UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 Commission File No. 1-2960 Newpark Resources, Inc. (Exact name of registrant as specified in its charter) Delaware 72-1123385 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3850 N. Causeway, Suite 1770 Metairie, Louisiana 70002 (Address of principal executive offices) (Zip Code) (504) 838-8222 (RegistrantOs telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No ______ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock, $0.01 par value: 14,503,881 shares at November 8, 1996 Page 1 of 18
<TABLE> <CAPTION> NEWPARK RESOURCES, INC. INDEX TO FORM 10-Q FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 Item Page Number Description Number PART I <S> <C> <C> 1 Unaudited Consolidated Financial Statements: Balance Sheets - September 30, 1996 and December 31, 1995 ..............3 Statements of Income for the Three Month and Nine Month Periods Ended September 30, 1996 and 1995..............4 Statements of Cash Flows for the Nine Month Periods Ended September 30, 1996 and 1995...............................................5 Notes to Consolidated Financial Statements...............6 2 Management's Discussion and Analysis of Financial Condition and Results of Operations......................10 PART II 6 Exhibits and Reports on Form 8-K...........................17 2
</TABLE> <TABLE> <CAPTION> Part I Item I - Financial Statements Newpark Resources, Inc. Consolidated Balance Sheets As of September 30, 1996 and December 31, 1995 ____________________________________________________________________________________ (Unaudited) September 30, December 31, (In thousands, except share data) 1996 1995 ____________________________________________________________________________________ <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 1,564 $ 1,018 Accounts and notes receivable, less allowance of $887 in 1996 and $768 in 1995 33,001 39,208 Inventories 8,167 11,996 Other current assets 4,312 4,088 _______ _______ Total current assets 47,044 56,310 Property, plant and equipment, at cost, net of accumulated depreciation 107,461 85,461 Cost in excess of net assets of purchased businesses, net of accumulated amortization 89,033 4,340 Other assets 23,764 6,636 _______ _______ $ 267,302 $ 152,747 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 517 $ 169 Current maturities of long-term debt 9,305 7,742 Accounts payable 10,403 11,664 Accrued liabilities 12,289 3,462 Current taxes payable 1,000 1,165 _______ _______ Total current liabilities 33,514 24,202 Long-term debt 29,307 46,724 Other non-current liabilities 3,122 285 Deferred taxes payable 7,062 4,018 Commitments and contingencies (See Note 9) 0 0 Shareholders' equity: Preferred Stock, $.01 par value, 1,000,000 shares authorized, no shares outstanding 0 0 Common Stock, $.01 par value, 20,000,000 shares authorized, 14,448,630 shares outstanding in 1996 and 10,634,177 in 1995 143 105 Paid-in capital 250,314 144,553 Retained earnings (deficit) (56,160) (67,140) _______ _______ Total shareholders' equity 194,297 77,518 _______ _______ $ 267,302 $ 152,747 ======= ======= See accompanying Notes to Consolidated Financial Statements. </TABLE> 3
<TABLE> <CAPTION> Newpark Resources, Inc. Consolidated Statements of Income For the Three and Nine Month Periods Ended September 30, (Unaudited) Three Months Ended Nine Months End September 30, September 30, ______________________________________________________________________________________________________ (In thousands, except per share data) 1996 1995 1996 1995 ______________________________________________________________________________________________________ <S> <C> <C> <C> <C> Revenues $ 28,551 $ 24,793 $ 81,497 $ 69,456 Operating costs and expenses: Cost of services provided 15,924 16,163 50,016 46,345 Operating costs 2,654 2,307 7,160 6,901 ________ ________ _________ ________ 18,578 18,470 57,176 53,246 General and administrative expenses 719 749 2,168 2,066 Non-recurring expense 2,432 436 2,432 436 Provision for uncollectible accounts and notes receivable 0 45 6 115 ________ ________ _________ ________ Operating income 6,822 5,093 19,715 13,593 Interest income (19) (31) (79) (152) Interest expense 910 905 2,814 2,794 ________ ________ _________ ________ Income from operations before provision for income taxes 5,931 4,219 16,980 10,951 Provision for income taxes 2,149 1,519 5,998 2,555 ________ ________ _________ ________ Net income $ 3,782 $ 2,700 $ 10,982 $ 8,396 ======== ======== ========= ======== Weighted average common and common equivalent shares outstanding: Primary 13,360 10,321 11,891 10,299 ======== ======== ========= ======== Fully Diluted 13,366 10,301 11,946 10,243 ======== ======== ========= ======== Net income per common share and common equivalent share: Primary $ 0.28 $ 0.26 $ 0.92 $ 0.82 ======== ======== ========= ======== Fully Diluted $ 0.28 $ 0.26 $ 0.92 $ 0.82 ======== ======== ========= ======== See accompanying Notes to Consolidated Financial Statements. </TABLE> 4
<TABLE> <CAPTION> Newpark Resources, Inc. Consolidated Statements of Cash Flows For the Nine Month Periods Ended September 30, (Unaudited) ___________________________________________________________________________________ (In thousands ) 1996 1995 ___________________________________________________________________________________ <S> <C> <C> Cash flows from operating activities: Net income $ 10,982 $ 8,396 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,329 7,306 Non-recurring expense 2,432 0 Provision for doubtful accounts 6 115 Provision for deferred income taxes 3,165 2,555 Loss on sales of assets 60 85 Change in assets and liabilities, net of effects of acquisitions and dispositions: Decrease (increase) in accounts and notes receivable 6,221 (10,925) Decrease (increase) in inventories 845 (3,136) Decrease (increase) in other assets 416 (1,276) (Decrease) increase in accounts payable (2,946) 2,163 Decrease in accrued liabilities and other (6,260) (179) ________ ________ Net cash provided by operating activities 25,250 5,104 ________ ________ Cash flows from investing activities: Capital expenditures (37,479) (17,876) Disbursements for loans outstanding 0 (221) Purchase of Campbell Wells assets (70,500) 0 Proceeds from disposal of property, plant and equipment 1,556 487 Purchase of patents (5,700) 0 Purchase of international partners' joint venture interest (1,170) 0 Payments received on notes receivable 0 120 ________ ________ Net cash used in investing activities (113,293) (17,490) ________ ________ Cash flows from financing activities: Net borrowings on lines of credit 8,603 16,638 Principal payments on notes payable, capital lease obligations and long-term debt (22,448) (19,564) Proceeds from issuance of stock 103,500 0 Offering cost on stock issuance (5,434) 0 Proceeds from issuance of debt 2,175 14,296 Proceeds from conversion of stock options 2,193 792 ________ ________ Net cash provided by financing activities 88,589 12,162 ________ ________ Net decrease in cash and cash equivalents 546 (224) Cash and cash equivalents at beginning of year 1,018 1,404 ________ ________ Cash and cash equivalents at end of the period $ 1,564 $ 1,180 ======== ======== </TABLE> During the nine month period ended September 30, 1996, the Company's noncash transactions included the acquisition of certain patents in exchange for $5,840,000 of the Company's common stock and $1,200,000 in cash. In connection with the purchase of these patents the Company recorded a deferred tax liablity of $900,000. Transfers from inventory to fixed assets of $3,040,000 were also made during this period. The company sold $13,251,000 of property, plant and equipment in exchange for $7,036,000 of long term notes receivable and the assumption of $7,544,000 in debt obligations. Included in accounts payable and accrued liabilities at September 30, 1996 were equipment purchases of $1,498,000. Also included are notes payable for equipment purchases in the amount $2,208,000 at September 30, 1996. A total of $13,831,000 of accrued liabilities were recorded in conjunction with the purchase of the Campbell Wells assets. Interest of $3,334,000 and $2,998,000 and income taxes of $2,998,000 and $51,400 were paid during the nine months ending September 30, 1996 and 1995, respectively. See accompanying Notes to Consolidated Financial Statements. 5
NEWPARK RESOURCES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 In the opinion of management the accompanying unaudited consolidated financial statements reflect all adjustments necessary to present fairly the financial position of Newpark Resources, Inc. ("Newpark" or the "Company") as of September 30, 1996, and the results of operations for the three and nine month periods ended September 30, 1996 and 1995 and cash flows for the nine month periods ended September 30, 1996 and 1995. All such adjustments are of a normal recurring nature. These interim financial statements should be read in conjunction with the December 31, 1995 audited financial statements and related notes filed on Form 10-K at December 31, 1995. Note 2 The consolidated financial statements include the accounts of Newpark and its wholly-owned subsidiaries. All material intercompany transactions are eliminated in consolidation. Note 3 The results of operations for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results to be expected for the entire year. Note 4 Primary and fully diluted income per common share is calculated by dividing net income by the average shares of common stock of the Company ("Common Stock") and Common Stock equivalents outstanding during the period. When dilutive, stock options are included as share equivalents using the treasury stock method. Note 5 Included in accounts and notes receivable at September 30, 1996 and December 31, 1995 (in thousands) are: 1996 1995 Trade receivables $22,827 $27,714 Unbilled revenues 7,230 8,600 ______ ______ Gross trade receivables 30,057 36,314 Allowance for doubtful accounts (887) (768) ______ ______ Net trade receivables 29,170 35,546 Notes and other receivables 3,831 3,662 ______ ______ Total $33,001 $39,208 ====== ====== Note 6 Inventories at September 30, 1996 and December 31, 1995 consisted principally of raw materials. 6
Note 7 Interest of $57,000 and $149,000 was capitalized during the three months ended September 30, 1996 and 1995, respectively. For the nine months ended September 30, 1996 and 1995, interest of $442,000 and $276,000 was capitalized, respectively. Note 8 The Company maintains a $60.0 million bank credit facility with $25.0 million in the form of a revolving line of credit commitment and $35.0 million in a term note. The line of credit is secured by a pledge of accounts receivable and certain inventory. It bears interest at either a specified prime rate (8.25% at September 30, 1996) or the LIBOR rate (5.625% at September 30, 1996) plus a spread which is determined quarterly based upon the ratio of the CompanyOs funded debt to cash flow. The line of credit requires monthly interest payments and matures on December 31, 1998. At September 30, 1996, $1.8 million of letters of credit were issued and outstanding, leaving a net of $16.4 million available for cash advances under the line of credit, against which $4.3 million had been borrowed. The outstanding balance on the term note at September 30, 1996 was $29.2 million. The term loan was used to refinance existing debt and requires monthly interest installments and seventeen equal quarterly principal payments which commenced March 31, 1996. The term loan bears interest at the Company's option of either a specified prime rate or LIBOR rate, plus a spread which is determined quarterly based upon the ratio of the Company's funded debt to cash flow. The credit facility requires that the Company maintain certain specified financial ratios and comply with other usual and customary requirements. The Company was in compliance with the agreement at September 30, 1996. In November 1996, an amendment to the credit facility was approved by the banks, which eliminated the monthly borrowing base determination, reduced certain of the restrictive and compliance covenants contained in the facility, and reduced the frequency of financial reporting. If this amendment had been in effect at September 30, 1996, the availability would have increased from $16.4 million to $23.3 million. Note 9 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. During 1992, the State of Texas assessed additional sales taxes for the years 1988-1991. The Company has filed a petition for redetermination with the Comptroller of Public Accounts. The Company believes that the ultimate resolution of this matter will not have a material adverse effect on the consolidated financial statements. 7
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 $1.8 million at September 30, 1996. On August 29, 1996, the Company sold the land, buildings and certain equipment comprising substantially all of the assets of its former marine repair operation to the operator of the facility. These assets had previously been subject to an operating lease to the same party, and the purchase was made under the terms of a purchase option granted in the original lease. The Company has guaranteed certain of the debt obligations of the operator, which is limited to a maximum of $10 million and reduces proportionately with debt repayments made by the operator. Note 10 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 a cash consideration of $70.5 million. Campbell continues to operate the landfarms. In addition, on May 22, 1996, the Company was granted a NORM direct injection disposal license at its Big Hill facility. As a result of these transactions, the Company has restructured certain of its operations in order to achieve certain operational efficiencies. This restructuring included a reduction in staffing and the closure or modification of several facilities. During the quarter ended September 30, 1996, a charge of $2.4 million was made against earnings for these costs. The following table sets forth summary pro forma financial information for the Company for the nine months ended September 30, 1996 and 1995. The summary pro forma information provides financial information giving effect to the offering of shares used to fund the acquisition, the acquisition and the repayment of indebtedness from proceeds provided by the offering for the periods presented. The pro forma information is provided for informational purposes only and is not necessarily indicative of actual results that would have been achieved had the offering and the acquisition been consummated at the beginning of the periods presented, or of future results. Management expects to achieve net cost reductions which are not reflected in the pro forma results. These cost reductions are related to the consolidation of certain duplicate administrative and personnel costs. 8
Nine Month Periods Ended Sept. 30, (In thousands, except per share data) 1996 1995 ______________ ______________ Revenues $98,276 $83,224 ======= ======= Net income $12,939 $11,042 ======= ======= Primary $ .88 $ .80 ======= ======= Fully diluted $ .88 $ .80 ======= ======= Note 11 On August 12, 1996, the Company completed a public offering of common stock to fund the Campbell acquisition, to provide the additional working capital needed as a result of the transaction and to fund future expansion of the Company. A total of 3,450,000 shares were sold in the offering providing proceeds (net of expenses) of $96.7 million. 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General On August 12, 1996 the Company purchased from Campbell Wells, Ltd. ("Campbell") its marine-related nonhazardous oilfield waste ("NOW") collection operations for a purchase price of $70.5 million. The Campbell acquisition was financed through a public offering of common stock which also provided the additional working capital needed as a result of the transaction, and improved the Company's capital structure to facilitate future expansion in the markets served by the Company. Results of Operations The following table presents revenue by product line for the three and nine month periods ended September 30, 1996 and 1995. The product line data has been reclassified from prior periodsO presentations in order to more effectively distinguish the Company's proprietary offsite waste processing and mat rental services from its other service offerings. These services, which are protected by patents and company-developed proprietary knowledge, serve to differentiate the Company's products and services from those of its competitors and provide a competitive advantage.
<TABLE> <CAPTION> Three Month Periods Ended Sept. 30, (Dollars in thousands) 1996 1995 _______________ ______________ <S> <C> <C> <C> <C> Revenues by product line: Offsite waste processing $11,555 40.5% $ 7,229 29.2% Mat rental services 7,004 24.5 7,531 30.4 General oilfield services 3,618 12.7 3,647 14.7 Wood product sales 3,621 12.7 3,039 12.2 Onsite environmental management 2,413 8.4 2,947 11.9 Other 340 1.2 400 1.6 _______ _____ ______ _____ Total revenues $28,551 100.0% $24,793 100.0% ======= ===== ====== ===== </TABLE> <TABLE> <CAPTION> Nine Month Periods Ended Sept. 30, (Dollars in thousands) 1996 1995 _______________ ______________ <S> <C> <C> <C> <C> Revenues by product line: Offsite waste processing $28,946 35.5% $22,144 31.9% Mat rental services 20,612 25.3 21,527 31.0 General oilfield services 12,916 15.8 10,585 15.2 Wood product sales 11,223 13.8 8,449 12.2 Onsite environmental management 6,440 7.9 5,551 8.0 Other 1,360 1.7 1,200 1.7 _______ _____ _______ _____ Total revenues $81,497 100.0% $69,456 100.0% ======= ===== ======= ===== </TABLE> 10
Three Month Period Ended September 30, 1996 Compared to Three Month Period ended September 30, 1995 Revenues Total revenues increased to $28.6 million in the 1996 period from $24.8 million in the 1995 period, an increase of $3.8 million or 15.3%. Two major factors were responsible for the change. Offsite waste processing revenue increased $4.3 million as a result of improved NOW and NORM disposal volume, and revenues from wood product sales increased $.6 million due to production capacity added in 1995. Partially offsetting these revenue increases was a $.5 million decrease in mat rental revenues caused by decreased volumes, and a $.5 million decrease in onsite environmental management. Both of these decreases are attributed to a shift of drilling in the South Louisiana land market towards the Austin Chalk formation, an uplands area which uses less of the Company's mat rental services for temporary site access. The popularity of drilling in the Austin Chalk formation has moved a majority of the rigs in that market outside of the Company's primary service area. NOW disposal and related services revenue increased $3.8 million to $9.4 million in the recent quarter compared to $5.6 million in the 1995 period. The revenue increase related to increased volumes which are primarily attributable to the Campbell acquisition, and an improvement in average pricing to $8.72 per barrel in 1996 as compared to $8.01 in the comparable 1995 period. NOW disposal volumes increased to 1,036,000 barrels compared to 690,000 barrels in the year-ago quarter. During the 1996 quarter, the Company processed and disposed of 25,900 barrels of NORM, earning revenue of $2.2 million, compared to 11,917 barrels and revenue of $1.6 million in the 1995 quarter. The average disposal charge paid by the customer of $85.00 in the 1996 quarter as compared to $136.70 in the 1995 quarter, reflects the fundamental change in the nature of the business resulting from the new disposal license, which was issued on May 21, 1996, and under which operations commenced at the Big Hill facility on June 1, 1996. The new license facilitates the direct injection disposal of NORM waste, at significantly lower cost per barrel. As a result of this, the Company reduced its listed charges for disposal and introduced volume pricing. The lower revenue per barrel in the quarter is the effect of these lower prices and discounts. Operating Income Operating income increased by $1.7 million or 34% to total $6.8 million in the 1996 period compared to $5.1 million in the prior period, representing an improvement in operating margin to 23.9% in the 1996 period compared to 20.5% in the 1995 period. The primary component of the increase was derived from offsite waste processing operations. 11
General and administrative expenses remained relatively unchanged decreasing as a proportion of revenue to 2.5% in the 1996 period from 3.0% in the 1995 period, and decreasing in absolute amount by $30,000. During the 1996 quarter, the Company recorded a non- recurring restructure charge in the amount of $2.4 million. A total of approximately $1.8 million was related to the restructuring of certain of the Company's NOW processing operations and staffing changes to facilitate the integration of its operations with those recently acquired from Campbell. The Company recognized an additional $.6 million of non-recurring costs associated with the termination of processing operations at its original NORM facility at Port Arthur, Texas and the partial closure of the site. The non-recurring expense of $.4 million reflected in the 1995 quarter was related to a proposed acquisition which was terminated in August, 1995. The majority of these expenses were legal, accounting and investment advisory fees. Interest Expense Interest expense was substantially unchanged at approximately $.9 million for both periods, although average outstanding borrowings increased approximately 9.7% from the prior period. This resulted from decreased net interest cost under the current credit agreement, which became effective as of June 29, 1995. Provision for Income Taxes For the 1996 and 1995 periods, the Company recorded income tax provisions of $2.1 million and $1.5 million respectively, equal to 36% of pre-tax income in both periods. Nine Month Period Ended September 30, 1996 Compared to Nine Month Period ended September 30, 1995 Revenues Total revenues increased to $81.5 million for the nine months ended September 30, 1996 compared to $69.5 million for the same period of 1995, an increase of $12 million or 17.3%. The major components of the increase by product line were: (i) increased offsite waste processing revenue of $6.8 million derived primarily from increased NOW and NORM disposal volume; (ii) an increase of $2.3 million in general oilfield service revenues derived from an increase in the level of drilling location site preparation work in the uplands region of the Gulf Coast and other onsite work; (iii) increased wood product sales of $2.8 million as a result of increased mill capacity added in 1995; and, (iv) $.9 million increase in onsite environmental management revenue due to increased site remediation operations. Partially offsetting these revenue increases was a $.9 12
million decrease in mat rental revenues caused by lower drilling activity in the Company's traditional land market area. NOW disposal and related revenue increased $4.4 million to $22.1 million for the nine months ended September 30, 1996 compared to $17.7 million for the first nine months of 1995. The revenue increase related to increased volumes which are primarily attributable to the Campbell acquisition and from remediation services provided for a major oil company customer. The volume of NOW waste barrels disposed of in 1996 increased to 2,393,000 barrels compared to 2,054,000 barrels in 1995 and average revenue per barrel increased to $8.67 per barrel in 1996 from $8.32 per barrel in 1995. NORM processing volume increased to 118,600 barrels, generating $6.9 million in revenue for the nine months ended September 30, 1996 from 31,000 barrels, and revenue of $4.5 million in the same period of 1995. While the volume of NORM contaminated waste processing increased, the average revenue per barrel of waste processed dropped to $58.00 per barrel from $145.00 per barrel. The change in average prices reflects the lower level of radium contamination in waste received from site remediation projects, which represent the largest portion of volumes for the first six months of the 1996 period, and price reductions, made possible by cost reductions facilitated by the direct injection disposal license granted to the Company on May 22, 1996. Operating Income Operating income for the nine months ended September 30, 1996 rose to $19.7 million from $13.6 million for the same period in 1995, representing an increase of 45%. Operating margin improved to 24.2% in 1996 as compared to 19.6% in 1995. The improved operations can primarily be attributed to the growth in waste processing operations. General and administrative expenses increased by $102,000 for the nine months ended September 30, 1996 as compared to 1995, but decreased as a percentage of revenue to 2.7% compared to 3.0%. During the nine months ended September 30, 1996, the Company recorded a nonrecurring restructure charge in the amount of $2.4 million. A total of approximately $1.8 million was related to the restructuring of certain of the Company's NOW processing operations and staffing changes to facilitate the integration of its operations with those recently acquired from Campbell. The Company recognized an additional $.6 million of non-recurring costs associated with the termination of processing operations at its original NORM facility at Port Arthur, Texas and the partial closure of the site. Non-recurring expenses of $.4 million recorded in 1995 were related to a proposed acquisition which was terminated in August, 1995. The majority of these expenses were legal, accounting and investment advisory fees. 13
Interest Expense Interest expense was approximately $2.8 million for 1996 and 1995, despite average outstanding borrowings increasing by approximately 5.1%. This resulted from decreased net interest cost under the current credit agreement, which became effective as of June 29, 1995, and interest capitalization related to construction in progress in the current period. Provision for Income Taxes During the nine months ended September 30, 1996 the tax provision of $6.0 million represented an effective tax rate of 35.3% as compared to $2.6 million equal to 23.3% in 1995. The 1995 tax provision reflects the benefit realized from federal tax carryforwards which were fully utilized in 1995. Liquidity and Capital Resources The Company's working capital position decreased by $18.6 million during the nine months ended September 30, 1996. Key working capital data is provided below: <TABLE> <CAPTION> Sept. 30, 1996 December 31, 1995 _______________ _________________ <S> <C> <C> Working Capital (000's) $13,530 $32,108 Current Ratio 1.4 2.3 </TABLE> Since December 31, 1995 the Company's working capital and current ratio have declined significantly. The primary reasons for this change include reduced levels of inventory and accounts receivable, and the increase in accrued liabilities provided for obligations assumed in conjunction with the recent Campbell acquisition and other investment transactions. On August 12, 1996, the Company completed the sale of 3,450,000 shares of its common stock, providing net proceeds of $98.1 million. A total of $70.5 million was used to complete the acquisition of the marine-related nonhazardous oilfield waste NOW collection operations of Campbell Wells, Ltd. The remaining proceeds were used to repay $19.0 million of borrowings under the Company's credit facility and provide working capital of $8.6 million. The Company has no plans to sell additional equity securities at this time. During 1996, the Company's operating activities generated $25.2 million of cash flow. Net proceeds of the recent equity offering in excess of the Campbell asset purchase amount, coupled with the $25.2 million generated by operations and net new borrowings (since the offering) of $4.3 million were used to fund the Company's investing activities. The majority of the funds used in investing activities were utilized for the purchase of board road mats and the expansion of waste disposal facilities, which is reflected in the increase in property, plant and equipment. In addition, the Company purchased its joint venture 14
partners' interest in international mat operations and purchased additional patent rights for use in the Company's proprietary business operations, which is reflected in the increase of other assets. During the nine months ended September 30, 1996 the Company entered into two non-cash acquisitions of additional patent and other rights for use in the Company's proprietary business operations. The acquisition of these items is reflected in the increase in other assets and the increase in shareholders' equity coupled with the increase in deferred taxes payable. The Company also sold the facility and certain equipment to the operator of the Company's former marine service business. These assets were being leased by the operator and were subject to debt obligations, which were assumed by the purchaser at closing. In addition to the extinguishment of these debt obligations, Newpark received $1.2 million in cash in the transaction. On June 29, 1995, Newpark entered into a new credit agreement with a group of three banks, providing a total of up to $50 million of term financing consisting of a $25 million term loan to be amortized over five years and a $25 million revolving line of credit. At NewparkOs option, these borrowings bear interest at either a specified prime rate or LIBOR rate, plus a spread which is determined quarterly based upon the ratio of Newpark's funded debt to cash flow. The credit agreement requires that Newpark maintain certain specified financial ratios and comply with other usual and customary requirements. Newpark was in compliance with all of the convenants in the credit agreement at September 30, 1996. The term loan was used to refinance existing debt and is being amortized over a five year term. In March 1996, the term loan was increased to $35 million, and the $10 million increase was used initially to reduce borrowings on the revolving line of credit portion of the facility. In June 1996, the Company increased its borrowing through the credit agreement in the form of a 60-day term loan in the amount of $2.0 million which was repaid out of proceeds from the offering. The funds were used to acquire board road mats. The revolving line of credit matures December 31, 1998. At September 30, 1996 availability of borrowings under the line of credit was tied to the level of Newpark's accounts receivable and certain inventory. At September 30, 1996, $1.8 million of letters of credit were issued and outstanding under the line and an additional $4.3 million had been borrowed and was outstanding thereunder. In November 1996, an amendment to the credit facility was approved which will: (i) eliminate the requirement of periodic borrowing base calculations; (ii) eliminate monthly financial reporting requirements; (iii) relax certain restrictions on guarantees and outside indebtedness; and, (iv) increase availability of borrowings under the facility. This amendment has the 15
affect of increasing the availability to the full $25 million. If this amendment had been in affect at September 30, 1996 it would have increased the availability (net of letters of credit) from $16.4 million to $23.3 million. Potential sources of additional funds, if required by the Company, would include additional borrowings. The Company presently has no commitments for credit facilities beyond its existing bank lines of credit by which it could obtain additional funds for current operations; however, it regularly evaluates potential borrowing arrangements which may be utilized to fund future expansion plans. Inflation has not materially impacted the Company's revenues or income. 16
PART II ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.23 Guaranty dated August 29, 1996 by the registrant in favor of Heller Financial Leasing, Inc., filed herewith. 27. Financial Data Schedule (b) Reports on Form 8-K During the quarter ended September 30, 1996, the registrant filed a current report on Form 8-K dated August 12, 1996 to report on Items 2 and 7. 17
NEWPARK RESOURCES, INC. SIGNATURES Pursuant to the requirements 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. Date: November 12, 1996 NEWPARK RESOURCES, INC. By:/s/Matthew W. Hardey Matthew W. Hardey, Vice President and Chief Financial Officer 18