##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
  þ
    
    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
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File Number 1-7573
 PARKER DRILLING COMPANY
  Delaware
    
    73-0618660(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 5 Greenway Plaza, Suite 100, Houston, Texas 77046  (Address of principal executive offices) (Zip code)
 (281) 406-2000  (Registrants telephone number, including area code)
  þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting Company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS
 PagePart I.Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Condensed Balance Sheets (Unaudited)
September 30, 2009 and December 31, 2008
    
    
    3Consolidated Condensed Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 2009 and 2008
    
    
    4Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2009 and 2008
    
    
    5Notes to the Unaudited Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36Part II.Other Information
    
    
    37Item 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    37Signatures
    
    
    38Officer CertificationsEX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 PARKER DRILLING COMPANY AND SUBSIDIARIES


CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    94,431
    
    
    $
    172,298Accounts and notes receivable, net
    
    
    196,039
    
    
    
    186,164Rig materials and supplies
    
    
    28,901
    
    
    
    30,241Deferred costs
    
    
    6,989
    
    
    
    7,804Deferred income taxes
    
    
    9,735
    
    
    
    9,735Other tax assets
    
    
    30,319
    
    
    
    40,924Other current assets
    
    
    46,350
    
    
    
    26,125Total current assets
    
    
    412,764
    
    
    
    473,291Property, plant and equipment less
accumulated depreciation and amortization of $788,324
at September 30, 2009 and $712,688 at December 31, 2008
    
    
    702,820
    
    
    
    675,548Deferred income taxes
    
    
    38,458
    
    
    
    22,956Other noncurrent assets
    
    
    36,375
    
    
    
    33,925Total assets
    
    $
    1,190,417
    
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    6,000Accounts payable and accrued liabilities
    
    
    127,516
    
    
    
    140,398Accrued income taxes
    
    
    9,967
    
    
    
    12,130Total current liabilities
    
    
    149,483
    
    
    
    158,528Long-term debt
    
    
    413,692
    
    
    
    435,394Other long-term liabilities
    
    
    19,719
    
    
    
    21,396Long-term deferred tax liability
    
    
    8,178
    
    
    
    8,230Contingencies (Note 10)
    
    
    
    
    
    
    Stockholders equity:Noncontrolling interest
    
    
    
    
    
    
    Common stock
    
    
    19,361
    
    
    
    18,910Capital in excess of par value
    
    
    622,692
    
    
    
    619,561Accumulated deficit
    
    
    (42,708
    )
    
    
    (56,299
    )Total stockholders equity
    
    
    599,345
    
    
    
    582,172Total liabilities and stockholders equity
    
    $
    1,190,417
    
    
    $
    1,205,720
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PARKER DRILLING COMPANY AND SUBSIDIARIES


CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share and Weighted Average Shares Outstanding)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:International Drilling
    
    $
    63,966
    
    
    $
    92,226
    
    
    $
    220,626
    
    
    $
    238,885U.S. Drilling
    
    
    12,350
    
    
    
    44,743
    
    
    
    35,095
    
    
    
    139,999Project Management and Engineering Services
    
    
    25,869
    
    
    
    24,089
    
    
    
    81,814
    
    
    
    72,219Construction Contract
    
    
    55,325
    
    
    
    20,421
    
    
    
    149,642
    
    
    
    40,501Rental Tools
    
    
    23,899
    
    
    
    45,975
    
    
    
    89,948
    
    
    
    125,858Total revenues
    
    
    181,409
    
    
    
    227,454
    
    
    
    577,125
    
    
    
    617,462Operating expenses:International Drilling
    
    
    41,964
    
    
    
    63,682
    
    
    
    140,628
    
    
    
    172,915U.S. Drilling
    
    
    10,057
    
    
    
    21,850
    
    
    
    34,821
    
    
    
    65,502Project Management and Engineering Services
    
    
    19,420
    
    
    
    21,451
    
    
    
    63,597
    
    
    
    61,819Construction Contract
    
    
    52,203
    
    
    
    19,323
    
    
    
    142,117
    
    
    
    38,373Rental Tools
    
    
    12,232
    
    
    
    18,166
    
    
    
    41,438
    
    
    
    50,014Depreciation and amortization
    
    
    29,307
    
    
    
    30,663
    
    
    
    85,382
    
    
    
    84,995Total operating expenses
    
    
    165,183
    
    
    
    175,135
    
    
    
    507,983
    
    
    
    473,618Total operating gross margin
    
    
    16,226
    
    
    
    52,319
    
    
    
    69,142
    
    
    
    143,844General and administration expense
    
    
    (9,812
    )
    
    
    (9,271
    )
    
    
    (33,998
    )
    
    
    (24,420
    )Provision for reduction in carrying value of certain
assets
    
    
    (2,757
    )
    
    
    
    
    
    
    (2,757
    )
    
    
    Gain on disposition of assets, net
    
    
    1,225
    
    
    
    799
    
    
    
    2,007
    
    
    
    2,014Total operating income
    
    
    4,882
    
    
    
    43,847
    
    
    
    34,394
    
    
    
    121,438Other income and (expense):Interest expense
    
    
    (7,093
    )
    
    
    (7,026
    )
    
    
    (22,663
    )
    
    
    (20,908
    )Interest income
    
    
    435
    
    
    
    383
    
    
    
    895
    
    
    
    1,121Equity in loss of unconsolidated joint venture and
related charges, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,105
    )Other
    
    
    (285
    )
    
    
    299
    
    
    
    (365
    )
    
    
    503Total other income and (expense)
    
    
    (6,943
    )
    
    
    (6,344
    )
    
    
    (22,133
    )
    
    
    (20,389
    )Income (loss) before income taxes
    
    
    (2,061
    )
    
    
    37,503
    
    
    
    12,261
    
    
    
    101,049Income tax (benefit) expense:Current
    
    
    1,325
    
    
    
    14,179
    
    
    
    14,224
    
    
    
    13,024Deferred
    
    
    (10,480
    )
    
    
    5,494
    
    
    
    (15,554
    )
    
    
    25,096Total income (benefit) tax expense
    
    
    (9,155
    )
    
    
    19,673
    
    
    
    (1,330
    )
    
    
    38,120Net income
    
    
    7,094
    
    
    
    17,830
    
    
    
    13,591
    
    
    
    62,929Net income attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income attributable to Parker Drilling
    
    $
    7,094
    
    
    $
    17,830
    
    
    $
    13,591
    
    
    $
    62,929Basic earnings per share:Net income
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.12
    
    
    $
    0.57Diluted earnings per share:Net income
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.12
    
    
    $
    0.56Number of common shares used in computing earnings per shareBasic
    
    
    113,263,123
    
    
    
    111,756,322
    
    
    
    112,905,172
    
    
    
    111,243,745Diluted
    
    
    115,237,348
    
    
    
    112,647,450
    
    
    
    114,604,108
    
    
    
    112,324,566
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PARKER DRILLING COMPANY AND SUBSIDIARIES


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    13,591
    
    
    $
    62,929Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation and amortization
    
    
    85,382
    
    
    
    84,995Gain on disposition of assets
    
    
    (2,007
    )
    
    
    (2,014
    )Equity loss in unconsolidated joint venture and related
charges, net of tax
    
    
    
    
    
    
    1,105Deferred income tax expense
    
    
    (15,554
    )
    
    
    25,096Provision for reduction in carrying value of certain assets
    
    
    2,757
    
    
    
    Expenses not requiring cash
    
    
    8,346
    
    
    
    11,780Change in accounts receivable
    
    
    (6,351
    )
    
    
    (46,903
    )Change in other assets
    
    
    (11,326
    )
    
    
    7,627Change in liabilities
    
    
    (8,511
    )
    
    
    (11,887
    )Net cash provided by operating activities
    
    
    66,327
    
    
    
    132,728Cash flows from investing activities:Capital expenditures
    
    
    (126,909
    )
    
    
    (157,313
    )Proceeds from the sale of assets
    
    
    3,364
    
    
    
    3,284Proceeds from insurance settlements
    
    
    
    
    
    
    951Investment in unconsolidated joint venture
    
    
    
    
    
    
    (5,000
    )Net cash used in investing activities
    
    
    (123,545
    )
    
    
    (158,078
    )Cash flows from financing activities:Proceeds from draw on term note facility
    
    
    
    
    
    
    50,000Proceeds from draw on revolver credit facility
    
    
    4,000
    
    
    
    25,000Paydown on revolver credit facility
    
    
    (23,000
    )
    
    
    (35,000
    )Payments of debt issuance costs
    
    
    
    
    
    
    (1,846
    )Proceeds from stock options exercised
    
    
    199
    
    
    
    1,970Excess tax cost (benefit) from stock based compensation
    
    
    (1,848
    )
    
    
    379Net cash provided (used in) by financing activities
    
    
    (20,649
    )
    
    
    40,503Net increase (decrease) in cash and cash equivalents
    
    
    (77,867
    )
    
    
    15,153Cash and cash equivalents at beginning of year
    
    
    172,298
    
    
    
    60,124Cash and cash equivalents at end of period
    
    $
    94,431
    
    
    $
    75,277Supplemental cash flow information:Interest paid
    
    $
    17,135
    
    
    $
    16,364Income taxes paid
    
    $
    16,534
    
    
    $
    32,158
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PARKER DRILLING COMPANY AND SUBSIDIARIES
 
 NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 1.
    
    General In the opinion of the management of Parker Drilling Company, the accompanying
unaudited consolidated condensed financial statements reflect all adjustments (of a normally
recurring nature) which are necessary for a fair presentation of (1) the financial position as
of September 30, 2009 and December 31, 2008, (2) the results of operations for the three and
nine months ended September 30, 2009 and 2008, and (3) cash flows for the nine months ended
September 30, 2009 and 2008. Results for the nine months ended September 30, 2009 are not
necessarily indicative of the results that will be realized for the year ending December 31,
2009. The financial statements should be read in conjunction with our Annual Report on Form
10-K for the year ended December 31, 2008.Stock-Based Compensation- Total stock-based compensation expense recognized for the three and
nine month periods ended September 30, 2009 and for the three and nine month periods ended
September 30, 2008 was $0.8 million and $3.7 million and $2.7 million and $6.5 million,
respectively, all of which was related to non-vested stock of the Company (or restricted
stock) plan expense. Stock-based compensation expense is included in our consolidated
condensed income statement in both General and administration expense and operating expense.
There were no unvested stock options at September 30, 2009. The Company had 205,300
outstanding and exercisable stock options as of September 30, 2009, the aggregate intrinsic
value of which was negligible, with a weighted average exercise price of $3.10. Unvested
restricted stock awards at September 30, 2009 and December 31, 2008 were 2,677,094 shares and
1,458,716 shares, respectively. Total unrecognized compensation cost related to unamortized
restricted stock awards was $3.4 million as of September 30, 2009 and $3.8 million as of
December 31, 2008. The remaining unrecognized compensation cost related to unamortized
restricted stock awards will be amortized over a weighted-average vesting period of
approximately one year.For the nine months ended September 30, 2009, the restricted stock vestings resulted in a tax
benefit that was less than the deferred tax asset previously recognized. As a result, a
shortfall or tax cost of $1.8 million for the nine months ended was offset against additional
paid in capital.Convertible Senior Notes, including call options and warrants- In May 2008, the Financial
Accounting Standards Board (FASB) issued accounting guidance in respect to accounting for
convertible debt instruments that may be settled in cash upon conversion (including partial cash
settlement). The accounting guidance requires that the liability and equity components of
convertible debt instruments that may be settled in cash upon conversion (including partial cash
settlement) be separated to account for the fair value of the debt and equity components as of
the date of issuance to reflect the issuers non-convertible debt borrowing rate. The
accounting guidance was effective for financial periods beginning after December 15, 2008 and
was applied retrospectively to all periods presented (retroactive restatement).The adoption of the new rules on January 1, 2009 impacted the treatment of the Companys 2.125
percent convertible senior notes due 2012 by reclassifying a portion of the convertible note
balances to additional paid in capital for the estimated fair value of the conversion feature at
the date of issuance and creating a discount on the convertible notes that will be amortized
through interest expense over the life of the convertible notes. The Companys non-convertible
debt borrowing rate at the date of issuance (July 2007) was 7.25 percent and, accordingly,
adoption of the accounting rules resulted in a significant increase in interest expense, and
reduced net income and basic earnings per share in the Companys consolidated condensed
financial statements. Upon adoption, the Company restated its Accumulated deficit balance by
approximately $6.8 million to reflect the additional interest expense from issuance on July 5,
2007 through December 31, 2008 and reduced Convertible senior notes by $19.7 million,
reflecting the issuance of the notes at a discount and including amortization of the discount
from the transaction date through the adoption date. The Companys Paid in capital balance
increased by $26.5 million, reflecting the equity portion of the initial transaction. A
deferred tax asset provision of $10.6 million was also established upon initial adoption with a
corresponding reduction in Paid in capital. This provision was then reduced by $2.7 million
with the offset to Accumulated deficit to reflect the benefit associated with the additional
interest recorded from July 2007 to December 31, 2008. See the tables below for changes to the
relevant 2008 financials.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 1.
    
    General (continued)
 Balance Sheet
 RestatedDecember 31, 2008
    
    
    Adjustments
    
    
    December 31, 2008ASSETSDeferred income taxes
    
    $
    30,867
    
    
    $
    (7,911
    )
    
    $
    22,956Total assets
    
    $
    1,213,631
    
    
    
    
    
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYLong-term debt
    
    $
    455,073
    
    
    $
    (19,679
    )
    
    $
    435,394Capital in excess of par
    
    
    603,731
    
    
    
    15,830
    
    
    
    619,561Accumulated deficit
    
    
    (52,237
    )
    
    
    (4,062
    )
    
    
    (56,299
    )Total liabilities and stockholders equity
    
    $
    1,213,631
    
    
    
    
    
    
    $
    1,205,720
 Statement of Operations
 RestatedThree months ended
    
    
    
    
    
    
    Three months endedSeptember 30, 2008
    
    
    Adjustments
    
    
    September 30, 2008Other expense:Interest expense
    
    $
    (5,820
    )
    
    $
    (1,206
    )
    
    $
    (7,026
    )Income tax (benefit) expense:Deferred
    
    
    5,979
    
    
    
    (485
    )
    
    
    5,494Net income
    
    $
    18,551
    
    
    
    
    
    
    $
    17,830
 RestatedNine months ended
    
    
    
    
    
    
    Nine months endedSeptember 30, 2008
    
    
    Adjustments
    
    
    September 30, 2008Other expense:Interest expense
    
    $
    (17,386
    )
    
    $
    (3,522
    )
    
    $
    (20,908
    )Income tax (benefit) expense:Deferred
    
    
    26,512
    
    
    
    (1,416
    )
    
    
    25,096Net income
    
    $
    65,035
    
    
    
    
    
    
    $
    62,929
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 1.
    
    General (continued)The maturity date of the notes (July 15, 2012) is the expected life of the liability due to the
current market value of the Companys stock which is significantly lower than the note
conversion price of $13.85 per share. The 7.25 percent cost of non-convertible debt was
calculated for use in our decision model when the convertible notes were issued in July 2007.
Using 7.25 percent, the fair value of the notes was calculated to be $98.5 million and the
discount on the notes $26.5 million. Interest expense for the three and nine months ended of
September 30, 2009 was increased by $1.3 million and $3.8 million, respectively, to reflect the
fair value increment calculated as the amortization of the debt discount, using the effective
interest rate method. In addition, $0.7 million of interest expense was recognized during the
current quarter for the contractual interest coupon on these convertible notes.Property, Plant and Equipment- In the first quarter 2009, we implemented a change in accounting
estimate to more accurately reflect the useful life of some of the long-lived assets in our U.S.
Drilling and International Drilling segments. This resulted in an approximate $12 million
reduction in depreciation expense in the nine months ended September 30, 2009. We extended the
useful lives of these long-lived assets based on our review of their service lives,
technological improvements in the asset, and recent changes to our refurbishment and maintenance
practices which helped to extend the lives.Non-Controlling Interest In December 2007, the FASB issued accounting guidance in regards to
noncontrolling interests in consolidating financial statements. The enhanced guidance related
to the disclosure of information regarding noncontrolling interests in a subsidiary and their
effect on the company. For the Company, the new guidance is effective January 1, 2009. The
Company did not apply the disclosure provisions of the new guidance as the information regarding
noncontrolling interests in a subsidiary is immaterial to the consolidated condensed financial
statements.Construction Contract- Historically the Company has primarily constructed drilling rigs for its
own use. In some instances, however, the Company enters into contracts to design, construct,
deliver and commission a rig for a major customer. In 2008, we were awarded a cost
reimbursable, fixed fee contract to construct, deliver and commission a rig for extended-reach
drilling work in Alaska. Total cost of the construction phase is currently expected to be
approximately $219 million. The Company recognizes revenues received and costs incurred related
to its construction contract on a gross basis and income for the related fees on a percentage of
completion basis using the cost-to-cost method. Construction costs in excess of funds received
from the customer are accumulated and reported as part of other current assets. At September
30, 2009, a net asset of $18.7 million is included
in other current assets.Cash and Cash Equivalents- For purposes of the balance sheet and the statement of cash flows,
the Company considers cash equivalents to be all highly liquid investment instruments that have
a remaining maturity of three months or less at the date of purchase.Subsequent Events- In preparing these financial statements, we have evaluated subsequent events
through November 6, 2009, which is the date the financial statements are being issued.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 2.
    
    Earnings Per Share (EPS)
 Three Months Ended September 30, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    7,094,000
    
    
    
    113,263,123
    
    
    $
    0.06Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,974,225
    
    
    $
    Diluted EPS:Net income
    
    $
    7,094,000
    
    
    
    115,237,348
    
    
    $
    0.06
 Nine Months Ended September 30, 2009Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    13,591,000
    
    
    
    112,905,172
    
    
    $
    0.12Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,698,936
    
    
    $
    Diluted EPS:Net income
    
    $
    13,591,000
    
    
    
    114,604,108
    
    
    $
    0.12
 Three Months Ended September 30, 2008Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    17,830,000
    
    
    
    111,756,322
    
    
    $
    0.16Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    891,128
    
    
    $
    Diluted EPS:Net income
    
    $
    17,830,000
    
    
    
    112,647,450
    
    
    $
    0.16
 Nine Months Ended September 30, 2008Income
    
    
    Shares
    
    
    Per-Share(Numerator)
    
    
    (Denominator)
    
    
    AmountBasic EPS:Net income
    
    $
    62,929,000
    
    
    
    111,243,745
    
    
    $
    0.57Effect of dilutive securities:Stock options and restricted stock
    
    
    
    
    
    
    1,080,821
    
    
    $
    (0.01
    )Diluted EPS:Net income
    
    $
    62,929,000
    
    
    
    112,324,566
    
    
    $
    0.56
 9




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##### Table of Contents



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 2.
    
    Earnings Per Share (EPS) (continued)There were no options to purchase shares of common stock outstanding during the three months
ended September 30, 2009, and options to purchase 90,300 shares of common stock with exercise
prices ranging from $3.78 to $4.20 were outstanding during the nine months ended September 30,
2009, but were not included in the computation of diluted EPS because the options exercise
prices were greater than the average market price of the common shares and would have been
accretive. All stock options outstanding during the three and nine months ended September 30,
2008, were included in the computation of diluted EPS as the options exercise prices were less
than the average market price of the common shares.
 3.
    
    Business Segments- The five primary services we provide are as follows: International
Drilling, U.S. Drilling, Project Management and Engineering Services, Construction Contract
and Rental Tools. In the first quarter of 2008, the Company created the Project Management
and Engineering Services segment by combining our labor, operations and maintenance and
engineering services contracts which had been previously reported in our U.S. Drilling or
International Drilling segments. The segment was created in anticipation of the significant
expansion of these projects and services and senior managements resultant separate
performance assessment and resource allocation for this segment. This segments operations,
unlike our U.S. and International Drilling and Rental Tools operations, generally require
little or no capital expenditures, and therefore have different performance assessment and
resource needs. The Company anticipates further growth of this segment of our business and
reviews and assesses its performance separately. In the second quarter of 2008, the Company
created the Construction Contract segment to reflect the Companys Engineering, Procurement,
Construction and Installation contract (EPCI). The Construction Contract segment income
(fees) is accounted for on a percentage of completion basis using the cost-to-cost method.
Revenues received and costs incurred related to the contract are recorded on a gross basis.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 3.
    
    Business Segments (continued)
 Information regarding our operations by industry segment for the three and nine months ended
September 30, 2009 and 2008 is as follows:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in Thousands)Revenues:International Drilling
    
    $
    63,966
    
    
    $
    92,226
    
    
    $
    220,626
    
    
    $
    238,885U.S. Drilling
    
    
    12,350
    
    
    
    44,743
    
    
    
    35,095
    
    
    
    139,999Project Management and Engineering Services
    
    
    25,869
    
    
    
    24,089
    
    
    
    81,814
    
    
    
    72,219Construction Contract
    
    
    55,325
    
    
    
    20,421
    
    
    
    149,642
    
    
    
    40,501Rental Tools
    
    
    23,899
    
    
    
    45,975
    
    
    
    89,948
    
    
    
    125,858Total revenues
    
    $
    181,409
    
    
    $
    227,454
    
    
    $
    577,125
    
    
    $
    617,462Operating gross margin:International Drilling
    
    $
    8,734
    
    
    $
    14,241
    
    
    $
    41,809
    
    
    $
    29,029U.S. Drilling
    
    
    (4,842
    )
    
    
    14,166
    
    
    
    (21,081
    )
    
    
    48,475Project Management and Engineering Services
    
    
    6,449
    
    
    
    2,638
    
    
    
    18,217
    
    
    
    10,400Construction Contract
    
    
    3,122
    
    
    
    1,098
    
    
    
    7,525
    
    
    
    2,128Rental Tools
    
    
    2,763
    
    
    
    20,176
    
    
    
    22,672
    
    
    
    53,812Total operating gross margin
    
    
    16,226
    
    
    
    52,319
    
    
    
    69,142
    
    
    
    143,844General and administration expense
    
    
    (9,812
    )
    
    
    (9,271
    )
    
    
    (33,998
    )
    
    
    (24,420
    )Provision for reduction in carrying value of
certain assets
    
    
    (2,757
    )
    
    
    
    
    
    
    (2,757
    )
    
    
    Gain on disposition of assets, net
    
    
    1,225
    
    
    
    799
    
    
    
    2,007
    
    
    
    2,014Total operating income
    
    
    4,882
    
    
    
    43,847
    
    
    
    34,394
    
    
    
    121,438Interest expense
    
    
    (7,093
    )
    
    
    (7,026
    )
    
    
    (22,663
    )
    
    
    (20,908
    )Other
    
    
    150
    
    
    
    682
    
    
    
    530
    
    
    
    519Income (loss) before income taxes
    
    $
    (2,061
    )
    
    $
    37,503
    
    
    $
    12,261
    
    
    $
    101,049
 4.
    
    Disposition of Assets- In the first nine months of 2009 asset dispositions consisted
primarily of the sale of miscellaneous equipment, resulting in a recognized gain of $2.0
million. Asset dispositions in the first nine months of 2008 included the sale of Rig 206 in
Indonesia, which we sold at our net book value, and miscellaneous equipment that resulted in a
recognized gain of $2.0 million.
 5.
    
    Accounting for Uncertainty in Income Taxes FIN 48 prescribes a recognition threshold and a
measurement attribute for the financial statement recognition and measurement of tax positions
taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. During March
2008, the Company resolved the pending tax case with the Kazakhstan Ministry of Finance by
paying the reduced interest assessment related to tax payments made in 2007 (see Note 8 -
Kazakhstan Tax Case), and we accordingly reduced the previously recorded accruals based on the
final resolution of this matter. During 2009, the Company recognized $1.1 million of expense
related to certain intercompany transactions between our U.S. companies and foreign
affiliates. In addition, the Company recognized $0.4 million of expense in the third quarter
of 2009 related to certain overhead charges at risk of not being fully deductible in a foreign
jurisdiction by one of our foreign branches. As of September 30, 2009, the Company had a
remaining liability for unrecognized tax benefits of $12.7 million primarily related to
foreign operations.
 6.
    
    Income Tax Expense  Income tax benefit was $9.2 million for the third quarter of 2009, as compared to income tax
expense of $19.7 million for the third quarter of 2008 which includes the reversal of a $3.1
million reserve for 2007 foreign tax credits. The decrease in income tax expense in the third
quarter of 2009, compared to the third quarter of 2008, was primarily due to lower pre-tax income
in the third quarter of 2009, as well as an incremental tax benefit of $6.1 million for crediting
foreign taxes previously deducted.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 7.
    
    Saudi Arabia Joint Venture- On April 9, 2008, a subsidiary of the Company executed an
agreement (Sale Agreement) to sell its 50 percent share interest in Al-Rushaid Parker
Drilling Co. Ltd. (ARPD) to an affiliate of the Al Rushaid subsidiary that owned the
remaining 50 percent interest. The terms of the Sale Agreement provided for a $2.0 million
payment to the Companys subsidiary as consideration for the 50 percent share interest of the
subsidiary and partial repayment of investments and advances of the Companys subsidiary to
ARPD, including a $5.0 million advance in January 2008. During the first quarter of 2008, the
subsidiary made the decision to terminate any future funding to ARPD, and accordingly, the
Company did not record equity in losses of ARPD in the first quarter of 2008. We recognized a
$1.1 million loss, net of income taxes, in the first quarter of 2008 primarily as a result of
nonrecoverable costs, as per the terms of the Sale Agreement, incurred by the Companys
affiliate to support ARPD operations. The subsidiary received the $2.0 million on April 15,
2008 in full settlement of the Companys investment in and advances to ARPD. The Sale
Agreement obligates the resulting Saudi shareholders to indemnify the Companys subsidiary
and its affiliates from claims arising out of, or related to, the operations of ARPD,
including the drilling contracts between ARPD and Saudi Aramco, ARPDs bank loans and vendors
providing goods or services to ARPD. Each party has agreed to waive any claims that it may
have against the other party arising out of the business of ARPD on or before the closing
date, and subject to the formal transfer of the shares to the Companys subsidiary, has agreed
to disclaim any remaining rights with respect to the unpaid portion of shareholder loans and
payables owed by ARPD to the subsidiary. The formal transfer of shares was approved by the
Saudi Arabian authorities in July 2008.The agreement also provides that there are no restrictions on the Company or any of its
affiliates with regard to competing with ARPD in the future, including in Saudi Arabia.
 8.
    
    Kazakhstan Tax Case- On October 12, 2005, the Kazakhstan Branch (PKD Kazakhstan) of Parker
Drillings subsidiary, Parker Drilling Company International Limited (PDCIL), received an
Act of Tax Audit from the Ministry of Finance of Kazakhstan (MinFin) assessing PKD
Kazakhstan an amount of KZT (Kazakhstan Tenge) 14.9 billion (approximately $125.8 million).
Approximately KZT7.5 billion or $63.3 million was assessed for import Value Added Tax (VAT)
on equipment imported to perform drilling contracts, including administrative fines and
interest (the VAT Assessment). Approximately KZT7.4 billion or $62.5 million was assessed
for corporate income tax, individual income tax and social tax, administrative fines and
interest in connection with reimbursements received by PDCIL from a client for the upgrade of
Barge Rig 257 and other issues related to PKD Kazakhstans operations in the Republic of
Kazakhstan (the Income Tax Assessment).On May 24, 2006, the Supreme Court of the Republic of Kazakhstan (SCK) issued a decision
upholding the VAT Assessment. Consistent with its contractual obligations, on November 20,
2006, the client advanced the actual amount of the VAT Assessment and this amount has been
remitted to MinFin. The administrative fines related to the VAT Assessment are being appealed.
The client is contractually responsible to reimburse PKD Kazakhstan for any administrative fines
ultimately assessed. The client has also contractually agreed to reimburse PKD Kazakhstan for
any incremental income taxes that PKD Kazakhstan incurs from the reimbursement of this VAT
Assessment. As of September 30, 2009, the appeal of the administrative fines was still being
pursued.After multiple appeals to the SCK and two meetings of the U.S. Competent Authorities under the
Mutual Agreement Procedure of the U.S.- Kazakhstan Tax Treaty, the SCK ultimately upheld the
Income Tax Assessment and on December 12, 2007, PKD Kazakhstan paid the principal tax portion of
the Income Tax Assessment, net of estimated taxes previously paid. After a further appeal
against the interest portion of the notice of assessment, on February 25, 2008, the Atyrau
Economic Court issued a ruling that interest on the income tax assessed should accrue from the
October 12, 2005 assessment date as opposed to the original assessment in 2001, resulting in a
revised interest assessment by the Atyrau Tax Committee of approximately US$13 million, which
was paid by PKD Kazakhstan on March 14, 2008, in final resolution of this matter.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 9.
    
    Long-Term Debt
 September 30,
    
    
    December 31,2009
    
    
    2008(Dollars in Thousands)Convertible Senior Notes
payable in July 2012 with interest
at 2.125%
payable semi-annually in January
and July, net of unamortized
discount
of $15,896 at September 30, 2009
and $19,679 at December 31, 2008
    
    $
    109,104
    
    
    $
    105,321Senior Notes payable in October 2013
with interest at 9.625% payable
semi-annually in April and October
net of unamortized premium of
$2,588 at September 30, 2009 and
$3,073 at December 31, 2008
    
    
    227,588
    
    
    
    228,073Term Note which began amortizing
September 30, 2009 at equal
installments
of $3.0 million per quarter with
interest at prime, plus an
applicable margin
or LIBOR, plus an applicable margin
    
    
    47,000
    
    
    
    50,000Revolving Credit Facility with interest
at prime, plus an applicable margin or
LIBOR, plus an applicable margin
    
    
    42,000
    
    
    
    58,000Total debt
    
    
    425,692
    
    
    
    441,394Less current portion
    
    
    12,000
    
    
    
    6,000Total long-term debt
    
    $
    413,692
    
    
    $
    435,394
 In May 2008, accounting guidance was issued relating to accounting for convertible debt
instruments that may be settled in cash upon conversion (including partial cash settlement).
The guidance requires that the liability and equity components of convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement) be separated to
account for the fair value of the debt and equity components as of the date of issuance to
reflect the issuers non-convertible debt borrowing rate. The accounting guidance is effective
for financial periods beginning after December 15, 2008 and is applied retrospectively to all
periods presented (retroactive restatement) (see Note 1).On May 15, 2008 we entered into a new Credit Agreement (2008 Credit Facility) with a five year
senior secured $80.0 million revolving credit facility (Revolving Credit Facility) and a senior
secured term loan facility (Term Loan Facility) of up to $50.0 million. The obligations of
the Company under the 2008 Credit Facility are guaranteed by substantially all of the Companys
domestic subsidiaries, except for domestic subsidiaries owned by foreign subsidiaries and
certain immaterial subsidiaries, each of which has executed a guaranty. The 2008 Credit
Facility contains customary affirmative and negative covenants such as minimum ratios for
consolidated leverage, consolidated interest coverage and consolidated senior secured leverage.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 9.
    
    Long-Term Debt (continued)The 2008 Credit Facility is available for general corporate purposes and to fund reimbursement
obligations under letters of credit the banks issue on our behalf pursuant to this facility.
Revolving loans are available under the 2008 Credit Facility subject to a borrowing base
calculation based on a percentage of eligible accounts receivable, certain specified barge
drilling rigs and eligible rental equipment of the Company and its subsidiary guarantors. As of
September 30, 2009, there were $17.7 million in letters of credit outstanding, $47.0 million
outstanding on the Term Loan Facility and $42.0 million outstanding on the Revolving Credit
Facility. As of September 30, 2009, the amount drawn represents 75 percent of the capacity of
the Revolving Credit Facility. The Term Loan began amortizing on September 30, 2009 at equal
installments of $3.0 million per quarter. On January 30, 2009, Lehman Commercial Paper, Inc.
assigned its obligations under the 2008 Credit Facility to Trustmark National Bank. Upon
assignment, Trustmark National Bank fully funded Lehman Commercial Paper, Inc.s commitment,
including an additional $4.0 million that Lehman Commercial Paper, Inc. did not fund in October
2008, therefore increasing our borrowings under the Revolving Credit Facility to $62.0 million
at that time. The Company expects to use the drawn amounts over the next twelve months to fund
construction of two new rigs for work in Alaska. As of September 30, 2009, the Company is in
compliance with all covenants.The estimated fair value of our $225.0 million principal amount of 9.625% Senior Notes due 2013,
based on quoted market prices, was $223.0 million at September 30, 2009. The estimated fair
value of our $125.0 million principal amount of Convertible Senior Notes due 2012 was $107.0
million on September 30, 2009.
 10.
    
    ContingenciesAsbestos-Related ClaimsIn August 2004, the Company was notified that certain of its subsidiaries have been named, along
with other defendants, in several complaints that have been filed in the Circuit Courts of the
State of Mississippi by several hundred persons that allege that they were employed by some of
the named defendants between approximately 1965 and 1986. The complaints name as defendants
numerous other companies that are not affiliated with the Company, including companies that
allegedly manufactured drilling-related products containing asbestos that are the subject of the
complaints.
 The complaints allege that the Companys subsidiaries and other drilling contractors used
asbestos-containing products in offshore drilling operations, land-based drilling operations and
in drilling structures, drilling rigs, vessels and other equipment and assert claims based on,
among other things, negligence and strict liability and claims under the Jones Act and that the
plaintiffs are entitled to monetary damages. Based on the report of the special master, these
complaints have been severed and venue of the claims transferred to the county in which the
plaintiff resides or the county in which the cause of action allegedly accrued. Subsequent to
the filing of amended complaints, Parker Drilling has joined with other co-defendants in filing
motions to compel discovery to determine which plaintiffs have an employment relationship with
which defendant, including whether or not any plaintiffs have an employment relationship with
subsidiaries of Parker Drilling. To date, sixteen (16) plaintiffs have identified Parker
Drilling or one of its affiliates as a defendant.The subsidiaries named in these asbestos-related lawsuits intend to defend themselves vigorously
and, based on the information available to the Company at this time, the Company does not expect
the outcome to have a material adverse effect on its financial condition, results of operations
or cash flows; however, the Company is unable to predict the ultimate outcome of these lawsuits.
No amounts were accrued at September 30, 2009.Gulfco SiteSeveral years ago the Company received an information request under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) designating Parker Drilling
Offshore Corporation, a subsidiary of Parker Drilling as a potentially responsible party with
respect to the Gulfco Marine Maintenance, Inc. Superfund Site in Freeport, Texas (EPA No. TX
055144539). The subsidiary responded to this request in 2003. In January 2008, the subsidiary
received an administrative order to participate in an investigation of the site and a study of
the remediation needs and alternatives. The EPA alleges that the subsidiary is successor to a
party who owned the Gulfco site during the time when chemical releases took place there. Two
other parties have been performing that work since mid-2005 under an earlier version of the same
order. The subsidiary believes that it has a sufficient cause to decline participation under
the order and has notified the EPA of that decision. Non-compliance with an EPA order absent
sufficient cause for doing so can result in substantial penalties under CERCLA. The subsidiary
is continuing to evaluate its relationship to the site and has conferred with the EPA and the
other parties in an effort to resolve the matter. The Company has not yet estimated the amount
or impact on our operations, financial position or cash flows of any costs related to the site. To date,
the EPA and other parties have spent approximately $3.0 million studying and conducting initial
remediation of the site. It is anticipated that an additional $1.3 million or more will be required
to complete the remediation. Other cost (not yet quantified) such as interest and administrative overhead
could be added to any action against the company. However, we currently anticipate that the cost of
investigation and remediation of the site will
not exceed $5.0 million and will be shared by all responsible parties. The Company does not believe
it has any obligation with respect to the remediation of the property, and accordingly no accrual was
made as of September 30, 2009.
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NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 10.
    
    Contingencies (continued)Foreign Corrupt Practices Act (FCPA) InvestigationAs previously disclosed, the Company received requests from the United States Department of
Justice (DOJ) in July 2007 and the United States Securities and Exchange Commission (SEC) in
January 2008 relating to the Companys utilization of the services of a customs agent. The DOJ
and the SEC are conducting parallel investigations into possible violations of U.S. law by the
Company, including the Foreign Corrupt Practices Act (the FCPA). In particular, the DOJ and
the SEC are investigating the Companys use of customs agents in certain countries in which the
Company currently operates or formerly operated, including Kazakhstan and Nigeria. The Company
is fully cooperating with the DOJ and SEC investigations and conducting an internal
investigation into potential customs and other issues in Kazakhstan and Nigeria. At this point,
we are unable to predict the duration, scope or result of the DOJ or the SEC investigation or
whether either agency will commence any legal action. If we are not in compliance with the FCPA
and other laws governing the conduct of business with foreign government entities (including
other United States laws and regulations as well as local laws), we may be subject to criminal
and civil penalties and other remedial measures, which could have an adverse impact on our
business, results of operations, financial condition and liquidity.Economic Sanctions ComplianceOur international operations are subject to laws and regulations restricting our international
operations including activities involving restricted countries, organizations, entities and
persons that have been identified as unlawful actors or that are subject to U.S. economic
sanctions. Pursuant to an internal review, we have identified certain shipments of equipment
and supplies that were routed through Iran as well as other activities that may have violated
applicable U.S. laws and regulations. In addition, we have engaged in drilling wells in the
Korpedje Field in Turkmenistan, from where natural gas may be exported by pipeline to Iran. We
are currently reviewing these shipments, transactions and drilling activities to determine
whether the timing, nature and extent of such activities or other conduct may have given rise to
violations of these laws and regulations. Although we are unable to predict the scope or result
of this internal review or its ultimate outcome, we have initiated voluntary disclosure of these
potential compliance issues to the appropriate U.S. government agency. If we are not in
compliance with export restrictions, U.S. economic sanctions or other laws and regulations that
apply to our international operations, we may be subject to civil or criminal penalties and
other remedial measures, which could have an adverse impact on our business, results of
operations, financial condition and liquidity.Kazakhstan Ministry of Finance Tax AuditOn August 14, 2009, the Kazakhstan Branch (PKD Kazakhstan) of Parker Drillings subsidiary,
Parker Drilling Company International Limited (PDCIL), received an Act of Tax Audit from the
Ministry of Finance of Kazakhstan (MinFin) for the period January 01, 2005 through December
31, 2007. PKD Kazakhstan was assessed additional taxes in the amount of KZT (Kazakhstan Tenge)
1.45 billion (approximately $9.7 million) and associated interest in the amount of KZT 700
million (approximately $4.7 million). The amounts assessed relate to corporate income taxes and
interest in connection with the disallowance of the head offices management and administrative
expenses, loan interest and state duties, as well as Value Added Taxes (VAT) and interest in
connection with VAT offset on debts classified as doubtful by MinFin and for property taxes and
interest in connection with Barge Rig 257 as a result of MinFin applying a lower rate of
depreciation.On September 25, 2009, PKD Kazakhstan appealed the Act of Tax Audit with MinFin on the basis
the Branch exercised its rights provided by the Convention between the Governments of the
Republic of Kazakhstan and the United States of America on the Avoidance of Double Taxation and
the Prevention of the Fiscal Evasion with respect to Taxes on Income and Capital as well as
improper application of Kazakhstan Tax Code provisions. PKD Kazakhstan is currently waiting on
MinFins response. As of November  6, 2009, MinFin had not responded to the appeal.
 15




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##### Table of Contents



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 10.
    
    Contingencies (continued)Kazakhstan Ministry of Finance Tax Audit(continued)PKD Kazakhstan intends to defend itself vigorously and, based on the information available to
the Company at this time, the Company does not expect the outcome to have a material adverse
effect on its financial condition, results of operations or cash flows; however, the Company is
unable to predict the ultimate outcome of this Act of Tax Audit. No amounts were accrued at
September 30, 2009.
 11.
    
    Recent Accounting Pronouncements- The FASB Accounting Standards Codification  (ASC) is
the exclusive authoritative reference for nongovernmental U.S. generally accepted accounting
principles (GAAP) for use in financial statements issued for both interim and annual
reporting periods ending after September 15, 2009, except for SEC rules and interpretive
releases, which also are authoritative GAAP for SEC registrants. The change was established
by FASB Statement 168, which divides nongovernmental U.S. GAAP into the authoritative
Codification and guidance that is non-authoritative which essentially removed the FASBs
previous four-level hierarchy. We have implemented the Codification principles into this
filing using the plain English approach as supported by the technical accounting guidance
supporting the Codification.In May 2009, the FASB issued accounting guidance related to Subsequent Events, which
established 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.
SFAS No. 165 is effective for interim and annual reporting periods ending after June 15, 2009.
We adopted the new disclosure requirements in our June 30, 2009 condensed consolidated financial
statements.In April 2009, the FASB issued accounting guidance related to Interim Disclosures about Fair
Value of Financial Instruments. This guidance amended previously issued guidance about
Disclosures about Fair Value of Financial Instruments, requiring publicly-traded companies to
provide disclosures on the fair value of financial instruments in interim financial statements.
The guidance was effective for interim periods ending after June 15, 2009. We have adopted the
new disclosure requirements in our June 30, 2009 financial statements.
 12.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements- Set
forth on the following pages are the consolidating condensed financial statements of (i)
Parker Drilling, (ii) its restricted subsidiaries that are guarantors of the Senior Notes, and
Convertible Senior Notes (the Notes) and (iii) the restricted and unrestricted subsidiaries
that are not guarantors of the Notes. The Notes are guaranteed by substantially all of the
domestic restricted subsidiaries of Parker Drilling. There are currently no restrictions on
the ability of the restricted subsidiaries to transfer funds to Parker Drilling in the form of
cash dividends, loans or advances. Parker Drilling is a holding company with no operations,
other than through its subsidiaries. Separate financial statements for each guarantor company
are not provided as the company complies with the exception to Rule 3-10(a)(1) of Regulation
S-X, set forth in sub-paragraph (f) of such rule. All guarantor subsidiaries are directly or
indirectly owned 100% by the parent company, all guarantees are full and unconditional and all
guarantees are joint and several.
 16




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##### Table of Contents



NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 12.
    
    Parent, Guarantor, Non-Guarantor Unaudited Consolidating Condensed Financial Statements
(continued)AralParker (a Kazakhstan joint stock company, owned 100 percent by Parker Drilling (Kazakstan),
LLC, Casuarina Limited (a wholly-owned captive insurance company), KDN Drilling Limited, Mallard
Argentine Holdings, Ltd., Mallard Drilling of South America, Inc., Mallard Drilling of
Venezuela, Inc., Parker Drilling Investment Company, Parker Drilling (Nigeria) Limited, Parker
Drilling Company (Bolivia) S.A., Parker Drilling Company Kuwait Limited, Parker Drilling Company
Limited (Bahamas), Parker Drilling Company of New Zealand Limited, Parker Drilling Company of
Sakhalin, Parker Drilling de Mexico S. de R.L. de C.V., Parker Drilling International of New
Zealand Limited, Parker Drilling Tengiz, Ltd., PD Servicios Integrales, S. de R.L. de C.V., PKD
Sales Corporation, Parker SMNG Drilling Limited Liability Company (owned 50 percent by Parker
Drilling Company International, LLC), Parker Drilling Kazakhstan B.V., Parker Drilling AME
Limited, Parker Drilling Asia Pacific, LLC, PD International Holdings C.V.,PD Dutch Holdings
C.V., PD Selective Holdings C.V., PD Offshore Holdings C.V., Parker Drilling Netherlands B.V.,
Parker Drilling Dutch B.V., Parker Hungary Rig Holdings Limited Liability Company, Parker
Drilling Spain Rig Services, S L, Parker 3Source, LLC, Parker 5272, LLC, Parker Central Europe
Rig Holdings Limited Liability Company, Parker Cyprus Leasing Limited, Parker Cyprus Ventures
Limited, Parker Drilling International B.V., Parker Drilling Offshore B.V., Parker Drilling
Offshore International, Inc., Parker Drilling Overseas B.V., Parker Drilling Russia B.V., Parker
Drillsource, LLC, PD  Sourcing, Services, Ltd., PD Personnel Labor Ltd., SaiPar Drilling Company
B.V.  (owned 50% by Parker Drilling Dutch B.V.) and Parker Enex, LLC are all non-guarantor subsidiaries. The Company is providing
consolidating condensed financial information of the parent, Parker Drilling, the guarantor
subsidiaries, and the non-guarantor subsidiaries as of September 30, 2009 and December 31, 2008
and for the three and nine months ended September 30, 2009 and 2008. The consolidating
condensed financial statements present investments in both consolidated and unconsolidated
subsidiaries using the equity method of accounting.
 17




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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 September 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,885
    
    
    $
    3,720
    
    
    $
    66,826
    
    
    $
    
    
    
    $
    94,431Accounts and notes receivable, net
    
    
    20,648
    
    
    
    203,972
    
    
    
    133,390
    
    
    
    (161,971
    )
    
    
    196,039Rig materials and supplies
    
    
    
    
    
    
    8,621
    
    
    
    20,280
    
    
    
    
    
    
    
    28,901Deferred costs
    
    
    
    
    
    
    3,026
    
    
    
    3,963
    
    
    
    
    
    
    
    6,989Deferred income taxes
    
    
    9,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,735Other tax assets
    
    
    89,928
    
    
    
    (58,888
    )
    
    
    (721
    )
    
    
    
    
    
    
    30,319Other current assets
    
    
    557
    
    
    
    31,333
    
    
    
    35,076
    
    
    
    (20,616
    )
    
    
    46,350Total current assets
    
    
    144,753
    
    
    
    191,784
    
    
    
    258,814
    
    
    
    (182,587
    )
    
    
    412,764Property, plant and equipment, net
    
    
    79
    
    
    
    502,841
    
    
    
    199,777
    
    
    
    123
    
    
    
    702,820Investment in subsidiaries and intercompany advances
    
    
    951,029
    
    
    
    886,570
    
    
    
    59,153
    
    
    
    (1,896,752
    )
    
    
    Investment in and advances to unconsolidated joint venture
    
    
    
    
    
    
    4,620
    
    
    
    (4,620
    )
    
    
    
    
    
    
    Other noncurrent assets
    
    
    46,774
    
    
    
    20,302
    
    
    
    17,789
    
    
    
    (10,032
    )
    
    
    74,833Total assets
    
    $
    1,142,635
    
    
    $
    1,606,117
    
    
    $
    530,913
    
    
    $
    (2,089,248
    )
    
    $
    1,190,417LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000Accounts payable and accrued liabilities
    
    
    54,387
    
    
    
    328,711
    
    
    
    95,687
    
    
    
    (351,269
    )
    
    
    127,516Accrued income taxes
    
    
    618
    
    
    
    3,364
    
    
    
    5,985
    
    
    
    
    
    
    
    9,967Total current liabilities
    
    
    67,005
    
    
    
    332,075
    
    
    
    101,672
    
    
    
    (351,269
    )
    
    
    149,483Long-term debt
    
    
    413,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    413,692Other long-term liabilities
    
    
    10
    
    
    
    13,812
    
    
    
    15,930
    
    
    
    (10,033
    )
    
    
    19,719Long-term deferred tax liability
    
    
    
    
    
    
    1,237
    
    
    
    6,941
    
    
    
    
    
    
    
    8,178Intercompany payables
    
    
    62,583
    
    
    
    583,025
    
    
    
    76,571
    
    
    
    (722,179
    )
    
    
    Contingencies (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    19,361
    
    
    
    39,898
    
    
    
    21,153
    
    
    
    (61,051
    )
    
    
    19,361Capital in excess of par value
    
    
    622,692
    
    
    
    997,078
    
    
    
    243,024
    
    
    
    (1,240,102
    )
    
    
    622,692Retained earnings (accumulated deficit)
    
    
    (42,708
    )
    
    
    (361,008
    )
    
    
    65,622
    
    
    
    295,386
    
    
    
    (42,708
    )Total stockholders equity
    
    
    599,345
    
    
    
    675,968
    
    
    
    329,799
    
    
    
    (1,005,767
    )
    
    
    599,345Total liabilities and stockholders equity
    
    $
    1,142,635
    
    
    $
    1,606,117
    
    
    $
    530,913
    
    
    $
    (2,089,248
    )
    
    $
    1,190,417
 18




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
 December 31, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    111,324
    
    
    $
    9,741
    
    
    $
    51,233
    
    
    $
    
    
    
    $
    172,298Accounts and notes receivable, net
    
    
    51,792
    
    
    
    217,435
    
    
    
    131,591
    
    
    
    (214,654
    )
    
    
    186,164Rig materials and supplies
    
    
    
    
    
    
    11,518
    
    
    
    18,723
    
    
    
    
    
    
    
    30,241Deferred costs
    
    
    
    
    
    
    2,000
    
    
    
    5,804
    
    
    
    
    
    
    
    7,804Deferred income taxes
    
    
    9,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,735Other tax assets
    
    
    83,788
    
    
    
    (41,008
    )
    
    
    (1,856
    )
    
    
    
    
    
    
    40,924Other current assets
    
    
    549
    
    
    
    13,755
    
    
    
    11,875
    
    
    
    (54
    )
    
    
    26,125Total current assets
    
    
    257,188
    
    
    
    213,441
    
    
    
    217,370
    
    
    
    (214,708
    )
    
    
    473,291Property, plant and equipment, net
    
    
    79
    
    
    
    465,659
    
    
    
    209,686
    
    
    
    124
    
    
    
    675,548Investment in subsidiaries and intercompany advances
    
    
    867,684
    
    
    
    1,066,216
    
    
    
    (88,992
    )
    
    
    (1,844,908
    )
    
    
    Investment in and advances to unconsolidated joint
venture
    
    
    
    
    
    
    4,620
    
    
    
    (4,620
    )
    
    
    
    
    
    
    Other noncurrent assets
    
    
    27,607
    
    
    
    21,215
    
    
    
    8,059
    
    
    
    
    
    
    
    56,881Total assets
    
    $
    1,152,558
    
    
    $
    1,771,151
    
    
    $
    341,503
    
    
    $
    (2,059,492
    )
    
    $
    1,205,720LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    6,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,000Accounts payable and accrued liabilities
    
    
    53,859
    
    
    
    337,464
    
    
    
    100,305
    
    
    
    (351,230
    )
    
    
    140,398Accrued income taxes
    
    
    540
    
    
    
    4,861
    
    
    
    6,729
    
    
    
    
    
    
    
    12,130Total current liabilities
    
    
    60,399
    
    
    
    342,325
    
    
    
    107,034
    
    
    
    (351,230
    )
    
    
    158,528Long-term debt
    
    
    435,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    435,394Other long-term liabilities
    
    
    10
    
    
    
    14,351
    
    
    
    7,035
    
    
    
    
    
    
    
    21,396Long-term deferred tax liability
    
    
    
    
    
    
    1,237
    
    
    
    6,993
    
    
    
    
    
    
    
    8,230Intercompany payables
    
    
    74,583
    
    
    
    583,027
    
    
    
    71,299
    
    
    
    (728,909
    )
    
    
    Contingencies (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity:Common stock
    
    
    18,910
    
    
    
    39,899
    
    
    
    21,153
    
    
    
    (61,052
    )
    
    
    18,910Capital in excess of par value
    
    
    619,561
    
    
    
    1,045,727
    
    
    
    141,112
    
    
    
    (1,186,839
    )
    
    
    619,561Retained earnings (accumulated deficit)
    
    
    (56,299
    )
    
    
    (255,415
    )
    
    
    (13,123
    )
    
    
    268,538
    
    
    
    (56,299
    )Total stockholders equity
    
    
    582,172
    
    
    
    830,211
    
    
    
    149,142
    
    
    
    (979,353
    )
    
    
    582,172Total liabilities and stockholders equity
    
    $
    1,152,558
    
    
    $
    1,771,151
    
    
    $
    341,503
    
    
    $
    (2,059,492
    )
    
    $
    1,205,720
 19




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Three months ended September 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    139,806
    
    
    $
    46,680
    
    
    $
    (5,077
    )
    
    $
    181,409Operating expenses
    
    
    
    
    
    
    108,308
    
    
    
    32,645
    
    
    
    (5,077
    )
    
    
    135,876Depreciation and amortization
    
    
    
    
    
    
    21,440
    
    
    
    7,867
    
    
    
    
    
    
    
    29,307Total operating gross margin
    
    
    
    
    
    
    10,058
    
    
    
    6,168
    
    
    
    
    
    
    
    16,226General and administration expense (1)
    
    
    (48
    )
    
    
    (9,758
    )
    
    
    (6
    )
    
    
    
    
    
    
    (9,812
    )Provision for reduction in carrying
value of certain assets
    
    
    
    
    
    
    (2,757
    )
    
    
    
    
    
    
    
    
    
    
    (2,757
    )Gain on disposition of assets, net
    
    
    
    
    
    
    1,075
    
    
    
    150
    
    
    
    
    
    
    
    1,225Total operating income (loss)
    
    
    (48
    )
    
    
    1,375
    
    
    
    6,312
    
    
    
    
    
    
    
    4,882Other income and (expense):Interest expense
    
    
    (8,043
    )
    
    
    (11,635
    )
    
    
    (758
    )
    
    
    13,343
    
    
    
    (7,093
    )Interest income
    
    
    10,493
    
    
    
    2,277
    
    
    
    1,008
    
    
    
    (13,343
    )
    
    
    435Other
    
    
    
    
    
    
    (283
    )
    
    
    (2
    )
    
    
    
    
    
    
    (285
    )Equity in net earnings of subsidiaries
    
    
    (17,775
    )
    
    
    
    
    
    
    
    
    
    
    17,775
    
    
    
    Total other income and (expense)
    
    
    (15,325
    )
    
    
    (9,641
    )
    
    
    248
    
    
    
    17,775
    
    
    
    (6,943
    )Income (benefit) before income taxes
    
    
    (15,373
    )
    
    
    (8,266
    )
    
    
    6,560
    
    
    
    17,775
    
    
    
    (2,061
    )Income tax expense (benefit):Current
    
    
    (10,240
    )
    
    
    11,530
    
    
    
    35
    
    
    
    
    
    
    
    1,325Deferred
    
    
    (12,227
    )
    
    
    1,759
    
    
    
    (12
    )
    
    
    
    
    
    
    (10,480
    )Total income tax expense (benefit)
    
    
    (22,467
    )
    
    
    13,289
    
    
    
    23
    
    
    
    
    
    
    
    (9,155
    )Net income (loss)
    
    $
    7,094
    
    
    $
    (21,555
    )
    
    $
    6,537
    
    
    $
    17,775
    
    
    $
    7,094
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 20




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Three months ended September 30, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    171,597
    
    
    $
    81,945
    
    
    $
    (26,088
    )
    
    $
    227,454Operating expenses
    
    
    5
    
    
    
    104,648
    
    
    
    65,907
    
    
    
    (26,088
    )
    
    
    144,472Depreciation and amortization
    
    
    
    
    
    
    21,745
    
    
    
    8,918
    
    
    
    
    
    
    
    30,663Total operating gross margin
    
    
    (5
    )
    
    
    45,204
    
    
    
    7,120
    
    
    
    
    
    
    
    52,319General and administration expense (1)
    
    
    (42
    )
    
    
    (9,221
    )
    
    
    (8
    )
    
    
    
    
    
    $
    (9,271
    )Gain on disposition of assets, net
    
    
    
    
    
    
    461
    
    
    
    338
    
    
    
    
    
    
    
    799Total operating income (loss)
    
    
    (47
    )
    
    
    36,444
    
    
    
    7,450
    
    
    
    
    
    
    
    43,847Other income and (expense):Interest expense
    
    
    (8,187
    )
    
    
    (11,814
    )
    
    
    (62
    )
    
    
    13,037
    
    
    
    (7,026
    )Interest income
    
    
    10,655
    
    
    
    1,890
    
    
    
    875
    
    
    
    (13,037
    )
    
    
    383Other
    
    
    2
    
    
    
    297
    
    
    
    
    
    
    
    
    
    
    
    299Equity in net earnings of subsidiaries
    
    
    28,048
    
    
    
    
    
    
    
    
    
    
    
    (28,048
    )
    
    
    Total other income and (expense)
    
    
    30,518
    
    
    
    (9,627
    )
    
    
    813
    
    
    
    (28,048
    )
    
    
    (6,344
    )Income (loss) before income taxes
    
    
    30,471
    
    
    
    26,817
    
    
    
    8,263
    
    
    
    (28,048
    )
    
    
    37,503Income tax (benefit) expense:Current
    
    
    12,013
    
    
    
    2,372
    
    
    
    (206
    )
    
    
    
    
    
    
    14,179Deferred
    
    
    628
    
    
    
    4,897
    
    
    
    (31
    )
    
    
    
    
    
    
    5,494Total income tax (benefit) expense
    
    
    12,641
    
    
    
    7,269
    
    
    
    (237
    )
    
    
    
    
    
    
    19,673Net income (loss)
    
    $
    17,830
    
    
    $
    19,548
    
    
    $
    8,500
    
    
    $
    (28,048
    )
    
    $
    17,830
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 21




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Nine months ended September 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    432,922
    
    
    $
    197,651
    
    
    $
    (53,448
    )
    
    $
    577,125Operating expenses
    
    
    
    
    
    
    328,759
    
    
    
    147,290
    
    
    
    (53,448
    )
    
    
    422,601Depreciation and amortization
    
    
    
    
    
    
    62,450
    
    
    
    22,932
    
    
    
    
    
    
    
    85,382Total operating gross margin
    
    
    
    
    
    
    41,713
    
    
    
    27,429
    
    
    
    
    
    
    
    69,142General and administration expense (1)
    
    
    (131
    )
    
    
    (33,827
    )
    
    
    (40
    )
    
    
    
    
    
    
    (33,998
    )Provision for reduction in carrying
value of certain assets
    
    
    
    
    
    
    (2,757
    )
    
    
    
    
    
    
    
    
    
    
    (2,757
    )Gain on disposition of assets, net
    
    
    
    
    
    
    1,683
    
    
    
    324
    
    
    
    
    
    
    
    2,007Total operating income (loss)
    
    
    (131
    )
    
    
    6,812
    
    
    
    27,713
    
    
    
    
    
    
    
    34,394Other income and (expense):Interest expense
    
    
    (25,442
    )
    
    
    (35,030
    )
    
    
    (921
    )
    
    
    38,730
    
    
    
    (22,663
    )Interest income
    
    
    31,717
    
    
    
    5,951
    
    
    
    8,318
    
    
    
    (45,091
    )
    
    
    895Other
    
    
    (3
    )
    
    
    (373
    )
    
    
    11
    
    
    
    
    
    
    
    (365
    )Equity in net earnings of subsidiaries
    
    
    (26,848
    )
    
    
    
    
    
    
    
    
    
    
    26,848
    
    
    
    Total other income and (expense)
    
    
    (20,576
    )
    
    
    (29,452
    )
    
    
    7,408
    
    
    
    20,487
    
    
    
    (22,133
    )Income (loss) before income taxes
    
    
    (20,707
    )
    
    
    (22,640
    )
    
    
    35,121
    
    
    
    20,487
    
    
    
    12,261Income tax expense (benefit):Current
    
    
    (15,929
    )
    
    
    22,948
    
    
    
    7,205
    
    
    
    
    
    
    
    14,224Deferred
    
    
    (18,369
    )
    
    
    2,867
    
    
    
    (52
    )
    
    
    
    
    
    
    (15,554
    )Total income tax expense (benefit)
    
    
    (34,298
    )
    
    
    25,815
    
    
    
    7,153
    
    
    
    
    
    
    
    (1,330
    )Net income (loss)
    
    $
    13,591
    
    
    $
    (48,455
    )
    
    $
    27,968
    
    
    $
    20,487
    
    
    $
    13,591
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 22




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
 Nine months ended September 30, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedTotal revenues
    
    $
    
    
    
    $
    464,000
    
    
    $
    226,148
    
    
    $
    (72,686
    )
    
    $
    617,462Operating expenses
    
    
    2
    
    
    
    281,697
    
    
    
    179,610
    
    
    
    (72,686
    )
    
    
    388,623Depreciation and amortization
    
    
    
    
    
    
    63,283
    
    
    
    21,712
    
    
    
    
    
    
    
    84,995Total operating gross margin
    
    
    (2
    )
    
    
    119,020
    
    
    
    24,826
    
    
    
    
    
    
    
    143,844General and administration expense (1)
    
    
    (163
    )
    
    
    (24,217
    )
    
    
    (40
    )
    
    
    
    
    
    
    (24,420
    )Gain on disposition of assets, net
    
    
    
    
    
    
    1,393
    
    
    
    621
    
    
    
    
    
    
    
    2,014Total operating income (loss)
    
    
    (165
    )
    
    
    96,196
    
    
    
    25,407
    
    
    
    
    
    
    
    121,438Other income and (expense):Interest expense
    
    
    (24,440
    )
    
    
    (35,392
    )
    
    
    (208
    )
    
    
    39,132
    
    
    
    (20,908
    )Changes in fair value of derivative positions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    31,916
    
    
    
    5,700
    
    
    
    2,637
    
    
    
    (39,132
    )
    
    
    1,121Equity in loss of unconsolidated joint venture, net of taxes
    
    
    
    
    
    
    (1,105
    )
    
    
    
    
    
    
    
    
    
    
    (1,105
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    4
    
    
    
    302
    
    
    
    197
    
    
    
    
    
    
    
    503Equity in net earnings of subsidiaries
    
    
    75,435
    
    
    
    
    
    
    
    
    
    
    
    (75,435
    )
    
    
    Total other income and (expense)
    
    
    82,915
    
    
    
    (30,495
    )
    
    
    2,626
    
    
    
    (75,435
    )
    
    
    (20,389
    )Income (loss) before income taxes
    
    
    82,750
    
    
    
    65,701
    
    
    
    28,033
    
    
    
    (75,435
    )
    
    
    101,049Income tax (benefit) expense:Current
    
    
    4,748
    
    
    
    1,363
    
    
    
    6,913
    
    
    
    
    
    
    
    13,024Deferred
    
    
    15,073
    
    
    
    9,561
    
    
    
    462
    
    
    
    
    
    
    
    25,096Total income tax expense
    
    
    19,821
    
    
    
    10,924
    
    
    
    7,375
    
    
    
    
    
    
    
    38,120Net income (loss)
    
    $
    62,929
    
    
    $
    54,777
    
    
    $
    20,658
    
    
    $
    (75,435
    )
    
    $
    62,929
 
 (1)
    
    All field operations general and administration expenses are included in operating expenses. 23




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES 
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Nine months ending September 30, 2009Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    13,591
    
    
    $
    (48,455
    )
    
    $
    27,968
    
    
    $
    20,487
    
    
    $
    13,591Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    
    
    
    
    62,450
    
    
    
    22,932
    
    
    
    
    
    
    
    85,382Gain on disposition of assets
    
    
    
    
    
    
    (1,683
    )
    
    
    (324
    )
    
    
    
    
    
    
    (2,007
    )Deferred tax expense (benefit)
    
    
    (18,369
    )
    
    
    2,867
    
    
    
    (52
    )
    
    
    
    
    
    
    (15,554
    )Provision for reduction in carrying value
of certain assets
    
    
    
    
    
    
    2,757
    
    
    
    
    
    
    
    
    
    
    
    2,757Expenses not requiring cash
    
    
    8,347
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    8,346Equity in net earnings of subsidiaries
    
    
    26,848
    
    
    
    
    
    
    
    
    
    
    
    (26,848
    )
    
    
    Change in accounts receivable
    
    
    31,144
    
    
    
    (35,696
    )
    
    
    (1,799
    )
    
    
    
    
    
    
    (6,351
    )Change in other assets
    
    
    (18,815
    )
    
    
    41,136
    
    
    
    (33,647
    )
    
    
    
    
    
    
    (11,326
    )Change in liabilities
    
    
    12,658
    
    
    
    (24,529
    )
    
    
    3,360
    
    
    
    
    
    
    
    (8,511
    )Net cash provided by (used in) operating activities
    
    
    55,404
    
    
    
    (1,154
    )
    
    
    18,438
    
    
    
    (6,361
    )
    
    
    66,327Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (113,409
    )
    
    
    (13,500
    )
    
    
    
    
    
    
    (126,909
    )Proceeds from the sale of assets
    
    
    
    
    
    
    2,632
    
    
    
    732
    
    
    
    
    
    
    
    3,364Intercompany dividend payments
    
    
    
    
    
    
    
    
    
    
    (6,361
    )
    
    
    6,361
    
    
    
    Net cash provided by (used in) investing activities
    
    
    
    
    
    
    (110,777
    )
    
    
    (19,129
    )
    
    
    6,361
    
    
    
    (123,545
    )Cash flows from financing activities:Proceeds from draw on revolver credit facility
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Paydown on revolver credit facility
    
    
    (23,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,000
    )Proceeds from stock options exercised
    
    
    199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199Excess tax cost from stock-based compensation
    
    
    (1,848
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,848
    )Intercompany advances, net
    
    
    (122,194
    )
    
    
    105,911
    
    
    
    16,283
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (142,843
    )
    
    
    105,911
    
    
    
    16,283
    
    
    
    
    
    
    
    (20,649
    )Net increase (decrease) in cash and cash equivalents
    
    
    (87,439
    )
    
    
    (6,020
    )
    
    
    15,592
    
    
    
    
    
    
    
    (77,867
    )Cash and cash equivalents at beginning of year
    
    
    111,324
    
    
    
    9,741
    
    
    
    51,233
    
    
    
    
    
    
    
    172,298Cash and cash equivalents at end of period
    
    $
    23,885
    
    
    $
    3,720
    
    
    $
    66,826
    
    
    $
    
    
    
    $
    94,431
 24




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##### Table of Contents



PARKER DRILLING COMPANY AND SUBSIDIARIES 
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
 Nine months ending September 30, 2008Parent
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    62,929
    
    
    $
    54,777
    
    
    $
    20,658
    
    
    $
    (75,435
    )
    
    $
    62,929Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    63,283
    
    
    
    21,712
    
    
    
    
    
    
    
    84,995Gain on disposition of assets
    
    
    
    
    
    
    (1,393
    )
    
    
    (621
    )
    
    
    
    
    
    
    (2,014
    )Equity in loss of unconsolidated joint venture
    
    
    
    
    
    
    1,105
    
    
    
    
    
    
    
    
    
    
    
    1,105Deferred income tax expense
    
    
    15,073
    
    
    
    9,561
    
    
    
    462
    
    
    
    
    
    
    
    25,096Expenses not requiring cash
    
    
    8,863
    
    
    
    2,917
    
    
    
    
    
    
    
    
    
    
    
    11,780Equity in net earnings of subsidiaries
    
    
    (75,435
    )
    
    
    
    
    
    
    
    
    
    
    75,435
    
    
    
    Change in accounts receivable
    
    
    20,418
    
    
    
    752
    
    
    
    (68,073
    )
    
    
    
    
    
    
    (46,903
    )Change in other assets
    
    
    8,039
    
    
    
    (4,065
    )
    
    
    3,653
    
    
    
    
    
    
    
    7,627Change in liabilities
    
    
    (1,542
    )
    
    
    (48,426
    )
    
    
    38,081
    
    
    
    
    
    
    
    (11,887
    )Net cash provided by operating activities
    
    
    38,345
    
    
    
    78,511
    
    
    
    15,872
    
    
    
    
    
    
    
    132,728Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (128,803
    )
    
    
    (28,510
    )
    
    
    
    
    
    
    (157,313
    )Proceeds from the sale of assets
    
    
    
    
    
    
    3,284
    
    
    
    0
    
    
    
    
    
    
    
    3,284Proceeds from insurance claims
    
    
    
    
    
    
    
    
    
    
    951
    
    
    
    
    
    
    
    951Investment in unconsolidated joint venture
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net cash used in investing activities
    
    
    
    
    
    
    (130,519
    )
    
    
    (27,559
    )
    
    
    
    
    
    
    (158,078
    )Cash flows from financing activities:Proceeds from draw on term note facility
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Paydown on revolver credit facility
    
    
    (35,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,000
    )Proceeds from draw on revolver credit facility
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Payment of debt issuance costs
    
    
    (1,846
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,846
    )Proceeds from stock options exercised
    
    
    1,970
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,970Excess tax benefit from stock based compensation
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379Intercompany advances, net
    
    
    (83,520
    )
    
    
    51,641
    
    
    
    31,879
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (43,017
    )
    
    
    51,641
    
    
    
    31,879
    
    
    
    
    
    
    
    40,503Net increase (decrease) in cash and cash equivalents
    
    
    (4,672
    )
    
    
    (367
    )
    
    
    20,192
    
    
    
    
    
    
    
    15,153Cash and cash equivalents at beginning of year
    
    
    31,326
    
    
    
    8,314
    
    
    
    20,484
    
    
    
    
    
    
    
    60,124Cash and cash equivalents at end of period
    
    $
    26,654
    
    
    $
    7,947
    
    
    $
    40,676
    
    
    $
    
    
    
    $
    75,277
 25




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    stability of prices and demand for oil and natural gas;
    
    levels of oil and natural gas exploration and production activities;
    
    demand for contract drilling and drilling related services and demand for rental tools;
    
    our future operating results and profitability;
    
    our future rig utilization, dayrates and rental tools activity;
    
    entering into new, or extending existing drilling contracts and our expectations
concerning when our rigs will commence operations under such contracts;
    
    growth through acquisitions of companies or assets;
    
    construction or upgrades of rigs and expectations regarding when these rigs will
commence operations;
    
    capital expenditures for acquisition of rigs, construction of new rigs or major
upgrades to existing rigs;
    
    entering into joint venture agreements;
    
    our future liquidity;
    
    availability and sources of funds to reduce our debt and expectations of when debt will
be reduced;
    
    the outcome of pending or future legal proceedings, tax assessments and other claims;
    
    the availability of insurance coverage for pending or future claims;
    
    the enforceability of contractual indemnification in relation to pending or future
claims;
    
    compliance with covenants under our senior credit facility and indentures for our
senior notes; and
    
    organic growth of our operations.
  
    
    worldwide economic and business conditions that adversely affect market conditions
and/or the cost of doing business;
    
    inability of the Company to access the credit markets;
    
    the U.S. economy and the demand for natural gas;
    
    worldwide demand for oil;
    
    fluctuations in the market prices of oil and natural gas;
    
    imposition of unanticipated trade restrictions;
    
    unanticipated operating hazards and uninsured risks;
    
    political instability, terrorism or war;
    
    governmental regulations, including changes in accounting rules or tax laws or ability
to remit funds to the U.S., that adversely affect the cost of doing business;
    
    changes in the tax laws that would allow double taxation on foreign sourced income;
    
    the outcome of our investigation and the parallel investigations by the Securities and
Exchange Commission and the Department of Justice into possible violations of U.S. law,
including the Foreign Corrupt Practices Act;
    
    contemplated U.S. legislation on carbon emissions;
 26




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##### Table of Contents



DISCLOSURE NOTE REGARDING FORWARD-LOOKING STATEMENTS (continued)
 
    
    potential new employer taxes on U.S. Health Care Plans;
    
    adverse environmental events;
    
    adverse weather conditions;
    
    global health concerns;
    
    changes in the concentration of customer and supplier relationships;
    
    ability of our customers and suppliers to obtain financing for their operations;
    
    unexpected cost increases for new construction and upgrade and refurbishment projects;
    
    delays in obtaining components for capital projects and ongoing operational
maintenance;
    
    shortages of skilled labor;
    
    unanticipated cancellation of contracts by operators;
    
    breakdown of equipment;
    
    other operational problems including delays in start-up of operations;
    
    changes in competition;
    
    the effect of litigation and contingencies; and
    
    other similar factors (some of which are discussed in documents referred to in this
Form 10-Q, including the risk factors described in our 2008 Annual Report on Form 10-K and
our other reports and filings with the Securities and Exchange Commission).
  OVERVIEW AND OUTLOOK
 Summary
   Overview
  27




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##### Table of Contents



OVERVIEW AND OUTLOOK (continued)
   Outlook
       28




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##### Table of Contents



RESULTS OF OPERATIONS
 Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008
    Three Months Ended September 30,2009
    
    
    2008(Dollars in Thousands)Revenues:International Drilling
    
    $
    63,966
    
    
    
    35
    %
    
    $
    92,226
    
    
    
    41
    %U.S. Drilling
    
    
    12,350
    
    
    
    7
    %
    
    
    44,743
    
    
    
    20
    %Project Management and Engineering Services
    
    
    25,869
    
    
    
    14
    %
    
    
    24,089
    
    
    
    10
    %Construction Contracts
    
    
    55,325
    
    
    
    30
    %
    
    
    20,421
    
    
    
    9
    %Rental Tools
    
    
    23,899
    
    
    
    14
    %
    
    
    45,975
    
    
    
    20
    %Total revenues
    
    $
    181,409
    
    
    
    100
    %
    
    $
    227,454
    
    
    
    100
    %Operating gross margin (1):International Drilling gross margin excluding depreciation and amortization
    
    $
    22,002
    
    
    
    34
    %
    
    $
    28,544
    
    
    
    31
    %U.S. Drilling gross margin excluding depreciation and amortization
    
    
    2,293
    
    
    
    19
    %
    
    
    22,893
    
    
    
    51
    %Project Management and Engineering Services gross margin
excluding depreciation and amortization
    
    
    6,449
    
    
    
    25
    %
    
    
    2,638
    
    
    
    11
    %Construction Contracts excluding depreciation and amortization
    
    
    3,122
    
    
    
    6
    %
    
    
    1,098
    
    
    
    5
    %Rental Tools gross margin excluding depreciation and amortization
    
    
    11,667
    
    
    
    49
    %
    
    
    27,809
    
    
    
    60
    %Depreciation and amortization
    
    
    (29,307
    )
    
    
    
    
    
    
    (30,663
    )Total operating gross margin (2)
    
    
    16,226
    
    
    
    
    
    
    
    52,319General and administration expense
    
    
    (9,812
    )
    
    
    
    
    
    
    (9,271
    )Provision for reduction in carrying value of certain assets
    
    
    (2,757
    )
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    1,225
    
    
    
    
    
    
    
    799Total operating income
    
    $
    4,882
    
    
    
    
    
    
    $
    43,847
 
 (1)
    
    Gross margins, excluding the depreciation and amortization line item are computed as revenues
less direct operating expenses, excluding depreciation
and amortization expense; gross margin percentages are computed as gross margin, excluding
depreciation and amortization, as a percent of revenues. The gross margin amounts, excluding
depreciation and amortization, and gross margin percentages should not be used as a substitute for
those amounts reported under accounting principles generally accepted in the United States
(GAAP). However, we monitor our business segments based on several criteria, including gross
margin. Management believes that this information is useful to our investors because it more
accurately reflects cash generated by segment. Such gross margin amounts are reconciled to our most
comparable GAAP measure as follows: 29




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 ProjectManagementandInternational
    
    
    
    
    
    
    Engineering
    
    
    ConstructionThree Months Ended:
    
    Drilling
    
    
    U.S. Drilling
    
    
    Services
    
    
    Contract
    
    
    Rental Tools(Dollars in Thousands)September 30, 2009Operating gross margin (2)
    
    $
    8,734
    
    
    $
    (4,842
    )
    
    $
    6,449
    
    
    $
    3,122
    
    
    $
    2,763Depreciation and amortization
    
    
    13,268
    
    
    
    7,135
    
    
    
    
    
    
    
    
    
    
    
    8,904Drilling and rental gross margin excluding depreciation and amortization
    
    $
    22,002
    
    
    $
    2,293
    
    
    $
    6,449
    
    
    $
    3,122
    
    
    $
    11,667September 30, 2008Operating gross margin (2)
    
    $
    14,241
    
    
    $
    14,166
    
    
    $
    2,638
    
    
    $
    1,098
    
    
    $
    20,176Depreciation and amortization
    
    
    14,303
    
    
    
    8,727
    
    
    
    
    
    
    
    
    
    
    
    7,633Drilling and rental gross margin excluding depreciation and amortization
    
    $
    28,544
    
    
    $
    22,893
    
    
    $
    2,638
    
    
    $
    1,098
    
    
    $
    27,809
 
 (2)
    
    Gross margin (operating)  revenues less direct operating expenses, including
depreciation and amortization expense. International Drilling Segment
    U.S. Drilling Segment
   Project Management and Engineering Services Segment
  Construction Contract Segment
  30




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Rental Tools Segment
  Other Financial Data
     Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008
   31




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
  Nine Months Ended September 30,2009
    
    
    2008(Dollars in Thousands)Revenues:International Drilling
    
    $
    220,626
    
    
    
    38
    %
    
    $
    238,885
    
    
    
    39
    %U.S. Drilling
    
    
    35,095
    
    
    
    6
    %
    
    
    139,999
    
    
    
    22
    %Project Management and Engineering Services
    
    
    81,814
    
    
    
    14
    %
    
    
    72,219
    
    
    
    12
    %Construction Contracts
    
    
    149,642
    
    
    
    26
    %
    
    
    40,501
    
    
    
    7
    %Rental Tools
    
    
    89,948
    
    
    
    16
    %
    
    
    125,858
    
    
    
    20
    %Total revenues
    
    $
    577,125
    
    
    
    100
    %
    
    $
    617,462
    
    
    
    100
    %Operating gross margin (1):International Drilling gross margin excluding depreciation and
amortization
    
    $
    79,998
    
    
    
    36
    %
    
    $
    65,970
    
    
    
    28
    %U.S. Drilling gross margin excluding depreciation and amortization
    
    
    274
    
    
    
    1
    %
    
    
    74,497
    
    
    
    53
    %Project Management and Engineering Services gross margin
excluding depreciation and amortization
    
    
    18,217
    
    
    
    22
    %
    
    
    10,400
    
    
    
    14
    %Construction Contracts excluding depreciation and amortization
    
    
    7,525
    
    
    
    5
    %
    
    
    2,128
    
    
    
    5
    %Rental Tools gross margin excluding depreciation and amortization
    
    
    48,510
    
    
    
    54
    %
    
    
    75,844
    
    
    
    60
    %Depreciation and amortization
    
    
    (85,382
    )
    
    
    
    
    
    
    (84,995
    )Total operating gross margin (2)
    
    
    69,142
    
    
    
    
    
    
    
    143,844General and administration expense
    
    
    (33,998
    )
    
    
    
    
    
    
    (24,420
    )Provision for reduction in carrying value of certain assets
    
    
    (2,757
    )
    
    
    
    
    
    
    Gain on disposition of assets, net
    
    
    2,007
    
    
    
    
    
    
    
    2,014Total operating income
    
    $
    34,394
    
    
    
    
    
    
    $
    121,438
 
 (1)
    
    Gross margins, excluding the depreciation and amortization line item included within
the above table, are computed as revenues less direct operating expenses, excluding
depreciation and amortization expense; gross margin percentages are computed as gross margin,
excluding depreciation and amortization, as a percent of revenues. The gross margin amounts,
excluding depreciation and amortization, and gross margin percentages should not be used as a
substitute for those amounts reported under accounting principles generally accepted in the
United States (GAAP). However, we monitor our business segments based on several criteria,
including gross margin. Management believes that this information is useful to our investors
because it more accurately reflects cash generated by segment. Such gross margin amounts are
reconciled to our most comparable GAAP measure as follows: ProjectManagementandInternational
    
    
    
    
    
    
    Engineering
    
    
    ConstructionNine Months Ended:
    
    Drilling
    
    
    U.S. Drilling
    
    
    Services
    
    
    Contract
    
    
    Rental Tools(Dollars in Thousands)September 30, 2009Operating gross margin (2)
    
    $
    41,809
    
    
    $
    (21,081
    )
    
    $
    18,217
    
    
    $
    7,525
    
    
    $
    22,672Depreciation and amortization
    
    
    38,189
    
    
    
    21,355
    
    
    
    
    
    
    
    
    
    
    
    25,838Drilling and rental gross margin excluding depreciation and amortization
    
    $
    79,998
    
    
    $
    274
    
    
    $
    18,217
    
    
    $
    7,525
    
    
    $
    48,510September 30, 2008Operating gross margin (2)
    
    $
    29,029
    
    
    $
    48,475
    
    
    $
    10,400
    
    
    $
    2,128
    
    
    $
    53,812Depreciation and amortization
    
    
    36,941
    
    
    
    26,022
    
    
    
    
    
    
    
    
    
    
    
    22,032Drilling and rental gross margin excluding depreciation and amortization
    
    $
    65,970
    
    
    $
    74,497
    
    
    $
    10,400
    
    
    $
    2,128
    
    
    $
    75,844
 
 (2)
    
    Gross margin (operating)  revenues less direct operating expenses, including
depreciation and amortization expense. 32




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 International Drilling Segment
    U.S. Drilling Segment
  Project Management and Engineering Services Segment
  Construction Contract Segment
  Rental Tools Segment
  Other Financial Data
  33




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##### Table of Contents



RESULTS OF OPERATIONS (continued)
 Other Financial Data (continued)
    LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
   Financing Activity
   34




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
 Financing Activity (continued)
    
    
    $125.0 million aggregate principal amount of Convertible Senior Notes at a coupon rate
of 2.125 percent, which are due July 15, 2012 net of $15.9 million in unamortized debt
discount;
    
    $225.0 million aggregate principal amount of 9.625 percent Senior Notes, which are due
October 1, 2013 plus an associated $2.6 million in unamortized debt premium; and
    
    $89.0 million drawn against our 2008 Credit Facility, including $42.0 million on our
Revolving Credit Facility and $47.0 million on our Term Loan Facility, $12.0 million of
which is classified as short term.
  35




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES (continued)
  Less than
    
    
    Years
    
    
    Years
    
    
    More thanTotal
    
    
    1 Year
    
    
    2 - 3
    
    
    4 - 5
    
    
    5 Years(Dollars in Thousands)Contractual cash obligations:Long-term debt  principal (1)
    
    $
    397,000
    
    
    $
    12,000
    
    
    $
    149,000
    
    
    $
    236,000
    
    
    $
    Long-term debt  interest (1)
    
    
    102,071
    
    
    
    27,083
    
    
    
    52,332
    
    
    
    22,656
    
    
    
    Operating leases (2)
    
    
    37,135
    
    
    
    6,496
    
    
    
    7,512
    
    
    
    6,071
    
    
    
    17,056Purchase commitments (3)
    
    
    60,636
    
    
    
    60,636
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    596,842
    
    
    $
    106,215
    
    
    $
    208,844
    
    
    $
    264,727
    
    
    $
    17,056Commercial commitments:Long-term debt -Revolving credit facility (4)
    
    $
    42,000
    
    
    $
    
    
    
    $
    
    
    
    $
    42,000
    
    
    $
    Standby letters of credit (4)
    
    
    17,716
    
    
    
    17,716
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    59,716
    
    
    $
    17,716
    
    
    $
    
    
    
    $
    42,000
    
    
    $
    
 
 (1)
    
    Long-term debt includes the principal and interest cash obligations of the 9.625
percent Senior Notes and the 2.125 percent Convertible Senior Notes as well as $47.0 million
of term loans drawn on our Credit Facility. The remaining unamortized premium of $2.6 million
on the 9.625 percent Senior Notes and unamortized discount of $15.9 million on the 2.125
percent Convertible Senior Notes are not included in the contractual cash obligations
schedule.(2)
    
    Operating leases consist of lease agreements in excess of one year for office space,
equipment, vehicles and personal property.(3)
    
    We have purchase commitments outstanding as of September 30, 2009, related to rig
upgrade projects and new rig construction.(4)
    
    We have a $130.0 million credit agreement of which $80.0 million is a revolving
credit facility. As of September 30, 2009, we had drawn down $42.0 million under the
revolving credit facility and $17.7 million of availability has been used to support letters
of credit that have been issued. The revolving credit facility expires May 14, 2013. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting 
 36




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity SecuritiesTotal Number of
    
    Average PriceDate
    
    Shares Purchased
    
    Paid Per ShareJuly 11, 2009
    
    
    5,290
    
    
    $
    3.73August 1, 2009
    
    
    344
    
    
    $
    4.80August 7, 2009
    
    
    661
    
    
    $
    4.68August 11, 2009
    
    
    264
    
    
    $
    4.56August 25, 2009
    
    
    261
    
    
    $
    4.69August 28, 2009
    
    
    212
    
    
    $
    4.62September 17, 2009
    
    
    156
    
    
    $
    5.73
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description31.1
    
    Section 302 Certification  President and Chief Executive Officer31.2
    
    Section 302 Certification  Senior Vice President and Chief Financial Officer32.1
    
    Section 906 Certification  President and Chief Executive Officer32.2
    
    Section 906 Certification  Senior Vice President and Chief Financial Officer
 37




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##### Table of Contents



SIGNATURES
  PARKER DRILLING COMPANY
 Date: November 6, 2009
    By:
    /s/ David C. MannonDavid C. MannonPresident and Chief Executive OfficerBy:
    /s/ W. Kirk BrassfieldW. Kirk BrassfieldSenior Vice President and Chief Financial Officer 38




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    Section 302 Certification  President and Chief Executive Officer31.2
    
    Section 302 Certification  Senior Vice President and Chief Financial Officer32.1
    
    Section 906 Certification  President and Chief Executive Officer32.2
    
    Section 906 Certification  Senior Vice President and Chief Financial Officer
 39