Guarantor/Non Guarantor Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2015

Guarantor Non-Guarantor Condensed Consolidated Financial Statements

Guarantor/Non Guarantor Condensed Consolidated Financial Statements

Guarantor/Non-Guarantor Condensed Consolidated Financial Statements

Our Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all existing domestic subsidiaries, except for Pioneer Services Holdings, LLC. The subsidiaries that generally operate our non-U.S. business concentrated in Colombia do not guarantee our Senior Notes. The non-guarantor subsidiaries do not have any payment obligations under the Senior Notes, the guarantees or the Indenture.

In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, such non-guarantor subsidiary will pay the holders of its debt and other liabilities, including its trade creditors, before it will be able to distribute any of its assets to us. In the future, any non-U.S. subsidiaries, immaterial subsidiaries and subsidiaries that we designate as unrestricted subsidiaries under the Indenture will not guarantee the Senior Notes. As of June 30, 2015, there were no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company.

As a result of the guarantee arrangements, we are presenting the following condensed consolidated balance sheets, statements of operations and statements of cash flows of the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)

	June 30, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	57,686			(2,033		)	6,815			—			$	62,468
Receivables, net of allowance	2,335			74,384			26,519			—			103,238
Intercompany receivable (payable)	(24,836		)	41,788			(16,952		)	—			—
Deferred income taxes	700			5,093			203			—			5,996
Inventory	—			6,378			3,150			—			9,528
Assets held for sale	—			4,056			—			—			4,056
Prepaid expenses and other current assets	1,192			4,972			1,515			—			7,679
Total current assets	37,077			134,638			21,250			—			192,965
Net property and equipment	3,652			741,734			35,705			—			781,091
Investment in subsidiaries	654,656			49,587			—			(704,243		)	—
Intangible assets, net of accumulated amortization	—			20,253			—			—			20,253
Noncurrent deferred income taxes	119,992			—			—			(119,992		)	—
Other long-term assets	9,466			1,122			—			—			10,588
Total assets	$	824,843		$	947,334		$	56,955		$	(824,235	)	$	1,004,897
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	986		$	45,883		$	2,433		—			$	49,302
Current portion of long-term debt	—			—			—			—			—
Deferred revenues	—			26,113			—			—			26,113
Accrued expenses	7,393			43,682			4,708			—			55,783
Total current liabilities	8,379			115,678			7,141			—			131,198
Long-term debt, less current portion	410,000			—			—			—			410,000
Noncurrent deferred income taxes	—			174,548			—			(119,992		)	54,556
Other long-term liabilities	418			2,452			227			—			3,097
Total liabilities	418,797			292,678			7,368			(119,992		)	598,851
Total shareholders’ equity	406,046			654,656			49,587			(704,243		)	406,046
Total liabilities and shareholders’ equity	$	824,843		$	947,334		$	56,955		$	(824,235	)	$	1,004,897
	December 31, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	27,688		$	(5,516	)	$	12,752		$	—		$	34,924
Receivables, net of allowance	1,641			151,048			37,512			—			190,201
Intercompany receivable (payable)	(24,836		)	55,567			(30,728		)	(3		)	—
Deferred income taxes	1,827			8,196			975			—			10,998
Inventory	—			7,208			6,909			—			14,117
Assets held for sale	—			9,909			—			—			9,909
Prepaid expenses and other current assets	1,217			6,554			1,154			—			8,925
Total current assets	7,537			232,966			28,574			(3		)	269,074
Net property and equipment	4,179			763,994			89,118			(750		)	856,541
Investment in subsidiaries	830,185			116,799			—			(946,984		)	—
Intangible assets, net of accumulated amortization	—			24,223			—			—			24,223
Noncurrent deferred income taxes	111,286			—			2,753			(111,286		)	2,753
Other long-term assets	10,122			1,955			6,921			—			18,998
Total assets	$	963,309		$	1,139,937		$	127,366		$	(1,059,023	)	$	1,171,589
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	735		$	57,910		$	5,660		$	—		$	64,305
Current portion of long-term debt	—			27			—			—			27
Deferred revenues	—			3,315			—			—			3,315
Accrued expenses	11,109			64,063			4,376			(3		)	79,545
Total current liabilities	11,844			125,315			10,036			(3		)	147,192
Long-term debt, less current portion	455,000			53			—			—			455,053
Noncurrent deferred income taxes	138			180,726			—			(111,286		)	69,578
Other long-term liabilities	513			3,658			531			—			4,702
Total liabilities	467,495			309,752			10,567			(111,289		)	676,525
Total shareholders’ equity	495,814			830,185			116,799			(947,734		)	495,064
Total liabilities and shareholders’ equity	$	963,309		$	1,139,937		$	127,366		$	(1,059,023	)	$	1,171,589

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)

	Three months ended June 30, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	120,933		$	14,078		$	—		$	135,011
Costs and expenses:
Operating costs	—			74,907			11,014			—			85,921
Depreciation and amortization	346			34,367			3,776			—			38,489
General and administrative	5,685			12,118			698			(138		)	18,363
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense	—			394			—			—			394
Impairment charges	—			15,447			56,632			(750		)	71,329
Gain on dispositions of property and equipment	—			(4,359		)	(18		)	—			(4,377		)
Total costs and expenses	6,031			131,659			73,317			(888		)	210,119
Income (loss) from operations	(6,031		)	(10,726		)	(59,239		)	888			(75,108		)
Other income (expense):
Equity in earnings of subsidiaries	(70,508		)	(62,574		)	—			133,082			—
Interest expense	(5,135		)	(118		)	8			—			(5,245		)
Other	(2		)	419			207			(138		)	486
Total other income (expense)	(75,645		)	(62,273		)	215			132,944			(4,759		)
Income (loss) before income taxes	(81,676		)	(72,999		)	(59,024		)	133,832			(79,867		)
Income tax (expense) benefit	3,645			2,491			(3,550		)	—			2,586
Net income (loss)	$	(78,031	)	$	(70,508	)	$	(62,574	)	$	133,832		$	(77,281	)
	Three months ended June 30, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	234,285		$	25,527		$	—		$	259,812
Costs and expenses:
Operating costs	—			149,539			17,059			—			166,598
Depreciation and amortization	356			41,979			3,456			—			45,791
General and administrative	6,800			17,438			1,176			(138		)	25,276
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense	—			561			—			—			561
Gain on dispositions of property and equipment	—			(186		)	(145		)	—			(331		)
Total costs and expenses	7,156			208,116			22,761			(138		)	237,895
Income (loss) from operations	(7,156		)	26,169			2,766			138			21,917
Other income (expense):
Equity in earnings of subsidiaries	19,707			3,512			—			(23,219		)	—
Interest expense	(10,707		)	(24		)	3			—			(10,728		)
Loss on extinguishment of debt	(14,595		)	—			—			—			(14,595		)
Other	7			617			1,531			(138		)	2,017
Total other income (expense)	(5,588		)	4,105			1,534			(23,357		)	(23,306		)
Income (loss) before income taxes	(12,744		)	30,274			4,300			(23,219		)	(1,389		)
Income tax (expense) benefit	12,425			(10,567		)	(788		)	—			1,070
Net income (loss)	$	(319	)	$	19,707		$	3,512		$	(23,219	)	$	(319	)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)

	Six months ended June 30, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	294,786		$	34,039		$	—		$	328,825
Costs and expenses:
Operating costs	—			190,443			26,542			—			216,985
Depreciation and amortization	695			72,044			7,532			—			80,271
General and administrative	10,760			28,373			1,366			(276		)	40,223
Intercompany leasing	—			(2,430		)	2,430			—			—
Bad debt expense	—			713			—			—			713
Impairment charges	—			21,437			56,632			(750		)	77,319
Gain on dispositions of property and equipment	—			(3,223		)	(21		)	—			(3,244		)
Total costs and expenses	11,455			307,357			94,481			(1,026		)	412,267
Income (loss) from operations	(11,455		)	(12,571		)	(60,442		)	1,026			(83,442		)
Other income (expense):
Equity in earnings of subsidiaries	(75,971		)	(67,163		)	—			143,134			—
Interest expense	(10,590		)	(122		)	12			—			(10,700		)
Other	7			871			(2,796		)	(276		)	(2,194		)
Total other income (expense)	(86,554		)	(66,414		)	(2,784		)	142,858			(12,894		)
Income (loss) before income taxes	(98,009		)	(78,985		)	(63,226		)	143,884			(96,336		)
Income tax (expense) benefit	7,959			3,014			(3,937		)	—			7,036
Net income (loss)	$	(90,050	)	$	(75,971	)	$	(67,163	)	$	143,884		$	(89,300	)
	Six months ended June 30, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	451,155		$	47,691		$	—		$	498,846
Costs and expenses:
Operating costs	—			290,304			31,784			—			322,088
Depreciation and amortization	625			83,843			6,849			—			91,317
General and administrative	13,535			34,636			1,864			(276		)	49,759
Intercompany leasing	—			(2,430		)	2,430			—			—
Bad debt expense (recovery)	—			437			—			—			437
Gain on dispositions of property and equipment	—			(1,464		)	(267		)	—			(1,731		)
Gain on litigation	(2,876		)	—			—			—			(2,876		)
Total costs and expenses	11,284			405,326			42,660			(276		)	458,994
Income (loss) from operations	(11,284		)	45,829			5,031			276			39,852
Other income (expense):
Equity in earnings of subsidiaries	32,592			4,087			—			(36,679		)	—
Interest expense	(23,106		)	(17		)	7			—			(23,116		)
Loss on extinguishment of debt	(22,482		)	—			—			—			(22,482		)
Other	10			1,288			793			(276		)	1,815
Total other income (expense)	(12,986		)	5,358			800			(36,955		)	(43,783		)
Income (loss) before income taxes	(24,270		)	51,187			5,831			(36,679		)	(3,931		)
Income tax (expense) benefit	21,372			(18,595		)	(1,744		)	—			1,033
Net income (loss)	$	(2,898	)	$	32,592		$	4,087		$	(36,679	)	$	(2,898	)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Six months ended June 30, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
Cash flows from operating activities	$	75,207		$	51,325		$	(4,761	)	$	121,771
Cash flows from investing activities:
Purchases of property and equipment	(268		)	(82,554		)	(1,205		)	(84,027		)
Proceeds from sale of property and equipment	22			34,487			29			34,538
Proceeds from insurance recoveries	—			227			—			227
	(246		)	(47,840		)	(1,176		)	(49,262		)
Cash flows from financing activities:
Debt repayments	(45,000		)	(2		)	—			(45,002		)
Debt issuance costs	(5		)	—			—			(5		)
Proceeds from exercise of options	753			—			—			753
Purchase of treasury stock	(711		)	—			—			(711		)
	(44,963		)	(2		)	—			(44,965		)
Net increase (decrease) in cash and cash equivalents	29,998			3,483			(5,937		)	27,544
Beginning cash and cash equivalents	27,688			(5,516		)	12,752			34,924
Ending cash and cash equivalents	$	57,686		$	(2,033	)	$	6,815		$	62,468
	Six months ended June 30, 2014
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidated
Cash flows from operating activities	$	25,255		$	57,484		$	12,748		$	95,487
Cash flows from investing activities:
Purchases of property and equipment	(494		)	(63,159		)	(10,914		)	(74,567		)
Proceeds from sale of property and equipment	—			6,262			276			6,538
	(494		)	(56,897		)	(10,638		)	(68,029		)
Cash flows from financing activities:
Debt repayments	(330,000		)	(13		)	—			(330,013		)
Proceeds from issuance of debt	320,000			—			—			320,000
Debt issuance costs	(6,187		)	—			—			(6,187		)
Tender premium costs	(15,381		)	—			—			(15,381		)
Proceeds from exercise of options	1,581			—			—			1,581
Purchase of treasury stock	(1,132		)	—			—			(1,132		)
	(31,119		)	(13		)	—			(31,132		)
Net increase (decrease) in cash and cash equivalents	(6,358		)	574			2,110			(3,674		)
Beginning cash and cash equivalents	28,368			(2,059		)	1,076			27,385
Ending cash and cash equivalents	$	22,010		$	(1,485	)	$	3,186		$	23,711