UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
[ ] 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)
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2170 PIEDMONT ROAD, NE, ATLANTA, GEORGIA 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (404) 321-2140
As of October 15, 2004, RPC, Inc. had 28,767,537 shares of common stock outstanding.
RPC, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -
As of September 30, 2004 and December 31, 2003 3
Consolidated statements of operations -
For the three months and nine months ended September 30, 2004 and 2003 4
Consolidated statements of cash flows -
For the nine months ended September 30, 2004 and 2003 5
Notes to consolidated financial statements 6 - 11
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 23
Item 4. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Unregistered sales of equity securities and use of proceeds 25
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits 27
SIGNATURES 28
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RPC, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(In thousands)
(Unaudited)
SEPTEMBER 30, December 31,
2004 2003
----------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 16,101 $ 22,302
Accounts receivable, net 73,403 53,719
Inventories 10,161 10,057
Deferred income taxes 5,905 6,394
Income taxes receivable 4,047 4,149
Prepaid expenses and other current assets 1,370 3,614
----------------------------------------------------------------------------------------------------
Total current assets 110,987 100,235
Property, plant and equipment, net 117,039 109,163
Intangibles, net 15,932 15,488
Other assets 2,415 1,864
----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 246,373 $ 226,750
====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 21,846 $ 19,603
Accrued payroll and related expenses 9,447 8,526
Accrued insurance expenses 4,041 2,852
Accrued state, local and other taxes 1,721 1,549
Current portion of long-term debt 2,700 1,110
Other accrued expenses 708 3,369
----------------------------------------------------------------------------------------------------
Total current liabilities 40,463 37,009
Accrued insurance expenses 6,458 5,856
Long-term debt 2,100 4,800
Pension liabilities 10,013 12,972
Deferred income taxes 13,638 13,296
Other long-term liabilities 2,610 1,711
----------------------------------------------------------------------------------------------------
Total liabilities 75,282 75,644
----------------------------------------------------------------------------------------------------
Common stock 2,876 2,862
Capital in excess of par value 28,348 26,796
Retained earnings 149,778 128,824
Deferred compensation (3,643) (1,076)
Accumulated other comprehensive loss (6,268) (6,300)
----------------------------------------------------------------------------------------------------
Total stockholders' equity 171,091 151,106
----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 246,373 $ 226,750
====================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(In thousands except per share data)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
-------------------------------------- ------------------------------------
2004 2003 2004 2003
------------------------------------------------------------------------------------------- ------------------------------------
REVENUES $ 88,721 $ 69,244 $ 254,149 $ 200,808
Cost of services rendered and goods sold 50,233 43,482 146,529 125,798
Selling, general and administrative expenses 16,921 13,438 48,213 38,599
Depreciation and amortization 8,596 8,387 25,736 24,784
------------------------------------------------------------------------------------------- ------------------------------------
Operating profit 12,971 3,937 33,671 11,627
Interest expense, net 17 45 75 137
Other income, net 1,555 264 2,324 747
------------------------------------------------------------------------------------------- ------------------------------------
Income before income taxes 14,509 4,156 35,920 12,237
Income tax provision 4,272 1,579 12,408 4,650
------------------------------------------------------------------------------------------- ------------------------------------
NET INCOME $ 10,237 $ 2,577 $ 23,512 $ 7,587
=========================================================================================== ====================================
EARNINGS PER SHARE
Basic $ 0.36 $ 0.09 $ 0.83 $ 0.27
================ ================ ================ ================
Diluted $ 0.35 $ 0.09 $ 0.82 $ 0.26
================ ================ ================ ================
DIVIDENDS PER SHARE $ 0.030 $ 0.025 $ 0.090 $ 0.075
================ ================ ================ ================
AVERAGE SHARES OUTSTANDING
Basic 28,321 28,446 28,296 28,380
================ ================ ================ ================
Diluted 28,914 28,877 28,792 28,794
================ ================ ================ ================
The accompanying notes are an integral part of these consolidated financial statements.
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RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(In thousands)
(Unaudited)
Nine months ended September 30,
---------------------------------------
2004 2003
------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
NET INCOME $ 23,512 $ 7,587
Noncash charges (credits) to earnings:
Depreciation, amortization and other non-cash charges 26,074 24,857
(Gain) loss on sale of property and equipment (2,195) 297
Deferred income tax provision (benefit) 812 (168)
(Increase) decrease in assets:
Accounts receivable (19,684) (8,419)
Income taxes receivable 267 5,824
Inventories (104) 64
Prepaid expenses and other current assets 2,276 1,625
Other non-current assets (532) 173
Increase (decrease) in liabilities:
Accounts payable 2,243 3,326
Accrued payroll and related expenses 921 257
Pension liabilities (2,959) 1,457
Accrued insurance expenses 1,791 1,724
Accrued state, local and other expenses 172 (159)
Other accrued expenses 174 (986)
Other non-current liabilities 899 1,021
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Net cash provided by operating activities 33,667 38,480
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INVESTING ACTIVITIES
Capital expenditures (36,594) (20,711)
Purchase of businesses (3,310) (6,211)
Proceeds from sale of property and equipment 5,244 1,328
------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (34,660) (25,594)
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FINANCING ACTIVITIES
Payment of dividends (2,558) (2,155)
Payments on debt (1,110) (552)
Cash paid for common stock purchased and retired (1,963) (836)
Proceeds received upon exercise of stock options 423 96
------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (5,208) (3,447)
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Net (decrease) increase in cash and cash equivalents (6,201) 9,439
Cash and cash equivalents at beginning of period 22,302 11,533
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 16,101 $ 20,972
==============================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited condensed consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries ("RPC" or the "Company") and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months period ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2003.
2. EARNINGS PER SHARE
Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. A reconciliation of the weighted average shares outstanding is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
(In thousands) SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Basic 28,321 28,446 28,296 28,380
Dilutive effect of stock options and
restricted shares 593 431 496 414
----------------------------------------------------------------
Diluted 28,914 28,877 28,792 28,794
================================================================
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities." The Interpretation requires that a variable interest entity, as defined, be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. The Company does not have any agreements in place that are subject to the Interpretation's provisions. As a result, the Company's adoption of the Interpretation did not have an impact on the financial position, results of operations or liquidity of the Company.
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." EITF 03-1 applies to investments accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and SFAS No. 124, "Accounting for Certain Investments Held by Not-for-Profit Organizations." EITF 03-1 provides a basic three-step model to evaluate whether the impairment is other than temporary. This model for evaluating impairment must be applied to all current and prospective investments beginning in the second quarter of 2004. Qualitative and quantitative disclosures are effective for the fiscal year ending December 31, 2004. The adoption of EITF 03-1 did not have a material impact on the financial position, results of operations or liquidity of the Company.
4. COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
(In thousands) SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2004 2003 2004 2003
---- ---- ---- ----
Net income as reported $ 10,237 $ 2,577 $ 23,512 $ 7,587
Change in unrealized gain on
marketable securities, net of
taxes 38 (12) 31 (37)
--------------------------------------------------------------
Comprehensive income $ 10,275 $ 2,565 $ 23,543 $ 7,550
==============================================================
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. STOCK-BASED COMPENSATION
RPC accounts for its stock incentive plan using the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has computed for pro forma disclosure purposes the value of all options granted during the nine months ended September 30, 2004 and 2003 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 "Accounting for Stock-Based Compensation. If RPC had accounted for the stock incentive plans in accordance with SFAS No.123, RPC's reported net income and net income per share would have been as follows:
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
---- ---- ---- ----
(IN THOUSANDS)
NET INCOME - AS REPORTED $ 10,237 $ 2,577 $ 23,512 $ 7,587
ADD: STOCK-BASED EMPLOYEE
COMPENSATION COST,
INCLUDED IN REPORTED NET
INCOME, NET OF RELATED TAX
EFFECT 113 38 239 113
DEDUCT: STOCK-BASED EMPLOYEE
COMPENSATION COST,
COMPUTED USING THE BLACK
SCHOLES OPTION PRICING
MODEL, FOR ALL AWARDS, NET
OF RELATED TAX EFFECT 42 (240) (467) (719)
--------------------------------------------------------------------------------------------------------------------
PRO FORMA NET INCOME $ 10,392 $ 2,375 $ 23,284 $ 6,981
====================================================================================================================
EARNINGS PER SHARE, AS REPORTED
BASIC $ 0.36 $ 0.09 $ 0.83 $ 0.27
DILUTED 0.35 0.09 0.82 0.26
PRO FORMA EARNINGS PER SHARE
BASIC $ 0.37 $ 0.08 $ 0.82 $ 0.25
DILUTED 0.36 0.08 0.81 0.24
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The stock-based employee compensation for the three months ended September 30, 2004 reflects a cumulative reduction in expense for grants outstanding resulting from a change in the estimated forfeiture rate.
6. BUSINESS SEGMENT INFORMATION
RPC has two reportable segments: Technical Services and Support Services. Technical Services includes RPC's oil and gas service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer's well. These services are generally directed toward improving the flow of oil and natural gas from producing formations or to address well control issues. The Technical Services business segment consists primarily of pressure pumping, snubbing, coiled tubing, nitrogen, wire line, well control, downhole tools, surface production equipment, casing installation services and fishing tool operations. The principal markets for this business segment include the United States, including the Gulf of Mexico, mid-continent, southwest and Rocky Mountain regions, and selected international locations. Customers include major multi-national and independent oil and gas producers, and selected nationally owned oil companies. Support Services includes RPC's oilfield service lines that primarily provide equipment for customer use or services to assist customer operations. The equipment and services include rental of drill pipe and related tools, pipe handling, inspection and storage services, work platform vessels, and oilfield training services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, Gulf of Mexico and mid-continent regions. Customers include domestic operations of major multi-national and independent oil and gas producers.
RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain information with respect to RPC's business segments is set forth in the following table:
Three months ended September 30, Nine months ended September 30,
------------------------------------------ ------------------------------------------
2004 2003 2004 2003
------------------------------------------ ------------------------------------------
(IN THOUSANDS)
REVENUES:
Technical Services $ 73,404 $ 53,603 $ 209,523 $ 159,494
Support Services 15,302 13,125 40,848 33,493
Other 15 2,516 3,778 7,821
----------------------------------- ------------------- ------------------- ------------------- -------------------
Total revenues $ 88,721 $ 69,244 $ 254,149 $ 200,808
OPERATING PROFIT (LOSS):
Technical Services $ 13,024 $ 3,969 $ 35,706 $ 15,154
Support Services 2,378 2,376 4,629 3,073
Other (382) (419) (803) (1,200)
Corporate (2,049) (1,989) (5,861) (5,400)
----------------------------------- ------------------- ------------------- ------------------- -------------------
Total operating profit $ 12,971 $ 3,937 $ 33,671 $ 11,627
Interest expense, net 17 45 75 137
Other income, net 1,555 264 2,324 747
----------------------------------- ------------------- ------------------- ------------------- -------------------
Income before income taxes $ 14,509 $ 4,156 $ 35,920 $ 12,237
=================================== =================== =================== ==================== ===================
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At the end of April 2004, RPC sold one of the company's non-oilfield businesses, which was previously reported in the Other segment. This sale generated approximately $4 million in cash. The impact of the sale of this business unit on consolidated operating and other income was immaterial.
7. INVENTORIES
Inventories consist of the following:
SEPTEMBER 30, December 31,
2004 2003
----------------------------------------------------------------------------------------------
(IN THOUSANDS)
Raw materials and supplies $ 10,161 $ 8,251
Work in process - 317
Finished goods - 1,489
----------------------------------------------------------------------------------------------
Total inventories $ 10,161 $ 10,057
==============================================================================================
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RPC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. EMPLOYEE BENEFIT PLAN
The following represents the net periodic defined benefit cost and related components of the Company's pension plan.
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
----------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
Service cost $ - $ - $ - $ -
Interest cost 437 484 1,311 1,453
Expected return on plan assets (361) (341) (1,083) (1,022)
Amortization of unrecognized net
(gains) and losses 231 257 692 770
----------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 307 $ 400 $ 920 $ 1,201
================================================================================================================
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As of September 30, 2004, the Company has contributed approximately $4,200,000 to the pension plan. The Company does not currently expect to make any additional contributions to the defined benefit plan in 2004.
9. INCOME TAXES
The Company determines its periodic income tax expense based upon the current period income and the estimated annual effective tax rate for the Company. The rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the Company's best current estimate of its annual effective tax rate.
The Company has filed amended federal and state tax returns for the years 1999, 2000 and 2001 to claim higher deductions for certain expenses and additional foreign tax credits representing potential tax benefits totaling up to approximately $3.5 million. These returns are currently being reviewed by the Internal Revenue Service before going to Joint Committee. There is significant uncertainty surrounding the amount and timing of the tax benefits that will be ultimately realized. The Company believes it has supportable positions for claiming these deductions and credits, but the amounts are subject to Joint Committee approval. Accordingly, the Company has not reflected these potential tax benefits in its financial statements. No tax benefits will be recognized in the financial statements until these gain contingencies are resolved through the eventual disposition with the respective tax authorities.
RPC, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
RPC provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest and Rocky Mountain regions, and selected international locations. RPC's business is affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers' drilling and production activities. The Company's revenues are earned by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. RPC's management is presently focused on opportunities to increase its revenues and earnings through expansion in the Middle East and selected domestic markets and to increase the prices it charges for its services. The Company's management also continues to monitor factors that impact the level of current and expected customer activities, such as the price of oil and natural gas, among other factors.
CRITICAL ACCOUNTING POLICIES
The discussion on Critical Accounting Polices is incorporated herein by reference from the Company's annual report on Form 10-K for the fiscal year ended December 31, 2003. There have been no significant changes in the critical accounting policies since year-end.
GENERAL
The Company's operations are influenced by U.S. domestic oil and natural gas well drilling, which relates to new wells, and production activity, which relates to existing wells. Factors within the drilling and production industry that impact the Company's business include the geographic location of wells, the conditions under which they are drilled, and the production enhancement services which they require. The Technical Services segment provides completion, production, and maintenance services to a customer's well. The demand for these services is more influenced by production activities than drilling activities; however, production activity typically increases at the same time drilling activity increases. The Support Services segment primarily provides equipment for customer operations, and the demand for these services tends to depend more on drilling activities than production activities. Drilling activity is influenced by the price of oil and natural gas. We believe that our activity levels are affected more by natural gas prices than oil prices, due to the nature of our services and our current geographic concentration in the domestic U.S. market. The prices of oil and natural gas are influenced by a wide variety of factors
RPC, INC. AND SUBSIDIARIES
and can be very volatile. This volatility can cause a great deal of fluctuation in the Company's revenues, profitability, and cash flow.
Although the Company has historically generated revenues internationally, the majority of revenues generated during the nine months ended September 30, 2004 were from the U.S. domestic oilfields. Domestic drilling activity, as measured by the weekly active rig count, reached its most recent cyclical peak in July 2001 with 1,293 active oil and gas rigs in operation. Activity began to decline in the third and fourth quarter of 2001 due to decreased demand and high natural gas storage levels. This depressed rig count continued in early 2002 and reached a weekly low of 738 during the third quarter of 2002. The average weekly rig count for the nine months ended September 30, 2004 was 1,170, which was 16.7 percent higher than the average weekly rig count during the nine months ended September 30, 2003. The Company believes that the rig count has stabilized for the near term, but is susceptible to further fluctuation based on the strength and timing of the economic recovery, near term weather conditions in the United States, the actions of the OPEC cartel, the supply of oil and natural gas in the United States, and the prospect of continued tensions in the oil-producing countries of the Middle East.
RPC, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ------------------------------
2004 2003 2004 2003
-----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REVENUES [IN THOUSANDS] $ 88,721 $ 69,244 $ 254,149 $ 200,808
REVENUES BY BUSINESS SEGMENT [IN THOUSANDS]:
TECHNICAL $ 73,404 $ 53,603 $ 209,523 $ 159,494
SUPPORT 15,302 13,125 40,848 33,493
OTHER 15 2,516 3,778 7,821
CONSOLIDATED OPERATING PROFIT [IN THOUSANDS] $ 12,971 $ 3,937 $ 33,671 $ 11,627
OPERATING PROFIT (LOSS) BY BUSINESS SEGMENT [IN THOUSANDS]:
TECHNICAL $ 13,024 $ 3,969 $ 35,706 $ 15,154
SUPPORT 2,378 2,376 4,629 3,073
OTHER (382) (419) (803) (1,200)
CORPORATE $ (2,049) $ (1,989) $ (5,861) $ (5,400)
PERCENTAGE COST OF SERVICES RENDERED & GOODS SOLD TO
REVENUES 56.6% 62.8% 57.7% 62.6%
PERCENTAGE SELLING, GENERAL & ADMINISTRATIVE EXPENSES TO
REVENUES 19.1% 19.4% 19.0% 19.2%
PERCENTAGE DEPRECIATION AND AMORTIZATION EXPENSE TO
REVENUES 9.7% 12.1% 10.1% 12.3%
AVERAGE U.S. DOMESTIC RIG COUNT 1,228 1,088 1,170 1,003
AVERAGE NATURAL GAS PRICE (PER THOUSAND CUBIC FEET (MCF)) $ 5.45 $ 4.82 $ 5.73 $ 5.51
AVERAGE OIL PRICE (PER BARREL) $ 43.66 $ 30.43 $ 39.03 $ 31.20
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THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2003
REVENUES for the three months ended September 30, 2004 increased $19,477,000 or 28.1 percent compared to the three months ended September 30, 2003. The Technical Services segment revenues increased 36.9 percent from last year's third quarter revenues. Revenues in this segment increased compared to prior year due to higher overall customer activity levels and higher pricing levels in most of our service lines. The Support Services segment revenues for the quarter ended September 30, 2004 increased 16.6 percent from last year's third quarter revenues. This increase was due to significantly higher utilization and slightly higher pricing in rental tools, which is the largest service line within this segment, offset by lower utilization and pricing of marine liftboats.
Domestic revenues increased during the quarter due to higher customer drilling and production activity. The average domestic rig count during the third quarter was 12.9
RPC, INC. AND SUBSIDIARIES
percent higher than the same period in 2003. Our consolidated revenues grew at a higher rate than the overall domestic rig count, principally because of the effect of strong activity in our West African operations, and our new operations in Kuwait and a new fishing tool service line, which began in the first quarter of 2004. These increases were partially offset by continued weakness in the Gulf of Mexico market and the sale of one of our non-oilfield businesses, which occurred at the end of April 2004. During the third quarter, there was a series of strong hurricanes in the Gulf of Mexico, which severely curtailed oilfield drilling and production activity in that market. We estimate that our third quarter 2004 revenues were negatively impacted by these hurricanes in the range of three to five percent, and our bottom line earnings per share were negatively impacted in the range of five to 10 percent. However, we believe that the eventual recovery of activity in the Gulf of Mexico will provide temporary opportunities for us as our customers repair and enhance production in wells damaged by the storms. At the end of the quarter, the Gulf of Mexico rig count was 119 or 4.8 percent lower than at the same time during the prior year. In addition, the average price of natural gas increased by 13.1 percent during the period as compared to the prior year. We believe that our activity levels are affected more by natural gas prices than by the price of oil. International revenues increased significantly during the three months ended September 30, 2004 as compared to the prior year due to our new operations in Kuwait which commenced in the first quarter of 2004; however, international revenues remain a small percentage of total revenues.
COST OF SERVICES RENDERED AND GOODS SOLD for the three months ended September 30, 2004 was $50,233,000 compared to $43,482,000 for the three months ended September 30, 2003, an increase of $6,751,000 or 15.5 percent. This increase was due to higher activity levels, which resulted in increased direct employment costs and increases in variable operational expenses such as maintenance and repairs, materials and supplies, sub-rental expense and fuel. Cost of services rendered and goods sold, as a percent of revenues, decreased from the third quarter of 2003 compared to the third quarter of 2004 as a result of increased revenues and the related improved operating leverage due to overall higher utilization of personnel and operating equipment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended September 30, 2004 were $16,921,000 compared to $13,438,000 for the three months ended September 30, 2003, an increase of $3,483,000 or 25.9 percent. These expenses increased primarily due to an increase in bad debt expense and higher employment costs mainly as a result of an increase in number of employees and higher incentive compensation expenses consistent with improved operating results. Selling, general and administrative expenses as a percent of revenues decreased slightly from the third quarter of 2003 compared to the third quarter of 2004.
DEPRECIATION AND AMORTIZATION were $8,596,000 for the three months ended September 30, 2004, an increase of $209,000 or 2.5 percent compared to $8,387,000 for the quarter ended September 30, 2003. This increase in depreciation and amortization resulted from
RPC, INC. AND SUBSIDIARIES
various capital expenditures during the previous twelve months within Support Services and Technical Services.
OPERATING PROFIT for the three months ended September 30, 2004 increased $9,034,000 or 229.5 percent compared to the three months ended September 30, 2003. This improvement was the result of increased revenues because of higher customer activity levels, partially offset by the increases in costs of services rendered and goods sold, selling, general and administrative expenses, and depreciation and amortization, as discussed above.
OTHER INCOME, NET for the three months ended September 30, 2004 was $1,555,000, an increase of $1,291,000 compared to $264,000 for the three months ended September 30, 2003. For the three months ended September 30, 2004 and 2003, other income, net primarily reflects net gains and losses related to the sale of property and operating equipment.
INTEREST EXPENSE, NET was $17,000 for the three months ended September 30, 2004 compared to $45,000 for the quarter ended September 30, 2003. The decrease in interest expense, net resulted primarily from the reduction in outstanding debt through annual principal payments made in the first and second quarters of 2004, and small increases in interest income in the current quarter compared to the prior year. RPC generates interest income from investment of its available cash primarily in highly liquid investments with original maturities of three months or less.
INCOME TAX PROVISION was $4,272,000 during the three months ended September 30, 2004, compared to $1,579,000 in 2003. This increase was due to the increase in operating profit during the period. During the third quarter of 2004, the effective tax rate was 29.4 percent for the quarter compared to 38.0 percent in the prior year. The decrease in the effective tax rate was due to higher anticipated foreign tax credit utilization this year and other adjustments recorded in the third quarter of 2004. The effective tax rate estimate change and adjustments increased third quarter net income by $1,241,000 or $0.04 diluted earnings per share.
The Company has filed amended federal and state tax returns for the years 1999, 2000 and 2001 to claim higher deductions for certain expenses and additional foreign tax credits representing potential tax benefits totaling up to approximately $3.5 million. These returns are currently being reviewed by the Internal Revenue Service before going to Joint Committee. There is significant uncertainty surrounding the amount and timing of the tax benefits that will be ultimately realized. The Company believes it has supportable positions for claiming these deductions and credits, but the amounts are subject to Joint Committee approval. Accordingly, the Company has not reflected these potential tax benefits in its financial statements. No tax benefits will be recognized in the financial statements until these gain contingencies are resolved through the eventual disposition with the respective tax authorities.
RPC, INC. AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2003
REVENUES for the nine months ended September 30, 2004 increased $53,341,000 or 26.6 percent compared to the nine months ended September 30, 2003. The Technical Services segment revenues for the nine months ended September 30, 2004 increased 31.4 percent from the same period of the prior year due primarily to higher overall customer activity levels, higher pricing levels in most of our service lines and a shift in the mix of pressure pumping work towards higher revenue generating jobs. The Support Services segment revenues for the nine months ended September 30, 2004 increased 22.0 percent from the same period of the prior year as a result of higher equipment utilization and slightly higher pricing in rental tools, which is the largest service line within this segment, partially offset by lower utilization and pricing of marine liftboats.
Domestic revenues increased during the period due to higher customer drilling and production activity. The average domestic rig count during the nine months ended September 30, 2004 was 16.7 percent higher than the same period in 2003. Our consolidated revenues grew at a higher rate than the overall domestic rig count, principally because of the effect of stronger activity in our West African operations, and our new operations in Kuwait which began generating operating revenues in the first quarter of 2004, our Bronco Oilfield Services acquisition, which was closed in the second quarter of 2003, and our new fishing tool service line, which began generating revenues in the first quarter of 2004. These increases were partially offset by continued weakness in the Gulf of Mexico market, exacerbated by the recent hurricanes in the area, and the sale of one of our non-oilfield businesses, which occurred during the second quarter of 2004. International revenues increased significantly during the nine months ended September 30, 2004 as compared to the prior year due to our new operations in Kuwait which commenced in the first quarter of 2004; however, international revenues remain a small percentage of total revenues.
COST OF SERVICES RENDERED AND GOODS SOLD for the nine months ended September 30, 2004 was $146,529,000 compared to $125,798,000 for the nine months ended September 30, 2003, an increase of $20,731,000 or 16.5 percent. This increase was due to higher activity levels, which resulted in increased direct employment costs, and because of variable operational expenses such as materials and supplies, sub-rental and fuel. Cost of services rendered and goods sold, as a percent of revenues, decreased from the nine months ended September 30, 2003 compared to same period of 2004 as a result of improved operating leverage due to overall higher utilization of personnel and operating equipment.
RPC, INC. AND SUBSIDIARIES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the nine months ended September 30, 2004 were $48,213,000 compared to $38,599,000 for the nine months ended September 30, 2003, an increase of $9,614,000 or 24.9 percent. These expenses increased primarily due to an increase in bad debt expense and higher employment costs mainly as a result of an increase in number of employees and higher incentive compensation expenses consistent with improved operating results. Selling, general and administrative expenses as a percent of revenues decreased slightly in the nine months ended September 30, 2004 compared to the same period in 2003.
DEPRECIATION AND AMORTIZATION were $25,736,000 for the nine months ended September 30, 2004, an increase of $952,000 or 3.8 percent compared to $24,784,000 for the nine months ended September 30, 2003. This increase in depreciation and amortization resulted from various capital expenditures during the previous twelve months within Support Services and Technical Services, and from the effect of the acquisition completed during the second quarter of 2003.
OPERATING PROFIT for the nine months ended September 30, 2004 increased $22,044,000 compared to the nine months ended September 30, 2003. This improvement was the result of increased revenues because of higher customer activity levels, partially offset by the increases in costs of services rendered and goods sold, selling, general and administrative expenses, and depreciation and amortization, as discussed above.
OTHER INCOME, NET for the nine months ended September 30, 2004 was $2,324,000, an increase of $1,577,000 compared to $747,000 for the nine months ended September 30, 2003. For the nine months ended September 30, 2004 and 2003, other income, net primarily reflects net gains related to the sale of property and operating equipment.
INTEREST EXPENSE, NET was $75,000 for the nine months ended September 30, 2004 compared to $137,000 for the nine months ended September 30, 2003. The decrease in interest expense, net resulted primarily from the reduction in outstanding debt through annual principal payments made in the first and second quarters of 2004, and small increases in interest income in the current period compared to the comparable period in the prior year. RPC generates interest income from investment of its available cash primarily in highly liquid investments with original maturities of three months or less.
INCOME TAX PROVISION was $12,408,000 during the nine months ended September 30, 2004, compared to $4,650,000 in 2003. This increase was due to the increase in operating profit during the period. During the third quarter of 2004, the company reduced the effective tax rate to 34.5 percent for the nine months ended September 30, 2004 compared to 38.0 percent in the prior year and the first six months of the current year. The decrease in the effective tax rate was due to anticipated higher foreign tax credit utilization this year and other adjustments recorded during the third quarter of 2004.
RPC, INC. AND SUBSIDIARIES
The effective tax rate estimate change and adjustments increased net income for the nine months ended September 30, 2004 by $1,242,000 or $0.04 diluted earnings per share.
The Company has filed amended federal and state tax returns for the years 1999, 2000 and 2001 to claim higher deductions for certain expenses and additional foreign tax credits representing potential tax benefits totaling up to approximately $3.5 million. These returns are currently being reviewed by the Internal Revenue Service before going to Joint Committee. There is significant uncertainty surrounding the amount and timing of the tax benefits that will be ultimately realized. The Company believes it has supportable positions for claiming these deductions and credits, but the amounts are subject to Joint Committee approval. Accordingly, the Company has not reflected these potential tax benefits in its financial statements. No tax benefits will be recognized in the financial statements until these gain contingencies are resolved through the eventual disposition with the respective tax authorities.
RPC, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
------------------------------------------------------------------------------------------------------------
(IN THOUSANDS) NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------------------------
2004 2003
------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 33,667 $ 38,480
Net cash used for investing activities (34,660) (25,594)
Net cash used for financing activities (5,208) (3,447)
------------------------------------------------------------------------------------------------------------
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The Company's decisions about the amount of cash to be used for investing and financing purposes are influenced by its capital position and the expected amount of cash to be provided by operations.
Cash provided by operating activities for the nine months ended September 30, 2004 decreased $4,813,000 or 12.5 percent compared to the nine months ended September 30, 2003. Although net income increased $15,925,000, cash provided from operating activities decreased primarily due to a $4.2 million contribution to the pension plan made during the first quarter of 2004 and receipt of income tax refunds in 2003 that did not recur in 2004. Also contributing to the decrease in cash provided was an increase in working capital requirements during 2004 consistent with the Company's higher overall activity levels and recent revenue increases. Working capital increases during the period compared to the prior year were caused principally by increases in accounts receivable and income taxes receivable offset partially by increases in accounts payable, accrued state taxes and accrued insurance.
Cash used in investing activities for the nine months ended September 30, 2004 increased by $9,066,000, compared to the nine months ended September 30, 2003, primarily as a result of an increase in capital expenditures partially offset by an increase in proceeds from sale of property and equipment and decrease in cash used in purchases of businesses.
Cash used in financing activities for the nine months ended September 30, 2004 increased by $1,761,000, compared to the nine months ended September 30, 2003, primarily as a result of a 20 percent increase in dividends paid per share, higher debt service requirements, and an increase in stock repurchases.
The prices for oil and natural gas remain historically strong, but until recently, have failed to drive any increase in drilling activity. Prices of oil and natural gas have also been volatile in the last several quarters, due to uncertainties over the conflict in the Middle East and fluctuating natural gas storage levels. Although the weekly domestic rig count has recently increased, the Company still believes that the operating environment for our services is uncertain in the near term. As a result of this uncertainty, RPC is monitoring customer exploration and production activity levels very closely, and is only making capital
RPC, INC. AND SUBSIDIARIES
expenditures to support known customer requirements or to maintain our existing fleet of operating equipment. The Company currently expects that capital expenditures during 2004 will be approximately $55 to $60 million, of which approximately $37 million, primarily in the Technical Services segment, has been spent during the nine months ended September 30, 2004.
The Company's Retirement Income Plan, a trusteed defined benefit pension plan, provides monthly benefits upon retirement at age 65 to eligible employees. In the first quarter of 2002, the Company's Board of Directors approved a resolution to cease all future retirement benefit accruals under the Retirement Income Plan effective September 30, 2002. However, the adverse conditions in the equity markets, along with the low interest rate environment, have had an unfavorable impact on the funded status of the Company's defined benefit pension plan. During the first quarter of 2004, the Company contributed approximately $4,200,000 to the pension plan. The Company does not currently expect to make any additional contributions to the defined benefit plan in 2004.
We believe the liquidity provided by our existing cash and cash equivalents, our overall strong capitalization, which includes access to a $25 million credit facility with a financial institution, of which $11.7 million was available as of September 30, 2004, and cash expected to be generated from operations, will provide sufficient capital to meet our requirements for at least the next twelve months. The portion of the credit facility that is not currently available supports letters of credit relating to self-insurance programs or contract bids. We believe our liquidity will allow us to grow our asset base and revenues as business conditions and customer activity levels increase.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any material off balance sheet arrangements.
SEASONALITY
Oil and natural gas prices affect demand throughout the oil and natural gas industry, including the demand for the Company's products and services. The Company's business depends in large part on the conditions of the oil and gas industry, and specifically on the capital expenditures of its customers related to the exploration and production of oil and natural gas. When these expenditures fluctuate, customers' demand for the Company's services fluctuates as well. These fluctuations depend on the current and projected prices of oil and natural gas and resulting drilling activity, and are not seasonal to any material degree.
INFLATION
RPC, INC. AND SUBSIDIARIES
RPC purchases its equipment and materials from suppliers who provide competitive prices. Due to the recent increases in activity in the domestic oilfield, the Company has experienced some upward wage pressures in the labor markets from which it hires employees. If inflation in the general economy increases, the Company's costs for equipment, materials and labor could increase as well. During the nine months ended September 30, 2004, the price of steel, for both the commodity and for products manufactured with steel, rose dramatically due to increased worldwide demand. This affected the Company's operations through delays in scheduled deliveries of new equipment and price quotations that were only valid for a limited period of time. Steel prices remained high as of September 30, 2004. If steel prices remain high, delays in scheduled deliveries of new equipment will continue, and it is likely that the cost of the Company's new equipment will increase. These increases would result in higher capital expenditures and depreciation expense. RPC may not be able to recover such increased costs through price increases to its customers, thereby reducing the Company's future profits. The Company operates in highly competitive areas of the oilfield services industry. The products and services of each of the Company's principal industry segments are sold in highly competitive markets, and its revenues and earnings may be affected by the following factors: changes in competitive prices, fluctuations in the level of activity and major markets, general economic conditions, and governmental regulation.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that are not historical facts are "forward-looking statements" under Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements that relate to our business strategy, plans and objectives, market risk exposure, adequacy of capital resources and funds, opportunity for growth, anticipated pension funding payments and capital expenditures, and our beliefs and expectations regarding future demand for our products and services and other events and conditions that may influence the oilfield services market and our performance in the future.
The words "may," "will," "expect," "believe," "anticipate," "project," "estimate," and similar expressions generally identify forward-looking statements. Such statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. We caution you that such statements are only predictions and not guarantees of future performance and that actual results, developments and business decisions may differ from those envisioned by the forward-looking statements. Risk factors that could cause such future events not to occur as expected include those described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and the following: the volatility of oil and natural gas prices, downturn in the economy leading to decreased oil and gas exploration, inability
RPC, INC. AND SUBSIDIARIES
to identify or complete acquisitions, adverse weather conditions, inability to attract and retain skilled employees, personal injury or property damage claims, and the changes in the supply and demand for oil and gas.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2004, cash and cash equivalents were primarily invested in money market accounts which are highly liquid with maturities of three months or less. As a result, we are not subject to material interest rate risk exposure on these investments. The Company has been affected by the impact of lower interest rates on interest income from its short-term investments. This risk is managed through conservative policies to invest in high-quality obligations. Also, as of September 30, 2004, RPC had debt with variable interest rates that exposes RPC to certain market risks. In the prior year, RPC performed an interest rate sensitivity analysis related to the debt instruments using a duration model over the near term of the securities and the term of the debt with a 10 percent change in interest rates. RPC 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.
As of September 30, 2004, RPC had accounts receivable of approximately $73.4 million (net of an allowance for doubtful accounts of approximately $2.8 million). RPC is subject to a concentration of credit risk because most of the accounts receivable are due from companies in the oil and gas industry.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES - The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, and that such information is accumulated and communicated to its management, including the President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, September 30, 2004 (the "Evaluation Date"), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of the Evaluation Date.
RPC, INC. AND SUBSIDIARIES
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING - There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
RPC is involved in litigation from time to time in the ordinary course of its business. RPC does not believe that the outcome of such litigation will have a material adverse effect on the financial position or results of operations of RPC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
SHARE REPURCHASES
Under a plan authorized by its Board of Directors on March 9, 1998, the Company has purchased an aggregate of 1,839,000 shares of its common stock on the open market and can purchase up to 161,000 additional shares. In January 2004, the Board approved an increase of 1,500,000 shares to the previous stock repurchase program to a total of 1,651,000 shares available for repurchase as of September 30, 2004. Currently the program does not have a predetermined expiration date. There were no repurchases of stock on the open market during the nine months ended September 30, 2004.
The following shares were repurchased during the three months ended September 30, 2004:
-------------------------- ------------------- ------------------------ ------------------ ----------------------
Total number of
Shares (or Maximum Number (or
Units) Purchased Approximate Dollar
as Part of Value) of Shares (or
Total Number of Publicly Units) that May Yet
Shares (or Units) Average Price Paid per Announced Plans Be Purchased Under
Period Purchased Share (or Unit) or Programs the Plans or Programs
-------------------------- ------------------- ------------------------ ------------------ ----------------------
July 1, 2004 -
July 31, 2004 - $ - - -
August 1, 2004 -
August 31, 2004 711 (1) $ 15.49 - -
September 1, 2004 -
September 30, 2004 1,737 (1) $ 17.28 - -
-------------------------- ------------------- --------------------- --------------------- ----------------------
Total 2,448 16.76 - -
========================== =================== ===================== ===================== ======================
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(1) Represents shares tendered in connection with the exercise of employee stock options.
RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
RPC, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. Exhibits
EXHIBIT
NUMBER DESCRIPTION
--------------------------------------------------------------------------------
3.1 Restated certificate of incorporation of RPC, Inc. (incorporated
herein by reference to exhibit 3.1 to the Annual Report on Form
10-K for the fiscal year ended December 31, 1999).
3.2 Bylaws of RPC, Inc. (incorporated herein by reference to Exhibit
3.2 to the Registrant's Quarterly Report on Form 10-Q filed on
May 5, 2004).
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 Form of Stock Option grant agreement.
10.2 Form of Time Lapse Restricted Stock grant agreement.
10.3 Form of Performance Restricted Stock grant agreement.
31.1 Section 302 certification for Chief Executive Officer.
31.2 Section 302 certification for Chief Financial Officer.
32.1 Section 906 certifications for Chief Executive Officer and
Chief Financial Officer.
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RPC, INC. AND SUBSIDIARIES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RPC, INC.
/s/ Richard A. Hubbell
----------------------
Date: November 1, 2004 Richard A. Hubbell
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Ben M. Palmer
-----------------
Date: November 1, 2004 Ben M. Palmer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT 10.1
RPC, INC.
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the day of ____, 2___ (the "Grant Date"), between RPC, INC., a Delaware corporation (hereinafter called the "Company"), and ((FNAME)) ((LNAME)), an employee of the Company or one or more of its subsidiaries (hereinafter called the "Employee").
WHEREAS, the Company desires to afford the Employee an opportunity to purchase shares of its Common Stock, par value $0.10 per share (hereinafter called the "Common Stock"), pursuant to the terms and provisions of the Company's 2004 Stock Incentive Plan (hereinafter called the "Plan"), as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and Employee's employment by the Company, the parties hereto agree as follows:
THE PLAN. This Option Agreement is made pursuant to and in accordance with the terms and provisions of the Plan. Anything in this Option Agreement to the contrary notwithstanding, the terms and provisions of the Plan, all of which are hereby incorporated herein by reference, shall be controlling in the event of any inconsistency herewith.
1. GRANT OF OPTION. The Company hereby irrevocably grants to the Employee the right and option (hereinafter called the "Option"), to purchase all or any part of an aggregate of _______ shares of Common Stock (subject to adjustment as provided in Paragraph 8 hereof), on the terms and conditions hereinafter set forth.
2. PURCHASE PRICE. The purchase price of the shares of Common Stock covered by the Option shall be $______ per share, which amount is at least 100% of fair market value of such shares at the date hereof, determined in accordance with the Plan, or 110% of such value if Employee owns more than 10% of the voting stock of the Company, calculated pursuant to applicable IRS regulations.
3. VESTING. No portion of the Option shall be exercisable prior to ______; beginning on such date, the Option shall become exercisable as follows:
With respect to __ shares, on or after _________;
With respect to ___ shares, on or after ________;
With respect to ___ shares, on or after ___________;
With respect to ___ shares, on or after _________; and,
With respect to ___ shares, on or after ____________.
4. TERM OF OPTION. To the extent vested pursuant to Section 3, each portion of the Option shall remain exercisable through the period ending ten (10) years after the date of the grant, subject to earlier termination as provided in Section 7 hereof.
5. ADMINISTRATION. Unless administration of the Plan is assumed by the Board of Directors of the Company, the Plan shall be administered by a committee of the Board of Directors of the Company constituted in accordance with the Plan, (hereinafter referred to as the "Committee".) The Committee is authorized and empowered to administer and interpret the Plan and this Option Agreement. Any interpretations of this Option Agreement or of the Plan made by the Committee shall be final and binding upon the parties hereto.
6. NON-TRANSFERABILITY. The Option shall not be assignable or transferable except by will or by the laws of descent and distribution and shall not be subject to execution, attachment or other process. Except as set forth in the Plan, during the lifetime of the Employee, the Option shall be exercisable only by the Employee. After the death of the Employee, the Option may be exercised prior to its termination as set forth in Section 7(b) hereof. Employee hereby agrees to retain ownership of, and to refrain from transferring, all shares of Common Stock obtained upon exercise of the Option for a period of twelve months after the date on which such Common Stock is obtained pursuant to the exercise of the Option; provided, however, that such twelve month transfer restriction shall be rescinded and shall no longer have any applicability following Employee's death, Normal Retirement (as defined in the Plan) or permanent Disability (as defined in the Plan). The Company may, at its discretion, place a legend to such effect on the certificates representing the shares of Common Stock obtained upon exercise of the option and issue appropriate stop transfer instructions to the Company's transfer agent.
7. TERMINATION. The Option may not be exercised by the Employee unless he/she, at the time of the exercise, shall have been in the continuous employ of the Company or a subsidiary thereof, in a position of equivalent or greater responsibility as on the Grant Date, except as follows:
(a) If, prior to the expiration of the Option, Employee's employment terminates by reason of permanent Disability (as defined in the Plan), Employee or his/her guardian may exercise the Option through the earlier of (i) such date of expiration, or (ii) one year after the date of termination of employment, to the extent that the Option was exercisable at the date of termination of employment.
(b) If Employee dies while in the employ of the Company or a subsidiary without having fully exercised the Option, the Option may be exercised prior to its expiration and within six (6) months of the date of death, to the extent the Option was exercisable at the date of death, by the legal representative of the estate or by the legatee of the Employee under the Employee's will.
(c) If, prior to the expiration of the Option, Employee's employment terminates by reason of Normal or Early Retirement (as defined in the Plan), Employee may exercise the Option through the earlier of (i) such date of expiration, or (ii) one day less than three months after the Retirement date, to the extent the Option was exercisable at such Retirement date.
The termination of employment of an Employee for any reason shall not accelerate or otherwise affect the number of shares with respect to which the Option may be exercised.
8. CHANGE IN CAPITALIZATION. In the event of any merger, reorganization, consolidation, recapitalization, stock dividends, stock split or other changes in corporate structure affecting the Common Stock, such substitution or adjustment shall be made in the number and option price of shares subject to this Option as may be determined to be appropriate by the Committee, in its sole discretion. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board of Directors, whose determination in that respect shall be final, binding and conclusive. The Committee need not treat other optionees and/or options in the same manner as Employee and the Option are treated. In no case shall the Company be required to sell a fractional share of Common Stock, and the total adjustment as set forth above shall be limited accordingly.
9. METHOD OF EXERCISING THE OPTION. Subject to the vesting provisions of Section 3 hereof, the Employee may exercise the Option in full or in part by written notice to the Company, delivered in person to the Treasurer of the Company or mailed, by registered mail, return receipt requested, to the Company's principal office at Atlanta, Georgia, attention of the Treasurer of the Company; provided, however, that if exercised in part, the Option may not be exercised for fewer than 100 shares, unless the remaining balance of the Option is less than 100 shares, in which case the Option may be exercised for the remaining balance. The written notice shall state the Employee's intention to exercise the Option and the number of shares in respect to which it is being exercised and shall be signed by the Employee or a legatee or personal representative of the Employee, as applicable. Such notice shall be accompanied by payment of the full purchase price of the shares, and instructions shall be given as to the address to which the stock certificates shall be mailed. The purchase price for the shares as to which the Option shall be exercised from time to time shall be paid in full in cash and/or unrestricted shares of Common Stock already owned by the optionee for a period of at least six months, based, in each case, on the Fair Market Value (as defined in the Plan) of the shares on the date the Option is exercised, unless it shall be determined by the Committee, at any time hereafter, in its sole discretion, that unrestricted shares of Common Stock are not a permissible form of payment with respect to the Option. No shares may be purchased if the Employee is not at the time of exercise in the employ of the Company, or a subsidiary, except as provided in Section 7.
10. REQUIREMENT OF LAW. If any law, regulation of the Securities and Exchange Commission, or any regulation of any other commission or agency having jurisdiction shall require the Company or the Employee to take any action with respect to the shares of Common Stock acquired by the exercise of the Option, then the date upon which the Company shall deliver or cause to be delivered the certificate or certificates for the shares of Common Stock shall be postponed until full compliance has been made with all such requirements or law or regulations. Further, at or before the time of the delivery of the shares with respect to which exercise of the Option has been made, the Employee shall, if requested by the Company, deliver to the Company his/her written statement that he/she intends to hold the shares so acquired by him on exercise of the Option for investment and not with a view to resale or other distribution thereof to the public. Further, in the event the Company shall determine that, in compliance with the Securities Act of 1933, as amended, or other applicable statute or regulation, it is necessary to register any of the shares of Common Stock with respect to which an exercise of the Option has been made, or to qualify any such shares for exemption from any of the requirements of the Securities Act of 1933, as amended, or other applicable statute or regulations, then the Company shall take such action at its own expense, but not until such action has been completed shall the Option shares be delivered to the Employee.
11. NO EFFECT ON EMPLOYMENT. Nothing herein shall be construed to grant Employee the right to continued employment with the Company, to limit or restrict the right of the Company or any of its subsidiaries to terminate an Employee's employment at any time, with or without cause, or to increase or decrease the compensation of the Employee from the rate in existence at the date hereof.
12. INCENTIVE STOCK OPTION. The Option granted hereunder has been designated as an "Incentive Stock Option" pursuant to Section 422 of the Code (as defined in the Plan); provided, however, that to the extent that the Option fails for any reason to comply with the provisions of Section 422, it shall be treated as a Non-Qualified Stock Option (as defined in the Plan). The Company shall have no liability whatsoever to Employee in the event the Option fails for any reason to satisfy the requirements for Incentive Stock Options set forth in Section 422.
13. GOVERNING LAW. This Agreement and all awards made and actions taken hereunder shall be governed by and construed in accordance with the Delaware General Corporation Law, to the extent applicable, and in accordance with the laws of the State of Georgia in all other respects.
IN WITNESS WHEREOF, the Company has caused this Incentive Stock Option Agreement to be duly executed by an authorized officer, and the Employee has hereunto set his/her hand, all as of the day and year first above written.
RPC, INC.
EXHIBIT 10.2
RPC, INC.
TIME-LAPSE RESTRICTED STOCK AGREEMENT
TIME-LAPSE RESTRICTED STOCK AGREEMENT made as of the __ day of ___, 2____, between RPC, INC., a Delaware corporation (hereinafter called the "Company"), and, ((FNAME)) ((LNAME)), an employee of the Company or one or more of its subsidiaries (hereinafter called the "Employee").
WHEREAS, the Company desires to grant to the Employee, as an incentive for Employee to promote the interests of the Company and its subsidiaries, shares of its Common Stock, par value $0.10 per share (hereinafter called the "Common Stock"), subject to certain continued employment vesting criteria, pursuant to the terms and provisions of the Company's 2004 Stock Incentive Plan (hereinafter called the "Plan"), as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and Employee's employment by the Company, the parties hereto agree as follows:
THE PLAN. This Agreement is made pursuant to and in accordance with the terms and provisions of the Plan. Anything in this Agreement to the contrary notwithstanding, the terms and provisions of the Plan, all of which are hereby incorporated herein by reference, shall be controlling in the event of any inconsistency herewith.
1. ADMINISTRATION. Unless administration of the Plan is assumed by the Board of Directors of the Company, the Plan shall be administered by a committee of the Board of Directors of the Company constituted in accordance with the Plan, (hereinafter referred to as the "Committee".) The Committee is authorized and empowered to administer and interpret the Plan and this Agreement. Any interpretations of this Agreement or of the Plan made by the Committee shall be final and binding upon the parties hereto.
2. GRANT OF TIME-LAPSE RESTRICTED STOCK. Effective as of _____, 2____ (the "Grant Date"), the Company hereby irrevocably grants to the Employee _______ shares of Common Stock, which shares are subject to satisfaction of the vesting requirements and the terms and conditions hereinafter set forth (such shares of Common Stock being hereinafter referred to in the aggregate as the "Time-Lapse Restricted Stock").
3. SERVICE/EMPLOYMENT. The shares of Time-Lapse Restricted Stock shall vest
____ percent effective ________, then __ percent annually thereafter,
and will be fully vested by ________ but only if, through each date,
Employee shall have been in the continuous employ of the Company or a
subsidiary thereof, in a position of equivalent or greater
responsibility as on the Grant Date. If Employee's employment with the
Company terminates at any time prior to the vesting pursuant to this
Section 3 of the Time-Lapse Restricted Stock issued hereunder, he or she
shall forfeit all remaining Time-Lapse Restricted Stock, unless the
Employee's employment terminates due to his or her death, Normal
Retirement (as defined in the Plan) or permanent Disability (as defined
in the Plan), in which case a pro rata portion of such unvested
Time-Lapse Restricted Stock
(determined by dividing the total number of months elapsed from the Grant Date to the date of death, Normal Retirement or permanent Disability, as applicable, by __ and multiplying the result by the aggregate amount of Time-Lapse Restricted Stock) shall vest immediately. The transfer of employment by Employee between the Company and a subsidiary thereof shall not be deemed a termination of employment under the Plan or this Agreement.
4. ESCROW; DIVIDENDS AND VOTING RIGHTS. Prior to the completion of the vesting periods referenced in Section 3 above, all shares of Time-Lapse Restricted Stock shall be held in escrow by the Company for the benefit of Employee. During such period, prior to any forfeiture of the shares, Employee shall receive all cash dividends declared with respect to the shares and shall have the right to exercise all voting rights with respect to the shares. At the discretion of the Company, any share certificates so held in escrow shall be inscribed with a legend referencing the transfer restrictions contained in this Agreement and any other applicable transfer restrictions. Any share certificates issued pursuant to a stock split or as dividends with respect to the Time-Lapse Restricted Stock held in escrow shall also be held in escrow on the same terms as the Time-Lapse Restricted Stock and shall be released at the same time as, and subject to the same risk of forfeiture as, the shares with respect to which they were issued. Any issued Time-Lapse Restricted Stock which the Employee does not forfeit pursuant to Section 3 above shall be transferred to the Employee free of any forfeiture conditions under the Plan or this Agreement as soon as practicable after the service vesting conditions under Section 3 above has been satisfied or no longer applies; provided, however, that if the Committee at any time before such transfer reasonably determines that the Employee might have violated any applicable criminal law, the Committee shall have the right to cause all of Employee's Time-Lapse Restricted Stock then held in escrow to be forfeited, without regard to whether (i) Employee has satisfied the service vesting condition set forth in Section 3 before the date the Committee makes such determination, or (ii) Employee's employment is (or might have been) terminated as a result of such conduct.
5. NON-TRANSFERABILITY. No Time-Lapse Restricted Stock granted pursuant to this Agreement shall be assignable or transferable, and such Time-Lapse Restricted Stock shall not be subject to execution, attachment or other process, until that date on which the Time-Lapse Restricted Stock vests pursuant to Section 3 above. Any attempt by the Employee to alienate, assign, pledge, hypothecate or otherwise dispose of the Employee's interest in this Agreement or any Restricted Stock prior to its becoming fully vested shall be ineffective and shall permit the Company to terminate this Agreement and cause the forfeiture of any unvested shares. The Company may, at its discretion, place a legend to such effect on the certificates representing the shares of Time-Lapse Restricted Stock and issue appropriate stop transfer instructions to the Company's transfer agent.
6. CHANGE IN CAPITALIZATION. In the event of any merger, reorganization, consolidation, or similar event, such substitution or adjustment shall be made in the shares subject to this Time-Lapse Restricted Stock award as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any Award shall always be a whole number. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board of Directors, whose determination in that respect shall be final, binding and
conclusive. The Committee need not treat other holders of Time-Lapse Restricted Stock in the same manner as Employee is treated.
7. REQUIREMENT OF LAW. If any law, regulation of the Securities and Exchange Commission, or any regulation of any other commission or agency having jurisdiction shall require the Company or the Employee to take any action prior to the issuance or release from escrow of any shares of Time-Lapse Restricted Stock, then the date upon which the Company shall deliver or cause to be issued or released from escrow the certificate or certificates for such shares of Time-Lapse Restricted Stock shall be postponed until full compliance has been made with all such requirements or law or regulations. Further, at or before the time of issuance of any shares of Time-Lapse Restricted Stock, the Employee shall, if requested by the Company, deliver to the Company his/her written statement that he/she intends to hold such shares for investment and not with a view to resale or other distribution thereof to the public. Further, in the event the Company shall determine that, in compliance with the Securities Act of 1933, as amended, or other applicable statute or regulation, it is necessary to register any of the shares of Time-Lapse Restricted Stock, or to qualify any such shares for exemption from any of the requirements of the Securities Act of 1933, as amended, or other applicable statute or regulations, then the Company shall take such action at its own expense, but not until such action has been completed shall the shares be issued in the name of the Employee.
8. WITHHOLDING. Employee shall have the right (absent any contrary action by the Committee) to elect that the minimum tax withholding requirements applicable to the receipt of any award pursuant to this Agreement be satisfied through a reduction in the number of shares of Time-Lapse Restricted Stock issued or transferred to him or her, and if the Employee so elects, the Committee shall have the right to reduce the number of shares of Time-Lapse Restricted Stock issued or transferred to the Employee in order to satisfy such minimum applicable tax withholding requirements.
9. NO EFFECT ON EMPLOYMENT. Nothing herein shall be construed to grant Employee the right to continued employment with the Company or to limit or restrict the right of the Company or any of its subsidiaries to terminate an Employee's employment at any time, with or without cause, or to increase or decrease the compensation of the Employee from the rate in existence at the date hereof.
10. GOVERNING LAW. This Agreement and all awards made and actions taken hereunder shall be governed by and construed in accordance with the Delaware General Corporation Law, to the extent applicable, and in accordance with the laws of the State of Georgia in all other respects.
IN WITNESS WHEREOF, the Company has caused this Time-Lapse Restricted Stock Agreement to be duly executed by an authorized officer, and the Employee has hereunto set his/her hand, all as of the day and year first above written.
RPC, INC.
EXHIBIT 10.3
RPC, Inc.
PERFORMANCE RESTRICTED STOCK AGREEMENT
PERFORMANCE RESTRICTED STOCK AGREEMENT made as of the ___ day of ______, 2____, between RPC, Inc., a Delaware corporation (hereinafter called the "Company"), and (Employee Name), an employee of the Company or one or more of its subsidiaries (hereinafter called the "Employee").
WHEREAS, the Company desires to grant to the Employee, as an incentive for Employee to promote the interests of the Company and its subsidiaries, the right to receive shares of its Common Stock, par value $0.10 per share (hereinafter called the "Common Stock"), subject to certain performance and continued employment vesting criteria, pursuant to the terms and provisions of the Company's 2004 Employee Stock Incentive Plan (hereinafter called the "Plan"), as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and Employee's employment by the Company, the parties hereto agree as follows:
THE PLAN. This Agreement is made pursuant to and in accordance with the terms and provisions of the Plan. Anything in this Agreement to the contrary notwithstanding, the terms and provisions of the Plan, all of which are hereby incorporated herein by reference, shall be controlling in the event of any inconsistency herewith.
1. ADMINISTRATION. Unless administration of the Plan is assumed by the Board of Directors of the Company, the Plan shall be administered by a committee of the Board of Directors of the Company, hereinafter referred to as the "Committee". The Committee is authorized and empowered to administer and interpret the Plan and this Agreement. Any interpretations of this Agreement or of the Plan made by the Committee shall be final and binding upon the parties hereto.
2. GRANT OF PERFORMANCE RESTRICTED STOCK. Effective as of _____ __, 2___ (the "Grant Date"), the Company hereby irrevocably grants to the Employee the right to receive the following ___ grants of shares of Common Stock, subject to satisfaction of the vesting requirements and the terms and conditions hereinafter set forth (such shares of Common Stock being hereinafter referred to in the aggregate as the "Performance Restricted Stock"):
# Of Average Stock Normal
Grant Shares Price Condition Award Date
----- ------ --------------- ----------
1 $ *
2 *
3 *
4 *
5 *
Total Shares
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o (Refer to Paragraph 3 Below)
3. STOCK PERFORMANCE. No Performance Restricted Stock will be issued pursuant to any of the aforementioned grants unless and until the performance criteria set forth below in this Section 3 with respect to such grant have been satisfied:
(a) With respect to the ___grant(s), the Average Closing
Price (defined to be the average closing price of the
Common Stock on the New York Stock Exchange for 10
consecutive trading days occurring from and after the
Grant Date) must equal or exceed the Average Stock Price
Condition for such grant (as disclosed in the table in
Section 2 above) on or before _______.
(b) With respect to grant(s) ______, the Average Closing Price must equal or exceed the Average Stock Price Condition for such grant at some point within the twelve month period beginning on the earlier to occur of (i) the Normal Award Date for such grant (as disclosed in the table in Section 2 above), or (ii) the date that the Average Closing Price first equaled or exceeded the Average Stock Price Condition with respect to the next previous grant.
(c) With respect to grant(s) ___, the Average Closing Price must equal or exceed the Average Stock Price Condition for such grant on or before _______.
Subject to the provisions hereof and of the Plan, as soon as
practicable after the performance conditions set forth above
have been satisfied with respect to any grant the Performance
Restricted Stock pertaining to such grant shall be issued in the
name of Employee and held in escrow by the Company in accordance
with Section 6 hereof. The date on which the Company becomes
obligated to issue shares of Performance Restricted Stock with
respect to any grant hereunder pursuant to the terms of this
Section 3 is hereinafter referred to as the "Obligation Date"
with respect to such Performance Restricted Stock. Should the
Employee's employment with the Company terminate for any reason
prior to the Obligation Date of any Performance Restricted Stock
that is the subject of this Agreement, such Performance
Restricted Stock shall not be issued and all rights hereunder
with respect to such Performance Restricted Stock shall be
forfeited.
With respect to each grant, if the Average Closing Price does not equal or exceed the Average Stock Price Condition for such grant within the required time period, the shares of Performance Restricted Stock to which the grant pertains shall not be issued; provided, however, that if the Average Closing Price equals or exceeds the Average Stock Price Condition with respect to grant(s) __ at any time on or before ______, all shares of Performance Restricted Stock pertaining to all five grants made pursuant to this Agreement shall be issued in accordance with the provisions of the foregoing paragraph hereof. If the Average Closing Price does not equal or exceed the Average Stock Price Condition with respect to grant(s) __ at any time on or before _________, all shares of Performance Restricted Stock pertaining to grants made pursuant to this Agreement which have not previously been issued shall be forfeited by Employee.
4. SERVICE/EMPLOYMENT. Once issued in accordance with Section 3
above, each Performance Restricted Stock award shall vest upon
that date which is the earlier of (a) the fifth (5th)
anniversary of the Obligation Date applicable to such award, or
(b) the date Employee reaches age 65, but only if, through such
date, Employee shall have been in the continuous employ of the
Company or a subsidiary thereof, in a position of equivalent or
greater responsibility as on the Grant Date. If Employee's
employment with the Company terminates at any time prior to the
vesting pursuant to this Section 4 of any Performance Restricted
Stock issued in his or her name, he or she shall forfeit all
such unvested Performance Restricted Stock, unless the
Employee's employment terminates due to his or her death or
permanent disability (as determined by the Committee in
accordance with the Plan), in which case any such unvested
Performance Restricted Stock shall vest immediately. Any
Performance Restricted Stock that is issued pursuant to Section
3 after age 65, but before Retirement (as defined in the Plan),
shall vest immediately upon the issuance thereof. The transfer
of employment by Employee between the Company and a subsidiary
thereof shall not be deemed a termination of employment under
the Plan or this Agreement.
5. ESCROW; DIVIDENDS AND VOTING RIGHTS. Prior to the completion of the vesting period referenced in Section 4 above, all issued (earned) shares of Performance Restricted Stock shall be held in escrow by the Company for the benefit of Employee. During such period, prior to any forfeiture of the shares, Employee shall receive all cash dividends declared with respect to the shares and shall have the right to exercise all voting rights with respect to the shares. At the discretion of the Company, any share certificates so held in escrow shall be inscribed with a legend referencing the transfer restrictions contained in this Agreement and any other applicable transfer restrictions. Any share certificates issued pursuant to a stock split or as dividends with respect to the Performance Restricted Stock held in escrow shall also be held in escrow on the same terms as the Performance Restricted Stock and shall be released at the same time as, and subject to the same risk of forfeiture as, the shares with respect to which they were issued. Any issued Performance Restricted Stock which the Employee does not forfeit pursuant to Section 4 above shall be transferred to the Employee free of any forfeiture conditions under the Plan or this Agreement as soon as practicable after the service vesting condition under Section 4 above has been satisfied or no longer applies; provided, however, that if the Committee at any time before such transfer reasonably determines that the Employee might have violated any applicable criminal law, the Committee shall have the right to cause all of Employee's Performance Restricted Stock then held in escrow to be forfeited, without regard to whether (i) Employee has satisfied the service vesting condition set forth in Section 4 before the date the Committee makes such determination, or (ii) Employee's employment is (or might have been) terminated as a result of such conduct.
6. NON-TRANSFERABILITY. No rights granted pursuant to this Agreement shall be assignable or transferable, and such rights shall not be subject to execution, attachment or other process until that date on which the Performance Restricted Stock vests pursuant to Section 4. The Company may, at its discretion, place a legend to such effect on the certificates representing the shares of Performance Restricted Stock and issue appropriate stop transfer instructions to the Company's transfer agent.
7. CHANGE IN CAPITALIZATION. In general, if the Company is merged into or consolidated with another corporation under circumstances in which the Company is not the surviving corporation, or if the Company is liquidated, or sells or otherwise
disposes of substantially all of its assets to another corporation (any such merger, consolidation, etc. being hereinafter referred to as a "Non-Acquiring Transaction") while the Performance Restricted Stock is outstanding under the Plan, after the effective date of a Non-Acquiring Transaction Employee shall be entitled to receive such stock or other securities as the holders of the same class of stock as the Performance Restricted Stock shall be entitled to receive in such Non-Acquiring Transaction based upon the agreed upon conversion ratio or per share distribution. However, in the discretion of the Board of Directors, any vesting restrictions on the Performance Restricted Stock may continue in full force and effect, subject to whatever adjustments the Board of Directors deems appropriate. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board of Directors, whose determination in that respect shall be final, binding and conclusive. The Committee need not treat other holders of Performance Restricted Stock in the same manner as Employee is treated.
8. REQUIREMENT OF LAW. If any law, regulation of the Securities and Exchange Commission, or any regulation of any other commission or agency having jurisdiction shall require the Company or the Employee to take any action prior to the issuance or release from escrow of any shares of Performance Restricted Stock, then the date upon which the Company shall deliver or cause to be issued or released from escrow the certificate or certificates for such shares of Performance Restricted Stock shall be postponed until full compliance has been made with all such requirements or law or regulations. Further, at or before the time of issuance of any shares of Performance Restricted Stock, the Employee shall, if requested by the Company, deliver to the Company his/her written statement that he/she intends to hold such shares for investment and not with a view to resale or other distribution thereof to the public. Further, in the event the Company shall determine that, in compliance with the Securities Act of 1933, as amended, or other applicable statute or regulation, it is necessary to register any of the shares of Performance Restricted Stock, or to qualify any such shares for exemption from any of the requirements of the Securities Act of 1933, as amended, or other applicable statute or regulations, then the Company shall take such action at its own expense, but not until such action has been completed shall the shares be issued in the name of the Employee.
9. WITHHOLDING. Employee shall have the right (absent any contrary
action by the Committee and subject to satisfying the
requirements, if any, of Rule 16b-3 promulgated pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended)
to elect that the minimum tax withholding requirements
applicable to the receipt of any award pursuant to this
Agreement be satisfied through a reduction in the number of
shares of Performance Restricted Stock issued or transferred to
him or her, and the Committee shall have the right to reduce the
number of shares of Performance Restricted Stock issued or
transferred to the Employee in order to satisfy such minimum
applicable tax withholding requirements.
10. NO EFFECT ON EMPLOYMENT. Nothing herein shall be construed to grant Employee the right to continued employment with the Company or to limit or restrict the right of the Company or any of its subsidiaries to terminate an Employee's employment at any time, with or without cause, or to increase or decrease the compensation of the Employee from the rate in existence at the date hereof.
11. GOVERNING LAW. This Agreement and all awards made and actions taken hereunder shall be governed by and construed in accordance with the Delaware General Corporation Law, to the extent applicable, and in accordance with the laws of the State of Georgia in all other respects.
IN WITNESS WHEREOF, the Company has caused this Performance Restricted Stock Agreement to be duly executed by an authorized officer, and the Employee has hereunto set his/her hand, all as of the day and year first above written.
RPC, Inc.
Exhibit 31.1
CERTIFICATIONS
I, Richard A. Hubbell, President and Chief Executive Officer of registrant,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of RPC, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/ Richard A. Hubbell
-------------------------------------
Date: November 1, 2004 Richard A. Hubbell
President and Chief Executive Officer
(Principal Executive Officer)
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Exhibit 31.2
I, Ben M. Palmer, Vice President, Chief Financial Officer, and Treasurer certify that:
1. I have reviewed this quarterly report on Form 10-Q of RPC, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent function):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ Ben M. Palmer
--------------------------------------------
Date: November 1, 2004, Ben M. Palmer
Vice President, Chief Financial Officer,
and Treasurer
(Principal Financial and Accounting Officer)
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EXHIBIT 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
To the best of their knowledge the undersigned hereby certify that the Quarterly Report on Form 10-Q of RPC, Inc. for the period ended September 30, 2004, fully complies with the requirements of Section 13(a) of The Securities Exchange Act of 1934 (15 U.S.C.78m) and that the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of RPC, Inc.
Date: November 1, 2004 /s/ Richard A. Hubbell
-----------------------------------------------------
Richard A. Hubbell
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 1, 2004 /s/ Ben M. Palmer
-----------------------------------------------------
Ben M. Palmer
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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