Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
OR
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o |
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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 1-02199
ALLIS-CHALMERS ENERGY INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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39-0126090 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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5075 WESTHEIMER, SUITE 890, HOUSTON, TEXAS
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77056 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer o |
Accelerated filer þ |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
At October 30, 2009 there were 71,382,780 shares of common stock, par value $0.01 per share,
outstanding.
ALLIS-CHALMERS ENERGY INC.
FORM 10-Q
For the Quarterly Period Ended September 30, 2009
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except for share and per share amounts)
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September 30, |
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December 31, |
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2009 |
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2008 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
41,635 |
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$ |
6,866 |
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Trade receivables, net |
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94,335 |
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157,871 |
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Inventories |
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35,197 |
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39,087 |
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Deferred income tax asset |
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4,839 |
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6,176 |
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Prepaid expenses and other |
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15,137 |
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15,238 |
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Total current assets |
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191,143 |
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225,238 |
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Property and equipment, net |
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756,211 |
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760,990 |
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Goodwill |
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41,982 |
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43,273 |
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Other intangible assets, net |
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33,813 |
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37,371 |
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Debt issuance costs, net |
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10,071 |
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12,664 |
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Deferred income tax asset |
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16,284 |
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3,993 |
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Other assets |
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26,965 |
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31,522 |
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Total assets |
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$ |
1,076,469 |
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$ |
1,115,051 |
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Liabilities and Stockholders Equity |
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Current maturities of long-term debt |
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$ |
16,710 |
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$ |
14,617 |
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Trade accounts payable |
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33,392 |
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62,078 |
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Accrued salaries, benefits and payroll taxes |
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21,420 |
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20,192 |
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Accrued interest |
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6,144 |
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18,623 |
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Accrued expenses |
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16,264 |
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26,642 |
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Total current liabilities |
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93,930 |
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142,152 |
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Long-term debt, net of current maturities |
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478,739 |
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579,044 |
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Deferred income tax liability |
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8,113 |
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8,253 |
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Other long-term liabilities |
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1,357 |
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2,193 |
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Total liabilities |
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582,139 |
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731,642 |
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Commitments and contingencies |
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Stockholders Equity |
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Preferred stock, $0.01 par value; liquidation value $1,000 per share
(25,000,000 shares authorized, 36,393 shares issued and outstanding
at September 30, 2009 and no shares issued at December 31, 2008) |
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34,183 |
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Common stock, $0.01 par value (100,000,000 shares authorized;
71,369,780 issued and outstanding at September 30, 2009 and
35,674,742 issued and outstanding at December 31, 2008) |
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714 |
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357 |
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Capital in excess of par value |
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424,024 |
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334,633 |
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Retained earnings |
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35,409 |
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48,419 |
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Total stockholders equity |
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494,330 |
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383,409 |
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Total liabilities and stockholders equity |
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$ |
1,076,469 |
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$ |
1,115,051 |
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The accompanying Notes are an integral part of the Consolidated Condensed Financial Statements.
3
ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, |
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September 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues |
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$ |
120,016 |
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$ |
178,265 |
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$ |
377,624 |
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$ |
494,582 |
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Operating costs and expenses |
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Direct costs |
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90,763 |
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116,921 |
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281,136 |
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319,761 |
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Selling, general and administrative |
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11,430 |
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15,849 |
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40,595 |
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46,162 |
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Loss on asset disposition |
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(166 |
) |
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1,916 |
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(166 |
) |
Depreciation and amortization |
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20,893 |
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16,628 |
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61,819 |
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48,542 |
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Total operating costs and expenses |
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123,086 |
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149,232 |
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385,466 |
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414,299 |
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Income (loss) from operations |
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(3,070 |
) |
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29,033 |
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(7,842 |
) |
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80,283 |
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Other income (expense): |
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Interest expense |
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(10,764 |
) |
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(12,166 |
) |
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(37,492 |
) |
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(36,243 |
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Interest income |
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39 |
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1,457 |
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53 |
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4,147 |
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Gain on debt extinguishment |
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26,365 |
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Other |
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37 |
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115 |
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(231 |
) |
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591 |
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Total other income (expense) |
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(10,688 |
) |
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(10,594 |
) |
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(11,305 |
) |
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(31,505 |
) |
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Income (loss) before income taxes |
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(13,758 |
) |
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18,439 |
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(19,147 |
) |
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48,778 |
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Provision for income taxes |
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4,108 |
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(6,127 |
) |
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6,802 |
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(17,858 |
) |
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Net income (loss) |
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(9,650 |
) |
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12,312 |
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(12,345 |
) |
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30,920 |
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Preferred stock dividend |
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(630 |
) |
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(665 |
) |
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Net income (loss) attributed
to common stockholders |
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$ |
(10,280 |
) |
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$ |
12,312 |
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$ |
(13,010 |
) |
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$ |
30,920 |
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Net income (loss) per common share: |
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Basic |
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$ |
(0.14 |
) |
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$ |
0.35 |
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$ |
(0.27 |
) |
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$ |
0.88 |
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Diluted |
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$ |
(0.14 |
) |
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$ |
0.35 |
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$ |
(0.27 |
) |
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$ |
0.87 |
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Weighted average shares outstanding: |
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Basic |
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70,945 |
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35,156 |
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47,834 |
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35,004 |
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Diluted |
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70,945 |
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35,551 |
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47,834 |
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|
35,455 |
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The accompanying Notes are an integral part of the Consolidated Condensed Financial Statements.
4
ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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For the Nine Months Ended |
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September 30, |
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2009 |
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2008 |
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Cash Flows from Operating Activities: |
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Net income (loss) |
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$ |
(12,345 |
) |
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$ |
30,920 |
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Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
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Depreciation and amortization |
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61,819 |
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48,542 |
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Amortization and write-off of debt issuance costs |
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1,691 |
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1,563 |
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Stock-based compensation |
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3,580 |
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6,212 |
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Allowance for bad debts |
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4,065 |
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1,505 |
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Deferred taxes |
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(11,094 |
) |
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4,315 |
|
Gain on sale of property and equipment |
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(1,180 |
) |
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(1,206 |
) |
Loss (gain) on asset disposition |
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1,916 |
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(166 |
) |
Gain on debt extinguishment |
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(26,365 |
) |
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Changes in operating assets and liabilities: |
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Decrease (increase) in trade receivable |
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59,471 |
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(30,642 |
) |
Decrease (increase) in inventories |
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3,890 |
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(6,961 |
) |
Decrease in prepaid expenses and other current assets |
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3,290 |
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|
544 |
|
Decrease (increase) in other assets |
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1,535 |
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(2,271 |
) |
Increase (decrease) in trade accounts payable |
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(29,035 |
) |
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16,590 |
|
(Decrease) in accrued interest |
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(12,479 |
) |
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(10,843 |
) |
Increase (decrease) in accrued expenses |
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(11,632 |
) |
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|
12,083 |
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Increase in accrued salaries, benefits and payroll taxes |
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1,228 |
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|
4,780 |
|
(Decrease) in other long-term liabilities |
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(836 |
) |
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(682 |
) |
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Net Cash Provided By Operating Activities |
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37,519 |
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|
74,283 |
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Cash Flows from Investing Activities: |
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Investment in note receivable |
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(40,000 |
) |
Deposits on asset commitments |
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|
7,054 |
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(9,219 |
) |
Purchase of investment interests |
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(1,102 |
) |
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|
(5,763 |
) |
Proceeds from sale of property and equipment |
|
|
7,980 |
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|
6,004 |
|
Proceeds from assets dispositions |
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|
3,916 |
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|
3,000 |
|
Purchase of property and equipment |
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|
(67,266 |
) |
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|
(117,835 |
) |
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Net Cash Used In Investing Activities |
|
|
(49,418 |
) |
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|
(163,813 |
) |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of stock, net |
|
|
120,337 |
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|
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|
Net proceeds from stock incentive plans |
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|
14 |
|
|
|
633 |
|
Proceeds from long-term debt |
|
|
25,000 |
|
|
|
20,001 |
|
Net borrowings (repayments) under line of credit |
|
|
(36,500 |
) |
|
|
38,500 |
|
Payments on long-term debt |
|
|
(61,539 |
) |
|
|
(6,451 |
) |
Tax benefits on stock-based compensation plans |
|
|
|
|
|
|
73 |
|
Debt issuance costs |
|
|
(644 |
) |
|
|
(109 |
) |
|
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|
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|
|
|
|
|
|
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|
|
|
Net Cash Provided By Financing Activities |
|
|
46,668 |
|
|
|
52,647 |
|
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|
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|
Net change in cash and cash equivalents |
|
|
34,769 |
|
|
|
(36,883 |
) |
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|
Cash and cash equivalents at beginning of period |
|
|
6,866 |
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|
43,693 |
|
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Cash and cash equivalents at end of period |
|
$ |
41,635 |
|
|
$ |
6,810 |
|
|
|
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|
The accompanying Notes are an integral part of the Consolidated Condensed Financial Statements.
5
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Allis-Chalmers Energy Inc. and subsidiaries (Allis-Chalmers, we, our or us) is a
multi-faceted oilfield service company that provides services and equipment to oil and natural gas
exploration and production companies, throughout the United States including Texas, Louisiana,
Arkansas, Pennsylvania, Oklahoma, New Mexico, offshore in the Gulf of Mexico, and internationally,
primarily in Argentina, Brazil, Bolivia and Mexico. We operate in three sectors of the oil and
natural gas service industry: Oilfield Services; Drilling and Completion and Rental Services.
We derive operating revenues from rates per day and rates per job that we charge for the labor and
equipment required to provide a service and rates per day for equipment and tools that we rent to
our customers. The price we charge for our services depends upon several factors, including the
level of oil and natural gas drilling activity and the competitive environment in the particular
geographic regions in which we operate. Contracts are awarded based on price, quality of service
and equipment and general reputation and experience of our personnel. The principal operating
costs are direct and indirect labor and benefits, repairs and maintenance of our equipment,
insurance, equipment rentals, fuel, depreciation and general and administrative expenses.
Basis of Presentation
Our unaudited consolidated condensed financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC.
Accordingly, certain information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed or omitted. We
believe that the presentations and disclosures herein are adequate to make the information not
misleading. The unaudited consolidated condensed financial statements reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the interim
periods. These unaudited consolidated condensed financial statements should be read in conjunction
with our audited consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2008. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full year.
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Future events and their effects cannot be perceived with certainty. Accordingly, our
accounting estimates require the exercise of judgment. While management believes that the
estimates and assumptions used in the preparation of the consolidated financial statements are
appropriate, actual results could differ from those estimates. Estimates are used for, but are not
limited to, determining the following: allowance for doubtful accounts, recoverability of
long-lived assets and intangibles, useful lives used in depreciation and amortization, income taxes
and valuation allowances. The accounting estimates used in the preparation of the consolidated
financial statements may change as new events occur, as more experience is acquired, as additional
information is obtained and as our operating environment changes.
We have evaluated subsequent events through November 5, 2009, up to the time of filing this Form
10-Q with the SEC.
Financial Instruments
Financial instruments consist of cash and cash equivalents, accounts receivable and payable, and
debt. The carrying value of cash and cash equivalents and accounts receivable and payable
approximate fair value due to their short-term nature. We believe the fair values and the carrying
value of our debt, excluding the senior notes, would not be materially different due to the
instruments interest rates approximating market rates for similar borrowings at September 30,
2009. Our senior notes, in the approximate aggregate amount of $430.2 million, trade over the
counter in limited amounts and on an infrequent basis. Based on those trades we estimate the fair
value of our senior notes to be approximately $326.6 million at September 30, 2009. The price at
which our senior notes trade is based on many factors such as the level of interest rates, the
economic environment, the outlook for the oilfield services industry and the perceived credit risk.
6
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassification
Certain reclassifications have been made to the prior years consolidated condensed financial
statements to conform with the current period presentation.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board, or FASB, issued new accounting
guidance related to fair value measurements and related disclosures. This new guidance defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. Subsequently, the FASB provided for a one-year deferral of the provisions as
it relates to fair value measurement requirements for non-financial assets and liabilities that are
recognized or disclosed at fair value in the consolidated financial statements on a non-recurring
basis. We adopted these provisions on January 1, 2008, except as they relate to nonfinancial
assets and liabilities, which were adopted on January 1, 2009 and neither adoption had any impact
on our financial position or results of operations.
In December 2007, the FASB issued new accounting guidance related to the accounting for business
combinations and related disclosures. This guidance changes the requirements for an acquirers
recognition and measurement of the assets acquired and the liabilities assumed in a business
combination. Additionally, the guidance requires that acquisition-related costs, including
restructuring costs, be recognized as expense separately from the acquisition. We adopted this
guidance on January 1, 2009 and the guidance will be applied prospectively to all business
combinations subsequent to the effective date.
In April 2009, the FASB further updated the fair value measurement standard to provide additional
guidance for estimating fair value when the volume and level of activity for the asset or liability
have significantly decreased. This update re-emphasizes that regardless of market conditions the
fair value measurement is an exit price concept as defined in the original standard. It clarifies
and includes additional factors to consider in determining whether there has been a significant
decrease in market activity for an asset or liability and provides additional clarification on
estimating fair value when the market activity for an asset or liability has declined
significantly. We adopted this update on April 1, 2009 and there was no impact on our financial
position or results of operations.
In April 2009, the FASB issued new accounting guidance related to interim disclosures on the fair
value of financial instruments. This guidance requires disclosures about the fair value of
financial instruments whenever a public company issues financial information for interim reporting
periods. We adopted the additional disclosure requirements in our June 30, 2009 financial
statements and there was no impact on our financial position or results of operations.
In May 2009, the FASB issued new accounting guidance that establishes general standards of
accounting for and disclosures of events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued. It requires the disclosure of the
date through which an entity has evaluated subsequent events. We adopted this guidance for the
period ending June 30, 2009, which did not have an impact on our financial position or results of
operations.
In June 2009, the FASB issued new accounting guidance related to variable interest entities and to
provide more relevant and reliable information to users of financial statements. The guidance
requires an analysis to determine whether an entity is a variable interest entity and requires an
enterprise to perform an analysis to determine whether the enterprises variable interest or
interests give it a controlling financial interest. The guidance also requires an ongoing
reassessment and eliminates the quantitative approach previously required for determining whether
an entity is the primary beneficiary. This guidance is effective for annual reporting periods
beginning after November 15, 2009. We are currently evaluating the impact the adoption of this
guidance will have on our financial position and operating results.
7
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In August 2009, FASB further updated the fair value measurement guidance to clarify how an entity
should measure liabilities at fair value. The update reaffirms fair value is based on an orderly
transaction between market participants, even though liabilities are infrequently transferred due
to contractual or other legal restrictions. However, identical liabilities traded in the active
market should be used when available. When quoted prices are not available, the quoted price of
the identical liability traded as an asset, quoted prices for similar liabilities or similar
liabilities traded as an asset, or another valuation approach should be used. This update also
clarifies that restrictions preventing the transfer of a liability should not be considered as a
separate input or adjustment in the measurement of fair value. This update is effective for our
fourth quarter 2009 and we are currently evaluating the impact the adoption of this guidance will
have on our financial position and operating results.
In October 2009, the FASB issued an update to existing guidance on revenue recognition for
arrangements with multiple deliverables. This update will allow companies to allocate
consideration received for qualified separate deliverables using estimated selling price for both
delivered and undelivered items when vendor-specific objective evidence or third-party evidence is
unavailable. This update requires expanded qualitative and quantitative disclosures and is
effective for fiscal years beginning on or after June 15, 2010. However, companies may elect to
adopt as early as interim periods ended September 30, 2009. This update may be applied either
prospectively from the beginning of the fiscal year for new or materially modified arrangements or
retrospectively. We are currently evaluating both the timing and impact of adopting this update on
our consolidated financial statements.
NOTE 2 STOCK-BASED COMPENSATION
Our net income (loss) for the three months ended September 30, 2009 and 2008 includes approximately
$1.2 million and $1.8 million, respectively of compensation costs related to share-based payments.
Our net income (loss) for the nine months ended September 30, 2009 and 2008 includes approximately
$3.6 million and $6.2 million, respectively, of compensation costs related to share-based payments.
As of September 30, 2009 there was $0.8 million of unrecognized compensation expense related to
non-vested stock option grants. We expect approximately $228,000 to be recognized over the
remainder of 2009 and approximately $539,000, $28,000 and $5,000 to be recognized during the years
ended 2010, 2011 and 2012, respectively.
A summary of our stock option activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
Shares |
|
Average |
|
Average |
|
Aggregate |
|
|
Under |
|
Exercise |
|
Contractual |
|
Intrinsic Value |
|
|
Option |
|
Price |
|
Life (Years) |
|
(millions) |
Balance at December 31, 2008 |
|
|
901,732 |
|
|
$ |
10.95 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
125,000 |
|
|
|
1.23 |
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(305,000 |
) |
|
|
18.18 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(7,000 |
) |
|
|
2.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2009 |
|
|
714,732 |
|
|
$ |
6.25 |
|
|
|
6.33 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2009 |
|
|
589,732 |
|
|
$ |
7.31 |
|
|
|
5.68 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the
difference between the closing price of our common stock on the last trading day of the third
quarter of 2009 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by the option holders had all option holders exercised their options on
September 30, 2009.
8
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 2 STOCK-BASED COMPENSATION (Continued)
We utilize the Black-Scholes model to determine fair value, which incorporates assumptions to value
stock-based awards. The dividend yield on our common stock is assumed to be zero as we have
historically not paid dividends and have no current plans to do so in the future. The expected
volatility is based on historical volatility of our common stock. The risk-free interest rate is
the related United States Treasury yield curve for periods within the expected term of the option
at the time of grant. We estimate forfeiture rates based on our historical experience. The
following summarizes the assumptions used for the options granted in the nine months ended
September 30, 2009 Black-Scholes model:
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
September 30, 2009 |
Expected dividend yield |
|
|
|
|
Expected price volatility |
|
|
77.32 |
% |
Risk free interest rate |
|
|
1.37 |
% |
Expected life of options |
|
5 |
years |
Weighted
average fair value of options granted at market value |
|
$ |
0.77 |
|
No options were granted during the three months ended September 30, 2009 or for the nine months
ended September 30, 2008.
Restricted stock awards, or RSAs, activity during the nine months ended September 30, 2009 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Number of |
|
|
Grant-Date Fair Value |
|
|
|
Shares |
|
|
Per Share |
|
Nonvested at December 31, 2008 |
|
|
953,102 |
|
|
$ |
15.34 |
|
Granted |
|
|
17,000 |
|
|
|
1.23 |
|
Vested |
|
|
(60,373 |
) |
|
|
14.94 |
|
Forfeited |
|
|
(10,200 |
) |
|
|
12.05 |
|
|
|
|
|
|
|
|
Nonvested at September 30, 2009 |
|
|
899,529 |
|
|
$ |
15.14 |
|
|
|
|
|
|
|
|
|
We determine the fair value of RSAs based on the market price of our common stock on the date of
grant. Compensation cost for RSAs is primarily recognized on a straight-line basis over the
vesting or service period and is net of forfeitures. As of September 30, 2009, there was
$5.8 million of total unrecognized compensation cost related to nonvested RSAs. We expect
approximately $1.0 million to be recognized over the remainder of 2009 and approximately $3.4
million, $1.2 million and $195,000 to be recognized during the years ended 2010, 2011 and 2012,
respectively.
NOTE 3 INVENTORIES
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Manufactured |
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
3,306 |
|
|
$ |
2,821 |
|
Work in process |
|
|
2,048 |
|
|
|
1,654 |
|
Raw materials |
|
|
1,277 |
|
|
|
2,499 |
|
|
|
|
|
|
|
|
Total manufactured |
|
|
6,631 |
|
|
|
6,974 |
|
Rig parts and related inventory |
|
|
10,490 |
|
|
|
13,097 |
|
Shop supplies and related inventory |
|
|
7,676 |
|
|
|
7,778 |
|
Chemicals and drilling fluids |
|
|
4,861 |
|
|
|
3,698 |
|
Rental supplies |
|
|
2,344 |
|
|
|
3,023 |
|
Hammers |
|
|
2,023 |
|
|
|
2,257 |
|
Coiled tubing and related inventory |
|
|
937 |
|
|
|
1,817 |
|
Drive pipe |
|
|
235 |
|
|
|
443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
35,197 |
|
|
$ |
39,087 |
|
|
|
|
|
|
|
|
9
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE
4 GOODWILL AND INTANGIBLE ASSETS
In accordance with generally accepted accounting principles in the United States, goodwill and
indefinite-lived intangible assets are not permitted to be amortized. Goodwill and
indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an
annual basis, or when there is reason to suspect that their values may have been diminished or
impaired. Goodwill and indefinite-lived intangible assets listed on the balance sheet totaled
$42.0 million and $43.3 million at September 30, 2009 and December 31, 2008, respectively. Based
on impairment testing performed during 2008 these assets were impaired to their current carrying
values.
Intangible assets with definite lives continue to be amortized over their estimated useful lives.
Definite-lived intangible assets that continue to be amortized relate to our purchase of
customer-related and marketing-related intangibles. These intangibles have useful lives ranging
from five to twenty years. Amortization of intangible assets for the three and nine months ended
September 30, 2009 were $1.2 million and $3.6 million, respectively, compared to $1.0 million and
$3.2 million for the same periods in the prior year. At September 30, 2009, intangible assets
totaled $33.8 million, net of $12.8 million of accumulated amortization.
NOTE
5 DEBT
Our long-term debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Senior notes |
|
$ |
430,238 |
|
|
$ |
505,000 |
|
Term loans |
|
|
62,838 |
|
|
|
49,609 |
|
Revolving line of credit |
|
|
|
|
|
|
36,500 |
|
Seller notes |
|
|
|
|
|
|
750 |
|
Notes payable to former directors |
|
|
|
|
|
|
32 |
|
Insurance premium financing |
|
|
1,982 |
|
|
|
991 |
|
Capital lease obligations |
|
|
391 |
|
|
|
779 |
|
|
|
|
|
|
|
|
Total debt |
|
|
495,449 |
|
|
|
593,661 |
|
Less: current maturities |
|
|
16,710 |
|
|
|
14,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities |
|
$ |
478,739 |
|
|
$ |
579,044 |
|
|
|
|
|
|
|
|
Senior notes, bank loans and line of credit agreements
On January 18, 2006 and August 14, 2006, we closed on private offerings, to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, of $160.0 and $95.0 million
aggregate principal amount of our senior notes, respectively. The senior notes are due January 15,
2014 and bear interest at 9.0%. The proceeds were used to fund the acquisitions of Specialty
Rental Tools, Inc. and DLS Drilling, Logistics & Services Company, or DLS, to repay existing debt
and for general corporate purposes. On June 29, 2009, we closed on a tender offer in which we
purchased $30.6 million aggregate principal of our 9.0% senior notes for a total consideration of
$650 per $1,000 principal amount.
In January 2007, we closed on a private offering, to qualified institutional buyers pursuant to
Rule 144A under the Securities Act, of $250.0 million principal amount of 8.5% senior notes due
2017. The proceeds of the senior notes offering, together with a portion of the proceeds of our
concurrent common stock offering, were used to repay the debt outstanding under our $300.0 million
bridge loan facility which we incurred to finance our acquisition of substantially all the assets
of Oil & Gas Rental Services, Inc. On June 29, 2009, we closed on a tender offer in which we
purchased $44.2 million aggregate principal of our 8.5% senior notes for a total consideration of
$600 per $1,000 principal amount.
10
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 5 DEBT (Continued)
On January 18, 2006, we also executed an amended and restated credit agreement which provided for a
$25.0 million revolving line of credit with a maturity of January 2010. On April 26, 2007, we
entered into a Second Amended and Restated Credit Agreement, which increased our revolving line of
credit to $62.0 million, and had a final maturity date of April 26, 2012. On December 3, 2007, we
entered into a First Amendment to Second Amended and Restated Credit Agreement, which increased our
revolving line of credit to $90.0 million. The amended and restated credit agreement contains
customary events of default and financial covenants and limits our ability to incur additional
indebtedness, make capital expenditures, pay dividends or make other distributions, create liens
and sell assets. Our obligations under the amended and restated credit agreement are secured by
substantially all of our assets located in the United States. On April 9, 2009, we entered into a
Third Amendment to our existing Second Amended and Restated Credit Agreement dated as of April 26,
2007 which modified the leverage ratio and interest coverage ratio covenants of the Credit
Agreement. In addition, permitted maximum capital expenditures were reduced to $85.0 million for
2009 compared to the previous limit of $120.0 million, which is consistent with our previously
announced plans to limit capital expenditures for the year. We were in compliance with all debt
covenants as of September 30, 2009 and December 31, 2008. As of September 30, 2009, we had no
borrowings under the facility and at December 31, 2008 we had $36.5 million of borrowings
outstanding. Availability under the facility was reduced by outstanding letters of credit of $4.3
million and $5.8 million at September 30, 2009 and December 31, 2008, respectively. The credit
agreement loan rates are based on prime or LIBOR plus a margin. The weighted average interest rate
was 4.6% at December 31, 2008.
As part of our acquisition of DLS, we assumed various bank loans with floating interest rates based
on LIBOR plus a margin and terms ranging from 2 to 5 years. The weighted average interest rate on
these loans was 2.2% and 5.1% as of September 30, 2009 and December 31, 2008, respectively. The
outstanding amount due as of September 30, 2009 and December 31, 2008 was $1.2 million and $2.5
million, respectively.
On February 15, 2008, through our DLS subsidiary in Argentina, we entered into a $25.0 million
import finance facility with a bank. Borrowings under this facility were used to fund a portion of
the purchase price of the new drilling and service rigs ordered for our Drilling and Completion
segment. The loan is repayable over four years in equal semi-annual installments beginning one
year after each disbursement with the final principal payment due not later than March 15, 2013.
The import finance facility is unsecured and contains customary events of default and financial
covenants and limits DLS ability to incur additional indebtedness, make capital expenditures,
create liens and sell assets. We were in compliance with all debt covenants as of September 30,
2009 and December 31, 2008. The bank loan interest rates are based on LIBOR plus a margin. The
weighted average interest rate was 4.8% and 6.9% at September 30, 2009 and December 31, 2008,
respectively. The outstanding amount as of September 30, 2009 and December 31, 2008 was $21.3
million and $25.0 million, respectively.
As part of our acquisition of BCH Ltd, or BCH, we assumed a $23.6 million term loan credit facility
with a bank. The credit agreement is dated June 2007 and contains customary events of default and
financial covenants. Obligations under the facility are secured by substantially all of the BCH
assets. The facility is repayable in quarterly principal installments plus interest with the final
payment due not later than August 2012. We were in compliance with all debt covenants as of
September 30, 2009 and December 31, 2008. The credit facility loan interest rates are based on
LIBOR plus a margin. At September 30, 2009 and December 31, 2008, the outstanding amount of the
loan was $16.2 million and $22.1 million and the interest rate was 3.8% and 6.0%, respectively.
On May 22, 2009, we drew down $25.0 million on a new term loan credit facility with a lending
institution. The facility was utilized to fund a portion of the purchase price of two new drilling
rigs. The loan is secured by the equipment. The facility is repayable in quarterly installments
of approximately $1.4 million of principal and interest and matures in May 2015. The loan bears
interest at a fixed rate of 9.0%. At September 30, 2009, the outstanding amount of the loan was
$24.2 million.
Notes payable
In connection with the acquisition of Rogers Oil Tools, Inc., we issued to the seller a note in the
amount of $750,000. The note bore interest at 5.0% and was paid in full in April 2009 in
accordance with its terms.
In 2000, we compensated directors, who served on the board of directors from 1989 to June 30, 1999
without compensation, by issuing promissory notes totaling $325,000. The notes bore interest at
the rate of 5.0%. As of September 30, 2009 and December 31, 2008, the principal and accrued
interest on these notes totaled approximately $0 and $32,000, respectively.
11
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 5 DEBT (Continued)
In April 2008 and August 2008, we obtained insurance premium financings in the aggregate amount of
$3.0 million with a fixed average weighted interest rate of 4.9%. Under terms of the agreements,
amounts outstanding are paid over 10 and 11 month repayment schedules. The outstanding balance of
these notes was approximately $0 and $991,000 at September 30, 2009 and December 31, 2008,
respectively. In 2009, we obtained insurance premium financings in the aggregate amount of $3.2
million with a fixed average weighted interest rate of 4.8%. Under terms of the agreements, the
amount outstanding is paid over 10 and 11 month repayment schedules. The outstanding balance of
these notes was approximately $2.0 million as of September 30, 2009.
Other debt
As part of our acquisition of BCH, we assumed various capital leases with terms of two to three
years. The outstanding balance under these capital leases was $391,000 at September 30, 2009 and
$779,000 at December 31, 2008.
NOTE 6 STOCKHOLDERS EQUITY
We recognized approximately $3.6 million of compensation expense related to share-based payments in
the first nine months of 2009 that was recorded as capital in excess of par value (see Note 2).
In June 2009, we closed our backstopped rights offering and private placement of convertible
preferred stock and received proceeds of approximately $120.3 million net of $5.3 million offering
expenses. Pursuant to an Investment Agreement, Lime Rock Partners V, L.P., or Lime Rock, agreed to
backstop the rights offering by purchasing, at the subscription price, shares of common stock not
purchased by our existing stockholders. We sold 15,794,644 shares of our common stock to existing
stockholders who exercised their rights through the rights offering and 19,889,044 shares of common
stock to Lime Rock, at a price of $2.50 per share. We issued 36,393 shares of 7.0% convertible
perpetual preferred stock to Lime Rock and received proceeds of approximately $34.2 million net of
$2.2 million offering expenses.
The preferred stock has an initial liquidation preference of $1,000 per share and is adjusted to
$3,000 per share solely upon ordinary liquidation events. Dividends on the preferred stock are
declared quarterly if approved by our Board of Directors and dividends accumulate if not paid. The
preferred stock is, with respect to dividend rights and rights upon liquidation, winding-up, or
dissolution: (1) senior to common stock; (2) on a parity with any class of capital stock
established after the original issue date when the terms of which provide that it will rank on a
parity with the preferred stock; (3) junior to each class of capital stock or series of preferred
stock established after the original issue date when the terms of such issuance expressly provide
that it will rank senior to the preferred stock; and (4) junior to all our existing and future debt
obligations and other liabilities, including claims of trade creditors.
Each share of the preferred stock is convertible at the holders option, at any time into 390.2439
shares of our common stock under certain conditions, subject to specified adjustments. This
conversion rate represents an equivalent conversion price of approximately $2.56 per share.
Conversion is limited to the earlier of June 26, 2012 or the date on which the transfer
restrictions included in the Investment Agreement expire, unless immediately after giving effect to
such conversion, such person or group would not beneficially own a number of shares of our common
stock exceeding 35% of the total number of issued and outstanding shares of common stock, unless we
have given prior written consent to such conversion. In addition, we will be able to cause the
preferred stock to be converted into common stock five years after issuance if our common stock is
trading at a premium of 300% to the conversion price for 30 consecutive trading days prior to our
issuance of a press release announcing the mandatory conversion. Generally, the preferred stock
vote together with the common stock on an as-converted basis, however, the preferred stock voting
rights held by any person or group when aggregated with common stock would be limited to 35% of all
the votes to be cast by all stockholders, including holders of common stock.
NOTE 7 ASSET DISPOSITIONS
During the nine months ended September 30, 2009, we recorded a $1.9 million loss on asset
disposition in our Drilling and Completion segment. The insurance proceeds related to damages
incurred on a blow-out which destroyed one of our drilling rigs were not sufficient to cover the
book value of the rig and related assets.
12
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 7 ASSET DISPOSITIONS (Continued)
Effective August 1, 2008, we sold our drill pipe tong manufacturing assets for approximately $7.5
million. We received cash of approximately $2.0 million at the time of the sale, a 90-day note for
$1.0 million and a 10 year non-interest bearing note for $4.5 million. Repayment on the 10 year
note is tied to various performance targets and we have assigned a fair value of approximately $3.1
million to this note. We reported a gain of approximately $166,000 on this transaction. The
assets sold represented a small portion of our Oilfield Services segment.
NOTE 8 GAIN ON DEBT EXTINGUISHMENT
We recorded a gain of $26.4 million as a result of a tender offer that we completed on June 29,
2009. We purchased $30.6 million aggregate principal of our 9.0% senior notes and $44.2 million
aggregate principal of our 8.5% senior notes for approximately $46.4 million. We also wrote-off
$1.5 million of debt issuance costs related to the retired notes and we incurred approximately
$466,000 in expenses related to the transactions.
NOTE 9 INCOME (LOSS) PER COMMON SHARE
Basic earnings per share are computed on the basis of the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per share is similar to basic
earnings per share, but presents the dilutive effect on a per share basis of potential common
shares (e.g., convertible preferred stock, stock options, etc.) as if they had been converted. The
components of basic and diluted earnings per share are as follows (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(9,650 |
) |
|
$ |
12,312 |
|
|
$ |
(12,345 |
) |
|
$ |
30,920 |
|
Preferred stock dividend |
|
|
(630 |
) |
|
|
|
|
|
|
(665 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to common
stockholders |
|
$ |
(10,280 |
) |
|
$ |
12,312 |
|
|
$ |
(13,010 |
) |
|
$ |
30,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding excluding nonvested
restricted stock |
|
|
70,945 |
|
|
|
35,156 |
|
|
|
47,834 |
|
|
|
35,004 |
|
Effect of potentially dilutive common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants and employee and director
stock options and restricted shares |
|
|
|
|
|
|
395 |
|
|
|
|
|
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding and assumed conversions |
|
|
70,945 |
|
|
|
35,551 |
|
|
|
47,834 |
|
|
|
35,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.14 |
) |
|
$ |
0.35 |
|
|
$ |
(0.27 |
) |
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.14 |
) |
|
$ |
0.35 |
|
|
$ |
(0.27 |
) |
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potentially dilutive securities excluded
as anti-dilutive |
|
|
15,016 |
|
|
|
786 |
|
|
|
15,557 |
|
|
|
776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock and share based compensation shares of approximately 14.5 million and
5.1 million were excluded in the computation of diluted earnings per share for the three and nine
months ended September 30, 2009, respectively as the effect would have been anti-dilutive (e.g.,
those that increase income per share) due to the net loss for the period.
13
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 10 SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
Cash paid for interest and income taxes: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
48,631 |
|
|
$ |
45,904 |
|
Income taxes |
|
|
3,963 |
|
|
|
16,564 |
|
|
|
|
|
|
|
|
|
|
Non-cash activities: |
|
|
|
|
|
|
|
|
Insurance premium financed |
|
$ |
3,204 |
|
|
$ |
2,995 |
|
Assets transferred to joint venture investment |
|
|
1,639 |
|
|
|
|
|
Preferred stock dividend |
|
|
665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transaction in connection with asset disposition: |
|
|
|
|
|
|
|
|
Value on goodwill and other intangibles disposed |
|
$ |
|
|
|
$ |
2,246 |
|
Value of inventory financed |
|
|
|
|
|
|
509 |
|
Value of property and equipment disposed |
|
|
|
|
|
|
337 |
|
Accrued expenses |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
Fair value of note receivable |
|
$ |
|
|
|
$ |
3,102 |
|
|
|
|
|
|
|
|
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Set forth on the following pages are the condensed consolidating financial statements of (i)
Allis-Chalmers Energy Inc., (ii) its subsidiaries that are guarantors of the senior notes and
revolving credit facility and (iii) the subsidiaries that are not guarantors of the senior notes
and revolving credit facility (in thousands, except for share and per share amounts).
14
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2009 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Non-Guarantors |
|
|
Adjustments |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
29,181 |
|
|
$ |
12,454 |
|
|
$ |
|
|
|
$ |
41,635 |
|
Trade receivables, net |
|
|
|
|
|
|
44,002 |
|
|
|
52,690 |
|
|
|
(2,357 |
) |
|
|
94,335 |
|
Inventories |
|
|
|
|
|
|
16,761 |
|
|
|
18,436 |
|
|
|
|
|
|
|
35,197 |
|
Intercompany receivables |
|
|
|
|
|
|
71,314 |
|
|
|
|
|
|
|
(71,314 |
) |
|
|
|
|
Note receivable from affiliate |
|
|
24,209 |
|
|
|
|
|
|
|
|
|
|
|
(24,209 |
) |
|
|
|
|
Prepaid expenses and other |
|
|
701 |
|
|
|
8,790 |
|
|
|
10,485 |
|
|
|
|
|
|
|
19,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
24,910 |
|
|
|
170,048 |
|
|
|
94,065 |
|
|
|
(97,880 |
) |
|
|
191,143 |
|
Property and equipment, net |
|
|
|
|
|
|
502,293 |
|
|
|
253,918 |
|
|
|
|
|
|
|
756,211 |
|
Goodwill |
|
|
|
|
|
|
23,251 |
|
|
|
18,731 |
|
|
|
|
|
|
|
41,982 |
|
Other intangible assets, net |
|
|
471 |
|
|
|
26,202 |
|
|
|
7,140 |
|
|
|
|
|
|
|
33,813 |
|
Debt issuance costs, net |
|
|
9,927 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
10,071 |
|
Note receivable from affiliates |
|
|
5,823 |
|
|
|
|
|
|
|
|
|
|
|
(5,823 |
) |
|
|
|
|
Investments in affiliates |
|
|
940,226 |
|
|
|
|
|
|
|
|
|
|
|
(940,226 |
) |
|
|
|
|
Other assets |
|
|
20,160 |
|
|
|
20,851 |
|
|
|
2,238 |
|
|
|
|
|
|
|
43,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,001,517 |
|
|
$ |
742,789 |
|
|
$ |
376,092 |
|
|
$ |
(1,043,929 |
) |
|
$ |
1,076,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
|
|
|
$ |
5,353 |
|
|
$ |
11,357 |
|
|
$ |
|
|
|
$ |
16,710 |
|
Trade accounts payable |
|
|
|
|
|
|
11,615 |
|
|
|
24,134 |
|
|
|
(2,357 |
) |
|
|
33,392 |
|
Accrued salaries, benefits and
payroll taxes |
|
|
|
|
|
|
1,883 |
|
|
|
19,537 |
|
|
|
|
|
|
|
21,420 |
|
Accrued interest |
|
|
5,684 |
|
|
|
236 |
|
|
|
224 |
|
|
|
|
|
|
|
6,144 |
|
Accrued expenses |
|
|
1,112 |
|
|
|
8,918 |
|
|
|
6,234 |
|
|
|
|
|
|
|
16,264 |
|
Intercompany payables |
|
|
70,153 |
|
|
|
|
|
|
|
1,161 |
|
|
|
(71,314 |
) |
|
|
|
|
Note payable to affiliate |
|
|
|
|
|
|
|
|
|
|
24,209 |
|
|
|
(24,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
76,949 |
|
|
|
28,005 |
|
|
|
86,856 |
|
|
|
(97,880 |
) |
|
|
93,930 |
|
Long-term debt, net of current
maturities |
|
|
430,238 |
|
|
|
20,832 |
|
|
|
27,669 |
|
|
|
|
|
|
|
478,739 |
|
Note payable to affiliate |
|
|
|
|
|
|
|
|
|
|
5,823 |
|
|
|
(5,823 |
) |
|
|
|
|
Deferred income tax liability |
|
|
|
|
|
|
|
|
|
|
8,113 |
|
|
|
|
|
|
|
8,113 |
|
Other long-term liabilities |
|
|
|
|
|
|
7 |
|
|
|
1,350 |
|
|
|
|
|
|
|
1,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
507,187 |
|
|
|
48,844 |
|
|
|
129,811 |
|
|
|
(103,703 |
) |
|
|
582,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
34,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,183 |
|
Common stock |
|
|
714 |
|
|
|
3,526 |
|
|
|
42,963 |
|
|
|
(46,489 |
) |
|
|
714 |
|
Capital in excess of par value |
|
|
424,024 |
|
|
|
570,512 |
|
|
|
137,439 |
|
|
|
(707,951 |
) |
|
|
424,024 |
|
Retained earnings |
|
|
35,409 |
|
|
|
119,907 |
|
|
|
65,879 |
|
|
|
(185,786 |
) |
|
|
35,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
494,330 |
|
|
|
693,945 |
|
|
|
246,281 |
|
|
|
(940,226 |
) |
|
|
494,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity |
|
$ |
1,001,517 |
|
|
$ |
742,789 |
|
|
$ |
376,092 |
|
|
$ |
(1,043,929 |
) |
|
$ |
1,076,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2009 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Non-Guarantors |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
154,502 |
|
|
$ |
225,013 |
|
|
$ |
(1,891 |
) |
|
$ |
377,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
101,284 |
|
|
|
181,743 |
|
|
|
(1,891 |
) |
|
|
281,136 |
|
Selling, general and
administrative |
|
|
3,029 |
|
|
|
27,199 |
|
|
|
10,367 |
|
|
|
|
|
|
|
40,595 |
|
Loss on asset disposition |
|
|
|
|
|
|
|
|
|
|
1,916 |
|
|
|
|
|
|
|
1,916 |
|
Depreciation and
amortization |
|
|
35 |
|
|
|
45,629 |
|
|
|
16,155 |
|
|
|
|
|
|
|
61,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses |
|
|
3,064 |
|
|
|
174,112 |
|
|
|
210,181 |
|
|
|
(1,891 |
) |
|
|
385,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
(3,064 |
) |
|
|
(19,610 |
) |
|
|
14,832 |
|
|
|
|
|
|
|
(7,842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in
affiliates, net of tax |
|
|
(1,101 |
) |
|
|
|
|
|
|
|
|
|
|
1,101 |
|
|
|
|
|
Interest, net |
|
|
(34,595 |
) |
|
|
24 |
|
|
|
(2,868 |
) |
|
|
|
|
|
|
(37,439 |
) |
Gain on debt
extinguishment |
|
|
26,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,365 |
|
Other |
|
|
50 |
|
|
|
(103 |
) |
|
|
(178 |
) |
|
|
|
|
|
|
(231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense) |
|
|
(9,281 |
) |
|
|
(79 |
) |
|
|
(3,046 |
) |
|
|
1,101 |
|
|
|
(11,305 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)before
income taxes |
|
|
(12,345 |
) |
|
|
(19,689 |
) |
|
|
11,786 |
|
|
|
1,101 |
|
|
|
(19,147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
10,517 |
|
|
|
(3,715 |
) |
|
|
|
|
|
|
6,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(12,345 |
) |
|
|
(9,172 |
) |
|
|
8,071 |
|
|
|
1,101 |
|
|
|
(12,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend |
|
|
(665 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(665 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributed to common
stockholders |
|
$ |
(13,010 |
) |
|
$ |
(9,172 |
) |
|
$ |
8,071 |
|
|
$ |
1,101 |
|
|
$ |
(13,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2009 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Non-Guarantors |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
$ |
|
|
|
$ |
43,797 |
|
|
$ |
76,840 |
|
|
$ |
(621 |
) |
|
$ |
120,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
29,041 |
|
|
|
62,343 |
|
|
|
(621 |
) |
|
|
90,763 |
|
Selling, general and
administrative |
|
|
1,043 |
|
|
|
7,243 |
|
|
|
3,144 |
|
|
|
|
|
|
|
11,430 |
|
Depreciation and
amortization |
|
|
12 |
|
|
|
15,446 |
|
|
|
5,435 |
|
|
|
|
|
|
|
20,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses |
|
|
1,055 |
|
|
|
51,730 |
|
|
|
70,922 |
|
|
|
(621 |
) |
|
|
123,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
(1,055 |
) |
|
|
(7,933 |
) |
|
|
5,918 |
|
|
|
|
|
|
|
(3,070 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in
affiliates, net of tax |
|
|
1,499 |
|
|
|
|
|
|
|
|
|
|
|
(1,499 |
) |
|
|
|
|
Interest, net |
|
|
(10,109 |
) |
|
|
45 |
|
|
|
(661 |
) |
|
|
|
|
|
|
(10,725 |
) |
Other |
|
|
15 |
|
|
|
3 |
|
|
|
19 |
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense) |
|
|
(8,595 |
) |
|
|
48 |
|
|
|
(642 |
) |
|
|
(1,499 |
) |
|
|
(10,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)before
income taxes |
|
|
(9,650 |
) |
|
|
(7,885 |
) |
|
|
5,276 |
|
|
|
(1,499 |
) |
|
|
(13,758 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
6,471 |
|
|
|
(2,363 |
) |
|
|
|
|
|
|
4,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(9,650 |
) |
|
|
(1,414 |
) |
|
|
2,913 |
|
|
|
(1,499 |
) |
|
|
(9,650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend |
|
|
(630 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(630 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributed to common
stockholders |
|
$ |
(10,280 |
) |
|
$ |
(1,414 |
) |
|
$ |
2,913 |
|
|
$ |
(1,499 |
) |
|
$ |
(10,280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2009 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Other Subsidiaries |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
(Non-Guarantors) |
|
|
Adjustments |
|
|
Total |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(12,345 |
) |
|
$ |
(9,172 |
) |
|
$ |
8,071 |
|
|
$ |
1,101 |
|
|
$ |
(12,345 |
) |
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
35 |
|
|
|
45,629 |
|
|
|
16,155 |
|
|
|
|
|
|
|
61,819 |
|
Amortization and write-off of debt
issuance costs |
|
|
1,682 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
1,691 |
|
Stock based compensation |
|
|
3,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,580 |
|
Allowance for bad debts |
|
|
|
|
|
|
4,065 |
|
|
|
|
|
|
|
|
|
|
|
4,065 |
|
Equity earnings in affiliates |
|
|
1,101 |
|
|
|
|
|
|
|
|
|
|
|
(1,101 |
) |
|
|
|
|
Deferred taxes |
|
|
(11,490 |
) |
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
(11,094 |
) |
(Gain) on sale of equipment |
|
|
|
|
|
|
(1,059 |
) |
|
|
(121 |
) |
|
|
|
|
|
|
(1,180 |
) |
Loss on asset disposition |
|
|
|
|
|
|
|
|
|
|
1,916 |
|
|
|
|
|
|
|
1,916 |
|
Gain on debt extinguishment |
|
|
(26,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,365 |
) |
Changes in operating assets and
liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in trade receivables |
|
|
|
|
|
|
41,296 |
|
|
|
18,175 |
|
|
|
|
|
|
|
59,471 |
|
Decrease in inventories |
|
|
|
|
|
|
2,621 |
|
|
|
1,269 |
|
|
|
|
|
|
|
3,890 |
|
(Increase) decrease in prepaid
expenses and other current assets |
|
|
7,296 |
|
|
|
2,488 |
|
|
|
(6,494 |
) |
|
|
|
|
|
|
3,290 |
|
(Increase) decrease in other assets |
|
|
|
|
|
|
(798 |
) |
|
|
2,333 |
|
|
|
|
|
|
|
1,535 |
|
(Decrease) in trade accounts
payable |
|
|
|
|
|
|
(16,979 |
) |
|
|
(12,056 |
) |
|
|
|
|
|
|
(29,035 |
) |
(Decrease) increase in accrued
interest |
|
|
(12,248 |
) |
|
|
236 |
|
|
|
(467 |
) |
|
|
|
|
|
|
(12,479 |
) |
(Decrease) in accrued expenses |
|
|
(300 |
) |
|
|
(4,923 |
) |
|
|
(6,409 |
) |
|
|
|
|
|
|
(11,632 |
) |
(Decrease) increase in accrued
salaries, benefits and payroll
taxes |
|
|
|
|
|
|
(2,050 |
) |
|
|
3,278 |
|
|
|
|
|
|
|
1,228 |
|
(Decrease) in other long- term
liabilities |
|
|
|
|
|
|
(57 |
) |
|
|
(779 |
) |
|
|
|
|
|
|
(836 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In)
Operating Activities |
|
|
(49,054 |
) |
|
|
61,306 |
|
|
|
25,267 |
|
|
|
|
|
|
|
37,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in affiliates |
|
|
(4,100 |
) |
|
|
|
|
|
|
|
|
|
|
4,100 |
|
|
|
|
|
Notes receivable from affiliates |
|
|
693 |
|
|
|
|
|
|
|
|
|
|
|
(693 |
) |
|
|
|
|
Deposits on asset commitments |
|
|
|
|
|
|
7,610 |
|
|
|
(556 |
) |
|
|
|
|
|
|
7,054 |
|
Purchase of investment interests |
|
|
(2,393 |
) |
|
|
|
|
|
|
1,291 |
|
|
|
|
|
|
|
(1,102 |
) |
Proceeds from sale of property and
equipment |
|
|
|
|
|
|
7,859 |
|
|
|
121 |
|
|
|
|
|
|
|
7,980 |
|
Proceeds from assets dispositions |
|
|
|
|
|
|
|
|
|
|
3,916 |
|
|
|
|
|
|
|
3,916 |
|
Purchase of property and equipment |
|
|
|
|
|
|
(53,716 |
) |
|
|
(13,550 |
) |
|
|
|
|
|
|
(67,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing
Activities |
|
|
(5,800 |
) |
|
|
(38,247 |
) |
|
|
(8,778 |
) |
|
|
3,407 |
|
|
|
(49,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2009 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis- |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Chalmers |
|
|
|
|
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
(Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors) |
|
|
Adjustments |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable from affiliates |
|
|
|
|
|
|
(18,637 |
) |
|
|
|
|
|
|
18,637 |
|
|
|
|
|
Accounts payable to affiliates |
|
|
18,661 |
|
|
|
|
|
|
|
(24 |
) |
|
|
(18,637 |
) |
|
|
|
|
Notes payable to affiliates |
|
|
|
|
|
|
|
|
|
|
(693 |
) |
|
|
693 |
|
|
|
|
|
Proceeds from parent contributions |
|
|
|
|
|
|
|
|
|
|
4,100 |
|
|
|
(4,100 |
) |
|
|
|
|
Proceeds from issuance of stock, net |
|
|
120,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,337 |
|
Net proceeds from stock incentive
plans |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
Proceeds from long-term debt |
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
Net repayment under line of credit |
|
|
(36,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,500 |
) |
Payments on long-term debt |
|
|
(47,167 |
) |
|
|
(3,011 |
) |
|
|
(11,361 |
) |
|
|
|
|
|
|
(61,539 |
) |
Debt issuance costs |
|
|
(491 |
) |
|
|
(153 |
) |
|
|
|
|
|
|
|
|
|
|
(644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used
In) Financing Activities |
|
|
54,854 |
|
|
|
3,199 |
|
|
|
(7,978 |
) |
|
|
(3,407 |
) |
|
|
46,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
|
|
|
|
26,258 |
|
|
|
8,511 |
|
|
|
|
|
|
|
34,769 |
|
Cash and cash equivalents at
beginning of period |
|
|
|
|
|
|
2,923 |
|
|
|
3,943 |
|
|
|
|
|
|
|
6,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
period |
|
$ |
|
|
|
$ |
29,181 |
|
|
$ |
12,454 |
|
|
$ |
|
|
|
$ |
41,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
Subsidiary |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors |
|
|
Adjustments |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
2,923 |
|
|
$ |
3,943 |
|
|
$ |
|
|
|
$ |
6,866 |
|
Trade receivables, net |
|
|
|
|
|
|
88,528 |
|
|
|
70,865 |
|
|
|
(1,522 |
) |
|
|
157,871 |
|
Inventories |
|
|
|
|
|
|
19,382 |
|
|
|
19,705 |
|
|
|
|
|
|
|
39,087 |
|
Intercompany receivables |
|
|
|
|
|
|
51,038 |
|
|
|
|
|
|
|
(51,038 |
) |
|
|
|
|
Note receivable from affiliate |
|
|
20,680 |
|
|
|
|
|
|
|
|
|
|
|
(20,680 |
) |
|
|
|
|
Prepaid expenses and other |
|
|
8,798 |
|
|
|
8,074 |
|
|
|
4,542 |
|
|
|
|
|
|
|
21,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
29,478 |
|
|
|
169,945 |
|
|
|
99,055 |
|
|
|
(73,240 |
) |
|
|
225,238 |
|
Property and equipment, net |
|
|
|
|
|
|
499,704 |
|
|
|
261,286 |
|
|
|
|
|
|
|
760,990 |
|
Goodwill |
|
|
|
|
|
|
23,251 |
|
|
|
20,022 |
|
|
|
|
|
|
|
43,273 |
|
Other intangible assets, net |
|
|
506 |
|
|
|
29,143 |
|
|
|
7,722 |
|
|
|
|
|
|
|
37,371 |
|
Debt issuance costs, net |
|
|
12,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,664 |
|
Note receivable from affiliates |
|
|
10,045 |
|
|
|
|
|
|
|
|
|
|
|
(10,045 |
) |
|
|
|
|
Investments in affiliates |
|
|
937,227 |
|
|
|
|
|
|
|
|
|
|
|
(937,227 |
) |
|
|
|
|
Other assets |
|
|
3,837 |
|
|
|
27,663 |
|
|
|
4,015 |
|
|
|
|
|
|
|
35,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
993,757 |
|
|
$ |
749,706 |
|
|
$ |
392,100 |
|
|
$ |
(1,020,512 |
) |
|
$ |
1,115,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
782 |
|
|
$ |
992 |
|
|
$ |
12,843 |
|
|
$ |
|
|
|
$ |
14,617 |
|
Trade accounts payable |
|
|
|
|
|
|
27,759 |
|
|
|
35,841 |
|
|
|
(1,522 |
) |
|
|
62,078 |
|
Accrued salaries, benefits and
payroll taxes |
|
|
|
|
|
|
3,933 |
|
|
|
16,259 |
|
|
|
|
|
|
|
20,192 |
|
Accrued interest |
|
|
17,932 |
|
|
|
|
|
|
|
691 |
|
|
|
|
|
|
|
18,623 |
|
Accrued expenses |
|
|
281 |
|
|
|
13,841 |
|
|
|
12,520 |
|
|
|
|
|
|
|
26,642 |
|
Intercompany payables |
|
|
49,853 |
|
|
|
|
|
|
|
1,185 |
|
|
|
(51,038 |
) |
|
|
|
|
Note payable to affiliate |
|
|
|
|
|
|
|
|
|
|
20,680 |
|
|
|
(20,680 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
68,848 |
|
|
|
46,525 |
|
|
|
100,019 |
|
|
|
(73,240 |
) |
|
|
142,152 |
|
Long-term debt, net of current
maturities |
|
|
541,500 |
|
|
|
|
|
|
|
37,544 |
|
|
|
|
|
|
|
579,044 |
|
Note payable to affiliate |
|
|
|
|
|
|
|
|
|
|
10,045 |
|
|
|
(10,045 |
) |
|
|
|
|
Deferred income tax liability |
|
|
|
|
|
|
|
|
|
|
8,253 |
|
|
|
|
|
|
|
8,253 |
|
Other long-term liabilities |
|
|
|
|
|
|
64 |
|
|
|
2,129 |
|
|
|
|
|
|
|
2,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
610,348 |
|
|
|
46,589 |
|
|
|
157,990 |
|
|
|
(83,285 |
) |
|
|
731,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
357 |
|
|
|
3,526 |
|
|
|
42,963 |
|
|
|
(46,489 |
) |
|
|
357 |
|
Capital in excess of par value |
|
|
334,633 |
|
|
|
570,512 |
|
|
|
133,339 |
|
|
|
(703,851 |
) |
|
|
334,633 |
|
Retained earnings |
|
|
48,419 |
|
|
|
129,079 |
|
|
|
57,808 |
|
|
|
(186,887 |
) |
|
|
48,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
383,409 |
|
|
|
703,117 |
|
|
|
234,110 |
|
|
|
(937,227 |
) |
|
|
383,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stock holders equity |
|
$ |
993,757 |
|
|
$ |
749,706 |
|
|
$ |
392,100 |
|
|
$ |
(1,020,512 |
) |
|
$ |
1,115,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING INCOME STATEMENTS
For the Nine Months Ended September 30, 2008 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
Subsidiary |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors |
|
|
Adjustments |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
283,961 |
|
|
$ |
210,640 |
|
|
$ |
(19 |
) |
|
$ |
494,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
156,807 |
|
|
|
162,973 |
|
|
|
(19 |
) |
|
|
319,761 |
|
Selling, general and
administrative |
|
|
5,480 |
|
|
|
32,894 |
|
|
|
7,788 |
|
|
|
|
|
|
|
46,162 |
|
Gain on asset dispositions |
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
(166 |
) |
Depreciation and
amortization |
|
|
35 |
|
|
|
38,224 |
|
|
|
10,283 |
|
|
|
|
|
|
|
48,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses |
|
|
5,515 |
|
|
|
227,759 |
|
|
|
181,044 |
|
|
|
(19 |
) |
|
|
414,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
(5,515 |
) |
|
|
56,202 |
|
|
|
29,596 |
|
|
|
|
|
|
|
80,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in
affiliates, net of tax |
|
|
67,898 |
|
|
|
|
|
|
|
|
|
|
|
(67,898 |
) |
|
|
|
|
Interest, net |
|
|
(31,520 |
) |
|
|
62 |
|
|
|
(638 |
) |
|
|
|
|
|
|
(32,096 |
) |
Other |
|
|
57 |
|
|
|
97 |
|
|
|
437 |
|
|
|
|
|
|
|
591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense) |
|
|
36,435 |
|
|
|
159 |
|
|
|
(201 |
) |
|
|
(67,898 |
) |
|
|
(31,505 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)before
income taxes |
|
|
30,920 |
|
|
|
56,361 |
|
|
|
29,395 |
|
|
|
(67,898 |
) |
|
|
48,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
(7,329 |
) |
|
|
(10,529 |
) |
|
|
|
|
|
|
(17,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
30,920 |
|
|
$ |
49,032 |
|
|
$ |
18,866 |
|
|
$ |
(67,898 |
) |
|
$ |
30,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING INCOME STATEMENTS
For the Three Months Ended September 30, 2008 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis-Chalmers |
|
|
|
|
|
|
Subsidiary |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors |
|
|
Adjustments |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
|
|
|
$ |
100,510 |
|
|
$ |
77,761 |
|
|
$ |
(6 |
) |
|
$ |
178,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
|
|
|
|
56,954 |
|
|
|
59,973 |
|
|
|
(6 |
) |
|
|
116,921 |
|
Selling, general and
administrative |
|
|
1,590 |
|
|
|
11,514 |
|
|
|
2,745 |
|
|
|
|
|
|
|
15,849 |
|
Gain on asset dispositions |
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
(166 |
) |
Depreciation and
amortization |
|
|
12 |
|
|
|
12,910 |
|
|
|
3,706 |
|
|
|
|
|
|
|
16,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses |
|
|
1,602 |
|
|
|
81,212 |
|
|
|
66,424 |
|
|
|
(6 |
) |
|
|
149,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
(1,602 |
) |
|
|
19,298 |
|
|
|
11,337 |
|
|
|
|
|
|
|
29,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in
affiliates, net of tax |
|
|
24,198 |
|
|
|
|
|
|
|
|
|
|
|
(24,198 |
) |
|
|
|
|
Interest, net |
|
|
(10,299 |
) |
|
|
2 |
|
|
|
(412 |
) |
|
|
|
|
|
|
(10,709 |
) |
Other |
|
|
15 |
|
|
|
73 |
|
|
|
27 |
|
|
|
|
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
(expense) |
|
|
13,914 |
|
|
|
75 |
|
|
|
(385 |
) |
|
|
(24,198 |
) |
|
|
(10,594 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)before
income taxes |
|
|
12,312 |
|
|
|
19,373 |
|
|
|
10,952 |
|
|
|
(24,198 |
) |
|
|
18,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
(2,880 |
) |
|
|
(3,247 |
) |
|
|
|
|
|
|
(6,127 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
12,312 |
|
|
$ |
16,493 |
|
|
$ |
7,705 |
|
|
$ |
(24,198 |
) |
|
$ |
12,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2008 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis- |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Chalmers |
|
|
|
|
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
(Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors) |
|
|
Adjustments |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
30,920 |
|
|
$ |
49,032 |
|
|
$ |
18,866 |
|
|
$ |
(67,898 |
) |
|
$ |
30,920 |
|
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
35 |
|
|
|
38,224 |
|
|
|
10,283 |
|
|
|
|
|
|
|
48,542 |
|
Amortization and write-off of debt
issuance costs |
|
|
1,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,563 |
|
Stock based compensation |
|
|
6,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,212 |
|
Allowance for bad debts |
|
|
|
|
|
|
1,505 |
|
|
|
|
|
|
|
|
|
|
|
1,505 |
|
Equity earnings in affiliates |
|
|
(67,898 |
) |
|
|
|
|
|
|
|
|
|
|
67,898 |
|
|
|
|
|
Deferred taxes |
|
|
4,708 |
|
|
|
(108 |
) |
|
|
(285 |
) |
|
|
|
|
|
|
4,315 |
|
Gain on asset dispositions |
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
(166 |
) |
(Gain) on sale of property and
equipment |
|
|
|
|
|
|
(1,097 |
) |
|
|
(109 |
) |
|
|
|
|
|
|
(1,206 |
) |
Changes in operating assets and
liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) in trade receivables |
|
|
|
|
|
|
(14,627 |
) |
|
|
(16,015 |
) |
|
|
|
|
|
|
(30,642 |
) |
(Increase) in inventories |
|
|
|
|
|
|
(5,901 |
) |
|
|
(1,060 |
) |
|
|
|
|
|
|
(6,961 |
) |
(Increase) decrease in prepaid
expenses and other current assets |
|
|
(8 |
) |
|
|
1,319 |
|
|
|
(767 |
) |
|
|
|
|
|
|
544 |
|
(Increase) decrease in other assets |
|
|
(4,073 |
) |
|
|
1,034 |
|
|
|
768 |
|
|
|
|
|
|
|
(2,271 |
) |
(Decrease) increase in trade
accounts payable |
|
|
|
|
|
|
5,673 |
|
|
|
10,917 |
|
|
|
|
|
|
|
16,590 |
|
Increase in accrued interest |
|
|
(10,929 |
) |
|
|
(10 |
) |
|
|
96 |
|
|
|
|
|
|
|
(10,843 |
) |
(Decrease) increase in accrued
expenses |
|
|
(687 |
) |
|
|
9,623 |
|
|
|
3,147 |
|
|
|
|
|
|
|
12,083 |
|
(Decrease) increase in accrued
salaries, benefits and payroll
taxes |
|
|
|
|
|
|
1,055 |
|
|
|
3,725 |
|
|
|
|
|
|
|
4,780 |
|
(Decrease) in other long-term
liabilities |
|
|
(31 |
) |
|
|
(167 |
) |
|
|
(484 |
) |
|
|
|
|
|
|
(682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used In)
Operating Activities |
|
|
(40,188 |
) |
|
|
85,389 |
|
|
|
29,082 |
|
|
|
|
|
|
|
74,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable from affiliates |
|
|
(6,075 |
) |
|
|
|
|
|
|
|
|
|
|
6,075 |
|
|
|
|
|
Investment in note receivable |
|
|
(40,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,000 |
) |
Deposits on asset commitments |
|
|
|
|
|
|
(19,544 |
) |
|
|
10,325 |
|
|
|
|
|
|
|
(9,219 |
) |
Purchase of investment interests |
|
|
(5,742 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
(5,763 |
) |
Proceeds from sale of property and
equipment |
|
|
|
|
|
|
5,738 |
|
|
|
266 |
|
|
|
|
|
|
|
6,004 |
|
Proceeds from asset disposition |
|
|
|
|
|
|
3,000 |
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
Purchase of property and equipment |
|
|
|
|
|
|
(52,560 |
) |
|
|
(65,275 |
) |
|
|
|
|
|
|
(117,835 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used in)
Investing Activities |
|
|
(51,817 |
) |
|
|
(63,387 |
) |
|
|
(54,684 |
) |
|
|
6,075 |
|
|
|
(163,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
For the Nine Months Ended September 30, 2008 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allis- |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Chalmers |
|
|
|
|
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
(Parent/ |
|
|
Subsidiary |
|
|
(Non- |
|
|
Consolidating |
|
|
Consolidated |
|
|
|
Guarantor) |
|
|
Guarantors |
|
|
Guarantors) |
|
|
Adjustments |
|
|
Total |
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable from affiliates |
|
|
52,908 |
|
|
|
|
|
|
|
|
|
|
|
(52,908 |
) |
|
|
|
|
Accounts payable to affiliates |
|
|
|
|
|
|
(52,908 |
) |
|
|
|
|
|
|
52,908 |
|
|
|
|
|
Note payable to affiliate |
|
|
|
|
|
|
|
|
|
|
6,075 |
|
|
|
(6,075 |
) |
|
|
|
|
Net proceeds from stock incentive
plans |
|
|
633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633 |
|
Tax benefit on stock-based
compensation plans |
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
Proceeds from long-term debt |
|
|
|
|
|
|
|
|
|
|
20,001 |
|
|
|
|
|
|
|
20,001 |
|
Net borrowing under line of credit |
|
|
38,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,500 |
|
Payments on long-term debt |
|
|
|
|
|
|
(4,633 |
) |
|
|
(1,818 |
) |
|
|
|
|
|
|
(6,451 |
) |
Debt issuance costs |
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By (Used
In) Financing Activities |
|
|
92,005 |
|
|
|
(57,541 |
) |
|
|
24,258 |
|
|
|
(6,075 |
) |
|
|
52,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
|
|
|
|
(35,539 |
) |
|
|
(1,344 |
) |
|
|
|
|
|
|
(36,883 |
) |
Cash and cash equivalents at
beginning of period |
|
|
|
|
|
|
41,176 |
|
|
|
2,517 |
|
|
|
|
|
|
|
43,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period |
|
$ |
|
|
|
$ |
5,637 |
|
|
$ |
1,173 |
|
|
$ |
|
|
|
$ |
6,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE
12 SEGMENT INFORMATION
All of our segments provide services to the energy industry. The revenues, operating income
(loss), depreciation and amortization, capital expenditures and assets of each of the reporting
segments, plus the corporate function, are reported below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
31,904 |
|
|
$ |
73,390 |
|
|
$ |
105,827 |
|
|
$ |
209,946 |
|
Drilling and Completion |
|
|
76,299 |
|
|
|
77,761 |
|
|
|
223,237 |
|
|
|
210,640 |
|
Rental Services |
|
|
11,813 |
|
|
|
27,114 |
|
|
|
48,560 |
|
|
|
73,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
120,016 |
|
|
$ |
178,265 |
|
|
$ |
377,624 |
|
|
$ |
494,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
(4,211 |
) |
|
$ |
13,831 |
|
|
$ |
(15,701 |
) |
|
$ |
40,218 |
|
Drilling and Completion |
|
|
5,508 |
|
|
|
11,337 |
|
|
|
14,420 |
|
|
|
29,596 |
|
Rental Services |
|
|
(1,218 |
) |
|
|
8,545 |
|
|
|
3,318 |
|
|
|
24,033 |
|
General corporate |
|
|
(3,149 |
) |
|
|
(4,680 |
) |
|
|
(9,879 |
) |
|
|
(13,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,070 |
) |
|
$ |
29,033 |
|
|
$ |
(7,842 |
) |
|
$ |
80,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
8,077 |
|
|
$ |
6,101 |
|
|
$ |
22,825 |
|
|
$ |
17,692 |
|
Drilling and Completion |
|
|
5,462 |
|
|
|
3,706 |
|
|
|
16,182 |
|
|
|
10,283 |
|
Rental Services |
|
|
7,281 |
|
|
|
6,699 |
|
|
|
22,580 |
|
|
|
20,163 |
|
General corporate |
|
|
73 |
|
|
|
122 |
|
|
|
232 |
|
|
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,893 |
|
|
$ |
16,628 |
|
|
$ |
61,819 |
|
|
$ |
48,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
1,348 |
|
|
$ |
11,782 |
|
|
$ |
9,408 |
|
|
$ |
35,599 |
|
Drilling and Completion |
|
|
7,067 |
|
|
|
25,782 |
|
|
|
50,775 |
|
|
|
65,476 |
|
Rental Services |
|
|
851 |
|
|
|
5,594 |
|
|
|
7,042 |
|
|
|
16,700 |
|
General corporate |
|
|
7 |
|
|
|
14 |
|
|
|
41 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,273 |
|
|
$ |
43,172 |
|
|
$ |
67,266 |
|
|
$ |
117,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
37,625 |
|
|
$ |
96,600 |
|
|
$ |
140,448 |
|
|
$ |
269,542 |
|
Argentina |
|
|
65,192 |
|
|
|
77,761 |
|
|
|
180,846 |
|
|
|
210,640 |
|
Brazil |
|
|
11,034 |
|
|
|
|
|
|
|
31,812 |
|
|
|
|
|
Other international |
|
|
6,165 |
|
|
|
3,904 |
|
|
|
24,518 |
|
|
|
14,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
120,016 |
|
|
$ |
178,265 |
|
|
$ |
377,624 |
|
|
$ |
494,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 12 SEGMENT INFORMATION (Continued)
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Goodwill: |
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
23,250 |
|
|
$ |
23,250 |
|
Drilling and Completion |
|
|
18,732 |
|
|
|
20,023 |
|
Rental Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
41,982 |
|
|
$ |
43,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Oilfield Services |
|
$ |
262,084 |
|
|
$ |
309,901 |
|
Drilling and Completion |
|
|
427,602 |
|
|
|
411,486 |
|
Rental Services |
|
|
320,655 |
|
|
|
360,376 |
|
General corporate |
|
|
66,128 |
|
|
|
33,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,076,469 |
|
|
$ |
1,115,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Lived Assets: |
|
|
|
|
|
|
|
|
United States |
|
$ |
579,867 |
|
|
$ |
573,975 |
|
Argentina |
|
|
188,254 |
|
|
|
212,456 |
|
Brazil |
|
|
74,044 |
|
|
|
79,568 |
|
Other international |
|
|
43,161 |
|
|
|
23,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
885,326 |
|
|
$ |
889,813 |
|
|
|
|
|
|
|
|
NOTE 13 LEGAL MATTERS
We are named from time to time in legal proceedings related to our activities prior to our
bankruptcy in 1988. However, we believe that we were discharged from liability for all such claims
in the bankruptcy and believe the likelihood of a material loss relating to any such legal
proceeding is remote.
We have been named as a defendant in two lawsuits in connection with our proposed merger with
Bronco Drilling, Inc., which was terminated August 2008. We do not believe that the suits have any
merit.
We are also involved in various other legal proceedings in the ordinary course of business. The
legal proceedings are at different stages; however, we believe that the likelihood of material loss
relating to any such legal proceeding is remote.
26
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial
statements and the notes thereto included elsewhere in this report. This report contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from the results discussed in such forward-looking statements. Factors that might cause
such differences include, but are not limited to, the general condition of the oil and natural gas
drilling industry, demand for our oil and natural gas service and rental products, and competition.
For more information on forward-looking statements please refer to the section entitled
Forward-Looking Statements on page 40.
Overview of Our Business
We are a multi-faceted oilfield services company that provides services and equipment to oil and
natural gas exploration and production companies, throughout the United States including Texas,
Louisiana, Arkansas, Pennsylvania, Oklahoma, New Mexico, offshore in the Gulf of Mexico and
internationally primarily in Argentina, Brazil, Bolivia and Mexico. We currently operate in three
sectors of the oil and natural gas service industry: Oilfield Services; Drilling and Completion and
Rental Services.
We derive operating revenues from rates per day and rates per job that we charge for the labor and
equipment required to provide a service and rates per day for equipment and tools that we rent to
our customers. The price we charge for our services depends upon several factors, including the
level of oil and natural gas drilling activity and the competitive environment in the particular
geographic regions in which we operate. Contracts are awarded based on price, quality of service
and equipment, and the general reputation and experience of our personnel. The demand for drilling
services has historically been volatile and is affected by the capital expenditures of oil and
natural gas exploration and development companies, which can fluctuate based upon the prices of oil
and natural gas, or the expectation for the prices of oil and natural gas.
The number of active rigs drilling, or the rig count, is an important indicator of activity levels
in the oil and natural gas industry. The rig count in the United States peaked at 2,031 in August
2008 but then declined to 1,721 as of December 26, 2008. According to Baker Hughes, the United
States rig count dropped to a recent low of 876 as of June 12, 2009 and has increased to 1,048 as
of October 23, 2009 compared to 1,964 one year earlier. The rapid decline in the United States rig
count is due to the economic slowdown in the United States and the decrease in natural gas and oil
prices which has impacted the capital expenditures of our customers. The turmoil in the financial
markets and its impact on the availability of capital for our customers has also affected drilling
activity in the United States. Directional and horizontal rig counts, according to the Baker
Hughes rig count in the United States, have also decreased and were 651 as of October 23, 2009
compared to 912 as of December 26, 2008 and 1,024 one year earlier.
While our revenue can be correlated to the rig count, our operating costs do not fluctuate in
direct proportion to changes in revenues. Our operating expenses consist principally of our labor
costs and benefits, equipment rentals, maintenance and repairs of our equipment, depreciation,
insurance and fuel. Because many of our costs are fixed, our operating income as a percentage of
revenues is generally affected by our level of revenues.
Our Industry
The oilfield services industry is highly cyclical. The most critical factor in assessing the
outlook for the industry is the worldwide supply and demand for oil and the domestic supply and
demand for natural gas. The industry is driven by commodity demand and corresponding price
increases. As demand increases, producers raise their prices. The price escalation enables
producers to increase their capital expenditures. The increased capital expenditures ultimately
result in greater revenues and profits for services and equipment companies. The increased capital
expenditures also ultimately result in greater production which historically has resulted in
increased supplies and reduced prices.
27
Company Outlook
We believe that our revenue and operating income for our Oilfield Services and Rental Services
segment will continue to suffer in the fourth quarter of 2009, due to the reduction of our
customers spending, the low price of natural gas and some seasonal decline in the utilization of
our services. While the United States rig count appears to have stabilized and we have seen an
increase in our Oilfield Services segment revenues and operating results in the third quarter of
2009 compared to the second quarter of 2009, we have not seen the same improvement for our Rental
Services segment. In 2009 we undertook steps to reduce costs, including laying off employees and
closing unprofitable operating locations. We have also attempted to convert our direct labor costs
to a variable job day-rate bonus structure, established a new customer account management system
with financial incentives for our sales force and executed on a strategy to deploy under-utilized
assets to the most attractive domestic and international markets. Even with these steps, our
Oilfield Services and Rental Services segment may continue to generate negative operating income
for the remainder of 2009 due to their reliance on the United States market. Our Drilling and
Completion segment, with operations in Argentina, Brazil and Bolivia, has performed better than our
domestic businesses due to the benefit of long-term contracts, the profile of its customer base and
the stability of oil prices compared to natural gas prices. Nevertheless, we anticipate our
Drilling and Completion segment results for the remainder of 2009 will continue to be impacted by
the decrease in the utilization of drilling rigs in Argentina and one less available rig in Brazil
due to a blow-out. We are redeploying rigs from Argentina to Brazil and other international
locations.
We expect our general and administrative expenses for the fourth quarter of 2009 to be consistent
with the third quarter of 2009 general and administrative expenses. Our net interest expense is
dependent upon our level of debt and cash on hand, which are principally dependent on our capital
expenditures and our cash flows from operations. We anticipate our interest expense for the fourth
quarter of 2009 to be consistent with the third quarter of 2009 interest expense. In June 2009 we
repaid $74.8 million of our outstanding senior notes and all outstanding borrowings under our
revolving credit facility and have excess cash as a result of our backstopped rights offering and
private placement of preferred stock. Offsetting some of those benefits will be the interest on
our new $25.0 million loan facility utilized to acquire two new drilling rigs in May 2009.
Demand for our services is dependent upon our customers capital spending plans. The capital
expenditures of our customers have been impacted by the decrease in oil and natural gas prices
compared to 2008, which affects their cash flow and the decrease in the availability of capital
resulting from the recent banking and credit crisis. The slowdown in economic activity caused by
the recession has reduced demand for energy and resulted in lower oil and natural gas prices
compared to the prior year. We are monitoring the credit worthiness of our customers, as well as
outstanding receivables, in light of the current credit crisis and as such increased our reserve
for doubtful accounts significantly during 2009, but further reserves may be necessary in the
fourth quarter of 2009.
We continue to monitor the effect of the global economic downturn on our industry, and the
resulting impact on the capital spending budgets of our customers in order to estimate the effect
on our company. We have reduced our planned capital spending significantly in 2009 compared to
2008. So far 2009 has been an extremely challenging year for our operations. We are optimistic
that our cost saving measures and the $125.6 million in gross equity proceeds received in June 2009
from our backstopped rights offering and private placement of preferred stock, our strategy of
international growth, offering new equipment and technology to our customers, and our focus on the
United States land shale plays, will carry us through the current recession.
Results of Operations
In December 2008, we acquired all of the outstanding stock of BCH Ltd, or BCH, which is reported as
part of our Drilling and Completion segment. In August 2008, we sold our drill pipe tong
manufacturing assets, which were reported in our Oilfield Services segment. We consolidated the
results of these transactions from the date they were effective.
The foregoing acquisition and disposition affect the comparability from period to period of our
historical results, and our historical results may not be indicative of our future results.
28
Comparison of Three Months Ended September 30, 2009 and 2008
Our revenues for the three months ended September 30, 2009 were $120.0 million, a decrease of 32.7%
compared to $178.3 million for the three months ended September 30, 2008. All of our operating
segments experienced a decline in revenue in the three months ended September 30, 2009 compared to
the three months ended September 30, 2008. However, revenues increased in the third quarter of
2009 for our Oilfield Services and Drilling and Completion segments compared to the second quarter
of 2009. Both our Oilfield Services segment and Rental Services segment have a strong
concentration in the United States domestic oil and natural gas market. Due to the decline in oil
and natural gas prices and drilling activity compared to 2008, we have experienced a significant
deterioration in both equipment utilization and pricing. Revenues in our Drilling and Completion
segment declined in spite of the contribution of $11.0 million in revenues during the three months
ended September 30, 2009 from our December 2008 acquisition of BCH. Our Drilling and Completion
revenues from Argentina declined in the quarter ended September 30, 2009 due to decreased rig
utilization and a decrease in rig rates as a result of lower commodity prices.
Our direct costs for the three months ended September 30, 2009 decreased 22.4% to $90.8 million, or
75.6% of revenues, compared to $116.9 million, or 65.6%, of revenues for the three months ended
September 30, 2008. The increase in the percentage of direct costs to revenue between periods is
primarily due to the change in our revenue mix and the fact that not all of our direct costs are
variable and therefore do not fluctuate with revenues. For the three months ended September 30,
2009, our higher margin Rental Services segment only comprised 9.8% of our total revenues compared
to 15.2% of our total revenues for the three months ended September 30, 2008. Our direct costs in
our Oilfield Services and Rental Services segments decreased in absolute dollars in the three
months ended September 30, 2009 compared to the three months ended September 30, 2008, but our
revenues in our Oilfield Services and Rental Services segments decreased faster during the quarter
than the reduction in direct costs. Our Oilfield Services segment direct costs for the three
months ended September 30, 2009 decreased 49.6% from direct costs for the three months ended
September 30, 2008, while the revenues decreased 56.5% over that same period. Our Oilfield
Services segment has also been impacted by pricing pressure that decreases revenues but has no
impact on direct costs.
Our direct costs for the Rental Services segment for the three months ended September 30, 2009
decreased 51.2% from direct costs for the three months ended September 30, 2008, while the revenues
decreased 56.4% over that same period. Our direct costs for the Rental Services segment are
largely fixed because they primarily relate to yard expenses to maintain the rental inventory. In
addition, pricing pressure has reduced our Rental Services revenues but had no impact on our direct
costs. Direct costs in our Drilling and Completion segment increased $2.8 million for the three
months ended September 30, 2009 compared to the three months ended September 30, 2008. Direct
costs related to our December 2008 acquisition of BCH were $7.4 million during the three months
ended September 30, 2009 and were offset by reduced costs as a result of reduced activity in our
Drilling and Completion operation in Argentina. Our Drilling and Completion segment direct costs
for the three months ended September 30, 2009 increased 4.7% from direct costs for the three months
ended September 30, 2008, while the revenues decreased 1.1% over that same period. This
unfavorable variance is primarily attributed to lower utilization of our drilling and service rigs
during the three months ended September 30, 2009 compared to the same period of the prior year.
Additionally, workforce reductions in response to market conditions are difficult and costly to
implement in the labor environment in Argentina. We incurred $1.1 million in severance costs in
Argentina during the three months ended September 30, 2009 to reduce our workforce.
Selling, general and administrative expense was $11.4 million for the three months ended September
30, 2009 compared to $15.8 million for the three months ended September 30, 2008. Selling, general
and administrative expense decreased due to cost reduction steps that were made in 2009 in response
to market conditions and a decrease related to the amortization of share-based compensation
arrangements. Selling, general and administrative expense includes share-based compensation
expense of $1.2 million in the third quarter of 2009 and $1.8 million in the third quarter of 2008.
During the three months ended September 30, 2009, we recorded bad debt expense of $0.5 million
compared to $0.9 million for the three months ended September 30, 2008. As a percentage of
revenues, selling, general and administrative expenses were 9.5% for the three months ended
September 30, 2009 compared to 8.9% for the same period in the prior year.
Effective August 1, 2008, we sold our drill pipe tong manufacturing assets that were acquired in
our acquisition of Rogers Oil Tools, Inc., or Rogers, and that were part of our Oilfield Services
segment. The total sale agreement was for $7.5 million and we recognized a gain of $166,000 on the
sale.
Depreciation and amortization expense increased 25.6% to $20.9 million for the three months ended
September 30, 2009 from $16.6 million for the three months ended September 30, 2008. The primary
increase in depreciation expense is due to our capital expenditure programs in 2008, principally
the addition of new service rigs and one drilling rig in Argentina and the
expansion of our coiled tubing fleet. Depreciation and amortization expense as a percentage of
revenues increased to 17.4% for the third quarter of 2009, compared to 9.3% for the third quarter
of 2008, due to the decrease in revenues as a result of the decline in United States drilling
activity. The acquisition of BCH at the end of 2008 contributed an additional $0.8 million of
depreciation and amortization expense in the three months ended September 30, 2009.
29
We had a $3.1 million loss from operations for the three months ended September 30, 2009, compared
to $29.0 million in income from operations for the three months ended September 30, 2008, for a
total decrease of $32.1 million. The loss from operations in the third quarter of 2009 is due to
the decrease in revenues and the increase in direct costs and depreciation as a percentage of
revenues, as revenues decreased more quickly than our cost reductions.
Our interest expense was $10.8 million for the three months ended September 30, 2009, compared to
$12.2 million for the three months ended September 30, 2008. During 2009, we decreased our debt
outstanding compared to September 30, 2008. On June 29, 2009 we prepaid the then $35.0 million
outstanding loan balance under our revolving credit facility with proceeds from the $125.6 million
equity issuances. This compares to an outstanding loan balance of $38.5 million at September 30,
2008 under our revolving credit facility. In addition we purchased $74.8 million of our senior
notes on June 29, 2009 from those same equity proceeds. Partially offsetting these debt reductions
was a new $25.0 million term loan facility used to fund a portion of the purchase price of two new
drilling rigs. Debt also increased due to the acquisition of BCH at the end of 2008. BCH had a
$22.1 million term loan facility at December 31, 2008 which was reduced to $16.2 million at
September 30, 2009. Interest expense includes amortization expense of debt issuance costs of
$539,000 and $525,000 for the three months ended September 30, 2009 and 2008, respectively.
Our interest income was $39,000 for the three months ended September 30, 2009, compared to $1.5
million for the three months ended September 30, 2008. In January 2008, we invested $40.0 million
into a 15% convertible subordinated secured debenture with BCH. We earned interest on this note up
until December 31, 2008, when we acquired all of the outstanding stock of BCH.
Our income tax benefit for the three months ended September 30, 2009 was $4.1 million, or 29.9%,
compared to an income tax expense of $6.1 million, or 33.2% of our net income before income taxes
for 2008. Our United States effective tax rate was 34.0% for the three months ended September 30,
2009, compared to 38.5% for the same period in the prior year. The effective tax rate is lower as
not all of our domestic losses generate state income tax benefit and, in fact, we incurred state
income tax expense in one state even though we have a loss. Our international effective tax rate
was 44.8% for the three months ended September 30, 2009, compared to 29.6% for the same period in
the prior year due to one of our international subsidiaries generating a tax net operating loss and
the future utilization of such net operation loss for tax purposes is uncertain.
We had a net loss of $9.7 million for the three months ended September 30, 2009, compared to net
income of $12.3 million for the three months ended September 30, 2008 due to the foregoing reasons.
During the three months ended September 30, 2009, we recorded a preferred stock dividend of $0.6
million related to the issuance of our preferred stock in June 2009.
The following table compares revenues and income (loss) from operations for each of our business
segments for the quarter ended September 30, 2009 and 2008. Income (loss) from operations consists
of our revenues and the loss on an asset disposition less direct costs, selling, general and
administrative expenses, depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
Income (Loss) from Operations |
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
Change |
|
|
2009 |
|
|
2008 |
|
|
Change |
|
|
|
(in thousands) |
|
Oilfield Services |
|
$ |
31,904 |
|
|
$ |
73,390 |
|
|
$ |
(41,486 |
) |
|
$ |
(4,211 |
) |
|
$ |
13,831 |
|
|
$ |
(18,042 |
) |
Drilling and Completion |
|
|
76,299 |
|
|
|
77,761 |
|
|
|
(1,462 |
) |
|
|
5,508 |
|
|
|
11,337 |
|
|
|
(5,829 |
) |
Rental Services |
|
|
11,813 |
|
|
|
27,114 |
|
|
|
(15,301 |
) |
|
|
(1,218 |
) |
|
|
8,545 |
|
|
|
(9,763 |
) |
General corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,149 |
) |
|
|
(4,680 |
) |
|
|
1,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
120,016 |
|
|
$ |
178,265 |
|
|
$ |
(58,249 |
) |
|
$ |
(3,070 |
) |
|
$ |
29,033 |
|
|
$ |
(32,103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Oilfield Services
Revenues for our Oilfield Services segment were $31.9 million for the three months ended September
30, 2009, a decrease of 56.5% compared to $73.4 million in revenues for the three months ended
September 30, 2008. Income from operations decreased $18.0 million and resulted in a loss from
operations of $4.2 million in the third quarter of 2009 compared to income from operations of $13.8
million in the third quarter of 2008. Our Oilfield Services segment revenues and operating income
for the third quarter of 2009 decreased compared to the third quarter of 2008 due to weak market
conditions that resulted in reduced demand and pricing for our services. Depreciation and
amortization expense for the Oilfield Services segment increased by $2.0 million or 32.4% in the
third quarter of 2009 compared to the third quarter of the previous year, due to capital
expenditures completed during 2008, including six coiled tubing units delivered in the last half of
2008. We have not realized the benefits of these capital expenditures due to decreased utilization
and pricing of our equipment as a result of the decline in United States drilling activity.
Drilling and Completion
Revenues for the quarter ended September 30, 2009 for the Drilling and Completion segment were
$76.3 million compared to $77.8 million in revenues for the quarter ended September 30, 2008.
Income from operations decreased to $5.5 million in the third quarter of 2009 compared to $11.3
million in the third quarter of 2008. This reduction was due to: (1) reduced rig utilization and
rig rates in Argentina; (2) an increase of $1.8 million, or 47.4%, in depreciation and
amortization; (3) increased labor and other costs in Argentina; and (4) $1.1 million of severance
costs during the three months ended September 30, 2009 related to workforce reductions in Argentina
as a result of lower activity. The increase in depreciation and amortization expense was the
result of the addition of new rigs in Argentina and the acquisition of BCH. Our Drilling and
Completion segment revenues for the third quarter of 2009 included $11.0 million of revenue
generated from the acquisition of BCH at the end of 2008.
Rental Services
Revenues for the quarter ended September 30, 2009 for the Rental Services segment were $11.8
million, a decrease from $27.1 million in revenues for the quarter ended September 30, 2008.
Income from operations decreased to a $1.2 million operating loss in the third quarter of 2009
compared to $8.5 million operating income in the third quarter of 2008. Our Rental Services
segment revenues and operating income for the third quarter of 2009 decreased compared to the prior
year due to the decrease in revenues as a result of the decrease in utilization of our rental
equipment and a more competitive pricing environment due to a decrease in drilling activity in the
United States In addition, depreciation and amortization expense for our Rental Services segment
increased $0.6 million, or 8.7%, in the third quarter of 2009 compared to the third quarter of 2008
due to capital expenditures made during 2008.
General Corporate
General corporate expenses decreased $1.5 million to $3.1 million for the three months ended
September 30, 2009 compared to $4.7 million for the three months ended September 30, 2008. The
decrease was due to the decrease in payroll costs and benefits due to reduced management and
accounting and administrative staff and the decrease in share-based compensation expense.
Share-based compensation expense included in general corporate expense was $1.0 million in the
third quarter of 2009 compared to $1.5 million in the third quarter of 2008.
Comparison of Nine Months Ended September 30, 2009 and 2008
Our revenues for the nine months ended September 30, 2009 were $377.6 million, a decrease of 23.6%
compared to $494.6 million for the nine months ended September 30, 2008. The decrease in revenues
is due to the decrease in revenues in our Oilfield Services and our Rental Services segments,
offset in part by an increase in revenues in our Drilling and Completion segment. The increase in
revenues in our Drilling and Completion segment was due to the acquisition of BCH in Brazil offset
by lower rig utilization and pricing in our Drilling and Completion operation conducted in
Argentina. The Drilling and Completion segment generated $223.2 million in revenues for the nine
months ended September 30, 2009 compared to $210.6 million for the nine months ended September 30,
2008. BCH generated $31.8 million of revenues for the nine months ended September 30, 2009. Our
Oilfield Services segment revenues decreased to $105.8 million for the nine months ended September
30, 2009 compared to $209.9 million for the nine months ended September 30, 2008. Revenues for our
Rental Services segment decreased to $48.6 million for the nine months ended September 30, 2009
compared to $74.0 million for the nine months ended September 30, 2008. The decline in oil and
natural gas prices and the resulting decrease in drilling activity caused a significant
deterioration in both equipment utilization and pricing for our Oilfield Services and Rental
Services segments.
31
Our direct costs for the nine months ended September 30, 2009 decreased 12.1% to $281.1 million, or
74.5% of revenues, compared to $319.8 million, or 64.7% of revenues, for the nine months ended
September 30, 2008. The increase in the percentage of direct costs to revenue between periods is
primarily due to the change in our revenue mix and the fact that not all of our direct costs are
variable and therefore do not fluctuate with revenues. For the nine months ended September 30,
2009, our higher margin Rental Services segment only comprised 12.9% of our total revenues compared
to 15.0% of our total revenues for the nine months ended September 30, 2008. Our direct costs in
our Oilfield Services and Rental Services segments decreased in absolute dollars in the nine months
ended September 30, 2009 compared to the nine months ended September 30, 2008, but our revenues in
our Oilfield Services and Rental Services segments decreased faster during that same period than
the reduction in direct costs. Our Oilfield Services segment direct costs for the nine months
ended September 30, 2009 decreased 37.8% from direct costs for the nine months ended September 30,
2008, while the revenues decreased 49.6% over that same period. In addition, our Oilfield Services
segment had $1.2 million of expenses recorded during the nine months ended September 30, 2009
related to severance payments, the closing of unprofitable locations and downsizing other
locations. Our Oilfield Services segment has also been impacted by pricing pressure that decreases
revenues but has no impact on direct costs.
Our Rental Services segment direct costs for the nine months ended September 30, 2009 decreased
23.1% from direct costs in the Rental Services segment for the nine months ended September 30,
2008, while the revenues decreased 34.4% over that same period. Our direct costs for the Rental
Services segment are largely fixed because they primarily relate to yard expenses to maintain the
rental inventory. In addition, pricing pressure has reduced our Rental Services revenues but had
no impact on our direct costs. Direct costs in our Drilling and Completion segment increased $17.4
million for the nine months ended September 30, 2009 compared to the nine months ended September
30, 2008. Direct costs related to our December 2008 acquisition of BCH were $20.8 million during
the nine months ended September 30, 2009. Our Drilling and Completion segment direct costs for the
nine months ended September 30, 2009 increased 10.7% from direct costs for the nine months ended
September 30, 2008, while the revenues increased 6.0% over that same period. This unfavorable
variance is primarily attributed to lower utilization of our drilling and service rigs during the
nine months ended September 30, 2009 compared to the same period of the prior year. Additionally,
workforce reductions in response to market conditions are difficult and costly to implement in the
labor environment in Argentina. We incurred $1.4 million in severance costs in Argentina during
the nine months ended September 30, 2009.
Selling, general and administrative expense was $40.6 million for the nine months ended September
30, 2009 compared to $46.2 million for the nine months ended September 30, 2008. Selling, general
and administrative expense decreased primarily due to cost reduction steps that were made in the
nine months ended September 30, 2009 in response to market conditions, and a decrease related to
the amortization of share-based compensation arrangements, offset in part by additional bad debt
expense. Selling, general and administrative expense includes share-based compensation expense of
$3.6 million in the nine months ended September 30, 2009 and $6.2 million in the nine months ended
September 30, 2008. During the nine months ended September 30, 2009, we recorded bad debt expense
of $4.1 million compared to $1.5 million for the nine months ended September 30, 2008. As a
percentage of revenues, selling, general and administrative expenses were 10.8% for the nine months
ended September 30, 2009 compared to 9.3% for the same period in the prior year.
During the nine months ended September 30, 2009, we recorded a $1.9 million loss on an asset
disposition from the total loss of a rig from a blow-out in our Drilling and Completion segment.
The insurance proceeds for the loss were not sufficient to cover the book value of the rig and
related assets. Effective August 1, 2008, we sold our drill pipe tong manufacturing assets that
were acquired in our acquisition of Rogers and that were part of our Oilfield Services segment.
The total sale agreement was for $7.5 million and we recognized a gain of $166,000 on the sale.
Depreciation and amortization expense increased 27.4% to $61.8 million for the nine months ended
September 30, 2009 from $48.5 million for the nine months ended September 30, 2008. The primary
increase in depreciation expense is due to our capital expenditure programs in 2008, principally
the addition of new service rigs and one drilling rig in Argentina and the expansion of our coiled
tubing fleet. Depreciation and amortization expense as a percentage of revenues increased to 16.4%
for the first nine months of 2009, compared to 9.8% for the first nine months of 2008, due to the
decrease in revenues as a result of the decline in United States drilling activity. The
acquisition of BCH at the end of 2008 contributed an additional $3.0 million of depreciation and
amortization expense in the nine months ended September 30, 2009.
32
We had a $7.8 million loss from operations for the nine months ended September 30, 2009, compared
to $80.3 million in income from operations for the nine months ended September 30, 2008, for a
total decrease of $88.1 million. The loss from operations for the nine months ended September 30,
2009 is due to the decrease in revenues and the increase in direct costs and depreciation as a
percentage of revenues, as revenues decreased more quickly than our cost reductions. The nine
months ended September 30, 2009 was also negatively affected by an increase of $2.6 million of bad
debt expense compared to the nine months ended September 30, 2008, a $1.9 million loss on an asset
disposition and $3.2 million of expenses related to severance payments, the closing of unprofitable
locations and downsizing other locations.
Our interest expense was $37.5 million for the nine months ended September 30, 2009, compared to
$36.2 million for the nine months ended September 30, 2008. On June 29, 2009 we purchased $74.8
million of our senior notes with proceeds from our $125.6 million in equity issuances on that same
date. We also prepaid the then $35.0 million outstanding loan balance under our revolving credit
facility on June 29, 2009 from those same equity proceeds. This compared to an outstanding balance
of $38.5 million at September 30, 2008 under our revolving credit facility. In 2008, through DLS
Drilling, Logistics & Services Company, or DLS, our subsidiary in Argentina, we also entered into a
new $25.0 million import finance facility with a bank to fund a portion of the purchase price of
new drilling and service rigs. Interest expense also increased due to the acquisition of BCH at
the end of 2008. BCH had a $22.1 million term loan facility at December 31, 2008 which was reduced
to $16.2 million at September 30, 2009. Interest expense includes amortization expense of debt
issuance costs of $1.7 million and $1.6 million for the nine months ended September 30, 2009 and
2008, respectively.
Our interest income was $53,000 for the nine months ended September 30, 2009, compared to $4.1
million for the nine months ended September 30, 2008. In January 2008, we invested $40.0 million
into a 15% convertible subordinated secured debenture with BCH. We earned interest on this note up
until December 31, 2008, when we acquired all of the outstanding stock of BCH.
During the nine months ended September 30, 2009, we recorded a gain of $26.4 million as a result of
a tender offer that we completed on June 29, 2009. We purchased $30.6 million aggregate principal
of our 9.0% senior notes and $44.2 million aggregate principal of 8.5% senior notes for
approximately $46.4 million. We also wrote-off $1.5 million of debt issuance costs related to the
retired notes and we incurred approximately $466,000 in expenses related to the transactions.
Our benefit for income taxes for the nine months ended September 30, 2009 was $6.8 million, or
35.5% of our net loss before income taxes, compared to an income tax expense of $17.9 million, or
36.6% of our net income before income taxes for 2008. Our United States effective tax rate was
34.0% for the nine months ended September 30, 2009, compared to 37.8% for the same period in the
prior year. The lower effective tax rate on our United States operations was due to nondeductible
expenses and state income taxes. Our tax rate from our international operations was 31.5% for the
nine months ended September 30, 2009, compared to 35.8% for the same period in the prior year due
to the impact of foreign currency losses.
We had a net loss of $12.3 million for the nine months ended September 30, 2009, compared to net
income of $30.9 million for the nine months ended September 30, 2008 due to the foregoing reasons.
The following table compares revenues and income (loss) from operations for each of our business
segments for the nine months ended September 30, 2009 and 2008. Income (loss) from operations
consists of our revenues and the loss on an asset disposition less direct costs, selling, general
and administrative expenses, depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
Income (Loss) from Operations |
|
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
Change |
|
|
2009 |
|
|
2008 |
|
|
Change |
|
|
|
(in thousands) |
|
Oilfield Services |
|
$ |
105,827 |
|
|
$ |
209,946 |
|
|
$ |
(104,119 |
) |
|
$ |
(15,701 |
) |
|
$ |
40,218 |
|
|
$ |
(55,919 |
) |
Drilling and Completion |
|
|
223,237 |
|
|
|
210,640 |
|
|
|
12,597 |
|
|
|
14,420 |
|
|
|
29,596 |
|
|
|
(15,176 |
) |
Rental Services |
|
|
48,560 |
|
|
|
73,996 |
|
|
|
(25,436 |
) |
|
|
3,318 |
|
|
|
24,033 |
|
|
|
(20,715 |
) |
General corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,879 |
) |
|
|
(13,564 |
) |
|
|
3,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
377,624 |
|
|
$ |
494,582 |
|
|
$ |
(116,958 |
) |
|
$ |
(7,842 |
) |
|
$ |
80,283 |
|
|
$ |
(88,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Oilfield Services
Revenues for our Oilfield Services segment were $105.8 million for the nine months ended September
30, 2009, a decrease of 49.6% compared to $209.9 million in revenues for the nine months ended
September 30, 2008. Income from operations decreased $55.9 million and resulted in loss from
operations of $15.7 million in the first nine months of 2009 compared to income from operations of
$40.2 million in the first nine months of 2008. Our Oilfield Services segment revenues and
operating income for the nine months ended September 30, 2009 decreased compared to the nine months
ended September 30, 2008 due to weak market conditions that resulted in reduced demand and pricing
for our services. During the nine months ended September 30, 2009, we incurred $1.2 million of
costs related to severance payments, the closing of unprofitable locations and downsizing other
locations in our Oilfield Services segment. In addition, we increased our bad debt reserve by
recording $3.1 million of bad debt expense for the Oilfield Services segment during the nine months
ended September 30, 2009 as a result of the decreased oil and natural gas prices and the financial
difficulties that some of our customers are facing. Our bad debt expense recorded in the nine
months ended September 30, 2008 for the Oilfield Services segment was $0.9 million. Depreciation
and amortization expense for the Oilfield Services segment increased by $5.1 million or 29.0% in
the first nine months of 2009 compared to the same period of the previous year, due to capital
expenditures completed during 2008, including six coiled tubing units delivered in the last half of
2008. We have not realized the benefits of these capital expenditures due to decreased utilization
and pricing of our equipment as a result of the decline in United States drilling activity.
Drilling and Completion
Revenues for the nine months ended September 30, 2009 for the Drilling and Completion segment were
$223.2 million, an increase of 6.0% compared to $210.6 million in revenues for the nine months
ended September 30, 2008. Income from operations decreased to $14.4 million in the first nine
months of 2009 compared to $29.6 million for the first nine months of 2008. This reduction was due
to: (1) reduced rig utilization and rig rates in Argentina during the nine months ended September
30, 2009; (2) increased labor and other costs in Argentina during the nine months ended September
30, 2009 (3) an increase of $5.9 million, or 57.4%, in depreciation and amortization in the first
nine months of 2009; (4) a $1.9 million non-cash loss recorded in the nine months ended September
30, 2009 on a rig destroyed in a blow-out; (5) $1.4 million of severance costs during the nine
months ended September 30, 2009 related to workforce reductions in Argentina as a result of lower
activity and (6) $329,000 of costs incurred to consolidate operating locations in Brazil during the
nine months ended September 30, 2009. The increase in depreciation and amortization expense was
the result of the addition of new rigs in Argentina and the acquisition of BCH. Our Drilling and
Completion segment revenues for the first nine months of 2009 included $31.8 million of revenue
generated from the acquisition of BCH at the end of 2008.
Rental Services
Revenues for the nine months ended September 30, 2009 for the Rental Services segment were $48.6
million, a decrease from $74.0 million in revenues for the nine months ended September 30, 2008.
Income from operations decreased to $3.3 million in the first nine months of 2009 compared to $24.0
million in the first nine months of 2008. Our Rental Services segment revenues and operating
income for the first half of 2009 decreased compared to the prior year due primarily to the
decrease in utilization of our rental equipment and a more competitive pricing environment due to a
decrease in drilling activity in the United States The decrease in income from operations in the
nine months ended September 30, 2009 is also due to a $1.0 million increase to the bad debt expense
for Rental Services segment customers who are facing financial difficulties, and $237,000 of costs
related to closing a rental yard and reducing our workforce. Our bad debt expense recorded in the
nine months ended September 30, 2008 for the Rental Services segment was $0.7 million. In
addition, depreciation and amortization expense for our Rental Services segment increased $2.4
million or 12.0%, in the first nine months of 2009 compared to the first nine months of 2008 due to
capital expenditures made during 2008 and a $584,000 additional reduction in the carrying value of
our airplane to its ultimate selling price received in April 2009.
General Corporate
General corporate expenses decreased $3.7 million to $9.9 million for the nine months ended
September 30, 2009 compared to $13.6 million for the nine months ended September 30, 2008. The
decrease was due to the decrease in payroll costs and benefits due to reduced management and
accounting and administrative staff and the decrease in share-based compensation expense.
Share-based compensation expense included in general corporate was $2.8 million in the nine months
ended September 30, 2009 compared to $5.3 million in the nine months ended September 30, 2008.
34
Liquidity
In June 2009, we strengthened our balance sheet by raising approximately $125.6 million in gross
proceeds from the sale of common stock and a newly issued series of preferred stock. The
transactions were effected through a common stock rights offering to our existing stockholders, the
sale of common stock to Lime Rock through its backstop commitment of the rights offering, and the
sale of convertible perpetual preferred stock to Lime Rock. Approximately $46.4 million of the
proceeds were used to purchase an aggregate of $74.8 million principal amount of our existing
senior notes, approximately $35.0 million was used to repay all the borrowings under our revolving
bank credit facility due 2012, except for outstanding letters of credit, and the remainder for
general corporate purposes.
Our on-going capital requirements arise primarily from our need to service our debt, to acquire and
maintain equipment, to fund our working capital requirements and to complete acquisitions. Our
primary sources of liquidity are proceeds from the issuance of debt and equity securities and cash
flows from operations. Our amended and restated revolving credit facility permits borrowings of up
to $90.0 million in principal amount. As of September 30, 2009, we had $85.7 million available for
borrowing under our amended and restated revolving credit facility. Our cash on hand and cash
flows from operations are expected to be our primary source of liquidity in fiscal 2009. We had
cash and cash equivalents of $41.6 million at September 30, 2009 compared to $6.9 million at
December 31, 2008.
Our revolving credit agreement requires us to maintain specified financial ratios. If we fail to
comply with the financial ratio covenants, it could limit or eliminate the availability under our
revolving credit agreement. Our ability to maintain such financial ratios may be affected by
events beyond our control, including changes in general economic and business conditions, and we
cannot assure you that we will maintain or meet such ratios and tests or that the lenders under the
credit agreement will waive any failure to meet such ratios or tests. The decrease in the United
States rig count experienced late in 2008 and 2009 and the resulting decrease in demand for our
services adversely impacts our ability to maintain or meet such financial ratios. We believe that
the $125.6 million in gross equity proceeds received in June 2009 has significantly improved our
liquidity and decreased our reliance on our revolving credit facility. We utilized a portion of
the equity proceeds to prepay all borrowings under our revolving credit agreement and maintained
$41.6 million of cash on hand as of September 30, 2009. We do not plan any new borrowings under
the revolving credit facility in the near future.
Operating Activities
During the nine months ended September 30, 2009, our operating activities provided $37.5 million in
cash. Our net loss for the nine months ended September 30, 2009 was $12.3 million. Non-cash
expenses totaled $34.4 million during the first nine months of 2009 consisting of $61.8 million of
depreciation and amortization, $3.6 million for share based compensation expense, $1.7 million in
amortization of debt issuance costs, $4.1 million related to increases to the allowance for
doubtful accounts receivables, a $1.9 million loss on a rig destroyed in a blow-out, less $26.4
million on the gain from debt extinguishment, $11.1 million for deferred income taxes related to
timing differences and $1.2 million on the gain from asset disposals.
During the nine months ended September 30, 2009, changes in operating assets and liabilities
provided $15.4 million in cash, principally due to a decrease in accounts receivable of $59.5
million, a decrease in prepaid expenses and other current assets of $3.3 million and a decrease in
inventory of $3.9 million, offset in part by a decrease in accounts payable of $29.0 million, a
decrease in accrued interest of $12.5 million and a decrease in accrued expenses of $11.6 million.
Accounts receivable, inventory and accounts payable decreased primarily due to the drop in our
activity in the first nine months of 2009. The decrease in prepaid expense and other current
assets was the result of tax refunds received. The decrease in accrued interest relates to the
semi-annual payment of interest on our senior notes. The decrease in accrued expenses related
primarily to the payment of a $3.0 million earn-out in conjunction with the acquisition of
substantially all of the assets of Diamondback Oilfield Services, Inc., as well as to the drop in
our activity for the first nine months of 2009.
During the nine months ended September 30, 2008, our operating activities provided $74.3 million in
cash. Net income for the nine months ended September 30, 2008 was $30.9 million. Non-cash
expenses totaled $60.8 million during the first nine months of 2008 consisting of $48.5 million of
depreciation and amortization, $4.3 million for deferred income taxes related to timing
differences, $1.6 in amortization of debt issuance costs, $6.2 million from the expensing of stock
based compensation, $1.5 million related to increases to the allowance for doubtful accounts
receivables, less $1.3 million on the gain from asset disposals.
35
During the nine months ended September 30, 2008, changes in operating assets and liabilities used
$17.4 million in cash, principally due to an increase of $30.6 million in accounts receivable, a
decrease in accrued interest of $10.8 million, an increase of $7.0 million in inventories, an
increase of $2.3 million in other assets, offset in part by an increase of $16.6 million in
accounts payable, an increase of $4.8 million in accrued salaries, benefits and payroll taxes and
an increase of $12.1 million in accrued expenses. Accounts receivable increased primarily due to
the increase in our revenues in the first nine months of 2008. The decrease in accrued interest is
due to the scheduled interest payments on our senior notes made in July and September. The
increase in inventories is related to the additional supplies needed to support our increasing rig
and coiled tubing fleets. The increase in other assets primarily relates to $4.0 million of
interest income on our $40.0 million note receivable from BCH offset by the sale of an investment
in a partnership with a cost basis of $1.4 million and reductions of $756,000 of deferred
mobilization costs and $217,000 of oil and natural gas investments. The increase in accounts
payable can be attributed to additional expenses related to the growth of our Drilling and
Completion segments rig fleet and our coiled tubing fleet. The increase in accrued salaries,
benefits and payroll taxes is primarily related to a retroactive pay increase granted to our
Drilling and Completion segments workers based in Argentina due to labor negotiations. The
increase in accrued expenses is primarily related to an additional operational activities and new
capital expenditures in all three of our segments.
Investing Activities
During the nine months ended September 30, 2009, we used $49.4 million in investing activities,
consisting of $67.3 million for capital expenditures, $1.1 million of additional investments,
offset by a decrease of $7.1 million in other assets, $8.0 million of proceeds from equipment sales
and $3.9 million in insurance proceeds for a drilling rig destroyed by a blow-out. Included in the
$67.3 million for capital expenditures was $9.4 million for our Oilfield Services segment, $37.2
million for our two domestic drilling rigs and $13.6 million for additional equipment in our
Drilling and Completion segment and $7.0 million for drill pipe and other equipment used in our
Rental Services segment. We invested $2.4 million of cash and cash expenditures into our
investment into our Saudi Arabia joint venture and we received $1.3 million from insurance proceeds
related to a pre-acquisition contingency on BCH. The decrease in other assets was due to the
conversion of deposits on equipment purchases into capital expenditures for the drilling rigs and
assets used in our directional drilling services. A majority of our equipment sales relate to
items lost in hole or damaged beyond repair by our customers. We also transferred $1.6 million
of rental assets as part of our investment into our Saudi Arabia joint venture in a non-cash
transaction.
During the nine months ended September 30, 2008, we used $163.8 million in investing activities,
consisting of $117.8 million for capital expenditures, a $40.0 million convertible subordinated
secured note from BCH, $9.2 million for deposits on equipment purchases for our Drilling and
Completion segment, $5.8 million for purchases of investment opportunities, offset by $9.0 million
of proceeds from asset sales. Included in the $117.8 million for capital expenditures was $35.6
million for our Oilfield Services segment, including additional casing and tubing equipment and
coiled tubing support equipment, $65.5 million for additional equipment in our Drilling and
Completion segment and $16.7 million for drill pipe and other equipment used in our Rental Services
segment. We made an investment of $5.6 million to acquire a 15% stock ownership interest in BCH,
which complimented our $40.0 million note receivable. We received $3.0 million from the sale of
our drill pipe tong manufacturing assets and $6.0 million from asset sales in connection with items
lost in hole or damaged beyond repair by our customers or other asset sales.
Financing Activities
During the nine months ended September 30, 2009, financing activities provided $46.7 million in
cash. We raised $120.3 million net of expenses from the issuance of common and preferred stock,
and borrowed $25.0 million under a loan facility to acquire two drilling rigs, offset in part by
repayments of $61.5 million of long-term debt and a net repayment on our revolving credit facility
of $36.5 million. The repayments of long-term debt consisted of $46.4 million on the senior notes
as a result of a tender offer and $15.1 million of scheduled debt repayment including prepayment on
our BCH loan facility. We also incurred $644,000 in debt issuance costs consisting of $513,000 on
the revolving credit facility, primarily to modify our loan covenants, and $131,000 on the rig
financing agreement. In addition, we financed our renewal of $3.2 million in insurance policy
premiums in non-cash transactions.
During the nine months ended September 30, 2008, financing activities provided $52.6 million in
cash. We received $38.5 million from net borrowings under our revolving line of credit and an
additional $20.0 million in proceeds from long-term debt and repaid $6.5 million in borrowings
under long-term debt facilities. Proceeds from the additional $20.0 million in long-term borrowing
were used for a portion of the purchase price of the new drilling and service rigs ordered for our
Drilling and Completion segment. We also financed our renewal of $3.0 million in insurance policy
premiums in a non-cash transaction. The $6.5 million of repayment of long-term debt facilities
were scheduled repayments. We also received $633,000 in proceeds from the exercise of options and
warrants.
36
At September 30, 2009, we had $495.4 million in outstanding indebtedness, of which $478.7 million
was long-term debt and $16.7 million is due within one year.
Senior notes, bank loans and line of credit agreements
On January 18, 2006 and August 14, 2006, we closed on private offerings, to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, of $160.0 and $95.0 million
aggregate principal amount of our senior notes, respectively. The senior notes are due January 15,
2014 and bear interest at 9.0%. The proceeds were used to fund the acquisitions of Specialty
Rental Tools, Inc. and DLS, to repay existing debt and for general corporate purposes. On June 29,
2009, we closed on a tender offer in which we purchased $30.6 million aggregate principal of our
9.0% senior notes for a total consideration of $650 per $1,000 principal amount.
In January 2007, we closed on a private offering, to qualified institutional buyers pursuant to
Rule 144A under the Securities Act, of $250.0 million principal amount of 8.5% senior notes due
2017. The proceeds of the senior notes offering, together with a portion of the proceeds of our
concurrent common stock offering, were used to repay the debt outstanding under our $300.0 million
bridge loan facility which we incurred to finance our acquisition of substantially all the assets
of Oil & Gas Rental Services, Inc. On June 29, 2009, we closed on a tender offer in which we
purchased $44.2 million aggregate principal of our 8.5% senior notes for a total consideration of
$600 per $1,000 principal amount.
On January 18, 2006, we also executed an amended and restated credit agreement which provided for a
$25.0 million revolving line of credit with a maturity of January 2010. On April 26, 2007, we
entered into a Second Amended and Restated Credit Agreement, which increased our revolving line of
credit to $62.0 million, and had a final maturity date of April 26, 2012. On December 3, 2007, we
entered into a First Amendment to Second Amended and Restated Credit Agreement, which increased our
revolving line of credit to $90.0 million. The amended and restated credit agreement contains
customary events of default and financial covenants and limits our ability to incur additional
indebtedness, make capital expenditures, pay dividends or make other distributions, create liens
and sell assets. Our obligations under the amended and restated credit agreement are secured by
substantially all of our assets located in the United States. On April 9, 2009, we entered into a
Third Amendment to our existing Second Amended and Restated Credit Agreement dated as of April 26,
2007 which modified the leverage ratio and interest coverage ratio covenants of the Credit
Agreement. In addition, permitted maximum capital expenditures were reduced to $85.0 million for
2009 compared to the previous limit of $120.0 million, which is consistent with our previously
announced plans to limit capital expenditures for the year. We were in compliance with all debt
covenants as of September 30, 2009 and December 31, 2008. As of September 30, 2009, we had no
borrowings under the facility and at December 31, 2008 we had $36.5 million of borrowings
outstanding. The credit agreement loan rates are based on prime or LIBOR plus a margin. The
weighted average interest rate was 4.6% at December 31, 2008. Availability under the facility was
reduced by outstanding letters of credit of $4.3 million and $5.8 million at September 30, 2009 and
December 31, 2008, respectively.
As part of our acquisition of DLS, we assumed various bank loans with floating interest rates based
on LIBOR plus a margin and terms ranging from 2 to 5 years. The weighted average interest rate on
these loans was 2.2% and 5.1% as of September 30, 2009 and December 31, 2008, respectively. The
outstanding amount due as of September 30, 2009 and December 31, 2008 was $1.2 million and $2.5
million, respectively.
On February 15, 2008, through our DLS subsidiary in Argentina, we entered into a $25.0 million
import finance facility with a bank. Borrowings under this facility were used to fund a portion of
the purchase price of the new drilling and service rigs ordered for our Drilling and Completion
segment. The loan is repayable over four years in equal semi-annual installments beginning one
year after each disbursement with the final principal payment due not later than March 15, 2013.
The import finance facility is unsecured and contains customary events of default and financial
covenants and limits DLS ability to incur additional indebtedness, make capital expenditures,
create liens and sell assets. We were in compliance with all debt covenants as of September 30,
2009 and December 31, 2008. The bank loan interest rates are based on LIBOR plus a margin. The
weighted average interest rate was 4.8% and 6.9% at September 30, 2009 and December 31, 2008,
respectively. The outstanding amount as of September 30, 2009 and December 31, 2008 was $21.3
million and $25.0 million, respectively.
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As part of our acquisition of BCH, we assumed a $23.6 million term loan credit facility with a
bank. The credit agreement is dated June 2007 and contains customary events of default and
financial covenants. Obligations under the facility are secured by substantially all of the BCH
assets. The facility is repayable in quarterly principal installments plus interest with the final
payment due not later than August 2012. We were in compliance with all debt covenants as of
September 30, 2009 and December 31, 2008. The credit facility loan interest rates are based on
LIBOR plus a margin. At September 30, 2009 and December 31, 2008, the outstanding amount of the
loan was $16.2 million and $22.1 million and the interest rate was 3.8% and 6.0%, respectively.
On May 22, 2009, we drew down $25.0 million on a new term loan credit facility with a financial
institution. The facility was utilized to fund a portion of the purchase price of two new drilling
rigs. The loan is secured by the equipment. The facility is repayable in quarterly installments
of approximately $1.4 million of principal and interest and matures in May 2015. The loan bears
interest at a fixed rate of 9.0%. At September 30, 2009, the outstanding amount of the loan was
$24.2 million.
Notes payable
In connection with the acquisition of Rogers, we issued to the seller a note in the amount of
$750,000. The note bore interest at 5.0% and was paid in full in April 2009 in accordance with its
terms.
In 2000, we compensated directors who served on the board of directors from 1989 to June 30, 1999
without compensation, by issuing promissory notes totaling $325,000. The notes bore interest at
the rate of 5.0%. As of September 30, 2009 and December 31, 2008, the principal and accrued
interest on these notes was $0 and $32,000.
In 2008, we obtained insurance premium financings in the aggregate amount of $3.0 million with a
fixed average weighted interest rate of 4.9%. Under terms of the agreements, amounts outstanding
are paid over 10 and 11 month repayment schedules. The outstanding balance of these notes was
approximately $0 and $991,000 at September 30, 2009 and December 31, 2008, respectively. In 2009,
we obtained insurance premium financings in the aggregate amount of $3.2 million with a fixed
average weighted interest rate of 4.8%. Under terms of the agreements, the amount outstanding is
paid over 10 and 11 month repayment schedules. The outstanding balance of these notes was
approximately $2.0 million as of September 30, 2009.
Other debt
As part of our acquisition of BCH, we assumed various capital leases with terms of two to three
years. The outstanding balance under these capital leases was $391,000 at September 30, 2009 and
$779,000 at December 31, 2008.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements, other than normal operating leases and employee
contracts, that have or are likely to have a current or future material effect on our financial
condition, changes in financial condition, revenues, expenses, results of operations, liquidity,
capital expenditures or capital resources. We do not guarantee obligations of any unconsolidated
entities. At September 30, 2009, we had a $90.0 million revolving line of credit with a maturity
of April 2012. At September 30, 2009, we had no borrowings on the facility but we had $4.3 million
in outstanding letters of credit.
Capital Resources
We have reduced our planned capital spending for 2009 compared to 2008. We currently expect to
spend a total of approximately $12.0 million of capital expenditures for the remainder of 2009.
This amount includes budgeted but unidentified expenditures which may be required to enhance or
extend the life of existing assets. We believe that our cash generated from operations, cash on
hand and cash available under our credit facilities will provide sufficient funds for our
identified projects and to service our debt. However, the decrease in drilling activity and the
resulting decrease in demand and pricing for our services has an adverse impact on our cash flow
from operations and our liquidity. This could require us to raise external capital and we cannot
be assured such capital will be available to us, especially in the current tight credit market and
volatility in the equity market.
Critical Accounting Policies
Please see our Annual Report on Form 10-K for the year ended December 31, 2008 for a description of
other policies that are critical to our business operations and the understanding of our results of
operations. The impact and any associated risks related to these policies on our business
operations is discussed throughout Managements Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected financial results. No
material changes to such information have occurred during the nine months ended September 30, 2009.
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Recently Issued Accounting Standards
In September 2006, the Financial Accounting Standards Board, or FASB, issued new accounting
guidance related to fair value measurements and related disclosures. This new guidance defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. Subsequently, the FASB provided for a one-year deferral of the provisions as
it relates to fair value measurement requirements for non-financial assets and liabilities that are
recognized or disclosed at fair value in the consolidated financial statements on a non-recurring
basis. We adopted these provisions on January 1, 2008, except as they relate to nonfinancial
assets and liabilities, which were adopted on January 1, 2009 and neither adoption had any impact
on our financial position or results of operations.
In December 2007, the FASB issued new accounting guidance related to the accounting for business
combinations and related disclosures. This guidance changes the requirements for an acquirers
recognition and measurement of the assets acquired and the liabilities assumed in a business
combination. Additionally, the guidance requires that acquisition-related costs, including
restructuring costs, be recognized as expense separately from the acquisition. We adopted this
guidance on January 1, 2009 and the guidance will be applied prospectively to all business
combinations subsequent to the effective date.
In April 2009, the FASB further updated the fair value measurement standard to provide additional
guidance for estimating fair value when the volume and level of activity for the asset or liability
have significantly decreased. This update re-emphasizes that regardless of market conditions the
fair value measurement is an exit price concept as defined in the original standard. It clarifies
and includes additional factors to consider in determining whether there has been a significant
decrease in market activity for an asset or liability and provides additional clarification on
estimating fair value when the market activity for an asset or liability has declined
significantly. We adopted this update on April 1, 2009 and there was no impact on our financial
position or results of operations.
In April 2009, the FASB issued new accounting guidance related to interim disclosures on the fair
value of financial instruments. This guidance requires disclosures about the fair value of
financial instruments whenever a public company issues financial information for interim reporting
periods. We adopted the additional disclosure requirements in our June 30, 2009 financial
statements and there was no impact on our financial position or results of operations.
In May 2009, the FASB issued new accounting guidance that establishes general standards of
accounting for and disclosures of events that occur after the balance sheet date but before the
financial statements are issued or are available to be issued. It requires the disclosure of the
date through which an entity has evaluated subsequent events. We adopted this guidance for the
period ending June 30, 2009, which did not have an impact on our financial position or results of
operations.
In June 2009, the FASB issued new accounting guidance related to variable interest entities and to
provide more relevant and reliable information to users of financial statements. The guidance
requires an analysis to determine whether an entity is a variable interest entity and requires an
enterprise to perform an analysis to determine whether the enterprises variable interest or
interests give it a controlling financial interest. The guidance also requires an ongoing
reassessment and eliminates the quantitative approach previously required for determining whether
an entity is the primary beneficiary. This guidance is effective for annual reporting periods
beginning after November 15, 2009. We are currently evaluating the impact the adoption of this
guidance will have on our financial position and operating results.
In August 2009, FASB further updated the fair value measurement guidance to clarify how an entity
should measure liabilities at fair value. The update reaffirms fair value is based on an orderly
transaction between market participants, even though liabilities are infrequently transferred due
to contractual or other legal restrictions. However, identical liabilities traded in the active
market should be used when available. When quoted prices are not available, the quoted price of
the identical liability traded as an asset, quoted prices for similar liabilities or similar
liabilities traded as an asset, or another valuation approach should be used. This update also
clarifies that restrictions preventing the transfer of a liability should not be considered as a
separate input or adjustment in the measurement of fair value. This update is effective for our
fourth quarter 2009 and we are currently evaluating the impact the adoption of this guidance will
have on our financial position and operating results.
39
In October 2009, the FASB issued an update to existing guidance on revenue recognition for
arrangements with multiple deliverables. This update will allow companies to allocate
consideration received for qualified separate deliverables using estimated selling price for both
delivered and undelivered items when vendor-specific objective evidence or third-party evidence is
unavailable. This update requires expanded qualitative and quantitative disclosures and is
effective for fiscal years beginning on or after June 15, 2010. However, companies may elect to
adopt as early as interim periods ended September 30, 2009. This update may be applied either
prospectively from the beginning of the fiscal year for new or materially modified arrangements or
retrospectively. We are currently evaluating both the timing and impact of adopting this update on
our consolidated financial statements.
Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, regarding our business, financial
condition, results of operations and prospects. Words such as expects, anticipates, intends,
plans, believes, seeks, estimates and similar expressions or variations of such words are intended
to identify forward-looking statements. However, these are not the exclusive means of identifying
forward-looking statements. Although such forward-looking statements reflect our good faith
judgment, such statements can only be based on facts and factors currently known to us.
Consequently, forward-looking statements are inherently subject to risks and uncertainties, and
actual outcomes may differ materially from the results and outcomes discussed in the
forward-looking statements. These factors include, but are not limited to, the following:
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the impact of the weak economic conditions and the future impact of such conditions
on the oil and natural gas industry and demand for our services; |
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the unexpected future capital expenditures (including amount and nature thereof); |
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unexpected difficulties in integrating our operations as a result of any
significant acquisitions; |
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adverse weather conditions in certain regions; |
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the impact of political disturbances, war, or terrorist attacks and changes in
global trade policies; |
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the availability (or lack thereof) of capital to fund our business strategy and/or
operations; |
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the potential impact of the loss of one or more key employees; |
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the effect of environmental liabilities that are not covered by an effective
indemnity or insurance; the impact of current and future laws; |
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the effects of competition; and |
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the effects of our indebtedness, which could adversely restrict our ability to
operate, could make us vulnerable to general adverse economic and industry conditions,
could place us at a competitive disadvantage compared to our competitors that have
less debt, and could have other adverse consequences. |
Further information about the risks and uncertainties that may impact us are described under
Item 1ARisk Factors in our Annual Report on Form 10-K for the year ended December 31, 2008.
You should read those sections carefully. You should not place undue reliance on forward-looking
statements, which speak only as of the date of this annual report. We undertake no obligation to
update publicly any forward-looking statements in order to reflect any event or circumstance
occurring after the date of this annual report or currently unknown facts or conditions or the
occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk primarily from changes in interest rates and foreign currency
exchange risks.
Interest Rate Risk.
Fluctuations in the general level of interest rates on our current and future fixed and variable
rate debt obligations expose us to market risk. We are vulnerable to significant fluctuations in
interest rates affecting our adjustable rate debt, and any future refinancing of our fixed rate
debt and our future debt. We have approximately $38.6 million of adjustable rate debt with a
weighted average interest rate of 4.3% at September 30, 2009.
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Foreign Currency Exchange Rate Risk.
We have designated the U.S. dollar as the functional currency for our operations in international
locations as we contract with customers, purchase equipment and finance capital using the U.S.
dollar. Local currency transaction gains and losses, arising from remeasurement of certain assets
and liabilities denominated in local currency, are included in our consolidated statements of
income.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this quarterly report, we have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e)
and 15d 15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. This
evaluation was carried out under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer. Based on this evaluation, these
officers have concluded that, as of September 30, 2009, our disclosure controls and procedures are
effective at a reasonable assurance level in ensuring that the information required to be disclosed
by us in reports filed under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission, or SEC, rules and
forms.
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Exchange Act, are recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that such
information is accumulated and communicated to management, including our chief executive officer
and chief financial officer, as appropriate, to allow timely decisions regarding required
disclosures.
(b) Change in Internal Control Over Financial Reporting.
There have not been any changes in our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this
report that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS.
Except as set forth below, there have been no material changes in the risk factors disclosed under
Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008.
Substantial sales of our common stock could adversely affect our stock price.
Sales of a substantial number of shares of our common stock, or the perception that such sales
could occur, could adversely affect the market price of our common stock.
We had 71,382,780 shares of common stock outstanding as of October 30, 2009 and 14,202,146
shares reserved for issuance upon conversion of our convertible preferred stock. At October 30,
2009, we had reserved an additional 1,634,387 shares of common stock for issuance under our equity
compensation plans, of which 701,732 shares were issuable upon the exercise of outstanding options
with a weighted average exercise price of $6.31 per share. As of the same date, there were a total
of 417,863 shares of non-performance-based restricted stock and 481,666 shares of performance-based
restricted stock outstanding under our equity compensation plans.
In connection with our acquisition of DLS we entered into an investors rights agreement with the
seller parties to the DLS stock purchase agreement, who collectively hold 11,792,186 shares of our
common stock as of October 30, 2009 In addition, in connection with our backstopped rights
offering, we entered into a registration rights agreement with Lime Rock who hold 19,889,044 shares
of our common stock and 36,393 shares of our preferred stock as of October 30,2009, which are
convertible into 14,202,146 shares of our common stock. Pursuant to those agreements, the DLS
sellers and Lime Rock are entitled to certain rights with respect to the registration of the sale
of such common shares under the Securities Act. By exercising their registration rights and
causing a large number of shares to be sold in the public market, these holders could cause the
market price of our common stock to decline.
We cannot predict whether future sales of our common stock, or the availability of our common
stock for sale, will adversely affect the market price for our common stock or our ability to raise
capital by offering equity securities.
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The DLS sellers and Lime Rock control substantial ownership stakes in us and have board nomination
rights, and they are therefore able to exert significant influence on our affairs and actions,
including matters submitted for a stockholder vote.
The DLS sellers collectively hold 11,792,186 shares of our common stock, representing
approximately 16.5% of our issued and outstanding shares as of October 30, 2009. Under the
investors rights agreement that we entered into in connection with the DLS acquisition, the DLS
sellers have the right to designate two nominees for election to our board of directors. Lime Rock
currently holds 19,889,044 shares of our common stock, representing approximately 27.9% of our
issued and outstanding shares as of October 30, 2009. In addition, Lime Rock owns 36,393 shares of
preferred stock which are convertible into 14,202,146 shares of our common stock. Through its
ownership of common and preferred stock, Lime Rock controls, in the aggregate, 35% of our
stockholders voting power. Pursuant to the investment agreement we entered into with Lime Rock,
Lime Rock has the right to designate up to four people to serve on our board of directors based
upon the amount of our common stock Lime Rock and its affiliates beneficially own (counting the
preferred stock on an as converted basis). Currently, Lime Rock has the right to designate four
nominees for election to our board of directors. As a result, the DLS sellers and Lime Rock each
have considerable influence over the composition of our board of directors, our future operations
and strategy and our future corporate actions, including matters submitted for a stockholder vote.
Following the earlier of June 26, 2012 and the date on which the transfer restrictions set forth in
the Investment Agreement expire, Lime Rock will not be prohibited from acquiring additional shares
of our common stock or converting its shares of preferred stock, even if such conversion will
result in its control of more than 35% of our stockholders voting power. As a result, Lime Rocks
influence over us may increase in the future.
Conflicts of interest between the DLS sellers and Lime Rock, on the one hand, and other holders of
our securities, on the other hand, may arise with respect to sales of shares of capital stock owned
by the DLS sellers or Lime Rock or other matters. In addition, the interests of the DLS sellers or
Lime Rock regarding any proposed merger or sale may differ from the interests of other holders of
our securities.
The board designation rights described above could have the effect of delaying or preventing a
change in our control or otherwise discouraging a potential acquirer from attempting to obtain
control of us, which in turn could have a material and adverse effect on the market price of our
securities and/or our ability to meet our obligations thereunder.
ITEM 6. EXHIBITS
(a) The exhibits listed on the Exhibit Index immediately following the signature page of this
Quarterly Report on Form 10-Q are filed as part of this report.
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 on November 5,
2009.
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Allis-Chalmers Energy Inc.
(Registrant)
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/s/ Munawar H. Hidayatallah
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Munawar H. Hidayatallah |
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Chief Executive Officer and
Chairman |
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EXHIBIT INDEX
3.1 |
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Certificate of Designations of 7% Convertible Perpetual Preferred Stock (incorporated by
reference to Exhibit 3.1 to the Registrants Form 8-K filed on July 1, 2009). |
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4.1 |
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First Amendment to Investment Agreement, dated June 25, 2006, between Allis-Chalmers Energy
Inc. and Lime Rock Partners V, L.P. (incorporated by reference to Exhibit 4.1 to the
Registrants Form 8-K filed on July 1, 2009). |
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4.2 |
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Second Amendment to Investment Agreement, dated September 1, 2009, between Allis-Chalmers
Energy Inc. and Lime Rock Partners V, L.P. (incorporated by reference to Exhibit 4.1 to the
Registrants Form 8-K filed on September 2, 2009). |
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4.3 |
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Registration Rights Agreement, dated June 26, 2009, between Allis-Chalmers Energy Inc. and
Lime Rock Partners V, L.P. (incorporated by reference to Exhibit 4.2 to the Registrants Form
8-K filed on July 1, 2009). |
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10.1 |
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Amended and Restated Employment Agreement, dated August 5, 2009, between Allis-Chalmers
Energy Inc. and Victor M. Perez (incorporated by reference to Exhibit 10.1 to the Registrants
Form 8-K filed on August 11, 2009). |
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10.2 |
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Amended and Restated Performance Award Agreement, dated August 5, 2009, between
Allis-Chalmers Energy Inc. and Victor M. Perez (incorporate by reference to Exhibit 10.2 to
the Registrants Form 8-K filed on August 11, 2009). |
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10.3 |
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Fifth Amendment to Second Amended and Restated Credit Agreement, dated as of October 13,
2009, by and among the Company, as borrower, certain subsidiaries of the Company, as
guarantors, Royal Bank of Canada, as administrative agent, and the lenders named thereto
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on October 16,
2009). |
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31.1* |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2* |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1* |
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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