1
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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, 1997
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 May 31, 1997, 76,668,155 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, 1997 and August 31, 1996 2
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Nine Months Ended May 31, 1997 and
May 31, 1996 3
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended May 31, 1997 and May 31, 1996 4
Notes to Unaudited Consolidated Condensed
Financial Statements 6 - 7
Report of Independent Accountants 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 13
Part II. Other Information
Item 6, Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 15, Letter Re Unaudited Interim 17
Financial Information
Exhibit 27, Financial Data Schedule (EDGAR version only)
3
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
May 31, August 31,
1997 1996
ASSETS ----------- ----------
------
Current assets:
Cash and cash equivalents $ 88,798 $ 61,738
Other short-term investments 2,877 16,247
Accounts and notes receivable 81,005 33,675
Rig materials and supplies 16,050 10,735
Other current assets 14,161 3,653
-------- --------
Total current assets 202,891 126,048
Property, plant and equipment less accumulated
depreciation, depletion and amortization of
$372,530 at May 31, 1997, and $351,714
at August 31, 1996 405,407 124,177
Goodwill, net of accumulated amortization
of $2,616 143,454 -
Other noncurrent assets 43,849 25,734
-------- --------
Total assets $795,601 $275,959
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 18,084 $ 584
Accounts payable and accrued liabilities 41,255 16,326
Accrued income taxes 5,850 6,217
-------- --------
Total current liabilities 65,189 23,127
-------- --------
Long-term debt 379,565 2,794
-------- --------
Other long-term liabilities 9,880 5,990
-------- --------
Common stock, $.16 2/3 par value 12,778 10,888
Capital in excess of par value 340,284 254,955
Retained earnings (accumulated deficit) (11,626) (20,338)
Other (469) (1,457)
-------- --------
Total stockholders' equity 340,967 244,048
-------- --------
Total liabilities and stockholders' equity $795,601 $275,959
======== ========
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, May 31, May 31,
1997 1996 1997 1996
-------- ------- -------- --------
Revenues:
Land drilling $49,419 $33,986 $132,193 $112,266
Offshore drilling 32,779 - 64,279 -
Tool rental 9,116 - 17,916 -
Other 639 1,012 1,805 3,371
------- ------- -------- --------
Total revenues 91,953 34,998 216,193 115,637
------- ------- -------- --------
Operating expenses:
Land drilling 32,110 23,000 90,434 76,987
Offshore drilling 19,233 - 38,883 -
Tool rental 2,957 - 4,982 -
Other 1,380 1,216 3,797 4,036
Depreciation, depletion and
amortization 13,262 5,733 32,874 17,339
General and administrative 4,673 5,460 14,055 15,194
------- ------- -------- --------
Total operating expenses 73,615 35,409 185,025 113,556
------- ------- -------- --------
Operating income (loss) 18,338 (411) 31,168 2,081
Other income and (expense):
Interest expense (9,930) (34) (22,037) (87)
Interest income 1,101 312 3,118 1,011
Other income (expense) - net (334) 1,233 1,753 3,108
------- ------- -------- --------
Total other income and (expense) (9,163) 1,511 (17,166) 4,032
------- ------- -------- --------
Income before income taxes 9,175 1,100 14,002 6,113
------- ------- -------- --------
Income tax expense 3,278 790 5,290 3,565
------- ------- -------- --------
Net income $ 5,897 $ 310 $ 8,712 $ 2,548
------- ------- -------- --------
Earnings per share,
primary and fully diluted $ .08 $ .01 $ .12 $ .05
======= ======= ======== ========
Number of common shares used
in computing earnings per
share:
Primary 73,988,916 56,251,437 69,678,303 56,014,726
========== ========== ========== ==========
Fully diluted 74,057,455 56,290,118 69,779,690 56,219,680
========== ========== ========== ==========
See accompanying notes to consolidated condensed financial statements.
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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, May 31,
1997 1996
-------- -------
Cash flows from operating activities:
Net income $ 8,712 $ 2,548
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 32,874 17,339
Expenses not requiring cash 2,910 108
Change in operating assets and liabilities (37,189) (3,678)
Other-net (1,792) (2,587)
-------- -------
Net cash provided by (used in) operating
activities 5,515 13,730
-------- -------
Cash flows from investing activities:
Capital expenditures (60,199) (26,359)
Acquisition of Mallard, net of cash acquired (311,837) -
Acquisition of Quail (66,888) -
Proceeds from the sale of equipment 10,418 5,377
Decrease (increase) in short-term
investments 13,370 (2,696)
Other-net (5,475) (1,136)
-------- -------
Net cash provided (used) by investing
activities (420,611) (24,814)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of debt 387,274 -
Principal payments under debt obligations (6,702) (285)
Proceeds from common stock offering 61,477 -
Proceeds from exercise of stock warrants - 1,552
Other 107 (81)
-------- -------
Net cash provided by financing
activities 442,156 1,186
-------- -------
Net change in cash and cash equivalents 27,060 (9,898)
Cash and cash equivalents at
beginning of period 61,738 20,752
-------- -------
Cash and cash equivalents at
end of period $88,798 $10,854
======== =======
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (continued)
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
Supplemental cash flow information:
Interest paid $ 19,822 $ 120
Taxes paid $ 6,076 $ 2,556
Business acquisitions in November 1996: Mallard Quail
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Working capital, net of cash acquired $ 8,168 $ (765)
Property, plant and equipment 232,039 24,099
Purchase price in excess of net assets
acquired 102,516 43,554
Other assets 1,853 -
Noncurrent liabilities (7,739) -
Preferred stock issued (25,000) -
-------- --------
Net cash used in acquisitions $311,837 $ 66,888
-------- --------
Supplemental noncash financing activity:
In November 1996, the Company issued $25,000,000 of preferred stock,
subsequently converted to common stock in December 1996, as a part of the
acquisition of Mallard. (See Note 3.)
See accompanying notes to consolidated condensed financial statements.
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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 May 31, 1997 and August 31, 1996, (2) the results
of operations for the three and nine months ended May 31, 1997 and May 31,
1996, and (3) cash flows for the nine months ended May 31, 1997 and May
31, 1996. Results for the nine months ended May 31, 1997, are not
necessarily indicative of the results which will be realized for the year
ending August 31, 1997. 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, 1996.
2. Earnings per common share are computed by dividing net income by the
weighted average number of common shares outstanding during the period
including the effect of dilutive options when applicable. Common shares,
subject to vesting, 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.
3. On November 12, 1996, the Company acquired Mallard Bay Drilling, Inc.
("Mallard") and Quail Tools, Inc. ("Quail"). Both were accounted for by
the purchase method of accounting.
The Company acquired all of the outstanding stock of Mallard from Energy
Ventures, Inc. ("EVI") for $336.8 million, including acquisition costs,
for cash of $311.8 million and $25.0 million of preferred stock which was
converted into 3,056,600 shares of common stock during the second quarter
of fiscal 1997. Mallard owns and operates 34 drilling and workover barges
in the shallow waters of the Gulf of Mexico and Nigeria, four platform
rigs in the Gulf of Mexico and four land drilling rigs in Argentina.
The Company acquired all of the outstanding stock of Quail for $66.9
million, including acquisition costs. Quail is a provider of premium
rental tools used in well drilling, production and workover primarily to
companies working in the Gulf of Mexico and Gulf Coast land regions. The
excess of purchase price over the fair values of the net assets acquired
was $102.5 million for Mallard and $43.6 million for Quail and has been
recorded as goodwill, which is being amortized on a straight-line basis
over 30 years.
The following unaudited pro forma information presents a summary of the
third quarter consolidated results of operations of the Company and the
acquired entities as if the acquisition had occurred September 1, 1995.
(Thousands except per share amounts)
Three Months Ended Nine Months Ended
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May 31, May 31, May 31, May 31,
1997 1996 1997 1996
-------- -------- -------- --------
Revenues $ 91,953 $ 58,440 $245,258 $187,991
Net income $ 5,897 $ (6,854) $ 7,194 $(18,457)
Earnings per common share $ .08 $ (.12) $ .10 $ (.31)
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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
4. The Company financed the acquisitions of Mallard and Quail through the
issuance of $300,000,000 of Senior Notes and a term loan of $100,000,000.
Additionally, the Company issued $25,000,000 of preferred stock which was
converted to 3,056,600 shares of common stock during the second quarter
of fiscal 1997.
The $300,000,000 Senior Notes, which were sold at a $2,355,000 discount,
have an interest rate of 9 3/4% and will mature in 2006. The $100,000,000
term loan was a part of commitment from a syndicate of financial
institutions to establish a Senior Credit Facility which consists of the
term loan and a $45,000,000 revolving credit facility.
The term loan bears interest, at the option of the Company, at prime to
prime plus 0.50% or at 1.75% to 2.25% above the one-, two-, three- and
six-month LIBOR rate, depending on the Company's debt-to-capital ratio
(as defined) and will be paid in quarterly payments, with a final balloon
payment on November 30, 2002. The term loan has no prepayment penalty, is
guaranteed by the principal subsidiaries of the Company and is
collateralized by substantially all of the assets of the Company and the
assets and stock of the Subsidiary Guarantors. The term loan contains
customary representations and warranties and will restrict the Company's
ability to, among other things, incur indebtedness, merge or sell assets
and make investments.
The revolving portion of the Senior Credit Facility is available, subject
to the satisfaction of customary borrowing conditions, for working
capital requirements and general corporate purposes. The revolver will
terminate on December 31, 1998 and is collateralized by a first lien on
the Company's accounts receivable. Borrowings under the revolver will not
be permitted to exceed a borrowing base equal to 80% of the Company's
eligible accounts receivable. Under the Senior Credit Facility the
Company is prohibited from paying dividends and is required to maintain
certain financial ratios.
5. On March 7, 1997, the Company filed a registration statement for the
registration of 11,565,090 shares of common stock (including a 15 percent
over-allotment option), comprised of 8,508,490 primary shares offered by
the Company and 3,056,600 secondary shares offered by EVI. Public
offerings of 11,203,200 shares have been completed, from which the
Company received net proceeds of approximately $61.5 million.
6. On April 8, 1997, the Company entered into an agreement to acquire
substantially all of the assets of Bolifor, S.A., a Bolivian-owned
contractor. The assets to be acquired include 11 rigs and an inventory of
spare parts, tubulars, camps and vehicles located in Bolivia, Paraguay and
Argentina, plus the assignment of three existing drilling contracts. The
acquisition is anticipated to be completed in the fourth quarter of fiscal
1997 and the purchase price of $25 million will be funded out of available
cash.
7. On May 9, 1997, the Company signed definitive agreements to acquire
Hercules Offshore Corporation and Hercules Rig Corp. for $195.0 million in
cash. The Hercules companies own seven jackup rigs and three self-
erecting platform rigs in the Gulf of Mexico and one additional platform
rig on bareboat charter to a firm in Brazil. The transaction is subject
to various conditions, including Malaysian regulatory approval and
financing by the Company. The Company anticipates the transaction will
close in early fiscal 1998. Management anticipates funding the
acquisitions through a combination of methods which may include existing
cash, the issuance of new debt, including the possibility of a new issue
of convertible subordinated debt, borrowings under the current Senior
Credit Facility or a possible new credit facility, and the issuance of
additional equity if necessary or desirable.
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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
8. On June 16, 1997 barge Rig 52 incurred a blowout and suffered extensive
damage. Three employees and a third party service representative were
killed. Management is still in the process of determining the amount of
salvageable equipment and the amount of insurance proceeds that will be
received. It is too early for management to make an estimate of possible
losses.
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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, 1997, and the related
consolidated condensed statements of operations for the three and nine month
periods ended May 31, 1997 and 1996 and consolidated condensed statements of
cash flows for the nine month periods ended May 31, 1997 and 1996. 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, 1996, 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, 1996, 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, 1996, 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
June 27, 1997
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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 1997 Compared with Third Quarter of Fiscal 1996
The Company recorded net income of $5.9 million for the third quarter of
fiscal 1997 as compared to net income of $ .3 million for the comparable
quarter of fiscal 1996. The Company's results of operations were favorably
impacted by its Mallard offshore drilling and Quail tool rental businesses that
were acquired in November 1996.
The Company's total revenues increased $57.0 million from last year's
third quarter due, in large part, to revenues generated by the acquired
businesses. Offshore drilling and tool rental operations accounted for $32.8
million and $9.1 million, respectively, of the increase in revenues. The demand
for drilling services in the transition zones of the Gulf of Mexico and Nigeria
and the rental demand for specialized drilling equipment in the offshore Gulf
of Mexico and Gulf Coast markets continued to strengthen. The revenues
generated by the offshore drilling and tool rental businesses in the third
quarter compare favorably to the $26.2 million and $7.1 million, respectively,
recorded in the second quarter of fiscal 1997.
The Company experienced a 93% utilization rate on its 23 available barge
rigs, which excludes those rigs that are currently cold-stacked. During the
quarter, barge Rig 74 commenced operations for Chevron in Nigeria.
Additionally, the refurbishment of barge Rig 60 was recently completed and the
rig will begin operations during the fourth quarter of fiscal 1997. A recent
blowout and fire involving Rig 52 damaged a significant portion of the rig.
Until such time as the rig is repaired and returned to service the Company will
sustain a loss in revenues.
Total land drilling revenues increased $15.4 million, primarily due to a
37 percent increase in rig revenue days as compared to the third quarter of
fiscal 1996. Principal areas of increased rig utilization included the United
States, the Asia Pacific region, Colombia and Peru.
Revenues from the Company's United States land drilling operations
increased $4.4 million from last year due to a 73 percent increase in rig
revenue days and improvements in day rates. All 14 of the Company's United
States rigs are currently under contract. During the quarter, Rig 238 in
Louisiana suffered extensive damage in a blowout and has been removed from the
rig fleet. Management anticipates that insurance proceeds will approximate the
book value of the lost equipment.
Revenues from the Latin America region increased $5.1 million primarily
due to four additional rigs under contract in Colombia and Peru. Revenue
generated by four Argentina land rigs obtained in the Mallard acquisition
offset revenue decreases on other rigs in Argentina. Asia Pacific region
revenues increased $5.3 million due to additional drilling activity in
Pakistan, Papua New Guinea and Indonesia.
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RESULTS OF OPERATIONS (continued)
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The Company's offshore drilling and tool rental operations generated a
combined $19.7 million profit margin (revenues less direct operating expenses)
during the third quarter of fiscal 1997. The third quarter profit margin of
$19.7 million compared to the $15.1 million profit margin for the second
quarter reflects a strengthening of the offshore drilling and tool rental
markets. Increased utilization and day rates in the land drilling business also
generated an additional $6.3 million of profit margin in the third quarter of
fiscal 1997 versus the comparable quarter in fiscal 1996.
Depreciation, depletion and amortization increased $7.5 million due to
the additional depreciation and goodwill amortization related to the
acquisition of Mallard and Quail. General and administrative expense decreased
$ .8 million principally due to one-time expenses associated with personnel
reductions recorded last year.
During the third fiscal quarter, the Company initiated plans to move
Partech, its rig manufacturing and service center, from Odessa, Texas to New
Iberia, Louisiana. In conjunction with the planned move, the Company evaluated
and wrote down to fair market value its properties and inventories in Odessa,
recording a $1.4 million expense in other operating expenses.
Other income and expense includes the $9.9 million interest expense and
amortization of debt issuance fees and costs on $400.0 million of borrowings
used to finance the Mallard and Quail acquisitions. The $ .8 million increase
in interest income was due to significantly higher cash balances due in part to
the receipt of $61.5 million in net proceeds from a common stock offering that
was completed in early April. Other income (expense) - net decreased $1.6
million principally due to fewer gains on sales of assets this quarter.
The $2.5 million increase in income tax expense is primarily attributable
to current foreign taxes resulting from higher international profits as
compared to last year.
First Nine Months of Fiscal 1997 Compared with First Nine Months of Fiscal
1996
The Company recorded net income of $8.7 million for the first nine months
of fiscal 1997, an increase of $6.2 million from the comparable period of
fiscal 1996. The Company's results of operations were favorably impacted by the
acquisitions of Mallard and Quail.
Total revenues of $216.2 million represent a $100.6 million increase from
the same period last year. The offshore drilling and tool rental businesses
accounted for $64.3 million and $17.9 million, respectively, of the increase in
revenues. Land drilling revenues increased $19.9 million from the same period
last year, of which $10.9 million was from United States operations and resulted
from additional rig utilization and improving day rates. The remaining increase
was primarily due to $7.1 million of revenues generated from four Argentina land
rigs obtained in the Mallard acquisition.
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RESULTS OF OPERATIONS (continued)
- ---------------------
The demand for drilling services in the shallow water transition zones of
the Gulf Coast and Nigeria, and the rental demand for specialized drilling
equipment in the offshore Gulf of Mexico and Gulf Coast markets, continued to
strengthen in the first nine months of fiscal 1997. The revenues generated by
the offshore drilling and tool rental businesses generated $8.6 million more
revenues in the third quarter as compared to the second quarter of fiscal 1997.
The Company's offshore drilling and tool rental businesses generated a
combined profit margin of $38.3 million for the first nine months of fiscal
1997. The land drilling business profit margin was $6.5 million higher for the
first nine months principally due to increased utilization and day rates in the
third quarter.
Increases in interest expense and depreciation, depletion and
amortization were attributable to the Mallard and Quail acquisitions in the
first quarter of fiscal 1997. Ongoing general and administrative expenses
throughout fiscal 1997 have been consistent with fiscal 1996, with the $1.1
million decrease resulting primarily from one-time expenses in fiscal 1996
associated with personnel reductions.
Interest income increased $2.1 million due to significantly higher cash
balances, partially resulting from a common stock offering completed in early
April 1997. A $1.4 million decrease in other income (expense) - net resulted
from fewer gains on sale of assets. The $1.7 million increase in income tax
expense was higher foreign taxes resulting from improved international
operations, which was partially offset by a $1.3 million reversal in fiscal
1997 of an income tax accrual in a country where the Company terminated
operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and short-term investments were $91.7 million at May 31, 1997, an
increase of $13.7 million from August 31, 1996. The Company received net
proceeds of $61.5 million from a common stock offering in April 1997. Capital
expenditures for the first nine months of fiscal 1997 amounted to $60.2
million.
Capital expenditures incurred to date include: the substantial upgrade of
barge Rig 74, which began work in Nigeria in the third quarter; the
refurbishments of platform Rig 41, which began work in the Gulf of Mexico in
the third quarter, and barge Rig 60, which will begin work in the transition
zones of the U.S. Gulf Coast in the fourth quarter; the upgrade of land Rig 7,
which has now begun working in Pakistan; and the expenditure of approximately
$3.0 million of the $12.5 million budgeted for expansion of tool rental
operations in the South Texas market.
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14
LIQUIDITY AND CAPITAL RESOURCES (continued)
- -------------------------------
In November 1996, the Company acquired Mallard for $311.8 million in cash
and $25.0 million in convertible preferred stock (that converted into 3,056,600
shares of common stock in the second quarter of fiscal 1997) and Quail for
$66.9 million in cash. The Company financed the acquisitions of Mallard and
Quail through the issuance of $300.0 million principal amount of 9 3/4% Senior
Notes and a term loan of $100.0 million under the Senior Credit Facility.
The Senior Notes, which were sold at a $2.4 million discount, have an
interest rate of 9 3/4% and will mature in 2006. The Senior Notes are
guaranteed by the Company's principal subsidiaries. The $100.0 million term
loan was a part of a commitment from a syndicate of financial institutions to
establish a Senior Credit Facility, which consists of the term loan and a $45.0
million revolving credit facility. The term loan bears interest (7.94% at
May 31, 1997), at the option of the Company, at prime to prime plus 0.50% or at
least 1.75% to 2.25% above the one-, two-, three- and six-month reserve adjusted
LIBOR rate, depending on the Company's Debt-to-Capital Ratio (as defined), and
matures on November 30, 2002. Installments of principal and interest are payable
quarterly in an amount that provides for the retirement of $10.0 million in
fiscal 1997, $14.0 million in fiscal 1998, $12.0 million in each of fiscal 1999
through 2002, with a final payment of $28 million due at maturity. The term loan
has no prepayment penalty, is guaranteed by the Company's principal subsidiaries
and is secured by substantially all of the assets of the Company and the assets
and stock of such subsidiaries.
The revolving credit facility is available for working capital
requirements and general corporate purposes. Availability under the revolving
credit facility is subject to certain borrowing base limitations based on 80%
of eligible accounts receivable. All advances to the Company under the
revolving credit facility bear interest, at the option of the Company at prime
to prime plus 0.50% or at least 1.75% to 2.25% above the one-, two-, three- and
six-month reserve adjusted LIBOR rate, depending on the percentage of the
credit used. The revolving credit facility is collateralized by a first lien on
the Company's accounts receivable. The revolving credit facility matures on
December 31, 1998.
Each of the 9 3/4% Senior Notes and the Senior Credit Facility contains
customary affirmative and negative covenants, including restrictions on
incurrence of debt and sales of assets. The Senior Credit Facility prohibits
payment of dividends and the indenture for the Senior Notes restricts the
payment of dividends.
On June 6, 1997, the Company entered into an agreement to acquire
substantially all of the assets of Bolifor, S.A., a Bolivian-owned contractor,
for $25 million. The assets to be acquired include 11 land rigs in Bolivia,
Paraguay and Argentina. Management expects the Bolifor acquisition to close in
July 1997 and be funded out of available cash.
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LIQUIDITY AND CAPITAL RESOURCES (continued)
- -------------------------------
In May 1997, the Company signed definitive agreements to acquire Hercules
Offshore Corporation and Hercules Rig Corp. for $195.0 million in cash. The
Hercules companies own seven jackup rigs and three self-erecting platform rigs
in the Gulf of Mexico and one additional platform rig on bareboat charter to a
firm in Brazil. The transaction is subject to various conditions, including
Malaysian regulatory approval and financing by the Company. The Company
anticipates the transaction will close in the fourth quarter of calendar 1997.
Management anticipates funding the acquisitions through a combination of methods
which may include existing cash, the possible issuance of convertible debt,
borrowings under the current Senior Credit Facility and the issuance of
additional equity securities if necessary or desirable.
With the exception of the acquisition of Hercules, which is expected to be
funded as described above, management believes that the current level of cash
and short-term investments and cash generated from operations should be
sufficient to finance the Company's working capital needs and expected capital
expenditures during the remainder of fiscal 1997 and fiscal 1998. Should new
opportunities requiring capital arise, the Company may utilize the revolving
portion of the Senior Credit Facility or may consider seeking additional equity
or long-term debt financing.
Subsequent Event:
On June 16, 1997, barge Rig 52 incurred a blowout and suffered extensive
damage. Three employees and a third party service representative were killed.
Management is still in the process of determining the amount of salvageable
equipment and the amount of insurance proceeds that will be received. It is too
early for management to make an estimate of possible losses.
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16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Page
Exhibit 10(n) Definitive agreement to acquire Hercules
Offshore Corporation
Exhibit 10(o) Definitive agreement to acquire Hercules Rig
Corp.
Exhibit 15 Letter re Unaudited Interim Financial Information 17
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 May 31, 1997.
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17
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: June 27, 1997
By: /s/ James J. Davis
----------------------------------------
James J. Davis
Senior Vice President-Finance and
Chief Financial Officer
By: /s/ Randy Ellis
----------------------------------------
Randy Ellis
Controller and
Chief Accounting Officer
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18
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
Exhibit 10(n) Definitive agreement to acquire Hercules Offshore Corporation
Exhibit 10(o) Definitive agreement to acquire Hercules Rig Corp.
Exhibit 15 Letter re Unaudited Interim Financial Information
Exhibit 27 Financial Data Schedule (EDGAR version only)