Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The
following discussion should be read in conjunction with “Selected Financial
Data,” and the Consolidated Financial Statements included elsewhere in this
document. See also “Forward-Looking Statements” on page 2.
RPC, Inc.
(“RPC”) provides a broad range of specialized oilfield services primarily to
independent and major oilfield companies engaged in exploration, production and
development of oil and gas properties throughout the United States, including
the Gulf of Mexico, mid-continent, southwest, northeast and Rocky Mountain
regions, and selected international locations. The Company’s revenues
and profits are generated by providing equipment and services to customers who
operate oil and gas properties and invest capital to drill new wells and enhance
production or perform maintenance on existing wells.
Our key
business and financial strategies are:
|
-
|
To
focus our management resources on and invest our capital in equipment and
geographic markets that we believe will earn high returns on capital, and
maintain an appropriate capital structure.
|
|
|
|
|
-
|
To
maintain a flexible cost structure that can respond quickly to volatile
industry conditions and business activity levels.
|
|
|
|
|
-
|
To
deliver equipment and services to our customers safely.
|
|
|
|
|
-
|
To
maintain and increase market share.
|
|
|
|
|
-
|
To
maximize stockholder return by optimizing the balance between cash
invested in the Company
’
s productive
assets, the payment of dividends to stockholders, and the repurchase of
our common stock on the open market.
|
|
|
|
|
-
|
To
align the interests of our management and stockholders.
|
|
|
|
|
-
|
To
maintain an efficient, low-cost capital structure, which includes an
appropriate use of debt.
|
In
assessing the outcomes of these strategies and RPC’s financial condition and
operating performance, management generally reviews periodic forecast data,
monthly actual results, and other similar information. We also
consider trends related to certain key financial data, including revenues,
utilization of our equipment and personnel, pricing for our services and
equipment, profit margins, selling, general and administrative expenses, cash
flows and the return on our invested capital. We continuously monitor
factors that impact the level of current and expected customer activity levels,
such as the price of oil and natural gas, changes in pricing for our services
and equipment and utilization of our equipment and personnel. Our
financial results are affected by geopolitical factors such as political
instability in the petroleum-producing regions of the world, overall economic
conditions and weather in the United States, the prices of oil and natural gas,
and our customers’ drilling and production activities.
Current
industry conditions include natural gas prices which stabilized during 2009
following a steep decline in 2008, and during the first quarter of 2010 have
increased slightly. Oil prices have increased gradually during 2009
and the first quarter of 2010, following a five-year low of $32 per barrel at
the end of 2008. In the beginning of 2010, natural gas prices are
approximately 27 percent higher than they were during the first quarter of 2009,
and the price of oil is approximately 74 percent higher than it was in the first
quarter of 2009. The average U.S. rig count declined by 42 percent in
2009, although it began to increase during the third and fourth quarters of
2009. During the first quarter of 2010, the rig count returned to the
same levels experienced in the first quarter of 2009.
In
addition to the overall rig count, the Company also monitors the number of
horizontal and directional wells drilled in the U.S. domestic market, because
this type of well is more service-intensive than a vertical oil or gas well,
thus requiring more of the Company’s services provided for a longer period of
time. The number of horizontal and directional wells drilled in the
United States increased in 2009, and was 60 percent of total wells drilled
during the year. During the first part of 2010, the percentage of
horizontal and directional wells drilled as a percentage of total wells
increased to approximately 66 percent. Between 2006 and 2008, the
supply of oilfield service equipment in the U.S. domestic market increased
tremendously, both from existing service companies and new entrants to the
oilfield services business. Although the supply of oilfield equipment
did not increase in 2009, the large supply of equipment and service providers
coupled with the tremendous decline in domestic oilfield activity has caused
pricing for the Company’s services to decrease tremendously during the past few
years, which has had a negative impact on the Company’s financial results and
returns. The Company responded by reducing its capital expenditures
during 2008 and 2009, managing working capital carefully, closely monitoring its
competitors’ activities, and scrutinizing planned capital expenditures more
closely for acceptable financial returns. In spite of a decline in
revenues and an operating loss during 2009, the Company generated sufficient
cash from operating activities to decrease the balance on its revolving credit
facility by 48 percent.
Loss
before income taxes was $33.5 million in 2009 compared to income before taxes of
$137.8 million in the prior year. The effective tax rate for 2009 was
32.1 percent compared to 39.5 percent in the prior year. Diluted loss
per share was $0.24 in 2009 compared to diluted earnings per share of $0.85 for
the prior year. Cash flows from operating activities were $168.7
million in 2008 compared to $177.3 million in the prior year, and cash and cash
equivalents were $4.5 million at December 31, 2009, an increase of $1.5 million
compared to December 31, 2008. During the third quarter of 2009, we
reduced the size of our revolving credit facility to $200 million. As of
December 31, 2009, there was $90.3 million in outstanding borrowings under this
credit facility.
Cost of
revenues as a percentage of revenues increased approximately 9.6 percentage
points in 2009 compared to 2008, because of lower pricing for our services and
lower revenues.
Selling,
general and administrative expenses as a percentage of revenues increased
approximately 3.3 percentage points in 2009 compared to 2008, which was due
to the fixed nature of many of these expenses and lower revenues.
Consistent
with our strategy to selectively grow our capacity and maintain our existing
fleet of high demand equipment, capital expenditures were $67.8 million in
2009.
Outlook
Drilling
activity in the U.S. domestic oilfields, as measured by the rotary drilling rig
count, had been gradually increasing since about 2003 when rig count was just
over 800 through the latter half of 2008 when the U.S. rig count peaked at 2,031
during the third quarter. The global recession that began in the
fourth quarter of 2007 precipitated the steepest annualized decline in U.S.
domestic oilfield history. From the third quarter of 2008 to the
second quarter of 2009, the U.S. domestic rig count dropped almost 57 percent,
reaching a trough of 876 in June 2009. Since June 2009, the rig count
has increased by 42 percent to 1,248 early in the first quarter of
2010. The outlook for U.S. domestic oilfield activity is to increase
slowly during the remainder of 2010. The price of oil fell by 77
percent from $147 per barrel in the third quarter of 2008 to $34 early in
2009. Since that time, the price of oil has increased by over 100
percent to approximately $80 per barrel in the first quarter of
2010. The price of natural gas fell by 85 percent from approximately
$13 per Mcf in the second quarter of 2008 to slightly below $2 per Mcf in the
third quarter of 2009. Since that time, the price of natural gas has
increased to almost $6 per Mcf early in the first quarter of 2010.
Unconventional
drilling activity, which requires more of RPC’s services, accounted for 65
percent of total U.S. domestic drilling at the end of
2009. Unconventional activity as a percentage of total oilfield
activity had grown to 66 percent by the first quarter of 2010.
We
continue to monitor the competitive environment in 2010, and are concerned about
pricing for our services. The highly competitive pricing levels are
due to lower activity levels and the large amount of additional equipment that
has been placed in service in the domestic market during the past several
years. Our recent response to industry conditions was to reduce
capital expenditures, continue cost-reduction plans and enhance our sales and
marketing efforts. We understand that factors influencing the
industry are unpredictable, and our response to the industry’s potential
uncertainty is to maintain sufficient liquidity and a conservative capital
structure and monitor our discretionary spending. Although we used
our bank credit facility to finance our expansion, we will still maintain a
conservative financial structure. We intend to closely manage the amount drawn
on this facility over the course of 2010. Based on current industry
conditions, we believe that the Company’s consolidated revenues will increase
and financial performance will improve.
Results
of Operations
Years
Ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Consolidated
revenues
|
|
$
|
587,863
|
|
|
$
|
876,977
|
|
|
$
|
690,226
|
|
Revenues
by business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical
|
|
$
|
513,289
|
|
|
$
|
745,991
|
|
|
$
|
574,723
|
|
Support
|
|
|
74,574
|
|
|
|
130,986
|
|
|
|
115,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
operating (loss) profit
|
|
$
|
(33,052
|
)
|
|
$
|
144,170
|
|
|
$
|
142,038
|
|
Operating
(loss) profit by business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Technical
|
|
$
|
(20,328
|
)
|
|
$
|
110,648
|
|
|
$
|
116,493
|
|
Support
|
|
|
(1,636
|
)
|
|
|
36,515
|
|
|
|
29,955
|
|
Corporate
expenses
|
|
|
(12,231
|
)
|
|
|
(9,360
|
)
|
|
|
(10,703
|
)
|
Gain
on disposition of assets, net
|
|
|
1,143
|
|
|
|
6,367
|
|
|
|
6,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(22,745
|
)
|
|
$
|
83,403
|
|
|
$
|
87,049
|
|
(Loss)
earnings per share — diluted
|
|
$
|
(0.24
|
)
|
|
$
|
0.85
|
|
|
$
|
0.89
|
|
Percentage
of cost of revenues to revenues
|
|
|
67
|
%
|
|
|
57
|
%
|
|
|
53
|
%
|
Percentage
of selling, general and administrative expenses to
revenues
|
|
|
17
|
%
|
|
|
13
|
%
|
|
|
16
|
%
|
Percentage
of depreciation and amortization expense to revenues
|
|
|
22
|
%
|
|
|
14
|
%
|
|
|
11
|
%
|
Effective
income tax rate
|
|
|
32.1
|
%
|
|
|
39.5
|
%
|
|
|
37.7
|
%
|
Average
U.S. domestic rig count
|
|
|
1,089
|
|
|
|
1,879
|
|
|
|
1,768
|
|
Average
natural gas price (per thousand cubic feet (mcf))
|
|
$
|
3.90
|
|
|
$
|
8.81
|
|
|
$
|
6.93
|
|
Average
oil price (per barrel)
|
|
$
|
61.90
|
|
|
$
|
99.96
|
|
|
$
|
72.78
|
|
Year
Ended December 31, 2009 Compared To Year Ended December 31, 2008
Revenues.
Revenues for 2009
decreased $289.1 million or 33.0 percent compared to 2008. The
Technical Services segment revenues for 2009 decreased 31.2 percent from the
prior year due primarily to highly competitive pricing coupled with lower
equipment utilization. The Support Services segment revenues for 2009
decreased 43.1 percent from the prior year due to decreased customer activity
and significantly lower pricing in the rental tool service line, the largest
within this segment.
Domestic
revenues decreased 36 percent to $543.0 million during 2009 compared to 2008 due
to decreased customer activity and competitive pricing in our largest service
lines, such as pressure pumping and rental tools. The average price
of natural gas decreased by 56 percent and the average price of oil decreased by
approximately 38 percent during 2009 compared to the prior year. In
conjunction with the decrease in natural gas prices, the average domestic rig
count during 2009 was 42 percent lower than in 2008. This decrease in
drilling activity had a negative impact on our financial results. We
believe that our activity levels are affected more by the price of natural gas
than by the price of oil, because the majority of U.S. domestic drilling
activity relates to natural gas, and many of our services are more appropriate
for gas wells than oil wells. Foreign revenues, which increased from
$30.8 million in 2008 to $44.8 million in 2009, were eight percent of
consolidated revenues. These revenue increases were due mainly to
higher customer activity levels in New Zealand and Mexico compared to the prior
year. Our international revenues are impacted by the timing of
project initiation and their ultimate duration.
Cost of
revenues.
Cost of revenues in 2009 was $393.8 million compared
to $503.6 million in 2008, a decrease of $109.8 million or 21.8
percent. The decrease in these costs was due to the variable nature
of most of these expenses as well as the impact of expense reduction measures
taken during 2009, including employment cost reductions. Cost of
revenues, as a percent of revenues, increased in 2009 from 2008 due to lower
pricing for our services.
Selling, general and administrative
expenses.
Selling, general and administrative expenses
decreased 16.6 percent
to $97.7 million in 2009 compared to $117.1 million in 2008. This
decrease was primarily due to lower employment costs and other expenses
resulting from expense reduction efforts instituted during 2009. As a
percentage of revenues, selling, general and administrative expenses increased
to 16.6 percent in 2009 compared to 13.4 percent in 2008.
Depreciation and
amortization.
Depreciation and amortization were $130.6
million in 2009, an increase of $12.2 million or 10.3 percent compared to $118.4
million in 2008. This increase resulted from a higher level of capital
expenditures during recent quarters within both Support Services and Technical
Services to increase capacity and to maintain our existing
equipment.
Gain on disposition of assets, net.
Gain on the disposition of assets, net decreased due primarily to reduced
gains related to various property and equipment dispositions or sales to
customers of lost or damaged rental equipment.
Other income (expense),
net.
Other income,
net was $1.6 million in 2009, an increase of $2.8 million compared to other
expense of $1.2 million in 2008. The increase is mainly due to the
current year increase in the fair value of trading securities held in the
non-qualified Supplemental Retirement Plan. In addition to
changes in the fair value of trading securities, other income (expense) includes
gains from settlements of various legal and insurance claims and royalty
payments.
Interest
expense.
Interest expense was $2.2 million in 2009
compared to $5.3 million in 2008. The decrease is due to lower
interest expense in 2009 incurred on lower outstanding interest bearing advances
on our revolving credit facility.
Interest income.
Interest income increased to $147 thousand in 2009 compared to $73 thousand in
2008 as a result of a higher average investable cash balance in 2009 compared to
2008.
Income tax (benefit)
provision.
The income tax benefit was $10.8 million in 2009
compared to a tax provision of $54.4 million in 2008. The change is
due to 2009’s loss before income tax, partially offset by a decrease in the
effective tax rate to 32.1 percent in 2009 from 39.5 percent in
2008.
Net (loss) income and diluted (loss)
earnings per share
. Net loss was $22.7 million in 2009,
or $0.24 per share, compared to net income of $83.4 million, or $0.85 per
diluted share in 2008. This decrease is due to decreased revenues and
higher, as a percentage of revenues, costs of revenues, selling, general and
administrative expenses and depreciation expense.
Year
Ended December 31, 2008 Compared To Year Ended December 31, 2007
Revenues.
Revenues for 2008
increased $186.8 million or 27.1 percent compared to 2007. The
Technical Services segment revenues for 2008 increased 29.8 percent from the
prior year due primarily to a higher drilling rig count and increased capacity
driven by higher capital expenditures partially offset by lower pricing for
services. The Support Services segment revenues for 2008 increased
13.4 percent from the prior year due to increased capacity driven by higher
capital expenditures as well as a more profitable job mix in the rental tool
service line, the largest within this segment.
Domestic
revenues increased 30 percent to $846.2 million during 2008 compared to 2007 due
to increased capacity in our largest service lines, such as pressure pumping and
rental tools. The average price of natural gas increased by 27
percent and the average price of oil increased by approximately 37 percent
during 2008 compared to the prior year. In conjunction with the
increase in natural gas prices, the average domestic rig count during 2008 was
seven percent higher than in 2007. This increase in drilling activity
had a positive impact on our financial results. We believe that our
activity levels are affected more by the price of natural gas than by the price
of oil, because the majority of U.S. domestic drilling activity relates to
natural gas, and many of our services are more appropriate for gas wells than
oil wells. Foreign revenues, which decreased from $41.1 million in
2007 to $30.8 million in 2008, were four percent of consolidated
revenues. These revenue decreases were due mainly to lower customer
activity levels in Turkmenistan and Hungary compared to the prior
year. Our international revenues are impacted by the timing of
project initiation and their ultimate duration.
Cost of
revenues.
Costs of revenues in 2008 was $503.6 million
compared to $368.2 million in 2007, an increase of $135.4 million or 36.8
percent. The increase in these costs was due to the variable nature
of many of these expenses, including materials and supplies, compensation, and
maintenance and repairs. Cost of revenues, as a percent of revenues,
increased in 2008 from 2007 due to more competitive pricing, higher costs of
proppant used in our pressure pumping service line and increased maintenance and
repairs expenses.
Selling, general and administrative
expenses.
Selling, general and administrative expenses
increased 8.7 percent
to $117.1 million in 2008 compared to $107.8 million in 2007. This
increase was primarily due to higher employment costs consistent with higher
activity levels and geographic expansion under RPC’s long-term growth
plan. As a percentage of revenues, selling, general and
administrative expenses decreased to 13.4 percent in 2008 compared to 15.6
percent in 2007.
Depreciation and
amortization.
Depreciation and amortization were $118.4
million in 2008, an increase of $39.9 million or 50.8 percent compared to $78.5
million in 2007. This increase resulted from a higher level of capital
expenditures during 2008 as compared to 2007 within both Support Services and
Technical Services to increase capacity and to maintain our existing
equipment.
Gain on disposition of assets, net.
Gain on the disposition of assets, net increased due primarily to gains
related to various property and equipment dispositions or sales to customers of
lost or damaged rental equipment.
Other (expense) income,
net.
Other
(expense), net in 2008 was $(1.2) million, a decrease of $3.1 million compared
to other income of $1.9 million in 2007. The decrease is mainly due
to the 2008 decline in the fair value of trading securities held in the
non-qualified Supplemental Retirement Plan. In addition to
changes in the fair value of trading securities, other (expense) income in 2008
includes gains from settlements of various legal and insurance claims and
royalty payments.
Interest
expense.
Interest expense was $5.3 million in 2008
compared to $4.2 million in 2007. The increase is due to higher
interest expense in 2008 incurred on larger outstanding interest bearing
advances on our revolving line of credit.
Interest income.
Interest income increased to $73 thousand in 2008 compared to $70 thousand in
2007 as a result of a higher average investable cash balance in 2008 compared to
2007.
Income tax
provision.
The income tax provision increased to $54.4 million
in 2008 from $52.8 million in 2007. The increase is due to an
increase in the effective tax rate to 39.5 percent in 2008 from 37.7 percent in
2007.
Net income and diluted earnings per
share
. Net income decreased 4.2 percent to $83.4
million, or $0.85 earnings per diluted share in 2008, compared to $87.0 million,
or $0.89 earnings per diluted share in 2007. This decrease is due to
higher costs of revenues, selling, general and administrative expenses,
depreciation expense, other expense, and interest expense partially offset by
increased revenues.
Liquidity
and Capital Resources
Cash
and Cash Flows
The
Company’s cash and cash equivalents were $4.5 million as of December 31, 2009,
$3.0 million as of December 31, 2008 and $6.3 million as of December 31,
2007.
The following table sets forth the
historical cash flows for the years ended December 31:
|
|
(in
thousands)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
cash provided by operating activities
|
|
$
|
168,740
|
|
|
$
|
177,320
|
|
|
$
|
141,872
|
|
Net
cash used for investing activities
|
|
|
(61,144
|
)
|
|
|
(158,953
|
)
|
|
|
(239,624
|
)
|
Net
cash (used for) provided by financing activities
|
|
|
(106,144
|
)
|
|
|
(21,668
|
)
|
|
|
101,361
|
|
Cash
provided by operating activities decreased by $8.6 million in 2009 compared to
the prior year. Net loss was $22.7 million in 2009 compared to net
income of $83.4 million in 2008, decreasing cash provided by operating
activities partially offset by decreases in working capital
requirements. Decreased business activity levels and revenues in 2009
resulted in lower accounts receivable and prepaid expenses partially offset by
increased inventory and declines in accounts payable and accrued payroll
including bonuses, consistent with lower activity levels and
profitability.
Cash used
for investing activities in 2009 decreased by $97.8 million compared to 2008,
primarily as a result of lower capital expenditures.
Cash used
for financing activities in 2009 increased by $84.5 million compared to 2008,
primarily due to the reduction in notes payable to banks during 2009, partially
offset by a decrease in common stock purchased and retired.
Cash
provided by operating activities increased by $35.4 million in 2008 compared to
the prior year. Although net income decreased $3.6 million in 2008
compared to 2007, cash provided by operating activities increased due primarily
to an increase in depreciation due to higher capital expenditures and a higher
deferred tax provision due to accelerated tax depreciation. Increased
business activity levels and revenues in 2008 resulted in higher accounts
receivable, inventories and prepaid expenses partially offset by increased
accounts payable and accrued payroll including bonuses.
Cash used
for investing activities in 2008 decreased by $80.7 million compared to 2007,
primarily as a result of lower capital expenditures.
Cash
(used for) provided by financing activities in 2009 increased by $123.0 million
compared to 2007, primarily due to lower net borrowings from notes payable to
banks during 2008, an increase in common stock purchased and retired, and a 20
percent increase in dividends paid per share to common
stockholders.
Financial
Condition and Liquidity
The
Company’s financial condition as of December 31, 2009, remains
strong. We believe the liquidity provided by our existing cash and
cash equivalents, our overall strong capitalization which includes a revolving
credit facility and cash expected to be generated from operations will provide
sufficient capital to meet our requirements for at least the next twelve
months. The Company currently has a $200 million revolving credit
facility (the “Revolving Credit Agreement”) that matures in September
2011. The Revolving Credit Agreement contains customary terms
and conditions, including certain financial covenants including covenants
restricting RPC’s ability to incur liens, merge or consolidate with another
entity. A total of $91.9 million was available under our facility as
of December 31, 2009; approximately $17.8 million of the credit facility
supports outstanding letters of credit relating to self-insurance programs or
contract bids. For additional information with respect to RPC’s
credit facility, see Note 6 of the Notes to Consolidated Financial
Statements.
The
Company’s decisions about the amount of cash to be used for investing and
financing purposes are influenced by its capital position, including access to
borrowings under our credit facility, and the expected amount of cash to be
provided by operations. We believe our liquidity will continue to
provide the opportunity to grow our asset base and revenues during periods with
positive business conditions and strong customer activity levels. The
Company’s decisions about the amount of cash to be used for investing and
financing activities could be influenced by the financial covenants in our
credit facility but we do not expect the covenants to restrict our planned
activities.
Cash
Requirements
Capital
expenditures were $67.8 million in 2009, and we currently expect capital
expenditures to be approximately $70.0 million in 2010. We expect
these expenditures to be primarily directed towards revenue-producing equipment
in our larger, core service lines including pressure pumping, snubbing,
nitrogen, and rental tools. The actual amount of 2010 expenditures
will depend primarily on equipment maintenance requirements, expansion
opportunities, and equipment delivery schedules.
The Company’s Retirement Income Plan, a
multiple employer trusteed defined benefit pension plan, provides monthly
benefits upon retirement at age 65 to eligible employees. The Company
does not currently expect to make a significant contribution to the defined
benefit pension plan in 2010 to meet its funding objectives.
The Company’s Board of Directors
announced a stock buyback program on March 9, 1998 authorizing the repurchase of
up to 11,812,500 shares of which 2,807,265 additional shares were available to
be repurchased as of December 31, 2009. The program does not have a
predetermined expiration date.
On
January 26, 2010, the Board of Directors approved a $0.04 per share cash
dividend, payable March 10, 2010 to stockholders of record at the close of
business on February 10, 2010. The Company expects to continue to pay
cash dividends to common stockholders, subject to the earnings and financial
condition of the Company and other relevant factors.
Contractual
Obligations
The
Company’s obligations and commitments that require future payments include our
credit facility, certain non-cancelable operating leases, purchase obligations
and other long-term liabilities. The following table summarizes the Company’s
significant contractual obligations as of December 31, 2009:
Contractual
obligations
|
|
Payments
due by period
|
|
(in
thousands)
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
More
than
5
years
|
|
Long-term
debt obligations
|
|
$
|
90,300
|
|
|
$
|
-
|
|
|
$
|
90,300
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
on long-term debt obligations
|
|
|
3,154
|
|
|
|
1,869
|
|
|
|
1,285
|
|
|
|
-
|
|
|
|
-
|
|
Capital
lease obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating
leases (1)
|
|
|
13,023
|
|
|
|
4,389
|
|
|
|
5,318
|
|
|
|
2,504
|
|
|
|
812
|
|
Purchase
obligations (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
long-term liabilities (3)
|
|
|
988
|
|
|
|
-
|
|
|
|
988
|
|
|
|
-
|
|
|
|
-
|
|
Total
contractual obligations
|
|
$
|
107,465
|
|
|
$
|
6,258
|
|
|
$
|
97,891
|
|
|
$
|
2,504
|
|
|
$
|
812
|
|
(1)
|
Operating leases include
agreements for various office locations, office equipment, and certain
operating equipment.
|
(2)
|
Includes
agreements to purchase goods or services that have been approved and that
specify all significant terms (pricing, quantity, and
timing). As part of the normal course of business the Company
occasionally enters into purchase commitments to manage its various
operating needs.
|
(3)
|
Includes expected cash payments
for long-term liabilities reflected on the balance sheet where the timing
of the payments are known. These amounts include incentive compensation.
These amounts exclude pension obligations with uncertain funding
requirements and deferred compensation
liabilities.
|
Fair
Value Measurements
The
Company’s assets and liabilities measured at fair value are classified in the
fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation.
Assets and liabilities that are traded on an exchange with a quoted price are
classified as Level 1. Assets and liabilities that are valued using significant
observable inputs in addition to quoted market prices are classified as Level 2.
The Company currently has no assets or liabilities measured on a recurring basis
that are valued using unobservable inputs and therefore no assets or liabilities
measured on a recurring basis are classified as Level 3. For defined benefit
plan assets classified as Level 3, the values are computed using inputs such as
cost, discounted future cash flows, independent appraisals and market based
comparable data or on net asset values calculated by the fund and not publicly
available.
In 2009, the Company transferred trading securities from assets
utilizing Level 1 inputs to assets utilizing Level 2 inputs because significant
observable inputs in addition to quoted market prices were used to value these
trading securities.
Inflation
The
Company purchases its equipment and materials from suppliers who provide
competitive prices, and employs skilled workers from competitive labor
markets. If inflation in the general economy increases, the Company’s
costs for equipment, materials and labor could increase as
well. Also, increases in activity in the domestic oilfield can cause
upward wage pressures in the labor markets from which it hires employees as well
as increases in the costs of certain materials used to provide services to the
Company’s customers. Both the costs of equipment and labor increased
prior to and during 2008. In the third and fourth quarters of 2008
and 2009, however, the prices of commodities such as steel decreased
dramatically, as did demand for oilfield equipment and personnel. As
a result, the Company’s labor costs declined, and equipment that the Company
ordered was not subject to extended lead time for deliveries. The costs of
certain materials used to provide services to RPC’s customers have remained high
throughout 2009, however, which has resulted in higher costs of
revenues. The Company has attempted to mitigate these high costs by
securing materials through different sources, although no assurance can be given
that these efforts will mitigate these high costs.
Off
Balance Sheet Arrangements
The
Company does not have any material off balance sheet arrangements.
Related
Party Transactions
Marine
Products Corporation
Effective
February 28, 2001, the Company spun off the business conducted through Chaparral
Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing
segment. RPC accomplished the spin-off by contributing 100 percent of
the issued and outstanding stock of Chaparral to Marine Products Corporation (a
Delaware corporation) (“Marine Products”), a newly formed wholly owned
subsidiary of RPC, and then distributing the common stock of Marine Products to
RPC stockholders. In conjunction with the spin-off, RPC and Marine
Products entered into various agreements that define the companies’
relationship.
In
accordance with a Transition Support Services agreement, which may be terminated
by either party, RPC provides certain administrative services, including
financial reporting and income tax administration, acquisition assistance, etc.,
to Marine Products. Charges from the Company (or from corporations
that are subsidiaries of the Company) for such services aggregated approximately
$713,000 in 2009, $842,000 in 2008 and $957,000 in 2007.
The Company’s receivable due from Marine Products for
these services as of December 31, 2009 and 2008 was approximately $65,000 and
$70,000.
The Company’s directors are also directors of Marine
Products and all of the executive officers are employees of both the Company and
Marine Products.
Other
The
Company periodically purchases in the ordinary course of business products or
services from suppliers, who are owned by significant officers or stockholders,
or affiliated with the directors of RPC. The total amounts paid to these
affiliated parties were approximately $409,000 in 2009, $393,000 in 2008 and
$1,035,000 in 2007.
RPC
receives certain administrative services and rents office space from Rollins,
Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is
otherwise affiliated with RPC). The service agreements between
Rollins, Inc. and the Company provide for the provision of services on a cost
reimbursement basis and are terminable on six months notice. The
services covered by these agreements include office space, administration of
certain employee benefit programs, and other administrative services. Charges to
the Company (or to corporations which are subsidiaries of the Company) for such
services and rent totaled $87,000 in 2009, $90,000 in 2008 and $72,000 in
2007.
Critical
Accounting Policies
The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require significant
judgment by management in selecting the appropriate assumptions for calculating
accounting estimates. These judgments are based on our historical experience,
terms of existing contracts, trends in the industry, and information available
from other outside sources, as appropriate. Senior management has
discussed the development, selection and disclosure of its critical accounting
estimates with the Audit Committee of our Board of Directors. The
Company believes the following critical accounting policies involve estimates
that require a higher degree of judgment and complexity:
Allowance for doubtful
accounts
— Substantially all of the Company’s receivables are due from
oil and gas exploration and production companies in the United States, selected
international locations and foreign, nationally owned oil
companies. Our allowance for doubtful accounts is determined using a
combination of factors to ensure that our receivables are not overstated due to
uncollectibility. Our established credit evaluation procedures seek
to minimize the amount of business we conduct with higher risk customers. Our
customers’ ability to pay is directly related to their ability to generate cash
flow on their projects and is significantly affected by the volatility in the
price of oil and natural gas. Provisions for doubtful accounts are recorded in
selling, general and administrative expenses. Accounts are
written-off against the allowance for doubtful accounts when the Company
determines that amounts are uncollectible and recoveries of amounts previously
written off are recorded when collected. Significant recoveries will
generally reduce the required provision in the period of
recovery. Therefore, the provision for doubtful accounts can
fluctuate significantly from period to period. Recoveries were
insignificant in 2009 and 2007. Recoveries in 2008 totaled $1.5
million, causing a reduction in bad debt expense in 2008. We record
specific provisions when we become aware of a customer’s inability to meet its
financial obligations to us, such as in the case of bankruptcy filings or
deterioration in the customer’s operating results or financial position. If
circumstances related to customers change, our estimates of the realizability of
receivables would be further adjusted, either upward or downward.
The
estimated allowance for doubtful accounts is based on our evaluation of the
overall trends in the oil and gas industry, financial condition of our
customers, our historical write-off experience, current economic conditions, and
in the case of international customers, our judgments about the economic and
political environment of the related country and region. In addition
to reserves established for specific customers, we establish general reserves by
using different percentages depending on the age of the
receivables. Excluding the effect of the recoveries referred to
above, the annual provisions for doubtful accounts have ranged from 0.10 percent
to 0.45 percent of revenues over the last three years. Increasing or
decreasing the estimated general reserve percentages by 0.50 percentage points
as of December 31, 2009 would have resulted in a change of approximately $0.7
million to the allowance for doubtful accounts and a corresponding change to
selling, general and administrative expenses.
Income taxes
— The effective
income tax rates were 32.1 percent in 2009, 39.5 percent in 2008 and 37.7
percent in 2007. Our effective tax rates vary due to changes in
estimates of our future taxable income, fluctuations in the tax jurisdictions in
which our earnings and deductions are realized, and favorable or unfavorable
adjustments to our estimated tax liabilities related to proposed or probable
assessments. As a result, our effective tax rate may fluctuate
significantly on a quarterly or annual basis.
We
establish a valuation allowance against the carrying value of deferred tax
assets when we determine that it is more likely than not that the asset will not
be realized through future taxable income. Such amounts are charged
to earnings in the period in which we make such determination. Likewise, if we
later determine that it is more likely than not that the net deferred tax assets
would be realized, we would reverse the applicable portion of the previously
provided valuation allowance. We have considered future market growth,
forecasted earnings, future taxable income, the mix of earnings in the
jurisdictions in which we operate, and prudent and feasible tax planning
strategies in determining the need for a valuation allowance.
We
calculate our current and deferred tax provision based on estimates and
assumptions that could differ from the actual results reflected in income tax
returns filed during the subsequent year. Adjustments based on filed returns are
recorded when identified, which is generally in the third quarter of the
subsequent year for U.S. federal and state provisions. Deferred tax
liabilities and assets are determined based on the differences between the
financial and tax bases of assets and liabilities using enacted tax rates in
effect in the year the differences are expected to reverse.
The
amount of income taxes we pay is subject to ongoing audits by federal, state and
foreign tax authorities, which may result in proposed assessments. Our estimate
for the potential outcome for any uncertain tax issue is highly judgmental. We
believe we have adequately provided for any reasonably foreseeable outcome
related to these matters. However, our future results may include favorable or
unfavorable adjustments to our estimated tax liabilities in the period the
assessments are made or resolved or when statutes of limitation on potential
assessments expire. Additionally, the jurisdictions in which our earnings or
deductions are realized may differ from our current estimates.
Insurance expenses
– The
Company self insures, up to certain policy-specified limits, certain risks
related to general liability, workers’ compensation, vehicle and equipment
liability. The cost of claims under these self-insurance programs is
estimated and accrued using individual case-based valuations and statistical
analysis and is based upon judgment and historical experience; however, the
ultimate cost of many of these claims may not be known for several years. These
claims are monitored and the cost estimates are revised as developments occur
relating to such claims. The Company has retained an independent
third party actuary to assist in the calculation of a range of exposure for
these claims. As of December 31, 2009, the Company estimates the
range of exposure to be from $11.1 million to $14.9 million. The
Company has recorded liabilities at December 31, 2009 of approximately $12.9
million which represents management’s best estimate of probable
loss.
Depreciable life of assets
—
RPC’s net property, plant and equipment at December 31, 2009 was $396.2 million
representing 61.0 percent of the Company’s consolidated
assets. Depreciation and amortization expenses for the year ended
December 31, 2009 were $130.6 million. Management judgment is
required in the determination of the estimated useful lives used to calculate
the annual and accumulated depreciation and amortization expense.
Property,
plant and equipment are reported at cost less accumulated depreciation and
amortization, which is provided on a straight-line basis over the estimated
useful lives of the assets. The estimated useful life represents the projected
period of time that the asset will be productively employed by the Company and
is determined by management based on many factors including historical
experience with similar assets. Assets are monitored to ensure
changes in asset lives are identified and prospective depreciation and
amortization expense is adjusted accordingly. We have not made any
changes to the estimated lives of assets resulting in a material impact in the
last three years.
Defined benefit pension
plan
– In
2002, the Company ceased all future benefit accruals under the defined benefit
plan, although the Company remains obligated to provide employees benefits
earned through March 2002. The Company accounts for the defined
benefit plan in accordance with the provisions of FASB ASC 715, “Compensation –
Retirement Benefits” and engages an outside actuary to calculate its obligations
and costs. With the assistance of the actuary, the Company evaluates
the significant assumptions used on a periodic basis including the estimated
future return on plan assets, the discount rate, and other factors, and makes
adjustments to these liabilities as necessary.
The
Company chooses an expected rate of return on plan assets based on historical
results for similar allocations among asset classes, the investments strategy,
and the views of our investment adviser. Differences between
the expected long-term return on plan assets and the actual return are amortized
over future years. Therefore, the net deferral of past asset gains
(losses) ultimately affects future pension expense. The Company’s
assumption for the expected return on plan assets was seven percent for 2009 and
eight percent for 2008 and 2007.
The
discount rate reflects the current rate at which the pension liabilities could
be effectively settled at the end of the year. In estimating this rate, the
Company utilizes a yield curve approach. The approach utilizes an
economic model whereby the Company’s expected benefit payments over the life of
the plan are forecasted and then compared to a portfolio of investment
grade corporate bonds that will mature at the same time that the benefit
payments are due in any given year. The economic model then
calculates the one discount rate to apply to all benefit payments over the life
of the plan which will result in the same total lump sum as the payments from
the corporate bonds. A lower discount rate increases the
present value of benefit obligations. The discount rate was 6.00
percent as of December 31, 2009 compared to 6.84 percent in 2008 and 6.25
percent in 2007.
As of
December 31, 2009, the defined benefit plan was under-funded and the recorded
change within accumulated other comprehensive loss increased stockholders’
equity by $0.9 million after tax. Holding all other factors
constant, a change in the discount rate used to measure plan liabilities by 0.25
percentage points would not result in a significant pre-tax change to the net
loss related to pension reflected in accumulated other comprehensive
loss.
The
Company recognized pre-tax pension (income) expense of $2.0 million in 2009,
$(0.4) million in 2008 and $0.3 million in 2007. Based on the
under-funded status of the defined benefit plan as of December 31, 2009, the
Company expects to recognize pension expense of $0.6 million in
2010. Holding all other factors constant, a change in the expected
long-term rate of return on plan assets by 0.50 percentage points would result
in an increase or decrease in pension expense/income of approximately $0.1
million in 2010. Holding all other factors constant, a change
in the discount rate used to measure plan liabilities by 0.25 percentage points
would result in an increase or decrease in pension expense/income of
approximately $0.1 million in 2010.
New
Accounting Pronouncements
Recently Adopted Accounting
Pronouncements
:
During
2009, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2009-01(ASU
2009-01)
titled “Topic
105-Generally Accepted Accounting Principles amendments based on Statement of
Financial Accounting Standards No. 168-The FASB Accounting Standards
Codification
TM
and
the Hierarchy of Generally Accepted Accounting Principles
.”
FASB
Accounting Standards Codification
TM
(ASC)
Topic 105
, “Generally Accepted Accounting
Principles”
has become the single source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities, effective for financial statements issued for interim
and annual periods ending after September 15, 2009. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB now issues Accounting Standards Updates
that are not considered authoritative in their own right, but will serve to
update the Codification, provide background information about the guidance, and
provide the bases for conclusions on the change(s) in the
Codification. References to accounting literature throughout this
document have been updated to reflect the codification.
In
September 2009, the FASB issued ASU No. 2009-12,
“Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (ASU
2009-12). ASU 2009-12 amends Accounting Standards Codification Topic 820-10,
“Fair Value Measurements-Overall.” The amendments in ASU 2009-12
provide a practical expedient to measure investments that are required to be
measured at fair value on a recurring or non-recurring basis but do not have a
readily determinable fair value. The investments can be valued on the basis of
the net asset value per share of the investment. There are additional
disclosure requirements by major category of investments and the nature of
restrictions on the investor’s ability to redeem its investments. The amendments
in this ASU are effective for annual periods ending after December 15, 2009. See
Note 10 of the Consolidated Financial Statements for related disclosures
regarding pension assets that do not have readily determinable fair
value.
In August 2009, the FASB issued Accounting Standards
Update No. 2009-5,
“Measuring Liabilities at Fair Value” (ASU 2009-05). ASU
2009-05 amends Accounting Standards Codification Topic 820, “Fair Value
Measurements.” ASU 2009-05 provides clarification that in
circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using one or more of the following methods: 1) a valuation technique that
uses a) the quoted price of the identical liability when traded as an asset
or b) quoted prices for similar liabilities or similar liabilities when
traded as assets and/or 2) a valuation technique that is consistent with
the principles of ASC Topic 820 (e.g. an income approach or market approach).
ASU 2009-05 also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to adjust to include inputs relating to the
existence of transfer restrictions on that liability.
The Company adopted
these provisions in the fourth quarter of 2009 and the a
doption did not have a material impact on the Company’s
consolidated financial statements.
In
December 2008, the FASB issued
certain amendments
as codified in ASC 715-20-65, “Compensation – Retirement Benefits, Defined
Benefit Plans.”
These amendments require additional disclosures regarding
how investment decisions are made: the major categories of plan assets; the
inputs and valuation techniques used to measure the fair value of plan assets;
the effect of fair value measurements using significant unobservable inputs on
changes in plan assets for the period; and significant concentrations of risk
within plan assets. The disclosures about plan assets are required to be
provided for fiscal years ending after December 15, 2009, with no restatement
required for earlier periods that are presented for comparative purposes, upon
initial application. Earlier application of the provisions is permitted.
See Note 10 of the Consolidated Financial Statements for
related disclosures.
In May
2009, the FASB issued a new standard, as codified in ASC Topic 855 “Subsequent
Events.” ASC Topic 855 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In addition, it
provides guidance regarding the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements; the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The Company adopted this
standard in the second quarter of 2009 and the adoption did not have a material
effect on the Company’s consolidated financial statements.
In April 2009, the FASB issued certain amendments as
codified in ASC 820-10-65, “Fair Value Disclosures.” ASC 820-10-65
affirms that the objective of fair value when the market for an asset is not
active is the price that would be received to sell the asset in an orderly
transaction, and includes additional factors for determining whether there has
been a significant decrease in market activity for an asset when the market for
that asset is not active. An entity is required to base its
conclusion about whether a transaction was not orderly on the weight of the
evidence.
The Company adopted these provisions in the second quarter of
2009 and the a
doption did not have a material
impact on the Company’s consolidated financial statements.
In April 2009, the FASB issued certain amendments as
codified in ASC Topic 320-10-65, “Investments — Debt and Equity Securities.”
These amendments (i) change existing guidance for determining whether an
impairment is other than temporary to debt securities and (ii) replace the
existing requirement that the entity’s management assert it has both the intent
and ability to hold an impaired security until recovery with a requirement that
management assert: (a) it does not have the intent to sell the security;
and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis. Declines in the fair value of
held-to-maturity and available-for-sale securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized losses
to the extent the impairment is related to credit losses. The amount of the
impairment related to other factors is recognized in other comprehensive income.
The Company adopted ASC 320 in the second quarter of 2009 and the a
doption did not have a material impact on the Company’s
consolidated financial statements.
In April 2009, the FASB issued certain amendments as
codified in ASC 825-10-65, “Financial Instruments,” that require an entity to
provide disclosures about fair value of financial instruments in interim
financial information including whenever it issues summarized financial
information for interim reporting periods. In addition, entities must disclose,
in the body or in the accompanying notes of its summarized financial information
for interim reporting periods and in its financial statements for annual
reporting periods, the fair value of all financial instruments for which it is
practicable to estimate that value, whether recognized or not recognized in the
statement of financial position.
The Company adopted these amendments in
the second quarter of 2009. See Note 8
of the Consolidated Financial Statements
for
related disclosures.
Recently
Issued Accounting Pronouncements Not Yet Adopted:
In
November 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810) –
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities,” which codifies FASB Statement No. 167, “Amendments to FASB
Interpretation No. 46(R).” The ASU changes how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entity’s purpose and design
and the reporting entity’s ability to direct the activities of the other entity
that most significantly impact the other entity’s economic
performance. These provisions are effective January 1, 2010, for a
calendar year-end entity, with early application not being
permitted. Adoption of these provisions is not expected to have a
material impact on the Company’s consolidated financial statements.
In
November 2009, the FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860)
– Accounting for Transfers of Financial Assets,” which formally codifies FASB
Statement No. 166, “Accounting for Transfers of Financial
Assets.” ASU 2009-16 is a revision to SFAS No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,” and requires more information about transfers of financial assets,
including securitization transactions, and where entities have continuing
exposure to the risks related to transferred financial assets. It eliminates the
concept of a “qualifying special-purpose entity,” changes the requirements for
derecognizing financial assets, and requires additional
disclosures. The provisions are effective January 1, 2010, for a
calendar year-end entity, with early application not being
permitted. Adoption of these provisions is not expected to have a
material impact on the Company’s consolidated financial statements.
In
September 2009, the FASB issued certain amendments as codified in ASC 605-25,
“Revenue Recognition; Multiple-Element Arrangements.” These
amendments provide clarification on whether multiple deliverables exist, how the
arrangement should be separated, and the consideration allocated. An
entity is required to allocate revenue in an arrangement using estimated selling
prices of deliverables in the absence of vendor-specific objective evidence or
third-party evidence of selling price. These amendments also eliminate the use
of the residual method and require an entity to allocate revenue using the
relative selling price method. The amendments significantly expand
the disclosure requirements for multiple-deliverable revenue
arrangements. These provisions are to be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, with earlier application
permitted. The Company is currently evaluating the impact of these
amendments to its consolidated financial statements.
Item 8. Financial Statements and
Supplementary Data
CONSOLIDATED
BALANCE SHEETS
RPC,
INC. AND SUBSIDIARIES
(in
thousands except share information)
December
31,
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
Cash
and cash equivalents
|
|
$
|
4,489
|
|
|
$
|
3,037
|
|
Accounts
receivable, net
|
|
|
130,619
|
|
|
|
210,375
|
|
Inventories
|
|
|
55,783
|
|
|
|
49,779
|
|
Deferred
income taxes
|
|
|
4,894
|
|
|
|
6,187
|
|
Income
taxes receivable
|
|
|
18,184
|
|
|
|
15,604
|
|
Prepaid
expenses and other current assets
|
|
|
5,485
|
|
|
|
7,841
|
|
Current
assets
|
|
|
219,454
|
|
|
|
292,823
|
|
Property,
plant and equipment, net
|
|
|
396,222
|
|
|
|
470,115
|
|
Goodwill
|
|
|
24,093
|
|
|
|
24,093
|
|
Other
assets
|
|
|
9,274
|
|
|
|
6,430
|
|
Total
assets
|
|
$
|
649,043
|
|
|
$
|
793,461
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
49,882
|
|
|
$
|
61,217
|
|
Accrued
payroll and related expenses
|
|
|
10,708
|
|
|
|
20,398
|
|
Accrued
insurance expenses
|
|
|
4,315
|
|
|
|
4,640
|
|
Accrued
state, local and other taxes
|
|
|
2,001
|
|
|
|
2,395
|
|
Income
taxes payable
|
|
|
647
|
|
|
|
3,359
|
|
Other
accrued expenses
|
|
|
220
|
|
|
|
320
|
|
Current
liabilities
|
|
|
67,773
|
|
|
|
92,329
|
|
Long-term
accrued insurance expenses
|
|
|
8,597
|
|
|
|
8,398
|
|
Notes
payable to banks
|
|
|
90,300
|
|
|
|
174,450
|
|
Long-term
pension liabilities
|
|
|
14,647
|
|
|
|
11,177
|
|
Other
long-term liabilities
|
|
|
1,838
|
|
|
|
3,628
|
|
Deferred
income taxes
|
|
|
56,165
|
|
|
|
54,395
|
|
Total
liabilities
|
|
|
239,320
|
|
|
|
344,377
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.10 par value, 1,000,000 shares authorized, none
issued
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.10 par value, 159,000,000 shares authorized, 98,364,669 and
97,705,142 shares issued and outstanding in 2009 and 2008,
respectively
|
|
|
9,836
|
|
|
|
9,770
|
|
Capital
in excess of par value
|
|
|
7,638
|
|
|
|
3,990
|
|
Retained
earnings
|
|
|
401,055
|
|
|
|
445,356
|
|
Accumulated
other comprehensive loss
|
|
|
(8,806
|
)
|
|
|
(10,032
|
)
|
Total
stockholders’ equity
|
|
|
409,723
|
|
|
|
449,084
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
649,043
|
|
|
$
|
793,461
|
|
The
accompanying notes are an integral part of these statements.
CONSOLIDATED
STATEMENTS OF OPERATIONS
RPC,
INC. AND SUBSIDIARIES
(in
thousands except per share data)
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
REVENUES
|
|
$
|
587,863
|
|
|
$
|
876,977
|
|
|
$
|
690,226
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
393,806
|
|
|
|
503,631
|
|
|
|
368,175
|
|
Selling,
general and administrative expenses
|
|
|
97,672
|
|
|
|
117,140
|
|
|
|
107,800
|
|
Depreciation
and amortization
|
|
|
130,580
|
|
|
|
118,403
|
|
|
|
78,506
|
|
Gain
on disposition of assets, net
|
|
|
(1,143
|
)
|
|
|
(6,367
|
)
|
|
|
(6,293
|
)
|
Operating
(loss) profit
|
|
|
(33,052
|
)
|
|
|
144,170
|
|
|
|
142,038
|
|
Interest
expense
|
|
|
(2,176
|
)
|
|
|
(5,282
|
)
|
|
|
(4,179
|
)
|
Interest
income
|
|
|
147
|
|
|
|
73
|
|
|
|
70
|
|
Other
income (expense), net
|
|
|
1,582
|
|
|
|
(1,176
|
)
|
|
|
1,905
|
|
(Loss)
income before income taxes
|
|
|
(33,499
|
)
|
|
|
137,785
|
|
|
|
139,834
|
|
Income
tax (benefit) provision
|
|
|
(10,754
|
)
|
|
|
54,382
|
|
|
|
52,785
|
|
Net
(loss) income
|
|
$
|
(22,745
|
)
|
|
$
|
83,403
|
|
|
$
|
87,049
|
|
(LOSS)
EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.24
|
)
|
|
$
|
0.86
|
|
|
$
|
0.90
|
|
Diluted
|
|
$
|
(0.24
|
)
|
|
$
|
0.85
|
|
|
$
|
0.89
|
|
Dividends
paid per share
|
|
$
|
0.22
|
|
|
$
|
0.24
|
|
|
$
|
0.20
|
|
The
accompanying notes are an integral part of these statements.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
RPC,
INC. AND SUBSIDIARIES
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Three Years
Ended
|
|
Comprehensive
|
|
|
|
Common
Stock
|
|
|
|
Par
|
|
|
|
Retained
|
|
|
|
Comprehensive
|
|
|
|
|
|
December 31,
2009
|
|
Income
(Loss)
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Value
|
|
|
|
Earnings
|
|
|
|
Income
(Loss)
|
|
|
|
Total
|
|
Balance,
December 31, 2006
|
|
|
|
|
|
97,214
|
|
|
$
|
9,721
|
|
|
$
|
13,595
|
|
|
$
|
317,705
|
|
|
$
|
(5,734
|
)
|
|
$
|
335,287
|
|
Stock
issued for stock incentive plans, net
|
|
|
|
|
|
989
|
|
|
|
99
|
|
|
|
4,843
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,942
|
|
Stock
purchased and retired
|
|
|
|
|
|
(163
|
)
|
|
|
(16
|
)
|
|
|
(2,838
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,854
|
)
|
Net
income
|
|
$
|
87,049
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,049
|
|
|
|
—
|
|
|
|
87,049
|
|
Pension
adjustment, net of taxes
|
|
|
2,535
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,535
|
|
|
|
2,535
|
|
Unrealized
gain on securities, net of taxes
|
|
|
486
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
486
|
|
|
|
486
|
|
Foreign
currency translation, net of taxes
|
|
|
172
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
172
|
|
|
|
172
|
|
Comprehensive
income
|
|
$
|
90,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,473
|
)
|
|
|
—
|
|
|
|
(19,473
|
)
|
Excess
tax benefits for share-based payments
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,128
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,128
|
|
Balance,
December 31, 2007
|
|
|
|
|
|
|
98,040
|
|
|
|
9,804
|
|
|
|
16,728
|
|
|
|
385,281
|
|
|
|
(2,541
|
)
|
|
|
409,272
|
|
Stock
issued for stock incentive plans, net
|
|
|
|
|
|
|
1,288
|
|
|
|
128
|
|
|
|
5,654
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,782
|
|
Stock
purchased and retired
|
|
|
|
|
|
|
(1,623
|
)
|
|
|
(162
|
)
|
|
|
(19,238
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,400
|
)
|
Net
income
|
|
$
|
83,403
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
83,403
|
|
|
|
—
|
|
|
|
83,403
|
|
Pension
adjustment, net of taxes
|
|
|
(6,053
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,053
|
)
|
|
|
(6,053
|
)
|
Loss
on cash flow hedge, net of taxes
|
|
|
(527
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(527
|
)
|
|
|
(527
|
)
|
Unrealized
loss on securities, net of taxes
|
|
|
(585
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(585
|
)
|
|
|
(585
|
)
|
Foreign
currency translation, net of taxes
|
|
|
(326
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(326
|
)
|
|
|
(326
|
)
|
Comprehensive
income
|
|
$
|
75,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(23,328
|
)
|
|
|
—
|
|
|
|
(23,328
|
)
|
Excess
tax benefits for share-based payments
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
846
|
|
|
|
—
|
|
|
|
—
|
|
|
|
846
|
|
Balance,
December 31, 2008
|
|
|
|
|
|
|
97,705
|
|
|
|
9,770
|
|
|
|
3,990
|
|
|
|
445,356
|
|
|
|
(10,032
|
)
|
|
|
449,084
|
|
Stock
issued for stock incentive plans, net
|
|
|
|
|
|
|
911
|
|
|
|
91
|
|
|
|
4,323
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,414
|
|
Stock
purchased and retired
|
|
|
|
|
|
|
(252
|
)
|
|
|
(25
|
)
|
|
|
(2,096
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,121
|
)
|
Net
loss
|
|
$
|
(22,745
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(22,745
|
)
|
|
|
—
|
|
|
|
(22,745
|
)
|
Pension
adjustment, net of taxes
|
|
|
897
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
897
|
|
|
|
897
|
|
Gain
on cash flow hedge, net of taxes
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
7
|
|
Unrealized
gain on securities, net of taxes
|
|
|
91
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
91
|
|
|
|
91
|
|
Foreign
currency translation, net of taxes
|
|
|
231
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
231
|
|
|
|
231
|
|
Comprehensive
loss
|
|
$
|
(21,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,556
|
)
|
|
|
—
|
|
|
|
(21,556
|
)
|
Excess
tax benefits for share-based payments
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,421
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,421
|
|
Balance,
December 31, 2009
|
|
|
|
|
|
|
98,364
|
|
|
$
|
9,836
|
|
|
$
|
7,638
|
|
|
$
|
401,055
|
|
|
$
|
(8,806
|
)
|
|
$
|
409,723
|
|
The
accompanying notes are an integral part of these statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
RPC,
Inc. and Subsidiaries
(in
thousands)
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(22,745
|
)
|
|
$
|
83,403
|
|
|
$
|
87,049
|
|
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and other non-cash charges
|
|
|
130,581
|
|
|
|
118,444
|
|
|
|
78,493
|
|
Stock-based
compensation expense
|
|
|
4,440
|
|
|
|
3,732
|
|
|
|
3,189
|
|
Gain
on disposition of assets, net
|
|
|
(1,143
|
)
|
|
|
(6,367
|
)
|
|
|
(6,293
|
)
|
Deferred
income tax provision
|
|
|
1,669
|
|
|
|
27,199
|
|
|
|
15,738
|
|
Excess
tax benefits for share-based payments
|
|
|
(1,421
|
)
|
|
|
(846
|
)
|
|
|
(1,128
|
)
|
Changes
in current assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
80,035
|
|
|
|
(34,508
|
)
|
|
|
(27,497
|
)
|
Income
taxes receivable
|
|
|
(1,159
|
)
|
|
|
(2,462
|
)
|
|
|
(7,229
|
)
|
Inventories
|
|
|
(5,798
|
)
|
|
|
(20,377
|
)
|
|
|
(8,316
|
)
|
Prepaid
expenses and other current assets
|
|
|
2,575
|
|
|
|
(2,231
|
)
|
|
|
(568
|
)
|
Accounts
payable
|
|
|
(5,711
|
)
|
|
|
9,691
|
|
|
|
7,826
|
|
Income
taxes payable
|
|
|
(2,712
|
)
|
|
|
(981
|
)
|
|
|
123
|
|
Accrued
payroll and related expenses
|
|
|
(9,690
|
)
|
|
|
2,426
|
|
|
|
4,683
|
|
Accrued
insurance expenses
|
|
|
(325
|
)
|
|
|
(113
|
)
|
|
|
1,426
|
|
Accrued
state, local and other taxes
|
|
|
(394
|
)
|
|
|
676
|
|
|
|
(1,078
|
)
|
Other
accrued expenses
|
|
|
(167
|
)
|
|
|
(203
|
)
|
|
|
46
|
|
Changes
in working capital
|
|
|
56,654
|
|
|
|
(48,082
|
)
|
|
|
(30,584
|
)
|
Changes
in other assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
liabilities
|
|
|
4,882
|
|
|
|
(481
|
)
|
|
|
(3,067
|
)
|
Accrued
insurance expenses
|
|
|
199
|
|
|
|
232
|
|
|
|
1,274
|
|
Other
non-current assets
|
|
|
(2,597
|
)
|
|
|
(20
|
)
|
|
|
(1,173
|
)
|
Other
non-current liabilities
|
|
|
(1,779
|
)
|
|
|
106
|
|
|
|
(1,626
|
)
|
Net
cash provided by operating activities
|
|
|
168,740
|
|
|
|
177,320
|
|
|
|
141,872
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(67,830
|
)
|
|
|
(170,318
|
)
|
|
|
(248,758
|
)
|
Proceeds
from sale of assets
|
|
|
6,686
|
|
|
|
11,365
|
|
|
|
9,134
|
|
Net
cash used for investing activities
|
|
|
(61,144
|
)
|
|
|
(158,953
|
)
|
|
|
(239,624
|
)
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of dividends
|
|
|
(21,556
|
)
|
|
|
(23,328
|
)
|
|
|
(19,473
|
)
|
Borrowings
from notes payable to banks
|
|
|
276,100
|
|
|
|
392,300
|
|
|
|
478,600
|
|
Repayments
of notes payable to banks
|
|
|
(360,250
|
)
|
|
|
(374,250
|
)
|
|
|
(357,800
|
)
|
Debt
issue costs for notes payable to banks
|
|
|
(234
|
)
|
|
|
(94
|
)
|
|
|
—
|
|
Excess
tax benefits for share-based payments
|
|
|
1,421
|
|
|
|
846
|
|
|
|
1,128
|
|
Cash
paid for common stock purchased and retired
|
|
|
(1,747
|
)
|
|
|
(17,489
|
)
|
|
|
(1,730
|
)
|
Proceeds
received upon exercise of stock options
|
|
|
122
|
|
|
|
347
|
|
|
|
636
|
|
Net
cash (used for) provided by financing activities
|
|
|
(106,144
|
)
|
|
|
(21,668
|
)
|
|
|
101,361
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
1,452
|
|
|
|
(3,301
|
)
|
|
|
3,609
|
|
Cash
and cash equivalents at beginning of year
|
|
|
3,037
|
|
|
|
6,338
|
|
|
|
2,729
|
|
Cash
and cash equivalents at end of year
|
|
$
|
4,489
|
|
|
$
|
3,037
|
|
|
$
|
6,338
|
|
The
accompanying notes are an integral part of these statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Note
1: Significant Accounting Policies
Principles
of Consolidation and Basis of Presentation
The
consolidated financial statements include the accounts of RPC, Inc. and its
wholly-owned subsidiaries (“RPC” or the “Company”). All significant intercompany
accounts and transactions have been eliminated.
Nature
of Operations
RPC
provides a broad range of specialized oilfield services and equipment primarily
to independent and major oil and gas companies engaged in the exploration,
production and development of oil and gas properties throughout the United
States, including the Gulf of Mexico, mid-continent, southwest, northeast and
Rocky Mountain regions, and in selected international markets. The services and
equipment provided include Technical Services such as pressure pumping services,
coiled tubing services, snubbing services (also referred to as hydraulic
workover services), nitrogen services, and firefighting and well control, and
Support Services such as the rental of drill pipe and other specialized oilfield
equipment and oilfield training.
Common Stock
RPC is
authorized to issue 159,000,000 shares of common stock, $0.10 par value. Holders
of common stock are entitled to receive dividends when, as, and if declared by
the Board of Directors out of legally available funds. Each share of common
stock is entitled to one vote on all matters submitted to a vote of
stockholders. Holders of common stock do not have cumulative voting rights. In
the event of any liquidation, dissolution or winding up of the Company, holders
of common stock are entitled to ratable distribution of the remaining assets
available for distribution to stockholders.
Preferred
Stock
RPC is authorized to issue up to 1,000,000 shares of
preferred stock, $0.10 par value. As of December 31, 2009, there were no shares
of preferred stock issued. The Board of Directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance of preferred stock as
a class without series or, if so determined from time to time, in one or more
series, and by filing a certificate pursuant to the applicable laws of the state
of Delaware and to fix the designations, powers, preferences and rights,
exchangeability for shares of any other class or classes of stock. Any preferred
stock to be issued could rank prior to the common stock with respect to dividend
rights and rights on liquidation.
Dividends
On
January 26, 2010, the Board of Directors approved a $0.04 per share cash
dividend payable March 10, 2010 to stockholders of record at the close of
business on February 10, 2010.
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant
estimates are used in the determination of the allowance for doubtful accounts,
income taxes, accrued insurance expenses, depreciable lives of assets, and
pension liabilities.
Revenues
RPC’s
revenues are generated principally from providing services and the related
equipment. Revenues are recognized when the services are rendered and
collectibility is reasonably assured. Revenues from services and
equipment are based on fixed or determinable priced purchase orders or contracts
with the customer and do not include the right of return. Rates for
services and equipment are priced on a per day, per unit of measure, per man
hour or similar basis. Sales tax charged to customers is presented on
a net basis within the consolidated statement of operations and excluded from
revenues.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Concentration
of Credit Risk
Substantially
all of the Company’s customers are engaged in the oil and gas industry. This
concentration of customers may impact overall exposure to credit risk, either
positively or negatively, in that customers may be similarly affected by changes
in economic and industry conditions. The Company provided oilfield
services to several hundred customers. Two customers individually accounted for
13 percent and 12 percent of the Company’s 2009 revenues. No
customers accounted for more than 10 percent of 2008 or 2007
revenues. Additionally, one of these customers accounted for 12
percent of accounts receivable as of December 31, 2009 and no customers
accounted for more than 10 percent of accounts receivable as of December 31,
2008.
Cash
and Cash Equivalents
Highly
liquid investments with original maturities of three months or less when
acquired are considered to be cash equivalents. The Company maintains its cash
in bank accounts which, at times, may exceed federally insured
limits. RPC maintains cash equivalents and investments in one or more
large financial institutions, and RPC’s policy restricts investment in any
securities rated less than “investment grade” by national rating
services.
Investments
Investments
classified as available-for-sale are stated at their fair values, with the
unrealized gains and losses, net of tax, reported as a separate component of
stockholders’ equity. The cost of securities sold is based on the specific
identification method. Realized gains and losses, declines in value judged to be
other than temporary, interest, and dividends with respect to available-for-sale
securities are included in interest income. The Company did not realize any
gains or losses on securities during 2009, 2008 or 2007 on its
available-for-sale securities. Securities that are held in the
non-qualified Supplemental Retirement Plan (“SERP”) are classified as
trading. See Note 10 for further information regarding the
SERP. The change in fair value of trading securities is presented in
other (expense) income on the consolidated statements of
operations.
Management
determines the appropriate classification of investments at the time of purchase
and re-evaluates such designations as of each balance sheet date.
Accounts
Receivable
The
majority of the Company’s accounts receivable are due principally from major and
independent oil and natural gas exploration and production
companies. Credit is extended based on evaluation of a customer’s
financial condition and, generally, collateral is not
required. Accounts receivable are considered past due after 60 days
and are stated at amounts due from customers, net of an allowance for doubtful
accounts.
Allowance
for Doubtful Accounts
Accounts
receivable are carried at the amount owed by customers, reduced by an allowance
for estimated amounts that may not be collectible in the future. The estimated
allowance for doubtful accounts is based on our evaluation of industry trends,
financial condition of our customers, our historical write-off experience,
current economic conditions, and in the case of our international customers, our
judgments about the economic and political environment of the related country
and region. Accounts are written off against the allowance for doubtful accounts
when the Company determines that amounts are uncollectible and recoveries of
previously written-off accounts are recorded when collected.
Inventories
Inventories,
which consist principally of (i) raw materials and supplies that are consumed in
RPC’s services provided to customers, (ii) spare parts for equipment used in
providing these services and (iii) manufactured components and attachments for
equipment used in providing services, are recorded at the lower of weighted
average cost or market value. Market value is determined based on replacement
cost for material and supplies. The Company regularly reviews inventory
quantities on hand and records provisions for excess or obsolete inventory based
primarily on its estimated forecast of product demand, market conditions,
production requirements and technological developments.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Derivative
Instruments and Hedging Activities
The
Company is subject to interest rate risk on the variable component of the
interest rate under our revolving credit agreement. Effective
December 2008, the Company entered into a $50 million interest rate swap
agreement. The agreement terminates on September 8,
2011. The Company has designated the interest rate swap as a cash
flow hedge. Changes in the fair value of the effective portion of the
interest rate swap are recognized in other comprehensive loss until the hedged
item is recognized in earnings.
Property,
Plant and Equipment
Property,
plant and equipment, including software costs, are reported at cost less
accumulated depreciation and amortization, which is provided on a straight-line
basis over the estimated useful lives of the assets. Annual
depreciation and amortization expense is computed using the following useful
lives: operating equipment, 3 to 10 years; buildings and leasehold improvements,
15 to 30 years; furniture and fixtures, 5 to 7 years; software, 5 years; and
vehicles, 3 to 5 years. The cost of assets retired or otherwise disposed of and
the related accumulated depreciation and amortization are eliminated from the
accounts in the year of disposal with the resulting gain or loss credited or
charged to income from operations. Expenditures for additions, major renewals,
and betterments are capitalized. Expenditures for restoring an identifiable
asset to working condition or for maintaining the asset in good working order
constitute repairs and maintenance and are expensed as incurred.
RPC
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of those assets. The Company periodically reviews the values
assigned to long-lived assets, such as property, plant and equipment and other
assets, to determine if any impairments should be recognized. Management
believes that the long-lived assets in the accompanying balance sheets have not
been impaired.
Goodwill
and Other Intangibles
Goodwill
represents the excess of the purchase price over the fair value of net assets of
businesses acquired. The carrying amount of goodwill was $24,093,000
at December 31, 2009 and 2008. Goodwill is reviewed annually, or more
frequently if events occur or circumstances change that would more likely than
not reduce the fair value of the reporting unit below its carrying
amount, for impairment. In reviewing goodwill for impairment,
potential impairment is measured by comparing the estimated fair value of a
reporting unit with its carrying value. Based upon the results of
these analyses, the Company has concluded that no impairment of its goodwill has
occurred for the years ended December 31, 2009, 2008 and 2007.
Other
intangibles primarily represent non-compete agreements related to businesses
acquired. Non-compete agreements are amortized on a straight-line
basis over the period of the agreement, as this method best estimates the ratio
that current revenues bear to the total of current and anticipated
revenues. These non-compete agreements are fully amortized as of
December 31, 2009 and 2008.
Advertising
Advertising
expenses are charged to expense during the period in which they are
incurred. Advertising expenses totaled $1,065,000 in 2009, $1,957,000
in 2008 and $1,594,000 in 2007.
Insurance
Expenses
RPC self
insures, up to certain policy-specified limits, certain risks related to general
liability, workers’ compensation, vehicle and equipment liability, and employee
health insurance plan costs. The estimated cost of claims under these
self-insurance programs is estimated and accrued as the claims are incurred
(although actual settlement of the claims may not be made until future periods)
and may subsequently be revised based on developments relating to such claims.
The portion of these estimated outstanding claims expected to be paid more than
one year in the future is classified as long-term accrued insurance
expenses.
Income
Taxes
Deferred
tax liabilities and assets are determined based on the difference between the
financial and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
Company establishes a valuation allowance against the carrying value of deferred
tax assets when the Company determines that it is more likely than not that the
asset will not be realized through future taxable income.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Defined
Benefit Pension Plan
The
Company has a defined benefit pension plan that provides monthly benefits upon
retirement at age 65 to eligible employees with at least one year of service
prior to 2002. In 2002, the Company’s Board of Directors approved a
resolution to cease all future retirement benefit accruals under the defined
benefit pension plan. See Note 10 for a full description of this plan and the
related accounting and funding policies.
Share
Repurchases
The
Company records the cost of share repurchases in stockholders’ equity as a
reduction to common stock to the extent of par value of the shares acquired and
the remainder is allocated to capital in excess of par value.
Earnings
per Share
FASB ASC
Topic 260-10 “Earnings Per Share-Overall,” requires a basic earnings per share
and diluted earnings per share presentation. During 2009, the Company
adopted certain amendments to ASC 260-10 which requires that all outstanding
unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents, whether paid or unpaid, be considered
participating securities and included in the calculation of its basic earnings
per share.
The
Company has periodically issued share-based payment awards that contain
non-forfeitable rights to dividends, and therefore are considered participating
securities. See Note 10 for further information on restricted stock
granted to employees.
The basic
and diluted calculations differ as a result of the dilutive effect of stock
options and time lapse restricted shares and performance restricted shares
included in diluted earnings per share, but excluded from basic earnings per
share. Basic and diluted earnings per share are computed by dividing net (loss)
income by the weighted average number of shares outstanding during the
respective periods.
A
reconciliation of weighted average shares outstanding along with the (loss)
earnings per share attributable to restricted shares of common stock
(participating securities) is as follows:
(In
thousands except per share data)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
(loss) income available for stockholders:
|
|
$
|
(22,745
|
)
|
|
$
|
83,403
|
|
|
$
|
87,049
|
|
Less: Dividends
paid
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
(21,229
|
)
|
|
|
(22,905
|
)
|
|
|
(19,159
|
)
|
Restricted
shares of common stock
|
|
|
(327
|
)
|
|
|
(423
|
)
|
|
|
(314
|
)
|
Undistributed
(loss) earnings
|
|
$
|
(44,301
|
)
|
|
$
|
60,075
|
|
|
$
|
67,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
of undistributed earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
$
|
(43,408
|
)
|
|
$
|
58,992
|
|
|
$
|
66,494
|
|
Restricted
shares of common stock
|
|
|
(893
|
)
|
|
|
1,083
|
|
|
|
1,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
94,260
|
|
|
|
94,750
|
|
|
|
94,664
|
|
Restricted
shares of common stock
|
|
|
2,045
|
|
|
|
1,815
|
|
|
|
1,604
|
|
|
|
|
96,305
|
|
|
|
96,565
|
|
|
|
96,268
|
|
Diluted
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
94,260
|
|
|
|
94,750
|
|
|
|
94,664
|
|
Dilutive
effect of options
|
|
|
-
|
|
|
|
1,300
|
|
|
|
2,094
|
|
|
|
|
94,260
|
|
|
|
96,050
|
|
|
|
96,758
|
|
Restricted shares of
common stock
|
|
|
2,045
|
|
|
|
1,815
|
|
|
|
1,604
|
|
|
|
|
96,305
|
|
|
|
97,865
|
|
|
|
98,362
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributed
earnings
|
|
$
|
0.22
|
|
|
$
|
0.24
|
|
|
$
|
0.20
|
|
Undistributed
(loss) earnings
|
|
|
(0.46
|
)
|
|
|
0.62
|
|
|
|
0.70
|
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.86
|
|
|
$
|
0.90
|
|
Restricted
shares of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributed
earnings
|
|
$
|
0.16
|
|
|
$
|
0.23
|
|
|
$
|
0.20
|
|
Undistributed
(loss) earnings
|
|
|
(0.44
|
)
|
|
|
0.60
|
|
|
|
0.67
|
|
|
|
$
|
(0.28
|
)
|
|
$
|
0.83
|
|
|
$
|
0.87
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributed
earnings
|
|
$
|
0.22
|
|
|
$
|
0.24
|
|
|
$
|
0.20
|
|
Undistributed
(loss) earnings
|
|
|
(0.46
|
)
|
|
|
0.61
|
|
|
|
0.69
|
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.85
|
|
|
$
|
0.89
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
During
the year ended December 31, 2009, the Company incurred a net loss from
continuing operations and consequently the common stock equivalents were
excluded from the computation of diluted loss per share because the effect would
have been anti-dilutive.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, marketable securities, accounts payable, an interest rate swap, and
debt. The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximate their fair value due to the short-term nature of
such instruments. The marketable securities classified as
available-for-sale and the securities held in the SERP classified as trading are
carried at fair value in the accompanying consolidated balance
sheets. The interest rate swap is carried at fair value, which is
based on quotes from the issuer of the swap and represents the estimated amounts
that we would expect to pay to terminate the swap. See Note 8 for
additional information.
Stock-Based
Compensation
Stock-based
compensation expense is recognized for all share-based payment awards, net of an
estimated forfeiture rate. Thus, compensation cost is amortized for those shares
expected to vest on a straight-line basis over the requisite service period of
the award. See Note 10 for additional information.
Reclassifications
In the
current year the Company classified stock-based compensation together with stock
issued for stock incentive plans, net in the consolidated statements of
stockholders' equity. For comparative purposes, amounts in the prior
year have been reclassified to conform to current year
presentation.
New
Accounting Pronouncements
Recently
Adopted Accounting Pronouncements:
During
2009, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2009-01(ASU
2009-01)
titled “Topic
105-Generally Accepted Accounting Principles amendments based on Statement of
Financial Accounting Standards No. 168-The FASB Accounting Standards
Codification
TM
and
the Hierarchy of Generally Accepted Accounting Principles.”
FASB
Accounting Standards Codification
TM
(ASC)
Topic 105
, “Generally Accepted Accounting
Principles”
has become the single source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities, effective for financial statements issued for interim
and annual periods ending after September 15, 2009. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The FASB now issues Accounting Standards Updates
that are not considered authoritative in their own right, but will serve to
update the Codification, provide background information about the guidance, and
provide the bases for conclusions on the change(s) in the
Codification. References to accounting literature throughout this
document have been updated to reflect the codification.
In
September 2009, the FASB issued ASU No. 2009-12,
“Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (ASU
2009-12). ASU 2009-12 amends Accounting Standards Codification Topic 820-10,
“Fair Value Measurements-Overall.” The amendments in ASU 2009-12
provide a practical expedient to measure investments that are required to be
measured at fair value on a recurring or non-recurring basis but do not have a
readily determinable fair value. The investments can be valued on the basis of
the net asset value per share of the investment. There are additional
disclosure requirements by major category of investments and the nature of
restrictions on the investor’s ability to redeem its investments. The amendments
in this ASU are effective for annual periods ending after December 15, 2009. See
Note 10 for related disclosures regarding pension assets that do not have
readily determinable fair value.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
In August 2009, the FASB issued Accounting Standards
Update No. 2009-5,
“Measuring Liabilities at Fair Value” (ASU 2009-05). ASU
2009-05 amends Accounting Standards Codification Topic 820, “Fair Value
Measurements.” ASU 2009-05 provides clarification that in
circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using one or more of the following methods: 1) a valuation technique that
uses a) the quoted price of the identical liability when traded as an asset
or b) quoted prices for similar liabilities or similar liabilities when
traded as assets and/or 2) a valuation technique that is consistent with
the principles of ASC Topic 820 (e.g. an income approach or market approach).
ASU 2009-05 also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to adjust to include inputs relating to the
existence of transfer restrictions on that liability.
The Company adopted
these provisions in the fourth quarter of 2009 and the a
doption did not have a material impact on the Company’s
consolidated financial statements.
In
December 2008, the FASB issued
certain amendments
as codified in ASC 715-20-65, “Compensation – Retirement Benefits, Defined
Benefit Plans.”
These amendments require additional disclosures regarding
how investment decisions are made: the major categories of plan assets; the
inputs and valuation techniques used to measure the fair value of plan assets;
the effect of fair value measurements using significant unobservable inputs on
changes in plan assets for the period; and significant concentrations of risk
within plan assets The disclosures about plan assets are required to
be provided for fiscal years ending after December 15, 2009, with no restatement
required for earlier periods that are presented for comparative purposes, upon
initial application. Earlier application of the provisions is permitted.
See Note 10 for related disclosures.
In May
2009, the FASB issued a new standard, as codified in ASC Topic 855 “Subsequent
Events.” ASC Topic 855 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. In addition, it
provides guidance regarding the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements; the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. The Company adopted this
standard in the second quarter of 2009 and the adoption did not have a material
effect on the Company’s consolidated financial statements.
In April 2009, the FASB issued certain amendments as
codified in ASC 820-10-65, “Fair Value Disclosures.” ASC 820-10-65
affirms that the objective of fair value when the market for an asset is not
active is the price that would be received to sell the asset in an orderly
transaction, and includes additional factors for determining whether there has
been a significant decrease in market activity for an asset when the market for
that asset is not active. An entity is required to base its
conclusion about whether a transaction was not orderly on the weight of the
evidence.
The Company adopted these provisions in the second quarter of
2009 and the a
doption did not have a material
impact on the Company’s consolidated financial statements.
In April 2009, the FASB issued certain amendments as
codified in ASC Topic 320-10-65, “Investments — Debt and Equity Securities.”
These amendments (i) changes existing guidance for determining whether an
impairment is other than temporary to debt securities and (ii) replace the
existing requirement that the entity’s management assert it has both the intent
and ability to hold an impaired security until recovery with a requirement that
management assert: (a) it does not have the intent to sell the security;
and (b) it is more likely than not it will not have to sell the security
before recovery of its cost basis. Declines in the fair value of
held-to-maturity and available-for-sale securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized losses
to the extent the impairment is related to credit losses. The amount of the
impairment related to other factors is recognized in other comprehensive income.
The Company adopted ASC 320 in the second quarter of 2009 and the a
doption did not have a material impact on the Company’s
consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
In April 2009, the FASB issued certain amendments as
codified in ASC 825-10-65, “Financial Instruments,” that require an entity to
provide disclosures about fair value of financial instruments in interim
financial information including whenever it issues summarized financial
information for interim reporting periods. In addition, entities must disclose,
in the body or in the accompanying notes of its summarized financial information
for interim reporting periods and in its financial statements for annual
reporting periods, the fair value of all financial instruments for which it is
practicable to estimate that value, whether recognized or not recognized in the
statement of financial position.
The Company adopted these amendments in
the second quarter of 2009. See Note 8 for related
disclosures.
Recently
Issued Accounting Pronouncements Not Yet Adopted:
In
November 2009, the FASB issued ASU 2009-17, “Consolidations (Topic 810) –
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities,” which codifies FASB Statement No. 167, “Amendments to FASB
Interpretation No. 46(R).” The ASU changes how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entity’s purpose and design
and the reporting entity’s ability to direct the activities of the other entity
that most significantly impact the other entity’s economic
performance. These provisions are effective January 1, 2010, for a
calendar year-end entity, with early application not being
permitted. Adoption of these provisions is not expected to have a
material impact on the Company’s consolidated financial statements.
In
November 2009, the FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860)
– Accounting for Transfers of Financial Assets,” which formally codifies FASB
Statement No. 166, “Accounting for Transfers of Financial
Assets.” ASU 2009-16 is a revision to SFAS No. 140, “Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,” and requires more information about transfers of financial assets,
including securitization transactions, and where entities have continuing
exposure to the risks related to transferred financial assets. It eliminates the
concept of a “qualifying special-purpose entity,” changes the requirements for
derecognizing financial assets, and requires additional
disclosures. The provisions are effective January 1, 2010, for a
calendar year-end entity, with early application not being
permitted. Adoption of these provisions is not expected to have a
material impact on the Company’s consolidated financial statements.
In
September 2009, the FASB issued certain amendments as codified in ASC 605-25,
“Revenue Recognition; Multiple-Element Arrangements.” These
amendments provide clarification on whether multiple deliverables exist, how the
arrangement should be separated, and the consideration allocated. An
entity is required to allocate revenue in an arrangement using estimated selling
prices of deliverables in the absence of vendor-specific objective evidence or
third-party evidence of selling price. These amendments also eliminate the use
of the residual method and require an entity to allocate revenue using the
relative selling price method. The amendments significantly expand
the disclosure requirements for multiple-deliverable revenue
arrangements. These provisions are to be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, with earlier application
permitted. The Company is currently evaluating the impact of these
amendments to its consolidated financial statements.
Note
2: Accounts Receivable
Accounts
receivable, net consists of the following:
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Trade
receivables:
|
|
|
|
|
|
|
Billed
|
|
$
|
98,275
|
|
|
$
|
168,989
|
|
Unbilled
|
|
|
34,753
|
|
|
|
47,034
|
|
Other
receivables
|
|
|
801
|
|
|
|
551
|
|
Total
|
|
|
133,829
|
|
|
|
216,574
|
|
Less:
Allowance for doubtful accounts
|
|
|
(3,210
|
)
|
|
|
(6,199
|
)
|
Accounts
receivable, net
|
|
$
|
130,619
|
|
|
$
|
210,375
|
|
Trade
receivables relate to sale of our services and products, for which credit is
extended based on the customer’s credit history. Unbilled receivables
represent revenues earned but not billed to the customer until future dates,
usually within one month. Other receivables consist primarily of
amounts due from purchasers of Company property and rebates from
suppliers.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Changes
in the Company’s allowance for doubtful accounts are as follows:
Years
Ended December 31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
6,199
|
|
|
$
|
5,217
|
|
Bad
debt expense (credit)
|
|
|
660
|
|
|
|
(84
|
)
|
Accounts
written-off
|
|
|
(3,763
|
)
|
|
|
(392
|
)
|
Recoveries
|
|
|
114
|
|
|
|
1,458
|
|
Ending
balance
|
|
$
|
3,210
|
|
|
$
|
6,199
|
|
Note
3: Inventories
Inventories
are $55,783,000 at December 31, 2009 and $49,779,000 at December 31, 2008 and
consist of raw materials, parts and supplies.
Note
4: Property, Plant and Equipment
Property,
plant and equipment are presented at cost net of accumulated depreciation and
consist of the following:
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Land
|
|
$
|
14,980
|
|
|
$
|
14,927
|
|
Buildings
and leasehold improvements
|
|
|
80,928
|
|
|
|
77,867
|
|
Operating
equipment
|
|
|
631,666
|
|
|
|
595,217
|
|
Capitalized
software
|
|
|
15,391
|
|
|
|
15,700
|
|
Furniture
and fixtures
|
|
|
4,342
|
|
|
|
4,398
|
|
Vehicles
|
|
|
180,408
|
|
|
|
181,102
|
|
Construction
in progress
|
|
|
35
|
|
|
|
231
|
|
Gross
property, plant and equipment
|
|
|
927,750
|
|
|
|
889,442
|
|
Less:
accumulated depreciation
|
|
|
(531,528
|
)
|
|
|
(419,327
|
)
|
Net
property, plant and equipment
|
|
$
|
396,222
|
|
|
$
|
470,115
|
|
Depreciation
expense was $130.6 million in 2009, $118.4 million in 2008 and $78.5 million in
2007. There are no capital leases outstanding as of December 31, 2009
and December 31, 2008. The Company had accounts payable for purchases
of property and equipment of approximately $3.7 million, $9.4 million and $19.1
million as of December 31, 2009, 2008 and 2007.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Note
5: Income Taxes
The
following table lists the components of the (benefit) provision for income
taxes:
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Current
(benefit) provision:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(
13,490
|
)
|
|
$
|
20,793
|
|
|
$
|
29,589
|
|
State
|
|
|
235
|
|
|
|
5,453
|
|
|
|
4,857
|
|
Foreign
|
|
|
832
|
|
|
|
937
|
|
|
|
2,601
|
|
Deferred
(benefit) provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,698
|
|
|
|
25,486
|
|
|
|
14,531
|
|
State
|
|
|
(
29
|
)
|
|
|
1,713
|
|
|
|
1,207
|
|
Total
income tax (benefit) provision
|
|
$
|
(10,754
|
)
|
|
$
|
54,382
|
|
|
$
|
52,785
|
|
Reconciliation
between the federal statutory rate and RPC’s effective tax rate is as
follows:
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal
statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State
income taxes, net of federal benefit
|
|
|
(2.4
|
)
|
|
|
3.2
|
|
|
|
2.8
|
|
Tax
credits
|
|
|
1.3
|
|
|
|
(0.8
|
)
|
|
|
(1.6
|
)
|
Federal
and state refunds
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
Non-deductible
expenses
|
|
|
(2.6
|
)
|
|
|
0.9
|
|
|
|
0.7
|
|
Other
|
|
|
0.8
|
|
|
|
1.2
|
|
|
|
0.7
|
|
Effective
tax rate
|
|
|
32.1
|
%
|
|
|
39.5
|
%
|
|
|
37.7
|
%
|
Significant
components of the Company’s deferred tax assets and liabilities are as
follows:
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Self-insurance
|
|
$
|
5,445
|
|
|
$
|
5,404
|
|
Pension
|
|
|
5,346
|
|
|
|
4,054
|
|
State
net operating loss carryforwards
|
|
|
1,742
|
|
|
|
1,649
|
|
Bad
debts
|
|
|
1,361
|
|
|
|
2,418
|
|
Accrued
payroll
|
|
|
866
|
|
|
|
1,579
|
|
Stock-based
compensation
|
|
|
2,413
|
|
|
|
2,294
|
|
All
others
|
|
|
149
|
|
|
|
501
|
|
Valuation
allowance
|
|
|
(1,550
|
)
|
|
|
(1,454
|
)
|
Gross
deferred tax assets
|
|
|
15,772
|
|
|
|
16,445
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(62,640
|
)
|
|
|
(60,946
|
)
|
Goodwill
amortization
|
|
|
(4,403
|
)
|
|
|
(3,707
|
)
|
Gross
deferred tax liabilities
|
|
|
(67,043
|
)
|
|
|
(64,653
|
)
|
Net
deferred tax liabilities
|
|
$
|
(51,271
|
)
|
|
$
|
(48,208
|
)
|
Historically
and currently, undistributed earnings of the Company’s foreign subsidiaries are
considered indefinitely reinvested and, accordingly, no provision for U.S.
federal income taxes has been recorded. Deferred taxes are provided
for earnings outside the United States when those earnings are not considered
indefinitely reinvested.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
As of
December 31, 2009, the Company has net operating loss carryforwards related to
state income taxes of approximately $40.6 million that will expire between 2010
and 2029. As of December 31, 2009 the Company has a valuation
allowance of approximately $1.6 million, representing the tax affected amount of
loss carryforwards that the Company does not expect to utilize, against the
corresponding deferred tax asset.
Total net
income tax payments (refunds) were ($8,351,000) in 2009, $29,714,000 in 2008 and
$46,328,000 in 2007.
The
Company’s policy is to record interest and penalties related to income tax
matters as income tax expense. Accrued interest and penalties were
immaterial to the financial statements as of December 31, 2009 and
2008.
During
2007 the Company adopted new accounting guidance relating to the accounting for
uncertainty in income tax reporting, which provided criteria for the
recognition, measurement, presentation and disclosure of uncertain tax
positions. As a result of the adoption the Company did not recognize
a material adjustment in the liability for unrecognized income tax
benefits.
The
Company’s liability for unrecognized tax benefits was $30 thousand as of
December 31, 2009 and $11 thousand as of December 31, 2008, all of which would
affect our effective rate if recognized. A reconciliation of the
beginning and ending amount of unrecognized tax benefits for 2009 and 2008 are
as follows:
Years
Ended December 31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
11
|
|
|
$
|
10
|
|
Additions
based on tax positions related to current year
|
|
|
-
|
|
|
|
-
|
|
Additions
for tax positions of prior years
|
|
|
19
|
|
|
|
1
|
|
Reductions
for tax positions of prior years
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
30
|
|
|
$
|
11
|
|
The
Company and its subsidiaries are subject to U.S. federal and state income tax in
multiple jurisdictions. In many cases our uncertain tax positions are
related to tax years that remain open and subject to examination by the relevant
taxing authorities. The Company’s 2006 through 2009 tax years remain
open to examination.
It is
reasonably possible that the amount of the unrecognized tax benefits with
respect to our unrecognized tax positions will increase or decrease in the next
12 months. These changes may be the result of, among other things,
state tax settlements under Voluntary Disclosure Agreements. However,
quantification of an estimated range cannot be made at this time.
Note
6: Long-Term Debt
The
Company currently has a revolving credit agreement (the “Revolving Credit
Agreement”) with SunTrust Capital Markets, Inc, as Joint Lead Arranger and Sole
Book Manager, Banc of America Securities LLC as Joint Lead Arranger, and a
syndicate of six other lenders. The Revolving Credit Agreement
includes a full and unconditional guarantee by RPC’s 100 percent owned domestic
subsidiaries whose assets equal substantially all of the consolidated assets of
RPC and its subsidiaries. The subsidiaries of the Company that are
not guarantors are considered minor.
The
Revolving Credit Agreement has a general term of five years and provides for an
unsecured line of credit of up to $200 million, which includes a $50 million
letter of credit subfacility, and a $20 million swingline subfacility. During
the third quarter of 2009, the Company and its banking syndicate lenders entered
into an agreement to amend two substantive components of the Revolving Credit
Agreement. First, the aggregate revolving commitment amount was
reduced from $296.5 million to $200 million. Second, the numerator of
the interest coverage ratio, one of two financial covenants contained in the
Revolving Credit Agreement, was changed from EBIT to EBITDA. In
addition, the amendment revises the definition of the term “Base Rate” to
provide that such rate will be not less than the per annum rate determined by
increasing the one (1) month LIBOR rate by 1.0%. The maturity date of
all revolving loans under the Credit Agreement is September 8,
2011. The Company has incurred loan origination fees and other debt
related costs associated with the Revolving Credit Agreement, including
amendment costs in the aggregate of approximately $753
thousand. These costs are being amortized over the five year term of
the loan, and the net amount is classified as non-current other assets on the
consolidated balance sheets.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Revolving
loans under the Revolving Credit Agreement bear interest at one of the following
two rates, at RPC’s election:
|
●
|
the
Base Rate, which is the highest of SunTrust Bank’s “prime rate” for the
day of the borrowing, a fluctuating rate per annum equal to the Federal
Funds Rate plus .50%, and a rate per annum equal to one (1) month LIBOR
rate plus 1.00%; or
|
|
●
|
with
respect to any Eurodollar borrowings, Adjusted LIBOR (which equals LIBOR
as increased to account for the maximum reserve percentages established by
the U.S. Federal Reserve) plus a margin ranging from .40% to .80%, based
upon RPC’s then-current consolidated debt-to-EBITDA ratio.
|
In
addition, RPC will pay an annual fee ranging from .10% to .20% of the total
credit facility based upon RPC’s then-current consolidated debt-to-EBITDA
ratio. The Revolving Credit Agreement contains customary terms and
conditions, including certain financial covenants and restrictions on
indebtedness, dividend payments, business combinations and other related
items. Further, the Revolving Credit Agreement contains financial
covenants limiting the ratio of the Company’s consolidated debt-to-EBITDA to no
more than 2.5 to 1, and limiting the ratio of the Company’s consolidated EBITDA
to interest expense to no less than 2 to 1.
As of
December 31, 2009, RPC has outstanding borrowings of $90.3 million under the
Revolving Credit Agreement.
Interest incurred and recorded as expense on
the facility was $2,327,000 in 2009, $5,188,000 in 2008 and $4,083,000 in 2007.
The weighted average interest rate was 1.8% in 2009, 3.6% in 2008 and 6.1% for
2007. The Company capitalized interest incurred of $150,000 in 2009,
$1,064,000 in 2008 and $2,300,000 in 2007 related to facilities and equipment
under construction. Additionally there were letters of credit
relating to self-insurance programs and contract bids outstanding for $17.8
million as of December 31, 2009.
Cash
interest paid (net of capitalized interest) was approximately $2,192,000 in
2009, $5,232,000 in 2008 and $3,849,000 in 2007.
Effective
December 2008 the Company entered into an interest rate swap agreement that
effectively converted $50 million of our variable-rate debt to a fixed rate
basis, thereby hedging against the impact of potential interest rate changes on
future interest expense. The agreement terminates on September 8,
2011. Under this agreement the Company and the issuing lender settle
on a monthly basis for the difference between a fixed interest rate of 2.07% and
a comparable one month LIBOR rate.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Note
7: Accumulated Other Comprehensive (Loss) Income
Accumulated
other comprehensive (loss) income consists of the following (in
thousands):
|
|
Pension
Adjustment
|
|
|
Unrealized
Gain
(Loss) On
Securities
|
|
|
Foreign
Currency
Translation
|
|
|
Net Gain
(Loss)
On
Cash Flow
Hedge
|
|
|
Total
|
|
Balance
at December 31, 2007
|
|
$
|
(3,427
|
)
|
|
$
|
714
|
|
|
$
|
172
|
|
|
$
|
—
|
|
|
$
|
(2,541
|
)
|
Change
during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before-tax
amount
|
|
|
(9,532
|
)
|
|
|
(921
|
)
|
|
|
(513
|
)
|
|
|
(830
|
)
|
|
|
(11,796
|
)
|
Tax
benefit
|
|
|
3,479
|
|
|
|
336
|
|
|
|
187
|
|
|
|
303
|
|
|
|
4,305
|
|
Total
activity in 2008
|
|
|
(6,053
|
)
|
|
|
(585
|
)
|
|
|
(326
|
)
|
|
|
(527
|
)
|
|
|
(7,491
|
)
|
Balance
at December 31, 2008
|
|
$
|
(9,480
|
)
|
|
$
|
129
|
|
|
$
|
(154
|
)
|
|
$
|
(527
|
)
|
|
$
|
(10,032
|
)
|
Change
during 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before-tax
amount
|
|
|
1,413
|
|
|
|
143
|
|
|
|
530
|
|
|
|
11
|
|
|
|
2,097
|
|
Tax
expense
|
|
|
(516
|
)
|
|
|
(52
|
)
|
|
|
(299
|
)
|
|
|
(4
|
)
|
|
|
(871
|
)
|
Total
activity in 2009
|
|
|
897
|
|
|
|
91
|
|
|
|
231
|
|
|
|
7
|
|
|
|
1,226
|
|
Balance
at December 31, 2009
|
|
$
|
(8,583
|
)
|
|
$
|
220
|
|
|
$
|
77
|
|
|
$
|
(520
|
)
|
|
$
|
(8,806
|
)
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Note
8: Fair Value Disclosures
The
various inputs used to measure assets at fair value establish a hierarchy that
distinguishes between assumptions based on market data (observable inputs) and
the Company’s assumptions (unobservable inputs). The hierarchy
consists of three broad levels as follows:
1.
|
Level
1 – Quoted market prices in active markets for identical assets or
liabilities.
|
2.
|
Level 2 –
Quoted prices for similar instruments in active markets, quoted
prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant
assumptions are observable in the market or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.
|
3.
|
Level
3 – Unobservable inputs developed using the Company’s estimates and
assumptions, which reflect those that market participants would
use.
|
The
following table summarizes the valuation of financial instruments measured at
fair value on a recurring basis on the balance sheet as of December 31, 2009 and
2008:
|
|
Fair
Value Measurements at December 31, 2009 with:
|
|
(in
thousands
)
|
|
Quoted
prices in
active markets for
identical assets
|
|
|
Significant
other
observable inputs
|
|
|
Significant
unobservable
inputs
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
$
|
-
|
|
|
$
|
6,905
|
|
|
$
|
-
|
|
Available-for-sale
securities
|
|
|
653
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swap
|
|
$
|
-
|
|
|
$
|
820
|
|
|
$
|
-
|
|
|
|
Fair
Value Measurements at December 31, 2008 with:
|
|
(in
thousands
)
|
|
Quoted
prices in
active markets for
identical assets
|
|
|
Significant
other
observable inputs
|
|
|
Significant
unobservable
inputs
|
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
$
|
4,074
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available-for-sale
securities
|
|
|
511
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swap
|
|
$
|
-
|
|
|
$
|
830
|
|
|
$
|
-
|
|
The
Company determines the fair value of the marketable securities that are
available-for-sale through quoted market prices. The total fair value
is the final closing price, as defined by the exchange in which the asset is
actively traded, on the last trading day of the period, multiplied by the number
of units held without consideration of transaction costs.
During fiscal year 2009, significant observable inputs
in addition to quoted market prices were used to value trading securities. As a
result, the Company classified these investments as using level 2
inputs.
At
December 31, 2009 and 2008, there was $90,300,000 and $174,450,000 outstanding
under our revolving credit agreement. The fair value of these
borrowings was $88,043,000 in 2009 and $174,450,000 in 2008. The fair
value of these borrowings was based on quotes from the lender (level 2
inputs). The borrowings under our revolving credit agreement bear
interest at the variable rate described in Note 6. We are subject to interest
rate risk on the variable component of the interest rate. Our risk
management objective is to lock in the interest cash outflows on a portion of
our debt. As a result, as described in Note 6, we entered into an
interest rate swap agreement effectively converting a portion of the outstanding
borrowings under the revolving credit agreement to a fixed-rate, thereby hedging
against the impact of potential interest rate changes on future interest
expense. At December 31, 2009 the interest rate swap had a negative
fair value of $820,000, which is recorded in other long-term
liabilities. The fair value of the interest rate swap was based on
quotes from the issuer of the swap and represents the estimated amounts that we
would expect to pay to terminate the swap.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
The
carrying amounts of other financial instruments reported in the balance sheet
for current assets and current liabilities approximate their fair values because
of the short maturity of these instruments.
The Company currently does not use the fair value option
to measure any of its existing financial instruments and has not determined
whether or not it will elect this option for financial instruments it may
acquire in the future.
Note
9: Commitments and Contingencies
Lease Commitments -
Minimum
annual rentals, principally for noncancelable real estate and equipment leases
with terms in excess of one year, in effect at December 31, 2009, are summarized
in the following table:
(in
thousands)
|
|
|
|
2010
|
|
$
|
3,671
|
|
2011
|
|
|
3,172
|
|
2012
|
|
|
2,146
|
|
2013
|
|
|
1,554
|
|
2014
|
|
|
950
|
|
Thereafter
|
|
|
812
|
|
Total
rental commitments
|
|
$
|
12,305
|
|
Total
rental expense, including short-term rentals, charged to operations was
approximately $10,787,000 in 2009, $9,109,000 in 2008 and $7,116,000 in
2007.
Income Taxes -
The amount of
income taxes the Company pays is subject to ongoing audits by federal and state
tax authorities, which often result in proposed assessments. Other
long-term liabilities include $30,000 as of December 31, 2009 and $11,000 as of
December 31, 2008, that represents the Company’s estimated statute for the
probable assessments payable.
Sales and Use Taxes -
The
Company has ongoing sales and use tax audits in various jurisdictions and may be
subjected to varying interpretations of statute that could result in unfavorable
outcomes that cannot be currently estimated.
Litigation -
RPC is a party
to various routine legal proceedings primarily involving commercial claims,
workers’ compensation claims and claims for personal injury. RPC insures against
these risks to the extent deemed prudent by its management, but no assurance can
be given that the nature and amount of such insurance will, in every case, fully
indemnify RPC against liabilities arising out of pending and future legal
proceedings related to its business activities. While the outcome of these
lawsuits, legal proceedings and claims cannot be predicted with certainty,
management, after consultation with legal counsel, believes that the outcome of
all such proceedings, even if determined adversely, would not have a material
adverse effect on the Company’s business or financial condition.
Note
10: Employee Benefit Plans
Defined
Benefit Pension Plan
The
Company’s Retirement Income Plan, a trusteed defined benefit pension plan,
provides monthly benefits upon retirement at age 65 to substantially all
employees with at least one year of service prior to 2002. As of
February 28, 2001, the plan became a multiple employer plan, with Marine
Products Corporation as an adopting employer.
In
2002, the Company’s Board of Directors approved a resolution to cease all future
retirement benefit accruals under the Retirement Income Plan. In lieu thereof,
the Company began providing enhanced benefits in the form of cash contributions
for certain longer serviced employees that had not reached the normal retirement
age of 65 as of March 31, 2002. The contributions were discretionary and made
annually based on continued employment over a seven year period ending in 2008.
These discretionary contributions were made to either the SERP established by
the Company or to the 401(k) plan for each employee that was entitled to the
enhanced benefit. There was no expense related to the enhanced benefits for
2009. The expense related to enhanced benefits was $295,000 for 2008
and $315,000 for 2007.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
The
Company permits selected highly compensated employees to defer a portion of
their compensation into the SERP. The SERP assets are marked to market and
totaled $6,905,000 as of December 31, 2009 and $4,073,000 as of December 31,
2008. The SERP assets are reported in other assets on the balance
sheet and changes related to the fair value of assets are recorded in the
consolidated statement of operations as part of other (expense) income, net.
Trading gains (losses) related to the SERP assets totaled $1,373,000 for 2009,
$(1,661,000) for 2008 and $73,000 for 2007. The SERP deferrals and
the contributions are recorded on the balance sheet in pension liabilities with
any change in the fair value of the liabilities recorded as compensation cost in
the statement of operations.
The
Company’s projected benefit obligation exceeds the fair value of the plan assets
under its pension plan by $7,258,000 and thus the plan was under-funded as of
December 31, 2009.
The
following table sets forth the funded status of the Retirement Income Plan and
the amounts recognized in RPC’s consolidated balance sheets:
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Accumulated
Benefit Obligation at end of year
|
|
$
|
32,190
|
|
|
$
|
29,203
|
|
|
|
|
|
|
|
|
|
|
CHANGE
IN PROJECTED BENEFIT OBLIGATION:
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year
|
|
$
|
29,203
|
|
|
$
|
30,149
|
|
Service
cost
|
|
|
—
|
|
|
|
—
|
|
Interest
cost
|
|
|
1,938
|
|
|
|
1,841
|
|
Amendments
|
|
|
—
|
|
|
|
—
|
|
Actuarial
(gain) loss
|
|
|
2,706
|
|
|
|
(1,239
|
)
|
Benefits
paid
|
|
|
(1,657
|
)
|
|
|
(1,548
|
)
|
Projected
benefit obligation at end of year
|
|
$
|
32,190
|
|
|
$
|
29,203
|
|
CHANGE
IN PLAN ASSETS:
|
|
|
|
|
|
|
|
|
Fair
value of plan assets at beginning of year
|
|
$
|
22,488
|
|
|
$
|
32,548
|
|
Actual
return on plan assets
|
|
|
4,101
|
|
|
|
(8,512
|
)
|
Employer
contribution
|
|
|
—
|
|
|
|
—
|
|
Benefits
paid
|
|
|
(1,657
|
)
|
|
|
(1,548
|
)
|
Fair
value of plan assets at end of year
|
|
|
24,932
|
|
|
|
22,488
|
|
|
|
|
|
|
|
|
|
|
Funded
status at end of year
|
|
$
|
(7,258
|
)
|
|
$
|
(6,715
|
)
|
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
AMOUNTS
RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF:
|
|
|
|
|
|
|
Noncurrent
assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Current
liabilities
|
|
|
—
|
|
|
|
—
|
|
Noncurrent
liabilities
|
|
|
(7,258
|
)
|
|
|
(6,715
|
)
|
|
|
$
|
(7,258
|
)
|
|
$
|
(6,715
|
)
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
AMOUNTS
(PRE-TAX) RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
CONSIST OF:
|
|
|
|
|
|
|
Net
loss (gain)
|
|
$
|
13,517
|
|
|
$
|
14,928
|
|
Prior
service cost (credit)
|
|
|
—
|
|
|
|
—
|
|
Net
transition obligation (asset)
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
13,517
|
|
|
$
|
14,928
|
|
The
accumulated benefit obligation for the Retirement Income Plan at December 31,
2009 and 2008 has been disclosed above. The Company uses a December
31 measurement date for this qualified plan.
Amounts
recognized in the consolidated balance sheets consist of:
December
31,
|
|
2009
|
|
|
2008
|
|
(in
thousands)
|
|
|
|
|
|
|
Funded
status
|
|
$
|
(7,258
|
)
|
|
$
|
(6,715
|
)
|
SERP
employer contributions/deferrals
|
|
|
(7,389
|
)
|
|
|
(4,462
|
)
|
Long-term
pension liabilities
|
|
$
|
(14,647
|
)
|
|
$
|
(11,177
|
)
|
RPC’s
funding policy is to contribute to the defined benefit pension plan the amount
required, if any, under the Employee Retirement Income Security Act of 1974. RPC
made no contributions in 2009 or in 2008.
The
components of net periodic benefit cost are summarized as follows:
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Service
cost for benefits earned during the period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest
cost on projected benefit obligation
|
|
|
1,938
|
|
|
|
1,841
|
|
|
|
1,759
|
|
Expected
return on plan assets
|
|
|
(1,521
|
)
|
|
|
(2,543
|
)
|
|
|
(2,321
|
)
|
Amortization
of net loss
|
|
|
1,538
|
|
|
|
285
|
|
|
|
860
|
|
Net
periodic benefit plan cost (credit)
|
|
$
|
1,955
|
|
|
$
|
(417
|
)
|
|
$
|
298
|
|
The
Company recognized pre-tax (increases) decreases to the funded status in
comprehensive loss of $(1,413,000) in 2009, $9,532,000 in 2008 and $(3,992,000)
in 2007. There were no previously unrecognized prior service costs as
of December 31, 2009, 2008 and 2007. The pre-tax amounts recognized
in comprehensive loss for the years ended December 31, 2009, 2008 and 2007 are
summarized as follows:
(in
thousands)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
loss (gain)
|
|
$
|
125
|
|
|
$
|
9,817
|
|
|
$
|
(3,132
|
)
|
Amortization
of net (loss) gain
|
|
|
(1,538
|
)
|
|
|
(285
|
)
|
|
|
(860
|
)
|
Net
transition obligation (asset)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Amount
recognized in other comprehensive loss
|
|
$
|
(1,413
|
)
|
|
$
|
9,532
|
|
|
$
|
(3,992
|
)
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
The
amounts in accumulated other comprehensive loss expected to be recognized as
components of net periodic benefit cost in 2010 are as follows:
(in
thousands)
|
|
2010
|
|
Amortization
of net loss (gain)
|
|
$
|
388
|
|
Prior
service cost (credit)
|
|
|
—
|
|
Net
transition obligation (asset)
|
|
|
—
|
|
Estimated
net periodic benefit plan cost
|
|
$
|
388
|
|
The
weighted average assumptions as of December 31 used to determine the projected
benefit obligation and net benefit cost were as follows:
December
31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Projected Benefit
Obligation
:
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
6.00
|
%
|
|
|
6.84
|
%
|
|
|
6.25
|
%
|
Rate
of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Net
Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
6.84
|
%
|
|
|
6.25
|
%
|
|
|
5.50
|
%
|
Expected
return on plan assets
|
|
|
7.00
|
%
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
Rate
of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
The
Company’s expected return on assets assumption is derived from a detailed
periodic assessment conducted by its management and its investment adviser. It
includes a review of anticipated future long-term performance of individual
asset classes and consideration of the appropriate asset allocation strategy
given the anticipated requirements of the plan to determine the average rate of
earnings expected on the funds invested to provide for the pension plan
benefits. While the study gives appropriate consideration to recent fund
performance and historical returns, the rate of return assumption is derived
primarily from a long-term, prospective view. Based on its recent assessment,
the Company has concluded that its expected long-term return assumption of seven
percent is reasonable.
The
Plan’s weighted average asset allocation at December 31, 2009 and 2008 by asset
category along with the target allocation for 2010 are as follows:
Asset
Category
|
|
Target
Allocation
for
2010
|
|
|
Percentage
of
Plan
Assets
as
of
December
31,
2009
|
|
|
Percentage
of
Plan
Assets
as
of
December
31,
2008
|
|
Debt
Securities – Core Fixed Income
|
|
|
27.0
|
%
|
|
|
26.2
|
%
|
|
|
14.0
|
%
|
Tactical
– Fund of Equity and Debt Securities
|
|
|
5.0
|
%
|
|
|
5.2
|
%
|
|
|
4.3
|
%
|
Domestic
Equity Securities
|
|
|
32.5
|
%
|
|
|
25.0
|
%
|
|
|
22.7
|
%
|
Global
Equity Securities
|
|
|
2.5
|
%
|
|
|
4.4
|
%
|
|
|
3.6
|
%
|
International
Equity Securities
|
|
|
8.0
|
%
|
|
|
13.8
|
%
|
|
|
11.2
|
%
|
Real
Estate
|
|
|
5.0
|
%
|
|
|
4.2
|
%
|
|
|
7.7
|
%
|
Other
|
|
|
20.0
|
%
|
|
|
21.2
|
%
|
|
|
36.5
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
The
Company’s overall investment strategy is to achieve a mix of approximately 70
percent of investments for long-term growth and 30 percent for near-term benefit
payments, with a wide diversification of asset types, fund strategies and fund
managers. Equity securities primarily include investments
in large-cap and mid-cap companies. Fixed-income securities include
corporate bonds of companies in diversified securities, mortgage-backed
securities, and U.S. Treasuries. Other types of investments include
hedge funds and private equity funds that follow several different investment
strategies. For each of the asset categories in the pension plan, the investment
strategy is identical – maximize the long-term rate of return on plan assets
with an acceptable level of risk in order to minimize the cost of providing
pension benefits. The investment policy establishes a target allocation
for each asset class which is rebalanced as required.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Some of
our assets, primarily our private equity, real estate and hedge funds, do not
have readily determinable market values given the specific investment structures
involved and the nature of the underlying investments. For the December 31,
2009 plan asset reporting, publicly traded asset pricing was used where
possible. For assets without readily determinable values, estimates were derived
from investment manager discussions focusing on underlying fundamentals and
significant events.
The
following table presents our plan assets using the fair value hierarchy as of
December 31, 2009. The fair value hierarchy has three levels based on the
reliability of the inputs used to determine fair value. See Note 8
for a brief description of the three levels under the fair value
hierarchy.
Investments
(
in thousands
)
|
|
|
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Cash
and Cash Equivalents
|
|
|
(1)
|
|
|
$
|
943
|
|
|
$
|
943
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Fixed
Income Securities
|
|
|
(2)
|
|
|
|
6,529
|
|
|
|
-
|
|
|
|
6,529
|
|
|
|
-
|
|
Domestic
Equity Securities
|
|
|
|
|
|
|
6,237
|
|
|
|
6,237
|
|
|
|
-
|
|
|
|
-
|
|
Global
Equity Securities
|
|
|
(3)
|
|
|
|
1,085
|
|
|
|
-
|
|
|
|
1,085
|
|
|
|
-
|
|
International
Equity Securities
|
|
|
(3)
|
|
|
|
3,440
|
|
|
|
1,475
|
|
|
|
1,965
|
|
|
|
-
|
|
Real
Estate
|
|
|
(4)
|
|
|
|
1,039
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,039
|
|
Hedge
Funds
|
|
|
(5)
|
|
|
|
5,659
|
|
|
|
-
|
|
|
|
1,302
|
|
|
|
4,357
|
|
|
|
|
|
|
|
$
|
24,932
|
|
|
$
|
8,655
|
|
|
$
|
10,881
|
|
|
$
|
5,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Cash
and cash equivalents, which are used to pay benefits and plan
administrative expenses, are held in Rule 2a-7 money market
funds.
|
|
(2)
|
Fixed
income securities are primarily valued using a market approach with inputs
that include broker quotes, benchmark yields, base spreads and reported
trades.
|
|
(3)
|
Global
equity securities and certain international securities are valued using a
market approach based on the quoted market prices of similar instruments
in their respective markets.
|
|
(4)
|
Real
estate fund values are primarily reported by the fund manager and are
based on valuation of the underlying investments, which include inputs
such as cost, discounted future cash flows, independent appraisals and
market based comparable data.
|
|
(5)
|
Hedge
funds consist of fund-of-fund LLC or commingled fund structures. The LLCs
are primarily valued based on Net Asset Values [NAV] calculated by the
fund and are not publicly available. Liquidity for the LLCs is monthly and
is subject to liquidity of the underlying funds. The commingled fund NAV
is calculated by the manager on a daily basis and has monthly
liquidity.
|
The
following table presents a reconciliation of Level 3 assets held during the year
ended December 31, 2009:
Investments
(
in thousands
)
|
|
Balance
at
December 31,
2008
|
|
|
Net
Realized
and Unrealized
Gains/(Losses)
|
|
|
Net
Purchases,
Issuances and
Settlements
|
|
|
Net
Transfers
In
to (Out
of) Level 3
|
|
|
Balance
at
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
$
|
1,723
|
|
|
$
|
(360
|
)
|
|
$
|
(324
|
)
|
|
$
|
-
|
|
|
$
|
1,039
|
|
Hedge
Funds
|
|
|
4,114
|
|
|
|
243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,357
|
|
|
|
$
|
5,837
|
|
|
$
|
(117
|
)
|
|
$
|
(324
|
)
|
|
$
|
-
|
|
|
$
|
5,396
|
|
The
Company does not currently expect to make a significant contribution to the
Retirement Income Plan in 2010 and does not expect to receive a refund in
2010.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
The
Company estimates that the future benefits payable for the Retirement Income
Plan over the next ten years are as follows:
|
(in
thousands)
|
|
|
|
|
2010
|
|
$
|
1,658
|
|
|
2011
|
|
|
1,683
|
|
|
2012
|
|
|
1,771
|
|
|
2013
|
|
|
1,867
|
|
|
2014
|
|
|
1,946
|
|
|
2015-2019
|
|
|
11,060
|
|
401(k)
Plan
RPC
sponsors a defined contribution 401(k) plan that is available to substantially
all full-time employees with more than three months of service. This plan allows
employees to make tax-deferred contributions from one to 25 percent of their
annual compensation, not exceeding the permissible contribution imposed by the
Internal Revenue Code. RPC matches 50 percent of each employee’s contributions
that do not exceed six percent of the employee’s compensation, as defined by the
plan. Employees vest in the RPC contributions after three years of service. The
charges to expense for the Company’s contributions to the 401(k) plan were
approximately $2,621,000 in 2009, $2,814,000 in 2008 and $2,300,000 in
2007.
Stock
Incentive Plans
The
Company has issued stock options and restricted stock to employees under two 10
year stock incentive plans that were approved by stockholders in 1994 and
2004. The 1994 plan expired in 2004. The Company reserved
5,062,500 shares of common stock under the 2004 Plan which expires in
2014. This plan provides for the issuance of various forms of stock
incentives, including, among others, incentive and non-qualified stock options
and restricted stock which are discussed in detail below. As of
December 31, 2009, there were approximately 2,200,000 shares available for
grants. The Company issues new shares from its authorized but
unissued share pool.
The
Company recognizes compensation expense for the unvested portion of awards
outstanding over the remainder of the service period. The compensation cost
recorded for these awards is based on their fair value at grant date less the
cost of estimated forfeitures. Forfeitures are estimated at the time of grant
and revised, if necessary, in subsequent periods to reflect actual forfeitures.
Cash flows related to share-based payment awards to employees that result in tax
benefits in excess of recognized cumulative compensation cost (excess tax
benefits) are classified as financing activity in the accompanying consolidated
statements of cash flows.
Pre-tax
stock-based employee compensation expense was $4,440,000 in 2009 ($2,819,000
after tax), $3,732,000 in 2008 ($2,382,000 after tax) and $3,189,000 in 2007
($2,167,000 after tax).
Stock
Options
Stock
options are granted at an exercise price equal to the fair market value of the
Company’s common stock at the date of grant except for grants of incentive stock
options to owners of greater than 10 percent of the Company’s voting securities
which must be made at 110 percent of the fair market value of the Company’s
common stock. Options generally vest ratably over a period of five
years and expire in 10 years, except incentive stock options granted to owners
of greater than 10 percent of the Company’s voting securities, which expire in
five years.
The
Company estimates the fair value of stock options as of the date of grant using
the Black-Scholes option pricing model. The Company has not granted
stock options to employees since 2003.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Transactions
involving RPC’s stock options for the year ended December 31, 2009 were as
follows:
|
|
Shares
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic Value
|
Outstanding
at January 1, 2009
|
|
1,108,022
|
|
$ 3.12
|
2.68
years
|
|
|
Granted
|
|
-
|
|
-
|
N/A
|
|
|
Exercised
|
|
(238,579)
|
|
2.89
|
N/A
|
|
|
Forfeited
|
|
(8,715)
|
|
3.76
|
N/A
|
|
|
Expired
|
|
-
|
|
-
|
N/A
|
|
|
|
Outstanding
at December 31, 2009
|
|
860,728
|
|
$ 3.39
|
2.25
years
|
|
$
|
6,034,000
|
Exercisable
at December 31, 2009
|
|
860,728
|
|
$ 3.39
|
2.25
years
|
|
$
|
6,034,000
|
The total
intrinsic value of stock options exercised was approximately $1,519,000 during
2009, $6,214,000 during 2008 and $7,758,000 during 2007. Recognized
excess tax benefits associated with the exercise of stock options were
approximately $353,000 during 2009 and $344,000 during 2008. There
were no recognized excess tax benefits associated with the exercise of stock
options during 2007, since all of the stock options exercised in 2007 were
incentive stock options which do not generate tax deductions for the
Company.
Restricted
Stock
The
Company has granted employees two forms of restricted stock: time lapse
restricted and performance restricted.
Time
lapse restricted shares
Time
lapse restricted shares vest after a stipulated number of years from the grant
date, depending on the terms of the issue. Time lapse restricted shares issued
in years 2003 and prior vest after ten years. Time lapse restricted
shares issued subsequent to fiscal year 2003 vest in 20 percent increments
annually starting with the second anniversary of the grant, over six years from
the date of grant. Grantees receive dividends declared and retain
voting rights for the granted shares.
Performance
restricted shares
The
performance restricted shares are granted, but not earned and issued until
certain five-year tiered performance criteria are met. The performance criteria
are predetermined market prices of RPC’s common stock. On the date the common
stock appreciates to each level (determination date), 20 percent of performance
shares are earned. Once earned, the performance shares vest five years from the
determination date. After the determination date, the grantee will receive
dividends declared and voting rights to the shares. The Company has
not granted performance restricted shares since 1999.
The
agreements under which the restricted stock is issued provide that shares
awarded may not be sold or otherwise transferred until restrictions established
under the stock plans have lapsed. Upon termination of employment from RPC or,
in certain cases, termination of employment from Marine Products Corporation or
Chaparral Boats, Inc., shares with restrictions must be returned to
RPC.
The
following is a summary of the changes in non-vested restricted shares for the
year ended December 31, 2009:
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
Average
Grant-Date Fair Value
|
|
Non-vested
shares at January 1, 2009
|
|
|
1,762,478
|
|
|
$
|
11.34
|
|
Granted
|
|
|
722,000
|
|
|
|
8.55
|
|
Vested
|
|
|
(453,200
|
)
|
|
|
8.87
|
|
Forfeited
|
|
|
(49,162
|
)
|
|
|
12.03
|
|
Non-vested
shares at December 31, 2009
|
|
|
1,982,116
|
|
|
$
|
10.88
|
|
The fair
value of restricted awards is based on the market price of the Company’s stock
on the date of the grant and is amortized to compensation expense on a
straight-line basis over the requisite service period. The weighted
average grant date fair value of these restricted stock awards was $8.55, $9.81
and $17.61 for the years ended December 31, 2009, 2008 and 2007. The
total fair value of shares vested was approximately $3,976,000 during 2009,
$3,675,000 during 2008 and $4,903,000 during 2007. The tax benefit
for compensation tax deductions in excess of compensation expense was credited
to capital in excess of par value aggregating $1,068,000 for 2009, $502,000 for
2008 and $1,128,000 for 2007. The excess tax deductions are
classified as financing activity in the accompanying consolidated statements of
cash flows.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Other
Information
As of
December 31, 2009, total unrecognized compensation cost related to non-vested
restricted shares was approximately $18,754,000 which is expected to be
recognized over a weighted-average period of 3.7 years. As of
December 31, 2009, there was no unrecognized compensation cost related to
non-vested stock options.
The
Company received cash from options exercised of $122,000 during 2009, $347,000
during 2008 and $636,000 during 2007. These cash receipts are classified as
financing activity in the accompanying consolidated statements of cash flows.
The fair value of shares tendered to exercise employee stock options totaled
approximately $389,000 during 2009, $1,911,000 during 2008 and $1,123,000 during
2007 and have been excluded from the consolidated statements of cash
flows.
Note
11: Related Party Transactions
Related
Party Transactions
Marine
Products Corporation
Effective
February 28, 2001, the Company spun-off the business conducted through Chaparral
Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing
segment. RPC accomplished the spin-off by contributing 100 percent of
the issued and outstanding stock of Chaparral to Marine Products Corporation (a
Delaware corporation) (“Marine Products”), a newly formed wholly-owned
subsidiary of RPC, and then distributing the common stock of Marine Products to
RPC stockholders. In conjunction with the spin-off, RPC and Marine
Products entered into various agreements that define the companies’
relationship.
In
accordance with a Transition Support Services agreement, which may be terminated
by either party, RPC provides certain administrative services, including
financial reporting and income tax administration, acquisition assistance, etc.,
to Marine Products. Charges from the Company (or from corporations
that are subsidiaries of the Company) for such services aggregated approximately
$713,000 in 2009, $842,000 in 2008 and $957,000 in 2007.
The Company’s receivable due from Marine Products for
these services as of December 31, 2009 and 2008 was approximately $65,000 and
$70,000.
The Company’s directors are also directors of Marine
Products and all of the executive officers are employees of both the Company and
Marine Products.
Other
The
Company periodically purchases in the ordinary course of business products or
services from suppliers, who are owned by significant officers or stockholders,
or affiliated with the directors of RPC. The total amounts paid to these
affiliated parties were approximately $409,000 in 2009, $393,000 in 2008 and
$1,035,000 in 2007.
RPC
receives certain administrative services and rents office space from Rollins,
Inc. (a company of which Mr. R. Randall Rollins is also Chairman and which is
otherwise affiliated with RPC). The service agreements between
Rollins, Inc. and the Company provide for the provision of services on a cost
reimbursement basis and are terminable on six months notice. The
services covered by these agreements include office space, administration of
certain employee benefit programs, and other administrative services. Charges to
the Company (or to corporations which are subsidiaries of the Company) for such
services and rent totaled $87,000 in 2009, $90,000 in 2008 and $72,000 in
2007.
A group
that includes the Company’s Chairman of the Board, R. Randall Rollins and his
brother Gary W. Rollins, who is also a director of the Company, and certain
companies under their control, controls in excess of fifty percent of the
Company’s voting power.
Note
12: Business Segment Information
RPC’s
service lines have been aggregated into two reportable oil and gas services
segments — Technical Services and Support Services — because of the similarities
between the financial performance and approach to managing the service lines
within each of the segments, as well as the economic and business conditions
impacting their business activity levels. Corporate includes selected
administrative costs incurred by the Company.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
Technical
Services include 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 include pressure pumping services,
coiled tubing, snubbing, nitrogen pumping, well control consulting and
firefighting, downhole tools, wireline, and fluid pumping services. These
Technical Services are primarily used in the completion, production and
maintenance of oil and gas wells. The principal markets for this segment include
the United States, including the Gulf of Mexico, the mid-continent, southwest,
Rocky Mountain and Appalachian regions, and international locations including
primarily Africa, Canada, China, Latin America, the Middle East and New Zealand.
Customers include major multi-national and independent oil and gas producers,
and selected nationally-owned oil companies.
Support
Services include RPC’s oil and gas service lines that primarily provide
equipment for customer use or services to assist customer operations. The
equipment and services include drill pipe and related tools, pipe handling,
inspection and storage services, 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, including the Gulf of Mexico, the mid-continent and Appalachian regions,
and international locations, including primarily Canada, Latin America, and the
Middle East. Customers include domestic operations of major multi-national and
independent oil and gas producers, and selected nationally-owned oil
companies.
The
accounting policies of the reportable segments are the same as those described
in Note 1 to these consolidated financial statements. RPC evaluates the
performance of its segments based on revenues, operating profits and return on
invested capital. Gains or losses on disposition of assets are
reviewed by the Company’s chief decision maker on a consolidated basis, and
accordingly the Company does not report gains or losses at the segment
level. Inter-segment revenues are generally recorded in segment
operating results at prices that management believes approximate prices for
arm’s length transactions and are not material to operating
results.
Summarized
financial information concerning RPC’s reportable segments for the years ended
December 31, 2009, 2008 and 2007 are shown in the following table.
|
|
Technical
Services
|
|
|
Support
Services
|
|
|
Corporate
|
|
|
Gain
on
disposition of
assets, net
|
|
|
Total
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
513,289
|
|
|
$
|
74,574
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
587,863
|
|
Operating
profit (loss)
|
|
|
(20,328
|
)
|
|
|
(1,636
|
)
|
|
|
(12,231
|
)
|
|
|
1,143
|
|
|
|
(33,052
|
)
|
Capital
expenditures
|
|
|
48,175
|
|
|
|
19,220
|
|
|
|
435
|
|
|
|
—
|
|
|
|
67,830
|
|
Depreciation
and amortization
|
|
|
101,780
|
|
|
|
28,085
|
|
|
|
715
|
|
|
|
—
|
|
|
|
130,580
|
|
Identifiable
assets
|
|
|
453,133
|
|
|
|
144,905
|
|
|
|
51,005
|
|
|
|
—
|
|
|
|
649,043
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
745,991
|
|
|
$
|
130,986
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
876,977
|
|
Operating
profit (loss)
|
|
|
110,648
|
|
|
|
36,515
|
|
|
|
(9,360
|
)
|
|
|
6,367
|
|
|
|
144,170
|
|
Capital
expenditures
|
|
|
127,054
|
|
|
|
42,238
|
|
|
|
1,026
|
|
|
|
—
|
|
|
|
170,318
|
|
Depreciation
and amortization
|
|
|
92,738
|
|
|
|
24,798
|
|
|
|
867
|
|
|
|
—
|
|
|
|
118,403
|
|
Identifiable
assets
|
|
|
564,708
|
|
|
|
181,991
|
|
|
|
46,762
|
|
|
|
—
|
|
|
|
793,461
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
574,723
|
|
|
$
|
115,503
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
690,226
|
|
Operating
profit (loss)
|
|
|
116,493
|
|
|
|
29,955
|
|
|
|
(10,703
|
)
|
|
|
6,293
|
|
|
|
142,038
|
|
Capital
expenditures
|
|
|
211,389
|
|
|
|
35,138
|
|
|
|
2,231
|
|
|
|
—
|
|
|
|
248,758
|
|
Depreciation
and amortization
|
|
|
59,436
|
|
|
|
18,106
|
|
|
|
964
|
|
|
|
—
|
|
|
|
78,506
|
|
Identifiable
assets
|
|
|
480,840
|
|
|
|
168,027
|
|
|
|
52,148
|
|
|
|
—
|
|
|
|
701,015
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RPC,
Inc. and Subsidiaries
Years
ended December 31, 2009, 2008 and 2007
The
following summarizes selected information between the United States and all
international locations combined for the years ended December 31, 2009, 2008 and
2007. The revenues are presented based on the location of the use of the product
or service. Assets related to international operations are less than 10 percent
of RPC’s consolidated assets, and therefore are not presented.
Years
ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
United
States Revenues
|
|
$
|
543,026
|
|
|
$
|
846,202
|
|
|
$
|
649,116
|
|
International
Revenues
|
|
|
44,837
|
|
|
|
30,775
|
|
|
|
41,110
|
|
|
|
$
|
587,863
|
|
|
$
|
876,977
|
|
|
$
|
690,226
|
|