NPK International Inc (NPKI) 0 Q0 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Newpark Resources conference call.

At this time, all participants are in a listen-only mode.

Following today's presentation, instructions will be given for the question-and-answer session. [OPERATOR INSTRUCTIONS].

As a reminder, this conference is being recorded today, Monday, November 13th, of 2006.

I would now like to turn our conference over to Ken Dennard, DRG&E.

Please go ahead, sir.

Thank you, Rose.

Good morning, everyone.

We appreciate you joining us for our Newpark Resources conference call to review Thursday's news release.

We'd also welcome our internet participants listening to the call live over the web.

Before I turn the call over to management, I have the normal housekeeping details to run through.

We are currently building the e-mail distribution list for Newpark, so if you did not receive an e-mail releases last week or anything from DRG&E, please call us at 713-529-6600 and provide us your contact information.

Or you can e-mail me at KSDennard@DRG-E.com.

Either way we want to get you added to the e-mail list if you so choose.

Also, there will be a replay of today's call.

It will be available by web cast by going to the Company's website at www.newpark.com.

There'll also be a telephonic recorded replay, which will be available for a week until November 20th.

And that may be accessed dialing 303-590-3000, using the pass code 11073370 pound.

Please note that information reported on this call speaks only as of today November 13th, 2006.

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 management of Newpark during the conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Acts of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.

These forward-looking statements reflect 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 statements made by management.

The listener is encouraged to read the Company's Amendment Number Two to annual report on Form 10-K A for the year ended December 31st, 2005, and the Company's quarterly report on Form 10-Q for the quarter -- quarterly period ended September 30, 2006 to understand certain of those risks, uncertainties, and contingencies.

Now, before I turn the call over to Paul Howes, the Company's President and CEO, let me give everyone a quick overview of Paul's background.

Prior to joining Newpark, Paul served as president and CEO of Astaris LLC, a primary chemicals company headquartered in St. Louis with operations in North America, Europe, and South America.

During his tenure at Astaris, Mr. Howes was instrumental in reshaping the business from a marginal industry player to a highly-respected company.

His career also included experience in the aerospace and defense industry, chemicals and plastics manufacturing, and the packaging industry.

Now with that, I'd like to turn the call over to Paul.

Thank you, Ken.

We are very happy to be having this conference call today, and thank you all for joining us.

With me today is Jim Braun, our Vice President and Chief Financial Officer.

As many of you know, we have been extremely busy for the past several quarters analyzing, reviewing, investigating, and reorganizing and doing everything possible to get this Company on the right path and position for future growth.

A quick review of the time line goes as follows -- I joined the Company on March 22nd, 2006; we announced on April 12th that the Board of Directors commissioned an internal investigation regarding potential irregularities, involving the processing and payments of invoices by one of our smaller subsidiaries, Soloco.

An outside independent council was also engaged to assist in this examination.

During the course of the investigation, the audit committee also requested a review of the Company's policies regarding the awarding of stock options, which was considered appropriate given the emphasis by the SEC on stock option grant policies.

Based on the findings from this internal investigation, and in conjunction with our auditors, on October 10th we announced the filing of our restated financial results for the years 2003 to 2005 on Form 10-K A. The Form 10-K A is available on the Company's website at www.newpark.com.

We believe the take away from this activity is that we have thoroughly examined our accounting practices and financial controls from the past management and have started to make the appropriate adjustments to move this Company forward.

We also believe that the restatement has not materially impacted our liquidity and financial standing.

In addition to completing the financial restatements, we have been and continue to reevaluate all business lines; and as announced on August 30th, we decided to exit Newpark's Environmental Water Solution operations, which we called NEWS, a division formed in early 2005 to test and market a proprietary water treatment technology.

Upon final examination, we determined that the technology is not commercially viable at this time and to commit further resources to that venture would not be in the best interest of our shareholders.

Thus, we are exiting this business completely.

So with the financial restatements and the decisions to shut down NEWS behind us, we are now fully focussed on developing our long-term strategies and growing the Company with sound goals and objectives.

Our core drilling fluids business, which we now call Fluid Systems and Engineering, is performing very well, outpacing market growth in its areas of operations.

And we believe that our position in these markets will allow us to continue to deliver strong results as the business fundamentals remain robust.

We continue to assess our portfolio of assets and have engaged Charles River and Associates advise us as we evaluate our strategy going forward.

At the end of this process, it's our belief that we will have a focussed strategy that will guide the Company in creating increased shareholder value.

We will give you an update on this process on our fourth quarter earnings call.

Without strong capable leadership, strategy alone is not going to get us where we want to be.

With this in mind, we are very pleased to have recently announced new executive management talent filling the roles of chief financial officer and chief administration officer.

Jim Braun has joined us as Chief Financial Officer.

Jim brings 25 years of professional, financial experience to Newpark and has a career that has been well-balanced between public accounting and public company experience, including strategic leadership and Sarbanes-Oxley compliance.

Most recently, Jim's responsibilities included financial management of $1 billion global oil field service business of Baker Hughes, where he also served as a member of the leadership team responsible for the strategic direction of the company.

Mark Airola has joined us as Chief Administration Officer.

Mark brings us over 20 years of professional legal experience, primarily with public companies, including senior litigation counsel positions in the areas of environmental regulation and compliance and commercial litigation.

Prior to joining Newpark, Mark has been assistant general counsel and chief compliant officer for BJ Services Company since 1995.

From 1988 to 1995, he held the position of senior litigation counsel at Cooper Industries, Incorporated.

We have built this management team with experienced oil field service professionals that we believe bring integrity and foresight to the positions at Newpark.

We also recently announced the appointment of David Anderson to the Board of Directors.

David is the founder and CEO of Anderson Partners, which provides senior level executive search and related management consulting services.

He has also served on the Board of Trustees of the American Management Association, where he was chairman of the Compensation and Benefits Committee and a member of the Nominating and Corporate Governance Committee.

Our Board will certainly benefit from expertise in these capacities.

Last week, James McFarland was also elected to the Board of Directors.

James is a professor of finance and economics at Tulane's Freeman School of Business and was Dean at Freeman between 1988 until 2005.

He was also a professor at the University of Houston from 1976 to 1988, and served as a Dean at the school's College of Business Administration from 1985 to 1988.

James serves on the boards of numerous public companies and other organizations.

I also want to say that we are very fortunate to have strong leaders serving our -- as presidents of our business segments.

Bruce Smith of Fluid Systems and Engineering, Sean Mikaelian of Mats and Integrated Services, and Sammy Cooper of Environmental Services.

In addition, I am pleased to have Tom Eisenman, President of Excalibar, running our barite business.

With our new leadership team in place, everyone is focussed on the strategic planning process that we are currently undergoing.

In the meantime, we are focused on maximizing our current lines of business with special emphasis on our core Fluid Systems and Engineering business.

I would now like to turn the call over Jim Braun, who will quickly review third quarter and year-to-date results.

Jim?

Thank you, Paul.

I will quickly run through the highlights of the third quarter and nine month period before we go to the Q&A.

For the third quarter ended September 30th, 2006, we reported a net loss of $2.3 million or $0.03 per share on revenues of $170.1 million.

Quarterly revenue grew 22.3% from the third quarter of 2005.

The latest quarterly results included the following pretax items -- an impairment charge of $17.8 million, related to the shutdown of the NEWS operations; a NEWS operating loss for the quarter of $1.4 million; a $4.2 million gain from the receipt of business interruption insurance proceeds; $1.2 million of expense related to the early repayment of long-term debt; and costs associated with the internal investigation and litigation of $0.6 million.

For comparative purposes, the third quarter of 2005 net income was $5.2 million or $0.06 per diluted share on revenues of $139.1 million.

For the nine months ended September 30th, 2006, we reported net income of $9.8 million or $0.11 per diluted share on revenues of $501.7 million.

This compares to net income of $15.3 million or $0.18 per diluted share on revenues of $409.7 million for the first months of 2005.

This represents a year-over-year revenue improvement of 22.5%.

The press release has a high level summary of the segment data; and the 10Qs, of course, have all the details on the quarter.

But the take away is that our core operations have been growing.

Fluid Systems and Engineering revenues rose by 25% through the first nine months of 2006; and operating margins, adjusted to exclude the proceeds from business interruption insurance, expanded to 12% from 10.1%.

We are looking forward to building upon this growth as we move through the strategic planning process mentioned earlier.

Turning to our balance sheet and liquidity position.

As of September 30th, 2006, our working capital stood at $210 million with our cash balances at $6.2 million.

Total debt ended the quarter at $221 million, and our total debt to capital ratio was 38%.

In August, we entered into a new $150 million term loan facility with the proceeds primarily used to redeem our senior subordinated notes.

The receptiveness of the credit market to our term loan was quite strong, which was oversubscribed by twice the size of the facility.

As of September 30th, 2006, the maximum amount we could borrow under the revolving portion of the credit facility was $70 million.

At September 30th, 2006, $6.9 million in letters of credit were issued and outstanding, and $50.2 million was outstanding under the revolving portion of the credit facility, leaving $12.9 million of availability.

Finally, with regard to providing guidance on future results.

Given that we are in the midst of our strategic review of all business lines, we feel it would be premature at this point to provide quarterly or annual revenue or earnings guidance for the remainder of 2006 and 2007.

We do intend to to provide such guidance at some point in the future, once we gain full comfort in this process.

With that, I'd like to turn the call back to Paul.

Thanks, Jim.

Our base business remains strong.

We had a solid third quarter performance and have the opportunity to build on this momentum.

Overall, we see the industry dynamics being strong, with continued tightness that should allow us to leverage up our pricing across most of our operating businesses.

In addition, we continue to focus on reducing our operating expenses and optimizing our capital expenditures.

We're optimistic about our business prospects.

In particular, we believe the market's acceptance of our product offering in the Fluid Systems and Engineering segment is demonstrated by a recently-awarded contract by one of the major integrated international oil companies where we will supply the company our drilling fluids to 75% of all of its U.S. land-based wells.

We were also put on that same major's offshore bidding list, a first for Newpark.

So we are very confident we have the right technology in our business to be competitive.

Before I turn the call over to questions, I would like to say that since joining Newpark back in March, I've become even more excited about our opportunities to turn this Company around and create value for our shareholders.

We are not in the business of dwelling on the past, rather we are in the business of focusing on the future and growing our businesses and accomplishing this in the most ethical and transparent way possible.

I would like, again, to personally thank all of our customers and stakeholders who have supported us, as well as our employees who have shown dedication and have continued to focus on our customers.

We look forward to reporting on our progress as we move forward.

We will now take your questions.

Operator, please.

[OPERATOR INSTRUCTIONS]. [Collin Gary], Raymond James.

Hi, guys.

Congratulations on the turn around.

And it's nice to hear you back on conference calls talking to investors again.

Thank you, Collin.

Real quick, it looks like Fluids division did great this quarter, and the profitability was certainly there.

And just to update us -- it's been a while -- do you know -- was that a function of pricing or were you all able to find some cost-cutting initiatives throughout this restatement process?

Or, I would imagine, a function of both?

Well, Collin, this is Paul.

The -- again, the industry dynamics have been strong for us there.

We continue to try to be opportunistic and drive pricing where we can.

But also, we are very focused on the operating expenses and have internal programs there where we're looking to continue to drive our expenses down.

So I would say it's coming from both ends.

But margins in that magnitude certainly sustainable going forward.

I mean, I know you're not necessarily giving guidance, but no reason to think this is an outlier of sorts?

Again, our commitment is to our shareholders is to continue to improve shareholder value and as I said earlier, we feel pretty optimistic that the industry dynamics are in our favor.

We'll continue to work on pricing and work on operating expenses going forward.

Okay.

One other question, last time we were speaking with Newpark, the Brazilian joint venture was somewhat of a new wrinkle.

What's the status there?

Are we up and running in Brazil or is that still going forward?

Yes, Collin, the -- that joint venture is in place.

It is up and running.

We have an [expat] that has been located down there now for some period of time.

But still in the early stages of building that business and so -- again, it's a small beach head at this time, but one that we feel very good about going forward.

Right.

So no real contribution in the third quarter numbers?

Jim --

No.

I don't believe so.

Okay.

And last question, another trend that we were following with you guys coming into this was kind of diversifying outside the historic bread and butter Gulf of Mexico market.

Any update as far as international diversification or just -- in the other regions as well within the U.S.?

Yes, Collin.

The -- I think you're familiar that we do have an operating business in Europe called Ava that has been doing very well.

And that continues the grow.

We -- we certainly as part of our strategic planning process that we've undertaken with support from Charles River and Associates understand the -- how tightly tied we have been historically to the Gulf of Mexico.

And that will be one of the questions that we'll be addressing in the strategy, and we'll certainly report that to you once we complete that activity.

Okay.

Well, thanks a lot.

That answers most of my questions.

And, again, glad to have you back.

Collin, thank you for the questions.

Corey Greendale, First Analysis.

Hi.

Good afternoon.

And it's good to talk to you.

Got about three quarter's worth of pent-up questions, but I'll keep it to a couple then get back in the queue.

The first question I had is -- I realize it's probably a little bit premature because you're still working with the consultants on the strategic direction, but reading between the lines a little bit, it sounds like you're pretty focussed on the Fluids and Engineering business more than the others.

So could you just comment at all about what possibilities are kind of on the table?

If there's a possibility that you could end up exiting or divesting those other businesses?

I think it's premature to -- Corey, to stake any really related to portfolio management at this time.

Clearly, the -- the engineering -- Fluids System and Engineering is roughly -- [I don't know] -- 70, 75% of our business.

It really is our platform for growth going forward.

And the real reason for emphasizing it today on the call is historically the prior management really emphasized NEWS and water treatment as our platform for growth.

We don't believe that today, obviously, because of exiting that business.

We believe that there are a lot of opportunities in the Fluid Systems and Engineering segment.

But we feel very good, as well concerning our other businesses.

So it's a little premature yet to speculate on any divestitures or any acquisitions.

Okay.

I understand.

On the fluids business, then?

Actually first of all, could you say a little bit more about that new contract you mentioned?

Is this a new customer for you and if you can give us any sense of the magnitude of that contract?

It -- it is not a new customer, it's a customer that we've been cultivating a relationship with for several years.

Beyond that, the fact that we've achieved a contract for 75% of all their land-based wells is significant for us.

And the fact that we've also been put on their offshore bidding list is a first for Newpark.

So we are very excited about that.

But really not prepared to bracket that anymore in terms of magnitude.

Okay.

And I'll sneak in one more and then get back in queue.

Actually, a question for Jim, which is, one of the questions about Newpark has kind of been the free cash flow historically, and looking -- obviously, the revenues are growing nicely.

The Fluids business doing well, but the free cash flow's still running negative.

Can you give us a sense, first of all, if looking at the cash flow from operations, if you back out the insurance recoveries is that what that's -- negative to the first nine months, if there's any timing in that.

If you think this starts to get more cash flow positive going forward?

And if you have any sense to what the normalized CapEx is excluding the -- obviously, excluding the water treatment business?

One of the things that we've focused on and committed to improving is our working capital management, particularly our receivables and our inventory management.

At the end of September, we did have a little blip in inventory as we took some positions in barite to make sure we locked in some good supply at good prices.

But certainly we want to -- we want to do better than we have been on the working capital management side.

Okay.

And on the CapEx, do you have a sense yet what the --?

Capital expenditures.

We look and anticipate to spending absent some unique opportunity, something around the depreciation levels moving forward.

All right.

Thanks, I'll get back in queue.

Thank you, Corey.

[Jason Felch], Equity Group Investments.

Yes.

First thing is it looks like the operating margin for the fluids is about 16% in the third quarter, I think that's a record margin.

I was wondering whether that's a sustainable rate or whether it's caused by some kind of one-time event.

Jason, this is Jim.

Let me take that one.

There were some insurance proceeds that may be inflating your number a bit on the margin.

I don't know if you've factored that into account.

Okay.

So on the fluid side, the insurance side is being categorized as an operating event?

The insurance proceed from the business interruption --

Okay.

-- are reported in those numbers and in our 12% that we mentioned in our conference call, we had adjusted or backed those out to take that out of the equation.

Okay.

Well, I'll see if I can make that adjustment.

The second thing is that I think you're running at about 5 million a quarter in G&A, and I think it had been about half that prior, and I know that there's a lot of unusual expenses going on.

I was wondering whether you thought you would be able to get back to the old rate of 2.5 million a quarter?

Yes, Jason, this is Paul Howes.

Certainly, we've been experiencing additional expenses in G&A as it relates to some of the defense work on the class action and the shareholder derivative suits we have.

As well as we're spending more money, certainly, in the area of strategic planning trying to get our Company focused on future growth opportunities.

So certainly going forward, I would expect those numbers to come down some.

But to a target, I'm not really willing to commit to anything at this time.

Okay.

Well, thanks a lot.

Congratulations.

It looks great.

All right.

Thank you, Jason.

Stephen Mead, Anchor Capital Advisors.

Yes, hi.

Hi.

Can you be more specific on the pricing issue in terms of what kind of pricing you're getting?

And just looking back over on a sequential basis or a year-over-year.

And also, relate that to the mix.

And if you could -- the hurricanes had an impact on your fluid business in the third quarter of last year.

And I was wondering sort of on an organic basis, what kind of year-over-year growth you were seeing?

Well, certainly from the growth side in our Fluid Systems and Engineering, you're right, it was impacted by the hurricanes in the Gulf.

All of that growth year-over-year has been organic in nature.

So 100% of the growth has been organic.

With respect to price mix volume, we're really not prepared in terms of prior years, I don't think, Jim, to be able to quantify that on the call.

But --

You're correct, Paul.

There certainly was a hurricane impact, but a good portion of that increase came from higher activity levels and our ability to get more revenue per -- per rig that was operating.

How much -- in terms of number of rigs, have you released sort of what the -- the number of rigs that you were working on in the fourth quarter?

No, we have not.

And then on a revenue per rig basis, what's the driver of that?

And is it -- pertain to a particular fluid product verses one verses the other?

No.

It's -- more deal with the nature of the drilling and where it's being -- where the rigs are working and some of the tight gas areas around that's providing more opportunity to produce revenue for that particular rig as opposed to other areas.

And then the price of barite.

What is that doing?

And as a percentage of your costs, how much does it account for in terms of -- of your cost of goods sold?

The cost of barite is certainly increasing.

It's a product that we import from overseas so it has a -- also a cost element that's associated with transportation that has continued to rise.

So that cost is increasing.

It does certainly make up a fair element of our total cost of our product, but we're not really prepared today to disclose that kind of information.

Okay.

Thanks.

Thank you.

Joe Feshbach, JFP.

Hi, guys.

Just a couple of quick ones.

A follow-up on the new drilling fluids contract.

Just curious whether the expansion of the contract impacted any quarter this year, particularly Q3, or whether that expanded relationship is something to look forward to over the next several quarters?

The -- that new contract that we signed with that major oil company was signed in the third quarter.

So there may have been some revenue associated with that in the third quarter, but I would estimate that to be relatively small.

Got it.

And then can you just talk about the -- give us a little color for the sustainable growth rates outside of drilling fluids and -- outside of drilling fluids and environmental and [matting] just to sort of get a concept of how important those businesses potentially could become?

Well, Joe, again, as you know and I've said earlier, we're in this process of pulling together our strategic plan and looking at those two businesses.

I don't think I can really give you any information on what we expect going forward right now, though.

That process will be completed here in the next quarter or so.

Certainly in the case of Newpark Mats & Integrate Services, that's a business that had been 5 separate operating companies that we've now brought under one umbrella, one leadership.

And Sean Mikaelian is running that business.

And what we're really trying to do there is to break down some of the barriers between those operating companies, leverage some of the synergies that existed there, say, in purchasing contracts, and we're in the process of doing it.

So it's a little premature at this point for us to give any guidance in those businesses.

No problem.

Well, nice work.

Thanks.

Thank you, Joe.

[OPERATOR INSTRUCTIONS].

Karen Green, Oppenheimer.

Thank you.

And congratulations, gentlemen, on getting the filings caught up in a very strong third quarter.

Paul, I was wondering if you could comment just a little bit more about your plans to reduce operating expenses, give us a little bit more color on how you plan to do that, maybe how quickly and how much actually showed up in the third quarter.

Just philosophically, a little bit of color there.

As I mentioned earlier in the Mats & Integrated Service area, we're bringing together 5 separate operating companies; and we're trying to leverage some of the purchasing synergies that exist amongst those units that historically have not been leveraged.

We've got some redundancy in other areas that we have to look at.

Certainly on the -- on the Fluid Systems and Engineering side, continue to, again, look at raw materials, logistics, I think everyone in this industry has been experiencing higher costs and -- as it relates to transportation.

So, again, focusing on how to leverage and pull together our purchasing contracts, which historically have not occurred.

And also, again, we're going to look very closely at payroll throughout the system, throughout the companies, as well.

So that's a little color on where we're looking on the expense side.

Again, to give you any guidance on how much or when probably wouldn't be appropriate.

As it relates to third quarter, very minimal savings at this point.

We're just starting to get -- start the initiation of some of these activities internally, so.

Right.

So on a scale of 1 to 10, you're probably closer towards the bottom end of that in terms of where you are right now verses where you're going?

I believe so.

Thank you.

Corey Greendale.

Hi, thanks for taking the follow-up.

Could you just comment -- talk a little bit more about the dynamics in the fluid business in the third quarter just from reading the color in the Q, it sounds like the -- looking at the overall market in the Gulf, your share was down a bit, but revenue per rig was up quite a bit.

Can you just talk about how much of that was kind of intentional?

How much you're more gearing toward?

Maybe the deeper -- the rigs that are drilling deeper.

How much was unintentional share loss and just what were the dynamics there in the quarter?

I'll be quite -- how much was intentional, unintentional -- I don't really know that we have that kind of a focus right now.

I think any quality revenues important to us, whether it's in the Gulf or whether it's in the mid-continent or any other region of the country.

And so the mix changes sometimes depending upon key customers and if they're taking on more rigs and drilling, we pick up more activities.

So it's probably more driven by individual customers and contracts we have in place than any intention on our part right now to move away from one region to another.

Okay.

Can I ask you about the personnel at this point?

Are you -- do you have everyone in place that you think you need to have in place?

And can you comment on turnover, Paul, since you've come in, either unintentional or intentional, with all the -- everything that's been going on there?

Sure, Corey.

In terms of the senior leadership team, we're -- we have the team in place now with individuals that I referenced in the lead-in.

Feel very comfortable with the team we're going to go to market with.

In terms of turnover within the Company at, say, lower levels, not -- turnover rate has not been any different than what it has been historically down in the Company.

Obviously, we're in a very tight market.

Resources are hard to find, and good people are in high demand.

But we believe we're holding on to our good people throughout the Company.

So that's kind of where we are.

We continue, though, to look for some other key positions in the organizations as we go forward.

So part of what we're going to be doing, too.

Historically, we've never had a succession planning process in the Company, so we're also putting that in place.

Okay.

And if I can just sneak one more in.

On the insurance side.

First of all, are the facilities that were damaged by the hurricanes, are those up and running at full-speed?

And, Jim, do you know what line the $1 million insurance recovery in Q2 fell under?

I didn't see if it was in one of the operating segments or in G&A.

If you know that, that will be helpful.

The -- the facilities in the Louisiana Gulf Coast are up and running, and the insurance proceeds have been recorded in the operating units as a reduction of the cost of sales.

Do you happen to know -- because it gave a pretty good break out for Q3 where that fell.

But I didn't see it in the Q2 Q, where the $1 million fell.

Do you happen to know that?

I don't have it with me, but I can -- if you get back with me, I can tell you where that was.

No problem.

Thanks much.

[OPERATOR INSTRUCTIONS] Stephen Mead.

Yes.

Can you actually provide a little more color on the Mediterranean and the Brazilian business in terms of the share of the foreign side and the contribution to growth?

And also, just comment about the profitability of that business, relative to your base North American business.

Jim, would you like to answer that?

Sure, Paul.

As we mentioned in an earlier question, the Brazilian business is a start-up business that has yet to contribute significantly to the operating results.

As you know, Brazil is a very large market, and it's one that we look to take advantage of.

In terms of our Ava operations in the Mediterranean which includes Italy and North Africa, they've continued to grow faster than some of the other regions and their profitability tends to be a little higher, as well.

So that's an area that's done well for us.

And your guidance of the 40% growth, was that 40% for the whole of 2006 or was that 40% growth in the fourth quarter versus last year?

I'm not sure I remember making a comment on a 40% growth.

The comments that were made in the remarks talked about year-over-year and they were in the 22.5 in one period and 25 in the other.

Okay.

No, I think maybe the 10-Q had a 40% growth number for 2006?

Or -- on the Mediterranean business or the --

That's correct.

If I remember correctly, it was saying that year-over-year growth was expected to be around 40%.

Okay.

And that's for the whole year 2006 versus 2005?

That's correct.

Okay.

[Cory Armand], [Reitholter].

Good afternoon.

Can you comment on when you'll be able to tell us about the results of your strategic planning process and how will you communicate those results to us?

And in terms of emphasis, is your strategic planning process focused on reducing expenses or is it more focused on adding new revenue streams?

In terms of timing, again, probably a little premature to give you any particular time frame.

Although I think we referenced it'll be early next year.

As it relates to the focus, certainly there's an element always, I believe, on trying to get to a -- your lowest cost position, but we're also very interested in growing this Company and so we're going to look at how we can accelerate the organic growth as well as look -- what can we do from an acquisition perspective.

So it'll be very comprehensive in terms of a strategy.

And as I said in my opening remarks, we'll probably give you an update on when that strategic planning process will be completed during our fourth quarter earnings call.

Okay.

Great.

Thanks.

Thank you, Cory.

And we have no further audio questions at this time.

Please continue.

Okay.

I want to thank you all for joining us on this call and for the interest in Newpark Resources.

We look forward to talking to you again on our fourth quarter earnings call.

Good-bye, and thank you.

Thank you.

Ladies and gentlemen, this does conclude the Newpark Resources teleconference.

You may now disconnect.

Thank you for your participation, and please have a pleasant day.