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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 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.)
3850 N. CAUSEWAY, SUITE 1770
METAIRIE, LOUISIANA 70002
(Address of principal executive offices) (Zip Code)
(504) 838-8222
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
8-5/8% Senior Subordinated Notes due 2007, Series B New York Stock Exchange
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 X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
At March 26 , 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $1,191,687,350. The aggregate market value
has been computed by reference to the closing sales price on such date, as
reported by The New York Stock Exchange.
As of March 26, 1998, a total of 64,780,194 shares of Common Stock, $.01
par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G(3) to this form, the information required
by Part III (Items 10, 11, 12 and 13 hereof) is incorporated by reference from
the registrant's definitive Proxy Statement for its Annual Meeting of
Stockholders scheduled to be held on May 13, 1998.
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NEWPARK RESOURCES, INC.
INDEX TO FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
ITEM PAGE
NUMBER DESCRIPTION NUMBER
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PART I
1 Business 3
2 Properties 22
3 Legal Proceedings 23
4 Submission of Matters to a Vote of Security Holders 24
PART II
5 Market for the Registrant's Common Equity and 25
Related Stockholder Matters
6 Selected Financial Data 26
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 27
7A Quantitative and Qualitative Disclosures About Market Risk 33
8 Financial Statements and Supplementary Data 34
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 55
PART III
10 Directors and Executive Officers of the Registrant 56
11 Executive Compensation 56
12 Security Ownership of Certain Beneficial Owners
and Management 56
13 Certain Relationships and Related Transactions 56
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 57
Signatures 60
Note: The responses to Items 10, 11, 12 and 13 are included
in the registrant's definitive Proxy Statement for
its Annual Meeting of Stockholders scheduled to be
held on May 13, 1998. The required information is
incorporated into this Report by reference to such
document and is not repeated here.
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PART I
ITEM 1. BUSINESS
GENERAL
Newpark Resources, Inc. ("Newpark" or the "Company") is a leading
provider of proprietary and integrated environmental and drilling fluids
services to the oil and gas exploration and production industry, primarily in
the U. S. Gulf Coast market. Services provided by the Company, either
individually or as part of a comprehensive package, include: (i) processing and
disposal of oilfield exploration and production ("E&P") waste; (ii) drilling
fluids and associated engineering and technical services; (iii) installation,
rental and sale of temporary access roads and work sites ("mat rental") in
oilfield and other construction applications; and, (iv) other related on-site
environmental and oilfield construction services. In order to take advantage of
many customers' desire to consolidate outsourced services and reduce the number
of vendors used, Newpark has integrated its drilling fluids products and
services with both its on-site environmental and construction services and its
off-site waste disposal services to provide a "one-stop shop" approach to
solving its customers' problems. The Company is further developing its
capability to process and recycle drilling fluids on the well-site in order to
provide a further integration step which it calls "Total Fluids Management."
Most of the E&P waste received by Newpark is processed for injection
into environmentally secure geologic formations deep underground. Certain
volumes of waste are delivered to surface disposal facilities. E&P waste not
disposed of by these means is processed into a product which is used as daily
cover material or cell liner and construction material at two municipal waste
landfills. Since 1994, Newpark has been licensed to process E&P waste
contaminated with naturally occurring radioactive material ("NORM"). The Company
currently operates under a license that authorizes the injection of NORM into
disposal wells at its Big Hill Texas, facility, the only offsite facility in the
U. S. Gulf Coast licensed for this purpose.
Newpark is a full service provider of drilling fluids and associated
engineering and technical services in the U. S. Gulf Coast market. Since
December 1997, the Company also has marketed its services in Mexico through a
joint venture with a Mexican company and has recently announced the planned
expansion of its operations into Canada by acquisition of a Canadian drilling
fluids company. In its drilling fluids business, Newpark focuses on providing
unique solutions to highly technical drilling projects involving complex
conditions, as these projects require critical engineering support of the fluids
system during the drilling process to ensure optimal performance at the lowest
total well cost. The Company has developed and begun to market several
proprietary and patented products that replace environmentally harmful
substances commonly used in drilling fluids and that are the elements of
greatest environmental concern in the waste stream created by drilling fluids.
The Company believes that these new products will benefit its customers by
reducing the cost of drilling.
Newpark has initiated a process to recycle a portion of the drilling
fluids received as waste in its E&P waste disposal business to (i) recover
barite and other key chemical components for reuse in the production of drilling
fluids, (ii) reduce the cost of materials in producing drilling fluids and (iii)
expand Newpark's supply of drilling fluids. During 1997, the Company established
its own barite grinding capacity to provide critical raw materials for its
drilling fluids operations and
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assembled the service infrastructure necessary to participate in the market in
the U.S. Gulf Coast and South Texas.
Newpark provides temporary access roads and worksites in unstable soil
conditions, primarily in support of oil and gas exploration operations along the
U.S. Gulf Coast, using its patented interlocking wooden mat systems. These sites
are typically rented to the customer for the duration of use, and are
occasionally sold to the customer to provide permanent access to a site or
facility. Newpark also markets its mat services for use in the construction of
pipelines, electrical distribution systems and highways in and through wetlands
environments, including the coastal areas of the Southeastern U.S.,
particularly Florida and Georgia. Newpark also markets its mat services to the
oil and gas exploration industries in Canada, Venezuela, Mexico and Algeria.
Newpark provides other services for its customers' oil and gas
exploration and production activities, including site assessment, waste pit
design, construction and installation, regulatory compliance assistance, site
remediation and closure, and oilfield construction services, including hook-up
and connection of wells and installation of production equipment.
Newpark was organized in 1932 as a Nevada corporation and in April 1991
changed its state of incorporation to Delaware. The Company's principal
executive offices are located at 3850 North Causeway Boulevard, Suite 1770,
Metairie, Louisiana 70002, and its telephone number is (504) 838-8222.
INDUSTRY FUNDAMENTALS
Demand for Newpark's services is being driven by several significant
trends: (i) increasing oil and gas exploration and production expenditures and
activity; (ii) the desire to drill in more environmentally difficult
environments, such as the coastal marsh and inland waters near the coastline
("transition zone") of the Gulf Coast, (iii) more complex drilling techniques,
which tend to generate more waste; and (iv) increasing environmental regulation
of E&P waste and NORM.
The demand for all of Newpark's services is heightened with increased
oil and gas drilling activity. According to the Baker-Hughes Rotary Rig Count,
the number of drilling rigs working in the U.S. Gulf Coast region recently
reached its highest level since 1990, and the average rig count in the region
for the year ended December 31, 1997 was the highest average since 1985.
Much of the increase in drilling within the market served by Newpark is
focused in the environmentally sensitive transition zone. Newpark believes that
technological advances that have reduced the risk and cost of finding oil and
gas is an important factor in the recent upturn in activity. These advances
include the use of three dimensional seismic data and the computer-enhanced
interpretation of that data, which increases the likelihood of drilling a
successful well, and improved drilling tools and fluids, which facilitate faster
drilling and reduce the overall cost. These advances also have increased the
willingness of exploration companies to drill in coastal marshes and inland
waters, and to drill deeper wells. Such projects rely heavily on services such
as those provided by Newpark. Deeper wells require the construction of larger
locations to accommodate larger drilling rigs and the equipment for handling
drilling fluids and associated wastes. Such locations are generally in service
for significantly longer periods, generating additional mat rental revenues.
Deeper wells also require more complex drilling fluid programs, which generate
wastes that are more difficult and costly to dispose of than those from simpler
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systems used in shallower wells. These same technology-related issues are
affecting drilling operations throughout the world. Newpark believes that deeper
drilling has contributed significantly to the increased demand for its services.
The oilfield market for environmental services has experienced growth
due to increased regulatory activity regarding the disposal of exploration and
production wastes. Louisiana, Texas and other states have enacted comprehensive
laws and regulations governing the proper handling of E&P waste and NORM, and
regulations have been proposed in other states. As a result, generators of waste
and landowners have become increasingly aware of the need for proper treatment
and disposal of such waste in both the drilling of new wells and the remediation
of production facilities. Similar sensitivity to environmental concerns exists
in many markets world-wide.
For many years, prior to current regulation, industry practice was to
allow E&P waste to remain in the environment. Onshore, surface pits were used
for the disposal of E&P waste; offshore or in inland waters, E&P waste was
discharged directly into the water. Since 1990, E&P waste has become subject to
increased public scrutiny and increased federal and state regulation. These
regulations have imposed strict requirements for ongoing drilling and production
activities in certain geographic areas, as well as for the remediation of sites
contaminated by past disposal practices and, in many respects, have prohibited
the prior disposal practices. In addition, operators have become increasingly
concerned about long-term liability for remediation, and landowners have become
more aggressive in requiring land restoration. For these reasons, operators are
increasingly retaining service companies such as Newpark to devise and implement
comprehensive waste management techniques to handle waste on an ongoing basis
and to remediate past contamination of oil and gas properties.
The Clean Water Act is the primary legislation resulting in these
regulations. Between 1990 and 1995, substantially all discharges of waste from
drilling and production operations on land (the "onshore subcategory") and in
the transition zone (the "coastal subcategory") were prohibited. This "zero
discharge" standard has become the expected pattern for the industry. Effective
December 4, 1997, discharges of waste from drilling operations in state
territorial waters of the Gulf of Mexico (the "territorial waters subcategory"),
were prohibited. Newpark immediately noticed an increase in waste volume
received from this subcategory in its daily operations. As of December 31, 1997,
the offshore waters of the Gulf of Mexico (the "offshore sub-category") were the
only surface waters of the United States into which such waste discharges are
allowed. Continued implementation of the Clean Water Act is expected to result
in further tightening of discharge regulations affecting the offshore waters of
the Gulf of Mexico, however, the timing of the implementation of these
regulations is uncertain
NORM regulations require more stringent worker protection, handling and
storage procedures than those required of E&P waste under Louisiana regulations.
Equivalent rules governing the handling and disposal of NORM in Texas have also
been adopted. Similar regulations have been proposed or adopted in Mississippi,
New Mexico, Arkansas and Oklahoma.
BUSINESS STRENGTHS
Proprietary Products and Services. Over the past 15 years, Newpark has
acquired, developed, and continued to improve its patented or proprietary
technology and know-how which has enabled the Company to provide innovative and
unique solutions to oilfield construction and
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waste disposal problems. The Company has developed and expects to continue to
introduce similarly innovative products and services in its drilling fluids
business. Newpark believes that increased customer acceptance of its proprietary
products and services has enabled it to take advantage of the recent upturn in
drilling and production activity.
Injection of Waste. Since 1992, Newpark has developed and used
proprietary technology to dispose of E&P waste by low-pressure injection into
unique geologic structures deep underground. In December 1996, Newpark was
issued patents covering its waste processing and injection operations. Newpark
believes that its injection technology is currently the most cost-effective
method for the offsite disposal of oilfield wastes and that this technology is
suitable for disposal of other types of waste. Newpark recently has filed an
application for a permit to operate a non-hazardous industrial waste facility in
Texas.
Patented Mats. Newpark owns or licenses several patents that cover its
wooden mats and subsequent improvements. To facilitate entry into new markets
and reduce the Company's dependence on the supply of hardwoods, Newpark has
obtained the exclusive license for a new patented composite mat manufactured
from recycled plastics and other synthetic materials. Through a 49% owned joint
venture, the Company has constructed a manufacturing facility to produce these
new composite mats and this facility is expected to begin production in the
second half of 1998.
Low Cost Infrastructure. Newpark has assembled an infrastructure in the
U.S. Gulf Coast region that includes (i) injection disposal sites, transfer
stations, barges and numerous permits relating to their operation; (ii) mat
inventories, mat service centers, a hardwood sawmill to produce lumber for the
construction of mats; and (iii) drilling fluids distribution centers, service
facilities and barite mills to supply raw materials for the make-up of drilling
fluids. Newpark believes that it owns, leases or has options to acquire a
majority of the available injection disposal sites in the U.S. Gulf Coast
suitable for its proprietary injection methods. Newpark also owns or leases
under long-term charter 43 of the 57 barges currently licensed to transport E&P
waste and NORM. Newpark built a substantial portion of its infrastructure during
the depressed market conditions that prevailed prior to 1996 and believes that,
under current market conditions, its infrastructure could be duplicated only at
significantly higher cost.
Integration of Services. Newpark believes it is one of the few
companies in the U.S. Gulf Coast able to provide a package of integrated
services and offer a "one-stop shop" approach to solving customers' site
management and drilling fluids management problems. Newpark's mats provide the
access roads and worksites for a majority of the land drilling in the Gulf Coast
market. Its on-site and off-site waste management services are frequently sold
in combination with mat rental services. Newpark's entry into the drilling
fluids business has created the opportunity for it to market drilling fluids
with other related services, including technical and engineering services,
recycling of used drilling fluids and, disposal of used fluids and other waste
material. The Company also provides construction services (installation at
production facilities), site cleanup and site closure. Consequently, Newpark
believes that it is uniquely positioned to take advantage of the industry trend
towards outsourcing and vendor consolidation.
Experience in Regulatory Environment. Newpark believes that its
operating history provides it with a competitive advantage in the highly
regulated oilfield waste disposal business. As a result of working closely with
regulatory officials and citizens' groups, Newpark has gained acceptance for its
proprietary injection technology and has received a series of permits for the
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Company's disposal facilities, including a permit allowing the disposal of NORM
at Newpark's Big Hill, Texas facility. These permits enable Newpark to expand
its business and operate cost-effectively. Newpark believes that its proprietary
injection method is superior to alternative methods of disposal of oilfield
wastes, including landfarming, because injection provides greater assurance that
the waste is permanently isolated from the environment and will not contaminate
adjacent property or groundwater. Newpark further believes that increasing
environmental regulation and activism will inhibit the widespread acceptance of
other disposal methods and the permitting of additional disposal facilities.
Experienced Management Team. Newpark's executive and operating
management team has built and augmented Newpark's capabilities over the past ten
years, allowing it to develop a base of knowledge and a unique understanding of
the oilfield construction and waste disposal markets. Newpark's executive and
operating management team has an average of 22 years of industry experience, and
an average of eight years with Newpark, including several who have been with
Newpark for 20 years or more. Newpark has strengthened its management team by
retaining key management personnel of the companies it has acquired and by
attracting additional experienced personnel.
BUSINESS STRATEGY
Implement Newpark's Total Fluids Management Concept. Newpark's strategy
is to integrate its operations to provide a "one-stop shop" approach to solving
customers' problems. By integrating its drilling fluids and waste disposal
services with other on-site fluids management and solids control and processing
services, Newpark intends to provide a comprehensive solution to the management
of the total fluids stream. Newpark calls this concept "Total Fluids Management"
and believes that its ability to provide a comprehensive package of products and
services reduces the total cost to the customer and increases operating
efficiency.
Service and Product Extensions. Newpark believes that it can apply the
waste processing and injection technology it has pioneered and developed in the
oil and gas exploration industry to other industrial waste markets. Initially,
Newpark intends to focus on wastes generated in the petrochemical processing and
refining industries, as many potential customers in these industries are located
in the markets already served by Newpark, and certain wastes generated by these
industries have many of the same characteristics as the E&P waste currently
handled by Newpark. In addition, Newpark will continue to evaluate the
applicability of its injection disposal methods to other waste streams. Newpark
is pursuing the development of a composite mat system to enhance its current mat
fleet and expand into new markets. Newpark believes that composite mats may also
have certain military and emergency response applications.
Geographic Expansion. Newpark believes that expansion opportunities
exist in each of its product lines domestically and in selected foreign markets.
Newpark intends to expand its oilfield waste disposal operations into West Texas
and the Permian Basin, with initial international expansions planned for Mexico,
Canada and Venezuela. As part of this strategy, Newpark will continue to add
injection disposal capacity throughout the U.S. Gulf Coast region in order to
more efficiently serve its customers. Newpark intends to expand its drilling
fluids business through acquisitions to the mid-continent and Permian Basin
regions of the United States, and, internationally, to Mexico, Venezuela and
Canada. In its domestic mat business, Newpark will continue to capitalize on
environmental regulations affecting the construction of pipelines, electrical
distribution systems and highways in and through wetlands and other
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environmentally sensitive locations. Internationally, Newpark intends to expand
its mat operations in Venezuela and Algeria and pursue expansion opportunities
in Canada, Mexico, South America, and other markets.
Cost Reductions. Newpark will continue to pursue cost reductions in its
existing operations to increase margins. Newpark is implementing washwater
recycling facilities at its principal E&P waste transfer stations and the
recycling of E&P waste for use in its drilling fluids business. These methods
allow Newpark to reduce the volume of waste transported and disposed of in its
injection wells and will provide it with a low-cost source of raw materials for
the production of drilling fluids. Newpark intends to continue to consolidate
supply and purchasing functions in its drilling fluids business to eliminate
duplicate costs, and take advantage of manufacturer direct pricing, volume
discounts and rail transportation efficiencies.
DESCRIPTION OF BUSINESS
Offsite Waste Processing
E&P Waste Processing. In most jurisdictions, if E&P waste cannot be
treated for discharge or disposed of on the location where it is generated, it
must be transported to a licensed E&P waste disposal or treatment facility.
Three primary alternatives for offsite disposal of E&P waste are available to
generators in the U.S. Gulf Coast: (i) underground injection (see "Injection
Wells"); (ii) disposal in surface facilities; and (iii) processing and
conversion into a reuse product. In addition, a portion of the waste can be
recycled into a drilling fluids product.
The volume of waste handled by the company in 1995, 1996 and 1997 is
summarized in the table below:
(barrels in thousands) 1997 1996 1995
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Drilling and Production 5,473 3,588 2,364
Remediation Activity 92 368 541
Total 5,565 3,956 2,905
In August 1996, Newpark completed the acquisition of substantially all
of the marine-related E&P waste collection operations, excluding landfarming
facilities and associated equipment of its largest competitor. In the
acquisition, Newpark acquired certain leases associated with five transfer
stations located along the U.S. Gulf Coast and three receiving docks at the
landfarm facilities now operated by a subsidiary of U. S. Liquids, Inc.. Newpark
is subject to an agreement under which an agreed annual quantity of E&P waste
must be delivered to the landfarm facilities for a period of 25 years. The
acquisition significantly increased Newpark's E&P waste disposal business and
disposal capacity.
Newpark operates nine receiving and transfer facilities located along
the U.S. Gulf Coast from Venice, Louisiana, to Corpus Christi, Texas. Waste
products are collected at the transfer facilities from three distinct
exploration and production markets: offshore; land and inland waters; and from
remediation operations at well sites and production facilities. These facilities
are supported by a fleet of 43 double-skinned barges certified by the U. S.
Coast Guard to transport E&P waste. Waste received at the transfer facilities is
transported by barge through the Gulf Intracoastal Waterway to Newpark's
processing and transfer facility at Port Arthur, Texas, and
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trucked to injection disposal facilities at Fannett, Texas. Since the third
quarter of 1995, the Fannett facility has served as Newpark's primary E&P waste
injection facility.
Improved processing equipment and techniques and increased injection
capacity has reduced the volume of waste processed for commercial reuse and
delivered to local municipal landfills as a reuse product. Landfills are
required by regulations to cover the solid waste deposited in the facility daily
with earth or other inert material. Newpark's reuse product is deposited at
either the City of Port Arthur Municipal Landfill or the City of Beaumont
Municipal Landfill for use as cover or construction material pursuant to
contracts with the respective cities. Newpark also has developed alternative
uses for the product as roadbase material or construction fill material.
NORM Processing and Disposal. Many alternatives are available to the
generator for the treatment and disposal of NORM. These include both chemical
and mechanical methods designed to achieve volume reduction, on-site burial of
encapsulated NORM within old well bores and soil washing and other techniques of
dissolving and suspending the radium in solution for onsite injection of NORM
liquids. When the application of these techniques are not economically
competitive with offsite disposal, or insufficient to bring the site into
compliance with applicable regulations, the NORM must be transported to a
licensed storage or disposal facility. The largest factor contributing to
activity in the market has been litigation on the part of landowners who contend
that their property has been damaged by past practices of the oil and gas
industry. In some cases, settlement of the litigation has mandated the
remediation of such sites. In addition, these lawsuits have caused other
operators to dispose of NORM waste offsite to avoid the threat of future
litigation. While litigation has contributed to increased offsite NORM disposal,
the project-oriented nature of the market makes it difficult to predict the
timing of revenues.
Newpark was initially licensed to operate a NORM disposal business in
September 1994 and began operations October 21, 1994. Since May 21, 1996,
Newpark has disposed of NORM by injection disposal at its Big Hill, Texas
facility. During 1997, Newpark received 52,400 barrels of NORM contaminated
waste, as compared to 143,500 barrels in 1996 and 70,000 barrels in 1995.
Injection Wells. Newpark's injection technology is distinguished from
conventional methods in that it utilizes very low pressure, typically under 100
pounds per square inch ("psi"), to move the waste into the injection zone.
Conventional wells typically use pressures of 2,000 psi or more. In the event of
a formation failure or blockage of the face of the injection zone, such pressure
can force waste material beyond the intended zone, posing a potential hazard to
the environment. The low pressure used by Newpark is inadequate to fracture the
formations' integrity, and accordingly does not allow the injected waste to
migrate from its intended geologic injection zone.
Newpark began using injection for disposal of E&P waste in February
1993. Under a permit from the Texas Railroad Commission, Newpark began
development of a 50 acre injection well facility in the Big Hill Field in
Jefferson County, Texas. During 1995, Newpark licensed and constructed a new
injection well facility at a 400 acre site near Fannett, Texas, which was placed
in service in September 1995 and now serves as Newpark's primary facility for
the disposal of E&P waste. The Company has subsequently acquired several
additional injection disposal sites, and now holds an inventory of approximately
1,100 acres of injection disposal property in Texas and Louisiana.
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Newpark has identified a number of additional sites in the U.S. Gulf
Coast region as suitable for development of disposal facilities, has received
permits for one additional site in Texas, and plans to file for additional
permit authority in Louisiana. Newpark believes that its current processing and
disposal capacity will be adequate to provide for expected future demand for its
oilfield waste disposal and other environmental services.
Newpark believes that its patented injection technology has application
to other industrial waste markets and waste streams. In January 1997, Newpark
acquired approximately 400 acres of mineral assets, including 120 surface acres
adjacent to its Big Hill site, a portion of which it plans to develop into an
industrial waste disposal facility. In furtherance of this objective, the
Company filed for permit authority with the Texas Natural Resource Conservation
Commission in September 1997. Initially, Newpark intends to focus on wastes
generated in the petrochemical processing and refining industries.
Drilling Fluids
Newpark entered the drilling fluids market as a full service company as
a means of distributing recycled products recovered from its waste business and
to provide environmentally safe, high performance fluid systems. The capacity to
provide complete drilling fluids service to its customers was a key step towards
implementation of Newpark's Total Fluids Management strategy. Newpark focuses on
highly technical drilling projects involving complex conditions, such as deep
horizontal drilling or deep water drilling. These projects require constant
monitoring and critical engineering support of the fluids system during the
drilling process.
In February 1997, Newpark completed the acquisition of Sampey, Bilbo,
Meschi Drilling Fluids Management, Inc. ("SBM") (now known as Newpark Drilling
Fluids, Inc.), a full-service provider of drilling fluids and associated
engineering and technical services to the onshore and offshore oil and gas
exploration industry in the Gulf Coast market. Newpark has subsequently expanded
its drilling fluids operations through additional acquisitions in order to
broaden its customer base and obtain the services of key employee-owners of the
acquired companies. These acquisitions included four retail drilling fluids
companies, one wholesale drilling fluids company and one specialty chemical
company. In November 1997, Newpark completed the acquisition of certain
Louisiana and Texas assets of Anchor Drilling Fluids USA, Inc., which has
enhanced Newpark's service capability in the offshore Gulf of Mexico. Newpark
intends to continue to expand its drilling fluids operations through
acquisitions and internal expansion.
In May 1997, Newpark acquired a specialty milling company that grinds
barite and other industrial minerals at facilities in Houston, Texas and New
Iberia, Louisiana. The acquisition and subsequent expansion of that company's
milling capacity has provided Newpark access to critical raw materials for its
drilling fluids operations. The Company has also entered into several contract
grinding agreements under which contract mills grind raw barite supplied by
Newpark for a fixed fee. These agreements help assure the Company adequate
supplies of raw materials.
Mat Rental and Sales
In 1988, Newpark acquired the right to use, in Louisiana and Texas, a
patented prefabricated interlocking mat system for the construction of drilling
and work sites, which displaced the use of individual hardwood boards. This
system is quicker to install and remove than individual hardwood boards,
substantially reducing labor costs. Prefabricated mats are also
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stronger, easier to repair and maintain, and generate less waste material during
construction and removal. In 1994, Newpark acquired the exclusive right to use
this system in the continental U.S. for the life of the patent. The original
holder of the patent continues to fabricate the mats for Newpark and acts as a
distributor of mats for non-oilfield applications.
Markets. Newpark provides this patented interlocking mat system to the
oil and gas industry to ensure all-weather access to exploration and production
sites in the unstable soil conditions common along the onshore Gulf of Mexico.
Newpark also provides access roads and temporary work sites to the pipeline,
electrical utility and highway construction industries where protection of the
soil is required by environmental regulations or to assure productivity in
unstable soil conditions. Newpark has performed projects in connection with
pipeline, electrical utility and highway construction projects in Georgia,
Florida, Texas and Louisiana.
Rerentals and Sales. Mats are usually rented by the customer for an
initial period of 60 days. Often, the customer extends the rental term for
additional 30 day periods, resulting in additional revenues to Newpark. These
rerental revenues provide high margins because only minimal incremental
depreciation and maintenance costs accrue to each rerental period. Factors which
may increase rerental revenue include: (i) the trend toward increased activity
in the "transition zone"; (ii) a trend toward deeper drilling, taking a longer
time to reach the desired target; and, (iii) the increased frequency of
commercial success, requiring logging, testing, and completion (hook-up),
extending the period during which access to the site is required. Occasionally,
the mats are purchased by the customer as a substructure for a limestone or
gravel access road or worksite when such a site is converted into a permanent
production facility.
International Markets
. Venezuela. The Venezuelan government has enacted legislation designed
to speed the opening of its petroleum sector to foreign investment, including
international oil companies, in furtherance of a national objective of
increasing that country's production of oil to five million barrels per day by
the year 2005. Many of the international oil companies investing in Venezuela
are existing customers of Newpark. As of December 31, 1997, Newpark had
approximately 21,000 mats in inventory in Venezuela. Newpark expects that
activity in Venezuela will increase as further exploration concessions are
granted.
Algeria. Newpark has placed 4,000 interlocking mats in Algeria in an
effort to develop a mat rental and sales market in that country. The goal is to
replace the gypsum and concrete commonly used in constructing drilling sites in
the desert with a more cost effective solution.
Canada. The Company has committed to initial shipments of mats to
Canada in the first quarter of 1998, and believes that the Canadian market will
develop somewhat more quickly than other international markets.
Mexico. Through a joint venture begun in December 1997, Newpark
expects to enter the Mexican market for temporary drilling sites during 1998.
Other Markets. Newpark will continue to review expansion opportunities
in other parts of Central and South America, as well as in Europe, Asia and
Africa.
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Composite Mats. The established mat patents utilize hardwood to
construct the mat. Newpark has acquired the rights to a patented composite
molded mat fabricated from recycled plastic, rubber and resins, which Newpark
believes will prove to be stronger and lighter than hardwood mats, have a longer
service life and have lower repair costs. A limited number of pre-production
samples of a prototype mat were delivered to Newpark for testing in April 1996.
Pending completion by the manufacturer of a production facility (in which
Newpark is a minority partner), Newpark expects to begin taking delivery of
commercial quantities of these new mats in the second half of 1998. The Company
plans to initially deploy these new mats in its oilfield site construction
business in the Gulf Coast market. Newpark believes that other markets for the
new mat system may include certain military and emergency response agencies and
governmental sales.
Other Integrated Services
Promulgation and enforcement of increasingly stringent environmental
regulations affecting drilling and production sites has increased the scope of
services required by the oil companies. Often it is more efficient for the site
operator to contract with a single company that can provide all-weather site
access and the required onsite and offsite environmental services on a fully
integrated basis. Newpark provides a comprehensive range of environmental
services necessary for its customers' oil and gas exploration and production
activities. These services include:
Site Assessment. Site assessment work begins prior to installation of
mats on a drilling site, and generally begins with a study of the proposed well
site, which includes site photography, background soil sampling, laboratory
analysis and investigation of flood hazards and other native conditions. The
assessment determines whether the site has previously been contaminated and
provides a baseline for later restoration to pre-drilling condition.
Pit Design, Construction and Drilling Waste Management. Where permitted
by regulations and landowners, Newpark constructs waste pits at drilling sites
and monitors the waste stream produced in drilling operations and the contents
and condition of the pits with the objective of minimizing the amount of waste
generated on the site. Where possible, Newpark disposes of waste onsite by
landfarming, through chemical and mechanical treatment of liquid waste and by
annular injection into a suitably permitted underground formation. Waste water
treated onsite may be reused in the drilling process or, where permitted,
discharged into adjacent surface waters.
Regulatory Compliance. Throughout the drilling process, Newpark assists
the operator in interfacing with the landowner and regulatory authorities.
Newpark also assists the operator in obtaining necessary permits and in
complying with record maintenance and reporting requirements.
Site Remediation.
E&P Waste (Drilling). At the completion of the drilling process, under
applicable regulations, wastewater on the site may be chemically and/or
mechanically treated to eliminate its waste-like characteristics and discharged
into surface waters. Other waste that may not remain on the surface of the site
may be land-farmed on the site or injected under permit into geologic formations
to minimize the need for offsite disposal. Any waste that cannot, under
regulations,
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remain onsite is manifested (in Louisiana) and transported to an
authorized facility for processing and disposal at the direction of the
generator or customer.
E&P Waste (Production). Newpark also provides services to remediate
production pits and inactive waste pits including those from past oil and gas
drilling and production operations. Newpark provides the following remediation
services: (i) analysis of the contaminants present in the pit and a
determination of whether remediation is required by applicable state regulation;
(ii) treatment of waste onsite, and where permitted, reintroduction of that
material into the environment; and (iii) removal, containerization and
transportation of E&P waste to Newpark's processing facility.
NORM. Newpark provides site remediation work at NORM contaminated sites
in Louisiana,Texas, Mississippi, and Arkansas. Because of the need for increased
worker-protective equipment, extensive decontamination procedures and other
regulatory compliance issues at NORM sites, the cost of providing such services
is materially greater than at E&P waste sites. Such services generate
proportionately higher revenues and operating margins than similar services at
E&P waste sites.
Site Closure. Site closure services are designed to restore a site to
its pre-drilling condition. Closure also involves delivery of test results
indicating that closure has been completed in compliance with applicable
regulations. This information is important to the customer because the operator
is subject to future regulatory review and audits. In addition, the information
may be required on a current basis if the operator is subject to a pending
regulatory compliance order.
General Oilfield Construction Services. Newpark performs general
oilfield construction services throughout the U.S. Gulf Coast area between
Corpus Christi, Texas and Pensacola, Florida. General oilfield services
performed by Newpark include preparing work sites for the installation of mats,
connecting wells and placing them in production, laying flow lines and infield
pipelines, building permanent roads, grading, lease maintenance (the maintenance
and repair of producing well sites), cleanup and general roustabout services.
General oilfield services are typically performed under short-term time and
material contracts, which are obtained by direct negotiation or bid. During
1997, Newpark acquired two oilfield site contractors, which expanded Newpark's
presence and service capabilities in Louisiana and Texas.
Wood Product Sales. Newpark owns a sawmill in Batson, Texas, which
provides access to adequate quantities of hardwood lumber in support of its mat
business. The mill's products include lumber, timber, and wood chips, as well as
bark and sawdust. Pulp and paper companies in the area supply a large proportion
of the hardwood logs processed at the sawmill and, in turn, are the primary
customers for wood chips created in the milling process. Newpark believes that
the capacity of the sawmill will be sufficient to meet its anticipated needs for
the foreseeable future.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND EQUIPMENT
Newpark believes that its sources of supply for any materials or
equipment used in its businesses are adequate for its needs and that it is not
dependent upon any one supplier. No serious shortages or delays have been
encountered in obtaining any raw materials and no shortages or delays are
currently contemplated.
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Newpark acquires the majority of its hardwood needs in its mat business
from its own sawmill. The hardwood logs are obtained from loggers who operate in
relatively close proximity to the mill. Logging activities are generally
conducted during the drier weather months of May through November. During this
period, inventory increases significantly at the sawmill and is consumed
throughout the remainder of the year.
Barite used in Newpark's drilling fluids business is provided by its
specialty milling company and, to a limited extent, by E&P waste recycling. In
addition, barite is obtained from third party mills under contract grinding
arrangements. The raw barite ore used by the mills is obtained under supply
agreements from foreign sources, primarily from China and India and to a lesser
extent, from Mexico. Due to the lead times involved in obtaining barite, a 90
day or greater supply of barite is maintained at the grinding facilities at all
times. Other materials used in the drilling fluids business are obtained from
various third party suppliers.
PATENTS AND LICENSES
Newpark seeks patents and licenses on new developments whenever
feasible. On December 31, 1996, Newpark was granted a U.S. patent on its E&P
waste and NORM waste processing and injection disposal system. Newpark has the
exclusive, worldwide license for the life of the patent to use, sell and lease
the prefabricated mats that it uses in connection with its site preparation
business. The licensor continues to fabricate the mats for Newpark and has the
right to sell mats in locations where Newpark is not engaged in business, but
only after giving Newpark the opportunity to take advantage of the opportunity
itself. The license is subject to a royalty which Newpark can satisfy by
purchasing specified quantities of mats annually from the licensor. Newpark
holds numerous patents on products used in its drilling fluids business.
The utilization of proprietary technology and systems is an important
aspect of Newpark's business strategy. For example, Newpark relies on a variety
of unpatented proprietary technologies and know-how in the recycling and
processing of E&P waste. Although Newpark believes that this technology and
know-how provide it with significant competitive advantages in the environmental
services business, competitive products and services have been developed and
marketed by others. Newpark believes that its reputation in its industry, the
range of services offered, ongoing technical development and know-how,
responsiveness to customers and understanding of regulatory requirements are of
equal or greater competitive significance than its existing proprietary rights.
CUSTOMERS
Newpark's customers are principally major and independent oil and gas
exploration and production companies operating in the U.S. Gulf Coast area, with
the vast majority of Newpark's customers concentrated in Louisiana and Texas.
During the year ended December 31, 1997, approximately 42% of Newpark's
revenues were derived from eight major customers, including three major oil
companies. One customer accounted for approximately 11% of consolidated
revenues. Given current market conditions and the nature of the products
involved, Newpark does not believe that the loss of any single customer would
have a material adverse effect upon Newpark.
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Newpark performs services either pursuant to standard contracts or
under longer term negotiated agreements. As most of Newpark's agreements with
its customers are cancelable upon limited notice, Newpark's backlog is not
significant.
Newpark does not derive a significant portion of its revenues from
government contracts of any kind.
COMPETITION
Newpark operates in several niche markets where it is a leading
provider of services. In Newpark's disposal business, Newpark often competes
with its major customers, who continually evaluate the decision whether to use
internal disposal methods or utilize a third party disposal company such as
Newpark. Other product markets are fragmented and highly competitive, with many
competitors providing similar products and services to the industry. In the
drilling fluids industry, Newpark faces competition from both larger companies
that have broader geographic coverage, and smaller companies that may have lower
cost structures.
Newpark believes that its ability to provide a number of services as
part of a comprehensive program to solve its customers' problems is the most
important competitive factor that the Company has. Newpark believes that other
competitive factors in its businesses are price, reputation, technical
proficiency, reliability, quality, breadth of services offered and managerial
experience. Newpark believes that it effectively competes on the basis of these
factors and that its competitive position benefits from the proprietary nature
of many of the products it provides.
ENVIRONMENTAL DISCLOSURES
Newpark has sought to comply with all applicable regulatory
requirements concerning environmental quality. Newpark has made, and expects to
continue to make, the necessary capital expenditures for environmental
protection at its facilities, but does not expect that these will become
material in the foreseeable future. No material capital expenditures for
environmental protection were made during 1996 or 1997.
Newpark derives a significant portion of its revenue from providing
environmental services to its customers. These services have become necessary in
order for these customers to comply with applicable environmental regulations. A
significant part of Newpark's capital expenditures made in the past several
years, and those planned for the foreseeable future, are directly or indirectly
influenced by the needs of customers to comply with such regulations.
EMPLOYEES
At February 28, 1998, Newpark employed approximately 1,097 full and
part-time personnel, none of which are represented by unions. Newpark considers
its relations with its employees to be satisfactory.
ENVIRONMENTAL REGULATION
Newpark deals primarily with E&P waste and NORM in its waste disposal
business. E&P waste and NORM are generally described as follows:
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E&P Waste. Oilfield exploration and production waste, or E&P waste, is
waste generated in the exploration for or production of oil and gas. These
wastes typically contain levels of oil and grease, salts or chlorides, and heavy
metals in excess of concentration limits defined by state regulators. E&P waste
also includes soils which have become contaminated by these materials. In the
environment, oil and grease and chlorides disrupt the food chain and have been
determined by regulatory authorities to be harmful to plant and animal life.
Heavy metals are toxic and can become concentrated in living tissues.
NORM. Naturally Occurring Radioactive Material, or NORM, is present
throughout the earth's crust at very low levels. Among the radioactive elements,
only Radium 226 and Radium 228 are slightly soluble in water. Because of their
solubility, which can carry them into living plant and animal tissues, these
elements may present a hazard. Radium 226 and Radium 228 can be leached out of
hydrocarbon bearing strata deep underground by salt water which is produced with
the hydrocarbons. Radium generally precipitates out of the production stream as
it is drawn to the surface and encounters a pressure or temperature change in
the well tubing or production equipment, forming a rust-like scale. This scale
contains radioactive elements which, over many years, can become concentrated on
tank bottoms or at water discharge points at production facilities. Thus, NORM
waste is E&P waste that has become contaminated with these radioactive elements
above concentration levels defined by state regulatory authorities.
Newpark's business is affected both directly and indirectly by
governmental regulations relating to the oil and gas industry in general, as
well as environmental, health and safety regulations that have specific
application to Newpark's business. Newpark, through the routine course of
providing its services, handles and profiles hazardous regulated material for
its customers. Newpark also handles, processes and disposes of nonhazardous
regulated materials. This section discusses various federal and state pollution
control and health and safety programs that are administered and enforced by
regulatory agencies, including, without limitation, the U.S. Environmental
Protection Agency ("EPA"), the U.S. Coast Guard, the U.S. Army Corps of
Engineers, the Texas Natural Resource Conservation Commission, the Texas
Department of Health, the Texas Railroad Commission, the Louisiana Department of
Environmental Quality and the Louisiana Department of Natural Resources. These
programs are applicable or potentially applicable to Newpark's current
operations. Although Newpark intends to make capital expenditures to expand its
environmental services capabilities, Newpark believes that it is not presently
required to make material capital expenditures to remain in compliance with
federal, state and local provisions relating to the protection of the
environment.
RCRA. The Resource Conservation and Recovery Act of 1976, as amended in
1984 ("RCRA"), is the principal federal statute governing hazardous waste
generation, treatment, storage and disposal. RCRA and state hazardous waste
management programs govern the handling and disposal of "hazardous wastes". The
EPA has issued regulations pursuant to RCRA, and states have promulgated
regulations under comparable state statutes, that govern hazardous waste
generators, transporters and owners and operators of hazardous waste treatment,
storage or disposal facilities. These regulations impose detailed operating,
inspection, training and emergency preparedness and response standards and
requirements for closure, financial responsibility, manifesting of waste,
record-keeping and reporting, as well as treatment standards for any hazardous
waste intended for land disposal.
Newpark's primary operations involve E&P waste, which is exempt from
classification as a RCRA-regulated hazardous waste. Many state counterparts to
RCRA also exempt E&P waste from
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classification as a hazardous waste; however, extensive state regulatory
programs govern the management of such waste. In addition, in performing other
services for its customers, Newpark is subject to both federal (RCRA) and state
solid or hazardous waste management regulations as contractor to the generator
of such waste.
Proposals have been made in the past to rescind the exemption that
excludes E&P waste from regulation as hazardous waste under RCRA. Repeal or
modification of this exemption by administrative, legislative or judicial
process could require Newpark to change significantly its method of doing
business. There is no assurance that Newpark would have the capital resources
available to do so, or that it would be able to adapt its operations to the
changed regulations.
Subtitle I of RCRA regulates underground storage tanks in which liquid
petroleum or hazardous substances are stored. States have similar regulations,
many of which are more stringent in some respects than the federal regulations.
The implementing regulations require that each owner or operator of an
underground tank notify a designated state agency of the existence of such
underground tank, specifying the age, size, type, location and use of each such
tank. The regulations also impose design, construction and installation
requirements for new tanks, tank testing and inspection requirements, leak
detection, prevention, reporting and cleanup requirements, as well as tank
closure and removal requirements.
Newpark has a number of underground storage tanks that are subject to
the requirements of RCRA and applicable state programs. Violators of any of the
federal or state regulations may be subject to enforcement orders or significant
penalties by the EPA or the applicable state agency. Newpark is not aware of any
existing conditions or circumstances that would cause it to incur liability
under RCRA for failure to comply with regulations applicable to underground
storage tanks. However, cleanup costs associated with releases from these
underground storage tanks or costs associated with changes in environmental laws
or regulations could be substantial and could have a material adverse effect on
Newpark's consolidated financial statements.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act, as amended in 1986 ("CERCLA"), provides for immediate response
and removal actions coordinated by the EPA in response to certain releases of
hazardous substances into the environment and authorizes the government, or
private parties, to respond to the release or threatened release of hazardous
substances. The government may also order persons responsible for the release to
perform any necessary cleanup. Liability extends to the present owners and
operators of waste disposal facilities from which a release occurs, persons who
owned or operated such facilities at the time the hazardous substances were
released, persons who arranged for disposal or treatment of hazardous substances
and waste transporters who selected such facilities for treatment or disposal of
hazardous substances. CERCLA has been interpreted to create strict, joint and
several liabilities for the costs of removal and remediation, other necessary
response costs and damages for injury to natural resources.
Among other things, CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have been or are
threatened to be released and that require investigation or cleanup. The NPL is
subject to change, with additional sites being added and remediated sites being
removed from the list. In addition, the states in which Newpark conducts
operations have enacted similar laws and keep similar lists of sites which may
be in need of remediation.
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Although Newpark primarily handles oilfield waste classified as E&P
waste, this waste typically contains constituents designated by the EPA as
hazardous substances under RCRA, despite the current exemption of E&P waste from
hazardous substance classification. Where Newpark's operations result in the
release of hazardous substances, including releases at sites owned by other
entities where Newpark performs its services, Newpark could incur CERCLA
liability. Previously owned businesses also may have disposed or arranged for
disposal of hazardous substances that could result in the imposition of CERCLA
liability on Newpark in the future. In particular, divisions and subsidiaries
previously owned by Newpark were involved in extensive mining operations at
facilities in Utah and Nevada and in waste generation and management activities
in numerous other states. These activities involved substances that may be
classified as RCRA hazardous substances. Any of those sites or activities
potentially could be the subject of future CERCLA damage claims.
With the exception of the sites discussed in "Environmental
Proceedings" below, Newpark is not aware of any present claims against it that
are based on CERCLA. Nonetheless, the identification of additional sites at
which clean-up action is required could subject Newpark to liabilities which
could have a material adverse effect on Newpark's consolidated financial
statements.
The Clean Water Act. The Clean Water Act regulates the discharge of
pollutants, including E&P waste, into waters of the United States. The Clean
Water Act establishes a system of standards, permits and enforcement procedures
for the discharge of pollutants from industrial and municipal wastewater
sources. The law sets treatment standards for industries and waste water
treatment plants, requires permits for industrial and municipal discharges
directly into waters of the United States and requires pretreatment of
industrial waste water before discharge into municipal systems. The Clean Water
Act gives the EPA the authority to set pretreatment limits for direct and
indirect industrial discharges.
In addition, the Clean Water Act prohibits certain discharges of oil or
hazardous substances and authorizes the federal government to remove or arrange
for removal of such oil or hazardous substances. Under the Clean Water Act, the
owner or operator of a vessel or facility from which oil or a hazardous
substance is discharged into navigable waters may be liable for penalties, the
costs of cleaning up the discharge and natural resource damage caused by the
spill.
Newpark treats and discharges wastewaters at certain of its facilities.
These activities are subject to the requirements of the Clean Water Act, and
comparable state statutes, and federal and state enforcement of these
regulations.
The Clean Water Act also imposes requirements that are applicable to
Newpark's customers and are material to its business. EPA Region 6, which
includes Newpark's market, continues to issue new and amended National Pollution
Discharge Elimination System ("NPDES") general permits further limiting or
restricting substantially all discharges of produced water from the Oil and Gas
Extraction Point Source Category into waters of the United States. These permits
include:
1) Onshore subcategory permits for Texas, Louisiana, Oklahoma and New
Mexico issued in February, 1991 (56 Fed. Reg. 7698). These permits
completely prohibit the discharge of drilling fluids, drill cuttings,
produced water or sand, and various other oilfield wastes generated by
onshore operations into waters of the United States. These permits have
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the effect of requiring that most oilfield wastes follow established
state disposal programs. These general permits expired on February 25,
1996, but pursuant to EPA policy, they are considered to remain in
effect until reissued by the EPA or superseded by other EPA action.
2) Permits for produced water and produced sand discharges into coastal
waters of Louisiana and Texas issued on January 9, 1995 (60 Fed. Reg.
2387). Coastal means "waters of the United States...located landward of
the territorial seas". Under these regulations, all such discharges
were required to cease by January 1, 1997.
3) The Outer Continental Shelf ("OCS") permit covering oil and gas
operations in federal waters in the Gulf (seaward of the Louisiana and
Texas territorial seas) was reissued in November 1992 and modified in
December 1993. The existing permit was combined with a new source
permit on August 9, 1996 (61 Fed. Reg. 41609). This permit prohibits
certain discharges of drilling fluids and drill cuttings and includes
stricter limits for oil and grease concentrations in produced waters to
be discharged. These limits are based on the Best Available Treatment
("BAT") requirements contained in the Oil and Gas Offshore Subcategory
national guidelines which were published March 3, 1993. Additional
requirements include toxicity testing and bioaccumulation monitoring
studies of proposed discharges. The combined permit expired on November
18, 1997; however, the expired permit will continue to be effective for
permittees that applied for a new permit prior to the expiration date,
until the EPA issues a new general permit for this area or requires
permittees to seek individual permits.
4) A permit for the territorial seas of Louisiana was issued on
November 4, 1997 (62 Fed. Reg. 59687). The permit becomes effective on
December 4, 1997, except for the water quality based limits and certain
monitoring requirements that became effective May 4, 1998. The permit
prohibits the discharge of drilling fluids, drill cuttings and produced
sand. Produced water discharges are limited for oil and grease, toxic
metals, organics, and chronic toxicity. The territorial seas part of
the Offshore Subcategory begins at the line of ordinary low water along
the part of the coast which is in direct contact with the open sea, and
extends out three nautical miles. This permit covers both existing
sources and new sources. All discharges in state waters must comply
with more stringent requirements contained in Louisiana Water Quality
Regulations, LAC 33.IX.7.708. A similar permit will be proposed for the
Texas territorial seas in the future.
The combined effect of all these permits closely approaches a "zero
discharge standard" affecting all waters except those of the OCS. Newpark and
many industry participants believe that these permits and the requirements of
the Clean Water Act may ultimately lead to a total prohibition of overboard
discharge in the Gulf of Mexico.
The Clean Air Act. The Clean Air Act provides for federal, state and
local regulation of emissions of air pollutants into the atmosphere. Any
modification or construction of a facility with regulated air emissions must be
a permitted or authorized activity. The Clean Air Act provides for
administrative and judicial enforcement against owners and operators of
regulated facilities, including substantial penalties. In 1990, the Clean Air
Act was reauthorized and amended, substantially increasing the scope and
stringency of the Clean Air Act's regulations. The Clean Air Act has very little
impact on Newpark's operations.
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Oil Pollution Act of 1990. The Oil Pollution Act of 1990 contains
liability provisions for cleanup costs, natural resource damages and property
damages resulting from discharges of oil into navigable waters, as well as
substantial penalty provisions. The OPA also requires double hulls on all new
oil tankers and barges operating in waters subject to the jurisdiction of the
United States. All marine vessels operated by Newpark already meet this
requirement.
State Regulation. In 1986, the Louisiana Department of Natural
Resources promulgated Order 29-B. Order 29-B contains extensive rules governing
pit closure and the generation, treatment, storage, transportation and disposal
of E&P waste. Under Order 29-B, onsite disposal of E&P waste is limited and is
subject to stringent guidelines. If these guidelines cannot be met, E&P waste
must be transported and disposed of offsite in accordance with the provisions of
Order 29-B. Moreover, under Order 29-B, most, if not all, active waste pits must
be closed or modified to meet regulatory standards; those pits that continue to
be allowed may be used only for a limited time. A material number of these pits
may contain concentrations of radium that are sufficient to require the waste
material to be categorized as NORM.
The DNR has recently issued emergency rules for oilfield waste testing
to become effective on May 1, 1998. The rules call for comprehensive and
systematic testing of oilfield waste disposed of in commercial facilities
throughout the state. Data collected over a 120 day period will then be used to
revise statewide Order 29-B.
Rule 8 of the Texas Railroad Commission also contains detailed
requirements for the management and disposal of E&P waste and Rule 94 governs
the management and disposal of NORM. In addition, Rule 91 regulates the cleanup
of spills of crude oil from oil and gas exploration and production activities,
including transportation by pipeline. In general, contaminated soils must be
remediated to total petroleum hydrocarbons content of less than 1%. The State of
Texas also has established an Oilfield Cleanup Fund to be administered by the
Texas Railroad Commission to plug abandoned wells if the Commission deems it
necessary to prevent pollution, and to control or clean up certain oil and gas
wastes that cause or are likely to cause pollution of surface or subsurface
water. Other states (New Mexico, Mississippi, Arkansas) where the Company
operates have similar regulations. Oklahoma is presently in the process of
drafting NORM oil and gas regulations. Newpark recently received the first
specific license to do NORM remediation in Arkansas.
Many states maintain licensing and permitting procedures for the
construction and operation of facilities that emit pollutants into the air. In
Texas, the Texas Natural Resource Conservation Commission (the "TNRCC") requires
companies that emit pollutants into the air to apply for an air permit or to
satisfy the conditions for an exemption. Newpark has obtained certain air
permits and believes that it is exempt from obtaining other air permits at its
facilities including its Port Arthur Texas E&P waste facility. Newpark met with
the TNRCC and filed for an exemption in the fall of 1991. A subsequent renewal
letter was filed in 1995. Based upon communications with the TNRCC, Newpark
expects that it will continue to remain exempt. However, should it not remain
exempt, Newpark believes that compliance with the permitting requirements of the
TNRCC would not have a material adverse effect on the consolidated financial
statements of Newpark.
Other Environmental Laws. Newpark is subject to the Occupation Safety
and Health Act that imposes requirements for employee safety and health and
applicable state provisions adopting worker health and safety requirements.
Moreover, it is possible that other
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developments, such as increasingly stricter environmental, safety and health
laws, and regulations and enforcement policies thereunder, could result in
substantial additional regulation of Newpark and could subject to further
scrutiny Newpark's handling, manufacture, use or disposal of substances or
pollutants. Newpark cannot predict the extent to which its operations may be
affected by future enforcement policies as applied to existing laws or by the
enactment of new statutes and regulations.
RISK MANAGEMENT
Newpark's business exposes it to substantial risks. For example,
Newpark's environmental services routinely involve the handling, storage and
disposal of nonhazardous regulated materials and waste, and in some cases,
handling of hazardous regulated materials and waste for its customers which are
generators of such waste. Newpark could be held liable for improper cleanup and
disposal, which liability could be based upon statute, negligence, strict
liability, contract or otherwise. As is common in the oil and gas industry,
Newpark often is required to indemnify its customers or other third-parties
against certain risks related to the services performed by Newpark, including
damages stemming from environmental contamination.
Newpark has implemented various procedures designed to ensure
compliance with applicable regulations and reduce the risk of damage or loss.
These include specified handling procedures and guidelines for regulated waste,
ongoing training and monitoring of employees and maintenance of insurance
coverage.
Newpark carries a broad range of insurance coverages that management
considers adequate for the protection of its assets and operations. This
coverage includes general liability, comprehensive property damage, workers'
compensation and other coverage customary in its industries; however, this
insurance is subject to coverage limits and certain policies exclude coverage
for damages resulting from environmental contamination. Newpark could be
materially adversely affected by a claim that is not covered or only partially
covered by insurance. There is no assurance that insurance will continue to be
available to Newpark, that the possible types of liabilities that may be
incurred by Newpark will be covered by its insurance, that Newpark's insurance
carriers will meet their obligations or that the dollar amount of such
liabilities will not exceed Newpark's policy limits.
FORWARD-LOOKING STATEMENTS
The foregoing discussion contains `forward-looking statements' within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. There are risks and
uncertainties that could cause future events and results to differ materially
from those anticipated by management in the forward-looking statements included
in this report. Among these risks and uncertainties are (a) the level of
exploration for and production of oil and gas and the industry's willingness to
spend capital on environmental and oilfield services; (b) oil and gas prices,
expectations about future prices, the cost of exploring for, producing and
delivering oil and gas, the discovery rate of new oil and gas reserves and the
ability of oil and gas companies to raise capital; (c) domestic and
international political, military, regulatory and economic conditions; (d) other
risks and uncertainties generally applicable to the oil and gas exploration and
production industry; (e) any rescission or relaxation of existing regulations
affecting the disposal of E&P waste and NORM, failure of governmental
authorities to enforce such regulations or the ability of industry participants
to avoid or delay compliance with
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such regulations; (f) future technological change and innovation, which could
result in a reduction in the amount of waste being generated or alternative
methods of disposal being developed; (g) increased competition in the Company's
product lines; and (h) the Company's success in introducing new products and
integrating potential future acquisitions.
ITEM 2. PROPERTIES
Newpark's corporate offices in Metairie, Louisiana, consisting of
approximately 7,000 square feet, are occupied at an annual rental of
approximately $138,000 under a lease expiring in December 2002.
Newpark owns an office building in Lafayette, Louisiana, consisting of
approximately 35,000 square feet, to house the administrative offices of two of
its subsidiaries.
Newpark's Port Arthur, Texas, E&P waste and NORM facility is subject to
annual rentals aggregating approximately $488,000 under three separate leases. A
total of six acres are under lease with various expiration dates through
September 2002, all with extended options to renew.
Newpark owns two injection disposal sites in Jefferson County, Texas,
one on 50 acres of land and the other on 400 acres. Eight wells are currently
operational at these sites. In January 1997, Newpark completed the purchase of
120 acres located adjacent to one of the disposal sites. Newpark plans to use
this property as an industrial waste injection disposal facility. Newpark also
has acquired an additional injection facility, which includes two active
injection wells on 37 acres of land, adjacent to its Big Hill, Texas facility.
In October 1997, Newpark acquired land and facilities in Andrews, Big
Springs, Plains and Fort Stockton, Texas at which brine is extracted and sold
and E&P waste is disposed of in the salt domes or caverns created by the
extraction process. A total of 125 acres of land was acquired in this
transaction.
Newpark maintains a fleet of 43 double-skinned barges, of which 16 are
owned by the Company, seven are under 10-year lease terms, six are under
seven-year lease terms and 14 are under five-year lease terms. The barges are
used to transport waste to processing stations and are certified for this
purpose by the U. S. Coast Guard. Annual rentals under the barge leases totaled
approximately $1.9 million during 1997.
The Company operates two specialty product grinding facilities. One is
located on 6.6 acres of leased land in Channelview, Texas, with an annual rental
rate of $12,000, and the other is located on 13.7 acres of leased land in New
Iberia, Louisiana, with an annual rental rate of $50,000.
In the Company's waste disposal operations, the Company uses nine
leased facilities located along the Gulf Coast at an annual aggregate rental of
$823,000. In the Company's drilling fluids operations, the Company serves
customers from four leased bases located along the Gulf Coast at an annual
aggregate rental rate of $423,000.
Newpark owns 80 acres occupied as a sawmill facility near Batson,
Texas. Additional facilities are held under short-term leases with annual
rentals aggregating approximately
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$473,000 during 1997. The Company believes that its facilities are suitable for
their respective uses and adequate for current needs.
Due to growth in Newpark's market areas, the Company has undertaken
efforts throughout 1997 to expand the capacity of a number of its facilities.
The Company is engaged in ongoing expansion efforts, which are anticipated to
continue throughout 1998 and into 1999. In addition, in order to facilitate its
continued growth, the Company is exploring various options for larger office
facilities which will house the administrative staffs of its subsidiaries in the
Houston, Texas area.
ITEM 3. LEGAL PROCEEDINGS
Newpark and its 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 Newpark's consolidated financial statements.
ENVIRONMENTAL PROCEEDINGS
In the ordinary course of conducting business, Newpark becomes involved
in judicial and administrative proceedings involving governmental authorities at
the federal, state and local levels, as well as private party actions. Pending
proceedings that allege liability related to environmental matters are described
below. Newpark believes that none of these matters involves material exposure.
There is no assurance, however, that such exposure does not exist or will not
arise in other matters relating to Newpark's past or present operations.
Newpark was identified by the EPA as a minor or "de minimus"
contributor of waste to a disposal site requiring cleanup under CERCLA. That
facility, the French Limited site, located in southeast Texas, is currently
undergoing a voluntary cleanup by those parties identified as waste
contributors. Five related private party suits have been filed against Newpark
and the other potentially responsible parties at the French Limited site.
Newpark has settled its potential liability in these suits.
Newpark continues to be involved in the voluntary cleanup associated
with the DSI sites in southern Mississippi. This includes three facilities known
as Clay Point, Lee Street and Woolmarket. The Mississippi Department of
Environmental Quality is overseeing the cleanup. The DSI Technical Group that
represents the potentially responsible parties, including Newpark, has recently
awarded a contract to Newpark to do the remaining remediation work at the three
sites. This cleanup should be completed by the end of 1998 with some continuing
ground water monitoring.
Newpark has been identified as one of 600 contributors of material to
the MAR Services facility, a state voluntary cleanup site located in Louisiana.
Because Newpark delivered only processed solids meeting the requirements of
Louisiana Statewide Executive Order 29-B to the
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site, Newpark does not believe it has material financial liability for the site
cleanup cost. The Louisiana Department of Natural Resources ("DNR") is
overseeing voluntary cleanup at the site.
Recourse against its insurers under general liability insurance
policies for reimbursement of cost and expense in the foregoing CERCLA actions
is uncertain as a result of conflicting court decisions in similar cases. In
addition, certain insurance policies under which coverage may be afforded
contain self-insurance levels that may exceed Newpark's ultimate liability.
Newpark believes that any liability incurred in the foregoing matters
will not have a material adverse effect on Newpark's consolidated financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Newpark's common stock is traded on the New York Stock Exchange under
the symbol "NR".
The following table sets forth the range of the high and low sales
prices for the periods indicated.
Period High Low
------ ---- ---
1996
1st Quarter $ 7.469 $ 4.906
2nd Quarter $ 9.469 $ 7.188
3rd Quarter $ 9.750 $ 7.750
4th Quarter $ 9.563 $ 8.094
1997
1st Quarter $ 12.375 $ 9.188
2nd Quarter $ 16.875 $ 9.875
3rd Quarter $ 20.000 $ 14.250
4th Quarter $ 22.500 $ 14.750
At December 31, 1997, the Company had 3,890 stockholders of record.
Newpark affected a two-for-one split of its common stock as of June 20,
1997 to stockholders of record on May 30, 1997. Newpark paid a 100% stock
dividend of its common stock on November 30, 1997 to stockholders of record on
November 14, 1997. Newpark does not intend to pay any cash dividends in the
foreseeable future, and the Board of Directors currently intends to retain
earnings for use in Newpark's business. In addition, Newpark's credit facility
and the Indenture relating to its outstanding Senior Subordinated Notes contain
covenants limiting the payments of dividends on the common stock.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated historical financial data presented below for
the five years ended December 31, 1997, are derived from the audited
consolidated financial statements of Newpark and reflect: (i) Newpark's
acquisition of SBM on February 28, 1997, which was accounted for as a pooling of
interests; (ii) a two-for-one split of Newpark's Common Stock effective May
1997; (iii) a 100% stock dividend issued by Newpark in November 1997; and (iv)
the adoption of SFAS No. 128, "Earnings Per Share." The following data should be
read in conjunction with the Consolidated Financial Statements of Newpark and
the Notes thereto included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME
DATA:
Revenues $ 215,354 $ 135,974 $ 105,720 $ 86,625 $ 57,585
Cost of services provided 127,228 87,081 70,360 60,901 43,389
Operating costs 22,463 11,523 11,156 10,384 9,791
General and administrative expenses 3,185 2,920 2,658 3,231 2,129
Restructure expense -- 2,432 -- -- --
--------- --------- --------- --------- ---------
Operating income from continuing
operations 62,478 32,018 21,546 12,109 2,276
Interest income (308) (223) (222) (80) (5)
Interest expense 4,133 3,900 3,833 2,724 1,306
Other -- -- 436 -- --
--------- --------- --------- --------- ---------
Income from continuing operations
before provision for income taxes 58,653 28,341 17,499 9,465 975
Provision (benefit) for income taxes 21,537 9,838 4,957 (252) (1,837)
--------- --------- --------- --------- ---------
Income from continuing operations 37,116 18,503 12,542 9,717 2,812
Loss from discontinued operations -- -- -- -- (2,366)
--------- --------- --------- --------- ---------
Net income $ 37,116 $ 18,503 $ 12,542 $ 9,717 $ 446
========= ========= ========= ========= =========
Income (loss) per common and common equivalent shares:
Basic
Continued operations $ 0.59 $ 0.36 $ 0.28 $ 0.22 $ 0.06
Discontinued operations -- -- -- -- (0.05)
--------- --------- --------- --------- ---------
Net income per common share $ 0.59 $ 0.36 $ 0.28 $ 0.22 $ 0.01
========= ========= ========= ========= =========
Diluted
Continued operations $ 0.58 $ 0.35 $ 0.27 $ 0.22 $ 0.06
Discontinued operations -- -- -- -- (0.05)
--------- --------- --------- --------- ---------
Net income per common share $ 0.58 $ 0.35 $ 0.27 $ 0.22 $ 0.01
========= ========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding
Basic 62,714 51,156 44,599 44,015 43,169
========= ========= ========= ========= =========
Diluted 64,186 52,915 45,665 44,839 43,169
========= ========= ========= ========= =========
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DECEMBER 31,
- ---------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 90,212 $ 29,881 $ 32,563 $ 13,868 $ 5,099
Total assets 446,580 289,884 154,132 112,572 91,329
Short-term debt 1,345 12,383 8,131 10,058 15,212
Long-term debt 127,235 34,918 47,106 29,404 15,329
Stockholders' equity 269,769 203,441 77,755 63,631 50,467
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition, results
of operations, liquidity and capital resources should be read in conjunction
with the "Consolidated Financial Statements" and the "Notes to Consolidated
Financial Statements" included elsewhere in this report.
OVERVIEW
The Baker-Hughes Rotary Rig Count has historically been viewed as the
most significant single indicator of oil and gas drilling activity in the
domestic market. In 1994, the United States rig count averaged 774 rigs in
operation. In 1995, the rig count averaged 723, the second lowest on record
since the advent of the indicator in the 1940's, and in 1996, the rig count
increased slightly to an average of 779. For 1997, the rig count continued to
increase to an average of 943, which was the highest average since 1985.
Newpark's primary market area includes the following rig count
measurement areas: (i) South Louisiana Land, (ii) Texas Railroad Commission
Districts 2 and 3, (iii) Louisiana and Texas Inland Waters; and (iv) Offshore
Gulf of Mexico. The rig count trend in Newpark's primary markets have tracked
these national trends as set forth in the table below:
1997 1996 1995 1Q97 2Q97 3Q97 4Q97
---- ---- ---- ---- ---- ---- ----
U.S. Rig Count 943 779 723 853 933 989 997
Newpark's market 252 208 194 229 251 258 273
Newpark's market to total 26.7% 26.7% 26.8% 26.8% 26.9% 26.1% 27.4%
- ------------
Source: Baker Hughes Incorporated
As of the week ended March 20, 1998, the U. S. rig count was 937 with
292 rigs, or 31.2%, within Newpark's market. The increase since the fourth
quarter of 1997 in the rig count in Newpark's key markets, while the domestic
total has declined, reflects the importance of natural-gas drilling relative to
oil in that market.
RECENT ACQUISITIONS
In February 1997, Newpark acquired SBM, a full-service drilling fluids
company, which serves customers in the Louisiana and Texas Gulf Coast, in
exchange for an
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aggregate of 2,328,000 shares of Newpark common stock. The acquisition was
accounted for as a pooling-of-interests, with direct acquisition costs of
$316,000 charged to current operations. SBM has since changed its name to
Newpark Drilling Fluids, Inc. Since the SBM acquisition, Newpark has completed
seven additional acquisitions in the drilling fluids industry, in exchange for
an aggregate of $9,186,000 in cash and 1,371,112 shares of Newpark common
stock. The acquisitions involved five drilling fluids distribution companies,
one specialty chemical company and one specialty milling company. In November,
1997, Newpark also purchased the Gulf Coast operations and related assets of
Anchor Drilling Fluids, Inc.
To expand its presence and service capabilities in the site preparation
business, Newpark acquired, during 1997, two oilfield site contractors in
exchange for an aggregate of 990,888 shares of Newpark common stock. Newpark
also acquired additional properties and facilities to expand its disposal
capacity, including two active injection wells on 37 acres of land adjacent to
Newpark's Big Hill facility, four facilities in the Permian Basin at which brine
is extracted and sold and E&P waste is disposed in the salt domes or caverns
created by the extraction process, and 120 acres of land adjacent to its Big
Hill facility, which Newpark plans to develop into an industrial waste disposal
facility. In December, 1997, the Company made a $7 million investment in
Environmental Safeguards, Inc., a publicly traded company (AMEX:EW) which uses a
patented process and equipment to extract and recycle various components from
E&P waste.
Subsequent to December 31, 1997, Newpark entered into agreements to
acquire three drilling fluids companies through three separate unrelated
transactions. One of these acquisitions represents the Company's entrance into
the Canadian drilling fluids market. These agreements contemplate that the three
companies will be purchased for an aggregate consideration of $4,162,500 in cash
and 1,052,085 shares of Newpark common stock.
RESULTS OF OPERATIONS
Years Ended December 31,
(Dollars in thousands)
1997 1996 1995
---------------------- -------------------- -------------------
Revenues by product line:
Fluids management services:
E&P waste and NORM disposal $ 62,301 28.9% $ 44,905 33.0% $ 31,126 29.5%
Fluids sales & engineering 54,510 25.3 14,432 10.6 7,738 7.3
---------- ----- ---------- ----- ---------- -----
Total fluids management
services 116,811 54.2 59,337 43.6 38,864 36.8
Mat services 52,083 24.2 32,757 24.1 30,775 29.1
Integrated services 46,460 21.6 42,520 31.3 34,481 32.6
Other 0 0.0 1,360 1.0 1,600 1.5
---------- ----- ---------- ----- ---------- -----
Total revenues $ 215,354 100.0% $ 135,974 100.0% $ 105,720 100.0%
========== ===== ========== ===== ========== =====
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YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues
Total revenues increased to $215.4 million in 1997, from $136.0 million
in 1996, an increase of $79.4 million, or 58.4%. Principal components of the
$57.5 million increase in fluids management services revenue were drilling
fluids sales and service revenue, which increased $40.1 million, and waste
disposal revenue, which increased $17.4 million. Drilling fluids sales increased
as a result of a series of purchase acquisitions made during 1997 in the
drilling fluids market, the expansion of the businesses acquired through
increased inventories and facilities to service new and expanded markets and an
increase in drilling activity. The increase in waste disposal revenues can be
primarily ascribed to the full year effect of acquisition of a competitor's
marine-related collection operations in August 1996, increases in the domestic
market rig count and increased pricing. The volume of waste received has also
been impacted by an increase in environmental regulations. Effective December 4,
1997, discharges of waste from drilling operations in the state territorial
waters of the Gulf of Mexico were prohibited. These regulations have already
started to impact volumes of waste handled by the Company. It is anticipated
that these new regulations and increased regulations in other areas will cause
the volume of E&P waste handled by the Company to continue to increase. E&P
waste revenues for 1997 increased to $56.1 million, compared to $36.2 million in
1996. The volume of E&P waste received increased to 5.6 million barrels, from
4.0 million barrels. The increase in volume accounted for approximately 80% of
the increase in E&P waste revenues, while price increases accounted for
approximately 20% of the increase in revenues. NORM revenue was $6.2 million in
1997, compared to $8.7 million in 1996, due to decreased site remediation
activity. The decrease in activity in the NORM market was partially offset by
higher average pricing on waste received in 1997 versus 1996. The increase of
$19.3 million in mat rental revenue reflects improvement in the domestic market
rig count and increased pricing for Newpark's mat inventory, coupled with the
completion of a purchase acquisition in 1997. Mat rental revenues include
revenues earned on the initial mat installation, which typically includes the
first 60 days of rental. If the mats are rented beyond the initial period, a
rerental charge is earned. In 1997 the initial rentals accounted for
approximately 60% of mat service revenues with rerentals accounting for 40%. In
1996, initial rentals accounted for 52% of the total mat service revenues and
rerentals accounted for 48%. In terms of pricing and volume impact on total mat
service revenues, pricing accounted for approximately 60% of the increase and
volume accounted for approximately 40%.
Operating Costs and Expenses
Operating costs and expenses increased by $51.1 million in 1997 as
compared to 1996. This increase is due to an increase in personnel and operating
assets which were required to service and facilitate the growth in revenue from
1997 to 1996. While the dollar amount of expenses grew by 51.8%, expenses as a
percentage of revenues declined to 69.5% in 1997 as compared to 72.5% in 1996.
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General and Administrative Expenses
General and administrative expenses increased by $265,000 from 1996 to
1997, but decreased as a percentage of revenues to 1.5% in 1997 from 2.1% in
1996.
Operating Income
Operating income of $62.5 million in the 1997 period increased $30.5
million, or 95.3%, compared to $32.0 million in the 1996 period. Factors
contributing to the increase include increased profitability from disposal
operations, increased utilization and higher pricing for Newpark's mat inventory
and increased contribution from rapid growth in drilling fluids revenue.
Provision for Income Taxes
For the 1997 and 1996 periods, Newpark recorded income tax provisions
of $21.5 million and $9.8 million, equal to 36.7% and 34.7% of pre-tax income,
respectively.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues
Total revenues increased to $136.0 million in 1996, from $105.7 million
in 1995, an increase of $30.3 million, or 28.7%. In the fluid management
services area, revenues increased $20.5 million, as E&P waste revenues increased
$11.1 million, NORM revenues increased $2.7 million and product sales and
engineering revenues increased $6.7 million. The volume of E&P waste processed
increased by 1.1 million barrels, or 38%, to 4.0 million barrels, from 2.9
million in 1995. In addition to increased volume, Newpark benefitted from
increased E&P waste prices. The volume of NORM waste processed grew to 143,500
barrels, from 70,000 barrels in 1995, while pricing declined due to increased
volume of lower priced remediation projects made possible by the new direct
injection license. In the mat service area, revenues grew by $2.0 million, or
6.4%, due primarily to sales of mats for nonoilfield applications. Revenues in
the integrated services area increased $8.0 million, due to increased onsite
environmental management and other services incidental to site preparation
activities, coupled with increased wood product sales.
Operating Costs and Expenses
Operating costs and expenses increased by $17.1 million in 1996 as
compared to 1995 primarily as a result of increased activity as reflected in
revenues for the period. Despite this growth in total costs, operating costs and
expenses as a percentage of sales decreased to 72.5% in 1996 from 77.1% in 1995.
General and Administrative Expenses
General and administrative expenses decreased as a proportion of
revenues to 2.1% in 1996, from 2.5% in 1995, and increased in absolute amount by
$262,000.
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Restructure Expense
During the year ended December 31, 1996, the Company recorded a
restructure charge in the amount of $2.4 million. A total of approximately $1.8
million was related to the restructuring of certain of Newpark's E&P waste
processing operations and staffing changes to facilitate the integration of its
operations with those acquired from a competitor. The Company recognized an
additional $600,000 of costs associated with the termination of processing
operations at its original NORM facility at Port Arthur, Texas and the partial
closure of the site.
Operating Income
Operating income increased by $10.5 million, or 48.6%, to $32.0 million
in 1996, compared to $21.5 million in 1995. Operating margin improved to 23.5%
in 1996, as compared to 20.4% in 1995. The increase resulted primarily from
increased profitability from E&P waste and NORM disposal operations. Such
increase was partially offset by the restructure charge mentioned above.
Provision for Income Taxes
In 1996 and 1995, Newpark recorded income tax provisions of $9.8
million and $5.0 million, for effective tax rates of 34.7% and 28.3%,
respectively. The 1995 provision reflects the benefit realized from federal tax
carryforwards which were fully recognized in 1995.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130") and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). The Company is required to adopt both standards for its fiscal year ended
December 31, 1998. Management believes that the implementation of SFAS 130 and
SFAS 131 will not have a material impact on the presentation of the Company's
financial statements but may require additional disclosure.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position increased by $60.3 million, or
202%, during the year ended December 31, 1997, as compared to 1996. Key working
capital data is provided below:
Year Ended December 31,
------------------------------
1997 1996
---- ----
Working Capital (000's) $90,212 $29,881
Current Ratio 3.94 1.77
The increase in working capital is primarily attributable to three
major factors. First, the issuance of $125 million of ten year, 8-5/8% senior
subordinated notes which are due December 15, 2007. The net proceeds from the
notes were $121.9 million, of which
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$90.5 million was immediately used to fully repay the outstanding balance under
the Company's revolving credit facility ("Credit Facility"). The remainder of
$31.4 million served to increase working capital. Secondly, due to growth in the
Company's business, receivables and inventory, net of payables and accrued
liabilities increased by $30.5 million. Thirdly, the repayment of the
outstanding balance under the credit facility had the impact of increasing
working capital by $11.0 million. Offsetting these increases were property and
other asset additions.
The Company's Long Term Capitalization as of December 31, 1997, 1996
and 1995 is as follows:
1997 1996 1995
-------- -------- --------
Long-term debt
(including current maturities):
Credit facility $ -- $ 41,351 $ 43,378
Subordinated debt 125,000 -- --
Other 3,435 5,303 11,572
-------- -------- --------
Total long-term debt 128,435 46,654 54,950
Stockholders equity* 269,769 203,441 77,755
-------- -------- --------
Total capitalization $398,204 $250,095 $132,705
======== ======== ========
*On August 12, 1996 the Company completed the sale of 13,800,000
shares of its common stock generating net proceeds of $98.1 million.
For the year ended December 31, 1997, Newpark's working capital needs
were met primarily from operating cash flow, and borrowings under the Credit
Facility (which were refinanced with the subordinated debt issue) and excess
proceeds from the subordinated debt issue. Total cash generated from operations
of $28.9 million was supplemented by $82.6 million from financing activities to
provide for a total of $92.7 million used in investing activities, including the
purchase of drilling fluids assets (including the Anchor Drilling Fluids
acquisition), the purchase of mats, the investment in Environmental Safeguards,
and the expansion of waste disposal facilities.
On June 30, 1997, Newpark entered into the Credit Facility, which
provides for a $90.0 million revolving credit facility maturing on June 30,
2000, including up to $5.0 million in standby letters of credit. At December 31,
1997, $2.4 million in letters of credit were issued and outstanding under the
Credit Facility, and no additional amounts were outstanding under the revolving
facility. Advances under the credit facility bear interest at either (i) a
specified prime rate or (ii) the LIBOR rate plus a spread which is determined
quarterly based on the Credit Facility. The Credit Facility requires that
Newpark maintain certain specified financial ratios and comply with other usual
and customary requirements. Newpark was in compliance with all requirements of
the Credit Facility at December 31, 1997.
For 1998, Newpark anticipates capital expenditures of approximately $70
million, including: (i) $10 million to acquire and develop additional injection
well sites, (ii) $15 million for expansion of drilling fluids operations,
including the purchase of equipment
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associated with fluids processing and recycling and infrastructure expansions;
(iii) $8 million to expand barite milling capacity; (iv) $15 million for the
purchase of additional hardwood mats; (v) $4 million for the development of
Newpark's synthetic mat system; (vi) $10 million for the upgrade and purchase of
equipment; and (vii) $8 million for expansion into industrial waste disposal
markets.
Potential sources of additional funds, if required by the Company,
would include additional borrowings and the sale of equity securities. The
Company presently has no commitments beyond its working capital and bank lines
of credit by which it could obtain additional funds for current operations;
however, it regularly evaluates potential borrowing arrangements which may be
utilized to fund future expansion funds. Newpark believes that its current
sources of capital coupled with internally generated funds, will be sufficient
to support its working capital, capital expenditure and debt service
requirements, for the foreseeable future. Except as described in the preceding
paragraph, Newpark is 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 beyond the next
12 months.
Inflation has not materially impacted the Company's revenues or income.
YEAR 2000
In accordance with the U.S. Securities and Exchange Commission's Staff
Legal Bulletin No. 5, the Company has assessed both the cost of addressing and
the costs or consequences of incomplete or untimely resolution of the Year 2000
issue. Most of the Company's major systems have already been updated or replaced
with applications, in the normal course of business, that are year 2000
compliant. Accordingly, the Company has determined that its estimated costs
related to the year 2000 issue are not anticipated to be material to the
Company's business, operations or financial condition.
In addition, the Company is in the process of initiating formal
communications with its significant suppliers and large customers to determine
the extent to which the Company is vulnerable to those third parties failure to
remediate their own Year 2000 Issues. The Company can give no guarantee that the
systems of other companies on which the Company's systems rely will be converted
on time or that a failure to convert by another company would not have a
material adverse effect on the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Newpark is not required to provide the information required under this
item for the fiscal year ended December 31, 1997.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Newpark Resources, Inc.
We have audited the accompanying consolidated balance sheets of Newpark
Resources, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Newpark Resources, Inc. and
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 27,1998
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Newpark Resources, Inc.
Consolidated Balance Sheets
December 31
- ------------------------------------------------------------------------------------------
(In thousands, except share data) 1997 1996
- ------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,715 $ 1,945
Accounts and notes receivable, less allowance
of $2,171 in 1997 and $1,695 in 1996 73,385 48,369
Inventories 21,147 7,470
Deferred tax asset 3,974 8,144
Other current assets 1,685 2,727
--------- ---------
Total current assets 120,906 68,655
Property, plant and equipment, at cost, net of
accumulated depreciation 188,752 114,670
Cost in excess of net assets of purchased businesses and
identifiable intangibles, net of accumulated amortization 97,542 83,512
Other assets 39,380 23,047
--------- ---------
$ 446,580 $ 289,884
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 145 $ 647
Current maturities of long-term debt 1,200 11,736
Accounts payable 17,376 15,091
Accrued liabilities 10,074 9,835
Current taxes payable 1,899 1,465
--------- ---------
Total current liabilities 30,694 38,774
Long-term debt 127,235 34,918
Other non-current liabilities 1,314 2,644
Deferred taxes payable 17,568 10,107
Commitments and contingencies (See Note M) -- --
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding -- --
Common Stock, $.01 par value, 80,000,000 shares
authorized, 64,061,289 shares outstanding in 1997
and 60,438,464 in 1996 640 604
Paid-in capital 283,281 253,825
Retained earnings (deficit) (14,152) (50,988)
--------- ---------
Total stockholders' equity 269,769 203,441
--------- ---------
$ 446,580 $ 289,884
========= =========
See accompanying Notes to Consolidated Financial Statements.
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Newpark Resources, Inc.
Consolidated Statements of Income
Years Ended December 31
- --------------------------------------------------------------------------------
(In thousands, except per share data) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenues $ 215,354 $ 135,974 $ 105,720
Operating costs and expenses:
Cost of services provided 127,228 87,081 70,360
Operating costs 22,463 11,523 11,156
--------- --------- ---------
149,691 98,604 81,516
General and administrative expenses 3,185 2,920 2,658
Restructure expense -- 2,432 --
--------- --------- ---------
Operating income 62,478 32,018 21,546
Interest income (308) (223) (222)
Interest expense 4,133 3,900 3,833
Other -- -- 436
--------- --------- ---------
Income before income taxes 58,653 28,341 17,499
Provision for income taxes 21,537 9,838 4,957
--------- --------- ---------
Net income $ 37,116 $ 18,503 $ 12,542
========= ========= =========
Weighted average common and common
equivalent shares outstanding:
Basic 62,714 51,156 44,599
========= ========= =========
Diluted 64,186 52,915 45,665
========= ========= =========
Net income per common and
common equivalent share:
Basic $ .59 $ .36 $ .28
========= ========= =========
Diluted $ .58 $ .35 $ .27
========= ========= =========
See accompanying Notes to Consolidated Financial Statements.
36
37
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1995, 1996 and 1997
- -----------------------------------------------------------------------------------------------------------
Retained
Common Paid-In Earnings
(In thousands) Stock Capital (Deficit) Total
- -----------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1995 $ 424 $ 136,513 $ (73,306) $ 63,631
Employee stock options 4 1,579 (1) 1,582
Stock dividend 20 8,704 (8,724) -
Net income - - 12,542 12,542
--------- ------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 448 146,796 (69,489) 77,755
Employee stock options 12 4,944 (2) 4,954
Public offering 140 96,249 - 96,389
Acquisitions 4 5,836 - 5,840
Net income - - 18,503 18,503
--------- ------------- ------------ ------------
BALANCE, DECEMBER 31, 1996 604 253,825 (50,988) 203,441
Employee stock options 12 9,091 (10) 9,093
Incentive plan - 668 - 668
Acquisitions 24 19,697 355 20,076
SBM net loss (11/1/96-12/31/96) - - (625) (625)
Net income - - 37,116 37,116
--------- ------------- ------------ ------------
BALANCE, DECEMBER 31, 1997 $ 640 $ 283,281 $ (14,152) $ 269,769
========= ============= ============ ============
See accompanying Notes to Consolidated Financial Statements.
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38
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
- -------------------------------------------------------------------------------------------------------------
(IN THOUSANDS ) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,116 $ 18,503 $ 12,542
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 25,844 17,220 10,000
Provision for deferred income taxes 15,880 6,168 3,326
Loss on sales of assets 147 36 79
Provision for doubtful accounts -- 775 190
Change in assets and liabilities net of effects of acquisitions:
Increase in accounts and notes receivable (19,990) (10,410) (16,410)
(Increase) decrease in inventories (12,009) 188 (4,897)
Increase in other assets (7,536) (1) (1,509)
(Decrease) increase in accounts payable (4,874) 1,395 1,896
(Decrease) increase in accrued liabilities and other (5,687) (9,009) 2,227
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,891 24,865 7,444
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (78,379) (44,521) (24,024)
Proceeds from sale of property, plant and equipment 40 1,492 567
Investment in joint ventures (4,833) (4,406) (1,094)
Acquisitions, net of cash acquired (6,580) (71,461) --
Payments received on notes receivable 70 440 249
Advances on notes receivable (3,000) (112) (227)
Purchase of patents -- (5,700) --
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (92,682) (124,268) (24,529)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on lines of credit -- 5,749 20,796
Principal payments on notes payable,
and long-term debt (46,675) (12,294) (20,784)
Proceeds from issuance of debt 125,122 3,374 15,328
Proceeds from exercise of stock options 4,114 4,953 1,266
Proceeds from issuance of stock, net of expenses -- 98,066 --
Other -- -- 317
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 82,561 99,848 16,923
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,770 445 (162)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,945 1,500 1,662
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 20,715 $ 1,945 $ 1,500
========= ========= =========
See accompanying Notes to Consolidated Financial Statements.
38
39
NEWPARK RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION. Newpark Resources, Inc. ("Newpark"
or the "Company") provides integrated fluids management, environmental and
oilfield services to the exploration and production industry in the Gulf Coast
region, principally Louisiana and Texas. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
material intercompany transactions are eliminated in consolidation.
USE OF ESTIMATES. 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.
CASH EQUIVALENTS. All highly liquid investments with a remaining
maturity of three months or less at the date of acquisition are classified as
cash equivalents.
FAIR VALUE DISCLOSURES. Statement of Financial Accounting Standards ("SFAS") No.
107, "Disclosures about Fair Value of Financial Instruments", requires the
disclosure of the fair value of all significant financial instruments. The
estimated fair value amounts have been developed based on available market
information and appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value. Therefore, such
estimates are not necessarily indicative of the amounts that could be realized
in a current market exchange. After such analysis, management believes the
carrying values of the Company's significant financial instruments (consisting
of cash and cash equivalents, receivables, payables and long-term debt,
primarily the Senior Subordinated Notes issued in December of 1997) approximate
fair values at December 31, 1997 and 1996.
INVENTORIES. Inventories are stated at the lower of cost (principally average
and first-in, first-out) or market. Such inventories consist of logs, supplies,
processed barite, other specialty chemicals used in drilling fluids, and board
road lumber. Board road lumber is amortized on the straight-line method over its
estimated useful life of approximately one year.
DEPRECIATION AND AMORTIZATION. Depreciation of property, plant and equipment,
including interlocking board road mats, is provided for financial reporting
purposes on the straight-line method over the estimated useful lives of the
individual assets which range from three to forty years.
The cost in excess of net assets of purchased businesses ("excess
cost") is being amortized on a straight-line basis over twenty-five to
thirty-five years, except for $2,211,000 relating to acquisitions prior to 1971
that is not being amortized. Management of the Company periodically reviews the
carrying value of the excess cost in relation to the current and expected
undiscounted cash flows of the businesses which benefit therefrom in order to
assess whether there has been a permanent impairment of the excess cost of the
net purchased assets. Accumulated amortization on excess cost was $3,936,000 and
$1,253,000 at December 31, 1997 and 1996, respectively.
39
40
REVENUE RECOGNITION. In substantially all of its lines of service, Newpark
recognizes revenue on a units of delivery basis. E&P waste and NORM disposal
revenues are generally recognized upon receipt of waste for processing, while
drilling fluids sales and engineering revenues are generally recognized upon
delivery of products or services. Revenues from certain integrated service
projects, which are typically of short duration, are recognized as projects
progress based upon sales values agreed to by the customer for specific units
delivered or project milestones completed. Included in accounts receivable are
unbilled revenues for projects in progress in the amounts of $7,509,000 and
$6,600,000 at December 31, 1997 and 1996, respectively, all of which are due
within one year.
INCOME TAXES. Income taxes are provided using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred
income taxes are recorded based upon differences between the financial reporting
and income tax basis of assets and liabilities and are measured using the
enacted income tax rates and laws that will be in effect when the differences
are expected to reverse.
INTEREST CAPITALIZATION. For the years ended December 31, 1997, 1996 and 1995
the Company incurred interest cost of $5,240,000, $4,415,000, and $4,291,000,
respectively, of which $1,107,000, $515,000, and $458,000, respectively, was
capitalized on qualifying construction projects.
INCOME PER SHARE. In 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share." SFAS No. 128 requires the replacement of previously reported primary and
fully diluted earnings per share required by Accounting Principles Board Opinion
No. 15 with basic earnings per share and diluted earnings per share. The
calculation of basic earnings per share excludes any dilutive effect of stock
options, while diluted earnings per share includes the dilutive effect of stock
options. Per share and weighted average share amounts for all years presented
have been restated to conform to the requirements of SFAS No. 128, and to give
retroactive effect to a 2-for-1 stock split approved by the stockholders on May
14, 1997, a 2-for-1 stock split, effected in the form of a 100% stock dividend,
approved by the Board of Directors on October 27, 1997 and a 5% stock dividend
declared and paid during 1995.
STOCK-BASED COMPENSATION. SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations, and has
adopted the disclosure-only provisions of SFAS 123.
NEW ACCOUNTING PRONOUNCEMENTS. During 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 130 provides guidance for the presentation and
display of comprehensive income. SFAS 131 establishes standards for disclosure
of operating segments, products, services, geographic areas and major customers.
The Company is required to adopt both standards for its fiscal year ended
December 31, 1998. Management believes that the implementation of SFAS 130 and
SFAS 131 will not have a
40
41
material impact on the presentation of the Company's financial statements, but
may require additional disclosure.
RECLASSIFICATIONS. Certain reclassifications of amounts reported in prior years
have been made to conform to the current year presentation.
B. ACQUISITIONS AND DISPOSITIONS
On February 28, 1997, Newpark issued 2,328,000 shares of its common
stock in exchange for all of the outstanding common stock of Sampey, Bilbo,
Meschi Drilling Fluids Management, Inc., ("SBM"), (now known as Newpark Drilling
Fluids, Inc.). SBM is a full service drilling fluids company serving the onshore
and offshore Louisiana and Texas Gulf Coast drilling markets. This business
combination has been accounted for as a pooling of interests, and accordingly,
the consolidated financial statements for periods prior to the combination have
been restated to include the accounts and results of operations of SBM.
Prior to the combination SBM's fiscal year end was October 31.
Newpark's fiscal year is December 31. In applying pooling of interests
accounting, the December 31, 1996, Newpark consolidated statement of income was
combined with the SBM statement of income for the year ended October 31, 1996.
Retained earnings of the combined entities were adjusted by $625,000 as of the
beginning of Newpark's fiscal 1997 year to include unaudited net losses of SBM
for the period November 1, 1996 to December 31, 1996. During this period, SBM's
revenues were $3.0 million. Amounts included in the accompanying consolidated
statements of income for the years ended December 31, 1996 and 1995 include the
results of SBM for the years ended October 31, 1996 and 1995, respectively.
Operating results prior to the combination of the separate companies
and the combined amounts presented in the consolidated financial statements are
summarized below:
- --------------------------------------------------------------
Year Ended
(In thousands of dollars) December 31,
- --------------------------------------------------------------
1996 1995
-------- --------
Revenues:
Newpark $121,542 $ 97,982
SBM 14,432 7,738
-------- --------
Combined $135,974 $105,720
======== ========
Net Earnings:
Newpark $ 18,453 $ 12,236
SBM 50 306
-------- --------
Combined $ 18,503 $ 12,542
======== ========
In addition to SBM, Newpark acquired, in the aggregate, seven other
companies in 1997. These acquisitions have been accounted for by the purchase
method and include the results of operations of the acquired companies since
their respective acquisition dates in 1997. These acquisitions were completed in
exchange for an aggregate of 1,193,332 shares of Newpark common stock and
$9,186,000 in cash. The purchase price was allocated based on estimated fair
values at the
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date of acquisition. This resulted in an excess of purchase price over assets
acquired of $16.5 million, which is being amortized on a straight-line basis
over 25 years.
The following unaudited pro forma summary presents the consolidated
results of operations of the Company as if the purchase acquisitions had
occurred on January 1, 1996:
- -----------------------------------------------------------------------------
(In thousands, except per share amounts) 1997 1996
- -----------------------------------------------------------------------------
Revenues $ 224,171 $ 148,341
Net income 36,697 18,342
=========== ==========
Net income per common and
common equivalent share:
Basic $ 0.57 $ 0.35
Diluted 0.56 0.34
=========== ==========
The above unaudited proforma amounts have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill, additional depreciation expense for assets
recorded at fair market value at the date of acquisition, additional interest
expense for borrowings, and the net impact of the above adjustments on income
tax expense. They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect on January
1, 1996, or of future results of operations of the consolidated entities.
Also during 1997, Newpark acquired two additional companies, the
acquisitions of which have been accounted for as poolings of interests. These
combinations were completed in exchange for an aggregate of 1,168,668 shares of
Newpark common stock. Prior year financial statements have not been restated
because the financial information related to these entities individually and in
the aggregate was not considered significant in relation to the financial
reporting requirements of Newpark.
On August 12, 1996, the Company acquired from Campbell Wells, Ltd.
("Campbell") substantially all of the non-landfarm assets and certain leases
associated with five transfer stations located along the Gulf Coast and three
receiving docks at the landfarm facilities operated by Campbell for cash
consideration of $70.5 million. This acquisition has been accounted for under
the purchase method, and the results of the operations of the acquired business
have been included in the consolidated financial statements since the date of
acquisition. The purchase price was allocated based on estimated fair values at
the date of acquisition. This resulted in an excess of purchase price over
assets acquired of $77.1 million, of which $68.6 million is being amortized on a
straight-line basis over 35 years, and $8.5 million is being amortized on a
straight-line basis over 25 years.
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43
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Campbell as if the
acquisition and the related equity offering had occurred January 1, 1995.
- -----------------------------------------------------------------------------
(In thousands, except per share amounts) 1996 1995
- -----------------------------------------------------------------------------
Revenues $ 152,753 $ 124,557
Net income 20,460 16,018
============ ============
Net income per common and
common equivalent share:
Basic $ 0.40 $ 0.36
Diluted 0.39 0.35
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill, the net effect on operating costs related to
the combined operations, reduced interest expense as a result of debt reduction
from the proceeds of the offering, and the net impact of the above adjustments
on income tax expense. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been in effect
on January 1, 1995, or of future results of operations of the consolidated
entities.
Concurrent with the Campbell acquisition, the Company entered into an
agreement to provide a certain volume of waste over a future period to Campbell.
See further discussion in Note M.
In conjunction with this acquisition and the acquisition of a new waste
disposal license, the Company recorded a third quarter restructure charge of
$2.4 million, $1.6 million after taxes, or $0.03 per common share. A total of
approximately $1.8 million was related to the restructuring of certain of the
Company's E&P waste processing operations and staffing changes to facilitate the
integration of its operations with those recently acquired by Campbell. The
Company recognized an additional $.6 million cost associated with the
termination of processing operations at its original NORM facility at Port
Arthur, Texas and the partial closure of the site.
On August 29, 1996, the Company sold the land, buildings and certain
equipment comprising substantially all of the assets of its former marine repair
operation to the operator of the facility and refinanced certain advances
previously made to the operator. The assets sold had previously been subject to
an operating lease to the same party, and the purchase was made under the terms
of a purchase option granted in the original lease. The sales price of
approximately $16.0 million represents the net book value of the assets sold and
refinanced. The consideration received included $1.2 million in cash, $7.2
million in notes receivable and $7.6 million in debt obligations which were
assumed by the operator. The notes receivable are included in other assets and
have been recorded at their estimated fair value, which approximates the amount
at which they can be prepaid at the operator's option during the term of the
notes. The notes receivable include two notes, one of which is in the face
amount of $8,534,000, bears interest at 5.0% per annum, with interest and
principal payable at September 30, 2003. The second note, which was subsequently
paid off during the first quarter of 1998, was in the face amount of $600,000,
bore interest at 8.0% per annum and was payable in monthly and annual
installments of principal and interest through September 30, 2003. The remaining
note is secured by a second lien on the assets sold as well as certain
guarantees of the operator.
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C. INVENTORY
The Company's inventory consisted of the following items at December
31, 1997 and 1996:
- ----------------------------------------------------------------------------------
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------
Board road lumber $ 5,017 $ 661
Logs 8,546 3,956
Drilling fluids raw materials and components 5,956 1,326
Supplies 686 636
Other 942 891
----------- ------------
Total $ 21,147 $ 7,470
=========== ============
D. PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment at December
31, 1997 and 1996 is summarized as follows:
- ---------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------
Land $ 8,190 $ 2,411
Buildings and improvements 41,870 17,258
Machinery and equipment 83,014 53,297
Board road mats 114,504 78,881
Other 3,730 2,579
----------- ------------
251,308 154,426
Less accumulated depreciation (62,556) (39,756)
----------- ------------
$ 188,752 $ 114,670
=========== ============
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E. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
Credit arrangements and long-term debt consisted of the following at
December 31, 1997 and 1996:
- ----------------------------------------------------------------------------
(In thousands) 1997 1996
- ----------------------------------------------------------------------------
Senior subordinated notes $ 125,000 $ --
Bank - line of credit -- 11,778
Bank - term note -- 27,223
Bank - line of credit -- 2,350
Building loan 1,683 1,799
Acquisition financing due in 1999 with an
interest rate of 7% -- 1,375
Note payable to stockholder
at 10% due in 2000 -- 382
Other, principally installment notes secured by
machinery and equipment, payable through
2001 with interest at 2.0% to 13.5% 1,752 1,747
--------- ---------
128,435 46,654
Less: current maturities of long-term debt (1,200) (11,736)
--------- ---------
Long-term portion $ 127,235 $ 34,918
========= =========
On December 17, 1997 the Company issued $125 million of unsecured
senior subordinated notes (the "Notes"), which mature on December 15, 2007.
Interest on the Notes accrues at the rate of 8-5/8% per annum and is payable
semi-annually on each June 15 and December 15, commencing June 15, 1998. The
Notes may be redeemed, in whole or in part, at a premium commencing after
December 15, 2002. Up to 35% of the Notes may be redeemed from proceeds of an
equity offering, at a premium at any time up to and including December 1, 2000.
The Notes are subordinated to all senior indebtedness, as defined in the
subordinated debt indenture, including the Company's bank revolving credit
facility.
The Notes are guaranteed by substantially all operating subsidiaries of
the Company (the "Subsidiary Guarantors"). The guarantee obligations of the
Subsidiary Guarantors (which are all direct or indirect wholly owned
subsidiaries of the Company) are full, unconditional and joint and several. The
aggregate assets, liabilities, earnings, and equity of the Subsidiary Guarantors
are substantially equivalent to the total assets, liabilities, earnings, and
equity of Newpark Resources, Inc. and its subsidiaries on a consolidated basis.
Separate financial statements of the Subsidiary Guarantors are not included in
the accompanying financial statements because management of the Company has
determined that the additional information provided by separate financial
statements of the Subsidiary Guarantors would not be of material value to
investors.
As of December 31, 1997, the Company maintained a $90.0 million bank
credit facility in the form of a revolving line of credit commitment. The credit
facility is unsecured. It bears interest at either a specified prime rate (8.50%
at December 31, 1997) or the LIBOR rate (5.81% at December 31, 1997) plus a
spread which is determined quarterly based upon the ratio of the Company's
funded debt to cash flow. The line of credit requires monthly interest payments
and matures on June 30, 2000. At December 31, 1997, $2.4 million of letters of
credit were issued and outstanding, leaving a net of $87.6 million available for
cash advances under the line of credit.
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The credit facility requires that the Company maintain certain specified
financial ratios and comply with other usual and customary requirements. The
Company was in compliance with the respective agreements at December 31, 1997.
Maturities of long-term debt are $1,200,000 in 1998, $575,000 in 1999,
$405,000 in 2000, $181,000 in 2001, $192,000 in 2002 and $125,882,000
thereafter.
F. INCOME TAXES
The provision for income taxes charged to operations is principally
U. S. Federal tax as follows:
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------
Current tax expense $ 5,657 $ 3,670 $ 1,631
Deferred tax expense 15,880 6,168 3,326
------- ------- -------
Total provision $21,537 $ 9,838 $ 4,957
======= ======= =======
Deferred tax expense includes a decrease (increase) in the valuation
allowance for deferred tax assets of ($1,326,000), $236,000, and $1,700,000 for
1997, 1996, and 1995, respectively.
The effective income tax rate is reconciled to the statutory federal
income tax rate as follows:
Year Ended December 31,
--------------------------
1997 1996 1995
---- ---- ----
Income tax expense at statutory rate 35.0% 35.0% 34.0%
Non-deductible expenses 1.1 1.0 1.4
Tax effect of NOL .4 (1.0) (9.7)
Other .2 (.3) 2.6
---- ---- ----
Total income tax expense 36.7% 34.7% 28.3%
==== ==== ====
For federal income tax purposes, the Company has net operating loss
carryforwards ("NOLs") of approximately $8.7 million (net of amounts disallowed
pursuant to IRC Section 382) that, if not used, will expire in 1999 through
2009. The Company also has approximately $3.4 million of alternative minimum tax
credit carryforwards, which are not subject to expiration and are available to
offset future regular income taxes subject to certain limitations. These
carryforwards have been recognized for financial reporting purposes.
Additionally, for state income tax purposes the Company has NOLs of
approximately $38.1 million available to reduce future state taxable income.
These NOLs expire in varying amounts beginning in year 2000 through 2012.
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47
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities at December 31, 1997
and 1996 are as follows:
- -----------------------------------------------------------------------------------
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------
Deferred tax assets:
Net operating losses $ 5,096 $ 4,424
Accruals not currently deductible 2,518 3,498
Bad debts 800 615
Alternative minimum tax credits 3,441 4,028
All other 530 424
-------- --------
Total deferred tax assets 12,385 12,989
Valuation allowance (1,326) --
-------- --------
Net deferred tax assets $ 11,059 $ 12,989
-------- --------
Deferred tax liabilities:
Accelerated depreciation and amortization $ 21,554 $ 12,648
Inventory costs capitalized for financial reporting 2,369 726
All other 730 1,578
-------- --------
Total deferred tax liabilities 24,653 14,952
-------- --------
Total net deferred tax liabilities $(13,594) $ (1,963)
======== ========
Under SFAS No. 109, a valuation allowance must be established to offset
a deferred tax asset if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. At December 31, 1997, the Company recorded a valuation allowance for
state NOLs generated by a particular subsidiary that the Company believes may
not be utilized in the future.
G. PREFERRED STOCK
The Company has been authorized to issue up to 1,000,000 shares of
Preferred Stock, $.01 par value, none of which are issued or outstanding at
December 31, 1997.
H. COMMON STOCK
On May 14, 1997, the stockholders of the Company approved an increase
in the number of authorized shares of common stock to 80,000,000. This allowed
the Company to effect a 2-for-1 stock split affecting record holders as of May
30, 1997, and a 100% stock dividend affecting record holders as of November 14,
1997. All share amounts and per share amounts have been adjusted retroactively
to reflect both the stock split and stock dividend.
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Changes in outstanding Common Stock for the years ended December 31,
1997, 1996, and 1995 were as follows:
- ------------------------------------------------------------------------------
(In thousands of shares) 1997 1996 1995
- ------------------------------------------------------------------------------
Outstanding, beginning of year 60,438 44,864 42,272
Shares issued for acquisitions 2,362 -- --
Shares issued for deferred compensation plan 59 -- --
Dividend shares issued -- -- 2,020
Shares issued for pubic offering -- 13,800 --
Shares issued to settle royalty obligations -- 434 --
Shares issued to acquire mat patent rights -- 276 --
Shares issued upon exercise of options 1,202 1,064 572
------ ------ ------
Outstanding, end-of-year 64,061 60,438 44,864
====== ====== ======
I. EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), the Company changed its method of calculating
earnings per share during the fourth quarter of 1997. The following table
presents the reconciliation of the numerator and denominator for calculating
earnings per share in accordance with the disclosure requirements of SFAS 128 as
follows (in thousands, except per share data):
FOR THE YEARS ENDED
--------------------------------- -------------------------------------- -----------------------------------
1997 1996 1995
--------------------------------- -------------------------------------- -----------------------------------
Income Shares Per Share Income Shares Per Share Income Shares Per Share
(Num) ((Den) Amount (Num) (Den) Amount (Num) (Den) Amount
---------- --------- ------------ ------------ ----------- ------------- ------------ -------- -------------
BASIC EPS
Income available
to common
stockholders $37,116 62,714 $ .59 $18,503 51,156 $ .36 $12,542 44,599 $ .28
======= ====== ======
EFFECTIVE
OF
DILUTIVE
SECURITIES
Stock options 1,472 1,759 1,066
----- ----- -----
DILUTED EPS
Income available
to common
stockholders
$37,116 64,186 $ .58 $18,503 52,915 $ .35 $12,542 45,665 $ .27
======= ====== ======= ======= ====== ====== ======= ====== ======
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Options to purchase 12,000 and 16,000 shares of common stock at
exercise prices of $20.84 and $19.53 per share, respectively, were outstanding
during the fourth quarter of 1997, but were not included in the computation of
diluted EPS because the options' exercise price was greater than the average
market price of the common shares. The options, which expire during the fourth
quarter of 2002, were still outstanding at the end of 1997.
Options to purchase 40,000 shares of common stock at an exercise price
of $9.31 per share were outstanding during the fourth quarter of 1996, but were
not included in the computation of diluted EPS because the options exercise
price was greater than the average market price of the common shares. The
options, which expire during the fourth quarter of 2001, were all outstanding at
the end of 1996.
On January 12, 1998, the Company granted to certain employees options
to purchase 754,000 shares of common stock at an exercise price of $14.00 per
share.
J. STOCK OPTION PLANS
At December 31, 1997, the Company had three stock-based compensation
plans, which are described below. The Company applies Accounting Principles
Board Opinion 25 ("APB 25") and related Interpretations in accounting for its
plans. Accordingly, no compensation cost has been recognized for its stock
option plans as the exercise price of all stock options granted thereunder is
equal to the fair value at the date of grant. Had compensation costs for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
Financial Accounting Standards Board Statement No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Net income As reported $ 37,116 $ 18,503 $ 12,542
Pro forma 34,620 17,541 12,208
Basic earnings per share As reported 0.59 0.36 0.28
Pro forma 0.55 0.34 0.27
Diluted earnings As reported 0.58 0.35 0.27
per share Pro forma 0.54 0.33 0.27
========= ========== =========
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions for
grants in 1997: no dividend yield; expected volatility of 64.3%; risk-free
interest rate of 6.3%, and expected life of four years. The following
assumptions were used for options granted in 1996: no dividend yield; expected
volatility of 40.8%; risk-free interest rate of 6.2%; and expected life of four
years. The following assumptions were used for options granted in 1995: no
dividend yield; expected volatility of 41.6%; risk-free interest rate of 6.0%;
and expected life of four years.
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A summary of the status of the Company's stock option plans as of
December 31, 1997, 1996, and 1995 and changes during the periods ending on those
dates is presented below:
Years Ended December 31,
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
W-A W-A W-A
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Outstanding at
beginning of year 4,110,132 $ 4.90 3,980,032 $ 3.26 2,159,924 $ 2.54
Granted 1,254,000 12.59 1,264,000 8.16 2,327,000 3.85
Exercised (1,153,315) 3.50 (1,066,768) 2.73 (548,668) 2.17
Dividend -- -- -- -- 130,440 3.29
Canceled (140,260) 6.69 (67,132) 3.78 (88,664) 3.43
---------- ---------- ---------
Outstanding at end of year 4,070,557 7.59 4,110,132 4.90 3,980,032 3.26
========== ========== =========
Weighted-average fair
value of options granted
during the year $6.80 $ 3.28 $1.55
The following table summarizes information about stock options
outstanding at December 31, 1997.
Options Outstanding Options Exercisable
------------------------------------------------------------ ---------------------------------------
Range of Weighted-Average Weighted- Weighted-
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life (Years) Exercise Price Exercisable Exercise Price
$1.73 to $4.94 1,705,758 4.51 $ 3.59 986,213 $ 3.44
$6.13 to $9.31 1,142,799 5.83 8.25 364,132 8.31
$10.19 to $14.72 870,000 6.29 10.88 - -
$16.09 to $17.13 304,000 6.66 16.25 - -
$19.34 to $20.84 48,000 6.82 19.78 - -
--------- ---------
4,070,557 1,350,345
========= =========
The Amended and Restated Newpark Resources, Inc. 1988 Incentive Stock
Option Plan (the "1988 Plan") was adopted by the Board of Directors on June 22,
1988 and thereafter was approved by the stockholders. The 1988 Plan has been
amended several times and currently provides for 4,000,000 shares to be issuable
thereunder. An option may not be granted for an exercise price less than the
fair market value on the date of grant and may have a term of up to ten years.
The 1993 Non-Employee Directors' Stock Option Plan (the "1993
Non-Employee Directors' Plan") was adopted on September 1, 1993 by the Board of
Directors and, thereafter, was approved by the stockholders in 1994.
Non-employee directors are not eligible to participate in any other stock option
or similar plans currently maintained by the Company. The purpose of the 1993
Non-Employee Directors' Plan is to promote an increased incentive and personal
interest in the welfare of Newpark by those individuals who are primarily
responsible for shaping the long-range plans of Newpark, to assist Newpark in
attracting and retaining on the Board persons of exceptional competence and to
provide additional incentives to serve as a director of Newpark.
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Upon the adoption of the 1993 Non-Employee Directors' Plan, the five
non-employee directors were each granted a stock option to purchase 63,000
shares of Common Stock at an exercise price of $2.14 per share, the fair market
value of the Common Stock on the date of grant. In addition, each new
Non-Employee Director, on the date of his or her election to the Board of
Directors automatically will be granted a stock option to purchase 63,000 shares
of Common Stock at an exercise price equal to the fair market value of the
Common Stock on the date of grant. The determination of fair market value of the
Common Stock is based on market quotations. On November 2, 1995, the Board of
Directors adopted, and the shareholders approved on June 12, 1996, amendments to
the Non-Employee Directors' Plan to increase the maximum number of shares
issuable thereunder from 630,000 to 840,000 and to provide for the automatic
grant at five year intervals of additional stock options to purchase 42,000
shares of Common Stock to each non-employee director who continues to serve on
the Board. At December 31, 1997, 113,000 options had been exercised under the
1993 Non-Employee Directors' Plan.
On November 2, 1995, the Board of Directors adopted, and on June 12,
1996 the stockholders approved, the Newpark Resources, Inc. 1995 Incentive Stock
Option Plan (the "1995 Plan"), pursuant to which the Compensation Committee may
grant incentive stock options and nonstatutory stock options to designated
employees of Newpark. Initially, a maximum of 2,100,000 shares of Common Stock
were issuable under the 1995 Plan, with such maximum number increasing on the
last business day of each fiscal year of Newpark, commencing with the last
business day of the fiscal year ending December 31, 1996, by a number equal to
1.25% of the number of shares of Common Stock issued and outstanding on the
close of business on such date, with a maximum number of shares of Common Stock
that may be issued upon exercise of options granted under the 1995 Plan being
limited to 5,250,000. At December 31, 1997 there were 2,406,133 options
outstanding under the 1995 plan, 464,000 of which were exercisable.
K. DEFERRED COMPENSATION PLAN
In March of 1997, the Company established a Long Term Stock and Cash
Incentive Plan (the "Plan"). By policy, the Company has limited participation in
the Plan to certain key employees of companies acquired subsequent to inception
of the Plan. The intent of the Plan is to increase the value of the
stockholders' investment in the Company by improving the Company's performance
and profitability and to retain, attract and motivate key employees who are not
directors or officers of Newpark but whose judgment, initiative and efforts are
expected to contribute to the continued success, growth and profitability of the
Company.
Subject to the provisions of the Plan, a committee may (i) grant awards
pursuant to the Plan, (ii) determine the number of shares of stock or the amount
of cash or both subject to each award, (iii) determine the terms and conditions
(which need not be identical) of each award, provided that stock shall be issued
without the payment of cash consideration other than an amount equal to the par
value of the stock, (iv) establish and modify performance criteria for awards,
and (v) make all of the determinations necessary or advisable with respect to
awards under the Plan.
Each award under the Plan will consist of a grant of shares of stock or
an amount of cash (to be paid on a deferred basis) subject to a restriction
period (after which the restrictions shall lapse), which shall mean a period
commencing on the date the award is granted and ending on such date as the
committee shall determine (the "Restriction Period"). The committee may provide
for the lapse of restrictions in installments, for acceleration of the lapse of
restrictions upon the
51
52
satisfaction of such performance or other criteria or upon the occurrence of
such events as the committee shall determine, and for the early expiration of
the Restriction Period upon a participant's death, disability, retirement at or
after normal retirement age or the termination of the participant's employment
with the Company by the Company without cause.
The maximum number of shares of common stock of Newpark that may be
issued pursuant to the Plan is 160,000, subject to adjustment pursuant to
certain provisions of the Plan. The maximum amount of cash that may be awarded
pursuant to the Plan is $1,500,000, and each such amount may be increased by the
Board of Directors. If shares of stock or the right to receive cash awarded or
issued under the Plan are reacquired by Newpark due to a forfeiture or for any
other reason, such shares or right to receive cash will be cancelled and
thereafter will again be available for purposes of the Plan. At December 31,
1997, 58,760 shares of common stock had been issued under the Plan and $672,000
had been awarded.
L. SUPPLEMENTAL CASH FLOW INFORMATION
During 1996, the Company's noncash transactions included the
acquisition of certain patents and exclusivity rights in exchange for 708,728
shares of the Company's common stock and $5,700,000 in cash. In connection with
the purchase of certain of these patents, the Company recorded a deferred tax
liability of $767,000. Transfers from inventory to fixed assets of $4,625,000
were also made during the period. As discussed in Note B, the Company sold and
refinanced $16,000,000 of certain assets in exchange for $7,200,000 of notes
receivable, $1,200,000 in cash and the assumption by the buyer of $7,600,000 in
debt obligations.
Included in accounts payable and accrued liabilities at December 31,
1997, 1996 and 1995, were equipment purchases of $3,632,000, $1,283,000, and
$4,141,000, respectively. Also included are notes payable for equipment
purchases in the amount of $83,000, $1,397,000 and $257,000 for 1997, 1996, and
1995, respectively.
Interest of $4,669,000, $4,217,000, and $4,290,000, was paid in 1997,
1996 and 1995, respectively. Income taxes of $4,751,000, $3,186,000, and $56,000
were paid in 1997, 1996 and 1995, respectively.
M. COMMITMENTS AND CONTINGENCIES
Newpark and its 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 will not
have a material adverse effect on Newpark's consolidated financial statements.
In conjunction with the closing of the Campbell acquisition, the
Company acquired Disposeco, thereby assuming the obligations provided in the
"NOW Disposal Agreement" between Disposeco and Campbell. The "NOW Disposal
Agreement" provides that for each of the 25 years following the closing, Newpark
will deliver to Campbell for disposal at its landfarms the lesser of one-third
of the barrels from a defined market area or 1,850,000 barrels of E&P waste,
subject to certain adjustments. The initial price per barrel to be paid by
Newpark to Campbell is $5.50 per barrel and is subject to adjustment in future
years. Prior to any adjustments, Newpark's obligation is $10,175,000 annually.
In addition, the liability of Newpark under the agreement is reduced by certain
prohibited revenues earned by Campbell or its affiliates.
52
53
During 1992, the State of Texas assessed additional sales taxes for the
years 1988-1991. The Company has filed a petition for redetermination with the
Comptroller of Public Accounts. The Company believes that the ultimate
resolution of this matter will not have a material adverse effect on its
consolidated financial statements.
In the normal course of business, in conjunction with its insurance
programs, the Company has established letters of credit in favor of certain
insurance companies in the amount of $1,500,000 and $1,750,000 at December 31,
1997 and 1996, respectively. At December 31, 1997 and 1996, the Company had
outstanding guaranty obligations totaling $1,201,000 and $865,000, respectively,
in connection with facility closure bonds issued by an insurance company.
Since May 1988, the Company has held the exclusive right to use a
patented prefabricated mat system with respect to the oil and gas exploration
and production industry within the State of Louisiana. On June 20, 1994, the
Company entered into a new license agreement by which it obtained the exclusive
right to use the same patented prefabricated mat system, without industry
restriction, throughout the continental United States. The license agreement
requires, among other things, that the Company purchase a minimum of 20,000 mats
annually through 2003. The Company has met this annual mat purchase requirement
since the inception of the agreement. Any purchases in excess of that level may
be applied to future annual requirements. The Company's annual commitment to
maintain the agreement in force is currently estimated to be $4,600,000.
The Company has guaranteed certain debt obligations of a joint venture
in which it holds a 49% interest. The guarantee is limited to $7.5 million, plus
accrued interest.
The Company leases various manufacturing facilities, warehouses, office
space, machinery and equipment, including transportation equipment, under
operating leases with remaining terms ranging from one to ten years, with
various renewal options. Substantially all leases require payment of taxes,
insurance and maintenance costs in addition to rental payments. Total rental
expenses for all operating leases were $5,993,000, $5,251,000, and $5,253,000,
in 1997, 1996 and 1995, respectively.
Future minimum payments under noncancelable operating leases, with
initial or remaining terms in excess of one year are: $4,392,000, in 1998,
$3,698,000 in 1999, $3,346,000 in 2000, $2,227,000 in 2001 $1,018,000 in 2002,
and $1,626,000 thereafter.
Capital lease commitments are not significant.
N. BUSINESS AND CREDIT CONCENTRATION
During the year ended December 31, 1997, 1996 and 1995, one customer
accounted for approximately 11%, 16% and 15%, or $23,393,000, $21,620,000, and
$15,890,000, respectively, of total revenues.
Export sales are not significant.
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54
O. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist principally of cash
investments and trade accounts and notes receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the Company's
trade area and company policy is designed to limit exposure to any one
institution. As part of the Company's investment strategy, the Company performs
periodic evaluations of the relative credit standing of these financial
institutions.
Concentrations of credit risk with respect to trade accounts and notes
receivable are limited due to the large number of entities comprising the
Company's customer base, and for notes receivable, the required collateral. The
Company maintains an allowance for losses based upon the expected collectibility
of accounts and notes receivable.
P. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended
- ---------------------------------------------------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
------ ------ ------ ------
(In thousands, except per share amounts)
FISCAL YEAR 1997
Revenues $42,915 $47,959 $57,908 $66,572
Operating income 11,953 13,959 16,873 19,693
Net income 7,115 8,269 10,129 11,603
Net income per share
Basic 0.12 0.13 0.16 0.18
Diluted 0.11 0.13 0.16 0.18
Weighted average common and common
equivalent shares outstanding:
Basic 61,265 61,921 63,588 64,041
Diluted 62,656 63,281 65,122 65,643
FISCAL YEAR 1996
Revenues $28,373 $29,091 $33,172 $45,338
Operating income 6,102 6,955 7,227 11,734
Net income 3,317 3,973 4,016 7,197
Net income per share
Basic 0.07 0.09 0.07 0.12
Diluted 0.07 0.08 0.07 0.12
Weighted average common and common
Equivalent shares outstanding:
Basic 44,927 45,491 53,747 60,331
Diluted 46,459 47,305 55,551 62,217
54
55
Q. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company entered into agreements to
acquire three drilling fluids companies through three separate unrelated
transactions. These agreements contemplate that the three companies will be
purchased for an aggregate consideration of $4,162,500 and 1,052,085 shares of
Newpark common stock.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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56
PART III
ITEM 10. Directors and Officers of the Registrant
The information required by this Item is incorporated by reference to the
registrant's Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Act of 1934 in connection with the Company's 1998 Annual Meeting of
Shareholders.
ITEM 11. Executive Compensation
The information required by this Item is incorporated by reference to the
registrant's Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Act of 1934 in connection with the Company's 1998 Annual Meeting of
Shareholders.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference to the
registrant's Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Act of 1934 in connection with the Company's 1998 Annual Meeting of
Shareholders.
ITEM 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference to the
registrant's Proxy Statement to be filed pursuant to Regulation 14A under the
Securities Act of 1934 in connection with the Company's 1998 Annual Meeting of
Shareholders.
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57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Reports of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
3. EXHIBITS
3.1 Certificate of Incorporation.(1)
3.1.1 Certificate of Amendment to Certificate of
Incorporation.(2)
3.2 Bylaws.(1)
4.1 Indenture, dated as of December 17, 1997, among the
registrant, each of the Guarantors identified therein and
State Street Bank and Trust Company, as Trustee.(3)
4.2 Registration Rights Agreement, dated as of December 10,
1997, among the registrant, the Guarantors identified
therein, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Morgan Grenfell Inc. and Salomon
Brothers Inc.(3)
4.3 Form of the Newpark Resources, Inc. 8-5/8% Senior
Subordinated Notes due 2007, Series A.(3)
4.4 Form of the Newpark Resources, Inc. 8-5/8% Senior
Subordinated Notes due 2007, Series B.(3)
4.5 Form of Guarantees of the Newpark Resources, Inc. 8-5/8%
Senior Subordinated Notes due 2007. (3)
10.1 Employment Agreement, dated as of October 23, 1990,
between the registrant and James D. Cole.(1)*
10.2 Lease Agreement, dated as of May 17, 1990, by and
between Harold F. Bean Jr. and Newpark Environmental
Services, Inc.
("NESI").(1)
10.3 Lease Agreement, dated as of July 29, 1994, by and
between Harold F. Bean Jr. and NESI.(4)
10.4 Building Lease Agreement, dated April 10, 1992, between
the registrant and The Traveler's Insurance Company.(5)
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58
10.5 Building Lease Agreement, dated May 14, 1992, between
State Farm Life Insurance Company, and SOLOCO, Inc.(5)
10.6 Operating Agreement, dated June 30, 1993, between Goldrus
Environmental Services, Inc. and NESI.(4)
10.7 Amended and Restated 1993 Non-Employee Directors' Stock
Option Plan.(10)*
10.8 Amendment to the 1993 Non-Employee Directors' Stock
Option Plan.(2)*
10.9 Amended and Restated 1988 Incentive Stock Option Plan.(6)*
10.10 1995 Incentive Stock Option Plan.(2)*
10.11 Exclusive License Agreement, dated June 20, 1994, between
SOLOCO, Inc. and Quality Mat Company.(4)
10.12 Restated Credit Agreement, dated June 30, 1997,
among the registrant, as borrower, the subsidiaries
of the registrant named therein, as guarantors, and
BankOne, Louisiana, National Association, Deutsche Bank
A.G., New York Branch and/or Cayman Islands Branch and
Hibernia National Bank, as banks (the "Banks").(7)
10.13 First Amendment to Restated Credit Agreement, dated
November 7, 1997, among the registrant, the subsidiaries
of the registrant named therein and the Banks.**
10.14 Second Amendment to Restated Credit Agreement, dated
December 10, 1997, among the registrant, the subsidiaries
of the registrant named therein and the Banks.**
10.15 Credit Agreement, dated December 1, 1995, between SOLOCO,
Inc., Hibernia National Bank.(2)
10.16 Asset Purchase and Lease Agreement, dated June 5, 1996,
among the registrant, Campbell Wells, Ltds and
Sanifill, Inc.(8)
10.17 Now Disposal Agreement, dated June 4, 1996, among
Sanifill, Inc., Now Disposal Operating Co. and Campbell
Wells, Ltd.(8)
10.18 Merger Agreement and Plan of Reorganization, dated
February 18, 1997, among the registrant, SBM Acquisition
Corporation, Sampey Bilbo Meschi Drilling Fluids
Management, Inc., James A. Sampey, David A. Meschi,
Steve Daniel and Jasper N. Warren. (9)
10.19 Purchase Agreement, dated as of December 10, 1997, among
Newpark Resources, Inc., each of the Guarantors identified
therein, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Morgan Grefell Inc., and Salomon
Brothers Inc. (3)
10.20 Long Term Stock and Cash Incentive Plan**
21.1 Subsidiaries of the Registrant **
23.1 Consent of Deloitte & Touche LLP**
24.1 Powers of Attorney**
27.1 Financial Data Schedule**
27.2 Financial Data Schedule**
27.3 Financial Data Schedule**
--------------------------------
*Management Compensation Plan or Agreement.
**Filed herewith.
(1) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-1 (File No. 33-40716)
and incorporated by reference herein.
(2) Previously filed in the exhibits to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein.
(3) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-4 (File No. 333-45197)
and incorporated by reference herein.
58
59
(4) Previously filed in the exhibits to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1994, and incorporated by reference herein.
(5) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-8 (Filed No. 33-83680)
and incorporated by reference herein.
(6) Previously filed as Exhibit B to the registrant's
Definitive Proxy Materials relating to its Annual Meeting
of Stockholders held on June 28, 1995 and incorporated by
reference herein.
(7) Previously filed in the exhibits to the registrant's
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997.
(8) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-3 (File No. 333-05805),
and incorporated by reference herein.
(9) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-3 (File No. 333-25413)
and incorporated by reference herein.
(10) Previously filed as Exhibit B to the registrant's
Definitive Proxy Materials relating to its Annual Meeting
of Stockholders to be held on May 13, 1998 and
incorporated by reference herein.
(B) REPORTS ON FORM 8-K
During the quarterly period ended December 31, 1997, Newpark filed
two reports on Form 8-K. In the first report, dated November 20,
1997, Newpark reported, under Item 5, that on November 20, 1997 it
had announced its intention to make a private offering of $125
million of Senior Subordinated Notes due 2007 to qualified
institutional buyers and non-U.S. persons. In the second report,
dated December 17, 1997, Newpark reported, under Item 5, that on
December 17, 1997 it had announced that it had completed the sale of
$125 million aggregate principal amount of 8-5/8% Senior Subordinated
Notes due 2007 pursuant to Rule 144A and other provisions of the
Securities Act of 1933.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 27, 1998
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
---------------------------------
James D. Cole, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ James D. Cole
- -----------------------------------
James D. Cole Chairman of the Board, President March 27, 1998
and Chief Executive Officer
/s/ Matthew W. Hardey
- -----------------------------------
Matthew W. Hardey Vice President of Finance and March 27, 1998
Chief Financial Officer
/s/ Kathleen D. Lacoste
- -----------------------------------
Kathleen D. Lacoste Controller (Principal March 27, 1998
Accounting Officer)
/s/ Wm. Thomas Ballantine
- -----------------------------------
Wm. Thomas Ballantine Executive Vice President and March 27, 1998
Director
/s/ Dibo Attar
- -----------------------------------
Dibo Attar* Director March 27, 1998
/s/ W. W. Goodson
- -----------------------------------
W. W. Goodson* Director March 27, 1998
/s/ David P. Hunt
- -----------------------------------
David P. Hunt* Director March 27, 1998
/s/ Dr. Alan Kaufman
- -----------------------------------
Dr. Alan Kaufman* Director March 27, 1998
/s/ James H. Stone
- -----------------------------------
James H. Stone* Director March 27, 1998
By /s/ James D. Cole
- -----------------------------------
*James D. Cole
Attorney-in-Fact
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation.(1)
3.1.1 Certificate of Amendment to Certificate of
Incorporation.(2)
3.2 Bylaws.(1)
4.1 Indenture, dated as of December 17, 1997, among the
registrant, each of the Guarantors identified therein and
State Street Bank and Trust Company, as Trustee.(3)
4.2 Registration Rights Agreement, dated as of December 10,
1997, among the registrant, the Guarantors identified
therein, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Morgan Grenfell Inc. and Salomon
Brothers Inc.(3)
4.3 Form of the Newpark Resources, Inc. 8-5/8% Senior
Subordinated Notes due 2007, Series A.(3)
4.4 Form of the Newpark Resources, Inc. 8-5/8% Senior
Subordinated Notes due 2007, Series B.(3)
4.5 Form of Guarantees of the Newpark Resources, Inc. 8-5/8%
Senior Subordinated Notes due 2007. (3)
10.1 Employment Agreement, dated as of October 23, 1990,
between the registrant and James D. Cole.(1)*
10.2 Lease Agreement, dated as of May 17, 1990, by and
between Harold F. Bean Jr. and Newpark Environmental
Services, Inc. ("NESI").(1)
10.3 Lease Agreement, dated as of July 29, 1994, by and
between Harold F. Bean Jr. and NESI.(4)
10.4 Building Lease Agreement, dated April 10, 1992, between
the registrant and The Traveler's Insurance Company.(5)
62
10.5 Building Lease Agreement, dated May 14, 1992, between
State Farm Life Insurance Company, and SOLOCO, Inc.(5)
10.6 Operating Agreement, dated June 30, 1993, between Goldrus
Environmental Services, Inc. and NESI.(4)
10.7 Amended and Restated 1993 Non-Employee Directors' Stock
Option Plan.(10)*
10.8 Amendment to the 1993 Non-Employee Directors' Stock
Option Plan.(2)*
10.9 Amended and Restated 1988 Incentive Stock Option Plan.(6)*
10.10 1995 Incentive Stock Option Plan.(2)*
10.11 Exclusive License Agreement, dated June 20, 1994, between
SOLOCO, Inc. and Quality Mat Company.(4)
10.12 Restated Credit Agreement, dated June 30, 1997,
among the registrant, as borrower, the subsidiaries
of the registrant named therein, as guarantors, and
BankOne, Louisiana, National Association, Deutsche Bank
A.G., New York Branch and/or Cayman Islands Branch and
Hibernia National Bank, as banks (the "Banks").(7)
10.13 First Amendment to Restated Credit Agreement, dated
November 7, 1997, among the registrant, the subsidiaries
of the registrant named therein and the Banks.**
10.14 Second Amendment to Restated Credit Agreement, dated
December 10, 1997, among the registrant, the subsidiaries
of the registrant named therein and the Banks.**
10.15 Credit Agreement, dated December 1, 1995, between SOLOCO,
Inc., and Hibernia National Bank.(2)
10.16 Asset Purchase and Lease Agreement, dated June 5, 1996,
among the registrant, Campbell Wells, Ltds and
Sanifill, Inc.(8)
10.17 Now Disposal Agreement, dated June 4, 1996, among
Sanifill, Inc., Now Disposal Operating Co. and Campbell
Wells, Ltd.(8)
10.18 Merger Agreement and Plan of Reorganization, dated
February 18, 1997, among the registrant, SBM Acquisition
Corporation, Sampey Bilbo Meschi Drilling Fluids
Management, Inc., James A. Sampey, David A. Meschi,
Steve Daniel and Jasper N. Warren.(9)
10.19 Purchase Agreement, dated as of December 10, 1997, among
Newpark Resources, Inc., each of the Guarantors identified
therein, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Morgan Grefell Inc., and Salomon
Brothers Inc.(3)
10.20 Long Term Stock and Cash Incentive Plan**
21.1 Subsidiaries of the Registrant**
23.1 Consent of Deloitte & Touche**
24.1 Powers of Attorney**
27.1 Financial Data Schedule**
27.2 Financial Data Schedule**
27.3 Financial Data Schedule**
- --------------------------------
*Management Compensation Plan or Agreement.
**Filed herewith.
(1) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-1 (File No. 33-40716)
and incorporated by reference herein.
(2) Previously filed in the exhibits to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995, and incorporated by reference herein.
(3) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-4 (File No. 333-45197)
and incorporated by reference herein.
63
(4) Previously filed in the exhibits to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1994, and incorporated by reference herein.
(5) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-8 (Filed No. 33-83680)
and incorporated by reference herein.
(6) Previously filed as Exhibit B to the registrant's
Definitive Proxy Materials relating to its Annual Meeting
of Shareholders held on June 28, 1995 and incorporated by
reference herein.
(7) Previously filed in the exhibits to the registrant's
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997.
(8) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-3 (File No. 333-05805),
and incorporated by reference herein.
(9) Previously filed in the exhibits to the registrant's
Registration Statement on Form S-3 (File No. 333-25413)
and incorporated by reference herein.
(10) Previously filed as Exhibit B to the registrant's
Definitive Proxy Materials relating to its Annual Meeting
of Shareholders to be held on Mary 13, 1998 and
incorporated by reference herein.
(b) REPORTS ON FORM 8-K
During the quarterly period ended December 31, 1997, Newpark filed two
reports on Form 8-K. In the first report, dated November 20, 1997,
Newpark reported, under Item 5, that on November 20, 1997 it had
announced its intention to make a private offering of $125 million of
Senior Subordinated Notes due 2007 to qualified institutional buyers
and non-U.S. persons. In the second report, dated December 17, 1997,
Newpark reported, under Item 5, that on December 17, 1997 it had
announced that it had completed the sale of $125 million aggregate
principal amount of 8-5/8% Senior Subordinated Notes due 2007
pursuant to Rule 144A and other provisions of the Securities Act of
1933.
1
EXHIBIT 10.13
FIRST AMENDMENT TO RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO RESTATED CREDIT AGREEMENT (hereinafter
referred to as the "First Amendment") executed as of the 7th day of November,
1997, by and among NEWPARK RESOURCES, INC., a Delaware corporation
("Borrower"), SOLOCO, L.L.C., a Louisiana limited liability company ("SOLOCO,
L.L.C."), NEWPARK SHIPHOLDING TEXAS, L.P., a Texas limited partnership
("Newpark Shipholding"), MALLARD & MALLARD OF LA., INC., a Louisiana
corporation ("Mallard"), SOLOCO TEXAS L.P., a Texas limited partnership
("SOLOCO Texas"), BATSON-MILL, L.P., a Texas limited partnership ("Batson"),
N.I.D., L.P., a Texas limited partnership ("N.I.D."), NEWPARK TEXAS, L.L.C., a
Louisiana limited liability company ("Newpark Texas"), NEWPARK HOLDINGS, INC.,
a Louisiana corporation ("Holdings"), NEWPARK ENVIRONMENTAL MANAGEMENT COMPANY,
L.L.C., a Louisiana limited liability company ("Environmental L.L.C."), NEWPARK
ENVIRONMENTAL SERVICES OF TEXAS L.P., a Texas limited partnership
("Environmental L.P."), NEWPARK DRILLING FLUIDS, INC., a Texas corporation
("Newpark Drilling"), SUPREME CONTRACTORS, INC., a Louisiana corporation
("Supreme"), EXCALIBAR MINERALS, INC., a Texas corporation ("Excalibar"),
EXCALIBAR MINERALS OF LA., L.L.C., a Louisiana limited liability company
("Excalibar Minerals"), CHEMICAL TECHNOLOGIES, INC., a Texas corporation
("Chemical"), NEWPARK ENVIRONMENTAL SERVICES, INC., a Delaware corporation
("Newpark Services") and NEWPARK TEXAS DRILLING FLUIDS, L.P., a Texas limited
partnership ("Texas Drilling") (SOLOCO, L.L.C., Newpark Shipholding, Mallard,
SOLOCO Texas, Batson, N.I.D., Newpark Texas, Holdings, Environmental L.L.C.,
Environmental L.P., Newpark Drilling, Supreme, Excalibar, Excalibar Minerals,
Chemical, Newpark Services and Texas Drilling are herein collectively referred
to as the "Guarantors", and individually, "Guarantor"), BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION, a national banking association ("Bank One"), DEUTSCHE
BANK A.G., NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH ("Deutsche"), HIBERNIA
NATIONAL BANK, a national banking association ("Hibernia") and each of the
financial institutions which is a party hereto (as evidenced by the signature
pages to this First Amendment) or which may from time to time become a party
hereto or any successor or assignee thereof (hereinafter collectively referred
to as "Banks", and individually, "Bank") and Bank One, as Administrative and
Syndication Agent ("Agent") and Deutsche as Documentation Agent ("Co-Agent").
W I T N E S S E T H:
WHEREAS, Borrower, certain of the Guarantors, Bank One and Hibernia
entered into a Credit Agreement dated as of June 29, 1995 under the terms of
which Bank One and Hibernia agreed to provide Borrower with a revolving loan
facility in amounts of up to $25,000,000.00 and a term loan facility in amounts
of up to $25,000,000.00; and
WHEREAS, as of June 30, 1997 the Borrower, the Guarantors, the Agent,
the Co-Agent and the Banks entered into a Restated Credit Agreement to
consolidate all outstanding loan facilities into one facility in a maximum
amount of $90,000,000 (the Restated Credit Agreement is hereinafter referred to
as the "Credit Agreement"); and
2
WHEREAS, the Borrower has requested that the Banks make an additional
$10,000,000 facility available to it and the Agent, the Co-Agent and the Banks
are willing to make such additional advance available to the Borrower.
NOW, THEREFORE, the parties hereto agree to amend the Loan Agreement
as follows:
1. Unless otherwise defined herein, all defined terms used herein
shall have the same meaning ascribed to such terms in the Credit Agreement.
2. Section 1 of the Credit Agreement is hereby amended in the
following respects:
(a) The definition of "Note" or "Notes" is hereby
deleted in its entirety and the following inserted in lieu thereof:
"Note or Notes" shall mean collectively the Revolving
Notes and the Special Advance Notes."
(b) The definition of "Pro Rata" or "Pro Rata Part" is
hereby deleted in its entirety and the following new definition
inserted in lieu thereof:
"Pro Rata or Pro Rata Part" shall mean for each Bank,
(i) for all purposes where no Revolving Loan and/or Special
Advance is outstanding, such Bank's Revolving Commitment
Percentage and/or Special Advance Commitment Percentage, as
the case may be, and (ii) otherwise, the proportion which the
portion of the outstanding Revolving Loans and/or Special
Advance Loans, as the case may be, owed to such Bank bears to
the aggregate outstanding Revolving Loans and/or Special
Advances, as the case may be, owed to all Banks at the time in
question.
(c) By the addition of the following six new definitions
thereto:
"First Amendment" shall mean the First Amendment to
Restated Credit Agreement dated as of November 7, 1997,
executed by Borrower, Guarantor, Bank, Agent and the Co-Agent.
"Revolving Note or Revolving Notes" shall mean the
Revolving Notes substantially in the form of Exhibit "B"
hereto issued or to be issued hereunder to each Bank,
respectively, to evidence the indebtedness to such Bank
arising by reason of the Advances on the Revolving Loans,
together with all modifications, renewals and extensions
thereof or any part thereof."
-2-
3
"Special Advance" is used herein as defined in
Section 2(g) hereof";
"Special Advance Commitment Percentage" shall mean
for each Bank the percentages set forth below:
Bank One 39.40%
Deutsche Bank 35.60%
Hibernia Bank 25.00%
"Special Advance Maturity Date" shall mean December
31, 1997;"
"Special Advance Note or Notes" shall mean the
Special Advance Notes substantially in the form of Exhibit
"B-1" hereto issued or to be issued hereunder to each Bank,
respectively, to evidence the indebtedness to such Bank
arising by reason of the Special Advance, together with all
modifications, renewals and extensions thereof or any part
thereof."
3. Section 2 of the Credit Agreement is hereby amended in the
following respects:
(a) By the addition of the following new sentence to the
end of Subsection (b) thereof as follows:
"The Special Advance shall be a one-time advance to
Borrower made at the date of the First Amendment."
(b) By the addition of a new Subsection (g) thereto as
follows:
"(g) Special Advance Facility. On the terms and
conditions hereinafter set forth, each Bank agrees severally
to make an Advance to Borrower in an amount equal to its
Special Advance Commitment Percentage times $10,000,000 (the
"Special Advance"). The Special Advance, once repaid, in
whole or in part, may not be reborrowed. The Special Advance
shall bear interest from time to time as set forth in Section
4 hereof. The election of the interest rate by Borrower made
from time to time shall be made by Borrower subject to the
applicable provisions of the Credit Agreement. Interest on
the Special Advance shall be payable on each Interest Payment
Date. All principal and accrued but unpaid interest on the
Special Advance shall be due and payable on the Special
Advance Maturity Date. A Facility Fee on the Special Advance
equal to
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4
1/8 of 1% of the Special Advance shall be due and payable on
the execution of the First Amendment."
4. Section 3 of the Credit Agreement is hereby amended in the
following respects:
(a) By the addition of a new sentence following the end
of the first sentence thereof:
"The Special Advance shall be evidenced by Notes in
the aggregate face amount of $10,000,000, in favor of each
Bank in the amount of their Pro Rata Part and shall be in the
form of Exhibit "B-1" hereto with appropriate insertions."
(b) By the deletion of Subsection (b) thereof in its
entirety and the insertion of the following in lieu thereof:
"(b) Issuance of Additional Notes - At the date of
the First Amendment there shall be three (3) Revolving Notes
in the aggregate face amount of $90,000,000; one payable to
Bank One in the face amount of $35,500,000, one payable to
Deutsche in the face amount of $32,000,000 and one payable to
Hibernia in the face amount of $22,500,000. At the date of
the First Amendment, there shall also be outstanding three
Special Advance Notes in the aggregate principal amount of
$10,000,000, one payable to Bank One in the face amount of
$3,940,000, one payable to Deutsche Bank in the face amount of
$3,560,000 and one payable to Hibernia in the face amount of
$2,500,000. From time to time new Notes may be issued to other
Banks as such Banks become parties to this Agreement. Upon
request from Agent, Borrower shall execute and deliver to
Agent any such new or additional Notes. From time to time as
new Notes are issued the Agent shall require each Bank to
exchange its Notes for newly issued Notes to reflect the
extent of each Bank's Revolving Commitments or Special Advance
Commitments, as the case may be, hereunder."
5. Section 8(b) of the Credit Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"(b) Mandatory Prepayment. Subject to the
provisions of Section 5(g) hereof, in the event (x) the Total
Outstandings (other than any outstandings under the Special
Advance Notes) ever exceed the Revolving Commitment or (y) the
Total Outstandings ever exceed the sum of (i) the Revolving
Commitment plus (ii) the Special Advance, the Borrower shall
immediately prepay, without premium or penalty, the principal
amount of
-4-
5
the Notes in an amount at least equal to such excess plus
accrued but unpaid interest thereon to the date of such
prepayment; such prepayment to be applied pro rata first to
the outstanding principal balances due on the Revolving Notes
until the same are paid in full and, thereafter, to the
outstanding principal balances due on the Special Advance
Notes."
6. Section 13(i) of the Credit Agreement is hereby deleted in its
entirety and the following inserted in lieu thereof:
"(i) In the event (a) the Total Outstandings
(other than outstandings under the Special Advance Notes)
shall at any time exceed the Revolving Commitment or (b) the
Total Outstandings shall at any time exceed the sum of (i) the
Revolving Commitment plus (ii) the Special Advance, and
Borrower shall fail to comply with the provisions of Section
8(b) hereof; or"
7. The Collateral pledged to secure the Revolving Notes shall
secure the Special Advance Notes on an equal or pari passu basis. Likewise,
the Guaranty shall extend to and cover the Special Advance on an equal or pari
passu basis with the Revolving Notes. The Continuing Guaranties of the
Guarantors shall be replaced by the Unconditional Guaranties of the Guarantors
in the form of Exhibit "A" hereto.
8. The obligations of Banks under this First Amendment and the
obligations of the Banks to make the Special Advance shall be subject to the
satisfaction of the following conditions precedent:
(a) Execution and Delivery. The Borrower shall have
executed and delivered this First Amendment, the new Notes in the form
of Exhibit "B-1" hereto, the Security Instruments and other required
documents, all in form and substance satisfactory to the Banks;
(b) Guarantors' Execution and Delivery. The Guarantors
shall have executed and delivered this First Amendment and their
Unconditional Guaranty in the form of Exhibit "A" hereto and other
required documents, all in form and substance satisfactory to the
Banks;
(c) Corporate Resolutions. Banks shall have received
appropriate certified corporate resolutions of each of the Borrower
and each of the Guarantors;
(d) Good Standing and Existence. The Banks shall have
received evidence of existence and good standing for Borrower and each
of the Guarantors;
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6
(e) Payment of Fees. The Agent shall have received all
fees due at the execution of this First Amendment;
(f) Representations and Warranties. The representations
and warranties of Borrower under this First Amendment are true and
correct in all material respects as of such date, as if then made
(except to the extent that such representations and warranties related
solely to an earlier date);
(g) No Event of Default. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default;
(h) Other Documents. Each Bank shall have received such
other instruments and documents incidental and appropriate to the
transaction provided for herein as such Bank or its counsel may
reasonably request, and all such documents shall be in form and
substance satisfactory to such Bank; and
(i) Legal Matters Satisfactory. All legal matters
incident to the consummation of the transactions contemplated hereby
shall be satisfactory to special counsel for Bank retained at the
expense of Borrower.
9. Except to the extent its provisions are specifically amended,
modified or superseded by this First Amendment, the representations, warranties
and affirmative and negative covenants of the Borrower contained in the Credit
Agreement are incorporated herein by reference for all purposes as if copied
herein in full. The Borrower hereby restates and reaffirms each and every term
and provision of the Credit Agreement, as amended, including, without
limitation, all representations, warranties and affirmative and negative
covenants. Except to the extent its provisions are specifically amended,
modified or superseded by this First Amendment, the Credit Agreement, as
amended, and all terms and provisions thereof shall remain in full force and
effect, and the same in all respects are confirmed and approved by the Borrower
and the Banks.
10. This First Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
-6-
7
IN WITNESS WHEREOF, the parties have caused this First
Amendment to Credit Agreement to be duly executed as of the date first
above written.
BORROWER:
NEWPARK RESOURCES, INC.
a Delaware corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
GUARANTORS:
CHEMICAL TECHNOLOGIES, INC.,
EXCALIBAR MINERALS, INC., NEWPARK
ENVIRONMENTAL SERVICES, INC.,
MALLARD & MALLARD OF LA., INC.,
NEWPARK HOLDINGS, INC., NEWPARK
DRILLING FLUIDS, INC. AND SUPREME
CONTRACTORS, Inc.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
NEWPARK ENVIRONMENTAL MANAGEMENT
COMPANY, L.L.C., NEWPARK TEXAS,
L.L.C., EXCALIBAR MINERALS OF
LA.,L.L.C. AND SOLOCO L.L.C.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-7-
8
BATSON-MILL, L.P., NEWPARK TEXAS
DRILLING, FLUIDS L.P., NEWPARK
ENVIRONMENTAL SERVICES OF TEXAS,
L.P., NEWPARK SHIPHOLDING TEXAS,
L.P., N.I.D., L.P. AND
SOLOCO TEXAS, L.P.
By: Newpark Holdings, Inc., the
general partner of each
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
BANKS:
BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION,
a national banking association
By:______________________________
Rose M. Miller, Vice President
DEUTSCHE BANK A.G., NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-8-
9
HIBERNIA NATIONAL BANK
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
AGENT:
BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION,
a national banking association
By:_______________________________
Rose M. Miller, Vice President
CO-AGENT:
DEUTSCHE BANK A.G., NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-9-
1
EXHIBIT 10.14
SECOND AMENDMENT TO RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO RESTATED CREDIT AGREEMENT (hereinafter
referred to as the "Second Amendment") executed as of the 10th day of December,
1997, by and among NEWPARK RESOURCES, INC., a Delaware corporation
("Borrower"), SOLOCO, L.L.C., a Louisiana limited liability company ("SOLOCO,
L.L.C."), NEWPARK SHIPHOLDING TEXAS, L.P., a Texas limited partnership
("Newpark Shipholding"), MALLARD & MALLARD OF LA., INC., a Louisiana
corporation ("Mallard"), SOLOCO TEXAS L.P., a Texas limited partnership
("SOLOCO Texas"), BATSON-MILL, L.P., a Texas limited partnership ("Batson"),
N.I.D., L.P., a Texas limited partnership ("N.I.D."), NEWPARK TEXAS, L.L.C., a
Louisiana limited liability company ("Newpark Texas"), NEWPARK HOLDINGS, INC.,
a Louisiana corporation ("Holdings"), NEWPARK ENVIRONMENTAL MANAGEMENT COMPANY,
L.L.C., a Louisiana limited liability company ("Environmental L.L.C."), NEWPARK
ENVIRONMENTAL SERVICES OF TEXAS L.P., a Texas limited partnership
("Environmental L.P."), NEWPARK DRILLING FLUIDS, INC., a Texas corporation
("Newpark Drilling"), SUPREME CONTRACTORS, INC., a Louisiana corporation
("Supreme"), EXCALIBAR MINERALS, INC., a Texas corporation ("Excalibar"),
EXCALIBAR MINERALS OF LA., L.L.C., a Louisiana limited liability company
("Excalibar Minerals"), CHEMICAL TECHNOLOGIES, INC., a Texas corporation
("Chemical"), NEWPARK ENVIRONMENTAL SERVICES, INC., a Delaware corporation
("Newpark Services"), NEWPARK TEXAS DRILLING FLUIDS, L.P., a Texas limited
partnership ("Texas Drilling"), NES PERMIAN BASIN, L.P., A Texas limited
partnership ("NES"), BOCKMON CONSTRUCTION COMPANY, INC., a Texas Corporation
("BOCKMON") and NEWPARK ENVIRONMENTAL SERVICES MISSISSIPPI, L.P., a Mississippi
limited partnership ("Mississippi") (SOLOCO, L.L.C., Newpark Shipholding,
Mallard, SOLOCO Texas, Batson, N.I.D., Newpark Texas, Holdings, Environmental
L.L.C., Environmental L.P., Newpark Drilling, Supreme, Excalibar, Excalibar
Minerals, Chemical, Newpark Services, Texas Drilling, NES, Bockmon and
Mississippi are herein collectively referred to as the "Guarantors", and
individually, "Guarantor"), BANK ONE, LOUISIANA, NATIONAL ASSOCIATION, a
national banking association ("Bank One"), DEUTSCHE BANK A.G., NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH ("Deutsche"), HIBERNIA NATIONAL BANK, a national
banking association ("Hibernia") and each of the financial institutions which
is a party hereto (as evidenced by the signature pages to this Second
Amendment) or which may from time to time become a party hereto or any
successor or assignee thereof (hereinafter collectively referred to as "Banks",
and individually, "Bank") and Bank One, as Administrative and Syndication Agent
("Agent") and Deutsche as Documentation Agent ("Co-Agent").
W I T N E S S E T H:
WHEREAS, Borrower, certain of the Guarantors, Bank One and Hibernia
entered into a Credit Agreement dated as of June 29, 1995 under the terms of
which Bank One and Hibernia agreed to provide Borrower with a revolving loan
facility in amounts of up to $25,000,000.00 and a term loan facility in amounts
of up to $25,000,000.00; and
WHEREAS, as of June 30, 1997 the Borrower, the Guarantors, the Agent,
the Co-Agent and the Banks entered into a Restated Credit Agreement to
consolidate all outstanding loan
2
facilities into one facility in a maximum amount of $90,000,000 (the Restated
Credit Agreement is hereinafter referred to as the "Credit Agreement"); and
WHEREAS, as of November 7, 1997, the Borrower, the Guarantors, the
Agent, the Co-Agent and the Banks entered into a First Amendment to Restated
Credit Agreement (the "First Amendment"); and
WHEREAS, the Borrower has requested that the Banks make certain
additional amendments to the Credit Agreement and the Agent, the Co-Agent and
the Banks are willing to make such additional amendments; and
WHEREAS, NES, Bockmon and Mississippi shall become "Guarantors" upon
the execution of continuing Guarantees which execution shall be
contemporaneously with the execution of the Second Amendment.
NOW, THEREFORE, the parties hereto agree to amend the Credit Agreement
as follows:
1. Unless otherwise defined herein, all defined terms used herein
shall have the same meaning ascribed to such terms in the Credit Agreement.
2. Section 1 of the Credit Agreement is hereby amended in the
following respects:
(a) By deleting the definition of "Consolidated Debt Service"
and substituting the following definition in lieu thereof:
"Consolidated Debt Service" shall mean, as of any
date of determination, current maturities of all long term
Debt and Capitalized Lease Obligations plus interest expense
thereon and interest expense on the Subordinated Indebtedness
for the period being measured. For the purpose of calculating
Consolidated Debt Service one-fifth of the principal balance
due on the Revolving Commitment will be included in current
maturities of long term debt plus interest for a one-year
period on that portion of the Revolving Commitment,
calculated on the basis of the Eurodollar Rate then in effect
plus the lesser of (i) 1.50% or (ii) the then applicable
Eurodollar Margin."
(b) By deleting the definition of "Consolidated Funded Debt"
and substituting the following definition in lieu thereof:
"Consolidated Funded Debt" shall mean indebtedness created by
the Borrower and its Subsidiaries, issued or incurred for (i)
borrowed money (whether by loan or the issuance and sale of
debt securities) including,
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3
without limitation, the Subordinated Indebtedness (as herein
defined); (ii) obligations to pay the deferred purchase or
acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and
accrued expenses incurred, in the ordinary course of
business; (iii) Debt of others secured by a Lien on the
property of Borrower or any Guarantor whether or not the
respective Debt so secured has been assumed; (iv) Letter of
Credit obligations; and (v) Capital Leases or non-cancellable
operating leases."
(c) By the addition of the following new definitions thereto:
"Exchange Offer" shall mean the exchange offer
contemplated by Section 2.1 of the Registration Rights
Agreement.
"Indenture" shall mean that certain indenture dated
as of December 17, 1997 by and among the Borrower, certain of
the Guarantors and State Street Bank & Trust Company, as
Trustee, relating to the Senior Unsecured Subordinated Notes,
as such indenture may be amended, supplemented or replaced as
contemplated by the Registration Rights Agreement in
connection with the Exchange Offer.
"Registration Rights Agreement" shall mean that
certain registration rights agreement dated as of December
17, 1997, among the Borrower, certain of the Guarantors and
the initial purchasers of the Senior Unsecured Subordinated
Notes.
"Senior Unsecured Subordinated Notes" shall mean the
senior unsecured subordinated notes issued by the Borrower to
which the Indenture relates, including but not limited to
such notes that are included in the "Securities," the
"Exchange Securities" and the "Private Exchange Securities,"
as those quoted terms are defined in the Registration Rights
Agreement.
"Subordinated Indebtedness" shall mean, as of any
date, the total amount outstanding on the Senior Unsecured
Subordinated Notes."
3. Section 11 of the Credit Agreement is hereby amended in the
following respects:
(a) By deleting Subsection (s) therefrom in its entirety.
(b) By deleting the second sentence of Subsection (t)
therefrom in its entirety and substituting the following in lieu
thereof:
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4
"Each such new Subsidiary shall execute and deliver, as
part of its Guaranty, a negative pledge covering all of its
assets."
4. Section 12 of the Credit Agreement is hereby amended in the
following respects:
(a) By deleting Subsection 12(d) therefrom in its entirety
and substituting the following in lieu thereof:
"(d) Maximum Total Debt Ratios. Borrower will not allow the
ratio of (i) total Debt (including Capital Lease Obligations) less
Subordinated Indebtedness, to (ii) Total Capitalization (including
Subordinated Indebtedness), to ever exceed 35% as of the end of any
fiscal quarter."
(b) Subsection 12(h) of the Credit Agreement is hereby
amended in the following respects:
(i) Subsection (iv) of Section 12(h) is hereby deleted in
is entirety and the following inserted in lieu thereof:
"(iv) additional indebtedness (other than the
Subordinated Indebtedness) for borrowed money or letters
of credit not in excess of $5,000,000 in the aggregate
during any fiscal year; or"
(ii) By deleting Subsection (x) therefrom in its entirety
and substituting the following two new Subsections in lieu
thereof:
"(x) indebtedness evidenced by the Senior
Unsecured Subordinated Notes and the Guaranties (as
defined in the Indenture); or
(xi) renewals or extensions (but not increases in) of
any or all of the foregoing."
(c) Subsection 12(o) of the Credit Agreement is hereby
amended by the deletion of the first sentence thereof and inserting
the following two sentences in lieu thereof:
"Neither Borrower nor any corporate Guarantor will
permit any material amendment to, or material alteration of,
its Articles of Incorporation, except that the Borrower may
amend its Articles of Incorporation to increase the amount of
its authorized capital stock at any time and from time to
time. No limited liability company Guarantor will
-4-
5
permit any material amendment to, or material alteration of,
its Articles of Organization."
(d) By the addition of a new Subsection (q) thereto as
follows:
"(q) Maximum Consolidated Funded Debt. Borrower will
not allow its ratio of Consolidated Funded Debt to
Consolidated EBITDA to ever exceed 2.25 to 1.0 as of the end
of any fiscal quarter for the previous twelve (12) months
ending on such date."
(e) By the addition of the following new Subsection (r)
thereto as follows:
"(r) Subordinated Indebtedness. The Borrower shall
not, and shall not permit any of its Subsidiaries to, amend
or otherwise change the terms of any Subordinated
Indebtedness (including without limitation the Indenture and
each of the exhibits thereto), and the Borrower shall not
permit any Subsidiary to amend or otherwise change its
guarantee in respect of the Subordinated Indebtedness or any
agreements relating to the Subordinated Indebtedness, nor
shall the Borrower make, or permit any Subsidiary to make,
any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to
increase the interest rate on such Subordinated Indebtedness,
change any dates upon which payments of principal or interest
are due thereon, change any of the covenants with respect
thereto in a manner which is more restrictive to the Borrower
or any of its Subsidiaries, change any event of default or
condition to an event of default with respect thereto, change
the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof, or change any
collateral therefor (other than to release such collateral)
or if the effect of such amendment or change, together with
all other amendments or changes made, is to increase the
obligations of the Borrower thereunder or to confer any
additional rights on the holders of such Subordinated
Indebtedness (or a trustee or other representative on their
behalf) which would be adverse to the Banks. Anything in this
subsection 12 (r) to the contrary notwithstanding, Borrower
and its Subsidiaries shall have the right, without being in
violation of this subsection (r), (i) to obtain consents
under the provisions of the Indenture to permit any actions
or inactions that are otherwise permitted under the Credit
Agreement (as amended by this Second Amendment) and (ii) to
obtain waivers of any default or events of default under the
Indenture. Without limitation of the foregoing, the Borrower
shall not make (or give any notice in respect of) any
voluntary or optional payment or prepayment or redemption or
defeasance of or with respect to the Subordinated
Indebtedness or any portion thereof without the consent of
the Majority Banks, except that the foregoing shall not apply
to any
-5-
6
voluntary or optional payment or prepayment or redemption or
defeasance of or with respect to the Subordinated
Indebtedness thereof if such payment, prepayment, redemption
or defeasance is (i) made from the proceeds of the issuance
and sale of Borrower's equity made for the specific purpose
of retiring a part or all of the Subordinated Indebtedness,
or (ii) made at a time when nothing is outstanding, principal
or interest, on the Revolving Commitment."
5. Section 13 of the Credit Agreement shall be amended in the
following respects:
(a) By deleting Subsection (j) therefrom in its entirety and
substituting the following in respect thereof:
"(j) A Change of Control hereunder or under the Indenture
(as therein defined) shall occur; or"
(b) By deleting Subsection (l) therefrom in its entirety and
substituting the following in respect thereof:
"(l) An Event of Default (as such term is defined in the
Indenture) shall occur under the Indenture."
6. Section 6 of the Credit Agreement is hereby deleted in its
entirety, and the Collateral pledged by the Borrower and the Guarantors
pursuant to Section 6 of the Credit Agreement is hereby released. Appropriate
releases of financing statements will be provided to Borrowers. Such Collateral
shall hereinafter be covered by the negative pledge included in Section 12(a)
of the Credit Agreement.
7. The Banks hereby consent to the issuance of the Senior Unsecured
Subordinated Notes and the Guaranties, as each is described in the Indenture,
and agree that no Event of Default shall occur as a result of the execution,
delivery and performance of the Indenture and related documents, the issuance
of the $125,000,000 in Senior Unsecured Subordinated Notes and the Guaranties
and the incurrence of the Subordinated Indebtedness.
8. This Second Amendment shall be effective as of the date first above
written, but only upon satisfaction of the conditions precedent set forth in
Paragraph 9 hereto.
9. The obligations of Banks under this Second Amendment shall be
subject to the satisfaction of the following conditions precedent:
(a) Execution and Delivery. The Borrower shall have executed and
delivered this Second Amendment and other required documents, all in
form and substance satisfactory to the Banks;
-6-
7
(b) Guarantors' Execution and Delivery. The Guarantors shall have
executed and delivered this Second Amendment and other required
documents, all in form and substance satisfactory to the Banks;
(c) Corporate Resolutions. Banks shall have received appropriate
certified corporate resolutions of each of the Borrower and each of the
Guarantors;
(d) Good Standing and Existence. The Banks shall have received
evidence of existence and good standing for Borrower and each of the
Guarantors;
(e) Senior Unsecured Subordinated Notes. The transaction described
in the Indenture (i) shall have closed and been funded contemporaneously
with the effectiveness of this Second Amendment and the net proceeds
thereof shall be used to pay off all amounts outstanding under the
Revolving Commitment and the Notes, and (ii) shall provide that the
Senior Subordinated Notes are subordinated, to the satisfaction of the
Banks, to all of the obligations of the Borrower under the Credit
Agreement, as amended, the Notes and the other Loan Documents;
(f) Representations and Warranties. The representations and
warranties of Borrower under the Credit Agreement are true and correct
in all material respects as of such date, as if then made (except to the
extent that such representations and warranties related solely to an
earlier date);
(g) No Event of Default. No Event of Default shall have occurred and
be continuing nor shall any event have occurred or failed to occur
which, with the passage of time or service of notice, or both, would
constitute an Event of Default;
(h) Other Documents. Each Bank shall have received such other
instruments and documents incidental and appropriate to the transaction
provided for herein as such Bank or its counsel may reasonably request,
and all such documents shall be in form and substance satisfactory to
such Bank; and
(i) Legal Matters Satisfactory. All legal matters incident to the
consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for Bank retained at the expense of
Borrower.
10. Except to the extent its provisions are specifically amended,
modified or superseded by this Second Amendment, the representations, warranties
and affirmative and negative covenants of the Borrower contained in the Credit
Agreement are incorporated herein by reference for all purposes as if copied
herein in full. The Borrower hereby restates and reaffirms each and every term
and provision of the Credit Agreement, as amended, including, without
limitation, all representations, warranties and affirmative and negative
covenants. Except to the extent its
-7-
8
provisions are specifically amended, modified or superseded by this Second
Amendment, the Credit Agreement, as amended, and all terms and provisions
thereof shall remain in full force and effect, and the same in all respects are
confirmed and approved by the Borrower and the Banks.
11. This Second Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Credit Agreement to be duly executed as of the date first above written.
BORROWER:
NEWPARK RESOURCES, INC.
a Delaware corporation
By:
-------------------------------
John R. Dardenne, Sr., Treasurer
GUARANTORS:
CHEMICAL TECHNOLOGIES, INC.,
EXCALIBAR MINERALS, INC., NEWPARK
ENVIRONMENTAL SERVICES, INC.,
MALLARD & MALLARD OF LA., INC.,
NEWPARK HOLDINGS, INC., NEWPARK
DRILLING FLUIDS, INC., SUPREME
CONTRACTORS, INC., AND BOCKMON
CONSTRUCTION COMPANY, INC.
By:
-------------------------------
John R. Dardenne, Sr., Treasurer
-8-
9
NEWPARK ENVIRONMENTAL MANAGEMENT
COMPANY, L.L.C., NEWPARK TEXAS,
L.L.C., EXCALIBAR MINERALS OF
LA.,L.L.C. AND SOLOCO L.L.C.
By:
-------------------------------
John R. Dardenne, Sr., Treasurer
BATSON-MILL, L.P., NEWPARK TEXAS
DRILLING, FLUIDS L.P., NEWPARK
ENVIRONMENTAL SERVICES OF TEXAS,
L.P., NEWPARK SHIPHOLDING TEXAS,
L.P., N.I.D., L.P., SOLOCO TEXAS,
L.P., NES PERMIAN BASIN, L.P. AND
NEWPARK ENVIRONMENTAL SERVICES
MISSISSIPPI, L.P.
By: Newpark Holdings, Inc.,
the general
partner of each
By:
-------------------------------
John R Dardenne, Sr., Treasurer
BANKS:
BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION,
a national banking association
By:
-------------------------------
Rose M. Miller, Vice President
-9-
10
DEUTSCHE BANK A.G., NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
HIBERNIA NATIONAL BANK
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
AGENT:
BANK ONE, LOUISIANA,
NATIONAL ASSOCIATION,
a national banking association
By:
-------------------------------
Rose M. Miller, Vice President
-10-
11
CO-AGENT:
DEUTSCHE BANK A.G., NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
-11-
1
EXHIBIT 10.20
NEWPARK RESOURCES, INC.
LONG TERM STOCK AND CASH INCENTIVE PLAN
1. PURPOSE
The Newpark Resources, Inc., Long Term Stock and Cash Incentive Plan
(the "Plan") is intended (i) to increase the value of the stockholders'
investment in Newpark Resources, Inc. ("Newpark" or the "Company"), by improving
the Company's performance and profitability; and (ii) to retain, attract and
motivate key employees who are not directors or officers of the Newpark but
whose judgment, initiative and efforts are expected to contribute to the
continued success, growth and profitability of the Company. Unless the context
indicates otherwise, references to "the Company" herein shall be deemed to
include reference to the subsidiary of the Company that actually employs the
affected Participant.
2. SHARES AND CASH SUBJECT TO THE PLAN
The maximum number of shares of common stock of Newpark (the "Stock")
that may be issued pursuant to the Plan shall be 40,000, subject to adjustment
pursuant to the provisions of Section 7. The maximum amount of cash that may be
awarded pursuant to the Plan shall be $1,500,000.00. If shares of Stock or the
right to receive cash awarded or issued under the Plan are reacquired by Newpark
due to a forfeiture or for any other reason, such shares or right to receive
cash shall be cancelled and thereafter shall again be available for purposes of
the Plan.
3. ADMINISTRATION
3.1 The PLAN shall be administered by a committee (the "Committee") of
two or more persons appointed by the Board of Directors of Newpark (the
"Board"). The Committee shall select one of its members as Chairman and shall
act by vote of a majority of a quorum or by unanimous written consent. A
majority of its members shall constitute a quorum. The Committee shall be
governed by the provisions of the Bylaws of Newpark and of Delaware law
applicable to the Board, except as otherwise provided herein or determined by
the Board.
3.2 The Committee shall have full power, discretion and authority to
administer, interpret and construe the Plan and any award or agreement made
pursuant to the Plan, and to prescribe and rescind rules, regulations and
policies for administration of the Plan. The Committee's actions,
interpretations and constructions with regard to the Plan shall be final,
conclusive and binding on all persons for all purposes.
3.3 No member of the Committee or the Board shall be liable for any
action or determination made in good faith with respect to the Plan or any award
pursuant to it. Newpark shall indemnify and hold harmless each member of the
Committee and the Board, and the estate and heirs of each such member, against
all claims, liabilities, expenses, penalties, damages or other pecuniary losses,
including legal fees, which such Committee member or Board member or his or her
estate or heirs may suffer as a result of any act or omission to act in
connection with the Plan, to the extent that insurance, if any, does not cover
the payment of such items.
4. ELIGIBILITY
Employees of the Company and its subsidiaries who are not directors or officers
of Newpark and whose responsibilities and decisions, in the judgment of the
Committee, materially affect the growth, performance or profitability of the
Company shall be eligible to be granted awards under the Plan. Such an employee
shall become a participant in the Plan (a "Participant") upon designation as a
1
2
Participant by the Committee, in its sole discretion.
5. GRANT OF AWARDS AND AWARD AGREEMENTS
5.1 Subject to the provisions of the PLAN, the Committee shall (i)
grant awards pursuant to the PLAN, (ii) determine the number of shares of Stock
or the amount of cash or both subject to each award, (iii) determine the terms
and conditions (which need not be identical) of each award, provided that Stock
shall be issued without the payment of cash consideration other than an amount
equal to the par value of the Stock, (iv) establish and modify performance
criteria for awards, and (v) make all of the determinations necessary or
advisable with respect to awards under the Plan.
5.2 Each award under the PLAN shall consists of a grant of shares of
Stock or an amount of cash (to be paid on a deferred basis) subject to a
restriction period (after which the restrictions shall lapse), which shall mean
a period commencing on the date the award is granted and ending on such date as
the Committee shall determine (the "Restriction Period"). The Committee may
provide for the lapse of restrictions in installments, for acceleration of the
lapse of restrictions upon the satisfaction of such performance or other
criteria or upon the occurrence of such events as the Committee shall determine,
and for the early expiration of the Restriction Period upon a Participant's
death, disability, retirement at or after normal retirement age or the
termination of the Participant's employment with the Company by the Company
without "Cause."
5.3 "Cause," when used with reference to termination of the employment
of a Participant by the Company for "Cause," shall mean:
(a) the Participant's continuing wilful and material breach of
his or her duties to the Company after he or she receives a demand from
the chief executive of the Company (or the subsidiary which employs the
Participant) specifying the manner in which he or she has wilfully and
materially breached such duties, other than any such failure resulting
from disability of the Participant; or
(b) the conviction of the Participant of a felony; or
(c) the Participant's commission of fraud in the course of his
or her employment with the Company, such as embezzlement or other
material and intentional violation of law against the Company; or
(d) the Participant's gross misconduct causing material harm
to the Company.
5.4 Each award granted under the Plan shall be evidenced by a written
agreement (an "Incentive Agreement"), in a form approved by the Committee and
executed by Newpark and the Participant to whom the award is granted. Each
Incentive Agreement shall be subject to the terms and conditions of the Plan and
other such terms and conditions as the Committee may specify.
5.5 The Committee may modify or amend any award under the PLAN or waive
any restrictions or conditions applicable to such awards; provided, however,
that the Committee may not undertake any such modifications, amendments or
waivers if the effect thereof materially adversely affects the rights of any
Participant without his or her consent.
6. TERMS AND CONDITIONS OF AWARDS
6.1 Upon receipt of an award of shares of Stock under the Plan, even
during the Restriction Period, a Participant shall be the holder of record of
the shares and shall have all the rights of a
2
3
stockholder with respect to such shares, subject to the terms and conditions of
the Plan and the award. Each cash award made under the Plan shall constitute an
unsecured promise by Newpark to pay the amount thereof without interest at the
end of the Restriction Period. Such amount shall remain part of Newpark's
general funds, need not be held separately, and shall remain subject to claims
of the Company's creditors until paid to the Participant in accordance with the
terms of the award to the Participant.
6.2 Except as otherwise provided in this Section, no shares of Stock
and no right to any cash awarded pursuant to the Plan shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period applicable to such shares or cash. Any purported disposition
of such Stock or cash or both in violation of this Section shall be null and
void.
6.3 If a Participant's employment with the Company terminates prior to
the expiration of the Restriction Period for an award, subject to any provisions
of the award with respect to the Participant's death, disability, retirement or
termination of employment without Cause, all shares of Stock and all cash
subject to the award shall be immediately forfeited by the Participant to
Newpark without any payment or other consideration to the Participant, and the
Participant shall have no further rights with respect to the award.
6.4 The Committee may require under such terms and conditions as it
deems appropriate or desirable that (i) the certificates for Stock delivered
under the Plan are held in custody by Newpark or a person or institution
designated by Newpark until the Restriction Period expires, (ii) such
certificates shall bear a legend referring to the restrictions on the Stock
pursuant to the Plan, and (iii) the Participant shall have delivered to Newpark
a stock power endorsed in blank relating to the Stock.
7. ADJUSTMENTS OF STOCK
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock, merger or consolidation of Newpark or sale by
Newpark of all or a portion of its assets, or similar event, the Committee shall
make such adjustments in the operation of the Plan, including but not limited to
changing the number and kind of securities which may be issued pursuant to the
Plan, as the Committee deems equitable. Until the Restriction Period has
expired, all property or stock issued with respect to the Stock by reason of any
stock dividend or any event described in this Section shall be subject to the
same restrictions as are applicable to the Stock.
8. WITHHOLDING TAXES
Newpark shall have the right, at the time of a Participant's taxation,
to make adequate provision for any federal, state, local or foreign taxes which
it believes are or may be required by law to be withheld with respect to such an
award under the Plan ("Tax Liability"), to ensure the payment of any such. Tax
Liability. Newpark may provide for the payment of any Tax Liability by any of
the following means or a combination of such means, as determined by the
Committee in its sole and absolute discretion in the particular case: (i) by
requiring the Participant to tender a cash payment to Newpark, (ii) by
withholding from the Participant's cash compensation, (iii) by withholding cash
or shares from the cash awarded and shares of Stock issued under the award,
valued as of the date the shares are withheld, or (iv) by any other method
deemed appropriate by the Committee.
9. AMENDMENT AND TERMINATION
The Board may at any time suspend, amend or terminate the Plan. No
such action shall adversely affect any outstanding Incentive Agreement without
the Participant's written consent.
3
4
10. MISCELLANEOUS
10.1 Nothing in this Plan or any award granted hereunder shall confer
upon any employee any right to continue: in the employ of the Company or
interfere in any way with the right of the Company to terminate his or her
employment at any time.
10.2 No award granted under the Plan shall be deemed salary or
compensation for the purpose of computing benefits under any employee benefit
plan or other arrangement of the Company for the benefit of its employees.
10.3 The Plan and the grant of awards under it shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any governmental or regulatory agency as may be required.
10.4 The Plan shall be construed in accordance with and governed by the
laws of the State of Delaware.
10.5 Each Incentive Agreement shall inure to the benefit of the
Participant and the Participant's heirs, representatives and successors and
shall be binding on Newpark and each successor (direct or indirect, whether by
purchase, merger, consolidation or otherwise).
10.6 After the Restriction Period lapses or is terminated, no Stock
issued under the Plan may be resold unless and until any applicable registration
or qualification requirements of federal and state securities laws and all other
requirements of law or any regulator), bodies having jurisdiction over such
resale have been fully complied with. Newpark shall have no obligation to file
any Registration Statement covering resales of the Stock.
11. MISCONDUCT OF A PARTICIPANT
Notwithstanding any other provision of the Plan, in the event that a
Participant commits fraud or dishonesty toward the Company, wrongfully uses or
discloses any trade secret, confidential data or other information proprietary
to the Company or intentionally takes any other action materially inimical to
the best interests of the Company, as determined by the Committee in its sole
and absolute discretion, such Participant shall forfeit all Stock and cash
previously awarded to him or her under the Plan as to which the Restriction
Period has not expired.
IN WITNESS WHEREOF, this Plan has been executed as of March , 1997.
NEWPARK RESOURCES, INC.
By:
-------------------------
Title:
-------------------------
4
1
EXHIBIT 21.1
SUBSIDIARIES OF
NEWPARK RESOURCES, INC.
Exhibit 21.1
STATE OF DATE OF
ENTITIES INCORPORATION INCORPORATION
- ----------------------------------------------------- -------------------- -----------------------
BATSON MILL, L.P.
BFC OIL COMPANY Louisiana 12/15/1978
BOCKMON CONSTRUCTION COMPANY, INC. Texas 11/4/1965
BOCKMON CONSTRUCTION COMPANY OF LOUISIANA, INC. Texas
CHESSHER CONSTRUCTION, INC. Texas 1/4/1995
CHEMICAL TECHNOLOGIES, INC. Texas 6/23/1995
CONSOLIDATED MAYFLOWER MINES Utah 7/21/1975
EXCALIBAR MINERALS, INC. Texas 4/12/1991
EXCALIBAR MINERALS OF LA., L.L.C Louisiana 3/25/1997
(Formerly IBERIA BARITE, L.L.C.)
FLORIDA MAT RENTAL, INC. Florida 8/24/1994
GEORGE R. BROWN SERVICES, INC. Texas 1/4/1995
INTERNATIONAL MAT, LTD. Cayman Islands
IML DE VENEZUELA, L.L.C. Cayman Islands
JPI ACQUISITION CORP. Texas 4/3/1996
MALLARD & MALLARD, INC. Texas 1/4/1995
MALLARD & MALLARD OF LA., INC. Louisiana 7/5/1979
NES PERMIAN BASIN, L.P. N/A
NDF MEXICO, INC. Texas 2/18/1998
NEWPARK DRILLING FLUIDS, INC. Texas 7/28/1989
(Formerly SAMPEY*BILBO*MESCHE Drilling Fluids
Management, Inc.)
NEWPARK ENVIRONMENTAL SERVICES, INC. Delaware 8/6/1996
(Formerly NOW Disposal Operating Co.)
NEWPARK ENVIRONMENTAL MANAGEMENT COMPANY, L.L.C. Louisiana 12/22/1995
(Formerly Newpark Environmental Services, L.L.C.)
NEWPARK ENVIRONMENTAL SERVICES MISSISSIPPI, L.P. N/A
NEWPARK ENVIRONMENTAL SERVICES, L.P. N/A 8/6/1996
2
SUBSIDIARIES OF
NEWPARK RESOURCES, INC.
STATE OF DATE OF
ENTITIES INCORPORATION INCORPORATION
- ---------------------------------------------------- -------------- -------------
NEWPARK HOLDINGS, INC. Louisiana 12/22/1994
NEWPARK SHIPHOLDING TEXAS, L.P. N/A
NEWPARK TEXAS DRILLING FLUIDS, L.P. N/A 7/28/1989
(Formerly FMI Wholesale Drilling Fluids USA, L.P.)
NEWPARK TEXAS L.L.C. Louisiana 12/22/1994
NID, L.P. N/A
SOLOCO, INC. Louisiana
SOLOCO, L.L.C. Louisiana 12/22/1994
SOLOCO TEXAS, L.P. N/A
SUPREME CONTRACTORS, INC. Louisiana 9/29/1986
1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-22291, 33-54060, 33-62643, 33-83680, and 333-07225 of Newpark Resources,
Inc. on Form S-8, Registration Statements No. 333-33957 and 333-40487 on Form
S-3, and Registration Statement No. 333-45197 on Form S-4 of our report dated
March 27, 1998, appearing in this Annual Report on Form 10-K of Newpark
Resources, Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 30, 1998
1
EXHIBIT 24.1
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of
NEWPARK RESOURCES, INC., does hereby constitute and appoint James D. Cole
and/or Matthew W. Hardey, his true and lawful attorney and agent to do any and
all acts and things and execute, in the name of the undersigned (whether on
behalf of Newpark Resources, Inc., or as a Director of Newpark Resources, Inc.,
or by attesting the seal of Newpark Resources, Inc., or otherwise), any and all
instruments which said attorney and agent may deem necessary or advisable in
order to enable Newpark Resources, Inc. to comply with the Securities Exchange
Act of 1934 and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of the Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the
fiscal year ended December 31, 1997, including specifically but without
limitation thereto, power and authority to sign the name of the undersigned
(whether on behalf of Newpark Resources, Inc., or as a Director of Newpark
Resources, Inc., or by attesting to the seal of Newpark Resources, Inc., or
otherwise) to the Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, or any of the exhibits filed therewith, or any
amendment or application for amendment of the Annual Report on Form 10-K, or
any of the exhibits filed therewith, and to attest the seal of Newpark
Resources, Inc. thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents, each of them, shall do or cause to be done by virtue
hereof. Any one of said attorneys and agents shall have, and may exercise, all
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the
date set forth opposite his name.
DATED: MARCH 20, 1998 /s/ WILLIAM W. GOODSON
------------------------------ --------------------------------
WILLIAM W. GOODSON, DIRECTOR
WITNESSES
- ------------------------------------
- ------------------------------------
2
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of
NEWPARK RESOURCES, INC., does hereby constitute and appoint James D. Cole
and/or Matthew W. Hardey, his true and lawful attorney and agent to do any and
all acts and things and execute, in the name of the undersigned (whether on
behalf of Newpark Resources, Inc., or as a Director of Newpark Resources, Inc.,
or by attesting the seal of Newpark Resources, Inc., or otherwise), any and all
instruments which said attorney and agent may deem necessary or advisable in
order to enable Newpark Resources, Inc. to comply with the Securities Exchange
Act of 1934 and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of the Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the
fiscal year ended December 31, 1997, including specifically but without
limitation thereto, power and authority to sign the name of the undersigned
(whether on behalf of Newpark Resources, Inc., or as a Director of Newpark
Resources, Inc., or by attesting to the seal of Newpark Resources, Inc., or
otherwise) to the Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, or any of the exhibits filed therewith, or any
amendment or application for amendment of the Annual Report on Form 10-K, or
any of the exhibits filed therewith, and to attest the seal of Newpark
Resources, Inc. thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents, each of them, shall do or cause to be done by virtue
hereof. Any one of said attorneys and agents shall have, and may exercise, all
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the
date set forth opposite his name.
DATED: MARCH 18, 1998 /s/ DAVID P. HUNT
------------------------------ --------------------------------
DAVID P. HUNT, DIRECTOR
WITNESSES
- ------------------------------------
- ------------------------------------
3
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of
NEWPARK RESOURCES, INC., does hereby constitute and appoint James D. Cole
and/or Matthew W. Hardey, his true and lawful attorney and agent to do any and
all acts and things and execute, in the name of the undersigned (whether on
behalf of Newpark Resources, Inc., or as a Director of Newpark Resources, Inc.,
or by attesting the seal of Newpark Resources, Inc., or otherwise), any and all
instruments which said attorney and agent may deem necessary or advisable in
order to enable Newpark Resources, Inc. to comply with the Securities Exchange
Act of 1934 and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of the Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the
fiscal year ended December 31, 1997, including specifically but without
limitation thereto, power and authority to sign the name of the undersigned
(whether on behalf of Newpark Resources, Inc., or as a Director of Newpark
Resources, Inc., or by attesting to the seal of Newpark Resources, Inc., or
otherwise) to the Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, or any of the exhibits filed therewith, or any
amendment or application for amendment of the Annual Report on Form 10-K, or
any of the exhibits filed therewith, and to attest the seal of Newpark
Resources, Inc. thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents, each of them, shall do or cause to be done by virtue
hereof. Any one of said attorneys and agents shall have, and may exercise, all
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the
date set forth opposite his name.
DATED: MARCH 18, 1998 /s/ JAMES H. STONE
------------------------------- --------------------------------
JAMES H. STONE, DIRECTOR
WITNESSES
- -------------------------------------
- -------------------------------------
4
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of
NEWPARK RESOURCES, INC., does hereby constitute and appoint James D. Cole
and/or Matthew W. Hardey, his true and lawful attorney and agent to do any and
all acts and things and execute, in the name of the undersigned (whether on
behalf of Newpark Resources, Inc., or as a Director of Newpark Resources, Inc.,
or by attesting the seal of Newpark Resources, Inc., or otherwise), any and all
instruments which said attorney and agent may deem necessary or advisable in
order to enable Newpark Resources, Inc. to comply with the Securities Exchange
Act of 1934 and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of the Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the
fiscal year ended December 31, 1997, including specifically but without
limitation thereto, power and authority to sign the name of the undersigned
(whether on behalf of Newpark Resources, Inc., or as a Director of Newpark
Resources, Inc., or by attesting to the seal of Newpark Resources, Inc., or
otherwise) to the Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, or any of the exhibits filed therewith, or any
amendment or application for amendment of the Annual Report on Form 10-K, or
any of the exhibits filed therewith, and to attest the seal of Newpark
Resources, Inc. thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents, each of them, shall do or cause to be done by virtue
hereof. Any one of said attorneys and agents shall have, and may exercise, all
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the
date set forth opposite his name.
DATED: MARCH 18, 1998 /s/ ALAN J. KAUFMAN
------------------------------- --------------------------------
ALAN J. KAUFMAN, DIRECTOR
WITNESSES
- -------------------------------------
- -------------------------------------
5
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of
NEWPARK RESOURCES, INC., does hereby constitute and appoint James D. Cole
and/or Matthew W. Hardey, his true and lawful attorney and agent to do any and
all acts and things and execute, in the name of the undersigned (whether on
behalf of Newpark Resources, Inc., or as a Director of Newpark Resources, Inc.,
or by attesting the seal of Newpark Resources, Inc., or otherwise), any and all
instruments which said attorney and agent may deem necessary or advisable in
order to enable Newpark Resources, Inc. to comply with the Securities Exchange
Act of 1934 and any requirements of the Securities and Exchange Commission in
respect thereof, in connection with the filing of the Annual Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the
fiscal year ended December 31, 1997, including specifically but without
limitation thereto, power and authority to sign the name of the undersigned
(whether on behalf of Newpark Resources, Inc., or as a Director of Newpark
Resources, Inc., or by attesting to the seal of Newpark Resources, Inc., or
otherwise) to the Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission, or any of the exhibits filed therewith, or any
amendment or application for amendment of the Annual Report on Form 10-K, or
any of the exhibits filed therewith, and to attest the seal of Newpark
Resources, Inc. thereon and to file the same with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents, each of them, shall do or cause to be done by virtue
hereof. Any one of said attorneys and agents shall have, and may exercise, all
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the
date set forth opposite his name.
DATED: MARCH 26, 1998 /s/ DIBO ATTAR
------------------------------- --------------------------------
DIBO ATTAR, DIRECTOR
WITNESSES
- -------------------------------------
- -------------------------------------
5
1,000
12-MOS
DEC-31-1997
JAN-01-1997
DEC-31-1997
20,715
0
75,556
(2,171)
21,147
120,906
251,308
(62,556)
446,580
(30,694)
0
0
0
(640)
(269,129)
(446,580)
215,354
215,354
127,228
149,691
3,185
0
3,825
58,653
21,537
37,116
0
0
0
37,116
0.59
0.58
5
1,000
3-MOS 3-MOS 3-MOS
DEC-31-1997 DEC-31-1997 DEC-31-1996
JAN-01-1997 JUL-01-1997 APR-01-1996
MAR-31-1997 SEP-30-1997 JUN-30-1996
4,178 6,179 1,063
0 0 0
54,032 60,092 39,853
(1,731) (1,925) (762)
6,586 18,305 8,923
74,586 88,257 53,266
170,198 221,159 134,965
(44,363) (56,808) (43,969)
308,035 376,728 156,040
(34,576) (30,434) (22,240)
0 0 0
0 0 0
0 0 0
(608) (634) (106)
(212,121) (256,818) (81,338)
(308,035) (376,728) (156,040)
42,915 57,908 29,091
42,915 57,908 29,091
26,490 34,661 19,091
30,154 40,152 21,398
808 883 732
0 0 0
811 799 975
11,142 16,074 5,980
4,027 5,945 2,007
7,115 10,129 3,973
0 0 0
0 0 0
0 0 0
7,115 10,129 3,973
0.12 0.16 0.09
0.11 0.16 0.08
5
1,000
12-MOS 12-MOS
DEC-31-1996 DEC-31-1995
JAN-01-1996 JAN-01-1995
DEC-31-1996 DEC-31-1995
1,945 1,500
0 0
50,064 40,666
(1,695) (768)
7,470 12,039
68,655 57,588
154,426 128,417
(39,756) (42,898)
289,884 154,132
(38,774) (25,025)
0 0
0 0
0 0
(604) (448)
(202,837) (77,307)
(289,884) (154,132)
135,974 105,720
135,974 105,720
87,081 70,360
98,604 81,516
5,352 2,658
0 0
3,677 3,611
28,341 17,499
9,838 4,957
18,503 12,542
0 0
0 0
0 0
18,503 12,542
0.36 0.28
0.35 0.27
