RPC, Inc. Q1 2010 Earnings Call Transcript

RPC, Inc. Q1 2010 Earnings Call Transcript
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RPC, Inc. (RES)

Q1 2010 Earnings Call

April 28, 2010 9:00 am ET

Executives

Jim Landers - VP of Corporate Finance

Rick Hubbell - President and CEO

Ben Palmer - VP, CFO and Treasurer

Analysts

Rob Mackenzie - FBR Capital Markets

Jeff Tillery - Tudor Pickering Holt

John Tasdemir - Canaccord

Andrea Sharkey - Gabelli & Company

Brad Handler - Credit Suisse

Presentation

Operator

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Previous Statements by RES
» RPC Inc. Q4 2008 Earnings Conference Call Transcript
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» RPC Inc. Q1 2008 Earnings Call Transcript

Good morning and thank you for joining us for RPC Inc's first quarter, 2010 earnings conference call. Today’s call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present, is Jim Landers, Vice President of Corporate Finance.

At this time all participants are in a listen-only mode. Following he presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Jim Landers

Thank you and good morning. Before we begin our call today, I want to remind you that in order to talk about our Company, we are going to mention a few things that are not historical facts. Some of the statements that we've make on this call, could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, along with our 2009 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.rpc.net.

I also need to inform you that in today's earnings release and conference call, we'll be referring to EBITDA, which is a non-GAAP measure of operating performance. RPC uses EBITDA as a measure of operating performance because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility.

On our press release today and our website provide a reconciliation of EBITDA to net income, which is the nearest GAAP financial measure to EBITDA. I invite you to review that disclosure, if you are interested in seeing how it's calculated. If you have not received our press release, please call us at 404-321-2140 and we'll provide one to you immediately.

I am now going to turn the call over to our President and CEO, Rick Hubbell.

Rick Hubbell

Thanks Jim. This morning we issued our earnings press release for the quarter ended March 31, 2010. In a few minutes Ben Palmer, will discuss our financial results in more detail. At this time I would like to provide you with a few operational highlights.

During the first quarter of 2010, RPC experienced its first profitable quarter in over a year and it’s a welcome change to discuss with you today the positives occurring in our business.

RPC's success during the first quarter of 2010 was due not only to improving conditions, but also to actions by our managers during the previous 12 months. Their initiatives to right-size our business and enhance strategic relationships with key customers put RPC in a position to take advantage of the rapid absorption of industry capacity.

While pricing still remains competitive, increasing demand has provided some relief from the high discounts experienced in 2009. in response to customer add-on opportunities, we have committed to increase our pressure pumping fleet to 90,000 horsepower or approximately 30% over the next year.

With that overview, Ben Palmer our CFO will provide some financial details.

Ben Palmer

Thanks a lot Rick. . For the quarter ended March 31, revenues increased to $213.1 million, a 20.9% increase compared to the prior year. EBITDA for the first quarter was $55.2 million, a 36.2% increase compared to the same period in '09. RPC reported an operating profit for the quarter of $22.6 million compared to $8.4 million in the prior year.

Our net income was $13.4 million or $0.14 diluted earnings per share. Cost of revenues increased in the first quarter from a $110 million in the prior year to $129.6 million in the current year. The increase in cost were due to a variety of factors resulting from higher [business] activity levels including material and supplies expenses, fuel cost and maintenance and repairs expenses.

Cost of revenues for the first quarter was 60.8% of revenues compared to 62.4% in the prior year. This decrease as a percentage of revenues was due primarily to the higher revenues associated with increased utilization in unconventional basins, lower direct headcount compared to the prior year and operational leverage.

Selling, general and administrative expenses during the quarter were $27.8 million, which was approximately same as the first quarter last year. Because of our ability to leverage these fixed costs over high revenues, SG&A cost as a percentage of revenues decreased from 15.7% last year to 13.1% due to these significantly higher revenues.

Depreciation and amortization was $32.3 million and was approximately the same as last year.

Our Technical Services segment revenues increased 26.7% due to improved utilization of the entire fleet and a favorable job mix. Operating profit more than quadrupled from $6.1 million to $25 million this year. This increase was due to higher revenues and both improved utilization in pricing and operational leverage. These improvements were partially offset by increased material and supplies and deal requirements due to job mix.

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