<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Filed pursuant to Rule 424(b)(5)
SEC File No. 333-37897
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 5, 1997
$300,000,000
LOGO
[Logo of ENSCO International Inc. appears here]
ENSCO INTERNATIONAL INCORPORATED
$150,000,000 % NOTES DUE NOVEMBER , 2007
$150,000,000 % DEBENTURES DUE NOVEMBER , 2027
----------
Interest on the % Notes due November , 2007 (the "Notes") and the %
Debentures due November , 2027 (the "Debentures") is payable on May and
November of each year, commencing May , 1998. The Notes and the Debentures
may be redeemed at any time at the option of the Company, in whole or in part,
at a price equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of redemption plus a Make-Whole Premium
(as defined below), if any, relating to the then prevailing Treasury Yield (as
defined below) and the remaining life of the Notes or Debentures. The Notes and
Debentures will be represented by one or more global securities ("Global
Securities") registered in the name of the nominee of The Depository Trust
Company ("DTC"). Beneficial interests in the Global Securities will be shown
on, and transfers thereof will be effected only through records maintained by
DTC and its participants. Except as described herein, neither the Notes nor the
Debentures will be offered in definitive form. The Notes and Debentures will be
issued only in denominations of $1,000 and integral multiples thereof. The
Notes and Debentures are being offered separately and not as a unit. See
"Description of the Notes and Debentures".
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Note........................... % % %
Total............................. $ $ $
Per Debenture...................... % % %
Total............................. $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from November , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $ payable by the Company.
----------
The Notes and Debentures offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Notes and Debentures will be ready for delivery in book-entry
form only through the facilities of DTC in New York, New York, on or about
November , 1997, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
----------
The date of this Prospectus Supplement is November , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OR
DEBENTURES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
FORWARD-LOOKING INFORMATION
The statements included in this Prospectus Supplement and the accompanying
Prospectus regarding future financial performance, expected market trends and
results of future operations and other statements that are not historical
facts are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended ("the Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Statements to the effect that the Company or management "anticipates,"
"believes," "estimates," "expects," "predicts," or "projects" a particular
result or course of events, or that such result or course of events "should"
occur, and similar expressions, are also intended to identify forward-looking
statements. Such statements are subject to numerous risks, uncertainties and
assumptions and other factors discussed in this Prospectus Supplement, the
accompanying Prospectus and in the Company's filings with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties
materialize, or should the assumptions underlying such statements prove
incorrect, actual results may vary materially from those expressed or implied
by such forward-looking statements.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. As used herein and unless the
context requires otherwise, the "Company" means ENSCO International
Incorporated and its subsidiaries and its predecessors.
THE COMPANY
ENSCO International Incorporated is one of the leading international
providers of offshore drilling and marine transportation services to the oil
and gas industry, with a fleet of 52 offshore drilling rigs and 37 oilfield
support vessels. The Company owns and operates the world's largest fleet of
premium jackup rigs, with 35 jackup rigs located throughout the world. Premium
jackups are generally defined as jackup rigs that have an independent leg
design and are capable of working in water depths of up to approximately 250 to
350 feet. These rigs are preferred because of their ability to work in many
offshore producing areas around the world in water depths commonly encountered
on continental shelves. The Company also owns and operates the fourth largest
fleet of oilfield supply vessels in the Gulf of Mexico, as well as seven
platform and ten barge drilling rigs.
The Company's operations are concentrated in four principal geographic
regions--North America, South America, Europe and Asia Pacific. In North
America, the Company's offshore fleet consists of 22 jackup rigs, seven
platform rigs, and 37 oilfield support vessels, all located in the Gulf of
Mexico. The Company's European operations consist of six jackup rigs currently
deployed in the United Kingdom and Dutch sectors of the North Sea. In South
America, the Company's fleet consists of ten lake barge drilling rigs located
in Venezuela. In Asia Pacific, the fleet consists of seven jackup rigs deployed
in various locations. All of the Company's domestic and foreign operations are
conducted through wholly owned subsidiaries, with the exception of the
Company's Venezuelan operations in which the Company holds an 85% interest.
BUSINESS STRATEGY
The Company is focused on the offshore drilling and marine transportation
segments of the oilfield services market, which it believes offer the best
long-term growth potential. The Company expects to grow and to enhance its
financial performance through the following strategic initiatives:
Fleet Additions
Over the last several years, the Company has added both offshore drilling
rigs and oilfield support vessels to expand its presence in these two
businesses, and has disposed of operations that did not fit with the Company's
strategic emphasis. Since 1992, the Company has acquired 33 of its 35 jackup
rigs, each of its seven platform rigs and eight of its 37 oilfield support
vessels, including two large anchor handling tug supply vessels. In June 1996,
the Company acquired DUAL DRILLING COMPANY ("Dual"). The Dual acquisition added
ten premium jackup rigs to the Company's fleet and expanded the Company's
international operations into the Asia Pacific region. In 1993 and 1994, the
Company built eight new lake drilling barges to service the drilling needs of a
subsidiary of the Venezuelan national oil company. These barge rigs were built
against five year, full payout contracts. The Company expects to continue to
pursue acquisitions of offshore rigs and vessels that meet the Company's strict
criteria for high quality and capability, and improved financial performance.
If the drilling market continues to improve, the Company will evaluate
opportunities to construct new drilling rigs.
S-3
<PAGE>
Equipment Enhancements
The Company has invested approximately $315 million since 1993 in upgrading
and extending the service life of its assets. By enhancing its asset base, the
Company has positioned many of its rigs in higher margin segments of the
market, thus contributing to the Company's increased profitability. The Company
has increased the capability of all six of its rigs in the North Sea to better
support extended reach drilling and to address the environmental requirements
of this market. The Company has increased the water-depth and/or drilling
capability of seven of its eleven large jackup rigs located in the Gulf of
Mexico and similarly plans to enhance the remaining four large jackup rigs by
the end of 1998. The Company has also enhanced five of its seven jackup rigs in
the Asia Pacific region and plans to enhance the remaining two in 1998.
Geographic Cores
The Company has concentrated its assets in the Gulf of Mexico, the North Sea,
Venezuela and the Asia Pacific region. By concentrating its assets in selected
geographic markets, the Company is able to focus its marketing efforts, better
serve its customers and limit the number of expensive shorebase facilities
required to support its field operations. The Company believes this allows it
to better control costs to maximize financial performance.
INDUSTRY CONDITIONS
The market for offshore drilling and marine transportation services is
largely determined by the supply of and demand for equipment. From the mid-
1980s to the early 1990s, demand for offshore drilling and marine equipment was
generally flat, while the over supply of offshore drilling and marine equipment
gradually decreased, primarily due to attrition. Since 1994, demand has
steadily improved and, as a result, day rates and utilization for offshore
drilling and marine equipment have increased. Technological advancements, such
as three dimensional seismic, extended reach drilling, and multilateral
drilling techniques, have improved the economics of finding and developing oil
and gas reserves. As a result, oil companies have increased their exploration
and production budgets, which has lead to increased demand for drilling and
marine transportation services. Nearly all actively marketed offshore rigs in
the world are currently under contract, and the demand for high quality rigs
exceeds supply in many markets.
In response to higher demand for offshore rigs, a number of offshore drilling
contractors, including the Company, are upgrading equipment to meet customer
needs for more capable drilling equipment. Some new offshore rigs are being
built, but most new equipment currently planned or under construction is
targeted for deep water drilling, such as semi-submersible rigs and drillships.
Currently, there are relatively few new jackup rigs on order. The Company
believes that increased demand for offshore rigs and marine transportation
services will be sustained over the next several years.
S-4
<PAGE>
THE OFFERING
Securities Offered.......... $150,000,000 aggregate principal amount of %
Notes due November , 2007 (the "Notes").
$150,000,000 aggregate principal amount of %
Debentures due November , 2027 (the
"Debentures").
Interest Payment Dates...... May and November , commencing May , 1998 .
Ranking..................... The Notes and Debentures will rank pari passu
with all existing unsecured, unsubordinated
indebtedness of the Company. See "Description of
the Notes and Debentures--Ranking".
Optional Redemption......... The Notes and the Debentures may be redeemed at
any time at the option of the Company, in whole
or in part, at a price equal to 100% of the
principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption plus
a Make-Whole Premium (as defined below), if any,
relating to the then prevailing Treasury Yield
(as defined below) and the remaining life of the
Notes or Debentures. See "Description of the
Notes and Debentures--Optional Redemption".
Certain Covenants........... The indenture and supplemental indenture relating
to the Notes and Debentures will contain
limitations on the Company's ability to (i) incur
indebtedness secured by certain liens, (ii)
engage in certain sale/leaseback transactions and
(iii) engage in certain merger, consolidation or
reorganization transactions. See "Description of
the Notes and Debentures--Certain Covenants".
Use of Proceeds............. Approximately $75 million of the net proceeds
from the offering of the Notes and Debentures
(the "Offering") will be used to retire the
Company's existing revolving credit facility, and
the balance of the proceeds will be used to
acquire an additional jackup rig and for general
corporate purposes. Following the completion of
the Offering, the Company intends to replace its
existing secured credit facility with an
unsecured credit facility. See "Use of Proceeds".
S-5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
This summary consolidated financial data should be read in conjunction with
"Selected Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
the Company's Quarterly Report on Form 10-Q for the nine months ended September
30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------
1997 1996(1) 1996(1) 1995 1994
-------- -------- -------- ------ ------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(2)
Operating revenues............. $ 580.3 $ 316.4 $ 468.8 $279.1 $245.5
Operating expenses............. 238.1 165.5 238.3 165.5 144.6
Depreciation and amortization . 76.9 57.9 81.8 58.4 51.8
-------- -------- -------- ------ ------
Operating income............... 265.3 93.0 148.7 55.2 49.1
Other expense.................. 11.5 .9 6.0 7.9 8.8
-------- -------- -------- ------ ------
Income from continuing
operations before income taxes
and minority interest......... 253.8 92.1 142.7 47.3 40.3
Provision for income taxes..... 95.2 26.6 44.0 3.4 3.7
Minority interest.............. 2.3 2.0 3.3 2.1 3.0
-------- -------- -------- ------ ------
Income from continuing
operations.................... 156.3 63.5 95.4 41.8 33.6
Income from discontinued
operations(2)................. -- -- -- 6.3 3.6
-------- -------- -------- ------ ------
Net income..................... $ 156.3 $ 63.5 $ 95.4 $ 48.1 $ 37.2
-------- -------- -------- ------ ------
OTHER FINANCIAL DATA
Capital expenditures(3)........ $ 140.6 $ 106.3 $ 176.0 $143.2 $150.4
EBITDA......................... 342.2 150.9 230.5 113.6 100.9
Ratio of EBITDA to interest
expense....................... 19.71x 10.23x 11.03x 6.86x 7.15x
Ratio of earnings to fixed
charges
Historical................... 15.07x 6.96x 7.62x 3.69x 3.61x
Pro forma(4).................
BALANCE SHEET DATA (END OF
PERIOD)
Working capital................ $ 181.1 $ 95.1 $ 107.5 $ 78.9 $129.2
Total assets................... 1,486.9 1,250.4 1,315.4 821.5 773.1
Long-term debt, net of current
portion....................... 209.3 253.5 258.6 159.2 162.5
Stockholders' equity........... 1,000.4 814.7 846.0 531.2 488.0
</TABLE>
- --------
(1) The Company acquired Dual on June 12, 1996. Statement of Operations Data
includes the results of Dual from the acquisition date.
(2) The Company sold its technical services segment in 1995. Results of the
technical services segment have been reclassified for comparative purposes.
The 1995 results include a gain of $5.2 million in connection with the sale
of the technical services segment.
(3) Excludes the value of stock issued in the acquisition of Dual.
(4) Assumes the Company's repayment of all of its borrowings under its
revolving credit facility (which totaled $125.1 million as of January 1,
1997 and $100.0 million as of September 30, 1997) and that the Notes and
the Debentures bear interest at annual rates of % and %, respectively.
See "Use of Proceeds".
S-6
<PAGE>
USE OF PROCEEDS
The estimated net proceeds of approximately $297 million from the Offering
(after deducting the underwriting discount and estimated expenses of the
Offering to be paid by the Company) will be used (i) to retire its existing
revolving credit facility, (ii) for the expected acquisition of an additional
jackup rig and (iii) for general corporate purposes. See "Business--Expected
Acquisition". The Company's existing revolving credit facility carries a
floating interest rate tied to the London InterBank Offered Rate; as of
October 31, 1997, the interest rate on the revolving credit facility was
6.125%. Following the completion of the Offering, the Company intends to
replace its existing secured credit facility with an unsecured credit
facility.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to give effect to (i) the sale of the
Notes and Debentures and the application of a portion of the estimated net
proceeds therefrom to retire the Company's revolving credit facility as
described under "Use of Proceeds" and (ii) the Company's repayment of
borrowings under its revolving credit facility of $25.0 million on October 20,
1997:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT
Notes offered hereby................................. $ -- $ 150,000
Debentures offered hereby............................ -- 150,000
Revolving credit facility............................ 100,000 --
9 7/8% Senior Subordinated Notes..................... 74,805 74,805
Secured term loans (non-recourse to the Company)..... 52,362 52,362
Secured term loans................................... 14,870 14,870
---------- ----------
Total debt......................................... 242,037 442,037
Less current maturities.............................. 32,778 32,778
---------- ----------
Total long-term debt............................... 209,259 409,259
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share, 250,000,000
shares authorized, 142,259,114 shares issued
and outstanding..................................... 15,509 15,509
Additional paid-in capital........................... 835,314 835,314
Retained earnings.................................... 224,560 224,560
Restricted stock (unearned compensation)............. (7,085) (7,085)
Cumulative translation adjustment.................... (1,086) (1,086)
Treasury stock....................................... (66,805) (66,805)
---------- ----------
Total stockholders' equity......................... 1,000,407 1,000,407
---------- ----------
Total capitalization............................. $1,209,666 $1,409,666
========== ==========
</TABLE>
S-7
<PAGE>
BUSINESS
The Company is one of the leading international providers of offshore
drilling and marine transportation services to the oil and gas industry, with
a fleet of 52 offshore drilling rigs and 37 oilfield support vessels. The
Company owns and operates the world's largest fleet of premium jackup rigs,
with 35 jackup rigs. Premium jackups are generally defined as jackup rigs that
have an independent leg design and are capable of working in water depths of
up to approximately 250 to 350 feet. These rigs are preferred because of their
ability to work in many offshore producing areas around the world in water
depths commonly encountered on continental shelves. The Company also owns and
operates the fourth largest fleet of oilfield supply vessels in the Gulf of
Mexico, as well as seven platform and ten barge drilling rigs.
The Company's operations are concentrated in four principal geographic
regions--North America, South America, Europe and Asia Pacific. In North
America, the Company's offshore fleet consists of 22 jackup rigs, seven
platform rigs and 37 oilfield support vessels, all located in the Gulf of
Mexico. The Company's European operations consist of six jackup rigs currently
deployed in the United Kingdom and Dutch sectors of the North Sea. In South
America, the Company's fleet consists of ten lake barge drilling rigs located
in Venezuela. In Asia Pacific, the fleet consists of seven jackup rigs
deployed in various locations. All of the Company's domestic and foreign
operations are conducted through wholly owned subsidiaries, with the exception
of the Company's Venezuelan operations in which the Company holds an 85%
interest; a locally owned private company owns the remaining 15%.
The Company was formed as a Texas corporation in 1975 and was reincorporated
in Delaware in 1987. The Company's principal office is located at 2700
Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202-2792, and its telephone
number is (214) 922-1500.
BUSINESS STRATEGY
The Company is focused on the offshore drilling and marine transportation
segments of the oilfield services market, which it believes offer the best
long-term growth potential. The Company expects to grow and to enhance its
financial performance through the following strategic initiatives:
Fleet Additions
Over the last several years, the Company has added both offshore drilling
rigs and oilfield support vessels to expand its presence in these two
businesses, and has disposed of operations that did not fit with the Company's
strategic emphasis. Since 1992, the Company has acquired 33 of its 35 jackup
rigs, each of its seven platform rigs and eight of its 37 oilfield support
vessels, including two large anchor handling tug supply vessels. In June 1996,
the Company acquired Dual. The Dual acquisition added ten premium jackup rigs
to the Company's fleet and expanded the Company's international operations
into the Asia Pacific region. In 1993 and 1994, the Company built eight new
lake drilling barges to service the drilling needs of a subsidiary of the
Venezuelan national oil company. These barge rigs were built against five
year, full payout contracts. The Company expects to continue to pursue
acquisitions of offshore rigs and vessels that meet the Company's strict
criteria for high quality and capability, and improved financial performance.
See "--Expected Acquisition". If the drilling market continues to improve, the
Company will evaluate opportunities to construct new drilling rigs.
Equipment Enhancements
The Company has invested approximately $315 million since 1993 in upgrading
and extending the service life of its assets. By enhancing its asset base, the
Company has positioned many of its rigs in higher margin segments of the
market, thus contributing to the Company's increased profitability. The
Company has increased the capability of all six of its rigs in the North Sea
to better support extended
S-8
<PAGE>
reach drilling and to address the environmental requirements of this market.
The Company has increased the water-depth and/or drilling capability of seven
of its eleven large jackup rigs located in the Gulf of Mexico and similarly
plans to enhance the remaining four large jackup rigs by the end of 1998. The
Company has also enhanced five of its seven jackup rigs in the Asia Pacific
region and plans to enhance the remaining two in 1998.
Geographic Cores
The Company has concentrated its assets in the Gulf of Mexico, the North
Sea, Venezuela and the Asia Pacific region. By concentrating its assets in
selected geographic markets, the Company is able to focus its marketing
efforts, better serve its customers and limit the number of expensive
shorebase facilities required to support its field operations. The Company
believes this allows it to better control costs and maximize financial
performance.
INDUSTRY CONDITIONS
The market for offshore drilling and marine transportation services is
largely determined by the supply of and demand for available equipment. From
the mid-1980s to the early 1990s, demand for offshore drilling and marine
equipment was generally flat, while the over supply of offshore drilling and
marine equipment gradually decreased, primarily due to attrition. Since 1994,
demand has steadily improved and, as a result, day rates and utilization for
offshore drilling and marine equipment have increased. Technological
advancements, such as three dimensional seismic, extended reach drilling and
multilateral drilling techniques, have improved the economics of finding and
developing oil and gas reserves. As a result, oil companies have increased
their exploration and production budgets, which has lead to increased demand
for drilling and marine transportation services. Nearly all actively marketed
offshore rigs in the world are currently under contract, and the demand for
high quality rigs exceeds supply in many markets.
In response to higher demand for offshore rigs, a number of offshore
drilling contractors, including the Company, are upgrading equipment to meet
customer needs for more capable drilling equipment. Some new offshore rigs are
being built, but most new equipment currently planned or under construction,
such as semi-submersible rigs and drillships, is targeted for deep water
drilling. Currently, there are relatively few new jackup rigs on order. The
Company believes that increased demand for offshore rigs and marine
transportation services should be sustained over the next several years.
DRILLING RIG FLEET
The Company operates three types of drilling rigs--jackup rigs, barge
drilling rigs and platform rigs. The Company's drilling rigs consist of
engines, drawworks, derricks, pumps to circulate the drilling fluid, blowout
preventers, drill string and related equipment. The engines power a drive
mechanism that turns a bit consisting of rotating cones so that a hole is
drilled by grinding the rock which is then carried to the surface by the
drilling fluid. The intended well depth and the drilling conditions are the
principal factors that determine the size and type of rig most suitable for a
particular drilling job.
Jackup Rigs
Jackup rigs stand on the ocean floor with their hull and drilling equipment
elevated above the water on connected leg supports. Jackup rigs are generally
preferred in water depths of 350 feet or less. All of the Company's jackup
rigs are of the independent leg design. The majority of the Company's jackup
units are equipped with cantilevers, which allow the rigs to extend outward
from their hulls over fixed platforms enabling drilling of both exploratory
and development wells. The jackup rig hull includes the drilling rig, jacking
system, crews' quarters, storage and loading facilities, helicopter landing
pad and related equipment.
S-9
<PAGE>
Barge Drilling Rigs
Barge drilling rigs are towed to the drilling location and are held in place
by anchors while drilling activities are conducted. The Company's barge
drilling rigs have all of the crews' quarters, storage facilities and related
equipment mounted on floating barges, with the drilling equipment cantilevered
from the stern of the barge.
Platform Rigs
Platform rigs are designed to be temporarily installed on permanently
constructed offshore platforms. The platform rig sections are lifted onto the
offshore platforms with the use of heavy lift cranes. A platform rig typically
stays at a location for a longer period of time than a jackup rig, because
several wells can be drilled from a single offshore platform.
DRILLING RIG AND MARINE FLEET
The following table provides certain information about the Company's
drilling rig fleet as of November 1, 1997:
JACKUP RIGS
<TABLE>
<CAPTION>
YEAR WATER RATED CURRENT CURRENT
RIG NAME BUILT/REBUILT RIG MAKE(1) DEPTH DEPTH LOCATION CUSTOMER
- ------------------------ ------------- --------------- ----- ------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
NORTH AMERICA
ENSCO 51................ 1982 FG-780II-C 300' 25,000' Gulf of Mexico Total
ENSCO 54................ 1982/1997 FG-780II-C 300' 25,000' Gulf of Mexico (2)
ENSCO 55................ 1981/1997 FG-780II-C 300' 25,000' Gulf of Mexico Forcenergy
ENSCO 60................ 1981/1997 Lev-111-C 300' 25,000' Gulf of Mexico Enserch
ENSCO 64................ 1974 MLT 53-S 250' 30,000' Gulf of Mexico Newfield
ENSCO 67................ 1976/1996 MLT 84-S 400' 30,000' Gulf of Mexico McMoran
ENSCO 68................ 1976 MLT 84-S 350' 30,000' Gulf of Mexico Murphy
ENSCO 69................ 1976/1995 MLT 84-S 400' 25,000' Gulf of Mexico Newfield
ENSCO 81................ 1979 MLT 116-C 350' 25,000' Gulf of Mexico Coastal
ENSCO 82................ 1979 MLT 116-C 300' 25,000' Gulf of Mexico British Borneo
ENSCO 83................ 1979 MLT 82 SD-C 250' 25,000' Gulf of Mexico Enron
ENSCO 84................ 1981 MLT 82 SD-C 250' 25,000' Gulf of Mexico UMC/Enron
ENSCO 86................ 1981 MLT 82 SD-C 350' 30,000' Gulf of Mexico Exxon
ENSCO 87................ 1982 MLT 116-C 250' 25,000' Gulf of Mexico Coastal
ENSCO 88................ 1982 MLT 82 SD-C 250' 25,000' Gulf of Mexico Hall Houston
ENSCO 89................ 1982 MLT 82 SD-C 250' 25,000' Gulf of Mexico Exxon
ENSCO 90................ 1982 MLT 82 SD-C 250' 25,000' Gulf of Mexico Exxon
ENSCO 93................ 1982 MLT 82 SD-C 250' 25,000' Gulf of Mexico Conoco
ENSCO 94................ 1981 Hitachi-250C 250' 25,000' Gulf of Mexico Mobil
ENSCO 95................ 1981 Hitachi-250C 250' 25,000' Gulf of Mexico Chevron
ENSCO 98................ 1977 MLT 82 SD-C 250' 25,000' Gulf of Mexico Apache
ENSCO 99................ 1985 MLT 82 SD-C 250' 30,000' Gulf of Mexico Exxon
EUROPE
ENSCO 70................ 1981/1996 Hitachi-300C NS 250' 30,000' The Netherlands NAM (Shell)
ENSCO 71................ 1982/1995 Hitachi-300C NS 225' 25,000' The Netherlands NAM (Shell)
ENSCO 72................ 1981/1996 Hitachi-300C NS 225' 25,000' The Netherlands NAM (Shell)
ENSCO 80................ 1978/1995 MLT 116E-C 225' 30,000' United Kingdom Arco
ENSCO 85................ 1981/1995 MLT 116-C 225' 25,000' The Netherlands NAM (Shell)
ENSCO 92................ 1982/1996 MLT 116-C 225' 25,000' United Kingdom Conoco
</TABLE>
S-10
<PAGE>
JACKUP RIGS
<TABLE>
<CAPTION>
YEAR WATER RATED CURRENT CURRENT
RIG NAME BUILT/REBUILT RIG MAKE(1) DEPTH DEPTH LOCATION CUSTOMER
-------- ------------- ------------ ----- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASIA PACIFIC
ENSCO 50......... 1983 FG-780II-C 300' 25,000' India ONGC
ENSCO 52......... 1983/1997 FG-780II-C 300' 25,000' Malaysia Petronas
ENSCO 53......... 1982 FG-780II-C 300' 30,000' India ONGC
ENSCO 56......... 1983/1997 FG-780II-C 300' 25,000' Australia Apache
ENSCO 57......... 1982/1997 FG-780II-C 300' 25,000' Thailand Unocal
ENSCO 96......... 1982/1997 Hitachi-250C 250' 25,000' Qatar Ras Laffan
ENSCO 97......... 1980/1997 MLT 82 SD-C 250' 30,000' Qatar Maersk
</TABLE>
BARGE DRILLING RIGS
<TABLE>
<CAPTION>
YEAR RATED CURRENT CURRENT
RIG NAME BUILD/REBUILT DEPTH LOCATION CUSTOMER
-------- ------------- ------- --------- --------
<S> <C> <C> <C> <C>
ENSCO V.......................... 1982/1996 15,000' Venezuela PdVSA
ENSCO VI......................... 1991/1996 15,000' Venezuela PdVSA
ENSCO VII........................ 1993 20,000' Venezuela PdVSA
ENSCO VIII....................... 1993 20,000' Venezuela PdVSA
ENSCO IX......................... 1993 20,000' Venezuela PdVSA
ENSCO X.......................... 1993 20,000' Venezuela PdVSA
ENSCO XI......................... 1994 25,000' Venezuela PdVSA
ENSCO XII........................ 1994 25,000' Venezuela PdVSA
ENSCO XIV........................ 1994 25,000' Venezuela PdVSA
ENSCO XV......................... 1994 25,000' Venezuela PdVSA
</TABLE>
PLATFORM RIGS
<TABLE>
<CAPTION>
YEAR RATED CURRENT CURRENT
RIG NAME BUILT/REBUILT DEPTH LOCATION CUSTOMER
-------- ------------- ------- -------------- ------------
<S> <C> <C> <C> <C>
ENSCO 20(3)............. 1980 25,000' China Arco
ENSCO 21................ 1982/1996 25,000' Gulf of Mexico Phillips
ENSCO 22................ 1982/1997 25,000' Gulf of Mexico Mobil
ENSCO 23................ 1980 30,000' Gulf of Mexico Amerada Hess
ENSCO 24................ 1980 25,000' Gulf of Mexico (2)
ENSCO 25................ 1980 30,000' Gulf of Mexico Texaco
ENSCO 26................ 1982 30,000' Gulf of Mexico Marathon
ENSCO 29................ 1981 30,000' Gulf of Mexico (2)
</TABLE>
- --------
(1) All jackup rigs are independent cantilever design except for ENSCO 64, 67,
68 and 69 which are independent leg slot rigs.
(2) ENSCO 54, 24 and 29 currently are in shipyards for modification and
enhancement.
(3) ENSCO 20 is managed by, but is not owned by, the Company.
S-11
<PAGE>
MARINE TRANSPORTATION OPERATIONS
The Company's marine transportation fleet of 37 vessels consists of five
anchor handling tug supply ("AHTS") vessels, 24 supply vessels and eight mini-
supply vessels.
The Company's five AHTS vessels ordinarily support semi-submersible drilling
rigs and large offshore construction projects or provide towing services. The
24 supply vessels and eight mini-supply vessels support general drilling and
production activity by ferrying supplies between land and offshore facilities.
All of the Company's marine transportation vessels have drilling fluid
handling capabilities which management believes enhance their marketability.
MARINE FLEET
The following table provides certain information about the Company's marine
transportation vessels as of November 1, 1997:
<TABLE>
<CAPTION>
NO. OF YEAR
VESSEL TYPE VESSELS BUILT HORSE POWER LENGTH LOCATION
----------- ------- --------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C>
KODIAKS--AHTS........... 2 1983 12,000 225' Gulf of Mexico
OTHER--AHTS............. 3 1976-1983 5,800-7,240 185'-230' Gulf of Mexico
SUPPLY.................. 24 1977-1985 1,800-3,000 166'-185' Gulf of Mexico
MINI-SUPPLY............. 8 1981-1984 1,200 140'-146' Gulf of Mexico
---
Total................. 37
===
</TABLE>
EXPECTED ACQUISITION
The Company has signed a letter of intent to acquire the West Omikron, a
Marathon LeTourneau 150-88C Gorilla class jackup drilling rig. The purchase
price for the rig is approximately $103 million. The closing of the
transaction is expected to occur by the end of December 1997.
S-12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 have
been derived from the audited consolidated financial statements of the Company
incorporated by reference in the accompanying Prospectus. The selected
consolidated financial data as of December 31, 1994, 1993 and 1992 and for
each of the two years in the period ended December 31, 1993 have been derived
from audited consolidated financial statements of the Company not incorporated
by reference in the accompanying Prospectus. The selected consolidated
financial data as of September 30, 1997 and September 30, 1996 are unaudited,
but in the opinion of management have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting of normal recurring adjustments, considered necessary for a fair
presentation of such data. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Company's consolidated financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and the Company's Quarterly Report on Form 10-Q
for the nine months ended September 30, 1997, which are incorporated by
reference in the accompanying Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- ---------------------------------------
1997 1996(1) 1996(1) 1995 1994 1993(2) 1992(3)
-------- -------- -------- ------ ------ ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS(4)
Operating revenues..... $ 580.3 $ 316.4 $ 468.8 $279.1 $245.5 $227.4 $ 84.2
Operating expenses..... 238.1 165.5 238.3 165.5 144.6 151.2 82.0
Depreciation and
amortization.......... 76.9 57.9 81.8 58.4 51.8 41.2 12.5
-------- -------- -------- ------ ------ ------ ------
Operating income
(loss)................ 265.3 93.0 148.7 55.2 49.1 35.0 (10.3)
Other expenses......... 11.5 .9 6.0 7.9 8.8 6.7 8.0
-------- -------- -------- ------ ------ ------ ------
Income (loss) from
continuing operations
before income taxes,
minority interest and
cumulative effect of
accounting change..... 253.8 92.1 142.7 47.3 40.3 28.3 (18.3)
Provision for income
taxes................. 95.2 26.6 44.0 3.4 3.7 5.9 2.0
Minority interest...... 2.3 2.0 3.3 2.1 3.0 6.9 --
-------- -------- -------- ------ ------ ------ ------
Income (loss) from
continuing
operations............ 156.3 63.5 95.4 41.8 33.6 15.5 (20.3)
Income (loss) from
discontinued
operations(4)......... -- -- 6.3 3.6 3.5 (9.0)
-------- -------- -------- ------ ------ ------ ------
Income (loss) before
cumulative effect of
accounting change..... 156.3 63.5 95.4 48.1 37.2 19.0 (29.3)
Cumulative effect of
accounting change,
net of minority
interest(5)........... -- -- -- -- -- (2.5) --
-------- -------- -------- ------ ------ ------ ------
Net income (loss)...... 156.3 63.5 95.4 48.1 37.2 16.5 (29.3)
Preferred stock
dividend
requirements.......... -- -- -- -- 2.2 4.3 4.3
-------- -------- -------- ------ ------ ------ ------
Income (loss)
applicable to common
stock................. $ 156.3 $ 63.5 $ 95.4 $ 48.1 $ 35.0 $ 12.2 $(33.6)
======== ======== ======== ====== ====== ====== ======
Income (loss) per
common share(6).......
Continuing
operations.......... $ 1.10 $ .49 $ .72 $ .35 $ .27 $ .14 $ (.41)
Discontinued
operations.......... -- -- -- .05 .03 .04 (.15)
Cumulative effect of
accounting change... -- -- -- -- -- (.03) --
-------- -------- -------- ------ ------ ------ ------
Income (loss) per
common share........ $ 1.10 $ .49 $ .72 $ .40 $ .30 $ .15 $ (.56)
======== ======== ======== ====== ====== ====== ======
Weighted average
common shares
outstanding(7)........ 141.9 129.5 132.6 121.1 115.7 80.7 60.0
BALANCE SHEET DATA (END
OF PERIOD)
Working capital........ $ 181.1 $ 95.1 $ 107.5 $ 78.9 $129.2 $124.6 $ 33.8
Total assets........... 1,486.9 1,250.4 1,315.4 821.5 773.1 689.3 272.4
Long-term debt, net of
current portion....... 209.3 253.5 258.6 159.2 162.5 126.0 23.6
$1.50 preferred stock.. -- -- -- -- -- 71.0 71.0
Stockholders' equity... 1,000.4 814.7 846.0 531.2 488.0 383.9 142.5
</TABLE>
S-13
<PAGE>
- --------
(1) The Company acquired Dual on June 12, 1996. Statement of Operations Data
includes the results of Dual from the acquisition date.
(2) The Company completed the step acquisition of Penrod Holding Corporation
("Penrod") in August 1993.
(3) Amounts have been restated for adoption of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes".
(4) The Company sold its technical services segment in 1995 and its supply
segment in 1993. Results of the technical services segment and the supply
segment have been reclassified for comparative purposes. The 1995 results
include a gain of $5.2 million in connection with the sale of the
technical services segment and the 1993 results include a gain of $2.1
million in connection with the sale of the supply segment.
(5) Effective January 1, 1993, Penrod adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions".
(6) Income (loss) per common share amounts have been adjusted for the two-for-
one stock split effected on September 15, 1997.
(7) Weighted average common shares outstanding has been adjusted for the two-
for-one stock split effected on September 15, 1997.
S-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's net income for the quarter ended September 30, 1997 increased
to $67.8 million, $.48 per share, from $27.2 million, $.19 per share, in the
prior year quarter. For the nine months ended September 30, 1997, net income
increased to $156.3 million, $1.10 per share, from $63.5 million, $.49 per
share, in the prior year period. These increases are due primarily to higher
average day rates for the Company's drilling rigs and marine vessels over 1996
levels and the benefit from the drilling rigs acquired in the Dual acquisition
in mid-June 1996.
The following analysis highlights the Company's operating results for the
three and nine months ended September 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING RESULTS
Revenues............................... $223,325 $134,588 $580,343 $316,383
Operating margin (1)................... 142,934 69,787 352,684 158,831
Operating income....................... 112,367 43,366 265,266 92,991
Other income (expense)................. (3,651) (2,465) (11,453) (845)
Provision for income taxes............. 40,401 12,979 95,217 26,595
Minority interest...................... 511 710 2,289 2,068
Net income............................. 67,804 27,212 156,307 63,483
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
REVENUES
Contract drilling
Jackup rigs
North America........................... $100,652 $ 56,670 $255,263 $134,002
Europe.................................. 48,501 22,428 120,145 63,174
Asia Pacific(2)......................... 22,788 11,828 53,932 13,761
-------- -------- -------- --------
Total jackup rigs...................... 171,941 90,926 429,340 210,937
-------- -------- -------- --------
Barge rigs--South America................ 22,150 18,145 63,235 53,232
Platform rigs(2)......................... 5,439 9,176 20,255 10,635
-------- -------- -------- --------
Total contract drilling................ 199,530 118,247 512,830 274,804
-------- -------- -------- --------
Marine transportation
AHTS(3).................................. 5,590 4,146 15,675 11,776
Supply................................... 15,326 10,078 43,655 24,484
Mini-Supply.............................. 2,879 2,117 8,183 5,319
-------- -------- -------- --------
Total marine transportation............ 23,795 16,341 67,513 41,579
-------- -------- -------- --------
Total................................ $223,325 $134,588 $580,343 $316,383
======== ======== ======== ========
OPERATING MARGIN(1)
Contract drilling
Jackup rigs
North America........................... $ 70,473 $ 31,411 $168,886 $ 67,870
Europe.................................. 34,010 9,837 78,899 25,858
Asia Pacific(2)......................... 11,491 4,636 22,210 5,326
-------- -------- -------- --------
Total jackup rigs...................... 115,974 45,884 269,995 99,054
-------- -------- -------- --------
Barge rigs--South America................ 11,509 11,863 36,619 34,976
Platform rigs(2)......................... 1,681 2,328 5,667 2,837
Land rig(4).............................. -- 798 -- 752
-------- -------- -------- --------
Total contract drilling................ 129,164 60,873 312,281 137,619
-------- -------- -------- --------
Marine transportation
AHTS(3).................................. 3,023 2,096 8,605 6,100
Supply................................... 9,046 5,789 27,179 12,678
Mini-supply.............................. 1,701 1,029 4,619 2,434
-------- -------- -------- --------
Total marine transportation............ 13,770 8,914 40,403 21,212
-------- -------- -------- --------
Total................................ $142,934 $ 69,787 $352,684 $158,831
======== ======== ======== ========
</TABLE>
S-15
<PAGE>
- --------
(1) Defined as revenues less operating expenses, exclusive of depreciation and
general and administrative expenses.
(2) The 1996 amounts for Asia Pacific and the platform rigs are comprised
exclusively of operations acquired in the Dual acquisition in June 1996.
(3) Anchor handling tug supply vessels.
(4) The Company sold its remaining land rig in July 1996.
The following is an analysis of certain operating information of the Company
for the three and nine months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ---------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
CONTRACT DRILLING
Utilization
Jackup rigs
North America.............................. 97% 95% 96% 92%
Europe..................................... 100% 83% 100% 85%
Asia Pacific............................... 86% 98% 76% 96%
------- ------- ------- -------
Total jackup rigs......................... 95% 94% 93% 91%
Barge rigs--South America.................... 100% 99% 100% 88%
Platform rigs................................ 56% 78% 60% 77%
------- ------- ------- -------
Total..................................... 91% 93% 90% 89%
======= ======= ======= =======
Average day rate
Jackup rigs
North America.............................. $51,005 $28,422 $44,194 $26,105
Europe..................................... 87,789 46,880 73,737 45,265
Asia Pacific............................... 40,915 25,733 37,658 25,591
------- ------- ------- -------
Total jackup rigs......................... 55,800 30,988 48,644 29,728
Barge rigs--South America.................... 24,061 19,789 23,149 21,989
Platform rigs................................ 20,954 16,612 18,394 16,375
------- ------- ------- -------
Total..................................... $47,224 $26,906 $40,709 $27,019
======= ======= ======= =======
MARINE TRANSPORTATION
Utilization
AHTS(1)...................................... 86% 81% 82% 80%
Supply....................................... 87% 93% 91% 91%
Mini-supply.................................. 95% 95% 97% 85%
------- ------- ------- -------
Total..................................... 88% 92% 91% 88%
======= ======= ======= =======
Average day rates
AHTS(1)...................................... $14,098 $ 9,265 $12,305 $ 8,899
Supply....................................... 8,019 5,120 7,502 4,281
Mini-supply.................................. 4,101 3,020 3,879 2,838
------- ------- ------- -------
Total..................................... $ 7,905 $ 5,242 $ 7,336 $ 4,663
======= ======= ======= =======
</TABLE>
- --------
(1) Anchor handling tug supply vessels.
Contract Drilling
For the quarter ended September 30, 1997, revenues from the drilling segment
increased $81.3 million, or 69%, and operating margin increased $68.3 million,
or 112%, from the prior year quarter. For the nine months ended September 30,
1997, revenues increased $238.0 million, or 87%, and operating margin
increased $174.7 million, or 127%, from the prior year period. The
significantly
S-16
<PAGE>
improved 1997 results are primarily due to increased revenue from higher day
rates offset, in part, by higher operating expenses. In general, the Company's
operating expenses have increased due to rig fleet additions, higher wages,
benefits and training costs for offshore rig workers, and increased oilfield
equipment and materials costs. As the demand for offshore drilling services
has increased, so has the demand for qualified personnel and certain oilfield
supply equipment which are fundamental to the Company's operations. The
Company places great importance on managing its operations efficiently in
order to minimize the effects of these cost increases.
North America Jackup Rigs
-------------------------
For the quarter ended September 30, 1997, revenues from North America jackup
rigs increased $44.0 million, or 78%, and operating margin increased by $39.1
million, or 124%, over the prior year quarter. For the nine months ended
September 30, 1997, revenues increased $121.3 million, or 90%, and operating
margin increased by $101.0 million, or 149%, from the prior year period. These
improvements are due primarily to average day rate increases of 79% and 69%
for the quarter and nine months ended September 30, 1997, respectively. The
Dual acquisition in mid-June 1996 added four jackup rigs to the North America
fleet. One of these jackup rigs was transferred from the Gulf of Mexico to the
Asia Pacific fleet in the first quarter of 1997.
Europe Jackup Rigs
------------------
For the quarter ended September 30, 1997, revenues from Europe jackup rigs
increased $26.1 million, or 116%, and operating margin increased $24.2
million, or 246%, over the prior year quarter. For the nine months ended
September 30, 1997, revenues increased $57.0 million, or 90%, and operating
margin increased $53.0 million, or 205%, from the prior year period. These
improvements are due primarily to increased average day rates of 87% and 63%
for the quarter and nine months ended September 30, 1997, respectively. Also,
utilization increased to 100% in the current year periods from 83% and 85% for
the comparable three and nine month periods in the prior year, respectively.
In the prior year, three of the Europe jackup rigs were undergoing
modification and enhancement for a portion of the first nine months of 1996,
including one rig that was in the shipyard for the entire third quarter.
Asia Pacific Jackup Rigs
------------------------
The Asia Pacific operations were acquired in the Dual acquisition.
Subsequent to the Dual acquisition, the Company purchased an additional jackup
rig located in Southeast Asia in November 1996, and relocated another jackup
rig from the Gulf of Mexico to Southeast Asia in the first quarter of 1997. In
May 1997, the Company completed the acquisition of the remaining 51% interest
in a jointly owned jackup rig located in Southeast Asia. This rig was
undergoing modification and enhancement during most of the second quarter and
all of the third quarter of 1997 and returned to work in the first part of
November. During the second quarter of 1997, two of the Company's Asia Pacific
jackup rigs that had previously been in the shipyard since late 1996
undergoing modification and enhancement returned to work. For the quarter
ended September 30, 1997, revenues from the Asia Pacific jackup rigs increased
$11.0 million, or 93%, and operating margin increased $6.9 million, or 148%,
from the prior year quarter. These improvements are primarily attributable to
a 59% increase in average day rates from the prior year quarter offset, in
part, by a decrease in utilization, from 98% to 86%, due to shipyard downtime.
For the nine months ended September 30, 1997, revenues increased $40.2
million, or 292%, and operating margin increased $16.9 million, or 317%, from
the prior year period. These increases are primarily due to a full period of
operations from the rigs acquired in the Dual acquisition. In the fourth
quarter of 1997 the Company plans to begin major modifications to two rigs
currently operating off the India coast. It is estimated that these two rigs
will be in the shipyard until mid-1998.
S-17
<PAGE>
South America Barge Rigs
------------------------
Revenues from South America barge rigs increased $4.0 million, or 22%, and
operating margin decreased by $0.4 million, or 3%, from the prior year
quarter. The increase in revenues is mostly due to a 22% increase in average
day rates. The increase in day rates results from inflation based increases
that effectively reimburse the Company for cost increases, thus, resulting in
the nearly level operating margin. For the nine months ended September 30,
1997, revenues increased $10.0 million, or 19%, and operating margin increased
$1.6 million, or 5%, from the prior year period. The increase in revenues and
operating margin is primarily due to the increase in utilization, to 100% for
the nine months ended September 30, 1997 compared to 88% for the prior year
period. The increase in utilization is attributable to two barge drilling rigs
returning to work in May and June of 1996 that had been under modification
since 1995. In addition, revenues were up due to a 5% increase in average day
rates over the prior year period, principally related to the recovery of
inflationary cost increases.
Marine Transportation
For the quarter ended September 30, 1997, revenues for the marine
transportation segment increased $7.5 million, or 46%, and operating margin
increased $4.9 million, or 54%, from the prior year quarter. For the nine
months ended September 30, 1997, revenues increased $25.9 million, or 62%, and
operating margin increased $19.2 million, or 90%, from the prior year period.
The 1997 results improved significantly over the prior year periods due
primarily to increased average day rates of approximately 51% and 57% for the
comparable three and nine month periods, respectively. In the third quarter of
1997, one of the Company's anchor handling tug supply vessels was converted to
a straight supply vessel, decreasing the number of vessels with anchor
handling tug capabilities to five.
General and Administrative Expense
General and administrative expense increased for the quarter and nine months
ended September 30, 1997 as compared to the prior year periods due primarily
to personnel added in connection with the Dual acquisition and higher
performance based benefit costs.
Depreciation and Amortization
Depreciation and amortization expense for the quarter ended September 30,
1997 increased by $3.4 million, or 14%, and for the nine months ended
September 30, 1997 increased by $19.1 million, or 33%, from the prior year
periods. These increases are due primarily to depreciation and amortization
from the drilling rigs acquired and goodwill recorded in connection with the
Dual acquisition, additional drilling rigs acquired in November 1996 and May
1997, and major modifications and enhancements to the Company's fleet in 1996
and the first part of 1997.
Other Income (Expense)
Other income (expense) for the three and nine months ended September 30,
1997 and 1996 was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Interest income..................... $ 1,460 $ 1,051 $ 4,161 $ 3,385
Interest expense.................... (5,006) (6,319) (15,669) (14,755)
Other, net.......................... (105) 2,803 55 10,525
------- ------- -------- --------
$(3,651) $(2,465) $(11,453) $ (845)
======= ======= ======== ========
</TABLE>
S-18
<PAGE>
The Company's interest income increased for the quarter and nine month
periods ended September 30, 1997 over the comparable prior year periods due
primarily to higher average cash balances in the current year.
Interest expense decreased for the quarter ended September 30, 1997 as
compared to the prior year quarter primarily due to lower average debt
balances as a result of debt repayments. Interest expense increased for the
nine month period ended September 30, 1997 over the comparable prior year
period due primarily to the debt that was added in June 1996 in connection
with the Dual acquisition.
"Other, net" decreased for the quarter ended September 30, 1997 as compared
to the prior year quarter due primarily to a $2.9 million gain recorded in the
third quarter of 1996 from the sale of securities that the Company had
received in the September 1995 disposition of assets of a discontinued
operation. For the nine months ended September 30, 1997, "Other, net"
decreased primarily due to a $6.4 million gain on a settlement with
TransAmerican Natural Gas Corporation recorded in the second quarter of 1996
and the $2.9 million gain recorded in the third quarter of 1996.
Provision for Income Taxes
The Company's provisions for income taxes increased significantly for the
three and nine months ended September 30, 1997 as compared to the prior year
periods due primarily to the increased profitability of the Company and the
recognition of the remaining net operating losses for financial reporting
purposes in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
The Company's cash flow from operations and capital expenditures for the
nine months ended September 30, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flow from operations............................... $231,963 $148,131
======== ========
Capital Expenditures
Sustaining............................................ $ 22,664 $ 10,755
Acquisitions.......................................... 96,210 82,262
Enhancements.......................................... 21,676 13,271
-------- --------
Total............................................... $140,550 $106,288
======== ========
</TABLE>
Cash flow from operations increased by $83.8 million for the nine months
ended September 30, 1997 as compared to the same period in the prior year. The
increase in cash flow from operations is primarily a result of increased
operating margin for the first nine months of 1997 offset, in part, by cash
used in the net change in working capital accounts.
Management anticipates that capital expenditures for the full year 1997,
excluding acquisitions, will be approximately $165.0 million to $185.0
million, represented by approximately $30.0 million to $35.0 million for
existing operations and $135.0 million to $150.0 million for modifications and
enhancements of rigs and vessels. In addition, the Company has signed a letter
of intent to acquire the West Omikron, a Marathon LeTourneau 150-88C Gorilla
class jackup drilling rig. The purchase price for the rig, which the Company
intends to fund with proceeds from this Offering, is approximately $103.0
million and the transaction is expected to close by the end of December 1997.
See "Use of Proceeds".
S-19
<PAGE>
Financing and Capital Resources
The Company's long-term debt, total capital and debt to capital ratios at
September 30, 1997 and December 31, 1996 are summarized below (in thousands,
except percentages):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Long-term debt................................. $ 209,259 $ 258,635
Total capital.................................. 1,209,666 1,104,586
Long-term debt to total capital................ 17.3% 23.4%
</TABLE>
The decrease in long-term debt is due to $51.0 million of debt repayments in
the first nine months of 1997. The total capital of the Company increased due
primarily to the profitability of the Company in the first nine months of 1997
offset, in part, by the $51.0 million of debt repayments in the first nine
months of 1997 and dividend payments of approximately $3.5 million in the
third quarter.
In September 1997, the Company paid a cash dividend on its common stock of
$.025 per share, after adjustment for a two-for-one stock split which was also
effected in September. This dividend was the first cash dividend ever paid on
the Company's common stock. The Company currently intends to continue to pay
such dividends in the foreseeable future. However, the final determination of
the timing, amount and payment of dividends on the common stock is at the
discretion of the Board of Directors and will depend on, among other things,
the Company's profitability, liquidity, financial condition, and capital
requirements.
As of September 30, 1997, $100.0 million was outstanding under the Company's
amended and restated $200.0 million revolving credit facility with a group of
international banks. The revolving credit facility carries a floating interest
rate tied to the London InterBank Offered Rate. As of October 31, 1997, the
interest rate on such facility was 6.125%. The revolving credit facility is
secured by a majority of the Company's jackup rigs. On October 20, 1997, the
Company repaid $25.0 million of borrowings outstanding under such facility.
The Company intends to use approximately $75.0 million of the proceeds from
this Offering to retire the revolving credit facility. Following the
completion of the Offering, the Company intends to replace such existing
secured credit facility with an unsecured credit facility, if such a facility
can be obtained on terms acceptable to the Company. There can be no assurance
that the Company will replace its existing facility with an unsecured
facility. See "Use of Proceeds".
The Company's liquidity position at September 30, 1997 and December 31, 1996
is summarized in the table below (in thousands, except ratios):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash and cash equivalents...................... $121,697 $ 80,698
Working capital................................ 181,144 107,519
Current ratio.................................. 2.5 2.0
</TABLE>
S-20
<PAGE>
DESCRIPTION OF THE NOTES AND DEBENTURES
The Notes and the Debentures (the "Securities") are each a separate series
of Debt Securities as described in the accompanying Prospectus under the
caption "Description of Debt Securities". Capitalized terms not otherwise
defined herein have the meanings given to them in the accompanying Prospectus.
GENERAL
The Securities will be issued as general unsecured, unsubordinated
obligations of the Company. The Notes will be limited to $150,000,000
aggregate principal amount and will mature on November , 2007. The
Debentures will be limited to $150,000,000 aggregate principal amount, and
will mature on November , 2027.
Each series of Securities will bear interest from November , 1997, payable
semi-annually in arrears on each May and November , commencing May , 1998,
at the rates set forth on the cover page of this Prospectus Supplement to the
persons in whose names the Securities are registered at the close of business
on the next preceding and , respectively.
The Securities will be issued under an Indenture dated as of November ,
1997, (the "Indenture"), and a Supplemental Indenture dated as of November ,
1997 (the "Supplemental Indenture"). Reference should be made to the
accompanying Prospectus for a detailed summary of additional provisions of the
Securities and of the Indenture.
The Trustee for the Securities is Bankers Trust Company under the Indenture
and the Supplemental Indenture.
The Securities will not be entitled to the benefit of any sinking fund or
other mandatory redemption provisions.
RANKING
The Securities will rank pari passu with all existing unsecured,
unsubordinated indebtedness of the Company. The Securities will be junior in
right of payment to all of the Company's secured obligations (insofar as the
assets securing such obligations are concerned). In addition, the rights of
creditors of the Company, including the Holders of the Securities, to
participate in the assets of any Subsidiary upon such Subsidiary's liquidation
or recapitalization, will be subject to prior claims of such Subsidiary's
creditors. Substantially all of the assets of the Company are owned by
Subsidiaries.
OPTIONAL REDEMPTION
The Notes and the Debentures may be redeemed at any time at the option of
the Company, in whole or in part, upon not less than 30 and not more than 60
days' notice mailed to each holder of Securities to be redeemed at the
holder's address appearing in the Securities Register, on any date prior to
maturity (the "Redemption Date") at a price equal to 100% of the principal
amount thereof plus accrued interest to the Redemption Date (subject to the
right of holders of record on the relevant record date to receive interest due
on an interest payment date that is on or prior to the Redemption Date) plus a
Make-Whole Premium, if any (the "Redemption Price"). In no event will the
Redemption Price be less than 100% of the principal amount of the Notes or
Debentures plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption Date,
of:
A. each interest payment that, but for such redemption, would have
been payable on the Security (or portion thereof) redeemed on each
Interest Payment Date occurring after the Redemption Date (excluding
any accrued interest for the period prior to the Redemption Date); and
B. the principal amount that, but for such redemption, would have
been payable at the final maturity of the Security (or portion thereof)
redeemed;
S-21
<PAGE>
over
(ii) the principal amount of the Security (or portion thereof) redeemed.
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles
of financial analysis. Such present values will be calculated by discounting
the amount of each payment of interest and principal from the date that each
such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined
below) plus basis points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company, provided,
that if the Company fails to make such appointment at least 45 business days
prior to the Redemption Date, or if the institution so appointed is unwilling
or unable to make such calculation, such calculation will be made by Goldman,
Sachs & Co. or, if such firm is unwilling or unable to make such calculation,
by an independent investment banking institution of national standing
appointed by the Trustee (in any such case, an "Independent Investment
Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means a
rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Securities, calculated to the nearest
1/12th of a year (the "Remaining Term"). The Treasury Yield will be determined
as of the third business day immediately preceding the applicable Redemption
Date.
The weekly average yields of United States Treasury Notes will be determined
by reference to the most recent statistical release published by the Federal
Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or
any successor release (the "Statistical Release"). If the Statistical Release
sets forth a weekly average yield for United States Treasury Notes having a
constant maturity that is the same as the Remaining Term, then the Treasury
Yield will be equal to such weekly average yield. In all other cases, the
Treasury Yield will be calculated by interpolation, on a straight-line basis,
between the weekly average yields on the United States Treasury Notes that
have a constant maturity closest to and greater than the Remaining Term and
the United States Treasury Notes that have a constant maturity closest to and
less than the Remaining Term (in each case as set forth in the Statistical
Release). Any weekly average yields so calculated by interpolation will be
rounded to the nearest 1/100th of 1%, with any figure of 1/200th of 1% or
above being rounded upward. If weekly average yields for United States
Treasury Notes are not available in the Statistical Release or otherwise, then
the Treasury Yield will be calculated by interpolation of comparable rates
selected by the Independent Investment Banker.
If less than all of the Securities are to be redeemed, the Trustee will
select the Securities to be redeemed by such method as the Trustee shall deem
fair and appropriate. The Trustee may select for redemption Securities and
portions of Securities in amounts of $1,000 or whole multiples of $1,000.
CERTAIN COVENANTS
Limitations on Liens
The Indenture Supplement provides that the Company will not create, assume
or suffer to exist any Lien (as defined below) on any Restricted Property (as
defined below) to secure any debt of the Company, any Subsidiary or any other
Person, or permit any Subsidiary so to do, without securing the Securities
equally and ratably with such debt for so long as such debt is so secured. The
foregoing restriction does not apply, however, to the following: (1) Liens
existing on the date of issuance of the Securities; (2) Liens on Restricted
Property of Subsidiaries at the time they become Subsidiaries; (3)
S-22
<PAGE>
Liens existing on Restricted Property when acquired; (4) any Lien to secure
any debt incurred prior to, at the time of, or within 24 months after the
acquisition of Restricted Property for the purpose of financing all or any
part of the purchase price thereof and any Lien to the extent that it secures
debt which is in excess of such purchase price and for the payment of which
recourse may be had only against such acquired Restricted Property; (5) any
Lien to secure any debt incurred prior to, at the time of, or within 24 months
after the completion of the construction and commencement of commercial
operation, alteration, repair or improvement of Restricted Property for the
purpose of financing all or any part of the cost thereof and any Lien to the
extent that it secures debt which is in excess of such cost and for the
payment of which recourse may be had only against such Restricted Property;
(6) any Lien securing debt of a Subsidiary owing to the Company or to another
Subsidiary; (7) Liens on the stock, partnership or other equity interest of
the Company or any Subsidiary in any Joint Venture (as defined below) to
secure debt, provided the amount of such debt is contributed and/or advanced
solely to such Joint Venture; (8) any Lien in favor of the United States of
America or any State thereof or any other country, or any agency,
instrumentality or political subdivision of any of the foregoing, to secure
partial, progress, advance or other payments or performance pursuant to the
provisions of any contract or statute, or any Liens securing industrial
development, pollution control or similar revenue bonds; (9) Liens imposed by
law, such as mechanics', workers', repairmen's, materialmen's, carriers',
vendors' or other similar Liens arising in the ordinary course of business, or
governmental (federal, state or municipal) Liens arising out of contracts for
the sale of products or services by the Company or any Subsidiary, or deposits
or pledges to obtain the release of any of the foregoing; (10) certain pledges
or deposits under workers' compensation or similar legislation or in certain
other circumstances; (11) certain Liens in connection with legal proceedings,
including certain Liens arising out of judgments or awards; (12) Liens for
certain taxes or assessments; (13) any extension, renewal or replacement (or
successive extensions, renewals or replacements) in whole or in part of any
Lien referred to in clauses (1) through (12) above, so long as the principal
amount of the debt secured thereby does not exceed the principal amount of
debt so secured at the time of the extension, renewal or replacement (except
that, where an additional principal amount of debt is incurred to provide
funds for the completion of a specific project, the additional principal
amount, and any related financing costs, also may be secured by the Lien) and
the Lien is limited to the same property subject to the Lien so extended,
renewed or replaced (plus improvements on the property); and (14) Liens
otherwise prohibited by this covenant securing debt that, together with the
aggregate amount of outstanding debt secured by Liens otherwise prohibited by
this covenant and the value of certain Sale and Leaseback Transactions (as
defined below), do not exceed 15% of the Company's Consolidated Net Tangible
Assets (as defined below).
Limitation on Sale and Leaseback
The Indenture Supplement provides that the Company will not, and will not
permit any Subsidiary to, enter into any Sale and Leaseback Transaction (as
defined below) covering any Restricted Property unless (1) the Company would
be entitled under the provisions described under "Limitation on Liens" above
to incur debt equal to the value of such Sale and Leaseback Transaction,
secured by Liens on the property to be leased, without equally and ratably
securing the Securities, or (2) after the date on which the Securities are
originally issued and within a period commencing nine months prior to the
effective date of such Sale and Leaseback Transaction and ending nine months
after such effective date, the Company or such Subsidiary shall have expended,
for Restricted Property used or to be used in the ordinary course of business
of the Company and its Subsidiaries, an amount equal to all or a portion of
the value of such Sale and Leaseback Transaction and the Company shall have
elected to designate such amount as a credit against such Sale and Leaseback
Transaction (with any such amount not being so designated to be applied as set
forth in clause (3) below or as otherwise permitted); or (3) the Company
during the nine months following the effective date of such Sale and Leaseback
Transaction, shall have applied either an amount equal (a) to the value of
such Sale and Leaseback Transaction to the voluntary retirement of long-term
debt or (b) to the acquisition of
S-23
<PAGE>
Restricted Property (in either case adjusted to reflect the remaining term of
the lease and any amount expended by the Company as set forth in clause (2)
above).
Consolidation, Merger and Sale of Assets
The Securities are entitled to the benefit of certain restrictive covenants
described in the accompanying Prospectus under the heading "Description of
Debt Securities--Consolidation, Merger and Sale of Assets".
Definitions
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting (1)
all current liabilities (excluding the amount of those which are by their
terms extendable or renewable at the option of the obligor to a date more than
12 months after the date as of which the amount is being determined) and (2)
all goodwill, tradenames, trademarks, patents, unamortized debt discount and
expense and other like intangible assets, all as set forth on the most recent
balance sheet of the Company and its consolidated subsidiaries and determined
in accordance with generally accepted accounting principles.
"Joint Venture" means any partnership, corporation or other entity, in which
up to and including 50% of the partnership interests, outstanding voting stock
or other equity interests is owned, directly or indirectly, by the Company
and/or one or more Subsidiaries. A Joint Venture shall not be a Subsidiary.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or security
interest.
"Restricted Property" means (1) any drilling rig or vessel, or portion
thereof, owned or leased by the Company or any Subsidiary and used for
drilling offshore oil and gas wells, which, in the opinion of the Board of
Directors, is of material importance to the business of the Company and its
Subsidiaries taken as a whole, but no such drilling rig or vessel, or portion
thereof, shall be deemed of material importance if its gross book value
(before deducting accumulated depreciation) is less than 1.5% of Consolidated
Net Tangible Assets, or (2) any shares of capital stock or indebtedness of any
Subsidiary owning any such drilling rig or vessel.
"Sale and Leaseback Transaction" means any arrangement with any Person
pursuant to which the Company or any Subsidiary leases any Restricted Property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such Person, other than (1) temporary leases for a term, including renewals
at the option of the lessee, of not more than five years, (2) leases between
the Company and a Subsidiary or between Subsidiaries, (3) leases of Restricted
Property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the
commencement of commercial operation of the Restricted Property, and (4)
arrangements pursuant to any provision of law with an effect similar to the
former Section 168(f)(8) of the Internal Revenue Code of 1954.
BOOK-ENTRY SYSTEM
The Securities initially will be represented by one or more Global
Securities deposited with DTC and registered in the name of a nominee of DTC.
Except as set forth below, the Securities will be available for purchase in
denominations of $1,000 and integral multiples thereof in book-entry form
only. The term "Depository" refers to DTC or any successor depository.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve
S-24
<PAGE>
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities of
persons who have accounts with DTC ("participants") and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations
and certain other organizations, some of which (and/or their representatives)
own DTC. Access to DTC's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
Upon the issuance by the Company of Securities represented by the Global
Securities, the Depository or its nominee will credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Securities represented by such Global Securities to the accounts of
participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in Securities represented by
the Global Securities will be limited to participants or persons that hold
interests through participants. Ownership of such beneficial interests in
Securities will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depository (with respect to
interests of participants in the Depository), or by participants in the
Depository or persons that may hold interests through such participants (with
respect to persons other than participants in the Depository). The laws of
some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interest in Securities represented
by Global Securities.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, the Depository or its nominee, as
the case may be, will be considered the sole owner or holder of the Securities
represented by such Global Security registered in its name. Participants and
persons that hold interests through participants will not receive or be
entitled to receive physical delivery of Securities in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Unless and until the Global Securities are exchanged in whole or in part for
individual certificates evidencing the Securities represented thereby, such
Global Securities may not be transferred except as a whole by the Depository
to a nominee of such Depository or by the Depository or any nominee of such
Depository to a successor Depository or any nominee of such successor
Depository.
Payments of principal, premium, if any, of and interest on the Securities
represented by Global Securities registered in the name of the Depository or
its nominee will be made by the Company through the Paying Agent in
immediately available funds to the Depository or its nominee, as the case may
be, as the registered owner of the Securities represented by such Global
Securities.
The Company has been advised that the Depository or its nominee, upon
receipt of any payment of principal, premium, if any, or interest in respect
of the Securities represented by Global Securities, will credit immediately
the accounts of the related participants with payment in amounts proportionate
to their respective beneficial interest in the Securities represented by the
Global Securities as shown on the records of the Depository. The Company
expects that payments by participants to owners of beneficial interests in the
Securities represented by the Global Securities will be governed by standing
customer instructions and customary practices. Such payments will be the
responsibility of such participants.
If the Depository is at any time unwilling or unable to continue as
Depository and a successor Depository is not appointed by the Company within
90 days, the Company will issue individual Securities in definitive form in
exchange for the Global Securities. In addition, the Company may at any
S-25
<PAGE>
time in its sole discretion determine not to have Global Securities and, in
such event, will issue individual Securities in definitive form in exchange
for the Global Securities. In either instance, the Company will issue
Securities in definitive form, equal in aggregate principal amount to the
Global Securities, in such names and in such principal amounts as the
Depository shall request. Securities so issued in definitive form will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only, without coupons.
Neither the Company, the Trustee, any Paying Agent nor the registrar for the
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Securities represented by such Global Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
and the Pricing Agreement, the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed
to purchase, the principal amount of Securities set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
UNDERWRITER NOTES DEBENTURES
----------- ------------ ------------
<S> <C> <C>
Goldman, Sachs & Co............................... $ $
BT Alex. Brown Incorporated.......................
Credit Suisse First Boston Corporation............
Salomon Brothers Inc..............................
------------ ------------
Total........................................... $150,000,000 $150,000,000
============ ============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the Pricing
Agreement, the Underwriters are committed to take and pay for all of the Notes
or Debentures, if any are taken. The Notes and Debentures are being offered
separately and not as a unit.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Underwriters propose to offer the Debentures in part directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of % of the principal amount of the Debentures. The
Underwriters may allow, and such dealers may reallow, a concession not to
exceed % of the principal amount of the Debentures to certain brokers and
dealers. After the Debentures are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
In connection with the offering, the Underwriters may purchase and sell the
Notes and Debentures in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Notes and
Debentures, and short positions created by the Underwriters involve the sale
by the Underwriters of a greater number of Notes and Debentures than they are
required to purchase from the Company in the offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to broker-
dealers in respect of the Notes and Debentures sold in the offering may be
reclaimed by the Underwriters if such Notes and Debentures are repurchased by
the Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes and
Debentures, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at
any time. These transactions may be effected on the New York Stock Exchange,
in the over-the-counter market or otherwise.
The Notes and the Debentures are each a new issue of securities with no
established trading market. The Company has been advised by the Underwriters
that the Underwriters intend to make a market in the Notes and Debentures but
are not obligated to do so and may discontinue market making
S-27
<PAGE>
at any time without notice. No assurance can be given as to the liquidity of
the trading market for the Notes or the Debentures.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged in, and may in the future
engage in, investment banking and commercial banking activities with the
Company and its subsidiaries.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF THE NOTES AND DEBENTURES
The validity of the Notes and Debentures offered hereby will be passed upon
for the Company by Baker & McKenzie, Dallas, Texas and New York, New York, and
for the Underwriters by Sullivan & Cromwell, New York, New York.
S-28
<PAGE>
PROSPECTUS
$500,000,000
[Logo of ENSCO International Incorporated appears here]
DEBT SECURITIES, PREFERRED STOCK AND COMMON STOCK
ENSCO International Incorporated (the "Company") may from time to time
offer, together or separately, its (i) unsecured debt securities consisting of
notes, debentures or other evidences of indebtedness (the "Debt Securities"),
in one or more series, which may be either senior debt securities (the "Senior
Debt Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (ii) shares of its Serial Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), and (iii) shares of its Common Stock, par value
$.10 per share (the "Common Stock"), in amounts, at prices and on terms to be
determined at the time of the offering. The Debt Securities, Preferred Stock
and Common Stock are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $500,000,000 in aggregate
initial public offering price. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered will be set
forth in an accompanying Prospectus Supplement (the "Prospectus Supplement"),
including, where applicable, (i) in the case of Debt Securities, the specific
title, aggregate principal amount, the denomination, maturity, premium, if
any, the interest rate, if any (which may be at a fixed or variable rate), the
time and method of calculating payment of interest, if any, the place or
places where principal of (and premium, if any) and interest, if any, on such
Debt Securities will be payable, the currency or currencies (including
composite currencies) in which principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, any terms of
redemption at the option of the Company or the holder, any sinking fund
provisions, terms for any conversion into Common Stock, the initial public
offering price, listing (if any) on a securities exchange or quotation (if
any) on an automated quotation system, acceleration, if any, and other terms
and (ii) in the case of Preferred Stock, the specific title, the aggregate
number of shares offered, any dividend (including the method of calculating
payment of dividends), liquidation, redemption, voting and other rights, any
terms for any conversion or exchange into Common Stock or Debt Securities, the
initial public offering price, listing (if any) on a securities exchange or
quotation (if any) on an automated quotation system and other terms. If so
specified in the applicable Prospectus Supplement, Debt Securities of a series
may be issued in whole or in part in the form of one or more temporary or
permanent global securities.
The Common Stock is listed on the New York Stock Exchange under the trading
symbol "ESV." Any Common Stock sold pursuant to a Prospectus Supplement will
be listed on the New York Stock Exchange, subject to official notice of
issuance.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities, when issued, will be subordinated in right of
payment to all Senior Debt (as defined in the applicable Prospectus
Supplement) of the Company.
The Prospectus Supplement will contain information concerning certain United
States federal income tax considerations, if applicable, to the Securities
offered.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement relating to such Securities. Any
statement contained in this Prospectus will be deemed to be modified or
superseded by any inconsistent statement contained in an accompanying
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of the Company or any dealers or underwriters are involved in the sale
of the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions
or discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities. See "Plan of Distribution" for
possible indemnification arrangements with agents, dealers and underwriters.
The date of this Prospectus is November 5, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OR
DEBENTURES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
No person is authorized to give any information or to make any
representations other than those contained in this Prospectus or the
accompanying Prospectus Supplement in connection with the offering described
herein and therein, and any information or representations not contained
herein or therein must not be relied upon as having been authorized by the
Company or by any underwriter, dealer or agent. This Prospectus may not be
used to consummate sales of Securities unless accompanied by a Prospectus
Supplement relating to such Securities. Neither this Prospectus nor any
Prospectus Supplement shall constitute an offer to sell or a solicitation of
an offer to buy any of the Securities covered by this Prospectus in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus and the
applicable Prospectus Supplement at any time does not imply that the
information herein is correct as of any time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities being
offered by this Prospectus (the "Registration Statement"). This Prospectus,
which constitutes a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement, certain items of
which are contained in exhibits and schedules to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Securities offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and the notes thereto filed as a part of
the Registration Statement. Statements made in this Prospectus concerning the
contents of any contract, agreement or other document filed with the
Commission as an exhibit are not necessarily complete. With respect to each
such contract, agreement or other document filed with the Commission as an
exhibit, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such documents can also be obtained at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Company is an electronic filer under the
EDGAR (Electronic Data Gathering, Analysis and Retrieval) system maintained by
the Commission. The Commission maintains a Web site (http://www.sec.gov) on
the Internet that contains reports, proxy and information statements and other
information regarding companies that file electronically with the Commission.
In addition, documents filed by the Company can be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
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INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company (File No. 1-
8097) with the Commission, are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997 and September 30, 1997;
(iii) the Company's Current Report on Form 8-K dated March 4, 1997;
(iv) the description of the Company's Preferred Share Purchase Rights
contained in its Registration Statement on Form 8-A filed with the
Commission on February 23, 1995 as amended by Form 8-A/A-1 filed with the
Commission on March 4, 1997; and
(v) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-B filed with the Commission on
November 12, 1987 and the Registration Statement on Form 8-A, filed with
the Commission on February 3, 1981, as amended by Form 8, filed with the
Commission on August 22, 1985.
All documents and reports filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of Securities (by the filing of a
post-effective amendment to the Registration Statement which indicates that
all Securities offered hereby have been sold, or which deregisters all
Securities then remaining unsold) shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents or reports.
Any statement contained in a document which is, or is deemed to be,
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference herein) modifies or supersedes the
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any document incorporated by reference in this Prospectus, other than
exhibits to any such document unless such exhibits are specifically
incorporated by reference in the documents this Prospectus incorporates.
Requests for such documents should be directed to ENSCO International
Incorporated, 2700 Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202-2792,
Attention: Corporate Secretary; telephone number (214) 922-1500.
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THE COMPANY
The Company is an international offshore contract drilling company that also
provides marine transportation services in the Gulf of Mexico. The Company's
complement of offshore drilling rigs includes 35 jackup rigs, 10 barge
drilling rigs and eight platform rigs. The Company's operations are integral
to the exploration, development and production of oil and gas.
The Company was formed as a Texas corporation in 1975 and was reincorporated
in Delaware in 1987. The Company's principal office is located at 2700
Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202-2792 and its telephone
number is (214) 922-1500.
USE OF PROCEEDS
Except as otherwise set forth in a Prospectus Supplement, the net proceeds
from the sale of the Securities will be used for general corporate purposes,
including, but not limited to the repayment of existing debt, working capital,
capital expenditures, acquisitions and/or the repurchase of securities of the
Company. The precise amounts and timing of the application of such net
proceeds for such purposes will depend upon a variety of factors, including
the Company's funding requirements and the availability of alternative sources
of funding. The Company routinely reviews acquisition opportunities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's ratios of earnings to fixed
charges and the ratio of earnings to combined fixed charges and preferred
stock dividends for each of the periods set forth below.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FISCAL YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------- --------------------------
1997 1996 1996 1995 1994 1993 1992(1)
------- ------ ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.. 15.1 7.0 7.6 3.7 3.6 3.3 --
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends(2)....................... 15.1 7.0 7.6 3.7 3.1 2.3 --
</TABLE>
- --------
(1) The Company's earnings before fixed charges were inadequate on a
historical basis to cover fixed charges for the year ended December 31,
1992. The additional amount of earnings required to cover fixed charges
for 1992 would have been $18.3 million, and the additional amount of
earnings required to cover combined fixed charges and preferred stock
dividends for 1992 would have been $22.1 million.
(2) The Company eliminated its preferred stock dividend obligations in 1994.
For purposes of computing the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock dividends,
"earnings" consist of income before income taxes plus fixed charges (excluding
capitalized interest). "Fixed charges" represent interest incurred (whether
expensed or capitalized), amortization of debt expense and that portion of
rental expense on operating leases deemed to be the equivalent of interest.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate (the "Offered Debt Securities"). The particular terms of the
Offered Debt Securities and the extent to which such general provisions may
apply will be described in a Prospectus Supplement relating to such Offered
Debt Securities.
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Company and a trustee (the "Trustee"). The statements under this
caption relating to the Debt Securities and the Indenture are summaries only
and do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Indenture,
including the definitions therein. A copy of the form of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus is
a part. See "Available Information." Certain capitalized terms used below and
not defined herein have the respective meanings assigned to them in the
Indenture.
TERMS
The Debt Securities will be general unsecured obligations of the Company and
may be either Senior Debt Securities or Subordinated Debt Securities. The
Indenture does not limit the aggregate principal amount of Debt Securities
that can be issued thereunder and provides that Debt Securities may be issued
from time to time thereunder in one or more series, each in an aggregate
principal amount authorized by the Company prior to issuance. The Indenture
does not limit the amount of other unsecured indebtedness or securities that
may be issued by the Company.
Unless otherwise indicated in a Prospectus Supplement, the Debt Securities
will not benefit from any covenant or other provision that would afford
Holders of such Debt Securities special protection in the event of a highly
leveraged transaction involving the Company.
The specific terms of each series of Offered Debt Securities, which will be
issued in registered form, will be set forth in the applicable Prospectus
Supplement relating thereto, including, without limitation, the following, as
applicable:
1. the title and aggregate principal amount of the Offered Debt
Securities;
2. the date or dates on which the Offered Debt Securities will mature;
3. the rate or rates (which may be fixed or variable) per annum, if any,
at which the Offered Debt Securities will bear interest or the method of
determining such rate or rates;
4. the date or dates from which such interest, if any, will accrue and
the date or dates at which such interest, if any, will be payable;
5. the place or places, where, subject to any provision of the Indenture,
the principal of (and premium, if any) and any interest on the Offered Debt
Securities is payable;
6. whether the Offered Debt Securities will be Senior Debt Securities or
Subordinated Debt Securities;
7. the terms for redemption or early payment, if any, including any
mandatory or optional sinking fund or analogous provision;
8. the terms and conditions, if applicable, upon which such Offered Debt
Securities will be convertible into Preferred Stock or Common Stock or
exchangeable for Preferred Stock or Common Stock, including the conversion
price or exchange rate, as the case may be (or the manner of calculation
thereof);
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<PAGE>
9. whether such Offered Debt Securities will be issued in the form of one
or more global securities and whether such global securities are to be
issuable in temporary global form or permanent global form;
10. if other than U.S. dollars, the currency or currencies (including
composite currencies) in which such Offered Debt Securities will be
denominated and in which the principal of, and premium and interest, if
any, on, such Offered Debt Securities will be payable;
11. whether, and the terms and conditions on which, the Company or a
Holder may elect that, or the other circumstances under which, payment of
principal of, or premium or interest, if any, on, such Offered Debt
Securities is to be made in a currency or currencies (including composite
currencies) other than that in which such Offered Debt Securities are
denominated;
12. if the amount of payments of principal of (and premium, if any) and
any interest on the Offered Debt Securities may be determined with
reference to any commodities, currencies or indices, or values, rates or
prices, and the manner in which such amounts shall be determined;
13. if other than the entire principal amount, the portion of the
principal amount of the Offered Debt Securities that shall be payable upon
acceleration of the stated maturity;
14. in addition to those provided in the Indenture, any additional means
of satisfaction and discharge of the Indenture with respect to the Offered
Debt Securities or any additional conditions or discharges;
15. any deletions or modifications of or additions to the Events of
Default or the covenants of the Company with respect to the Offered Debt
Securities; and
16. any other specific terms of the Offered Debt Securities.
No service charge will be made for any registration of transfer or exchange
of the Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Substantially all of the assets of the Company are owned by Subsidiaries.
Therefore, the Company's rights and the rights of its creditors, including the
Holders of Debt Securities, to participate in the assets of any Subsidiary
upon the Subsidiary's liquidation or recapitalization, will be subject to the
prior claims of such Subsidiary's creditors.
Offered Debt Securities may be sold at a discount (which may be substantial)
below their stated principal amount bearing no interest or interest at a rate
that at the time of issuance is below market rates. Any material United States
federal income tax consequences and other special considerations applicable
thereto will be described in the Prospectus Supplement relating to any such
Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of, or premium or interest, if any, on, any
of the Offered Debt Securities is payable in any foreign currency or currency
unit, the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
Senior and Subordinated Debt Securities
The Senior Debt Securities will be direct, unsecured obligations of the
Company, ranking pari passu with all other unsecured and unsubordinated
indebtedness of the Company. To the extent provided in the Prospectus
Supplement, and any supplemental indenture, relating thereto, the Company may
be required to secure Senior Debt Securities equally and ratably with other
indebtedness with respect to which the Company elects or is required to
provide security. The Subordinated Debt Securities will be unsecured and will
be subordinated and junior to all "Senior Indebtedness" (which for this
purpose includes any Senior Debt Securities) to the extent set forth in the
applicable supplemental Indenture and the Prospectus Supplement relating to
such series.
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<PAGE>
The Subordinated Debt Securities will be direct, unsecured obligations of
the Company. The obligations of the Company pursuant to the Subordinated Debt
Securities will be subordinate in right of payment to the extent set forth in
the Indenture and the applicable supplemental Indenture to all Senior
Indebtedness (including all Senior Debt Securities) (in each case as defined
in the applicable supplemental Indenture). Except to the extent otherwise set
forth in a Prospectus Supplement, the Indenture does not contain any
restriction on the amount of Senior Indebtedness which the Company may incur.
The terms of the subordination of a series of Subordinated Debt Securities,
together with the definition of Senior Indebtedness related thereto, will be
as set forth in the applicable supplemental Indenture and the Prospectus
Supplement relating to such series.
The Subordinated Debt Securities will not be subordinated to indebtedness of
the Company that is not Senior Indebtedness, and the creditors of the Company
who do not hold Senior Indebtedness will not benefit from the subordination
provisions described herein. In the event of the bankruptcy or insolvency of
the Company before or after maturity of the Subordinated Debt Securities, such
other creditors would rank pari passu with holders of the Subordinated Debt
Securities, subject, however, to the broad equity powers of the Federal
bankruptcy court pursuant to which such court may, among other things,
reclassify the claims of any series of Subordinated Debt Securities into a
class of claims having a different relative priority with respect to the
claims of such other creditors or any other claims against the Company.
Events of Default
Unless otherwise provided with respect to any series of Debt Securities, the
following are Events of Default under the Indenture with respect to the Debt
Securities of such series issued under such Indenture: (i) failure to pay
principal of (or premium, if any, on) any Debt Security of such series when
due; (ii) failure to pay any interest on any Debt Security of such series when
due, continued for 30 days; (iii) failure to deposit any mandatory sinking
fund payment, when due, in respect of the Debt Securities of such series,
continued for 30 days; (iv) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture for
the benefit of a series of Debt Securities other than such series), continued
for 90 days after written notice as provided in the Indenture; (v) certain
events of bankruptcy, insolvency or reorganization; and (vi) any other Event
of Default as may be specified with respect to Debt Securities of such series.
If an Event of Default with respect to any outstanding series of Debt
Securities occurs and is continuing, either the Trustee or the Holders of at
least 25% in principal amount of the outstanding Debt Securities of such
series (in the case of an Event of Default described in clause (i), (ii),
(iii) or (vi) above) or at least 25% in principal amount of all outstanding
Debt Securities under the Indenture (in the case of other Events of Default)
may declare the principal amount of all the Debt Securities of the applicable
series (or of all outstanding Debt Securities under the Indenture, as the case
may be) to be due and payable immediately. At any time after a declaration of
acceleration has been made, but before a judgment has been obtained, the
Holders of a majority in principal amount of the outstanding Debt Securities
of such series (or of all outstanding Debt Securities under the applicable
Indenture, as the case may be) may, under certain circumstances, rescind and
annul such declaration of acceleration. Depending on the terms of other
indebtedness of the Company outstanding from time to time, an Event of Default
under the Indenture may give rise to cross defaults on such other indebtedness
of the Company.
The Indenture provides that, within 90 days after the occurrence of a
default in respect of any series of Debt Securities, the Trustee will give to
the Holders of the Debt Securities of such series
7
<PAGE>
notice of all uncured and unwaived defaults known to it; provided, however,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or any interest on, or any sinking fund installment with
respect to, any Debt Securities of such series, the Trustee will be protected
in withholding such notice if it in good faith determines that the withholding
of such notice is in the interest of the Holders of the Debt Securities of
such series; and provided further, that such notice shall not be given until
at least 30 days after the occurrence of a default in the performance or
breach of any covenant or warranty of the Company under such Indenture other
than for the payment of the principal of (or premium, if any) or any interest
on, or any sinking fund installment with respect to, any Debt Securities of
such series. For the purpose of this provision, "default" with respect to Debt
Securities of any series means any event that is, or after notice or lapse of
time, or both, would become, an Event of Default with respect to the Debt
Securities of such series.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) have the right, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Debt Securities of such series
(or of all outstanding Debt Securities under the Indenture). The Indenture
provides that in case an Event of Default shall occur and be continuing, the
Trustee shall exercise such of its rights and powers under the applicable
Indenture and use the same degree of care and skill in its exercise as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the Holders of the Debt Securities unless they shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series (or, in certain cases, all outstanding Debt
Securities under the Indenture) may on behalf of the Holders of all Debt
Securities of such series (or of all outstanding Debt Securities under the
Indenture) waive any past default under the Indenture, except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security or in respect of a provision that under the applicable Indenture
cannot be modified or amended without the consent of the Holder of each
outstanding Debt Security affected. The Holders of a majority in principal
amount of the outstanding Debt Securities affected thereby may on behalf of
the Holders of all such Debt Securities waive compliance by the Company with
certain restrictive provisions of the Indenture.
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
Modification
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the outstanding Debt Securities under the Indenture affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each outstanding Debt Security affected thereby, (i)
change the stated maturity date of the principal of, or any installment of
principal of or interest on, any Debt Security, (ii) reduce the principal
amount of, or the premium (if any) or interest on, any Debt Security, (iii)
change the place or currency or currencies (including composite currencies) of
payment of principal of, or premium (if any) or interest on, any Debt
Security, (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security or (v) reduce the percentage
in principal amount of outstanding Debt Securities, the consent of the Holders
of which is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
8
<PAGE>
The Indenture provides that the Company and the Trustee may, without the
consent of any Holders of Debt Securities, enter into supplemental indentures
for the purposes, among other things, of adding to the Company's covenants,
adding additional Events of Default, establishing the form or terms of Debt
Securities or curing ambiguities or inconsistencies in the Indenture, provided
that such action to cure ambiguities or inconsistencies shall not adversely
affect the interests of the Holders of the Debt Securities in any material
respect.
Consolidation, Merger and Sale of Assets
The Company, without the consent of any Holders of outstanding Debt
Securities, may consolidate with or merge into, or convey, transfer or lease
its assets substantially as an entirety to, any Person, provided that (i) the
Person formed by such consolidation or into which the Company is merged or
that acquires or leases the assets of the Company substantially as an entirety
is a Person that expressly assumes by supplemental indenture the Company's
obligations on the Debt Securities and under the Indenture, (ii) after giving
effect to the transaction, no Event of Default and no event that, after notice
or lapse of time or both, would become an Event of Default shall have occurred
and be continuing, and (iii) certain other conditions are met. Upon compliance
with these provisions by a successor Person, the Company will (except in the
case of a lease) be relieved of its obligations under the Indenture and the
Debt Securities.
Discharge and Defeasance
The Company may terminate its obligations under the Indenture, other than
its obligation to pay the principal of (and premium, if any) and interest on
the Debt Securities of any series and certain other obligations, provided that
it (i) irrevocably deposits, or causes to be irrevocably deposited with the
Trustee as trust funds, money or U.S. Government Obligations, maturing as to
principal and interest sufficient to pay the principal of, any interest on,
and any mandatory sinking funds in respect of, all outstanding Debt Securities
of such series on the stated maturity of such payments or on any redemption
date and (ii) complies with any additional conditions specified to be
applicable with respect to the covenant defeasance of Debt Securities of such
series.
The terms of any series of Debt Securities may also provide for legal
defeasance pursuant to the Indenture. In such case, if the Company (i)
irrevocably deposits or causes to be irrevocably deposited money or U.S.
Government Obligations as described above, (ii) makes a request to the Trustee
to be discharged from its obligations on the Debt Securities of such series
and (iii) complies with any additional conditions specified to be applicable
with respect to legal defeasance of Debt Securities of such series, then the
Company shall be deemed to have paid and discharged the entire indebtedness on
all the outstanding Debt Securities of such series, the obligations of the
Company under the Indenture and the Debt Securities of such series to pay the
principal of (and premium, if any) and interest on the Debt Securities of such
series shall cease, terminate and be completely discharged, and the Holders
thereof shall thereafter be entitled only to payment out of the money or U.S.
Government Obligations deposited with the Trustee as aforesaid, unless the
Company's obligations are revived and reinstated because the Trustee is unable
to apply such trust fund by reason of any legal proceeding, order or judgment.
"U.S. Government Obligations" is defined in the Indenture as direct
noncallable obligations of, or noncallable obligations the payment of
principal of and interest on which is guaranteed by, the United States of
America, or to the payment of which obligations or guarantees the full faith
and credit of the United States of America is pledged, or beneficial interests
in a trust the corpus of which consists exclusively of money or such
obligations or a combination thereof.
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<PAGE>
Form, Exchange, Registration and Transfer
Debt Securities are issuable in definitive form as Registered Debt
Securities. Reference is made to the Prospectus Supplement for the terms
relating to the form, exchange, registration and transfer of Debt Securities
issuable in temporary or permanent global forms.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate
principal amount and tenor of different authorized denominations.
Registered Debt Securities may be presented for registration of transfer
(with the form of transfer endorsed thereon duly executed), at the office of
the Security Registrar or at the office of any transfer agent designated by
the Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the Person making the request. Except to
the extent otherwise indicated in the applicable Prospectus Supplement, the
Company will appoint the Trustee as Security Registrar. If a Prospectus
Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Debt Securities of a series are issuable
solely as Registered Debt Securities, the Company will be required to maintain
a transfer agent in each Place of Payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange Registered Debt Securities of
any series during a period beginning at the opening of business 15 days prior
to the selection of Debt Securities of that series for redemption and ending
on the close of business on the day of mailing of the relevant notice of
redemption or (ii) register the transfer of or exchange any Registered Debt
Security, or portion thereof, called for redemption, except the unredeemed
portion of any Registered Debt Security being redeemed in part.
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and any premium and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as the Company may designate from time to time,
except that, at the option of the Company, payment of any interest may be made
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any installment of interest on
Registered Debt Securities will be made to the Person in whose name such
Registered Debt Security is registered at the close of business on the Regular
Record Date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee in New York, New York will be designated
as a Paying Agent for the Company for payments with respect to Debt Securities
issuable solely as Registered Debt Securities. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that the Company will be required to maintain a Paying Agent in each
Place of Payment for such series.
All monies paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security that remain
unclaimed at the end of three years after such
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principal, premium or interest shall have become due and payable will (subject
to applicable escheat laws) be repaid to the Company, and the Holder of such
Debt Security or any coupon will thereafter look only to the Company for
payment thereof.
Book-entry Debt Securities
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more global Debt Securities that would be deposited with a
depositary or its nominee identified in the applicable Prospectus Supplement.
Global Debt Securities may be issued in either temporary or permanent form.
The specific terms of any depositary arrangement with respect to any portion
of a series of Debt Securities and the rights of, and limitations on, owners
of beneficial interests in any such global Debt Security representing all or a
portion of a series of Debt Securities will be described in the applicable
Prospectus Supplement.
Meetings
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. A meeting may be called at any time by the
Trustee, and also, upon request, by the Company or the Holders of at least 10%
in principal amount of the Outstanding Debt Securities of such series, in any
such case upon notice given as described under "Notices" below. Except for any
consent that must be given by the Holder of each Outstanding Debt Security
affected thereby, as described under "Modification" above, any resolution
presented at a meeting or adjourned meeting at which a quorum is present may
be adopted by the affirmative vote of the Holders of a majority in principal
amount of the Outstanding Debt Securities of that series; provided, however,
that, except for any consent that must be given by the Holder of each
Outstanding Debt Security affected thereby, as described under "Modification"
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the Holders of a specified percentage, which is less than a majority
in principal amount of the Outstanding Debt Securities of a series, may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Subject to
the proviso set forth above, any resolution passed or decision taken at any
meeting of Holders of Debt Securities of any series duly held in accordance
with the Indenture will be binding on all Holders of Debt Securities of that
series and any related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series.
Governing Law
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
Notices
Notices to Holders of Registered Debt Securities will be given by mail to
the addresses of such Holders as they appear in the Security Register.
The Trustee
The Trustee for each series of Debt Securities will be identified in the
applicable Prospectus Supplement. The Indenture contains certain limitations
on the right of the Trustee, as a creditor of the Company, to obtain payment
of claims in certain cases and to realize on certain property received with
respect to any such claims, as security or otherwise. The Trustee is permitted
to engage in other
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transactions, except that, if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign.
The Trustee may from time to time serve as a depositary of funds of, make
loans to and perform other services for the Company.
DESCRIPTION OF EQUITY SECURITIES
GENERAL
The authorized capital stock of the Company consists of 250,000,000 shares
of Common Stock, par value $.10 per share, 15,000,000 shares of Preferred
Stock, par value $1.00 per share and 5,000,000 shares of First Preferred
Stock, par value $1.00 per share. On October 31, 1997, 142,282,699 shares of
Common Stock were issued and outstanding and no shares of Preferred Stock or
First Preferred Stock were outstanding. All issued and outstanding shares of
Common Stock are fully-paid and non-assessable.
The Company's Amended and Restated Certificate of Incorporation provides
that any dividend on shares of First Preferred Stock shall be paid, or
declared and set apart for payment, before any dividend shall be paid, or
declared and set apart for payment, on shares of Common Stock or any
subordinate series of Preferred Stock. In addition, the Amended and Restated
Certificate of Incorporation provides that the Preferred Stock shall generally
be subordinate to the First Preferred Stock. However, the Board of Directors
may grant powers, preferences and rights to any series of Preferred Stock
which are on parity with, or senior to, the powers, preferences and rights of
any series of First Preferred Stock, provided that such series or class of
First Preferred Stock shall have approved of such powers, preferences and
rights by an applicable vote.
On February 21, 1995, the Company filed a Certificate of Designations
creating a series of 1,250,000 shares of Preferred Stock designated as Series
A Junior Participating Preferred Stock (the "Series A Junior Participating
Preferred Stock") in connection with establishing a stockholder rights plan.
See "Certain Provisions of Certificate of Incorporation, Bylaws and Statute--
Stockholder Rights Plan."
PREFERRED STOCK
Terms
The following description of the Preferred Stock summarizes certain general
terms and provisions of each series of Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of a particular series of Preferred
Stock will be summarized in the Prospectus Supplement relating to such series.
The summaries of the terms of the Preferred Stock below and in any Prospectus
Supplement do not, and will not, purport to be complete and are subject to,
and qualified in their entirety by reference to, the Company's Amended and
Restated Certificate of Incorporation (as it may be amended from time to time)
and the certificate of designations establishing a series of Preferred Stock
(each, a "Certificate of Designations"), which will be filed with the
Commission as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus forms a part, at or prior to the time of
the issuance of such series of Preferred Stock.
The Board of Directors is authorized (without further stockholder action) to
provide for issuance of the Preferred Stock of the Company from time to time,
in one or more series, and to fix the dividend rate, conversion or exchange
rights, voting rights, terms of redemption, redemption price or prices,
liquidation preferences and qualifications, limitations and restrictions
thereof with respect to each series.
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An applicable Prospectus Supplement will set forth or describe other
specific terms regarding each series of Preferred Stock offered thereby,
including, without limitation:
1. the distinctive title of such Preferred Stock;
2. the number of shares of such Preferred Stock offered, the liquidation
preference per share and the initial offering price of such Preferred
Stock;
3. the dividend rate, period and/or payment date applicable to such
Preferred Stock;
4. the date from which dividends on such Preferred Stock shall
accumulate, if applicable;
5. whether the shares of Preferred Stock may be issued at a discount
below their liquidation preference ("Original Issue Discount Preferred
Stock"), and material United States federal income tax, accounting and
other considerations applicable to Original Issue Discount Preferred Stock;
6. whether the dividends, if any, on the Preferred Stock are to be
payable, at the election of the Company or a holder thereof, in cash or in
additional shares of Preferred Stock ("PIK Preferred Stock") and the period
or periods within which, and the terms and conditions upon which, such
election may be made, and material United States federal income tax,
accounting and other considerations applicable to such PIK Preferred Stock;
7. the provision for a sinking fund, if any, for such Preferred Stock;
8. the provision for redemption, if applicable, of such Preferred Stock;
9. any listing of such Preferred Stock on any securities exchange or any
quotation on an automated quotation system;
10. the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock or exchangeable for Debt
Securities, including the conversion price or exchange rate, as the case
may be (or the manner of calculation thereof);
11. a discussion of federal tax considerations applicable to such
Preferred Stock;
12. the relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
13. any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with a series of Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company;
14. the voting powers, if any, of such Preferred Stock, in addition to
those set forth below; and
15. any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
The Preferred Stock will have no preemptive rights. All of the Preferred
Stock, upon payment in full therefor, will be fully-paid and non-assessable.
Dividends
Unless otherwise set forth in an applicable Prospectus Supplement, the
holders of the Preferred Stock of each series shall be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of the
funds of the Company legally available therefor, dividends at such rate and on
such dates and on such terms as shall be set forth in the Prospectus
Supplement relating to such series. Different series of the Preferred Stock
may be entitled to dividends at different rates or based upon different
methods of determination. Such rate may be fixed or variable or both. Each
such dividend will be payable to the holders of record as they appear on the
stock books of the Company on such record dates as will be fixed by the Board
of Directors of the Company or a duly authorized
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committee thereof. Dividends on any series of the Preferred Stock may be
cumulative or noncumulative, as provided in the Prospectus Supplement relating
thereto.
Ranking
The Preferred Stock will rank senior in right of payment to the Common
Stock, and the First Preferred Stock (unless its terms otherwise provide) will
rank senior in right of payment to the Preferred Stock, as to dividends and
upon liquidation, dissolution or winding up of the Company, except as set
forth in the Prospectus Supplement relating thereto.
Conversion
The terms and conditions, if any, upon which any series of Preferred Stock
will be convertible into Common Stock will be set forth in the Prospectus
Supplement relating thereto. Such terms will include the conversion price (or
manner of calculation thereof), the conversion period, provisions as to
whether conversion will be at the option of the holders of such series of
Preferred Stock or at the option of the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
Exchange
The Prospectus Supplement may provide that the Company may, at its option,
exchange, in whole or in part, any series of Preferred Stock for Debt
Securities. The terms, notice and procedures for any such exchange will be set
forth in the applicable Prospectus Supplement.
Voting Rights
Unless otherwise provided in the applicable Prospectus Supplement, holders
of record of each series of Preferred Stock will have no voting rights, except
as required by law and as provided in the applicable Certificate of
Designations. However, if any series of Preferred Stock has voting rights,
such Preferred Stock shall not have the right to vote as a separate class on
any matter, except as provided by law.
Redemption Provisions
The Preferred Stock of each series will have such optional or mandatory
redemption terms, if any, as shall be set forth in the applicable Prospectus
Supplement.
Certain Covenants
The applicable Prospectus Supplement will describe any material covenants in
respect of any series of Preferred Stock.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for the
Preferred Stock will be designated in the applicable Prospectus Supplement.
The registrar for shares of Preferred Stock will send notices to stockholders
of any meetings at which holders of the Preferred Stock have the right to
elect directors of the Company or to vote on any other matter.
COMMON STOCK
Dividends
The Company paid no dividends on its Common Stock until September 1997. In
September 1997, the Company paid a cash dividend of $.025 per share on its
shares of Common Stock. The Company
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currently intends to continue to pay such dividend in the foreseeable future.
However, the final determination of the timing, amount and payment of
dividends on the Common Stock is at the discretion of the Board of Directors
and will depend on, among other things, the Company's profitability,
liquidity, financial condition, and capital requirements.
Voting Rights
Each share of Common Stock is entitled to one vote.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.
The foregoing descriptions of the Preferred Stock and Common Stock are
summaries, and reference is herein made to the detailed provisions of the
Company's Amended and Restated Certificate of Incorporation (including,
without limitation, the Certificate of Designations relating to any series of
Preferred Stock filed hereafter and incorporated by reference herein) and the
Company's Bylaws, copies of which are incorporated by reference herein.
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND STATUTE
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
The General Corporation Law of the State of Delaware (the "DGCL") provides
that a corporation may limit the personal liability of each director to the
corporation or its stockholders for monetary damages except for liability (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and
(iv) for any transaction from which the director derives an improper personal
benefit. The Amended and Restated Certificate of Incorporation provides for
the elimination and limitation of the personal liability of directors of the
Company for monetary damages except for situations described in (i) through
(iv) above. The effect of this provision is to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek non-monetary relief such as
an injunction or rescission in the event of a breach of a director's duty of
care.
Pursuant to Section 145 of the DGCL, the Company generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they
are, or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The statute also expressly provides that the power
to indemnify authorized thereby is not exclusive of any rights granted under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
The Company's Amended and Restated Certificate of Incorporation provides, in
general, that the Company must indemnify its officers and directors under
certain of the circumstances defined in Section 145 of the DGCL. In addition,
the Amended and Restated Certificate of Incorporation provides that no
directors of the Company will be liable to the Company or its stockholders for
monetary damages for any breach of such director's fiduciary duties, with
certain exceptions.
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The Bylaws provide that the Company shall indemnify its officers, directors,
employees, and agents to the full extent permitted by the DGCL.
The Company has entered into an indemnity agreement with each officer and
director of the Company that provides for indemnification to the fullest
extent of applicable law for any threatened, pending or completed action, suit
or proceeding arising out of the fact that such person was serving as an
officer or director of the Company. In addition, the agreements provide for
the advancement of expenses for defending against such claims upon such
person's undertaking to repay such advances if it is determined that he is in
fact not entitled to indemnification.
SECTION 203 OF THE DGCL
The Company is subject to the "business combination" statute of the DGCL, an
anti-takeover law enacted in 1988. In general, Section 203 of the DGCL
("Section 203") prohibits a publicly-held Delaware corporation from engaging
in a "business combination" with an "interested stockholder," for a period of
three years after the date of the transaction in which a person became an
"interested stockholder," unless (i) prior to such date the board of directors
of the corporation approved either the "business combination" or the
transaction which resulted in the stockholder becoming an "interested
stockholder," (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested stockholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(iii) on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the "interested stockholders." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. Although Section 203 permits the Company to elect
not to be governed by its provisions, the Company to date has not made this
election. As a result of the application of Section 203, potential acquirors
of the Company may be discouraged from attempting to effect an acquisition
transaction with the Company, thereby possibly depriving holders of the
Company's securities of certain opportunities to sell or otherwise dispose of
such securities at above-market prices pursuant to such transactions.
RESTRICTIONS ON ALIEN OWNERSHIP
The Company's Amended and Restated Certificate of Incorporation contains
certain provisions to limit ownership and control of shares of any class of
capital stock of the Company by certain non-U.S. citizens in order to permit
the Company to hold, obtain or reinstate a license or franchise from a
governmental agency necessary to conduct its business as an owner and operator
of U.S.-flag vessels. The Company's Amended and Restated Certificate of
Incorporation restricts the transfer of shares of Common Stock when such
transfer would result in the ownership or control by one or more non-U.S.
citizens of an aggregate percentage of the shares of Common Stock in excess of
a specified percentage and under certain circumstances, provides that certain
capital stock owned by non-U.S. citizens may not be permitted to vote or
receive dividends.
CLASSIFIED BOARD OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors of the Company is divided into three classes of
directors. Each class of directors serves a staggered three-year term. The
classified board may make it more difficult for any stockholder who is
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attempting to acquire the Company, including a stockholder holding a majority
of shares, to succeed. Such a stockholder will be unable to force immediate
changes in the composition of a majority of the Board of Directors, since the
terms of approximately one-third of the incumbent directors would expire each
year, and at least two annual meetings would be required for stockholders to
change a majority of the Board of Directors.
STOCKHOLDER RIGHTS PLAN
On February 21, 1995, the Company's Board of Directors declared a dividend
of one preferred share purchase right (a "Right") for each outstanding share
of Common Stock. The dividend was payable on March 6, 1995 (the "Rights Record
Date") to the stockholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one-hundredth of a share of
Series A Junior Participating Preferred Stock of the Company at a price of
$250.00 per one-hundredth of a share of Series A Junior Participating
Preferred Stock (the "Purchase Price"), subject to adjustment. The Rights are
described in the Company's Registration Statement on Form 8-A filed with the
Commission on February 23, 1995, as amended by Form 8-A/A-1 filed with the
Commission on March 4, 1997, which are incorporated herein by reference.
PLAN OF DISTRIBUTION
The Company may sell Securities to one or more underwriters for public
offering and sale, and also may sell Securities directly to investors or to
other purchasers or through dealers or agents. Any such underwriter, dealer or
agent involved in the offer and sale of the Securities will be named in an
applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Sales of Common Stock
offered hereby may be effected from time to time in one or more transactions
on the New York Stock Exchange or in negotiated transactions or a combination
of such methods of sale.
In connection with distributions of Common Stock or otherwise, the Company
may enter into hedging transactions with broker-dealers in connection with
which such broker-dealers may sell Common Stock registered hereunder in the
course of hedging through short sales of the positions they assume with the
Company.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and commissions from the purchasers for whom
they may act as agents. Underwriters, dealers and agents who participate in
the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. Any such underwriter, dealer or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement. Unless otherwise indicated in
a Prospectus Supplement, an agent will be acting on a best efforts basis and a
dealer will purchase Securities as a principal, and may then resell such
Securities at varying prices to be determined by the dealer.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company
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against and contribution toward certain civil liabilities, including
liabilities under the Securities Act, and to reimbursement by the Company for
certain expenses.
If so indicated in a Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Securities from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Such contracts will be
subject to only those conditions set forth in the Prospectus Supplement, and
the Prospectus Supplement will set forth the commission payable for
solicitation of such offers.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for the Company in the
ordinary course of business.
The Securities may or may not be listed on a national securities exchange or
quoted on an automated quotation system (other than the Common Stock, which is
listed on the New York Stock Exchange). Any Common Stock sold pursuant to a
Prospectus Supplement will be listed on the New York Stock Exchange, subject
to official notice of issuance. Any underwriters to whom Securities are sold
by the Company for public offering and sale may make a market in such
Securities, but such underwriters will not be obligated to do so and may
discontinue any market-making activities at any time without notice. No
assurances can be given that there will be an active trading market for the
Securities.
VALIDITY OF THE SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Company by Baker & McKenzie, Dallas, Texas.
EXPERTS
The financial statements and notes thereto incorporated in this Prospectus
by reference to the Annual Report on Form 10-K for the year ended December 31,
1996, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
With respect to the unaudited consolidated financial information of the
Company for the nine-month periods ended September 30, 1997 and 1996, for the
six-month periods ended June 30, 1997 and 1996 and for the three-month periods
ended March 31, 1997 and 1996 incorporated by reference in this Prospectus,
Price Waterhouse LLP reported that they have applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate reports dated October 31, 1997, July 28, 1997 and
April 28, 1997 incorporated by reference herein, state that they did not audit
and they do not express an opinion on that unaudited consolidated financial
information. Price Waterhouse LLP has not carried out any significant or
additional audit tests beyond those which would have been necessary if their
reports had not been included. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Price Waterhouse LLP is not subject
to the liability provisions of section 11 of the Securities Act of 1933 for
their reports on the unaudited consolidated financial information because
those reports are not a "report" or a "part" of the registration statement
prepared or certified by Price Waterhouse LLP within the meaning of sections 7
and 11 of the Securities Act of 1933.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CRE-
ATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COM-
PANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Information............................................... S-2
Prospectus Supplement Summary............................................. S-3
The Offering.............................................................. S-5
Summary Consolidated Financial Data....................................... S-6
Use of Proceeds........................................................... S-7
Capitalization............................................................ S-7
Business.................................................................. S-8
Selected Consolidated Financial Data...................................... S-13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-15
Description of Notes and Debentures....................................... S-21
Underwriting.............................................................. S-27
Validity of the Notes and Debentures...................................... S-28
PROSPECTUS
Available Information..................................................... 2
Incorporation by Reference................................................ 3
The Company............................................................... 4
Use of Proceeds........................................................... 4
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................................ 4
Description of Debt Securities............................................ 5
Description of Equity Securities.......................................... 12
Certain Provisions of Certificate of Incorporation, Bylaws and Statute.... 15
Plan of Distribution...................................................... 17
Validity of the Securities................................................ 18
Expert.................................................................... 18
</TABLE>
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$300,000,000
ENSCO INTERNATIONAL
INCORPORATED
$150,000,000
% NOTES DUE NOVEMBER , 2007
$150,000,000
% DEBENTURES DUE NOVEMBER , 2027
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[Logo of ENSCO International Incorporated appears here]
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GOLDMAN, SACHS & CO.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
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