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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-7573
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PARKER DRILLING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0618660
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Parker Building, Eight East Third Street, Tulsa, Oklahoma 74103
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (918) 585-8221
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of March 31, 1995, 55,702,395 common shares were outstanding.
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PARKER DRILLING COMPANY
INDEX
Part I. Financial Information Page No.
Consolidated Condensed Balance Sheets (Unaudited) -
February 28, 1995 and August 31, 1994 2
Consolidated Condensed Statements of Operations (Unaudited) -
Three and Six Months Ended February 28, 1995 and
February 28, 1994 3
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended February 28, 1995 and 4
February 28, 1994
Notes to Unaudited Consolidated Condensed
Financial Statements 5
Report of Review by Independent Accountants 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 10(a) Amendment dated as of March 17, 1995, to the
Parker Drilling Company Stock Bonus Plan, filed as Exhibit 10(e)
to Annual Report on Form 10-K for the year ended August 31, 1993,
as amended by Form 10-K/A dated February 24, 1994.
Exhibit 15, Letter Re Unaudited Interim
Financial Information
PART 1. FINANCIAL INFORMATION
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
February 28, August 31,
1995 1994
ASSETS ---------- ----------
------
Current assets:
Cash and cash equivalents $ 21,599 $ 10,660
Other short-term investments 1,030 3,811
Accounts and notes receivable 31,900 34,675
Rig materials and supplies 9,318 9,117
Other current assets 5,193 4,029
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Total current assets 69,040 62,292
Property, plant and equipment less accumulated
depreciation, depletion and amortization of
$443,050 at February 28, 1995, and $454,763
at August 31, 1994 120,021 127,178
Other noncurrent assets 18,818 19,878
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Total assets $207,879 $209,348
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion of long-term debt $ 264 $ -
Accounts payable and accrued liabilities 16,220 16,569
Accrued income taxes 4,667 5,053
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Total current liabilities 21,151 21,622
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Long-term debt 1,586 -
Deferred income tax 294 294
Other long-term liabilities 3,722 3,596
Minority interest - 3,253
Stockholders' equity:
Common stock, $.16 2/3 par value 9,282 9,185
Capital in excess of par value 205,191 202,403
Retained earnings (accumulated deficit) (29,331) (28,307)
Other (4,016) (2,698)
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Total stockholders' equity 181,126 180,583
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Total liabilities and stockholders' equity $207,879 $209,348
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-------- --------
See accompanying notes to consolidated condensed financial statements.
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
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1995 1994 1995 1994
-------- -------- -------- --------
Revenue:
Drilling contracts $37,725 $39,694 $69,780 $79,090
Other 1,013 1,038 2,241 1,685
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Gross operating revenue 38,738 40,732 72,021 80,775
------- ------- ------- -------
Operating expense:
Drilling 27,098 30,471 51,867 58,465
Other 1,215 1,443 2,665 2,527
Depreciation, depletion and
amortization 5,420 5,067 10,926 9,989
General and administrative 5,140 4,914 10,155 8,963
------- ------- ------- -------
38,873 41,895 75,613 79,944
------- ------- ------- -------
Operating income (loss) (135) (1,163) (3,592) 831
------- ------- ------- -------
Other income and (expense):
Interest expense (33) (4) (35) (7)
Interest income 317 198 577 555
Other income (expense) - net 380 392 3,281 432
------- ------- ------- -------
664 586 3,823 980
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Income (loss) before 529 (577) 231 1,811
income taxes ------- ------- ------- -------
Income tax expense 460 173 1,255 953
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Net income (loss) 69 (750) (1,024) 858
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Earnings (loss) per share,
primary and fully diluted $ .00 $ (.01) $ (.02) $ .02
------- ------- ------- -------
------- ------- ------- -------
Number of common shares used
in computing earnings (loss)
per share:
Primary 54,972,034 54,223,674 54,610,611 54,539,402
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted 55,021,452 54,223,674 54,610,611 54,539,402
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to consolidated condensed financial statements.
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PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
Six Months Ended
February 28,
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1995 1994
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Cash flows from operating activities:
Net income (loss) $(1,024) $ 858
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion and amortization 10,926 9,989
Expenses not requiring cash (180) 1,513
Change in operating assets and liabilities 720 (11,536)
Other-net (1,552) (495)
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Net cash provided by operating activities 8,890 329
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Cash flows from investing activities:
Capital expenditures (6,174) (23,592)
Proceeds from the sale of equipment 5,427 892
Decrease (increase) in short-term
investments 2,781 24,241
Other-net 121 -
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Net cash provided by investing
activities 2,155 1,541
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Cash flows from financing activities:
Other (106) (304)
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Net cash provided (used) by financing
activities (106) (304)
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Net increase in cash and cash equivalents 10,939 1,566
Cash and cash equivalents at
beginning of period 10,660 12,570
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Cash and cash equivalents at
end of period $21,599 $14,136
------- -------
------- -------
Supplemental disclosure:
Interest paid $ 2 $ 7
Taxes paid $ 1,641 $ 1,316
Supplemental noncash financing activity:
In November, 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory
note in the amount of $1,850,000.
See accompanying notes to consolidated condensed financial statements.
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/TABLE
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (of a normally
recurring nature) which are necessary for a fair presentation of (1) the
financial position as of February 28, 1995 and August 31, 1994, (2) the
results of operations for the three and six months ended February 28, 1995
and February 28, 1994, and (3) cash flows for the six months ended
February 28, 1995 and February 28, 1994. Results for the six months ended
February 28, 1995, are not necessarily indicative of the results which
will be realized for the year ending August 31, 1995. The August 31, 1994
consolidated condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements should
be read in conjunction with the Company's Form 10-K for the year ended
August 31, 1994.
The Company reclassified division office expenses of $4,474,000 and
$4,646,000 from general and administrative expense to either drilling or
other operating expense for the six months ended February 28, 1995 and
1994, respectively. Division office expenses of $2,561,000 and $2,557,000
were similarly reclassified for the three months ended February 28, 1995
and 1994, respectively.
2. Earnings per common share is based on the weighted average number of
common shares and common share equivalents outstanding during the period.
Common shares granted under the 1969 Key Employee Stock Grant Plan, 1980
Incentive Career Stock Plan and the 1991 Stock Grant Plan are issued and
outstanding and are only considered in the computation of weighted average
shares outstanding when their effect on earnings per share is dilutive.
3. In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships, PCA I Limited ("PCA I") and PCA
II Limited ("PCA II"), in exchange for a promissory note of $1.8 million.
The promissory note is payable in seven equal annual installments
beginning November 1995, with interest at 5 3/4%. Through this
transaction the Company acquired all of the limited partnership interest
in PCA I and the partnership was dissolved.
The acquisition was accounted for under the purchase method of accounting.
The estimated fair value of the net assets acquired exceeded the cost of
acquisition. After the net book value of long-term assets acquired was
written down to zero, negative goodwill of $1.2 million was recorded.
This negative goodwill is being amortized on the straight-line basis over
3 years, which is the remaining estimated useful life of the assets
acquired.
In December 1994, the Company acquired the remaining limited partnership
interest in PCA II and dissolved the partnership.
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Report of Independent Accountants
To the Board of Directors and Shareholders
Parker Drilling Company
We have reviewed the consolidated condensed balance sheet of Parker
Drilling Company and subsidiaries as of February 28, 1995, and the related
consolidated condensed statements of operations for the three and six month
periods ended February 28, 1995 and 1994 and consolidated condensed statements
of cash flows for the six month periods ended February 28, 1995 and 1994.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1994, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report, dated October 18, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of August 31, 1994, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
April 12, 1995
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Second Quarter of Fiscal 1995 Compared with Second Quarter of Fiscal 1994
The Company recorded net income of $.1 million in the second quarter of
fiscal 1995 as compared to a net loss of $.7 million for the same period in
fiscal 1994. The improvement of $.8 million is due primarily to an increase
in drilling margins of $1.4 million offset somewhat by an increase of $.4
million in depreciation expense.
Drilling revenue in the second quarter of fiscal 1995 was $37.7 million,
as compared to second quarter fiscal 1994 revenue of $39.7 million.
International utilization declined from 58% in the second quarter of fiscal
1994 to 54% in the second quarter of fiscal 1995 while domestic utilization
reflected a decline from 25% to 21% for the same periods. Overall utilization
declined from 43% to 40%. (Fiscal 1994 utilization has been adjusted to
reflect rigs removed from the rig fleet at the end of fiscal 1994.)
Western Hemisphere international drilling revenue increased from $11.2
million in the second quarter of fiscal 1994 to $17.5 million in the second
quarter of fiscal 1995. Increased utilization in Colombia and an increase in
the number of operating rigs in Argentina were the primary reasons for the
increase in drilling revenue. The increase in revenue from these two
countries was somewhat offset by a decline in revenue from Ecuador, where the
two rigs in that country completed contracts in fiscal 1994.
Drilling revenue from operations in Africa, the Middle East and
Commonwealth of Independent States ("CIS") declined a total of $5.4 million in
the second quarter of fiscal 1995 when compared to the second quarter of
fiscal 1994. In fiscal 1994 the Company completed one-rig contracts in the
Congo and Yemen. Both of these rigs have been redeployed to Argentina and are
currently operating in that country. The Company also completed contracts for
two rigs in the Russian Republic in fiscal 1994 and these rigs were redeployed
to the country of Kazakhstan. One of these rigs began operations on a short-
term contract in Kazakhstan in the second quarter of fiscal 1995. Revenue
earned by this rig partially offset a decline in revenue from a labor contract
the Company has with a major customer in that country.
The Asia Pacific region's drilling revenue declined $1.3 million in fiscal
1995's second quarter compared to the second quarter of fiscal 1994, primarily
due to a decline in utilization in Papua New Guinea. Increased utilization in
New Zealand and revenue from a labor contract in China were offsets to the
decline in revenue recorded in this region. Domestic drilling revenue
declined $1.7 million in the current fiscal year's second quarter when
compared to the prior fiscal year's second quarter due primarily to lower
utilization in Alaska and the Rocky Mountain states.
Drilling margins (drilling revenue less drilling expense) as a percentage
of revenue increased from 23% in the second quarter of fiscal 1994 to 28% in
the second quarter of fiscal 1995. Drilling margins improved in most of the
Company's market sectors, including Argentina where drilling margins have
improved somewhat due to the Company operating a greater percentage of its
rigs in that country on a daywork basis (versus footage rate basis) in the
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RESULTS OF OPERATIONS (Continued)
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second quarter of the current year. The Company anticipates that the
improvement in operating results will continue in Argentina through the
remainder of the fiscal year.
Fiscal 1994 capital expenditures have resulted in an increase in
depreciation expense of $.4 million for the current quarter as compared to the
fiscal 1994 second quarter. General and administrative expense and other
income (expense) for the quarter were both comparable in amount to the same
quarter in the prior fiscal year. Income tax expense consists primarily of
foreign income taxes.
First Six Months of Fiscal 1995 Compared with First Six Months of Fiscal 1994
The Company's net loss of $1.0 million for the first six months of fiscal
1995 compares to net income of $.9 million for the same period in fiscal 1994.
A decline of $2.7 million in drilling margins was the primary reason for the
decline of $1.9 million in net income. Increases in general and administrative
expense and depreciation expense also contributed to the decline in net
income. An increase of $2.8 million in other income somewhat offset these
items.
Drilling revenue decreased to $69.8 million for the first six months of
the current fiscal year from $79.1 million in the first six months of fiscal
1994. Utilization for all of the Company's rigs declined to 39% for the
current year period from 44% for the first six months of fiscal 1994.
International utilization declined from 60% to 53% while domestic utilization
declined from 24% to 21%.(Fiscal 1994 utilization has been adjusted to reflect
rigs removed from the rig fleet at the end of fiscal 1994.)
Western Hemisphere international drilling revenue increased $11.4 million
for the first six months of fiscal 1995 when compared to the first six months
of fiscal 1994. Additional rigs operating in Colombia and Argentina were
offset to some degree by decreased utilization in Ecuador where two rigs
operating in the prior year completed contracts in fiscal 1994.
Drilling revenue from operations in Africa, the Middle East and
Commonwealth of Independent States ("CIS") declined a total of $12.4 million
in the first six months of fiscal 1995 when compared to the first six months
of fiscal 1994. In fiscal 1994 the Company completed one-rig contracts in the
Congo and Yemen, resulting in a decline in revenue of $6.7 million when
comparing the first six months of fiscal 1995 and 1994. As discussed in the
second quarter comparison, both of these rigs were redeployed to Argentina and
are currently operating in that country. The Company also completed contracts
for two rigs in the Russian Republic in fiscal 1994 and these rigs were
redeployed to the country of Kazakhstan.
The Asia Pacific region's drilling revenue declined $3.6 million in the
first six months of fiscal 1995 when compared to the first six months of
fiscal 1994, primarily due to a decline in utilization in Papua New Guinea.
Increased utilization in New Zealand, where the Company has begun operations
with an additional rig which last operated in Myanmar, and revenue from a
labor contract in China were offsets to the decline in revenue recorded in
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RESULTS OF OPERATIONS (Continued)
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this region. Domestic drilling revenue declined $4.8 million in the current
fiscal year's first six months when compared to the same period in the prior
fiscal year. This decline is due primarily to lower utilization in Alaska and
the Rocky Mountain states, partially offset by increased utilization in the
Mid-Continent states.
Drilling margins as a percentage of revenue were consistent at 26% when
comparing the first six months of the current and prior fiscal year. Fiscal
1994 capital expenditures resulted in an increase in depreciation expense of
$.9 million between the two periods. General and administrative expense
increased $1.2 million in the first six months of fiscal 1995 compared to the
first six months of fiscal 1994 primarily due to increases in the amortization
of deferred compensation and legal expenses. Other income (expense) increased
by $2.8 million as the Company recognized a $1.5 million gain on reversal of a
prior year's foreign currency accrual in the current fiscal year. Gains from
the sale of fixed assets in the current year have exceeded those recorded in
the first six months of fiscal 1994 by $1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
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Cash and other short-term investments increased $8.2 million in the first
six months of the fiscal year. Cash of $8.9 million was provided by operating
activities and $5.4 million was received from the sale of fixed assets.
Proceeds from the sale of fixed assets included $2.9 million from the sale of
one domestic and one international rig.
Capital expenditures in the first six months of fiscal 1995 totalled $6.2
million. The Company's capital spending is below the fiscal 1994 six-month
total of $23.6 million, which included expenditures related to seven new rigs
placed into service in South America. Management currently forecasts
capital expenditures for fiscal 1995 to be approximately $30.5 million. The
increase in projected capital spending over the $14.0 million stated in the
Company's Form 10-Q for the first quarter of fiscal 1995 anticipates the
possible award of several international drilling contracts. Any significant
increase in capital expenditures would be subject to restrictions imposed on
the Company as specified below.
The Company has a credit agreement with a bank which provides for a $7.5
million revolving credit facility, all of which was available for drawdown as
of February 28, 1995. The credit agreement, which expires March 1, 1996,
contains restrictions on annual capital expenditures and certain senior and
subordinated indebtedness which can be incurred by Parker Drilling Company and
certain subsidiaries designated in the credit agreement. These designated
subsidiaries comprise the operating subsidiaries through which the Company
performs the majority of its drilling operations. The credit facility also
limits payment of dividends on the Company's common stock to the lesser of 40%
of consolidated net income for the preceding year, or $2.6 million. The
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LIQUIDITY AND CAPITAL RESOURCES (Continued)
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remaining subsidiaries of the Company are not a party to the credit facility
and are able to make capital expenditures and obtain independent financing
from lenders that have no recourse to Parker Drilling Company and the
designated subsidiaries, subject only to an overall limitation of
indebtedness.
The restrictions in the credit agreement are not anticipated to restrict
growth or investment opportunities in the foreseeable future.
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory note
totalling $1.8 million. (See Note 3 of Notes to Unaudited Consolidated
Condensed Financial Statements.) The promissory note is payable in seven
equal annual installments beginning November 1995, with interest at 5 3/4%.
Management believes that the current level of cash and short-term
investments, together with cash generated from operations, should be
sufficient to meet the company's immediate capital needs. However, in the
event the Company obtains additional contracts requiring further significant
capital expenditures or acquires equipment or companies in the drilling
service industry, management believes the Company would likely meet both
short-term and long-term capital needs through a combination of cash generated
from operations, borrowings under the bank credit agreement and either equity
or long-term debt financing.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
During the Annual Meeting of Stockholders held on December 14, 1994,
stockholders approved two stock option plans:
1. The 1994 Non-Employee Director Stock Option Plan provides for the issuance
to non-employee directors of options to purchase up to 200,000 shares of the
Company's common stock. The vote was 34,852,882 affirmative votes, 13,208,113
negative votes and 1,796,142 abstentions.
2. The 1994 Executive Stock Option Plan provides for the granting of a
maximum of 2,400,000 shares of the Company's common stock to key employees
through the granting of stock options, stock appreciation rights and
restricted and deferred stock awards. The vote was 33,891,123 affirmative
votes, 14,169,284 negative votes and 1,796,730 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits:
Exhibit 10(a) Amendment dated as of March 17, 1995, to the
Parker Drilling Company Stock Bonus Plan, filed as
Exhibit 10(e) to Annual Report on Form 10-K for the year
ended August 31, 1993, as amended by Form 10-K/A dated
February 24, 1994.
Exhibit 15 Letter re Unaudited Interim Financial Information
(b)Reports on Form 8-K - There were no reports on Form 8-K filed
during the six months ended February 28, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Parker Drilling Company
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Registrant
Date: April 12, 1995
By: /s/James J. Davis
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James J. Davis
Vice President, Finance and
Chief Financial Officer
By: /s/Randy Ellis
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Randy Ellis
Controller and
Chief Accounting Officer
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