RPC, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, ~~2018~~2019 AND DECEMBER 31, ~~2017~~2018

(In thousands)

(Unaudited)


	June 30,		December 31,
	2019		2018
			(Note 1)
ASSETS

Cash and cash equivalents	$	47,642	$	116,262
Accounts receivable, net of allowance for doubtful accounts of $5,577 in 2019 and $4,813 in 2018		358,002		323,533
Inventories		118,606		130,083
Income taxes receivable		4,674		35,832
Prepaid expenses		8,154		9,766
Other current assets		3,049		3,462
Total current assets		540,127		618,938
Property, plant and equipment, less accumulated depreciation of $1,669,168 in 2019 and $1,633,827 in 2018		574,858		517,982
Operating lease right-of-use assets		42,727		—
Goodwill		32,150		32,150
Other assets		34,105		30,510
Total assets	$	1,223,967	$	1,199,580

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable	$	122,766	$	103,401
Accrued payroll and related expenses		22,981		25,715
Accrued insurance expenses		7,350		6,183
Accrued state, local and other taxes		5,834		3,081
Income taxes payable		1,059		4,706
Current portion of operating lease liabilities		12,181		—
Other accrued expenses		213		151
Total current liabilities		172,384		143,237
Long-term accrued insurance expenses		14,280		12,072
Long-term pension liabilities		33,675		29,638
Deferred income taxes		47,823		60,375
Long-term operating lease liabilities		31,624		—
Other long-term liabilities		2,506		3,839
Total liabilities		302,292		249,161
Common stock		21,458		21,454
Capital in excess of par value		—		—
Retained earnings		920,917		947,711
Accumulated other comprehensive loss		(20,700)		(18,746)
Total stockholders’ equity		921,675		950,419
Total liabilities and stockholders’ equity	$	1,223,967	$	1,199,580

June 30, December 31,
2018 2017
(Note 1)
ASSETS

Cash and cash equivalents $ 94,175 $ 91,050
Accounts receivable, net of allowance for doubtful accounts of $5,022 in 2018 and $4,471 in 2017 376,815 377,853
Inventories 126,504 114,866
Income taxes receivable 21,258 40,243
Prepaid expenses 6,382 8,992
Other current assets 5,924 7,131
Total current assets 631,058 640,135
Property, plant and equipment, less accumulated depreciation of $1,693,141 in 2018 and $1,659,311 in 2017 523,330 443,928
Goodwill 32,150 32,150
Other assets 32,110 31,011
Total assets $ 1,218,648 $ 1,147,224

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable $ 138,971 $ 103,462
Accrued payroll and related expenses 24,061 23,577
Accrued insurance expenses 5,592 5,299
Accrued state, local and other taxes 5,904 8,655
Income taxes payable 7,566 3,224
Other accrued expenses 1,302 1,143
Total current liabilities 183,396 145,360
Long-term accrued insurance expenses 10,816 10,376
Long-term pension liabilities 30,833 35,635
Deferred income taxes 44,715 39,437
Other long-term liabilities 3,901 4,719
Total liabilities 273,661 235,527
Common stock 21,483 21,654
Capital in excess of par value — —
Retained earnings 940,308 906,745
Accumulated other comprehensive loss (16,804 ) (16,702 )
Total stockholders' equity 944,987 911,697
Total liabilities and stockholders' equity $ 1,218,648 $ 1,147,224

The accompanying notes are an integral part of these consolidated financial statements.

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RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2018~~2019 AND ~~2017~~2018

(In thousands except per share data)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Revenues	$	358,516	$	467,926	$	693,172	$	904,260
Cost of revenues (exclusive of items shown below)		265,088		312,079		517,483		607,684
Selling, general and administrative expenses		43,293		42,534		88,714		86,348
Depreciation and amortization		42,881		40,094		85,386		77,574
Gain on disposition of assets, net		(1,133)		(1,810)		(4,637)		(3,173)
Operating income		8,387		75,029		6,226		135,827
Interest expense		(164)		(113)		(253)		(218)
Interest income		594		458		1,394		860
Other (expense) income, net		(53)		4,104		392		9,499
Income before income taxes		8,764		79,478		7,759		145,968
Income tax provision		2,593		19,535		2,327		33,895
Net income	$	6,171	$	59,943	$	5,432	$	112,073

Earnings per share
Basic	$	0.03	$	0.28	$	0.02	$	0.52
Diluted	$	0.03	$	0.28	$	0.02	$	0.52

Dividends per share	$	0.05	$	0.10	$	0.15	$	0.20

Three months ended Six months ended
June 30, June 30,
2018 2017 2018 2017
Revenues $ 467,926 $ 398,810 $ 904,260 $ 696,929
Cost of revenues (exclusive of items shown below) 312,079 254,016 607,684 470,258
Selling, general and administrative expenses 42,534 40,288 86,348 77,445
Depreciation and amortization 40,094 41,263 77,574 85,926
Gain on disposition of assets, net (1,810 ) (3,759 ) (3,173 ) (5,276 )
Operating income 75,029 67,002 135,827 68,576
Interest expense (113 ) (114 ) (218 ) (217 )
Interest income 458 411 860 540
Other income, net 4,104 2,010 9,499 2,222
Income before income taxes 79,478 69,309 145,968 71,121
Income tax provision 19,535 25,469 33,895 23,647
Net income $ 59,943 $ 43,840 $ 112,073 $ 47,474

Earnings per share
Basic $ 0.28 $ 0.20 $ 0.52 $ 0.22
Diluted $ 0.28 $ 0.20 $ 0.52 $ 0.22

Dividends per share $ 0.10 $ — $ 0.20 $ —

The accompanying notes are an integral part of these consolidated financial statements.

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RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2018~~2019 AND ~~2017~~2018

(In thousands)

(Unaudited)


	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net income	$	6,171	$	59,943	$	5,432	$	112,073

Other comprehensive income (loss):
Pension adjustment and reclassification adjustment, net of taxes		174		155		347		328
Foreign currency translation		333		66		431		(415)
Comprehensive income	$	6,678	$	60,164	$	6,210	$	111,986

Three months ended Six months ended
June 30, June 30,
2018 2017 2018 2017
Net income $ 59,943 $ 43,840 $ 112,073 $ 47,474

Other comprehensive income (loss):
Pension adjustment and reclassification adjustment, net of taxes 156 135 328 270
Foreign currency translation 65 189 (415 ) 231
Unrealized loss on securities, net of taxes — (6 ) — (21 )
Comprehensive income $ 60,164 $ 44,158 $ 111,986 $ 47,954

The accompanying notes are an integral part of these consolidated financial statements.

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RPC, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands)

(Unaudited)


	Six months ended June 30, 2019
								Accumulated
				Capital in				Other
	Common Stock			Excess of		Retained		Comprehensive
	Shares	Amount		Par Value		Earnings		(Loss) Income		Total
Balance , December 31, 2018	214,544	$	21,454	$	—	$	947,711	$	(18,746)	$	950,419
Adoption of accounting standards (Note 2)	—		—		—		2,376		(2,732)		(356)
Stock issued for stock incentive plans, net	843		84		2,368		—		—		2,452
Stock purchased and retired	(245)		(24)		(2,368)		(306)		—		(2,698)
Net loss	—		—		—		(739)		—		(739)
Dividends	—		—		—		(21,486)		—		(21,486)
Pension adjustment, net of taxes	—		—		—		—		173		173
Foreign currency translation	—		—		—		—		98		98
Balance, March 31, 2019	215,142	$	21,514	$	—	$	927,556	$	(21,207)	$	927,863
Adoption of accounting standards (Note 2)	—		—		—		87		—		87
Stock issued for stock incentive plans, net	(23)		(2)		2,438		—		—		2,436
Stock purchased and retired	(540)		(54)		(2,438)		(2,159)		—		(4,651)
Net income	—		—		—		6,171		—		6,171
Dividends	—		—		—		(10,738)		—		(10,738)
Pension adjustment, net of taxes	—		—		—		—		174		174
Foreign currency translation	—		—		—		—		333		333
Balance, June 30, 2019	214,579	$	21,458	$	—	$	920,917	$	(20,700)	$	921,675

Common Stock Capital in
Excess of Retained Accumulated
Other
Comprehensive
Shares Amount Par Value Earnings Loss Total
Balance, December 31, 2017 216,544 $ 21,654 $ — $ 906,745 $ (16,702 ) $ 911,697
Adoption of accounting standard (Note 2) — — — 15 (15 ) —
Stock issued for stock incentive plans, net 416 42 4,544 — — 4,586
Stock purchased and retired (2,133 ) (213 ) (4,544 ) (35,339 ) — (40,096 )
Net income — — — 112,073 — 112,073
Dividends — — — (43,186 ) — (43,186 )
Pension adjustment, net of taxes — — — — 328 328
Foreign currency translation — — — — (415 ) (415 )
Balance, June 30, 2018 214,827 $ 21,483 $ — $ 940,308 $ (16,804 ) $ 944,987


	Six months ended June 30, 2018
								Accumulated
				Capital in				Other
	Common Stock			Excess of		Retained		Comprehensive
	Shares	Amount		Par Value		Earnings		(Loss) Income		Total
Balance , December 31, 2017	216,544	$	21,654	$	—	$	906,745	$	(16,702)	$	911,697
Adoption of accounting standard (Note 2)	—		—		—		15		(15)		—
Stock issued for stock incentive plans, net	498		50		2,505		—		—		2,555
Stock purchased and retired	(1,573)		(157)		(2,505)		(28,048)		—		(30,710)
Net income	—		—		—		52,130		—		52,130
Dividends	—		—		—		(21,657)		—		(21,657)
Pension adjustment, net of taxes	—		—		—		—		173		173
Foreign currency translation	—		—		—		—		(481)		(481)
Balance, March 31, 2018	215,469	$	21,547	$	—	$	909,185	$	(17,025)	$	913,707
Adoption of accounting standard (Note 2)	—		—		—		—		—		0
Stock issued for stock incentive plans, net	(82)		(8)		2,039		—		—		2,031
Stock purchased and retired	(560)		(56)		(2,039)		(7,291)		—		(9,386)
Net income	—		—		—		59,943		—		59,943
Dividends	—		—		—		(21,529)		—		(21,529)
Pension adjustment, net of taxes	—		—		—		—		155		155
Foreign currency translation	—		—		—		—		66		66
Balance, June 30, 2018	214,827	$	21,483	$	—	$	940,308	$	(16,804)	$	944,987

The accompanying notes are an integral part of these consolidated financial statements.

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RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, ~~2018~~2019 AND ~~2017~~2018

(In thousands)

(Unaudited)


	Six months ended June 30,
	2019		2018
OPERATING ACTIVITIES
Net income	$	5,432	$	112,073
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash charges		86,809		79,410
Stock-based compensation expense		4,888		4,586
Gain on disposition of assets, net		(4,637)		(3,173)
Deferred income tax (benefit) provision		(12,579)		5,171
(Increase) decrease in assets:
Accounts receivable		(34,337)		843
Income taxes receivable		31,158		18,984
Inventories		11,701		(11,880)
Prepaid expenses		1,614		2,607
Other current assets		600		990
Other non-current assets		(3,609)		(1,113)
Increase (decrease) in liabilities:
Accounts payable		2,764		22,892
Income taxes payable		(3,647)		4,342
Accrued payroll and related expenses		(2,758)		515
Accrued insurance expenses		1,167		293
Accrued state, local and other taxes		2,753		(2,751)
Other accrued expenses		(349)		160
Pension liabilities		4,497		(4,367)
Long-term accrued insurance expenses		2,208		440
Other long-term liabilities		(245)		(818)
Net cash provided by operating activities		93,430		229,204

INVESTING ACTIVITIES
Capital expenditures		(132,253)		(149,692)
Proceeds from sale of assets		9,776		6,895
Net cash used for investing activities		(122,477)		(142,797)

FINANCING ACTIVITIES
Payment of dividends		(32,224)		(43,186)
Cash paid for common stock purchased and retired		(7,349)		(40,096)
Net cash used for financing activities		(39,573)		(83,282)

Net (decrease) increase in cash and cash equivalents		(68,620)		3,125
Cash and cash equivalents at beginning of period		116,262		91,050
Cash and cash equivalents at end of period	$	47,642	$	94,175

Supplemental cash flows disclosure:
Income taxes (refund) paid, net	$	(12,125)	$	4,977

Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable	$	31,407	$	19,727

Six months ended June 30,
2018 2017
OPERATING ACTIVITIES
Net income $ 112,073 $ 47,474
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash charges 79,410 87,379
Stock-based compensation expense 4,586 6,012
Gain on disposition of assets, net (3,173 ) (5,276 )
Deferred income tax provision (benefit) 5,171 (20,759 )
(Increase) decrease in assets:
Accounts receivable 843 (174,220 )
Income taxes receivable 18,984 48,248
Inventories (11,880 ) (4,193 )
Prepaid expenses 2,607 1,309
Other current assets 990 310
Other non-current assets (1,113 ) (2,256 )
Increase (decrease) in liabilities:
Accounts payable 22,892 27,760
Income taxes payable 4,342 10,277
Accrued payroll and related expenses 515 4,742
Accrued insurance expenses 293 252
Accrued state, local and other taxes (2,751 ) 3,547
Other accrued expenses 160 (5,024 )
Pension liabilities (4,367 ) 2,479
Long-term accrued insurance expenses 440 389
Other long-term liabilities (818 ) 219
Net cash provided by operating activities 229,204 28,669

INVESTING ACTIVITIES
Capital expenditures (149,692 ) (30,645 )
Proceeds from sale of assets 6,895 8,407
Net cash used for investing activities (142,797 ) (22,238 )

FINANCING ACTIVITIES
Payment of dividends (43,186 ) —
Cash paid for common stock purchased and retired (40,096 ) (12,454 )
Net cash used for financing activities (83,282 ) (12,454 )

Net increase (decrease) in cash and cash equivalents 3,125 (6,023 )
Cash and cash equivalents at beginning of period 91,050 131,835
Cash and cash equivalents at end of period $ 94,175 $ 125,812

Supplemental cash flows disclosure:
Interest paid, net of amounts capitalized $ 133 $ 72
Income taxes paid (refund), net $ 4,977 $ (14,119 )

Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable $ 19,727 $ 8,866

The accompanying notes are an integral part of these consolidated financial statements.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (“RPC” or the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control.

In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2018~~2019 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2018.~~

2019.

The balance sheet at December 31, ~~2017~~2018 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2017.~~

2018.

A group that includes the Company’s Chairman of the Board, R. Randall Rollins, and his brother Gary W. Rollins, who is also a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.

2. RECENT ACCOUNTING STANDARDS

The FASB issued the following applicable Accounting Standards Updates (ASU):

Recently Adopted Accounting Standards:

~~ASU No. 2014-09, Revenue from Contracts with Customers~~Accounting Standards Update (ASU) 2016-02, Leases (Topic ~~606)~~842). ~~On January 1, 2018, the~~The Company adoptedASC ~~606, Revenue from Contracts with Customers~~842, Leases, and all the related amendments ~~(“new revenue standard”)~~on January 1, 2019, by recognizing on its balance sheet, right-of-use assets and lease liabilities totaling approximately $44 million, for all ~~contracts~~of its leases with terms greater than 12 months. The Company adopted the standard using the ~~modified retrospective~~optional transition method, with ~~no cumulative-effect~~an immaterial adjustment to retained earnings upon ~~adoption since most of the Company’s services are primarily short-term in nature and the pattern of transfer under ASC 605 is consistent with the pattern of transfer when evaluated under ASC 606.~~adoption. The comparative information has not been restated and continues to be reported under the accounting standards that were in effect for those periods. The adoption of the ~~new revenue~~ standard did not have a material impact on ~~our~~the Company’s consolidated ~~financial statements. See “Revenues” in~~statements of operations and consolidated statements of cash flows. For expanded disclosures see Note 13 of the Notes to Consolidated Financial ~~Statements for expanded disclosures.~~

~~ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~The amendments make targeted improvements to existing U.S. GAAP and affects accounting for equity investments and financial instruments and liabilities and related disclosures. The Company adopted these provisions in the first quarter of 2018 and recognized the change of approximately $26,000 in fair value of its equity securities, as part of other income. In addition, as of the beginning of the first quarter of 2018, the Company adjusted opening retained earnings to recognize the cumulative impact of the adoption of these amendments. The Company does not expect the adoption of these provisions to have an ongoing material impact on its consolidated financial statements.

~~ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.~~The amendments provide guidance in the presentation and classification of certain cash receipts and cash payments in the statement of cash flows including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The Company adopted these provisions in the first quarter of 2018 and will present cash flow statements in conformity with these provisions when such issues arise. The Company does not expect the adoption of these provisions to have an ongoing material impact on its consolidated financial statements.

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.~~The amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. The Company adopted these provisions in the first quarter of 2018, and since the Company’s intra-entity transfers of property, plant and equipment are carried out at net book values, the adoption did not have a material impact on its consolidated financial statements.

~~ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.~~ The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments provide a more robust framework to use in determining when a set of assets and activities is a business. The Company adopted these provisions in the first quarter of 2018 and will apply these provisions as it completes future acquisitions. The Company does not expect the adoption of these provisions to have an ongoing material impact on its consolidated financial statements.

~~ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.~~The provisions are applicable when there are changes to the terms or conditions of a share-based payment award. The amendments require an entity to apply modification accounting for the effects of changes to the terms and conditions of a share-based payment award unless certain conditions including fair value, vesting conditions and classification are met. The Company adopted these provisions in the first quarter of 2018 and will apply these provisions if changes to the terms or conditions of a share-based payment award are made. The Company does not expect the adoption of these provisions to have an ongoing material impact on its consolidated financial statements.

~~Recently Issued Accounting Standards Not Yet Adopted:~~

~~To be adopted in 2019:~~

~~ASU No. 2016-02, Leases (Topic 842).~~Under the new guidance, lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease), at the commencement of the lease term. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs and lessor provided incentives. The amendments are effective starting in the first quarter of 2019, with early adoption permitted. As part of its preparation to adopt the standard, the Company has established an initial project governance framework, selected a working group and hired a third party service provider to assist with the implementation. The Company is currently evaluating the impact of this guidance on its financial statements and related disclosures, including the increase in the assets and liabilities on its balance sheet and the impact on its current lease portfolio from a lessee perspective.

Statements.

ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.The amendments provide an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act ~~(or portion thereof)~~ is ~~recorded and require expanded disclosures regarding~~recorded. The Company adopted the ~~Company’s accounting policy decisions on such reclassification. The amendments are effective starting~~standard in the first quarter of 2019 ~~with early adoption permitted. The Company is currently evaluating the impact~~and elected to reclassify approximately $2.7 million of ~~adopting these provisions on~~stranded tax effects related to its ~~consolidated financial statements.~~

pension plan from AOCI to retained earnings.

ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.The amendments expand the scope of ~~ASU~~ASC 718 to include share-based payments issued to nonemployees for goods or services, thereby substantially aligning the accounting for ~~share-based~~share-

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

based payments to nonemployees and employees. The ~~amendments are effective starting~~Company adopted these provisions in the first quarter of ~~2019. The Company currently does not expect~~2019 and the adoption ~~of these provisions to~~did not have a material impact on its consolidated financial statements.

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Recently Issued Accounting Standards Not Yet Adopted:

To be adopted in 2020 and later:

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. In addition, the amendments require the credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration to be presented as an allowance rather than a write-down. It also allows recording of credit loss reversals in current period net income. The amendments are effective starting in the first quarter of 2020 with early application ~~permitted a year earlier.~~permitted. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.

ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for annual or any interim goodwill impairment tests beginning in 2020 applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.

ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments reduce the complexity for the accounting for costs of implementing a cloud computing service arrangement and align the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract with the costs incurred to develop or obtain internal-use software. The provisions may be applied prospectively or retrospectively. The amendments are effective starting in the first quarter of 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.

3. REVENUES

Accounting Policy:

RPC’s contract revenues are generated principally from providing oilfield services. These services are based on mutually agreed upon pricing with the customer prior to the services being delivered and, given the nature of the services, do not include the right of return. Pricing for these services is a function of rates based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. RPC typically satisfies its performance obligations over time as the services are performed. RPC records revenues based on the transaction price agreed upon with its customers.

Sales tax charged to customers is presented on a net basis within the consolidated statements of operations and therefore excluded from revenues.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Nature of services:

RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets. RPC manages its business as either (1) services offered on the well site with equipment and personnel (Technical Services) or (2) services and tools offered off the well site (Support Services). For more detailed information about operating segments, see Note 6.

RPC contracts with its customers to provide the following services by reportable segment:

Technical Services

·●

Includes pressure pumping, downhole tools services, coiled tubing, nitrogen, snubbing and other oilfield related services including wireline, well control, fishing and pump down services.

Support Services

·●

Rental tools – RPC rents tools to its customers for use with onshore and offshore oil and gas well drilling, completion and workover activities.

·●

Other support services include oilfield pipe inspection services, pipe management and pipe storage; well control training and consulting.

Our contracts with customers are generally very short-term in nature and generally consist of a single performance obligation – the provision of oilfield services.

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Payment terms:

RPC’s contracts with ~~the customer states~~customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection generally occurs between 30 to 60 days after invoicing. As the Company enters into contracts with its customers, it generally expects there to be no significant timing difference between the date the services are provided to the customer (satisfaction of the performance obligation) and the date cash consideration is received. Accordingly, there is no financing component to our arrangements with customers.

Significant judgments:

RPC believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. RPC has elected the right to invoice practical expedient for recognizing revenue related to its performance obligations.

Disaggregation of revenues:

See Note 6 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Timing of revenue recognition for each of the periods presented is shown below:

	Three months ended				Six months ended
	June 30,				June 30,

									Three months ended				Six months ended
									June 30,				June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Oilfield services transferred at a point in time	$	-	$	-	$	-	$	-	$	—	$	—	$	—	$	—
Oilfield services transferred over time		467,926		398,810		904,260		696,929		358,516		467,926		693,172		904,260
Total revenues	$	467,926	$	398,810	$	904,260	$	696,929	$	358,516	$	467,926	$	693,172	$	904,260

Contract balances:

Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net on the consolidated balance sheets are shown below:


									June 30,		December 31,		June 30,		December 31,
(in thousands)	June 30, 2018		December 31, 2017		June 30, 2017		December 31, 2016		2019		2018		2018		2017
Unbilled trade receivables	$	113,453	$	68,494	$	82,466	$	39,223	$	95,898	$	56,408	$	113,453	$	68,494

Substantially all of the unbilled trade receivables ~~as of December 31, 2017 and December 31, 2016~~disclosed were invoiced during the following quarter.

4. EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. The following table shows the restricted shares of common stock (participating securities) outstanding and a reconciliation of outstanding weighted average shares is as follows:


	Three months ended				Six months ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Net income available for stockholders:	$	6,171	$	59,943	$	5,432	$	112,073
Less: Adjustments for earnings attributable to participating securities		(109)		(673)		(334)		(1,266)
Net income used in calculating earnings per share	$	6,062	$	59,270	$	5,098	$	110,807

Weighted average shares outstanding (including participating securities)		214,908		215,194		214,974		215,641
Adjustment for participating securities		(2,569)		(2,473)		(2,559)		(2,528)
Shares used in calculating basic and diluted earnings per share		212,339		212,721		212,415		213,113

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Three months ended
June 30, Six months ended
June 30,
(In thousands) 2018 2017 2018 2017
Net income available for stockholders: $ 59,943 $ 43,840 $ 112,073 $ 47,474
Less: Adjustments for earnings attributable to participating securities (673 ) (592 ) (1,266 ) (652 )
Net income used in calculating earnings per share $ 59,270 $ 43,248 $ 110,807 $ 46,822

Weighted average shares outstanding (including participating securities) 215,194 217,530 215,641 217,622
Adjustment for participating securities (2,473 ) (2,936 ) (2,528 ) (2,989 )
Shares used in calculating basic and diluted earnings per share 212,721 214,594 213,113 214,633

5. STOCK-BASED COMPENSATION

In April 2014, the Company reserved 8,000,000 shares of common stock under the 2014 Stock Incentive Plan with a term of 10 years expiring in April 2024. This plan provides for the issuance of various forms of stock incentives, including, among others, incentive and non-qualified stock options and restricted shares. As of June 30, ~~2018,~~2019, there were ~~5,358,867~~4,578,747 shares available for grant.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-based employee compensation expense was as follows for the periods indicated:

	Three months ended				Six months ended
	June 30,				June 30

									Three months ended				Six months ended
									June 30,				June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Pre-tax expense	$	2,031	$	3,325	$	4,586	$	6,012	$	2,436	$	2,031	$	4,888	$	4,586
After tax expense	$	1,533	$	2,112	$	3,462	$	3,818	$	1,839	$	1,533	$	3,690	$	3,462

Restricted Stock

The following is a summary of the changes in non-vested restricted shares for the six months ended June 30, ~~2018:~~2019:

	Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at December 31, 2017		2,736,365	$	14.50

						Weighted Average
					Shares	Grant-Date Fair Value
Non-vested shares at December 31, 2018					2,352,150	$	17.15
Granted		522,800		25.13	858,150		11.39
Vested		732,213		13.02	(615,160)		14.71
Forfeited		107,212		16.77	(37,613)		15.69
Non-vested shares at June 30, 2018		2,419,740	$	17.15
Non-vested shares at June 30, 2019					2,557,527	$	13.21

The total fair value of shares vested was ~~approximately~~$6,970,000 during the six months ended June 30, 2019 and $16,194,000 during the six months ended June 30, ~~2018 and $19,271,000 during the six months ended June 30, 2017.~~2018. Excess tax benefits or deficits realized from tax compensation deductions in excess of, or lower than compensation expense are recorded as either a beneficial or detrimental discrete tax adjustment. This discrete tax adjustment was a detriment of $510,000 for the six months ended June 30, 2019 and a benefit of $1,620,000 for the six months ended June 30, ~~2018 and $2,562,000 for the six months ended June 30, 2017.~~

2018.

As of June 30, ~~2018,~~2019, total unrecognized compensation cost related to non-vested restricted shares was ~~$48,332,000,~~$48,384,000, which is expected to be recognized over a weighted-average period of ~~3.7~~3.9 years.

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

6. BUSINESS SEGMENT INFORMATION

RPC’s reportable segments are the same as its operating segments. RPC manages its business under Technical Services and Support Services. Technical Services is comprised of service lines that generate revenue based on equipment, personnel or materials at the well site and are closely aligned with completion and production activities of the customers. Support Services is comprised of service lines which generate revenue from services and tools offered off the well site and are more closely aligned with the customers’ drilling activities. Selected overhead including centralized support services and regulatory compliance are classified as Corporate.

Technical Services consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. The services offered under Technical Services are high capital and personnel intensive businesses. The Company considers all of these services to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services.

Support Services consist primarily of drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels.

The Company’s Chief Operating Decision Maker (“CODM”) assesses performance and makes resource allocation decisions regarding, among others, staffing, growth and maintenance capital expenditures and key initiatives based on the operating segments outlined above.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment Revenues:

RPC’s operating segment revenues by major service lines are shown in the following table:

	Three months ended				Six months ended
	June 30,				June 30,

									Three months ended				Six months ended
									June 30,				June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Technical Services:
Pressure Pumping	$	269,040	$	253,743	$	525,195	$	436,675	$	170,066	$	269,040	$	317,825	$	525,195
Downhole Tools		107,521		71,862		200,562		124,207		112,763		107,521		222,434		200,562
Coiled Tubing		27,404		25,956		52,600		47,335		21,284		27,404		41,462		52,600
Nitrogen		11,784		9,271		23,215		17,948		12,219		11,784		23,527		23,215
Snubbing		6,055		6,588		10,027		12,231		4,355		6,055		7,818		10,027
All other		28,048		18,042		57,316		33,264		17,347		28,048		39,047		57,316
Total Technical Services	$	449,852	$	385,462	$	868,915	$	671,660	$	338,034	$	449,852	$	652,113	$	868,915
Support Services:
Rental Tools	$	12,550	$	6,459	$	22,570	$	11,847	$	13,962	$	12,550	$	27,898	$	22,570
All other		5,524		6,889		12,775		13,422		6,520		5,524		13,161		12,775
Total Support Services	$	18,074	$	13,348	$	35,345	$	25,269	$	20,482	$	18,074	$	41,059	$	35,345
Total revenues	$	467,926	$	398,810	$	904,260	$	696,929	$	358,516	$	467,926	$	693,172	$	904,260

The following summarizes revenues for the United States and separately for all international locations combined for the three and six months ended June 30, ~~2018.~~2019. The revenues are presented based on the location of the use of the equipment or services. Assets related to international operations are less than 10 percent of RPC’s consolidated assets, and therefore are not presented.


	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2019		2018		2019		2018
United States revenues	$	343,688	$	443,922	$	657,656	$	861,306
International revenues		14,828		24,004		35,516		42,954
Total revenues	$	358,516	$	467,926	$	693,172	$	904,260

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Three months ended Six months ended
June 30, June 30,
(in thousands) 2018 2017 2018 2017
United States revenues $ 443,922 $ 387,667 $ 861,306 $ 672,101
International revenues 24,004 11,143 42,954 24,828
Total revenues $ 467,926 $ 398,810 $ 904,260 $ 696,929

The accounting policies of the reportable segments are the same as those described in Note 1 to these consolidated financial statements. RPC evaluates the performance of its segments based on revenues, operating profits and return on invested capital. Gains or losses on disposition of assets are reviewed by the CODM on a consolidated basis, and accordingly the Company does not report gains or losses at the segment level. Inter-segment revenues are generally recorded in segment operating results at prices that management believes approximate prices for arm’s length transactions and are not material to operating results.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Summarized financial information with respect RPC’s reportable segments for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 are shown in the following table:

	Three months ended June 30,						Six months ended June 30,

													Three months ended				Six months ended
													June 30,				June 30,
(in thousands)	2018			2017			2018			2017			2019		2018		2019		2018
Revenues:
Technical Services	$	449,852		$	385,462		$	868,915		$	671,660		$	338,034	$	449,852	$	652,113	$	868,915
Support Services		18,074			13,348			35,345			25,269			20,482		18,074		41,059		35,345
Total revenues	$	467,926		$	398,810		$	904,260		$	696,929		$	358,516	$	467,926	$	693,172	$	904,260
Operating income (loss):
Technical Services	$	75,624		$	70,901		$	140,629		$	80,106		$	6,850	$	75,624	$	2,392	$	140,629
Support Services		1,193			(3,339	)		288			(8,560	)		4,018		1,193		7,155		288
Corporate		(3,598	)		(4,319	)		(8,263	)		(8,246	)		(3,614)		(3,598)		(7,958)		(8,263)
Gain on disposition of assets, net		1,810			3,759			3,173			5,276			1,133		1,810		4,637		3,173
Total operating income	$	75,029		$	67,002		$	135,827		$	68,576		$	8,387	$	75,029	$	6,226	$	135,827
Interest expense		(113	)		(114	)		(218	)		(217	)		(164)		(113)		(253)		(218)
Interest income		458			411			860			540			594		458		1,394		860
Other income , net		4,104			2,010			9,499			2,222
Other (expense) income , net														(53)		4,104		392		9,499
Income before income taxes	$	79,478		$	69,309		$	145,968		$	71,121		$	8,764	$	79,478	$	7,759	$	145,968

As of and for the six months ended

Technical

Support

June 30, 2019

Services

Corporate

Total

(in thousands)

Depreciation and amortization

80,370

4,856

160

85,386

Capital expenditures

125,171

6,260

822

132,253

Identifiable assets

1,030,073

86,928

106,966

1,223,967


As of and for the six months ended	Technical		Support
June 30, 2018	Services		Services		Corporate		Total
(in thousands)
Depreciation and amortization	$	70,910	$	6,444	$	220	$	77,574
Capital expenditures		144,511		4,467		714		149,692
Identifiable assets	$	983,177	$	77,372	$	158,099	$	1,218,648

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

As of and for the six months ended
June 30,2018 Technical
Services Support
Services Corporate Total
(in thousands)
Depreciation and amortization $ 70,910 $ 6,444 $ 220 $ 77,574
Capital expenditures 144,511 4,467 714 149,692
Identifiable assets $ 983,177 $ 77,372 $ 158,099 $ 1,218,648

As of and for the six months ended
June 30,2017 Technical
Services Support
Services Corporate Total
(in thousands)
Depreciation and amortization $ 76,242 $ 9,451 $ 233 $ 85,926
Capital expenditures 25,282 5,165 198 30,645
Identifiable assets $ 857,482 $ 75,117 $ 173,286 $ 1,105,885

7. INVENTORIES

Inventories of ~~$126,504,000~~$118,606,000 at June 30, ~~2018~~2019 and ~~$114,866,000~~$130,083,000 at December 31, ~~2017~~2018 consist of raw materials, parts and supplies.

8. EMPLOYEE BENEFIT PLAN

The following represents the net periodic benefit cost and related components of the Company’s multiple employers Retirement Income Plan:

	Three months ended June 30,						Six months ended June 30,

													Three months ended				Six months ended
													June 30,				June 30,
(in thousands)	2018			2017			2018			2017			2019		2018		2019		2018
Interest cost	$	458		$	483		$	916		$	966		$	490	$	458	$	980	$	916
Expected return on plan assets		(709	)		(589	)		(1,418	)		(1,178	)		(650)		(709)		(1,300)		(1,418)
Amortization of net losses		206			213			412			425			230		206		460		412
Net periodic benefit (credit) cost	$	(45	)	$	107		$	(90	)	$	213
Net periodic benefit cost (credit)													$	70	$	(45)	$	140	$	(90)

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company ~~made a contribution of $5,000,000~~did not make any contributions to this plan during the six months ended June 30, ~~2018;~~2019; and noa contribution of $5,000,000 was made during the six months ended June 30, ~~2017.~~

2018.

The Company permits selected highly compensated employees to defer a portion of their compensation into the non-qualified Supplemental Retirement Plan (“SERP”). The SERP assets are marked to market and totaled ~~$24,705,000~~$26,454,000 as of June 30, ~~2018~~2019 and ~~$23,463,000~~$22,815,000 as of December 31, ~~2017.~~2018. The SERP assets are reported in non-current other assets on the consolidated balance sheets and changes in the fair value of these assets are reported in the consolidated statements of operations as compensation cost in selling, general and administrative expenses. Unrealized gains (losses), net related to the SERP assets were approximately as follows:

	Three months ended June 30,				Six months ended June 30,

									Three months ended				Six months ended
									June 30,				June 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Unrealized gains, net	$	871	$	936	$	385	$	1,552	$	785	$	871	$	3,636	$	385

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The SERP liability includes participant deferrals net of distributions and is recorded on the consolidated balance sheets in long-term pension liabilities with any change in the fair value of the liabilities recorded as compensation cost within selling, general and administrative expenses in the consolidated statements of operations.

9. NOTES PAYABLE TO BANKS

The Company has a revolving credit facility with ~~Banc~~Bank of America ~~Securities, LLC, SunTrust Robinson Humphrey, Inc.,~~ and ~~Regions Capital Markets as Joint Lead Arrangers and Joint Book Managers, and a syndicate of four~~five other ~~lenders. The facility has a term ending July 26, 2023 and~~lenders which provides for a line of credit of up to $125 million, including a $35 million letter of credit subfacility, and a $35 million swingline subfacility. The revolving credit facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. The revolving credit facility includes a full and unconditional guarantee by the Company's 100 percent owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of the Company and its subsidiaries. Certain of the ~~Company’s~~Company's minor subsidiaries are not guarantors.

On ~~June 30, 2016,~~July 26, 2018, the Company ~~amended~~entered into Amendment No. 4 to Credit Agreement (the “Amendment”). The Amendment, among other matters, replaces the ~~revolving credit facility to (1) establish a borrowing base to be~~existing minimum tangible net worth covenant with the ~~lesser of (a) $125 million or (b) the difference between~~following covenants: (i) ~~a specified percentage (ranging from 70% to 80%) of eligible accounts receivable less (ii) the amount of any outstanding letters of credit, (2) secure payment obligations~~when RPC’s trailing four quarter EBITDA (as calculated under the ~~credit facility with~~Credit Agreement) is equal to or greater than $50 million, a ~~security interest in the~~maximum consolidated ~~accounts receivable,~~leverage ratio of 2.50:1.00 and ~~(3) replace the financial covenants related to~~a minimum ~~leverage and~~ debt service coverage ~~ratios with a covenant to maintain~~ratio of 2.00:1.00, and (ii) otherwise, a minimum tangible net worth covenant of ~~not~~no less than ~~$700~~$600 million. The Amendment additionally (1) extends the Credit Agreement maturity date from January 17, 2019 to July 26, 2023, (2) eliminates any borrowing base limitations on revolving loans when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, (3) reduces the commitment fees payable by RPC by 7.5 basis points at each pricing level and (4) reduces the letter of credit sublimit from $50 million to $35 million. As of June 30, ~~2018,~~2019, the Company was in compliance with ~~this covenant.~~

these covenants.

Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:

·●

the Eurodollar Rate, which is the rate per annum equal to the London Interbank Offering Rate (“LIBOR”); plus, a margin ranging from 1.125% to 2.125%, based on a quarterly consolidated leverage ratio calculation; or

●

the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) Bank of America’s publicly announced “prime rate,” and (c) the Eurodollar Rate plus 1.00%; in each case plus a margin that ranges from 0.125% to 1.125% based on a quarterly consolidated leverage ratio ~~calculation; or~~calculation.

the Eurodollar Rate, which is the rate per annum equal to the London Interbank Offering Rate (“LIBOR”) plus, a margin ranging from 1.125% to 2.125%, based upon a quarterly debt covenant calculation.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In addition, the Company pays an annual fee ranging from ~~0.225%~~0.15% to ~~0.325%~~0.25%, based on a quarterly consolidated leverage ratio calculation, on the unused portion of the credit facility.

The Company has incurred total loan origination fees and other debt related costs associated with ~~the~~this revolving credit facility in the aggregate of approximately ~~$3.0~~$3.3 million. These costs ~~net of amounts written off as a result of a reduction in the size of the revolving credit facility in 2015,~~ are being amortized to interest expense over the remaining term of the ~~five-year~~ loan, and the remaining net balance of ~~$61 thousand~~$0.3 million at June 30, ~~2018~~2019 is classified as part of ~~current~~non-current other assets.

~~All letters of credit are currently issued under RPC’s $125 million credit facility.~~ As of June 30, ~~2018,~~2019, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled ~~$19.6~~$20.6 million; therefore, a total of ~~$105.4~~$104.4 million of the facility was available.

Interest incurred, which includes facility fees on the unused portion of the revolving credit facility and the amortization of loan ~~costs, was as follows:~~

Three months ended
June 30, Six months ended
June 30,
(in thousands) 2018 2017 2018 2017
Interest incurred $ 103 $ 104 $ 206 $ 207

~~On July 26, 2018,~~cost, and interest paid on the ~~Company further amended the revolving~~ credit facility ~~to, among other matters, replace~~were as follows for the existing minimum tangible net worth covenant with the following covenants: (i) when RPC’s trailing four quarter EBITDA (as calculated under the credit agreement) is equal to or greater than $50 million, a maximum consolidated leverage ratio of 2.50:1.00 and a minimum debt service coverage ratio of 2.00:1.00, and (ii) otherwise, a minimum tangible net worth covenant of no less than $600 million. This amendment additionally (1) extends the maturity date of the revolving credit facility from January 17, 2019 to July 26, 2023, (2) eliminates any borrowing base limitations on revolving loans when RPC’s trailing four quarter EBITDA (as calculated under the credit agreement) is equal to or greater than $50 million, (3) reduces the commitment fees payable by RPC by 7.5 basis points at each pricing level and (4) reduces the letter of credit sublimit from $50 million to $35 million.periods indicated:


	Three months ended				Six months ended
	June 30,				June 30,
(in thousands)	2019		2018		2019		2018
Interest incurred	$	89	$	103	$	178	$	206
Interest paid		58		62		121		133

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~10.~~

10. INCOME TAXES

The Company determines its periodic income tax expense or benefit based upon the current period income or loss and the annual estimated tax rate for the Company adjusted for discrete items including changes to prior period estimates. The estimated tax rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the ~~Company's~~Company’s current annual estimated tax rate.

For the three months ended June 30, ~~2018,~~2019, the income tax provision reflects an effective tax rate of ~~24.6~~29.6 percent compared to ~~36.7~~24.6 percent for the comparable period in the prior year. For the six months ended June 30, ~~2018,~~2019, the income tax provision reflects an effective tax rate of ~~23.2~~30.0 percent compared to ~~33.2~~23.2 percent for the comparable period in the prior year. The ~~2018~~2019 effective ~~tax~~ rate ~~reflects the lower corporate income tax rate from the recently enacted Tax Cuts and Jobs Act. Both periods reflect beneficial~~includes detrimental discrete adjustments of ~~ASU 2016-09 that requires excess tax benefits~~$2.2 million resulting from restricted stock vesting and ~~deficiencies related to stock based compensation to be recognized~~dividends as ~~a component of income tax expense rather than stockholders’ equity.~~

As part of the implementation of the provisions of the Tax Cuts and Jobs Act, the Company recorded adjustments relating to changes in tax rates on deferred tax assets and liabilities during the fourth quarter of 2017. The Company is currently analyzing additional information related to its accounting for the income tax effects of the Tax Cuts and Jobs Act as it pertainscompared to the deduction for executive compensation, including the impact for compensation that is paid pursuant to a binding contract that would have been deductible under the prior rules. Due to the complexity of this provision, additional time is needed to further analyze our executive compensation program, exceptions under the binding contract rule, and the impact of vesting of restricted stock grants, dividends, and bonuses. We are also conducting additional testing and review of assets that qualify for immediate expensing under the new rules that may adjust the provisional amounts that were recognized in our financial statements at December 31, 2017. The ultimate impact of the Tax Cut and Jobs Act may differ from the recorded amounts due to changes in our interpretations and assumptions, as well as additional regulatory guidance that may be issued. We expect to complete the accounting for tax reform with the completion of our 2017 Federal income tax return, expected to be complete by the third quarter of 2018.2018 effective rate.

~~11.~~

11. FAIR VALUE DISCLOSURES

The various inputs used to measure assets at fair value establish a hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the valuation of financial instruments measured at fair value on a recurring basis in the balance sheets as of June 30, ~~2018~~2019 and December 31, ~~2017:~~2018:

Fair Value Measurements at June 30, 2018 with:

Fair Value Measurements at June 30, 2019 with:

Quoted prices in

Significant

active markets

other

Significant

for identical

observable

unobservable

(in thousands)

Total

Quoted prices in
active markets
for identical
assets

Significant
other
observable
inputs

Significant
unobservable
inputs

Total

assets

inputs

(Level 1)

(Level 2)

(Level 3)

(Level 1)

(Level 2)

(Level 3)

Assets:

Equity securities

320

—

232

—

Investments measured at net asset value

24,705

26,454

Fair Value Measurements at December 31, 2018 with:

Quoted prices in

Significant

active markets

other

Significant

for identical

observable

unobservable

(in thousands)

Total

assets

inputs

(Level 1)

(Level 2)

(Level 3)

Assets:

Equity securities

211

—

Investments measured at net asset value

22,815

~~RPC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Fair Value Measurements at December 31, 2017 with:

(in thousands) Total Quoted prices in
active markets
for identical
assets Significant
other
observable
inputs Significant
unobservable
inputs
(Level 1) (Level 2) (Level 3)
Assets:
Equity securities $ 270 $ 270 $ — $ —
Investments measured at net asset value $ 23,463

The Company determines the fair value of equity securities that have a readily determinable fair value through quoted market prices. The total fair value is the final closing price, as defined by the exchange in which the asset is actively traded, on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. Marketable securities comprised of the SERP assets, as described in Note 8, are recorded primarily at their net cash surrender values, calculated using their net asset values, which approximates fair value, as provided by the issuing insurance company. Significant observable inputs, in addition to quoted market prices, were used to value the trading securities. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods. For the period ended June 30, ~~2018,~~2019, there were no significant transfers in or out of levels 1, 2 or 3.

Under the Company’s revolving credit facility, there was no balance outstanding at June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Borrowings under our revolving credit facility are typically based on the quote from the lender (level 2 inputs), which approximates fair value, and bear variable interest rates as described in Note 9. The Company is subject to interest rate risk on the variable component of the interest rate.

The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments. The Company currently does not use the fair value option to measure any of its existing financial instruments and has not determined whether it will elect this option for financial instruments acquired in the future.

~~12.~~

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive (loss) income consists of the following (in thousands):

Pension
Adjustment Unrealized
Gain (Loss) On
Securities Foreign
Currency
Translation Total
Balance at December 31, 2017 $ (14,470 ) $ 15 $ (2,247 ) $ (16,702 )
Change during the period:
Before-tax amount — (15 ) (415 ) (430 )
Reclassification adjustment, net of taxes:
Amortization of net loss⁽¹⁾ 328 — — 328
Total activity for the period 328 (15 ) (415 ) (102 )
Balance at June 30, 2018 $ (14,142 ) $ — $ (2,662 ) $ (16,804 )


			Foreign
	Pension		Currency
	Adjustment		Translation		Total
Balance at December 31, 2018	$	(15,878)	$	(2,868)	$	(18,746)
Change during the period:
Before-tax amount		��		431		431
Adoption of accounting standard (Note 2)		(2,732)				(2,732)
Reclassification adjustment, net of taxes:
Amortization of net loss ⁽¹⁾		347		—		347
Total activity for the period		(2,385)		431		(1,954)
Balance at June 30, 2019	$	(18,263)	$	(2,437)	$	(20,700)

(1)

~~(1)~~

Reported as part of selling, general and administrative expenses.


			Unrealized		Foreign
	Pension		Gain (Loss) On		Currency
	Adjustment		Securities		Translation		Total
Balance at December 31, 2017	$	(14,470)	$	15	$	(2,247)	$	(16,702)
Change during the period:
Before-tax amount		—		(15)		(415)		(430)
Reclassification adjustment, net of taxes:
Amortization of net loss ⁽¹⁾		328		—		—		328
Total activity for the period		328		(15)		(415)		(102)
Balance at June 30, 2018	$	(14,142)	$	—	$	(2,662)	$	(16,804)

(1)	Reported as part of selling, general and administrative expenses.

As of January 1, 2018, the balance related to the cumulative unrealized gain on marketable securities included in accumulated other comprehensive income was reclassed upon adoption of ASU 2016-1,Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

In the first quarter of 2019, the Company adopted the provisions of ASU 2018-02, which provides an option to reclassify stranded tax effects within accumulated other comprehensive income/(loss) (AOCI) to retained earnings due to the change in the U.S. federal tax rate as a result of the Tax Cuts and Jobs Act, which took effect in January 2018. Accordingly, the Company elected to reclassify approximately $2.7 million of stranded tax effects related to its pension plan from AOCI to retained earnings.

13. LEASES

The Company adopted ASU No. 2016-02, Leases (Topic 842) on January 1, 2019 and recognized leases with duration greater than 12 months on the balance sheet using the modified retrospective approach. Prior year financial statements have not been restated and therefore those amounts are not presented below. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed for a carry-forward of the historical lease classification. For leases with terms greater than 12 months, the Company has recorded the related Right-Of-Use (ROU) asset and liability at the present value of lease payments over the term. A few of the leases include rental escalation clauses or renewal options and they have been factored into the determination of lease payments when appropriate. There are no residual value guarantees on the existing leases. The Company estimates its incremental borrowing rate, at lease commencement,

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

to determine the present value of lease payments, since most of the Company’s leases do not provide an implicit rate of return. ROU assets exclude lessor incentives received.

The Company’s lease population consists primarily of real estate including its corporate headquarters, office space and warehouses, in addition to vehicles, railcars, storage containers and office equipment. The Company does not have any finance leases. The Company has a significant population of month-to-month real estate leases that have been classified as short-term leases, and therefore has not recognized a ROU asset or lease liability related to them. The Company determines at contract inception, if an arrangement is a lease or contains a lease based on whether the Company obtains the right to control the use of specifically identifiable property, plant and equipment for a period of time in exchange for consideration. The Company has elected not to separate non-lease components from lease components for its leases. Variable lease payments relate primarily to taxes and insurance on real estate contracts and are recognized as expense when incurred.

The Company subleases certain real estate to third parties. Our sublease portfolio consists solely of operating leases. As of June 30, 2019, the Company had no operating leases that had not yet commenced. During the six months ended June 30, 2019, the Company entered into new leases or modified existing leases that resulted in an increase of ROU assets in exchange for operating lease liabilities as disclosed below.

Lease position:

Pension
Adjustment Unrealized
Gain (Loss) On
Securities Foreign
Currency
Translation Total
Balance at December 31, 2016 $ (15,503 ) $ 39 $ (2,638 ) $ (18,102 )
Change during the period:
Before-tax amount — (33 ) 231 198
Tax benefit — 12 — 12
Reclassification adjustment, net of taxes:
Amortization of net loss⁽¹⁾ 270 — — 270
Total activity for the period 270 (21 ) 231 480
Balance at June 30, 2017 $ (15,233 ) $ 18 $ (2,407 ) $ (17,622 )

The table below presents the assets and liabilities related to operating leases recorded on the balance sheet:

~~(1)~~

~~Reported as part of selling, general and administrative expenses.~~

~~13.~~


(in thousands)	Classification on the Consolidated Balance Sheet	June 30, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	42,727

Liabilities:
Current – operating leases	Current portion of operating leases	$	12,181
Non-current – operating leases	Long-term operating lease liabilities		31,624
Total lease liabilities		$	43,805

Lease costs:

The components of lease expense for the period are reported as follows:


	Classification on the Consolidated	Three months ended		Six months ended
(in thousands)	Statements of Operations	June 30, 2019		June 30, 2019
Operating lease cost	Selling, general and administrative expenses	$	3,904	$	7,878
Short-term lease cost	Selling, general and administrative expenses		2,142		3,916
Variable lease cost	Selling, general and administrative expenses		26		52
Sublease income	Selling, general and administrative expenses		(18)		(36)
Total lease cost		$	6,054	$	11,810


	Six months ended
Other information:	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities – operating leases (in thousands)	$	6,992
ROU assets obtained in exchange for operating lease liabilities (in thousands)	$	6,559
Weighted average remaining lease term – operating leases		5.5	years
Weighted average discount rate – operating leases		3.74	%

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


	Operating
Maturity of lease liabilities (in thousands)	Leases
2019 (excluding the six months ended June 30, 2019)	$	7,021
2020		11,900
2021		9,147
2022		6,370
2023		3,881
Thereafter		10,868
Total lease payments		49,187
Less: Amounts representing interest		(5,382)
Present value of lease liabilities	$	43,805

14. SUBSEQUENT EVENT

On July ~~24, 2018,~~23, 2019, the Board of Directors ~~declared a regular quarterly cash~~voted to suspend RPC's dividend ~~of $0.10 per share payable September 10, 2018~~ to common ~~stockholders~~stockholders.

Table of ~~record at the close of business August 10, 2018.~~Contents

RPC, INC. AND SUBSIDIARIES

ITEM 2. ~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion should be read in conjunction with the Consolidated Financial Statements included elsewhere in this document. See also “Forward-Looking Statements” on page ~~27.~~

28.

RPC, Inc. (“RPC”) provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Rocky Mountain and Appalachian regions, and in selected international locations. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. We continuously monitor factors that impact current and expected customer activity levels, such as the price of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel. Our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities.

The discussion of our key business and financial strategies set forth under the Overview section in the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 is incorporated herein by reference. In ~~2018,~~2019, the Company’s strategy of utilizing equipment in unconventional basins has continued. During the ~~six~~three months ended June 30, ~~2018,~~2019, capital expenditures totaled ~~$149.7~~$70.0 million primarily for new revenue-producing equipment and capitalized maintenance of our existing equipment.

During the second quarter of ~~2018,~~2019, revenues ~~increased to $467.9~~of $358.5 million decreased by $109.4 million or ~~17.3~~23.4 percent compared to the same period in the prior year. The ~~increase~~decrease in revenues is due to ~~higher~~lower pricing, lower activity levels and ~~a larger fleet of revenue-producing equipment.~~an unfavorable materials mix within pressure pumping, which is RPC’s largest service line. International revenues for the second quarter of ~~2018 increased 115.4~~2019 decreased 38.2 percent to ~~$24.0~~$14.8 million compared to the same period in the prior year. We continue to pursue international growth opportunities, but the nature of this work is unpredictable and we believe that international revenues will continue to be less than ten percent of RPC’s consolidated revenues in the future.

Cost of revenues ~~increased~~decreased during the second quarter of ~~2018~~2019 in comparison to the same period of the prior year, consistent with lower activity levels, due ~~primarily~~ to ~~higher employment costs,~~lower materials and supplies ~~expense, and other~~ expenses, ~~which vary with activity levels.~~including an unfavorable materials mix within RPC’s pressure pumping service line, as well as lower fuel costs. As a percentage of revenues, cost of revenues increased in the second quarter of ~~2018~~2019 compared to the same period in the prior year, due to ~~job mix~~lower revenues, increasingly competitive pricing for our services and ~~higher fuel prices.~~

labor costs inefficiencies.

Selling, general and administrative expenses were $43.3 million in the second quarter of 2019 compared to $42.5 million in the second quarter of ~~2018 compared to $40.3 million in the second quarter of 2017.~~2018. As a percentage of revenues, these ~~costs decreased~~expenses increased to 12.1 percent in the second quarter of 2019 compared to 9.1 percent in the second quarter of 2018 ~~compared to 10.1 percent in the second quarter of 2017,~~ due to the leverage of ~~higher~~lower revenues over primarily fixed expenses.

Income before income taxes was ~~$79.5~~$8.8 million for the three months ended June 30, ~~2018~~2019 compared to ~~$69.3~~$79.5 million in the same period of ~~2017.~~2018. Diluted earnings per share were ~~$0.28~~$0.03 for the three months ended June 30, ~~2018~~2019 compared to ~~$0.20~~$0.28 in the same period of ~~2017.~~2018. Cash provided by operating activities ~~increased~~decreased to ~~$229.2~~$93.4 million for the ~~three~~six months ended June 30, ~~2018~~2019 compared to ~~$28.7~~$229.2 million in the same period of ~~2017~~2018 due to ~~higher~~lower earnings coupled with a ~~favorable~~negative change in working capital.

We expect capital expenditures ~~during the full year of 2018~~in 2019 will be approximately ~~$280~~$260 million, and will be directed primarily towards new revenue-producing equipment and capitalized maintenance of our existing equipment.

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RPC, INC. AND SUBSIDIARIES

Outlook

Drilling activity in the U.S. domestic oilfields, as measured by the rotary drilling rig count, reached a cyclical peak of 1,931 during the third quarter of 2014. Between the third quarter of 2014 and the second quarter of 2016, the drilling rig count fell by ~~approximately~~ 79 percent. During the second quarter of 2016, the U.S. domestic drilling rig count reached the lowest level ever recorded. The principal catalyst for this steep rig count decline was the decrease in the price of oil in the world markets, which began in the second quarter of 2014. The price of oil began to fall at that time due to the perceived oversupply of oil, weak global demand growth, and the strength of the U.S. dollar on world currency markets. During the second quarter of 2016, the price of oil and the U.S. domestic rig count began to increase, and increased steadily throughout the remainder of 2016, ~~throughout~~ 2017 and ~~through~~2018. At the ~~first~~end of the second quarter of ~~2018. As of the beginning of the third quarter of 2018,~~2019, the U.S. domestic rig count ~~was~~had fallen by approximately ~~159~~eleven percent ~~higher than~~compared with the ~~historically low rig count reported during the second quarter~~end of ~~2016.~~

2018. RPC monitors rig count efficiencies and well completion trends because the majority of our services are directed toward well completions. Improvements in drilling rig efficiencies have increased the number of potential well completions for a given drilling rig count; therefore, we believe the statistics regarding well completions are more meaningful indicators of the outlook for RPC’s activity levels and revenues. Annual well completions in the U.S. domestic market fell from 21,355 in 2014 to 8,060 in 2016. ~~Well~~Annual well completions increased by approximately 40 percent to 11,277 in 2017, and ~~increased~~ by approximately 4231 percent to 14,756 during ~~the first and second quarters of 2018 as compared to the same period in 2017. RPC believes~~2018. We believe that U.S. oilfield well completion activity will ~~continue to increase moderately~~remain at its current level or decline during the near term.

The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity. During the first two quarters of 2016, the prices of oil and natural gas remained at low levels that discouraged our customers from undertaking most of their potential exploration and production activities. The prices of oil and natural gas increased during the third and fourth quarters of 2016, throughout 2017 and continued during the first three quarters of 2018. The price of natural gas continued to rise during the fourth quarter of ~~2018. We believe that~~2018 and into the ~~price~~first quarter of ~~oil has risen~~2019, due to ~~a level that provides adequate financial returns to our customers~~low natural gas storage levels, cold weather and ~~encourages increased drilling and production activities~~increasing demand for natural gas exports. In spite of the steady increase in ~~many domestic oil-producing basins. However,~~ the price of natural gas since mid-2016, we do not believe that it has ~~not~~ risen to a level that encourages our customers to increase their natural gas directed drilling and production activities. By contrast, the price of oil began to fall significantly during the fourth quarter of 2018, and at the end of the quarter, was approximately 38 percent lower than at the end of the third quarter of 2018. At the end of the second quarter of 2019, the price of oil had risen by approximately 29 percent when compared with the end of the fourth quarter of 2018. The average price of natural gas liquids ~~through the second quarter of~~in 2018 increased by ~~12.3~~14.7 percent compared to the average price for the full year 2017. ~~Prevailing commodity prices early~~The change in the price of oil during the first ~~quarter~~and second quarters of ~~2018 have~~2019 carries moderately positive implications for RPC’s near-term activity levels.

The majority of the U.S. domestic rig count remains directed towards oil. At the beginning of ~~the third quarter of 2018,~~2019, approximately 8281 percent of the U.S. domestic rig count was directed towards oil, consistent with the prior year. We believe that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near term. We believe that this relationship will continue due to relatively low prices for natural gas, high production from existing natural gas wells, and industry projections of limited increases in domestic natural gas demand during the near term.

We continue to monitor the market for our services and the competitive environment. The U.S. domestic rig count has increased sharply since the historical low recorded during the second quarter of 2016, ~~which~~though the rig count has ~~increased demand and pricing for our services. We are encouraged by~~declined through the second quarter of 2019. The fact that drilling and completion activities continue to be highly service-intensive and require a large amount of equipment and raw ~~materials.~~materials carries favorable implications for our activity levels. Furthermore, we note that some wells in the U.S. domestic market have been drilled but not completed. ~~As of~~At the ~~beginning~~end of the second quarter of ~~2018,~~2019, the number of wells in this category ~~has~~had increased by ~~more than 80~~approximately three percent since the beginning of ~~2014.~~2019. We believe that operators will complete ~~many~~some of these wells in the near term, and that they ~~will~~may provide potential revenue for RPC’s completion-directed services.

~~During the second quarter of~~ Also, during 2018, ~~industry observers became concerned~~we began to observe that ~~growing oil production in the Permian Basin~~ oilfield ~~may temporarily exceed the capacity of the region’s pipelines to transport oil from oil wells to oil refineries. The Permian Basin is RPC’s largest market,~~completion crews and ~~if the region’s pipelines become constrained, such a constraint could force our customers in~~equipment were providing services with increasing efficiency, and we believe that this higher efficiency has caused the market for several oilfield completion services, including pressure pumping, to ~~reduce their drilling~~become oversupplied. This trend has continued during the first and ~~completion activities, which represents a risk to~~second quarters of 2019, and we believe that this development carries negative consequences for pricing of our ~~near-term financial results. Should such an activity decline occur, RPC would respond by moving~~services, utilization of our equipment and ~~personnel to other U.S. domestic oilfield markets in which we operate, as well as reducing expenses in~~ our ~~affected Permian Basin locations.~~financial results during the near term.

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RPC, INC. AND SUBSIDIARIES

~~We believe that~~Activity levels and pricing for oilfield services ~~to the industry has~~ reached a level during 2018 that ~~provides financial returns that will allow~~allowed the industry to maintain its ~~fleet~~equipment and encouraged oilfield service providers to expand their fleets of revenue-producing equipment and hire additional ~~personnel to operate idle equipment. We note that these~~personnel. The prospect of improved financial returns ~~have~~also provided access to the capital markets and allowed previously insolvent service companies to resume operations and add ~~equipment,~~equipment. As a result, competition increased during 2018. Increased competition and ~~that a number of smaller competitors have completed initial or secondary public equity offerings over~~improved service efficiency, coupled with the ~~past year, which may facilitate their access to capital. We believe that demand for revenue-producing service capacity will continue to exceed supply~~significant decline in oil prices during the ~~near term. However, we also note that competition has increased, both from new entrants into the oilfield services industry~~fourth quarter of 2018, became catalysts for lower pricing and ~~from established competitors who are adding to their fleets of revenue-producing equipment. This increased competition has prevented RPC from meaningfully increasing the prices for our services~~activity levels during the first and second quarters of 2018, as well as increasing the competition for skilled labor. One of our responses to such competitive threats is to undertake relatively moderate fleet expansions, thus preserving our capital strength and liquidity.2019. RPC ~~did not increase~~expanded the size of its fleet of revenue-producing equipment modestly during ~~2017, although in the third quarter of 2017 we~~2018 and has placed orders for a small amount of new ~~revenue-producing~~ equipment to be delivered ~~during 2018. At the end of the second quarter of 2018,~~in 2019. The equipment we ~~had~~ placed in service ~~all~~in 2018 and 2019 is more powerful and efficient than earlier generations of ~~the~~oilfield service equipment, ~~ordered~~and we believe that it will produce acceptable financial returns when placed in ~~2017.~~

RPC also monitors the financial stability of our customers, because many of them rely on the debt and equity markets as a source of capital to conduct their operations, and if these sources of capital do not continue, our customers may have to curtail their drilling and completion operations.service. Our consistent response to the ~~industry's persistent uncertainty~~near-term potential of lower activity levels and pricing is to ~~maintain sufficient liquidity and a conservative capital structure and monitor our discretionary spending. We intend~~undertake moderate fleet expansions which we believe will allow us to maintain a financial structure that includes little or no debt during the near term. An additional benefit of our financial liquidity is that we were able to take advantage of our ability to maintain our equipment during the recent industry downturn, which allowed us to benefit immediately when industrystrong balance sheet, even if near-term pricing and activity levels generated by such new equipment are modest.

The negative implications for RPC’s near-term activity levels from low oil prices and increased competition are partially offset by improved availability and ~~we were able to return our idle revenue-producing equipment to service quickly and at minimal cost.~~

~~While RPC believes that the near-term outlook regarding commodity prices holds positive indications~~lower cost for ~~oilfield activity, and that we provide many~~some of the ~~types~~critical raw materials used in providing RPC’s services. In addition, lower activity levels reduce the cost, and increase the availability of, skilled labor. These factors may reduce the cost of providing RPC’s services ~~required by our customers in the current oilfield completion operating environment, we are also concerned that increasing competition~~ and reduce logistical constraints in the oilfield will negatively impact our revenues, earnings and operating cash flows for the remainder of 2018. We also expect that the recently enacted Tax Cuts and Jobs Act will have a meaningful positive impact on our financial results through increased earnings and operating cash flow for the remainder of 2018. We believe that our projected lower tax rates will enhance our ability to improve RPC’s shareholder returns through profitable growth, dividends and share repurchases.

constraints.

Results of Operations


	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Consolidated revenues [in thousands]	$	358,516		$	467,926		$	693,172		$	904,260
Revenues by business segment [in thousands]:
Technical	$	338,034		$	449,852		$	652,113		$	868,915
Support		20,482			18,074			41,059			35,345

Consolidated operating income [in thousands]	$	8,387		$	75,029		$	6,226		$	135,827
Operating income (loss) by business segment [in thousands]:
Technical	$	6,850		$	75,624		$	2,392		$	140,629
Support		4,018			1,193			7,155			288
Corporate		(3,614)			(3,598)			(7,958)			(8,263)
Gain on disposition of assets, net		1,133			1,810			4,637			3,173

Percentage cost of revenues to revenues		73.9	%		66.7	%		74.7	%		67.2	%
Percentage selling, general & administrative expenses to revenues		12.1	%		9.1	%		12.8	%		9.5	%
Percentage depreciation and amortization expense to revenues		12.0	%		8.6	%		12.3	%		8.6	%
Average U.S. domestic rig count		989			1,039			1,016			1,003
Average natural gas price (per thousand cubic feet (mcf))	$	2.57		$	2.85		$	2.75		$	3.01
Average oil price (per barrel)	$	59.89		$	68.05		$	57.24		$	65.49

Three months ended
June 30 Six months ended
June 30
2018 2017 2018 2017
Consolidated revenues [in thousands] $ 467,926 $ 398,810 $ 904,260 $ 696,929
Revenues by business segment [in thousands]:
Technical $ 449,852 $ 385,462 $ 868,915 $ 671,660
Support 18,074 13,348 35,345 25,269

Consolidated operating income [in thousands] $ 75,029 $ 67,002 $ 135,827 $ 68,576
Operating income (loss) by business segment [in thousands]:
Technical $ 75,624 $ 70,901 $ 140,629 $ 80,106
Support 1,193 (3,339 ) 288 (8,560 )
Corporate (3,598 ) (4,319 ) (8,263 ) (8,246 )
Gain on disposition of assets, net 1,810 3,759 3,173 5,276

Percentage cost of revenues to revenues 66.7 % 63.7 % 67.2 % 67.5 %
Percentage selling, general & administrative expenses to revenues 9.1 % 10.1 % 9.5 % 11.1 %
Percentage depreciation and amortization expense to revenues 8.6 % 10.3 % 8.6 % 12.3 %
Average U.S. domestic rig count 1,039 895 1,003 820
Average natural gas price (per thousand cubic feet (mcf)) $ 2.85 $ 3.08 $ 3.01 $ 3.05
Average oil price (per barrel) $ 68.05 $ 48.19 $ 65.49 $ 49.94

~~RPC, INC. AND SUBSIDIARIES~~

THREE MONTHS ENDED JUNE 30, ~~2018~~2019 COMPARED TO THREE MONTHS ENDED JUNE 30, ~~2017~~

2018

Revenues.Revenues of $358.5 million for the three months ended June 30, ~~2018 increased 17.3~~2019 decreased 23.4 percent compared to the three months ended June 30, ~~2017.~~2018. Domestic revenues of ~~$443.9~~$343.7 million ~~increased 14.5~~decreased 22.6 percent for the three months ended June 30, ~~2018~~2019 compared to the same period in the prior year. The ~~increase~~decrease in revenues was due primarily to ~~higher~~lower pricing, lower activity levels, and ~~a larger fleet of revenue-producing equipment.~~an unfavorable materials mix within pressure pumping, which is RPC’s largest service line. International revenues of ~~$24.0~~$14.8 million ~~increased 115.4~~decreased 38.2 percent for the three months ended June 30, ~~2018~~2019 compared to the same period in the prior year. Our international revenues are impacted by the timing of project initiations and their ultimate duration and can be difficult to predict.

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~~The~~RPC, INC. AND SUBSIDIARIES

During the second quarter of 2019, the average price of natural gas was ~~7.5~~9.8 percent lower ~~while~~and the average price of oil was ~~41.2~~12.0 percent ~~higher during the second quarter of 2018~~lower, both as compared to the same period in the prior year. The average domestic rig count during the second quarter of ~~2018~~2019 was ~~16.1~~4.8 percent ~~higher~~lower than the same period in ~~2017.~~

2018.

The Technical Services segment revenues for the second quarter of ~~2018 increased 16.7~~2019 decreased 24.9 percent compared to the same period in the prior year due to ~~higher~~lower pricing and activity levels ~~and a larger active fleet~~within most of ~~revenue-producing equipment, particularly within our pressure pumping~~the service ~~line,~~lines which ~~is the largest service line within Technical Services.~~comprise this segment. The Support Services segment revenues for the second quarter of ~~2018~~2019 increased by ~~35.4~~13.3 percent compared to the same period in the prior year. This increase was due principally to improved activity levels ~~and pricing in the rental tool~~across all service ~~line, which is the largest service line~~lines within this segment. Technical Services reported a significantly lower operating profit of $6.9 million during the second quarter of 2019 compared to $75.6 million in the second quarter of 2018 due to lower pricing and activity levels. Support Services reported a higher operating ~~income~~profit of ~~$75.6~~$4.0 million for the second quarter of ~~2018~~2019 compared to ~~$70.9 million in the second quarter of the prior year, while Support Services reported a small operating profit of~~ $1.2 million for the second quarter of ~~2018 compared to an operating loss of $3.3 million for the second quarter of 2017.~~

2018.

Cost of revenues. Cost of revenues ~~increased 22.9~~decreased 15.1 percent to $265.1 million for the three months ended June 30, 2019 compared to $312.1 million for the three months ended June 30, ~~2018 compared to $254.0 million for the three months ended June 30, 2017.~~2018. Cost of revenues ~~increased primarily~~decreased, consistent with lower activity levels, due to ~~higher employment costs,~~lower materials and supplies expenses, ~~and other expenses which vary with activity levels.~~including an unfavorable materials mix within RPC’s pressure pumping service line, as well as lower fuel costs. As a percentage of revenues, cost of revenues increased in the second quarter of ~~2018~~2019 compared to the ~~second quarter of 2017,~~same period in the prior year, due to ~~job mix~~lower revenues, increasingly competitive pricing for our services, and ~~higher fuel prices.~~

labor cost inefficiencies.

Selling, general and administrative expenses.Selling, general and administrative expenses were $43.3 million for the three months ended June 30, 2019 and $42.5 million for the three months ended June 30, ~~2018 and $40.3 million for the three months ended June 30, 2017.~~2018. As a percentage of revenues, these costs ~~decreased~~increased to 12.1 percent in the second quarter of 2019 compared to 9.1 percent in the second quarter of 2018 ~~compared to 10.1 percent in the second quarter of 2017,~~ due to the leverage of ~~higher~~lower revenues over primarily fixed expenses.

Depreciation and amortization.Depreciation and amortization ~~decreased 2.8~~increased 7.0 percent to $42.9 million for the three months ended June 30, 2019, compared to $40.1 million for the three months ended June 30, 2018 ~~compared to $41.3 million for the quarter ended June 30, 2017~~ due to ~~lower~~ capital expenditures inmade during the ~~prior year.~~

previous four quarters.

Gain on disposition of assets, net. Gain on disposition of assets, net decreased to $1.1 million for the three months ended June 30, 2019 compared to $1.8 million for the three months ended June 30, 2018 compared to $3.8 million for the three months ended June 30, 2017. The decrease is due to the sale of operating equipment related to our oilfield pipe inspection business during the second quarter of 2017 that did not recur in the current period.2018. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

Other (expense) income, net.Other ~~income,~~expense, net was ~~$4.1 million~~$53 thousand for the three months ended June 30, ~~2018~~2019 compared to ~~$2.0~~other income, net of $4.1 million for the same period in the prior year. Other income recorded in the second quarter of 2018 included property insurance proceeds of $4.4 million.

Interest expense. Interest expense was $164 thousand for the three months ended June 30, ~~2018 includes property insurance proceeds totaling $4.4 million.~~

~~Interest expense.~~~~Interest expense was~~2019 compared to $113 thousand for the three months ended June 30, ~~2018 compared to $114 thousand for the three months ended June 30, 2017.~~2018. Interest expense ~~during the second quarters of 2018 and 2017~~ consists of facility fees on the unused portion of the credit facility and the amortization of loan costs.

Income tax provision.Income tax provision was ~~$19.5~~$2.6 million during the three months ended June 30, ~~2018~~2019 compared to ~~$25.5~~$19.5 million for the same period in ~~2017.~~2018. The effective tax rate was 29.6 percent for the three months ended June 30, 2019 compared to 24.6 percent for the three months ended June 30, ~~2018~~2018. The 2019 effective rate includes detrimental discrete adjustments of $2.2 million resulting from restricted stock vesting and dividends as compared to ~~36.7 percent for~~ the ~~three months ended June 30, 2017. The~~ 2018 effective tax rate reflects the lower corporate income tax rate from the recently enacted Tax Cuts and Jobs Act. Both quarters reflect beneficial discrete adjustments as a result of ASU 2016-09 that requires excess tax benefits and deficiencies related to stock based compensation to be recognized as a component of income tax expense rather than stockholders’ equity.rate.

~~RPC, INC. AND SUBSIDIARIES~~

SIX MONTHS ENDED JUNE 30, ~~2018~~2019 COMPARED TO SIX MONTHS ENDED JUNE 30, ~~2017~~

2018

Revenues.Revenues of $693.2 million for the six months ended June 30, ~~2018 increased 29.7~~2019 decreased 23.3 percent compared to the six months ended June 30, ~~2017.~~2018. Domestic revenues of ~~$861.3~~$657.7 million ~~increased 28.2~~decreased 23.6 percent for the six months ended June 30, ~~2018~~2019 compared to the same period in the prior year. The ~~increase~~decrease in revenues was due primarily to ~~higher~~lower

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RPC, INC. AND SUBSIDIARIES

pricing, lower activity levels, and ~~a larger fleet of revenue-producing equipment.~~an unfavorable materials mix within pressure pumping, which is RPC’s largest service line. International revenues of ~~$43.0~~$35.5 million ~~increased 73.0~~decreased 17.3 percent for the six months ended June 30, ~~2018~~2019 compared to the same period in the prior year. Our international revenues are impacted by the timing of project initiations and their ultimate duration and can be difficult to predict.

~~The~~During the six months ended June 30, 2019, the average price of natural gas was ~~1.5~~8.7 percent lower ~~while~~and the average price of oil was ~~31.1~~12.6 percent ~~higher during the six months ended June 30, 2018~~lower both as compared to the same period in the prior year. The average domestic rig count during the six months ended June 30, ~~2018~~2019 was ~~22.3~~1.0 percent higher than the same period in ~~2017.~~

2018.

The Technical Services segment revenues for the six months ended June 30, ~~2018 increased 29.4~~2019 decreased 25.0 percent compared to the same period in the prior year due to ~~higher~~lower pricing and activity levels ~~and a larger active fleet~~within most of ~~revenue-producing equipment, particularly within our pressure pumping~~the service ~~line,~~lines which ~~is the largest service line within Technical Services.~~comprise this segment. The Support Services segment revenues for the six months ended June 30, ~~2018~~2019 increased by ~~39.9~~16.2 percent compared to the same period in the prior year. This increase was due principally to improved activity levels ~~and pricing in the rental tool service line, which is the largest service line~~across all services lines within this segment. Technical Services reported ~~higher~~significantly lower operating ~~income~~profit of ~~$140.6~~$2.4 million ~~for~~during the six months ended June 30, ~~2018~~2019 compared to ~~$80.1~~$140.6 million in the same period of the prior year ~~while~~due to lower pricing and activity levels. Support Services reported ~~a small~~higher operating ~~income~~profit of $7.2 million for the six months ended June 30, 2019 compared to $0.3 million for the six months ended June 30, ~~2018 compared~~2018.

Cost of revenues. Cost of revenues decreased 14.8 percent to ~~an operating loss of $8.6~~$517.5 million for the six months ended June 30, ~~2017.~~

~~Cost of revenues.~~ ~~Cost of revenues increased 29.2 percent~~2019 compared to $607.7 million for the six months ended June 30, ~~2018~~2018. Cost of revenues decreased, consistent with lower activity levels, due to lower materials and supplies expenses within RPC’s pressure pumping service line, as well as lower fuel costs and maintenance and repairs expense. As a percentage of revenues, cost of revenues increased in the six months ended June 30, 2019 compared to ~~$470.3~~the same period in the prior year, due to lower revenues, increasingly competitive pricing for our services, and labor cost inefficiencies.

Selling, general and administrative expenses. Selling, general and administrative expenses were $88.7 million for the six months ended June 30, ~~2017. Cost of revenues increased primarily due to higher employment costs, materials~~2019 and supplies expenses, and other expenses which vary with activity levels. As a percentage of revenues, cost of revenues decreased slightly to 67.2 percent in the six months ended June 30, 2018 compared to 67.5 percent in the prior year same period.

~~Selling, general and administrative expenses.~~~~Selling, general and administrative expenses were~~ $86.3 million for the six months ended June 30, ~~2018 and $77.4 million for the six months ended June 30, 2017. The increase in these expenses was due tohigher employment costs consistent with higher activity levels.~~2018. As a percentage of revenues, these costs ~~decreased~~increased to 12.8 percent in the six months ended June 30, 2019 compared to 9.5 percent in the six months ended June 30, 2018 ~~compared to 11.1 percent in the six months ended June 30, 2017,~~ due to the leverage of ~~higher~~lower revenues over primarily fixed expenses.

Depreciation and amortization.Depreciation and amortization ~~decreased 9.7~~increased 10.1 percent to ~~$77.6~~$85.4 million for the six months ended June 30, ~~2018,~~2019, compared to ~~$85.9~~$77.6 million for the ~~six months~~quarter ended June 30, ~~2017~~2018 due to ~~lower~~ capital expenditures inmade during the ~~prior year.~~

previous four quarters.

Gain on disposition of assets, net. Gain on disposition of assets, net ~~decreased~~increased to $4.6 million for the six months ended June 30, 2019 compared to $3.2 million for the six months ended June 30, 2018 compared to $5.3 million for the six months ended June 30, 2017. The decrease is due to the sale of operating equipment related to its oilfield pipe inspection service line during the second quarter of 2017 that did not recur in the current period.2018. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.

Other income, net.Other income, net was ~~$9.5~~$0.4 million for the six months ended June 30, ~~2018~~2019 compared to ~~$2.2~~$9.5 million for the same period in the prior year. Other income recorded in the six months ended June 30, 2018 ~~includes~~included property insurance proceeds ~~totaling~~of approximately $9.6 million.

Interest expense.Interest expense was $253 thousand for the six months ended June 30, 2019 compared to $218 thousand for the six months ended June 30, ~~2018 compared to $217 thousand for the six months ended June 30, 2017.~~2018. Interest expense ~~during the six months ended June 30, 2018 and 2017~~ consists of facility fees on the unused portion of the credit facility and the amortization of loan costs.

Income tax provision.Income tax provision was ~~$33.9~~$2.3 million during the six months ended June 30, ~~2018~~2019 compared to ~~$23.6~~$33.9 million for the same period in ~~2017.~~2018. The effective tax rate was 30.0 percent for the six months ended June 30, 2019 compared to 23.2 percent for the six months ended June 30, ~~2018~~2018. The 2019 effective rate includes detrimental discrete adjustments of $2.2 million resulting from restricted stock vesting and dividends as compared to ~~33.2 percent for~~ the ~~six months ended June 30, 2017. The~~ 2018 effective ~~tax rate reflects the lower corporate income tax rate from the recently enacted Tax Cuts and Jobs Act. Both periods reflect beneficial discrete adjustments as a result~~rate.

Table of ~~ASU 2016-09 that requires excess tax benefits and deficiencies related to stock based compensation to be recognized as a component of income tax expense rather than stockholders’ equity.~~Contents

RPC, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

Cash Flows

The Company’s cash and cash equivalents as of June 30, ~~2018~~2019 were ~~$94.2~~$47.6 million. The following table sets forth the historical cash flows for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018:


	Six months ended June 30,
(In thousands)	2019		2018
Net cash provided by operating activities	$	93,430	$	229,204
Net cash used for investing activities		(122,477)		(142,797)
Net cash used for financing activities		(39,573)		(83,282)

Six months ended June 30,
(In thousands) 2018 2017
Net cash provided by operating activities $ 229,204 $ 28,669
Net cash used for investing activities (142,797 ) (22,238 )
Net cash used for financing activities (83,282 ) (12,454 )

Cash provided by operating activities for the six months ended June 30, ~~2018 increased~~2019 decreased by ~~$200.5~~$135.8 million compared to the same period in the prior year. This ~~increase~~decrease is due primarily to ~~an increase~~decreases in net ~~income~~earnings of ~~$64.6 million, net favorable changes in working capital of $124.0~~$106.6 million and the deferred income tax provision of ~~$25.9~~$17.7 million coupled with a net unfavorable change in working capital of $26.3 million partially offset by ~~a decrease~~increases in depreciation and amortization expenses of ~~$8.0~~$7.4 million and long-term pension liability of $8.9 million. The net ~~favorable~~unfavorable change in working capital is ~~primarily~~ due to ~~favorable~~unfavorable changes of ~~$175.1~~$35.2 million in accounts receivable $5.2 million in accrued expenses and $2.0 million in prepaid expenses/ other current assets. This favorable change was partially offset by unfavorable changes in working capital of $35.2 million in net income taxes receivable/ payable, $7.7 million in inventories, $4.9due to lower revenues, $20.1 million in accounts payable ~~$6.3~~and $3.3 million in accrued payroll due to lower activity levels. These unfavorable changes were partially offset by favorable changes of $23.6 million in inventory, $4.2 million in income taxes receivable, payable (net) and $5.5 million accrued state and local ~~taxes and $4.2 million in accrued payroll and related expenses consistent with higher business activity levels coupled with the timing of payments.~~

taxes.

Cash used for investing activities for the six months ended June 30, ~~2018 increased~~2019 decreased by ~~$120.6~~$20.3 million compared to the six months ended June 30, ~~2017,~~2018, primarily because of ~~higher~~lower capital ~~expenditures.~~

expenditures partially offset by an increase in proceeds from the sale of assets.

Cash used for financing activities for the six months ended June 30, ~~2018 increased~~2019 decreased by ~~$70.8~~$43.7 million primarily as a result of ~~cash~~lower dividends paid to common ~~stockholders in the first and second quarters of 2018 coupled with the higher~~stock holders as well as lower cost of repurchases of the Company’s shares on the open market and for taxes related to the vesting of ~~certain~~ restricted shares.

Financial Condition and Liquidity

The Company’s financial condition as of June 30, ~~2018~~2019 remains strong. We believe the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months. The Company currently has a $125 million revolving credit facility that matures in July 2023, as recently amended. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. On June 30, 2016, the Company amended the revolving credit facility to establish a borrowing base to be the lesser of $125 million or a specified percentage of eligible accounts receivable less the amount of any outstanding letters of credit. On July 26, 2018, the Company further amended the revolving credit facility to, among other matters, replace the existing minimum tangible net worth covenant, as well as, (1) extend the maturity date of the revolving credit facility to July 26, 2023, (2) eliminate any borrowing base limitations on revolving loans when certain criteria exist, (3) reduce the commitment fees payable by RPC and (4) reduce the letter of credit sublimit from $50 million to $35 million. As of June 30, ~~2018,~~2019, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled ~~$19.6~~$20.6 million; therefore, a total of ~~$105.4~~$104.4 million of the facility was available. For additional information with respect to RPC’s facility, see Note 9 of the Notes to Consolidated Financial Statements included in this report.

The Company’s decisions about the amount of cash to be used for investing and financing purposes are influenced by its capital position, including access to borrowings under our facility, and the expected amount of cash to be provided by operations. We believe our liquidity will continue to provide the opportunity to grow our asset base and revenues during periods with positive business conditions and strong customer activity levels. In addition, the Company's decisions about the amount of cash to be used for investing and financing activities may also be influenced by the financial covenants in our credit facility, but we do not expect the covenants to restrict our planned activities. The Company is in compliance with these financial ~~covenants.~~covenants as of June 30, 2019.

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Cash Requirements

The Company currently expects that capital expenditures will be approximately ~~$280~~$260 million during ~~2018,~~2019, of which ~~$149.7~~$132.3 million has been spent as of June 30, ~~2018.~~2019. We expect capital expenditures for the remainder of ~~2018~~2019 to be primarily directed towards new revenue-producing equipment and capitalized maintenance of our existing equipment. The actual amount of ~~2018~~2019 capital expenditures will depend primarily on equipment maintenance requirements, expansion opportunities, and equipment delivery schedules.

The Company has ongoing sales and use tax audits in various jurisdictions subject to varying interpretations of statutes. The Company has recorded the exposure from these audits to the extent issues are resolved or are reasonably estimable. There are issues that could result in unfavorable outcomes that cannot be currently estimated.

The Company’s Retirement Income Plan, a multiple employer trusteed defined benefit pension plan, provides monthly benefits upon retirement at age 65 to eligible employees. During the ~~second quarter of 2018,~~six months ended June 30, 2019, the Company ~~contributed $5.0 million~~did not make any contributions to the plan and does not expect to make any ~~additional~~ cash contributions for the remainder of ~~2018.~~

2019.

As of June 30, ~~2018,~~2019, the Company’s stock buyback program ~~has authorized~~authorizes the aggregate repurchase of up to 41,578,125 shares, including an additional 10,000,000 shares authorized for repurchase by the Board of Directors on February 12, 2018. There were ~~559,869~~539,643 shares purchased on the open market during the second quarter of ~~2018~~2019 and ~~9,072,853~~8,248,184 shares remain available to be repurchased under the current authorization as of June 30, ~~2018.~~2019. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date.

On July ~~24, 2018,~~22, 2019, the Board of Directors ~~declared a regular quarterly cash~~voted to suspend RPC’s dividend ~~of $0.10 per share payable September 10, 2018~~ to common ~~stockholders of record at the close of business August 10, 2018.~~stockholders. The Company expects to ~~continue to pay~~resume cash dividends to common stockholders, subject to ~~industry conditions~~the earnings and ~~RPC’s earnings,~~ financial condition of the Company and other relevant factors.

INFLATION

The Company purchases its equipment and materials from suppliers who provide competitive prices, and employs skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. ~~In addition,~~Also, activity increases can cause increases in the costs of certain materials and key equipment components used to provide services to the Company’s customers. ~~Since~~When oilfield activity began to increase in the second quarter of 2016, the Company ~~has~~ experienced upward pressure on the price of labor due to the shortage of skilled employees as well as occasional increases in the prices of certain raw materials used in providing our services. ~~Early~~During 2018, however, prices for the raw material comprising the Company’s single largest raw material purchase began to decline due to increased sources of supply of the material, particularly in geographic markets located close to the ~~second~~largest U.S. oil and gas basin. In addition, labor cost pressures during the fourth quarter of 2018 began to abate due to lower oilfield activity. These cost pressures continued to decline in the ~~Company had experienced minimal price increases~~first and second quarters of ~~raw materials used in providing our services because of increased supplies of such raw materials. However, the Company had begun to experience increased upward pressure on the price of skilled labor.~~2019.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any material off balance sheet arrangements.

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RELATED PARTY TRANSACTIONS

Marine Products Corporation

Effective February 28, 2001, the Company spun-off the business conducted through Chaparral Boats, Inc., RPC’s former powerboat manufacturing segment. In conjunction with the spin-off, RPC and Marine Products Corporation entered into various agreements that define the companies’ relationship. During the six months ended June 30, ~~2018,~~2019, RPC charged Marine Products Corporation for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products Corporation totaling ~~$451,000~~$427,000 for the six months ended June 30, ~~2018~~2019 compared to ~~$386,000~~$451,000 for the comparable period in ~~2017.~~2018.

Other

~~RPC, INC. AND SUBSIDIARIES~~

~~Other~~

The Company periodically purchases in the ordinary course of business products or services from suppliers who are owned by officers or significant stockholders of, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $587,000 for the six months ended June 30, 2019 and $602,000 for the six months ended June 30, ~~2018 and $800,000 for the six months ended June 30, 2017.~~

2018.

RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman, and which is controlled by Mr. Rollins and his affiliates). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on nine months’ notice. The services covered by these agreements include office space, selected administration services for certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated $60,000 for the six months ended June 30, 2019 and $75,000 for the six months ended June 30, ~~2018 and $52,000 for the six months ended June 30, 2017.~~2018.

CRITICAL ACCOUNTING POLICIES

The discussion of Critical Accounting Policies is incorporated herein by reference from the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. There have been no significant changes in the critical accounting policies since year-end.

IMPACT OF RECENT ACCOUNTING STANDARDS

See Note 32 of the Notes to Consolidated Financial Statements for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.

SEASONALITY

~~SEASONALITY~~

Oil and natural gas prices affect demand throughout the oil and natural gas industry, including the demand for the Company’s products and services. The Company’s business depends in large part on the economic conditions of the oil and gas industry, and specifically on the capital expenditures of its customers related to the exploration and production of oil and natural gas. There is a positive correlation between these expenditures and customers’ demand for the Company’s services. As such, when these expenditures fluctuate, customers’ demand for the Company’s services fluctuates as well. These fluctuations depend on the current and projected prices of oil and natural gas and resulting drilling activity, and are not seasonal to any material degree.

FORWARD-LOOKING STATEMENTS

Certain statements made in this report that are not historical facts are “forward-looking statements” under Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements regarding ~~the effect of recent accounting pronouncements on the Company’s consolidated financial statements;~~ our plans to continue to pursue international growth opportunities and our belief that international revenues will continue to ~~represent a low percentage~~be less than ten percent of our

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consolidated revenues in the future; our ~~expectation for the amount and focus of our capital expenditures during 2018; our~~ belief ~~about increases in~~that U.S. oilfield well completion ~~activity; our belief that~~activity will remain at its current level or decline during the ~~price of oil has risen to a level that provides our customers financial returns that encourages increased drilling and production activities;~~near term; our belief that the price of natural gas has not risen to a level that encourages our customers to increase their drilling and production activities; our belief that ~~current commodity prices have~~the change in the price of oil during the first and second quarters of 2019 carries moderately positive implications for ~~near term~~our near-term activity levels; ~~the~~our belief that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near ~~term; the belief~~term and that the pricing for our services has reached a level that will allow for the industry to maintain its fleet of revenue-producing equipment and hire additional personnel to operate idle equipment; the belief that demand for revenue-producing service capacitythis relationship will continue due to ~~exceed supply; our plans to place some additional equipment into service over the next two quarters; our plans to maintain our financial structure which includes little or no debt~~relatively low prices for natural gas, high production from existing natural gas wells, and industry projections of limited increases in domestic natural gas demand during the near term; our belief that ~~the current macroeconomic environment as well as the near-term outlook regarding commodity prices~~drilling and ~~the types~~completion activities continue to be highly service-intensive and require a large amount of ~~services required by~~equipment and raw materials and, therefore, carry favorable implications for our ~~customers~~activity levels; our belief that many wells in the ~~current oilfield completion operating environment holds positive indications~~U.S. domestic market that have been drilled but not completed will be completed in the near term and that they will provide potential revenue for our revenues, earnings and operating cash flows during 2018; our expectation that the recently enacted Tax Cuts and Jobs Act will have a meaningful positive impact on our financial results through increased earnings and operating cash flow for the remainder of 2018, andRPC’s completion-directed services; our belief that the ~~projected~~equipment we placed in service in 2018 and the new equipment we have ordered so far in 2019 is more powerful and efficient than earlier generations of oilfield service equipment, which will produce acceptable financial returns when placed in service; our belief that undertaking moderate fleet expansions in response to the near-term potential of lower ~~tax rates~~activity levels and pricing will ~~further enhance our ability~~allow us to ~~improve our shareholder returns through profitable growth, dividends~~maintain a strong balance sheet, even if near-term pricing and ~~share repurchases;~~activity levels generated by such new equipment is modest; our belief that the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve ~~months,~~months; our expectation that we will continue to pay cash dividends, subject to industry conditions, the earnings and financial condition of the Company and other relevant factors; our belief that our liquidity will continue to provide the opportunity to grow our asset base and revenues during periods with positive business conditions and strong customer activity levels; our ~~business strategy, plans~~expectations that the financial covenants in our credit facility will not restrict our planned activities; our expectations that capital expenditures will be approximately $260 million in 2019 and ~~objectives; market risk exposure; adequacy~~will be directed primarily towards new revenue-producing equipment and capitalized maintenance of ~~capital resources and funds; opportunity for growth and expansion;~~our existing equipment; our expectation that we will ~~continue~~not make any cash contributions to ~~pay cash dividends, subject to industry conditions,~~our Retirement Income Plan for the ~~earnings and financial condition~~remainder of the Company and other relevant factors; the possible unfavorable outcome of sales and use tax audits; the impact of inflation and related trends on the Company’s financial position and operating results; our beliefs regarding oilfield activity and the related impact on wages for skilled labor and the prices of raw material used in providing our services; our belief that changes in foreign exchange rates are not expected to have a material effect on our consolidated results of operations or financial condition;2019; our belief that the outcome of litigation will not have a material adverse effect upon our financial position or results of operations; and our beliefs and expectations regarding future demand for our products and services, and other events and conditions that may influence the oilfield services market and our performance in the future. The Company does not undertake to update its forward-looking statements.

~~RPC, INC. AND SUBSIDIARIES~~

The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “focus,” “plan,” and similar expressions generally identify forward-looking statements. Such statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RPC to be materially different from any future results, performance or achievements expressed or implied in such forward-looking statements. Risk factors that could cause such future events not to occur as expected include the following: the declines in the price of oil and natural gas, which tend to result in a decrease in drilling activity and therefore a decline in the demand forour services, the actions of the OPEC cartel, the ultimate impact of current and potential political unrest and armed conflict in the oil producing regions of the world, which could impact drilling activity, adverse weather conditions in oil or gas producing regions, including the Gulf of Mexico, competition in the oil and gas industry, the Company’s ability to implement price increases, the potential impact of possible future regulations on hydraulic fracturing on our business, risks of international operations,, and reliance on large ~~customers~~.customers. Additional discussion of factors that could cause actual results to differ from management’s projections, forecasts, estimates and expectations is contained in the ~~Company's~~ Annual Report on Form 10-K for the fiscal year ended December 31, 20~~17.~~2018.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk exposure through borrowings on its credit facility. As of June 30, ~~2018,~~2019, there were no outstanding interest-bearing advances on our credit facility, which ~~bears~~bear interest at a floating rate.
Additionally, the Company is exposed to market risk resulting from changes in foreign exchange rates. However, since the majority of the Company’s transactions occur in U.S. currency, this risk is not expected to have a material effect on its consolidated results of operations or financial condition.

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RPC, INC. AND SUBSIDIARIES

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures – The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, June 30, ~~2018~~2019 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
28
~~RPC, INC. AND SUBSIDIARIES~~
Changes in internal control over financial reporting – Management’s evaluation of changes in internal control did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
RPC is involved in litigation from time to time in the ordinary course of its business. RPC does not believe that the outcome of such litigation will have a material adverse effect on the financial position or results of operations of RPC.
ITEM 1A. RISK FACTORS
~~Pipeline capacity constraints in the Permian Basin may temporarily disrupt our operations during the near term.~~
RPC’s largest geographic market is the Permian Basin in the U.S. domestic oilfield. At the present time, the oil and gas industry is concerned that the region’s capacity to transport oil from this market to regional refineries is not sufficient to transport the growing production of the region. During 2018, the industry is constructing additional pipeline capacity in the region, but analysts estimate that new pipeline capacity will not be completed until the third quarter of 2019. If pipeline capacity becomes constrained in the Permian Basin, RPC’s activity in the region may decline, which will negatively impact the Company’s revenues and profits during the period in which pipeline capacity is constrained.
See additional risk factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Shares repurchased by the Company and affiliated ~~purchases~~purchasers in the second quarter of ~~2018~~2019 are outlined below.
Period
Total Number of
Shares
(or Units) Purchased

Average Price
Paid Per
Share
(or Unit)
Total Number
of Shares (or
Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs⁽¹⁾ Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs⁽¹⁾
April 1, 2018 to April 30, 2018 22,970 ⁽¹⁾ $ 17.89 22,970 9,609,752
May 1, 2018 to May 31, 2018 393,573 ⁽¹⁾⁽²⁾ 17.24 393,506 9,216,246
June 1, 2018 to June 30, 2018 143,393 ⁽¹⁾ 15.27 143,393 9,072,853
Totals 559,936 $ 16.76 559,869 9,072,853

Total Number

Maximum Number

of Shares (or

(or Approximate

Units)

Dollar Value) of

Purchased as

Shares (or Units)

Total Number of

Average Price

Part of Publicly

that May Yet Be

Shares

Paid Per

Announced

Purchased Under

(or Units)

Share

Plans or

the Plans or
Period

Purchased

(or Unit)

Programs ⁽¹⁾

Programs ⁽¹⁾
April 1, 2019 to April 30, 2019

69
⁽²⁾
$
11.48

—

8,787,827
May 1, 2019 to May 31, 2019

371,008
⁽¹⁾

9.21

371,008

8,416,819
June 1, 2019 to June 30, 2019

168,635
⁽¹⁾

7.30

168,635

8,248,184
Totals

539,712

$
8.62

539,643

8,248,184
(1) The Company has a stock buyback program initially adopted in 1998 (and subsequently amended in 2013 and 2018) that authorizes the aggregate repurchase of up to 41,578,125 shares, including an additional 10,000,000 shares authorized for repurchase by the Board of Directors on February 12, 2018. There were ~~559,869~~539,643 shares purchased on the open market during the second quarter of ~~2018~~2019 and ~~9,072,853~~8,248,184 remain available to be repurchased under the current authorization as of June 30, ~~2018.~~2019. Currently the program does not have a predetermined expiration date.
(2) ~~Shares purchased by the Company in excess of those purchased as part of publicly announced plans or programs, represent~~Represent shares repurchased in connection with taxes related to the vesting of certain restricted shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
The information required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Form 10-Q.
ITEM 5. OTHER INFORMATION
None.
~~We are providing the following disclosure in lieu of filing a Current Report on Form 8-K relating to Item 1.01:~~
~~Item 1.01. Entry into a Material Definitive Agreement.~~
On July 26, 2018, the Company entered into that certain Amendment No. 4 to Credit Agreement (the “Amendment”), between RPC, Bank of America, N.A., certain other Lenders party thereto, and the Subsidiary Loan parties thereto.
The Amendment, among other matters, replaces the existing minimum tangible net worth covenant with the following covenants: (i) when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, a maximum consolidated leverage ratio of 2.50:1.00 and a minimum debt service coverage ratio of 2.00:1.00, and (ii) otherwise, a minimum tangible net worth covenant of no less than $600 million.
The Amendment additionally (1) extends the Credit Agreement maturity date from January 17, 2019 to July 26, 2023, (2) eliminates any borrowing base limitations on revolving loans when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, (3) reduces the commitment fees payable by RPC by 7.5 basis points at each pricing level and (4) reduces the letter of credit sublimit from $50 million to $35 million.
~~The summary description of the Amendment is qualified in its entirety by the terms of the Amendment, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.~~
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ITEM 6. EXHIBITS
Exhibit

Number
Description
3.1(a)
Restated certificate of incorporation of RPC, Inc. (incorporated herein by reference to Exhibit 3.1 to the Annual Report on Form ~~10-K~~10K for the fiscal year ended December 31, 1999).
3.1(b)
~~3.1(b)~~
Certificate of amendment of the certificate of incorporation of RPC, Inc. (incorporated by reference to Exhibit 3.1(b) to Registrant’s Quarterly Report on Form ~~10-Q~~10Q filed on May 8, 2006).
3.1(c)
~~3.1(c)~~
Certificate of amendment of the certificate of incorporation of RPC, Inc. (incorporated by reference to Exhibit 3.1(c) to the Registrant’s Quarterly Report on Form ~~10-Q~~10Q filed on August 2, 2011).
3.2
~~3.2~~
Amended and Restated Bylaws of RPC, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form ~~10-Q~~10Q filed on April 28, 2017).
4
4
Form of Stock Certificate (incorporated herein by reference to Exhibit 4 to the Registrant’s Annual Report on Form ~~10-K~~10K for the fiscal year ended December 31, 1998).
31.1
~~10.1~~
~~Amendment No. 4to Credit Agreement dated as of July 26, 2018 among RPC, Bank of America, N.A., certain other lenders party thereto, and the Subsidiary Loan Parties party thereto.~~
~~31.1~~ Section 302 certification for Chief Executive Officer.
31.2
~~31.2~~
Section 302 certification for Chief Financial Officer.
32.1
~~32.1~~
Section 906 certifications for Chief Executive Officer and Chief Financial Officer.
95.1
~~95.1~~
Mine Safety Disclosures.
101.INS
~~101.INS~~
XBRL Instance Document
101.SCH
~~101.SCH~~
XBRL Taxonomy Extension Schema Document
101.CAL
~~101.CAL~~
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
~~101.LAB~~
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
~~101.PRE~~
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
~~101.DEF~~
XBRL Taxonomy Extension Definition Linkbase Document

31

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RPC, INC. AND SUBSIDIARIES

SIGNATURES
Pursuant to the requirements of the Securities 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: July 31, ~~2018~~2019

Richard A. Hubbell

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Ben M. Palmer
Date: July 31, ~~2018~~2019

Ben M. Palmer

Vice President, Chief Financial Officer and ~~Treasurer~~
Corporate Secretary

(Principal Financial and Accounting Officer)

~~Delaware~~		~~58-1550825~~
Delaware		58-1550825
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


Title of each class:	Trading Symbol(s)	Name of each exchange on which registered:
Common stock, par value $0.10	RES	New York Stock Exchange


Large accelerated filerx	⌧	Accelerated filer¨	☐
Non-accelerated filer¨ ~~(Do not check if a smaller reporting company)~~	☐	Smaller reporting company¨	☐
Emerging growth company¨	☐