UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code -- (
Securities Registered under Section 12(b) of the Act:
Title of each class: |
| Trading Symbol(s) |
| Name of each exchange on which registered: |
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.
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).
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 | ☐ | ☒ | |
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
As of July 21, 2023, RPC, Inc. had
RPC, INC. AND SUBSIDIARIES
Table of Contents
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2023 AND DECEMBER 31, 2022
(In thousands)
June 30, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS | (Unaudited) | (Note 1) | ||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net of allowance for credit losses of $ | | | ||||
Inventories |
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Income taxes receivable |
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Prepaid expenses |
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Purchase of business - advance (Note 16) | | — | ||||
Other current assets |
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Total current assets |
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Property, plant and equipment, less accumulated depreciation of $ | | | ||||
Operating lease right-of-use assets | | | ||||
Goodwill |
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Other assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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LIABILITIES |
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Accounts payable | $ | | $ | | ||
Accrued payroll and related expenses |
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Accrued insurance expenses |
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Accrued state, local and other taxes |
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Income taxes payable |
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Pension liabilities | — | | ||||
Current portion of operating lease liabilities | | | ||||
Other accrued expenses |
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Total current liabilities |
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Long-term accrued insurance expenses |
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Long-term retirement plan liabilities |
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Deferred income taxes |
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Long-term operating lease liabilities | | | ||||
Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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STOCKHOLDERS’ EQUITY |
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Preferred stock, $ |
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Common stock, $ |
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Capital in excess of par value |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
3
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands except per share data)
(Unaudited)
Three months ended | Six months ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||
Revenues | $ | | $ | | $ | | $ | | |||||
Cost of revenues |
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Selling, general and administrative expenses |
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Pension settlement charges | | — | | — | |||||||||
Depreciation and amortization |
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Gain on disposition of assets, net |
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Operating income |
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Interest expense |
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Interest income |
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Other income, net |
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Income before income taxes |
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Income tax provision |
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Net income | $ | | $ | | $ | | $ | | |||||
Earnings per share |
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Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
4
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands)
(Unaudited)
Three months ended | Six months ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||
Net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive income: |
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Pension adjustment and reclassification adjustment, net of taxes |
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Foreign currency translation |
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Comprehensive income | $ | | $ | | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
5
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands)
(Unaudited)
Six months ended June 30, 2023 | |||||||||||||||||
Accumulated | |||||||||||||||||
Capital in | Other | ||||||||||||||||
Common Stock | Excess of | Retained | Comprehensive | ||||||||||||||
| Shares |
| Amount |
| Par Value |
| Earnings |
| Loss |
| Total | ||||||
Balance, December 31, 2022 |
| | $ | | $ | — | $ | | $ | ( | $ | | |||||
Stock issued for stock incentive plans, net |
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Stock purchased and retired |
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Net income |
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Dividends |
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Pension adjustment, net of taxes |
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Foreign currency translation |
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Balance, March 31, 2023 | | $ | | $ | — | $ | | $ | ( | $ | | ||||||
Stock issued for stock incentive plans, net | | | | — | — | | |||||||||||
Stock purchased and retired | ( | — | ( | | — | ( | |||||||||||
Net income | — | — | — | | — | | |||||||||||
Dividends | — | — | — | ( | — | ( | |||||||||||
Pension adjustment, net of taxes | — | — | — | — | | | |||||||||||
Foreign currency translation | — | — | — | — | | | |||||||||||
Balance, June 30, 2023 | | $ | | $ | — | $ | | $ | ( | $ | |
Six months ended June 30, 2022 | |||||||||||||||||
Accumulated | |||||||||||||||||
Capital in | Other | ||||||||||||||||
Common Stock | Excess of | Retained | Comprehensive | ||||||||||||||
| Shares |
| Amount |
| Par Value |
| Earnings |
| Loss |
| Total | ||||||
Balance, December 31, 2021 |
| | $ | | $ | — | $ | | $ | ( | $ | | |||||
Stock issued for stock incentive plans, net |
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Stock purchased and retired |
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Net income |
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Pension adjustment, net of taxes |
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Foreign currency translation |
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Balance, March 31, 2022 | | $ | | $ | — | $ | | $ | ( | $ | | ||||||
Stock issued for stock incentive plans, net | | | | — | — | | |||||||||||
Stock purchased and retired | — | — | ( | | — | — | |||||||||||
Net income | — | — | — | | — | | |||||||||||
Pension adjustment, net of taxes | — | — | — | — | | | |||||||||||
Foreign currency translation | — | — | — | — | | | |||||||||||
Balance, June 30, 2022 |
| | $ | | $ | — | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
6
RPC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands)
(Unaudited)
Six months ended June 30, | |||||||
| 2023 |
| 2022 | ||||
OPERATING ACTIVITIES |
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Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation, amortization and other non-cash charges |
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Stock-based compensation expense |
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Gain on disposition of assets, net |
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Deferred income tax provision |
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Pension settlement charges |
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(Increase) decrease in assets: |
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Accounts receivable |
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Income taxes receivable |
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Inventories |
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Prepaid expenses |
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Other current assets |
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Other non-current assets |
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Increase (decrease) in liabilities: |
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Accounts payable |
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Income taxes payable |
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Accrued payroll and related expenses |
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Accrued insurance expenses |
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Accrued state, local and other taxes |
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Other accrued expenses |
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Pension and retirement plans liabilities |
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Long-term accrued insurance expenses |
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Other long-term liabilities |
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Net cash provided by operating activities |
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INVESTING ACTIVITIES |
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Capital expenditures |
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Proceeds from sale of assets |
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Purchase of business - advance (Note 16) |
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Net cash used for investing activities |
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FINANCING ACTIVITIES |
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Payment of dividends |
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Cash paid for common stock purchased and retired |
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Cash paid for finance lease | — | ( | |||||
Net cash used for financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | |||
Supplemental cash flows disclosure: | |||||||
Income tax payments, net | $ | | $ | | |||
Interest paid | $ | | $ | | |||
Supplemental disclosure of noncash investing activities: | |||||||
Capital expenditures included in accounts payable | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
7
1. GENERAL
The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (RPC or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control.
In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.
The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.
A group that includes Gary W. Rollins, Pamela R. Rollins, Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a director of the Company, and certain companies under their control, controls in excess of
2. RECENT ACCOUNTING STANDARDS
Recently Adopted Accounting Standards:
ACCOUNTING STANDARDS UPDATE (ASU) No. 2021-08: Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: The amendments in this ASU address diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination, by adopting guidance requiring an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer would recognize and measure the acquired contract assets and contract liabilities in the same manner that they were recognized and measured in the acquiree's financial statements before the acquisition. The Company adopted these provisions in the second quarter of 2023 prospectively to future business combinations and the adoption did not have a material impact 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 accompanying Consolidated Statements of Operations and therefore excluded from revenues.
Nature of services:
RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international
8
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 6.
RPC contracts with its customers to provide the following services by reportable segment:
Technical Services
Support Services
Our contracts with customers are generally short-term in nature and generally consist of a single performance obligation – the provision of oilfield services.
Payment terms:
RPC’s contracts with customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection is generally expected between
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 6 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions.
Contract balances:
Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net in the accompanying Consolidated Balance Sheets are shown below:
June 30, | December 31, | |||||
(in thousands) |
| 2023 |
| 2022 | ||
Unbilled trade receivables | $ | | $ | |
Substantially all of the unbilled trade receivables disclosed were or are expected to be invoiced during the following quarter.
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4. EARNINGS PER SHARE
Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. Restricted shares of common stock (participating securities) outstanding and a reconciliation of weighted average shares outstanding is as follows:
Three months ended | Six months ended | ||||||||||||
June 30 | June 30 | ||||||||||||
(in thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Net income available for stockholders | $ | | $ | | $ | | $ | | |||||
Less: Adjustments for earnings attributable to participating securities | ( | ( | ( | ( | |||||||||
Net income used in calculating earnings per share | $ | | $ | | $ | | $ | | |||||
Weighted average shares outstanding (including participating securities) |
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Adjustment for participating securities |
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Shares used in calculating basic and diluted earnings per share |
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5. STOCK-BASED COMPENSATION
In April 2014, the Company reserved
In the first quarter of 2023, the Company issued time-lapse restricted shares to certain employees that will vest ratably over a period of
Stock-based employee compensation expense for the three and six months ended June 30, 2023 was as follows:
Three months ended | Six months ended | |||||||||||
June 30, | June 30, | |||||||||||
(in thousands) |
| 2023 | 2022 |
| 2023 | 2022 | ||||||
Pre-tax expense | $ | | $ | | $ | | $ | | ||||
After tax expense | $ | | $ | | $ | | $ | |
The following is a summary of the changes in non-vested restricted shares for the six months ended June 30, 2023:
Weighted Average | |||||
| Shares |
| Grant-Date Fair Value | ||
Non-vested shares at January 1, 2023 | | $ | | ||
Granted |
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Vested |
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Forfeited |
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Non-vested shares at June 30, 2023 |
| | $ | |
10
The total fair value of shares vested was $
6. 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 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 certain 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 | Six months ended | ||||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) |
| 2023 |
| 2022 |
| 2023 |
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Technical Services: |
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Pressure Pumping | $ | | $ | | $ | | $ | | |||||
Downhole Tools |
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Coiled Tubing |
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Nitrogen |
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Snubbing |
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All other |
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Total Technical Services | $ | | $ | | $ | | $ | | |||||
Support Services: |
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Rental Tools | $ | | $ | | $ | | $ | | |||||
All other |
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Total Support Services | $ | | $ | | $ | | $ | | |||||
Total revenues | $ | | $ | | $ | | $ | |
11
The following summarizes revenues for the United States and separately for all international locations combined for the three and six months ended June 30, 2023 and 2022. 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 |
| Six months ended | ||||||||||
June 30, | June 30, | ||||||||||||
(in thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
United States revenues | $ | | $ | | $ | | $ | | |||||
International revenues |
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Total revenues | $ | | $ | | $ | | $ | |
The accounting policies of the reportable segments are the same as those referenced 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 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 and six months ended June 30, 2023, and 2022 are shown in the following table:
Three months ended | Six months ended | |||||||||||
June 30, | June 30, | |||||||||||
(in thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Revenues: |
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Technical Services | $ | | $ | | $ | | $ | | ||||
Support Services |
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Total revenues | $ | | $ | | $ | | $ | | ||||
Operating income: |
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Technical Services | $ | | $ | | $ | | $ | | ||||
Support Services |
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Corporate expenses |
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Pension settlement charges | ( | — | ( | — | ||||||||
Gain on disposition of assets, net |
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Total operating income | $ | | $ | | $ | | $ | | ||||
Interest expense |
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Interest income |
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Other income, net |
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Income before income taxes | $ | | $ | | $ | | $ | |
As of and for the six months ended | Technical | Support | ||||||||||
June 30, 2023 |
| Services |
| Services |
| Corporate |
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(in thousands) |
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Depreciation and amortization | $ | | $ | | $ | | $ | | ||||
Capital expenditures |
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Identifiable assets | | | | |
As of and for the six months ended | Technical | Support | ||||||||||
June 30, 2022 |
| Services |
| Services |
| Corporate |
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(in thousands) | ||||||||||||
Depreciation and amortization | $ | | $ | | $ | | $ | | ||||
Capital expenditures |
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Identifiable assets | | | | |
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7. CURRENT EXPECTED CREDIT LOSSES
The Company utilizes an expected credit loss model for valuing its accounts receivable, a financial asset measured at amortized cost. The Company is exposed to credit losses primarily from providing oilfield services. The Company’s expected allowance for credit losses 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 estimated 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 allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of 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 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:
Six months ended June 30, |
| 2023 |
| 2022 | ||
(in thousands) | ||||||
Beginning balance | $ | | $ | | ||
Provision for current expected credit losses | |
| | |||
Write-offs | ( |
| ( | |||
Recoveries collected (net of expenses) | |
| | |||
Ending balance | $ | | $ | |
8. INVENTORIES
Inventories consist of (i) raw materials and supplies that are consumed providing services to the Company’s customers, (ii) spare parts for equipment used in providing these services and (iii) components and attachments for manufactured equipment used in providing services. In the table below, spare parts and components are included as part of raw materials and supplies; tools that are assembled using components are reported as finished goods. Inventories are recorded at the lower of cost or net realizable value. Cost is determined using first-in, first-out method or the weighted average cost method.
June 30, | December 31, | |||||
(in thousands) | 2023 | 2022 | ||||
Raw materials and supplies | $ | | $ | | ||
Finished goods | |
| | |||
Ending balance | $ | | $ | |
9. COMMITMENTS AND CONTINGENCIES
Sales and Use Taxes - The Company has ongoing sales and use tax audits in various jurisdictions and may be subjected to varying interpretations of statute that could result in unfavorable outcomes. In accordance with ASC 450-20, Loss Contingencies, any probable and reasonable estimate of assessment costs have been included in Accrued state, local and other taxes.
The Company has received a state tax notification of audit results related to sales and use tax and with its outside legal counsel has evaluated the perceived merits of this tax assessment. The Company believes the likelihood of a material loss related to this contingency is remote and cannot be reasonably estimated at this time. Therefore, no loss has been recorded and the Company currently does not believe the resolution of this claim will have a material impact on its consolidated financial position, results of operations or cash flows.
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10. PENSION AND RETIREMENT PLANS LIABILITIES
The following represents the net periodic benefit cost and related components of the Company’s multiemployer Retirement Income Plan (Plan), a trusteed defined benefit pension plan:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
December 31, |
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||||||||||
(in thousands) | |||||||||||||||||||||
| $ | |
| $ | 243 |
| $ | 41 |
| $ | 486 | ||||||||||
Expected return on Plan assets |
| — |
| — |
| — |
| — | |||||||||||||
| |
| 252 |
| 224 |
| 505 | ||||||||||||||
Settlement loss | | — | 18,286 | — | |||||||||||||||||
Net periodic benefit cost | $ | | $ | 495 | $ | 18,551 | $ | 991 |
During the second quarter of 2023, as part of the termination of the Plan, the Company transferred approximately $
The Company permits selected highly compensated employees to defer a portion of their compensation into the non-qualified Supplemental Retirement Plan (SERP). The Company maintains certain securities primarily in mutual funds and company-owned life insurance policies as a funding source to satisfy the obligation of the SERP that have been classified as trading and are stated at fair value totaling $
The SERP liabilities include participant deferrals, net of distributions, and are stated at fair value of approximately $
11. NOTES PAYABLE TO BANKS
The Company has a revolving Credit Agreement with Bank of America and
The Credit Agreement contains
14
As of June 30, 2023, the Company was in compliance with all covenants.
Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:
● | Term SOFR; plus, a margin ranging from |
● | the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus |
In addition, the Company pays an annual fee ranging from
The Company has incurred total loan origination fees and other debt related costs associated with this revolving credit facility in the aggregate of approximately $
As of June 30, 2023, RPC had
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, |
| ||||||||||||||
(in thousands) |
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||||
Interest incurred | $ | | $ | | $ | 120 | $ | 128 |
| |||||||
Interest paid | | | 83 | 123 |
12. INCOME TAXES
The Company generally 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. In certain instances, the Company uses the discrete method when it believes the actual year-to-date effective rate provides a more reliable estimate of its income tax rate for the period. The estimated 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 June 30, 2023, the effective rate reflects a provision of
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:
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The following table summarizes the valuation of financial instruments measured at fair value on a recurring basis in the balance sheets as of June 30, 2023 and December 31, 2022:
Fair Value Measurements at June 30, 2023 with: | ||||||||||||
Quoted prices in | Significant | |||||||||||
active markets | other | Significant | ||||||||||
for identical | observable | unobservable | ||||||||||
(in thousands) |
| Total |
| assets |
| inputs |
| inputs | ||||
| (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets: | ||||||||||||
Equity securities | $ | | $ | | $ | | $ | | ||||
Investments measured at net asset value | $ | |
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Fair Value Measurements at December 31, 2022 with: | ||||||||||||
Quoted prices in | Significant | |||||||||||
active markets | other | Significant | ||||||||||
for identical | observable | unobservable | ||||||||||
(in thousands) |
| Total |
| assets |
| inputs |
| inputs | ||||
|
|
| (Level 1) |
| (Level 2) |
| (Level 3) | |||||
Assets: | ||||||||||||
Equity securities | $ | | $ | | $ | | $ | | ||||
Investments measured at net asset value | $ | |
|
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|
|
|
|
The Company determines the fair value of equity securities that have a readily determinable fair value through quoted market prices. The total fair value is the final closing price, as defined by the exchange in which the asset is actively traded, on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. Marketable securities comprised of the SERP assets, are recorded primarily at their net cash surrender values, calculated using their net asset values, which approximates fair value, as provided by the issuing insurance or investment company. Significant observable inputs, in addition to quoted market prices, were used to value the equity securities. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods. For the quarter ended June 30, 2023, there were no significant transfers in or out of levels 1, 2 or 3.
Under the Company’s revolving credit facility, there was
The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments. The Company currently does not use the fair value option to measure any of its existing financial instruments and has not determined whether it will elect this option for financial instruments acquired in the future.
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14. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive (loss) income consists of the following (in thousands):
Foreign | |||||||||
Pension | Currency | ||||||||
| Adjustment |
| Translation |
| Total | ||||
Balance at December 31, 2022 | $ | ( | $ | ( | $ | ( | |||
Change during the period: |
|
|
| ||||||
Before-tax amount |
| |
| |
| | |||
Tax expense | ( | — | ( | ||||||
Pension settlement charges, net of taxes | | — | | ||||||
Reclassification adjustment, net of taxes: |
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| ||||||
Amortization of net loss (1) |
| |
| — |
| | |||
Total activity for the period |
| |
| |
| | |||
Balance at June 30, 2023 | $ | ( | $ | ( | $ | ( |
(1) | Reported as part of Selling, general and administrative expenses. |
Foreign | |||||||||
Pension | Currency | ||||||||
| Adjustment |
| Translation |
| Total | ||||
Balance at December 31, 2021 | $ | ( | $ | ( | $ | ( | |||
Change during the period: |
|
|
| ||||||
Before-tax amount |
| — |
| |
| | |||
Reclassification adjustment, net of taxes: |
|
|
|
| |||||
Amortization of net loss (1) |
| |
| — |
| | |||
Total activity for the period |
| |
| |
| | |||
Balance at June 30, 2022 | $ | ( | $ | ( | $ | ( |
(1) | Reported as part of Selling, general and administrative expenses. |
15. CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED
The Company has a stock buyback program to repurchase up to
Shares purchased for withholding taxes represent taxes due upon vesting of time-lapse restricted shares granted to employees. Total share repurchases for 2023 and 2022 year to date are detailed below:
Six months ended | Six months ended | |||||||||||||
June 30, 2023 | June 30, 2022 | |||||||||||||
| No. of shares | Avg. price | Total cost |
| No. of shares | Avg. price | Total cost | |||||||
Shares purchased for withholding taxes | | $ | $ | | | $ | $ | | ||||||
Open market purchases | | | — | — | — | |||||||||
Total | | $ | $ | | | $ | $ | |
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16. SUBSEQUENT EVENTS
Acquisition of Spinnaker Oilwell Services, LLC.
Effective July 1, 2023, the Company completed its acquisition of all of the outstanding equity interests in Spinnaker Oilwell Services, LLC ("Spinnaker"), pursuant to a Merger Agreement ("Merger Agreement") with Catapult Energy Services Group, LLC, as the representative of the Sellers.
Spinnaker, which is headquartered in Oklahoma City, Oklahoma, is a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. Spinnaker operates
The purchase price was $
As of June 30, 2023, $
The Company will account for this transaction as a purchase of business under the acquisition method of accounting. The required disclosures under ASC 805, "Business Combinations" will be included in the Quarterly Report on Form 10-Q for the period ended September 30, 2023.
Dividends
On July 25, 2023, the Board of Directors declared a regular quarterly cash dividend of $
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
The following discussion should be read in conjunction with the Consolidated Financial Statements included elsewhere in this document. See also Forward-Looking Statements on page 26.
RPC, Inc. (RPC or the Company) provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration, production and development of oil and gas properties throughout the United States, including the Gulf of Mexico, mid-continent, southwest, Rocky Mountain and Appalachian regions, and in selected international locations. The Company’s revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells. We continuously monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel. Our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities.
The discussion of our key business and financial strategies set forth under the Overview section in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022 is incorporated herein by reference. In 2023, the Company’s strategy of utilizing equipment in unconventional basins has continued. During the six months ended June 30, 2023, capital expenditures totaled $104.5 million, primarily for new tier four dual fuel equipment that was placed into service during the quarter, coupled with capitalized maintenance and upgrades of our existing equipment. We currently expect capital expenditures to be $200 to $250 million during 2023 and to be directed primarily towards capitalized maintenance of our existing equipment and selected growth opportunities.
During the second quarter of 2023, revenues of $415.9 million increased by $40.4 million or 10.7 percent compared to the same period in the prior year. The increase in revenues is due to improved pricing, higher customer activity levels and a larger active fleet of revenue-producing equipment. International revenues for the second quarter of 2023 decreased 3.8 percent to $6.4 million compared to the same period in the prior year. We continue to pursue international growth opportunities, but the nature of this work is unpredictable and we believe that international revenues will continue to be less than ten percent of RPC’s consolidated revenues in the foreseeable future.
Cost of revenues increased in the second quarter of 2023 compared to the same period in the prior year, primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies expenses, maintenance and repairs expenses, employment costs and fuel costs. Cost of revenues as a percentage of revenues decreased primarily due to improved pricing for our services as well as reduced maintenance expenses due to a decrease in the average age of our equipment.
Selling, general and administrative expenses increased to $43.6 million in the second quarter of 2023 from $35.9 million in the second quarter of 2022 primarily due to costs related to the settlement of a vendor dispute and the acquisition of Spinnaker Oilwell Services. Selling, general and administrative expenses increased from 9.6 percent of revenues in the second quarter of 2022 to 10.5 percent of revenues in the second quarter of 2023.
Income before income taxes was $85.6 million for the three months ended June 30, 2023 compared to $60.4 million during the same period of 2022. Diluted earnings per share were $0.30 for the three months ended June 30, 2023 compared to $0.22 per share in the same period of 2022. Cash provided by operating activities increased to $177.6 million for the six months ended June 30, 2023 compared to $42.9 million in the same period of 2022 primarily due to a significant increase in earnings.
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Outlook
Drilling activity in the U.S. domestic oilfields, as measured by the rotary drilling rig count, reached a cyclical peak of 1,083 during the fourth quarter of 2018 (Source: Baker Hughes, Inc.). Between the fourth quarter of 2018 and the third quarter of 2020, the drilling rig count fell by 77 percent. During the third quarter of 2020, the U.S. domestic drilling rig count reached the lowest level recorded up to that time. The principal catalyst for this steep rig count decline was the decrease in the price of oil in the world markets resulting from the decline in global oil demand associated with the COVID-19 pandemic which began in the first quarter of 2020. The drilling rig count during the second quarter of 2023 was relatively unchanged compared to the second quarter of 2022.
The current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity. Following the trough of the most recent oilfield downturn in the second quarter of 2020, the price of oil rose by more than 250 percent in the third quarter of 2022 compared to the average price of oil in the second quarter of 2020. The price of natural gas has risen by over 300 percent during the same time period. Following a low price of $0.23 per gallon in the second quarter of 2020, the price of benchmark natural gas liquids rose to $1.25 per gallon in the third quarter of 2022 (Source: U.S. Energy Information Administration). In addition, oil and gas prices experienced increases beginning in February 2022 due to concerns about potential world-wide supply constraints resulting from the Russian invasion of Ukraine. Although the price increases in these commodities have recently moderated from their highs, RPC believes that they remain above levels sufficient to motivate our customers to maintain drilling and completion activities.
The Russian invasion of Ukraine during the first quarter of 2022 prompted Western European countries to curtail or eliminate their purchases of natural gas from Russia. As a result, the demand for liquified natural gas from the United States increased significantly, which increased the price for natural gas in the United States to its highest level since 2008 and encouraged additional investment in liquified natural gas production facilities in the United States. These factors have been offset by warm weather and the idling of a major liquified natural gas facility in the U.S. contributing to the recent decline in price of natural gas. Despite the recent decline in price, we believe the favorable long-term outlook for natural gas provided by the U.S. oil and gas industry is sufficient to encourage our customers to maintain their natural gas-directed exploration and production activities.
The majority of the U.S. domestic rig count remains directed towards oil. In the second quarter of 2023, approximately 79 percent of the U.S. domestic rig count was directed towards oil, compared to 82 percent in the same quarter of the prior year. We believe that oil-directed drilling will remain the majority of domestic drilling, and that natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near term. However, we believe that natural gas-directed drilling will increase in the future because of favorable long-term market dynamics. This projected higher demand for oil and natural gas should drive increased activity in most of the basins in which RPC operates.
We continue to monitor the market for our services and the competitive environment, including the current trends and expectations with regard to environmental concerns and related impact on our equipment fleets. The growing efficiency in recent years with which oilfield completion crews are providing services is a catalyst for the oversupplied nature of the oilfield services market. We believe that most of the feasible efficiency gains have been realized, and a number of our smaller competitors have ceased operations. These factors, combined with the increase in drilling and completion activities and the improvement in commodity prices, leads us to believe that the competitive market for our services improved during 2022 and early 2023, and despite what we believe is a temporary moderation of customer drilling and completion activity we expect demand will continue to improve over the next several quarters.
During 2022, RPC completed payment under a finance lease arrangement for a new Tier 4 dual-fuel pressure pumping fleet that went to work during the fourth quarter of 2021 and refurbished an existing fleet that was placed into service during 2022. Additionally, during the second quarter of 2023 the Company placed into service another pressure pumping fleet, replacing existing older equipment sent out for refurbishment. We have selectively upgraded our existing equipment to operate using multiple fuel sources and to take advantage of advances in technology and data collection. RPC’s response to our industry’s recent higher activity levels and improved service pricing is primarily to maintain and upgrade our current fleet capacity of revenue-producing equipment. We will remain highly disciplined about adding new incremental revenue-producing equipment capacity and will only expand when we believe the projected financial returns of such capital expenditures meet our financial return criteria. The Company is allocating capital to maintain the capacity of our pressure pumping fleet to offset anticipated future fleet retirements.
Effective July 1, 2023, the Company acquired Spinnaker, a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. The Company expects the acquisition of Spinnaker will expand RPC’s cementing business from its presence in South Texas to basins in which we currently provide other services.
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Results of Operations
Three months ended | Six months ended |
| |||||||||||
June 30, | June 30, | ||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||
Consolidated revenues [in thousands] | $ | 415,858 | $ | 375,507 | $ | 892,526 | $ | 660,131 | |||||
Revenues by business segment [in thousands]: | |||||||||||||
Technical | $ | 390,018 | $ | 356,103 | $ | 842,009 | $ | 622,452 | |||||
Support | 25,840 | 19,404 | 50,517 | 37,679 | |||||||||
Consolidated operating income [in thousands] | $ | 82,369 | $ | 60,415 | $ | 173,026 | $ | 83,450 | |||||
Operating income (loss) by business segment [in thousands]: | |||||||||||||
Technical | $ | 77,017 | $ | 59,827 | $ | 180,550 | $ | 81,638 | |||||
Support | 7,920 | 3,334 | 14,564 | 6,114 | |||||||||
Corporate | (4,672) | (4,544) | (9,753) | (9,054) | |||||||||
Pension settlement charges | (911) | — | (18,286) | — | |||||||||
Gain on disposition of assets, net | 3,015 | 1,798 | 5,951 | 4,752 | |||||||||
Percentage cost of revenues to revenues | 63.9 | % | 69.5 | % | 64.0 | % | 71.2 | % | |||||
Percentage selling, general & administrative expenses to revenues | 10.5 | % | 9.6 | % | 9.6 | % | 10.9 | % | |||||
Percentage depreciation and amortization expense to revenues | 6.3 | % | 5.4 | % | 5.6 | % | 6.0 | % | |||||
Average U.S. domestic rig count | 719 | 719 | 740 | 678 | |||||||||
Average natural gas price (per thousand cubic feet (mcf)) | $ | 2.2 | $ | 7.5 | $ | 2.4 | $ | 6.1 | |||||
Average oil price (per barrel) | $ | 73.5 | $ | 109.0 | $ | 74.8 | $ | 102.0 |
THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THREE MONTHS ENDED JUNE 30, 2022
Revenues. Revenues of $415.9 million for the three months ended June 30, 2023 increased 10.7 percent compared to the three months ended June 30, 2022. Domestic revenues of $409.4 million increased 11.0 percent for the three months ended June 30, 2023 compared to the same period in the prior year. The increase in revenues was primarily due to improved pricing, higher customer activity levels and a larger active fleet of pressure pumping equipment. International revenues of $6.4 million decreased 3.8 percent for the three months ended June 30, 2023 compared to the same period in the prior year.
During the second quarter of 2023, the average price of oil was 32.5 percent lower and the average price of natural gas was 71.2 percent lower, both as compared to the same period in the prior year. Oil and gas prices have moderated since the price increases in the prior year due to the Russian invasion of Ukraine but remain at sufficient levels to encourage customer drilling and completion activities. The average domestic rig count during the second quarter of 2023 was unchanged compared to the same period in 2022.
The Technical Services segment revenues for the second quarter of 2023 increased by 9.5 percent compared to the same period of the prior year due to higher customer activity levels, improved pricing and a larger fleet of pressure pumping equipment in service. Technical Services reported operating income of $77.0 million during the second quarter of 2023 compared to operating income of $59.8 million in the second quarter of 2022. The Support Services segment revenues for the second quarter of 2023 increased by 33.2 percent compared to the same period in the prior year, primarily due to higher activity levels and improved pricing within rental tools. Support Services reported operating income of $7.9 million for the second quarter of 2023 compared to an operating income of $3.3 million for the second quarter of 2022. Second quarter 2023 Support Services operating profit increased by $4.6 million compared to the second quarter of the prior year due to higher activity levels, improved pricing, and leverage of higher revenues over costs that are fixed during the short term.
Cost of revenues. Cost of revenues increased 1.9 percent to $265.8 million for the three months ended June 30, 2023 compared to $260.9 million for the three months ended June 30, 2022. Cost of revenues increased primarily due to increases in expenses consistent with higher activity levels, such as materials and supplies expenses, maintenance and repairs expenses, employment costs and fuel costs. Cost of revenues, as a percentage of revenues, decreased from 69.5 percent in the second quarter of 2022 to 63.9 percent in the
21
second quarter of 2023 primarily due to improved pricing for our services as well as reduced maintenance expense due to a decrease in the average age of our equipment.
Selling, general and administrative expenses. Selling, general and administrative expenses increased to $43.6 million for the three months ended June 30, 2023 compared to $35.9 million for the three months ended June 30, 2022, primarily due to costs related to the settlement of a vendor dispute and the acquisition of Spinnaker Oilwell Services. Selling, general and administrative expenses increased from 9.6 percent of revenues in the second quarter of 2022 to 10.5 percent of revenues in the second quarter of 2023.
Pension settlement charges. Pension settlement charges were $911 thousand for the three months ended June 30, 2023. There were no pension settlement charges for the three months ended June 30, 2022. See note 10 of the notes to the consolidated financial statements for more information.
Depreciation and amortization. Depreciation and amortization increased 30.4 percent to $26.2 million for the three months ended June 30, 2023, compared to $20.1 million for the three months ended June 30, 2022. Depreciation and amortization increased due to capital expenditures in the past year.
Gain on disposition of assets, net. Gain on disposition of assets, net was $3.0 million for the three months ended June 30, 2023 compared to a gain on disposition of assets, net of $1.8 million for the three months ended June 30, 2022. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.
Other income, net. Other income, net was $631 thousand for the three months ended June 30, 2023 compared to other income, net of $79 thousand for the same period in the prior year.
Interest expense and interest income. Interest expense was $73 thousand for the three months ended June 30, 2023 compared to $222 thousand for the three months ended June 30, 2022. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $2.7 million compared to $128 thousand in the prior year due to a higher average cash balance coupled with higher investment yields.
Income tax provision. Income tax provision was $20.6 million during the three months ended June 30, 2023 compared to $13.5 million tax provision for the same period in 2022. The effective tax rate was 24.1 percent for the three months ended June 30, 2023 compared to a 22.3 percent for the three months ended June 30, 2022. The increase in the 2023 effective tax rate is primarily due to unfavorable permanent items.
SIX MONTHS ENDED JUNE 30, 2023 COMPARED TO SIX MONTHS ENDED JUNE 30, 2022
Revenues. Revenues of $892.5 million for the six months ended June 30, 2023 increased 35.2 percent compared to the six months ended June 30, 2022. Domestic revenues of $878.8 million increased 36.4 percent for the six months ended June 30, 2023 compared to the same period in the prior year. The increase in revenues was primarily due to improved pricing, higher customer activity levels and a larger active fleet of pressure pumping equipment. International revenues of $13.7 million decreased 14.1 percent for the six months ended June 30, 2023 compared to the same period in the prior year.
During the first six months of 2023, the average price of oil was 26.7 percent lower, and the average price of natural gas was 60.4 percent lower, both as compared to the same period in the prior year. The average domestic rig count for the six months ended June 30, 2023 was 9.1 percent higher than the same period in 2022.
The Technical Services segment revenues for the first six months of 2023 increased by 35.3 percent compared to the same period of the prior year due to higher customer activity levels, improved pricing and a larger fleet of pressure pumping equipment in service. Technical Services reported operating income of $180.6 million during the first six months of 2023 compared to operating income of $81.6 million in the same period of 2022. The Support Services segment revenues for the first six months of 2023 increased by 34.1 percent compared to the same period in the prior year, primarily due to higher activity levels and improved pricing within rental tools. Support Services reported operating income of $14.6 million for the first six months of 2023 compared to an operating income of $6.1 million for the same period of 2022.
Cost of revenues. Cost of revenues increased 21.6 percent to $571.0 million for the six months ended June 30, 2023 compared to $469.8 million for the six months ended June 30, 2022. Cost of revenues increased primarily due to increases in expenses consistent
22
with higher activity levels, such as materials and supplies expenses, maintenance and repairs expenses, employment costs and fuel costs. Cost of revenues, as a percentage of revenues, decreased from 71.2 percent for the six months ended June 30, 2022 to 64.0 percent for the six months ended June 30, 2023 primarily due to improved pricing for our services, as well as reduced maintenance expense due to a decrease in the average age of our equipment.
Selling, general and administrative expenses. Selling, general and administrative expenses increased to $85.8 million for the six months ended June 30, 2023 compared to $72.1 million for the six months ended June 30, 2022, primarily due to costs related to the settlement of a vendor dispute and the acquisition of Spinnaker Oilwell Services, as well as increases in variable employee compensation costs consistent with improved financial operating results. Selling, general and administrative expenses, as a percentage of revenues, decreased from 10.9 percent in the first six months of 2022 to 9.6 percent in the same period of 2023 primarily due to the leverage of costs that are relatively fixed during the short term over higher revenues, partially offset by the impact of the acquisition of Spinnaker Oilwell Services.
Pension settlement charges. Pension settlement charges were $18.3 million for the six months ended June 30, 2023. There was no pension settlement charge for the six months ended June 30, 2022. See note 10 of the notes to the consolidated financial statements for more information.
Depreciation and amortization. Depreciation and amortization increased 27.2 percent to $50.3 million for the six months ended June 30, 2023, compared to $39.6 million for the six months ended June 30, 2022. Depreciation and amortization increased due to capital expenditures in the past year.
Gain on disposition of assets, net. Gain on disposition of assets, net was $6.0 million for the six months ended June 30, 2023 compared to a gain on disposition of assets, net of $4.8 million for the six months ended June 30, 2022. The gain on disposition of assets, net is generally comprised of gains and losses related to various property and equipment dispositions or sales to customers of lost or damaged rental equipment.
Other income, net. Other income, net was $1.4 million for the six months ended June 30, 2023 compared to other income, net of $583 thousand for the same period in the prior year.
Interest expense and interest income. Interest expense was $145 thousand for the six months ended June 30, 2023 compared to $400 thousand for the six months ended June 30, 2022. Interest expense includes facility fees on the unused portion of the credit facility and the amortization of loan costs. Interest income increased to $4.6 million compared to $143 thousand in the prior year due to a higher average cash balance coupled with higher investment yields.
Income tax provision. Income tax provision. Income tax provision was $42.3 million during the six months ended June 30, 2023 compared to $21.8 million tax provision for the same period in 2022. The effective tax rate was 23.6 percent for the six months ended June 30, 2023 compared to a 26.0 percent effective tax rate for the six months ended June 30, 2022. The decrease in the 2023 effective tax rate is primarily due to favorable discrete adjustments.
Liquidity and Capital Resources
Cash Flows
The Company’s cash and cash equivalents decreased $25.9 million to $100.5 million as of June 30, 2023 compared to cash and cash equivalents of $126.4 million as of December 31, 2022. This decrease is primarily due to the advance of cash to fund the purchase of business on June 30, 2023, partially offset by an increase in net income during 2023 compared to the prior year.
The following table sets forth the historical cash flows for the six months ended June 30, 2023 and 2022:
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|
| ||||||
|
| ||||||
Six months ended June 30, |
| ||||||
(In thousands) |
| 2023 |
| 2022 |
| ||
Net cash provided by operating activities | $ | 177,558 | $ | 42,853 | |||
Net cash used for investing activities | (174,782) | (43,430) | |||||
Net cash used for financing activities | 28,665 | (3,623) |
Cash provided by operating activities for the six months ended June 30, 2023 increased by $134.7 million compared to the six months ended June 30, 2022. Cash provided by operating activities for the six months ended June 30, 2023 includes net income of $136.5 million, coupled with favorable changes in accounts receivable of $23.0 million primarily due to improved collections, offset by unfavorable changes in other components of our working capital (accounts payable and accrued payroll) totaling $37.7 million primarily due to the timing of payments.
Cash used for investing activities for the six months ended June 30, 2023 increased by $131.4 million compared to the six months ended June 30, 2022, primarily due to the advance of cash to fund the purchase of business on June 30, 2023, coupled with an increase in capital expenditures primarily due to the timing of new equipment deliveries and consistent with higher business activity levels.
Cash used for financing activities for the six months ended June 30, 2023 increased by $25.0 million primarily due to the resumption of cash dividends paid to common stockholders beginning in the third quarter of 2022, coupled with repurchases during the first quarter of 2023 of the Company’s common shares on the open market and repurchases for taxes related to the vesting of restricted shares.
Financial Condition and Liquidity
The Company’s financial condition as of June 30, 2023 remains strong. We believe the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months. The Company’s decisions relating to the amount of cash to be used for investing and financing activities are influenced by our capital position, and the expected amount of cash to be provided by operations. RPC does not currently expect to utilize our revolving credit facility to meet these liquidity requirements.
The majority of our cash and cash equivalents are held at a single financial institution and are in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC). This financial institution is among the largest in the United States and we believe it is a safe place to hold our deposits.
The Company currently has a $100.0 million revolving credit facility that matures in June 2027 as recently amended. The facility contains customary terms and conditions, including restrictions on indebtedness, dividend payments, business combinations and other related items. In the second quarter of 2022, the Company amended the revolving credit facility. Among other matters, the amendment (1) extends the termination date for revolving loans from July 26, 2023 to June 22, 2027, (2) replaces LIBOR with Term SOFR as an interest rate option in connection with revolving loan borrowings and reduces the applicable rate margins by approximately 0.25% at each pricing level, (3) introduces a 1.00% per annum floor for base rate borrowings, (4) permits the issuance of letters of credit in currencies other than U.S. dollars. As of June 30, 2023, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.4 million; therefore, a total of $83.6 million of the facility was available. The Company was in compliance with the credit facility financial covenants as of June 30, 2023. For additional information with respect to RPC’s facility, see Note 11 of the consolidated financial statements.
Cash Requirements
The Company currently expects capital expenditures to be $200 million to $250 million in 2023 and to be directed towards both capitalized maintenance of our existing equipment and selected growth opportunities. The Company is allocating capital to maintain the capacity of its pressure pumping fleet to offset anticipated future fleet retirements. During the second quarter of 2023 the Company placed into service a new pressure pumping fleet, replacing existing older equipment sent out for refurbishment. The actual amount of capital expenditures in 2023 will depend primarily on equipment maintenance requirements, expansion opportunities, and equipment delivery schedules.
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The Company has ongoing sales and use tax audits in various jurisdictions subject to varying interpretations of statutes. The Company has recorded the exposure from these audits to the extent issues are resolved or are reasonably estimable. There are issues that could result in unfavorable outcomes that cannot be currently estimated. See Note 9 of the Notes to Consolidated Financial Statements for additional information.
During the first six months of 2023, the Company made cash contributions of $5.4 million to its Retirement Income Plan and currently expects to make minimal contributions for the remainder of the year.
Effective July 1, 2023, the Company acquired Spinnaker, a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. The purchase price was $79.5 million for 100 percent of Spinnaker’s equity. The acquisition was effective July 1, 2023 and amounts advanced as of June 30, 2023, consisted of approximately $77.0 million in cash and a $2.0 million pay-off of capital lease liabilities. Additionally, the Company assumed $518 thousand of capital lease liabilities effective July 1, 2023. The agreement contains a post-closing adjustment window for an agreed-upon level of Spinnaker’s working capital, as well as other usual and customary items, which we expect to finalize during the third quarter of 2023.
The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in the second quarter of 2023. As of June 30, 2023, 15,115,820 shares remained available to be repurchased. During the three months ended June 30, 2023 there were no shares repurchased in the open market primarily due to our self-imposed trading blackout pending the closing of the Spinnaker acquisition. During the first quarter of 2023 the Company repurchased 1,132,364 shares on the open market. The Company may repurchase outstanding common shares periodically based on market conditions and our capital allocation strategies considering restrictions under our credit facility. The stock buyback program does not have a predetermined expiration date.
On July 25, 2023, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable September 11, 2023 to common stockholders of record at the close of business on August 10, 2023. The Company expects to continue to pay cash dividends to common stockholders, subject to industry conditions and RPC’s earnings, financial condition, and other relevant factors.
INFLATION
The Company purchases its equipment and materials from suppliers who provide competitive prices and employs skilled workers from competitive labor markets. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. In addition, increases in activity in the domestic oilfield can cause upward wage pressures in the labor markets from which it hires employees, especially if employment in the general economy increases. Also, activity increases can cause supply disruptions and higher costs of certain materials and key equipment components used to provide services to the Company’s customers. In recent years, the price of labor and raw materials increased due to higher oilfield activity and labor shortages caused by the departure of skilled labor from the domestic oilfield industry in prior years. These cost increases moderated in the second quarter of 2023 but remain high by historical standards.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any material off balance sheet arrangements.
RELATED PARTY TRANSACTIONS
Marine Products Corporation
In conjunction with the spin-off of its former power boat manufacturing segment conducted through Chaparral Boats, Inc., RPC and Marine Products Corporation (Marine Products) entered into various agreements that define the companies’ relationship. RPC charged Marine Products for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products Corporation totaling $526 thousand for the six months ended June 30, 2023 and $473 thousand for the comparable period in 2022.
As part of the termination of the Retirement income plan, The Company paid $482 thousand to Marine Products, during the second quarter of 2023, to reimburse funds paid using Marine Product’s assets in the Plan to settle its participant liabilities.
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Other
The Company periodically purchases, in the ordinary course of business, products or services from suppliers that are owned by officers or significant stockholders of, or affiliated with the directors of RPC. The total amounts paid to these affiliated parties were $1.1 million for the six months ended June 30, 2023 and $740 thousand for the six months ended June 30, 2022.
RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. Gary W. Rollins is Chairman, and which is controlled by Mr. Rollins and his affiliates). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on three months’ notice. The services covered by these agreements include selected administrative services for certain employee benefit programs, and other administrative services. Charges to the Company (or to corporations which are subsidiaries of the Company) for such services and rent aggregated $3 thousand for the six months ended June 30, 2023 and $52 thousand for the six months ended June 30, 2022.
RPC and Marine Products own 50 percent each of a limited liability company called 255 RC, LLC that was created for the joint purchase and ownership of a corporate aircraft. RPC recorded certain net operating costs comprised of rent and an allocable share of fixed costs of $100 thousand for each of the six months ended June 30, 2023 and June 30, 2022.
CRITICAL ACCOUNTING POLICIES
The discussion of Critical Accounting Policies is incorporated herein by reference from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022. There have been no significant changes in the critical accounting policies since year-end.
IMPACT OF RECENT ACCOUNTING STANDARDS
See Note 2 of the Notes to Consolidated Financial Statements for a description of recent accounting standards, including the expected dates of adoption and estimated effects on results of operations and financial condition.
SEASONALITY
Oil and natural gas prices affect demand throughout the oil and natural gas industry, including the demand for the Company’s products and services. The Company’s business depends in large part on the economic conditions of the oil and gas industry, and specifically on the capital expenditures of its customers related to the exploration and production of oil and natural gas. There is a positive correlation between these expenditures and customers’ demand for the Company’s services. As such, when these expenditures fluctuate, customers’ demand for the Company’s services fluctuates as well. These fluctuations depend on the current and projected prices of oil and natural gas and resulting drilling activity, and are not seasonal to any material degree.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that are not historical facts are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include, without limitation, statements that relate to our business strategy, plans and objectives, and our beliefs and expectations regarding future demand for our equipment and services and other events and conditions that may influence the oilfield services market and our performance in the future. Forward-looking statements made elsewhere in this report include, without limitation, statements regarding: our ability to continue to monitor factors that impact current and expected customer activity levels, such as the prices of oil and natural gas, changes in pricing for our services and equipment, and utilization of our equipment and personnel; the effect of geopolitical factors such as political instability in the petroleum-producing regions of the world, the actions of the OPEC oil cartel, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities on our financial results; our strategy of utilizing equipment in unconventional basins; our expectation that capital expenditures will be $200 million to $250 million during 2023 and our expectation that such expenditures will be directed primarily towards capitalized maintenance of our existing equipment and selected growth opportunities; our plans to continue to pursue international growth opportunities; our belief that international revenues will continue to be less than ten percent of our consolidated revenues in the foreseeable future; our belief that current and projected prices of oil, natural gas and natural gas liquids are important catalysts for U.S. domestic drilling activity; our belief that oil and gas price increases motivate our customers to maintain drilling and completion activities; our belief that the favorable long-term outlook for natural gas provided by the U.S. oil and gas industry is sufficient to encourage our customers to maintain their natural gas-directed exploration and production activities; our belief that oil-directed drilling will remain the majority of domestic drilling and that
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natural gas-directed drilling will remain a low percentage of U.S. domestic drilling in the near-term; our belief that natural gas-directed drilling will increase in the future because of favorable long-term market dynamics and our belief that this projected higher demand should drive increased activity in most of the basins in which we operate; our plans to continue to monitor the market for our services and the competitive environment and related impact on our equipment fleets; our belief that the growing efficiency with which oilfield completion crews are providing services is a catalyst for the oversupplied nature of the oilfield services market; our belief that most of the feasible efficiency gains have been realized and that a number of our smaller competitors have ceased operations; our belief that the competitive market for our services improved during 2022 and early 2023 and will continue to improve during the near term; our plans to remain highly disciplined for about adding new incremental revenue-producing equipment capacity and to expand only when we believe the projected financial returns of such capital expenditures meet our financial return criteria; our plans to allocate capital to maintain the capacity of our pressure pumping fleet to offset anticipated fleet requirements; our plans to refurbish an existing fleet that will be activated in 2023 and our expectations regarding the delivery of a pressure pumping fleet in the second half of 2023; the strength of our financial condition; our plans with respect to our stock buyback program; our belief that the liquidity provided by our existing cash and cash equivalents and our overall strong capitalization will provide sufficient liquidity to meet our requirements for at least the next twelve months; our belief that we will not need our revolving credit facility to meet our liquidity requirements; our expectations to continue to pay cash dividends to common stockholders, subject to industry conditions and RPC earnings, financial condition and other relevant factors; estimates made with respect to our critical accounting policies; the effect of new accounting standards; the effect of the changes in foreign exchange rates on our consolidated results of operations or financial condition; and the impact of lawsuits, legal proceedings and claims on our financial position and results of operation.
The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “focus,” “plan,” and similar expressions generally identify forward-looking statements. Such statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. 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. Risk factors that could cause such future events not to occur as expected include the following: the volatility of oil and natural gas prices; our concentration of customers in the energy industry and periodic downturns; our business depends on capital spending by our customers, many of whom rely on outside financing to fund their operations; dependence on our key personnel; our ability to identify or complete acquisitions; our ability to attract and retain skilled workers; some of our equipment and several types of materials used in providing our services are available from a limited number of suppliers; whether outside financing is available or favorable to us; increasing expectations from customers, investors and other stakeholders regarding our environmental, social and governance practices; our compliance with regulations and environmental laws; the combined impact of the OPEC disputes and the COVID-19 pandemic on our operating results; possible 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 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; the Company’s ability to implement price increases; the potential impact of possible future regulations on hydraulic fracturing on our business; risks of international operations; reliance on large customers; our operations rely on digital systems and processes that are subject to cyber-attacks or other threats; and our cash and cash equivalents are held primarily at a single financial institution. Additional discussion of factors that could cause actual results to differ from management’s projections, forecasts, estimates and expectations is contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in this 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk exposure through borrowings on its credit facility. As of June 30, 2023, there were no outstanding interest-bearing advances on our credit facility, which bear interest at a floating rate.
Additionally, the Company is exposed to market risk resulting from changes in foreign exchange rates. However, since the majority of the Company’s transactions occur in U.S. currency, this risk is not expected to have a material effect on its consolidated results of operations or financial condition.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures – The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its
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management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, June 30, 2023 (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the Evaluation Date.
Changes in internal control over financial reporting – Management’s evaluation of the effectiveness of the design and operation of its disclosure controls and procedures described above did not identify any changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
RPC is involved in litigation from time to time in the ordinary course of its business. RPC does not believe that the outcome of such litigation will have a material adverse effect on the financial position or results of operations of RPC.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
| |||||||||
Period |
| Total Number of Shares (or Units) Purchased | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) | ||||
April 1, 2023 to April 30, 2023 |
| 306 | (2) | $ | 7.39 | — | 15,115,820 | ||
May 1, 2023 to May 31, 2023 |
| — | — |
| — | 15,115,820 | |||
June 1, 2023 to June 30, 2023 |
| — |
| — |
| — | 15,115,820 | ||
Total |
| 306 | $ | 7.39 |
| — | 15,115,820 |
(1) | The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in the second quarter of 2023. As of June 30, 2023, 15,115,820 shares remained available to be repurchased. During the three months ended June 30, 2023 there were no shares purchased in the open market. |
(2) | Represent shares repurchased by the Company in connection with taxes related to vesting of certain restricted shares. |
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended June 30, 2023, no director or officer, as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, of the
ITEM 6. EXHIBITS
Exhibit |
| Description |
3.1(a) | ||
3.1(b) | ||
3.1(c) | ||
3.2 | ||
4 | ||
10.25* | ||
31.1 | ||
31.2 | ||
32.1 | Section 906 certifications for Chief Executive Officer and Chief Financial Officer. | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
104 * | Cover Page Interactive Data File (formatted as Inline XBRL) Portions of this Exhibit have been omitted pursuant to Item 601(a)(6) of Regulation S-K |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RPC, INC. | ||
/s/ Ben M. Palmer | ||
Date: July 28, 2023 | Ben M. Palmer | |
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Michael L. Schmit | ||
Date: July 28, 2023 | Michael L. Schmit | |
Vice President, Chief Financial Officer and Corporate Secretary | ||
(Principal Financial and Accounting Officer) |
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EXHIBIT 10.25EXECUTION VERSION
CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT PURSUANT TO ITEM 601(a)(6) OF REGULATION S-K BECAUSE DISCLOSURE OF SUCH INFORMATION WOULD CONSTITUTE A CLEARLY UNWARRANTED INVASION OF PERSONAL PRIVACY. OMISSIONS ARE IDENTIFIED AS [***].
MERGER AGREEMENT
by and among
CUDD PUMPING SERVICES, INC.,
RPC 123, LLC,
SPINNAKER OILWELL SERVICES LLC, and
CATAPULT ENERGY SERVICES GROUP, LLC
(in its capacity as the Members’ Representative and Paying Agent hereunder)
Dated as of June 30, 2023
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TABLE OF CONTENTS
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SCHEDULES
Schedule 1.1-PLPermitted Liens
Schedule 1.7(b)Paid-Off Closing Debt; Transaction Expenses
Schedule 1.9(a)(vii)Resignations
Schedule 1.9(a)(xiv)Third-Party Consents, Notices and Approvals
Schedule 1.10Settlement Statement Methodology; Pro Rata Percentages
Schedule 1.11(b)Allocation Principles
Schedule 2.1Organizational Status; Authorization
Schedule 2.2(a)No Conflicts (Company)
Schedule 2.2(b)Consents and Approvals (Company)
Schedule 2.3(a)Capitalization
Schedule 2.3(b)Agreements with Respect to the Membership Interests
Schedule 2.3(c)Subsidiaries
Schedule 2.4Financial Statements
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Schedule 2.5Absence of Undisclosed Liabilities
Schedule 2.6(a)Facilities
Schedule 2.6(b)Real Property Leases
Schedule 2.6(c)Personal Property Leases
Schedule 2.7Material Contracts
Schedule 2.8(a)Employee Benefit Plans
Schedule 2.8(j)Transaction Bonuses
Schedule 2.9(a)Company’s Intellectual Property
Schedule 2.9(c)Customized Software
Schedule 2.10(a)(i)Compliance with Required Governmental Authorizations
Schedule 2.10(a)(ii)Required Governmental Authorizations
Schedule 2.10(b)Compliance with Laws
Schedule 2.11Litigation
Schedule 2.12Taxes
Schedule 2.13Absence of Certain Changes
Schedule 2.14Environmental Matters
Schedule 2.15(a)(i)Company Employees
Schedule 2.15(a)(ii)Company Individual Service Providers
Schedule 2.15(a)(iii)Compliance with Laws Relating to Labor
Schedule 2.15(e)Severance Arrangements
Schedule 2.15(g)Work Authorization
Schedule 2.16Brokers (Company)
Schedule 2.17Insurance
Schedule 2.18Title, Condition and Sufficiency of Assets
Schedule 2.19Banking Facilities; Powers of Attorney
Schedule 2.20(a)Accounts Receivable
Schedule 2.20(b)Accounts Payable
Schedule 2.20(c) Inventory
Schedule 2.21Rebates
Schedule 2.22Material Customers and Suppliers
Schedule 2.23Affiliate Transactions
Schedule 3.2(a)No Conflicts (Members)
Schedule 3.2(b)Consents and Approvals (Members)
Schedule 4.2No Conflicts; Consents and Approvals
Schedule 4.6Brokers (Parent)
Schedule 5.7(a)Accrued Bonuses
Schedule 9.3Affiliate Services
EXHIBITS
Exhibit ADefinitions
Exhibit BForm of Transmittal Letter
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this “Agreement”), dated as of June 30, 2023 (the “Closing Date”), is entered into by and among Cudd Pumping Services, Inc., a Delaware corporation (“Parent”), RPC 123, LLC, a Delaware limited liability company (“Merger Sub”), Spinnaker Oilwell Services LLC, a Delaware limited liability company (the “Company”), and Catapult Energy Services Group, LLC, a Delaware limited liability company, solely in its capacity as the Members’ representative as set forth in forth in Section 10.17 (“Members’ Representative”) and in its capacity as Paying Agent. Each of the foregoing is referred to herein as a “Party” and collectively are referred to as the “Parties.”
RECITALS
WHEREAS, Parent has formed Merger Sub solely for the purpose of merging it with and into the Company, as more specifically set forth below, with the Company continuing as the surviving limited liability company and as a wholly-owned subsidiary of Parent (the “Merger”);
WHEREAS, Parent desires to acquire the Company, which is engaged in the business of oil and gas cementing services in Texas, New Mexico, Oklahoma, Kansas and Arkansas (the “Business”), through the Merger;
WHEREAS, the board of managers and the Members of the Company holding at least a majority of the Company Membership Interests have (i) approved this Agreement and declared that it is advisable to enter into this Agreement providing for the merger of the Merger Sub with and into the Company, with the Company as the surviving entity, in accordance with the Delaware Limited Liability Company Act (as amended, the “Act”), upon the terms and subject to the conditions set forth herein and; (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, in accordance with the Act, upon the terms and conditions contained herein;
WHEREAS, the Members of the Company holding at least a majority of the Company Membership Interests have executed and delivered to the Company letters of transmittal with respect to the membership interests of the Company held thereby, in the form of Exhibit B attached hereto (the “Transmittal Letters”);
WHEREAS, the requisite number of directors of Parent and the sole member of Merger Sub have (i) approved this Agreement and declared that it is advisable and in the best interests of Parent to enter into this Agreement providing for the merger of the Merger Sub with and into the Company, with the Company as the surviving entity, in accordance with the Act, upon the terms and subject to the conditions set forth herein and (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, in accordance with the Act, upon the terms and conditions contained herein;
WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated by this Agreement; and
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WHEREAS, capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in Exhibit A attached hereto.
AGREEMENT
NOW, THEREFORE, in consideration of these recitals and the respective representations, warranties and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:
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Member, as contemplated by this Section 1.6, such Member’s Company Membership Interests shall be deemed at any time after the Closing to represent only the right to receive the amounts determined pursuant to this Section 1.6 and Section 5.12, if any, subject to the delivery of the Transmittal Letter. If a Member delivers to the Paying Agent a Transmittal Letter after the Closing, the Paying Agent shall promptly, but no later than five (5) days after its receipt of the Transmittal Letter, provide a copy of such executed Transmittal Letter to Parent in accordance with the notice provisions in Section 10.5; provided, that for purposes of this sentence, notice may be provided solely by electronic mail. Any portion of the amount paid to the Paying Agent pursuant to this Agreement that remains unclaimed by any Member one (1) year after the Closing shall, to the extent permitted by applicable Law, be returned to Parent, and any Member who has not submitted a Transmittal Letter to receive its applicable consideration prior to such time shall thereafter look only to Parent for payment thereof without any interest thereon (subject to abandoned property, escheat or similar Laws). Notwithstanding any provision of this Agreement to the contrary, neither Parent, the Surviving Company, the Paying Agent nor the Members’ Representative shall be liable to any Member in respect of any Company Membership Interest or monetary obligation derived therefrom that has been delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.
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Transaction Expenses, to the accounts designated on the Funds Flow Memorandum;
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The Company represents and warrants to Parent and Merger Sub that the statements contained in this Article II with respect to the Company are true and correct as of the date hereof, except as set forth in the Disclosure Schedules.
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Notwithstanding anything to the contrary herein, (x) this Section 2.12, Section 2.13(o), and, to the extent expressly referencing the Code, Section 2.8 (collectively, the “Tax Reps”) constitute the sole and exclusive representations of the Company regarding any and all Tax matters, including the compliance with Tax-related Laws, the payment (or nonpayment) of any Taxes and the filing (or non-filing) of any Tax Returns, and (y) neither the Company nor any Member is making any, and none of the Tax Reps or any representations or warranties of Article III are to be considered or interpreted as, representations or warranties (1) regarding the availability, amount or accuracy of any Tax benefit or asset for any taxable period (or portion thereof) beginning after the Closing or (2) as to any taxable period(s) or portion(s) thereof beginning after the Closing.
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Notwithstanding any of the representations and warranties contained elsewhere in this Agreement, all liabilities or obligations arising under Environmental Laws or relating to Environmental Liabilities, Hazardous Substances, or any other environmental matter shall be governed exclusively by this Section 2.14.
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Each Member, severally and not jointly and severally, represents and warrants to Parent and Merger Sub that the statements contained in this Article III with respect to such Member are true and correct as of the date hereof , except as set forth in the Disclosure Schedules.
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Parent represents and warrants to the Company and to the Members, that the statements contained in this Article IV with respect to Merger Sub and Parent, as applicable, are true and correct as of the date hereof.
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(b) if sent by reputable overnight air courier (such as DHL or Federal Express), one (1) Business Day after mailing; (c) if sent by electronic mail so long as also given by another means permitted hereby, when transmitted and receipt is confirmed in writing by the recipient; or (d) if otherwise actually personally delivered, when delivered, and shall be delivered as follows:
If to the Company (prior to Closing) or Members’ Representative:
Catapult Energy Services Group, LLC
3050 Post Oak Blvd., Suite 650
Houston, TX 77056
E-mail: [***]
Attention: [***]
With a copy (which shall not constitute notice) to:
Locke Lord LLP
600 Travis, Suite 2800
Houston, Texas 77002
E-mail: MTiras@lockelord.com
Attention: Mitch Tiras
and
NGP Energy Capital
2850 N. Harwood Street, 19th Floor
Dallas, Texas 75201
E-mail: [***]
Attention: [***]
If to Parent, Merger Sub, or the Surviving Company:
Cudd Pumping Services, Inc.
c/o RPC, Inc.
2801 Buford Highway NE, Suite 300
Atlanta, Georgia 30329
Email: [***]
Attention: [***]
With a copy (which shall not constitute notice) to:
Arnall Golden Gregory LLP
171 17th Street, NW, Suite 2100
Atlanta, Georgia 30363
E-mail: sean.fogarty@agg.com
Attention: Sean P. Fogarty, Esq.
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or to such other address or to such other Person as any Party hereto has last designated by written notice to the other parties.
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With respect to all such matters, all of the Members will be bound by the actions taken by the Members’ Representative. The Members’ Representative may resign at any time, and may be removed for any reason or no reason by the vote or written consent of a majority in interest of the Members according to each Member’s Pro Rata Percentage (the “Majority Holders”). In the event of the death, incapacity, resignation or removal of Members’ Representative, a new Members’ Representative shall be appointed by the vote or written consent of the Majority Holders. Notice of such vote or a copy of the written consent appointing such new Members’ Representative shall be sent to Parent, such appointment to be effective upon the later of the date indicated in such consent or the date such notice is received by Parent.
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(Signatures appear on following pages.)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Closing.
PARENT:
CUDD PUMPING SERVICES, INC.
By:
Name:
Title:
MERGER SUB:
RPC 123, LLC
By:
Name:
Title:
[Signature Page to Merger Agreement]
4855-0363-3265.v2
COMPANY:
SPINNAKER OILWELL SERVICES LLC
By:
Name:
Title:
MEMBERS’ REPRESENTATIVE
and
PAYING AGENT:
CATAPULT ENERGY SERVICES GROUP, LLC
By:
Name:
Title:
[Signature Page to Merger Agreement]
4855-0363-3265.v2
EXHIBIT A
DEFINITIONS
“Accounts Receivable” means: (a) all trade accounts receivable and other rights to payment from customers of the Company and the full benefit of all security for such accounts or debts, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers; (b) all other accounts or notes receivable and the full benefit of all security for such accounts or notes; and (c) any claims, remedies and other rights related to any of the foregoing.
“Affiliate” means, with respect to any specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. For purposes of this definition, “control” (including the correlative terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting equity interest, by contract or otherwise.
“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010, and other applicable Laws concerning or relating to bribery or corruption.
“Assets and Properties” of any Person means all assets and/or properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including, without limitation, cash, cash equivalents, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, Inventory, goods and Intellectual Property.
“Business Day” means any day other than Saturday, Sunday or any day on which banks located in Houston, Texas are authorized to be closed for the conduct of regular banking business.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136) and any administrative or other guidance published with respect thereto by any Governmental Authority applicable to the Company.
“Catapult” means Catapult Energy Services Group, LLC, a Delaware limited liability company.
“Charter Documents” means, with respect to any Entity at any time, in each case as amended, modified and supplemented at that time, (i) the articles or certificate of formation, incorporation or organization (or the equivalent organizational documents) of that Entity, (ii) the bylaws, regulations or limited liability company agreement or regulations (or the equivalent governing documents) of that Entity and (iii) each document setting forth the designation, amount and relative rights, limitations and preferences of any class or series of that Entity’s capital stock or of any rights in respect of that Entity’s capital stock.
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“Closing Cash” means the aggregate cash and cash equivalents of the Company as of the Closing, as determined in accordance with GAAP.
“Closing Date Merger Consideration” shall mean (i) the Base Price, (ii) plus the amount of the Estimated Closing Cash, (iii) minus the amount of the Estimated Closing Debt, and (iv) minus the amount of the Estimated Transaction Expenses.
“Closing Debt” means the difference between (i) Indebtedness of the Company as of the Closing, minus (ii) the Prepaid Capital Lease Payments.
“Code” means the Internal Revenue Code of 1986, as amended.
“Comerica Letters of Credit” means (i) that certain Letter of Credit No. OSB20037T, dated October 13, 2021, as amended, and (ii) that certain Letter of Credit No. OSB22126T, dated September 30, 2022, as amended, each issued by Comerica Bank in favor of Zurich American Insurance Company.
“Company Capital Leases” means that certain Master Equipment Lease Agreement No. 21647, dated October 11, 2018, as may be amended from time to time, and that certain Master Equipment Lease Agreement No. 32077, dated as of September 16, 2019, by and between Liberty Commercial Finance LLC and the Company, as supplemented by that certain Equipment Schedule No. 1, dated September 18, 2019, by and between Liberty Commercial Finance LLC and the Company.
“Company Data” means the Company’s proprietary, confidential data, including customer data and Personal Data held by the Company.
“Company Fundamental Representation” means, with respect to the Company, those representations and warranties in Section 2.1 (Organizational Status; Authorization), Section 2.2(a)(i) (No Conflicts; Consent and Approvals), Section 2.3 (Capitalization of the Company) and Section 2.16 (Brokers).
“Company Guarantees” means those guaranties, letters of credit, bonds, sureties and other forms of credit support or assurances provided by any Member or any of their respective Affiliates in support of obligations of the Company or with respect to the Business.
“Confidential Information” means, with respect to any Person, all trade secrets, know-how and other confidential, nonpublic or proprietary information of that Person, including any such information derived from reports, investigations, research, studies, work in progress, codes, marketing, sales or service programs, customer lists, records relating to past service provided to customers, capital expenditure projects, cost summaries, equipment or production system designs or drawings, pricing formulae, contract analyses, financial information, projections, present and future business plans, agreements with vendors, joint venture agreements, confidential filings with any Governmental Authority and all other confidential, nonpublic concepts, methods, techniques or processes of doing business, ideas, materials or information prepared or performed for, by or on behalf of that Person.
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“Contract” means, any written or oral agreement, contracts, binding arrangements, bonds, notes, indentures, mortgages, debt instruments, licenses, franchises, leases and other instruments of any kind, including any amendments and other modifications thereto.
“COVID-19” means the infectious disease known as coronavirus disease 2019, or COVID-19, caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), and any evolutions thereof or related or associated epidemics, pandemics or disease outbreaks.
“COVID-19 Legal Requirement” shall mean the CARES Act, the Families Coronavirus Response Act of 2020, any U.S. presidential memorandum or executive order, or any other Legal Requirement intended to address the consequences of COVID-19 and applicable to the Company.
“COVID-19 Measures” means any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shut down, closure, sequester, safety or similar law promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19 and applicable to the Company, including any COVID-19 Legal Requirement.
“COVID-19 Subsidy Benefit” means any subsidy, loan, rebate or abatement of taxes, or deferral of taxes or Social Security payments (to the extent not quantified at Closing and included in the definition of Indebtedness) issued or granted by any Governmental Authority to the Company pursuant to any economic relief program or law enacted as a result of the COVID-19 pandemic anywhere in the world, including the Paycheck Protection Program administered by the U.S. Small Business Administration and the CARES Act.
“Data Security Requirements” means, collectively, all of the following to the extent relating to the access, collection, use, import, export, processing, storage, sharing, distribution, transfer, disclosure, security, destruction, or disposal of any Personal Data (whether in electronic or any other form or medium) or otherwise relating to personal information data protection, privacy, security, or security breach notification requirements and to the extent applicable to the Company, to the conduct of the Business, or to any of the Information Systems or any Company Data: (i) the Company’s own rules, policies, and procedures; (ii) all applicable Laws, including to the extent applicable HIPAA Part 2, and state medical privacy laws; (iii) industry standards applicable to the industry in which the Business operates; and (iv) Contracts into which the Company has entered or by which the Company is otherwise bound.
“Disclosure Schedules” means the disclosure schedules delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement.
“Employee Benefit Plan” shall mean (i) any “employee welfare benefit plan” or “employee pension benefit plan” as defined in Sections 3(1) and 3(2) of ERISA, respectively, whether or not subject to ERISA, including, but not limited to, a plan that provides retirement income or results in deferrals of income by employees for periods extending to their terminations of employment or beyond, and a plan that provides medical, surgical or hospital care benefits or benefits in the event of sickness, accident, disability, death or unemployment, and (ii) any other benefit plan, agreement, policy, program or arrangement, including without limitation, any deferred compensation, profit
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sharing, incentive, bonus, stock option, stock purchase, stock or stock-based award, phantom equity, golden parachute , retention, severance pay, indemnity, change in control, dependent care assistance, Code Section 125 cafeteria, employee assistance, scholarship, employment, consulting, vacation, sick pay or paid time off (PTO), fringe benefit, or other similar benefit plan, agreement, policy, program or arrangement, whether or not reduced to writing and whether funded or unfunded.
“Entity” means any sole proprietorship, corporation, partnership of any kind having a separate legal status, limited liability company, business trust, unincorporated organization or association, mutual company, joint stock company or joint venture.
“Environmental Laws” means any applicable international, federal, state, or local law, rules, regulations, codes, ordinances, decrees, and orders and principles of Common Law relating to, governing, or regulating pollution, protection of human health and the environment, or exposure to Hazardous Substances, including, without limitation, any of the foregoing relating to the use, generation, transport, treatment, storage, release, or disposal of any Hazardous Substance or laws relating to emissions, discharges or releases of any Hazardous Substance into air, surface water, groundwater or land.
“Environmental Liabilities” means any loss, liability (including STRICT LIABILITY), claim, damage, expense, or cost relating to any fines, penalties, damages, remediation costs, natural resource damages, or any environmental response obligation arising from or under any Environmental Laws or any Environmental Permits.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any Person that is treated as a single employer together with the Company under Section 414 of the Code.
“Escrow Agent” means U.S. Bank National Association, a national banking association.
“Escrow Agreement” means that certain Escrow Agreement, dated of even date herewith, by and among the Parent, Members’ Representative and Escrow Agent.
“Escrow Amount” means an amount equal to the sum of the Merger Consideration Escrow Amount and the Indemnity Escrow Amount.
“Exempted Losses” means Indemnity Losses for which Parent Indemnified Parties are entitled to indemnification from the Members as contemplated by this Agreement due to (a) any breach of, or inaccuracy in, any Fundamental Representations, (b) any breach of, or inaccuracy in, any representation or warranty (other than the Fundamental Representations) to the extent of (and in the amount up to) Fundamental Payout Amounts, and (c) claims based on Fraud.
“Export Control Laws” means the Arms Export Control Act, International Traffic in Arms Regulations, Export Administration Regulations and Laws administered and implemented by the Office of Foreign Assets Control (“OFAC”), Foreign Trade Regulations, and any other U.S. or
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foreign Law related to the exportation or importation of supplies or services, including any export or import declaration filing and payment of customs duties.
“Family Member” means, with respect to any natural Person, (a) such Person’s spouse, (b) any children or siblings of such Person or such Person’s spouse and (c) any other natural Person who resides with such Person.
“Final Closing Date Balance Sheet” means the final consolidated balance sheet of the Company as of the Closing Date, as determined pursuant to Section 1.10(b)(ii) or 1.10(b)(iii).
“Final Working Capital Negative Adjustment” means the amount by which the Final Working Capital is less than $10,000,000.00.
“Final Working Capital Positive Adjustment” means the amount by which the Final Working Capital is greater than $10,500,000.00.
“Fraud” means an intentional and willful misrepresentation by a Party with respect to the making of any representation or warranty expressly contained herein; provided, the Party making such representation or warranty had actual knowledge that the applicable representation or warranty (as qualified by the Disclosure Schedules, if applicable) was false at the time it was made, it was made with the intention that the other Party rely thereon to its detriment and the other Party did so rely thereon to its detriment. For the avoidance of doubt, “Fraud” does not include (a) constructive fraud, statutory fraud, equitable fraud, negligent misrepresentation or omission or promissory fraud or (b) any fraud based on constructive knowledge, negligent misrepresentation or recklessness.
“Fundamental Payout Amounts” means with respect to any Indemnity Losses, to the extent that the coverage limit under the R&W Policy is exceeded, the amount of Indemnity Losses that would have been paid from the R&W Policy if not for the amounts previously paid under the R&W Policy for Fundamental Representations.
“Fundamental Representations” means the Company Fundamental Representations and the Member Fundamental Representations.
“Funds Flow Memorandum” means that certain Funds Flow Memorandum, dated as of the Closing Date, by and among Parent, Merger Sub, Members’ Representative and the Company, which shall include the Estimated Settlement Statement.
“GAAP” means the prevailing generally accepted accounting principles in the United States, in effect from time to time.
“Governmental Authority” means any federal, state, local or foreign judicial, legislative, executive or regulatory authority or agency.
“Governmental Authorizations” means approvals, licenses, permits, consents, authorizations, qualifications, orders and certificates from Governmental Authorities necessary to conduct the Business and own and operate the assets of the Business.
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“Hazardous Substance” means any pollutant, contaminant, chemical, waste, material or substance that (i) is defined as toxic or hazardous by, or otherwise regulated or restricted under any Environmental Law because of its actual or potential adverse effects upon health or the environment, or (ii) that causes or may cause injury to persons, property, human health, or the environment and subjects the Company to an Environmental Liability. “Hazardous Substances” specifically includes but is not limited to: (i) petroleum and petroleum products, including crude oil and any fractions thereof; (ii) natural gas, synthetic gas, and any mixtures thereof; (iii) polychlorinated biphenyls; (iv) asbestos or asbestos-containing materials; and (v) (to the extent regulated under Environmental Laws) per- and polyfluoroalkyl substances, a/k/a “PFAS”.
“Indebtedness” of any Person means any obligations of such Person (a) for borrowed money (whether by loan or the issuance and sale of debt securities or otherwise), (b) evidenced by notes, bonds, indentures or similar instruments, (c) for the deferred purchase price of goods and services (other than trade payables incurred in the Ordinary Course of Business) and all deferred purchase price obligations related to past acquisitions, whether contingent or otherwise (including any “earn-out” or similar payments or obligations at the maximum amount payable in respect thereof), (d) obligations (contingent or otherwise) in respect of any credit agreement, letters of credit or similar instruments issued or accepted by banks and other financial institutions (other than the Comerica Letters of Credit), (e) all deferred revenue and collections in excess of earnings, (f) to the extent not included as a Transaction Expense or in the calculation of Final Working Capital, all employee obligations related to deferred compensation, pensions, retention agreements, transaction bonus agreements, phantom stock obligations or any similar types of payments (other than base salaries payable), including, without limitation, severance, bonus or change of control payments, including the employer portion of any payroll Taxes associated with these payments, (g) under capital leases, but, for the avoidance of doubt, excluding all ground leases and operating leases and determined without regard to the implementation of ASC 842, and (h) in the nature of guarantees of the obligations described in clauses (a) through (g) above of any other Person, and (i) any interest, principal, breakage costs, prepayment or other premiums, penalties and other fees, costs and expenses associated with prepayment or redemption or tender for any of the foregoing; provided, that Indebtedness shall not include any (x) accounts payable to trade creditors, purchase commitments incurred in the Ordinary Course of Business, or accrued expenses and deferred revenues, in each case to the extent included as Working Capital Liabilities in the calculation of Final Working Capital, or (y) Taxes other than as expressly set forth above in clause (f) of this definition, which amount shall not be less than zero for any jurisdiction.
“Indemnified Taxes” means (i) any Taxes (or the non-payment thereof) imposed on or with respect to the Company with respect to any Pre-Closing Tax Period (determined with respect to a Straddle Period in accordance with Section 9.1(a)), including any payroll taxes deferred by the Company pursuant to the CARES Act or other similar Executive Order, state, or local Law, (ii) any payments for Taxes required by the Company to be made after the Closing Date pursuant to a Tax sharing, Tax indemnity, Tax allocation or similar contracts (whether or not written) to which the Company was obligated, or was a party, on or prior to the Closing Date (and, in each case, as in effect prior to the Closing), other than any payments for Taxes pursuant to a Non-TSA except to the extent such payment was required to have been paid prior to the Closing and was not so paid in breach of such Non-TSA, (iii) any and all Taxes of any Person imposed on the Company as a transferee or successor or pursuant to any Law, rule or regulation, in each case, which Taxes relate
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to an event or transaction occurring on or prior to the Closing, (iv) all Taxes of any Member for a Pre-Closing Tax Period to the extent not arising from a breach by Parent (or any of its Affiliates) of any representation, warranty or covenant in any Transaction Document, and (v) all Taxes for which the Members are responsible pursuant to Section 9.1(d); provided, however, notwithstanding anything to the contrary herein, Indemnified Taxes will not include any Tax that is (x) taken into account in the determination of Indebtedness, Transaction Expense or Working Capital (y) otherwise withheld or deducted pursuant to Section 1.14 or (z) (i) due or payable for a tax period other than for a Pre-Closing Tax Period or (ii) arises on the Closing Date but after the Closing.
“Indemnity Escrow Amount” means an amount equal to $278,250.
“Indemnity Loss” means any damages, losses, liabilities, claims, Lien, penalties, costs, expenses, duties, deficiencies, demands, Proceedings, assessments and Taxes (including costs of investigation and defense and reasonable attorneys’ fees and expenses); provided, that (i) with respect to claims arising under Sections 8.1(a)(i), 8.1(a)(ii) and 8.1(b)(i) other than for a breach of a Fundamental Representation, Indemnity Losses shall not include any punitive or exemplary damages or any criminal fines or penalties, except to the extent (a) insurable under the applicable law of any Most Favorable Jurisdiction (as defined in the R&W Policy) and (b) awarded or assessed against the Insureds (as defined in the R&W Policy) in connection with a Third Party Claim (as defined in the R&W Policy) pursuant to (1) a final settlement consented to in writing by the Insurer or (2) a final (x) order of a government or regulatory agency, (y) judgment of a court of competent jurisdiction or (z) award of an arbitrator, arbitration panel or similar adjudicative body; provided that the Defense Costs (as defined in the R&W Policy) or Prosecution Costs (as defined in the R&W Policy) relating to the foregoing shall constitute Indemnity Loss, and (ii) other than for the claims set forth in clause (i), Indemnity Losses shall not include any Non-Reimbursable Damages.
“Independent Accounting Firm” means Deloitte.
“Information Systems” means the internal or third-party information and reporting systems of the Company (whether owned, licensed, leased or otherwise) that are used in its Business or operations, including computer hardware systems, Software and embedded systems.
“Intellectual Property” means all intellectual property, whether arising or protected under the laws of the United States or any other jurisdiction or treaty, including, without limitation: (a) Trademarks; (b) all patents (including certificates of invention, industrial rights and other patent equivalents), provisional, non-provisional, divisional, continuation, continuation in-part and reissue applications and patents issuing therefrom, any revivals, renewals, extensions, inventions and discoveries that may be patentable (collectively, “Patents”); (c) all registered and unregistered copyrights in both published works and unpublished works and applications for registration, all moral rights and all rights to register and obtain renewals and extensions of registrations; (d) all know-how, trade secrets, concepts, processes, customer lists, technical information and other confidential or proprietary information (collectively, “Trade Secrets”); (e) all user guides, manuals, instructions, forms, layouts, programmer notes or logs, source code annotations, designs, plans, drawings, process technology, plans, blue prints, documentation or materials that relate to
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any aspect of the Intellectual Property, whether in tangible, electronic or other intangible form; (f) all rights in internet web sites, FTP sites and internet domain names used, including all associated scripts, information, text, graphics and other content relating to the websites or FTP site and all derivative works thereof; (g) all versions of all software (including software programs, objects, modules, routines, algorithms and code, in source code, object code and executable form), machine readable databases and compilations, data structures and all data and collections of data and all derivative works of any such software (collectively, “Software”); and (h) all rights in mask works and similar rights protecting circuits and chip topographies and layouts.
“Inventory” or “Inventories” means all inventories of the Company, wherever located, including all finished goods, work in process, raw materials, spare parts, replacement parts and all other materials, supplies to be used or consumed by the Company in the operation of the Business.
“Knowledge of Catapult,” or any phrase of similar import means the actual knowledge of Gregory D. Laake, after making reasonable investigation of such Personnel of the Company who, in light of the role of the Person in the Company, would reasonably be expected to know the subject matter of the applicable representations and warranties.
“Knowledge of the Company,” or any phrase of similar import means the actual knowledge of Mark Crowder and Samantha Zamarripa, after making reasonable investigation of such Personnel of the Company who, in light of the role of the Person in the Company, would reasonably be expected to know the subject matter of the applicable representations and warranties.
“Latest Balance Sheet” means the unaudited balance sheet of the Company as of the Latest Balance Sheet Date.
“Laws” means all laws, statutes, rules, regulations, ordinances, policy, order, decree, consent decree, governmental requirement and other pronouncements in effect on the date of this Agreement having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental Authority.
“Comerica Letters of Credit” means (i) that certain Letter of Credit No. OSB20037T, dated October 13, 2021, as amended, and (ii) that certain Letter of Credit No. OSB22126T, dated September 30, 2022, as amended, each issued by Comerica Bank in favor of Zurich American Insurance Company.
“Liens” means any liens (statutory or other), mortgages, pledges, security interests, charges, claims, options, easements, rights of way (other than easements of record) and other encumbrances of any kind or nature whatsoever, including those encumbrances set forth on any schedule hereto.
“Material Adverse Effect” means change, effect, fact, event, circumstance or occurrence, including any change affecting the business, customer, employee or Governmental Authority relations of the Company, which individually or in the aggregate with any one or more other changes, effects, facts, event, circumstances or occurrences has had or may reasonably be expected to have a material and adverse effect on, or a material adverse change in, as the case may be, the
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assets, financial position, or results of operations of the Company, taken as a whole; provided, however, that none of the following shall be deemed to constitute a Material Adverse Effect: (a) any adverse change, event, development or effect arising from or relating to (1) the execution, performance or public announcement of this Agreement or the transactions contemplated by this Agreement, (2) general business or economic conditions, including such conditions related to the Business and the concrete and aggregates industries (including changes in commodity prices, general market prices and regulatory changes affecting such industry generally), (3) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war or the occurrence of any military or terrorist attack upon the United States or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (4) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index) and any fluctuations in interest, currency, or exchange rates, (5) changes in GAAP or any Law or industry standard, (6) the failure of the Company to meet, with respect to any period or periods, any internal or industry analyst, projections, forecasts, estimates of earnings or revenues, or business plans, (7) acts of God, earthquakes, hurricanes, tornados, any weather-related or other force majeure event or natural disasters, (8) crises affecting public health, safety or welfare, including any epidemic, pandemic, or disease outbreak (including the COVID-19 virus), public health emergencies, including the continuation, escalation or worsening of such conditions; (9) actions required to be taken under applicable Laws (including in compliance with Laws resulting from or relating to COVID-19 or other disease, virus, or outbreak) or Contracts; or (10) matters that arise from any actions or omissions of Parent, Merger Sub and their Affiliates; provided, however, that in the case of each of the foregoing clauses (2) through (5) and (7) through (10), any change, effect, fact, event, circumstance or occurrence may be taken into account in determining whether a Material Adverse Effect has occurred to the extent that such change, effect, fact, event, circumstance or occurrence has a disproportionate impact on the Company relative to other businesses participating in the industries in which the Company conducts its business, or (b) any action or omission of the Company or Members’ Representative or any of their respective Affiliates taken with the written consent or waiver of Parent.
“Member Fundamental Representation” means, with respect to any Member, those representations and warranties in Section 3.1 (Organizational Status; Authorization) and Section 3.2(a) (No Conflicts; Consent and Approvals).
“Members” means, collectively, the holders of Company Membership Interests.
“Merger Consideration Escrow Amount” means an amount equal to $1,000,000.00.
“Non-Reimbursable Damages” means special, punitive, exemplary, incidental, consequential or indirect damages (including any damages on account of diminution in value, lost profits or opportunities, or lost or delayed business based on valuation methodologies ascribing a decrease in value to the company member, on the basis of a multiple of a reduction in a multiple based or yield-based measure of financial performance), whether based on contract, tort, strict liability, other law or otherwise and whether or not arising from the other party’s or any of its affiliates’ or representatives’ sole, joint or concurrent negligence, strict liability or other fault;
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provided, that (i) any amounts payable to a third party pursuant to a Third-Party Claim awarded by a court of competent jurisdiction and (ii) any damages that are the reasonably foreseeable result of the underlying breach will not be deemed Non-Reimbursable Damages.
“Ordinary Course of Business” means, with respect to the Company, the ordinary and usual course of normal day-to-day operations of the business of the Company consistent with past custom and practice; provided, that in no event shall any breach of Law or Contract or violation of any Governmental Authorization be considered ordinary or usual course of normal day-to-day operations of the business of the Company.
“Paid-Off Closing Debt” means the Closing Debt set forth on Schedule 1.7(b), which will be paid off at Closing in accordance with Section 1.7(b)(i); provided, that, for purposes of calculating any per diem owed under such Paid-Off Closing Debt, Paid-Off Closing Debt will be calculated as of payoff in accordance with Section 1.7(b)(i) and not as of the Balance Sheet Time.
“Pass-Through Tax Return” means any Tax Return (such as an IRS Form 1065 and associated IRS Schedules K-1 and corresponding, and local and non-U.S. Tax Returns) of the Company with respect to which the Company is treated as a flow-through or fiscally transparent entity for purposes of such Tax Return, i.e., where items of any income, gain, losses, deductions or other Tax items of the Company reflected on such Tax Returns are allocated to, and intended to be reflected on the Tax Return(s) of, as applicable, the Company’s direct or indirect members, partners or equity owners (which shall include for this purpose any “composite,” non-resident partner withholding, or similar Tax Return and including any and all Tax Returns and elections relating to any “pass through entity” tax or similar regime). By way of example and without limitation, Tax Returns primarily concerning property Taxes, sales and use Taxes, payroll Taxes, and withholding Taxes (other than any such withholding Taxes associated with a “composite,” a non-resident partner withholding or similar Tax Return) are not Pass-Through Tax Returns.
“Payoff Letters” means pay-off letters from the holders of Paid-Off Closing Debt of the Company indicating the amounts necessary to be paid at Closing in order to repay in full all amounts owed with respect thereto, and, if such Paid-Off Closing Debt is secured, an undertaking or allowance by such holder to discharge in connection with the Closing any Lien securing such Paid-Off Closing Debt.
“Permitted Encumbrances” means (a) restrictions on any sale, assignment or transfer of securities under applicable securities Laws, (b) restrictions on any sale, assignment or transfer of the Company Membership Interests or other equity interests of the Company set forth in the Charter Documents of the Company, and (c) any Liens created by or through Parent or any of its respective Affiliates.
“Permitted Liens” means (a) statutory Liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings, (b) mechanics’, carriers’, workers’, repairers’ and similar statutory Liens arising or incurred in the Ordinary Course of Business, (c) public roads and highways, (d) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation, (e) Liens and other rights reserved by or in favor of (i) any landlord or lessor under a Real Property
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Lease or (ii) any grantor under the instrument creating or vesting title in and to any Real Property, (f) other Liens arising in the Ordinary Course of Business and not incurred in connection with the incurrence of Indebtedness, (g) Liens created by Parent or its Affiliates, (h) Liens imposed by Law with respect to obligations not yet delinquent, (i) with respect to the Real Property, (i) zoning, entitlement, building and other land use regulations imposed by Governmental Authorities having jurisdiction over the Real Property, (ii) covenants, conditions, restrictions, easements and other similar matters that would be disclosed by an inspection or accurate survey of any parcel of Real Property; provided, that the same, individually and in the aggregate, do not impair in any material respect the occupancy, use or operation of any Real Property for purpose of the ownership or operation of the Business, (iii) all matters, both general and specific, that are disclosed (whether or not subsequently deleted or endorsed over) in any title policies insuring Real Property or any commitments therefor that have been made available to Parent or Merger Sub or obtained by or on behalf of Parent or Merger Sub, (iv) any easement, encroachment, restriction, right-of-way and any other defect, whether or not of record; provided, that the same, individually and in the aggregate, do not impair in any material respect the occupancy, use or operation of any Real Property for purposes of the ownership or operation of the Business, (v) permits, licenses, surface leases, sub-surface leases, grazing rights, logging rights, ponds, lakes, waterways, canals, ditches, reservoirs, equipment, pipelines, utility lines, railways, streets, roads and structures; provided, that the same, individually and in the aggregate, do not impair in any material respect the occupancy, use or operation of any Real Property for purposes of the ownership or operation of the Business, and (vi) preferential rights to purchase and similar contractual provisions and consents to or approval of or waivers respecting assignments and similar agreements, (j) Liens that shall be released, waived or otherwise terminated in connection with the Closing, and (k) those matters identified on Schedule 1.1-PL.
“Person” means any natural person, firm, partnership, association, corporation, company, trust, business trust, Governmental Authority or other such entity.
“Personal Data” means (a) a natural person’s name, street address, telephone number, email address, passport number, credit card number, bank information, or account number, and (b) any other piece of non-publicly available information that allows the identification of such natural person.
“Personnel” means any director, manager, officer, employee, consultant, agent of such Person.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.
“Prepaid Capital Lease Payments” means all deposits paid pursuant to the terms of the equipment schedules to the Master Equipment Lease Agreement No. 21647, dated October 11, 2018, as may be amended from time to time.
“Proceeding” means an action, arbitration, audit, hearing, litigation or suit (whether civil, criminal or administrative) commenced, brought, conducted or heard by or before any Governmental Authority or arbitrator.
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“Representatives” means with respect to any Person, its Affiliates and its and their respective officers, directors, managers, employees, counsel, accountants, financial advisers, consultants or agents.
“Retention” has the meaning set forth in the R&W Policy.
“R&W Policy” means that certain Representations and Warranties Insurance Policy, dated as of the Closing Date and issued by Travelers Excess and Surplus Lines Company to Parent.
“Securities Act” means the Securities Act of 1933, as amended.
“Subsidiary” or “Subsidiaries” shall mean, when used with reference to an entity, any other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions, or a majority of the outstanding voting securities of which, are owned directly or indirectly by such entity.
“Tax Return” means all returns and reports (including declarations, disclosures, schedules and information returns), including any amendments thereof, required to be supplied to a Tax authority relating to Taxes.
“Taxes” means all federal, state, local and foreign taxes, including without limitation, income taxes, capital gains taxes, intangible taxes, gross receipts tax, ad valorem taxes, estimated taxes, value-added taxes, windfall profits taxes, franchise taxes, withholding taxes, payroll and employment taxes, unemployment insurance taxes, social security taxes, sales and use taxes, excise taxes, real and personal property taxes, stamp taxes, transfer taxes and workers’ compensation taxes, alternative or add-on minimum taxes, and other similar taxes of any kind such as highway use, fuel or customs duties, in all cases together with all interest, penalties and additions payable with respect thereto.
“Taxing Authority” means any Governmental Authority that imposes, administers, collects or regulates Taxes in any applicable jurisdiction.
“Trademark” means all trade names, trademarks, service marks, trade dress, brand names, designs, jingles, slogans, logos, or corporate names, whether registered or unregistered, and all registrations and applications thereof (including, in each case, the goodwill associated therewith).
“Transaction Documents” means this Agreement, the Escrow Agreement, the Transition Services Agreement, the Restrictive Covenants Agreements, the Funds Flow Memorandum and any other agreement, certificate or similar document to be executed and/or delivered pursuant to this Agreement and the transactions contemplated herein.
“Transaction Expenses” means (a) all investment banking fees, costs and expenses and legal fees, costs and expenses incurred by the Members or the Company in connection with the preparation for, negotiation or consummation of the transactions contemplated by this Agreement and the other Transaction Documents, (b) 50% of all premiums, fees, costs and expenses payable at or prior to the Closing with respect to or otherwise in connection with the binding and issuance of the R&W Policy; (c) 50% of the Escrow Agent’s fee with respect to the Escrow Agreement; (d)
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all amounts payable to Catapult, its Subsidiaries, NGP X US Holdings, L.P. or NGP Energy Technology Partners II, L.P. pursuant to the Advisory Services Agreement or otherwise; and (e) any transaction, retention, or change in control bonus, or severance payments in connection with the transactions contemplated by this Agreement, or similar compensatory amounts payable to any employees or service providers of the Company that become payable by the Company pursuant to an agreement with the Company, any Member or any of their respective Affiliates (other than Parent) in whole or in part as a result of or in combination with the consummation of the transactions contemplated hereby (including, in each case, the employer’s share of any Tax withholding and any gross-up or similar payments for another Person’s Taxes required to be paid in connection therewith).
“Transaction Tax Deduction” means, any item of Tax deduction available (on a “more likely than not” or greater reporting basis) under applicable Law relating to or arising (in whole or in part) from (i) any Transaction Expenses (including for this purpose any amount that would be a Transaction Expense), (ii) any unamortized fees, deferred financing costs, or other amounts deductible as a result of the payment of or otherwise with respect to the Closing Debt, (iii) any expenses or fees paid prior to the Closing, and (iv) liabilities and similar items included in the Final Working Capital determination; provided, as and to the extent relevant, the parties agree that an election under Revenue Procedure 2011-29 will be made to apply the 70% safe harbor to any “success based fee” as defined in Treasury Regulation Section 1.263(a)-5(f) that are included as Transaction Tax Deductions.
“Unpaid Closing Taxes” means any unpaid Taxes of the Company (in each case) that have an original due date (i.e., are first due) on or after the Closing Date but which are due and payable for solely a Pre-Closing Tax Period; provided, that for purposes of determining such unpaid Taxes (i) such amounts shall be determined by following the past practices used by the Company for determining its tax payment and filing obligations; (ii) all Transaction Tax Deductions shall be allocable to taxable periods (or portions thereof in the case of Straddle Periods) ending on or prior to the Closing Date and taken into account; (iii) all available Tax credits, overpayments, and estimated payments shall be taken into account as outstanding and accrued assets and offsets to Tax liabilities; (iv) any Taxes for a Straddle Period shall be determined in accordance with Section 9.1(a); (v) any and all amounts of deferred income and/or deferred Taxes shall be excluded from such determinations and (vi) in all events, any Transfer Taxes and any Taxes arising on the Closing Date from events occurring, or income, gains or profits accruing or arising, after the Closing will be excluded from any such determination.
“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any similar state or local Law.
“Working Capital” means, as of the Closing Date, an amount (which may be positive or negative) equal to the total book value of the current assets of the Company minus the Working Capital Liabilities, determined in accordance with the policies, practices and methods set forth on Schedule 1.10; provided, however, that current assets shall not include (i) any Closing Cash, (ii) any Prepaid Capital Lease Payments or (iii) any deferred Tax assets.
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“Working Capital Liabilities” means the current liabilities of the Company, determined in accordance with the policies, practices and methods set forth on Schedule 1.10; provided, however, that Working Capital Liabilities shall not include (i) any Indebtedness, (ii) any Taxes other than Unpaid Closing Taxes, (iii) any payments by Parent pursuant to this Agreement, or (iv) any Transaction Expenses.
In addition to the terms set forth above, the following terms shall have the meanings assigned to them in the provisions of this Agreement shown in the table below:
Defined Term | Location in Agreement |
Act | Recitals |
Affiliate Transaction | Section 2.23 |
Agreement | Preamble |
Allocation Principles | Section 1.11(b) |
Balance Sheet Time | Section 1.10(a) |
Base Price | Section 1.7(a) |
Books and Records | Section 9.2(b)(i) |
Business | Recitals |
Catapult Confidential Information | Section 5.10 |
Certificate of Merger | Section 1.1 |
Claimant | Section 8.4 |
Closing | Section 1.8 |
Closing Amount | Section 1.7(b)(iv) |
Closing Date | Preamble |
Company | Preamble |
Company Benefit Plan | Section 2.8(a) |
Company Employees | Section 2.15(a) |
Company Indemnified Party | Section 5.5(a) |
Company’s Intellectual Property | Section 2.9(a) |
Company Membership Interests | Section 1.5(a) |
Continuing Employees | Section 5.7(a) |
Disagreement Notice | Section 8.5 |
Dispute Deadline | Section 1.10(b)(ii) |
Dispute Notice | Section 1.10(b)(ii) |
Due Diligence Information | Section 8.2(b)(ii) |
Effective Time | Section 1.1 |
Election Notice | Section 8.6(a) |
Environmental Permits | Section 2.14(a) |
Estimated Closing Cash | Section 1.10(a) |
Estimated Closing Date Balance Sheet | Section 1.10(a) |
Estimated Closing Debt | Section 1.10(a) |
Estimated Closing Transaction Expenses | Section 1.10(a) |
Estimated Settlement Statement | Section 1.10(a) |
Exception Claims | Section 8.6(a) |
Facilities | Section 2.6(a) |
Final Closing Cash | Section 1.10(b)(iv) |
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Final Closing Debt | Section 1.10(b)(iv) |
Final Closing Transaction Expenses | Section 1.10(b)(iv) |
Final Merger Consideration | Section 1.10(b)(iv) |
Final Working Capital | Section 1.10(b)(iv) |
Financial Statements | Section 2.4(a) |
Indemnification Cap | Section 8.8(c) |
Indemnification Deductible | Section 8.8(b) |
Indemnification Notice | Section 8.4 |
Indemnified Directors and Officers | Section 5.5(b) |
Indemnifying Party | Section 8.4 |
Indemnity Threshold | Section 8.8(a) |
Interim Financial Statements | Section 2.4(a) |
Initial Closing Date Balance Sheet | Section 1.10(b)(i) |
Initial Closing Date Cash | Section 1.10(b)(i) |
Initial Closing Date Debt | Section 1.10(b)(i) |
Initial Closing Date Items | Section 1.10(b)(i) |
Initial Closing Date Transaction Expenses | Section 1.10(b)(i) |
Initial Closing Date Working Capital | Section 1.10(b)(i) |
Latest Balance Sheet Date | Section 2.4(a) |
Leased Real Property | Section 2.6(a) |
Litigation Notice | Section 8.4 |
Majority Holders | Section 10.17(a) |
Material Contracts | Section 2.7(a) |
Material Customer | Section 2.22 |
Material Supplier | Section 2.22 |
Members Group Law Firm | Section 10.15(a) |
Member Indemnified Parties | Section 8.3 |
Members’ Representative | Preamble |
Merger | Recitals |
Merger Consideration | Section 1.7(a) |
Merger Consideration Allocation | Section 1.11(b) |
Merger Sub | Preamble |
Non-Preparing Party | Section 9.1(b) |
Non-Recourse Party | Section 10.16 |
Non-TSA | Section 2.12(g) |
Other Firm | Section 9.1(b) |
Owned Real Property | Section 2.6(a) |
Parent | Preamble |
Parent Assignee | Section 10.6 |
Parent Closing Statement | Section 1.10(b)(i) |
Parent Indemnified Parties | Section 8.1(a) |
Parent Plan | Section 5.7(b) |
Parent Prepared Return | Section 9.1(b) |
Parties | Preamble |
Party | Preamble |
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Paying Agent | Section 1.3 |
Personal Property Leases | Section 2.6(c) |
Policy | Section 2.17 |
Pre-Closing Pass-Through Tax Return | Section 9.1(b) |
Preparing Party | Section 9.1(b) |
Privileged Communications | Section 10.15(c) |
Pro Rata Percentage | Section 1.10(a) |
Property Taxes | Section 9.1(a) |
Real Property Lease | Section 2.6(b) |
Remaining Dispute Items | Section 1.10(b)(iii) |
Required Governmental Authorizations | Section 2.10(a) |
Restrictive Covenant Agreements | Section 1.9(a)(x) |
Reviewable Return | Section 9.1(b) |
Shortfall | Section 1.10(c) |
Stout | Section 1.11(b) |
Stout Valuation Report | Section 1.11(b) |
Straddle Period | Section 9.1(a) |
Surviving Company | Section 1.1 |
Surviving Company LLC Agreement | Section 1.3 |
Tail Coverage | Section 5.5(b) |
Tax Claim | Section 9.1(g) |
Tax Reps | Section 2.12 |
Tax Treatment | Section 1.11(a) |
Transition Date | Section 5.7(b) |
Transfer Taxes | Section 9.1(d) |
Third-Party Claim | Section 8.4 |
Transition Services Agreement | Section 1.9(a)(viii) |
Transmittal Letter | Recitals |
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EXHIBIT 31.1
CERTIFICATIONS
I, Ben M. Palmer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of RPC, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| /s/ Ben M. Palmer |
Date: July 28, 2023 | Ben M. Palmer |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS
I, Michael L. Schmit, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of RPC, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| /s/ Michael L. Schmit |
Date: July 28, 2023 | Michael L. Schmit |
| Vice President, Chief Financial Officer and Corporate Secretary |
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
To the best of their knowledge the undersigned hereby certify that the Quarterly Report on Form 10-Q of RPC, Inc. for the period ended June 30, 2023, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78m) and that the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of RPC, Inc.
| /s/ Ben M. Palmer |
Date: July 28, 2023 | Ben M. Palmer |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
| /s/ Michael L. Schmit |
Date: July 28, 2023 | Michael L. Schmit |
| Vice President, Chief Financial Officer and Corporate Secretary |
| (Principal Financial and Accounting Officer) |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
CONSOLIDATED BALANCE SHEETS | ||
Allowance for credit losses | $ 6,574 | $ 7,078 |
Accumulated depreciation | $ 782,144 | $ 775,334 |
Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized (in shares) | 349,000,000 | 349,000,000 |
Common stock, shares issued (in shares) | 216,408,974 | 216,609,191 |
Common stock, shares outstanding (in shares) | 216,408,974 | 216,609,191 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenues | $ 415,858 | $ 375,507 | $ 892,526 | $ 660,131 |
Cost of revenues | 265,786 | 260,917 | 571,036 | 469,754 |
Selling, general and administrative expenses | 43,604 | 35,879 | 85,801 | 72,119 |
Pension settlement charges | 911 | 18,286 | ||
Depreciation and amortization | 26,203 | 20,094 | 50,328 | 39,560 |
Gain on disposition of assets, net | (3,015) | (1,798) | (5,951) | (4,752) |
Operating income | 82,369 | 60,415 | 173,026 | 83,450 |
Interest expense | (73) | (222) | (145) | (400) |
Interest income | 2,698 | 128 | 4,553 | 143 |
Other income, net | 631 | 79 | 1,392 | 583 |
Income before income taxes | 85,625 | 60,400 | 178,826 | 83,776 |
Income tax provision | 20,612 | 13,461 | 42,289 | 21,758 |
Net income | $ 65,013 | $ 46,939 | $ 136,537 | $ 62,018 |
Earnings per share | ||||
Basic (in dollars per share) | $ 0.30 | $ 0.22 | $ 0.63 | $ 0.29 |
Diluted (in dollars per share) | $ 0.30 | $ 0.22 | $ 0.63 | $ 0.29 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 65,013 | $ 46,939 | $ 136,537 | $ 62,018 |
Other comprehensive income: | ||||
Pension adjustment and reclassification adjustment, net of taxes | 576 | 195 | 17,254 | 390 |
Foreign currency translation | 439 | 65 | 423 | 181 |
Comprehensive income | $ 66,028 | $ 47,199 | $ 154,214 | $ 62,589 |
GENERAL |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
GENERAL | |
GENERAL | 1. GENERAL The accompanying unaudited consolidated financial statements include the accounts of RPC, Inc. and its wholly-owned subsidiaries (RPC or the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These consolidated financial statements have been prepared in accordance with Accounting Standards Codification (ASC) Topic 810, “Consolidation” and Rule 3A-02(a) of Regulation S-X. In accordance with ASC Topic 810 and Rule 3A-02 (a) of Regulation S-X, the Company’s policy is to consolidate all subsidiaries and investees where it has voting control. In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023. The balance sheet at December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022. A group that includes Gary W. Rollins, Pamela R. Rollins, Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power. |
RECENT ACCOUNTING STANDARDS |
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RECENT ACCOUNTING STANDARDS | |
RECENT ACCOUNTING STANDARDS | 2. RECENT ACCOUNTING STANDARDS Recently Adopted Accounting Standards: ACCOUNTING STANDARDS UPDATE (ASU) No. 2021-08: Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: The amendments in this ASU address diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination, by adopting guidance requiring an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer would recognize and measure the acquired contract assets and contract liabilities in the same manner that they were recognized and measured in the acquiree's financial statements before the acquisition. The Company adopted these provisions in the second quarter of 2023 prospectively to future business combinations and the adoption did not have a material impact on its consolidated financial statements. |
REVENUES |
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REVENUES | 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 accompanying Consolidated Statements of Operations and therefore excluded from revenues. Nature of services: RPC provides a broad range of specialized oilfield services to independent and major oil and gas companies engaged in the exploration, production and development of oil and gas properties throughout the United States and in selected international markets. RPC manages its business as either (1) services offered on the well site with equipment and personnel (Technical Services) or (2) services and tools offered off the well site (Support Services). For more detailed information about operating segments, see Note 6. RPC contracts with its customers to provide the following services by reportable segment: Technical Services ●Includes pressure pumping, downhole tools services, coiled tubing, nitrogen, snubbing and other oilfield related services including wireline, well control, fishing, pump down services and cementing. Support Services ●Rental tools – RPC rents tools to its customers for use with onshore and offshore oil and gas well drilling, completion and workover activities. ●Other support services include oilfield pipe inspection services, pipe management and pipe storage, well control training and consulting. Our contracts with customers are generally short-term in nature and generally consist of a single performance obligation – the provision of oilfield services. Payment terms: RPC’s contracts with customers state the final terms of the sales, including the description, quantity, and price of each service to be delivered. The Company’s contracts are generally short-term in nature and in most situations, RPC provides services ahead of payment - i.e., RPC has fulfilled the performance obligation prior to submitting a customer invoice. RPC invoices the customer upon completion of the specified services and collection is generally expected between 30 to 60 days after invoicing. As the Company enters into contracts with its customers, it generally expects there to be no significant timing difference between the date the services are provided to the customer (satisfaction of the performance obligation) and the date cash consideration is received. Accordingly, there is no financing component to our arrangements with customers. Significant judgments: RPC believes the output method is a reasonable measure of progress for the satisfaction of our performance obligations, which are satisfied over time, as it provides a faithful depiction of (1) our performance toward complete satisfaction of the performance obligation under the contract and (2) the value transferred to the customer of the services performed under the contract. RPC has elected the right to invoice practical expedient for recognizing revenue related to its performance obligations. Disaggregation of revenues: See Note 6 for disaggregation of revenue by operating segment and services offered in each of them and by geographic regions. Contract balances: Contract assets representing the Company’s rights to consideration for work completed but not billed are included in accounts receivable, net in the accompanying Consolidated Balance Sheets are shown below:
Substantially all of the unbilled trade receivables disclosed were or are expected to be invoiced during the following quarter. |
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EARNINGS PER SHARE | 4. EARNINGS PER SHARE Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. Restricted shares of common stock (participating securities) outstanding and a reconciliation of weighted average shares outstanding is as follows:
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STOCK-BASED COMPENSATION | 5. 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 June 30, 2023, there were 866,487 shares available for grant. In the first quarter of 2023, the Company issued time-lapse restricted shares to certain employees that will vest ratably over a period of four years. In addition, the Company granted performance share unit awards to its executive officers and certain other employees that vest based on the achievement of pre-established financial performance targets and relative total shareholder return performance. The awards will be issued at different levels based on the performance achieved with a cliff vesting at the end of fiscal year ending 2025. The Company evaluated the portion of the award that are probable to vest and has accrued compensation expense at percent of the target award. Stock-based employee compensation expense for the three and six months ended June 30, 2023 was as follows:
The following is a summary of the changes in non-vested restricted shares for the six months ended June 30, 2023:
The total fair value of shares vested was $7.8 million during the six months ended June 30, 2023 and $2.8 million during the six months ended June 30, 2022. 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 income tax adjustment. This was a favorable adjustment of $165 thousand for the six months ended June 30, 2023 and a detrimental adjustment of $669 thousand for the six months ended June 30, 2022. The table above does not include any of the activity related to performance share unit awards since they are not currently issued or vested. |
BUSINESS SEGMENT INFORMATION |
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BUSINESS SEGMENT INFORMATION | 6. 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 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 certain 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:
The following summarizes revenues for the United States and separately for all international locations combined for the three and six months ended June 30, 2023 and 2022. 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.
The accounting policies of the reportable segments are the same as those referenced 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 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 and six months ended June 30, 2023, and 2022 are shown in the following table:
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CURRENT EXPECTED CREDIT LOSSES | 7. CURRENT EXPECTED CREDIT LOSSES The Company utilizes an expected credit loss model for valuing its accounts receivable, a financial asset measured at amortized cost. The Company is exposed to credit losses primarily from providing oilfield services. The Company’s expected allowance for credit losses 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 estimated 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 allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of 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 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:
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Inventories | 8. INVENTORIES Inventories consist of (i) raw materials and supplies that are consumed providing services to the Company’s customers, (ii) spare parts for equipment used in providing these services and (iii) components and attachments for manufactured equipment used in providing services. In the table below, spare parts and components are included as part of raw materials and supplies; tools that are assembled using components are reported as finished goods. Inventories are recorded at the lower of cost or net realizable value. Cost is determined using first-in, first-out method or the weighted average cost method.
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COMMITMENTS AND CONTINGENCIES |
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COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 9. COMMITMENTS AND CONTINGENCIES Sales and Use Taxes - The Company has ongoing sales and use tax audits in various jurisdictions and may be subjected to varying interpretations of statute that could result in unfavorable outcomes. In accordance with ASC 450-20, Loss Contingencies, any probable and reasonable estimate of assessment costs have been included in Accrued state, local and other taxes. The Company has received a state tax notification of audit results related to sales and use tax and with its outside legal counsel has evaluated the perceived merits of this tax assessment. The Company believes the likelihood of a material loss related to this contingency is remote and cannot be reasonably estimated at this time. Therefore, no loss has been recorded and the Company currently does not believe the resolution of this claim will have a material impact on its consolidated financial position, results of operations or cash flows.
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PENSION AND RETIREMENT PLANS LIABILITIES | 10. PENSION AND RETIREMENT PLANS LIABILITIES The following represents the net periodic benefit cost and related components of the Company’s multiemployer Retirement Income Plan (Plan), a trusteed defined benefit pension plan:
During the second quarter of 2023, as part of the termination of the Plan, the Company transferred approximately $1.2 million to a government agency for participants that were not included in the first quarter transfer of liabilities to a commercial annuity provider. The Company made a total cash contribution to the plan of $5.4 million during the six months ended June 30, 2023. As part of this transfer, the Company recognized a pre-tax, non-cash settlement charge of $911 thousand in the second quarter of 2023, which represents the accelerated recognition of actuarial losses. In addition, the Company paid $482 thousand to Marine Products, during the second quarter of 2023, to reimburse funds paid using Marine Product’s assets in the Plan to settle its participant liabilities. The Company did not contribute to this Plan during the six months ended June 30, 2022. The Company permits selected highly compensated employees to defer a portion of their compensation into the non-qualified Supplemental Retirement Plan (SERP). The Company maintains certain securities primarily in mutual funds and company-owned life insurance policies as a funding source to satisfy the obligation of the SERP that have been classified as trading and are stated at fair value totaling $25.4 million as of June 30, 2023 and $24.2 million as of December 31, 2022. Trading gains related to the SERP assets totaled approximately $808 thousand during the three months ended June 30, 2023, compared to trading losses of approximately $2.6 million during the three months ended June 30, 2022. Trading gains related to the SERP assets totaled approximately $1.2 million during the six months ended June 30, 2023, compared to trading losses of approximately $4.1 million during the six months ended June 30, 2022. The SERP assets are reported in non-current Other assets in the accompanying Consolidated Balance Sheets and changes in the fair value of these assets are reported in the accompanying Consolidated Statements of Operations as compensation cost in Selling, general and administrative expenses. The SERP liabilities include participant deferrals, net of distributions, and are stated at fair value of approximately $23.5 million as of June 30, 2023 and $23.1 million as of December 31, 2022. The SERP liabilities are reported in the accompanying Consolidated Balance Sheets in Long-term retirement plan liabilities and any change in the fair value is recorded as compensation cost within Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. Changes in the fair value of the SERP liabilities resulted in unrealized gains of approximately $872 thousand during the three months ended June 30, 2023, compared to unrealized losses of approximately $2.5 million during the three months ended June 30, 2022. Changes in the fair value of the SERP liabilities resulted in unrealized gains of approximately $1.3 million during the six months ended June 30, 2023, compared to unrealized losses of approximately $3.9 million during the six months ended June 30, 2022. |
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NOTES PAYABLE TO BANKS | 11. NOTES PAYABLE TO BANKS The Company has a revolving Credit Agreement with Bank of America and four other lenders which provides for a line of credit of up to $100.0 million, including a $35.0 million letter of credit subfacility, and a $35.0 million swingline subfacility. The 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. The Credit Agreement has a maturity date of June 22, 2027. The Credit Agreement contains three financial covenants. When RPC’s trailing four quarter EBITDA (as calculated under the Credit Agreement) is equal to or greater than $50.0 million: (i) the consolidated leverage ratio cannot exceed 2.50:1.00 and (ii) the debt service coverage ratio must be equal to or greater than 2.00:1.00; otherwise, the minimum tangible net worth must be greater than or equal to $400.0 million. As of June 30, 2023, the Company was in compliance with all covenants. Revolving loans under the amended revolving credit facility bear interest at one of the following two rates at the Company’s election:
In addition, the Company pays an annual fee ranging from 0.20% to 0.30%, 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 $3.7 million. These costs are being amortized to interest expense over the remaining term of the loan, and the remaining unamortized balance of approximately $300 thousand at June 30, 2023 is classified as part of non-current Other assets. As of June 30, 2023, RPC had no outstanding borrowings under the revolving credit facility, and letters of credit outstanding relating to self-insurance programs and contract bids totaled $16.4 million; therefore, a total of $83.6 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 costs, and interest paid on the credit facility were as follows for the periods indicated:
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INCOME TAXES |
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Jun. 30, 2023 | |
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INCOME TAXES | 12. INCOME TAXES The Company generally 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. In certain instances, the Company uses the discrete method when it believes the actual year-to-date effective rate provides a more reliable estimate of its income tax rate for the period. The estimated 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 June 30, 2023, the effective rate reflects a provision of 24.1 percent compared to a provision of 22.3 percent for the comparable period in the prior year. For the six months ended June 30, 2023, the effective rate reflects a provision of 23.6 percent compared to a provision of 26.0 percent for the comparable period in the prior year. The decrease in the comparative effective tax rate year to date is primarily due to favorable discrete items.
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FAIR VALUE DISCLOSURES |
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FAIR VALUE DISCLOSURES | 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 – Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use. The following table summarizes the valuation of financial instruments measured at fair value on a recurring basis in the balance sheets as of June 30, 2023 and December 31, 2022:
The Company determines the fair value of equity securities that have a readily determinable fair value through quoted market prices. The total fair value is the final closing price, as defined by the exchange in which the asset is actively traded, on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs. Marketable securities comprised of the SERP assets, are recorded primarily at their net cash surrender values, calculated using their net asset values, which approximates fair value, as provided by the issuing insurance or investment company. Significant observable inputs, in addition to quoted market prices, were used to value the equity securities. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods. For the quarter ended June 30, 2023, there were no significant transfers in or out of levels 1, 2 or 3. Under the Company’s revolving credit facility, there was no balance outstanding at June 30, 2023 and December 31, 2022. Borrowings under our revolving credit facility are typically based on the quote from the lender (level 2 inputs), which approximates fair value, and bear variable interest rates as described in Note 11. The Company is subject to interest rate risk, to the extent there are outstanding borrowings on the variable component of the interest rate. The carrying amounts of other financial instruments reported in the balance sheet for current assets and current liabilities approximate their fair values because of the short maturity of these instruments. The Company currently does not use the fair value option to measure any of its existing financial instruments and has not determined whether it will elect this option for financial instruments acquired in the future. |
ACCUMULATED OTHER COMPREHENSIVE LOSS |
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ACCUMULATED OTHER COMPREHENSIVE LOSS | 14. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive (loss) income consists of the following (in thousands):
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CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED |
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CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | 15. CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED The Company has a stock buyback program to repurchase up to 49,578,125 shares in the open market, including an additional 8,000,000 shares authorized for repurchase by the Board of Directors in the second quarter of 2023. As of June 30, 2023, 15,115,820 shares remained available to be repurchased. The program does not have a preset expiration date. Repurchases of shares of the Company’s common stock may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by the Company. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the Company's shares, general market and economic conditions, and other factors. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. Shares purchased for withholding taxes represent taxes due upon vesting of time-lapse restricted shares granted to employees. Total share repurchases for 2023 and 2022 year to date are detailed below:
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SUBSEQUENT EVENT |
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Jun. 30, 2023 | |
SUBSEQUENT EVENT. | |
SUBSEQUENT EVENT | 16. SUBSEQUENT EVENTS Acquisition of Spinnaker Oilwell Services, LLC. Effective July 1, 2023, the Company completed its acquisition of all of the outstanding equity interests in Spinnaker Oilwell Services, LLC ("Spinnaker"), pursuant to a Merger Agreement ("Merger Agreement") with Catapult Energy Services Group, LLC, as the representative of the Sellers. Spinnaker, which is headquartered in Oklahoma City, Oklahoma, is a leading provider of oilfield cementing services in the Permian and Mid-Continent basins. Spinnaker operates two facilities located in El Reno, OK and Hobbs, NM and maintains 18 full-service cementing spreads. This acquisition will significantly expand RPC's cementing business from its presence in South Texas to basins in which we currently provide other services. The purchase price was $79.5 million for 100 percent of Spinnaker’s equity. The acquisition was effective July 1, 2023 and amounts advanced as of June 30, 2023, consisted of approximately $77.0 million in cash and a $2.0 million pay-off of capital lease liabilities. Additionally, the Company assumed $518 thousand of capital lease liabilities effective July 1, 2023. The agreement contains a post-closing adjustment window for an agreed-upon level of Spinnaker’s working capital, as well as other usual and customary items, which we expect to finalize during the third quarter of 2023. Spinnaker will be included in the Technical Services Segment, post-acquisition. As of June 30, 2023, $79.0 million, representing the cash portion of the purchase price, has been recorded as Purchase of business – advance in the current assets section of the Consolidated Balance Sheets. The assumption of $518 thousand in capital lease liabilities was effective on July 1, 2023, and is therefore not reflected in the June 30, 2023 financial statements. In addition, the Company recorded $243 thousand related to representations and warranties, and directors’ and officers’ insurance in Prepaid expenses on the Consolidated Balance Sheets as of June 30, 2023. Acquisition-related transaction costs of $616 thousand were recorded during the second quarter of 2023 and are included in Selling, general and administrative expenses on the Consolidated Statements of Operations. The Company will account for this transaction as a purchase of business under the acquisition method of accounting. The required disclosures under ASC 805, "Business Combinations" will be included in the Quarterly Report on Form 10-Q for the period ended September 30, 2023. Dividends On July 25, 2023, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable September 11, 2023 to common stockholders of record at the close of business on August 10, 2023. |
RECENT ACCOUNTING STANDARDS (Policies) |
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RECENT ACCOUNTING STANDARDS | |
Recently Issued Accounting Standards Adopted and Not Yet Adopted | Recently Adopted Accounting Standards: ACCOUNTING STANDARDS UPDATE (ASU) No. 2021-08: Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers: The amendments in this ASU address diversity in practice related to the accounting for revenue contracts with customers acquired in a business combination, by adopting guidance requiring an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer would recognize and measure the acquired contract assets and contract liabilities in the same manner that they were recognized and measured in the acquiree's financial statements before the acquisition. The Company adopted these provisions in the second quarter of 2023 prospectively to future business combinations and the adoption did not have a material impact on its consolidated financial statements. |
Revenues | RPC’s contract revenues are generated principally from providing oilfield services. These services are based on mutually agreed upon pricing with the customer prior to the services being delivered and, given the nature of the services, do not include the right of return. Pricing for these services is a function of rates based on the nature of the specific job, with consideration for the extent of equipment, labor, and consumables needed for the job. RPC typically satisfies its performance obligations over time as the services are performed. RPC records revenues based on the transaction price agreed upon with its customers. Sales tax charged to customers is presented on a net basis within the accompanying Consolidated Statements of Operations and therefore excluded from revenues. |
REVENUES (Tables) |
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Schedule of contract assets included in accounts receivable |
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EARNINGS PER SHARE (Tables) |
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Schedule of reconciliation of weighted average shares outstanding |
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STOCK-BASED COMPENSATION (Tables) |
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Schedule of stock-based employee compensation expense |
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Schedule of summary of the changes in non-vested restricted shares | The following is a summary of the changes in non-vested restricted shares for the six months ended June 30, 2023:
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BUSINESS SEGMENT INFORMATION (Tables) |
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CURRENT EXPECTED CREDIT LOSSES (Tables) |
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Schedule of 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 |
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PENSION AND RETIREMENT PLANS LIABILITIES (Tables) |
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NOTES PAYABLE TO BANKS (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE TO BANKS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest incurred and paid on the credit facility, interest capitalized related to facilities and equipment under construction, and the related weighted average interest rates on long term debt |
|
FAIR VALUE DISCLOSURES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE DISCLOSURES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of valuation of financial instruments measured at fair value on a recurring basis |
|
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive (loss) income | Accumulated other comprehensive (loss) income consists of the following (in thousands):
|
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of total share repurchases |
|
GENERAL - (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Affiliated Entity | Director Group | Minimum | |
Ownership control | |
Voting power (in percent) | 50.00% |
REVENUES - Payment Terms (Details) |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Minimum | |
Revenue satisfaction period | 30 days |
Maximum | |
Revenue satisfaction period | 60 days |
REVENUES - Contract balances (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts receivable | ||
Disaggregation of revenue: | ||
Unbilled trade receivables | $ 60,139 | $ 103,498 |
EARNINGS PER SHARE - (Details) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
EARNINGS PER SHARE | ||||||
Net income available for stockholders: | $ 65,013 | $ 71,524 | $ 46,939 | $ 15,079 | $ 136,537 | $ 62,018 |
Less: Adjustments for earnings attributable to participating securities | (1,056) | (695) | (2,193) | (886) | ||
Net income used in calculating earnings per share | $ 63,957 | $ 46,244 | $ 134,344 | $ 61,132 | ||
Weighted average shares outstanding (including participating securities) | 216,398 | 216,565 | 216,762 | 216,403 | ||
Adjustment for participating securities | (3,584) | (3,206) | (3,544) | (3,090) | ||
Shares used in calculating basic earnings per share | 212,814 | 213,359 | 213,218 | 213,313 | ||
Shares used in calculating diluted earnings per share | 213,359 | 212,359 | 213,649 | 213,313 |
STOCK-BASED COMPENSATION (Details) - Stock Incentive Plans - shares |
1 Months Ended | |
---|---|---|
Apr. 30, 2014 |
Jun. 30, 2023 |
|
Stock-based compensation | ||
Stock authorized (in shares) | 8,000,000 | |
Term (in years) | 10 years | |
Available for grant (in shares) | 866,487 |
STOCK-BASED COMPENSATION - Compensation expense (Details) - Stock Incentive Plans - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share-Based Compensation Arrangement By Share-Based Payment Award [Line Items] | ||||
Pre-tax expense | $ 2,316 | $ 1,695 | $ 4,118 | $ 3,192 |
After tax expense | $ 1,744 | $ 1,279 | $ 3,126 | $ 2,409 |
STOCK-BASED COMPENSATION - Non-vested RSU's (Details) - Restricted Shares |
6 Months Ended |
---|---|
Jun. 30, 2023
$ / shares
shares
| |
Shares | |
Non-vested shares at Beginning | shares | 3,248,728 |
Granted | shares | 1,235,728 |
Vested | shares | (858,425) |
Forfeited | shares | (47,276) |
Non-vested shares at Ending | shares | 3,578,755 |
Weighted Average Grant-Date Fair Value | |
Non-vested shares at Beginning | $ / shares | $ 6.87 |
Granted | $ / shares | 9.50 |
Vested | $ / shares | 8.60 |
Forfeited | $ / shares | 8.22 |
Non-vested shares at Ending | $ / shares | $ 7.35 |
STOCK-BASED COMPENSATION - Other Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Restricted Shares | ||||
Stock-based compensation | ||||
Fair value, shares vested | $ 7,800 | $ 2,800 | ||
Tax (expense) benefits for compensation tax deductions in excess of compensation expense | $ 165 | $ (669) | ||
Time Lapse Restricted Shares 2023 | ||||
Stock-based compensation | ||||
Vesting period | 4 years | |||
Stock based compensation award, vesting percentage | 100.00% |
BUSINESS SEGMENT INFORMATION - Geographic (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Segment information: | ||||
Total revenues | $ 415,858 | $ 375,507 | $ 892,526 | $ 660,131 |
Operating Segments | ||||
Segment information: | ||||
Total revenues | 415,858 | 375,507 | 892,526 | 660,131 |
United States | ||||
Segment information: | ||||
Total revenues | 409,431 | 368,824 | 878,818 | 644,169 |
International | ||||
Segment information: | ||||
Total revenues | $ 6,427 | $ 6,683 | $ 13,708 | $ 15,962 |
BUSINESS SEGMENT INFORMATION - Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Revenues: | |||||
Revenues | $ 415,858 | $ 375,507 | $ 892,526 | $ 660,131 | |
Operating income: | |||||
Operating income | 82,369 | 60,415 | 173,026 | 83,450 | |
Pension settlement charges | (911) | (18,286) | |||
Gain on disposition of assets, net | 3,015 | 1,798 | 5,951 | 4,752 | |
Interest expense | (73) | (222) | (145) | (400) | |
Interest income | 2,698 | 128 | 4,553 | 143 | |
Other income, net | 631 | 79 | 1,392 | 583 | |
Income before income taxes | 85,625 | 60,400 | 178,826 | 83,776 | |
Depreciation and amortization | 26,203 | 20,094 | 50,328 | 39,560 | |
Capital expenditures | 104,488 | 50,578 | |||
Identifiable assets | 1,228,188 | 965,079 | 1,228,188 | 965,079 | $ 1,129,013 |
Technical Services | |||||
Revenues: | |||||
Revenues | 390,018 | 356,103 | 842,009 | 622,452 | |
Operating income: | |||||
Operating income | 77,017 | 59,827 | 180,550 | 81,638 | |
Support Services | |||||
Revenues: | |||||
Revenues | 25,840 | 19,404 | 50,517 | 37,679 | |
Operating income: | |||||
Operating income | 7,920 | 3,334 | 14,564 | 6,114 | |
Segment reconciling item | |||||
Operating income: | |||||
Corporate expenses | (4,672) | (4,544) | (9,753) | (9,054) | |
Pension settlement charges | (911) | (18,286) | |||
Gain on disposition of assets, net | 3,015 | 1,798 | 5,951 | 4,752 | |
Depreciation and amortization | 25 | 126 | |||
Capital expenditures | 1,886 | 94 | |||
Identifiable assets | 286,379 | 186,712 | 286,379 | 186,712 | |
Operating Segments | |||||
Revenues: | |||||
Revenues | 415,858 | 375,507 | 892,526 | 660,131 | |
Operating income: | |||||
Operating income | 82,369 | 60,415 | 173,026 | 83,450 | |
Income before income taxes | 85,625 | 60,400 | 178,826 | 83,776 | |
Operating Segments | Technical Services | |||||
Operating income: | |||||
Depreciation and amortization | 45,580 | 34,682 | |||
Capital expenditures | 97,317 | 43,418 | |||
Identifiable assets | 853,837 | 702,162 | 853,837 | 702,162 | |
Operating Segments | Support Services | |||||
Operating income: | |||||
Depreciation and amortization | 4,723 | 4,752 | |||
Capital expenditures | 5,285 | 7,066 | |||
Identifiable assets | $ 87,972 | $ 76,205 | $ 87,972 | $ 76,205 |
CURRENT EXPECTED CREDIT LOSSES (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Allowance for doubtful accounts rollforward | ||
Beginning balance | $ 7,078 | $ 6,765 |
Provision for current expected credit losses | 1,678 | 762 |
Write-offs | (2,300) | (1,708) |
Recoveries collected (net of expenses) | 118 | 12 |
Ending balance | $ 6,574 | $ 5,831 |
INVENTORIES (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
INVENTORIES | ||
Raw materials and supplies | $ 102,391 | $ 95,384 |
Finished goods | 1,803 | 1,723 |
Ending balance | $ 104,194 | $ 97,107 |
PENSION AND RETIREMENT PLANS LIABILITIES - Components of net periodic benefit cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Settlement loss | $ 18,286 | |||
Retirement Income Plan | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Interest cost | $ 1 | |||
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Interest Cost, Statement of Income or Comprehensive Income [Extensible Enumeration] | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. |
Amortization of net losses | $ 4 | |||
Defined Benefit Plan, Net Periodic Benefit (Cost) Credit, Amortization of Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. | Selling, General and Administrative Expenses. |
Settlement loss | $ 911 | |||
Net periodic benefit cost | $ 916 |
PENSION AND RETIREMENT PLANS LIABILITIES - Other information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2023 |
|
Defined Benefit Plan Disclosure [Line Items] | ||
Settlement loss | $ (18,286) | |
Retirement Income Plan | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Amount transferred to government agencies | $ 1,200 | |
Cash contribution | $ 5,400 | |
Settlement loss | (911) | |
Amount paid to reimburse funds | $ 482 |
PENSION AND RETIREMENT PLANS LIABILITIES - SERP (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
Defined Benefit Plan Disclosure [Line Items] | |||||
Unrealized gain/loss due to change in fair value of SERP liabilities | $ (576) | $ (195) | $ (17,254) | $ (390) | |
Non-qualified Supplemental Retirement Plan ("SERP") | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Fair value of plan assets | 25,400 | 25,400 | $ 24,200 | ||
Trading gains (losses), net | 808 | (2,600) | 1,200 | (4,100) | |
SERP Liabilities | 23,500 | 23,500 | $ 23,100 | ||
Unrealized gain/loss due to change in fair value of SERP liabilities | $ 872 | $ (2,500) | 1,300 | $ 3,900 | |
Retirement Income Plan | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Cash contribution | $ 5,400 |
NOTES PAYABLE TO BANKS - Interest incurred (Details) - Revolving credit facility - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Revolving credit facility | ||
Interest incurred | $ 61 | $ 63 |
Interest paid | $ 42 | $ 80 |
INCOME TAXES- (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
INCOME TAXES | ||||
Effective tax rate (as a percent) | 24.10% | 22.30% | 23.60% | 26.00% |
FAIR VALUE DISCLOSURES - Financial instruments measured at fair value on recurring basis (Details) - Fair value on a recurring basis - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Assets: | ||
Equity securities | $ 284 | $ 305 |
Investments measured at net asset value | 25,385 | 24,175 |
Level 1 | ||
Assets: | ||
Equity securities | 284 | 305 |
Level 2 | ||
Assets: | ||
Equity securities | 0 | 0 |
Level 3 | ||
Assets: | ||
Equity securities | $ 0 | $ 0 |
FAIR VALUE DISCLOSURES (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Revolving credit facility | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Letters of credit outstanding amount | $ 0 | $ 0 |
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
AOCI rollforward | ||
Balance | $ (19,939) | $ (20,708) |
Change during the period: | ||
Before-tax amount | 4,320 | 181 |
Tax expense | (896) | |
Pension settlement charges, net of taxes | 14,080 | |
Reclassification adjustment, net of taxes: | ||
Amortization of net loss | 173 | 390 |
Total activity for the period | 17,677 | 571 |
Balance | (2,262) | (20,137) |
Pension Adjustment | ||
AOCI rollforward | ||
Balance | (17,307) | (18,071) |
Change during the period: | ||
Before-tax amount | 3,897 | |
Tax expense | (896) | |
Pension settlement charges, net of taxes | 14,080 | |
Reclassification adjustment, net of taxes: | ||
Amortization of net loss | 173 | 390 |
Total activity for the period | 17,254 | 390 |
Balance | (53) | (17,681) |
Foreign Currency Translation | ||
AOCI rollforward | ||
Balance | (2,632) | (2,637) |
Change during the period: | ||
Before-tax amount | 423 | 181 |
Reclassification adjustment, net of taxes: | ||
Total activity for the period | 423 | 181 |
Balance | $ (2,209) | $ (2,456) |
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||
No.of shares | 1,388,673 | 157,720 |
Avg. price | $ 8.17 | $ 5.77 |
Total cost | $ 11,351,151 | $ 909,912 |
Stock buyback program | ||
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||
Stock repurchase program | 49,578,125 | |
Remaining stock repurchase program | 15,115,820 | |
Stock buyback program | Board of Directors | ||
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||
Stock repurchase program | 8,000,000 | |
Shares purchased for withholdings taxes | ||
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||
No.of shares | 256,309 | 157,720 |
Avg. price | $ 9.24 | $ 5.77 |
Total cost | $ 2,367,178 | $ 909,912 |
Open market purchases | ||
CASH PAID FOR COMMON STOCK PURCHASED AND RETIRED | ||
No.of shares | 1,132,364 | |
Avg. price | $ 7.93 | |
Total cost | $ 8,983,973 |
SUBSEQUENT EVENT (Details) $ / shares in Units, $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jul. 25, 2023
$ / shares
|
Jul. 01, 2023
USD ($)
item
facility
|
Jun. 30, 2023
USD ($)
|
|
Subsequent Event [Line Items] | |||
Cash | $ 78,982 | ||
Purchase of business - advance | 78,982 | ||
Spinnaker | |||
Subsequent Event [Line Items] | |||
Purchase of business - advance | 79,000 | ||
Amount of representations and warranties, directors and officers insurance included in prepaid expenses | 243 | ||
Acquisition-related transaction costs | $ 616 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Cash dividend payable (in dollars per share) | $ / shares | $ 0.04 | ||
Dividends payable, date to be payable | Sep. 11, 2023 | ||
Dividend payable, date declared | Aug. 10, 2023 | ||
Subsequent Event | Spinnaker | |||
Subsequent Event [Line Items] | |||
Number of facilities located | facility | 2 | ||
Number of full service cementing spreads | item | 18 | ||
Purchase price | $ 79,500 | ||
Percent of equity acquired | 100.00% | ||
Cash | $ 77,000 | ||
Payoff | 2,000 | ||
Assumption of capital lease liabilities | $ 518 |
Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Mar. 31, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Pay vs Performance Disclosure | ||||||
Net Income (Loss) | $ 65,013 | $ 71,524 | $ 46,939 | $ 15,079 | $ 136,537 | $ 62,018 |
Insider Trading Arrangements |
3 Months Ended |
---|---|
Jun. 30, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
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