Guarantor/Non Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2019

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 June 30, 2019, 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

(unaudited, in thousands)

	June 30, 2019
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	25,591		$	—	$	4,541		$	—		$	30,132
Restricted cash	998			—		—			—			998
Receivables, net of allowance	169			108,747		36,088			568			145,572
Intercompany receivable (payable)	(27,363		)	65,708		(38,345		)	—			—
Inventory	—			11,784		11,016			—			22,800
Assets held for sale	—			5,962		—			—			5,962
Prepaid expenses and other current assets	2,301			3,591		1,169			—			7,061
Total current assets	1,696			195,792		14,469			568			212,525
Net property and equipment	2,029			471,153		27,661			—			500,843
Investment in subsidiaries	570,070			31,020		—			(601,090		)	—
Deferred income taxes	43,490			—		—			(43,490		)	—
Operating lease assets	3,353			4,779		643			—			8,775
Other noncurrent assets	616			485		425			—			1,526
Total assets	$	621,254		$	703,229	$	43,198		$	(644,012	)	$	723,669
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,798		$	32,324	$	5,897		$	—		$	41,019
Deferred revenues	—			528		892			—			1,420
Accrued expenses	10,266			48,063		4,664			568			63,561
Total current liabilities	13,064			80,915		11,453			568			106,000
Long-term debt, less unamortized discount and debt issuance costs	466,093			—		—			—			466,093
Noncurrent operating lease liabilities	2,968			3,034		493			—			6,495
Deferred income taxes	—			48,403		—			(43,490		)	4,913
Other noncurrent liabilities	784			807		232			—			1,823
Total liabilities	482,909			133,159		12,178			(42,922		)	585,324
Total shareholders’ equity	138,345			570,070		31,020			(601,090		)	138,345
Total liabilities and shareholders’ equity	$	621,254		$	703,229	$	43,198		$	(644,012	)	$	723,669
	December 31, 2018
	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	50,350		$	—	$	3,216		$	—		$	53,566
Restricted cash	998			—		—			—			998
Receivables, net of allowance	436			95,030		35,219			196			130,881
Intercompany receivable (payable)	(27,245		)	67,098		(39,853		)	—			—
Inventory	—			9,945		8,953			—			18,898
Assets held for sale	—			3,582		—			—			3,582
Prepaid expenses and other current assets	1,743			3,197		2,169			—			7,109
Total current assets	26,282			178,852		9,704			196			215,034
Net property and equipment	2,022			494,376		28,460			—			524,858
Investment in subsidiaries	574,695			25,370		—			(600,065		)	—
Deferred income taxes	42,585			—		—			(42,585		)	—
Other noncurrent assets	596			511		551			—			1,658
Total assets	$	646,180		$	699,109	$	38,715		$	(642,454	)	$	741,550
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,093		$	26,795	$	6,246		$	—		$	34,134
Deferred revenues	—			95		1,627			—			1,722
Accrued expenses	14,020			49,640		5,056			196			68,912
Total current liabilities	15,113			76,530		12,929			196			104,768
Long-term debt, less unamortized discount and debt issuance costs	464,552			—		—			—			464,552
Deferred income taxes	—			46,273		—			(42,585		)	3,688
Other noncurrent liabilities	1,457			1,611		416			—			3,484
Total liabilities	481,122			124,414		13,345			(42,389		)	576,492
Total shareholders’ equity	165,058			574,695		25,370			(600,065		)	165,058
Total liabilities and shareholders’ equity	$	646,180		$	699,109	$	38,715		$	(642,454	)	$	741,550

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Three months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	127,421		$	25,422		$	—		$	152,843
Costs and expenses:
Operating costs	—			97,417			18,553			—			115,970
Depreciation and amortization	210			21,268			1,373			—			22,851
General and administrative	6,907			10,579			677			(135		)	18,028
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense (recovery), net	—			(348		)	—			—			(348		)
Impairment	—			332			—			—			332
Gain on dispositions of property and equipment, net	—			(1,121		)	(5		)	—			(1,126		)
Total costs and expenses	7,117			126,912			21,813			(135		)	155,707
Income (loss) from operations	(7,117		)	509			3,609			135			(2,864		)
Other income (expense):
Equity in earnings of subsidiaries	3,305			3,431			—			(6,736		)	—
Interest expense	(10,059		)	(1		)	(45		)	—			(10,105		)
Other income (expense)	91			401			(8		)	(135		)	349
Total other income (expense), net	(6,663		)	3,831			(53		)	(6,871		)	(9,756		)
Income (loss) before income taxes	(13,780		)	4,340			3,556			(6,736		)	(12,620		)
Income tax (expense) benefit 1	836			(1,035		)	(125		)	—			(324		)
Net income (loss)	$	(12,944	)	$	3,305		$	3,431		$	(6,736	)	$	(12,944	)
	Three months ended June 30, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	133,008		$	21,774		$	—		$	154,782
Costs and expenses:
Operating costs	—			97,134			17,063			—			114,197
Depreciation and amortization	266			21,720			1,301			—			23,287
General and administrative	10,130			14,090			714			(105		)	24,829
Intercompany leasing	—			(1,215		)	1,215			—			—
Bad debt expense (recovery), net	—			(370		)	—			—			(370		)
Impairment	—			2,368			—			—			2,368
Gain on dispositions of property and equipment, net	—			(713		)	(13		)	—			(726		)
Total costs and expenses	10,396			133,014			20,280			(105		)	163,585
Income (loss) from operations	(10,396		)	(6		)	1,494			105			(8,803		)
Other income (expense):
Equity in earnings of subsidiaries	521			1,034			—			(1,555		)	—
Interest expense	(9,645		)	(2		)	5			—			(9,642		)
Other income (expense)	159			223			(233		)	(105		)	44
Total other income (expense), net	(8,965		)	1,255			(228		)	(1,660		)	(9,598		)
Income (loss) before income taxes	(19,361		)	1,249			1,266			(1,555		)	(18,401		)
Income tax (expense) benefit 1	1,209			(728		)	(232		)	—			249
Net income (loss)	$	(18,152	)	$	521		$	1,034		$	(1,555	)	$	(18,152	)
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 CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)

	Six months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	252,346		$	47,065		$	—		$	299,411
Costs and expenses:
Operating costs	—			189,519			35,036			—			224,555
Depreciation and amortization	490			42,298			2,716			—			45,504
General and administrative	14,903			22,025			1,128			(270		)	37,786
Intercompany leasing	—			(2,430		)	2,430			—			—
Bad debt recovery, net of expense	—			(286		)	—			—			(286		)
Impairment	—			1,378			—			—			1,378
Gain on dispositions of property and equipment, net	—			(2,105		)	(96		)	—			(2,201		)
Total costs and expenses	15,393			250,399			41,214			(270		)	306,736
Income (loss) from operations	(15,393		)	1,947			5,851			270			(7,325		)
Other income (expense):
Equity in earnings of subsidiaries	6,073			5,895			—			(11,968		)	—
Interest expense	(19,933		)	(15		)	(42		)	—			(19,990		)
Other income	297			667			339			(270		)	1,033
Total other income (expense), net	(13,563		)	6,547			297			(12,238		)	(18,957		)
Income (loss) before income taxes	(28,956		)	8,494			6,148			(11,968		)	(26,282		)
Income tax (expense) benefit 1	897			(2,421		)	(253		)	—			(1,777		)
Net income (loss)	$	(28,059	)	$	6,073		$	5,895		$	(11,968	)	$	(28,059	)
	Six months ended June 30, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	259,875		$	39,385		$	—		$	299,260
Costs and expenses:
Operating costs	—			186,943			30,020			—			216,963
Depreciation and amortization	557			43,729			2,748			—			47,034
General and administrative	16,368			26,629			1,236			(210		)	44,023
Intercompany leasing	—			(2,430		)	2,430			—			—
Bad debt recovery, net of expense	—			(422		)	—			—			(422		)
Impairment	—			2,368			—			—			2,368
Gain on dispositions of property and equipment, net	—			(1,034		)	(27		)	—			(1,061		)
Total costs and expenses	16,925			255,783			36,407			(210		)	308,905
Income (loss) from operations	(16,925		)	4,092			2,978			210			(9,645		)
Other income (expense):
Equity in earnings of subsidiaries	5,070			2,687			—			(7,757		)	—
Interest expense	(19,161		)	(2		)	8			—			(19,155		)
Other income	161			442			155			(210		)	548
Total other income (expense), net	(13,930		)	3,127			163			(7,967		)	(18,607		)
Income (loss) before income taxes	(30,855		)	7,219			3,141			(7,757		)	(28,252		)
Income tax (expense) benefit 1	1,564			(2,149		)	(454		)	—			(1,039		)
Net income (loss)	$	(29,291	)	$	5,070		$	2,687		$	(7,757	)	$	(29,291	)
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

(unaudited, in thousands)

	Six months ended June 30, 2019
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(35,104	)	$	35,209		$	3,941		$	—	$	4,046
Cash flows from investing activities:
Purchases of property and equipment	(314		)	(28,634		)	(2,434		)	—		(31,382		)
Proceeds from sale of property and equipment	—			3,376			63			—		3,439
Proceeds from insurance recoveries	—			588			—			—		588
	(314		)	(24,670		)	(2,371		)	—		(27,355		)
Cash flows from financing activities:
Purchase of treasury stock	(125		)	—			—			—		(125		)
Intercompany contributions/distributions	10,784			(10,539		)	(245		)	—		—
	10,659			(10,539		)	(245		)	—		(125		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(24,759		)	—			1,325			—		(23,434		)
Beginning cash, cash equivalents and restricted cash	51,348			—			3,216			—		54,564
Ending cash, cash equivalents and restricted cash	$	26,589		$	—		$	4,541		$	—	$	31,130
	Six months ended June 30, 2018
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities	$	(26,626	)	$	37,071		$	6,680		$	—	$	17,125
Cash flows from investing activities:
Purchases of property and equipment	(435		)	(26,989		)	(4,061		)	—		(31,485		)
Proceeds from sale of property and equipment	—			2,212			13			—		2,225
Proceeds from insurance recoveries	—			527			14			—		541
	(435		)	(24,250		)	(4,034		)	—		(28,719		)
Cash flows from financing activities:
Proceeds from exercise of options	12			—			—			—		12
Purchase of treasury stock	(549		)	—			—			—		(549		)
Intercompany contributions/distributions	12,876			(12,821		)	(55		)	—		—
	12,339			(12,821		)	(55		)	—		(537		)
Net increase (decrease) in cash, cash equivalents and restricted cash	(14,722		)	—			2,591			—		(12,131		)
Beginning cash, cash equivalents and restricted cash	72,385			—			3,263			—		75,648
Ending cash, cash equivalents and restricted cash	$	57,663		$	—		$	5,854		$	—	$	63,517