Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

Note 5: Income Taxes

The following table lists the components of the provision (benefit) for income taxes:

Years ended December 31,	2012			2011		2010
(in thousands)
Current provision:
Federal	$	147,580		$	91,415	$	56,289
State		14,673			12,938		11,180
Foreign		1,109			1,007		1,059
Deferred provision (benefit):
Federal		5,027			70,599		22,833
State		(206	)		6,475		(571	)
Total income tax provision	$	168,183		$	182,434	$	90,790

Reconciliation between the federal statutory rate and RPC’s effective tax rate is as follows:

Years ended December 31,	2012			2011			2010
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.2			3.1			2.9
Tax credits		(0.3	)		(0.2	)		(0.6	)
Non-deductible expenses		0.5			0.4			0.4
Other		(0.4	)		(0.2	)		0.5
Effective tax rate		38.0	%		38.1	%		38.2	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31,	2012			2011
(in thousands)
Deferred tax assets:
Self-insurance	$	7,417		$	6,344
Pension		9,688			8,922
State net operating loss carry forwards		1,165			1,671
Bad debts		3,489			3,044
Accrued payroll		2,038			2,099
Stock-based compensation		4,567			3,680
All others		274			1
Valuation allowance		(1,003	)		(1,295	)
Gross deferred tax assets		27,635			24,466
Deferred tax liabilities:
Depreciation		(168,717	)		(166,190	)
Goodwill amortization		(6,394	)		(5,707	)
All others		(1,754	)		(1,314	)
Gross deferred tax liabilities		(176,865	)		(173,211	)
Net deferred tax liabilities	$	(149,230	)	$	(148,745	)

As of December 31, 2012, undistributed earnings of the Company’s foreign subsidiaries amounted to $9.5 million. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes payable to the foreign countries. The Company’s current intention is to permanently reinvest funds held in our foreign subsidiaries outside of the U.S., with the possible exception of repatriation of funds that have been previously subject to U.S. federal and state taxation or when it would be tax effective through the utilization of foreign tax credits, or would otherwise create no additional U.S. tax cost.

As of December 31, 2012, the Company has net operating loss carry forwards related to state income taxes of approximately $27.2 million that will expire between 2013 and 2030. As of December 31, 2012 the Company has a valuation allowance of approximately $1.0 million, representing the tax affected amount of loss carry forwards that the Company does not expect to utilize, against the corresponding deferred tax asset.

Total net income tax payments were $158,700,000 in 2012, $90,729,000 in 2011, and $61,632,000 in 2010.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties were immaterial to the financial statements as of December 31, 2012 and 2011.

In accordance with the accounting guidance relating to the accounting for uncertainty in income tax reporting, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions, the Company did not recognize a material adjustment in the liability for unrecognized income tax benefits.

The Company’s liability for unrecognized tax benefits was $38,000 as of December 31, 2012 and $35,000 as of December 31, 2011, all of which would affect our effective rate if recognized.

The Company and its subsidiaries are subject to U.S. federal and state income tax in multiple jurisdictions. In many cases our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. The Company’s 2009 through 2012 tax years remain open to examination.

It is reasonably possible that the amount of the unrecognized tax benefits with respect to our unrecognized tax positions will increase or decrease in the next 12 months. These changes may be the result of, among other things, state tax settlements under Voluntary Disclosure Agreements. However, quantification of an estimated range cannot be made at this time.

The American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013 and includes an extension for one year of the 50 percent bonus depreciation allowance. The provision specifically applies to qualifying property placed in service before January 1, 2014. The acceleration of deductions on 2012 qualifying capital expenditures resulting from the bonus depreciation provision had no impact on our 2012 effective tax rate.