10-Q 1 res-20230930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2023

Commission File No. 001-08726

RPC, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

58-1550825

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

2801 Buford Highway, Suite 300, Atlanta, Georgia 30329

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code -- (404) 321-2140

Securities Registered under Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common stock, par value $0.10

RES

New York Stock Exchange

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 No

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 20, 2023, RPC, Inc. had 216,228,372 shares of common stock outstanding.

RPC, INC. AND SUBSIDIARIES

Table of Contents

    

Page No.

Part I. Financial Information

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets –As of September 30, 2023 and December 31, 2022

3

Consolidated Statements of Operations – For the three and nine months ended September 30, 2023 and 2022

4

Consolidated Statements of Comprehensive Income – For the three and nine months ended September 30, 2023 and 2022

5

Consolidated Statements of Stockholders’ Equity – For the three and nine months ended September 30, 2023 and 2022

6

Consolidated Statements of Cash Flows – For the nine months ended September 30, 2023 and 2022

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23 – 31

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4.

Controls and Procedures

31

Part II. Other Information

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

32

Item 3.

Defaults upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

33

Item 6.

Exhibits

33

Signatures

34

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(In thousands)

September 30, 

December 31, 

    

2023

    

2022

ASSETS

(Unaudited)

(Note 1)

Cash and cash equivalents

$

171,874

$

126,424

Accounts receivable, net of allowance for credit losses of $6,910 in 2023 and $7,078 in 2022

326,778

416,568

Inventories

 

109,969

 

97,107

Income taxes receivable

 

62,889

 

42,403

Prepaid expenses

 

11,701

 

17,753

Other current assets

 

3,228

 

3,086

Total current assets

 

686,439

 

703,341

Property, plant and equipment, less accumulated depreciation of $795,047 in 2023 and $775,334 in 2022

436,336

333,093

Operating lease right-of-use assets

25,567

28,864

Finance lease right-of-use assets

1,101

Goodwill

 

50,824

 

32,150

Other intangibles, net

13,354

1,084

Other assets

 

33,752

 

30,481

Total assets

$

1,247,373

$

1,129,013

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Accounts payable

$

88,389

$

115,213

Accrued payroll and related expenses

 

27,909

 

33,161

Accrued insurance expenses

 

6,760

 

3,232

Accrued state, local and other taxes

 

6,196

 

4,296

Income taxes payable

 

259

 

499

Pension liabilities

9,610

Current portion of operating lease liabilities

7,959

10,728

Accrued expenses and other liabilities

 

2,640

 

1,864

Total current liabilities

 

140,112

 

178,603

Long-term accrued insurance expenses

 

9,489

 

7,149

Long-term retirement plan liabilities

 

21,898

 

23,106

Deferred income taxes

 

50,472

 

37,473

Long-term operating lease liabilities

19,040

19,517

Long-term finance lease liabilities

882

Other long-term liabilities

 

7,724

 

5,430

Total liabilities

 

249,617

 

271,278

Commitments and contingencies (Note 11)

 

 

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.10 par value, 1,000,000 shares authorized, none issued

 

 

Common stock, $0.10 par value, 349,000,000 shares authorized, 216,228,372 and 216,609,191 shares issued and outstanding in 2023 and 2022, respectively

 

21,623

 

21,661

Capital in excess of par value

 

 

Retained earnings

 

978,496

 

856,013

Accumulated other comprehensive loss

 

(2,363)

 

(19,939)

Total stockholders’ equity

 

997,756

 

857,735

Total liabilities and stockholders’ equity

$

1,247,373

$

1,129,013

The accompanying notes are an integral part of these consolidated financial statements.

3

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands except per share data)

(Unaudited)

Three months ended

Nine months ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Revenues

$

330,417

$

459,601

$

1,222,943

$

1,119,732

Cost of revenues (exclusive of depreciation and amortization shown separately below)

 

239,084

 

309,790

 

810,120

 

779,544

 

Selling, general and administrative expenses

 

42,012

 

38,243

 

127,813

 

110,362

 

Pension settlement charges

18,286

Depreciation and amortization

 

28,388

 

20,941

 

78,716

 

60,501

 

Gain on disposition of assets, net

 

(1,778)

 

(1,543)

 

(7,729)

 

(6,295)

 

Operating income

 

22,711

 

92,170

 

195,737

 

175,620

 

Interest expense

 

(101)

 

(143)

 

(246)

 

(543)

 

Interest income

 

1,450

 

329

 

6,003

 

472

 

Other income (expense), net

 

804

 

(67)

 

2,196

 

516

 

Income before income taxes

 

24,864

 

92,289

 

203,690

 

176,065

 

Income tax provision

 

6,547

 

22,949

 

48,836

 

44,707

 

Net income

$

18,317

$

69,340

$

154,854

$

131,358

Earnings per share

 

  

 

 

  

 

  

Basic

$

0.08

$

0.32

$

0.71

$

0.61

Diluted

$

0.08

$

0.32

$

0.71

$

0.61

Dividends paid per share

$

0.04

$

0.02

$

0.12

$

0.02

The accompanying notes are an integral part of these consolidated financial statements.

4

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)

(Unaudited)

Three months ended

Nine months ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Net income

$

18,317

$

69,340

$

154,854

$

131,358

Other comprehensive income:

  

  

  

  

Pension adjustment and reclassification adjustment, net of taxes

 

 

195

 

17,254

 

585

 

Foreign currency translation

 

(101)

 

(90)

 

322

 

91

 

Comprehensive income

$

18,216

$

69,445

$

172,430

$

132,034

The accompanying notes are an integral part of these consolidated financial statements.

5

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)

(Unaudited)

Nine months ended September 30, 2023

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Loss

    

Total

Balance, December 31, 2022

 

216,609

$

21,661

$

$

856,013

$

(19,939)

$

857,735

Stock issued for stock incentive plans, net

 

1,149

 

115

 

1,687

 

 

 

1,802

Stock purchased and retired

 

(1,388)

 

(139)

 

(1,687)

 

(9,523)

 

 

(11,349)

Net income

 

 

 

 

71,524

 

 

71,524

Dividends

 

 

 

 

(8,679)

 

 

(8,679)

Pension adjustment, net of taxes

 

 

 

 

 

16,678

 

16,678

Foreign currency translation

 

 

 

 

 

(16)

 

(16)

Balance, March 31, 2023

216,370

$

21,637

$

$

909,335

$

(3,277)

$

927,695

Stock issued for stock incentive plans, net

40

4

2,312

2,316

Stock purchased and retired

(1)

(2,312)

2,310

(2)

Net income

65,013

65,013

Dividends

(8,635)

(8,635)

Pension adjustment, net of taxes

576

576

Foreign currency translation

439

439

Balance, June 30, 2023

216,409

$

21,641

$

$

968,023

$

(2,262)

$

987,402

Stock issued for stock incentive plans, net

(44)

(4)

1,919

1,915

Stock purchased and retired

(137)

(14)

(1,919)

790

(1,143)

Net income

18,317

18,317

Dividends

(8,634)

(8,634)

Pension adjustment, net of taxes

Foreign currency translation

(101)

(101)

Balance, September 30, 2023

 

216,228

$

21,623

$

$

978,496

$

(2,363)

$

997,756

Nine months ended September 30, 2022

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Loss

    

Total

Balance, December 31, 2021

 

215,629

$

21,563

$

$

640,936

$

(20,708)

$

641,791

Stock issued for stock incentive plans, net

 

1,037

 

104

 

1,393

 

 

 

1,497

Stock purchased and retired

 

(190)

 

(19)

 

(1,393)

 

502

 

 

(910)

Net income

 

 

 

15,079

 

 

15,079

Pension adjustment, net of taxes

 

 

 

 

 

195

 

195

Foreign currency translation

 

 

 

 

 

116

 

116

Balance, March 31, 2022

216,476

$

21,648

$

$

656,517

$

(20,397)

$

657,768

Stock issued for stock incentive plans, net

186

18

1,677

1,695

Stock purchased and retired

(1,677)

1,677

Net income

46,939

46,939

Pension adjustment, net of taxes

195

195

Foreign currency translation

65

65

Balance, June 30, 2022

 

216,662

$

21,666

$

$

705,133

$

(20,137)

$

706,662

Stock issued for stock incentive plans, net

(31)

(3)

1,575

1,572

Stock purchased and retired

(1,575)

1,573

(2)

Net income

69,340

69,340

Pension adjustment, net of taxes

195

195

Foreign currency translation

(90)

(90)

Dividends declared

(4,267)

(4,267)

Balance, September 30, 2022

216,631

$

21,663

$

$

771,779

$

(20,032)

$

773,410

The accompanying notes are an integral part of these consolidated financial statements.

6

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)

(Unaudited)

Nine months ended September 30, 

    

2023

    

2022

OPERATING ACTIVITIES

  

  

Net income

$

154,854

$

131,358

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation, amortization and other non-cash charges

 

78,758

 

61,352

 

Stock-based compensation expense

 

6,033

 

4,764

 

Gain on disposition of assets, net

 

(7,729)

 

(6,295)

 

Deferred income tax provision

 

7,845

 

13,284

 

Pension settlement charges

 

18,286

 

-

 

(Increase) decrease in assets:

 

 

 

Accounts receivable

 

102,591

 

(211,375)

 

Income taxes receivable

 

(20,486)

 

13,038

 

Inventories

 

(11,506)

 

(14,708)

 

Prepaid expenses

 

6,437

 

2,907

 

Other current assets

 

(167)

 

(83)

 

Other non-current assets

 

(2,341)

 

6,393

 

Increase (decrease) in liabilities:

 

 

 

Accounts payable

 

(31,569)

 

42,700

 

Income taxes payable

 

(240)

 

(139)

 

Accrued payroll and related expenses

 

(5,245)

 

10,759

 

Accrued insurance expenses

 

3,528

 

(5,702)

 

Accrued state, local and other taxes

 

1,900

 

4,309

 

Accrued expenses and other liabilities

 

(4,385)

 

(2,804)

 

Pension and retirement plans liabilities

 

(6,696)

 

(6,044)

 

Long-term accrued insurance expenses

 

2,340

 

(3,762)

 

Other long-term liabilities

 

6,934

 

976

 

Net cash provided by operating activities

 

299,142

 

40,928

 

INVESTING ACTIVITIES

 

  

 

  

 

Capital expenditures

 

(148,816)

 

(90,227)

 

Proceeds from sale of assets

 

12,569

 

11,572

 

Purchase of business

 

(78,798)

 

 

Net cash used for investing activities

 

(215,045)

 

(78,655)

 

FINANCING ACTIVITIES

 

  

 

  

 

Payment of dividends

 

(25,948)

 

(4,267)

 

Cash paid for common stock purchased and retired

 

(12,445)

 

(912)

 

Cash paid for finance lease and finance obligations

(254)

(3,642)

Net cash used for financing activities

 

(38,647)

 

(8,821)

 

Net increase (decrease) in cash and cash equivalents

 

45,450

 

(46,548)

 

Cash and cash equivalents at beginning of period

 

126,424

 

82,433

 

Cash and cash equivalents at end of period

$

171,874

$

35,885

Supplemental cash flows disclosure:

Income tax payments, net

$

61,484

$

18,615

Interest paid

$

124

$

127

Supplemental disclosure of noncash investing activities:

Capital expenditures included in accounts payable

$

9,527

$

13,912

The accompanying notes are an integral part of these consolidated financial statements.

7

Table of Contents

RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    GENERAL

The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (RPC or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control.

In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.

A group that includes Gary W. Rollins, Pamela R. Rollins, Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.

Certain prior year amounts have been reclassified to conform to the presentation in the current year.

2. RECENT ACCOUNTING STANDARDS

Recently Adopted Accounting Standards:

ACCOUNTING STANDARDS UPDATE (ASU) No. 2021-08: Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: The amendments in this ASU address diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination, by adopting guidance requiring an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer would recognize and measure the acquired contract assets and contract liabilities in the same manner that they were recognized and measured in the acquiree's financial statements before the acquisition. The Company adopted these provisions in the second quarter of 2023 prospectively for future acquisitions. For the acquisition completed effective in the third quarter of 2023, the Company has recognized the contract assets and contract liabilities in the same manner as the acquiree. See Note 3 titled Business Acquisition for additional information. The adoption did not have a material impact on its consolidated financial statements.

8

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RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. BUSINESS ACQUISITION

Effective July 1, 2023 (Effective Date), the Company completed its acquisition of all of the outstanding equity interests in Spinnaker Oilwell Services, LLC (Spinnaker), pursuant to a Merger Agreement (Merger Agreement) with Catapult Energy Services Group, LLC, as the representative of the Sellers.

Spinnaker, headquartered in Oklahoma City, Oklahoma, is a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. Spinnaker operates two facilities located in El Reno, Oklahoma and Hobbs, New Mexico and maintains 18 full-service cementing spreads. This acquisition significantly expanded RPC's cementing business from its presence in South Texas to basins in which it currently provides other services. Spinnaker is included in our Technical Services Segment.

The purchase price was $79.3 million for 100 percent of Spinnaker’s equity, and consisted of approximately $76.8 million in cash, a $2.0 million pay-off of capital lease liabilities together with an assumption of $518 thousand of capital lease liabilities. The Merger Agreement includes a post-closing adjustment window for an agreed-upon level of Spinnaker’s working capital, as well as other usual and customary items, which is reflected in the purchase price allocation below and expected to be finalized during the fourth quarter of 2023. Acquisition-related transaction costs of $767 thousand were recorded during the nine months ended September 30, 2023, and included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The acquisition was funded with cash on hand.

The acquisition was accounted for as a business combination with the assets acquired and liabilities assumed measured at their fair values as of the acquisition date, primarily using Level 3 inputs.

The acquisition consideration allocation below is preliminary, pending finalization of the working capital settlement and the final review of certain assets’ fair value. The excess of the acquisition consideration over the estimated fair values of the acquired assets and assumed liabilities has been assigned to goodwill which is primarily attributable to expected revenue synergies. As additional information becomes available, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which will not exceed twelve months from the closing of the acquisition. Such revisions or changes, if any, are currently not expected but may be material.

Preliminary Fair Value

(in thousands)

as of July 1, 2023

Accounts receivable

$

12,836

Inventories

1,373

Prepaid and other current assets

384

Accounts payable

(4,499)

Property, plant and equipment

37,374

Operating lease right-of-use assets

46

Current portion of operating lease liabilities

(31)

Long-term operating lease liabilities

(15)

Finance lease right-of-use assets

1,165

Current portion of finance lease liabilities

(247)

Long-term finance lease liabilities

(944)

Goodwill

18,674

Other intangibles

13,200

Total consideration

79,316

Less: Assumption of capital lease liabilities (1)

(518)

Total cash consideration

$

78,798

(1) Disclosed as part of Accrued expenses and other current liabilities on

the Consolidated Balance Sheet as of September 30, 2023.

9

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RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of receivables acquired approximates the gross contractual value. The contractual amount not expected to be collected is immaterial. The fair value of acquired inventory was based on the lower of cost and net realizable value, with cost determined using the weighted-average cost method.

Property, plant and equipment is comprised of buildings and leasehold improvements, machinery and equipment, vehicles, land, and information technology. The preliminary estimated fair value was determined using the cost and market approaches.

The Company assumed the following leases and obligations as of the Effective Date - a finance lease for certain land and facilities with a remaining lease term of approximately 4.5 years; three spreads under failed sale and lease back arrangements with varying expiration dates; and an operating lease for an office space with a remaining lease term of approximately 1.5 years. There were no favorable or unfavorable market terms for the leases.

Acquired intangible assets include customer relationships, tradenames and trademarks. Intangible assets were valued using the multi-period excess earnings and relief-from-royalty methods, both forms of the income approach which considers a forecast of future cash flows generated from the use of each asset. The following table shows the preliminary fair values assigned to identifiable intangible assets:

Weighted-Average

(in thousands)

Fair Value

Amortization Period (Years)

Customer Relationships

$

10,000

10

Trade Names and Trademarks

3,200

10

Total Amortizable Intangible Assets

$

13,200

Revenues and Net income of Spinnaker included in the Company's Consolidated Statements of Operations from the acquisition date are as follows:

(in thousands)

Three months ended
September 30, 2023

Revenues

$

22,173

Net income

1,761

Spinnaker’s duration of contracts is typically a day or less and their contract assets and liabilities are measured similar to RPC’s other businesses.

The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Spinnaker and RPC. This proforma financial information does not necessarily represent what the combined company’s revenues or results of operations would have been had the acquisition been completed on January 1, 2022, nor do they intend to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining Spinnaker and RPC.

10

Table of Contents

RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides unaudited supplemental pro forma financial information as if the acquisition had occurred on January 1, 2022.

Three months ended September 30,

(in thousands)

2023

2022

Revenues

$

330,417

$

482,779

Net income

18,317

73,405

Nine months ended September 30,

(in thousands)

2023

2022

Revenues

$

1,274,700

$

1,183,765

Net income

163,951

143,075

4.    REVENUES

Accounting Policy:

RPC’s contract revenues are generated principally from providing oilfield services. These services are based on mutually agreed upon pricing with the customer prior to the services being delivered and, given the nature of the services, do not include the right of return. Pricing for these services is a function of rates based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. RPC typically satisfies its performance obligations over time as the services are performed. RPC records revenues based on the transaction price agreed upon with its customers.

Sales tax charged to customers is presented on a net basis within the accompanying Consolidated Statements of Operations and therefore excluded from revenues.

Nature of services:

RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets. RPC manages its business as either (1) services offered on the well site with equipment and personnel (Technical Services) or (2) services and tools offered off the well site (Support Services). For more detailed information about operating segments, see Note 8.

Our contracts with customers are generally short-term in nature and generally consist of a single performance obligation – the provision of oilfield services. RPC contracts with its customers to provide the following services by reportable segment:

Technical Services

Includes pressure pumping, downhole tools services, coiled tubing, nitrogen, snubbing and other oilfield related services including wireline, well control, fishing, pump down services and cementing.

Support Services

Rental tools – RPC rents tools to its customers for use with onshore and offshore oil and gas well drilling, completion and workover activities.
Other support services include oilfield pipe inspection services, pipe management and pipe storage, well control training and consulting.

11

Table of Contents

RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Payment terms:

RPC’s contracts with customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection is generally expected between 30 to 60 days after invoicing. As the Company enters into contracts with its customers, it generally expects there to be no significant timing difference between the date the services are provided to the customer (satisfaction of the performance obligation) and the date cash consideration is received. Accordingly, there is no financing component to our arrangements with customers.

Significant judgments:

RPC believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. RPC has elected the right to invoice practical expedient for recognizing revenue related to its performance obligations.

Disaggregation of revenues:

See Note 8 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.

Contract balances:

Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net in the accompanying Consolidated Balance Sheets are shown below:

September 30, 

December 31, 

(in thousands)

    

2023

    

2022

Unbilled trade receivables

$

75,670

$

103,498

Substantially all of the unbilled trade receivables disclosed were or are expected to be invoiced during the following quarter.

5. DEPRECIATION AND AMORTIZATION

Depreciation and amortization disclosed in the Consolidated Statements of Operations related to the following components:

Three months ended

Nine months ended

September 30, 

September 30, 

(in thousands)

    

2023

2022

    

2023

2022

Cost of revenues

$

25,590

$

18,795

$

71,249

$

53,942

Selling, general and administrative expenses

2,798

2,146

7,467

6,559

Total

28,388

20,941

78,716

60,501

6.    EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. The following table shows the

12

Table of Contents

RPC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

restricted shares of common stock (participating securities) outstanding and a reconciliation of outstanding weighted average shares:

Three months ended

Nine months ended

September 30, 

September 30, 

(in thousands)

    

2023

    

2022

    

2023

    

2022

Net income available for stockholders

$

18,317

$

69,340

$

154,854

$

131,358

Less: Adjustments for earnings attributable to participating securities

(279)

(1,041)

(2,477)

(1,910)

Net income used in calculating earnings per share

$

18,038

$

68,299

$

152,377

$

129,448