NPK International Inc. (NPKI) Q2 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Newpark Resources Second Quarter Earnings Conference Call. Following the presentation, the conference will be open for questions. [Operator Instructions] This conference is being recorded today, Friday, July 27, 2012. At this time, I'd like to turn the conference over to Ken Dennard with DRG&L. Please go ahead, sir.

Thanks, Fritz. Good morning, everyone. I appreciate you joining us for Newpark Resources conference call today to review 2012 second quarter results. We'd also like to welcome our Internet participants that are listening to the call simulcast over the web. Before I turn the call over to management, I have the normal housekeeping details to run through. For those of you who did not receive an e-mail of the release yesterday afternoon and would like be added to my list, just call our offices at DRG&L, (713) 529-6600, and we'll get you on those lists. There will be a replay of today's call. It will be available via webcast on the company's website, and that's www.newpark.com. There'll also be a recorded replay available by phone, which will be available for -- until August 10, 2012, and all the contact information there is in the press release. Please note that the information reported on the call today speaks only as of today, July 27, 2012, and therefore, you are advised that time-sensitive information may be no longer accurate as of the time of any replay listening. In addition, the comments made by management today of Newpark during this conference call may contain forward-looking statements within the meaning of the United States Federal Securities laws. These forward-looking statements reflect the current views of management of Newpark. However, various risks, uncertainties and contingencies could cause Newpark's actual results, performance or achievements to differ materially from those expressed in the statements made by management. Listeners are encouraged to read the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. And now, with all of that behind us, I'd like to turn the call over to Newpark's President and CEO, Mr. Paul Howes. Paul?

Thank you, Ken. Good morning to everyone. We'd like to thank you for joining us today for our second quarter 2012 conference call. With me today are Bruce Smith, President of our Drilling Fluids business; and Gregg Piontek, our Chief Financial Officer. Following my opening remarks, Bruce will provide an update on our Fluids business, and Gregg will discuss the Mats and Environmental Service businesses, as well as the consolidated financial results of the quarter. I will then conclude with a discussion of our market outlook before opening the call for Q&A. Now turning our attention to the second quarter. We are pleased with the improvement in profitability from our U.S. Fluids business, which was up considerably from a very difficult first quarter. While revenues were flat sequentially, our U.S. operating income improved by more than $5 million from the first quarter. As we stated in the first quarter call, the decline in profitability was attributable to several factors including: increased barite cost and delays in passing these through to customers; the reduction in third-party barite sales; weakness in our completion services and equipment rental business in the Mid-Continent region; cost inefficiencies associated with the accelerated transition from dry gas to liquid regions; and support costs associated with our ERP system implementation. In the second quarter, meaningful progress was made on all fronts, contributing to the $5.6 million sequential improvement in operating income. While our performance strengthened in the U.S. Fluids business, these gains were offset by declines in other regions, including: spring break-up in Canada, where we saw a sequential revenue decline of $11 million; delays in North Africa due to the timing of customer projects; and the transition to a new contract with Sonatrach in Algeria resulted in an additional $5 million sequential revenue decline. In addition, operating expenses increased in North Africa in preparation for the ramp-up in activity associated with new contracts. The combined effect of these items decreased our second quarter revenues by about $16 million and net income by about $0.04 per share. Our Evolution system continues to see strong results in key U.S. markets. Evolution sales are $27 million in the second quarter, up from $23 million in the first quarter and $18 million in the second quarter of last year. We're seeing an increased level of interest in our technologies as inquiries about Evolution have broadened beyond the usual independent drillers to include the major international oil companies. In addition, we expect to see Evolution used for the first time outside North America by the end of the year, which would represent a significant step as we look to introduce this technology into the international markets. The Mats business continues to perform very well as second quarter revenues of $30 million were up 8% year-over-year and down 2% from the all-time record we set in the first quarter. Mats sales activity has remained strong, and the U.S. rental business continues to expand their customer base and deliver solid results. Our Environmental Service business remained very stable, achieving revenues of over $13 million, which were up 12% from a year ago and flat sequentially. We believe that with the recent ramp-up in deepwater permitting in the Gulf and our strong competitive position in this region, we're well positioned to participate in the growth. Now let me turn the call over to Bruce Smith, who will review the performance of our Fluids business.

Thank you, Paul, and good morning. In the second quarter, the Fluids Systems and Engineering segment totaled revenues of $202 million, a 6% increase over last year's second quarter and a 7% sequential decrease. North American revenues totaled $150 million, also up 6% over last year's second quarter and a 7% sequential decline. Due to the spring break-up, Canada experienced an $11 million sequential decline in revenue, reflecting a 61% drop from the first quarter levels. While this seasonal decline was significant on a sequential basis, the second quarter of 2012 revenue of $7 million is nearly double the level achieved in the prior year second quarter, reflecting our market share gains in this region. In the U.S., revenues were up 4% from a year ago and flat sequentially. We have continued to see the shift from dry gas to liquid-rich plays, with large year-over-year revenue declines in our East Texas and Rocky regions being offset by growth in our South Texas and Oklahoma business units. As Paul mentioned earlier, our operating income in the U.S. improved by $5.6 million sequentially, in line with our expectations stated on last quarter's call. We continue to be pleased with the North American market penetration of our Evolution system. Evolution revenues increased to $27 million in the second quarter, with the largest sequential gains coming from the Mississippian line play. Through the first half of 2012, our Evolution revenues are $50 million, reflecting a nice balance of activity across regions. One major milestone reached in the second quarter was the completion of our 1,000th well, 100 of them with one large independent operator. As Evolution continues to gain traction in the marketplace, we have seen greater levels of interest among the major IOCs. Having launched the system and penetrated the market primarily through smaller independents in 2010, we have now been receiving more inquiries from the major IOCs, which we believe is yet another affirmation of the effectiveness of our technology and its benefits. In addition, we are now looking to introduce Evolution into markets outside of North America, where we expect to have our first Evolution well by the end of the year. Now turning to our international business. Our Europe, Middle East and Africa revenues were down about 3% year-over-year to $25 million, which represented a 16% sequential drop. The decline was attributable to issues in North Africa, where activity was soft due to the timing of customer projects, and delays associated with a new 2-year contract with Sonatrach in Algeria. The lower revenues in the quarter combined with increased spending and preparation for the new contract contributed to an unusually low operating margin in the second quarter. The new Sonatrach contract is important for a couple of reasons. First, our market share with this NOC should increase from our current levels of 20-plus percent up closer to 30%. But second and more importantly, it demonstrates that Newpark can successfully compete with any of the large integrated service companies anywhere in the world. In Libya, while we expect to see offshore activity resume by year end, we do not expect any meaningful land activity until 2013. North Africa remains susceptible to political instability, and we have seen some of the fallout from last year's Arab Spring in the form of demand for higher pay in certain markets. In summary for our Europe, Middle East and Africa business, we expect profitability to rebound in the third quarter to a more historic level. In Brazil, revenues were up 3% year-over-year to $18 million and were down 2% sequentially. Our business in Brazil has stabilized and remains profitable. Recently, we signed a 2-year contract addendum with Petrobras to supply completion additives. This represents a new product line for us in Brazil and is a demonstration of our deepening relationship with Petrobras. Additionally, we expect to begin work offshore with an IOC in the third quarter. In the Asia Pacific region, revenues were $9 million for the second quarter, up 40% from the year ago period as the prior year included a powerful quarter following our April 2011 acquisition of this business. Sequentially, revenues rose by 4%. The 2-year Santos contract to provide fluids and services on Australia's northwest continental shelf started near the end of the second quarter, and we expect to see a more significant impact of this contract going forward. The Fluids segment reported operating income of $13.5 million in the second quarter compared to $20.8 million a year ago and $14 million in the first quarter of 2012. The operating margin for the segment in the second quarter was 6.7%, down from 10.9% in the second quarter of 2011 but up from the 6.4% we achieved in the first quarter despite the seasonal downturn in Canada. Improving our margins, particularly given the numerous difficulties we experienced in the first quarter, remains a primary area of focus. Our U.S. margins were negatively impacted in that quarter by several factors, as Paul mentioned previously. Although these issues remain, we are very encouraged by the improvements we've made during the second quarter. We've made good progress on increasing pricing on barite to offset the cost increases experienced in recent quarters, and our efforts in this regard continue. Barite costs appear to have stabilized over the last 3 months, in part due to the slowdown in North American drilling activity. Nonetheless, we will continue to work with existing and new suppliers to improve our cost position. Another challenge experienced in the first quarter was the influx of competitors moving from dry gas plays into the Mid-Continent region, negatively impacting our Mid-Continent completion services and equipment rental business. This area of our business is showing noticeable signs of improvement. Although revenues were still down $9 million year-over-year, they increased nearly $2 million sequentially, resulting in a $1.4 million improvement in operating income. While making notable progress, this continues to be a work in process. Looking forward, assuming the gas price remains at $3 levels and oil remains above $80, we are optimistic about the near-term outlook for the Fluids business. We expect the gradual recovery of our U.S. operating margins to continue, while the impact of new contracts in Asia Pacific and North Africa are expected to drive top line and operating margin improvements in each of these regions. Canada should also improve as drilling activity recovers from the spring break-up. However, to date, activities in Canada appear to be rebounding at a slower pace than we've seen in recent years. With that, I will now turn the call over to our CFO, Gregg Piontek.

Thank you, Bruce, and good morning, everyone. Let me begin by discussing our Mats and Integrated Services and Environmental Services segments then conclude with a discussion of our consolidated results. The Mats segment posted very solid results again, reporting second quarter revenues of $30 million, an 8% increase over the same quarter of last year and a 2% sequential decrease. There continues to be strong demand for our composite mats overseas, and we're seeing solid utilization of our rental fleet despite rising competitive pressures. We see regional shifts in customer demand driven by changes in regional activity and weather conditions. While activity continues to decline in dry gas areas in the northeast, to date, we have successfully offset the impact of declining activity by expanding our customer base within this region. The Mats segment generated operating income of $13.1 million in the second quarter, down 11% from the second quarter of 2011 and down 9% sequentially. Operating margin in the second quarter was 43%. This compares with a record 53% operating margin in the second quarter of 2011 and a 47% operating margin in the first quarter of 2012. As we've emphasized in previous quarters, we remain very pleased with the strong results in this segment, driven by the superior performance of our differentiated product offering. However, we do expect to see competitive pressures continue to push margins downward, particularly in the U.S. rental business. Meanwhile, the near-term demand for mat sales remains strong, which we expect to help maintain revenues near current levels in the upcoming quarter. Now turning to the Environmental Services business. Revenues in this segment were $13.3 million, up 13% from the second quarter of 2011 and flat sequentially. Steady volumes in the Gulf continue, and with the ramp-up of deepwater permits, we remain hopeful that we'll see increasing activities in the offshore market within the next few quarters. The Environmental Services business achieved operating income of $3.5 million compared to $3 million in the same quarter a year ago and $3.6 million in the first quarter. Operating margins for the segment have been relatively stable, coming in at 26% in the second quarter, up from the 25% margin we achieved a year ago and down from the 27% in the first quarter. Now moving on to our consolidated results. For the second quarter of 2012, we reported total revenues of $246 million, up 7% from a year ago and down 6% sequentially. Operating income was $24.8 million, down 22% from a year ago and down 5% sequentially. Net income in the second quarter was $14.5 million or $0.15 per diluted share compared to net income of $19.3 million or $0.19 per share a year ago and $15.6 million or $0.16 per share in the first quarter. The second quarter 2012 tax rate was 34%, which is in line with our expectation for this year. Now let me discuss our cash and liquidity position. As we discussed last quarter, one particular area of focus has been the rate of customer invoicing as our unbilled receivables grew significantly following our fourth quarter 2011 ERP system conversion within our U.S. Fluids business. The level of unbilled customer receivables in this business unit increased by $63 million in the fourth quarter of 2011 and has since come down by $38 million in the first half of 2012, including a $15 million decrease in the second quarter. Total receivables ended the second quarter at $334 million, down $21 million from the previous quarter. While significant progress has been made, this remains an area of focus in order to get our receivables down to historical levels, which we expect to accomplish over the next few quarters. Looking to the consolidated second quarter cash flows. Operating activities generated cash of $22 million. We used $9 million to fund capital expenditures, along with $17 million to fund share repurchases. We also made the final payment of $12 million on our April 2011 acquisition of Rheochem. As a result of these expenditures, the amount outstanding under our revolving credit facility increased by $13 million. We ended the second quarter with cash of $29 million and a revolving credit facility balance of $66 million. We expect the revolving credit facility balance to decline in the near term, driven in part by our efforts on the reduction in receivables. Progress has continued early in the third quarter as the revolving credit balance as of July 26 was $51 million, down $15 million from the June ending balance and also below our March ending balance. We continue to expect our 2012 capital spending to be between $50 million and $60 million, which includes the new $30 million technology center in the Fluids business. In early July, we completed $15 million of share repurchases, purchasing 2.6 million shares at an average cost of $5.74. Combined with $15 million of share repurchases made earlier in the year, we have purchased a total of $30 million of outstanding shares at an average cost of $6.71, reducing our outstanding share count by $4.5 million or about 5% from the beginning of the year. Our total debt at the end of the second quarter was $240 million, with a resulting debt-to-total-capitalization ratio of 32.3%. Now I'd like to turn the call back over to Paul for his concluding remarks.

Thank you, Gregg. The first half of 2012 has not been without its challenges, but we are beginning to see the turnaround in our U.S. Drilling Fluids business. Although we are not back to our historical margins, we are encouraged by the progress made over the past quarter. We expect to see continued strengthening of the U.S. Fluid margins over the next 2 quarters. Meanwhile, as we look to other regions and segments of our business, we see many positive developments, including: increasing activity levels in the Gulf of Mexico that will likely drive additional revenue growth; a return to drilling activity in Canada, where our team has done a great job of capturing market share over the last 12 to 18 months; the ramp-up of our new offshore contract in Australia; the new 2-year Fluids contract with Sonatrach in North Africa; and the increasing interest from international oil companies in our Evolution technology. I would also mention we remain very pleased with the exceptional performance of our Mats business. While we recognize that the competition will continue to put pressure on our margins, we remain focused on further enhancements to our existing product offering along with the creation of new products. Specifically, we anticipate that we will have a spill containment system ready for deployment in the field by the end of the year. Our goal is to provide a spill control solution to A&P operators during the drilling and completion process. In conclusion, we remain optimistic concerning our business both domestically and internationally. With that, we'll now take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Jim Rollyson with Raymond James. James M. Rollyson - Raymond James & Associates, Inc., Research Division: Paul, just to circle back to one of the things you were just talking about on the mat side of things, you've been talking about competitive pressures and margin, potential pressure for a while. And outside of one customer-specific situation you had up in the northeast, margins have held up extremely well for quite a long period of time. Just kind of curious if the commentary towards competitive pressures is more just something you say in the -- given that margins there have been so strong, and it's inevitable that eventually, guys will come into that market? Or is it actually something you've been seeing? Or just a little -- maybe a little added color on that.

I think it's really a combination of both, Jim. We certainly believe that the -- those high-level margins attracts new competition trying to come in. We have seen some local pressure. Certainly, in given areas where it's been very dry, where the mats have been used to stabilize some soil conditions, there's been pricing pressures. But the team has done a great job of bringing on new accounts, and that's helped offset some of that pricing pressure. And the other thing I would say, in terms of the overall segment margins, is that the sale of our mats, the margins they are continuing to hold pretty steady. James M. Rollyson - Raymond James & Associates, Inc., Research Division: And for my second question, on the fluid side of things, when you think about going through the rest of the year, you continue -- should continue, I suspect, to recover the barite cost increases from your customers. You've got some of the contract changes going on in the Europe, Africa, Middle East regions that will get into place over the next 2, 3 quarters. And I assume Canada will eventually recover back to the winter drilling season. How do you think about -- it sounds like up, but in terms of margin direction and really magnitude, when you think about going into the -- and let's say we get into the fourth quarter, all else being equal, where do you think margins can end up for the end of the year relative to the -- just under 7% this quarter?

I think in all of those things, we expect to get our margins by the end of the year back to the historical levels we were at, which is around that 11% range.

Our next question comes from the line of Neal Dingmann with SunTrust Robinson Humphrey.

Say, guys, I'm just wondering what -- you kind of just addressed on this last question, the confidence, Bruce, that you have that after seeing margins kind of stall up just this last quarter, second to first there sequentially, what confidence do you already have? Is it just the raw materials that you've already seen improvement? Or again, is it just more international, that you're going to see some more higher margins there? Bruce, what gives you that confidence?

Neal, I think both things. Within the U.S. business, we're certainly managing now to begin to pass on the cost increases we've already had. And that's flowing through the system as we speak, and we will continue to do that. Internationally, we have some good things going on with the contracts that we've mentioned that will increase our business there quite significantly. And we expect, of course, that -- the margin to follow the revenue increase coming from these new contracts.

Okay. And then a follow-up, if I could, maybe, Paul, for you or Bruce. Just wondering when you look at Evolution, Paul, is -- maybe a broader question for Paul and then maybe a bit more detail for Bruce. As far as Paul, is it about right now, Paul, where you thought Evolution would be as far as tracking? And then when you see kind of the growth, you mentioned now going international. I know we've talked about that in the past and then finally, like it's coming to fruition. Is this Evolution now growing about as you would expect? And then Bruce, if you could talk a little bit about margins and demand out there. Are you already starting to see some higher demand on that, that's going to boost the margins in the Evolution?

Sure, Neal. I'll take that first and then pass it off to Bruce. Yes, we're pleased with the revenue growth in Evolution. As you know, historically, we've tried to be very diligent about how fast we ramp it up. We've hit a major milestone this quarter, where we've now drilled over 1,000 wells. I think we're over 3 million feet. So we're starting to get a little more aggressive in taking Evolution to new regions, specifically taking it to the international market. The other thing that we're obviously excited to see is that with a lot of the majors, the large IOCs now are starting to be interested in the technology. And our hope is it that those -- that'll be a market that we'll penetrate over the next 6 to 12 months.

International is interesting. We're pursuing various options, and I'm not sure which one of them will come first. That's why we're saying there will be one at the end of -- before the end of the year and really not saying exactly which area it is, because we are pursuing several. In terms of the margin, the margin with Evolution remains consistent at the moment, because we're still focused on a penetration of the system into the marketplaces in different geographical regions. So that's the focus currently.

Our next question is from the line of Mike Harrison with First Analysis.

Was hoping that you could give us maybe a little bit more color or detail on how you guys are seeing the progress in sort of repositioning your business and resources out of the dry gas shales and into some of the more liquid-rich areas where you're seeing greater activity. Were you still encountering some costs during Q2? Or have we largely seen those costs run their course?

We were encountering some costs still in Q2, but they are nearing running their course, I think is the correct answer. The majority of the change from dry gas to liquids, we've already accomplished. So we expect to be fairly flat going forward on the cost side of things.

And as Bruce had mentioned earlier, the biggest area of focus on a year-over-year basis continues to be in that -- in the completion services business, where that's still down quite a bit year-over-year. So they continue to focus on that piece of it.

Right. And then I was hoping to maybe get some more detail on the new Petrobras contract extension. You suggested that, that was sort of a product line extension, and tell us what's new there. And also, what does the contract require of you? I know that your past contract with Petrobras was -- required you to really staff up and put a lot of resources in place, and then you kind of sat there for quite a while and were stuck before business started to ramp up. Is this contract a little bit more attractive from that standpoint?

This is an addendum to the original contract, and it's with completion additives, which is a different line of chemicals than we've been providing before. We understand a lot better how Petrobras functions. And we've built a fairly good relationship with them now, and we have people, actually, internally within the Petrobras office. So we expect this addendum to not have the same delays as the initial contract, and we feel that this will just begin as part of the existing process now.

Our next question comes from the line of Doug Garber with Dahlman Rose. Douglas Garber - Dahlman Rose & Company, LLC, Research Division: I wanted to ask you guys about the spill containment system, and I'm curious how big of a percentage of the AFE it's going to be for the customers? I understand pricing to be sensitive, but maybe on that perspective, just trying to get a sense of how much of an incremental cost it'll be for them. And also, if you could tell us more about the value proposition for them versus kind of regulatory cost for spills and fines, things like that, just the value proposition there.

Yes, we really haven't worked up necessarily how much the percentage is on an AFE basis. As you know, in the North American market, we deploy a rental model. So the spill control or spill management would be a rental program, certainly in the case where you have an environmental exposure and if you do have a spill either during the drilling process or the completion process. And that's what we're really looking to do too, is create kind of a new market segment. We're focusing on the completion side of it to help control any possible spills that could occur during frac-ing. Douglas Garber - Dahlman Rose & Company, LLC, Research Division: Okay. And also, on the Mat margins, coming back to kind of the near term, is there anything that's happening immediately that would cause the margins to -- that are under kind of very near-term pressure? I mean, is anything with a customer in the Northeast or seasonality or anything like that? Or do you think for now, they're relatively stable despite kind of the longer-term lower bias you have?

In the near term, we don't see anything in particular that would cause a significant change to what we've been experiencing. But the downward pressure on the rental margins, that continues over the longer term.

Our next question is from the line of Michael Marino with Stephens.

Gregg, a quick question on the accounts receivables. How much cash do you figure is kind of -- or excess cash is kind of tied up there now versus kind of where you see it over the next couple of quarters as you kind of work through that?

Yes. I mean if you -- going back to where we were at the time of conversion, basically, we are still a good approximately $7 million higher in this business than that point in time. So there's still a significant amount of cash to come off the receivables.

Okay. And then on the -- just to kind of follow up on the Mats. Is -- could you remind us again kind of if there's much of a difference between kind of the sales margins and the rental margins and how mix might affect consolidated margins in Mats?

Yes, just real quick. This is Paul. I think on the prior question, Gregg, you were answering how much extra cash. I think you said $7 million. It's $70 million, $70 million, $7-0 million.

7-0.

Just to make certain that's clear how much excess cash is on the balance sheet... I'm sorry, could you repeat your second question, Michael?

Yes. On the mix within the Mats business, sales versus rental, how does that impact margin? And well, how does it impact margin? And how do you see it kind of unfolding?

Generally, your incremental impact of your rental business is it's got a higher incremental margin than the sales business. And that's really a function of the fact that your cost structure is more fixed on the rental business between your mat fleet, your operations et cetera. So as you do see things shift from rental to sales, you'll generally see a downward trend.

[Operator Instructions] Our next question comes from the line of Bill Dezellem with Tieton Capital Management.

Two additional questions. One, relative to that accounts receivable decline that you did experience in the quarter, how does that compare to what you were hoping for at the beginning of the quarter?

Yes. Well, the -- as we've discussed on the previous quarter, the progress to make our way back to our historical levels has got several facets to it between the process and efficiencies and retraining, et cetera. Compared to our expectations, I would say, from my perspective, it's been a little slower than what I would have initially hoped. But nonetheless, it is heading in the right direction, and we continue to make progress.

And are you seeing that, that's -- that the progress is accelerating the further down the timeline you get?

Yes, we continue to make progress on it. And I kind of go back to my point of what we're seeing here early in the third quarter, where in the first 3-plus weeks of the quarter, we've seen very nice collections and our revolver balance is down $15 million from the beginning of the month.

Our next question is a follow-up question from the line of Mike Harrison with First Analysis.

I was just hoping to get a little bit more detail on the ERP-related costs. How much did they change from last quarter to this quarter? And can you maybe walk us through the next, I don't know, maybe 3 or 4 quarters and give us a sense for what you're going to be -- what we should expect to see in costs and maybe what kind of benefits when those start to creep in?

Yes. As far as the costs go, last quarter, we had mentioned that it was running about $2 million in the quarter. We are seeing that continuing to ramp down. It's probably down roughly $0.5 million quarter-over-quarter, so in the $1.5 million range here in the second quarter. I would expect it to continue kind of on that slope over the next few quarters as we continue to make progress and reduce our reliance on third-party contract resources, et cetera.

And when do we start to see the benefits?

I think the benefits are really a little longer term, a few quarters out before we would really start seeing benefits. We had pointed to a number of different areas where we would expect the system to provide long-term benefits, including on the receivables side. But obviously, you have to go through a little bit of pain upfront before you really see some of those long-term benefits.

Our next question is a follow-up question from the line of Doug Garber with Dahlman Rose. Douglas Garber - Dahlman Rose & Company, LLC, Research Division: Wanted to follow up. It seems to be a theme in North America, at least for certain service lines, that there's some more competitive environment and price pressures. Wanted to see what you guys are seeing in your core Fluids business in terms of leading-edge pricing or competition there.

This is Bruce. Within the Drilling Fluids business, it's always been quite competitive, and that continues. So there is competitive pricing out there, but that's where we need to try and differentiate with Evolution and other technologies we have in our armory. But the competitive pressure is there and usually is there. Douglas Garber - Dahlman Rose & Company, LLC, Research Division: So has there been any kind of the recent trends in terms of pricing in just the last, I guess, few months where it's really started to impact other select North American business lines?

Not really at this point.

And gentlemen, I'm showing no further questions at this time. I'd like to turn the conference back over to you for any closing remarks.

Thank you for joining us today on the call and for your interest in Newpark Resources, and we look forward to talking to you again after the conclusion of the third quarter. Thank you very much.

Thank you, sir. Ladies and gentlemen, this does conclude the Newpark Resources Second Quarter Earnings Conference Call. We'd like to thank you for your participation. You may now disconnect.