<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 MARCH 31, 2000
/ / 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 58-1550825
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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 March 31, 2000, RPC, Inc. had 28,242,263 shares of common stock
outstanding.
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RPC, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000, AND DECEMBER 31, 1999
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
(UNAUDITED) (Audited)
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 11,657 $ 8,278
Marketable securities 4,374 4,798
Accounts receivable, net of allowance for doubtful
accounts of $4,870 and $4,659, respectively 38,258 34,871
Inventories, at lower of cost or market 20,148 19,631
Deferred income taxes 8,385 8,254
Federal income taxes receivable -- 1,806
Prepaid expenses and other current assets 2,242 2,337
-------- --------
Current assets 85,064 79,975
-------- --------
Equipment and property, net 81,271 75,472
Marketable securities 21,739 24,871
Intangible assets, net 8,741 9,006
Other assets 1,255 1,251
-------- --------
TOTAL ASSETS $198,070 $190,575
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 10,433 $ 13,728
Accrued payroll and related expenses 6,268 5,725
Accrued insurance expenses 7,699 7,689
Accrued state, local and other taxes 4,222 4,106
Federal income taxes payable 2,300 --
Accrued discounts 1,453 1,131
Current portion of long-term debt 610 255
Other accrued expenses 8,576 8,976
-------- --------
Current liabilities 41,561 41,610
-------- --------
Long-term accrued insurance expenses 3,850 3,684
Long-term debt 902 1,547
Deferred income taxes 1,026 926
-------- --------
Total liabilities 47,339 47,767
-------- --------
Commitments and contingencies
-------- --------
Common stock 2,824 2,826
Capital in excess of par value 22,424 22,548
Earnings retained 125,483 117,434
-------- --------
Total stockholders' equity 150,731 142,808
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $198,070 $190,575
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUE $ 73,768 $ 54,935
-------- --------
Cost of goods sold 31,884 25,911
Operating expenses 30,209 23,363
Depreciation and amortization 4,427 4,044
Gain on settlement of claim (6,817) --
Interest income (376) (366)
-------- --------
Income before income taxes 14,441 1,983
Income tax provision 5,487 754
-------- --------
NET INCOME $ 8,954 $ 1,229
======== ========
EARNINGS PER SHARE
Basic $ 0.32 $ 0.04
-------- --------
Diluted $ 0.32 $ 0.04
-------- --------
AVERAGE SHARES OUTSTANDING
Basic 27,828 28,331
-------- --------
Diluted 28,124 28,532
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 10,829 $ 10,371
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10,351) (2,282)
Proceeds from sale of equipment and property 703 728
Net sale (purchase) of marketable securities 3,556 (4,621)
Other 46 --
-------- --------
Net cash used for investing activities (6,046) (6,175)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend distributions (988) (1,005)
Repayments of long term debt (290) (301)
Purchase of treasury stock (152) (2,625)
Proceeds from exercise of stock options 26 51
-------- --------
Net cash (used for) financing activities (1,404) (3,880)
-------- --------
Net increase in cash and cash equivalents 3,379 316
Cash and cash equivalents at beginning of period 8,278 10,029
-------- --------
Cash and cash equivalents at end of period $ 11,657 $ 10,345
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
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 accounting principles generally accepted in the United
States 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, 1999.
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 March 31, 2000, and the results
of operations and the cash flows for the three months then ended.
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 March 31, 2000, are not
necessarily indicative of the results to be expected for the full year.
4. In June, 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective
Date of FASB Statement No. 133," which defers the effective date of
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," establishes accounting and reporting standards for
derivative instruments including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires
entities to recognize all instruments as either assets or liabilities
in the balance sheet and measure those instruments at fair value. The
Company does not anticipate the adoption of these standards to have a
material impact on its financial position or results of operations.
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
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 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. All 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>
----------------------------------------------------------------
March 31, 2000 1999
----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE:
Oil and gas services $ 32,472 $ 20,512
Boat manufacturing 37,885 31,233
Other 3,411 3,190
-------- --------
Total revenue $ 73,768 $ 54,935
-------- --------
OPERATING INCOME(LOSS):
Oil and gas services $ 3,968 ($ 1,839)
Boat manufacturing 4,525 4,294
Other (214) 129
-------- --------
Total operating income $ 8,279 $ 2,584
-------- --------
Corporate expenses (1,031) (967)
Gain on settlement of claim 6,817 --
Interest income 376 366
-------- --------
Income before
income taxes $ 14,441 $ 1,983
======== ========
</TABLE>
The identifiable assets for the powerboat manufacturing segment increased by
$495,000 from $30,850,000 at December 31, 1999 to $31,345,000 at March 31, 2000.
The identifiable assets for the oil and gas services segment increased by
$2,774,000 from $107,894,000 at December 31, 1999 to $110,668,000 at March 31,
2000.
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RPC, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenue for the first quarter ended March 31, 2000, increased $18,833,000 or 34%
to $73,768,000 compared with $54,935,000 for the quarter ended March 31, 1999.
The oil and gas services segment revenue of $32,472,000 increased 58% from last
year's first quarter. This increase was due to increased customer drilling and
production enhancement activity relating to the improved commodity prices. The
average working US rig count has increased 54% from last year's first quarter.
The powerboat manufacturing segment revenue for the quarter ended March 31,
2000, of $37,885,000 increased 21% from last year's first quarter revenue of
$31,233,000. This revenue increase resulted from an increase in the volume of
boats sold coupled with a small increase in the average sales price compared to
the prior year.
Cost of goods sold for the first quarter ended March 31, 2000, was $31,884,000
compared to $25,911,000 for the first quarter ended March 31, 1999, an increase
of $5,973,000 or 23%. Cost of goods sold for the boat manufacturing segment
totaled $29,499,000 for the quarter ended March 31, 2000 compared to $23,475,000
for the same period one year ago. The remainder of cost of goods sold relates to
businesses in other industries. The increase in cost of goods sold (as a percent
of revenue) for the powerboat manufacturing segment is due primarily to higher
cost of materials used to manufacture the current year's newly designed boat
models. With more experience in manufacturing these new models, production
efficiency is expected to improve.
Operating expenses for the first quarter ended March 31, 2000 were $30,209,000
compared to $23,363,000 for the first quarter ended March 31, 1999, an increase
of $6,846,000 or 29%. The oil and gas services segment operating expenses were
$24,459,000 or 75% of segment revenue for the first quarter 2000 compared to
$18,500,000 or 90% of segment revenue for the same period one year earlier. The
reduction in the operating expenses as a percent of segment revenue is due to
improved operating efficiencies as a result of higher activity levels and
revenue. Operating expenses in the boat manufacturing segment were $3,564,000 or
9% of segment revenue for the first quarter 2000 and $2,936,000 or 9% of segment
revenue for the first quarter 1999.
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RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
Net income for the quarter ended March 31, 2000, was $8,954,000 or $0.32 diluted
earnings per share compared to net income of $1,229,000 or $0.04 diluted
earnings per share for the quarter ended March 31, 1999. In the first quarter of
2000, RPC recorded a pre-tax gain in its powerboat manufacturing business
segment of $6,817,000 ($4,227,000 after-tax), or $0.15 after-tax diluted
earnings per share. Net income excluding the gain would have been approximately
$4,727,000 or $0.17 diluted earnings per share. The increase in earnings per
share (excluding the gain on settlement) from the same period one year ago was
due primarily to the increase in revenues and operating profits in the oil and
gas services segment.
GAIN ON SETTLEMENT
During the three months ended March 31, 2000, a gain was recorded related to
settlement of a claim. The gain is a result of Chaparral Boats' receipt of its
share of a non-refundable $35 million settlement payment made by Brunswick
Corporation (Brunswick), a major engine supplier, to the members of the American
Boatbuilders Association (ABA), a buying group which includes Chaparral Boats.
Under the terms of this agreement between the ABA and Brunswick, additional
payments will be made to the ABA depending on the final judgment or settlement
of a lawsuit brought by Independent Boatbuilders Association (IBBI), another
buying group supplied engines by Brunswick. In March 2000, the U.S. Court of
Appeals for the Eighth Circuit ordered the trial court to enter a judgment for
Brunswick, thereby reversing the initial decision in favor of IBBI. No
additional settlement payments are expected to be made to the ABA.
FINANCIAL CONDITION
The Company's current ratio remained strong as of March 31, 2000, with current
assets of $85,064,000 exceeding current liabilities of $41,561,000 by a ratio of
2.0-to-1. This compares to a current ratio of 1.9-to-1 at December 31, 1999.
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RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
Capital expenditures during the first three months of 2000 totaled $10,351,000.
Revenue-producing equipment purchases in the oil and gas services segment
totaled approximately $8,400,000 while the boat manufacturing segment spent
$1,845,000 on plant expansion. Funding for future capital requirements is
expected to be provided from operations.
SPIN-OFF TRANSACTION
On January 14, 2000, RPC announced it had taken the initial steps to spin-off
its 100% ownership in Chaparral Boats. The transaction, if effected, is expected
to be completed during the third quarter of 2000 and will be structured as a
tax-free distribution of Chaparral Boats stock to RPC shareholders. The spin-off
transaction is subject to various approvals including a favorable tax ruling
from the Internal Revenue Service and final approval of RPC's Board of
Directors.
YEAR 2000 ISSUE
Aware that the Year 2000 (Y2K) information technology programming issue could
have a significant potential impact on its future operations and financial
reporting, RPC began its assessment and remediation processes regarding its
primary financial and operating systems in 1997. RPC's assessment activities
included (1) identifying critical systems, (2) testing for Y2K compliance, (3)
obtaining assurances from its vendors and its large commercial customers, and
(4) developing contingency plans to address Y2K issues which could occur. RPC's
remediation activities included replacing certain software and operating
systems, followed by testing to ensure Y2K compliance of the replacements. No
negative or materially significant impact has yet been experienced internally
with RPC's systems or from any supplier due to the Y2K related issue, nor is any
such impact anticipated. No contingency plans have yet been invoked.
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
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RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
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 future capital
requirements, anticipated impact of IBBI legal proceedings, expected
improvements in boat production efficiency, timing and structure of the proposed
spin-off transaction, potential exposure to market risk, the impact of Year 2000
programming issues, 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 under the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties which could cause actual results
to differ materially from the company's expectations, including economic
conditions, the price of oil and gas, conditions in the industries in which the
Company operates, 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.
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RPC, INC. AND SUBSIDIARIES
ITEM 3.
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.
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RPC, INC. AND SUBSIDIARIES
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
None
ITEM 5. OTHER INFORMATION
None
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RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1 RPC's restated Certificate of Incorporation is
incorporated herein by reference to Exhibit 3.1 to
the 1999 Form 10-K.
3.2 By-laws of RPC (incorporated herein by reference to
Exhibit (3)(b) to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1993).
4 Form of Stock Certificate (incorporated herein by
reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1998).
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 March 31, 2000.
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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: May 11, 2000 Richard A. Hubbell
President and Chief Operating Officer
/S/ BEN M. PALMER
--------------------------
Date: May 11, 2000 Ben M. Palmer
Treasurer and Chief Financial Officer
14 of 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,657
<SECURITIES> 4,374
<RECEIVABLES> 43,128
<ALLOWANCES> 4,870
<INVENTORY> 20,148
<CURRENT-ASSETS> 85,064
<PP&E> 241,943
<DEPRECIATION> 160,672
<TOTAL-ASSETS> 198,070
<CURRENT-LIABILITIES> 41,561
<BONDS> 902
0
0
<COMMON> 2,824
<OTHER-SE> 147,907
<TOTAL-LIABILITY-AND-EQUITY> 198,070
<SALES> 0
<TOTAL-REVENUES> 73,768
<CGS> 31,884
<TOTAL-COSTS> 62,093
<OTHER-EXPENSES> 4,427
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,441
<INCOME-TAX> 5,487
<INCOME-CONTINUING> 8,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,954
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.32
</TABLE>
