Guarantor/Non Guarantor Condensed Consolidated Financial Statements

12 Months Ended

Dec. 31, 2017

Guarantor Non-Guarantor Condensed Consolidated Financial Statements

Guarantor/Non Guarantor Condensed Consolidated Financial Statements

Guarantor/Non-Guarantor Condensed Consolidating Financial Statements

Our Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all existing 100% owned 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 December 31, 2017, 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 consolidating balance sheets, statements of operations and statements of cash flows of the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries.

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

	December 31, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	72,258		$	(1,881	)	$	3,263		$	—		$	73,640
Restricted cash	2,008			—			—			—			2,008
Receivables, net of allowance	7			93,866			19,174			(42		)	113,005
Intercompany receivable (payable)	(24,836		)	51,532			(26,696		)	—			—
Inventory	—			7,741			6,316			—			14,057
Assets held for sale	—			6,620			—			—			6,620
Prepaid expenses and other current assets	1,238			3,193			1,798			—			6,229
Total current assets	50,675			161,071			3,855			(42		)	215,559
Net property and equipment	2,011			521,080			26,532			—			549,623
Investment in subsidiaries	596,927			20,095			—			(617,022		)	—
Deferred income taxes	38,028			—			—			(38,028		)	—
Other long-term assets	496			788			403			—			1,687
Total assets	$	688,137		$	703,034		$	30,790		$	(655,092	)	$	766,869
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	286		$	24,174		$	5,078		$	—		$	29,538
Deferred revenues	—			97			808			—			905
Accrued expenses	12,504			37,814			4,195			(42		)	54,471
Total current liabilities	12,790			62,085			10,081			(42		)	84,914
Long-term debt, less unamortized discount and debt issuance costs	461,665			—			—			—			461,665
Deferred income taxes	—			41,179			—			(38,028		)	3,151
Other long-term liabilities	3,586			2,843			614			—			7,043
Total liabilities	478,041			106,107			10,695			(38,070		)	556,773
Total shareholders’ equity	210,096			596,927			20,095			(617,022		)	210,096
Total liabilities and shareholders’ equity	$	688,137		$	703,034		$	30,790		$	(655,092	)	$	766,869
	December 31, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	9,898		$	(764	)	$	1,060		$	—		$	10,194
Receivables, net of allowance	480			64,946			7,210			(513		)	72,123
Intercompany receivable (payable)	(24,836		)	35,427			(10,591		)	—			—
Inventory	—			5,659			4,001			—			9,660
Assets held for sale	—			15,035			58			—			15,093
Prepaid expenses and other current assets	1,280			4,014			1,632			—			6,926
Total current assets	(13,178		)	124,317			3,370			(513		)	113,996
Net property and equipment	2,501			556,062			25,517			—			584,080
Investment in subsidiaries	577,965			24,270			—			(602,235		)	—
Deferred income taxes	65,041			—			—			(65,041		)	—
Other long-term assets	583			1,029			414			—			2,026
Total assets	$	632,912		$	705,678		$	29,301		$	(667,789	)	$	700,102
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	546		$	16,317		$	2,345		$	—		$	19,208
Deferred revenues	—			680			769			—			1,449
Accrued expenses	9,316			34,765			1,777			(513		)	45,345
Total current liabilities	9,862			51,762			4,891			(513		)	66,002
Long-term debt, less unamortized discount and debt issuance costs	339,473			—			—			—			339,473
Deferred income taxes	—			73,249			(28		)	(65,041		)	8,180
Other long-term liabilities	2,179			2,702			168			—			5,049
Total liabilities	351,514			127,713			5,031			(65,554		)	418,704
Total shareholders’ equity	281,398			577,965			24,270			(602,235		)	281,398
Total liabilities and shareholders’ equity	$	632,912		$	705,678		$	29,301		$	(667,789	)	$	700,102

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

	Year ended December 31, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	405,106		$	41,349		$	—		$	446,455
Costs and expenses:
Operating costs	—			298,898			31,982			—			330,880
Depreciation and amortization	1,242			91,817			5,718			—			98,777
General and administrative	22,869			45,387			1,922			(497		)	69,681
Bad debt expense	—			53			—			—			53
Impairment	—			1,902			—			—			1,902
Gain (loss) on dispositions of property and equipment, net	2			(3,454		)	(156		)	—			(3,608		)
Intercompany leasing	—			(4,860		)	4,860			—			—
Total costs and expenses	24,113			429,743			44,326			(497		)	497,685
Income (loss) from operations	(24,113		)	(24,637		)	(2,977		)	497			(51,230		)
Other income (expense):
Equity in earnings of subsidiaries	4,317			(3,936		)	—			(381		)	—
Interest expense, net of interest capitalized	(27,061		)	20			2			—			(27,039		)
Loss on extinguishment of debt	(1,476		)	—			—			—			(1,476		)
Other income (expense), net	54			896			(29		)	(497		)	424
Total other (expense) income	(24,166		)	(3,020		)	(27		)	(878		)	(28,091		)
Income (loss) before income taxes	(48,279		)	(27,657		)	(3,004		)	(381		)	(79,321		)
Income tax (expense) benefit 1	(26,839		)	31,974			(932		)	—			4,203
Net income (loss)	$	(75,118	)	$	4,317		$	(3,936	)	$	(381	)	$	(75,118	)
	Year ended December 31, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	270,268		$	6,808		$	—		$	277,076
Costs and expenses:
Operating costs	—			194,515			9,434			—			203,949
Depreciation and amortization	1,250			106,193			6,869			—			114,312
General and administrative	21,657			38,564			1,515			(552		)	61,184
Bad debt expense	—			156			—			—			156
Impairment	—			12,260			555			—			12,815
Gain on dispositions of property and equipment, net	—			(1,838		)	(54		)	—			(1,892		)
Intercompany leasing	—			(4,860		)	4,860			—			—
Total costs and expenses	22,907			344,990			23,179			(552		)	390,524
Income (loss) from operations	(22,907		)	(74,722		)	(16,371		)	552			(113,448		)
Other income (expense):
Equity in earnings of subsidiaries	(63,374		)	(17,835		)	—			81,209			—
Interest expense, net of interest capitalized	(25,845		)	(88		)	(1		)	—			(25,934		)
Loss on extinguishment of debt	(299		)	—			—			—			(299		)
Other income (expense), net	18			1,430			(338		)	(552		)	558
Total other (expense) income	(89,500		)	(16,493		)	(339		)	80,657			(25,675		)
Income (loss) before income taxes	(112,407		)	(91,215		)	(16,710		)	81,209			(139,123		)
Income tax (expense) benefit 1	(15,984		)	27,841			(1,125		)	—			10,732
Net income (loss)	$	(128,391	)	$	(63,374	)	$	(17,835	)	$	81,209		$	(128,391	)
1  The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings (losses) of subsidiaries.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(Continued)

(in thousands)

	Year ended December 31, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	496,900		$	43,878		$	—		$	540,778
Costs and expenses:
Operating costs	—			322,458			35,558			—			358,016
Depreciation and amortization	1,338			137,987			11,614			—			150,939
General and administrative	21,515			50,710			2,230			(552		)	73,903
Bad debt expense (recovery)	—			571			(759		)	—			(188		)
Impairment	—			73,270			56,632			(750		)	129,152
Gain (loss) on dispositions of property and equipment, net	117			(4,350		)	(111		)	—			(4,344		)
Intercompany leasing	—			(4,860		)	4,860			—			—
Total costs and expenses	22,970			575,786			110,024			(1,302		)	707,478
Income (loss) from operations	(22,970		)	(78,886		)	(66,146		)	1,302			(166,700		)
Other income (expense):
Equity in earnings of subsidiaries	(126,553		)	(74,459		)	—			201,012			—
Interest expense, net of interest capitalized	(21,128		)	(117		)	23			—			(21,222		)
Loss on extinguishment of debt	(2,186		)	—			—			—			(2,186		)
Other income (expense), net	6			1,687			(3,752		)	(552		)	(2,611		)
Total other (expense) income	(149,861		)	(72,889		)	(3,729		)	200,460			(26,019		)
Income (loss) before income taxes	(172,831		)	(151,775		)	(69,875		)	201,762			(192,719		)
Income tax (expense) benefit 1	16,941			25,222			(4,584		)	—			37,579
Net income (loss)	$	(155,890	)	$	(126,553	)	$	(74,459	)	$	201,762		$	(155,140	)
1  The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings (losses) of subsidiaries.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended December 31, 2017
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	(40,068	)	$	25,492		$	8,759		$	—		$	(5,817	)
Cash flows from investing activities:
Purchases of property and equipment	(745		)	(56,556		)	(6,407		)	431			(63,277		)
Proceeds from sale of property and equipment	—			12,768			232			(431		)	12,569
Proceeds from insurance recoveries	—			3,344			—			—			3,344
	(745		)	(40,444		)	(6,175		)	—			(47,364		)
Cash flows from financing activities:
Debt repayments	(120,000		)	—			—			—			(120,000		)
Proceeds from issuance of debt	245,500			—			—			—			245,500
Debt issuance costs	(6,332		)	—			—			—			(6,332		)
Purchase of treasury stock	(533		)	—			—			—			(533		)
Intercompany contributions/distributions	(13,454		)	13,835			(381		)	—			—
	105,181			13,835			(381		)	—			118,635
Net increase (decrease) in cash, cash equivalents and restricted cash	64,368			(1,117		)	2,203			—			65,454
Beginning cash, cash equivalents and restricted cash	9,898			(764		)	1,060			—			10,194
Ending cash, cash equivalents and restricted cash	$	74,266		$	(1,881	)	$	3,263		$	—		$	75,648
	Year ended December 31, 2016
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	(39,344	)	$	45,035		$	(560	)	$	—		$	5,131
Cash flows from investing activities:
Purchases of property and equipment	(452		)	(31,049		)	(880		)	—			(32,381		)
Proceeds from sale of property and equipment	—			7,523			54			—			7,577
Proceeds from insurance recoveries	—			37			—			—			37
	(452		)	(23,489		)	(826		)	—			(24,767		)
Cash flows from financing activities:
Debt repayments	(71,000		)	—			—			—			(71,000		)
Proceeds from issuance of debt	22,000			—			—			—			22,000
Debt issuance costs	(819		)	—			—			—			(819		)
Proceeds from exercise of options	183			—			—			—			183
Proceeds from common stock, net of offering costs	65,430			—						—			65,430
Purchase of treasury stock	(124		)	—			—			—			(124		)
Intercompany contributions/distributions	16,803			(16,698		)	(105		)	—			—
	32,473			(16,698		)	(105		)	—			15,670
Net increase (decrease) in cash and cash equivalents	(7,323		)	4,848			(1,491		)	—			(3,966		)
Beginning cash and cash equivalents	17,221			(5,612		)	2,551			—			14,160
Ending cash and cash equivalents	$	9,898		$	(764	)	$	1,060		$	—		$	10,194

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(Continued)

(in thousands)

	Year ended December 31, 2015
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities	$	4,067		$	147,643		$	(8,991	)	$	—		$	142,719
Cash flows from investing activities:
Purchases of property and equipment	(663		)	(157,336		)	(1,885		)	269			(159,615		)
Proceeds from sale of property and equipment	32			57,444			467			(269		)	57,674
Proceeds from insurance recoveries	—			285			—			—			285
	(631		)	(99,607		)	(1,418		)	—			(101,656		)
Cash flows from financing activities:
Debt repayments	(60,000		)	(2		)	—			—			(60,002		)
Debt issuance costs	(1,877		)	—			—			—			(1,877		)
Proceeds from exercise of options	781			—			—			—			781
Purchase of treasury stock	(729		)	—			—			—			(729		)
Intercompany contributions/distributions	47,922			(48,130		)	208			—			—
	(13,903		)	(48,132		)	208			—			(61,827		)
Net increase (decrease) in cash and cash equivalents	(10,467		)	(96		)	(10,201		)	—			(20,764		)
Beginning cash and cash equivalents	27,688			(5,516		)	12,752			—			34,924
Ending cash and cash equivalents	$	17,221		$	(5,612	)	$	2,551		$	—		$	14,160