Employee Benefit Plans

12 Months Ended

Dec. 31, 2023

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

Note 16: Employee Benefit Plans

Defined Benefit Pension Plan

The Company initiated actions to terminate the Plan in 2021 and it was fully terminated in 2023. As part of termination, the Company settled its participant liabilities in one of the following ways – (i) through a lump-sum settlement at the election of the participants; or (ii) transfer to a commercial annuity provider or a government agency. The Company funded this transfer through the liquidation of investments in the Plan assets and an additional cash contribution of $5.4 million. The Company recognized a pre-tax, non-cash settlement charge of $18.3 million during 2023, which represents the accelerated recognition of net actuarial loss that was previously recorded in accumulated other comprehensive loss (net of tax) and deferred taxes (tax effect). In addition, the Company utilized funds related to Marine Product’s plan assets to settle its participant liabilities, since it was a multiemployer Plan. See footnote titled Related Party Transactions for additional information.

The following table sets forth the funded status of the Plan and the amounts recognized in RPC’s consolidated balance sheets:

December 31,	2023		2022
(in thousands)
Accumulated benefit obligation at end of year	$	—	$	29,651
Change in projected benefit obligation:
Benefit obligation at beginning of year	$	29,651	$	41,038
Service cost		—		—
Interest cost		22		972
Actuarial (gain) loss		(3,715)		(5,258)
Benefits paid		(836)		(3,248)
Settlement		(25,122)		(3,853)
Projected benefit obligation at end of year	$	—	$	29,651
Change in Plan assets:
Fair value of Plan assets at beginning of year	$	20,041	$	35,339
Actual return on Plan assets		249		(8,197)
Employer contribution		5,454		—
Benefits paid		(836)		(3,248)
Transfer of assets		524		—
Refund related to Plan trust dissolution		(310)		—
Settlement		(25,122)		(3,853)
Fair value of Plan assets at end of year	$	—	$	20,041
Funded status at end of year	$	—	$	(9,610)

The Company used a December 31 measurement date for this qualified Plan. As of December 31, 2022, the underfunded status of the Plan was disclosed in the current liabilities section on the Consolidated Balance Sheets.   

December 31,	2023		2022
(in thousands)
Amounts (pre-tax) recognized in accumulated other comprehensive income (loss) consist of:
Net loss	$	—	$	22,476
Prior service cost (credit)		—		—
Net transition obligation (asset)		—		—
	$	—	$	22,476

The components of net periodic cost of the Retirement Income Plan are summarized as follows:

December 31,	2023		2022		2021
(in thousands)
Interest cost	$	22	$	972	$	988
Expected return on Plan assets		—		—		(1,509)
Amortization of net losses		226		1,010		808
Settlement loss		18,286		2,921		—
Net periodic benefit cost	$	18,534	$	4,903	$	287

The pre-tax amounts recognized in accumulated other comprehensive (loss) income for the years ended December 31, 2023, 2022 and 2021 are summarized as follows:

December 31,	2023		2022		2021
(in thousands)
Net (loss) gain	$	(3,964)	$	2,939	$	4,169
Amortization of net loss		(226)		(1,010)		(808)
Settlement loss		(18,286)		(2,921)		—
Amount recognized in accumulated other comprehensive (loss) income	$	(22,476)	$	(992)	$	3,361

The weighted average assumptions as of December 31 used to determine the projected benefit obligation and net benefit cost were as follows:

December 31,	2023	2022		2021
Projected Benefit Obligation:
Discount rate	(1)	(1)		(1)
Rate of compensation increase	N/A	N/A		N/A
Net Benefit Cost:
Discount rate	N/A	4.86	%	2.50	%
Expected return on Plan assets	N/A	0.0	%	4.00	%
Rate of compensation increase	N/A	N/A		N/A

(1) As of December 31, 2023, there was no liability in the plan and therefore, a discount rate does not apply. Projected benefit obligation as of December 31, 2022, and 2021 reflects proposed termination of the Plan and is calculated based on various assumptions in accordance with the Plan agreement.

There were no assets in the Plan as of December 31, 2023. The Plan’s weighted average asset allocation as of December 31, 2022, by asset category was as follows: 

	Percentage of Plan Assets
December 31,	2022
Asset Category
Cash and cash equivalents	3.7	%
Fixed income securities	96.3	%
Total	100.0	%

The following tables present our Plan assets using the fair value hierarchy as of December 31, 2022. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. See note titled Fair Value Disclosures for a brief description of the three levels under the fair value hierarchy.

Fair Value Hierarchy as of December 31, 2022:

Investments (in thousands)		Total		Level 1		Level 2
Cash and Cash Equivalents	(1)	$	740	$	740	$	—
Fixed Income Securities	(2)		19,301		—		19,301
Total Assets in the Fair Value Hierarchy		$	20,041	$	740	$	19,301
Investments measured at Net Asset Value			—
Investments at Fair Value		$	20,041

(1) Cash and cash equivalents, which are used to pay benefits and Plan administrative expenses, are held in money market funds.

(2) Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades. Subsequent to December 31, 2022 these securities were liquidated to fund the annuity purchases.

Supplemental Executive Retirement Plan (SERP)

The Company permits selected highly compensated employees to defer a portion of their compensation to the SERP. The liabilities related to these deferrals are recognized as Long-term retirement plan liabilities in the Consolidated Balance Sheets.

The SERP assets are invested primarily in company-owned life insurance (COLI) policies as a funding source to satisfy the obligations of the SERP. The assets are subject to claims by creditors, and the Company can designate them for another purpose at any time. Investments in COLI policies consisted of variable life insurance policies totaling $49.3 million as of December 31, 2023, and $45.4 million as of December 31, 2022. In the COLI policies, the Company is able to allocate the investment of the assets across a set of choices provided by the insurance underwriters, including fixed income securities and equity funds. The COLI policies are recorded at their net cash surrender values, which approximates fair value, as provided by the issuing insurance company, whose Standard & Poor’s credit rating was A+.

The Company classifies the SERP assets as trading securities as described in note 1. The fair value of these assets totaled $26.8 million as of December 31, 2023, and $24.2 million as of December 31, 2022. The SERP assets are reported in other assets on the balance sheet. The changes in the fair value of these assets, and normal insurance expenses are recorded in the consolidated statement of operations as compensation cost within selling, general and administrative expenses. Trading gains (losses) related to the SERP assets totaled $2.6 million in 2023, $(4.4 million) in 2022, and $2.6 million in 2021. The SERP liability includes participant deferrals net of distributions and is recorded on the balance sheet in long-term pension liabilities with any change in the fair value of the liabilities recorded as compensation cost within selling, general and administrative expenses in the consolidated statements of operations. Trading gains (losses) related to the SERP liability totaled $2.8 million in 2023, $(4.1 million) in 2022, and $3.1 million in 2021.

401(k) Plan

RPC sponsors a defined contribution 401(k) Plan that is available to substantially all full-time employees with more than three months of service. This Plan allows employees to make tax-deferred contributions from one to 25 percent of their annual compensation, not exceeding the permissible contribution imposed by the Internal Revenue Code. Effective January 1, 2019, the Company began making 100 percent matching contributions for each dollar $(1.00) of a participant’s contribution to the 401(k) Plan for the first three percent of his or her annual compensation and fifty cents $(0.50) for each dollar $(1.00) of a participant’s contribution to the 401(k) Plan for the next three percent of his or her annual compensation. Employees vest in the RPC contributions after two years of service. The charges to expense for the Company’s contributions to the 401(k) Plan were $11.3 million in 2023, $9.8 million in 2022, and $6.9 million in 2021.

Stock Incentive Plans

The Company has issued stock options and restricted stock to employees under stock incentive plans that were approved by stockholders. 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 allows for a wide variety of stock-based awards such as stock options and restricted stock. In recent years, we have awarded time-based restricted stock in lieu of granting stock options. We have not issued any stock options since 2003 and have no immediate plans to issue additional stock options. As of December 31, 2023, 911,997 shares were available for grant under the 2014 plan. As of December 31, 2022, 2,046,199 shares were available for grant.

The Company recognizes compensation expense for the unvested portion of awards outstanding over the remainder of the service period. The compensation cost recorded for these awards is based on their fair value at the grant date less the cost of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods to reflect actual forfeitures.

Pre-tax stock-based employee compensation expense included as part of selling, general and administrative expense was $7.9 million in 2023 $(6.1 million after tax), $6.4 million in 2022 $(4.9 million after tax) and $6.6 million in 2021 $(5.1 million after tax).

Restricted Stock

The Company has granted certain employees and directors time lapse restricted stock which vests after a stipulated number of years from the grant date in the case of employees and vests immediately for non-employee directors, depending on the terms of the issue. The time-lapse restricted shares granted to employees in 2024 will vest ratably over a period of three years; the shares granted to employees in 2023 vest ratably over a period of four years; the shares granted to employees in 2022 vest ratably over a period of five

years. Prior to 2022, the time-lapse restricted shares vested one-fifth per year beginning on the second anniversary of the grant date. Grantees receive dividends declared and retain voting rights for the granted shares. The agreement under which the restricted stock is issued provides that shares awarded may not be sold or otherwise transferred until restrictions established under the stock plans have lapsed. Upon termination of employment from RPC, with the exception of death (fully vests) or disability (partially vests based on pre-approved formula), shares with restrictions are forfeited in accordance with the plan.

The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2023:

		Weighted Average
	Shares	Grant-Date Fair Value
Non-vested shares at January 1, 2023	3,248,728	$	6.87
Granted	1,235,728		9.50
Vested	(859,485)		8.63
Forfeited	(92,786)		7.74
Non-vested shares at December 31, 2023	3,532,185	$	7.35

The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2022:

		Weighted Average
	Shares	Grant-Date Fair Value
Non-vested shares at January 1, 2022	2,619,691	$	7.89
Granted	1,254,276		6.72
Vested	(510,084)		11.86
Forfeited	(115,155)		6.29
Non-vested shares at December 31, 2022	3,248,728	$	6.87

The fair value of restricted share awards is based on the market price of the Company’s stock on the date of the grant and is amortized to compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period. The weighted average grant date fair value per share of these restricted stock awards was $9.50 for 2023, $6.72 for 2022 and $3.87 for 2021. The total fair value of shares vested was $7.8 million during 2023, $2.9 million during 2022 and $1.8 million during 2021.

The consolidated statements of cash flows reflect discrete income tax adjustments that resulted in $222,000 of beneficial impact in 2023 and $640,000 of detrimental impact in 2022 realized from tax compensation deductions and classified within operating activities as part of net income.

Other Information

As of December 31, 2023, total unrecognized compensation cost related to non-vested restricted shares was $13.8 million which is expected to be recognized over a weighted-average period of 2.8 years.