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Rpc Inc (RES) SEC Filing 10-K Annual report for the fiscal year ending Saturday, December 31, 2011

Rpc Inc

CIK: 742278 Ticker: RES

Exhibit 99
 

GRAPHIC
 

 
RPC, Inc. Reports Fourth Quarter and Record 2011 Financial Results

·   Revenues Increased by 47.1 Percent Compared to the Fourth Quarter of 2010
·   Net Income Increased by 34.5 Percent Compared to the Fourth Quarter of 2010
·   Diluted EPS Increased to $0.51 Compared to $0.38 in the Fourth Quarter 2010
·   Three-for-two stock split effective March 9, 2012
·   20.0 Percent Increase in Quarterly Cash Dividend to $0.12 per Share (based on pre-split shares)

ATLANTA, January 25, 2012 -- RPC, Inc. (NYSE: RES) today announced its unaudited results for the fourth quarter and year ended December 31, 2011.  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 December 31, 2011, revenues increased 47.1 percent to $482,782,000 compared to $328,144,000 in the fourth quarter last year.  Revenues improved due to an increase in the fleet of revenue-producing equipment in several service lines, improved utilization across most of our service lines, and improved pricing.  Operating profit for the quarter was $122,034,000 compared to $89,798,000 in the prior year. Net income for the quarter was $74,581,000 or $0.51 diluted earnings per share ($0.34 adjusted for the three-for-two split), compared to $55,471,000 or $0.38 diluted earnings per share last year ($0.25 adjusted for the three-for-two split).  Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 37.2 percent to $171,784,000 compared to $125,169,000 in the prior year. 1

Cost of revenues was $268,525,000, or 55.6 percent of revenues, during the fourth quarter of 2011, compared to $174,477,000, or 53.2 percent of revenues, in the prior year.  Cost of revenues increased due to the variable nature of many of these expenses.  Cost of revenues as a percentage of revenues also increased during the quarter due to increases in employment costs and higher raw materials costs.

Selling, general and administrative expenses were $42,083,000 in the fourth quarter of 2011, a 33.9 percent increase compared to $31,429,000 in the prior year.  This increase was primarily due to increases in total employment costs consistent with improved operating results. As a percentage of revenues, however, these costs decreased to 8.7 percent in 2011 compared to 9.6 percent last year due to the fixed nature of many of these expenses and our ability to leverage these costs over higher revenues.  Depreciation and amortization increased by 41.5 percent to $48,999,000 during the quarter compared to $34,624,000 last year due to assets that have been placed in service during the last twelve months, but decreased as a percentage of revenues from 10.6 percent in the fourth quarter of 2010 to 10.1 percent this year.

Interest expense decreased from $912,000 last year to $489,000 in 2011 due to lower interest rates on RPC’s revolving credit facility, partially offset by a higher average balance on the facility.
 
 

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.
 
 
 

 
 
Page 2
Fourth Quarter and Year End 2011 Earnings Press Release
 
For the twelve months ended December 31, 2011, revenues increased 65.1 percent to $1,809,807,000 compared to $1,096,384,000 last year.  Net income was $296,381,000 or $2.02 earnings per diluted share ($1.35 adjusted for the three-for-two split), compared to net income of $146,742,000 or $1.00 earnings per diluted share last year ($0.67 adjusted for the three-for-two split).  EBITDA increased from $373,508,000 in 2010 to $662,155,000 in 2011. 1

RPC also announced that its Board of Directors has approved a three-for-two split of the Company’s outstanding common shares.  The split will be effected by issuing an additional share of common stock for every two shares of common stock held.  The additional shares of common stock will be distributed on March 9, 2012 to holders of record at the close of business on February 10, 2012.  No fractional shares will be issued.  Fractional share amounts resulting from the split will be paid to stockholders in cash.

“RPC is pleased to report continued year-over-year growth during the fourth quarter of 2011,” stated Richard A. Hubbell, RPC’s President and Chief Executive Officer.  “The average U.S. domestic rig count during the fourth quarter was 2,010, an 18.9 percent increase compared to the same period in 2010.  The average price of natural gas was $3.23 per Mcf, a decrease of 14.6 percent compared to the prior year, while the average price of oil was $94.55 per barrel, a 10.7 percent increase compared to the prior year.  Our revenue and earnings grew at a greater rate than the changes in these industry indicators because of an increased capacity of revenue-producing equipment, higher equipment utilization, and strong pricing compared to the fourth quarter of 2010.  We continued to benefit from an increasing horizontal and directional drilling rig count, because these activities require more of our services, and the continued shift in drilling activity to more liquids-rich basins, which provide additional customer opportunities to us.  During the quarter we invested approximately $111 million in new equipment and capitalized maintenance.  The balance on our revolving credit facility increased by $62.5 million compared to the end of the third quarter of 2011 due to the timing of our capital expenditures and changes in working capital requirements.  However, accounts receivable collections and other working capital items improved significantly during the beginning of the first quarter of 2012, thus reducing most of the increase in the balance on our credit facility that occurred late in the fourth quarter of 2011.  While we continued to achieve leverage on costs which are relatively fixed in nature, the high demand for skilled labor and raw materials increased those costs significantly.  These increases resulted in lower operating margins in the fourth quarter of 2011 compared to the fourth quarter of 2010.

“Compared to the third quarter of 2011, RPC’s consolidated revenues decreased by 3.9 percent during the fourth quarter of 2011.  The factors contributing to this sequential decline included longer than normal holiday breaks among several large customers, activity deferrals due to various raw material shortages, and customer delays resulting from the transition between large projects.  While some of these factors are believed to be transitory, several of these issues, such as procurement of raw materials, remain challenging.  As we begin the first quarter of 2012, we note that the average U.S. domestic rig count during the fourth quarter increased by a relatively low 3.1 percent compared to the third quarter of this year, and the average price of natural gas decreased by 20.6 percent.  We are concerned about these trends, and are monitoring the natural gas-focused basins in which we operate for signs of slowing customer activity and the impact on pricing for our services.

“Our Board approved a three-for-two stock split at its regular quarterly meeting, the sixth in our history.  Also, our Board voted to increase our dividend by 20 percent, from $0.10 to $0.12 per share.  This dividend will be paid on pre-split shares.  These decisions are responses to record 2011 financial results, a strong balance sheet, and our long-term confidence in our business,” concluded Hubbell.

 
 

 
 
Page 3
Fourth Quarter and Year End 2011 Earnings Press Release
 
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 increased 50.6 percent for the quarter compared to the prior year due to an increase in the fleet of revenue-producing equipment and higher activity levels from customer commitments, as well as improved pricing in all of the service lines within this segment.  Support Services revenues increased by 16.5 percent during the quarter compared to the prior year due principally to improved pricing in the rental tool service line, which is the largest service line within this segment. Operating profit in both Technical and Support Services improved due to higher revenues, improved pricing, and cost leverage.

   
Three Months Ended December 31
Twelve Months Ended December 31  
   
2011
   
2010
   
2011
   
2010
 
          (in thousands)        
Revenues:
                       
   Technical services
  $ 443,970     $ 294,843     $ 1,663,793     $ 979,834  
   Support services
    38,812       33,301       146,014       116,550  
Total revenues
  $ 482,782     $ 328,144     $ 1,809,807     $ 1,096,384  
Operating Profit:
                               
   Technical services
  $ 113,957     $ 80,618     $ 451,259     $ 217,144  
   Support services
    14,462       10,522       51,672       31,086  
   Corporate expenses
    (5,244 )     (3,526 )     (17,019 )     (13,143 )
   (Loss)/Gain on disposition of assets, net
    (1,141 )     2,184       (3,831 )     3,758  
Total operating profit
  $ 122,034     $ 89,798     $ 482,081     $ 238,845  
Other Income, net
    751       747       169       1,303  
Interest Expense
    (489 )     (912 )     (3,453 )     (2,662 )
                                 
Interest Income
    2       0       18       46  
                                 
Income before income taxes
  $ 122,298     $ 89,633     $ 478,815     $ 237,532  
 
RPC, Inc. will hold a conference call today, January 25, 2012 at 9:00 a.m. ET to discuss the results of the fourth quarter.  Interested parties may listen in by accessing a live webcast in the investor relations section of RPC, Inc.’s Web site at www.rpc.net.  The live conference call can also be accessed by calling (877) 719-9789 or (719) 325-4784 and using the access code #1148479.  For those not able to attend the live conference call, a replay of the conference call will be available in the investor relations section of RPC, Inc.’s Web site (www.rpc.net) beginning approximately two hours after the call.

 
 

 
 
Page 4
Fourth Quarter and Year End 2011 Earnings Press Release
 
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, Appalachian and Rocky Mountain regions, and in selected international markets.  RPC’s investor Web site 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 and our concern about the trends related to average U.S. domestic rig count and the average price of natural gas during the fourth quarter, and the effect of these trends on customer activity and pricing for our services. 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; risks of reduced availability or increased costs of both labor and raw materials used in providing our services; the impact on our operations if we are unable to comply with regulatory and environmental laws; turmoil in the financial markets and the potential difficulty to fund our capital needs; the potentially high cost of capital required to fund our capital needs; the possibility that the recent growth in unconventional exploration and production activities may cease or change in nature so as to reduce 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, 2010.

For information about RPC, Inc., please contact:

Ben M. Palmer
Chief Financial Officer
(404) 321-2140
irdept@rpc.net

Jim Landers
Vice President, Corporate Finance
(404) 321-2162
jlanders@rpc.net
 
 
 

 
 
Page 5
Fourth Quarter and Year End 2011 Earnings Press Release
 
RPC INCORPORATED AND SUBSIDIARIES
                                   
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)
                   
Periods ended December 31, (Unaudited)
 
Fourth Quarter
         
Twelve Months
       
   
2011
   
2010
   
%
BETTER
(WORSE)
   
2011
   
2010
   
%
BETTER
(WORSE)
 
REVENUES
  $ 482,782     $ 328,144       47.1 %   $ 1,809,807     $ 1,096,384       65.1 %
COSTS AND EXPENSES:
                                               
Cost of revenues
    268,525       174,477       (53.9 )     992,704       606,098       (63.8 )
Selling, general and administrative expenses
    42,083       31,429       (33.9 )     151,286       121,839       (24.2 )
Depreciation and amortization
    48,999       34,624       (41.5 )     179,905       133,360       (34.9 )
Loss (gain) on disposition of assets, net
    1,141       (2,184 )     N/M       3,831       (3,758 )     N/M  
Operating profit
    122,034       89,798       35.9       482,081       238,845       101.8  
Interest expense
    (489 )     (912 )     46.4       (3,453 )     (2,662 )     (29.7 )
Interest income
    2       -       N/M       18       46       (60.9 )
Other income, net
    751       747       0.5       169       1,303       (87.0 )
Income before income taxes
    122,298       89,633       36.4       478,815       237,532       101.6  
Income tax provision
    47,717       34,162       (39.7 )     182,434       90,790       (100.9 )
NET INCOME
  $ 74,581     $ 55,471       34.5 %   $ 296,381     $ 146,742       102.0 %
                                                 
                                                 
EARNINGS PER SHARE
                                               
   Basic
  $ 0.51     $ 0.38       34.2 %   $ 2.04     $ 1.01       102.0 %
   Diluted
  $ 0.51     $ 0.38       34.2 %   $ 2.02     $ 1.00       102.0 %
                                                 
AVERAGE SHARES OUTSTANDING
                                               
     Basic
    144,995       145,111               145,122       144,989          
     Diluted
    146,434       146,689               146,833       146,537          
                                                 
ADJUSTED FOR THE THREE-FOR-TWO STOCK SPLIT EFFECTIVE MARCH 9, 2012
                         
                                                 
EARNINGS PER SHARE
                                               
   Basic
  $ 0.34     $ 0.25       36.0 %   $ 1.36     $ 0.67       103.0 %
   Diluted
  $ 0.34     $ 0.25       36.0 %   $ 1.35     $ 0.67       101.5 %
                                                 
AVERAGE SHARES OUTSTANDING
                                               
     Basic
    217,493       217,666               217,683       217,484          
     Diluted
    219,651       220,034               220,250       219,805          
 
 
 

 
 
Page 6
Fourth Quarter and Year End 2011 Earnings Press Release
 
RPC INCORPORATED AND SUBSIDIARIES
 
           
CONSOLIDATED BALANCE  SHEETS
           
At December 31, (Unaudited)
 
(In thousands)
 
   
2011
   
2010
 
ASSETS
           
Cash and cash equivalents
  $ 7,393     $ 9,035  
Accounts receivable, net
    461,272       294,002  
Inventories
    100,438       64,059  
Deferred income taxes
    7,183       7,426  
Income taxes receivable
    10,805       17,251  
Prepaid expenses
    8,478       5,695  
Other current assets
    30,986       1,210  
  Total current assets
    626,555       398,678  
Property, plant and equipment, net
    675,360       453,017  
Goodwill
    24,093       24,093  
Other assets
    12,203       12,083  
  Total assets
  $ 1,338,211     $ 887,871  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable
  $ 122,987     $ 78,743  
Accrued payroll and related expenses
    33,680       23,881  
Accrued insurance expenses
    5,744       5,141  
Accrued state, local and other taxes
    5,066       2,988  
Income taxes payable
    10,705       5,788  
Other accrued expenses
    1,284       963  
  Total current liabilities
    179,466       117,504  
Long-term accrued insurance expenses
    9,000       8,489  
Notes payable to banks
    203,300       121,250  
Long-term pension liabilities
    24,445       18,397  
Other long-term liabilities
    3,480       2,448  
Deferred income taxes
    155,928       80,888  
  Total liabilities
    575,619       348,976  
Common stock
    14,746       14,818  
Capital in excess of par value
    -       6,460  
Retained earnings
    760,492       527,150  
Accumulated other comprehensive loss
    (12,646 )     (9,533 )
  Total stockholders' equity
    762,592       538,895  
  Total liabilities and stockholders' equity
  $ 1,338,211     $ 887,871  
 
 
 

 
 
Page 7
Fourth Quarter and Year End 2011 Earnings Press Release
 
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 Web site, which can be found on the Internet at www.rpc.net.

Periods ended December 31, (Unaudited)  
Fourth Quarter
   
% BETTER
(WORSE)
   
Twelve Months
   
% BETTER
(WORSE)
 
   
2011
   
2010
       
2011
   
2010
     
                                     
Reconciliation of Net Income to EBITDA
                                   
Net Income
  $ 74,581     $ 55,471       34.5 %   $ 296,381     $ 146,742       102.0 %
Add:
                                               
     Income tax provision
    47,717       34,162       (39.7 )     182,434       90,790       (100.9 )
     Interest expense
    489       912       46.4       3,453       2,662       (29.7 )
     Depreciation and amortization
    48,999       34,624       (41.5 )     179,905       133,360       (34.9 )
Less:
                                               
     Interest income
    2       -       N/M       18       46       (60.9 )
EBITDA
  $ 171,784     $ 125,169       37.2 %   $ 662,155     $ 373,508       77.3 %
                                                 
EBITDA PER SHARE
                                               
     Basic
  $ 1.18     $ 0.86       37.2 %   $ 4.56     $ 2.58       76.7 %
     Diluted
  $ 1.17     $ 0.85       37.6 %   $ 4.51     $ 2.55       76.9 %
                                                 
EBITDA PER SHARE ADJUSTED FOR THE THREE-FOR-TWO STOCK SPLIT EFFECTIVE MARCH 9, 2012
                 
     Basic
  $ 0.79     $ 0.58       36.2 %   $ 3.04     $ 1.72       76.7 %
     Diluted
  $ 0.78     $ 0.57       36.8 %   $ 3.01     $ 1.70       77.1 %

The following information was filed by Rpc Inc (RES) on Wednesday, January 25, 2012 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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