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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 MAY 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-7573
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PARKER DRILLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0618660
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(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 June 30, 1994, 55,098,270 common shares were outstanding.
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PARKER DRILLING COMPANY
INDEX
Part I. Financial Information Page No.
Consolidated Condensed Balance Sheets (Unaudited) -
May 31, 1994 and August 31, 1993 2
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Nine Months Ended May 31, 1994 and
May 31, 1993 3
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended May 31, 1994 and May 31, 1993 4
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 - 10
Part II. Other Information
Item 6, Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 10(a) Amendment dated as of May 2, 1994, to the
Credit Agreement, dated as of September 24, 1992,
between Morgan Guaranty Trust Company of New York,
Internationale Nederlanden Bank N.V. and Parker
Drilling Company.
Exhibit 15, Letter Re Unaudited Interim
Financial Information
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
May 31, August 31,
1994 1993
ASSETS ---------- ----------
------
Current assets:
Cash and cash equivalents $ 8,403 $ 12,570
Other short-term investments 4,977 31,419
Accounts and notes receivable 35,893 23,353
Rig materials and supplies 10,372 10,970
Other current assets 8,897 2,793
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Total current assets 68,542 81,105
Property, plant and equipment less accumulated
depreciation, depletion and amortization of
$485,486 at May 31, 1994, and $472,466
at August 31, 1993 155,043 139,326
Other noncurrent assets 15,740 15,911
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Total assets $239,325 $236,342
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-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Accounts payable $ 11,427 $ 5,915
Accrued liabilities 9,613 9,646
Accrued income taxes 4,088 5,291
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Total current liabilities 25,128 20,852
Deferred income taxes 1,198 1,198
Other long-term liabilities 2,711 3,495
Minority interest 3,267 3,118
Common stock, $.16 2/3 par value 9,182 9,164
Capital in excess of par value 202,271 201,784
Retained earnings (Accumulated deficit) (1,434) 499
Other (2,998) (3,768)
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Total liabilities and stockholders' equity $239,325 $236,342
-------- --------
-------- --------
See accompanying notes to consolidated condensed financial statements.
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- -------------------
1994 1993 1994 1993
------- -------- ------- -------
Revenue:
Drilling contracts $35,631 $24,190 $114,721 $70,748
Other 1,048 843 2,733 3,518
------- ------- -------- -------
Gross operating revenue 36,679 25,033 117,454 74,266
------- ------- -------- -------
Operating expense:
Drilling 26,584 15,195 81,123 44,760
Other 1,031 769 2,838 3,045
Depreciation, depletion and
amortization 5,698 4,941 15,687 15,328
General and administrative 6,302 6,177 19,911 19,768
------- ------- -------- -------
39,615 27,082 119,559 82,901
------- ------- -------- -------
Operating income (loss) (2,936) (2,049) (2,105) (8,635)
------- ------- -------- -------
Other income and (expense):
Interest expense (2) (14) (9) (53)
Interest income 251 487 806 1,292
Other income (expense) - net 70 (12) 502 (540)
------- ------- -------- -------
319 461 1,299 699
------- ------- -------- -------
Income (loss) before
income taxes (2,617) (1,588) (806) (7,936)
------- ------- -------- -------
Income tax expense 174 525 1,127 1,675
------- ------- -------- -------
Net income (loss) (2,791) (2,113) (1,933) (9,611)
------- ------- -------- -------
Dividends on preferred stock - - - 6
------- ------- -------- -------
Income (loss) applicable
to common stock $(2,791) $(2,113) $ (1,933) $(9,617)
------- ------- -------- -------
------- ------- -------- -------
Earnings (loss) per share,
primary and fully diluted $ (.05) $ (.04) $ (.04) $ (.18)
------- ------- -------- -------
Number of common shares ------- ------- -------- -------
used in computing earnings
(loss) per share:
Primary 54,325,100 53,772,534 54,209,089 53,007,108
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 54,325,100 53,772,534 54,209,089 53,007,108
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated condensed financial statements.
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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)
Nine Months Ended
May 31,
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1994 1993
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Cash flows from operating activities:
Net income (loss) $(1,933) $(9,611)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 15,687 15,328
Expenses not requiring cash 2,259 3,698
Change in operating assets and liabilities (14,989) 5,813
Other-net (705) (958)
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Net cash provided by operating activities 319 14,270
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Cash flows from investing activities:
Capital expenditures (31,841) (6,529)
Proceeds from the sale of equipment 1,247 6,053
Decrease (increase) in short-term investments 26,442 (17,627)
Proceeds from disposition of a subsidiary - 2,325
Other-net (30) (127)
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Net cash provided (used) by investing
activities (4,182) (15,905)
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Cash flows from financing activities:
Principal payments under debt obligations - (777)
Proceeds from exercise of a stock warrant - 4,320
Other-net (304) (1,043)
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Net cash provided (used) by financing
activities (304) 2,500
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Net increase (decrease) in cash and cash equivalents (4,167) 865
Cash and cash equivalents at
beginning of period 12,570 13,288
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Cash and cash equivalents at
end of period $ 8,403 $14,153
------- -------
------- -------
Supplemental disclosure:
Interest paid $ 9 $ 47
Taxes paid $ 2,330 $ 1,953
See accompanying notes to consolidated condensed financial statements.
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/TABLE
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 May 31, 1994 and August 31, 1993, (2) the results
of operations for the three and nine months ended May 31, 1994 and May 31,
1993, and (3) cash flows for the nine months ended May 31, 1994 and May
31, 1993. Results for the three and nine months ended May 31, 1994, are
not necessarily indicative of the results which will be realized for the
year ending August 31, 1994. 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, 1993.
2. Earnings per common share is 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 but are not considered in the computation of weighted average
shares outstanding until the restrictions lapse. However, they are
considered common stock equivalents.
3. A former employee ("Plaintiff") was injured while working for the Company
on a rig owned and operated by another firm ("Defendant"). The Plaintiff
was granted an award totaling $6.75 million from the Defendant. Although,
the Company provided a defense for the Defendant pursuant to the indemnity
provision in the contract between the parties, the Company is currently in
litigation to determine the liability of the Company to indemnify the
Defendant due to the findings by the jury as to the conduct of the
Defendant's agents that caused the injury to the Plaintiff. Pending
resolution of the liability issue, the Company and the Defendant entered
into a non-binding funding arrangement whereby in March 1994 each party
funded $3.375 million of the award without prejudice to their respective
legal positions. Management believes that the Company is not legally
obligated to fund the award. However, if the Company is liable,
management believes it has adequate insurance to recover the majority of
any loss.
4. During the third quarter fiscal 1994 the Company entered into an amendment
to its Credit Agreement. The amendment extends $7.5 million of the $15
million revolving credit facility from September 1994, through March 1996.
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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 May 31, 1994, and the related
consolidated condensed statements of operations for the three and nine month
periods ended May 31, 1994 and 1993 and consolidated condensed statements of
cash flows for the nine month periods ended May 31, 1994 and 1993. 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, 1993, 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 14, 1993, 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, 1993, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND
Tulsa, Oklahoma
July 13, 1994
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Third Quarter of Fiscal 1994 Compared with Third Quarter of Fiscal 1993
The Company experienced a net loss of $2.8 million for the third quarter
of fiscal 1994, compared to a net loss of $2.1 million for the same period in
fiscal 1993. The primary reason for the increase in net loss was an increase
in depreciation expense of $.8 million. In addition, drilling margins of $9.0
million did not improve over the third quarter of fiscal 1993 even though
drilling revenue increased $11.4 million.
Drilling revenue in the third quarter of fiscal 1994 increased to $35.6
million from $24.2 million in the third quarter of fiscal 1993. International
utilization in the third quarter of fiscal 1994 was 53 percent compared to 38
percent for the same period of fiscal 1993, and overall utilization increased
to 31 percent from 24 percent.
Drilling revenue from operations in Africa, the Middle East and
Commonwealth of Independent States ("CIS") declined a combined $.2 million
when comparing the third quarter of fiscal 1994 with the third quarter of
fiscal 1993. The Company entered a new market in the fourth quarter of fiscal
1993 when it obtained a labor contract with a major customer in the country of
Kazakhstan. This increase in revenue was offset by a decease in revenue from
the country of Chad which had two rigs operating beginning in the third
quarter of fiscal 1993 through the first quarter of fiscal 1994. These two
rigs began operations again in Chad during the fourth quarter of fiscal 1994.
International drilling revenue from operations in Asia and the Pacific
during the third quarter of fiscal 1994 increased $5.2 million compared to the
same quarter of fiscal 1993. The primary reasons for the increase were the
start-up of operations in the Philippines, another new market for the Company,
and the resumption of operations in Pakistan, both during the first quarter of
fiscal 1994. Also contributing to the increase was higher utilization in
Papua New Guinea in the third quarter of fiscal 1994 versus the third quarter
of fiscal 1993.
Western Hemisphere international drilling revenue increased $7.3 million
from the third quarter of fiscal 1993. The primary reason for the increase
was revenue from operations in the country of Argentina. The Company
reentered the Argentina drilling market during the fourth quarter of fiscal
1993. In addition revenue from operations in Colombia increased in the third
quarter of fiscal 1994 compared to the third quarter of fiscal 1993 due to an
increase in utilization.
Domestic drilling revenue declined $.9 million due primarily to the
release at the end of the third quarter of fiscal 1994 of the Company's
specialized arctic rig. Management forecasts this rig will begin operations
again in the second quarter of fiscal 1995.
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RESULTS OF OPERATIONS (continued)
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Although drilling revenue increased $11.4 million versus last year's third
quarter, the Company's drilling margin (drilling revenue less drilling
expense) remained nearly the same. Drilling margins in Colombia declined due
to increased operating expenses and costs associated with the startup of two
rigs. In Argentina, the initial startup costs of entering a new market and
putting ten newly acquired rigs to work (four in the third quarter) continued
to negatively impact drilling margins. Additionally, during this transition
period the Company encountered drilling problems which resulted in slower-
than-expected drilling progress on some of the footage rate contracts.
Management is taking steps to resolve the drilling problems and reduce
operating expenses in these two countries.
Depreciation expense in the third quarter of fiscal 1994 increased $.8
million over the same quarter of fiscal 1993. The increase in depreciation
expense was the result of the increased level of capital expenditures during
the current fiscal year. The Company was able to hold general and
administrative expense at the same level as the third quarter of the prior
year even as overall utilization increased. Income tax expense, consisting
primarily of foreign income taxes, decreased $.4 million due primarily to the
reversal of an accrual in a country where the Company received a favorable tax
treatment of earnings from prior years' operations.
First Nine Months of Fiscal 1994 Compared with First Nine Months of Fiscal
1993
The Company's net loss of $1.9 million for the first nine months of fiscal
1994 represented a $7.7 million improvement over the same period of fiscal
1993. The improvement was primarily attributable to increased drilling
revenue and drilling margin for the first nine months of fiscal 1994.
Drilling revenue of $114.7 million for the first nine months of fiscal
1994 was up $44.0 million from the first nine months of fiscal 1993 as overall
utilization increased to 35 percent from 24 percent. International
utilization for the first nine months of fiscal 1994 was 57 percent compared
to 37 percent for the same period of fiscal 1993.
International drilling revenue from operations in Africa, the Middle East
and CIS increased $11.5 million over the first nine months of fiscal 1993.
Revenue increased from the operation of two work-over rigs in the Russian
Republic and a one-rig contract in Congo, both areas that had no operations
during the first nine months of fiscal 1993. These three rigs were released
during the second quarter of fiscal 1994. Also during the fourth quarter of
fiscal 1993 the Company began operating in the country of Kazahkstan under a
labor contract for a major customer.
International drilling revenue from operations in Asia and the Pacific
during the first nine months of fiscal 1994 increased $17.1 million compared
to the same period of fiscal 1993. The increase was primarily the result of
the operation of two geothermal rigs in the Philippines, the resumption of
operations in Pakistan during the first quarter of fiscal 1994 and increased
utilization in Papua New Guinea.
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RESULTS OF OPERATIONS (continued)
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Western Hemisphere international drilling revenue increased $13.4 million
as operations in Argentina and increased utilization in Ecuador and Peru more
than offset a decline in revenue in Colombia resulting from a decrease in
utilization in that country. Domestic drilling revenue increased $2.2 million
as utilization in the continental United States improved to 15 percent for the
first nine months of fiscal 1994 versus 11 percent for the first nine months
of 1993.
Drilling margins did not improve in proportion to the increase in drilling
revenue for reasons previously discussed in the third quarter comparison.
Depreciation expense increased $.4 million as a result of increased capital
spending during fiscal 1994. Other income (expense) increased $1.0 million
due primarily to a $.9 million adjustment of a prior years workers'
compensation liability recorded in the first quarter of fiscal 1993. Income
tax expense declined $.5 million for the reason previously discussed in the
comparison of third quarter operations.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1994, cash and other short-term
investments declined $30.6 million. The decline was caused by the Company
financing capital expenditures of $31.8 million primarily with existing cash
and short-term investments.
Capital expenditures for the first nine months of fiscal 1994 included
expenditures for the acquisition and modification of twelve drilling rigs.
Eleven of the rigs are in Argentina with ten having been under contract during
the third quarter of fiscal 1994. Another rig is currently operating in
Colombia for a major customer. Management currently forecasts total capital
expenditures for fiscal 1994 to be approximately $37.0 million. In the event
the Company obtains contracts in addition to those currently anticipated that
would require the construction or purchase of new or specialized rigs or
significant modifications to existing rigs, capital expenditures could be
greater than this forecasted amount. Any significant increase in capital
expenditures would be subject to restrictions imposed on the Company as
specified below.
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LIQUIDITY AND CAPITAL RESOURCES (continued)
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The Company has a credit agreement ("Agreement") with two banks which
provides for a $15.0 million revolving credit facility through September 1994.
The Agreement was amended in the third quarter of fiscal 1994 to extend $7.5
million of the revolving credit facility through March 1996. All of the
credit facility was available for drawdown as of May 31, 1994. It 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
credit facility and are able to make capital expenditures and obtain
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, 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.
OTHER MATTERS
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The Company is currently involved in litigation as discussed in Note 3 of
Notes to Unaudited Consolidated Condensed Financial Statements.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits:
Exhibit 10(a) Amendment dated as of May 2, 1994, to the Credit Agreement,
dated as of September 24, 1992, between Morgan Guaranty Trust
Company of New York, Internationale Nederlanden Bank N.V. and Parker
Drilling Company
Exhibit 15 Letter re Unaudited Interim Financial Information
(b)Reports on Form 8-K - There were no reports on Form 8-K filed
during the nine months ended May 31, 1994.
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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
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Registrant
Date: July 12, 1994
By: /s/James J. Davis
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James J. Davis
Vice President, Finance and
Chief Financial Officer
By: /s/Randy Ellis
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Randy Ellis
Controller and
Chief Accounting Officer
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