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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

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

Newpark Resources, Inc.

(504) 838-8222
(Registrant’s telephone number)

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 [ü]     No [   ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Common stock, $0.01 par value: 73,142,306 shares at August 9, 2002.

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NEWPARK RESOURCES, INC.
INDEX TO FORM 10-Q
FOR THE THREE MONTH PERIOD ENDED
June 30, 2002

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Newpark Resources, Inc.
Consolidated Balance Sheets

See Accompanying Notes to Consolidated Financial Statements

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Newpark Resources, Inc.
Consolidated Statements of Operations
For the Three and Six Month Periods Ended June 30,
(Unaudited)

See Accompanying Notes to Consolidated Financial Statements

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Newpark Resources, Inc.
Consolidated Statements of Comprehensive Income
For the Six Month Periods Ended June 30,
(Unaudited)

See Accompanying Notes to Consolidated Financial Statements

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Newpark Resources, Inc.
Consolidated Statements of Cash Flows
For the Six Month Periods Ended June 30,
(Unaudited)

See Accompanying Notes to Consolidated Financial Statements

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NEWPARK RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Interim Financial Statements

     In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly the financial position of Newpark Resources, Inc. (“Newpark”) as of June 30, 2002, and the results of its operations and its cash flows for the three month and six month periods ended June 30, 2002 and 2001. All such adjustments are of a normal recurring nature. These interim financial statements should be read in conjunction with the December 31, 2001 audited financial statements and related notes filed on Form 10-K. The results of operations for the three month and six month periods ended June 30, 2002 are not necessarily indicative of the results to be expected for the entire year.

     Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

Note 2 — Common Stock and Preferred Stock Transactions

     On May 15, 2002 Newpark issued two million shares of common stock in a public offering. The shares were sold at a gross price of $8.50 per share, with Newpark receiving a total of $16.4 million in proceeds after commissions and legal and accounting costs. The principal use of proceeds was to repurchase all of the outstanding shares of Series A Preferred Stock (Series A Stock). The total repurchase price for the Series A Stock was $15.1 million, including $106,249 of dividends earned from the last dividend payment date through the date of repurchase. The remaining proceeds were used to repay debt.

     As a result of the repurchase of the Series A Stock, Newpark recorded a non-recurring, non-cash charge of $861,350 ($.01 per share) as of May 15, 2002 for the write-off of the unamortized balance of the discount received upon the issuance of the Series A Stock in April 1999. This discount was previously being amortized over a period of five years. The Warrants issued in conjunction with the issuance of the Series A Stock (Series A Warrant) and Series B Preferred Stock (Series B Warrants) contain anti-dilution provisions. A total of 22,162 additional shares of Common Stock became issuable on exercise of the Series A Warrants and 56,683 additional shares of Common Stock became issuable on exercise of the Series B Warrants in the second quarter of 2002 under these anti-dilution provisions, primarily related to the issuance of two million common shares noted above. During the second quarter of 2002, Newpark recorded a one-time adjustment of $194,004 to its equity accounts to reflect the value assigned to the additional shares of common stock issuable on exercise of these Warrants. These charges, totaling $1,055,000, are included in other non-cash preferred stock charges in the income statement for the quarter ended June 30, 2002.

     On April 15, 2002, Newpark and the holder of the 120,000 outstanding shares of Series C Preferred Stock (Series C Stock) entered into an agreement under which the holder elected to convert the Series C Stock into common stock as of April 15, 2002, at the variable conversion price then in effect under the governing documents of the Series C Stock. This agreement was contingent upon certain conditions that, if not satisfied by June 30, 2002 or waived by the holder, would result in this agreement becoming null and

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void. These conditions were not met by June 30, 2002, and the holder did not waive the conditions. Accordingly, the Series C Stock was not converted and remains outstanding.

Note 3 — Acquisition

     On May 23, 2002, Newpark acquired 100% of the outstanding capital stock of Ava, S.p.A (Ava), a privately owned provider of drilling fluids headquartered in Rome, Italy. The total purchase price of approximately $7.0 million was paid through the issuance of 170,704 shares of Newpark common stock, valued at approximately $1.4 million (based on the fair market value of Newpark stock on the date of acquisition), and approximately $5.6 million in cash. Ava was founded in 1954 and provides drilling fluids and related products to exploration companies in the Mediterranean, Eastern Europe and North Africa. Ava’s pre-acquisition operating results were not significant relative to Newpark.

     The purchase price, including approximately $400,000 of acquisition costs, was allocated to the net assets of Ava based on their estimated fair values at the date of acquisition, as follows (in thousands):

     Newpark has not completed its evaluation of identifiable intangible assets. These evaluations are expected to be completed in the third quarter of 2002. The allocations of purchase price to intangible assets and goodwill noted above are based on preliminary assessments and are subject to adjustment upon completion of our evaluations.

Note 4 — Earnings Per Share

     The following table presents the reconciliation of the numerator and denominator for calculating income per share in accordance with the disclosure requirements of SFAS 128 (in thousands, except per share amounts).

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     Basic net income (loss) per share was calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. For the three months and six months ended June 30, 2001, Newpark had dilutive stock options and warrants of approximately 10.4 million shares and 7.1 million shares, respectively, which were assumed exercised using the treasury stock method. The resulting net effects of stock options and warrants were used in calculating diluted income per share for these periods. Since Newpark incurred a loss for the quarter and six months ended June 30, 2002, all options and warrants outstanding for these periods were excluded from the computation of loss per share as they would be considered anti-dilutive.

     Options and warrants to purchase a total of approximately 150,000 shares and 3.4 million shares of common stock were outstanding during the three months and six months ended June 30, 2001, respectively, but were not included in the computation of diluted income per share because they were anti-dilutive.

     The net effect of the assumed conversion of the Series A Preferred Stock through the date of repurchase has been excluded from the computation of diluted income per share for all periods presented because the effect would be anti-dilutive. The net effects of the assumed conversion of the Series B and Series C Preferred Stock have been excluded from the computation of diluted loss per share for the three months and six months ended June 30, 2002 because the effects would be anti-dilutive.

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Note 5 — Accounts and Notes Receivable

     Included in current accounts and notes receivable at June 30, 2002 and December 31, 2001 are:

Note 6 — Inventory

     Newpark’s inventory consisted of the following items at June 30, 2002 and December 31, 2001:

Note 7 — Long-Term Debt

     As of June 30, 2002, Newpark had outstanding $125 million of unsecured senior subordinated notes (the “Notes”) which mature on December 15, 2007. Interest on the Notes accrues at the rate of 8-5/8% per annum and is payable semi-annually on June 15 and December 15.

     In November 2001, Newpark entered into an interest-rate swap instrument, which effectively converted the Notes to a floating rate for a two year period ending in December 2003. On July 10, 2002, Newpark terminated the swap instrument and received a payment of $1,040,000. The total benefit recognized under the swap instrument as a reduction to interest expense, including the termination fee, was $1.8 million and $2.2 million, respectively, for the three months and six months ended June 30, 2002. As of June 30, 2002, Newpark recorded the termination fee receivable on the balance sheet as a reduction in accrued interest payable.

     As of June 30, 2002, Newpark also maintained a $100.0 million bank credit facility, including up to $25.0 million in standby letters of credit, in the form of a revolving line of credit commitment, which expires February 27, 2005. At June 30, 2002, $16.7 million in

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letters of credit were issued and outstanding under the facility and $37.1 million was outstanding under the revolving facility, leaving $46.2 million of availability under this facility at June 30, 2002. The facility bears interest at either a specified prime rate (4.75% at June 30, 2002) or the LIBOR rate (1.86% at June 30, 2002), in each case plus a spread determined quarterly based on the ratio of Newpark’s funded debt to cash flow. The weighted average interest rates on the outstanding balance under the credit facility for the three months and six months ended June 30, 2002 were 5.94% and 4.95%, respectively, as compared to 8.89% and 9.04%, respectively, for the comparable periods in 2001.

     As of June 30, 2002, Newpark was in compliance with the financial covenants contained in the Credit Facility, as amended.

Note 8 — New Accounting Standards

     On January 1, 2002, Newpark adopted Statement of Financial Accounting Standards No. 141 and 142. These Standards, among other requirements, (i) prohibit the use of the pooling-of-interests method of accounting for business combinations, (ii) provide that goodwill not be amortized in any circumstance, and (iii) require that goodwill be tested for impairment annually or when events or circumstances occurring between annual tests indicate that goodwill for a reporting unit might be impaired. The Standards established a new method for testing goodwill for impairment based on a fair value concept. Newpark completed its fair value testing of goodwill balances during the quarter ended March 31, 2002 and determined that its existing goodwill balances were not impaired under the new standards. Upon adoption of the Standards on January 1, 2002, Newpark ceased to amortize its remaining goodwill balance. Goodwill amortization was approximately $1.2 million and $2.5 million for the three month and six month periods ended June 30, 2001.

     The table below reconciles Newpark’s net income and earnings per share as reported to the amounts that would have been reported had these Standards been adopted as of January 1, 2001 (in thousands, except per share amounts):

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Note 9 — Segment Data

     Summarized financial information concerning Newpark’s reportable segments is shown in the following table (dollars in thousands):

The figures above are shown net of intersegment transfers.

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     The following discussion of our financial condition, results of operations, liquidity and capital resources should be read together with our “Unaudited Consolidated Financial Statements” and “Notes to Unaudited Consolidated Financial Statements” as well as our annual report on Form 10-K for the year ended December 31, 2001.

Operating Environment and Recent Developments

     Our operating results depend primarily on the level of oil and gas drilling activity in the markets we serve. These levels in turn depend, to a great extent, on oil and gas commodities pricing, inventory levels and product demand. Key average rig count data for the last five quarters is listed in the following table: