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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
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 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)
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(504) 838-8222
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
8-5/8% Senior Subordinated Notes due 2007, Series B New York Stock Exchange
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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 or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].
At March 27, 2000 the aggregate market value of the voting stock held by
non-affiliates of the registrant was $484,368,995. 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 27, 2000, a total of 69,100,811 shares of Common Stock, $.01
par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instruction G(3) to this form, the information required
by Part III (Items 10, 11, 12 and 13 hereof) is incorporated by reference from
the registrant's definitive Proxy Statement for its Annual Meeting of
Stockholders scheduled to be held on June 14, 2000.
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NEWPARK RESOURCES, INC.
INDEX TO FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
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ITEM PAGE
NUMBER DESCRIPTION NUMBER
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PART I
1 Business 3
2 Properties 21
3 Legal Proceedings 24
4 Submission of Matters to a Vote of Security Holders 25
PART II
5 Market for the Registrant's Common Equity and
Related Stockholder Matters 26
6 Selected Financial Data 27
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 29
7A Quantitative and Qualitative Disclosures about Market Risk 44
8 Financial Statements and Supplementary Data 47
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 80
PART III
10 Directors and Executive Officers of the Registrant 81
11 Executive Compensation 81
12 Security Ownership of Certain Beneficial Owners
and Management 81
13 Certain Relationships and Related Transactions 81
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 82
Signatures 85
Note: The responses to Items 10, 11, 12 and 13 are
included in the registrant's definitive Proxy
Statement for its Annual Meeting of Stockholders
scheduled to be held June 14, 2000. The required
information is incorporated into this Report by
reference to such document and is not repeated here.
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PART I
ITEM 1. BUSINESS
GENERAL
Newpark Resources, Inc. is a leading provider of proprietary
environmental services to the oil and gas exploration and production industry.
We operate primarily in the U.S. Gulf Coast market. We also operate in west
Texas, the U.S. Mid-continent, the U.S. Rockies and Canada. We provide, either
individually or as part of a comprehensive package, the following services:
o we sell drilling fluids and provide associated engineering
and technical services;
o we install, rent and sell patented hardwood and composite
interlocking mats used for temporary access roads and work
sites in oilfield and other construction applications;
o we sell lumber, timber and wood by-products;
o we process and dispose of oilfield exploration and production
("E&P") waste;
o we provide other related on-site environmental and oilfield
construction services; and
o we process and dispose of non-hazardous wastes for the
refining, petrochemical and manufacturing industry in the
U.S. Gulf Coast market.
We offer our drilling fluids, fluids processing and management and
waste disposal services in an integrated package we call "Minimization
Management(TM)". This allows our customers to consolidate their outsourced
services and reduce the number of vendors used. It can also speed up the
drilling process while reducing the amount of waste that must be disposed. We
believe our Minimization Management(TM) program differentiates us from our
competitors and increases the efficiencies of our customers' drilling
operations.
In our drilling fluids business, we focus on providing unique
solutions to highly technical drilling projects involving complex conditions.
These projects require critical engineering support of the fluids system during
the drilling process to ensure optimal performance at the lowest total well
cost. We have developed and begun to market several proprietary and patented
products that replace environmentally harmful substances commonly used in
drilling fluids. These elements are typically of the greatest concern in the
waste stream created by drilling fluids. We recently introduced a new,
high-performance, water-based fluid system using these products, and we call
this system DeepDrill(TM). We believe that these new products will make it
easier for our customers to comply with increasingly strict environmental
regulations affecting their drilling operations and improve the economics of
the drilling process.
In addition to the U.S. Gulf Coast market, in 1998, we expanded our
drilling fluids operations into west Texas, the U.S. Mid-continent, the U.S.
Rockies and western Canada by acquiring several drilling fluids companies. We
have the service infrastructure necessary to participate in the drilling fluids
market in these regions. We also have our own barite grinding capacity to
provide critical raw materials for our drilling fluids operations, primarily in
the U.S. Gulf Coast market.
In our mat rental business, we use patented interlocking wooden and
composite mat systems to provide temporary access roads and worksites in
unstable soil conditions. These mats
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are used primarily in support of oil and gas exploration operations along the
U.S. Gulf Coast and are typically rented to the customer. Occasionally,
however, we sell the mats to the customer for permanent access to a site or
facility. Since 1994, we also have marketed mat services for use in the
construction of pipelines, highways and construction and maintenance of
electrical distribution systems in and through wetlands environments, including
the coastal areas of the Southeastern U.S., particularly Florida and Georgia.
We also market mat services to the oil and gas exploration industry in western
Canada.
We recently started using our new DuraBase(TM) composite plastic mat
primarily in our U.S. Gulf Coast market. We believe the DuraBase(TM) mat will
in many applications replace our traditional wooden mats. We believe the new
plastic mats provide significant economic benefits to us because they are
lighter, stronger, require fewer repairs and last longer than our wooden mats.
We also are currently exploring selling these mats to various governmental
agencies, who we believe view the strength, durability and shelf life of our
composite mats as an advantage over traditional wooden mats.
Most of the E&P waste received by us is processed and then injected
into environmentally secure geologic formations deep underground. Certain
volumes of waste are delivered to surface disposal facilities. We also can
process E&P waste into a product which is used as daily cover material or cell
liner and construction material at two municipal waste landfills, although we
do not currently use this method for a significant volume of waste.
Since 1994, we have been licensed to process E&P waste contaminated
with naturally occurring radioactive material ("NORM"). We currently operate
under a license that authorizes the direct injection of NORM into disposal
wells at our Big Hill, Texas facility. This is the only offsite facility in the
U.S. Gulf Coast licensed for this purpose. Since July 1999, we also have been
operating a facility adjacent to our NORM facility to dispose of non-hazardous
industrial waste produced by the petrochemical processing and refining
industries. This facility uses the same waste disposal technology as we use for
E&P waste and NORM waste disposal.
We also provide other services for our customers' oil and gas
exploration and production activities. These services include the following:
o site assessment;
o waste pit design;
o construction and installation;
o regulatory compliance assistance;
o site remediation and closure; and
o oilfield construction services, including hook-up and
connection of wells and installation of production equipment.
Newpark was originally organized in 1932 as a Nevada corporation. In
April 1991, we changed our state of incorporation to Delaware. Our principal
executive offices are located at 3850 North Causeway Boulevard, Suite 1770,
Metairie, Louisiana 70002. Our telephone number is (504) 838-8222.
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INDUSTRY FUNDAMENTALS
Demand for our services has historically been driven by several
factors: (i) commodity pricing of oil and gas, (ii) oil and gas exploration and
production expenditures and activity; (iii) the desire to drill in more
environmentally difficult environments, such as the coastal marsh and inland
waters near the coastline ("transition zone") of the Gulf Coast, (iv) use of
more complex drilling techniques which tend to generate more waste; and (v)
increasing environmental regulation of E&P waste and E&P waste containing NORM.
The demand for most of our services is related to the level, type,
depth and complexity of oil and gas drilling. The most widely accepted measure
of activity is the Baker-Hughes Rotary Rig Count. During the fourth quarter of
1997, the number of drilling rigs working in the U.S. Gulf Coast region reached
its highest level since 1990, then began a decline that continued into the
second quarter of 1999. The rig count in our principal U.S. Gulf Coast market
peaked in the first quarter of 1998 and had declined 36% by the end of the
fourth quarter. That decline continued through the second quarter of 1999, when
it reached the lowest level ever recorded in the history of the indicator,
which began over 50 years ago. Since that time, the rig count in our principal
market began to increase, but is presently significantly lower than the 1997
peak.
We believe that technological advances such as three-dimensional
seismic data and the computer-enhanced interpretation of that data and improved
drilling tools and fluids, which facilitate faster drilling, have reduced the
risk and cost of finding oil and gas and are important factors in the economics
faced by the industry. These advances also have increased the willingness of
exploration companies to drill in coastal marshes and inland waters, and to
drill deeper wells. These projects rely heavily on services such as those that
we provide. Deeper wells require the construction of larger more expensive
locations to accommodate larger drilling rigs and the equipment for handling
drilling fluids and associated wastes. These locations are generally in service
for significantly longer periods, generating additional mat rental revenues.
Deeper wells also require more complex drilling fluid programs, and generate
larger waste volumes than those from simpler systems used in shallower wells.
The oilfield market for environmental services has grown due to
increasingly stringent regulations restricting the discharge of exploration and
production wastes into the environment. Louisiana, Texas and other states have
enacted comprehensive laws and regulations governing the proper handling of E&P
waste and NORM, and regulations have been proposed in other states. As a
result, generators of waste and landowners have become increasingly aware of
the need for proper treatment and disposal of this waste in both the drilling
of new wells and the remediation of production facilities.
Our industrial waste disposal business receives non-hazardous waste
from generators in the Gulf Coast market. Those generators include refiners,
manufacturers, service companies and municipalities that produce waste that is
not characterized or listed as a regulated waste under The Resource
Conservation and Recovery Act. We believe that we can effectively
serve the market that extends from Baton Rouge, Louisiana to Houston, Texas
from the current facility located near the Texas-Louisiana state line.
Included in the non-hazardous waste market pursued by us are many
recurring waste streams that are continually created by customers in the normal
course of their business operations. In addition, "event" driven waste streams
may result from specific business activities that do not happen often, such as
a refinery "turnaround" or facility remediation projects. These wastes include
contaminated soils, wastewater treatment residues, tank bottoms, process
wastewater, storm water runoff, equipment wash water and leachate water from
sanitary landfills.
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In comparison to our E&P waste disposal market, which according to the
most recently published U.S. EPA data represents 22% of the total U.S. waste
market, the non-hazardous industrial waste market constitutes 59% of the total
volume of wastes produced in the United States each year.
BUSINESS STRENGTHS
Proprietary Products and Services. Over the past 15 years, we have
acquired, developed, and improved our patented or proprietary technology and
know-how, which has enabled us to provide innovative and unique solutions to
oilfield construction and waste disposal problems. We have developed and expect
to continue to introduce similarly innovative products in our drilling fluids
business. We believe that increased customer acceptance of our proprietary
products and services will enable us to take advantage of any upturn in
drilling and production activity.
Injection of Waste. Since 1993, we have developed and used proprietary
technology to dispose of E&P waste by low-pressure injection into unique
geologic structures deep underground. In December 1996, we were issued patents
covering our waste processing and injection operations. We believe that our
injection technology is currently the most cost-effective method for the
offsite disposal of oilfield wastes and that this technology is suitable for
disposal of other types of waste. We were recently granted a new permit to
construct and operate a non-hazardous industrial waste injection disposal
facility in Texas. This facility was completed and operations began in July
1999.
Patented Mats. We own or license several patents that cover our wooden
mats and subsequent improvements. To facilitate entry into new markets and
reduce our dependence on the supply of hardwoods, we have obtained the
exclusive license for a new patented composite mat manufactured from plastics
and other materials. Through a 49% owned joint venture that owns and operates
the manufacturing facility, we began taking delivery of these mats in the
fourth quarter of 1998. We expect that over the next three years we will
convert the majority of our mat fleet to the new composite product. However, a
portion of the fleet will continue to be made up of the wooden mats.
DeepDrill(TM). We own the patent rights to this high-performance,
completely biodegradable, water-based drilling fluid system, which provides
unique answers to both performance and environmental concerns in many drilling
situations. Some of the performance areas that DeepDrill(TM) can address
include hydrate suppression in deepwater drilling, torque and drag reduction,
shale inhibition and minimized hole enlargement. The product offers superior
environmental attributes to the commonly used oil-based and synthetic-based
fluid systems, which are often used in environmentally sensitive areas due to
performance requirements.
Low Cost Infrastructure. We have assembled an infrastructure in the
U.S. Gulf Coast region that includes injection disposal sites, transfer
stations, barges, drilling fluids distribution centers, service facilities and
barite mills to supply raw materials for the make-up of drilling fluids.
Integration of Services. We believe we are one of the few companies in
the U.S. Gulf Coast able to provide a package of integrated services and offer
a "one-stop shop" approach to solving customers' problems. Our mats provide the
access roads and work sites for a majority of the land
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drilling in the Gulf Coast market. Our on-site and off-site waste management
services are frequently sold in combination with our mat rental services. In
addition, our entry into the drilling fluids business has created the
opportunity for us to market drilling fluids with other related services,
including technical and engineering services, disposal of used fluids and other
waste material, construction services, site cleanup and site closure.
Consequently, we believe that we are uniquely positioned to take advantage of
the industry trend towards outsourcing and vendor consolidation.
Experience in the Regulatory Environment. We believe that our
operating history provides us with a competitive advantage in the highly
regulated oilfield waste disposal business. As a result of working closely with
regulatory officials and citizens' groups, we have gained acceptance for our
proprietary injection technology and have received a series of permits for our
disposal facilities, including a permit allowing the disposal of NORM at our
Big Hill, Texas facility. These permits enable us to expand our business and
operate cost-effectively. We believe that our proprietary injection method is
superior to alternative methods of disposal of oil field wastes, including
landfarming, because injection provides greater assurance that the waste is
permanently isolated from the environment and will not contaminate adjacent
property or groundwater. We further believe that increasing environmental
regulation and activism will inhibit the widespread acceptance of other
disposal methods and the permitting of additional disposal facilities.
Experienced Management Team. Our executive and operating management
team has built and augmented our capabilities over the past ten years, allowing
us to develop a base of knowledge and a unique understanding of the oilfield
construction and waste disposal markets. Our executive and operating management
team has an average of 22 years of industry experience, and an average of 10
years with us, including several who have been with us for 20 years or more. We
have strengthened our management team by retaining key management personnel of
the companies we have acquired and by attracting additional experienced
personnel.
BUSINESS STRATEGY
Implement Newpark's Minimization Management(TM) Concept. Our strategy
is to integrate our operations to provide a "one-stop shop" approach to solving
customers' problems. By integrating our drilling fluids and waste disposal
services with other on-site services, we intend to provide a comprehensive high
performance, total fluids management solution to managing the total fluids
stream. We call this concept "Minimization Management(TM)". We believe that our
ability to provide a comprehensive high performance package of products and
services reduces the total cost to the customer and increases operating
efficiency.
Service and Product Extensions. We believe that we can apply the waste
processing and injection technology we have pioneered and developed in the oil
and gas exploration industry to other industrial waste markets. Initially, we
have elected to focus on wastes generated in the petrochemical processing and
refining industries, as many potential customers in these industries are
located in the markets we already serve. In addition, we will continue to
evaluate applying our injection disposal methods to other industrial waste
streams. We have begun using a composite plastic mat system to enhance our
current mat fleet and expand into new markets. We believe that these composite
mats may have certain military and emergency response applications for which
the wooden mats were not suitable due to their limited storage life.
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Cost Reductions. Since the third quarter of 1998, we have implemented
a program of reducing operating cost and expenses throughout the company in
order to reposition our operations for the current market. We will continue to
pursue cost reductions in our existing operations to increase margins.
We have implemented washwater recycling facilities at our principal E&P
waste transfer stations. These methods allow us to reduce the volume of waste we
transport, as well as the volume we ultimately dispose in our injection wells.
We recently consolidated certain facilities, as well as supply and purchasing
functions in our drilling fluids business, to eliminate duplicate costs, and to
take advantage of manufacturer direct pricing, volume discounts and rail
transportation efficiencies.
DESCRIPTION OF BUSINESS
E & P WASTE DISPOSAL
E&P Waste Processing. In most jurisdictions, E&P waste, if not treated
for discharge or disposed of on the location where it is generated, must be
transported to a licensed E&P waste disposal or treatment facility. Three
primary alternatives for offsite disposal of E&P waste are available to
generators in the U.S. Gulf Coast: (1) underground injection (see "Injection
Wells"); (2) disposal in surface facilities; and (3) processing and conversion
into a reuse product. In addition, a portion of the waste can be recycled into
a drilling fluids product.
The volume of waste handled by us in 1999, 1998 and 1997 is summarized
in the table below:
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(barrels in thousands) 1999 1998 1997
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Drilling and Production 3,300 4,746 5,329
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Remediation Activity 0 206 92
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Total 3,300 4,952 5,421
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We operate six receiving and transfer facilities located along the
U.S. Gulf Coast from Venice, Louisiana, to Corpus Christi, Texas. Waste
products are collected at the transfer facilities from three distinct
exploration and production markets: (1) offshore; (2) land and inland waters;
and (3) remediation operations at well sites and production facilities. A fleet
of 46 double-skinned barges certified by the U. S. Coast Guard to transport E&P
waste supports these facilities. Waste received at the transfer facilities is
transported by barge through the Gulf Intracoastal Waterway to our 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 our primary E&P waste injection facility.
Improved processing equipment and techniques and increased injection
capacity has substantially eliminated the volume of waste processed for reuse
and delivered to local municipal landfills as a reuse product. Landfills are
required by regulations to cover the solid waste deposited in the facility
daily with earth or other inert material. Our reuse product is deposited at
either the City of Port Arthur Municipal Landfill or the City of Beaumont
Municipal Landfill for use as cover or construction material pursuant to
contracts with the respective cities. We also have developed alternative uses
for the product as roadbase material or construction fill material.
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NORM Processing and Disposal. Many alternatives are available to the
generator for the treatment and disposal of NORM. These include both chemical
and mechanical methods designed to achieve volume reduction, on-site burial of
encapsulated NORM within old well bores and soil washing and other techniques
of dissolving and suspending the radium in solution for onsite injection of
NORM liquids. When 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. We were initially licensed to operate a NORM disposal
business in September 1994 and began operations October 21, 1994. Since May 21,
1996, we have disposed of NORM by injection disposal at our Big Hill, Texas
facility. During 1999, we received 13,900 barrels of NORM contaminated waste,
as compared to 16,500 barrels in 1998 and 52,400 barrels in 1997.
Non-hazardous Industrial Waste. In September 1997, we began the
licensing process to obtain authority to build and operate a facility that will
process and dispose of non-hazardous industrial waste. The permits were issued
in February 1999, and operations began in the third quarter of 1999. Our market
includes refiners, manufacturers, service companies and municipalities.
Injection Wells. Our injection technology is distinguished from
conventional methods in that it utilizes very low pressure, typically less than
100 pounds per square inch ("psi"), to move the waste into the injection zone.
Conventional wells typically use pressures of 2,000 psi or more. If there is a
formation failure or blockage of the face of the injection zone, this pressure
can force waste material beyond the intended zone, posing a potential hazard to
the environment. The low pressure used by us is inadequate to drive the
injected waste from its intended geologic injection zone.
We began using injection for disposing of E&P waste in April 1993.
Under a permit from the Texas Railroad Commission, we began developing a 50
acre injection well facility in the Big Hill Field in Jefferson County, Texas.
During 1995, we licensed and built a new injection well facility at a 400 acre
site near Fannett, Texas, which was placed in service in September 1995 and now
serves as our primary facility for disposing of E&P waste. We have subsequently
acquired several additional injection disposal sites, and now hold an inventory
of approximately 1,250 acres of injection disposal property in Texas and
Louisiana.
We have identified a number of additional sites in the U.S. Gulf Coast
region as suitable for disposal facilities. We have received permits for one
additional site in Texas, and we plan to file for additional permit authority
in Louisiana. We believe that our current processing and disposal capacity will
be adequate to provide for expected future demand for our oilfield and other
waste disposal services.
FLUIDS SALES AND ENGINEERING
We entered the drilling fluids market as a means of distributing
recycled products recovered from our waste business and to provide
environmentally safe high performance fluid systems. In response to weak
pricing due to current market conditions, we have temporarily suspended our
offsite recycling operations, but maintain the capability to produce these
recycled products and expect to resume recycling operations when market
conditions permit. The capacity to provide complete drilling fluids service to
our customers was a key step towards implementation
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of our Minimization Management(TM) strategy. We focus on highly technical
drilling projects involving complex conditions, such as horizontal drilling or
deep water drilling. These projects require constant monitoring and critical
engineering support of the fluids system during the drilling process.
In February 1997, we acquired SBM (now known as Newpark Drilling
Fluids), a full-service provider of drilling fluids and associated engineering
and technical services to the onshore and offshore oil and gas exploration
industry in the Gulf Coast market. We have subsequently expanded our drilling
fluids operations by additional acquisitions in order to broaden our customer
base and obtain the services of key employee-owners of the acquired companies.
These acquisitions have resulted in the expansion of drilling fluids operations
into west Texas, the U.S. Mid-continent, the U.S. Rockies and Canada, and
strengthened our market position on the Gulf Coast.
In May 1998, we began to provide on-site solids control services to our
customers. Solids control services involve the use of specialized equipment to
separate drilling fluids components from drill cuttings during drilling
operations. The drilling fluids components can then be reused in the fluids
system. These solids control services are part of our Minimization
Management(TM) product offering. In the third quarter of 1999, we decided to
discontinue our own solids control services operations and began to outsource
these services through an alliance with Tuboscope, Inc., the industry leader in
solids control services.
Through our drilling fluids operations, we provide environmental
services to the drilling and production industry in Canada using composting
technology. This technique bioremediates the drill cuttings and drilling waste
on location. The customer-generated waste is mixed with wood chips to provide
the bacteria and a proprietary recipe of water and nutrients to reduce the
contaminants below regulatory thresholds. Once remediation is completed, the
remaining compost is returned to the customer for spreading on their property.
We anticipate that this technology will be used in remote areas in our markets.
A project has been successfully completed in Wyoming, and further market
penetration is being pursued there. This composting technology provides us with
another product that is synergistic with our drilling fluids in Canada to
provide the customer a total fluids package.
In the less remote areas, we also have introduced our Tornado
Dryer(TM) to separate oil from the drill cuttings and waste on location. This
equipment also enhances the efficiency of the composting operations by reducing
the amount of oil content in the drill cuttings and waste, prior to composting
treatment.
In May 1997, we acquired a specialty milling company that grinds
barite and other industrial minerals at facilities in Houston, Texas and New
Iberia, Louisiana. Acquiring and then expanding that company's milling capacity
has provided us access to critical raw materials for our drilling fluids
operations. We have also entered into several contract grinding agreements
under which contract mills grind raw barite supplied by us for a fixed fee.
These agreements help assure that we have adequate supplies of raw materials.
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MAT RENTAL AND INTEGRATED SERVICES
Mat rental and sales.
In 1988, we acquired the right to use, in Louisiana and Texas, a
patented prefabricated interlocking wooden mat system for constructing drilling
and work sites, which displaced the use of individual hardwood boards. In 1994,
we began exploring other products, which could substitute for wood in the
constructing of mats. In 1997, we formed a joint venture to manufacture our new
DuraBase(TM) composite mat designed to be lighter, stronger and more durable
than the wooden mats currently in use. The manufacturing facility was completed
in the third quarter of 1998 and immediately began production of the new
composite mats. We have taken delivery of over 18,000 composite mats since
production began. The facility's production rate increased to approximately
5,000 mats per quarter by the fourth quarter of 1999. While we will replace a
large portion of our wooden mats with composite mats, we will maintain some
level of wooden mats in our fleet.
Markets. We provide mats 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. We also provide access
roads and temporary work sites for pipeline, electrical utility and highway
construction projects where protection of the soil is required by environmental
regulations or to assure productivity in unstable soil conditions. We have
performed projects in Georgia, Florida, Texas and Louisiana. Revenue from this
source, which tends to be cyclical, was approximately $2.4 million in 1999,
$5.3 million in 1998 and $1.4 million in 1997.
Rerentals and Sales. The customer typically rents drilling and work
sites for an initial period of 60 days. Often, the customer extends the rental
term for additional 30 day periods, resulting in additional revenues. These
rerental revenues provide higher margins because only minimal incremental
depreciation and maintenance costs accrue to each rerental period. Factors
which may increase rerental revenue include: (1) the trend toward increased
activity in the "transition zone"; (2) a trend toward deeper drilling, taking a
longer time to reach the desired target; and (3) increased commercial success,
requiring logging, testing, and completion (hook-up), extending the period
during which access to the site is required. Occasionally, the customer
purchases the mats when a site is converted into a permanent worksite.
As noted above, we are currently exploring opportunities to sell
composite mats to various governmental agencies, as the composite mats are
stronger, last longer and have a greater shelf life than the wooden mats.
International Markets
Canada. We began shipping wooden mats to Canada in the first quarter
of 1998, and have expanded these operations since then to meet the growing
demand. At present, our entire fleet of 12,000 wooden mats in Canada is in
service, and we are shipping 10,000 more wooden mats to the area. We believe
that customer acceptance for the mat system has grown and that the additional
10,000 wooden mats also will be fully utilized. We believe that continued
acceptance of our mat system in Canada, combined with the need to keep rigs
functioning in Canada during the spring break-up season, may eventually result
in the Canadian mat market approaching the size of our U.S. Gulf Coast mat
market.
Parts of the terrain in western Canada where drilling activity is most
prevalent has soil conditions similar to the marsh regions of the U.S. Gulf
Coast. During the break-up season, beginning in April, and continuing until the
ground freezes late in the year, drilling activity decreases dramatically
because of reduced access to drilling sites. Our mat system provides year
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round access in these areas and should help to reduce the amount of seasonal
inactivity which has traditionally occurred during the break-up season.
Venezuela. Until the end of 1999, we maintained mat operations in
Venezuela. As a result of poor market conditions and continued political
instability in the area, we decided to close down these operations in the
fourth quarter of 1999.
Other Integrated Services
As increasingly more stringent environmental regulations affecting
drilling and production sites are promulgated and enforced, the scope of
services required by the oil companies has increased. 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 on a fully integrated basis. We provide a comprehensive
range of environmental services necessary for our customers' oil and gas
exploration and production activities. These services include:
Site Assessment. Site assessment work begins prior to installing mats
on a drilling site, and generally begins with a study of the proposed well
site. This includes site photography, background soil sampling, laboratory
analysis and investigating 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 our Environmentally Managed Pit
("EMP") Program, we construct waste pits at drilling sites and monitor 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, we dispose of waste onsite by landfarming, through
chemically and mechanically treating 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, we assist the
operator in interfacing with the landowner and regulatory authorities. We also
assist the operator in obtaining necessary permits and in complying with record
maintenance and reporting requirements.
Site Remediation.
E&P Waste (Drilling). When the drilling process is complete, under
applicable regulations, wastewater on the site may be chemically and/or
mechanically treated to eliminate its waste-like characteristics and discharged
into surface waters. Other waste that may not remain on the surface of the site
may be land-farmed on the site or injected under permit into geologic
formations to minimize the need for offsite disposal. Any waste that cannot,
under regulations, remain onsite is manifested and transported to an authorized
facility for processing and disposal at the direction of the generator or
customer.
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E&P Waste (Production). We also provide services to remediate
production pits and inactive waste pits, including those from past oil and gas
drilling and production operations. We provide the following remediation
services: (1) analyzing contaminants present in the pit and determining whether
remediation is required by applicable state regulation; (2) treating waste
onsite and, where permitted, reintroducing that material into the environment;
and (3) removing, containerizing and transporting E&P waste to our processing
facility.
NORM (Production). In January 1994, we became a licensed NORM
contractor, allowing us to perform site remediation work at NORM contaminated
facilities in Louisiana and Texas. We subsequently have received licenses to
perform NORM remediation in other states. Because of increased
worker-protective equipment, extensive decontamination procedures and other
regulatory compliance issues at NORM facilities, the cost of providing NORM
remediation services is materially greater than at E&P waste facilities. These
services generate proportionately higher revenues and operating margins than
similar services at E&P waste facilities.
Site Closure. Site closure services are designed to restore a site to
its pre-drilling condition, replanted with native vegetation. Closure also
involves delivering test results indicating that closure has been completed in
compliance with applicable regulations. This information is important to the
customer because the operator is subject to future regulatory review and
audits. In addition, the information may be required on a current basis if the
operator is subject to a pending regulatory compliance order.
General Oilfield Construction Services. We perform general oilfield
construction services throughout the U.S. Gulf Coast area between Corpus
Christi, Texas and Pensacola, Florida. General oilfield services performed by
us include preparing work sites for installing mats, connecting wells and
placing them in production, laying flow lines and infield pipelines, building
permanent roads, grading, lease maintenance (maintaining and repairing
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. We own a sawmill in Batson, Texas that provides
access to adequate quantities of hardwood lumber to support our wooden mat
business. The mill's products include lumber, timber, and wood chips, 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. We believe that as the composite
mats are introduced into the market, our dependence on the sawmill lumber will
diminish. Therefore, other markets for the wood products are being developed,
including marine lumber, skid material, timbers for crane mats and support
lumber for packaging.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND EQUIPMENT
We believe that our sources of supply for materials or equipment used
in our businesses are adequate for our needs and that we are not dependent upon
any one supplier. Barite used in our drilling fluids business is primarily
provided by our specialty milling company. In addition, barite is obtained from
third party mills under contract grinding arrangements. The raw barite ore used
by the mills is obtained under supply agreements from foreign sources,
primarily China and India. Due to the lead times involved in obtaining barite,
a 90 day or greater supply of barite is maintained at the grinding facilities
at all times. Other materials used in the drilling fluids business are obtained
from various third party suppliers. No serious shortages or delays have been
encountered in obtaining any raw materials, and we do not currently anticipate
any of these shortages or delays.
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We obtain certain patented chemical compounds under long-term supply
contracts with various chemical manufacturers. We own the patent rights for
these products, and we believe that we could arrange suitable supply agreements
with other manufacturers if the current supplier is unable to provide the
products in sufficient quantities.
The new composite mats, which will substantially replace our current
domestic mat fleet, are manufactured through a joint venture in which we have a
49% interest. The resins, chemicals and other materials used to manufacture the
mats are widely available in the market.
We acquire the majority of our hardwood needs in our mat business from
our own sawmill. The hardwood logs are obtained from loggers who operate in
relatively close proximity to the mill. Logging activities are generally
conducted during the drier weather months of May through November. During this
period, inventory increases significantly at the sawmill and is consumed
throughout the remainder of the year.
PATENTS AND LICENSES
We seek patents and licenses on new developments whenever feasible. On
December 31, 1996, we were granted a U.S. patent on our E&P waste and NORM
waste processing and injection disposal system. We have the exclusive,
worldwide license for the life of the patent to use, sell and lease the wooden
and composite mats that we use in our site preparation business. The licensor
of the wooden mats continues to fabricate the mats for us and has the right to
sell mats in locations where we are not engaged in business, but only after
giving us the opportunity to take advantage of the opportunity. We have the
exclusive right to use and resell the new composite mats. Both licenses are
subject to a royalty, which we can satisfy by purchasing specified quantities
of mats annually from the licensor. In our drilling fluids business, we have
obtained a patent on our DeepDrill(TM) product and own the patent on the two
primary components of this product.
Using proprietary technology and systems is an important aspect of our
business strategy. For example, we rely on a variety of unpatented proprietary
technologies and know-how to process E&P waste. Although we believe that this
technology and know-how provide us with significant competitive advantages in
the environmental services business, competitive products and services have
been successfully developed and marketed by others. We believe that our
reputation in our industry, the range of services we offer, ongoing technical
development and know-how, responsiveness to customers and understanding of
regulatory requirements are of equal or greater competitive significance than
our existing proprietary rights.
CUSTOMERS
Our customers are principally major and independent oil and gas
exploration and production companies operating in the markets that we serve,
with the vast majority of these customers concentrated in Louisiana and Texas.
During the year ended December 31, 1999, approximately 37% of our
revenues were derived from 20 major customers, including five major oil
companies. No one customer accounted for more than 10% of our consolidated
revenues. Given current market conditions and the nature
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of the products involved, we do not believe that the loss of any single
customer would have a material adverse effect on our business.
We perform services either pursuant to standard contracts or under
longer term negotiated agreements. As most agreements with our customers are
cancelable upon limited notice, our backlog is not significant.
We do not derive a significant portion of our revenues from government
contracts of any kind.
COMPETITION
We operate in several niche markets where we are a leading provider of
services. In our disposal business, we often compete with our major customers,
who continually evaluate the decision whether to use internal disposal methods
or utilize a third party disposal company such as Newpark. The markets for our
mat and integrated services business are fragmented and highly competitive,
with many small competitors providing similar products and services. In the
drilling fluids industry, we face competition from both larger companies that
may have broader geographic coverage, and smaller companies that may have lower
capital cost structures.
We believe that the principal competitive factors in our businesses
are price, reputation, technical proficiency, reliability, quality, breadth of
services offered and managerial experience. We believe that we effectively
compete on the basis of these factors. We also believe that our competitive
position benefits from our proprietary, patented mat system used in our site
preparation business, our proprietary treatment and disposal methods for both
E&P waste and NORM waste streams and our ability to provide our customers with
an integrated well site management program, including environmental, drilling
fluids and general oilfield services. Additionally, 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.
We believe our ability to provide a number of services as part of a
comprehensive program enables us to price our services competitively.
ENVIRONMENTAL DISCLOSURES
We have sought to comply with all applicable regulatory requirements
concerning environmental quality. We have made, and expect to continue to make,
the necessary expenditures for environmental protection and compliance at our
facilities, but we do not expect that these will become material in the
foreseeable future. No material expenditures for environmental protection or
compliance were made during 1998 or 1999.
We derive a significant portion of our revenue from environmental
services provided to our customers. These services have become necessary in
order for our customers to comply with regulations governing discharge of
materials into the environment. Substantially all of our capital expenditures
made in the past several years, and those planned for the foreseeable future,
are directly or indirectly influenced by the needs of customers to comply with
these regulations.
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EMPLOYEES
At February 29, 2000, we employed 933 full and part-time personnel,
none of which are represented by unions. We consider our relations with our
employees to be satisfactory.
ENVIRONMENTAL REGULATION
We deal primarily with E&P waste and NORM in our waste disposal
business. E&P waste and NORM are generally described as follows:
E&P Waste. Oilfield Exploration and Production Waste, or E&P waste, is
waste generated in exploring for or producing oil and gas. These wastes
typically contain levels of oil and grease, salts or chlorides, and heavy
metals exceeding concentration limits defined by state regulators. E&P waste
also includes soils that have become contaminated by these materials. In the
environment, oil and grease and chlorides disrupt the food chain and have been
determined by regulatory authorities to be harmful to plant and animal life.
Heavy metals are toxic and can become concentrated in living tissues.
NORM. Naturally Occurring Radioactive Material, or NORM, is present
throughout the earth's crust at very low levels. Among the radioactive
elements, only Radium 226 and Radium 228 are slightly soluble in water. Because
of their solubility, which can carry them into living plant and animal tissues,
these elements may present a hazard. Radium 226 and Radium 228 can be leached
out of hydrocarbon bearing strata deep underground by salt water which is
produced with the hydrocarbons. Radium can coprecipitate with scale out of the
production stream as it is drawn to the surface and encounters a pressure or
temperature change in the well tubing or production equipment, forming a
rust-like scale. This scale contains radioactive elements that, over many
years, can become concentrated on tank bottoms or at water discharge points at
production facilities. Thus, NORM waste is E&P waste that has become
contaminated with these radioactive elements above concentration levels defined
by state regulatory authorities.
For many years, prior to current regulation, industry practice was to
allow E&P waste to remain in the environment. Onshore, surface pits were used
for disposing E&P waste; offshore or in inland waters, E&P waste was discharged
directly into the water. Since 1990, E&P waste has become subject to increased
public scrutiny and increased federal and state regulation. These regulations
have imposed strict requirements for ongoing drilling and production activities
in certain geographic areas, as well as for remediating sites contaminated by
past disposal practices and, in many respects, have prohibited the prior
disposal practices. In addition, operators have become increasingly concerned
about long-term liability for remediation, and landowners have become more
aggressive in requiring land restoration. For these reasons, operators are
increasingly retaining service companies such as Newpark to devise and
implement comprehensive waste management techniques to handle waste on an
ongoing basis and to remediate past contamination of oil and gas properties.
Between 1990 and 1995, substantially all discharges of waste from
drilling and production operations on land (the "onshore subcategory") and in
the transition zone (the "coastal subcategory") were prohibited. This "zero
discharge" standard has become the expected pattern for the industry. Effective
December 4, 1997, discharges of waste from drilling operations in state
territorial waters of the Gulf of Mexico (the "territorial waters
subcategory"), were prohibited. We immediately noticed an increase in waste
volume received from this subcategory in our daily
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operations. However, as drilling projects in progress as of that date were
completed, most of the rigs subsequently moved outside of the area covered by
those regulations. Since December 4, 1997, the offshore waters of the Gulf of
Mexico have been the only surface waters of the United States into which these
waste discharges are allowed. Recent EPA rulemaking efforts have been directed
towards further restricting discharges into those waters. Stricter enforcement
of the requirements of the Clean Water Act is expected to ultimately result in
similar "zero discharge" regulations affecting the offshore waters of the Gulf
of Mexico. However, the timing for implementing these regulations is uncertain.
NORM regulations require more stringent worker protection, handling
and storage procedures than those required of E&P waste under Louisiana
regulations. Equivalent rules governing the disposal of NORM have also been
adopted in Texas, and similar regulations have been adopted in Mississippi, New
Mexico, and Arkansas.
Our 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
our business. We routinely handle and profile hazardous regulated material for
our customers. We also handle, process and dispose of nonhazardous regulated
materials. This section discusses various federal and state pollution control
and health and safety programs that are administered and enforced by regulatory
agencies, including, without limitation, the U.S. Environmental Protection
Agency ("EPA"), the U.S. Coast Guard, the U.S. Army Corps of Engineers, the
Texas Natural Resource Conservation Commission, the Texas Department of Health,
the Texas Railroad Commission, the Louisiana Department of Environmental
Quality and the Louisiana Department of Natural Resources. These programs are
applicable or potentially applicable to our current operations. Although we
intend to make capital expenditures to expand our environmental services
capabilities in response to customers' needs, we believe that we are not
presently required to make material capital expenditures to remain in
compliance with federal, state and local provisions relating to the protection
of the environment.
RCRA. The Resource Conservation and Recovery Act of 1976, as amended
in 1984 ("RCRA"), is the principal federal statute governing hazardous waste
generation, treatment, storage and disposal. RCRA and state hazardous waste
management programs govern the handling and disposal of "hazardous wastes". The
EPA has issued regulations pursuant to RCRA, and states have promulgated
regulations under comparable state statutes, that govern hazardous waste
generators, transporters and owners and operators of hazardous waste treatment,
storage or disposal facilities. These regulations impose detailed operating,
inspection, training and emergency preparedness and response standards and
requirements for closure, financial responsibility, manifesting of waste,
record-keeping and reporting, as well as treatment standards for any hazardous
waste intended for land disposal.
Our primary operations involve E&P waste, which is exempt from
classification as a RCRA-regulated hazardous waste. Many state counterparts to
RCRA also exempt E&P waste from classification as a hazardous waste; however,
extensive state regulatory programs govern the management of such waste. In
addition, in performing other services for its customers, we are subject to
both federal (RCRA) and state solid or hazardous waste management regulations
as contractor to the generator of this waste.
Proposals have been made in the past to rescind the exemption that
excludes E&P waste from regulation as hazardous waste under RCRA. If this
exemption is repealed or modified by
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administrative, legislative or judicial process, we could be required to
significantly change our method of doing business. There is no assurance that
we would have the capital resources available to do so, or that we would be
able to adapt our operations to the changed regulations.
Subtitle I of RCRA regulates underground storage tanks in which liquid
petroleum or hazardous substances are stored. States have similar regulations,
many of which are more stringent in some respects than the federal regulations.
The implementing regulations require that each owner or operator of an
underground tank notify a designated state agency of the existence of the
underground tank, specifying the age, size, type, location and use of each
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.
We have a number of underground storage tanks that are subject to 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. We are not aware of any existing
conditions or circumstances that would cause us to incur liability under RCRA
for failure to comply with regulations relating to underground storage tanks.
However, cleanup costs associated with releases from these underground storage
tanks or costs associated with changes in environmental laws or regulations
could be substantial and could have a material adverse effect on our
consolidated financial statements.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act, as amended in 1986 ("CERCLA"), provides for immediate response
and removal actions coordinated by the EPA in response to certain releases of
hazardous substances into the environment and authorizes the government, or
private parties, to respond to the release or threatened release of hazardous
substances. The government may also order persons responsible for the release
to perform any necessary cleanup. Liability extends to the present owners and
operators of waste disposal facilities from which a release occurs, persons who
owned or operated the facilities at the time the hazardous substances were
released, persons who arranged for disposal or treatment of hazardous
substances and waste transporters who selected the facilities for treatment or
disposal of hazardous substances. CERCLA has been interpreted to create strict,
joint and several liabilities for the costs of removal and remediation, other
necessary response costs and damages for injury to natural resources.
Among other things, CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have been or are
threatened to be released and that require investigation or cleanup. The NPL is
subject to change, with additional sites being added and remediated sites being
removed from the list. In addition, the states in which we conduct operations
have enacted similar laws and keep similar lists of sites that may need
remediation.
Although we primarily handle oilfield waste classified as E&P waste,
this waste typically contains constituents designated by the EPA as hazardous
substances under RCRA, despite the current exemption of E&P waste from
hazardous substance classification or another applicable federal statute. Where
our operations result in the release of hazardous substances, including
releases at sites owned by other entities where we perform our services, we
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 us in the future.
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In particular, divisions and subsidiaries that we previously owned were
involved in extensive mining operations at facilities in Utah and Nevada and in
waste generation and management activities in numerous other states. These
activities involved substances that may be classified as RCRA hazardous
substances. Any of those sites or activities potentially could be the subject
of future CERCLA damage claims.
With the exception of the sites discussed in "Environmental
Proceedings" below, we are not aware of any present claims against us that are
based on CERCLA or comparable state statutes. Nonetheless, we could be subject
to liabilities if additional sites at which clean-up action is required are
identified. These liabilities could have a material adverse effect on our
consolidated financial statements.
The Clean Water Act. The Clean Water Act regulates the discharge of
pollutants, including E&P waste, into waters of the United States. The Clean
Water Act establishes a system of standards, permits and enforcement procedures
for discharging pollutants from industrial and municipal wastewater sources.
The law sets treatment standards for industries and waste water treatment
plants, requires permits for industrial and municipal discharges directly into
waters of the United States and requires pretreatment of industrial waste water
before discharge into municipal systems. The Clean Water Act gives the EPA the
authority to set pretreatment limits for direct and indirect industrial
discharges.
In addition, the Clean Water Act prohibits certain discharges of oil
or hazardous substances and authorizes the federal government to remove or
arrange for removal of this oil or hazardous substances. Under the Clean Water
Act, the owner or operator of a vessel or facility from which oil or a
hazardous substance is discharged into navigable waters may be liable for
penalties, the costs of cleaning up the discharge and natural resource damage
caused by the spill.
We treat and discharge waste waters at certain of our facilities.
These activities are subject to the requirements of the Clean Water Act, and
comparable state statutes, and federal and state enforcement of these
regulations.
The Clean Water Act also imposes requirements that are applicable to
our customers and are material to our business. EPA Region 6, which includes
our market, continues to issue new and amended National Pollutant Discharge
Elimination System ("NPDES") general permits further limiting or restricting
substantially all discharges of produced water from the Oil and Gas Extraction
Point Source Category into waters of the United States. These permits include:
1) Onshore subcategory permits for Texas, Louisiana, Oklahoma
and New Mexico issued in February, 1991 (56 Fed. Reg. 7698).
These permits completely prohibit discharging drilling
fluids, drill cuttings, produced water or sand, and various
other oilfield wastes generated by onshore operations into
waters of the United States. These permits have effectively
require that most oilfield wastes follow established state
disposal programs. These general permits expired on February
25, 1996, but pursuant to EPA policy, they are considered to
remain in effect until reissued by the EPA or superseded by
other EPA action.
2) Permits for produced water and produced sand discharges into
coastal waters of Louisiana and Texas were issued on January
9, 1995 (60 Fed. Reg. 2387). Coastal
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means "waters of the United States...located landward of the
territorial seas". Under these regulations, all such
discharges were required to cease by January 1, 1997.
3) The Outer Continental Shelf ("OSC") permit covering oil and
gas operations in federal waters in the Gulf (seaward of the
Louisiana and Texas territorial seas) was reissued in
November 1992 and modified in December 1993. The existing
permit was combined with a new source permit on August 9,
1996 (61 Fed. Reg. 41609). This permit prohibits certain
discharges of drilling fluids and drill cuttings and includes
stricter limits for oil and grease concentrations in produced
waters to be discharged. These limits are based on the Best
Available Treatment ("BAT") requirements contained in the Oil
and Gas Offshore Subcategory national guidelines which were
published March 4, 1993. Additional requirements include
toxicity testing and bioaccumulation monitoring studies of
proposed discharges. The general permit for the Western
portion of the Gulf of Mexico was reissued on November 2,
1998 (63 Fed. Reg. 58722) with very few changes. However, on
February 3, 1999 (64 Fed. Reg. 5488) the EPA issued a
proposed rule that will establish effluent limitation
guidelines for synthetic-based and other non-aqueous drilling
fluids. One of the proposed guidelines is a discharge limit
of 10.2 % for drilling fluid retained on cuttings. We believe
that companies will likely require additional solids handling
technology in order to achieve the proposed limit and that we
have access to technology capable of meeting this standard.
The comment period for this proposed rule currently is
scheduled to end on May 4, 1999.
4) A permit for the territorial seas of Louisiana was issued on
November 4, 1997 (62 Fed. Reg. 59687). The permit became
effective on December 4, 1997, except for the water quality
based limits and certain monitoring requirements that became
effective May 4, 1998. The permit prohibits the discharge of
drilling fluids, drill cuttings and produced sand. Produced
water discharges are limited for oil and grease, toxic
metals, organics, and chronic toxicity. The territorial seas
part of the Offshore Subcategory begins at the line of
ordinary low water along the part of the coast which is in
direct contact with the open sea, and extends out three
nautical miles. This permit covers both existing sources and
new sources. All discharges in state waters must comply with
any more stringent requirements contained in Louisiana Water
Quality Regulations, LAC 33.IX.7.708. We believe that a
similar permit will be proposed for the Texas territorial
seas in the future.
The combined effect of all these permits closely approaches a "zero
discharge standard" affecting all waters except those of the OCS. We, along
with industry participants, believe that these permits and the requirements of
the Clean Water Act may ultimately lead to a total prohibition of overboard
discharge in the Gulf of Mexico.
The Clean Air Act. The Clean Air Act provides for federal, state and
local regulation of emissions of air pollutants into the atmosphere. Any
modification or construction of a facility with regulated air emissions must be
a permitted or authorized activity. The Clean Air Act provides for
administrative and judicial enforcement against owners and operators of
regulated facilities, including substantial penalties. In 1990, the Clean Air
Act was reauthorized and amended, substantially increasing the scope and
stringency of the Clean Air Act's requirements. The Clean Air Act has very
little impact on our operations.
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Oil Pollution Act of 1990. The Oil Pollution Act of 1990 contains
liability provisions for cleanup costs, natural resource damages and property
damages resulting from discharges of oil into navigable waters, as well as
substantial penalty provisions. The OPA also requires double hulls on all new
oil tankers and barges operating in waters subject to the jurisdiction of the
United States. All marine vessels operated by Newpark already meet this
requirement.
State Regulation. In 1986, the Louisiana Department of Natural
Resources ("DNR") promulgated Order 29-B. Order 29-B contains extensive rules
governing pit closure and the generation, treatment, storage, transportation
and disposal of E&P waste. Under Order 29-B, onsite disposal of E&P waste is
limited and is subject to stringent guidelines. If these guidelines cannot be
met, E&P waste must be transported and disposed of offsite in accordance with
the provisions of Order 29-B. Moreover, under Order 29-B, most, if not all,
active waste pits must be closed or modified to meet regulatory standards;
those pits that continue to be allowed may be used only for a limited time. A
material number of these pits may contain concentrations of radium that are
sufficient to require the waste material to be categorized as NORM.
The DNR issued three emergency rules for oilfield waste testing during
1998. The rules call for comprehensive and systematic testing of oilfield waste
disposed at commercial facilities throughout the State of Louisiana. All E&P
waste generated within or without Louisiana, including offshore Louisiana
(state and federal waters), that is to be transported to a commercial facility
in the State of Louisiana must be sampled at the point of generation in
accordance with the emergency rule. We understand that the DNR may use the
collected data to revise Statewide Order 29-B. The three rules were effective
as of May 1, August 29 and October 1, 1998, and each rule, by law, remained
effective for a period of only 120 days. The DNR has continued the requirement
for oilfield waste testing in a fourth emergency rule that became effective as
of January 29, 1999.
Rule 8 of the Texas Railroad Commission also contains detailed
requirements for the management and disposal of E&P waste and Rule 94 governs
the management and disposal of NORM. In addition, Rule 91 regulates the cleanup
of spills of crude oil from oil and gas exploration and production activities,
including transportation by pipeline. In general, contaminated soils must be
remediated to total petroleum hydrocarbons content of less than 1%. The State
of Texas also has established an Oilfield Cleanup Fund to be administered by
the Texas Railroad Commission to plug abandoned wells if the Commission deems
it necessary to prevent pollution, and to control or clean up certain oil and
gas wastes that cause or are likely to cause pollution of surface or subsurface
water. Other states (New Mexico, Mississippi, Arkansas) where the Company
operates have similar regulations. Oklahoma is presently in the process of
drafting NORM oil and gas regulations. We recently received the first specific
license to conduct NORM remediation in Arkansas.
Many states maintain licensing and permitting procedures for the
constructing and operating 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. We have obtained certain air
permits and believe that we are exempt from obtaining other air permits at our
Texas facilities, including our Port Arthur, Texas, E&P waste facility. We met
with the TNRCC and filed for an air permit exemption for our Port Arthur
facility in the fall of 1991, which exemption was granted by the TNRCC. A
subsequent renewal letter was filed and granted in 1995. Based upon
communications with the TNRCC, we expect that our operations at the Port Arthur
facility will
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continue to remain exempt from air permitting requirements. However, should it
not remain exempt, we believe that compliance with the permitting requirements
of the TNRCC would not have a material adverse effect on our consolidated
financial statements.
Other Environmental Laws. We are 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 us and could
subject to further scrutiny our handling, manufacture, use or disposal of
substances or pollutants. We cannot predict the extent to which our operations
may be affected by future enforcement policies as applied to existing laws or
by the enactment of new statutes and regulations.
RISK MANAGEMENT
Our business exposes us to substantial risks. For example, our
environmental services business routinely handles, stores and disposes
nonhazardous regulated materials and waste, and in some cases, handles
hazardous regulated materials and waste for our customers who generate this
waste. We 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, we often are required
to indemnify our customers or other third-parties against certain risks related
to the services we perform, including damages stemming from environmental
contamination.
We have 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 maintaining insurance
coverage.
We carry a broad range of insurance coverage that we consider adequate
for protecting our assets and operations. This coverage includes general
liability, comprehensive property damage, workers' compensation and other
coverage customary in our industries; however, this insurance is subject to
coverage limits and certain policies exclude coverage for damages resulting
from environmental contamination. We 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 us, that the possible
types of liabilities that may be incurred will be covered by our insurance,
that our insurance carriers will meet their obligations or that the dollar
amount of any liability will not exceed our policy limits.
ITEM 2. PROPERTIES
Our corporate offices in Metairie, Louisiana, consisting of
approximately 7,000 square feet, are occupied at an annual rental of
approximately $138,000 under a lease expiring in December 2002.
We own an office building in Lafayette, Louisiana, consisting of
approximately 35,000 square feet. This building houses the administrative
offices of our E&P waste disposal and mat
22
<PAGE> 23
and integrated services segments. We are in the process of selling our office
building in Lafayette, Louisiana in a sale-leaseback transaction.
We lease approximately 105,000 square feet of office space in Houston,
Texas, which houses the administrative offices of our fluids sales and
engineering segment. The lease has an annual rent of approximately $2.0 million
and expires in December 2009. We sublease approximately 26,000 square feet of
this office space at an annual aggregate rental of $460,000 for five years,
commencing in August 2000. This sublease also contains an option to sublease an
additional 21,000 square feet at similar rates.
Our Port Arthur, Texas, E&P waste facility, which is used in our E&P
waste disposal segment, is subject to annual rentals totaling approximately
$535,000 under three separate leases. A total of six acres are under lease with
various expiration dates through 2002, all with extended options to renew.
We own two injection disposal sites, which are used in our E&P waste
disposal segment. These disposal sites are both in Jefferson County, Texas, one
on 50 acres of land and the other on 400 acres. Eight wells are currently
operational at these sites. In January 1997, we purchased 120 acres located
adjacent to one of the disposal sites, on which we have constructed a
non-hazardous industrial waste injection disposal facility. We also own an
additional injection facility, which includes two active injection wells on 37
acres of land, adjacent to our Big Hill, Texas facility.
In October 1997, we acquired land and facilities in west Texas at
Andrews, Big Springs, Plains and Fort Stockton, Texas at which brine is
extracted and sold and E&P waste is disposed in the salt domes or caverns
created by the extraction process. A total of 125 acres of land was acquired in
this transaction, which is used in our E&P waste disposal segment.
We lease a fleet of 46 double-skinned barges, which we use in our E&P
waste disposal segment under leases with terms from five to ten years. 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 $2.6 million during 1999.
We operate two specialty product grinding facilities in our fluids
sales and engineering segment. One is located on 6.6 acres of leased land in
Channelview, Texas, with an annual rental rate of $24,000. The other is located
on 13.7 acres of leased land in New Iberia, Louisiana, with an annual rental
rate of $78,000.
In our E&P waste disposal segment, we use six leased facilities
located along the Gulf Coast at an annual total rental of $568,000. In our
fluids sales and engineering segment, we serve customers from five leased bases
located along the Gulf Coast at an annual total rental rate of approximately
$1.5 million.
We own 80 acres occupied as a sawmill facility near Batson, Texas,
which is used in our mat and integrated services segment.
23
<PAGE> 24
ITEM 3. LEGAL PROCEEDINGS
We are involved in litigation and other claims or assessments on
matters arising in the normal course of our business. In the opinion of
management, any recovery or liability in these matters should not have a
material effect on our consolidated financial statements.
ENVIRONMENTAL PROCEEDINGS
In the ordinary course of conducting our business, we become involved
in judicial and administrative proceedings involving governmental authorities
at the federal, state and local levels, as well as private party actions.
Pending proceedings that allege liability related to environmental matters are
described below. We believe 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 our past or present operations.
We continue to be involved in the voluntary cleanup associated with
the DSI sites in southern Mississippi. This includes three facilities known as
Clay Point, Lee Street and Woolmarket. The Mississippi Department of
Environmental Quality is overseeing the cleanup. The DSI Technical Group that
represents the potentially responsible parties, including Newpark, awarded us a
contract to perform the remediation work at the three sites. The cleanup of
Clay Point and Lee Street has been completed. Some additional work may be
required at the Woolmarket site. However, we do not expect the amount to be
material.
We have been identified as a contributor of material to the MAR
Services facility, a state voluntary cleanup site located in Louisiana. Because
we delivered only processed solids meeting the requirements of Louisiana
Statewide Executive Order 29-B to the site, we do not believe we have material
financial liability for the site cleanup cost. The Louisiana Department of
Natural Resources is overseeing voluntary cleanup at the site. The oversight
group has awarded us a contract for the initial phase of cleanup at this site.
Recourse against our insurers under general liability insurance
policies for reimbursement in the actions described above 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 our ultimate liability.
We believe that any liability incurred in the matters described above
will not have a material adverse effect on our consolidated financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
24
<PAGE> 25
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded on the New York Stock Exchange under the
symbol "NR".
The following table sets forth the range of the high and low sales
prices for our common stock for the periods indicated:
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C>
1998
1st Quarter $ 20.313 $ 12.000
2nd Quarter $ 25.375 $ 9.750
3rd Quarter $ 12.875 $ 5.500
4th Quarter $ 10.000 $ 5.313
1999
1st Quarter $ 8.0625 $ 4.8750
2nd Quarter $ 11.4375 $ 6.7500
3rd Quarter $ 10.4375 $ 6.7500
4th Quarter $ 8.1875 $ 5.0000
</TABLE>
At December 31, 1999, we had 2,743 stockholders of record.
Except for the dividends required under the terms of the outstanding
shares of Preferred Stock, we do not intend to pay any cash dividends in the
foreseeable future, and our Board of Directors currently intends to retain
earnings for use in our business. In addition, our credit facility and the
Indenture relating to our outstanding Senior Subordinated Notes contain
covenants which significantly limit the payment of dividends on the common
stock.
25
<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated historical financial data presented below for
the five years ended December 31, 1999, are derived from our audited
consolidated financial statements. This financial data has been restated to
reflect: (i) discontinuation of operations in our solids control business during
1999, (ii) several acquisitions made during 1997 and 1998 which were accounted
for as poolings of interests; (iii) a two-for-one split of our common stock
effective May 1997; and (iv) a 100% stock dividend issued by us in November
1997. The following data should be read in conjunction with our Consolidated
Financial Statements and the Notes thereto, which are included elsewhere in this
Form 10-K, and with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------
1999 1998(1) 1997(1) 1996(2) 1995
-----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Revenues $ 190,776 $ 245,458 $ 227,223 $ 151,906 $ 120,133
Cost of services provided 132,530 168,364 134,231 99,196 81,446
Operating costs 54,920 58,649 24,573 14,024 14,565
General and administrative expenses 2,589 4,305 3,185 2,920 2,658
Goodwill amortization 4,996 5,206 2,683 856 63
Provision for uncollectible accounts 2,853 9,180 -- -- --
Write-down of abandoned and disposed assets 44,870 52,266 -- -- --
Impairment of long-lived assets 23,363 -- -- -- --
Terminated merger expenses 2,957 -- -- -- --
Arbitration settlement -- 27,463 -- -- --
Equity in net loss of unconsolidated affiliates -- 1,293 -- -- --
Restructure expense -- -- -- 2,432 --
---------- ---------- ---------- ---------- ----------
Operating income (loss) (78,302) (81,268) 62,551 32,478 21,401
Interest income (987) (1,488) (308) (264) (278)
Interest expense 16,651 11,554 4,168 3,965 3,883
Other -- -- -- -- 183
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations before
income taxes & cumulative effect of accounting
change (93,966) (91,334) 58,691 28,777 17,613
Provision (benefit) for income taxes (27,246) (29,787) 21,755 9,839 4,971
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before cumulative effect of accounting change (66,720) (61,547) 36,936 18,938 12,642
Income (loss) from discontinued operations
(less applicable income taxes) (3,406) (742) 805 14 238
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative effect of
accounting change (70,126) (62,289) 37,741 18,952 12,880
Cumulative effect of accounting change
(net of income tax effect) 1,471 (1,326) -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (68,655) $ (63,615) $ 37,741 $ 18,952 $ 12,880
========== ========== ========== ========== ==========
Net income (loss) per common and common
equivalent shares:
Basic $ (1.01) $ (0.95) $ 0.59 $ 0.36 $ 0.28
========== ========== ========== ========== ==========
Diluted $ (1.01) $ (0.95) $ 0.58 $ 0.34 $ 0.27
========== ========== ========== ========== ==========
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1999 1998(1) 1997(1) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Weighted average common and common
equivalent shares outstanding:
Basic 68,949 67,058 64,158 53,197 46,640
========== ========== ========== ========== ==========
Diluted 68,949 67,058 65,630 54,956 47,706
- ----------------------- ========== ========== ========== ========== ==========
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 48,244 $ 75,937 $ 88,882 $ 28,301 $ 31,832
Total assets 450,191 494,605 448,902 298,421 160,296
Short-term debt 1,618 1,267 1,661 13,348 8,389
Long-term debt 209,210 208,057 127,179 35,359 47,365
Stockholders' equity 186,339 236,879 269,442 206,362 80,227
</TABLE>
(1) 1998 includes the effects of eight acquisitions and 1997 includes the
effects of seven acquisitions, primarily in the fluids sales and
engineering segment. These were accounted for by the purchase method of
accounting (See Note B to Consolidated Financial Statements).
(2) 1996 includes the effects of the purchase of substantially all of the
non-landfarm assets and certain leases from Campbell Wells, Ltd. (See Note
B to Consolidated Financial Statements).
27
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our financial condition, results of
operations, liquidity and capital resources should be read together with our
"Consolidated Financial Statements" and the "Notes to Consolidated Financial
Statements" included elsewhere in this report.
OPERATING ENVIRONMENT AND RECENT DEVELOPMENTS
Our operating results depend primarily on oil and gas drilling activity
levels in the markets we serve. These levels, in turn, depend on oil and gas
commodities pricing, inventory levels and product demand. Key average rig count
data for the last three years is listed in the following table:
<TABLE>
<CAPTION>
1999 1998 1997 1Q99 2Q99 3Q99 4Q99
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Rig Count 625 831 943 551 521 637 773
Newpark's primary Gulf Coast market 189 243 252 185 172 183 213
Newpark's primary market to total 30.2% 29.2% 26.7% 33.6% 33.0% 28.7% 27.6%
Canadian Rig Count 246 261 375 290 104 253 337
</TABLE>
- -------
Source: Baker Hughes Incorporated
Our primary Gulf Coast market, which accounted for approximately 75% of
1999 revenues, includes: (1) South Louisiana Land; (2) Texas Railroad Commission
Districts 2 and 3; (3) Louisiana and Texas Inland Waters; and (4) Offshore Gulf
of Mexico. According to Baker Hughes Incorporated, as of the week ended March
10, 2000, the U.S. rig count was 768, with 224 rigs, or 29.2%, within our
primary market.
The Canadian "muskeg" presents much of the same soil stability and
access problems as does the marsh area of the U.S. Gulf Coast region. Most
drilling activity in the muskeg has historically been conducted when winter
temperatures freeze the soil and stabilize it, allowing safe access. The
quarterly fluctuations in the Canadian rig count generally reflect the seasonal
nature of drilling activity related to these access issues. As of the week ended
March 10, 2000, the Canadian rig count was 441.
The table below shows the average crude oil and natural gas prices for
1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
West Texas Intermediate Crude ($/bbl) 19.20 14.39 20.63
U.S. Spot Natural Gas ($/mcf) 2.33 2.09 2.49
</TABLE>
- -----------
Source: Wall Street Journal
Oil prices declined throughout 1998 and remained low through the first
quarter of 1999. Oil prices began to recover in the second quarter of 1999 and
improved throughout the remainder of 1999 and into the first quarter of 2000.
During the first quarter of 2000, the pricing for West Texas intermediate crude
approached $30.00/bbl, and the U.S. spot price for natural gas approached
$2.75/mcf. In spite of the recent recovery, the decline in oil and gas prices
had a major negative impact on average rig counts during 1998 and 1999
28
<PAGE> 29
in the markets we serve. During this time, the U.S. rig count reached the lowest
level ever recorded in the history of the indicator. With the improvement in oil
and gas prices in the second half of 1999, the average rig activity increased
for the first time in six quarters during the third quarter of 1999. The
increase in rig activity has continued through the first quarter of 2000, but
has trailed the recovery in oil and gas prices as our independent oil and gas
exploration customers repair their balance sheets and replenish their cash
position.
Natural gas production accounts for the majority of activity in the
Gulf Coast region. The relative concentration of rigs in our primary market, as
compared to the total domestic rig count, reflects the importance of natural gas
drilling relative to oil in that market. Low oil prices reduce the cash flow
available for all exploration and production activity. In addition, gas storage
levels and demand for natural gas have a significant impact on gas drilling
requirements, as gas suppliers need to maintain adequate storage for peak demand
levels and insure adequate supplies for anticipated future demand.
During 2000, gas storage levels reached their lowest point in over
three years, and current industry forecasts reflect a stable to growing demand
for natural gas. In addition, current productive gas reserves are being depleted
at a rate faster than current replacement through drilling activities.
Accordingly, we believe that gas drilling activity will increase over current
levels in order to avoid a shortage in gas supply during peak demand periods in
the coming months. Because most shallow fields in the Gulf Coast market have
been exploited, producers are increasing the depth of drilling to reach the
larger gas reserves. As such, we expect gas drilling activity to be increasingly
associated with deeper, more costly wells.
According to industry forecasts, increases in gas supplies resulting
from the new Canadian pipeline may help to abate some of the anticipated gas
supply problem. However, these increased supplies are not expected to be
sufficient to avoid the need for increases in Gulf Coast gas drilling activity.
In the third quarter of 1998, we began to reshape our company in
response to the downturn in industry activity and to accommodate our
introduction of new products and services. Our employment peaked late in 1998 at
1,325 employees, with direct payroll costs representing almost 28% of revenue.
By the fourth quarter of 1999, we had reduced employment by 25%, to 991, with
direct payroll costs representing less than 19% of revenue. Despite the adverse
market, we continued to develop new products and services, and provide existing
products and services to new geographic regions, to meet new opportunities that
we expect to arise with increased industry activity. These include:
o The DuraBase(TM) composite mat system
o The DeepDrill(TM) fluid system
o Minimization Management(TM)
o Wooden mats in the western Canadian market
o Composting in the eastern Canadian and U.S. Rocky Mountain market
o The Tornado Dryer(TM) in the western Canadian market
o Industrial non-hazardous waste processing and disposal
29
<PAGE> 30
In 1998 and 1999, these new products and services accounted for the
majority of capital expenditures. In addition, the costs associated with
introducing these new products and services negatively impacted operating
segment income, exclusive of the charges discussed below. These new products and
services, together with our operational restructuring, are expected to enhance
our ability to take advantage of the market recovery that appears to be
underway. However, no assurances can be made that our market will recover to
previous levels or that these new products and services will be successful.
As a result of these new products and services and other market shifts,
we have displaced some of our operations and operating assets and during 1998
and 1999 recorded several significant charges as discussed below.
RESULTS OF OPERATIONS
Operating Results for 1998 and 1997 have been restated to give effect
to our discontinuing operations in our solids control business in the third
quarter of 1999. In addition, results for 1997 have been restated to give effect
to a series of pooling of interests transactions which took place during 1997
and 1998.
As noted above, due to a significant decrease in the price of oil and
gas and the resultant impact on drilling activity, we experienced a sharp
decline in demand for our products and services during the third and fourth
quarters of 1998, which continued in 1999. This decline in customer demand
materialized quickly from the previous growth period and, when coupled with our
continued efforts to bring certain proprietary innovations to our customers,
caused us to reassess our overall operations. This change in our market and the
reassessment of our operations, as well as the settlement of an arbitration
dispute in 1998, resulted in our recording the following pretax charges during
1999 and 1998:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
----------- -----------
<S> <C> <C>
Provision for uncollectible accounts $ 2,853 $ 9,180
Write-down of abandoned and disposed assets 44,870 52,266
Impairment of long-lived assets 23,363 --
Terminated merger expense 2,957 --
Arbitration settlement -- 27,463
----------- -----------
Total $ 74,043 $ 88,909
=========== ===========
</TABLE>
The provision for uncollectible accounts in 1998 was made due to the
financial weakness of certain customers, which resulted from continued downward
pressure on oil and gas prices. This, in turn, caused a strain on customer cash
flows. We had by then identified three specific customer balances where the
financial concern merited the majority of the additional reserve in 1998. Most
of these customers have now filed for bankruptcy protection. For 1999, the
additional provision relates primarily to a decrease in the recovery we expect
to receive from pre-bankruptcy receivables for these same customers, as
indicated in their approved or proposed plans of reorganization.
30
<PAGE> 31
The write-down of abandoned and disposed assets includes the following
amounts for 1998 and 1999:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
------- -------
<S> <C> <C>
Mat and integrated services segment:
Domestic wooden mats $ 30.4 $ 43.0
Venezuela operations 11.6 --
Other .4 1.3
------- -------
Total mat and integrated services segment 42.4 44.3
Fluids sales and engineering segment:
Investment in Mexican joint venture 2.5 --
Austin Chaulk assets -- 4.7
------- -------
Total fluids sales and engineering segment 2.5 4.7
E&P waste disposal segment:
Barge disposal -- 1.3
Write-down of proposed disposal sites -- 2.0
------- -------
Total E&P waste disposal segment -- 3.3
------- -------
Total write-down for abandoned and disposed assets $ 44.9 $ 52.3
======= =======
</TABLE>
The $43.0 million write-down of our domestic wooden mat fleet in 1998
is primarily due to a significant excess capacity in the fleet resulting from
the sharp decline in drilling activity. In addition, in late 1998, we began
converting a portion of our domestic rental fleet to the new composite mat. The
write-down represents the net book value associated only with mats that were
abandoned or destroyed.
In the fourth quarter of 1999, after we completed our evaluation of our
wooden mat inventory and after further indication that the Gulf Coast mat market
would likely stabilize below its peak in 1997, we recorded a charge of $30.4
million. Included in the write-down cost for wooden mats are disposal costs of
approximately $1.1 million. As of December 31, 1999, the accrual for mat
disposal costs to be incurred was approximately $500,000. Also included in this
amount is $3.0 million of charges for the write-down of our board road lumber
inventory. We recorded this write-down because loose lumber is not generally
required in the laying of composite mats.
In addition to the disposals in our wooden mat fleet, in the fourth
quarter of 1999, we recorded a charge of $11.6 million associated with closing
down our mat business in Venezuela. Our decision to close these operations was
due to poor market conditions and continued political instability in the area.
Our estimate of the amount recoverable for the Venezuelan operations is based on
our judgement of the most likely value to be received on the sale of assets,
less the costs to sell these assets. This estimate is subject to change in 2000
as actual amounts from the sale or recovery of these assets are realized.
The other charges for write-down of assets in the mat and integrated
services segment were $0.4 million in 1999 and $1.3 million in 1998. For 1999,
this charge
31
<PAGE> 32
represents the net book value of various equipment we deemed obsolete. This
equipment has since been sold or abandoned. In 1998, this charge represents the
net book value of a machine previously used in remediation operations that was
abandoned after it was rendered obsolete by other new, technologically superior
equipment.
The $2.5 million write-down charge recorded in our fluids sales and
engineering segment in 1999 relates to the decision to withdraw from our Mexican
joint venture in order to focus management's attention on our U.S. and Canadian
markets. Our measurement of the amount recoverable for the Mexican operations is
based on our judgement of the most likely amount to be received from our joint
venture partner. This estimate is subject to change in 2000 as actual payments
from our joint venture partner are received. In 1998, the write-down charge of
$4.7 million recorded in this segment relates to assets that were either
abandoned or disposed (primarily warehouses and mixing plants located in the
Austin Chauk region). These assets were abandoned or disposed due to market
shifts or due to excess capacity created by a downturn in our operations. The
disposal value for these assets was received in 1999 with no significant
differences from estimated amounts being realized.
Included in the write-down charges for the E&P waste disposal segment
in 1998 was $1.3 million to write-down barges to their disposal value, which
value was received in 1999. These barges were previously used in this segment
but were no longer required due to decreased volumes of waste being handled.
Also included in the write-down for 1998 in this segment is a charge of $2.0
million relating to our abandoning additional disposal sites being developed for
future use. Due to the downturn in the oilfield waste market created by reduced
oilfield drilling, we decided not to pursue bringing this additional capacity
on-line.
In addition to the charges for the write-down of assets to be disposed
or abandoned, in the fourth quarter of 1999, we recorded an impairment charge of
$23.4 million in our mat and integrated services segment on our remaining
domestic wooden mat fleet, which we will continue to use in the short-term. This
charge reflects the reduced recoverability of these mats over their estimated
service life, which result from our plan to replace them with composite mats
over the next two to three years. This reduced the domestic wooden mat fleet to
a total carrying value of $4.5 million as of the date of the impairment charge.
This carrying value was determined based on an estimate of the net discounted
cash flows expected to be received for the wooden mats remaining in service
until their expected replacement by composite mats. In connection with this
impairment, we also adjusted the remaining depreciable life on the domestic
wooden mats in anticipation of our plan to displace these mats in two to three
years.
On November 10, 1999, we announced that we had jointly elected with
Tuboscope to form operational alliances in key market areas rather than proceed
with our proposed merger, which had been announced on June 24, 1999. The
decision not to proceed with the merger was made because recent market
conditions in the oilfield services market and the resulting uncertainty in the
capital markets made it difficult to obtain the type of credit facility both we
and Tuboscope believed necessary for the combined company. Both Tuboscope and we
agreed to pay our respective transaction expenses relating to the proposed
merger, which for us were approximately $3.0 million.
32
<PAGE> 33
The $27.5 million of charges relating to the arbitration settlement
stems from the settlement during the third quarter of 1998 (with final
modifications during the fourth quarter of 1998) between our E&P waste disposal
segment and U. S. Liquids, Inc. The arbitration was over a contract dispute
discussed more fully in Note N of the Notes to Consolidated Financial
Statements. The total settlement was $30 million, of which $6 million and $11
million was paid in 1998 and 1999, respectively, and $9 million and $4 million
is to be paid in 2000 and 2001, respectively. The settlement provides for, among
other things, (1) terminating our original contractual commitment to provide
waste to U.S. Liquids' disposal facilities for twenty-five years, and (2) the
right, but not the obligation, to deliver specified volumes of E&P waste to U.S.
Liquids' facilities until June 30, 2001 without additional cost. The right to
deliver waste was valued at its estimated fair market value of $8 million based
on the volumes that can be delivered and the market price for disposing the
waste. This amount is being recorded as a charge to operations over the disposal
period. The termination feature was valued at $22 million, which represented the
balance of the total settlement. This obligation was recorded based on the
present value of the contractual payments assigned to the termination feature.
The recorded amount of the obligation was $8.1 million at December 31, 1999 and
$15.3 million at December 31, 1998. Total pretax charges associated with the
$27.5 million settlement included a $6.1 million write down to the estimated
fair value of the remaining non-compete with U.S. Liquids. The remaining $21.4
million represents the portion of the settlement associated with the termination
feature.
The following table sets forth operating results by segment:
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in thousands)
1999 1998 1997
---------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues by segment:
E&P waste disposal $ 42,954 22.5% $ 57,588 23.5% $ 62,301 27.4%
Fluids sales & engineering 92,928 48.7 91,703 37.3 63,205 27.8
Mat & integrated services 54,894 28.8 96,167 39.2 101,717 44.8
--------- --------- --------- ------ --------- ------
Total $ 190,776 100.0% $ 245,458 100.0% $ 227,223 100.0%
========= ========= ========= ====== ========= ======
Operating income (loss) by segment:
E&P waste disposal $ 13,068 $ 19,014 $ 28,768
Fluids sales & engineering (8,616) (10,628) 11,297
Mat & integrated services (1,126) 10,059 28,354
--------- --------- ---------
Total by segment 3,326 18,445 68,419
General and administrative expenses 2,589 4,305 3,185
Goodwill amortization 4,996 5,206 2,683
Provision for uncollectible accounts 2,853 9,180 --
Write-down of abandoned and
Disposed assets 44,870 52,266 --
Impairment of long-lived assets 23,363 -- --
Terminated merger expenses 2,957 -- --
Arbitration settlement -- 27,463 --
Equity in net loss of
unconsolidated affiliate -- 1,293 --
--------- --------- ---------
Total operating income (loss) $ (78,302) $ (81,268) $ 62,551
========= ========= =========
</TABLE>
- --------------
Figures shown above are net of intersegment transfers.
33
<PAGE> 34
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues
Total revenues declined to $190.8 million in 1999, from $245.5 million
in 1998, a decrease of $54.7 million, or 22.3%. The components of the decrease
in revenues were a $14.6 million decrease in E&P waste disposal revenue and a
$41.3 million decrease in mat and integrated services revenue. The decrease was
slightly offset by a $1.2 million increase in fluids sales and engineering
revenue.
The E&P waste disposal revenue decline of $14.6 million, or 25.3%, is
consistent with the 22.2% decline in average rig activity in our primary market
for 1999 as compared to 1998. During 1999, we received approximately 3.3 million
barrels of E&P waste. This compares to approximately 5.0 million barrels in
1998, a decline of 34.0%. Contributing to the decline in barrels received was
continued expansion of our wash water recycling program, which reduced the total
barrels we disposed during 1999 and 1998. The average revenue per barrel of E&P
waste remained relatively unchanged at just over $11. During 1999, we began
operating our industrial, non-hazardous waste disposal facility. Only minimal
revenues were recorded in 1999 during this facility's start-up phase of
operations.
Fluids sales and engineering revenue increased $1.2 million, or 1.3%,
in spite of the decline in average rig activity. Fluids revenues benefited from
the inclusion for the full period in 1999 of several acquisitions made in 1998
which, among other things, expanded operations into the Oklahoma Anadarko Basin
and into western Canada. In addition, our drilling fluids segment continued to
penetrate the markets that we serve and to gain market share. While the mix of
rig activity and commodity oil and gas pricing has put downward pressure on both
revenues and margins in this segment, we continue to see progress in the
acceptance of our DeepDrill(TM) fluids system and our Minimization
Management(TM) concept. As these product and service offerings gain greater
market acceptance, we expect enhancement of revenues and margins for this
segment.
The mat and integrated services revenue decline of $41.3 million, or
42.9%, reflects lower rig activity, reductions in location size and competitive
pricing. Record low rig activity due to falling oil and gas prices and a shift
by customers away from higher cost transition zone and major wetlands projects
to lower cost inland drilling projects were the primary reasons for the activity
decline and the reduction in location size in this segment. In addition, we,
along with many of our competitors, had increased capacity through the first
half of 1998 in response to increasing industry activity. The sharp decline in
drilling activity created significant overcapacity in this market. The resulting
overcapacity further contributed to the revenue decline because of pricing
pressure.
Expansion of the new composite mats into our rental fleet is continuing
and the anticipated lower operating costs for the new mats is expected to help
us better compete in the future competitive pricing environment. We also
continue to develop our wooden mat service business in western Canada, and we
are currently expanding our Canadian mat operations to meet the growing demand
for this service. At present, our entire mat fleet in Canada is utilized and we
are in discussions with several customers to keep the current fleet utilized for
all of 2000. We believe that continued acceptance of our mat system in Canada,
along with the need to keep rigs in Canada functioning in the spring and summer
season, could eventually result in the Canadian mat market approaching the size
of the U.S. Gulf Coast market.
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<PAGE> 35
Operating Income (Loss)
We reported an operating loss of $78.3 million in 1999, compared to an
operating loss of $81.3 million in 1998. The primary factors contributing to the
operating losses were charges totaling $74.0 million in 1999 and $88.9 million
in 1998, as discussed above. Segment operating income, excluding these charges,
declined to $3.3 million in 1999, from $18.4 million in 1998, a decrease of
$15.1 million or 82.1%. The components of the decrease were a $5.9 million
decrease in E&P waste disposal operating income and an $11.2 million decrease in
mat and integrated services operating income. This decrease was partially offset
by a $2.0 million decrease in the operating loss for the fluids sales and
engineering segment.
The $5.9 million decrease in E&P waste disposal operating income is
primarily due to the $14.6 million decline in segment revenue, as well as the
high operating leverage of this segment. In response to the decline in disposal
volumes resulting from reduced drilling activity, we began to reduce operating
costs for this segment in late 1998 and early 1999. The cost reductions included
selling or disposing barges, closing facilities and reducing staffing levels.
While these cost reductions helped to abate some of the effects of the revenue
decline, we were not able to further reduce our operating costs without
significantly affecting the required level of current and future customer
service. The high level of operating leverage in this operating segment, which
has now been enhanced by cost containment measures in 1998 and 1999, should have
a significant effect on operating income as revenues increase in response to the
market recovery. Operating profit for this segment also was negatively impacted
by the start-up of our industrial waste business. The break-even level of
revenues for our industrial waste business was not reached until early 2000.
Fluids sales and engineering operating loss declined by $2.0 million on
an increase of $1.2 million in revenues. Throughout late 1998 and 1999, in
response to market shifts and the significant downturn in drilling activity, we
closed certain facilities and made other cost reductions, primarily in staffing
levels. In addition, lower commodity pricing, in particular for the sale of
barite, a key component of most drilling fluids, resulted in reduced margins on
product sales beginning in late 1998 and continuing throughout 1999. During this
time, we continued to introduce several products, including our DeepDrill(TM)
fluids system and our Minimization Management(TM) concept. These new product and
service offerings have resulted in certain product introduction costs during
1998 and 1999. We expect to recognize the benefits of these products in 2000 and
beyond as they gain wider customer acceptance.
The mat and integrated services operating loss of $1.1 million for 1999
compares to operating income of $10.1 million in 1998, a change of $11.2
million. This change is primarily associated with the decline in revenue
resulting from record low drilling activity, reductions in mat location size and
competitive pricing due to overcapacity. As in other operating business
segments, we reduced operating costs in our mat and integrated services segment
beginning in late 1998 in response to the significant declines in rig activity
in the Gulf Coast market. As discussed above, during 1998 and 1999 we disposed
of a significant portion of our domestic wooden mat fleet. In 1999, we also
recorded an impairment charge for our remaining domestic wooden mat fleet, in
response to both
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<PAGE> 36
changing market conditions and our introducing the new composite mat. The
significantly lower maintenance, transportation and other associated operating
costs and substantially longer useful life of the composite mat system as
compared to the wooden mat system are expected to enhance future operating
margins for this segment and better position the segment to compete against
competitive pricing pressures.
General and Administrative Expenses
General and administrative expenses during 1999 were $2.6 million, or
1.4% of revenues, compared to $4.3 million, or 1.8% of revenues, in 1998. In
response to the market downturn, beginning in late 1998 and continuing
throughout 1999, we took steps to reduce our general and administrative
expenses.
Goodwill Amortization
Goodwill amortization for 1999 was $5.0 million, as compared to $5.2
million for 1998. There were no significant changes in 1999 to the carrying
value of assets acquired in 1998 purchase transactions.
Equity Earnings of Unconsolidated Affiliate
Included in the loss from unconsolidated affiliates for 1998 are
charges of $1.3 million. This includes recognition of our share of joint venture
losses related to the start-up period of the composite mat manufacturing
facility.
Interest Income and Interest Expense
Net interest expense was $15.7 million in 1999, as compared to $10.1
million in 1998. The increase in net interest cost is due to an increase of
$40.5 million in average outstanding borrowings, which was slightly offset by a
decrease in average effective interest rates from 8.32% in 1998 to 8.10% in
1999. The increase in average outstanding borrowings is due primarily to funding
of capital expenditures in 1998.
Provision for Income Taxes
We recorded income tax benefits of $27.2 million in 1999 and $29.8
million in 1998 on the loss from continuing operations. This equates to 29% of
pre-tax loss from continuing operations in 1999 and 32.6% of pre-tax loss from
continuing operations in 1998. In 1999, we provided a valuation allowance for
any benefits arising from state net operating loss carryforwards and any federal
net operating loss carryforwards that expire prior to 2005 and are subject to
various limitations. This valuation allowance was recorded due to the
uncertainty of ultimately recovering these amounts. The majority of our
remaining federal net operating loss carryforwards were generated in 1998 and
1999 and don't expire until 2018 and beyond. Given our history of generating
taxable income sufficient to fully utilize these remaining net operating loss
carryforwards and our expectations of future profitable operations, further
valuation allowances on these amounts were not considered necessary.
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Discontinued Operations of Solids Control Business
In September 1999, we adopted a plan to discontinue operations of our
solids control business and simultaneously entered into an alliance agreement
with a division of Tuboscope to provide these services. We received
approximately $5.5 million for the sale of these operations, which resulted in
an after tax net loss of $32,000. The operating results of our solids control
business, including provisions for employee termination costs, employee benefits
and losses during the phase-out period, have been classified as discontinued
operations in the consolidated financial statements. Revenues of these
discontinued operations totaled approximately $7.4 million in 1999, $11.4
million in 1998 and $6.0 million in 1997.
Cumulative Effect of Accounting Change
The unit-of-production method of providing for depreciation on certain
assets used in our barite grinding activity and in our waste disposal business
was adopted in the second quarter of 1999, effective January 1, 1999. Prior to
this change, we had depreciated these assets using the straight-line method. As
a result of this change in accounting for depreciation, the reported loss from
operations for the year ended December 31, 1999 was reduced by $1,471,000, with
related per share amounts of $.02 basic and diluted. This reflects the
cumulative effect, net of income taxes, of the change on years prior to 1999.
Preferred Stock Dividends and Accretion of Discount
In April 1999, we sold 150,000 shares of preferred stock, as discussed
below. For the year ended December 31, 1999, dividends of $532,000 were paid on
preferred stock, and the accretion of the discount on the preferred stock was
$318,000. These amounts reflect dividends and accretion for the period of April
16, 1999 (the issuance date of the preferred stock) through December 31, 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Total revenues increased to $245.5 million in 1998, from $227.2 million
in 1997. This is an increase of $18.3 million, or 8.1%. The components of this
increase were a $28.5 million increase in drilling fluids sales and engineering,
partially offset by a $4.7 million decrease in waste disposal and a $5.5 million
decrease in mat and integrated services.
The E&P waste disposal revenue decline of $4.7 million, or 7.6%, in
1998 is partly due to the 3.6% decline in average rig activity in our primary
market for 1998 as compared to 1997. During 1998, we received approximately 5.0
million barrels of E&P waste compared to approximately 5.4 million barrels in
1997, a decline of 7.4%. The average revenue per barrel of E&P waste increased
by approximately 10% to just over $11 in 1998. In the first quarter of 1998, E&P
waste volume increased due to increased regulations, which banned waste
discharges in the state territorial waters of the Gulf of Mexico. This increase
was offset by declines in drilling activity, particularly in the territorial
waters, beginning in the second quarter of 1998. In the latter half of 1998,
volume declined due to lower drilling activity and as a result of our waste
minimization efforts to reduce the volume of wash water created at transfer
facilities in the vessel and container cleaning
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process. In addition, volumes were lower due to the effect of unusual weather
conditions encountered in the third quarter of 1998.
Drilling fluids sales increased $28.5 million, or 45.1%, as a result of
a series of acquisitions made during 1997 and 1998, and the expansion of the
businesses acquired. The decline in drilling activity has reduced the size of
the market for drilling fluids; however, we have increased our sales of drilling
fluids by obtaining a larger share of the market. The growth in sales volume
during 1998 masked the softness in commodity oil and gas prices experienced
throughout the drilling fluids industry in the latter part of 1998, especially
during the fourth quarter, which continued during 1999. In particular, the
selling price for barite, which is a key component in most drilling fluids,
declined significantly during the fourth quarter of 1998. This decline continued
during 1999 due to competitive pressures.
The decrease of $5.5 million in mat and integrated services revenue
reflects the general decline in drilling activity, as well as the effect of
unusual weather conditions on drilling activity in the area surrounding the Gulf
of Mexico. Mat rental revenues include revenues earned on the initial mat
installation, which typically includes the first 60 days of rental, and
re-rentals earned beyond the initial installation term. The price received for
mat rentals and re-rentals declined significantly during the latter part of 1998
and the first quarter of 1999. This decline in pricing was caused by competitive
pressure and low activity relative to industry capacity. We, together with many
of our competitors, had increased inventories of mats during 1997 and the first
part of 1998 in response to increasing industry activity.
Operating Income (Loss)
We reported an operating loss of $81.3 million in 1998, as compared to
operating income of $62.6 million in 1997. The primary factors contributing to
the operating loss in 1998 were the charges noted above. The total of these
charges in 1998 was $88.9 million.
Segment operating income, excluding these charges, declined to $18.4
million in 1998, from $68.4 million in 1997, a decrease of $50.0 million, or
73%. The components of the decrease were a $9.8 million decrease in E&P waste
disposal operating income, a $21.9 million decrease in fluids sales and
engineering operating income and a $18.3 million decrease in mat and integrated
services operating income. The $9.8 million decrease in waste disposal operating
income can be attributed to the $4.7 million decrease in revenues discussed
above coupled with a decline in operating margins. Since completing the 1996
acquisition of U.S. Liquids' marine waste business, we have expanded our overall
capacity to handle volumes of waste through increased underground disposal,
barge and transfer station capacities. While this capacity was necessary for the
increase in business we experienced in 1997 as compared to 1996, this capacity
added significantly to the cost of the waste disposal operations. When the sharp
decline hit in 1998, we reacted to the situation by disposing barges, closing
facilities and reducing staffing levels. We were not able to reduce the costs of
these operations as fast as the decline in revenues, and we continued to reduce
costs in this segment during 1999.
While revenues for the fluids sales and engineering segment increased
by $28.5 million in 1998 as compared to 1997, operating income decreased by
$21.9 million. The
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increase in revenue can be attributed to the rapid growth in this business
segment due to a series of acquisitions, our expanding the facilities acquired
and our establishing new distribution facilities. In particular, we saw a rapid
growth in business in the Austin Chauk region. In order to service this growing
market, we expanded our facilities capacity in this region. With the downturn in
oil prices, and disappointing drilling results in the Austin Chauk region, this
market fell quickly and dramatically. We have since closed our facilities in the
Austin Chauk area and downsized our operations. This downsizing included
disposing assets that did not serve our other markets effectively, and reducing
staffing levels. We continued to make cost reductions in this business segment
during 1999. We also saw profits from this business segment decline as a result
of falling sales prices for many products used in drilling fluids.
Operating income in the mat and integrated services segment decreased
$18.3 million in 1998 as compared to 1997. This decline in operating income can
be attributed in part to the $5.5 million decrease in revenues in this segment
along with declining margins and costs associated with disposing mats during the
third and fourth quarters of 1998. Mat disposal operations during 1998 were
conducted for the most part with internal labor and assets. There were some
continuing costs for mat disposal in the first and second quarters of 1999, but
to a lesser degree than in 1998. We have significantly cut costs in this segment
in response to the decline in demand for our services by reducing staffing
levels, closing facilities and disposing excess assets. Further cost cuts were
implemented in this segment in 1999.
General and Administrative Expenses
General and administrative expenses during 1998 were $4.3 million, as
compared to $3.2 million in 1997. The increase is attributable to a growth in
revenues, acquisitions and growth in new product offerings. We took steps to
reduce our general and administrative costs in the latter part of 1998 and
during 1999.
Goodwill Amortization
Goodwill amortization for 1998 was $5.2 million, as compared to $2.7
million for 1997. The primary reason for the increase in goodwill from 1997 to
1998 is related to purchase acquisitions in 1998 and the effects of full year
amortization for 1997 acquisitions.
Equity Earnings of Unconsolidated Affiliate
Included in the loss from unconsolidated affiliates for 1998 are
charges of $1.3 million. This includes recognition of our share of joint venture
losses related to the start-up period of the composite mat manufacturing
facility.
Interest Income and Interest Expense
Net interest expense was $10.1 million in 1998, as compared to $3.9 in
1997. The increase in net interest cost is due to an increase of $81.0 million
in average outstanding borrowings and an increase in average effective interest
rates from 6.07% in 1997 to 8.32% in 1998. The increase in average outstanding
borrowings and average effective interest rates is due to the issuance of $125
million of ten year, 8-5/8% senior subordinated notes in
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December 1997 and additional borrowings under the Credit Facility. The proceeds
from the senior subordinated notes and the Credit Facility were used to fund
acquisitions, capital expenditures and working capital for operations growth.
Provision for Income Taxes
For 1998, we recorded income tax benefits of $29.8 million, which is
equal to 32.6% of pre-tax loss. For 1997, we recorded income tax provisions of
$21.8 million, which is equal to 37.1% of pre-tax income.
Cumulative Effect of Accounting Change
On July 1, 1998, we elected early adoption of Statement of Position
98-5 "Reporting on Costs of Start-up Activities", which provided standards for
recording costs related to start-up activities. The cumulative effect of this
change in accounting, net of income taxes, was $1,326,000, with related per
share amounts of $.02 basic and diluted.
LIQUIDITY AND CAPITAL RESOURCES
As compared to 1998, our working capital position decreased by $27.3
million, or 36%, during the year ended December 31, 1999. Key working capital
data is provided below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998
------- -------
<S> <C> <C>
Working Capital (000's) $48,244 $75,937
Current Ratio 1.95 2.94
</TABLE>
Working capital was consumed during 1999 to fund acquisitions of
long-lived assets in excess of the amount of financing arranged during the
period for that purpose. Because current operations were unprofitable, this
reduction of working capital was not offset from operations.
Our long term capitalization as of December 31, 1999, 1998 and 1997 was
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Long-term debt (including current maturities):
Credit facility $ 83,250 $ 80,900 $ --
Subordinated debt 125,000 125,000 125,000
Other 1,951 3,352 4,495
-------- -------- --------
Total long-term debt 210,201 209,252 129,495
Stockholders' equity 186,339 236,879 269,442
-------- -------- --------
Total capitalization $396,540 $446,131 $398,937
======== ======== ========
</TABLE>
For the year ended December 31, 1999, our working capital needs were
met primarily from operating cash flow and proceeds from a preferred stock
offering. Total cash generated from operations of $2.2 million was supplemented
by $16.6 million from
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financing activities. This helped provide for a total of $20.9 million used in
investing activities.
During 1999, we entered into several lease transactions being accounted
for as operating leases. In one series of leases, we leased approximately $9.8
million of equipment, a portion of which we had previously acquired. In
conjunction with terminating the merger with Tuboscope and forming the alliance
agreement, Tuboscope acquired the majority of the assets used in our solids
control operations. Tuboscope made the acquisition by paying us cash and
assuming a portion of these leases. Under another operating lease transaction in
1999, we leased $3.0 million of composite mats. In 1999, we also sold some of
our non-core assets and entered into sale-leaseback transactions which yielded
$2.5 million. We also received income tax refunds totaling $13.3 million in
1999.
As of December 31, 1999, we maintained a $100.0 million bank credit
facility, including up to $20.0 million in standby letters of credit, in the
form of a revolving line of credit commitment which expires June 30, 2001. At
December 31, 1999, $16.7 million in letters of credit were issued and
outstanding under the Credit Facility and $83.3 million was outstanding under
the revolving facility. Based on these outstanding amounts and the outstanding
letters of credit, we had no availability under this facility at December 31,
1999. The facility bears interest at either a specified prime rate (8.5% at
December 31, 1999) or the LIBOR rate (6.18% at December 31, 1999) plus a spread
determined quarterly based on the ratio of our funded debt to cash flow. The
weighted average interest rate on the outstanding balance under the Credit
Facility was 7.85% in 1999 and 5.87% in 1998.
On March 27, 2000 the banks agreed to amend the Credit Facility to
provide for the following: 1) the facility will be secured by substantially all
of our accounts receivable, inventory and property plant and equipment 2) the
financial covenants as of December 31, 1999 and going forward will provide for
covenants that are consistent with our current financial condition and
anticipated outlook, 3) the variable interest rate will be increased based on
our Debt to EBITDA ratio, as defined, to a range of a) prime plus 0% to prime
plus
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1.25% or b) LIBOR plus 1.25% to LIBOR plus 4%, and 4) we will pay an amendment
fee of $250,000. Under the amended agreement, the expected interest rate for
early 2000 is prime plus 1.25% (10.25% at March 27, 2000) or LIBOR plus 4%
(10.25% at March 27, 2000). Several of the financial covenants under the amended
credit facility are at or near their limit. For example, the facility requires
us to maintain consolidated tangible net worth, as defined as consolidated
stockholders' equity less certain intangible assets such as goodwill,
unamortized debt discount and patents, of $69 million. Our consolidated tangible
net worth, as defined, was $69.9 million at December 31, 1999. Any losses
sustained in future quarters may cause us to not be in compliance with the
financial covenants unless waivers or amendments can be obtained from the banks.
Our Senior Subordinated Notes do not contain any financial covenants.
However, if we do not meet the financial covenants of the Credit Facility and
are unable to obtain an amendment from the banks, we would be in default of the
Credit Facility which would cause the Notes to be in default and immediately
due. The Notes and the Credit Facility also contain covenants that significantly
limit the payment of dividends on our Common Stock.
In April 1999, we sold to SCF-IV, L.P., a Delaware limited partnership
managed by SCF Partners, 150,000 shares of Series A Cumulative Perpetual
Preferred Stock and a warrant to purchase up to 2,400,000 shares of our common
stock at an exercise price of $8.50 per share, subject to anti-dilution
adjustments. The aggregate purchase price for the Series A Preferred Stock and
the warrant was $15.0 million, and the net proceeds from the sale have been used
to repay indebtedness.
For 2000, we anticipate total capital expenditures of approximately
$14.0 million. This amount includes: (1) $7.5 million to purchase synthetic
mats; (2) $1.7 million to complete an enlarged joint operational offshore
facility; (3) $0.7 million to develop industrial NORM disposal and expand
industrial nonhazardous waste disposal; and (4) $4.1 million for other new
capacities and routine capital expenditures.
We have obtained a commitment for an additional $7 million of lease
funding, which we applied in the first quarter of 2000 towards the lease of new
composite mats. We are in the process of selling our office building in
Lafayette, Louisiana in a sale-leaseback transaction that should yield
approximately $2.9 million. The LOMA Company, LLC, which produces composite mats
and in which we hold a 49% joint venture interest, is attempting to refinance
its debt. We currently supply a letter of credit to secure this debt. The
contemplated transaction could potentially restore approximately $15.2 million
of availability under the Credit Facility.
Potential sources of additional funds, if required, would include
additional operating leases for equipment, selling certain operating assets and
selling equity securities. Other than as discussed above, we presently have no
commitments beyond our working capital and bank lines of credit by which we
could obtain additional funds for current operations. However, we regularly
evaluate potential borrowing arrangements which we may utilize to fund future
expansion. We believe that our current sources of capital, coupled with
internally generated funds, will be sufficient to support our working
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capital, capital expenditures and debt service requirements for the foreseeable
future provided that market conditions stabilize or continue to improve from
current levels. Any long-term downturn in market conditions could have an
adverse affect on our financial position, results of operations and future
available capital. Such a downturn would likely result in reductions in planned
capital expenditures and reassessment of our operations and business strategy in
light of such market conditions.
Except as described in the preceding paragraphs, we are not aware of
any material expenditures, significant balloon payments or other payments on
long term obligations or any other demands or commitments, including off-balance
sheet items to be incurred within the next 12 months. Inflation has not
materially impacted our revenues or income.
YEAR 2000 UPDATE
In prior years, we have disclosed the nature and progress of our plans
to address the year 2000 issue. By the end of 1999, we completed our remediation
and testing of our critical information technology and non-information
technology systems. As a result of those efforts, we experienced no significant
disruptions in those systems and believe those systems successfully responded to
the year 2000 date change. We expended less than $100,000 during 1998 and 1999
in connection with remediating our systems. We are not aware of any material
problems resulting from year 2000 issues, either with our product or service
offerings, our internal systems or the products and services of third parties.
We will continue to monitor our critical computer applications and those of our
suppliers and vendors throughout the year 2000 to ensure that any latent year
2000 matters that may arise are addressed promptly.
NEW ACCOUNTING STANDARDS.
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The statement establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Changes in a derivative's fair value are to be recognized
currently in earnings unless specific hedge accounting criteria are met. We will
be required to adopt SFAS No. 133, as amended by SFAS No. 137, which defers the
effective date, on January 1, 2001. We do not believe that adopting the
statement will have a material effect on our consolidated financial statements
since we do not currently use derivative instruments or hedging activities in
our business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our
financial instruments arising from transactions that are entered into in the
normal course of business. Historically, we have not entered into derivative
financial instrument transactions to manage or reduce market risk or for
speculative purposes. A discussion of our primary market risk exposure in
financial instruments is presented below.
Long-term Debt
We are subject to interest rate risk on our long-term fixed interest
rate senior subordinated notes. The bank credit facility has a variable interest
rate and, accordingly, is not subject to interest rate risk. All other things
being equal, the fair market value of debt with a fixed interest rate will
increase as interest rates fall. Conversely, the fair market value of debt will
decrease as interest rates rise. Our policy is to manage exposure to interest
rate fluctuations through the use of a combination of fixed and variable-rate
debt.
The $125 million senior subordinated notes accrue interest at the rate
of 8-5/8% per annum and mature on December 15, 2007. There are no scheduled
principal payments under the notes prior to the maturity date. However, all or
some of the notes may be redeemed at a premium after December 15, 2002. In
addition, at any time up through December 31, 2000, up to 35% of the notes may
be redeemed, also at a premium, with proceeds from an equity offering. We have
no plans to repay the notes ahead of their scheduled maturity.
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Investments
Included in Other Assets is a note receivable with a face amount of
$8,534,000 related to the sale of substantially all of the assets of our former
marine repair operations. The note bears simple interest at 5% per annum, with
accrued interest and principal payable at September 30, 2003.
Foreign Currency
Our principal foreign operations are conducted in Canada, although we
also had foreign operations in Venezuela and Mexico until the end of 1999. There
is exposure to future earnings due to changes in foreign currency exchange rates
when transactions are denominated in currencies other than our functional
currencies. We primarily conduct our business in the functional currency of the
jurisdictions in which we operate. At present, we do not use hedging
arrangements to offset any anticipated affects of this exposure.
FORWARD-LOOKING STATEMENTS
The foregoing discussion contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. There are risks and uncertainties that could
cause future events and results to differ materially from those anticipated by
us in the forward-looking statements included in this report. Among these risks
and uncertainties are the following:
o oil and gas exploration and production levels and the industry's
willingness to spend capital on environmental and oilfield
services;
o 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;
o domestic and international political, military, regulatory and
economic conditions;
o other risks and uncertainties generally applicable to the oil and
gas exploration and production industry;
o existing regulations affecting E&P and NORM waste disposal being
rescinded or relaxed, governmental authorities failing to enforce
these regulations or industry participants being able to avoid or
delay compliance with these regulations;
o future technological change and innovation, which could result in
a reduction in the amount of waste being generated or alternative
methods of disposal being developed;
o increased competition in our product lines;
o our success in integrating acquisitions;
o our success in replacing our wooden mat fleet with our new
composite mats;
o our ability to obtain the necessary permits to operate our
non-hazardous waste disposal wells and our ability to
successfully compete in this market;
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o our ability to successfully compete in the drilling fluids
markets in the Canadian provinces of Alberta and Saskatchewan,
the Permian Basin of West Texas and New Mexico and the Anadarko
Basin in Western Oklahoma, where we have only recently entered
the market; and
o adverse weather conditions, which could disrupt drilling
operations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Newpark Resources, Inc.
We have audited the accompanying consolidated balance sheet of Newpark
Resources, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1999, and the related consolidated statements of operations, comprehensive
income, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Newpark
Resources, Inc. and subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As explained in Note A to the financial statements, effective January
1, 1999, the Company, changed its method of accounting for depreciation on
certain of its waste disposal assets and its barite grinding mills from the
straight-line method to the units-of-production method.
Arthur Andersen LLP
New Orleans, Louisiana
March 27, 2000
46
<PAGE> 47
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Newpark Resources, Inc.
We have audited the accompanying consolidated balance sheet of Newpark
Resources, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, comprehensive income, stockholders'
equity, and cash flows, for each of the two years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Newpark Resources, Inc. and
subsidiaries at December 31, 1998, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
As discussed in Note A of the Notes to Consolidated Financial
Statements, effective July 1, 1998, the Company changed its method of accounting
for costs of start-up activities.
Deloitte & Touche LLP
New Orleans, Louisiana
March 26, 1999
(March 27, 2000 as to Note D)
47
<PAGE> 48
Newpark Resources, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
- --------------------------------------------------------------------------------------
(In thousands, except share data) 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,517 $ 6,618
Accounts and notes receivable, less allowance
of $9,936 in 1999 and $10,008 in 1998 54,447 62,163
Inventories 17,524 18,663
Current taxes receivable 165 10,593
Deferred tax asset 10,463 13,776
Net current assets of discontinued operations 3,109 --
Other current assets 8,602 3,259
--------- ---------
TOTAL CURRENT ASSETS 98,827 115,072
Property, plant and equipment, at cost, net of
accumulated depreciation 166,603 203,381
Cost in excess of net assets of purchased businesses,
net of accumulated amortization 116,465 123,539
Deferred tax asset 33,595 1,735
Net property, plant and equipment, and other assets of
discontinued operations -- 14,939
Other assets 34,701 35,939
--------- ---------
$ 450,191 $ 494,605
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 627 $ 72
Current maturities of long-term debt 991 1,195
Accounts payable 29,232 16,432
Accrued liabilities 14,103 11,070
Net current liabilities of discontinued operations -- 3,190
Arbitration settlement payable 5,630 7,176
--------- ---------
TOTAL CURRENT LIABILITIES 50,583 39,135
Long-term debt 209,210 208,057
Arbitration settlement payable 2,451 8,080
Other non-current liabilities 1,608 2,454
Commitments and contingencies (See Note N) -- --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, 150,000 shares outstanding 13,009 --
Common Stock, $.01 par value, 100,000,000 shares
authorized, 69,079,243 shares outstanding in 1999
and 68,839,672 in 1998 690 688
Paid-in capital 322,724 319,833
Unearned restricted stock compensation (3,838) (5,618)
Accumulated other comprehensive income 250 (1,033)
Retained deficit (146,496) (76,991)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 186,339 236,879
--------- ---------
$ 450,191 $ 494,605
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
48
<PAGE> 49
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 190,776 $ 245,458 $ 227,223
Operating costs and expenses:
Cost of services provided 132,530 168,364 134,231
Operating costs 54,920 58,649 24,573
--------- --------- ---------
187,450 227,013 158,804
General and administrative expenses 2,589 4,305 3,185
Goodwill amortization 4,996 5,206 2,683
Provision for uncollectible accounts 2,853 9,180 --
Write-down of abandoned and disposed assets 44,870 52,266 --
Impairment of long-lived assets 23,363 -- --
Terminated merger expenses 2,957 -- --
Arbitration settlement -- 27,463 --
Equity in net loss of
unconsolidated affiliates -- 1,293 --
--------- --------- ---------
Operating income (loss) (78,302) (81,268) 62,551
Interest income (987) (1,488) (308)
Interest expense 16,651 11,554 4,168
--------- --------- ---------
Income (loss) from continuing operations before income
taxes & cumulative effect of accounting change (93,966) (91,334) 58,691
Provision (benefit) for income taxes (27,246) (29,787) 21,755
--------- --------- ---------
Income (loss) from continuing operations before
cumulative effect of accounting change (66,720) (61,547) 36,936
Discontinued operations of solids control business:
Income (loss) from discontinued operations
(less applicable income taxes) (3,374) (742) 805
Loss on disposal, (less applicable income taxes) (32) -- --
--------- --------- ---------
Income (loss) before cumulative effect
of accounting change (70,126) (62,289) 37,741
Cumulative effect of accounting
changes (net of income tax effect) 1,471 (1,326) --
--------- --------- ---------
Net income (loss) (68,655) (63,615) 37,741
Less:
Preferred stock dividends 532 -- --
Accretion of discount on preferred stock 318 -- --
--------- --------- ---------
Net income (loss) applicable to common
and common equivalent shares $ (69,505) $ (63,615) $ 37,741
========= ========= =========
Weighted average number of common and common equivalent shares outstanding:
Basic 68,949 67,058 64,158
========= ========= =========
Diluted 68,949 67,058 65,630
========= ========= =========
Income (loss) per common and common equivalent share:
Basic:
Continuing operations $ (0.98) $ (0.92) $ 0.58
Discontinued operations (0.05) (0.01) 0.01
Cumulative effect of accounting change 0.02 (0.02) --
--------- --------- ---------
Net income (loss) $ (1.01) $ (0.95) $ 0.59
========= ========= =========
Diluted:
Continuing operations $ (0.98) $ (0.92) $ 0.56
Discontinued operations (0.05) (0.01) 0.01
Cumulative effect of accounting change 0.02 (0.02) --
--------- --------- ---------
Net income (loss) $ (1.01) $ (0.95) $ 0.58
========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
49
<PAGE> 50
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
- -----------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $(68,655) $(63,615) $ 37,741
Other comprehensive income (loss):
Foreign currency translation adjustments 1,283 (1,033) --
-------- -------- --------
Comprehensive income (loss) $(67,372) $(64,648) $ 37,741
======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
50
<PAGE> 51
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1997, 1998 and 1999
- ----------------------------------------------------------------------------------------------------------------------------
Unearned Accumulated
Restricted Other
Preferred Common Paid-In Stock Comprehensive Retained
(In thousands) Stock Stock Capital Compensation Income Deficit Total
--------- ------ ------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ -- $ 624 $256,785 $ -- $ -- $ (51,047) $206,362
Employee stock options -- 13 9,090 -- -- (7) 9,096
Acquisitions -- 15 16,728 -- -- -- 16,743
Issuance of restricted stock -- -- 668 (668) -- -- --
Amortization of restricted stock -- -- -- 125 -- -- 125
Results of operations of pooled entity -- -- -- -- -- -- --
due to different year end -- -- -- -- -- (625) (625)
Net income -- -- -- -- -- 37,741 37,741
--------- ------ ------- ------------ ------------- --------- --------
BALANCE, DECEMBER 31, 1997 -- 652 283,271 (543) -- (13,938) 269,442
Employee stock options -- 9 6,757 -- -- (1) 6,765
Acquisitions -- 23 23,337 -- -- -- 23,360
Issuance of restricted stock -- 4 6,468 (6,472) -- -- --
Amortization of restricted stock -- -- -- 1,397 -- -- 1,397
Foreign currency translation -- -- -- -- (1,033) -- (1,033)
Results of operations of pooled entities -- -- -- -- -- -- --
due to different year ends -- -- -- -- -- 563 563
Net loss -- -- -- -- -- (63,615) (63,615)
--------- ------ ------- ------------ ------------- --------- --------
BALANCE, DECEMBER 31, 1998 -- 688 319,833 (5,618) (1,033) (76,991) 236,879
Employee stock options -- 2 119 -- -- -- 121
Issuance of restricted stock -- -- 181 (181) -- -- --
Amortization of restricted stock -- -- -- 1,961 -- -- 1,961
Foreign currency translation -- -- -- -- 1,283 -- 1,283
Preferred stock and warrants issuance 12,597 -- 2,153 -- -- -- 14,750
Preferred stock dividends & accretion 412 -- 438 -- -- (850) --
Net loss -- -- -- -- -- (68,655) (68,655)
--------- ------ ------- ------------ ------------- --------- --------
BALANCE, DECEMBER 31, 1999 $ 13,009 $ 690 $322,724 $ (3,838) $ 250 $(146,496) $186,339
========= ====== ======= ============ ============= ========= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
51
<PAGE> 52
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
- -------------------------------------------------------------------------------------------------------------
(In thousands ) 1999 1998 1997
- --------------- --------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (68,655) $ (63,615) $ 37,741
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 26,881 37,901 26,393
(Benefit) provision for deferred income taxes (29,298) (25,965) 15,880
(Gain) loss on sale of assets (131) 45 147
Provision for doubtful accounts 2,853 9,180 --
Write-down of abandoned and disposed assets 44,870 52,266 --
Cumulative effect of accounting changes (1,471) 1,326 --
Impairment of long-lived assets 23,363 -- --
Loss on sale of discontinued operations 50 -- --
Arbitration settlement -- 22,056 --
Net loss in unconsolidated affiliates -- 1,293 --
Change in assets and liabilities, net of acquisitions:
Decrease in net current assets of discontinued operations (6,999) -- --
Decrease (increase) in accounts and notes receivable 3,055 11,434 (21,221)
(Increase) decrease in inventories (7,263) 3,605 (12,195)
Decrease (increase) in other assets 1,475 (9,554) (6,814)
Increase (decrease) in accounts payable 9,509 (6,920) (3,685)
Increase (decrease) in accrued liabilities and other 3,996 (3,799) (4,578)
--------- --------- ---------
NET CASH PROVIDED BY OPERATIONS 2,235 29,253 31,668
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (40,497) (104,660) (79,476)
Proceeds from sale of property, plant and equipment 11,899 382 40
Proceeds on sale of discontinued operations 5,500 -- --
Investment in joint ventures -- -- (4,833)
Acquisitions, net of cash acquired -- (15,809) (7,679)
Payments received on notes receivable 2,173 2,456 70
Advances on notes receivable -- (1,734) (3,000)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (20,925) (119,365) (94,878)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit 2,978 80,900 --
Principal payments on notes payable and long-term debt (1,675) (10,001) (46,777)
Proceeds from issuance of debt -- 452 125,122
Proceeds from exercise of stock options 536 3,687 4,114
Net proceeds from preferred stock issue 14,750 -- --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,589 75,038 82,459
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,101) (15,074) 19,249
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,618 21,692 2,443
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,517 $ 6,618 $ 21,692
========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
52
<PAGE> 53
NEWPARK RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION. Newpark Resources, Inc., a
Delaware corporation, ("Newpark" or the "Company") provides integrated fluids
management, environmental and oilfield services to the exploration and
production industry principally in the Louisiana and Texas Gulf Coast region. In
addition, the Company provides some or all of its services to the U.S.
Mid-continent region and Canada. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. Investments in
which the Company owns 20 percent to 50 percent and exercises significant
influence over operating and financial policies are accounted for using the
equity method. All material intercompany transactions are eliminated in
consolidation.
USE OF ESTIMATES AND MARKET RISKS. 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.
The Company receives substantially all of its revenues from customers
in the oil and gas industry. During 1998 and continuing in 1999, oil and gas
prices and related activities decreased to new lows, for the past several
decades, on an inflation adjusted basis. During the mid 1990's through the first
half of 1998, the Company experienced significant growth through a series of
strategic acquisitions and mergers and increasing demand for its products and
services. The Company completed ten and eleven acquisitions in 1998 and 1997,
respectively, which allowed the Company to enter into new markets and expand its
product lines. With significant decreases in the price of oil and gas and the
resultant impact on drilling activity, the Company experienced a sharp decline
in the demand for its products and services during the latter half of 1998 and
continuing through 1999. This decline in demand materialized quickly from the
previous growth period and at a time when the Company was developing and
introducing new and proprietary products and services to its customers.
In the third quarter of 1998 the Company began to reassess its
operations in response to the downturn in industry activity and to evaluate the
need for the introduction of new products and services. During 1998, in addition
to the settlement of an arbitration dispute, the Company implemented several
operational changes including the abandonment of several markets and products
and the reduction of employees and assets. The Company also decided to continue
the development and introduction of new products and services such as the
composite mats discussed in Note C. During 1999 the Company continued to review
its operations and product offerings and implemented plans to further reduce
operating costs and improve operating efficiencies while also continuing to
develop and introduce new products and services. During 1998 and 1999, the
Company expended $104.7 million and $40.5 million, respectively, for capital
assets, a significant portion of which was related to the new products and
services. As a result of these changes in the Company's market and operations,
significant charges were recorded (see Note C) and the Company has incurred
significant losses in both 1998 and 1999.
These conditions have had a negative impact on the Company's cash flows
and liquidity. In April 1999, the Company issued $15 million of preferred stock
(see Note I.) and in early 2000, the Company amended its bank credit facility
and agreed to secure the facility with substantially all of the Company's
accounts receivables, inventory and property and equipment. The banks agreed to
53
<PAGE> 54
restructure the financial covenant requirements to be consistent with the
Company's current financial position (see Note G). As of March 27, 2000, the
Company had no borrowing availability on this credit facility, as amended.
The Company believes that given 1) the current outlook for oil and gas
prices and related activity, 2) the changes that have been made to the Company's
operations, including its investments in the new products and services, and 3)
the Company's current financial position, the Company will be able to continue
its current business strategy for 2000 and the foreseeable future. However, the
Company believes that a prolonged depression in oil and gas drilling activity
would have a material adverse affect on the Company's financial position and
results of operations and would require the company to further reassess its
business strategies.
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
Company's significant financial instruments consist of cash and cash
equivalents, receivables, payables and long-term debt. 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, except as described below, management believes
the carrying values of these instruments approximate fair values at December 31,
1999 and 1998.
The estimated fair value of the Company's senior subordinated notes
payable at December 31, 1999 and 1998, based upon available market information,
was $116.3 million and $118.8 million, respectively, as compared to the carrying
amount of $125.0 million on those dates.
INVENTORIES. Inventories are stated at the lower of cost (principally average
and first-in, first-out) or market. Such inventories consist of logs, supplies,
processed barite, other specialty chemicals used in drilling fluids, and, until
its write-down in 1999, board road lumber (See Note C). Until the write-down,
board road lumber was amortized on the straight-line method over its estimated
useful life of approximately one year.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are recorded at
cost. Additions and improvements are capitalized. Maintenance and repair
expenses are charged to income as incurred. The cost of property, plant and
equipment sold or otherwise disposed of and the accumulated depreciation thereon
are eliminated from the property and related accumulated depreciation accounts,
and any gain or loss is credited or charged to income.
For financial reporting purposes, except as described below,
depreciation is provided by utilizing the straight-line method over the
following estimated useful service lives:
<TABLE>
<S> <C>
Computers, autos and light trucks 2-5 years
Wooden mats 2-4 years
Composite mats 15 years
Tractors and trailers 10-15 years
Machinery and heavy equipment 10-15 years
Owned buildings 20-35 years
Leasehold improvements lease term, including all renewal options
</TABLE>
54
<PAGE> 55
As described in Note C, in connection with the impairment of the
domestic wooden mat fleet, in 1999 the Company adjusted the remaining
depreciable life on these mats in anticipation of the eventual displacement of
such mats to an approximate average of two years.
The Company computes the provision for depreciation on certain of its
E&P waste and NORM disposal assets ("the waste disposal assets") and its barite
grinding mills using the unit-of-production method. In applying this method, the
Company has considered certain factors which affect the expected production
units (lives) of these assets. These factors include obsolescence, periods of
nonuse for normal maintenance and economic slowdowns and other events which are
reasonably predictable. The unit-of-production method of providing for
depreciation on these assets was adopted in the second quarter of 1999,
effective January 1, 1999. Prior to 1999, the Company computed the provision for
depreciation of these assets on a straight-line basis.
The original useful lives for the waste disposal assets were developed
assuming a relatively constant annual volume of the expected waste streams.
However, the actual volume of waste disposed by the Company has been more
volatile than expected in the markets which Newpark serves, and the volatility
in utilization rates is expected to continue. Because the utility of disposal
assets is diminished by volume of waste disposed rather than time, the Company
believes the unit-of-production method provides a better measure of loss of
utility of the disposal assets. In addition, a review of major competitors in
the industrial waste business indicates that the unit-of-production method is a
commonly used method of depreciation for surface disposal assets utilized in
this industry.
The original useful life for the barite mills was developed based on
maximum utilization rates which considered non-utilized time only for scheduled
repair periods. The Company's actual utilization rates closely followed this
pattern from inception of operations (1997) through July 1998. The significant
declines in drilling activity since that time has resulted in a drastic
reduction in utilization rates for the barite mills. The life of a barite
grinding mill is affected primarily by the volume of barite material ground in
the mill, not the passage of time. As a result, consistent with the waste
disposal assets, the Company believes the unit-of-production method provides a
better measure of diminution of utility of these assets.
In applying the unit-of-production method of providing depreciation,
the Company makes estimates of certain factors which are involved in determining
the expected productive units for its waste disposal assets and barite grinding
mill assets. The capacity of the waste disposal assets was determined based
primarily on seismic and geological studies, while the capacity for the barite
grinding mill assets was based primarily on manufacturer's certifications and
the capacity of similar assets. These factors also include consideration of
obsolescence and periods of non-use.
The reported loss from operations for the year ended December 31, 1999
was reduced by $1,471,000 (related per share amounts of $.02 basic and diluted)
reflecting the cumulative effect (net of income taxes) on years prior to 1999
for the change in accounting for depreciation. In addition, the effect of the
change in 1999 is to reduce the net loss from operations for the year ended
December 31, 1999 by $717,000 (related per share amounts of $.01 basic and
diluted).
55
<PAGE> 56
Consolidated net income (loss) that would have been reported for the
years ended December 31, 1998 and 1997 had the change been applied retroactively
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended
(In thousands of dollars) December 31,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (63,166) $ 38,182
Income (loss) per common and common equivalent share:
Basic (.94) .60
Diluted (.94) .58
</TABLE>
COST IN EXCESS OF NET ASSETS OF PURCHASED BUSINESSES AND IDENTIFIABLE
INTANGIBLES. The cost in excess of net assets of purchased businesses ("excess
cost") and identifiable intangibles are being amortized on a straight-line basis
over fifteen to thirty-five years, except for $2,211,000 relating to
acquisitions prior to 1971 that is not being amortized. Management of the
Company periodically reviews the carrying value of the excess cost in relation
to the current and expected undiscounted cash flows of the businesses which
benefit therefrom in order to assess whether there has been a permanent
impairment of the excess cost of the net purchased assets. Accumulated
amortization on excess cost was $13,879,000 and $9,004,000 at December 31, 1999
and 1998, respectively.
REVENUE RECOGNITION. In substantially all of its operating segments, Newpark
recognizes revenue on a units of delivery basis. E&P waste and NORM disposal
revenues are generally recognized upon receipt of waste for processing, while
drilling fluids sales and engineering revenues are generally recognized upon
delivery of products or services. Revenues from certain mat rental and
integrated service projects, which are typically of short duration, are
recognized as projects progress based upon sales values agreed to by the
customer for specific units delivered or project milestones completed. Included
in accounts receivable are unbilled revenues for projects in progress in the
amounts of $2,874,000 and $2,635,000 at December 31, 1999 and 1998,
respectively, all of which are due within one year.
INCOME TAXES. Income taxes are provided using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred
income taxes are recorded based upon differences between the financial reporting
and income tax basis of assets and liabilities and are measured using the
enacted income tax rates and laws that will be in effect when the differences
are expected to reverse.
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE. The Company owns a 49% interest in
the LOMA Company, LLC, the manufacturer of composite mats. During the start up
phase of operations for LOMA, the Company recorded its 49% interest in the
cumulative operating losses of the joint venture ($1,293,000) as a separate item
in the Consolidated Statements of Operations. In 1999, full production began at
the LOMA manufacturing facility. Given that all production from the facility is
for Newpark and all of LOMA's operations are production of composite mats, the
Company began recording its 49% interest in the income/(loss) of LOMA as a
reduction/(increase) to its cost of the composite mats included in property,
plant and equipment of the Company. During 1999, the carrying value of property,
plant and equipment was reduced by $520,000, reflecting the Company's 49%
interest in the earnings of LOMA for 1999.
56
<PAGE> 57
INTEREST CAPITALIZATION. For the years ended December 31, 1999, 1998 and 1997
the Company incurred interest cost of $18,381,000, $14,114,000, and $5,372,000,
respectively, of which $1,730,000, $2,560,000, and $1,107,000, respectively, was
capitalized on qualifying construction projects.
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.
FOREIGN CURRENCY TRANSACTIONS. The Company's Canadian subsidiary maintains its
accounting records in its local currency. This currency is converted to U.S.
dollars with the effect of the foreign currency translation reflected in
"accumulated other comprehensive income," a component of stockholders' equity,
in accordance with SFAS No. 52 and SFAS No. 130, "Reporting Comprehensive
Income." Foreign currency transaction gains or losses, if any, are credited or
charged to income. There were no transaction gains or losses incurred in 1999,
1998, or 1997. Cumulative foreign currency translation adjustments related to
the Canadian subsidiary reflected in stockholders' equity amounted to $669,000
and ($1,033,000) at December 31, 1999 and 1998, respectively. At December 31,
1999 and 1998, the Company's Canadian subsidiary had net assets of approximately
$31.3 million and $25.5 million, respectively.
RECLASSIFICATIONS. Certain reclassifications of amounts reported in prior years
have been made to conform to the current year presentation.
NEW ACCOUNTING STANDARDS During 1998, the Financial Accounting Standards Board
("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The statement establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Changes in a
derivative's fair value are to be recognized currently in earnings unless
specific hedge accounting criteria are met. The Company will be required to
adopt SFAS No. 133, as amended by SFAS No. 137, which defers the effective date,
on January 1, 2001. The Company does not believe that adoption of the statement
will have a material effect on the Company's consolidated financial statements
since the Company does not currently use derivative instruments or hedging
activities in its business.
During 1998, the American Institute of Certified Pubic Accountants
promulgated Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 broadly defines start-up activities as those
one-time activities related to opening a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. SOP 98-5 requires that companies
expense start-up activities as incurred. The Company adopted SOP 98-5 effective
July 1, 1998. Thus, in accordance with SOP 98-5, the Company recorded the
after-tax charge as a cumulative effect of accounting change within the
Company's 1998 Consolidated Statement of Operations. The effect of this change
in accounting principle was to decrease net income by $1,326,000 (net of related
income tax benefits of $778,000) or $.02 per basic and diluted share.
57
<PAGE> 58
B. ACQUISITIONS AND DISPOSITIONS
During 1998 and 1997, Newpark issued an aggregate of 1,151,000 shares
and 3,496,668 shares, respectively, of its common stock in exchange for all of
the outstanding common stock of the following six companies:
<TABLE>
<CAPTION>
Company Name Type of Company Location Shares
------------ --------------- -------- ------
<S> <C> <C> <C>
1998 acquisitions:
Southwestern Universal Corp Drilling Fluids West Texas 450,000
Optimum Fluids, Inc. Drilling Fluids Western Canada 281,000
Houston Prime Pipe & Supply Solids Control Gulf Coast 420,000
---------
1,151,000
1997 acquisitions:
Sampey, Bilbo, Meschi Drilling
Fluids Management, Inc. Drilling Fluids Gulf Coast 2,328,000
Excalibar Minerals, Inc. Barite Grinding Gulf Coast 666,668
Bockmon Construction Company Site Preparation Gulf Coast 502,000
---------
3,496,668
</TABLE>
These business combinations have been accounted for as poolings of
interests, and accordingly, the consolidated financial statements for periods
prior to the combinations have been restated to include the accounts and results
of operations of these entities.
Prior to the combinations, the year end for two of the entities was
September 30 and the year end for one of the entities was October 31. Newpark's
fiscal year is December 31. In applying pooling of interests accounting, the
December 31, 1997 Newpark consolidated statements of operations were combined
with the statements of operations for the corresponding year end of each pooled
entity. Retained earnings (deficit) of the combined entities were adjusted by
$563,000 and ($625,000) as of the beginning of Newpark's fiscal 1998 and 1997
years, respectively, to include net income/(losses) of the pooled entities for
the periods October 1, 1997 to December 31, 1997 and November 1, 1996 to
December 31, 1996. During these periods, the revenues of the pooled entities
which were excluded from the consolidated statements of operations were $3.9
million for 1997. Amounts included in the accompanying consolidated statements
of operations for the years ended December 31, 1997 include the results of these
entities for the year ended September 30, 1997.
In September, 1999, the Company's management adopted a plan to
discontinue operations of its solids control business (see Note D). The
discontinued solids control business includes all of the remaining assets and
operations from the acquisition of Houston Prime Pipe and Supply.
Operating results prior to the combination of the separate companies
and the combined amounts presented in the consolidated financial statements are
summarized below. Given that the Houston Prime transaction was part of the
Company's solids control business, which was discontinued in 1999, amounts for
Houston Prime are excluded in the following information, and are included in the
results from discontinued operations:
58
<PAGE> 59
<TABLE>
<CAPTION>
- -------------------------------------------------------
Year Ended
(In thousands of dollars) December 31,
- -------------------------------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Newpark $ 242,411 $ 210,277
Optimum 2,016 1,813
Southwestern 1,031 6,882
Bockmon -- 3,174
Excalibar -- 5,077
SBM -- --
--------- ---------
Combined $ 245,458 $ 227,223
--------- ---------
Net Income (Loss):
Newpark $ (63,801) $ 37,714
Optimum (6) (354)
Southwestern 192 162
Bockmon -- 12
Excalibar -- 207
SBM -- --
--------- ---------
Combined $ (63,615) $ 37,741
--------- ---------
</TABLE>
In addition to these transactions, Newpark acquired, in the aggregate,
eight other companies in 1998 and seven other companies in 1997. These
acquisitions have been accounted for by the purchase method and include the
results of operations of the acquired companies since their respective
acquisition dates. These acquisitions were completed in exchange for an
aggregate of 2,346,771 shares of Newpark common stock and $22,652,000 in cash
during 1998 and 1,193,332 shares of Newpark common stock and $9,186,000 in cash
during 1997. The purchase prices were allocated based on preliminary estimates
of fair values at the dates of acquisition. The final purchase price allocation
did not differ significantly from the preliminary purchase price allocation.
This resulted in an excess of purchase price over assets acquired of
$51,671,000, which is being amortized on a straight-line basis over 15 to 20
years.
The purchase price was allocated to the net assets acquired based on
their fair values at the date of acquisition, as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current assets $ 15,078 $ 3,240
Property, Plant & Equipment 6,579 10,848
Liabilities assumed (17,729) (6,096)
Goodwill 35,241 16,430
-------- --------
Total purchase price, net of cash acquired 39,169 24,422
Less value of common stock issued (23,360) (16,743)
-------- --------
Cash purchase price, net of cash acquired $ 15,809 $ 7,679
======== ========
</TABLE>
The following unaudited pro forma summary presents the consolidated
results of operations of the Company as if the above purchase acquisitions had
occurred on January 1, 1997:
59
<PAGE> 60
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands, except per share amounts) 1998 1997
- ---------------------------------------- ----------- -----------
<S> <C> <C>
Revenues $ 268,146 $ 270,454
Net income (loss) (62,047) 37,777
Net income (loss) per common and
common equivalent share:
Basic $ (.90) $ 0.58
Diluted (.90) 0.56
=========== ===========
</TABLE>
The above unaudited proforma amounts have been prepared for comparative
purposes only and include certain adjustments, such as additional amortization
expense as a result of goodwill, additional depreciation expense for assets
recorded at fair market value at the date of acquisition, additional interest
expense for borrowings, and the net impact of the above adjustments on income
tax expense. They do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect on January
1, 1997, or of future results of operations of the consolidated entities.
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 was accounted for under the
purchase method, and resulted in an excess of purchase price over assets
acquired of $77.1 million, of which $68.6 million is being amortized on a
straight-line basis over 35 years, $7.5 million, attributable to a non-compete
agreement, was being amortized on a straight-line basis over 25 years and $1.0
million, attributable to dock leases, which is being amortized over the
respective lease terms. As a result of the signing of a Settlement Agreement
with U.S. Liquids, Inc. (see Notes C and N), the remaining unamortized value of
the non-compete agreement was reduced to $900,000, (the estimated fair market
value) and is being amortized over the revised non-compete period of three
years. The adjustment to the unamortized balance of the non-compete agreement of
$6.1 million was included in arbitration settlement charged to operations in
1998.
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 sales price of approximately $16.0 million
represents the net book value of the assets sold and refinanced. The
consideration received included $1.2 million in cash, $7.2 million in notes
receivable and $7.6 million in debt obligations which were assumed by the
operator. The notes receivable are included in other assets and have been
recorded at their estimated fair value, which approximates the amount at which
they can be prepaid at the operator's option during the term of the notes. The
notes receivable include two notes, one of which is in the face amount of
$8,534,000, bears simple interest at 5.0% per annum, with interest and principal
payable at September 30, 2003. The second note, in the amount of $600,000,
bearing interest at 8% per annum, was subsequently paid off during the first
quarter of 1998. The remaining note is secured by a second lien on the assets
sold as well as certain guarantees of the operator.
C. SIGNIFICANT 1999 AND 1998 CHARGES
During the mid 1990's through the first half of 1998, the Company
experienced significant growth through a series of strategic acquisitions and
mergers, and increasing demand for its related products and services. Due to a
significant decrease in the price of oil and gas and the resultant impact on
drilling activity, the Company experienced a sharp decline in the demand for its
products and
60
<PAGE> 61
services during the third and fourth quarters of 1998 which continued in 1999.
This decline in customer demand materialized quickly from the previous growth
period and, coupled with the timing of the Company's continued efforts to bring
certain proprietary innovations to its customers, caused the Company to reassess
its overall operations. This change in the Company's market and reassessment of
operations, as well as the settlement of an arbitration dispute in 1998,
resulted in the Company recording the following pretax charges during 1999 and
1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(In thousands) 1999 1998
- -------------- ------- -------
<S> <C> <C>
Provision for uncollectible accounts $ 2,853 $ 9,180
Write-down of abandoned and disposed assets 44,870 52,266
Impairment of long-lived assets 23,363 --
Terminated merger expense 2,957 --
Arbitration settlement -- 27,463
------- -------
Total $74,043 $88,909
======= =======
</TABLE>
The provision for uncollectible accounts in 1998 was made due to the
financial weakness of certain customers resulting from continued downward
pressure on oil prices, which caused a strain on customer cash flows. The
Company had then identified three specific customer balances where the risk of
financial concern merited the majority of the additional reserve in 1998. Most
of these customers have filed for bankruptcy protection. In 1999, the additional
provision is primarily related to a decrease in the expected recovery of
pre-bankruptcy receivables for these same customers as indicated in their
approved or proposed plans of reorganization.
The write-down of abandoned and disposed assets includes the following
amounts for 1998 and 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(In millions) 1999 1998
- ------------- ----- -----
<S> <C> <C>
Mat and integrated services segment:
Domestic wooden mats $30.4 $43.0
Venezuela operations 11.6 --
Other .4 1.3
----- -----
Total mat and integrated services segment 42.4 44.3
Fluids sales and engineering segment:
Investment in Mexican joint venture 2.5 --
Austin Chaulk assets -- 4.7
----- -----
Total fluids sales and engineering segment 2.5 4.7
E&P waste disposal segment:
Barge disposal -- 1.3
Write-down of proposed disposal sites -- 2.0
----- -----
Total E&P waste disposal segment -- 3.3
----- -----
Total write-down for abandoned and disposed assets $44.9 $52.3
===== =====
</TABLE>
The $43.0 million write-down of the Company's domestic wooden mat
fleet in 1998 is primarily due to a significant excess capacity in the fleet
resulting from the sharp decline in drilling activity. In addition, in late
1998, the Company began the process of converting a portion of its domestic
rental
61
<PAGE> 62
fleet to the new composite mat. The write-down represents the net book value
associated only with mats that were abandoned or destroyed.
In the fourth quarter of 1999, after the Company completed its
evaluation of the composite mat and its advantages over the wooden mat system
and further indication that the Gulf Coast mat market would likely stabilize
below its peak in 1997, the Company removed an additional amount of the
remaining wooden mats from service and began the process of destroying these
mats, recording a charge of $30.4 million. Included in the write-down cost for
wooden mats in 1999 are disposal costs of approximately $1.1 million. As of
December 31, 1999, the accrual for mat disposal costs to be incurred was
approximately $500,000. Also included in this amount is $3.0 million of charges
for the write-down of the Company's board road lumber inventory, since this
loose lumber is generally not required in the laying of composite mats.
In addition to the disposals of the wooden mat fleet, in the fourth
quarter of 1999, the Company made the decision to close down its mat business in
Venezuela, due to poor market conditions and continued political instability in
that area, recording a charge of $11.6 million. The measurement of the
recoverable amount for the Venezuelan operations is based on management's
judgement of the most likely value to be received on the sale of assets, less
costs to sell. This estimate is subject to change in 2000 as actual amounts from
the sale or recovery of these assets are realized.
The other charges for write-down of assets in the mat and integrated
services segment were $0.4 million and $1.3 million in 1999 and 1998,
respectively. In 1999, this charge represents the net book value of various
equipment deemed obsolete which has been sold or abandoned. In 1998, this charge
represents the net book value of a machine previously used in remediation
operations that was abandoned after it was rendered obsolete by other new
equipment introduced by the Company, which was technologically superior.
The $2.5 million write-down charge recorded in the Company's fluids
sales and engineering segment in 1999 relates to the decision to withdraw from
its Mexican joint venture in order to focus management's attention on the U.S.
and Canadian markets it serves. The measurement of the recoverable amount for
the Mexican operations is based on management's judgement of the most likely
value to be received from its joint venture partner. This estimate is subject to
change in 2000 as actual payments from the joint venture partner are received.
In 1998, the write-down charge of $4.7 million recorded in this segment relates
to assets that were either abandoned or disposed (primarily warehouses and
mixing plants located in the Austin Chauk region). These assets were abandoned
or disposed due to market shifts or due to excess capacity created by a downturn
in the Company's operations. The disposal value for these assets was received in
1999 with no significant differences from estimated amounts being realized.
Included in the write-down charges for the E&P waste disposal segment
in 1998 was $1.3 million to write-down barges to their disposal value, which
value was received in 1999. These barges were previously used in this segment
and were no longer required due to decreased volumes of waste being handled.
Also included in the write-down in this segment for 1998 is a charge of $2.0
million relating to the abandonment of additional disposal sites being developed
for future use. Due to the downturn in the oilfield waste market created by
reduced oilfield drilling, the Company decided not to pursue bringing this
additional capacity on-line.
62
<PAGE> 63
In addition to the charges for the write-down of assets to be disposed
or abandoned, in the fourth quarter of 1999, the Company recorded an impairment
charge of $23.4 million in the mat and integrated services segment on the
remaining domestic wooden mat fleet which the Company will continue to use in
the short-term. This charge reflects the reduction in the recoverability of
these mats over their estimated service life which was reduced due to their
planned replacement with composite mats over the next two to three years. This
reduced the domestic wooden mat fleet to a total carrying value of $4.5 million
as of the date of the impairment charge. This carrying value was determined
based on an estimation of the net discounted cash flows expected to be received
for the wooden mats remaining in service until their expected replacement by
composite mats. In connection with this impairment, the Company also adjusted
the remaining depreciable life on the domestic wooden mats in anticipation of
the planned displacement of such mats to an approximate average of two years.
On June 24, 1999, the Company entered into a definitive agreement to
merge with Tuboscope, Inc. (Tuboscope). On November 10, 1999, the Company and
Tuboscope announced that they had jointly elected to form operational alliances
in key market areas rather than proceed with the proposed merger. The decision
was made because recent market conditions in the oilfield services market and
the resulting uncertainty in the capital markets made it difficult to obtain the
type of credit facility believed necessary for the combined companies. Each
company agreed to pay its respective transaction expenses relating to the
proposed merger, which for Newpark are approximately $3.0 million. Under the
alliance agreement, Tuboscope will provide solids control services to Newpark's
Minimization Management(TM) customers, while Newpark will provide E&P waste
disposal services to Tuboscope.
The $27.5 million of charges relating to the arbitration settlement
stems from the settlement during the third quarter of 1998 (with final
modifications during the fourth quarter 1998) between the Company's E&P waste
disposal segment and U. S. Liquids, Inc. ("USL") over a contract dispute which
is discussed more fully in Note N. The total settlement was $30 million, of
which $6 million and $11 million was paid in 1998 and 1999, and $9 million and
$4 million will be paid in 2000 and 2001, respectively. The settlement provided
for, among other things, 1) the termination of Newpark's original contractual
commitment to provide waste to USL's disposal facilities for twenty-five years
and 2) the right, but not the obligation, to deliver specified volumes of E&P
waste to USL's facilities until June 30, 2001 without additional cost. The right
to deliver waste was valued at its estimated fair market value of $8 million
based on the volumes that can be delivered and the market price to dispose of
such waste. This amount is being recorded as a charge to operations over the
disposal period. The termination feature was valued at $22 million, which
represented the balance of the total settlement, and an obligation was recorded
based on the present value of the contractual payments assigned to the
termination feature. At December 31, 1999 and 1998, the recorded amount of the
obligation was $8.1 million and $15.3 million, respectively. Total pretax
charges associated with the settlement of $27.5 million included a $6.1 million
write down to the estimated fair value of the remaining non-compete with U.S.
Liquids, with the remaining $21.4 million representing the portion of the
settlement associated with the termination feature.
D. DISCONTINUED OPERATIONS OF SOLIDS CONTROL BUSINESS
In September, 1999, the Company's management adopted a plan to
discontinue the operations of its solids control business and simultaneously
entered into an alliance agreement with a division of Tuboscope, which is now
providing these services. The Company received approximately $5.5 million for
the sale of these operations, which resulted in a net loss on the disposal of
$32,000, net of tax. The operating results of the solids control business,
including provisions in 1999 for employee termination costs, employee benefits
and losses during the phase-out period, have been classified as discontinued
operations in the consolidated financial statements. Revenues of these
discontinued operations totaled
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<PAGE> 64
approximately $7.4 million, $11.4 million and $6.0 million in 1999, 1998 and
1997, respectively. Included in net assets of discontinued operations as of
December 31, 1999 are $3,459,000 in accounts receivable, (net of allowances for
doubtful accounts of $1,700,000) and accrued expenses of $350,000.
E. INVENTORY
The Company's inventory consisted of the following items at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(In thousands) 1999 1998
- -------------- ------- -------
<S> <C> <C>
Board road lumber $ -- $ 1,276
Logs 3,338 4,835
Drilling fluids raw materials and components 13,062 10,667
Supplies 724 1,285
Other 400 600
------- -------
Total $17,524 $18,663
======= =======
</TABLE>
F. PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment at December
31, 1999 and 1998 is summarized as follows:
<TABLE>
- -----------------------------------------------------------------
(In thousands) 1999 1998
- -------------- --------- ---------
<S> <C> <C>
Land $ 9,183 $ 9,770
Buildings and improvements 43,476 33,753
Machinery and equipment 147,087 152,304
Composite and wooden mats 15,111 71,660
Other 5,439 6,111
--------- ---------
220,296 273,598
Less net PP&E of discontinued operations -- (14,607)
Less accumulated depreciation (53,693) (55,610)
--------- ---------
$ 166,603 $ 203,381
========= =========
</TABLE>
G. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
Credit arrangements and long-term debt consisted of the following at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In thousands) 1999 1998
- -------------- --------- ---------
<S> <C> <C>
Senior subordinated notes $ 125,000 $ 125,000
Bank line of credit 83,250 80,900
Building loan 809 1,335
Other, principally installment notes secured by
machinery and equipment, payable through
2002 with interest at 2.0% to 13.5% 1,142 2,017
--------- ---------
210,201 209,252
Less: current maturities of long-term debt (991) (1,195)
--------- ---------
Long-term portion $ 209,210 $ 208,057
========= =========
</TABLE>
64
<PAGE> 65
On December 17, 1997 the Company issued $125 million of unsecured
senior subordinated notes (the "Notes"), which mature on December 15, 2007.
Interest on the Notes accrues at the rate of 8-5/8% per annum and is payable
semi-annually on each June 15 and December 15, commencing June 15, 1998. The
Notes may be redeemed by Newpark, in whole or in part, at a premium commencing
after December 15, 2002. Up to 35% of the Notes may be redeemed from proceeds of
an equity offering, at a premium at any time up to and including December 1,
2000. The Notes are subordinated to all senior indebtedness, as defined in the
subordinated debt indenture, including the Company's bank revolving credit
facility.
The Notes are guaranteed by substantially all operating subsidiaries of
the Company (the "Subsidiary Guarantors"). The guarantee obligations of the
Subsidiary Guarantors (which are all direct or indirect wholly owned
subsidiaries of the Company) are full, unconditional and joint and several. The
aggregate assets, liabilities, earnings, and equity of the Subsidiary Guarantors
are substantially equivalent to the total assets, liabilities, earnings, and
equity of Newpark Resources, Inc. and its subsidiaries on a consolidated basis.
Separate financial statements of the Subsidiary Guarantors are not included in
the accompanying financial statements because management of the Company has
determined that the additional information provided by separate financial
statements of the Subsidiary Guarantors would not be of material value to
investors.
As of December 31, 1999, the Company maintained a $100.0 million bank
credit facility, including up to $20.0 million in standby letters of credit, in
the form of a revolving line of credit commitment which expires June 30, 2001.
At December 31, 1999, $16.7 million in letters of credit were issued and
outstanding under the credit facility and $83.3 million was outstanding under
the revolving facility. Based on these outstanding amounts and the outstanding
letters of credit, the Company had no availability under this facility at
December 31, 1999. The facility bears interest at either a specified prime rate
(8.5% at December 31, 1999) or the LIBOR rate (6.18% at December 31, 1999) plus
a spread determined quarterly based on the ratio of the Company's funded debt to
cash flow. The weighted average interest rate on the outstanding balance under
the credit facility in 1999 and 1998 was 7.85% and 5.87%, respectively.
On March 27, 2000 the Company and the banks agreed to an amendment to
the Credit Facility which provided for the following: 1) the facility will be
secured by substantially all of the accounts receivable, inventory and property
plant and equipment of the Company; 2) the financial covenants as of December
31, 1999 and going forward will provide for covenants that are consistent with
the Company's current financial condition and anticipated outlook, 3) the
variable interest rate will be increased based on the Company's Debt to EBITDA
ratio, as defined, to a range of a) prime plus 0% to prime plus 1.25% or b)
LIBOR plus 1.25% to LIBOR plus 4%, and 4) the Company will pay an amendment fee
of $250,000. Under the amended agreement, the expected interest rate for early
2000 is prime plus 1.25% (10.25% at March 27, 2000) or LIBOR plus 4% (10.25% at
March 27, 2000). Several of the financial covenants under the amended credit
facility are at or near their limit. For example, the facility requires the
company to maintain consolidated tangible net worth, as defined as consolidated
stockholders' equity less certain intangible assets such as goodwill,
unamortized debt discount and patents, of $69 million. The Company's
consolidated tangible net worth, as defined, was $69.9 million at December 31,
1999. Any losses sustained in future quarters may cause the Company to not be in
compliance with the financial covenants unless waivers or amendments can be
obtained from the banks.
The Notes do not contain any financial covenants; however, in the event
that the Company does not meet the financial covenants of the credit facility
and is unable to obtain an amendment from the
65
<PAGE> 66
banks, the Company would be in default of the credit facility which would cause
the Notes to be in default and immediately due. The Notes and the credit
facility also contain covenants that significantly limit the payment of
dividends on the common stock of the Company.
Maturities of long-term debt, exclusive of the credit facility which
expires September 30, 2001, are $991,000 in 2000, $382,000 in 2001, $214,000 in
2002, $172,000 in 2003, $128,000 in 2004 and $125,063,000 thereafter.
H. INCOME TAXES
The provision (benefit) for income taxes charged to operations is
principally U. S. Federal tax as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------
(In thousands) 1999 1998 1997
- -------------- -------- -------- --------
<S> <C> <C> <C>
Current tax expense (benefit) $ 611 $ (5,083) $ 6,366
Deferred tax expense (benefit) (29,298) (25,965) 15,880
-------- -------- --------
Total provision (benefit) $(28,687) $(31,048) $ 22,246
======== ======== ========
</TABLE>
The total provision (benefit) was allocated to the following components
of income (loss):
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- -------------- -------- -------- --------
<S> <C> <C> <C>
Income (loss) from operations $(27,246) $(29,787) $ 21,755
Discontinued operations (2,215) (483) 491
Cumulative effect of accounting change 774 (778) --
-------- -------- --------
Total provision (benefit) $(28,687) $(31,048) $ 22,246
======== ======== ========
</TABLE>
The effective income tax rate is reconciled to the statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate (35.0%) (35.0%) 35.0%
Non-deductible expenses 1.5 1.4 1.5
Increase in valuation allowance 2.2 -- .4
Other 1.9 .8 .2
----- ----- -----
Total income tax expense (benefit) (29.4%) (32.8%) 37.1%
===== ===== =====
</TABLE>
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities at December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(In thousands) 1999 1998
- -------------- -------- --------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 57,533 $ 25,640
Accruals not currently deductible 2,432 3,103
Bad debts 3,469 3,411
Deferred payments under settlement agreement 3,652 6,164
Alternative minimum tax credits 2,341 2,341
All other 965 962
-------- --------
Total deferred tax assets 70,392 41,621
Valuation allowance (9,060) (1,326)
-------- --------
Total deferred tax assets, net of allowances $ 61,332 $ 40,295
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(In thousands) 1999 1998
- -------------- ------- -------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation and amortization $14,399 $21,033
Inventory costs capitalized for financial reporting -- 943
All other 2,875 2,808
------- -------
Total deferred tax liabilities 17,274 24,784
------- -------
Total net deferred tax assets $44,058 $15,511
======= =======
</TABLE>
For federal income tax purposes, the Company has net operating loss
carryforwards ("NOLs") of approximately $141 million (net of amounts disallowed
pursuant to IRC Section 382) that, if not used, will expire in 2001 through
2019. The Company also has approximately $2.3 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. Additionally,
for state income tax purposes, the Company has NOLs of approximately $156
million available to reduce future state taxable income. These NOLs expire in
varying amounts beginning in year 2000 through 2014.
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, 1999 and 1998, the Company recorded a valuation
allowance for all state NOLs and the portion of federal NOLs that the Company
believes may not be fully utilized in the future. At December 31, 1999, the
Company has recognized a net deferred tax asset of $44.1 million, the
realization of which is dependent on the Company's ability to generate taxable
income in future periods. The Company believes that its estimate of future
earnings based on contracts in place and its earnings trend from recent prior
years supports recognition of this amount.
Deferred tax expense includes an increase in the valuation allowance
for deferred tax assets of ($7,734,000) and ($1,326,000) for 1999 and 1997,
respectively.
I. EQUITY SECURITIES
The Company has been authorized to issue up to 1,000,000 shares of
Preferred Stock, $.01 par value, of which 150,000 were outstanding at December
31, 1999.
On April 16, 1999, the Company, issued to SCF-IV, L.P., a Delaware
limited partnership managed by SCF Partners (the "Purchaser"), 150,000 shares of
Series A Cumulative Perpetual Preferred Stock, $0.01 par value per share (the
"Series A Preferred Stock"), and a warrant (the "Warrant") to purchase up to
2,400,000 shares of the Common Stock of the Company at an exercise price of
$8.50 per share, subject to anti-dilution adjustments. The aggregate purchase
price for these instruments was $15.0 million, of which approximately $12.8
million was allocated to the Series A Preferred Stock and approximately $2.2
million to the Warrant. The difference between the carrying
67
<PAGE> 68
value and the redemption value for the Series A Preferred Stock is being
amortized to retained earnings over a period of five years and affects the
earnings per share of common stock. The net proceeds from the sale were used to
repay indebtedness. No underwriting discounts, commissions or similar fees were
paid in connection with the sale of the securities.
Cumulative dividends are payable on the Series A Preferred Stock
quarterly in arrears at the initial dividend rate of 5% per annum, based on the
stated value of $100 per share of Series A Preferred Stock. Dividends for the
first three years are payable in Newpark Common Stock, based on the average
closing price of Newpark's Common Stock for the five business days preceding the
record date. The dividend rate is subject to adjustment three, five and seven
years after the date of issuance. The agreement does not restrict common stock
dividends or repurchases of common stock by the Company as long as all
accumulated dividends on the Series A Preferred Stock have been paid in full.
Dividends paid on preferred stock and accretion of the discount on the preferred
stock for the year ended December 31, 1999 were $532,000 and $318,000,
respectively. These amounts reflect dividends and accretion for the period of
April 16, 1999 (the issuance date of the preferred stock) through December 31,
1999.
On May 13, 1998, the stockholders of the Company approved an increase
in the number of authorized shares of common stock to 100,000,000.
Changes in outstanding Common Stock for the years ended December 31,
1999, 1998, and 1997 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
(In thousands of shares) 1999 1998 1997
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
Outstanding, beginning of year 68,840 65,212 62,758
Shares issued for acquisitions -- 2,347 1,193
Shares issued for deferred compensation plan 46 535 59
Other -- 17 --
Shares issued for preferred stock dividend 71 -- --
Shares issued upon exercise of options 122 729
------ ------ ------
1,202
Outstanding, end-of-year 69,079 68,840 65,212
====== ====== ======
</TABLE>
J. EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), the Company changed its method of calculating
earnings per share during the fourth quarter of 1997. Per share and weighted
average share amounts for all years presented have been restated to conform to
the requirements of SFAS No. 128, and to give effect for all 1998 and 1997
transactions accounted for as poolings of interest (see Note B).
The following table presents the reconciliation of the numerator and
denominator for calculating earnings per share in accordance with the disclosure
requirements of SFAS 128 as follows (in thousands, except per share data):
68
<PAGE> 69
<TABLE>
<CAPTION>
For the Years Ended
------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------- ------------------------------- --------------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
(Num) (Den) Amount (Num) (Den) Amount (Num) (Den) Amount
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income (loss)
available to
common
stockholders
$(69,505) 68,949 $ (1.01) $(63,615) 67,058 $ (0.95) $37,741 64,158 $ .59
======= ======= =====
EFFECT OF
DILUTIVE
SECURITIES
Stock options -- -- 1,472
-------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended
------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------- ------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DILUTED EPS
Income (loss)
available to
common
stockholders $(69,505) 68,949 $ (1.01) $(63,615) 67,058 $ (0.95) $37,741 65,630 $ .58
========= ====== ======= ======== ======= ======== ======= ======= =====
</TABLE>
Options and warrants excluded from the computation of diluted EPS for
the years ended December 31, 1999 and 1998 that could potentially dilute basic
EPS in the future were 7,426,455 shares and 4,435,664 shares, respectively.
Since the Company incurred a loss per share for 1999 and 1998, such dilutive
options were excluded, as they would be antidilutive to basic EPS.
Options to purchase 12,000 and 16,000 shares of common stock, at
exercise prices of $20.84 and $19.53 per share, respectively, were outstanding
during the fourth quarter of 1997, but were not included in the computation of
diluted EPS because the options' exercise price was greater than the average
market price of the common shares. The options, which expire during the fourth
quarter of 2002, were still outstanding at the end of 1997.
K. STOCK OPTION PLANS
At December 31, 1999, the Company had three stock-based compensation
plans, which are described below. The Company applies Accounting Principles
Board Opinion 25 ("APB 25") and related Interpretations in accounting for its
plans. Accordingly, no compensation cost has been recognized for its stock
option plans as the exercise price of all stock options granted thereunder is
equal to the fair value at the date of grant. Had compensation costs for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
Financial Accounting Standards Board Statement No. 123, the Company's net income
(loss) and earnings (loss) 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) 1999 1998 1997
- ------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) As reported $ (69,505) $ (63,615) $ 37,741
Pro forma (76,210) (68,977) 35,245
Basic earnings (loss) per share As reported (1.01) (0.95) 0.59
Pro forma (1.11) (1.03) 0.55
Diluted earnings (loss) As reported (1.01) (0.95) 0.58
=========== ========== ========== ==========
per share Pro forma (1.11) (1.03) 0.54
=========== ========== ========== ==========
</TABLE>
69
<PAGE> 70
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:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Risk free interest rate 6.5% 5.2% 6.3%
Expected years until exercise 4 4 4
Expected stock volatility 259.1% 56.9% 64.3%
Dividend yield 0% 0% 0%
===== ===== =====
</TABLE>
A summary of the status of the Company's stock option plans as of
December 31, 1999, 1998 and changes during the periods ending on those
dates is presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------- ------------------------ ------------------------
W-A W-A W-A
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 4,435,664 $ 8.02 4,070,557 $ 7.59 4,110,132 $ 4.90
Granted 1,057,600 5.35 1,254,000 11.35 1,254,000 12.59
Exercised (122,238) 4.43 (726,222) 4.92 (1,153,315) 3.50
Canceled (344,571) 9.17 (162,671) 13.45 (140,260) 6.69
---------- ---------- ----------
Outstanding at end of year 5,026,455 $ 7.46 4,435,664 $ 8.02 4,070,557 $ 7.59
========== ========== ==========
Weighted-average fair
value of options granted
during the year $ 5.23 $ 6.51 $ 6.80
</TABLE>
The following table summarizes information about all stock options
outstanding at December 31, 1999.
<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>
$1.90 to $4.11 1,030,400 2.98 $ 3.61 1,017,800 $ 3.61
$4.28 to $6.25 1,040,696 5.94 $ 5.09 94,334 $ 5.59
$6.50 to $8.31 1,155,388 4.33 $ 8.11 971,724 $ 8.25
$8.62 to $9.94 63,667 5.33 $ 9.17 30,001 $ 9.38
$10.00 to $21.00 1,736,304 4.76 $10.69 861,006 $10.46
--------- ---- ------ ------------ ------
5,026,455 4.55 $ 7.46 2,974,865 $ 7.23
</TABLE>
70
<PAGE> 71
On December 15, 1998 a total of 1,729,306 options, none of which were for
the benefit of executive officers, were amended to reflect a reduction of the
exercise price to $10.00 per share. On the date of the amendment, the price of
Newpark's common stock was $5.63 per share.
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
several times and provided for approximately 4,000,000 shares to be issuable
thereunder. Under the terms of the 1988 Plan, an option could not be granted for
an exercise price less than the fair market value on the date of grant and could
have a term of up to ten years. No future grants are available under the 1988
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 stockholders in 1994.
Non-employee directors are not eligible to participate in any other stock option
or similar plans currently maintained by the Company. The purpose of the 1993
Non-Employee Directors' Plan is to promote an increased incentive and personal
interest in the welfare of Newpark by those individuals who are primarily
responsible for shaping the long-range plans of Newpark, to assist Newpark in
attracting and retaining on the Board persons of exceptional competence and to
provide additional incentives to serve as a director of Newpark.
Prior to January 29, 1998, the 1993 Non-Employee Directors' Stock
Option Plan (the "Non-Employee Directors' Plan") provided that each non-employee
director who was serving on the Board of Directors on September 1, 1993, and
each new non-employee director who was first elected to the Board of Directors
after September 1, 1993, would be granted a stock option to purchase, at an
exercise price equal to the fair market value of the Common Stock on the date of
grant, 63,000 shares of common stock. The Non-Employee Directors' Plan also
provided that each time a non-employee director had served on the Board for a
period of five consecutive years, such director automatically would be granted a
stock option to purchase 42,000 shares of Common Stock, at an exercise price
equal to the fair market value of the Common Stock on the date of grant.
Effective January 29, 1998, the Non-Employee Directors' Plan was amended to
reduce the number of shares of Common Stock for which a stock option will be
granted to each non-employee director who is first elected a director after that
date from 63,000 shares to 10,000 shares of Common Stock. The Non-Employee
Directors' Plan also was amended to delete the provisions for the automatic
grant of additional stock options at five-year intervals and to provide instead
for automatic additional grants to each Non-Employee Director of stock options
to purchase 10,000 shares of Common Stock on January 29, 1998, and each time the
Non-Employee director is re-elected to the Board of Directors. These amendments
were approved by the stockholders on May 13, 1998.
On November 2, 1995, the Board of Directors adopted, and on June 12,
1996 the stockholders approved, the Newpark Resources, Inc. 1995 Incentive Stock
Option Plan (the "1995 Plan"), pursuant to which the Compensation Committee may
grant incentive stock options and nonstatutory stock options to designated
employees of Newpark. Initially, a maximum of 2,100,000 shares of Common Stock
were issuable under the 1995 Plan, with such maximum number increasing on the
last business day of each fiscal year of Newpark, commencing with the last
business day of the fiscal year ending December 31, 1996, by a number equal to
1.25% of the number of shares of Common Stock issued and outstanding on the
close of business on such date, with a maximum number of shares of Common Stock
that may be issued upon exercise of options granted under the 1995 Plan being
limited to 5,250,000.
71
<PAGE> 72
L. DEFERRED COMPENSATION PLAN
In March of 1997, the Company established a Long-Term Stock and Cash
Incentive Plan (the "Plan"). By policy, the Company has limited participation in
the Plan to certain key employees of companies acquired subsequent to inception
of the Plan. The intent of the Plan is to increase the value of the
stockholders' investment in the Company by improving the Company's performance
and profitability and to retain, attract and motivate key employees who are not
directors or officers of Newpark but whose judgment, initiative and efforts are
expected to contribute to the continued success, growth and profitability of the
Company.
Subject to the provisions of the Plan, a committee may (i) grant awards
pursuant to the Plan, (ii) determine the number of shares of stock or the amount
of cash or both subject to each award, (iii) determine the terms and conditions
(which need not be identical) of each award, provided that stock shall be issued
without the payment of cash consideration other than an amount equal to the par
value of the stock, (iv) establish and modify performance criteria for awards,
and (v) make all of the determinations necessary or advisable with respect to
awards under the Plan.
Each award under the Plan will consist of a grant of shares of stock or
an amount of cash (to be paid on a deferred basis) subject to a restriction
period (after which the restrictions shall lapse), which shall mean a period
commencing on the date the award is granted and ending on such date as the
committee shall determine (the "Restriction Period"). The committee may provide
for the lapse of restrictions in installments, for acceleration of the lapse of
restrictions upon the satisfaction of such performance or other criteria or upon
the occurrence of such events as the committee shall determine, and for the
early expiration of the Restriction Period upon a participant's death,
disability, retirement at or after normal retirement age or the termination of
the participant's employment with the Company by the Company without cause.
The maximum number of shares of common stock of Newpark that may be
issued pursuant to the Plan is 676,909, subject to adjustment pursuant to
certain provisions of the Plan. The maximum amount of cash that may be awarded
pursuant to the Plan is $1,500,000, and each such amount may be increased by the
Board of Directors. If shares of stock or the right to receive cash awarded or
issued under the Plan are reacquired by Newpark due to a forfeiture or for any
other reason, such shares or right to receive cash will be cancelled and
thereafter will again be available for purposes of the Plan. At December 31,
1999, 640,136 shares of common stock had been issued under the Plan and
$1,418,000 had been awarded.
M. SUPPLEMENTAL CASH FLOW INFORMATION
Included in accounts payable and accrued liabilities at December 31,
1999, 1998 and 1997, were equipment purchases of $1,326,000, $5,186,000, and
$3,632,000, respectively. Also included are notes payable for equipment
purchases in the amount of $434,000 and $83,000 for 1998 and 1997, respectively.
Interest of $18,063,000, $13,144,000 and $4,801,000, was paid in 1999,
1998 and 1997, respectively. Income tax refunds, net of payments, totaled
$11,191,000 for the year ended December 31, 1999. Income taxes of $9,991,000,
and $4,751,000 were paid in 1998 and 1997, respectively.
72
<PAGE> 73
N. 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 1996 acquisition of Campbell Wells Ltd.
("Campbell"), Newpark became a party to a "NOW Disposal Agreement", pursuant to
which Newpark was required, for a period of 25 years following the acquisition,
to deliver to Campbell for disposal at its landfarm facilities an agreed annual
quantity of E&P Waste, and Campbell executed a Noncompetition Agreement under
which it agreed not to compete with Newpark in the marine-related E&P Waste
disposal business for five years. The landfarms are now operated by U.S.
Liquids, Inc. ("USL"), which also assumed Campbell's obligations under the
Noncompetition Agreement. During 1998, a dispute arose between the parties
concerning Newpark's obligations under the NOW Disposal Agreement. In September
1998, Newpark and USL settled their dispute by executing a Settlement Agreement
and a "Payment Agreement" under which, among other things, Newpark's contractual
commitment to deliver waste to USL's disposal facilities was terminated
immediately, and Newpark agreed to pay USL $30 million, $6 million of which was
paid in 1998, $11 million of which was paid in 1999, $9 million of which is to
be paid in 2000 and $4 million of which is to be paid in 2001. The payments to
be made in 2000 and 2001 are subject to increase based on the increase, if any,
in the Consumer Price Index between July 1, 1998 and January 3, 2000. As a
result of the change in the Consumer Price Index, in 2000 Newpark will pay a
total of $9.2 million to USL. Under the Payment Agreement, Newpark has the
right, but not the obligation, to deliver specified volumes of E&P Waste to
USL's facilities until June 30, 2001 without additional cost, and subject to
certain conditions, Newpark may extend this arrangement for two additional
one-year terms at an additional annual cost of $8 million, which is also subject
to increase based on increases in the Consumer Price Index. As part of the
settlement, Newpark agreed that USL may engage in the business of cleaning
tanks, barges, vessels, containers and similar structures used in the
transportation and storage of E&P Waste, and USL purchased from Newpark certain
equipment used by Newpark in such cleaning activities.
The Company is currently involved in proceedings with the Texas State
Comptroller of Public Accounts related to sales tax audits for the periods of
April 1988 through September 1995. The Company believes that the ultimate
resolution of this matter will not have a material adverse effect on its
consolidated financial statements.
In the normal course of business, in conjunction with its insurance
programs, the Company has established letters of credit in favor of certain
insurance companies in the amount of $1,250,000 and $1,000,000 at December 31,
1999 and 1998, respectively. At December 31, 1999 and 1998, the Company had
outstanding guaranty obligations totaling $1,494,000 and $1,526,000,
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 wooden 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
5,000 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, absent any reductions resulting
from excess purchases, is currently estimated to be $3.7 million.
73
<PAGE> 74
Since July 1995, Newpark has held the exclusive worldwide right to use
a patented composite mat system. Production of these mats did not commence until
1998. The license agreement requires, among other things, that the Company
purchase a minimum of 5,000 mats annually. Any purchases in excess of that level
may be applied to future annual requirements. Newpark's annual commitment to
maintain the agreement in force is currently estimated to be $3,500,000.
The Company has guaranteed certain debt obligations of a joint venture
in which it holds a 49% interest, through the issuance of a letter of credit.
The guarantee is limited to $15 million, plus accrued interest. The joint
venture partner has obtained a commitment for the refinancing of its debt. The
pending transaction would not require a guarantee from the Company.
The Company leases various manufacturing facilities, warehouses, office
space, machinery and equipment, including transportation equipment and composite
mats, 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 $9,173,000, $10,731,000, and $5,993,000,
in 1999, 1998 and 1997, respectively.
Future minimum payments under noncancellable operating leases and
future minimum receipts under noncancellable subleases, with initial or
remaining terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------
Net
Operating Operating Operating
Lease Sublease Lease
Payments Receipts Payments
- ------------------------------ --------- ---------
<S> <C> <C> <C>
2000 $10,854 $ 175 $10,679
2001 9,968 466 9,502
2002 9,407 466 8,941
2003 8,636 475 8,161
2004 8,113 498 7,615
2005 and thereafter 22,776 314 22,462
------- ------- -------
$69,754 $ 2,394 $67,360
======= ======= =======
</TABLE>
The Company is self-insured for health claims up to a certain policy
limit. Claims in excess of $100,000 per incident and approximately $4.8 million
in the aggregate per year are insured by third-party reinsurers. At December 31,
1999, the Company had accrued a liability of $900,000 for outstanding and
incurred, but not reported, claims based on historical experience.
O. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist principally of cash
investments and trade accounts and notes receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the Company's
trade area and company policy is designed to limit exposure to any one
institution. As part of the Company's investment strategy, the Company performs
periodic evaluations of the relative credit standing of these financial
institutions.
74
<PAGE> 75
Concentrations of credit risk with respect to trade accounts and notes
receivable are generally limited due to the large number of entities comprising
the Company's customer base, and for notes receivable the required collateral.
The Company maintains an allowance for losses based upon the expected
collectibility of accounts and notes receivable.
P. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<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 1999 (AS RESTATED)
Revenues $ 50,775 $ 39,268 $ 48,873 $ 51,860
Operating income (loss) 5,103 (5,579) (1,011) (76,815)
Net income (loss) 2,029 (5,492) (8,218) (57,824)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
- ---------------------------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
(In thousands, except per share amounts)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) per share Basic:
Continuing operations 0.01 (0.07) (0.10) (0.83)
Discontinued operations (0.00) (0.02) (0.02) (0.01)
Cumulative effect of accounting change 0.02 -- -- --
---------- ---------- ---------- ----------
Net income (loss) 0.03 (0.08) (0.12) (0.84)
Diluted:
Continuing operations 0.01 (0.07) (0.10) (0.83)
Discontinued operations (0.00) (0.02) (0.02) (0.01)
Cumulative effect of accounting change 0.02 -- -- --
---------- ---------- ---------- ----------
Net income (loss) 0.03 (0.08) (0.12) (0.84)
Weighted average common and common
equivalent shares outstanding:
Basic 68,872 68,893 68,986 69,044
Diluted 69,185 68,893 68,986 69,044
FISCAL YEAR 1998 (AS RESTATED)
Revenues $ 70,870 $ 65,486 $ 59,218 $ 49,884
Operating income (loss) 18,903 16,138 (42,130) (74,179)
Net income (loss) 11,227 9,109 (32,882) (51,069)
Net income (loss) per share
Basic:
Continuing operations 0.17 0.13 (0.46) (0.73)
Discontinued operations (0.01) 0.01 (0.01) (0.01)
Cumulative effect of accounting change -- -- (0.02) --
---------- ---------- ---------- ----------
Net income (loss) 0.17 (0.08) (0.49) (0.74)
Diluted:
Continuing operations 0.17 0.13 (0.46) (0.73)
Discontinued operations (0.01) 0.01 (0.01) (0.01)
Cumulative effect of accounting change -- -- (0.02) --
---------- ---------- ---------- ----------
Net income (loss) 0.17 (0.08) (0.49) (0.74)
Weighted average common and common
equivalent shares outstanding:
Basic 65,364 66,448 67,605 68,775
Diluted 66,784 67,731 67,605 68,775
</TABLE>
75
<PAGE> 76
The information above has been restated to reflect the presentation of
discontinued operations of the Company's solids control operations in the third
quarter of 1999. In addition, as further discussed in Note C, during the fourth
quarter of 1999 and the third and fourth quarters of 1998, the Company recorded
significant charges associated with asset write-downs and impairments,
arbitration settlement, and increases in the provision for uncollectible
accounts. Also, included in the fourth quarter of 1998 are charges to adjust
certain inventories to physical amounts and to account for differences in gross
margins, primarily in the Fluids Sales & Engineering segment, which were
estimated during the interim periods of 1998. The total of these charges was
$4,381,000 and is included in costs of services provided.
Q. SEGMENT AND RELATED INFORMATION
The Company's three business units have separate management teams and
infrastructures that offer different products and services to a homogenous
customer base. The business units form the three reportable segments of E&P
Waste Disposal, Fluids Sales & Engineering and Mat & Integrated Services.
E&P Waste Disposal: This segment provides disposal services for both
oilfield exploration and production ("E&P") waste and E&P waste contaminated
with naturally occurring radioactive material. The primary method used for
disposal is low pressure injection into environmentally secure geologic
formations deep underground. The primary operations for this segment are in the
Gulf Coast market and customers include major multinational and independent oil
companies. This segment began operations of its non-hazardous industrial waste
disposal facility in 1999. Disposal of this type of waste could lead to an
expansion of Newpark's customer base and geographic service points for this
segment.
Fluids Sales & Engineering: This segment provides drilling fluids sales
and engineering services and onsite drilling fluids processing services. The
primary operation for this segment are in the Gulf Coast market. However, other
markets served by this segment include Oklahoma, Canada, and the Permian Basin.
Customers include major multinational, independent and national oil companies.
Mat & Integrated Services: This segment provides prefabricated
interlocking mat systems for the construction of drilling and work sites. In
addition, the segment provides fully-integrated onsite and offsite environmental
services, including site assessment, pit design, construction and drilling waste
management, and regulatory compliance services. The primary markets served
include the Gulf Coast market and Canada. The principal customers are major
national, independent and national oil companies. In addition, this segment
provides temporary work site services to the pipeline, electrical utility and
highway construction industries principally in the Southeastern portion of the
United States.
Newpark does not believe it is dependent on any one customer. During
the years ended December 31, 1999 and 1998 there were no sales to one customer
in excess of 10%. During the year ended December 31, 1997, one customer
accounted for approximately 10% of total revenues. This customer is a customer
of the Mat & Integrated Services segment. Export sales are not significant.
Summarized financial information concerning the Company's reportable
segments is shown in the following table:
76
<PAGE> 77
<TABLE>
<CAPTION>
Years Ended December 31,
- --------------------------------------------------------------------------------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
REVENUES (1)
E&P Waste Disposal $ 42,954 $ 58,457 $ 62,681
Fluids Sales & Engineering 93,018 92,792 63,205
Mat & Integrated Services 60,560 111,513 103,216
Eliminations (5,756) (17,304) (1,879)
--------- --------- ---------
Total Revenues $ 190,776 $ 245,458 $ 227,223
========= ========= =========
(1) Segment revenues include the following intersegment transfers:
E&P Waste Disposal $ -- $ 869 $ 380
Fluids Sales & Engineering 89 1,089 --
Mat & Integrated Services 5,667 15,346 1,499
--------- --------- ---------
Total Intersegment Transfers $ 5,756 $ 17,304 $ 1,879
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
OPERATING INCOME (LOSS):
Segment Operating Income (Loss)
E&P Waste Disposal $ 13,068 $ 19,014 $ 28,768
Fluids Sales & Engineering (8,616) (10,628) 11,297
Mat & Integrated Services (1,126) 10,059 28,354
--------- --------- ---------
Total Segment Operating Income $ 3,326 $ 18,445 $ 68,419
========= ========= =========
General and administrative expenses (2,589) (4,305) (3,185)
Goodwill amortization (4,996) (5,206) (2,683)
Provision for uncollectible accounts (2,853) (9,180) --
Write-down of abandoned and disposed assets (44,870) (52,266) --
Impairment of long-lived assets (23,363) -- --
Terminated merger expense (2,957) --
Arbitration settlement -- (27,463) --
Equity in net loss of unconsolidated affiliate -- (1,293) --
--------- --------- ---------
Total Operating Income (Loss) $ (78,302) $ (81,268) $ 62,551
========= ========= =========
SEGMENT ASSETS
E&P Waste Disposal $ 154,097 $ 156,047 $ 149,746
Fluids Sales & Engineering 153,096 156,172 71,072
Mat & Integrated Services 77,292 136,737 173,303
Other 65,706 45,649 54,781
--------- --------- ---------
Total Assets $ 450,191 $ 494,605 $ 448,902
========= ========= =========
</TABLE>
77
<PAGE> 78
<TABLE>
<S> <C> <C> <C>
DEPRECIATION & AMORTIZATION
E&P Waste Disposal $ 5,452 $ 6,258 $ 5,371
Fluids Sales & Engineering 7,019 5,791 1,331
Mat & Integrated Services 14,305 25,822 19,617
Other 105 30 74
--------- --------- ---------
Total Depreciation & Amortization $ 26,881 $ 37,901 $ 26,393
========= ========= =========
CAPITAL EXPENDITURES
E&P Waste Disposal $ 14,241 $ 30,621 $ 20,816
Fluids Sales & Engineering 6,961 14,326 15,475
Mat & Integrated Services 19,295 47,335 42,296
Other -- 15 115
--------- --------- ---------
Total Capital Expenditures $ 40,497 $ 92,297 $ 78,702
========= ========= =========
</TABLE>
The following table sets forth information about the Company's
operations by geographic area:
<TABLE>
<CAPTION>
Years Ended December 31,
- ----------------------------------------------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
REVENUE
Domestic $ 168,584 $ 227,959 $ 224,662
International 22,192 17,499 2,561
--------- --------- ---------
Total Revenue $ 190,776 $ 245,458 $ 227,223
--------- --------- ---------
OPERATING INCOME (LOSS)
Domestic $ (71,039) $ (83,274) $ 62,558
International (7,263) 2,006 (7)
--------- --------- ---------
Total Operating Income (Loss) $ (78,302) $ (81,268) $ 62,551
========= ========= =========
ASSETS
Domestic $ 415,930 $ 460,981 $ 439,396
International 34,261 33,624 9,506
--------- --------- ---------
Total Assets $ 450,191 $ 494,605 $ 448,902
========= ========= =========
</TABLE>
78
<PAGE> 79
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
79
<PAGE> 80
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 2000 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 2000 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 2000 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 2000 Annual Meeting of
Shareholders.
80
<PAGE> 81
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, 1999 and 1998
Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997. Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1999, 1998 and 1997.
Consolidated Statement of Cash Flows for the years ended December 31,
1999, 1998 and 1997. Consolidated Statements of Comprehensive Income
for the years ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have
been omitted.
3. EXHIBITS
3.1 Restated Certificate of Incorporation.(9)
3.2 Bylaws.(1)
4.1 Indenture, dated as of December 17, 1997, among the
registrant, each of the Guarantors identified therein and
State Street Bank and Trust Company, as Trustee.(2)
4.2 Form of the Newpark Resources, Inc. 8 5/8% Senior Subordinated
Notes due 2007, Series B.(2)
4.3 Form of Guarantees of the Newpark Resources, Inc. 8 % Senior
Subordinated Notes due 2007. (2)
10.1 Employment Agreement, dated as of October 23, 1990, between
the registrant and James D. Cole.(1)*
10.2 Lease Agreement, dated as of May 17, 1990, by and between
Harold F. Bean Jr. and Newpark Environmental Services, Inc.
("NESI").(1)
10.3 Lease Agreement, dated as of July 29, 1994, by and between
Harold F. Bean Jr. and NESI.(3)
81
<PAGE> 82
10.4 Building Lease Agreement, dated April 10, 1992, between the
registrant and The Traveler's Insurance Company.(4)
10.5 Building Lease Agreement, dated May 14, 1992, between State
Farm Life Insurance Company, and SOLOCO, Inc.(4)
10.6 Operating Agreement, dated June 30, 1993, between Goldrus
Environmental Services, Inc. and NESI.(3)
10.7 Amended and Restated 1993 Non-Employee Directors' Stock Option
Plan.(9)*
10.8 1995 Incentive Stock Option Plan.(5)*
10.9 Exclusive License Agreement, dated June 20, 1994, between
SOLOCO, Inc. and Quality Mat Company.(3)
10.10 Restated Credit Agreement, dated June 30, 1997, among the
registrant, as borrower, the subsidiaries of the registrant
named therein, as guarantors, and BankOne, Louisiana, National
Association, Deutsche Bank A.G., New York Branch and/or Cayman
Islands Branch and Hibernia National Bank, as banks (the
"Banks").(6)
10.11 First Amendment to Restated Credit Agreement, dated November
7, 1997, among the registrant, the subsidiaries of the
registrant named therein and the Banks.(7)
10.12 Second Amendment to Restated Credit Agreement, dated December
10, 1997, among the registrant, the subsidiaries of the
registrant named therein and the Banks.(7)
10.13 Third, Fourth, Fifth and Sixth Amendment to Restated Credit
Agreement, dated December 10, 1997, among the registrant, the
subsidiaries of the registrant named therein and the
Banks.(7)(9)
10.14 Credit Agreement, dated December 1, 1995, between SOLOCO,
Inc., and Hibernia National Bank.(5)
10.15 Now Disposal Agreement, dated June 4, 1996, among Sanifill,
Inc., Now Disposal Operating Co. and Campbell Wells, Ltd.(8)
10.16 Settlement of Arbitration and Release, dated July 22, 1998,
among the registrant and U.S. Liquids, Inc.(9)
10.17 Payment Agreement, dated December 31, 1998, among the
registrant, Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.18 Option Agreement, dated December 31, 1998, among the
registrant, Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.19 Asset Purchase Agreement, dated September 16, 1998 among
Newpark Environmental Services, Inc. and U.S. Liquids, Inc.(9)
10.20 Amendment to Asset Purchase Agreement, dated September 22,
1998 among Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.21 Noncompetition Agreement of September 16, 1998, among the
registrant and U.S. Liquids, Inc.(9)
10.22 Miscellaneous Agreement, dated September 16, 1998, among the
registrant and U.S. Liquids, Inc.(9)
10.23 Operating Agreement of The Loma Company L.L.C.(9)
82
<PAGE> 83
10.24 Termination and Release Agreement, dated November 10, 1999,
between Tuboscope Inc. and the registrant. +
10.25 Asset Purchase Agreement, dated as of November 12, 1999, among
Tuboscope Inc., the registrant, Newpark Drilling Fluids, Inc.,
and Newpark Holdings, Inc., as amended on December 8, 1999. +
10.26 Alliance Agreement, dated as of February 3, 2000, among
Tuboscope Inc., Tuboscope Vetco International, Inc., the
registrant, Newpark Drilling Fluids, L.L.C., and Newpark
Environmental Services, L.L.C. +
10.27 Newpark Resources, Inc. 1999 Employee Stock Purchase Plan. +*
21.1 Subsidiaries of the Registrant+
23.1 Consent of Arthur Andersen LLP+
23.2 Consent of Deloitte & Touche LLP+
24.1 Powers of Attorney+
27.1 Financial Data Schedule+
- --------------
+ Filed herewith.
* Management Compensation Plan or Agreement.
(1) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-1 (File No. 33-40716) and incorporated by reference
herein.
(2) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-4 (File No. 333-45197) and incorporated by
reference herein.
(3) 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.
(4) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-8 (File No. 33-83680) and incorporated by reference
herein.
(5) 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.
(6) Previously filed in the exhibits to the registrant's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1997.
(7) Previously filed in the exhibits to the registrants Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated by
reference herein.
(8) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-3 (File No. 333-05805), and incorporated by
reference herein.
(9) Previously filed in the exhibits to the registrants Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated by
reference herein.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
83
<PAGE> 84
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 2000
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
-------------------------------------
James D. Cole, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ James D. Cole
- ----------------------------------
James D. Cole Chairman of the Board, President March 27,2000
and Chief Executive Officer
/s/ Matthew W. Hardey
- ----------------------------------
Matthew W. Hardey Vice President of Finance and March 27,2000
Chief Financial Officer
/s/ Eric M. Wingerter
- ----------------------------------
Eric M. Wingerter Vice President and Controller March 27,2000
(Principal Accounting Officer)
/s/ Wm. Thomas Ballantine
- ----------------------------------
Wm. Thomas Ballantine Executive Vice President and March 27,2000
Director
/s/ Dibo Attar
- ----------------------------------
Dibo Attar* Director March 27,2000
/s/ W. W. Goodson
- ----------------------------------
W. W. Goodson* Director March 27,2000
/s/ David P. Hunt
- ----------------------------------
David P. Hunt* Director March 27,2000
/s/ Dr. Alan Kaufman
- ----------------------------------
Dr. Alan Kaufman* Director March 27,2000
/s/ James H. Stone
- ----------------------------------
James H. Stone* Director March 27,2000
By /s/ James D. Cole
- ----------------------------------
*James D. Cole
Attorney-in-Fact
</TABLE>
84
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation.(9)
3.2 Bylaws.(1)
4.1 Indenture, dated as of December 17, 1997, among the
registrant, each of the Guarantors identified therein and
State Street Bank and Trust Company, as Trustee.(2)
4.2 Form of the Newpark Resources, Inc. 8 5/8% Senior Subordinated
Notes due 2007, Series B.(2)
4.3 Form of Guarantees of the Newpark Resources, Inc. 8 % Senior
Subordinated Notes due 2007. (2)
10.1 Employment Agreement, dated as of October 23, 1990, between
the registrant and James D. Cole.(1)*
10.2 Lease Agreement, dated as of May 17, 1990, by and between
Harold F. Bean Jr. and Newpark Environmental Services, Inc.
("NESI").(1)
10.3 Lease Agreement, dated as of July 29, 1994, by and between
Harold F. Bean Jr. and NESI.(3)
</TABLE>
<PAGE> 86
<TABLE>
<S> <C>
10.4 Building Lease Agreement, dated April 10, 1992, between the
registrant and The Traveler's Insurance Company.(4)
10.5 Building Lease Agreement, dated May 14, 1992, between State
Farm Life Insurance Company, and SOLOCO, Inc.(4)
10.6 Operating Agreement, dated June 30, 1993, between Goldrus
Environmental Services, Inc. and NESI.(3)
10.7 Amended and Restated 1993 Non-Employee Directors' Stock Option
Plan.(9)*
10.8 1995 Incentive Stock Option Plan.(5)*
10.9 Exclusive License Agreement, dated June 20, 1994, between
SOLOCO, Inc. and Quality Mat Company.(3)
10.10 Restated Credit Agreement, dated June 30, 1997, among the
registrant, as borrower, the subsidiaries of the registrant
named therein, as guarantors, and BankOne, Louisiana, National
Association, Deutsche Bank A.G., New York Branch and/or Cayman
Islands Branch and Hibernia National Bank, as banks (the
"Banks").(6)
10.11 First Amendment to Restated Credit Agreement, dated November
7, 1997, among the registrant, the subsidiaries of the
registrant named therein and the Banks.(7)
10.12 Second Amendment to Restated Credit Agreement, dated December
10, 1997, among the registrant, the subsidiaries of the
registrant named therein and the Banks.(7)
10.13 Third, Fourth, Fifth and Sixth Amendment to Restated Credit
Agreement, dated December 10, 1997, among the registrant, the
subsidiaries of the registrant named therein and the
Banks.(7)(9)
10.14 Credit Agreement, dated December 1, 1995, between SOLOCO,
Inc., and Hibernia National Bank.(5)
10.15 Now Disposal Agreement, dated June 4, 1996, among Sanifill,
Inc., Now Disposal Operating Co. and Campbell Wells, Ltd.(8)
10.16 Settlement of Arbitration and Release, dated July 22, 1998,
among the registrant and U.S. Liquids, Inc.(9)
10.17 Payment Agreement, dated December 31, 1998, among the
registrant, Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.18 Option Agreement, dated December 31, 1998, among the
registrant, Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.19 Asset Purchase Agreement, dated September 16, 1998 among
Newpark Environmental Services, Inc. and U.S. Liquids, Inc.(9)
10.20 Amendment to Asset Purchase Agreement, dated September 22,
1998 among Newpark Environmental Services, Inc. and U.S.
Liquids, Inc.(9)
10.21 Noncompetition Agreement of September 16, 1998, among the
registrant and U.S. Liquids, Inc.(9)
10.22 Miscellaneous Agreement, dated September 16, 1998, among the
registrant and U.S. Liquids, Inc.(9)
10.23 Operating Agreement of The Loma Company L.L.C.(9)
</TABLE>
<PAGE> 87
<TABLE>
<S> <C>
10.24 Termination and Release Agreement, dated November 10, 1999,
between Tuboscope Inc. and the registrant. +
10.25 Asset Purchase Agreement, dated as of November 12, 1999, among
Tuboscope Inc., the registrant, Newpark Drilling Fluids, Inc.,
and Newpark Holdings, Inc., as amended on December 8, 1999. +
10.26 Alliance Agreement, dated as of February 3, 2000, among
Tuboscope Inc., Tuboscope Vetco International, Inc., the
registrant, Newpark Drilling Fluids, L.L.C., and Newpark
Environmental Services, L.L.C. +
10.27 Newpark Resources, Inc. 1999 Employee Stock Purchase Plan. +*
21.1 Subsidiaries of the Registrant+
23.1 Consent of Arthur Andersen LLP+
23.2 Consent of Deloitte & Touche LLP+
24.1 Powers of Attorney+
27.1 Financial Data Schedule+
</TABLE>
- --------------
+ Filed herewith.
* Management Compensation Plan or Agreement.
(1) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-1 (File No. 33-40716) and incorporated by reference
herein.
(2) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-4 (File No. 333-45197) and incorporated by
reference herein.
(3) 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.
(4) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-8 (File No. 33-83680) and incorporated by reference
herein.
(5) 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.
(6) Previously filed in the exhibits to the registrant's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1997.
(7) Previously filed in the exhibits to the registrants Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated by
reference herein.
(8) Previously filed in the exhibits to the registrant's Registration
Statement on Form S-3 (File No. 333-05805), and incorporated by
reference herein.
(9) Previously filed in the exhibits to the registrants Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated by
reference herein.
<PAGE> 1
EXHIBIT 10.24
TERMINATION AND RELEASE AGREEMENT
THIS TERMINATION AND RELEASE AGREEMENT (the "Agreement") is made and
entered into this 10th day of November, 1999, by and between Tuboscope Inc., a
Delaware corporation ("Tuboscope"), and Newpark Resources, Inc., a Delaware
corporation ("Newpark," and collectively with Tuboscope, the "Parties").
WITNESSETH:
WHEREAS, the Parties entered into that certain Agreement and Plan of
Merger, dated as of June 24, 1999 (the "Merger Agreement," and capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the
Merger Agreement);
WHEREAS, in connection with the negotiations surrounding the Merger
Agreement, the Parties entered into a Confidentiality Agreement dated June 4,
1999; and
WHEREAS, the Parties hereto wish to terminate the Merger Agreement, and
release their respective rights, claims, obligations and liabilities in
connection therewith, and the board of directors of each Party has approved such
termination and authorized such Party to enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
set forth, the Parties agree as follows:
1. TERMINATION OF MERGER AGREEMENT. Effective immediately, each of
Tuboscope and Newpark abandon the Merger and mutually terminate the Merger
Agreement pursuant to Section 8.01(a) thereof (including any provisions which
would survive termination pursuant to the terms of the Merger Agreement).
Notwithstanding anything to the contrary contained in the Merger Agreement,
except as provided herein, no Released Party (as defined herein) shall have any
liability or obligation under the Merger Agreement, including without
limitation, as a result of any action or failure to act in connection with the
Merger Agreement.
2. NON-DISPARAGEMENT; SURVIVAL OF CONFIDENTIALITY AGREEMENT.
(a) Each Party agrees that it will not, and will cause its respective
subsidiaries, directors, officers and employees not to, and will use its best
efforts to cause its financial advisors, consultants and affiliated entities not
to, make any public statements or any statements reasonably calculated to become
public (orally, in writing, electronically or otherwise), or instigate, assist
or participate in making any such statement, which would or may reasonably be
considered to disparage the other Party or its business or operations, any of
the other Party's corporate predecessors, subsidiaries or affiliates or their
respective businesses or operations, or any of the other Party's present and
former officers, partners, directors, employees, agents, stockholders or
representatives, in their capacity as such. From and after the date hereof,
except as otherwise agreed by the
<PAGE> 2
Parties, no Party shall make any public statements or any statements reasonably
calculated to become public regarding, and in response to inquiries from the
media, analysts, investors and other third parties each Party agrees not to
comment on, (i) the business or prospects of the other Party or (ii) the reasons
for the abandonment of the Merger and mutual termination of the Merger
Agreement, except as provided in the form of joint press release attached hereto
as Exhibit A or as otherwise required by law upon the advice of counsel, which
shall be confirmed in writing. For purposes of this Agreement, a statement made
by, or authorized by or made under the direction of, an officer or director of a
Party, or a representative of such Party's media relations or investor relations
departments, to the media, analysts, investment community or a significant
shareholder of a Party will be conclusively presumed to be "reasonably
calculated to become public" and any other statement which actually becomes
public will be subject to a rebuttable presumption that it was "reasonably
calculated to become public" at the time it was made.
(b) The Confidentiality Agreement shall remain in full force and effect
in accordance with its terms.
3. EXPENSES. No Party shall pay a termination fee to, or expense of,
the other Party under the Merger Agreement or in connection with the proposed
Merger, including without limitation any termination fee or expense provided for
in Sections 8.03(b)-(g) of the Merger Agreement. Each Party shall bear its own
costs and expenses heretofore or hereafter incurred by each Party in connection
with or relating to this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby, including the proposed Merger.
4. GENERAL RELEASE AND WAIVER. Effective immediately, each of the
Parties and each of their respective predecessors, successors, subsidiaries and
assigns and any of the present and former officers, directors and employees of
the foregoing (each, a "Releasing Party"), in their capacity as such, hereby
covenants not to sue and forever releases and discharges the other Party (and
each of their respective directors, officers, representatives, advisors
(including but not limited to financial advisors), attorneys, accountants,
employees, agents, parents, subsidiaries, affiliated persons and entities,
predecessors, successors and assigns and heirs, executors and administrators and
all persons acting in concert with any such party) (each, a "Released Party")
from all manner of claims, actions, causes of action or suits, at law or in
equity, known or unknown, which each now has or hereafter can, shall or may have
by reason of any matter, cause or thing whatsoever relating to or arising out of
the Merger Agreement or the agreements or instruments ancillary thereto or the
transactions contemplated thereby, or any action or failure to act under the
Merger Agreement or in connection therewith, or in connection with the events
leading to the abandonment of the Merger and the mutual termination of the
Merger Agreement, excepting only any claim, action, cause of action or suit
arising (i) out of an undertaking or promise contained in this Agreement or any
agreement entered into between the parties subsequent to the date of this
Agreement, or (ii) by virtue of obligations under the Confidentiality Agreement,
or (iii) by virtue of transactions or dealings undertaken in the ordinary course
of business and not arising out of, or in connection with, the Merger Agreement
and the transactions contemplated thereby.
2
<PAGE> 3
Nothing in this Agreement or the Merger Agreement shall in any way constitute an
agreement by any party hereto to indemnify any other party hereto against any
third party claim.
5. GOVERNING LAW. This Agreement, and all matters relating hereto,
shall be governed by, and construed in accordance with the laws of the State of
Delaware without reference to the conflict of laws principles thereof.
6. ENTIRE AGREEMENT. This Agreement and the Confidentiality Agreement
constitute the entire agreement between the parties and supersede all prior
agreements and understandings, both written and oral, between the Parties, or
any of them, with respect to the subject matter hereof.
7. COOPERATION. Each Party agrees to cooperate with the other and to
take all action reasonably necessary to give full effect to the provisions and
intent of this Agreement, including, without limitation, any action necessary to
defend the validity and enforceability hereof. For such purpose, each Party will
bear its own costs and expenses incurred to take such action.
8. AMENDMENT AND MODIFICATION. This Agreement may be amended, modified,
and supplemented only by a written document executed by the Parties which
specifically states that it is an amendment, modification or supplement to this
Agreement.
9. AUTHORIZATION. Each Party represents and warrants (i) this Agreement
has been duly and validly authorized, executed and delivered, and (ii) the
person executing this Agreement on its behalf is duly authorized and fully
competent to execute this Agreement on its behalf. In entering into this
Agreement, the undersigned represent that they have read all the terms hereof,
have discussed the terms with counsel and that such terms are fully understood
and voluntarily accepted.
10. CONSTRUCTION. This Agreement shall be construed without regard to
the Party or Parties responsible for its preparation, and it shall be deemed to
have been prepared jointly by the Parties. Any ambiguity or uncertainty arising
herein shall not be interpreted or construed against any Party hereto.
11. NOTICES. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (a)
when sent if sent by facsimile, provided that the facsimile is promptly
confirmed by telephone confirmation thereof to the intended recipient, (b) when
delivered, if delivered personally to the intended recipient, and (c) one
business day later, if sent by overnight delivery via a national courier
service, and in each case, addressed to a Party at the following address for
such Party:
3
<PAGE> 4
if to Tuboscope:
Tuboscope Inc.
2835 Holmes Road
Houston, Texas 77051
Attention: James F. Maroney, Esq.
Telecopy: (713) 799-5224
with a copy to:
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626
Attention: Patrick T. Seaver, Esq.
Telecopy: (714) 755-8290
if to Newpark:
Newpark Resources, Inc.
3850 North Causeway, Suite 1770
Metairie, Louisiana 70002
Attention: James D. Cole
Telecopy: (504) 833-9506
with a copy to:
Ervin, Cohen & Jessup LLP
9401 Wilshire Blvd., 9th Floor
Beverly Hills, CA 90212-2974
Attention: Bertram K. Massing, Esq.
Telecopy: (310) 859-2325
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
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<PAGE> 5
13. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affect the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction, and if any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
14. ENFORCEMENT. The parties agree that in the event of a breach of any
provision of this Agreement irreparable damage would occur, the aggrieved party
would be without an adequate remedy at law, and damages would be difficult to
determine. The parties therefore agree that in the event of a breach of any
provision of this Agreement, the aggrieved party may elect to institute and
prosecute proceedings to enforce specific performance or to enjoin the
continuing breach of such provision. By seeking or obtaining such relief, the
aggrieved party will not be precluded from seeking or obtaining any other relief
to which it may be entitled at law or in equity. In the event of any dispute,
litigation or other adversary proceeding that may arise with respect to the
subject matter of this Agreement (including the Confidentiality Agreement), the
prevailing party will be entitled to receive from the other party reasonable
attorneys' fees, costs and expenses incurred in such dispute, litigation or
proceeding. The "prevailing party" means the party determined by the court or
arbitrator to have most nearly prevailed, even if such party did not prevail in
all matters, and not necessarily the party in whose favor a judgment is
rendered.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 6
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
TUBOSCOPE INC.
By: /s/ Joseph C. Winkler
-----------------------------------
Name: Joseph C. Winkler
Title: Executive Vice President and Chief
Financial Officer
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
-----------------------------------
Name: James D. Cole
Title: President
SIGNATURE PAGE TO TERMINATION AND RELEASE AGREEMENT
<PAGE> 1
EXHIBIT 10.25
ASSET PURCHASE AGREEMENT
AMONG
TUBOSCOPE INC
AND
NEWPARK RESOURCES, INC.,
NEWPARK DRILLING FLUIDS, INC.
AND
NEWPARK HOLDINGS, INC.
November 12, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions......................................................1
2. Basic Transaction................................................3
(a) Purchase and Sale of Assets.............................3
(b) Assumption of Liabilities...............................3
(c) Purchase Price..........................................3
(d) The Closing.............................................3
(e) Deliveries at the Closing...............................3
(f) Allocation..............................................4
3. Representations and Warranties of Sellers........................4
(a) Organization of Sellers.................................4
(b) Authorization of Transaction............................4
(c) Noncontravention........................................5
(d) Brokers' Fees...........................................5
(e) Title to Assets.........................................5
(f) Contracts...............................................5
(g) Environmental Matters...................................6
(h) Powers of Attorney......................................6
(i) Litigation..............................................6
(j) Limitation on Assumed Liabilities.......................6
4. Representations and Warranties of Buyer..........................6
(a) Organization of Buyer...................................6
(b) Authorization of Transaction............................7
(c) Noncontravention........................................7
(d) Brokers' Fees...........................................7
(e) As Is Purchase..........................................7
5. Pre-Closing Covenants............................................8
(a) General.................................................8
(b) Notices and Consents....................................8
(c) Preservation of Acquired Assets.........................8
(d) Full Access.............................................8
(e) Notice of Developments..................................8
(f) Amendment of Lease Agreement............................8
(g) Release.................................................8
(h) Removal of Acquired Assets..............................8
6. Conditions to Obligation to Close................................9
(a) Conditions to Obligation of Buyer.......................9
(b) Conditions to Obligation of Sellers.....................9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Non-Competition....................................................10
8. Remedies for Breaches of this Agreement............................10
(a) Survival of Representations and Warranties................10
(b) Indemnification Provisions for Benefit of Buyer...........10
(c) Indemnification Provisions for Benefit of Sellers.........11
(d) Matters Involving Third Parties...........................11
(e) Other Indemnification Provisions..........................12
9. Termination........................................................12
(a) Termination of Agreement..................................12
(b) Effect of Termination.....................................13
10. Miscellaneous......................................................13
(a) Press Releases and Public Announcements...................13
(b) No Third-Party Beneficiaries..............................13
(c) Entire Agreement..........................................13
(d) Succession and Assignment.................................13
(e) Counterparts..............................................13
(f) Headings..................................................13
(g) Notices...................................................14
(h) Governing Law.............................................14
(i) Amendments and Waivers....................................14
(j) Severability..............................................15
(k) Expenses..................................................15
(l) Construction..............................................15
(m) Incorporation of Exhibits and Schedules...................15
(n) Specific Performance......................................15
(o) Submission to Jurisdiction................................15
</TABLE>
Schedule 1--Acquired Assets
Exhibit A--Form of Bill of Sale
Exhibit B--Form of Assignments and Assumption
Exhibit C--Form of Special Warranty Deed
Exhibit D--Allocation Schedule
ii
<PAGE> 4
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of November
12, 1999, by and among Tuboscope Inc., a Delaware corporation ("Buyer"), on the
one hand, and Newpark Resources, Inc., a Delaware corporation ("Parent"),
Newpark Drilling Fluids, Inc., a Texas corporation ("NDF"), and Newpark
Holdings, Inc., a Louisiana corporation (together with NDF, the "Selling
Subsidiaries," and together with Parent, "Sellers"), on the other hand. Buyer,
Newpark and Selling Subsidiaries are referred to collectively herein as the
"Parties."
This Agreement contemplates a transaction in which Buyer will
purchase certain assets owned or held under lease by Sellers in return for
Buyer's payment of cash and assumption of certain liabilities related to the
Acquired Assets (as defined below).
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Acquired Assets" means all of Sellers' right, title and
interest in and to the Core Assets and Non-Core Assets, which represent all or
substantially all of the operating assets of Sellers' solids control
businesses.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Assumed Liabilities" means those liabilities of Sellers with
respect to the Leased Assets, which accrue on or after the Closing, under the
Lease Agreement.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Core Assets" means those assets of Sellers listed under the
heading "Core Assets" on Schedule 1 attached hereto.
"Environmental Law" means any federal, state, local or
foreign law, regulation, order, decree, permit, authorization, opinion, common
law or agency requirement relating to:
<PAGE> 5
(A) the protection, preservation, investigation, remediation or restoration of
environmental quality, health and safety, or natural resources, or (B) noise,
odor, wetlands, pollution, contamination or any injury or threat of injury to
persons or property.
"Hazardous Substance" means: (A) any substance that is
listed, classified or regulated pursuant to or that could result in liability
under any Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance which is the subject of regulatory action by any governmental entity
pursuant to any Environmental Law.
"IRS" means the Internal Revenue Service.
"Knowledge" means actual knowledge after reasonable
investigation.
"Lease Agreement" means either (i) that certain Master Lease
Agreement dated as of February 17, 1999, by and between General Electric
Capital Corporation and NDF or (ii) if NDF enters into a new agreement
governing its lease of the Leased Assets prior to Closing in accordance with
Section 5(f), such new agreement.
"Leased Assets" means those Acquired Assets which are held by
Sellers pursuant to the Lease Agreement.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" shall mean a material adverse
effect on the business, properties, financial condition, results of operations
or assets of Buyer or Sellers, as applicable, taken as a whole, or on the
ability of Buyer or Sellers, as applicable, to consummate the transactions
contemplated hereby.
"Non-Core Assets" means those assets or substantially similar
assets of Sellers listed under the heading "Non-Core Assets" on Schedule 1
attached hereto.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Owned Assets" means those Acquired Assets which are not
Leased Assets.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2(c)
below.
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<PAGE> 6
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation, partnership, limited
liability company or other entity with respect to which a specified Person (or
a Subsidiary thereof) owns a majority of the voting power or has the power to
vote or direct the voting of sufficient securities to elect a majority of the
directors, general partners, managing members or the equivalent.
"Tax" means any real property, personal property,
withholding, sales, use, transfer, registration or customs duties or other tax
of any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject
to the terms and conditions of this Agreement, Buyer agrees to purchase from
Sellers, and Sellers agree to sell, transfer, convey, and deliver to Buyer or,
if required by Buyer, a Subsidiary of Buyer, all of the Acquired Assets at the
Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject
to the terms and conditions of this Agreement, Buyer agrees to, or to cause a
Subsidiary of Buyer to, assume and become responsible for all of the Assumed
Liabilities at the Closing. Neither Buyer nor such Subsidiary of Buyer will
assume or have any responsibility, however, with respect to any other
obligation or Liability of Sellers not included within the definition of
Assumed Liabilities.
(c) Purchase Price. In addition to assuming the
Assumed Liabilities, Buyer agrees to, or cause a Subsidiary of Buyer to, pay to
Sellers at the Closing $5,470,000 (collectively, the "Purchase Price"), payable
by wire transfer of immediately available funds to an account specified by
Parent to Buyer at least two business days prior to the Closing.
(d) The Closing. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Latham & Watkins, 650 Town Center Drive, 20th Floor, Costa Mesa,
California 92626, commencing at 9:00 a.m. local time on the business day
following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date or place as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing,
the following deliveries shall be made by the Parties, as applicable:
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<PAGE> 7
(i) Sellers will deliver to Buyer the
certificate referred to in Section 6(a)(v) below;
(ii) Buyer will deliver to Sellers the
certificate referred to in Section 6(b)(iv) below;
(iii) Sellers will execute, acknowledge (if
appropriate) and deliver to Buyer (A) bills of sale in the
form attached hereto as Exhibit A, (B) the assignment and
assumption agreement in the form attached hereto as Exhibit
B, (C) the grant deed in the form attached hereto as Exhibit
C, and (D) such other instruments of sale, transfer,
conveyance and assignment as Buyer and its counsel reasonably
may request;
(iv) Buyer will execute, acknowledge (if
appropriate), and deliver to Sellers (A) the assignment and
assumption agreement in the form attached hereto as Exhibit
B, and (B) such other instruments of assumption as Sellers
and their counsel reasonably request;
(v) Buyer will deliver to Sellers the
consideration specified in Section 2(c) above; and
(vi) Buyer will deliver to Sellers, if
available, the unconditional release of Sellers from the
Assumed Liabilities.
(f) Allocation. The Parties agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance with
the allocation schedule attached hereto as Exhibit D.
3. Representations and Warranties of Sellers. Sellers represent and
warrant to Buyer that the statements contained in this Section 3 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3).
(a) Organization of Sellers. Each of Sellers is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Each of Sellers has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder. Without
limiting the generality of the foregoing, the board of directors of each of
Sellers has duly authorized the execution, delivery and performance of this
Agreement by Sellers. This Agreement constitutes a valid and legally binding
obligation of Sellers, enforceable in accordance with its terms and conditions,
except as enforceability may be restricted, limited or delayed by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws or equitable
principles affecting creditors' rights generally and except
4
<PAGE> 8
as enforceability may be subject to general principles of equity and the
possible unavailability of equitable remedies.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above),
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which any of Sellers and their Subsidiaries is
subject or any provision of the charter or bylaws of any of Sellers and their
Subsidiaries, or (ii) except for such consents as may be required in order for
Buyer to assume the Assumed Liabilities, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which any of Sellers and their Subsidiaries is a party or by which they are
bound or to which any of their assets is subject (or result in the imposition
of any Security Interest upon any of their assets), which, in the case of
subsections (i) and (ii) above, would have a Material Adverse Effect on
Sellers. Except for the recordation of a special warranty deed with respect to
the transfer of any real property, none of Sellers and their Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 2 above).
(d) Brokers' Fees. Neither of Sellers nor their Subsidiaries
has any Liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement
for which Buyer could become liable or obligated.
(e) Title to Assets. Sellers have (i) good and marketable
title to all of the Owned Assets, free and clear of any Security Interests or
restriction on transfer, (ii) good and marketable title to such of the Non-Core
Assets as are actually in the possession of Sellers on the Closing Date, and
(iii) valid and enforceable leasehold interests to the Leased Assets, free and
clear of any Security Interests or restriction on transfer, except for the
Assumed Liabilities.
(f) Contracts. The Lease Agreement is the only contract or
agreement relating to the Acquired Assets and the Assumed Liabilities to which
any of Sellers or their Subsidiaries is a party. Sellers have delivered to
Buyer a correct and complete copy of the Lease Agreement. With respect to the
Lease Agreement: (i) the agreement is legal, valid, binding, enforceable and in
full force and effect, except as enforceability may be restricted, limited or
delayed by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws or equitable principles affecting creditors' rights generally and
except as enforceability may be subject to general principles of equity and the
possible unavailability of equitable remedies; (ii) assuming the consent of the
lessor thereunder to the assignment and assumption of the Lease Agreement as
contemplated by this Agreement, the Lease Agreement will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 above); (iii) neither
Sellers nor, to the Knowledge of Sellers, any other party is in breach or
default, and no event has occurred which with notice or lapse of
5
<PAGE> 9
time would constitute a breach or default by Sellers or, to the Knowledge of
Sellers, any other party, or permit termination, modification or acceleration
under the agreement by Sellers or, to the Knowledge of Sellers, any other
party; and (iv) neither Sellers nor, to the Knowledge of Sellers, any other
party has repudiated any provision of the agreement.
(g) Environmental Matters. Except for (x) matters that are
specifically disclosed in the reports filed by Newpark pursuant to the rules
and regulations of the Securities Exchange Act of 1934, as amended, prior to
the date hereof (with reference to a specifically named site or claim), (y)
matters that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on Sellers and (z) matters that do not impact
the Acquired Assets which are real property: (i) Sellers and their Subsidiaries
comply, and within all applicable statutes of limitations periods have
complied, with all applicable Environmental Laws; (ii) none of Sellers or their
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that Sellers or any of their Subsidiaries may be in
violation of or liable under any Environmental Law; (iii) none of Sellers or
any of their Subsidiaries is subject to any orders, decrees or injunctions
issued by, or other arrangements with, any governmental entity or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (iv) there
are no circumstances or conditions involving Sellers or any of their
Subsidiaries that could reasonably be expected to cause Sellers or any of their
Subsidiaries to become subject to any claims, liability, investigations or
costs, or to restrictions on the ownership, use or transfer of any property of
Sellers or any of their Subsidiaries, pursuant to any Environmental Law.
(h) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of Sellers and their Subsidiaries relating
to the Acquired Assets or Assumed Liabilities.
(i) Litigation. None of Sellers or their Subsidiaries (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the Knowledge of any of the directors and
officers (and employees with responsibility for litigation matters) of Sellers
and their Subsidiaries, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator which directly relates to or may
otherwise directly affect the Acquired Assets or Assumed Liabilities.
(j) Limitation on Assumed Liabilities. Sellers represent and
warrant that the Assumed Liabilities do not exceed $7,500,000 in the aggregate.
4. Representations and Warranties of Buyer. Buyer represents and
warrants to Sellers that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4).
(a) Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
6
<PAGE> 10
(b) Authorization of Transaction. Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions, except as enforceability may be
restricted, limited or delayed by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws or equitable principles affecting
creditors' rights generally and except as enforceability may be subject to
general principles of equity and the possible unavailability of equitable
remedies.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above),
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which Buyer is subject or any provision of its
charter or bylaws, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject, which, in the case of subsections (i) and (ii) above, would have a
Material Adverse Effect on Buyer. Buyer does not need to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 2 above).
(d) Brokers' Fees. Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Sellers could become
liable or obligated.
(e) As Is Purchase. Buyer represents and warrants that it has
inspected the Acquired Assets prior to purchase and that it is purchasing the
Acquired Assets on an "AS IS" basis and in "WITH ALL FAULTS" condition and,
except as specifically provided in this Agreement, none of Sellers is making
any warranty, whether expressed or implied, regarding the physical condition of
the Acquired Assets, their fitness or suitability for any particular purpose,
or the compliance with applicable laws. Without limited the generality of the
foregoing, Buyer, by its signature below, hereby acknowledges and agrees (and
upon which Sellers shall have materially relied in transferring the Acquired
Assets to Buyer on the terms and conditions set forth herein) that, except as
otherwise specifically provided in this Agreement, none of Sellers, nor any of
their officers, employees or agents, has made any warranty regarding the
Acquired Assets, including, but not limited to, any warranty of habitability,
merchantability or suitability for a particular purpose, and Buyer hereby
expressly disclaims the implied warrant of habitability, the implied warranty
of merchantability, the implied warrant of fitness for a particular purpose,
and, except as otherwise specifically provided in this Agreement, all expressed
or implied warranties relating to the quality of or otherwise relating to the
physical condition of the Acquired Assets. In addition, notwithstanding
anything contained herein to the contrary, Buyer acknowledges and agrees that
none of Sellers is making any representation or warranty regarding the
quantity, condition or usefulness of any of the Non-Core Assets, except to the
extent of the warranty of title set forth in Section 3(e)
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<PAGE> 11
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use all commercially
reasonable efforts to take all action and to do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 6 below).
(b) Notices and Consents. Sellers will give (and will cause
each of their Subsidiaries to give) any notices to third parties, and Sellers
will use all commercially reasonable efforts (and will cause each of their
Subsidiaries to use all commercially reasonable efforts) to obtain any third
party consents that Buyer reasonably may request in connection with the matters
referred to in Section 3(c) above. Each of the Parties will (and cause each of
their Subsidiaries to) give any notices to, make any filings with, and use all
commercially reasonable efforts to obtain any authorizations, consents, and
approvals of, governments and governmental agencies in connection with the
matters referred to in Section 3(c) and Section 4(c) above.
(c) Preservation of Acquired Assets. Sellers (i) will keep
(and will cause each of their Subsidiaries to keep) the Core Assets intact and
in good condition and repair not worse than their condition and repair as of
the date hereof, except for such wear and tear incurred in the Ordinary Course
of Business after the date hereof, and (ii) will not transfer the Acquired
Assets to any third party, except that Sellers may transfer the Non-Core Assets
to third parties in the Ordinary Course of Business.
(d) Full Access. Sellers will permit (and will cause each of
their Subsidiaries to permit) representatives of Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business of Sellers, to all books, records, contracts and documents of or
pertaining to the Acquired Assets and the Assumed Liabilities.
(e) Notice of Developments. Each Party will give prompt
written notice to the other Party of any material adverse development causing a
breach of any of its representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(e), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
(f) Amendment of Lease Agreement. Sellers shall use
commercially reasonable efforts to enter into a new lease agreement with
General Electric Capital Corporation which covers solely the Leased Assets and
is on terms no less favorable to NDF as the terms of the Lease Agreement in
effect as of the date hereof.
(g) Release. Buyer shall use commercially reasonable efforts
to obtain the unconditional release of Sellers from each of the Assumed
Liabilities effective upon the assumption of the Assumed Liabilities by Buyer
or its Subsidiary.
(h) Removal of Acquired Assets. Buyer shall use commercially
reasonable efforts to remove the Acquired Assets from all real property not
owned or held under lease by Buyer as soon as practicable and, in any event,
within 30 days of the Closing Date.
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<PAGE> 12
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of
Sellers set forth in Section 3 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) Sellers shall have performed and complied with
all of their covenants hereunder in all material respects through the
Closing;
(iii) Sellers and their Subsidiaries shall have
procured all of the third party consents specified in Section 5(b)
above;
(iv) no action, suit or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling or charge would (A) prevent the consummation of any of
the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of Buyer to own the
Acquired Assets or perform its obligations under the Assumed
Liabilities (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect); and
(v) Sellers shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above
in Section 6(a)(i)-(iv) is satisfied in all respects.
Buyer may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of Buyer set
forth in Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing;
(iii) no action, suit or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling or charge would (A) prevent the consummation of any of
the
9
<PAGE> 13
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect);
(iv) Buyer shall have delivered to Sellers a
certificate to the effect that each of the conditions specified above
in Section 6(b)(i)-(iii) is satisfied in all respects; and
(v) Buyers shall have obtained the unconditional
release of Sellers from each of the Assumed Liabilities effective upon
the assumption of the Assumed Liabilities by Buyer.
Sellers may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.
7. Non-Competition. From the Closing Date until the third
anniversary of the Closing Date, Sellers shall not, and will not permit their
Subsidiaries to, unless acting in accordance with Buyer's prior written
consent, directly or indirectly, own, manage, join, operate or control, or
participate in the ownership, management, operation or control of, or be
connected as a director, officer, employee, partner, consultant or otherwise
with, or permit their names to be used by or in connection with, any business
or organization which is engaged in the solids control services business or any
substantially similar business within the United States; provided, however,
that nothing herein shall be deemed or construed to prohibit Sellers and its
Subsidiaries from owning or holding, in the aggregate, 5% or less of the
capital stock or other equity interests in any entity or organization whose
capital stock or equity interests are traded on an established securities
exchange or market; and provided further that Buyer shall not unreasonably
withhold its consent to allow Sellers to participate in the solids control
services business in any geographic region in which Buyer is not engaged in the
business of providing solids control services.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All
of the representations and warranties of Buyer and Sellers contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of one year
thereafter.
(b) Indemnification Provisions for Benefit of Buyer.
(i) If any of Sellers breaches (or if
any third party alleges facts that, if true, would mean
either of Sellers has breached) any of its representations,
warranties and covenants contained in this Agreement,
provided that Buyer makes a written claim for indemnification
against Sellers within the survival period in Section 8(a),
then Sellers, jointly and severally, agree to indemnify Buyer
from and against the entirety of any Adverse Consequences
Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences Buyer may
suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
10
<PAGE> 14
(ii) Sellers agree, jointly and
severally, to indemnify Buyer from and against the entirety
of any Adverse Consequences Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by
any Liability relating to the Acquired Assets which is not an
Assumed Liability to the extent such Liability is based upon
acts or omissions occurring prior to the Closing Date.
(c) Indemnification Provisions for Benefit of Sellers.
(i) If Buyer breaches (or if any third
party alleges facts that, if true, would mean Buyer has
breached) any of its representations, warranties and
covenants contained in this Agreement, provided that Sellers
make a written claim for indemnification against Buyer within
the survival period in Section 8(a), then Buyer agrees to
indemnify Sellers from and against the entirety of any
Adverse Consequences Sellers may suffer through and after the
date of the claim for indemnification (including any Adverse
Consequences Sellers may suffer after the end of any
applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or
the alleged breach).
(ii) Buyer agrees to indemnify Sellers from
and against the entirety of any Adverse Consequences Sellers
may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Assumed Liability and any
Liability relating to the Acquired Assets which are based
upon acts or omissions occurring after the Closing Date.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") which may give rise to a claim for
indemnification against the other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party
shall promptly notify the Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(ii) The Indemnifying Party will have the
right to defend the Indemnified Party against the Third Party
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim, (B) the Indemnifying
Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an
11
<PAGE> 15
adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice
materially adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance
with Section 8(d)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(iv) If any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Indemnifying
Party in connection therewith), (B) the Indemnifying Party
will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and
expenses), and (C) the Indemnifying Party will remain
responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 8.
(e) Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law remedy any Party may have for breach of
representation, warranty, or covenant.
9. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) By mutual written consent of the
Parties at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by
giving written notice to Sellers at any time prior to the
Closing if any of Sellers has breached any material
representation, warranty or covenant contained in this
Agreement in any material respect, Buyer has notified Sellers
of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach; and
(iii) Any Seller may terminate this
Agreement by giving written notice to Buyer at any time prior
to the Closing if Buyer has breached any material
12
<PAGE> 16
representation, warranty or covenant contained in this Agreement in any
material respect, such Seller has notified Buyer of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
10. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Party prior to making
the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the other Party; provided, however, that Buyer may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed by any party by delivery of a facsimile signature, which signature
shall have the same force and effect as an original signature. Any Party which
delivers a facsimile signature shall promptly thereafter deliver an originally
executed signature to the other Parties; provided, however, that the failure to
deliver an original signature page shall not affect the validity of any
signature delivered by facsimile.
(f) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
13
<PAGE> 17
(g) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below:
If to Parent or
Seller Subsidiaries: Newpark Resources, Inc.
3850 North Causeway Boulevard, Suite 1770
Metairie, Louisiana 70002-1752
Attention: Chief Financial Officer
Telecopy: (504) 833-9506
Copy to: Ervin, Cohen & Jessup LLP
9401 Wilshire Blvd., 9th Floor
Beverly Hills, CA 90212-2974
Attn: Bertram K. Massing, Esq.
Telecopy: (310) 859-5224
If to Buyer: Tuboscope Inc.
2835 Holmes Road
Houston, Texas 77051
Attention: Chief Financial Officer
Telecopy: (713) 799-5100
Copy to: Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attention: Patrick T. Seaver, Esq.
Telecopy: (714) 755-8290
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Texas without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Texas or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Texas.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and
14
<PAGE> 18
Sellers. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule
identifies the exception with particularity and describes the relevant facts in
detail.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges
and agrees that the other Party would be damaged irreparably if any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which it may
be entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits
to the jurisdiction of any state or federal court sitting in Houston, Texas, in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect thereto.
Nothing in this Section 10(o), however, shall affect the
15
<PAGE> 19
right of any Party to serve legal process in any other manner permitted by law
or in equity. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.
*****
16
<PAGE> 20
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
TUBOSCOPE INC., a
Delaware corporation
By:
---------------------------------------------
Name: Joseph C. Winkler
Title: Executive Vice President, Chief
Financial Officer and Treasurer
NEWPARK RESOURCES, INC., a
Delaware corporation
By:
---------------------------------------------
Name:
Title:
NEWPARK DRILLING FLUIDS, INC., a
Texas corporation
By:
--------------------------------------------
Name:
Title:
NEWPARK HOLDINGS, INC., a
Louisiana corporation
By:
--------------------------------------------
Name:
Title:
17
<PAGE> 21
SCHEDULE 1
Acquired Assets
A. CORE ASSETS:
Newpark Resources, Inc.
Processing Service Assets
As of October 31, 1999
<TABLE>
<CAPTION>
Book Value
Units ($000's)
----- ----------
<S> <C> <C>
Gulf Coast Business Unit:
Land, Buildings and Contents
Royalton Yard 582
1850 Centrifuges - Gulf Coast 2 138
Tornado Dryers and Components 3 651
5500 Centrifuges and VFD's 28 7,227
Pumps 773
------
Subtotal 9,371
Mid-Continent Business Unit:
1850 Centrifuges w/VFD's 15 839
5500 Centrifuges w/VFD's 4 972
Pumps 12 100
------
Subtotal 1,911
SOLOCO:
PAH Pump and 350KW Generator 200
------
TOTAL 11,482
</TABLE>
<PAGE> 22
B. NON-CORE ASSETS:
Newpark Resources, Inc.
Processing Service Assets
As of October 31, 1999
<TABLE>
<CAPTION>
Book Value
Units ($000's)
----- ----------
<S> <C>
Gulf Coast Business Unit:
Trucks, trailers, transportation equipment 129
Shakers 298
Mud Cleaners 140
Screen Boxes 41
Stands 218
Tanks 169
Motors, Drives, Miscellaneous Equipment, Spares 267
-------
Subtotal 1,262
Mid-Continent Business Unit:
Stands 9 49
Shakers 6 97
Miscellaneous parts and equipment 80
-------
Subtotal 226
-------
TOTAL 1,488
</TABLE>
<PAGE> 23
EXHIBIT A
Form of Bill of Sale
BILL OF SALE
For good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Newpark Resources, Inc., a Delaware
corporation ("Parent"), Newpark Drilling Fluids, Inc., a Texas corporation
("NDA"), and Newpark Holdings, Inc., a Louisiana corporation (together with
NDA, "Selling Subsidiaries" and together with Parent, "Sellers"), do hereby
grant, bargain, transfer, sell, assign, convey and deliver to Tuboscope Inc., a
Delaware corporation ("Buyer"), all right, title and interest in and to the
Owned Assets as such term is defined in the Asset Purchase Agreement dated as
of November 12, 1999, by and among Sellers and Buyer (the "Agreement"). Buyer
hereby acknowledges that Buyer is accepting the Owned Assets on an "AS IS"
basis and in "WITH ALL FAULTS" condition and Sellers are making no
representation or warranty with respect to the assets being conveyed hereby
except as specifically set forth in the Agreement. Sellers for themselves,
their successors and assigns hereby covenant and agree that, at any time and
from time to time forthwith upon the written request of Buyer, Sellers will,
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, each and all of such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as may
reasonably be required by Buyer in order to assign, transfer, set over, convey,
assure and confirm unto and vest in Buyer, its successors and assigns, title to
the assets sold, conveyed, transferred and delivered by this Bill of Sale.
This Bill of Sale is being executed and delivered by Sellers
pursuant to the terms of the Agreement. Executed at _______________________,
this ______ day of ___________, 1999.
NEWPARK RESOURCES, INC., a [SELLING SUBSIDIARY], a
Delaware corporation ______________ corporation
By: By:
----------------------- ---------------------------
Name: Name:
Title: Title:
STATE OF ____________________ )
) ss.
COUNTY OF __________________ )
On _______________________, before me, ___________________, personally appeared
____________________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________ [SEAL]
Notary Public in and for said
County and State
STATE OF ____________________ )
)
COUNTY OF __________________ )
On _______________________, before me, ___________________, personally appeared
____________________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________ [SEAL]
Notary Public in and for said
County and State
<PAGE> 24
EXHIBIT B
Form of Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
Pursuant to that certain Asset Purchase Agreement, dated
November 12, 1999 (the "Agreement"), by and among Tuboscope Inc., a Delaware
corporation ("Buyer"), on the one hand, and Newpark Resources, Inc., a Delaware
corporation ("Parent"), Newpark Drilling Fluids, Inc., a Texas corporation
("NDF"), and Newpark Holdings, Inc., a Louisiana corporation (together with
NDF, "Selling Subsidiary" and together with Parent, "Sellers"), for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the parties hereto, Sellers hereby assign their rights, title
and interest to the Acquired Assets (as defined in the Agreement) and duties
and obligations evidenced by the Assumed Liabilities (as defined in the
Agreement), and Buyer hereby accepts and assumes the Acquired Assets and
Assumed Liability, respectively, in each case by, and subject to the terms and
conditions of the Agreement. Except as expressly assumed herein, Buyer does not
assume and shall not in any manner be responsible for any liability (including
without limitation any contingent liability), obligation, lien or encumbrance
of Sellers.
TUBOSCOPE INC., a NEWPARK RESOURCES, INC., a
Delaware corporation Delaware corporation
By: By:
------------------------ ----------------------------
Name: Name:
Title: Title:
NEWPARK DRILLING FLUIDS, INC., a NEWPARK HOLDINGS, INC., a
Texas corporation Louisiana corporation
By: By:
----------------------- ----------------------------
Name: Name:
Title: Title:
<PAGE> 25
EXHIBIT C
Form of Special Warranty Deed
SPECIAL WARRANTY DEED
THE STATE OF TEXAS )
) Known All Men by These Presents:
COUNTY OF ___________ )
That NEWPARK DRILLING FLUIDS, INC., a Texas corporation, as
Grantor, for and in consideration of the sum of TEN AND NO/100 ($10.00) DOLLARS
to it in hand paid by TUBOSCOPE INC., a Delaware corporation, has Granted, Sold
and Conveyed and by these presents does Grant, Sell and Convey, unto the said
TUBOSCOPE INC., whose address is 2835 Holmes Road, Houston, Texas 77051, all
right, title and interest in and to the real property described on Exhibit "A"
attached hereto and made a part hereof.
This conveyance is expressly made subject to any and all
restrictions, covenants, conditions and easements, if any, relating to the
property conveyed, but only to the extent they are still in effect and shown of
record, and to all zoning laws, regulations and ordinances of municipal and
other governmental authorities, if any, but only to the extent that they are
still in effect relating to the herein described property.
TO HAVE AND TO HOLD the above described premises, together
with all and singular the rights and appurtenances thereto in anywise belonging
unto the said Grantor, its heirs and assigns forever and the undersigned does
hereby bind itself, its successors and assigns, to Warrant and Forever Defend,
all and singular the said premises unto the said TUBOSCOPE INC., its heirs and
assigns, against any and all acts, conveyances, liens and encumbrances
affecting such property made or suffered to be made or done by, through or
under Grantor, but not otherwise.
IN WITNESS WHEREOF, the Grantor has signed these presents at
Houston, Texas this ___ day of ______, 1999.
NEWPARK DRILLING FLUIDS, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
State of Texas )
)
County of Harris )
On ___________, 1999, before me, ________________________, a
notary public in and for the State of Louisiana, personally appeared
________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the within instrument the person, or the
entity upon behalf of which the person acted, executed the within instrument.
WITNESS my hand and official seal.
_________________________________ (Seal)
Notary Public
<PAGE> 26
EXHIBIT D
Allocation Schedule
<PAGE> 1
EXHIBIT 10.26
ALLIANCE AGREEMENT
AMONG
TUBOSCOPE INC.,
TUBOSCOPE VETCO INTERNATIONAL, INC.,
NEWPARK RESOURCES, INC.,
NEWPARK DRILLING FLUIDS, L.L.C.,
AND
NEWPARK ENVIRONMENTAL SERVICES, L.L.C.
February 3, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions..............................................................................................1
2. Waste Services...........................................................................................3
(a) Waste Services Relationship.....................................................................3
(b) Pricing.........................................................................................3
(c) Representations and Covenants of the Tuboscope Parties..........................................4
(d) Existing Bids and Contracts.....................................................................5
3. Brandt Energy Environmental, L.P.........................................................................5
(a) Acknowledgement by the Newpark Parties..........................................................5
(b) Covenants by the Tuboscope Parties..............................................................5
(c) Right of First Refusal..........................................................................5
(d) Purchase Option.................................................................................6
4. Solids Control Services..................................................................................8
(a) Solids Control Relationship.....................................................................8
(b) Pricing.........................................................................................8
(c) Representations and Covenants of the Newpark Parties............................................9
(d) Canadian Market................................................................................10
(e) Existing Bids and Contracts....................................................................10
5. Term and Termination....................................................................................10
(a) Term...........................................................................................10
(b) Termination by Mutual Consent..................................................................10
(c) Termination by Tuboscope.......................................................................10
(d) Termination by Newpark.........................................................................11
(e) Effect of Termination..........................................................................11
(f) Survival of Certain Provisions.................................................................11
6. Indemnification.........................................................................................11
(a) Indemnification by the Tuboscope Parties.......................................................11
(b) Indemnification by the Newpark Parties.........................................................11
7. Insurance...............................................................................................11
(a) Tuboscope Parties..............................................................................11
(b) Newpark Parties................................................................................11
8. Miscellaneous...........................................................................................12
(a) Payment Terms..................................................................................12
(b) Press Releases and Public Announcements........................................................12
(c) Confidentiality................................................................................12
(d) No Agency......................................................................................13
(e) Force Majeure..................................................................................13
(f) No Third-Party Beneficiaries...................................................................13
(g) Entire Agreement...............................................................................13
(h) Succession and Assignment......................................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(i) Counterparts...................................................................................14
(j) Headings.......................................................................................14
(k) Notices........................................................................................14
(l) Governing Law..................................................................................15
(m) Amendments and Waivers.........................................................................15
(n) Severability...................................................................................15
(o) Expenses.......................................................................................15
(p) Construction...................................................................................15
(q) Submission to Jurisdiction.....................................................................15
(r) Remedies Not Exclusive.........................................................................15
</TABLE>
Exhibit A-Alliance Price Sheet
ii
<PAGE> 4
ALLIANCE AGREEMENT
This Alliance Agreement is entered into as of February 3,
2000, by and among Tuboscope Inc., a Delaware corporation ("Tuboscope"), and
Tuboscope Vetco International, Inc., a Texas Corporation ("TVI", and
collectively with Tuboscope, the "Tuboscope Parties"), on the one hand, and
Newpark Resources, Inc., a Delaware corporation ("Newpark"), Newpark Drilling
Fluids, L.L.C., a Texas limited liability company ("NDF"), and Newpark
Environmental Services, L.L.C., a Louisiana limited liability company ("NES",
and together with Newpark and NDF, the "Newpark Parties"), on the other hand.
Tuboscope, TVI, Newpark, NDF and NES are referred to collectively herein as the
"Parties" and individually a "Party."
RECITALS
WHEREAS, both the Tuboscope Parties and the Newpark Parties
conduct or have conducted oilfield solids control operations and oilfield waste
services operations in the United States;
WHEREAS, the Tuboscope Parties desire to discontinue their
oilfield waste services operations in the Gulf Coast Market (as defined herein);
WHEREAS, the Newpark Parties desire to discontinue their
oilfield solids control operations in the United States Market (as defined
herein);
WHEREAS, the Tuboscope Parties and the Newpark Parties desire
to establish a relationship by which (i) the Newpark Parties are the exclusive
providers of oilfield waste services to the Tuboscope Parties in the Gulf Coast
Market and (ii) the Tuboscope Parties are the exclusive providers of solids
control services to the Newpark Parties in the United States Market; and
WHEREAS, the Tuboscope Parties and the Newpark Parties desire
to define the terms of such relationship in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"BEELP" has the meaning ascribed thereto in Section 3(a).
"Confidential Information" means, with respect to any Party,
all confidential information relating to the business affairs, finances,
products, services or intellectual property of such Party.
"Damages" has the meaning ascribed thereto in Section 6(a).
<PAGE> 5
"Discloser" has the meaning ascribed thereto in Section 8(c).
"Effective Date" has the meaning ascribed thereto in
Section 5(a).
"Exception Areas" means those areas within the States of
Texas, Louisiana, Mississippi, Alabama and Florida, including all territorial
waters of such states and all federal and international waters of the Gulf of
Mexico abutting such states, in which the Newpark Parties do not provide Waste
Services on terms and at prices at least as favorable to the purchaser of such
services as those offered by the primary participants in the Waste Services
market in such areas.
"Final Closing Date" has the meaning ascribed thereto in
Section 3(d)(iii).
"Gulf Coast Market" means the States of Texas, Louisiana,
Mississippi, Alabama and Florida, including all territorial waters of such
states and all federal and international waters of the Gulf of Mexico abutting
such states; provided, however, that the Gulf Coast Market does not include the
Exception Areas.
"High Island Site" has the meaning ascribed thereto in Section
3(a).
"Marine Conveyance" means a ship, supply boat, barge, shipping
container (including but not limited to a cutting box) or any other type of
marine conveyance.
"Newpark Notice" has the meaning ascribed thereto in Section
3(d)(i).
"Newpark Option" has the meaning ascribed thereto in Section
3(d)(i).
"Party" and "Parties" have the meanings set forth in the
preface above.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Recipient" has the meaning ascribed thereto in Section 8(c).
"Solids Control Services" means the business of selling and
renting equipment used in, and providing services relating to, the separation
and containment of solid drill cuttings from fluids used in oil and gas drilling
processes.
"Subsidiary" means any corporation, partnership, limited
liability company or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the voting power or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors, general partners, managing members or the equivalent.
"Term" has the meaning ascribed thereto in Section 5(a).
"Tuboscope Interest" has the meaning ascribed thereto in
Section 3(c)(i).
2
<PAGE> 6
"Tuboscope Offer" has the meaning ascribed thereto in Section
3(c)(i).
"United States Market" means all states within the United
States, including all state and territorial waters and the federal and
international waters of the Gulf of Mexico and other approved offshore drilling
regions of the United States, where oil and gas drilling and other energy well
bores are drilled and production exists or where disposal well drilling and
utility usage well bores are drilled, but excluding those areas of the United
States in which the Tuboscope Parties do not provide Solids Control Services on
terms and at prices at least as favorable to the purchaser of such services as
those offered by the primary participants in the Solids Control Services market
in such areas.
"Waste Services" means the business of processing and
disposing of oilfield exploration and production waste, but excludes Solids
Control Services.
2. Waste Services.
(a) Waste Services Relationship.
(i) Gulf Coast Market. Subject to the conditions
set forth herein, the Newpark Parties shall serve as the exclusive provider of
Waste Services to the Tuboscope Parties in the Gulf Coast Market during the
Term.
(ii) Exception Areas. If the Tuboscope Parties
propose a Waste Services project in the Exception Areas, the Tuboscope Parties
shall notify the Newpark Parties in writing of such proposal prior to
commencement of the project. If the Tuboscope Parties propose to use a third
party provider of Waste Services for such project, their notice to the Newpark
Parties shall indicate the price and other payment terms offered by such third
party. Upon such notice from the Tuboscope Parties, the Newpark Parties shall
have ten days to match or beat the price and terms offered by the third party.
If the Newpark Parties at least match such price and terms, then the Newpark
Parties shall be the Waste Services provider for the project. If the Newpark
Parties do not at least match the price and terms of such third party provider,
the Tuboscope Parties shall be permitted to utilize the services of the third
party provider for so long as such services are provided by the third party
provider at prices and terms no less favorable to the Tuboscope Parties as those
set forth in the notice to the Newpark Parties. Additionally, nothing herein
shall prohibit the Tuboscope Parties from delivering waste to a customer (i.e.,
the owner of the waste) for the customer's disposal of the waste or to any third
party provider of Waste Services who has been specifically designated by a
Tuboscope Parties' customer; provided, however, that the Tuboscope Parties shall
not recommend any Waste Services provider other than the Newpark Parties and
shall provide Newpark with written notice of any delivery of waste to a third
party specifically designated by the customer.
(b) Pricing.
(i) Temporary Disposal Pricing. Until such time
as the Tuboscope Parties have withdrawn from the Waste Services business in the
Gulf Coast Market as provided herein, the Newpark Parties will provide disposal
services for materials delivered by the Tuboscope Parties to Port Arthur, Texas
by means of a barge at the following prices:
3
<PAGE> 7
(A) if the barge is returned to service
for collection of waste by the Tuboscope Parties, $6.50 per barrel; and
(B) if the barge is returned to the
owner of such barge and removed from service for collection of waste, $4.50 per
barrel.
(ii) General Pricing. Except as set forth in
Section 2(b)(i), all prospective Waste Services projects governed by this
Agreement shall be reviewed, priced, bid and submitted by the Newpark Parties.
Pricing shall take into consideration appropriate quantity discounts on large
projects as well as adjustments necessitated by special logistics. In all cases,
pricing shall not exceed the following (excluding special handling, special
services, cleaning or logistics required by the Tuboscope Parties, which will be
billed at the Newpark Parties' published list price):
(A) for waste disposal, 95% of the
Newpark Parties' current published list price;
(B) for services and dock charges, 95%
of the Newpark Parties' current published list price; and
(C) for cutting boxes, $4.75 per barrel
of designed capacity (stevedoring charge).
(iii) No Superior Terms. The Newpark Parties
hereby represent and warrant that the above pricing terms, taken as a whole, are
at least as favorable to the Tuboscope Parties as the pricing terms for Waste
Services currently in effect with respect to, and being offered by the Newpark
Parties or their Subsidiaries to, any other customer or prospective customer of
the Newpark Parties or their Subsidiaries in the Gulf Coast Market. Moreover,
the Newpark Parties shall not during the term of this Agreement offer Waste
Services in the Gulf Coast Market to any other party on terms superior (from the
standpoint of the other party) to the terms set forth above without also
concurrently offering such terms to the Tuboscope Parties. If the Newpark
Parties offer such superior terms to the Tuboscope Parties and the Tuboscope
Parties accept such terms, the Newpark Parties and the Tuboscope Parties shall
enter into an amendment to this Agreement to reflect such superior terms.
(c) Representations and Covenants of the Tuboscope
Parties.
(i) Discontinued Operations. The Tuboscope
Parties represent and warrant that, except for the operations of BEELP, they and
their Subsidiaries have discontinued their Waste Services operations in the Gulf
Coast Market.
(ii) Authority, No Conflict; Enforceability: Each
of the Tuboscope Parties hereby represents and warrants as follows: (1) it has
the full authority and legal right to carry out the terms of this Agreement; (2)
the terms of this Agreement will not violate the terms of any material
agreement, contract or other instrument to which it is a party and no consent or
authorization of any other person is required in order for it to enter into and
carry out the terms of this Agreement; (3) it has taken all corporate and other
action necessary to authorize the execution and delivery of this Agreement; and
(4) this Agreement is a legal, valid and binding
4
<PAGE> 8
obligation of such Tuboscope Party, enforceable against it in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, whether enforcement is sought in equity or at law.
(iii) No Solicitation. From the Effective Date
until the end of the Term, the Tuboscope Parties shall not actively solicit any
Waste Services business in the Gulf Coast Market.
(iv) Oilfield Waste Collection Stations.
From the Effective Date until the end of the Term, the Tuboscope Parties shall
not operate, or provide marine transportation services for, oilfield waste
collection stations in the Gulf Coast Market without the prior written consent
of the Newpark Parties.
(v) Exceptions. Notwithstanding
anything to the contrary herein, the Tuboscope Parties and their Subsidiaries
are expressly permitted (A) to conduct Solids Control Services operations in the
Gulf Coast Market and the Exception Areas and (B) to continue offering Waste
Services through "on lease" disposal and thermal desorption technologies (e.g.,
cuttings reinjection, thermal desorption, land farming and land spreading, end
of well pump downs and pit closures) to customers in the Gulf Coast Market and
the Exception Areas.
(d) Existing Bids and Contracts. The Tuboscope Parties
have delivered, or will promptly deliver, to the Newpark Parties all of the
Tuboscope Parties' annual contracts and outstanding bids relating to Waste
Services. The Newpark Parties will not be obligated to honor the terms of such
contracts and bids; provided, however, that the Newpark Parties will consider
exceptions for committed single-well drilling projects which were underway as of
November 12, 1999. Each such annual contract and outstanding bid must be
withdrawn by the Tuboscope Parties unless the Newpark Parties expressly consent
to the continuance of such contract or bid.
3. Brandt Energy Environmental, L.P.
(a) Acknowledgement by the Newpark Parties. The Newpark
Parties acknowledge that the Tuboscope Parties or their Subsidiaries are the
majority owners of Brandt Energy Environmental, L.P. ("BEELP"), which operates a
Waste Services business in the Gulf Coast Market, including the High Island
injection disposal site (the "High Island Site"). The Newpark Parties further
acknowledge that the Tuboscope Parties or their Subsidiaries have certain
contractual obligations to the other owners of BEELP which could result in the
High Island Site remaining in competition with the Newpark Parties under
separate management. Nothing herein shall prevent the Tuboscope Parties or their
Subsidiaries from fulfilling their contractual obligations to the other owners
of BEELP.
(b) Covenants by the Tuboscope Parties. As soon as
practical after the Effective Date, to the extent consistent with their
contractual obligations, the Tuboscope Parties will, and will cause their
Subsidiaries to, use their best efforts to cease an active role in the
management of BEELP and to cease providing financial support to BEELP.
(c) Right of First Refusal.
5
<PAGE> 9
(i) Restrictions on Transfer. The Tuboscope
Parties may not transfer their interest in the High Island Site (the "Tuboscope
Interest") to any third party which is not affiliated with a Tuboscope Party
without first offering such interest to the Newpark Parties. Prior to
transferring the Tuboscope Interest to a proposed third party, the Tuboscope
Parties shall provide to Newpark a written offer to transfer to the Newpark
Parties the Tuboscope Interest on terms (including price terms) no less
favorable than those offered to the proposed third party (a "Tuboscope Offer").
The written offer shall set forth the proposed amount and form of consideration
and terms and conditions of payment for the Tuboscope Interest.
(ii) Option to Purchase. Upon Newpark's receipt
of a Tuboscope Offer, the Newpark Parties shall have the option, for a period of
30 days, to purchase the Tuboscope Interest by delivering written notice of
their exercise of the option to Tuboscope. If the Newpark Parties do not deliver
such notice of exercise within the 30-day period described above, the Tuboscope
Parties shall have the right for a period of 90 days after the expiration of
such 30-day period (or, if sooner, after written waiver by the Newpark Parties
of their option to purchase) to offer for sale, and to sell, the Tuboscope
Interest to a third party, but only at a price per share and on terms and
conditions no less favorable to the purchaser than those set forth in the
Tuboscope Offer.
(iii) Claims. If the Newpark Parties elect to
purchase the Tuboscope Interest pursuant to this Section 3(c), the closing of
such purchase shall take place on or before the fifteenth day following the date
the Newpark Parties deliver their notice of exercise (or, if such date is not a
business day, the next succeeding business day) or on such other date as
Tuboscope and Newpark agree, but in no case more than 90 days after the date the
Newpark Parties deliver their notice of exercise.
(iv) Expiration. The right of first refusal
provided for in this Section 3(c) shall terminate on the third anniversary of
this Agreement.
(d) Purchase Option.
(i) General Terms. Subject to the consent of the
other owners of BEELP, the Tuboscope Parties hereby grant to the Newpark Parties
a two-year option (the "Newpark Option") to purchase the Tuboscope Interest on
an "AS IS" basis (but subject to customary representations, warranties and
indemnification on behalf of the Tuboscope Parties) for fair market value
(calculated in accordance with Section 3(d)(ii) below). To validly exercise this
option, the Newpark Parties must provide written notice to the Tuboscope Parties
of their intention to purchase the Tuboscope Interest (the "Newpark Notice") on
or prior to the second anniversary of this Agreement. If the Newpark Parties do
not provide the Newpark Notice to the Tuboscope Parties on or before the second
anniversary of this Agreement, the Newpark Option shall expire and be of no
further force or effect. The Tuboscope Parties agree to use commercially
reasonable efforts to obtain the consent of the other owners of BEELP to the
option granted hereby.
(ii) Fair Market Value.
6
<PAGE> 10
(A) For purposes of Section 3(d)(i)
above, the fair market value of the Tuboscope Interest shall be determined by
agreement of the Newpark Parties and the Tuboscope Parties or by a certified
appraiser appointed in accordance with this Section 3(d)(ii). If the Newpark
Parties exercise the Newpark Option, the Newpark Parties and the Tuboscope
Parties shall attempt to agree on the fair market value of the Tuboscope
Interest. If the Tuboscope Parties and the Newpark Parties are unable to agree
on such fair market value within 30 days after the date of the Newpark Notice,
the fair market value of the Tuboscope Interest shall be determined by one or
more independent certified appraisers, selected in accordance with this Section
3(d)(ii).
(B) If the fair market value of the
Tuboscope Interest is not determined by mutual agreement of the parties in
accordance with Section 3(d)(ii)(A), then, within 60 days after the date of the
Newpark Notice, the Tuboscope Parties and the Newpark Parties shall attempt to
mutually designate one certified appraiser. If the Tuboscope Parties and the
Newpark Parties mutually designate a certified appraiser within such 60-day
period, then such certified appraiser shall determine the fair market value of
the Tuboscope Interest. The fees and expenses of such certified appraiser shall
be borne equally by the Tuboscope Parties, on the one hand, and the Newpark
Parties, on the other hand.
(C) If the Tuboscope Parties are unable
to agree on a certified appraiser within such 60-day period, then within 75 days
after the date of the Newpark Notice, the Tuboscope Parties shall designate one
certified appraiser and the Newpark Parties shall designate another certified
appraiser. In such case, the two certified appraisers shall independently
appraise the Tuboscope Interest within 105 days after the date of the Newpark
Notice. If the appraisals of the two certified appraisers are within a 10%
range, then the average of such appraisals shall constitute the fair market
value of the Tuboscope Interest. The fees and expenses of the appraiser
designated by the Tuboscope Parties shall be borne by the Tuboscope Parties and
the fees and expenses of the appraiser designated by the Newpark Parties shall
be borne by the Newpark Parties.
(D) If there is a variance of greater
than 10% between any appraisals performed pursuant to Section 3(d)(ii)(c), then
the two certified appraisers appointed pursuant to Section 3(d)(ii)(c) shall
jointly appoint a third certified appraiser, or if they cannot agree to such
appointment within 125 days after the date of the Newpark Notice, then the
senior sitting Federal District Judge for the Southern District of Texas,
Houston Division, on active status, acting in a nonjudicial capacity, shall
appoint such certified appraiser on written request made by any Party. This
certified appraiser shall determine the fair market value of the Tuboscope
Interest. The fees and expenses of such certified appraiser shall be borne
equally by the Tuboscope Parties, on the one hand, and the Newpark Parties, on
the other hand.
(E) The fair market value of the
Tuboscope Interest as determined by this Section 3d(ii) shall in all cases be
determined as of the date of the Newpark Notice, subject to any material adverse
changes occurring since the date of the Newpark Notice.
(iii) Closing. If the Newpark Parties exercise the
Newpark Option, they must complete the purchase of the Tuboscope Interest on or
before the fifteenth day after the date that the fair market value of the
Tuboscope Interest is determined in accordance with
7
<PAGE> 11
Section 3(d)(ii) (the "Final Closing Date"). If the Newpark Parties fail to
complete the purchase of the Tuboscope Interest by the Final Closing Date as a
result of the failure by any of the Newpark Parties to perform its obligations
in connection with such purchase, the Newpark Option will expire and be of no
further force or effect. The closing of such purchase shall take place at the
principal corporate office of Tuboscope. At such closing, the Tuboscope Parties
shall assign and deliver to the Newpark Parties the appropriate instruments
evidencing the Tuboscope Interest. The Newpark Parties shall deliver to the
Tuboscope Parties the full consideration therefor specified in Section 3(d)(ii)
in immediately available funds. Any transfer or similar taxes involved in such
sale shall be paid by the Newpark Parties.
(iv) No Prohibition on Sale. Nothing in this
Section 3(d) shall prohibit the Tuboscope Parties from selling or otherwise
transferring the Tuboscope Interest to a third party subject to the restrictions
of Section 3(c).
4. Solids Control Services.
(a) Solids Control Relationship.
(i) United States Market. Subject to the
conditions set forth herein, the Tuboscope Parties shall serve as the exclusive
provider of Solids Control Services to the Newpark Parties in the United States
Market.
(ii) Exceptions. If the Newpark Parties propose a
Solids Control Service project in an area in which the Tuboscope Parties do not
provide Solids Control Services on terms and at prices at least as favorable to
the purchaser of such services as those offered by the primary participants in
the Solids Control Services market in such area, the Newpark Parties shall
notify the Tuboscope Parties in writing of such proposal prior to commencement
of the project. If the Newpark Parties propose to use a third party provider of
Solids Control Services for such project, their notice to the Tuboscope Parties
shall indicate the price and other payment terms offered by such third party.
Upon such notice from the Newpark Parties, the Tuboscope Parties shall have ten
days to match or beat the price and terms offered by the third party. If the
Tuboscope Parties at least match such price and terms, then the Tuboscope
Parties shall be the Solids Control Service provider for the project. If the
Tuboscope Parties do not at least match the price and terms of such third party
provider, the Newpark Parties shall be permitted to utilize the services of the
third party provider for so long as such services are provided by the third
party provider at a price and terms no less favorable to the Tuboscope Parties
as those set forth in the notice to the Newpark Parties. Additionally, nothing
herein shall prohibit the Newpark Parties from using a third party provider of
Solids Control Services who has been specifically designated by a Newpark
Parties' customer; provided, however, that the Newpark Parties shall not
recommend any Solids Control Services provider other than the Tuboscope Parties
and shall provide the Tuboscope Parties with written notice of any delivery of
waste to a third party specifically designated by the customer.
(b) Pricing.
(i) General Pricing. All prospective Solids Control
Services projects governed by this Agreement shall be reviewed, priced, bid and
submitted by the Tuboscope
8
<PAGE> 12
Parties. Pricing shall take into consideration appropriate quantity discounts on
large projects as well as adjustments necessitated by special logistics. In all
cases, the percentage discounts off published list prices to the Newpark Parties
shall equal or exceed the discounts listed on Exhibit A. Exhibit A also contains
a compilation of Tuboscope's recent published list prices. It is acknowledged
that the prices listed on Exhibit A may be raised by Tuboscope from time to
time.
(ii) Special Pricing on Newpark Minimization Management
Projects. Notwithstanding the foregoing, on each "minimization management"
project of the Newpark Parties, the Tuboscope Parties shall offer to the Newpark
Parties Solids Control Services with pricing at 10% below the "bid pricing"
offered to the customer on such project; provided that such "bid pricing" must
be reasonably acceptable to the Tuboscope Parties.
(iii) No Superior Terms. The Tuboscope Parties hereby
represent and warrant that the above pricing terms, taken as a whole, are at
least as favorable to the Newpark Parties as the pricing terms for Solids
Control Services currently in effect with respect to, and being offered by the
Tuboscope Parties or their Subsidiaries to, any other customer or prospective
customer of the Tuboscope Parties or their Subsidiaries in the United States
Market, except for those offered by Tuboscope's subsidiary, Advanced Wire Cloth,
Inc., with respect to replacement screens for shakers. Moreover, the Tuboscope
Parties shall not during the term of this Agreement offer Solids Control
Services in the United States Market to any other party on terms superior (from
the standpoint of the other party) to the terms set forth above without also
concurrently offering such terms to the Newpark Parties. If the Tuboscope
Parties offer such superior terms to the Newpark Parties and the Newpark Parties
accept such terms, the Newpark Parties and the Tuboscope Parties shall enter
into an amendment to this Agreement to reflect such superior terms.
(c) Representations and Covenants of the Newpark Parties.
(i) Discontinued Operations. The Newpark Parties
represent and warrant that they and their Subsidiaries have discontinued their
Solids Control Services operations in the United States Market.
(ii) Authority; No Conflict; Enforceability. Each of the
Newpark Parties hereby represents and warrants as follows: (1) it has the full
authority and legal right to carry out the terms of this Agreement; (2) the
terms of this Agreement will not violate the terms of any material agreement,
contract or other instrument to which it is a party and no consent or
authorization of any other person is required in order for it to enter into and
carry out the terms of this Agreement; (3) it has taken all corporate and other
action necessary to authorize the execution and delivery of this Agreement; and
(4) this Agreement is a legal, valid and binding obligation of such Newpark
Party, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
whether enforcement is sought in equity or at law.
9
<PAGE> 13
(iii) No Solicitation. From the Effective Date
until the end of the Term, the Newpark Parties shall not actively solicit any
Solids Control Services business in the United States Market.
(iv) Exceptions. Notwithstanding anything to the
contrary herein, the Newpark Parties and their Subsidiaries are expressly
permitted to directly participate in minimization management and drilling fluids
projects (i) at rig sites at which they utilize the products and services of the
Tuboscope Parties and (ii) at all projects in which the Tuboscope Parties do not
at least match the price and terms of the third party provider as set forth in
Section 4(a)(ii).
(d) Canadian Market. The Parties shall use their best
efforts to enter into an alliance with respect to Solids Control Services in
Canada on substantially the same terms as those relating to the United States
Market set forth herein.
(e) Existing Bids and Contracts. The Newpark Parties have
delivered, or will promptly deliver, to the Tuboscope Parties all of the Newpark
Parties' annual contracts and outstanding bids relating to Solids Control
Services. The Tuboscope Parties will not be obligated to honor the terms of such
contracts and bids; provided, however, that the Tuboscope Parties will consider
exceptions for committed single-well drilling projects which were underway as of
November 12, 1999. Each such annual contract and outstanding bid must be
withdrawn by the Newpark Parties unless the Tuboscope Parties expressly consent
to the continuance of such contract or bid.
5. Term and Termination.
(a) Term. This Agreement shall be effective on the date
of this Agreement (the "Effective Date") and shall continue in effect from the
Effective Date until three years thereafter unless terminated earlier pursuant
to the provisions of this Section 5 or extended by mutual consent of the
parties. Thereafter, this Agreement shall automatically renew for successive one
year terms unless either party provides the other with written notice of its
intention to terminate this Agreement at least 90 days prior to the expiration
of the then-current term. The period in which this Agreement is in effect is
referred to herein as the "Term."
(b) Termination by Mutual Consent. The Parties may
terminate this Agreement upon the unanimous consent of the Parties.
(c) Termination by Tuboscope. Tuboscope will have the
right to terminate this Agreement immediately upon written notice to Newpark at
any time if:
(i) Any Newpark Party is in material breach of
(i) any material term, condition or covenant of this Agreement or (ii) its
payment obligations under any other contract with a Tuboscope Party related to
Solids Control Services, and, in either case, fails to cure that breach within
30 days after written notice of such breach.
(ii) Newpark: (A) becomes insolvent; (B) admits
in writing to insolvency or inability to pay its debts or perform its
obligations as they mature; or (C) makes an assignment for the benefit of
creditors.
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<PAGE> 14
(d) Termination by Newpark. Newpark will have the right
to terminate this Agreement immediately upon written notice to Tuboscope at any
time if:
(i) Any Tuboscope Party is in material breach of
(i) any material term, condition or covenant of this Agreement or (ii) its
payment obligations under any other contract with a Newpark Party related to
Waste Services and, in either case, fails to cure that breach within 30 days
after written notice of such breach.
(ii) Tuboscope: (A) becomes insolvent; (B) admits
in writing to insolvency or inability to pay its debts or perform its
obligations as they mature; or (C) makes an assignment for the benefit of its
creditors.
(e) Effect of Termination. If any Party terminates this
Agreement pursuant to this Section 5, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach).
(f) Survival of Certain Provisions. Sections 6 and 8
shall survive the termination of this Agreement.
6. Indemnification.
(a) Indemnification by the Tuboscope Parties. The
Tuboscope Parties shall indemnify, defend and hold harmless the Newpark Parties
and the Newpark Parties' affiliates, stockholders, members, directors, officers,
employees, contractors, agents and other representatives from all demands,
claims, actions, causes of action, proceedings, assessments, losses, damages,
liabilities, settlements, judgments, fines, penalties, interest, costs and
expenses (including fees and disbursements of counsel) (collectively, "Damages")
of every kind (i) directly caused by the provision by the Tuboscope Parties of
Solids Control Services pursuant to this Agreement and (ii) arising from or
related to any breach by the Tuboscope Parties of any of their obligations under
this Agreement.
(b) Indemnification by the Newpark Parties. The Newpark
Parties shall indemnify, defend and hold harmless the Tuboscope Parties and the
Tuboscope Parties' affiliates, stockholders, members, directors, officers,
employees, contractors, agents and other representatives from all Damages of
every kind (i) directly caused by the provision by the Newpark Parties of Waste
Services pursuant to this Agreement and (ii) arising from or related to any
breach by the Newpark Parties of any of their obligations under this Agreement.
7. Insurance.
(a) Tuboscope Parties. The Tuboscope Parties agree to
maintain fire and casualty, general liability and product liability insurance
coverage covering their Solids Control Services operations hereunder throughout
the Term, which coverage shall be from reputable insurance carriers and shall be
in character and amount at least equivalent to that carried by persons engaged
in similar businesses and subject to the same or similar hazards.
(b) Newpark Parties. The Newpark Parties agree to
maintain fire and casualty, general liability and product liability insurance
coverage covering their Waste Services
11
<PAGE> 15
operations hereunder throughout the Term, which coverage shall be from reputable
insurance carriers and shall be in character and amount at least equivalent to
that carried by persons engaged in similar businesses and subject to the same or
similar hazards.
8. Miscellaneous.
(a) Payment Terms. All invoices and other charges payable
hereunder will be paid solely in United States Dollars. If conversion from other
currencies is required for any purpose, the mid-market, mid-day rate as posted
by Reuters shall apply. All invoices will be due and payable in full within 30
days after receipt. Any amounts disputed in good faith and the reasons therefor
shall be reported within 15 days after receipt of the applicable invoice, and
the Parties agree to work diligently to resolve the dispute within 30 days of
the receipt of the notice of dispute. Invoices that are not paid within 30 days,
other than those for which a dispute has been reported in good faith, shall be
assessed a late payment charge at the rate of 1.5% per month on the unpaid
invoice, retroactive to the date of invoice.
(b) Press Releases and Public Announcements. Neither the
Tuboscope Parties, on the one hand, or the Newpark Parties, on the other hand,
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise Tuboscope or
Newpark, as appropriate, prior to making the disclosure).
(c) Confidentiality. In the performance of or otherwise
in connection with this Agreement, any party ("Discloser") may disclose to any
other party ("Recipient") certain Confidential Information of the Discloser. The
Recipient will treat such Confidential Information as confidential and
proprietary of the Discloser and during and after the Term will:
(i) use the Confidential Information of the
Discloser solely for the purposes set forth in this Agreement;
(ii) take suitable precautions and measures to
maintain the confidentiality of the Confidential Information of the Discloser;
and
(iii) not disclose or otherwise furnish the
Confidential Information of the Discloser to any third party other than
employees or independent contractors of the Recipient who have a need to know
the Confidential Information to perform its obligations under this Agreement,
provided such employees or independent contractors are obligated to maintain the
confidentiality of the Confidential Information.
(iv) The obligations under this Section 8(c) will
not apply to any: (i) use or disclosure of any information pursuant to the
exercise of the Discloser's rights under this Agreement; (ii) information that
is now or hereafter becomes generally known or available to the public other
than through a violation of this Agreement; (iii) information that is obtained
by the Recipient from a third party (other than in connection with this
Agreement) who was not under any obligation of secrecy or confidentiality with
respect to such information;
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<PAGE> 16
(iv) information that is independently developed by the Recipient without
reference to any Confidential Information and such independent development can
be shown by documentary evidence; (v) any disclosure required by applicable law,
provided that the Recipient will use reasonable efforts to give advance notice
to and cooperate with the Discloser in connection with any such disclosure; and
(vi) any disclosure made with the consent of the Discloser. The Recipient shall
promptly return to the Discloser or destroy all copies of any Confidential
Information of the Discloser in its possession or control upon request, or in
any event, upon any termination or expiration of the Term.
(d) No Agency. Each of the Tuboscope Parties, on the one
hand, and the Newpark Parties, on the other hand, will act as an independent
contractor hereunder, and neither will (i) have authority or represent that it
has any authority to assume or create any obligation, express or implied, on
behalf of the other, or (ii) represent the other as an agent, employee or in any
other capacity. Neither execution nor performance of this Agreement shall be
construed to have established any agency, joint venture or partnership.
(e) Force Majeure. If performance hereunder is prevented,
restricted or interfered with by any act or condition whatsoever beyond the
reasonable control of a Party, the Party so affected, upon giving prompt notice
to the other Parties, shall be excused from such performance to the extent of
such prevention, restriction or interference. In the event of any such
prevention, restriction or interference, the party affected shall promptly
notify the other party in writing and shall use all commercially reasonable
efforts to overcome the event or circumstance causing the prevention,
restriction or interference as soon as practicable. In addition, if a party's
performance is excused pursuant to this Section 8(e), the other party may take
any steps deemed reasonably necessary to secure the services of a third party to
replace the services previously provided by the non-performing party for so long
as such prevention, restriction or interference shall remain and for a
reasonable period of time thereafter if necessary to secure such replacement
services.
(f) No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns.
(g) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements or representations
by or between the Parties, written or oral, to the extent they related in any
way to the subject matter hereof.
(h) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the
prior written approval of the other Party; provided, however, that any Party may
(i) assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases such Party nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
13
<PAGE> 17
(i) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. This Agreement may be
executed by any party by delivery of a facsimile signature, which signature
shall have the same force and effect as an original signature. Any Party which
delivers a facsimile signature shall promptly thereafter deliver an originally
executed signature to the other Parties; provided, however, that the failure to
deliver an original signature page shall not affect the validity of any
signature delivered by facsimile.
(j) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(k) Notices. All notices, requests, demands, claims and
other communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to any Newpark Resources, Inc.
Newpark Party: 3850 North Causeway Boulevard, Suite 1770
Metairie, Louisiana 70002-1752
Attention: Chief Financial Officer
Telecopy: (504) 833-9506
Copy to: Ervin, Cohen & Jessup LLP
9401 Wilshire Blvd., 9th Floor
Beverly Hills, CA 90212-2974
Attn: Bertram K. Massing, Esq.
Telecopy: (310) 859-2325
If to any Tuboscope Inc.
Tuboscope Party: 2835 Holmes Road
Houston, Texas 77051
Attention: Chief Financial Officer
Telecopy: (713) 799-5227
Copy to: Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attention: Patrick T. Seaver, Esq.
Telecopy: (714) 755-8290
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may
14
<PAGE> 18
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(l) Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Texas without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Texas.
(m) Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by Tuboscope and Newpark. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(n) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(o) Expenses. Each of the Parties will bear its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby.
(p) Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. If an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.
(q) Submission to Jurisdiction. Each of the Parties
submits to the jurisdiction of any state or federal court sitting in Houston,
Texas, in any action or proceeding arising out of or relating to this Agreement
and agrees that all claims in respect of the action or proceeding may be heard
and determined in any such court. Each Party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court.
Each of the Parties waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other Party with respect thereto. Nothing
in this Section 8(q), however, shall affect the right of any Party to serve
legal process in any other manner permitted by law or in equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
(r) Remedies Not Exclusive. Except as specifically
provided for elsewhere in this Agreement, no remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy will be cumulative and will be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies by a
party will not constitute a waiver of the right to pursue other available
remedies.
*****
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<PAGE> 19
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
TUBOSCOPE INC., a
Delaware corporation
By:
---------------------------------------
Name:
Title:
TUBOSCOPE VETCO INTERNATIONAL, INC., a
Texas corporation
By:
---------------------------------------
Name:
Title:
NEWPARK RESOURCES, INC., a
Delaware corporation
By:
---------------------------------------
Name:
Title:
NEWPARK DRILLING FLUIDS, L.L.C.,
a Texas limited liability company
By:
---------------------------------------
Name:
Title:
NEWPARK ENVIRONMENTAL SERVICES,
L.L.C., a Louisiana limited
liability company
By:
---------------------------------------
Name:
Title:
16
<PAGE> 20
EXHIBIT A
ALLIANCE PRICE SHEET
--------------------
<PAGE> 1
EXHIBIT 10.27
NEWPARK RESOURCES, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
This Newpark Resources, Inc. 1999 Employee Stock Purchase Plan (the
"Plan") is intended as an incentive to encourage stock ownership by employees of
Newpark Resources, Inc., a Delaware corporation ("Newpark"), and Subsidiaries
which it may have from time to time (Newpark and its Subsidiaries together being
referred to herein as the "Company"), so that they may acquire a proprietary
interest, or increase their proprietary interest, in the Company, and to
encourage them to remain in the employ of the Company and its Subsidiaries.
"Subsidiary" shall mean each corporation which (i) is or becomes a "subsidiary
corporation" of Newpark, within the definition contained in Section 424(f) of
the Internal Revenue Code of 1986, as amended (the "Code"), (ii) conducts its
principal business operations in the United States, and (iii) is designated to
have its employees participate in this Plan by the Committee (as defined below).
It is further intended that the Plan qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of Newpark's Board of Directors (the "Board"). Each member of the
Committee shall be a "Non-Employee Director" as that term is defined in Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Securities and Exchange Act of 1934, as amended, but no action of the Committee
shall be invalid if this requirement is not met. The Committee shall select one
of its members as Chairman and shall act by vote of a majority of a quorum or by
unanimous written consent. A majority of its members shall constitute a quorum.
The Committee shall be governed by the provisions of the Company's Bylaws and of
Delaware law applicable to the Board, except as otherwise provided herein or
determined by the Board.
2.2 The Committee shall have full and complete authority, in its
discretion, but subject to the express provisions of the Plan: to designate
which corporations shall be "Subsidiaries" under this Plan, to determine when
the first offering shall be made; to determine the aggregate number of shares of
common stock, $0.01 par value per share, of Newpark ("Common Stock"), to be made
available for each offering, and to adopt such rules and regulations and to make
all other interpretations, constructions or determinations deemed necessary or
desirable for the administration of the Plan in its discretion. All
interpretations and constructions of the Plan by the Committee, and all of its
actions hereunder, shall be binding and conclusive on all persons for all
purposes.
2.3 The Company hereby agrees to indemnify and hold harmless each
Committee member and each employee of the Company, and the estate and heirs of
such Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee or his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in connection with
the Plan, to the extent that insurance, if any, does not cover the payment of
such items.
<PAGE> 2
3. ELIGIBILITY.
3.1 Each regular full-time employee of the Company shall be eligible to
participate in the Plan, provided such employee has been employed continuously
by the Company for at least 90 days as of the Effective Date or any subsequent
Offering Date (in each case as defined in paragraph 4 below).
3.2 The term "employee" shall have the same meaning as the term
"employee" as defined in Treasury Regulation Section 1.421-7(h), and shall
include officers, directors who are also employees and employees on Participant
Leaves of Absence (as defined in paragraph 22), but shall exclude employees
whose customary employment is for less than 20 hours per week or for less than
five months in any calendar year.
3.3 Any provision of the Plan to the contrary notwithstanding, no
employee shall be granted an award:
(a) if, immediately after the grant, such employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all classes of
stock of Newpark or of any subsidiary or parent of Newpark,
determinations of employee stock ownership being made for this purpose
in accordance with Section 424(d) of the Code; or
(b) which permits such employee's rights to purchase stock
under all employee stock purchase plans (within the meaning of Section
423 of the Code) for the Company to accrue at a rate which exceeds
$10,000 in fair market value of such stock (determined at the time the
award is made) for each calendar year in which such award would be
outstanding at any time, within the meaning of Section 423(b)(8) of the
Code.
4. OFFERING DATES.
The Plan will be implemented by a continuous series of offerings, each
of which shall commence on the first business day after the completion of the
immediately prior offering (the "Offering Date") and shall terminate six months
after the applicable Offering Date (the "Termination Date"). The first offering
shall be made as soon after stockholder approval of the Plan as is determined by
the Committee in its sole discretion (the "Effective Date"). No offering shall
be made if in the opinion of the Committee the Common Stock available under the
Plan has been so substantially exhausted as to make an offering to all eligible
employees impractical under the Plan.
5. PARTICIPATION.
An eligible employee may become a participant by completing and filing
an authorization for a payroll deduction on the form provided by the Committee.
Payroll deductions shall become effective on the first Offering Date after a
participant has filed an authorization and shall terminate upon the earlier to
occur of (i) the participant's request to have payroll deductions discontinued,
as set forth in paragraph 6.3, or (ii) the ceasing for any reason of the
participant to meet the eligibility requirements of paragraph 3, in which event
the provisions of paragraph 9.2 shall apply. Each participant will receive an
award on each Offering Date, and all participants will have the same rights and
privileges under the Plan.
2
<PAGE> 3
6. PAYROLL DEDUCTIONS.
6.1 At the time a participant files an authorization for a payroll
deduction, he or she shall elect to have deductions made from his or her
Annualized Base Pay, as hereinafter defined, on each payday during the time he
or she is a participant. The minimum deduction permitted hereunder shall be
$5.00 per week, and the maximum deduction shall be 10% of the participant's
Annualized Base Pay. For purposes of the Plan, the term "Annualized Base Pay"
shall mean the participant's current annualized base pay from the Company
(excluding overtime and all other extra compensation such as bonuses and
contributions to pension, profit sharing, health and life insurance and other
plans).
6.2 All payroll deductions made for a participant shall be credited to
his or her account under the Plan and held with other Company funds. A
participant may not make any separate cash payment into such account, except as
provided in paragraph 22.
6.3 A participant may elect to have payroll deductions completely
discontinued at any time, but an election to discontinue payroll deductions
during an offering shall be deemed to be an election to withdraw pursuant to
paragraph 9.1. No change in payroll deductions other than complete
discontinuance can be made during an offering, and, specifically, once an
offering has commenced, a participant may not alter the rate of his or her
payroll deductions for such offering.
7. GRANTING OF AWARDS.
7.1 On each Offering Date, the Committee shall determine the number of
available shares of Common Stock which will be sold to participants in such
offering. On each Offering Date, each participant shall be granted an award to
purchase up to that number of available shares which is equal to the total
number of available shares for such offering multiplied by a fraction, the
numerator of which is the amount of payroll deductions from such participant's
Annualized Base Pay authorized by such participant for the offering period
beginning on such Offering Date, and the denominator of which is the total
amount of payroll deductions from the Annualized Base Pay of all participants
authorized by such participants for the offering period beginning on such
Offering Date. The purchase price of each such share shall be the lower of:
(a) 85% of the fair market value per share of the Common Stock on
the Offering Date, or
(b) 85% of the fair market value per share of the Common Stock on
the Termination Date.
7.2 The fair market value of a share of Common Stock shall be equal to
the closing price of the Common Stock for the last preceding day on which
Newpark's shares were traded, and the method for determining the closing price
shall be determined by the Committee.
8. EXERCISE OF AWARDS.
8.1 Unless a participant gives written notice to the Committee as
hereinafter provided, the participant's award will be exercised automatically
for such participant on the Termination Date for the purchase of as many full
shares of Common Stock (no fractional shares shall be issued under
3
<PAGE> 4
this Plan) as the accumulated payroll deductions in such participant's account
at that time will purchase at the applicable purchase price (but not to exceed
the maximum number of shares subject to the award), and such shares shall be
credited to the participant's account at such time. The amount remaining in the
account of a participant after the exercise in full of an award shall be carried
forward in the participant's account and be available for the next succeeding
offering to the extent such remaining amount is attributable to fractional
shares; such remaining amount shall be refunded to the participant to the extent
it exceeds the amount attributable to fractional shares.
8.2 No participant may purchase during any calendar year Common Stock
under this and all other employee stock purchase plans (within the meaning of
Section 423 of the Code) of the Company having a fair market value (determined
at the time the award is made) in excess of $10,000. When a participant has
purchased the maximum amount of stock which may be purchased in any calendar
year, all amounts credited to such participant's account under the Plan in
excess of the amount applied to the purchase of such stock shall be returned to
the participant, payroll deductions for the participant shall cease and the
participant shall be ineligible to participate in any additional offering during
such calendar year.
8.3 Upon a participant's death, the participant's beneficiary (or
executor or administrator, as determined under paragraph 12) shall have the
right to elect, by written notice given to the Committee before the earlier of
the Termination Date of the current offering or the expiration of a period of 60
days beginning with the date of the participant's death, either to:
(a) withdraw all of the payroll deductions previously credited to
the participant's account, or
(b) apply to the exercise of the participant's award any amount
in such participant's account as of the date of death, and thereby
purchase Common Stock on the Termination Date next following the date
of the participant's death, with any excess payroll deductions in such
account being returned to such beneficiary (or other person entitled
thereto under paragraph 12) without interest.
If the Committee does not receive any such written notice of election within the
time specified in this paragraph 8.3, the beneficiary (or executor or
administrator, as determined under paragraph 12) shall be deemed to have
automatically elected to exercise the participant's award pursuant to
subparagraph (b) of this paragraph 8.3.
9. WITHDRAWAL.
9.1 By written notice to the Committee at any time during any offering,
a participant may elect to withdraw all the accumulated payroll deductions in
such participant's account as of the Termination Date of such offering, without
interest. A participant shall be deemed to have elected to make such a
withdrawal if such participant elects to discontinue payroll deductions
completely during an offering as described in paragraph 6.3. A participant who
withdraws all or any part of the amount credited to such participant's account
during an offering, or who elects to discontinue payroll deductions completely
during an offering under paragraph 6.3, shall be deemed to have given notice of
his or her intention to cease to be a participant for that offering and any
succeeding offerings, and all payroll deductions under the Plan with respect to
such participant shall be discontinued; provided, however, that such participant
may become a participant in any succeeding offering for which he or
4
<PAGE> 5
she is otherwise eligible in accordance with the Plan, if the participant files
with the Committee a new authorization for payroll deductions in accordance with
paragraph 5.
9.2 Upon the ceasing of a participant to meet the eligibility
requirements of paragraph 3, or the termination of the participant's employment
for any reason, including retirement, except as provided in paragraph 8.3, he or
she shall immediately cease to be a participant, any award which he or she may
have been granted under the Plan shall immediately expire and shall not be
exercised, and the payroll deductions and shares previously credited to his or
her account shall be returned to him or her within 30 days after such cessation
or termination, without interest.
10. DELIVERY.
As promptly as practicable after each Termination Date, the Company
will deliver to each participant, as appropriate, any Common Stock purchased
upon the exercise of his or her award and any cash to which he or she may be
entitled.
11. STOCK.
11.1 The stock to be sold to participants under the Plan shall be
Common Stock of Newpark. The maximum number of shares of Common Stock which
shall be made available for sale under the Plan during all offerings under the
Plan shall be 500,000 shares, subject to adjustment upon changes in
capitalization of the Company as provided in paragraph 15.
11.2 Stock to be delivered to a participant under the Plan will be
registered in the name of the participant.
11.3 No participant will have any interest in stock covered by an award
until such award has been exercised. Any shares which are subject to sale
pursuant to an award made under the Plan but which are not purchased on the
Termination Date of the related offering shall be available for sale pursuant to
awards made in subsequent offerings under the Plan.
12. DESIGNATION OF BENEFICIARY.
A participant may file with the Committee, and change from time to
time, a written designation of a beneficiary who is to receive any payroll
deductions and shares of Common Stock credited to the participant's account
under the Plan in the event of such participant's death. Upon receipt by the
Committee at the participant's death of proof of the identity and existence of a
beneficiary validly designated by the participant under the Plan, the Company
shall deliver such Common Stock and cash to such beneficiary. In the event of
the death of a participant who has not filed a written designation of a
beneficiary, the Company shall deliver such cash and Common Stock to the
executor or administrator of the estate of the participant, or, if no such
executor or administrator has been appointed (to the knowledge of the
Committee), at the direction of the Committee acting in its discretion, to the
spouse or to any one or more dependents or relatives of the participant, or, if
no spouse, dependent, or relative is known to the Committee, to such other
person as the Committee may designate. No designated beneficiary shall, prior to
the death of the participant, acquire any interest in the cash or Common Stock
credited to a participant's account under the Plan.
5
<PAGE> 6
13. TRANSFERABILITY.
Neither awards, payroll deductions credited to a participant's account
nor any rights to receive Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the participant,
except that payroll deductions and shares credited to a participant's account
shall be transferable by will or the laws of descent and distribution or as
provided by paragraph 12. Any attempted assignment, transfer, pledge or other
disposition prohibited by the preceding sentence shall be without effect, except
that the Company may treat such act as an election to withdraw funds in
accordance with paragraph 9.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.
15. CHANGES IN CAPITALIZATION.
15.1 The number and class of shares of stock covered by each
outstanding award, the purchase price per share thereof, and the maximum number
and class of shares of stock issuable upon exercise of all awards under the Plan
shall be proportionately adjusted in the event of any increase or decrease in
the number of the issued shares of Common Stock of the Company which results
from a split-up or consolidation of shares, payment of a stock dividend or
dividends exceeding a total of 2.5% for which the record dates occur in any one
fiscal year, a recapitalization (other than the conversion of convertible
securities according to their terms), a combination of shares or other like
capital adjustment, so that upon exercise of the award, the participant shall
receive the number and class of shares such participant would have received had
such participant been the holder of the number of shares of Common Stock for
which the award is being exercised upon the date of such change or increase or
decrease in the number of issued shares of the Company. If any adjustment
hereunder would create a fractional share or a right to acquire a fractional
share, such fractional share shall be disregarded and the number of shares
available under this Plan or the number of shares to which any participant is
entitled shall be the next lower number of whole shares, rounding all fractions
downward.
15.2 Upon a reorganization, merger or consolidation of Newpark with one
or more corporations as a result of which Newpark is not the surviving
corporation or in which Newpark survives as a wholly-owned subsidiary of another
corporation, or upon a sale of all or substantially all of the property of the
Company to another corporation, or any dividend or distribution to stockholders
of more than ten percent (10%) of the Company's assets, adequate adjustment or
other provisions shall be made by the Company or other party to such transaction
so that there shall remain and/or be substituted for the Common Stock subject to
each award, the shares, securities, cash or assets which would have been
issuable in respect of such award, as if the participant had been the owner of
such Common Stock as of the applicable date. Any share, securities, cash or
assets so substituted shall be subject to similar successive adjustments.
6
<PAGE> 7
16. SECURITIES REGISTRATION.
16.1 If the Company shall deem it necessary to register under the
Securities Act of 1933, as amended (the "Securities Act"), or other applicable
statutes any shares with respect to which an award shall have been made, then
the Company will use reasonable efforts to maintain the effectiveness of a
Registration Statement under the Securities Act before delivery of such shares.
If the shares of stock of the Company shall be listed on any national securities
exchange at the time of exercise of any award, then whenever required, the
Company shall make prompt application for the listing on such stock exchange of
such shares, at the sole expense of the Company.
16.2 Notwithstanding any other provision of this Plan or any award
hereunder, the Company shall be under no obligation to issue shares under the
Plan while, in the opinion of its counsel, any applicable legal requirement for
the issuance of such shares may not be satisfied, including but not limited to
the requirements of the Securities Act and Delaware or other state securities
laws. The Company shall use its best efforts to satisfy all such applicable
legal requirements. If any shares are issued upon exercise of an award under the
Plan without registration under the Securities Act, then the award shares shall
bear a suitable restrictive legend and the acceptance of such Award Shares shall
be subject to the execution of an investment letter by the participant, in form
and substance satisfactory to the Committee.
17. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. No such
termination shall affect awards previously made, nor may an amendment make any
change in any award theretofore granted which would adversely affect the rights
of any participant, nor may an amendment be made without prior approval of the
stockholders of the Company if such amendment would:
(a) Permit the sale of more shares of Common Stock than are
authorized under paragraph 11 of the Plan;
(b) Effect any change in the designation of eligible employees
under paragraph 3 of the Plan; or
(c) Materially increase the benefits accruing to participants
under the Plan.
18. APPLICATION OF PROCEEDS.
Proceeds from the sale of award shares shall constitute a part of the
general funds of the Company.
19. SUCCESSORS IN INTEREST.
The provisions of this Plan and the actions of the Committee shall be
binding on all heirs and successors of the Company and each participant.
7
<PAGE> 8
20. WITHHOLDING TAXES.
The Company shall have the right at the time of purchase of any shares
of Common Stock hereunder to make adequate provision for any federal, state,
local or foreign taxes which it believes are or may be required by law to be
withheld with respect to such purchase, to ensure the payment of any such taxes,
including by withholding from the participant's salary.
21. CONTINUED EMPLOYMENT.
This Plan and awards hereunder shall not impose any obligation on the
Company to continue to employ any participant. Moreover, no provision of this
Plan or any document executed or delivered pursuant hereto shall be deemed
modified in any way by any employment contract between a participant (or other
employee) and the Company.
22. LEAVES OF ABSENCE.
22.1 For purposes of participation in this Plan, a person on leave of
absence shall be deemed to be an employee for the first 90 days of such leave of
absence, or, if longer, the period for which the participant's reemployment is
guaranteed by statute (a "Participant Leave Of Absence"). Such employee's
employment for all purposes of this Plan, and such employee's participation in
this Plan and right to exercise any award, shall be deemed to have terminated at
the close of business on the last day of such Participant Leave Of Absence and
the provisions of paragraph 6.3 shall apply, unless such employee returns to
employment (as defined in paragraph 3.2) before the close of business on such
last day. Termination by the Company of any Participant's Leave of Absence,
other than termination of such Participant Leave of Absence on return to
employment (as defined in paragraph 3.2), shall terminate such employee's
employment for all purposes of this Plan, and shall terminate such employee's
participation in the Plan and right to exercise any award, and the provisions of
paragraph 6.3 shall apply.
22.2 While a participant is on a Participant Leave Of Absence treated
as employment under the provisions of paragraph 22.1, such participant shall
have the right to continue participation in the Plan, and to apply to the
exercise of awards (i) any amounts in such participant's account as of the
commencement of such Participant Leave Of Absence, (ii) any amounts which the
participant authorizes the Company to deduct from any payments made by the
Company to such participant during such Participant Leave Of Absence, and (iii)
any amounts paid by the participant to the Company to the extent that the
amounts set forth in clauses (i) and (ii) of this sentence are less than the
amounts such participant could have had deducted from such participant's
Annualized Base Pay if such participant had actually worked for the Company
during the period of his or her Participant Leave Of Absence.
23. TERM OF PLAN.
This Plan was adopted by the Board as of March 25, 1999, shall be
effective upon approval by the stockholders of Newpark and shall terminate on
March 24, 2009. No award shall be made under the Plan after such termination,
but awards made prior thereto shall be unaffected by such termination.
8
<PAGE> 9
24. GOVERNING LAW.
The Plan shall be construed in accordance with, and governed by, the
laws of the State of Delaware.
25. RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
The excess of the fair market value of Common Stock purchased hereunder
on its date of purchase over the amount actually paid for such Common Stock
hereunder shall not be deemed to be salary or other compensation to any
participant for purposes of any pension, thrift, profit-sharing, stock option or
any other employee benefit plan now maintained or hereafter adopted by the
Company.
26. OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this
Plan shall be, in substance and form, as established and modified by the
Committee or by persons under its direction and supervision; provided, however,
that all such documents shall be subject in every respect to the provisions of
this Plan, and in the event of any conflict between the terms of any such
document and this Plan, the provisions of this Plan shall prevail.
27. NOTICES.
All notices or other communications by a participant to the Committee
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Committee at the location or by the
person designated by the Committee for the receipt thereof.
28. SEVERABILITY.
If any of the provisions of the Plan shall be held invalid, the
remainder of the Plan shall not be affected thereby.
IN WITNESS WHEREOF, this document has been executed as of the 25th day
of March, 1999.
NEWPARK RESOURCES, INC.
By: /s/ James D. Cole
--------------------------------------
James D. Cole, Chairman of the Board,
President and Chief Executive Officer
9
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
OF
NEWPARK RESOURCES, INC.
1. BATSON MILL L.P.
2. BOCKMON CONSTRUCTION COMPANY, INC.
3. CHESSHER CONSTRUCTION, INC.
4. CHEMICAL TECHNOLOGIES, INC.
5. CONSOLIDATED MAYFLOWER MINES
6. DARCOM INTERNATIONAL, L.P.
7. EXCALIBAR MINERALS, INC.
8. EXCALIBAR MINERALS OF LA., L.L.C.
9. FLORIDA MAT RENTAL, INC.
10. HYDRA FLUIDS INTERNATIONAL, LTD.
11. INTERNATIONAL MAT, LTD.
12. IML DE VENEZUELA, LLC
13. JPI ACQUISITION CORP.
14. MALLARD & MALLARD, INC.
15. MALLARD & MALLARD OF LA., INC.
16. NES PERMIAN BASIN, L.P.
17. NDF MEXICO, INC.
18. NEWPARK CANADA, INC.
19. NEWPARK DRILLING FLUIDS, L.L.C.
<PAGE> 2
20. NEWPARK ENVIRONMENTAL SERVICES, L.L.C.
21. NEWPARK ENVIRONMENTAL MANAGEMENT COMPANY, L.L.C.
22. NEWPARK ENVIRONMENTAL SERVICES MISSISSIPPI, L.P.
23. NEWPARK ENVIRONMENTAL SERVICES OF TEXAS, L.P
24. NEWPARK HOLDINGS, INC.
25. NEWPARK PERFORMANCE SERVICES, INC.
26. NEWPARK SHIPHOLDING TEXAS, L.P.
27. NEWPARK TEXAS L.L.C.
28. NID, L.P.
29. OGS LABORATORY, INC.
30. SHAMROCK DRILLING FLUIDS, INC.
31. SOLOCO FSC, INC.
32. SOLOCO, L.L.C.
33. SOLOCO TEXAS, L.P.
34. SONNEX, INC.
35. SUPREME CONTEACTORS, L.L.C.
2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-22291, 33-54060, 33-62643, 33-83680, and
333-07225.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
March 27, 2000
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-22291, 33-54060, 33-62643, 33-83680, and 333-07225 of Newpark Resources, Inc.
on Form S-8 of our report dated March 26, 1999 (March 27, 2000 as to Note D),
appearing in this Annual Report on Form 10-K of Newpark Resources, Inc. for the
year ended December 31, 1999.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 27, 2000
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of NEWPARK
RESOURCES, INC., does hereby constitute and appoint JAMES D. COLE AND/OR MATTHEW
W. HARDEY, his true and lawful attorney and agent to do any and all acts and
things and execute, in the name of the undersigned (whether on behalf of Newpark
Resources, Inc., or as a Director of Newpark Resources, Inc., or by attesting
the seal of Newpark Resources, Inc., or otherwise), any and all instruments
which said attorney and agent may deem necessary or advisable in order to enable
Newpark Resources, Inc. to comply with the Securities Exchange Act of 1934 and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of the Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year
ended December 31, 1999, including specifically but without limitation thereto,
power and authority to sign the name of the undersigned (whether on behalf of
Newpark Resources, Inc., or as a Director of Newpark Resources, Inc., or by
attesting to the seal of Newpark Resources, Inc., or otherwise) to the Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission, or
any of the exhibits filed therewith, or any amendment or application for
amendment of the Annual Report on Form 10-K, or any of the exhibits filed
therewith, and to attest the seal of Newpark Resources, Inc. thereon and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the date
set forth opposite his name.
DATED: FEBRUARY 3, 2000 /s/ DIBO ATTAR
---------------------------- -----------------------------------------
DIBO ATTAR, DIRECTOR
WITNESSES:
/s/ EDAH KEATING
- -----------------------------------
Edah Keating
/s/ SANDRA ROBERT
- -----------------------------------
Sandra Robert
<PAGE> 2
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of NEWPARK
RESOURCES, INC., does hereby constitute and appoint JAMES D. COLE AND/OR MATTHEW
W. HARDEY, his true and lawful attorney and agent to do any and all acts and
things and execute, in the name of the undersigned (whether on behalf of Newpark
Resources, Inc., or as a Director of Newpark Resources, Inc., or by attesting
the seal of Newpark Resources, Inc., or otherwise), any and all instruments
which said attorney and agent may deem necessary or advisable in order to enable
Newpark Resources, Inc. to comply with the Securities Exchange Act of 1934 and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of the Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year
ended December 31, 1999, including specifically but without limitation thereto,
power and authority to sign the name of the undersigned (whether on behalf of
Newpark Resources, Inc., or as a Director of Newpark Resources, Inc., or by
attesting to the seal of Newpark Resources, Inc., or otherwise) to the Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission, or
any of the exhibits filed therewith, or any amendment or application for
amendment of the Annual Report on Form 10-K, or any of the exhibits filed
therewith, and to attest the seal of Newpark Resources, Inc. thereon and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the date
set forth opposite his name.
DATED: FEBRUARY 3, 2000 /s/ WILLIAM W. GOODSON
---------------------------- -----------------------------------------
WILLIAM W. GOODSON, DIRECTOR
WITNESSES:
/s/ EDAH KEATING
- -----------------------------------
Edah Keating
/s/ SANDRA ROBERT
- -----------------------------------
Sandra Robert
<PAGE> 3
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of NEWPARK
RESOURCES, INC., does hereby constitute and appoint JAMES D. COLE AND/OR MATTHEW
W. HARDEY, his true and lawful attorney and agent to do any and all acts and
things and execute, in the name of the undersigned (whether on behalf of Newpark
Resources, Inc., or as a Director of Newpark Resources, Inc., or by attesting
the seal of Newpark Resources, Inc., or otherwise), any and all instruments
which said attorney and agent may deem necessary or advisable in order to enable
Newpark Resources, Inc. to comply with the Securities Exchange Act of 1934 and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of the Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year
ended December 31, 1999, including specifically but without limitation thereto,
power and authority to sign the name of the undersigned (whether on behalf of
Newpark Resources, Inc., or as a Director of Newpark Resources, Inc., or by
attesting to the seal of Newpark Resources, Inc., or otherwise) to the Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission, or
any of the exhibits filed therewith, or any amendment or application for
amendment of the Annual Report on Form 10-K, or any of the exhibits filed
therewith, and to attest the seal of Newpark Resources, Inc. thereon and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the date
set forth opposite his name.
DATED: FEBRUARY 3, 2000 /s/ DAVID P. HUNT
---------------------------- -----------------------------------------
DAVID P. HUNT, DIRECTOR
WITNESSES:
/s/ EDAH KEATING
- -----------------------------------
Edah Keating
/s/ SANDRA ROBERT
- -----------------------------------
Sandra Robert
<PAGE> 4
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of NEWPARK
RESOURCES, INC., does hereby constitute and appoint JAMES D. COLE AND/OR MATTHEW
W. HARDEY, his true and lawful attorney and agent to do any and all acts and
things and execute, in the name of the undersigned (whether on behalf of Newpark
Resources, Inc., or as a Director of Newpark Resources, Inc., or by attesting
the seal of Newpark Resources, Inc., or otherwise), any and all instruments
which said attorney and agent may deem necessary or advisable in order to enable
Newpark Resources, Inc. to comply with the Securities Exchange Act of 1934 and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of the Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year
ended December 31, 1999, including specifically but without limitation thereto,
power and authority to sign the name of the undersigned (whether on behalf of
Newpark Resources, Inc., or as a Director of Newpark Resources, Inc., or by
attesting to the seal of Newpark Resources, Inc., or otherwise) to the Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission, or
any of the exhibits filed therewith, or any amendment or application for
amendment of the Annual Report on Form 10-K, or any of the exhibits filed
therewith, and to attest the seal of Newpark Resources, Inc. thereon and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the date
set forth opposite his name.
DATED: FEBRUARY 3, 2000 /s/ ALAN J. KAUFMAN
---------------------------- -----------------------------------------
ALAN J. KAUFMAN, DIRECTOR
WITNESSES:
/s/ EDAH KEATING
- -----------------------------------
Edah Keating
/s/ SANDRA ROBERT
- -----------------------------------
Sandra Robert
<PAGE> 5
POWER OF ATTORNEY
WITH RESPECT TO THE ANNUAL REPORT ON FORM 10-K
OF NEWPARK RESOURCES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of NEWPARK
RESOURCES, INC., does hereby constitute and appoint JAMES D. COLE AND/OR MATTHEW
W. HARDEY, his true and lawful attorney and agent to do any and all acts and
things and execute, in the name of the undersigned (whether on behalf of Newpark
Resources, Inc., or as a Director of Newpark Resources, Inc., or by attesting
the seal of Newpark Resources, Inc., or otherwise), any and all instruments
which said attorney and agent may deem necessary or advisable in order to enable
Newpark Resources, Inc. to comply with the Securities Exchange Act of 1934 and
any requirements of the Securities and Exchange Commission in respect thereof,
in connection with the filing of the Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year
ended December 31, 1999, including specifically but without limitation thereto,
power and authority to sign the name of the undersigned (whether on behalf of
Newpark Resources, Inc., or as a Director of Newpark Resources, Inc., or by
attesting to the seal of Newpark Resources, Inc., or otherwise) to the Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission, or
any of the exhibits filed therewith, or any amendment or application for
amendment of the Annual Report on Form 10-K, or any of the exhibits filed
therewith, and to attest the seal of Newpark Resources, Inc. thereon and to file
the same with the Securities and Exchange Commission; and the undersigned does
hereby ratify and confirm all that said attorneys and agents, each of them,
shall do or cause to be done by virtue hereof. Any one of said attorneys and
agents shall have, and may exercise, all the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has signed his name hereto on the date
set forth opposite his name.
DATED: FEBRUARY 3, 2000 /s/ JAMES H. STONE
---------------------------- -----------------------------------------
JAMES H. STONE, DIRECTOR
WITNESSES:
/s/ EDAH KEATING
- -----------------------------------
Edah Keating
/s/ SANDRA ROBERT
- -----------------------------------
Sandra Robert
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,517
<SECURITIES> 0
<RECEIVABLES> 64,383
<ALLOWANCES> 9,936
<INVENTORY> 17,524
<CURRENT-ASSETS> 98,827
<PP&E> 220,296
<DEPRECIATION> 53,693
<TOTAL-ASSETS> 450,191
<CURRENT-LIABILITIES> 50,583
<BONDS> 0
0
13,009
<COMMON> 690
<OTHER-SE> 172,640
<TOTAL-LIABILITY-AND-EQUITY> 450,191
<SALES> 190,776
<TOTAL-REVENUES> 190,776
<CGS> 132,530
<TOTAL-COSTS> 227,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,664
<INCOME-PRETAX> (93,966)
<INCOME-TAX> (27,246)
<INCOME-CONTINUING> (66,720)
<DISCONTINUED> (3,406)
<EXTRAORDINARY> 0
<CHANGES> 1,471
<NET-INCOME> (69,505)
<EPS-BASIC> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
