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

3 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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 2015 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 unaudited consolidating condensed financial information of the parent, Parker Drilling, the guarantor subsidiaries, and the non-guarantor subsidiaries as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014, respectively. 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, 2015
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	31,704		$	10,944		$	70,551		$	—		$	113,199
Accounts and notes receivable, net	(52		)	110,172			169,300			—			279,420
Rig materials and supplies	—			(3,551		)	53,887			—			50,336
Deferred costs	—			—			6,432			—			6,432
Deferred income taxes	—			3,963			1,685			—			5,648
Other tax assets	—			270			8,930			—			9,200
Other current assets	—			5,762			13,256			—			19,018
Total current assets	31,652			127,560			324,041			—			483,253
Property, plant and equipment, net	(19		)	587,126			298,126			—			885,233
Investment in subsidiaries and intercompany advances	3,126,778			2,520,407			2,691,390			(8,338,575		)	—
Other noncurrent assets	(438,614		)	524,232			268,297			(182,086		)	171,829
Total assets	$	2,719,797		$	3,759,325		$	3,581,854		$	(8,520,661	)	$	1,540,315

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	—		$	—		$	—
Accounts payable and accrued liabilities	67,054			119,414			326,166			(318,702		)	193,932
Accrued income taxes	(16,195		)	25,438			6,224			—			15,467
Total current liabilities	50,859			144,852			332,390			(318,702		)	209,399
Long-term debt	585,000			—			—			—			585,000
Other long-term liabilities	2,869			5,864			9,826			—			18,559
Long-term deferred tax liability	—			62,296			(3,984		)	—			58,312
Intercompany payables	1,413,346			1,375,184			1,412,566			(4,201,096		)	—
Total liabilities	2,052,074			1,588,196			1,750,798			(4,519,798		)	871,270
Total equity	667,723			2,171,129			1,831,056			(4,000,863		)	669,045
Total liabilities and stockholders’ equity	$	2,719,797		$	3,759,325		$	3,581,854		$	(8,520,661	)	$	1,540,315

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)



	December 31, 2014
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	36,728		$	13,546		$	58,182		$	—		$	108,456
Accounts and notes receivable, net	(33		)	96,100			174,885			—			270,952
Rig materials and supplies	—			(1,473		)	49,416			—			47,943
Deferred costs	—			—			5,673			—			5,673
Deferred income taxes	—			6,131			1,345			—			7,476
Other tax assets	19,885			(18,273		)	9,111			—			10,723
Other current assets	—			7,999			10,557			—			18,556
Total current assets	56,580			104,030			309,169			—			469,779
Property, plant and equipment, net	(19		)	589,055			306,904			—			895,940
Investment in subsidiaries and intercompany advances	3,060,867			2,441,527			2,464,502			(7,966,896		)	—
Other noncurrent assets	(440,918		)	490,597			272,823			(167,562		)	154,940
Total assets	$	2,676,510		$	3,625,209		$	3,353,398		$	(8,134,458	)	$	1,520,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	10,000		$	—		$	—		$	—		$	10,000
Accounts payable and accrued liabilities	77,603			71,645			309,344			(304,113		)	154,479
Accrued income taxes	(4,061		)	10,109			8,138			—			14,186
Total current liabilities	83,542			81,754			317,482			(304,113		)	178,665
Long-term debt	605,000			—			—			—			605,000
Other long-term liabilities	2,867			7,135			8,663			—			18,665
Long-term deferred tax liability	—			56,105			(3,990		)	—			52,115
Intercompany payables	1,322,172			1,311,405			1,204,768			(3,838,345		)	—
Total liabilities	2,013,581			1,456,399			1,526,923			(4,142,458		)	854,445
Total equity	662,929			2,168,810			1,826,475			(3,992,000		)	666,214
Total liabilities and stockholders’ equity	$	2,676,510		$	3,625,209		$	3,353,398		$	(8,134,458	)	$	1,520,659

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)



	Three months ended March 31, 2015
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Total revenues	—			$	79,395		$	150,931		$	(26,250	)	$	204,076
Operating expenses	—			44,145			121,375			(26,250		)	139,270
Depreciation and amortization	—			23,311			17,228			—			40,539
Total operating gross margin	—			11,939			12,328			—			24,267
General and administration expense ⁽¹⁾	(112		)	(10,115		)	(610		)	—			(10,837		)
Gain (loss) on disposition of assets, net	—			52			2,389			—			2,441
Total operating income (loss)	(112		)	1,876			14,107			—			15,871
Other income and (expense):
Interest expense	(11,059		)	(17		)	(328		)	326			(11,078		)
Interest income	417			3			89			(326		)	183
Other	—			10			(1,390		)	—			(1,380		)
Equity in net earnings of subsidiaries	8,988			—			—			(8,988		)	—
Total other income (expense)	(1,654		)	(4		)	(1,629		)	(8,988		)	(12,275		)
Income (benefit) before income taxes	(1,766		)	1,872			12,478			(8,988		)	3,596
Total income tax expense (benefit)	(4,988		)	(447		)	5,253			—			(182		)
Net income (loss)	3,222			2,319			7,225			(8,988		)	3,778
Less: Net income attributable to noncontrolling interest	—			—			556			—			556
Net income (loss) attributable to controlling interest	$	3,222		$	2,319		$	6,669		$	(8,988	)	$	3,222

(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, 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 (loss) 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
Loss on 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 (loss) before income taxes	(31,609		)	18,424			2,659			(10,489		)	(21,015		)
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 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 COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)



	Three Months Ended March 31, 2015
	Parent		Guarantor		Non-Guarantor			Eliminations			Consolidated
Comprehensive income:
Net income (loss)	$	3,222	$	2,319	$	7,225		$	(8,988	)	$	3,778
Other comprehensive income (loss), net of tax:
Currency translation difference on related borrowings	—		—		(1,670		)	—			(1,670		)
Currency translation difference on foreign currency net investments	—		—		(849		)	—			(849		)
Total other comprehensive income (loss), net of tax:	—		—		(2,519		)	—			(2,519		)
Comprehensive income (loss)	3,222		2,319		4,706			(8,988		)	1,259
Comprehensive (income) attributable to noncontrolling interest	—		—		(394		)	—			(394		)
Comprehensive income (loss) attributable to controlling interest	$	3,222	$	2,319	$	4,312		$	(8,988	)	$	865

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 income (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 income (loss), net of tax:	—			—		(105		)	—			(105		)
Comprehensive income (loss)	(12,549		)	12,040		(1,499		)	(10,489		)	(12,497		)
Comprehensive (income) 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

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)



	Three Months Ended March 31, 2015
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	3,222		$	2,319		$	7,225		$	(8,988	)	$	3,778
Adjustments to reconcile net income (loss):
Depreciation and amortization	—			23,311			17,228			—			40,539
Gain on disposition of assets	—			(52		)	(2,389		)	—			(2,441		)
Deferred income tax expense	(7,932		)	3,117			(1,489		)	—			(6,304		)
Expenses not requiring cash	2,443			436			(1,142		)	—			1,737
Equity in net earnings of subsidiaries	(8,988		)	—			—			8,988			—
Change in assets and liabilities:
Accounts and notes receivable	19			(12,289		)	5,620			—			(6,650		)
Other assets	25,016			(41,216		)	(3,887		)	—			(20,087		)
Accounts payable and accrued liabilities	(10,549		)	47,058			17,536			—			54,045
Accrued income taxes	(10,727		)	13,922			(581		)	—			2,614
Net cash provided by (used in) operating activities	(7,496		)	36,606			38,121			—			67,231

Cash flows from investing activities:
Capital expenditures	—			(24,418		)	(9,037		)	—			(33,455		)
Proceeds from the sale of assets	—			50			196			—			246
Proceeds from insurance settlements	—			—			2,500			—			2,500
Net cash (used in) investing activities	—			(24,368		)	(6,341		)	—			(30,709		)

Cash flows from financing activities:
Repayments of long-term debt	(30,000		)	—			—			—			(30,000		)
Payment of debt issuance costs	(1,359		)	—			—			—			(1,359		)
Excess tax benefit from stock-based compensation	(420		)	—			—			—			(420		)
Intercompany advances, net	34,251			(14,840		)	(19,411		)	—			—
Net cash provided by (used in) financing activities	2,472			(14,840		)	(19,411		)	—			(31,779		)

Net change in cash and cash equivalents	(5,024		)	(2,602		)	12,369			—			4,743
Cash and cash equivalents at beginning of year	36,728			13,546			58,182			—			108,456
Cash and cash equivalents at end of year	$	31,704		$	10,944		$	70,551		$	—		$	113,199

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 assets and liabilities:
Accounts and notes receivable	11			(18,803		)	12,566			—			(6,226		)
Other assets	12,746			(14,180		)	1,040			—			(394		)
Accounts payable and accrued liabilities	(8,476		)	(34		)	305			—			(8,205		)
Accrued income taxes	(4,420		)	7,206			(2,636		)	—			150
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	(418,699		)	—			—			—			(418,699		)
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