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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------- -------------------
COMMISSION FILE NUMBER 1-7573
----------------------
PARKER DRILLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0618660
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (918) 585-8221
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of March 31, 1996, 56,178,367 common shares were outstanding.
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<TABLE>
PARKER DRILLING COMPANY
INDEX
<CAPTION>
<S> <C>
Part I. Financial Information Page No.
Consolidated Condensed Balance Sheets (Unaudited) -
February 29, 1996 and August 31, 1995 2
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Six Months Ended February 29, 1996 and
February 28, 1995 3
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three and Six Months Ended February 29, 1996 and 4
February 28, 1995
Notes to Unaudited Consolidated Condensed
Financial Statements 5
Report of Review by Independent Accountants 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Part II. Other Information
Item 4, Submission of Matters to a Vote of Security Holders 10
Item 6, Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 15, Letter Re Unaudited Interim 12
Financial Information
Exhibit 27, Financial Data Schedule (EDGAR version only)
</TABLE>
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<TABLE>
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Feb. 29, Aug. 31,
1996 1995
-------- --------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,766 $ 20,752
Other short-term investments 6,581 1,372
Accounts and notes receivable 38,994 39,578
Rig materials and supplies 11,127 11,532
Other current assets 4,441 5,146
-------- --------
Total current assets 75,909 78,380
Property, plant and equipment less accumulated
depreciation, depletion and amortization of
$414,814 at February 29, 1996, and $432,360
at August 31, 1995 122,342 122,258
Other noncurrent assets 24,215 16,321
-------- --------
Total assets $222,466 $216,959
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 289 $ 289
Accounts payable and accrued liabilities 15,616 16,940
Accrued income taxes 6,550 5,109
-------- --------
Total current liabilities 22,455 22,338
-------- --------
Long-term debt 1,473 1,748
-------- --------
Other long-term liabilities 6,755 5,953
-------- --------
Common stock, $.16 2/3 par value 9,364 9,287
Capital in excess of par value 207,095 205,310
Retained earnings (accumulated deficit) (22,153) (24,391)
Other (2,523) (3,286)
-------- --------
Total stockholders' equity 191,783 186,920
-------- --------
Total liabilities and stockholders' equity $222,466 $216,959
-------- --------
-------- --------
See accompanying notes to consolidated condensed financial statements.
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</TABLE>
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<TABLE>
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------------ -------------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Drilling contracts $36,776 $37,725 $78,280 $69,780
Other 1,153 1,013 2,359 2,241
------- ------- ------- -------
Gross operating revenue 37,929 38,738 80,639 72,021
------- ------- ------- -------
Operating expense:
Drilling 25,586 27,098 53,987 51,867
Other 1,429 1,215 2,820 2,665
Depreciation, depletion and
amortization 5,226 5,420 10,712 10,926
General and administrative 5,468 5,140 10,628 10,155
------- ------- ------- -------
37,709 38,873 78,147 75,613
------- ------- ------- -------
Operating income (loss) 220 (135) 2,492 (3,592)
------- ------- ------- -------
Other income and (expense):
Interest expense (22) (33) (53) (35)
Interest income 355 317 699 577
Other income (expense) - net 836 380 1,875 3,281
------- ------- -------- -------
1,169 664 2,521 3,823
------- ------- -------- -------
Income before income taxes 1,389 529 5,013 231
------- ------- -------- -------
Income tax expense 1,038 460 2,775 1,255
------- ------- -------- -------
Net income (loss) 351 69 2,238 (1,024)
------- ------- -------- -------
Earnings (loss) per share,
primary and fully diluted $ .01 $ .00 $ .04 $ (.02)
------- ------- -------- -------
------- ------- -------- -------
Number of common shares used
in computing earnings (loss)
per share:
Primary 55,978,658 54,972,034 55,863,977 54,610,611
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 56,038,992 55,021,452 55,950,437 54,610,611
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated condensed financial statements.
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</TABLE>
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<TABLE>
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
-------------------------
Feb. 29, Feb. 28,
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,238 $(1,024)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 10,712 10,926
Expenses not requiring cash 917 (180)
Change in operating assets and liabilities 847 720
Other-net (1,926) (1,552)
------- -------
Net cash provided by operating activities 12,788 8,890
------- -------
Cash flows from investing activities:
Capital expenditures (17,850) (6,174)
Proceeds from the sale of equipment 4,234 5,427
Decrease (increase) in short-term
investments (5,209) 2,781
Other-net (1,140) 121
------- -------
Net cash provided (used) by investing
activities (19,965) 2,155
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock warrants 1,552 -
Other (361) (106)
------- -------
Net cash provided (used) by financing
activities 1,191 (106)
------- -------
Net change in cash and cash equivalents (5,986) 10,939
Cash and cash equivalents at
beginning of period 20,752 10,660
------- -------
Cash and cash equivalents at
end of period $14,766 $21,599
------- -------
------- -------
Supplemental disclosure:
Interest paid $ 109 $ 2
Taxes paid $ 1,334 $ 1,641
Supplemental noncash financing activity:
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory
note in the amount of $1,850,000.
See accompanying notes to consolidated condensed financial statements.
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</TABLE>
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PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (of a normally
recurring nature) which are necessary for a fair presentation of (1) the
financial position as of February 29, 1996 and August 31, 1995, (2) the
results of operations for the three and six months ended February 29, 1996
and February 28, 1995, and (3) cash flows for the six months ended
February 29, 1996 and February 28, 1995. Results for the six months ended
February 29, 1996, are not necessarily indicative of the results which
will be realized for the year ending August 31, 1996. The year-end
consolidated condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements should
be read in conjunction with the Company's Form 10-K for the year ended
August 31, 1995.
2. Earnings per common share are based on the weighted average number of
common shares and common share equivalents outstanding during the period.
Common shares granted under the 1969 Key Employee Stock Grant Plan, 1980
Incentive Career Stock Plan and the 1991 Stock Grant Plan are issued and
outstanding and are only considered in the computation of weighted average
shares outstanding when their effect on earnings per share is dilutive.
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<PAGE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
Parker Drilling Company
We have reviewed the consolidated condensed balance sheet of Parker
Drilling Company and subsidiaries as of February 29, 1996, and the related
consolidated condensed statements of operations for the three and six month
periods ended February 29, 1996 and February 28, 1995 and consolidated
condensed statements of cash flows for the six month periods ended February
29, 1996 and February 28, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1995, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report, dated October 17, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of August 31, 1995, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
By: /s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
April 12, 1996
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Second Quarter of Fiscal 1996 Compared with Second Quarter of Fiscal 1995
The Company recorded net income of $.4 million in the second quarter of
fiscal 1996 compared to net income of $.1 million in the second quarter of
fiscal 1995. This improvement was primarily attributable to increases in
drilling margins (drilling revenue less drilling expense) of $.6 million and
other income of $.5 million offset by an increase of $.6 million in income tax
expense.
Drilling revenue of $36.8 million in the second quarter of fiscal 1996
reflected a decline of $.9 million from the $37.7 million recorded in the same
quarter of the prior fiscal year. Utilization rates of 42 percent for the
Company's entire rig fleet and 59 percent solely for its international rigs
were comparable to the prior year's second quarter. (Utilization figures have
been adjusted to reflect rigs removed from the rig fleet at the end of fiscal
1995 and in the current quarter as noted below.)
Western Hemisphere international drilling revenue declined $2.8 million in
the quarter comparison due to the termination of the Company's operations in
southern Argentina. The reduced revenue was the result of management's
decision in the current quarter to sell the Company's six rigs and ancillary
equipment located in southern Argentina. These rigs have been removed from
the Company's rig fleet and are classified as assets held for disposition.
This decline in revenue was partially offset by increased utilization in
northern Argentina where the Company is currently operating three rigs.
Drilling revenue in the Asia Pacific region increased $.9 million in the
second quarter of fiscal 1996 due primarily to increased utilization in Papua
New Guinea. Also contributing to this increase in revenue was the
commencement of a one-rig contract in Vietnam, a new market for the Company.
Revenue declined in Pakistan, New Zealand and the Philippines due to a
reduction in rig utilization in those countries.
There was no change in revenue in Africa, the Middle East and Commonwealth
of Independent States. Increased revenue in the Russian Republic due to a new
one-rig contract was offset by a loss of one rig previously operating in
Kazakhstan. Domestic drilling revenue increased $1.0 million due to increased
rig utilization and the relocation of several rigs in the Lower 48 states to
markets with higher dayrates.
Drilling margins as a percent of revenue were comparable at 30% and 28%
for the second quarter of fiscal 1996 and fiscal 1995, respectively. The
improvement was attributable to Western Hemisphere international operations.
General and administrative expense increased $.3 million in comparing the two
quarters due to employee severance payments in the current quarter. Other
income included gains of $1.2 million on the disposition of property, plant
- 7 -
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<PAGE>
RESULTS OF OPERATIONS (Continued)
- ---------------------------------
and equipment offset by a $.7 million settlement of litigation involving a
Company subsidiary. Income tax expense increased $.6 million due to increased
revenue and taxable income in certain foreign countries in which the Company
operates. Fiscal 1995 included tax benefits unavailable in fiscal 1996,
including net operating loss carryforwards in several countries.
First Six Months of Fiscal 1996 Compared with First Six Months of Fiscal 1995
The Company's net income of $2.2 million recorded for the first six months
of fiscal 1996 is an improvement of $3.3 million over the first half of the
prior fiscal year. An increase in drilling margins of $6.4 million was the
primary reason for the improvement, offset by a $1.5 million increase in tax
expense and a $1.3 million reduction in other income.
Drilling revenue of $78.3 million reflected an increase of $8.5 million.
Utilization in the current fiscal year of 44 percent for the entire rig fleet
and 62 percent solely for the international fleet corresponds to fiscal 1995
figures of 38 percent and 55 percent, respectively. (Utilization rates have
been adjusted in both years for rigs removed from the rig fleet in both fiscal
1995 and 1996.)
Drilling revenue in the Company's Western Hemisphere international
operations declined $2.9 million due to reduced utilization in Argentina as
discussed above in the second quarter comparison. Operations in the Asia
Pacific region have generated an increase in revenue of $7.8 million. This
increase is attributable to improved utilization in Papua New Guinea where the
Company has operated all five of its rigs in fiscal 1996. Revenue through six
months of fiscal 1996 has declined in several countries in the Asia Pacific
region as noted in the second quarter comparison.
Drilling revenue in Africa, the Middle East and Commonwealth of
Independent States declined $.8 million due to the completion of one-rig
contracts in Chad and Kazakhstan in the first half of fiscal 1995, offset by
increased revenue in the Russian Republic where the Company commenced a one-
rig contract in the first quarter of fiscal 1996. Domestic drilling revenue
increased $4.6 million due primarily to the operation of Rig 245 in Alaska.
This rig had been idle during the first quarter of fiscal 1995.
Drilling margins increased $6.4 million for the six month comparison due
to operations in Colombia, Argentina, Papua New Guinea and Alaska. General
and administrative expense increased $.5 million due to employee severance
payments made in fiscal 1996 while other income declined $1.3 million due
primarily to the $1.5 million gain on reversal of a prior year's foreign
currency accrual recognized in the first half of fiscal 1995. Income tax
expense increased $1.5 million for reasons noted in the quarterly comparison.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and other short-term investments decreased $.8 million in the first
six months of fiscal 1996. Cash generated from operations of $12.8 million,
proceeds of $4.2 million from the sale of property, plant and equipment and
$1.6 million received upon the exercise of stock warrants were sources of
cash.
Capital expenditures of $17.9 million, primarily related to international
contract opportunities, reflect an increase of $11.7 million over expenditures
made in the first half of fiscal 1995. The Company continues to upgrade its
fleet of rigs by adding equipment such as top drives and additional rig power
to selected rigs. Management currently forecasts capital expenditures for
fiscal 1996 to be approximately $32.0 million. In the event the Company
obtains additional contracts that require the purchase or construction of new
or specialized rigs, or significant modifications to existing rigs, capital
expenditures could increase further. Any significant increase in capital
expenditures would be subject to any restrictions imposed on the Company as
specified below.
The Company has a credit agreement with a bank which provides for a $7.5
million revolving credit facility through May 31, 1996 (the "Agreement"). The
Company is in the process of replacing this credit facility with an agreement
having similar terms. The entire $7.5 million was available for drawdown as
of February 29, 1996. The Agreement contains restrictions on annual capital
expenditures and certain senior and subordinated indebtedness which can be
incurred by Parker Drilling Company and certain subsidiaries designated in the
agreement. These designated subsidiaries comprise the operating subsidiaries
through which the Company performs the majority of its drilling operations.
The credit facility also limits payment of dividends on the Company's common
stock to the lesser of 40 percent of consolidated net income for the preceding
fiscal year, or $2.6 million. The remaining subsidiaries of the Company are
not a party to the Agreement and are able to make capital expenditures with
independent financing from lenders that have no recourse to Parker Drilling
Company and the designated subsidiaries, subject only to an overall limitation
of indebtedness.
The restrictions in the Agreement are not anticipated to restrict growth
or investment opportunities in the foreseeable future.
Management believes that the current level of cash and short-term
investments, together with cash generated from operations, should be
sufficient to meet the Company's immediate capital needs. However, in the
event the Company obtains additional contracts requiring further significant
capital expenditures or acquires equipment or companies in the drilling
service industry, management believes the Company would likely meet both
short-term and long-term capital needs through a combination of cash generated
from operations, borrowings under the bank credit agreement and either equity
or long-term debt financing.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Stockholders of the Company was held on
December 13, 1995.
The stockholders voted to elect two Class III directors to the
Company's Board of Directors as follows:
<TABLE>
<CAPTION>
Authority Broker
Directors For Against Withheld Abstentions Non-Votes
--------- --- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Robert L. Parker 50,632,198 - 1,165,738 - -
Robert L. Parker Jr. 50,643,630 - 1,154,306 - -
The stockholders voted to ratify the appointment of Coopers & Lybrand as
independent accountants for Parker Drilling Company for the fiscal year
ending August 31, 1996. The votes were cast as follows:
</TABLE>
<TABLE>
<CAPTION>
Authority Broker
For Against Withheld Abstentions Non-Votes
--- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
51,385,478 302,308 - 110,150 -
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Page
Exhibit 15 Letter re Unaudited Interim Financial Information 12
Exhibit 27 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
during the three months ended February 29, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Parker Drilling Company
-----------------------
Registrant
Date: April 12, 1996
By: /s/James J. Davis
-----------------------------
James J. Davis
Vice President, Finance and
Chief Financial Officer
By: /s/Randy Ellis
-----------------------------
Randy Ellis
Controller and
Chief Accounting Officer
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Exhibit 15
April 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 10549
Re: Parker Drilling Company
Registration on Form S-8
We are aware that our report dated April 12, 1996, on our review of the
interim financial information of Parker Drilling Company for the period ended
February 29, 1996, and included in this Form 10-Q is incorporated by reference
in the Company's registration statements on Form S-8 (File No. 2-87944, 33-
24155, 33-56698 and 33-57345). Pursuant to Rule 436(c) under the Securities
Act of 1933, this report should not be considered a part of the registration
statement prepared or certified by us within the meaning of Section 7 and 11
of that Act.
By: /s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF FEBRUARY 29, 1996 AND THE
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 14766
<SECURITIES> 6581
<RECEIVABLES> 39662
<ALLOWANCES> 668
<INVENTORY> 0
<CURRENT-ASSETS> 75909
<PP&E> 537156
<DEPRECIATION> 414814
<TOTAL-ASSETS> 222466
<CURRENT-LIABILITIES> 22455
<BONDS> 1473
0
0
<COMMON> 9364
<OTHER-SE> 182419
<TOTAL-LIABILITY-AND-EQUITY> 222466
<SALES> 0
<TOTAL-REVENUES> 80639
<CGS> 0
<TOTAL-COSTS> 56807
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 5013
<INCOME-TAX> 2775
<INCOME-CONTINUING> 2238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2238
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
