<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997
REGISTRATION NO. 333-22987
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
PARKER DRILLING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 73-0618660
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
JAMES J. DAVIS
SENIOR VICE PRESIDENT -- FINANCE AND
CHIEF FINANCIAL OFFICER
8 EAST THIRD STREET 8 EAST THIRD STREET
TULSA, OKLAHOMA 74103 TULSA, OKLAHOMA 74103
(918) 585-8221 (918) 585-8221
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone number,
including area code, of registrant's principal including area code, of agent for service)
executive offices)
Copies to:
T. MARK KELLY CURTIS W. HUFF
VINSON & ELKINS L.L.P. FULBRIGHT & JAWORSKI L.L.P.
2300 FIRST CITY TOWER 1301 MCKINNEY, SUITE 5100
1001 FANNIN STREET HOUSTON, TEXAS 77010-3095
HOUSTON, TEXAS 77002-6760 (713) 651-5151
(713) 758-2222
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 25, 1997
<TABLE>
<C> <C> <C>
[PARKER DRILLING LOGO] 10,056,600 SHARES
PARKER DRILLING COMPANY
COMMON STOCK
</TABLE>
---------------------
Parker Drilling Company (the "Company") is offering 7,000,000 shares and a
selling shareholder (the "Selling Shareholder") is offering 3,056,600 shares of
common stock (the "Common Stock") of the Company (the "Offering").
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol PKD. On March 25, 1997, the last reported sale price of the Common
Stock on the New York Stock Exchange was $9 per share. See "Price Range of
Common Stock and Dividends."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
---------------------
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.
<TABLE>
<S> <C> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDER(2)
---------------------- ---------------------- ---------------------- ----------------------
Per Share.............. $ $ $ $
Total(3)............... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Shareholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting expenses payable by the Company estimated to be $350,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 1,508,490 shares of Common Stock on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Shareholder will be
$ , $ , $ and $ , respectively. See
"Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if issued to and accepted by the Underwriters. The
Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of shares of Common Stock will be made against payment
therefor in New York, New York, on or about , 1997.
------------------
JEFFERIES & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
JOHNSON RICE & COMPANY L.L.C.
, 1997
<PAGE> 3
[PHOTO]
Above:
Helicopter -- Transportable
Land rig 229, Wyoming
[PHOTO]
Right:
Deep Drilling Barge
Rig No. 53,
Southern Louisiana
[PHOTO]
Above:
5-inch drill pipe ready for rental,
New Iberia, Louisiana
[PHOTO]
Right:
Workover/Shallow
Drilling Barge
Rig No. 23,
Offshore Louisiana
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "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 ("Exchange
Act"). All statements other than statements of historical facts included in this
Prospectus, including, without limitation, statements regarding the Company's
financial position, business strategy, budgets, and plans and objectives of
management for future operations, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements") are
disclosed under "Risk Factors" and elsewhere in this Prospectus, including,
without limitation, in conjunction with the forward-looking statements included
in this Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company, or persons acting on its behalf, are expressly
qualified in their entirety by the Cautionary Statements.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Securities and Exchange Commission
(the "Commission") by the Company pursuant to the Exchange Act, are incorporated
herein by reference and made a part of this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1996;
(ii) the Company's Quarterly Report on Form 10-Q and Form 10-Q/A for
the quarter ended November 30, 1996;
(iii) the Company's Current Reports on Form 8-K filed September 19,
October 17 and November 25, 1996; and
(iv) the Company's Current Reports on Form 8-K/A filed October 24,
1996 and January 6, 1997.
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such document. Any statement contained in a document incorporated or 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 in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
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 A COPY OF
THIS PROSPECTUS IS DELIVERED, ON THE REQUEST OF ANY SUCH PERSON, A COPY OF ANY
OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE IN SUCH DOCUMENTS). WRITTEN OR TELEPHONE REQUESTS FOR SUCH COPIES
SHOULD BE DIRECTED TO PUBLIC RELATIONS DEPARTMENT, PARKER DRILLING COMPANY, 8
EAST THIRD STREET, TULSA, OKLAHOMA 74103, TELEPHONE (918) 585-8221.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
included elsewhere in this Prospectus or incorporated by reference herein. The
as adjusted data presented give effect to the net proceeds estimated to be
received by the Company from the sale of the Common Stock in the Offering.
Unless otherwise indicated, the information in this Prospectus assumes the
Underwriters' over-allotment option with respect to the sale of the Common Stock
will not be exercised. References to "Parker" or the "Company" in this
Prospectus include Parker Drilling Company and, unless the context otherwise
requires, its subsidiaries.
THE COMPANY
Parker is a leading provider of onshore and offshore contract drilling and
workover services to major, independent and foreign national oil companies.
Historically, Parker operated as a land drilling contractor, with an
internationally recognized expertise in deep and difficult drilling and in
drilling in remote locations. In November 1996, the Company acquired Mallard Bay
Drilling, Inc. ("Mallard") and Quail Tools, Inc. ("Quail"). Through the
acquisition of Mallard (the "Mallard Acquisition"), Parker has diversified into
the offshore market, with barge drilling and workover operations in the shallow
coastal waters or "transition zones" of the Gulf of Mexico and Nigeria. Quail
provides specialized rental equipment for drilling and workover operations in
the offshore Gulf of Mexico and Gulf Coast markets. The acquisition of Quail
(the "Quail Acquisition" and, together with the Mallard Acquisition, the
"Acquisitions") added a complementary rental tool business to the Company's
contract drilling operations, diversifying the Company's land and offshore
operations outside its core drilling business and providing additional
opportunities for expansion worldwide.
The oilfield services industry has experienced a significant increase in
activity in the last 12 to 18 months as oil and gas companies have increased
their exploration and production budgets in response to increasing demand for
oil and gas, higher oil and gas prices and improved technology. In the offshore
drilling market, including transition zones, rig utilization levels are at a ten
year high with many markets at or approaching full utilization. The land
drilling industry, both in the United States and internationally, has also shown
a marked improvement in dayrates and utilization driven by several factors,
including increasing commodity prices, rig attrition and consolidation of
drilling contractors, especially in the domestic market. Through its diversified
operations, the Company is well positioned to take advantage of these positive
trends.
BUSINESS STRATEGY
The Company's business strategy is to expand its market position as a
worldwide provider of contract drilling and drilling related services. The
Company seeks to achieve this objective by capitalizing on its recent
acquisitions of Mallard and Quail, responding to increased demand in core land
drilling markets and seeking complementary acquisitions of businesses.
In order to take advantage of increased demand for barge and platform rigs
in the Gulf of Mexico, the Company intends to selectively upgrade and introduce
into service certain of its cold stacked barge and platform rigs. The Company
will also utilize its international infrastructure, operating expertise and
long-term relationships with oil and gas companies to market refurbished or
newly constructed barge rigs for long-term contracts in international markets
such as Nigeria, Venezuela, Indonesia, Tunisia, Mexico and the Caspian Sea.
In the rental tool business, the Company intends to expand its operations
to meet increasing demand in the domestic market. Further, management believes
the Company's international presence will facilitate the expansion of its rental
tool business worldwide.
In the international land drilling market, management intends to respond to
increased demand in core markets by refurbishing existing rigs for service and
by pursuing the purchase of additional rigs in these areas. Management believes
that the demand for contract drilling services in international markets will
continue to
4
<PAGE> 6
grow as demand for oil and gas increases in developing countries and as
countries dependent on oil and gas revenues seek to increase their production.
The Company also intends to continue evaluating opportunities for the
acquisition of businesses which complement or enhance the Company's existing
operations.
BARGE DRILLING AND WORKOVER
The Company's barge drilling and workover operations are concentrated in
the transition zones of the Gulf of Mexico and Nigeria, where conventional
jackup rigs typically are unable to operate.
Domestic. The Company is the second-largest drilling contractor in the Gulf
of Mexico barge market, with 15 drilling barges and 15 workover barges, most of
which have been upgraded or refurbished since 1990. The barge market in the
transition zones of the Gulf of Mexico has undergone significant attrition and
consolidation in recent years, with the number of drilling rigs declining from
over 120 in the early 1980s to approximately 55 today, and the number of
competitors decreasing over the same period from more than 30 to only two
significant contractors. Drilling and workover activity has been increasing in
the Gulf of Mexico transition zones, spurred by the increased use of 3-D seismic
technology that has resulted in the identification of previously undiscovered
drilling prospects. The settlement of a royalty dispute between the State of
Louisiana and Texaco, the region's largest leaseholder, has stimulated drilling
activity. These trends have resulted in a significant increase in dayrates and
utilization for the Company's rigs. For the year ended December 31, 1995, the
Company's marketable deep drilling barge rigs averaged 75% utilization and had
an average dayrate of $12,880, as compared to 86% utilization and an average
dayrate of $13,793 for the year ended December 31, 1996. As of March 6, 1997,
100% of the Company's marketable deep drilling barge rigs were in operation at
an average dayrate of $15,468.
The Company is the largest barge workover contractor in the Gulf of Mexico.
Management believes this sector of its business offers opportunities for further
improvement for the following reasons: (i) workover activity typically lags
drilling activity by one to two years and activity has increased substantially
during the last two years; (ii) the transition zones of Louisiana have been an
active exploration area for a number of years and have a substantial number of
producing wells that require periodic workover; and (iii) the Company has five
stacked workover barges and therefore has the fleet capacity, upon
refurbishment, to benefit from increases in utilization and dayrates as demand
improves. In June 1996, the Company entered into an exclusive one-year alliance
agreement with Texaco, subject to annual renewal, to provide barge rig
completion and workover services in the transition zones of the Gulf of Mexico.
The barge workover business complements the Company's land and barge drilling
businesses due to customer overlap and serves to lessen the Company's dependence
on exploratory drilling activity by increasing the Company's operations in the
production phase of an oil and gas well.
International. The Company's international barge fleet is concentrated in
the transition zones of Nigeria, where it is the leading barge drilling
contractor. The Company is currently operating three deep drilling barges under
long-term contracts for affiliates of Shell and Chevron at an average dayrate of
$25,422. A fourth barge rig (Rig No. 74), which has been substantially upgraded
and is in transit to Nigeria, will commence operations in March 1997 under a
two-year contract for Chevron at an initial dayrate of $26,535. The Company
anticipates that the use of 3-D seismic technology will stimulate increases in
demand for drilling in a number of other foreign transition zones, including
those of Venezuela, Indonesia, Tunisia, Mexico and the Caspian Sea.
LAND DRILLING
Since its inception in 1934, Parker has provided land drilling services
throughout the United States and in 47 foreign countries, making it one of the
most geographically diverse land drilling contractors in the world. Parker
specializes in the drilling of deep and difficult wells and wells in remote and
harsh locations. The Company has a total of 67 land rigs, including six rigs
acquired in the Mallard Acquisition. A total of 52 rigs (including 22
helicopter-transportable rigs) currently are located in 13 foreign countries and
15 rigs are located in the United States. Parker's international land drilling
operations are focused primarily in South
5
<PAGE> 7
America and the Asia Pacific region, where Parker specializes in drilling that
requires equipment specially designed to be transported by helicopter or
all-terrain vehicles into remote areas such as jungle, mountainside or desert
locations. Management believes Parker is the dominant operator in the heli-rig
market, with an estimated 75% worldwide market share. Parker traditionally has
been a pioneer in "frontier areas" and is currently working in China, Russia,
Kazakstan and Vietnam.
Demand for land drilling services has recovered in response to improved
market conditions. Currently, 100% of Parker's domestic rigs and 67% of its
international rigs are in operation as compared with an average of 56% and of
55%, respectively, for the year ended August 31, 1996. Parker recently was
awarded a five-year alliance contract by the operator of the Tengiz field to
operate and maintain its rigs, including the provision of expatriate and local
drilling crews and management of its warehouse, drilling base and mobile
equipment fleet.
PLATFORM DRILLING
The Company operates five platform rigs and one shallow water workover
jackup rig which were acquired as part of the Mallard Acquisition. Three of the
platform rigs and the jackup rig are located in the Gulf of Mexico, and the
other two platform rigs are located in Peru. One platform rig in the Gulf of
Mexico has been refurbished to incorporate a modular self-erecting system that
significantly improves the efficiency of rigging up and rigging down on
platforms. A second platform rig is undergoing similar refurbishment and is
expected to commence operations in the Gulf of Mexico in April 1997.
RENTAL TOOLS
As a result of the Quail Acquisition, the Company is a provider of
specialized rental tools used in difficult well drilling and in production and
workover operations in the Gulf of Mexico and the Gulf Coast region. The
Company's rental tools include a full line of drill pipe, drill collars, tubing,
high- and low-pressure blowout preventers and manifolds, casing scrapers and
cement and junk mills. The Company has recently entered into a contract with a
major oil company to be its preferred provider of rental tools to the onshore
and offshore Texas markets. The Company is opening a new rental tool facility to
service customers in this region. Management believes that its international
drilling operations will enable the Company to expand the rental tool business
internationally as well as incorporate rental tool services as part of
integrated drilling or project management contracts.
THE OFFERING
Common Stock offered by the
Company............................. 7,000,000 shares
Common Stock offered by the Selling
Shareholder......................... 3,056,600
Common Stock Outstanding:
Before the Offering............... 68,504,191 shares(1)
After the Offering................ 75,504,191 shares(1)
Use of Proceeds..................... The net proceeds to the Company from
the sale of Common Stock offered hereby
are estimated to be approximately
$ million ($ million, if the
Underwriters' overallotment option is
exercised in full), assuming a public
offering price of $ per share and
after deducting the underwriting
discount and estimated expenses payable
by the Company. Such net proceeds will
be used to refurbish and upgrade rigs,
to expand rental tool operations and to
prepay a portion of the Company's bank
term loan. See "Use of Proceeds." The
Company will not receive any of the
proceeds from the sale of Common Stock
by the Selling Shareholder.
New York Stock Exchange symbol...... PKD
- ---------------
(1) Excludes 748,000 shares of Common Stock subject to employee and director
stock options outstanding at February 28, 1997.
6
<PAGE> 8
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
The following table presents for the periods indicated certain historical
financial data for the Company. The following information should be read
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, the historical financial statements of Parker, Mallard
and Quail, including the notes thereto, and the Unaudited Pro Forma Combined
Financial Statements, including the notes thereto, included elsewhere or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
------------------------------ ------------------
1994 1995 1996(1) 1995 1996(1)
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................. $152,424 $157,371 $156,652 $42,710 $45,198
-------- -------- -------- ------- -------
Operating expenses:
Drilling rental and other................ 121,295 118,060 112,766 29,792 30,596
Depreciation, depletion and
amortization.......................... 23,246 23,745 23,061 5,851 6,898
General and administrative............... 17,018 17,063 19,428 4,795 4,508
Provision for reduction in carrying value
of certain assets..................... 19,718 -- -- -- --
-------- -------- -------- ------- -------
Total operating expenses............ 181,277 158,868 155,255 40,438 42,002
-------- -------- -------- ------- -------
Operating income (loss).................... (28,853) (1,497) 1,397 2,272 3,196
Interest income (expense), net............. 1,150 1,184 1,507 313 (1,489)
Other income............................... 784 7,413 5,663 1,039 1,070
-------- -------- -------- ------- -------
Income (loss) before income taxes.......... (26,919) 7,100 8,567 3,624 2,777
Income tax expense......................... 1,887 3,184 4,514 1,737 1,298
-------- -------- -------- ------- -------
Net income (loss).......................... $(28,806) $ 3,916 $ 4,053 $ 1,887 $ 1,479
======== ======== ======== ======= =======
Earnings (loss) per share, fully diluted... $ (.53) $ .07 $ .07 $ .03 $ .02
======== ======== ======== ======= =======
Weighted average shares outstanding (fully
diluted)................................. 54,247,664 55,332,541 57,466,183 55,705,953 66,315,399
OTHER FINANCIAL DATA (UNAUDITED):
EBITDA(2).................................. $ 14,111 $ 22,248 $ 24,458 $ 8,123 $10,094
Capital expenditures:
Maintenance.............................. 5,444 5,133 6,646 1,232 1,271
Other.................................... 29,320 16,407 24,190 7,157 7,740
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1996
--------------------------
AS
ACTUAL ADJUSTED(3)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and other short-term investments... $ 86,753 $ 99,075
Property, plant and equipment, net........................ 382,859 382,859
Total assets.............................................. 740,680 753,002
Total debt................................................ 403,897 353,897
Total stockholders' equity................................ 271,392 333,714
</TABLE>
- ---------------
(1) Except for the three months ended November 30, 1996, the data presented
above does not reflect the effect of the Acquisitions (which were completed
November 12, 1996). Pro forma for the Acquisitions for the year ended August
31, 1996, the Company's revenues and EBITDA would have been $277.0 million
and $67.9 million, respectively, and for the three months ended November 30,
1996, the Company's revenues and EBITDA would have been $74.3 million and
$21.7 million, respectively.
(2) EBITDA represents operating income (loss) before depreciation, depletion and
amortization and provision for reduction in carrying value of certain
assets. EBITDA is frequently used by securities analysts and is presented
here to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
(3) Reflects the issuance of 7,000,000 shares of Common Stock by the Company at
an assumed public offering price of $9.375 per share and the application of
a portion of the estimated net proceeds, together with current cash, to
reduce debt as described under "Use of Proceeds."
7
<PAGE> 9
The following tables present for the periods indicated certain historical
barge rig activity data for Mallard, which was acquired on November 12, 1996,
and certain historical land rig activity data for Parker.
BARGE RIG ACTIVITY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996 CURRENT(1)
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE FOR PERIOD:
Domestic barge deep drilling
Rigs available for service(2)......... 7.0 7.0 7.0 7.0 7.0 8.0
Utilization rate of rigs available for
service(3).......................... 71% 83% 73% 75% 86% 100%
Dayrate............................... $ 8,713 $ 9,606 $13,537 $12,880 $13,793 $15,468
Cold stacked rigs(2).................. 1.0 1.0 1.0 2.0 3.0 3.0
Domestic barge intermediate drilling
Rigs available for service(2)......... 3.7 5.0 5.0 5.0 5.0 4.0
Utilization rate of rigs available for
service(3).......................... 57% 77% 65% 74% 85% 100%
Dayrate............................... $ 7,015 $ 7,671 $10,432 $10,143 $10,381 $ 9,986
Cold stacked rigs(2).................. 0.0 0.0 0.0 0.0 0.0 0.0
Domestic barge workover and shallow
drilling
Rigs available for service(2)......... 8.9 10.0 9.0 7.3 8.7 10.0
Utilization rate of rigs available for
service(3).......................... 66% 66% 48% 66% 71% 80%
Dayrate............................... $ 6,301 $ 6,742 $ 8,181 $ 8,066 $ 7,595 $ 8,584
Cold stacked rigs(2)(5)............... 8.9 12.0 13.0 12.6 6.3 5.0
International barge drilling
Rigs available for service(2)......... 1.0 1.0 1.0 1.0 1.7 3.0
Utilization rate of rigs available for
service(3).......................... 100% 57% 46% 89% 89% 100%
Dayrate............................... $21,659 $22,049 $23,531 $25,141 $25,302 $25,422
Cold stacked rigs(2)(4)............... 0.0 0.0 0.0 0.0 1.0 1.0
</TABLE>
LAND RIG ACTIVITY DATA
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------
1992 1993 1994 1995 1996 CURRENT(1)
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Utilization of international land
rigs(6)............................... 52% 40% 56% 54% 55% 67%
Utilization of domestic land
rigs(6)(7)............................ 40% 41% 45% 46% 56% 100%
</TABLE>
- ---------------
(1) As of March 6, 1997.
(2) The number of rigs is determined by calculating the number of days each rig
was in Mallard's fleet, e.g. a Mallard rig under contract or available for
contract for an entire year is 1.0 "rigs available for service" and a
Mallard rig cold stacked for one quarter is 0.25 "cold stacked rigs." "Rigs
available for service" includes rigs currently under contract or available
for contract. "Cold stacked rigs" includes all rigs that are stacked and
would require significant refurbishment before being placed into service.
(3) Barge rig utilization rates are based on a weighted average basis assuming
365 days availability for all of its rigs available for service. Rigs
acquired or disposed of have been treated as added to or removed from the
rig fleet as of the date of acquisition or disposal. Rigs that are in
operation or fully or partially staffed and on a revenue-producing standby
status are considered to be utilized. Rigs under contract that generate
revenues during moves between locations or during
mobilization/demobilization are also considered to be utilized.
(4) Mallard acquired Rig No. 74, at the beginning of 1996 as a cold-stacked deep
drilling barge. Rig No. 74 has been substantially upgraded and will begin
operating in Nigeria in March 1997.
(5) Mallard removed a total of six stacked barge workover rigs from its fleet
since the beginning of 1995 and refurbished and activated two such rigs
during this period.
(6) Parker calculates its land rig utilization rates on a weighted average basis
assuming 365 days availability for all of its rigs. Rigs retired, disposed
of or reclassified as assets held for sale have been treated as removed from
the rig fleet as of the last day of each fiscal period, except as described
in footnote (7) below. Rigs that are in operation or fully or partially
staffed and on a revenue-producing standby status are considered to be
utilized. Rigs under contract that generate revenues during moves between
locations or during mobilization/demobilization are also considered to be
utilized.
(7) Domestic utilization for the fiscal years ended August 31, 1992, 1993, 1994
and 1995 has been adjusted to reflect the removal of 16 domestic mechanical
rigs in August 1994 and the sale of an additional 22 such rigs in August
1996. Including these 38 domestic rigs during such periods, historical
domestic utilization was as follows: 1992 -- 13%, 1993 -- 14%, 1994 -- 15%,
and 1995 -- 21%.
8
<PAGE> 10
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
consider the following risk factors, as well as the other information set forth
or incorporated by reference in this Prospectus.
INDUSTRY CONDITIONS
The Company's revenues and earnings are affected directly by the worldwide
level of oil and gas exploration and development activity. The level of such
activity is affected by many factors over which the Company has no control,
including, among others, the market prices of oil and gas, the volatility of
such prices, the levels of production by, and other activities of, the
Organization of Petroleum Exporting Countries and other oil and gas producers,
governmental regulation and trade restrictions, the level of worldwide economic
activity, political stability in major oil producing areas, the development of
alternate energy sources and the long-term effect of worldwide energy
conservation measures. Since the early 1980's, the contract drilling business
has been severely impacted by instability in the prices of oil and natural gas.
Substantial uncertainty exists as to the future level of oil and gas drilling
activity.
RISKS OF INTERNATIONAL OPERATIONS
A significant portion of Parker's operations is conducted in international
markets, including South America, the Asia Pacific region and West Africa.
International activities accounted for approximately 57% of the Company's
operating revenues on a pro forma basis for the year ended August 31, 1996. In
addition to the risks inherent in the drilling business, the Company's
international operations are subject to certain political, economic and other
uncertainties, including, among others, risks of war and civil disturbances,
expropriation, nationalization, termination of existing contracts, taxation
policies, foreign exchange restrictions and fluctuations and other risks arising
out of foreign governmental sovereignty over certain areas in which the Company
conducts operations. Although the Company seeks to protect against some of these
risks through insurance, insurance is not available for all types of risks or
for all areas in which the Company operates. To the extent insurance is
available for a particular risk, there can be no assurance that such insurance
will be sufficient to cover all losses that could be incurred with respect to a
particular covered risk. Losses from these factors could be material in those
countries where the Company has a significant concentration of assets.
The Company's Nigerian operations are subject to certain risks relating to
political instability in Nigeria and the possibility of the promulgation of
legislation or regulations by the United States that, if adopted, could restrict
the ability of the Company and its customers to engage in trade with and invest
in Nigeria. Since beginning operations in 1991, Mallard has not been materially
affected by political instability in Nigeria, but other rig contractors have in
recent years experienced work stoppages and delays relating to civil unrest in
Nigeria. If the United States were to adopt such legislation or regulations or
if such civil unrest were to reoccur, the Company could lose an important source
of income and could be required to redeploy its rigs out of Nigeria. The costs
of such redeployment might not be reimbursable, and such costs, together with
the lost revenues resulting from a termination of its Nigerian operations, could
have a material adverse effect on the Company. Revenues and operating income
attributable to the Company's Nigerian operations on a pro forma basis for the
year ended August 31, 1996 were $26.7 million and $8.2 million, respectively.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's drilling operations are subject to various hazards inherent
in the drilling of oil and gas wells, including blowouts, reservoir damage, loss
of well control, cratering, and oil and gas well fires. Such events can result
in personal injury or death, severe damage to or destruction of equipment and
facilities, suspension of operations, and substantial damage to surrounding
areas and the property of others. The Company's offshore operations also are
subject to hazards inherent in marine operations, such as capsizings,
groundings, collisions, damage from weather, sea damage or unsound location.
Generally, the Company obtains indemnification from its customers by contract
for certain of these risks. To the extent not transferred to customers by
contract, the Company seeks protection against such risks through insurance.
However, potential liabilities associated with oilfield casualties or losses
could arise in risk categories where no insurance
9
<PAGE> 11
has been purchased, where claims exceed the applicable insurance coverage, or
where indemnification is not available or satisfied. The occurrence of events
that are not fully insured or the failure of a customer to meet its
indemnification obligations could have a material adverse effect on the Company.
In addition, there can be no assurance that insurance will be available or, even
if available, that insurance premiums or other costs will not rise sharply in
the future.
INTEGRATION OF RECENT ACQUISITIONS
The Mallard Acquisition and the Quail Acquisition each will require the
Company to integrate and manage businesses that are related to, but
substantially different from, Parker's traditional land drilling business. No
assurance can be given that the Company will be successful in managing and
incorporating the acquired businesses into its existing operations or that such
activities will not require a disproportionate amount of management's attention.
The Company's failure to successfully incorporate the acquired businesses into
its existing operations, or the occurrence of unexpected costs or liabilities in
the acquired businesses, could have a material adverse effect on the Company.
RISKS OF ACQUISITION STRATEGY
The Company's growth strategy includes the acquisition of other oilfield
services businesses. There can be no assurance, however, that the Company will
be able to continue to identify attractive acquisition opportunities, obtain
financing for acquisitions on satisfactory terms or successfully acquire
identified targets. In addition, no assurance can be given that the Company will
be successful in integrating acquired businesses into its existing operations,
and such integration may result in unforeseen operational difficulties or
require a disproportionate amount of management's attention. Future acquisitions
may be financed through the incurrence of additional indebtedness or through the
issuance of capital stock. Furthermore, there can be no assurance that
competition for acquisition opportunities in the industry will not escalate,
thereby increasing the cost to the Company of making further acquisitions or
causing the Company to refrain from making additional acquisitions.
COMPETITION
The drilling market is competitive. Drilling contracts are generally
awarded on a competitive bid basis and, while an operator may consider factors
such as quality of service and type and location of equipment as well as the
ability to provide ancillary services, price is generally the primary factor in
determining which contractor is awarded a job. The Company believes that the
market for drilling contracts will continue to be competitive for the
foreseeable future. Certain of the Company's competitors have greater financial
resources than the Company, which may enable them to better withstand industry
downturns, to compete more effectively on the basis of price, to acquire
existing rigs or to build new rigs. There can be no assurance that the Company
will be able to compete successfully against its competitors in the future or
that such competition will not have a material adverse effect on the Company's
business, financial condition and results of operations.
CONCENTRATION OF CUSTOMER BASE
The Company's customer base is concentrated, with its two largest customers
accounting for approximately 19% and 18% of total revenues for fiscal year 1996.
In addition, the two largest customers of Quail accounted for approximately 31%
and 23% of its total revenues for the year ended December 31, 1996, and the
three largest customers of Mallard accounted for approximately 13%, 12% and 11%
of its total revenues for the period. There can be no assurance that these
customers will continue to request the Company's services or that the loss of
such customers would not have a material adverse effect on the Company's
business, financial condition and results of operations.
10
<PAGE> 12
RISK OF UPGRADE AND REFURBISHMENT PROJECTS
The Company's business strategy contemplates significant expenditures to
upgrade and refurbish certain of its rigs. These projects are subject to the
risks of delay or cost overruns inherent in large refurbishment projects,
including shortages of materials or skilled labor, unforeseen engineering
problems, work stoppages, weather interference, unanticipated cost increases,
nonavailability of necessary equipment and inability to obtain any of the
requisite permits or approvals. Significant delays could also have a material
adverse effect on the Company's marketing plans for such rigs and could
jeopardize the contracts under which the Company plans to operate such rigs.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous domestic and foreign
governmental regulations that may relate directly or indirectly to the contract
drilling industry, including environmental and safety matters. Some of the
Company's activities take place in or near ecologically sensitive areas, such as
wetlands, beaches and inland waterways. Numerous federal and state environmental
laws regulate drilling activities and impose liability for causing pollution in
inland, coastal and offshore waters. In addition, the regulations applicable to
the Company's operations include certain regulations that control the discharge
of materials into the environment or require remediation of contamination under
certain circumstances. For example, the Company may be liable for damages and
costs incurred in connection with oil spills for which it is legally
responsible. Certain environmental laws and regulations impose "strict
liability," rendering a person liable without regard to negligence or fault on
the part of such person. Such environmental laws and regulations may expose the
Company to liability for the conduct of, or conditions caused by, others, or for
acts of the Company that were in compliance with all applicable laws at the time
such acts were performed.
The Company has made and will continue to make expenditures to comply with
environmental and safety requirements. Because the requirements imposed by such
laws and regulations are subject to change, the Company is unable to predict the
ultimate cost of compliance with such requirements. The modification of existing
foreign or domestic laws or regulations or the adoption of new laws or
regulations curtailing exploratory or development drilling for oil and gas for
economic, political, environmental or other reasons could have a material
adverse effect on the Company by limiting drilling opportunities.
SUBSTANTIAL INDEBTEDNESS
The financings related to the Acquisitions substantially increased the
Company's debt levels. At November 30, 1996, the Company had $403.9 million in
total indebtedness, compared to $3.4 million of indebtedness at August 31, 1996.
Although the Company intends to use a portion of the proceeds of the Offering to
partially prepay its term loan, the amount of debt that will remain outstanding
will be at a level substantially higher than that at which the Company has
operated historically. The Company's debt instruments also contain various
affirmative and negative covenants, including restrictions on acquisitions and
capital expenditures, incurrence of debt and sales of assets. The Company's
level of indebtedness will have several important effects on its future
operations, including, without limitation, (i) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of interest
and principal on its indebtedness, (ii) the Company's leveraged position will
substantially increase its vulnerability to adverse changes in general economic
and industry conditions, as well as to competitive pressure, and (iii) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be limited.
The Company's ability to meet its debt service obligations and to reduce its
total indebtedness will be dependent upon the Company's future performance,
which will be subject to general economic conditions, industry cycles and
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. There can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt, it may be required, among other
things, to seek additional financing in the debt or equity markets, to refinance
or restructure all or a portion of
11
<PAGE> 13
its indebtedness or to sell selected assets or reduce or delay planned capital
expenditures. There can be no assurance that any such measures would be
sufficient to enable the Company to service its debt.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be approximately $ million, ($ million, if the
Underwriters' overallotment option is exercised in full), assuming a public
offering price of $ per share and after deducting the underwriting
discount and estimated expenses payable by the Company.
The Company currently intends to utilize a portion of the net proceeds of
this Offering to help fund anticipated capital expenditures over the next 12
months of between $80 million and $100 million, including: (i) approximately $27
million to refurbish three barge drilling rigs and two platform rigs for
operation in the Gulf of Mexico; (ii) approximately $10 million to refurbish and
upgrade (in response to specific contracts) four land rigs in Pakistan, Papua
New Guinea and Indonesia; and (iii) approximately $11 million for inventory and
improvements at a rental tool facility being opened in Victoria, Texas.
In addition, the Company currently intends to apply a portion of the net
proceeds from this Offering, together with its current cash, to prepay up to $50
million of the $100 million term loan that was initially incurred to partially
finance the Acquisitions. Such term loan matures on November 30, 2002 and as of
February 28, 1997 bore interest at a rate of 7.69% per annum. The Company is
negotiating with its lenders to increase the borrowing base under its revolving
credit facility. Currently, the revolving credit facility provides for
borrowings of up to $45 million at any one time outstanding. No borrowings under
the revolving credit facility are currently outstanding, exclusive of $11.8
million reserved against letters of credit. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for additional information as to the terms of the Company's
term loan and its revolving credit facility (collectively, the "Senior Credit
Facility").
Pending the Company's use of the net proceeds of the Offering, such funds
will be invested in short-term interest bearing, investment-grade securities.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Shareholder.
12
<PAGE> 14
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock trades on the New York Stock Exchange under the symbol
"PKD". The following table sets forth the high and low sales prices per share of
the Common Stock as reported on the New York Stock Exchange composite
transactions tape for the fiscal periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995:
First Quarter............................................ $ 6 1/4 $5
Second Quarter........................................... 5 1/8 4 3/8
Third Quarter............................................ 5 5/8 4 3/8
Fourth Quarter........................................... 5 5/8 4 5/8
1996:
First Quarter............................................ 6 3/8 4 7/8
Second Quarter........................................... 6 1/2 5
Third Quarter............................................ 8 1/8 5 3/8
Fourth Quarter........................................... 7 3/8 5 1/4
1997:
First Quarter............................................ 10 1/4 6 1/8
Second Quarter........................................... 11 7 7/8
Third Quarter (through March 25, 1997)................... 10 8
</TABLE>
No dividends have been paid on Common Stock since February 1987.
Restrictions contained in the Senior Credit Facility prohibit the payment of
cash dividends, and the indenture for the Company's 9 3/4% Senior Notes due 2006
(the "Senior Notes") restricts the payment of such dividends. The Company has no
present intention to pay dividends on its Common Stock in the foreseeable
future.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the cash, short-term debt and capitalization
of Parker as of November 30, 1996 and as adjusted to give effect to (i) the
issuance by the Company in the Offering of 7,000,000 shares of Common Stock,
(ii) the assumed retirement of $50 million of the Company's $100 million term
loan under the Senior Credit Facility, and (iii) the conversion into 3,056,000
shares of Common Stock of the Company's Series D Convertible Preferred Stock
issued in connection with the Mallard Acquisition. This table should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations, Parker's Consolidated Financial Statements, including the
notes thereto, and the Unaudited Pro Forma Combined Financial Statements,
including the notes thereto, included elsewhere or incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
AT NOVEMBER 30, 1996
--------------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and other short-term investments..... $ 86,753 $ 99,075
======== ========
Current portion of long-term debt........................... $ 16,282 $ 16,282
======== ========
Long-term debt:
Senior Credit Facility(1)................................. $ 86,500 $ 36,500
9 3/4% Senior Notes due 2006.............................. 297,665 297,665
Other debt................................................ 3,450 3,450
-------- --------
Total long-term debt.............................. 387,615 337,615
-------- --------
Stockholders' equity:
Preferred Stock, $1.00 par value, 1,942,000 shares
authorized, 30,566 shares of Series D Convertible
Preferred Stock outstanding, no shares outstanding as
adjusted(2)............................................ 25,000 --
Common stock, $.16 2/3 par value, 120,000,000 shares
authorized, 65,424,313 shares outstanding and
75,480,913 shares as adjusted(2)(3).................... 10,904 12,580
Additional paid-in capital................................ 255,358 341,004
Retained earnings (deficit)............................... (18,859) (18,859)
Other..................................................... (1,011) (1,011)
-------- --------
Total stockholders' equity............................. 271,392 333,714
-------- --------
Total capitalization........................................ $659,007 $687,611
======== ========
</TABLE>
- ---------------
(1) The Company has maximum availability of $45 million under the revolving
credit portion of the Senior Credit Facility, subject to borrowing base
limitations. A portion of the revolving credit facility is being used to
support letters of credit, approximately $11.8 million of which are
currently outstanding.
(2) In December 1996, stockholders approved an amendment to the Company's
Restated Certificate of Incorporation increasing the number of authorized
shares of Common Stock from 70,000,000 to 120,000,000. At that time, the
outstanding shares of Series D Convertible Preferred Stock were
automatically converted into 3,056,600 shares of Common Stock.
(3) Reflects the issuance of 7,000,000 shares of Common Stock by the Company at
an assumed public offering price of $9.375 per share, resulting in estimated
net proceeds of approximately $62,322,000, of which approximately $1,167,000
(equal to the par value of the shares issued) is reflected in Common Stock
and the remainder is reflected in additional paid-in capital. Excludes
748,000 shares of Common Stock issuable upon exercise of employee and
director stock options outstanding at February 28, 1997.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended August 31, 1996 are
derived from the consolidated condensed statements of the Company audited by
Coopers & Lybrand L.L.P., independent accountants. The historical financial data
presented in the table below for and at the end of each of the three-month
periods ended November 30, 1995 and 1996 are derived from the unaudited
consolidated financial statements of the Company. In the opinion of management
of the Company, such unaudited consolidated financial statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial data for such periods. The results for the three
months ended November 30, 1996 are not necessarily indicative of the results to
be achieved for the full year.
Except for the three months ended November 30, 1996, the data presented
below do not reflect the effect of the Acquisitions and should be read in
conjunction with the Company's Consolidated Financial Statements, including the
notes thereto, the Unaudited Pro Forma Combined Financial Statements, including
the notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
------------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996(1) 1995 1996(1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Drilling contracts.......... $ 116,082 $ 96,719 $ 147,480 $ 153,075 $ 145,160 $ 41,504 $ 42,871
Rental...................... -- -- -- -- -- -- 1,713
Other....................... 7,250 4,082 4,944 4,296 11,492 1,206 614
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues.......... 123,332 100,801 152,424 157,371 156,652 42,710 45,198
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Drilling.................... 74,196 69,237 114,732 113,132 100,942 28,401 29,334
Rental...................... -- -- -- -- -- -- 339
Other....................... 8,007 5,951 6,563 4,928 11,824 1,391 923
Depreciation, depletion and
amortization.............. 23,182 23,376 23,246 23,745 23,061 5,851 6,898
General and
administrative............ 15,753 14,617 17,018 17,063 19,428 4,795 4,508
Provision for reduction in
carrying value of certain
assets(2)................. 19,257 -- 19,718 -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 140,395 113,181 181,277 158,868 155,255 40,438 42,002
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)....... (17,063) (12,380) (28,853) (1,497) 1,397 2,272 3,196
----------- ----------- ----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income
(expense) -- net.......... 1,592 1,676 1,150 1,184 1,507 313 (1,489)
Minority interest........... 596 149 (135) (227) -- -- --
Other(3).................... 6,504 (469) 919 7,640 5,663 1,039 1,070
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total other income
(expense)............. 8,692 1,356 1,934 8,597 7,170 1,352 (419)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... (8,371) (11,024) (26,919) 7,100 8,567 3,624 2,777
Income tax expense
(benefit)................... 2,795 (337) 1,887 3,184 4,514 1,737 1,298
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ (11,166) $ (10,687) $ (28,806) $ 3,916 $ 4,053 $ 1,887 $ 1,479
=========== =========== =========== =========== =========== =========== ===========
Earnings (loss) per share,
primary and fully diluted... $ (.21) $ (.20) $ (.53) $ .07 $ .07 $ .03 $ .02
=========== =========== =========== =========== =========== =========== ===========
Weighted average shares
outstanding (fully
diluted).................... 52,115,038 53,082,078 54,247,664 55,332,541 57,466,183 55,705,953 66,315,399
=========== =========== =========== =========== =========== =========== ===========
OTHER FINANCIAL DATA
(UNAUDITED):
EBITDA(4)..................... $ 25,376 $ 10,996 $ 14,111 $ 22,248 $ 24,458 $ 8,123 $ 10,094
Capital expenditures:
Maintenance................. 4,036 3,552 5,444 5,133 6,646 1,232 1,271
Other....................... 23,931 15,165 29,320 16,407 24,190 7,157 7,740
BALANCE SHEET DATA (END OF
PERIOD):
Cash, cash equivalents and
other short-term
investments................. $ 37,319 $ 43,989 $ 14,471 $ 22,124 $ 77,985 $ 25,385 $ 86,753
Property, plant and equipment,
net......................... 145,750 139,325 127,178 122,258 124,177 124,846 382,859
Total assets.................. 245,869 236,342 209,348 216,959 275,959 223,567 740,680
Total debt.................... 932 -- -- 2,037 3,378 1,764 403,897
Total stockholders' equity.... 210,181 207,679 180,583 186,920 244,048 190,859 271,392
</TABLE>
- ---------------
(1) Except for the three months ended November 30, 1996, the data presented
above do not reflect the effect of the Acquisitions (which were completed
November 12, 1996). Pro forma for the Acquisitions, for the year ended
August 31, 1996, the Company's revenues and EBITDA would have been $277.0
million and $67.9 million, respectively, and for the three months ended
November 30, 1996, the Company's revenues and EBITDA would have been $74.3
million and $21.7 million, respectively.
(2) In fiscal 1992, management evaluated Parker's assets and operations with the
intent of reducing future operating costs and disposing of non-performing
assets. Accordingly, Parker removed 14 rigs from its domestic fleet and two
rigs from its international fleet and recorded a $19.3 million provision for
reduction in carrying value of certain assets. In fiscal 1994, Parker
reorganized its domestic land drilling and manufacturing operations and made
the decision to dispose of certain drilling equipment inventories and other
properties. Accordingly, Parker removed 16 rigs from its domestic fleet and
recorded a $19.7 million provision for reduction in carrying value of
certain assets.
(3) Other income for the year ended August 31, 1992 included a $4.0 million gain
on settlement and $2.6 million of gains on the sales of assets. Other income
for the years ended August 31, 1995 and 1994 included $6.4 million and $5.4
million, respectively, of gains on the sales of assets.
(4) EBITDA represents operating income (loss) before depreciation, depletion,
amortization and provision for reduction in carrying value of certain
assets. EBITDA is frequently used by securities analysts and is presented
here to provide additional information about the Company's operations.
EBITDA is not a measurement presented in accordance with generally accepted
accounting principles. EBITDA should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK AND OVERVIEW
The Company's operations and future results have been altered significantly
by the acquisitions of Mallard and Quail in November 1996. As a result of the
Mallard Acquisition, the Company has become one of the primary barge drilling
contractors in the Gulf of Mexico and Nigeria, each of which were markets in
which Parker previously did not operate. As a result of the Quail Acquisition,
the Company expanded its operations into the complementary rental tool market in
the Gulf of Mexico and the Gulf Coast region.
The Company will experience substantial revenue growth as a result of the
Acquisitions. The operations of Mallard and Quail also have generated higher
historical operating margins than Parker. After giving effect to the
Acquisitions, the Company's pro forma revenues and operating income for the
fiscal year ended August 31, 1996, were $277.0 million and $21.9 million,
respectively, compared to the Company's actual revenues and operating income of
$156.7 million and $1.4 million, respectively. In addition, the Company's pro
forma earnings before depreciation, depletion and amortization ("EBITDA") for
fiscal 1996 were $67.9 million compared to a historical EBITDA of $24.5 million
for fiscal 1996. These pro forma results do not give effect to the Company's
addition of a fourth rig in Nigeria that will be commencing operations in March
1997 at an initial dayrate of $26,535.
In addition to increasing the size and scope of the Company's operations,
the Acquisitions have increased the percentage of revenue generated
domestically. Parker generated approximately 73% of its revenue from
international sources in fiscal 1996 compared with 57% for the Company on a pro
forma basis for the same period. The Acquisitions also increased the Company's
participation in the workover service and production phase of the market, which
historically has been characterized by less volatility than the drilling
services market. A significant amount of the Company's business is now based in
the shallow waters of the Gulf of Mexico, so the Company may experience some
seasonal variation in its future results. Mallard's business historically has
been subject to seasonality with the first two quarters of the calendar year
(generally corresponding to the Company's second and third quarters) being less
active than the second half of the calendar year. Parker's and Quail's
operations generally have not reflected seasonal variation.
The Company is currently expanding its business in several areas. Quail
recently entered into a contract with a major oil company to be its preferred
provider of rental tools to the onshore and offshore Texas markets. To service
this market, Quail is in the process of acquiring property and inventories to
commence operations at a new facility in Victoria, Texas, during the latter part
of fiscal 1997. Mallard is in the process of refurbishing two barge drilling
rigs and one platform rig for additional drilling contracts. The substantial
upgrade of Rig No. 74 (deep drilling) was completed in January 1997 and it is
anticipated that it will go to work in Nigeria in March 1997. Rigs Nos.
41(platform) and 60 (deep drilling) are currently being refurbished and will
operate in the Gulf of Mexico and the transition zones of the U.S. Gulf Coast,
respectively. After refurbishment is completed in the third quarter of fiscal
1997, Rig No. 7 will be relocated from the United States to Pakistan for work
under a land drilling contract. The Company also plans to refurbish an
additional barge rig and a platform rig for operation in the Gulf of Mexico.
The Acquisitions were accounted for under the purchase method of
accounting. As a result, the assets and liabilities of Mallard and Quail were
recorded at their estimated fair values as of the date the Acquisitions were
consummated. The purchase price in excess of the estimated fair value of
Mallard's and Quail's assets was recorded as goodwill and will be amortized over
a 30-year period. Accordingly, the Company's depreciation and amortization will
increase significantly in future periods.
The financings related to the Acquisitions substantially increased the
Company's debt levels. At November 30, 1996, the Company had $403.9 million in
total indebtedness, compared to $3.4 million of indebtedness at August 31, 1996.
The Company will use up to $50.0 million of the proceeds from the Offering,
together with its current cash, to partially prepay the term loan under the
Senior Credit Facility. The substantial levels of debt will result in a higher
level of interest expense and an increased percentage of the Company's cash
flows being used for debt service and may limit the Company's ability to obtain
additional financing for future acquisitions and capital expenditures. See
"-- Liquidity and Capital Resources" and "Risk Factors -- Substantial
Indebtedness."
16
<PAGE> 18
For the foregoing reasons, the acquisitions of Mallard and Quail will
affect the comparability of the Company's historical results of operations with
results in future periods.
RESULTS OF OPERATIONS
Three Months Ended November 30, 1996 Compared to Three Months Ended November
30, 1995
During the first quarter of fiscal 1997, the Company recorded net income of
$1.5 million as compared to net income of $1.9 million for the first quarter of
fiscal 1996. On November 12, 1996, the Company acquired Mallard and Quail. The
acquisitions were recorded using the purchase method of accounting; accordingly,
the results of operations for the first quarter of fiscal 1997 included 18 days
of operations for both Mallard and Quail as well as the interest expense and
goodwill amortization related to the purchases.
Total revenues for the first fiscal quarter of 1997 were $45.2 million, an
increase of $2.5 million from last year's first quarter, and included $5.3
million of revenue from Mallard's offshore barge and platform drilling
operations and $1.7 million of revenue from Quail's tool rental operations. The
offshore drilling revenue was generated primarily by 19 barge rigs under
contract in the transition zones of the Gulf of Mexico and three barge rigs
operating in Nigeria. Tool rental revenue was derived from the rental of drill
pipe and collars, tubing, blowout preventers and other tools used in drilling,
production and workover operations, in the Gulf of Mexico and Gulf Coast land
regions.
Revenue from the Company's traditional land drilling operations decreased
$3.9 million in the first fiscal quarter of 1997 compared to the first quarter
last year due principally to lower rig utilization in the Asia Pacific region.
In Papua New Guinea, where the Company currently has two of its four contracted
rigs on standby rates, revenue decreased due to fewer operating days during the
quarter. Revenue also decreased in New Zealand due to the completion in fiscal
1996 of contracts for three rigs. However, two of the rigs have recently resumed
operations in New Zealand.
Revenue from the Company's U.S. land drilling operations increased $2.5
million due to an increase in rig utilization from 56% to 81%. Most of the
increase was due to contracting four additional rigs in Louisiana, where the
Company is currently operating six land rigs. All of the Company's operating
U.S. land rigs are currently utilized.
The Company's land drilling profit margin (revenue less drilling expense)
decreased $1.7 million in the first quarter of fiscal 1997 from last year
principally as a result of the decreased revenue in the Asia Pacific region.
Management anticipates that land drilling profit margins should improve slightly
during the remainder of the fiscal year due to higher dayrates. Management
believes that the profit margins generated by Mallard's offshore drilling and
Quail's tool rentals during the last 18 days of November are indicative of the
margins that will be sustained throughout the second quarter.
Depreciation, depletion and amortization increased $1.0 million due to $1.0
million of depreciation in the first quarter on Mallard's and Quail's assets and
$0.2 million of goodwill amortization.
Interest expense for the first fiscal quarter of 1997 was $2.6 million and
consisted of interest on $400 million of borrowings used to finance the
Acquisitions and the amortization of the debt issuance fees and costs. Interest
income was $0.8 million higher due to cash and short-term investment balances
averaging approximately $80 million during the first quarter of fiscal 1997
versus approximately $24 million in the first quarter of fiscal 1996. The
increased cash position reflected the net proceeds of the Company's June 1996
public offering of Common Stock prior to the Acquisitions.
Income tax expense, which consists primarily of international taxes,
decreased $0.4 million due to lower land drilling revenue and profits in certain
international countries. The Company anticipates that domestic income generated
by Mallard and Quail will be offset by net operating loss carryforwards for the
next few years.
Year Ended August 31, 1996 Compared to Year Ended August 31, 1995
The Company recorded net income of $4.1 million in fiscal 1996 as compared
to net income of $3.9 million in fiscal 1995. An improvement in drilling margins
in fiscal 1996 was offset by reduced other income and by increased general and
administrative expense due primarily to severance costs.
17
<PAGE> 19
Drilling revenue decreased $7.9 million in fiscal 1996 due to the
termination in late fiscal 1995 of the Company's low-margin southern Argentina
operations, which had generated $13.0 million of revenue in fiscal 1995. The
Company's overall rig utilization rate increased from 52% in fiscal 1995 to 55%
in fiscal 1996. Excluded from the utilization percentages for both years are 22
domestic mechanical rigs sold in the fourth quarter of fiscal 1996.
South America drilling revenue decreased from $76.1 million in fiscal 1995
to $58.5 million in fiscal 1996, primarily due to the loss of revenue generated
in the terminated southern Argentina operations in fiscal 1995. In Colombia,
three rigs were refurbished in fiscal 1996 and resumed work under new contracts.
The Company had seven rigs under contract in Colombia and two rigs under
contract both in northern Argentina and in Peru as of September 30, 1996.
Management anticipates additional drilling activity and increased revenue in
South America in fiscal 1997. The privatization of Petroperu, Peru's national
oil company, and additional acreage leased by outside operators are anticipated
to result in additional drilling activity in that country. Drilling activity is
expected to remain strong in Colombia in fiscal 1997. Additionally, the Company
is exploring the possibility of entering other drilling markets in South
America.
Operations in the Asia Pacific areas generated revenue of $47.9 million in
fiscal 1996, an increase of $2.9 million from fiscal 1995. The primary area of
increased revenue was Papua New Guinea where the Company experienced a 91% rig
utilization rate on its five rigs in fiscal 1996. Additionally, during the
second quarter of fiscal 1996 the Company began operating one rig under a
contract in Vietnam, a new market for the Company. Revenue decreased in New
Zealand, the Philippines and Pakistan because five rigs completed contracts in
fiscal 1996. Management anticipates that revenue from the Asia Pacific countries
will increase modestly in fiscal 1997, primarily due to increased geothermal
drilling on the islands of Java and Sumatra in Indonesia. Two of the Company's
rigs were recently redeployed to Indonesia under geothermal drilling contracts,
which will require additional management services and technical assistance to be
provided by the Company to two Indonesian-owned drilling companies.
Fiscal 1996 revenue of $8.0 million from operations in Africa, Russia and
Kazakstan was nearly the same as fiscal 1995. Management believes these areas
have promise for significant expansion of operations; however, much of the
future expansion is contingent on the resolution of technical, logistical and
political issues in the former Soviet Union.
The Company's domestic operations generated $30.8 million of drilling
revenue in fiscal 1996 as compared to $23.7 million in fiscal 1995. The increase
in revenue was attributable to the Company's Alaska Rig No. 245 operating the
entire year in fiscal 1996 as compared to nine months in fiscal 1995 and a 10%
increase in utilization days for the rigs in the lower 48 states. The increase
in domestic drilling activity occurred primarily in the Tuscaloosa Trend in
Louisiana, where the Company deployed three rigs in fiscal 1996 and is currently
deploying another rig under a new contract.
During the fourth quarter of fiscal 1996, the Company sold 22 mechanical
rigs from its domestic rig fleet, leaving 15 SCR electric rigs and two
mechanical rigs. At the end of fiscal year 1996, the Company had 13 of its 17
domestic rigs under contract. Management anticipates that revenue from its
domestic land operations should increase in fiscal 1997.
Although worldwide contract drilling revenue decreased $7.9 million in
fiscal 1996 as compared to fiscal 1995, the total drilling margin (drilling
revenue less drilling expense) increased $4.3 million over the same period. This
increase was attributable to increased utilization of rigs in Papua New Guinea,
improved contract margins in Colombia and the termination of the low-margin
southern Argentina operations.
Other revenue increased $7.2 million in fiscal 1996 due to the sale of a
rig by the Company's manufacturing subsidiary, Parker Technology, Inc.
("Partech(R)"). General and administrative expense increased $2.4 million in
fiscal 1996 principally due to non-recurring severance costs associated with a
reduction in corporate personnel.
Other income (expense) decreased $2.0 million due to the reversal in fiscal
1995 of a prior year's foreign currency accrual of $1.5 million and reduced
gains on sales of assets in fiscal 1996. The increase in income tax expense was
attributable to increased international profits in fiscal 1996.
18
<PAGE> 20
Year Ended August 31, 1995 Compared to Year Ended August 31, 1994
The fiscal 1995 net income of $3.9 million was an improvement of $32.7
million over the net loss of $28.8 million recorded in fiscal 1994. Excluding a
$19.7 million provision for reduction in carrying value of certain assets from
fiscal 1994's net loss, fiscal 1995's net income was an improvement of $13.0
million over fiscal 1994. The primary reasons for the improvement in fiscal 1995
were an increase in drilling margins of $7.2 million and an increase in other
income of $6.7 million.
Drilling revenue increased $5.6 million to $153.1 million in fiscal 1995
from $147.5 million in fiscal 1994, even though international and domestic
operating days were nearly the same over each period. An increase in the
utilization of larger rigs in northern Argentina and Colombia more than offset
decreased utilization of smaller rigs in southern Argentina.
South America drilling revenue increased $23.4 million in fiscal 1995 when
compared with fiscal 1994. In Colombia, revenue increased $13.9 million due
primarily to revenue earned by one rig relocated from Indonesia during the year
and from a full year of operations by one rig that was added to the rig fleet in
fiscal 1994. In addition, several rigs which were either on a standby or stacked
status in fiscal 1994 operated all of fiscal 1995. In Argentina, drilling
revenue increased $12.6 million as two additional deep rigs, one relocated from
the Congo in fiscal 1994 and one relocated from Yemen in fiscal 1995, operated
much of the year. Additionally, one rig added to the rig fleet in fiscal 1994
operated all of fiscal 1995 and one rig leased by the Company commenced
operations in the fourth quarter of fiscal 1995. During fiscal 1995 and 1994, a
number of shallow depth capacity rigs (10,000 feet or less) operated in southern
Argentina, many of them operating on a meterage basis. Two of these rigs were
relocated to mid-Argentina as the Company focused its marketing efforts on
regions of the country where operations are generally conducted on a daywork
basis. At fiscal year-end, the remaining rigs in southern Argentina were on a
stacked status. Drilling revenue declined $4.8 million in Ecuador where two rigs
located in that country did not operate in fiscal 1995 and were retired from the
rig fleet at the end of the fiscal year.
Operations in the Asia Pacific region resulted in an increase in drilling
revenue of $1.5 million in fiscal 1995. Increased utilization in New Zealand and
revenue earned from a labor contract in China more than offset a decline in
revenue in Papua New Guinea and Indonesia due to lower utilization in those
countries.
International drilling revenue from operations in Africa, Russia and
Kazakstan declined $17.4 million in fiscal 1995. Utilization declined due to the
completion of contracts in Chad, the Congo, Russia and Yemen. The rigs that
operated in the Congo and Yemen in fiscal 1994 have both been redeployed to
Argentina. In Kazakstan, a reduction in revenue from a labor contract in that
country was partially offset by operations from one rig that has been relocated
from Russia.
Domestic drilling revenue declined $2.3 million due to fewer operating days
in the Rocky Mountain states and Alaska.
Drilling margins (drilling revenue less drilling expense) increased $7.2
million in fiscal 1995 to $39.9 million compared to $32.7 million in fiscal
1994. Margins improved in the Company's South American operations, including
those in the countries of Colombia and Argentina. Margins were negatively
impacted in fiscal 1994 in Colombia due to increased operating expenses and
costs associated with the start-up of two rigs. In fiscal 1995, these two rigs
operated for the full year with improved margins when compared with the previous
fiscal year. In Argentina, margins also improved as two additional deep capacity
rigs began operating in the northern region of the country and two rigs operated
during the year in the country's middle region. In the Company's other operating
regions, both internationally and domestically, drilling margins as a percentage
of drilling revenue in fiscal 1995 remained relatively consistent with fiscal
1994.
Other income (expense) increased $6.7 million to $8.6 million in fiscal
1995 from $1.9 million in fiscal 1994. Gains of $6.4 million were recognized in
fiscal 1995 from the disposition of property, plant and equipment as the Company
continued its efforts to sell assets that were no longer a part of its marketing
strategy. In addition, the reversal of a prior year foreign currency accrual of
$1.5 million was recorded in fiscal 1995. Fiscal 1994 other income included $2.1
million from gains associated with the disposition of property, plant and
equipment, a $1.5 million gain from the reversal of a prior year foreign payroll
tax accrual and a
19
<PAGE> 21
$2.6 million charge for the settlement of certain litigation. The $1.3 million
increase in income tax expense was primarily attributable to the reversal in
1994 of an accrued foreign tax.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of the Company was $102.9 million as of August 31, 1996,
and $108.4 million as of November 30, 1996. Cash and short-term investments
comprised $78.0 million and $86.8 million of working capital on these respective
dates.
Capital expenditures for the first five months of fiscal 1997 were $24.8
million, which were primarily related to international contracts opportunities.
The Company currently anticipates spending between $80.0 and $100.0 million in
capital expenditures over the next 12 months. These expenditures include (i)
approximately $27.0 million to refurbish three barge drilling rigs and two
platform rigs for operation in the Gulf of Mexico; (ii) approximately $10.0
million to refurbish and upgrade (in response to specific contracts) four land
rigs in Pakistan, Papua New Guinea and Indonesia; and (iii) approximately $11.0
million for inventory and improvements at a rental tool facility in Victoria,
Texas.
In November 1996, the Company acquired Mallard for $313 million in cash and
$25 million in convertible preferred stock that converted into 3,056,600 shares
of Common Stock in the second quarter of fiscal 1997. The purchase price is
subject to certain adjustments in net assets anticipated to be settled on or
before March 12, 1997. The Company acquired Quail for $65.0 million in cash,
which has subsequently been adjusted to $65.9 million for changes in net assets
during the interim period prior to closing. The Company financed the
acquisitions of Mallard and Quail through the issuance of $300.0 million
principal amount of Senior Notes and a term loan of $100.0 million under the
Senior Credit Facility. Management anticipates using $50.0 million of the
proceeds from this Offering, together with its current cash, to reduce such term
loan. See "Use of Proceeds."
The Senior Notes, which were sold at a $2.4 million discount, have an
interest rate of 9 3/4% and will mature in 2006. The Senior Notes are guaranteed
by the Company's principal subsidiaries. The $100.0 million term loan was a part
of a commitment from a syndicate of financial institutions to establish a Senior
Credit Facility, which consists of the term loan and a $45.0 million revolving
credit facility. The term loan bears interest, at the option of the Company, at
prime to prime plus 0.50% or at 1.75% to 2.25% above the one-,
two-, three- and six-month reserve-adjusted LIBOR rate, depending on the
Company's Debt-to-Capital Ratio (as defined), and matures on November 30, 2002.
Installments of principal and interest are payable quarterly in an amount that
provides for the retirement of $10.0 million in fiscal 1997, $14.0 million in
fiscal 1998, $12.0 million in each of fiscal 1999 through 2002, with a final
payment of $28 million due at maturity. The term loan has no prepayment penalty,
is guaranteed by the Company's principal subsidiaries and is secured by
substantially all of the assets of the Company and the assets and stock of such
subsidiaries.
The revolving credit facility is available for general corporate purposes,
including capital expenditures for rig refurbishments and upgrades, working
capital and standby letters of credit. Availability under the revolving credit
facility is subject to certain borrowing base limitations based on eligible
accounts receivable. All advances to the Company under the revolving credit
facility bear interest, at the option of the Company, at prime to prime plus
0.50% or at 1.75% to 2.25% above the one-, two-, three- and six-month
reserve-adjusted LIBOR rate, depending on the percentage of the credit used. The
revolving credit facility is also guaranteed by the Company's principal
subsidiaries, is secured by substantially all of the assets of the Company and
the stock and assets of such subsidiaries. The revolving credit facility matures
on December 31, 1998. The Company is negotiating with its lenders to increase
the borrowing base under its revolving credit facility.
Each of the Senior Notes and the Senior Credit Facility contains customary
affirmative and negative covenants, including restrictions on incurrence of debt
and sales of assets. The Senior Credit Facility prohibits payment of dividends
and the indenture for the Senior Notes restricts the payment of dividends.
20
<PAGE> 22
Management believes that the current level of cash and short-term
investments, together with cash generated from operations and the proceeds from
the Offering after prepaying a portion of the term loan, should be sufficient to
meet the Company's immediate capital needs as well as capital required in
connection with additional contracts which the Company is currently bidding.
Should further opportunities requiring capital arise, the Company believes it
would be able to satisfy these needs through a combination of cash generated
from operations, borrowing under the revolving portion of the Senior Credit
Facility and either additional equity or long-term debt financing.
RECENT ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of," was issued. The statement establishes accounting standards for the
impairment of long-lived assets, such as the Company's drilling, transportation
and other equipment, and will be effective for the Company beginning with the
year ending August 31, 1997. The Company does not believe the new standard will
have a material effect on the Company's financial position or results of
operations.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. The statement requires
the computation of compensation for grants of stock, stock options and other
equity instruments issued to employees based on fair value and will be effective
for the Company beginning with the year ended August 31, 1997. The compensation
calculated is to be either recorded as an expense in the financial statements
or, alternatively, disclosed. The Company anticipates it will elect the
disclosure method of complying with the new standard. Under the provisions of
the new statement, it is anticipated that pro forma net income to be disclosed
will be lower than net income reported in the financial statements.
BUSINESS
GENERAL
Parker is a leading provider of onshore and offshore contract drilling and
workover services to major, independent and foreign national oil companies.
Historically, Parker operated as a land drilling contractor, with an
internationally recognized expertise in deep and difficult drilling and drilling
in remote locations. Through the recent Mallard Acquisition, Parker has
diversified into the offshore market, with barge drilling and workover
operations in the shallow coastal waters or "transition zones" of the Gulf of
Mexico and Nigeria. Parker also recently acquired Quail, a company that provides
specialized rental equipment for drilling and workover operations in the
offshore Gulf of Mexico and Gulf Coast markets. The Quail Acquisition added a
complementary rental tool business to the Company's contract drilling
operations, diversifying the Company's land and offshore operations outside its
core drilling business and providing additional opportunities for expansion
worldwide.
The oilfield service industry has experienced a significant increase in
activity in the last twelve to eighteen months as oil and gas companies have
increased their exploration and production budgets in response to increasing
demand for oil and gas, higher oil and gas prices and improved technology. In
the offshore drilling market, including transition zones, rig utilization levels
are at a ten year high with many markets at or approaching full utilization. The
land drilling industry, both in the U.S. and internationally, has also shown a
marked improvement in dayrates and utilization driven by several factors,
including increasing commodity prices, rig attrition and consolidation of
drilling contractors, especially in the domestic market. Through its diversified
operations, the Company is well positioned to take advantage of these positive
trends.
BARGE DRILLING AND WORKOVER
Barge rigs are mobile drilling and workover platforms that are submersible
and are built to work in eight to 20 feet of water, otherwise described as
"transition zones". These rigs are towed by tug boats to the drill site with the
derrick laid down. The lower hull is then submerged by flooding until it rests
on the sea floor. The
21
<PAGE> 23
derrick is then raised and drilling and workover operations are conducted with
the barge in this position. There are two basic forms of barge rigs; posted and
conventional. A posted barge is identical to a conventional barge except that
the hull and super structure are separated by 12- to 14-foot columns, which
increases the water depth capabilities of the rig.
Domestic Barge Drilling
Mallard's principal domestic market for its barge drilling rigs is the
transition zones of the Gulf of Mexico, primarily in Louisiana and, to a lesser
extent, Alabama and Texas, where conventional jackup rigs are unable to operate.
This area historically has been the world's largest market for shallow-water
barge drilling. Mallard is the second-largest operator of barge drilling rigs in
this market, with 15 drilling barges. Barge rigs are also employed inland, in
lakes, bays, rivers and marshes.
The barge market in the transition zones of the Gulf of Mexico has
undergone significant attrition and consolidation in recent years, with the
number of rigs declining from over 120 in the early 1980s to approximately 55
today, and with the number of competitors decreasing over the same period from
more than 30 to only two significant contractors. Drilling and workover activity
has been increasing in the Gulf of Mexico transition zones, spurred by the
increased use of 3-D seismic technology, which has resulted in the
identification of previously undiscovered drilling prospects. The settlement of
a royalty dispute between the state of Louisiana and Texaco, the largest
leaseholder in the region, has stimulated drilling activity. It is estimated
that Texaco holds approximately 45% of the shallow water leases in Louisiana.
Pursuant to a settlement reached in March 1994, Texaco agreed to invest
approximately $150 million to drill in Louisiana over a five-year period. Higher
natural gas prices have also significantly contributed to this increased
drilling and workover activity. Historically, dayrates for barge drilling rigs
have ranged from a high of approximately $18,000 in the early 1980s to a low of
approximately $6,000 during the period from 1986 to 1992. For the year ended
December 31, 1995, the Company's marketable deep drilling barge rigs averaged
75% utilization and an average dayrate of $12,880, compared to 86% utilization
and an average dayrate of $13,793 for the year ended December 31, 1996. As of
March 6, 1997, 100% of the Company's marketable deep drilling barge rigs were in
operation at an average dayrate of $15,468.
The Company believes that international markets, in which jackup rigs have
historically been utilized for offshore drilling, will utilize an increasing
number of barge rigs over the next several years and that these will come
primarily from rigs currently or formerly employed in the Gulf of Mexico shallow
water market. Once a barge rig has been modified for international service, it
is not feasible for it to return to service in the Gulf of Mexico shallow water
market, because the modifications restrict the ability of the rig to navigate
inland waterways.
The following table sets forth, as of March 6, 1997, the Company's estimate
of the number of barge drilling rigs in the domestic market. The table does not
include rigs that are suitable principally for workover or shallow drilling.
<TABLE>
<CAPTION>
CONTRACTOR TOTAL ACTIVE
---------- ----- ------
<S> <C> <C>
Falcon Drilling Company, Inc. ("Falcon Drilling")........... 39 25
Mallard..................................................... 15 12
Nabors Industries........................................... 1 1
-- --
Total............................................. 55 38
== ==
</TABLE>
Mallard is currently refurbishing one inactive barge drilling rig with a
maximum drilling depth of 30,000 feet. The two remaining rigs, each with 30,000
feet drilling capacity, are cold stacked in the Louisiana area and are not being
marketed. Given the improvement in barge drilling demand and dayrates, the
Company may contemplate refurbishing the two remaining stacked rigs.
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<PAGE> 24
A schedule of Mallard's deep and intermediate drilling barges located in
the Gulf of Mexico as of March 6, 1997 is set forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Deep Drilling:
Rig No. 50........................ 2,000 1993 25,000 Active
Rig No. 51........................ 2,000 1993 25,000 Active
Rig No. 52........................ 2,000 1993 25,000 Active
Rig No. 53........................ 1,600 1995 20,000 Active
Rig No. 54........................ 2,000 1995 30,000 Active
Rig No. 55........................ 2,000 1993 30,000 Active
Rig No. 56........................ 2,000 1992 30,000 Active
Rig No. 57........................ 1,500 1997 20,000 Active
Rig No. 58........................ 3,000 1982 30,000 Stacked
Rig No. 59........................ 3,000 1972 30,000 Stacked
Rig No. 60(2)..................... 3,000 1980 30,000 Shipyard
Intermediate Drilling:
Rig No. 8......................... 1,700 1995 15,000 Active
Rig No. 12........................ 1,200 1990 14,000 Active
Rig No. 17........................ 1,200 1993 13,000 Active
Rig No. 21........................ 1,200 1995 14,000 Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
(2) This rig is currently in the shipyard undergoing refurbishment and is
expected to be available for service in May 1997.
Domestic Barge Workover and Shallow Drilling
Mallard's domestic barge workover and shallow drilling business is based in
the same geographical area as its barge drilling market. The same factors that
have affected the structure of the barge drilling sector also have affected this
sector, including considerable consolidation of competitors and reduction of
available rigs since the early 1980s. In June 1996, Mallard was awarded an
exclusive one-year alliance to provide barge rig completion and workover
services to Texaco in the shallow waters of the Gulf of Mexico. The following
table sets forth as of March 6, 1997 the Company's estimate of the number of
barge units in the workover and shallow drilling sector:
<TABLE>
<CAPTION>
CONTRACTOR TOTAL ACTIVE
---------- ----- ------
<S> <C> <C>
Mallard..................................................... 15 10
Falcon Drilling............................................. 9 9
Other contractors........................................... 5 2
-- --
Total............................................. 29 21
== ==
</TABLE>
23
<PAGE> 25
A schedule of Mallard's workover rigs as of March 6, 1997, which includes
some rigs with shallow drilling capabilities, is set forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Heavy Workover and Shallow Drilling:
Rig No. 5............................. 800 1991 -- Stacked
Rig No. 10............................ 800 1978 -- Stacked
Rig No. 15............................ 800 1991 11,500 Stacked
Rig No. 16............................ 800 1994 11,500 Active
Rig No. 18............................ 800 1993 11,500 Active
Rig No. 20............................ 800 1995 11,500 Active
Rig No. 23............................ 1,000 1993 13,000 Active
Rig No. 24............................ 1,000 1992 13,000 Active
Rig No. 25............................ 1,000 1993 13,000 Active
Rig No. 27............................ 800 1987 -- Stacked
Rig No. 28............................ 800 1987 -- Stacked
Workover and Other:
Rig No. 6............................. 700 1995 -- Active
Rig No. 7............................. 700 1995 -- Active
Rig No. 9............................. 650 1996 -- Active
Rig No. 26............................ 650 1996 -- Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
International Barge Drilling
The most promising international barge drilling markets are currently
located in the transition zones of Venezuela, Indonesia, Tunisia, Mexico, the
Caspian Sea and West Africa. Mallard has focused its international efforts in
the transition zones of West Africa, where it is the leading provider of barge
drilling services in Nigeria, with four of the nine rigs in the market.
International markets are particularly attractive due to the long-term nature of
the work and the opportunity to earn dayrates higher than domestic rates. The
Company believes that international markets, in which jackup rigs have
historically been utilized for offshore drilling, will utilize an increasing
number of barge rigs over the next several years and that these will come
primarily from rigs currently or formerly employed in the Gulf of Mexico
transition zones.
Since 1991, Mallard has operated Rig No. 71 in the transition zones of
Nigeria. Rig No. 71 is currently contracted with Chevron Nigeria through August
30, 1998, at an operating dayrate of $25,935. Mallard is also in the process of
redeploying Rig No. 74 to Nigeria to operate under a two-year contract with
Chevron Nigeria, with a one-year extension option, commencing in March 1997, at
an operating dayrate of $26,535. Rig No. 74 was recently substantially upgraded
for international operations at a cost of approximately $10 million.
In addition, on August 21, 1996, Mallard acquired from Noble Drilling (West
Africa) Limited two barge rigs that were operating in Nigeria. These two rigs
acquired were substantially upgraded by Noble for international drilling
operations in 1990 and 1991 at a cost in excess of $50 million and have been
working under contract since 1991. At the time of their acquisition, the rigs
were under contract to Shell Petroleum Development Company of Nigeria Ltd., and
these contracts were assigned to Mallard. The rigs, redesignated Rig Nos. 72 and
73, are contracted through July 1998 and July 1999, at initial operating
dayrates of $26,215 and $22,000, respectively. Each of the term contracts for
Rig Nos. 71, 72, 73 and 74 has a stated term but provides no contractual
penalties for early termination by the operator.
24
<PAGE> 26
A schedule of Mallard's drilling barges deployed in or in the process of
being deployed to Nigeria, as of March 6, 1997, is set out below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) STATUS(1)
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Deep Drilling:
Rig No. 71............................ 3,000 1994 30,000 Active
Rig No. 72............................ 3,000 1991 30,000 Active
Rig No. 73............................ 3,000 1991 30,000 Active
Rig No. 74............................ 3,000 1996 30,000 Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract.
LAND DRILLING
General
Parker is a leading international provider of land contract drilling
services. Parker specializes in the drilling of deep and difficult wells and
drilling in remote and harsh environments. Since beginning operations in 1934,
Parker has operated in 47 foreign countries and throughout the United States,
making it one of the most geographically diverse land drilling contractors in
the world. The following table sets forth, as of March 6, 1997, the locations of
the Company's rigs (including six rigs acquired in the Mallard Acquisition) and
their drilling depth ratings.
<TABLE>
<CAPTION>
DRILLING DEPTH RATING IN FEET
------------------------------------------------------------
10,000
OR
LESS 15,000 20,000 25,000 30,000 TOTAL
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
International:
South America(1)..................... 5 4 9 3 4 25
Asia Pacific......................... 4 3 11 2 - 20
Africa and the Former Soviet Union... 3 2 2 - - 7
-- -- -- -- -- --
Total International.......... 12 9 22 5 4 52
Domestic:
Gulf Coast........................... - - 2 - 4 6
Rocky Mountains...................... - - 2 - 2 5
Mid-Continent........................ - - 4 - - 3
Alaska............................... - - - - 1 1
-- -- -- -- -- --
Total Domestic............... - - 8 - 7 15
-- -- -- -- -- --
Total........................ 12 9 30 5 11 67
== == == == == ==
</TABLE>
- ---------------
(1) Includes two rigs owned by a joint venture in which Mallard has a 49%
interest.
International Land Drilling Operations
Parker's international land drilling operations are focused primarily in
South America and the Asia Pacific region, where Parker specializes in drilling
that requires equipment specially designed to be transported by helicopter or
all-terrain vehicles into remote access areas such as jungle, mountainside or
desert locations. Management believes that Parker's 22 heli-rigs, with
technologically advanced pumps and power generation systems that are capable of
drilling difficult wells in excess of 15,000 feet, have established Parker as
the dominant operator in the heli-rig market, with an estimated 75% worldwide
market share. Parker traditionally has been a pioneer in "frontier areas" and is
currently working for operators in the countries of China, Russia, Kazakstan and
Vietnam.
25
<PAGE> 27
In recent years, many major and independent oil companies have directed a
greater portion of their exploration budgets to foreign markets. This is
particularly true in South America and the Asia Pacific region, where the demand
for land rigs has increased significantly. Parker has benefitted from this trend
due to its long-standing presence in these markets and has been able to deploy
rigs under longer term contracts at higher dayrates and operating margins than
domestic operations. Management believes that the demand for drilling services
in international markets will continue to grow as demand for oil and gas
increases and countries dependent on oil and gas revenues seek to increase their
production. The Company intends to capitalize on its global presence and
substantial international experience to pursue growth opportunities in both
current and developing markets.
International markets differ from the domestic market in terms of
competition, nature of customers, equipment and experience requirements. The
majority of international drilling markets have the following characteristics:
(i) a small number of competitors; (ii) customers who are major, large
independent or foreign national oil companies; (iii) drilling programs in remote
locations requiring drilling equipment with a large inventory of spare parts and
often other ancillary equipment; and (iv) drilling of difficult wells requiring
considerable experience.
South America. The Company currently has 25 rigs located in the South
American drilling markets of Colombia, Argentina and Peru, including six land
rigs acquired in the Mallard Acquisition. Parker's rigs have been upgraded to
meet the demands of deep, difficult drilling in these areas. Most of these rigs
are currently under contract to major or national oil companies at attractive
dayrates. The Company anticipates it will continue to relocate rigs to the South
American market to meet increased demand for drilling in such countries as
Colombia, Peru, Venezuela and Bolivia.
Asia Pacific Region. Parker operates 15 of its fleet of 22 helicopter
transportable rigs in the Asia Pacific region due to the remoteness of the
mountainside and jungle drilling performed in this region. Parker entered the
Indonesian geothermal market in 1995. In 1996, Parker became the first land
drilling contractor to enter the Vietnam market subsequent to the liberalization
of Vietnam's trading policy and the lifting of restrictions on doing business
with Vietnam. Also in 1996, Parker formed an alliance with the national drilling
company in China, pursuant to which Parker is providing project management
assistance and rig supervisory personnel to western oil companies in conjunction
with Parker's Chinese partner. Parker has the longest presence of any foreign
drilling contractor in China, beginning with its first contract in 1980.
Africa and the Former Soviet Union. Seven of Parker's rigs are currently
located in the markets of Africa and the former Soviet Union. After becoming the
first western drilling contractor to enter the markets of the former Soviet
Union in 1991, expansion of Parker's business in this region has been hampered
by bureaucratic inefficiencies, constantly changing tax and other laws and
political issues that have retarded the investment of capital by major and large
independent oil companies in the former Soviet Union. As anticipated, the
recently announced agreement regarding the pipeline to be built to accommodate
incremental production from the Tengiz field in Kazakstan has already increased
exploration efforts in this region. Parker recently was awarded a five-year
alliance contract by the operator of the Tengiz field to operate and maintain
its rigs, including the provision of expatriate and local drilling crews and
management of its warehouse, drilling base and mobile equipment fleet.
Domestic Land Drilling Operations
In the United States, Parker operates onshore rigs in the Gulf Coast, Rocky
Mountain and Mid-Continent regions and the arctic region of Alaska. Industry
conditions in the United States land drilling market have recently improved
after having been depressed through most of the 1980s and early 1990s. The
improved market conditions have resulted in both increased rig utilization and
dayrates and shortages for certain types of rigs in certain markets. The
increased drilling activity has been reflected in a greater demand for rigs of
all depth capabilities, in particular deep drilling rigs such as those owned by
the Company. The recent market improvements have been a result of a combination
of a general consolidation trend in the industry, higher and more stable oil and
natural gas prices and improvements in exploration technology, in particular the
greater use of 3-D seismic data and horizontal drilling.
26
<PAGE> 28
Of Parker's 15 rigs located in the United States, 14 are SCR electric, two
are equipped with top drive units and all are capable of drilling in excess of
15,000 feet. Traditionally, Parker has differentiated itself from its domestic
competitors by specializing in the drilling of deep and difficult wells.
Specialty Land Drilling Services
Helicopter Transportable Rigs. Parker specializes in difficult wells and
drilling in remote areas and harsh environments, primarily in international
locations. A significant factor contributing to Parker's success in obtaining
drilling contracts in remote areas is the use of rigs that are transportable by
air, land and water. These rigs have been specially designed and constructed by
Parker for quick assembly and disassembly under the proprietary designations
"Heli-Hoist(R)" rig, Transportable By Anything(R) ("TBA(R)") rig and All-Terrain
("AT2000E(R)") rig. Management believes that Parker's 22 helicopter
transportable rigs comprise approximately 75% of the operational helicopter
transportable rigs worldwide. The Heli-Hoist(R), TBA(R) and AT2000E(R) rigs
allow Parker to perform drilling operations in remote and otherwise inaccessible
locations such as jungle areas, mountainous areas and offshore platforms.
Deep Drilling. During the U.S. drilling boom of the late 1970s and early
1980s, Parker developed its specialty of deep difficult drilling, primarily in
the Anadarko Basin of Western Oklahoma and the Overthrust Region in the Rocky
Mountains. The majority of the expansion of Parker's domestic fleet was built
around this deep gas drilling. Parker's largest drilling rig is rated in excess
of 35,000 feet.
During the last several years, drilling activity has shifted from domestic
deep gas drilling to international deep oil and gas drilling. While
international deep drilling is generally in the range of 15,000 feet to 20,000
feet as opposed to the domestic deep drilling which often exceeded 20,000 feet,
Parker has benefitted in the international arena from the development of this
expertise, particularly in the deep drilling markets of the Cusiana and Cupiagua
fields of Colombia and in northern Argentina.
Arctic Drilling. Parker has been one of the pioneers in arctic drilling
conditions and continues to offer new technology to meet the demand for
increased drilling in an ecologically sensitive manner. Parker's most recent
development has been the introduction of a self-contained mobile drilling unit
capable of being moved in one unit by giant "crawlers" similar to the system
used to move rocket thrusters for the space program. The environmentally
sensitive rig also has a complete closed-loop mud system and cuttings processing
system that eliminate the need for mud pits.
Geothermal Drilling. Parker also has developed expertise in the area of
geothermal drilling. Geothermal operations involve drilling into a pocket of
geothermal energy, tapping the source of this energy in the form of steam, hot
water or hot rocks and converting this heat into usable forms of energy. The
market for geothermal drilling is expanding into several areas of the world,
including the Philippines, New Zealand and Indonesia, as various countries elect
to access this alternative form of energy.
PLATFORM DRILLING
The Company operates five platform rigs and one shallow water jackup rig.
Three platform rigs and the jackup rig are located in the Gulf of Mexico and two
of platform rigs are located in Peru. One platform rig in the Gulf of Mexico,
which is currently under contract, has been refurbished to incorporate a modular
self-erecting system that significantly improves the efficiency of rigging up
and rigging down on platforms. A second platform rig is undergoing similar
refurbishment and is expected to commence operations in the Gulf of Mexico in
April 1997.
27
<PAGE> 29
The details regarding Mallard's platform rigs, as of March 6, 1997, are set
forth below:
<TABLE>
<CAPTION>
MAXIMUM
YEAR BUILT DRILLING
OR LAST DEPTH
HORSEPOWER REFURBISHED (FEET) LOCATION STATUS(1)
---------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Platform:
Rig No. 41E(2).......... 950 1993 12,500 Gulf of Mexico Shipyard
Rig No. 42E............. 950 1996 12,500 Gulf of Mexico Active
Rig No. 43(3)........... 650 1994 -- Gulf of Mexico Stacked
Rig No. 47.............. 750 1993 11,000 Gulf of Mexico Stacked
Rig No. 40(4)........... 750 1992 11,000 Peru Active
Rig No. 48(4)........... 750 1992 11,000 Peru Active
</TABLE>
- ---------------
(1) "Active" denotes that the rig is currently under contract or available for
contract. "Stacked" denotes that the rig is currently cold stacked and would
need to be refurbished at a significant cost before being placed back into
service.
(2) This rig is currently in the shipyard undergoing refurbishment and is
expected to be available for service in April 1997.
(3) Shallow water workover jackup rig.
(4) 100% owned by Mallard and deployed under a joint venture agreement in which
Mallard has a 49% interest.
RENTAL TOOLS
The Quail Acquisition provided the Company with a complementary business
unit that management believes will enhance the capabilities of the Company's
contract drilling business and provide substantial revenues as a stand-alone
business unit. Quail, based in New Iberia, Louisiana, is a provider of premium
rental tools used for onshore and offshore oil and gas drilling and workover
activities. Approximately 70% of Quail's equipment is utilized in offshore and
coastal water operations. Since its inception in 1978, Quail's principal
customers have been major and independent oil and gas exploration and production
companies.
Quail rents specialized equipment utilized in difficult well drilling and
production and workover applications. Quail offers a full line of drill pipe,
drill collars, tubing, high- and low-pressure blowout preventers and manifolds,
casing scrapers and cement and junk mills. Quail has recently entered into a
contract with a major oil company to be its preferred provider of rental tools
to the onshore and offshore Texas markets. Quail is opening a new rental tool
facility in Victoria, Texas, in order to service the increasing demand.
Approximately 60% of Quail's revenues is realized from rentals for production
and workover activities.
The rental tool industry is currently experiencing increasing demand due to
the trend toward outsourcing by oil companies of non-core equipment and services
and the significant increase in drilling activity in the Gulf of Mexico. In
recent years, major and independent oil companies have liquidated certain
ancillary drilling equipment in an effort to improve drilling efficiencies and
returns on drilling programs. In addition, drilling activity has increased
substantially in the Gulf of Mexico, causing an increase in dayrates for
drilling rigs and a further increase in the demand for rental tools. The Company
believes that Quail will benefit from such trends.
During the past three years, Quail has experienced significant growth in
revenue and earnings due in general to the growth trends in the oil and gas
industry and specifically to the increased production and drilling activity in
the Gulf of Mexico and the movement within the industry towards fewer or single
source vendors. Quail derives equipment rental revenue primarily from the daily
rental charges for its tools, pipe, and related equipment and to a lesser extent
by charging customers for ancillary parts and repairs, transportation of the
rental items to the customer's location, inspection of rental items as specified
by the customer, items its sub-rents from other rental tool companies, the
disposal of waste removed from the rental items after their use, and the cost of
rental items lost or damaged beyond repair. The operating costs associated with
Quail's rentals
28
<PAGE> 30
consist primarily of expenses associated with depreciation, transportation,
inspection, maintenance and repair, and related direct overhead.
COMPETITION
The contract drilling industry is a competitive and cyclical business
characterized by high capital and maintenance costs. See "Risk
Factors -- Competition."
Demand in the offshore drilling markets serviced by Mallard and Quail is
much improved from previous years. In the Gulf of Mexico barge drilling and
workover markets, Mallard competes primarily with Falcon Drilling. However, a
few small contractors remain, principally in the barge workover market. Certain
drilling jobs for which Mallard competes also can be performed by shallow water
jackup rigs.
The land drilling market also is competitive. Drilling contracts are
generally awarded on a competitive bid basis and, while an operator may consider
factors such as quality of service and type and location of equipment as well as
the ability to provide ancillary services, price is generally the primary factor
in determining which contractor is awarded a job. In international markets,
experience in operating in certain environments and customer alliances have also
been factors in the selection of Parker in certain cases, as well as Parker's
patented drilling equipment for remote drilling projects. Parker believes that
the market for land drilling contracts will continue to be competitive for the
foreseeable future. Certain of Parker's competitors have greater financial
resources than Parker, which may enable them to better withstand industry
downturns, to compete more effectively on the basis of price, to build new rigs
or to acquire existing rigs.
Management believes that Quail is one of the four leading rental tool
companies in the offshore Gulf of Mexico. Quail competes with a number of rental
tool companies in the Gulf of Mexico and in the Gulf Coast land markets, certain
of which are substantially larger than, and have greater financial resources
than, the Company.
CUSTOMERS AND DRILLING CONTRACTS
Parker believes it has developed an international reputation for providing
efficient, quality drilling services. A key for advancing the Company's business
is maintaining and developing relationships and strategic alliances with
customers. An increasing number of the Company's customers have been seeking to
establish exploration, development drilling and workover programs based on
partnering relationships or alliances with a limited number of preferred
drilling contractors. Such relationships or alliances can result in longer term
work and higher efficiencies that increase profitability for drilling
contractors at a lower overall well cost for oil companies. The Company is
currently a preferred contractor for operators in certain domestic and
international locations, which management believes is a result of the Company's
quality service and experience.
The Company's drilling rigs are generally operated under individual dayrate
contracts. Drilling contracts generally cover either the drilling of a specified
well or wells for a stated term. Historically, most domestic contracts have been
on a well-to-well basis while contracts in the international markets frequently
are offered on a term basis. Because Parker focuses on drilling deep and
difficult wells in both domestic and international markets, contracts typically
last longer than 90 days. Certain of Parker's contracts in Colombia have three-
year terms with early termination penalties. Mallard's contracts in Nigeria have
two- to three-year stated terms but provide no contractual penalties for early
termination.
Parker's drilling customer base consists of major, independent and foreign
national oil and gas companies. In fiscal 1996, two customers accounted for 19%
and 18% of Parker's total revenue. During fiscal 1995, two customers accounted
for approximately 22% and 13% of Parker's total revenue.
Mallard's customer base consists of independent and major oil companies.
For the year ended December 31, 1996, YPF, Chevron and Texaco accounted for 13%,
12% and 11%, respectively, of Mallard's revenues. For the year ended December
31, 1995, Texaco, Petro-Tech Peruana S.A. and Chevron accounted for 25%, 13% and
11%, respectively, of Mallard's revenues.
29
<PAGE> 31
Quail's customers are primarily major and independent oil and gas
companies. During the years ended December 31, 1994, 1995 and 1996, Texaco and
Exxon collectively accounted for 49%, 53% and 55% of Quail's revenues,
respectively.
LEGAL PROCEEDINGS
A judgment in the amount of $4.9 million was entered against a subsidiary
of Parker by a judge of the First Civil Specialized Court in Maynas, Peru on May
10, 1996. The judgment was based on a $22 million claim by former employees of
Parker's subsidiary alleging that such subsidiary impaired their employment
opportunities with that subsidiary and other employers. The subsidiary of Parker
disputed the claim and appealed the decision based on a lack of evidence and
procedural and due process irregularities. On or about September 5, 1996, this
judgment was declared void by the Superior Court in Iquitos, Peru. On January
29, 1997, the Superior Court of Maynas issued a resolution declaring the
resolution originally admitting the complaint null and void on the grounds that
the signatures on the complaint do not correspond to the named plaintiffs. As a
result of this decision, the plaintiffs will be required to file a new complaint
if they elect to pursue their claim. While the Company does not believe that the
ultimate disposition of this matter will have a material adverse effect on its
financial condition, results of operations or its operations in South America,
there can be no assurance in this regard.
The Company is a party to certain other legal proceedings that have
resulted from the ordinary conduct of its business. In the opinion of the
Company's management, none of these proceedings is expected to have a material
adverse effect on the Company.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The U.S. Gulf Coast market, and particularly the shallow-water areas where
Mallard's contract drilling service operations are concentrated, are
ecologically sensitive. As a result, environmental issues have led to higher
drilling costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas. U.S. laws and regulations applicable to Mallard's operations
include those controlling the discharge of materials into the environment,
requiring removal and cleanup of materials that may harm the environment, or
otherwise relating to the protection of the environment. The Company, as an
operator of drilling rigs in navigable U.S. waters and certain offshore areas,
may be liable for damages and costs incurred in connection with oil spills for
which it is held responsible, subject to certain limitations. An oil spill in a
wetland or inland waterway could produce substantial damage to the environment,
including wildlife and ground water. Laws and regulations protecting the
environment have become more stringent in recent years, and may, in certain
circumstances, impose strict liability, rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company which were
in compliance with all applicable laws at the time such acts were performed. The
application of these requirements or the adoption of the new requirements could
have a material adverse effect on the Company.
The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of both onshore and offshore facilities operating in or near waters of
the United States, may be liable for the costs of removal and damages arising
out of a pollution incident to the extent set forth in the Federal Water
Pollution Control Act, as amended by the Oil Pollution Act of 1990 ("OPA") and
the Outer Continental Shelf Lands Act. In addition, the Company may also be
subject to applicable state law and other civil claims arising out of any such
incident. Certain of the Company's facilities are also subject to regulations of
the Environmental Protection Agency ("EPA") that require the preparation and
implementation of spill prevention, control and countermeasure plans relating to
possible discharge of oil into navigable waters. Other regulations of the EPA
may require certain precautions in storing, handling and transporting hazardous
wastes. State statutory provisions relating to oil and natural gas generally
include requirements as to well spacing, waste prevention, production
limitations, pollution prevention and cleanup, obtaining drilling and dredging
permits and similar matters. The Company believes that it is in substantial
compliance with such laws, rules and regulations.
30
<PAGE> 32
The OPA and regulations promulgated pursuant thereto impose a variety of
regulations on "responsible parties" related to the prevention of oil spills and
liability for damages resulting from such spills. A "responsible party" includes
the owner or operator of a facility or vessel, or the lessee or permittee of the
area in which an offshore facility is located. The OPA assigns liability to each
responsible party of oil removal costs and a variety of public and private
damages. While liability limits apply in some circumstances, a responsible party
for an Outer Continental Shelf facility must pay all spill removal costs
incurred by a federal, state or local government. The OPA establishes liability
limits (subject to indexing) for offshore drilling rigs. If functioning as an
offshore facility, the offshore drilling rigs are considered "tank vessels" for
spills of oil on or above the water surface, with liability limits of $1,200 per
gross ton or $10 million. To the extent damages and removal costs exceed this
amount, the offshore drilling rigs will be treated as an offshore facility and
the offshore lessee will be responsible up to higher liability limits for all
removal costs plus $75 million. A party cannot take advantage of liability
limits if the spill was caused by gross negligence or willful misconduct or
resulted from violation of a federal safety, construction or operating
regulation. If the party fails to report a spill or to cooperate fully in the
cleanup, liability limits likewise do not apply. Few defenses exist to the
liability imposed by the OPA. The OPA also imposes ongoing requirements on a
responsible party, including proof of financial responsibility (to cover at
least some costs in a potential spill) and preparation of an oil spill
contingency plan. Recently adopted amendments to the OPA reduced the amount of
financial responsibility required for "offshore facilities" from $150 million to
$35 million, but such amendments did not reduce the amount of financial
responsibility required for "tank vessels." Since the Company's offshore
drilling rigs are typically classified as tank vessels, the recent amendments to
the OPA are not expected to have a significant effect on the Company's
operations. A failure to comply with ongoing requirements or inadequate
cooperation in a spill may even subject a responsible party to civil or criminal
enforcement actions.
In addition, the Outer Continental Shelf Lands Act authorized regulations
relating to safety and environmental protection applicable to lessees and
permittees operating on the Outer Continental Shelf. Specific design and
operational standards may apply to Outer Continental Shelf vessels, rigs,
platforms, vehicles and structures. Violations of environmental-related lease
conditions or regulations issues pursuant to the Outer Continental Shelf Lands
Act can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases. Such
enforcement liabilities can result from either governmental or citizen
prosecution.
All of Mallard's operating domestic barge drilling rigs have zero discharge
capabilities as required by law. In addition, in recognition of environmental
concerns regarding dredging of inland waters and permitting requirements,
Mallard conducts minimal dredging operations and approximately two-thirds of
Mallard's drilling contracts involve directional drilling, which minimizes the
need for dredging. However, the existence of such laws and regulations has had
and will continue to have a restrictive effect on Mallard and its customers.
The drilling industry is dependent on the demand for services from the oil
and gas exploration and development industry and, accordingly, is affected by
changes in laws relating to the energy business. The Company's business is
affected generally by political developments and by federal, state, local and
foreign laws and regulations that may relate directly to the oil and gas
industry. The adoption of laws and regulations, both domestic and foreign, that
curtail exploration and development drilling for oil and gas for economic,
environmental and other policy reasons may adversely affect the Company's
operations by limiting available drilling opportunities.
31
<PAGE> 33
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert L. Parker..................................... 73 Chairman of the Board of Directors
Robert L. Parker Jr. ................................ 48 President and Chief Executive Officer
James W. Linn........................................ 51 Executive Vice President and Chief
Operating Officer
James J. Davis....................................... 50 Senior Vice President-Finance and Chief
Financial Officer
I. E. Hendrix, Jr. .................................. 52 Vice President and Treasurer
Kenneth R. Hoit...................................... 59 Vice President, Planning and Accounting
Leslie D. Rosencutter................................ 41 Vice President, Administration and
Corporate Secretary
T. Bruce Blackman.................................... 45 Vice President, Asia/Pacific Operations
Donald D. Goodson.................................... 42 Vice President, Latin America Operations
John R. Gass......................................... 45 Vice President, Frontier Areas
Thomas L. Wingerter ................................. 44 Vice President, North American Operations
Randy L. Ellis....................................... 45 Controller
Bernard Duroc-Danner................................. 43 Director
David L. Fist........................................ 65 Director
Earnest F. Gloyna.................................... 75 Director
R. Rudolph Reinfrank................................. 41 Director
</TABLE>
The following is a brief description of the background and principal
occupation of each director and executive officer:
Mr. Parker, Chairman of the Board, has been a Director since 1954 and
served as President of the Company from 1954 until October 1977, when he was
elected Chairman and Chief Executive Officer. Since December 1991, he has
retained the position of Chairman. He serves on the board of directors of MAPCO
Inc., a diversified energy company; Clayton Williams Energy, Inc., a company
engaged in exploration and production of oil and natural gas; and BOK Financial
Corporation, a bank holding company organized under the laws of the State of
Oklahoma. Mr. Parker also serves on the board of directors of the American
Petroleum Institute and the National Petroleum Council. He is the father of
Robert L. Parker Jr.
Mr. Parker Jr. has been a Director since 1973 and is President and Chief
Executive Officer. He joined the Company in 1973 and was elected President and
Chief Operating Officer in 1977 and Chief Executive Officer in December 1991. He
was elected Vice President in 1973 and Executive Vice President in 1976. He
currently serves on the board of directors of Alaska Air Group, Inc., the
holding company for Alaska Airlines and Horizon Air Industries. He is the son of
Robert L. Parker.
Mr. Linn has been a Director since 1986, is Executive Vice President and
Chief Operating Officer of the Company and has general charge of the Company's
business affairs and its officers. He joined the Company in 1973 in the
Company's international department. He then served in the Company's domestic
operations, being named northern U.S. district manager in 1976. Mr. Linn was
elected Vice President of U.S. and Canada operations in 1979, was promoted to
Senior Vice President in September 1981 and was elected to his present position
in December 1991.
Mr. Davis serves as Senior Vice President-Finance and Chief Financial
Officer. He joined Parker in November 1991 as Vice President-Finance and Chief
Financial Officer and was promoted to his current position in December 1996.
From 1986 through 1991, Mr. Davis was vice president and treasurer of MAPCO
Inc., a diversified energy company with interests in natural gas liquids,
marketing and transportation, oil
32
<PAGE> 34
refining and retail motor fuel marketing. He serves as a member of the board of
directors of Dollar Rent A Car Finance Company.
Mr. Hendrix is Vice President and Treasurer of the Company. He joined
Parker in 1976 as manager of the Company's treasury department and was elected
Treasurer in 1978. Mr. Hendrix was elected Vice President of the Company in
April 1983. He serves as a member of the board of directors of American
Performance Mutual Fund.
Mr. Hoit serves as Vice President, Planning and Accounting of the Company.
He joined Parker in 1973. He served as financial analyst and manager of budgets
and analysis prior to being elected a Vice President in April 1983. In June
1991, Mr. Hoit was given additional management responsibilities over corporate
accounting and information systems departments.
Ms. Rosencutter serves as Corporate Secretary and Vice President,
Administration. She has responsibility for the public relations and human
resources departments. She previously had served as Assistant Vice President,
Administration since 1987. Ms. Rosencutter joined Parker in 1974 as secretary to
the Controller and later was secretary to the Robert L. Parker Trust. She has
served as executive secretary and administrative assistant to the Chairman prior
to being elected an officer. She was elected Corporate Secretary in April 1996.
Mr. Blackman serves as Vice President, Asia Pacific Operations. He joined
the Company in 1977 and held management positions in Africa, Singapore and Tulsa
as international accounting manager. In 1983 he was the division manager for the
Indonesian operations. In 1989, he was promoted to contract manager, Asia
Pacific region. He was elected to his current position in January 1996.
Mr. Goodson serves as Vice President, Latin America Operations. He joined
the Company in 1976 and held various accounting and finance positions prior to
being named contract manager for U.S. operations in 1981. In June 1989, Mr.
Goodson was named Indonesian division manager. In July 1993, he served as
contract manager for the Middle East, Africa and Colombia. In January 1996, he
was elected to his current position.
Mr. Gass is Vice President, Frontier Areas. He joined the Company in 1977
and has served in various management positions in the Company's international
division. In 1985 he became the division manager of Africa and the Middle East.
In 1987 he directed the Company's mining operations in South Africa. In 1989 he
was promoted to international contract manager. In January 1996, he was
appointed to his current position.
Mr. Wingerter serves as Vice President, North America Operations. He joined
Parker in 1979, and in 1983 he was named contracts manager for the Rocky
Mountain division. He was promoted to Rocky Mountain division manager in 1984, a
position he held until September 1991 when he was elected a Vice President.
Mr. Ellis was elected Corporate Controller in June 1991. He joined Parker
in 1979 as general accounting supervisor and was named manager of general
accounting in May 1983.
Mr. Duroc-Danner has been a director since November 1996. Mr. Duroc-Danner
has been President, Chief Executive Officer and a director of Energy Ventures,
Inc., the former parent company of Mallard, for more than the past five years.
Energy Ventures, Inc. is an international manufacturer and supplier of oilfield
equipment and contract drilling services. See "Selling Shareholder." Mr.
Duroc-Danner is also a director of Dailey Petroleum Services Corp., a provider
of services and equipment to the oil and gas industry.
Mr. Fist, a Director since 1986, is a member of the law firm of Rosenstein,
Fist & Ringold, Tulsa, Oklahoma, having been associated with the firm since
1955. He serves as a director of Peoples State Bank and Alliance Business
Investment Company, a federally licensed small business investment company.
Dr. Gloyna has been a Director since 1978 and is presently a chaired
professor in Environmental Engineering at the University of Texas at Austin. He
served as dean, College of Engineering, from April 1970 to August 1987. He is
also a consultant in environmental engineering through Earnest F. Gloyna
Enterprises, and is president of Gloyna Properties, Inc. Dr. Gloyna serves as a
member of the board of trustees of Southwest Research Institute, a nonprofit
research institute that does contract research work for government and industry.
33
<PAGE> 35
Mr. Reinfrank has been a Director since 1993. Since May 1993, Mr. Reinfrank
has been managing director of the Davis Companies, the holding company for the
Marvin Davis family. Mr. Reinfrank also serves as a managing general partner of
Davis Reinfrank Company. From January 1, 1988 through June 30, 1993, Mr.
Reinfrank was executive vice president of Shamrock Holdings, Inc., the holding
company for the Roy E. Disney family. From January 1990 through December 1992,
Mr. Reinfrank also served as managing director of Trefoil Investors, Inc. and
Shamrock Capital Advisors, Inc., the general partner and management services
company respectively, for Trefoil Capital Investors, L.P. Mr. Reinfrank is a
director of Weatherford Enterra, Inc., an international provider of services and
specialized equipment to the oil and gas industry.
34
<PAGE> 36
SELLING SHAREHOLDER
The Selling Shareholder, Energy Ventures, Inc., whose principal executive
offices are located at 5 Post Oak Park, Suite 1760, Houston, Texas 77027, is
offering all of the 3,056,600 shares of Common Stock that it owns, which at
February 28, 1997 represented 4.5% of the aggregate issued and outstanding
shares of Common Stock. The Selling Shareholder acquired such shares of Common
Stock in connection with the sale of its former wholly-owned subsidiary,
Mallard, to the Company in November 1996. In connection with the Mallard
Acquisition, the Company and the Selling Shareholder entered into a Registration
Rights Agreement, dated November 12, 1996, pursuant to which the Company has
agreed to bear all costs in connection with this Offering, other than
underwriters' discounts, fees of counsel for the Selling Shareholder and any
applicable transfer taxes associated with the shares of Common Stock to be sold
by the Selling Shareholder. Bernard Duroc-Danner, a director of the Company, is
the President, Chief Executive Officer and a director of Energy Ventures, Inc.
35
<PAGE> 37
DESCRIPTION OF CAPITAL STOCK
The Company has 121,942,000 authorized shares of stock, consisting of (a)
120,000,000 shares of Common Stock, having a par value of $0.16 2/3 per share,
and (b) 1,942,000 shares of Preferred Stock, having a par value of $1.00 per
share. The summary description of the capital stock of the Company contained
herein is necessarily general and reference should be made in each case to the
Company's Restated Certificate of Incorporation (the "Company's Charter"), and
By-Laws, which are exhibits to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
As of February 28, 1997, there were 68,504,191 shares of Common Stock
outstanding. All of such outstanding shares of Common Stock are, and the shares
of Common Stock offered by the Company hereby will be upon issuance, fully paid
and nonassessable. Each share of Common Stock has an equal and ratable right to
receive dividends when, as and if declared by the Board of Directors of the
Company out of assets legally available therefor and subject to the dividend
obligations of the Company to the holders of any Preferred Stock then
outstanding. The Company is subject to certain restrictions on the payment of
dividends on, and the repurchase or redemption of, the Common Stock under the
provisions of the Senior Credit Facility and the indenture for the Senior Notes.
See "Price Range of Common Stock and Dividends."
In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share equally and ratably in the
assets available for distribution after payment of all liabilities, and subject
to any prior rights of any holders of Preferred Stock that at the time may be
outstanding.
The holders of Common Stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments by the
Company. There are no sinking fund provisions applicable to the Common Stock.
Each share of Common Stock is entitled to one vote in the election of directors
and on all other matters submitted to a vote of stockholders. Holders of Common
Stock have no right to cumulate their votes in the election of directors.
PREFERRED STOCK
As of the date of the Prospectus, there are no shares of Preferred Stock
outstanding. Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors, without further approval of the
stockholders, is authorized to fix the designations, dividends rates, conversion
rights, redemption rights, liquidation price, and sinking fund rights. It is not
possible to state the actual effect of the authorization and issuance of a new
series of Preferred Stock upon the rights of holders of the Common Stock unless
and until the Board of Directors determines the attributes of such new series of
Preferred Stock and the specific rights of its holders. Such effects might
include, however, (i) restrictions on dividends on Common Stock if dividends on
such new series of Preferred Stock have not been paid; (ii) dilution of the
voting power of Common Stock to the extent that such new series of Preferred
Stock has voting rights, or to the extent that any such new series of Preferred
Stock is convertible into Common Stock; (iii) dilution of the equity interest of
Common Stock; and (iv) limitation on the right of holders of Common Stock to
share in the Company's assets upon liquidation until satisfaction of any
liquidation preference attributable to such new series of Preferred Stock. While
the ability of the Company to issue Preferred Stock provides flexibility in
connection with possible acquisitions and other corporate purposes, its issuance
could be used to impede an attempt by a third party to acquire a majority of the
outstanding voting stock of the Company.
POSSIBLE ANTI-TAKEOVER PROVISIONS
The Company's Charter contains certain provisions that might be
characterized as anti-takeover provisions. Such provisions may render more
difficult certain possible takeover proposals to acquire control of the Company
and make removal of management of the Company more difficult.
The Company's Charter provides for the Board of Directors to be divided
into three classes of directors serving staggered three-year terms, with each
class as nearly equal in number as possible. Directors of the
36
<PAGE> 38
Company may only be removed for cause and only by the affirmative vote of a
majority of the then outstanding shares of stock entitled to vote on the matter.
Any stockholder wishing to submit a nomination to the Board of Directors must
follow certain procedures outlined in the Company's By-Laws. In addition, the
By-Laws require written application by the holders of 75% of the Company's
outstanding voting stock to call a special stockholders' meeting.
Certain outstanding contracts binding on the Company with respect to
certain employees may render more difficult the removal of management or
attempts to acquire control of the Company.
As described above, the Company's Charter authorizes a class of
undesignated Preferred Stock consisting of 1,942,000 shares. Preferred Stock may
be issued from time to time in one or more series, and the Board of Directors,
without further approval of the stockholders, is authorized to fix the rights,
preferences, privileges and restrictions applicable to each series of Preferred
Stock. One possible result of authorizing the Board of Directors to determine
such rights, preferences, privileges and restrictions is to eliminate delays
associated with a stockholder vote on specific issuance. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company.
The Company is incorporated under the laws of State of Delaware. Section
203 of the Delaware General Corporation Law prevents an "interested stockholder"
(defined as a stockholder owning 15 percent or more of a corporation's voting
stock) from engaging in a business combination with such corporation for a
period of three years from the date such stockholder became an interested
stockholder unless (a) the corporation's board of directors had earlier approved
either the business combination or the transaction by which the stockholder
became an interested stockholder, or (b) upon attaining that status, the
interested stockholder had acquired at least 85 percent of the corporations's
voting stock (not counting shares owned by persons who are directors and also
officers), or (c) the business combination is later approved by the board of
directors and authorized by a vote of two-thirds of the stockholders (not
including the shares held by the interested stockholder). Since the Company has
not amended its Restated Certificate of Incorporation or By-Laws to exclude the
application of Section 203, such section does apply to the Company and thus may
inhibit an interested stockholder's ability to engage in a business combination
with the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, N.A.
37
<PAGE> 39
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholder have severally agreed to sell
to the Underwriters named below (the "Underwriters"), for whom Jefferies &
Company, Inc., Prudential Securities Incorporated and Johnson Rice & Company
L.L.C. are acting as representatives (the "Representatives"), and the
Underwriters have severally agreed to purchase, the number of shares of Common
Stock set forth opposite their respective names in the table below at the price
set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------ ----------
<S> <C>
Jefferies & Company, Inc....................................
Prudential Securities Incorporated..........................
Johnson Rice & Company L.L.C................................
----------
Total............................................. 10,056,600
==========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock is subject to certain conditions. The
Underwriters are committed to purchase all of the shares of Common Stock offered
(other than those covered by the over-allotment option described below), if any
are purchased.
The Underwriters propose to offer the Common Stock initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share to certain other dealers. After the initial
public offering of the shares of Common Stock to the public, the public offering
price, and concessions to selected dealers and the reallowance to other dealers
may be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 1,508,490 additional shares
of Common Stock at the public offering price, less the underwriting discount.
The Underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the shares of Common Stock. To
the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase additional shares of Common Stock
proportionate to such Underwriter's initial commitment as indicated in the
preceding table.
The Company, the Selling Shareholder and the directors and executive
officers of the Company have agreed, except in certain circumstances, not to
offer for sale or otherwise dispose of any shares of Common Stock for a period
of 90 days from the date of this Prospectus, without the prior written consent
of Jefferies & Company, Inc. ("Jefferies").
The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales of shares of Common Stock offered by this
Prospectus to any accounts over which they exercise discretionary authority.
The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain civil liabilities that may be incurred in
connection with the Offering, including liabilities under the Securities Act, or
to contribute to payments the Underwriters may be required to make in respect
thereof.
38
<PAGE> 40
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
Common Stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the New
York Stock Exchange or otherwise and, if commenced, may be discontinued at any
time.
Jefferies has provided investment banking and financial advisory services
to the Company in the past, including acting as lead managing underwriter in the
Company's July 1996 offering of Common Stock and placement agent in the
Company's offering of Senior Notes in November 1996 and rendering a fairness
opinion to the Company's Board of Directors in connection with the Company's
acquisition of Mallard. In each case, Jefferies received usual and customary
fees. Prudential Securities Incorporated ("Prudential") acted as co-manager in
the Company's July 1996 offering of Common Stock and received usual and
customary fees. Jefferies and Prudential have also provided, from time to time,
investment banking and financial advisory services to the Selling Shareholder,
for which they have received usual and customary fees.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and the Selling Shareholder by Vinson & Elkins
L.L.P., Houston, Texas and for the Underwriters by Fulbright & Jaworski L.L.P.,
Houston, Texas.
EXPERTS
The consolidated balance sheets as of August 31, 1996 and 1995, and the
consolidated statements of operations, redeemable preferred stock and
stockholders' equity, and cash flows for each of the three years in the period
ended August 31, 1996, included herein and incorporated by reference in this
Prospectus, have been included herein and incorporated by reference in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the periods ended November 30,
1996 and 1995, included herein and incorporated by reference in this Prospectus,
the independent accountants have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report included in the Company's quarterly
report on Form 10-Q for the quarter ended November 30, 1996, included herein and
incorporated by reference, states that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. The accountants
are not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for their report on the unaudited interim financial information because
that report is not a "report" or a "part" of the Registration Statement prepared
or certified by the accountants within the meaning of Sections 7 and 11 of the
Act.
The combined balance sheets of Mallard Bay Drilling Division of Energy
Ventures, Inc. as of December 31, 1995 and 1994 and the combined statement of
income, equity investments and cash flows for each of the three years in the
period ended December 31, 1995, incorporated by reference in this Prospectus,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
39
<PAGE> 41
The balance sheets of Quail Tools, Inc. as of December 31, 1995 and 1994
and the related statements of earnings and retained earnings and cash flows for
each of the years in the three-year period ended December 31, 1995, incorporated
by reference in this Prospectus, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as stated in their report incorporated
by reference, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP refers to the adoption in 1994 of
the method of accounting for certain investments in debt and equity securities
prescribed by Statement of Financial Accounting Standards No. 115.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy and information
statements and other information with the Commission. Such reports, proxy and
information statements and other information can 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 following regional
offices of the Commission: Seven World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained by mail from the
Public Reference Section of the Commission, at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. In addition,
reports, proxy statements and other information concerning the Company can be
inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005, on which exchange the Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act.
This Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement for
further information with respect to the Company and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
40
<PAGE> 42
INDEX TO FINANCIAL STATEMENTS
PARKER DRILLING COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS OF PARKER DRILLING COMPANY AND
SUBSIDIARIES:
Report of Independent Accountants......................... F-2
Consolidated Statement of Operations for the years ended
August 31, 1996, 1995 and 1994......................... F-3
Consolidated Balance Sheet as of August 31, 1996 and
1995................................................... F-4
Consolidated Statement of Redeemable Preferred Stock and
Stockholders' Equity for the years ended August 31,
1996, 1995 and 1994.................................... F-5
Consolidated Statement of Cash Flows for the years ended
August 31, 1996, 1995 and 1994......................... F-6
Notes to Consolidated Financial Statements for the years
ended August 31, 1996, 1995 and 1994................... F-7
UNAUDITED FINANCIAL STATEMENTS OF PARKER DRILLING COMPANY
AND SUBSIDIARIES
Report of Independent Accountants......................... F-17
Consolidated Condensed Statements of Operations for the
three months ended November 30, 1996 and 1995.......... F-18
Consolidated Condensed Balance Sheets as of November 30,
1996 and August 31, 1996............................... F-19
Consolidated Condensed Statements of Cash Flows for the
three months ended November 30, 1996 and 1995.......... F-20
Notes to Unaudited Consolidated Condensed Financial
Statements............................................. F-22
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Description of Unaudited Pro Forma Combined Financial
Statements............................................. F-24
Pro Forma Consolidated Statements of Operations for the
three months ended November 30, 1996................... F-25
Pro Forma Combined Statements of Operations for the twelve
months ended August 31, 1996........................... F-26
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-27
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Parker Drilling Company
We have audited the consolidated balance sheet of Parker Drilling Company
and subsidiaries as of August 31, 1996 and 1995, and the related consolidated
statements of operations, redeemable preferred stock and stockholders' equity
and cash flows for each of the three years in the period ended August 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Parker Drilling
Company and subsidiaries as of August 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended August 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
October 14, 1996
F-2
<PAGE> 44
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT EARNINGS (LOSS) PER SHARE
AND WEIGHTED AVERAGE SHARES OUTSTANDING)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Drilling contracts................................... $ 145,160 $ 153,075 $ 147,480
Other................................................ 11,492 4,296 4,944
---------- ---------- ----------
Total revenues............................... 156,652 157,371 152,424
---------- ---------- ----------
Operating expenses:
Drilling............................................. 100,942 113,132 114,732
Other................................................ 11,824 4,928 6,563
Depreciation, depletion and amortization............. 23,061 23,745 23,246
General and administrative........................... 19,428 17,063 17,018
Provision for reduction in carrying value of certain
assets............................................ -- -- 19,718
---------- ---------- ----------
Total operating expenses..................... 155,255 158,868 181,277
---------- ---------- ----------
Operating income (loss)................................ 1,397 (1,497) (28,853)
---------- ---------- ----------
Other income and (expense):
Interest expense..................................... (135) (88) (11)
Interest income...................................... 1,642 1,272 1,161
Minority interest.................................... -- (227) (135)
Other................................................ 5,663 7,640 919
---------- ---------- ----------
Total other income and (expense)............. 7,170 8,597 1,934
---------- ---------- ----------
Income (loss) before income taxes...................... 8,567 7,100 (26,919)
---------- ---------- ----------
Income tax expense..................................... 4,514 3,184 1,887
---------- ---------- ----------
Net income (loss)...................................... $ 4,053 $ 3,916 $ (28,806)
========== ========== ==========
Earnings (loss) per share, primary and fully diluted... $ .07 $ .07 $ (.53)
========== ========== ==========
Weighted average shares outstanding (fully diluted).... 57,466,183 55,332,541 54,247,664
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 45
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 61,738 $ 20,752
Other short-term investments.............................. 16,247 1,372
Accounts and notes receivable, net of allowance for bad
debts of $739 in 1996 and $726 in 1995................. 33,675 39,578
Rig materials and supplies................................ 10,735 11,532
Other current assets...................................... 3,653 5,146
-------- --------
Total current assets.............................. 126,048 78,380
-------- --------
Property, plant and equipment, at cost:
Drilling equipment........................................ 423,023 506,130
Buildings, land and improvements.......................... 14,871 13,259
Other..................................................... 19,153 20,470
Construction in progress.................................. 18,844 14,759
-------- --------
475,891 554,618
Less accumulated depreciation, depletion and
amortization........................................... 351,714 432,360
-------- --------
Net property, plant and equipment......................... 124,177 122,258
-------- --------
Rig materials and supplies.................................. 7,984 6,895
-------- --------
Deferred charges and other assets:
Assets held for disposition............................... 8,065 2,486
Notes receivable, net of allowance of $70 in 1995......... 1,817 1,817
Other..................................................... 7,868 5,123
-------- --------
Total deferred charges and other assets........... 17,750 9,426
-------- --------
Total assets...................................... $275,959 $216,959
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 584 $ 289
Accounts payable.......................................... 9,415 9,539
Accrued liabilities....................................... 6,911 7,401
Accrued income taxes...................................... 6,217 5,109
-------- --------
Total current liabilities......................... 23,127 22,338
-------- --------
Long-term debt (Note 2)..................................... 2,794 1,748
-------- --------
Other long-term liabilities................................. 5,990 5,953
-------- --------
Commitments and contingencies (Note 8)
Preferred stock, $1 par value, 1,942,000 shares authorized,
no shares outstanding..................................... -- --
-------- --------
Stockholders' equity:
Common stock, $.16 2/3 par value, authorized 70,000,000
shares, issued and outstanding 65,327,088 shares
(55,722,183 shares in 1995)............................ 10,888 9,287
Capital in excess of par value............................ 254,955 205,310
Retained earnings (accumulated deficit)................... (20,338) (24,391)
Other..................................................... (1,457) (3,286)
-------- --------
Total stockholders' equity........................ 244,048 186,920
-------- --------
Total liabilities and stockholders' equity........ $275,959 $216,959
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE> 46
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
CAPITAL RETAINED UNEARNED
IN EXCESS EARNINGS RESTRICTED
COMMON OF PAR (ACCUMULATED STOCK PLAN
STOCK VALUE DEFICIT) COMPENSATION
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Balances, August 31, 1993....................... $ 9,164 $201,784 $ 499 $(3,768)
Activity in employees' stock plans.............. 28 916 1,070
Acquisition of stock from certain employees..... (7) (297)
Net income (loss)............................... (28,806)
------- -------- -------- -------
Balances, August 31, 1994....................... 9,185 202,403 (28,307) (2,698)
Activity in employees' stock plans.............. 111 3,175 (588)
Acquisition of stock from certain employees..... (9) (268)
Net income...................................... 3,916
------- -------- -------- -------
Balances, August 31, 1995....................... 9,287 205,310 (24,391) (3,286)
Activity in employees' stock plans.............. 36 1,008 1,829
Acquisition of stock from certain employees..... (10) (372)
Issuance of 400,000 common shares upon exercise
of warrants at $3.88 per share................ 67 1,485
Issuance of 9,050,000 common shares in public
offering...................................... 1,508 47,524
Net income...................................... 4,053
------- -------- -------- -------
Balances, August 31, 1996....................... $10,888 $254,955 $(20,338) $(1,457)
======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 47
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 4,053 $ 3,916 $(28,806)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization.............. 23,061 23,745 23,246
Loss (gain) on disposition of property, plant and
equipment........................................... (5,416) (6,395) (2,083)
Provision for reduction in carrying value of certain
assets.............................................. -- -- 19,718
Deferred tax expense (benefit)........................ -- (294) (904)
Other................................................. 307 (282) 1,194
Change in assets and liabilities:
Accounts and notes receivable....................... 8,057 (4,105) (10,889)
Rig materials and supplies.......................... (532) (627) (313)
Other current assets................................ 1,493 (1,364) (1,356)
Accounts payable and accrued liabilities............ (1,504) 3,319 1,109
Accrued income taxes................................ 1,108 56 (238)
Minority interest................................... -- 227 135
Other assets........................................ (656) (260) 137
-------- -------- --------
Net cash provided by operating activities........ 29,971 17,936 950
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant and
equipment............................................. 8,288 11,711 4,740
Capital expenditures..................................... (30,836) (21,540) (34,764)
Investments in affiliates................................ (1,720) (501) (140)
Decrease (increase) in other short-term and long-term
investments........................................... (14,875) 2,439 27,608
Other.................................................... -- 121 --
-------- -------- --------
Net cash provided by (used in) investing activities...... (39,143) (7,770) (2,556)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt........................... $ -- $ 187 $ --
Proceeds from common stock offering...................... 49,032 -- --
Principal payments under debt obligations................ (367) -- --
Repurchase of common stock............................... (382) (277) (304)
Proceeds from exercise of stock warrant.................. 1,552 -- --
Other.................................................... 323 16 --
-------- -------- --------
Net cash provided (used) by financing activities...... 50,158 (74) (304)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 40,986 10,092 (1,910)
Cash and cash equivalents at beginning of year............. 20,752 10,660 12,570
-------- -------- --------
Cash and cash equivalents at end of year................... $ 61,738 $ 20,752 $ 10,660
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.............................................. $ 145 $ 2 $ 11
Income taxes.......................................... $ 3,406 $ 3,422 $ 3,029
</TABLE>
Supplemental noncash financing activity:
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory note in
the amount of $1,850,000.
In May 1995, the Company received rig materials and supplies valued at
$556,000 in lieu of payment on a note due the Company.
In fiscal 1996 the Company acquired computer and office equipment under
capital lease arrangements totalling $1,708,000.
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE> 48
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation -- The consolidated financial statements include the accounts
of Parker Drilling Company ("Parker Drilling") and all of its majority-owned
subsidiaries (collectively, the "Company").
Operations -- The Company provides land contract drilling services on a
worldwide basis to major, independent and foreign national oil companies.
Currently, the Company has 46 international rigs in 13 countries and 17 rigs in
the United States. The Company specializes in the drilling of deep and difficult
wells and drilling in remote and harsh environments. The Company also provides a
range of services that are ancillary to its principal drilling services,
including engineering, logistics and construction, as well as various types of
project management.
Drilling Contracts -- The Company recognizes revenue and expenses on
dayrate contracts as the drilling progresses (percentage-of-completion method)
because the Company does not bear the risk of completion of the well. For
meterage contracts, the Company recognizes the revenue and expenses upon
completion of the well (completed-contract method).
Cash and Cash Equivalents -- For purposes of the balance sheet and the
statement of cash flows, the Company considers cash equivalents to be all highly
liquid debt instruments that had a remaining maturity of three months or less at
the date of purchase.
Other Short-term Investments -- Other short-term investments include
primarily certificates of deposit, U.S. government securities and commercial
paper having remaining maturities of greater than three months at the date of
purchase and are stated at the lower of cost or market.
Property, Plant and Equipment -- The Company provides for depreciation of
property, plant and equipment primarily on the straight-line method over the
estimated useful lives of the assets after provision for salvage value. When
properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
included in operations. Management periodically evaluates the Company's assets
to determine if they are not in excess of their net realizable value. Management
considers a number of factors such as estimated future cash flows, appraisals
and current market value analysis in determining net realizable value. Assets
are written down to reflect any decrease in net realizable value below their net
carrying value (see Note 7).
Rig Materials and Supplies -- Since the Company's foreign drilling
generally occurs in remote locations, making timely outside delivery of spare
parts unlikely, a complement of parts and supplies is maintained for each rig
either at the drilling site or in warehouses close to the operations. During
periods of high rig utilization, these parts are generally consumed and
replenished within a one-year period. During a period of lower rig utilization
in a particular location, the parts, like the related idle rigs, are generally
not transferred to other foreign locations until new contracts are obtained
because of the significant transportation costs which would result from such
transfers. The Company classifies those parts which are not expected to be
utilized in the following year as long-term assets.
Income Taxes -- The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109: Accounting for Income Taxes. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
Earnings (Loss) Per Share -- Earnings (loss) per share is computed by
dividing net income (loss), as adjusted for dividends on preferred stock, by the
weighted average number of common shares outstanding during the period including
the effect of dilutive options when applicable. Common shares issued under the
1969 Key Employees Stock Grant Plan, 1980 Incentive Career Stock Plan and the
1991 Stock Grant Plan are issued and outstanding and are only considered in the
computation of weighted average shares outstanding when their effect on earnings
per share is dilutive.
F-7
<PAGE> 49
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of trade
receivables with a variety of national and international oil and natural gas
companies. The Company generally does not require collateral on its trade
receivables. Such credit risk is considered by management to be limited due to
the large number of customers comprising the Company's customer base. The
Company places substantially all its interest-bearing investments with major
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution. At August 31, 1996, the Company had deposits in
domestic banks in excess of federally insured limits of approximately $.4
million. In addition, the Company had deposits in foreign banks of $4.9 million
which are not federally insured.
Fair Market Value of Financial Instruments -- The carrying amount of the
Company's cash and short-term investments and short-term and long-term debt had
fair values that approximated their carrying amounts.
Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements -- In March 1995, Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of," was issued. The statement
establishes accounting standards for the impairment of long-lived assets, such
as the Company's drilling, transportation and other equipment, and will be
effective for the Company beginning with the year ending August 31, 1997. The
Company does not believe the new standard will have a material effect on the
Company's financial position or results of operations.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. The statement requires
the computation of compensation for grants of stock, stock options and other
equity instruments issued to employees based on fair value and will be effective
for the Company beginning with the year ending August 31, 1997. The compensation
calculated is to be either recorded as an expense in the financial statements
or, alternatively, disclosed. The Company anticipates it will elect the
disclosure method of complying with the new standard. Under the provisions of
the new statement, it is anticipated that pro forma net income to be disclosed
will be lower than net income reported in the financial statements.
Reclassification -- Certain amounts in 1995 and 1994 have been reclassified
to conform to current year presentation.
F-8
<PAGE> 50
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
AUGUST 31,
------------------
1996 1995
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Parker Drilling
Note payable annually until November 2001 with interest at
5.75%.................................................. $1,586 $1,850
Capital leases payable monthly through August 2001........ 1,634 --
Parker Drilling International of New Zealand, Ltd. Note
payable monthly through February 2003..................... 158 187
------ ------
Total debt.................................................. 3,378 2,037
Less current portion........................................ 584 289
------ ------
Total long-term debt........................................ $2,794 $1,748
====== ======
</TABLE>
The aggregate maturities of long-term debt for the five years ending August
31, 2001, are as follows: 1997 -- $584,000; 1998 -- $606,000; 1999 -- $632,000;
2000 -- $660,000; and 2001 -- $597,000.
The Company has entered into a $15.0 million credit and letter of credit
facility which expires on April 19, 1999 (the "Agreement"). At August 31, 1996,
the Company had letters of credit totaling $10.0 million under the Agreement.
The Agreement contains restrictions on annual capital expenditures in excess of
$30 million plus proceeds from the sale of assets and certain senior and
subordinated indebtedness which can be incurred by the Company and certain
operating subsidiaries designated in the Agreement through which the Company
performs the majority of its drilling operations. The Agreement also limits
payment of dividends on Common Stock and requires the Company to maintain
certain financial ratios. The remaining subsidiaries of the Company are not a
party to the Agreement and are able to make capital expenditures with
independent financing from lenders that have no recourse to the Company and the
designated subsidiaries, subject only to an overall limitation of indebtedness.
The Company has obtained waivers under certain covenants, effective through
February 1997, with respect to the acquisitions (see Note 12 -- Subsequent
Events) and the related incurrence of indebtedness.
NOTE 3 -- INCOME TAXES
Income (loss) before income taxes (in thousands) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
-----------------------------
1996 1995 1994
------- ------ --------
<S> <C> <C> <C>
United States................................. $(4,623) $1,180 $(33,929)
Foreign....................................... 13,190 5,920 7,010
------- ------ --------
$ 8,567 $7,100 $(26,919)
======= ====== ========
</TABLE>
F-9
<PAGE> 51
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) (in thousands) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current:
United States:
Federal................................. $ -- $ -- $ --
State................................... -- -- (246)
Foreign.................................... 4,514 3,478 3,037
Deferred:
United States:
Federal................................. -- -- (326)
State................................... -- -- --
Foreign.................................... -- (294) (578)
------ ------ ------
$4,514 $3,184 $1,887
====== ====== ======
</TABLE>
Total income tax expense (benefit) differs from the amount computed by
multiplying income (loss) before income taxes by the U.S. federal income tax
statutory rate. The reasons for this difference are as follows:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------------------------------
1996 1995 1994
--------------- --------------- ----------------
% OF % OF % OF
PRETAX PRETAX PRETAX
INCOME INCOME INCOME
AMOUNT (LOSS) AMOUNT (LOSS) AMOUNT (LOSS)
------ ------ ------ ------ ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense
(benefit)........................... $2,913 34% $2,414 34% $(9,153) (34)%
Foreign tax at rates different than
U.S................................. 29 -- 1,171 16% 76 --
Utilization of loss carryforwards..... (290) (3)% (401) (5)% -- --
Limitation on recognition of tax
benefit............................. 1,862 22% -- -- 11,536 43%
Other................................. -- -- -- -- (572) (2)%
------ -- ------ -- ------- ---
Actual tax expense (benefit).......... $4,514 53% $3,184 45% $ 1,887 7%
====== == ====== == ======= ===
</TABLE>
The components of the Company's tax assets and (liabilities) as of August
31, 1996 and 1995, are shown below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Domestic:
Deferred tax assets:
Net operating loss and tax credit carryforwards........ $ 63,454 $ 67,259
Reserves established against realization of certain
assets............................................... 815 1,089
Accruals not deducted for tax purposes................. 4,088 4,169
Depreciation of property, plant and equipment.......... 3,265 3,385
-------- --------
71,622 75,902
Deferred tax liabilities:
Depreciation of property, plant and equipment.......... (9,778) (8,408)
-------- --------
Net deferred tax asset.................................... 61,844 67,494
Valuation allowance....................................... (61,844) (67,494)
-------- --------
$ -- $ --
======== ========
</TABLE>
F-10
<PAGE> 52
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At August 31, 1996, the Company had $141,598,000 net operating loss
carryforwards for tax purposes which expire over a fifteen year period as
follows: 2000, $24,701,000; 2001, $48,560,000; 2002, $28,541,000; thereafter,
$39,796,000. In addition, the Company had $8,200,000 investment tax credit
carryforwards for tax purposes which expire in 1997. The Company has recorded a
full valuation allowance with respect to its net deferred tax asset. However,
the amount of the deferred tax asset considered realizable could be different in
the near term if estimates of future taxable income change.
NOTE 4 -- COMMON STOCK AND STOCK OPTIONS
The Company's 1969 Key Employees Stock Grant Plan (formerly the 1969 Key
Employees Stock Option Plan) was amended in December 1990 to provide for the
issuance of 223,000 shares of common stock for no cash consideration to key
non-officer employees. Each employee receiving a grant of shares may dispose of
15 percent of his/her grant on each annual anniversary date from the date of
grant for the first four years. On the fifth year anniversary, the employee may
dispose of the remaining 40 percent of his/her grant. No shares were granted in
fiscal 1996 and 1995. In fiscal 1995, 1,375 shares were cancelled leaving 1,375
shares reserved for issuance and available for granting as of August 31, 1996.
The Company's 1980 Incentive Career Stock Plan ("1980 Plan") provides for
the issuance of 2,100,000 shares of common stock for no cash consideration to
key employees. Each employee receiving a grant of shares may dispose of 15
percent of his/her grant on each annual anniversary date from the date of grant
for the first four years. On the fifth year anniversary, the employee may
dispose of the remaining 40 percent of his/her grant. No shares were granted in
fiscal 1996 and 1995. In fiscal 1995 and fiscal 1996 3,500 shares and 2,750
shares were cancelled, respectively, leaving 9,000 shares reserved for issuance
and available for granting at August 31, 1996.
The Company's 1991 Stock Grant Plan ("1991 Plan") provides for the issuance
to officers and key employees of up to 3,160,000 shares of common stock for no
cash consideration. Shares granted under the 1991 Plan are fully vested no
earlier than 24 months from the effective date of the grant and not later than
36 months. The specific vesting schedule for each grant is determined at the
time of grant. In fiscal 1995, 545,000 shares were granted and no shares were
cancelled. In fiscal 1996, 18,000 shares were granted and no shares cancelled
leaving 1,562,195 shares reserved for issuance and available for granting at
August 31, 1996.
The fair market value of the common stock at date of grant for the Plans is
recorded as deferred compensation and amortized to expense over the period
during which the restrictions lapse. Deferred compensation is shown as a
deduction from stockholders' equity.
During fiscal 1996, 1995 and 1994, the Company purchased 59,347, 51,279 and
41,638 Parker Drilling shares, respectively, from certain of its employees who
had received stock grants under the 1991 and 1980 Plans. The Company acquired
the shares at the market price (weighted average price was $6.44 per share in
fiscal 1996, $5.40 per share in fiscal 1995 and $7.31 per share in fiscal 1994).
The proceeds were used to pay the employees' tax withholding obligations arising
from the vesting of shares under the Plans.
The 1994 Non-Employee Director Stock Option Plan ("Director Plan") provides
for the issuance of options to purchase up to 200,000 shares of the Company's
common stock. The option price per share is equal to the fair market value of a
Parker Drilling share on the date of grant. The term of each option is ten
years, and an option first becomes exercisable six months after the date of
grant. Under the Director Plan, on the first trade day of each calendar year,
each person who is then a non-employee director of the Company will be
automatically granted an option to purchase 5,000 shares of common stock.
The 1994 Executive Stock Option Plan provides for the granting of a maximum
of 2,400,000 shares to key employees and consultants of the Company and its
subsidiaries through the granting of stock options, stock appreciation rights
and restricted and deferred stock awards. The option price per share may not be
less
F-11
<PAGE> 53
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
than 50% of the fair market value of a share on the date the option is granted,
and the maximum term of a non-qualified option may not exceed fifteen years and
the maximum term of an incentive option is ten years.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
1994 OPTION PLAN
1994 --------------------------
DIRECTOR INCENTIVE NON-QUALIFIED
PLAN OPTIONS OPTIONS
-------- --------- -------------
<S> <C> <C> <C>
Shares under option:
Outstanding at September 1, 1994.......... -- -- --
Granted................................... 15,000 733,000 147,000
Exercised................................. -- -- (7,000)
Cancelled................................. -- -- --
------ ------- -------
Outstanding at August 31, 1995............ 15,000 733,000 140,000
Granted................................... 15,000 -- --
Exercised................................. -- (57,000) (29,652)
Cancelled................................. -- -- --
------ ------- -------
Outstanding at August 31, 1996............ 30,000 676,000 110,348
Average option price per share at August 31,
1996...................................... $ 5.31 $ 4.50 $ 2.25
Options exercisable at August 31, 1996...... 30,000 676,000 110,348
Price of options exercised during fiscal
1996...................................... -- $ 4.50 $ 2.25
</TABLE>
The following is a summary of common stock reserved for issuance at fiscal
year end:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Key employee stock plans.............................. 4,078,918 4,180,820
Stock Bonus Plan...................................... 81,579 186,279
Warrants.............................................. -- 400,000
--------- ---------
Total shares reserved for issuance.................... 4,160,497 4,767,099
========= =========
</TABLE>
NOTE 5 -- EMPLOYEE BENEFIT PLANS
The Parker Drilling Company Stock Bonus Plan ("Plan") was adopted effective
September 1980 for employees of Parker Drilling and its subsidiaries who are
U.S. citizens and who have completed one year of service with the Company. It
was amended in 1983 to qualify as a 401(k) plan under the Internal Revenue Code
which permits a specified percentage of an employee's salary to be voluntarily
contributed on a before-tax basis and to provide for a Company matching feature.
Participants may contribute from one percent to 15 percent of eligible earnings
and direct contributions to one or more of seven investment funds. The Company
presently makes dollar-for-dollar matching contributions up to three percent of
a participant's compensation. The Company's matching contribution is made in
Parker Drilling common stock. The Plan was amended effective September 1, 1996
to provide for immediate vesting of participants in the full amount of the
Company's past and future contributions. Each Plan year, additional Company
contributions can be made, at the discretion of the Board of Directors, in
amounts not exceeding the permissible deductions under the Internal Revenue
Code. The Company issued 104,700 shares to the Plan in 1996, 113,399 shares in
1995 and 123,619 shares in 1994.
F-12
<PAGE> 54
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- BUSINESS SEGMENTS
Information regarding the Company's operations by geographic area is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operations by Geographic Area
Revenue:
United States............................ $ 41,743 $ 28,487 $ 30,975
South America............................ 59,041 76,115 52,722
Asia Pacific............................. 47,857 44,911 43,445
Africa and the former Soviet Union....... 8,011 7,858 25,282
-------- -------- --------
Total revenue.................... $156,652 $157,371 $152,424
======== ======== ========
Operating income (loss):
United States............................ $ (8,988) $ (7,609) $(30,518)
South America............................ 4,802 (921) (5,937)
Asia Pacific............................. 7,943 8,701 6,771
Africa and the former Soviet Union....... (2,360) (1,668) 831
-------- -------- --------
Total operating income (loss).... $ 1,397 $ (1,497) $(28,853)
======== ======== ========
Identifiable assets:
United States............................ $135,923 $ 71,233 $ 64,337
South America............................ 82,292 83,345 73,688
Asia Pacific............................. 46,683 49,223 43,456
Africa and the former Soviet Union....... 11,061 13,158 27,867
-------- -------- --------
Total identifiable assets........ $275,959 $216,959 $209,348
======== ======== ========
</TABLE>
Two customers accounted for approximately 19 percent and 18 percent,
respectively, of total revenue in 1996. Two customers accounted for
approximately 22 percent and 13 percent, respectively, of total revenue in 1995.
Three customers accounted for approximately 14 percent, 12 percent and 11
percent, respectively, of total revenue in 1994. Operating income (loss) is
total revenue less operating expenses including depreciation, depletion and
amortization and an allocation of general corporate expenses based on rig
operating days.
NOTE 7 -- ASSETS HELD FOR DISPOSITION AND PROVISION FOR REDUCTION IN CARRYING
VALUE OF CERTAIN ASSETS
In fiscal 1996, the Company reclassified to assets held for disposition six
rigs and related equipment located in southern Argentina with a net book value
of $6,179,000. Although the Company believes it will recover the carrying value
of the assets, it is reasonably possible that a lesser amount will be recovered.
During the fourth quarter of fiscal 1994, management analyzed its domestic
operations and made the strategic decision to reorganize certain of these
operations and sell certain of these assets. In Alaska, the Company decided to
reduce operating and administrative costs and to look for opportunities to joint
venture or combine operations with other drilling companies. As a result, the
Company reduced the carrying value of certain assets in Alaska, including rigs,
spare parts and property that were to be sold. The Company's Partech(R)
manufacturing operations were downsized by the sale of land, buildings,
equipment and excess inventories, and accordingly, the Company wrote down to net
realizable value certain drilling equipment, property and inventories that were
sold. In the lower 48 divisions, the Company disposed of a number of mechanical
rigs and certain rig equipment which also were written down to net realizable
value. Write-offs relating to the lower 48 and Alaska rigs resulted in the
removal of 16 rigs from the Company's fleet. Aggregating the items described
above, the Company recorded a $19,718,000 provision during the fourth quarter of
fiscal 1994.
F-13
<PAGE> 55
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
At August 31, 1996, the Company had letters of credit facilities of
$25,062,000 of which $10,015,000 had been issued.
Certain officers of the Company entered into Severance Compensation and
Consulting Agreements with the Company in 1988 and 1992. In October 1996, the
officers executed revised Severance Compensation and Consulting Agreements (the
"Agreements"). The Agreements provide for an initial six year term and the
payment of certain benefits upon a change of control (as defined in the
Agreements). A change of control includes certain mergers or reorganizations,
changes in the board of directors, sale or liquidation of the Company or
acquisition of more than 20% of the outstanding common stock of the Company by a
third party. After a change of control occurs, if an officer is terminated
within four years without good cause or resigns within two years for good reason
(as each are defined in the Agreements) the officer shall receive a payment of
three times his annual cash compensation, plus additional compensation for a one
year consulting agreement at the officer's annual cash compensation, plus
extended life, health and other miscellaneous benefits for four years.
A judgment in the amount of $4,860,000 was entered against a subsidiary of
the Company by a judge of the First Civil Specialized Court in Maynas, Peru on
May 10, 1996. The judgment was based on a $22,000,000 claim by former employees
of the Company's subsidiary alleging that such subsidiary impaired their
employment opportunities with that subsidiary and other employers. The
subsidiary of the Company disputed the claim and appealed the decision based on
a lack of evidence and procedural and due process irregularities. On or about
September 5, 1996, this judgment was declared void by Superior Court in Iquitos,
Peru due to procedural irregularities, including the failure to comply with
certain due process requirements. The Superior Court has remanded the case to
the First Civil Specialized Court and the plaintiffs, in order to pursue their
claim, would be required to satisfy all mandated procedural and due process
requirements. While the Company does not believe that the judgment will have a
material adverse effect on its financial condition, results of operations or its
operations in South America, there can be no assurance that a judgment will not
be entered against the Company's subsidiary in a substantial amount.
In addition, the Company is a party to various other lawsuits and claims
arising out of the ordinary course of business. Management, after review and
consultation with legal counsel, considers that any liability resulting from
these matters would not materially affect the results of operations or the
financial position of the Company.
NOTE 9 -- RELATED PARTY TRANSACTIONS
At August 31, 1996, the Company owned an insurance policy on the life of
Mr. R. L. Parker, chairman and a principal stockholder. The Company is the
beneficiary of this policy which was issued pursuant to a Stock Purchase
Agreement ("Agreement") approved by vote of the stockholders at the 1975 Annual
Meeting on December 10, 1975. This Agreement was entered into between the
Company and the Robert L. Parker Trust and provides that upon the death of
Robert L. Parker, the Company would be required, at the option of the Trust, to
purchase from the Trust at a discounted price the amount of Parker Drilling
common stock which could be purchased with the proceeds of the policy of
$7,000,000. On August 3, 1994, the Company and the Trust modified this Agreement
so that the Company will have the option but not the obligation to purchase the
stock at a discounted price with the proceeds or to retain the entire proceeds
upon the death of Robert L. Parker. If action under the agreement had been
required at August 31, 1996, and the Company elected to purchase Parker Drilling
common stock from the Trust, Parker Drilling's outstanding common stock would
have been reduced by approximately two percent.
As a part of the agreement to terminate the option held by the Trust and to
grant the Company a limited option to purchase stock at a discounted price, the
Company has also agreed to pay a premium of $655,019
F-14
<PAGE> 56
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
annually for a split dollar last-to-die life insurance policy on Robert L.
Parker and Mrs. Robert L. Parker. Upon the deaths of Mr. Parker and Mrs. Parker,
the Company will be reimbursed by the Robert L. Parker Sr. and Catherine M.
Parker Family Trust from the proceeds of the policy for the full amount of
premiums paid plus interest at the one-year treasury bill rate on the premiums
paid after fiscal year 1999. Robert L. Parker and the Company agreed in October
1996 that the Company would cash surrender a $500,000 Executive Life policy on
his life and, in exchange, the interest on the above-described policy would not
begin accruing until March 2003. Additionally, Robert L. Parker Jr., Chief
Executive Officer of the Company and son of Robert L. Parker, will receive as a
beneficiary of the Trust one-third of the net proceeds of this policy. The face
value of the policy is $13,200,000.
NOTE 10 -- SUPPLEMENTARY INFORMATION
At August 31, 1996, accrued liabilities included $1,321,000 of workers'
compensation liabilities and $2,392,000 of accrued payroll and payroll taxes. At
August 31, 1995, accrued liabilities included $1,178,000 of workers'
compensation liabilities and $2,981,000 of accrued payroll and payroll taxes.
Other long-term liabilities included $1,434,000 and $1,679,000 of workers'
compensation liabilities as of August 31, 1996 and 1995, respectively.
NOTE 11 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FISCAL 1996
Revenue................................. $42,710 $37,929 $34,998 $41,015 $156,652
Gross profit(1)......................... $ 7,067 $ 5,209 $ 4,999 $ 3,550 $ 20,825
Operating income(loss).................. $ 2,272 $ 220 $ (411) $ (684) $ 1,397
Net income.............................. $ 1,887 $ 351 $ 310 $ 1,505 $ 4,053
Primary and fully diluted earnings per
share................................. $ .03 $ .01 $ .01 $ .02 $ .07
</TABLE>
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- --------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
FISCAL 1995
Revenue................................. $33,283 $38,738 $43,259 $ 42,091 $157,371
Gross profit(1)......................... $ 863 $ 4,328 $ 5,301 $ 5,074 $ 15,566
Operating income (loss)................. $(3,457) $ (135) $ 1,016 $ 1,079 $ (1,497)
Net income (loss)....................... $(1,093) $ 69 $ 2,050 $ 2,890 $ 3,916
Primary and fully diluted earnings
(loss) per share...................... $ (.02) $ .00 $ .04 $ .05 $ .07
</TABLE>
- ---------------
(1) Gross profit is calculated by excluding General and administrative expense
and Provision for reduction in carrying value of certain assets from
Operating income (loss), as reported in the Consolidated Statement of
Operations.
NOTE 12 -- SUBSEQUENT EVENTS
On September 14, 1996 the Company signed a definitive agreement to acquire
Mallard Bay Drilling, a worldwide offshore drilling company, for a total
consideration of $338 million, subject to adjustment for changes in Mallard's
net assets prior to closing. The Company intends to fund the transaction
principally through debt. Additionally, the Company will issue $25.0 million of
preferred stock, convertible to common stock if additional shares are authorized
for issuance. The Company is in the process of obtaining the financing for the
acquisition and anticipates closing the transaction in November 1996.
F-15
<PAGE> 57
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mallard Bay owns 47 rigs, the majority of which are barge and platform rigs
that operate primarily in the shallow coastal and offshore waters of the Gulf of
Mexico. It also has international operations utilizing barge rigs in Nigeria,
platform rigs in Peru and land rigs in Argentina.
On October 8, 1996 the Company signed an agreement to acquire Quail Tools,
Inc., a privately owned, family-run tool rental business, for $65 million,
subject to adjustment for changes in Quail's net assets prior to closing. The
Company intends to fund the transaction principally through debt. Quail provides
premium rental tools used in difficult well drilling, and completion and
production operations, primarily to companies operating in the Gulf of Mexico.
The Company is in the process of obtaining the financing for the acquisition and
anticipates closing the transaction in November 1996.
F-16
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Parker Drilling Company
We have reviewed the consolidated condensed balance sheet of Parker
Drilling Company and subsidiaries as of November 30, 1996, and the related
consolidated condensed statements of operations for the three month periods
ended November 30, 1996 and 1995 and consolidated condensed statements of cash
flows for the three month periods ended November 30, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally auditing
standards, the consolidated balance sheet as of August 31, 1996, and the related
consolidated statements of operations, redeemable preferred stock and
stockholders' equity and cash flows for the year then ended; and in our report,
dated October 14, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of August 31, 1996, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
January 13, 1997
F-17
<PAGE> 59
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Land drilling............................................. $ 37,585 $ 41,504
Offshore drilling......................................... 5,286 --
Tool rental............................................... 1,713 --
Other..................................................... 614 1,206
---------- ----------
Total revenues.................................... 45,198 42,710
---------- ----------
Operating expenses:
Land drilling............................................. 26,158 28,401
Offshore drilling......................................... 3,176 --
Tool rental............................................... 339 --
Other..................................................... 923 1,391
Depreciation, depletion and amortization.................. 6,898 5,851
General and administrative................................ 4,508 4,795
---------- ----------
Total operating expenses.......................... 42,002 40,438
---------- ----------
Operating income............................................ 3,196 2,272
---------- ----------
Other income and (expense):
Interest expense.......................................... (2,610) (31)
Interest income........................................... 1,121 344
Other income (expense) -- net............................. 1,070 1,039
---------- ----------
Total other income and (expense).................. (419) 1,352
---------- ----------
Income before income taxes.................................. 2,777 3,624
---------- ----------
Income tax expense.......................................... 1,298 1,737
---------- ----------
Net income.................................................. $ 1,479 $ 1,887
========== ==========
Earnings per share, primary and fully diluted............... $ .02 $ .03
========== ==========
Number of common shares used in computing earnings per
share:
Primary................................................... 66,170,374 55,678,060
========== ==========
Fully diluted............................................. 66,315,399 55,705,953
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-18
<PAGE> 60
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
1996 1996
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 71,116 $ 61,738
Other short-term investments.............................. 15,637 16,247
Accounts and notes receivable............................. 65,576 33,675
Rig materials and supplies................................ 14,692 10,735
Other current assets...................................... 11,611 3,653
-------- --------
Total current assets.............................. 178,632 126,048
Property, plant and equipment less accumulated depreciation,
depletion and amortization of $353,706 at November 30,
1996, and $351,714 at August 31, 1996..................... 382,859 124,177
Goodwill.................................................... 141,286 --
Other noncurrent assets..................................... 37,903 25,734
-------- --------
Total assets...................................... $740,680 $275,959
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 16,282 $ 584
Accounts payable and accrued liabilities.................. 46,695 16,326
Accrued income taxes...................................... 7,230 6,217
-------- --------
Total current liabilities......................... 70,207 23,127
-------- --------
Long-term debt.............................................. 387,615 2,794
-------- --------
Other long-term liabilities................................. 11,466 5,990
-------- --------
Preferred stock............................................. 25,000 --
Common stock, $.16 2/3 par value............................ 10,904 10,888
Capital in excess of par value.............................. 255,358 254,955
Retained earnings (accumulated deficit)..................... (18,859) (20,338)
Other....................................................... (1,011) (1,457)
-------- --------
Total stockholders' equity........................ 271,392 244,048
-------- --------
Total liabilities and stockholders' equity........ $740,680 $275,959
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-19
<PAGE> 61
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,479 $ 1,887
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization............... 6,898 5,486
Expenses not requiring cash............................ 185 413
Change in operating assets and liabilities............. (8,142) 2,500
Other-net.............................................. (762) (772)
--------- --------
Net cash provided by (used in) operating
activities...................................... (342) 9,514
--------- --------
Cash flows from investing activities:
Capital expenditures...................................... (9,011) (8,389)
Acquisition of Mallard, net of cash acquired.............. (308,366) --
Acquisition of Quail...................................... (65,900) --
Proceeds from the sale of equipment....................... 5,849 1,687
Decrease (increase) in short-term investments............. 610 (3,366)
Other-net................................................. (676) (826)
--------- --------
Net cash provided (used) by investing
activities...................................... (377,494) (10,894)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of debt............................ 387,274 --
Principal payments under debt obligations................. (324) (273)
Proceeds from exercise of stock warrants.................. -- 1,552
Other..................................................... 264 (4)
--------- --------
Net cash provided (used) by financing
activities...................................... 387,214 1,275
--------- --------
Net change in cash and cash equivalents..................... 9,378 (105)
Cash and cash equivalents at beginning of period............ 61,738 20,752
--------- --------
Cash and cash equivalents at end of period.................. $ 71,116 $ 20,647
========= ========
</TABLE>
F-20
<PAGE> 62
PARKER DRILLING COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Supplemental cash flow information:
Interest paid............................................. $ 307 $ 109
Taxes paid................................................ $ 704 $ 701
</TABLE>
<TABLE>
<CAPTION>
MALLARD QUAIL
-------- -------
<S> <C> <C>
Business acquisitions in November 1996:
Working capital, net of cash acquired..................... $ 6,590 $ (340)
Property, plant and equipment............................. 234,439 23,695
Purchase price in excess of net assets acquired........... 98,223 42,545
Other assets.............................................. 1,853 --
Noncurrent liabilities.................................... (7,739) --
Preferred stock issued.................................... (25,000) --
-------- -------
Net cash used in acquisitions..................... $308,366 $65,900
======== =======
</TABLE>
Supplemental noncash financing activity:
In November 1996, the Company issued $25,000,000 of preferred stock as a
part of the acquisition of Mallard. (See Note 3.)
In November 1994, the Company acquired a limited partner's ownership
interest in two consolidated partnerships in exchange for a promissory note in
the amount of $1,850,000.
See accompanying notes to consolidated condensed financial statements.
F-21
<PAGE> 63
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements reflect all adjustments (of a normally recurring
nature) which are necessary for a fair presentation of (1) the financial
position as of November 30, 1996 and August 31, 1996, (2) the results of
operations for the three months ended November 30, 1996 and November 30, 1995,
and (3) cash flows for the three months ended November 30, 1996 and November 30,
1995. Results for the three months ended November 30, 1996, are not necessarily
indicative of the results which will be realized for the year ending August 31,
1997. The year-end consolidated condensed balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements should be
read in conjunction with the Company's Form 10-K for the year ended August 31,
1996.
2. Earnings per common share are computed by dividing net income by the
weighted average number of common shares outstanding during the period including
the effect of dilutive options when applicable. Common shares, subject to
vesting, granted under the 1969 Key Employee Stock Grant Plan, 1980 Incentive
Career Stock Plan and the 1991 Stock Grant Plan are issued and outstanding and
are only considered in the computation of weighted average shares outstanding
when their effect on earnings per share is dilutive.
3. On November 12, 1996, the Company acquired Mallard Bay Drilling, Inc.
("Mallard") and Quail Tools, Inc. ("Quail"), both of which were accounted for by
the purchase method of accounting.
The Company acquired all of the outstanding stock of Mallard for $335.0
million, including acquisition costs, for cash of $310.0 and $25.0 million of
preferred stock which will be converted into 3,056,600 shares of common stock
during the second quarter of fiscal 1997. Mallard operates 40 drilling and
workover barges in the shallow waters of the Gulf of Mexico and Nigeria, plus
seven platform rigs in the Gulf of Mexico and offshore Peru and Thailand.
The Company acquired all of the outstanding stock of Quail for $65.9
million, including acquisition costs. Quail is a provider of premium rental
tools used in difficult well drilling, production and workover primarily to
companies working in the Gulf of Mexico and Gulf Coast land regions. The
purchase prices of Mallard and Quail are both subject to adjustment for changes
in net assets that occurred between the agreement and purchase dates. The excess
of purchase price over the fair values of the net assets acquired was $99.0
million for Mallard and $42.5 million for Quail and has been recorded as
goodwill, which is being amortized on a straight-line basis over 30 years.
The following unaudited pro forma information presents a summary of the
first quarter consolidated results of operations of the Company and the acquired
entities as if the acquisition had occurred September 1, 1995.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
(Thousands except per share amounts)
Revenues.................................................. $74,263 $67,758
Net income................................................ $ 152 $ 4,409
Earnings per common share................................. $ -- $ (.08)
</TABLE>
4. The Company financed the acquisitions of Mallard and Quail through the
issuance of $300,000,000 of Senior Notes and a term loan of $100,000,000.
Additionally, the Company issued $25,000,000 of preferred stock which will be
converted to 3,056,600 shares of common stock during the second quarter of
fiscal 1997.
The $300,000,000 Senior Notes, which were sold at a $2,355,000 discount,
have an interest rate of 9 3/4% and will mature in 2006. The $100,000,000 term
loan was a part of commitment from a syndicate of financial institutions to
establish a Senior Credit Facility which consists of the term loan and a
$45,000,000 revolving credit facility.
The term loan bears interest, as the option of the Company, at prime to
prime plus 0.50% or at 1.75% to 2.25% above the one-, two-, three- and six-month
LIBOR rate, depending on the Company's debt-to-capital
F-22
<PAGE> 64
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
ratio (as defined) and will be paid in quarterly payments, with a final balloon
payment on November 30, 2002. The term note will have no prepayment penalty,
will be guaranteed by the principal subsidiaries of the Company and will be
secured by substantially all of the assets of the Company and the assets and
stock of the Subsidiary Guarantors. The term loan contains customary
representations and warranties and will restrict the Company's ability to, among
other things, incur indebtedness, merge or sell assets and make investments. The
Company is prohibited from paying dividends and will also be required to
maintain certain financial ratios.
The revolving portion of the Senior Credit Facility will be available,
subject to the satisfaction of customary borrowing conditions, for working
capital requirements and general corporate purposes. The revolver will terminate
on December 31, 1998 and will be secured by a first lien on the Company's
accounts receivable. Borrowings under the revolver will not be permitted to
exceed a borrowing base equal to 80% of the Company's eligible accounts
receivable.
F-23
<PAGE> 65
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial information is derived
from the historical financial statements of Parker, Mallard and Quail,
incorporated by reference herein, and certain assumptions deemed appropriate by
the Company. The Unaudited Pro Forma Combined Statements of Operations for the
three months ended November 30, 1996, and for the year ended August 31, 1996
reflect: (i) the Mallard Acquisition, (ii) the Quail Acquisition, (iii) the
acquisition by Mallard of two drilling barges from Noble Drilling Corporation
("Noble") in August 1996, (iv) the issuance of the $300 million Notes and $100
million term loan and the application of the net proceeds therefrom, (v)
issuance of 7,000,000 shares of Common Stock of the Company, and the repayment
of $50 million, from a portion of the net proceeds of this Offering together
with current cash, to reduce the $100 million term loan, and (vi) the issuance
of $25 million in shares of convertible preferred stock, and the subsequent
conversion of such shares into 3,056,600 shares of Common Stock in December
1996, as if such transactions had occurred on September 1, 1995. Such three
months unaudited pro forma combined information combines the unaudited operating
results for Parker, Mallard and Quail for the three months ended November 30,
1996. Such 12 months unaudited pro forma combined information combines (i) the
audited operating results for Parker for the twelve months ended August 31,
1996; (ii) the unaudited operating results of Mallard for the twelve months
ended September 30, 1996; and (iii) the unaudited operating results of Quail for
the twelve months ended August 31, 1996. The unaudited pro forma combined
financial information should be read in conjunction with the notes thereto and
the historical financial statements of the Parker, Mallard and Quail, including
the notes thereto, incorporated by reference herein.
The pro forma adjustments giving effect to the various events described
above are based upon currently available information and upon certain
assumptions that management believes are reasonable. The historical operating
results of Mallard included in the Unaudited Pro Forma Combined Financial
Statements do not reflect any allocation of general corporate, accounting, tax,
legal and other administrative costs incurred by its parent corporation.
Management does not believe that it will be required to incur any significant
amount of additional general and administrative expense in connection with the
incorporation of Mallard's operations. The Acquisitions have been accounted for
by the Company under the purchase method of accounting and the assets and
liabilities of Mallard and Quail were recorded at their estimated fair market
values at the date of acquisition.
The unaudited pro forma combined financial information does not purport to
be indicative of the results of operations that would actually have occurred if
the transactions described had occurred as presented in such statements or that
may be obtained in the future. In addition, future results may vary
significantly from the results reflected in such statements due to general
economic conditions, oil and gas commodity prices, the demand and prices for
contract drilling services and rental tools, increases in the number of rigs
available for service, the Company's ability to successfully integrate the
operations of Mallard and Quail with its current business and several other
factors, many of which are beyond the Company's control. See "Risk Factors."
F-24
<PAGE> 66
PARKER DRILLING COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NOVEMBER 30,
1996
--------------------------------
HISTORICAL
--------------------------------
PARKER MALLARD QUAIL ADJUSTMENTS(1) PRO FORMA
-------- ----------- ------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Drilling contracts.................. $36,896 $29,653 $ -- $ $ 66,549
Rental.............................. -- -- 7,100 7,100
Other............................... 614 -- -- 614
------- ------- ------ -------- ----------
Total revenues.............. 37,510 29,653 7,100 74,263
------- ------- ------ -------- ----------
Operating expenses:
Drilling............................ 25,579 17,718 -- 2,352(e) 45,649
Rental.............................. -- -- 590 927(e) 1,517
Other............................... 923 -- -- 923
Depreciation, depletion and
amortization..................... 5,558 3,632 675 926(a) 11,928
1,137(d)
General and administrative.......... 4,508 2,352 927 (3,279)(e) 4,508
------- ------- ------ -------- ----------
Total operating expenses.... 36,568 23,702 2,192 2,063 64,525
------- ------- ------ -------- ----------
Operating income...................... 942 5,951 4,908 (2,063) 9,738
------- ------- ------ -------- ----------
Other income (expense):
Interest expense.................... (94) (126) -- (8,281)(f) (8,837)
(336)(h)
Interest income..................... 1,121 -- 962 (949)(g) 1,134
Other............................... 1,001 (9) 5 997
------- ------- ------ -------- ----------
Total other income
(expense)................. 2,028 (135) 967 (9,566) (6,706)
------- ------- ------ -------- ----------
Income before income taxes............ 2,970 5,816 5,875 (11,629) 3,032
Income tax expense (benefit).......... 1,215 486 -- 1,701
------- ------- ------ -------- ----------
Income before extraordinary item...... $ 1,755 $ 5,330 $5,875 $(11,629) $ 1,331
======= ======= ====== ======== ==========
Earnings per share, primary and fully
diluted............................. $ 0.02
==========
Weighted average shares outstanding
(fully diluted)..................... 74,863,000
==========
</TABLE>
F-25
<PAGE> 67
PARKER DRILLING COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE VALUES)
<TABLE>
<CAPTION>
12 MONTHS ENDED
---------------------------------------
AUGUST 31, SEPTEMBER 30, AUGUST 31,
1996 1996 1996
---------- ------------- ----------
PARKER MALLARD QUAIL ADJUSTMENTS(1) PRO FORMA
---------- ------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Drilling contracts............ $ 145,160 $87,293 $ -- $ 15,648(b) $ 248,101
Rental........................ -- -- 17,429 17,429
Other......................... 11,492 -- -- 11,492
---------- ------- ------- -------- -----------
Total revenues........ 156,652 87,293 17,429 15,648 277,022
---------- ------- ------- -------- -----------
Operating expenses:
Drilling...................... 100,942 51,392 -- 8,414(b) 172,289
(153)(c)
11,694(e)
Rental........................ -- -- 1,767 3,838(e) 5,605
Other......................... 11,824 -- -- 11,824
Depreciation, depletion and
amortization............... 23,061 11,833 2,789 3,703(a) 45,933
4,547(d)
General and administrative.... 19,428 11,694 3,838 (15,532)(e) 19,428
---------- ------- ------- -------- -----------
Total operating
expenses............ 155,255 74,919 8,394 16,511 255,079
---------- ------- ------- -------- -----------
Operating income................ 1,397 12,374 9,035 (863) 21,943
---------- ------- ------- -------- -----------
Other income (expense):
Interest expense.............. (135) (483) -- (33,125)(f) (35,086)
(1,343)(h)
Interest income............... 1,642 -- 165 (165)(g) 1,642
Other......................... 5,663 312 999 (420)(g) 6,554
---------- ------- ------- -------- -----------
Total other income
(expense)........... 7,170 (171) 1,164 (35,053) (26,890)
---------- ------- ------- -------- -----------
Income (loss) before income
taxes......................... 8,567 12,203 10,199 (35,916) (4,947)
Income tax expense (benefit).... 4,514 4,899 (3,318)(i) 6,877
782(b)
---------- ------- ------- -------- -----------
Income (loss) before
extraordinary item............ $ 4,053 $ 7,304 $10,199 $(33,380) $ (11,824)
========== ======= ======= ======== ===========
Earnings (loss) per share,
primary and fully diluted..... $ 0.07 $ (0.18)
========== ===========
Weighted average shares
outstanding (fully diluted)... 57,466,183 67,522,782
========== ===========
</TABLE>
F-26
<PAGE> 68
PARKER DRILLING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 PRO FORMA ADJUSTMENTS
(a) To adjust depreciation expense on assets obtained in the Mallard and
Quail acquisition using the allocated purchase price. Depreciation was
calculated over 17 1/2 years for drilling rigs and seven years for tool rental
equipment using 5% salvage on both.
(b) To record the estimated historical results of operations for two barge
rigs acquired by Mallard from Noble on August 21, 1996. The two rigs are working
under a long-term contract in Nigeria at dayrates of $26,215 and $22,000,
respectively. Estimated historical results of operations were derived from the
contractual dayrates on the two rigs, estimated operating costs based on a
similar Mallard barge rig operating in Nigeria and the related Nigerian taxes.
(c) Eliminate expenses associated with Iranian operations not purchased.
(d) Amortization of excess cost over fair value of net assets obtained in
the Mallard and Quail acquisitions over 30 years.
(e) Reclassify the general and administrative expense of Mallard and Quail
to drilling expense and rental expense, respectively.
(f) To record interest expense related to $50 million term loan ($100
million originally issued less $50 million prepayment by proceeds from this
Offering, together with current cash) under the Senior Credit Facility, assuming
a rate of 7.75%, and $300 million of principal amount of Senior Notes at a rate
of 9.75%.
(g) Eliminate interest and investment income on Quail cash and investments
not acquired.
(h) Amortization of original issue discount and debt issuance costs over
the ten-year term of the Notes and the six-year term of the term loan portion of
the Senior Credit Facility.
(i) Eliminate U.S. federal income taxes allocated to Mallard by its former
parent as a result of the Company's significant net operating loss ("NOL")
carryforwards for U.S. federal income tax purposes. Also as a result of the
Company's NOL carryforwards no U.S. federal income taxes have been added for
Quail, which prior to the Quail Acquisition was an S corporation for U.S.
federal income tax purposes.
F-27
<PAGE> 69
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDER OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disclosure Regarding Forward-Looking
Statements.............................. 3
Incorporation of Certain Documents by
Reference............................... 3
Prospectus Summary........................ 4
Risk Factors.............................. 9
Use of Proceeds........................... 12
Price Range of Common Stock and Dividends... 13
Capitalization............................ 14
Selected Consolidated Financial Data...... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 16
Business.................................. 21
Management................................ 32
Selling Shareholder....................... 35
Description of Capital Stock.............. 36
Underwriting.............................. 38
Legal Matters............................. 39
Experts................................... 39
Available Information..................... 40
Index to Financial Statements............. F-1
</TABLE>
10,056,600 SHARES
LOGO
PARKER DRILLING
COMPANY
COMMON STOCK
PROSPECTUS
JEFFERIES & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
JOHNSON RICE & COMPANY L.L.C.
, 1997
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company or the
Selling Shareholder in connection with the issuance and distribution of the
Common Stock registered hereby, other than underwriting discounts and
commissions. The Selling Shareholder will pay only the legal fees and expenses
of its counsel. All the amounts shown are estimates, except the registration and
NASD filing fees.
<TABLE>
<S> <C>
Registration fee............................................ $ 32,418
NASD filing fee............................................. 11,198
Fees and expenses of accountants............................ 50,000
Fees and expenses of legal counsel of the Company........... 75,000
Fees and expenses of legal counsel to the Selling
Shareholder............................................... 5,000
Printing and engraving expenses............................. 125,000
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous............................................... 46,384
--------
Total............................................. $350,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-Laws provide that each person who was or is made a party
to, or is involved in, any action, suit or proceeding by reason of the fact that
he or she was a director or officer of the Company (or was serving at the
request of the Company as a director, officer, employee or agent for another
entity) will be indemnified and held harmless by the Company, to the full extent
authorized by the Delaware General Corporation Law.
Under Section 145 of the Delaware General Corporation Law, a corporation
may indemnify a director, officer, employee or agent of the corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify a director, officer, employee or agent of the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her if he or she acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the corporation, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation
unless a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
The Company's Restated Certificate of Incorporation provides that to the
fullest extent permitted by Delaware General Corporation Law as the same exists
or may hereafter be amended, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. The Delaware General Corporation Law permits Delaware
corporations to include in their certificates of incorporation a provision
eliminating or limiting director liability for monetary damages arising from
breaches of their fiduciary duty. The only limitations imposed under the statute
are that the provision may not eliminate or limit a director's liability for (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or known violations of law, (iii) the payment of unlawful dividends
or unlawful stock purchases or redemptions, or (iv) transactions in which the
director received an improper personal benefit.
The Company is insured against liabilities which it may incur by reason of
its indemnification of officers and directors in accordance with its By-Laws. In
addition, directors and officers are insured, at the Company's
II-1
<PAGE> 71
expense, against certain liabilities which might arise out of their employment
and are not subject to indemnification under the By-Laws.
The foregoing summaries are necessarily subject to the complete text of the
statute, Restated Certificate of Incorporation, By-Laws and agreements referred
to above and are qualified in their entirety by reference thereto.
ITEM 16. EXHIBITS.
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated herein by reference to a prior
filing of the Company under the Securities Act or the Exchange Act as indicated
in parentheses:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBITS
----------- --------
<C> <S>
*1.1 -- Form of Underwriting Agreement.
*4.1 -- Form of Restated Certificate of Incorporation of the
Company.
*4.2 -- Form of Certificate of Retirement of the Company.
**4.3 -- Certificate of Amendment of Restated Certificate of
Incorporation dated December 18, 1996.
4.4 -- Term Loan Agreement between the Company and ING (U.S.)
Capital Corporation dated November 8, 1996 (incorporated
by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q/A for the three months ended November 30, 1996).
4.5 -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to Annual Report on form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated
February 18, 1993).
4.6 -- Indenture dated as of November 12, 1996 among the
Company, as issuer, certain Subsidiary Guarantors (as
defined therein) and Texas Commerce Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.3 to the Company's S-4 Registration Statement
No. 333-19317).
4.7 -- Registration Rights Agreement dated as of November 12,
1996 by and among the Company, certain Subsidiary
Guarantors (as defined therein) and Jefferies & Company,
Inc. and ING Baring (U.S.) Securities, Inc. (incorporated
by reference to Exhibit 4.4 to the Company's S-4
Registration Statement No. 333-19317).
**5.1 -- Opinion of Vinson & Elkins L.L.P.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Coopers & Lybrand L.L.P.
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
**23.5 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
**24.1 -- Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
II-2
<PAGE> 72
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefits plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, by-law, contract, arrangement,
statute, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such labilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Tulsa, State of Oklahoma, on the 25th
day of March, 1997.
PARKER DRILLING COMPANY
By /s/ ROBERT L. PARKER JR.
-----------------------------------
Robert L. Parker Jr.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on March 25, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
(i) Principal executive officer:
/s/ ROBERT L. PARKER JR. President, Chief Executive Officer and
- ----------------------------------------------------- Director
Robert L. Parker Jr.
(ii) Principal financial and accounting officer:
/s/ JAMES J. DAVIS Senior Vice President -- Finance and Chief
- ----------------------------------------------------- Financial Officer
James J. Davis
(iii) Directors:
*
- -----------------------------------------------------
Robert L. Parker
*
- -----------------------------------------------------
James W. Linn
*
- -----------------------------------------------------
Bernard Duroc-Danner
*
- -----------------------------------------------------
David L. Fist
*
- -----------------------------------------------------
Earnest F. Gloyna
*
- -----------------------------------------------------
R. Rudolph Reinfrank
*By: /s/ JAMES J. DAVIS
- -----------------------------------------------------
(James J. Davis,
Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 74
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S> <C>
*1.1 -- Form of Underwriting Agreement.
*4.1 -- Form of Restated Certificate of Incorporation of the
Company.
*4.2 -- Form of Certificate of Retirement of the Company.
**4.3 -- Certificate of Amendment of Restated Certificate of
Incorporation dated December 18, 1996.
4.4 -- Term Loan Agreement between the Company and ING (U.S.)
Capital Corporation dated November 8, 1996 (incorporated
by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q/A for the three months ended November 30, 1996).
4.5 -- By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to Annual Report on form 10-K for the year
ended August 31, 1992, as amended by Form 8 dated
February 18, 1993).
4.6 -- Indenture dated as of November 12, 1996 among the
Company, as issuer, certain Subsidiary Guarantors (as
defined therein) and Texas Commerce Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.3 to the Company's S-4 Registration Statement
No. 333-19317).
4.7 -- Registration Rights Agreement dated as of November 12,
1996 by and among the Company, certain Subsidiary
Guarantors (as defined therein) and Jefferies & Company,
Inc. and ING Baring (U.S.) Securities, Inc. (incorporated
by reference to Exhibit 4.4 to the Company's S-4
Registration Statement No. 333-19317).
**5.1 -- Opinion of Vinson & Elkins L.L.P.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Coopers & Lybrand L.L.P.
*23.3 -- Consent of Arthur Andersen LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
**23.5 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
5.1).
**24.1 -- Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
<PAGE> 1
EXHIBIT 1.1
PARKER DRILLING COMPANY
(A DELAWARE CORPORATION)
10,056,600 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
March 2_, 1997
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
As Representatives of
the Several Underwriters
c/o Jefferies & Company, Inc.
Attn: Syndicate Department
650 Fifth Avenue, 4th Floor
New York, New York 10019
Dear Sirs:
Parker Drilling Company, a Delaware corporation (the "Company") and
Energy Ventures, Inc. (the "Selling Stockholder"), hereby confirm their
agreement with you, as representatives (the "Representatives") of the
underwriters named in Schedule I hereto (the "Underwriters"), with respect to
the issuance and sale by the Company of an aggregate of 7,000,000 shares and the
sale by the Selling Stockholder of 3,056,600 shares (the "Firm Shares") of the
Company's Common Stock, $.16 2/3 par value (collectively, the "Common Stock"),
and the purchase of the Firm Shares by the Underwriters, acting severally and
not jointly. The Company also has agreed to sell up to 1,508,490 shares (the
"Additional Shares") of Common Stock to cover over-allotments, if any. The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"Shares".
You have advised us that you desire to purchase the Shares and that you
propose to make a public offering of the Shares as soon as you deem advisable
after the Registration Statement referred to below becomes effective upon the
terms set forth in the Prospectus referred to below.
The terms that follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto
became or become effective and each date after the date hereof on which a
document incorporated by reference in the Registration Statement is filed.
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
Section below and any preliminary prospectus included in the Registration
Statement at the Effective Date that omits Rule 430A Information (as defined
below). "Registration Statement" shall mean the registration statement referred
to in Section below, including incorporated documents, exhibits and financial
statements, as amended at the Representation Date (as defined below) (or, if not
effective at the Representation Date, in the
<PAGE> 2
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 2
form in which it shall become effective) and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Date (as defined in
Section hereof), shall also mean such registration statement as so amended. Such
term shall include Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A (as defined below). If the Company files
an additional registration statement to register additional shares of Common
Stock pursuant to Rule 462(b) (defined below) (the "Additional Registration
Statement"), all references in this Underwriting Agreement to "Registration
Statement" shall mean the Additional Registration Statement, as amended at the
Effective Date, including the contents of the initial registration statement
incorporated by reference therein and including all information (if any) deemed
to be a part of the Additional Registration Statement as of its effective time
pursuant to Rule 430A(b). The prospectus constituting a part of the Registration
Statement (including the Rule 430A Information), as from time to time amended or
supplemented, is hereinafter referred to as the "Prospectus", except that if any
revised prospectus shall be provided to the Underwriters by the Company that
differs from the prospectus on file at the Securities and Exchange Commission
(the "Commission") at the Effective Date (whether or not such revised prospectus
is required to be filed by the Company pursuant to Rule 424 of the Act
Regulations), the term "Prospectus" shall refer to each such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
"Rule 158", "Rule 415", "Rule 424", "Rule 430A", "Rule 462" and "Regulation S-K"
refer to such rules or regulation under the Securities Act of 1933, as amended
(the "Act"; and the rules and regulations under the Act, the "Act Regulations").
"Rule 430A Information" means information with respect to the Shares and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. "Exchange Act" refers to the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder. Any reference herein to the Registration
Statement, a Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 which were filed under the Exchange Act on or before the
Effective Date of the Registration Statement or the issue date of such
Preliminary Prospectus or the Prospectus, as the case may be; and any reference
herein to the terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the filing of any document under the Exchange Act
after the Effective Date of the Registration Statement, or the issue date of any
Preliminary Prospectus or the Prospectus, as the case may be, deemed to be
incorporated therein by reference.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the Underwriters as of the
date hereof (such date being referred to as the "Representation Date") and as of
the Closing Date, as follows:
(i) the Company meets the requirements for use of Form S-3
under the Act and has filed with the Commission a registration
statement on such Form (Registration No. 333-22987), including a
related preliminary prospectus, and one or more
<PAGE> 3
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 3
amendments thereto, including the related preliminary prospectus, each
of which has previously been furnished to the Underwriters, for the
registration under the Act of the offering and sale of the Shares. The
Company will file with the Commission (A) prior to effectiveness of
such registration statement, a further amendment to such registration
statement (including the form of final prospectus), (B) after
effectiveness of such registration statement, if applicable, an
additional registration statement pursuant to Rule 462(b) or (C) after
effectiveness of such registration statement or such additional
registration statement, a final prospectus in accordance with Rules
430A and 424(b)(1) or (4) or Rule 434 of the Act Regulations. The
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information in
the case of clause (B)) required by the Act and the Act Regulations to
be included in the prospectus with respect to the Shares and the
offering thereof. As filed, such amendment and form of final
prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information, with
respect to the Shares and the offering thereof and, except to the
extent the Underwriters shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to the
Underwriters prior to the date hereof;
(ii) on the Effective Date, the Representation Date and the
Closing Date, the Registration Statement did and will, and when the
Prospectus is first filed (if required) in accordance with Rule 424(b)
the Prospectus will, comply in all material respects with the
applicable requirements of the Act and the Act Regulations and the
Exchange Act; on the Effective Date, the Representation Date and the
Closing Date, the Registration Statement did not and will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, the
Representation Date and the Closing Date, and on the date of any filing
pursuant to Rule 424(b), the Prospectus did not and will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, that the Company makes no
representation or warranty as to the information provided in writing to
the Company by or on behalf of the Selling Stockholder or the
Underwriters, expressly for use in the Registration Statement or the
Prospectus. The Company agrees that the only information provided in
writing by or on behalf of the Underwriters to the Company, expressly
for use in the Registration Statement or the Prospectus, is that
information contained in the table and the second, fifth and eighth
paragraphs following the table in the section of the Prospectus
entitled "Underwriting" and the last paragraph on the cover page of the
Prospectus;
(iii) the Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction where
the
<PAGE> 4
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 4
nature or location of its properties (owned or leased) or the conduct
of its business requires such registration or qualification, except
where the failure so to register or qualify would not have a Material
Adverse Effect. As used herein, the term "Material Adverse Effect"
shall mean an adverse effect on the financial condition, business,
properties, net worth or results of operations of the Company or any of
the Subsidiaries (as hereinafter defined) that would be, singly or in
the aggregate, material to the Company and the Subsidiaries, taken as a
whole, whether or not occurring in the ordinary course of business (a
"Material Adverse Effect");
(iv) the only significant subsidiaries (as defined in the Act
Regulations) of the Company are the subsidiaries listed on Schedule II
hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is
a corporation duly organized and validly existing in good standing
under the laws of its jurisdiction of incorporation with full corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and in
the Prospectus, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction where the nature
or location of its properties (owned or leased) or the conduct of its
business requires such registration or qualification, except where the
failure so to register or qualify would not have a Material Adverse
Effect;
(v) each of the Company and the Subsidiaries has all necessary
authorizations, approvals, orders, licenses, rights-of-way, operating
rights, easements, certificates and permits of and from, and has made
all declarations and filings with, all regulatory or governmental
officials and bodies, all self-regulatory organizations and all courts
and other tribunals ("Permits"), to own or lease its respective
properties and to conduct its respective businesses described in the
Prospectus and the Registration Statement, except where failure to have
obtained or made the same would not have a Material Adverse Effect, and
neither the Company nor any of the Subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such
Permits, if the failure to be so licensed or approved or if the subject
of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect; the Company and each of the Subsidiaries has fulfilled
and performed all its current material obligations with respect to such
Permits and no event has occurred that allows, or after notice or lapse
of time, or both, would allow, revocation or termination thereof or
result in any other material impairment of the rights of the holder of
any such Permit except where the nonfulfillment or performance or event
would not have a Material Adverse Effect; and the Company and each of
the Subsidiaries is in compliance with all applicable laws, rules,
regulations, orders and consents, the violation of which would have a
Material Adverse Effect. The property and business of the Company and
the Subsidiaries conform in all material respects to the descriptions
thereof contained in the Prospectus and the Registration Statement;
(vi) all of the Company's authorized and outstanding
capital stock has been duly authorized, validly issued and is fully
paid and nonassessable and the
<PAGE> 5
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 5
capitalization of the Company conforms to the descriptions thereof and
the statements made with respect thereto in the Registration Statement
and the Prospectus as of the date set forth therein. There are no
outstanding securities convertible into or exchangeable for, and no
outstanding options, warrants or other rights to purchase, any shares
of the capital stock of the Company, nor any agreements or commitments
to issue any of the same, except as described in the Registration
Statement and the Prospectus, and there are no preemptive or other
rights to subscribe for or to purchase, and no restrictions upon the
voting or transfer of, any capital stock of the Company pursuant to the
Company's restated certificate of incorporation or by-laws or any
agreement or other instrument to which the Company is a party, except
as described in the Registration Statement and the Prospectus;
(vii) all the outstanding shares of capital stock of each
Subsidiary have been duly authorized and are validly issued, fully paid
and nonassessable and were not issued in violation of or subject to any
preemptive or similar rights. Except as otherwise set forth in the
Registration Statement and the Prospectus, all outstanding shares of
capital stock of the Subsidiaries are owned by the Company, directly or
indirectly through another Subsidiary, free and clear of any security
interests, liens, encumbrances, equities or other claims;
(viii) each of the Company and the Subsidiaries has good and
indefeasible title to all real property and good and marketable title
to all personal property owned by it, including those properties
described in the Registration Statement and Prospectus, in each case
free and clear of all liens, charges, encumbrances and restrictions,
except such as are described in the Registration Statement and
Prospectus or such as would not have a Material Adverse Effect. Each of
the Company and the Subsidiaries has valid, subsisting and enforceable
leases for the properties described in the Registration Statement and
the Prospectus as leased by it, with such exceptions as are described
in the Registration Statement and the Prospectus or that in the
aggregate would not have a Material Adverse Effect;
(ix) the Company has all requisite power, authority,
authorizations, approvals, orders, licenses, certificates and permits
to enter into this Agreement and to carry out the provisions and
conditions hereof, and to issue and deliver the Shares to the
Underwriters as provided herein. This Agreement has been duly
authorized, executed and delivered by the Company;
(x) the Shares to be issued and sold by the Company have been
duly and validly authorized for issuance by the Company, and the
Company has full corporate power and authority to issue, sell and
deliver the Shares; and, when such Shares are issued and delivered
against payment therefor as provided by this Agreement, the Shares will
have been validly issued, fully paid and nonassessable, and the
issuance of such Shares will not be subject to any statutory preemptive
rights or similar statutory rights or any other preemptive or similar
rights. All corporate action required to be
<PAGE> 6
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 6
taken by the Company for the authorization, issuance and sale of the
Shares has been duly and validly taken;
(xi) Coopers & Lybrand L.L.P. are independent accountants
with respect to the Company and the Subsidiaries as required by
the Act;
(xii) the consolidated financial statements and related notes
and schedules included in the Registration Statement or in the
Prospectus present fairly the financial position of the Company and the
Subsidiaries, on the basis stated in the Registration Statement, as of
the respective dates thereof and the consolidated statements of income,
shareholders' equity and cash flows of the Company and the
Subsidiaries, for the respective periods covered thereby; and such
financial statements and the related schedules and notes have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the entire period involved,
except as otherwise disclosed in the Registration Statement and the
Prospectus. The selected financial information included in the
Registration Statement or the Prospectus presents fairly the
information shown therein and has been compiled on a basis consistent
with that of the audited financial statements of the Company included
therein. The pro forma financial information in the Registration
Statement or in the Prospectus complies in all material respects with
the applicable accounting requirements of Article 11 of Regulation S-X
promulgated by the Commission and presents fairly the information shown
therein; the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein. No other financial
statements or schedules of the Company and the Subsidiaries are
required by the Exchange Act, the Act or the Act Regulations to be
included in the Registration Statement or Prospectus;
(xiii) the Shares conform in all material respects to the
descriptions thereof in the Registration Statement and Prospectus;
(xiv) since the respective dates as of which information is
provided in the Registration Statement and Prospectus, except as
otherwise specifically stated therein, there has been no change or
development with respect to the condition (financial or otherwise) or
business of the Company and the Subsidiaries, taken as a whole, whether
or not arising in the ordinary course of business, that would have a
Material Adverse Effect;
(xv) neither the Company nor any Subsidiary is in violation of
its certificate of incorporation or by-laws or other organizational
documents. Neither the Company nor any Subsidiary is, nor with the
passage of time or the giving of notice or both would be, in violation
of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries, or of
any judgment, order or decree of any court or governmental agency or
body or of any arbitrator having
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March 2_, 1997
Page 7
jurisdiction over the Company or any of the Subsidiaries, or in default
in the performance or observance of any obligation, agreement, covenant
or condition contained in any mortgage, loan agreement, note, bond,
debenture, credit agreement or any other evidence of indebtedness or in
any agreement, contract, indenture, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which it may be
bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject, the effect of which violation or
default in performance or observance would have a Material Adverse
Effect;
(xvi) there is no action, suit or proceeding pending before or
by any court, arbitrator or governmental agency or body or, to the
Company's knowledge, threatened against the Company or any of the
Subsidiaries or to which any of their respective property is subject
(A) that is required to be described in the Registration Statement or
the Prospectus but is not described as required or (B) that, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect. There is no agreement, contract, indenture, lease or
other document or instrument that is required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit to
the Registration Statement that is not described or filed as required;
(xvii) except for the Selling Stockholder, no person has any
right to the registration of any security of the Company by reason of
the filing of the Registration Statement with the Commission or the
consummation of the transactions contemplated hereby, which right has
not been waived or lapsed;
(xviii) the Company is not an "investment company" within the
meaning of the Investment Company Act of 1940 and is not subject to
registration under such Act;
(xix) as of the date of the Prospectus, neither the Company
nor any of the Subsidiaries currently is planning any probable
acquisitions for which disclosure of pro forma financial information
would be required by the Act;
(xx) except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), since the
respective dates as of which information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
except as otherwise stated therein, (A) neither the Company nor any of
the Subsidiaries (1) has issued any securities other than in connection
with the exercise of any outstanding options, (2) incurred any material
liability or obligations, direct or contingent, for borrowed money, (3)
entered into any transaction, not in the ordinary course of business,
that is material to the Company and the Subsidiaries, taken as a whole,
(4) entered into any transaction with an affiliate of the Company (as
the term "affiliate" is defined in Rule 405 of the Act Regulations)
that would otherwise be required to be disclosed in the Prospectus or
the Registration Statement, or (5) declared or paid any dividend on its
capital stock, or made any other distribution to its equity holders,
(B) there has not been any material change in the
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Jefferies & Company, Inc.
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Johnson Rice & Company
March 2_, 1997
Page 8
capital stock or other equity, or material increase in the short-term
or long-term debt, of the Company or any of the Subsidiaries and (C)
there has been no change or development with respect to the condition
(financial or otherwise) or business of the Company and the
Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, that would have a Material Adverse Effect;
(xxi) the Company has not distributed and, prior to the later
to occur of (A) the Closing Date and (B) completion of the distribution
of the Shares, will not distribute without your prior consent any
offering material in connection with the offering and sale of the
Shares other than the Registration Statement, the Prospectus or other
materials, if any, permitted by the Act;
(xxii) prior to the Closing Date, the Shares will be duly
authorized for listing on the New York Stock Exchange upon official
notice of issuance;
(xxiii) neither the Company nor any Subsidiary is involved in
any labor dispute or, to the knowledge of the Company, is any dispute
threatened, other than disputes that would not have a Material Adverse
Effect;
(xxiv) neither the Company nor any Subsidiary nor, to the best
of its knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds of a character required to
be disclosed in the Prospectus;
(xxv) the Company and each of the Subsidiaries have filed (or
have obtained extensions thereto) all federal, state and local or
foreign tax returns that are required to be filed, which returns are
complete and correct in all material respects, and have paid all taxes
shown on such returns and all assessments with respect thereto to the
extent that the same have become due, except those taxes that are being
contested or protested in good faith by the Company or its Subsidiaries
or which the failure to have would not have a Material Adverse Effect;
(xxvi) except for the shares of capital stock of each of the
Subsidiaries, neither the Company nor any of the Subsidiaries owns any
shares of stock or any other securities of any corporation or has any
equity interest in any firm, partnership, association or other entity
other than as reflected in the consolidated financial statements
included in the Registration Statement and the Prospectus;
(xxvii) neither the execution or delivery of this Agreement,
the offer, issuance, sale or delivery of the Shares nor the
consummation by the Company of the terms of this Agreement (A) requires
the consent, approval, authorization or order of any court or
governmental agency or body, except such as have been obtained under
the Act and such as may be required under the state securities or blue
sky laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters or
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Johnson Rice & Company
March 2_, 1997
Page 9
such as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") and such other approvals as have been
obtained, (B) will conflict with, result in a breach of, or constitute
a default under the terms of any indenture, agreement, lease or other
instrument to which the Company or any of the Subsidiaries is a party
or by which any of them or any of their respective properties may be
bound, or will result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to
which any of them is a party or by which any of them may be bound or to
which any of the property or assets of any of them is subject, (C) will
conflict with or violate any law, order, statute, regulation, consent
or memorandum of understanding applicable to the Company or any
Subsidiary of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or
any of the Subsidiaries (in the case of (B) or (C) above, where such
conflict, breach, default or violation, individually or in the
aggregate, would have a Material Adverse Effect), or (D) will conflict
with or violate the certificate of incorporation or by-laws or other
organizational documents of the Company or any Subsidiary;
(xxviii) the Company has not taken, directly or indirectly,
any action designed to cause or result in or that has constituted or
that might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate
the sale or resale of the Shares;
(xxix) the Company and each of the Subsidiaries (A) are in
compliance with any and all applicable federal, state, local and
foreign laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (B) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their business and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or approvals or failure
to comply with the terms and conditions of such permits, licenses or
approvals would not have a Material Adverse Effect; and
(xxx) there are no costs or liabilities, to the Company's
knowledge after due inquiry, associated with the effect of
Environmental Laws on the business, operations and properties of the
Company and its Subsidiaries that would have a Material Adverse Effect.
(b) The Selling Stockholder represents and warrants to the
Underwriters as of the Representation Date and as of the Closing
Date, as follows:
(i) The Selling Stockholder now has, and on the Closing Date
will have, valid title to the Shares to be sold by the Selling
Stockholder pursuant to this Agreement,
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Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 10
free and clear of any security interests, liens, encumbrances, equities
or other claims, including, without limitation, any restriction on
transfer (except for restrictions imposed by applicable federal or
state securities laws) other than as specified on the certificate(s)
representing such Shares.
(ii) The Selling Stockholder now has, and on the Closing Date
will have, full legal right, power and authorization, and any approval
required by law (except such as may be required under the Act or such
as may be required by the NASD or under state securities or blue sky
laws governing the purchase and distribution of the Shares), to sell,
assign, transfer and deliver the Shares to be sold by the Selling
Stockholder pursuant to this Agreement in the manner provided in this
Agreement, and upon delivery of and payment for such Shares hereunder,
the several Underwriters will acquire valid title to such Shares free
and clear of any adverse claims, assuming that the Underwriters have
acquired such Shares for value, in good faith and without notice of any
adverse claim.
(iii) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder.
(iv) Neither the execution and delivery of this Agreement by
or on behalf of the Selling Stockholder nor the consummation of the
transactions herein contemplated by or on behalf of the Selling
Stockholder requires any consent, approval, authorization or order of,
or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official
(except such as may be required under the Act or such as may be
required by the NASD or under state securities or blue sky laws
governing the purchase and distribution of the Shares) or conflicts or
will conflict with or constitutes or will constitute a breach of, or
default under, or violates or will violate, any agreement, indenture or
other instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder is or may be bound or to which any of the
Selling Stockholder's property or assets is subject, or any statute,
law, rule, regulation, ruling, judgment, injunction, order or decree
applicable to the Selling Stockholder or to any property or assets of
the Selling Stockholder, which breach, default or violation would
impair the Selling Stockholder's ability to perform under this
Agreement and would have any adverse impact on the Company or the
Underwriters under this Agreement.
(v) The information with respect to the Selling Stockholder
contained in the section entitled "Selling Stockholder" in the
Prospectus does not and will not on the Closing Date contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(vi) The Selling Stockholder has not taken, directly or
indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or
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Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 11
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Shares, except for the lock-up arrangements described in
the Prospectus.
(c) Any certificate signed by any officer of the Company or the Selling
Stockholder delivered to the Underwriters or to counsel for the Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Company or the Selling Stockholder, as the case may be, to each
Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriters; Closing.
(a) Subject to the terms and conditions set forth herein, and
subject to adjustments as you may determine to avoid fractional shares:
(i) the Company agrees to sell to each Underwriter, severally
and not jointly, and, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, each Underwriter, severally and not jointly, agrees
to purchase from the Company, at a purchase price of $__________ per
share (the "Initial Price"), the aggregate number of Firm Shares that
bears the same proportion to the aggregate number of Firm Shares to be
issued and sold by the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I (or such number of
Firm Shares increased as provided in Section 9 hereof) bears to the
aggregate number of Firm Shares to be sold by the Company and the
Selling Stockholder. The Company will have no obligation to sell to the
Underwriters any of such Firm Shares that are being issued and sold by
the Company hereunder unless the Underwriters purchase all of the Firm
Shares hereunder; and
(ii) the Selling Stockholder agrees, severally and not
jointly, to sell to each Underwriter, severally and not jointly, and,
on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, each Underwriter,
severally and not jointly, agrees to purchase from the Selling
Stockholder at the Initial Price, the aggregate number of Firm Shares
that bears the same proportion to the aggregate number of Firm Shares
to be sold by the Selling Stockholder as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares increased as provided in Section 9 hereof)
bears to the aggregate number of Firm Shares to be sold by the Company
and the Selling Stockholder, and the Selling Stockholder will have no
obligation to sell to the Underwriters any of the Firm Shares to be
sold by the Selling Stockholder hereunder unless the Underwriters
purchase all of such Firm Shares hereunder.
(b) The Company grants to the Underwriters an option to purchase all or
any part of the Additional Shares at the Initial Price. Additional
Shares shall be purchased from the Company, severally and not jointly,
for the accounts of the Underwriters in proportion to the
<PAGE> 12
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 12
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter. Such option may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time on or before 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date (as hereinafter defined), and only once
thereafter within 30 days after the date of the Prospectus, in each case upon
written or telegraphic notice, or oral or telephonic notice confirmed by written
or facsimile notice, by the Underwriters to the Company no later than 12:00
noon, New York City time, on the business day before the Firm Shares Closing
Date or at least two business days before the Additional Shares Closing Date (as
hereinafter defined), as the case may be, setting forth the number of Additional
Shares to be purchased and the time and date (if other than the Firm Shares
Closing Date) of such purchase.
(c) Payment of the purchase prices for, and delivery of, the Firm
Shares to be purchased by the Underwriters shall be made at the offices of
Jefferies & Company, Inc., 39 Broadway, New York, New York 10006, or at such
other place as shall be agreed upon by the Underwriters and the Company, at
10:00 A.M., New York City time, on the third or fourth business day following
the date of the Registration Statement becomes effective (or, if the Company
elected to rely upon Rule 430A, the fourth business day after the date of
execution of this Agreement), or such other time not later than ten business
days after such date as shall be agreed upon by the Underwriters and the Company
(such time and date of payment and delivery being herein called the "Firm Shares
Closing Date"). Payment shall be made to the Company and the Selling
Stockholder, as the case may be, by wire transfer or in same day funds payable
to the order of the Company or the Selling Stockholder, as applicable, against
delivery to the Underwriters of the Firm Shares.
(d) Payment of the purchase price for, and delivery of, the Additional
Shares to be purchased by the Underwriters shall be made at the office as set
forth above or at such other place as shall be agreed upon by the Underwriters
and the Company at the time and on the date (which may be the same as, but in no
event shall be earlier than, the Firm Shares Closing Date) specified in the
notice referred to in Section (such time and date of delivery and payment being
herein called the "Additional Shares Closing Date"). The Firm Shares Closing
Date and the Additional Shares Closing Date are called, individually, the
"Closing Date" and together, the "Closing Dates". Payment shall be made to the
Company by wire transfer in same day funds payable to the order of the Company
against delivery to the Underwriters of the Additional Shares.
(e) Certificates representing the Shares shall be in such denominations
and registered in such names as the Underwriters may request in writing at least
two business days before the Firm Shares Closing Date or, in the case of
Additional Shares, on the day of notice of exercise of the option as described
in Section . The certificates representing the Shares will be made available for
examination and packaging by the Underwriters not later than 1:00 P.M., New York
City time, on the last business day prior to the Firm Shares Closing Date (or
the Additional Shares Closing Date in the case of the Additional Shares) at such
place as is designated by the Underwriters.
<PAGE> 13
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 13
SECTION 3. Covenants of the Company.
The Company covenants with each of the Underwriters as follows:
(a) the Company will use its best efforts to cause the Registration
Statement, if not effective at the Representation Date, and any amendment
thereof, to become effective, as promptly as possible after the filing thereof.
The Company will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus to which the Underwriters shall
reasonably object in writing after a reasonable opportunity to review such
amendment or supplement. Subject to the foregoing sentences in this clause (a),
if the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus or supplement to the Prospectus is otherwise
required under Rule 424(b), the Company will cause the Prospectus, properly
completed, or such supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the Underwriters of such timely filing.
The Company will promptly advise the Underwriters (i) when the Registration
Statement, if not effective at the Representation Date, and any amendment
thereto, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b), (iii) when any amendment to the Registration Statement
shall have been filed or become effective, (iv) of any request by the Commission
for any amendment of the Registration Statement or supplement to any Prospectus
or for any additional information, (v) of the receipt by the Company of any
notification of, or if the Company otherwise has knowledge of, the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order and, if issued, to obtain as soon as possible the lifting
thereof;
(b) if, at any time when a prospectus relating to the Shares is
required to be delivered under the Act or the Act Regulations, any event occurs
as a result of which the Prospectus as then amended or supplemented would
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if it shall be necessary to amend the Registration Statement or amend or
supplement the Prospectus to comply with the Act or the Act Regulations, the
Company promptly will prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section , an amendment or supplement
that will correct such statement or omission or effect such compliance.
(c) the Company consents to the use of the Prospectus in accordance
with the provisions of the Act and with the securities or blue sky laws of the
jurisdictions in which the Shares are offered by the Underwriters and by all
dealers to whom Shares may be sold, both
<PAGE> 14
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 14
in connection with the offering and sale of the Shares and for such period of
time thereafter as the Prospectus is required by the Act to be delivered in
connection with the sales by any Underwriter or dealer. The Company will comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
so far as necessary to permit the continuance of sales of or dealing in the
Shares in accordance with the provisions hereof and the Prospectus;
(d) as soon as practicable, the Company will make generally available
to its securityholders and to the Underwriters a consolidated earnings statement
or statements of the Company and the Subsidiaries covering a twelve-month period
beginning after the Effective Date that will satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act Regulations;
(e) the Company will furnish to the Representatives, without charge,
four signed copies of the Registration Statement (including exhibits thereto and
all documents incorporated by reference therein) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, or the Act
Regulations, as many copies of the Prospectus and all amendments and supplements
thereto as the Underwriters may reasonably request;
(f) during the period of five years hereafter, the Company will furnish
to you, as soon as practicable after the end of each fiscal year, a copy of its
annual report to shareholders for such year; and the Company will furnish to you
(i) as soon as available, a copy of each report or definitive proxy statement of
the Company filed with the Commission under Exchange Act or mailed to
shareholders, and (ii) from time to time, such other information concerning the
Company as you may reasonably request, provided that prior to the Company's
furnishing any such other information that is non-public, you shall enter into
an agreement, in such form as the Company shall reasonably request, with respect
to the confidentiality of such information;
(g) the Company will not, and will cause each of its executive officers
and directors to enter into agreements with the Underwriters in the form set
forth in Exhibit A to the effect that they will not, for a period of 90 days
following the date of the Prospectus, without prior written consent of Jefferies
& Company, Inc., offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any shares of Common Stock
or any securities convertible into, or exchangeable for, shares of Common Stock;
provided, however, that the Company may issue and sell Common Stock pursuant to
any stock bonus plan, stock grant plan or stock option plan in effect as of the
date of the Prospectus;
(h) the Company will comply with all the provisions of any undertakings
contained in the Registration Statement;
(i) the Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in accordance with the description set
forth in the "Use of Proceeds" section of the Prospectus;
<PAGE> 15
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Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 15
(j) the Company will cooperate with the Underwriters and their counsel
in connection with endeavoring to obtain and maintain the qualification or
registration, or exemption from qualification, of the Shares for offer and sale
under the applicable securities laws of such states and other jurisdictions of
the United States as the Underwriters may designate; provided, that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
taxation or general service of process in any jurisdiction where it is not now
so subject; and
(k) the Company will cause the Shares to be duly listed on the New
York Stock Exchange.
SECTION 4. Covenants of the Selling Stockholders.
The Selling Stockholder covenants with each of the Underwriters as
follows:
(a) The Selling Stockholder shall cooperate to the extent reasonably
necessary to cause the Registration Statement, if not effective at the
Representation Date, and any amendment thereof, to become effective, as promptly
as possible after the filing thereof.
(b) Without prejudice to any rights the Selling Stockholder may have
against the Company, the Selling Stockholder shall pay all federal and other
taxes, if any, on the transfer or sale of the Shares being sold by the Selling
Stockholder to the Underwriters.
(c) The Selling Stockholder shall do or perform all things required to
be done or performed by the Selling Stockholder prior to the Firm Shares Closing
Date to satisfy all conditions precedent to the delivery of and the payment for
the Shares to be sold by the Selling Stockholder pursuant to this Agreement.
(d) The Selling Stockholder will not at any time, directly or
indirectly, take any action intended, or that might reasonably be expected, to
cause or result in, or that will cause, stabilization of the price of the shares
of Common Stock to facilitate the sale or resale of any of the Shares.
(e) The Selling Stockholder will advise the Representatives promptly,
and if requested by the Representatives will confirm such advice in writing, of
any change in the information relating to the Selling Stockholder contained in
the Registration Statement under the caption "Selling Stockholder".
SECTION 5. Payment of Expenses.
The Company will pay, or reimburse if paid by the Underwriters, all
actual and reasonable costs and expenses incident to the performance of the
obligations of the Company and the Selling Stockholder under this Agreement,
including (i) the fees, disbursements and expenses of counsel and accountants
for the Company and the Selling Stockholder and all
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Jefferies & Company, Inc.
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Johnson Rice & Company
March 2_, 1997
Page 16
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus, the Prospectus, and any
amendments or supplements thereto, and the mailing and delivery of copies
thereof to the Underwriters and dealers, (ii) the cost of reproducing the
Agreement Among Underwriters, this Agreement, the Selling Agreement, any Dealer
Agreements, the Underwriters' Questionnaire and the Blue Sky Memorandum (in both
preliminary and final form); (iii) all expenses in connection with qualification
of the Shares for offering and sale under state securities laws as provided in
Section hereof, including filing and registration fees and the fees,
disbursements and expenses of counsel for the Underwriters in connection with
such qualification and in connection with Blue Sky surveys; (iv) the filing fees
incident to securing any required review by the NASD; (v) the cost of preparing
stock certificates; (vi) all fees of the Company's transfer agent and registrar;
(vii) any fees for including the Shares on the New York Stock Exchange; and
(viii) all other costs and expenses incident to the performances of its
obligations hereunder that are not otherwise specifically provided for in this
Section.
If this Agreement is terminated by the Underwriters because of any
failure or refusal on the part of the Company or the Selling Stockholder to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company shall reimburse the Underwriters for all of their reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters. The Company shall not in any event be liable to
any of the Underwriters for consequential damages including loss of anticipated
profits from the transactions covered by this Agreement.
SECTION 6. Conditions of the Underwriters' Obligation.
The obligation of the Underwriters to purchase the Shares hereunder is
subject to the continued accuracy of the representations and warranties of the
Company and the Selling Stockholder herein contained, to the accuracy of the
statements of the Company and the Selling Stockholder made in any certificates
pursuant to the provisions hereof, to the performance by the Company and the
Selling Stockholder of its obligations hereunder and to the following further
conditions:
(a) the Registration Statement shall have become effective, and you
shall have received notice thereof, not later than 5:30 p.m., Washington D.C.
time, on the date hereof, or such later time and date as shall be approved by
the Representatives and the Company and shall remain effective at the Closing
Date. No stop order suspending the effectiveness of the Registration Statement
shall have been issued under the Act or proceedings therefor initiated or
threatened by the Commission. No order suspending the effectiveness of the
Registration Statement or the qualification or registration of the Shares under
the securities or blue sky laws of any jurisdiction shall be in effect or
proceedings therefor initiated or threatened by the Commission or the
authorities of any such jurisdiction. If the Company has elected to rely upon
Rule 430A, the price of the Shares and any price-related or other information
previously omitted from the effective Registration Statement pursuant to Rule
430A shall have been transmitted to the Commission for filing pursuant to Rule
424(b) within the prescribed time
<PAGE> 17
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 17
period, and, prior to the Closing Date, the Company shall have provided evidence
satisfactory to the Underwriters of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and declared
effective in accordance with the requirement of Rule 430A;
(b) subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business, properties,
condition (financial or other) or results of operations of the Company and the
Subsidiaries, taken as a whole, which, in the reasonable judgment of the
Underwriters, materially impairs the investment quality of the Shares and
constitutes a Material Adverse Effect; (ii) any material loss or interference
with the business or properties of the Company or any of the Subsidiaries from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, that is not set forth in the Registration Statement and
the Prospectus, if in the reasonable judgment of the Underwriters any such
development makes it impracticable or inadvisable to proceed with completion of
the sale of and payment for the Shares; (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange or The Nasdaq
National Market, or any setting of minimum prices for trading on such exchange
or system, or any suspension of trading of any securities of the Company on any
exchange or system or in the over-the-counter market; (iv) any banking
moratorium declared by federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the reasonable judgment of the
Underwriters, the effect of any such outbreak, escalation, declaration, calamity
or emergency makes it impractical or inadvisable to proceed with completion of
the sale of and payment for the Shares;
(c) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of the Subsidiaries or
any of their respective officers or directors in their capacities as such,
before or by any federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, or
arbitrator, in which litigation or proceeding an unfavorable ruling, decision or
finding would have a Material Adverse Effect;
(d) each of the representations and warranties of the Selling
Stockholder contained herein shall be true and correct at the Closing Date, as
if made at the Closing Date, and all covenants and agreements contained herein
to be performed on the part of the Selling Stockholder, and all conditions
contained herein to be fulfilled or complied with by the Selling Stockholder at
or prior to the Closing Date, shall have been duly performed, fulfilled or
complied with, and the Representatives shall have received a certificate to such
effect, dated the Closing Date and signed by or on behalf of the Selling
Stockholder;
<PAGE> 18
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 18
(e) the Underwriters shall have received an opinion from Vinson &
Elkins L.L.P., counsel for the Company, satisfactory in form and substance to
counsel for the Underwriters, dated as of each Closing Date, to the effect set
forth in Exhibit B;
(f) the Underwriters shall have received an opinion from Ronald C.
Potter, Esq., counsel for the Company, satisfactory in form and substance to
counsel for the Underwriters, dated as of each Closing Date, to the effect set
forth in Exhibit C;
(g) the Underwriters shall have received a favorable opinion, dated as
of each Closing Date, of Fulbright & Jaworski L.L.P., counsel for the
Underwriters, with respect to such matters as may be reasonably requested by the
Underwriters, and you shall have provided such counsel with such papers and
information as they may reasonably request to enable them to provide such
opinion;
(h) on the Firm Shares Closing Date, the Underwriters shall have
received an opinion from legal counsel for the Selling Stockholder, satisfactory
in form and substance to counsel for the Underwriters, dated as of the Firm
Shares Closing Date, to the effect set forth in Exhibit D;
(i) the following conditions contained in clauses (i), (ii) and (iii)
of this Section shall have been satisfied on and as of each Closing Date and the
Company shall have furnished to the Underwriters a certificate of the Company,
signed by the President and the principal financial or accounting officer of the
Company, dated such Closing Date to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplement or amendment to the Prospectus, and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date and the Company has complied
with all the agreements and satisfied all the conditions under this
Agreement on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus, there has been no change to the financial
condition of the Company that would have a Material Adverse Effect.
(j) At the Representation Date and at each Closing Date, Coopers &
Lybrand L.L.P., KPMG Peat Marwick LLP and Arthur Andersen LLP shall have
furnished to the Underwriters, the Company and the Selling Stockholder a letter
or letters, dated respectively as of the date of this Agreement and each Closing
Date, in form and substance satisfactory to the
<PAGE> 19
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 19
Underwriters, containing statements and information of the type customarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial and statistical information
pertaining to the Company and the Subsidiaries contained in the Registration
Statement and the Prospectus.
(k) At the Representation Date, the Company shall have furnished to the
Underwriters a letter substantially in the form of Exhibit A hereto from each
executive officer and director of the Company and the Selling Stockholder,
addressed to the Underwriters, in which each such person agrees not to offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offering of, any shares of Common Stock beneficially owned by such
person or any securities convertible into, or exchangeable for, shares of Common
Stock for a period of 90 days following the date of the Prospectus without the
prior written consent of Jefferies & Company, Inc.
(l) At the Closing Date, counsel for the Underwriters shall have been
furnished with such information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein and related proceedings, or to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained, or otherwise in
connection with the offering contemplated hereby; and all opinions and
certificates mentioned above or elsewhere in this Agreement shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.
If any condition specified in this Section shall not have been fulfilled in all
material respects when and as required to be fulfilled, this Agreement may be
terminated by the Underwriters by notice to the Company and such termination
shall be without liability of any party to any other party except as provided in
Section 5.
SECTION 7. Indemnification and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and its respective officers, shareholders, employees, directors and
agents and any person who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any loss,
expense, damage, liability or claim (including the reasonable cost of
investigating such claim) that, jointly or severally, any such Underwriter or
any such officer, shareholder, employee, director, agent or controlling person
may incur under the Act, the Exchange Act or otherwise, as such expenses are
incurred, insofar as such loss, expense, damage, liability or claim arises out
of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof) or any omission or
alleged omission to state a material fact required to be stated in such
Registration Statement or necessary to make the statements made therein not
misleading or any untrue statement or alleged untrue statement of a material
fact contained in a Prospectus (the term Prospectus for the purpose of this
Section being deemed to include any Preliminary
<PAGE> 20
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 20
Prospectus, the Prospectus, the Prospectus as amended or supplemented and any
document filed under the Exchange Act and incorporated by reference into the
Prospectus) or any omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, the Company will not be liable in any such case to the extent any such
loss, expense, damage, liability or claim arises out of or is based upon any
untrue statement or omission or alleged untrue statement or omission that has
been made therein or omitted therefrom in reliance upon and in conformity with
the information provided in writing to the Company by or on behalf of the
Selling Stockholder or any Underwriter, expressly for use in the Registration
Statement or the Prospectus; and provided, further that with respect to any
untrue statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus the indemnity agreement contained in this Section shall
not inure to the benefit of any such indemnified Underwriter or its respective
officers, shareholders, employees, directors and agents, and the Company shall
not be liable to any such indemnified Underwriter or its respective officers,
shareholders, employees, directors and agents, from whom the person asserting
any such losses, claims, expense, damage, or liabilities purchased the Shares
concerned, to the extent that any such loss, claim, expense, damage or liability
of such indemnified Underwriter or its respective officers, shareholders,
employees, directors, and agents results from the fact that there was not sent
or given to such person at or prior to the written confirmation of the sale of
such shares to such person, a copy of the Prospectus, as the same may be amended
or supplemented, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in such Prospectus and the Company had
previously furnished copies thereof to such indemnified Underwriter on a timely
basis to permit the Prospectus (as the same may be amended or supplemented) to
be sent or given. The Company agrees that the only such information provided in
writing by or on behalf of any Underwriter to the Company, expressly for use in
the Registration Statement or the Prospectus, is that information contained in
the table and the second, fifth and eighth paragraphs following the table in the
section of the Prospectus entitled "Underwriting" and the last paragraph on the
cover page of the Prospectus. The foregoing indemnity agreement shall be in
addition to any liability that the Company may otherwise have.
(b) The Selling Stockholder agrees to indemnify, defend and hold
harmless each Underwriter and its respective officers, shareholders, employees
and directors and any person who controls any Underwriter within the meaning of
Section 15 of the Act from and against any loss, expense, liability or claim
(including the reasonable cost of investigating such claim) that, jointly or
severally, any such Underwriter or any such officer, shareholder, employee,
director or controlling person may incur under the Act, the Exchange Act or
otherwise, as such expenses are incurred, insofar as such loss, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact supplied by the Selling Stockholder
for use in the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof) or any omission or alleged
omission to state a material fact required to be stated in such Registration
Statement or necessary to make the statements made therein not misleading or any
untrue statement or alleged untrue
<PAGE> 21
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 21
statement of a material fact contained in a Prospectus (the term Prospectus for
the purpose of this Section being deemed to include any Preliminary Prospectus,
the Prospectus, the Prospectus as amended or supplemented and any document filed
under the Exchange Act and incorporated by reference into the Prospectus) or any
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any Preliminary Prospectus, the indemnity
agreement contained in this Section shall not inure to the benefit of any such
indemnified Underwriter or its respective officers, shareholders, employees and
directors, and the Selling Stockholder shall not be liable to any such
indemnified Underwriter or its respective officers, shareholders, employees and
directors, from whom the person asserting any such losses, claims, damage, or
liabilities purchased the Shares concerned, to the extent that any such loss,
claim, damage or liability of such indemnified Underwriter or its respective
officers, shareholders, employees and directors results from the fact that there
was not sent or given to such person at or prior to the written confirmation of
the sale of such shares to such person, a copy of the Prospectus, as the same
may be amended or supplemented, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in such Preliminary Prospectus was corrected in such Prospectus and the
Company had previously furnished copies thereof to such indemnified Underwriter
on a timely basis to permit the Prospectus (as the same may be amended or
supplemented) to be sent or given, and provided further, that the liability of
the Selling Stockholder pursuant hereto shall not exceed an amount equal to the
net proceeds received by the Selling Stockholder from the sale of its Shares
hereunder to the Underwriter. The Underwriters agree that the only information
provided in writing by or on behalf of the Selling Stockholder expressly for use
in the Registration Statement is that information contained in the section of
the Prospectus entitled "Selling Stockholder".
(c) Each Underwriter agrees to indemnify, defend and hold harmless the
Selling Stockholder, the Company and their respective officers, shareholders,
employees and directors and any person who controls either of them within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any loss, expense, damage, liability or claim (including the reasonable
cost of investigating such claim) that the Selling Stockholder, Company or any
such officer, shareholder, employee, director or controlling person may incur
under the Act, the Exchange Act or otherwise to the same extent as the
provisions of Section 7.(a) above, but only insofar as such loss, expense,
damage, liability or claim arises out of or is based upon any untrue statement
or omission or alleged untrue statement or omission made in reliance or in
conformity with information relating to such Underwriter furnished in writing to
the Company by or on behalf of such Underwriter, expressly for use in the
Registration Statement or the Prospectus. The Selling Stockholder and the
Company agree that the only information provided in writing by or on behalf of
the Underwriters to the Company, expressly for use in the Registration Statement
or the Prospectus, is that information contained in the table and the second,
fifth and eighth paragraphs following the table in the section of the Prospectus
entitled "Underwriting" and the last paragraph on the cover page of the
Prospectus.
<PAGE> 22
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 22
(d) If any action is brought against an indemnified party under this
Section , the indemnified party or parties shall promptly notify the
indemnifying party in writing of the institution of such action (provided that
the failure to give such notice shall not relieve the indemnifying party of any
liability that it may have pursuant to this Agreement, unless and to the extent
the indemnifying party did not otherwise learn of such action and such failure
has resulted in the forfeiture of substantive rights or defenses by the
indemnifying party) and the indemnifying party shall assume the defense of such
action, including the employment of counsel and payment of reasonable expenses.
The indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
take charge of the defense of such action within a reasonable time after notice
of the institution of such action or (iii) the named parties to any such
proceeding (including any impleaded parties) include both an indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between the named parties (in
which case the indemnifying party shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying party and paid
as incurred; provided that the indemnifying party shall only be responsible for
the fees and expenses of one counsel for the indemnified party or parties
hereunder. Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim or
action effected without its written consent, which consent shall not be
unreasonably withheld.
(e) If the indemnification provided for in this Section is unavailable
to an indemnified party under subsection (a), (b) or (c) of this Section in
respect of any losses, damages, expenses, liabilities or claims referred to
therein, then each applicable indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, damages,
expenses, liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Selling Stockholder on the one hand and
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other hand shall be deemed to be in the same proportion
as the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and the
Selling Stockholder bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the Company and the Selling
Stockholder on the one hand and of the Underwriters on the other hand shall be
determined by reference to, among other
<PAGE> 23
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 23
things, whether the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission relates to information supplied by the
Company, the Selling Stockholder or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim
or action.
(f) The Company, the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in Section
above. Notwithstanding the provisions of this Section , (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discount
received by it by reason of such untrue statement or alleged untrue statement or
omission or alleged omission, (ii) the Selling Stockholder shall not be required
to contribute any amount in excess of the gross proceeds received by the Selling
Stockholder from the sale of the Shares pursuant to this Agreement and (iii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnity and contribution agreements contained in Section , and the
covenants, representations and warranties of the Company and the Selling
Stockholder contained in this Agreement or contained in certificates of officers
of the Company and the Selling Stockholder submitted pursuant hereto, shall
remain in full force and effect, regardless of any investigation, or statement
as to the results thereof, made by or on behalf of any Underwriter or any of its
respective officers, employees, directors, shareholders, agents or any person
who controls any Underwriters, or by or on behalf of the Company or the Selling
Stockholder or any of the officers or directors or any controlling person of the
Company or the Selling Stockholder, as the case may be, and will survive
delivery of and payment for the Shares.
SECTION 9. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Shares hereunder on either the Firm Shares
Closing Date or the Additional Shares Closing Date and the aggregate number of
Shares that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of Shares that the Underwriters
are obligated to purchase on such Closing Date, the Representatives may make
arrangements satisfactory to the Company and the Selling Stockholder for the
purchase of such Shares by other persons, including any of the Underwriters, but
if no such arrangements are made by such Closing Date the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Shares that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of Shares with respect to which
such default or defaults occur exceeds 10% of the total number of Shares that
the Underwriters are obligated to purchase on such Closing
<PAGE> 24
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 24
Date and arrangements satisfactory to the Representatives and the Company and
the Selling Stockholder for the purchase of such Shares by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter, the Company or the
Selling Stockholder, except as provided in this Section (provided that if such
default occurs with respect to the Additional Shares after the Firm Shares
Closing Date, this Agreement will not terminate as to the Firm Shares). As used
in this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 10. Notices. All notices and other communications hereunder will be in
writing and shall be deemed to have been duly given if mailed or transmitted
by standard form of telecommunication. Notices to the Underwriters shall be
directed to the Underwriters in care of:
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, California 90071
Attention of Jerry Gluck, Esq.
with a copy to: Curtis W. Huff, Esq.
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
or, if sent to the Company, directed to:
Parker Drilling Company
Parker Building
Eight East Third Street
Tulsa, Oklahoma 74103
Attention of Ronald C. Potter, Esq.
<PAGE> 25
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 25
with a copy to: T. Mark Kelly
Vinson & Elkins LLP
1001 Fannin
Houston, Texas 77002
or, if sent to the Selling Stockholder, directed to:
Energy Ventures, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: Bernard Duroc-Danner
SECTION 11. Parties. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Company and the Selling Stockholder and their
respective successors and legal representatives. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to provide any person, firm
or corporation, other than the Underwriters, the Company and the Selling
Stockholder and their respective successors and legal representatives and the
controlling persons, officers, employees, directors and shareholders referred to
in Sections and and their respective heirs and legal representatives, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein or therein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Stockholder and their respective
successors and legal representatives, and such controlling persons,
shareholders, officers and directors and their respective heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 12. Governing Law and Time. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in such State. Specified times of day refer
to New York time, unless otherwise specified.
SECTION 13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 26
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
March 2_, 1997
Page 26
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Company and the Underwriters in accordance with its terms.
Very truly yours,
PARKER DRILLING COMPANY
By:___________________________________
Name:_________________________________
Title:________________________________
SELLING STOCKHOLDER
Energy Ventures, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
JEFFERIES & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
JOHNSON RICE & COMPANY
As Representatives of the Several Underwriters
JEFFERIES & COMPANY, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE> 27
SCHEDULE I
UNDERWRITERS
Number of Firm
Shares to be
Name of Underwriter Purchased
- ------------------------------------------------------- --------------
Jefferies & Company, Inc...............................
Prudential Securities Incorporated.....................
Johnson Rice & Company.................................
Total 10,056,600
<PAGE> 28
SCHEDULE II
SUBSIDIARIES
Name Jurisdiction Ownership (%)
- ---------------------------- --------------------- --------------------
Choctaw International Rig Corporation (Nevada) 100
DGH, Inc. (Texas) 100
Parker Drilling Company Eastern Hemisphere, Ltd. (Oklahoma) 100
Parker Drilling Company International Limited (Nevada) 100
Parker Drilling Company Limited (Nevada) 100
Parker Drilling Company of Alaska, Limited (Alaska) 100
Parker Drilling Company of Oklahoma Inc. (Oklahoma) 100
Parker Drilling Company of South America, Inc. (Oklahoma) 100
Parker Drilling U.S.A. Ltd. (Nevada) 100
Parker Drilling Company North America, Inc. (Oklahoma) 100
Parker Drilling Company of New Guinea, Inc. (Oklahoma) 100
Parker Technology, Inc. (Oklahoma) 100
Vance Systems Engineering, Inc. (Texas) 100
Mallard Bay Drilling, Inc. (Louisiana) 100
Quall Tools, Inc. (Louisiana) 100
AWI Drilling & Workover, Inc. (Louisiana) 100
Bay Drilling Corporation (Louisiana) 100
Mallard Drilling International, Inc. (Cayman) 100
Mallard Argentine Holdings, Ltd. (Cayman) 100
Mallard Drilling of South America, Inc. (Cayman) 100
<PAGE> 29
EXHIBIT A
___________________, 1997
Jefferies & Company, Inc.
Prudential Securities Incorporated
Johnson Rice & Company
c/o Jefferies & Company, Inc.
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Dear Sirs:
The undersigned has been informed that you, as representatives of the
underwriters (the "Underwriters"), are planning to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Parker Drilling Company, a
Delaware corporation (the "Company"), and Energy Ventures, Inc. (the "Selling
Stockholder"), providing for the purchase by the Underwriters of 10,000,000
shares of the Company's common stock, $.16 2/3 par value (the "Common Stock")
from the Company and 3,056,600 shares of Common Stock from the Selling
Stockholder, with the right to purchase up to __________ additional shares of
Common Stock from the Company to cover over-allotments.
To induce you to enter into the Underwriting Agreement and in
consideration of the purchase and public offering by you of such shares of
Common Stock (which the undersigned considers to be in the best interests of the
Company and its shareholders and to the undersigned's benefit), the undersigned
agrees with the Underwriters that for a period of 90 days from the date of the
final Prospectus relating to such sale of Common Stock covered by the
Underwriting Agreement, the undersigned will not without the prior written
consent of Jefferies & Company, Inc., or unless pursuant to bona fide gifts to
persons or entities who agree to be bound by the provisions of this letter,
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce an offering of, any shares of Common Stock beneficially
owned by the undersigned or any securities convertible into, or exchangeable
for, shares of Common Stock.
Very truly yours,
A-1
<PAGE> 30
EXHIBIT B
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus;
(ii) there are no preemptive or other rights to subscribe for or to
purchase shares of capital stock of the Company, pursuant to any statute, the
articles of incorporation or by-laws of the Company;
(iii) to such counsel's knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of the Subsidiaries required
to be disclosed in the Prospectus that is not adequately disclosed in the
Prospectus;
(iv) to such counsel's knowledge, there is no contract or other
document of a character which is required to be filed as an exhibit to the
Registration Statement which has not been filed as required;
(v) the Registration Statement has become effective under the Act; any
required filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued, no proceedings for that purpose
have been instituted or threatened;
(vi) the statements in the Registration Statement and Prospectus under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business", insofar as they are descriptions of contracts,
agreements or other legal documents, are accurate in all material respects and
present fairly, the information required to be shown;
(vii) this Agreement has been duly authorized, executed and delivered
by the Company and the Company has full corporate power and authority to enter
into this Agreement;
(viii) no consent, approval, authorization or order of any court or
governmental agency or body is required in connection with the execution and
delivery of this Agreement or for the issuance and sale by the Company of the
Shares, except such as have been obtained under the Act and such as may be
required under the state securities or blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Shares by the Underwriters
and such other approvals (specified in such opinion) as have been obtained;
(ix) neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, will result in a breach
of, or constitute a default under, (a) the terms of any indenture or other
agreement or instrument (i) to which the Company or any of the Subsidiaries is a
party or by which it is bound and (ii) that is either filed as an exhibit to the
Registration Statement or is identified to such counsel as being material to the
Company and the Subsidiaries, taken as a whole, and listed on a schedule to such
counsel's opinion, (b) any law, statute, rule, order, regulation or decree of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or any of the Subsidiaries of
which such counsel is aware and that is known by such counsel
B-1
<PAGE> 31
to be applicable to the Company or any of the Subsidiaries (where such conflict,
breach or default would have a Material Adverse Effect and other than Federal or
state securities or blue sky laws, as to which such counsel need not express an
opinion in this subparagraph) or (c) the certificate of incorporation or by-laws
of the Company;
(x) the Shares have been duly and validly authorized by the Company for
issuance, and the Company has full corporate power and authority to issue, sell
and deliver the Shares; and, when the Shares are issued and delivered against
payment therefor as provided by this Agreement, the Shares will have been
validly issued and will be fully paid and nonassessable, and the issuance of
such Shares will not be subject to any statutory preemptive rights or similar
statutory rights;
(xi) the certificates for the Shares are in due and proper form under
Delaware law and the by-laws of the Company and conform with the form of
certificates duly authorized by the Board of Directors of the Company;
(xii) the Shares, when issued, will conform in all material respects to
the description thereof contained in the Prospectus and the Registration
Statement under the caption "Description of Capital Stock"; and
(xiii) the Company is not an "investment company" as defined under the
Investment Company Act or subject to registration under such Act.
In addition, such counsel shall state that such counsel is of the
opinion that the Registration Statement and the Prospectus (except the financial
statements, supporting schedules and other information of a financial nature
included therein, as to which such counsel does not express any opinion) comply
as to form in all material respects with the requirements of the Act and the
applicable Act Regulations. In passing upon the form of the Registration
Statement and the Prospectus, such counsel has necessarily assumed the
correctness and completeness of the statements made therein. Such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus (except to the extent set forth in subparagraphs
(iii), (iv) and (vi) above), and such counsel has not independently verified the
accuracy, completeness or fairness of such statements (except as aforesaid).
Without limiting the foregoing, such counsel assumes no responsibility for and
has not independently verified the accuracy, completeness or fairness of the
financial statements and other financial data included in the Registration
Statement and has not examined the financial or reserve records from which such
statements and data are derived. Such counsel notes that, although certain
portions of the Registration Statement have been included therein on the
authority of "experts" within the meaning of the Act, such counsel is not an
expert with respect to any portion of the Registration Statement. However, such
counsel shall state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent accountants of the Company, and with the underwriters'
representatives and counsel, at which the contents of the Registration Statement
and Prospectus and related matters were discussed. Such counsel has also
reviewed certain corporate documents furnished to them by the Company. Based on
such participation and review (relying as to materiality to a certain extent
upon the officers and the other representatives of the Company), and subject to
the limitations described above, such counsel shall state that no information
has come to such counsel's attention that causes them to believe that the
Registration Statement, at the time it became effective or as of the Closing
Date, contained or contains an untrue statement of a material fact or omitted or
omits to state
B-2
<PAGE> 32
a material fact required to be stated therein or necessary to make the
statements therein no misleading, or that the Prospectus, as of its date or as
of the Closing Date, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The opinions of such counsel relate solely to, are based solely upon
and are limited exclusively to the laws of the State of Delaware and the federal
laws of the United States of America, to the extent applicable.
B-3
<PAGE> 33
EXHIBIT C
(i) each of the Subsidiaries with foreign operations is duly registered
and qualified to conduct its business and is in good standing in each foreign
jurisdiction where the nature or location of its properties (owned or leased) or
the conduct of its business requires such registration or qualification, except
where the failure so to register or qualify would not have a Material Adverse
Effect;
(ii) to such counsel's knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator involving any of the Subsidiaries with respect to its
foreign operations required to be disclosed in the Prospectus that is not
adequately disclosed in the Prospectus;
(iii) to such counsel's knowledge, with respect to the foreign
operations of the Subsidiaries, there is no contract or other document required
to be described in the Registration Statement or Prospectus, or to be filed as
an exhibit, that is not described or filed as required;
(iv) with respect to the foreign operations of the Subsidiaries, the
statements in the Registration Statement and Prospectus, insofar as they are
descriptions of contracts, agreements or other legal documents, are accurate in
all material respects and present fairly the information required to be shown.
(v) each Significant Subsidiary as defined in the Act Regulations has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus;
(vi) each of the Company and the Significant Subsidiaries is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction where the nature or location of its properties (owned or leased) or
the conduct of its business requires such registration or qualification, except
where the failure so to register or qualify would not have a Material Adverse
Effect;
(vii) all the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of each such Subsidiary are owned of record
and, to such counsel's knowledge, beneficially by the Company, either directly
or through a wholly owned subsidiary of the Company, free and clear of any
perfected security interests and, to such counsel's knowledge, any other
security interests, liens, encumbrances, equities, other rights to purchase or
other claims;
(viii) there are no preemptive or other rights to subscribe for or to
purchase shares of capital stock of the Company pursuant to any statute, the
articles of incorporation or by-laws of the Company or, to such counsel's
knowledge, any agreement or other instrument to which the Company is a party as
to which any person can successfully maintain an action, suit or proceeding
against the Company for violation of his or her preemptive rights with respect
to the issuance of any shares of capital stock of the Company;
C-1
<PAGE> 34
(ix) all of the Company's issued and outstanding capital stock has been
duly authorized and validly issued and is fully paid and nonassessable as of the
date hereof and the authorized capital stock of the Company conforms in all
material respects to the descriptions thereof under the caption "Description of
Capital Stock" in the Prospectus;
(x) to such counsel's knowledge, there is no pending or threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of the Subsidiaries required
to be disclosed in the Prospectus that is not adequately disclosed in the
Prospectus; and
(xi) to such counsel's knowledge, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, to cause
the Company to sell or otherwise issue to such person, or to permit such person
to underwrite the sale of, any of the Shares or the right to have any Common
Stock or other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement, to
require registration under the Act of any shares of Common Stock or other
securities of the Company that has not been waived or lapsed.
In addition, such counsel shall also state that such counsel has
participated in conferences with representatives of the Underwriters, officers
and other representatives of the Company and representatives of the independent
certified public accountants of the Company and the Subsidiaries at which
conferences the contents of the Registration Statement and the Prospectus and
related matters were discussed and that, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except as set forth in clause (iv), (ix) or (x) of this Exhibit C),
on the basis of the foregoing (relying as to materiality upon officers and other
representatives of the Company), no facts have come to the attention of such
counsel that lead such counsel to believe that the Registration Statement at the
time it became effective or at the Representation Date and the Closing Date
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading or that the Prospectus, at the
Representation Date (unless the term "Prospectus" refers to a prospectus that
has been provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the Prospectus on file at the
Commission at the Representation Date, in which case at the time it is first
provided to the Underwriters for such use) or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, that such counsel need not express any comment with
respect to the financial statements and schedules contained therein, including
the notes thereto, the auditors' report thereon and the related summary of
accounting policies.
The opinions of such counsel relate solely to, are based solely upon
and are limited exclusively to the laws of the State of Delaware, the laws of
the State of Oklahoma and the federal laws of the United States of America, to
the extent applicable.
C-2
<PAGE> 35
EXHIBIT D
(i) the Agreement has been duly executed and delivered by or on behalf
of the Selling Stockholder;
(ii) to such counsel's knowledge, the Selling Stockholder has
corporate power and authority to sell, assign, transfer and deliver the Shares;
(iii) to such counsel's knowledge, the execution and delivery of the
Agreement by or on behalf of the Selling Stockholder and the sale of the Shares
pursuant to the terms thereof will not conflict with or violate, result in a
breach of or constitute a default under the terms or provisions of any
agreement, indenture, mortgage or other instrument to which the Selling
Stockholder is a party or by which it or any of its assets or property is bound
and which has been identified to such counsel as being material to the Selling
Stockholder and its subsidiaries, taken as a whole, or any court order or decree
or any laws, rule, or regulation (except such as may be required under the Act
or such as may be required by the NASD or under state securities or blue sky
laws governing the purchase and distribution of the Shares) applicable to the
Selling Stockholder or to any of the property or assets of the Selling
Stockholder, which breach, default or violation would impair the Selling
Stockholder's ability to sell the Shares pursuant to the terms of the Agreement;
and
(iv) upon delivery of the Shares that the Selling Stockholder has
agreed to sell pursuant to the Agreement and payment therefor as contemplated
therein and assuming the Underwriters are acquiring the Shares in good faith
without notice of any adverse claims, the Underwriters will acquire valid title
to such Shares free and clear of any adverse claims.
D-1
<PAGE> 1
EXHIBIT 4.1
RESTATED CERTIFICATE OF INCORPORATION
OF
PARKER DRILLING COMPANY
Parker Drilling Company, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Parker Drilling Company. The date
of filing of its original Certificate of Incorporation with the Secretary of
State was August 4, 1970.
2. Pursuant to Section 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Restated
Certificate of Incorporation of this corporation as heretofore amended or
supplemented and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation.
3. The text of the Restated Certificate of Incorporation, as amended
or supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
ARTICLE FIRST: The name of the corporation is Parker Drilling Company.
ARTICLE SECOND: Its registered office in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805. The name and address of its registered agent is The Prentice-Hall
Corporation System, Inc. 1013 Centre Road, Wilmington, Delaware 19805.
ARTICLE THIRD: The nature of the business, or objects and purposes to be
transacted, conducted or promoted are as follows:
(1) To carry on, maintain and operate a business for the drilling of
wells for the production of oil and/or gas and other hydrocarbons; to drill
wells for the production of oil or gas or carry on and conduct a general
drilling contracting business; and to operate a business for the drilling of
wells and holes whether or not for the production of oil and/or gas and other
hydrocarbons, and to drill for any purpose whatsoever;
<PAGE> 2
(2) To acquire, hold and deal in machinery, equipment and processes
for the drilling of wells, whether or not for the production of oil, gas and
other hydrocarbons;
(3) To do all such other and further things as are required and as
are usually done in the drilling of wells, whether or not for the production of
oil, gas and other hydrocarbons;
(4) To build, own, operate and sell any and all tank farms,
pipelines, pump stations, refineries and other structures necessary for or
incident to the drilling and operation of wells for the production of oil
and/or gas, or the sale of the production therefrom;
(5) To buy and sell oil and/or gas and the by-products thereof and to
acquire, construct, operate and sell filling and other stations for the
marketing of such products and by-products;
(6) To buy, sell, exchange, lease, store, install, maintain, repair,
export, import and deal in all machines, appurtenances, accessories, parts,
apparatus and articles of any and every kind used in, or upon, or useful in
connection with all kinds of motor driven or propelled machinery, including
automobiles, automobile trucks, tractors and other vehicles and motor boats,
and to do any and every act or thing necessary, incidental or appertaining
thereto;
(7) To purchase or otherwise acquire, hold, own, mortgage, pledge,
sell, assign and transfer or otherwise dispose of, to invest, trade, deal in
and with goods, wares and merchandise and real and personal property of every
class and description; and lands, buildings, business concerns and
undertakings, mortgages, shares, stock, debentures, securities, concessions,
products, policies, book debts and claims and any interest in real or personal
property, and claims against such property or against any person or corporation
and to carry on any business concern or undertaking so acquired;
(8) To acquire, own and operate such machinery, apparatus and
appliances as may be necessary, proper or incidental to the mining, production
and development of lands for petroleum oil, natural gas and other minerals, or
for any of the purposes for which this corporation is organized;
(9) To carry on the business of producers, refiners, storers,
suppliers and distributors of petroleum and petroleum products in all its
branches; to purchase or otherwise acquire real or personal property of all
kinds in the United States and elsewhere, and in particular land, oil wells,
refineries, mines, mining rights, minerals, ores, buildings, machinery, plant,
stores, patents, licenses, concessions, rights of way, light or water, and any
rights or privileges which it may deem convenient to obtain for the purposes of
or in connection with the business of the company, and whether for the purposes
of resale or realization or otherwise, and to manage, develop, sell, exchange,
lease, mortgage or otherwise develop any lands, wells, mines, mining rights,
minerals, ores, works or other properties, from time to time in the possession
of the company, in any manner deemed desirable; to erect all necessary or
convenient refineries, mills, works, machinery, laboratories, workshops,
dwelling houses for workmen and others, and other buildings, works and
appliances, and to aid in, or subscribe towards, or subsidize, any such
objects;
(10) To acquire, lease, hold, use and enjoy, whether as owner or a
licensee, United States and foreign patents and patent rights, secret patented
processes, methods, franchises and privileges
<PAGE> 3
in any way relating to or considered as furthering the due and economical
exercise of the powers and rights belonging to the corporation;
(11) To acquire, and pay for in cash, stock or bonds of this
corporation or otherwise, the good will, rights, assets and property, and to
undertake or assume the whole or any part of the obligations or liabilities of
any person, firm, association or corporation;
(12) To acquire, hold, use, sell, assign, lease, grant licenses in
respect of, mortgage, or otherwise dispose of letters patent of the United
States or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks, and trade
names, relating to or useful in connection with any business of this
corporation;
(13) To buy, acquire, hold, sell and deal in stocks of any corporation
and in bonds, certificates of participation, securities and other interests; to
issue notes, stocks, bonds, debentures and other evidences of indebtedness and
execute mortgages, liens and other encumbrances upon the property of the
corporation, real or otherwise, to secure the payment of any such evidences of
indebtedness;
(14) To buy, acquire, develop, hold, sell and deal in all forms and
kinds of property that may be lawfully acquired, held, sold and dealt in by oil
and gas corporations under the laws of this State;
(15) To acquire, hold and sell real estate necessary for and incident
to the operation of the business of the corporation and to transact any and all
business connection with or incidental to the powers hereby vested in said
corporation;
(16) To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware;
(17) In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of Delaware or by this certificate of
incorporation, together with any powers incidental thereto, so far as such
powers and privileges are necessary or convenient to the conduct, promotion or
attainment of the business or purposes of the corporation;
(18) The business and purposes specified in the foregoing clauses
shall, except where otherwise expressed, be in no way limited or restricted by
reference to, or inference from, the terms of any other clause in this
certificate of incorporation, but the business and purposes specified in each
of the foregoing clauses of this article shall be regarded as independent
business and purposes;
ARTICLE FOURTH: The aggregate number of shares of all classes of stock
which the corporation shall have authority to issue is 121,942,000 of which
1,942,000 shares shall be Preferred Stock of the par value of One Dollar
($1.00) per share (hereinafter called "Preferred Stock"), and the remaining
120,000,000 shares shall be Common Stock of the par value of sixteen and two-
thirds cents ($.16-2/3) per share (hereinafter called "Common Stock"). The
designations and the powers, preferences and rights, and the qualifications,
limitations restrictions and other special or relative
<PAGE> 4
attributes granted to or imposed upon the shares of Preferred Stock shall be as
fixed in Section 1 of this ARTICLE FOURTH, or as may be fixed by the Board of
Directors in accordance with the provisions thereof, and the designations and
the powers, preferences and the rights, and the qualifications, limitations,
restrictions and other special or relative attributes granted to or imposed
upon the shares of Common Stock shall be fixed in Section 2 of this ARTICLE
FOURTH.
Section 1. Statement of Designations, Powers, Preferences, Rights,
Qualifications, Limitations, Restrictions and Other Special or Relative
Attributes in Respect of Shares of Preferred Stock and Authority of Board of
Directors to Fix Designations, Dividend Rates, Conversion Rights, Redemption
Rights, Liquidation Price and Sinking Fund Rights Thereof Not Fixed Hereby.
(a) Shares of Preferred Stock may be issued from time to time in
one or more series as may be determined from time to time Board of
Directors, each such series to be distinctly designated. All shares of
any one series of Preferred Stock so designated by the Board of
Directors shall be alike in every particular. All shares of any one
series of Preferred Stock shall be convertible or not, as determined by
the Board of Directors as a relative attribute pursuant to paragraph (b)
of this Section 1. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of
voting by classes.
(b) The designations, dividend rates, conversion rights,
redemption rights, liquidation price and sinking fund rights, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding; and,
subject to the provisions of paragraphs (d) and (e) of this Section 1,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix, from time to time, by resolution or resolutions duly
adopted prior to the issuance of any shares of a particular series of
Preferred Stock so designated by the Board of Directors, the following:
(i) The number and designations of series of shares in
any class and the number of shares in any series, provided that
no allotted shares shall, except in the exercise of conversion
rights, be shifted from one series or class to another series or
class or otherwise have their attributes altered;
(ii) The dividend rate of any unallotted shares of any
series or class;
(iii) The right, if any, of the holders of the shares of
such series to convert the same into, or exchange the same for,
shares of other classes or series of stock of this corporation
and the terms and conditions of such conversion or exchange;
(iv) The redemptive price and terms and conditions of
redemption of any unallotted shares of any series or class;
(v) The liquidation price of any unallotted shares of
any series or class; and
<PAGE> 5
(vi) The terms and conditions of a sinking fund, if any,
to be provided for such series, provided that no such sinking
fund shall be created unless provision for a sinking fund, at
least as beneficial to all allotted shares of the same class,
shall either then exist or at that time be created or provided
for.
(c) The holders of Preferred Stock of each series shall be
entitled to receive, in preference to the holders of Common
Stock, when and as declared by the Board of Directors out of the
funds of this corporation legally available therefor, cash
dividends which may be cumulative for each series as to which the
Board of Directors shall have so specified, but unless specified
to be cumulative, shall be non-cumulative, at the annual rate for
such series theretofore fixed by the Board of Directors as
hereinbefore authorized, and no more, payable quarterly on such
dates as may be fixed in the resolution or resolutions adopted by
the Board of Directors creating such series. If the dividend
period for such series for which the dividends are specified to
be cumulative shall not have been declared and paid or set apart
in full (whether or not earned), the aggregate deficiency shall
be cumulative and shall be fully paid or set apart for payment
before any dividends shall be paid upon or set aside for the
Common Stock, but not in the case of such series as to which the
dividends are not cumulative. Accumulations of dividends on the
Preferred Stock shall not bear interest.
After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of this
Section 1) shall have been met and after this corporation shall have
complied with all the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts (fixed
in accordance with the provisions of this Section 1), then and not
otherwise the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of
Directors.
(d) Shares of Preferred Stock of any and all series shall be
redeemable in whole at any time, or in part by lot, pro rata or by any
other means which the Board of Directors deems equitable from time to
time, at the option of this corporation by resolution of the Board of
Directors at the applicable price or prices fixed by the Board of
Directors for the shares of such series, plus all dividends accrued and
unpaid thereupon up to the date fixed for redemption, and all of the
procedures prescribed or adopted in connection therewith shall be in
conformity with the laws of the State of Delaware in force at the time
thereof.
Nothing herein shall prevent this corporation from purchasing
from time to time shares of any series of Preferred Stock, and any
shares so purchased may be held in the treasury of this corporation or
may be disposed of as determined by the Board of Directors, or, by
action of the Board of Directors, shall have the status of authorized
but unallotted shares of Preferred Stock undesignated as to series.
(e) In the event of any liquidation, dissolution or winding up
of the affairs of this corporation, whether voluntary or involuntary,
and after payment or provision for payment of the debts and other
liabilities of this corporation, the holders of shares of Preferred
Stock shall be entitled to receive in full, out of the net assets of
this corporation, the respective
<PAGE> 6
amounts fixed by the Board of Directors in the resolution or resolutions
authorizing the issue thereof (which amounts may vary, depending upon
whether the liquidation, dissolution or winding up is voluntary or
involuntary), plus an amount equal to all dividends accrued and unpaid
thereon up to the date fixed for distribution, and no more, before any
distribution shall be made to the holders of Common Stock. Neither the
merger or consolidation of this corporation, nor the sale, lease or
conveyance of all or part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the affairs of this
corporation within the meaning of this Section.
After distribution in full of the preferential amount to be
distributed to the holders of Preferred Stock (fixed in accordance with
the provisions of this Section 1) in the event of the voluntary or
involuntary liquidation, dissolution or winding up of this corporation,
the holders of Common Stock shall be entitled to receive all the
remaining assets of this corporation, tangible or intangible, or
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(f) Except as otherwise expressly provided in this Section 1,
or as may be required by law, the holders of the Preferred Stock shall
be entitled at all meetings of stockholders to one vote for each share
of such stock held by them respectively, and the holders of all series
of Preferred Stock shall vote together with the holders of Common Stock
as one class.
If and whenever dividends on the Preferred Stock shall be in
arrears in an amount equivalent to six quarterly dividends or there
shall be a default in mandatory Preferred Stock sinking fund obligations
for one year, then, at any ensuing annual meetings of the stockholders
at which at least one-third of the outstanding shares of Preferred
Stock, voting separately as a class without regard to series, shall be
entitled to elect two directors. Such right of the holders of such of
the series of the Preferred Stock as to which dividends are cumulative
shall continue to be exercisable until all dividends in arrears on such
series of the Preferred Stock shall have been paid in full or declared
and a sum sufficient for the payment thereof set apart and all mandatory
sinking fund obligations in default relating to such series of Preferred
Stock shall have been satisfied in full and, with respect to such series
of the Preferred Stock as to which dividends are non-cumulative, such
right of the holders of such of those series of Preferred Stock shall
continue to be exercisable until dividends on such of those series of
Preferred Stock shall have been paid regularly for at least one year,
whereupon such right shall cease. During any time that the holders of
such series of Preferred Stock are entitled to elect two directors as
hereinabove provided, they shall also be entitled to participate with
the holders of the Common Stock in the election of any other directors.
Notwithstanding any other provisions of this corporation's
Certificate of Incorporation, the affirmative approval of the holders of
at least two-thirds of the Preferred Stock outstanding, acting as a
single class without regard to series shall be required for any
amendment of such Certificate altering materially any existing provision
of the Preferred Stock.
<PAGE> 7
Section 2. Statement of Designations, Powers, Preferences, Rights,
Qualifications, Limitations, Restrictions and Other Special or Relative
Attributes Granted to or Imposed Upon Shares of Common Stock.
(a) Except as otherwise required by the laws of the State of
Delaware, the holders of the Common Stock, at any meeting of the stockholders
of this corporation, shall be entitled to one vote for each share thereof held.
(b) In the event of any liquidation, dissolution or winding up of
this corporation, whether voluntary or involuntary, the assets of this
corporation remaining after the payments provided in Section 1 of this ARTICLE
FOURTH to be made to the holders of the Preferred Stock shall be distributed
among the holders of the Common Stock, share and share alike.
(c) Subject to the prior rights of the holders of the Preferred Stock
the holders of the Common Stock shall be entitled to receive cash dividends,
share and share alike, when and as declared by the Board of Directors, out of
any legally available surplus or legally available net profits of this
corporation.
(d) In the event of any stock dividends on or subdivision or split of
the Common Stock of this corporation, in lieu of the issuance of fractional
shares of Common Stock there shall be paid in cash to each stockholder who
would otherwise be entitled to a fractional share of Common Stock the
appropriate fractional portion of the market value of one share of Common
Stock, as determined by the Treasurer of this corporation as of the record date
fixed for the determination of stockholders entitled to receive such dividends
or to participate in such subdivision or split.
Section 3. General.
(a) No holder of any capital stock of this corporation of any class
now or hereafter authorized shall have any right as such holder to purchase,
subscribe for or otherwise acquire any shares of capital of this corporation of
any class now or hereafter authorized, or any securities convertible into or
exchangeable for any such shares, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase or otherwise acquire
any such shares, whether such shares, securities, warrants or other instruments
be how or hereafter authorized, unissued or issued and thereafter acquired by
this corporation.
(b) No holder of any capital stock of this corporation of any class
shall have cumulative voting rights.
ARTICLE FIFTH: The names and mailing addresses of each of the
incorporators are omitted from this Restated Certificate of Incorporation by
authority of Section 245 of the Delaware Corporation Law.
ARTICLE SIXTH: The corporation is to have perpetual existence.
<PAGE> 8
ARTICLE SEVENTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
PARKER DRILLING COMPANY
[Corporate Seal]
By: /s/ ROBERT L. PARKER
--------------------
Robert L. Parker
Chairman
Attest:
/s/ LESLIE D. ROSENCUTTER
- ----------------------------
Leslie D. Rosencutter
Vice President and Secretary
<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF RETIREMENT
PARKER DRILLING COMPANY
March 25, 1997
Parker Drilling Company, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), hereby
certifies the following:
FIRST: That at a meeting of the Board of Directors of the Company a
resolution was adopted approving the filing of this Certificate to retire
certain series of the Company's preferred stock which had the status of retired
shares.
SECOND: Pursuant to the series designations establishing shares of $.75
Cumulative Preferred Stock, Series B, par value $1.00 per share (the "Series B
Preferred"), shares of $.75 Cumulative Preferred Stock, Series C, par value
$1.00 per share (the "Series C Preferred") and shares of Series D Convertible
Preferred Stock, par value $1.00 per share (the "Series D Preferred"), a total
of 400,000 shares of Series B Preferred, 157,428 shares of Series C Preferred
and 30,566 shares of Series D Preferred were authorized; as of the date hereof,
all issued and outstanding shares of Series B Preferred, Series C Preferred and
Series D Preferred have been retired.
THIRD: That the Restated Certificate of Incorporation of the Company
prohibits the reissue of the shares of the Series B Preferred, Series C
Preferred and Series D Preferred once those shares are retired; and pursuant to
the provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this Certificate, the
Restated Certificate of Incorporation of the Company shall be amended so as to
effect a reduction in the authorized number of shares of the Series B Preferred,
Series C Preferred and Series D Preferred.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed
by Leslie D. Rosencutter, its authorized officer, on this 25th day of March,
1997.
PARKER DRILLING COMPANY
/s/ LESLIE D. ROSENCUTTER
---------------------------------------
By: Leslie D. Rosencutter
Title: Vice President and Secretary
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to Parker Drilling
Company's registration statement on Form S-3 (File No. 333-22987) of our report
dated October 14, 1996, on our audits of the financial statements and financial
statement schedule of Parker Drilling Company. We also consent to the reference
to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
March 26, 1997
<PAGE> 1
EXHIBIT 23.2
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Parker Drilling Company
Amendment No. 1 to Registration on Form S-3 (File No. 333-22987)
We are aware that our report dated January 13, 1997 on our review of
interim financial information of Parker Drilling Company for the period ended
November 30, 1996 and 1995 and included in the Company's quarterly report on
Form 10-Q for the quarter then ended is incorporated by reference in this
amendment to Parker Drilling Company's registration statement. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered a
part of the amendment to Parker Drilling Company's registration statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Amendment No. 1 to Form S-3 (File No. 333-22987) of our
report dated October 7, 1996 on the combined financial statements of the Mallard
Bay Drilling division of Energy Ventures, Inc. as of December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995, and to
all references to our Firm included in this Amendment No. 1 to the
above-referenced Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 26, 1997
<PAGE> 1
EXHIBIT 23.4
The Board of Directors
Parker Drilling Company:
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-3 of Parker Drilling Company (File No.
333-22987) of our report dated September 27, 1996, with respect to the balance
sheets of Quail Tools, Inc. as of December 31, 1995 and 1994, and the related
statements of earnings and retained earnings, and cash flows for each of the
years in the three-year period ended December 31, 1995, which report appears in
the Form 8-K/A of Parker Drilling Company dated January 6, 1997. Our report
refers to the adoption in 1994 of the method of accounting for certain
investments in debt and equity securities prescribed by Statement of Financial
Accounting Standards No. 115.
We also consent to the reference to our firm under the heading "Experts" in
the prospectus.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
March 26, 1997
