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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
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 X 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 [X].
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 34
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EXPLANATORY NOTE:
On February 28, 1997, Newpark issued 582,000 shares of its common
stock in exchange for all the outstanding common stock of Sampey Bilbo Meschi
Drilling Fluids Management, Inc. ("SBM"). SBM is a full service drilling fluids
company serving the onshore and offshore Louisiana and Texas Gulf Coast
drilling markets.
This business combination has been accounted for as a pooling of
interests and, in accordance with the rules of the Securities & Exchange
Commission, the Selected Financial Data (Item 6.), Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item 7.), Financial
Statements and Supplementary Data (Item 8.), and Financial Statement Schedule
(Item 14.) for the periods presented in Newpark's Annual Report on Form 10-K
for the year ended December 31, 1996, are required to be restated to include
the accounts and results of operations of SBM for such periods.
This 10-K/A includes all items that are significantly affected by the
transaction.
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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 which includes the effects of the Company's acquisition of Sampey
Bilbo Meschi Drilling Fluids Management, Inc. ("SBM"), which was accounted for
as a pooling of interests. Also included, for all periods presented, are the
effects of a 2-for-1 stock split approved by the shareholders of the Company on
May 14, 1997. 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."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
-------------------------------------------------------------
(In thousands, except Per Share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenues $ 135,974 $ 105,720 $ 86,625 $ 57,585 $ 49,457
Cost of services provided 87,081 70,360 60,901 43,389 36,860
Operating costs 10,784 10,693 9,124 9,120 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 1,260 671 154
--------- --------- --------- --------- ---------
Operating income from continuing
operations 32,018 21,546 12,109 2,276 4,961
Interest income (223) (222) (80) (5) (18)
Interest expense 3,900 3,833 2,724 1,306 847
Non-recurring expense -- 436 -- -- --
--------- --------- --------- --------- ---------
Income from continuing operations
before provision for income taxes 28,341 17,499 9,465 975 4,132
Provision (benefit) for income taxes 9,838 4,957 (252) (1,837) 51
--------- --------- --------- --------- ---------
Income from continuing operations 18,503 12,542 9,717 2,812 4,081
Income (loss) from discontinued operations -- -- -- (2,366) 1,205
--------- --------- --------- --------- ---------
Net income $ 18,503 $ 12,542 $ 9,717 $ 446 $ 5,286
========= ========= ========= ========= =========
Income (loss) per common and common
equivalent shares:
Primary
Continued operations $ 0.70 $ 0.55 $ 0.45 $ 0.14 $ 0.20
Discontinued operations -- -- -- (0.12) 0.06
--------- --------- --------- --------- ---------
Net income per common share $ 0.70 $ 0.55 $ 0.45 $ 0.02 $ 0.26
========= ========= ========= ========= =========
Fully Diluted
Continued operations $ 0.70 $ 0.55 $ 0.45 $ 0.14 $ 0.20
Discontinued operations -- -- -- (0.12) 0.06
--------- --------- --------- --------- ---------
Net income per common share $ 0.70 $ 0.55 $ 0.45 $ 0.02 $ 0.26
========= ========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding
Primary 26,396 22,820 21,386 20,544 20,292
========= ========= ========= ========= =========
Filly Diluted 26,496 22,904 21,548 20,544 20,292
========= ========= ========= ========= =========
</TABLE>
3
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<TABLE>
<CAPTION>
DECEMBER 31,
- -----------------------------------------------------------------------------------------------
(IN THOUSANDS) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 29,881 $ 32,563 $ 13,868 $ 5,099 $ 5,502
Total assets 289,884 154,132 112,572 91,329 75,375
Short-term debt 12,383 8,131 10,058 15,212 12,212
Long-term debt 34,918 47,106 29,404 15,329 11,034
Shareholders' equity 203,441 77,755 63,631 50,467 44,915
</TABLE>
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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.
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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 On February 28, 1997, the Company purchased SBM through which the
Company is recycling a portion of the material it receives as
waste. The acquisition has been accounted for as a pooling of
interest and all financial data presented has been restated to
include the effects of the acquisition.
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:
<TABLE>
<CAPTION>
1996 1995 1994 1Q96 2Q96 3Q96 4Q96
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
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.
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
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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 and has been restated to
give effect to the acquisition of SBM on a pooling of interest basis. The
product line data has been reclassified from prior years' presentation in order
to more effectively distinguish the fluids management services and mat rental
services, in which the Company maintains certain proprietary advantages, from
its other service offerings.
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands)
1996 1995 1994
---------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues by product line:
Fluids management services:
NOW & NORM disposal $ 44,905 33.0% $ 31,126 29.5% $ 20,738 23.9%
Product sales & engineering 14,432 10.6 7,738 7.3 6,993 8.1
---------- ----- ---------- ----- ---------- -----
Total fluids
management services 59,337 43.6 38,864 36.8 27,731 32.0
Mat rental services 32,757 24.1 30,775 29.1 23,048 26.6
Integrated services 42,520 31.3 34,481 32.6 34,246 39.5
Other 1,360 1.0 1,600 1.5 1,600 1.9
---------- ----- ---------- ----- ---------- -----
Total revenues $ 135,974 100.0% $ 105,720 100.0% $ 86,625 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues
Total revenues increased to $136.0 million in 1996 from $105.7 million in
1995, an increase of $30.3 million or 28.7%. The components of the increase by
product line are as follows: (i) fluid management services revenues increased
$20.5 million, as NOW revenue increased $11.1 million, NORM revenue increased
$2.7 million, and product sales and engineering increased $6.7 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.
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Operating Income
Operating income increased by $10.5 million or 48.6% to $32.0 million in
1996 compared to $21.5 million in 1995. Operating margin improved to 23.5% in
1996 as compared to 20.4% in 1995. The increase resulted primarily from
increased profitability from NOW and NORM disposal operations.
General and administrative expenses decreased as a proportion of revenue
to 2.1% in 1996 from 2.5% 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 $3.9 million in 1996
compared to $3.8 million in 1995.
Provision for Income Taxes
For 1996 and 1995, the Company recorded income tax provisions of $9.8
million and $5.0 million for effective rates of 34.7% and 28.3%, respectively.
The 1995 provision reflects the benefit realized from federal tax carryforwards
which were fully recognized in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Total revenues increased to $105.7 million in 1995 from $86.6 million in
1994, an increase of $19.1 million or 22.0%. The components of the increase by
product line are as follows: (i) fluids management services revenues increased
$11.1 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. Product sales and
engineering revenue increased $.8 million; (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 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
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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
Operating income from continuing operations increased by $9.4 million or
77.9% to total $21.5 million in the 1995 period compared to $12.1 million in
the prior year, representing an improvement in operating margin to 20.4% in
1995 compared to 14.0% 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 $797,000 less in the 1995 period as compared to
the 1994 period.
Interest Expense
Interest expense increased to $3.8 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 $5.0 million
equal to 28.3% 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 reduced the effective tax rate for that portion
of the year. During 1994, the Company recorded a tax benefit of $252,000 as a
result of the availability of net operating loss carryforwards.
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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:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Working Capital (000's) $29,881 $32,563
Current Ratio 1.77 2.3
</TABLE>
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 $24.9 million of
cash flow. Net proceeds of the recent equity offering in excess of Campbell
Wells asset purchase amount, coupled with the $24.9 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. 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.
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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.
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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.
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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
May 14, 1997
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Newpark Resources, Inc.
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(In thousands, except share data) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,945 $ 1,500
Accounts and notes receivable, less allowance
of $1,695 in 1996 and $768 in 1995 48,369 39,898
Inventories 7,470 12,039
Deferred tax asset 8,144 2,701
Other current assets 2,727 1,450
--------- ---------
TOTAL CURRENT ASSETS 68,655 57,588
Property, plant and equipment, at cost, net of
accumulated depreciation 114,670 85,519
Cost in excess of net assets of purchased businesses and
identifiable intangibles, net of accumulated amortization 83,512 4,340
Other assets 23,047 6,685
--------- ---------
$ 289,884 $ 154,132
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 647 $ 287
Current maturities of long-term debt 11,736 7,844
Accounts payable 15,091 12,167
Accrued liabilities 9,835 3,562
Current taxes payable 1,465 1,165
--------- ---------
TOTAL CURRENT LIABILITIES 38,774 25,025
Long-term debt 34,918 47,106
Other non-current liabilities 2,644 285
Deferred taxes payable 10,107 3,961
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, 80,000,000 shares
authorized, 30,219,232 shares outstanding in 1996
and 22,432,354 in 1995 150 111
Paid-in capital 254,279 147,133
Retained earnings (deficit) (50,988) (69,489)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 203,441 77,755
--------- ---------
$ 289,884 $ 154,132
========= =========
</TABLE>
14
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 15
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(In thousands, except per share data) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 135,974 $ 105,720 $ 86,625
Operating costs and expenses:
Cost of services provided 87,081 70,360 60,901
Operating costs 10,784 10,693 9,124
--------- --------- ---------
97,865 81,053 70,025
General and administrative expenses 2,920 2,658 3,231
Restructure expense 2,432 -- --
Provision for uncollectible accounts and
notes receivable 739 463 1,260
--------- --------- ---------
Operating income 32,018 21,546 12,109
Interest income (223) (222) (80)
Interest expense 3,900 3,833 2,724
Non-recurring expense -- 436 --
--------- --------- ---------
Income before income taxes 28,341 17,499 9,465
Provision (benefit) for income taxes 9,838 4,957 (252)
--------- --------- ---------
Net income $ 18,503 $ 12,542 $ 9,717
========= ========= =========
Weighted average common and common
equivalent shares outstanding:
Primary 26,396 22,820 21,386
========= ========= =========
Fully diluted 26,496 22,904 21,548
========= ========= =========
Net income per common and common equivalent share:
Primary $ .70 $ .55 $ .45
========= ========= =========
Fully diluted $ .70 $ .55 $ .45
========= ========= =========
</TABLE>
15
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 16
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Retained
Common Paid-In Earnings
(In thousands) Stock Capital (Deficit) Total
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 208 $133,282 $(83,023) $ 50,467
Employee stock options 2 949 -- 951
Other -- 2,496 -- 2,496
Net income -- -- 9,717 9,717
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1994 210 136,727 (73,306) 63,631
Employee stock options 2 1,581 -- 1,583
Stock dividend 10 8,714 (8,724) --
Net income -- -- 12,541 12,541
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1995 222 147,022 (69,489) 77,755
Employee stock options 6 4,950 (2) 4,954
Public offering 70 96,319 -- 96,389
Acquisitions 2 5,838 -- 5,840
Net income -- -- 18,503 18,503
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 $ 300 $254,129 $(50,988) $203,441
======== ======== ======== ========
</TABLE>
16
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 17
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(In thousands ) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,503 $ 12,542 $ 9,716
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 17,220 10,000 7,393
Provision for doubtful accounts 775 190 974
Provision (benefit) from deferred income taxes 4,738 3,326 (383)
Loss (gain) on sales of assets 36 79 (2)
Change in assets and liabilities net of effects of acquisitions:
Increase in accounts and notes receivable (10,410) (16,410) (4,003)
Decrease (increase) in inventories 188 (4,897) 702
Decrease (increase) in other assets (1) (1,509) (1,875)
(Decrease) increase in accounts payable 1,395 1,896 (152)
(Decrease) increase in accrued liabilities and other (7,579) 2,227 (864)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,865 7,444 11,506
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (44,521) (24,024) (23,160)
Disposal of property, plant and equipment 1,492 567 102
Investment in joint venture (4,406) (1,094) 30
Payments received on notes receivable 440 249 (1,000)
Advances on notes receivable (112) (227) --
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 (124,268) (24,529) (23,367)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on lines of credit 5,749 20,796 492
Principal payments on notes payable
and long-term debt (12,294) (20,784) (10,709)
Proceeds from issuance of debt 3,374 15,328 21,617
Proceeds from exercise 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 99,848 16,923 12,352
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 445 (162) 491
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,500 1,662 1,171
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,945 $ 1,500 $ 1,662
========= ========= =========
</TABLE>
17
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 18
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 financial statements have been restated to include the
effects of the Sampey Bilbo Meschi Drilling Fluids Management, Inc. ("SBM")
acquisition that was accounted for as a pooling of interests. 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
judgement 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.
18
<PAGE> 19
The cost in excess of net assets of purchased businesses ("excess cost")
is being amortized on a straight-line basis over twenty-five to 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 $4,415,000, $4,291,000, and $2,869,000 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. All per share and weighted average share amounts have been
restated to give retroactive effect to a 2-for-1 stock split approved by the
shareholders on May 14, 1997 and a 5% stock dividend declared and paid during
1995.
STOCK-BASED COMPENSATION. SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations and has adopted the disclosure-only provisions of
SFAS 123. 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.
19
<PAGE> 20
NEW ACCOUNTING PRONOUNCEMENTS. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards Number 128
"Earnings per share" ("SFAS 128") which changes the method of calculating
earnings per share (EPS). SFAS 128 requires the presentation of "basic" EPS and
"diluted" EPS on the face of the statement of income. Basic EPS is computed by
dividing the net income available to common shareholders by the weighted
average shares of outstanding common stock. The calculation of diluted EPS is
similar to basic EPS except that the denominator includes dilutive common stock
equivalents such as stock options and warrants. The statement is effective for
financial statements for periods ending after December 31, 1997. The Company
will adopt SFAS 128 in the fourth quarter of 1997, as early adoption is not
permitted. Management believes that the adoption of this standard will not have
a significant impact on the financial statements.
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
(In thousands except per share amounts) 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 152,753 $ 124,557
Net income 20,460 16,018
============ ============
Net income per common and
common equivalent share:
Primary $ 0.78 $ 0.70
Fully diluted 0.77 0.70
===================================================================================
</TABLE>
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
20
<PAGE> 21
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 $0.06 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 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 options during the
term of the notes. The notes receivable 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.
On February 28, 1997, Newpark issued 582,000 shares of its common stock in
exchange for all of the outstanding common stock of SBM. SBM is a full service
drilling fluids company serving the onshore and offshore Louisiana and Texas
Gulf Coast drilling markets. This business combination has been accounted for
as a pooling of interests, and accordingly, the consolidated financial
statements for periods prior to the combination have been restated to include
the accounts and results of operations of SBM.
21
<PAGE> 22
Prior to the combination SBM's fiscal year end was October 31. Newpark's
fiscal year is December 31. In applying pooling of interests accounting, the
December 31, Newpark consolidated financial statements were combined with the
October 31 SBM financial statements for all years presented.
Operating results prior to the combination of the separate companies and
the combined amounts presented in the consolidated financial statements are
summarized below:
(In thousands of dollars)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995
---------- --------------
<S> <C> <C>
Revenues:
Newpark $ 121,542 $ 97,982
SBM 14,432 7,738
---------- --------------
Combined $ 135,974 $ 105,720
========== ==============
Net Earnings:
Newpark $ 18,453 $ 12,236
SBM 50 306
---------- --------------
Combined $ 18,503 $ 12,542
========== ==============
</TABLE>
C. PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment at December 31,
1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Land $ 2,411 $ 5,072
Buildings and improvements 17,258 30,172
Machinery and equipment 53,297 44,203
Board road mats 78,881 46,386
Other 2,579 2,584
--------- ---------
154,426 128,417
Less accumulated depreciation (39,756) (42,898)
--------- ---------
$ 114,670 $ 85,519
========= =========
</TABLE>
22
<PAGE> 23
D. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
Credit arrangements and long-term debt consisted of the following at
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Bank - line of credit $ 11,778 $ 18,378
Bank - term note 27,223 25,000
Bank - line of credit 2,350 --
Building loan 1,799 482
Acquisition financing due in 1999 with an
interest rate of 7% 1,375 --
Note payable to stockholder
at 10% due in 2000 382 484
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% 1,747 2,204
-------- --------
46,654 54,950
Less: current maturities of long-term debt (11,736) (7,844)
-------- --------
Long-term portion $ 34,918 $ 47,106
======== ========
</TABLE>
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
23
<PAGE> 24
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.
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.
The Company has an additional revolving credit loan agreement whereby it
can borrow a maximum of $2,500,000. Borrowings under the revolving credit loan
agreement are limited to the amount of certain accounts receivable and
inventory. The aggregate advances outstanding as of December 31, 1996 totaled
$2,350,000, due August 30, 1997. Under the terms of the agreement, interest is
payable monthly at the bank's prime rate plus 1%. This line of credit was paid
in full subsequent to December 31, 1996.
Maturities of long-term debt are $11,736,000 in 1997, $21,099,000 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,
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense $ 3,670 $ 1,631 $ 115
Deferred tax expense (benefit) 6,168 3,326 (367)
------- ------- ------
Total provision (benefit) $ 9,838 $ 4,957 $ (252)
======= ======= ======
</TABLE>
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.
24
<PAGE> 25
The effective income tax rate is reconciled to the statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income tax expense at statutory rate 35.0% 34.0% 34.0%
Non-deductible portion of business expenses 1.0 1.4 (2.4)
Tax benefit of NOL utilization (1.0) (9.7) (36.6)
Other (.3) 2.6 2.3
---- ---- ----
Total income tax expense (benefit) 34.7% 28.3% (2.7%)
==== ==== ====
</TABLE>
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, 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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(In thousands) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 4,424 $ 8,769
Accruals not currently deductible 3,041 --
Alternative minimum tax credits 4,028 1,592
All other 1,496 398
---------- ----------
Total deferred tax assets 12,989 10,759
Valuation allowance -- (236)
---------- ----------
Net deferred tax assets $ 12,989 $ 10,523
---------- ----------
Deferred tax liabilities:
Depreciation $ 11,032 $ 8,783
Amortization 726 1,823
All other 3,194 1,177
---------- ----------
Total deferred tax liabilities 14,952 11,783
---------- ----------
Total net deferred tax liabilities $ (1,963) $ (1,260)
========== ==========
</TABLE>
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
25
<PAGE> 26
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.
G. COMMON STOCK
On May 14, 1997, the shareholders of the Company approved an increase in
the number of authorized common stock shares to 80,000,000. This allowed the
Company to effect a 2-for-1 stock split previously authorized by the Board of
Directors. All share amounts and per share amounts have been adjusted
retroactively to reflect this stock split.
<TABLE>
<CAPTION>
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
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning of year 22,432 21,136 20,880
Dividend shares issued -- 1,010 --
Shares issued for public offering 6,900 -- --
Shares issued to settle royalty obligations 217 -- --
Shares issued to acquire mat patent rights 138 -- --
Shares issued upon exercise of options 532 286 256
------ ------ ------
Outstanding, end-of-year 30,219 22,432 21,136
====== ====== ======
</TABLE>
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
26
<PAGE> 27
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:
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income As reported $ 18,503 $ 12,542
Pro forma 17,541 12,208
Primary earnings per share As reported 0.70 0.55
Pro forma 0.66 0.53
Fully diluted earnings As reported 0.70 0.55
per share Pro forma 0.66 0.53
</TABLE>
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.
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:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------
1996 1995
------------------------------------------ ---------------------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
----------------- -------------------- -------------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,990,016 $ 6.52 1,079,962 $ 5.07
Granted 632,000 16.32 1,163,500 7.69
Exercised (533,384) 5.45 (274,334) 4.34
Dividend - - 65,220 6.57
Canceled (33,566) 7.56 (44,332) 6.86
------------ -----------
Outstanding at end of year 2,055,066 9.80 1,990,016 6.52
============ ==========
Weighted-average fair value of options
granted during the year $ 6.56 $ 3.10
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ------------------------------------
Range of Weighted-Average Weighted- Weighted-
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life (Years) Exercise Price Exercisable Exercise Price
- --------------- ------------ ------------------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$3.45 to $4.70 217,598 3.87 $ 4.01 181,934 $ 3.95
$6.55 to $9.87 1,217,468 5.48 7.44 466,498 7.32
$12.25 to $18.62 620,000 6.87 16.44 - -
------------ ----------
Total 2,055,066 648,432
============ ==========
</TABLE>
27
<PAGE> 28
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 210,000 to 945,000;
was further amended by the Board of Directors and stockholders in 1994 to
increase the number of shares of Common Stock issuable thereunder from 945,000
to 1,365,000, 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 1,365,000 to two 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 granted a stock option to purchase
105,000 shares of Common Stock at an exercise price of $4.16 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 31,500
shares of Common Stock at an exercise price of $4.28 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 31,500
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 315,000 to 420,000 and to provide for the
automatic grant at five year
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intervals of additional stock options to purchase 21,000 shares of Common Stock
to each non-employee director who continues to serve on the Board. At December
31, 1996, 52,500 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 1,050,000 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 2,625,000. At December 31, 1996 there were 792,000 options
outstanding under the 1995 plan, 84,000 of which were exercisable.
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 $1,397,000 and $257,000 for 1996 and 1995, respectively.
Interest of $4,217,000, $4,290,000 and $2,713,000, was paid in 1996, 1995
and 1994, respectively. Income taxes of $3,186,000, $56,000 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
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<PAGE> 30
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.
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.
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<PAGE> 31
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 $5,251,000, $5,253,000, and $4,090,000, in 1996, 1995 and
1994, respectively.
Future minimum payments under noncancelable operating leases, with initial
or remaining terms in excess of one year are: $3,093,000, in 1997, $2,581,000
in 1998, $2,402,000 in 1999, $2,233,000 in 2000, $1,548,000 in 2001, and
$1,070,000 thereafter.
Capital lease commitments are not significant.
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.
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<PAGE> 32
M. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
- --------------------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
------ ------ ------ ------
(In thousands, except per share amounts)
=============================================================================================
<S> <C> <C> <C> <C>
FISCAL YEAR 1996
Revenues $ 28,373 $ 29,091 $ 33,172 $ 45,338
Operating income 6,102 6,955 7,227 11,734
Net income 3,317 3,973 4,016 7,197
Net income per share
Primary 0.14 0.17 0.14 0.23
Fully diluted 0.14 0.17 0.14 0.23
FISCAL YEAR 1995
Revenues $ 24,680 $ 24,938 $ 26,555 $ 29,547
Operating income 4,009 5,030 5,682 6,825
Net income 2,772 3,423 2,829 3,518
Net income per share
Primary 0.12 0.15 0.12 0.15
Fully diluted 0.12 0.15 0.12 0.15
</TABLE>
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<PAGE> 33
Newpark Resources, Inc. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>
<CAPTION>
Additions
Balance Charged Balance
at to at
Beginning Costs and Other Other End of
of Year Expenses Additions Deductions Year
------------- ------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
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
============= ============= ============== ============== ================
</TABLE>
(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.
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<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by the undersigned
hereunto duly authorized.
NEWPARK RESOURCES, INC.
Dated: May 22, 1997 by /s/ James D. Cole
-----------------------
James D. Cole
Chairman of the Board, President
and Chief Executive Officer
34
