Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements

Set forth on the following pages are the consolidating condensed financial statements of Parker Drilling. The Company’s Secured Credit Agreement and Senior Notes are fully and unconditionally guaranteed by substantially all of our direct and indirect domestic subsidiaries other than immaterial subsidiaries and subsidiaries generating revenues primarily outside the United States, subject to the following customary release provisions:

• in connection with any sale or other disposition of all or substantially all of the assets of that guarantor (including by way of merger or consolidation) to a person that is not (either before or after giving effect to such transaction) a subsidiary of the Company;

• in connection with any sale of such amount of capital stock as would result in such guarantor no longer being a subsidiary to a person that is not (either before or after giving effect to such transaction) a subsidiary of the Company;

• if the Company designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary;

• if the guarantee by a guarantor of all other indebtedness of the Company or any other guarantor is released, terminated or discharged, except by, or as a result of, payment under such guarantee; or

• upon legal defeasance or covenant defeasance (satisfaction and discharge of the indenture).

There are currently no restrictions on the ability of the restricted subsidiaries to transfer funds to Parker Drilling in the form of cash dividends, loans or advances. Parker Drilling is a holding company with no operations, other than through its subsidiaries. Separate financial statements for each guarantor company are not provided as the Company complies with the exception to Rule 3-10(a)(1) of Regulation S-X, set forth in sub-paragraph (f) of such rule. All guarantor subsidiaries are owned 100 percent by the parent company.

We are providing consolidating condensed financial information of the parent, Parker Drilling, the guarantor subsidiaries, and the non-guarantor subsidiaries as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013. The consolidating condensed financial statements present investments in both consolidated and unconsolidated subsidiaries using the equity method of accounting.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)

	March 31, 2014
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	30,649		$	15,916		$	46,496		$	—		$	93,061
Accounts and notes receivable, net	(12		)	122,122			142,327			—			264,437
Rig materials and supplies	—			2,578			41,910			—			44,488
Deferred costs	—			—			10,698			—			10,698
Deferred income taxes	(2		)	7,447			1,528			—			8,973
Other tax assets	50,772			(42,985		)	15,526			—			23,313
Other current assets	—			6,122			14,040			—			20,162
Total current assets	81,407			111,200			272,525			—			465,132
Property, plant and equipment, net	(19		)	564,469			309,850			—			874,300
Investment in subsidiaries and intercompany advances	2,043,180			(135,328		)	1,892,995			(3,800,847		)	—
Other noncurrent assets	(450,209		)	475,387			253,763			(118,005		)	160,936
Total assets	$	1,674,359		$	1,015,728		$	2,729,133		$	(3,918,852	)	$	1,500,368
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	18,801		$	—		$	—		$	—		$	18,801
Accounts payable and accrued liabilities	67,464			92,591			262,044			(254,644		)	167,455
Accrued income taxes	(4,420		)	6,767			14,848			—			17,195
Total current liabilities	81,845			99,358			276,892			(254,644		)	203,451
Long-term debt	612,574			—			—			—			612,574
Other long-term liabilities	5,036			6,664			5,827			—			17,527
Long-term deferred tax liability	—			50,229			(9,203		)	—			41,026
Intercompany payables	354,161			514,644			626,054			(1,494,859		)	—
Contingencies	—			—			—			—			—
Stockholders’ equity:
Common stock	20,164			18,049			43,003			(61,052		)	20,164
Capital in excess of par value	660,742			740,441			1,572,919			(2,313,360		)	660,742
Retained earnings (accumulated deficit)	(60,163		)	(413,657		)	208,594			205,063			(60,163		)
Accumulated other comprehensive income	—			—			1,783			—			1,783
Total controlling interest stockholders’ equity	620,743			344,833			1,826,299			(2,169,349		)	622,526
Noncontrolling interest	—			—			3,264			—			3,264
Total equity	620,743			344,833			1,829,563			(2,169,349		)	625,790
Total liabilities and stockholders’ equity	$	1,674,359		$	1,015,728		$	2,729,133		$	(3,918,852	)	$	1,500,368

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)

	December 31, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	88,697		$	8,310		$	51,682		$	—		$	148,689
Accounts and notes receivable, net	—			101,299			156,590			—			257,889
Rig materials and supplies	—			3,002			38,779			—			41,781
Deferred costs	—			—			13,682			—			13,682
Deferred income taxes	(57		)	8,435			1,562			—			9,940
Other tax assets	54,524			(46,770		)	16,325			—			24,079
Other current assets	—			9,089			14,134			—			23,223
Total current assets	143,164			83,365			292,754			—			519,283
Property, plant and equipment, net	60			562,148			309,148			—			871,356
Investment in subsidiaries and intercompany advances	1,906,128			(336,570		)	1,667,937			(3,237,495		)	—
Other noncurrent assets	(457,954		)	468,864			250,983			(117,776		)	144,117
Total assets	$	1,591,398		$	777,807		$	2,520,822		$	(3,355,271	)	$	1,534,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	25,000		$	—		$	—		$	—		$	25,000
Accounts payable and accrued liabilities	75,268			92,546			261,436			(254,364		)	174,886
Accrued income taxes	—			725			6,541			—			7,266
Total current liabilities	100,268			93,271			267,977			(254,364		)	207,152
Long-term debt	628,781			—			—			—			628,781
Other long-term liabilities	5,037			6,743			15,134			—			26,914
Long-term deferred tax liability	—			51,747			(12,980		)	—			38,767
Intercompany payables	227,504			291,783			422,645			(941,932		)	—
Contingencies	—			—			—			—			—
Stockholders’ equity:
Common stock	20,075			18,049			43,003			(61,052		)	20,075
Capital in excess of par value	657,349			740,438			1,572,919			(2,313,357		)	657,349
Retained earnings (accumulated deficit)	(47,616		)	(424,224		)	208,790			215,434			(47,616		)
Accumulated other comprehensive income	—			—			1,888			—			1,888
Total controlling interest stockholders’ equity	629,808			334,263			1,826,600			(2,158,975		)	631,696
Noncontrolling interest	—			—			1,446			—			1,446
Total Equity	629,808			334,263			1,828,046			(2,158,975		)	633,142
Total liabilities and stockholders’ equity	$	1,591,398		$	777,807		$	2,520,822		$	(3,355,271	)	$	1,534,756

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Three months ended March 31, 2014
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	123,431		$	149,132		$	(43,338	)	$	229,225
Operating expenses	—			76,548			132,815			(43,338		)	166,025
Depreciation and amortization	—			20,168			14,169			—			34,337
Total operating gross margin	—			26,715			2,148			—			28,863
General and administration expense (1)	(70		)	(8,464		)	(430		)	—			(8,964		)
Gain on disposition of assets, net	(79		)	(81		)	31			—			(129		)
Total operating income (loss)	(149		)	18,170			1,749			—			19,770
Other income and (expense):
Interest expense	(12,715		)	(50		)	(2,499		)	3,225			(12,039		)
Interest income	439			176			2,642			(3,225		)	32
Extinguishment of debt	(29,673		)	—			—			—			(29,673		)
Other	—			128			767			—			895
Equity in net earnings of subsidiaries	10,489			—			—			(10,489		)	—
Total other income (expense)	(31,460		)	254			910			(10,489		)	(40,785		)
Income (benefit) before income taxes	(31,609		)	18,424			2,659			(10,489		)	(21,015		)
Total income tax expense (benefit)	(19,060		)	6,384			4,053			—			(8,623		)
Net income (loss)	(12,549		)	12,040			(1,394		)	(10,489		)	(12,392		)
Less: Net income (loss) attributable to noncontrolling interest	—			—			157			—			157
Net income (loss) attributable to controlling interest	$	(12,549	)	$	12,040		$	(1,551	)	$	(10,489	)	$	(12,549	)

(1) General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	$	—		$	104,342		$	86,300		$	(23,507	)	$	167,135
Operating expenses	—			58,578			81,675			(23,507		)	116,746
Depreciation and amortization	—			18,659			10,853			—			29,512
Total operating gross margin	—			27,105			(6,228		)	—			20,877
General and administration expense (1)	(45		)	(12,732		)	(68		)	—			(12,845		)
Gain on disposition of assets, net	—			1,108			40			—			1,148
Total operating income (loss)	(45		)	15,481			(6,256		)	—			9,180
Other income and (expense):
Interest expense	(10,980		)	(24		)	(3,417		)	4,415			(10,006		)
Interest income	1,569			190			2,715			(4,415		)	59
Loss on extinguishment of debt	—			—			—			—			—
Other	37			101			(303		)	—			(165		)
Equity in net earnings of subsidiaries	179			—			—			(179		)	—
Total other income (expense)	(9,195		)	267			(1,005		)	(179		)	(10,112		)
Income (loss) before income taxes	(9,240		)	15,748			(7,261		)	(179		)	(932		)
Income tax expense (benefit)	(9,832		)	5,589			2,739			—			(1,504		)
Net income (loss)	592			10,159			(10,000		)	(179		)	572
Less: Net income (loss) attributable to noncontrolling interest	—			—			(20		)	—			(20		)
Net income (loss) attributable to controlling interest	$	592		$	10,159		$	(9,980	)	$	(179	)	$	592

(1) General and administration expenses for field operations are included in operating expenses.

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2014
	Parent			Guarantor		Non-Guarantor			Eliminations			Consolidated
Comprehensive income:
Net income (loss)	$	(12,549	)	$	12,040	$	(1,394	)	$	(10,489	)	$	(12,392	)
Other comprehensive loss, net of tax:
Currency translation difference on related borrowings	—			—		(804		)	—			(804		)
Currency translation difference on foreign currency net investments						699						699
Total other comprehensive loss, net of tax:	—			—		(105		)	—			(105		)
Comprehensive income (loss)	(12,549		)	12,040		(1,499		)	(10,489		)	(12,497		)
Comprehensive (income) loss attributable to noncontrolling interest	—			—		(154		)	—			(154		)
Comprehensive income (loss) attributable to controlling interest	$	(12,549	)	$	12,040	$	(1,653	)	$	(10,489	)	$	(12,651	)

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2013
	Parent		Guarantor		Non-Guarantor			Eliminations			Consolidated
Comprehensive income:
Net income (loss)	$	592	$	10,159	$	(10,000	)	$	(179	)	$	572
Other comprehensive loss, net of tax:
Currency translation difference on related borrowings	—		—		—			—			—
Currency translation difference on foreign currency net investments					—						—
Total other comprehensive loss, net of tax:	—		—		—			—			—
Comprehensive income (loss)	592		10,159		(10,000		)	(179		)	572
Comprehensive (income) loss attributable to noncontrolling interest	—		—		20			—			20
Comprehensive income (loss) attributable to controlling interest	$	592	$	10,159	$	(9,980	)	$	(179	)	$	592

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2014
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(12,549	)	$	12,040		$	(1,394	)	$	(10,489	)	$	(12,392	)
Adjustments to reconcile net income (loss):
Depreciation and amortization	—			20,168			14,169			—			34,337
Loss on extinguishment of debt	29,673			—			—			—			29,673
Gain on disposition of assets	79			81			(31		)	—			129
Deferred income tax expense	(17,472		)	3,891			1,289			—			(12,292		)
Expenses not requiring cash	4,180			129			2,535			—			6,844
Equity in net earnings of subsidiaries	(10,489		)	—			—			10,489			—
Change in accounts receivable	11			(18,803		)	12,566			—			(6,226		)
Change in accrued income taxes	(4,420		)	7,206			(2,636		)	—			150
Change in other assets	12,746			(14,180		)	1,040			—			(394		)
Change in liabilities	(8,476		)	(34		)	305			—			(8,205		)
Net cash provided by (used in) operating activities	(6,717		)	10,498			27,843			—			31,624
Cash flows from investing activities:
Capital expenditures	—			(25,523		)	(11,922		)	—			(37,445		)
Proceeds from the sale of assets	—			472			1,154			—			1,626
Net cash (used in) investing activities	—			(25,051		)	(10,768		)	—			(35,819		)
Cash flows from financing activities:
Proceeds from debt issuance	400,000			—			—			—			400,000
Repayments of long term debt	(416,199		)	—			—			—			(416,199		)
Paydown on term note	(2,500		)	—			—			—			(2,500		)
Payment of debt issuance costs	(7,273		)	—			—			—			(7,273		)
Payment of debt extinguishment costs	(25,796		)	—			—			—			(25,796		)
Excess tax benefit from stock-based compensation	335			—			—			—			335
Intercompany advances, net	102			22,159			(22,261		)	—			—
Net cash provided by (used in) financing activities	(51,331		)	22,159			(22,261		)	—			(51,433		)
Net change in cash and cash equivalents	(58,048		)	7,606			(5,186		)	—			(55,628		)
Cash and cash equivalents at beginning of year	88,697			8,310			51,682			—			148,689
Cash and cash equivalents at end of year	$	30,649		$	15,916		$	46,496		$	—		$	93,061

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2013
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	592		$	10,159		$	(10,000	)	$	(179	)	$	572
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization	—			18,659			10,853			—			29,512
Gain on disposition of assets	—			(1,108		)	(40		)	—			(1,148		)
Deferred income tax expense	(8,310		)	2,936			3,767			—			(1,607		)
Expenses not requiring cash	2,951			5,875			(1,647		)	—			7,179
Equity in net earnings of subsidiaries	(179		)	—			—			179			—
Change in accounts receivable	(25		)	(14,540		)	(3,992		)	—			(18,557		)
Change in other assets	(3,051		)	(3,030		)	(1,937		)	—			(8,018		)
Change in accrued income taxes	(630		)	1,141			1,049			—			1,560
Change in liabilities	10,412			3,784			3,551			—			17,747
Net cash provided by operating activities	1,760			23,876			1,604			—			27,240
Cash flows from investing activities:
Capital expenditures	—			(21,998		)	(8,025		)	—			(30,023		)
Proceeds from the sale of assets	—			1,504			46			—			1,550
Net cash (used in) investing activities	—			(20,494		)	(7,979		)	—			(28,473		)
Cash flows from financing activities:
Paydown on term note	(2,500		)	—			—			—			(2,500		)
Payment of debt issuance costs	(307		)	—			—			—			(307		)
Excess tax benefit from stock-based compensation	(159		)	—			—			—			(159		)
Intercompany advances, net	2,447			(8,484		)	6,037			—			—
Net cash provided by (used in) financing activities	(519		)	(8,484		)	6,037			—			(2,966		)
Net change in cash and cash equivalents	1,241			(5,102		)	(338		)	—			(4,199		)
Cash and cash equivalents at beginning of year	42,251			11,023			34,612			—			87,886
Cash and cash equivalents at end of year	$	43,492		$	5,921		$	34,274		$	—		$	83,687