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

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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

Note 13 - 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 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(f) of Regulation S-X. 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, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017, 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, 2018
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	56,723		$	16,509		$	45,083		$	—		$	118,315
Accounts and Notes receivable, net	—			35,177			91,508			—			126,685
Rig materials and supplies	—			(2,869		)	34,318			373			31,822
Other current assets	—			5,613			14,825			—			20,438
Total current assets	56,723			54,430			185,734			373			297,260
Property, plant and equipment, net	(19		)	423,377			187,144			242			610,744
Goodwill	—			6,708			—			—			6,708
Intangible assets, net	—			6,551			—			—			6,551
Investment in subsidiaries and intercompany advances	2,931,773			2,983,588			4,024,920			(9,940,281		)	—
Other noncurrent assets	(256,973		)	234,495			533,156			(480,811		)	29,867
Total assets	$	2,731,504		$	3,709,149		$	4,930,954		$	(10,420,477	)	$	951,130
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	(70,088	)	$	191,260		$	586,677		$	(617,477	)	$	90,372
Accrued income taxes	80,627			(59,776		)	(16,660		)	—			4,191
Total current liabilities	10,539			131,484			570,017			(617,477		)	94,563
Long-term debt, net	578,404			—			—			—			578,404
Other long-term liabilities	2,867			3,875			4,368			—			11,110
Deferred tax liability	—			—			78			—			78
Intercompany payables	1,871,869			1,468,837			2,495,167			(5,835,873		)	—
Total liabilities	2,463,679			1,604,196			3,069,630			(6,453,350		)	684,155
Total equity	267,825			2,104,953			1,861,324			(3,967,127		)	266,975
Total liabilities and stockholders’ equity	$	2,731,504		$	3,709,149		$	4,930,954		$	(10,420,477	)	$	951,130

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED BALANCE SHEET

(Dollars in Thousands)

(Unaudited)

	December 31, 2017
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	75,342		$	20,655		$	45,552		$	—		$	141,549
Accounts and Notes receivable, net	—			32,338			90,173			—			122,511
Rig materials and supplies	—			(3,025		)	34,440			—			31,415
Other current assets	—			6,362			15,999			—			22,361
Total current assets	75,342			56,330			186,164			—			317,836
Property, plant and equipment, net	(19		)	428,556			197,234			—			625,771
Goodwill	—			6,708			—			—			6,708
Intangible assets, net	—			7,128			—			—			7,128
Investment in subsidiaries and intercompany advances	2,955,050			2,971,456			3,955,553			(9,882,059		)	—
Other noncurrent assets	(261,232		)	237,755			537,124			(480,811		)	32,836
Total assets	$	2,769,141		$	3,707,933		$	4,876,075		$	(10,362,870	)	$	990,279
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	(51,060	)	$	179,247		$	588,536		$	(617,477	)	$	99,246
Accrued income taxes	76,883			(56,870		)	(15,583		)	—			4,430
Total current liabilities	25,823			122,377			572,953			(617,477		)	103,676
Long-term debt, net	577,971			—			—			—			577,971
Other long-term liabilities	2,867			5,741			3,825			—			12,433
Deferred tax liability	(1		)	—			79			—			78
Intercompany payables	1,865,810			1,465,744			2,430,340			(5,761,894		)	—
Total liabilities	2,472,470			1,593,862			3,007,197			(6,379,371		)	694,158
Total equity	296,671			2,114,071			1,868,878			(3,983,499		)	296,121
Total liabilities and stockholders’ equity	$	2,769,141		$	3,707,933		$	4,876,075		$	(10,362,870	)	$	990,279

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

(Dollars in Thousands)

(Unaudited)

	Three months ended March 31, 2018
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Revenues	$	—		$	42,591		$	81,622		$	(14,538	)	$	109,675
Operating expenses	—			25,817			80,255			(14,538		)	91,534
Depreciation and amortization	—			19,996			8,553			—			28,549
Total operating gross margin (loss)	—			(3,222		)	(7,186		)	—			(10,408		)
General and administrative expense (1)	(89		)	(5,983		)	(129		)	—			(6,201		)
Gain (loss) on disposition of assets, net	—			11			332			—			343
Total operating income (loss)	(89		)	(9,194		)	(6,983		)	—			(16,266		)
Other income (expense):
Interest expense	(12,228		)	223			(2,056		)	2,821			(11,240		)
Interest income	182			181			2,481			(2,821		)	23
Other	—			2			289			—			291
Equity in net earnings of subsidiaries	(16,372		)	—			—			16,372			—
Total other income (expense)	(28,418		)	406			714			16,372			(10,926		)
Income (loss) before income taxes	(28,507		)	(8,788		)	(6,269		)	16,372			(27,192		)
Income tax expense (benefit)	288			329			987			—			1,604
Net income (loss)	(28,795		)	(9,117		)	(7,256		)	16,372			(28,796		)
Less: Mandatory convertible preferred stock dividend	906			—			—			—			906
Net income (loss) available to common stockholders	$	(29,701	)	$	(9,117	)	$	(7,256	)	$	16,372		$	(29,702	)

(1) General and administrative 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, 2017
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Revenues	$	—		$	27,893		$	88,237		$	(17,859	)	$	98,271
Operating expenses	—			20,950			82,723			(17,859		)	85,814
Depreciation and amortization	—			21,188			11,014			—			32,202
Total operating gross margin (loss)	—			(14,245		)	(5,500		)	—			(19,745		)
General and administrative expense (1)	(78		)	(6,870		)	(92		)	—			(7,040		)
Gain (loss) on disposition of assets, net	—			(216		)	(136		)	—			(352		)
Total operating income (loss)	(78		)	(21,331		)	(5,728		)	—			(27,137		)
Other income (expense):
Interest expense	(11,669		)	(45		)	(1,942		)	2,786			(10,870		)
Interest income	149			179			2,468			(2,786		)	10
Other	—			32			498			—			530
Equity in net earnings of subsidiaries	(21,780		)	—			—			21,780			—
Total other income (expense)	(33,300		)	166			1,024			21,780			(10,330		)
Income (loss) before income taxes	(33,378		)	(21,165		)	(4,704		)	21,780			(37,467		)
Income tax expense (benefit)	6,430			(5,577		)	1,489			—			2,342
Net income (loss)	(39,808		)	(15,588		)	(6,193		)	21,780			(39,809		)
Less: Mandatory convertible preferred stock dividend	—			—			—						—
Net income (loss) available to common stockholders	$	(39,808	)	$	(15,588	)	$	(6,193	)	$	21,780		$	(39,809	)

(1) General and administrative 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, 2018
	Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
Comprehensive income (loss):
Net income (loss)	$	(28,795	)	$	(9,117	)	$	(7,256	)	$	16,372	$	(28,796	)
Other comprehensive income (loss), net of tax:
Currency translation difference on related borrowings	—			—			276			—		276
Currency translation difference on foreign currency net investments	—			—			(576		)	—		(576		)
Total other comprehensive income (loss), net of tax:	—			—			(300		)	—		(300		)
Comprehensive income (loss)	(28,795		)	(9,117		)	(7,556		)	16,372		(29,096		)

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2017
	Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
Comprehensive income (loss):
Net income (loss)	$	(39,808	)	$	(15,588	)	$	(6,193	)	$	21,780	$	(39,809	)
Other comprehensive income (loss), net of tax:
Currency translation difference on related borrowings	—			—			83			—		83
Currency translation difference on foreign currency net investments	—			—			763			—		763
Total other comprehensive income (loss), net of tax:	—			—			846			—		846
Comprehensive income (loss)	(39,808		)	(15,588		)	(5,347		)	21,780		(38,963		)

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2018
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(28,795	)	$	(9,117	)	$	(7,256	)	$	16,372		$	(28,796	)
Adjustments to reconcile net income (loss):
Depreciation and amortization	—			19,996			8,553			—			28,549
(Gain) loss on disposition of assets	—			(11		)	(332		)	—			(343		)
Deferred tax expense (benefit)	(3,420		)	3,015			(138		)	—			(543		)
Expenses not requiring cash	1,411			(10		)	(11,032		)	10,738			1,107
Change in assets and liabilities:
Accounts and notes receivable	—			(2,840		)	(1,339		)	—			(4,179		)
Other assets	23,587			(10,095		)	(61,331		)	57,850			10,011
Accounts payable and accrued liabilities	(12,971		)	5,333			74,636			(84,960		)	(17,962		)
Accrued income taxes	3,745			(2,907		)	(886		)	—			(48		)
Net cash provided by (used in) operating activities	(16,443		)	3,364			875			—			(12,204		)
Cash flows from investing activities:
Capital expenditures	—			(7,554		)	(1,370		)	—			(8,924		)
Proceeds from the sale of assets	—			44			26			—			70
Net cash provided by (used in) investing activities	—			(7,510		)	(1,344		)	—			(8,854		)
Cash flows from financing activities:
Payments of debt issuance costs	(1,148		)	—			—			—			(1,148		)
Preferred stock dividend	(906		)	—			—			—			(906		)
Shares surrendered in lieu of tax	(122		)	—			—			—			(122		)
Net cash provided by (used in) financing activities	(2,176		)	—			—			—			(2,176		)
Net increase (decrease) in cash and cash equivalents	(18,619		)	(4,146		)	(469		)	—			(23,234		)
Cash and cash equivalents at beginning of period	75,342			20,655			45,552			—			141,549
Cash and cash equivalents at end of period	$	56,723		$	16,509		$	45,083		$	—		$	118,315

PARKER DRILLING COMPANY AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Three Months Ended March 31, 2017
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(39,808	)	$	(15,588	)	$	(6,193	)	$	21,780		$	(39,809	)
Adjustments to reconcile net income (loss)
Depreciation and amortization	—			21,188			11,014			—			32,202
(Gain) loss on disposition of assets	—			216			136			—			352
Deferred tax expense (benefit)	(5,641		)	5,165			(166		)	—			(642		)
Expenses not requiring cash	1,781			91			278			—			2,150
Equity in net earnings of subsidiaries	21,780			—			—			(21,780		)	—
Change in assets and liabilities:
Accounts and notes receivable	—			(3,668		)	(1,206		)	—			(4,874		)
Other assets	17,984			(18,296		)	(2,380		)	—			(2,692		)
Accounts payable and accrued liabilities	(34,867		)	15,591			3,339			—			(15,937		)
Accrued income taxes	(5,783		)	7,055			393			—			1,665
Net cash provided by (used in) operating activities	(44,554		)	11,754			5,215			—			(27,585		)
Cash flows from investing activities:
Capital expenditures	—			(10,994		)	(3,457		)	—			(14,451		)
Proceeds from the sale of assets	—			—			46			—			46
Net cash provided by (used in) investing activities	—			(10,994		)	(3,411		)	—			(14,405		)
Cash flows from financing activities:
Proceeds from the issuance of common stock	25,200			—			—			—			25,200
Proceeds from the issuance of mandatory convertible preferred stock	50,000			—			—			—			50,000
Payment of equity issuance costs	(2,861		)	—			—			—			(2,861		)
Shares surrendered in lieu of tax	(352		)	—			—			—			(352		)
Intercompany advances, net	4,106			(2,090		)	(2,016		)	—			—
Net cash provided by (used in) financing activities	76,093			(2,090		)	(2,016		)	—			71,987
Net change in cash and cash equivalents	31,539			(1,330		)	(212		)	—			29,997
Cash and cash equivalents at beginning of period	65,000			14,365			40,326			—			119,691
Cash and cash equivalents at end of period	$	96,539		$	13,035		$	40,114		$	—		$	149,688