Team, Inc. (TISI) Q2 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to your Second Quarter 2014 Team Inc. Earnings Conference Call. My name is Kanti, and I'm your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Phil Hawk, Chairman and Chief Executive Officer. Please proceed, sir.

Thank you, Kanti, and good morning, everyone. Again, it's my pleasure to welcome you to the Team web conference call. Again, my name is Phil Hawk. I'm the Chairman and CEO of Team. Joining me again this morning is Mr. Ted Owen, the company's Executive Vice President and Chief Financial Officer. The purpose of today's conference call is to discuss our recently released financial results for the company's second quarter for fiscal year 2014, with that quarter ending November 30, 2013. As with past calls, our primary objective is to provide our shareholders and potential shareholders with an enhanced understanding of our company's performance and prospects. This discussion is intended to supplement our earnings releases, our SEC filings, as well as our annual report. Ted will begin with the review of the financial results. I will follow Ted with a few remarks and observation about our performance and prospects, and then following these remarks, we'll take questions from our listeners. With that introduction, Ted, let me turn it over to you.

Thank you, Phil. First, the -- a word from our lawyers. As usual, I want to remind everyone that any forward-looking information that we discuss today is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information. A description of those factors is set forth in the company's SEC filings. Accordingly, there can be no assurance that the forward-looking information discussed today will occur or that our objectives will be achieved. And we assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the company whether as a result of new information, future events or otherwise. Now for the financial results. Adjusted net income available to shareholders was $0.62 per share in the current-year quarter versus $0.66 in last year's quarter. The adjusted net income for the quarter excludes a $2.1 million pretax accounting gain that is associated with a revaluation of contingent consideration in a business acquisition from a year ago. On a GAAP basis, which would include the pretax revaluation gain, earnings were $0.68 per share, which represents the highest quarterly earnings in the history of our company. Revenues were $200 million in the quarter, about the same as in last year's quarter. Operating income or EBIT was $21.7 million in the current quarter, again, that's adjusted. Now here's the breakdown of revenue and operating profit by business group. First, revenues. Inspection & Heat Treating revenues were $109.4 million, about the same as last year's second quarter. Mechanical Service revenues were $71 million, down about $5 million from last year due primarily to fewer large turnaround projects in the current-year quarter. And finally, Quest revenues were $20 million, up $4.5 million or 29% from last year's second quarter. This reflects, by the way, the first quarter in Quest's history of revenues in excess of $20 million. Now for adjusted operating income, again, or EBIT by group. First, total adjusted EBIT percentage for the quarter was 11%, only slightly less than the very strong second quarter of last year. Inspection & Heat Treating's adjusted EBIT percentage was 14%, and the Mechanical Service EBIT percentage was 10%, which was down about 3 percentage points from last year, again, due primarily to the impact of fewer, large projects in the current-year quarter. Quest EBIT margin was 27% in the current-year quarter, reflecting an 85% growth in EBIT from last year's quarter and the regained momentum that we expected after Quest's slow start to the fiscal year in the first quarter. Now with respect to cash flow-related items. Capital expenditures were $7.4 million in the quarter, and the combination of depreciation and amortization plus noncash compensation charges was $6.6 million in the quarter. So adjusted EBITDA for the quarter was $28.4 million or 14% of revenues and on a trailing 12-month basis was $75 million. During the quarter, we reacquired 370,000 shares of our common stock for a total expenditure of $13.3 million. And at the end of the quarter, our total debt was $92 million and our cash was $37 million. Therefore, net debt was $55 million, which was about the same as at the end of the first quarter. Our net debt to trailing 12-month EBITDA remained at 0.7:1. So with that, Phil, I'll turn it back to you.

Thanks, Ted. Now I would like to provide a few additional perspectives on our recent performance and outlook. All financial results referred to in my remarks will be adjusted results that exclude nonroutine items that were described by Ted and are set forth in our financial statements. Ted shared the overall results with you. Revenues were $200 million, approximately flat with the prior year quarter. While normally, we would not be pleased with flat revenue performance, we are encouraged by this revenue performance because we achieved it without the benefit of the significant very large project activity of the prior year period. I will elaborate on that more in a moment. Adjusted earnings per share was $0.62, slightly down from the record $0.66 per share earned in the corresponding prior year period. Again, there are encouraging trends here as well, both with Quest and our job margin improvement initiatives in our business groups. Similar to the discussion of the first quarter results in our last conference call, I will review and discuss our detailed results in 2 separate groupings: Quest Integrity Group and then a combined rest of Team grouping that includes Inspection & Heat Treating Services, Mechanical Services and corporate support activities. As Ted indicated, we are pleased that Quest has bounced back nicely in the second quarter achieving record performance. Quest quarterly revenues exceeded $20 million level for the first time in its history. The revenue growth reflected significant momentum in both process and pipeline inspection services and engineering assessment services. Several aspects of Quest's business are noteworthy. First, demand continues to be very strong for Quest integrated -- integrity and -- integrated integrity and reliability management solutions. We are encouraged both by the breadth and depth of interest across geographies. Pipeline and process piping integrity present multifaceted challenges and are major industry issues. Quest provides a very interesting set of solutions specifically designed to address these challenges for difficult-to-inspect lines. In this regard, we expect to apply these solutions to an expanding array of customer segments in the near-to-medium term. Second, we are pleased with Quest's ability to expand its service delivery capability and capacity. Reaching the $20 million revenue level in this quarter was a significant milestone, reflective of our management's focus on disciplined scaling. And finally, we are pleased with the attractive operating leverage associated with the Quest business growth. Quest remains on track with its business and performance plans. Now let me move on to a discussion of the rest of Team's businesses. In the second quarter just completed, the combined revenues for the rest of Team's businesses, excluding Quest, were about $180 million, down about $5 million or 3% from the prior year quarter. As I mentioned in my introductory remarks, there was encouraging positive growth in a number of areas or our business during the quarter. However, all of this growth was offset in this quarter by the $24 million decline in very large project activity versus the prior year period. The primary cause of this decline was the very high level of large project activity in the prior year comparable rather than significant revenue weakness in this quarter. As a reminder, we define very large project activity as any customer or project with more than $2 million of revenue in the quarter. For the second quarter just ended, Team had 2 very large projects versus 9 similarly sized projects in the corresponding prior year period. Both the number of very large projects, 9, and the total project revenue from these very large projects, $29 million achieved in last year's second quarter, were significantly higher than this quarter, as well as, by the way, any other prior quarter for Team. As a further illustration of this, in the second fiscal quarter 2 years ago, Team also had just 2 very large projects similar to this year. The difference versus last year primarily reflects the specific timing of individual projects and turnarounds and not any unfavorable trends in either overall demand or in Team's competitive position in very large projects. I am pleased that Team was able to offset nearly all of this a very large project decline in the quarter with attractive growth in other segments. For example, Team's smaller activity -- smaller project activity, those with revenues less than $500,000 in the quarter, increased by $16 million or 17% in the quarter. Inspection services, again, this excludes Quest, including both standard and advanced inspection services, increased $7 million or 8% in the quarter. Onstream Mechanical Services, which includes leak sealing, hot tapping and fugitive emissions monitoring, increased about $5 million or 13% in the quarter. Not surprisingly, turnaround services declined $16 million or 24% given the larger project association. Summarizing all these facts and figures, Team faced a difficult comparison with the prior year due to extremely strong, very large project activity in that same prior year period. Nevertheless, we continue to see attractive growth and progress in many segments. And we remain optimistic about our growth opportunities in the second half of the year. There are several attractive factors supporting this positive outlook: the continued positive momentum in the inspection and onstream services; the lack of strong prior year large project comps going forward; and the expectation of project tailwinds in the remainder of the fiscal year. This is driven by a very active spring turnaround season and a significant number of new projects related to America's new low-cost energy position that will initially take place along the Gulf Coast. These new facilities include petrochemical facility expansion, LNG export terminals and related infrastructure and gas-to-liquids projects. Now turning to operating profits and profit margins. Adjusted overall profits for the rest of Team business grouping are down nearly $4 million, reflecting primarily lower volumes. Overall gross margin was about flat, about 29% for both the current and prior year quarters. Following several quarters of unfavorable gross margin comparisons, I was pleased with our performance this quarter. It reflects in part progress with our job margin improvement initiatives. Excluding Quest, SG&A expenses for the rest of Team businesses increased about $1.9 million versus the prior year quarter, reflecting the impact of acquired businesses, as well as our continuing business development initiatives in a number of areas. As our expected revenue growth returns in the second half of the year, we believe we are well positioned to achieve attractive operating profit leverage consistent with our performance in past years. As stated in our earnings release yesterday, we are affirming our current guidance of $1.55 to $1.85 per share on an adjusted basis. We continue to expect full year revenue in the $765 million to $790 million range. While the holiday period during the third quarter always presents challenges for us, looking forward, we see significant project activity levels beginning in mid-January and continuing at least through the end of the fiscal year. Now to wrap up, I remain confident about our overall position and longer-term prospects. Of course, we still have to earn all of these opportunities with continued outstanding service and support to our customers. All Team colleagues are focused on that responsibility everyday. That concludes my remarks. Let's now open up for questions.

[Operator Instructions] And your first question comes from the line of Matt Duncan from Stephens Inc.

You guys did a very nice job getting the gross margins back up this quarter. And Phil, you touched on this a little bit, but how much of that is -- are you now starting to get the wage rate inflation in the form of price to help offset that wage inflation? How much is that helping versus other actions that you guys have taken?

I think it's a combination of rate improvement that's kind of offsetting some of the wage inflation that we're having, as well as we continue to work hard on utilization levels. So I think it's a combination of both. Because we're the sum of so many different projects, it's hard to be real precise about that. But I can tell you, there's just a lot of focus on margins across our company, and we are getting some traction in rate adjustments in a number of places.

Okay. Looking at the spring turnaround season, you referenced that you guys see a lot of large projects out there. I'm wondering if maybe as you sit here projecting the spring season, can you maybe quantify how many projects you're expecting to do that are north of that $2 million mark that you would define as a large project, just to kind of give us some idea how many big projects are out there for you guys?

I'm very humbled about projecting anything these days, Matt, with kind of some of the difficulties we have kind of in forecasting. But I would just say, as I mentioned, it starting earlier. We have significant manning that will be taking place here within a week or so on kind of a major Gulf Coast project. And if you look at our kind of total expected activities I mentioned in my remarks, we expect kind of project activity to continue or we can identify projects really all the way through the end of the fiscal year. So I think there'll be a number of very significant projects there. If not, very large, above $2 million, certainly in that next category. So we're -- again, we're going to be cautious about kind of forecasts, but we're pretty excited about the outlook. If you -- kind of stepping back from this, our kind of day-to-day business, our small project activity continues and has continued to expand nicely as it has over, really, the last decade. What we've been challenged with is just the lumpiness of big projects. And I feel like from -- as we go forward from here, we're on the positive side of the curve on that as we kind of got behind some big comps and see some pretty good tailwinds that will be beneficial.

And, Phil, the bigger projects you're seeing for the first half of your fiscal '15 to the back half of the calendar year, are those turnaround-driven or are we now starting to talk more about some of the petrochem plant expansion projects that are on the horizon?

They're primarily turnaround-driven in the spring. I think the other projects are probably fall events, for the most part, is when they start to crank up.

And we have the next question, and it comes from the line of Arnie Ursaner from CJS Securities.

Easy follow-ups starting with Matt. So you had 55 projects in 2012 greater than $500,000, 7 large ones over $2 million. In '13, it was 65 projects greater than $500,000, and 2 greater than $2 million. What are the same numbers for this year?

You're talking about for the second quarter?

Well, when you -- last year, obviously after you gave your Q2 guidance, things changed very rapidly. And you did a bottoms-up review, and so I'm assuming you have at least a rough similar idea of the number of projects you're looking at.

You mean going forward?

Yes.

I think the -- honestly, the -- we do forecast those numbers from our groups. But when you get out more than frankly, the current quarter, they get very suspect. And, frankly, our estimates versus actual have not been very good. And so I kind of -- I'm kind of reflecting more the tone of what I'm hearing from our managers in our quarterly VP meetings than I am kind of specific forecast.

Arnie, were you asking about forecasted? Or were you asking about the -- kind of the categorization of various buckets for the second quarter?

I think I'm looking at the various buckets you have and, again, the quantity. One of the things that should make it easier for you guys is the breadth of how many inquiries are you getting, and I think you mentioned it was pretty broad.

Yes.

It is. I think -- I don't have very meaningful numbers in terms of a forecast as we look at the third and fourth quarter. I have detail on projects by size actual in the second quarter if that -- I may have misunderstood your question, if that's what you're -- are looking at. As I mentioned in my remarks that the very large projects, we had 2 versus 9 last year. As we get into the other sizes, they were fairly comparable, if that's what you're asking. Kind of the $1 million to $2 million, they were 15 this year versus 13 last year; $500 million to $1 million, there were 32 this year versus 40 last year. And so it's 49 versus 62 if -- in terms of counts above $500,000, if that was what you were referring to. And again, as I mentioned, we are bigger on the smaller projects.

I guess what I'm trying to figure out is, last year when you guys spoke and had to revise your views, you had 65 projects. And I guess I'm trying to equate where we stand now versus that number.

Okay, I think the 65 -- my number here is 62, so we might have misspoke last year or there might have been some adjustments. We had 62 projects greater than $500,000 in last year's second quarter. The corresponding number is 49 for this year's second quarter. Is that the...

So I guess what I'm trying to get a better feel for it is the tone of optimism given that -- at least it appears that you have fewer in the back half.

We have fewer in the actual, and that reflects the downturn of our turnaround activity in this just recently completed quarter. As we look forward to next year, if you will, for the second half of the year, for the total second half of the year, we have -- above $500,000, we have approximately 100 projects in last year's period, but again, only 6 that were greater than $2 million in the quarter for that 6-month period, and we would be expecting more than that, probably significantly more than that in the upcoming 6 months.

Perfect. The other question I have is, you normally, at this time of year, have a fairly broad range of guidance driven by 2 factors: one would be when you expect activity to start, and then the other real important factor that impacts you is the amount of work you'll have at the end of your fiscal year when you come to May. Yet it sounds like your tone is you're going to start a fair amount of work in mid-January, which sometimes is earlier than normal. And it also sounds like you have quite a bit of work that will continue post-May, particularly if you have more like petrochemical work. Why wouldn't that lead you to be at the higher end of your guidance?

Have you been paying attention the last few quarters, Arnie? I'm just being -- I'm being facetious, of course. I think the -- we are optimistic, but I think until we start actually delivering on that optimism or that, I think, the positive view that we see, I think it's prudent to maintain our current guidance.

And we have a next question, and it comes from line of Tahira Afzal from KeyBanc Capital Markets.

This is Saagar Parikh on for Tahira. First off, looking at your Quest business, on your prior call, you guys mentioned that for fiscal '14, you're looking at something around $70 million revenue for Quest and $11.5 million in operating profit. If we take the fiscal second quarter go -- fiscal second quarter results and look at it on a go-forward run rate, you'd be on track to meet the top line forecast, but you'd be much over on the profit guidance. So can you just give us some additional insight on the different puts and takes, including your confidence and worries that you might have around meeting the targets for Quest?

I think, as I mentioned, we are confident about Quest business and its performance and its trajectory. I think the just timing of kind of investments and expenditures and all that, again, caused us not to be or not to want to kind of continually tweak kind of estimates for areas. So we continue to be comfortable with the overall guidance we gave for Quest, which you correctly related, I think is $70 million and $11.5 million in operating profit.

Okay. And then kind of a follow on, as I said, you guys have commendable fiscal 2Q performance given the sharp declines and the turnaround work and the large projects, and along with that, you had a big uptick in Quest performance. So quarter-over-quarter, should we expect a less seasonal dip for Team from fiscal second to fiscal third versus what you have normally seen?

I think, as I mentioned, I think the challenge of the third quarter, it's always the weakest quarter, and we would expect that to be the case this year as well. We're hopeful that the earlier start to kind of high activity or project activity will be helpful and constructive for the quarter. I think if you look at our total revenues for the second half of the year for the -- exclude Quest now for a moment, we're looking at revenues there are -- that would be for the rest of Team up 11% versus the prior year and probably sequentially up about 5% from the first half of the year. So we're, again, pretty positive and constructive about the rest of the year.

Again, having said that, just to reiterate the point relative to the third quarter, will be -- will still be the weakest quarter of the year. That's true every year. It'll be true this year. We have a resetting of benefit costs on January 1, which falls into kind of the middle of our third quarter. So [indiscernible] costs plus the kind of the seasonal downtime of Christmas, New Year's, all of those things portend a much weaker third quarter than any other quarter of the year.

Great. And then one last question on weather. In December, weather was -- weather temperatures were down, colder 16% or so year-over-year. And then as everyone knows, the temperatures in the beginning part of January have been very cold. Is there any impact on your business from that, negative or positive?

For the length of time we're talking about, I think it's about a push. I mean, obviously, it disrupts activity. It's a very time of extreme cold and hazardous conditions. But that's generally -- the work that we have to do doesn't go away, so we have to make that up kind of in the subsequent days and weeks. I don't think there's a big impact to it, that's what I would say.

And we have the next question, and it comes from the line of Adam Thalhimer from BB&T Capital Markets. Adam R. Thalhimer - BB&T Capital Markets, Research Division: I wanted to ask you, you seem bullish about the new construction that's coming along the Gulf Coast, and I just -- can you talk for a little bit about how and when you think Team benefits from that?

Well, I think what we have and I think the first projects will be starting kind of summer to fall, is we have just a whole lot of new facilities that are going to be constructed. The -- what it reminds us of is, frankly, the reconstruction related to Katrina when -- and that was destruction. So it was a rebuild of existing facilities so it was different, obviously, than new facilities. But the scramble for resources is going to be very, very significant, and the scramble for kind of main -- the trades and the kind of general construction. So we think just a tight demand environment, plus we'll do our -- all our turnaround activities are needed for new construction, so we'll have inspection, field machining, heat treating, all those activities associated with that, those where we participate, some of those projects. But just more generally, we're just going to have a tone of tightness and scarcity, which we think is bullish for our business. Adam R. Thalhimer - BB&T Capital Markets, Research Division: And then the one -- when I say that to investors, the one pushback I get is, well, how is Team going to keep their people if the industry's so tight? How does that work?

We're going to meet competitive environment and have our -- maintain our wages, much the same way we did in Katrina. So it's -- and we have the advantage of a business that we're -- again, we're -- inherently local, so no competitor can have a fundamental cost or wage advantage versus Team or vice versa. And then if we keep our focus on -- if we're a good place to work and keep our focus on market levels, we're highly confident that we can maintain our staffs. Adam R. Thalhimer - BB&T Capital Markets, Research Division: And when some of the early -- the plants that you see starting in the early phase of this summer or fall this year, when would those be operational?

I don't know. I think they're probably a couple of year projects, some of them. I just -- I mean, more just broadly, I think it's really unbelievably positive for America that we're -- it's the beginning of a manufacturing renaissance, I think, in some respects. Adam R. Thalhimer - BB&T Capital Markets, Research Division: I wanted to ask about the spring turnaround season. We have seen some press that the -- it was supposed to be very strong along the Gulf, but then not as strong in the mid-continent, but you seem pretty bullish about the spring turnaround season. So is that -- you just have more exposure to the Gulf and less exposure to the Midwest? Or you would disagree with that?

I don't know that I've kind of tallied it kind of in every single region or kind of made note of the tallies. But I think there's some general strength across all of our markets. It is, for sure, strong in the Gulf Coast, but I think it's not just the Gulf Coast, would be my observation. Adam R. Thalhimer - BB&T Capital Markets, Research Division: And then again, what's driving that is really just lumpiness, timing?

We think so. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And then 2 last questions. One, Canada, what's the -- is that improving at all? It looks like some large projects are finally starting to move forward up there.

Yes, a little bit. If you look at our -- the turnaround activity decline in the quarter, obviously, which was significant, about half of that was in Canada, again, because we had very big stuff going on last year. We see -- we have some project work up there, and we're encouraged by our position there and the opportunities -- some of the opportunities we have. Again, I just hesitate to -- our planning premise is not that we go back to the boom era of not only last year, but if you go back to the real boom time of the expansion with the upgrade of projects, I think that's still going to be fairly limited. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And then lastly, I just wanted to ask about the buyback. I would assume you're maybe fairly active with the program when the stock is in the mid-30s, but less active with the stock in the low 40s, is that fair?

That's correct.

[Operator Instructions] We have the next question, and that comes from Tristan Richardson from D.A. Davidson. Tristan Richardson - D.A. Davidson & Co., Research Division: Just curious with the strength that you guys saw in the Quest business, sort of the rebound from the previous quarter and, Phil, you talked a little bit about the pipeline integrity work, I mean, do you see that continuing sort of going forward, that strength in the pipeline work? And do you see that sort of changing as a percentage of your business? I mean, do you expect to see more pipeline work in your overall portfolio over the next couple of years?

Yes, is the short answer. Within Quest, again, we're going to do on pipeline work, both within Quest but also within the other, particularly Inspection & Heat Treating Services activity as well. Within Quest, they're kind of on the leading edge of a lot of the kind of new techniques and in-depth analysis and understanding of just condition assessment. And high-profile failures, both within plants but also in pipelines kind of create a great urgency and focus on this issue. So we expect continued growth in kind of Quest, kind of present in that market. And as I mentioned, not only traditional applications, but we see new segments where these techniques and technologies are going to be applied. Nuclear power is one of them that we expect to be kind of in the fairly near term, but expanding offshore and other plant piping system applications are also kind of segments that are being developed and kind of working with customers on solutions in some of those areas, again, expanding the served market. Now within Team, if you look at the other 2 service groups of Team, our legacy and history is that we're more plant-centric, so we have kind of a greater mix of plant work than pipeline work. Yet again, there's a tremendous amount of opportunity in the pipeline world, and we're extending our capabilities there. So both in inspection of existing and -- while we've traditionally been limited to inspection of new -- activities related to new pipeline construction, we're developing some techniques, sometimes in concert with Quest but not always, with regard to kind of pipeline inspection activities or pipeline integrity management activities associated with these existing pipeline activities. And we're extending our -- a lot of our onstream services of hot tapping, in particular, and some of the line intervention activities, we're building our capabilities and extending our presence in the pipeline world in those services as well. Tristan Richardson - D.A. Davidson & Co., Research Division: And the list of customers in that market is a little bit different. I mean, do you guys see the same on the competition side? I mean, is it the same players sort of plant focused versus pipeline focused? Or are you going up against different competitors and run into different sort of ways to market yourself as far as reputation in the market, et cetera?

I think we start from different points of historical kind of presence, and so our relative market strength is kind of different. It's kind of -- even within plants, it's different by region and area, so it would be different in pipelines than it is in plants. We're weaker, historically, so we don't have the same presence, but we think the technology is applied. We think there's really -- we get a lot of receptivity to our presence in the market, and we're encouraged that we can continue to grow our -- and expand our position. Tristan Richardson - D.A. Davidson & Co., Research Division: Great. And I guess, you hit on them major theme that we've been hearing for a while now about the Gulf Coast and just really the theme of tight demand for resources: labor, et cetera. You talked a little bit about how you're seeing some rate improvements on some of your projects. And I mean, will be -- will rate improvement be a big theme going forward for Team? I mean, is that an active initiative that you guys are pursuing? Or is it more of sort of just a natural progression as the cycle kind of plays out?

Well, I think what we think about rate improvement, it's not getting ahead of where we have been vis-à-vis our customers. It's kind of maintaining our position and kind of maintaining our margins is the way we think about it. And if you're in an inflationary environment, and I think we are because of these demand issues that we've -- that you referenced, that you have to -- our processes have to be focused on regular price adjustments or rate adjustments to reflect the -- if you will, the regular, ongoing kind of pressures or cost increases that are occurring in our labor force. So that the -- those are the habits we have to build back into our organization. By the way, it was exactly that case in the Katrina time frame. We had a lot of the same issues, and we had to address them the same way. What we had in the interim, though, was a period of fairly modest demand or labor demand pressure. And so we had modest adjustment -- correspondingly modest adjustment and infrequent adjustments with our customers. So it's just kind of building our habits again to kind of stay up. Tristan Richardson - D.A. Davidson & Co., Research Division: Great. And I guess just one last one. Ted, could you talk a little bit about the noncash gain? I mean, what -- was that a particular acquisition that earnout was associated with? And was it just, that -- didn't expect...

Yes, it was -- we had a -- it was associated with the TCI acquisition of a year ago that, you'll recall, is the above-ground storage tank inspection company. We had a contingent consideration earnout based on the achievement of certain performance levels within the first year after acquisition so that on the day of acquisition, that future consideration was valued pursuant to some kind of arcane accounting rules. And then it was revalued after the first year and that simply resulted in a kind of reduction in the valuation of that consideration. And because of just very arcane accounting rules, rather than adjusting goodwill for instance, which most people would probably think that's what you would do since that's where you put it in the first place, you'd adjust that, that's not the accounting rule. It's more of a fair value accounting concept. And so the change in value goes to the P&L, whether it be a gain or a loss, by the way, so it wouldn't have -- either way. And so it just -- it's one of those almost inexplicable accounting nuances that results in a gain but it really doesn't change our view. It has nothing to do with what our view of the intrinsic value of the transaction or how the transaction is doing. It's doing just fine. It just so happens the accounting rules resulted in the recognition of a noncash gain.

As there are no further questions, I would like to turn the call over to Mr. Hawk for closing remarks. Please proceed.

All right. Thank you, Kanti. And I would like to thank everyone for your participation in this call this morning and your continuing interest in Team. We look forward to updating you on our progress during our third quarter conference call in early April. In the meantime, everyone, have a good day.

Thank you for your participation in today's conference call. This concludes your presentation. You may now disconnect. Have a good day.