UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-8726
RPC, INC.
(exact name of registrant as specified in its charter)
DELAWARE 58-1550825
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2170 PIEDMONT ROAD, NE, ATLANTA, GEORGIA 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (404) 321-2140
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of March 31, 1999, RPC, Inc. had 28,546,050 shares of common stock
outstanding.
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RPC, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999, AND DECEMBER 31, 1998
(In thousands)
MARCH 31, December 31,
1999 1998
(UNAUDITED) (Audited)
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ASSETS
Cash and cash equivalents $ 10,345 $ 10,029
Marketable securities 5,032 3,414
Accounts receivable, net of allowance for doubtful
accounts of $7,742 and $7,004, respectively 23,809 25,266
Inventories, at lower of cost or market 17,249 17,446
Deferred income taxes 10,423 10,787
Federal income taxes receivable 1,200 3,673
Prepaid expenses and other current assets 2,005 1,909
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Current assets 70,063 72,524
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Equipment and property, net 68,315 70,206
Marketable securities 32,510 29,507
Intangible assets, net 7,198 7,401
Other assets 1,051 1,053
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TOTAL ASSETS $179,137 $180,691
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 7,412 $ 5,859
Accrued payroll and related expenses 4,720 4,192
Accrued insurance expenses 5,255 6,329
Accrued state, local and other taxes 3,595 4,063
Accrued discounts 1,555 1,053
Current portion of long-term debt 604 659
Other accrued expenses 9,717 10,270
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Current liabilities 32,858 32,425
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Long-term accrued insurance expenses 3,545 3,308
Long-term debt 390 636
Deferred income taxes 1,556 1,256
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Total liabilities 38,349 37,625
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Commitments and contingencies
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Common stock 2,855 2,888
Capital in excess of par value 24,145 26,538
Earnings retained 113,788 113,640
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Total stockholders' equity 140,788 143,066
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $179,137 $180,691
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The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three months ended March 31,
--------------------------------
1999 1998
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REVENUE $ 54,935 $ 66,940
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Cost of goods sold 25,911 23,121
Operating expenses 23,363 31,570
Depreciation and amortization 4,044 3,620
Interest income (366) (489)
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Income before income taxes 1,983 9,118
Income tax provision 754 3,464
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NET INCOME $ 1,229 $ 5,654
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EARNINGS PER SHARE
Basic $ 0.04 $ 0.19
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Diluted $ 0.04 $ 0.19
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AVERAGE SHARES OUTSTANDING
Basic 28,331 29,230
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Diluted 28,532 29,630
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The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended March 31,
-----------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES $ 10,371 $ 9,671
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,282) (5,775)
Proceeds from sale of equipment and property 728 594
Net (purchase) sale of marketable securities (4,621) (8,874)
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Net cash used for investing activities (6,175) (14,055)
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CASH FLOWS FROM FINANCING ACTIVITIES
Dividend distributions (1,005) (1,037)
Repayments of long term debt (301) (571)
Purchase of treasury stock (2,625) (968)
Proceeds from exercise of stock options 51 41
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Net cash (used for) provided by financing activities (3,880) (2,535)
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Net increase (decrease) in cash and cash equivalents 316 (6,919)
Cash and cash equivalents at beginning of period 10,029 17,409
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Cash and cash equivalents at end of period $ 10,345 $ 10,490
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The accompanying notes are an integral part of these statements.
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with
the financial statements and related notes contained in the
Company's annual report on Form 10-K for the fiscal year ended
December 31, 1998.
In the opinion of management, the consolidated financial statements
included herein contain all adjustments necessary to present fairly
the financial position of the Company as of March 31, 1999, and the
results of operations and the cash flows for the three months then
ended.
2. Basic and diluted earnings per share are computed by dividing net
income by the respective weighted average number of shares
outstanding during the respective periods.
3. The results of operations for the quarter ended March 31, 1999, are
not necessarily indicative of the results to be expected for the full
year.
4. In June, 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), which
establishes standards for reporting and disclosing information about
derivative instruments. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The adoption of SFAS No. 133 is not
expected to have a material impact.
5. RPC has two reportable segments: oil and gas services and boat
manufacturing. The oil and gas services segment provides a variety
of services, equipment, and personnel to the oil and gas industry.
The boat manufacturing segment manufactures and sells powerboats to
a nationwide network of independent dealers.
RPC evaluates performance based on profit or loss from operations
before income taxes. RPC accounts for intersegment sales and
transfers as if the sales or
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
transfers were to third parties, that is, at current market prices.
RPC's reportable segments are strategic business units that offer
different products and services. They are managed separately because
each business requires different technology and marketing
strategies. All of these businesses were acquired as a unit, and the
management at the time of acquisition was retained.
Certain information with respect to RPC's business segments is set
forth in the following table:
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March 31, 1999 1998
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(IN THOUSANDS)
REVENUE:
Oil and gas services $ 20,512 $ 35,891
Boat manufacturing 31,233 26,487
Other 3,190 4,562
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Total revenue $ 54,935 $ 66,940
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OPERATING INCOME(LOSS):
Oil and gas services ($ 1,839) $ 6,254
Boat manufacturing 4,294 3,610
Other 129 (148)
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Total operating income $ 2,584 $ 9,716
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Corporate expenses (967) (1,087)
Interest income 366 489
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Income before income taxes $ 1,983 $ 9,118
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The identifiable assets for the powerboat manufacturing segment increased by
$2,442,000 from $28,085,000 at December 31, 1998 to $30,527,000 at March 31,
1999. The identifiable assets for the oil and gas segment decreased by
$5,348,000 from $89,891,000 at December 31, 1998 to $84,543,000 at March 31,
1999.
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RPC, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenue for the first quarter ended March 31, 1999, was $54,935,000 compared
with $66,940,000 for the quarter ended March 31, 1998. Revenue for the
quarter ended March 31, 1999, decreased $12,005,000 or 18% from the same
period one year ago. The oil and gas services segment revenue of $20,512,000
decreased 43% from last year's first quarter. This decrease was due to a slow
down in drilling activity. Oil and natural gas prices have decreased 8% and
22%, respectively, as compared to the first quarter of 1998. The average US
rig count has also declined 43% versus last year's first quarter. The
powerboat manufacturing segment revenue for the quarter ended March 31, 1999,
of $31,233,000 increased 18% from last year's first quarter of $26,487,000
which is attributed to an increase in the volume of boats sold coupled with
an increase in the average sales price versus the prior year. The increase in
the average sales price is the result of a price increase and an increase in
the number of larger boats sold versus prior year.
Cost of goods sold for the first quarter ended March 31, 1999, was
$25,911,000 compared to $23,121,000 for the first quarter ended March 31,
1998, an increase of $2,790,000 or 12%. This increase is somewhat less than
the increase in sales due to a change in product mix with a greater
percentage of larger, higher margin boats being sold.
Net income for the quarter ended March 31, 1999, was $1,229,000 or $0.04
diluted earnings per share versus net income of $5,654,000 or $0.19 diluted
earnings per share for the quarter ended March 31, 1998. Basic earnings per
share was the same as diluted earnings per share at $0.04 cents per share
versus $0.19 cents per share last year. The decrease in earnings from the
same period one year ago was due to the decreased revenues coupled with
decreased profit margins for the oil and gas services segment offset to some
extent by the increase in revenues and profit margins for the powerboat
manufacturing segment.
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RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
FINANCIAL CONDITION
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The Company's current ratio remained strong as of March 31, 1999, with
current assets of $70,063,000 exceeding current liabilities of $32,858,000 by
a ratio of 2.1-to-1. This compares to a current ratio of 2.2-to-1 at December
31, 1998.
Capital expenditures during the first three months of 1999 totaling $2,282,000
were primarily for revenue-producing equipment in the oil and gas services
segment. The remainder was spent on various purchases for the other business
segments. Funding for future capital requirements is expected to be provided
from operations.
Year 2000 Issue
- ---------------
The Company began its assessment and remediation processes related to the
Year 2000 (Y2K) information technology programming issue in 1997. RPC's
assessment activities have included (1) identifying all software and
operating systems -both information technology (IT) and non-IT systems with
embedded technology, which are critical to operations and/or financial
reporting, (2) testing of such software and systems for Y2K compliance, and
(3) obtaining assurances from its vendors and its large commercial customers.
RPC's remediation activities have included replacing certain software and
operating systems, followed by testing to ensure the Y2K compliance of the
replacements.
Based on its assessment and remediation activities to date, RPC believes that
its critical internal software and operating systems are Y2K compliant with
the exception of a subsidiary billing system. The total cost of Y2K
expenditures to date have not been material. The remaining Y2K remediation
costs are anticipated to be less than $50,000.
Based on assurances from the majority of its vendors and large commercial
customers to date, RPC does not anticipate any material Y2K impact on its
operations or financial reporting at this time. RPC believes that the worst
case scenario will be temporary delays in billing and collection of customer
receivables. RPC expects to have contingency plans in place by the end of
1999 that address any potential Y2K issues.
Forward-Looking Statements
- --------------------------
Management's discussion and analysis of results of operations and financial
condition include "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), Section
21E of the Securities Exchange
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RPC, INC. AND SUBSIDIARIES
ITEM 2. CONT'D
Act of 1934, as amended (the "Exchange Act") and the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included or incorporated by reference which address
activities, events or developments which the Company expects or anticipates
will or may occur in the future, including statements regarding the impact of
the year 2000 programming issue, funding of future capital requirements,
potential exposure to market risk, and anticipated trends and similar
expressions concerning matters that are not historical facts, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results and developments will conform
with the Company's expectations are influenced by a number of factors,
including economic conditions, conditions in the industries in which the
Company operates, competition, and other factors, many of which are beyond
the control of the Company. Consequently, all of the forward-looking
statements made are qualified by these cautionary statements and there can be
no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on the Company or its business
or operations. The Company assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RPC maintains an investment portfolio, comprised of U.S. Government and
corporate debt securities, which is subject to interest rate risk exposure.
This risk is managed through conservative policies to invest in high-quality
obligations. RPC has performed an interest rate sensitivity analysis using a
duration model over the near term with a 10 percent change in interest rates.
RPC's portfolio is not subject to material interest rate risk exposure based
on this analysis. RPC does not expect any material changes in market risk
exposures or how those risks are managed.
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RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
3(i)(a) RPC's Certificate of Incorporation
is incorporated herein by reference
to Exhibit (3)(1)(a) to the 1998
Third Quarter Form 10-Q.
3(i)(b) RPC's Certificate of Amendment of
the Certificate of Incorporation is
incorporated herein by reference to
Exhibit (3)(1)(b) to the 1998 Third
Quarter Form 10-Q.
3(ii) By-laws of RPC
4 RPC's Form of Stock Certificate is
incorporated herein by reference to
the 1998 Form 10-K.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed
during the quarter ended March 31, 1999.
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SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RPC, INC.
/s/ RICHARD A. HUBBELL
---------------------------------------
Date: May 14, 1999 Richard A. Hubbell
President and Chief Operating Officer
/s/ BEN M. PALMER
---------------------------------------
Date: May 14, 1999 Ben M. Palmer
Treasurer and Chief Financial Officer
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