Company Quick10K Filing
RPC
Price5.23 EPS-0
Shares212 P/E-17
MCap1,110 P/FCF7
Net Debt-50 EBIT-85
TEV1,061 TEV/EBIT-12
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-07-31
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-07-31
10-Q 2018-03-31 Filed 2018-04-30
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-10-31
10-Q 2017-06-30 Filed 2017-07-31
10-Q 2017-03-31 Filed 2017-04-28
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-10-31
10-Q 2016-06-30 Filed 2016-08-01
10-Q 2016-03-31 Filed 2016-05-03
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-10-30
10-Q 2015-06-30 Filed 2015-07-31
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-11-03
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-04-29
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-01
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-05-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-02
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-02
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-03-04
10-Q 2010-09-30 Filed 2010-11-04
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-03
8-K 2020-06-10
8-K 2020-05-06
8-K 2020-05-05
8-K 2020-04-28
8-K 2020-04-28
8-K 2020-04-09
8-K 2020-01-29
8-K 2020-01-08
8-K 2019-11-14
8-K 2019-10-23
8-K 2019-10-08
8-K 2019-08-21
8-K 2019-07-24
8-K 2019-07-01
8-K 2019-07-01
8-K 2019-06-20
8-K 2019-04-26
8-K 2019-04-24
8-K 2019-04-24
8-K 2019-04-23
8-K 2019-04-01
8-K 2019-04-01
8-K 2019-03-26
8-K 2019-02-11
8-K 2019-01-23
8-K 2019-01-23
8-K 2019-01-22
8-K 2019-01-02
8-K 2019-01-02
8-K 2018-11-26
8-K 2018-10-24
8-K 2018-10-24
8-K 2018-10-09
8-K 2018-09-04
8-K 2018-07-25
8-K 2018-07-25
8-K 2018-07-02
8-K 2018-07-02
8-K 2018-04-25
8-K 2018-04-25
8-K 2018-04-24
8-K 2018-04-03
8-K 2018-04-02
8-K 2018-02-12
8-K 2018-01-24
8-K 2018-01-24
8-K 2018-01-02

RES 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 res-20200331xex31d1.htm
EX-31.2 res-20200331xex31d2.htm
EX-32.1 res-20200331xex32d1.htm
EX-95 res-20200331xex95.htm

RPC Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.81.41.10.70.40.02012201420172020
Assets, Equity
0.70.50.40.20.1-0.12012201420172020
Rev, G Profit, Net Income
0.30.20.10.0-0.1-0.22012201420172020
Ops, Inv, Fin

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Table of Contents

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 March 31, 2020

Commission File No. 1-8726

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 April 24, 2020, RPC, Inc. had 215,259,661 shares of common stock outstanding.

Table of Contents

RPC, INC. AND SUBSIDIARIES

Table of Contents

    

Page No.

Part I. Financial Information

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets –As of March 31, 2020 and December 31, 2019

3

Consolidated Statements of Operations – For the three months ended March 31, 2020 and 2019

4

Consolidated Statements of Comprehensive Income - For the three months ended March 31, 2020 and 2019

5

Consolidated Statements of Stockholders’ Equity – For the three months ended March 31, 2020 and 2019

6

Consolidated Statements of Cash Flows – For the three months ended March 31, 2020 and 2019

8

Notes to Consolidated Financial Statements

9 – 21

Item 2.

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

22 – 29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 4.

Controls and Procedures

29 – 29

Part II. Other Information

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

31

Item 6.

Exhibits

31

Signatures

32

2

Table of Contents

RPC, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019

(In thousands)

(Unaudited)

    

March 31, 

    

December 31, 

2020

2019

(Note 1)

ASSETS

 

  

 

  

Cash and cash equivalents

$

82,646

$

50,023

Accounts receivable, net of allowance for doubtful accounts of $5,100 in 2020 and $5,181 in 2019

 

247,965

 

242,574

Inventories

 

97,267

 

100,947

Income taxes receivable

 

35,000

 

24,145

Prepaid expenses

 

8,701

 

10,459

Assets held for sale

5,385

5,385

Other current assets

 

2,860

 

3,325

Total current assets

 

479,824

 

436,858

Property, plant and equipment, less accumulated depreciation of $1,145,122 in 2020 and $1,396,908 in 2019

 

295,262

 

516,727

Operating lease right-of-use assets

33,250

33,850

Goodwill

 

32,150

 

32,150

Other assets

 

28,646

 

33,633

Total assets

$

869,132

$

1,053,218

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

Accounts payable

$

70,601

$

53,147

Accrued payroll and related expenses

 

19,791

 

19,641

Accrued insurance expenses

 

7,092

 

7,540

Accrued state, local and other taxes

 

3,774

 

2,427

Income taxes payable

 

1,791

 

1,534

Current portion of operating lease liabilities

10,215

10,625

Other accrued expenses

 

4,914

 

6,488

Total current liabilities

 

118,178

 

101,402

Long-term accrued insurance expenses

 

14,865

 

14,040

Long-term pension liabilities

 

33,208

 

39,254

Deferred income taxes

 

4,068

 

37,319

Long-term operating lease liabilities

27,529

28,378

Other long-term liabilities

 

49

 

2,492

Total liabilities

 

197,897

 

222,885

Common stock

 

21,526

 

21,443

Capital in excess of par value

 

 

Retained earnings

 

672,912

 

832,113

Accumulated other comprehensive loss

 

(23,203)

 

(23,223)

Total stockholders’ equity

 

671,235

 

830,333

Total liabilities and stockholders’ equity

$

869,132

$

1,053,218

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

3

Table of Contents

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands except per share data)

(Unaudited)

Three months ended

March 31, 

    

2020

    

2019

Revenues

$

243,777

$

334,656

Cost of revenues (exclusive of items shown below)

 

181,944

 

252,395

Selling, general and administrative expenses

 

36,530

 

45,421

Impairment and other charges

205,536

Depreciation and amortization

 

39,293

 

42,505

Gain on disposition of assets, net

 

(819)

 

(3,504)

Operating loss

 

(218,707)

 

(2,161)

Interest expense

 

(113)

 

(89)

Interest income

 

334

 

800

Other (expense) income, net

 

(308)

 

445

Loss before income taxes

 

(218,794)

 

(1,005)

Income tax benefit

 

(58,371)

 

(266)

Net loss

$

(160,423)

$

(739)

(Loss) Earnings per share

 

 

Basic

$

(0.76)

$

Diluted

$

(0.76)

$

Dividends per share

$

$

0.10

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

4

Table of Contents

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands)

(Unaudited)

Three months ended

March 31, 

    

2020

    

2019

Net loss

$

(160,423)

$

(739)

Other comprehensive income (loss):

Pension adjustment and reclassification adjustment, net of taxes

 

732

 

173

Foreign currency translation

 

(712)

 

98

Comprehensive loss

$

(160,403)

$

(468)

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

5

Table of Contents

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands)

(Unaudited)

Three months ended March 31, 2020

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

(Loss) Income

    

Total

Balance, December 31, 2019

 

214,423

$

21,443

$

$

832,113

$

(23,223)

$

830,333

Stock issued for stock incentive plans, net

 

1,014

 

100

 

1,997

 

 

 

2,097

Stock purchased and retired

 

(177)

 

(17)

 

(1,997)

 

1,222

 

 

(792)

Net loss

 

 

 

 

(160,423)

 

 

(160,423)

Pension adjustment, net of taxes

 

 

 

 

 

732

 

732

Foreign currency translation

 

 

 

 

 

(712)

 

(712)

Balance, March 31, 2020

215,260

$

21,526

$

$

672,912

$

(23,203)

$

671,235

6

Table of Contents

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2019

(In thousands)

(Unaudited)

Three months ended March 31, 2019

Accumulated

Capital in 

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

(Loss) Income

    

Total

Balance, December 31, 2018

 

214,544

$

21,454

$

$

947,711

$

(18,746)

$

950,419

Adoption of accounting standards (Note 14)

 

 

 

 

2,376

 

(2,732)

 

(356)

Stock issued for stock incentive plans, net

 

843

 

84

 

2,368

 

 

 

2,452

Stock purchased and retired

 

(245)

 

(24)

 

(2,368)

 

(306)

 

 

(2,698)

Net loss

 

 

 

 

(739)

 

 

(739)

Dividends

 

 

 

 

(21,486)

 

 

(21,486)

Pension adjustment, net of taxes

 

 

 

 

 

173

 

173

Foreign currency translation

 

 

 

 

 

98

 

98

Balance, March 31, 2019

215,142

$

21,514

$

$

927,556

$

(21,207)

$

927,863

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

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RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(In thousands)

(Unaudited)

Three months ended March 31, 

    

2020

    

2019

OPERATING ACTIVITIES

 

  

 

  

Net loss

$

(160,423)

$

(739)

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

 

  

 

  

Depreciation, amortization and other non-cash charges

 

39,532

 

43,062

Stock-based compensation expense

 

2,097

 

2,452

Gain on disposition of assets, net

 

(819)

 

(3,504)

Deferred income tax benefit

 

(33,495)

 

(7,446)

Impairment and other non-cash charges

205,437

(Increase) decrease in assets:

 

  

 

  

Accounts receivable

 

(5,664)

 

4,400

Income taxes receivable

 

(10,855)

 

27,219

Inventories

 

3,286

 

5,731

Prepaid expenses

 

1,753

 

423

Other current assets

 

81

 

354

Other non-current assets

 

4,980

 

(2,844)

Increase (decrease) in liabilities:

 

  

 

  

Accounts payable

 

17,004

 

3,666

Income taxes payable

 

257

 

(1,187)

Accrued payroll and related expenses

 

182

 

433

Accrued insurance expenses

 

(448)

 

179

Accrued state, local and other taxes

 

1,347

 

1,647

Other accrued expenses

 

(2,733)

 

166

Pension liabilities

 

(5,070)

 

3,145

Long-term accrued insurance expenses

 

825

 

637

Other long-term liabilities

 

(2,435)

 

(648)

Net cash provided by operating activities

 

54,839

 

77,146

INVESTING ACTIVITIES

 

  

 

  

Capital expenditures

 

(25,019)

 

(62,280)

Proceeds from sale of assets

 

3,595

 

6,070

Net cash used for investing activities

 

(21,424)

 

(56,210)

FINANCING ACTIVITIES

 

  

 

  

Payment of dividends

 

 

(21,486)

Cash paid for common stock purchased and retired

 

(792)

 

(2,698)

Net cash used for financing activities

 

(792)

 

(24,184)

Net increase (decrease) in cash and cash equivalents

 

32,623

 

(3,248)

Cash and cash equivalents at beginning of period

 

50,023

 

116,262

Cash and cash equivalents at end of period

$

82,646

$

113,014

Supplemental cash flows disclosure:

 

  

 

  

Income taxes (refund) paid, net

$

(12,281)

$

292

Supplemental disclosure of noncash investing activities:

 

  

 

  

Capital expenditures included in accounts payable

$

7,250

$

17,634

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

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE 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 the Financial Accounting Standards Board (FASB) 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 months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The balance sheet at December 31, 2019 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, 2019.

A group that includes the Company’s Chairman of the Board, R. Randall Rollins, and his brother Gary W. Rollins, who is also a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.

2.    RECENT ACCOUNTING STANDARDS

The FASB issued the following applicable Accounting Standards Updates (ASU):

Recently Adopted Accounting Standards:

ASU No. 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The ASU introduced a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for recognition in place of the current incurred loss model. The Company adopted the provisions of the standard in the first quarter of 2020 specifically identified an immaterial cumulative-effect adjustment to the opening balance of retained earnings. The Company plans to continue to record an allowance on its trade receivables based on aging at the end of each reporting period using current reasonable and supportable forecasted economic conditions. See Note 8 “Current Expected Credit Losses” for expanded disclosures.
ASU No. 2017-04 —Intangibles —Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted these provisions in the first quarter of 2020, on a prospective basis.
ASU No. 2018-15 — Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments reduce the complexity for the accounting for costs of implementing a cloud computing service arrangement and align the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract with the costs incurred to

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

develop or obtain internal-use software. The Company adopted these provisions in the first quarter of 2020 and the adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

ASU No. 2019-12 — Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing the exceptions to the incremental approach for intra-period tax allocation in certain situations, requirement to recognize a deferred tax liability for a change in the status of a foreign investment, and the general methodology for computing income taxes in an interim period when year-to date loss exceeds the anticipated loss for the year. The amendments also simplify the accounting for income taxes with regard to franchise tax, evaluation of step up in the tax basis of goodwill in certain business combinations, allocating current and deferred tax expense to legal entities that are not subject to tax and enacted change in tax laws or rates. The amendments are effective beginning in the first quarter of 2021 and the Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.

3.    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 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 7.

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 and pump down services.

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.

Our contracts with customers are generally very short-term in nature and generally consist of a single performance obligation – the provision of oilfield services.

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE 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 generally occurs 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 7 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.

Timing of revenue recognition for each of the periods presented is shown below:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Oilfield services transferred at a point in time

$

$

Oilfield services transferred over time

 

243,777

 

334,656

Total revenues

$

243,777

$

334,656

Contract balances:

Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net on the consolidated balance sheets are shown below:

    

March 31, 

    

December 31, 

    

March 31, 

    

December 31, 

(in thousands)

2020

2019

2019

2018

Unbilled trade receivables

$

47,128

$

52,052

$

90,539

$

56,408

Substantially all of the unbilled trade receivables disclosed were invoiced during the following quarter.

4.    IMPAIRMENT AND OTHER CHARGES

The oil and gas industry experienced an unprecedented disruption during the first quarter of 2020 due to the substantial decline in global demand for oil caused by the COVID-19 pandemic and subsequent mitigation efforts as well as macroeconomic events such as the geopolitical tensions between the Organization of Petroleum Exporting Countries (OPEC) and Russia, regarding limits on oil production. These factors resulted in a significant drop in oil prices and a substantial deterioration of the Company’s market capitalization. The combined impact of the OPEC disputes and the COVID-19 pandemic resulted in the Company’s customers canceling current and scheduled drilling and completion activities. By the end of the quarter, the domestic rig count began to decline precipitously, and oilfield operators announced significant capital expenditure reductions for the remainder of 2020. The Company determined these recent events constituted a triggering event that required a review of the recoverability of its long-lived assets and performance of an interim goodwill impairment assessment, both as of March 31, 2020.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company used both income based and market based approaches to determine the fair value of its long-lived asset groups and its reporting units for goodwill impairment assessment. Under the income approach, the fair value for each of our asset groups and reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used internal forecasts, updated for recent events, to estimate future cash flows and terminal value calculations, which incorporated historical and forecasted trends, including an estimate of long-term future growth rates, based on its most recent views of the outlook for each asset group and reporting unit. For the market based valuation, the Company used comparable public company multiples. The selection of comparable businesses was based on the markets in which the asset groups and reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services.

Based on the concluded fair value of the asset groups, the Company measured and recorded an impairment loss that represents the amount by which the asset groups' carrying amounts exceeded their fair value. For purposes of the goodwill impairment assessment, the fair value of each reporting unit exceeded its net book value and therefore, goodwill was deemed to not be impaired. The Company recorded the following pre-tax charges during the three months ended March 31. 2020 which are reflected in “Impairment and other charges” in the consolidated statements of operations:

Three months ended

    

March 31,

    

March, 31,

(in thousands)

2020

2019

Long-lived asset impairments (1)

$

204,765

$

Severance costs

 

395

 

Other (2)

 

376

 

Total

$

205,536

$

(1).

Relates solely to the Technical Services segment and primarily includes pressure pumping and coiled tubing assets.

(2).

Includes interest costs related to leased assets that were impaired in the third and fourth quarters of 2019 and additional costs related to abandoned assets.

See Note 7 for details of impairment and other charges by segment.

The full impact of the COVID-19 pandemic and OPEC disputes on the business, financial condition, results of operations or cash flows or the pace or extent of any subsequent recovery, cannot be reasonably predicted at this time. In response, the Company has reduced its workforce, instituted compensation adjustments, and lowered its expense structure and capital expenditures. The Company plans to continue to adjust its cost structure in accordance with its assessment of the operating environment. If market conditions continue to deteriorate, including crude oil prices further declining and remaining at low levels for a sustained period of time, the Company may record further asset impairments, or an impairment of the carrying value of goodwill.

5.    EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing net income or loss 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 reflects the

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Three months ended

March 31, 

(In thousands)

    

2020

    

2019

Net loss available for stockholders:

$

(160,423)

$

(739)

Less: Adjustments for earnings attributable to participating securities

 

 

(225)

Net loss income used in calculating earnings per share

$

(160,423)

$

(964)

Weighted average shares outstanding (including participating securities)

 

215,007

 

215,041

Adjustment for participating securities

 

(2,696)

 

(2,550)

Shares used in calculating basic and diluted earnings per share

 

212,311

 

212,491

6.    STOCK-BASED COMPENSATION

In April 2014, the Company reserved 8,000,000 shares of common stock under the 2014 Stock Incentive Plan with a term of 10 years expiring in April 2024. This plan provides for the issuance of various forms of stock incentives, including, among others, incentive and non-qualified stock options and restricted shares. As of March 31, 2020, there were 3,716,000 shares available for grant.

Stock-based employee compensation expense was as follows for the periods indicated:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Pre-tax expense

$

2,097

$

2,452

After tax expense

$

1,583

$

1,851

Restricted Stock

The following is a summary of the changes in non-vested restricted shares for the three months ended March 31, 2020:

Weighted Average

    

Shares

    

Grant-Date Fair Value

Non-vested shares at December 31, 2019

 

2,393,673

$

13.23

Granted

 

1,085,875

 

4.59

Vested

 

(547,426)

 

16.65

Forfeited

 

(72,287)

 

15.32

Non-vested shares at March 31, 2020

 

2,859,835

$

7.17

The total fair value of shares vested was $2,461,000 during the three months ended March 31, 2020 and $6,934,000 during the three months ended March 31, 2019. Excess tax benefits or deficits realized from tax compensation deductions in excess of, or lower than compensation expense are recorded as either a beneficial or detrimental discrete tax adjustment. This discrete tax adjustment was a detriment of $1,631,000 for the three months ended March 31, 2020 and a detriment of $510,000 for the three months ended March 31, 2019.

As of March 31, 2020, total unrecognized compensation cost related to non-vested restricted shares was $47,529,000, which is expected to be recognized over a weighted-average period of 3.8 years.

7.    BUSINESS SEGMENT INFORMATION

RPC’s reportable segments are the same as its operating segments. RPC manages its business under Technical Services and Support Services. Technical Services is comprised of service lines that generate revenue based on equipment, personnel or

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

materials at the well site and are closely aligned with completion and production activities of the customers. Support Services is comprised of service lines which generate revenue from services and tools offered off the well site and are more closely aligned with the customers’ drilling activities. Selected overhead including centralized support services and regulatory compliance are classified as Corporate.

Technical Services consists primarily of pressure pumping, downhole tools, coiled tubing, snubbing, nitrogen, well control, wireline and fishing. The services offered under Technical Services are high capital and personnel intensive businesses. The Company considers all of these services to be closely integrated oil and gas well servicing businesses, and makes resource allocation and performance assessment decisions based on this operating segment as a whole across these various services.

Support Services consist primarily of drill pipe and related tools, pipe handling, pipe inspection and storage services, and oilfield training and consulting services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels.

The Company’s Chief Operating Decision Maker (“CODM”) assesses performance and makes resource allocation decisions regarding, among others, staffing, growth and maintenance capital expenditures and key initiatives based on the operating segments outlined above.

Segment Revenues:

RPC’s operating segment revenues by major service lines are shown in the following table:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Technical Services:

 

  

 

  

Pressure Pumping

$

96,765

$

147,759

Downhole Tools

 

85,908

 

109,671

Coiled Tubing

 

16,239

 

20,178

Nitrogen

 

9,931

 

11,308

Snubbing

 

2,304

 

3,463

All other

 

16,553

 

21,700

Total Technical Services

$

227,700

$

314,079

Support Services:

 

 

Rental Tools

$

10,404

$

13,936

All other

 

5,673

 

6,641

Total Support Services

$

16,077

$

20,577

Total Revenues

$

243,777

$

334,656

The following summarizes revenues for the United States and separately for all international locations combined for the three months ended March 31, 2020 and 2019. The revenues are presented based on the location of the use of the equipment or services. Assets related to international operations are less than 10 percent of RPC’s consolidated assets, and therefore are not presented.

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

United States revenues

$

227,994

$

313,968

International revenues

 

15,783

 

20,688

Total revenues

$

243,777

$

334,656

The accounting policies of the reportable segments are the same as those described in Note 1 to these consolidated financial statements. RPC evaluates the performance of its segments based on revenues, operating profits and return on invested capital. Gains or losses on disposition of assets are reviewed by the CODM on a consolidated basis, and accordingly the Company does

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

not report gains or losses at the segment level. Inter-segment revenues are generally recorded in segment operating results at prices that management believes approximate prices for arm’s length transactions and are not material to operating results.

Summarized financial information with respect RPC’s reportable segments for the three months ended March 31, 2020 and 2019 are shown in the following table:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Revenues:

 

  

 

  

Technical Services

$

227,700

$

314,079

Support Services

 

16,077

 

20,577

Total revenues

$

243,777

$

334,656

Operating (loss) income:

 

 

Technical Services

$

(12,207)

$

(4,457)

Support Services

 

1,547

 

3,137

Corporate Expenses

 

(3,330)

 

(4,345)

Impairment and Other Charges (1)

(205,536)

Gain on disposition of assets, net

 

819

 

3,504

Total operating loss

$

(218,707)

$

(2,161)

Interest expense

 

(113)

 

(89)

Interest income

 

334

 

800

Other (expense) income , net

 

(308)

 

445

Loss before income taxes

$

(218,794)

$

(1,005)

(1)Relates exclusively to Technical Services

As of and for the three months ended

Technical

Support

March 31, 2020

    

Services

    

Services

    

Corporate

    

Total

(in thousands)

 

  

 

  

 

  

 

  

Depreciation and amortization

$

36,995

$

2,228

$

70

$

39,293

Capital expenditures

 

20,338

 

4,681

 

 

25,019

Identifiable assets

$

654,354

(1)  

$

70,022

$

173,254

$

897,630

(1)Reflects impact of impairment charges recorded during the three months ended March 31, 2020.

As of and for the three months ended

Technical

Support

March 31, 2019

    

Services

    

Services

    

Corporate

    

Total

(in thousands)

Depreciation and amortization

$

39,902

$

2,511

$

92

$

42,505

Capital expenditures

 

59,889

 

2,069

 

322

 

62,280

Identifiable assets

$

969,036

$

82,111

$

175,345

$

1,226,492

8.    CURRENT EXPECTED CREDIT LOSSES

The Company adopted ASU No 2016-13, Current Expected Credit Losses (Topic 326) on January 1, 2020 on a prospective basis with a non-adjustment to operating retained earnings due to the immaterially of the charge. This ASU replaces the current loss model with an expected credit loss model for financial assets measured at amortized cost that includes accounts (trade) receivable. The Company is exposed to credit losses primarily from providing oilfield services. The Company’s expected credit loss allowance for accounts receivable is based on historical collection experience, current and future economic and market conditions and a review of the current status of customers’ account receivable balances. Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific amounts are established to record the appropriate allowance for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliations, monitoring of aging of receivables, dispute resolution monitoring, payment confirmation, consideration of

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

specific customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible and recoveries of amounts previously written off are recorded when collected. The Company considered the current and expected future economic and market conditions in the oil and gas industry surrounding the COVID-19 pandemic and disruption caused by OPEC disputes and determined that the estimate of current expected credit losses was not significantly impacted. Estimates used to determine the allowance for current expected credit losses are based on an assessment of anticipated payments and all other historical, current and future information that is reasonably available.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected for the three months ended March 31, 2020:

(in thousands)

    

2020

Beginning balance, January 1

$

5,181

Adoption of ASC 326

 

Provision for current expected credit losses

 

212

Write-offs

 

(301)

Recoveries collected (net of expenses)

 

8

Balance as of March 31

$

5,100

9.    INVENTORIES

Inventories of $97,267,000 at March 31, 2020 and $100,947,000 at December 31, 2019 consist of raw materials, parts and supplies.

10.    EMPLOYEE BENEFIT PLAN

The following represents the net periodic benefit cost and related components of the Company’s multiple employers Retirement Income Plan:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Interest cost

$

411

$

490

Expected return on plan assets

 

(395)

 

(650)

Amortization of net losses

 

246

 

230

Net periodic benefit cost

$

262

$

70

The Company did not make a contribution to this plan during the three months ended March 31, 2020 or March 31, 2019.

The Company permits selected highly compensated employees to defer a portion of their compensation into the non-qualified Supplemental Retirement Plan (“SERP”). The SERP assets are marked to market and totaled $23,491,000 as of March 31, 2020 and $28,476,000 as of December 31, 2019. The SERP assets are reported in non-current other assets on the consolidated balance sheets and changes in the fair value of these assets are reported in the consolidated statements of operations as compensation cost in selling, general and administrative expenses. Unrealized gains (losses), net related to the SERP assets were approximately as follows:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Unrealized (losses) gains, net

$

(4,987)

$

2,852

The SERP liability includes participant deferrals net of distributions and is recorded on the consolidated balance sheets in long-term pension liabilities with any change in the fair value of the liabilities recorded as compensation cost within selling, general and administrative expenses in the consolidated statements of operations.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11.    NOTES PAYABLE TO BANKS

The Company has a revolving credit facility with Bank of America and five other lenders which provides for a line of credit of up to $125 million, including a $35 million letter of credit subfacility, and a $35 million swingline subfacility. The revolving credit facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. The revolving credit facility includes a full and unconditional guarantee by the Company's 100 percent owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of the Company and its subsidiaries. Certain of the Company's minor subsidiaries are not guarantors.

On July 26, 2018, the Company entered into Amendment No. 4 to Credit Agreement (the “Amendment”). The Amendment, among other matters, replaces the existing minimum tangible net worth covenant with the following covenants: (i) when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, a maximum consolidated leverage ratio of 2.50:1.00 and a minimum debt service coverage ratio of 2.00:1.00, and (ii) otherwise, a minimum tangible net worth covenant of no less than $600 million. The Amendment additionally (1) extended the Credit Agreement maturity date from January 17, 2020 to July 26, 2023, (2) eliminated any borrowing base limitations on revolving loans when RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50 million, (3) reduced the commitment fees payable by RPC by 7.5 basis points at each pricing level and (4) reduced the letter of credit sublimit from $50 million to $35 million. As of March 31, 2020, the Company was in compliance with these covenants.

Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:

the Eurodollar Rate, which is the rate per annum equal to the London Interbank Offering Rate (“LIBOR”); plus, a margin ranging from 1.125% to 2.125%, based on a quarterly consolidated leverage ratio calculation; or
the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) Bank of America’s publicly announced “prime rate,” and (c) the Eurodollar Rate plus 1.00%; in each case plus a margin that ranges from 0.125% to 1.125% based on a quarterly consolidated leverage ratio calculation.

In addition, the Company pays an annual fee ranging from 0.15% to 0.25%, based on a quarterly consolidated leverage ratio calculation, on the unused portion of the credit facility.

The Company has incurred total loan origination fees and other debt related costs associated with this revolving credit facility in the aggregate of approximately $3.3 million. These costs are being amortized to interest expense over the remaining term of the loan, and the remaining net balance of $0.2 million at March 31, 2020 is classified as part of non-current other assets.

As of March 31, 2020, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $19.8 million; therefore, a total of $105.2 million of the facility was available.

Interest incurred, which includes facility fees on the unused portion of the revolving credit facility and the amortization of loan cost, and interest paid on the credit facility were as follows for the periods indicated:

Three months ended

March 31, 

(in thousands)

    

2020

    

2019

Interest incurred

$

113

$

89

Interest paid

40

62

12.  INCOME TAXES

The Company determines its periodic income tax expense or benefit based upon the current period income or loss and the annual estimated tax rate for the Company adjusted for discrete items including changes to prior period estimates. The estimated

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RPC, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

tax rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the Company’s current annual estimated tax rate.

For the three months ended March 31, 2020, the income tax benefit reflects an effective tax rate of 26.7 percent compared to an effective tax rate of 26.5 percent for the comparable period in the prior year. The effective rate for the current quarter reflects a net discrete provision totaling $22.8 million related primarily to revaluing certain deferred tax assets and liabilities expected to be recognized in 2020, offset by the beneficial revaluation of the 2019 net operating loss which can be carried back to prior years.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted into law on March 27, 2020, provides the opportunity for a five-year carryback of net operating losses for the tax years ended 2018, 2019 and 2020. The Company expects to realize the benefit of their tax year 2019 net operating loss carryback to tax year 2014 where the tax rate was 35 percent and therefore, recognized a discrete tax benefit of $13.1 million during the current quarter. In addition, the Company recorded a net discrete tax provision during the current quarter of $35.9 million related primarily to certain deferred tax assets and liabilities recorded as of December 31, 2019 that are expected to be recognized in tax year 2020. The expected reversal of these deferred tax assets and liabilities are estimates based on available information at this time and the Company expects to refine these estimates in subsequent quarters as better information becomes available.

13.  FAIR VALUE DISCLOSURES

The various inputs used to measure assets at fair value establish a hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:

1.Level 1 – Quoted market prices in active markets for identical assets or liabilities.
2.Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
3.Level 3 – Unobs