UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C.  20549
 
 
 FORM
10-Q
 
 
 Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
  For
the quarterly period ended September 30, 2008
 
 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)
 
 2801
Buford Highway, Suite 520, Atlanta, Georgia  30329
 (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 o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):
 
 Large
accelerated filer o    Accelerated
filer x   Non-accelerated
filer  o    Smaller
reporting company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes o Nox
 
 As of
October 30, 2008, RPC, Inc. had 98,114,022 shares of common stock
outstanding.
 
 
  RPC,
INC. AND SUBSIDIARIES
 
 TABLE OF
CONTENTS
 Part
      I. Financial Information
              Page
                No.Item
      1.
              Financial
      Statements (Unaudited)Consolidated
      Balance Sheets –As of September 30, 2008 and December 31,
    2007
              3Consolidated
      Statements of Operations – For the three and nine months ended September
      30, 2008 and 2007
              4Consolidated
      Statement of Stockholders’ Equity – For the nine months ended September
      30, 2008
              5Consolidated
      Statements of Cash Flows – For the nine months ended September 30, 2008
      and 2007
              6Notes
      to Consolidated Financial Statements
              7 –
      18Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              19 –
      30Item
      3.
              Quantitative
      and Qualitative Disclosures about Market Risk
              31Item
      4.
              Controls
      and Procedures
              31Part
      II.  Other InformationItem
      1.
              Legal
      Proceedings
              32Item
      1A.
              Risk
      Factors
              32Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              32Item
      3.
              Defaults
      upon Senior Securities
              33Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              33Item
      5.
              Other
      Information
              33Item
      6.
              Exhibits
              34Signatures
              35
  2
  RPC,
      INC. AND SUBSIDIARIESPART
      I.  FINANCIAL INFORMATIONITEM
      1. FINANCIAL STATEMENTSCONSOLIDATED
      BALANCE SHEETSAS
      OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007(In
      thousands)(Unaudited)September
      30,
                
                
                December
      31,2008
                
                
                2007ASSETS
                
                
                
                
                (Note
      1)Cash
      and cash equivalents
                
                $
                3,293
                
                
                $
                6,338Accounts
      receivable, net
                
                
                218,616
                
                
                
                176,154Inventories
                
                
                40,633
                
                
                
                29,602Deferred
      income taxes
                
                
                5,293
                
                
                
                3,974Income
      taxes receivable
                
                
                17,842
                
                
                
                12,296Prepaid
      expenses and other current assets
                
                
                4,063
                
                
                
                6,696Total
      current assets
                
                
                289,740
                
                
                
                235,060Property,
      plant and equipment, net
                
                
                477,479
                
                
                
                433,126Goodwill
                
                
                24,093
                
                
                
                24,093Other
      assets
                
                
                9,743
                
                
                
                8,736Total
      assets
                
                $
                801,055
                
                
                $
                701,015LIABILITIES
      AND STOCKHOLDERS' EQUITYAccounts
      payable
                
                $
                72,350
                
                
                $
                61,371Accrued
      payroll and related expenses
                
                
                21,879
                
                
                
                17,972Accrued
      insurance expenses
                
                
                5,705
                
                
                
                4,753Accrued
      state, local and other taxes
                
                
                4,026
                
                
                
                1,719Income
      taxes payable
                
                
                2,160
                
                
                
                4,340Other
      accrued expenses
                
                
                411
                
                
                
                567Total
      current liabilities
                
                
                106,531
                
                
                
                90,722Accrued
      insurance expenses
                
                
                8,601
                
                
                
                8,166Notes
      payable to banks
                
                
                185,600
                
                
                
                156,400Long-term
      pension liabilities
                
                
                5,174
                
                
                
                4,527Other
      long-term liabilities
                
                
                2,562
                
                
                
                2,692Deferred
      income taxes
                
                
                48,036
                
                
                
                29,236Total
      liabilities
                
                
                356,504
                
                
                
                291,743Common
      stock
                
                
                9,810
                
                
                
                9,804Capital
      in excess of par value
                
                
                6,496
                
                
                
                16,728Retained
      earnings
                
                
                430,778
                
                
                
                385,281Accumulated
      other comprehensive loss
                
                
                (2,533
                )
                
                
                (2,541
                )Total
      stockholders' equity
                
                
                444,551
                
                
                
                409,272Total
      liabilities and stockholders' equity
                
                $
                801,055
                
                
                $
                701,015The
      accompanying notes are an integral part of these consolidated financial
      statements.
  3
  RPC,
      INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFOR
      THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND
2007(In
      thousands except per share data)(Unaudited)Three
      months ended September 30,
                
                
                Nine
      months ended September 30,2008
                
                
                2007
                
                
                2008
                
                
                2007Revenues
                
                $
                237,217
                
                
                $
                161,961
                
                
                $
                649,133
                
                
                $
                504,037Cost
      of services rendered and goods sold
                
                
                134,878
                
                
                
                91,431
                
                
                
                372,723
                
                
                
                267,143Selling,
      general and administrative expenses
                
                
                29,660
                
                
                
                26,327
                
                
                
                86,987
                
                
                
                79,229Depreciation
      and amortization
                
                
                30,445
                
                
                
                20,846
                
                
                
                86,948
                
                
                
                54,804Gain
      on disposition of assets, net
                
                
                (1,998
                )
                
                
                (1,306
                )
                
                
                (4,998
                )
                
                
                (4,492
                )Operating
      profit
                
                
                44,232
                
                
                
                24,663
                
                
                
                107,473
                
                
                
                107,353Interest
      expense
                
                
                (1,241
                )
                
                
                (1,391
                )
                
                
                (3,962
                )
                
                
                (2,513
                )Interest
      income
                
                
                17
                
                
                
                17
                
                
                
                63
                
                
                
                49Other
      (expense) income, net
                
                
                (356
                )
                
                
                200
                
                
                
                (258
                )
                
                
                1,624Income
      before income taxes
                
                
                42,652
                
                
                
                23,489
                
                
                
                103,316
                
                
                
                106,513Income
      tax provision
                
                
                16,872
                
                
                
                8,596
                
                
                
                40,321
                
                
                
                39,760Net
      income
                
                $
                25,780
                
                
                $
                14,893
                
                
                $
                62,995
                
                
                $
                66,753Earnings
      per shareBasic
                
                $
                0.27
                
                
                $
                0.15
                
                
                $
                0.65
                
                
                $
                0.69Diluted
                
                $
                0.26
                
                
                $
                0.15
                
                
                $
                0.64
                
                
                $
                0.68Dividends
      per share
                
                $
                0.06
                
                
                $
                0.05
                
                
                $
                0.18
                
                
                $
                0.15Average
      shares outstandingBasic
                
                
                96,802
                
                
                
                96,426
                
                
                
                96,728
                
                
                
                96,128Diluted
                
                
                98,232
                
                
                
                98,261
                
                
                
                98,202
                
                
                
                98,335The
      accompanying notes are an integral part of these consolidated financial
      statements.
  4
  RPC,
      INC. AND SUBSIDIARIESCONSOLIDATED STATEMENT
      OF STOCKHOLDERS' EQUITYFOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008(In
      thousands)(Unaudited)Comprehensive
                
                
                Common
      Stock
                
                
                Capital
      in Excess of
                
                
                Retained
                
                
                Accumulated
      Other ComprehensiveIncome
      (Loss)
                
                
                Shares
                
                
                Amount
                
                
                Par
Value
                
                
                Earnings
                
                
                Loss
                
                
                TotalBalance,
      December 31, 2007
                
                
                
                
                
                98,040
                
                
                $
                9,804
                
                
                $
                16,728
                
                
                $
                385,281
                
                
                $
                (2,541
                )
                
                $
                409,272Stock
      issued for stock incentiveplans,
      net
                
                
                
                
                
                1,284
                
                
                
                128
                
                
                
                1,916
                
                
                
                —
                
                
                
                —
                
                
                
                2,044Stock
      purchased and retired
                
                
                
                
                
                (1,222
                )
                
                
                (122
                )
                
                
                (15,682
                )
                
                
                —
                
                
                
                —
                
                
                
                (15,804
                )Net
      income
                
                $
                62,995
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                62,995
                
                
                
                —
                
                
                
                62,995Pension
      adjustment, net of taxes
                
                
                89
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                89
                
                
                
                89Foreign
      currency translation,net
      of taxes
                
                
                (40
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (40
                )
                
                
                (40
                )Unrealized
      gain on securities,net
      of taxes
                
                
                (41
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (41
                )
                
                
                (41
                )Comprehensive
      income
                
                $
                63,003Dividends
      declared
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (17,498
                )
                
                
                —
                
                
                
                (17,498
                )Stock-based
      compensation
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                2,728
                
                
                
                —
                
                
                
                —
                
                
                
                2,728Excess
      tax benefits for share-based
      payments
                
                
                
                
                
                
                —
                
                
                
                —
                
                
                
                806
                
                
                
                —
                
                
                
                —
                
                
                
                806Balance,
      September 30, 2008
                
                
                
                
                
                
                98,102
                
                
                $
                9,810
                
                
                $
                6,496
                
                
                $
                430,778
                
                
                $
                (2,533
                )
                
                $
                444,551The
      accompanying notes are an integral part of this consolidated financial
      statement.
  5
  RPC,
      INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007(In
      thousands)(Unaudited)Nine
      months ended September 30,2008
                
                
                2007OPERATING
      ACTIVITIESNet
      income
                
                $
                62,995
                
                
                $
                66,753Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation,
      amortization and other non-cash charges
                
                
                86,948
                
                
                
                54,808Stock-based
      compensation expense
                
                
                2,728
                
                
                
                2,401Gain
      on disposition of assets, net
                
                
                (4,998
                )
                
                
                (4,492
                )Deferred
      income tax provision
                
                
                17,425
                
                
                
                3,938Excess
      tax benefits for share-based payments
                
                
                (806
                )
                
                
                (1,121
                )Changes
      in current assets and liabilities:Accounts
      receivable
                
                
                (42,557
                )
                
                
                (11,658
                )Income
      taxes receivable
                
                
                (4,740
                )
                
                
                (5,805
                )Inventories
                
                
                (11,098
                )
                
                
                (6,892
                )Prepaid
      expenses and other current assets
                
                
                2,504
                
                
                
                2,697Accounts
      payable
                
                
                13,466
                
                
                
                1,239Income
      taxes payable
                
                
                (2,180
                )
                
                
                (2,483
                )Accrued
      payroll and related expenses
                
                
                3,907
                
                
                
                3,358Accrued
      insurance expenses
                
                
                952
                
                
                
                1,224Accrued
      state, local and other taxes
                
                
                2,307
                
                
                
                516Other
      accrued expenses
                
                
                (137
                )
                
                
                31Changes
      in working capital
                
                
                (37,576
                )
                
                
                (17,773
                )Changes
      in other assets and liabilities:Accrued
      pension
                
                
                647
                
                
                
                (3,362
                )Accrued
      insurance expenses
                
                
                435
                
                
                
                1,350Other
      non-current assets
                
                
                (777
                )
                
                
                (888
                )Other
      non-current liabilities
                
                
                (130
                )
                
                
                (2,016
                )Net
      cash provided by operating activities
                
                
                126,891
                
                
                
                99,598INVESTING
      ACTIVITIESCapital
      expenditures
                
                
                (136,941
                )
                
                
                (197,550
                )Proceeds
      from sale of assets
                
                
                8,143
                
                
                
                6,295Net
      cash used for investing activities
                
                
                (128,798
                )
                
                
                (191,255
                )FINANCING
      ACTIVITIESPayment
      of dividends
                
                
                (17,498
                )
                
                
                (14,608
                )Borrowings
      from notes payable to banks
                
                
                299,650
                
                
                
                390,350Repayments
      of notes payable to banks
                
                
                (270,450
                )
                
                
                (277,100
                )Debt
      issue costs for notes payable to banks
                
                
                (94
                )
                
                
                -Excess
      tax benefits for share-based payments
                
                
                806
                
                
                
                1,121Cash
      paid for common stock purchased and retired
                
                
                (13,856
                )
                
                
                (1,730
                )Proceeds
      received upon exercise of stock options
                
                
                304
                
                
                
                552Net
      cash (used for) provided by financing activities
                
                
                (1,138
                )
                
                
                98,585Net
      (decrease) increase in cash and cash equivalents
                
                
                (3,045
                )
                
                
                6,928Cash
      and cash equivalents at beginning of period
                
                
                6,338
                
                
                
                2,729Cash
      and cash equivalents at end of period
                
                $
                3,293
                
                
                $
                9,657The
      accompanying notes are an integral part of these consolidated financial
      statements.
  6
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   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 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 nine
month period ended September 30, 2008 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2008.
 
 The
balance sheet at December 31, 2007 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles 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
year ended December 31, 2007.
 
 A group
that includes the Company’s Chairman of the Board, R. Randall Rollins and his
brother Gary W. Rollins, who is also a director of the Company, and certain
companies under their control, controls in excess of fifty percent of the
Company’s voting power.
 
 2.
              REVENUE
  RPC’s
revenues are generated principally from providing services and the related
equipment.  Revenues are recognized when the services are rendered and
collectibility is reasonably assured.  Revenues from services and
equipment are based on fixed or determinable priced purchase orders or contracts
with the customer and do not include the right of return.  Rates for
services and equipment are priced on a per day, per unit of measure, per man
hour or similar basis.  Sales tax charged to customers is presented on
a net basis within the consolidated statement of operations and excluded from
revenues.
  7
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 3.
              EARNINGS
      PER SHARE
 
 Statement
of Financial Accounting Standard (“SFAS”) No. 128, “Earnings Per Share,”
requires a basic earnings per share and diluted earnings per share presentation.
The two calculations differ as a result of the dilutive effect of stock options
and time lapse restricted shares and performance restricted shares included in
diluted earnings per share, but excluded from basic 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.  A reconciliation of weighted average shares outstanding is
as follows:
  Three
      months ended
                September
      30,
              
              
              Nine
      months ended
                September
      30,(In
      thousands except per share data )
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      income available for stockholders (numerator for basic and
      diluted  earnings per share):
              $
              25,780
              
              
              $
              14,893
              
              
              $
              62,995
              
              
              $
              66,753Shares
      (denominator):Weighted
      average shares outstanding (denominator for basic earnings per
      share)
              
              
              96,802
              
              
              
              96,426
              
              
              
              96,728
              
              
              
              96,128Effect
      of dilutive securities:Employee
      stock options and restricted stock
              
              
              1,430
              
              
              
              1,835
              
              
              
              1,474
              
              
              
              2,207Adjusted
      weighted average shares (denominator for diluted earnings per
      share)
              
              
              98,232
              
              
              
              98,261
              
              
              
              98,202
              
              
              
              98,335Earnings
      per share:Basic
              
              $
              0.27
              
              
              $
              0.15
              
              
              $
              0.65
              
              
              $
              0.69Diluted
              
              $
              0.26
              
              
              $
              0.15
              
              
              $
              0.64
              
              
              $
              0.68
 
 
 4.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
 
 In
October 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-3,
“Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active.”   FSP 157-3 clarifies the application of SFAS No.
157, “Fair Value Measurements,” in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not
active.  Certain key existing principles of SFAS 157 illustrated in
the example include the following: determining fair value in a dislocated market
depends on the facts and circumstances and may require the use of significant
judgment when evaluating the various sources of the fair value measurement
including individual transactions or broker quotes.  In addition, FSP
FAS 157-3 states that if an entity uses its own assumptions to determine fair
value, it must include appropriate risk adjustments that market participants
would make for nonperformance and liquidity risks.  FSP FAS 157-3 is
effective upon issuance, including prior periods for which financial statements
have not been issued.  The Company adopted FSP FAS 157-3 in the third
quarter of 2008 and has concluded that it does not have a material effect on its
consolidated financial statements.
  8
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 In
September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, “Disclosures
about Credit Derivatives and Certain Guarantees – An Amendment of FASB Statement
No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date
of FASB Statement No. 161.”   This FSP amends SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” to require
disclosures by sellers of credit derivatives, including credit derivatives
embedded in a hybrid instrument.  This FSP also amends FASB
Interpretation No. (FIN) 45, “Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” to
require an additional disclosure about the current status of the
payment/performance risk of a guarantee.   Further this FSP
clarifies the Board’s intent about the effective date of SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging Activities.”  The provisions
of this FSP that amend SFAS No. 161 and FIN 45 are effective for reporting
periods ending after November 15, 2008 and the clarification of the effective
date of SFAS No. 161 is effective upon issuance of this FSP.  The
Company is currently in the process of determining the additional disclosures
required upon the adoption of this FSP.
 
 In
September 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities,” to clarify that all outstanding unvested share-based payment awards
that contain nonforfeitable rights to dividends or dividend equivalents, whether
paid or unpaid, are participating securities. An entity must include
participating securities in its calculation of basic and diluted earnings per
share (EPS) pursuant to the two-class method, as described in FASB Statement
128, Earnings per Share. FSP EITF 03-6-1 is effective for fiscal years beginning
after December 15, 2008 and interim periods within those fiscal years. The
Company intends to adopt FSP EITF 03-6-1 effective January 1, 2009 and apply its
provisions retrospectively to all prior-period EPS data presented in its
financial statements. The Company has periodically issued share-based payment
awards that contain nonforfeitable rights to dividends and is in the process of
evaluating the impact that the adoption of FSP EITF 03-6-1 will have on its
consolidated financial statements.
 
 In May
2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting
Principles.”   SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in financial statements that are presented in
conformity with U.S. generally accepted accounting principles for
nongovernmental entities.  SFAS 162 is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles.”  The adoption of SFAS 162 is not
expected to have a significant impact on the Company’s consolidated financial
statements.
  9
 RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
  In
April 2008, the FASB issued FSP FAS No. 142-3, which amends the
factors that must be considered in developing renewal or extension assumptions
used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS No. 142, “Goodwill and Other
Intangible Assets.” The FSP requires an entity that is estimating the useful
life of a recognized intangible asset to consider its historical experience in
renewing or extending similar arrangements or, in the absence of historical
experience, must consider assumptions that market participants would use about
renewal or extension that are both consistent with the asset’s highest and best
use and adjusted for entity-specific factors under SFAS
No. 142.  The FSP is effective for fiscal years beginning after
December 15, 2008, and the guidance for determining the useful life of a
recognized intangible asset must be applied prospectively to intangible assets
acquired after the effective date. The Company does not expect the adoption of
FSP FAS No. 142-3 to have a material effect on its consolidated financial
statements.
 
 In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
Hedging Activities - an Amendment of FASB Statement 133.” SFAS 161 requires
enhanced disclosures regarding how: (a) an entity uses derivative instruments;
(b) derivative instruments and related hedged items are accounted for under FASB
Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities;” and (c) derivative instruments and related hedged items affect an
entity's financial position, financial performance, and cash
flows.  SFAS 161 is effective for fiscal years and interim periods
beginning after November 15, 2008 with early application being
encouraged.  The Company does not have any derivative instruments nor
is currently involved in hedging activities and therefore adoption of SFAS 161
is not expected to have a material impact on the Company’s consolidated
financial statements.
 
 In
February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1, “Application
of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements that Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13,” and FSP FAS 157-2, “Effective
Date of FASB Statement No. 157.” These FSPs:
 ●          Exclude
certain leasing transactions accounted for under FASB Statement No. 13,
Accounting for Leases, from the scope of FASB Statement No. 157, “Fair Value
Measurements” (Statement 157). The exclusion does not apply to fair value
measurements of assets and liabilities recorded as a result of a lease
transaction but measured pursuant to other pronouncements within the scope of
Statement 157.
 ●          Defer
the effective date in Statement 157 for one year for certain nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually).
 FSP FAS
157-1 is effective upon the initial adoption of Statement 157.  FSP
FAS 157-2 is effective February 12, 2008.  The Company adopted the
provisions of FSP 157-1 and 157-2 in the first quarter of 2008.  See
Note 13 for details regarding impact of adoption.
 
 10
 
 RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 5.
              COMPREHENSIVE
      INCOME
 
 The components of comprehensive
income are as follows:
 
 Three
      months ended
                September
      30,
              
              
              Nine
      months ended
                September
      30,(In
      thousands)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      income as reported
              
              $
              25,780
              
              
              $
              14,893
              
              
              $
              62,995
              
              
              $
              66,753Change
      in unrealized gain on securities, net of taxes
              
              
              (500
              )
              
              
              (27
              )
              
              
              (41
              )
              
              
              361Pension
      adjustment, net of taxes
              
              
              45
              
              
              
              -
              
              
              
              89
              
              
              
              -Change
      in foreign currency translation, net of taxes
              
              
              (94
              )
              
              
              241
              
              
              
              (40
              )
              
              
              269Comprehensive
      income
              
              $
              25,231
              
              
              $
              15,107
              
              
              $
              63,003
              
              
              $
              67,383
  
 6.
              STOCK-BASED
      COMPENSATION
 
 The
Company reserved 5,062,500 shares of common stock under its 2004 Stock Incentive
Plan which expires ten years from the date of approval.  This plan
provides for the issuance of various forms of stock incentives, including, among
others, incentive and non-qualified stock options and restricted
stock.  As of September 30, 2008, there were approximately 2,890,000
shares available for grants.
 
 Stock-based
employee compensation expense was as follows for the periods
indicated:
  Three
      months ended
                  September
      30,
                
                
                Nine
      months ended
                  September
      30,(in
      thousands)
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Pre-tax
      expense
                
                $
                919
                
                
                $
                829
                
                
                $
                2,728
                
                
                $
                2,401After
      tax expense
                
                
                584
                
                
                
                561
                
                
                
                1,744
                
                
                
                1,632
 
 11
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 Stock
Options
 Transactions
involving RPC’s stock options for the nine months ended September 30, 2008 were
as follows:
  Shares
              
              
              Weighted
                Average
                ExercisePrice
              
              
              
              Weighted
                Average
                Remaining
      Contractual
                Life
              
              
              Aggregate
                Intrinsic
      ValueOutstanding
      at January 1, 2008
              
              
              1,878,252
              
              
              $
              3.11
              
              
              
              3.32
      yearsGranted
              
              
              -
              
              
              
              -
              
              
              
              N/AExercised
              
              
              (738,651
              )
              
              
              3.05
              
              
              
              N/AForfeited
              
              
              (8,776
              )
              
              
              3.88
              
              
              
              N/AExpired
              
              
              -
              
              
              
              -
              
              
              
              N/AOutstanding
      and exercisable at September 30, 2008
              
              
              1,130,825
              
              
              $
              3.14
              
              
              
              3.14
      years
              
              
              $
              12,349,000
 
 The total
intrinsic value of stock options exercised was approximately $6,134,000 during
the nine months ended September 30, 2008 and approximately $7,422,000 during the
nine months ended September 30, 2007.  The tax benefits related to
options exercised totaled $277,000 during the nine months ended September 30,
2008 and have been classified as financing cash flows in accordance with SFAS
123(R), “Shared-Based Payments.”  There were no recognized excess tax
benefits associated with the exercise of stock options during the nine months
ended September 30, 2007 since all of the stock options exercised were incentive
stock options which do not generate tax deductions for the Company.
 
 Restricted
Stock
 The
following is a summary of the changes in non-vested restricted shares for the
nine months ended September 30, 2008:
 
 Shares
              
              
              WeightedAverage
                Grant-Date
      Fair
                ValueNon-vested
      shares at January 1, 2008
              
              
              1,570,232
              
              
              $
              11.01Granted
              
              
              608,500
              
              
              
              9.81Vested
              
              
              (345,756
              )
              
              
              8.86Forfeited
              
              
              (60,857
              )
              
              
              11.61Non-vested
      shares at September 30, 2008
              
              
              1,772,119
              
              
              $
              11.34
 
 The total
fair value of shares vested during the nine months ended September 30, 2008 was
approximately $3,675,000 and during the nine months ended September 30, 2007 was
approximately $4,902,000.  The tax benefits for compensation tax
deductions in excess of compensation expense for the nine months ended September
30, 2008 totaled approximately $529,000 and were credited to capital in excess
of par value and are classified as financing cash flows in accordance with SFAS
123R.
  12
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 Other
Information
 
 As of
September 30, 2008, total unrecognized compensation cost related to non-vested
restricted shares was approximately $17,970,000 which is expected to be
recognized over a weighted-average period of 3.6 years.  As of
September 30, 2008, all of the compensation cost related to stock options has
been recognized.
 
 7.
              BUSINESS
      SEGMENT INFORMATION
 
 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.  Corporate includes selected
administrative costs incurred by the Company that are not allocated to business
units.  Gains or losses on disposition of assets are reviewed by the
Company’s chief decision maker on a consolidated basis, and accordingly the
Company does not report gains or losses at the segment level.
 
 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, and fluid pumping
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 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.
  13
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 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.
  Certain information with respect to
RPC’s business segments is set forth in the following
tables:
  Three
      months ended September 30,
                
                
                Nine
      months ended September 30,2008
                
                
                2007
                
                
                2008
                
                
                2007(in
      thousands)Revenues:Technical
      Services
                
                $
                203,462
                
                
                $
                134,819
                
                
                $
                557,977
                
                
                $
                417,324Support
      Services
                
                
                33,755
                
                
                
                27,142
                
                
                
                91,156
                
                
                
                86,713Total
      revenues
                
                $
                237,217
                
                
                $
                161,961
                
                
                $
                649,133
                
                
                $
                504,037Operating
      profit (loss):Technical
      Services
                
                $
                34,644
                
                
                $
                20,558
                
                
                $
                87,288
                
                
                $
                87,271Support
      Services
                
                
                10,333
                
                
                
                5,527
                
                
                
                22,955
                
                
                
                23,564Corporate
                
                
                (2,743
                )
                
                
                (2,728
                )
                
                
                (7,768
                )
                
                
                (7,974
                )Gain
      on disposition of assets, net
                
                
                1,998
                
                
                
                1,306
                
                
                
                4,998
                
                
                
                4,492Total
      operating profit
                
                $
                44,232
                
                
                $
                24,663
                
                
                $
                107,473
                
                
                $
                107,353Interest
      expense
                
                
                (1,241
                )
                
                
                (1,391
                )
                
                
                (3,962
                )
                
                
                (2,513
                )Interest
      income
                
                
                17
                
                
                
                17
                
                
                
                63
                
                
                
                49Other
      (expense) income, net
                
                
                (356
                )
                
                
                200
                
                
                
                (258
                )
                
                
                1,624Income
      before income taxes
                
                $
                42,652
                
                
                $
                23,489
                
                
                $
                103,316
                
                
                $
                106,513
   Nine
      months ended September 30, 2008
              
              Technical
                Services
              
              
              Support
                Services
              
              
              Corporate
              
              
              Total(in
      thousands)Identifiable
      assets at September 30, 2008
              
              $
              553,103
              
              
              $
              197,601
              
              
              $
              50,351
              
              
              $
              801,055Capital
      expenditures
              
              
              105,717
              
              
              
              30,314
              
              
              
              910
              
              
              
              136,941Depreciation
      and amortization
              
              
              68,318
              
              
              
              17,961
              
              
              
              669
              
              
              
              86,948
  8.
              INVENTORIES
  Inventories
of $40,633,000 at September 30, 2008 and $29,602,000 at December 31, 2007
consist of raw materials, parts and supplies.
  14
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 9.
              EMPLOYEE
      BENEFIT PLAN
 
 The
following represents the net periodic benefit (credit) cost and related
components of the Company’s multiple employer Retirement Income
Plan:
  Three
      months ended
                September
      30,
              
              
              Nine
      months ended
                September
      30,(in
      thousands)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Service
      cost
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Interest
      cost
              
              
              461
              
              
              
              440
              
              
              
              1,382
              
              
              
              1,319Expected
      return on plan assets
              
              
              (636
              )
              
              
              (580
              )
              
              
              (1,908
              )
              
              
              (1,741
              )Amortization
      of net losses
              
              
              71
              
              
              
              214
              
              
              
              213
              
              
              
              645Net
      periodic benefit (credit)cost
              
              $
              (104
              )
              
              $
              74
              
              
              $
              (313
              )
              
              $
              223
  The
Company has not made any contributions to the plan during the nine months ended
September 30, 2008 and does not currently expect to make any additional
contributions to this plan during the remainder of 2008.
 
 10.
              NOTES
      PAYABLE TO BANKS
  The
Company currently has a revolving credit agreement (the "Revolving Credit
Agreement") with SunTrust Capital Markets, Inc, as Joint Lead Arranger and Sole
Book Manager, Banc of America Securities LLC as Joint Lead Arranger, and a
syndicate of other lenders.  The Revolving Credit Agreement includes a
full and unconditional guarantee by RPC's 100% owned domestic subsidiaries whose
assets equal substantially all of the consolidated assets of RPC and its
subsidiaries.  The subsidiaries of the Company that are not guarantors
are considered minor.
  The
Revolving Credit Agreement has a general term of five years and provides for an
unsecured line of credit of up to $296.5 million, which includes a $50 million
letter of credit subfacility, and a $20 million swingline subfacility. During
the second quarter of 2008, the Company entered into a certain Commitment
Increase Amendment to the Revolving Credit Agreement to increase the amount of
the credit facility by $46.5 million to its current amount of $296.5 million.
The maturity date of all revolving loans under the Credit Agreement is September
8, 2011.  The Company has incurred loan origination fees and other
debt related costs associated with the line of credit and Commitment Increase
Amendment in the aggregate of approximately $514,000.  These costs are
being amortized over the remaining term of the five year loan, and the net
amount is classified as non-current other assets on the consolidated balance
sheets.
  15
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
   Revolving
loans under the Revolving Credit Agreement bear interest at one of the following
two rates, at RPC's election:
  ●           the
Base Rate, which is the greater of SunTrust Bank's "prime rate" for the day of
the borrowing and a fluctuating rate per annum equal to the Federal Funds Rate
plus .50%; or
  ●          with
respect to any Eurodollar borrowings, Adjusted LIBOR (which equals LIBOR as
increased to account for the maximum reserve percentages established by the U.S.
Federal Reserve) plus a margin ranging from .40% to .80%, based upon RPC's
then-current consolidated debt-to-EBITDA ratio.  In addition, RPC will
pay an annual fee ranging from .10% to .20% of the total credit facility based
upon RPC's then-current consolidated debt-to-EBITDA ratio.
  The
Revolving Credit Agreement contains customary terms and conditions, including
certain financial covenants and restrictions on indebtedness, dividend payments,
business combinations and other related items.  Further, the Revolving
Credit Agreement contains financial covenants restricting RPC's ability to
permit the ratio of RPC's consolidated debt to EBITDA to exceed 2.5 to 1, and to
permit the ratio of RPC's consolidated EBIT to interest expense to exceed 2 to
1.
  As of
September 30, 2008, RPC has outstanding borrowings of $185.6 million under the
Revolving Credit Agreement.Interest expense incurred on
the line of credit was $1,473,000 and $4,684,000 during the three and nine
months ended September 30, 2008 and $1,979,000 and $4,265,000 during the three
and nine months ended September 30, 2007. The weighted average interest rate was
3.3% and 3.7% for the three and nine months ended September 30, 2008 and 6.1%
and 6.2% for the three and nine months ended September 30, 2007.  For
the nine months ended September 30, 2008, and September 30, 2007, the Company
capitalized interest of approximately $803,000 and $1,761,000 related to
facilities and equipment under construction.  Additionally there were
letters of credit outstanding relating to self-insurance programs and contract
bids for $17.3 million as of September 30, 2008.
 
 11.
              INCOME
      TAXES
 
 The
Company determines its periodic income tax expense based upon the current period
income and the annual estimated tax rate for the Company adjusted for any change
to prior period estimates. 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.
 
 As of
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109” (“FIN 48”), which provides criteria for the
recognition, measurement, presentation and disclosure of uncertain tax
positions.  The Company is subject to the provisions of FIN 48 and has
analyzed filing positions in federal, state and foreign filing jurisdictions
where it is required to file income tax returns, as well as all open years in
those jurisdictions.  As a result of the implementation of FIN 48, the
Company recognized an immaterial adjustment in the liability for unrecognized
income tax benefits.  As of the adoption date, the Company had gross
tax affected unrecognized tax benefits of $922,000, of which $850,000, if
recognized, would affect the Company’s effective tax rate.  As of
December 31, 2007, the Company had gross tax affected unrecognized tax benefits
of $10,000, of which $10,000, if recognized would affect the Company’s effective
tax rate.  There have been no material changes to these amounts during
the nine months ended September 30, 2008.
  16
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 The
Company and its subsidiaries are subject to U.S. Federal income tax as well as
income tax in multiple state and foreign jurisdictions.  In many cases
our uncertain tax positions are related to tax years that remain open and
subject to examination by the relevant taxing authorities.  For
Federal and state purposes, the Company’s 2004 through 2007 tax years remain
open to examination.
 
 Baring an
unforeseen event, the Company does not anticipate a material change in the
unrecognized tax benefits in the next 12 months.
 
 The
Company’s policy is to record interest and penalties related to income tax
matters as income tax expense.   Accrued interest and penalties
were immaterial as of September 30, 2008.
 
 12.
              SUPPLEMENTAL
      CASH FLOWS INFORMATION
 
 The
Company had accounts payable for purchases of property, plant and equipment of
approximately $16,719,000 as of September 30, 2008 and approximately $16,145,000
as of September 30, 2007.
 
 13.
              FAIR
      VALUE DISCLOSURES
 
 The
Company adopted SFAS 157, “Fair Value Measurements,” and FSP 157-2, “Effective
Date of FASB Statement No. 157,” in the first quarter of 2008 for financial
assets and liabilities.  SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements about
items measured at fair value.  SFAS 157 does not require any new fair
value measurements.  It applies to accounting pronouncements that
already require or permit fair value measures.  As a result, the
Company will not be required to recognize any new assets or liabilities at fair
value. FSP 157-2 delays the effective date of SFAS 157 for nonfinancial assets
and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis.
  17
  RPC,
INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 SFAS 157
establishes a fair value 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 – Inputs other than level 1 that are either directly or indirectly
      observable.3.
              Level
      3 – Unobservable inputs developed using the Company’s estimates and
      assumptions, which reflect those that market participants would
      use.
  Securities:
 The
Company determines the fair value of the marketable securities that are trading
and available for sale through quoted market prices.  The adoption of
SFAS 157 had no effect on the Company’s valuation of marketable
securities.
 
 The
following table summarizes the valuation of financial instruments measured at
fair value on a recurring basis in the balance sheet as of September 30,
2008:
 
 Fair
      value Measurements at September 30, 2008 with:(in
      thousands)
              
              Quoted
      prices in active markets for identical assets
              
              
              Significant
      other observable inputs
              
              
              Significant
      unobservable
                inputs(Level 1)
              
              
              (Level 2)
              
              
              (Level 3)Assets:Trading
      securities
              
              $
              4,642
              
              
              $
              -
              
              
              $
              -Available
      for sale securities
              
              
              1,366
              
              
              
              -
              
              
              
              -
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities — including an amendment of FASB
Statement No. 115.” This statement permits entities to choose to measure
many financial instruments and certain other items at fair value. This statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, including interim periods within that fiscal year. The
Company did not elect the fair value option for any of its existing financial
instruments as of September 30, 2008 and the Company has not determined whether
or not it will elect this option for financial instruments it may acquire in the
future.
 
 18
  RPC, INC. AND
SUBSIDIARIES
 
 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 30.
  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.
  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, 2007 is incorporated herein by reference.  Since
year-end, the Company's operational strategies have not changed.
  During
the third quarter of 2008, revenues increased 46.5 percent to $237.2 million
compared to the same period in the prior year.  The growth in revenues
is primarily due to higher capacity from revenue-producing equipment placed in
service during the last 12 months, and greater utilization of the entire fleet
of revenue-producing equipment.  International revenues for the third
quarter of 2008 decreased due to declines in customer activity levels in
Turkmenistan, Hungary, Gabon and Eqypt partially offset by increases in Congo,
Saudi Arabia, Australia, and Canada. 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.
  Cost of
revenues as a percentage of revenues increased approximately 0.4 percentage
points in the third quarter of 2008 compared to the same period of
2007.  This increase was due primarily to higher costs for materials
and supplies and increased maintenance and repairs expenses, partially offset by
lower employment costs as a percentage of revenues.
  Selling,
general and administrative expenses as a percentage of revenues decreased by
approximately 3.7 percentage points in the third quarter of 2008 compared to the
same period in the prior year due to positive leverage of these costs realized
from higher revenues.
  19
  RPC, INC. AND
SUBSIDIARIES
   Income
before income taxes was $42.7 million for the three months ended September 30,
2008 compared to $23.5 million in the prior year.  The effective tax
rate for the three months ended September 30, 2008 was 39.6 percent compared to
36.6 percent in the prior year.  Diluted earnings per share increased
to $0.26 for the three months ended September 30, 2008 compared to $0.15 in the
same period in the prior year. Cash flows from operating activities were $126.9
million for the nine months ended September 30, 2008 compared to $99.6 million
for the same period in the prior year, and cash and cash equivalents were $3.3
million at September 30, 2008, a decrease of $3.0 million compared to December
31, 2007.  The notes payable to banks were $185.6 million as of
September 30, 2008 and $148.9 million as of September 30, 2007.
  Consistent
with our strategy to grow our capacity and maintain our existing fleet of high
demand equipment, capital expenditures were $136.9 million during the first nine
months of 2008. Although we currently expect capital expenditures to be
approximately $170 million during 2008, the total amount of expenditures for the
year will depend primarily on equipment maintenance requirements and the
ultimate delivery dates and timing of payments for equipment
delivered.  We expect these expenditures to be primarily directed
toward our larger, core service lines including primarily pressure pumping, but
also hydraulic workover, coiled tubing, nitrogen, and rental tools.
  Outlook
 
 Drilling
activity in the U.S. domestic oilfield, 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 nine months ended September 30, 2008 was
approximately 6.3 percent higher than in the comparable period in 2007. The
average price of oil increased by approximately 71.3 percent and the average
price of natural gas increased by approximately 39.4 percent during the nine
months ended September 30, 2008 compared to the prior year.  We are
watching closely the recent softness in natural gas and oil prices, the current
announcements by some of our customers that they plan to reduce their
exploration and production spending, as well as any indications that the general
economy is slowing, which will reduce the demand for these commodities, and
ultimately, our customers’ demands for our services.  We are also
closely monitoring the turmoil in the financial markets for any implications
that it may have for our capital expenditure and other capital structuring and
capital allocation strategies.  Our response to the industry's
potential uncertainty is to maintain sufficient liquidity and a conservative
capital structure.  Although we increased our borrowings under our
bank credit facility in 2007 and during the first nine months of 2008, we still
maintain a conservative financial structure.  We expect revenues and
operating profit will be higher in 2008 than in 2007; however, we are
experiencing pricing pressure for many of our services coupled with higher
interest expense, higher depreciation expense resulting from increased capital
expenditures and increases in employment, materials and supplies, fuel and other
operating costs which reduces our operating profit, income before income taxes,
and net income.  We believe that our income before income taxes and
net income will be lower in 2008 than in 2007.  In most of the
Company’s service lines and many of our geographic markets, we are experiencing
the negative impacts of increased competition.  One negative impact is
lower pricing for our services.  In addition, increased competition
increases the costs and reduces the availability of qualified employees and
critical materials and supplies used in our business, and competitive pressures
are preventing us from passing much of these increased costs through to our
customers.
  20
  RPC, INC. AND
SUBSIDIARIES
   The high
activity levels in the domestic oilfield have increased demand for equipment
from the manufacturers of equipment and components used in the Company's
business.  This increased demand has increased the lead times for
ordering and delivery of such equipment and components over the past several
years.  As of the end of the third quarter of 2008, however, we
believe that much of this demand has been met, and that delivery lead times for
many types of equipment have decreased.
  Further
discussion of the Company’s outlook is set forth under the Outlook section in
the Company’s annual report on Form 10-K for the fiscal year ended December 31,
2007 and is incorporated herein by reference.  There have been no
significant changes in the Company’s outlook since the filing of the 10-K for
2007 except as discussed above.
 
 RESULTS OF
OPERATIONS
 
 Three
      months ended
                September
      30,
              
              
              Nine
      months ended
                September
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Consolidated
      revenues [in thousands]
              
              $
              237,217
              
              
              $
              161,961
              
              
              $
              649,133
              
              
              $
              504,037Revenues
      by business segment [in thousands]:Technical
              
              $
              203,462
              
              
              $
              134,819
              
              
              $
              557,977
              
              
              $
              417,324Support
              
              $
              33,755
              
              
              $
              27,142
              
              
              $
              91,156
              
              
              $
              86,713Consolidated
      operating profit [in thousands]
              
              $
              44,232
              
              
              $
              24,663
              
              
              $
              107,473
              
              
              $
              107,353Operating
      profit (loss) by business segment [in thousands]:Technical
              
              $
              34,644
              
              
              $
              20,558
              
              
              $
              87,288
              
              
              $
              87,271Support
              
              $
              10,333
              
              
              $
              5,527
              
              
              $
              22,955
              
              
              $
              23,564Corporate
              
              $
              (2,743
              )
              
              $
              (2,728
              )
              
              $
              (7,768
              )
              
              $
              (7,974
              )Gain
      on disposition of assets, net
              
              $
              1,998
              
              
              $
              1,306
              
              
              $
              4,998
              
              
              $
              4,492Percentage
      cost of revenues to revenues
              
              
              56.9
              %
              
              
              56.5
              %
              
              
              57.4
              %
              
              
              53.0
              %Percentage
      selling, general & administrative expenses to revenues
              
              
              12.5
              %
              
              
              16.3
              %
              
              
              13.4
              %
              
              
              15.7
              %Percentage
      depreciation and amortization expense to revenues
              
              
              12.8
              %
              
              
              12.9
              %
              
              
              13.4
              %
              
              
              10.9
              %Average
      U.S. domestic rig count
              
              
              1,979
              
              
              
              1,789
              
              
              
              1,871
              
              
              
              1,760Average
      natural gas price (per thousand cubic feet (mcf))
              
              $
              9.00
              
              
              $
              6.15
              
              
              $
              9.65
              
              
              $
              6.92Average
      oil price (per barrel)
              
              $
              118.83
              
              
              $
              75.74
              
              
              $
              114.03
              
              
              $
              66.56
 
 21
  RPC, INC. AND
SUBSIDIARIES
 
 THREE MONTHS ENDED SEPTEMBER
30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007
  Revenues.Revenues
for the three months ended September 30, 2008 increased 46.5 percent compared to
the three months ended September 30, 2007.  Domestic revenues
increased 52.6 percent to $230.1 million during the third quarter of 2008
compared to the same period in the prior year.  The increases in
revenues are due primarily to strong industry activity levels and increased
capacity driven by equipment purchased under our long-term growth
plan.  International revenues decreased from $11.2 million to $7.1
million compared to the prior year quarter.  Our international
revenues are impacted by the timing of project initiation and their ultimate
duration and can be volatile in nature.
  The
average price of natural gas increased approximately 46.3 percent and the
average price of oil increased 56.9 percent during the third quarter of 2008 as
compared to the prior year.  The average domestic rig count during the
quarter was approximately 10.6 percent higher than the same period in
2007.  This 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 for the quarter increased 50.9 percent
compared to the third quarter of last year.  Revenues in this segment
increased due primarily to strong industry activity, which included more
unconventional drilling, increased capacity, and improved utilization,
particularly in pressure pumping and downhole tool services. The Support
Services segment revenues for the quarter rose by 24.4 percent compared to the
third quarter of prior year.  This increase was due to increased
activity in the rental tool service line, the largest within this segment,
partially offset by lower pricing in that service line.  Operating
profit increased in both segments primarily due to a larger fleet of
revenue-producing equipment, higher utilization, and cost leverage.
  Cost of revenues. Cost of
revenues increased 47.5 percent to $134.9 million for the three months ended
September 30, 2008 compared to $91.4 million for three months ended September
30, 2007.  This increase is attributable to increased activity levels
and the variable nature of many of these expenses, including materials and
supplies, compensation, and fuel. Cost of revenues, as a percentage of revenues,
increased in the third quarter of 2008 compared to the third quarter of 2007 due
primarily to higher costs for materials and supplies and increased maintenance
and repairs expense.  In addition, fuel costs continued to be high
during the quarter.  These increases were partially offset by direct
labor cost efficiencies realized by higher utilization of a larger fleet of
equipment during the quarter compared to last year.
  Selling, general and administrative
expenses. Selling, general and administrative expenses for
the three months ended September 30, 2008 increased 12.7 percent to $29.7
million compared to $26.3 million for the three months ended September 30, 2007.
This increase was primarily due to higher compensation costs and other
operational expenses consistent with higher activity levels.  However,
these costs as a percent of revenues decreased during the three months ended
September 30, 2008 compared to the same period in the prior year due to the
fixed nature of these expenses and the positive cost leverage realized with
increasing revenues.
  22
  RPC, INC. AND
SUBSIDIARIES
   Depreciation and
amortization. Depreciation and amortization totaled $30.4
million for the three months ended September 30, 2008, a 46.0 percent increase,
compared to $20.8 million for the quarter ended September 30, 2007. This
increase in depreciation and amortization resulted from a higher level of
capital expenditures during recent quarters within both Technical Services and
Support Services to increase capacity, expand facilities and to maintain our
existing fleet of equipment.
  Gain on disposition of assets,
net.  Gain on disposition of assets, net was $2.0 million for
the three months ended September 30, 2008 compared to $1.3 million for the three
months ended September 30, 2007.  The gain on disposition of assets,
net includes gains or losses related to various property and equipment
dispositions or sales to customers of lost or damaged rental
equipment.
  Other (expense) income, net.Other (expense) income, net was $(356) thousand for the three months
ended September 30, 2008 and $200 thousand for the same period in the prior
year.  Other (expense) income, net primarily includes gains and losses
from investments in the non-qualified plan being marked to market, settlements
of various legal and insurance claims and royalty payments.
  Interest expense and interest
income.Interest expensewas $1.2 million for
the three months ended September 30, 2008 compared to $1.4 million for the
quarter ended September 30, 2007.  The decrease in 2008 is due to
lower interest rates, partially offset by a higher average balance on our
revolving line of credit, net of interest capitalized on equipment and
facilities under construction.  Interest income was $17 thousand for
the three months ended September 30, 2008 and for the three months ended
September 30, 2007.
  Income tax provision.Income
tax provision was $16.9 million during the three months ended September 30,
2008, compared to $8.6 million in 2007.  This increase was due to the
increase in income before taxes.  The effective tax rate was 39.6
percent for the three months ended September 30, 2008 compared to 36.6 percent
for the three months ended September 30, 2007.
 
 NINE MONTHS ENDED SEPTEMBER
30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007
  Revenues.Revenues
for the nine months ended September 30, 2008 increased 28.8 percent compared to
the nine months ended September 30, 2007.  Domestic revenues increased
32.8 percent to $624.9 million during the nine months ended September 30, 2008
compared to the same period in the prior year.  The increases in
revenues are due primarily to strong industry activity levels and increased
capacity driven by equipment purchased under our long-term growth plan partially
offset by increased competition which has adversely impacted pricing for
services and to a lesser extent utilization.  International revenues
decreased from $33.3 million to $24.2 million compared to the prior
period.  International revenues for the nine months ended September
30, 2008 decreased, compared to the nine months ended September 30, 2007, due to
declines in customer activity levels in Turkmenistan, Hungary, Cameroon and
Angola partially offset by increases in Saudi Arabia, Oman, United Arab
Emirates, Egypt, and Canada.  Our international revenues are impacted
by the timing of project initiation and their ultimate duration and can be
volatile in nature.
  23
  RPC, INC. AND
SUBSIDIARIES
   The
average price of natural gas increased approximately 39.5 percent and the
average price of oil increased 71.3 percent during the nine months ended
September 30, 2008 as compared to the prior year.  The average
domestic rig count during the period was approximately 6.3 percent higher than
the same period in 2007.  This 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 for the first nine months of 2008 increased
33.7 percent compared to the same period of last year.  Revenues in
this segment increased due primarily to strong industry activity and higher
capacity through increased capital expenditures partially offset by lower
pricing for services. The Support Services segment revenues for the first nine
months of 2008 increased 5.1 percent compared to the same period of the prior
year.  This increase was due to increased activity in the rental tool
service line, partially offset by lower pricing in this service line, the
largest within this segment.  Operating profit increased slightly in
the Technical Services segment and declined slightly in the Support Services
segment primarily due to the negative margin impact from competitive pricing
pressure, higher fuel and transportation costs, higher costs for critical
materials and supplies and increased depreciation expense with the additional
equipment added to our fleet.
  Cost of revenues. Cost of
revenues increased 39.5 percent to $372.7 million for the nine months ended
September 30, 2008 compared to $267.1 million for the nine months ended
September 30, 2007.  The increase is attributable to the variable
nature of many of these expenses, including increases in materials and supplies,
direct employment costs caused by competition for qualified employees and fuel
and transportation costs. Cost of revenues, as a percent of revenues, increased
in the first nine months of 2008 compared to the same period of 2007 due
primarily to increases in cost of certain critical materials and supplies to
perform customer jobs, direct employment costs and fuel costs, most of which
could not be passed through to the customer because of the competitive
environment.
  Selling, general and administrative
expenses. Selling, general and administrative expenses for
the nine months ended September 30, 2008 increased 9.8 percent to $87.0 million
compared to $79.2 million for the nine months ended September 30, 2007. This
increase was primarily due to higher compensation costs and other operational
expenses consistent with higher activity levels.  However, these costs
as a percent of revenues decreased during the nine months ended September 30,
2008 compared to the same period in the prior year due to the fixed nature of
these expenses and the positive cost leverage realized with increasing
revenues.
  Depreciation and
amortization. Depreciation and amortization totaled $87.0
million for the nine months ended September 30, 2008, a 58.7 percent increase,
compared to $54.8 million for the nine months ended September 30, 2007. This
increase in depreciation and amortization resulted from a higher level of
capital expenditures during recent quarters within both Technical Services and
Support Services to increase capacity, expand facilities and to maintain our
existing fleet of equipment.
  Gain on disposition of assets,
net.  Gain on disposition of assets, net was $5.0 million for
the nine months ended September 30, 2008 compared to $4.5 million for the nine
months ended September 30, 2007.  The gain on disposition of assets,
net include gains or losses related to various property and equipment
dispositions or sales to customers of lost or damaged rental
equipment.
  24
  RPC, INC. AND
SUBSIDIARIES
   Other (expense) income, net.Other (expense) income, net was $(258) thousand for the nine months ended
September 30, 2008 and $1.6 million for the same period in the prior
year.  Other (expense) income, net primarily includes gains and losses
from investments in the non-qualified plan being marked to market, settlements
of various legal and insurance claims and royalty payments.
  Interest expense and interest
income.Interest expensewas $4.0 million for
the nine months ended September 30, 2008 compared to $2.5 million for the nine
months ended September 30, 2007.  The increase in 2008 is due to a
higher average balance on our revolving line of credit, net of interest
capitalized on equipment and facilities under construction.  Interest
income was $63 thousand for the nine months ended September 30, 2008 compared to
$49 thousand for the same period of the prior year.
  Income tax provision.Income
tax provision was $40.3 million during the nine months ended September 30, 2008,
compared to $39.8 million in 2007.  This increase was due to the
increase in income before taxes and by an increase in the effective tax rate to
39.0 percent for the nine months ended September 30, 2008 from 37.3 percent for
the nine months ended September 30, 2007.
  LIQUIDITY AND CAPITAL
RESOURCES
 
 Cash
Flows
  The
Company’s cash and cash equivalents at September 30, 2008 were $3.3
million.  The following table sets forth the historical cash flows for
the nine months ended September 30, 2008 and 2007:
 
 Nine
      months ended September 30,(In
      thousands)
              
              2008
              
              
              2007Net
      cash provided by operating activities
              
              $
              126,891
              
              
              $
              99,598Net
      cash used for investing activities
              
              
              (128,798
              )
              
              
              (191,255
              )Net
      cash (used for) provided by financing activities
              
              
              (1,138
              )
              
              
              98,585
  Cash
provided by operating activities for the nine months ended September 30, 2008
increased by $27.3 million compared to the comparable period in the prior
year.  Although net income decreased $3.8 million for the nine months
ended September 30, 2008 compared to the same period of 2007, cash provided by
operating activities increased due primarily to an increase in depreciation due
to higher capital expenditures over the year, increased deferred income tax
provision due to bonus depreciation, lower contributions to the pension plan
partially offset by higher growth in working capital requirements. Changes in
working capital requirements were due to decreases in income taxes receivable/
payable, net due to timing of tax payments together with increases in accounts
payable and accrued state, local and other taxes.  These positive
changes were partially offset by increases in inventory and accounts receivable
resulting from increased business activity levels and higher
revenues.
  25
  RPC, INC. AND
SUBSIDIARIES
   Cash used
for investing activities for the nine months ended September 30, 2008 decreased
by $62.5 million, compared to the nine months ended September 30, 2007, as a
result of lower capital expenditures.
  Cash
provided by financing activities for the nine months ended September 30, 2008
decreased by $99.7 million, compared to the nine months ended September 30,
2007, due to a decrease in net borrowings from notes payable to banks, partially
offset by higher repurchases of the Company’s stock and an increase in dividends
per share paid to common shareholders.
  Financial
Condition and Liquidity
  The
Company’s financial condition as of September 30, 2008, remains
strong.  We believe the liquidity provided by our existing cash and
cash equivalents, our overall strong capitalization, cash expected to be
generated from operations and our credit facility will provide sufficient
capital to meet our requirements for at least the next twelve
months.  The Company currently has a $296.5 million revolving credit
facility (the “Revolving Credit Agreement”) that matures in 2011.The Revolving Credit
Agreement contains customary terms and conditions, including certain financial
covenants including covenants restricting RPC’s ability to incur liens or merge
or consolidate with another entity.  Our outstanding borrowings were
$185.6 million at September 30, 2008 and approximately $17.3 million of the
credit facility supports outstanding letters of credit relating to
self-insurance programs or contract bids.  Therefore a total of $93.6
million was available under our facility as of September 30,
2008.  Additional information regarding our Revolving Credit Agreement
is included in Note 10 to our Consolidated Financial Statements included in this
report.
  The
Company’s decisions about the amount of cash to be used for investing and
financing purposes are influenced by its capital position, including access to
borrowings under our credit facility, and the expected amount of cash to be
provided by operations.  We believe our liquidity will continue to
provide the opportunity to grow our asset base and revenues during periods with
positive business conditions and strong customer activity levels.  In
addition, the Company’s decisions about the amount of cash to be used for
investing and financing activities may also be influenced by the financial
covenants in our credit facility.
  26
  RPC, INC. AND
SUBSIDIARIES
   Cash
Requirements
  The
Company currently expects that capital expenditures during 2008 will be
approximately $170 million, of which $136.9 million has been spent as of
September 30, 2008.  We expect these expenditures to be primarily
directed towards revenue-producing equipment in our larger, core service lines
including pressure pumping, snubbing, nitrogen, and rental tools. The actual
amount of 2008 expenditures will depend primarily on equipment maintenance
requirements, expansion opportunities, and equipment delivery
schedules.
  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 that cannot be currently estimated.
  The
Company’s Retirement Income Plan, a multiple employer trusteed defined benefit
pension plan, provides monthly benefits upon retirement at age 65 to eligible
employees.  The Company did not make any contributions to the pension
plan in the nine months ended September 30, 2008 and does not currently expect
to make any contributions to the pension plan for the remainder of
2008.
  The
Company’s Board of Directors announced a stock buyback program on March 9, 1998
authorizing the repurchase of 11,812,500 shares.  The Company
repurchased 859,700 shares of common stock under the program during the nine
months ended September 30, 2008 and may repurchase outstanding common shares
periodically based on market conditions and our capital allocation strategies
and restrictions under our credit facility.  The stock buyback program
does not have a predetermined expiration date.
  On
October 28, 2008, the Board of Directors approved a $0.06 per share cash
dividend payable December 10, 2008 to stockholders of record at the close of
business November 10, 2008.  The Company expects to continue to pay
cash dividends to common stockholders, subject to the earnings and financial
condition of the Company 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 increase as well.  Due to the
increases in activity in the domestic oilfield over the past several years, as
well as a shortage of a skilled work force due to historically low activity in
the oilfield, the Company has experienced upward wage pressures in the labor
markets from which it hires employees.  More recently, the Company has
experienced shortages for critical materials used in some of its largest service
lines, and these shortages have caused price increases for these materials as
well as higher transportation costs, since some alternative suppliers are
located farther from the Company’s operational locations than the original
suppliers.  Also, high fuel prices have affected the Company’s costs
because fuel is used to transport the Company’s equipment as well as to provide
power at customer locations. Over the past several years, the price of steel,
for both the commodity and for products manufactured with steel, increased
dramatically.  Steel prices have moderated but remain high by
historical standards.  This factor has affected the Company's
operations by increasing the cost of the Company's new equipment, which has
resulted in higher capital expenditures and depreciation expense.  RPC
attempts to recover such increased costs, particularly personnel costs,
materials and fuel, through price increases to its customers.  Due to
increased competition during recent periods, however, the majority of these
attempts have not been successful, which has decreased the Company’s
profitability.  Such decreased profitability is likely to continue as
long as fuel prices remain high, costs for materials and labor in the domestic
oilfield remain high, and competition prevents the Company from recovering such
increased costs through increased prices charged to
our customers.
  27
 RPC, INC. AND
SUBSIDIARIES
   OFF BALANCE SHEET
ARRANGEMENTS
 
 The Company does not have any material
off balance sheet arrangements.
 
 RELATED PARTY TRANSACTIONS
  Marine
Products Corporation
  Effective
February 28, 2001, the Company spun-off the business conducted through Chaparral
Boats, Inc, 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,
2007.  During the nine months ended September 30, 2008, RPC charged
Marine Products for its allocable share of administrative costs incurred for
services rendered on behalf of Marine Products totaling $632,000 compared to
$679,000 for the comparable period in 2007.
  Other
  The
Company periodically purchases in the ordinary course of business products or
services from suppliers who are owned by officers or significant shareholders
of, or affiliated with the directors of RPC. The total amounts paid to these
affiliated parties were approximately $271,000 for the nine months ended
September 30, 2008 and $801,000 for the nine months ended September 30,
2007.
  RPC
receives certain administrative services and rents office space from Rollins,
Inc. (a company of which Mr. R. Randall Rollins is also 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 six months notice.  The
services covered by these agreements include office space, selected
administration 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 approximately
$104,000 for the nine months ended September 30, 2008 and $52,000 for the nine
months ended September 30, 2007.
  28
  RPC, INC. AND
SUBSIDIARIES
 
 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, 2007.  There have been no significant changes in the critical
accounting policies since year-end.
  29
  RPC, INC. AND
SUBSIDIARIES
   IMPACT OF RECENT ACCOUNTING
PRONOUNCEMENTS
  See
Notes 4 and 13 of the Notes to Consolidated Financial Statements for a
description of recent accounting pronouncements, 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 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 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 regarding
the effect of recent accounting pronouncements on the Company’s consolidated
financial statements, forecasted revenues and operating profit for 2008,
forecasted lower income before taxes and net income in 2008 compared to 2007,
our ability to acquire and delivery times for revenue-producing equipment to
support long-term growth, our business strategy, plans and objectives, market
risk exposure, adequacy of capital resources and funds, opportunity for growth
and expansion, anticipated pension funding payments and capital expenditures,
expectations as to future payment of dividends, the impact of inflation on the
Company’s financial position and operating results, 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 Company does not undertake to update its
forward-looking statements.
 
 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 those described in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2007, its other SEC filings
and the following:  the 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 actions of the OPEC cartel, 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, and risks of international operations.
  30
  RPC, INC. AND
SUBSIDIARIES
 
 ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  The
Company is subject to interest rate risk exposure through borrowings on its
$296.5 million credit facility.  As of September 30, 2008, there are
outstanding interest-bearing advances of $185.6 million on our credit facility
which bear interest at a floating rate.  A change in the interest rate
of one percent on the balance outstanding at September 30, 2008 would cause a
change of $1,856,000 in total annual interest costs.
  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 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, September 30, 2008 (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 changes in internal
control 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.
  31
  RPC, INC. AND
SUBSIDIARIES
  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
 
 See risk
factors described in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007.
 
 ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
  Shares
repurchased by the Company and affiliated purchases in the third quarter of 2008
are outlined below.
  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
                
                
                Maximum
      Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be
      Purchased Under the Plans
                  or
      Programs (2)Month
      #1July
      1, 2008 to July 31, 2008
                
                
                1,598
                (1)
                
                $
                17.81
                
                
                
                –
                
                
                
                3,731,365Month
      #2August
      1, 2008 to August 31, 2008
                
                
                2,994
                (1)
                
                $
                18.23
                
                
                
                –
                
                
                
                3,731,365Month
      #3September
      1, 2008 to September 31, 2008
                
                
                524,100
                
                
                $
                15.61
                
                
                
                524,100
                
                
                
                3,207,265Totals
                
                
                528,692
                
                
                $
                15.64
                
                
                
                524,100
                
                
                
                3,207,265
 (1)
                Consists
      of shares repurchased by the Company in connection with option exercised
      and taxes related to vesting of restricted shares.(2)
                The
      Company’s Board of Directors announced a stock buyback program in March
      1998 authorizing the repurchase of 11,812,500 shares in the open
      market.  Currently the program does not have a predetermined
      expiration date.
  32
  RPC, INC. AND
SUBSIDIARIES
  
 ITEM
      3.
              DEFAULTS
      UPON SENIOR SECURITIES
 
 None
 
 ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 None
 
 ITEM
      5.
              OTHER
      INFORMATION
 
 None
  33
  RPC, INC. AND
SUBSIDIARIES
 
 ITEM
      6.
              Exhibits
 
 Exhibit
      Number
              
              Description3.1(a)
              
              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).3.1(b)
              
              Certificate
      of amendment of the certificate of incorporation of RPC, Inc.
      (incorporated by reference to Exhibit 3.1(b) to Registrant’s Quarterly
      Report on Form 10-Q filed on May 8, 2006).3.2
              
              Amended
      and Restated Bylaws of RPC, Inc. (incorporated herein by reference to
      Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on
      October 25, 2007).4
              
              Form
      of Stock Certificate (incorporated herein by reference to Exhibit 4 to the
      Registrant’s Annual Report on Form 10-K for the fiscal year ended December
      31, 1998).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.
  34
 RPC, INC. AND
SUBSIDIARIES
  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/
      Richard A. HubbellDate:  November
      6, 2008
              Richard
      A. HubbellPresident
      and Chief Executive Officer(Principal
      Executive Officer)/s/
      Ben M. PalmerDate:  November
      6, 2008
              Ben
      M. PalmerVice
      President and Chief Financial Officer(Principal
      Financial and Accounting Officer)






35