RPC INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2005

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 1-8726

RPC, INC.

(exact name of registrant as specified in its charter)

Delaware	58-1550825
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2170 Piedmont Road, NE, Atlanta, Georgia 30324

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code — (404) 321-2140

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. Yes X No__

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No__

As of April 26, 2005, RPC, Inc. had 43,331,143 shares of common stock outstanding.

RPC, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
(In thousands)
(Unaudited)

	March 31,			December 31,
	2005			2004
ASSETS

Cash and cash equivalents	$	22,272		$	29,636
Accounts receivable, net		79,805			75,793
Inventories		11,565			10,587
Deferred income taxes		5,151			6,144
Income taxes receivable		286			-
Prepaid expenses and other current assets		3,462			3,638
Total current assets		122,541			125,798
Property, plant and equipment, net		117,941			114,222
Goodwill and other intangibles, net		20,509			20,183
Other assets		3,121			2,739
Total assets	$	264,112		$	262,942



LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable	$	23,804		$	23,389
Accrued payroll and related expenses		7,645			10,842
Accrued insurance expenses		3,844			3,875
Accrued state, local and other taxes		1,581			2,183
Income taxes payable		-			113
Current portion of long-term debt		2,000			2,700
Other accrued expenses		5,086			5,187
Total current liabilities		43,960			48,289
Accrued insurance expenses		6,294			6,451
Long-term debt		-			2,100
Pension liabilities		10,527			11,379
Deferred income taxes		11,467			11,945
Other long-term liabilities		1,372			1,355
Total liabilities		73,620			81,519
Common stock		4,347			4,321
Capital in excess of par value		30,842			27,326
Retained earnings		168,411			160,189
Deferred compensation		(6,335	)		(3,527	)
Accumulated other comprehensive loss		(6,773	)		(6,886	)
Total stockholders' equity		190,492			181,423
Total liabilities and stockholders' equity	$	264,112		$	262,942

The accompanying notes are an integral part of these consolidated financial statements.

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(In thousands except per share data)
(Unaudited)



	Three months ended March 31,
	2005			2004

Revenues	$	92,330		$	80,002
Cost of services rendered and goods sold		50,411			47,107
Selling, general and administrative expenses		18,406			15,126
Depreciation and amortization		9,280			8,536
Operating profit		14,233			9,233
Interest (income) expense, net		(92	)		25
Other income, net		1,896			149
Income before income taxes		16,221			9,357
Income tax provision		6,294			3,556
Net income	$	9,927		$	5,801


Earnings per share
Basic	$	0.23		$	0.14
Diluted	$	0.23		$	0.13

Dividends per share	$	0.04		$	0.02

Average shares outstanding
Basic		42,614			42,401
Diluted		44,033			43,071



The accompanying notes are an integral part of these consolidated financial statements.

RPC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(In thousands)
(Unaudited)

	Three months ended March 31,
	2005			2004
OPERATING ACTIVITIES
Net income	$	9,927		$	5,801
Noncash charges (credits) to earnings:
Depreciation, amortization and other non-cash charges		9,621			8,555
Gain on sale of property and equipment		(626	)		(65	)
Deferred income tax provision		446			1,283
(Increase) decrease in assets:
Accounts receivable		(4,012	)		(12,619	)
Income taxes receivable		(286	)		2,075
Inventories		(969	)		(781	)
Prepaid expenses and other current assets		357			182
Other non-current assets		(382	)		10
Increase (decrease) in liabilities:
Accounts payable		415			2,435
Income taxes payable		(113	)		-
Accrued payroll and related expenses		(3,197	)		(2,299	)
Pension liabilities		(852	)		(3,752	)
Accrued insurance expenses		(188	)		220
Accrued state, local and other expenses		(602	)		(599	)
Other accrued expenses		(436	)		(3	)
Other non-current liabilities		17			(113	)
Net cash provided by operating activities		9,120			330

INVESTING ACTIVITIES
Capital expenditures		(13,318	)		(8,625	)
Proceeds from sale of property and equipment		947			453
Net cash used for investing activities		(12,371	)		(8,172	)

FINANCING ACTIVITIES
Payment of dividends		(1,704	)		(859	)
Payments on debt		(2,800	)		(410	)
Cash paid for common stock purchased and retired		(73	)		(6	)
Proceeds received upon exercise of stock options		464			44
Net cash used for financing activities		(4,113	)		(1,231	)

Net decrease in cash and cash equivalents		(7,364	)		(9,073	)
Cash and cash equivalents at beginning of period		29,636			22,302
Cash and cash equivalents at end of period	$	22,272		$	13,229

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying unaudited condensed 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 generally accepted accounting principles for complete financial statements. 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 month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

The Board of Directors, at their quarterly meeting on January 25, 2005, authorized a three-for-two stock split by the issuance on March 10, 2005 of one additional common share for every two common shares held of record as of February 10, 2005. Accordingly, the par value of additional shares issued was adjusted between common stock and capital in excess of par value, and fractional shares resulting from the stock split were settled in cash. All share and per share data appearing in the consolidated financial statements and related footnotes have been retroactively adjusted for this split.

In accordance with SFAS No. 128, Earnings Per Share (“EPS”), the Company presents basic EPS and diluted EPS. Basic EPS is computed on the basis of weighted-average shares outstanding. Diluted EPS is computed on the basis of weighted-average shares outstanding plus restricted stock and common stock options outstanding during the period which, if exercised or earned, would have a dilutive effect on EPS. Basic and diluted EPS have been restated for the March 10, 2005, three-for-two stock split for all periods presented (See Note 1). A reconciliation of the number of weighted-average shares used in computing basic and diluted EPS is as follows:

	Three months ended March 31,
(In thousands except per share data amounts)	2005		2004
Net income available for stockholders (numerator for basic and diluted earnings per share):	$	9,927	$	5,801

Shares (denominator):
Weighted-average shares outstanding (denominator for basic earnings per share)		42,614		42,401
Effect of dilutive securities:
Employee stock options and restricted stock		1,419		670
Adjusted weighted average shares (denominator for diluted earnings per share)		44,033		43,071

Earnings per share:
Basic	$	0.23	$	0.14
Diluted	$	0.23	$	0.13

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs—An Amendment of ARB No. 43, Chapter 4" ("SFAS 151"). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and therefore is required to be adopted by the Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company is currently evaluating the effect that the adoption of SFAS 151 will have on its consolidated results of operations and financial condition but does not expect SFAS 151 to have a material impact.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial

statement recognition. Under SFAS 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include the modified prospective application and the modified retrospective application. Under the modified retrospective application, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The modified prospective application requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS 123R, while the modified retrospective application would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated. SFAS No. 123R states that the requirement is to adopt the provisions in the first interim or annual period beginning after June 15, 2005. However, the Securities and Exchange Commission issued a new rule that allows companies to implement Statement No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. The Company will implement the provisions of SFAS 123R in the first quarter of 2006 pursuant to this rule. The Company is currently evaluating the impact of applying the various provisions of SFAS 123R.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets—An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions" ("SFAS 153"). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for non-monetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. By focusing the exception on exchanges that lack commercial substance, SFAS 153 intends to produce financial reporting that more faithfully represents the economics of the transaction. SFAS 153 is effective for the fiscal periods beginning after June 15, 2005 with earlier application permitted for nonmonetay exchanges occurring in fiscal periods beginning after the date of issuance. The provisions are to be applied prospectively. The Company is currently evaluating the effect that the adoption of SFAS 153 will have on its consolidated results of operations and financial condition but does not expect it to have a material impact.

FASB Staff Position ("FSP") No. 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" ("FSP 109-2"), issued in December 2004, is intended to provide limited relief in the application of the indefinite reinvestment criterion due to ambiguities surrounding the implementation of the Act. The Jobs Act was enacted on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying FASB Statement No. 109. RPC is currently evaluating the impact of the repatriation provisions but does not expect it to have a material impact.

RPC accounts for its stock incentive plans using the intrinsic value method prescribed by Accounting Principles Board (”APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company has computed for pro forma disclosure purposes the value of all options granted during the three months ended March 31, 2005 and 2004 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 “Accounting for Stock-Based Compensation." If RPC had accounted for the stock incentive plans in accordance with SFAS No.123, RPC’s reported net income and net income per share would have been as follows:

	Three months ended March 31,
(In thousands)	2005			2004

Net income - as reported	$	9,927		$	5,801
Add: Stock-based employee compensation cost, included in reported net income, net of related tax effect		343			38
Deduct: Stock-based employee compensation cost, computed using the Black-Scholes option pricing model, for all awards, net of related tax effect		(512	)		(227	)
Pro forma net income	$	9,758		$	5,612

Earnings per share, as reported
Basic	$	0.23		$	0.14
Diluted	$	0.23		$	0.13

Pro forma earnings per share
Basic	$	0.23		$	0.13
Diluted	$	0.22		$	0.13

RPC’s service lines have been aggregated into two reportable oil and gas services segments — Technical Services and Support Services — because of the similarities between the financial performance and approach to managing the service lines within each of the segments, as well as the economic and business conditions impacting their business activity levels. The other business segment includes information concerning RPC’s business units that do not qualify for separate segment reporting. These business units include an interactive training software developer and an overhead crane fabricator, prior to its disposition in April 2004. Corporate includes selected administrative costs incurred by the Company.

Technical Services include RPC’s oil and gas service lines that utilize people and equipment to perform value-added completion, production and maintenance services directly to a customer’s well. These services include pressure pumping services, snubbing, coiled tubing, nitrogen pumping, well control consulting and firefighting, down-hole tools, wireline, fluid pumping, and casing installation services. These Technical Services are primarily used in the completion, production and maintenance of oil and gas wells. The principal markets for this segment include the United States, including the Gulf of Mexico, the mid-continent, southwest and Rocky Mountain regions, and international locations including primarily Africa, Canada, China, Latin America and the Middle East. Customers include major multi-national and independent oil and gas producers, and selected nationally-owned oil companies.

Support Services include RPC’s oil and gas service lines that primarily provide equipment for customer use or services to assist customer operations. The equipment and services include drill pipe and related tools, pipe handling, inspection and storage services, work platform marine vessels, and oilfield training services. The demand for these services tends to be influenced primarily by customer drilling-related activity levels. The principal markets for this segment include the United States, including the Gulf of Mexico and the mid-continent regions, and international locations, including primarily Canada, Latin America, and the Middle East. Customers include domestic operations of major multi-national and independent oil and gas producers, and selected nationally-owned oil companies. During the fourth quarter of 2004, the Company sold the marine lift boat division previously reported in this segment.

	Three months ended March 31,
	2005			2004
(in thousands)

Revenues:
Technical Services	$	77,958		$	65,486
Support Services		14,355			11,700
Other		17			2,816
Total revenues	$	92,330		$	80,002
Operating profit (loss):
Technical Services	$	14,788		$	11,150
Support Services		2,171			139
Other		(165	)		(211	)
Corporate		(2,561	)		(1,845	)
Total operating profit	$	14,233		$	9,233
Interest (income) expense, net		(92	)		25
Other income, net		1,896			149
Income before income taxes	$	16,221		$	9,357

The Company has previously filed amended federal and state tax returns for the years 1999, 2000 and 2001 to claim higher deductions for certain expenses and additional foreign tax credits representing potential tax benefits totaling up to approximately $3.5 million. These returns have been reviewed by the Internal Revenue Service and are currently being evaluated by the Joint Committee. The Company believes it has supportable positions for claiming these deductions and credits, but the amounts are subject to Joint Committee approval. Accordingly, the Company has not reflected these potential tax benefits in its financial statements. No tax benefits will be recognized in the financial statements until these gain contingencies are resolved through the eventual disposition with the respective tax authorities.

RPC, Inc. (“RPC”) 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 and Rocky Mountain regions, and 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 the level of current and expected customer activity levels, such as the price 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, overall economic conditions and weather in the United States, the prices of oil and natural gas, and our customers’ drilling and production activities.

During the first quarter of 2005, revenues increased 15.4 percent to $92.3 million compared to the same period in the prior year. The growth in revenues resulted primarily from higher capacity, increased utilization consistent with higher customer activity levels, and increased pricing for our equipment and services. International revenues for the first quarter of 2005 declined mainly due to a decrease in our Kuwait operation partially offset by increases from new business in China. We continue to focus on developing international growth opportunities; however, it is difficult to predict when contracts and projects will be initiated and their ultimate duration.

During the first quarter, earnings before income taxes increased to $16.2 million in 2005 compared to $9.4 million in the same period in the prior year. The effective tax rate for the three months ended March 31, 2005 of 38.8 percent remained relatively stable compared to the rate of 38.0 percent for the same period in 2004. Diluted earnings per share increased to $0.23 for the three months ended March 31, 2005 compared to $0.13 (adjusted for the three-for-two stock split) for the three months ended March 31, 2004. Cash flows from operating activities were $9.1 million compared to $0.3 million in the prior year, and cash and cash equivalents were $22.3 million at March 31, 2005, a decrease of $7.4 million compared to December 31, 2004. Despite improved operating results, this decrease in cash and cash equivalents resulted primarily from increased capital expenditures, payment of incentive bonuses, a 100 percent increase in dividends paid per share, repayment of a note for $2.8 million and contributions to the defined benefit pension plan. Our financial condition remains strong as our debt to capitalization remains at less than one percent as of March 31, 2005.

Consistent with our strategy to selectively grow our capacity and maintain our existing fleet of high demand equipment, capital expenditures were $13.3 million in the first quarter of 2005. The actual amount of 2005 expenditures will depend primarily on equipment maintenance requirements and expansion opportunities, although we currently expect capital expenditures to be approximately $60 million in 2005. We expect these expenditures to be primarily directed toward our larger, core service lines including pressure pumping, snubbing, nitrogen, and rental tools.

Drilling activity in the U.S. domestic oilfields, as measured by the rotary drilling rig count, has been stable or gradually increasing for several years, and the overall domestic rig count during the first quarter of 2005 was approximately 14.7 percent higher than in the comparable period in 2004. The average price of oil rose by approximately 44 percent and the average price of natural gas rose by approximately 16 percent during the quarter as well. While the overall drilling rig count has increased, drilling activity in the Gulf of Mexico remains weak, which is unfavorable because of the Company’s historical presence in this geographic market. The Company has responded to these trends by emphasizing investments in more robust domestic markets and making only selective investments in the Gulf of Mexico market. In spite of relatively stable industry conditions, the Company understands that factors influencing the industry are unpredictable. Our response to the industry's potential uncertainty is to maintain sufficient liquidity and a conservative capital structure. Based on current industry conditions and trends during the first quarter of 2005, we expect consolidated revenues for 2005 to increase as compared to 2004, although the volatility in our industry makes accurate near-term forecasts difficult.

	Three months ended March 31,
$ In thousands	2005			2004

Consolidated revenues [in thousands]	$	92,330		$	80,002
Revenues by business segment [in thousands]:
Technical	$	77,958		$	65,486
Support		14,355			11,700
Other		17			2,816

Consolidated operating profit [in thousands]	$	14,233		$	9,233
Operating profit (loss) by business segment [in thousands]:
Technical	$	14,788		$	11,150
Support		2,171			139
Other		(165	)		(211	)
Corporate	$	(2,561	)	$	(1,845	)

Percentage cost of services rendered & goods sold to revenues		55	%		59	%
Percentage selling, general & administrative expenses to revenues		20	%		19	%
Percentage depreciation and amortization expenses to revenues		10	%		11	%
Average U.S. domestic rig count		1,283			1,119
Average natural gas price (per thousand cubic feet (mcf))	$	6.55		$	5.63
Average oil price (per barrel)	$	50.43		$	35.14

Revenues for the three months ended March 31, 2005 increased 15.4 percent compared to the three months ended March 31, 2004. Domestic revenues increased 20.4 percent to $90.0 million during the first quarter of 2005 compared to the same period in the prior year due to increases in capacity, utilization and pricing. The percentage increase in our consolidated revenues was impacted by a decline in our international revenues from $5.2 to $2.3 million. Revenues declined in our Kuwait operation, although this decline was partially offset by increases from new business in China. In addition, the strength in our domestic oilfield revenues compared to the prior year was partially offset by no revenue from our domestic marine liftboat division and our non-oilfield business unit, both of which were sold subsequent to the end of the first quarter of 2004.

In addition, the average price of natural gas increased by more than 16 percent and the average price of oil increased almost 44 percent during the 2005 period as compared to the prior year. The average domestic rig count during the first quarter was 14.7 percent higher than the same period in 2004. This increase in oil and gas prices and resulting increase in drilling activity had a positive impact on our financial results. We believe that our activity levels are affected more by the price of natural gas than by the price of oil, because the majority of U.S. domestic drilling activity relates to natural gas, and many of our services are more appropriate for gas wells than oil wells.

The Technical Services segment revenues increased 19.0 percent from last year's first quarter revenues. Revenues in this segment increased compared to the prior year due to higher customer activity, capacity and pricing, particularly in pressure pumping, but also in many other service lines in this segment, offset by decreases in snubbing revenues due to declines in international revenues. The Support Services segment revenues for the quarter ended March 31, 2005 increased 22.7 percent from last year's first quarter revenues. This improvement was due to increased capacity and utilization in the rental tool service line, which is the largest within this segment, partially offset by no revenues from our marine liftboat division, which was sold during the fourth quarter of 2004. Other revenues declined primarily due to the sale of a non-oilfield business unit in April 2004. Corporate expenses increased primarily due to higher public company compliance costs.

Cost of services rendered and goods sold increased 7.0 percent due to the variable nature of many of these expenses, including higher fuel costs, maintenance and repair expenses, and materials and supplies expenses. Cost of services rendered and goods sold, as a percent of revenues, decreased from the first quarter of 2004 compared to the first quarter of 2005. This improvement is due to leveraging of fixed costs over higher revenues as a result of increased equipment and personnel utilization and improved pricing.

Selling, general and administrative expenses for the three months ended March 31, 2005 increased 21.7 percent to $18.4 million compared to $15.1 million for the three months ended March 31, 2004, and as a percent of revenues, increased slightly in the first quarter of 2005 as compared to the same period in 2004. This increase was primarily due to higher employment costs mainly as a result of an increase in number of employees and higher incentive compensation expenses consistent with higher activity levels and improved profitability. These expenses also increased due to increased public compliance costs.

Other income, net for the three months ended March 31, 2005 was $1.9 million, an increase of $1.7 million compared to $149 thousand for the three months ended March 31, 2004. The increase is due primarily to proceeds of approximately $1.3 million from a litigation settlement in the first quarter of 2005. For the three months ended March 31, 2004, other income, net primarily reflects net gains and losses related to the sale of property and operating equipment.

Interest (income) expense, net was $92 thousand of interest income for the three months ended March 31, 2005 compared to interest expense of $25 thousand for the quarter ended March 31, 2004. The increase in interest (income) expense, net resulted primarily from the reduction in outstanding debt through annual principal payments made during 2004 and the first quarter of 2005, and small increases in interest income in the current quarter compared to the prior year. RPC generates interest income from investment of its available cash primarily in highly liquid investments with original maturities of three months or less.

Cash provided by operating activities for the three months ended March 31, 2005 increased $8.8 million compared to the three months ended March 31, 2004. Cash provided by operating activities increased primarily due to a $4.1 million increase in net income, lower cash contributions to the Company’s pension plan, and a slower growth in our working capital requirements in the current quarter compared to the same period in the prior year. The major contributions to this slower growth were accounts receivable due to improved collections, partially offset by accounts payable and income taxes receivable due to the timing of payments.

The Company’s financial condition as of March 31, 2005, remains strong. We believe the liquidity provided by our existing cash and cash equivalents, our overall strong capitalization, which includes access to a $25 million credit facility with a financial institution, of which $9.9 million was available as of March 31, 2005, and cash expected to be generated from operations, will provide sufficient capital to meet our requirements for at least the next twelve months. The portion of the credit facility that is not currently available supports letters of credit relating to self-insurance programs or contract bids.

The Company’s Retirement Income Plan, a trusteed defined benefit pension plan, provides monthly benefits upon retirement at age 65 to eligible employees. In the first quarter of 2002, the Company's Board of Directors approved a resolution to cease all future retirement benefit accruals under the Retirement Income Plan effective March 31, 2002. During the first quarter of 2005, the Company contributed $1.6 million to the pension plan. The Company does not currently expect to make any additional contributions to the pension plan in 2005.

On January 25, 2005, the Board of Directors approved a 100 percent increase in the quarterly cash dividend, from $0.02 to $0.04 which was paid March 10, 2005 to shareholders of record on February 10, 2005. Based on the shares outstanding on March 31, 2005, the aggregate annual amount would be approximately $6.9 million of which $1.7 million was paid as of March 31, 2005. The Company expects to continue to pay cash dividends to the common stockholders, subject to the earnings and financial condition of the Company and other relevant factors.

In accordance with the respective purchase agreements, earnout payments to sellers of two acquired businesses may be paid on an annual basis and through interim periods ending during 2005. The Company made earnout payments of approximately $4.6 million in April 2005 related to 2004 operating results. Final earnout payments to sellers of these two acquired businesses are expected to be made in the third and fourth quarter based on the interim 2005 results ending during the second quarter of 2005.

The Company purchases its equipment and materials from suppliers who provide competitive prices. Due to the recent increases in activity in the domestic oilfield, the Company has experienced some upward wage pressures in the labor markets from which it hires employees. If inflation in the general economy increases, the Company’s costs for equipment, materials and labor could increase as well. During 2004, the price of steel, for both the commodity and for products manufactured with steel, rose dramatically due to increased worldwide demand. This affected the Company's operations through delays in scheduled deliveries of new equipment and price quotations that were only valid for a limited period of time. Steel prices remained high as of March 31, 2005. If steel prices remain high, delays in scheduled deliveries of new equipment will continue, and it is likely that the cost of the Company's new equipment will increase. These increases would result in higher capital expenditures and depreciation expense. RPC may not be able to recover such increased costs through price increases to its customers, thereby reducing the Company's future profits.

Effective February 28, 2001, the Company spun-off the business conducted through Chaparral Boats, Inc. (“Chaparral”), RPC’s former powerboat manufacturing segment. In conjunction with the spin-off, RPC and Marine Products entered into various agreements that define the companies’ relationship. A detailed discussion of the various agreements in effect is contained in the Company’s annual report on Form 10-K for the year ended December 31, 2004. During the three months ended March 31, 2005, RPC charged Marine Products for its allocable share of administrative costs incurred for services rendered on behalf of Marine Products totaling $158,000 compared to $145,000 for the comparable period in 2004.

RPC receives certain administrative services and rents office space from Rollins, Inc. (a company of which Mr. R. Randall Rollins is also Chairman). The service agreements between Rollins, Inc. and the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months notice. The services covered by these agreements include office space, administration of 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 approximately $17,000 for the three months ended March 31, 2005 and $26,000 for the three months ended March 31, 2004.

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 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. 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.

Certain statements made in this report that are not historical facts are “forward-looking statements” under Section 21E of the Securities Exchange Act of 1934 and 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, market risk exposure, adequacy of capital resources and funds, opportunity for growth, anticipated pension funding payments and capital expenditures, the impact of SFAS 151, SFAS 123R, SFAS 153 and FSP 109-2 and our beliefs and expectations regarding future demand for our products and services and other events and conditions that may influence the oilfield services market and our performance in the future.

The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” 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. We caution you that such statements are only predictions and not guarantees of future performance and that actual results, developments and business decisions may differ from those envisioned by the forward-looking statements. Risk factors that could cause such future events not to occur as expected include those described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and the following: the volatility of oil and natural gas prices, downturn in the economy leading to decreased oil and gas exploration, inability to identify or complete acquisitions, adverse weather conditions, inability to attract and retain skilled employees, personal injury or property damage claims, and the changes in the supply and demand for oil and gas.

As of March 31, 2005, cash and cash equivalents were primarily invested in overnight U.S. treasury bills and money market accounts which are highly liquid with maturities of three months or less. Management believes that, we are not subject to material interest rate risk exposure on these investments. The Company has been affected by the impact of lower interest rates on interest income from its short-term investments. This risk is managed through conservative policies to invest in high-quality obligations. Also, as of March 31, 2005, RPC had debt with a variable interest rate that exposes RPC to certain market risks; however, all outstanding debt is scheduled to mature in 2005, which mitigates interest rate risk exposure on this debt. RPC did not experience any material changes in market risk exposures or how those risks are managed during the first quarter of 2005.

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 management, including the President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, March 31, 2005 (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 the reasonable assurance level as of the Evaluation Date.

Changes in internal control over financial reporting - Management’s evaluation of changes in internal control over financial reporting 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.

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 (4)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet be Purchased Under the Plans or Programs
January 1, 2005 to January 31, 2005	254	(1)	$	16.66	-	2,491,500
February 1, 2005 to February 28, 2005	8,261	(2)		17.70	-	2,491,500
March 1, 2005 to March 31, 2005	3,992	(3)		18.16	-	2,491,500
Totals	12,507		$	17.83	-	2,491,500

Exhibit Number		Description
3.1		Restated certificate of incorporation of RPC, Inc. (incorporated herein by reference to exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1999).

3.2		Bylaws of RPC, Inc. (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed on May 5, 2005).

4		Form of Stock Certificate (incorporated herein by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 1998).

10.9		Summary of ‘at will’ compensation arrangements with the Executive Officers (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K filed on March 16, 2005).

10.10		Summary of compensation arrangements with the Directors (incorporated herein by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed on March 16, 2005).

31.1		Section 302 certification for Chief Executive Officer.

31.2		Section 302 certification for Chief Financial Officer.

32.1		Section 906 certifications for Chief Executive Officer and Chief Financial Officer.

Part I. Financial Information		Page No.
Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets - As of March 31, 2005 and December 31, 2004	3

	Consolidated Statements of Operations - For the three months ended March 31, 2005 and 2004	4

	Consolidated Statements of Cash Flows - For the three months ended March 31, 2005 and 2004	5

	Notes to Consolidated Financial Statements	6 - 12

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	13 - 21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22

Part II. Other Information
Item 1.	Legal Proceedings	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3.	Defaults upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Security Holders	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

Signatures		26

	Three months ended March 31,
(In thousands)	2005		2004

Net income as reported	$	9,927	$	5,801
Change in unrealized gain on marketable securities, net of taxes		112		(33	)
Comprehensive income	$	10,039	$	5,768

	Three months ended March 31,
(in thousands)	2005			2004

Service cost	$	-		$	-
Interest cost		436			437
Expected return on plan assets		(428	)		(361	)
Amortization of unrecognized net losses		263			230
Net periodic benefit cost	$	271		$	306

	RPC, INC.


	/s/ Richard A. Hubbell
Date: May 6, 2005	Richard A. Hubbell
	President and Chief Executive Officer
	(Principal Executive Officer)


	/s/ Ben M. Palmer
Date: May 6, 2005	Ben M. Palmer
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

	Three months ended March 31,
*(In thousands)*	2005		2004

Net cash provided by operating activities	$	9,120	$	330
Net cash used for investing activities		12,371		8,172
Net cash used for financing activities		4,113		1,231