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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, 1996 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:
Title of each class
Common Stock, $.01 par value
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 3 No _
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 of
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K [3].
At March 24, 1997, the aggregate market value of the voting stock held
by non-affiliates of the registrant is
$649,859,863. 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 24, 1997, a total of 15,175,438 shares of Common Stock, $.01
par value, were outstanding.
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the upcoming 1997
Annual Meeting of Shareholders are incorporated by reference into Part III
hereof.
Page 1 of 70
Exhibit Index Appears on Page 66
NEWPARK RESOURCES, INC.
INDEX TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Item Page
Number Description Number
PART I
1 Business 3
2 Properties 31
3 Legal Proceedings 32
4 Submission of Matters to a Vote of Security Holders 33
PART II
5 Market for the Registrant's Common Equity and 34
Related Stockholder Matters
6 Selected Financial Data 35
7 Management's Discussion and Analysis of Financial 37
Condition and Results of Operations
8 Financial Statements and Supplementary Data 45
9 Changes in and Disagreements with Accountants 64
on Accounting and Financial Disclosure
PART III
10 Directors and Executive Officers of the Registrant 65
11 Executive Compensation 65
12 Security Ownership of Certain Beneficial Owners 65
and Management
13 Certain Relationships and Related Transactions 65
PART IV
14 Exhibits, Financial Statement Schedules, and Reports 66
on Form 8-K
Signatures
69
PART I
ITEM 1. Business
Introduction
Newpark Resources, Inc. ("Newpark" or the "Company") is a leading
provider of integrated environmental services to the oil and gas
exploration and production industry in the Gulf Coast area,
principally in Louisiana and Texas. These services are concentrated
in three key product lines: (i) processing and disposal of
nonhazardous oilfield waste ("NOW"); (ii) processing and disposal of
NOW which is contaminated with naturally occurring radioactive
material ("NORM"); and (iii) mat rental services in which patented
prefabricated wooden mats are used as temporary worksites in oilfield
and other construction applications. In its waste disposal
operations, the Company utilizes patented and proprietary technology.
Oilfield Waste and Other Environmental Services
Newpark collects, processes and disposes of oilfield waste,
primarily NOW and NORM. Newpark also treats NOW at the well site,
remediates waste pits and other contaminated sites, and provides
general oilfield services in connection with these waste-related
services. In its NOW processing and disposal business, Newpark
processes the majority of the NOW received at its facilities for
injection into environmentally secure geologic formations deep
underground and creates from the remainder a product which is used as
intermediate daily cover material or as cell liner and construction
material at municipal waste landfills. In addition, the Company has
initiated a process to recycle a portion of the NOW for use in the
makeup of drilling fluids.
Since the fourth quarter of 1994, and until June, 1996, Newpark
disposed of NOW waste that is contaminated with NORM by processing the
waste into NOW and injected it into wells owned by the Company. On
May 21, 1996, Newpark was issued a license by the Texas Railroad
Commission authorizing the direct injection of NORM into disposal
wells, subject to certain contamination limits, at Newpark's Big Hill,
Texas facility. These operations began June 1, 1996. The direct
injection of NORM permitted under the new license expands Newpark's
NORM disposal capacity and significantly reduces the amount of pre-
injection transportation processing and chemicals required, thereby
reducing Newpark's cost of disposal.
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Newpark received a process patent in December 1996 for its
offsite NOW and NORM waste processing operations. This patent covers
the process to prepare the waste into a slurry and inject it at low
pressures into specific geological formations.
Newpark also provides industrial waste management, laboratory and
consulting services for the customers of its NOW and NORM services.
Mat Rental
The Company uses a patented interlocking wooden mat system to
provide temporary worksites in unstable soil conditions typically
found along the Gulf Coast. Prior to 1994, mat rental services were
provided primarily to the oil and gas exploration and production
industry in Louisiana and Texas. In 1994, the Company began marketing
these temporary worksites to other industries. Increasing
environmental regulation affecting the construction of pipelines,
electrical distribution systems and highways in and through wetlands
environments has provided a substantial and growing new market for
these services and has broadened the geographic market served by the
Company to include the coastal areas of the Southeastern states,
particularly Florida and Georgia, in addition to its traditional Gulf
Coast market. In 1995, through a joint venture, the Company began
marketing its mat rental services in Venezuela. In September 1996,
Newpark purchased the minority interests of its partners in the
venture. Late in 1996, the Company made an initial shipment of mats
to Algeria, and plans to continue development of this market during
1997. Mat rental revenue has increased from $11 million in 1990 to
$33 million in 1996. The Company owns a sawmill in Batson, Texas, and
has expanded the capacity of the facility during the period 1994-1995
to help ensure an adequate supply of hardwoods for its mat rental
business.
The recent trend toward more strict environmental regulation of
both drilling and production operations conducted by the Company's
customers has resulted in greater synergy between the Company's mat
rental and oilfield general construction services and its other
environmental services. The Company offers these services
individually and as an integrated package and provides a comprehensive
combination of onsite waste management and construction services for
both the drilling of new sites and the remediation of existing sites.
4
The following table sets forth for the years ended December 31,
1996, 1995, and 1994, respectively, the amount of revenues for each
class of similar products and services.
Year ended December 31,
________________________
1996 1995 1994
____ ____ ____
(Dollars in thousands)
Revenues:
Offsite waste processing $44,905 $31,126 $20,738
Mat rental 32,757 30,775 23,048
Integrated services 42,520 34,481 34,246
Other 1,360 1,600 1,600
________ _______ _______
Total revenues $121,542 $97,982 $79,632
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.
Development of the Business
Recent developments include:
o On August 12, 1996, Newpark completed the acquisition of
substantially all of the marine-related NOW collection
operations of Campbell Wells Ltd. ("Campbell Wells"), a
wholly owned subsidiary of Sanifill, Inc. ("Sanifill"), for
an aggregate purchase price of $70.5 million.
o The Company began implementation of two NOW waste recycling
strategies which will reduce the volume of washwater to be
disposed of and reclaim certain components of drilling fluid
waste for use as a product in the make-up of new fluids.
o On May 21, 1996, the Company was awarded a license by the
Texas Railroad Commission authorizing the direct injection
of NORM into disposal wells at its Big Hill, Texas facility.
Operations under this license commenced June 1, 1996.
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o More stringent environmental regulations continue to impact
the Company's NOW disposal business.
o The volume of NOW processed by Newpark grew 38% during 1996.
The source of the growth was principally the effect of the
acquisition of the oilfield waste collection operations of
Campbell Wells during the year and, to a lesser extent, the
increase in drilling activity in the market served by the
Company late in the year as measured by the rig count.
o In September 1996, Newpark purchased the interests of its
minority partners in a joint venture which was begun in
March 1995 to provide mat rental services to the exploration
and production industry in Venezuela.
o The Company entered a new mat rental service market in
Algeria.
o The Company began a joint venture to manufacture a synthetic
mat made from recycled products.
Campbell Wells Acquisition. On August 12, 1996, Newpark
completed the acquisition (the "Acquisition") of substantially all of
the marine-related NOW collection operations of Campbell Wells, for an
aggregate purchase price of $70.5 million. The acquisition was
completed pursuant to the terms of an Asset Purchase and Lease
Agreement, dated June 5, 1996 (the "OAcquisition Agreement"), which
provided for the purchase and lease of certain marine-related assets
of Campbell Wells' NOW service business (the "Acquired Business"),
excluding its landfarming facilities and associated equipment. In
connection with the Acquisition, Newpark assumed obligations under a
NOW Disposal Agreement (the "Disposal Agreement") with Sanifill and
Campbell Wells, providing for the delivery by Newpark for a period of
25 years of an agreed annual quantity of NOW waste for disposal at
certain of Campbell Wells' landfarming facilities. Subsequently, USA
Waste acquired Sanifill, and Sanifill and Campbell Wells sold their
landfarming facilities and associated equipment and assigned their
rights under the Disposal Agreement and other agreements with Newpark
that were executed upon consummation of the Acquisition to US Liquids,
Inc., a newly formed corporation which assumed Sanifill's and Campbell
Wells' obligations under such agreements. The acquisition by USA
Waste and the assignment and assumption by U. S. Liquids, Inc. did not
release or diminish any party's obligations to Newpark under such
agreements.
6
The aggregate purchase price under the Acquisition Agreement was
$70.5 million, paid at closing of the Acquisition from part of the
proceeds of the sale of 3,450,000 shares of Newpark Common Stock, at
$30.00 per share, in an underwritten public offering also completed on
August 12, 1996. The remaining net proceeds from the public offering,
approximately $25.8 million after payment of related transaction
costs, were used to repay all amounts outstanding under the revolving
line of credit portion of Newpark's bank credit agreement.
The Acquisition has significantly expanded Newpark's service
capabilities and processing capacity. Newpark believes that the
Acquisition has provided and will continue to provide economies of
scale associated with handling a larger volume of waste through its
facilities. Newpark is combining the service capabilities of the
Acquired Business with its existing operations to speed the turnaround
of barges and boats at its transfer stations, thus providing better
customer service. Newpark believes that economic efficiencies will
result from the reduction in the size of the combined barge fleet
operated by Newpark to service its transfer stations and from the
consolidation of operations at more efficient transfer stations,
permitting Newpark to receive a substantially higher volume of waste
without material additions to existing costs. Furthermore, Newpark
expects that as a result of the Acquisition, access to Sanifill's
disposal facilities under the Disposal Agreement will allow Newpark to
reduce its barge transportation costs and make more efficient use of
its barge fleet, further augmenting its processing capacity. Newpark
believes that its current processing and disposal capacity, combined
with access provided to the landfarm disposal facilities of Sanifill
under the Disposal Agreement, will be adequate to provide for expected
future demand for its oilfield waste disposal and other environmental
services. Newpark will nevertheless continue its strategy of adding
injection disposal capacity throughout the U.S. Gulf Coast region to
more efficiently serve its customers.
NOW waste recycling. During 1996, the Company installed a
washwater recycling plant at one of its transfer stations, and
determined to make such installation at all of its facilities. Use of
the process could materially reduce the volume of washwater created in
its operations and thereby reduce disposal costs. The Company has
developed the capacity to recycle certain components of drilling
fluids collected in its NOW processing operations. On February 28,
1997 Newpark completed the acquisition of SBM Drilling Fluids
Management, Inc. ("SBM") which provides technical services and sells
and manages drilling fluids programs for oil and gas exploration
activities. Newpark plans to provide SBM access to certain NOW for
7
process and recycling in the make-up of drilling fluids for its
customers, reducing SBM's cost of material and increasing its margins.
It is anticipated that the recycling of NOW will reduce handling and
disposal costs. It is anticipated that it will take twelve months to
fully integrate recycling into the Company's operations.
NORM Direct Injection License. On May 21, 1996, Newpark was
awarded a new license from the State of Texas permitting receipt and
direct injection disposal of NORM waste at its Big Hill facility,
which has become primarily a NORM disposal site. This license
eliminates the requirement to process the waste until it attains NOW
characteristics. The processing facility and the disposal wells are
now located at the same site, minimizing transportation costs.
Additionally, since the new license allows injection of more
concentrated NORM into the wells, subject only to Newpark's facility
contamination limits, the volume of material expanded in the prior
process is reduced. This reduction in volume significantly expands
the capacity and extends the useful life of the site. The new license
has allowed Newpark to reduce prices to customers and encourage the
use of the direct injection process for the disposal of large volumes
of NORM. A recent contract with a major oil company for a large NORM
disposal project was the first remediation project to take advantage
of this new direct injection license.
Regulations. Continuing implementation of regulations required
under the Clean Water Act have continued the trend toward more
stringent regulation of NOW. During September 1996, the comment
period was ended on proposed zero-discharge regulations for the
territorial seas subcategory (corresponding to state territorial
waters) of the Gulf of Mexico. Final regulations are expected to be
promulgated late in 1997 or early 1998. Zero-discharge regulations
affecting production waste in the coastal zone sub category (generally
including inland waters and transition zone onshore areas) became
effective January 1, 1997. While limited temporary exemptions have
been granted to some oil companies by state regulators, these actions
have been opposed by leading environmental groups. In addition,
several lawsuits have been filed opposing these regulations,
accordingly, the timing of the implementation of these regulations is
not currently certain.
Developments related to NOW. The Company processed and disposed
of 3,956,000 barrels of NOW in 1996, of which 3,588,000 barrels were
generated from current drilling and production operations and 368,000
barrels were generated from the remediation of old pits and production
facilities, compared with 2,905,000 barrels in 1995, of which
2,364,000 were from current drilling and production operations and
541,000 were from remediation activities. The increase resulted
8
principally from the Campbell Wells acquisition in August 1996, and to
a lesser extent, from increased drilling activity late in 1996 as
measured by the rig count.
Newpark has expanded its NOW injection facility, located at
Fannett, Texas, making it the primary facility for the disposal of
NOW. The facility currently includes three injection wells and a
processing plant which efficiently handles the large quantities of
NOW. The processing plant is used to reduce and make uniform the size
of the particles in the waste stream to maintain desired flow
characteristics in the Company's injection wells. Since opening the
facility in September 1995, the Company has completed a bulk barge
unloading facility adjacent to the original Port Arthur processing
plant. Together with additions to personnel and equipment at its
receiving facilities, the Company has significantly increased its NOW
processing capacity.
Venezuela joint venture. 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 5 million barrels per day by the year 2005. Many
of the international oil companies investing in Venezuela are
Newpark's customers in the United States. During the first quarter of
1995, Newpark invested in a joint venture, in which it held a 38.8%
interest, providing mat rental services in Venezuela in support of oil
and gas exploration and production activities. In September 1996,
Newpark purchased the interest of its joint venture partners in the
Venezuela venture. As of December 31, 1996, there were approximately
21,000 mats in rental inventory in Venezuela. Newpark expects that
activity in Venezuela will continue to increase as further exploration
concessions are granted.
Algeria operations. During 1996, the Company shipped 4,000
interlocking mats to Algeria in an effort to develop a mat rental
market in that country. The goal is to replace gypsum and concrete
commonly used in constructing drilling sites in the desert, with a
more cost effective solution.
Synthetic mat joint venture. During 1996, the Company entered
into a joint venture to manufacture a synthetic mat system, raw
materials for which will ultimately be derived primarily from recycled
plastics. The Company believes that certain military and emergency-
response type governmental sales may constitute the initial market for
9
the synthetic mat system. The system will also enhance the current
rental mat fleet for use in certain markets and will provide the
ability for the Company to expand into new markets. It is anticipated
that it will take twelve to eighteen months to build a facility to
begin the manufacturing of these mats.
Regulatory Background
The oilfield market for environmental services has increased as
regulations have increased. Louisiana, Texas, and other states have
enacted comprehensive laws and regulations governing the proper
handling of NOW and NORM. This has also heightened the awareness of
both the generators of waste and landowners of the need for proper
treatment and disposal of such waste in both the drilling of new wells
and the remediation of production facilities.
For many years, prior to current regulation, industry practice
was to allow NOW to remain in the environment. Onshore, surface pits
were used for the disposal of NOW; offshore or in inland waters, NOW
was discharged directly into the water. As a result of increasing
public concern over the environment, NOW has in recent years become
subject to public scrutiny and governmental regulation. Operators of
exploration and production facilities, including major and independent
oil companies, have found themselves subject to numerous laws and
regulations issued by both state and federal agencies. These laws and
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 possible
long-term liability for remediation, and landowners have become more
aggressive about 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.
Late in 1992, the Louisiana Department of Environmental Quality
("DEQ") began to promulgate and enforce new, stricter limits on the
level of radium concentration above which NOW became categorized as
NORM. NORM regulations require more stringent worker protection,
handling and storage procedures than those required of NOW under
Louisiana Statewide Executive Order 29-B. Early in 1994, DEQ
10
published draft NORM regulations which, with minor modification,
became effective January 20, 1995, as LAC 33:XV.1401-1420, Chapter 14.
In Texas, the Railroad Commission adopted final rules ("Rule 94")
effective February 1, 1995. Adoption of these regulations has
resolved the regulatory uncertainty associated with NORM. Similar
regulations have been promulgated in the states of Mississippi, New
Mexico and Arkansas. Draft regulations are presently being reviewed
in the state of Oklahoma.
The primary laws that have helped to create the market for
Newpark's environmental services in the Gulf Coast region, and which
apply to Newpark in the conduct of its business, are the Resource
Conservation and Recovery Act of 1976, as amended in 1984 ("RCRA"),
the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended in 1986 ("CERCLA"), the laws and regulations
promulgated by the states of Louisiana, Texas and Alabama, the Federal
Water Pollution Control Act, as amended (the "Clean Water Act"), and
the Federal Oil Pollution Act of 1990 ("OPA"). These laws are
discussed under "Environmental Regulation".
Description of Business
Offsite Waste Processing
NOW Waste Processing. Generally under state regulation, if NOW
cannot be treated for discharge or disposed of on the location where
it is generated, it must be transported to a licensed NOW disposal or
treatment facility. Three primary alternatives for offsite disposal
of NOW are available to generators in the Gulf Coast: (i) underground
injection (See "Injection Wells"); (ii) land-farming, provided by the
Company's competitors; and (iii) processing and conversion of the NOW
into a reuse product. In addition, a portion of the NOW can be
recycled into a drilling fluids product.
On August 12, 1996, the Company acquired substantially all of
Campbell Well's non-landfarm assets and certain leases associated with
the five transfer stations located along the Gulf Coast and three
receiving docks at the landfarm facilities operated by Campbell. The
Company is subject to an agreement with Campbell by which an agreed
annual quantity of NOW must be delivered to the Campbell landfarms. A
successor to Campbell, U. S. Liquids, continues to operate the
landfarms.
11
Including the facilities acquired from Campbell Wells, Newpark
operates ten receiving and transfer facilities located along the Gulf
Coast from Venice, Louisiana, to Corpus Christi, Texas. Waste
products are collected at the transfer facilities from three distinct
markets: offshore exploration and production; land and inland waters
exploration and production; and remediation of existing or inactive
well sites and production facilities. These facilities are supported
by a fleet of 51 double-skinned barges certified by the U. S. Coast
Guard to transport NOW. Waste received is transported by barge
through the Gulf Intracoastal Waterway to the Company's processing and
transfer facility at Port Arthur, Texas, and trucked to injection
disposal facilities at Fannett, Texas. Since the third quarter of
1995, the Fannett facility has served as Newpark's primary NOW
injection facility.
Before 1994 a large portion, and in 1995 and later years, a small
portion of the waste received by the Company has been converted into a
commercial reuse product meeting the specifications applicable under
federal and state regulations for reuse as a covering material or cell
liner material at municipal sanitary landfills. Under these
regulations, landfills must cover the solid waste deposited daily with
earth or other inert material. The Company'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 material pursuant
to contracts with the respective cities. This reuse is conducted
under authorization from the Texas Natural Resource Conservation
Commission. Increased injection capacity and access to the Campbell
landfarms has reduced the volume of waste delivered to these landfills
as a reuse product. The Company has also 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, in-situ 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. One significant factor
contributing to the growth in the NORM disposal market has been
increased 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 sites by offsite disposal of the NORM waste. In
addition, these lawsuits have caused other operators to dispose of
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NORM waste offsite to avoid the threat of future litigation. While
the increase in volume has been driven by litigation the project-
oriented nature of the market has the effect of making the timing of
revenues difficult to predict.
Newpark's initial NORM processing facility in Port Arthur, Texas
was licensed in September 1994 and began operations October 21, 1994.
On May 21, 1996, Newpark was awarded a new license permitting receipt
of NORM waste and direct injection disposal of NORM at its Big Hill,
Texas facility, eliminating the need to process the waste until it
attains NOW characteristics, as was the case at the Port Arthur
facility. Additionally, since the processing facility and the
disposal wells are now located at the same site, transportation costs
are minimized. The new license also allows injection of more
concentrated NORM into the wells, subject only to Newpark's facility
contamination limits. As a result, the capacity and useful life of
the site has been extended and costs have been reduced. The new
license has allowed Newpark to reduce prices to customers and
encourage the use of the direct injection process for the disposal of
large volumes of NORM. During 1996 and 1995, Newpark received 143,500
and 70,000 barrels, respectively, of NORM contaminated waste.
Injection Wells. In February 1993, upon receipt of a permit
from the Texas Railroad Commission, the Company began development of a
50 acre injection well facility in the Big Hill Field in Jefferson
County, Texas. Newpark's injection technology is distinguished from
conventional methods in that it utilizes very low pressure, typically
under 100 pounds per square inch, to move the waste into the injection
zones. Conventional wells typically use pressures as high as 2,000
pounds per square inch. 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
drive the injected waste from its intended geological injection zone.
Three wells were initially installed at the Big Hill facility
and three additional wells have since been successfully completed.
Disposal operations began at this site in 1993. During 1995, the
Company licensed and constructed a new injection well facility at a
400 acre site near Fannett, Texas, which was placed in service in
September 1995. To date, three wells have been successfully drilled
at this facility. Because of differences between the geology and
physical size of the two sites, the Fannett site is expected to
provide greater capacity than the Big Hill site. The injection wells
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at Fannett receive NOW waste from the Company's processing facilities
at Port Arthur, as well as from customers in the surrounding area.
Newpark anticipates that it will open additional injection
facilities for both NOW and NORM waste in Louisiana, Mississippi and
Texas over the next two to three years. The Company has identified a
number of sites in the Gulf Coast region as suitable for development
of such disposal facilities, has received permits for one additional
well in Texas, and plans to file for additional permit authority in
Louisiana. The Company believes that its patented injection
technology has application to other markets and waste streams, and has
begun preliminary work and analysis to enter the nonhazardous
industrial waste market in the future.
The Company also operates an analytical laboratory in Lafayette,
Louisiana, which supports all phases of its environmental services and
provides independent laboratory services to the oil and gas industry.
These services include analytical laboratory and sampling services,
permit application and maintenance services, and environmental site
assessment and audit services.
Mat Rental
In 1988, the Company acquired the right to use, in Louisiana and
Texas, a patented prefabricated interlocking mat system for the
construction of drilling and work sites, which has displaced the use
of individual hardwood boards. This system is quicker to install and
remove, substantially reducing labor costs. It is also stronger,
easier to repair and maintain, and generates less waste material
during construction and removal than conventional board roads. In
1994, the Company acquired the exclusive right to use this system in
the Continental U.S. and in 1996, the Company acquired the exclusive
right to use this system worldwide for the life of the patent. The
patent is currently granted through 2003. Modifications were made to
the patent for which an application , if granted, will significantly
extend the life. Newpark provides this service to two markets:
Oilfield market: 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. These sites are generally
rented to the customer for an initial period of 60 days; after that
time, additional rentals are earned on a monthly basis until the mats
are released by the customer.
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In much of the coastal marsh and inland waters, termed the
"transition zone," the high cost associated with access to the site
and lack of seismic data has been an obstacle to development, and as a
result, the area has been less actively drilled compared to the
offshore and land areas. High quality seismic data has become
available only through recent improvements in technology. The
increased use of advanced seismic data and the computer-enhanced
interpretation of that data has enabled Newpark's customers to select
exploratory drilling sites with greater likelihood of success, which
is expected to provide improved project economics. This enables them
to undertake more expensive projects, such as drilling in the
transition zone along the Gulf Coast region.
Wetlands market: Beginning in 1994, the Company recognized the
development of another market for its patented mat system in providing
access roads and temporary work sites to the pipeline, electrical
utility and highway construction industries. Demand for these
services was spurred by Federal Energy Regulatory Commission orders
requiring compliance with environmental protection rules under the
Clean Water Act in the pipeline construction business.
Rerentals. Drilling and work sites are typically 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 the Company. 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. In the opinion of industry analysts,
application of advanced technologies, particularly the use of three-
dimensional seismic data, has contributed to these trends.
Synthetic Mats. All of the established mat patents utilize
hardwood to construct mats. Newpark has acquired the rights to a
patented synthetic molded mat fabricated from recycled plastic,
rubber, and resins. A limited number of pre-production samples of a
prototype mat were delivered to Newpark for testing in April 1996.
Pending successful results in the testing program and construction 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 during 1998. No assurances
15
can be given, however, that these mats will be successfully produced
or become accepted in the mat rental market or other targeted markets.
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 provide the
required onsite and offsite environmental services and other site
services on a fully integrated basis. The Company provides a
comprehensive range of 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, under its Environmentally
Managed Pit ("EMP") Program, the Company 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, the Company disposes of waste onsite by land-farming,
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, the
Company assists the operator in interfacing with the landowner and
regulatory authorities. The Company also assists the operator in
obtaining necessary permits and in complying with record maintenance
and reporting requirements.
16
Site Remediation. The Company provides site remediation services
in three distinct markets:
NOW (Drilling). At the completion of the drilling process, under
applicable regulations, waste water 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,
remain onsite is manifested (in Louisiana) and transported to an
authorized facility for processing and disposal at the direction of
the generator or customer.
NOW (Production). The Company also provides services to
remediate production pits and inactive waste pits including those from
past oil and gas drilling and production operations. The Company
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, (iii) removal, containerization and
transportation of NOW waste to the Company's processing facility.
NORM. In January 1994, Newpark became a licensed NORM
contractor, allowing the Company to perform site remediation work at
NORM contaminated facilities in Louisiana and Texas. 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 are materially greater
than at NOW facilities, and such services generate proportionately
higher revenues and operating margins than similar services at a NOW
facility.
Site Closure. Site closure services are designed to restore a
site to its pre-drilling condition, reseeded with native vegetation.
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.
17
General Oilfield Services. The Company performs general oilfield
services throughout the Gulf Coast area between Corpus Christi, Texas
and Pensacola, Florida. General oilfield services performed by the
Company include preparation of work sites for installations 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.
Wood Product Sales. The Company purchased a sawmill in Batson,
Texas, in October 1992 in order to ensure itself access to adequate
quantities of hardwood lumber in support of its mat rental 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. During 1993, Newpark invested approximately $1.0 million in
expansion of the sawmill to increase its capacity for producing wood
chips. During 1995, the Company invested an additional $750,000 to
install a log watering system to maintain the level of moisture in the
wood chips produced, as desired by its customers, and for expanded and
improved sawing capacity, which improved both production and
efficiency. The Company believes that the capacity of the sawmill
will be sufficient to meet its anticipated hardwood lumber needs for
the foreseeable future.
International Expansion
During the first quarter of 1995, the Company initiated
participation in a venture which provides mat rental services to the
oil and gas industry in Venezuela. During 1996 the Company purchased
its minority partners' interests in the Venezuelan operations. As of
December 31, 1996, the Company had 21,000 mats in Venezuela. During
1996 the Company shipped 4,000 mats to Algeria in an effort to provide
an alternative to the established method of site construction using
gypsum and concrete. Depletion of native gypsum deposits near the
central oil and gas producing fields have increased the cost of such
locations, providing a competitive opportunity for the Company's mats.
The Company is currently reviewing additional opportunities for mat
rental services and mat sales in various other foreign markets.
18
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.
Patents and Licenses
Newpark seeks patents and licenses on new developments whenever
feasible. On December 31, 1996, Newpark was granted U.S. patents on
its NOW 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 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.
The utilization of patented and proprietary technology and
systems is an important aspect of the Company's business strategy.
For example, the Company relies on a variety of unpatented proprietary
technologies and know-how in the processing of NOW. Although the
Company believes that this technology and know-how provide it with
significant competitive advantages in the environmental services
business, competitive products and services have been successfully
developed and marketed by others. The Company 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.
Dependence Upon Limited Number of Customers
The Company's customers are principally major and independent oil
and gas exploration and production companies operating in the Gulf
Coast area, with the vast majority of the Company's customers
concentrated in Louisiana and Texas.
19
During the year ended December 31, 1996, approximately 30% of the
Company's revenues were derived from eight major oil companies, and
one other customer accounted for approximately 18% of consolidated
revenues. Given current market conditions and the nature of the
products involved, management does not believe that the loss of any
single customer would have a material adverse effect upon the Company.
The Company performs services either pursuant to standard
contracts or under longer term negotiated agreements. As most of the
Company's agreements with its customers are cancelable upon limited
notice, the Company's backlog is not significant.
Newpark does not derive a significant portion of its revenues
from government contracts of any kind.
Competition
The Company operates in several niche markets where it is a
leading provider of services. In certain of these key markets, the
major competition is often the Company's major customers. Other
segments are fragmented and highly competitive with many competitors
providing similar services to the industry. The Company believes that
the principal competitive factors in its businesses are price,
reputation, technical proficiency, reliability, quality, breadth of
services offered and managerial experience. The Company believes that
it effectively competes on the basis of these factors, and that its
competitive position benefits from its proprietary position with
respect to the patented mat system used in its site preparation
business, its proprietary treatment and disposal methods for both NOW
and NORM waste streams and its ability to provide its customers with
an integrated well site management program including environmental and
general oilfield services.
It is often more efficient for the site operator to contract with
a single company that can prepare the well site and provide the
required onsite and offsite environmental services. The Company
believes that its ability to provide a number of services as part of a
comprehensive program enables the Company to price its services
competitively.
The NOW disposal market is very large. Only a small portion of
the total waste generated is taken to a commercial disposal facility
and many other methods exist for dealing with the waste stream. In
the areas served by the Company there are atEleast 250 permitted
commercial facilities, including landfarms, landfills, and injection
20
facilities authorized to dispose of NOW. There are also thousands of
infield injection wells owned and operated by oil and gas producers.
Environmental Disclosures
Newpark has sought to comply with all applicable regulatory
requirements concerning environmental quality. The Company has made,
and expects to continue to make, the necessary capital expenditures
for environmental protection at its facilities but, under current laws
and regulations, does not expect that these will become material in
the foreseeable future. No material capital expenditures for
environmental compliance were made during 1996.
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
regulations governing the discharge of materials into the environment.
Substantially all of Newpark's capital expenditures made in the past
several years and those planned in the foreseeable future are directly
or indirectly influenced by the needs of customers to comply with
regulations.
Employees
At February 28, 1997 Newpark employed approximately 600 full and
part-time personnel, none of which are represented by unions. Newpark
considers its relations with its employees to be satisfactory.
Environmental Regulation
The Company'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 the Company's business. The Company,
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
21
Department of the Interior's Office of Surface Mining, 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 the Company's current
operations. Although the Company intends to make capital expenditures
to expand its environmental services capabilities, the Company
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
EPA-approved state hazardous waste management programs govern the
handling of "hazardous wastes". Under RCRA, liability and stringent
operating requirements are imposed on a person who is either a
"generator" or "transporter" of hazardous waste or an "owner" or
"operator" of a hazardous waste treatment, storage or disposal
facility. The EPA and the states have issued regulations pursuant to
RCRA for 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, continuing financial responsibility,
manifesting of waste, record-keeping and reporting, as well as
treatment standards for any hazardous waste intended for land
disposal.
The Company's primary operations involve NOW, which is exempt
from classification as a RCRA-regulated hazardous waste. However,
extensive state regulatory programs govern the management of such
waste. In addition, in performing other services for its customers,
the Company 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 to rescind the exemption of NOW from
regulation as hazardous waste under RCRA. Repeal or modification of
this exemption by administrative, legislative or judicial process
could require the Company to change significantly its method of doing
business. There is no assurance that the Company would have the
capital resources available to do so, or that it would be able to
adapt its operations.
22
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 federal programs. 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.
The Company 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. The Company is not aware of any instances in
which it has incurred liability under RCRA. Cleanup costs or costs
associated with changes in environmental laws or regulations could be
substantial and could have a material adverse effect on the Company.
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 for
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 liability 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 constantly expanding. In
23
addition, the states in which the Company conducts operations have
enacted similar laws and keep similar lists of sites which may be in
need of remediation.
Although Newpark primarily handles oilfield waste classified as
NOW under relevant laws, this waste typically contains constituents
designated by the EPA as hazardous substances under RCRA, despite the
current exemption of NOW from hazardous substance classification.
Where the Company's operations result in the release of hazardous
substances, including releases at sites owned by other entities where
the Company performs its services, the Company 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 the Company in the future. In
particular, divisions and subsidiaries previously owned by the Company
were involved in extensive mining operations at facilities in Utah and
Nevada. In addition, divisions and subsidiaries previously owned by
the Company were involved in waste generation and management
activities in numerous 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 "Legal Proceedings -
Environmental Proceedings" below, the Company is not aware of any
instances in which it has incurred liability under CERCLA.
Nonetheless, the identification of additional sites at which clean-up
action is required could subject the Company to liabilities which
could have a material adverse effect on the Company.
The Clean Water Act. The Clean Water Act regulates the discharge
of pollutants, including NOW, into waters. The Clean Water Act
establishes a system of standards, permits and enforcement procedures
for the discharge of pollutants from industrial and municipal waste
water sources. The law sets treatment standards for industries and
waste water treatment plants and provides federal grants to assist
municipalities in complying with the new standards. In addition to
requiring permits for industrial and municipal discharges directly
into waters of the United States, the Clean Water Act also 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.
24
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. The
Clean Water Act also requires the adoption of the National Contingency
Plan to cover removal of such materials. Under the Clean Water Act,
the owner or operator of a vessel or facility may be liable for
penalties and costs incurred by the federal government in responding
to a discharge of oil or hazardous substances.
The Company treats and discharges waste waters at certain of its
facilities. These activities are subject to the requirements of the
Clean Water Act and federal and state enforcement of these
regulations.
The EPA Region 6 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. This permit 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.
EPA Region 6, which includes the Company'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). This permit
completely prohibits the discharge of drilling fluids, drill cuttings,
produced water or sand, and various other oilfield wastes generated by
onshore operations into waters of the U.S. This provision has the
effect of requiring that most oilfield wastes follow established state
disposal programs.
2) Permits for produced water and produced sand discharges into
coastal waters of Louisiana and Texas issued on January 9, 1995 (60
25
Fed. Reg. 2387). Coastal means "any water landward of the territorial
seas... or any wetlands adjacent to such waters". Under these
regulations all such discharges must cease by January 1, 1997.
3) The Outer Continental Shelf (OCS) permit for the western Gulf of
Mexico, covering oil and gas operations in federal waters (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. The combined permits'
expiration date is November 18, 1997.
4) A NPDES permit for the territorial seas of Louisiana was proposed
on July 19, 1996. The proposed regulations prohibit the discharge of
drilling fluids, drill cuttings, and the discharge of produced sand.
Produced water discharges will be 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 will cover
both existing sources and new sources. All discharges in state waters
must comply with any more stringent requirements contained in
Louisiana Water Quality Regulations, LAC 33.IX.7.708. A similar
permit will also be proposed for the Texas territorial seas in the
future.
The combined effect of all these regulations will closely
approach a "zero discharge standard" affecting all waters except those
of the OCS. The Company and many industry participants believe that
these permits 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 the Company's operations.
Oil Pollution Act of 1990. The Oil Pollution Act of 1990
contains liability provisions for cleanup costs, natural resource
damages and property damages as well as substantial penalty
26
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 the Company 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 NOW. Under Order 29-B, onsite disposal
of NOW is limited and is subject to stringent guidelines. If these
guidelines cannot be met, NOW 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 sufficient concentrations of NORM to become
subject to regulation by the DEQ. Rule 8 of the Texas Railroad
Commission also contains detailed requirements for the management and
disposal of NOW and Rule 94 governs the management and disposal of
NORM. In addition, the Texas Legislature recently enacted a law that
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.
The Railroad Commission of Texas Rule 91 (16 TAC 3.91) became
effective November 1, 1993. This rule regulates the cleanup of spills
of crude oil and gas exploration and production activities including
transportation by pipeline. In general, contaminated soils must be
remediated to oil and grease content of less than 1%.
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.
The Company has obtained certain air permits and believes that it is
exempt from obtaining other air permits at its facilities including
its Port Arthur, Texas, NOW facility. The Company met with the TNRCC
and filed for an exemption in the fall of 1991. A subsequent renewal
27
letter was filed in 1995. Based upon its feedback from the TNRCC, the
Company expects that it will continue to remain exempt. However,
should it not remain exempt, the Company believes that any remedial
actions that the TNRCC may require with regard to non-exempt air
emissions would not have a material adverse effect on the financial
position or operation of the Company.
Other Environmental Laws. Newpark may be subject to other
federal and state environmental protection laws, including without
limitation, the Toxic Substances Control Act, the Surface Mining
Control and Reclamation Act ("SMCRA") and the Super Fund Amendments
and Reauthorization Act, including the Emergency Planning and
Community Right-To-Know-Act. In particular, SMCRA established a
nationwide program to regulate surface mining and reclamation, and the
surface effects of underground mining. It sets strict reclamation
standards and a mandatory enforcement system. While the Company does
not currently conduct mining activities, SMCRA reclamation
responsibility and corresponding state regulatory programs could apply
to any of the facilities in which the Company participated in mining
activities in the past. In addition, the Company 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 developments, such as increasingly stricter environmental,
safety and health laws, and regulations and enforcement policies
thereunder, could result in substantial additional regulation of the
Company and could subject to further scrutiny the Company's handling,
manufacture, use or disposal of substances or pollutants. The Company
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
The Company's business exposes it to substantial risks. For
example, the Company'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. The
Company 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, the
Company often is required to indemnify its customers or other third-
28
parties against certain risks related to the services performed by the
Company, including damages stemming from environmental contamination.
The Company 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 its insurance coverage.
The Company 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.
The Company 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 the Company,
that the possible types of liabilities that may be incurred by the
Company will be covered by its insurance, that the Company's insurance
carriers will meet their obligations or that the dollar amount of such
liabilities will not exceed the Company's policy limits.
Forward-Looking Statements
The foregoing discussion contains Oforward-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; and (e) any rescission or relaxation of existing regulations
affecting the disposal of NOW and NORM, failure of governmental
authorities to enforce such regulations or the ability of industry
participants to avoid or delay compliance with such regulations. For
29
further information regarding these and other factors, risks and
uncertainties affecting the Company, reference is made to the section
entitled "Risk Factors", on pages 9 and 10 of the Prospectus dated
August 6, 1996, included in the Company's Registration Statement on
Form S-3 (File No. 333-05805).
30
ITEM 2. Properties
Newpark's corporate offices in Metairie, Louisiana, are occupied
at an annual rental of approximately $125,000 under a lease expiring
in December 1997.
During 1996, the Company acquired an office building in Lafayette,
Louisiana, to house the administrative offices of two of its
subsidiaries.
The Company's Port Arthur, Texas, NOW and NORM facility is
subject to annual rentals aggregating approximately $500,000 under
three separate leases. A total of 6.0 acres are under lease with
various expiration dates from June 1997 to September 2002, all with
extended options to renew.
The Company 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. On January 2,
1997 the Company completed the purchase of 120 acres located adjacent
to one of the disposal sites. The Company plans to use this property
as an industrial waste injection disposal facility.
The Company maintains a fleet of fifty-one barges of which
nineteen are owned by the Company, eight are on daily rental
agreements, ten are under 10-year lease terms, four are under 7-year
terms and ten are under 5-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 $1,900,000 during 1996.
Additional facilities are held under short-term leases with
annual rentals aggregating approximately $725,000 during 1996. The
Company believes that its facilities are suitable for their respective
uses and adequate for current needs.
The Company also owns 80 acres occupied as a sawmill facility
near Batson, Texas. The Company believes this facility is adequate
for current production needs.
31
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 its business, the Company
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 may involve
liability for violation of environmental matters are described below.
The Company 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 the Company's
past or present operations.
The Company was identified by the EPA as a minor or "de minimus"
contributor of waste to a disposal site requiring cleanup under
CERCLA, as amended in 1986. 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 the Company and
the other potentially responsible parties at the French Limited site.
The Company has settled its potential liability in four of those
suits. Management does not anticipate that the outcome of the
remaining suit will have a material adverse impact upon the Company,
and anticipates either a nominal settlement or dismissal from the
action.
The Company has been identified by the EPA as a potentially
responsible party in a CERCLA action, based on its contribution of
oilfield waste to three disposal sites. In the first case, the
Company was the largest volume contributor of waste to the Disposal
Services, Inc. Clay Point site, located in southern Mississippi. The
Company has resolved its liability by its voluntary participation in a
consent decree with the EPA, and payment of $158,900 in 1992 as its
pro rata share of the removal costs. Two other facilities operated by
the same company, the Lee Street and Woolmarket sites, are not subject
to any enforcement action by a federal regulatory agency, and the EPA
has specifically declined pursuing an action for remediation of these
two facilities. However, the Mississippi Department of Environmental
Quality is overseeing a continued, voluntary cleanup at the three
sites.
The Company has been identified as one of 600 contributors of
material to the MAR Services facility, a state voluntary cleanup site.
Because the Company delivered only processed solid meeting the
requirements of Louisiana Statewide Executive Order 29-B to the site,
it does not believe it has material financial liability for the site
cleanup cost. The Louisiana Department of Environmental Quality is
overseeing voluntary cleanup at the site.
32
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
the Company's ultimate liability.
The Company believes that any liability incurred in the foregoing
matters will not have a material adverse effect on the Company's
consolidated financial statements. However, a material adverse
outcome in any of the foregoing matters could have an adverse effect
on the Company.
ITEM 4. Submission of Matters to a Vote of Shareholders
None
33
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Newpark's common stock traded on The Nasdaq Stock Market under
the symbol "NPRS" through December 5, 1995, and commenced trading on
the New York Stock Exchange on December 6, 1995 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
______ ____ ___
1995
1st Quarter $ 26.00 $14.75
2nd Quarter $ 24.25 $20.25
3rd Quarter $ 23.25 $17.00
4th Quarter $ 22.86 $15.50
1996
1st Quarter $ 29.875 $19.625
2nd Quarter $ 37.875 $28.75
3rd Quarter $ 39.00 $31.00
4th Quarter $ 38.25 $32.375
At December 31, 1996, the Company had 4,019 stockholders of
record.
34
ITEM 6. Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial
information with respect to Newpark for the five years ended
December 31, 1996. The selected consolidated financial information
for the five years ended December 31, 1996 is derived from the audited
consolidated financial statements of Newpark. Information with
respect to this item can also be found in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and "Notes
to Consolidated Financial Statements."
Years Ended December 31,
____________________________________________________
1996 1995 1994 1993 1992
____________________________________________________
(In thousands, except Per Share data)
Consolidated Statements
of Income Data:
Revenues $121,542 $ 97,982 $79,632 $56,330 $49,457
Cost of services provided 73,911 64,467 56,259 42,581 36,860
Operating costs 9,700 9,414 7,277 6,557 5,519
General and administrative
expenses 2,920 2,658 3,231 2,129 1,963
Restructure expense 2,432 - - - -
Provision for uncollectible
accounts and notes
receivable 739 463 974 671 154
_______ _______ _______ ______ ______
Operating income from
continuing operations 31,840 20,980 11,891 4,392 4,961
Interest income (216) (183) (78) - (18)
Interest expense 3,808 3,740 2,660 1,274 847
Non-recurring expense - 436 - - -
_______ _______ _______ ______ ______
Income from continuing
operations before
provision for income
taxes 28,248 16,987 9,309 3,118 4,132
Provision (benefit) for
income taxes 9,795 4,751 (85) (1,670) 51
_______ _______ _______ ______ ______
Income from continuing
operations
extraordinary items 18,453 12,236 9,394 4,788 4,081
Income (loss) from
discontinued operations - - - (2,366) 1,205
_______ _______ _______ ______ ______
Net income $18,453 $12,236 $9,394 $ 2,422 $5,286
======= ======= ======== ====== ======
Income (loss) per
common and common
equivalent shares:
Primary
Continued operations $1.46 $ 1.13 $ .93 $ .49 $.43
Discontinued operations - - - (.24) .12
_______ _______ _______ ______ ______
Net income per common
share $ 1.46 $ 1.13 $ .93 $ .25 $.55
======= ======= ======== ====== ======
Fully Diluted
Continued operations $ 1.46 $ 1.13 $ .92 $ .49 $.43
Discontinued operations - - - (.24) .12
_______ _______ _______ ______ ______
Net income per common
share $ 1.46 $ 1.13 $ .92 $ .25 $.55
======= ======= ======== ====== ======
Weighted average common
and common equivalent
shares outstanding
Primary 12,616 10,828 10,111 9,690 9,564
======= ======= ======== ====== ======
Filly Diluted 12,666 10,870 10,192 9,690 9,564
======= ======= ======== ====== ======
35
December 31,
____________________________________________________________________________
(In thousands) 1996 1995 1994 1993 1992
____________________________________________________________________________
Consolidated Balance Sheet Data:
Working capital $30,094 $32,108 $13,585 $ 5,361 $ 4,900
Total assets 282,518 152,747 110,756 90,316 75,478
Short-term debt 9,925 7,911 10,032 14,928 12,212
Long-term debt 34,612 46,724 28,892 12,446 10,432
Shareholders' equity 203,154 77,518 63,699 53,353 45,658
36
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
Since 1990, Newpark has concentrated on expanding and further
integrating its environmental service capabilities. The Company has
made the following steps toward this goal:
o In 1991, the Company completed the current NOW processing
plant at Port Arthur, Texas.
o In 1993, the Company placed in service its first injection
well facility for underground disposal of NOW.
o In 1994, the Company obtained a permit to process NORM waste
for disposal.
o In 1994, the Company began to offer temporary worksite
installation and mat rental services utilizing its
proprietary prefabricated mat system outside of the oil and
gas industry in connection with pipeline construction,
electrical power distribution and highway construction
projects, in environmentally sensitive "wetlands" and other
areas where unstable soil conditions exist.
o In 1995, the Company commenced offering mat rental services
in foreign markets and in 1996 continued to expand and
develop its presence in foreign markets.
o During 1996, the Company also entered into a joint venture
to manufacture and market a synthetic mat for use in markets
similar to those presently served as well as new markets.
o On May 22, 1996, the Company obtained a permit for the
direct injection of NORM.
37
o On August 12, 1996, the Company purchased the marine-related
NOW business of Campbell Wells, Ltd.
o On December 31, 1996, the Company obtained a patent on its
injection process.
o Subsequent to December 31, 1996, the Company purchased SBM
Drilling Fluids Management, Inc. through which the Company
is recycling a portion of the material it receives as waste.
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. The U. S. rig count for the last three years
is reflected in the table below. Newpark's key market area includes
(i) South Louisiana Land, (ii) Texas Railroad Commission Districts 2
and 3, (iii) Louisiana and Texas Inland Waters and (iv) Offshore Gulf
of Mexico rig count measurement areas. The rig count trend in the
Company's primary market has tracked the national trend as set forth
in the table below:
1996 1995 1994 1Q96 2Q96 3Q96 4Q96
____ ____ ____ ____ ____ ____ ____
U.S. Rig Count 779 723 774 708 760 803 845
Newpark's key market 208 194 202 189 210 217 219
Newpark's key market
to total 26.7% 26.8% 26.1% 26.7% 27.6% 27.0% 25.9%
The decline in the South Louisiana and Texas land rig count from
1994 through the first nine months of 1996 created downward price
pressure on the site preparation and mat rerental businesses of the
Company. Prices were also negatively impacted by a significant shift
in land drilling activity toward the Austin Chalk area. The Austin
Chalk is further inland and drilling locations less frequently require
use of the Company's mat system. This downward price pressure did not
begin to reverse until the fourth quarter of 1996 as shortages of
equipment and supporting services in the land market began to appear
as a result of increased land drilling activity. In addition, the
Company was able to modify a portion of its mat fleet which allowed
the Company to compete with native rock foundations typically used in
the inland areas, such as the Austin Chalk.
Despite the decline in rig activity, the volume of waste received
by Newpark increased primarily due to: (i) the recovery of the
remediation market following implementation of NORM regulations; and,
(ii) new, more stringent regulations governing the discharge of
drilling and production waste in the coastal and inland waters and in
the offshore Gulf of Mexico. The volume of waste processed by the
Company in 1996 increased significantly over 1995 primarily as a
result of the acquisition of the Campbell Wells marine-related
business.
38
The Company's financial statements do not include any provision
for possible contingent liabilities, such as liability for violation
of environmental laws or other risks noted under "Business - Risk
Management." To the best of the Company's knowledge, it has conducted
its business in compliance with applicable laws and, except as noted
under "Legal Proceedings," is not involved in any material litigation
with respect to violations of such laws.
Results of Operations
The following table represents revenue by product line, for each
of the three years ended December 31, 1996, 1995 and 1994. The
product line data has been reclassified from prior years' presentation
in order to more effectively distinguish the offsite waste processing
and mat rental services, in which the Company maintains certain
proprietary advantages, from its other service offerings.
Years Ended December 31,
(Dollars in thousands)
1996 1995 1994
_____________ _____________ _____________
Revenues by product line:
Offsite waste processing $44,905 36.9% $31,126 31.8% $20,738 26.1%
Mat rental services 32,757 27.0 30,775 31.4 23,048 28.9
Integrated services 42,520 35.0 34,481 35.2 34,246 43.0
Other 1,360 1.1 1,600 1.6 1,600 2.0
_______ _____ ______ _____ ______ _____
Total revenues $121,542 100.0% $97,982 100.0% $79,632 100.0%
======= ===== ====== ===== ====== ======
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues
Total revenues increased to $121.5 million in 1996 from $98.0
million in 1995, an increase of $23.6 million or 24.0%. The
components of the increase by product line are as follows: (i)
offsite waste processing revenues increased $13.8 million, as NOW
revenue increased $11.1 million and NORM revenue increased $2.7
million. The volume of NOW waste processing increased by 1,051,000
barrels or 36% to 3,956,000 barrels from 2,905,000 in 1995. In
addition to the increased volume, the Company benefited from increased
NOW 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; (ii) mat rental service revenue grew
by $2.0 million or 6.4% due primarily to sales of mats for nonoilfield
applications; (iii) integrated services increased $8.0 million due to
increased onsite environmental management and other services
incidental to site preparation activities coupled with increased wood
product sales.
39
Operating Income
Operating income increased by $10.9 million or 51.8% to $31.8
million in 1996 compared to $21.0 million in 1995. Operating margin
improved to 26.2% in 1996 as compared to 21.4% in 1995. The increase
resulted primarily from offsite waste processing revenues.
General and administrative expenses decreased as a proportion of
revenue to 2.4% in 1996 from 2.7% in 1995 and increased in absolute
amount by $262,000.
During 1996, the Company recorded a restructure charge in the
amount of $2.4 million. Approximately $1.8 million was related to the
restructuring of certain of the Company's NOW processing
operations and staffing changes to facilitate the integration
of its operations with those recently acquired from Campbell
Wells. The Company recognized an additional $.6 million of non-
recurring costs associated with the termination of processing
operations at its original NORM facility at Port Arthur, Texas and the
partial closure of the site.
Interest Expense
Interest expense was substantially unchanged at $3.8 million in
1996 compared to $3.7 million in 1995.
Provision for Income Taxes
For 1996 and 1995, the Company recorded income tax provisions of
$9.8 million and $4.8 million for effective rates of 34.7% and 28.0%,
respectively. The 1995 provision reflects the benefit realized from
federal tax carryforwards which were fully utilized in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues
Total revenues increased to $98.0 million in 1995 from $79.6
million in 1994, an increase of $18.4 million or 23.0%. The components
of the increase by product line are as follows: (i) offsite waste
processing revenues increased $10.4 million, as NOW revenue increased
$5.5 million, due almost exclusively to additional volume, and NORM
processing revenue increased to $6.0 million on approximately 70,000
barrels in the full year 1995 from $1.2 million and 15,000 barrels in
the two months of operations during 1994; (ii) mat rental revenue
increased $7.7 million, or 34% due to two factors: (a) increased
volume installed at similar pricing compared to the prior year, and,
(b) an increase in revenues from extended rerentals of $3.6 million
40
resulting from the longer use of sites, consistent with the trend
toward deeper drilling. The size of the average location installed in
1995 grew 17% from the prior year, primarily the result of the trend
toward deeper drilling in more remote locations, requiring larger
sites to accommodate increased equipment and supplies on the site;
(iii) integrated service revenue increased $.2 due to the increased
level of site preparation work incident to the rental of mats in the
oilfield segment of that business.
Operating Income from Continuing Operations
Operating income from continuing operations increased by $9.1
million or 76.4% to total $21.0 million in the 1995 period compared to
$11.9 million in the prior year, representing an improvement in
operating margin to 21.4% in 1995 compared to 14.9% in 1994.
Primary components of the increase included: (i) approximately
$2.9 million related to the effect of volume increases in both NOW and
NORM processing; (ii) $3.6 million from increased mat rerentals, and,
(iii) $1.3 million resulting from the increase in the volume of mats
rented at similar margins, and, (iv) an approximate $200,000 increase
in operating profit on better gross margin mix from wood product
sales.
The decline of $573,000 in general and administrative expenses
reflects the effect of approximately $600,000 of prior year charges
for legal costs incurred in an appeal of an expropriation matter.
Additionally, the provision for uncollectible accounts was $511,000
less in the 1995 period as compared to the 1994 period.
Interest Expense
Interest expense increased to $3.7 million in 1995 from $2.7
million in 1994. The increase is a result of an increase in
borrowings, proceeds of which were used to fund continued additions to
productive capacity, including the Company's waste processing
facilities, its prefabricated board road mats, and additions to
inventory, primarily at the sawmill facility.
Non-recurring Expense
Results for 1995 include $436,000 of non-recurring cost
associated with a proposed merger which was not completed.
Provision for Income Taxes
During 1995, the Company recorded an income tax provision of $4.8
million equal to 28% of pre-tax income. While the Company's net
operating loss carryforwards remain to be used for income tax return
purposes, for financial reporting purposes, substantially all of the
remaining net operating loss and tax credit carryforwards applicable
to federal taxes were recognized in the first half of the year, which
41
reduced the effective tax rate for that portion of the year. During
1994, the Company recorded a tax benefit of $85,000 as a result of the
availability of net operating loss carryforwards.
Liquidity and Capital Resources
The Company's working capital position remained relatively
constant during the year ended December 31, 1996 as compared to 1995.
Key working capital data is provided below:
Year Ended December 31,
_______________________
1996 1995
______ ______
Working Capital (000's) $30,094 $32,108
Current Ratio 1.94 2.3
During 1995, the Company's working capital needs were met
primarily from operating cash flow.
On August 12, 1996, the Company completed the sale of 3,450,000
shares of its common stock, generating net proceeds of $98.1 million.
A total of $70.5 million was used to complete the acquisition of the
marine-related nonhazardous oilfield waste NOW collection operations
of Campbell Wells. The remaining proceeds were used to repay $19.0
million of borrowings under the Company's credit facility and provide
working capital of $8.6 million. The Company has no plans to sell
additional equity securities at this time.
During 1996, the Company's operating activities generated $26.8
million of cash flow. Net proceeds of the recent equity offering in
excess of Campbell Wells asset purchase amount, coupled with the
$26.8 million generated by operations and net new borrowings (since
the offering) of $11.8 million were used to fund the Company's
investing activities. Exclusive of the Campbell acquisition the
majority of the funds used in investing activities were utilized for
the purchase of board road mats and the expansion of waste disposal
facilities, which is reflected in the increase in property, plant
and equipment. In addition, the Company purchased its joint venture
partners' interest in international mat operations and purchased
additional patent rights in the Company's proprietary business,
which is reflected in the increase of other assets.
During the year ended December 31, 1996, the Company entered
into two transactions which were primarily non-cash in nature for the
acquisition of additional patent and other rights for use in the
Company's proprietary business operations. The acquisition of these
items is reflected in the increase in other assets and the increase
in shareholders' equity coupled with the increase in deferred taxes
payable.
The Company also sold the facility and certain equipment to the
operator of the Company's former marine service business. These
assets were being leased by the operator and were subject to debt
obligations, which were assumed by the purchaser at closing. In
addition to the extinguishment of these debt obligations, Newpark
received $1.2 million in cash in the transaction.
42
On June 29, 1995, Newpark entered into a new credit agreement
with a group of three banks, providing a total of up to $50 million of
term financing consisting of a $25 million term loan to be amortized
over five years and a $25 million revolving line of credit. At
Newpark's option, these borrowings bear interest at either a specified
prime rate or LIBOR rate, plus a spread which is determined quarterly
based upon the ratio of Newpark's funded debt to cash flow. The
credit agreement requires that Newpark maintain certain specified
financial ratios and comply with other usual and customary
requirements. Newpark was in compliance with all of the convenants in
the credit agreement at December 31, 1996.
The term loan was used to refinance existing debt and is being
amortized over a five year term. In March 1996, the term loan was
increased to $35 million, and the $10 million increase was used
initially to reduce borrowings on the revolving line of credit portion
of the facility. In June 1996, the Company increased its borrowing
through the credit agreement in the form of a 60-day term loan in the
amount of $2.0 million which was repaid out of proceeds from the
offering. The funds were used to acquire board road mats.
The revolving line of credit matures December 31, 1998. In
November 1996, an amendment to the credit facility was approved which:
(i) eliminated the requirement of periodic borrowing base
calculations; (ii) eliminated monthly financial reporting
requirements; (iii) relaxed certain restrictions on guarantees and
outside indebtedness; and, (iv) increased availability of borrowings
under the facility. This amendment had the affect of increasing the
availability to the full $25 million. At December 31, 1996, $1.8
million of letters of credit were issued and outstanding under the
line and an additional $11.8 million had been borrowed and was
outstanding thereunder.
Subsequent to December 31, 1996, the banks providing the credit
facility approved a $10 million increase in the facility. The $10
million increase involves a new term note for $5 million with twenty
equal quarterly payments of principal plus interest commencing June
30, 1997 with an initial maturity date of December 31, 1998. The
proceeds of this new loan will be used to reduce the outstanding
balance on the revolving line of credit portion of the facility. In
addition, the revolving line of credit will increase from $25 million
to $30 million.
Potential sources of additional funds, if required by the
Company, would include additional borrowings. The Company presently
has no commitments for credit facilities beyond its existing 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 plans.
Inflation has not materially impacted the Company's revenues or
income.
43
Deferred Tax Asset
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." This standard requires, among other things,
recognition of future tax benefits measured by enacted tax rates,
attributable to deductible temporary differences between the financial
statement and income tax basis of assets and liabilities and to tax
net operating loss and credit carryforwards to the extent that
realization of such benefits is more likely than not. Management
believes that the recorded deferred tax assets ($12,889,000 at
December 31, 1996) are realizable through reversals of existing
taxable temporary differences.
44
ITEM 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Newpark Resources, Inc.
We have audited the accompanying consolidated balance sheets of
Newpark Resources, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement
schedule for the years ended December 31, 1996, 1995 and 1994 listed
in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial
statements and financial statement schedule 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, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial
statement schedule for the years ended December 31, 1996, 1995 and
1994, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 21, 1997
45
Newpark Resources, Inc.
Consolidated Balance Sheets
December 31
_________________________________________________________________
(In thousands, except share data) 1996 1995
_________________________________________________________________
ASSETS
Current assets:
Cash and cash equivalents $ 1,862 $ 1,018
Accounts and notes receivable, less
allowance of $1,695 in 1996 and
$768 in 1995 43,529 39,208
Inventories 6,144 11,996
Deferred tax asset 8,111 2,701
Other current assets 2,424 1,387
______ ______
Total current assets 62,070 56,310
Property, plant and equipment, at
cost, net of accumulated depreciation 113,891 85,461
Cost in excess of net assets of purchased
businesses and identifiable intangibles,
net of accumulated amortization 83,512 4,340
Other assets 23,045 6,636
______ ______
$282,518 $152,747
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 647 $ 169
Current maturities of long-term debt 9,278 7,742
Accounts payable 10,845 11,664
Accrued liabilities 9,741 3,462
Current taxes payable 1,465 1,165
______ ______
Total current liabilities 31,976 24,202
Long-term debt 34,612 46,724
Other non-current liabilities 2,644 285
Deferred taxes payable 10,132 4,018
Commitments and contingencies (See Note J) - -
Shareholders' equity:
Preferred Stock, $.01 par value,
1,000,000 shares authorized, no
shares outstanding - -
Common Stock, $.01 par value,
20,000,000 shares authorized,
14,527,616 shares outstanding in 1996
and 10,634,177 in 1995 144 105
Paid-in capital 251,699 144,553
Retained earnings (deficit) (48,689) (67,140)
______ ______
Total shareholders' equity 203,154 77,518
_______ ______
$282,518 $ 152,747
======= =======
See accompanying Notes to Consolidated Financial Statements.
46
Newpark Resources, Inc.
Consolidated Statements of Income
Years Ended December 31
____________________________________________________________________________
(In thousands, except per share data) 1996 1995 1994
____________________________________________________________________________
Revenues $121,542 $ 97,982 $ 79,632
Operating costs and expenses:
Cost of services provided 73,911 64,467 56,259
Operating costs 9,700 9,414 7,277
_______ ______ ______
83,611 73,881 63,536
General and administrative expenses 2,920 2,658 3,231
Restructure expense 2,432 - -
Provision for uncollectible accounts and
notes receivable 739 463 974
_______ ______ ______
Operating income 31,840 20,980 11,891
Interest income (216) (183) (78)
Interest expense 3,808 3,740 2,660
Non-recurring expense - 436 -
_______ ______ ______
Income before income taxes 28,248 16,987 9,309
Provision (benefit) for income taxes 9,795 4,751 (85)
_______ ______ ______
Net income $ 18,453 $ 12,236 $ 9,394
======= ======= ======
Weighted average common and common
equivalent shares outstanding:
Primary 12,616 10,828 10,111
======= ======= ======
Fully diluted 12,666 10,870 10,192
======= ======= ======
Net income per common and
common equivalent share:
Primary $ 1.46 $ 1.13 $ .93
======= ======= ======
Fully diluted $ 1.46 $ 1.13 $ .92
======= ======= ======
See accompanying Notes to Consolidated Financial Statements.
47
Newpark Resources, Inc.
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1994, 1995 and 1996
_______________________________________________________________________________
Retained
Common Paid-In Earnings
(In thousands) Stock Capital (Deficit) Total
Balance, January 1, 1994 $ 98 $ 133,301 $ (80,046) $ 53,353
Employee stock options 1 950 - 951
Other - 1 - 1
Net income - - 9,394 9,394
____________________________________________
Balance, December 31, 1994 99 134,252 (70,652) 63,699
Employee stock options 1 1,582 - 1,583
Stock dividend 5 8,719 (8,724) -
Net income - - 12,236 12,236
____________________________________________
Balance, December 31, 1995 105 144,553 (67,140) 77,518
Employee stock options 3 4,953 (2) 4,954
Public offering 35 96,354 - 96,389
Acquisitions 1 5,839 - 5,840
Net income - - 18,453 18,453
____________________________________________
Balance, December 31, 1996 $ 144 $ 251,699 $ (48,689) $ 203,154
======= ========= ========= ========
See accompanying Notes to Consolidated Financial Statements.
48
Newpark Resources, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31
______________________________________________________________________
(In thousands ) 1996 1995 1994
______________________________________________________________________
Cash flows from operating activities:
Net income $ 18,453 $ 12,236 $ 9,394
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 17,148 9,967 7,370
Provision for doubtful accounts 739 463 974
Provision (benefit) from deferred
income taxes 4,740 3,217 (200)
Loss (gain) on sales of assets - 80 (9)
Change in assets and liabilities net
of effects of acquisitions:
Increase in accounts and notes
receivable (6,169) (17,129) (3,723)
Decrease (increase) in inventories 1,471 (4,897) 739
Decrease (increase) in other assets 184 (1,536) (1,839)
(Decrease) increase in accounts payable (2,289) 2,577 (677)
(Decrease) increase in accrued
liabilities and other (7,514) 2,096 (937)
_______ _______ _______
Net cash provided by operating
activities 26,763 7,074 11,092
_______ _______ _______
Cash flows from investing activities:
Capital expenditures (43,734) (23,989) (23,149)
Disposal of property, plant and
equipment 1,466 564 97
Investment in joint venture (4,406) (1,094) -
Payments received on notes receivable 440 249 30
Advances on notes receivable (112) (227) (1,000)
Purchase of Campbell Wells assets (70,330) - -
Purchase of patents (5,700) - -
Purchase of partners' joint
venture interest (1,131) - -
Proceeds from sale of net assets
of discontinued operations - - 661
_______ _______ _______
Net cash used in investing activities (123,507) (24,497) (23,361)
_______ _______ _______
Cash flows from financing activities:
Net borrowings on lines of credit 3,399 20,796 492
Principal payments on notes payable,
capital lease obligations and
long-term debt (12,189) (20,170) (10,109)
Proceeds from issuance of debt 3,359 14,828 21,167
Proceeds from conversion of stock
options 4,953 1,266 897
Proceeds from issuance of stock,
net of expenses 98,066 - -
Other - 317 55
_______ _______ _______
Net cash provided by financing
activities 97,588 17,037 12,502
_______ _______ _______
Net increase (decrease) in cash
and cash equivalents 844 (386) 233
Cash and cash equivalents at
beginning of year 1,018 1,404 1,171
_______ _______ _______
Cash and cash equivalents at
end of year $ 1,862 $ 1,018 $ 1,404
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
49
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 comprehensive environmental
management and oilfield construction services to the oil and gas
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) approximate fair values at
December 31, 1996 and 1995.
Inventories. Inventories are stated at the lower of cost
(principally average and first-in, first-out) or market. Such
inventories consist of logs, supplies, 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. For income tax purposes, accelerated methods of
depreciation are used.
The cost in excess of net assets of purchased businesses ("excess
cost") is being amortized on a straight-line basis over twenty-five to
50
forty 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 operating results 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 $1,253,000 and $437,000 at
December 31, 1996 and 1995, respectively.
Revenue Recognition. Revenues from certain contracts, which are
typically of short duration, are reported as income on a percentage-of-
completion method. Contract revenues are recognized in the proportion
that costs incurred bear to the estimated total costs of the contract.
When an ultimate loss is anticipated on a contract, the entire
estimated loss is recorded. Included in accounts receivable are
unbilled revenues in the amounts of $6,600,000 and $8,600,000 at
December 31, 1996 and 1995, respectively, all of which are due within
a one year period.
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.
Non-recurring Expense. Results for the 1995 period include $436,000
of non-recurring cost associated with a proposed merger which was not
completed.
Interest Capitalization. For the years ended December 31, 1996,
1995 and 1994 the Company incurred interest cost of $4,323,000,
$4,198,000, and $2,805,000 of which $515,000, $458,000, and $145,000
was capitalized, respectively, on qualifying construction projects.
Income Per Share. Primary and fully diluted net income per share is
based on the weighted average number of shares of common stock and
common stock equivalents outstanding during the year. Common stock
equivalents consist of stock options.
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. Accordingly,
compensation cost for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the stock. See
Note H.
51
Reclassifications. Certain reclassifications of prior year amounts
have been made to conform to the current year presentation.
B. Acquisitions and Dispositions
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 $77.2 million, of which $68.7
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.
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 $138,321 $116,819
Net income 20,410 15,712
Net income per common and ======== ========
common equivalent share:
Primary $ 1.62 $ 1.14
Fully diluted 1.61 1.13
======================================================================
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 J.
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 $0.12
per common share. A total of approximately $1.8 million was related
to the restructuring of certain of the Company's NOW processing
operations and staffing changes to facilitate the integration of its
52
operations with those recently acquired by Campbell. The Company
recognized an additional $.6 million of non-recurring costs 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 receivalbe include two notes, and 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 is in the face amount of $600,000, bears interest at 8.0% per
annum and is payable in monthly and annual installments of principal
and interest through September 30, 2003. Both notes are secured by a
second lien on the assets sold as well as certain guarantees of the
operator. The Company has guaranteed certain of the debt obligations
of the operator, which is limited to a maximum of $10 million and
reduces proportionately with debt repayments made by the operator.
C. Property, Plant and Equipment
The Company's investment in property, plant and equipment at
December 31, 1996 and 1995 is summarized as follows:
______________________________________________________________________
(In thousands) 1996 1995
______________________________________________________________________
Land $2,411 $5,072
Buildings and improvements 17,258 30,172
Machinery and equipment 52,486 44,062
Board road mats 78,881 46,386
Other 2,422 2,537
_______ _______
153,458 128,229
Less accumulated depreciation (39,567) (42,768)
_______ ________
$113,891 $ 85,461
======================================================================
53
D. Credit Arrangements and Long-Term Debt
Credit arrangements and long-term debt consisted of the following
at December 31, 1996 and 1995:
______________________________________________________________________
(In thousands) 1996 1995
______________________________________________________________________
Bank - line of credit $11,778 $18,378
Bank - term note 27,223 25,000
Building loan 1,799 482
Acquisition financing due in 1999 with an
interest rate of 7% 1,375 -
Assets subject to lease, financed through
2001 with an interest rate of 10.1% - 8,075
Acquisition financing due in 1996 with an
interest rate of 8% - 327
Other, principally installment notes secured by
machinery and equipment, payable through
2001 with interest at 3.3% to 13.5% 1,715 2,204
______ ______
43,890 54,466
Less: current maturities of long-term debt (9,278) (7,742)
_______ ________
Long-term portion $34,612 $ 46,724
=======================================================================
The Company maintains a $60.0 million bank credit facility with
$25.0 million in the form of a revolving line of credit commitment and
$35.0 million in a term note. The credit facility is secured by a
pledge of substantially all of the Company's accounts receivable,
inventory and property, plant, and equipment. It bears interest at
either a specified prime rate (8.25% at December 31, 1996) or the
LIBOR rate (5.563% at December 31, 1996) plus a spread which is
determined quarterly based upon the ratio of the Company's funded debt
to cash flow. The average interest rate for the year ended December
31, 1996 was 7.41%. The line of credit requires monthly interest
payments and matures on December 31, 1998. At December 31, 1996, $1.8
million of letters of credit were issued and outstanding, leaving a
net of $23.2 million available for cash advances under the line of
credit, against which $11.8 million had been borrowed. The
outstanding balance on the term note at December 31, 1996 was $27.2
million. The term loan was used to refinance existing debt and
requires monthly interest installments and seventeen equal quarterly
principal payments which commenced March 31, 1996. The term loan bears
interest at the Company's option of either a specified prime rate or
LIBOR rate, plus a spread which is determined quarterly based upon the
ratio of the Company's funded debt to cash flow. The average interest
rate for the year ended December 31, 1996 was 7.82%. 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 agreement at
December 31, 1996.
54
In November 1996, an amendment to the credit facility was
approved by the banks, which eliminated the monthly borrowing base
determination, reduced certain of the restrictive and compliance
covenants contained in the facility, and reduced the frequency of
financial reporting.
Subsequent to December 31, 1996, the banks providing the credit
facility approved a $10 million increase in the facility. The $10
million increase involves a new term note for $5 million with twenty
equal quarterly payments of principal plus interest commencing June
30, 1997 with an initial maturity date of December 31, 1998. The
proceeds of this new loan will be used to reduce the outstanding
balance on the revolving line of credit portion of the facility. In
addition, the revolving line of credit will increase from $25 million
to $30 million.
Maturities of long-term debt are $9,278,000 in 1997, $20,793,000
in 1998, $8,466,000 in 1999, $4,105,000 in 2000, $180,000 in 2001 and
$1,068,000 thereafter.
E. Income Taxes
The provision for income taxes charged to operations is
principally U. S. Federal tax as follows:
Year Ended December 31,
_______________________________________________________________________
(In thousands) 1996 1995 1994
_______________________________________________________________________
Current tax expense $3,626 $1,534 $ 115
Deferred tax expense (benefit) 6,169 3,217 (200)
______ _______ ______
Total provision (benefit) $9,795 $ 4,751 $(85)
========================================================================
The deferred tax expense (benefit) includes a decrease in the
valuation allowance for deferred tax assets of $236,000, $1,700,000,
and $3,129,000 for 1996, 1995 and 1994, respectively.
The effective income tax rate is reconciled to the statutory
federal income tax rate as follows:
Year Ended December 31,
________________________________________________________________________
1996 1995 1994
________________________________________________________________________
Income tax expense at statutory rate 35.0% 34.0% 34.0%
Non-deductible portion of business expenses .9 1.4 (2.5)
Tax benefit of NOL utilization (.4) (10.0) (33.6)
Other (.8) 2.6 1.2
___________________________
Total income tax expense (benefit) 34.7% 28.0% (0.9%)
========================================================================
For federal income tax purposes, the Company has net operating
loss carryforwards ("NOLs") of approximately $10 million (net of
amounts disallowed pursuant to IRC Section 382) that, if not used,
55
will expire in 1999 through 2010. The Company also has approximately
$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.
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities at December
31, 1996 and 1995 are as follows:
______________________________________________________________________
(In thousands) 1996 1995
______________________________________________________________________
Deferred tax assets:
Net operating losses $ 4,357 $ 8,696
Accruals not currently deductible 3,041 -
Alternative minimum tax credits 4,028 1,592
All other 1,463 398
________ ________
Total deferred tax assets 12,889 10,686
Valuation allowance - (236)
________ ________
Net deferred tax assets $12,889 $ 10,450
________ ________
Deferred tax liabilities:
Depreciation $ 10,991 $ 8,767
Amortization 726 1,823
All other 3,193 1,177
________ ________
Total deferred tax liabilities 14,910 11,767
________ ________
Total net deferred tax liabilities $ (2,021) $ (1,317)
========================================================================
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, 1995, the
deferred tax liabilities of the consolidated group exceeded the
deferred tax assets, therefore a deferred tax benefit was recorded for
the full amount of the remaining federal NOLs. The valuation
allowance at December 31, 1995, related to certain state NOLs that
were not yet recognized in the financial statements. At December 31,
1996, the Company recognized a deferred tax benefit for these state
NOLs for financial reporting purposes. The Company believes that its
estimate of future earnings based on contracts in place, the overall
improved gas market, and its prior earnings trend supports the
recorded net state deferred tax asset.
F. 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, 1996.
56
G. Common Stock
Changes in outstanding Common Stock for the years ended December
31, 1996, 1995, and 1994 were as follows:
_______________________________________________________________________
(In thousands of shares) 1996 1995 1994
_______________________________________________________________________
Outstanding, beginning of year 10,634 9,986 9,858
Dividend shares issued - 505 -
Shares issued for pubic offering 3,450 - -
Shares issued to settle royalty obligations 109 - -
Shares issued to acquire mat patent rights 69 - -
Shares issued upon exercise of options 266 143 128
______ ______ ______
Outstanding, end-of-year 14,528 10,634 9,986
=======================================================================
H. Stock Option Plans
At December 31, 1996, the Company has four stock-based
compensation plans, which are described below. The Company applies
Accounting Principles Board Opinion 25 ("APB 25") and related
Intrepretations 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) 1996 1995
________________________________________________________________________
Net income As reported $ 18,453 $12,236
Pro forma 17,491 11,902
Primary earnings
per share As reported 1.46 1.13
Pro forma 1.39 1.10
Fully diluted earnings As reported 1.46 1.13
per share Pro forma 1.38 1.10
=========================================================================
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 1996: no dividend yield; expected
volatility of 40.8%; risk-free interest rate of 6.2%; and expected
life of 4 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 4 years.
57
A summary of the status of the Company's four stock option plans
as of December 31, 1996, and 1995, and changes during the periods
ending on those dates is presented below:
Years Ended December 31,
____________________________________________________
1996 1995
____________________________________________________
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
________ _______________ _______ ________________
Outstanding at
beginning of year 995,008 $ 13.05 539,981 $ 10.14
Granted 316,000 32.64 581,750 15.38
Exercised (266,692) 10.90 (137,167) 8.68
Dividend - - 32,610 13.14
Canceled (16,783) 15.13 (22,166) 13.72
_________ _________ _______
Outstanding at
end of year 1,027,533 19.60 995,008 13.05
========= =========
Weighted-average
fair value of
options granted
during the year $13.13 $6.20
The following table summarizes information about stock options
outstanding at December 31, 1996.
Options Outstanding Options Exercisable
_____________________________________________ ___________________________
Weighted-Average
Range of Remaining Weighted- Weighted-
Exercise Number Contractual Life Average Number Average
Prices Outstanding (Years) Exercise Price Exercisable Exercise Price
_________________ ___________ ________________ ______________ ___________ ______________
$6.90 to $9.41 108,799 3.87 $8.03 90,967 $ 7.91
$13.10 to $19.75 608,734 5.48 14.89 233,249 14.64
$24.50 to $37.25 310,000 6.87 32.89 - -
_________ ________
Total 1,027,533 324,216
========= ========
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 was amended and restated by the Board of
Directors and stockholders in 1992 to increase the number of shares of
Common Stock issuable thereunder from 105,000 to 472,500; was further
amended by the Board of Directors and stockholders in 1994 to increase
the number of shares of Common Stock issuable thereunder from 472,500
to 682,500, and was further amended by the Board of Directors and
stockholders in 1995 to increase the number of shares of Common Stock
issuable thereunder from 682,500 to one million shares. 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 1992 Directors' Stock Option Plan (the "1992 Directors'
Plan") was adopted on October 21, 1992 by the Compensation Committee
and, thereafter, was approved by the stockholders in 1993.
The purpose of the 1992 Directors' Plan was to provide two
directors ("Optionees") additional compensation for their services to
Newpark and to promote an increased incentive and personal interest in
the welfare of Newpark by such directors. The Optionees were each
58
granted a stock option to purchase 52,500 shares of Common Stock at an
exercise price of $8.33 per share, the fair market value of the Common
Stock on the date of grant for a term of ten years. No additional
options may be granted under the Directors' Plan. At December 31,
1996, all options had been exercised under this plan.
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 shareholders
in 1994. Non-employee directors are not eligible to participate in
any other stock option or similar plan currently maintained by
Newpark. 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.
Upon the adoption of the 1993 Non-Employee Directors' Plan, the
five non-employee directors were each granted a stock option to
purchase 15,750 shares of Common Stock at an exercise price of $8.57
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 15,750 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 157,500 to 210,000
and to provide for the automatic grant at five year intervals of
additional stock options to purchase 10,500 shares of Common Stock to
each non-employee director who continues to serve on the Board. At
December 31, 1996, 26,250 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 525,000 shares of Common Stock may be issued
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 1,312,500. At
December 31, 1996 there were 396,000 options outstanding under the
1995 plan, 42,000 of which were exercisable.
59
I. Supplemental Cash Flow Information
During 1996, the Company's noncash transactions included the
acquisition of certain patents and exclusivity rights in exchange for
177,182 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.
During 1994, the Company's noncash transactions included the
consummation of the sale of the operations of the Company's marine
repair business for $661,000 in cash and a $400,000 note receivable.
Included in accounts payable and accrued liabilities at December
31, 1996, 1995 and 1994, were equipment purchases of $1,283,000,
$4,141,000 and $774,000, respectively. Also included are notes
payable for equipment purchases in the amount of $1,378,000 and
$257,000 for 1996 and 1995, respectively.
Interest of $4,153,000, $4,235,000 and $2,713,000, was paid in
1996, 1995 and 1994, respectively. Income taxes of $2,998,000,
$51,000 and $90,200 were paid in 1996, 1995 and 1994, respectively.
J. 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 NOW, 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
Sanifill.
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 the consolidated financial statements.
60
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 $1,750,000 and
$2,825,000 at December 31, 1996 and 1995, respectively. At December
31, 1996 and 1995, the Company had outstanding guaranty obligations
totaling $865,000 and $469,000, 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.
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. These
assets 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 Company has guaranteed certain of
the debt obligations of the operator, which is limited to a maximum of
$10 million and reduces proportionately with debt repayments made by
the operator.
At December 31, 1995, the Company had outstanding a letter of
credit in the amount of $3,816,000 issued to a state regulatory agency
to assure funding for future site closure obligations at its NORM
processing facility.
The Company leases various manufacturing facilities, warehouses,
office space, machinery and equipment and 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
$5,177,000, $5,210,000, and $4,049,000, in 1996, 1995 and 1994,
respectively.
Future minimum payments under noncancelable operating leases,
with initial or remaining terms in excess of one year are: $2,972,000,
in 1997, $2,460,000 in 1998, $2,298,000 in 1999, $2,183,000 in 2000,
$1,547,000 in 2001, and $1,070,000 thereafter.
Capital lease commitments are not significant.
61
K. Business and Credit Concentration
During 1996 two customers each accounted for greater than 10% of
revenues. One customer accounted for approximately 18% and 16%,
$21,620,000 and $15,890,000, of total revenues for 1996 and 1995,
respectively. The other customer accounted for 10.5%, or $12,836,000,
of revenues for 1996. In 1994, the Company did not derive ten percent
or more of its revenues from sales to any single customer.
Export sales are not significant.
L. 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.
62
M. Supplemental Selected Quarterly Financial Data (Unaudited)
Quarter Ended
________________________________________________________________________
Mar 31 Jun 30 Sep 30 Dec 31
(In thousands, except per share amounts)
========================================================================
Fiscal Year 1996
Revenues $26,767 $26,179 $28,551 $40,045
Operating income 6,092 6,801 6,822 12,125
Net income 3,316 3,884 3,782 7,471
Net income per share
Primary 0.30 0.34 0.28 0.50
Fully diluted 0.30 0.34 0.28 0.50
Fiscal Year 1995
Revenues $22,209 $22,454 $24,793 $28,526
Operating income 3,711 4,789 5,529 6,951
Net income 2,490 3,206 2,700 3,840
Net income per share
Primary 0.23 0.29 0.25 0.35
Fully diluted 0.23 0.29 0.25 0.34
N. Subsequent Event
On February 28, 1997, the Company acquired SBM Drilling Fluids
Management, Inc. ("SBM"). The Company issued 582,000 shares of its
common stock as consideration for the acquisition which will be
accounted for by the pooling of interest method.
Historical financial data in future reports will be restated to
include SBM data. The following unaudited pro forma data summarizes
the combined results of operations of the Company and SBM as though
the merger had occurred at the beginning of fiscal 1994. This pro
forma data does not purport to be indicative of what would have
occurred had the acquisition actually been made as of such date or of
results which may occur in the future.
(Unaudited pro forma) Year Ended December 31,
______________________________________________________________________
(In thousands, except per share data) 1996 1995 1994
______________________________________________________________________
Revenue $135,974 $105,720 $86,625
Net income 18,503 12,542 9,716
Net income per common and
common equivalent share:
Primary 1.40 1.10 .91
Fully diluted 1.40 1.10 .90
======================================================================
63
SBM's fiscal year ends on October 31. For purposes of this pro
forma presentation, SBM's year end was not adjusted to coincide with
that of the Company's. The combination of the unlike year ends does
not materially alter the pro forma results.
ITEM 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
None
64
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
1997 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
1997 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
1997 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
1997 Annual Meeting of Shareholders.
65
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, 1996 and
1995
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following financial statement schedule is included:
Schedule II - Valuation and Qualifying Accounts
All other 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.
3.1.1 Certificate of Amendment to Certificate of
Incorporation.
3.2 Bylaws.
10.1 Employment Agreement, dated as of October 23, 1990,
between the registrant and James D. Cole.*
10.2 Lease Agreement, dated as of May 17, 1990, by and
between Harold F. Bean Jr. and Newpark
Environmental Services, Inc. ("NESI").
10.3 Building Lease Agreement, dated April 10, 1992,
between the registrant and The Traveler's
Insurance Company.
10.4 Building Lease Agreement, dated May 14, 1992,
between State Farm Life Insurance Company, and
SOLOCO, Inc.
10.5 Operating Agreement, dated June 30, 1993,
between Goldrus Environmental Services, Inc. and NESI.
10.6 Agreement and Plan of Reorganization, dated April 8,
1996, among the registrant, JPI Acquisition Corp.
("JPI"), J. Pouyer Interests, Inc., Uni-Mat
International, Inc. ("Uni-Mat"), and Joseph E. Pouyer, as
amended.
10.7 1993 Non-Employee Directors' Stock Option Plan.*
10.7.1Amendment to the 1993 Non-Employee Directors'
Stock Option Plan.*
10.8 Amended and Restated 1988 Incentive Stock
Option Plan.*
10.8.11995 Incentive Stock Option Plan.*
66
10.9 Exclusive License Agreement, dated June 20, 1994,
between SOLOCO, Inc. and Quality Mat Company.
10.10 Lease Agreement, dated as of July 29, 1994, by
and between Harold F. Bean Jr. and NESI.
10.11 Credit Agreement by and among Newpark
Resources, Inc., SOLOCO, Inc., Newpark Environmental
Services, Inc., SOLOCO, Texas, L. P., Batson-Mill, L. P.,
Newpark Environmental Water Services, Inc., Newpark
Shipholding Texas, L.P., Mallard and Mallard of La.,
Inc., SOLOCO, L.L.C., Newpark Texas, L.L.C., Newpark
Holdings, Inc., Hibernia National Bank, Bank One Texas,
N. A., and Premier Bank, National Association.
10.12 Second Amendment and Supplement to the Credit
Agreement, dated March 5, 1996 by and among Newpark
Resources, Inc., SOLOCO, L.L.C., Newpark Environmental
Services, L.L.C., Newpark Shipholding Texas, L.P., Soloco
Texas, L.P., Batson-Mill, L.P., Newpark Environmental
Services, L.P., Mallard and Mallard of La., Inc., Newpark
Texas, L.L.C., Newpark Holdings, Inc., Hibernia National
Bank, Bank One Texas, N. A., and Premier Bank, National
Association.
10.13 Third Amendment and Supplement to the Credit
Agreement, dated June 27, 1996 by and among Newpark
Resources, Inc., SOLOCO, L.L.C., Newpark Environmental
Services, L.L.C., Newpark Shipholding Texas, L.P., Soloco
Texas, L.P., Batson-Mill, L.P., Newpark Environmental
Services, L.P., Mallard and Mallard of La., Inc., Newpark
Texas, L.L.C., Newpark Holdings, Inc., Hibernia National
Bank, Bank One Texas, N.A., Bank One Louisiana, N. A.,
and Premier Bank, National Association.**
10.14 Fourth Amendment and Supplement to the Credit
Agreement, dated December 23, 1996 by and among Newpark
Resources, Inc., SOLOCO, L.L.C., Newpark Environmental
Services, L.L.C., Newpark Shipholding Texas, L.P., Soloco
Texas, L.P., Batson-Mill, L.P., Newpark Environmental
Services, L.P., Mallard and Mallard of La., Inc., Newpark
Texas, L.L.C., Newpark Holdings, Inc., Hibernia National
Bank, Bank One Louisiana, N. A., and Premier Bank,
National Association.**
10.15 Credit Agreement, dated December 1, 1995,
between SOLOCO, Inc., and Hibernia National Bank.
10.16 Asset Purchase and Lease Agreement, dated June 5, 1996,
among the registrant, Campbell Wells, Ltds and
Sanifill, Inc.
10.17 Now Disposal Agreement, dated June 4, 1996,
among Sanifill, Inc., Now Disposal Operating Co. and
Campbell Wells, Ltd.
10.18 Guaranty dated August 29, 1996 by the
registrant in favor of Heller Financial Leasing, Inc.
21.1 Subsidiaries of the Registrant **
23.1 Consent of Deloitte & Touche **
27.1 Financial Data Schedule**
________________________________
* Management Compensation Plan or Agreement.
** Filed herewith.
67
Previously filed in the exhibits to the
registrant's Registration Statement on Form S-1
(File No. 33-40716) filed on June 21, 1991,
and incorporated by reference herein.
Previously filed in the exhibits to the registrant's
Registration Statement on Form S-8 (File No.
33-67284) filed on August 12, 1993, and
incorporated by reference herein.
Previously filed in the exhibits to the
registrant's Registration Statement on Form S-8
(File No. 33-83680) filed on August 12, 1993, and
incorporated by reference herein.
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.
Previously filed in the exhibits to the
registrant's Current Report on Form 8-K, dated
July 18, 1995, and incorporated by reference herein.
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.
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.
Previously filed in the exhibits to the
registrant's Registration Statement on Form S-3
(File No. 333-05805), and incorporated by reference
herein.
Previously filed in the exhibits to the
registrant's Registration Statement on Form S-3
(File No. 333-20895) and incorporated by
reference herein.
Previously filed in the exhibits to the
registrant's Form 10-Q for the quarterly period
ended September 30, 1996, and incorporated by
reference herein.
(b) Reports on Form 8-K
The registrant did not file a report on Form 8-K during the
fourth quarter of 1996.
68
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 28, 1997
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 below by the following persons
on behalf of the registrant in the capacities and on the date indicated.
Signatures Title Date
/s/ James D. Cole Chairman of the Board, President March 28, 1997
James D. Cole and Chief Executive Officer
/s/ Matthew W. Hardey Vice President of Finance and March 28, 1997
Matthew W. Hardey Chief Financial Officer
/s/ Kathleen D. Lacoste Controller March 28, 1997
Kathleen D. Lacoste
/s/ Wm. Thomas Ballantine Executive Vice President and March 28, 1997
Wm. Thomas Ballantine Director
/s/Dibo Attar Director March 28, 1997
Dibo Attar
/s/ W. W. Goodson Director March 28, 1997
W. W. Goodson
/s/ David P. Hunt Director March 28, 1997
David P. Hunt
/s/ Dr. Alan Kaufman Director March 28, 1997
Dr. Alan Kaufman
/s/ James H. Stone Director March 28, 1997
James H. Stone
69
Newpark Resources, Inc. SCHEDULE II
Valuation and Qualifying Accounts
Years Ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
Additions
Balance Charged Balance
at to at
Beginning Costs and Other Other End of
of Year Expenses Additions Deductions Year
_________ _________ _________ __________ _______
1996
Allowance for
doubtful accounts $ 768 $ 739 $ 229 (a) $ (41)(b) $ 1,695
========= ========= ========= ========== =======
Valuation allowance for
deferred tax assets $ 236 - $ - (d) $ (236)(c) $ -
========= ========= ========= ========== =======
1995
Allowance for
doubtful accounts $ 455 $ 463 $ 13 (a) $ (163)(b) $ 768
========= ========= ========= ========== =======
Valuation allowance for
deferred tax assets $ 967 - $ 969 (d) $ (1,700)(c) $ 236
========= ========= ========= ========== =======
1994
Allowance for
doubtful accounts $ 354 $ 974 $ 44 (a) $ (917)(b) $ 455
========= ========= ========= ========== =======
Valuation allowance for
deferred tax assets $ 4,096 - - $ (3,129)(c) $ 967
========= ========= ========= ========== =======
(a) Recovery of amounts previously written off and other adjustments.
(b) Write-offs.
(c) Change in valuation allowance reflecting the future benefit of net operating losses.
(d) Initial set-up of valuation allowance.
70