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Newpark Resources, Inc. (NYSE:NR)

Q2 2008 Earnings Call Transcript

August 1, 2008 10:00 am ET

Executives

Ken Dennard – IR, DRG&E

Paul Howes – President & CEO

Bruce Smith – VP

Jim Braun – VP and CFO

Analysts

John Fitzgerald – Raymond James

Terese Fabian – Sidoti and Company

Karen David-Green – Oppenheimer

John Flanagin – First Analysis Securities

Vijay Singh – Janco Partners

Joe Marver [ph] – Loomis, Sayles

Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to Newpark Resources second quarter earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator instructions) This conference is being recorded today, Friday, August 1, 2008. I would now like to turn the conference over to Ken Dennard of DRG&E. Please go ahead, sir.

Ken Dennard

Thank you, Mary, and good morning everyone. We appreciate you joining us for Newpark Resources conference call today to review 2008 second quarter results. We'd also like to welcome our Internet participants as the call is being simulcast live over the Web. Before I turn the call over to management I have a few housekeeping details to run through. For those of you who didn't receive an e-mail of the release yesterday afternoon and would like to be added to the distribution list, please call DRG&E on our office number 713-529-6600 and just request to be added to the distribution list. Also you could e-mail me; many of you have my e-mails on most of the press releases. There will be a replay of today's call and it will be available on the webcast on the company's web site, www.newpark.com, and there's also a telephonic replay that'll be available for seven days ending next Friday, August 8 and the dial-in information is in the press release.

Please note that information reported on this call speaks only as of today, August 1, 2008, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening. In addition, the comments made today by the management 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 the management of Newpark; however, various risks, uncertainties, and contingencies could cause Newpark's actual results, performance or achievement to differ materially from those expressed in the statements made by management. The listener is encouraged to read the company's 2007 Annual Report on Form 10-K, subsequently filed quarterly reports on Form 10-Q, and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies.

Now, with that being said I'd like to now turn the call over to Newpark's President and CEO, Mr. Paul Howes. Paul?

Paul Howes

Thank you, Ken, and good morning to everyone. We'd like to take this opportunity to thank all of you for joining us today for our second quarter conference call. With me today are Jim Braun, our Chief Financial Officer, and Bruce Smith, President of our Drilling Fluids business. Before we go to the details of our second quarter, I would like to highlight the quarter’s results and give a quick update on the sale of our Environmental Service business. Following my remarks, Bruce will provide an update on the Fluids business and Jim will then cover the Mats and Integrated Services business as well as the balance sheet. I will then conclude with a discussion of our market outlook before opening the call to Q&A.

Now, turning our attention to the quarter. We continue to make strong progress in growing the company in both new and existing markets. Revenues for the quarter were $194 million, up 9% sequentially and 29% over last year. Our income from continuing operations rose 41% year-over-year to $8.7 million or $0.10 a share. We saw an improvement this quarter in the US drilling environment, as the upward trend we saw in the first quarter appears to be gaining momentum. The US rate count rose 6% year-over-year in the second quarter of 2008, and during the same timeframe, our US Fluids revenues were up 22%. This revenue increase reflects continued market share gains in the US as the number of rigs we serviced increased by about 18%. The acceptance of our products and our services continues to grow as we gain new customers and additional work with our existing customer base. We believe that our investment in personnel, equipment and products will fuel continued future growth within our target markets.

Turning to the international market, our Fluids business continued to show strong gains, benefitting from a robust and developing business in North Africa, Eastern Europe, and most recently, Brazil. Revenues from our Mediterranean operations were $31 million in the quarter, a 53% increase from the same period last year, a 9% sequential gain. We continue to invest in new and emerging markets such as Eastern Europe, Brazil, and the Hanceville shale as well as the existing markets like the Rockies and East Texas. While such investments create downward pressure in operating margins in the short term, we expect that these actions will pay dividends in the future.

Turning to our Mats and Integrated Services business, we saw double-digit revenue gains, both sequentially and year-over-year for the second quarter. The gains were due to an increase in composite mat sales, which more than offset the decline in mat rental and related services. Operating margins for Mats has rebounded to 9.7% for this quarter, in line with our expectations.

Lastly, let me briefly address the issue of our sale of the Environmental Service business. As you know from our press release last month, the FTC has issued a request for additional information and documents as part of its standard review process. At this time, we expect to provide the requested information to the FTC by late August. Following that, it should be another 30 days for the FTC to complete its review of the proposed transaction. Therefore, we are now expecting the close of sale sometime during the fourth quarter.

With that, let me hand the call over to Bruce Smith for a more in-depth look at our Fluids business. Bruce?

Bruce Smith

Thank you, Paul. This morning, I will present a review of the Fluids Systems and Engineering segment. Looking at our year-over-year results for the second quarter, Fluid revenues were $169 million, an increase of 29%. US revenues were up 22% to $132 million. We are achieving market penetration as the number of rigs we serviced increased 18%, thus as an average US rig count increase of 6%. The revenue increases were achieved in almost all of the geographic regions of the US in which we participate. Specifically, we saw the largest gains in the Rockies, West and East Texas. As has been the case over much of the recent past, our international operations continued to grow in importance. Second quarter revenues from our Mediterranean business increased to $31 million or 53% year-over-year, mostly due to brisk overseas drilling activity, continued penetration into the North African and Eastern European markets and a strengthening euro. In addition, we saw $3.4 million in revenues from Brazil, where there were none last year.

On a sequential basis, Fluid revenues of $169 million in the second quarter were up 8%. Our US business overcame the seasonal Canadian decline by posting a strong revenue gain of 12% as compared to the US rig count increase of 5%. Again, market share gains drove a large part of the revenue growth in the US. Meanwhile, our Mediterranean business was up 9% sequentially.

Operating margins in our Fluids segment decreased to 10.7% from 12.4% a year ago. The drop was due to several factors including an unfavorable product mix, but most notably, we experienced an acceleration in the inflationary increases in various operating costs such as fuel, transportation and product costs. Although not as significant, we saw increases in our personnel costs that were required to remain competitive in the marketplace. Not all of these cost increases could be passed on through higher prices due to contractual obligations and market conditions. There were also startup costs associated with new contracts, where we had to incur expenses prior to the full benefit of the revenue being realized. In some cases, drilling plans were delayed, although we were fully staffed and ready to go.

And finally, there were certain non-recurring items in the current quarter, including asset write-offs, legal settlements, and higher-than-usual repair and maintenance costs. Due to the nature of these cost items as well as our anticipated ability to adjust some pricing in the third quarter, I expect our Fluids margins to improve in the second half of the year, although we will continue to incur expenses in advance of future revenue in Brazil, as we develop our base of operations there. In addition, we continue to work on ways to improve our efficiencies and reduce costs wherever possible.

In closing, I want to say how pleased I am with the growth and progress achieved in our Fluids business, both domestically and internationally, and I look forward to continued success in building and growing our company. With that, I’ll now turn the call over to our CFO, Jim Braun.

Jim Braun

Thank you, Bruce, and good morning everyone. First, let me review our Mats and Integrated Services business, and follow-up with a summary of Newpark’s consolidated results and a discussion of the balance sheet.

For Mats and Integrated Services, the revenues were $24.9 million in the quarter, up 32% from the second quarter of last year. This improvement was driven by composite mat sales, which increased $8.3 million to $10.6 million. As composite mat orders are sporadic, sales tend to be variable from quarter to quarter. Mat rental and services revenues were down 13% to $14.3 million. Southern Louisiana land activity remains an area of weakness as the land rig count averaged 23 in the second quarter compared with 33 a year ago. As a result, competitive pressure is having a negative impact on pricing. On a sequential basis, the Mats segment was up 17%, again mainly due to the increase in composite mat sales. The rental and services business was down 16% sequentially, due primarily to decreased activity and increased competition in southern Louisiana and the loss of some work in Colorado. Operating income in this segment rose to $2.4 million during the quarter, compared to $2.3 million in the same period in 2007 and a breakeven result in the first quarter of 2008. Operating margins were 9.7% in the second quarter of 2008, compared to 12.1% in the same quarter a year ago.

And now looking at some of our other expenses. Our total G&A expense of $5 million for the second quarter of 2008 was comparable to both the year-ago quarter and the previous quarter. Interest expense was lower by $1.2 million as compared to the second quarter of 2007, and the tax rate for the second quarter was about 34% versus our full-year estimate of between 34% and 35%.

And to summarize total Newpark results. Revenues were $194 million in the quarter, up 29% from the second quarter of 2007, and up 9% from the first quarter of 2008. Income from continuing operations was $0.10 per share, which is $0.03 better than the $0.07 we reported a year ago in the second quarter. On a sequential basis, we reported $0.10 from continuing operations in the first quarter of 2008. And as Bruce mentioned earlier, there were some non-recurring expenses and spend-ahead items in our second quarter results. The non-recurring items impacted the quarter by about a penny a share while the spend-ahead items and the project delays cost us almost another full penny. With the exception of Brazil, the majority of the spend-ahead items we believe are behind us.

Now turning to the balance sheet. We applied our available cash flow toward debt reduction and share repurchases. We paid down long-term debt by over $27 million during the quarter, before the funding of $7 million for share repurchases. We ended the quarter with total debt of $179 million, and a total debt-to-capital ratio of 32%.

Since the approval by our Board of a share repurchase program in February of this year, we have purchased about 1.9 million shares for a total cost of $10 million, an average cost of $5.32 per share. Finally our capital expenditures for the quarter were $5.7 million, including $3.4 million related to the new fluids plant in Brazil, while depreciation and amortization was $6.4 million. For the full year 2008, we now project capital spending to be about $22 million, down slightly from our previous estimate.

And with that I would like to now turn the call back over to Paul for his concluding comments.

Paul Howes

Thanks, Jim. I am very happy with the quarter’s revenue growth and market penetration in our Fluids business. In addition, I am pleased with the improvement in the Mats and Integrated Services business, and our new division President, Bill Moss. However, we need to stay focused on improving our operating margins. The investments we have made in the second quarter should start to pay dividends in the second half of 2008. We expect to be able to pass on price increases as contract terms and market conditions permit, which should result in improved margins in the third quarter. In the US, we expect the rig count to continue to grow, provided natural gas prices remain at attractive levels. We are optimistic that our Mediterranean operations will see continued gains, although perhaps not the same growth rates we saw last year. And we are encouraged by the strong return in the Canadian rig count.

And lastly, I would like to comment on our activities in Brazil. First, our work head continued on the building of our fluids plant and we expect it to become operational in September. Secondly, we have accelerated the hiring of key personnel to support our new offshore contract with a super major that we announced last quarter. And thirdly, we are awaiting the result of the Petrobras tender.

With that, we will now take your questions. Operator?

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator instructions) And our first question comes from the line of John Fitzgerald with Raymond James. Please go ahead.

John Fitzgerald – Raymond James

Good morning, guys.

Paul Howes

Good morning.

John Fitzgerald – Raymond James

Quick question on the Fluids side. Given the pickup in domestic activity, do you guys see the international growth still outpacing your growth domestically from a revenue perspective?

Bruce Smith

Certainly the pickup in the US has been very dramatic in this period. We still fully expect the international growth to continue at the rate it has been, and of course we are waiting and expecting several significant things to happen in our Brazilian market going forward, which would certainly add to the pickup on the international side.

John Fitzgerald – Raymond James

I guess what I’m getting at is your percentage revenues growing internationally as a total in the fluids.

Paul Howes

John, it continues to grow. I am just not sure I follow the question. Would you mind repeating it, make sure we understand it?

John Fitzgerald – Raymond James

Yes. Just I’m trying to get a – your international revenues on the Fluids side as a percentage of the total, compared to domestically, is that increasing?

Bruce Smith

Yes. The rate of growth in the international market, which is about 15% of our business, we expect it to continue to grow strongly, although perhaps not as (inaudible) as some of the same rates that we saw in this quarter over last quarter 53%. Then it’ll start to slow down, but we should see those rates continue – the growth continues to grow, and it should be a rate at least as comparable to the US.

John Fitzgerald – Raymond James

Okay.

Paul Howes

One additional comment. This is Paul. As you know, we have the Petrobras tender that is out currently. That is due to be awarded here shortly. It has been delayed some obviously. If we are successful in winning that; that is a fairly significant contract that could begin to shift the ratio above 15% in terms of our international business.

John Fitzgerald – Raymond James

Okay. And then on the margins side, is there – is the international side generally better than domestically?

Bruce Smith

Yes, that is correct. It tends to be generally a little better.

Operator

Thank you. Your next question comes from the line of Terese Fabian with Sidoti and Company. Please go ahead.

Terese Fabian – Sidoti and Company

Hi, good morning. We are seeing that you are getting market share gains in the Drilling Fluids. Can you talk about whether you are seeing changes in the competitive landscape and what would allow you to exercise some raising of prices?

Bruce Smith

The competitive landscape remains pretty much the same as it has been. We tend to be a technically-led organization, and when we bid on projects, we try to differentiate through the technologies that we have and we have never been overly aggressive on the pricing side of things. So competitively, still a very competitive market, but we are picking up the work. We are picking up work in areas that are technically demanding and we have been very successful using our technologies in those areas. Subsequently, we continue to pick up market share in that regard.

Terese Fabian – Sidoti and Company

Okay. And in the Mediterranean region, are you getting any new contracts in North Africa or Egypt?

Bruce Smith

Yes. Egypt is still the status quo currently. We are waiting for the bids to come out in Egypt as the timing period there for the bids will come out in due course. In other parts of north Africa, we are about to be rebidding our Algerian portion of business, which we expect to obtain a slightly higher increase in the percentages of work we have had in that area going forward.

Paul Howes

The other thing I might add. This is Paul. We recently completed our first successful well in the Black Sea off the coast of Romania and as a result of that we have been awarded a new contract for additional work in the Black Sea. So we are also very optimistic about that part.

Operator

Thank you. Your next question comes from the line of Karen David-Green with Oppenheimer. Please go ahead.

Karen David-Green – Oppenheimer

Thanks and good morning.

Paul Howes

Good morning, Karen.

Karen David-Green – Oppenheimer

Wanted to catch a little bit on the matting side of the business. Certainly the numbers show sequential improvement that you mentioned with the rig count still being lackluster in the Gulf Coast – the pricing is still under pressure. Can you kind of give us maybe an indication of where pricing is versus a couple of months ago and kind of how you see that going forward on the rentals side?

Jim Braun

Karen, the pricing has been under pressure; it has come down, it is certainly lower than it was – 90 days ago, certainly as well as it was versus a year ago, and it will continue to remain under pressure at these current levels, which is why we took the action we did early in the quarter to start rightsizing the business to these activity levels. Nevertheless, there still remains capacity in the marketplace, there are a number of mats and a number of operators that continue to keep a lid on our ability there to improve pricing.

Paul Howes

Karen, this is Paul, and the other things we are looking at doing is obviously trying to push out of the Gulf and to go into the Northern Louisiana market more, which we have been successful at, as well as trying to expand our footprint in western Colorado on the Piceance Basin, where we bought a business last year. So, hopefully, over the next couple of quarters, we will start to see more revenue from outside the Gulf of Mexico.

Karen David-Green – Oppenheimer

And in terms of inventory levels, can you just talk a little bit about that?

Jim Braun

The inventory of Mats – we have a combination of our composite mats in our rental fleet as well as wood mats. We are not adding any inventory, in fact, we are shrinking the inventory of mats as the wood mats are depleted and taken off the books. We are not replacing those. So we continue to contract the amount of assets and the inventory in that market.

Operator

Thank you. Your next question comes from the line of John Flanagin with First Analysis Securities. Please go ahead.

John Flanagin – First Analysis Securities

Good morning, guys. First one is concerning Fluids, perhaps for Bruce. I saw in the release reference to an unfavorable product mix and I am curious to know whether you can comment on the extent that is a function of sort of geography, or a mix of oil and gas wells. That surprised me and I am wondering what has changed this quarter?

Bruce Smith

Nothing has changed, actually. It tends to be more directly related to the rig activity and where you are specifically on a well, and different parts of wells of course are more lucrative than others; so, there is a timing as to where the wells happen to be at certain points. So it was more an issue of just the rig’s activity at the time and we don’t expect that to be a significant problem going forward, it just happens from time to time. We also had some deepwater activity, which requires ahead of the more lucrative sales, what we call pump and dump, which tends to be a large volume of lower margin fluid. They probably get into the more lucrative parts of the deepwater wells. So that was really the mix issue in the quarter and we don’t expect that to be significant going forward, it was a moment in time.

John Flanagin – First Analysis Securities

Thank you Bruce. Next on Mats and Integrated Services, and again a certain geography outside of South Louisiana, can you comment on where Paul you are seeing some success, if any, on building out the former array of services, well-side construction services in other basins?

Paul Howes

Yes. Certainly in North Louisiana in the Hanceville Shale area, in Arkansas, Fayetteville Shale; so we are starting to see activity there. We are also starting to see some increased activity in Colorado with one of our large accounts there and some additional work as well. So –

Operator

Thank you. (Operator instructions) And our next question comes from the line of Vijay Singh with Janco Partners. Please go ahead.

Vijay Singh – Janco Partners

Good morning, gentlemen.

Paul Howes

Good morning.

Vijay Singh – Janco Partners

Hey, just a question, Jim. You have mentioned that the spend-ahead that is behind you is a non-recurring measure that is not going to be – going forward is not going to affect your margins. What is that spend-ahead as a percentage of total spend-ahead, that you expect; like in Brazil, you continue to invest, what would that percentage be? I am just trying to get a sense for where the margins are going to rebound to –?

Jim Braun

Yes. In rough terms, the spend-ahead in some of the project delays were about a penny and I think in basis points it works out to about 80 basis points or 90 basis points in the quarter. So it had another full impact. Then again, we are taking actions to getting people in place, equipment in place. Many times, we are all ready to go and our rigs don’t arrive, but we still incur some of those costs, and as you mentioned, we believe most of that is behind us with the exception of Brazil and that will be an area that we continue to develop our infrastructure and our capabilities to serve the market.

Vijay Singh – Janco Partners

Okay. So the 80 basis points to 90 basis points is total, is it?

Jim Braun

For the quarter, the impact for the quarter.

Vijay Singh – Janco Partners

Impact for the quarter. But the margins declined a little bit more than that, and you may have mentioned that, I apologize if I missed it but –

Jim Braun

Certainly a piece of it was Canada. We talked about the seasonal breakup in Canada. We had about $8 million drop in revenues in Canada on a sequential basis, which had about $2.3 million profit impact. The other big items would include couple of non-recurring things that we had mentioned, as well as the ability we – or the inability I should say we have to capture all the cost increases that we saw accelerate during the quarter in fuel, transportation, and the like, we weren’t able to keep our head above that. Fortunately we will have an opportunity to do that here in the third quarter.

Vijay Singh – Janco Partners

Sure. And then lastly, just not to beat this too much, but 80 basis points to 90 basis points of total, the Brazilian side is – how much do you think that is recurring in nature, on the incomes of spend-ahead, or the ones that are behind you, how much of that would be–?

Jim Braun

I would say that about half of them are behind us.

Operator

Thank you. Your next question is a follow-up from the line of Terese Fabian with Sidoti and Company. Please go ahead.

Terese Fabian – Sidoti and Company

Yes I have a question on the Environmental segment sale. Do you still plan to use the proceeds to pay down debt at this point or are you narrowing on any acquisitions?

Paul Howes

We would use the proceeds to pay down debt, Terese, while at the same time, we do have some things in the acquisition pipeline that we continue to look at and evaluate and would have those funds available for acquisitions if needed.

Terese Fabian – Sidoti and Company

And then another question on Brazil. The production capacity of the Brazilian plant, how is that looking to you?

Bruce Smith

I think the capacity currently for the contract that we have in place is more than sufficient. I guess as we hopefully pick up more contracts in Brazil, we will relook at that position and establish whether it is sufficient or if whether we might need some more going forward.

Operator

Thank you. Next question is a follow-up from the line of Karen David-Green with Oppenheimer. Please go ahead.

Karen David-Green – Oppenheimer

Thanks. I just had another question with regards to the Petrobras tender. Is that work that you are bidding on onshore or offshore related, and most likely would that be – assuming you are successful, that would be more than ’09 impact, is that correct?

Bruce Smith

The work we are bidding on for Petrobras is offshore deepwater predominantly. There are lots A, B and C; lot A has already been awarded. So we are awaiting lots B and C, the outcome of those. What was the second part again?

Karen David-Green – Oppenheimer

In terms of start date, would that be something that you would look – if you are successful to be more of an impact in 2009 or would some of that be work beginning in ’08?

Bruce Smith

No. I would expect it to be more of an ’09 event.

Karen David-Green – Oppenheimer

Okay, great. And just one more follow-up on the Hanceville you mentioned that you have some fluid activity there. Can you maybe give us a little bit more color on the number of rigs you are working on, your outlook for that region?

Bruce Smith

The Hanceville Shale, the point that everyone is excited about is really the more technically-demanding lateral statite [ph] wells. And currently we are operating six rigs there, which is about 30% of that particular market.

Operator

Thank you. The next question is a follow-up from the line of John Flanagin with First Analysis Securities. Please go ahead.

John Flanagin – First Analysis Securities

Thank you. On the mats side, just clarifying; Paul, you. Activity, does that mean actual kind of work being performed or is that more at the bidding stage?

Paul Howes

We are actually performing more work there, but certainly as you move into the north Louisiana and the Arkansas area, it is not – some bidding in Arkansas, north Louisiana is actually work we are performing, but we are not using mats up there. It is more construction-type equipment, path preparation, that type of thing.

John Flanagin – First Analysis Securities

And the follow-up is, do you still anticipate trying to grow that business, perhaps with some small tuck-ins of operations?

Paul Howes

Yes. We remain optimistic about this business and believe that there are places that we can grow it. We desire to grow it outside of the Gulf of Mexico, and we continue to see operations, be it organic growth opportunities or maybe some small bolt-on.

John Flanagin – First Analysis Securities

Thank you.

Operator

Thank you. (Operator instructions) And our next question comes from the line of Joe Marver [ph] with Loomis, Sayles. Please go ahead.

Joe Marver – Loomis, Sayles

Hello. I am relatively new to the Newpark story, and just comparing your results against some south-side models in the Fluids business, Q2 revenues were quite a bit above expectations, yet the margins sequentially were down a fair amount. Now you have won over four buckets of (inaudible) margins, including the startups costed 80, 90 BPs. Can you give us some more granularity on some of the other areas such as the inflation and cost pressures to give us kind of a ballpark number on what that hurt in terms of margins?

Jim Braun

The Canadian was about – I mentioned 30, the startup with the non-recurring is about the 90 and then the other big piece, large part of it was the inflationary cost that we talked about. If you look at the one-times, those were about a 90 bps and the startups and project delays were about 1 basis point.

Paul Howes

Again, the inflationary pressure that we were seeing is all tied to the price of the well, obviously it relates to transportation, the fuel cost, a lot of the product technology, even our water-based technology uses hydrocarbon technology that has been polymerized. So a lot it is tied to the price of oil and it came at us so quickly that we didn’t have a chance to push it through the marketplace, but certainly in the third quarter we are very focused on getting those increases pushed through.

Joe Marver – Loomis, Sayles

Okay, and just a follow-up item. If you wanted to break your operation time between existing which is I guess largely US operations and lot of the startup areas where you are incurring costs ahead of revenue, is it possible that the existing areas had margins maybe in the range of what you have done in Q1 and the startup areas were perhaps low or possible even zero?

Paul Howes

I think that is a fair characterization.

Joe Marver – Loomis, Sayles

Alright. Thank you.

Paul Howes

Thank you.

Operator

Thank you. Next question is a follow-up from the line of Terese Fabian with Sidoti and Company. Please go ahead.

Terese Fabian – Sidoti and Company

Hi, just a quick question on the Mat segment. What is driving mat sales and is this something that you anticipate continuing higher in coming periods?

Paul Howes

Terese, we have made a conservative effort over the past year to spend more time understanding the opportunities internationally for composite mat sales. We have seen some benefit there. We do expect it to continue at a level above the $1 million to $2 million to $3 million that we historically experience. But a $10 million quarter was extremely high and we would think it would moderate after that, but we do think it will continue to be an important part of this business.

Terese Fabian – Sidoti and Company

Okay, thank you.

Operator

Thank you. Mr. Howes, at this time, I will turn it back to you for closing comments. Please go ahead.

Paul Howes

Thank you. We would like to thank you once again for joining us on this call and for your interest in Newpark Resources. We look forward to talking to you again after the conclusion of our third quarter. Take care.

Operator

Thank you. Ladies and gentlemen, that will conclude today's teleconference. If you would like to listen to replay of today's conference, please dial into 303-590-3000 and enter access code of 11115505 followed by the pound sign. We thank you again for your participation and at this time, you may disconnect. Have a nice day.

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