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 September 30, 1998 / / 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 juridsiction (I.R.S. Employer of incorporation or organization) Identification Number) 2170 Piedmont Road, NE, Atlanta, Georgia 30324 (Address of principal executive offices) (zip code) Telephone Number -- (404) 321-2140 (Registrant's telephone number, including area code) 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 September 30, 1998, RPC, Inc. had 28,971,872 shares of common stock issued and outstanding. 1 of 11
RPC, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1998, AND DECEMBER 31, 1997 (In thousands except share information) <TABLE> <CAPTION> September 30, December 31, 1998 1997 (Unaudited) (Audited) - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> ASSETS Cash and cash equivalents $8,353 $17,409 Marketable securities 3,841 11,276 Accounts receivable, net of allowance for doubtful accounts of $7,388 and $6,967, respectively 33,158 32,153 Inventories, at lower of cost or market 17,282 16,025 Deferred income taxes 9,504 8,626 Federal income taxes receivable 2,963 -- Prepaid expenses and other current assets 1,416 2,390 - -------------------------------------------------------------------------------------------------------------- Current assets 76,517 87,879 - -------------------------------------------------------------------------------------------------------------- Equipment and property, net 67,817 55,673 Marketable securities 30,689 29,499 Intangibles, net 7,625 8,289 Other assets 975 1,178 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Total assets $183,623 $182,518 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $6,939 $7,437 Accrued payroll and related expenses 5,145 5,826 Accrued insurance expenses 5,793 7,422 Accrued state, local and other taxes 4,934 4,211 Federal income taxes payable -- 1,061 Accrued discounts 718 826 Current portion of long-term debt 589 857 Other accrued expenses 10,046 9,844 - -------------------------------------------------------------------------------------------------------------- Current liabilities 34,164 37,484 - ----------------------------------------------------------------------------------------------------------- Deferred income taxes 573 309 Long-term accrued insurance expenses 3,595 4,034 Long-term debt 804 1,315 - -------------------------------------------------------------------------------------------------------------- Total liabilities 39,136 43,142 - -------------------------------------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------------------------------------- Common stock 2,897 2,978 Capital in excess of par value 27,200 35,211 Earnings retained 114,390 101,805 Common stock in treasury, at cost, 0 shares and 169,392 shares, respectively -- (618) - -------------------------------------------------------------------------------------------------------------- Total stockholders' equity 144,487 139,376 - -------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $183,623 $182,518 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- </TABLE> The accompanying notes are an integral part of these statements. 2 of 11
RPC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998, AND 1997 (In thousands except per share data) (Unaudited) <TABLE> <CAPTION> Three months ended September 30, Nine months ended September 30, -------------------------------- -------------------------------- 1998 1997 1998 1997 <S> <C> <C> <C> <C> - ---------------------------------------------------------------------------------------------------------------------------------- Revenue $56,977 $57,856 $190,292 $183,092 - ---------------------------------------------------------------------------------------------------------------------------------- Cost of goods sold 20,405 17,191 68,236 64,574 Operating expenses 27,053 29,539 86,759 86,985 Depreciation and amortization 4,074 3,512 11,439 9,408 Interest income (610) (645) (1,653) (1,735) - ---------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 6,055 8,259 25,511 23,860 Income tax provision 2,302 2,850 9,694 8,232 - ---------------------------------------------------------------------------------------------------------------------------------- Net income $3,753 $5,409 $15,817 $15,628 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Earnings per share Basic $0.13 $0.19 $0.54 $0.54 - ---------------------------------------------------------------------------------------------------------------------------------- Diluted $0.13 $0.18 $0.54 $0.53 - ---------------------------------------------------------------------------------------------------------------------------------- Average shares outstanding Basic 29,030 29,186 29,110 29,092 - ---------------------------------------------------------------------------------------------------------------------------------- Diluted 29,387 29,937 29,507 29,469 - ---------------------------------------------------------------------------------------------------------------------------------- </TABLE> The accompanying notes are an integral part of these statements. 3 of 11
RPC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998, and 1997 (In thousands) (Unaudited) <TABLE> <CAPTION> Nine months ended September 30, -------------------------------------- 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES $16,765 $21,775 - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (24,360) (16,904) Proceeds from sale of equipment and property 3,132 1,932 Net sale (purchase) of marketable securities 6,245 (4,648) Other 0 (1,048) - ----------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (14,983) (20,668) - ----------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Dividend distributions (3,094) (736) (Decrease) increase in long term debt, net of repayments (779) 1,760 Common stock purchased and retired (7,038) 0 Proceeds from exercise of stock options 73 249 - ----------------------------------------------------------------------------------------------------------------------------- Net cash (used for) provided by financing activities (10,838) 1,273 - ----------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (9,056) 2,380 Cash and cash equivalents at beginning of period 17,409 13,124 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $8,353 $15,504 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- </TABLE> The accompanying notes are an integral part of these statements. 4 of 11
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 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, 1997. 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 September 30, 1998, the results of operations for the quarter and the nine months ended September 30, 1998 and 1997, and the cash flows for the nine months ended September 30, 1998 and 1997. 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 September 30, 1998, are not necessarily indicative of the results to be expected for the full year. 4. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which establishes standards for displaying comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 130 does not have a material impact. 5. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), which establishes standards for reporting information about operating segments in annual financial statements and requires reporting selected information about operating segments in interim financial reports issued to stockholders. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. 5 of 11
6. In June, 1998, the Financial Accounting Standards Board 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. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The adoption of SFAS No. 133 is not expected to have a material impact. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1997 Revenue for the third quarter ended September 30, 1998, was $56,977,000 compared with $57,856,000 for the quarter ended September 30, 1997, a decrease of $879,000 or 2%. The oil and gas services segment revenue of $30,633,000 decreased 14% from last year's third quarter of $35,512,000. This was due, in large part, to decreased foreign activity, primarily in Venezuela due to the reorganization of the Venezuelan national oil company, coupled with an overall decrease in domestic activity. In addition, oil and natural gas prices have decreased 24 and 26 percent, respectively, compared to the comparable period in the prior year and the number of working rigs in the United States has decreased approximately 25 percent from the third quarter of 1997. The third quarter oil and gas services segment revenue was also negatively impacted by poor weather conditions in the Gulf of Mexico and gulf states region. The powerboat manufacturing segment revenue for the quarter ended September 30, 1998, increased to $22,420,000 or 17% from last year's third quarter of $19,136,000 as the result of an increase in Chaparral's market share. Cost of goods sold for the third quarter ended September 30, 1998, was $20,405,000 compared to $17,191,000 for the third quarter ended September 30, 1997, an increase of $3,214,000 or 19%. This increase is comparable to the increase in sales for the third quarter for the powerboat manufacturing segment. Net income for the quarter ended September 30, 1998, was $3,753,000 or $0.13 diluted earnings per share versus net income of $5,409,000 or $0.18 diluted earnings per share for the quarter ended September 30, 1997. Basic earnings per share was $0.13 cents per share versus $0.19 cents per share last year. The decrease in earnings from the same period one year ago was due to the decreased revenues coupled with decreased profit margins for the oil and gas services segment offset to some extent by the increase in the profit margins for the powerboat manufacturing segment. 6 of 11
RPC, INC. AND SUBSIDIARIES ITEM 2. CONT'D NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997 Revenue for the nine months ended September 30, 1998 was $190,292,000 compared with $183,092,000 for the nine months ended September 30, 1997, an increase of $7,200,000 or 4%. The oil and gas services segment revenue decreased by less than 1% and the powerboat manufacturing segment increased 7%. The oil and gas services revenue has experienced a slight decrease for the nine months as a result of the overall declines in drilling activity and decreased foreign activity, primarily in Venezuela, due to the reorganization of the Venezuelan national oil company. The powerboat manufacturing revenue increased due to Chaparral's increased market share. Cost of goods sold for the nine months ended September 30, 1998, was $68,236,000 compared to $64,574,000 for the third quarter ended September 30, 1997, an increase of $3,662,000 or 6%. This increase is comparable to the increase in sales for the nine months for the powerboat manufacturing segment. Net income for the nine months ended September 30, 1998 was $15,817,000 or $0.54 diluted earnings per share versus net income of $15,628,000 or $0.53 diluted earnings per share for the nine months ended September 30, 1997. Basic earnings per share was $0.54 compared to $0.54 for the comparable period last year. The increase in earnings from the same period one year ago was due to the overall revenue increase coupled with the improved profit margins for both the oil and gas services and the powerboat manufacturing segments, offset by an increase in the effective income tax rate from 34.5% last year to 38% this year. FINANCIAL CONDITION The Company's current ratio remained strong as of September 30, 1998, with current assets of $76,517,000 exceeding current liabilities of $34,164,000 by a ratio of 2.2-to-1. This compares to a current ratio of 2.3-to-1 at December 31, 1997. Capital expenditures during the first nine months of 1998 totaling $24,360,000 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 from operations. The Company is in the process of assessing the effect of Year 2000 on the Company's operating plans and systems. The Company is developing a plan for identifying, 7 of 11
RPC, INC. AND SUBSIDIARIES ITEM 2. CONT'D renovating, testing and implementing its systems for Year 2000 processing and internal control requirements. The Company is also in the process of developing strategies for evaluating the risks associated with the Year 2000 issue with respect to its major customers and suppliers. The cost of becoming Year 2000 compliant has not yet been determined; however, management feels such cost will not be material to the Company's financial 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 trends in the boating industry, 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, including economic conditions, 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. ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has not entered into transactions or contracts which require disclosure pursuant to this item. 8 of 11
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 Appropriate proposals of stockholders intended to be presented at the Company's 1999 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), must be received by the Company by December 2, 1998 for inclusion in its Proxy Statement and form of proxy relating to that meeting. If the date of the 1999 Annual Meeting is subsequently advanced or delayed by more than 30 calendar days from the 1998 Annual Meeting, the Company shall, in a timely manner, inform its stockholders of the change and the date by which such proposals of stockholders must be received. In addition, all stockholder proposals submitted outside of the stockholder proposal rules promulgated pursuant to Rule 14a-8 under the Exchange Act must be received by the Company by February 15, 1999 in order to be considered timely. If such stockholder proposals are not timely received, proxyholders will have discretionary voting authority with regard to any such stockholder proposals which may come before the Annual Meeting. With regard to such stockholder proposals, if the date of the 1999 annual meeting is subsequently advanced or delayed by more than 30 days from the date of the 1998 Annual Meeting to which the Proxy Statement relates, the Company shall, in a timely manner, inform stockholders of the change and the date by which proposals must be received. 9 of 11
RPC, INC. AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (3)(1)(a) The Company's Certificate of Incorporation (3)(1)(b) The Company's Certificates of Amendment of the Certificate of Incorporation Exhibit 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 September 30, 1998. 10 of 11
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: November 13, 1998 Richard A. Hubbell President and Chief Operating Officer /s/ Ben M. Palmer --------------------------------------------- Date: November 13, 1998 Ben M. Palmer Vice President, Treasurer and Chief Financial Officer 11 of 11