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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ___________ to _____________
Commission file number: 0-13857
NOBLE DRILLING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-0374541
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(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
10370 RICHMOND AVENUE, SUITE 400, HOUSTON, TEXAS 77042
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 974-3131
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Securities registered pursuant to Section 12(b) of the Act:
NONE
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Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
$2.25 CONVERTIBLE EXCHANGEABLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
$1.50 CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
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(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of Common Stock held by nonaffiliates as of
March 8, 1995: $336,300,000
Number of shares of Common Stock outstanding as of
March 8, 1995: 79,100,802
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by
reference and the part of this report into which the document is incorporated:
(1) Proxy statement for the 1995 annual meeting of stockholders - Part III
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TABLE OF CONTENTS
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PART ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquisitions and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rig Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Drilling Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Offshore Drilling Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
International Contract Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Domestic Contract Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Labor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Land Drilling Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Turnkey Drilling and Engineering Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Competition and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Governmental Regulation and Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 5
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Financial Information About Foreign and Domestic Operations . . . . . . . . . . . . . . . . . . . 6
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Drilling Rig Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Offshore Drilling Rigs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Land Drilling Rigs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . 9
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
II STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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PART ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . 40
III ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . 40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . 40
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PART ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 40
IV
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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PART I
ITEM 1. BUSINESS
GENERAL
Noble Drilling Corporation is a leading provider of diversified
contract drilling services for the oil and gas industry worldwide. The
Company's activities include offshore and land drilling services, turnkey
drilling services and engineering and production management services. The
Company's drilling fleet is broadly diversified allowing it to work in a
variety of operating conditions.
On September 15, 1994, the Company completed the merger of Chiles
Offshore Corporation ("Chiles") with and into a subsidiary of the Company
("Chiles Merger"). The Chiles Merger was accounted for as a pooling of
interests. The consolidated financial statements and information presented
herein reflect the restatement of the Company's historical financial statements
to account for the Chiles Merger as of the beginning of the earliest year
presented. Unless otherwise specified, all information (including operating
data) contained herein gives effect to the Chiles Merger.
Noble Drilling Corporation ("Noble Drilling") was organized as a
Delaware corporation in 1939. Noble Drilling and its predecessors have been
engaged in the contract drilling of oil and gas wells for others domestically
since 1921 and internationally during various periods since 1939. As used
herein, unless otherwise required by the context, the term "Noble Drilling"
refers to Noble Drilling Corporation and the term "Company" refers to Noble
Drilling and its consolidated subsidiaries (including Noble Offshore
Corporation, successor by merger to Chiles).
BUSINESS STRATEGY
The Company's business strategy has been to actively expand its
international and offshore capabilities through acquisitions and to position
itself in geologically promising areas. The Company intends to make selective
strategic acquisitions as opportunities arise. The domestic land drilling
operations of the Company are expected to diminish in significance as the
Company continues to emphasize offshore and international operations. The
Company strives to balance its revenues between international and domestic
operations.
The following table sets forth, for the periods presented, the
percentages of operating revenues generated by the international and domestic
operations:
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YEAR ENDED DECEMBER 31,
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1994 1993 1992 1991 1990
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Operating Revenues
International . . . . . . . . . . . . . . . . . . . . . . 48% 53% 73% 50% 45%
Domestic . . . . . . . . . . . . . . . . . . . . . . . . 52% 47% 27% 50% 55%
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ACQUISITIONS AND MERGERS
On September 15, 1994, the Company completed the merger of Chiles with
Noble Offshore Corporation ("NOC"), a wholly owned subsidiary of Noble
Drilling. Prior to the Chiles Merger, Chiles was engaged in the drilling and
workover of offshore oil and gas wells on a contract basis for major and
independent oil and gas companies. The assets added by the Company in the
Chiles Merger included a fleet of 13 offshore jackup drilling rigs, 11 of which
are located in the U.S. Gulf of Mexico and two of which are located offshore
Nigeria.
On April 22, 1994, the Company purchased all the outstanding capital
stock (the "Triton Acquisition") of Triton Engineering Services Company
("Triton"). Triton was a privately held corporation which was engaged, through
its subsidiaries, in providing engineering, consulting and turnkey drilling
services, and in manufacturing and renting oilfield equipment to the oil and
gas industry.
The offshore contract drilling industry remains highly fragmented in
the markets in which the Company operates. From time to time, the Company has
had discussions with third parties regarding asset acquisitions or possible
business combinations. The Company intends to pursue possible acquisitions
and/or business combinations, if considered prudent.
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RIG UTILIZATION
The following table sets forth the average rig utilization rates for
the Company's rig fleet for the periods indicated:
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YEAR ENDED DECEMBER 31,
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1994 1993 1992 1991 1990
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AVERAGE RIG UTILIZATION RATE
(OWNED AND LEASED) (1)
Offshore
International . . . . . . . . . . . . . . . . . . . . . . 82% 73% 99% 72% 37%
Domestic . . . . . . . . . . . . . . . . . . . . . . . . 82% 89% 45% 67% 80%
Land
International . . . . . . . . . . . . . . . . . . . . . . 77% 43% 22% 41% 38%
Domestic . . . . . . . . . . . . . . . . . . . . . . . . 51% 39% 48% 32% 35%
</TABLE>
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(1) Utilization rates reflect the policy of the Company to report
utilization rates based on the number of rigs in the fleet being
actively marketed. During the periods presented, the Company purchased
and sold certain drilling rigs. Prior utilization rates have not been
adjusted to reflect purchases and sales of such rigs.
DRILLING CONTRACTS
The Company's drilling contracts are obtained through competitive
bidding or as a result of negotiations with customers. Contracts for land rigs
are normally for a single well, while contracts involving offshore drilling
frequently are for a period of time and may involve several wells. With the
exception of Triton's operations, the Company's offshore drilling is normally
done on a dayrate basis, and its land drilling is done on either a dayrate or
footage basis. Triton's drilling is done on a turnkey basis. For more
information regarding Triton's operations, see "Turnkey Drilling and
Engineering Services." The risk of loss to the Company on wells drilled on a
turnkey or footage basis is significantly higher than on wells drilled on a
dayrate basis.
OFFSHORE DRILLING OPERATIONS
The Company's offshore drilling operations are conducted worldwide.
Principal regions of operations currently include the Gulf of Mexico, West
Africa, Venezuela and, to a lesser extent, India. The offshore fleet consists
of 44 rigs, composed of 32 jackup drilling rigs, eight submersible rigs and
four posted barges. The average age of the offshore fleet is 14 years with 34
of the 44 offshore rigs having been built or rebuilt since 1980. In 1994, one
of the Company's customers, The Royal Dutch/Shell Group, accounted for
approximately 11 percent of the Company's total operating revenues.
INTERNATIONAL CONTRACT DRILLING
The Company's international offshore contract drilling operations are
conducted in Nigeria, Zaire, Venezuela, Mexico and India. The Company's
international offshore contract drilling fleet consists of 15 rigs, of which 12
were working under contract at January 31, 1995 and three were available for
bidding. The Company's average international offshore contract rig utilization
rate decreased from 99 percent in 1992 to 73 percent in 1993 and increased to
82 percent in 1994. Revenues from international offshore contract drilling
operations as a percentage of consolidated operating revenues were 30 percent,
30 percent and 46 percent in 1994, 1993 and 1992, respectively.
In 1994, approximately 50 percent of the Company's international
offshore contract drilling revenues was derived from contracts with major oil
and gas companies, 39 percent from government-owned companies and the balance
from contracts with independent operators.
One of the Company's jackup rigs, the ED HOLT, is bareboat chartered
to a third party which has worked the rig under contract for Oil and Natural
Gas Commission, the government-owned oil company of India, since April 1989.
Under the charter, the Company maintains operating control of the rig and
receives a dayrate. The current charter has been extended through June 1995.
The Company currently has four jackup rigs and three posted barges in
Nigeria. At January 31, 1995, the CHUCK SYRING, a posted barge, was under
contract for The Shell Petroleum Development Company of Nigeria Limited through
June 1996. Three of the four jackup rigs were under contract as of January 31,
1995. The TOMMY CRAIGHEAD is working for Mobil Producing Nigeria under a
contract that expires in December 1996, the ED NOBLE is working for Texaco
Overseas (Nigeria) Petroleum Company under a contract that expires in December
1995 and the DON WALKER is working for Ashland Oil
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(Nigeria) Co. under a contract that expires in April 1995. The Company is
actively seeking employment of its other assets in Nigeria.
In Zaire, the ROY BUTLER is under contract with Zaire Gulf through
February 1996.
The GEORGE MCLEOD is working offshore Mexico in the Bay of Campeche
for PEMEX, the government-owned oil company of Mexico. The current PEMEX work
program under the existing contract is scheduled to be completed in April 1995.
A 90-day extension is currently under review and pending approval by PEMEX.
The SAM NOBLE is working offshore Mexico in the Bay of Campeche for Cia
Perforadora Mexico, S.A. de C.V. with a contract that expires at the end of
April 1995.
The Company has four jackup rigs working for Lagoven, a subsidiary of
the government-owned oil company of Venezuela. The contracts for the CHARLES
COPELAND, EARL FREDERICKSON, DICK FAVOR and CARL NORBERG expire in the first
quarter of 1995. Negotiations are currently underway to extend these contracts
under an alliance program with Lagoven.
DOMESTIC CONTRACT DRILLING
The Company's domestic offshore contract drilling operations are
conducted through the Gulf Coast Marine Division. The Company's domestic
offshore contract drilling fleet consists of 29 rigs, of which 18 were working
under contract at January 31, 1995, one was available for bidding, two were
being refurbished, two were being held for planned refurbishment and six were
stacked and not being actively marketed.
Two of the Company's independent slot rigs, the JOHN SANDIFER and ED
DIE PAUL, are currently being refurbished. The JOHN SANDIFER is being
converted to a cantilever rig with a top drive system and cascade mud system to
make the rig more versatile. It is anticipated that this project will be
completed in mid April 1995 and the rig will be available to return to service.
The EDDIE PAUL is being converted to an Extended Reach Cantilever ("ERC") rig
to enable this unit to drill over larger platforms. This rig's legs will be
extended from 467 feet to 500 feet to increase the water depth capacity to
approximately 390 feet, depending on certain conditions. A top drive drilling
system and cascade mud system will also be installed on this rig. The
modifications will make the EDDIE PAUL one of the largest rigs in the Gulf of
Mexico in terms of water depth capacity and the largest in terms of cantilever
reach capacity. The ERC project is scheduled to be completed in June of 1995.
The total cost of these two projects is estimated to be $31.0 million.
The Company's average domestic offshore rig utilization rate increased
from 45 percent in 1992 to 89 percent in 1993 and decreased to 82 percent in
1994. Revenues from domestic offshore drilling operations as a percentage of
consolidated operating revenues were 33 percent, 45 percent and 22 percent in
1994, 1993 and 1992, respectively. In 1994, approximately 50 percent of the
Company's domestic offshore revenues was derived from contracts with major oil
and gas companies and the remaining 50 percent from contracts with independent
operators.
LABOR CONTRACTS
The Company's offshore operations also include labor contracts for
drilling and workover activities covering 16 rigs operating in the U.K. North
Sea and one offshore rig operating in the Middle East. These rigs are not owned
or leased by the Company. Under its labor contracts, the Company provides the
personnel necessary to manage and perform the drilling operations from drilling
platforms owned by the operator. The contracts are generally renewable no more
frequently than on an annual basis. After drilling operations are completed,
workover operations usually become an important element of each platform's
activity. Thus, drilling contractor crews usually remain on the platform until
a field is depleted by production.
A subsidiary of Noble Drilling (Canada) Ltd. ("Noble Canada") was
awarded a contract in July 1994 by Hibernia Management and Development Company
Ltd. for offshore production drilling and related services. The contract calls
for the Company to commission, operate and maintain two state-of-the-art
platform rigs to be installed on the concrete gravity-based structure that will
be used to develop the Hibernia field off the coast of Newfoundland. Drilling
is due to commence in 1997 for a five-year program with a five-year extension
option. It is anticipated that the Company will have approximately 120
employees assigned to this project at its peak in 1997.
LAND DRILLING OPERATIONS
The Company's land drilling operations are conducted in Canada, Texas
and Louisiana. Nineteen of the Company's 46 land rigs are being or can be
actively bid by the Company. Of these 19 rigs, 10 are located in the United
States and nine are located in Canada. As of January 31, 1995, 15 of the 19
actively marketed rigs were operating under contract and four were available
for bidding. Twenty-seven rigs were mothballed or stacked and not being
actively marketed. The 19 actively marketed rigs have an average age of 13
years. The domestic land drilling operations are expected to diminish in
significance as the Company continues to emphasize domestic and international
offshore operations.
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TURNKEY DRILLING AND ENGINEERING SERVICES
Through its wholly owned subsidiary, Triton, the Company provides
turnkey drilling, drilling project management, drilling and completion planning
and design, specialized drilling tools and services, and contract engineering
and consulting manpower. Turnkey drilling, Triton's major service, involves the
coordination of all equipment, materials, services and management to drill a
well to a specified depth, for a fixed price. Under turnkey drilling contracts,
Triton bears the financial risk of delays in the completion of the well. In
providing its services, Triton can use drilling rigs owned either by the
Company or by a third party, depending on availability. The drilling of a
turnkey well is generally completed within 30 to 45 days. Twenty-eight wells
were completed by Triton from the time of the Triton Acquisition in April 1994
through year end. Revenues from turnkey drilling services represented 16
percent of consolidated operating revenues in 1994.
Through its wholly owned subsidiary, Noble Engineering Services Ltd.
("Noble Engineering"), the Company provides engineering services relating
primarily to the design of drilling equipment for offshore development and
production services. Noble Engineering works, on a contract basis, with
operators and prime construction contractors of drilling and production
platforms in the design of drilling equipment configurations aimed at
optimizing the operational efficiency of developmental drilling by maximizing
platform space utilization and load capability. Triton's consulting services
are provided primarily in Mexico, Venezuela and, to a lesser extent, the Far
East.
COMPETITION AND RISKS
The contract drilling industry is a highly competitive and cyclical
business characterized by high capital and maintenance costs. Although
conditions in recent years in the oil and gas industry have precipitated
consolidation of industry participants, there remains a substantial oversupply
of drilling equipment. As a consequence, there has been intense competition for
available drilling contracts resulting in much equipment being idle for long
periods of time and generally unfavorable terms and prices for contract
drilling. Certain competitors of the Company may have access to greater
financial resources than the Company.
Competition in contract drilling involves numerous factors, including
price, the experience of the work force, rig availability and suitability,
efficiency, condition of equipment, operating integrity, reputation, industry
standing and customer relations. Price is the major consideration in most
markets, especially with respect to domestic land drilling. The Company
believes it competes favorably with respect to all these factors. The Triton
Acquisition has enabled the Company to compete more effectively in the turnkey
drilling market. Competition is primarily on a regional basis and may vary
significantly by region at a particular time. Demand for land and offshore
drilling equipment is also dependent on the exploration and development
programs of oil and gas producers, which are in turn influenced by the
financial condition of such producers, by general economic conditions and
prices of oil and gas, and, from time to time, by political considerations and
policies.
It is impracticable to estimate the number of competitors of the
Company. Many independent drilling contractors in recent years have sought
protection from creditors under bankruptcy laws or combined with other
companies as a result of the depressed conditions in the contract drilling
industry. Although this has reduced the total number of competitors, management
of the Company believes that competition for drilling contracts will continue
to be intense for the foreseeable future.
The Company follows a policy of keeping its equipment well maintained
and technologically competitive. However, its equipment could be made obsolete
by the development of new techniques and equipment. In addition, from time to
time in the past, industry-wide shortages of supplies, services, skilled
personnel and equipment necessary to conduct the Company's business, such as
drill pipe, have occurred and such shortages could occur again.
The Company's operations are subject to the many hazards inherent in
the drilling business, including blowouts, cratering, fires and collisions or
groundings of offshore equipment, which could cause substantial damage to the
environment, and damage or loss from adverse weather and seas. These hazards
could cause personal injury and loss of life, suspend drilling operations or
seriously damage or destroy the property and equipment involved and, in
addition to environmental damage, could cause substantial damage to producing
formations and surrounding areas. Although the Company maintains insurance
against many of these hazards, such insurance is subject to substantial
deductibles and provides for premium adjustments based on claims. It also
excludes certain matters from coverage, such as loss of earnings on certain
rigs. Also, while the Company generally obtains indemnification from its
customers for environmental damage with respect to offshore drilling, such
indemnification is generally only in excess of a specified amount, which
usually ranges from $100,000 to $250,000.
In the case of the turnkey drilling operations, Triton maintains
insurance against pollution and environmental damage in amounts ranging from
$5.0 million to $50.0 million depending on location, subject to self-insured
retentions of $100,000 to $500,000. Under turnkey drilling contracts, Triton
generally assumes the risk of pollution and environmental damage, but on
occasion receives indemnification from the customer for environmental and
pollution liabilities in excess of Triton's pollution insurance coverage.
Further, Triton is not insured against certain drilling risks that could result
in delays
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or nonperformance of a turnkey drilling contract, although it generally
maintains insurance against delays related to loss of well control. Triton
typically obtains contractual indemnification from the drilling contractors
that provide the rigs for Triton's turnkey drilling operations for pollution
arising from certain acts of such contractors.
The Company's international operations are also subject to certain
political, economic and other uncertainties including, among others, risks of
war and civil disturbances, expropriation, nationalization, renegotiation or
modification of existing contracts, taxation policies, foreign exchange
restrictions, international monetary fluctuations and other hazards arising out
of foreign governmental sovereignty over certain areas in which the Company
conducts operations. The Company has insurance covering expropriation and other
political risks to the extent available to the Company at rates it considers
prudent to pay. International operations are sometimes impacted by laws,
regulations or customs giving preferential considerations to drilling
contractors with some local ownership. Where necessary, international
subsidiaries of Noble Drilling have entered into agreements with foreign
companies either to comply with statutory requirements or to take advantage of
the additional consideration given to companies with local ownership. The
revenues generated through such arrangements have not been significant.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by the 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. 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. Usually these 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. It has been the Company's experience that
environmental laws, rules and regulations of the United States are more
stringent than those found in foreign jurisdictions, and therefore the
requirements of foreign jurisdictions do not, in general, impose an additional
compliance burden on the Company.
The U.S. Oil Pollution Act of 1990 ("OPA '90") and the regulations
promulgated pursuant thereto impose certain additional operational requirements
on the Company's domestic offshore rigs and govern liability for leaks, spills
and blowouts. Regulations under OPA '90 may increase the level of financial
assurance required of owners and operators of rigs in the waters of the United
States. The Company has monitored these regulations and does not believe that
they are likely to have a material adverse effect on the Company's financial
condition or results of operations.
The Company has made and will continue to make expenditures in its
efforts to comply with environmental requirements. The Company does not believe
that it has to date expended material amounts in connection with such
activities or that compliance with such requirements will have a material
adverse effect upon the capital expenditures, results of operations or
competitive position of the Company. Although such requirements do have a
substantial impact upon the energy and energy services industries, generally
they do not appear to affect the Company any differently or to any greater or
lesser extent than other companies in the energy services industry.
The Company believes that insurance in place and that indemnities the
Company generally seeks to include in its drilling contracts provide the
Company with an appropriate degree of protection from liability resulting from
current governmental regulation that might have a material adverse effect on
the Company, including environmental regulation. However, notwithstanding the
indemnity coverage provided to and insurance coverage carried by the Company,
the occurrence of a significant event not fully indemnified against or insured
or the failure of a customer to meet its indemnification obligations could
materially and adversely affect the Company's operations and financial
condition.
The modification of existing laws or regulations or the adoption of
new laws or regulations curtailing exploratory or development drilling for oil
and gas for economic, environmental or other reasons could materially and
adversely affect the Company's operations by limiting drilling opportunities.
EMPLOYEES
The Company provides the crews and most of the ancillary equipment
used in the operation of its domestic rigs, and provides crews for the
operation of operator-owned rigs in its international markets. Over many years,
the Company has developed and maintained a well-trained and experienced work
force.
At December 31, 1994, the Company employed 2,673 employees, of whom
1,512 were deployed in international operations and 1,161 were in domestic
operations. Of the 2,782 employees at December 31, 1993, 1,375 were deployed in
international operations and 1,407 were in domestic operations.
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FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Information regarding operating revenues, operating income and loss,
and identifiable assets attributable to each of the Company's geographic areas
of operations for the last three fiscal years is presented in Note 14 of Notes
to Consolidated Financial Statements included elsewhere herein.
ITEM 2. PROPERTIES
DRILLING RIG FLEET
OFFSHORE DRILLING RIGS
The Company's offshore drilling rig fleet consists of 32 jackup rigs,
eight submersible rigs and four posted barges. Each type of rig is described
further below. There are several factors that determine the type of rig most
suitable for a particular job, the more significant of which include the water
depth and bottom conditions at the proposed drilling location, whether the
drilling is being done over a platform or other structure, and the intended
well depth. At year end 1994, the Company retired two platform rigs from its
drilling rig fleet.
Fifteen of the Company's 44 offshore rigs have a top drive unit, and
the Company has five additional top drive units which have not been installed
on rigs. A top drive unit is a technologically advanced drilling tool used in
many drilling applications both on land and offshore. Twenty-four of the
Company's 44 offshore rigs are equipped with a cascading solids control system.
A cascading solids control system is a technologically advanced method for
controlling the solids in drilling mud during drilling operations, the use of
which enhances removal of well bore cuttings and results in better bit
performance and reduced mud conditioning costs to the operator. In addition,
seven of the Company's 44 offshore rigs have been equipped with zero discharge
capability.
JACKUP RIGS. Jackup rigs are mobile self-elevating drilling platforms
equipped with legs which can be lowered to the ocean floor until a foundation
is established to support the drilling platform. The rig hull includes the
drilling rig, jacking system, crew quarters, loading and unloading facilities,
storage areas for bulk and liquid materials, helicopter landing deck and other
related equipment. The rig legs may operate independently or have a mat
attached to the bottom of them in order to provide a more stable foundation in
soft bottom areas. Nineteen of the Company's jackup rigs are independent leg
rigs and 13 are mat supported rigs. Moving a rig to the drill site involves
jacking up its legs until the hull is floating on the surface of the water. The
hull is then towed to the drill site by tugs and the legs are jacked down to
the ocean floor. The jacking operation continues until the hull is raised out
of the water and drilling operations are conducted with the hull in its raised
position. A cantilevered jackup has a feature that permits the drilling
platform to be extended out from the hull, allowing it to perform drilling or
workover operations over pre-existing platforms or structures. Slot type jackup
rigs are configured for the drilling operations to take place through a slot in
the hull. The Company's jackup rigs are capable of drilling to a maximum depth
of 25,000 feet in water depths ranging between 45 and 390 feet, depending on
the jackup rig.
SUBMERSIBLE RIGS. Submersible rigs are mobile drilling platforms which
are towed to the drill site and submerged to drilling position by flooding the
lower hull until it rests on the sea floor, with the upper deck above the water
surface. Submersible rigs typically operate in water depths up to approximately
100 feet. The Company's submersible rigs are capable of drilling to a maximum
depth of 30,000 feet in water depths ranging between 12 and 100 feet, depending
on the submersible rig.
POSTED BARGES. Posted barges are mobile drilling platforms which are
towed to the drill site and submerged by flooding the lower hull until it rests
on the sea floor. Drilling operations are conducted with the barge in this
position. Posted barges typically operate in shallow water. The Company's
posted barges are capable of drilling to a maximum depth of 30,000 feet in
water depths ranging between nine and 18 feet, depending on the posted barge.
The following table sets forth, as of January 31, 1995, certain
information concerning the Company's offshore drilling rig fleet. The table
does not include 17 offshore rigs owned by operators for which the Company had
labor contracts as of January 31, 1995. Unless otherwise indicated, the Company
owns and operates the rigs included in the table.
6
<PAGE> 9
<TABLE>
<CAPTION>
OFFSHORE DRILLING RIGS
YEAR WATER MAXIMUM
BUILT OR DEPTH DRILLING
NAME MAKE/TYPE REBUILT RATING DEPTH LOCATION STATUS (1)
- ------------------------- ------------------------ -------- ------ -------- -------- ----------
(FEET) (FEET)
<S> <C> <C> <C> <C> <C> <C>
JACKUP RIGS
Eddie Paul (2)(3)(4) MLT 84-E.R.C. 1995 390 25,000 U.S. Gulf Refurbishing
Independent Leg Cantilevered
John Sandifer (2)(3)(4) Levingston 111-C 1995 300 25,000 U.S. Gulf Refurbishing
Independent Leg Cantilevered
Ed Holt (5) Levingston 111-C 1994 300 25,000 India Active
Independent Leg Cantilevered
Sam Noble (4) Levingston 111-C 1982 300 25,000 Mexican Gulf Active
Independent Leg Cantilevered
Johnnie Hoffman (4) Baker Marine BMC 300 IC 1993 300 25,000 U.S. Gulf Active
Independent Leg Cantilevered
Roy Butler (4)(6) F&G L-780 MOD II 1982 300 25,000 Zaire Active
Independent Leg Cantilevered
Tommy Craighead (2)(4) F&G L-780 MOD I 1982 300 25,000 Nigeria Active
Independent Leg Cantilevered
Percy Johns F&G L-780 MOD II 1981 300 25,000 U.S. Gulf Active
Independent Leg Cantilevered
George McLeod (4) F&G L-780 MOD II 1981 300 25,000 Mexican Gulf Active
Independent Leg Cantilevered
Tom Jobe (2)(4) MLT Class 82-SD-C 1982 250 25,000 U.S. Gulf Active
Independent Leg Cantilevered
Ed Noble (2)(4) MLT Class 82-SD-C 1984 250 20,000 Nigeria Active
Independent Leg Cantilevered
Lloyd Noble (2)(4) MLT Class 82-SD-C 1983 250 20,000 U.S. Gulf Active
Independent Leg Cantilevered
Earl Frederickson MLT Class 82-SD-C 1979 250 20,000 Venezuela Active
Independent Leg Cantilevered
Charles Copeland MLT Class 82-SD-C 1979 250 20,000 Venezuela Active
Independent Leg Cantilevered
Carl Norberg MLT Class 82-C 1976 250 20,000 Venezuela Active
Independent Leg Cantilevered
Dick Favor Baker Marine BMC 150 IC 1993 150 20,000 Venezuela Active
Independent Leg Cantilevered
Don Walker (4) Baker Marine BMC 150 IC 1982 150 20,000 Nigeria Active
Independent Leg Cantilevered
Coral Sea (2) MLT 53-S 1972 320 25,000 U.S. Gulf Stacked
Independent Leg Slot
Nimitz (2) MLT 84-S 1975 300 25,000 U.S. Gulf Stacked
Independent Leg Slot
Marvin Winters (2) Bethlehem JU-250 MC 1982 250 20,000 U.S. Gulf Active
Mat Supported Cantilevered
Duke Hinds Bethlehem JU-200 MC 1990 200 25,000 U.S. Gulf Active
Mat Supported Cantilevered
Red McCarty Bethlehem JU-200 MC 1982 200 25,000 U.S. Gulf Active
Mat Supported Cantilevered
Frank Lamaison (2) Bethlehem JU-200 MC 1982 200 20,000 U.S. Gulf Active
Mat Supported Cantilevered
W.T. Johnson (2) Bethlehem JU-200 MC 1982 200 20,000 U.S. Gulf Active
Mat Supported Cantilevered
Mac McCoy (2) Bethlehem JU-200 MC 1982 200 20,000 U.S. Gulf Active
Mat Supported Cantilevered
Cecil Forbes Bethlehem JU-300 MS 1974 300 20,000 U.S. Gulf Stacked
Mat Supported Slot
Jim Bawcom Bethlehem JU-250 MS 1981 250 25,000 U.S. Gulf Active
Mat Supported Slot
Linn Richardson Bethlehem JU-250 MS 1994 250 20,000 U.S. Gulf Active
Mat Supported Slot
Cliff Matthews (2) Bethlehem JU-250 MS 1976 250 20,000 U.S. Gulf Active
Mat Supported Slot
Frank Reiger Bethlehem JU-250 MS 1975 250 20,000 U.S. Gulf Stacked
Mat Supported Slot
Jack Clark Bethlehem JU-250 MS 1974 250 20,000 U.S. Gulf Stacked
Mat Supported Slot
NN-1 (7) Bethlehem JU-45 MS 1990 45 20,000 Nigeria Available
Mat Supported Slot
</TABLE>
(Table continued and footnotes appear on the following page)
7
<PAGE> 10
<TABLE>
<CAPTION>
OFFSHORE DRILLING RIGS
YEAR WATER MAXIMUM
BUILT OR DEPTH DRILLING
NAME MAKE/TYPE REBUILT RATING DEPTH LOCATION STATUS (1)
- ------------------------- ------------------------ -------- ------ -------- -------- ----------
(FEET) (FEET)
<S> <C> <C> <C> <C> <C> <C>
SUBMERSIBLE RIGS
Paul Romano (4) Column Stabilized 1981 100 30,000 U.S. Gulf Available
Paul Wolff Column Stabilized 1981 100 30,000 U.S. Gulf Active
Jim Thompson Column Stabilized 1993 100 25,000 U.S. Gulf Active
Amos Runner (4) Column Stabilized 1982 100 25,000 U.S. Gulf Active
Max Smith Column Stabilized 1980 100 25,000 U.S. Gulf Active
Joe Alford Column Stabilized 1982 85 25,000 U.S. Gulf Stacked
Lester Pettus Column Stabilized 1982 85 25,000 U.S. Gulf Stacked
Fri Rodli Column Stabilized 1979 70 25,000 U.S. Gulf Stacked
POSTED BARGES
Lewis Dugger (4) Ideco E-3000 1990 18 30,000 Nigeria Available
Chuck Syring (4) Oilwell E-3000 1990 18 25,000 Nigeria Active
Gene Rosser National 1625-DE 1990 18 25,000 Nigeria Available
Gus Androes Ideco E-3000 1985 18 30,000 U.S. Gulf Active
</TABLE>
_______________
(1) Rigs listed as "active" were operating under contract and rigs listed
as "available" were available for bidding as of January 31, 1995. Rigs
listed as "stacked" were not operating under contract and were either
in need of expenditures to reactivate or not being actively marketed
at such date. The rigs listed as stacked were protected at the time of
deactivation, utilizing procedures recommended by the original
equipment manufacturer. A rig that has undergone this deactivation
procedure generally takes less cost and lead time in order to be
returned to active service than a rig that has not undergone such
procedure.
(2) Rigs acquired through Chiles Merger on September 15, 1994 (see "Item
1. Business - Acquisitions and Mergers"). These rigs, except for the
CORAL SEA and NIMITZ, have been renamed.
(3) Rigs are currently being converted to cantilever rigs (see "Item 1.
Business - Offshore Drilling Operations - Domestic Contract
Drilling").
(4) Equipped with a top drive unit.
(5) Bareboat chartered to a third party under which the Company maintains
operating control of the rig.
(6) Although the rig is designed to drill in a maximum water depth of 300
feet, the rig is currently equipped with legs adequate to drill in
approximately 125 feet of water. The Company has fabricated an
additional 120 feet of legs, which have not yet been installed.
(7) Owned by NN-1 Limited Partnership, of which Noble Drilling is the
general partner and in which it has a majority interest. The rig is
mortgaged under a first preferred ship mortgage in favor of the United
States government to secure repayment of the U.S. Government
Guaranteed Ship Financing Sinking Fund Bonds issued in 1978 by the
predecessor of the partnership in connection with the construction and
purchase of the rig.
LAND DRILLING RIGS
The Company's land drilling fleet consists of 46 rigs, of which 19 are
being or can be actively bid by the Company. See "Item 1. Business - Land
Drilling Operations." Intended well depth, drill site conditions and drilling
applications are the principal factors in determining the size and type of land
rig used for a particular job. Of the 19 actively bid rigs in the fleet, eight
are mechanical and 11 are electric. Mechanical land rigs transmit the engine
power to the rig equipment through converters, compounds, chains and V-belts.
Electric land rigs transmit the engine power to rig equipment through
generators and electric cables to electric motors on the rig components.
The following table sets forth as of January 31, 1995 certain
information concerning the 19 actively bid land drilling rigs owned by the
Company. The table does not include 27 mothballed or stacked rigs.
8
<PAGE> 11
<TABLE>
<CAPTION>
LAND DRILLING RIGS
Year Maximum
Built or Drilling
Name Make/Type Rebuilt Depth Location Status (1)
- ------------------------- ------------------------ -------- -------- -------- ----------
(feet)
<S> <C> <C> <C> <C> <C>
INTERNATIONAL
Canada
OW-842 Oilwell/Electric 1980 20,000 Newfoundland Active
N-134 National/Electric 1977 20,000 British Columbia Active
E-1501 Emsco/Electric 1980 18,000 Alberta Active
E-1502 Emsco/Electric 1977 18,000 British Columbia Active
OW-762 Oilwell/Electric 1981 15,000 British Columbia Active
OW-763 Oilwell/Electric 1981 15,000 Alberta Active
N-821 National/Mechanical 1980 14,000 Alberta Active
GD-501 Gardner Denver/Mechanical 1979 9,000 Alberta Active
GD-502 Gardner Denver/Mechanical 1979 9,000 British Columbia Active
DOMESTIC
Gulf Coast Land
OW-24 Oilwell/Electric 1981 25,000 Texas Available
OW-841 Oilwell/Electric 1982 20,000 Texas Active
SB-952 Skytop-Brewster/Electric 1985 20,000 Texas Available
S-101 Superior/Electric 1981 15,000 Texas Active
S-102 Superior/Electric 1981 15,000 Texas Available
N-815 National/Mechanical 1982 15,000 Texas Active
N-818 National/Mechanical 1981 15,000 Texas Available
N-611 National/Mechanical 1980 12,500 Texas Active
N-612 National/Mechanical 1981 12,000 Texas Active
N-614 National/Mechanical 1981 12,000 Texas Active
</TABLE>
_______________
(1) Rigs listed as "active" were operating under contract and rigs listed
as "available" were available for bidding as of January 31, 1995. Rigs
listed as "stacked" were not being actively marketed at such date,
although a stacked rig can be reactivated and placed into operation in
the near term should it become attractive to do so.
Noble Canada owns nine land rigs, five of which are pledged as
collateral to secure a $1,000,000 credit facility of Noble Canada. There was no
amount outstanding under such facility at December 31, 1994.
FACILITIES
The Company's principal executive offices are located in Houston,
Texas, and leased through the year 2000. The Company also leases administrative
and marketing offices, and sites used primarily for storage, maintenance and
repairs for drilling rigs and equipment, in Williston, North Dakota, Evanston,
Wyoming, New Orleans, Lafitte and Youngsville, Louisiana, Calgary, Canada,
London, England, Warri, Lagos and Port Harcourt, Nigeria, Aberdeen, Scotland,
Carmen, Mexico, and Tamare and Cuidad Ojeda, Venezuela.
The Company owns certain tracts of land, including office and
administrative buildings, warehouse facilities and a manufacturing facility, in
Harris and Waller Counties, Texas, Lafayette, Shreveport and Bayou Black,
Louisiana, Nisku, Canada, Aberdeen, Scotland, and Tulsa and Oklahoma City,
Oklahoma.
As a result of the Company's continuing assessment of its owned and
leased facilities, certain consolidation and write-down costs were recognized
during 1994 as restructuring charges. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- 1994 Compared With 1993 -- Restructuring/Asset Write-down
Charges."
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company is a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
9
<PAGE> 12
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of February 28,
1995 with respect to the executive officers of Noble Drilling.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James C. Day 51 Chairman, President and Chief Executive Officer
Byron L. Welliver 49 Senior Vice President - Finance, Treasurer and Controller
Julie J. Robertson 39 Corporate Secretary and Vice President - Administration, Noble Drilling Services Inc.
</TABLE>
James C. Day has served as Chairman of Noble Drilling since October
22, 1992 and as President and Chief Executive Officer since January 1, 1984.
From January 1983 until his election as President and Chief Executive Officer,
Mr. Day served as Vice President of Noble Drilling. Prior to 1983, Mr. Day
served as Vice President and Assistant Secretary of Noble Affiliates, Inc. He
has been a director of Noble Drilling since 1984. Mr. Day is also a director of
Global Industries Limited and Noble Affiliates, Inc.
Byron L. Welliver has served as Senior Vice President - Finance of
Noble Drilling since April 1989, as Treasurer of Noble Drilling since July 1986
and as Controller of Noble Drilling since September 1994. Mr. Welliver had
served as Controller from April 1989 to April 1991. From July 1986 to April
1989, he also served as Vice President - Finance for Noble Drilling. He joined
Noble Drilling in October 1985 as Controller. Prior to joining Noble Drilling,
Mr. Welliver served consecutively as Tax Manager, Controller and Treasurer of
Noble Affiliates, Inc. beginning in March 1981.
Julie J. Robertson has served as Corporate Secretary of Noble Drilling
since December 1993 and as Vice President - Administration of Noble Drilling
Services Inc. since September 1994. From January 1989 to September 1994, Ms.
Robertson served consecutively as Manager of Benefits and Director of Human
Resources. Prior to 1989, Ms. Robertson served in the capacities of Risk and
Benefits Manager and Marketing Services Coordinator for Bawden Drilling Inc.
Ms. Robertson joined Bawden Drilling Inc. in 1979.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Noble Drilling's Common Stock, par value $.10 per share ("Common
Stock"), is traded in the NASDAQ National Market System under the symbol
"NDCO." The following table sets forth for the periods indicated the high and
low sales prices of the Common Stock as reported in the NASDAQ National Market
System.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1994
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 1/8 $ 6 3/8
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6 3/8
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3/8 6 1/4
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5/8 5 1/4
1993
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6 $ 3 5/8
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3/4 5 1/2
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1/2 7 5/8
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1/8 7 1/8
</TABLE>
The Company has not paid any cash dividends on the Common Stock since
becoming a publicly held corporation in October 1985 and does not anticipate
paying dividends on the Common Stock at any time in the foreseeable future. The
outstanding $2.25 Convertible Exchangeable Preferred Stock and $1.50
Convertible Preferred Stock of the Company have priority as to dividends over
the Common Stock, and no dividend (other than dividends payable solely in
Common Stock) may be declared, paid or set apart for payment on the Common
Stock unless all accrued and unpaid dividends on such preferred stock have been
paid or declared and set apart for payment. Furthermore, certain provisions of
the indenture governing the Company's 9 1/4% Senior Notes Due 2003 issued in
1993 restrict the Company's ability to pay cash dividends on the Common Stock.
At December 31, 1994 and March 8, 1995, respectively, there were 2,416
and 2,393 record holders of Common Stock.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1)(2)
Operating revenues . . . . . . . . . . . . . . . . . . . . $ 351,988 $ 264,531 $ 184,166 $ 230,151 $ 181,831
Operating costs (3) . . . . . . . . . . . . . . . . . . . . 243,208 178,684 135,252 179,490 151,445
Depreciation and amortization . . . . . . . . . . . . . . . 39,519 28,886 27,248 30,052 18,420
Selling, general and administrative . . . . . . . . . . . . 47,606 28,284 30,716 32,684 20,734
Restructuring/asset write-downs (4) . . . . . . . . . . . . 3,661 - 21,120 11,134 -
Minority interest . . . . . . . . . . . . . . . . . . . . . (169) (232) 89 78 (185)
--------- --------- --------- --------- ---------
Operating income . . . . . . . . . . . . . . . . . . . . . 18,163 28,909 (30,259) (23,287) (8,583)
Interest expense . . . . . . . . . . . . . . . . . . . . . (12,351) (8,038) (13,274) (20,411) (6,665)
Interest income . . . . . . . . . . . . . . . . . . . . . . 5,640 2,497 3,276 2,155 3,797
Other income, net . . . . . . . . . . . . . . . . . . . . . 15,743 1,047 3,675 4,786 1,148
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and extraordinary item . . . . . . . . . . . 27,195 24,415 (36,582) (36,757) (10,303)
Income tax provision . . . . . . . . . . . . . . . . . . . (5,672) (3,333) (3,396) (2,417) (1,211)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations . . . . . . . . . 21,523 21,082 (39,978) (39,174) (11,514)
Discontinued operations . . . . . . . . . . . . . . . . . . - - (3,372) (1,815) 1
Extraordinary item (5) . . . . . . . . . . . . . . . . . . - 1,770 - 4,978 -
--------- --------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . 21,523 22,852 (43,350) (36,011) (11,513)
Preferred stock dividends . . . . . . . . . . . . . . . . . (12,764) (7,936) (6,728) (721) -
--------- --------- --------- --------- ---------
Net income (loss) applicable to common shares . . . . . . . $ 8,759 $ 14,916 $ (50,078) $ (36,732) $ (11,513)
========= ========= ========= ========= =========
Net income (loss) applicable to common shares
per share (6)(7) . . . . . . . . . . . . . . . . . . . . . $ 0.11 $ 0.22 $ (1.05) $ (0.81) $ (0.31)
Weighted average common shares outstanding . . . . . . . . 78,326 66,923 47,762 45,554 36,854
BALANCE SHEET DATA (AT END OF PERIOD) (2)
Working capital (deficit) (8) . . . . . . . . . . . . . . . $ 157,885 $ 150,535 $ 42,993 $ (3,239) $ 54,187
Property and equipment, net . . . . . . . . . . . . . . . . $ 493,322 $ 482,029 $ 338,382 $ 384,182 $ 343,875
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 739,889 $ 696,553 $ 456,529 $ 560,987 $ 474,431
Long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 126,546 $ 127,144 $ 87,280 $ 73,145 $ 127,008
Total debt (9)(10) . . . . . . . . . . . . . . . . . . . . $ 132,790 $ 127,690 $ 114,477 $ 182,784 $ 146,143
Shareholders' equity . . . . . . . . . . . . . . . . . . . $ 527,611 $ 516,770 $ 301,634 $ 324,367 $ 289,335
OTHER DATA (2)
Cash dividend per common share . . . . . . . . . . . . . . $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Capital expenditures . . . . . . . . . . . . . . . . . . . $ 55,834 $ 173,501 $ 5,997 $ 129,986 $ 201,208
</TABLE>
_______________
(1) The statement of operations data for all periods contain certain
reclassifications to the data presented in the past to conform to the
classifications used in the 1994 consolidated financial statements.
(2) Includes the effect of the October 7, 1993 acquisition of nine
offshore rigs and associated assets (the "Western Acquisition") from
The Western Company of North America, the Triton Acquisition and the
Chiles Merger. The Selected Financial Data reflect the restatement of
the Company's historical financial statements to reflect the Chiles
Merger as a pooling of interests as of the beginning of the earliest
year presented.
(3) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative, minority interest,
restructuring charges and write-down of assets charges.
(4) Consists of provisions resulting from write-downs of certain assets,
facility consolidation costs and, to a lesser extent, severance costs.
(5) Consists of a gain on extinguishment of debt in 1993 and a gain on an
insurance settlement in 1991.
(6) Includes the effect of accretion on the stock subject to put option,
which is charged to retained earnings and not reflected in the amount
of net loss applicable to common shares for each applicable period.
The amount of the accretion was $92,000 and $591,000 for the years
ended December 31, 1991 and 1990, respectively.
(7) Net income (loss) applicable to common shares per share before
extraordinary item was $.20 and $(.92) for the years ended December
31, 1993 and 1991, respectively. Loss applicable to common shares per
share from discontinued operations was $(.07) and $(.04) for the years
ended December 31, 1992 and 1991, respectively.
(footnotes continued on following page)
12
<PAGE> 15
(8) Chiles reclassified $50.5 million of its outstanding indebtedness from
long-term to current liabilities in 1991. This reclassification was
made because as of December 31, 1991, Chiles anticipated not being
able to remain in compliance, and subsequently was not able to remain
in compliance, with all of the terms of its debt agreements.
(9) Consists of current installments of long-term debt and short-term
debt and long-term debt.
(10) As discussed further in Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 6 of Notes to
Consolidated Financial Statements included elsewhere herein, Chiles
completed an offering of preferred stock during October 1993 which
resulted in net proceeds to Chiles of $96.5 million. Chiles used
approximately $45.2 million of such proceeds to repay all of its
outstanding indebtedness, including prepayments of principal of $44.3
million. The remaining net proceeds were used for general corporate
purposes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On September 15, 1994, the Company completed the Chiles Merger which
was accounted for as a pooling of interests. The Consolidated Financial
Statements and information presented herein reflect the restatement of the
Company's historical financial statements to account for the Chiles Merger as a
pooling of interests as of the beginning of the earliest year presented.
The following discussion is intended to assist in understanding the
Company's financial position as of December 31, 1994 and 1993 and its results
of operations for each of the three years in the period ended December 31,
1994. Reference is also made to the Consolidated Financial Statements and the
Notes thereto, included elsewhere herein, which should be read in conjunction
with this discussion.
OUTLOOK
The Company's operating strategy has been to pursue drilling
opportunities in the U.S. and in the various international markets. Worldwide
drilling conditions vary substantially from region to region; however, the
Company operates in most markets where there is a demand for offshore and land
drilling rigs. In response to depressed conditions within the U.S. market, in
1991, the Company mobilized appropriate drilling units to markets with
increasing activity levels. Conditions in the U.S. market remained depressed
through the summer of 1992, primarily due to continued depressed natural gas
prices and an oversupply of rigs. During late 1992, U.S. natural gas prices
improved, resulting in greater demand and higher dayrates for drilling rigs.
Increasing U.S. natural gas prices resulted in significant improvements in the
U.S. Gulf of Mexico ("U.S. Gulf ") rig demand and dayrates during the second
half of 1993. Declining world oil prices during this period reduced rig demand
outside the U.S. Gulf. As a result of declining international rig demand and
improved market conditions in the U.S. Gulf, many contractors mobilized rigs
from international markets to the U.S. Gulf in late 1993 and early 1994. The
increased supply of drilling rigs in the U.S. Gulf has more than offset the
increased level of U.S. Gulf rig demand during 1994, causing dayrates to
deteriorate. Dayrates charged by the Company in the fourth quarter of 1994 in
the U.S. Gulf were 25 percent lower than those charged by the Company in the
fourth quarter of 1993. If the price of natural gas, which has decreased in
recent months, remains at current levels or decreases further, the Company's
dayrates and utilization rates in the U.S. Gulf could be adversely affected.
The Company believes that absent an improvement in rig demand outside the U.S.
Gulf, additional rigs may be moved to the U.S. Gulf, which would increase
pressure for lower dayrates and could adversely affect the utilization levels
of the Company's rig fleet. The Company can predict neither the future level of
demand for its drilling services nor the future conditions in the offshore
contract drilling industry. The Company anticipates that the domestic offshore
market will experience pressure on pricing and utilization levels in the first
and second quarters of 1995.
The Company has significant operations in Nigeria. Since the
cancellation of presidential elections in June 1993, Nigeria has undergone a
period of political unrest. During 1994, this included a series of strikes,
protests and other disruptions to the economy. Nigeria's two oil worker unions
and other national labor unions participated in strikes in mid-1994 which
resulted in the suspension of drilling activity in Nigeria by certain
operators, but which did not materially adversely affect the Company's
operations. The strikes ended in September 1994.
Currently, the Company has four offshore drilling rigs under contract
and three offshore drilling rigs available for bidding in Nigeria. The
contracts under which the four rigs are operating each contain provisions
permitting the operator to suspend operations in the event of force majeure and
to terminate the contract if the force majeure continues; however, no operator
has elected to suspend operations pursuant to these provisions. The Company
maintains war and political risk insurance (covering physical damage or loss up
to the insured value of each rig), subject, in the case of certain coverages,
to
13
<PAGE> 16
immediate termination upon certain events or upon termination by the
underwriter on seven days' notice. Revenues from drilling activities in Nigeria
accounted for approximately 13 percent and 22 percent, respectively, of the
Company's operating revenues in 1994 and 1993.
In addition to the disruptions caused by the 1994 strikes, the recent
political and economic instability in Nigeria has caused delays in the ability
to renew existing contracts and to secure new drilling contracts for offshore
Nigeria. No assurance can be given that the political and economic climate in
Nigeria will improve or that it will not worsen.
The Company began to operate in Venezuela in late 1993 and currently
has four jackup rigs under contract for Lagoven, a subsidiary of the
government-owned oil company of Venezuela. In recent periods, the Venezuelan
economy has experienced high inflation and a shortage of foreign currency.
During a banking crisis in July 1994, the Venezuelan government imposed a
program of currency exchange controls and taxes on certain financial
transactions that temporarily limited the ability of the government-owned oil
companies and their affiliates to make payment in U.S. dollars or other hard
currencies to oilfield service contractors. During this period, the Company's
operations were not materially affected, and the Company received timely
payment for its services in U.S. dollars. Although timely U.S. dollar payments
are currently being made to the Company, future exchange control actions of the
Venezuelan government could adversely affect the Company's operations in
Venezuela. Revenues from drilling activities in Venezuela accounted for
approximately 10 percent and one percent, respectively, of the Company's
operating revenues in 1994 and 1993.
The Company currently has two rigs working under contract offshore
Mexico in the Bay of Campeche. In late December 1994, the Mexican government
devalued its currency by approximately 45 percent. The Company's operations in
Mexico have not been materially affected by this devaluation. Revenues from
drilling activities in Mexico accounted for approximately six percent and four
percent, respectively, of the Company's operating revenues in 1994 and 1993. At
this time, it is not known whether this situation will cause delays in the
renewal of existing contracts or the execution of new drilling contracts for
offshore Mexico. No assurance can be given that the economic climate in Mexico
will improve or that it will not worsen.
PURCHASE OF TRITON ENGINEERING SERVICES COMPANY
On April 22, 1994, the Company acquired all of the issued and
outstanding shares of common stock (the "Shares") of Triton pursuant to the
terms of the Stock Purchase Agreement dated April 22, 1994. In consideration
for the Shares, the Company paid approximately $4.1 million in cash, issued
promissory notes in the aggregate amount of $4.0 million and issued 751,864
shares of Noble Drilling common stock valued at $5.2 million. The promissory
notes were paid on October 21, 1994. In addition, the Company has a contingent
obligation on April 22, 1996 to pay additional consideration, including
issuance of up to 254,551 shares of Noble Drilling common stock. The Triton
Acquisition has been accounted for under the purchase method, and accordingly,
Triton's operating results have been included in the consolidated operating
results since the date of acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $157.9 million and $150.5 million
as of December 31, 1994 and 1993, respectively. The increase in working capital
of $7.4 million was primarily due to the increase in cash provided by operating
activities of $78.7 million offset by capital expenditures of $55.8 million.
The ratio of current assets to current liabilities at December 31, 1994 was
2.92:1 as compared to 3.94:1 at December 31, 1993. The decrease in the current
ratio was primarily the result of the increased accounts payable for capital
projects at December 31, 1994. In addition, the Company had a short-term note
payable of $5.7 million at December 31, 1994, related to the financing of the
Company's insurance package for the current policy year. The ratio of long-term
debt to total debt plus shareholders' equity improved to 0.19:1 at December 31,
1994 from 0.20:1 at December 31, 1993.
The Company has cash requirements for debt and principal payments, and
preferred stock dividends, when and if declared. In 1995, debt and principal
payments are estimated to be approximately $6.2 million. Cumulative dividends
on Noble Drilling's $2.25 Convertible Exchangeable Preferred Stock ("$2.25
Preferred Stock") and $1.50 Convertible Preferred Stock ("$1.50 Preferred
Stock") for 1995 are approximately $4.6 million and $6.1 million, respectively,
for aggregate dividends of approximately $10.7 million. On March 8, 1995, the
Company announced that four beneficial owners of the $2.25 Preferred Stock had
agreed with the Company to convert an aggregate of 923,862 shares of $2.25
Preferred Stock into Noble Drilling common stock in accordance with the terms
thereof. The Company paid an aggregate of approximately $1.5 million in cash to
such beneficial owners in consideration for their agreement forthwith to
convert. Accordingly, the foregoing annual cumulative dividend amounts are
based on the 2,065,238 shares of $2.25 Preferred Stock outstanding after giving
effect to such stockholder conversions and the 4,025,000 shares of $1.50
Preferred Stock currently outstanding. Under the covenant contained in the
indenture governing the Senior Notes restricting the payment of dividends,
approximately $7.1 million was available, as of December 31, 1994 (after giving
effect to the dividends payable as of that date), for payment of the dividends
on the $1.50 Preferred Stock and $2.25
14
<PAGE> 17
Preferred Stock. Under the terms of such covenant, the amount of the aggregate
carrying value of shares of $2.25 Preferred Stock that are converted into Noble
Drilling common stock is added to the amount available for the payment of
dividends increasing the amount to approximately $27.0 million. The Company
expects to fund these 1995 obligations of $16.9 million out of cash and
short-term investments as well as cash expected to be provided by operations.
At December 31, 1994, the Company had planned capital expenditures for
1995 of approximately $66.0 million related to upgrades of several drilling
rigs and replacements of equipment and drill pipe. The Company expects to fund
these improvements to its assets out of cash provided by operations, to the
extent available, and/or existing cash balances.
Total assets increased by $43.3 million from 1993 to 1994, primarily
as a result of the Triton Acquisition and the increase in cash and cash
equivalents due principally to the cash provided by operating activities. Total
liabilities increased by $32.5 million from 1993 to 1994. Approximately
one-half of this increase was due to the Triton Acquisition. Short-term debt
increased by $5.7 million for the reason discussed above. In addition, taxes
payable increased due to the recording of $3.4 million of foreign deferred
income taxes in 1994, mainly as a result of the book and tax depreciation
differences for the assets deployed in Mexico and Venezuela.
CREDIT FACILITIES AND LONG-TERM DEBT
On June 16, 1994, the Company entered into a credit agreement with
First Interstate Bank of Texas, N.A. for a $25.0 million revolving credit
facility and a $5.0 million letter of credit facility (see Note 5 of Notes to
Consolidated Financial Statements included elsewhere herein). At December 31,
1994, the Company had lines of credit totaling $26.0 million and letter of
credit facilities aggregating $5.7 million, subject to the Company's
maintenance of certain levels of collateral. Based on the levels of collateral
at December 31, 1994, the Company had $21.8 million available under these lines
of credit and $2.9 million available to support the issuance of letters of
credit. No amounts were outstanding under the lines of credit at December 31,
1994.
In 1993, the Company issued $125,000,000 aggregate principal amount of
9 1/4% Senior Notes Due 2003 (the "Senior Notes"), which will mature on October
1, 2003. Interest on the Senior Notes is payable semi-annually on April 1 and
October 1 of each year. The Senior Notes are redeemable at the option of the
Company, in whole or in part, on or after October 1, 1998 at 103.47 percent of
the principal amount, declining ratably to par on or after October 1, 2001,
plus accrued interest. Mandatory sinking fund payments of 25 percent of the
original principal amount of the Senior Notes at par plus accrued interest will
be required on October 1, 2001 and October 1, 2002. The indenture governing the
Senior Notes contains certain restrictive covenants, including limitations on
additional indebtedness and the ability to secure such indebtedness,
restrictions on dividends and certain investments, and limitations on sale of
assets, sales and leasebacks, transactions with affiliates, and merger or
consolidations.
In connection with the initial construction of the NN-1, the
predecessor of NN-1 Limited Partnership issued its U.S. Government Guaranteed
Ship Financing Sinking Fund Bonds, of which $2.1 million was outstanding at
December 31, 1994. The bonds are secured by the vessel, and the applicable
security agreement contains certain restrictions among others, on distributions
to partners, dispositions of assets and services to related parties. In
addition, there are minimum working capital, net worth and long-term debt to
net worth requirements applicable to NN-1 Limited Partnership. The Company's
sharing percentage in NN-1 Limited Partnership's distributions from operations
is generally 90 percent.
The Company's outstanding principal of $38.6 million to Transworld
Drilling Company under its promissory note dated November 21, 1991 was prepaid
in full on October 14, 1993 with proceeds from the October 7, 1993 public
offerings of Common Stock and the Senior Notes. An extraordinary gain of $1.8
million for extinguishment of debt was recognized from the prepayment of the
note, representing excess accrued interest.
The Company and its wholly owned subsidiary, Noble Drilling (West
Africa) Inc. ("NDWA"), were parties to a secured loan agreement (the "Project
Loan Agreement") with US WEST Financial Services, Inc. dated as of October 31,
1990, as amended, pursuant to which NDWA borrowed $52.5 million for the purpose
of financing in part the equipping, refurbishment, and mobilization to Nigeria
of four offshore drilling rigs: the NN-1, which is majority owned through NN-1
Limited Partnership, GENE ROSSER, LEWIS DUGGER and CHUCK SYRING. On July 7,
1993 the final installment of $6.6 million plus accrued interest was paid in
accordance with the terms of the Project Loan Agreement. Interest was charged
under the Project Loan Agreement at a fixed rate of 11.12 percent.
Minimum principal payments on the long-term debt as described above
are $520,000 in 1995, $520,000 in 1996, $520,000 in 1997, $506,000 in 1998 and
$125.0 million thereafter.
15
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial
information of the Company expressed as a percentage of total operating
revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating revenues
Contract drilling services
International offshore . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.7% 29.8% 46.0%
Domestic offshore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.0 44.6 22.2
International land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 7.3 3.1
Domestic land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 2.8 5.2
Labor contract drilling services . . . . . . . . . . . . . . . . . . . . . . . 10.3 12.9 18.8
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0 - -
Engineering and consulting services . . . . . . . . . . . . . . . . . . . . . 1.1 .9 1.8
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 1.7 2.9
----- ----- -----
100.0 100.0 100.0
Operating costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69.1) (67.6) (73.5)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . (11.2) (10.9) (14.8)
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . (13.5) (10.7) (16.7)
Other income (expense), net (2) . . . . . . . . . . . . . . . . . . . . . . . . (1.0) .1 (11.5)
----- ----- -----
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 10.9 (16.5)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.5) (3.0) (7.2)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 .9 1.8
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 .4 2.0
----- ----- -----
Income (loss) from continuing operations before
income tax and extraordinary item . . . . . . . . . . . . . . . . . . . . . . 7.8 9.2 (19.9)
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.6) (1.3) (1.8)
----- ----- -----
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . 6.2 7.9 (21.7)
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (1.8)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - .7 -
----- ----- -----
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 8.6 (23.5)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.6) (3.0) (3.7)
----- ----- -----
Net income (loss) applicable to common shares . . . . . . . . . . . . . . . . . 2.6% 5.6% (27.2)%
===== ===== =====
</TABLE>
_______________
(1) Consists of operating costs and expenses other than depreciation and
amortization, selling, general and administrative, minority interest,
and restructuring charges/asset write-downs.
(2) Consists of minority interest and restructuring charges/asset
write-downs in 1994, minority interest in 1993, and minority interest
and a write-down of assets charge in 1992.
1994 COMPARED WITH 1993
OPERATING REVENUES. During 1994, the Company generated operating
revenues of $352.0 million compared to operating revenues of $264.5 million in
1993. This increase of $87.5 million was due primarily to the Triton
Acquisition and a full year's revenue from the assets purchased in the Western
Acquisition in October 1993. The Company's contract drilling fleet statistics
are shown below.
<TABLE>
<CAPTION>
Operating Days Average Dayrate
---------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
CONTRACT DRILLING SERVICES
Offshore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,013 9,137 $ 20,024 $ 21,105
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,332 3,464 $ 6,763 $ 7,449
</TABLE>
Labor contract drilling services revenue increased by $1.7 million due
to the increased number of labor contracts from 1993.
Turnkey drilling services revenues were $56.4 million in 1994, which
represents nine months of revenue from the date of the Triton Acquisition.
Twenty-eight wells were completed in 1994 subsequent to the Triton Acquisition
for average revenues per completed well of approximately $2.0 million.
16
<PAGE> 19
The increase in engineering and consulting services revenues and other
revenue of $1.5 million and $1.3 million, respectively, was primarily due to
the Triton Acquisition.
OPERATING COSTS. Operating costs ("Operating Costs") consist of
operating costs and expenses other than depreciation and amortization, selling,
general and administrative, minority interest, restructuring charges and write-
down of assets charges. Operating Costs were $243.2 million, or 69 percent of
operating revenues, during 1994 compared to $178.7 million, or 68 percent of
operating revenues, in 1993. The increase in Operating Costs is due to the
turnkey drilling services expense and the increase in operating days as
discussed above.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expenses were $39.5 million in 1994 as compared to $28.9 million in 1993. The
increase of $10.6 million is principally due to a full year's depreciation on
the assets purchased from Western in October 1993 and the increase of
approximately $35.0 million in capital expenditures from 1993. The Company will
reassess the useful life of all its rigs in 1995 and adjust, if necessary, on a
prospective basis.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") were $47.6 million during 1994 as compared to
$28.3 million in 1993, an increase of $19.3 million. SG&A expenses increased
from 1993 due to the Triton Acquisition ($7.8 million), pooling expenses
related to the Chiles Merger ($5.3 million), and a full year of administrative
expense from the Venezuela and Zaire operations ($2.8 million), with the
balance due to an increased level of corporate personnel.
RESTRUCTURING/ASSET WRITE-DOWN CHARGES. A restructuring charge of $3.7
million related to the Chiles Merger was recorded in 1994 as a result of
facility consolidation, including the write-down of certain of the Company's
owned properties and, to a lesser extent, severance costs. This restructuring
plan was developed in the fourth quarter of 1994 and approved by the board of
directors of Noble Drilling.
INTEREST (INCOME) EXPENSE. Interest expense, net of interest income,
was $6.7 million in 1994 as compared to net interest expense of $5.5 million in
1993. This increase was due to increased interest expense of $4.3 million
related to the issuance of the Senior Notes in October 1993 offset by
additional interest income of $3.1 million. The increase in interest income is
attributable to the cash proceeds from Chiles' preferred stock offering in
October 1993 (see Note 6 of Notes to Consolidated Financial Statements included
elsewhere herein).
OTHER, NET. Other, net was $15.7 million during 1994 compared to $1.0
million in 1993. This increase was principally due to a gain of $8.0 million on
the sale of a drilling rig, net unrealized gains of $4.2 million on marketable
equity investments, and a gain of $1.6 million on the recovery of a previously
written-off notes receivable offset by realized losses on marketable debt
securities of $2.2 million.
INCOME TAX PROVISION. Provisions for income taxes of $5.6 million and
$3.3 million were recorded in 1994 and 1993, respectively. This increase is due
to the foreign deferred tax provision of $3.4 million in 1994 related to the
book and tax depreciation differences for the assets deployed in Venezuela and
Mexico.
1993 COMPARED WITH 1992
OPERATING REVENUES. During 1993, the Company generated operating
revenues of $264.5 million compared to operating revenues of $184.2 million
during 1992. This increase of $80.3 million was primarily attributable to an
increase in the number of active days worked and an increase in average
dayrates earned in the U.S. Gulf of Mexico. The increase in revenue was also
attributable to the assets purchased in the Western Acquisition in October
1993. The Company's contract drilling fleet statistics are shown below.
<TABLE>
<CAPTION>
Operating Days Average Dayrate
---------------- -----------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
CONTRACT DRILLING SERVICES
Offshore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,137 5,057 $ 21,105 $ 24,864
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,464 3,529 $ 7,449 $ 4,209
</TABLE>
The Company had a decrease in its international labor contracts on
operator-owned rigs to 15 in 1993 from 17 in 1992, and experienced a decline of
$1.0 million in its engineering and consulting services revenues, primarily due
to decreased oil and gas activity in the United Kingdom, resulting from
depressed oil prices.
OPERATING COSTS. Operating Costs were $178.7 million, or 68 percent of
operating revenues, during 1993 compared to $135.3 million, or 73 percent of
operating revenues, in 1992. The increase of $43.4 million is primarily
attributable to the increase in active days worked as discussed above.
17
<PAGE> 20
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expenses were $28.9 million in 1993 as compared to $27.2 million in 1992. The
increase of $1.7 million is primarily attributable to the capital expenditures
incurred near the end of 1992. These capital expenditures included upgraded
equipment on reactivated offshore drilling units, purchases of drill pipe put
into service in 1993 and addition of top drive units to some of the offshore
rigs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $28.3
million during 1993 as compared to $30.7 million in 1992.
INTEREST (INCOME) EXPENSE. Interest expense, net of interest income,
was $5.5 million in 1993 as compared to net interest expense of $10.0 million
in 1992. The decrease in net interest expense of $4.5 million was primarily
attributable to lower outstanding average borrowings, lower average interest
rates on outstanding borrowings, the elimination of long-term indebtedness by
Chiles and interest income earned on Chiles' net cash proceeds of a preferred
stock offering completed in October 1993.
INCOME TAX PROVISION. Provisions for income taxes of $3.3 million and
$3.4 million were recorded in 1993 and 1992, respectively, primarily related to
the Company's operations in Nigeria and Venezuela.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed in this Item 8:
Report of Independent Accountants (Price Waterhouse LLP)
Report of Independent Public Accountants (Arthur Andersen LLP)
Consolidated Balance Sheets at December 31, 1994 and 1993
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1994
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1994
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements
18
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Noble Drilling Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, cash flows and shareholders' equity
present fairly, in all material respects, the financial position of Noble
Drilling Corporation and its subsidiaries (the "Company") at December 31, 1994,
and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, on September
15, 1994, the Company merged with Chiles Offshore Corporation. The merger was
accounted as a pooling of interests.
PRICE WATERHOUSE LLP
Houston, Texas
February 2, 1995
19
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Noble Drilling Corporation:
We have audited the accompanying consolidated balance sheet of Noble Drilling
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993,
and the related consolidated statements of operations, cash flows and
shareholders' equity for each of the two years in the period ended December 31,
1993. These financial statements reflect a restatement of the Company's
previously reported amounts for the merger with Chiles Offshore Corporation
("Chiles"), see Note 1. 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 financial position of Noble Drilling Corporation and
subsidiaries (including Chiles) as of December 31, 1993, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
September 15, 1994
20
<PAGE> 23
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,163 $ 69,177
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898 1,793
Investment in marketable equity securities . . . . . . . . . . . . . . . . . . . . . . 9,489 -
Investment in marketable debt securities . . . . . . . . . . . . . . . . . . . . . . . 39,673 39,451
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,563 66,219
Costs of uncompleted contracts in excess of billings . . . . . . . . . . . . . . . . . 841 -
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,008 9,999
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,584 15,093
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,219 201,732
-------- --------
PROPERTY AND EQUIPMENT
Drilling equipment and facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 804,445 765,807
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,461 15,801
-------- --------
824,906 781,608
-------- --------
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (331,584) (299,579)
-------- --------
493,322 482,029
-------- --------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,348 12,792
-------- --------
$739,889 $696,553
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments of long-term debt and short-term debt . . . . . . . . . . . . . . $ 6,244 $ 546
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,662 19,578
Accrued payroll and related costs . . . . . . . . . . . . . . . . . . . . . . . . . . 14,888 12,063
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,972 7,098
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,853 2,974
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,715 8,938
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,334 51,197
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,546 127,144
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,767 1,286
MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 156
-------- --------
212,278 179,783
-------- --------
SHAREHOLDERS' EQUITY
$2.25 Preferred stock-par value $1; convertible; cumulative; redeemable and
exchangeable at the option of the Company; aggregate liquidation preference
of $74,728 in 1994 and $74,750 in 1993; 15,000 shares authorized; 2,989
issued and outstanding in 1994, 2,990 issued and outstanding in 1993 . . . . . . . . 2,989 2,990
$1.50 Preferred stock-par value $1; convertible; cumulative; redeemable at the
option of the Company; aggregate liquidation preference of $100,625; 15,000
shares authorized; 4,025 issued and outstanding . . . . . . . . . . . . . . . . . . . 4,025 4,025
Common stock-par value $.10; 200,000 shares authorized; 78,076 issued and
77,826 outstanding in 1994, 76,371 issued and 76,121 outstanding in
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,808 7,637
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,733 583,110
Unrealized losses on marketable securities . . . . . . . . . . . . . . . . . . . . . . (1,847) -
Minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,825) -
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . (2,325) (2,286)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,197) (76,956)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,750) (1,750)
-------- --------
527,611 516,770
-------- --------
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
-------- --------
$739,889 $696,553
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE> 24
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES
Contract drilling services . . . . . . . . . . . . . . . . . . . . . . . . . . $249,820 $223,321 $140,594
Labor contract drilling services . . . . . . . . . . . . . . . . . . . . . . . 36,203 34,474 35,016
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . . . . 56,380 - -
Engineering and consulting services . . . . . . . . . . . . . . . . . . . . . 3,796 2,292 3,263
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,789 4,444 5,293
-------- -------- --------
351,988 264,531 184,166
-------- -------- --------
OPERATING COSTS AND EXPENSES
Contract drilling services . . . . . . . . . . . . . . . . . . . . . . . . . . 160,109 146,008 99,523
Labor contract drilling services . . . . . . . . . . . . . . . . . . . . . . . 28,355 27,857 28,841
Turnkey drilling services . . . . . . . . . . . . . . . . . . . . . . . . . . 46,886 - -
Engineering and consulting services . . . . . . . . . . . . . . . . . . . . . 2,958 2,083 3,559
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900 2,736 3,329
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 39,519 28,886 27,248
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . 47,606 28,284 30,716
Restructuring charges/asset write-downs . . . . . . . . . . . . . . . . . . . 3,661 - 21,120
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (169) (232) 89
-------- -------- --------
333,825 235,622 214,425
-------- -------- --------
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,163 28,909 (30,259)
OTHER INCOME (EXPENSE)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,351) (8,038) (13,274)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,640 2,497 3,276
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,743 1,047 3,675
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . . 27,195 24,415 (36,582)
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,672) (3,333) (3,396)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS. . . . . . . . . . . . . . . . . . . . 21,523 21,082 (39,978)
DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (3,372)
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . 21,523 21,082 (43,350)
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,770 -
-------- -------- --------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,523 22,852 (43,350)
PREFERRED STOCK DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,764) (7,936) (6,728)
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES . . . . . . . . . . . . . . . . . $ 8,759 $ 14,916 $(50,078)
======== ======== ========
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES
PER SHARE:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.11 $ 0.20 $ (0.98)
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (0.07)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 0.02 -
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHARES PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.11 $ 0.22 $ (1.05)
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . . . . 78,326 66,923 47,762
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE> 25
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
--------- --------- --------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,523 $ 22,852 $ (43,350)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 39,519 28,886 27,248
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . (9,546) (785) (674)
Loss (gain) on foreign exchange . . . . . . . . . . . . . . . . . . . . 76 (79) (452)
Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . 3,433 - -
Restructuring charges/asset write-downs . . . . . . . . . . . . . . . . 3,661 - 21,120
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . - - 3,098
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . - (1,770) -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,009) 227 1,092
Changes in current assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 20,208 (18,694) 12,158
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,791 (11,508) (229)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . (2,635) 7,863 (9,281)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (12,365) 7,806 (3,908)
--------- --------- ---------
78,656 34,798 6,822
--------- --------- ---------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . (55,834) (20,259) (7,891)
Acquisition of Western rigs and related assets . . . . . . . . . . . . . . - (150,000) -
Proceeds from Triton Acquisition, net of negative
noncash working capital of $3,532 acquired . . . . . . . . . . . . . . . 13,600 - -
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . 13,792 1,712 11,394
Investment in marketable securities . . . . . . . . . . . . . . . . . . . (2,069) (15,100) (24,351)
Investment in unconsolidated affiliate . . . . . . . . . . . . . . . . . . (342) (983) (2,455)
Payments to minority interest holders, net . . . . . . . . . . . . . . . . (4,478) - -
Reimbursable modifications in progress . . . . . . . . . . . . . . . . . . - - 3,421
Discontinued items . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 5,361
--------- --------- ---------
(35,331) (184,630) (14,521)
--------- --------- ---------
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . - 125,000 -
Payment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (598) (109,592) (67,873)
Dividends paid on preferred stock . . . . . . . . . . . . . . . . . . . . (12,764) (7,936) (6,728)
Proceeds from issuance of common stock, net . . . . . . . . . . . . . . . 2,604 97,451 29,752
Proceeds from issuance of preferred stock, net . . . . . . . . . . . . . . - 96,500 -
Payment of short-term debt . . . . . . . . . . . . . . . . . . . . . . . . (7,500) (2,449) (712)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 (820) (857)
--------- --------- ---------
(17,047) 198,154 (46,418)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . . . . . . . . . (292) 645 (1,003)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . 25,986 48,967 (55,120)
--------- --------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . 69,177 20,210 75,330
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . $ 95,163 $ 69,177 $ 20,210
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,947 $ 7,033 $ 10,271
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,254 $ 2,123 $ 1,250
Noncash investing and financing activities:
Rig purchase with common stock . . . . . . . . . . . . . . . . . . . . . - $ 5,725 -
Triton Acquisition with common stock . . . . . . . . . . . . . . . . . . $ 5,169 - -
Triton Acquisition with notes payable . . . . . . . . . . . . . . . . . . $ 4,000 - -
Triton Acquisition, minority interest assumed . . . . . . . . . . . . . . $ 5,392 - -
</TABLE>
See accompanying notes to the consolidated financial statements.
23
<PAGE> 26
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
$2.25 PREFERRED STOCK $1.50 PREFERRED STOCK
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
JANUARY 1, 1992 . . . . . . . . . . . . . . . . . . . . 2,990 $2,990 - $ -
Net loss . . . . . . . . . . . . . . . . . . . . . . . - - - -
Issuance of stock:
Sale of common stock . . . . . . . . . . . . . . . . . - - - -
Exercise of stock options . . . . . . . . . . . . . . - - - -
Contribution to benefit plans . . . . . . . . . . . . - - - -
Exercise of warrants . . . . . . . . . . . . . . . . . - - - -
Stock options granted at discount . . . . . . . . . . - - - -
Retirement of common stock . . . . . . . . . . . . . . - - - -
Dividends on preferred stock . . . . . . . . . . . . . - - - -
Translation adjustment . . . . . . . . . . . . . . . . - - - -
------ ------ ------ ------
DECEMBER 31, 1992 . . . . . . . . . . . . . . . . . . . 2,990 2,990 - -
Net income . . . . . . . . . . . . . . . . . . . . . . - - - -
Issuance of stock:
Sale of common stock . . . . . . . . . . . . . . . . . - - - -
Sale of preferred stock . . . . . . . . . . . . . . . - - 4,025 4,025
Purchase of Portal rigs . . . . . . . . . . . . . . . - - - -
Exercise of stock options . . . . . . . . . . . . . . - - - -
Contribution to benefit plans . . . . . . . . . . . . - - - -
Stock options granted at discount . . . . . . . . . . . - - - -
Dividends on preferred stock . . . . . . . . . . . . . - - - -
Translation adjustment . . . . . . . . . . . . . . . . - - - -
------ ------ ------ ------
DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . 2,990 2,990 4,025 4,025
Net income . . . . . . . . . . . . . . . . . . . . . . - - - -
Issuance of stock:
Purchase of Triton . . . . . . . . . . . . . . . . . . - - - -
Exercise of stock options . . . . . . . . . . . . . . - - - -
Contribution to benefit plans . . . . . . . . . . . . - - - -
Exchange of Chiles options . . . . . . . . . . . . . . - - - -
Stock options granted at discount . . . . . . . . . . . - - - -
Conversion of preferred stock . . . . . . . . . . . . . (1) (1) - -
Dividends on preferred stock . . . . . . . . . . . . . - - - -
Net unrealized losses on marketable securities . . . . - - - -
Minimum pension liability . . . . . . . . . . . . . . . - - - -
Translation adjustment . . . . . . . . . . . . . . . . - - - -
------ ------ ------ ------
DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . . . 2,989 $2,989 4,025 $4,025
====== ====== ====== ======
</TABLE>
See accompanying notes to the consolidated financial statements.
24
<PAGE> 27
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK CAPITAL LOSSES ON MINIMUM CUMULATIVE
-------------------- IN EXCESS MARKETABLE PENSION TRANSLATION ACCUMULATED TREASURY
SHARES AMOUNT OF PAR VALUE SECURITIES LIABILITY ADJUSTMENT DEFICIT STOCK
------ ------ ------------ ---------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
45,880 $4,588 $359,949 $ - $ - $ 384 $(41,794) $(1,750)
- - - - - - (43,350) -
16,650 1,664 26,613 - - - - -
322 32 767 - - - - -
210 21 649 - - - - -
34 3 3 - - - - -
- - 472 - - - - -
(8) - - - - - - -
- - - - - - (6,728) -
- - - - - (2,879) - -
------ ------ -------- ------- ------- ------- -------- -------
63,088 6,308 388,453 - - (2,495) (91,872) (1,750)
- - - - - - 22,852 -
12,041 1,204 93,705 - - - - -
- - 92,475 - - - - -
626 63 5,662 - - - - -
486 49 2,047 - - - - -
130 13 560 - - - - -
- - 208 - - - - -
- - - - - - (7,936) -
- - - - - 209 - -
------ ------ -------- ------- ------- ------- -------- -------
76,371 7,637 583,110 - - (2,286) (76,956) (1,750)
- - - - - - 21,523 -
752 75 5,094 - - - - -
197 20 1,248 - - - - -
271 27 1,781 - - - - -
480 48 (480) - - - - -
- - 20 - - - - -
5 1 - - - - - -
- - - - - - (12,764) -
- - - (1,847) - - - -
- - - - (3,825) - - -
- - - - - (39) - -
------ ------ -------- ------- ------- ------- -------- -------
78,076 $7,808 $590,773 $(1,847) $(3,825) $(2,325) $(68,197) $(1,750)
====== ====== ======== ======= ======= ======= ======== =======
</TABLE>
See accompanying notes to the consolidated financial statements.
25
<PAGE> 28
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Noble Drilling Corporation ("Noble Drilling" or, together with its
consolidated subsidiaries, unless the context requires otherwise, the
"Company") is primarily engaged in domestic and international contract oil and
gas drilling and workover operations. On September 15, 1994, Chiles Offshore
Corporation ("Chiles") merged with Noble Offshore Corporation ("NOC"), a wholly
owned subsidiary of Noble Drilling (the "Chiles Merger"). The Company's
international operations are conducted in the United Kingdom, Nigeria, Zaire,
India, Venezuela, Mexico, Canada, Korea and Qatar.
On September 15, 1994, the Company completed the merger of Chiles with
NOC. The consolidated financial statements reflect the restatement of the
Company's historical financial statements to reflect the Chiles Merger as a
pooling of interests as of the beginning of the earliest year presented. Unless
indicated, all Chiles common stock amounts are presented on an equivalent Noble
common stock basis.
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries, including Chiles, and the assets,
liabilities and operations of Perforadora Faja de Oro, S.A. de C.V. ("Faja
Joint Venture") and NN-1 Limited Partnership, of which the Company is the
general partner. The minority interest in Faja Joint Venture and NN-1 Limited
Partnership is included in the balance sheet and the statement of operations as
minority interest. In 1994, the Company made distributions of $4.5 million to
its partner in Faja Joint Venture. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Certain reclassifications have been made in the 1993 and 1992
consolidated financial statements to conform to the classifications used in the
1994 consolidated financial statements. These reclassifications have no impact
on net income or loss.
FOREIGN CURRENCY TRANSLATION
The Company follows a translation policy in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 52, FOREIGN CURRENCY
TRANSLATION. The U.S. dollar has been designated as the functional currency
where appropriate, based on an evaluation of such factors as the markets in
which the subsidiary operates, generation of cash flow, financing activities
and intercompany arrangements. For the Company's subsidiaries in the United
Kingdom and Canada, the local currency is the functional currency. Assets and
liabilities are translated at the rates of exchange on the balance sheet date.
Income and expense items are translated at average rates of exchange. The
resulting gains or losses arising from the translation of accounts from the
functional currency to the U.S. dollar are included as a separate component of
shareholders' equity designated as cumulative translation adjustment. (Losses)
gains from foreign currency exchange transactions are included in other income
and consist of $(76,000) in 1994, $(611,000) in 1993 and $452,000 in 1992.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, demand deposits with
banks and all highly liquid investments with original maturities of three
months or less, when purchased.
In accordance with SFAS No. 95, STATEMENT OF CASH FLOWS, cash flows
from the Company's operations in the United Kingdom and Canada are calculated
based on their functional currency. As a result, amounts related to assets and
liabilities reported on the Consolidated Statements of Cash Flows will not
necessarily agree to changes in the corresponding balances on the Consolidated
Balance Sheets. The effect of exchange rate changes on cash balances held in
foreign currencies is reported on a separate line below cash (used in) provided
by financing activities.
Of the cash on hand at December 31, 1994 and 1993, approximately
$898,000 and $1.8 million, respectively, was restricted as a result of exchange
controls in certain foreign countries and cash collateral requirements for
performance bonds and letters of credit.
INVESTMENT IN MARKETABLE SECURITIES
Pursuant to the cash management policy implemented in 1992, the
Company invests in marketable debt securities. Effective January 1, 1994, the
Company adopted SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. The Company classifies its investments in marketable debt
securities as available for sale and marketable equity securities as trading
(see Note 3).
26
<PAGE> 29
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
INVESTMENT IN UNCONSOLIDATED AFFILIATES
The Company uses the equity method to account for affiliates in which
it does not have voting control.
INVENTORIES
Inventories of spare parts, material and supplies held for consumption
are stated principally at average cost.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. Drilling equipment and facilities are depreciated
using the straight-line method over estimated remaining useful lives ranging
from three to twenty-five years from the date of construction. All other
property and equipment is depreciated using the straight-line method over
useful lives ranging from three to twenty years.
During the second quarter of 1992, industry conditions in the U.S.
Gulf of Mexico continued the deterioration that had begun in early 1991.
Accordingly, as of June 30, 1992, management of Chiles determined, based on its
continuing review of the net asset carrying values of its rigs, that several
additional rigs would not realize their net asset carrying values over their
estimated remaining useful lives. Accordingly, Chiles recorded a provision of
$21.1 million in the second quarter of 1992 to reduce the carrying value of the
rigs in its fleet in the U.S. Gulf of Mexico to their estimated recoverable
values as of June 30, 1992. The Company continually evaluates the net asset
carrying values of its assets.
Maintenance and repairs on drilling equipment are charged to expense
as incurred. Total maintenance and repair expense for the years ended December
31, 1994, 1993 and 1992 were approximately $33.7 million, $25.9 million and
$17.6 million, respectively. When assets are sold, retired or otherwise
disposed of, the cost and related accumulated depreciation are eliminated from
the accounts and the gain or loss is recognized.
OTHER ASSETS
In 1994, other assets include deferred debt issuance costs in
connection with the October 7, 1993 issuance of debt securities (see Note 4).
These charges totaled $4.1 million and are being amortized over the life of the
debt securities. The accumulated amortization at December 31, 1994 and 1993 was
$540,000 and $92,000, respectively.
REVENUE RECOGNITION
Revenues generated from the Company's dayrate-basis drilling contracts
are recognized as services are performed. The Company's turnkey drilling
contracts are of a short-term, fixed fee nature, and accordingly, revenues and
expenses are recognized on a completed contract method.
CONCENTRATION OF CREDIT RISK
The primary market for the Company's services is the offshore oil and
gas industry, and the Company's customers consist primarily of major oil
companies, independent oil and gas producers and government-owned oil
companies. The Company performs ongoing credit evaluations of its customers and
generally does not require material collateral. The Company provides allowances
for potential credit losses when necessary.
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES PER SHARE
Net income (loss) applicable to common shares per share has been
computed on the basis of the weighted average number of common shares and,
where dilutive, common share equivalents, outstanding during the indicated
periods, and includes the effect of preferred stock dividends (see Note 6). The
calculation of net income (loss) applicable to common shares per share assuming
full dilution was antidilutive; therefore, fully diluted amounts were not
presented.
NOTE 2 -- ACQUISITIONS AND MERGERS
The Chiles Merger was consummated on September 15, 1994, through the
exchange of 28,598,777 shares of Noble Drilling common stock for all the
outstanding common stock of Chiles and the exchange of 4,025,000 shares of
Noble Drilling $1.50 convertible preferred stock ("$1.50 Preferred Stock")
(liquidation preference $25.00 per share), par value $1.00 per share, for all
the outstanding shares of Chiles $1.50 convertible preferred stock. The Chiles
Merger was accounted for as a pooling of interests and all financial
information for the current and prior periods has been restated to reflect this
merger. In addition, Noble Drilling issued an additional 480,000 shares of its
common stock in exchange for the cancellation of outstanding Chiles stock
options (see Note 7).
27
<PAGE> 30
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
On April 22, 1994, the Company acquired all of the issued and
outstanding shares of common stock (the "Shares") of Triton Engineering
Services Company ("Triton"), a Texas corporation, pursuant to the terms of the
Stock Purchase Agreement dated April 22, 1994 ("Triton Acquisition"). In
consideration for the Shares, the Company paid approximately $4.1 million in
cash, issued promissory notes in the aggregate amount of $4.0 million and
issued 751,864 shares of Noble Drilling common stock valued at $5.2 million.
The promissory notes were paid on October 21, 1994. In addition, the Company
has a contingent obligation on April 22, 1996 to pay additional consideration,
including issuance of up to 254,551 shares of Noble Drilling common stock. The
Triton Acquisition has been accounted for under the purchase method, and
accordingly, the operating results have been included in the consolidated
operating results since the date of acquisition.
The Company acquired nine mobile offshore jackup drilling rigs and
associated assets (the "Western Acquisition") from The Western Company of North
America ("Western") for $150.0 million in cash on October 7, 1993. The Western
Acquisition has been accounted for under the purchase method, and accordingly,
the operating results have been included in the consolidated operating results
since the date of acquisition.
The following table summarizes certain unaudited pro forma condensed
consolidated results of operations data that give effect to the Triton
Acquisition and the Western Acquisition as if these purchases had occurred on
January 1, 1993 and January 1, 1992, respectively:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 378,123 $ 428,284 $ 239,780
Net income applicable to common shares . . . . . . . . . . . . . . . . . . . . $ 8,853 $ 9,256 $ (57,906)
Net income applicable to common shares per share . . . . . . . . . . . . . . . $ 0.11 $ .12 $ (0.99)
</TABLE>
On September 16, 1994, the Company exchanged its interest in Grasso
Corporation for 645,656 shares of common stock of Offshore Logistics, Inc.
("OLOG"). The investment in OLOG is classified as a marketable equity security
(see Note 3).
Pursuant to an agreement dated August 20, 1993, the Company purchased
two submersible offshore drilling rigs from Portal Rig Corporation ("Portal")
for 626,410 shares of Noble Drilling common stock (see Note 6) on October 25,
1993. The Company acquired the rigs subject to certain federal income tax "safe
harbor leases" and a related preferred ship mortgage relating to a tax benefit
transaction entered into in 1982 by a predecessor of Portal, and the Company
will be indemnified by Portal for any potential liabilities as a result of this
earlier tax benefit transaction.
NOTE 3 -- MARKETABLE SECURITIES
Effective January 1, 1994, the Company adopted SFAS No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Under the
provisions of SFAS No. 115, investments in debt and equity securities are
required to be classified into one of three categories: held to maturity,
available for sale or trading securities. At each reporting date, the
appropriateness of such classification is required to be reassessed.
As of December 31, 1994, the Company classified all of its debt
securities, with original maturities of three months or more, as available for
sale. These investments are classified as marketable securities within current
assets on the accompanying consolidated balance sheets. The following table
highlights information applicable to the Company's investments classified as
available for sale as of December 31, 1994:
28
<PAGE> 31
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
<TABLE>
<CAPTION>
Amortized Unrealized
Debt Security/Maturity Cost Fair Value Losses
---------------------- -------- ---------- ----------
<S> <C> <C> <C>
Corporate Obligations
Mature within 1 year . . . . . . . . . . . . . . . . . . . . . . . . $ 11,526 $ 11,447 $ (79)
Mature after 1 year through 5 years . . . . . . . . . . . . . . . . 4,485 4,412 (73)
-------- -------- -------
16,011 15,859 (152)
-------- -------- -------
U.S. Government Obligations
Mature within 1 year . . . . . . . . . . . . . . . . . . . . . . . . 5,156 5,010 (146)
Mature after 1 year through 5 years . . . . . . . . . . . . . . . . 20,353 18,804 (1,549)
-------- -------- -------
25,509 23,814 (1,695)
-------- -------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,520 $ 39,673 $(1,847)
======== ======== =======
</TABLE>
An allowance for unrealized losses has been established and included
as a reduction of shareholders' equity. Total realized losses related to
short-term investments for the twelve months ended December 31, 1994 were $2.2
million.
The Company categorizes its investments in marketable equity
securities of $9.5 million as trading securities and such investments are
classified as current assets and are recorded at fair value at December 31,
1994. Total net unrealized gains related to these equity investments for the
twelve months ended December 31, 1994 were $4.2 million.
NOTE 4 -- LONG-TERM DEBT
As discussed further in Note 6, Chiles completed an offering of its
preferred stock on October 21, 1993. Approximately $45.2 million of the net
proceeds were used to retire all of Chiles' outstanding long-term indebtedness,
including principal and interest.
On October 14, 1993, the Company prepaid a promissory note with
proceeds from the Public Offerings (as defined below). The terms of the note
provided that interest did not accrue from September 1, 1991 through December
31, 1992, after which date interest on the unpaid principal amount accrued at a
fixed rate of 7.5 percent per annum. The Company had accrued interest on the
note at 4.9 percent for all periods, which was the imputed rate based on the
revised note terms. An extraordinary gain of $1.8 million for extinguishment of
debt was recognized in 1993 (see Note 10) from the prepayment of the note,
representing excess accrued interest.
On October 7, 1993, in connection with the Western Acquisition and the
issuance of 12,041,000 shares of Noble Drilling common stock in an
underwritten public offering (the "Stock Offering") (see Note 6), the Company
issued $125,000,000 principal amount of 9 1/4% Senior Notes Due 2003 ("Senior
Notes") (the Stock Offering and the issuance of Senior Notes are collectively
referred to as the "Public Offerings"). The Senior Notes will mature on
October 1, 2003. Interest on the Senior Notes is payable semi-annually on April
1 and October 1 of each year. The Senior Notes are redeemable at the option of
the Company, in whole or in part, on or after October 1, 1998 at 103.47 percent
of principal amount, declining ratably to par on or after October 1, 2001, plus
accrued interest. Mandatory sinking fund payments of 25 percent of the original
principal amount of the Senior Notes at par plus accrued interest will be
required on October 1, 2001 and October 1, 2002. The indenture governing the
Senior Notes contains certain restrictive covenants, including limitations on
additional indebtedness and the ability to secure such indebtedness,
restrictions on dividends and certain investments and limitations on sales of
assets, sales and leaseback, transactions with affiliates, and merger or
consolidation.
In connection with the initial construction of the NN-1, the
predecessor of NN-1 Limited Partnership issued U.S. Government Guaranteed Ship
Financing Sinking Fund Bonds, of which $2.1 million principal amount was
outstanding at December 31, 1994. Interest is payable semi-annually on June 15
and December 15 of each year with interest at 8.95 percent, and the bonds
mature in 1998. The bonds are secured by the vessel, and the applicable
security agreement contains certain restrictions, among others, on
distributions to partners, dispositions of assets and services to related
parties. In addition, there are minimum working capital, net worth and
long-term debt to net worth requirements applicable to NN-1 Limited
Partnership. The Company's sharing percentage in NN-1 Limited Partnership's
distribution from operations is generally 90 percent. The NN-1 has not been
under contract since March of 1993.
The Company and its wholly owned subsidiary, Noble Drilling (West
Africa) Inc. ("NDWA"), were parties to a secured loan agreement (the "Project
Loan Agreement") with US WEST Financial Services, Inc. dated as of October 31,
1990, as amended, pursuant to which NDWA borrowed $52.5 million for the purpose
of financing, in part, the equipping,
29
<PAGE> 32
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
refurbishment and mobilization to Nigeria of four offshore drilling rigs: the
NN-1, which is majority owned through NN-1 Limited Partnership, GENE ROSSER,
LEWIS DUGGER and CHUCK SYRING. On July 2, 1993, the final installment of $6.6
million plus accrued interest was paid in accordance with the terms of the
Project Loan Agreement. Interest was charged under the Project Loan Agreement
at the fixed rate of 11.12 percent per annum.
Annual maturities of long-term debt are $520,000 in 1995 through 1997,
$506,000 in 1998 and $125.0 million thereafter.
The following table summarizes the Company's long-term debt:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
9 1/4% Senior Notes Due 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,000 $ 125,000
U.S. Government Guaranteed Ship Financing Sinking Fund Bonds . . . . . . . . . . 2,066 2,586
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 104
--------- ---------
127,066 127,690
Current installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (520) (546)
--------- ---------
$ 126,546 $ 127,144
========= =========
</TABLE>
The fair value of the Company's long-term debt at December 31, 1994,
estimated based on the quoted market prices for similar issues or on the
current rates offered to the Company for debt of similar remaining maturities,
was approximately $119.1 million.
NOTE 5 -- CREDIT FACILITIES
At December 31, 1994, the Company had available credit facilities
aggregating $31.7 million, as described below, of which $26.0 million, subject
to certain limitations, related to lines of credit and $5.7 million related to
letter of credit facilities. Based on the level of the borrowing base at
December 31, 1994, the Company had $21.8 million available under the credit
lines and $2.9 million available to support issuance of letters of credit at
that date. No amounts were drawn under the lines of credit at December 31,
1994.
On June 16, 1994, the Company entered into an unsecured credit
agreement with First Interstate Bank of Texas, N.A. for a $25.0 million
revolving credit line facility and $5.0 million letter of credit facility. The
Company pays a quarterly commitment fee on the unused portion of the facility.
The agreement contains certain restrictive and financial covenants, including
those related to indebtedness, net worth and fixed charges, and provides for
guarantees of the indebtedness by certain subsidiaries of Noble Drilling. At
December 31, 1994, the Company was in full compliance with the covenants of
this agreement.
NOTE 6 -- SHAREHOLDERS' EQUITY
On October 25, 1993, the Company issued 626,410 shares of common stock
to purchase two rigs from Portal as discussed in Note 2. The shares were issued
to Portal pursuant to a private placement, and the Company does not have an
obligation to register the resale of the shares under the Securities Act of
1933, as amended.
Chiles completed a public offering of $1.50 convertible preferred
stock on October 21, 1993 with the sale and issuance to the public of 4,025,000
shares by Chiles at $25.00 per share. Net proceeds to Chiles were approximately
$96.5 million, after underwriting discounts and issuance costs. Chiles utilized
approximately $45.2 million of these proceeds to retire all of Chiles'
outstanding long-term indebtedness, including principal and interest, during
the fourth quarter of 1993. In the Chiles Merger, this series of preferred
stock was converted into and exchanged for an equivalent number of shares of
$1.50 Preferred Stock having substantially the same rights, privileges,
preferences and voting power as the Chiles preferred stock. Holders of the
$1.50 Preferred Stock are entitled to receive cash dividends at an annual rate
of $1.50 per share, when, as and if declared by the board of directors of Noble
Drilling, payable quarterly, and such dividends are cumulative. Each share of
$1.50 Preferred Stock is convertible, at the option of the holder, into 2.4446
shares of common stock (subject to adjustment in certain circumstances). The
$1.50 Preferred Stock is not redeemable prior to December 31, 1996. On or after
such date, the $1.50 Preferred Stock is redeemable at the option of the
Company, in whole or part, at $26.05 per share if redeemed prior to December
31, 1997, and at prices decreasing ratably to $25.00 per share on and after
December 31, 2003, plus accrued and unpaid dividends to the redemption date.
30
<PAGE> 33
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
On October 7, 1993, the Company issued and sold 12,041,000 shares of
common stock in the Stock Offering at an initial public offering price of $8.375
per share. This resulted in net proceeds of $94.9 million, after deducting
underwriting discounts, commissions and other related costs. The net proceeds
of the Public Offerings (see Note 4) were used to purchase the nine jackup rigs
and related assets discussed previously in Note 2, and prepay a promissory note
discussed in Note 4, with the balance of the proceeds, approximately $26.0
million, used for general corporate purposes.
Chiles completed a public offering of its common stock on November 20
and December 16, 1992 with the sale and issuance of 16,650,000 shares by
Chiles. This offering was made concurrently with the restructuring of Chiles'
secured debt facilities. Net proceeds to Chiles were approximately $28.3
million from the sale of common stock, of which $17.3 million was used to
reduce debt. The remaining $11.0 million of net proceeds provided additional
working capital to be used for general corporate purposes.
In 1991, the Company issued and sold 2,990,000 shares of a new series
of $2.25 Convertible Exchangeable Preferred Stock ("$2.25 Preferred Stock")
(liquidation preference $25.00 per share), par value $1.00 per share. Holders
of the $2.25 Preferred Stock are entitled to receive cash dividends at an
annual rate of $2.25 per share, when, as and if declared by the board of
directors of Noble Drilling, and such dividends are cumulative. Each share of
$2.25 Preferred Stock is convertible, at the option of the holder, into 5.41946
shares of common stock (subject to adjustment in certain circumstances). On
December 31, 1994, the $2.25 Preferred Stock became redeemable at the option of
the Company, in whole or in part, at $26.575 per share if redeemed prior to
December 31, 1995, and at prices decreasing ratably annually to $25.00 per
share on and after December 31, 2001, plus accrued and unpaid dividends to the
redemption date. The $2.25 Preferred Stock is also exchangeable, in whole but
not in part, at the option of the Company on any dividend payment date for the
Company's 9% Convertible Subordinated Debentures due 2016 (the "Debentures") at
a rate of $25.00 principal amount of Debentures for each share of preferred
stock. The Debentures contain conversion and optional redemption provisions
similar to those of the $2.25 Preferred Stock, and are subject to a mandatory
annual sinking fund redemption of 5 percent of the amount of Debentures
initially issued, commencing on December 31, 2002 (or the first December 31
following their issuance, if later).
Under the covenant contained in the indenture governing the Senior
Notes restricting the payment of dividends (see Note 4), approximately $7.1
million was available, as of December 31, 1994, (after giving effect to the
dividends payable as of that date) for the payment of dividends on
the $1.50 Preferred Stock and the $2.25 Preferred Stock.
NOTE 7 -- STOCK OPTIONS
EMPLOYEE STOCK OPTION PLANS
1991 STOCK OPTION PLAN
The Company's 1991 Stock Option and Restricted Stock Plan (the "1991
Plan") was amended and restated ("Amended 1991 Plan") in September 1994. The
Amended 1991 Plan was adopted by the board of directors of Noble Drilling in
July 1994 and approved by stockholders on September 15, 1994. The Company's two
other employee stock option plans, adopted in 1985 and 1987, were amended in
connection with the adoption of the 1991 Plan to provide that no further grants
would be made under those plans after April 25, 1991; however, all options
outstanding at that date ("Pre-1991 Options") remained in effect in accordance
with their respective terms.
Under the Amended 1991 Plan, a maximum of 5,200,000 shares of the
Company's common stock may be subject to grants of options or awards of
restricted stock to participants, who are selected from regular salaried
officers or other employees of the Company. Options may be either incentive
options or nonqualified options, and may be with or without stock appreciation
rights ("SARs"). The option price under the Amended 1991 Plan may not be less
than 100 percent of the fair market value of the common stock at the time of
grant, in the case of an incentive option, and may not be less than 50 percent
of the fair market value of the common stock at the time of grant, in the case
of a nonqualified option. The Amended 1991 Plan also limits to 1,500,000 the
total number of shares of common stock that may be made subject to grants of
options or stock appreciation rights or awards of restricted stock to any one
person during any five-year period. All Pre-1991 Options were granted at an
option price of at least 100 percent of the fair market value of the common
stock at the time of grant. The exercise of either the tandem SAR or the option
serves to cancel the other. At December 31, 1994, 3,670,912 shares were
available for grant under the Amended 1991 Plan.
31
<PAGE> 34
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
The following is a summary of option transactions under the plans:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Outstanding, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . 1,312,617 1,586,034
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728,000 290,000
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,875) (169,880)
Exercised (at share prices ranging from $2.50 to $7.69) . . . . . . . . . . . . . . (171,270) (393,537)
--------- ---------
Outstanding at end of year (at share prices ranging from $2.50 to $7.69 in 1994). . 1,810,472 1,312,617
========= =========
Exercisable at end of year (at share prices ranging from $2.50 to $7.69 in 1994). . 855,672 703,042
========= =========
</TABLE>
Options granted under the Amended 1991 Plan in 1994 become exercisable
on certain dates that range from January 27, 1995 through December 8, 1997 at
prices ranging from $5.63 per share to $7.375 per share.
1990 STOCK OPTION PLAN OF CHILES
Effective June 10, 1993, the board of directors of Chiles approved an
amendment to Chiles' Amended and Restated 1990 Stock Option Plan, pursuant to
which a maximum aggregate of 697,750 shares of common stock of Chiles had been
reserved for grant to officers, directors and employees. This amendment
increased the maximum number of shares available for grant from 697,750 to
1,500,000. Options were granted at not less than market value on the date of
grant. As part of the Chiles Merger, Noble Drilling issued 480,000 shares of
common stock in exchange for the cancellation of the then outstanding Chiles'
options.
OTHER STOCK OPTIONS
In addition to the above, during 1987, options to purchase a total of
300,000 shares of Noble Drilling's common stock at $2.50 per share were granted
to certain non-employee directors of the Company pursuant to stock option
agreements which were approved by stockholders at the 1988 annual meeting.
Options to purchase 160,000 shares were outstanding and exercisable at December
31, 1994.
In 1993, the stockholders approved the 1992 Nonqualified Stock Option
Plan for Non-Employee Directors (the "1992 Option Plan"). Under the 1992 Option
Plan, non-employee directors received a one-time grant of an option to purchase
10,000 shares of common stock, and thereafter, after each annual meeting of
shareholders of the Company, receive an annual grant of an option to purchase
3,500 shares of common stock. The options are granted at fair market value on
the grant date and are exercisable from time to time over a period commencing
approximately one year from the grant date and ending on the expiration of ten
years from the grant date, unless terminated sooner as described in the 1992
Option Plan. Options to purchase 50,000 shares were outstanding and exercisable
at December 31, 1994.
SEVERANCE AGREEMENTS
During 1993, Chiles entered into severance agreements with its
officers and certain managerial employees, including Chiles' rig management
personnel. These agreements provide for severance payments equal to between six
months and two years of such person's annual salary in the event a person's
employment is terminated otherwise than for cause within one year following the
occurrence of a change in control of Chiles or the person voluntarily
terminates his employment within one year of a change in control of Chiles for
"good reason," as defined in the agreement.
NOTE 8 -- INCOME TAXES
The Company follows SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under
SFAS No. 109, the tax provision is determined under the liability method. Under
this method, deferred tax assets and liabilities are recognized based on
differences between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates. SFAS No. 109 provides in part
that a deferred tax asset shall be evaluated for realization based on a more
likely than not criteria using a valuation allowance.
32
<PAGE> 35
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
Amounts of deferred tax assets and liabilities are as follows at:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax asset, net of valuation allowance of $21,329 in
1994 and $25,562 in 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 47,696 $ 35,927
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,089) (35,927)
-------- --------
Net, total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,393) $ 0
======== ========
</TABLE>
The components of and changes in the net deferred taxes were as
follows:
<TABLE>
<CAPTION>
Deferred
December 31, Expense December 31,
1993 (Credit) 1994
----------- -------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Domestic
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . $ 55,676 $ 7,441 $ 63,117
Tax basis of assets in excess of book basis . . . . . . . . . . . . . . . . . 695 (695) -
Investment tax credit carryforward . . . . . . . . . . . . . . . . . . . . . 1,457 - 1,457
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 (97) 149
International
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . 1,142 1,913 3,055
Tax basis of assets in excess of book basis . . . . . . . . . . . . . . . . . 1,251 (4) 1,247
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,022 (1,022) -
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,489 7,536 69,025
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,562) 4,233 (21,329)
-------- -------- --------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,927 $ 11,769 $ 47,696
======== ======== ========
Deferred tax liabilities:
Domestic
Excess of net book basis over remaining tax basis . . . . . . . . . . . . . . $(34,705) $(11,179) $(45,884)
International
Excess of net book basis over remaining tax basis . . . . . . . . . . . . . . (1,222) (3,983) (5,205)
-------- -------- --------
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $(35,927) $(15,162) $(51,089)
======== ======== ========
</TABLE>
Income (loss) from continuing operations before income taxes and
extraordinary item consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,024 $ 16,948 $ (53,513)
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,171 7,467 16,931
-------- -------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,195 $ 24,415 $ (36,582)
======== ======== =========
</TABLE>
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current - Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 205 $ -
Current - International . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,599 3,128 3,396
Deferred - International . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,073 - -
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,672 $ 3,333 $ 3,396
======= ======= =======
</TABLE>
33
<PAGE> 36
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
A reconciliation of Federal statutory and effective income tax rates
is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
Effect of:
U. S. operating loss generating no current tax benefit . . . . . . . . . . . - - (40.0)
U.S. operating loss carryforward benefit . . . . . . . . . . . . . . . . . . (9.0) (23.6) -
Canadian operating loss carryforward benefit . . . . . . . . . . . . . . . . - (2.2) -
International tax rates which are different than the U. S. rate . . . . . . . (5.8) 3.7 (3.3)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 .8 -
---- ----- -----
Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.9% 13.7% (9.3)%
==== ===== =====
</TABLE>
The Company had available at December 31, 1994, unused investment tax
credits, which may be used to offset future U.S. taxes payable, of
approximately $1.5 million expiring in various years from 1998 to 2001.
Substantially all of this amount represents the Company's allocated share of
the consolidated investment tax credit carryforward of Noble Affiliates, Inc.
("NAI"). Taxable income or loss from the Company's operations through September
30, 1985 was included in the consolidated tax returns of NAI. The Company
became a separate U.S. taxpayer as of October 1, 1985. Amendments or other
adjustments to the current or prior consolidated tax returns of NAI may reduce
the carryforward available to the Company. In addition, Noble Drilling has net
operating loss carryforwards ("NOLs") for tax purposes of approximately $112.0
million at December 31, 1994 which expire in the years 2000 through 2009, and
NOC has NOLs for tax purposes of approximately $68.4 million which expire in
the years 2004 through 2009.
The Chiles Merger qualifies as a tax-free reorganization. NOC, as the
surviving entity, inherits all of Chiles' tax attributes, including NOL
carryforwards. In accordance with the "Separate Return Limitation Year" rules
of the Internal Revenue Code of 1986, as amended (the "Code"), Chiles' NOL
carryforwards which arose prior to the Chiles Merger may only be used to reduce
NOC's future taxable income, and cannot be used to reduce Noble Drilling's
taxable income.
If a corporation undergoes an "ownership change" within the meaning of
Section 382 of the Code, the corporation's right to use its then existing NOLs
(and certain other tax attributes) is limited during each future year to a
percentage of the fair market value of such corporation's stock immediately
before the ownership change (the "Section 382 Limitation"). In general, there
is an "ownership change" under Section 382 if over a three-year period certain
shareholders increase their percentage ownership of a corporation by more than
50 percent. To the extent the amount of the NOLs existing at the time of an
ownership change that are used in any subsequent year is less than the annual
Section 382 Limitation, the otherwise available Section 382 Limitation is
correspondingly increased for future years. An ownership change for purposes of
Section 382 took place on September 15, 1994. The annual Section 382 Limitation
attributable to the Noble Drilling pre-merger carryforwards is $26.8 million.
The annual Section 382 Limitation attributable to NOC is $17.1 million.
Applicable U.S. income and foreign withholding taxes have not been
provided on undistributed earnings of the Company's international subsidiaries.
Management does not intend to repatriate such undistributed earnings for the
foreseeable future except for distributions upon which incremental income taxes
would not be material. Any withholding taxes ultimately paid may be recoverable
as foreign tax credits in the United States.
34
<PAGE> 37
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
NOTE 9 -- ADDITIONAL BALANCE SHEET AND STATEMENT OF OPERATIONS INFORMATION
Other current assets consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,287 $ 6,624
Withholding tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,223 2,703
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,074 5,766
------- -------
$18,584 $15,093
======= =======
</TABLE>
Other current liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,421 $ 475
Accrued dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,191 -
Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . 844 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,259 8,463
------- -------
$10,715 $ 8,938
======= =======
</TABLE>
The allowance for doubtful accounts was $249,000 and $697,000 at
December 31, 1994 and 1993, respectively.
Rent expense was $1.2 million, $1.3 million and $1.8 million for 1994,
1993 and 1992, respectively.
Stock appreciation rights benefits of $0, $126,000 and $0 in 1994,
1993 and 1992, respectively, are included in selling, general and
administrative expenses.
Other income - other, net consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain on sale of property and equipment . . . . . . . . . . . . . . . . . . . . $ 8,858 $ 737 $ 993
Foreign currency exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . (76) (611) 452
Sale of scrap equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 70 244
Insurance refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 - -
Unrealized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . 4,162 - -
Realized (loss) gain on investments . . . . . . . . . . . . . . . . . . . . . . (2,199) 272 917
Recovery of written-off notes receivable . . . . . . . . . . . . . . . . . . . 1,530 - -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,524 579 1,069
------- ------ ------
$15,743 $1,047 $3,675
======= ====== ======
</TABLE>
A restructuring charge of $3.7 million related to the Chiles Merger
was recorded in 1994 as a result of facility consolidation, including the
write-down of certain of the Company's owned properties, and to a lesser extent
severance costs. This restructuring plan was developed in the fourth quarter of
1994 and approved by the board of directors of Noble Drilling.
NOTE 10 -- EXTRAORDINARY ITEM
The Company prepaid a promissory note in the fourth quarter of 1993
with proceeds from the Public Offerings (see Notes 4 and 6). This prepayment
resulted in an extraordinary gain from extinguishment of debt of $1.8 million
($0.02 per common share), representing excess accrued interest.
35
<PAGE> 38
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
NOTE 11 -- EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has a noncontributory defined benefit plan which covers
substantially all salaried employees and a noncontributory defined benefit
pension plan which covers certain field employees. The benefits from these
plans are based primarily on years of service and employees' compensation near
retirement. The Company's funding policy is consistent with funding
requirements of applicable laws and regulations. The assets of these plans
consist of cash, municipal bonds and corporate equity securities.
Noble Drilling (U.K.) Limited, an indirect wholly owned subsidiary of
Noble Drilling, maintains a pension plan which covers all of its salaried,
nonunion employees. Benefits are based on credited service and the average of
the highest three years of qualified salary within the past ten years of
participation.
Pension cost includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1994 1993 1992
----------------------- ------------------------- -------------------------
International Domestic International Domestic International Domestic
------------- -------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Service costs (benefits
earned during the year) . . . . . $ 544 $ 758 $ 563 $ 535 $ 572 $ 537
Interest cost on projected
benefit obligation . . . . . . . . 607 1,698 549 1,534 563 1,456
Actual return on assets . . . . . . (787) 1,806 (597) (2,506) (631) (1,065)
Amortization of net gain
at January 1 . . . . . . . . . . . (77) (3,758) 12 563 (4) (1,075)
Settlement, curtailment
and termination gain . . . . . . . - - - - - (327)
----- ------- ----- ------- ----- -------
Net pension (credit) expense . . . $ 287 $ 504 $ 527 $ 126 $ 500 $ (474)
===== ======= ===== ======= ===== =======
</TABLE>
36
<PAGE> 39
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1994 1993
------------------------- -------------------------
International Domestic International Domestic
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefits . . . . . . . . . . . . . . . . . . . . $(6,578) $(18,513) $(6,473) $(19,996)
Nonvested benefits . . . . . . . . . . . . . . . . . . - (373) - (552)
------- -------- ------- --------
Accumulated benefits . . . . . . . . . . . . . . . . . (6,578) (18,886) (6,473) (20,548)
Effect of projected future compensation levels . . . . (1,223) (1,895) (1,054) (1,474)
------- -------- ------- --------
Projected benefits . . . . . . . . . . . . . . . . . . . (7,801) (20,781) (7,527) (22,022)
Plan assets at fair value . . . . . . . . . . . . . . . . 8,625 19,192 8,078 21,390
------- -------- ------- --------
Plan assets in excess (shortfall) of projected benefit
obligations . . . . . . . . . . . . . . . . . . . . . . 824 (1,589) 551 (632)
Unrecognized net gain (loss) . . . . . . . . . . . . . . (1,595) 8,327 (1,392) 7,011
Unrecognized prior service cost . . . . . . . . . . . . . - (79) - 139
Unrecognized transition obligation (asset) . . . . . . . 120 (1,966) 128 (2,422)
Additional liability . . . . . . . . . . . . . . . . . . - (3,825) - (1,034)
------- -------- ------- --------
(Accrued liability) prepaid asset . . . . . . . . . . . . $ (651) $ 868 $ (713) $ 3,062
======= ======== ======= ========
</TABLE>
In accordance with SFAS No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS,
the Company recorded an additional minimum liability of $3.8 million at
December 31, 1994, representing the excess of the accumulated benefit
obligations over the fair value of plan assets and accrued pension liabilities
of the domestic salaried pension plan. This additional minimum pension
liability is reported as a separate reduction of shareholders' equity.
The projected benefit obligations for the international and domestic
plans were determined using an assumed discount rate of 9 percent and 8.5
percent respectively, in 1994, 8 percent and 7.25 percent respectively, in 1993
and 9.25 percent and 8 percent, respectively, in 1992. Assumed long-term rate
of return on international plan assets was 9.75 percent, 8.75 percent and 10
percent in 1994, 1993 and 1992, respectively. Assumed long-term rate of return
on domestic plan assets was 9 percent in each of the years presented. The
projected benefit obligations for the international plan assumes a compensation
increase of 6.75 percent, 5.75 percent and 5.75 percent in 1994, 1993 and 1992,
respectively, and 6 percent per annum for the domestic plan in each of the
years presented.
The Company presently sponsors medical and other plans for the benefit
of its employees. The cost of maintaining these plans aggregated $5.5 million,
$3.8 million and $4.1 million in 1994, 1993 and 1992, respectively.
The Company does not provide postretirement benefits (other than
pensions) or any postemployment benefits to its employees.
NOTE 12 -- COMMITMENTS, CONTINGENCIES AND OBLIGATIONS
In 1991, Chiles sold a semi-submersible offshore drilling and
production rig to Braspetro Oil Services Company ("Brasoil"), a subsidiary of
Petrobras, the Brazilian national oil company. The terms of this sale required
Chiles to enter into a fixed price modification and upgrade contract with
Brasoil ("Petrobras Contract") to enhance the rig's capabilities as an offshore
production platform. Chiles delivered the modified rig on September 25, 1992.
In accordance with the contract, Brasoil has challenged and audited the costs
of two change orders made at Brasoil's request during the rig modification.
Chiles billed and collected from Brasoil $2.4 million related to these two
change orders. The Company does not believe that the outcome of these
negotiations with Brasoil will have a significant impact on the Company's
financial position or results of operations.
In connection with the contract and other matters, Chiles entered into
an agreement to pay brokerage and advisory fees of $3.0 million in addition to
the $2.0 million in fees paid at the time of the rig sale. To date, the Company
has paid $300,000 pursuant to this agreement. The Company believes that the
other party to this agreement has failed to provide the agreed to advisory
services and that, because of such non-performance, it owes no additional fees
under the contract. During the second quarter of 1993, Chiles received a demand
for payment of all unpaid fees from the broker, which Chiles denied. Management
believes that this request and any potential future claims for payment are
without merit and is pre-
37
<PAGE> 40
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
pared to defend vigorously any claim or other actions. Management further
believes that the Company will incur no material adverse effect on its
financial position or results of operations as a result of this matter.
In May 1992, four former employees brought an action against Chiles
alleging Chiles failed to compensate employees for time spent on certain self
study programs, pretour meetings and training activities. This suit is a
collective action pursuant to Section 16(b) of the Fair Labor Standards Act. In
February 1993, 257 potential plaintiffs filed a motion for consent to
participate in the action which motion was approved by the court. Chiles has
been notified by an additional ten potential plaintiffs who may seek to join
their action or pursue their related claims separately. The Company has
offered a settlement to the plaintiffs and management believes that the outcome
of this action will not have any material adverse effect on the financial
position or results of operations of the Company.
The Company is a defendant in certain other claims and litigation
arising out of operations in the normal course of business. In the opinion of
management, uninsured losses, if any, will not be material to the Company's
financial position or results of operations.
NOTE 13 -- UNAUDITED INTERIM FINANCIAL DATA
Unaudited interim financial information for the years ended December
31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Quarter Ended,
-------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994
Operating revenues . . . . . . . . . . . . . . . . . . . . $ 78,921 $ 87,595 $ 98,060 $ 87,412
Operating income . . . . . . . . . . . . . . . . . . . . . $ 10,362 $ 5,309 $ 2,216 $ 276
Net income (loss) applicable to common shares . . . . . . . $ 4,930 $ 9,206 $ (695) $ (4,682)
Net income (loss) applicable to common shares per share . . $ 0.06 $ 0.12 $ (0.01) $ (0.06)
1993
Operating revenues . . . . . . . . . . . . . . . . . . . . $ 65,323 $ 54,467 $ 63,431 $ 81,310
Operating income . . . . . . . . . . . . . . . . . . . . . $ 2,258 $ 5,457 $ 6,462 $ 14,732
Net income (loss) applicable to common shares:
Continuing operations . . . . . . . . . . . . . . . . . . $ (2,015) $ 1,205 $ 4,303 $ 9,653
Extraordinary item . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ 1,770
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (2,015) $ 1,205 $ 4,303 $ 11,423
Net income (loss) applicable to common shares per share:
Continuing operations . . . . . . . . . . . . . . . . . . $ (0.03) $ 0.02 $ 0.07 $ 0.13
Extraordinary item . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ 0.02
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (0.03) $ 0.02 $ 0.07 $ 0.15
</TABLE>
38
<PAGE> 41
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unless otherwise noted, dollar amounts in tables are in thousands,
except per share amounts)
NOTE 14 -- GEOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating revenues
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $181,950 $125,505 $ 50,458
International
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,059 19,141 3,230
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,041 4,093 4,655
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,269 10,503 -
Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,195 58,630 80,217
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,939 40,036 41,617
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,155 3,736 -
Zaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,781 1,763 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599 1,124 3,989
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $351,988 $264,531 $184,166
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating income (loss)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,852) $20,057 $(49,842)
International
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,549 363 (1,463)
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (676) (116) 875
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,434 5,316 -
Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,727 734 20,132
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,505 1,486 (234)
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,289 832 -
Zaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,613 400 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (426) (163) 273
------- ------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,163 $28,909 $(30,259)
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Identifiable assets
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $404,010 $393,525 $236,021
International
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,421 8,416 6,726
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,912 16,422 17,595
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,167 36,999 -
Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,716 140,542 179,798
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,147 13,394 11,568
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,977 64,025 -
Zaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,833 21,602 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,706 1,628 4,821
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $739,889 $696,553 $456,529
======== ======== ========
</TABLE>
Customer A accounted for approximately 11 percent, 17 percent and 28
percent of the Company's consolidated operating revenues during 1994, 1993 and
1992, respectively. Customer B accounted for approximately 13 percent and 12
percent of the Company's consolidated operating revenues during 1993 and 1992,
respectively.
39
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On October 7, 1994, the accounting firm of Price Waterhouse LLP was
engaged as independent accountant to audit the financial statements of the
Company for the year ended December 31, 1994. The board of directors of Noble
Drilling has also appointed this firm to audit the financial statements of the
Company for the year ended December 31, 1995. Such appointment will not be
submitted to the stockholders for ratification or approval.
The accounting firm of Arthur Andersen LLP served as the independent
accountant for the Company from August 1, 1988 until dismissed by the Company
on October 7, 1994. The decision to change accountants was recommended by the
audit committee of the board of directors of Noble Drilling. Arthur Andersen
LLP's report on the financial statements of the Company for each of the years
ended December 31, 1993 and 1992 contained no adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles, or as to any other matter. During each of the years
ended December 31, 1993 and 1992 and the subsequent interim period preceding
the dismissal, there were no disagreements with Arthur Andersen LLP on any
matter of accounting principles or practices, financial statement disclosure,
or accounting scope or procedure, which disagreements if not resolved to the
satisfaction of Arthur Andersen LLP would have caused it to make reference
thereto in its reports on the financial statements of the Company for such
years. Additionally, no "reportable events" (as such term is defined under the
applicable rules and regulations of the Securities and Exchange Commission)
occurred during the years ended December 31, 1993 and 1992 or the subsequent
interim periods preceding Arthur Andersen LLP's dismissal.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a)
Reporting Delinquencies" appearing in Noble Drilling's proxy statement for the
annual meeting of stockholders to be held on April 27, 1995 (the "1995 Proxy
Statement"), set forth certain information with respect to the directors of
Noble Drilling and with respect to reporting under Section 16(a) of the
Securities Exchange Act of 1934, and are incorporated herein by reference.
Certain information with respect to the executive officers of Noble Drilling is
set forth under the caption "Executive Officers of the Registrant" in Part I of
this report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" appearing in the 1995
Proxy Statement sets forth certain information with respect to the compensation
of management of Noble Drilling, and, except for the report of the compensation
and stock option committees of the board of directors of Noble Drilling on
executive compensation and the information therein under "Performance Graph,"
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Security Ownership of Certain Beneficial
Owners" and "Security Ownership of Management" appearing in the 1995 Proxy
Statement set forth certain information with respect to the ownership of voting
securities and equity securities of Noble Drilling, and are incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The section entitled "Certain Transactions" appearing in the 1995
Proxy Statement sets forth certain information with respect to certain
relationships and related transactions, and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) A list of the Financial Statements filed as a part of
this report is set forth in Item 8 on page 18 and
is incorporated herein by reference.
40
<PAGE> 43
(2) Financial Statement Schedules:
All schedules are omitted because they are either not
applicable or the required information is shown in
the financial statements or notes hereto.
(3) Exhibits:
The information required by this Item 14(a)(3) is set
forth in the Index to Exhibits accompanying this
Annual Report on Form 10-K.
(4) Financial Statements required by Form 11-K for the
fiscal year ended December 31, 1994 with respect to
the Noble Drilling Corporation Thrift Plan (to be
filed by amendment).
(b) The following reports on Form 8-K were filed by the Registrant
during the three-month period ended December 31, 1994:
Form 8-K dated October 14, 1994 (Date of Event: October 7,
1994) which reported the change in principal independent
accountants of the Company.
Form 8-K dated December 8, 1994 (Date of Event: December 6,
1994) which presented Restated Selected Financial Data,
Restated Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Restated Consolidated
Financial Statements of Noble Drilling Corporation and its
subsidiaries to reflect the merger of Chiles Offshore
Corporation into a wholly owned subsidiary of Noble Drilling
Corporation. The merger was accounted for as a pooling of
interests.
41
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NOBLE DRILLING CORPORATION
Date: March 15, 1995 /s/ JAMES C. DAY
By: ______________________________
James C. Day, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following individuals on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- -------------------------------- ------------------------------------------ --------------
<S> <C> <C>
/s/ JAMES C. DAY
_______________________________ Chairman, President and Chief Executive March 15, 1995
James C. Day Officer and Director
/s/ BYRON L. WELLIVER
_______________________________ Senior Vice President - Finance, Treasurer March 15, 1995
Byron L. Welliver and Controller (Principal Financial and
Accounting Officer)
/s/ MICHAEL A. CAWLEY
_______________________________ Director March 15, 1995
Michael A. Cawley
/s/ LAWRENCE J. CHAZEN
_______________________________ Director March 15, 1995
Lawrence J. Chazen
/s/ TOMMY C. CRAIGHEAD
_______________________________ Director March 15, 1995
Tommy C. Craighead
/s/ JAMES L. FISHEL
_______________________________ Director March 15, 1995
James L. Fishel
/s/ JOHNNIE W. HOFFMAN
_______________________________ Director March 15, 1995
Johnnie W. Hoffman
/s/ MARC E. LELAND
_______________________________ Director March 15, 1995
Marc E. Leland
/s/ JOHN F. SNODGRASS
_______________________________ Director March 15, 1995
John F. Snodgrass
/s/ BILL M. THOMPSON
_______________________________ Director March 15, 1995
Bill M. Thompson
</TABLE>
42
<PAGE> 45
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- --------------------------------------------------------------------------------
2.1 - Assets Purchase Agreement dated as of August 20, 1993 (the "Western
Assets Purchase Agreement"), between the Registrant and The Western
Company of North America (filed as Exhibit 2.1 to the Registrant's
Registration Statement on Form S-3 (No. 33-67130) and incorporated
herein by reference).
2.2 - Agreement dated as of October 7, 1993, among the Registrant, Noble
Drilling (U.S.) Inc., Noble International Limited, The Western
Company of North America and Offshore International Ltd., amending
the Western Assets Purchase Agreement (filed as Exhibit 2.2 to the
Registrant's Form 8-K dated October 15, 1993 and incorporated
herein by reference).
2.3 - Exchange Agreement dated as of June 4, 1993, by and among the
Registrant, Grasso Corporation, Offshore Logistics, Inc.,
PPI-Seahawk, Inc. and Noble Production Services Inc. (filed as
Exhibit 2.2 to the Registrant's Registration Statement on Form S-3
(No. 33-67130) and incorporated herein by reference).
2.4 - Amendment No. 1 dated October 29, 1993 to the Exchange Agreement by
and among the Registrant, Grasso Corporation, Offshore Logistics,
Inc., PPI-Seahawk Services, Inc. and Noble Production Services Inc.
(filed as Exhibit 2.4 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 and incorporated herein
by reference).
2.5 - Assets Purchase Agreement dated as of August 20, 1993 (the "Portal
Assets Purchase Agreement"), between the Registrant and Portal Rig
Corporation (filed as Exhibit 2.3 to the Registrant's Registration
Statement on Form S-3 (No. 33-67130) and incorporated herein by
reference).
2.6 - Agreement dated as of October 25, 1993, among the Registrant, Noble
(Gulf of Mexico) Inc. and Portal Rig Corporation, amending the
Portal Assets Purchase Agreement (filed as Exhibit 2.5 to the
Registrant's Quarterly Report on Form 10-Q for the three-month
period ended September 30, 1993 and incorporated herein by
reference).
2.7 - Assignment and Assumption Agreement made as of October 28, 1993 by
and between Noble Production Management Inc., Noble Production
Services Inc., OLOG Production Management Inc., PPI-Seahawk
Services, Inc. and Grasso Corporation. (filed as Exhibit 2.7 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
2.8 - Stock Purchase Agreement dated April 22, 1994 among Joseph E.
Beall, George H. Bruce, Triton Engineering Services Company and the
Registrant (filed as Exhibit 2.1 to the Registrant's Form 8-K dated
May 6, 1994 and incorporated herein by reference).
2.9 - Agreement and Plan of Merger dated June 13, 1994 among the
Registrant, Chiles Offshore Corporation and Noble Offshore
Corporation (filed as Appendix I to the joint proxy
statement/prospectus of the Registrant and Chiles Offshore
Corporation dated August 12, 1994 constituting Part I of the
Registration Statement on Form S-4 (No. 33-54495) and incorporated
herein by reference).
3.1 - Restated Certificate of Incorporation of the Registrant dated
August 29, 1985 (filed as Exhibit 3.7 to the Registrant's
Registration Statement on Form 10 (No. 0-13857) and incorporated
herein by reference).
3.2 - Certificate of Amendment of Restated Certificate of Incorporation
of the Registrant dated May 5, 1987 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3 (No. 33-67130) and
incorporated herein by reference).
3.3 - Certificate of Amendment of Restated Certificate of Incorporation
of the Registrant dated June 1, 1987 (filed as Exhibit 4.3 to the
Registrant's Registration Statement on Form S-3 (No. 33-67130) and
incorporated herein by reference).
3.4 - Certificate of Amendment of Restated Certificate of Incorporation
of the Registrant dated April 28, 1988 (filed as Exhibit 3.12 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988 and incorporated herein by reference).
3.5 - Certificate of Amendment of Restated Certificate of Incorporation
of the Registrant dated April 27, 1989 (filed as Exhibit 3.13 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, as amended, and incorporated herein by
reference).
3.6 - Certificate of Amendment of Certificate of Incorporation of the
Registrant dated August 1, 1991 (filed as Exhibit 3.16 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991 and incorporated herein by reference).
43
<PAGE> 46
3.7 - Certificate of Designations of $2.25 Convertible Exchangeable
Preferred Stock, par value $1.00 per share, of the Registrant,
dated as of November 18, 1991 (filed as Exhibit 3.17 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991 and incorporated herein by reference).
3.8 - Certificate of Designations of $1.50 Convertible Preferred Stock,
par value of $1.00 per share, of the Registrant, dated as of
September 15, 1994.
3.9 - Composite copy of the Bylaws of the Registrant as currently in
effect (filed as Exhibit 4.8 to the Registrant's Registration
Statement on Form S-3 (No. 33-67130) and incorporated herein by
reference).
4.1 - Indenture governing the Senior Notes (filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the three-month
period ended September 30, 1993 and incorporated herein by
reference).
4.2 - Form of Senior Notes (included in Section 2.02 of the Indenture
filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form
10-Q for the three-month period ended September 30, 1993 and
incorporated herein by reference).
10.1* - Noble Drilling Corporation Short-Term Incentive Compensation Plan
(filed as Exhibit 10.1 to the Registrant's Registration Statement
on Form 10 (No. 0-13857) and incorporated herein by reference).
10.2* - Noble Drilling Corporation 1985 Stock Option Plan (filed as Exhibit
4.1(b) to the Registrant's Registration Statement on Form S-8 (No.
33-3289), as amended, and incorporated herein by reference).
10.3* - Amendment No. 1 to Noble Drilling Corporation 1985 Stock Option
Plan dated as of February 17, 1987 (files as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1986, as amended, and incorporated herein by reference).
10.4 - Amended and Restated Noble-National Joint Venture Partnership
Agreement between the Registrant and National Enerdrill Corporation
dated December 7, 1990 (filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
10.5 - Limited Partnership Agreement between the Registrant and National
Enerdrill Corporation dated as of January 16, 1992 (filed as
Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991 and incorporated herein by reference).
10.6 - Certificate of Limited Partnership of NN-1 Limited Partnership
(filed as Exhibit 10.6 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991 and incorporated herein
by reference).
10.7* - Noble Drilling Corporation 1991 Stock Option and Restricted Stock
Plan (as amended and restated through September 15, 1994) (filed as
Exhibit 10.1 to the Registrant's Form 8-K dated December 8, 1994
and incorporated herein by reference).
10.8* - Noble Drilling Corporation 1987 Stock Option Plan (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1986, is amended, and incorporated herein by
reference).
10.9* - Noble Drilling Corporation Thrift Trust Agreement (filed as Exhibit
4.2 to the Registrant's Registration Statement on Form S-8 (No.
33-18966) and incorporated herein by reference).
10.10* - Amendment No. 1 to the Noble Drilling Corporation Thrift Trust
dated January 27, 1992 (filed as Exhibit 10.11 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.11* - Noble Drilling Corporation Thrift Plan, as amended and restated,
dated July 27, 1989 (filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.12* - Amendment No. 1 to the Noble Drilling Corporation Thrift Plan dated
February 13, 1992 (filed as Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.13* - Directors' Option Agreements dated October 29, 1987, between the
Registrant and each of Michael A. Cawley, Johnnie W. Hoffman and
John F. Snodgrass (filed as Exhibit 10.11 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference).
10.14 - Registration Rights Agreement dated as of January 29, 1988 between
the Registrant and General Electric Capital Corporation (filed as a
part of Exhibit 2.1 to the Registrant's Current Report on Form 8-K
dated February 11, 1988 and incorporated herein by reference).
10.15 - First Amendment to Registration Rights Agreement dated as of
February 5, 1993 between the Registrant and General Electric
Capital Corporation (filed as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for
44
<PAGE> 47
the year ended December 31, 1992 and incorporated herein by
reference).
10.16 - Guarantee Agreement dated as of August 10, 1989 between the
Registrant and The Royal Bank of Canada (filed as Exhibit 10.28 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989, as amended, and incorporated herein by
reference).
10.17 - Credit Agreement dated as of October 29, 1990 between Noble
Drilling (Canada) Ltd. and The Royal Bank of Canada (filed as
Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991 and incorporated herein by
reference).
10.18 - Letter Agreement amending the Credit Agreement between Noble
Drilling (Canada) Ltd. and The Royal Bank of Canada dated October
25, 1993 (filed as Exhibit 10.18 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference).
10.19 - Credit Agreement dated as of October 29, 1990 between Noble
Drilling (U.K.) Ltd. and The Royal Bank of Canada (filed as Exhibit
10.28 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 and incorporated herein by reference).
10.20 - Credit Agreement dated as of October 29, 1990 between Noble
Enterprises Limited and The Royal Bank of Canada (filed as Exhibit
10.30 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 and incorporated herein by reference).
10.21 - Letter Agreement amending the Credit Agreement between Noble
Enterprises Limited and The Royal Bank of Canada dated October 25,
1993. (filed as Exhibit 10.21 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference).
10.22 - Credit Agreement dated as of July 30, 1992 between Noble Drilling
(U.K.) Ltd. and The Royal Bank of Canada (filed as Exhibit 10.33 to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference).
10.23 - Letter Agreement amending the Credit Agreement between Noble
Drilling (U.K.) Ltd. and The Royal Bank of Canada dated October 25,
1993 (filed as Exhibit 10.23 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference).
10.24 - Guarantee and Subordination Agreement dated as of July 30, 1992
between the Registrant and The Royal Bank of Canada (filed as
Exhibit 10.34 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992 and incorporated herein by
reference).
10.25* - Amendment No. 2 to the Noble Drilling Corporation Thrift Plan dated
effective as of August 1, 1992 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 (No. 33-50270) and
incorporated herein by reference).
10.26 - Amended and Restated Letter of Credit Agreement, dated as of
October 25, 1993, among Portal Rig Corporation, Noble (Gulf of
Mexico) Inc., NationsBank of Texas, N.A., as agent and as one of
the "Banks" thereunder, and Marine Midland Bank, N.A., Bank of
America National Trust and Savings Association, and Norwest Bank
Minnesota, National Association (collectively, the "Banks") (filed
as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the three-month period ended September 30, 1993 and
incorporated herein by reference).
10.27 - Assignment, Assumption and Amended and Restated Preferred Ship
Mortgage, dated October 25, 1993, by Noble (Gulf of Mexico) Inc. to
the Banks (filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the three-month period ended September 30,
1993 and incorporated herein by reference).
10.28 - Security Agreement and Assignment, dated October 25, 1993, by Noble
(Gulf of Mexico) Inc. to the Banks (filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the three-month
period ended September 30, 1993 and incorporated herein by
reference).
10.29 - Noble Support Agreement, dated October 25, 1993, among the
Registrant and the Banks (filed as Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the three-month period ended
September 30, 1993 and incorporated herein by reference).
10.30* - Noble Drilling Corporation 1992 Nonqualified Stock Option Plan for
Non-Employee Directors (filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8 (No. 33-62394) and incorporated
herein by reference).
10.31* - Amendment No. 3 to the Noble Drilling Corporation Thrift Plan dated
effective as of January 1, 1994 (filed as Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
45
<PAGE> 48
10.32 - Registration Agreement dated April 22, 1994 between the Registrant
and Joseph E. Beall (filed as Exhibit 10.1 to the Registrant's Form
8-K dated May 6, 1994 and incorporated herein by reference).
10.33 - Employment Agreement dated April 22, 1994 between Triton
Engineering Services Company and Joseph E. Beall (filed as Exhibit
10.2 to the Registrant's Form 8-K dated May 6, 1994 and
incorporated herein by reference).
10.34 - Lease Indemnity Agreement dated April 22, 1994 among Joseph E.
Beall, Triton Engineering Services Company, 1201 Dairy Ashford Ltd.
and the Registrant (filed as Exhibit 10.3 to the Registrant's Form
8-K dated May 6, 1994 and incorporated herein by reference).
10.35 - Credit Agreement dated as of June 16, 1994 among the Registrant,
First Interstate Bank of Texas, N.A., in its individual capacity
and as agent, and Credit Lyonnais Cayman Island Branch (filed as
Exhibit 10.1 to the Registrant's Registration Statement on Form S-4
(No. 33-54495) and incorporated herein by reference).
10.36 - Revolving Credit Note dated June 16, 1994 of the Registrant in the
amount of $12,500,000 in favor of Credit Lyonnais Cayman Island
Branch (filed as Exhibit 10.2 to the Registrant's Registration
Statement on Form S-4 (No. 33-54495) and incorporated herein by
reference).
10.37 - Revolving Credit Note dated June 16, 1994 of the Registrant in the
amount of $12,500,000 in favor of First Interstate Bank of Texas,
N.A. (filed as Exhibit 10.3 to the Registrant's Registration
Statement on Form S-4 (No. 33-54495) and incorporated herein by
reference).
10.38 - Guaranty Agreement dated as of June 16, 1994 by and among Noble
Drilling (U.S.) Inc., Noble Drilling (West Africa) Inc. and Noble
Drilling (Mexico) Inc. (filed as Exhibit 10.4 to the Registrant's
Registration Statement on Form S-4 (No. 33-54495) and incorporated
herein by reference).
10.39 - Registration Rights Agreement dated as of September 15, 1994
between the Registrant and P.A.J.W. Corporation (filed as Exhibit
10.1 to the Registrant's Form 10-Q for the quarter ended September
30, 1994 and incorporated herein by reference).
10.40 - Severance Agreement dated as of July 1, 1993 between Noble Offshore
Corporation (as successor by merger to Chiles Offshore Corporation)
and C.R. Bearden (filed as Exhibit 10.2 to the Registrant's Form
10-Q for the quarter ended September 30, 1994 and incorporated
herein by reference).
10.41* - Noble Drilling Corporation Short-Term Incentive Plan (revised April
1994).
10.42* - Amendment No. 2 to the Noble Drilling Corporation Thrift Trust
dated June 24, 1994.
10.43* - Amendment No. 4 to the Noble Drilling Corporation Thrift Plan dated
December 30, 1994.
10.44* - Amendment No. 1 to the Noble Drilling Corporation 1992 Nonqualified
Stock Option Plan for Non-Employee Directors dated as of July 28,
1994.
10.45 - Guarantee dated August 26, 1994 between the Registrant and Hibernia
Management and Development Company Ltd.
10.46* - Noble Drilling Corporation Amended and Restated Thrift Restoration
Plan.
21.1 - Subsidiaries of the Registrant.
23.1 - Consent of Price Waterhouse LLP.
23.2 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
___________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit hereto.
46
<PAGE> 1
EXHIBIT 3.8
CERTIFICATE OF DESIGNATIONS
OF
$1.50 CONVERTIBLE PREFERRED STOCK
(PAR VALUE $1.00 PER SHARE)
OF
NOBLE DRILLING CORPORATION
____________________________
PURSUANT TO SECTION 151
OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
____________________________
NOBLE DRILLING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY
that, pursuant to the authority conferred on the Board of Directors of the
Corporation by the Restated Certificate of Incorporation, as amended, of the
Corporation and in accordance with Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation on
September 14, 1994 duly adopted the following preamble and resolution
establishing and creating a series of 4,025,000 shares of Preferred Stock, par
value $1.00 per share, of the Corporation:
WHEREAS, the Board of Directors on June 9, 1994 duly adopted
resolutions authorizing the Corporation to enter into that certain
Agreement and Plan of Merger (the "Merger Agreement") dated June 13,
1994 among the Corporation, Chiles Offshore Corporation, a Delaware
corporation ("Chiles"), and Noble Offshore Corporation, a Delaware
corporation and a wholly owned subsidiary of the Corporation ("Noble
Sub"), which provides for the merger (the "Merger") of Chiles with and
into Noble Sub; and
WHEREAS, the Corporation agreed in the Merger Agreement to
take action prior to the Effective Time (as defined in the Merger
Agreement and in the following resolution), to establish and create a
new series of preferred stock of the Corporation to be designated the
"$1.50 Convertible Preferred Stock;" and
WHEREAS, the Merger Agreement provides, among other things,
that, subject to the terms and conditions of the Merger Agreement, at
the Effective Time, by virtue of the Merger, each share of Chiles
$1.50 Convertible Preferred Stock, par value $1.00 per share ("Chiles
Preferred Stock"), issued and outstanding immediately prior to the
Effective Time, other than any shares of Chiles Preferred Stock to be
cancelled pursuant to Section 1.7(c) of the Merger Agreement, shall be
converted into the right to receive one share of the $1.50 Convertible
Preferred Stock of the Corporation; and
<PAGE> 2
WHEREAS, the $1.50 Convertible Preferred Stock of the
Corporation shall rank on a parity with the $2.25 Convertible
Exchangeable Preferred Stock, par value $1.00 per share, of the
Corporation; and
WHEREAS, a certificate of designations with respect to the
$1.50 Convertible Preferred Stock of the Corporation shall become
effective, in accordance with Section 151 of the General Corporation
Law of the State of Delaware, prior to the Effective Time;
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the
authority conferred on the Board of Directors of this Corporation by
the Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of the Corporation, a series of
Preferred Stock, par value $1.00 per share, of the Corporation is
hereby established and created, and that the designation and number of
shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of
such series, and the qualifications, limitations and restrictions
thereof, are as follows:
$1.50 CONVERTIBLE PREFERRED STOCK
Section 1. Number of Shares and Designation. 4,025,000 shares
of the Preferred Stock, par value $1.00 per share, of the Corporation are
hereby constituted as a series of the Preferred Stock designated as "$1.50
Convertible Preferred Stock" (hereinafter referred to as the "$1.50 Preferred
Stock").
Section 2. Definitions. For purposes of the $1.50 Preferred
Stock, the following terms shall have the meanings indicated:
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the $1.50
Preferred Stock.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City of New York
are authorized or obligated by law or executive order to close.
"Change of Control" shall have the meaning set forth in
paragraph (e)(i) of Section 8 hereof.
"Chiles Preferred Stock" shall mean the $1.50 Convertible
Preferred Stock, par value $1.00 per share, of Chiles Offshore
Corporation, a Delaware corporation, which shall be converted into the
right to receive shares of the $1.50 Preferred Stock pursuant to the
Merger.
"Closing Price" with respect to a particular security on any
day shall mean on such day the last reported sales price, regular way,
for such security or, in case no sale takes place on such day, the
average of the reported closing bid and asked prices, regular
-2-
<PAGE> 3
way, for such security, in either case as reported on the principal
national securities exchange on which such security is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ National Market System"), or, if such security is not
quoted on the NASDAQ National Market System, the average of the
closing bid and asked prices for such security in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such
security on such day shall not have been reported by NASDAQ, the
average of the bid and asked prices for such security for such day as
furnished by any National Association of Securities Dealers, Inc.
("NASD") member firm regularly making a market in such security
selected for such purpose by the board of directors or similar
governing body of the issuer of such security or, if no such
quotations are available, the fair market value of such security
furnished by any NASD member firm selected from time to time by the
board of directors or similar governing body of the issuer of such
security for that purpose.
"Common Stock" shall mean the Common Stock of the Corporation,
par value $.10 per share.
"Conversion Price" shall mean the conversion price per share
of Common Stock into which the $1.50 Preferred Stock is convertible,
as such Conversion Price may be adjusted pursuant to Section 7 hereof.
The initial Conversion Price will be $10.23 (equivalent to the rate of
2.4446 shares of Common Stock for each share of $1.50 Preferred
Stock).
"Current Market Price" per share of Common Stock on any date
shall mean the average of the daily Closing Prices for the 30
consecutive Trading Dates commencing 45 Trading Dates before the date
of determination.
"Defaulted Preferred Stock" shall have the meaning set forth
in paragraph (a) of Section 10 hereof.
"dividend payment date" shall have the meaning set forth in
paragraph (a) of Section 3 hereof.
"dividend payment record date" shall have the meaning set
forth in paragraph (a) of Section 3 hereof.
"Dividend Periods" shall mean quarterly dividend periods
commencing on the first day of January, April, July and October of
each year and ending on and including the day preceding the first
day of the next succeeding Dividend Period (other than the initial
Dividend Period, which shall commence on the Effective Date and
end on and include September 30, 1994).
"Effective Date" shall mean July 1, 1994.
-3-
<PAGE> 4
"Effective Time" shall mean such time as a certificate of
merger with respect to the Merger is duly filed with the Secretary of
State of Delaware or at such later time (not to exceed 90 days from
the date the certificate is filed) as is specified in the certificate
of merger pursuant to the mutual agreement of the Corporation and
Chiles Offshore Corporation.
"Fundamental Change" shall have the meaning set forth in
paragraph (e)(ii) of Section 8 hereof.
"Merger" shall mean the merger of Chiles Offshore Corporation
with and into Noble Offshore Corporation pursuant to that certain
Agreement and Plan of Merger dated June 13, 1994 among the
Corporation, Chiles Offshore Corporation and Noble Offshore
Corporation.
"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Redemption Price" shall have the meaning set forth in
paragraph (a) of Section 5 hereof.
"Securities" shall have the meaning set forth in paragraph
(d)(iii) of Section 7 hereof.
"Trading Date" with respect to any security means (i) if such
security is listed or admitted for trading on any national securities
exchange, a day on which such national securities exchange is open for
trading, (ii) if such security is quoted on the NASDAQ National Market
System, or any similar system of automated dissemination of quotations
of securities prices, a day on which trades may be made on such
system, (iii) if not listed or admitted for trading as described in
clause (i) or quoted as described in clause (ii), a day on which
quotations are reported by the National Quotation Bureau Incorporated
or (iv) otherwise, any Business Day.
"Transaction" shall have the meaning set forth in paragraph
(e) of Section 7 hereof.
"Transfer Agent" means Liberty Bank and Trust Company of
Oklahoma City, N.A., Oklahoma City, Oklahoma, or such other agent or
agents of the Corporation as may be designated by the Board of
Directors as the transfer agent or conversion agent for the $1.50
Preferred Stock.
Section 3. Dividends. (a) The holders of shares of the $1.50
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor, cumulative cash
dividends at an annual rate of $1.50 per share of $1.50 Preferred Stock. Such
dividends shall be cumulative from the Effective Date, whether or not in any
Dividend Period or Periods there shall be funds of the Corporation legally
available for the payment of such dividends and whether or not such dividends
are declared, and shall be payable quarterly, when, as and if declared by the
Board of Directors, on March 31, June 30,
-4-
<PAGE> 5
September 30 and December 31 in each year (each a "dividend payment date"),
commencing on September 30, 1994. If any dividend payment date shall be on a
day other than a Business Day, then the dividend payment date shall be on the
next succeeding Business Day. Except as set forth in the following sentence,
each such dividend shall be payable in arrears to the holders of record of
shares of the $1.50 Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on those dates (each such date, a
"dividend payment record date"), not less than 10 days nor more than 60 days
preceding the dividend payment dates thereof, as shall be fixed by the Board of
Directors. The dividend payable in respect of the quarter ending September 30,
1994 will be paid to the holders of Chiles Preferred Stock of record at the
close of business on September 15, 1994, or to the assignee of any such holder,
upon surrender of the certificates that prior to the Merger represented such
stock in exchange for shares of the $1.50 Preferred Stock. Dividends on the
$1.50 Preferred Stock shall accrue (whether or not declared) on a daily basis
from the Effective Date and accrued dividends for each Dividend Period shall
accumulate to the extent not paid on the dividend payment date occurring on the
last day of the Dividend Period for which they accrue. As used herein, the
term "accrued" with respect to dividends includes both accrued and accumulated
dividends. Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any regular dividend
payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
(b) The amount of dividends payable for each full Dividend Period
for the $1.50 Preferred Stock shall be computed by dividing the annual dividend
amount by four (rounded down to the nearest cent). The amount of dividends
payable for any period shorter or longer than a full Dividend Period on the
$1.50 Preferred Stock shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Holders of shares of $1.50 Preferred Stock
called for redemption on a redemption date falling between the close of
business on a dividend payment record date and the opening of business on the
corresponding dividend payment date shall, in lieu of receiving such dividend
on the dividend payment date fixed therefor, receive such dividend payment
together with all other accrued and unpaid dividends on the date fixed for
redemption (unless such holder converts such shares in accordance with Section
7 hereof). Holders of shares of $1.50 Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or securities, in excess of
cumulative dividends, as herein provided, on the $1.50 Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the $1.50 Preferred Stock which are in
arrears.
(c) So long as any shares of the $1.50 Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the $1.50
Preferred Stock, for any period unless full cumulative dividends on all
outstanding shares of $1.50 Preferred Stock have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment for all Dividend Periods terminating on or prior to the
date of payment, or setting apart for payment, of such full cumulative
dividends on such parity stock. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, upon the shares of
the $1.50 Preferred Stock and any other class or series of stock ranking on a
parity as to dividends with the
-5-
<PAGE> 6
$1.50 Preferred Stock, all dividends declared upon such other stock shall be
declared and paid pro rata so that the amounts of dividends per share declared
and paid on the $1.50 Preferred Stock and such other stock shall in all cases
bear to each other the same ratio that accrued and unpaid dividends per share
on the shares of the $1.50 Preferred Stock and on such other stock bear to each
other.
(d) So long as any shares of the $1.50 Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
$1.50 Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by
the Corporation (except by conversion into or exchange for stock of the
Corporation ranking junior to the $1.50 Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) unless (i) the full cumulative
dividends, if any, accrued on all outstanding shares of the $1.50 Preferred
Stock shall have been paid or set apart for payment for all past Dividend
Periods and (ii) sufficient funds shall have been set apart for the payment of
the dividend for the current Dividend Period with respect to the $1.50
Preferred Stock.
(e) So long as any shares of the $1.50 Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of Common Stock or other stock ranking junior to the $1.50 Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) shall be declared
or paid or set apart for payment and no other distribution shall be declared or
made or set apart for payment, in each case upon the Common Stock or any other
stock of the Corporation ranking junior to the $1.50 Preferred Stock as to
dividends or upon liquidation, dissolution or winding up, nor shall any Common
Stock nor any other such stock of the Corporation ranking junior to the $1.50
Preferred Stock as to dividends or upon liquidation, dissolution or winding up
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund or otherwise for the
purchase or redemption of any shares of any such stock) by the Corporation
(except by conversion into or exchange for stock of the Corporation ranking
junior to the $1.50 Preferred Stock as to dividends and upon liquidation,
dissolution or winding up) unless, in each case (i) the full cumulative
dividends, if any, accrued on all outstanding shares of the $1.50 Preferred
Stock and any other stock of the Corporation ranking on a parity with the $1.50
Preferred Stock as to dividends shall have been paid or set apart for payment
for all past Dividend Periods and all past dividend periods with respect to
such other stock and (ii) sufficient funds shall have been set apart for the
payment of the dividend for the current Dividend Period with respect to the
$1.50 Preferred Stock and for the current dividend period with respect to any
other stock of the Corporation ranking on a parity with the $1.50 Preferred
Stock as to dividends.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of Common Stock or any other
series or class or classes of stock of the Corporation ranking junior to the
$1.50 Preferred Stock upon liquidation, dissolution or winding up, the holders
of the shares of $1.50 Preferred Stock shall be entitled to receive $25.00 per
share
-6-
<PAGE> 7
plus an amount per share equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final distribution to such
holders; but such holders shall not be entitled to any further payment. No
payment on account of any liquidation, dissolution or winding up of the
Corporation shall be made to the holders of any class or series of stock
ranking on a parity with the $1.50 Preferred Stock in respect of the
distribution of assets upon dissolution, liquidation or winding up unless there
shall likewise be paid at the same time to the holders of the $1.50 Preferred
Stock like proportionate amounts determined ratably in proportion to the full
amounts to which the holders of all outstanding shares of $1.50 Preferred Stock
and the holders of all outstanding shares of such parity stock are respectively
entitled with respect to such distribution. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the shares of $1.50
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the $1.50 Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among
the holders of shares of $1.50 Preferred Stock and any such other stock ratably
in accordance with the respective amounts that would be payable on such shares
of $1.50 Preferred Stock and any such other stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4, neither a
consolidation or merger of the Corporation with one or more corporations or
other entities nor a sale, lease, exchange or transfer of all or any part of
the Corporation's assets for cash, securities or other property shall be deemed
to be a liquidation, dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series
or class or classes of stock ranking on a parity with or prior to the $1.50
Preferred Stock upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Corporation, after payment shall
have been made in full to the holders of $1.50 Preferred Stock, as provided in
this Section 4, any other series or class or classes of stock ranking junior to
the $1.50 Preferred Stock upon liquidation, dissolution or winding up shall,
subject to the respective terms and provisions (if any) applicable thereto, be
entitled to receive any and all assets remaining to be paid or distributed, and
the holders of $1.50 Preferred Stock shall not be entitled to share therein.
(c) Written notice of any liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage prepaid, not less than 30 days
prior to any payment date stated therein, to the holders of record of the $1.50
Preferred Stock at their respective addresses as the same shall appear on the
stock records of the Corporation.
Section 5. Redemption at the Option of the Corporation.
(a) $1.50 Preferred Stock may not be redeemed by the Corporation
prior to December 31, 1996. On or after such date the Corporation, at its
option, may redeem the shares of $1.50 Preferred Stock, in whole or in part,
out of funds legally available therefor, at any time or from time to time,
subject to the notice provisions and provisions for partial redemption
described below, during the twelve-month periods beginning on December 31 in
each of the following years at the following redemption prices per share plus
an amount equal to accrued and unpaid
-7-
<PAGE> 8
dividends, if any, to (and including) the date fixed for redemption, whether or
not earned or declared (the "Redemption Price").
<TABLE>
<CAPTION>
Year Price per Share
---- ---------------
<S> <C>
1996 $26.05
1997 $25.90
1998 $25.75
1999 $25.60
2000 $25.45
2001 $25.30
2002 $25.15
2003 and thereafter $25.00
</TABLE>
(b) In the event the Corporation shall redeem shares of $1.50
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed, at such
holder's address as the same appears on the stock records of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares of $1.50 Preferred Stock to be redeemed and, if less than all the shares
held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the Redemption Price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
Redemption Price; (v) the then current Conversion Price; and (vi) that
dividends on the shares to be redeemed shall cease to accrue on such redemption
date. If, on the date fixed for redemption, funds necessary for the redemption
shall be available therefor and shall have been irrevocably deposited or set
aside, then, notwithstanding that the certificates evidencing any shares of
$1.50 Preferred Stock so called for redemption shall not have been surrendered,
the dividends with respect to the shares so called shall cease to accrue after
the date fixed for redemption, such shares shall no longer be deemed
outstanding, all rights of the holders of such shares as stockholders of the
Corporation shall cease, and all rights whatsoever with respect to the shares
so called for redemption (except the right of the holders to receive the
Redemption Price without interest upon surrender of their certificates
therefor) shall terminate.
Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Redemption Price
aforesaid. If fewer than all the outstanding shares of $1.50 Preferred Stock
are to be redeemed, shares to be redeemed shall be selected by the Corporation
from outstanding shares of $1.50 Preferred Stock not previously called for
redemption by lot or pro rata (as near as may be) or by any other method
determined by the Board of Directors of the Corporation in its sole discretion
to be equitable. If fewer than all the shares represented by any certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
In the event that the Corporation has failed to pay accrued and unpaid
dividends on the $1.50 Preferred Stock, it may not redeem less than all of the
then outstanding shares of the
-8-
<PAGE> 9
$1.50 Preferred Stock until all such accrued and unpaid dividends and the then
current quarterly dividends have been paid in full.
Notwithstanding the foregoing, if notice of redemption has been given
pursuant to this Section 5 and any holder of shares of $1.50 Preferred Stock
shall, prior to the close of business on the redemption date, give written
notice to the Corporation pursuant to Section 7(b) hereof of the conversion of
any or all of the shares to be redeemed held by such holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation), then (i) the Corporation shall not have the right to redeem such
shares, (ii) the conversion of such shares to be redeemed shall become
effective as provided in Section 7 and (iii) any funds which shall have been
deposited for the payment of the Redemption Price for such shares shall be
returned to the Corporation immediately after such conversion (subject to
declared dividends payable to holders of shares of $1.50 Preferred Stock on the
dividend payment record date for such dividends being so payable, to the extent
set forth in Section 7 hereof, regardless of whether such shares are converted
subsequent to such dividend payment record date and prior to the related
dividend payment date).
Section 6. Shares to be Retired. All shares of $1.50 Preferred
Stock purchased, redeemed, exchanged or converted by the Corporation shall be
retired and cancelled and shall be restored to the status of authorized but
unissued shares of preferred stock, without designation as to series, and may
thereafter be reissued.
Section 7. Conversion. Holders of shares of $1.50 Preferred
Stock shall have the right to convert all or a portion of such shares into
shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of shares of $1.50 Preferred Stock shall have the right, at
such holder's option, at any time to convert all or any of such shares into the
number of fully paid and nonassessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing the
aggregate liquidation preference of the shares to be converted by the
Conversion Price and by surrender of such shares, such surrender to be made in
the manner provided in paragraph (b) of this Section 7; provided, however, that
the right to convert shares called for redemption pursuant to Section 5 hereof
shall terminate at the close of business on the date fixed for such redemption.
No share of $1.50 Preferred Stock may be converted in part into Common Stock.
(b) In order to exercise the conversion right, the holder of each
share of $1.50 Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent, accompanied by written notice to
the Corporation that the holder thereof elects to convert such share of $1.50
Preferred Stock. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such share of $1.50 Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid or
are not required to be paid).
-9-
<PAGE> 10
Holders of shares of $1.50 Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date (except that holders
of shares called for redemption on a redemption date falling between the close
of business on such dividend payment record date and the opening of business on
the corresponding dividend payment date shall, in lieu of receiving such
dividend on the dividend payment date fixed therefor, receive such dividend
payment together with all other accrued and unpaid dividends on the date fixed
for redemption, unless such holders convert such shares called for redemption
pursuant to this Section 7) notwithstanding the conversion thereof following
such dividend payment record date and prior to such dividend payment date.
However, shares of $1.50 Preferred Stock surrendered for conversion during the
period between the close of business on any dividend payment record date and the
opening of business on the corresponding dividend payment date (except shares of
$1.50 Preferred Stock called for redemption on a redemption date during such
period) must be accompanied by payment of an amount equal to the dividend
payment with respect to such shares of $1.50 Preferred Stock presented for
conversion prior to the opening of business on such dividend payment date. A
holder of shares of $1.50 Preferred Stock on a dividend payment record date who
(or whose transferee) surrenders any such shares for conversion into shares of
Common Stock on the corresponding dividend payment date will receive the
dividend payable by the Corporation on such shares of $1.50 Preferred Stock on
such date and the converting holder need not include payment in the amount of
such dividend upon surrender of shares of $1.50 Preferred Stock for conversion
on the dividend payment date. Except as provided in this paragraph, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares of $1.50 Preferred Stock or for dividends on
the shares of Common Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for
shares of $1.50 Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or on such holder's written order,
a certificate or certificates for the number of shares of Common Stock issuable
upon the conversion of such shares in accordance with the provisions of this
Section 7, and any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided in paragraph (c) of
this Section 7.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for shares
of $1.50 Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Price in effect at such time on
such date, unless the stock transfer books of the Corporation shall be closed
on that date, in which event such person or persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which such shares
shall have been surrendered and such notice received by the Corporation. All
shares of Common Stock delivered upon conversion of the $1.50 Preferred Stock
will upon delivery be duly and validly issued and fully paid and nonassessable.
-10-
<PAGE> 11
(c) In connection with the conversion of any shares of $1.50
Preferred Stock, no fractional shares or scrip representing fractions of shares
of Common Stock shall be issued upon conversion of the $1.50 Preferred Stock.
Instead of any fractional interest in a share of Common Stock which would
otherwise be deliverable upon the conversion of a share of $1.50 Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the Closing Price of Common Stock on
the Trading Date immediately preceding the date of conversion multiplied by the
fraction of a share of Common Stock represented by such fractional interest.
If more than one certificate for shares of $1.50 Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of $1.50 Preferred Stock so
surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall after the Effective Time (A)
pay a dividend or make a distribution on its Common Stock that is paid
or made (1) in shares of its Common Stock or (2) in rights to purchase
stock or other securities if such rights are not separable from the
Common Stock except upon the occurrence of a contingency, (B)
subdivide or split its outstanding Common Stock into a greater number
of shares, (C) combine its outstanding Common Stock into a smaller
number of shares or (D)issue any shares of capital stock by
reclassification of its Common Stock, the Conversion Price in effect
immediately prior thereto shall be adjusted or (in the case of clause
(A)(2)) other provision shall be made so that the holder of any share
of $1.50 Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock of the
Corporation and rights to purchase stock or other securities which
such holder would have owned or have been entitled to receive after
the occurrence of any of the events described above had such share
been surrendered for conversion immediately prior to the occurrence of
such event or the record date therefor, whichever is earlier. In the
event of the redemption of any rights referred to in clause (A), such
holder shall have the right to receive, in lieu of any such rights,
any cash, property or securities paid in respect of such redemption;
provided, however, that if the value of such cash, property or
securities is less than $.10 per share of Common Stock, such holder
shall not be entitled to such cash, property or securities. An
adjustment made pursuant to this subparagraph (i) shall become
effective immediately after the close of business on the record date
for determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution (except as
provided in paragraph (h) below) and shall become effective
immediately after the close of business on the effective date in the
case of a subdivision, split, combination or reclassification. Any
shares of Common Stock issuable in payment of a dividend shall be
deemed to have been issued immediately prior to the close of business
on the record date for such dividend for purposes of calculating the
number of outstanding shares of Common Stock under clauses (ii) and
(iii) below.
(ii) In case the Corporation shall issue after the
Effective Time rights or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after the issuance
date) to subscribe for or purchase Common Stock at a price per share
less than the Current Market Price per share of Common Stock at the
record date
-11-
<PAGE> 12
for the determination of stockholders entitled to receive such rights
or warrants, then the Conversion Price in effect immediately prior
thereto shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by (B) a fraction, the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants
(without giving effect to any such issuance) and (2) the number of
shares which the aggregate proceeds from the exercise of such rights
or warrants for Common Stock would purchase at such Current Market
Price, and the denominator of which shall be the sum of (1) the number
of shares of Common Stock outstanding on the date of issuance of such
rights or warrants (without giving effect to any such issuance) and
(2) the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become
effective immediately after such record date. In determining whether
any rights or warrants entitle the holders of Common Stock to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon
exercise of such rights or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors (whose
determination shall, if made in good faith, be conclusive).
(iii) In case the Corporation shall pay a dividend or make
a distribution to all holders of its Common Stock after the Effective
Time of any shares of capital stock of the Corporation or its
subsidiaries (other than Common Stock) or evidences of its
indebtedness or assets, including securities (any of the foregoing
being hereinafter in this subparagraph (iii) called the "Securities"),
but excluding rights, warrants, dividends and distributions referred
to in subparagraphs (i) and (ii) above, regular periodic cash
dividends payable out of the Corporation's surplus that may from time
to time be fixed by the Board of Directors and dividends and
distributions in connection with the liquidation, dissolution or
winding up of the Corporation, then in each such case, the Conversion
Price shall be adjusted so that it shall equal the price determined by
multiplying (A) the Conversion Price in effect on the record date
mentioned below by (B) a fraction, the numerator of which shall be the
Current Market Price per share of the Common Stock on the record date
mentioned below less the then fair market value as determined by the
Board of Directors (whose determination shall, if made in good faith,
be conclusive) as of such record date of the portion of the Securities
applicable to one share of Common Stock, and the denominator of which
shall be the Current Market Price per share of the Common Stock on
such record date; provided, however, that in the event the then fair
market value (as so determined) of the portion of Securities so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price per share of Common Stock on the
record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of shares of
$1.50 Preferred Stock shall have the right to receive the amount and
kind of Securities such holder would have received had such holder
converted each such share of $1.50 Preferred Stock immediately prior
to the record date for the distribution of the Securities. Except as
provided in paragraph (h) below, such adjustment shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
-12-
<PAGE> 13
(iv) Notwithstanding anything in subparagraph (ii) above,
if such rights or warrants shall by their terms provide for an
increase or increases with the passage of time or otherwise in the
price payable to the Corporation upon the exercise thereof, the
Conversion Price upon any such increase becoming effective shall
forthwith be readjusted (but to no greater extent than originally
adjusted by reason of such issuance or sale) to reflect the same.
Upon the expiration or termination of such rights or warrants, if any
such rights or warrants shall not have been exercised, then the
Conversion Price shall forthwith be readjusted and thereafter be the
rate which it would have been had an adjustment been made on the basis
that (A) the only rights or warrants so issued or sold were those so
exercised and they were issued or sold for the consideration actually
received by the Corporation upon such exercise plus the consideration,
if any, actually received by the Corporation for the granting of all
such rights or warrants whether or not exercised and (B) the
Corporation issued and sold a number of shares of Common Stock equal
to those actually issued upon exercise of such rights or warrants, and
such shares were issued and sold for a consideration equal to the
aggregate exercise price in effect under the rights or warrants
actually exercised at the respective dates of their exercise. For
purposes of subparagraph (ii), the aggregate consideration received by
the Corporation in connection with the issuance of shares of Common
Stock or of rights or warrants shall be deemed to be equal to the sum
of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of all
such securities plus the minimum aggregate amount, if any, payable
upon the exercise of such rights or warrants into shares of Common
Stock.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments
which by reason of this subparagraph (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment; and provided, however, that any adjustment shall be
required and shall be made in accordance with the provisions of this
Section 7 (other than this subparagraph (v)) not later than such time
as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. All
calculations under this Section 7 shall be made to the nearest cent
(with $.005 being rounded upward) or to the nearest 1/100th of a share
(with .005 of a share being rounded upward), as the case may be.
Anything in this paragraph (d) to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make
such reductions in the Conversion Price, in addition to those required
by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision of
shares, distribution of rights or warrants to purchase stock or
securities, or distribution of other assets or any other transaction
which could be treated as any of the foregoing transactions pursuant
to Section 305 of the Internal Revenue Code of 1986, as amended (or
any successor statute), hereafter made by the Corporation to its
stockholders shall not be taxable to such stockholders.
(e) In case the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share
exchange, sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock), in each case as a result of which shares
of Common Stock shall be converted into the right to receive stock, securities
or
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<PAGE> 14
other property (including cash or any combination thereof) (each of the
foregoing transactions being referred to as a "Transaction"), then the $1.50
Preferred Stock remaining outstanding will thereafter no longer be subject to
conversion into Common Stock pursuant to Section 7, but instead shall be
convertible into the kind and amount of shares of stock and other securities
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares or fraction thereof of Common
Stock into which one share of $1.50 Preferred Stock was convertible immediately
prior to such Transaction. The Corporation shall not be a party to any
Transaction after which shares of the $1.50 Preferred Stock shall remain
outstanding unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any such Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the $1.50 Preferred Stock which will contain
provisions enabling the holders of shares of the $1.50 Preferred Stock which
remain outstanding after such Transaction to convert such shares into the
consideration received by holders of Common Stock at the Conversion Price
immediately after such Transaction. In the event that at any time, as a result
of an adjustment made pursuant to this Section 7, the $1.50 Preferred Stock
shall become subject to conversion into any securities other than shares of
Common Stock, thereafter the number of such other securities so issuable upon
conversion of the shares of $1.50 Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of $1.50 Preferred
Stock contained in this Section 7. The provisions of this paragraph (e) shall
similarly apply to successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock that would cause an adjustment
to the Conversion Price of the $1.50 Preferred Stock pursuant to the
terms of any of the paragraphs above (including such an adjustment
that would occur but for the terms of the first sentence of
subparagraph (d)(v) above);
(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class of stock or any other rights or
warrants;
(iii) there shall be any reclassification or change of the
Common Stock (other than an event to which paragraph (d)(i) of this
Section 7 applies) or any consolidation, merger or statutory share
exchange to which the Corporation is a party and for which approval of
any stockholders of the Corporation is required, or the sale or
transfer of all or substantially all of the assets of the Corporation
or any Fundamental Change or Change of Control (each as defined in
Section 8 below); or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in addition to actions otherwise required to be taken pursuant to Section
8, the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of
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<PAGE> 15
shares of the $1.50 Preferred Stock at their addresses as shown on the stock
records of the Corporation, as promptly as possible, but at least 30 days prior
to the applicable date hereinafter specified, a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution or rights or warrants are to be determined or (B) the date on
which such reclassification, change, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
change, consolidation, merger, statutory share exchange, sale, transfer,
dissolution, liquidation or winding up. Failure to give such notice or any
defect therein shall not affect the legality or validity of the proceeding
described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an officers'
certificate signed by the President or a Vice President and the Chief Financial
Officer or the Secretary of the Corporation setting forth the Conversion Price
after such adjustment, the method of calculation thereof and setting forth a
brief statement of the facts requiring such adjustment and upon which such
adjustment is based. If the calculation of the adjustment requires a
determination by the Board of Directors pursuant to paragraph (d)(iii) of this
Section 7 or any similar provision, such certificate shall include a copy of
the resolution of the Board of Directors relating to such determination.
Promptly after delivery of such certificate, the Corporation shall prepare a
notice of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price, the facts requiring such adjustment and upon which such
adjustment is based and the date on which such adjustment becomes effective and
shall mail such notice of such adjustment of the Conversion Price to the holder
of each share of $1.50 Preferred Stock at such holder's last address as shown
on the stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides
that an adjustment shall become effective immediately after a record date for
an event and the date fixed for conversion pursuant to Section 7 occurs after
such record date but before the occurrence of such event, the Corporation may
defer until the actual occurrence of such event (i) issuing to the holder of
any share of $1.50 Preferred Stock surrendered for conversion the additional
shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of any fraction pursuant to paragraph (c) of
this Section 7.
(i) For purposes of this Section 7, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation or any corporation
controlled by the Corporation.
(j) If any single action would require adjustment pursuant to more
than one paragraph of this Section 7, only one adjustment shall be made and
such adjustment shall be the amount of adjustment which has the highest
absolute value to the holders of the $1.50 Preferred Stock.
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<PAGE> 16
(k) In case the Corporation shall take any action affecting the
Common Stock, other than action described in this Section 7, which in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of $1.50 Preferred Stock, the
Conversion Price for the $1.50 Preferred Stock may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Directors may determine to be equitable in the circumstances. Subject to the
foregoing, there shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section 7.
(l) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the $1.50
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of $1.50 Preferred Stock not theretofore
converted. For purposes of this paragraph (l), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of $1.50 Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the $1.50 Preferred Stock, the Corporation will
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Common Stock at such adjusted Conversion
Price.
The Corporation will endeavor to make the shares of Common Stock
required to be delivered upon conversion of the $1.50 Preferred Stock eligible
for trading upon any national securities exchange, or any automated quotation
system of a registered securities association, upon or through which the Common
Stock shall then be traded prior to such delivery.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the $1.50 Preferred Stock, the
Corporation will endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(m) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
the shares of $1.50 Preferred Stock (or any other securities issued on account
of the $1.50 Preferred Stock pursuant hereto) or shares of Common Stock on
conversion of the $1.50 Preferred Stock pursuant hereto; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of shares of $1.50
Preferred Stock (or any other securities issued on account of the $1.50
Preferred Stock pursuant hereto) or shares of Common Stock in a name other than
the name in which the shares of $1.50 Preferred Stock with respect to which
such Common Stock shares are issued were registered and the Corporation shall
not be required to make any issue or delivery unless and until the person
requesting such issue or delivery has paid to the Corporation the amount of any
such tax or has established, to
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<PAGE> 17
the reasonable satisfaction of the Corporation, that such tax has been paid or
is not required to be paid.
(n) The Corporation shall not take any action which results in an
adjustment of the number of shares of Common Stock issuable upon conversion of
a share of $1.50 Preferred Stock if the total number of shares of Common Stock
issuable after such action upon conversion of the $1.50 Preferred Stock then
outstanding, together with the total number of shares of Common Stock then
outstanding, would exceed the total number of shares of Common Stock then
authorized under the Certificate of Incorporation. Subject to the foregoing,
the Corporation shall take all such actions as it may deem reasonable under the
circumstances to provide for the issuance of such number of shares of Common
Stock as would be necessary to allow for the conversion from time to time, and
taking into account adjustments as herein provided, of outstanding shares of
the $1.50 Preferred Stock in accordance with the terms and provisions of the
Certificate of Incorporation.
Section 8. Special Conversion Rights.
(a) Upon the occurrence of a Change of Control with respect to the
Corporation, each holder of $1.50 Preferred Stock shall have the right, at the
holder's option, for a period of 30 days after the mailing of a notice by the
Corporation to the holders of the $1.50 Preferred Stock pursuant to Section 12
hereof that a Change of Control has occurred, to convert all, but not less than
all, of such holder's $1.50 Preferred Stock into Common Stock of the
Corporation at an adjusted Conversion Price per share equal to the Special
Conversion Price (as defined in paragraph (e) below). The Corporation may, at
its option, in lieu of providing Common Stock upon any such special conversion,
pay to the holder cash equal to the Market Value (as defined in paragraph (e)
below) of the Common Stock multiplied by the number of shares of Common Stock
into which such shares of $1.50 Preferred Stock would have been convertible
immediately prior to such Change of Control at an adjusted Conversion Price
equal to the Special Conversion Price. The Special Conversion Price arising
upon a Change of Control shall only be applicable in respect of the first
Change of Control that occurs after the Effective Time. $1.50 Preferred Stock
which becomes convertible pursuant to a special conversion right shall, unless
so converted, remain convertible into the number of shares of Common Stock that
the holders of the $1.50 Preferred Stock would have owned immediately after the
Change of Control if the holders had converted the $1.50 Preferred Stock
immediately before the effective date of the Change of Control, subject to
adjustment as provided in Section 7 hereof.
(b) Upon the occurrence of a Fundamental Change with respect to the
Corporation, each holder of $1.50 Preferred Stock shall have a special
conversion right, at the holder's option, for a period of 30 days after the
mailing of a notice by the Corporation to the holders of the $1.50 Preferred
Stock pursuant to Section 12 hereof that a Fundamental Change has occurred, to
convert all, but not less than all, of such holder's $1.50 Preferred Stock into
the kind and amount of cash, securities, property or other assets receivable
upon such Fundamental Change by a holder of the number of shares of Common Stock
into which such shares of $1.50 Preferred Stock would have been convertible
immediately prior to such Fundamental Change at an adjusted Conversion Price
equal to the Special Conversion Price. The Corporation or a successor
corporation, as the case may be, may, at its option and in lieu of providing the
consideration as required above upon such conversion, pay to the holder cash
equal to the
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<PAGE> 18
Market Value of the Common Stock multiplied by the number of shares of Common
Stock into which such shares of $1.50 Preferred Stock would have been
convertible immediately prior to such Fundamental Change at an adjusted
Conversion Price equal to the Special Conversion Price. $1.50 Preferred Stock
which becomes convertible pursuant to a special conversion right shall, unless
so converted, remain convertible into the kind and amount of cash, securities,
property or other assets that the holders of the $1.50 Preferred Stock would
have owned immediately after the Fundamental Change if the holders had
converted the $1.50 Preferred Stock immediately before the effective date of
the Fundamental Change, subject to adjustment as provided in Section 7 hereof.
(c) Upon the occurrence of a Change of Control or a Fundamental
Change with respect to the Corporation, within 30 days after such occurrence,
the Corporation shall mail to each registered holder of $1.50 Preferred Stock a
notice of such occurrence (the "Special Conversion Notice") setting forth the
following:
(i) the event constituting the Change of Control or
Fundamental Change;
(ii) the conversion date upon exercise of the applicable
special conversion right;
(iii) the Special Conversion Price;
(iv) the conversion rate (and related conversion price)
then in effect under Section 7 and the continuing conversion rights,
if any, under Section 7;
(v) the name and address of the paying agent and
conversion agent;
(vi) that holders who want to convert shares of $1.50
Preferred Stock must satisfy the requirements of Section 7(b)
(specifying such requirements) and must exercise such conversion right
within the 30-day period after the mailing of such notice by the
Corporation;
(vii) that exercise of such conversion right shall be
irrevocable and no dividends on shares of $1.50 Preferred Stock (or
portions thereof) tendered for conversion shall accrue from and after
the conversion date; and
(viii) that the Corporation (or a successor corporation, if
applicable) may, at its option, elect to pay cash (specifying the
amount thereof per share) for all shares of $1.50 Preferred Stock
tendered for conversion.
(d) A holder of $1.50 Preferred Stock must exercise the special
conversion right within the 30-day period after the mailing of the Special
Conversion Notice or such special conversion right shall expire. Such right
must be exercised in accordance with Section 7(b) to the extent the procedures
in Section 7(b) are consistent with the special provisions of this Section 8.
Exercise of such conversion right shall be irrevocable, to the extent permitted
by applicable law, and dividends on $1.50 Preferred Stock tendered for
conversion shall cease to accrue from and after the conversion date. The
conversion date with respect to the exercise of a special
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<PAGE> 19
conversion right arising upon a Change of Control or Fundamental Change shall
be the 30th day after the mailing of the Special Conversion Notice. In taking
any action in connection with any Change of Control or Fundamental Change or
related special conversion right, the Corporation will comply with all
applicable federal securities laws and regulations.
(e) The following definitions shall apply to terms used in this
Section 8:
(i) a "Change of Control" with respect to the Corporation
shall be deemed to have occurred at such time as any person (within
the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), including a
group (within the meaning of Rule 13 d-5 under the Exchange Act and
any successor rule), together with any of its Affiliates or Associates
(as defined below), files or becomes obligated to file a report (or
any amendment or supplement thereto) on Schedule 13D or 14D-1 pursuant
to the Exchange Act disclosing that such person has become the
beneficial owner of either (i) 55% or more of the shares of Common
Stock of the Corporation then outstanding or (ii) securities
representing 55% or more of the combined voting power of the Voting
Stock (as defined below) of the Corporation then outstanding;
provided, however, that a Change of Control shall not be deemed to
have occurred with respect to any transaction that constitutes a
Fundamental Change. An "Affiliate" of a specified person is a person
that directly or indirectly controls, or is controlled by, or is under
common control with, the person specified. An "Associate" of a person
means (1) any corporation or organization, other than the Corporation
or any subsidiary of the Corporation, of which the person is an
officer or partner or is, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities; (2) any trust or
estate in which the person has a substantial beneficial interest or as
to which the person serves as trustee or in a similar fiduciary
capacity; (3) any relative or spouse of the person, or any relative of
the spouse, who has the same home as the person; and (4) any person
who is a director or officer of the person or any of its parents or
subsidiaries. As used herein, a person shall be deemed to have
"beneficial ownership" with respect to, and shall be deemed to
"beneficially own," any securities of the Corporation in accordance
with Section 13 of the Exchange Act and the rules and regulations
(including Rule 13d-3, Rule 13d-5 and any successor rules) promulgated
by the Securities and Exchange Commission thereunder; provided,
however, that a person shall be deemed to have beneficial ownership of
all securities that any such person has a right to acquire whether
such right is exercisable immediately or only after the passage of
time and without regard to the 60-day limitation referred to in Rule
13d-3.
(ii) a "Fundamental Change" with respect to the
Corporation means (i) the occurrence of any transaction or event in
connection with which 55% or more of the outstanding Common Stock of
the Corporation shall be exchanged for, converted into, acquired for
or constitute solely the right to receive cash, securities, property
or other assets (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) or (ii) the conveyance, sale, lease,
assignment, transfer or other disposal of all or substantially all of
the Corporation's property, business or assets; provided, however,
that a Fundamental Change shall not be deemed to have occurred with
respect to either of the following transactions or events: (a) any
transaction or event in which more than 50% (by value
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<PAGE> 20
as determined in good faith by the Board of Directors of the
Corporation) of the consideration received by holders of Common Stock
consists of Marketable Stock (as defined below); or (b) any
consolidation or merger of the Corporation in which the holders of
Common Stock of the Corporation immediately prior to such transaction
own, directly or indirectly, (1) 50% or more of the common stock of
the sole surviving corporation (or of the ultimate parent of such sole
surviving corporation) outstanding at the time immediately after such
consolidation or merger and (2) securities representing 50% or more of
the combined voting power of the surviving corporation's Voting Stock
(as defined below) (or of the Voting Stock of the ultimate parent of
such surviving corporation) outstanding at such time.
(iii) "Voting Stock" means, with respect to any person,
capital stock of such person having general voting power under
ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such person (irrespective of
whether or not at the time capital stock of any other class or classes
shall have or might have voting power by reason of the happening of
any contingency).
(iv) the "Special Conversion Price" shall mean (i) the
higher of (a) the Market Value of the Common Stock or (b) $6.53 per
share (which amount will, each time the Conversion Price is adjusted
as provided elsewhere herein, be adjusted so that the ratio of such
dollar amount to the Conversion Price, after giving effect to any such
adjustment, shall always be the same as the ratio of $6.53 to the
initial Conversion Price, without giving effect to any such
adjustment) multiplied by (ii) a ratio the numerator of which is
$25.00 and the denominator of which is the Redemption Price (or, if
prior to the date on which the Corporation may begin to redeem the
$1.50 Preferred Stock, the Redemption Price applicable commencing on
such date).
(v) the "Market Value" of the Common Stock or any other
Marketable Stock shall be the average of the Closing Price of the
Common Stock or such other Marketable Stock, as the case may be, for
the five Trading Dates ending on the last Trading Date preceding the
date of the Change of Control or Fundamental Change; provided,
however, that if the Marketable Stock is not traded on any national
securities exchange or similar quotation system as described in the
definition of "Marketable Stock" during such period, then the Market
Value of such Marketable Stock shall be the average of the Closing
Price of such Marketable Stock during the first five Trading Dates
commencing with the first day after the date on which such Marketable
Stock was first distributed to the general public and traded on the
New York Stock Exchange, the American Stock Exchange, the NASDAQ
National Market System or any similar system of automated
dissemination of quotations of securities prices in the United States.
(vi) "Marketable Stock" shall mean the Common Stock or
common stock of any corporation that is the successor to all or
substantially all of the business or assets of the Corporation as a
result of a Fundamental Change (or of the ultimate parent of such
successor), which is (or will, upon distribution thereof, be) listed
or quoted on the New York Stock Exchange, the American Stock Exchange,
the NASDAQ National Market System or any similar system of automated
dissemination of quotations of securities prices in the United States.
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Section 9. Ranking.
(a) Any class or classes of stock of the Corporation shall be
deemed to rank:
(i) prior to the $1.50 Preferred Stock, as to dividends
or as to the distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the holders of $1.50 Preferred Stock;
(ii) on a parity with the $1.50 Preferred Stock, as to
dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share thereof be
different from those of the $1.50 Preferred Stock, if the holders of
such class of stock and of the $1.50 Preferred Stock shall be entitled
to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
proportion to their respective amounts of accrued and unpaid dividends
per share or liquidation prices, without preference or priority of one
over the other; and
(iii) junior to the $1.50 Preferred Stock, as to dividends
or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock shall be the Common Stock or if the holders
of $1.50 Preferred Stock shall be entitled to receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in preference or priority to the holders of shares
of such stock.
(b) For purposes of dividends and the distribution of assets upon
liquidation, dissolution or winding up, the shares of the $2.25 Convertible
Exchangeable Preferred Stock, par value $1.00 per share, of the Corporation
shall rank on a parity with the shares of $1.50 Preferred Stock.
Section 10. Voting.
(a) Except as herein provided or as otherwise from time to time
required by law, holders of $1.50 Preferred Stock shall have no voting rights.
Whenever, at any time or times, dividends payable on the shares of $1.50
Preferred Stock at the time outstanding have not been paid in an aggregate
amount equal to at least six quarterly dividends on such shares (whether or not
consecutive), the holders of $1.50 Preferred Stock shall have the right, voting
separately as a class with the holders of shares of any one or more other
series of stock ranking on a parity as to dividends with the $1.50 Preferred
Stock upon which like voting rights have been conferred and are exercisable
(the $1.50 Preferred Stock and any such other stock, collectively for purposes
hereof, the "Defaulted Preferred Stock"), to elect two directors of the
Corporation at the Corporation's next annual meeting of the stockholders and at
each subsequent annual meeting of stockholders; provided, however, that if such
voting rights shall become vested more than 90 days or less than 20 days before
the date prescribed for the annual meeting of stockholders, thereupon the
holders of the shares of Defaulted Preferred Stock shall be entitled to
exercise their voting rights at a special meeting of the holders of shares of
Defaulted Preferred Stock as set forth herein. At elections for such
directors, each holder of $1.50 Preferred Stock shall be
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entitled to one vote for each share held (the holders of shares of any other
series of Defaulted Preferred Stock ranking on such a parity being entitled to
such number of votes, if any, for each share of stock held as may be granted to
them). Upon the vesting of such rights of the holders of Defaulted Preferred
Stock, the then authorized number of members of the Board of Directors shall
automatically be increased by two and the two vacancies so created shall be
filled by vote of the holders of outstanding Defaulted Preferred Stock as
hereinafter set forth. The right of holders of Defaulted Preferred Stock,
voting separately as a class, to elect members of the Board of Directors as
aforesaid shall continue until such time as all dividends accumulated on
Defaulted Preferred Stock shall have been paid, or declared and funds set aside
for payment in full, at which time such right shall terminate, except as herein
or by law expressly provided, subject to revesting in the event of each and
every subsequent default of the character above mentioned. As long as any
shares of $1.50 Preferred Stock shall remain outstanding, the number of
directors of the Corporation (excluding any directors elected by vote of the
holders of shares of Defaulted Preferred Stock) elected at any meeting of
stockholders of the Corporation at which directors are to be elected shall not
be such as would cause the number of directors in office after such meeting
(excluding any directors elected by vote of the holders of shares of Defaulted
Preferred Stock) to exceed the number which is two less than the maximum number
of directors permitted by the Certificate of Incorporation.
(b) Whenever such voting right shall have vested, such right may
be exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meetings, or by the written consent of such holders pursuant
to Section 228 of the General Corporation Law of the State of Delaware.
(c) At any time when such voting right shall have vested in the
holders of shares of Defaulted Preferred Stock entitled to vote thereon, and if
such right shall not already have been initially exercised, an officer of the
Corporation shall, upon the written request of 10% of the holders of record of
shares of such Defaulted Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of shares of
such Defaulted Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice to holders of Defaulted Preferred Stock given
as required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation or, if none, at a place designated
by the Secretary of the Corporation. If such meeting shall not be called by
the proper officers of the Corporation within 30 days after the personal
service of such written request upon the Secretary of the Corporation, or
within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of Defaulted
Preferred Stock then outstanding may designate in writing any person to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice to holders of Defaulted Preferred
Stock given as required for annual meetings of stockholders and shall be held
at the same place as is elsewhere provided in this paragraph. Any holder of
shares of Defaulted Preferred Stock then outstanding that would be entitled to
vote at such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph. Notwithstanding the provisions of this
paragraph, however, no such special meeting shall be called or held during
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<PAGE> 23
a period within 45 days immediately preceding the date fixed for the next
annual meeting of stockholders.
(d) The directors elected as provided herein shall serve until the
next annual meeting or until their respective successors shall be elected and
shall qualify; any director elected by the holders of Defaulted Preferred Stock
may be removed without cause by, and shall not be removed without cause
otherwise than by, the vote of the holders of a majority of the outstanding
shares of the Defaulted Preferred Stock who are entitled to participate in such
election of directors, voting separately as a class, at a meeting called for
such purpose or by written consent as permitted by law and the Certificate of
Incorporation and Bylaws of the Corporation. If the office of any director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the remaining director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Upon any termination of the right of
the holders of Defaulted Preferred Stock to vote for directors as herein
provided, the term of office of all directors then in office elected by the
holders of Defaulted Preferred Stock, voting separately as a class, shall
terminate immediately. Whenever the terms of office of the directors elected
by the holders of Defaulted Preferred Stock, voting separately as a class,
shall so terminate and the special voting powers vested in the holders of
Defaulted Preferred Stock shall have expired, the number of directors shall be
reduced by the number of directors whose term of office shall have terminated
as provided hereinabove.
(e) So long as any shares of the $1.50 Preferred Stock remain
outstanding, the affirmative vote or consent of the holders of at least 66-2/3%
of the shares of $1.50 Preferred Stock outstanding at the time given either by
written consent or in person or by proxy at any special or annual meeting,
shall be necessary to permit, effect or validate any one or more of the
following:
(i) the authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or series of
stock, or any security convertible into stock of such class or series,
ranking prior to the $1.50 Preferred Stock as to dividends or the
distribution of assets upon liquidation, dissolution or winding up;
(ii) the amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of the
Certificate of Incorporation (including the Certificate of
Designations relating to the $1.50 Preferred Stock) which would
adversely affect any right, preference, privilege or voting power of
the $1.50 Preferred Stock or of the holders thereof; provided,
however, that any increase in the amount of authorized preferred stock
or the creation and issuance of other series of preferred stock, or
any increase in the amount of authorized shares of any such other
series of preferred stock, in each case ranking on a parity with or
junior to the $1.50 Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to adversely affect such rights,
preferences, privileges or voting powers; or
(iii) the authorization of any reclassification of the
$1.50 Preferred Stock.
-23-
<PAGE> 24
(f) So long as any shares of the $1.50 Preferred Stock remain
outstanding, the affirmative vote or consent of the holders of at least 50% of
the shares of $1.50 Preferred Stock outstanding at the time given either by
written consent or in person or by proxy at any special or annual meeting,
shall be necessary to permit, effect or validate any increase in the amount of
authorized $1.50 Preferred Stock or the creation of additional classes of stock
or the issuance of any series of capital stock ranking on a parity with the
$1.50 Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution and winding up of the
Corporation.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of $1.50 Preferred Stock shall have
been redeemed.
Section 11. Record Holders. The Corporation and the Transfer
Agent may deem and treat the record holder of any shares of $1.50 Preferred
Stock as the true and lawful owner thereof for all purposes, and neither the
Corporation nor the Transfer Agent shall be affected by any notice to the
contrary.
Section 12. Notice. Except as may otherwise be provided by law
or provided for herein, all notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon receipt, in the
case of a notice of conversion given to the Corporation as contemplated in
Section 7(b) hereof, or, in all other cases, upon the earlier of receipt of
such notice or three Business Days after the mailing of such notice if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms hereof) with postage prepaid, addressed: if to the
Corporation, to its offices at 10370 Richmond Avenue, Suite 400, Houston, Texas
77042 (Attention: Corporate Secretary) or other agent of the Corporation
designated as permitted hereby; or, if to any holder of the $1.50 Preferred
Stock, to such holder at the address of such holder of the $1.50 Preferred
Stock as listed in the stock record books of the Corporation (which shall
include the records of the Transfer Agent), or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.
EFFECTIVE TIME
This Certificate shall become effective at 2:00 p.m., Eastern Daylight
Time, on September 15, 1994.
-24-
<PAGE> 25
IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Corporation by its Chairman, President and Chief Executive Officer as of the
15th day of September, 1994.
NOBLE DRILLING CORPORATION
By: /s/ JAMES C. DAY
-----------------------------------
James C. Day
Chairman, President and Chief
Executive Officer
-25-
<PAGE> 1
EXHIBIT 10.41
NOBLE DRILLING CORPORATION
SHORT TERM INCENTIVE PLAN
Revised: April 1994*
PURPOSE
The success of Noble Drilling Corporation ("Noble Drilling") and its
subsidiaries (collectively, unless the context otherwise requires, the
"Company") is a result of the collective efforts of all employees. Each
position within the Company has the ability to make a positive contribution to
key factors making up the components used to measure a successful year. Those
components include factors such as: Increase in Shareholder Value, Cash Flow
from Operations, Major New Contracts/Operating Days, Net Income and Safety. In
order to intensify each employee's attention on available opportunities to
increase revenues, control costs and seek out profitable ventures, the Company
maintains a bonus program that rewards employees for successful achievement of
specific goals. It is management's belief that shareholders will benefit from
the creation of an environment that ties employee compensation to the success
of the Company.
Participation and Eligibility
The bonus plan covers all full-time employees in salary classifications 18 and
higher who have completed one year of service at the close of the bonus plan
year, which will be a calendar year. The bonus earned by employees with less
than two full years of service will be adjusted based upon the number of full
months employed compared to twenty-four months. Additionally, no bonus
payments will be made for partial year's service; the eligibility will be
determined from the employee roster at the close of the bonus plan year.
STRUCTURE
TARGET BONUS
The target bonus amount shall be determined on an aggregate basis for each
division and department. The target bonus shall be the base salary at year end
of eligible employees multiplied times the appropriate percentage factor
assigned to the salary classification. Salary classifications and target bonus
factors are as follows:
*Established 1977
-1-
<PAGE> 2
<TABLE>
<CAPTION>
Salary Classification Target Factor
--------------------- -------------
<S> <C>
18N through 23N 15%
24N through 25N 20%
26N THROUGH 27N 25%
28N through 32N 30%
30C through 32C 30%
33C through 36C 35%
37C 50%
</TABLE>
GOALS
At the end of each year, the total bonus pool will be determined by the Board
of Directors, considering target bonus levels, the Board's assessment of
overall company results, and attainment of specific, predetermined division or
corporate goals. Goals in the following categories will be recommended each
year by the Chief Executive Officer of Noble Drilling and approved by the Board
of Directors for the corporation and for each division. The percentage weighting
assigned to each goal shall be as follows subject to annual review by the Board
of Directors.
<TABLE>
<CAPTION>
Corporate Goals Assigned Weight
--------------- ----------------
<S> <C> <C>
1. Increase Shareholder Value 30%
2. Cash Flow from Operations 30%
3. Major New Contracts(1)/Operating Days 20%
4. Net Income 10%
5. Safety Results 10%
</TABLE>
<TABLE>
<CAPTION>
Division Goals Assigned Weight
-------------- ---------------
<S> <C> <C>
1. Operating Days 40%
2. Cash Flow from Operations 40%
3. Safety Results 10%
4. Rig Maintenance and Appearance 10%
</TABLE>
(1) Defined: One (1) year 20% internal rate of return, $8.5 million in
revenue-applicable to the International Divisions.
-2-
<PAGE> 3
The goal weighting percentage will be used in measuring overall performance,
considering measurement of actual results measured against the goal for each
factor. The adjustment to the goal weighting will be based upon the following
schedule.
<TABLE>
<CAPTION>
Goal Achievement Range Adjustment Factor
---------------------- ------------------
<S> <C>
Greater than 135% 2.00
125--135% 1.75
115--125% 1.50
105--115% 1.25
95--105% 1.00
85--95% .75
75--85% .50
Less than 75% .00
</TABLE>
The target bonus for corporate employees will be adjusted to reflect the
combined percentage of achievement of all assigned goals. The target bonus for
division employees will be adjusted to reflect the combined percentage of
achievement of all assigned goals using the ratio of 75 percent for division
goal achievement and 25 percent for corporate goal achievement. Accordingly,
the bonus payable to division employees is dependent on the level of
achievement of both division and corporate goals. The dollar amount of the
bonus payable, if any, will be calculated using the target bonus amount times
the applicable multiplier determined under the following adjustment schedule:
<TABLE>
<CAPTION>
Combined Target Bonus
Goal Achievement Payable
---------------- -------
<S> <C>
Greater than 160% 2.00
140--160% 1.75
130--140% 1.50
120--130% 1.40
105--120% 1.20
95--105% 1.00
75--95% .75
65--75% .25
Below 65% .00
</TABLE>
-3-
<PAGE> 4
BONUS ALLOCATION
Each division manager, department head and operating committee member shall
receive a bonus (assuming a bonus is payable) as calculated using the target
bonus times the applicable multiplier. The remaining bonus pool shall be
allocated to eligible employees within the division or department based upon
merit. Deviation above or below the target bonus percent must be
justified in writing by the employee's supervisor. Division managers and
department heads shall submit the allocated bonus listing to the Chief
Executive Officer of Noble Drilling for review and approval. In order to
recognize exceptional performance by an employee, the division manager or
department head may recommend an additional bonus amount be paid over and above
the target bonus calculation. The recommendation must be accompanied by a
written description of the accomplishments justifying the additional bonus
amount. All bonus calculations, allocations and recommendations are subject to
review and approval by the Compensation Committee of the Board of Directors.
GOAL FLEXIBILITY
It is intended that the total bonus pool will reflect the best judgement of the
Board of Directors in determining overall Company performance for the year. In
determining overall Company performance, the Board will consider the Company's
performance in relation to the predetermined goals. However, because the goals
are established in November/December of the preceding plan year, some
consideration to subsequent budget revisions may be given. It is expected that
the Company will prepare budgets and forecasts in March/April of the plan year.
If such budgets have substantially changed due to subsequent events, then the
Chief Executive Officer of Noble Drilling shall, at his discretion, submit
revised goals to the Board of Directors of Noble Drilling for its approval.
Revision to the goals can be considered subsequent to April at the Board's
discretion.
-4-
<PAGE> 5
CORPORATE GOALS
I. INCREASE SHAREHOLDER VALUE
An increase in shareholder value will be evidenced by Noble Drilling's
common stock outperforming the common stock of its competitor group index
by 5% at each measurement date. The competitor group index will be
determined at each measurement date by averaging the share prices of the
common stock of the seven industry participants listed below (assuming
reinstatement of dividends) against the beginning of the period average
prices. The measurement date will be the end of each calendar year, and
return of each component participant will be weighted according to the
respective participant's stock market capitalization. The final result
will be the average of the quarterly results.
<TABLE>
<S> <C>
Atwood Oceanics, Inc. Marine Drilling Company, Inc.
Chiles Offshore Corporation Reading & Bates Corporation
Cliffs Drilling Company Rowan Companies, Inc.
Global Marine, Inc.
</TABLE>
<TABLE>
<CAPTION>
Adjustment Factor
-----------------
<S> <C>
Greater than 1.42 2.00
1.31 - 1.42 1.75
1.21 - 1.31 1.50
1.10 - 1.21 1.25
1.00 - 1.10 1.00
.89 - 1.00 .75
.79 - .89 .50
Less than .79 .00
</TABLE>
II. MAJOR NEW CONTRACTS/OPERATING DAYS
The object of the goal is to measure the management's ability to
control costs and increase revenue to ensure a reasonable rate of return
on the shareholders' investment.
Any new contract (one rig) in the international market must generate a
20% internal rate of return and $8.5 million in revenue with a duration of
no less than one year.
Each operating division is expected to meet their operating days target
as budgeted.
-5-
<PAGE> 6
III. CASH FLOW OPERATIONS
Cash flow from operations will be determined by the summation of the
following items:
-Net income (loss) from continuing operations before income taxes and
extraordinary items, and
-Depreciation and amortization
as reported in Noble Drilling Corporation's consolidated statement of
operations for the period.
<TABLE>
<CAPTION>
(in thousands) Adjustment Factor
--------------- -----------------
<S> <C>
Greater than $80,384 2.00
$74,430 - 80,384 1.75
68,476 - 74,430 1.50
62,521 - 68,476 1.25
56,567 - 62,521 1.00
50,612 - 56,567 .75
44,658 - 50,612 .50
Less than $44,658 .00
</TABLE>
IV. NET INCOME
Net income is defined as net income from continuing operations after
taxes before extraordinary items and preferred dividends as reported in
Noble Drilling Corporation's consolidated statement of operations for the
period.
<TABLE>
<CAPTION>
(in thousands) Adjustment Factor
--------------- ------------------
<S> <C>
Greater than $38,445 2.00
$35,597 - 38,445 1.75
32,750 - 35,597 1.50
29,902 - 32,750 1.25
27,054 - 29,902 1.00
24,206 - 27,054 .75
21,358 - 24,206 .50
Less than $21,358 .00
</TABLE>
-6-
<PAGE> 7
V. SAFTEY RESULTS
Saftey performance will be based on:
A. Results will be in the top 33% of the I.A.D.C. L.T.I.
incidence rate for applicable categories.
B. Results will be a 10% improvement from the previous year. New
operations/divisions' safety goals will be set when operations
are initiated. If L.T.I.s are zero (0) then it is to be
maintained.
DIVISION GOALS
I. OPERATING DAYS
Each operating division is to meet its budgeted number of
operating days for the reporting period.
II. RIG MAINTENANCE AND APPEARANCE
A. Average daily maintenance cost not to exceed the average daily
maintenance cost while operating for the past two years by 10%.
B. The appearance of each rig shall meet the following
guidelines, as determined by the division manager:
1. The deck areas shall be clean, uncluttered and neatly
organized.
2. All equipment shall be clean, well maintained and
neatly painted with Noble standard colors.
3. There shall be no rusty areas that have not as a
minimum been properly cleaned and a coat of primer or
coating applied.
4. The quarters shall be thoroughly clean and neat with
well maintained furniture and bathroom fixtures and
the flooring shall be in good condition.
5. All Noble logos, safety signs, safety and training
libraries and pipe markings shall be in place and
neatly maintained.
6. Rig inspection sheets will evidence a 90% position
rating for the period.
-7-
<PAGE> 1
EXHIBIT 10.42
AMENDMENT NO. 2 TO THE
NOBLE DRILLING CORPORATION THRIFT TRUST
Pursuant to the provisions of Section 4.1 thereof, the Noble Drilling
Corporation Thrift Trust (the "Trust") is hereby amended in the following
respect only:
The first sentence of Section 3.3 of the Trust is hereby amended by
restatement in its entirety to read as follows:
The appointment of a successor trustee hereunder shall be accomplished
by and shall take effect upon the delivery to the resigning or removed
Trustee, as the case may be, of (a) an instrument in writing
appointing such successor trustee, executed by the Company, and (b) an
acceptance in writing of the office of successor trustee hereunder
executed by the successor so appointed.
IN WITNESS WHEREOF, this Amendment has been executed to be
effective this 24th day of June, 1994.
NOBLE DRILLING CORPORATION
By: /s/ Byron L. Welliver
Title: Sr.V.P. - Finance
BANK OF OKALAHOMA, N.A.
By: /s/ Jeffrey K. Mace
Title: Vice President
<PAGE> 2
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, the undersigned authority, a notary public in and for said
County and State, on this day personally appeared Byron L. Welliver,
known to me to be the person and office whose name is subscribed to the
foregoing instrument and acknowledged to me the same was the act of the said
NOBLE DRILLING CORPORATION, a Delaware corporation, and that he executed the
same as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 24th day of June, 1994.
/s/ KATHERINE L. BRADLEY
-------------------------------------
Notary Public, State of Texas
[SEAL]
My Commission expires:
10/28/97
THE STATE OF OKLAHOMA )
)
COUNTY OF TULSA )
BEFORE ME, the undersigned authority, a notary public in and for said
County and State, on this day personally appeared Jeffrey K. Mace, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me the same was the act of the said BANK OF
OKLAHOMA, N.A, a national banking association, and that he executed the same as
the act of such association for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 28th day of June, 1994.
/s/ CAROLE H. VAN STATEN
--------------------------------------
Notary Public, State of Oklahoma
My Commission expires:
July 22, 1994
<PAGE> 1
EXHIBIT 10.43
AMENDMENT NO. 4 TO THE
NOBLE DRILLING CORPORATION THRIFT PLAN
Pursuant to Section 8.1 thereof, the Noble Drilling
Corporation Thrift Plan as in effect prior to August 1, 1989 (the
"Plan"), is hereby amended in the following respects only:
FIRST: Effective as of January 1, 1989, Section 1.1(f) of
the Plan is hereby amended by adding to the end thereof two
sentences to read as follows:
Any provision of this Section to the contrary notwithstanding, the
Compensation of an Employee taken into account under the Plan for any
Plan Year commencing after December 31, 1988, shall not exceed
$200,000 (as adjusted to take into account any cost-of-living increase
authorized pursuant to Section 401(a)(17) of the Internal Revenue
Code). In determining the Compensation of an Employee, the rules of
Section 414(q)(6) of the Internal Revenue Code shall apply, except
that in applying such rules, the term "family" shall include only the
spouse of the Employee and any lineal descendants of the Employee who
have not attained age 19 prior to the end of the Plan Year.
SECOND: Effective as of January 1, 1989, Article III of the
Plan is hereby amended by adding to the end thereof a section to
read as follows:
3.7 Multiple Use Limitation. Any provision of this Plan to
the contrary notwithstanding, the sum of the actual deferral percentage
and the contribution percentage for the group of Highly Compensated
Employees (as defined in Model Amendment IV attached to this Plan) as
determined pursuant to and after application of actual deferral
percentage and contribution percentage tests shall not exceed the
"aggregate limit." The "aggregate limit" shall be equal to the
greater of:
(1) the sum of: (i) 1.25 times the greater of the
relevant actual deferral percentage or the relevant
contribution percentage, and (ii) two percentage points plus
the lesser of the relevant actual deferral percentage or the
relevant contribution percentage, provided that the amount in
this clause (ii) shall not exceed twice the lesser of the
relevant actual deferral percentage or the relevant
contribution percentage; or
<PAGE> 2
(2) the sum of: (i) 1.25 times the lesser of the relevant
actual deferral percentage or the relevant contribution percentage,
and (ii) two percentage points plus the greater of the relevant actual
deferral percentage or the relevant contribution percentage, provided
that the amount in this clause (ii) shall not exceed twice the
greater of the relevant actual deferral percentage or the relevant
contribution percentage.
The "relevant actual deferral percentage" means the actual deferral percentage
determined pursuant Model Amendment IV attached to this Plan for the group of
Employees who are not Highly Compensated Employees. The "relevant contribution
percentage" means the contribution percentage determined pursuant to said Model
Amendment IV for the group of Employees who are not Highly Compensated
Employees. In the event that the aggregate limit is exceeded in any year,
then the actual deferral percentage and/or contribution percentage for
Participants who are members of the group of Highly Compensated Employees shall
be reduced by reducing first the Pre-Tax Contributions and then the Matching
Contributions made for such Plan Year for or on behalf of the Highly
Compensated Employees with the largest individual actual deferral percentages
and/or contribution percentages to the largest uniform actual deferral
percentage and/or contribution percentage (commencing with the Highly
Compensated Employee with the largest actual deferral percentage and/or
contribution percentage and reducing his or her actual deferral percentage
and/or contribution percentage to the extent necessary to satisfy the above
restrictions or to lower such actual deferral percentage and/or contribution
percentage to the actual deferral percentage and/or contribution percentage of
the Highly Compensated Employee with the next highest actual deferral
percentage and/or contribution percentage, and repeating this process as
necessary) that permits the sum of the actual deferral percentage and
contribution percentage for said group of Highly Compensated Employees to
satisfy the above restrictions. Any portion of a Pre-Tax Contribution made on
behalf of a Participant which cannot be credited to the Pre-Tax Account of such
Participant for a Plan Year because of the limitation contained in this Section
(along with any income allocable thereto) shall be distributed to such
Participant within 2 1/2 months after the end of such year. Any Matching
Contributions made for a Participant which cannot be credited to the Employer
Matching Account of such Participant for a Plan Year because of the limitation
contained in this Section (along with any income allocable thereto) shall be
forfeited if forfeitable, but if not forfeitable, distributed to such
Participant within 2 1/2 months after the end of such year.
-2-
<PAGE> 3
THIRD: Effective as of January 1, 1989, Section 6.2 of the Plan is
hereby amended by restatement in its entirety to read as follows:
Section 6.2 Time of Distribution. Distributions to a
Participant or beneficiary under the Plan shall be made or commence
being made, as the case may be, no later than the earlier of (i) sixty
(60) days after the end of the Plan Year during which such Participant
or beneficiary becomes entitled to a distribution or (ii) April 1 of
the calendar year following the calendar year in which such
Participant attains age 70 1/2.
FOURTH: Effective as of January 1, 1987, the Plan is hereby
amended by adding to the end thereof and incorporating therein by this
reference the Model Amendment IV attached hereto as Exhibit A.
IN WITNESS WHEREOF, this Amendment has been executed this 30 day of
December, 1994.
NOBLE DRILLING CORPORATION
By /s/ Byron L. Welliver
-----------------------------------
Title: Sr. Vice President - Finance
-3-
<PAGE> 1
EXHIBIT 10.44
AMENDMENT NO. 1
TO THE
NOBLE DRILLING CORPORATION
1992 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Pursuant to the provisions of Section 5.1 of the Noble Drilling
Corporation 1992 Nonqualified Stock Option Plan for Non-Employee Directors (the
"Plan"), the Plan is hereby amended as follows:
1. Restate Section 3.02(d) of the Plan in its entirety to read as
follows:
(d) Option Period. Each Option shall be exercisable from
time to time over a period (i) commencing upon the earlier of (A) the
date that is one year following the Grant Date of such Option and (B)
the day immediately prior to the date of the next annual meeting of
stockholders occurring following such Grant Date, provided that the
date of such annual meeting of stockholders is at least 355 days after
such Grant Date, and (ii) ending upon the expiration of ten years from
the Grant Date (the "Option Period"), unless terminated sooner
pursuant to the provisions described in Section 3.02(e) below.
2. Restate Section 3.02(g) of the Plan in its entirety to read as
follows:
(g) Agreement to Continue in Service. Each Optionee shall agree to
remain in the service of the Company, at the pleasure of the Company's
stockholders, for a continuous period extending at least through the earlier of
(i) the date that is one year following the Grant Date of the Option and (ii)
the day immediately prior to the date of the next annual meeting of
stockholders occurring following such Grant Date, at the retainer rate and fee
schedule then in effect or at such changed rate or schedule as the Company from
time to time may establish; provided, that nothing in the Plan or in any stock
option agreement evidencing an Option shall confer upon such Optionee any right
to continue as a Director.
NOBLE DRILLING CORPORATION
By /s/ JAMES C. DAY
---------------------------
James C. Day
Chairman, President and
Chief Executive Officer
DATE: JULY 28, 1994
<PAGE> 1
EXHIBIT 10.45
PARENT COMPANY GUARANTEE
WHEREAS, a Contract ("Contract") was entered into on the 26th day of August,
1994, by and between Hibernia Management and Development Company, Ltd.
("Company") and Noble Offshore Ltd. ("Contractor") for Consulting and
Specialist Services, Offshore Production Drilling and Related Services for the
Hibernia Development Project, and
WHEREAS Contractor is indirectly wholly owned by Noble Drilling Corporation
("Guarantor") and Contractor is obligated under the terms of the Contract to
furnish a Parent Company Guarantee respecting Contractor's obligations under
Section A of the Contract, Guarantor hereby agree to the following:
1. The Guarantor guarantees the performance (including without limitation all
necessary financial resources) by Contractor of all Contractor's
obligations under Section A of the Contract.
2. In the event Contractor fails to perform any of Contractor's obligations
under Section A of the Contract, the Guarantor shall perform or arrange
to have performed such obligations to the satisfaction of Company or
shall pay to Company any and all costs incurred by Company in completing
Contractor's obligations under Section A of the Contract, including legal
fees and disbursements. Company may enforce its rights or remedies against
either Contractor or Guarantor in such manner as it may in its discretion
determine, and may proceed upon this Guarantee herein contained without
first proceeding against Contractor and further may exercise its rights
and remedies simultaneously against both Contractor and Guarantor.
3. The Guarantor hereby: a) waives any right of notice by Company to the
Guarantor of any changes, alterations or modifications to the Contract
which may from time to time and at any time by agreed between Contractor
and Company in accordance with the express terms as of the Contract and
b) agree that any such changes, alterations or modifications as aforesaid
shall not release the Guarantor of their liability hereunder.
4. This Guarantee shall be construed and the relations between the parties
determined in accordance with the laws of the Province of Newfoundland,
Canada. The Guarantor accept the courts of the Province of Newfoundland
as the exclusive and proper legal venue for the settlement of any
controversy or dispute that may arise in connection with or as a result
of the Contract and that cannot be resolved by the parties hereto.
<PAGE> 2
Signed under seal for and on behalf of:
By: /s/ JAMES C. DAY
---------------------------------------
Name: James C. Day
Title: President, Chief Executive Officer,
Chairman of the Board
<PAGE> 1
EXHIBIT 10.46
NOBLE DRILLING CORPORATION
AMENDED AND RESTATED
THRIFT RESTORATION PLAN
THIS PLAN, made and executed at Houston; Texas, by NOBLE DRILLING
CORPORATION, a Delaware corporation, is being established primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees of Noble Drilling Corporation and its
participating affiliates.
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. Unless the context clearly indicates
otherwise, when used in this Plan:
(a) "Account" means a Participant's Deferral Account or
Matching Account, as the context requires.
(b) "Affiliated Company" means any corporation or
organization, other than an Employer, which is a member of a
controlled group of corporations (within the meaning of Section 414(b)
of the Internal Revenue Code of 1986, as amended ("Internal Revenue
Code")) or of an affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) with respect to which an
Employer is also a member, and any other incorporated or
unincorporated trade or business which along with an Employer is under
common control (within the meaning of Section 414(c) of the Internal
Revenue Code).
(c) "Applicable Percentage" means (i) with respect to the
Plan Year ending December 31, 1994, 14% per annum, and (ii) with
respect to each succeeding Plan Year, 14% per annum unless prior to
the end of the first quarter of such Plan Year the Compensation
Committee of the Board of Directors of the Company specifies another
percentage to be the Applicable Percentage for the purposes of this
Plan.
(d) "Committee" means the committee designated pursuant
to Plan Section 2.1 to administer this Plan.
(e) "Company" means Noble Drilling Corporation.
(f) "Deferral Account" means the account established and
maintained on the books of an Employer pursuant to Plan Section 3.2 to
record a Participant's interest under this Plan attributable to
amounts credited to such Participant pursuant to Plan Section 3.2(a).
(g) "Election Period" means the period prior to the
beginning of a Plan Year (or, with respect to the Plan's first Plan
Year, the period prior to April 11, 1994) which
<PAGE> 2
is specified by the Committee for the making of deferral elections for
such year pursuant to Plan Section 3.1.
(h) "Eligible Employee" means employee of an Employer
whose annual base salary as of the first day of such year (as
estimated by the Committee during the Election Period for such year)
will be at least equal to the greater of $66,000 or the compensation
threshold amount applicable in determining a highly compensated
employee in the top-paid group of employees under Section 414(g)(1)(C)
of the Internal Revenue Code for such year (as estimated by the
Committee during the Election Period for such year).
(i) "Employer" includes the Company and any other
incorporated or unincorporated trade or business which may adopt both
the Thrift Plan and this Plan.
(j) "Matching Account" means the account established and
maintained on the books of an Employer pursuant to Plan Section 3.2 to
record a Participant's interest under this Plan attributable to
amounts credited to such Participant pursuant to Plan Section 3.2(b).
(k) "Participant" means an Eligible Employee or former
Eligible Employee for whom an Account is being maintained under this
Plan.
(l) "Plan" means this Noble Drilling Corporation Amended
and Restated Thrift Restoration Plan as in effect from time to time.
(m) "Plan Year" means the twelve-month period commencing
January 1 and ending the following December 31.
(n) "Thrift Plan" means the Noble Drilling Corporation
Thrift Plan as in effect from time to time.
(o) "Unit" means a fictional deferred compensation unit
used solely for accounting purposes under this Plan to determine an
amount payable in cash to or with respect to a Participant pursuant to
the Plan.
(p) "Unit Value" means an amount equal to (i) if Company
common stock is listed or admitted to trading on a securities exchange
registered under the Securities Exchange Act of 1934, the average of
the closing sale prices per share of such stock as reported on the
principal such exchange for the immediately preceding five days on
which a sale of such stock was reported on such exchange, (ii) if
Company common stock is not listed or admitted to trading on any such
exchange, but is listed as a national market security by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or any similar system then in use, the average of the
closing sale prices per share of such stock as reported on NASDAQ or
such system for the immediately preceding five days on which a sale of
such stock was reported on NASDAQ or such system, and (iii) if Company
common stock is not listed or admitted
-2-
<PAGE> 3
to trading on any such exchange and is not listed as a national
market security on NASDAQ or any similar system then in use, but is
quoted on NASDAQ or any similar system then in use, the average of the
mean between the closing high bid and low asked quotations per share
for such stock as reported on NASDAQ or such system for the
immediately preceding five days on which bid and asked quotations for
such stock were reported on NASDAQ or such system.
ARTICLE II.
PLAN ADMINISTRATION
Section 2.1 Committee. This Plan shall be administered by the Committee
appointed to administer the Thrift Plan on behalf of the Employers. The
Committee shall have discretionary and final authority to interpret and
implement the provisions of the Plan. The Committee shall act by a majority of
its members at the time in office and such action may be taken either by a vote
at a meeting or in writing without a meeting. The Committee may adopt such
rules and procedures for the administration of the Plan as are consistent with
the terms hereof and shall keep adequate records of its proceedings and acts.
Every interpretation, choice, determination or other exercise by the Committee
of any power or discretion given either expressly or by implication to it shall
be conclusive and binding upon all parties having or claiming to have an
interest under the Plan or otherwise directly or indirectly affected by such
action, without restriction, however, on the right of the Committee to
reconsider and redetermine such action. The Employers shall indemnify and hold
harmless each member of the Committee against any claim, cost, expense
(including attorneys' fees), judgment or liability (including any sum paid in
settlement of a claim with the approval of the Company) arising out of any act
or omission to act as a member of the Committee under this Plan, except in the
case of willful misconduct.
ARTICLE III.
DEFERRED COMPENSATION PROVISIONS
Section 3.1 Deferral Election. During the Election Period for each
Plan Year, an Eligible Employee may elect to have the payment of (i) the
portion of his or her elected pre-tax contributions to the Thrift Plan which
cannot be made to the Thrift Plan because of the contribution limitations
imposed by the Thrift Plan Committee in order to comply with the requirements
of the Internal Revenue Code, (ii) up to 10% of the annual base salary
otherwise payable by an Employer to him or her for such year, and (iii) all or
any portion of any bonus otherwise payable by an Employer to him or her for
such year, deferred for payment in the manner and at the time specified in Plan
Section 3.5. All elections made pursuant to this Plan Section 3.1 shall be made
in writing on a form prescribed by and filed with the Committee and shall be
irrevocable.
Section 3.2 Participant Accounts. An Employer shall establish and
maintain on its books a Deferral Account and a Matching Account for each
Eligible Employee employed by such Employer. Each such Account shall be
designated by the name of the Participant for whom established and shall be
credited in accordance with the following provisions:
-3-
<PAGE> 4
(a) The amount of any compensation from an Employer for a
Plan Year that a Participant has elected to defer pursuant to Plan
Section 3.1 shall be credited by such Employer to such Participant's
Deferral Account as of the last day of the month in which such amount
would otherwise have been paid to such Participant by such Employer.
(b) The amount of any Employer matching contribution that
would have been made by an Employer to the Thrift Plan for a
Participant for a Plan Year if the compensation such Participant
elected to defer for such year pursuant to Plan Section 3.1 (i) had
been contributed to the Thrift Plan as a pre-tax contribution for such
Participant for such year shall be credited to such Participant's
Matching Account as of the day such Employer matching contribution
would otherwise have been made to the Thrift Plan for such
Participant.
Section 3.3 Deferral Account Adjustments. On the last day of each
quarter of each Plan Year, each Deferral Account shall be credited with an
amount equal to the interest that would have been earned during that quarter on
the amounts credited to such Account if such amounts were credited with
interest at the Applicable Percentage.
Section 3.4 Matching Account Adjustments. Except as provided in Plan
Section 3.5, on the last day of each quarter of each Plan Year the amount
credited to a Participant's Matching Account as a dollar amount shall be
converted into Units by dividing such dollar amount by the Unit Value on such
date. If a cash dividend is paid on Company common stock, a Participant's
Matching Account shall be credited on the date said dividend is paid with the
number of Units equal to the amount of said dividend per share of Company
common stock multiplied by the number of Units then credited to such Matching
Account, with the product thereof divided by the Unit Value on the date such
dividend is paid. If the Company effects a split of its shares of common stock
or pays a dividend in the form of shares of Company common stock, or if the
outstanding shares of Company common stock are combined into a smaller number
of shares, the Units then credited to a Participant's Matching Account shall be
increased or decreased to reflect proportionately the increase or decrease in
the number of outstanding shares of Company common stock resulting from such
split, dividend or combination. In the event of a reclassification of shares of
Company common stock not covered by the foregoing, or in the event of a
liquidation, separation or reorganization (including, without limitation, a
merger, consolidation or sale of assets) involving the Company, the Board of
Directors of the Company shall make such adjustments, if any, to a
Participant's Matching Account as such Board may deem appropriate.
Section 3.5 Account Payments. On the last day of the quarter of the
Plan Year during which a Participant's employment with an Employer or
Affiliated Company terminates for any reason other than transfer to employment
with another Employer or Affiliated Company, (i) the Units credited to such
Participant's Matching Account shall be converted into a dollar amount by
multiplying the number of such Units by the Unit Value on such date, (ii) if
such Participant was not fully vested in the amount credited to his or her
Company Matching Account under the Thrift Plan as of the date of such
termination of employment, the dollar amount credited to such Participant's
Matching Account following said conversion of Units shall be reduced to an
amount equal to the dollar amount then credited to said Matching Account
multiplied by the vested percentage applicable to such Participant's Company
Matching Account under the Thrift Plan
-4-
<PAGE> 5
as of the date of such termination of employment, and (iii) following the
foregoing conversion of Units and amount reduction, the amount credited to the
Matching Account maintained by an Employer for such Participant shall be
credited to the Deferral Account maintained by such Employer for such
Participant and charged against such Matching Account. Within thirty days
following the last day of the quarter of the Plan Year during which a
Participant's employment with an Employer or Affiliated Company terminates for
any reason other than transfer to employment with another Employer or
Affiliated Company, the amount credited to the Deferral Account maintained by
an Employer for such Participant shall be paid or commence being paid, as the
case may be, by such Employer to such Participant (or, in the event of his or
her subsequent death, to the beneficiary or beneficiaries designated by such
Participant pursuant to Plan Section 3.6) in cash and charged against such
Deferral Account either in a single lump sum or in approximately equal annual
installments over a period of five years, such form of distribution to be
determined by such Employer in its absolute discretion.
Section 3.6 Designation of Beneficiaries. Any amount payable under this
Plan after the death of a Participant shall be paid when otherwise due
hereunder to the beneficiary or beneficiaries designated by such Participant.
Such designation of beneficiary or beneficiaries shall be made in writing on a
form prescribed by and filed with the Committee and shall remain in effect
until changed by such Participant by the filing of a new beneficiary
designation form with the Committee. If a Participant fails to so designate a
beneficiary, or in the event all of the designated beneficiaries are
individuals who either predecease the Participant or survive the Participant
but die prior to receiving the full amount payable under this Plan, any
remaining amount payable under this Plan shall be paid to such Participant's
estate when otherwise due hereunder.
Section 3.7 Hardship Distributions. If a Participant who is fully
vested in the amount credited to his or her Company Matching Account under the
Thrift Plan encounters an unanticipated severe financial emergency which is
caused by an event or series of events beyond the control of such Participant
and which has or will result in a severe financial hardship to such Participant
if he or she does not receive an early distribution from an Account being
maintained for such Participant under this Plan, the Committee in its absolute
discretion may direct the Employer maintaining such Account to pay to such
Participant in cash and charge against such Account such portion of the amount
then credited to such Account (including, if appropriate, the entire balance
thereof) as the Committee shall determine to be necessary to alleviate the
severe financial hardship of such Participant. No distribution shall be
made to a Participant pursuant to this Plan Section 3.7 unless such Participant
requests such a distribution in writing and provides to the Committee such
information and documentation with respect to his or her financial emergency
and hardship as may be requested by the Committee.
Section 3.8 Matching Account Forfeiture. Any provision of this Plan to
the contrary notwithstanding, if the Committee in its absolute discretion
determines that a Participant's employment with an Employer or Affiliated
Company was terminated either (i) by discharge by such Employer or Affiliated
Company for cause, or (ii) by such Participant's quitting to render services
to, become employed by or otherwise directly or indirectly participate or
engage in the financing or conduct of any business which competes with a
business conducted by such Employer or Affiliated Company in an area where such
business is then being conducted by such
-5-
<PAGE> 6
Employer or Affiliated Company, such Participant shall thereupon forfeit the
entire amount credited to his or her Matching Account.
ARTICLE IV.
AMENDMENT AND TERMINATION
Section 4.1 Amendment and Termination. The Board of Directors of the
Company shall have the right and power at any time and from time to time to
amend this Plan, in whole or in part, on behalf of all Employers, and at any
time to terminate this Plan or any Employer's participation hereunder;
provided, however, that no such amendment or termination shall reduce
the amounts actually credited to a Participant's Accounts as of the date of
such amendment or termination, or further defer the dates for the payment of
such amounts, without the consent of the affected Participant; and provided
further that the provisions of Plan Sections 1.1(h), 1.1(p), 3.2(b) and 3.4,
and any other provision that constitutes a formula referred to in Rule 16b-
3(c)(2)(ii)(A) under the Securities Exchange Act of 1934, as amended, shall not
be amended more than once every six months, other than to comport with changes
in the Internal Revenue Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
ARTICLE V.
MISCELLANEOUS PROVISIONS
Section 5.1 Nature of Plan and Rights. This Plan is unfunded and
maintained by the Employers primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
of the Employers. The Units credited and Accounts maintained under this Plan
are fictional devices used solely for the accounting purposes of this Plan to
determine an amount of money to be paid by an Employer to a Participant
pursuant to this Plan, and shall not be deemed or construed to create a trust
fund or security interest of any kind for or to grant a property interest of
any kind to any Participant, designated beneficiary or estate. The amounts
credited by an Employer to Accounts maintained under this Plan are and for all
purposes shall continue to be a part of the general assets of such Employer,
and to the extent that a Participant, designated beneficiary or estate acquires
a right to receive a payment from such Employer pursuant to this Plan, such
right shall be no greater than the right of any unsecured general creditor of
such Employer.
Section 5.2 Spendthrift Provision. No Account balance or other right or
interest under this Plan of a Participant, designated beneficiary or estate may
be assigned, transferred or alienated, in whole or in part, either directly or
by operation of law, and no such balance, right or interest shall be liable for
or subject to any debt, obligation or liability of such Participant, designated
beneficiary or estate.
Section 5.3 Employment Noncontractual. The establishment of this
Plan shall not enlarge or otherwise affect the terms of any Participant's
employment with an Employer, and such Employer may terminate the employment of
such Participant as freely and with the same effect as if this Plan had not
been established.
-6-
<PAGE> 7
Section 5.4 Adoption by Other Employers. This Plan may be adopted by
any Employer participating in the Thrift Plan, such adoption to be effective
as of the date specified by such Employer at the time of adoption.
Section 5.5 Claims Procedure. If any person (hereinafter called the
"Claimant") feels that he or she is being denied a benefit to which he or she
is entitled under this Plan, such Claimant may file a written claim for said
benefit with the Committee. Within sixty days following the receipt of such
claim the Committee shall determine and notify the Claimant as to whether he or
she is entitled to such benefit. Such notification shall be in writing and, if
denying the claim for benefit, shall set forth the specific reason or reasons
for the denial, make specific reference to the pertinent provisions of this
Plan, and advise the Claimant that he or she may, within sixty days following
the receipt of such notice, in writing request to appear before the Committee
or its designated representative for a hearing to review such denial. Any such
hearing shall be scheduled at the mutual convenience of the Committee or its
designated representative and the Claimant, and at any such hearing
the Claimant and/or his or her duly authorized representative may examine any
relevant documents and present evidence and arguments to support the granting
of the benefit being claimed. The final decision of the Committee with respect
to the claim being reviewed shall be made within sixty days following the
hearing thereon, and Committee shall in writing notify the Claimant of said
final decision, again specifying the reasons therefor and the pertinent
provisions of this Plan upon which said final decision is based. The final
decision of the Committee shall be conclusive and binding upon all parties
having or claiming to have an interest in the matter being reviewed.
Section 5.6 Applicable Law. This Plan shall be governed and construed
in accordance with the internal laws (and not the principles relating to
conflicts of laws) of the State of Texas, except where superseded by federal
law.
Section 5.7 Restatement. This Plan amends and restates, and as such
supersedes, the Noble Drilling Corporation Thrift Restoration Plan executed on
April 5, 1994.
IN WITNESS WHEREOF, this Plan, as amended and restated, has been
executed on this day 17th of March, 1995, to be effective as of April 5, 1994.
NOBLE DRILLING CORPORATION
By /s/ James C. Day
------------------------------------------
Name: James C. Day
Title: Chairman of the Board, President and
Chief Executive Officer
-7-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
The following table sets forth the direct and indirect subsidiaries of Noble
Drilling Corporation as of February 28, 1995:
<TABLE>
<CAPTION>
SUBSIDIARY NAME INCORPORATED OR ORGANIZED IN
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NN-1 Limited Partnership(1) Texas
Noble Properties, Inc.(2) Oklahoma
Noble Drilling International Inc.(2) Delaware
Noble Drilling (U.S.) Inc.(2) Delaware
Noble Drilling Services Inc.(2) Delaware
Noble Production Management Inc.(2) Delaware
Noble Drilling (West Africa) Inc.(2) Delaware
Noble Offshore Corporation(2) Delaware
Triton Engineering Services Company(2) Texas
Noble Drilling (Mexico) Inc.(3) Delaware
Noble (Gulf of Mexico) Inc.(3) Delaware
Mexico Offshore Drilling Services Inc.(3) Delaware
Bawden Drilling Inc.(4) Delaware
Noble Drilling (Canada) Ltd.(4) Alberta
Drillhawk Service & Supply Ltd.(4) Alberta
Noble Offshore Limited(4) Alberta
372733 Alberta Inc.(4) Alberta
Noble International Limited(4) Cayman Islands
Noble Drilling International Ltd.(4) Bermuda
Noble Drilling (Europe) Ltd.(4) Bermuda
Noble Holdings Ltd.(4) Bermuda
Interco Oilfield Supply Ltd.(4) Bermuda
International Directional Services Ltd.(4) Bermuda
Noble International Services Ltd.(4) Bermuda
Resolute Insurance Group Ltd.(4) Bermuda
Bawden Drilling International Ltd.(4) Bermuda
Noble Drilling (UK) Limited (4) Scotland
Noble Offshore Services Ltd.(4) Scotland
Noble Engineering Services Ltd.(4) Scotland
Noble Services SDN. BHD(4) Brunei
Noble Enterprises Limited(4) Cayman Islands
Noble Drilling Limited(4) Cayman Islands
Noble Drilling International Services PTE LTd.(4) Singapore
Noble Drilling Arabia Ltd.(4) Saudi Arabia
Bawden Drilling (Guatemala) Ltd.(4) Bermuda
Noble Drilling (West Africa) Ltd.(5) Bermuda
Noble Drilling (Nigeria) Ltd.(5) Nigeria
Noble Drilling (Malaysia) SDN. BHD(6) Malaysia
Noble Drilling de Venezuela C.A.(4) Venezuela
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Chiles Offshore International, Inc.(7) Delaware
Chiles Offshore Africa, Inc.(7) Cayman Islands
Chiles Offshore Mexico, Inc.(7) Delaware
Threadneedle Oil Company(8) Texas
Triton International, Inc.(8) Delaware
Triton USA, Inc.(8) Delaware
Triton Tool & Supply, Inc.(8) Texas
Triton Engineering Services Company, S.A.(8) Venezuela
Triton Engineering Services Company Limited(8) England
Asociacion en Participacion(8) Mexico
Triton International de Mexico, S.A. de C.V.(9) Mexico
</TABLE>
_______________
(1) General partnership interest owned 50% by Noble Drilling
Corporation. Noble Drilling Corporation's sharing percentage in
NN-1 Limited Partnership's distributions from operations is
generally 90%.
(2) 100% owned by Noble Drilling Corporation.
(3) Direct or indirect subsidiary of Noble Drilling (U.S.) Inc.
(4) Direct or indirect subsidiary of Noble Drilling International Inc.
(5) 100% owned by Noble Drilling (West Africa) Inc.
(6) 70% owned indirectly by Noble Drilling International Inc.
(7) 100% owned by Noble Offshore Corporation.
(8) 100% owned by Triton Engineering Services Company.
(9) 100% owned by Triton International, Inc.
<PAGE> 1
EXHIBIT 23.1
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-3289), Form S-8 (No. 33-15269), Form S-8 (No.
33-18966), Form S-8 (No. 33-46724), Form S-8 (No. 33-50270), Form S-8 (No.
33-50272) and Form S-8 (No. 33-62394) of Noble Drilling Corporation of our
report dated February 2, 1995 appearing on page 19 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 17, 1995
<PAGE> 1
EXHIBIT 23.2
NOBLE DRILLING CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated September 15, 1994 appearing on Page 20 of
this Annual Report on Form 10-K into Registration Statements, File Nos.
33-3289, 33-15269, 33-18966, 33-46724, 33-50270, 33-50272, 33-62394 and
33-57675.
ARTHUR ANDERSEN LLP
Houston, Texas
March 17, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 96,061
<SECURITIES> 49,162
<RECEIVABLES> 61,563
<ALLOWANCES> 0
<INVENTORY> 14,008
<CURRENT-ASSETS> 240,219
<PP&E> 824,906
<DEPRECIATION> 331,584
<TOTAL-ASSETS> 739,889
<CURRENT-LIABILITIES> 82,334
<BONDS> 126,546
<COMMON> 7,808
0
7,014
<OTHER-SE> 512,789
<TOTAL-LIABILITY-AND-EQUITY> 739,889
<SALES> 351,988
<TOTAL-REVENUES> 351,988
<CGS> 243,208
<TOTAL-COSTS> 243,208
<OTHER-EXPENSES> 90,617
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,351
<INCOME-PRETAX> 27,195
<INCOME-TAX> 5,672
<INCOME-CONTINUING> 8,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,759
<EPS-PRIMARY> .11
<EPS-DILUTED> .21
</TABLE>
