<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d)of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File No. 1-8726
RPC, INC.
(exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
58-1550825
(I.R.S. Employer Identification Number)
2170 PIEDMONT ROAD, NE, ATLANTA, GEORGIA 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (404) 321-2140
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of June 30, 1999, RPC, Inc. had 28,578,763 shares of common stock
outstanding.
<PAGE>
RPC, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999, AND DECEMBER 31, 1998
(In thousands except share information)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
(UNAUDITED) (Audited)
- -----------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $17,235 $10,029
Marketable securities 1,523 3,414
Accounts receivable, net of allowance for doubtful
accounts of $4,899 and $7,004, respectively 26,468 25,266
Inventories, at lower of cost or market 17,166 17,446
Deferred income taxes 9,860 10,787
Federal income taxes receivable 1,234 3,673
Prepaid expenses and other current assets 1,722 1,909
- ------------------------------------------------------------------------------------------------------------
Current assets 75,208 72,524
- ------------------------------------------------------------------------------------------------------------
Equipment and property, net 68,573 70,206
Marketable securities 34,417 29,507
Intangibles, net 6,976 7,401
Other assets 1,108 1,053
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $186,282 $180,691
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $10,119 $5,859
Accrued payroll and related expenses 4,686 4,192
Accrued insurance expenses 6,697 6,329
Accrued state, local and other taxes 4,139 4,063
Accrued discounts 2,286 1,053
Current portion of long-term debt 501 659
Other accrued expenses 10,161 10,270
- -----------------------------------------------------------------------------------------------------------
Current liabilities 38,589 32,425
- -----------------------------------------------------------------------------------------------------------
Long-term accrued insurance expenses 3,326 3,308
Long-term debt 360 636
Deferred income taxes 1,376 1,256
- -----------------------------------------------------------------------------------------------------------
Total liabilities 43,651 37,625
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Commitments and contingencies
- -----------------------------------------------------------------------------------------------------------
Common stock 2,859 2,888
Capital in excess of par value 24,512 26,538
Earnings retained 115,260 113,640
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity 142,631 143,066
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $186,282 $180,691
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999, AND 1998
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------------------- -------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
REVENUE $59,978 $66,375 $114,913 $133,315
- -------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold 28,475 24,710 54,386 47,831
Operating expenses 23,150 28,136 46,513 59,706
Depreciation and amortization 4,153 3,745 8,197 7,365
Interest income (482) (554) (848) (1,043)
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 4,682 10,338 6,665 19,456
Income tax provision 1,778 3,928 2,532 7,392
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $2,904 $6,410 $4,133 $12,064
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Basic $0.10 $0.22 $0.15 $0.41
- -------------------------------------------------------------------------------------------------------------------------------
Diluted $0.10 $0.22 $0.15 $0.41
- -------------------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OUTSTANDING
Basic 28,178 29,269 28,251 29,243
- -------------------------------------------------------------------------------------------------------------------------------
Diluted 28,480 29,685 28,478 29,649
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999, and 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $20,805 $15,598
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (6,657) (14,176)
Proceeds from sale of equipment and property 1,257 2,350
Net purchase of marketable securities (3,020) (1,270)
Other (19) -
- ----------------------------------------------------------------------------------------
Net cash used for investing activities (8,439) (13,096)
- ----------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend distributions (2,003) (2,072)
Repayments of debt (434) (683)
Purchase of treasury stock (2,774) (2,135)
Proceeds from exercise of stock options 51 55
- -----------------------------------------------------------------------------------------
Net cash used for financing activities (5,160) (4,835)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,206 (2,333)
Cash and cash equivalents at beginning of period 10,029 17,409
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $17,235 $15,076
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with
the financial statements and related notes contained in the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1998.
In the opinion of management, the consolidated financial statements
included herein contain all adjustments necessary to present fairly the
financial position of the Company as of June 30, 1999, the results of
operations for the quarter and the six months ended June 30, 1999 and
1998, and the cash flows for the six months ended June 30, 1999 and
1998.
2. Basic and diluted earnings per share are computed by dividing net
income by the respective weighted average number of shares outstanding
during the respective periods.
3. The results of operations for the quarter ended June 30, 1999, are not
necessarily indicative of the results to be expected for the full year.
4. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), which
establishes standards for reporting and disclosing information about
derivative instruments. In the second quarter of 1999, the FASB voted
to delay the effective date of this standard to fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133 is not expected to
have a material impact.
5. RPC has two reportable segments: oil and gas services and boat
manufacturing. The oil and gas services segment provides a variety of
services, equipment, and personnel to the oil and gas industry. The
boat manufacturing segment manufactures and sells powerboats to a
nationwide network of independent dealers.
RPC evaluates performance based on profit or loss from operations
before income taxes. RPC accounts for intersegment sales and transfers
as if the sales or
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<PAGE>
RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
transfers were to third parties, that is, at current market prices.
RPC's reportable segments are strategic business units that offer
different products and services. They are managed separately because
each business requires different technology and marketing strategies.
Each of these businesses were acquired as a unit, and the management
at the time of acquisition was retained.
Certain information with respect to RPC's business segments is set
forth in the following table:
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
--------------------------- -------------------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUE:
Oil and gas services $ 21,761 $ 33,603 $ 42,273 $ 69,494
Boat manufacturing 35,135 29,056 66,368 55,543
Other segments 3,082 3,716 6,272 8,278
- ----------------------------- -------- -------- -------- --------
Total revenue $ 59,978 $ 66,375 $114,913 $133,315
- ----------------------------- -------- -------- -------- --------
- ----------------------------- -------- -------- -------- --------
OPERATING INCOME (LOSS):
Oil and gas services $ 395 $ 7,875 $ (1,444) $ 14,129
Boat manufacturing 5,126 3,958 9,420 7,568
Other segments (452) (1,000) (323) (1,148)
- ----------------------------- -------- -------- -------- --------
Total operating income 5,069 10,833 7,653 20,549
- ----------------------------- -------- -------- -------- --------
CORPORATE EXPENSES (869) (1,049) (1,836) (2,136)
INTEREST INCOME 482 554 848 1,043
- ----------------------------- -------- -------- -------- --------
Income before income taxes $ 4,682 $ 10,338 $ 6,665 $ 19,456
- ----------------------------- -------- -------- -------- --------
</TABLE>
The identifiable assets for the powerboat manufacturing segment increased by
$3,556,000 from $28,085,000 at December 31, 1998 to $31,641,000 at June 30,
1999. The identifiable assets for the oil and gas services segment decreased by
$2,365,000 from $89,891,000 at December 31, 1998 to $87,526,000 at June 30,
1999.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JUNE 30, 1999, COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Revenue for the second quarter ended June 30, 1999, was $59,978,000 compared
with $66,375,000 for the quarter ended June 30, 1998, a decrease of
$6,397,000 or 10%. The oil and gas services segment revenue of $21,761,000
decreased 35% from last year's second quarter. During the last year, oilfield
services revenues have significantly declined due to the sharp decrease in
demand and price for services. These conditions are the result of worldwide
uncertainty regarding oil and natural gas prices which have contributed to
reduced drilling and workover activity. Despite recent increases in oil and
natural gas prices, the number of active drilling rigs in the United States
has decreased approximately 35% from the previous year. The powerboat
manufacturing segment revenue for the quarter ended June 30, 1999, of
$35,135,000 increased 21% from last year's second quarter of $29,056,000 as
the result of an increase in the average unit sales price. The increase in
the average unit sales price is the result of an overall price increase and
an increase in the number of larger, higher priced boats sold versus prior
year.
Cost of goods sold for the second quarter ended June 30, 1999, was
$28,475,000 compared to $24,710,000 for the second quarter ended June 30,
1998, an increase of $3,765,000 or 15%. Cost of goods sold relates primarily
to the powerboat manufacturing segment. This increase is somewhat less than
the increase in sales due to a change in product mix with a greater
percentage of larger, higher margin boats being sold.
Net income for the quarter ended June 30, 1999, was $2,904,000 or $0.10
diluted earnings per share versus net income of $6,410,000 or $0.22 diluted
earnings per share for the quarter ended June 30, 1998. Basic earnings per
share was the same as diluted earnings per share at $0.10 cents per share
versus $0.22 cents per share last year. The decrease in earnings per share
from the same period one year ago was due to the decreased operating income
for the oil and gas services segment offset to some extent by the increase in
operating income for the powerboat manufacturing segment.
SIX MONTHS ENDED JUNE 30, 1999, COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenue for the six months ended June 30, 1999 was $114,913,000 compared with
$133,315,000 for the six months ended June 30, 1998, a decrease of
$18,402,000 or 14%. The oil and gas services segment revenue decreased 39%
and the powerboat manufacturing segment increased 19%. The oil and gas
services revenue decreased for the reasons discussed above. The powerboat
manufacturing revenue increased despite
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<PAGE>
RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
an overall decline in sales in the powerboat market. The increase in revenue
for the powerboat manufacturing segment is attributable to an increase in the
average unit sales price versus the prior year for the reasons discussed
above.
Cost of goods sold for the six months was $54,386,000 compared to $47,831,000
for the prior year, an increase of $6,555,000 or 14%. The increase is
somewhat less than the increase in sales due to a change in product mix with
a greater percentage of larger, higher margin boats being sold.
Net income for the six months ended June 30, 1999 was $4,133,000 or $0.15
diluted earnings per share versus net income of $12,064,000 or $0.41 diluted
earnings per share for the six months ended June 30, 1998. Basic earnings per
share was the same as diluted earnings per share at $0.15 cents per share
versus $0.41 cents per share last year. The decrease in earnings per share
from the same period one year ago was due to the decreased operating income
for the oil and gas services segment offset to some extent by the increase in
operating income for the powerboat manufacturing segment.
FINANCIAL CONDITION
The Company's current ratio remained strong as of June 30, 1999, with current
assets of $75,208,000 exceeding current liabilities of $38,589,000 by a ratio
of 1.9-to-1. This compares to a current ratio of 2.2-to-1 at December 31,
1998.
Capital expenditures during the first six months of 1999 totaling $6,657,000
were primarily for revenue-producing equipment in the oil and gas services
segment. The remainder was spent on various purchases for the other business
segments. Funding for future capital requirements will be provided by cash
flow from operations.
YEAR 2000 ISSUE
The Company began its assessment and remediation processes related to the
Year 2000 (Y2K) information technology programming issue in 1997. RPC's
assessment activities have included (1) identifying all software and
operating systems -both information technology (IT) and non-IT systems with
embedded technology, which are critical to operations and/or financial
reporting, (2) testing of such software and systems for Y2K compliance, and
(3) obtaining assurances from its vendors and its large commercial customers.
RPC's remediation activities have included replacing certain software and
operating systems, followed by testing to ensure the Y2K compliance of the
replacements.
8 of 12
<PAGE>
RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
Based on its assessment and remediation activities to date, RPC believes that
its critical internal software and operating systems are Y2K compliant with
the exception of a subsidiary billing system. The total cost of Y2K
expenditures to date have not been material. The remaining Y2K remediation
costs are anticipated to be less than $50,000.
Based on assurances from the majority of its vendors and large commercial
customers to date, RPC does not anticipate any material Y2K impact on its
operations or financial reporting at this time. RPC believes that the worst
case scenario will be temporary delays in billing and collection of customer
receivables. RPC expects to have contingency plans in place by the end of
1999 that address any potential Y2K issues.
FORWARD-LOOKING STATEMENTS
Management's discussion and analysis of results of operations and financial
condition include "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included or incorporated by
reference which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including statements
regarding the impact of the year 2000 programming issue, funding of future
capital requirements, potential exposure to market risk, and anticipated
trends and similar expressions concerning matters that are not historical
facts, are forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its experience and
its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with the Company's expectations are influenced by a number of factors,
including economic conditions, conditions in the industries in which the
Company operates including the impact of the worldwide supply and demand for
oil and natural gas, competition, and other factors, many of which are beyond
the control of the Company. Consequently, all of the forward-looking
statements made are qualified by these cautionary statements and there can be
no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on the Company or its business
or operations. The Company assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.
9 of 12
<PAGE>
RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RPC maintains an investment portfolio, comprised of U.S. Government and
corporate debt securities, which is subject to interest rate risk exposure.
This risk is managed through conservative policies to invest in high-quality
obligations. RPC has performed an interest rate sensitivity analysis using a
duration model over the near term with a 10 percent change in interest rates.
RPC's portfolio is not subject to material interest rate risk exposure based
on this analysis. RPC does not expect any material changes in market risk
exposures or how those risks are managed.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on April 27, 1999. At
the meeting, stockholders elected three Class I Directors for the three year
term expiring in 2002. Results of the voting were as follows:
<TABLE>
<CAPTION>
ELECTION OF CLASS I DIRECTORS FOR WITHHELD
<S> <C> <C>
R. Randall Rollins 27,026,740 207,530
Henry B. Tippie 27,026,568 207,702
James B. Williams 27,030,664 203,606
</TABLE>
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<PAGE>
RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION CONT'D
ITEM 5. OTHER INFORMATION
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
3(i)(a) RPC's Certificate of Incorporation is incorporated
herein by reference to Exhibit (3)(1)(a) to the 1998
Third Quarter Form 10-Q.
3(i)(b) RPC's Certificate of Amendment of the Certificate of
Incorporation is incorporated herein by reference to
Exhibit (3)(1)(b) to the 1998 Third Quarter Form
10-Q.
3(ii) By-laws of RPC are incorporated herein by reference
to the 1999 First Quarter Form 10-Q.
4 RPC's Form of Stock Certificate is incorporated
herein by reference to the 1998 Form 10-K.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed during the
quarter ended June 30, 1999.
11 of 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RPC, INC.
/S/ RICHARD A. HUBBELL
-----------------------
Date: August 13, 1999 Richard A. Hubbell
President and Chief Operating Officer
/S/ BEN M. PALMER
-----------------
Date: August 13, 1999 Ben M. Palmer
Treasurer and Chief Financial Officer
12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,235
<SECURITIES> 1,523
<RECEIVABLES> 31,367
<ALLOWANCES> 4,899
<INVENTORY> 17,166
<CURRENT-ASSETS> 75,208
<PP&E> 224,000
<DEPRECIATION> 155,427
<TOTAL-ASSETS> 186,282
<CURRENT-LIABILITIES> 38,589
<BONDS> 360
0
0
<COMMON> 2,859
<OTHER-SE> 139,772
<TOTAL-LIABILITY-AND-EQUITY> 186,282
<SALES> 0
<TOTAL-REVENUES> 59,978
<CGS> 28,475
<TOTAL-COSTS> 51,625
<OTHER-EXPENSES> 4,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,682
<INCOME-TAX> 1,778
<INCOME-CONTINUING> 2,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,904
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
