NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Summary of Significant Accounting Policies
Nature of Operations —
Parker Drilling, together with its subsidiaries, is an international provider of contract drilling and
drilling-related services and rental tools. We have operated in over 50 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental tools providers in the world. We currently have
operations in 24 countries, 10 of which we entered through our acquisition in 2013 of International Tubular Services Limited and certain of its affiliates (collectively, ITS) and other related assets (the ITS Acquisition). We own and operate
drilling rigs and drilling-related equipment and also perform drilling-related services, referred to as Operations & Maintenance (O&M) work, for
customer-owned
drilling rigs on a contracted basis.
We have extensive experience and expertise in drilling geologically difficult wells and in managing the logistical and technological challenges of operating in remote, harsh and ecologically sensitive areas. Our rental tools business supplies
premium equipment to operators on land and offshore in the U.S. and select international markets. We have significant knowledge of the equipment needs of drilling operators and the logistical and product quality requirements of an effective rental
tools supplier. We believe we are among the industry leaders in quality, health, safety and environmental practices.
Our business is
currently comprised of five operating segments: Rental Tools, U.S. Barge Drilling, U.S. Drilling, International Drilling, and Technical Services. Our rental tools business provides premium rental tools for land and offshore oil and natural gas
drilling and workover and production applications. Tools we provide include drill pipe, heavy-weight drill pipe, tubing, high-torque connections, BOPs, drill collars, casing running systems, tools for fishing services and more. Our U.S. barge
drilling business operates barge rigs that drill for oil and natural gas in the shallow waters in and along the inland waterways and coasts of Louisiana, Alabama, and Texas. Our U.S. drilling business primarily consists of two new-design
arctic-class drilling rigs in Alaska intended to address the challenges presented by the remote location, harsh climate and sensitive environment that characterize the Alaskan North Slope in addition to O&M work in support of ExxonMobil’s
Santa Ynez Unit offshore platform operations located in the Channel Islands region of California. Our international drilling business includes operations related to Parker-owned and customer-owned rigs. Operations related to customer rigs includes
operations and maintenance and other project management services, such as labor, maintenance, and logistics for operators who own their own drilling rigs, but choose Parker Drilling to operate the rigs for them. Our Technical services business
includes engineering and related project services during Front End Engineering Design (FEED), pre-FEED and concept development phases of customer-owned drilling facility projects. During the EPCI phase we focus primarily on drilling systems
engineering, procurement, commissioning and installation and we typically provide customer support during construction.
At
December 31, 2013, our marketable rig fleet consisted of 13 barge drilling rigs and 23 land rigs located in the United States, Latin America and the EMEA regions.
Consolidation
— The consolidated financial statements include the accounts of the Company and subsidiaries in which we exercise
control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns, regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50
percent interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that interest is accounted for under the equity method.
Noncontrolling Interest
— We apply accounting standards related to noncontrolling interests for ownership interests in our
subsidiaries held by parties other than Parker Drilling. The entities that comprise the noncontrolling interest include Parker SMNG Drilling Limited Liability Company and Primorsky Drill Rig Services B.V. We report noncontrolling interest as equity
on the consolidated balance sheets and report net income (loss) attributable to controlling interest and to noncontrolling interest separately on the consolidated statements of operations.
F-10
Reclassifications
— Certain reclassifications have been made to prior period
amounts to conform with the current period presentation. These reclassifications did not materially affect our consolidated financial results.
Revenue Recognition
— Contract drilling revenues and expenses, comprised of daywork drilling contracts, call-outs against
MSAs and engineering and related project service contracts, are recognized as services are performed and collection is reasonably assured. For certain contracts, we receive payments contractually designated for the mobilization of rigs and other
drilling equipment. Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized over the term of the related drilling contract; however, costs incurred to relocate rigs and other drilling equipment to
areas in which a contract has not been secured are expensed as incurred. Reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs. For contracts that are terminated prior to the specified term, early
termination payments received by us are recognized as revenues when all contractual requirements are met. Revenues from rental activities are recognized ratably over the rental term which is generally less than six months. Construction contract
revenues and costs are recognized on a percentage of completion basis utilizing the cost-to-cost method.
During 2013 the Company entered
into a FEED contract including long-lead equipment procurement services accounted for under the milestone method of revenue recognition. Milestone payments are based on achievement of specified procurement coordination and delivery events in regards
to our customer’s newly manufactured drilling rig. The quantity of specific long-lead items to be procured is spelled out in the contract and the payment terms are identified with each piece of equipment as well as each specific milestone.
Management concluded that each of these payments, constitute substantive milestones. This conclusion was based primarily on the facts that (i) each triggering event represents a specific outcome that can be achieved only through successful
performance by the Company of one or more of its deliverables, (ii) achievement of each triggering event was subject to inherent risk and uncertainty and would result in additional payments becoming due to the Company, (iii) each of the
milestone payments is non-refundable, (iv) substantial effort is required to complete each milestone, (v) the amount of each milestone payment is reasonable in relation to the value created in achieving the milestone, and (vi) the
milestone payments relate solely to past performance.
Reimbursable Costs
— The Company recognizes reimbursements
received for out-of-pocket expenses incurred as revenues and accounts for out-of-pocket expenses as direct operating costs. Such amounts totaled $69.7 million, $44.9 million, and $64.2 million during the years ended December 31, 2013, 2012, and
2011, respectively. Additionally, the Company typically receives a nominal handling fee, which is recognized as earned in revenues in our consolidated statement of operations.
Use of Estimates
— The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and
assumptions that affect our reported amounts of assets and liabilities, our disclosure of contingent assets and liabilities at the date of the financial statements, and our revenue and expenses during the periods reported. Estimates are typically
used when accounting for certain significant items such as legal or contractual liability accruals, mobilization and deferred mobilization, revenue and cost accounting for projects that follow the percentage of completion method, self-insured
medical/dental plans, and other items requiring the use of estimates. Estimates are based on a number of variables which may include third party valuations, historical experience, where applicable, and assumptions that we believe are reasonable
under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ from management estimates.
Purchase price allocation
— We allocate the purchase price of an acquired business to its identifiable assets and liabilities
based on estimated fair values at the transaction date. Transaction and integration costs associated with an acquisition are expensed as incurred. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is
recorded as goodwill. We use all available information to estimate fair values, including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. We typically engage
third-party appraisal firms to assist in fair value determination of inventories, identifiable intangible assets, and any other significant assets or liabilities. Judgments are made in determining the estimated fair value assigned to each class of
assets acquired and liabilities assumed, as well as asset lives, which can materially impact our results of operations.
F-11
Intangible Assets —
We recorded $10.0 million and $0.2 million, upon the ITS
Acquisition, to recognize the fair values of definite and indefinite lived intangible assets, respectively. Preliminary estimates of fair value of identifiable assets acquired and liabilities assumed in the ITS Acquisition were based on
management’s estimates, judgments and assumptions and are subject to change upon final valuation. As of December 31, 2013, the fair value estimate of the definite lived and indefinite lived intangibles have been adjusted to $8.5 million
and zero, respectively. Definite lived intangible assets recorded in connection with the ITS Acquisition primarily relate to trade names, customer relationships, and developed technology and will be amortized over a weighted average period of
approximately 3 years. See Note 2 —
Acquisition of ITS
for further discussion of the ITS Acquisition and preliminary fair value estimates.
Cash and Cash Equivalents
— For purposes of the consolidated balance sheets and the consolidated statements of cash flows, the
Company considers cash equivalents to be highly liquid debt instruments that have a remaining maturity of three months or less at the date of purchase.
Accounts Receivable and Allowance for Doubtful Accounts
— Trade accounts receivable are recorded at the invoice amount and
typically do not bear interest. The allowance for doubtful accounts is estimated for losses that may occur resulting from disputed amounts and the inability of our customers to pay amounts owed. We estimate the allowance based on historical
write-off experience and information about specific customers. We review individually, for collectability, all balances over 90 days past due as well as balances due from any customer with respect to which we have information leading us to
believe that a risk exist for potential collection.
Account balances are charged off against the allowance when we believe it is probable
the receivable will not be recovered. We do not have any off-balance-sheet credit exposure related to customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Trade
|
|
$
|
270,498
|
|
|
$
|
176,082
|
|
|
Notes receivable
|
|
|
244
|
|
|
|
650
|
|
|
Allowance for doubtful accounts(1)
|
|
|
(12,853
|
)
|
|
|
(8,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total accounts and notes receivable, net of allowance for bad debt
|
|
$
|
257,889
|
|
|
$
|
168,615
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Additional information on the allowance for doubtful accounts for the years ended December 31, 2013, 2012 and 2011 is reported on Schedule II — Valuation and Qualifying Accounts.
|
Property, Plant and Equipment
— Property, plant and equipment is carried at cost. Maintenance and repair costs are expensed as
incurred. The cost of upgrades and replacements is capitalized. The Company capitalizes software developed or obtained for internal use. Accordingly, the cost of third-party software, as well as the cost of third-party and internal personnel that
are directly involved in application development activities, are capitalized during the application development phase of new software systems projects. Costs during the preliminary project stage and post-implementation stage of new software systems
projects, including data conversion and training costs, are expensed as incurred. We account for depreciation of property, plant and equipment on the straight line method over the estimated useful lives of the assets after provision for salvage
value. Depreciation, for tax purposes, utilizes several methods of accelerated depreciation. Depreciable lives for different categories of property, plant and equipment are as follows:
|
|
|
|
|
|
|
Land drilling equipment
|
|
|
3 to 20 years
|
|
|
Barge drilling equipment
|
|
|
3 to 20 years
|
|
|
Drill pipe, rental tools and other
|
|
|
4 to 10 years
|
|
|
Buildings and improvements
|
|
|
5 to 30 years
|
|
F-12
Impairment
— We review the carrying amounts of long-lived assets for potential
impairment annually, typically during the fourth quarter, or when events occur or circumstances change that indicate the carrying value of such assets may not be recoverable. We determine recoverability by evaluating the undiscounted estimated
future net cash flows. When impairment is indicated, we measure the impairment as the amount by which the assets’ carrying value exceeds its fair value. Management considers a number of factors such as estimated future cash flows from the
assets, appraisals and current market value analysis in determining fair value. Assets are written down to fair value if the final estimate of current fair value is below the net carrying value.
Capitalized Interest
— Interest from external borrowings is capitalized on major projects until the assets are ready for their
intended use. Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets. Capitalized interest costs reduce net interest expense in the
consolidated statements of operations. During 2013, 2012 and 2011, capitalized interest costs were $2.4 million, $10.2 million and $19.3 million, respectively.
Assets held for sale —
We classify an asset as held for sale when the facts and circumstances meet the criteria for such
classification, including the following: (a) we have committed to a plan to sell the asset, (b) the asset is available for immediate sale, (c) we have initiated actions to complete the sale, including locating a buyer, (d) the
sale is expected to be completed within one year, (e) the asset is being actively marketed at a price that is reasonable relative to its fair value, and (f) the plan to sell is unlikely to be subject to significant changes or termination.
Rig Materials and Supplies
— Because our international drilling generally occurs in remote locations, making timely outside
delivery of spare parts uncertain, a complement of parts and supplies is maintained either at the drilling site or in warehouses close to the operation. During periods of high rig utilization, these parts are generally consumed and replenished
within a one-year period. During a period of lower rig utilization in a particular location, the parts, like the related idle rigs, are generally not transferred to other international locations until new contracts are obtained because of the
significant transportation costs that would result from such transfers. We classify those parts which are not expected to be utilized in the following year as long-term assets. Additionally, our international rental tools business holds machine shop
consumables and steel stock for manufacture in our machine shops and inspection and repair shops. Rig materials and supplies are valued at the lower of cost or market value.
Deferred Costs
— We defer costs related to rig mobilization and amortize such costs over the term of the related contract.
The costs to be amortized within twelve months are classified as current.
Debt Issuance Costs
— We typically defer costs
associated with issuance of indebtedness, and amortize those costs over the term of the related debt using the effective interest method.
Income Taxes —
Income taxes are accounted for under the asset and liability method and have been provided based upon tax laws and
rates in effect in the countries in which operations are conducted and income is earned. There is little or no expected relationship between the provision for or benefit from income taxes and income or loss before income taxes as the countries
in which we operate have taxation regimes that vary not only with respect to nominal rate, but also in terms of the availability of deductions, credits, and other benefits. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled and the effect of changes in tax rates is recognized in income in the period in which the change is
enacted. Accordingly, the impact of the Mexican tax reform, which was enacted October 31, 2013, has been recognized in 2013. The Company recognizes the effect of income tax positions only if those positions are more likely than not to
be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized and changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
F-13
Earnings (Loss) Per Share (EPS) —
Basic earnings (loss) per share is computed by
dividing net income by the weighted average number of common shares outstanding during the period. The effects of dilutive securities, stock options, unvested restricted stock and convertible debt are included in the diluted EPS calculation, when
applicable.
Concentrations of Credit Risk
— Financial instruments, that potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables with a variety of national and international oil and natural gas companies. We generally do not require collateral on our trade receivables.
At December 31, 2013 and 2012, we had deposits in domestic banks in excess of federally insured limits of approximately $104.3 million
and $12.2 million, respectively. The increase is primarily because as of January 1, 2013, all regular checking account deposits are only guaranteed up to $250,000 at each institution while prior to January 1, 2013, all regular
checking account deposits were guaranteed, except investments. In addition, we had deposits in foreign banks, which were not insured at December 31, 2013 and 2012 of $50.1 million and $34.5 million, respectively.
Our customer base primarily consists of major, independent and national oil and natural gas companies and integrated service providers. We
depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited constituted 15.6 percent of our revenues for 2013.
Fair value measurements
— For purposes of recording fair value adjustments for certain financial and
non-financial
assets and liabilities, and determining fair value disclosures, we estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the principal market for the asset or liability. Our valuation technique requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:
(1) unadjusted quoted prices for identical assets or liabilities in active markets (Level 1), (2) direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or
identical assets or liabilities in less active markets (Level 2) and (3) unobservable inputs that require significant judgment for which there is little or no market data (Level 3). When multiple input levels are required for a valuation, we
categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.
Derivative Financial Instruments
— We periodically use derivative instruments to manage risks associated with changes in
associated interest rate fluctuations in connection with our Secured Credit Agreement (see Note 9,
Derivative Financial Instruments
). These derivative instruments, which consist of variable-to-fixed interest rate swaps, are not
designated as hedges. Accordingly, the change in the fair value of the interest rate swaps is recognized in earnings at each reporting period.
Foreign Currency
— In our international rental tool business, for certain subsidiaries and branches outside the U.S., the local
currency is the functional currency. The financial statements of these subsidiaries and branches are translated into U.S. dollars as follows: (i) assets and liabilities at month-end exchange rates; (ii) income, expenses and cash flows at
monthly average exchange rates or exchange rates in effect on the date of the transaction; and (iii) stockholders’ equity at historical exchange rates. For those subsidiaries where the local currency is the functional currency, the
resulting translation adjustment is recorded as a component of accumulated other elements of comprehensive income (loss) in the accompanying consolidated balance sheets.
Stock-Based Compensation —
Under our long term incentive plans, we grant restricted stock awards (RSA), restricted stock
units (RSU) and performance-based award units (PAU). Our RSUs and RSAs are service-based awards and compensation expense is recognized ratably over the applicable vesting period, which is typically three years. The grant-date fair value of nonvested
RSAs and RSUs is determined based on the closing trading price of the company’s shares on the grant date. Our RSAs and RSUs are settled in stock upon vesting.
F-14
Share-based
compensation expense is recognized, net of an estimated forfeiture rate, which is based on historical experience and adjusted, if necessary, in
subsequent periods based on actual forfeitures. Our PAU awards contain market conditions which are based on our performance against our peers with regard to relative total shareholder return (TSR) and absolute and relative return on capital employed
(ROCE). The effect of the market condition is reflected in the grant-date fair value of the award using a lattice model for valuation. PAUs can be settled in cash or stock, or a combination of cash and stock. We evaluate the terms of each PAU award
to determine if the award should be accounted for as equity or a liability under the stock compensation rules of U.S. GAAP. Compensation costs for PAUs is recognized ratably over the service period.
We recognize share-based compensation expense in the same financial statement line item as cash compensation paid to the respective employees.
Tax deduction benefits for awards in excess of recognized compensation costs are reported as a financing cash flow.
Note 2 — Acquisition of
ITS
On April 22, 2013 we acquired International Tubular Services Limited and certain of its affiliates (collectively, ITS) and
other related assets (the ITS Acquisition) for an initial purchase price of $101.0 million paid at the closing of the ITS Acquisition. An additional $24.0 million was deposited into an escrow account, which will either be paid to the seller or to
us, as the case may be, in accordance with the Agreement. As of December 31, 2013 $5.0 million of escrow funds has been released to the seller. The ITS Acquisition closed simultaneously with the execution of the agreement on April 22,
2013.
Fair value of Consideration Transferred
The following details the fair value of the consideration transferred to effect the ITS Acquisition (dollars in thousands).
|
|
|
|
|
|
|
Cash paid to, or on behalf of, ITS and its equity holders
|
|
$
|
101,000
|
|
|
Cash deposited in escrow
|
|
|
19,000
|
|
|
Fair value of contingent consideration deposited in escrow for assets not acquired(1)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
Total fair value of the consideration transferred
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
(1)
|
Based on the terms of the acquisition agreement, $5.0 million of the $24.0 million in escrow to be paid to the seller is contingent upon certain future liabilities that could become due by ITS in certain jurisdictions.
Any payments in relation to these liabilities will be deducted from the $5.0 million escrow amount and the net balance of the escrow will be paid to the seller. We estimate that the entire $5.0 million in escrow will be paid to the seller, and
therefore, the estimated fair value of the consideration in escrow related to these liabilities is $5.0 million. We do not expect to receive any amount back from escrow, and therefore did not record a receivable from the escrow. Any changes to the
fair value of the contingent consideration in the future of less than $5.0 million will result in recording a receivable from escrow. The receivable will be recorded at fair value. As of December 31, 2013, the fair value of the receivable is
$0.0 million.
|
Preliminary Allocation of Consideration Transferred to Net Assets Acquired
Preliminary estimates of fair value of identifiable assets acquired and liabilities assumed in the ITS Acquisition were based on
management’s estimates, judgments and assumptions and are subject to change upon final valuation. As of December 31, 2013, the fair value estimate of certain identifiable assets acquired and liabilities assumed has been adjusted. These
estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values. Management estimated that the fair value of the net assets acquired less noncontrolling interest equals consideration paid.
Therefore, there was no goodwill recorded.
F-15
The final allocation of consideration will include changes in (1) amounts deposited in
escrow, (2) estimated fair values of property and equipment, (3) allocations to intangible assets and liabilities, (4) changes in contingent consideration, and (5) other assets and liabilities. These amounts will be finalized as
soon as possible, but no later than one year from the acquisition date.
|
|
|
|
|
|
|
|
|
April 22, 2013
|
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
7,009
|
|
|
Accounts and notes receivable, net(1)
|
|
|
50,043
|
|
|
Other current assets
|
|
|
1,803
|
|
|
Accounts payable and accrued liabilities
|
|
|
(39,156
|
)
|
|
Accrued income taxes
|
|
|
(1,251
|
)
|
|
|
|
|
|
|
|
Working capital excluding rig materials and supplies
|
|
|
18,448
|
|
|
Rig materials and supplies
|
|
|
11,514
|
|
|
Property, plant and equipment, net(2)
|
|
|
73,863
|
|
|
Investment in joint venture
|
|
|
4,134
|
|
|
Other noncurrent assets
|
|
|
2,818
|
|
|
|
|
|
|
|
|
Total tangible assets
|
|
|
110,777
|
|
|
Deferred income tax assets — current
|
|
|
222
|
|
|
Deferred income tax assets — noncurrent(3)
|
|
|
11,249
|
|
|
Intangible assets(4)
|
|
|
8,500
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
130,748
|
|
|
Other long-term liabilities
|
|
|
(211
|
)
|
|
Long-term deferred tax liability
|
|
|
(2,856
|
)
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
127,681
|
|
|
Less: Noncontrolling interest(5)
|
|
|
(2,681
|
)
|
|
|
|
|
|
|
|
Total consideration transferred
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
(1)
|
Gross contractual amounts receivable totaled $55.9 million as of the acquisition date.
|
|
(2)
|
We recorded an adjustment of $40.2 million to reduce the historical carrying value of the acquired property, plant and equipment to its estimated fair value.
|
|
(3)
|
In connection with the ITS Acquisition, we recorded a $5.0 million adjustment to increase deferred income tax assets primarily related to the differences between acquisition date estimated fair value and tax basis of
acquired property, plant and equipment.
|
|
(4)
|
We recorded $8.5 million to reflect the estimated fair value of definite lived intangible assets recognized in connection with the ITS Acquisition. Our depreciation and amortization expense will reflect this valuation
adjustment as the definite lived intangible assets are amortized in future periods. Definite lived intangible assets recorded in connection with the ITS Acquisition, which primarily relate to trade names, customer relationships, and developed
technology will be amortized over a weighted average period of approximately 3.4 years.
|
|
(5)
|
We recorded an adjustment of $1.0 million to write-down the noncontrolling interest to its estimated fair value. The estimated fair value of the noncontrolling interest was calculated as a percentage of the net assets
acquired related to certain subsidiaries in which ITS holds less than a 100 percent controlling interest. The fair value of the net assets of these subsidiaries was primarily based on the income approach valuation model.
|
Acquisition Related Costs
Acquisition-related transaction costs consisted of various advisory, compliance, legal, accounting, valuation and other professional or
consulting fees totaled approximately $22.5 million for the year ended December 31, 2013. The costs were expensed as incurred and are included in general and administrative expense in our
F-16
consolidated statement of operations. Debt issuance costs of $5.4 million associated with our $125 million term loan, fully funded by Goldman Sachs Bank USA as Sole Lead Arranger and
Administrative Agent (the Goldman Term Loan) issued on April 18, 2013 were initially deferred to be amortized to interest expense over the life of the term loan. However, the Goldman Term Loan was repaid on July 30, 2013 with net proceeds
from the issuance of $225.0 million aggregate principal amount of 7.50% Senior Notes due August 1, 2020 (7.50% Notes) (see Note 8 —
Long-Term Debt
, for further discussion) and the unamortized deferred costs of $5.2 million were
expensed during the 2013 third quarter.
Supplemental Pro forma Results
ITS’ results of operations have been included in our financial statements for periods subsequent to April 22, 2013, the effective
date of the ITS Acquisition. ITS contributed revenues of $88.0 million and net income of approximately $10.0 million to Parker Drilling for the period from the closing of the ITS Acquisition through December 31, 2013.
The following unaudited supplemental pro forma results present consolidated information for the years ended December 31, 2013 and 2012 as
if the ITS Acquisition had been completed on January 1, 2012. The pro forma results have been calculated after applying our accounting policies and include, among others, (i) the amortization associated with the fair value of the
acquired intangible assets, (ii) interest expense associated with the Goldman Term Loan and (iii) the impact of certain fair value adjustments such as a decrease in depreciation expense related to the write-down in property, plant and
equipment. The pro forma results do not include any potential synergies, non-recurring charges which result directly from the ITS Acquisition, cost savings or other expected benefits of the ITS Acquisition. The pro forma financial information
does not necessarily represent what would have occurred if the transaction had taken place at the beginning of the period presented and should not be taken as representative of our future consolidated results of operations. We have not concluded our
integration work. Accordingly, this pro forma information does not include all costs related to the integration nor the benefits we expect to realize from operating synergies.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
(unaudited)
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(Dollars in thousands,
except per share data)
|
|
|
Revenue
|
|
$
|
914,992
|
|
|
$
|
794,640
|
|
|
Net income
|
|
$
|
45,785
|
|
|
$
|
(14,117
|
)
|
|
Net income attributable to Parker Drilling
|
|
$
|
45,391
|
|
|
$
|
(13,981
|
)
|
|
Earnings per share — basic
|
|
$
|
0.38
|
|
|
$
|
(0.12
|
)
|
|
Earnings per share — diluted
|
|
$
|
0.37
|
|
|
$
|
(0.12
|
)
|
|
Basic number of shares
|
|
|
119,284,468
|
|
|
|
117,721,135
|
|
|
Diluted number of shares
|
|
|
121,224,550
|
|
|
|
119,093,590
|
|
Note 3 — Accumulated Other Comprehensive Income
Accumulated other comprehensive loss consisted of the following:
|
|
|
|
|
|
|
|
|
Foreign Currency Items
|
|
|
|
|
(in thousands)
|
|
|
December 31, 2012
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Current period other comprehensive income
|
|
|
1,888
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
$
|
1,888
|
|
|
|
|
|
|
|
No amounts were reclassified out of accumulated other comprehensive income for the year ended December 31, 2013.
F-17
Note 4 — Asset Impairment
Asset Impairment
During
the fourth quarter of 2011, we evaluated the present value of the future cash flows related to our arctic-class drilling rigs in accordance with the U.S. GAAP guidance for impairment or disposal of long-lived assets. The evaluation was performed as
a result of the delay in completion of the rigs to modify the rigs to meet their design and functional requirements and an increase in the cost of the rigs. The need for the modifications was determined as a result of comprehensive safety, technical
and operational reviews during commissioning activities of these prototype drilling rigs. The modification work extended the commissioning activities and increased the rigs’ total costs. At the time of the impairment evaluation, the two
rigs’ cost at completion was estimated to be $385 million, which included capitalized interest estimates of approximately $50.7 million. This cost exceeded the estimated fair value of the rigs based on their projected cash flows. Based on this
evaluation, the Company determined that the long-lived assets with a carrying amount of $339.5 million as of December 31, 2011, were no longer recoverable and were in fact impaired and recorded a charge in the 2011 fourth quarter of $170.0
million ($109.1 million, net of taxes) to reflect their estimated fair value of $169.5 million. Fair value was based on expected future cash flows using Level 3 inputs under the fair value measurement requirements. The cash flows are those expected
to be generated by our assets, discounted at the 10 percent rate of interest. In December 2012 we commenced drilling operations with the first arctic-class drilling rig. The second rig completed client acceptance testing and began drilling in
February 2013. The rigs are reported as part of the U.S. Drilling segment.
Provision for Reduction in Carrying Value of an Asset
During the 2013 fourth quarter, for two rigs previously reported as assets held for sale as of December 31, 2012, management
concluded that facts and circumstances no longer support the expectation that a sale would be consummated within a reasonable time period. As a result, we reclassified these assets back to assets held and used in accordance with generally accepted
accounting principles. Concurrently, we performed an impairment analysis of the two rigs and determined the fair value was less than the carrying amount before the assets were classified as held for sale, adjusted for any depreciation expense that
would have been recognized had the assets been continuously classified as held and used. Therefore, during the 2013 fourth quarter we recorded a non-cash charge of $1.9 million to reflect the rigs current estimated fair value. Additionally, during
the 2013 fourth quarter a sales agreement was terminated for three additional rigs which were previously expected to be sold prior to December 31, 2013. Upon termination of the sales agreement we performed a fair value analysis of the rigs and
concluded for one rig, the carrying value of the rig exceeded fair value. Therefore, during the 2013 fourth quarter we recorded a non-cash charge of $0.6 million. Fair value was based on expected future cash flows using Level 3 inputs in accordance
with fair value measurement requirements. The two rigs are reported as part of the International Drilling segment.
In 2011, we recognized
a charge of $1.4 million related to a final settlement of a bankruptcy proceeding.
Note 5 — Disposition of Assets
During the 2013 fourth quarter, we sold two rigs located in New Zealand, including rig related inventory, property and leasehold improvements.
The assets had a carrying value at the time of sale of $2.3 million and were sold for proceeds of $3.2 million resulting in a gain of approximately $0.9 million. The assets were part of our international drilling rig fleet. During the 2013 fourth
quarter we also completed the sale of a building located in Tulsa, OK. As a result of the completed sale, we recognized proceeds of $0.8 million and $0.1 million gain on the sale. Additionally, during the 2013 third quarter we sold a barge rig
located in Mexico with carrying value at the time of sale of $0.3 million for proceeds of $0.5 million, resulting in a $0.2 million gain. The barge rig was part of our Latin America rig fleet and has historically been included in the international
drilling segment.
In December 2012, we sold a 33 year old posted barge drilling rig for proceeds of $0.2 million, resulting in a $0.5
million loss. There were no individually significant asset dispositions in 2011.
F-18
In addition, during the normal course of operations, we periodically sell equipment deemed to be
excess, obsolete, or not currently required for operations.
Note 6 — Assets Held for Sale
We had no assets classified as assets held for sale as of December 31, 2013. During 2013, for five rigs previously reported as assets held
for sale, management concluded that facts and circumstances no longer support the expectation that a sale would be consummated within a reasonable time period. During the 2013 second quarter, we reclassified three rigs from assets held for sale to
assets held and used and inventory. We initially classified the three rigs as assets held for sale as of December 31, 2010. We performed an analysis of the fair value of the three rigs and determined the rigs’ carrying amount was less than
fair value; therefore, the rigs were reclassified at their carrying amount at the time the assets were classified as held for sale, adjusted for depreciation expense that would have been recognized had the assets been continuously classified as held
and used. The amount of additional depreciation recorded during the 2013 second quarter to place the assets in held and used categorization was $0.7 million.
Additionally, during the 2013 fourth quarter we reclassified two rigs from assets held for sale to assets held and used and inventory. We
initially classified these rigs as held for sale as of September 30, 2012. We performed an analysis of the fair value of the two rigs and determined the fair value was less than the carrying amount before the assets were classified as held for
sale, adjusted for any depreciation expense that would have been recognized had the assets been continuously classified as held and used. Therefore, during the 2013 fourth quarter we recorded a non-cash charge of $1.9 million to reflect the rigs
current estimated fair value.
We have adjusted the Assets held for sale, Inventory, and Property, plant and equipment balances for the
year ended December 31, 2012 from what was reported in our December 31, 2012 Form 10-K, to reflect the reclassification of these assets.
Note 7 — Income Taxes
Income (loss)
before income taxes is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in Thousands)
|
|
|
United States
|
|
$
|
32,136
|
|
|
$
|
52,422
|
|
|
$
|
(61,434
|
)
|
|
Foreign
|
|
|
20,651
|
|
|
|
18,555
|
|
|
|
(3,978
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,787
|
|
|
$
|
70,977
|
|
|
$
|
(65,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(3,658
|
)
|
|
$
|
7,791
|
|
|
$
|
17,168
|
|
|
State
|
|
|
1,968
|
|
|
|
733
|
|
|
|
1,264
|
|
|
Foreign
|
|
|
14,599
|
|
|
|
9,518
|
|
|
|
15,176
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
10,720
|
|
|
|
15,612
|
|
|
|
(46,694
|
)
|
|
State
|
|
|
2,820
|
|
|
|
4,296
|
|
|
|
1,864
|
|
|
Foreign
|
|
|
(841
|
)
|
|
|
(4,071
|
)
|
|
|
(3,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,608
|
|
|
$
|
33,879
|
|
|
$
|
(14,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
Total income tax expense differs from the amount computed by multiplying income before income
taxes by the U.S. federal income tax statutory rate. The reasons for this difference are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Amount
|
|
|
% of Pre-Tax
Income
|
|
|
Amount
|
|
|
% of Pre-Tax
Income
|
|
|
Amount
|
|
|
% of Pre-Tax
Income
|
|
|
Computed Expected Tax Expense
|
|
$
|
18,476
|
|
|
|
35
|
%
|
|
$
|
24,842
|
|
|
|
35
|
%
|
|
$
|
(22,894
|
)
|
|
|
35
|
%
|
|
Foreign Taxes
|
|
|
12,470
|
|
|
|
24
|
%
|
|
|
13,171
|
|
|
|
19
|
%
|
|
|
11,752
|
|
|
|
(17
|
)%
|
|
Tax Effect Different From Statutory Rates
|
|
|
(8,920
|
)
|
|
|
(17
|
)%
|
|
|
(8,080
|
)
|
|
|
(11
|
)%
|
|
|
(1,571
|
)
|
|
|
2
|
%
|
|
State Taxes, net of federal benefit
|
|
|
4,099
|
|
|
|
8
|
%
|
|
|
4,757
|
|
|
|
7
|
%
|
|
|
2,689
|
|
|
|
(4
|
)%
|
|
Foreign Tax Credits
|
|
|
(1,484
|
)
|
|
|
(3
|
)%
|
|
|
(1,867
|
)
|
|
|
(3
|
)%
|
|
|
(14,595
|
)
|
|
|
22
|
%
|
|
Kazakhstan Tax Settlement
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
(536
|
)
|
|
|
1
|
%
|
|
Change in Valuation Allowance
|
|
|
1,975
|
|
|
|
4
|
%
|
|
|
(1,662
|
)
|
|
|
(2
|
)%
|
|
|
2,542
|
|
|
|
(4
|
)%
|
|
Uncertain Tax Positions
|
|
|
2,472
|
|
|
|
5
|
%
|
|
|
(6,642
|
)
|
|
|
(9
|
)%
|
|
|
3,647
|
|
|
|
(6
|
)%
|
|
Permanent Differences
|
|
|
4,005
|
|
|
|
7
|
%
|
|
|
5,477
|
|
|
|
8
|
%
|
|
|
6,356
|
|
|
|
(10
|
)%
|
|
Prior Year Return to Provision Adjustments
|
|
|
(6,268
|
)
|
|
|
(12
|
)%
|
|
|
4,057
|
|
|
|
5
|
%
|
|
|
4,156
|
|
|
|
(6
|
)%
|
|
Other
|
|
|
(1,217
|
)
|
|
|
(2
|
)%
|
|
|
(174
|
)
|
|
|
(1
|
)%
|
|
|
(829
|
)
|
|
|
1
|
%
|
|
Unremitted Foreign Earnings-Current Year Adjustment
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
(5,484
|
)
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Tax Expense
|
|
$
|
25,608
|
|
|
|
49
|
%
|
|
$
|
33,879
|
|
|
|
48
|
%
|
|
$
|
(14,767
|
)
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The balances for the years ended December 31, 2012 and 2011 have been adjusted to reflect
reclassifications of $1.3 million and $5.6 million, respectively, between foreign taxes and, primarily, prior year return to provision adjustments and amendments and other. Management concluded based on the facts and circumstances during 2013 the
adjustments are closely related to items included in foreign taxes.
F-20
The components of the Company’s deferred tax assets and liabilities as of December 31,
2013 and 2012 are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Reserves established against realization of certain assets
|
|
$
|
1,504
|
|
|
$
|
1,634
|
|
|
Accruals not currently deductible for tax purposes
|
|
|
7,223
|
|
|
|
6,747
|
|
|
Other state deferred tax asset, net
|
|
|
990
|
|
|
|
361
|
|
|
Foreign Local Office
|
|
|
223
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross current deferred tax assets
|
|
|
9,940
|
|
|
|
8,742
|
|
|
Current deferred tax valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current deferred tax assets
|
|
|
9,940
|
|
|
|
8,742
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets:
|
|
|
|
|
|
Federal net operating loss carryforwards
|
|
|
—
|
|
|
|
—
|
|
|
State net operating loss carryforwards
|
|
|
864
|
|
|
|
3,095
|
|
|
Other state deferred tax asset, net
|
|
|
1,909
|
|
|
|
914
|
|
|
Foreign Tax Credits
|
|
|
27,462
|
|
|
|
25,977
|
|
|
FIN 48
|
|
|
8,317
|
|
|
|
8,015
|
|
|
Foreign tax
|
|
|
18,499
|
|
|
|
5,838
|
|
|
Asset Impairment
|
|
|
48,743
|
|
|
|
56,190
|
|
|
Accruals not currently deductible for tax purposes
|
|
|
1,017
|
|
|
|
—
|
|
|
Deferred compensation
|
|
|
2,436
|
|
|
|
—
|
|
|
Other
|
|
|
—
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross long-term deferred tax assets
|
|
|
109,247
|
|
|
|
100,100
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
(6,827
|
)
|
|
|
(4,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net non-current deferred tax assets, net of valuation allowance
|
|
|
102,420
|
|
|
|
95,295
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
112,360
|
|
|
|
104,037
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Property, Plant and equipment
|
|
|
(32,505
|
)
|
|
|
(19,139
|
)
|
|
Accruals
|
|
|
—
|
|
|
|
(1,066
|
)
|
|
Foreign tax local
|
|
|
(1,440
|
)
|
|
|
—
|
|
|
Deferred Compensation
|
|
|
—
|
|
|
|
2,001
|
|
|
Other state deferred tax liability, net
|
|
|
(4,819
|
)
|
|
|
(2,643
|
)
|
|
Other
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross non-current deferred tax liabilities
|
|
|
(38,767
|
)
|
|
|
(20,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
73,593
|
|
|
$
|
83,190
|
|
|
|
|
|
|
|
|
|
|
|
As part of the process of preparing the consolidated financial statements, the Company is required to
determine its provision for income taxes. This process involves estimating the annual effective tax rate and the nature and measurements of temporary and permanent differences resulting from differing treatment of items for tax and accounting
purposes. These differences and the operating loss and tax credit carryforwards result in deferred tax assets and liabilities. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or
a portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of appropriate
F-21
character in each taxing jurisdiction during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities
(including the impact of available carryback and carryforward periods), projected future taxable income, and tax planning strategies in making this assessment. To the extent the Company believes that it does not meet the test that recovery is
more likely than not, it establishes a valuation allowance. To the extent that the Company establishes a valuation allowance or changes this allowance in a period, it adjusts the tax provision or tax benefit in the consolidated statement of
operations. We use our judgment in determining provisions or benefits for income taxes, and any valuation allowance recorded against previously established deferred tax assets. Based upon the factors considered by management in assessing the
realizability of the deferred tax assets, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2013. The amount
of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
On September 13, 2013, the U.S. Treasury Department and the Internal Revenue Service issued final regulations that address costs incurred
in acquiring, producing, or improving tangible property (the “tangible property regulations”). The tangible property regulations are generally effective for tax years beginning on or after January 1, 2014. The tangible property
regulations required the Company to make additional tax accounting method changes as of January 1, 2014; however, the impact of these changes has not been material to the Company’s consolidated financial position, its results of
operations, or both.
The 2013 results include income tax benefits of $3.3 million related to the enacted Mexican tax reform as applied to
the expected future utilization of deferred tax assets and liabilities and $20.9 million for depreciation and amortization relating to our arctic-class drilling rigs in Alaska. In addition, we increased our valuation allowance by $2.0 million
primarily related to foreign net operating losses.
The 2012 results include income tax expenses of $1.7 million related to the effective
settlement of our US Federal Internal Revenue Service examination for the 2006 through 2010 periods and $7.7 million for depreciation and amortization relating to our arctic-class drilling rigs in Alaska. In addition, we decreased our valuation
allowance by $1.7 million primarily related to foreign NOLs.
The 2011 results include an income tax benefit of $60.9 million (federal and
state combined) related to the $170.0 million non-cash pretax impairment charge relating to our arctic-class drilling rigs in Alaska. In addition, we increased our valuation allowance by $2.5 million primarily related to foreign NOLs.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
In Thousands
|
|
|
Balance at January 1, 2013
|
|
$
|
(10,030
|
)
|
|
Additions based on tax positions taken during a prior period
|
|
|
(3,245
|
)
|
|
Reductions related to settlement of tax matters
|
|
|
1,066
|
|
|
Reductions related to a lapse of applicable statute of limitations
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
$
|
(12,209
|
)
|
|
|
|
|
|
|
In many cases, our uncertain tax positions are related to tax years that remain subject to examination by tax
authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2013:
|
|
|
|
|
|
|
Colombia
|
|
|
2008-present
|
|
|
Kazakhstan
|
|
|
2007-present
|
|
|
Mexico
|
|
|
2008-present
|
|
|
Papua New Guinea
|
|
|
2010-present
|
|
|
Russia
|
|
|
2010-present
|
|
|
United States — Federal
|
|
|
2011-present
|
|
|
United Kingdom
|
|
|
2010-present
|
|
F-22
At December 31, 2013, we had a liability for unrecognized tax benefits of $12.2 million
($5.4 million of which, if recognized, would favorably impact our effective tax rate).
The Company recognized interest and penalties
related to uncertain tax positions in income tax expense. As of December 31, 2013 and December 31, 2012 we had approximately $7.9 million and $7.0 million of accrued interest and penalties related to uncertain tax positions, respectively.
We recognized an increase of $0.9 million of interest and no penalties on unrecognized tax benefits for the year ended December 31, 2013.
As of December 31, 2013, the Company has permanently reinvested accumulated undistributed earnings of foreign subsidiaries and,
therefore, has not recorded a deferred tax liability related to subject earnings. Upon distribution of additional earnings in the form of dividends or otherwise, we would likely be subject to US income taxes and foreign withholding taxes. It is
not practicable to determine precisely the amount of taxes that may be payable on the eventual remittance of these earnings because of the application of US foreign tax credits. While we currently claim foreign tax credits, we may not be in a
credit position if and when future remittances of foreign earnings occur, or the limitation imposed by the Internal Revenue Code and regulations thereunder may not allow the credits to be utilized during the applicable carryback and carryforward
periods.
Note 8 — Long-Term Debt
The following table illustrates the Company’s current debt portfolio as of December 31, 2013 and December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
(Dollars in Thousands)
|
|
|
7.50% Senior Notes, due August 2020
|
|
$
|
225,000
|
|
|
$
|
—
|
|
|
9.125% Senior Notes, due April 2018
|
|
|
428,781
|
|
|
|
429,205
|
|
|
Term Note — Effective interest rate of 3.21 percent at December 31, 2012
|
|
|
—
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
653,781
|
|
|
|
479,205
|
|
|
Less current portion
|
|
|
25,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
628,781
|
|
|
$
|
469,205
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, we have no debt maturities prior to 2018. However, we have classified $25.0
million of 9.125% Senior Notes (9.125% Notes) due April 2018, as current debt as management intends to repay this debt prior to maturity. The aggregate maturities of long-term debt, including unamortized premiums of $3.8 million, for 2018 and
thereafter is $628.8 million. Subsequent to December 31, 2013, we issued $360.0 million aggregate principal amount of 6.75% Senior Notes due 2022 (6.75% Notes). Net proceeds from the 6.75% Notes offering plus a $40.0 million draw on the Secured
Credit Agreement and cash on hand, were utilized to redeem $416.2 million aggregate principal amount of our outstanding 9.125% Notes. After payment for the tendered notes, $8.8 million aggregate principal amount of our 9.125% Notes remains
outstanding. At December 31, 2013 management had the ability and intent to refinance the 9.125% Notes. With the issuance of the 6.75% Notes and the $40.0 million borrowing on the Secured Credit Agreement, we refinanced $400.0 million of our
long-term debt, which remains classified as long-term debt as of December 31, 2013. The remaining $25.0 million of 9.125% Notes is classified as current debt as management intends to repay this portion of the debt prior to maturity. See Note 21
— Subsequent Events, for further discussion.
7.50% Senior Notes, due August 2020
On July 30, 2013, we issued $225.0 million aggregate principal amount of 7.50% Notes pursuant to an Indenture between the Company and The
Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 7.50% Notes offering were primarily used to repay the $125.0 million aggregate principal amount of the Goldman Term Loan, to repay $45.0 million of Term Loan borrowings
under our Secured Credit Agreement and for general corporate purposes.
F-23
The 7.50% Notes are general unsecured obligations of the Company and rank equal in right of
payment with all of our existing and future senior unsecured indebtedness. The 7.50% Notes are jointly and severally guaranteed by all of our subsidiaries that guarantee indebtedness under our Secured Credit Agreement Interest on the 7.50% Notes is
payable on February 1 and August 1 of each year, beginning February 1, 2014. Debt issuance costs related to the 7.50% Notes were $5.3 million ($5.1 million, net of amortization as of December 31, 2013) and will be amortized over
the term of the notes using the effective interest rate method.
At any time prior to August 1, 2016, we may redeem up to 35 percent
of the aggregate principal amount of the 7.50% Notes at a redemption price of 107.50 percent of the principal amount, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of certain equity offerings by us. On and after
August 1, 2016, we may redeem all or a part of the 7.50% Notes upon appropriate notice, at a redemption price of 103.750 percent of the principal amount, and at redemption prices decreasing each year thereafter to par beginning August 1,
2018. If we experience certain changes in control, we must offer to repurchase the 7.50% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.
The Indenture restricts our ability and the ability of certain subsidiaries to: (i) sell assets, (ii) pay dividends or make other
distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments, (iv) incur or guarantee additional indebtedness; (v) create or incur liens; (vi) enter into sale and
leaseback transactions; (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or consolidate with other entities, (ix) enter into transactions with affiliates, and (x) engage in certain business
activities. Additionally, the Indenture contains certain restrictive covenants designating certain events as Events of Default. These covenants are subject to a number of important exceptions and qualifications.
9.125% Senior Notes, due April 2018
On March 22, 2010, we issued $300.0 million aggregate principal amount of 9.125% Notes pursuant to an Indenture between the Company and
The Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 9.125% Notes offering were primarily used to redeem the $225.0 million aggregate principal amount of our 9.625% Senior Notes due 2013 and to repay $42.0 million of
borrowings under our Secured Credit Agreement.
On April 25, 2012, we issued an additional $125.0 million aggregate principal amount
of 9.125% Notes under the same indenture at a price of 104.0 percent of par, resulting in gross proceeds of $130.0 million. Net proceeds from the offering were utilized to refinance $125.0 million aggregate principal amount of the 2.125% Convertible
Notes due July 2012. We repurchased $122.9 million aggregate principal amount of the 2.125% Convertible Notes tendered pursuant to a tender offer on May 9, 2012 and paid off the remaining $2.1 million at their stated maturity on
July 15, 2012.
The 9.125% Notes are general unsecured obligations of the Company and rank equal in right of payment with all of our
existing and future senior unsecured indebtedness. The 9.125% Notes are jointly and severally guaranteed by substantially all of our direct and indirect subsidiaries other than immaterial subsidiaries and subsidiaries generating revenues primarily
outside the United States. Interest on the 9.125% Notes is payable on April 1 and October 1 of each year. Debt issuance costs related to the 9.125% Notes of approximately $11.6 million ($7.7 million, net of amortization) are being
amortized over the term of the notes using the effective interest rate method.
On January 7, 2014, we commenced a tender and consent
solicitation with respect to the 9.125% Notes. The tender offer price was $1,061.98, inclusive of a $30.00 consent payment, for each $1,000 principal amount of 9.125% Notes, plus accrued and unpaid interest. On January 22, 2014, we paid $453.7
million for the tendered 9.125% Notes, comprised of $416.2 million of aggregate principal amount of the 9.125% Notes, $25.8 million of tender and consent premiums and $11.7 million of accrued interest. After payment for the tendered 9.125% Notes,
$8.8 million aggregate principal amount of our 9.125% Notes remains outstanding.
F-24
At any time after to April 1, 2014, we may redeem all or a part of the 9.125% Notes upon
appropriate notice, at a redemption price of 104.563 percent of the principal amount, and at redemption prices decreasing each year thereafter to par beginning April 1, 2016. If we experience certain changes in control, we must offer to
repurchase the 9.125% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.
On January 24, 2014, the Indenture was amended to remove most of the restrictions on our ability and the ability of certain subsidiaries
to: (i) sell assets, (ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments, (iv) incur or guarantee additional indebtedness;
(v) create or incur liens; (vi) enter into sale and leaseback transactions; (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or consolidate with other entities, (ix) enter into
transactions with affiliates, and (x) engage in certain business activities. The Indenture also was amended to remove certain restrictive covenants designating certain events as Events of Default. Additionally, the remaining restrictive
covenants are subject to a number of important exceptions and qualifications.
Goldman Term Loan
In connection with the ITS Acquisition described in Note 2,
Acquisition of ITS,
on April 18, 2013, we entered into the $125 million
Goldman Term Loan. The Goldman Term Loan was repaid on July 30, 2013 with net proceeds from issuance of the 7.50% Notes. In connection with the repayment of the Goldman Term Loan we incurred debt extinguishment costs of $5.2 million.
2.125% Convertible Senior Notes, due July 2012
On July 5, 2007, we issued $125.0 million aggregate principal amount of 2.125% Convertible Notes. As noted above, on May 9, 2012, we
repurchased $122.9 million aggregate principal amount of the 2.125% Convertible Notes pursuant to a tender offer. The tender offer price was $1,003.27 for each $1,000 principal amount of 2.125% Convertible Notes, plus accrued and unpaid interest.
This repurchase resulted in the recording of debt extinguishment costs of $1.8 million related to the accelerated amortization of both the unamortized debt issuance costs and debt discount associated with the 2.125% Convertible Notes. The remaining
$2.1 million aggregate principal amount of non-tendered 2.125% Convertible Notes was subsequently paid off at their stated maturity on July 15, 2012.
Amended and Restated Credit Agreement
On December 14, 2012, we entered into an Amended and Restated Credit Agreement (Secured Credit Agreement) consisting of a senior secured
$80.0 million Revolver and senior secured term loan facility (Term Loan) of $50.0 million. The Secured Credit Agreement amended and restated the Prior Credit Agreement. We entered into the Secured Credit Agreement to extend its maturity from
May 14, 2013 to December 14, 2017 and to decrease the range of Applicable Rates under our Revolver. The Secured Credit Agreement provides that, subject to certain conditions, including the approval of the Administrative Agent and the
lenders’ acceptance (or additional lenders being joined as new lenders), the amount of the Term Loan or Revolver can be increased by an additional $50.0 million, so long as after giving effect to such increase, the Aggregate Commitments shall
not be in excess of $180.0 million.
Our obligations under the Secured Credit Agreement are guaranteed by substantially all of our
domestic subsidiaries, each of which has executed guaranty agreements; and are secured by first priority liens on our accounts receivable, specified barge rigs and rental equipment. The Secured Credit Agreement contains customary affirmative and
negative covenants with which we were in compliance as of December 31, 2013 and December 31, 2012. The Secured Credit Agreement terminates on December 14, 2017.
F-25
On July 19, 2013, we entered into an amendment to our Secured Credit Agreement which, among
other things, permits us or any of our subsidiaries (other than certain immaterial subsidiaries) to incur indebtedness pursuant to additional unsecured senior notes in an aggregate principal amount not to exceed $250.0 million at any one time
outstanding; provided that any such notes shall (x) have a scheduled maturity occurring after the maturity date of our Secured Credit Agreement, (y) contain terms (including covenants and events of default) no more restrictive, taken as a
whole, to us and our subsidiaries than those contained in our Secured Credit Agreement and (z) have no scheduled amortization, no sinking fund requirements and no maintenance financial covenants. In addition, pursuant to the amendment, and
subject to the terms and conditions set forth in the Secured Credit Agreement, to the extent we repay the principal amount of Term Loans outstanding under our Secured Credit Agreement, until April 30, 2014 we may re-borrow, in the form of
additional term loans, up to $45.0 million of the principal amount of such outstanding term loans we have repaid, provided that such $45.0 million borrowing amount will decrease by $2.5 million at the end of each quarter beginning September 30,
2013 and ending March 31, 2014, such that the borrowing availability on December 31, 2013 was $40.0 million and on April 30, 2014 would be $37.5 million.
Revolver
Our
Revolver is available for general corporate purposes and to support letters of credit. Interest on Revolver loans accrues at a Base Rate plus an Applicable Rate or LIBOR plus an Applicable Rate. Under the Secured Credit Agreement, the Applicable
Rate varies from a rate per annum ranging from 2.50 percent to 3.00 percent for LIBOR rate loans and 1.50 percent to 2.00 percent for base rate loans, determined by reference to the consolidated leverage ratio (as defined in the Secured Credit
Agreement). Under the Prior Credit Agreement, the Applicable Rate varied from a rate per annum ranging from 2.75 percent to 3.25 percent for LIBOR rate loans and 1.75 percent to 2.25 percent for base rate loans. Revolving loans are available subject
to a borrowing base calculation based on a percentage of eligible accounts receivable, certain specified barge drilling rigs and rental equipment of the Company and its subsidiary guarantors. There were no revolving loans outstanding at
December 31, 2013 and December 31, 2012. Letters of credit outstanding as of December 31, 2013 and December 31, 2012 totaled $4.6 million and $4.5 million, respectively.
Term Loan
The
Term Loan originated at $50.0 million on December 14, 2012 and requires quarterly principal payments of $2.5 million beginning March 31, 2013. Interest on the Term Loan accrues at a Base Rate plus 2.00 percent or LIBOR plus 3.00 percent.
The Prior Credit Agreement required quarterly principal payments of $6.0 million, and interest accrued at a Base Rate plus 2.25 percent or LIBOR plus 3.25 percent. The were no borrowings on the Term Loan at December 31, 2013. The outstanding
balance under the Term Loan as of December 31, 2012 was $50.0 million.
Note 9 — Derivative Financial Instruments
During the 2011 second quarter, we entered into two variable-to-fixed interest rate swap agreements as a strategy to manage the floating rate
risk on the Term Loan borrowings under the Secured Credit Agreement. The two agreements fixed the interest rate on a notional amount of $73.0 million of borrowings at 3.878 percent for the period beginning June 27, 2011 and terminating
May 14, 2013. The notional amount of the swap agreements decreased correspondingly with amortization of the Term Loan under the Prior Credit Agreement. We did not apply hedge accounting to the agreements and, accordingly, change in the fair
value of the interest rate swaps were recognized in earnings. As of December 31, 2013 the swap agreements had expired and as of December 31, 2012, the fair value of the interest rate swap was a liability of $0.1 million and was recorded in
accrued liabilities in our consolidated balance sheets. For the year ended December 31, 2013, we recognized in earnings a nominal gain relating to these contracts. For both years ended December 31, 2012 and December 31, 2011 we
recognized a nominal loss, relating to these contracts.
F-26
Note 10 — Fair Value of Financial Instruments
Certain of our assets and liabilities are required to be measured at fair value on a recurring basis. For purposes of recording fair value
adjustments for certain financial and non-financial assets and liabilities, and determining fair value disclosures, we estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the principal market for the asset or liability.
The FASB fair value measurement and disclosure guidance
requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:
Level 1 — Unadjusted
quoted prices for identical assets or liabilities in active markets
Level 2 — Direct or indirect observable inputs, including quoted prices or other
market data, for similar assets or liabilities inactive markets or identical assets or liabilities in less active markets and
Level 3 — Unobservable
inputs that require significant judgment for which there is little or no market data.
When multiple input levels are required for a
valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable. The amounts reported
in our consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. The carrying amount of our interest rate swap agreements represents the estimated fair value, measured using Level 2
inputs. As of December 31, 2013 the swap agreements had expired and as of December 31, 2012, the fair value of the interest rate swap was a liability of $0.1 million and was recorded in accrued liabilities in our consolidated balance
sheets.
Fair value of our debt instruments is determined using Level 2 inputs. Fair values and related carrying values of our debt
instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
December 31, 2012
|
|
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
Carrying Amount
|
|
|
Fair Value
|
|
|
|
|
(in thousands)
|
|
|
Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.50% Notes
|
|
$
|
225,000
|
|
|
$
|
236,250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
9.125% Notes
|
|
|
425,000
|
|
|
|
446,250
|
|
|
|
425,000
|
|
|
|
453,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
650,000
|
|
|
$
|
682,500
|
|
|
$
|
425,000
|
|
|
$
|
453,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As discussed in Note 4, in accordance with the impairment or disposal of long-lived assets guidance, during
the fourth quarter of 2011, our arctic-class rigs with a carrying value as of December 31, 2011 of $339.5 million were written down to their estimated fair value of $169.5 million, resulting in a pretax non-cash charge of $170.0 million which
is included in earnings for the period. The fair value was based on expected future cash flows using Level 3 inputs.
The assets acquired
and liabilities assumed in the ITS Acquisition were recorded at fair value in accordance with U.S. GAAP. Acquisition date fair values represent either Level 2 fair value measurements (current assets and liabilities, property, plant and equipment) or
Level 3 fair value measurements (intangible assets).
Market conditions could cause an instrument to be reclassified from Level 1 to Level
2, or Level 2 to Level 3. There were no transfers between levels of the fair value hierarchy or any changes in the valuation techniques used during the year ended December 31, 2013.
F-27
Note 11 — Common Stock and Stockholders’ Equity
Stock Plans
— The Company’s employee and non-employee director stock plans are summarized as follows:
The 2010 Long-Term Incentive Plan, as amended and restated (the Plan) was approved by the stockholders at the Annual Meeting of Stockholders on
May 8, 2013. The Plan authorizes the compensation committee or the board of directors to issue stock options, stock appreciation rights, RSAs, RSUs, PAUs and other types of awards in cash or stock to key employees, consultants, and directors.
The maximum number of shares that may be delivered pursuant to the awards granted under the Amended and Restated 2010 Long Term Incentive Plan is 11,000,000 shares of common stock. As of December 31, 2013 there were 5,130,182 shares remaining
available under the Plan.
For service-based awards and performance-based awards with graded vesting conditions, we recognize compensation
expense on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. For market-based awards that vest at the end of the service period, we recognize
compensation expense on a straight-line basis through the end of the service period. Share-based awards generally vest over three years. Share-based compensation expense is recognized, net of an estimated forfeiture rate, which is based on
historical experience and adjusted, if necessary, in subsequent periods based on actual forfeitures. The fair value of nonvested RSAs and RSUs is determined based on the closing trading price of the company’s shares on the grant date. Our RSAs
and RSUs are settled in stock upon vesting. Our PAU awards can be settled in cash or stock, or a combination of cash and stock. We evaluate the terms of each PAU award to determine if the award should be accounted for as equity or a liability under
the stock compensation rules of U.S. GAAP.
We recognize share-based compensation expense in the same financial statement line item as
cash compensation paid to the respective employees. Tax deduction benefits for awards in excess of recognized compensation costs are reported as a financing cash flow.
On September 17, 2012, Gary Rich was elected as President, Chief Executive Officer and Director of the Company. As part of his employment
agreement, he was granted 349,651 RSUs. Additionally, on May 9, 2013 Chris Weber was elected Senior Vice President and Chief Financial Officer of the Company. As part of his employment agreement, he was granted 261,438 RSUs. Both of these
awards were granted outside of the Company’s 2010 Plan but are subject to substantially the same terms and conditions of other service-based RSUs granted by the Company to its executive officers.
Information regarding the Company’s Long-Term Incentive plans is summarized below:
|
|
|
|
|
|
|
|
|
|
|
Nonvested Shares
|
|
Shares
|
|
|
Weighted
Average
Grant-Date
Fair
Value
|
|
|
Nonvested at January 1, 2013
|
|
|
2,812,482
|
|
|
$
|
5.15
|
|
|
Granted
|
|
|
2,602,973
|
|
|
|
4.77
|
|
|
Vested
|
|
|
(1,636,373
|
)
|
|
|
5.00
|
|
|
Forfeited
|
|
|
(370,727
|
)
|
|
|
5.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2013
|
|
|
3,408,355
|
|
|
$
|
4.97
|
|
|
|
|
|
|
|
|
|
|
|
In 2013 and 2012, we issued 2,602,973 and 1,558,347, respectively, of restricted shares to selected key
personnel. Total stock-based compensation expense recognized for the years ended December 31, 2013, 2012, and 2011 was $9.4 million, $7.2 million, and $5.9 million, respectively, all of which was related to nonvested stock. The total fair value
of the shares vested during the years ended December 31, 2013, 2012, and 2011 was
F-28
$7.4 million, $5.2 million, and $6.9 million, respectively. The fair value of RSAs and RSUs is determined based on the closing trading price of the company’s shares on the grant date. The
weighted-average grant-date fair value of shares granted during the years 2013, 2012, and 2011 was $4.77, $5.37, and $5.61, respectively. Stock-based compensation expense is included in our consolidated statements of operations in both “General
and administration expense” and “Operating expenses.”
Nonvested RSUs at December 31, 2013 totaled
3,408,355 shares and total unrecognized compensation cost related to unamortized nonvested stock awards was $8.4 million as of December 31, 2013. The remaining unrecognized compensation cost related to non-vested stock awards will be
amortized over a weighted-average vesting period of approximately 20.8 months.
During the years ended December 31, 2013 and
2012, we granted to certain of our officers and key employees a total of 18,000 and 38,429 PAUs under the Plan, respectively. Subsequent to the award of these PAUs, 13,358 and 3,955 units were forfeited during 2013 and 2012, respectively. Incentive
grants included in this issuance were based on the attainment of pre-established performance goals. Each PAU has a nominal value of $100.00. Awards are dependent upon our total stockholder return and return on capital employed relative to a peer
group of companies over a three-year performance period. A maximum of 200 percent of the number of PAUs granted may be earned if performance at the maximum level is achieved. Compensation expense recognized related to the PAUs for the years
ended December 31, 2013, 2012, and 2011 was $1.8 million, $0.5 million, and $2.1 million, respectively.
As of December 31, 2013
and 2012, we had no stock options outstanding or exercisable and we had 668,897 and 1,709,963 shares held in treasury stock, respectively.
Note 12
— Reconciliation of Income and Number of Shares Used to Calculate Basic and Diluted Earnings per Share (EPS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2013
|
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per-Share
Amount
|
|
|
Basic EPS
|
|
$
|
27,015,000
|
|
|
|
119,284,468
|
|
|
$
|
0.23
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
|
|
|
|
1,940,082
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
27,015,000
|
|
|
|
121,224,550
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2012
|
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per-Share
Amount
|
|
|
Basic EPS
|
|
$
|
37,313,000
|
|
|
|
117,721,135
|
|
|
$
|
0.32
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
|
|
|
|
1,372,455
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
$
|
37,313,000
|
|
|
|
119,093,590
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2011
|
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per-Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
$
|
(50,451,000
|
)
|
|
|
116,081,590
|
|
|
$
|
(0.43
|
)
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
$
|
(50,451,000
|
)
|
|
|
116,081,590
|
|
|
$
|
(0.43
|
)
|
F-29
For the years ended December 31, 2013 and 2012, weighted-average shares outstanding used in
our computation of diluted EPS includes the dilutive effect of potential common shares. For the year ended December 31, 2011, all potential common shares have been excluded from the calculation of weighted-average shares outstanding used in our
computation of diluted EPS as the company incurred a loss for that year, and therefore, inclusion of potential common shares in the calculation of diluted EPS would be anti-dilutive.
Note 13 — Employee Benefit Plan
The
Company sponsors a defined contribution 401(k) plan (Plan) in which substantially all U.S. employees are eligible to participate. The Company matches 100 percent of each participant’s pre-tax contributions in an amount not exceeding 4
percent of the participant’s compensation and 50 percent of each participant’s pre-tax contributions in an amount not exceeding 2 percent of the participant’s compensation, up to the maximum amounts of contributions allowed by law.
The costs of our matching contributions to the Plan were $3.6 million, $2.8 million and $2.4 million in 2013, 2012 and 2011, respectively. Employees become 100 percent vested in the employer match contributions immediately upon participation in
the Plan. Coverage for office based employees begins on the date of hire. For rig-based and rental tools employees, coverage begins on the first of the month following completion of 30 calendar days of continuous full-time employment.
F-30
Note 14 — Reportable Segments
Our business is comprised of five segments: (1) Rental Tools, (2) U.S. Barge Drilling, (3) U.S. Drilling, (4) International
Drilling, and (5) Technical Services. Historically, we reported a sixth segment, Construction Contract, for which there was no activity during the nine months ended September 30, 2013 or the year ended December 31, 2012. As a result
of activity in the fourth quarter of 2013, this segment has been included in this report. We eliminate inter-segment revenue and expenses. The following table represents the results of operations by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Operations by Reportable Industry Segment:
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Tools(1)
|
|
$
|
310,041
|
|
|
$
|
246,900
|
|
|
$
|
237,068
|
|
|
U.S. Barge Drilling(1)
|
|
|
136,855
|
|
|
|
123,672
|
|
|
|
93,763
|
|
|
U.S. Drilling(1)
|
|
|
66,928
|
|
|
|
1,387
|
|
|
|
—
|
|
|
International Drilling(1)
|
|
|
333,962
|
|
|
|
291,772
|
|
|
|
318,481
|
|
|
Technical Services(1)
|
|
|
26,386
|
|
|
|
14,030
|
|
|
|
27,284
|
|
|
Construction Contract(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
9,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
874,172
|
|
|
|
677,761
|
|
|
|
686,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Tools(2)
|
|
|
91,164
|
|
|
|
113,899
|
|
|
|
120,822
|
|
|
U.S. Barge Drilling(2)
|
|
|
51,257
|
|
|
|
39,608
|
|
|
|
11,115
|
|
|
U.S. Drilling(2)
|
|
|
(4,484
|
)
|
|
|
(15,168
|
)
|
|
|
(3,915
|
)
|
|
International Drilling(2)
|
|
|
23,732
|
|
|
|
13,138
|
|
|
|
22,948
|
|
|
Technical Services(2)
|
|
|
2,050
|
|
|
|
79
|
|
|
|
5,680
|
|
|
Construction Contract(2)
|
|
|
4,728
|
|
|
|
—
|
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
168,447
|
|
|
|
151,556
|
|
|
|
157,421
|
|
|
General and administrative expense
|
|
|
(68,025
|
)
|
|
|
(46,257
|
)
|
|
|
(31,567
|
)
|
|
Impairments and other charges
|
|
|
—
|
|
|
|
—
|
|
|
|
(170,000
|
)
|
|
Provision for reduction in carrying value of certain assets
|
|
|
(2,544
|
)
|
|
|
—
|
|
|
|
(1,350
|
)
|
|
Gain on disposition of assets, net
|
|
|
3,994
|
|
|
|
1,974
|
|
|
|
3,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
101,872
|
|
|
|
107,273
|
|
|
|
(41,837
|
)
|
|
Interest expense
|
|
|
(47,820
|
)
|
|
|
(33,542
|
)
|
|
|
(22,594
|
)
|
|
Interest income
|
|
|
2,450
|
|
|
|
153
|
|
|
|
256
|
|
|
Loss on extinguishment of debt
|
|
|
(5,218
|
)
|
|
|
(2,130
|
)
|
|
|
—
|
|
|
Changes in fair value of derivative positions
|
|
|
53
|
|
|
|
55
|
|
|
|
(110
|
)
|
|
Other
|
|
|
1,450
|
|
|
|
(832
|
)
|
|
|
(1,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
52,787
|
|
|
$
|
70,977
|
|
|
$
|
(65,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
Rental Tools
|
|
$
|
350,429
|
|
|
$
|
194,600
|
|
|
U.S. Barge Drilling
|
|
|
89,884
|
|
|
|
99,409
|
|
|
U.S. Drilling
|
|
|
354,208
|
|
|
|
369,683
|
|
|
International Drilling
|
|
|
460,461
|
|
|
|
414,546
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets
|
|
|
1,254,982
|
|
|
|
1,078,238
|
|
|
Corporate and other assets(3)
|
|
|
279,774
|
|
|
|
177,495
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,534,756
|
|
|
$
|
1,255,733
|
|
|
|
|
|
|
|
|
|
|
|
F-31
|
1)
|
In 2013, our largest customer, Exxon Neftegas Limited (ENL), constituted approximately 15.6 percent, respectively, of our total consolidated revenues and approximately 38.3 percent of our International Drilling segment
and 33.9 percent of our Technical Services segment. In 2012, our two largest customers, ENL and Schlumberger, constituted approximately 12 percent and 10 percent, respectively, of our total consolidated revenues and approximately 27 percent and 24
percent of our International Drilling segment, respectively. In 2011, our largest customer, ENL constituted approximately 16 percent of our total revenues and approximately 34 percent of our International Drilling segment.
|
|
2)
|
Operating income is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
|
|
3)
|
This category includes corporate assets as well as minimal assets for our Technical Services segment primarily related to office furniture and fixtures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Operations by Reportable Industry Segment:
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Tools
|
|
$
|
76,928
|
|
|
$
|
61,958
|
|
|
$
|
61,702
|
|
|
U.S. Barge Drilling
|
|
|
23,694
|
|
|
|
8,808
|
|
|
|
7,339
|
|
|
U.S. Drilling
|
|
|
1,809
|
|
|
|
86,786
|
|
|
|
99,915
|
|
|
International Drilling
|
|
|
39,115
|
|
|
|
15,240
|
|
|
|
15,011
|
|
|
Corporate
|
|
|
14,099
|
|
|
|
18,751
|
|
|
|
6,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
155,645
|
|
|
$
|
191,543
|
|
|
$
|
190,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Tools
|
|
|
54,625
|
|
|
|
42,944
|
|
|
|
40,497
|
|
|
U.S. Barge Drilling
|
|
|
13,796
|
|
|
|
13,906
|
|
|
|
17,006
|
|
|
U.S. Drilling
|
|
|
16,120
|
|
|
|
7,011
|
|
|
|
2,223
|
|
|
International Drilling
|
|
|
46,022
|
|
|
|
45,967
|
|
|
|
48,965
|
|
|
Corporate and other(1)
|
|
|
3,490
|
|
|
|
3,189
|
|
|
|
3,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
134,053
|
|
|
$
|
113,017
|
|
|
$
|
112,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
This category includes depreciation of corporate assets as well as minimal depreciation for our Technical Services segment primarily related to office furniture and fixtures.
|
F-32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Operations by Geographic Area:
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa and Middle East
|
|
$
|
58,416
|
|
|
$
|
26,528
|
|
|
$
|
6,774
|
|
|
Asia Pacific
|
|
|
170,165
|
|
|
|
117,392
|
|
|
|
147,643
|
|
|
CIS
|
|
|
55,165
|
|
|
|
44,312
|
|
|
|
67,255
|
|
|
Europe
|
|
|
16,788
|
|
|
|
—
|
|
|
|
—
|
|
|
Latin America
|
|
|
120,261
|
|
|
|
103,540
|
|
|
|
96,810
|
|
|
United States
|
|
|
453,377
|
|
|
|
385,989
|
|
|
|
367,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
874,172
|
|
|
|
677,761
|
|
|
|
686,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa and Middle East(1)
|
|
|
(383
|
)
|
|
|
(2,027
|
)
|
|
|
(8,724
|
)
|
|
Asia Pacific(1)
|
|
|
21,995
|
|
|
|
16,550
|
|
|
|
23,528
|
|
|
CIS(1)
|
|
|
11,888
|
|
|
|
(9,580
|
)
|
|
|
8,709
|
|
|
Europe(1)
|
|
|
274
|
|
|
|
—
|
|
|
|
—
|
|
|
Latin America(1)
|
|
|
1,140
|
|
|
|
9,581
|
|
|
|
1,126
|
|
|
United States(1)
|
|
|
133,533
|
|
|
|
137,032
|
|
|
|
132,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
168,447
|
|
|
|
151,556
|
|
|
|
157,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense
|
|
|
(68,025
|
)
|
|
|
(46,257
|
)
|
|
|
(31,567
|
)
|
|
Impairments and other charges
|
|
|
—
|
|
|
|
—
|
|
|
|
(170,000
|
)
|
|
Provision for reduction in carrying value of certain assets
|
|
|
(2,544
|
)
|
|
|
—
|
|
|
|
(1,350
|
)
|
|
Gain on disposition of assets, net
|
|
|
3,994
|
|
|
|
1,974
|
|
|
|
3,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
101,872
|
|
|
|
107,273
|
|
|
|
(41,837
|
)
|
|
Interest expense
|
|
|
(47,820
|
)
|
|
|
(33,542
|
)
|
|
|
(22,594
|
)
|
|
Interest income
|
|
|
2,450
|
|
|
|
153
|
|
|
|
256
|
|
|
Loss on extinguishment of debt
|
|
|
(5,218
|
)
|
|
|
(2,130
|
)
|
|
|
—
|
|
|
Changes in fair value of derivative positions
|
|
|
53
|
|
|
|
55
|
|
|
|
(110
|
)
|
|
Other
|
|
|
1,450
|
|
|
|
(832
|
)
|
|
|
(1,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
52,787
|
|
|
$
|
70,977
|
|
|
$
|
(65,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa and Middle East
|
|
$
|
110,336
|
|
|
$
|
25,032
|
|
|
|
|
|
|
Asia Pacific
|
|
|
44,606
|
|
|
|
18,688
|
|
|
|
|
|
|
CIS
|
|
|
55,722
|
|
|
|
110,848
|
|
|
|
|
|
|
Europe
|
|
|
82,473
|
|
|
|
—
|
|
|
|
|
|
|
Latin America
|
|
|
15,198
|
|
|
|
63,899
|
|
|
|
|
|
|
United States
|
|
|
563,021
|
|
|
|
574,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
871,356
|
|
|
$
|
793,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Operating income is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
|
|
2)
|
Long-lived assets primarily consist of property, plant and equipment, net and exclude assets held for sale, if any.
|
F-33
Note 15 — Commitments and Contingencies
The Company has various lease agreements for office space, equipment, vehicles and personal property. These obligations extend through 2025 and
are typically non-cancelable. Most leases contain renewal options and certain of the leases contain escalation clauses. Future minimum lease payments at December 31, 2013, under operating leases with non-cancelable terms are as follows:
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
(Dollars in Thousands)
|
|
|
2014
|
|
|
13,979
|
|
|
2015
|
|
|
9,488
|
|
|
2016
|
|
|
7,592
|
|
|
2017
|
|
|
7,114
|
|
|
2018
|
|
|
5,944
|
|
|
Thereafter
|
|
|
7,988
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
52,105
|
|
|
|
|
|
|
|
Total rent expense for all operating leases amounted to $19.9 million for 2013, $11.8 million for 2012 and
$12.1 million for 2011.
We are self-insured for certain losses relating to workers’ compensation, employers’ liability, general
liability (for onshore liability), protection and indemnity (for offshore liability) and property damage. Our exposure (that is, the retention or deductible) per occurrence is $250,000 for worker’s compensation, employer’s liability,
$500,000 general liability, protection and indemnity and maritime employers’ liability (Jones Act). In addition, we assume a $500,000 annual aggregate deductible for protection and indemnity and maritime employers’ liability claims. The
annual aggregate deductible is reduced by every dollar that exceeds the $500,000 per occurrence retention. We also assume a retention for foreign casualty exposures of $100,000 for workers’ compensation, employers’ liability, and
$1,000,000 for general liability losses and a $100,000 deductible for auto liability claims. For all primary insurances mentioned above, the Company has excess coverage for those claims that exceed the retention and annual aggregate deductible. We
maintain
actuarially-determined
accruals in our consolidated balance sheets to cover the self-insurance retentions.
We have self-insured retentions for certain other losses relating to rig, equipment, property, business interruption and political, war, and
terrorism risks which vary according to the type of rig and line of coverage. Political risk insurance is procured for international operations. However, this coverage may not adequately protect us against liability from all potential consequences.
As of December 31, 2013 and 2012, our gross self-insurance accruals for workers’ compensation, employers’ liability,
general liability, protection and indemnity and maritime employers’ liability totaled $5.7 million and $4.7 million, respectively and the related insurance recoveries/receivables were $1.7 million and $1.2 million, respectively.
We have entered into employment agreements with terms of one to two years with certain members of management with automatic one year renewal
periods at expiration dates. The agreements provide for, among other things, compensation, benefits and severance payments. The employment agreements also provide for lump sum compensation and benefits in the event of termination within two years
following a change in control of the Company.
We are a party to various lawsuits and claims arising out of the ordinary course of
business. We estimate the range of our liability related to pending litigation when we believe the amount or range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and
there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related
F-34
to the lawsuits or claims. As additional information becomes available, we assess the potential liability related to our pending litigation and claims and revise our estimates. Due to
uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ significantly from our estimates. In the opinion of management and based on liability accruals provided, our ultimate exposure with respect to these
pending lawsuits and claims is not expected to have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our results of operations for a particular reporting period.
Asbestos-Related Claims
We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of
monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At December 31, 2013, there were approximately 15 of these lawsuits in which we are one of many
defendants. These lawsuits have been filed in the United States in the State of Mississippi.
Our subsidiaries named in these
asbestos-related lawsuits intend to defend themselves vigorously and, based on the information available to us at this time, we do not expect the outcome to have a material adverse effect on our financial condition, results of operations or cash
flows. However, we are unable to predict the ultimate outcome of these lawsuits. No amounts were accrued at December 31, 2013.
Customs Agent and Foreign Corrupt Practices Act (FCPA) Settlement
On April 16, 2013, the Company and the Department of Justice (DOJ) entered into a deferred prosecution agreement (DPA), under which the
DOJ will defer for three years prosecuting the Company for criminal violations of the anti-bribery provisions of the FCPA relating to the Company’s retention and use of an individual agent in Nigeria with respect to certain customs-related
issues, in return for: (i) the Company’s acceptance of responsibility for, and agreement not to contest or contradict the truthfulness of, the statement of facts and allegations that have been filed in a United States District Court
concurrently with the DPA; (ii) the Company’s payment of an approximately $11.76 million fine; (iii) the Company’s reaffirming its commitment to compliance with the FCPA and other applicable anti-corruption laws in connection
with the Company’s operations, and continuing cooperation with domestic and foreign authorities in connection with the matters that are the subject of the DPA; (iv) the Company’s commitment to continue to address any identified areas
for improvement in the Company’s internal controls, policies and procedures relating to compliance with the FCPA and other applicable anti-corruption laws if, and to the extent, not already addressed; and (v) the Company’s agreement
to report to the DOJ in writing annually during the term of the DPA regarding remediation of the matters that are the subject of the DPA, implementation of any enhanced internal controls, and any evidence of improper payments the Company may have
discovered during the term of the agreement. If the Company remains in compliance with the terms of the DPA throughout its effective period, the charge against the Company will be dismissed with prejudice. The Company also settled a related civil
complaint filed by the SEC in a United States District Court.
Demand Letter and Derivative Litigation
In April 2010, we received a demand letter from a law firm representing Ernest Maresca. The letter states that Mr. Maresca is one of our
stockholders and that he believes that certain of our current and former officers and directors violated their fiduciary duties related to the issues described above under “Customs Agent and Foreign Corrupt Practices Act (FCPA)
Settlement.” The letter requests that our Board of Directors take action against the individuals in question. In response to this letter, the Board formed a special committee to evaluate the issues raised by the letter and determine a course of
action for the Company. The special committee engaged its own counsel for the investigation and evaluated potential claims against all individuals identified in the demand letter. The special committee considered whether pursuing each of the
individuals named in the demand
F-35
letter was in the best interests of the Company based upon a variety of factors, including among others, whether the Company had a potential cause of action against the individual, the defenses
the individual might offer to such a claim, the ability of the individual to satisfy any judgment the Company might secure as a result of a claim asserted, and other risks to the Company of pursuing the claims. After taking various factors into
account, on July 29, 2013, the special committee recommended to the Board that the Company not pursue any action against the current and former officers and directors named in the demand letter, and the Board accepted such recommendation.
ITS Internal Controls
Our due diligence process with respect to the ITS Acquisition identified certain transactions that suggest that ITS’ internal controls may
have failed to prevent violations of potentially applicable international trade and anti-corruption laws, including those of the United Kingdom. We have investigated such violations and have and will, as appropriate, make any identified violations
known to relevant authorities, cooperate with any resulting investigations and take proper remediation measures (including seeking any necessary government authorizations). While it is possible that matters may arise where a contingency may require
further accounting considerations, we do not believe that as a result of these matters a loss is probable and estimable at this time.
Note 16 —
Related Party Transactions
Consulting Agreement
The Company was a party to a consulting agreement with Robert L. Parker Sr., the former Chairman of the Board of Directors of the Company and
the father of our current Executive Chairman, Robert L. Parker Jr. The consulting agreement expired on April 30, 2011. Under the agreement, Mr. Parker Sr. was paid consulting fees of $40,000 during the year ended December 31, 2011.
For one year after the termination of the consulting agreement, Mr. Parker Sr. was prohibited from soliciting business from any of our customers or individuals with which we have done business, from becoming interested in any business that
competes with the Company, and from recruiting any employees of the Company. Under the consulting agreement, Mr. Parker Sr. also represented the Company on the U.S.-Kazakhstan Business Council. In addition, we pay a monthly rental fee to
Mr. Parker Sr. for various pieces of artwork which are displayed throughout our corporate office. We paid Mr. Parker $36,000 for each of the years ended December 31, 2013, 2012, and 2011 for the artwork rental.
Effective January 1, 2012, the Company entered into two separate ranch lease agreements under which the Company agreed to pay a daily
usage fee per person for utilization of the Cypress Springs Ranch owned by the Robert L. Parker, Sr. and Catherine M. Parker Family Limited Partnership and the Camp Verde Ranch owned by Robert L. Parker, Jr. During 2013, the Company incurred fees of
$14,281 in 2013 for the Cypress Springs Ranch. During 2012, the company incurred fees of $39,875 and $1,650 in 2012 for the Cypress Springs Ranch and Camp Verde Ranch, respectively, pursuant to the ranch lease agreements for the right to utilize the
premises of the ranches for the purpose of hosting business meetings.
Other Related Party Agreements
During 2013 and 2012, one of the Company’s directors held executive positions at Apache Corporation (Apache), including the positions of
President and Chief Corporate Officer, Executive Vice President and Chief Financial Officer and Chief Corporate Officer. During 2013 and 2012, affiliates of Apache paid affiliates of the Company a total of $40.8 million and $31.2 million,
respectively, for performance of drilling services and provision of rental tools. Also during 2013, one of our directors served on the board of directors of Gardner Denver, Inc. (GD). During 2013, affiliates of the Company paid affiliates of GD $0.2
million for goods and services provided to the Company. This information is considered and discussed annually in connection with the Board of Directors’ assessment of facts and circumstances that could preclude a determination that such
director is independent under the New York Stock Exchange governance listing standards.
F-36
Note 17 — Supplementary Information
At December 31, 2013, accrued liabilities included $8.1 million of deferred mobilization fees, $16.8 million of accrued interest expense,
$2.7 million of worker’s compensation liabilities and $33.5 million of accrued payroll and payroll taxes. Other long-term obligations included $3.0 million of workers’ compensation liabilities as of December 31, 2013.
At December 31, 2012, accrued liabilities included $1.6 million of deferred mobilization fees, $9.7 million of accrued interest expense,
$2.3 million of worker’s compensation liabilities and $26.0 million of accrued payroll and payroll taxes. Other long-term obligations included $2.5 million of workers’ compensation liabilities as of December 31, 2012.
Note 18 —
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 December 31, 2013 and December 31, 2012 and for the years ended December 31, 2013, 2012, and 2011. The consolidating condensed financial statements present investments in both consolidated and
unconsolidated subsidiaries using the equity method of accounting.
F-37
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2013
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
468,073
|
|
|
$
|
549,295
|
|
|
$
|
(143,196
|
)
|
|
$
|
874,172
|
|
|
Operating expenses
|
|
|
—
|
|
|
|
252,211
|
|
|
|
462,657
|
|
|
|
(143,196
|
)
|
|
|
571,672
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
77,416
|
|
|
|
56,637
|
|
|
|
—
|
|
|
|
134,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
—
|
|
|
|
138,446
|
|
|
|
30,001
|
|
|
|
—
|
|
|
|
168,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expense(1)
|
|
|
(202
|
)
|
|
|
(67,083
|
)
|
|
|
(740
|
)
|
|
|
—
|
|
|
|
(68,025
|
)
|
|
Provision for reduction in carrying value of certain assets
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,544
|
)
|
|
|
—
|
|
|
|
(2,544
|
)
|
|
Gain on disposition of assets, net
|
|
|
—
|
|
|
|
1,759
|
|
|
|
2,235
|
|
|
|
—
|
|
|
|
3,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
(202
|
)
|
|
|
73,122
|
|
|
|
28,952
|
|
|
|
—
|
|
|
|
101,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(51,439
|
)
|
|
|
(335
|
)
|
|
|
(9,930
|
)
|
|
|
13,884
|
|
|
|
(47,820
|
)
|
|
Changes in fair value of derivative positions
|
|
|
53
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
53
|
|
|
Interest income
|
|
|
3,824
|
|
|
|
1,761
|
|
|
|
10,749
|
|
|
|
(13,884
|
)
|
|
|
2,450
|
|
|
Loss on extinguishment of debt
|
|
|
(5,218
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,218
|
)
|
|
Other
|
|
|
(1
|
)
|
|
|
(143
|
)
|
|
|
1,594
|
|
|
|
—
|
|
|
|
1,450
|
|
|
Equity in net earnings of subsidiaries
|
|
|
55,430
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(55,430
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
2,649
|
|
|
|
1,283
|
|
|
|
2,413
|
|
|
|
(55,430
|
)
|
|
|
(49,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,447
|
|
|
|
74,405
|
|
|
|
31,365
|
|
|
|
(55,430
|
)
|
|
|
52,787
|
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(21,431
|
)
|
|
|
18,737
|
|
|
|
15,603
|
|
|
|
—
|
|
|
|
12,909
|
|
|
Deferred
|
|
|
(3,137
|
)
|
|
|
19,454
|
|
|
|
(3,618
|
)
|
|
|
—
|
|
|
|
12,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
(24,568
|
)
|
|
|
38,191
|
|
|
|
11,985
|
|
|
|
—
|
|
|
|
25,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
27,015
|
|
|
|
36,214
|
|
|
|
19,380
|
|
|
|
(55,430
|
)
|
|
|
27,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net (loss) attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
164
|
|
|
|
—
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling interest
|
|
$
|
27,015
|
|
|
$
|
36,214
|
|
|
$
|
19,216
|
|
|
$
|
(55,430
|
)
|
|
$
|
27,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
General and administration expenses for field operations are included in operating expenses.
|
F-38
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
393,738
|
|
|
$
|
385,279
|
|
|
$
|
(101,256
|
)
|
|
$
|
677,761
|
|
|
Operating expenses
|
|
|
—
|
|
|
|
184,946
|
|
|
|
329,498
|
|
|
|
(101,256
|
)
|
|
|
413,188
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
65,354
|
|
|
|
47,663
|
|
|
|
—
|
|
|
|
113,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
—
|
|
|
|
143,438
|
|
|
|
8,118
|
|
|
|
—
|
|
|
|
151,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expense(1)
|
|
|
(182
|
)
|
|
|
(45,758
|
)
|
|
|
(317
|
)
|
|
|
—
|
|
|
|
(46,257
|
)
|
|
Gain on disposition of assets, net
|
|
|
—
|
|
|
|
775
|
|
|
|
1,199
|
|
|
|
—
|
|
|
|
1,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
(182
|
)
|
|
|
98,455
|
|
|
|
9,000
|
|
|
|
—
|
|
|
|
107,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(37,326
|
)
|
|
|
(151
|
)
|
|
|
(8,739
|
)
|
|
|
12,674
|
|
|
|
(33,542
|
)
|
|
Interest income
|
|
|
9,863
|
|
|
|
5,073
|
|
|
|
41,999
|
|
|
|
(56,782
|
)
|
|
|
153
|
|
|
Loss on extinguishment of debt
|
|
|
(2,130
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,130
|
)
|
|
Changes in fair value of derivative positions
|
|
|
55
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55
|
|
|
Other
|
|
|
—
|
|
|
|
(206
|
)
|
|
|
(626
|
)
|
|
|
—
|
|
|
|
(832
|
)
|
|
Equity in net earnings of subsidiaries
|
|
|
43,884
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(43,884
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
14,346
|
|
|
|
4,716
|
|
|
|
32,634
|
|
|
|
(87,992
|
)
|
|
|
(36,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
14,164
|
|
|
|
103,171
|
|
|
|
41,634
|
|
|
|
(87,992
|
)
|
|
|
70,977
|
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(25,406
|
)
|
|
|
32,781
|
|
|
|
10,667
|
|
|
|
—
|
|
|
|
18,042
|
|
|
Deferred
|
|
|
2,257
|
|
|
|
15,429
|
|
|
|
(1,849
|
)
|
|
|
—
|
|
|
|
15,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
(23,149
|
)
|
|
|
48,210
|
|
|
|
8,818
|
|
|
|
—
|
|
|
|
33,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
37,313
|
|
|
|
54,961
|
|
|
|
32,816
|
|
|
|
(87,992
|
)
|
|
|
37,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net (loss) attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
(215
|
)
|
|
|
—
|
|
|
|
(215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling interest
|
|
|
37,313
|
|
|
|
54,961
|
|
|
|
33,031
|
|
|
|
(87,992
|
)
|
|
|
37,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
General and administration expenses for field operations are included in operating expenses.
|
F-39
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2011
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Total revenues
|
|
$
|
—
|
|
|
$
|
375,798
|
|
|
$
|
426,491
|
|
|
$
|
(116,055
|
)
|
|
$
|
686,234
|
|
|
Operating expenses
|
|
|
—
|
|
|
|
174,955
|
|
|
|
357,777
|
|
|
|
(116,055
|
)
|
|
|
416,677
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
62,744
|
|
|
|
49,392
|
|
|
|
—
|
|
|
|
112,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
—
|
|
|
|
138,099
|
|
|
|
19,322
|
|
|
|
—
|
|
|
|
157,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expense(1)
|
|
|
(218
|
)
|
|
|
(30,968
|
)
|
|
|
(381
|
)
|
|
|
—
|
|
|
|
(31,567
|
)
|
|
Impairment and other charges
|
|
|
—
|
|
|
|
(170,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(170,000
|
)
|
|
Provision for reduction in carrying value of certain assets
|
|
|
—
|
|
|
|
(1,350
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,350
|
)
|
|
Gain on disposition of assets, net
|
|
|
—
|
|
|
|
2,706
|
|
|
|
953
|
|
|
|
—
|
|
|
|
3,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
(218
|
)
|
|
|
(61,513
|
)
|
|
|
19,894
|
|
|
|
—
|
|
|
|
(41,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(26,654
|
)
|
|
|
(17,889
|
)
|
|
|
(8,865
|
)
|
|
|
30,814
|
|
|
|
(22,594
|
)
|
|
Interest income
|
|
|
18,131
|
|
|
|
750
|
|
|
|
12,189
|
|
|
|
(30,814
|
)
|
|
|
256
|
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Changes in fair value of derivative positions
|
|
|
(110
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(110
|
)
|
|
Other
|
|
|
—
|
|
|
|
(315
|
)
|
|
|
(812
|
)
|
|
|
—
|
|
|
|
(1,127
|
)
|
|
Equity in net earnings of subsidiaries
|
|
|
(23,484
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
23,484
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and (expense)
|
|
|
(32,117
|
)
|
|
|
(17,454
|
)
|
|
|
2,512
|
|
|
|
23,484
|
|
|
|
(23,575
|
)
|
|
Income (loss) before income taxes
|
|
|
(32,335
|
)
|
|
|
(78,967
|
)
|
|
|
22,406
|
|
|
|
23,484
|
|
|
|
(65,412
|
)
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(13,402
|
)
|
|
|
27,169
|
|
|
|
19,841
|
|
|
|
—
|
|
|
|
33,608
|
|
|
Deferred
|
|
|
31,518
|
|
|
|
(57,030
|
)
|
|
|
(22,863
|
)
|
|
|
—
|
|
|
|
(48,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
|
18,116
|
|
|
|
(29,861
|
)
|
|
|
(3,022
|
)
|
|
|
—
|
|
|
|
(14,767
|
)
|
|
Net income (loss)
|
|
|
(50,451
|
)
|
|
|
(49,106
|
)
|
|
|
25,428
|
|
|
|
23,484
|
|
|
|
(50,645
|
)
|
|
Less: Net (loss) attributable to noncontrolling interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(194
|
)
|
|
$
|
—
|
|
|
$
|
(194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling interest
|
|
|
(50,451
|
)
|
|
|
(49,106
|
)
|
|
|
25,622
|
|
|
|
23,484
|
|
|
|
(50,451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
General and administration expenses for field operations are included in operating expenses.
|
F-40
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
|
|
|
Accumulated other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
1,888
|
|
|
|
—
|
|
|
|
1,888
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(47,616
|
)
|
|
|
(424,224
|
)
|
|
|
208,790
|
|
|
|
215,434
|
|
|
|
(47,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,251
|
|
|
$
|
11,023
|
|
|
$
|
34,612
|
|
|
$
|
—
|
|
|
$
|
87,886
|
|
|
Accounts and notes receivable, net
|
|
|
(7
|
)
|
|
|
77,927
|
|
|
|
90,695
|
|
|
|
—
|
|
|
|
168,615
|
|
|
Rig materials and supplies
|
|
|
—
|
|
|
|
2,835
|
|
|
|
26,587
|
|
|
|
—
|
|
|
|
29,422
|
|
|
Deferred costs
|
|
|
—
|
|
|
|
—
|
|
|
|
1,089
|
|
|
|
—
|
|
|
|
1,089
|
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
7,615
|
|
|
|
1,127
|
|
|
|
—
|
|
|
|
8,742
|
|
|
Other tax assets
|
|
|
46,249
|
|
|
|
(31,136
|
)
|
|
|
18,411
|
|
|
|
—
|
|
|
|
33,524
|
|
|
Other current assets
|
|
|
—
|
|
|
|
8,708
|
|
|
|
4,145
|
|
|
|
—
|
|
|
|
12,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
88,493
|
|
|
|
76,972
|
|
|
|
176,666
|
|
|
|
—
|
|
|
|
342,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
60
|
|
|
|
548,794
|
|
|
|
244,343
|
|
|
|
—
|
|
|
|
793,197
|
|
|
Investment in subsidiaries and intercompany advances
|
|
|
1,492,708
|
|
|
|
(523,143
|
)
|
|
|
1,467,617
|
|
|
|
(2,437,182
|
)
|
|
|
—
|
|
|
Other noncurrent assets
|
|
|
(378,297
|
)
|
|
|
370,877
|
|
|
|
219,196
|
|
|
|
(91,371
|
)
|
|
|
120,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,202,964
|
|
|
$
|
473,500
|
|
|
$
|
2,107,822
|
|
|
$
|
(2,528,553
|
)
|
|
$
|
1,255,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
|
Accounts payable and accrued liabilities
|
|
|
65,839
|
|
|
|
94,037
|
|
|
|
205,864
|
|
|
|
(227,994
|
)
|
|
|
137,746
|
|
|
Accrued income taxes
|
|
|
—
|
|
|
|
612
|
|
|
|
3,508
|
|
|
|
—
|
|
|
|
4,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
75,839
|
|
|
|
94,649
|
|
|
|
209,372
|
|
|
|
(227,994
|
)
|
|
|
151,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
469,205
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
469,205
|
|
|
Other long-term liabilities
|
|
|
3,933
|
|
|
|
6,129
|
|
|
|
13,120
|
|
|
|
—
|
|
|
|
23,182
|
|
|
Long-term deferred tax liability
|
|
|
—
|
|
|
|
36,894
|
|
|
|
(16,047
|
)
|
|
|
—
|
|
|
|
20,847
|
|
|
Intercompany payables
|
|
|
62,583
|
|
|
|
43,657
|
|
|
|
216,369
|
|
|
|
(322,609
|
)
|
|
|
—
|
|
|
Contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
19,818
|
|
|
|
18,049
|
|
|
|
43,003
|
|
|
|
(61,052
|
)
|
|
|
19,818
|
|
|
Capital in excess of par value
|
|
|
646,217
|
|
|
|
733,112
|
|
|
|
1,455,246
|
|
|
|
(2,188,358
|
)
|
|
|
646,217
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(74,631
|
)
|
|
|
(458,990
|
)
|
|
|
187,530
|
|
|
|
271,460
|
|
|
|
(74,631
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total controlling interest stockholders’ equity
|
|
|
591,404
|
|
|
|
292,171
|
|
|
|
1,685,779
|
|
|
|
(1,977,950
|
)
|
|
|
591,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
(771
|
)
|
|
|
—
|
|
|
|
(771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
591,404
|
|
|
|
292,171
|
|
|
|
1,685,008
|
|
|
|
(1,977,950
|
)
|
|
|
590,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,202,964
|
|
|
$
|
473,500
|
|
|
$
|
2,107,822
|
|
|
$
|
(2,528,553
|
)
|
|
$
|
1,255,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,015
|
|
|
$
|
36,214
|
|
|
$
|
19,380
|
|
|
$
|
(55,430
|
)
|
|
$
|
27,179
|
|
|
Other comprehensive gain, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,525
|
)
|
|
|
—
|
|
|
|
(1,525
|
)
|
|
Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
3,051
|
|
|
|
—
|
|
|
|
3,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive gain, net of tax:
|
|
|
—
|
|
|
|
—
|
|
|
|
1,526
|
|
|
|
—
|
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
27,015
|
|
|
|
36,214
|
|
|
|
20,906
|
|
|
|
(55,430
|
)
|
|
|
28,705
|
|
|
Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
198
|
|
|
|
—
|
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to controlling interest
|
|
$
|
27,015
|
|
|
$
|
36,214
|
|
|
$
|
21,104
|
|
|
$
|
(55,430
|
)
|
|
$
|
28,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-43
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
37,313
|
|
|
$
|
54,961
|
|
|
$
|
32,816
|
|
|
$
|
(87,992
|
)
|
|
$
|
37,098
|
|
|
Other comprehensive gain, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive gain, net of tax:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
37,313
|
|
|
|
54,961
|
|
|
|
32,816
|
|
|
|
(87,992
|
)
|
|
|
37,098
|
|
|
Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
215
|
|
|
|
—
|
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to controlling interest
|
|
$
|
37,313
|
|
|
$
|
54,961
|
|
|
$
|
33,031
|
|
|
$
|
(87,992
|
)
|
|
$
|
37,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2011
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-
Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(50,451
|
)
|
|
$
|
(49,106
|
)
|
|
$
|
25,428
|
|
|
$
|
23,484
|
|
|
$
|
(50,645
|
)
|
|
Other comprehensive gain, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive gain, net of tax:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
(50,451
|
)
|
|
|
(49,106
|
)
|
|
|
25,428
|
|
|
|
23,484
|
|
|
|
(50,645
|
)
|
|
Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
194
|
|
|
|
—
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to controlling interest
|
|
$
|
(50,451
|
)
|
|
$
|
(49,106
|
)
|
|
$
|
25,622
|
|
|
$
|
23,484
|
|
|
$
|
(50,451
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-45
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
27,015
|
|
|
$
|
36,214
|
|
|
$
|
19,380
|
|
|
$
|
(55,430
|
)
|
|
$
|
27,179
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
77,416
|
|
|
|
56,637
|
|
|
|
—
|
|
|
|
134,053
|
|
|
Loss on extinguishment of debt
|
|
|
5,218
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,218
|
|
|
Gain on disposition of assets
|
|
|
—
|
|
|
|
(1,759
|
)
|
|
|
(2,235
|
)
|
|
|
—
|
|
|
|
(3,994
|
)
|
|
Deferred income tax expense
|
|
|
(3,137
|
)
|
|
|
19,454
|
|
|
|
(3,618
|
)
|
|
|
—
|
|
|
|
12,699
|
|
|
Provision for reduction in carrying value of certain assets
|
|
|
—
|
|
|
|
—
|
|
|
|
2,544
|
|
|
|
—
|
|
|
|
2,544
|
|
|
Expenses not requiring cash
|
|
|
13,173
|
|
|
|
12
|
|
|
|
4,579
|
|
|
|
—
|
|
|
|
17,764
|
|
|
Equity in net earnings of subsidiaries
|
|
|
(55,430
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
55,430
|
|
|
|
—
|
|
|
Change in accounts receivable
|
|
|
(7
|
)
|
|
|
(12,888
|
)
|
|
|
(20,617
|
)
|
|
|
—
|
|
|
|
(33,512
|
)
|
|
Change in other assets
|
|
|
74,411
|
|
|
|
(85,520
|
)
|
|
|
487
|
|
|
|
—
|
|
|
|
(10,622
|
)
|
|
Change in accrued income taxes
|
|
|
6,617
|
|
|
|
(1,052
|
)
|
|
|
4,889
|
|
|
|
—
|
|
|
|
10,454
|
|
|
Change in liabilities
|
|
|
6,934
|
|
|
|
(877
|
)
|
|
|
(6,343
|
)
|
|
|
—
|
|
|
|
(286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
74,794
|
|
|
|
31,000
|
|
|
|
55,703
|
|
|
|
—
|
|
|
|
161,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(94,269
|
)
|
|
|
(61,376
|
)
|
|
|
—
|
|
|
|
(155,645
|
)
|
|
Proceeds from the sale of assets
|
|
|
—
|
|
|
|
3,725
|
|
|
|
4,493
|
|
|
|
—
|
|
|
|
8,218
|
|
|
Acquisition of ITS, net of cash acquired
|
|
|
—
|
|
|
|
(6,903
|
)
|
|
|
(111,088
|
)
|
|
|
—
|
|
|
|
(117,991
|
)
|
|
Intercompany dividend payment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
—
|
|
|
|
(97,447
|
)
|
|
|
(167,971
|
)
|
|
|
—
|
|
|
|
(265,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from debt issuance
|
|
|
350,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
350,000
|
|
|
Proceeds from draw on revolver credit facility
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Repayment of long term debt
|
|
|
(125,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(125,000
|
)
|
|
Repayment of term loan
|
|
|
(50,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,000
|
)
|
|
Paydown on revolver credit facility
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment of debt issuance costs
|
|
|
(11,172
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,172
|
)
|
|
Payment of debt extinguishment costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Excess tax benefit from stock-based compensation
|
|
|
896
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
896
|
|
|
Intercompany advances, net
|
|
|
(193,072
|
)
|
|
|
63,734
|
|
|
|
129,338
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(28,348
|
)
|
|
|
63,734
|
|
|
|
129,338
|
|
|
|
—
|
|
|
|
164,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
46,446
|
|
|
|
(2,713
|
)
|
|
|
17,070
|
|
|
|
—
|
|
|
|
60,803
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
42,251
|
|
|
|
11,023
|
|
|
|
34,612
|
|
|
|
—
|
|
|
|
87,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
88,697
|
|
|
$
|
8,310
|
|
|
$
|
51,682
|
|
|
$
|
—
|
|
|
$
|
148,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated condensed financial statements.
F-46
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
37,313
|
|
|
$
|
54,961
|
|
|
$
|
32,816
|
|
|
$
|
(87,992
|
)
|
|
$
|
37,098
|
|
|
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
65,354
|
|
|
|
47,663
|
|
|
|
—
|
|
|
|
113,017
|
|
|
Loss on extinguishment of debt
|
|
|
2,130
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,130
|
|
|
Gain on disposition of assets
|
|
|
—
|
|
|
|
(775
|
)
|
|
|
(1,199
|
)
|
|
|
—
|
|
|
|
(1,974
|
)
|
|
Deferred income tax expense
|
|
|
2,257
|
|
|
|
15,429
|
|
|
|
(1,849
|
)
|
|
|
—
|
|
|
|
15,837
|
|
|
Expenses not requiring cash
|
|
|
16,558
|
|
|
|
33,644
|
|
|
|
(27,602
|
)
|
|
|
—
|
|
|
|
22,600
|
|
|
Equity in net earnings of subsidiaries
|
|
|
(43,884
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
43,884
|
|
|
|
—
|
|
|
Change in accounts receivable
|
|
|
(445
|
)
|
|
|
(1,788
|
)
|
|
|
17,474
|
|
|
|
—
|
|
|
|
15,241
|
|
|
Change in other assets
|
|
|
1,649
|
|
|
|
2,060
|
|
|
|
(9,200
|
)
|
|
|
—
|
|
|
|
(5,491
|
)
|
|
Change in accrued income taxes
|
|
|
(4,055
|
)
|
|
|
220
|
|
|
|
(2,267
|
)
|
|
|
—
|
|
|
|
(6,102
|
)
|
|
Change in liabilities
|
|
|
3,914
|
|
|
|
(4,158
|
)
|
|
|
(2,413
|
)
|
|
|
—
|
|
|
|
(2,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
15,437
|
|
|
|
164,947
|
|
|
|
53,423
|
|
|
|
(44,108
|
)
|
|
|
189,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(176,333
|
)
|
|
|
(15,210
|
)
|
|
|
—
|
|
|
|
(191,543
|
)
|
|
Proceeds from the sale of assets
|
|
|
—
|
|
|
|
2,062
|
|
|
|
1,875
|
|
|
|
—
|
|
|
|
3,937
|
|
|
Intercompany dividend payment
|
|
|
(8,387
|
)
|
|
|
(4,357
|
)
|
|
|
(31,364
|
)
|
|
|
44,108
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(8,387
|
)
|
|
|
(178,628
|
)
|
|
|
(44,699
|
)
|
|
|
44,108
|
|
|
|
(187,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from debt issuance
|
|
|
130,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
130,000
|
|
|
Proceeds from draw on revolver credit facility
|
|
|
7,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,000
|
|
|
Paydown on senior notes
|
|
|
(125,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(125,000
|
)
|
|
Paydown on term note
|
|
|
(18,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,000
|
)
|
|
Paydown on revolver credit facility
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Payment of debt issuance costs
|
|
|
(4,859
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,859
|
)
|
|
Payment of debt extinguishment costs
|
|
|
(555
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(555
|
)
|
|
Excess tax benefit from stock-based compensation
|
|
|
(662
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(662
|
)
|
|
Intercompany advances, net
|
|
|
(8,393
|
)
|
|
|
20,492
|
|
|
|
(12,099
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(20,469
|
)
|
|
|
20,492
|
|
|
|
(12,099
|
)
|
|
|
—
|
|
|
|
(12,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(13,419
|
)
|
|
|
6,811
|
|
|
|
(3,375
|
)
|
|
|
—
|
|
|
|
(9,983
|
)
|
|
Cash and cash equivalents at beginning of year
|
|
|
55,670
|
|
|
|
4,212
|
|
|
|
37,987
|
|
|
|
—
|
|
|
|
97,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
42,251
|
|
|
$
|
11,023
|
|
|
$
|
34,612
|
|
|
$
|
—
|
|
|
$
|
87,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated condensed financial statements.
F-47
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
Parent
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(50,451
|
)
|
|
$
|
(49,106
|
)
|
|
$
|
25,428
|
|
|
$
|
23,484
|
|
|
$
|
(50,645
|
)
|
|
Adjustments to reconcile net income (loss)to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
62,744
|
|
|
|
49,392
|
|
|
|
—
|
|
|
|
112,136
|
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Gain on disposition of assets
|
|
|
—
|
|
|
|
(2,706
|
)
|
|
|
(953
|
)
|
|
|
—
|
|
|
|
(3,659
|
)
|
|
Deferred income tax expense
|
|
|
31,518
|
|
|
|
(57,030
|
)
|
|
|
(22,863
|
)
|
|
|
—
|
|
|
|
(48,375
|
)
|
|
Impairment and other charges
|
|
|
—
|
|
|
|
170,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
170,000
|
|
|
Provision for reduction in carrying value of certain assets
|
|
|
—
|
|
|
|
1,350
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,350
|
|
|
Expenses not requiring cash
|
|
|
16,411
|
|
|
|
376
|
|
|
|
(3,954
|
)
|
|
|
—
|
|
|
|
12,833
|
|
|
Equity in net earnings of subsidiaries
|
|
|
23,484
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(23,484
|
)
|
|
|
—
|
|
|
Change in accounts receivable
|
|
|
(288,333
|
)
|
|
|
347,344
|
|
|
|
(65,852
|
)
|
|
|
—
|
|
|
|
(6,841
|
)
|
|
Change in other assets
|
|
|
62,173
|
|
|
|
(16,724
|
)
|
|
|
16,404
|
|
|
|
—
|
|
|
|
61,853
|
|
|
Change in accrued income taxes
|
|
|
(12,852
|
)
|
|
|
(2,053
|
)
|
|
|
17,046
|
|
|
|
—
|
|
|
|
2,141
|
|
|
Change in liabilities
|
|
|
2,398
|
|
|
|
(51,351
|
)
|
|
|
24,045
|
|
|
|
—
|
|
|
|
(24,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(215,652
|
)
|
|
|
402,844
|
|
|
|
38,693
|
|
|
|
—
|
|
|
|
225,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(174,999
|
)
|
|
|
(15,400
|
)
|
|
|
—
|
|
|
|
(190,399
|
)
|
|
Proceeds from the sale of assets
|
|
|
—
|
|
|
|
4,335
|
|
|
|
1,200
|
|
|
|
—
|
|
|
|
5,535
|
|
|
Proceeds from insurance settlements
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany dividend payment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
(170,414
|
)
|
|
|
(14,200
|
)
|
|
|
—
|
|
|
|
(184,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from debt issuance
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
Paydown on term note
|
|
|
(21,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,000
|
)
|
|
Paydown on revolver credit facility
|
|
|
(25,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,000
|
)
|
|
Payment of debt issuance costs
|
|
|
(504
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(504
|
)
|
|
Payment of debt extinguishment costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Proceeds from stock options exercised
|
|
|
183
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
183
|
|
|
Excess tax benefit from stock-based compensation
|
|
|
1,488
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,488
|
|
|
Intercompany advances, net
|
|
|
252,320
|
|
|
|
(230,535
|
)
|
|
|
(21,785
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
257,487
|
|
|
|
(230,535
|
)
|
|
|
(21,785
|
)
|
|
|
—
|
|
|
|
5,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
41,835
|
|
|
|
1,895
|
|
|
|
2,708
|
|
|
|
—
|
|
|
|
46,438
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
13,835
|
|
|
|
2,317
|
|
|
|
35,279
|
|
|
|
—
|
|
|
|
51,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
55,670
|
|
|
$
|
4,212
|
|
|
$
|
37,987
|
|
|
$
|
—
|
|
|
$
|
97,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated condensed financial statements.
F-48
Note 19 — Selected Quarterly Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Year 2013
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
|
(Dollars in Thousands Except Per Share Amounts)
|
|
|
|
|
(Unaudited)
|
|
|
Revenues
|
|
$
|
167,135
|
|
|
$
|
225,954
|
|
|
$
|
237,762
|
|
|
$
|
243,321
|
|
|
$
|
874,172
|
|
|
Operating gross margin(2)
|
|
$
|
20,877
|
|
|
$
|
50,273
|
|
|
$
|
48,733
|
|
|
$
|
48,564
|
|
|
$
|
168,447
|
|
|
Operating income
|
|
$
|
9,180
|
|
|
$
|
28,587
|
|
|
$
|
35,589
|
|
|
$
|
28,516
|
|
|
$
|
101,872
|
|
|
Net income attributable to controlling interest
|
|
$
|
592
|
|
|
$
|
8,281
|
|
|
$
|
7,970
|
|
|
$
|
10,172
|
|
|
$
|
27,015
|
|
|
Basic earnings per share — net income(1)
|
|
$
|
0.00
|
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.08
|
|
|
$
|
0.23
|
|
|
Diluted earnings per share — net income(1)
|
|
$
|
0.00
|
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.08
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
Year 2012
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
|
(Dollars in Thousands Except Per Share Amounts)
|
|
|
|
|
(Unaudited)
|
|
|
Revenues
|
|
$
|
176,495
|
|
|
$
|
178,895
|
|
|
$
|
165,200
|
|
|
$
|
157,171
|
|
|
$
|
677,761
|
|
|
Operating gross margin(2)
|
|
$
|
53,744
|
|
|
$
|
46,914
|
|
|
$
|
34,261
|
|
|
$
|
16,637
|
|
|
$
|
151,556
|
|
|
Operating income
|
|
$
|
48,689
|
|
|
$
|
40,978
|
|
|
$
|
25,903
|
|
|
$
|
(8,297
|
)
|
|
$
|
107,273
|
|
|
Net income (loss) attributable to controlling interest
|
|
$
|
26,392
|
|
|
$
|
20,083
|
|
|
$
|
10,936
|
|
|
$
|
(20,098
|
)
|
|
$
|
37,313
|
|
|
Basic earnings per share — net income (loss)(1)
|
|
$
|
0.23
|
|
|
$
|
0.17
|
|
|
$
|
0.09
|
|
|
$
|
(0.17
|
)
|
|
$
|
0.32
|
|
|
Diluted earnings per share — net income (loss)(1)
|
|
$
|
0.22
|
|
|
$
|
0.17
|
|
|
$
|
0.09
|
|
|
$
|
(0.17
|
)
|
|
$
|
0.31
|
|
|
1)
|
As a result of shares issued during the year, earnings per share for each of the year’s four quarters, which are based on weighted average shares outstanding during each quarter, may not equal the annual earnings
per share, which is based on the weighted average shares outstanding during the year. Additionally, as a result of rounding to the thousands, revenues, operating gross margin, operating income, and net income (loss) attributable to controlling
interest may not equal the 2013 year to date results.
|
|
2)
|
As the Company modified its reporting segments to be consistent with recent organizational changes to improve our drilling organization, expenses related to our U.S. Barge Drilling segment were found to be incorrectly
included in our general and administrative expense during the first through third quarters of the current year. These expenses have been appropriately reclassified to be included as part of the segment operating expenses, therefore our operating
gross margin for each of the first three quarters will not agree to the respective 10-Q reports for the current year only.
|
Note 20
— Recent Accounting Pronouncements
Fair value measurements
— Effective January 1, 2012, we adopted the
accounting standards update that changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments included in this update are
intended to clarify the applications of existing fair value measurement requirements. The update is effective for annual periods beginning after December 15, 2011. This adoption did not have a material effect on the disclosures contained in our
notes to the consolidated financial statements.
Comprehensive Income
— On January 1, 2012, we adopted an update issued
by the FASB to existing guidance on the presentation of comprehensive income. The update eliminates the option to present the components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. Public
entities are required to comply with the new reporting requirements for fiscal years beginning after December 15, 2011 and interim periods within those years. Calendar year-end companies must adopt the requirements for the quarter ended
March 31, 2012. The adoption of this update did not have a material impact on our financial position, results of operations, cash flows, or disclosures.
Impairment —
In July 2012, the FASB issued an update to existing guidance on the impairment assessment of indefinite-lived
intangibles. This update simplifies the impairment assessment of indefinite-lived intangibles
F-49
by allowing companies to consider qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount
before performing the two step impairment review process. The adoption of this update did not have an impact on our condensed consolidated financial statements.
Note 21 — Subsequent Events
6.75% Senior Notes, due July 2022
On January 22, 2014, we issued $360.0 million aggregate principal amount of 6.75% Notes pursuant to an Indenture between the Company and
The Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 6.75% Notes offering plus a $40.0 million Term Loan on the Secured Credit Agreement and cash on hand, were utilized to redeem $416.2 million aggregate principal
amount of our outstanding 9.125% Notes due 2018 pursuant to a tender and consent solicitation offer commenced on January 7, 2014. The tender offer price was $1,061.98, inclusive of a $30.00 consent payment, for each $1,000.00 principal amount
of 9.125% Notes, plus accrued and unpaid interest. On January 22, 2014, we paid $453.7 million for the tendered bonds, comprised of $416.2 million of aggregate principal amount of the bonds, $25.8 million of tender and consent premiums and
$11.7 million of accrued interest. After payment for the tendered notes, $8.8 million aggregate principal amount of our 9.125% Notes remains outstanding.
The 6.75% Notes are general unsecured obligations of the Company and rank equal in right of payment with all of our existing and future senior
unsecured indebtedness. The 6.75% Notes are jointly and severally guaranteed by all of our subsidiaries that guarantee indebtedness under our Secured Credit Agreement. Interest on the 6.75% Notes is payable on January 15 and July 15 of
each year, beginning July 15, 2014. Debt issuance costs related to the 6.75% Notes are estimated to be $7.1 million and will be amortized over the term of the notes using the effective interest rate method. The Term Loan amortizes quarterly
with required payments of $2.5 million. For further discussion of the Term Loan see Note 8
— Long-Term Debt.
At any time
prior to January 15, 2017, we may redeem up to 35 percent of the aggregate principal amount of the 6.75% Notes at a redemption price of 106.75 percent of the principal amount, plus accrued and unpaid interest to the redemption date, with the
net cash proceeds of certain equity offerings by us. On and after January 15, 2018, we may redeem all or a part of the 6.75% Notes upon appropriate notice, at a redemption price of 103.375 percent of the principal amount, and at redemption
prices decreasing each year thereafter to par beginning January 15, 2020. If we experience certain changes in control, we must offer to repurchase the 6.75% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid
interest and additional interest, if any, to the date of repurchase.
The Indenture restricts our ability and the ability of certain
subsidiaries to: (i) sell assets, (ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments, (iv) incur or guarantee additional
indebtedness; (v) create or incur liens; (vi) enter into sale and leaseback transactions; (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or consolidate with other entities, (ix) enter
into transactions with affiliates, and (x) engage in certain business activities. Additionally, the Indenture contains certain restrictive covenants designating certain events as Events of Default. These covenants are subject to a number of
important exceptions and qualifications.
9.125% Senior Notes, due April 2018
On January 7, 2014, we commenced a tender and consent solicitation with respect to the 9.125% Notes issued pursuant to an Indenture
between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The tender offer price was $1,061.98, inclusive of a $30.00 consent payment, for each $1,000 principal amount of 9.125% Notes, plus accrued and unpaid interest. On
January 22, 2014, we paid $453.7 million for the
F-50
tendered 9.125% Notes, comprised of $416.2 million of aggregate principal amount of the 9.125% Notes, $25.8 million of tender and consent premiums and $11.7 million of accrued interest. After
payment for the tendered 9.125% Notes, $8.8 million aggregate principal amount of our 9.125% Notes remains outstanding.
At any time prior
to April 1, 2014, we may redeem all or a part of the 9.125% Notes upon appropriate notice, at a redemption price of 104.563 percent of the principal amount, and at redemption prices decreasing each year thereafter to par beginning April 1,
2016. If we experience certain changes in control, we must offer to repurchase the 9.125% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.
On January 24, 2014, the Indenture was amended to remove most of the restrictions on our ability and the ability of certain subsidiaries
to: (i) sell assets, (ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments, (iv) incur or guarantee additional indebtedness;
(v) create or incur liens; (vi) enter into sale and leaseback transactions; (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or consolidate with other entities, (ix) enter into
transactions with affiliates, and (x) engage in certain business activities. The Indenture also was amended to remove certain restrictive covenants designating certain events as Events of Default. Additionally, the remaining restrictive
covenants are subject to a number of important exceptions and qualifications.
F-51
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
93,061
|
|
|
$
|
148,689
|
|
|
Accounts and notes receivable, net of allowance for bad debts of $11,292 and $12,853 at March 31, 2014 and December 31,
2013
|
|
|
264,437
|
|
|
|
257,889
|
|
|
Rig materials and supplies
|
|
|
44,488
|
|
|
|
41,781
|
|
|
Deferred costs
|
|
|
10,698
|
|
|
|
13,682
|
|
|
Deferred income taxes
|
|
|
8,973
|
|
|
|
9,940
|
|
|
Other tax assets
|
|
|
23,313
|
|
|
|
24,079
|
|
|
Other current assets
|
|
|
20,162
|
|
|
|
23,223
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
465,132
|
|
|
|
519,283
|
|
|
Property, plant and equipment less accumulated depreciation and amortization of $1,160,435 and $1,136,024 at March 31, 2014 and
December 31, 2013
|
|
|
874,300
|
|
|
|
871,356
|
|
|
Debt issuance costs
|
|
|
13,484
|
|
|
|
14,208
|
|
|
Deferred income taxes
|
|
|
118,431
|
|
|
|
102,420
|
|
|
Other noncurrent assets
|
|
|
29,021
|
|
|
|
27,489
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,500,368
|
|
|
$
|
1,534,756
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
18,801
|
|
|
$
|
25,000
|
|
|
Accounts payable and accrued liabilities
|
|
|
167,455
|
|
|
|
174,886
|
|
|
Accrued income taxes
|
|
|
17,195
|
|
|
|
7,266
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
203,451
|
|
|
|
207,152
|
|
|
Long-term debt
|
|
|
612,574
|
|
|
|
628,781
|
|
|
Other long-term liabilities
|
|
|
17,527
|
|
|
|
26,914
|
|
|
Long-term deferred tax liability
|
|
|
41,026
|
|
|
|
38,767
|
|
|
Contingencies (Note 10)
|
|
|
—
|
|
|
|
—
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
20,164
|
|
|
|
20,075
|
|
|
Capital in excess of par value
|
|
|
660,742
|
|
|
|
657,349
|
|
|
Accumulated deficit
|
|
|
(60,163
|
)
|
|
|
(47,616
|
)
|
|
Accumulated other comprehensive income
|
|
|
1,783
|
|
|
|
1,888
|
|
|
|
|
|
|
|
|
|
|
|
|
Total controlling interest stockholders’ equity
|
|
|
622,526
|
|
|
|
631,696
|
|
|
Noncontrolling interest
|
|
|
3,264
|
|
|
|
1,446
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
625,790
|
|
|
|
633,142
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,500,368
|
|
|
$
|
1,534,756
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated condensed financial statements.
F-52
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Revenues
|
|
$
|
229,225
|
|
|
$
|
167,135
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
166,025
|
|
|
|
116,746
|
|
|
Depreciation and amortization
|
|
|
34,337
|
|
|
|
29,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,362
|
|
|
|
146,258
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
28,863
|
|
|
|
20,877
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expense
|
|
|
(8,964
|
)
|
|
|
(12,845
|
)
|
|
Gain (loss) on disposition of assets, net
|
|
|
(129
|
)
|
|
|
1,148
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
|
19,770
|
|
|
|
9,180
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(12,039
|
)
|
|
|
(10,006
|
)
|
|
Interest income
|
|
|
32
|
|
|
|
59
|
|
|
Loss on extinguishment of debt
|
|
|
(29,673
|
)
|
|
|
—
|
|
|
Other
|
|
|
895
|
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(40,785
|
)
|
|
|
(10,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(21,015
|
)
|
|
|
(932
|
)
|
|
Income tax benefit
|
|
|
(8,623
|
)
|
|
|
(1,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(12,392
|
)
|
|
|
572
|
|
|
Less: Net income (loss) attributable to noncontrolling interest
|
|
|
157
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling interest
|
|
$
|
(12,549
|
)
|
|
$
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
(0.10
|
)
|
|
$
|
0.00
|
|
|
Diluted earnings per share
|
|
$
|
(0.10
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
Number of common shares used in computing earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
120,368,650
|
|
|
|
118,867,678
|
|
|
Diluted
|
|
|
120,368,650
|
|
|
|
120,072,574
|
|
See accompanying notes to the unaudited consolidated condensed financial statements.
F-53
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(12,392
|
)
|
|
$
|
572
|
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
Currency translation difference on related borrowings
|
|
|
(804
|
)
|
|
|
—
|
|
|
Currency translation difference on foreign currency net investments
|
|
|
699
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss, net of tax:
|
|
|
(105
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
(12,497
|
)
|
|
|
572
|
|
|
Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
(154
|
)
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to controlling interest
|
|
$
|
(12,651
|
)
|
|
$
|
592
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited consolidated condensed financial statements.
F-54
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(12,392
|
)
|
|
$
|
572
|
|
|
Adjustments to reconcile net income to net cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
34,337
|
|
|
|
29,512
|
|
|
Loss on extinguishment of debt
|
|
|
29,673
|
|
|
|
—
|
|
|
(Gain) loss on disposition of assets
|
|
|
129
|
|
|
|
(1,148
|
)
|
|
Deferred income tax benefit
|
|
|
(12,292
|
)
|
|
|
(1,607
|
)
|
|
Expenses not requiring cash
|
|
|
6,844
|
|
|
|
7,179
|
|
|
Changes in current assets and liabilities, net of effects of acquisition
|
|
|
|
|
|
|
|
|
|
Change in accounts receivable
|
|
|
(6,226
|
)
|
|
|
(18,557
|
)
|
|
Change in other assets
|
|
|
(394
|
)
|
|
|
(8,018
|
)
|
|
Change in accrued income taxes
|
|
|
150
|
|
|
|
1,560
|
|
|
Change in liabilities
|
|
|
(8,205
|
)
|
|
|
17,747
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
31,624
|
|
|
|
27,240
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(37,445
|
)
|
|
|
(30,023
|
)
|
|
Proceeds from the sale of assets
|
|
|
1,626
|
|
|
|
1,550
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(35,819
|
)
|
|
|
(28,473
|
)
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of debt
|
|
|
400,000
|
|
|
|
—
|
|
|
Repayments of long term debt
|
|
|
(416,199
|
)
|
|
|
—
|
|
|
Repayments of term loan
|
|
|
(2,500
|
)
|
|
|
(2,500
|
)
|
|
Payments of debt issuance costs
|
|
|
(7,273
|
)
|
|
|
(307
|
)
|
|
Payments of debt extinguishment costs
|
|
|
(25,796
|
)
|
|
|
—
|
|
|
Excess tax benefit (expense) from stock based compensation
|
|
|
335
|
|
|
|
(159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(51,433
|
)
|
|
|
(2,966
|
)
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(55,628
|
)
|
|
|
(4,199
|
)
|
|
Cash and cash equivalents, beginning of year
|
|
|
148,689
|
|
|
|
87,886
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
93,061
|
|
|
$
|
83,687
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
20,443
|
|
|
$
|
425
|
|
|
Income taxes paid
|
|
$
|
4,131
|
|
|
$
|
2,929
|
|
See accompanying notes to the unaudited consolidated condensed financial statements.
F-55
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
In the opinion of the management of Parker Drilling
Company (Parker Drilling or the Company), the accompanying unaudited consolidated condensed financial statements reflect all adjustments normally recurring which we believe are necessary for a fair presentation of: (1) Parker Drilling’s
financial position as of March 31, 2014 and December 31, 2013, (2) Parker Drilling’s results of operations for the three month periods ended March 31, 2014 and 2013, (3) Parker Drilling’s consolidated condensed
statement of comprehensive income for the three month periods ended March 31, 2014 and 2013, and (4) Parker Drilling’s cash flows for the three month periods ended March 31, 2014 and 2013. Results for the three month period ended
March 31, 2014 are not necessarily indicative of the results that will be realized for the year ending December 31, 2014. The financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended
December 31, 2013.
Nature of Operations
— Parker Drilling, together with its subsidiaries, is an
international provider of contract drilling and drilling-related services and rental tools. We have operated in over 50 countries since beginning operations in 1934, making us among the most geographically experienced drilling contractors and rental
tools providers in the world. We currently have operations in 24 countries, 10 of which we entered through our acquisition in 2013 of International Tubular Services Limited and certain of its affiliates (collectively, ITS) and other related assets
(the ITS Acquisition). We own and operate drilling rigs and drilling-related equipment and also perform drilling-related services, referred to as operations and maintenance (O&M) work, for customer-owned drilling rigs on a contracted basis. We
have extensive experience and expertise in drilling geologically difficult wells and in managing the logistical and technological challenges of operating in remote, harsh and ecologically sensitive areas. Our rental tools business supplies premium
equipment to operators on land and offshore in the U.S. and select international markets. We have significant knowledge of the equipment needs of drilling operators and the logistical and product quality requirements of an effective rental tools
supplier. We believe we are industry leaders in quality, health, safety and environmental practices.
Our business is
currently comprised of five operating segments: Rental Tools, U.S. Barge Drilling, U.S. Drilling, International Drilling, and Technical Services. Our rental tools business provides premium rental tools for land and offshore oil and natural gas
drilling and workover and production applications. Tools we provide include drill pipe, heavy-weight drill pipe, tubing, high-torque connections, BOPs, drill collars, casing running systems, tools for fishing services and more. Our U.S. barge
drilling business operates barge rigs that drill for oil and natural gas in the shallow waters in and along the inland waterways and coasts of Louisiana, Alabama, and Texas. Our U.S. drilling business primarily consists of two
new-design
arctic-class drilling rigs in Alaska intended to address the challenges presented by the remote location, harsh climate and sensitive environment that characterize the Alaskan North Slope in addition to
O&M work in support of ExxonMobil’s Santa Ynez Unit offshore platform operations located in the Channel Islands region of California. Our international drilling business includes operations related to Parker-owned and customer-owned rigs.
We provide O&M and other project management services, such as labor, maintenance, and logistics for operators who own their own drilling rigs, but choose Parker Drilling to operate the rigs for them. Our Technical services business includes
engineering and related project services during Front End Engineering Design (FEED), pre-FEED and concept development phases of customer-owned drilling facility projects. During the engineering, procurement, commission and installation phase we
focus primarily on drilling systems and we typically provide customer support during construction.
At March 31, 2014,
our marketable rig fleet consisted of 13 barge drilling rigs and 23 land rigs located in the United States, Latin America and the Europe, Middle East, and Asia regions.
F-56
Consolidation
— The consolidated condensed financial
statements include the accounts of the Company and subsidiaries in which we exercise control or have a controlling financial interest, including entities, if any, in which the Company is allocated a majority of the entity’s losses or returns,
regardless of ownership percentage. If a subsidiary of Parker Drilling has a 50 percent interest in an entity but Parker Drilling’s interest in the subsidiary or the entity does not meet the consolidation criteria described above, then that
interest is accounted for under the equity method.
Noncontrolling Interest
— We apply accounting
standards related to noncontrolling interests for ownership interests in our subsidiaries held by parties other than Parker Drilling. The entities that comprise the noncontrolling interest include Primorsky Drill Rig Services B.V., ITS Arabia
Limited, and International Tubular Services - Egypt SAE. We report noncontrolling interest as equity on the consolidated balance sheets and report net income (loss) attributable to controlling interest and to noncontrolling interest separately on
the consolidated statements of operations.
Reclassifications
— Certain reclassifications have been made
to prior period amounts to conform to the current period presentation. These reclassifications did not materially affect our consolidated financial results.
Revenue Recognition
— Contract drilling revenues and expenses, comprised of daywork drilling contracts,
call-outs against master service agreements and engineering and related project service contracts, are recognized as services are performed and collection is reasonably assured. For certain contracts, we receive payments contractually designated for
the mobilization of rigs and other drilling equipment. Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized over the term of the related drilling contract; however, costs incurred to relocate
rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. For contracts accounted for under the milestone method of revenue recognition, revenue is recognized on achievement of specified
procurement coordination and delivery events in regards to our customer’s newly manufactured drilling rig. Reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs. For contracts that are terminated
prior to the specified term, early termination payments received by us are recognized as revenues when all contractual requirements are met. Revenues from rental activities are recognized ratably over the rental term which is generally less than six
months. Construction contract revenues and costs are recognized on a percentage of completion basis utilizing the cost-to-cost method.
Reimbursable Costs
— The Company recognizes reimbursements received for out-of-pocket expenses incurred
as revenues and accounts for out-of-pocket expenses as direct operating costs. Such amounts totaled $16.4 million and $14.8 million during the first quarters of 2014 and 2013, respectively. Additionally, the Company typically receives a nominal
handling fee, which is recognized as earned in revenues in our consolidated statement of operations.
Use of
Estimates
— The preparation of financial statements in accordance with accounting policies generally accepted in the United States (U.S. GAAP) requires us to make estimates and assumptions that affect our reported amounts of assets and
liabilities, our disclosure of contingent assets and liabilities at the date of the financial statements, and our revenue and expenses during the periods reported. Estimates are typically used when accounting for certain significant items such as
legal or contractual liability accruals, mobilization and deferred mobilization, revenue and cost accounting for projects that follow the percentage of completion method, self-insured medical/dental plans, income taxes and valuation allowance, and
other items requiring the use of estimates. Estimates are based on a number of variables which may include third party valuations, historical experience, where applicable, and assumptions that we believe are reasonable under the circumstances. Due
to the inherent uncertainty involved with estimates, actual results may differ from management estimates.
Purchase
price allocation
— We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on estimated fair values at the transaction date. Transaction and integration costs associated with an
acquisition are expensed as incurred. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. We use all available information to
F-57
estimate fair values, including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. We typically engage
third-party appraisal firms to assist in fair value determination of inventories, identifiable intangible assets, and any other significant assets or liabilities. Judgments made in determining the estimated fair value assigned to each class of
assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.
Intangible Assets
—
We recorded $8.5 million to recognize the fair values of definite-lived
intangible assets assumed in the ITS Acquisition. Definite-lived intangible assets recorded in connection with the ITS Acquisition primarily relate to trade names, customer relationships, and developed technology and will be amortized over a
weighted average period of approximately 3 years. See Note 2 — Acquisition of ITS for further discussion of the ITS Acquisition and fair value estimates.
Concentrations of Credit Risk
— Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of trade receivables with a variety of national and international oil and gas companies. We generally do not require collateral on our trade receivables.
At March 31, 2014 and December 31, 2013, we had deposits in domestic banks in excess of federally insured limits of
approximately $50.8 million and $104.3 million, respectively. In addition, as of March 31, 2014 and December 31, 2013, we had deposits in foreign banks, which were not insured of $43.9 million and $50.1 million, respectively.
Our customer base primarily consists of major, independent, national and international oil and gas companies and integrated
service providers. We depend on a limited number of significant customers. Our largest customer, Exxon Neftegas Limited (ENL), constituted 17.1% of our revenues for the three months ended March 31, 2014. Each of our segments depends on a
limited number of key customers and the loss of any one or more key customers could have a material adverse effect on a segment.
On April 22, 2013 we acquired ITS for an
initial purchase price of $101.0 million paid at the closing of the ITS Acquisition. An additional $24.0 million was deposited into an escrow account, which is payable to the seller or to us, as the case may be, in accordance with the ITS
Acquisition agreement (the Acquisition Agreement). As of March 31, 2014, $7.0 million of the escrow funds had been released to the seller. The ITS Acquisition closed simultaneously with the execution of the Acquisition Agreement on
April 22, 2013.
Fair value of Consideration Transferred
The following details the fair value of the consideration transferred to effect the ITS Acquisition (dollars in thousands).
|
|
|
|
|
|
|
Cash paid to, or on behalf of, ITS and its equity holders
|
|
$
|
101,000
|
|
|
Cash deposited in escrow
|
|
|
19,000
|
|
|
Fair value of contingent consideration deposited in escrow for assets not acquired(1)
|
|
|
5,000
|
|
|
|
|
|
|
|
|
Total fair value of the consideration transferred
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
(1)
|
Based on the terms of the Acquisition Agreement, $5.0 million of the $24.0 million in escrow to be paid to the seller is contingent upon certain future liabilities that could become due by ITS in certain jurisdictions.
Any payments in relation to these liabilities will be deducted from the $5.0 million escrow amount and the net balance of the escrow will be paid to the seller. We estimate that the entire $5.0 million in escrow will be paid to the seller, and
therefore, the estimated fair value of the consideration in escrow related to these liabilities is $5.0 million. We do not expect to receive any amount back from escrow, and therefore did not record a receivable from the escrow. Any changes to the
fair value of the contingent consideration in the future of less than $5.0 million will result in recording a receivable from escrow. The receivable will be recorded at fair value. As of March 31, 2014, the fair value of the receivable was $0.0
million.
|
F-58
Allocation of Consideration Transferred to Net Assets Acquired
We have finalized the determination of the fair values of the assets acquired and liabilities assumed as set forth below. The
acquired assets and assumed liabilities were subject to adjustment during a one-year measurement period subsequent to the ITS Acquisition as permitted under GAAP. The estimated fair values of certain assets and liabilities, primarily receivables,
intangible assets, property, plant and equipment, taxes, contingencies and noncontrolling interests required judgments and assumptions that resulted in adjustments made to these estimates during the measurement period. The measurement period
adjustments were recorded to reflect new information obtained about facts and circumstances existing as of the ITS Acquisition and did not result from subsequent intervening events.
|
|
|
|
|
|
|
|
|
April 22, 2013
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
7,009
|
|
|
Accounts and notes receivable, net(1)
|
|
|
48,184
|
|
|
Other current assets
|
|
|
1,803
|
|
|
Accounts payable and accrued liabilities(2)
|
|
|
(35,156
|
)
|
|
Accrued income taxes
|
|
|
(1,251
|
)
|
|
|
|
|
|
|
|
Working capital excluding rig materials and supplies
|
|
|
20,589
|
|
|
Rig materials and supplies
|
|
|
11,514
|
|
|
Property, plant and equipment, net(3)
|
|
|
72,935
|
|
|
Investment in joint venture
|
|
|
4,134
|
|
|
Other noncurrent assets
|
|
|
2,818
|
|
|
|
|
|
|
|
|
Total tangible assets
|
|
|
111,990
|
|
|
Deferred income tax assets — current(4)
|
|
|
222
|
|
|
Deferred income tax assets — noncurrent(4)
|
|
|
11,640
|
|
|
Intangible assets(5)
|
|
|
8,500
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
132,352
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
(211
|
)
|
|
Long-term deferred tax liability
|
|
|
(2,796
|
)
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
129,345
|
|
|
Less: Noncontrolling interest(6)
|
|
|
(4,345
|
)
|
|
|
|
|
|
|
|
Total consideration transferred
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
(1)
|
Our provisional allocation included $54.7 million of gross contractual accounts receivable. During the 2013 fourth quarter, adjustments of $1.2 million were recorded as of December 31, 2013 resulting in final fair
value of gross accounts receivable of $55.9 million. These adjustments were recorded to reflect recognition of receivables for revenue earned prior to the acquisition date. Additionally, the initial allocation included $5.9 million of allowance for
doubtful accounts. During the 2014 first quarter, we recorded an additional $1.9 million allowance to reserve against receivables that existed as of the acquisition date and were deemed to be uncollectible based on new information obtained during
the measurement period that existed at the time of acquisition.
|
|
|
(2)
|
Our provisional allocation included $39.2 million of accounts payable and accrued liabilities. During the 2013 third quarter we recorded a reclassification of $4.0 million to reclassify reserves to property, plant, and
equipment. This reclassification was reflected in our December 31, 2013 consolidated balance sheet but was not included in our disclosure of the Allocation of Consideration Transferred to Net Assets Acquired as of December 31, 2013. We
have corrected this as of March 31, 2014 and do not believe the reclassification is material to our previously reported disclosure.
|
|
|
(3)
|
Management determined that the fair value of the net assets acquired less noncontrolling interest equaled consideration paid. Therefore no goodwill
was recorded. Our provisional allocation included
|
F-59
|
|
an adjustment of $40.2 million to reduce the historical carrying value of the acquired property, plant and equipment to its estimated fair value at the date of acquisition. The measurement period
adjustments to receivables, deferred income taxes, intangibles, and noncontrolling interests directly impacted the determination of the final fair value of the acquired property, plant and equipment, resulting in measurement period adjustments
totaling $2.6 million to increase the fair value of property, plant and equipment.
|
|
|
(4)
|
Our provisional allocation included $14.4 million of deferred tax assets. During the measurement period, adjustments of ($2.9) million and $0.4 million were recorded as of December 31, 2013 and March 31, 2014,
respectively, resulting in final fair value of deferred tax assets of $11.9 million. Adjustments to deferred income tax assets primarily related to the differences between the final acquisition date fair value and tax basis of acquired property,
plant and equipment.
|
|
|
(5)
|
Our provisional allocation included $10.0 million and $0.2 million to reflect the estimated fair values of definite- and indefinite-lived intangible assets, respectively, for the ITS Acquisition. During the 2013 fourth
quarter we recorded adjustments of $1.5 million and $0.2 million to reduce the value of the definite- and indefinite-lived intangible assets down to $8.5 million and zero respectively. Our depreciation and amortization expense for the year ended
December 31, 2013 reflects this valuation adjustment. Definite-lived intangible assets recorded in connection with the ITS Acquisition, which primarily relate to trade names, customer relationships, and developed technology will be amortized
over a weighted average period of approximately 3.4 years.
|
|
|
(6)
|
Our provisional allocation included noncontrolling interest of $2.7 million. The estimated fair value of the noncontrolling interest was calculated as a percentage of the net assets acquired related to certain
subsidiaries in which ITS holds less than a 100 percent controlling interest. The fair value of the net assets of these subsidiaries was primarily based on the income approach valuation model. During the 2014 first quarter, we obtained new
information about the acquired subsidiaries that existed at the date of acquisition which resulted in an increase in the acquisition date fair value of $1.6 million, resulting in a final fair value of the noncontrolling interest of $4.3 million.
|
The impacts to our December 31, 2013 consolidated balance sheet for the revisions to the provisional
allocation made during the 2014 first quarter are as follows:
|
|
|
|
|
|
|
|
|
Increase/(Decrease)
(In thousands)
|
|
|
Accounts and notes receivable, net
|
|
$
|
(1,859
|
)
|
|
|
|
|
|
|
|
Total current assets
|
|
|
(1,859
|
)
|
|
Property, plant and equipment
|
|
|
3,072
|
|
|
Deferred income tax assets — noncurrent
|
|
|
391
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
3,463
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,604
|
|
|
|
|
|
|
|
|
Long-term deferred tax liabilities
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
(60
|
)
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
$
|
1,664
|
|
|
|
|
|
|
|
|
Total liabilities and stockholder’s equity
|
|
$
|
1,604
|
|
|
|
|
|
|
|
The impact of the revisions to the provisional allocation recorded during the 2014 first
quarter, including the impact to depreciation expense related to the increase in property, plant and equipment, are not material to our historical consolidated financial statements or disclosures.
F-60
Acquisition Related Costs
Acquisition-related transaction costs, consisting of various advisory, compliance, legal, accounting, valuation and other
professional or consulting fees, were nominal for the three month period ended March 31, 2014 and were $22.5 million for the year ended December 31, 2013. These costs were expensed as incurred and included in general and administrative
expense on our consolidated condensed statement of operations. Debt issuance costs of $5.4 million associated with our $125 million term loan, fully funded by Goldman Sachs Bank USA as Sole Lead Arranger and Administrative Agent (the
Goldman Term Loan) issued on April 18, 2013 were initially deferred to be amortized to interest expense over the life of the term loan. However, the Goldman Term Loan was repaid on July 30, 2013 with net proceeds from the issuance of
$225.0 million aggregate principal amount of 7.50% Senior Notes due August 1, 2020 (see Note 8 —
Long-Term Debt
, for further discussion), and the unamortized deferred costs of $5.1 million were expensed during the third quarter of
2013.
Supplemental Pro forma Results
ITS’s results of operations have been included in our financial statements for periods subsequent to April 22, 2013,
the effective date of the ITS Acquisition. ITS contributed revenues of $88.0 million and net income of approximately $10.0 million to Parker Drilling for the period from the closing of the ITS Acquisition through December 31, 2013. For the
three months ended March 31, 2014 ITS contributed revenues of $27.8 million and net loss of approximately $2.0 million.
The following unaudited supplemental pro forma results present consolidated information for the three months ended
March 31, 2013 as if the ITS Acquisition had been completed on January 1, 2012. The pro forma results have been calculated after applying our accounting policies and include, among others, (i) the amortization associated with the
fair value of the acquired intangible assets, (ii) interest expense associated with the Goldman Term Loan and (iii) the impact of certain fair value adjustments such as a decrease in depreciation expense related to the write-down in
property, plant and equipment. The pro forma results do not include any potential synergies, non-recurring charges which result directly from the ITS Acquisition, cost savings or other expected benefits of the ITS Acquisition. The pro forma
financial information does not necessarily represent what would have occurred if the transaction had taken place at the beginning of the period presented and should not be taken as representative of our future consolidated results of operations.
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2013
|
|
|
|
|
(Dollars in thousands
except per share data)
|
|
|
Revenue
|
|
$
|
199,951
|
|
|
Net income
|
|
$
|
6,715
|
|
|
Net income attributable to Parker Drilling
|
|
$
|
6,735
|
|
|
Earnings per share — basic
|
|
$
|
0.06
|
|
|
Earnings per share — diluted
|
|
$
|
0.06
|
|
|
|
|
|
Basic number of shares
|
|
|
118,867,678
|
|
|
Diluted number of shares
|
|
|
120,072,574
|
|
F-61
|
3.
|
Earnings per share (EPS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per-Share
Amount
|
|
|
Basic EPS
|
|
$
|
(12,549,000
|
)
|
|
|
120,368,650
|
|
|
$
|
(0.10
|
)
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
(12,549,000
|
)
|
|
|
120,368,650
|
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2013
|
|
|
|
|
Income
(Numerator)
|
|
|
Shares
(Denominator)
|
|
|
Per-Share
Amount
|
|
|
Basic EPS
|
|
$
|
592,000
|
|
|
|
118,867,678
|
|
|
$
|
0.00
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock
|
|
|
—
|
|
|
|
1,204,896
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$
|
592,000
|
|
|
|
120,072,574
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2014 all common shares potentially issuable in
connection with outstanding restricted stock unit awards have been excluded from the calculation of diluted EPS as the company incurred a loss during the quarter, and therefore, inclusion of such potential common shares in the calculation of diluted
EPS would be anti-dilutive.
|
4.
|
Accumulated Other Comprehensive Income
|
Accumulated other
comprehensive income consisted of the following:
|
|
|
|
|
|
|
|
|
Foreign Currency Items
|
|
|
|
|
(in thousands)
|
|
|
December 31, 2013
|
|
$
|
1,888
|
|
|
Current period other comprehensive income (loss)
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
March 31, 2014
|
|
$
|
1,783
|
|
|
|
|
|
|
|
No amounts were reclassified out of accumulated other comprehensive income for the three months ended
March 31, 2014.
We report our business activities in five
business segments: (1) Rental Tools, (2) U.S. Barge Drilling, (3) U.S. Drilling, (4) International Drilling, and (5) Technical Services. We eliminate inter-segment revenues and expenses.
F-62
The following table represents the results of operations by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Operations by Reportable Industry Segment
|
|
2014
|
|
|
2013
|
|
|
|
|
(Dollars in Thousands)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Rental Tools(1)
|
|
$
|
80,506
|
|
|
$
|
57,082
|
|
|
U.S. Barge Drilling(1)
|
|
|
30,490
|
|
|
|
29,865
|
|
|
U.S. Drilling(1)
|
|
|
19,417
|
|
|
|
11,635
|
|
|
International Drilling(1)
|
|
|
85,469
|
|
|
|
64,650
|
|
|
Technical Services(1)
|
|
|
13,343
|
|
|
|
3,903
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
229,225
|
|
|
|
167,135
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating gross margin:
|
|
|
|
|
|
|
|
|
|
Rental Tools(2)
|
|
|
13,345
|
|
|
|
21,507
|
|
|
U.S. Barge Drilling(2)
|
|
|
7,824
|
|
|
|
8,758
|
|
|
U.S. Drilling(2)
|
|
|
1,641
|
|
|
|
(4,052
|
)
|
|
International Drilling(2)
|
|
|
5,477
|
|
|
|
(5,645
|
)
|
|
Technical Services(2)
|
|
|
576
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
28,863
|
|
|
|
20,877
|
|
|
General and administrative expense
|
|
|
(8,964
|
)
|
|
|
(12,845
|
)
|
|
Gain (loss) on disposition of assets, net
|
|
|
(129
|
)
|
|
|
1,148
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
|
19,770
|
|
|
|
9,180
|
|
|
Interest expense
|
|
|
(12,039
|
)
|
|
|
(10,006
|
)
|
|
Interest income
|
|
|
32
|
|
|
|
59
|
|
|
Loss on extinguishment of debt
|
|
|
(29,673
|
)
|
|
|
—
|
|
|
Other
|
|
|
895
|
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
$
|
(21,015
|
)
|
|
$
|
(932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For the three months ended March 31, 2014, our largest customer, ENL, constituted 17.1% of our total consolidated revenues and approximately 37.6% and 52.4% of our International Drilling and Technical Services
segment revenues, respectively. For the three months ended March 31, 2013, our largest customer, ENL, constituted approximately 15.1% of our total consolidated revenues and approximately 38.5% of our International Drilling segment revenues.
|
|
|
(2)
|
Operating gross margin is calculated as revenues less direct operating expenses, including depreciation and amortization expense.
|
|
6.
|
Accounting for Uncertainty in Income Taxes
|
We apply the
accounting guidance related to accounting for uncertainty in income taxes. This guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. At March 31, 2014, we had a liability for unrecognized tax benefits of $12.4 million
(which includes $5.6 million of benefits which would favorably impact our effective tax rate upon recognition) primarily related to foreign operations. As of March 31, 2013, we had a liability for unrecognized tax benefits of $10.0 million
($3.2 million of which, if recognized, would favorably impact our effective tax rate). In addition, we recognize interest and penalties that could be applied to uncertain tax positions in periodic income tax expense. As of March 31, 2014 and
December 31, 2013, we had approximately $8.1 million and $7.9 million, respectively, of accrued interest and penalties related to uncertain tax positions.
F-63
During the first quarter ended March 31, 2014, we appealed notices of
assessment related to deductions claimed in Kazakhstan by one of our subsidiaries. Management is currently evaluating the assessments and appellate process and does not anticipate a material change to our financial position. We believe that it is
reasonably possible that settlement of approximately $6.1 million included in the liability for unrecognized tax benefits may occur within the coming year.
|
7.
|
Income Tax Benefit/Expense
|
During the first quarter of 2014 we
had an income tax benefit of $8.6 million compared to $1.5 million for the first quarter of 2013. The increase in current period income tax benefit is primarily due to the reduction of pre-tax earnings in the first quarter of 2014 when compared with
pre-tax earnings reported for the 2013 first quarter primarily driven by the debt extinguishment costs recorded during the 2014 first quarter.
The following table illustrates our debt
portfolio as of March 31, 2014 and December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
|
|
(Dollars in Thousands)
|
|
|
6.75% Senior Notes, due July 2022
|
|
$
|
360,000
|
|
|
$
|
—
|
|
|
7.50% Senior Notes, due August 2020
|
|
|
225,000
|
|
|
|
225,000
|
|
|
9.125% Senior Notes, due April 2018
|
|
|
8,875
|
|
|
|
428,781
|
|
|
Term Note, due December 2017
|
|
|
37,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
631,375
|
|
|
|
653,781
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
18,801
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
612,574
|
|
|
$
|
628,781
|
|
|
|
|
|
|
|
|
|
|
|
6.75% Senior Notes, due July 2022
On January 22, 2014, we issued $360.0 million aggregate principal amount of 6.75% Senior Notes due 2022 (6.75% Notes)
pursuant to an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 6.75% Notes offering plus a $40.0 million draw under the Secured Credit Agreement (as defined below) and cash on
hand, were utilized to redeem $416.2 million aggregate principal amount of our outstanding 9.125% Notes due 2018 pursuant to a tender and consent solicitation offer commenced on January 7, 2014. See further discussion of the tender and consent
solicitation offer below entitled “
9.125% Senior Notes, due April 2018”.
The 6.75% Notes are
general unsecured obligations of the Company and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 6.75% Notes are jointly and severally guaranteed by all of our subsidiaries that guarantee
indebtedness under our Secured Credit Agreement, our 7.50% Notes (as defined below) or our 9.125% Notes (as defined below, and collectively with the 7.50% Notes and the 6.75% Notes, the Senior Notes). Interest on the 6.75% Notes is payable on
January 15 and July 15 of each year, beginning July 15, 2014. Debt issuance costs related to the 6.75% Notes of approximately $7.3 million ($7.1 million net of amortization as of March 31, 2014) are being amortized over the term
of the notes using the effective interest rate method.
At any time prior to January 15, 2017, we may redeem up to 35
percent of the aggregate principal amount of the 6.75% Notes at a redemption price of 106.75 percent of the principal amount, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of certain equity offerings by us. On
and after January 15, 2018, we may redeem all or a part of the 6.75% Notes upon appropriate notice, at a redemption price of 103.375 percent of the principal amount, and at redemption prices decreasing each year
F-64
thereafter to par beginning January 15, 2020. If we experience certain changes in control, we must offer to repurchase the 6.75% Notes at 101.0 percent of the aggregate principal amount,
plus accrued and unpaid interest and additional interest, if any, to the date of repurchase.
The Indenture restricts our
ability and the ability of certain subsidiaries to: (i) sell assets, (ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments,
(iv) incur or guarantee additional indebtedness, (v) create or incur liens, (vi) enter into sale and leaseback transactions, (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or
consolidate with other entities, (ix) enter into transactions with affiliates, and (x) engage in certain business activities. Additionally, the Indenture contains certain restrictive covenants designating certain events as Events of
Default. These covenants are subject to a number of important exceptions and qualifications.
7.50% Senior Notes, due
August 2020
On July 30, 2013, we issued $225.0 million aggregate principal amount of 7.50% Senior Notes
due 2020 (7.50% Notes) pursuant to an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 7.50% Notes offering were primarily used to repay the $125.0 million aggregate principal
amount of the Goldman Term Loan, to repay $45.0 million of Term Loan borrowings under our Secured Credit Agreement and for general corporate purposes.
The 7.50% Notes are general unsecured obligations of the Company and rank equal in right of payment with all of our existing
and future senior unsecured indebtedness. The 7.50% Notes are jointly and severally guaranteed by all of our subsidiaries that guarantee indebtedness under our Secured Credit Agreement or any of our other series of Senior Notes. Interest on the
7.50% Notes is payable on February 1 and August 1 of each year, beginning February 1, 2014. Debt issuance costs related to the 7.50% Notes of approximately $5.5 million ($5.1 million, net of amortization as of March 31, 2014) are
being amortized over the term of the notes using the effective interest rate method.
At any time prior to August 1,
2016, we may redeem up to 35 percent of the aggregate principal amount of the 7.50% Notes at a redemption price of 107.50 percent of the principal amount, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of certain
equity offerings by us. On and after August 1, 2016, we may redeem all or a part of the 7.50% Notes upon appropriate notice, at a redemption price of 103.750 percent of the principal amount, and at redemption prices decreasing each year
thereafter to par beginning August 1, 2018. If we experience certain changes in control, we must offer to repurchase the 7.50% Notes at 101.0 percent of the aggregate principal amount, plus accrued and unpaid interest and additional interest,
if any, to the date of repurchase.
The Indenture restricts our ability and the ability of certain subsidiaries to:
(i) sell assets, (ii) pay dividends or make other distributions on capital stock or redeem or repurchase capital stock or subordinated indebtedness, (iii) make investments, (iv) incur or guarantee additional indebtedness;
(v) create or incur liens; (vi) enter into sale and leaseback transactions; (vii) incur dividend or other payment restrictions affecting subsidiaries, (viii) merge or consolidate with other entities, (ix) enter into
transactions with affiliates, and (x) engage in certain business activities. Additionally, the Indenture contains certain restrictive covenants designating certain events as Events of Default. These covenants are subject to a number of
important exceptions and qualifications.
9.125% Senior Notes, due April 2018
On March 22, 2010, we issued $300.0 million aggregate principal amount of 9.125% Senior Notes due 2018 (9.125% Notes)
pursuant to an Indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. Net proceeds from the 9.125% Notes offering were primarily used to redeem the $225.0 million aggregate principal amount of our 9.625%
Senior Notes due 2013 and to repay $42.0 million of borrowings under our senior secured revolving credit facility.
F-65
On April 25, 2012, we issued an additional $125.0 million aggregate
principal amount of 9.125% Notes under the same indenture at a price of 104.0% of par, resulting in gross proceeds of $130.0 million. Net proceeds from the offering were utilized to refinance $125.0 million aggregate principal amount of the 2.125%
Convertible Senior Notes due July 2012 (2.125% Notes).
On January 7, 2014, we commenced a tender and consent
solicitation with respect to the 9.125% Notes. The tender offer price was $1,061.98, inclusive of a $30.00 consent payment, for each $1,000 principal amount of 9.125% Notes, plus accrued and unpaid interest. On January 22, 2014, we paid $453.7
million for the tendered 9.125% Notes, comprised of $416.2 million of aggregate principal amount of the 9.125% Notes, $25.8 million of tender and consent premiums and $11.7 million of accrued interest. In connection with the tender and consent
solicitation, approximately $3.7 million of unamortized debt issuance premium and approximately $7.6 million of debt issuance costs were written off in the three months ended March 31, 2014. On April 1, 2014, we redeemed the remaining $8.8
million outstanding 9.125% Notes for a purchase price of $9.6 million, inclusive of a $0.4 million call premium and $0.4 million interest.
Amended and Restated Credit Agreement
On December 14, 2012, we entered into an Amended and Restated Credit Agreement (Secured Credit Agreement) consisting of a
senior secured $80.0 million revolving facility (Revolver) and a senior secured term loan facility (Term Loan) of $50.0 million. The Secured Credit Agreement provides that, subject to certain conditions, including the approval of the Administrative
Agent and the lenders’ acceptance (or additional lenders being joined as new lenders), the amount of the Term Loan or Revolver can be increased by an additional $50.0 million, so long as after giving effect to such increase, the aggregate
commitments are not in excess of $180.0 million.
Our obligations under the Secured Credit Agreement are guaranteed by
substantially all of our direct and indirect domestic subsidiaries other than immaterial subsidiaries and subsidiaries generating revenues primarily outside the United States, each of which has executed guaranty agreements, and are secured by first
priority liens on our accounts receivable, specified barge rigs and rental equipment. The Secured Credit Agreement contains customary affirmative and negative covenants with which we were in compliance as of March 31, 2014 and December 31,
2013. The Secured Credit Agreement matures on December 14, 2017.
Revolver
Our Revolver is available for general corporate purposes and to support letters of credit. Interest on Revolver loans accrues
at a Base Rate plus an Applicable Rate or LIBOR plus an Applicable Rate. Under the Secured Credit Agreement, the Applicable Rate varies from a rate per annum ranging from 2.50 percent to 3.00 percent for LIBOR rate loans and 1.50 percent to 2.00
percent for base rate loans, determined by reference to the consolidated leverage ratio (as defined in the Secured Credit Agreement). Revolving loans are available subject to a borrowing base calculation based on a percentage of eligible accounts
receivable, certain specified barge drilling rigs and rental equipment of the Company and its subsidiary guarantors. There were no revolving loans outstanding at March 31, 2014 and December 31, 2013. Letters of credit outstanding against
the Revolver as of March 31, 2014 and December 31, 2013 totaled $6.0 million and $4.6 million, respectively.
Term Loan
The Term Loan originated at $50.0 million on December 14, 2012 and requires quarterly principal payments of
$2.5 million, which began March 31, 2013. Interest on the Term Loan accrues at a Base Rate plus 2.00 percent or LIBOR plus 3.00 percent. The outstanding balance on the Term Loan at December 31, 2013 was zero. and as of March 31, 2014
the remaining balance on the Term Loan was $37.5 million. We are no longer able to re-borrow amounts under the Term Loan.
F-66
|
9.
|
Fair Value of Financial Instruments
|
Certain of our assets and
liabilities are required to be measured at fair value on a recurring basis. For purposes of recording fair value adjustments for certain financial and non-financial assets and liabilities, and determining fair value disclosures, we estimate fair
value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability.
The fair value measurement and disclosure requirements of FASB Accounting Standards Codification Topic No. 820,
Fair
Value Measurement and Disclosures
(ASC 820) requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:
|
|
•
|
|
Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
|
|
|
•
|
|
Level 2 — Direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets;
|
|
|
•
|
|
Level 3 — Unobservable inputs that require significant judgment for which there is little or no market data.
|
When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the
lowest level of input that is significant to the entire measurement even though we may also have utilized significant inputs that are more readily observable. The amounts reported in our consolidated balance sheets for cash and cash equivalents,
accounts receivable, and accounts payable approximate fair value.
Fair value of our debt instruments is determined using
Level 2 inputs. Fair values and related carrying values of our debt instruments were as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
|
|
(in thousands)
|
|
|
Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.75% Notes
|
|
$
|
360,000
|
|
|
$
|
371,700
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
7.50% Notes
|
|
|
225,000
|
|
|
|
240,188
|
|
|
|
225,000
|
|
|
|
236,250
|
|
|
9.125% Notes
|
|
|
8,801
|
|
|
|
9,202
|
|
|
|
425,000
|
|
|
|
446,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
593,801
|
|
|
$
|
621,090
|
|
|
$
|
650,000
|
|
|
$
|
682,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assets acquired and liabilities assumed in the ITS Acquisition were recorded at fair value
in accordance with U.S. GAAP. Acquisition date fair values represent either Level 2 fair value measurements (current assets and liabilities, property, plant and equipment) or Level 3 fair value measurements (intangible assets).
Market conditions could cause an instrument to be reclassified from Level 1 to Level 2, or Level 2 to Level 3. There were no
transfers between levels of the fair value hierarchy or any changes in the valuation techniques used during the three months ended March 31, 2014.
|
10.
|
Commitments and Contingencies
|
Asbestos-Related Claims
We are from time to time a party to various lawsuits in the ordinary course of business that are incidental to our operations
in which the claimants seek an unspecified amount of monetary damages for personal injury, including injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At March 31, 2014, there were
approximately 15 of these lawsuits in which we are one of many defendants. These lawsuits have been filed in the United States in the states of California, Illinois and Mississippi.
F-67
We intend to defend ourselves vigorously and, based on the information available
to us at this time, we do not expect the outcome to have a material adverse effect on our financial condition, results of operations or cash flows. However, we are unable to predict the ultimate outcome of these lawsuits. No amounts were accrued at
March 31, 2014.
Customs Agent and Foreign Corrupt Practices Act (FCPA) Settlement
On April 16, 2013, the Company and the Department of Justice (DOJ) entered into a deferred prosecution agreement (DPA),
under which the DOJ will defer for three years prosecuting the Company for criminal violations of the anti-bribery provisions of the FCPA relating to the Company’s retention and use of an individual agent in Nigeria with respect to certain
customs-related issues, in return for: (i) the Company’s acceptance of responsibility for, and agreement not to contest or contradict the truthfulness of, the statement of facts and allegations that have been filed in a United States
District Court concurrently with the DPA; (ii) the Company’s payment of an approximately $11.76 million fine; (iii) the Company’s reaffirming its commitment to compliance with the FCPA and other applicable anti-corruption laws in
connection with the Company’s operations, and continuing cooperation with domestic and foreign authorities in connection with the matters that are the subject of the DPA; (iv) the Company’s commitment to continue to address any
identified areas for improvement in the Company’s internal controls, policies and procedures relating to compliance with the FCPA and other applicable anti-corruption laws if, and to the extent, not already addressed; and (v) the
Company’s agreement to report to the DOJ in writing annually during the term of the DPA regarding remediation of the matters that are the subject of the DPA, implementation of any enhanced internal controls, and any evidence of improper
payments the Company may have discovered during the term of the agreement. If the Company remains in compliance with the terms of the DPA throughout its effective period, the charge against the Company will be dismissed with prejudice. The Company
also settled a related civil complaint filed by the SEC in a United States District Court.
Demand Letter and Derivative Litigation
In April 2010, we received a demand letter from a law firm representing Ernest Maresca. The letter states that
Mr. Maresca is one of our stockholders and that he believes that certain of our current and former officers and directors violated their fiduciary duties related to the issues described above under “Customs Agent and Foreign Corrupt
Practices Act (FCPA) Settlement.” The letter requests that our Board of Directors take action against the individuals in question. In response to this letter, the Board formed a special committee to evaluate the issues raised by the letter and
determine a course of action for the Company. The special committee engaged its own counsel for the investigation and evaluated potential claims against all individuals identified in the demand letter. The special committee considered whether
pursuing each of the individuals named in the demand letter was in the best interests of the Company based upon a variety of factors, including among others, whether the Company had a potential cause of action against the individual, the defenses
the individual might offer to such a claim, the ability of the individual to satisfy any judgment the Company might secure as a result of a claim asserted, and other risks to the Company of pursuing the claims. After taking various factors into
account, on July 29, 2013, the special committee recommended to the Board that the Company not pursue any action against the current and former officers and directors named in the demand letter, and the Board accepted such recommendation.
ITS Internal Controls
Our due diligence process with respect to the ITS Acquisition identified certain transactions that suggest that ITS’
pre-acquisition internal controls may have failed to prevent violations of potentially applicable international trade and anti-corruption laws, including those of the United Kingdom. We have investigated such violations and have and will, as
appropriate, make any identified violations known to relevant authorities, cooperate with any resulting investigations and take proper remediation measures
F-68
(including seeking any necessary government authorizations). While it is possible that matters may arise where a contingency may require further accounting considerations, we do not believe that
as a result of these matters a loss is probable and estimable at this time.
|
11.
|
Recent Accounting Pronouncements
|
In February 2013, the FASB
issued Accounting Standards Update (ASU) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires that companies present, either in a single note or parenthetically on
the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. This
accounting guidance was effective for our first quarter in fiscal 2013 and did not impact the presentation of our condensed consolidated financial statements and related notes.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar
tax loss or tax credit carryforward, rather than as a liability when: (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred
tax asset for that purpose. This accounting guidance is effective for our first quarter in fiscal 2014 and does not impact our condensed consolidated financial statements.
|
12.
|
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.
F-69
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-70
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-71
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.
|
F-72
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.
|
F-73
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
On
April 22, 2013, Parker Drilling Company (“Parker Drilling”) and two of its wholly-owned subsidiaries, Parker Drilling Offshore Corporation (“Parker Offshore”) and PD International Holdings C.V. (“PD International”
and, together with Parker Drilling and Parker Offshore, the “Parker Parties”), entered into a Sale and Purchase Agreement (the “Agreement”) with ITS Tubular Service (Holdings) Limited (“ITS Holdings”), a company
organized under the laws of Scotland and in administration proceedings under the laws thereof (the “Seller”), Ian David Green, John Bruce Cartwright and Graham Douglas Frost, each of PricewaterhouseCoopers LLP, as joint administrators of
the Seller, and ITS Holdings, Inc., an indirect subsidiary of the Seller. Pursuant to the Agreement, Parker Drilling acquired International Tubular Services Limited and certain of its affiliates (collectively, “ITS”) and other related
assets held by the Seller (the “Acquisition”) for an initial purchase price of $101.0 million paid at the closing of the Acquisition. An additional $24.0 million was deposited into an escrow account which is payable to the seller or to us,
as the case may be, in accordance with the Agreement. As of March 31, 2014, $7.0 million of the escrow funds had been released to the seller. The Acquisition closed simultaneously with the execution of the Agreement. The following unaudited pro
forma condensed consolidated financial information and related notes give effect to the Acquisition and related transactions and financing and should be read in conjunction with the annual consolidated financial information of Parker Drilling, as
well as the historical annual financial information of ITS Holdings, including the respective notes thereto, flied with this offering memorandum. The unaudited pro forma condensed consolidated financial information gives effect to the Acquisition in
accordance with the acquisition method of accounting. We believe all significant adjustments necessary to reflect the effects of the Acquisition and related transactions and financing have been made.
The unaudited pro forma condensed consolidated financial information does not reflect synergies expected from the combination of the two entities. The
unaudited pro forma condensed consolidated financial information is presented for informational purposes only and is not necessarily indicative of what the actual consolidated financial position or results of operations of Parker Drilling and ITS
would have been as of and for the periods presented, nor does it purport to represent the future results of operations of Parker Drilling and ITS.
Below
is the unaudited pro forma condensed consolidated financial information and related notes thereto which give effect to the Acquisition and related transactions and financing. The following unaudited pro forma condensed consolidated financial
information sets forth:
(i) The historical financial information for the year ended December 31, 2013, as derived from the audited financial
statements of Parker Drilling;
(ii) Adjustments to conform the presentation of ITS Holdings financial information to be consistent with that of Parker
Drilling, including adjustments to conform to ITS Holdings’ historical presentation in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”),
to U.S. generally accepted accounting principles (“U.S. GAAP”);
(iii) Adjustments to remove specific entities and geographical operations that
were not acquired by Parker Drilling; and
(iv) Pro forma adjustments giving effect to the Acquisition and related transactions and financing, as if such
transactions had been completed as of January 1, 2013 for purposes of the unaudited pro forma condensed consolidated statements of operations. The pro forma adjustments made are (1) directly attributable to the Acquisition,
(2) factually supportable, and expected to have a continuing impact on the consolidated results.
F-77
PARKER DRILLING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(Dollars in Thousands, Except Per Share and Weighted Average Shares Outstanding)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parker
Drilling
Historical
|
|
|
ITS IFRS
Historical(1)
|
|
|
IFRS to U.S.
GAAP
Adjustments(2)
|
|
|
|
|
Pro Forma
Adjustments(3)
|
|
|
|
|
Pro Forma
Consolidated
|
|
|
Revenues
|
|
$
|
874,172
|
|
|
$
|
40,820
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
914,992
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
571,672
|
|
|
|
32,410
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
604,082
|
|
|
Depreciation and amortization
|
|
|
134,053
|
|
|
|
6,012
|
|
|
|
—
|
|
|
|
|
|
(2,297
|
)
|
|
5(b)(c)
|
|
|
137,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705,725
|
|
|
|
38,422
|
|
|
|
—
|
|
|
|
|
|
(2,297
|
)
|
|
|
|
|
741,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating gross margin
|
|
|
168,447
|
|
|
|
2,398
|
|
|
|
—
|
|
|
|
|
|
2,297
|
|
|
|
|
|
173,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration expense
|
|
|
(68,025
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
22,530
|
|
|
5(a)
|
|
|
(45,495
|
)
|
|
Impairments and restructuring charges
|
|
|
—
|
|
|
|
(43
|
)
|
|
|
(181
|
)
|
|
2(a)
|
|
|
—
|
|
|
|
|
|
(224
|
)
|
|
Provisions for reduction in carrying value of certain assets
|
|
|
(2,544
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,544
|
)
|
|
Gain (loss) on disposition of assets, net
|
|
|
3,994
|
|
|
|
(114
|
)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss)
|
|
|
101,872
|
|
|
|
2,241
|
|
|
|
(181
|
)
|
|
|
|
|
24,827
|
|
|
|
|
|
128,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(45,370
|
)
|
|
|
(1,427
|
)
|
|
|
1,299
|
|
|
2(b)
|
|
|
(3,019
|
)
|
|
5(d)
|
|
|
(48,517
|
)
|
|
Loss on extinguishment of debt
|
|
|
(5,218
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(5,218
|
)
|
|
Change in fair value of derivative positions
|
|
|
53
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
53
|
|
|
Other
|
|
|
1,450
|
|
|
|
139
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and (expense)
|
|
|
(49,085
|
)
|
|
|
(1,288
|
)
|
|
|
1,299
|
|
|
|
|
|
(3,019
|
)
|
|
|
|
|
(52,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
52,787
|
|
|
|
953
|
|
|
|
1,118
|
|
|
|
|
|
21,808
|
|
|
|
|
|
76,666
|
|
|
Income tax expense (benefit)
|
|
|
25,608
|
|
|
|
642
|
|
|
|
—
|
|
|
|
|
|
4,751
|
|
|
5(e)
|
|
|
31,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
27,179
|
|
|
$
|
311
|
|
|
$
|
1,118
|
|
|
|
|
$
|
17,057
|
|
|
|
|
$
|
45,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (loss) per share:
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.38
|
|
|
Diluted Earnings (loss) per share:
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.38
|
|
|
Weighted Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
119,284,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,284,468
|
|
|
Diluted
|
|
|
121,224,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,224,550
|
|
|
(1)
|
ITS IFRS Historical financial information includes the historical financial information of ITS Holdings prior to acquisition by Parker Drilling, adjusted for ITS Holdings’ entities not acquired by Parker Drilling
in the ITS Acquisition.
|
|
(2)
|
See note 2 in the accompanying notes for discussion of adjustments related to conversion of IFRS to U.S. GAAP.
|
|
(3)
|
See note 5 in the accompanying notes for discussion of pro forma adjustments.
|
The accompanying notes are an
integral part of, and should be read together with, this unaudited pro forma condensed consolidated statements of operations.
F-78
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
The accompanying unaudited pro forma condensed consolidated financial
information presents the pro forma results of operations of Parker Drilling and ITS on a consolidated basis based on the historical financial information of each company after giving effect to the Acquisition, related transactions and transaction
specific financing, as well as pro forma adjustments. The unaudited pro forma condensed consolidated financial information was prepared in accordance with Securities and Exchange Commission Regulation S-X Article 11, using the acquisition method of
accounting.
Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification (“ASC”) 805,
Business Combinations
(“ASC 805”), requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820,
Fair Value Measurements
, as of the
acquisition date. In addition, the applicable accounting literature requires that consideration transferred be measured at the closing date of the asset acquisition.
Under the acquisition method of accounting, the assets acquired and liabilities assumed are recorded as of the completion of the acquisition,
primarily at their respective fair values and added to those of Parker Drilling. The results of operations of ITS are reflected in the reported results of operations of Parker Drilling from the date of acquisition but Parker Drilling’s
financial statements will not be retroactively restated to reflect the historical financial position or results of operations of ITS.
The
unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2013 is presented “as if” the Acquisition had occurred on January 1, 2013.
Acquisition-related transaction costs (i.e., advisory, legal, valuation, and other professional fees) and certain acquisition-related
restructuring charges impacting ITS are expensed in the period in which the costs are incurred. Total advisory, legal, regulatory, and valuation costs incurred by Parker Drilling in connection with the Acquisition were approximately $22.5 million
and are not reflected in the pro forma condensed consolidated statement of operations because they will not have a continuing impact.
|
2.
|
Adjustments to ITS Holdings’ Financial Statements to Reconcile to U.S. GAAP
|
ITS
Holdings’ financial statements were prepared in accordance with IFRS, as issued by IASB, which differ in certain respects from U.S. GAAP. Adjustments have been made with respect to the following items to reconcile ITS Holdings’ historical
IFRS financial information to U.S. GAAP for the purposes of the pro forma presentation. Significant adjustments include:
(a) Restructuring Provision
— Under IFRS, a provision was made for certain restructuring costs relating to ITS Holdings winding down its business in Iran. Under U.S. GAAP, these costs are recognized in the period in which they are incurred as they do not meet the criteria
to recognize a liability. Of these costs, $0.2 million were incurred between January 1, 2013 and April 21, 2013 for which the adjustment is recorded in the unaudited pro forma condensed consolidated statement of operations for the year ended
December 31, 2013 to reverse $0.2 million recognized under IFRS of restructuring liabilities.
(b) Interest expense has been adjusted to reflect
(1) Deferred financing costs — the amortization method applied by ITS Holdings differs from that of Parker Drilling. Under IFRS, the effective interest method was applied, while under U.S. GAAP, the deferred financing costs relating to the
ITS Holdings revolver, are amortized on a straight line basis; and (2) A Ordinary Shares — ITS Holdings had issued a class of share capital, the A Ordinary shares, which carried an entitlement to a fixed cumulative preferential dividend
and could have been redeemed at certain times at the option of the shareholder. Under IFRS, such shares were classified as a compound instrument
F-79
at inception, recognizing both a debt and equity component to the instrument. Related financing costs were offset against the fair value of the debt, which was then being amortized back to the
redeemable value of the instrument. Any related dividends were treated as interest. Interest expense for the year ended December 31, 2013 was reduced as the fixed cumulative preferential dividend is treated as a dividend under U.S. GAAP.
The interest expense adjustments to reflect the decrease in interest expense resulting from the paragraphs above was:
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2013
|
|
|
Adjustment (1) — Deferred financing costs
|
|
$
|
(199
|
)
|
|
Adjustment (2) — A Ordinary shares
|
|
|
1,498
|
|
|
Total impact to
Interest expense, net
|
|
$
|
1,299
|
|
|
3.
|
Adjustments for ITS Entities and Operations Not Acquired
|
The Parker Parties did not acquire
certain entities or geographic operations of ITS Holdings reflected in the historical financial information of ITS Holdings. These entities or operations were related to the operations in Iran, Sudan, Peru, Ecuador, Venezuela, Pakistan, Cyprus,
Spain, and Brazil, and certain non-core operations in the U.S. that were sold as part of another transaction prior to the Acquisition. The UK holding company that held ITS Holdings’ capital shares, debt and debt related accounts was also not
acquired. Accordingly, adjustments have been made to remove the results of operations, as well as impairment and restructuring charges, attributable to these entities so as to reflect only the operations assumed by Parker Drilling. Adjustments are
included in the “ITS IFRS Historical” column in the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Year ended December 31, 2013.
|
4.
|
Purchase Price Allocation
|
The total purchase price of the acquisition was $125.0 million. The
purchase consideration was comprised of $101.0 million of cash paid at closing and $24.0 million of cash deposited in escrow. The total purchase consideration of $125.0 million was allocated to the net tangible and intangible assets acquired and
liabilities assumed in the ITS Acquisition based on their estimated fair values. As of March 31, 2014 we finalized the determination of the fair values of the assets acquired and liabilities assumed. The information below represents the final
purchase price allocation of ITS (in thousands):
|
|
|
|
|
|
|
Cash paid to, or on behalf of, ITS and its equity holders
|
|
$
|
101,000
|
|
|
Cash deposited in escrow
|
|
|
19,000
|
|
|
Fair value of contingent consideration deposited in escrow for assets not
acquired
(1)
|
|
|
5,000
|
|
|
Total purchase consideration
|
|
|
125,000
|
|
|
Working capital excluding Rig material and supplies
|
|
|
20,589
|
|
|
Rig material and supplies
|
|
|
11,514
|
|
|
Property, plant and equipment, net
|
|
|
72,935
|
|
|
Investment in joint venture
|
|
|
4,134
|
|
|
Other noncurrent assets
|
|
|
2,818
|
|
|
Total tangible assets
|
|
|
111,990
|
|
|
Deferred income tax assets
|
|
|
11,862
|
|
|
Intangible assets
|
|
|
8,500
|
|
|
Total assets acquired
|
|
$
|
132,352
|
|
|
Less: Other liabilities assumed
|
|
|
(211
|
)
|
|
Less: Non-current deferred income tax liabilities
|
|
|
(2,796
|
)
|
|
Net assets acquired
|
|
$
|
129,345
|
|
|
Less: Noncontrolling interest
|
|
|
(4,345
|
)
|
|
Goodwill
|
|
$
|
—
|
|
F-80
|
(l)
|
Based on the terms of the Agreement, $5.0 million of the $24.0 million in escrow to be paid to the seller is contingent upon certain future liabilities that could
become due by ITS in certain jurisdictions. Any payments in relation to these liabilities will be deducted from the $5.0 million escrow amount and the net balance of the escrow will be paid to the seller. We estimate that the entire $5.0 million in
escrow will be paid to the seller, and therefore, the estimated fair value of the consideration in escrow related to these liabilities is $5.0 million. We do not expect to receive any amount back from escrow, and therefore did not record a
receivable from escrow. Any changes to the fair value of the contingent consideration in the future of less than $5.0 million will result in recording a receivable from escrow. The receivable will be recorded at fair value. As of December 31,
2013 and March 31, 2014, the fair value of the receivable was $0.0 million.
|
The pro forma adjustments included in the unaudited pro forma condensed
consolidated statement of operations take into consideration the final purchase price allocation and are as follows:
(a) Reversal of professional fees and
other non-recurring transaction costs incurred associated with the Acquisition of approximately $22.5 million recorded in the historical statement of operations of Parker Drilling for the year ended December 31, 2013.
(b) Reduction in depreciation expense of $3.2 million for the period from January 1, 2013 to April 21, 2013 resulting from the purchase price adjustment to
property, plant and equipment. The depreciation expense was calculated based on the final fair value of ITS’ fixed assets at acquisition using estimated average remaining useful lives consistent with Parker Drilling’s policies. Depreciable
lives for different categories of property, plant and equipment are as follows:
|
|
|
|
|
Land drilling equipment
|
|
3 to 20 years
|
|
Barge drilling equipment
|
|
3 to 20 years
|
|
Drill pipe, rental tools and other
|
|
4 to 7 years
|
|
Buildings and improvements
|
|
15 to 30 years
|
(c) Recording amortization expense on the final fair value of ITS’ intangible assets in the amount of $0.9 million for
the period from January 1, 2013 to April 21, 2013 at acquisition using an estimated average remaining useful life of 3 years.
(d) Recording estimated
interest expense of $2.8 million for the period from January 1, 2013 to April 21, 2013 on new long-term unsecured borrowings, related to the Acquisition, of $125.0 million at an average interest rate of 6.5 percent and associated estimated
amortization of deferred financing cost of $0.2 million for the year ended December 31, 2013.
(e) Includes adjustment of income taxes for the items
described in notes (a) through (d), above, using an estimated aggregate of statutory income tax rate of the jurisdictions for which the above adjustments relate. Using this method, the estimated aggregate income tax rate used is 35 percent for
the period from January 1, 2013 to April 21, 2013.
F-81
Independent auditor’s report
The Board of Directors of Parker Drilling Company
We have
audited the accompanying consolidated financial statements of ITS Tubular Services (Holdings) Limited (the “Company”), which comprise the consolidated statements of financial position as of 31 December 2012, 2011 and 2010, and the
related consolidated income statement, statements of comprehensive income, changes in deficit and cash flow for each of the three years in the period ended 31 December 2012 and the related notes to the consolidated financial statements.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our audit opinion.
Opinion on financial statements
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ITS Tubular
Services (Holdings) Limited and its subsidiaries as of 31 December 2012, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended 31 December 2012 in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
Emphases of matter regarding prior year
restatement and going concern
As discussed in Note 31 to the financial statements, the 2010 and 2011 financial statements have been restated to
correct the accounting for the A Ordinary shares issued in 2009 for a total consideration of $55,000,000. Our opinion is not modified with respect to this matter.
F-82
The accompanying financial statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 30 to the financial statements, on 19 April 2013, the Company was placed into Administration proceedings under the laws of Scotland. Subsequent to entering Administration, the Company entered into a sale and
purchase agreement for a substantial portion of the Company’s assets to Parker Drilling Company. These circumstances create substantial doubt about the Company’s ability to continue as a going concern in the foreseeable future. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
|
|
|
/s/ Deloitte LLP
Aberdeen, Scotland, UK
8 July 2013
|
F-83
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
As restated
see Note 31
|
|
|
2010
As restated
see Note 31
|
|
|
|
|
Note
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Continuing operations
|
|
|
6
|
|
|
|
137,903
|
|
|
|
142,814
|
|
|
|
123,382
|
|
|
Cost of sales
|
|
|
|
|
|
|
(90,064
|
)
|
|
|
(76,983
|
)
|
|
|
(68,943
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
47,839
|
|
|
|
65,831
|
|
|
|
54,439
|
|
|
Administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Other administrative expenses
|
|
|
|
|
|
|
(64,889
|
)
|
|
|
(52,422
|
)
|
|
|
(49,633
|
)
|
|
– Impairment of jars fleet and associated leasehold improvements
|
|
|
7
|
|
|
|
(11,536
|
)
|
|
|
—
|
|
|
|
—
|
|
|
– Impairment of other plant and oilfield equipment
|
|
|
7
|
|
|
|
(18,011
|
)
|
|
|
—
|
|
|
|
—
|
|
|
– Impairment of goodwill and intangible fixed assets
|
|
|
7
|
|
|
|
(6,588
|
)
|
|
|
—
|
|
|
|
—
|
|
|
– Impairment and provision for costs on territory exit
|
|
|
7
|
|
|
|
(11,217
|
)
|
|
|
—
|
|
|
|
—
|
|
|
– Loss on sale of fixed assets
|
|
|
|
|
|
|
(893
|
)
|
|
|
(105
|
)
|
|
|
(122
|
)
|
|
– Amortisation of intangible assets
|
|
|
|
|
|
|
(1,247
|
)
|
|
|
(1,286
|
)
|
|
|
(1,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group operating (loss)/profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing operations
|
|
|
|
|
|
|
(66,542
|
)
|
|
|
12,018
|
|
|
|
3,564
|
|
|
Share of profit in joint venture
|
|
|
16
|
|
|
|
796
|
|
|
|
807
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating (loss)/profit: Group and share of joint venture
|
|
|
|
|
|
|
(65,746
|
)
|
|
|
12,825
|
|
|
|
4,449
|
|
|
|
|
|
|
|
|
(Loss)/profit from operating activities
|
|
|
7
|
|
|
|
(65,746
|
)
|
|
|
12,825
|
|
|
|
4,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
9
|
|
|
|
330
|
|
|
|
157
|
|
|
|
94
|
|
|
Finance expense
|
|
|
10
|
|
|
|
(22,906
|
)
|
|
|
(17,214
|
)
|
|
|
(18,069
|
)
|
|
Accretion of A Ordinary shares to redemption
|
|
|
10
|
|
|
|
(5,258
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Other gains and losses
|
|
|
11
|
|
|
|
3,494
|
|
|
|
(3,600
|
)
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxation from continuing operations
|
|
|
|
|
|
|
(90,086
|
)
|
|
|
(7,832
|
)
|
|
|
(12,287
|
)
|
|
Taxation
|
|
|
12
|
|
|
|
(12,025
|
)
|
|
|
676
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year from continuing operations
|
|
|
|
|
|
|
(102,111
|
)
|
|
|
(7,156
|
)
|
|
|
(11,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year from discontinued operations
|
|
|
13
|
|
|
|
(1,631
|
)
|
|
|
618
|
|
|
|
627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
|
|
|
|
|
|
(103,742
|
)
|
|
|
(6,538
|
)
|
|
|
(10,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent
|
|
|
|
|
|
|
(103,821
|
)
|
|
|
(6,241
|
)
|
|
|
(10,301
|
)
|
|
Non-controlling interests
|
|
|
|
|
|
|
79
|
|
|
|
(297
|
)
|
|
|
(667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss recognised in year
|
|
|
|
|
|
|
(103,742
|
)
|
|
|
(6,538
|
)
|
|
|
(10,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages F-90 to F-129 are an integral part of these consolidated financial statements.
Subsequent to 31 December 2012, the Group has disposed of certain activities and is in the process of discontinuing and selling the remaining
operations. Further details are provided at Note 13.
F-84
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
As restated
see Note 31
|
|
|
2010
As restated
see Note 31
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Loss for the year
|
|
|
(103,742
|
)
|
|
|
(6,538
|
)
|
|
|
(10,968
|
)
|
|
Currency translation difference on foreign currency net investments
|
|
|
377
|
|
|
|
(729
|
)
|
|
|
(3,634
|
)
|
|
Currency translation difference on related borrowings
|
|
|
(907
|
)
|
|
|
(2,210
|
)
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year
|
|
|
(104,272
|
)
|
|
|
(9,477
|
)
|
|
|
(14,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the financial year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Equity holders of the parent
|
|
|
(104,351
|
)
|
|
|
(9,180
|
)
|
|
|
(13,799
|
)
|
|
– Non-controlling interests
|
|
|
79
|
|
|
|
297
|
|
|
|
(667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year
|
|
|
(104,272
|
)
|
|
|
(9,477
|
)
|
|
|
(14,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes on pages 11 to 53 are an integral part of these consolidated financial statements.
F-85
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF 31 DECEMBER 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2012
$’000
|
|
|
2011
As restated
see Note 31
$’000
|
|
|
2010
As restated
see Note 31
$’000
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
14
|
|
|
|
5,915
|
|
|
|
14,562
|
|
|
|
15,802
|
|
|
Tangible assets
|
|
|
15
|
|
|
|
129,544
|
|
|
|
188,249
|
|
|
|
190,905
|
|
|
Deferred tax asset
|
|
|
18
|
|
|
|
6,186
|
|
|
|
13,545
|
|
|
|
9,608
|
|
|
Investments in joint ventures
|
|
|
16
|
|
|
|
3,907
|
|
|
|
4,976
|
|
|
|
3,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,552
|
|
|
|
221,332
|
|
|
|
219,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
19
|
|
|
|
11,021
|
|
|
|
21,310
|
|
|
|
23,157
|
|
|
Other financial assets
|
|
|
17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
Trade and other receivables
|
|
|
20
|
|
|
|
54,626
|
|
|
|
61,211
|
|
|
|
57,862
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
8,345
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
Assets held for sale
|
|
|
13
|
|
|
|
18,643
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,635
|
|
|
|
94,533
|
|
|
|
89,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
238,187
|
|
|
|
315,865
|
|
|
|
309,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
21
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
Share premium account
|
|
|
22
|
|
|
|
2,468
|
|
|
|
2,468
|
|
|
|
2,468
|
|
|
Other reserves
|
|
|
|
|
|
|
9,093
|
|
|
|
9,093
|
|
|
|
8,893
|
|
|
Currency translation reserve
|
|
|
|
|
|
|
(13,418
|
)
|
|
|
(12,888
|
)
|
|
|
(9,949
|
)
|
|
(Accumulated deficit)/Retained earnings
|
|
|
|
|
|
|
(77,164
|
)
|
|
|
26,657
|
|
|
|
32,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders of the parent
|
|
|
|
|
|
|
(79,019
|
)
|
|
|
25,332
|
|
|
|
34,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
|
|
|
|
1,744
|
|
|
|
1,815
|
|
|
|
2,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,275
|
)
|
|
|
27,147
|
|
|
|
36,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Ordinary shares
|
|
|
21
|
|
|
|
—
|
|
|
|
52,571
|
|
|
|
49,801
|
|
|
Loans and borrowings
|
|
|
23
|
|
|
|
—
|
|
|
|
172,714
|
|
|
|
—
|
|
|
Other creditors
|
|
|
24
|
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
Obligations under hire-purchase contracts
|
|
|
23
|
|
|
|
392
|
|
|
|
823
|
|
|
|
1,257
|
|
|
Deferred tax liability
|
|
|
18
|
|
|
|
4,784
|
|
|
|
3,424
|
|
|
|
3,506
|
|
|
Financial liability
|
|
|
17
|
|
|
|
—
|
|
|
|
3,494
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
|
|
|
|
5,176
|
|
|
|
233,026
|
|
|
|
54,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Ordinary shares
|
|
|
21
|
|
|
|
57,352
|
|
|
|
—
|
|
|
|
—
|
|
|
Trade payables
|
|
|
|
|
|
|
20,927
|
|
|
|
16,979
|
|
|
|
22,891
|
|
|
Corporation tax
|
|
|
|
|
|
|
1,907
|
|
|
|
2,831
|
|
|
|
2,456
|
|
|
Obligations under hire-purchase contracts
|
|
|
23
|
|
|
|
568
|
|
|
|
826
|
|
|
|
1,870
|
|
|
Revolving credit facility and bank overdraft
|
|
|
23
|
|
|
|
174,327
|
|
|
|
—
|
|
|
|
166,339
|
|
|
Other payables
|
|
|
25
|
|
|
|
52,259
|
|
|
|
35,056
|
|
|
|
24,747
|
|
|
Liabilities directly associated with assets classified as held for sale
|
|
|
13
|
|
|
|
2,946
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
310,286
|
|
|
|
55,692
|
|
|
|
218,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
238,187
|
|
|
|
315,865
|
|
|
|
309,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The notes pages 11 to 53 are an integral part of these consolidated financial statements.
F-86
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY / (DEFICIT)
FOR THE YEAR ENDED 31 DECEMBER 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
Share
premium
account
|
|
|
1
Other
reserves
|
|
|
Currency
translation
reserve
|
|
|
Retained
earnings/
(Accumulated
deficit)
|
|
|
Total
|
|
|
Non-
controlling
interest
|
|
|
Total
Equity
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Balance at 1 January 2010 as previously reported
|
|
|
2
|
|
|
|
2,468
|
|
|
|
1,306
|
|
|
|
(6,451
|
)
|
|
|
53,199
|
|
|
|
50,524
|
|
|
|
2,910
|
|
|
|
53,434
|
|
|
Restatement (Note 31)
|
|
|
—
|
|
|
|
—
|
|
|
|
7,587
|
|
|
|
—
|
|
|
|
(10,000
|
)
|
|
|
(2,413
|
)
|
|
|
—
|
|
|
|
(2,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2010 (as restated, Note 31)
|
|
|
2
|
|
|
|
2,468
|
|
|
|
8,893
|
|
|
|
(6,451
|
)
|
|
|
43,199
|
|
|
|
48,111
|
|
|
|
2,910
|
|
|
|
51,021
|
|
|
Loss for year (as restated, Note 31)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,301
|
)
|
|
|
(10,301
|
)
|
|
|
(667
|
)
|
|
|
(10,968
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,634
|
)
|
|
|
—
|
|
|
|
(3,634
|
)
|
|
|
—
|
|
|
|
(3,634
|
)
|
|
– Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
136
|
|
|
|
—
|
|
|
|
136
|
|
|
|
—
|
|
|
|
136
|
|
|
Exchange adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2010 (as restated, Note 31)
|
|
|
2
|
|
|
|
2,468
|
|
|
|
8,893
|
|
|
|
(9,949
|
)
|
|
|
32,898
|
|
|
|
34,312
|
|
|
|
2,252
|
|
|
|
36,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for year (as restated, Note 31)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,241
|
)
|
|
|
(6,241
|
)
|
|
|
(297
|
)
|
|
|
(6,538
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(729
|
)
|
|
|
—
|
|
|
|
(729
|
)
|
|
|
—
|
|
|
|
(729
|
)
|
|
– Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,210
|
)
|
|
|
—
|
|
|
|
(2,210
|
)
|
|
|
—
|
|
|
|
(2,210
|
)
|
|
Equity apportionment for warrant
|
|
|
—
|
|
|
|
—
|
|
|
|
200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
200
|
|
|
|
248
|
|
|
|
448
|
|
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(309
|
)
|
|
|
(309
|
)
|
|
Exchange adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2011 (as restated, Note 31)
|
|
|
2
|
|
|
|
2,468
|
|
|
|
9,093
|
|
|
|
(12,888
|
)
|
|
|
26,657
|
|
|
|
25,332
|
|
|
|
1,815
|
|
|
|
27,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for year
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(103,821
|
)
|
|
|
(103,821
|
)
|
|
|
79
|
|
|
|
(103,742
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Currency translation difference on foreign currency net investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
377
|
|
|
|
—
|
|
|
|
377
|
|
|
|
—
|
|
|
|
377
|
|
|
– Currency translation difference on related borrowings
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(907
|
)
|
|
|
—
|
|
|
|
(907
|
)
|
|
|
—
|
|
|
|
(907
|
)
|
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(102
|
)
|
|
|
(102
|
)
|
|
Exchange adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2012
|
|
|
2
|
|
|
|
2,468
|
|
|
|
9,093
|
|
|
|
(13,418
|
)
|
|
|
(77,164
|
)
|
|
|
(79,019
|
)
|
|
|
1,744
|
|
|
|
(77,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Other reserves at December 2012 comprise the merger reserve of $1,306,000, which was created following the merger of ITS Tubular Services (Holdings) and ITS Cayman in 2003, and the equity component of the
A Ordinary shares of $7,787,000.
|
F-87
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Net cash from operating activities
|
|
|
i
|
|
|
|
11,511
|
|
|
|
28,892
|
|
|
|
34,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
|
|
|
|
330
|
|
|
|
157
|
|
|
|
94
|
|
|
Joint venture dividend received
|
|
|
|
|
|
|
1,000
|
|
|
|
350
|
|
|
|
200
|
|
|
Purchase of tangible fixed assets
|
|
|
|
|
|
|
(11,426
|
)
|
|
|
(32,671
|
)
|
|
|
(50,765
|
)
|
|
Purchase of intangible fixed assets
|
|
|
|
|
|
|
(412
|
)
|
|
|
(260
|
)
|
|
|
(5,103
|
)
|
|
Proceeds from sale of tangible fixed assets
|
|
|
|
|
|
|
4,719
|
|
|
|
11,902
|
|
|
|
6,241
|
|
|
Investment in joint venture
|
|
|
|
|
|
|
—
|
|
|
|
(90
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(5,789
|
)
|
|
|
(20,612
|
)
|
|
|
(49,333
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
|
|
|
(9,725
|
)
|
|
|
(8,124
|
)
|
|
|
(7,744
|
)
|
|
Dividends paid to non-controlling interests
|
|
|
|
|
|
|
(101
|
)
|
|
|
(316
|
)
|
|
|
—
|
|
|
Finance charges under hire-purchase contracts paid
|
|
|
|
|
|
|
(37
|
)
|
|
|
(450
|
)
|
|
|
(317
|
)
|
|
Funds drawn from long-term facilities
|
|
|
|
|
|
|
—
|
|
|
|
4,350
|
|
|
|
29,000
|
|
|
Debt issue costs
|
|
|
|
|
|
|
(1,313
|
)
|
|
|
(3,120
|
)
|
|
|
(875
|
)
|
|
Issue of A Ordinary shares
|
|
|
|
|
|
|
—
|
|
|
|
3,225
|
|
|
|
—
|
|
|
Shareholder advance
|
|
|
|
|
|
|
3,009
|
|
|
|
1,500
|
|
|
|
—
|
|
|
Repayment of obligations under finance leases
|
|
|
|
|
|
|
(898
|
)
|
|
|
(1,988
|
)
|
|
|
(2,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from financing activities
|
|
|
|
|
|
|
(9,065
|
)
|
|
|
(4,923
|
)
|
|
|
17,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
(3,343
|
)
|
|
|
3,357
|
|
|
|
2,982
|
|
|
Cash and cash equivalents at 1 January
|
|
|
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
|
6,049
|
|
|
Effect of exchange rate fluctuations on cash held
|
|
|
|
|
|
|
(137
|
)
|
|
|
(101
|
)
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at 31 December
|
|
|
|
|
|
|
8,532
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents comprises:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand
|
|
|
|
|
|
|
8,532
|
|
|
|
11,949
|
|
|
|
8,691
|
|
|
Cash on short-term deposit
|
|
|
|
|
|
|
—
|
|
|
|
63
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,532
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand at 31 December 2012 includes $187,000 of cash classified as assets held for resale.
At 31 December 2012 cash includes $850,000 held in countries where exchange control restrictions do not permit transfer outside the country and is therefore
considered to be restricted cash.
F-88
NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2012
i.
Reconciliation of loss for the year to net cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Loss for the year
|
|
|
(103,742
|
)
|
|
|
(6,538
|
)
|
|
|
(10,968
|
)
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange loss in net debt included in operating profit
|
|
|
(115
|
)
|
|
|
94
|
|
|
|
219
|
|
|
Other foreign exchange adjustment
|
|
|
(1,330
|
)
|
|
|
(1,113
|
)
|
|
|
(497
|
)
|
|
Depreciation
|
|
|
27,261
|
|
|
|
25,378
|
|
|
|
23,325
|
|
|
Amortisation of intangible assets
|
|
|
1,247
|
|
|
|
1,286
|
|
|
|
1,120
|
|
|
Revaluation of derivative financial instruments
|
|
|
(3,494
|
)
|
|
|
3,600
|
|
|
|
(106
|
)
|
|
Impairment losses on goodwill and intangible fixed assets
|
|
|
6,588
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment losses on tangible assets
|
|
|
30,826
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment losses on trade receivables
|
|
|
6,412
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment losses on inventory
|
|
|
7,472
|
|
|
|
—
|
|
|
|
—
|
|
|
Provision for impairment on territory exit
|
|
|
11,217
|
|
|
|
—
|
|
|
|
—
|
|
|
Income tax expense
|
|
|
12,025
|
|
|
|
78
|
|
|
|
609
|
|
|
(Gain)/loss on sale of tangible assets
|
|
|
(2,326
|
)
|
|
|
(1,577
|
)
|
|
|
122
|
|
|
Net finance expense
|
|
|
27,834
|
|
|
|
17,413
|
|
|
|
16,905
|
|
|
Share of operating profit in joint venture
|
|
|
(796
|
)
|
|
|
(807
|
)
|
|
|
(885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows before movements in working capital
|
|
|
19,079
|
|
|
|
37,814
|
|
|
|
29,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in inventories
|
|
|
(2,167
|
)
|
|
|
1,438
|
|
|
|
(6,114
|
)
|
|
Change in trade and other receivables
|
|
|
(12,360
|
)
|
|
|
(3,750
|
)
|
|
|
8,922
|
|
|
Change in trade and other payables
|
|
|
11,207
|
|
|
|
(2,895
|
)
|
|
|
5,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash generated from operating activities
|
|
|
15,759
|
|
|
|
32,607
|
|
|
|
37,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
(4,248
|
)
|
|
|
(3,715
|
)
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities
|
|
|
11,511
|
|
|
|
28,892
|
|
|
|
34,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year, impairment reviews were carried out that indicated impairments in several categories of assets operating in
specific geographical segments. These are non-cash movements disclosed in the reconciliation of loss for the year to net cash flow from operating activities statement above.
F-89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2012
1. General information
ITS Tubular Services (Holdings)
Limited (in administration) is a company incorporated in Scotland. The address of its registered office is Unit 5, Commerce Centre, Souterhead Road, Altens, Aberdeen, AB12 3LF.
The consolidated financial statements of the Group as at 31 December 2012 and for the year then ended comprise the parent company and its subsidiaries
(together referred to as “the Group” and individually as “Group entities”) and the Group’s interest in jointly controlled entities. The Group is mainly involved in the provision of products and services to the upstream oil
and gas industry, primarily focused on drilling activities.
These consolidated financial statements for the year end 31 December 2012 were
authorised for issue by management on 8 July 2013.
2. Basis of preparation of financial statements
The financial statements have been prepared in accordance with applicable International Financial Reporting Standards as issued by the International Accounting
Standards Board. The information presented for the years ended 31 December 2012, 2011 and 2010 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the respective periods (except
31 December 2012) have been reported upon by the Group’s Auditor and delivered to the Registrar of Companies. The report of the Auditor was unqualified, did not include a reference to any matters to which the Auditor drew attention by way
of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
For the year
ended 31 December 2012, the Group reported a loss after tax totalling $103,742,000, and at 31 December 2012, had net current liabilities of $217,651,000 including $174,327,000 in total bank loans and overdrafts.
The Company was in breach of its bank covenant as at 31 December 2012 and subsequently on 19 April 2013, the Company filed for administration under
the laws of Scotland. On 22 April 2013, the Company consummated the sale of its wholly owned subsidiary International Tubular Services Limited and certain affiliates and other subsidiaries to Parker Drilling Company (“Parker”) for an
estimated total consideration of $125 million. The sale represented substantially all of the continuing business and operating assets of the Group at that date. Further details of activities sold or discontinued after the balance sheet date of
31 December 2012 is provided in Note 30. The Company continues to hold certain subsidiaries and in the circumstances it is anticipated that the trade or assets of the remaining subsidiaries will be sold or liquidated in due course. The proceeds
will largely facilitate the repayment of bank indebtedness. The aforementioned events raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the
recoverability and classification of assets and liabilities that might result should the Company be unable to continue as a going concern. Such circumstances were not committed or entered into at the balance sheet date.
a) Basis of measurement
The consolidated
financial statements have been prepared on a historical cost basis except for certain financial instruments, which are stated at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
The methods used to measure fair values are detailed below.
b) Functional and presentation currency
These consolidated financial statements are presented in US Dollars, which is the Group’s principal functional currency. All financial
information presented has been rounded to the nearest $1,000.
F-90
c) Use of estimates and judgments
In the preparation of financial statements in conformity with IFRS, the directors are required to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
Estimates and underlying assumptions are subject to regular/ongoing review.
Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods which are affected by those revisions.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
|
|
i.
|
Carrying values, depreciation rates and residual values of plant and oilfield equipment
|
As
described in Note 3, the Group depreciates plant and oilfield equipment over its assessment of their estimated useful lives less estimated residual values using a straight-line basis. The useful lives range between 5-15 years with residual values
estimated between 5%-20% for various equipment. The Group takes into account its maintenance practices and industry experience in assessing the carrying values, useful lives and residual values of plant and oilfield equipment.
In making its judgment, management considered the detailed requirements of the depreciation and estimated residual values of the plant and
oilfield equipment goods as set out in IAS 16 Property Plant and Equipment.
The Group recognises deferred tax assets on unused tax losses where it is
probable that future taxable profits will be available for utilisation. This requires management to make judgments and assumptions indicating future trading performance and capital expenditure. The carrying amount of the recognised deferred tax
asset at 31 December 2012 was $6,186,000 (2011: $13,545,000; 2010: $9,608,000).
|
|
iii.
|
Impairment of goodwill
|
Determining whether goodwill is impaired requires an estimation of the
value in use of the cash-generating units to which goodwill has been allocated. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order
to calculate present value. The carrying amount of goodwill at the balance sheet date was $5.7 million.
|
|
iv.
|
Recognition and measurement of intangible assets under IFRS 3 “Business Combinations”
|
In order to determine the value of the separately identifiable intangible assets on the acquisition of a business combination, management are
required to make estimates on fair value of the separately identifiable assets acquired and residual goodwill. Management uses their judgment and knowledge of the industry and where necessary involve outside independent parties to perform these
calculations and determine the fair value and estimated useful lives of these assets.
|
|
v.
|
Fair value of derivatives and other financial instruments
|
As described in Note 3, management
use their judgment in selecting an appropriate valuation technique for derivative financial instruments. Assumptions are made based on quoted market rates adjusted for
F-91
specific features of the instrument. Other financial instruments are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or
rates. The estimation of fair value of unlisted shares includes some assumptions not supported by observable market prices or rates. Details of the carrying amount of the A Ordinary shares and assumptions used are provided in Note 21.
3. Significant Accounting Policies
The principal
accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
3.1 Basis of
consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company made up
to 31 December each year.
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the effective date
that control commences until the effective date that control ceases. The accounting policies of subsidiaries have been aligned, where necessary, with the policies adopted by the Group.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling
shareholders may be initially measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition
basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the
Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of
the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between
(i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any
non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be
required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under
IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the costs on initial recognition of an investment in an associate or jointly controlled entity.
In the consolidated financial statements, investments in joint ventures are
accounted for using the equity method. The consolidated income statement includes the Group’s share of joint ventures’ profits less losses while the Group’s share of the net assets of the joint ventures is shown in the consolidated
statement of financial position.
F-92
|
(iii)
|
Transactions and balances eliminated on consolidation:
|
Intra-Group transactions and balances,
and any unrealised income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee.
3.2 Revenue recognition
Turnover comprises the value of goods and services supplied by the Group in the normal course of business, net of trade discounts and sales taxes. Revenue is
recognised when the significant risks and rewards of ownership have been transferred to the buyer; it is probable that the economic benefits associated with a transaction will flow to the Group and the amount of revenue can be measured reliably.
Transfers of risks and rewards vary depending on the individual terms of the contract of sale.
|
(i)
|
Sale of equipment, and other goods:
|
Turnover is recognised when the goods are delivered to the
customer, at the contractually agreed delivery location. Lost in hole revenue is recognised when the customer confirms that rental equipment is either lost in hole or damaged beyond repair.
Rental income from operating leases is recognised as earned over the term of
the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
|
(iii)
|
Rendering of services:
|
Turnover is recognised in line with the fulfillment of its contractual
obligations. In most cases relating to the supply of services this represents the fulfillment of all obligations contained in its contracts. In certain circumstances specific elements of the total income relating to a contract are recognised where
completion of these elements (by reference to contractual trigger points) entitles the Group to the income. Where the rendering of services includes rental income, the rental income element is recognised on a straight-line basis over the period of
the rental contract.
3.3 Intangible fixed assets
The Group elected to exercise the exemption available under IFRS 1, First- time
Adoption of IFRS, in relation to the restatement of acquisitions prior to the transition date, 1 January 2008. The goodwill in relation to those acquisitions therefore remains frozen as reported on 1 January 2008, under UK GAAP, but
is subject to annual review for impairment.
Acquisitions subsequent to the transition date have been accounted for in accordance with IFRS
3 (Revised 2008), Business Combinations.
Goodwill arising on these acquisitions represents the excess of the sum of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over the net acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed.
Goodwill is not subject to amortisation but is reviewed at least annually for impairment. Goodwill is stated at
cost less accumulated impairment losses.
F-93
For the purpose of impairment testing, goodwill is allocated to the cash-generating unit in
respect of which the goodwill arose. Impairment is determined by assessing the ability of the cash-generating units to generate future cash flows and comparison of the recoverable amount with the respective goodwill balances. Impairment losses in
respect of goodwill are not reversed.
Acquired computer software licences are capitalised on the basis of the
costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful life which has been established as three to four years.
|
(iii)
|
Internally-generated intangible assets — research and development expenditure:
|
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset
arising from development expenditure is recognised only if all of the following conditions are met:
|
|
•
|
|
an asset is created that can be identified (such as software and new processes);
|
|
|
•
|
|
it is probable that the asset created will generate future economic benefits; and
|
|
|
•
|
|
the development cost of the asset can be measured reliably.
|
Internally-generated intangible
assets are amortised on a straight-line basis over their useful lives up to 10 years. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
|
(iv)
|
Patents and trademarks:
|
Patents and trademarks associated with internally-generated intangible
assets are amortised on a straight-line basis over a period not exceeding 10 years.
3.4 Property, plant and equipment
|
(i)
|
Recognition and measurement:
|
Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses.
Cost comprises the purchase price or construction cost, together with direct
borrowing costs and other costs directly attributable to making the asset capable of operating as intended, in the intended location. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration
given to acquire the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
Gains and losses on disposals of property, plant and equipment other than those held for
rental are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net in the income statement. Where items are sold from the fleet of oilfield equipment available for rental or
sale, the proceeds are reflected in revenue and the remaining net book value is charged to cost of sales.
Depreciation is calculated using the straight-line basis to allocate the cost
less residual values, to the income statement over the estimated useful lives of each item of property, plant and equipment. Assets acquired under finance leases are depreciated over the shorter of the lease term and their useful lives. Land is not
depreciated.
F-94
The estimated useful lives are as follows:
|
|
|
|
|
|
|
Buildings
|
|
|
5-10 years
|
|
|
Fixtures, fittings and office equipment
|
|
|
5-10 years
|
|
|
Motor vehicles
|
|
|
4 years
|
|
|
Plant and oilfield equipment
|
|
|
5-15 years
|
|
Improvements to leasehold premises are depreciated over the shorter of the primary period of the leases to
which the improvements relate or their useful lives.
Depreciation methods, useful lives and residual values are reviewed at each reporting
date for assets held at fair value.
3.5 Non-current assets held for sale
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be
expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan
involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its
former subsidiary after the sale.
3.6 Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis, and includes all direct costs incurred
and attributable production overheads. Net realisable value is based on estimated selling price less all further costs of completion and disposal.
Provision for impairment is based on a management assessment of excess and obsolete inventories.
Costs in relation to partially complete projects are treated as work in progress.
3.7 Foreign currencies
|
(i)
|
Transactions and balances:
|
Transactions denominated in foreign currencies are translated and
recorded at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at each balance sheet date. Gains and losses on retranslation are
recognised in the income statement for the year.
The results and financial position of all Group entities that have a
functional currency different from US Dollars are translated into US Dollars as follows:
|
|
•
|
|
assets and liabilities for each balance sheet presented are translated at the rate ruling at the balance sheet date;
|
|
|
•
|
|
income and expenses for each income statement are translated at average annual exchange rates; and
|
F-95
|
|
•
|
|
resulting exchange differences are recognised directly in other comprehensive income. Such differences have been recognised in a separate Foreign Currency Translation Reserve (FCTR) in the consolidated statement of
financial position.
|
When a foreign subsidiary is disposed of, the portion of the FCTR relating to that subsidiary is
required to be included as part of the calculation of profit or loss on the sale.
Foreign exchange gains and losses arising from a
monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future and is therefore considered to be long-term financing, are considered to form part of the net investment
in a foreign operation and are recognised in other comprehensive income and included in FCTR.
3.8 Employee benefits
|
(i)
|
Defined contribution plans:
|
Obligations for contributions to defined contribution pension
plans are recognised as an employee benefit expense in the income statement in the period to which they relate. The majority of the Group’s employees participate in plans of this nature.
|
(ii)
|
Short-term benefits:
|
Short-term employee benefit obligations such as annual performance
bonuses are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid as a short-term benefit if the Group has a legal or constructive obligation to pay this
benefit as a result of past service provided by the employee and the amount of the obligation can be measured reliably.
3.9 Leasing
Leases (including hire-purchase contracts) are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
As lessee
Rentals payable under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Benefits
received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the period of lease.
As lessor
Operating lease
rental income arising from leased assets is recognised in the income statement on a straight-line basis over the period of the lease.
As lessee
Assets held under finance leases are capitalised, at their fair value or, if lower, at the present value of the minimum lease payments, as
property, plant and equipment, and depreciated over the shorter of the lease term and the asset’s useful life. The capital element of the future lease obligation is recorded as a liability, with the interest element charged to the income
statement over the period of the lease so as to produce a constant rate of charge on the capital outstanding.
F-96
3.10 Financial instruments
Financial assets and financial liabilities are recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial Assets:
All financial assets are recognised and
derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the time frame established by the market concerned, and are initially measured at fair value,
plus transaction costs, except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets “at Fair Value Through Profit or Loss” (FVTPL),
“held-to-maturity” investments, “Available-For-Sale” (AFS) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of
initial recognition.
Effective interest method:
The
effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that discounts estimated future cash receipts (including
all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL.
Loans and receivables:
Trade
receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
3.11 Accounting for derivative financial instruments and hedging activities
The Group enters into derivative financial instruments to manage its exposure to interest rate risk. Further details of derivative instruments are disclosed in
Note 17.
Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value
at each balance sheet date.
The fair value of interest rate swaps are calculated as the present value of their estimated future cash flows. The fair
value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the balance sheet date. The fair value of currency options is determined using market rates at the balance sheet date.
3.12 Impairment
Financial assets are assessed at each reporting date to determine whether
there is any objective evidence that they may be impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
F-97
An impairment loss in respect of a financial asset measured at amortised cost is calculated as
the difference between its carrying amount and the present value of the estimated discounted future cash flows. All impairment losses on financial assets measured at amortised cost are recognised in the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
|
(ii)
|
Impairment of tangible and intangible assets excluding goodwill:
|
At each statement of
financial position date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The Group’s approach to impairment testing in relation to goodwill is outlined in section 3.3 (i) above.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses
are recognised in the income statement.
3.13 Income tax expense
Income tax expense comprises current and deferred tax.
Current
income tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to, or recovered from, the taxation authorities. Taxable profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in later years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred income tax is recognised on all temporary differences at the balance sheet date between the
carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with the following exceptions:
|
•
|
|
where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss;
|
F-98
|
•
|
|
in respect of taxable temporary differences associated with investments in subsidiaries and joint ventures, where the timing of reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future; and
|
|
•
|
|
deferred income tax assets are recognised only to the extent that it is probable that a taxable profit will be available against which the deductible temporary differences, carried-forward tax credits or tax losses can
be utilised.
|
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax liabilities and assets are measured on
an undiscounted basis at the tax rates that are expected to apply when the liability is settled or the asset is realised, based on tax rates and tax laws enacted or substantively enacted at the balance sheet date.
Current and deferred income tax is charged or credited directly to other comprehensive income if it relates to items that are credited or charged to equity.
Otherwise, income tax is recognised in the income statement.
3.14 Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and
liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods;
|
(i)
|
Property, plant and equipment:
|
The fair value of property, plant and equipment recognised as a
result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s-length
transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on management’s knowledge of prices offered and
accepted for comparable items.
The fair value of order books and other intangible assets acquired in a
business combination is based on the discounted cash flows expected to be derived from the use of the assets.
The fair value of inventories acquired in a business combination is determined
based on historic cost adjusted to fair value, if applicable. However where its estimated selling price in the ordinary course of business, less the estimated costs of completion and sale, are lower than cost, then that lower value is adopted.
|
(iv)
|
Trade and other receivables:
|
The fair value of trade and other receivables is estimated as the
present value of future cash flows, discounted where appropriate.
|
(v)
|
Non-derivative financial liabilities:
|
Fair value is calculated based on the present value of
future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
F-99
3.15 Contingent consideration
Contingent consideration relates to the future cash consideration payable in respect of acquisitions which is contingent on the outcome of future events. When
an acquisition agreement provides for an adjustment to the consideration which is contingent on future events, provision is made for that amount if the adjustment is probable and can be measured reliably. The amount provided is included in the cost
of the acquisition. Those provisional amounts are adjusted during the measurement period (see below), as additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date, and is subject to a maximum of one year.
3.16 Borrowings
Borrowings are initially recorded at
fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs.
Net financing costs comprise interest payable on borrowings, interest receivable on cash and cash equivalents and amortisation of debt finance costs that are
recognised in the income statement.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.17 Cash and cash equivalents
Cash and cash equivalents
are carried in the balance sheet at fair value. For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and other short-term highly liquid investments, less bank
overdrafts.
3.18 Share capital
The Group has three
classes of ordinary shares. The A Ordinary shares are classified as a compund instrument with both debt and equity components. The Ordinary and B Ordinary shares are classified as equity.
An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised at the proceeds received, net of direct issue costs.
3.19 Compound instruments
The component parts of compound instruments issued by the Group are classified separately as financial liabilities and equity in accordance with the substance
of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised
cost basis using the effective
F-100
interest method until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair
value of the compound instrument as a whole. This is recognised and included in equity, and is not subsequently remeasured.
3.20 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be
required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.21 Operating profit
Operating profit is stated after
charging restructuring costs and after the share of results of joint venture but before investment income and finance costs.
3.22 Discontinued
operations
Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held for sale
(see Note 13), if earlier. In accordance with IFRS 5, where there is a cessation and abandonment of an operation it is classified as discontinued at the point where the activities have ceased permanently and the abandonment is complete. When an
operation is classified as a discontinued operation, the comparative statement of comprehensive income is restated as if the operation had been discontinued from the start of the earliest year presented.
4. Financial risk management
The Group’s
multinational operations and debt financing expose it to a variety of financial risks. The Group has in place risk management policies that seek to limit the adverse effects of these risks on financial performance.
4.1 Foreign exchange risk
The Group is exposed to
foreign exchange risk arising from various currencies. The Group also has a number of subsidiary companies whose revenue and expenses are denominated in currencies other than the US Dollar. In order to protect the Group’s balance sheet from
movements in exchange rates wherever practicable, the Group finances its net investment in non-US Dollar subsidiaries primarily by means of borrowings denominated in the appropriate currency. Other strategies, including the payment of dividends, are
used to minimise the amount of net assets exposed to foreign currency revaluation.
The Group monitors the economic and political situation in the
countries in which it operates to minimise foreign currency exposure.
The Group’s main foreign exchange risk relates primarily to movements in the
Group’s key transactional currencies (which are described in Note 26 to the US Dollar. Movements in those currencies impact the
F-101
translation of non-dollar profit earned across the Group and the translation of non-dollar denominated net assets. Movement in the Euro/US Dollar rate impacts the carrying value of the
Euro-denominated receivables and payables.
4.2 Cash flow and fair-value interest rate risk
The Group has interest rate risk arising from its long-term borrowings. Borrowings at variable rates expose the Group to cash flow interest rate risk.
The Group has no significant interest-bearing assets other than cash and cash equivalents of a working capital nature. Therefore the Group’s income and
operating cash flows arising from such assets are substantially independent of changes in market interest rates.
The Group monitors its exposure to
interest rate risk as part of its overall financial risk management.
There were no changes in the Group’s approach to cash flow and fair-value
interest rate risk during the year.
4.3 Credit risk
Financial instruments that potentially subject the Group to a concentration of credit risk consist primarily of cash and cash equivalents and accounts
receivable. Cash and cash equivalents, primarily composed of current account balances, are maintained with major financial institutions in each of the territories in which the Group operates.
Sales are made on credit and result in short-term credit exposure on trade receivables. The Group’s customers are principally major companies in the oil
and gas exploration and production sector that have several years’ transaction history with the Group. Credit risk from the ordinary course of trade activities is managed by the relevant operating companies on a customer and/or project basis.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The major
component of this allowance is a specific loss component that relates to individually significant exposures. The ageing of receivables is shown in Note 26.
4.4 Liquidity risk
The Group has a blend of long-term
and short-term committed facilities to fund operations and to meet its financial obligations as they fall due.
F-102
New standards impact note
5. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet effective:
|
|
|
|
|
IFRS 1 (amended)
|
|
Government Loans
|
|
IFRS 7 (amended)
|
|
Disclosures — Offsetting Financial Assets and Financial Liabilities
|
|
Annual Improvements to IFRSs
|
|
(2009 — 2011) Cycle
|
|
IFRS 9
|
|
Financial Instruments
|
|
IFRS 10
|
|
Consolidated Financial Statements
|
|
IFRS 10, IFRS 12 and IAS 27 (amended)
|
|
Investment entities
|
|
IFRS 11
|
|
Joint Arrangements
|
|
IFRS 12
|
|
Disclosure of Interests in Other Entities
|
|
IFRS 13
|
|
Fair Value Measurement
|
|
IAS 27 (revised)
|
|
Separate Financial Statements
|
|
IAS 28 (revised)
|
|
Investments in Associates and Joint Ventures
|
|
IAS 32 (amended)
|
|
Offsetting Financial Assets and Financial Liabilities
|
|
IFRIC 20
|
|
Stripping Costs in the Production Phase of a Surface Mine
|
The directors do not expect that the adoption of the standards listed above will have a material impact on the financial
statements of the Group in future periods, except as follows:
|
•
|
|
IFRS 7 (amended) will increase the disclosure requirements where netting arrangements are in place for financial assets and financial liabilities;
|
|
•
|
|
IFRS 9 will impact both the measurement and disclosures of Financial Instruments;
|
|
•
|
|
IFRS 12 will impact the disclosure of interests the Group has in other entities; and
|
|
•
|
|
IFRS 13 will impact the measurement of fair value for certain assets and liabilities as well as the associated disclosures.
|
It is not considered practicable at this time to estimate the effect of these standards until a detailed review has been completed. However, the directors do
not believe that the impact of these standards will be material.
6. Revenue
An analysis of the Group’s revenue is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Sales of goods and lost in hole
|
|
|
10,925
|
|
|
|
15,272
|
|
|
|
16,452
|
|
|
Rendering of services
|
|
|
126,978
|
|
|
|
127,542
|
|
|
|
106,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,903
|
|
|
|
142,814
|
|
|
|
123,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-103
6. Revenue (cont.)
Revenue by destination
There are five main geographical areas and are analysed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
United Kingdom and Europe
|
|
|
20,093
|
|
|
|
23,845
|
|
|
|
16,887
|
|
|
Africa
|
|
|
9,992
|
|
|
|
6,488
|
|
|
|
10,955
|
|
|
North and South America
|
|
|
35,656
|
|
|
|
34,666
|
|
|
|
24,617
|
|
|
Middle East
|
|
|
57,326
|
|
|
|
68,273
|
|
|
|
46,227
|
|
|
Far East and Asia Pacific
|
|
|
14,836
|
|
|
|
9,542
|
|
|
|
24,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,903
|
|
|
|
142,814
|
|
|
|
123,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. (Loss)/profit from operating activities
(Loss)/profit from operating activities has been arrived at after charging/(crediting):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Depreciation of property, plant and equipment
|
|
|
27,261
|
|
|
|
25,378
|
|
|
|
23,325
|
|
|
Loss/(gain) on disposal of rental assets
|
|
|
893
|
|
|
|
(1,577
|
)
|
|
|
(122
|
)
|
|
Amortisation of intangible assets
|
|
|
1,247
|
|
|
|
1,286
|
|
|
|
1,120
|
|
|
Hire of plant and machinery — rentals payable under operating leases
|
|
|
688
|
|
|
|
196
|
|
|
|
81
|
|
|
Operating lease rentals — land and buildings
|
|
|
5,329
|
|
|
|
4,614
|
|
|
|
4,142
|
|
|
Impairment loss/(gain) recognised on trade receivables
|
|
|
6,412
|
|
|
|
(1,825
|
)
|
|
|
1,969
|
|
|
Net foreign exchange losses/(gains)
|
|
|
1,308
|
|
|
|
713
|
|
|
|
(110
|
)
|
|
Impairment and loss of jars fleet, inventory and associated leasehold improvements
|
|
|
11,536
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment of other plant and oilfield equipment
|
|
|
18,011
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment of goodwill and intangible fixed assets
|
|
|
6,588
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment and provision on territory exit
|
|
|
11,217
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2012, the Group impaired its jars rental CGU by $11,536,000. As described in Note 15, this comprised
$10,180,000 relating to tangible fixed asset impairment ($8,300,000 relating to rental assets and $1,880,000 relating to associated leasehold improvements). In addition, $1,356,000 of this impairment related to inventories.
As described in Note 15, as at 31 December 2012, the Group impaired other plant and oilfield equipment by $9,300,000 with lost equipment contributing a
further $8,711,000.
As described in Note 14, as at 31 December 2012, the Group impaired goodwill and other intangible assets by $6,588,000.
Following a decision to exit Iran, a provision of $11,217,000 was made by the Group during 2012 of which $8,039,000 relates to receivables and retentions,
$543,000 relates to other costs of exit and $2,635,000 was written off on disposal of unrecovered assets on exit (Note 15).
F-104
8. Remuneration of directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Directors’ emoluments
|
|
|
2,318
|
|
|
|
2,048
|
|
|
|
2,041
|
|
|
Company contributions to money purchase pension schemes
|
|
|
17
|
|
|
|
21
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,335
|
|
|
|
2,069
|
|
|
|
2,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of directors
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
Retirement benefits accruing to the following number of directors under:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money purchase schemes
|
|
|
4
|
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Finance income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Bank interest
|
|
|
11
|
|
|
|
25
|
|
|
|
18
|
|
|
Other interest
|
|
|
319
|
|
|
|
132
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330
|
|
|
|
157
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Finance expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
As restated
see Note 31
$’000
|
|
|
2010
As restated
see Note 31
$’000
|
|
|
Bank loans and overdraft interest (including unwinding of debt issue costs)
|
|
|
15,137
|
|
|
|
10,206
|
|
|
|
8,529
|
|
|
Accretion of A Ordinary shares to redemption value (Note 21)
|
|
|
10,604
|
|
|
|
5,518
|
|
|
|
9,092
|
|
|
Other interest
|
|
|
2,386
|
|
|
|
1,054
|
|
|
|
207
|
|
|
Finance charges under hire-purchase contracts
|
|
|
37
|
|
|
|
436
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,164
|
|
|
|
17,214
|
|
|
|
18,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2012, accretion of A Ordinary shares to their redemption value in the year ended 31 December 2012 includes $5,258,000,
which arises from a bank covenant breach in September 2012, thus resulting in the A Ordinary shares financial liability becoming repayable on demand. Refer to Note 23 for further details. Other interest relates to interest payable on the A Ordinary
share dividends.
11. Other gains and losses
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
2011
$’000
|
|
2010
$’000
|
|
Change in fair value of financial instruments (Note 17)
|
|
3,494
|
|
(3,600)
|
|
1,239
|
|
|
|
|
|
|
|
|
F-105
12. Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation tax on UK profits for year
|
|
|
198
|
|
|
|
85
|
|
|
|
79
|
|
|
Double taxation relief
|
|
|
(198
|
)
|
|
|
(85
|
)
|
|
|
(79
|
)
|
|
Foreign tax — current
|
|
|
3,324
|
|
|
|
3,832
|
|
|
|
3,628
|
|
|
Foreign tax — adjustments in respect of prior periods
|
|
|
—
|
|
|
|
—
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,324
|
|
|
|
3,832
|
|
|
|
3,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– United Kingdom
|
|
|
5,090
|
|
|
|
(4,108
|
)
|
|
|
(2,057
|
)
|
|
– Foreign tax
|
|
|
3,611
|
|
|
|
(400
|
)
|
|
|
(2,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,701
|
|
|
|
(4,508
|
)
|
|
|
(4,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense/(credit)
|
|
|
12,025
|
|
|
|
(676
|
)
|
|
|
(692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax charge/(credit) for the year can be reconciled to accounting loss as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Loss before taxation from continuing operations
|
|
|
(90,086
|
)
|
|
|
(7,832
|
)
|
|
|
(12,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%, 2010: 28%)
|
|
|
(22,071
|
)
|
|
|
(2,075
|
)
|
|
|
(3,440
|
)
|
|
Reduction in tax rate
|
|
|
1,029
|
|
|
|
136
|
|
|
|
30
|
|
|
Tax effect of expenses that are not deductible
|
|
|
10,947
|
|
|
|
1,586
|
|
|
|
5,248
|
|
|
Effect of different tax rates of subsidiaries operating in other jurisdictions
|
|
|
17,883
|
|
|
|
994
|
|
|
|
2,352
|
|
|
Derecognition of previously recognised deferred tax asset
|
|
|
4,237
|
|
|
|
—
|
|
|
|
—
|
|
|
Deferred tax asset previously unrecognised
|
|
|
—
|
|
|
|
(1,317
|
)
|
|
|
(4,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation for the year
|
|
|
12,025
|
|
|
|
(676
|
)
|
|
|
(692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Finance Act 2012 announced a lower UK Corporate Tax rate of 23% which comes into effect on 1 April 2013. On
20 March 2013 the UK Government announced further rate reductions to the UK Corporate Tax rate for 2014 and 2015 to 21% and 20% respectively. These rate changes will affect the size of the Company’s balance sheet deferred tax assets and
liabilities in the future. The deferred tax recognised has been calculated at the rates substantively enacted at the balance sheet date of 23%.
13. Discontinued operations
The results of the discontinued operations, which are included in the consolidated income statement and have been discontinued through sale
or cessation subsequent to 31 December 2012 are summarised as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Revenue
|
|
|
19,943
|
|
|
|
20,313
|
|
|
|
10,662
|
|
|
Expenses
|
|
|
(21,574
|
)
|
|
|
(19,203
|
)
|
|
|
(8,998
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit before tax
|
|
|
(1,631
|
)
|
|
|
1,110
|
|
|
|
1,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable tax expense
|
|
|
—
|
|
|
|
(492
|
)
|
|
|
(1,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit from discontinued operations
|
|
|
(1,631
|
)
|
|
|
618
|
|
|
|
627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-106
13. Discontinued operations (cont.)
In December 2012, the Group entered into an exclusivity agreement to dispose of the business and assets of
ITS Threading and Manufacturing Inc and ITS Precision Manufacturing Inc, which carried out non-core activities.
At the balance sheet date, these
operations were expected to be sold within 12 months, and have been classified as a disposal group held for sale and are presented separately in the balance sheet. No impairment losses have been recognised on the classification of these operations
held for sale. The sale was concluded in April 2013 and proceeds of the disposal exceeded book value of the related net assets.
During 2012, it was
decided not to proceed with an intended joint venture in Indonesia. As a result plant and oilfield equipment amounting to $978,000, being part of the intended investment, is reclassified as held for sale at 31 December 2012.
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
Goodwill
|
|
|
1,386
|
|
|
Tangible fixed assets
|
|
|
10,738
|
|
|
Inventories
|
|
|
2,602
|
|
|
Trade and other receivables
|
|
|
3,730
|
|
|
Cash and bank balances
|
|
|
187
|
|
|
|
|
|
|
|
|
Total assets classified as held for sale
|
|
|
18,643
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
(2,946
|
)
|
|
|
|
|
|
|
|
Total liabilities associated with the assets classified as held for sale
|
|
|
(2,946
|
)
|
|
|
|
|
|
|
|
Net assets of disposal group
|
|
|
15,697
|
|
|
|
|
|
|
|
Cash flows from discontinued operations:
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
Net cash used in operating activities
|
|
|
2,220
|
|
|
Net cash from investing activities
|
|
|
(233
|
)
|
|
Net cash from financing activities
|
|
|
(2,034
|
)
|
|
|
|
|
|
|
|
Net cash flows for the year
|
|
|
(47
|
)
|
|
|
|
|
|
|
F-107
14. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
$’000
|
|
|
Patents and
trademarks
$’000
|
|
|
Development
costs
$’000
|
|
|
Licences
$’000
|
|
|
Software
$’000
|
|
|
Total
$’000
|
|
|
Cost or deemed cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
9,098
|
|
|
|
296
|
|
|
|
2,608
|
|
|
|
1,222
|
|
|
|
393
|
|
|
|
13,617
|
|
|
Additions
|
|
|
3,886
|
|
|
|
—
|
|
|
|
639
|
|
|
|
500
|
|
|
|
83
|
|
|
|
5,108
|
|
|
Exchange movements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
Disposals
|
|
|
(977
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
(987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
12,007
|
|
|
|
296
|
|
|
|
3,247
|
|
|
|
1,719
|
|
|
|
466
|
|
|
|
17,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
—
|
|
|
|
10
|
|
|
|
—
|
|
|
|
29
|
|
|
|
220
|
|
|
|
259
|
|
|
Exchange movements
|
|
|
(222
|
)
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
(227
|
)
|
|
Disposals
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
11,785
|
|
|
|
308
|
|
|
|
3,247
|
|
|
|
1,748
|
|
|
|
679
|
|
|
|
17,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
—
|
|
|
|
2
|
|
|
|
32
|
|
|
|
251
|
|
|
|
131
|
|
|
|
416
|
|
|
Exchange movements
|
|
|
267
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(117
|
)
|
|
|
149
|
|
|
Disposals
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
Classified as held for sale
|
|
|
(1,386
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(106
|
)
|
|
|
(1,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
10,666
|
|
|
|
310
|
|
|
|
3,279
|
|
|
|
1,998
|
|
|
|
582
|
|
|
|
16,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation and impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
977
|
|
|
|
—
|
|
|
|
—
|
|
|
|
615
|
|
|
|
203
|
|
|
|
1,795
|
|
|
Amortisation for the year
|
|
|
—
|
|
|
|
59
|
|
|
|
522
|
|
|
|
441
|
|
|
|
98
|
|
|
|
1,120
|
|
|
Disposals
|
|
|
(977
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
(982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
—
|
|
|
|
59
|
|
|
|
522
|
|
|
|
1,056
|
|
|
|
296
|
|
|
|
1,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation for the year
|
|
|
—
|
|
|
|
61
|
|
|
|
649
|
|
|
|
467
|
|
|
|
109
|
|
|
|
1,286
|
|
|
Exchange movements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
|
(5
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
—
|
|
|
|
120
|
|
|
|
1,171
|
|
|
|
1,514
|
|
|
|
400
|
|
|
|
3,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment loss for year
|
|
|
5,005
|
|
|
|
128
|
|
|
|
1,455
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,588
|
|
|
Amortisation for the year
|
|
|
—
|
|
|
|
62
|
|
|
|
653
|
|
|
|
432
|
|
|
|
100
|
|
|
|
1,247
|
|
|
Exchange movements
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
4
|
|
|
|
(13
|
)
|
|
Classified as held for sale
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(106
|
)
|
|
|
(106
|
)
|
|
Disposals
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
5,005
|
|
|
|
310
|
|
|
|
3,279
|
|
|
|
1,929
|
|
|
|
397
|
|
|
|
10,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
8,121
|
|
|
|
296
|
|
|
|
2,608
|
|
|
|
607
|
|
|
|
190
|
|
|
|
11,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
12,007
|
|
|
|
237
|
|
|
|
2,725
|
|
|
|
663
|
|
|
|
170
|
|
|
|
15,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
11,785
|
|
|
|
188
|
|
|
|
2,076
|
|
|
|
234
|
|
|
|
279
|
|
|
|
14,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
5,661
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69
|
|
|
|
185
|
|
|
|
5,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-108
14. Intangible assets (cont.)
Acquisitions 2010
Colombia
On 30 September 2010, the Company acquired
the assets and business of Gagie Corporation S.A. for a total of $5,203,000. The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date
Assets of Gagie Corporation S.A.
|
|
|
|
|
|
|
|
|
Recognised
values on
acquisition
$’000
|
|
|
Property, plant and equipment
|
|
|
1,317
|
|
|
|
|
|
|
|
|
Net identifiable assets and liabilities
|
|
|
1,317
|
|
|
Goodwill on acquisition
|
|
|
3,886
|
|
|
|
|
|
|
|
|
Total consideration
|
|
|
5,203
|
|
|
|
|
|
|
|
|
Satisfied by
|
|
|
|
|
|
Cash
|
|
|
3,850
|
|
|
Deferred consideration
|
|
|
775
|
|
|
Other
|
|
|
578
|
|
|
|
|
|
|
|
|
|
|
|
5,203
|
|
|
|
|
|
|
|
Amortisation and impairment charge
The amortisation and impairment charges are allocated to administrative expenses.
In accordance with IAS 36 ‘Impairment of assets’, the Group tests goodwill annually for impairment or more frequently if there are indicators that
goodwill might be impaired. Goodwill is allocated for impairment testing to cash-generating units (CGU) which reflect how it is monitored for internal management purposes. The recoverable amounts of the CGUs are determined from value-in-use
calculations. Value-in-use is calculated using pre-tax cash flow projections based on the financial budgets and business plans covering a three-year period, which take into account historical trends and market conditions, which have been approved by
the Board.
The key assumptions for the value in use calculations are those regarding the discount rates and growth rates for the period. Management
estimates its annual discount rate using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the business, equivalent to a pre-tax discount rate which was 15% (2011: 15%, 2010: 10%).
Cash flows for 2013-15 assume a growth at a rate based on expected outturn by territory and subsequent cash flows have been assumed to grow between 0% to
5% per annum for a further 3 to 15 years reflecting expected long-term growth rates in the countries in which the Group operates. During 2012, as a result of a change in customer base and termination of contracts acquired on acquisition, the
goodwill in the Colombian branch was impaired by $3,886,000 (2011: $Nil, 2010: $Nil). Further, goodwill related to the Venezuela entity was impaired by $867,000 and other goodwill impaired by $252,000. These impairment losses are reflected in
administrative expenses in the consolidated income statement.
Further, at 31 December 2012 development costs and patents relating to whipstocks were
impaired by $1,583,000.
The Group’s impairment review is sensitive to changes in the key assumptions used. The major assumptions that result in
significant sensitivities are the revenue growth and the discount rate. Given the Group’s sensitivity analysis, a reasonably possible change in a single assumption will not result in further impairment. Goodwill is allocated primarily to the
rental division.
F-109
15. Tangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
and short
leasehold
|
|
|
Assets under
construction
|
|
|
Plant and
oilfield
equipment
|
|
|
Motor
vehicles
|
|
|
Fixtures,
fittings
& office
equipment
|
|
|
Total
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Cost or deemed cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
7,009
|
|
|
|
3,004
|
|
|
|
206,960
|
|
|
|
1,884
|
|
|
|
3,627
|
|
|
|
222,484
|
|
|
Additions
|
|
|
2,442
|
|
|
|
690
|
|
|
|
46,550
|
|
|
|
680
|
|
|
|
1,055
|
|
|
|
51,417
|
|
|
Transfers
|
|
|
3,004
|
|
|
|
(3,004
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disposals
|
|
|
(27
|
)
|
|
|
—
|
|
|
|
(8,628
|
)
|
|
|
(36
|
)
|
|
|
(139
|
)
|
|
|
(8,830
|
)
|
|
Exchange movements
|
|
|
(112
|
)
|
|
|
—
|
|
|
|
(2,771
|
)
|
|
|
(83
|
)
|
|
|
(45
|
)
|
|
|
(3,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
12,316
|
|
|
|
690
|
|
|
|
242,111
|
|
|
|
2,445
|
|
|
|
4,498
|
|
|
|
262,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
523
|
|
|
|
49
|
|
|
|
33,645
|
|
|
|
514
|
|
|
|
418
|
|
|
|
35,149
|
|
|
Transfers
|
|
|
333
|
|
|
|
(690
|
)
|
|
|
357
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disposals
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
(19,203
|
)
|
|
|
(224
|
)
|
|
|
(260
|
)
|
|
|
(19,703
|
)
|
|
Exchange movements
|
|
|
(561
|
)
|
|
|
—
|
|
|
|
(1,216
|
)
|
|
|
(62
|
)
|
|
|
(77
|
)
|
|
|
(1,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
12,595
|
|
|
|
49
|
|
|
|
255,694
|
|
|
|
2,673
|
|
|
|
4,579
|
|
|
|
275,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassified as held for sale
|
|
|
(4,164
|
)
|
|
|
(46
|
)
|
|
|
(12,000
|
)
|
|
|
(295
|
)
|
|
|
(314
|
)
|
|
|
(16,819
|
)
|
|
Additions
|
|
|
368
|
|
|
|
286
|
|
|
|
21,927
|
|
|
|
446
|
|
|
|
420
|
|
|
|
23,447
|
|
|
Transfers
|
|
|
—
|
|
|
|
(218
|
)
|
|
|
218
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disposals
|
|
|
(387
|
)
|
|
|
—
|
|
|
|
(47,710
|
)
|
|
|
(350
|
)
|
|
|
(416
|
)
|
|
|
(48,863
|
)
|
|
Exchange movements
|
|
|
254
|
|
|
|
—
|
|
|
|
260
|
|
|
|
(37
|
)
|
|
|
17
|
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
8,666
|
|
|
|
71
|
|
|
|
218,389
|
|
|
|
2,437
|
|
|
|
4,286
|
|
|
|
233,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
1,537
|
|
|
|
—
|
|
|
|
47,902
|
|
|
|
673
|
|
|
|
1,482
|
|
|
|
51,594
|
|
|
Depreciation for the year
|
|
|
964
|
|
|
|
—
|
|
|
|
20,885
|
|
|
|
526
|
|
|
|
950
|
|
|
|
23,325
|
|
|
Disposals
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,391
|
)
|
|
|
(9
|
)
|
|
|
(67
|
)
|
|
|
(2,467
|
)
|
|
Exchange movements
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
(1,150
|
)
|
|
|
(66
|
)
|
|
|
(34
|
)
|
|
|
(1,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
2,454
|
|
|
|
—
|
|
|
|
65,246
|
|
|
|
1,124
|
|
|
|
2,331
|
|
|
|
71,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation for the year
|
|
|
1,481
|
|
|
|
—
|
|
|
|
22,742
|
|
|
|
468
|
|
|
|
687
|
|
|
|
25,378
|
|
|
Disposals
|
|
|
42
|
|
|
|
—
|
|
|
|
(8,260
|
)
|
|
|
(120
|
)
|
|
|
(237
|
)
|
|
|
(8,575
|
)
|
|
Exchange movements
|
|
|
(133
|
)
|
|
|
—
|
|
|
|
(396
|
)
|
|
|
(38
|
)
|
|
|
(50
|
)
|
|
|
(617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
3,844
|
|
|
|
—
|
|
|
|
79,332
|
|
|
|
1,434
|
|
|
|
2,731
|
|
|
|
87,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On assets reclassified as held for sale
|
|
|
(1,850
|
)
|
|
|
—
|
|
|
|
(3,882
|
)
|
|
|
(165
|
)
|
|
|
(183
|
)
|
|
|
(6,080
|
)
|
|
Depreciation for the year
|
|
|
1,446
|
|
|
|
—
|
|
|
|
24,515
|
|
|
|
593
|
|
|
|
707
|
|
|
|
27,261
|
|
|
Impairment in year
|
|
|
1,880
|
|
|
|
—
|
|
|
|
17,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,480
|
|
|
Disposals
|
|
|
(18
|
)
|
|
|
—
|
|
|
|
(23,196
|
)
|
|
|
(226
|
)
|
|
|
(337
|
)
|
|
|
(23,777
|
)
|
|
Exchange movements
|
|
|
(74
|
)
|
|
|
—
|
|
|
|
171
|
|
|
|
(33
|
)
|
|
|
16
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
5,228
|
|
|
|
—
|
|
|
|
94,540
|
|
|
|
1,603
|
|
|
|
2,934
|
|
|
|
104,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2010
|
|
|
5,472
|
|
|
|
3,004
|
|
|
|
159,058
|
|
|
|
1,211
|
|
|
|
2,145
|
|
|
|
170,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2010
|
|
|
9,862
|
|
|
|
690
|
|
|
|
176,865
|
|
|
|
1,321
|
|
|
|
2,167
|
|
|
|
190,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2011
|
|
|
8,751
|
|
|
|
49
|
|
|
|
176,362
|
|
|
|
1,239
|
|
|
|
1,848
|
|
|
|
188,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2012
|
|
|
3,438
|
|
|
|
71
|
|
|
|
123,849
|
|
|
|
834
|
|
|
|
1,352
|
|
|
|
129,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-110
15. Tangible assets (cont.)
The impairment loss on tangible assets of $19,480,000 arose in connection with the reassessment of the jars
rental asset product line (10,180,000) and general plant and equipment (9,300,000).
The net book value of plant and equipment disposals of $24,514,000
includes losses of $8,711,000 and $2,635,000 relating to country exits.
Leased plant and machinery
The Group leases equipment under a number of finance lease arrangements. At 31 December 2012, the net carrying amount of leased plant and machinery was
$1,985,000 (2011: $2,757,000, 2010: $7,326,000).
Security
At each balance sheet date all tangible fixed assets were subject to a fixed or floating charge over bank borrowings.
16. Investment in joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Interests in joint venture (share of net assets)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January
|
|
|
4,976
|
|
|
|
3,485
|
|
|
|
2,692
|
|
|
Exchange adjustments
|
|
|
28
|
|
|
|
141
|
|
|
|
108
|
|
|
Investment in Indonesian JV
|
|
|
(893
|
)
|
|
|
893
|
|
|
|
—
|
|
|
Dividend received from joint venture
|
|
|
(1,000
|
)
|
|
|
(350
|
)
|
|
|
(200
|
)
|
|
Share of profit for the year
|
|
|
796
|
|
|
|
807
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December
|
|
|
3,907
|
|
|
|
4,976
|
|
|
|
3,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has a 50% interest in Shenhzen Weisheng ITS Tubular Equipment Company Limited, a company registered in China.
Additional information relating to the performance of this joint venture is given below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Fixed assets
|
|
|
1,103
|
|
|
|
1,190
|
|
|
|
1,077
|
|
|
Current assets
|
|
|
3,792
|
|
|
|
3,803
|
|
|
|
3,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of gross assets
|
|
|
4,895
|
|
|
|
4,993
|
|
|
|
4,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities due within one year
|
|
|
988
|
|
|
|
911
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of gross liabilities
|
|
|
988
|
|
|
|
911
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of net assets
|
|
|
3,907
|
|
|
|
4,082
|
|
|
|
3,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of turnover
|
|
|
7,607
|
|
|
|
6,269
|
|
|
|
5,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit before tax
|
|
|
1,076
|
|
|
|
1,076
|
|
|
|
1,148
|
|
|
Share of taxation
|
|
|
(280
|
)
|
|
|
(269
|
)
|
|
|
(263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of profit after tax
|
|
|
796
|
|
|
|
807
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2011 the Company made an initial investment of $893,000 in an unincorporated JV in Indonesia. The JV did not proceed
and at 31 December 2012, the assets included in the initial investment were reclassified as held for sale.
F-111
17. Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Financial asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
Financial liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– Non-current liabilities
|
|
|
—
|
|
|
|
(3,494
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
(3,494
|
)
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On 15 November 2010, the Group entered into a three-year swap with a notional principal value of $120,000,000, effective
20 August 2011. The fixed interest rate is 1.43% in year one, 1.77% in year two and 2.19% in the final year. Floating rates are linked to US LIBOR plus a lending margin. Gains and losses on the interest rate swap have been recognised in other
gains and losses in the Consolidated Income Statement.
18. Deferred tax
Recognised deferred tax assets and liabilities
Deferred tax is calculated in full on temporary differences under the liability method using the tax rate applicable to the territory in which the asset or
liability has arisen. Deferred tax in relation to UK companies is provided at 23% (2011: 25%, 2010: 27%).
No deferred tax is recognised on the unremitted
earnings of overseas subsidiaries and joint ventures. These earnings are expected to be reinvested with no tax charge arising from them in the foreseeable future.
Deferred tax assets and liabilities are only offset where this is a legally enforceable right of offset, they relate to income taxes levied by the same
taxation authority and there is an intention to settle the balances on a net basis. The deferred tax balances are analysed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Tangible assets
|
|
|
(2,490
|
)
|
|
|
(10,662
|
)
|
|
|
(8,942
|
)
|
|
|
4,803
|
|
|
|
4,531
|
|
|
|
4,795
|
|
|
Retirement benefit obligations
|
|
|
(12
|
)
|
|
|
(18
|
)
|
|
|
(22
|
)
|
|
|
(6
|
)
|
|
|
(16
|
)
|
|
|
(15
|
)
|
|
Provisions/accruals
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
2,382
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Financial liability
|
|
|
—
|
|
|
|
(873
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Inventories
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(106
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other items
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
Tax losses carried forward
|
|
|
(3,677
|
)
|
|
|
(1,979
|
)
|
|
|
(2,221
|
)
|
|
|
—
|
|
|
|
(1,091
|
)
|
|
|
(1,274
|
)
|
|
Trade debts
|
|
|
|
|
|
|
—
|
|
|
|
(695
|
)
|
|
|
(19
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax (assets)/liabilities
|
|
|
(6,186
|
)
|
|
|
(13,545
|
)
|
|
|
(9,608
|
)
|
|
|
4,784
|
|
|
|
3,424
|
|
|
|
3,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
(1,402
|
)
|
|
|
(10,121
|
)
|
|
|
(6,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets are recognised to the extent that they are expected to unwind as a result of future taxable profits. These
deferred tax assets are determined by most recently available projections for the three years ended 31 December 2015. Taxable profits beyond that period are not considered for the purposes of recognising deferred tax assets.
F-112
18. Deferred tax (cont.)
Deferred tax impact of movements in temporary differences during the year — 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
1 January 2012
$’000
|
|
|
Foreign
exchange
$’000
|
|
|
Discontinued
operations
$’000
|
|
|
Recognised
income
statement
$’000
|
|
|
Balance
31 December
2012
$’000
|
|
|
Tangible assets
|
|
|
(6,131
|
)
|
|
|
17
|
|
|
|
—
|
|
|
|
8,427
|
|
|
|
2,313
|
|
|
Retirement benefit obligations
|
|
|
(34
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
15
|
|
|
|
(18
|
)
|
|
Provisions/accruals
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
Financial liability
|
|
|
(873
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
873
|
|
|
|
—
|
|
|
Inventories
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
Other items
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
|
Tax losses carried forward
|
|
|
(3,070
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(607
|
)
|
|
|
(3,677
|
)
|
|
Trade debts
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,121
|
)
|
|
|
18
|
|
|
|
—
|
|
|
|
8,701
|
|
|
|
(1,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax impact of movements in temporary differences during the year —
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
1 January 2011
$’000
|
|
|
Foreign
exchange
$’000
|
|
|
Discontinued
operations
$’000
|
|
|
Recognised
income
statement
$’000
|
|
|
Balance
31 December
2011
$’000
|
|
|
Tangible assets
|
|
|
(4,147
|
)
|
|
|
(39
|
)
|
|
|
350
|
|
|
|
(2,295
|
)
|
|
|
(6,131
|
)
|
|
Retirement benefit obligations
|
|
|
(37
|
)
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
7
|
|
|
|
(34
|
)
|
|
Provisions/accruals
|
|
|
2,382
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2,393
|
)
|
|
|
(13
|
)
|
|
Financial liability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(873
|
)
|
|
|
(873
|
)
|
|
Inventories
|
|
|
(106
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
106
|
|
|
|
—
|
|
|
Other items
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
Tax losses carried forward
|
|
|
(3,495
|
)
|
|
|
—
|
|
|
|
184
|
|
|
|
241
|
|
|
|
(3,070
|
)
|
|
Trade debts
|
|
|
(695
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
695
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,102
|
)
|
|
|
(45
|
)
|
|
|
534
|
|
|
|
(4,508
|
)
|
|
|
(10,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax impact of movements in temporary differences during the year —
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
1 January 2010
$’000
|
|
|
Foreign
exchange
$’000
|
|
|
Discontinued
operations
$’000
|
|
|
Recognised
income
statement
$’000
|
|
|
Balance
31 December
2010
$’000
|
|
|
Tangible assets
|
|
|
(480
|
)
|
|
|
(39
|
)
|
|
|
1,725
|
|
|
|
(5,353
|
)
|
|
|
(4,147
|
)
|
|
Retirement benefit obligations
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
(37
|
)
|
|
Provisions/accruals
|
|
|
(351
|
)
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
2,735
|
|
|
|
2,382
|
|
|
Inventories
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(106
|
)
|
|
|
(106
|
)
|
|
Other items
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
Tax losses carried forward
|
|
|
(1,839
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,656
|
)
|
|
|
(3,495
|
)
|
|
Trade debts
|
|
|
(46
|
)
|
|
|
—
|
|
|
|
(708
|
)
|
|
|
59
|
|
|
|
(695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,718
|
)
|
|
|
(41
|
)
|
|
|
1,017
|
|
|
|
(4,360
|
)
|
|
|
(6,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-113
18. Deferred tax (cont.)
Unrecognised deferred tax asset
As at 31 December 2012
Deferred tax assets have not
been recognised in respect of the following items:
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
– Deductible temporary differences
|
|
|
6,027
|
|
|
– Tax losses
|
|
|
2,144
|
|
|
|
|
|
|
|
|
|
|
|
8,171
|
|
|
|
|
|
|
|
19. Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Raw materials and consumables
|
|
|
8,962
|
|
|
|
12,212
|
|
|
|
11,817
|
|
|
Work in progress
|
|
|
486
|
|
|
|
4,128
|
|
|
|
2,652
|
|
|
Stock in transit
|
|
|
906
|
|
|
|
1,001
|
|
|
|
3,719
|
|
|
Finished products for resale
|
|
|
667
|
|
|
|
3,969
|
|
|
|
4,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,021
|
|
|
|
21,310
|
|
|
|
23,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Trade receivables
|
|
|
37,202
|
|
|
|
46,800
|
|
|
|
42,382
|
|
|
Amounts owed by joint ventures
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
Prepayments and accrued income
|
|
|
8,415
|
|
|
|
5,561
|
|
|
|
5,160
|
|
|
Deposits and advances
|
|
|
2,981
|
|
|
|
654
|
|
|
|
2,019
|
|
|
Other receivables
|
|
|
6,018
|
|
|
|
8,186
|
|
|
|
8,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due within one year
|
|
|
54,626
|
|
|
|
61,211
|
|
|
|
57,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts falling due after one year
|
|
|
—
|
|
|
|
—
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,626
|
|
|
|
61,211
|
|
|
|
57,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group’s exposure to credit risk and impairment losses related to trade and other receivables are disclosed in Note
26. Under the normal course of business, the Group does not charge interest on its overdue receivables. Management consider that the carrying amount of trade and other receivables approximate to their fair value.
F-114
21. Share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Authorised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,960,294 (2011: 199,960,294, 2010: 199,960,294) Ordinary shares of £0.01 each
|
|
|
3,917
|
|
|
|
3,917
|
|
|
|
3,917
|
|
|
39,706 (2011: 39,706, 2010: 39,706) A Ordinary shares of £0.01 each
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
8,668 (2011: 8,668, 2010: 8,668) Ordinary B shares of £0.01 each
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,918
|
|
|
|
3,918
|
|
|
|
3,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allotted, called-up and fully paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,588 (2011: 70,588, 2010: 70,588) Ordinary shares of £0.01 each
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
39,706 (2011: 39,706, 2010: 36,368) A Ordinary shares of £0.01 each
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
8,668 (2011: 8,668, 2010: 8,668) Ordinary B shares of £0.01 each
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity share capital
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity investment — A Ordinary shares
|
|
|
57,352
|
|
|
|
52,571
|
|
|
|
49,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Ordinary shares
On
26 September 2009, the Company issued 29,752 A Ordinary shares and options to purchase 3,342 A Ordinary shares for aggregate gross proceeds of $45,000,000. In conjunction with the same transaction, 6,612 of Ordinary shares were re-designated as
A Ordinary shares and were sold for $10,000,000 by an existing investor to the new investors of A Ordinary shares. The options had an aggregate exercise price of $3,225,000 and an expiration date of one year from the issuance date of the 2009
audited accounts. The options were exercised on 18 February 2011, prior to exercise such options were measured at fair value through profit and loss at each reporting date.
The A Ordinary shares also carry an entitlement to a non-discretionary cumulative dividend of 10% of the principal amount issued. Such dividends are payable
on 30 June each year for the first five years from the date of issuance, being 26 September 2009 with payment being deferred and accrued at the Company’s discretion each year. The A Ordinary shares may be redeemed at the issue price
at any time after 30 September 2016 at the option of either the holder or the Company. The A Ordinary shares may also be redeemed by the holder on demand in the event that the Group’s lenders seek to enforce repayment of the Group’s
borrowings as a result of a breach of any loan covenants. The A Ordinary shares are also convertible at the option of the holder on a one for one basis into ordinary shares at any time. The A Ordinary shares represent a compound financial liability
and the options, as they related to a financial liability in the A Ordinary shares, represent a derivative financial liability.
At the date of issue of
the A Ordinary shares the fair value of the liability component was estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount was recorded as a liability on an amortised cost basis using the effective
interest rate method. The equity component of the A Ordinary shares, determined by deducting the amount of the liability component from the proceeds allocated to the A Ordinary shares upon issuance, was recognised and included in equity.
Ordinary B shares
In 2010 8,668 Ordinary B shares of
£0.01 each were issued at par. These shares have full voting rights, except there are no voting rights if there is a proposal for winding-up, resolution for a reduction in capital or rights attaching to the A Ordinary shares: or an event
defined in the Memorandum and Articles of Association of the Company has occurred and is continuing unremedied or unwaived. There is no dividend entitlement.
F-115
22. Share premium account
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
As at 1 January and at 31 December
|
|
|
2,468
|
|
|
|
2,468
|
|
|
|
2,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23. Loans and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at
amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, see Note 26.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured bank borrowings
|
|
|
—
|
|
|
|
169,414
|
|
|
|
—
|
|
|
Shareholder loans
|
|
|
—
|
|
|
|
3,300
|
|
|
|
—
|
|
|
Obligations under hire-purchase contracts
|
|
|
392
|
|
|
|
823
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
392
|
|
|
|
173,537
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured bank loan and overdraft
|
|
|
174,327
|
|
|
|
—
|
|
|
|
166,339
|
|
|
Shareholder loans
|
|
|
6,309
|
|
|
|
—
|
|
|
|
1,800
|
|
|
Obligations under hire-purchase contracts
|
|
|
568
|
|
|
|
826
|
|
|
|
1,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,204
|
|
|
|
826
|
|
|
|
170,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and borrowings
|
|
|
181,596
|
|
|
|
174,363
|
|
|
|
171,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due for settlement within 12 months
|
|
|
181,204
|
|
|
|
826
|
|
|
|
170,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due for settlement after 12 months
|
|
|
392
|
|
|
|
173,537
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The bank loans and overdraft are secured by a bond and floating charge over certain assets of the Group. In addition, the bank
holds a cross-guarantee over all sums, incorporating rights of offset between certain Group companies.
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2012
|
|
|
31 December 2011
|
|
|
31 December 2010
|
|
|
|
|
Currency
|
|
|
Nominal
interest rate
|
|
|
Date of
maturity
|
|
|
Face value
$’000
|
|
|
Carrying
amount
$’000
|
|
|
Face value
$’000
|
|
|
Carrying
amount
$’000
|
|
|
Face value
$’000
|
|
|
Carrying
amount
$’000
|
|
|
Revolving credit facility
|
|
|
US Dollar
|
|
|
|
US LIBOR +2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–6
|
%
|
|
|
30/09/2013
|
|
|
|
125,000
|
|
|
|
174,327
|
|
|
|
172,350
|
|
|
|
169,414
|
|
|
|
168,000
|
|
|
|
166,312
|
|
|
Bank overdraft
|
|
|
Trinidadian Dollar
|
|
|
|
Prime lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate +2
|
%
|
|
|
31/12/2011
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27
|
|
|
|
27
|
|
|
Shareholder loans
|
|
|
US Dollar
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,800
|
|
|
|
1,800
|
|
|
Shareholder loans
|
|
|
US Dollar
|
|
|
|
10
|
%
|
|
|
—
|
|
|
|
6,309
|
|
|
|
6,309
|
|
|
|
3,300
|
|
|
|
3,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,309
|
|
|
|
180,636
|
|
|
|
175,650
|
|
|
|
172,714
|
|
|
|
169,827
|
|
|
|
168,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group’s ongoing banking facilities were amended in December 2011 and included an extension of the scheduled maturity
date to 30 September 2013 (previously 31 August 2012), an increase in the applied interest margin and agreement to a further arrangement fee of $3,062,500, being 1.75% of total facilities.
F-116
23. Loans and borrowings (cont.)
The interest margin on the revised facilities varies according to the overall debt leverage. A margin of 6%
over US LIBOR is payable if the leverage covenant (being the ratio of EBITDA/bank borrowings) is greater than 4.00 and a reducing scale applies if the ratio falls below this level.
The Group breached certain bank covenants in September 2012 and advised the lenders on 18 October 2012. On 2 November 2012, following disclosure of
the covenant breaches, Lime Rock Partners, holder of the A Ordinary shares, issued a liquidity request to the board of directors. As a result the A Ordinary shares (Note 21) are due and payable and are presented as a current liability at
31 December 2012. In November 2012, the board appointed a corporate restructuring officer, as requested by the Group’s lenders.
Finance
lease liabilities are payable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
minimum
lease payments
|
|
|
Interest
|
|
|
Present
value of
minimum
lease payments
|
|
|
Future
minimum
lease payments
|
|
|
Interest
|
|
|
Present
value of
minimum
lease payments
|
|
|
Future
minimum
lease payments
|
|
|
Interest
|
|
|
Present
value of
minimum
lease payments
|
|
|
|
|
2012
$’000
|
|
|
2012
$’000
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2011
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
2010
$’000
|
|
|
2010
$’000
|
|
|
Less than one year
|
|
|
588
|
|
|
|
20
|
|
|
|
568
|
|
|
|
836
|
|
|
|
10
|
|
|
|
826
|
|
|
|
1,965
|
|
|
|
95
|
|
|
|
1,870
|
|
|
Between one and five years
|
|
|
447
|
|
|
|
55
|
|
|
|
392
|
|
|
|
913
|
|
|
|
90
|
|
|
|
823
|
|
|
|
1,330
|
|
|
|
73
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035
|
|
|
|
75
|
|
|
|
960
|
|
|
|
1,749
|
|
|
|
100
|
|
|
|
1,649
|
|
|
|
3,295
|
|
|
|
168
|
|
|
|
3,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24. Other creditors due after more than one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Other creditors more than one year
|
|
|
—
|
|
|
|
—
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25. Other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Other tax and social security
|
|
|
5,090
|
|
|
|
2,716
|
|
|
|
1,003
|
|
|
Other payables
|
|
|
9,513
|
|
|
|
4,799
|
|
|
|
3,488
|
|
|
Shareholder loans
|
|
|
6,309
|
|
|
|
—
|
|
|
|
1,800
|
|
|
Accruals
|
|
|
31,347
|
|
|
|
27,541
|
|
|
|
18,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,259
|
|
|
|
35,056
|
|
|
|
24,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
Management consider that the carrying amount of trade and other payables approximates to their fair value.
Accruals include $19,872,000 (2011: $13,238,000, 2010: $7,035,000) in respect of dividends on A Ordinary shares.
F-117
26. Financial instruments
The Group’s activities give rise to a variety of financial risks: market risk (including currency risk and cash flow interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management strategy is to hedge exposures wherever practicable in order to minimise any potential adverse impact on the Group’s financial performance.
Risk management is carried out by the Group management. Group management, together with the Group’s business units identify, evaluate and where
appropriate, hedge financial risks. The Group’s management cover specific areas, such as foreign exchange risk, interest rate risk, use of derivative financial instruments and investment of excess cash.
Foreign exchange risk
The Group is exposed to foreign
exchange risk arising from various currencies. The Group also has a number of subsidiary companies whose revenue and expenses are denominated in currencies other than the US Dollar. In order to protect the Group’s balance sheet from movements
in exchange rates, wherever practicable, the Group finances its net investment in non-US Dollar subsidiaries primarily by means of borrowings denominated in the appropriate currency. Other strategies, including the payment of dividends, are used to
minimise the amount of net assets exposed to foreign currency revaluation.
The Group monitors the economic and political situation in the countries in
which it operates to ensure appropriate action is taken to mitigate any foreign currency exposure.
The Group’s main foreign exchange risk primarily
relates to movements in the Group’s key transactional currencies which are described in this note, to the US Dollar. Movements in those currencies impact the translation of non-dollar profit earned and the translation of non-dollar denominated
net assets.
If the average rate of subsidiary functional currencies to the US Dollar had been 10% higher during 2012, post-tax loss for the year would
have been $0.7 million lower (2011: $1.1 million lower). If the average rate for non-US Dollar denominated entities had been weakened by 10% during 2012, post-tax loss for the year would have been $0.7 million higher (2011:
$1.1 million higher). If the closing rate for
non-US Dollar
denominated entities was strengthened or weakened by 10% at 31 December 2012, exchange differences in equity would have been $2.7
million (2011: $2.6 million) higher or lower respectively.
F-118
26. Financial instruments (cont.)
The carrying amount of the Group’s net trade payables were denominated in the following principal
currencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
US Dollar
|
|
|
11,418
|
|
|
|
8,876
|
|
|
|
17,631
|
|
|
Sterling
|
|
|
2,634
|
|
|
|
2,435
|
|
|
|
1,913
|
|
|
Indian Rupee
|
|
|
815
|
|
|
|
793
|
|
|
|
838
|
|
|
Venezuelan Bolivar
|
|
|
162
|
|
|
|
60
|
|
|
|
76
|
|
|
Egyptian Pound
|
|
|
78
|
|
|
|
48
|
|
|
|
12
|
|
|
Euro
|
|
|
152
|
|
|
|
208
|
|
|
|
1,431
|
|
|
Pakistan Rupee
|
|
|
1,901
|
|
|
|
1,507
|
|
|
|
34
|
|
|
Singapore Dollar
|
|
|
77
|
|
|
|
104
|
|
|
|
2
|
|
|
Saudi Riyal
|
|
|
138
|
|
|
|
523
|
|
|
|
—
|
|
|
Trinidad Dollar
|
|
|
450
|
|
|
|
300
|
|
|
|
60
|
|
|
Malaysian Ringgit
|
|
|
544
|
|
|
|
366
|
|
|
|
—
|
|
|
Mexican Peso
|
|
|
240
|
|
|
|
245
|
|
|
|
156
|
|
|
Peruvian Nuevo Sol
|
|
|
95
|
|
|
|
221
|
|
|
|
57
|
|
|
Kazakhstan Tenge
|
|
|
67
|
|
|
|
196
|
|
|
|
332
|
|
|
United Arab Emirates Dirham
|
|
|
—
|
|
|
|
375
|
|
|
|
219
|
|
|
Colombian Peso
|
|
|
2,112
|
|
|
|
684
|
|
|
|
83
|
|
|
Others
|
|
|
44
|
|
|
|
38
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group balance sheet exposure
|
|
|
20,927
|
|
|
|
16,979
|
|
|
|
22,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following significant exchange rates applied during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average rate
|
|
|
Reporting date spot rate
|
|
|
|
|
2012
$
|
|
|
2011
$
|
|
|
2010
$
|
|
|
2012
$
|
|
|
2011
$
|
|
|
2010
$
|
|
|
Sterling
|
|
|
0.631
|
|
|
|
0.6236
|
|
|
|
0.6188
|
|
|
|
0.6188
|
|
|
|
0.6471
|
|
|
|
0.6242
|
|
|
Indian Rupee
|
|
|
53.5269
|
|
|
|
47.0408
|
|
|
|
45.2009
|
|
|
|
54.839
|
|
|
|
54.4026
|
|
|
|
45.3348
|
|
|
Iranian Rial
|
|
|
12174.2
|
|
|
|
10,611.4
|
|
|
|
10,388
|
|
|
|
12.285
|
|
|
|
11,171.7
|
|
|
|
10,654
|
|
|
Venezuelan Bolivar
|
|
|
4.2997
|
|
|
|
4.2997
|
|
|
|
4.2997
|
|
|
|
4.2997
|
|
|
|
4.2997
|
|
|
|
4.2997
|
|
|
Egyptian Pound
|
|
|
6.0677
|
|
|
|
5.9439
|
|
|
|
5.8807
|
|
|
|
6.1663
|
|
|
|
6.0340
|
|
|
|
5.9511
|
|
|
Euro
|
|
|
0.7777
|
|
|
|
0.7189
|
|
|
|
0.7134
|
|
|
|
0.7566
|
|
|
|
0.7723
|
|
|
|
0.6949
|
|
|
Pakistan Rupee
|
|
|
93.2637
|
|
|
|
86.3283
|
|
|
|
84.8002
|
|
|
|
97.35
|
|
|
|
89.8769
|
|
|
|
86.0300
|
|
|
Singapore Dollar
|
|
|
1.2494
|
|
|
|
1.257
|
|
|
|
1.2582
|
|
|
|
1.2238
|
|
|
|
1.2990
|
|
|
|
1.2357
|
|
|
Saudi Riyal
|
|
|
3.7502
|
|
|
|
3.7503
|
|
|
|
3.7482
|
|
|
|
3.7504
|
|
|
|
3.7502
|
|
|
|
3.7496
|
|
|
Trinidad Dollar
|
|
|
6.25
|
|
|
|
6.2500
|
|
|
|
6.2500
|
|
|
|
6.25
|
|
|
|
6.2500
|
|
|
|
6.2500
|
|
|
Malaysian Ringgit
|
|
|
3.087
|
|
|
|
3.0528
|
|
|
|
3.2115
|
|
|
|
3.0512
|
|
|
|
3.1717
|
|
|
|
3.1018
|
|
|
Mexican Peso
|
|
|
13.1464
|
|
|
|
12.4317
|
|
|
|
11.8840
|
|
|
|
13.01385
|
|
|
|
13.9875
|
|
|
|
11.7838
|
|
|
Peruvian Nuevo Sol
|
|
|
2.6375
|
|
|
|
2.7540
|
|
|
|
2.7519
|
|
|
|
2.5525
|
|
|
|
2.6963
|
|
|
|
2.7470
|
|
|
Kazakhstan Tenge
|
|
|
149.098
|
|
|
|
146.651
|
|
|
|
144.0390
|
|
|
|
150.325
|
|
|
|
147.8960
|
|
|
|
146.1000
|
|
|
United Arab Emirates Dirham
|
|
|
3.6730
|
|
|
|
3.6730
|
|
|
|
3.6724
|
|
|
|
3.67295
|
|
|
|
3.6730
|
|
|
|
3.6728
|
|
|
Colombian Peso
|
|
|
1798.000
|
|
|
|
1827.49
|
|
|
|
1877.32
|
|
|
|
1767.5000
|
|
|
|
1929.09
|
|
|
|
1950.47
|
|
Credit risk
The
Group’s credit risk primarily relates to its trade receivables. The amounts presented in the financial statements are net of provisions for doubtful balances. Exposure to credit risk is actively managed by assessing the creditworthiness of
individual customers in each operating location. An allowance for impairment is made when there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows.
F-119
26. Financial instruments (cont.)
The Group’s major customers are typically national oil companies and large companies which have strong
credit ratings assigned by international credit rating agencies. Where a customer does not have sufficiently strong credit ratings, alternative forms of security such as letters of credit may be obtained. The Group has a broad customer base and
management believe that no further credit risk provision is required in excess of the provision for impairment of trade receivables.
Management review
trade receivables across the Group based on receivable days calculations to assess performance. A table showing trade receivables and receivable days is shown below.
Receivable days calculations are not provided on non-trade receivables as management do not believe that this information is a relevant metric.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Trade receivables
|
|
|
37,202
|
|
|
|
46,800
|
|
|
|
42,382
|
|
|
Cash and cash equivalents
|
|
|
8,345
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,547
|
|
|
|
58,812
|
|
|
|
51,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets exclude amounts owed by joint ventures, prepayments and accrued income, deposits and advances, other debtors
and other non-current receivables.
The carrying amount of the Group’s net trade receivables was denominated in the following principal currencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
US Dollar
|
|
|
24,945
|
|
|
|
29,164
|
|
|
|
24,945
|
|
|
Sterling
|
|
|
3,787
|
|
|
|
2,990
|
|
|
|
4,395
|
|
|
Indian Rupee
|
|
|
899
|
|
|
|
787
|
|
|
|
1,132
|
|
|
Venezuelan Bolivar
|
|
|
173
|
|
|
|
688
|
|
|
|
1,021
|
|
|
Euro
|
|
|
2,953
|
|
|
|
9,614
|
|
|
|
9,060
|
|
|
Pakistan Rupee
|
|
|
1,785
|
|
|
|
1,805
|
|
|
|
610
|
|
|
Peruvian Nuevo Sol
|
|
|
35
|
|
|
|
369
|
|
|
|
—
|
|
|
Trinidad Dollar
|
|
|
424
|
|
|
|
51
|
|
|
|
—
|
|
|
Mexican Peso
|
|
|
33
|
|
|
|
7
|
|
|
|
—
|
|
|
UAE Dirhams
|
|
|
42
|
|
|
|
264
|
|
|
|
82
|
|
|
Kazakhstan Tenge
|
|
|
597
|
|
|
|
777
|
|
|
|
795
|
|
|
Colombian Peso
|
|
|
1,104
|
|
|
|
—
|
|
|
|
—
|
|
|
Others
|
|
|
425
|
|
|
|
284
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,202
|
|
|
|
46,800
|
|
|
|
42,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-120
26. Financial instruments (cont.)
The ageing of trade receivables, including amounts falling due after one year, at the reporting date was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
2012
|
|
|
Provision for
impairment
2012
|
|
|
Past due
but not
impaired
|
|
|
Gross
2011
|
|
|
Provision for
impairment
2011
|
|
|
Past due
but not
impaired
|
|
|
Gross
2010
|
|
|
Provision for
impairment
2010
|
|
|
Past due
but not
impaired
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Current
|
|
|
12,974
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,458
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,485
|
|
|
|
—
|
|
|
|
—
|
|
|
Accrued income with current date
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
877
|
|
|
|
—
|
|
|
|
—
|
|
|
31-60 days
|
|
|
7,883
|
|
|
|
14
|
|
|
|
7,869
|
|
|
|
10,648
|
|
|
|
—
|
|
|
|
10,648
|
|
|
|
11,038
|
|
|
|
—
|
|
|
|
11,038
|
|
|
61-90 days
|
|
|
5,808
|
|
|
|
—
|
|
|
|
5,808
|
|
|
|
3,713
|
|
|
|
—
|
|
|
|
3,713
|
|
|
|
5,070
|
|
|
|
—
|
|
|
|
5,070
|
|
|
91-120 days
|
|
|
5,733
|
|
|
|
1
|
|
|
|
5,732
|
|
|
|
2,771
|
|
|
|
36
|
|
|
|
2,735
|
|
|
|
2,607
|
|
|
|
35
|
|
|
|
2,572
|
|
|
Over 120 days
|
|
|
20,948
|
|
|
|
16,129
|
|
|
|
4,819
|
|
|
|
13,135
|
|
|
|
5,109
|
|
|
|
8,026
|
|
|
|
14,281
|
|
|
|
6,941
|
|
|
|
7,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,346
|
|
|
|
16,144
|
|
|
|
24,228
|
|
|
|
51,945
|
|
|
|
5,145
|
|
|
|
25,122
|
|
|
|
49,358
|
|
|
|
6,976
|
|
|
|
26,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net value of trade receivables
|
|
|
|
|
|
|
37,202
|
|
|
|
|
|
|
|
|
|
|
|
46,800
|
|
|
|
|
|
|
|
|
|
|
|
42,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average credit period taken on sales is 98 days (2011: 104 days, 2010: 120 days). The provision levels for the various
operations are determined by references to past experience and assessment of individual debt recoverability. The provision for impairment at 31 December 2012 includes $8,039,000 related to the cessation of activities in certain Middle Eastern
territories.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Balance at 1 January
|
|
|
5,145
|
|
|
|
6,976
|
|
|
|
5,004
|
|
|
Foreign exchange movement
|
|
|
2
|
|
|
|
(6
|
)
|
|
|
3
|
|
|
Net provision created/(released)
|
|
|
10,997
|
|
|
|
(1,825
|
)
|
|
|
1,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December
|
|
|
16,144
|
|
|
|
5,145
|
|
|
|
6,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-121
26. Financial instruments (cont.)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and including the impact of netting agreements:
Non-derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
Carrying amount
$’000
|
|
|
Contractual
cash flows
$’000
|
|
|
1-6 months
$’000
|
|
|
7-12 months
$’000
|
|
|
1-2 years
$’000
|
|
|
2-5 years
$’000
|
|
|
More than
5 years
$’000
|
|
|
Secured bank loans
|
|
|
174,327
|
|
|
|
175,027
|
|
|
|
175,027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Finance lease liabilities
|
|
|
960
|
|
|
|
1,035
|
|
|
|
308
|
|
|
|
280
|
|
|
|
289
|
|
|
|
158
|
|
|
|
—
|
|
|
Shareholder loans
|
|
|
6,309
|
|
|
|
6,309
|
|
|
|
6,309
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Trade and other payables
|
|
|
70,284
|
|
|
|
70,284
|
|
|
|
70,284
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,880
|
|
|
|
252,655
|
|
|
|
251,928
|
|
|
|
280
|
|
|
|
289
|
|
|
|
158
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Secured bank loans
|
|
|
169,414
|
|
|
|
190,838
|
|
|
|
4,149
|
|
|
|
4,362
|
|
|
|
182,327
|
|
|
|
—
|
|
|
|
—
|
|
|
Finance lease liabilities
|
|
|
1,649
|
|
|
|
1,749
|
|
|
|
465
|
|
|
|
370
|
|
|
|
526
|
|
|
|
388
|
|
|
|
—
|
|
|
Shareholder loans
|
|
|
3,300
|
|
|
|
3,944
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,944
|
|
|
|
—
|
|
|
|
—
|
|
|
Trade and other payables
|
|
|
54,866
|
|
|
|
54,866
|
|
|
|
54,866
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,229
|
|
|
|
251,397
|
|
|
|
59,480
|
|
|
|
4,732
|
|
|
|
186,797
|
|
|
|
388
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Secured bank loans and overdraft
|
|
|
166,339
|
|
|
|
168,339
|
|
|
|
168,339
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Finance lease liabilities
|
|
|
3,127
|
|
|
|
3,295
|
|
|
|
1,189
|
|
|
|
776
|
|
|
|
670
|
|
|
|
660
|
|
|
|
—
|
|
|
Shareholder loans
|
|
|
1,800
|
|
|
|
1,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,800
|
|
|
|
—
|
|
|
|
—
|
|
|
Trade and other payables
|
|
|
48,544
|
|
|
|
48,544
|
|
|
|
48,294
|
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,810
|
|
|
|
221,978
|
|
|
|
217,822
|
|
|
|
776
|
|
|
|
2,720
|
|
|
|
660
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate risk
The
Group has interest rate risk arising from its borrowings. Borrowings at variable rates expose the Group to cash flow interest rate risk.
The Group has no
significant interest-bearing assets other than cash and cash equivalents of a working capital nature. Therefore the Group’s income and operating cash flows arising from such assets are substantially independent of changes in market interest
rates.
The Group monitors its exposure to interest rate risk as part of its overall financial risk management. On 15 November 2010 the Group entered
into a three-year swap with a notional principal value of $120 million, effective 20 August 2011. The notional principal amount of the outstanding interest rate swap contract at 31 December 2012 was $Nil (2011: $3,494,000, 2010: $Nil). The
fixed interest rate is 1.43% in year one, 1.77% in year two and 2.19% in the final year. Floating rates are linked to US LIBOR plus a lending margin. Gains and losses on the interest rate swap have been accounted for through the income statement.
F-122
26. Financial instruments (cont.)
Profile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
$’000
|
|
|
$’000
|
|
|
$’000
|
|
|
Fixed-rate instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases
|
|
|
960
|
|
|
|
1,649
|
|
|
|
3,127
|
|
|
Shareholder loans
|
|
|
6,309
|
|
|
|
3,300
|
|
|
|
1,800
|
|
|
Other loans
|
|
|
—
|
|
|
|
—
|
|
|
|
27
|
|
|
Financial liability
|
|
|
—
|
|
|
|
3,494
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at 31 December
|
|
|
7,269
|
|
|
|
8,443
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable-rate instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments at 31 December
|
|
|
174,327
|
|
|
|
169,414
|
|
|
|
166,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair-value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3
based on the degree to which the fair value is observable:
|
•
|
|
Level 1 fair-value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
•
|
|
Level 2 fair-value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
|
|
•
|
|
Level 3 fair-value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
The financial instruments carried at fair value recognised in the statement of financial position as at 31 December 2011 and 2010 are measured in
accordance with Level 2. At 31 December 2012, no fair values are presented due to the circumstances of the Holding Company entering administration on 19 April 2013, as described in Note 2.
Fair-value sensitivity analysis for fixed-rate instruments
Fixed instruments consist of bank borrowings, shareholder loans and finance leases. As these are fixed-rate financial instruments, no sensitivity analysis has
been presented.
Cash flow sensitivity analysis for variable-rate instruments
If average interest rates had been 1% higher or lower during 2012, post-tax loss and net assets would have been $1,747,000 higher or lower respectively (2011:
$1,745,000, 2010: $1,270,000).
This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis for 2011 and 2010.
F-123
26. Financial instruments (cont.)
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
amount*
2012
$’000
|
|
|
Carrying
amount
2011
$’000
|
|
|
Fair value
2011
$’000
|
|
|
Carrying
amount
2010
$’000
|
|
|
Fair value
2010
$’000
|
|
|
Trade receivables
|
|
|
37,202
|
|
|
|
46,800
|
|
|
|
46,800
|
|
|
|
42,382
|
|
|
|
42,382
|
|
|
Shareholder loans
|
|
|
(6,309
|
)
|
|
|
(3,300
|
)
|
|
|
(3,300
|
)
|
|
|
(1,800
|
)
|
|
|
(1,800
|
)
|
|
Cash and cash equivalents
|
|
|
8,345
|
|
|
|
12,012
|
|
|
|
12,012
|
|
|
|
8,756
|
|
|
|
8,756
|
|
|
Secured bank loans and overdraft
|
|
|
(174,327
|
)
|
|
|
(169,414
|
)
|
|
|
(172,350
|
)
|
|
|
(166,339
|
)
|
|
|
(154,460
|
)
|
|
A Ordinary shares
|
|
|
(57,352
|
)
|
|
|
(52,571
|
)
|
|
|
(52,571
|
)
|
|
|
(49,801
|
)
|
|
|
(51,006
|
)
|
|
Finance lease liabilities
|
|
|
(960
|
)
|
|
|
(1,649
|
)
|
|
|
(1,602
|
)
|
|
|
(3,127
|
)
|
|
|
(2,882
|
)
|
|
Trade and other payables
|
|
|
(30,440
|
)
|
|
|
(21,778
|
)
|
|
|
(21,778
|
)
|
|
|
(26,379
|
)
|
|
|
(26,379
|
)
|
|
Interest rate swap
|
|
|
—
|
|
|
|
(3,494
|
)
|
|
|
(3,494
|
)
|
|
|
106
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(223,841
|
)
|
|
|
(193,394
|
)
|
|
|
(196,283
|
)
|
|
|
(196,202
|
)
|
|
|
(185,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of borrowings have been calculated by discounting expected future cash flows at prevailing interest rates.
|
*
|
No fair values as at 31 December 2012 are presented due to the circumstances of the Holding Company entering administration on 19 April 2013 as described in Note 2.
|
Interest rates for determining fair value
The interest
rates used to discount estimated cash flows, where applicable, are based on the rates applicable to the borrowings at the relevant balance sheet date, and were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
%
|
|
|
2011
%
|
|
|
2010
%
|
|
|
Loans and borrowings
|
|
|
—
|
|
|
|
6.3
|
|
|
|
4.3
|
|
|
Leases
|
|
|
9.7
|
|
|
|
5.7
|
|
|
|
10.2
|
|
27. Operating lease commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Total commitments under non-cancellable operating leases expiring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
|
1,143
|
|
|
|
890
|
|
|
|
2,948
|
|
|
Between one and five years
|
|
|
4,500
|
|
|
|
3,597
|
|
|
|
8,778
|
|
|
More than five years
|
|
|
17,949
|
|
|
|
12,373
|
|
|
|
11,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,592
|
|
|
|
16,860
|
|
|
|
23,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Total commitments under non-cancellable operating leases expiring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
|
—
|
|
|
|
187
|
|
|
|
1,396
|
|
|
Between one and five years
|
|
|
403
|
|
|
|
668
|
|
|
|
4,782
|
|
|
More than five years
|
|
|
5,530
|
|
|
|
6,613
|
|
|
|
4,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,933
|
|
|
|
7,468
|
|
|
|
10,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-124
27. Operating lease commitments (cont.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Total commitments under non-cancellable operating leases expiring:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year
|
|
|
29
|
|
|
|
6
|
|
|
|
348
|
|
|
Between one and five years
|
|
|
1,655
|
|
|
|
1,938
|
|
|
|
1,254
|
|
|
More than five years
|
|
|
—
|
|
|
|
—
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,684
|
|
|
|
1,944
|
|
|
|
1,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28. Contingent liabilities
The Group provides performance bonds and guarantees in the normal course of its business. As at 31 December the value of performance
bonds and guarantees issued is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
$’000
|
|
|
2011
$’000
|
|
|
2010
$’000
|
|
|
Performance bonds and guarantees
|
|
|
3,558
|
|
|
|
4,215
|
|
|
|
4,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The bank loans and overdraft are secured by a bond and floating charge over certain assets of the Group. In addition, the bank
holds a cross-guarantee over all sums, incorporating rights of offset between certain Group companies.
The Group is investigating certain of its
operations regarding its compliance with potentially applicable international trade and anti-corruption laws, including those of the United Kingdom. Based on the knowledge and information available at this time management does not consider financial
loss probable and no provision has been made in these financial statements.
29. Capital commitments
At 31 December 2012 the Group had entered into contracts to purchase property, plant and equipment totalling $3,769,000 (2011:
$2,363,000, 2010: $5,373,000) in respect of which delivery and settlement was expected to take place in the following financial year.
30. Events after the balance sheet date
In the period prior to ITS Tubular Services (Holdings) Ltd being placed into administration International Tubulars FZE concluded the
cessation of operations in Iran, leaving trapped assets abandoned in Iran. The Group was demonstrably committed to this course of action as at 31 December, and accordingly full provision for impairment of $11,217,000 is included in the
financial statements at 31 December 2012 (Note 7).
On the 27 March 2013 ITS Tubular Services (Holdings) Ltd incorporated a 100% subsidiary
International Tubular Services (UK) Ltd.
In April 2013, International Tubulars FZE abandoned all operations in Sudan. This course of action was not
determined and committed until after 31 December 2012 and the financial statements do not include the costs and write down associated with this decision, estimated to be $2,938,000. Based on the condition and circumstances surrounding the Sudan
assets and receivables at 31 December 2012, a provision for impairment of $2,113,000.
F-125
30. Events after the balance sheet date (cont.)
On 4 April 2013, the Group concluded the sale of the business and assets of ITS Threading and
Manufacturing Inc and ITS Precision Manufacturing Inc to OFS International LLC for $14.9 million. The associated assets and liabilities are classified as held for sale at 31 December 2012 (Note 13).
On 19 April 2013, ITS Tubular Services (Holdings) Limited was placed into Administration.
On 20 April 2013, certain assets of ITS Tubular Services (Holdings) Limited were transferred by the Administrator to International Tubular Services
Limited for $88.7 million.
On 22 April 2013, Parker Drilling Company acquired 100% of the issued share capital of International Tubular Services
Limited and certain other subsidiaries from ITS Tubular Services (Holdings) Limited for a total sum of $125 million, with $24 million of that being placed in Escrow, contingent on the successful conclusion of a number of post-completion matters.
On 29 April 2013 the ITS Scomi joint venture was dissolved. ITS Scomi PTE Ltd (renamed ITS Energy Services PTE Ltd) and its subsidiaries (being [i]
ITS Scomi (Asia Pacific) PTE Ltd now renamed ITS Energy Services (Asia Pacific) PTE Ltd; and [ii] ITS Scomi Sdn Bhd now renamed ITS Energy Services Sdn Bhd) are now 100% owned by International Tubular Services Limited.
On 6 June 2013 a Petition to appoint PwC as interim liquidators of ITS Global Services Ltd was lodged at Aberdeen Sheriff Court.
On 24 June 2013 a Sale & Purchase Agreement was entered into between ITS Tubular Services (Holdings) Ltd (in administration) and Grupo CRB Corp,
in respect of the sale of the shares in Servicios ITS Latinamericana S.A., Servicios Internationales Tubular Services S.A., ITS Energy Services Perú S.A., ITS Locação e Serviços Ltda, International Tubular Services (UK)
Limited and ITS Energy Services Spain S.L.U. for a consideration of US$6.00. The entities posted a combined after tax net loss of $3,362,436 and net liabilities of $4,911,828 in the year ended 31 Dec 2012. ITS Locação e Serviços
Ltda, International Tubular Services (UK) Limited and ITS Energy Services Spain S.L.U. are dormant companies. Grupo CRB Corp is a company controlled by J A Chandler, a director of several ITS Group companies.
31. Restatement of prior periods
The financial statements for each of the years ended 31 December 2011 and 2010 have been restated to give accounting recognition to the
issuance of 6,612 A Ordinary shares in September 2009 arising on the redesignation of 6,612 Ordinary shares for a deemed consideration of $10,000,000.
As
discussed in Note 21 at that time a further 29,752 A Ordinary shares of $0.01 and warrants to subscribe for a further 3,342 A Ordinary Shares, which were only exercisable in the event that the Group did not meet an EBITDA threshold for the year
ended 31 December 2009 were also issued for an aggregate cash consideration of $45,000,000, net of direct issue costs of $1,377,138. The number of A Ordinary shares in issue was increased in February 2011 through exercise of all of the warrants
for a total consideration of $3,225,000.
The financial statements for 2011 and 2010 have been restated to reflect a reassessment of the fair value of the
debt and equity components of the total consideration of $55,000,000 associated with the A Ordinary Shares, which represent a compound financial instrument. The debt component of the A Ordinary shares has been calculated using a discount rate of
11%, which is deemed to approximate to the cost of an equivalent subordinated debt instrument at the date of issuance in 2009.
F-126
31. Restatement of prior periods (cont.)
The impact on the financial statements arising from the restatement is summarised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
As previously
reported
$’000
|
|
|
Adjustments
brought
forward
from 2010
$’000
|
|
|
Adjustments
$’000
|
|
|
As
restated
$’000
|
|
|
As
previously
reported
$’000
|
|
|
Adjustments
brought
forward
from 2009
$’000
|
|
|
Adjustments
$’000
|
|
|
As
restated
$’000
|
|
|
At 31 December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
40,278
|
|
|
|
(13,823
|
)
|
|
|
202
|
|
|
|
26,657
|
|
|
|
46,721
|
|
|
|
(10,000
|
)
|
|
|
(3,823
|
)
|
|
|
32,898
|
|
|
A Ordinary shares (non-current liability)
|
|
|
46,738
|
|
|
|
6,236
|
|
|
|
(403
|
)
|
|
|
52,571
|
|
|
|
43,565
|
|
|
|
2,413
|
|
|
|
3,823
|
|
|
|
49,801
|
|
|
Equity attributable to equity holders of the parent
|
|
|
31,166
|
|
|
|
(6,235
|
)
|
|
|
403
|
|
|
|
25,332
|
|
|
|
40,548
|
|
|
|
(2,413
|
)
|
|
|
(3,823
|
)
|
|
|
34,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
(17,423
|
)
|
|
|
—
|
|
|
|
209
|
|
|
|
(17,214
|
)
|
|
|
(14,246
|
)
|
|
|
—
|
|
|
|
(3,823
|
)
|
|
|
(18,069
|
)
|
|
Loss before taxation
|
|
|
(8,041
|
)
|
|
|
—
|
|
|
|
209
|
|
|
|
(7,832
|
)
|
|
|
(8,464
|
)
|
|
|
—
|
|
|
|
(3,823
|
)
|
|
|
(12,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The A Ordinary shares were issued in September 2009 and the opening balances as at 1 January 2010 are restated for the
initial recognition on the issuance of 6,612 A Ordinary shares in September 2009 arising on the conversion and cancellation of 6,612 Ordinary shares for a deemed consideration of $10,000,000 and recognition of the equity component of 36,364 A
Ordinary shares of $7,587,124.
32. Related party transactions
The following balances relate to transactions carried out with Group undertakings:
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Group
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2012
$’000
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2011
$’000
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2010
$’000
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Receivable from joint venture
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10
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10
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10
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During the year, the Group incurred rent of $1,841,000 (2011: $1,737,000, 2010: $1,438,000) to Blue Properties, a partnership
jointly owned by a director, R G Kidd and A & E Investments, a company controlled by R G Kidd. Further, the Group purchased inspection services of $313,000 (2011: $314,000, 2010: $262,000) from Independent Inspection Services Inc, a company
controlled by R G Kidd. In addition, the Group sold oilfield equipment for $605,000 (2011: $834,000, 2010: $Nil) to Downhole Solutions, a company controlled by R G Kidd. The balance due by ITS Tubular Services (Holdings) Limited to Downhole
Solutions at 31 December 2012, amounted to $402,000 (2011: $76,000, 2010: $Nil).
During the year, R G Kidd advanced the Group a 10% loan, totalling
$2,607,000 (2011: $1,000,000, 2010: $1,800,000). This is included in loans and borrowings (Note 23). In 2011, Limerock Partners advanced the Group a 10% loan, totalling $500,000, included in loans and borrowings (Note 23). For the advances received
from R G Kidd and Limerock, there are no set repayment terms.
F-127
33. Subsidiary undertakings
Related party transactions were effected at arm’s length.
Details of investments in which the Group and the Company holds more than 20% of the nominal value of any class of share capital are as follows:
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Company
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Country of registration
or incorporation
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Shares held
Class
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%
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International Tubular Services Limited
1
***
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Scotland
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Ordinary
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100
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International Tubular Services (Pakistan) Limited
2
***
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Scotland
|
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Ordinary
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100
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ITS Netherlands BV
1
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Netherlands
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Ordinary
|
|
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100
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ITS India Private Limited
1
***
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India
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Ordinary
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|
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100
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International Tubulars Services- Egypt (ITS Egypt)
1
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Egypt
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Ordinary
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|
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66
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International Tubulars FZE
1
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United Arab Emirates
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Ordinary
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|
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100
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Technology Specialists for Tubes Manufacturing
1
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Iraq
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Ordinary
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|
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100
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International Tubulars (M.E.) W.L.L.
1
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United Arab Emirates
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Ordinary
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49
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ITS Arabia Limited
1
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Saudi Arabia
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Ordinary
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|
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70
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ITS Scomi Pte. Limited
1
*
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Singapore
|
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Ordinary
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|
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75
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ITS Scomi (Asia-Pacific) Ltd.
1
***
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Singapore
|
|
Ordinary
|
|
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75
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ITS Scomi Sdn Bhd
1
***
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Malaysia
|
|
Ordinary
|
|
|
25
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ITS Indonesia Pte Ltd
1
*
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Singapore
|
|
Ordinary
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|
|
100
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ITS-Energy Services Cyprus Limited
2
***
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Cyprus
|
|
Ordinary
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|
|
100
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|
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ITS Energy Services Peru S.A.
2
***
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|
Peru
|
|
Ordinary
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|
|
100
|
|
|
ITS Energy Services, formerly ITS Cayman
1
|
|
Cayman Islands
|
|
Ordinary
|
|
|
100
|
|
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ITS Holdings Inc
2
*
|
|
USA
|
|
Ordinary
|
|
|
100
|
|
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ITS Rental & Sales Inc
1
|
|
USA
|
|
Ordinary
|
|
|
100
|
|
|
ITS Threading & Manufacturing Inc
3
|
|
USA
|
|
Ordinary
|
|
|
100
|
|
|
ITS Precision Manufacturing Inc
3
|
|
USA
|
|
Ordinary
|
|
|
100
|
|
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Servicios ITS Latinamericana S.A.
2
|
|
Venezuela
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|
Ordinary
|
|
|
100
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International Tubular Services De Mexico S de Rl de CV
1
|
|
Mexico
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|
Ordinary
|
|
|
100
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Servicios de personal ITS S de RL de CV
1
****
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Mexico
|
|
Ordinary
|
|
|
100
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|
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ITS Locação e Serviços Ltda
2
****
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Brazil
|
|
Ordinary
|
|
|
100
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Servicios Internacionales Tubular Services S.A.
2
|
|
Ecuador
|
|
Ordinary
|
|
|
100
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|
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Shenzhen Weisheng ITS Tubular Equipment Co. Ltd
1
|
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China
|
|
Ordinary
|
|
|
50
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|
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ITS Energy Services Ltd, formerly Trinpet- ITS Limited
1
***
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Trinidad
|
|
Ordinary
|
|
|
100
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|
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International Tubular Services Kish (PJSCO)
2
|
|
Iran
|
|
Ordinary
|
|
|
100
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|
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ITS Energyservices Spain, S.L.
2
|
|
Spain
|
|
Ordinary
|
|
|
100
|
|
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ITS Oilfield Supply Ltd
2
***
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Scotland
|
|
Ordinary
|
|
|
100
|
|
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ITS Global Services Ltd
2
** ***
|
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Scotland
|
|
Ordinary
|
|
|
100
|
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The Group undertook preliminary steps to establish a joint venture in Indonesia. This entity was never legally formed and the
Group reabsorbed certain assets as its intended investment in the joint venture in 2011. In 2012, it was concluded that the joint venture would not proceed and these assets were reclassified as held for sale at 31 December 2012, (Note 13).
The principal activity of all Group companies is the rental, inspection, sale and repair and manufacture of oilfield equipment, with the exception of those
marked * which are holding companies, ** which is dormant and **** which are service companies. Companies under direct control of the holding company are marked ***.
|
1
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On 19 April 2013, ITS Tubular Services (Holdings) Limited was placed in administration. On 22 April 2013, PD International Holdings CV acquired certain companies from the administrators.
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2
|
Those companies not acquired by Parker Drilling Company remained subsidiaries of ITS Tubular Services (Holdings) Limited on 22 April 2013, and are under the control of the administrators. These companies are in the
process of being sold or wound up. Refer to Note 30 for further details.
|
F-128
|
3
|
The business and assets of these entities were classified as held for sale at 31 December 2012.
|
34. Control
The Group was controlled in the current and previous period, by one of its directors, R G Kidd, by virtue of the controlling interest in the
issued share capital. On 19 April 2013, an Administrator was appointed to the ultimate holding company under the terms of the 2006 Companies Act.
F-129
Until
, 2014 all dealers that effect transactions in the exchange notes, whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.
Parker Drilling Company
Preliminary
Prospectus
Offer to Exchange
$360,000,000 6.75% Senior Notes due 2022
which have been registered under
the Securities Act of 1933
for any and all outstanding
$360,000,000 unregistered
6.75% Senior Notes due 2022
issued on January 22, 2014