ATLANTA, July 23 GA-RPC-Inc-Q2earnings
ATLANTA, July 23 /PRNewswire-FirstCall/ -- RPC, Inc. (NYSE: RES) today
announced its unaudited results for the second quarter ended June 30, 2008.
RPC provides a broad range of specialized oilfield services and equipment
primarily to independent and major oilfield companies engaged in the
exploration, production and development of oil and gas properties throughout
the United States and in selected international markets.
For the quarter ended June 30, 2008, revenues increased 25.5 percent to
$214,689,000 compared to $171,031,000 in the second quarter last year.
Revenues increased compared to the prior year primarily due to higher capacity
of revenue-producing equipment placed in service during the last 12 months,
partially offset by lower pricing for many of our services. Operating profit
for the quarter was $37,800,000 compared to $38,705,000 in the prior year.
Net income was $22,458,000 or $0.23 diluted earnings per share, compared to
$23,815,000 or $0.24 diluted earnings per share last year. Earnings before
interest, taxes, depreciation and amortization (EBITDA) were $67,082,000
compared to $57,927,000 in the prior year, an increase of 15.8 percent.(1)
Cost of services rendered and goods sold was $120,175,000, or 56.0 percent
of revenues, during the second quarter of 2008, compared to $88,191,000, or
51.6 percent of revenues, in the prior year. The increase in these costs was
due to increased activity levels and the variable nature of many of these
expenses, including materials and supplies, compensation, and fuel. As a
percentage of revenues, cost of services rendered and goods sold also
increased because of upward cost pressures for materials and supplies and
fuel, most of which could not be passed through to customers because of the
current pricing and competitive environment. Selling, general and
administrative expenses increased by 7.1 percent in the second quarter of 2008
to $29,010,000 from $27,077,000 in the prior year. This increase was due
primarily to higher employment and other costs consistent with higher activity
levels. As a percentage of revenues, however, these costs decreased to 13.5
percent in 2008 compared to 15.8 percent last year due to positive leverage of
these costs realized from the higher revenues. Depreciation and amortization
increased to $29,177,000 during the quarter, compared to $18,695,000 last
year, due to the large amount of capital expenditures made during the last
year. Interest expense also increased, from $368,000 last year to $1,250,000
in 2008, due to a higher average balance on the revolving credit facility.
For the six months ended June 30, 2008, revenues increased 20.4 percent to
$411,916,000 compared to $342,076,000 last year. Net income decreased 28.2
percent to $37,215,000, or $0.38 diluted earnings per share, compared to net
income of $51,860,000, or $0.53 diluted earnings per share last year.
"We are pleased with RPC's improved performance this quarter relative to
the first quarter of 2008," stated Richard A. Hubbell, RPC's President and
Chief Executive Officer. "We received the last of the pressure pumping
equipment to be delivered under our long-term growth plan, as well as other
types of equipment, and we had improved utilization among the majority of our
equipment fleet. We also achieved an operating margin of 17.6 percent during
the quarter, and generated significant year over year EBITDA growth. This was
due to efficiencies gained from cost leverage and better operational
execution. However, we still face margin pressures due to competitive pricing
and operating cost increases, especially for fuel and certain materials and
supplies used in providing our services. In most cases, we are not currently
able to share these cost increases with our customers due to the pricing
environment.
Hubbell continued, "RPC's revenues grew approximately 25 percent during
the quarter as compared to the prior year, representing a higher growth rate
than our domestic industry benchmarks, due to capacity added under our long-
term growth plan and good utilization of our equipment. The average domestic
rig count during the second quarter was 1,864, a 6.1 percent increase compared
to the same period in 2007. The price of natural gas increased 52.3 percent,
and the price of oil increased 91.7 percent. Domestic drilling activity
continues to be robust, and commodity prices are strong in spite of general
economic weakness and the fact that spot natural gas prices are often lower
during this time of year. At the present time, our outlook for the domestic
oilfield services industry for the remainder of this year is positive,
especially considering the service-intensive nature of the unconventional
exploration and production activities that have been taking place this year.
"We invested almost $55 million in capital expenditures during the second
quarter of 2008. Our capital expenditures will be lower during the second
half of 2008, and as always, we continue to evaluate the potential financial
returns of new capital projects. As we projected, the balance drawn on our
revolving credit facility grew during the quarter, and stood at $183 million
at June 30. If our operational performance remains strong, we anticipate
reducing the balance on this facility during the remainder of 2008, and in any
event, we will continue to manage our capital expenditures, working capital,
and revolving credit facility to maintain a strong balance sheet," concluded
Hubbell.
Summary of Segment Operating Performance
RPC's business segments are Technical Services and Support Services.
Technical Services includes RPC's oilfield service lines that utilize
people and equipment to perform value-added completion, production and
maintenance services directly to a customer's well. These services are
generally directed toward improving the flow of oil and natural gas from
producing formations or to address well control issues. The Technical
Services segment includes pressure pumping, coiled tubing, hydraulic workover
services, nitrogen, downhole tools, surface pressure control equipment, well
control, and fishing tool operations.
Support Services includes RPC's oilfield service lines that provide
equipment for customer use or services to assist customer operations. The
equipment and services offered include rental of drill pipe and related tools,
pipe handling, inspection and storage services and oilfield training services.
Technical Services revenues rose 32.2 percent for the quarter compared to
the prior year, driven by strong industry activity and increased capacity, and
improved utilization. Support Services revenues declined by 4.6 percent
during the quarter compared to the prior year because of lower pricing in the
rental tool service line, which is the largest service line within Support
Services. Operating profit declined in both segments, primarily due to
increased depreciation, coupled with competitive pricing, and higher costs for
materials and supplies, and fuel.
Three Months Ended June 30 Six Months Ended June 30
2008 2007 2008 2007
(in thousands)
Revenues:
Technical services$185,284 $140,199 $354,515 $282,505
Support services29,405 30,832 57,401 59,571
Total revenues $214,689 $171,031 $411,916 $342,076
Operating Profit:
Technical services $31,958 $31,426 $52,644 $66,713
Support services 6,7648,496 12,622 18,037
Corporate expenses (2,395) (2,854) (5,025) (5,246)
(Gain) on disposition
of assets, net (1,473) (1,637) (3,000) (3,186)
Total operating profit$37,800 $38,705 $63,241 $82,690
Other Income, net 105 527 981,424
Interest Expense (1,250)(368) (2,721) (1,122)
Interest Income24 14 46 32
Income before income
taxes$36,679 $38,878 $60,664 $83,024
RPC provides a broad range of specialized oilfield services and equipment
primarily to independent and major oilfield companies engaged in the
exploration, production and development of oil and gas properties throughout
the United States, including the Gulf of Mexico, mid-continent, southwest and
Rocky Mountain regions, and in selected international markets. RPC's investor
website can be found at www.rpc.net .
Certain statements and information included in this press release
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
include statements regarding our plans for long-term growth, our outlook for
the domestic oilfield services industry for the remainder of the year, and our
plans for managing capital expenditures, working capital, and our revolving
credit facility, including our expectations that capital expenditures will be
lower during the second half of the year and that we will reduce the balance
on our credit facility during the second half of 2008. These statements
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of RPC to be materially
different from any future results, performance or achievements expressed or
implied in such forward-looking statements. Such risks include changes in
general global business and economic conditions, drilling activity and rig
count; unanticipated demands on our liquidity or difficulties in collecting
trade accounts receivable accounts; fluctuations in market interest rates and
our continued ability to hedge against such fluctuations; the possibility that
recent unconventional exploration and production activities may cease or
change in nature so as to reduce demand for our services; the possibility of
declines in the price of oil and natural gas, which tend to result in a
decrease in drilling activity and therefore a decline in the demand for our
services, the actions of the OPEC cartel, the ultimate impact of current and
potential political unrest and armed conflict in the oil-producing regions of
the world, which could impact drilling activity, adverse weather conditions in
oil or gas producing regions, including the Gulf of Mexico, competition in the
oil and gas industry, an inability to implement price increases, and risks of
international operations. Additional discussion of factors that could cause
the actual results to differ materially from management's projections,
forecasts, estimates and expectations is contained in RPC's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2007.
(1) EBITDA is a financial measure which does not conform to generally
accepted accounting principles (GAAP). Additional disclosure regarding this
non-GAAP financial measure is disclosed in Appendix A to this press release.
RPC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Periods ended June 30, (Unaudited) Second Quarter
% BETTER
2008 2007 (WORSE)
REVENUES $214,689 $171,031 25.5%
COSTS AND EXPENSES:
Cost of services rendered and goods
sold 120,175 88,191 (36.3)
Selling, general and administrative
expenses 29,010 27,077 (7.1)
Depreciation and amortization 29,177 18,695 (56.1)
Gain on disposition of assets, net (1,473) (1,637)(10.0)
Operating profit 37,800 38,705 (2.3)
Interest expense (1,250)(368) N/M
Interest income24 14 71.4
Other income, net 105 527 (80.1)
Income before income taxes 36,679 38,878 (5.7)
Income tax provision 14,221 15,063 5.6
NET INCOME$22,458 $23,815 (5.7)%
EARNINGS PER SHARE
Basic$0.23$0.25 (8.0)%
Diluted $0.23$0.24 (4.2)%
AVERAGE SHARES OUTSTANDING
Basic 96,778 96,350
Diluted 98,120 98,448
RPC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Periods ended June 30, (Unaudited) Six Months
% BETTER
2008 2007 (WORSE)
REVENUES $411,916 $342,076 20.4%
COSTS AND EXPENSES:
Cost of services rendered and goods
sold 237,845 175,712 (35.4)
Selling, general and administrative
expenses 57,327 52,902 (8.4)
Depreciation and amortization 56,503 33,958 (66.4)
Gain on disposition of assets, net (3,000) (3,186) (5.8)
Operating profit 63,241 82,690 (23.5)
Interest expense (2,721) (1,122) (142.5)
Interest income46 32 43.8
Other income, net 981,424 (93.1)
Income before income taxes 60,664 83,024 (26.9)
Income tax provision 23,449 31,164 24.8
NET INCOME$37,215 $51,860 (28.2)%
EARNINGS PER SHARE
Basic$0.39$0.54 (27.8)%
Diluted $0.38$0.53 (28.3)%
AVERAGE SHARES OUTSTANDING
Basic 96,603 96,037
Diluted 98,124 98,391
RPC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At June 30, (Unaudited)(In thousands)
2008 2007
ASSETS
Cash and cash equivalents $9,028$4,723
Accounts receivable, net 193,334 165,092
Inventories 35,70725,030
Deferred income taxes4,601 4,876
Income taxes receivable248 7,248
Prepaid expenses and other current assets5,273 3,888
Total current assets 248,191 210,857
Property, plant and equipment, net 471,168 370,909
Goodwill24,09324,093
Other assets 9,702 5,854
Total assets$753,154 $611,713
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $63,385 $57,162
Accrued payroll and related expenses16,15413,147
Accrued insurance expenses 5,161 3,965
Accrued state, local and other taxes 3,014 3,787
Income taxes payable 3,000 1,660
Other accrued expenses 468 641
Total current liabilities 91,18280,362
Accrued insurance expenses 8,696 7,245
Notes payable to banks 182,550 125,150
Pension liabilities 5,326 5,505
Other long-term liabilities 2,030 1,907
Deferred income taxes 31,02912,264
Total liabilities320,813 232,433
Common stock 9,859 9,800
Capital in excess of par value 13,61214,978
Retained earnings 410,854 359,820
Accumulated other comprehensive loss(1,984) (5,318)
Total stockholders' equity 432,341 379,280
Total liabilities and stockholders'
equity $753,154 $611,713
Appendix A
RPC has used the non-GAAP financial measure of earnings before interest,
taxes, depreciation and amortization (EBITDA) in today's earnings release, and
anticipates using EBITDA in today's earnings conference call. EBITDA should
not be considered in isolation or as a substitute for operating income, net
income or other performance measures prepared in accordance with GAAP. RPC
uses EBITDA as a measure of operating performance because it allows us to
compare performance consistently over various periods without regard to
changes in our capital structure. We are also required to use EBITDA to
report compliance with financial covenants under our revolving credit
facility. A non-GAAP financial measure is a numerical measure of financial
performance, financial position, or cash flows that either 1) excludes
amounts, or is subject to adjustments that have the effect of excluding
amounts, that are included in the most directly comparable measure calculated
and presented in accordance with GAAP in the statement of operations, balance
sheet or statement of cash flows, or 2) includes amounts, or is subject to
adjustments that have the effect of including amounts, that are excluded from
the most directly comparable measure so calculated and presented. Set forth
below is a reconciliation of EBITDA with Net Income, the most comparable GAAP
measure. This reconciliation also appears on RPC's investor website, which
can be found on the Internet at www.rpc.net .
Periods ended June 30, (Unaudited) Second Quarter
% BETTER
20082007(WORSE)
Reconciliation of Net Income to EBITDA
Net Income $22,458 $23,815(5.7)%
Add:
Income tax provision14,221 15,063 5.6
Interest expense 1,250 368 NM
Depreciation and amortization 29,177 18,695 (56.1)
Less:
Interest income 24 1471.4
EBITDA $67,082 $57,92715.8%
EBITDA PER SHARE
Basic$0.69 $0.6015.0%
Diluted $0.68 $0.5915.3%
Periods ended June 30, (Unaudited)Six Months
% BETTER
20082007(WORSE)
Reconciliation of Net Income to EBITDA
Net Income $37,215 $51,860 (28.2)%
Add:
Income tax provision23,449 31,16424.8
Interest expense 2,721 1,122 NM
Depreciation and amortization 56,503 33,958 (66.4)
Less:
Interest income 46 3243.8
EBITDA $119,842$118,072 1.5%
EBITDA PER SHARE
Basic$1.24 $1.23 0.8%
Diluted $1.22 $1.20 1.7%
For information about RPC, Inc., please contact:
Ben M. Palmer
Chief Financial Officer
404.321.2140
irdept@rpc.net
Jim Landers
Corporate Finance
404.321.2162
jlanders@rpc.net
SOURCE RPC, Inc.
