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 March 31, 1995 Commission File No. 1-2960
NEWPARK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1123385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3850 N. CAUSEWAY, SUITE 1770
METAIRIE, LOUISIANA 70002
(Address of principal executive offices) (Zip Code)
(504) 838-8222
(Registrant's telephone number)
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: 10,053,952 shares at May 5, 1995.
Page 1 of 13
NEWPARK RESOURCES, INC.
INDEX TO FORM 10-Q
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1995
Item Page
Number Description Number
- ------- -------------- -------
PART I
- -------
1 Unaudited Financial Statements:
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994............... 3
Consolidated Statements of Income for the
Three Month Periods Ended March 31, 1995 and 1994.. 4
Consolidated Statements of Cash Flows for the
Three Month Periods Ended March 31, 1995 and 1994.. 5
Notes to Consolidated Financial Statements.......... 6
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 8
PART II
- ---------
5 Other Information................................... 12
6 Exhibits and Reports on Form 8-K.................... 12
2
PART I
ITEM 1. FINANCIAL STATEMENTS
---------------------
Newpark Resources, Inc.
Consolidated Balance Sheets
As of March 31, 1995 and December 31, 1994
(Unaudited) March 31, December 31,
- ------------------------------------------------------------------------------------------
(In thousands, except per share data) 1995 1994
- ------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 771 $ 1,404
Accounts and notes receivable, less allowance
of $492 in 1995 and $455 in 1994 25,462 21,450
Inventories 6,192 7,099
Other current assets 1,776 1,544
-------- --------
TOTAL CURRENT ASSETS 34,201 31,497
Property, plant and equipment, at cost, net of
accumulated depreciation 68,318 67,630
Cost in excess of net assets of purchased
businesses, net of accumulated amortization 4,387 4,403
Deferred tax assets 1,594 2,271
Other assets 5,886 4,955
-------- --------
$114,386 $110,756
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 599 $ 1,796
Current maturities of long-term debt 7,967 8,236
Accounts payable 6,663 5,022
Accrued liabilities 2,306 2,858
-------- --------
TOTAL CURRENT LIABILITIES 17,535 17,912
Long-term debt 30,110 28,892
Other non-current liabilities 253 253
Commitments and contingencies (Note 7)
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 1,000,000
shares authorized, no shares outstanding - -
Common Stock, $.01 par value, 50,000,000
shares authorized, 10,025,252 shares
outstanding in 1995 and 9,985,785 in 1994 100 99
Paid-in capital 134,551 134,253
Retained earnings (deficit) (68,162) (70,652)
Other shareholders' equity (1) (1)
-------- --------
Total shareholders' equity 66,488 63,699
-------- --------
$114,386 $110,756
======== ========
See accompanying Notes to Consolidated Financial Statements.
3
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Month Periods Ended March 31,
(Unaudited)
- -----------------------------------------------------------
(In thousands, except per share data) 1995 1994
- ----------------------------------------------------------- ------- -------
Revenues $22,209 $17,146
Operating costs and expenses:
Cost of services provided 15,532 12,198
Operating costs 2,288 2,070
------- -------
17,820 14,268
General and administrative expenses 648 590
Provision for uncollectible accounts and notes receivable 30 -
------- -------
Operating income 3,711 2,288
Interest income (91) -
Interest expense 889 548
------- -------
Income from operations before
provision for income taxes 2,913 1,740
Provision for income taxes 423 -
------- -------
Net income $ 2,490 $ 1,740
======= =======
Weighted average shares outstanding 10,007 9,875
======= =======
Net income per common share $0.25 $0.18
======= =======
See accompanying Notes to Consolidated Financial Statements.
4
Newpark Resources, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Month Periods Ended March 31,
(Unaudited)
- ----------------------------------------------------------
(In thousands) 1995 1994
- ---------------------------------------------------------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,490 $ 1,740
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,335 1,703
Gain on sales of assets (2) (14)
Provision for deferred income taxes 423 -
Provision for doubtful accounts 30 -
Change in assets and liabilities:
(Increase) decrease in accounts and notes receivable (4,137) 1,417
Decrease in inventories 907 1,669
Increase in other assets (1,068) (3,447)
Increase (decrease) in accounts payable 1,222 (2,254)
Decrease in accrued liabilities and other (298) (661)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,902 153
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 11 37
Capital expenditures (2,597) (1,458)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,586) (1,421)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (reductions) on lines of credit 2,866 (5,171)
Principal payments on notes payable, capital lease
obligations and long-term debt (3,337) (5,160)
Proceeds from the issuance of debt 223 10,608
Proceeds from conversion of stock options 299 339
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 51 616
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (633) (652)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,404 1,171
------- -------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 771 $ 519
======= =======
Included in accounts payable and accrued liabilities at March 31, 1995 and 1994
were equipment purchases of $419,000 and $211,000 respectively.
The net assets of the Company's discontinued operations were exchanged for a
receivable in the amount of $1,061,000 during the three months ended March 31,
1994.
Interest of $892,000 and $569,000 was paid during the three months ending March
31, 1995 and 1994, respectively. No income taxes were paid during the 1995 or
1994 quarter.
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 March 31, 1995, and the results of operations and
cash flows for the three month periods ended March 31, 1995 and 1994.
All such adjustments are of a normal recurring nature. These interim
financial statements should be read in conjunction with the December
31, 1994 audited financial statements and related notes filed on Form
10-K at December 31, 1994.
Note 2 The consolidated financial statements include the accounts of Newpark
and its wholly-owned subsidiaries. All material intercompany
transactions are eliminated in consolidation.
Certain reclassifications have been made in the 1994 financial
statements to conform them to the 1995 presentation.
Note 3 The results of operations for the three month period ended March 31,
1995 are not necessarily indicative of the results to be expected for
the entire year.
Note 4 The following is a summary of inventories at March 31, 1995 and
December 31, 1994 (in thousands):
1995 1994
------ -----
Raw materials $5,668 $6,752
Finished goods 524 347
------ ------
$6,192 $7,099
====== ======
Note 5 Interest of $56,000 and $26,000 was capitalized during the three months
ended March 31, 1995 and 1994, respectively.
Note 6 The Company maintains a $17.0 million bank line of credit for which it
paid a 1/2 of 1% annual fee. The line of credit is secured by a pledge
of accounts receivable. At March 31, 1995, $2.5 million of letters of
credit were issued and outstanding, leaving a net of $14.5 million
available for cash advances under the line of credit, against which
$11.6 million had been funded at March 31, 1995. The line of credit
bears interest at a specified "prime rate" (9.0 % at March 31, 1995)
plus 0.5% with interest payable monthly and matures July 1, 1996. The
6
line of credit agreement requires that the Company maintain certain
specified financial ratios and contains other usual requirements. The
Company was in compliance with all of these covenants at March 31,
1995.
The Company also maintains an inventory line of credit with a Texas
bank to finance its seasonal log purchases at its sawmill facility. The
Company may borrow up to $2.0 million secured by its log inventory.
Advances against the line will be available from August 1 through
November 15 of each calendar year; the paydown period (six equal
monthly installments of principal plus accrued interest), extends from
December through June of the succeeding calendar year. The line of
credit bears interest at a specified "prime rate" (9.0% at March 31,
1995) plus 2%. The Company paid a 1/4 of 1% fee to obtain the
commitment. At March 31, 1995, $599,000 was outstanding against the
line.
Note 7 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
financial position or results of operations.
During 1992, the State of Texas assessed additional sales taxes for the
years 1988-1991. The Company has filed a petition for redetermination
with the Comptroller of Public Accounts. The Company believes that the
ultimate resolution of this matter will not have a material adverse
effect on the consolidated financial statements.
In the normal course of business, in conjunction with its insurance
programs, the Company has established letters of credit in favor of
certain insurance companies in the amount of $2,825,000 at March 31,
1995. At March 31, 1995, the Company had outstanding guaranty
obligations totaling $469,000 in connection with facility closure bonds
issued by an insurance company.
The Company holds the exclusive right to use a patented prefabricated
mat system throughout the continental United States. The license
agreement requires, among other things, that the Company purchase a
minimum of 20,000 mats annually. Any purchases in excess of that level
may be applied to future annual requirements. The Company's annual
commitment to maintain the agreement in force is estimated to be
$3,600,000.
Effective September 6, 1994, the Company issued a $920,000 guarantee
obligation to a state regulatory agency to assure funding for future
site closure obligations at its NORM processing facility.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table represents revenue by product line for three month
periods ended March 31, 1995 and 1994.
Three Month Periods Ended March 31,
(Dollars in thousands)
1995 1994
-------------------- ---------------
Revenues by product line:
Offsite waste processing $ 7,391 33.3% $ 3,680 21.5%
Site preparation 5,262 23.7 5,391 31.4
Onsite environmental management 4,585 20.6 2,552 14.9
Wood product sales 2,623 11.8 3,308 19.3
General oilfield services 1,948 8.8 1,815 10.6
Other 400 1.8 400 2.3
------- ---- ------- -----
Total revenues $22,209 100.0% $17,146 100.0%
======= ===== ======= =====
THREE MONTH PERIOD ENDED MARCH 31, 1995 COMPARED TO THREE MONTH PERIOD ENDED
MARCH 31, 1994
Revenues
Total revenues increased to $22.2 million in the 1995 period from $17.1
million in the 1994 period, an increase of $5.1 million or 29.5%. Principal
components of the increase by product line are described as follows:
Offsite waste processing revenue increased $3.7 million or 100.8%, and
included two principal components: a $2.3 million or 62% increase in
nonhazardous oilfield waste ("NOW") processing revenue, which rose due to
increased volume, with 690,000 barrels received in the current period compared
to 407,000 barrels in the 1994 quarter, and $1.4 million from naturally
occurring radioactive material ("NORM") processing, a revenue source which began
late in the fourth quarter of 1994.
Onsite environmental management service revenue increased $2.0 million, or
79.7%. The change was composed of a $1.1 million or 100% increase in revenue
from on-site remediation operations as that market became more active following
resolution of NORM regulations, and a $900,000 or 56.0% increase in rerental
revenue due to changes in the mix of site projects resulting in longer periods
of utilization.
8
Revenue from wood product sales were $700,000 below the 1994 level, which
included a large order that did not recur.
Site preparation revenue decreased $100,000. While the oil and gas
exploration and production (E&P) component declined as anticipated due to recent
low commodity prices, this was substantially offset by growth in wetlands site
preparation activity, principally in Florida and Georgia.
Operating Income
Operating income increased $1.4 million or 62.2% to $3.7 million or 16.7%
of revenue in the 1995 period from $2.3 million or 13.3% of revenue in the 1994
period. Material factors contributing to the increase are discussed below:
Operating income from offsite waste processing increased $1.5 million or
504.6%. The increase was contributed equally by the new NORM processing
operations and the increased volume of NOW received in the period. Gross margin
per barrel of NOW declined 5% to $4.41 per barrel, due to changes in the mix of
revenues.
Operating income from onsite environmental management services increased
$250,000 and was primarily related to rerental of mats due to increased average
period of use resulting from the continued trend towards deeper drilling.
Operating income from wood product sales decreased $200,000 due to the
effect of lower revenue and the relatively high proportion of fixed costs
associated with the business. The operating margin declined to 9.2% from 13.2%
as a result.
General and administrative expenses as a proportion of revenue decreased to
2.9% in the 1995 period from 3.4% in the 1994 period, while nominally rising in
total.
Interest Expense
Interest expense increased $341,000 to $889,000 in the 1995 period from
$548,000 in the 1994 period, as the Company increased net borrowings to finance
new and existing facilities and equipment subsequent to the first quarter of
1994.
Income from Operations
Income from operations increased $1.2 million or 67.4% to $2.9 million in
the 1995 period from $1.7 million in the 1994 period.
9
Provision for Income Taxes
The net provision for the 1995 period of $423,000 is comprised of a
provision for federal income taxes net of the recognition of certain state
income tax carryforwards available to offset estimated future earnings.
Net Income
Net income increased $750,000 or 43.1% to $2.5 million in the 1995 period
from $1.7 million in the 1994 period.
LIQUIDITY AND CAPITAL RESOURCES
Newpark's short-term liquidity needs are provided primarily by operating
cash flow and borrowings under bank lines of credit.
During the first quarter of the year, the Company made capital expenditures
of $2.6 million, and added $3.1 million to net working capital. Funded long-
term debt increased $1.2 million, with the remainder provided primarily by
operations. Operating cash flow in the current quarter rose by $1.7 million to
$1.9 million in the 1995 period.
The Company maintains a $17.0 million bank line of credit for which it paid
a 1/2 of 1% annual fee. The line of credit, which is secured by a pledge of
accounts receivable, bears interest at 0.5% above a specified prime rate, and
matures July 1, 1996. At March 31, 1995 $2.5 million of letters of credit were
issued and outstanding, leaving a net of $14.5 million available for cash
advances under the line of credit, against which $11.6 million had been funded
at March 31, 1995. The credit agreement requires that the Company maintain
certain specified financial ratios and comply with other usual and customary
requirements. The Company was in full compliance with the agreement at March
31, 1995.
The Company also maintains a $2.0 million inventory line of credit to
finance seasonal raw materials purchases for its sawmill. The Company paid a
1/4 of 1% annual commitment fee for the credit facility. At March 31, 1995
$599,000 was outstanding against the line, bearing interest at 2% over a
specified prime rate.
Fixed asset additions during the period included continued expansion of the
Company's injection disposal capacity, improvements and additions to its NORM
processing operation, further expansion of its site construction capabilities,
and productivity improvements at its wood products mill.
10
Long-term debt increased $1.2 million during the quarter, but, as a
percentage of total long-term capital, was unchanged from year end at 31.2%. At
March 31, 1995 the Company had commitments in place for approximately $2.4
million of additional long-term debt or capital lease financing, approximately
half of which it expected to use in the immediate future.
While these and other sources of borrowed funds are available, Newpark does
not plan to significantly increase the proportion of debt in its capital
structure during the remainder of 1995, and expects operating cash flow, net of
working capital requirements, to be sufficient to fund substantially all of its
planned capital expenditures. While some additions to debt may be made to
accommodate the timing of cash flows during the year, most of the planned
capital expenditures are discretionary, and can be deferred as appropriate to
meeting this objective.
Potential sources of additional funds, if required by the Company, would
include additional borrowings and the sale of equity securities. The Company
presently has no commitments beyond its 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.
11
PART II
ITEM 5. OTHER INFORMATION
On April 5, 1995 S & S Newpark Ventures, L.P. ("S & S") distributed its
holdings of Newpark shares to its partners. Prior to distribution of the
shares, the partnership held 2.0 million shares representing approximately 20%
of the total outstanding, all which were distributed.
S & S was formed in 1987 for the purpose of investing in Newpark, and, in
a transaction completed December 30, 1987, provided the capital that facilitated
the initial restructuring of the Company. S & S subsequently provided two
additional tranches of financing in 1990 and 1991.
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) The registrant did not file a report on Form 8-K for the quarter
ended March 31, 1995.
12
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: May 11, 1995
NEWPARK RESOURCES, INC.
By: /s/Matthew W. Hardey
--------------------
Matthew W. Hardey, Vice President
and Chief Financial Officer
13
5
1,000
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
771
0
25,954
(492)
6,192
34,201
106,218
(37,900)
114,386
17,535
0
100
0
0
66,388
114,386
22,209
22,209
17,820
17,820
648
30
889
2,913
423
2,490
0
0
0
2,490
0.25
0
