Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 22 136K
2: EX-4 Instrument Defining the Rights of Security Holders 3 10K
3: EX-21 Subsidiaries of the Registrant 1 5K
4: EX-23 Consent of Experts or Counsel 1 5K
5: EX-24 Power of Attorney 8 14K
6: EX-27 Financial Data Schedule (Pre-XBRL) 2 6K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ________ to __________.
Commission File No. 1-8726
RPC, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1550825
(State of Incorporation) (I.R.S. Employer Identification No.)
2170 PIEDMONT ROAD, NE, ATLANTA, GEORGIA 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code(404)321-2140
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
COMMON STOCK, $0.10 PAR VALUE THE NEW YORK STOCK EXCHANGE
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of February 26, 1999, RPC, Inc. had 28,649,450 shares of common stock
outstanding and the aggregate market value of this stock (based on the
closing price on The New York Stock Exchange of $6.125 per share) held by
nonaffiliates was $57,411,144.
Documents Incorporated by Reference:
Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders
of RPC, Inc. are incorporated by reference into Part III, Items 10 through 13.
1
PART I
ITEM 1. BUSINESS
PRINCIPAL PRODUCTS AND SERVICES
RPC, Inc. ("RPC") was incorporated as RPC Energy Services, Inc. in the
state of Delaware on January 20, 1984. RPC has two major business segments:
boat manufacturing and oil and gas services.
BOAT MANUFACTURING
Chaparral Boats, Inc. ("Chaparral"), a wholly owned subsidiary of RPC,
sells four lines of powerboats to a nationwide network of independent dealers.
These lines consist of two different runabout lines, a deckboat line, and a
cruiser line. New models are introduced each year. Operations are seasonal in
nature with the second quarter recording the highest sales volume for the year.
This business segment contributed 42 percent of RPC's consolidated revenue in
1998, 39 percent in 1997, and 43 percent in 1996. Research and development
expenditures, totaling $2,499,000 in 1998, $2,122,000 in 1997, and $1,951,000
in 1996, were necessary to generate new product innovations.
OIL AND GAS SERVICES
The oil and gas services segment provides a variety of services,
equipment, and personnel to the oil and gas industry. Service locations
include Belle Chasse, Houma, Lafayette, Fourchon, and Morgan City, Louisiana;
Alice, Corpus Christi, Houston, Longview, and Odessa, Texas; Elk City,
Woodward, Lindsay, and McAlester, Oklahoma; Rock Springs, Wyoming; Venezuela
and Algeria. The oil and gas services business is not generally seasonal.
However, severe weather conditions will increase the demand for oil and
natural gas, which generally results in an increase in the demand for our
services. During 1998, 1997, and 1996 there were no material expenditures for
research and development in this business segment.
The services provided by the oil and gas services segment of RPC include
the following:
OIL FIELD SERVICES
Cudd Pressure Control, Inc. ("Cudd"), a wholly owned subsidiary of RPC,
provides a wide range of oil and gas well services throughout the
southwestern United States and other countries. These oil field services
include coiled tubing, snubbing, nitrogen pumping, wireline, marine, well
control, and engineering consulting. This portion of the business segment
contributed 30 percent of RPC's consolidated revenue in 1998, 32 percent in
1997, and 29 percent in 1996.
EQUIPMENT RENTAL SERVICES
Patterson Services, Inc., a wholly owned subsidiary of RPC, offers
specialized tools and equipment on a rental basis. These include drill pipe,
drill collars, tubing, blowout preventors, and torque-turning equipment. In
addition, Patterson Services provides experienced personnel to install and
remove customer-owned casing at well sites and operate company-owned,
diesel-driven hammers and welding machines used to weld and drive pipe into
the ground. On average, approximately 23 percent of rental equipment was
rented on a daily basis in 1998 and 26 percent in 1997. In the rental
business, maximum utilization is approximately 50 percent due to
transportation, inspection, and cleaning requirements. This portion of the
business segment contributed 15 percent of RPC's consolidated revenue
in 1998, 15 percent in 1997, and 13 percent in 1996.
STORAGE AND INSPECTION SERVICES
Patterson Tubular Services, Inc. ("PTS"), a wholly owned subsidiary of
RPC, performs tubular inspections, stores pipe, and inventories pipe using an
on-line computerized inventory system. Waterfront dock facilities enable PTS
to services a wide variety of offshore and inland vessels.
In January 1996 PTS opened a state-of-the-art internal pipe-coating
facility in Channelview, Texas. The plant uses CERAMKOTE 54 -Registered
Trademark-, a high-performance ceramic-epoxy coating system, which provides
abrasion and corrosion protection. This portion of the business segment
contributed 6 percent of RPC's consolidated revenue in 1998, 8 percent in
1997, and 9 percent in 1996.
Neither the boat manufacturing nor the oil and gas services business segment
are significantly affected by the availability of raw materials or the
existence of licenses, patents, and trademarks.
CUSTOMERS
RPC's business is not dependent on any one customer, but on a variety of
customers in both major business segments. No one customer accounts for more
than 10 percent of consolidated revenue.
2
The boat manufacturing segment produces four lines of boats with
distribution to a nationwide network of independent dealers. Sales to these
dealers are generated by a six-person sales force. Although production is
scheduled from orders placed by dealers, these are not firm orders and are
frequently changed or canceled. As a result, this segment does not have an
identifiable backlog of sales.
The oil and gas services segment provides services to drilling
contractors, oil field supply stores and service companies, major oil and gas
producers, and independent exploration companies. Sales are generated by
RPC's sales force and from customer referrals. RPC has no written contracts
of a material nature with any of its oil and gas services segment customers.
Also, there is no material sales backlog due to the short-term nature of the
rental and services industry.
COMPETITION
There are many companies that compete with RPC's subsidiaries in each
segment, some of which are larger and have been established in the
industries for longer periods of time.
The boat manufacturing segment's competition includes small independent
companies, as well as large vertically integrated companies that have both
engine and boat manufacturing capabilities. Major markets include the
southeastern and Gulf states, the northeastern states, and California.
Competitive factors in this industry are the quality of materials, the
quality of the construction process, the design features, and the selling
prices. Selling prices are set by management and vary from dealer to dealer
based upon volume. The sales prices of Chaparral's boats are similar to
equivalent competitors' models.
In the oil and gas services segment, intense competition exists and has
led to substantial price reductions for services offered. Industry conditions
are influenced by such factors as weather, economic and political conditions,
as well as worldwide demand for, and prices of, oil and natural gas. The
notable competitive factors in this segment are quality, availability, and
price of equipment and service. This segment's predominant markets are the
Gulf of Mexico, the southwestern United States, Venezuela, and Algeria.
EMPLOYEES
At December 31,1998, RPC employed 1,587 persons.
ENVIRONMENTAL CONSIDERATIONS
The capital expenditures, earnings, and competitive position of RPC are
not materially affected by compliance with federal, state, and local
provisions that have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of
the environment.
INDUSTRY SEGMENTS' FINANCIAL INFORMATION
Information about RPC's operations by segment, as well as financial
information about foreign and domestic operations for the three years ended
December 31, 1998, is set forth in Note 9 of the Financial Statements on
pages 22 and 23.
ITEM 2 PROPERTIES
RPC owns or leases 63 offices and operating facilities. Considered
individually, the only facility that represents a materially important
physical property is the boat manufacturing plant in Nashville, Georgia. RPC
believes its current operating facilities are suitable and adequate to meet
current and reasonably anticipated future needs. Descriptions of the major
facilities are as follows:
OWNED LOCATIONS
Houston, Texas--Pipe storage terminal, inspection shed, and pipe coating
facility
Nashville, Georgia--Boat manufacturing facility
Irving, Texas--Crane fabrication plant
Houma, Louisiana--Oil and gas administrative office
LEASED LOCATIONS
Morgan City, Louisiana--Pipe storage terminal and inspection shed
Expiration date of lease: January 31, 2002
ITEM 3 LEGAL PROCEEDINGS
RPC is involved in various legal proceedings encountered in the ordinary
course of business. In the opinion of management, any judgment or settlement
arising from these proceedings will not, individually or in the aggregate,
have a material adverse effect on its business or its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1998.
3
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Each of the executive officers of RPC was elected by the Board of Directors
to serve until the Board of Directors' meeting immediately following the next
annual meeting of stockholders or until his or her earlier removal by the
Board of Directors or his or her resignation. The following table lists the
executive officers of RPC and their ages, offices, and terms of office with
RPC.
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Name and Office Date First
with Registrant Age Elected to Office
R. Randall Rollins 67 1/24/84
Chairman of the Board
Chief Executive Officer
Richard A. Hubbell 54 1/27/87
President
Chief Operating Officer
Bobby Joe Cudd 69 1/24/84
Executive Vice President
James A. Lane, Jr. 56 1/27/87
Executive Vice President
Linda H. Graham 62 1/27/87
Vice President
Secretary
Ben M. Palmer(1) 38 7/8/96
Vice President
Chief Financial Officer
Treasurer
(1) Ben M. Palmer joined the Registrant in July 1996 as Chief Financial
Officer and Treasurer. He was elected Vice President in April 1998. From 1992
to 1996, Mr. Palmer served as Senior Vice President, Chief Financial Officer,
and Treasurer of EQ Services, Inc., a commercial mortgage servicing and asset
management company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
RPC common stock is listed for trading on the New York Stock Exchange
under the symbol RES. At the close of business on December 31, 1998, there
were 1,283 holders of record of common stock. The high and low prices of
RPC's common stock for each quarter in the years ended December 31, 1998 and
1997 were as follows:
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1998 1997
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Quarter High Low High Low
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First $ 13.500 $ 10.875 $ 7.688 $ 7.188
Second 14.250 12.250 7.407 6.188
Third 12.625 8.750 16.219 7.344
Fourth 9.938 7.000 15.313 11.125
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During 1998, RPC declared and paid quarterly cash dividends of $0.035
per common share payable March 10, June 10, September 10, and December 10,
1998. Dividends were first paid in the third quarter of 1997.
4
ITEM 6. SELECTED FINANCIAL DATA
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RPC, INC. AND SUBSIDIARIES (IN THOUSANDS EXCEPT PER SHARE DATA)
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1998 1997 1996 1995 1994
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OPERATIONS SUMMARY
Revenue $ 244,274 $ 245,799 $ 200,833 $ 161,379 $ 155,765
Net costs and expenses 218,428 211,836 180,596 145,228 142,583
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Income before income taxes 25,846 33,963 20,237 16,151 13,182
Income tax provision 9,821 11,718 6,982 5,396 4,404
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Net income $ 16,025 $ 22,245 $ 13,255 $ 10,755 $ 8,778
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Earnings per share:
Basic $ 0.55 $ 0.76 $ 0.46 $ 0.37 $ 0.31
Diluted .55 .75 .46 .37 .31
Cash dividends declared .14 .05 -- -- --
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CAPITAL EXPENDITURES $ 30,124 $ 20,479 $ 20,889 $ 15,529 $ 10,618
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FINANCIAL POSITION
Total assets $ 180,691 $ 182,518 $ 152,800 $ 132,656 $ 122,242
Working capital 40,099 50,395 39,192 41,943 37,827
Stockholders' equity 143,066 139,376 117,799 104,361 93,499
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED
Consolidated revenue decreased less than 1 percent in 1998 to
$244,274,000 compared to $245,799,000 in 1997. Consolidated revenue in 1997
was 22 percent higher than 1996 revenue of $200,833,000. In 1998, revenue in
the boat manufacturing segment increased 9 percent due primarily to an
increase in the average sales price of boats sold. Chaparral has expanded its
revenues despite minimal overall industry growth. The oil and gas services
segment revenue decreased 10 percent in 1998 compared to 1997 because a
worldwide imbalance between the supply and demand for oil created depressed
oil prices. Therefore, oil field services' customers were not actively
seeking to expand oil and gas reserves through new drilling.
Consolidated income before income taxes was $25,846,000 in 1998,
$33,963,000 in 1997, and $20,237,000 in 1996. This represented a decrease of
$8,117,000 or 24 percent in 1998 and an increase of $13,726,000 or 68 percent
in 1997. In 1998, the boat manufacturing segment generated a 17 percent
increase in income before income taxes due primarily to the reasons discussed
above. Chaparral was able to maintain its pricing structure, despite
continued price competition, resulting in a slight improvement in margins. The
oil and gas services segment's income before income taxes decreased 37
percent because of the reasons discussed above.
Consolidated net income was $16,025,000 or $0.55 diluted earnings per
share in 1998 compared to $22,245,000 or $0.75 diluted earnings per share in
1997. This compares to $0.55 basic earnings per share in 1998 versus $0.76
basic earnings per share in 1997. Consolidated net income in 1996 was
$13,255,000 or $0.46 diluted and basic earnings per share. This represented a
decrease of $6,220,000 or 28 percent in 1998 and an increase of $8,990,000
or 68 percent in 1997.
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REVENUE--BUSINESS SEGMENTS
Boat Manufacturing--The boat manufacturing segment reported a 9 percent or
$8,468,000 increase in revenue from $95,029,000 in 1997 to $103,497,000 in
1998. Revenue for 1996 was $86,225,000.
The total number of boats sold by Chaparral in 1998 decreased less than
1 percent while the average sales price increased 10 percent. The average
sales price increased because of the larger number of higher priced boats
sold. The SS line of family runabouts, introduced in 1993, and the Sunesta,
the deckboat line introduced in 1992, continued to be very popular. Revenues
also continued to increase as a result of the favorable response to the
dealer incentive schedule, which reduces the fluctuation in production
levels, and increased production of higher priced models to meet dealer
demands. There were price increases in July 1998 and December 1998 that
averaged 1 percent each, as a result of higher material costs.
The total number of boats sold by Chaparral in 1997 increased 5 percent
compared to 1996. The increase was due to increased sales from new model
changes coupled with a favorable response to the dealer incentive schedule.
Oil and Gas Services--The oil and gas services segment generated $123,949,000
or 51 percent of 1998 revenue. Revenue was $137,599,000 in 1997 and
$101,741,000 in 1996. Patterson Services' revenue decreased 4 percent in 1998
as demand decreased for its specialized rental tools because of significant
reductions in customer drilling activity. Cudd Pressure Control's
international operations experienced a 42 percent decrease in revenues in
1998 due to the restructuring of Venezuela's national oil company, and a
worldwide slow down in industry activity as a result of the lower oil prices.
The decreased activity occurred in the latter half of 1998 following
increasing activity levels during 1997.
The revenue decrease for the oil and gas services segment of 10 percent
for 1998, as compared to 1997, can be attributed to a number of factors,
including a decrease in oil and natural gas prices due to decreases in demand
and the resulting decrease in customer exploration and production activity.
Oil prices and natural gas prices decreased 35 percent and 22 percent
compared to prior year. The number of active domestic drilling rigs has
decreased 38 percent compared to the prior year.
EXPENSES
Cost of goods sold for the boat manufacturing segment was $77,776,000 in
1998 compared to $72,899,000 in 1997 and $67,426,000 in 1996. This represents
an increase of $4,877,000 or 7 percent in 1998, which is somewhat less than
the increase in revenue. As a percent of revenue, cost of goods sold for this
segment was 75 percent in 1998, 77 percent in 1997 and 78 percent in 1996.
The decrease as a percentage of segment revenues can be attributed to an
increased emphasis on inventory pricing controls. The remaining cost of goods
sold was incurred by subsidiaries in other businesses.
Consolidated operating expenses were $113,994,000 in 1998, $117,777,000 in
1997, and $95,820,000 in 1996. Expenses were 3 percent lower in 1998 than in
1997, primarily in the oil and gas services segment, resulting from this
segment's revenue decrease.
The boat manufacturing segment's operating expenses were $11,024,000 or
11 percent of this segment's revenue in 1998 as compared to $9,595,000 or 10
percent of this segment's revenue in 1997. The oil and gas services segment's
operating expenses were $92,118,000 or 74 percent of this segment's revenue
in 1998. Operating expenses were $99,981,000 or 73 percent of this segment's
revenue in 1997 and $79,421,000 or 78 percent of this segment's revenue in
1996.
The portion of depreciation and amortization not included in cost of
goods sold was $15,661,000 in 1998, $12,877,000 in 1997, and $9,210,000 in
1996. The majority of this expense represented the oil and gas services
segment depreciation of $14,368,000 in 1998, $11,521,000 in 1997, and
$8,126,000 in 1996. The 1998 increase of $2,784,000 or 22 percent was due
6
EXPENSES-CONTINUED
primarily to increased capital expenditures. Chaparral's depreciation expense
for production equipment is a component of cost of goods sold, therefore this
category includes only amortization of intangibles and depreciation of
nonproduction assets. Chaparral's depreciation and amortization was $776,000
for 1998, $780,000 for 1997, and $734,000 for 1996. Consolidated
amortization of intangible assets was $888,000 in 1998, $865,000 in 1997, and
$797,000 in 1996.
INTEREST INCOME
Interest income was $2,023,000 in 1998, $2,376,000 in 1997, and $2,018,000
in 1996. The decrease in total cash and marketable securities from $58,184,000
at December 31, 1997, to $42,950,000 at December 31, 1998, resulted in a
decrease in interest income of 15 percent in 1998 due to lower average balances
and moderately lower yields.
FINANCIAL CONDITION
As of December 31, 1998, RPC's cash and cash equivalents and short-term
marketable securities had decreased $15,242,000 from $28,685,000 at December 31,
1997 to $13,443,000. Cash provided by operating activities was $24,496,000
compared to $30,196,000 in 1997. Accounts receivable were $25,266,000 at
December 31, 1998, compared to $32,153,000 at December 31, 1997, a decrease of
$6,887,000 due to the decrease in revenues. Inventories were $1,421,000 higher
than the prior year mainly due to an increase in the value of finished boats
on hand for the boat manufacturing segment. Inventory increased due to the
higher production levels for the boat manufacturing segment to satisfy increased
demand.
During 1998, current assets decreased $15,355,000 and current liabilities
decreased $5,059,000, a combined decrease in working capital of $10,296,000.
Working capital at December 31, 1998, was $40,099,000 compared to $50,395,000 in
the prior year. The current ratio remained strong at the end of 1998 with a
ratio of 2.2-to-1 as compared to 2.3-to-1 both 1997 and 1996.
Capital expenditures for 1998 were $30,124,000, an increase of $9,645,000
from $20,479,000 in 1997. $27,814,000 of these expenditures were in the oil and
gas services segment for revenue-producing equipment. Capital expenditures
for the oil and gas services segment were $19,668,000 in 1997.
RPC expects that funding for capital requirements over the next twelve
months will be provided by available cash and marketable securities and cash
generated from operations.
FORWARD-LOOKING STATEMENTS
This Annual Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, included or
incorporated by reference in this Annual Report which address activities,
events, or developments which RPC expects or anticipates will or may occur in
the future, including statements regarding RPC's competitive position,
future capital requirements, the anticipated impact of legal proceedings,
plans to increase revenues and profit margins, trends in the boating
industry, plans to increase boat sales, future acquisitions, the impact of
the year 2000 programming issue, RPC's ability to take advantage of current
conditions and opportunities in the oil and gas businesses and boat
manufacturing business, the impact of consolidation in the oil and gas and
boat manufacturing industries on RPC's business, and other statements
regarding future plans and strategies, anticipated trends and similar
expressions concerning matters that are not historical facts, are
forward-looking statements. These statements are based on certain
conditions and analyses made by RPC in light of its experience and its
perception of historical trends, current conditions and expected future
develop-
7
ments as well as other factors it believes are appropriate under the
circumstances. However, whether actual results and developments will conform
with RPC's expectations and predictions is subject to a number of risks and
uncertainties which could cause actual results to differ materially from
RPC's expectations, including economic conditions, conditions in the
industries in which RPC operates, competition, the availability of
acquisition candidates, the ability of RPC to obtain financing on reasonable
terms and conditions, and other factors, many of which are beyond the
control of RPC. Consequently, all of the forward-looking statements made in
this Annual Report are qualified by these cautionary statements and there can
be no assurance that the actual results or developments anticipated by RPC
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on RPC or its business or operations.
RPC assumes no obligation to update publicly any such forward-looking
statements, whether as a result of new information, future events or
otherwise.
YEAR 2000 ISSUE
Aware that the Year 2000 (Y2K) information technology programming issue
could have a significant potential impact on its future operations and
financial reporting, RPC began its assessment and remediation processes
regarding its primary financial and operating systems in 1997. RPC's
assessment activities have included (1) identifying all software and
operating systems--both information technology (IT) systems and non-IT
systems with embedded technology--which are critical to operations and/or
financial reporting, (2) testing of such software and systems for Y2K
compliance, and (3) obtaining assurances from its vendors and its large
commercial customers. RPC's remediation activities have included replacing
certain software and operating systems, followed by testing to ensure the Y2K
compliance of the replacements.
Based on its assessment and remediation activities to date, RPC believes
that its critical internal software and operating systems are Y2K compliant
with the exception of a subsidiary billing system. The total cost of Y2K
expenditures to date have not been material. The remaining Y2K remediation
costs are anticipated to be less than $50,000.
Based on assurances from the majority of its vendors and large
commercial customers to date, RPC does not anticipate any material Y2K impact
on its operations or financial reporting at this time. RPC believes that the
worst case scenario will be temporary delays in billing and collection of
customer receivables.
RPC expects to have contingency plans in place by the end of 1999 that
address any potential Y2K issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
RPC maintains an investment portfolio, comprised of U.S. Government and
corporate debt securities, which is subject to interest rate risk exposure.
This risk is managed through conservative policies to invest in high-quality
obligations. RPC has performed an interest rate sensitivity analysis using a
duration model over the near term with a 10 percent change in interest rates.
RPC's portfolio is not subject to material interest rate risk exposure based
on this analysis, and no material changes in market risk exposures or how
those risks are managed is expected.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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BALANCE SHEETS RPC, INC. AND SUBSIDIARIES (IN THOUSANDS EXCEPT SHARE INFORMATION)
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At December 31, 1998 1997
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ASSETS
Cash and cash equivalents $ 10,029 $ 17,409
Marketable securities 3,414 11,276
Accounts receivable, net 25,266 32,153
Inventories 17,446 16,025
Deferred income taxes 10,787 8,626
Federal income taxes receivable 3,673 --
Prepaid expenses and other current assets 1,909 2,390
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Current assets 72,524 87,879
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Equipment and property, net 70,206 55,673
Marketable securities 29,507 29,499
Intangibles, net of accumulated amortization
of $8,847 in 1998 and $7,959 in 1997 7,401 8,289
Other assets 1,053 1,178
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Total assets $180,691 $182,518
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LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 5,859 $ 7,437
Accrued payroll and related expenses 4,192 5,826
Accrued insurance expenses 6,329 7,422
Accrued state, local and other taxes 4,063 4,211
Federal income taxes payable -- 1,061
Accrued discounts 1,053 826
Current portion of long-term debt 659 857
Other accrued expenses 10,270 9,844
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Current liabilities 32,425 37,484
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Long-term accrued insurance expenses 3,308 4,034
Long-term debt 636 1,315
Deferred income taxes 1,256 309
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Total liabilities 37,625 43,142
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Commitments and contingencies
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Common stock, $.10 par value, 79,000,000 shares
authorized, 28,887,872 shares issued in 1998,
29,780,382 shares issued in 1997 2,888 2,978
Capital in excess of par value 26,538 35,211
Earnings retained 113,640 101,805
Common stock in treasury, at cost,
169,392 shares in 1997 -- (618)
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Total stockholders' equity 143,066 139,376
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Total liabilities and stockholders' equity $180,691 $182,518
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The accompanying notes are an integral part of these statements.
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STATEMENTS
RPC, INC. AND SUBSIDIARIES (IN THOUSANDS EXCEPT PER SHARE DATA) OF INCOME
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YEARS ENDED DECEMBER 31, 1998 1997 1996
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REVENUE $244,274 $245,799 $200,833
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Cost of goods sold 90,796 83,558 77,584
Operating expenses 113,994 117,777 95,820
Depreciation and amortization 15,661 12,877 9,210
Interest income (2,023) (2,376) (2,018)
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Income before income taxes 25,846 33,963 20,237
Income tax provision 9,821 11,718 6,982
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Net income $ 16,025 $ 22,245 $ 13,255
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EARNINGS PER SHARE
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Basic $ 0.55 $ 0.76 $ 0.46
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Diluted $ 0.55 $ 0.75 $ 0.46
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STATEMENTS OF
RPC, INC. AND SUBSIDIARIES (IN THOUSANDS) STOCKHOLDERS'
EQUITY
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YEARS ENDED DECEMBER 31, 1998 1997 1996
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COMMON STOCK
Balance at beginning of year $ 2,978 $ 1,471 $ 1,461
Stock purchased and retired (53) -- --
Two-for-one stock split -- 1,487 --
Treasury stock retired (42) -- --
Stock issued for benefit plans, net 5 20 10
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Balance at end of year $ 2,888 $ 2,978 $ 1,471
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CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year $ 35,211 $ 35,176 $ 34,599
Stock purchased and retired (5,469) -- --
Two-for-one stock split -- (1,487) --
Treasury stock retired (3,641) -- --
Stock issued for benefit plans, net 437 1,522 577
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Balance at end of year $ 26,538 $ 35,211 $ 35,176
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EARNINGS RETAINED
Balance at beginning of year $101,805 $ 81,555 $ 68,526
Net income 16,025 22,245 13,255
Dividends declared (4,108) (1,475) --
Stock issued for benefit plans, net (82) (520) (226)
---------------------------------------------------------------------------
Balance at end of year $113,640 $101,805 $ 81,555
---------------------------------------------------------------------------
TREASURY STOCK
Balance at beginning of year $ 618 $ 403 $ 225
Stock purchased 3,045 -- --
Treasury stock retired (3,682) -- --
Stock options exercised 19 215 178
---------------------------------------------------------------------------
Balance at end of year $ -- $ 618 $ 403
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
10
[Enlarge/Download Table]
Statements --------------------------------------------------------------------------------------------------------------
of Cash RPC, INC. AND SUBSIDIARIES (IN THOUSANDS)
Flows --------------------------------------------------------------------------------------------------------------
Years ended December 31, 1998 1997 1996
--------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 16,025 $ 22,245 $ 13,255
Noncash charges (credits) to earnings:
Depreciation and amortization 16,430 13,510 9,818
Gain on sale of equipment and property (2,350) (2,216) (1,316)
Deferred income tax (benefit) provision (1,213) (608) 246
(Increase) decrease in assets:
Accounts receivable 6,887 (7,997) (3,354)
Inventories (1,421) (598) (982)
Federal income taxes receivable (3,673) -- --
Prepaid expenses and other current assets 606 (727) 185
Other noncurrent assets 23 427 2
Increase (decrease) in liabilities:
Accounts payable (2,809) 681 1,721
Accrued payroll and related expenses (1,634) 1,285 642
Accrued insurance expenses (1,819) 1,226 1,883
Other accrued expenses (556) 2,968 1,960
--------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 24,496 30,196 24,060
--------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (30,124) (20,479) (20,889)
Proceeds from sale of equipment and property 3,657 2,510 1,769
Net sale (purchase) of marketable securities 7,854 (7,555) (9,472)
Other -- 623 (502)
--------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (18,613) (24,901) (29,094)
--------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends (4,108) (1,475) --
Repayments of long-term debt (877) -- --
Cash paid for common stock purchased and retired (8,351) -- --
Proceeds received upon exercise of stock options 73 465 32
--------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities (13,263) (1,010) 32
--------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (7,380) 4,285 (5,002)
Cash and cash equivalents at beginning of year 17,409 13,124 18,126
--------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 10,029 $ 17,409 $ 13,124
--------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
11
NOTES TO FINANCIAL STATEMENTS
RPC, INC. AND SUBSIDIARIES
Years ended December 31, 1998, 1997, and 1996
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
the accounts of RPC, Inc. and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
Nature of Operations--RPC is principally engaged in two businesses:
manufacturing powerboats and providing a variety of services, equipment, and
personnel to the oil and gas industry. The boat manufacturing segment
manufactures and distributes fiberglass boats to a nationwide network of
independent dealers. The principal markets for the oil and gas services
segment are domestic customers comprised of drilling contractors, oil field
supply stores and service companies, major oil and gas producers, and
independent exploration companies.
Use of Estimates in the Preparation of Financial Statements--The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue--Revenue is recognized at the time services are performed or goods
are delivered.
Cash Equivalents--Highly liquid investments with original maturities of 3
months or less are considered to be cash equivalents.
Marketable Securities--Marketable securities should be classified as either
"trading" or "available-for-sale," which requires reporting at fair value on
the balance sheet. Any unrealized gains and losses on trading securities are
included in earnings. For available-for-sale securities, any unrealized gains
and losses are excluded from earnings and, if significant, reported in a
separate component of stockholders' equity. As of December 31, 1998 and 1997,
the difference between fair value and cost for both classifications was not
material.
Investments with original maturities between 3 and 12 months are
considered to be current marketable securities. Investments with original
maturities greater than 12 months are considered to be noncurrent marketable
securities.
Inventories--Inventories are recorded at the lower of cost (first-in,
first-out basis) or market value.
Long-Lived Assets--Long-lived assets and certain intangibles are reviewed
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company periodically reviews the
values assigned to long-lived assets, such as property and equipment and
other assets, to determine if any impairments are other than temporary.
Management believes that the long-lived assets in the accompanying balance
sheets are appropriately valued.
Equipment and Property--Depreciation is provided principally on a
straight-line basis over the estimated useful lives of assets. Annual
provisions for depreciation are computed using the following useful lives:
operating equipment and property, 3 to 10 years; buildings and leasehold
improvements, 15 to 30 years; furniture and fixtures, 5 to 7 years; and
vehicles, 3 to 5 years. The cost of assets retired or otherwise disposed of
and the related accumulated depreciation are eliminated from the accounts in
the year of disposal with the resulting gain or loss credited or charged to
income. Expenditures for additions, major renewals, and betterments are
capitalized. Depreciation expense on production equipment in the
manufacturing businesses is included in the "cost of goods sold" caption in the
12
NOTES TO FINANCIAL STATEMENTS--CONTINUED
income statement. All other depreciation is included in the "depreciation and
amortization" caption.
Intangibles--Intangibles represent the excess of the purchase price over the
fair value of net assets of businesses acquired and noncompete agreements
related to businesses acquired. Intangibles are presented net of accumulated
amortization and are amortized using the straight-line method over a period
not exceeding 20 years or the period of the noncompete agreement.
Stock-Based Compensation--Statements of Financial Accounting Standards ("SFAS
No. 123") defines a fair value-based method of accounting for an employee
stock option plan or similar equity instrument. However, it also allows an
entity to continue to measure compensation cost for those plans using the
method of accounting prescribed by APB 25. Entities electing to remain with
the accounting in APB 25 must make pro forma disclosures of net income and
earnings per share, as if the fair value-based method of accounting defined
in the statement had been applied.
RPC has elected to account for its stock-based compensation plans under
APB 25; however, the Company has computed for pro forma disclosure purposes
the value of all options granted during 1998, 1997, and 1996 using the
Black-Scholes option pricing/model as prescribed by SFAS No. 123 using the
following weighted average assumptions for grants:
[Download Table]
------------------------------------------------------------------------------
1998 1997 1996
------------------------------------------------------------------------------
Risk free interest rate 5.4% 6.2% 5.3%
Expected dividend yield 2% 0% 0%
Expected lives 7 years 7 years 7 years
Expected volatility 31-34% 26-31% 24-31%
------------------------------------------------------------------------------
The total fair value of the options granted during the years ended December
31, 1998, 1997, and 1996, were computed as approximately $1,092,000,
$524,000, and $148,000, respectively, which would be amortized over the
vesting period of the options. If the Company had accounted for these plans
in accordance with SFAS No. 123, the Company's reported pro forma net income
and pro forma net income per share would have been as follows:
[Download Table]
------------------------------------------------------------------------------
December 31, 1998 1997 1996
------------------------------------------------------------------------------
Net Income (IN THOUSANDS)
As reported $ 16,025 $ 22,245 $ 13,255
Pro forma 15,818 22,163 13,238
Basic EPS
As reported $ 0.55 $ 0.76 $ 0.46
Pro forma 0.55 0.76 0.46
Diluted EPS
As reported $ 0.55 $ 0.75 $ 0.46
Pro forma 0.54 0.75 0.45
------------------------------------------------------------------------------
Insurance Expenses--RPC self-insures, up to specified limits, certain risks
related to general liability, product liability, workers' compensation, and
vehicle liability. The estimated cost of claims under the self-insurance
program is accrued as the claims are incurred (although actual settlement of
the claims may not be made until future periods) and may subsequently be
revised based on developments relating to such claims. The noncurrent portion
of these estimated outstanding claims is classified as long-term accrued
insurance expenses.
Income Taxes--Deferred tax liabilities and assets are determined based on the
difference between the financial and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse. These differences are more inclusive in nature than
differences determined under previously applicable accounting principles.
Earnings per Share--RPC adopted SFAS No. 128, "Earnings Per Share," in 1997,
which requires a basic earnings per share and diluted earnings per share
presentation. The two calculations differ as a result of common stock
equivalents and restricted shares included in diluted earnings per share, but
excluded in basic earnings per share. A reconciliation of the weighted shares
outstanding is as follows:
[Download Table]
1998 1997 1996
------------------------------------------------------------------------------
Basic EPS 28,987,345 29,181,668 28,942,180
Common stock
equivalents and
restricted shares 377,870 423,195 200,498
------------------------------------------------------------------------------
Diluted EPS 29,365,215 29,604,863 29,142,678
------------------------------------------------------------------------------
13
New Accounting Standards--In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS No. 133), which
establishes standards for reporting and disclosing information about derivative
instruments. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. The adoption of SFAS No. 133 is not expected to have a material impact.
NOTE 2: ACCOUNTS RECEIVABLE
Accounts receivable, net, at December 31, 1998 of $25,266,000 and at
December 31, 1997, of $32,153,000 are net of allowances for doubtful accounts
of $7,004,000 in 1998, and $6,967,000 in 1997.
NOTE 3: INVENTORIES
Inventories are recorded at the lower of cost (first-in, first-out basis)
or market value and are detailed as follows:
[Download Table]
-------------------------------------------------------------------
December 31, 1998 1997
-------------------------------------------------------------------
(IN THOUSANDS)
Raw materials and supplies $ 9,942 $10,392
Work in process 1,414 1,262
Finished goods 6,090 4,371
-------------------------------------------------------------------
Total inventories $17,446 $16,025
-------------------------------------------------------------------
NOTE 4: EQUIPMENT AND PROPERTY
Equipment and property are presented at cost net of accumulated
depreciation and are detailed as follows:
[Download Table]
-------------------------------------------------------------------
December 31, 1998 1997
-------------------------------------------------------------------
(IN THOUSANDS)
Operating equipment
and property $175,842 $164,584
Buildings 17,142 15,991
Furniture and fixtures 4,233 4,546
Vehicles 18,999 17,506
Land 4,941 4,941
-------------------------------------------------------------------
Gross equipment and property 221,157 207,568
Less: accumulated depreciation 150,951 151,895
-------------------------------------------------------------------
Net equipment and property $ 70,206 $ 55,673
-------------------------------------------------------------------
NOTE 5: INCOME TAXES
The following table lists the components of the provision for income
taxes:
[Enlarge/Download Table]
-------------------------------------------------------------------------------------
December 31, 1998 1997 1996
-------------------------------------------------------------------------------------
(IN THOUSANDS)
Current:
Federal $10,264 $11,838 $6,353
State 770 488 383
Deferred (1,213) (608) 246
-------------------------------------------------------------------------------------
Total income tax provision $ 9,821 $11,718 $6,982
-------------------------------------------------------------------------------------
A reconciliation between the federal statutory rate and RPC's effective
tax rate is as follows:
[Enlarge/Download Table]
-------------------------------------------------------------------------------------
December 31, 1998 1997 1996
-------------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes 1.9 1.4 1.9
Other 1.1 (1.9) (2.4)
-------------------------------------------------------------------------------------
Effective tax rate 38.0% 34.5% 34.5%
-------------------------------------------------------------------------------------
The components of the net deferred tax assets (liabilities) are as follows:
[Download Table]
-----------------------------------------------------------------------
December 31, 1998 1997
-----------------------------------------------------------------------
(IN THOUSANDS)
Current deferred tax asset:
Self-insurance reserves $ 2,158 $ 2,088
Bad debt reserves 2,278 2,503
State, local & other taxes 1,015 852
Payroll accruals 985 703
Warrant reserves 1,051 795
All others 3,300 1,685
Valuation allowance -- --
-----------------------------------------------------------------------
Total current deferred tax asset $10,787 $ 8,626
-----------------------------------------------------------------------
Noncurrent deferred tax asset (liability):
Self-insurance reserves $ 1,585 $ 1,452
Depreciation (2,562) (1,592)
All others (279) (169)
Valuation allowance -- --
-----------------------------------------------------------------------
Total noncurrent deferred
tax (liability): $(1,256) $ (309)
-----------------------------------------------------------------------
14
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Total income tax payments, net of refunds, were $12,765,000 in 1998,
$11,260,000 in 1997, and $4,510,000 in 1996.
NOTE 6: LONG-TERM DEBT
The fair value of the long-term debt approximates the carrying value.
All obligations are collateralized by property, plant, and equipment.
At December 31, 1998, future minimum lease payments on long-term debt
and capitalized lease obligations were as follows:
[Download Table]
------------------------------------------------------------------------------
(IN THOUSANDS)
1999 $ 659
2000 276
2001 230
2002 130
2003 --
------------------------------------------------------------------------------
Total minimum principal payments $ 1,295
------------------------------------------------------------------------------
The long-term debt of RPC as of December 31, 1998, and December 31,
1997, is summarized as follows:
[Download Table]
(IN THOUSANDS) Range of
Maturity Interest
Type Dates Rates 1998 1997
------------------------------------------------------------------------------
Notes payable 2001-2002 6.25-8.50% $ 820 $ 1,300
Capital leases 2000 10.99% 475 872
------------------------------------------------------------------------------
Total debt 1,295 2,172
Less current portion 659 857
------------------------------------------------------------------------------
Long-term debt $ 636 $ 1,315
------------------------------------------------------------------------------
The net book value of equipment under capital lease was $1,085,000 at
December 31, 1998.
NOTE 7: COMMITMENTS AND CONTINGENCIES
Minimum annual rentals, prinipally for noncancelable real estate and
truck leases with terms in excess of one year, in effect at December 31,
1998, are summarized in the following table:
[Download Table]
------------------------------------------------------------------------------
(IN THOUSANDS)
1999 $ 965
2000 808
2001 613
2002 332
2003 169
2004-2008 157
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Total rental commitments $ 3,044
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Total rental expense charged to operations was $2,514,000 in 1998,
$3,610,000 in 1997, and $3,517,000 in 1996.
RPC is a defendant in a number of lawsuits which allege that plaintiffs
have been damaged as a result of the rendering of services by RPC personnel
and equipment, in vehicle accidents, or from the use of RPC's products. RPC
is vigorously contesting these actions. Management is of the opinion that the
outcome of these lawsuits will not have a material adverse effect on the
financial position or results of operations or liquidity of RPC.
To assist dealers in obtaining financing for the purchase of its boats,
Chaparral has entered into agreements with various dealers and financing
institutions to guarantee varying amounts of the dealers' purchase debt
obligations. Chaparral's obligation under its guarantee becomes effective in
the case of default in payments by the dealer. The agreements provide for the
return of all repossessed boats to Chaparral in new condition, in exchange
for Chaparral's assumption of the unpaid debt obligation on those boats. As
of December 31, 1998, guarantees outstanding totaled $6,382,000.
NOTE 8: EMPLOYEE BENEFIT PLANS
Retirement Plan--In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 132),
which establishes standards for disclosures for pensions and other
postretirement benefit plans. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. All prior years
15
have been restated to conform with current year presentation.
RPC has a tax-qualified defined benefit, noncontributory, trusteed
retirement income plan which covers substantially all employees with at
least one year of service. Benefits are based on an employee's years of
service and compensation near retirement. RPC has the right to terminate or
modify the plan at any time.
The following table sets forth the funded status of the plan and the
amounts recognized in RPC's consolidated balance sheet:
[Download Table]
------------------------------------------------------------------------------
December 31, 1998 1997
------------------------------------------------------------------------------
(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning
of year $ 16,172 $ 14,005
Service cost 914 602
Interest cost 1,343 1,053
Actuarial loss 2,244 1,014
Benefits paid (547) (502)
------------------------------------------------------------------------------
Benefit obligation at end of year 20,126 16,172
------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at
beginning of year 16,493 14,752
Actual return on plan assets 2,161 2,243
Benefits paid (547) (502)
------------------------------------------------------------------------------
Fair value of plan assets at
end of year 18,107 16,493
------------------------------------------------------------------------------
Funded status (2,019) 321
Unrecognized net asset (674) (867)
Unrecognized net loss 2,458 888
Unrecognized prior service cost (25) (34)
------------------------------------------------------------------------------
Net (accrued) prepaid benefit $ (260) $ 308
------------------------------------------------------------------------------
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATIONS:
Accumulated benefit obligation $ 16,928 $ 13,797
------------------------------------------------------------------------------
Plan assets at fair value $ 18,107 $ 16,493
------------------------------------------------------------------------------
RPC's funding policy is to contribute to the retirement income plan the
amount required, if any, under the Employee Retirement Income Security Act of
1974. No contributions were required in 1998, 1997, or 1996.
Total retirement plan cost was $569,000 in 1998, $86,000 in 1997, and
$72,000 in 1996. The components of net periodic benefit cost are summarized
as follows:
[Download Table]
------------------------------------------------------------------------------
December 31, 1998 1997 1996
------------------------------------------------------------------------------
(IN THOUSANDS)
Service cost for benefits earned
during the period $ 914 $ 602 $ 540
Interest cost on projected benefit
obligation 1,342 1,053 991
Expected return on plan assets (1,531) (2,243) (1,719)
Net amortization and deferral (156) 674 260
------------------------------------------------------------------------------
Net periodic benefit cost $ 569 $ 86 $ 72
------------------------------------------------------------------------------
The weighted average assumptions were as follows:
[Download Table]
------------------------------------------------------------------------------
December 31, 1998 1997 1996
------------------------------------------------------------------------------
Discount rate 7.00% 7.50% 7.50%
Expected return on plan
assets 9.50% 9.50% 9.50%
Rate of compensation
increase 4.00% 4.50% 5.00%
------------------------------------------------------------------------------
401(k) Plan--RPC sponsors a deferred compensation 401(k) plan that is
available to substantially all full-time employees with more than six months
of service. This plan allows employees to make tax-deferred contributions of
up to 15 percent of their annual compensation, not exceeding the permissible
deduction imposed by the Internal Revenue Code. RPC matches 40 percent of
each employee's contributions up to 3 percent of the employee's compensation.
Employees vest in the RPC contributions after five years of service. The
charges to expense for RPC's contributions were $392,000 in 1998, $315,00 in
1997, and $276,000 in 1996.
Stock Incentive Plans--RPC has an Employee Incentive Stock Option Plan (the
"1984 Plan") under which 1,000,000 shares of common stock were reserved for
issuance. The 1984 Plan expired in October 1994. On January 25, 1994, RPC
adopted a new ten-year Employee Stock Incentive Plan (the "1994 Plan") under
which 1,000,000 shares of common stock were reserved for issuance. During
1997, an additional 1,600,000 shares were reserved for issuance. These plans
provide for the issuance of various forms of stock incentives, including,
among others,
16
NOTES TO FINANCIAL STATEMENTS--CONTINUED
incentive stock options and restricted stock. As of December 31, 1998, there
were 1,660,400 shares available for the granting of options or other awards
under the 1994 Plan.
Incentive Stock Options--Transactions involving the incentive stock option
plans were as follows:
[Enlarge/Download Table]
Weighted
Average
Option Price Exercise
Shares (Per Share) Price
--------------------------------------------------------------------------------------------------------
Outstanding 1/1/96 676,976 $1.625-$4.000 $ 2.72
Granted 80,000 4.438 4.44
Canceled (29,800) 3.000-4.000 3.40
Exercised (172,884) 1.625-4.000 1.76
-----------------------------------------------------------------
Outstanding 12/31/96 554,292 $1.625-$4.438 $ 3.23
Granted 158,000 7.500 7.50
Canceled (5,232) 1.625-7.500 6.12
Exercised (264,260) 1.625-4.438 2.58
-----------------------------------------------------------------
Outstanding 12/31/97 442,800 $3.000-$7.500 $ 5.11
Granted 218,000 12.750 12.75
Canceled (28,400) 3.063-12.750 4.44
Exercised (30,300) 3.063-7.500 3.63
-----------------------------------------------------------------
Outstanding 12/31/98 602,100 $3.063-$12.750 $ 7.85
-----------------------------------------------------------------
[Enlarge/Download Table]
1998 1997 1996
------------------------------------------------------------------------------------------------------
Exercisable at December 31 210,660 151,120 360,692
Weighted average exercise price
of exercisable options $4.27 $3.51 $2.94
Per share weighted average grant date
fair value of options granted $5.20 $3.40 $1.85
------------------------------------------------------------------------------------------------------
The weighted average remaining contractual life of options outstanding at
December 31, 1998 was 7 years.
Restricted Stock--RPC has granted employees two forms of restricted stock:
performance restricted and time lapse. The performance restricted shares are
granted, but not earned and issued, until certain five-year tiered
performance criteria are met. The performance criteria are predetermined
market prices of the Company stock. On the date the stock appreciates to each
level (determination date), 20 percent of performance shares are earned. Once
earned, the performance shares vest five years from the determination date.
Time lapse shares vest ten years from the grant date. There were 52,000 units
granted under these restricted stock programs during 1998, 52,000 units
granted during 1997, and 50,000 units during 1996. No performance shares were
awarded under the plans in 1998. No shares were forfeited or canceled.
The agreements under which the restricted stock is issued provide that
shares awarded may not be sold or otherwise transferred until restrictions as
established under the Plan have lapsed. Upon termination of employment,
shares upon which restrictions have not lapsed must be returned to the
Company. As of December 31, 1998, none of the shares of restricted stock were
vested.
NOTE 9. BUSINESS SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No.131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes
standards for reporting information about operating segments in annual
financial statements and requires reporting selected information about
operating segments in interim financial reports issued to stockholders. SFAS
No. 131 is effective for fiscal years beginning after December 15,1997. All
prior years have been restated to conform with current year presentation.
RPC has two reportable segments: oil and gas services and boat
manufacturing. The oil and gas services segment provides a variety of
services, equipment, and personnel to the oil and gas industry. The boat
manufacturing segment manufactures and sells powerboats to a nationwide
network of independent dealers.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. RPC evaluates performance
based on profit or loss from operations before income taxes. RPC accounts for
intersegment sales and transfers as if the sales or transfers
17
were to third parties, that is, at current market prices.
RPC's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. All of these
businesses were acquired as a unit, and the management at the time of
acquisition was retained.
Certain information with respect to RPC's business segments is set forth
in the following table:
[Download Table]
------------------------------------------------------------------------------
DECEMBER 31, 1998 1997 1996
------------------------------------------------------------------------------
(IN THOUSANDS)
Revenue:
Oil and gas services $ 123,949 $ 137,599 $ 101,741
Boat manufacturing 103,497 95,029 86,225
Other 16,828 13,171 12,867
------------------------------------------------------------------------------
Total revenue $ 244,274 $ 245,799 $ 200,833
------------------------------------------------------------------------------
Operating income (loss):
Oil and gas services $ 17,465 $ 26,264 $ 14,194
Boat manufacturing 13,920 11,755 9,524
Other (3,519) (3,212) (2,609)
------------------------------------------------------------------------------
Total operating income $ 27,866 $ 34,807 $ 21,109
------------------------------------------------------------------------------
Corporate expenses (4,043) (3,220) (2,890)
Interest income 2,023 2,376 2,018
------------------------------------------------------------------------------
Income before
income taxes $ 25,846 $ 33,963 $ 20,237
------------------------------------------------------------------------------
Identifiable assets:
Oil and gas services $ 89,891 $ 86,578 $ 68,692
Boat manufacturing 28,085 25,076 26,167
Other, including
corporate assets 62,715 70,864 57,941
------------------------------------------------------------------------------
Total identifiable assets $ 180,691 $ 182,518 $ 152,800
------------------------------------------------------------------------------
Revenue from international operations in the oil and gas services
segment totaled $9,822,000 in 1998, $17,407,000 in 1997, and $12,851,000 in
1996. The respective operating profits were $608,000 in 1998, $2,720,000 in
1997, and $3,096,000 in 1996. There were $6,450,000 in identifiable assets
attributable to these operations in 1998, $9,987,000 in 1997, and $8,351,000
in 1996. There were no material amounts of international operations in the
boat manufacturing segment.
NOTE 10: UNAUDITED QUARTERLY DATA
[Download Table]
------------------------------------------------------------------------------
QUARTER FIRST SECOND THIRD FOURTH
------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
1998
Revenue $ 66,940 $ 66,375 $ 56,977 $ 53,982
Net Income 5,654 6,410 3,753 208
Earning per share
Basic .19 .22 .13 .01
Diluted .19 .22 .13 .01
1997
Revenue $ 58,203 $ 67,032 $ 57,857 $ 62,707
Net income 4,307 5,912 5,410 6,616
Earnings per share
Basic .15 .20 .19 .23
Diluted .15 .20 .18 .22
18
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This item is not applicable to RPC because there has been no change in
or disagreements with its independent public accountants.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive offers is included in the
RPC Proxy for its 1999 Annual Meeting of Stockholders, in the sections
entitled "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." This information is incorporated herein by reference.
Information about executive officers is contained on page 9.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is included in the RPC
Proxy for its 1999 Annual Meeting of Stockholders, in the section entitled
"Executive Compensation." This information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership is included in the RPC Proxy
for its 1999 Annual Meeting of Stockholders, in the sections entitled
"Capital Stock" and "Election of Directors." This information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
included in the RPC Proxy for its 1999 Annual Meeting of Stockholders, in the
sections entitled "Certain Relationships and Related Transactions" and
"Compensation Committee Interlocks and Insider Participation." This
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report.
[Download Table]
FINANCIAL STATEMENTS PAGE
Balance Sheets as of December 31, 1998 and 1997 14
Statements of Income for the three years ended
December 31, 1998 15
Statements of Stockholders' Equity for the three
years ended December 31, 1998 15
Statements of Cash Flows for the three years
ended December 31, 1998 16
Notes to Financial Statements 17-23
SCHEDULES
Schedule II-Valuation and Qualifying Accounts 25
EXHIBITS
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
---------------------------------------------------------------
(3)(i)(a) RPC's Certificate of Incorporation is
incorporated herein by reference to Exhibit
(3)(1)(a) to the 1998 Third Quarter Form 10-Q.
(3)(i)(b) RPC's Certificate of Amendment of the
Certificate of Incorporation is incorporated
herein by reference to Exhibit (3)(1)(b) to the
1998 Third Quarter Form 10-Q.
(3)(ii) By-laws of RPC are incorporated herein by
reference to Exhibit (3)(b) to the fiscal 1993
Form 10-K.
(4) Form of Stock Certificate.
(10) RPC's 1994 Employee Stock Incentive Plan is
incorporated herein by reference to Exhibit A
of the 1994 Proxy Statement.
(10)(i) Compensation agreement with James Lane is
incorporated herein by reference to page 8 of
the 1999 Proxy Statement.
19
(21) Subsidiaries of RPC.
(23) Consent of Arthur Anderson LLP.
(24) Power of Attorney for Directors.
(27) Financial Data Schedule (for Commission use only).
REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed by RPC for the quarter
ended December 31, 1998. Any schedules or exhibits not shown above have been
omitted because they are not applicable.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------------------------
RPC, INC. AND SUBSIDIARIES (IN THOUSANDS OF DOLLARS)
--------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998, 1997, and 1996.
--------------------------------------------------------------------------------------------------------------
Balance at Charged to Net Balance at
Beginning Costs and (Write-Offs) End of
Description of Period Expenses Recoveries Period
--------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
Allowance for Doubtful Accounts $ 6,967 $ 1,675 $ (1,638) $ 7,004
--------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
Allowance for Doubtful Accounts $ 7,058 $ 137 $ (228) $ 6,967
--------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
Allowance for Doubtful Accounts $ 4,205 $ 2,624 $ 229 $ 7,058
--------------------------------------------------------------------------------------------------------------
20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------------------------
To the Directors and Stockholders of RPC, Inc.:
We have audited the accompanying consolidated balance sheets of RPC,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1998. These financial statements and schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of RPC, Inc. and
subsidiaries as of December 31,1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31,1998, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14 is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ATLANTA, GEORGIA Arthur Andersen LLP
MARCH 15, 1999
21
SIGNATURES
-------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RPC, INC.
By:
/s/ R. Randall Rollins
----------------------
R. Randall Rollins
Chairman of the Board of Directors
(Principal Executive Officer)
March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
[Download Table]
/s/ R. Randall Rollins /s/ Ben M. Palmer
---------------------- -----------------
R. Randall Rollins Ben M. Palmer
Chairman of the Board of Directors Chief Financial Officer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
March 25, 1999 March 25, 1999
The Directors of RPC, Inc. (listed below) executed a power of attorney
appointing Richard A. Hubbell their attorney-in-fact, empowering him to sign
this report on their behalf.
Bobby Joe Cudd, Director
James A. Lane, Jr., Director
Wilton Looney, Director
Gary W. Rollins, Director
John W. Rollins, Director
Henry B. Tippie, Director
James B. Williams, Director
/s/ Richard A. Hubbell
----------------------
Richard A. Hubbell
Director and as Attorney-in-fact
March 25, 1999
22
Dates Referenced Herein and Documents Incorporated by Reference
14 Subsequent Filings that Reference this Filing
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