UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2007

or

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

For the transition period from                      to                     .

Commission File No. 1-2960

Newpark Resources, Inc.

(Exact name of registrant as specified in its charter)

Delaware		72-1123385
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2700 Research Forest Drive, Suite 100
The Woodlands, Texas		77381
(Address of principal executive offices)		(Zip Code)

(281) 362-6800
(Registrant’s telephone number, including area code)

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

Yes þ      No o

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer o          Accelerated filer þ           Non-accelerated filer o

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

Yes o      No þ

As of October 24, 2007, a total of 90,100,704 shares of Common Stock, $0.01 par value per share, were outstanding.

 

 

NEWPARK RESOURCES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED
September 30, 2007

Item				Page
Number		Description		Number
		PART I-FINANCIAL INFORMATION
1		Financial Statements:
		Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006			3
		Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2006			4
		Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2007 and 2006			5
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006			6
		Notes to Unaudited Consolidated Condensed Financial Statements			7
2		Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
3		Quantitative and Qualitative Disclosures About Market Risk			24
4		Controls and Procedures			25
		PART II-OTHER INFORMATION
1		Legal Proceedings			27
1A		Risk Factors			27
2		Unregistered Sales of Equity Securities and Use of Proceeds			27
3		Defaults upon Senior Securities			27
4		Submission of Matters to a Vote of Security Holders			27
5		Other Information			27
6		Exhibits			27
		Signatures			28
Memberships Interests Agreement
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

          This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. We also may provide oral or written forward-looking statements in other materials we release to the public. The words “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying them. These forward-looking statements reflect the current views of our management; however, various risks, uncertainties and contingencies, including the risks identified in Item 1A, “Risk Factors,” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2006, and those set forth from time to time in our filings with the Securities and Exchange Commission, could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, these statements, including the success or failure of our efforts to implement our business strategy.

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

          For further information regarding these and other factors, risks and uncertainties affecting us, we refer you to the risk factors set forth in Part I of our Annual Report on Form 10-K for the year ended December 31, 2006.

PART I

Newpark Resources, Inc.

		September 30,				December 31,
(In thousands, except share data)		2007				2006
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	7,412			$	12,736
Receivables, net			142,141				141,790
Inventories			108,319				107,778
Deferred tax asset			20,076				23,001
Prepaid expenses and other current assets			16,566				12,176
Assets of discontinued operations			87,780				102,365
Total current assets			382,294				399,846
Property, plant and equipment, net			160,319				152,207
Goodwill			62,028				54,624
Deferred tax asset			—				7,096
Other intangible assets, net			17,503				8,236
Other assets			7,052				7,440
		$	629,196			$	629,449
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Foreign bank lines of credit		$	5,928			$	10,938
Current maturities of long-term debt			3,066				4,058
Accounts payable			45,815				37,087
Accrued liabilities			35,299				40,439
Liabilities of discontinued operations			11,554				11,403
Total current liabilities			101,662				103,925
Long-term debt, less current portion			169,252				198,037
Deferred tax liability			858				—
Other non-current liabilities			4,591				4,344
Total liabilities			276,363				306,306
Stockholders’ equity:
Common Stock, $0.01 par value, 100,000,000 shares authorized, 90,092,704 and 89,675,292 shares issued and outstanding, respectively			901				897
Paid-in capital			448,940				444,763
Accumulated other comprehensive income			14,283				7,940
Retained deficit			(111,291	)			(130,457	)
Total stockholders’ equity			352,833				323,143
		$	629,196			$	629,449

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements

Newpark Resources, Inc.

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands, except per share data)		2007				2006				2007				2006
Revenues		$	153,778			$	147,618			$	453,024			$	435,160
Cost of revenues			133,756				122,846				393,176				376,028
			20,022				24,772				59,848				59,132
General and administrative expenses			4,567				5,050				17,833				13,842
Operating income			15,455				19,722				42,015				45,290
Foreign currency exchange (gain) loss			(57	)			16				(279	)			(496	)
Interest expense, net			3,950				6,160				12,182				15,210
Income from continuing operations before income taxes			11,562				13,546				30,112				30,576
Provision for income taxes			3,950				3,813				10,586				9,936
Income from continuing operations			7,612				9,733				19,526				20,640
(Loss) income from discontinued operations, net of tax			(229	)			(11,998	)			2,563				(10,797	)
Loss from disposal of discontinued operations, net of tax			—				—				(2,173	)			—
Net income (loss)		$	7,383			$	(2,265	)		$	19,916			$	9,843
Weighted average shares outstanding
Basic			90,085				89,417				89,965				89,281
Diluted			90,542				89,658				90,503				89,872
Basic and diluted earnings per share
Income from continuing operations		$	0.08			$	0.11			$	0.22			$	0.23
(Loss) income from discontinued			(0.00	)			(0.14	)			0.00				(0.12	)
Income (loss) per share		$	0.08			$	(0.03	)		$	0.22			$	0.11

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements

Newpark Resources, Inc.

(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands)		2007				2006				2007				2006
Net income (loss)		$	7,383			$	(2,265	)		$	19,916			$	9,843
Changes in fair value of interest rate swap and cap, net of tax			84				(378	)			(88	)			(378	)
Foreign currency translation adjustments			2,255				426				6,431				1,391
Comprehensive income (loss)		$	9,722			$	(2,217	)		$	26,259			$	10,856

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements

Newpark Resources, Inc.

(Unaudited)

		Nine Months Ended
		September 30,
(In thousands)		2007				2006
Cash flows from operating activities:
Net income		$	19,916			$	9,843
Adjustments to reconcile net income to net cash provided by operations:
Net (income) loss from discontinued operations			(2,563	)			10,797
Net loss on disposal of discontinued operations			2,173				—
Depreciation and amortization			14,835				15,908
Stock-based compensation expense			2,270				1,711
Provision for deferred income taxes			8,385				2,564
Provision for doubtful accounts			530				1,074
Loss (gain) on sale of assets			193				(614	)
Change in assets and liabilities:
Decrease (increase) in accounts and notes receivable			3,872				(21,420	)
Increase in inventories			(1,340	)			(24,593	)
Increase in other assets			(3,994	)			(3,752	)
Increase (decrease) in accounts payable			7,606				(5,546	)
(Decrease) Increase in accrued liabilities and other			(4,099	)			11,463
Net operating activities of continuing operations			47,784				(2,565	)
Net operating activities of discontinued operations			15,018				10,388
Net cash provided by operating activities			62,802				7,823
Cash flows from investing activities:
Capital expenditures			(13,227	)			(20,162	)
Proceeds from sale of property, plant and equipment			888				1,210
Business acquisitions			(21,919	)			—
Insurance proceeds from property, plant and equipment claim			—				3,471
Net investing activities of continuing operations			(34,258	)			(15,481	)
Net investing activities of discontinued operations			153				(9,246	)
Net cash used in investing activities			(34,105	)			(24,727	)
Cash flows from financing activities:
Net (payments) borrowings on lines of credit			(15,766	)			17,078
Proceeds from long-term financing			—				150,000
Payments on notes payable and long-term debt, net			(20,806	)			(156,217	)
Proceeds from exercise of stock options and ESPP			2,016				4,385
Excess tax benefit from exercise of stock options			—				640
Net financing activities of continuing operations			(34,556	)			15,886
Net financing activities of discontinued operations			(45	)			(646	)
Net cash (used in) provided by financing activities			(34,601	)			15,240
Effect of exchange rate changes			580				226
Net decrease in cash and cash equivalents			(5,324	)			(1,438	)
Cash and cash equivalents at beginning of period			12,736				7,344
Cash and cash equivalents at end of period		$	7,412			$	5,906
Cash Paid for:
Income taxes (net of refunds)		$	4,686			$	2,391
Interest		$	12,486			$	14,696

See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements

NEWPARK RESOURCES, INC.

Note 1 — Basis of Presentation and Significant Accounting Policies

          The accompanying unaudited consolidated condensed financial statements of Newpark Resources, Inc. and our wholly-owned subsidiaries, which we refer to as “we,” “our” or “us”, have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2006. The results of operations for the three and nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for the entire year.

          In the opinion of management, the accompanying unaudited consolidated condensed financial statements reflect all adjustments necessary to present fairly our financial position as of September 30, 2007, and the results of our operations and our cash flows for the three and nine months ended September 30, 2007 and 2006. All adjustments are of a normal recurring nature. Our balance sheet at December 31, 2006 has been derived from the audited financial statements at that date. We have reclassified certain amounts related to discontinued operations previously reported to conform with the presentation at September 30, 2007.

          The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For further information, see Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2006.

          In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements (“SFAS 157”).” This standard defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America and expands disclosure about fair value measurements. This pronouncement applies whenever other accounting standards require or permit assets or liabilities to be measured at fair value. Accordingly, this statement does not require any new fair value measurement. This statement is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently assessing the impact of applying SFAS 157 on the Company’s consolidated financial statements.

           In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). This standard provides companies with an option to measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. A company will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We are currently assessing the impact of applying SFAS 159’s elective fair value option on the Company’s consolidated financial statements.

Note 2 — Discontinued Operations

          During October 2007, we entered into a definitive agreement to sell our U.S. Environmental Services business for $81.5 million in cash, and potentially an additional $8 million under the terms of the five-year earn out provision in the agreement. The sale is expected to close during the fourth quarter of 2007 subject to regulatory approval, completion of environmental due diligence and other customary requirements. In conjunction with this action, we exited certain Environmental Services activities in the Canadian market during the third quarter of 2007, which resulted in charges of $1.1 million ($0.6 million after-tax), including $0.5 million for the impairment of goodwill. As a result of these developments, we reclassified all assets, liabilities and results of our U.S. and Canadian Environmental Services operations to discontinued operations for all periods presented.

          During the third quarter of 2007, we completed the sale of a sawmill facility that supplies wood products to third parties and provides wooden mat materials for our Mats and Integrated Services segment. As a result of this sale agreement, which was executed during the second quarter of 2007, we recorded an impairment loss on the pending sale of discontinued operations of $3.2 million ($2.2 million after-tax).

          During 2006, we decided to shut down the operations of Newpark Environmental Water Solutions, LLC (“NEWS”), and dispose of the assets related to this operation along with the disposal and water treatment operations in Wyoming which existed prior to the start up of NEWS. The operations ceased at these facilities during the fourth quarter of 2006, and all remaining assets of these businesses are held for sale. As a result of separate agreements entered into during 2007 to sell substantially all remaining assets and settle outstanding claims related to the NEWS business, a $0.9 million charge ($0.6 million after-tax) was recorded during the second quarter of 2007.

          We reclassified all assets, liabilities and the results of operations for the above businesses to discontinued operations for all periods presented. Summarized results of operations from discontinued operations are as follows:

		Three Months Ended								Nine Months Ended
(In thousands)		September 30,								September 30,
		2007				2006				2007				2006
Revenues		$	17,080			$	22,523			$	60,468			$	66,577
(Loss) income from discontinued operations before income taxes			(431	)			(17,272	)			4,830				(15,544	)
(Loss) income from discontinued operations, net of tax			(229	)			(11,998	)			2,563				(10,797	)
Loss from disposal of discontinued operations, before tax			—				—				(4,095	)			—
Loss from disposal of discontinued operations, net of tax			—				—				(2,173	)			—

          Assets and liabilities of discontinued operations are as follows as of September 30, 2007 and December 31, 2006:

(In thousands)		September 30, 2007				December 31, 2006
Current assets		$	12,154			$	19,878
Property, plant and equipment			71,804				75,836
Other assets			3,822				6,651
Assets of discontinued operations		$	87,780			$	102,365
Accounts payable		$	8,555			$	8,837
Accrued liabilities			2,746				2,268
Other liabilities			253				298
Liabilities of discontinued operations		$	11,554			$	11,403

Note 3 — Earnings per Share

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

		Three Months Ended								Nine Months Ended
(In thousands, except per share amounts)		September 30,								September 30,
		2007				2006				2007				2006
Net income (loss)		$	7,383			$	(2,265	)		$	19,916			$	9,843
Weighted average number of common shares outstanding			90,085				89,417				89,965				89,281
Add: Net effect of dilutive stock options, warrants and restricted stock			457				241				538				591
Adjusted weighted average number of common shares outstanding			90,542				89,658				90,503				89,872
Basic and diluted income (loss) per share		$	0.08			$	(0.03	)		$	0.22			$	0.11

          For the three and nine months ended September 30, 2007, we had dilutive stock options of approximately 0.9 million shares and 1.2 million shares, respectively, which were assumed to be exercised using the treasury stock method. For the nine months ended September 30, 2006, we had dilutive stock options and warrants of approximately 2.2 million shares which were assumed to be exercised using the treasury stock method. The resulting net effects of stock options and warrants were used in calculating diluted income per share for these periods.

          During the three and nine months ended September 30, 2007, we issued 22,834 shares and 341,396 shares in conjunction with the exercise of stock options, respectively. During the nine months ended September 30, 2007, we issued 50,000 shares in conjunction with the vesting of time restricted shares.

          Options and warrants to purchase a total of approximately 4.7 million shares and 3.9 million shares, of common stock were outstanding during the three and nine months ended September 30, 2007, respectively, but were not included in the computation of diluted income per share because they were anti-dilutive. Options and warrants to purchase a total of approximately 5.9 million

shares and 4.0 million shares, of common stock were outstanding during the three and nine months ended September 30, 2006, respectively, but were not included in the computation of diluted income per share because they were anti-dilutive.

          On June 1, 2000, we completed the sale of 120,000 shares of Series B Convertible Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”), and a warrant (the “Series B Warrant”) to purchase up to 1,900,000 shares of our Common Stock at an exercise price of $10.075 per share, subject to anti-dilution adjustments. Prior to 2007, all outstanding shares of the Series B Preferred Stock were converted to Common Stock. The Series B Warrant was originally issued with a seven year life, expiring June 1, 2007. This warrant contains certain registration provisions, which, if not met, reduce the exercise price of the warrants by 2.5%, compounding annually, and extending the term of the warrant. As of September 30, 2007, the Series B Warrant, as adjusted for certain anti-dilution provisions, remains outstanding and provides for the right to purchase up to 1,928,972 shares of our Common Stock at an exercise price of $9.43. We are currently not in compliance with the registration provisions and do not currently expect to establish an effective registration of this warrant until November 2007. Upon completion of the registration, the remaining life of the warrant will be approximately 16 months.

Note 4 — Acquisition

          In August 2007, we completed the acquisition of substantially all of the assets and operations of SEM Construction Company (“SEM”), headquartered in Grand Junction, Colorado. SEM is a full-service well site construction company engaged in construction, reclamation, maintenance, and general rig work for the oil and gas industry at drilling locations throughout Western Colorado. SEM is reported within the Mats and Integrated Services segment and generated sales of $1.2 million during the third quarter of 2007.

          Total cash consideration paid during the third quarter was $21.3 million which was funded by borrowing on our revolving credit facility. The final purchase price is subject to adjustment for actual working capital conveyed at closing, for which $0.3 million is expected to be paid during the fourth quarter of 2007.

     The following table summarizes the estimated fair value of the assets acquired at the date of acquisition:

		August 31,
(In thousands)		2007
Receivables, net		$	2,093
Property, plant and equipment			4,800
Goodwill			4,576
Employment and non-compete agreements (4.5 year life)			1,914
Customer relationships (10.6 year life)			8,294
Purchase price allocated		$	21,677

     We are accounting for this acquisition using the purchase method of accounting and are in the process of finalizing the valuations of certain assets acquired; consequently, the initial allocation of the purchase price is preliminary and subject to change for a period of one year following the acquisition, although management believes it is materially accurate as of September 30, 2007.

Note 5 — Receivables, net

          Receivables consisted of the following at September 30, 2007 and December 31, 2006:

		September 30,				December 31,
(In thousands)		2007				2006
Trade receivables		$	120,441			$	118,480
Unbilled revenues			24,651				22,891
Notes and other receivables			431				2,735
Gross accounts receivables			145,523				144,106
Allowance for doubtful accounts			(3,382	)			(2,316	)
Receivables, net		$	142,141			$	141,790

Note 6 — Inventory

          Inventory consisted of the following at September 30, 2007 and December 31, 2006:

		September 30,				December 31,
(In thousands)		2007				2006
Finished goods-composite mats		$	5,360			$	14,458
Raw materials and components:
Drilling fluids raw material and components			97,151				89,240
Supplies and other			5,808				4,080
Total raw materials and components			102,959				93,320
Total inventory		$	108,319			$	107,778

Note 7 — Commitments and Contingencies

Shareholder Litigation

Settlement of Shareholder Derivative and Class Action Litigation

          On April 13, 2007, we announced that, subject to court approval, we had reached a settlement of our pending derivative and class action litigation described below. The settlement received final approval from the U.S. District Court for the Eastern District of Louisiana on October 9, 2007. Under the terms of the settlement, we paid $1.6 million, and our directors and officers’ liability insurance carrier paid $8.3 million. A portion of these amounts will be used to pay administration costs and legal fees. This settlement resolves all pending shareholder class and derivative litigation against us, our former and current directors, and former officers. As part of the settlement, however, we preserved certain claims against our former Chief Executive Officer and Chief Financial Officer for matters arising from the potential invoicing irregularities at Soloco Texas, LP and the backdating of stock options. The history and nature of this litigation is set forth below.

Derivative Actions

          On August 17, 2006, a shareholder derivative action was filed in the 24th Judicial District Court for the Parish of Jefferson, captioned: Victor Dijour, Derivatively on Behalf of Nominal Defendant Newpark Resources, Inc., v. James D. Cole, et al. On August 28, 2006, a second shareholder derivative action was filed in the 24th Judicial District Court for the Parish of Jefferson, captioned: James Breaux, Derivatively on Behalf of Nominal Defendant Newpark Resources, Inc., v. James D. Cole, et al. These actions, which are substantially similar, were brought, allegedly for the benefit of us, in which we are sued as a nominal defendant in each of these actions, against James D. Cole, our former Chief Executive Officer and director; Matthew W. Hardey, our former Chief Financial Officer; William Thomas Ballantine, our former Chief Operating Officer, President and director; and directors David P. Hunt, Alan J. Kaufman, Roger C. Stull and James H. Stone. The plaintiffs in these respective actions allege improper backdating of stock option grants to our executives, improper recording and accounting of the backdated stock option grants and producing and disseminating false financial statements and other SEC filings to our shareholders and the market. The plaintiffs do not seek any recovery against us. Instead, they seek unspecified damages from the individual defendants on our behalf for alleged breach of fiduciary duty, and against Messrs. Cole and Hardey, and also against Mr. Ballantine in the second shareholder derivative action, for alleged unjust enrichment. These two cases were voluntarily dismissed without prejudice by the plaintiffs on December 29, 2006 and have subsequently been re-filed in the U.S. District Court for the Eastern District of Louisiana. The complaints in the re-filed cases are virtually identical to the complaints filed in the Galchutt and Pomponi cases described below.

          On October 5, 2006, a third shareholder derivative action was filed in the U.S. District Court, Eastern District of Louisiana, captioned: Vincent Pomponi, Derivatively on Behalf of Newpark Resources, Inc., v. James D. Cole, et al. On October 6, 2006, a fourth derivative action was filed in the U.S. District Court, Eastern District of Louisiana, captioned: David Galchutt, Derivatively on Behalf of Newpark Resources, Inc., v. James D. Cole, et al. These complaints are virtually identical and were brought, allegedly for the benefit of us, in which we are sued as a nominal defendant, against Messrs. Cole and Hardey and current and previous directors Hunt, Kaufman, Stone, Stull, Jerry W. Box, F. Walker Tucei, Jr., Gary L. Warren, Ballantine, Michael Still, Dibo Attar, Phillip S. Sassower, Lawrence I. Schneider and David C. Baldwin, alleging improper financial reporting and backdating of stock option grants to our employees. The plaintiffs do not seek any recovery against us. Instead, they seek unspecified damages from Messrs. Cole and Hardey for alleged disgorgement under the Sarbanes-Oxley Act of 2002 and alleged rescission, against Messrs. Hardey, Hunt, Kaufman, Stone, Ballantine, Still, Attar, Sassower, Schneider, and Baldwin for alleged violation of Section 14(a) of the Securities Exchange Act of 1934, which we refer to as the Exchange Act, and against all of the individual defendants on behalf of us for alleged unjust enrichment, breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and constructive trust. All four derivative actions are consolidated in Judge Livaudais’ court.

          Pursuant to previously existing indemnification agreements, we have advanced to the officer and director defendants the fees they have incurred to defend themselves, subject to repayment in the event of a determination that they are not entitled to indemnification. We have also agreed to advance to the former directors the fees they have incurred to defend themselves subject to certain restrictions on reasonableness and agreements to repay in the event of a determination that they are not entitled to indemnification.

          Our Board of Directors formed a Special Litigation Committee consisting of David C. Anderson and James W. McFarland, recently elected independent directors who are not named in any of the derivative actions, to review the allegations in these actions and in any other derivative actions that may be filed that involve the same subject matter, and the

Special Litigation Committee retained outside counsel to assist it. After conducting its investigation and analysis of the claims made in the derivative actions, the Special Litigation Committee approved the settlement of the derivative actions on the terms outlined above. The Special Litigation Committee recommended that we preserve our causes of action against Messrs. Cole and Hardey, but that we not pursue claims against any other officer or director of our company named in the derivative actions.

Class Action Lawsuit

          Between April 21, 2006 and May 9, 2006, five lawsuits asserting claims against us for violation of Section 10(b) of the Exchange Act, and SEC Rule 10b-5 were filed in the U.S. District Court for the Eastern District of Louisiana. All five lawsuits have been transferred to Judge Marcel Livaudais who has consolidated these actions as In re: Newpark Resources, Inc. Securities Litigation. Following the filing of the Amendment No. 2 to our Annual Report on Form 10-K/A for 2005 (filed on October 10, 2006), the plaintiffs filed (on November 9, 2006) a Consolidated Class Action Complaint for Securities Fraud (the “Consolidated Class Complaint”) against us and the following directors and officers: James Cole, Matthew Hardey, Thomas Ballantine, David Hunt, Alan Kaufman, James Stone, Roger Stull and Jerry Box. The Consolidated Class Complaint alleges that we and the individual defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act. These allegations arise from our disclosure of an internal investigation into potential irregularities in the processing and payment of invoices at one of our subsidiaries, Soloco Texas, LP, and alleged improper granting, recording and accounting of backdated grants of our stock options to our executives. The Consolidated Class Complaint does not specify the damages sought by the Plaintiffs.

          Pursuant to previously existing indemnification agreements, we have advanced to the officer and director defendants the fees they have incurred to defend themselves, subject to repayment in the event of a determination that they are not entitled to indemnification.

James D. Cole Demand Letter

          By letter dated April 25, 2007, counsel for James D. Cole, our former Chief Executive Officer and former director, notified us that Mr. Cole is pursuing claims against us for breach of his employment agreement and other causes of action. Mr. Cole seeks recovery of approximately $3.1 million purportedly due under his employment agreement and reimbursement of certain defense costs incurred in connection with the shareholder litigation and our internal investigation. Mr. Cole also claims that he is entitled to the sum of $640,000 pursuant to the non-compete provision of his employment agreement. We believe that Mr. Cole’s claims regarding his employment agreement are without merit and intend to vigorously defend any action brought by him. The employment agreement with Mr. Cole provides for arbitration of certain disputes and Mr. Cole has recently notified us that he has submitted his employment agreement claims to arbitration.

Matthew Hardey Lawsuit

           On November 2, 2007, we were served with a lawsuit filed on behalf of Matthew Hardey, our former Chief Financial Officer, against Newpark Resources and Paul Howes. The lawsuit was filed on October 9, 2007, in the 24th Judicial District Court in Jefferson Parish, Louisiana. The lawsuit includes a variety of allegations arising from our internal investigation and Mr. Hardey’s termination, including breach of contract, unfair trade practices, defamation, and negligence. The lawsuit does not specify the amount of damages being sought by Mr. Hardey. We dispute the allegations in the lawsuit and intend to vigorously defend our position.

Other Matters

          In response to our announcement to exit the business activities of NEWS, we received a letter from counsel for the Mexican company in September 2006 demanding the return of certain equipment and pay it an aggregate of $4.0 million for the period that this equipment was utilized, technical support and administrative costs, unreimbursed costs of the equipment, and lost profits due to the Mexican company’s dedication of time to our water treatment business. We have resolved this claim by returning certain equipment belonging to the Mexican company and providing to them certain assets from the former NEWS operations, which was completed during the third quarter of 2007. A charge of $0.4 million was recorded in the second quarter of 2007 related to the decommissioning of one of the former NEWS facilities and our obligations to return the equipment.

          We have also been advised that the Securities and Exchange Commission (“SEC”) has opened a formal investigation into the matters disclosed in Amendment No. 2 to our Annual Report on Form 10-K/A filed on October 10, 2006. We are cooperating with the SEC in their investigation.

          In addition, we and our subsidiaries are involved in litigation and other claims or assessments on matters arising in the normal course of business. In the opinion of management, any recovery or liability in these matters should not have a material effect on our results of operations or financial position.

Note 8 — Segment Data

          Summarized financial information concerning our reportable segments is shown in the following table:

		Three Months Ended								Nine Months Ended
(In thousands)		September 30,								September 30,
		2007				2006				2007				2006
Revenues by segment:
Fluids Systems and Engineering		$	129,986			$	125,130			$	386,447			$	352,287
Mats and Integrated Services			23,792				22,488				66,577				82,873
Total revenues		$	153,778			$	147,618			$	453,024			$	435,160
Segment operating income:
Fluids Systems and Engineering		$	15,467			$	20,178	(1)		$	48,420			$	45,981	(1)
Mats and Integrated Services			4,555				4,594				11,428				13,151
Total segment operating income			20,022				24,772				59,848				59,132
General and administrative expenses			4,567				5,050				17,833				13,842
Total operating income		$	15,455			$	19,722			$	42,015			$	45,290

Note 9 — Uncertain Tax Positions

          On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). As a result of the implementation of FIN 48, we performed a comprehensive review of possible uncertain tax positions in accordance with recognition standards established by FIN 48. As a result of the implementation of FIN 48, we recognized a liability of approximately $0.8 million resulting in a corresponding increase to the retained deficit balance.

          We recognize accrued interest and penalties related to uncertain tax positions in interest and general and administrative expenses, respectively. No interest or penalties have been accrued due to tax net operating loss carry forwards.

          Our United States and international income tax returns for 2003 and subsequent years remain subject to examination by tax authorities.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          The following discussion of our financial condition, results of operations, liquidity and capital resources should be read together with our consolidated financial statements and Notes to Consolidated Financial Statements contained in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2006.

          We are a diversified oil and gas industry supplier and we currently have two operating segments: Fluids Systems and Engineering and Mats and Integrated Services. We provide these products and services principally to the oil and gas exploration and production (“E&P”) industry in the U.S. Gulf Coast, West Texas, U.S. Mid-continent, U.S. Rocky Mountains, Canada, Mexico, Brazil and areas of Europe and North Africa surrounding the Mediterranean Sea. Further, we are expanding our presence outside the E&P sector, particularly in Mats and Integrated Services, where we are marketing to utilities, municipalities, and government sectors.

          Following a comprehensive review of all of our businesses in the first quarter of 2007, we decided to explore strategic alternatives with regards to our Environmental Services business, which was historically reported as a third segment to our business. Subsequently, we initiated a sale process for this business and entered into an agreement in October 2007 to sell the U.S. Environmental Services business for $81.5 million in cash and potentially an additional $8 million which can be earned under a five-year earn out provision. This sale is expected to close during the fourth quarter of 2007. In conjunction with this process, we decided to exit certain Environmental Services activities within the Canadian market during the third quarter of 2007, which resulted in a $1.1 million charge, including $0.5 million for the impairment of goodwill. As a result of these developments, we reclassified all assets, liabilities and results of operations of our U.S. and Canadian Environmental Services business to discontinued operations for all periods presented.

          The decision to sell the Environmental Services business is part of our strategic plan to focus our attention and capital on our Fluids Systems and Engineering and Mats and Integrated Services businesses. In August 2007, we completed the acquisition of substantially all of the assets and operations of SEM Construction Company (“SEM”), for cash consideration of $21.3 million. SEM is a full-service well site construction company engaged in construction, reclamation, maintenance, and general rig work for the oil and gas industry at drilling locations throughout Western Colorado and is reported within the Mats and Integrated Services segment.

          Also during August 2007, we completed the sale of a sawmill facility for $4.1 million, which was historically reported within the Mats & Integrated Services segment. As a result of the sales agreement for this transaction, we recorded an impairment loss on the sale of discontinued operations of $3.2 million ($2.2 million after-tax) in the second quarter of 2007 and reclassified all assets, liabilities and results of operations to discontinued operations, for all periods presented.

          In October 2007, we received final court approval of the previously announced settlement of our pending derivative and class action litigation. Under the terms of the settlement, we paid $1.6 million, and our directors and officers’ liability insurance carrier paid $8.3 million. The settlement resolves all pending shareholder class and derivative litigation against us, our former and current directors, and our former officers. As part of the settlement, however, we preserved certain claims against our former Chief Executive Officer and Chief Financial Officer for matters arising from the potential invoicing irregularities at Soloco Texas, LP and the backdating of stock options. As of September 30, 2007, we have accrued our estimated costs required to conclude this settlement.

Results of Operations

          Our operating results depend in large measure on oil and gas drilling activity levels in the markets we serve, as well as on the depth of drilling, which governs the revenue potential of each

well. These levels, in turn, depend on oil and gas commodity pricing, inventory levels and product demand. Rig count data is the most widely accepted indicator of drilling activity. Key average rig count data for the last seven quarters is listed in the following table:

		1Q06				2Q06				3Q06				4Q06				1Q07				2Q07				3Q07
U.S. rig count			1,521				1,635				1,721				1,719				1,734				1,757				1,789
Canadian rig count			661				292				490				441				521				144				347

          Summarized financial information concerning our reportable segments is shown in the following table:

		Three Months Ended								Nine Months Ended
(In thousands)		September 30,								September 30,
		2007				2006				2007				2006
Revenues by segment:
Fluids Systems and Engineering		$	129,986			$	125,130			$	386,447			$	352,287
Mats and Integrated Services			23,792				22,488				66,577				82,873
Total revenues		$	153,778			$	147,618			$	453,024			$	435,160
Segment operating income:
Fluids Systems and Engineering		$	15,467			$	20,178	(1)		$	48,420			$	45,981	(1)
Mats and Integrated Services			4,555				4,594				11,428				13,151
Total segment operating income			20,022				24,772				59,848				59,132
General and administrative expenses			4,567				5,050				17,833				13,842
Total operating income		$	15,455			$	19,722			$	42,015			$	45,290
Segment Operating Margin:
Fluids Systems and Engineering			11.9	%			16.1	%			12.5	%			13.1	%
Mats and Integrated Services			19.1	%			20.4	%			17.2	%			15.9	%

The amounts above are shown net of intersegment transfers.

Quarter Ended September 30, 2007 Compared to Quarter Ended September 30, 2006

Fluids Systems and Engineering

Revenues

          Total revenues by region for this segment were as follows for the three months ended September 30, 2007 and 2006 (dollars in millions):

										Change
		2007				2006				$				%
Drilling fluid sales and engineering:
North America		$	77.6			$	80.8			$	(3.2	)			(4	)%
Mediterranean			25.5				15.7				9.8				62
Total drilling fluid sales and engineering			103.1				96.5				6.6				7
Completion fluids and services			16.9				17.9				(1.0	)			(5	)
Industrial materials			10.0				10.7				(0.7	)			(7	)
Total		$	130.0			$	125.1			$	4.9				4	%

          North American drilling fluid sales and engineering revenues decreased 4% to $77.6 million for the quarter ended September 30, 2007, as compared to $80.8 million for the quarter ended September 30, 2006. Overall North American rig activity decreased 3%, while the average number of North American rigs serviced by this business segment decreased by 10%. This decrease in rigs serviced is primarily related to the weak Canadian market, as well as a lower level of drilling activity in the regions that we serve and a lower level of drilling activity within our customer base in the U.S. market. The decrease in number of rigs serviced is partially offset by a 7% increase in our average revenue per rig, resulting from our focused efforts to concentrate on deeper and more complex wells, including the off-shore Gulf Coast markets.

          In the quarter ended September 30, 2007, our Mediterranean revenues increased 62% over the same period in 2006. This increase was driven by increased rig activity and continued penetration into the North African and Eastern European markets.

          Revenues in our completion fluids and industrial materials businesses decreased $1.7 million for the quarter ended September 30, 2007, or 6%, as compared to the same period in 2006.

Operating Income

          Operating income for this segment decreased $4.7 million for the quarter ended September 30, 2007 on a $4.9 million increase in revenues, compared to the same period in 2006, resulting in a decline in operating margin from 16.1% to 11.9%. The third quarter of 2006 included $3.5 million of insurance recoveries from Hurricanes Katrina and Rita. Excluding the insurance recoveries, the operating profit in the North American business units decreased by $2.9 million on a $4.9 million decrease in revenues, reflecting the impact of higher operating costs, including significant increases in barite transportation costs. This decrease was partially offset by a $1.7 million increase in Mediterranean operating income generated on a $9.8 million increase in revenues, as the incremental gross profits generated by the higher sales were partially offset by higher transportation and other operating costs.

Mats and Integrated Services

Revenues

          Total revenues for this segment consisted of the following for the three months ended September 30, 2007 and 2006 (dollars in millions):

										Change
		2007				2006				$				%
Mat rental and integrated services		$	15.6			$	16.2			$	(0.6	)			(4	%)
Mat sales			7.7				5.8				1.9				33
Non-oilfield services and other			0.5				0.4				0.1				25
Total		$	23.8			$	22.4			$	1.4				6	%

          Total mat rental and integrated services revenues decreased by $0.6 million in the quarter ended September 30, 2007, compared to the same period in 2006 as the impact of the lower rental volume driven by weakness in the Gulf Coast rig count was partially offset by higher activity in other areas, improved pricing, and $1.2 million of sales generated by the SEM business acquired in August 2007. Oilfield mat rental volume decreased 13% for the quarter ended September 30, 2007 compared to the same period in 2006, while the average price per square foot increased 4%.

          Mat sales primarily consist of export sales of composite mats to various international markets and wooden mats to Canada. The increase in mat sales is attributable to a $3.4 million increase in composite mats sales, partially offset by lower wooden mat sales in the weak Canadian market.

Operating Income

          Mats and Integrated Services operating income was unchanged at $4.6 million for the quarter ended September 30, 2007 on a $1.4 million increase in revenues, compared to the same period in 2006, reflecting a decrease in operating margins to 19.1% from 20.4%. The decrease in operating margin is primarily attributable to the change in sales mix, as certain overhead and administrative costs associated with the mat rental and integrated services remain relatively fixed, despite a decrease in sales volume.

General and Administrative Expense

          General and administrative expense decreased $0.5 million to $4.6 million for the quarter ended September 30, 2007 from the comparable period of 2006. The decrease in spending is primarily attributable to $0.8 million of consulting fees in the quarter ended September 30, 2006 associated with strategic planning projects. This decrease is partially offset by higher share-based compensation expense during the quarter ended September 30, 2007.

Interest Expense, net

          Interest expense, net totaled $3.9 million for the quarter ended September 30, 2007 compared to $6.2 million for the quarter ended September 30, 2006. The quarter ended September 30, 2006 included $1.2 million of charges associated with prepayment penalties under barite financing agreements and the write-off of unamortized debt issuance costs. The remainder of the decrease is attributable to lower debt balances in 2007.

Provision for Income Taxes

          We recorded an income tax provision of $3.9 million, reflecting an income tax rate of 34.1% in the quarter ended September 30, 2007, compared to an income tax provision of $3.8 million, reflecting an income tax rate of 28.1% in the quarter ended September 30, 2006. The higher income tax rate in 2007 is primarily attributable to the impact of higher state tax rates along with discrete tax benefits recorded in 2006 that did not recur in 2007.

Discontinued Operations

          As described above, discontinued operations includes all of the assets, liabilities and results of operations associated with the former Environmental Services segment, as well as the sawmill facility sold in August 2007, which was historically reported within the Mats & Integrated Services segment.

          Also, during 2006, we announced the decision to shut down of operations of Newpark Environmental Water Solutions, LLC (“NEWS”), and dispose of the assets related to this operation along with the disposal and water treatment operations in Wyoming which existed prior to the start up of NEWS. The operations ceased at these facilities during the fourth quarter of 2006, and all remaining assets of these businesses are held for sale. As a result, all assets, liabilities and continuing exit costs of this business are reported as discontinued operations.

          During the quarter ended September 30, 2007, discontinued operations generated a pre-tax operating loss of $0.4 million. This loss included $0.9 million of operating losses from the sawmill facility prior to the August 2007 sale and $0.3 million on-going costs associated with the satisfaction of liabilities in the exited NEWS business. These losses were partially offset by $0.8 million of pre-tax income generated by the Environmental Services business, which included $1.9 million of earnings from the U.S. operation, offset by a $1.1 million loss resulting from impairments and other exit costs in the Canadian operation.

          During the quarter ended September 30, 2006, discontinued operations generated a pre-tax operating loss of $17.3 million. This loss included a $17.8 million impairment related to the shut down of the NEWS business. The total NEWS loss of $19.3 million was partially offset by $2.2 million of pre-tax income generated by the Environmental Services business, and a $0.2 million loss from the sawmill facility.

Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006

Fluids Systems and Engineering

Revenues

          Total revenues by region for this segment were as follows for the nine months ended September 30, 2007 and 2006 (dollars in millions):

										Change
		2007				2006				$				%
Drilling fluid sales and engineering:
North America		$	239.5			$	227.0			$	12.5				6	%
Mediterranean			60.8				42.0				18.8				45
Total drilling fluid sales and engineering			300.3				269.0				31.3				12
Completion fluids and services			53.9				53.3				0.6				1
Industrial materials			32.2				30.0				2.2				7
Total		$	386.4			$	352.3			$	34.1				10	%

          North American drilling fluid sales and engineering revenues increased 6% to $239.5 million

for the nine months ended September 30, 2007, as compared to $227.0 million for the nine months ended September 30, 2006. Overall North American rig activity decreased 2% while the average number of North American rigs serviced by this business segment decreased by 8%. This decrease in rigs serviced is primarily related to the weak Canadian market as well as a lower level of drilling activity in the regions that we serve and a lower level of drilling activity within our customer base in the U.S. market. The decrease in number of rigs serviced is partially offset by a 15% increase in our average revenue per rig, resulting from our focused efforts to concentrate on deeper and more complex wells, including the off-shore Gulf Coast markets.

          In the nine months ended September 30, 2007, our Mediterranean revenues increased 45% over the same period in 2006. This increase was driven by increased rig activity and continued penetration into the North African and Eastern European markets.

          Revenues in our completion fluids and industrial materials businesses increased $2.8 million for the nine months ended September 30, 2007, or 3%, as compared to the same period in 2006.

Operating Income

          Operating income for this segment increased $2.4 million for the nine months ended September 30, 2007 on a $34.1 million increase in revenues, compared to the same period in 2006, resulting in a decline in operating margin from 13.1% to 12.5%. The nine months ended September 30, 2006 included $4.3 million of insurance recoveries from Hurricanes Katrina and Rita. Excluding this item, the operating profit in the North American business units increased $1.1 million on a $15.1 million decrease in revenues, reflecting the impact of higher operating costs, including significantly higher barite transportation costs, as well as the continued operating costs in the Canadian business which have remained relatively flat, despite the decline in sales volumes. The Mediterranean operating income increased $5.6 million on an $18.8 million increase in revenues.

Mats and Integrated Services

Revenues

          Total revenues for this segment consisted of the following for the nine months ended September 30, 2007 and 2006 (dollars in millions):

										Change
		2007				2006				$				%
Mat rental and integrated services		$	46.6			$	42.6			$	4.0				9	%
Mat sales			16.6				37.6				(21.0	)			(56	)
Non-oilfield services			3.4				2.7				0.7				26
Total		$	66.6			$	82.9			$	(16.3	)			(20	%)

          Total mat rental and integrated services increased by $4.0 million in the nine months ended September 30, 2007, compared to the same period in 2006, as the impact of the lower rental volume was more than offset by improved pricing combined with a higher mix of re-rental activity and services. Oilfield mat rental volume decreased 17% for the nine months ended September 30, 2007 compared to the same period in 2006, while the average price per square foot increased 17%.

          Mat sales primarily consist of composite mats to international markets and export sales of wooden mats to Canada. The decline in mat sales is primarily attributable to a $17.9 million decrease in Canadian sales, due to lower drilling activity and non-recurring wooden mat sales recorded in the nine months ended September 30, 2006. Composite mat export sales were also down in the nine months ended September 30, 2007 from the comparable period of 2006.

Operating Income

          Mats and Integrated Services operating income declined $1.7 million for the nine months ended September 30, 2007 on a $16.3 million decrease in revenues, compared to the same period in 2006. Operating margins improved to 17.2% for the nine months ended September 30, 2007 as compared to 15.9% for the same period in 2006. The improvement in operating margin is primarily attributable to favorable pricing and strong market conditions experienced in the first quarter of 2007, combined with $1.4 million of cost reductions achieved in 2007, resulting from organizational restructuring and general and administrative workforce reductions completed during the first quarter of 2007.

General and Administrative Expense

          General and administrative expense increased $4.0 million to $17.8 million for the nine months ended September 30, 2007 from the comparable period of 2006. The nine months ended September 30, 2007 included $3.4 million of legal expenses related to the shareholder class action and derivative litigation, including a $1.6 million settlement charge. The nine months ended September 30, 2006 included $2.0 million of expenses related to the internal investigation conducted by our Audit Committee which resulted in the restatement of financial statements for the year ended December 31, 2005. The remaining spending increase of $2.6 million is primarily attributable to an increase in salaries and other employee related costs resulting from the relocation of the corporate office and the addition of new corporate executive officers and staff positions.

Interest Expense, net

          Interest expense, net totaled $12.2 million for the nine months ended September 30, 2007 as compared to $15.2 million for the comparable period of 2006. The nine months ended September 30, 2006 included $1.2 million of charges associated with prepayment penalties under barite financing agreements and the write-off of unamortized debt issuance costs. The remainder of the decrease is attributable to lower debt balances in 2007.

Provision for Income Taxes

          For the nine months ended September 30, 2007, we recorded an income tax provision of $10.6 million, reflecting an income tax rate of 35.1%. For the nine months ended September 30, 2006, we recorded an income tax provision of $9.9 million, reflecting an income tax rate of 32.5%. The higher income tax rate in 2007 is primarily attributable to the impact of higher state tax rates along with discrete tax benefits recorded in 2006 that did not recur in 2007.

Discontinued Operations

          During the nine months ended September 30, 2007, discontinued operations generated pre-tax income of $4.2 million ($2.3 million after-tax). The Environmental Services business generated $6.9 million of pre-tax income, which includes $8.0 million of earnings from the U.S. operation, offset by a $1.1 million loss resulting of impairments and other exit costs in the Canadian operation. This income was partially offset by operating losses of $1.0 million from the sawmill facility prior to the August 2007 sale and $1.7 million of losses from the exited NEWS business.

          During the nine months ended September 30, 2006, discontinued operations generated a pre-tax loss of $15.5 million ($10.8 million after-tax). The NEWS business generated a $21.2 million pre-tax loss including a $17.8 million impairment associated with the shut down of this business. This was partially offset by $6.7 million of pre-tax income generated by the Environmental Services business, while the sawmill facility generated a $1.0 million loss.

          Pre-tax losses from the disposal of discontinued operations were $3.2 million ($2.2 million after-tax) for the nine months ended September 30, 2007, reflecting the impairment of the sawmill facility assets to sales price during the second quarter of 2007.

Liquidity and Capital Resources

          Cash generated from operating activities during the nine months ended September 30, 2007 totaled $62.8 million. Net income adjusted for non-cash items generated $45.7 million of cash during the period, while cash provided by operating activities of discontinued operations was $15.0 million, and changes in working capital provided $2.0 million of cash.

          Net cash used in investing activities was $34.1 million, including $13.2 million of capital expenditures and $21.9 million associated with acquisitions. This was partially offset by $1.0 million of net cash provided by disposals and discontinued operations.

          Net cash used in financing activities during the nine months ended September 30, 2007 totaled $34.6 million and included $36.6 million in net debt repayments. These repayments were primarily funded by net income, $5.3 million reduction in idle cash balances, along with $2.0 million in proceeds from employee stock plans.

          We anticipate that our working capital requirements for continuing operations will remain consistent with the changes in revenue in the near term. Cash generated by net income, the anticipated sale of the Environmental Services business, along with our continued focus on improving our collection cycle are expected to be adequate to fund this increase in working capital.

Our long term capitalization was as follows as of:

		September 30,				December 31,
		2007				2006
Long-term debt:
Term Credit Facility		$	133,316			$	148,125
Credit facility-revolver			35,282				44,825
Other, primarily mat financing			654				5,087
Total long-term debt, less current portion			169,252				198,037
Stockholders’ equity			352,833				323,143
Total capitalization		$	522,085			$	521,180
Long-term debt to long-term capitalization			32.4	%			38.0	%

          In August 2006, we entered into a Term Credit Facility, which has an aggregate face amount of $150.0 million, a five-year term and a current interest rate of LIBOR plus 3.00%, based on our corporate family ratings by Moody’s and Standard & Poor’s. The maturity date of the Term Credit Facility is August 18, 2011.

          In December 2006, we entered into a Revolving Credit Facility, which has a maximum aggregate face amount of $100.0 million and matures on June 25, 2011. The Revolving Credit Facility is secured by a first lien on our U.S. accounts receivable and inventory and by a second lien on our U.S. tangible and intangible assets. Availability under the Revolving Credit Facility is based on a percentage of our eligible consolidated accounts receivable and inventory as defined in the Revolving Credit Facility.

          At September 30, 2007, we had $35.3 million outstanding under the $100 million Revolving Credit Facility and $3.7 million in letters of credit issued and outstanding, leaving $61.0 million of availability. The Revolving Credit Facility bears interest at our choice of either a specified prime rate (7.75% at September 30, 2007), or a LIBOR rate plus a spread determined quarterly based upon the amount of the prior quarter average availability under the Revolving Credit Facility (6.91% at

September 30, 2007). The weighted average interest rates on the outstanding balances under the credit facilities as of September 30, 2007 and December 31, 2006 were 7.11% and 7.63%, respectively.

          Both the Term Credit Facility and Revolving Credit Facility contain a fixed charge coverage ratio covenant and a debt to EBITDA ratio. As of September 30, 2007, we were in compliance with the financial covenants contained in these facilities. The Term Credit Facility and the Revolving Credit Facility also contain covenants that significantly limit our ability to pay dividends on our common stock, incur additional debt and repurchase our common stock.

          With respect to additional off-balance sheet liabilities, we lease most of our office and warehouse space, barges, rolling stock and certain pieces of operating equipment under operating leases.

          Except as described in the preceding paragraphs, we are not aware of any material expenditures, significant balloon payments or other payments on long-term obligations or any other demands or commitments, including off-balance sheet items to be incurred within the next 12 months. Inflation has not materially impacted our revenues or income.

Critical Accounting Estimates

          Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, which requires us to make assumptions, estimates and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments related to uncollectible accounts and notes receivable, customer returns, reserves for obsolete and slow moving inventory, impairments of long-lived assets, including goodwill and other intangibles and our valuation allowance for deferred tax assets. Our estimates are based on historical experience and on our future expectations that we believe to be reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our current estimates and those differences may be material.

          For additional discussion of our critical accounting estimates and policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2006. Our critical accounting policies have not changed materially since December 31, 2006, except for the adoption of Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” which we refer to as “FIN 48”, in Note 9 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

          We are exposed to market risk from changes in interest rates and changes in foreign currency rates. A discussion of our primary market risk exposure in financial instruments is presented below.

Interest Rate Risk

          Our policy historically has been to manage exposure to interest rate fluctuations by using a combination of fixed and variable-rate debt. At September 30, 2007, we had total debt outstanding of $178.2 million, all of which is subject to variable rate terms.

          Our Term Credit Agreement requires that we enter into, and thereafter maintain, interest rate management transactions, such as interest rate swap arrangements, to the extent necessary to provide that at least 50% of the aggregate principal amount of the Term Credit Facility is subject to

either a fixed interest rate or interest rate protection for a period of not less than three years from the date of execution. To satisfy this requirement, we entered into an interest rate swap arrangement for the period from September 22, 2006 through March 22, 2008, which fixes the LIBOR rate applicable to 100% of the principle amount under the Term Credit Facility at 5.35% plus a spread based on our corporate family ratings by Moody’s and Standard & Poor’s. In addition, we entered into an interest rate cap arrangement that provides for a maximum LIBOR rate of 6.00% on the principal amount of $68.9 million for the period from March 22, 2008 through September 22, 2009. We paid a fee of $170,000 for the interest rate cap arrangement. Through this swap arrangement, we have effectively fixed the interest rate on $133.3 million, or 74.8%, of our total debt outstanding as of September 30, 2007.

          The fair value of the Term Credit Facility totaled $130.7 million at September 30, 2007, as compared to the recorded balance of $133.3 million. The fair value of the interest rate swap is a $0.2 million asset as of September 30, 2007. The fair value of the interest rate cap is $22,000 as of September 30, 2007 as compared to the original cost of $170,000.

          As of September 30, 2007, Ava, S.p.A, our European fluids systems and engineering subsidiary, which we refer to as Ava, had a swap arrangement in which Ava received a floating rate from a bank and paid a rate which varied based on inflation. Under the terms of the swap, Ava receives an annual payment from the bank based on a Euro notional amount of 4.0 million times the Euribor rate in effect as of the end of the determination period, and pays an annual amount to the bank based on the notional amount times a rate which varies according to both the Euribor rate and the published inflation rate for the Euro area. This arrangement requires annual settlements and matures in February 2015. At September 30, 2007, the fair value of this arrangement represents a liability of approximately $0.7 million.

          The remaining $38.6 million of debt outstanding at September 30, 2007 bears interest at a floating rate. At September 30, 2007, the weighted average interest rate under our floating-rate debt was approximately 7.10%. A 200 basis point increase in market interest rates during 2007 would cause our annual interest expense to increase approximately $0.4 million, net of taxes, resulting in less than a $0.01 per diluted share reduction in annual earnings.

Foreign Currency

          Our principal foreign operations are conducted in Canada, Brazil and in areas surrounding the Mediterranean Sea. 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. 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 because the dollar amount of these transactions has not warranted our using hedging instruments. However, during the quarter ended March 31, 2005, our Canadian subsidiary committed to purchase approximately $2.0 million of barite from one of our U.S. subsidiaries and we entered into a foreign currency forward contract arrangement to reduce its exposure to foreign currency fluctuations related to this commitment. During the quarter ended March 31, 2007, this contract expired and we have not entered into a similar contract.

ITEM 4. Controls and Procedures

(a) We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principle executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation and oversight of our principle executive officer and principal financial officer, evaluated the design and effectiveness of our disclosure controls and procedures as of the end of

the period covered by this report. Based on that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2007.

(c) Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, we used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Controls — Integrated Framework.” As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2006, in conducting this evaluation, the following material weaknesses were identified in our internal control over financial reporting:

	§		Management did not adequately monitor certain control practices to foster an environment that allowed for a consistent and open flow of information and communication between those who initiated transactions and those who were responsible for the financial reporting of those transactions, principally at one of our subsidiaries, Soloco Texas, LP. This control deficiency resulted in 2006 adjustments that were recorded by management and related to accounts receivable and revenues; and
	§		Management did not maintain effective controls over the recording of intangible assets. This control deficiency resulted in 2006 adjustments that were recorded by management and related to intangible assets and cost of revenues.

We implemented certain corrective actions in 2006, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2006. In order to further address the identified material weaknesses, management implemented additional corrective measures during 2007 including:

	§		We have distributed our Corporate Compliance and Business Ethics Manual (“Manual”) to all U.S. employees and are in the process of distributing the Manual to our international employees. We have also established a process to train all management level employees regarding the policies in the Manual and have established procedures for employees to certify they have read and understand the policies.
	§		We have activated our enhanced fraud hotline. We have also implemented an education campaign to inform employees of the hotline and its availability.
	§		We have implemented procedures to provide assurances that no side agreements exist between us, our subsidiaries or employees and our significant vendors or customers.
	§		We have further strengthened our controls in our Mats and integrated services segment surrounding the purchasing of products and services, particularly as they relate to receiving products at the operating locations.
	§		We have implemented a policy that requires senior division management approval prior to entering into any transaction to sell products or services to a customer that is also a vendor.
	§		Our Intellectual Property Committee, which was established in 2006 and became operational in 2007, is responsible for the oversight and review of the establishment of intangible assets on our books, setting of the useful lives of intangible assets, the periodic review of the useful lives of intangible assets and the periodic review for potential impairment of intangible assets. This committee meets on a quarterly basis to review our intangible assets.

We believe that the corrective actions described above, taken together with the corrective actions taken in 2006, remedied the identified material weaknesses described above, and have improved both our disclosure controls and procedures and internal control over financial reporting. However, these controls have not been tested as extensively as required for the annual evaluation under Section 404 of the Sarbanes-Oxley Act of 2002. Additionally, there may be some additional control procedures implemented in the future to further strengthen the controls over financial reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2007, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. Legal Proceedings

          The information set forth in the legal proceedings section of Note 7, “Commitments and Contingencies,” to our consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1.

ITEM 1A. Risk Factors

          There have been no material changes during the period ended September 30, 2007 in our risk factors as set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

	(a)		None.
	(b)		None.
	(c)		None.

ITEM 3. Defaults Upon Senior Securities

          Not applicable.

ITEM 4. Submission of Matters to a Vote of Security Holders

Not applicable.

ITEM 5. Other Information

          Not applicable.

ITEM 6. Exhibits

	10.1		Memberships Interests Agreement by and among Newpark Resources, Inc., Newpark Drilling Fluids, LLC, Newpark Texas LLC, Trinity TLM Acquisitions, LLC and Trinity Storage Services, LP.
	31.1		Certification of Paul L. Howes pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2		Certification of James E. Braun pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1		Certification of Paul L. Howes pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of James E. Braun pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

NEWPARK RESOURCES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 6, 2007

Exhibit Index

10.1		Memberships Interests Agreement by and among Newpark Resources, Inc., Newpark Drilling Fluids, LLC, Newpark Texas LLC, Trinity TLM Acquisitions, LLC and Trinity Storage Services, LP.
31.1		Certification of Paul L. Howes pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of James E. Braun pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Paul L. Howes pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of James E. Braun pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 10.1

MEMBERSHIP INTERESTS
PURCHASE AGREEMENT

BY AND AMONG

NEWPARK RESOURCES, INC.,
NEWPARK DRILLING FLUIDS LLC,
NEWPARK TEXAS, L.L.C.,
TRINITY TLM ACQUISITIONS, LLC,

AND

TRINITY STORAGE SERVICES, L.P.

Dated as of October 10, 2007

TABLE OF CONTENTS

ARTICLE I DEFINITIONS; INTERPRETATION					1
1.1		Defined Terms			1
1.2		Other Definitions			7
1.3		Interpretation; Absence of Presumption			10
1.4		Headings; Definitions			10
ARTICLE II THE SALE					11
2.1		Agreement to Purchase and Sell; Non-assumed Liabilities			11
2.2		Consideration			12
2.3		Closing			13
2.4		Working Capital Price Adjustment			15
2.5		Earn-Out Consideration			17
2.6		Purchase Price Allocation			21
2.7		Further Assurances			21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEWPARK					22
3.1		Organization and Qualification			22
3.2		Capitalization of the Transferred Entities			22
3.3		Authority Relative to This Agreement			23
3.4		Consents and Approvals; No Violations			23
3.5		Compliance with Law			24
3.6		Financial Statements; Liabilities			24
3.7		Absence of Certain Changes or Events			25
3.8		Litigation			26
3.9		Permits			26
3.10		Employee Benefits; Labor Matters			26
3.11		Brokers			29
3.12		Taxes			29
3.13		Environmental Matters			29
3.14		Title; Condition and Sufficiency of Assets			30
3.15		Intellectual Property			31
3.16		Material Contracts			31
3.17		Real Property			32
3.18		Inventory			33
3.19		Accounts Receivable			33
3.20		Insurance			33
3.21		Customers and Suppliers			34
3.22		No Other Representations or Warranties			34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER					34
4.1		Organization and Qualification			34
4.2		Authority Relative to This Agreement			34
4.3		Consents and Approvals; No Violations			35
4.4		Financing			35
4.5		Brokers			35

4.6		Acquisition of Transferred Interests			36
4.7		Limitation of Newpark’s Warranties			36
ARTICLE V COVENANTS					36
5.1		Access			36
5.2		Efforts			37
5.3		Further Assurances			38
5.4		Conduct of Business			38
5.5		Consents			40
5.6		Public Announcements			40
5.7		No Shop			40
5.8		Intercompany Accounts			40
5.9		Termination of Intercompany Agreements			40
5.10		Use of Names, etc.			41
5.11		Litigation Support			41
5.12		Noncompetition; Nonsolicitation			41
5.13		Labor Matters			42
5.14		Environmental Inspection			42
5.15		Post-Closing Covenants			45
ARTICLE VI EMPLOYEE MATTERS COVENANTS					46
6.1		Employees and Compensation			46
6.2		Welfare Benefits Plans			46
6.3		Miscellaneous Employee Issues			48
ARTICLE VII TAX MATTERS					48
7.1		Liability for Taxes and Related Matters			48
7.2		Transfer Taxes			50
ARTICLE VIII CONDITIONS TO OBLIGATIONS TO CLOSE					51
8.1		Conditions to Obligation of Each Party to Close			51
8.2		Conditions to Purchaser’s Obligation to Close			51
8.3		Conditions to DFI’s and Newpark Texas’ Obligations to Close			52
ARTICLE IX TERMINATION					53
9.1		Termination			53
9.2		Notice of Termination			54
9.3		Effect of Termination			54
ARTICLE X SURVIVAL AND INDEMNIFICATION					55
10.1		Survival Periods			55
10.2		Indemnification by Newpark, DFI and Newpark Texas			55
10.3		Indemnification by Purchaser and Trinity			56
10.4		Third-Party Claims			56
10.5		Limitations			57
10.6		Disregard of Materiality			58
10.7		Mitigation; Additional Indemnification Provisions			58

10.8		Exclusive Remedies			58
10.9		Tax Indemnification Matters			59
ARTICLE XI MISCELLANEOUS					59
11.1		Counterparts			59
11.2		Governing Law; Jurisdiction and Forum; Waiver of Jury Trial			59
11.3		Entire Agreement			59
11.4		Expenses			60
11.5		Notices			60
11.6		Successors and Assigns			60
11.7		Third-Party Beneficiaries			60
11.8		Amendments and Waivers			60
11.9		Severability			60

SCHEDULES

Schedule 1.3		–		Knowledge of Newpark
Schedule 3.2(a)		–		Liens
Schedule 3.2(c)		–		Capitalization of Transferred Entities
Schedule 3.4		–		Consents and Approvals
Schedule 3.6(a)		–		Financial Statements
Schedule 3.6(b)		–		Interim Financial Statements
Schedule 3.6(d)		–		Internal Controls
Schedule 3.7		–		Absence of Certain Changes and Events
Schedule 3.8		–		Litigation
Schedule 3.9		–		Permits
Schedule 3.10(a)		–		Employee Benefits
Schedule 3.10(b)		–		Compliance with ERISA and Code Section 409A
Schedule 3.10(c)		–		Contributions or Payments
Schedule 3.10(f)		–		Transferred Employees
Schedule 3.10(j)		–		Claims
Schedule 3.12		–		Tax Matters
Schedule 3.13(a)		–		Environmental Matters
Schedule 3.13(b)		–		Environmental Permits
Schedule 3.13(d)		–		Third Party Disposal Sites
Schedule 3.14(a)		–		Title
Schedule 3.14(b)		–		Condition of Assets
Schedule 3.15(a)		–		Transferred Intellectual Property
Schedule 3.15(c)		–		Infringement Matters
Schedule 3.16		–		Material Contracts
Schedule 3.17(a)		–		Owned Real Property
Schedule 3.17(b)		–		Leased Real Property
Schedule 3.19		–		Accounts Receivable
Schedule 3.20		–		Insurance Policies
Schedule 3.21		–		Customers and Suppliers
Schedule 5.4		–		Conduct of Business
Schedule 5.9		–		Intercompany Agreements
Schedule 5.12(c)		–		Nonsolicitation for Employees
Schedule 5.15(b)		–		Fourchon Sublease Agreement
Schedule 6.1(b)		–		Excluded Post-Closing Benefits
Schedule 6.2(f)		–		Severance Benefits
Schedule 8.2(g)		–		Lafayette Sublease Agreement
Schedule 8.2(i)		–		Additional Conditions
Schedule 10.2(d)		–		Indemnification

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

     This MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”), dated as of October 10, 2007, is entered into by and among Newpark Resources, Inc., a Delaware corporation (“Newpark”), Newpark Drilling Fluids LLC, a Texas limited liability company and a direct wholly-owned subsidiary of Newpark (“DFI”), Newpark Texas, L.L.C., a Louisiana limited liability company and an indirect wholly-owned subsidiary of Newpark (“Newpark Texas”), Trinity Storage Services, L.P., a Texas limited partnership (“Trinity”), and Trinity TLM Acquisitions, LLC, a Texas limited liability company (“Purchaser”), and an Affiliate of Trinity.

RECITALS

     WHEREAS, DFI owns all of the outstanding membership interests of Newpark Environmental Services, LLC, a Texas limited liability company (“NESI”);

     WHEREAS, NESI owns (i) all of the outstanding membership interests of Newpark Environmental Management Company, L.L.C., a Louisiana limited liability company (“NESI Management”), and (ii) all of the outstanding limited partner interests in Newpark Environmental Services Mississippi, L.P., a Mississippi limited partnership (“NESI Mississippi”);

     WHEREAS, Newpark Texas owns all of the outstanding general partner interest in NESI Mississippi;

     WHEREAS, NESI and its Subsidiaries are engaged in the business of receiving, transferring, processing and disposal of non-hazardous exploration and production waste generated in the oil and gas industry and the processing and disposal of non-hazardous industrial waste generated by refiners, manufacturers, service companies and industrial municipalities located primarily in the United States Gulf Coast area;

     WHEREAS, DFI desires to sell and transfer all of its interest in NESI and Newpark Texas desires to sell and transfer all of its general partner interest in NESI Mississippi;

     WHEREAS, Purchaser desires to purchase from DFI all of its interest in NESI and from Newpark Texas all of its interest in NESI Mississippi; and

     WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS; INTERPRETATION

     1.1 Defined Terms. For the purposes of this Agreement, the following terms shall have the following meanings:

     (a) “Acquired Interests” shall mean all of the outstanding (i) membership interests in NESI, and (ii) general partner interests in NESI Mississippi.

     (b) “Action” shall mean any action, claim, suit, arbitration, litigation, proceeding or investigation by any Person or by or before any Governmental Entity.

     (c) “Affiliate” shall mean, with respect to any Person, any other Person that directly, or through one or more intermediaries, controls or is controlled by or is under common control with such Person; provided, that, after the Closing, (i) none of the Transferred Entities shall be considered an Affiliate of Newpark or any of Newpark’s Affiliates and (ii) none of Newpark or any of Newpark’s Affiliates shall be considered an Affiliate of any Transferred Entity. For purposes of this Agreement, “control” shall mean, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise (and the terms “controlled by” and “under common control with” shall have correlative meanings).

     (d) “Benefit Plan” shall mean any “employee benefit plan,” as defined in Section 3(3) of ERISA (whether or not subject to ERISA), and any other plan, policy, program, practice, agreement, understanding or arrangement (whether written or oral) providing compensation or other benefits to any current or former director, officer, manager, member, employee or consultant (or to any dependent or beneficiary thereof) of a Transferred Entity, which is now (or was within the past six (6) years) maintained, sponsored or contributed to by Newpark or its Subsidiaries, under which any Transferred Entity has any present or future significant obligation or liability, whether actual or contingent, including but not limited to all profit-sharing, bonus, stock option, stock purchase, stock appreciation, restricted stock, phantom stock, or other stock or equity-based compensation, pension, retirement, severance, deferred compensation, excess benefit, supplemental unemployment, post-retirement medical or life insurance, welfare, flexible benefit, cafeteria, incentive, sick leave, long-term disability, medical, hospitalization, life insurance, other insurance or employee benefit plan.

     (e) “Business” shall collectively mean the business conducted by the Transferred Entities relating to (x) the receiving, transferring, processing and disposal of non-hazardous exploration and production wastes generated in the oil and gas industry that is exempt from RCRA, including waste that is contaminated with naturally occurring radioactive materials (“NORM”), primarily for generators in the United States Gulf Coast and Permian Basin areas, and (y) the processing and disposal of non-hazardous industrial wastes generated by refiners, manufacturers, service companies and industrial municipalities located primarily in the United States Gulf Coast.

     (f) “Business Day” shall mean any day that is not a Saturday, a Sunday or other day on which commercial banks in the City of Houston, Texas, are required or authorized by Law to be closed.

     (g) “COBRA Continuation Coverage” shall mean the continuation coverage requirements under Code Section 4980B and Part 6 of Title I of ERISA, or comparable provisions of state and local Law.

     (h) “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

     (i) “Confidentiality Agreement” shall mean the Confidentiality Agreement dated March 22, 2007, by and among Newpark, Trinity and Moss Bluff Property, LP.

     (j) “Contract” shall mean any agreement, indenture, deed of trust, note, bond, mortgage, lease, license, commitment, guarantee, purchase order, contract, obligation or undertaking (whether written or oral and whether express or implied).

     (k) “Environmental Laws” shall mean any Law relating to pollution or the protection of the environment or natural resources; to releases, discharges, emissions or disposals to air, water, land or groundwater of Hazardous Materials; to the use, handling, transport, release or disposal of polychlorinated biphenyls, asbestos or urea formaldehyde or any other Hazardous Material; to the treatment, storage, disposal or management of Hazardous Materials; including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq. (“CERCLA”), the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq. (“RCRA”), the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. (“TSCA”), the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001, et seq. (“EPCRA”); and other comparable foreign, state and local Laws, including the Texas Natural Resources Code (only insofar as it relates to pollution or the protection of the environment or natural resources), and all rules, regulations and guidance documents promulgated pursuant thereto or published thereunder.

     (l) “Environmental Permits” means all Permits issued by Governmental Entities that are required under Environmental Laws in connection with the Business.

     (m) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     (n) “Former Employee” shall mean an individual who, as of immediately prior to the Closing, is not a current employee of Newpark or any of its Affiliates (including the Transferred Entities, DFI and Newpark Texas) in any capacity but who, during any period prior to the Closing, was primarily employed by the Transferred Entities, Newpark Texas, DFI, Newpark or its other Subsidiaries in connection with the Business (as opposed to the other businesses of Newpark, its Subsidiaries or Affiliates).

     (o) “GAAP” shall mean generally accepted accounting principles in the United States as in effect at the time the applicable financial statements were prepared.

     (p) “Governmental Entity” shall mean any court, administrative agency, commission or other governmental authority, body or instrumentality, federal, state, local, domestic or foreign governmental or regulatory authority or any self-regulatory authority or arbitral or similar forum.

     (q) “Hazardous Materials” shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under Environmental Laws or the release of which is

regulated under Environmental Laws. Without limiting the generality of the foregoing, the term includes: “hazardous substances” as defined in CERCLA; “extremely hazardous substances” as defined in EPCRA; “hazardous waste” as defined in RCRA; crude oil, petroleum products or any fraction thereof; radioactive materials including source, byproduct or special nuclear materials; asbestos or asbestos-containing materials; chlorinated fluorocarbons; and radon.

     (r) “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     (s) “Indebtedness” means, without duplication: (i) the principal of and premium (if any) in respect of all indebtedness for borrowed money, including accrued interest, (ii) bank overdrafts (excluding undrawn lines) and outstanding checks to the extent treated as negative cash, accounts payable, bank overdrafts or otherwise included as debt in the financial statements of the Transferred Entities (it being understood that only the amount of such bank overdraft or the portion of the check that is treated as negative cash, accounts payable, bank overdraft or debt shall be treated as “Indebtedness”), and (iii) lease obligations that are properly classified as a capital lease on a balance sheet in accordance with GAAP (“Capital Leases”); provided, that “Indebtedness” shall not include (A) trade payables, accrued expenses and intercompany or intracompany liabilities arising in the ordinary course of business, or (B) any liability for Taxes.

     (t) “Intellectual Property” means all U.S. and foreign or multinational intellectual property, including all trademarks, service marks and trade names (“Trademarks”), mask works, inventions, patents, copyrights and copyrightable works, trade secrets and know-how (including any registrations or applications for registration of any of the foregoing) and all other similar types of proprietary intellectual property rights arising under the Laws of any country or jurisdiction.

     (u) “Inventory” means all inventory of each of the Transferred Entities, wherever located, including raw materials, works-in-progress, finished goods, consigned goods, supplies, scrap, wrappings, supply and packaging terms, containers and spare parts.

     (v) “Law” shall mean any federal, state, local or foreign law (including common law), statute, ordinance, rule, regulation, judgment, code, order, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Entity.

     (w) “Liens” shall mean all liens, pledges, charges, claims, security interests, purchase agreements, options, title defects, restrictions on transfer, imperfections of title, easements, encroachments, options, rights of first refusal, rights of first offer or other encumbrances and agreements of any nature whatsoever, whether consensual, statutory or otherwise; provided, that, with respect to the Transferred Interests, “Liens” shall not include any of the foregoing as set forth in the Organizational Documents of any of the Transferred Entities.

     (x) “Losses” shall mean all losses, costs, charges, expenses (including interest and penalties due and payable with respect thereto and reasonable attorneys’ and other professional fees and expenses in connection with any Action whether involving a third-party claim or any claim solely between the parties hereto), obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, demands, claims, assessments or deficiencies.

     (y) “Material Adverse Effect” shall mean any event, circumstance, change or effect that has or would reasonably be expected to have a material adverse effect on the Business, results of operations or financial condition of the Transferred Entities, taken as a whole; provided, however, that no change or effect arising out of or resulting from any of the following shall be deemed by itself or by themselves, either alone or in combination, to constitute or contribute to a Material Adverse Effect:

     (i) general changes affecting the industries or markets in which the Business operates, provided, that any such change does not have or cause a disproportionate effect on the Transferred Entities;

     (ii) general political or economic conditions or changes therein (including the commencement, continuation or escalation of a war, material armed hostilities or other material international or national calamity or acts of terrorism or earthquakes, hurricanes, other natural disasters or acts of God), provided that with respect to earthquakes, hurricanes, other natural disasters or acts of God, any such events do not have or cause a disproportionate effect on the Transferred Entities;

     (iii) general financial or capital market conditions, including interest rates or currency exchange rates, or changes therein;

     (iv) any changes in applicable Law or GAAP or other accounting standards, or authoritative interpretations thereof, from and after the date of this Agreement, provided, that any such change in Law does not make it illegal for the Transferred Entities to continue to conduct the Business in substantially the same manner in which it is conducted on the date of this Agreement;

     (v) the announcement of the potential sale of the Business; the negotiation, execution, announcement or existence of this Agreement or the consummation of the transactions contemplated by this Agreement; or changes or actions directly resulting from any of the foregoing, including any change in the relationships of the Transferred Entities with their respective customers, suppliers or employees; and

     (vi) any action or omission required pursuant to the terms of this Agreement, or pursuant to the express written request of Purchaser.

     (z) “Measurement Period” shall mean a twelve (12) month period ending December 31; provided, however, that if the Closing occurs in 2008, the initial Measurement Period shall commence on the first day of the calendar month immediately following the Closing and end on December 31, 2008.

     (aa) “Newpark Change of Control” shall mean (i) a merger or consolidation of Newpark with or into any other corporation or other entity or Person or (ii) a sale, lease, exchange or other transfer in one transaction or series of related transactions of all or substantially all of Newpark’s outstanding securities or all or substantially all of Newpark’s assets; provided, that the following events shall not constitute a “Newpark Change of Control”: (A) a merger or consolidation of Newpark in which the holders of the voting securities of Newpark immediately prior to the merger or consolidation hold at least a majority of the voting

securities in the successor corporation immediately after the merger or consolidation; (B) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of Newpark’s assets to a wholly-owned subsidiary; or (C) the reincorporation of Newpark.

     (bb) “Newpark Group Health Plan” shall mean the benefit programs under Newpark’s group benefits plan providing health, medical, prescription drug, dental and vision benefits other than through a Section 125 health care flexible spending account.

     (cc) “Organizational Documents” of any Person means, as applicable, the following documents or equivalent governing documents: (i) the articles of incorporation and bylaws of any Person that is a corporation, (ii) the certificate of formation and company agreement of any Person that is a limited liability company, or (iii) the certificate of formation and partnership agreement of any Person that is a partnership, including any amendments to any of the foregoing documents.

     (dd) “Permitted Liens” means the following Liens: (a) Liens for Taxes, assessments or other governmental charges or levies that are not yet due or payable or that are being contested in good faith by appropriate proceedings or that may thereafter be paid without penalty if, to the extent required by GAAP, adequate reserves with respect thereto are maintained on the books of the Transferred Entities in accordance with GAAP; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen, workmen, repairmen and other similar Liens imposed by Law and on a basis consistent with past practice; (c) Liens incurred or deposits made in the ordinary course of business and on a basis consistent with past practice in connection with workers’ compensation, unemployment insurance or other types of social security; (d) defects or imperfections of title, easements, covenants, rights-of-way, restrictions and other similar non-monetary charges or encumbrances not materially detracting from the value of or materially interfering with the use or operation of the affected property within the ordinary conduct of the Business; (e) Liens incurred in the ordinary course of business and on a basis consistent with past practice and the provisions of Section 5.4 hereof securing obligations or liabilities that are not material to the Transferred Entities or the Transferred Interests; and (f) easements, covenants, rights-of-way and other similar conditions and restrictions (i) recorded in the applicable real property records of the county in which the affected property is located, (ii) that may reasonably be shown or identified by survey or physical inspection of the affected property, or (iii) set forth in applicable zoning, building and other similar regulations, so long as no such matter identified in clauses (i), (ii) or (iii) prevents or materially hinders or interferes with the use of such affected property substantially as currently used for the purposes of the Business.

     (ee) “Permits” means all franchises, approvals, consents, permits, authorizations, licenses, orders, registrations, certificates, variances or other similar rights obtained from any Governmental Entity.

     (ff) “Person” shall mean a person, group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), corporation, partnership, limited liability company, joint venture, trust or other entity or organization, including a Governmental Entity.

     (gg) “Subsidiary” shall mean, with respect to any Person, any corporation, entity or other organization whether incorporated or unincorporated, of which (i) such first Person directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions or (ii) such first Person is a general partner, manager or managing member.

     (hh) “Tax” shall mean any tax of any kind, including any federal, state, local and foreign (including any political subdivision thereof) income, profits, license, severance, occupation, windfall profits, capital gains, capital stock, transfer, registration, social security (or similar), production, franchise, gross receipts, margin, payroll, sales, employment, use, property, excise, value added, estimated, stamp, alternative or add-on minimum, environmental, withholding and any other tax or assessment, together with all interest, penalties and additions imposed with respect to such amounts.

     (ii) “Tax Benefit” shall mean any decrease in Taxes paid or increase in a refund due, including any interest with respect thereto.

     (jj) “Tax Return” shall mean any return, declaration, report, claim for refund or information return or statement filed or required to be filed with any taxing authority relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

     (kk) “Transferred Employee” shall mean an individual who is, at the time of the Closing, employed by any of the Transferred Entities. “Transferred Employee” shall also include any employee of any Transferred Entity at the time of Closing who is on short-term disability, sick leave or other authorized leave of absence or military leave.

     (ll) “Transferred Entities” shall mean NESI, NESI Management and NESI Mississippi.

     (mm) “Transferred Interests” shall collectively mean (i) the Acquired Interests, (ii) all of the outstanding membership interests in NESI Management, and (iii) all of the outstanding limited partnership interests of NESI Mississippi.

     (nn) “Treasury Regulations” shall mean the Treasury Regulations promulgated under the Code.

     (oo) “Welfare Plan” shall mean any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any short-term disability program classified as a “payroll practice,” any group health plan within the meaning of Code Section 105, any cafeteria plan within the meaning of Code Section 125, any dependent care assistance program within the meaning of Code Section 129, any adoption assistance plan within the meaning of Code Section 137, any tuition assistance plan within the meaning of Code Section 127, and any qualified transportation plan within the meaning of Code Section 132, other than any severance plan.

     1.2 Other Definitions. The following terms shall have the meanings defined in the Section indicated:

Accelerated Earn-Out Payment		Section 2.5(e)
Accounting Arbitrator		Section 2.4(b)
Acquired Business		Section 5.12(b)
Acquired Company		Section 5.12(b)
Acquisition Transaction		Section 5.7
Act		Section 3.2(a)
Agreement		Preamble
Alleged Recognized Environmental Condition		Section 5.14(b)
Alleged Recognized Environmental Cost		Section 5.14(c)(i)
Allocation Statement		Section 2.6
Annual Financial Statements		Section 3.6(a)
ASTM E1527-05		Section 5.14(a)
Baseline EBITDA		Section 2.5(c)
Capital Leases		Section 1.1(s)
CERCLA		Section 1.1(k)
Claim		Section 2.2(b)
Closing		Section 2.1(a)
Closing Date		Section 2.3(a)
Closing Date Net Working Capital		Section 2.4(b)
Corporate Guaranty		Section 5.15(a)
Covered Business		Section 5.12(a)
Credit Agreement		Section 2.1(b)(v)
Current Assets		Section 2.4(c)
Current Liabilities		Section 2.4(c)
Deductible		Section 10.5(a)
DFI		Preamble
Divestiture Threshold		Section 5.12(b)
Due Date		Section 7.1(e)
Earn-Out Consideration		Section 2.5
Earn-Out Dispute Notice		Section 2.5(d)(ii)
Effective Time		Section 2.3(a)
Environmental Dispute		Section 5.14(d)
Environmental Inspection Period		Section 5.14(b)
Environmental Report		Section 5.14(c)
EPCRA		Section 1.1(k)
EPCRS		Section 3.10(a)
Escrow Account		Section 2.2(b)
Escrow Agent		Section 2.2(b)
Escrow Agreement		Section 2.2(b)
Estimated Baseline EBITDA		Section 2.5(c)
Estimated Closing Statement		Section 2.4(a)
Estimated Net Working Capital		Section 2.4(a)
Estimated Net Working Capital Deficiency Amount		Section 2.4(a)(ii)
Estimated Net Working Capital Excess Amount		Section 2.4(a)(ii)
Final Closing Statement		Section 2.4(b)
Final Working Capital Adjustment		Section 2.4(b)

Fourchon Sublease		Section 5.15(b)
Holdback Funds		Section 2.2(b)
Indemnified Parties		Section 10.3
Indemnifying Party		Section 10.4
Initial Closing Consideration		Section 2.2(a)
Interim Financial Statements		Section 3.6(b)
IRS		Section 3.10(a)
Lafayette Sublease Agreement		Section 8.2(g)
Leased Real Property		Section 3.17(b)
Management		Section 3.13(c)
Material Contracts		Section 3.16
Maximum Earn-Out Amount		Section 2.5(a)
MBP		Section 2.5(b)
Measurement Period Earn-Out Payment		Section 2.5(a)
Minimum Claim Amount		Section 10.5(a)
NESI		Recitals
NESI Management		Recitals
NESI Mississippi		Recitals
Net Working Capital		Section 2.4(c)
Newpark		Preamble
Newpark Breach		Section 9.1(d)
Newpark Disclosure Schedule		Article III
Newpark Indemnified Parties		Section 10.3
Newpark Texas		Preamble
NMIS		Section 8.2(g)
Non-assumed Liabilities		Section 2.1(b)
NORM		Section 1.1(e)
Notice of Alleged Recognized Environmental Conditions		Section 5.14(b)
Order		Section 3.8
Outside Date		Section 9.1(b)
Owned Real Property		Section 3.17(a)
Phase I Report		Section 5.14(b)
Phase II Report		Section 5.14(b)
Post-Closing EBITDA		Section 2.5(b)
Post-Closing Period		Section 7.1(b)
Pre-Closing Period		Section 7.1(a)
Predecessor Entities		Section 3.1(b)
Purchase Price		Section 2.2(a)
Purchaser		Preamble
Purchaser Breach		Section 9.1(c)
Purchaser Indemnified Parties		Section 10.2
RCRA		Section 1.1(k)
Real Property Lease		Section 3.17(b)
Recapitalization		Section 2.5(e)
Remaining Alleged Recognized Environmental Conditions		Section 5.14(c)(iii)
Restricted Period		Section 5.12(a)