RPC - Q1 2024
April 25, 2024
Transcript
Operator (participant)
Good morning, and thank you for joining us for RPC, Inc.'s Q1 2024 conference call. Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmit, Chief Financial Officer. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. I will now turn the call over to Mr. Schmit.
Mike Schmit (CFO)
Thank you, and good morning. Before we begin, I want to remind you that some of the statements that will be made on this call could be forward-looking in nature and reflect a number of known and unknown risks. Please refer to our press release issued today, along with our 2023 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net. In today's earnings release and conference call, we'll be referring to several non-GAAP measures of operating performance and liquidity. We believe these non-GAAP measures allow us to compare performance consistently over various periods. Our press release issued today and our website contain reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. I'll now turn the call over to our President and CEO, Ben Palmer.
Ben Palmer (President and CEO)
Thanks, Mike, and thank you for joining our call this morning. Before we get started, I'd like to take a moment to share some unfortunate and sad news. Our longtime Head of Investor Relations and Vice President of Corporate Services, Jim Landers, passed away a few weeks ago after a long and courageous battle with cancer. I worked closely with Jim here at RPC for more than 20 years, and he was a tremendous contributor to the company in so many ways. I'm sure those of you listening today who were lucky enough to work with him over the years, know he was also a great friend and colleague. He will truly be missed by all of us. Shifting to the quarter, as you can see from our earnings release, the Q1 was a soft start to the year in what feels like a muted oilfield services market.
Though we did not give explicit financial guidance for the Q1, we did expect more stable EBITDA. Our activity level and pressure pumping was down modestly on a sequential basis compared to the Q4 of 2023, contributing to our overall results finishing below our original expectations. Unlike some recent quarters, where we have seen more volatility in pressure pumping compared to other service lines, revenue performance was generally consistent throughout the business. Our total revenues declined about 4%, with pressure pumping down 5% and other service lines in aggregate down 3%. The frac market remains highly competitive. We have seen some fleets moving into the Permian from gassy plays, adding capacity to an already crowded basin. In addition, ongoing operating efficiency gains have created additional pump hour capacity.
Regarding pricing, motivation to keep assets utilized and absorb fixed cost has certainly impacted industry pricing compared to year-ago levels. We are working vigorously to control costs to be as competitive as possible in this environment. We are also balancing our interest in putting our assets to work with our preference to not burn them out on low-return projects. Our Tier 4 DGB fleets are highly sought after and generally serve semi-dedicated customers. Regarding our new Tier 4 dual-fuel fleet, we eagerly await bringing those assets into service around mid-year and expect to have solid utilization for this new fleet for the remainder of 2024. We highlight that our operational performance on existing Tier 4 DGB assets has been quite strong. For example, our gas substitution efficiency has sustained an average of above or about 65% over the past few quarters.
We believe this efficiency metric is among the best in the pumping industry and demonstrates our ability to effectively operate these high-quality assets and drive value for our customers. As we have said before, we intend to continue to invest in fleet upgrades. To reiterate, when we place the new Tier 4 DGB fleet in service in a few months, we will be pulling a Tier 2 diesel fleet out of service, so we do not add to industry capacity. Likely, repurposing those assets in other parts of our business or keeping them as spare parts and equipment. We continue to monitor the market for electric fleets. While we do see the benefits of this evolving technology, we also see some potential shifts around the ideal long-term technical and power source solutions.
We will continue to invest in our fleet with a strong focus on upgrading to Tier 4 dual fuel. In our view, dual fuel assets have a long demand runway, and we will focus our efforts and capital in this direction until we feel the risk-return profile on investments in electric fleets is further in our favor. Regarding how we see the next few quarters playing out, visibility remains limited, but we are certainly encouraged by the recent increase in oil prices, with WTI reaching above $80 a barrel recently. The rally is in part attributed to geopolitical events, which can be, of course, unpredictable and reverse quickly, but also supported by a strong U.S. economy.
If this level is sustained, we are cautiously optimistic that many of the smaller private E&Ps that make up the spot and semi-dedicated pressure pumping market will steadily increase activity, while the larger E&Ps stick to budgeted expenditures and exercise capital discipline. Mike will now discuss the quarter's financial results.
Mike Schmit (CFO)
Thanks, Ben. I'll now discuss the Q1 results with sequential comparisons to the Q4 of 2023. Revenues decreased 4% to $378 million, driven by a combination of moderately lower industry activity and some competitive pricing concessions. Breaking down our operating segments, technical services revenues decreased 4%, driven by pressure pumping, our largest service line within that segment. Technical services represented 94% of our total Q1 revenues. Support services were down 9% and represented 6% of our total quarter revenues. The following is a breakdown of our Q1 revenues for our top five service lines. Pressure pumping, 46.6%; downhole tools, 24.8%; coiled tubing, 8.8%; cementing, 7.3%; rental tools, 4.2%.
So together, these top five service lines accounted for 92% of our total revenues. Cost of revenues, excluding depreciation and amortization, during the Q1, decreased by $2.8 million to $276.6 million, from $279.4 million, or a 1% decrease. Despite lower sales, total employment expenses were flat, and maintenance and repairs costs increased slightly compared to the Q4, contributing to margin compression. On another note, materials and supplies were a higher percentage of our sales mix, which also impacted our margins. SG&A expenses were $40.1 million, up slightly from $38.1 million. The increase in SG&A was due to total employment costs and was in part due to the timing of certain accruals.
Diluted EPS was $0.13 in the Q1, down from $0.19 in the Q4. There were no non-GAAP adjustments to these figures. Adjusted EPS, or sorry, adjusted EBITDA was $63.1 million, down from $79.5 million, with adjusted EBITDA margin decreasing 340 basis points to 16.7%. Again, there were no adjustments made to these measures for unusual items. Operating cash flow was $56.6 million, and after CapEx of $52.8 million, free cash flow was $3.8 million. We noted that Q2 will have a heavy spend as we make final payments and accept delivery of our new Tier 4 DGB fleet.
While our guided CapEx range of $200 million-$250 million in 2024 remains unchanged, we may manage the lower end of that range, depending on market conditions in the second half of the year. During the quarter, we spent nearly $10 million on share repurchases, of which $7.5 million was under our buyback program, and we paid $8.6 million in dividends. Thus, we returned more than $16 million of capital to our shareholders between our cash dividend returns and our buyback program. We continue to maintain a debt-free balance sheet with a strong cash position of $212 million at quarter end. We remain proud of our healthy financial position, a function of our ongoing discipline and conservative approach.
We're also pleased to share that subsequent to the end of the quarter, we received a $52 million tax refund, including interest, from the IRS this week, related to past tax years. I'll now turn it back over to Ben for some closing remarks.
Ben Palmer (President and CEO)
Thanks, Mike. So looking ahead, we are encouraged by oil price trends and optimistic for an uptick in rig count. This should translate into improved activity, which would hopefully be accompanied by disciplined pumping capacity management in the marketplace. We also see potential for increased activity by smaller E&Ps as a fallout from the wave of M&A in the larger M&A space, E&P space, excuse me. As mergers and acquisitions close, we see possible non-core asset divestitures, with the acreage moving into the hands of our customers. We would be well positioned to capitalize on this trend, given our deep customer relationships. We are, we are strong, not only with spot and simulated dedicated customers in pressure pumping, but our other service lines have excellent relationships with both small and large E&Ps. We continue to be presented with opportunities to use our strong balance sheet to grow the business.
We're confident that in time, we will find attractive acquisitions to increase our scale, bolster our service lines, broaden our customer relationships, and of course, provide a solid return on capital. As we said last quarter, we are patient buyers and believe a potential silver lining to current industry conditions will be the availability of attractive acquisition targets. In the meantime, our balance sheet is quite strong, supporting our $0.04 per share quarterly cash dividend and opportunistic share buybacks. If over time, we maintain an elevated cash position, we would likely assess options to return additional capital to investors at an accelerated pace. In closing, I want to reiterate that in an often volatile market, our discipline remains consistent, with a focus on financial stability and long-term shareholder returns.
Thank you to all our employees who work tirelessly to deliver high levels of service and value to our customers. Thanks for joining us this morning. At this time, we're happy to address any questions.
Operator (participant)
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you have been called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star one to join the queue. Your first question comes from Stephen Gengaro with Stifel. Please go ahead.
Stephen Gengaro (Managing Director)
Thanks. Good morning, everybody.
Ben Palmer (President and CEO)
Good morning.
Stephen Gengaro (Managing Director)
So a couple from me. I think just first, can you talk about the just the overall pressure pumping market? The kind—like, so I'm thinking about the competitive landscape. You talked about competitive pricing environment and how you think about either holding assets back or marketing assets at current price levels. And also, how do you think that evolves over time as far as the pricing structure?
Ben Palmer (President and CEO)
Stephen, this is Ben. Good question. You know, we're gonna exercise a lot of discipline, have exercised discipline. We have clearly, compared to a year ago, there has been some degradation in pricing, and that's clearly affected our results. But we talk about it often. We do have some, you know, floors that we've established. We're not bidding everything at those floors today. But we're gonna remain disciplined. We're not gonna burn out our equipment. There's been a bit of volatility here recently. There have been some people dropping down, trying to take, quote-unquote, "take advantage" of the spot market and the semi-dedicated market. So we're seeing some of that taking place.
I don't know if that's an indication of some others having some pressure on, you know, their businesses. But but it's something that, you know, we're our team is very agile, you know, very in tune with the market, participating in a lot of opportunities. And as I said, we're gonna remain disciplined. Certainly, I think the market to get better, we're gonna obviously have to see increased activity. We're gonna have to see some of that capacity absorbed, to where, you know, the service companies can have a little bit more control over the pricing demand, rising to the point where we can realize a bit more stability. We're working really, really hard with our customers. You know, we're our own worst enemy with how efficient we're being.
Our efficiency measures, when we look back over the last 12 months, our efficiency is up considerably with our fleet. And unfortunately, again, in this environment, it's not necessarily translating immediately or directly into better financial results. But I think that is kind of—I think that's consistent with everybody. We're just in a, we're in an not unusual, I mean, this is a normal market, right? It's a highly competitive market. And we'll work through it. We're prepared to take more significant steps if we need to. But right now, we feel that... You know, we talked about pressure pumping revenue was down slightly more than some of the other service lines, but you know, the margin change or indication was similar.
I mean, pressure pumping is not the contributor to any decline in or an outsized contributor to changes in our operating performance. So everybody, on a relative basis, you know, we're talking about a fairly small change in revenues, and so, you know, there's some volatility in their pressure pumping. Our pressure pumping group hung in just fine, as you would expect it, with a kind of a single mid-single digit revenue decline. So we're not displeased with core. I think we're more disappointed with, you know, the environment, that it wasn't a little bit stronger coming out of the Q4.
Stephen Gengaro (Managing Director)
Thanks. I apologize because I jumped on a little late, but when just looking at others' commentary from an activity level perspective, it feels like there's a maybe modest growth in Q2s sequentially, just coming off of kind of early year inefficiencies and white space. Are you seeing the same thing into the Q2? Any thoughts on that?
Ben Palmer (President and CEO)
It's, again, highly volatile. I wouldn't say we're seeing any strong indication up or down. It's sort of thumping along at this point.
Stephen Gengaro (Managing Director)
Okay, great. Thank you for the details.
Ben Palmer (President and CEO)
Sure. Thank you, Steve.
Operator (participant)
Your next question comes from Don Crist with Johnson Rice. Please go ahead.
Don Crist (Research Analyst)
Morning, gentlemen. I wanted to ask about, you know, non-pressure pumping activities. You know, obviously, they held up a little bit better than pressure pumping during the quarter, but are you seeing as competitive a market in, say, coil or downhole tools as you are in pressure pumping? I know pressure pumping is significantly competitive in the Permian, but, you know, obviously, your other services are in other basins. Just curious about demand there.
Ben Palmer (President and CEO)
Yeah. Good, Don. Let me make a comment, then I'll have Mike take it over. I just wanna reiterate that pressure pumping did, again, did not contribute outsized to the decline in EBITDA. It was fairly consistent across the board. Mike can speak to downhole tools and some of the other service lines.
Mike Schmit (CFO)
Yeah, I mean, they were down 3%, on average, our other non-pressure pumping lines. So, you know, the customer mix is a little different in those for us as well. So they were kind of more in line with the overall industry. We're also, as you know, spread out into various basins, where our pressure pumping is really kind of more heavily in the Permian. So, you know, we have that diversity, which helps those a little bit as well. So, overall, the impact wasn't as strong in those, but, you know, as Ben indicated, they were down slightly also.
Ben Palmer (President and CEO)
It's really sitting back and looking at the, you know, performance for the quarter. Again, it was... Again, we're talking about mid-single digit changes in revenues, and so, you know, that can, you know, the numbers and the margins can move around quite a bit with that small of a revenue change. But Downhole Tools continuing to do well. We've come out with some new technology that we're really excited about. And you know, working now to you know, strategically, you know, determine you know, the pricing for that particular new tool that we think, again, creates a lot of efficiencies for our customers.
So it's sort of a, you know, it's a mixed blessing, so we're looking at our pricing strategy there, and look forward to some of those, you know, results coming through in the next few quarters. So, you know, again, not outsized changes or differences between the various service lines.
Mike Schmit (CFO)
Yeah, I'll add, too, our CapEx spend is spread across all our service lines, too. So we're making some investments in, you know, our other than just the new Tier 4 DGB fleet in our other service lines also, so we expect those to pay off for us, you know, as the year goes on and in future years.
Don Crist (Research Analyst)
I appreciate that color. Can you remind us on the coil side, are you pretty much doing new drill outs, or are you doing some kind of, you know, work-over work on oil wells, et cetera? I'm just trying to drive, you know, are you seeing any kind of pickup in coil, if not necessarily a new drill out perspective?
Ben Palmer (President and CEO)
No, drill outs is certainly the largest component of that business revenues in that business. We do have a special project which is starting up very soon using some of our other specialty tools with coiled tubing to do some P&A work. That happens to be out in California. You wouldn't believe how difficult it is to start to do business in California, or maybe you would. But yeah, but we're looking forward to that. That could be a nice opportunity to expand and diversify coiled tubing for us and add some nice you know incremental revenue.
Otherwise, overall, I mean, it's a very appropriate question. There's not a significant amount of other coiled tubing work out there at this point in time.
Don Crist (Research Analyst)
Okay. I'll get back in queue. I appreciate the question or the answers. Thank you.
Ben Palmer (President and CEO)
Yeah, thank you.
Operator (participant)
Your next question comes from Sean Mitchell with Daniel Energy. Please go ahead.
Sean Mitchell (CEO)
Hi, guys. Thanks for taking the question. Just wondering, as we look at, you alluded to the kind of M&A in the E&P space, and I think you're right, that activity should pick up as some of these assets get consummated by these folks, and then you get some splinters for some of these private, smaller guys. But what are the smaller guys saying, or the private guys saying? Because it seems like crude above $80, service costs coming down and continuing to come down, what are they saying is like the key driver here? Is it they don't have acreage to drill, or is it? Because the economics seem to make a ton of sense today, at $80, above $80.
Ben Palmer (President and CEO)
Great question, Sean. To be honest with you, I can't tell you that I personally have talked to a lot of these guys. But just on an overall basis, it's the same sort of thing with the price of the oil. Where it is, it's kind of a mixed blessing, right? I mean, everybody's showing-
Sean Mitchell (CEO)
Yep
Ben Palmer (President and CEO)
... discipline, and that's great. Hopefully, that, that will result in, in some more stability. Maybe the cycles won't be quite as severe. Maybe, you know, we're not seeing the, the uptick, but maybe we're not gonna see a whole lot of significant downward pressure from here, hopefully.
Sean Mitchell (CEO)
Yeah. Yep.
Ben Palmer (President and CEO)
If everybody can show some sufficient discipline on the oilfield services side, it should translate into, you know, a better operating environment. So, I don't have an answer for you, but it's a great question. You know, I think, you know, a lot of people are talking about 2025 and gas prices and all that. Everybody's starting to look forward to 2025, and, you know, and hopefully-
Sean Mitchell (CEO)
Yeah
Ben Palmer (President and CEO)
... hopefully, things maybe get a little bit better in the rest of this year, and we can look forward to a little bit stronger 2025. But we'll just have to see how some of these, you know, new companies shake out. You know, they're still working on ... many of the divestitures haven't taken place yet, so a lot of those management teams probably aren't getting ahead of themselves, right? They got to first, you know, close and integrate-
Sean Mitchell (CEO)
Yep.
Ben Palmer (President and CEO)
some of those transactions before they get to work and start making some phone calls and sending out RFPs.
Sean Mitchell (CEO)
Yep. Thanks for that. And then maybe, maybe one more. Just as you think about the consolidation in the E&P space, I know you guys are looking for opportunities in the service space. Are things picking up there in terms of consolidation opportunities? And kind of where do you see the best opportunities today for you guys?
Mike Schmit (CFO)
Yeah, I can start. This is Mike. We're always looking. We're getting a lot of opportunities, you know, coming across our desk. It's just finding the right one at the right price and, you know, the right fit. We think we are, we will be successful in finding, you know, some good opportunities that make sense. But we're definitely actively looking at opportunities, and there are a lot of them, you know, out there. So I don't know, Ben, if you want to add?
Ben Palmer (President and CEO)
Yeah, yeah. Yeah, a lot, a lot have been presented. We've had discussions with several. I think seller expectations on valuation are still, still haven't lined up. But we're gonna remain disciplined, right? We don't like to do transactions just to do transactions.
Sean Mitchell (CEO)
Yep
Ben Palmer (President and CEO)
... and, so but I think, you know, especially, I think, you know, you look at our results and it's not, again, not what we wanted it to be. But I think we'll see that others in the space are, you know, the results are not where they want them to be either. So I think... And the privates are seeing the same thing. You know, with some of our discussions with some of the privates, private oilfield service companies, you know, I think they're feeling the pressure. And I think that... I think that environment will get better. That is for, you know, finding some people who maybe will be a little more accommodative or reasonable-
Sean Mitchell (CEO)
Yep
Ben Palmer (President and CEO)
... or whatever, you know, whatever you want to say. And maybe those will come our way. But you know, we are focused on you know, some of our other... Some of our service lines where we have nice market share. Pressure pumping, we are open to an opportunity. Some of the smaller pressure pumping companies, you know, sometimes you know, the condition of the equipment and things like that can be an issue. But we are seeing multiple opportunities. You can imagine people would love to merge their company into our balance sheet. So-
Sean Mitchell (CEO)
Yeah
Ben Palmer (President and CEO)
… we have to be-
Sean Mitchell (CEO)
Yep
Ben Palmer (President and CEO)
... we have to be mindful of that as well.
Sean Mitchell (CEO)
All right, guys. Thanks.
Ben Palmer (President and CEO)
Thank you, Sean.
Operator (participant)
Your next question comes from Stephen Gengaro with Stifel. Please go ahead.
Stephen Gengaro (Managing Director)
Thanks. I just wanted to follow up and I don't think you said this earlier in the call. When you look at the active fleets you have now, and I think you have 10 horizontal fleets in total, can you just give us kind of where the fleet count was during Q1 and where you expect to be during Q2? Like, were they active and just underutilized, or has anything been kind of taken off the marketed fleet short term?
Mike Schmit (CFO)
Yeah, so they were all active during the quarter, but that said, just the utilization wasn't, you know, exactly where we would want it. We typically don't give the exact kind of utilization percentage, but obviously, our newer Tier 4s were utilized a lot more than some of the other fleets. But we're still fully staffed, not as staffed as we were this time last year, but enough that, you know, if the work's there, we can get them going. So we haven't taken any down, and in the current environment, have no plans to set any aside at the moment. Other than the one that we'll take when new Tier 4 comes on board. You know, we're, as Ben said, we're not going to add capacity.
We'll take a Tier 2 down when that one comes on board later this quarter.
Stephen Gengaro (Managing Director)
Okay. Thank you. Then one other... When we think about, you know, the bigger players, right? They talk all about these long-term arrangements and for lack of a better word, some level of contracted assets with some big E&Ps. When you think about your fleet and your strategy, how does that impact you? I mean, it seems to be the case there, there's been consolidation, so there's probably more bigger players. But does that give you kind of an advantage when things ultimately turn with the smaller players and available assets? Like, how should we think about the short and long-term implications of kind of consolidation and a lot of players going after sort of the term contracts and how that impacts you?
Mike Schmit (CFO)
Yeah, we certainly hope so. I mean, obviously, it's we wouldn't see that. We haven't seen that, you know, right now in this quarter, but our hope is, you know, if things stay where they are, that, you know, some of the smaller players and privates will get more active in the second half of the year, and we'll benefit then. But, you know, that's certainly our belief.
Ben Palmer (President and CEO)
No, that's exactly right. We, Yes, I mean, our, our results, given our customer base and where we are, might be a little more volatile than some others, but certainly that gives us opportunity to the upside, right? So there may be a little bit more downside, but there's opportunities to the downside. We definitely think that's the case. Great question.
Stephen Gengaro (Managing Director)
Good. Thanks. Thank you again, gentlemen.
Ben Palmer (President and CEO)
... Thank you, Steve.
Mike Schmit (CFO)
Thanks.
Operator (participant)
Your next question comes from Chuck Minervino with Susquehanna. Please go ahead.
Chuck Minervino (Equity Research Analyst)
Hi, good morning. I was just wondering if you could provide a little bit more color on kind of the pricing situation in frack right now. You talked about some competitive pricing. Do you think it's kind of bottoming here, or is it still kind of trying to find its bottom? Just wanted to try to get a sense of where we are in that. And also kind of tied to that, you mentioned some frack fleets coming in from gas basins. Has that stopped, or do you expect that will continue as well?
Ben Palmer (President and CEO)
Chuck, I mean, it's all in flux. I mean, we are hopeful that we're reaching a trough or a bottom. As I indicated, we've got our stated price at which we won't work below. We're not bidding everything at that particular price level. So we'll see. You know, if at some point we're not winning anything at the level at which we're bidding it, we'll have to take more dramatic steps. But we're hopeful that the industry will be rational, and we are monitoring it very closely. And I can tell you that, you know, competition, all of the industries we compete in, all of oilfield services is incredibly competitive.
Our customers do an incredible job, you know, exploiting the fact that they have lots of choices, and, and, you know, if our industry can show some discipline, it would... Or more discipline. But it is competitive, you know, this is capitalism, so we understand that. And, so we're hopeful we're reaching that point. You know, it may help with some of the smaller players who, you know, at the very low end of the market, that they're probably bidding more aggressively. But they're gonna be, you know, wearing out their equipment and perhaps don't have the capital to be able to invest back in the fleet, like others do, like us. So we're trying to be very mindful. We don't wanna burn our equipment up.
We wanna be in a position, obviously, to generate a nice return on our investment. So we're not gonna dip down too low. But we're hoping things will shake out, and there'll be some improvement. There's obviously a lot of focus on the E-fleet market. A lot of investment going in at that upper end of the market. I have to believe the competition there is intensifying as well. So it, it's an ever-changing market. You know, technology's changing constantly.
We're hearing of new types of technology that are, you know, different, innovative, and could be quite interesting, which is one of the reasons we haven't, you know, at this point, tried to go into electric technology in a big way because it is changing, right? It is changing, and it is evolving. And as we noted in our comments, the ideal or appropriate configuration for the equipment and the ability to get power sources is evolving and changing. Lots of people are spending a lot of time coming up with viable solutions that hopefully, at the appropriate time, we'll be able to exploit. But at this point, we're monitoring that market and feel good about our position in the market that we focus on.
Mike Schmit (CFO)
I'll add in relation to your question about potentially more fleets from gassy basins moving into Permian or other areas. I mean, gas prices have been pretty low for a while, so we don't anticipate there's a lot more movement that could happen, because we don't think there are a lot of fleets left in gassy basins that, you know, are not working. So if they're there at this price, you know, we don't anticipate there to be incremental movement.
Chuck Minervino (Equity Research Analyst)
Got it. And then just one more. If you can, if you could just talk me through a little bit the free cash flow outlook for the year here. It sounds like maybe the CapEx number might be coming down a little bit. Also, you mentioned a tax refund coming in and I guess a little bit of the moving parts there with EBITDA as well.
Mike Schmit (CFO)
Well, we did receive the tax refund. That came in this week, actually. So, that was good. And you know, we said if things slow, you know, we would move to the lower end of the range. Obviously, we're hopeful that's not the case, but I mean, we have flexibility in that spend, I guess, is the point there. You know, there's... So, you know, if things are good, we'll definitely spend the money, and continue, and we'll continue to invest in our businesses. We, as you know, have a very strong balance sheet.
We've got over $200 million in cash, and so, you know, we're not concerned currently, you know, about our ability to generate cash for the rest of the year and, you know, meet all of our CapEx needs. And we, you know, still plan to. We think we have plenty to do an acquisition if we find the right one, and also return cash to our shareholders. So not a lot of concerns. The comment on CapEx is just that's a lever we can pull to ensure that we do continue to generate the cash we need to for our plans.
Ben Palmer (President and CEO)
Our plans this year include some, I'll call them, strategic investments. We don't have a tremendous amount of, you know, specific growth capacity investments, but we're making a lot of targeted strategic investments in, in different parts of the business that we think are, obviously, we think is appropriate and are gonna pay off. That's part of what's driving our number this year, but we can manage down. Certainly, the capitalized maintenance would come down naturally if activity levels were to fall. That one, you know, would kind of manage itself, if you will. So, you know, the upper end of that $200-$250 has some "extra stuff" in there that is incremental, so that's really not our, you know, annual run rate at this level of activity.
It'd be something closer to the lower end of the range.
Chuck Minervino (Equity Research Analyst)
Got it. Thank you.
Ben Palmer (President and CEO)
Sure. Thank you.
Operator (participant)
Again, if you would like to ask a question, please press star one now. Seeing no further questions in the queue, I will turn the call back to Ben Palmer for any closing remarks.
Ben Palmer (President and CEO)
Thank you, operator. Thank you, everybody, for joining us this morning, and we look forward to catching up again soon. Take care.
Operator (participant)
This will conclude our conference call. Please note, a replay of today's call will be available on marineproductscorp.com within two hours following the completion of this call. Thank you for your participation. You may now disconnect.