UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______ .
Commission File No. 1-8726
RPC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1550825
(State of Incorporation) (I.R.S. Employer Identification No.)
2170 PIEDMONT ROAD, NE, ATLANTA, GEORGIA 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code--(404) 321-2140
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
COMMON STOCK, $0.10 PAR VALUE THE NEW YORK STOCK EXCHANGE
Securities registered pursuant to section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
As of February 29, 2000, RPC, Inc. had 28,242,263 shares of common stock
outstanding and the aggregate market value of this stock (based on the closing
price on The New York Stock Exchange of $7.625 per share) held by nonaffiliates
was $67,999,544.
Documents Incorporated by Reference:
Portions of the Proxy Statement for the 2000 Annual Meeting of Stockholders of
RPC, Inc. are incorporated by reference into Part III, Items 10 through
13.
PART I
Item 1. Business
Principal Products and Services
RPC, Inc. ("RPC") was incorporated as RPC Energy Services, Inc. in the
state of Delaware on January 20, 1984. RPC has two major business segments: boat
manufacturing and oil and gas services.
Boat Manufacturing
Chaparral Boats, Inc. ("Chaparral"), a wholly owned subsidiary of RPC,
sells three lines of powerboats to a nationwide network of independent dealers.
These lines consist of a sportboat line, a deckboat line, and a cruiser line.
New models are introduced each year. Operations are seasonal in nature with the
second quarter recording the highest sales volume for the year. This business
segment contributed 53 percent of RPC's consolidated revenue in 1999, 42 percent
in 1998, and 39 percent in 1997. Research and development expenditures, totaling
$2,948,000 in 1999, $2,499,000 in 1998, and $2,122,000 in 1997, were necessary
to generate new product innovations.
Oil and Gas Services
The oil and gas services segment provides a variety of services,
equipment, and personnel to the oil and gas industry. Service locations include
Belle Chasse, Houma, Lafayette, Fourchon, and Morgan City, Louisiana; Alice,
Corpus Christi, Houston, Longview, and Odessa, Texas; Elk City, Woodward,
Lindsay, and McAlester, Oklahoma; Rock Springs, Wyoming; Venezuela and Algeria.
The oil and gas services business is not generally seasonal. However, severe
weather conditions will increase the demand for oil and natural gas, which
generally results in an increase in the demand for our services. During 1999,
1998, and 1997 there were no material expenditures for research and development
in this business segment.
The services provided by the oil and gas services segment of RPC
include the following:
Oil Field Services
Cudd Pressure Control, Inc. ("Cudd"), a wholly owned subsidiary of RPC,
provides a wide range of oil and gas well services throughout the southwestern
United States and other countries. These oil field services include coiled
tubing, snubbing, nitrogen and fluid pumping, wireline, marine, well control,
and engineering consulting. This portion of the oil and gas services business
segment contributed 28 percent of RPC's consolidated revenue in 1999, 30 percent
in 1998, and 32 percent in 1997.
Equipment Rental Services
Patterson Services, Inc. a wholly owned subsidiary of RPC, offers
specialized tools and equipment on a rental basis. These include drill pipe,
drill collars, tubing, blowout preventors, and torque-turning equipment. In
addition, Patterson Services provides experienced personnel to install and
remove customer-owned casing at well sites and operate company-owned,
diesel-driven hammers and welding machines used to weld and drive pipe into the
ground. On average, approximately 15 percent of its rental equipment was rented
on a daily basis in 1999, 23 percent in 1998, and 26 percent in 1997. In the
rental business, maximum utilization is approximately 50 percent due to
transportation, inspection, and cleaning requirements. This portion of the oil
and gas services business segment contributed 10 percent of RPC's consolidated
revenue in 1999, 15 percent in 1998, and 15 percent in 1997.
Storage and Inspection Services
Patterson Tubular Services, Inc. ("PTS"), a wholly owned subsidiary of
RPC, performs tubular inspections, coats tubular, stores pipe, and inventories
pipe using an on-line computerized inventory system. Waterfront dock facilities
enable PTS to service a wide variety of offshore and inland vessels.
This portion of the oil and gas services business segment contributed 2
percent of RPC's consolidated revenue in 1999, 6 percent in 1998, and 8 percent
in 1997.
Neither the boat manufacturing nor the oil and gas services business
segment is significantly affected by the availability of raw materials or the
existence of licenses, patents, and trademarks.
Customers
RPC's business is not dependent on any one customer, but on a variety
of customers in both major business segments. No one customer accounts for more
than 10 percent of consolidated revenue.
The boat manufacturing segment produces three lines of boats with
distribution to a nationwide network of independent dealers. Sales to these
dealers are generated by a seven-person sales force. Although production is
scheduled from orders placed by dealers, these are not firm orders and are
frequently changed or canceled. As a result, this segment does not have an
identifiable backlog of sales.
The oil and gas services segment provides services to drilling
contractors, oil field supply stores and service companies, major oil and gas
producers, and independent exploration companies. Sales are generated by RPC's
sales force and from customer referrals. RPC has no written contracts of a
material nature with any of its oil and gas services segment customers. Also,
there is no material sales backlog due to the short-term nature of the rental
and services industry.
Competition
There are many companies that compete with RPC's subsidiaries in each
segment, some of which are larger and have been established in the industries
for longer periods of time.
The boat manufacturing segment's competition includes small independent
companies, as well as large vertically integrated companies that have both
engine and boat manufacturing capabilities. Major markets include the
southeastern and Gulf states, the northeastern states, and California.
Competitive factors in this industry are the quality of materials, the quality
of the construction process, the design features, and the selling prices.
Selling prices are set by management and vary from dealer to dealer based upon
volume. The sales prices of Chaparral's boats are similar to equivalent
competitors' models.
In the oil and gas services segment, intense competition exists and has
led to substantial price reductions for services offered. Industry conditions
are influenced by such factors as weather, economic and political conditions, as
well as worldwide demand for, and prices of, oil and natural gas. The notable
competitive factors in this segment are quality, availability, and price of
equipment and services. This segment's predominant markets are the Gulf of
Mexico, southwestern United States, Venezuela, and Algeria.
Employees
As of December 31, 1999, RPC employed 1,732 persons.
Environmental Considerations
The capital expenditures, earnings, and competitive position of RPC are
not materially affected by compliance with federal, state, and local provisions
that have been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment.
Anticipated Spin-off of Chaparral Boats
On January 14, 2000, RPC announced it had taken the initial steps to
spin-off its 100 percent ownership in Chaparral Boats. The transaction, expected
to be completed during the third quarter of 2000, will be structured as a
tax-free distribution of Chaparral Boats stock to RPC shareholders. The spin-off
is subject to various approvals including a favorable tax ruling from the
Internal Revenue Service and final approval of RPC's Board of Directors.
Industry Segment's Financial Information
Information about RPC's operations by segment, as well as financial
information about foreign and domestic operations for the three years ended
December 31, 1999, is set forth in Note 9 of the Financial Statements on
page 22.
Item 2. Properties
RPC owns or leases 65 offices and operating facilities. Considered
individually, the only facility that represents a materially important physical
property is the boat manufacturing plant in Nashville, Georgia. RPC believes its
current operating facilities are suitable and adequate to meet current and
reasonably anticipated future needs. Descriptions of the major facilities are as
follows:
OWNED LOCATIONS
Houston, Texas--Pipe storage terminal, inspection shed, and pipe coating
facility
Nashville, Georgia--Boat manufacturing facility
Irving, Texas--Crane fabrication plant
Houma, Louisiana--Oil and gas administrative office
LEASED LOCATIONS
Morgan City, Louisiana--Pipe storage terminal and inspection shed
Expiration date of lease: January 31, 2002
Item 3. Legal Proceedings
RPC is involved in various legal proceedings encountered in the
ordinary course of business. In the opinion of management, any judgment or
settlement arising from these proceedings will not, individually or in the
aggregate, have a material adverse effect on its business or its financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of 1999.
Item 4A. Executive Officers of the Registrant
Each of the executive officers of RPC was elected by the Board of
Directors to serve until the Board of Directors' meeting immediately following
the next annual meeting of stockholders or until his or her earlier removal by
the Board of Directors or his or her resignation. The following table lists the
executive officers of RPC and their ages, offices, and terms of office with RPC.
Name and Office Date First
With Registrant Age Elected to Office
R. Randall Rollins 68 1/24/84
Chairman of the Board
Chief Executive Officer
Richard A. Hubbell 55 1/27/87
President
Chief Operating Officer
James A. Lane, Jr. 57 1/27/87
Executive Vice President
Jonathan W. Moss 69 5/1/99
Executive Vice President
Linda H. Graham 63 1/27/87
Vice President
Secretary
Ben M. Palmer 39 7/8/96
Vice President
Chief Financial Officer
Treasurer
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
RPC common stock is listed for trading on the New York Stock Exchange
under the symbol RES. At the close of business on December 31, 1999, there were
1,191 holders of record of common stock. The high and low prices of RPC's common
stock for each quarter in the years ended December 31, 1999 and 1998 were as
follows:
1999 1998
---------------------------------------------------------------------
Quarter High Low High Low
---------------------------------------------------------------------
First $ 7.688 $ 5.750 $ 13.500 $ 10.875
Second 9.813 5.875 14.250 12.250
Third 8.875 6.500 12.625 8.750
Fourth 7.735 5.688 9.938 7.000
---------------------------------------------------------------------
During 1999, RPC declared and paid quarterly cash dividends of $0.035 per common
share payable March 10, June 10, September 10, and December 10, 1999. Dividends
were first paid in the third quarter of 1997.
Item 6. Selected Financial Data
- ------------------------------------------------------------------------------------------------
RPC, INC. AND SUBSIDIARIES (in thousands except per share data)
- ------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------
OPERATIONS SUMMARY
Revenue $230,463 $244,274 $245,799 $200,833 $161,379
Net costs and expenses 217,316 218,428 211,836 180,596 145,228
- ------------------------------------------------------------------------------------------------
Income before income taxes 13,147 25,846 33,963 20,237 16,151
Income tax provision 4,996 9,821 11,718 6,982 5,396
- ------------------------------------------------------------------------------------------------
Net income $ 8,151 $ 16,025 $ 22,245 $ 13,255 $ 10,755
================================================================================================
Earnings per share:
Basic $ 0.29 $ 0.55 $ 0.76 $ 0.46 $ 0.37
Diluted .29 .55 .75 .46 .37
Cash dividends declared .14 .14 .05 -- --
- ------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES $ 22,129 $ 30,124 $ 20,479 $ 20,889 $ 15,529
- ------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets $190,575 $180,691 $182,518 $152,800 $132,656
Working capital 38,365 40,099 50,395 39,192 41,943
Stockholders' equity 142,808 143,066 139,376 117,799 104,361
- ------------------------------------------------------------------------------------------------
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Consolidated
Consolidated revenue in 1999 was $230,463,000 a 6 percent decrease
compared to $244,274,000 in 1998. In 1999, revenue in the boat manufacturing
segment increased 19 percent compared to 1998 due primarily to increases in both
the average sales price and the number of boats sold. The oil and gas services
segment revenue in 1999 decreased 24 percent compared to 1998 because of
significant decreases in customer drilling-related and production-related
activity. Consolidated revenue in 1998 decreased less than 1 percent compared to
1997 revenue of $245,799,000. The boat manufacturing segment revenue increased
$8,468,000 or 9 percent in 1998, however, this increase was offset by the
decrease in the oil and gas services segment revenue of $13,650,000 or 10
percent.
Consolidated income before income taxes was $13,147,000 in 1999,
$25,846,000 in 1998, and $33,963,000 in 1997. This represented a decrease of
$12,699,000 or 49 percent in 1999 and a decrease of $8,117,000 or 24 percent in
1998. In 1999, the boat manufacturing segment generated a $2,552,000 or 18
percent increase in operating profit to $16,472,000. The increase was achieved
because Chaparral was able to increase boat sales revenue and maintain its
pricing structure and margins, despite continued price competition and
significant product enhancements. The oil and gas services segment operating
profit decreased $17,749,000 because of the reasons discussed more fully below.
In 1998, the boat manufacturing segment increased operating profit $2,165,000 or
18 percent as a result of increased revenue and margin improvements, while
operating profit decreased $8,799,000 or 34 percent in the oil and gas services
segment because of the reasons discussed below. Corporate expenses and interest
income in 1999 were comparable to 1998.
Consolidated net income was $8,151,000 or $0.29 diluted earnings per
share in 1999 compared to $16,025,000 or $0.55 diluted earnings per share in
1998. This represented a decrease of $7,874,000 or 49 percent in 1999, which was
comparable with the decrease in income before income taxes. Consolidated net
income in 1997 was $22,245,000 or $0.75 diluted earnings per share. Net income
decreased $6,220,000 or 28 percent in 1998 compared to 1997. This decrease was
higher than the decrease in income before income taxes because the effective
income tax rate increased in 1998 compared to 1997. This increase was the result
of all remaining state tax net operating loss benefits having been recognized
prior to 1998.
Revenue--Business Segments
Boat Manufacturing--The boat manufacturing segment generated a 19 percent or
$19,381,000 increase in revenue from $103,497,000 in 1998 to $122,878,000 in
1999. Revenue for 1997 was $95,029,000.
The total number of boats sold by Chaparral in 1999 increased 8 percent
compared to 1998 while the average sales price also increased 8 percent. The
average sales price increase resulted from selling a larger number of higher
priced Cruisers and Sunestas in 1999 compared to 1998. In addition, revenue in
1999 increased compared to 1998 as a result of increased sales of parts and
accessories and the favorable response to the dealer incentive programs. Lastly,
there were price increases in July 1999 and December 1999 that averaged
approximately 2 percent each, as a result of higher material costs, product
upgrades and other product changes. The increase in revenue during 1999 was
similar to the overall industry growth.
The total number of boats sold by Chaparral in 1998 decreased less
than 1 percent compared to 1997 while the average sales price increased 10
percent. The increase in the average sales price in 1999 compared to 1998 was
due to increased sales of larger, higher priced boats coupled with favorable
response to the dealer incentive programs.
Oil and Gas Services-- The oil and gas services segment revenue
decreased 24 percent in 1999 compared to 1998. Segment revenue was $94,864,000
in 1999, $123,949,000 in 1998, and $137,599,000 in 1997.
Customer activity levels in the first half of 1998 were strong, but
declined dramatically in the second half of 1998. Customer activity remained
weak during most of 1999. This decline in activity resulted from a perceived
world-wide imbalance between the supply and demand for oil and natural gas.
Beginning in the second quarter of 1999, oil and natural gas prices began to
increase from the low levels experienced in late 1998 and early 1999. Despite
significant improvement in the commodity price environment during 1999,
exploration and production spending increased only modestly. While the demand
for our equipment and services began increasing during the third quarter of
1999, pricing remained highly competitive. At the end of 1999, the number of
active drilling rigs in the United States had increased 24 percent over the
prior year.
Patterson Services' revenue in 1999 decreased 38 percent compared to
1998. The significant decrease in drilling-related activity resulted in lower
demand for Patterson's specialized rental tools. Cudd Pressure Control's revenue
in 1999 decreased 11 percent compared to 1998 because of decreased customer
expenditures toward enhancing production of existing wells. However, Cudd's
international operations experienced a 17 percent increase in revenue in 1999
due to increased activity levels in Venezuela and a new service contract in the
North Sea.
Oil and gas services segment revenue in 1998 decreased 10 percent
compared to 1997 because of the dramatic decline in customer activity levels in
the second half of 1998 as discussed above.
Expenses
Cost of goods sold for the boat manufacturing segment was $93,247,000
in 1999 compared to $77,776,000 in 1998 and $72,899,000 in 1997. Cost of goods
sold in 1999 for this segment increased $15,471,000 or 20 percent compared to
1998, which is comparable to the increase in this segment's revenue. As a
percent of revenue, cost of goods sold for this segment was 76 percent in 1999,
75 percent in 1998, and 77 percent in 1997. The 1 percent increase as a
percentage of segment revenue in 1999 compared to 1998 can be attributed to the
introduction of several new boat models in 1999 with enhanced features, which
were somewhat more expensive to manufacture. The 2 percent decrease in 1998
compared to 1997 results from an emphasis on inventory pricing controls. The
remaining portion of consolidated cost of goods sold was incurred by
subsidiaries in other businesses.
Consolidated operating expenses were $99,523,000 in 1999, $113,994,000
in 1998, and $117,777,000 in 1997. Operating expenses were 13 percent lower in
1999 than in 1998, primarily because of lower costs incurred in the oil and gas
services segment as a result of the decline in oil and gas services revenue.
Operating expenses in the boat manufacturing segment were $12,403,000
or 10 percent of segment revenue in 1999 which is comparable to $11,024,000 or
11 percent of segment revenue in 1998. The oil and gas services segment
operating expenses were $79,835,000 or 84 percent of segment revenue in 1999
compared to $92,118,000 or 74 percent of segment revenue in 1998. Operating
expenses within the oil and gas services segment could not be reduced enough in
1999 to offset the significant decreases in segment revenue. Operating expenses
in 1997 of $99,981,000 or 73 percent of segment revenue was comparable to 1998.
Depreciation and amortization, excluding the portion included in cost of
goods sold, was $16,614,000 in 1999, $15,661,000 in 1998, and $12,877,000 in
1997. Included in these totals were the oil and gas services segment
depreciation and amortization of $15,314,000 in 1999,
$14,368,000 in 1998, and $11,521,000 in 1997. Depreciation and amortization in
1999 increased $953,000 or 6 percent as a result of depreciation on purchases of
revenue related equipment in the oil and gas services segment. Chaparral's
depreciation expense for production-related equipment is a component of cost of
goods sold, therefore this category includes only amortization of intangibles
and depreciation of non-production assets. Chaparral's depreciation and
amortization was $778,000 for 1999, $776,000 for 1998, and $780,000 for 1997.
Consolidated amortization of intangible assets was $960,000 in 1999, $888,000 in
1998, and $865,000 in 1997.
Interest Income
Interest income was $1,718,000 in 1999, $2,023,000 in 1998, and
$2,376,000 in 1997. Total cash and marketable securities were $37,947,000 at
December 31, 1999, compared to $42,950,000 at December 31, 1998. As a result of
lower average balances and moderately lower yields, interest income decreased 15
percent in 1999 compared to 1998, and 15 percent in 1998 compared to 1997.
Financial Condition
As of December 31, 1999, RPC's cash and cash equivalents and short-term
marketable securities totaled $13,076,000, a $367,000 decrease from $13,443,000
at December 31, 1998. Cash provided by operating activities was $25,642,000
compared to $24,496,000 in 1998. Accounts receivable were $34,871,000 at
December 31, 1999, compared to $25,266,000 at December 31, 1998, an increase of
$9,605,000. The increases in accounts receivable and accounts payable are due to
the increased revenue and related activity levels experienced in the fourth
quarter of 1999 compared to decreasing activity levels and revenue in the fourth
quarter of 1998. Inventories were $2,185,000 higher than the prior year mainly
due to an increase in the value of finished boats on hand for the boat
manufacturing segment. Inventory of finished boats increased because of higher
production levels to satisfy increased customer demand.
Working capital at December 31, 1999, was $38,365,000 compared to
$40,099,000 in the prior year. The current ratio remained strong at the end of
1999 with a ratio of 1.9-to-1 as compared to 2.2-to-1 in 1998.
Capital expenditures for 1999 were $22,129,000, a decrease of
$7,995,000 from $30,124,000 in 1998. The oil and gas services segment had
capital expenditures in 1999 primarily for revenue-producing equipment totaling
$19,175,000. Capital expenditures for the oil and gas services segment were
$27,814,000 in 1998.
RPC expects that funding for capital requirements over the next twelve
months will be provided by available cash and marketable securities and cash
generated from operations.
Anticipated Spin-off of Chaparral Boats
On January 14, 2000, RPC announced it had taken the initial steps to
spin-off its 100 percent ownership in Chaparral Boats. The transaction, expected
to be completed during the third quarter of 2000, will be structured as a
tax-free distribution of Chaparral Boats stock to RPC shareholders. The spin-off
is subject to various approvals including a favorable tax ruling from the
Internal Revenue Service and final approval of RPC's Board of Directors.
As more fully discussed in Note 11 of the Financial Statements on page
23, an after-tax gain of approximately $4,200,000, or $.15 diluted earnings per
share, will be recorded by Chaparral Boats in the first quarter of 2000 in
connection with a non-refundable settlement of a claim.
Forward-Looking Statements
This Annual Report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical facts, included or
incorporated by reference in this Annual Report which address activities,
events, or developments which RPC expects or anticipates will or may occur in
the future, including statements regarding RPC's competitive position, future
capital requirements, the anticipated impact of legal proceedings, plans to
increase revenue and profit margins, trends in the boating industry, plans to
increase boat sales, future acquisitions, the impact of year 2000 programming
issues, RPC's ability to take advantage of current conditions and opportunities
in the oil and gas businesses and boat manufacturing business, the impact of
consolidation in the oil and gas and boat manufacturing industries on RPC's
business, market risk exposure and risk management, and other statements
regarding future plans and strategies, anticipated trends and similar
expressions concerning matters
that are not historical facts, are forward-looking statements. These statements
are based on certain conditions and analyses made by RPC in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate under the circumstances. However, whether actual results and
developments will conform to RPC's expectations and predictions is subject to a
number of risks and uncertainties which could cause actual results to differ
materially from RPC's expectations, including economic conditions, the price of
oil and natural gas, conditions in the industries in which RPC operates,
competition, the availability of acquisition candidates, the ability of RPC to
obtain financing on reasonable terms and conditions, and other factors, many of
which are beyond the control of RPC. Consequently, all of the forward-looking
statements made in this Annual Report are qualified by these cautionary
statements and there can be no assurance that the actual results or developments
anticipated by RPC will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on RPC or its business or
operations. RPC assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events or otherwise.
Year 2000 Issue
Aware that the Year 2000 (Y2K) information technology programming issue
could have a significant potential impact on its future operations and financial
reporting, RPC began its assessment and remediation processes regarding its
primary financial and operating systems in 1997. RPC's assessment activities
included (1) identifying critical systems, (2) testing for Y2K compliance, (3)
obtaining assurances from its vendors and its large commercial customers, and
(4) developing contingency plans to address Y2K issues which could occur. RPC's
remediation activities included replacing certain software and operating
systems, followed by testing to ensure Y2K compliance of the replacements. No
negative or materially significant impact has yet been experienced internally
with RPC's systems or from any supplier due to the Y2K related issue, nor is any
such impact anticipated. No contingency plans have yet been invoked.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
RPC maintains an investment portfolio, comprised of U.S. Government and
corporate debt securities, which is subject to interest rate risk exposure. This
risk is managed through conservative policies to invest in high-quality
obligations. RPC has performed an interest rate sensitivity analysis using a
duration model over the near term with a 10 percent change in interest rates.
RPC's portfolio is not subject to material interest rate risk exposure based on
this analysis, and no material changes in market risk exposures or how those
risks are managed is expected.
Item 8. Financial Statements and Supplementary Data
Balance Sheets
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RPC, INC. AND SUBSIDIARIES (in thousands except share information)
- --------------------------------------------------------------------------------
At December 31, 1999 1998
- --------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 8,278 $ 10,029
Marketable securities 4,798 3,414
Accounts receivable, net 34,871 25,266
Inventories 19,631 17,446
Deferred income taxes 8,254 10,787
Federal income taxes receivable 1,806 3,673
Prepaid expenses and other current assets 2,337 1,909
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Current assets 79,975 72,524
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Equipment and property, net 75,472 70,206
Marketable securities 24,871 29,507
Intangibles, net of accumulated amortization
of $9,807 in 1999 and $8,847 in 1998 9,006 7,401
Other assets 1,251 1,053
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Total assets $190,575 $180,691
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 13,728 $ 5,859
Accrued payroll and related expenses 5,725 4,192
Accrued insurance expenses 7,689 6,329
Accrued state, local and other taxes 4,106 4,063
Accrued discounts 1,131 1,053
Current portion of long-term debt 255 659
Other accrued expenses 8,976 10,270
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Current liabilities 41,610 32,425
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Long-term accrued insurance expenses 3,684 3,308
Long-term debt 1,547 636
Deferred income taxes 926 1,256
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Total liabilities 47,767 37,625
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Commitments and contingencies
- --------------------------------------------------------------------------------
Common stock, $.10 par value, 79,000,000 shares
authorized, 28,262,463 shares issued in 1999,
28,887,872 shares issued in 1998 2,826 2,888
Capital in excess of par value 22,548 26,538
Earnings retained 117,434 113,640
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Total stockholders' equity 142,808 143,066
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $190,575 $180,691
================================================================================
The accompanying notes are an integral part of these statements.
Statements of Income
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RPC, INC. AND SUBSIDIARIES (in thousands except per share data)
- --------------------------------------------------------------------------------
Years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
REVENUE $230,463 $244,274 $245,799
- --------------------------------------------------------------------------------
Cost of goods sold 102,897 90,796 83,558
Operating expenses 99,523 113,994 117,777
Depreciation and amortization 16,614 15,661 12,877
Interest income (1,718) (2,023) (2,376)
- --------------------------------------------------------------------------------
Income before income taxes 13,147 25,846 33,963
Income tax provision 4,996 9,821 11,718
- --------------------------------------------------------------------------------
Net income $ 8,151 $ 16,025 $ 22,245
================================================================================
EARNINGS PER SHARE
================================================================================
Basic $ 0.29 $ 0.55 $ 0.76
================================================================================
Diluted $ 0.29 $ 0.55 $ 0.75
================================================================================
Statements of Stockholders' Equity
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RPC, INC. AND SUBSIDIARIES (in thousands)
- ----------------------------------------------------------------------------------------------------------
Three Years ended Common Capital in Excess Earnings Treasury
December 31, 1999 Stock of Par Value Retained Stock
- ----------------------------------------------------------------------------------------------------------
Balance December 31, 1996 $ 1,471 $ 35,176 $ 81,555 $ 403
Two-for-one stock split 1,487 (1,487) -- --
Stock issued for stock incentive plans, net 20 1,522 (520) 215
Net income -- -- 22,245 --
Dividends declared -- -- (1,475) --
- ----------------------------------------------------------------------------------------------------------
Balance December 31, 1997 2,978 35,211 101,805 618
Stock issued for stock incentive plans, net 5 437 (82) 19
Stock purchased and retired (95) (9,110) -- (637)
Net income -- -- 16,025 --
Dividends declared -- -- (4,108) --
- ----------------------------------------------------------------------------------------------------------
Balance December 31, 1998 2,888 26,538 113,640 0
Stock issued for stock incentive plans, net 14 758 (355) --
Stock purchased and retired (76) (4,748) -- --
Net income -- -- 8,151 --
Dividends declared -- -- (4,002) --
- ----------------------------------------------------------------------------------------------------------
Balance December 31, 1999 $ 2,826 $ 22,548 $ 117,434 $ 0
==========================================================================================================
The accompanying notes are an integral part of these statements.
Statements of Cash Flows
- --------------------------------------------------------------------------------------------------
RPC, INC. AND SUBSIDIARIES (in thousands)
- --------------------------------------------------------------------------------------------------
Years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 8,151 $ 16,025 $ 22,245
Noncash charges (credits) to earnings:
Depreciation and amortization 17,507 16,430 13,510
Gain on sale of equipment and property (1,615) (2,350) (2,216)
Deferred income tax provision (benefit) 2,203 (1,213) (608)
(Increase) decrease in assets:
Accounts receivable (9,605) 6,887 (7,997)
Inventories 1,867 (1,421) (598)
Federal income taxes receivable (2,185) (3,673) --
Prepaid expenses and other current assets (428) 606 (727)
Other noncurrent assets (244) 23 427
Increase (decrease) in liabilities:
Accounts payable 7,895 (2,809) 681
Accrued payroll and related expenses 1,533 (1,634) 1,285
Accrued insurance expenses 1,736 (1,819) 1,226
Other accrued expenses (1,173) (556) 2,968
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 25,642 24,496 30,196
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (22,129) (30,124) (20,479)
Proceeds from sale of equipment and property 2,248 3,657 2,510
Net sale (purchase) of marketable securities 3,252 7,854 (7,555)
Other (2,564) -- 623
- --------------------------------------------------------------------------------------------------
Net cash used for investing activities (19,193) (18,613) (24,901)
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends (4,002) (4,108) (1,475)
Reduction of long-term debt (680) (877) --
Increase in long-term debt 1,187 -- --
Cash paid for common stock purchased and retired (4,814) (8,351) --
Proceeds received upon exercise of stock options 109 73 465
- --------------------------------------------------------------------------------------------------
Net cash used for financing activities (8,200) (13,263) (1,010)
- --------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (1,751) (7,380) 4,285
Cash and cash equivalents at beginning of year 10,029 17,409 13,124
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 8,278 $ 10,029 $ 17,409
==================================================================================================
The accompanying notes are an integral part of these statements.
Notes to Financial Statements
RPC, Inc. and Subsidiaries
Years ended December 31, 1999, 1998, and 1997
Note 1: Significant Accounting Policies
Principles of Consolidation--The consolidated financial statements include the
accounts of RPC, Inc. and its wholly owned subsidiaries ("RPC" or the
"Company"). All material intercompany accounts and transactions have been
eliminated.
Nature of Operations--RPC is principally engaged in two businesses:
manufacturing powerboats and providing a variety of services, equipment, and
personnel to the oil and gas industry. The boat manufacturing segment
manufactures and distributes fiberglass boats to a nationwide network of
independent dealers. The principal markets for the oil and gas services segment
are domestic customers comprised of drilling contractors, oil field supply
stores and service companies, major oil and gas producers, and independent
exploration companies.
Use of Estimates in the Preparation of Financial Statements--The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue--Revenue is recognized at the time services are performed or goods are
delivered.
Cash Equivalents--Highly liquid investments with original maturities of 3 months
or less are considered to be cash equivalents.
Marketable Securities--Marketable securities should be classified as either
"trading" or "available-for-sale," which requires reporting at fair value on the
balance sheet. Any unrealized gains and losses on trading securities are
included in earnings. For available-for-sale securities, any unrealized gains
and losses are excluded from earnings and, if significant, reported in a
separate component of stockholders' equity. As of December 31, 1999 and 1998,
the difference between fair value and cost for both classifications was not
material.
Investments with original maturities between 3 and 12 months are
considered to be current marketable securities. Investments with original
maturities greater than 12 months are considered to be noncurrent marketable
securities.
Inventories--Inventories are recorded at the lower of cost (first-in, first-out
basis) or market value.
Long-Lived Assets--Long-lived assets and certain intangibles are reviewed
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company periodically reviews the values
assigned to long-lived assets, such as property and equipment and other assets,
to determine if any impairments are other than temporary. Management believes
that the long-lived assets in the accompanying balance sheets are appropriately
valued.
Equipment and Property--Depreciation is provided principally on a straight-line
basis over the estimated useful lives of assets. Annual provisions for
depreciation are computed using the following useful lives: operating equipment
and property, 3 to 10 years; buildings and leasehold improvements, 15 to 30
years; furniture and fixtures, 5 to 7 years; and vehicles, 3 to 5 years. The
cost of assets retired or otherwise disposed of and the related accumulated
depreciation are eliminated from the accounts in the year of disposal with the
resulting gain or loss credited or charged to income. Expenditures for
additions, major renewals, and betterments are capitalized. Depreciation expense
on production equipment in the manufacturing businesses is included in the "cost
of goods sold" caption in the income statement. All other depreciation is
included in the "depreciation and amortization" caption.
Intangibles--Intangibles represent the excess of the purchase price over the
fair value of net assets of businesses acquired and noncompete agreements
related to businesses acquired. Intangibles are presented net of accumulated
amortization and are amortized using the straight-line method over a period not
exceeding 20 years or the period of the noncompete agreement.
Stock-Based Compensation--Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation" defines a fair value-based
method of accounting for an employee stock option plan or similar equity
instrument. However, it also allows an entity
to continue to measure compensation cost for those plans using the method of
accounting prescribed in Accounting Principles Board ("APB") Opinion No. 25.
Entities electing to remain with the accounting in APB 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value-based
method of accounting defined in the statement had been applied.
RPC has elected to account for its stock-based compensation plans under
APB 25; however, the Company has computed for pro forma disclosure purposes the
value of all options granted during 1999, 1998, and 1997 using the Black-Scholes
option pricing model as prescribed by SFAS No. 123 using the following weighted
assumptions for grants:
1999 1998 1997
- ---------------------------------------------------------------------------------
Risk free interest rate 4.6% 5.4% 6.2%
Expected dividend yield 1% 2% 0%
Expected lives 7 years 7 years 7 years
Expected volatility 34-37% 31-34% 26-31%
- ---------------------------------------------------------------------------------
The total fair value of the options granted during the years ended
December 31, 1999, 1998, and 1997, were computed as approximately $742,000,
$1,092,000 and $524,000, respectively, which would be amortized over the vesting
period of the options. If the Company had accounted for these plans in
accordance with SFAS No. 123, the Company's reported pro forma net income and
pro forma net income per share would have been as follows:
December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Net Income (in thousands)
As reported $ 8,151 $ 16,025 $ 22,245
Pro forma 7,848 15,818 22,163
Basic EPS
As reported $ 0.29 $ 0.55 $ 0.76
Pro forma 0.28 0.55 0.76
Diluted EPS
As reported $ 0.29 $ 0.55 $ 0.75
Pro forma 0.28 0.54 0.75
- --------------------------------------------------------------------------------
Insurance Expenses--RPC self insures, up to specified limits, certain risks
related to general liability, product liability, workers' compensation, and
vehicle liability. The estimated cost of claims under the self-insurance program
is accrued as the claims are incurred (although actual settlement of the claims
may not be made until future periods) and may subsequently be revised based on
developments relating to such claims. The noncurrent portion of these estimated
outstanding claims is classified as long-term accrued insurance expenses.
Income Taxes--Deferred tax liabilities and assets are determined based on the
difference between the financial and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
Earnings per Share--SFAS No. 128, "Earnings Per Share," requires a basic
earnings per share and diluted earnings per share presentation. The two
calculations differ as a result of common stock equivalents and restricted
shares included in diluted earnings per share, but excluded in basic earnings
per share. A reconciliation of the weighted shares outstanding is as follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Basic EPS 28,177,251 28,987,345 29,181,668
Common stock
equivalents and
restricted shares 256,089 377,870 423,195
- --------------------------------------------------------------------------------
Diluted EPS 28,433,340 29,365,215 29,604,863
================================================================================
New Accounting Standards--In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," which defers the effective date of
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires entities to recognize all
instruments as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The Company does not anticipate the adoption of
these standards to have a material impact on its financial position or results
of operations.
Note 2: Accounts Receivable
Accounts receivable, net, at December 31, 1999, of $34,871,000 and at
December 31, 1998, of $25,266,000 are net of allowances for doubtful accounts of
$4,659,000 in 1999, and $7,004,000 in 1998.
Note 3: Inventories
Inventories are recorded at the lower of cost (first-in, first-out basis) or
market value and are detailed as follows:
December 31, 1999 1998
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Raw materials and supplies $11,382 $ 9,942
Work in process 1,843 1,414
Finished goods 6,406 6,090
- --------------------------------------------------------------------------------
Total inventories $19,631 $17,446
================================================================================
Note 4: Equipment and Property
Equipment and property are presented at cost net of accumulated depreciation and
are detailed as follows:
December 31, 1999 1998
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Operating equipment
and property $188,380 $175,842
Buildings 17,816 17,142
Furniture and fixtures 4,322 4,233
Vehicles 20,747 18,999
Land 4,927 4,941
- --------------------------------------------------------------------------------
Gross equipment and property 236,192 221,157
Less: accumulated depreciation 160,720 150,951
- --------------------------------------------------------------------------------
Net equipment and property $ 75,472 $ 70,206
================================================================================
Note 5: Income Taxes
The following table lists the components of the provision for income taxes:
December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Current:
Federal $ 1,783 $ 10,264 $ 11,838
State 1,010 770 488
Deferred 2,203 (1,213) (608)
- --------------------------------------------------------------------------------
Total income tax provision $ 4,996 $ 9,821 $ 11,718
- --------------------------------------------------------------------------------
A reconciliation between the federal statutory rate and RPC's effective tax rate
is as follows:
December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes 3.0% 1.9% 1.4%
Other 0.0% 1.1% (1.9)
- --------------------------------------------------------------------------------
Effective tax rate 38.0% 38.0% 34.5%
================================================================================
The components of the net deferred tax assets (liabilities) are as follows:
December 31, 1999 1998
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Current deferred tax asset:
Self-insurance reserves $ 2,116 $ 2,158
Bad debt reserves 1,752 2,278
State, local & other taxes 967 1,015
Payroll accruals 903 985
Warranty reserves 1,139 1,051
All others 1,377 3,300
Valuation allowance -- --
- --------------------------------------------------------------------------------
Total current deferred tax asset $ 8,254 $10,787
================================================================================
Noncurrent deferred tax asset (liability):
Self-insurance reserves $ 1,933 $ 1,585
Depreciation (2,669) (2,562)
All others (190) (279)
Valuation allowance -- --
- --------------------------------------------------------------------------------
Total noncurrent deferred
tax (liability): $ (926) $(1,256)
================================================================================
Total income tax payments, net of refunds, were $1,616,000 in 1999, $12,765,000
in 1998, and $11,260,000 in 1997.
Note 6: Long-Term Debt
The fair value of the long-term debt approximates the carrying value.
All obligations are collateralized by equipment and property.
At December 31, 1999, future minimum payments on long-term debt and
capitalized lease obligations were as follows:
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
2000 $ 255
2001 626
2002 526
2003 395
2004 --
- --------------------------------------------------------------------------------
Total $1,802
================================================================================
The long-term debt of RPC as of December 31, 1999, and December 31, 1998, is
summarized as follows:
(in thousands) Range of
Maturity Interest
Type Dates Rates 1999 1998
- --------------------------------------------------------------------------------
Notes payable 2001-2002 6.25-8.50% $1,703 $ 820
Capital leases 2003 10.99% 99 475
- --------------------------------------------------------------------------------
Total debt 1,802 1,295
Less current portion 255 659
- --------------------------------------------------------------------------------
Long-term debt $1,547 $ 636
================================================================================
The net book value of equipment under capital leases was $801,000 at December
31, 1999.
Note 7: Commitments and Contingencies
Minimum annual rentals, principally for noncancelable real estate and
truck leases with terms in excess of one year, in effect at December 31, 1999,
are summarized in the following table:
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
2000 $1,089
2001 699
2002 365
2003 262
2004 174
Thereafter 18
- --------------------------------------------------------------------------------
Total rental commitments $2,607
================================================================================
Total rental expense charged to operations was $2,014,000 in 1999, $2,514,000 in
1998, and $3,610,000 in 1997.
RPC is a defendant in a number of lawsuits which allege that plaintiffs
have been damaged as a result of the rendering of services by RPC personnel and
equipment, in vehicle accidents, or from the use of RPC's products. RPC is
vigorously contesting these actions. Management is of the opinion that the
outcome of these lawsuits will not have a material adverse effect on the
financial position or results of operations or liquidity of RPC.
To assist dealers in obtaining financing for the purchase of its boats,
Chaparral has entered into agreements with various dealers and financing
institutions to guarantee varying amounts of the dealers' purchase debt
obligations. Chaparral's obligation under its guarantee becomes effective in the
case of default in payments by the dealer. The agreements provide for the return
of all repossessed boats to Chaparral in new condition, in exchange for
Chaparral's assumption of the unpaid debt obligation on those boats. As of
December 31, 1999, guarantees outstanding totaled $1,308,000.
Note 8: Employee Benefit Plans
Retirement Plan--In February 1998, the FASB issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," which
establishes standards for disclosures for pensions and other postretirement
benefit plans. SFAS No. 132 is effective for fiscal years beginning after
December 15, 1997. All prior years have been restated to conform to current year
presentation.
RPC has a tax-qualified defined benefit, noncontributory, trusteed
retirement income plan that covers substantially all employees with at least one
year of service. Benefits are based on an employee's years of service and
compensation near retirement. RPC has the right to terminate or modify the plan
at any time.
The following table sets forth the funded status of the plan and the
amounts recognized in RPC's consolidated balance sheet:
December 31, 1999 1998
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning
of year $ 20,126 $ 16,172
Service cost 1,031 914
Interest cost 1,453 1,343
Actuarial (gain) loss (2,115) 2,244
Benefits paid (699) (547)
- --------------------------------------------------------------------------------
Benefit obligation at end of year 19,796 20,126
- --------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at
beginning of year 18,107 16,493
Actual return on plan assets 1,136 2,161
Benefits paid (699) (547)
- --------------------------------------------------------------------------------
Fair value of plan assets at
end of year 18,544 18,107
- --------------------------------------------------------------------------------
Funded status (1,252) (2,019)
Unrecognized net asset (482) (674)
Unrecognized net loss 824 2,458
Unrecognized prior service cost (14) (25)
- --------------------------------------------------------------------------------
Net accrued benefit $ (924) $ (260)
================================================================================
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS:
Accumulated benefit obligation $ 16,192 $ 16,928
- --------------------------------------------------------------------------------
Plan assets at fair value $ 18,544 $ 18,107
================================================================================
RPC's funding policy is to contribute to the retirement income plan the
amount required, if any, under the Employee Retirement Income Security Act of
1974. No contributions were required in 1999, 1998, and 1997.
Total retirement plan cost was $663,000 in 1999, $569,000 in 1998, and
$86,000 in 1997. The components of net periodic benefit cost are summarized as
follows:
December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Service cost for benefits earned
during the period $ 1,031 $ 914 $ 602
Interest cost on projected
benefit obligation 1,453 1,342 1,053
Expected return on
plan assets (1,680) (1,531) (2,243)
Net amortization and
deferral (141) (156) 674
- --------------------------------------------------------------------------------
Net periodic benefit cost $ 663 $ 569 $ 86
================================================================================
The weighted average assumptions were as follows:
December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------
Discount rate 8.00% 7.00% 7.50%
Expected return on plan
assets 9.50% 9.50% 9.50%
Rate of compensation
increase 5.00% 4.00% 4.50%
- ---------------------------------------------------------------------------------
401(k) Plan--RPC sponsors a deferred compensation 401(k) plan that is available
to substantially all full-time employees with more than six months of service.
This plan allows employees to make tax-deferred contributions of up to 15
percent of their annual compensation, not exceeding the permissible deduction
imposed by the Internal Revenue Code. RPC matches 40 percent of each employee's
contributions up to 3 percent of the employee's compensation. Employees vest in
the RPC contributions after five years of service. The charges to expense for
RPC's contributions were $356,000 in 1999, $392,000 in 1998, and $315,000 in
1997.
Stock Incentive Plans--RPC has an Employee Incentive Stock Option Plan (the
"1984 Plan") under which 1,000,000 shares of common stock were reserved for
issuance. The 1984 Plan expired in October 1994. On January 25, 1994, RPC
adopted a new ten-year Employee Stock Incentive Plan (the "1994 Plan") under
which 1,000,000 shares of common stock were reserved for issuance. During 1997,
an additional 1,600,000 shares were reserved for issuance. These plans provide
for the issuance of various forms of stock incentives, including, among others,
incentive stock options and restricted stock. As of December 31, 1999, there
were 1,323,900 shares available for the granting of options or other awards
under the 1994 Plan.
Incentive Stock Options--Transactions involving the incentive stock option plans
were as follows:
Weighted
Average
Option Price Exercise
Shares (Per Share) Price
- ---------------------------------------------------------------------------------
Outstanding
12/31/96 554,292 $1.625-$4.438 $ 3.23
Granted 158,000 7.500 7.50
Canceled (5,232) 1.625-7.500 6.12
Exercised (264,260) 1.625-4.438 2.58
- ---------------------------------------------------------------------------------
Outstanding
12/31/97 442,800 3.000-7.500 5.11
Granted 218,000 12.750 12.75
Canceled (28,400) 3.063-12.750 4.44
Exercised (30,300) 3.063-7.500 3.63
- ---------------------------------------------------------------------------------
Outstanding
12/31/98 602,100 3.063-12.750 7.85
Granted 246,500 6.875 6.88
Exercised (65,200) 3.063-7.500 3.21
- ---------------------------------------------------------------------------------
Outstanding
12/31/99 783,400 $3.000-$12.750 $ 7.93
================================================================================
1999 1998 1997
- -----------------------------------------------------------------------------------
Exerciseable at December 31 232,600 210,660 151,120
Weighted average exercise price
of exerciseable options $ 6.51 $ 4.27 $ 3.51
Per share weighted average grant
date fair value of options
granted during the year $ 3.01 $ 5.20 $ 3.40
- -----------------------------------------------------------------------------------
The weighted average remaining contractual life of options outstanding at
December 31, 1999 was 7 years.
Restricted Stock--RPC has granted employees two forms of restricted stock:
performance restricted and time lapse. The performance restricted shares are
granted, but not earned and issued, until certain five-year tiered performance
criteria are met. The performance criteria are predetermined market prices of
the Company stock. On the date the stock appreciates to each level
(determination date), 20 percent of performance shares are earned. Once earned,
the performance shares vest five years from the determination date. Time lapse
shares vest ten years from the grant date. There were 90,000 units granted under
these restricted stock programs during 1999, 52,000 units granted during 1998
and 52,000 units granted during 1997. There were 7,600 performance shares
awarded under the plans in 1999. No shares were forfeited or canceled.
The agreements under which the restricted stock is issued provide that
shares awarded may not be sold or otherwise transferred until restrictions as
established under the Plan have lapsed. Upon termination of employment, shares
upon which restrictions have not lapsed must be returned to the Company. As of
December 31, 1999, none of the shares of restricted stock were vested.
Note 9: Business Segment Information
In June 1997, SFAS Number 131, "Disclosures about Segments of an
Enterprise and Related Information" was adopted. SFAS Number 131 establishes
standards for reporting information about operating segments in annual financial
statements and requires reporting selected information about operating segments
in interim financial reports issued to stockholders. SFAS Number 131 is
effective for fiscal years beginning after December 15, 1997. All prior years
have been restated to conform with current year presentation.
RPC has two reportable segments: oil and gas services and boat
manufacturing. The oil and gas services segment provides a variety of services,
equipment, and personnel to the oil and gas industry. The boat manufacturing
segment manufactures and sells powerboats to a nationwide network of independent
dealers.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. RPC evaluates performance
based on profit or loss from operations before income taxes. RPC accounts for
intersegment sales and transfers as if the sales or transfers were to third
parties, that is, at current market prices.
RPC's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Each of these
businesses was acquired as a business unit, and the management at the time of
acquisition was retained.
Certain information with respect to RPC's business segments is set
forth in the following table:
December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
(in thousands)
- --------------------------------------------------------------------------------
Revenue:
Oil and gas services $ 94,864 $ 123,949 $ 137,599
Boat manufacturing 122,878 103,497 95,029
Other 12,721 16,828 13,171
- --------------------------------------------------------------------------------
Total revenue $ 230,463 $ 244,274 $ 245,799
================================================================================
Operating income (loss):
Oil and gas services $ (284) $ 17,465 $ 26,264
Boat manufacturing 16,472 13,920 11,755
Other (817) (3,519) (3,212)
- --------------------------------------------------------------------------------
Total operating income 15,371 27,866 34,807
- --------------------------------------------------------------------------------
Corporate expenses (3,942) (4,043) (3,220)
Interest income 1,718 2,023 2,376
- --------------------------------------------------------------------------------
Income before
income taxes $ 13,147 $ 25,846 $ 33,963
================================================================================
Identifiable assets:
Oil and gas services $ 107,893 $ 89,891 $ 86,578
Boat manufacturing 30, 850 28,085 25,076
Other, including
corporate assets 51,832 62,715 70,864
- --------------------------------------------------------------------------------
Total identifiable assets $ 190,575 $ 180,691 $ 182,518
================================================================================
Revenue from international operations in the oil and gas services
segment totaled $11,523,000 in 1999, $9,822,000 in 1998, and $17,407,000 in
1997. The respective operating profits were $1,977,000 in 1999, $608,000 in
1998, and $2,720,000 in 1997. There were $10,385,000 in identifiable assets
attributable to these operations in 1998, $6,450,000 in 1998, and $9,987,000 in
1997. There were no material amounts of international operations in the boat
manufacturing segment.
Note 10: Unaudited Quarterly Data
Quarter First Second Third Fourth
- ----------------------------------------------------------------------------------
(in thousands except per share data)
- ----------------------------------------------------------------------------------
1999
Revenue $ 54,935 $ 59,978 $ 53,105 $ 62,445
Net income 1,229 2,904 1,400 2,618
Earnings per share
Basic .04 .10 .05 .09
Diluted .04 .10 .05 .09
1998
Revenue $ 66,940 $ 66,375 $ 56,977 $ 53,982
Net income 5,654 6,410 3,753 208
Earnings per share
Basic .19 .22 .13 .01
Diluted .19 .22 .13 .01
Note 11: Subsequent Events
Spin-offTransaction: On January 14, 2000, RPC announced it had taken
the initial steps to spin-off its 100% ownership in Chaparral Boats. The
transaction, expected to be completed during the third quarter of 2000, will be
structured as a tax-free distribution of Chaparral Boats stock to RPC
shareholders. The spin-off is subject to various approvals including a favorable
tax ruling from the Internal Revenue Service and final approval of RPC's Board
of Directors.
Gain on Settlement of Claim: In the first quarter of 2000, RPC will
record an after-tax gain of approximately $4,200,000, or $0.15 diluted earnings
per share, in its powerboat manufacturing business segment. The gain is a result
of Chaparral Boats' receipt, in the first quarter of 2000, of its share of a
non-refundable $35 million settlement payment made by Brunswick Corporation
(Brunswick), a major engine supplier, to the members of the American
Boatbuilders Association (ABA), a buying group which includes Chaparral Boats.
Under the terms of this agreement between the ABA and Brunswick, additional
payments will be made to ABA depending on the final judgment or settlement of a
lawsuit brought by Independent Boatbuilders Association (IBBI), another buying
group supplied engines by Brunswick. If Brunswick ultimately makes a payment to
IBBI in excess of $35 million in connection with a final judgment or settlement,
Brunswick will make an equal payment to ABA, less the $35 million already paid.
Chaparral Boats would be entitled to receive its share of any additional
payments, less expenses, in a similar proportion to the initial $35 million
payment.
PART III
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
This item is not applicable to RPC because there has been no change in
or disagreements with its independent public accountants.
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and executive officers is included in
the RPC Proxy for its 2000 Annual Meeting of Stockholders, in the sections
entitled "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." This information is incorporated herein by reference.
Information about executive officers is contained on page 9.
Item 11. Executive Compensation
Information concerning executive compensation is included in the RPC
Proxy for its 2000 Annual Meeting of Stockholders, in the section entitled
"Executive Compensation." This information is incorporated herein by reference.
Item 12. Security ownership of certain beneficial owners and management
Information concerning security ownership is included in the RPC Proxy
for its 2000 Annual Meeting of Stockholders, in the sections entitled "Capital
Stock" and "Election of Directors." This information is incorporated herein by
reference.
Item 13. Certain relationships and related transactions
Information concerning certain relationships and related transactions
is included in the RPC Proxy for its 2000 Annual Meeting of Stockholders, in the
sections entitled "Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation." This information
is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement schedules, and reports on Form 8-K
The following documents are filed as part of this report.
FINANCIAL STATEMENTS PAGE
Balance Sheets as of December 31, 1999 14
and 1998
Statements of Income for the three years ended 15
December 31, 1999
Statements of Stockholders' Equity for the three 15
years ended December 31, 1999
Statements of Cash Flows for the three years 16
ended December 31, 1999
Notes to Financial Statements 17-23
SCHEDULES
Schedule II--Valuation and Qualifying Accounts 25
EXHIBITS
Exhibit
Number Description
3.1 Restated certificate of incorporation of RPC, Inc.
3.2 Bylaws of RPC (incorporated herein by reference to Exhibit (3)(b) to
the Annual Report on form 10-K for the fiscal year ended December 31,
1993).
4 Form of Stock Certificate (incorporated herein by reference to the
Annual Report on form 10-K for the fiscal year ended December 31,
1998).
10.1 RPC's 1994 Employees Stock Incentive Plan (incorporated herein by
reference to Exhibit A of the definitive Proxy Statement dated March
20, 1994).
10.2 Compensation agreement with James Lane.
21 Subsidiaries of RPC.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney for Directors.
27 Financial Data Schedule (for Commission use only).
REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed by RPC for the quarter ended
December 31, 1999. Any schedules or exhibits not shown above have been omitted
because they are not applicable.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
- --------------------------------------------------------------------------------------
RPC, INC. AND SUBSIDIARIES (in thousands of dollars)
- --------------------------------------------------------------------------------------
For the years ended December 31, 1999, 1998, and 1997
- --------------------------------------------------------------------------------------
Balance at Charged to Balance at
Beginning Costs and Net End of
Description of Period Expenses Write-Offs Period
- --------------------------------------------------------------------------------------
Year ended December 31, 1999
Allowance for Doubtful Accounts $ 7,004 $ 123 $(2,468) $ 4,659
- --------------------------------------------------------------------------------------
Year ended December 31, 1998
Allowance for Doubtful Accounts $ 6,967 $ 1,675 $(1,638) $ 7,004
- --------------------------------------------------------------------------------------
Year ended December 31, 1997
Allowance for Doubtful Accounts $ 7,058 $ 137 $ (228) $ 6,967
- --------------------------------------------------------------------------------------
Report of Independent Public Accountants
To the Directors and Stockholders of RPC, Inc.:
We have audited the accompanying consolidated balance sheets of RPC,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements and schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of RPC, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14 is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Atlanta, Georgia Arthur Andersen LLP
March 10, 2000
Signatures
Pursuant to the requirements of Section 13 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.
By:
/s/ R. Randall Rollins
R. Randall Rollins
Chairman of the Board of Directors
(Principal Executive Officer)
March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
/s/ R. Randall Rollins /s/ Ben M. Palmer
R. Randall Rollins Ben M. Palmer
Chairman of The Board of Directors Chief Financial Officer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
March 24, 2000 March 24, 2000
The Directors of RPC, Inc. (listed below) executed a power of attorney
appointing Richard A. Hubbell their attorney-in-fact, empowering him to sign
this report on their behalf.
James A. Lane, Jr., Director
Wilton Looney, Director
Gary W. Rollins, Director
John W. Rollins, Director
Henry B. Tippie, Director
James B. Williams, Director
/s/ Richard A. Hubbell
Richard A. Hubbell
Director and as Attorney-in-fact
March 24, 2000
Officers and Directors
OFFICERS
R. Randall Rollins
Chairman of the Board
and Chief Executive Officer
Richard A. Hubbell
President and Chief
Operating Officer
James A. Lane, Jr.
Executive Vice President
Jonathan W. Moss
Executive Vice President
Linda H. Graham
Vice President and Secretary
Ben M. Palmer
Vice President, Chief
Financial Officer
and Treasurer
DIRECTORS
R. Randall Rollins
Chairman of the Board and
Chief Executive Officer,
Rollins, Inc. (consumer services)
Henry B. Tippie*+
Chairman of the Board and
Chief Executive Officer,
Tippie Services, Inc.
(management services)
Wilton Looney*
Honorary Chairman of the
Board, Genuine Parts Company
(automotive parts distributor)
John W. Rollins
Chairman of the Board
Rollins Truck Leasing Corp.
(vehicle leasing and transportation),
and Chairman of the Board,
Dover Downs Entertainment, Inc.
(entertainment complex)
James B. Williams*
Chairman of the Executive
Committee, SunTrust Banks, Inc.
(bank holding company)
Gary W. Rollins
President and Chief Operating
Officer, Rollins, Inc. (consumer
services)
Richard A. Hubbell
James A. Lane, Jr.
* Member of the Audit
Committee and Executive
Compensation Committee
+ Chairman of the Audit
Committee and Executive
Compensation Committee
STOCKHOLDER INFORMATION
CORPORATE OFFICES
RPC, Inc.
2170 Piedmont Road, NE
Atlanta, Georgia 30324
Telephone: (404) 321-2140
STOCK LISTING
The New York Stock Exchange
TICKER SYMBOL--RES
NEWSPAPER STOCK TABLE--RPC
INVESTOR RELATIONS WEB-SITE
www.rpc.net
TRANSFER AGENT AND REGISTRAR
For inquiries related to stock certificates,
including changes of address, please contact:
SunTrust Bank, Atlanta
Stock Transfer Department
PO Box 4625
Atlanta, GA 30302
Telephone: (404) 588-7817
ANNUAL MEETING
The Annual Meeting of RPC will be held at
9:00 am, April 25, 2000, at the corporate
offices in Atlanta, Georgia.
RPC
INCORPORATED
2170 Piedmont Road, NE
Atlanta, Georgia 30324
MARCH 17, 2000
RPC, INC.
EXHIBITS INDEX
EXHIBIT NUMBER DESCRIPTION
3.1 RESTATED CERTIFICATE OF
INCORPORATION OF RPC, INC.
3.2 BYLAWS OF RPC (INCORPORATED
HEREIN BY REFERENCE TO EXHIBIT
(3)(B) TO THE ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1993).
4 FORM OF STOCK CERTIFICATE
(INCORPORATED HEREIN BY
REFERENCE TO THE ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1998).
10.1 RPC'S 1994 EMPLOYEES STOCK
INCENTIVE PLAN (INCORPORATED
HEREIN BY REFERENCE TO EXHIBIT
A OF THE DEFINITIVE PROXY
STATEMENT DATED MARCH 20,
1994).
10.2 COMPENSATION AGREEMENT WITH
JAMES LANE.
21 SUBSIDIARIES OF RPC
23 CONSENT OF ARTHUR ANDERSEN LLP.
24 POWERS OF ATTORNEY FOR DIRECTORS.
27 FINANCIAL DATA SCHEDULE (FOR
COMMISSION USE ONLY).