UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
__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, 1993
OR
_____ 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 No. 1-5587
READING & BATES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-0642271
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Threadneedle, Suite 200, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 713-496-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, $.05 par value New York Stock Exchange
Pacific Stock Exchange
$1.625 Convertible Preferred Stock,
$1.00 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES ON FEBRUARY 28, 1994 - $160,635,000
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON FEBRUARY 28, 1994 - 55,488,588
NUMBER OF SHARES OF NON-VOTING CONVERTIBLE CLASS B COMMON STOCK
OUTSTANDING ON FEBRUARY 28, 1994 - NONE
DOCUMENTS INCORPORATED BY REFERENCE
1) Proxy Statement for Annual Meeting of Stockholders to be held on May 10,
1994 - Part III
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . .
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . .
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . .
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions . . . . . . . . . .
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
READING & BATES CORPORATION AND SUBSIDIARIES
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1993
PART I
Item 1. Business and Item 2. Properties
Business Developments
Reading & Bates Corporation was incorporated in 1955 under the laws of
the State of Delaware. Unless the context otherwise indicates, the term
"Company" herein refers to the total business conducted by the Company and its
subsidiaries.
The Company provides contract drilling services in major offshore oil and
gas producing areas worldwide. The Company began as one of the first offshore
contract drillers in 1956, and considers itself one of the most experienced
offshore drilling contractors in the world. The Company's offshore drilling
fleet currently consists of eleven jack-up drilling units, five semisubmersible
drilling units (including two drilling units owned by Arcade Drilling AS) and
two drilling tenders. Ten of the Company's jack-up rigs have maximum drilling
depth capabilities of 25,000 feet and can operate in water depths of up to 300
feet. The Company's five semisubmersible rigs have maximum drilling depth
capabilities ranging from 25,000 to 30,000 feet and maximum water depth
capabilities ranging from 1,500 to 4,000 feet (with two rigs capable of upgrades
to 6,000 feet and 10,000 feet). The Company's two drilling tenders each have
maximum drilling depth capabilities of 20,000 feet.
The Company's fleet is internationally diversified. Two of the Company's
rigs are located in the Gulf of Mexico. The remainder of the Company's rigs are
located in various parts of the world, including in the North Sea and waters
offshore Australia, China, Gabon, Greece, India, Indonesia, Malaysia, Singapore,
Tunisia, United Arab Emirates and the United Kingdom.
In 1992, as a part of the implementation of its strategy to focus on fourth
generation semisubmersible technology, the Company acquired effective voting
control of Arcade Shipping AS ("Shipping") and Arcade Drilling AS ("Drilling"),
both of which are Norwegian companies listed on the Oslo Stock Exchange (the
"Arcade Acquisition"). Shipping owns approximately 46.2% of the outstanding
stock of Drilling. Drilling owns the "HENRY GOODRICH" and the "SONAT ARCADE
FRONTIER", two fourth generation semisubmersible drilling units. Since the
first quarter of 1992, the Company has consolidated the accounts of Shipping and
Drilling into the consolidated financial statements of the Company. The Company
has approved a plan for Shipping to dispose of its non-drilling operations and,
as a result, the shipping operations of Shipping are accounted for as
discontinued operations.
Following the completion in April 1993 of a mandatory tender offer by the
Company for shares of Shipping (required by Norwegian law) and after additional
acquisitions of Shipping and Drilling shares, the Company has increased the
percentages of Shipping and Drilling stock over which it has direct or indirect
voting control to approximately 82.6% and 67.7%, respectively as of December 31,
1993. In January 1994, the Company purchased additional shares of Drilling
increasing the Company's direct ownership of Drilling to 21.9%. See "Financial
Condition - Tender Offer", "Liquidity and Capital Resources - Drilling" and " -
Shipping" and Notes G and I of Notes to Consolidated Financial Statements.
Pursuant to an agreement dated August 31, 1991 (the "Standstill
Agreement") with Sonat Offshore Drilling Inc. ("Sonat"), a Delaware corporation
which owns approximately 25% of the stock of Drilling (and is a subsidiary of
Sonat, Inc.), the Company and its affiliates (including Shipping) are subject to
certain restrictions on engaging in various transactions with Drilling,
including with respect to the rigs owned by Drilling and the stock of Drilling
(unless, in some cases, the terms are no less favorable to Drilling or to Sonat
than similar transactions with an unaffiliated third party). Such restrictions
continue (so far as the Company's obligations are concerned) until the earliest
of (i) the date when neither the Company nor Shipping (so long as the Company
owns at least 5% of Shipping stock) owns the 46% of Drilling stock then owned
by Shipping, (ii) September 1, 1998, or (iii) the date when Sonat owns less
than 5% of Drilling (the "Standstill Period").
The Standstill Agreement further provides that during the Standstill Period
the Company may not permit Drilling to terminate certain management agreements
(as amended, the "Management Agreements") pursuant to which Sonat manages the
"HENRY GOODRICH" and the "SONAT ARCADE FRONTIER". In return for general
management and the marketing of such rigs outside the Norwegian continental
shelf, Sonat receives a variable management fee from Drilling. The Management
Agreements expire by their terms in December 1995. One of the Management
Agreements has been modified in connection with a drilling contract for the
"HENRY GOODRICH" to allow Sonat to bareboat charter such rig with renewal
options up to May 1997, subject to continuation of this drilling contract.
Business Strategy
The Company engages in contract drilling in major offshore oil and gas
producing areas worldwide. The Company's principal operating strategy is to
achieve a high utilization of its fleet by operating in promising areas
throughout the world and to earn premium dayrates by concentrating its
capabilities in the harsh environment and/or deepwater drilling segments of
the market. The Company's emphasis on the harsh environment and/or deepwater
segments is also reflected in its recent acquisitions of the capital stock of
Shipping and Drilling. In addition, the Company intends selectively to seek
opportunities to manage and/or market rigs owned by third parties.
The offshore drilling industry is highly competitive. In addition to price,
factors such as the quality of a drilling company's fleet, the overseas
operating experience of its management and employees, the experience and
reputation of its engineering staff, its reputation as a deepwater operator and
customer relationships determine a contract drilling company's ability to
compete favorably with other contractors in the international offshore drilling
market. In addition, high utilization of a drilling company's rigs, as compared
to the industry average, may enhance its operational capabilities and safety
performance by promoting retention of trained personnel and equipment
maintenance.
The Company intends to continue to modernize its fleet, in order to meet
with the requirements of competitive conditions and the changing needs of its
customers. The Company continues to consider the selective acquisition of
existing rigs, directly or through business combination transactions, but, other
than as described below with respect to floating production, the Company does
not currently contemplate entering into arrangements for the construction of any
new rigs. However, if the Company were able to enter into a firm drilling
contract or contracts of sufficient duration to allow the Company to obtain
financing, the Company may under the circumstances consider the construction of
a new drilling unit or units.
The Company is also evaluating various opportunities to expand its
activities in the area of floating production facilities, and is reviewing a
range of potential floating production projects. These potential projects
include the acquisition and/or construction of specific floating production
units, the provision of management and other contract services involving
floating production facilities, and the establishment of joint ventures or other
cooperative arrangements with various third parties. The Company's wholly owned
subsidiary, Reading & Bates Development Co., is the General Contractor for the
provision of a semisubmersible floating production system for the Liuhua 11-1
Project being jointly developed by Amoco Orient Petroleum Company and China
Offshore Oil Nanhai East Corporation in the South China Sea.
Drilling Contracts, Marketing and Customers
Rigs are generally employed under individual contracts which extend over
a period of time covering either the drilling of a well or wells (a "well-to-
well contract") or a stated term (a "term contract"). Contracts for the
employment of rigs are most often awarded based on competitive bidding; however,
some contracts are the result of negotiations between the drilling contractor
and the customer. Most contracts provide for early termination and many
provide for extension by the customer. The Company's drilling contracts
generally provide for payment in U.S. dollars. The Company's contracts also
typically provide for compensation on a "daywork" basis, under which the
Company receives a fixed amount per day that the rig is operating under
contract. Certain of the contracts may allow the Company to recover some or all
of its mobilization and demobilization costs associated with moving a rig
between contracts, depending on market conditions then prevailing. The
dayrate under such daywork contracts is generally lower or not payable when the
rig is under tow to or from the drill site (other than field moves) or when
operations are suspended because of weather or mechanical problems. Under
daywork contracts, the Company generally is responsible for paying the operating
expenses of the rig, including wages and the cost of incidental supplies.
The Company has traditionally employed its rigs through daywork contracts
rather than through "turnkey" contracts, under which the drilling contractor
agrees to drill a well to a specified depth for a fixed price because of the
greater risks generally associated with turnkey contracts. Nevertheless,
the Company formally established in 1993 a group of employees to offer
turnkey and integrated service contracts and will consider turnkey employment
of its rigs in the future if market conditions warrant. In general,
the Company seeks to have a reasonable balance of short- and long-term
contracts to minimize the downside impact of a decline in the market,
while obtaining the benefit of increasing market prices in a rising market.
The Company maintains a decentralized organizational system, with
foreign regional offices throughout the world. The Company's primary marketing
efforts are carried out through these regional offices and its Houston office.
When the Company's rigs operate in foreign locations, operations are often
conducted in conjunction with local companies. Representative of the offshore
areas where the Company has arrangements with local companies are Abu Dhabi,
Brazil, Brunei, China, India, Indonesia, Korea, Malaysia and Nigeria. The
purpose of these arrangements is to draw on the marketing, technical, supply and
government relations assistance of local third parties and in some cases to
comply with local legal requirements. Typically, the financial terms of these
arrangements are such that the third party receives a stated percentage of
drilling revenues. Most of the Company's existing arrangements are with third
parties with which the Company has had a relationship for ten or more years.
The drilling units owned by Drilling are operated under management agreements
with Sonat, as discussed above.
The Company has a base of customers which includes major and independent
foreign and domestic oil and gas companies, as well as foreign state-owned
oil companies. During 1993, the Company performed services for approximately
25 different customers. The following is a listing of customers from whom
the Company received revenues in excess of ten percent of total operating
revenues:
<TABLE>
<CAPTION>
1993 1992 1991
----------------- ----------------- -----------------
% of Total % of Total % of Total
Customer Revenue Revenues Revenue Revenues Revenue Revenues
----------------- ----------------- -----------------
(in millions) (in millions) (in millions)
<S> <C> <C> <C> <C> <C> <C>
Royal Dutch/Shell Group
and affiliates $ 39.6 22% $ 27.8 18% $ 27.9 22%
AGIP S.p.A. and
affiliates $ 37.7 20% $ 40.9 26% $ 38.6 30%
British Gas Exploration
and Production Limited
and affiliates $ 20.3 11% $ - - $ - -
Oil and Natural Gas
Commission of India $ - - $ - - $ 14.1 11%
</TABLE>
As is typical in the industry, the Company does business with a relatively
small number of customers at any given time. The loss of any one of such
customers could, at least on a short-term basis, have a material adverse impact
on the Company's business or results of operations. Management believes,
however, that the Company would have alternative customers for its services in
the event of the loss of any single customer and that the loss of any one
customer would not have a material adverse effect on the Company on a long-term
basis.
Financial information by geographic area is furnished in Note Q of Notes
to Consolidated Financial Statements.
Rig Descriptions and Utilization Statistics
Mobile offshore drilling rigs consist of a hull, positioning equipment and
drilling equipment. The design of a rig determines the marine environment in
which it can operate. The drilling equipment determines the drilling operations
which a rig is capable of performing and is principally comprised of hoisting
equipment, power plant, fluid handling systems, well control apparatus and a
means of rotating the drill string and tubulars. A rig also has living
quarters, cranes, a heliport and material storage facilities.
Although the Company's fleet consists of jack-up rigs, semisubmersibles and
drilling tenders, there are several other types of rigs that compete with the
Company's rigs for drilling contracts. The major categories of rigs include the
following:
1. Jack-Up Rigs. Jack-up 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 have a lower hull ("mat")
attached to the bottom of them in order to provide a more stable foundation
in soft bottom areas. Independent leg rigs are better suited for harder or
uneven seabed conditions. Jack-up rigs are generally subject to maximum
water depth of approximately 350 feet, and some jack-up rigs may drill in
water depths as shallow as ten feet. The water depth limit of a particular
rig is determined by the length of the rig's legs and the operating
environment. Moving a rig from one drill site to another involves jacking
the hull down into the water until it is afloat and then jacking up its legs
with the hull floating on the surface of the water. The hull is then towed
to the new drilling site by tugs and the legs are then jacked down to the
ocean floor. The jacking operation continues until the hull is raised out
of the water, preloaded with sea water and elevated to a level that provides
a final air gap above the effects of the sea. Drilling operations are then
conducted with the hull in its raised position. A cantilever jack-up has a
feature which allows the drilling platform to be extended out from the hull,
allowing it to perform drilling or workover operations over pre-existing
platforms or structures. Certain cantilever jack-up rigs have "skid-off"
capability, which allows the derrick equipment set to be skidded onto an
adjacent platform, thereby increasing the operational capability of the rig.
Slot type jack-up rigs are configured for the drilling operations to take
place through a slot in the hull. Slot type rigs are usually used for
exploratory drilling, in that their configuration makes them difficult to
position over existing platforms or structures.
2. Semisubmersible Rigs. Semisubmersible rigs are floating platforms which, by
means of a water ballasting system, can be submerged to a predetermined depth
so that a substantial portion of the lower hulls, or pontoons, are below the
water surface during drilling operations. Some semisubmersible rigs are
capable of operating in the "submersible" mode, sitting on the bottom in
water depths of approximately 40 to 50 feet. The rig is "semi-submerged",
remaining afloat, off bottom, in a position in which the lower hull is about
60-80 feet below the water line and the upper deck protrudes well above the
surface. These rigs maintain their position over the well through the use of
an anchoring system or computer controlled thruster system. They have lower
wave motions than other types of floating units because of their geometry at
the water line. Some semisubmersible rigs are designed to work in water
depths up to 6,000 feet. Some semisubmersible rigs are self-propelled and
move from location to location under their own power when afloat on the lower
hulls, or pontoons; however, most semisubmersible rigs are relocated with
the assistance of tugs.
3. Submersible Rigs. Submersible rigs are somewhat similar in configuration
to semisubmersible rigs, but the lower hull of the rig rests on the sea floor
during drilling operations. A submersible rig is towed to the well site
where it is submerged by flooding its lower hull until it rests on the sea
floor, with the upper hull above the water surface. After completion of the
drilling operations, the rig is refloated by pumping water out of the lower
hull and it is towed to another location. Submersible rigs typically operate
in water depths of 12 to 70 feet, although some submersible rigs are capable
of operating at greater depths.
4. Self-Contained Platform Rigs. Platform rigs consist of drilling equipment,
power generation machinery and quarters arranged in modular packages which
are transported to and assembled, using derrick barges, on fixed offshore
platforms provided by the customer. Upon completion of drilling operations,
the rig is disassembled and moved to another location. Platform rigs are
typically used for development drilling and workover operations. Fixed
offshore platforms are steel tower-like structures which stand on the sea
floor, with the top portion, or deck, being above the water level and
providing the site for the platform rig.
5. Drilling Tenders. Drilling tenders are usually non-self-propelled barges
or semisubmersibles which are moored alongside a platform and contain the
quarters, mud pits, mud pumps, power generation, etc. Thus, the only
equipment on the platform is the derrick equipment set consisting of the
substructure, drillfloor, derrick and drawworks. Thus, drilling tenders
allow smaller, less costly platforms to be used for development projects.
Self-erecting tenders carry their own derrick equipment set and have a crane
capable of erecting it on the platform, thereby eliminating the cost
associated with a separate derrick barge and related equipment. Older tenders
frequently require the assistance of a derrick barge to erect the derrick
equipment set.
6. Drillships. Drillships are ships that are equipped for drilling and are
typically self-propelled and move from one location to another under their
own power. Drillships are positioned over the well through use of either an
anchoring system or computer controlled thruster system similar to those used
on semisubmersible rigs. Certain drillships are capable of drilling in water
depths of more than 6,000 feet. However, drillships normally require water
depth of at least 200 feet in order to conduct operations.
There are several factors that determine the type of rig most suitable for a
particular job, the most significant of which include the marine environment,
water depth and seabed conditions at the proposed drilling location, whether
the drilling is being done over a platform or other structure, the intended well
depth, variable load requirements and well control equipment requirements where
high pressure and high temperature wells are contemplated. Thus, the market
tends to be highly segmented and considerable variation in utilization and
dayrates often exists for various rigs as a function of their capabilities.
Assuming available rigs meet customer requirements, price is the most
important competitive factor in obtaining a drilling contract. Confidence of
customers in the financial stability of the contractor, the quality of its rigs,
the competence of its personnel, the reputation for reliability and condition of
its rigs and its safety record are also important in securing drilling
contracts.
Published industry statistics of rig utilization include data based on both
the "contract method", which measures the number of days under contract (whether
or not earning revenues) compared to the total days the rigs were owned, and the
"operating method", which measures utilization in terms of the number of days
the rigs are earning revenues to the total days the rigs are owned.
Consequently, the available industry data set forth below may not be directly
comparable to the Company's data calculated based on the operating method. The
following table sets forth certain data regarding rig utilization for the
industry and the Company's fleet. Industry data is based upon all operational
rigs of the types indicated for the periods indicated and includes many rigs
that are dissimilar to the Company's rigs in many respects, including
performance capabilities, age, operational criteria and environmental
capabilities. The increase in the Company's semisubmersibles in 1992 reflects
the two rigs owned by Drilling.
<TABLE>
<CAPTION>
Averages for
Years Ended December 31,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Company:
Jack-Ups
Total Rigs 11 11 11 11 12
Utilization Rate (Operating Method) 84% 71% 89% 80% 84%
Semisubmersibles
Total Rigs 5 5 3 3 3
Utilization Rate (Operating Method) 80% 64% 76% 92% 71%
Drilling Tenders
Total Rigs 2 2 2 2 2
Utilization Rate (Operating Method) 100% 100% 18% 48% 41%
Industry:<F1>
Jack-Ups
Total Rigs 323 331 340 345 356
Utilization Rate 82% 71% 76% 78% 70%
Semisubmersibles
Total Rigs 134 141 147 145 148
Utilization Rate 76% 73% 81% 77% 69%
Drilling Tenders
Total Rigs 31 32 33 36 40
Utilization Rate 77% 80% 74% 67% 59%
<FN>
<F1> Industry averages were calculated from data derived from the Offshore Rig
Locator.
</TABLE>
The increase in industry average rig utilization in 1990 was attributable to
rig retirements and longer-term contracts, as well as increased offshore
exploration and development activity. The increase in utilization and dayrates
in that year occurred in specific regions, including the West African market and
the North Sea. In 1991, rig activity in the Gulf of Mexico, generally a natural
gas-rich area, was adversely affected by the low natural gas prices prevailing
in the United States. Nonetheless, worldwide utilization rates for 1991
remained flat from 1990 at 77%. The trend in the Gulf of Mexico was reversed
beginning in the second half of 1992 primarily due to a strengthening in the
price of natural gas. However, due to decreasing activity elsewhere, the
worldwide utilization rates slipped to 69% in 1992. In 1993, the industry saw
an improvement in worldwide utilization as it increased to 78%. In response to
changing demand, offshore drilling rigs can be moved from one region to another.
The cost of such moves is significant, however, and is weighed against the
benefits expected to be derived. The Company normally will not undertake a
major mobilization of a drilling unit without its customer agreeing to reimburse
the Company for all or a substantial portion of such costs, unless the dayrates
to be paid by such customer are sufficient to justify such expenditures.
The Company's operations have benefitted from a decline in the availability
of operational rigs during the last several years. The decline in the number of
available operational rigs is expected to continue in the near future because of
the continued aging and deterioration of existing rigs. In addition, the
construction of new rigs is generally uneconomical under current market
conditions. Nevertheless, there continues to be an excess of capacity in the
industry. Further, there continues to be a number of available rigs not
currently active in the market. The reentry of this idle capacity into the
active market could depress dayrates and utilization rates of the Company's
rigs. However, many of these inactive rigs would require significant capital
expenditures to reenter the market.
Floating Production Facilities
The Company is actively pursuing opportunities to participate in the
design, construction, project management and/or ownership of floating production
facilities.
Floating production offers a lower cost alternative to fixed platforms as
water depth increases. There are two major categories of floating production
facilities, those with surface (dry) wellheads and those with subsea (wet)
wellheads. Those with surface wellheads, such as tension leg platforms and deep
draft vessels like the SPAR buoy, generally require larger investments than
systems utilizing subsea wellheads.
The systems utilizing subsea wellheads have the flexible production risers
connected to a moored vessel, either a semisubmersible or a monohull, with the
processing equipment mounted on deck.
If a semisubmersible vessel is utilized, it is called a floating production
unit or system. This unit or system does not provide any storage, and the crude
oil must be exported either through a pipeline or a floating storage vessel
which is, in turn, offloaded by shuttle tankers.
If a monohull vessel is utilized, it has inherent storage capability and is
called a floating production, storage and offloading vessel. These vessels can
be spread moored in mild/moderate environments but are turret moored in harsh
environments to minimize mooring forces and vessel motion. These vessels can
export directly to shuttle tankers.
The Company's Fleet
At February 28, 1994, sixteen of the Company's eighteen drilling units were
operating or committed under contract. Thirteen of the drilling contracts
expire prior to the end of 1994 with three contracts extending past 1994. The
Company's fleet currently operates, to a large extent, pursuant to short-term
contracts having anticipated durations of less than one year. The number of
rigs working at any given date can fluctuate considerably. No representation
can be made with respect to the continuance of current utilization rates, or the
length, conditions or terms of any new contracts or commitments.
The following table sets forth the types of equipment operated by the
Company and the locations and status of such equipment as of February 28, 1994.
<TABLE>
OFFSHORE DRILLING UNITS
<CAPTION>
Water Drilling
Year Depth Depth
Type and Name Constructed Capability Capability Location Status
(expressed in feet)
<S> <C> <C> <C> <C> <C>
Jack-Ups
F. G. McCLINTOCK <F1><F2> 1975 300 25,000 United Kingdom Operating
D. K. McINTOSH <F3> 1978 250 20,000 India Operating
RON TAPPMEYER <F3> 1978 300 25,000 Australia Operating
C. E. THORNTON <F1><F2> 1974 300 25,000 Gabon Operating
RANDOLPH YOST <F3> 1979 300 25,000 Malaysia Operating
SONNY VOSS <F1> 1980 300 25,000 United Arab
Emirates Operating
D. R. STEWART <F3> 1980 300 25,000 India Operating
HARVEY H. WARD <F4> 1981 300 25,000 Singapore Stacked
ROGER W. MOWELL <F5> 1982 300 25,000 Greece Operating
J. T. ANGEL <F5> 1982 300 25,000 Tunisia Operating
GEORGE H. GALLOWAY <F1> 1985 300 25,000 Gulf of Mexico Operating
Semisubmersibles
JIM CUNNINGHAM <F5> 1982 1,500 25,000 China Operating
M. G. HULME, JR. <F3> 1983 2,500 25,000 Gulf of Mexico Operating
JACK BATES <F3> 1986 4,000 30,000 Enroute to
Indonesia <F7>Committed
HENRY GOODRICH <F6> 1985 2,000 30,000 North Sea Operating
SONAT ARCADE FRONTIER<F6> 1987 2,000 25,000 North Sea Operating
Drilling Tenders
CHARLEY GRAVES <F3> 1975 - 20,000 Malaysia Operating
W. D. KENT <F3> 1977 - 20,000 Indonesia Operating
<FN>
<F1> The "F. G. McCLINTOCK" is accounted for as a capital lease. The "C. E.
THORNTON", the "GEORGE H. GALLOWAY" and the "SONNY VOSS" are not owned
by the Company but are operated under operating leases. A sale/leaseback
of the "SONNY VOSS" was closed on March 25, 1992. See Notes D and F of
Notes to Consolidated Financial Statements.
<F2> The "F.G. McCLINTOCK" and the "C.E. THORNTON" were upgraded in 1984 and
converted to cantilever with "skid-off" capability.
<F3> Subject to a first preferred mortgage in favor of Internationale
Nederlanden Bank N.V. ("ING Bank").
<F4> Subject to a first preferred mortgage in favor of Den norske Bank.
<F5> Subject to a first preferred mortgage in favor of ABC Equipment Leasing,
Inc. and a second preferred mortgage in favor of ING Bank.
<F6> Drilling unit is owned by Drilling and subject to a first preferred
mortgage in favor of The Chase Manhattan Bank, N.A. See Note G of Notes
to Consolidated Financial Statements.
<F7> The Company has received letters of intent to commence drilling operations
in May 1994 offshore Indonesia.
</TABLE>
All but four of the Company's drilling rigs have top drive units which
increase the rig's marketability and dayrates. In 1994, the Company plans to
install top drive units on two of these four drilling rigs. A top drive unit is
a drilling tool which allows drilling with 90-foot lengths of drill pipe rather
than 30-foot lengths, thus reducing the number of connections. A top drive
unit also permits rotation of the drill string while tripping in and out of the
hole. These characteristics increase drilling speed and efficiency and reduce
the risk of the drill string sticking during operations, especially during the
drilling of highly deviated directional wells which are common in development
drilling operations.
The Company's jack-up drilling rigs are capable of drilling to depths of
20,000 to 25,000 feet in water depths ranging between 10 and 300 feet, depending
on the rig. All but one of the Company's jack-up rigs have the cantilever
feature, which allows the drilling platform to be extended out from the hull of
the rig, facilitating operations over existing structures such as well
platforms. Ten of the Company's jack-up rigs are independent leg rigs and one
is a mat-supported rig.
The Company's semisubmersible drilling rigs are capable of drilling to
depths of 25,000 feet to 30,000 feet in maximum water depths ranging from 1,500
feet to 4,000 feet. The "JACK BATES", the "SONAT ARCADE FRONTIER" and the
"HENRY GOODRICH" are among the most technically advanced "fourth generation"
semisubmersible drilling units in existence. Semisubmersibles are frequently
classified into four generations, based primarily on rig capabilities. The
fourth generation classification generally refers to semisubmersibles that have
been built since 1984, and have large physical size, harsh environment
capability, high variable loads, top drive units, 15,000 psi blowout preventers
and superior motion characteristics. There are currently 13 fourth generation
semisubmersibles worldwide. These rigs are the best choice for operators in
deep water and/or harsh environments or for drilling that requires larger
variable loads and the ability to handle large pieces of subsea equipment.
There are limited markets for this type of rig and a relatively small group of
users. The principal markets are the North Sea/Norway, the Gulf of Mexico and
offshore Brazil.
The "JACK BATES" (formerly known as the "ZANE BARNES") was built in 1986.
This rig was designed for moored drilling operations, with the assistance of a
computer-controlled thruster system, in up to 7,500 feet of water and is
currently outfitted for operations in up to 4,000 feet of water. This rig was
also specifically designed for operations in harsh marine environments. Its
low-heave motion response characteristics reduce the effects of wave motions and
thus reduce downtime in harsh environments. Other features of this unit are its
mechanized drilling and handling systems, its mooring system and equipment, its
payload capabilities and its engineering design characteristics that facilitate
upgrades in water depth capabilities at significantly lower expense relative to
other semisubmersibles. The "JACK BATES" has a variable load capacity of
approximately 6,000 tons. Until July 1991, the "JACK BATES" had been employed
by Shell Oil Company in the deep waters of the Gulf of Mexico for several years.
It continued to work in the Gulf of Mexico until April 1992, when the rig was
stacked. The Company obtained a commitment for a drilling contract for the
"JACK BATES" from AGIP S.p.A. which was to commence in December 1992 and last
for approximately nine months. The rig had been scheduled to mobilize in mid-
October from the Gulf of Mexico to the Mediterranean Sea. However, in August
1992 Hurricane Andrew entered the Gulf of Mexico and passed close to the "JACK
BATES", which had been secured and her personnel evacuated prior to the storm's
arrival. After the hurricane passed, the rig was found aground in a damaged
condition. The repairs were completed and the rig was then mobilized to Italy
in mid-February 1993, to commence its drilling contract with AGIP S.p.A. It
continued to work for AGIP S.p.A. until mid-November 1993, when the rig was
stacked. The Company has obtained letters of intent for drilling contracts for
the "JACK BATES" from BP Exploration Operating Company Ltd. and INPEX Aceh,
Ltd., a Tokyo-based petroleum company, to commence drilling operations in
Indonesia in early May 1994.
The "SONAT ARCADE FRONTIER" is one of the most modern dynamically-positioned
drilling units in existence and is also equipped with a conventional mooring
system, enabling it to perform a wide range of drilling assignments. Built in
1987, this rig has a 4,000 ton variable load capacity and is currently capable
of drilling high-pressure wells in up to 2,000 feet of water, but can be up-
graded to operate in depths of up to 6,000 feet of water. The "SONAT ARCADE
FRONTIER" started its first contract in 1991 with Conoco (U.K.) Ltd. in the
North Sea and is certified to operate in both the Norwegian and the U.K. sectors
of the North Sea. In 1991, the rig also completed operations in the Barents Sea
for Conoco Norway and Esso Norge AS, for which it was specially outfitted for
temperatures as low as minus 25 degrees Celsius. The rig is currently operating
for Mobil in the U.K. sector of the North Sea.
The "HENRY GOODRICH" has a 6,800 ton variable load capacity and can be up-
graded to operate in depths of up to 10,000 feet of water, although it is
currently outfitted for drilling high-pressure, deep wells in water depths of up
to 2,000 feet. Built in 1985, this rig is one of the few drilling units capable
of drilling under arctic conditions. The rig has a conventional mooring system
and is designed to accept a dynamic positioning system. The "HENRY GOODRICH" is
certified to operate in the U.K. sector of the North Sea. The rig is currently
operating under a multi-year contract for Shell U.K. Limited in the U.K. sector
of the North Sea.
The Company's two drilling tenders are highly specialized self-erecting
drilling tenders. These units are equipped with two cranes which provide the
capability of erecting their derrick equipment sets on offshore platforms
without the need for separate crane barges or associated equipment. Both of
these units are capable of drilling to depths of 20,000 feet.
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, industry-wide
shortages of supplies, services, skilled personnel and equipment necessary to
conduct the Company's business have occurred in the past, and such shortages
could occur again.
Industry Conditions and Competition
The financial performance of the offshore contract drilling industry,
domestically and abroad, is dependent upon the exploration and production
programs of oil and gas producers. These programs are substantially influenced
by producing companies' financial planning, demand for and price of oil and
natural gas, exploration success, restrictions and incentives relative to
exploration and production imposed by governmental authorities controlling
offshore production areas and economic conditions in general. A dramatic
decline in demand for offshore drilling services began in 1985. This decline
reflected the effects of lower earnings of oil and gas producers and the
unstable oil and gas price environment. As a result, the entire offshore
drilling industry experienced lower dayrates and associated earnings. Demand
for drilling services turned upward in the latter part of 1987. This upward
trend continued through 1990 but conditions deteriorated in 1991 and 1992,
primarily as a result of depressed conditions in the Gulf of Mexico. However,
as U.S. natural gas prices increased in late 1992, conditions in the Gulf of
Mexico have improved and have continued to improve throughout most of 1993.
Overall industry conditions have improved in 1993 from 1992, as idustry
utilizations have increased.
Political and military events in the Middle East and in the former Soviet
Union are an example of the factors which contribute to the volatility of world
oil prices. Other factors which influence demand for the Company's services
include the ability of the Organization of Petroleum Exporting Countries
("OPEC") to set and maintain production targets, the level of production by non-
OPEC countries, worldwide demand for oil and gas, domestic production of natural
gas, general economic and political conditions, availability of new offshore oil
and gas leases and concessions to explore and develop, and governmental
regulations. Accordingly, there is and probably will continue to be uncertainty
as to the future level of demand for the Company's services and the timing and
duration of any increases in demand.
The offshore contract drilling market is highly competitive and no one
competitor is dominant. There are approximately 110 competitors in the offshore
drilling industry deploying approximately 500 rigs around the world. The supply
of such equipment has, since 1982, substantially exceeded demand. The result
has been a prolonged period of intense price competition during which many rigs
have been idle for long periods of time. Consequently, some drilling
contractors have gone out of business, sought protection under the bankruptcy
laws or consolidated with other contractors. Notwithstanding these events, the
industry remains highly fragmented and competitive. The Company believes that
competition for drilling contracts will continue to be intense for the
foreseeable future. Certain of the Company's competitors are larger and have
greater financial resources than the Company, which may enable them to better
withstand industry downturns, to compete on the basis of dayrates, or to build
new rigs or acquire existing rigs that become available for purchase.
The harsh environment or deep water capabilities of the Company's fourth
generation semisubmersibles and the versatility of its ten 300 foot cantilever
jack-up rigs, the geographical dispersion of the Company's rigs throughout the
world and its experienced drilling personnel are positive elements in the
pursuit of these strategies and have enabled the Company to maintain a strong
competitive position in the industry. Further, the Company believes that the
reputation for quality equipment, performance and safety it has built over the
past four decades compares favorably with many of its competitors.
Environmental Matters
In recent years, increased concern has been raised over protection of the
environment. Offshore drilling in certain areas has been opposed by
environmental groups and, in certain areas, has been restricted. To the extent
laws are enacted or other governmental actions are taken that prohibit or
restrict offshore drilling or impose environmental protection requirements that
result in increased costs to the oil and gas industry in general and the
offshore contract drilling industry in particular, the business and prospects
of the Company could be adversely affected.
The Company's operations may involve the use or handling of materials that
may be classified as environmentally hazardous substances. Laws and regulations
protecting the environment have generally become more stringent, and may in
certain circumstances impose "strict liability", rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company which were
in compliance with all applicable laws at the time such acts were taken. The
Company does not believe that environmental regulations have had any material
adverse effect on its capital expenditures, results of operations or competitive
position, and does not anticipate that any material expenditures will be re-
quired to enable it to comply with existing laws and regulations. However, the
modification of existing laws or regulations or the adoption of new laws or
regulations curtailing exploratory or developmental drilling for oil and gas for
economic, environmental or other reasons could have a material adverse effect on
the Company's operations.
The Oil Pollution Act of 1990 ("OPA '90") and regulations promulgated
pursuant thereto impose a variety of regulations on "responsible parties"
related to the prevention of oil spills and liability for damages resulting from
such spills. A "responsible party" includes the owner or operator of a facility
or vessel, or the lessee or permittee of the area in which an offshore facility
is located. OPA '90 assigns liability to each responsible party for oil removal
costs and a variety of public and private damages. While liability limits apply
in some circumstances, a party cannot take advantage of liability limits if the
spill was caused by gross negligence or willful misconduct or resulted from
violation of a federal safety, construction or operating regulation. If the
party fails to report a spill or to cooperate fully in the cleanup, liability
limits likewise do not apply. Few defenses exist to the liability imposed by
OPA '90. OPA '90 also imposes ongoing requirements on a responsible party.
These include proof of financial responsibility (to cover at least some costs in
a potential spill) and preparation of an oil spill contingency plan. A failure
to comply with ongoing requirements or inadequate cooperation in a spill event
may subject a responsible party to civil or criminal enforcement action. In
short, OPA '90 places a burden on drilling rig owners or operators to conduct
safe operations and take other measures to prevent oil spills. If a spill
occurs, OPA '90 then imposes liability for resulting damages.
The Company generally seeks to obtain indemnity agreements whenever possible
from the Company's customers requiring such customers to hold the Company
harmless in the event of liability for pollution that originates below the water
surface, including, where applicable, liability under OPA '90, and maintains
marine liability insurance and contingent operators extra expense coverage which
affords limited protection to the Company. There is no assurance that such
insurance or contractual indemnification will be sufficient or effective to
protect the Company from liability under OPA '90.
In addition, the Outer Continental Shelf Lands Act and regulations
promulgated pursuant thereto impose a variety of regulations relating to safety
and environmental protection applicable to lessees, permitees and other parties
operating on the Outer Continental Shelf. Specific design and operational
standards may apply to Outer Continental Shelf vessels, rigs, platforms,
vehicles and structures. Violations of lease conditions or regulations issued
pursuant to the Outer Continental Shelf Lands Act can result in substantial
civil and criminal penalties as well as potential court injunctions
curtailing operations and the cancellation of leases. Such enforcement
liabilities can result from either governmental or citizen prosecution.
Governmental Regulation
Many aspects of the Company's operations are affected by domestic and foreign
political developments and are subject to numerous domestic and foreign
governmental laws and regulations that may relate directly or indirectly to the
contract drilling industry, including, without limitation, laws and regulations
controlling the discharge of materials into the environment, requiring removal
and cleanup under certain circumstances or otherwise relating to the protection
of the environment, and certification, licensing and other requirements imposed
by treaties, laws, regulations and conventions in the jurisdictions in which the
Company operates. The contract drilling industry is dependent on demand for
services from the oil and gas exploration industry and, accordingly, is affected
by changing taxes, price controls and other laws relating to the energy business
generally. The Company does not believe that governmental regulations have had
any material adverse effect on its capital expenditures, results of operations
or competitive position, and does not anticipate that any material expenditures
will be required to enable it to comply with existing laws and regulations.
However, the modification of existing laws and regulations or the adoption of
new laws and regulations curtailing or increasing the effective cost of
exploratory or developmental drilling for oil and gas for economic,
environmental or other reasons could have a material adverse effect on the
Company's operations. The Company cannot currently determine the extent to
which future earnings may be affected by new legislation or regulations or
compliance with new or existing regulations which may become applicable as a
result of rig relocation.
Changes to the U.K. Petroleum Revenue Tax
The United Kingdom levies a petroleum revenue tax ("PRT") on revenue derived
from the extraction of oil and natural gas from the U.K. sector of the North
Sea. Currently, a company is permitted to reduce the amount of PRT it owes by
taking as a credit against its revenues certain of its expenditures used to
explore for oil and natural gas in the U.K.
In 1993, the Chancellor of the Exchequer announced the following significant
changes in the PRT: (i) effective July 1, 1993, the rate of PRT was reduced
from 75% to 50% on revenues derived from existing fields; (ii) the PRT for new
fields, defined as those for which development consent is received after March
15, 1993 was abolished; and (iii) the credit attributable to exploration costs
was eliminated.
The Company cannot predict what effect, if any, these changes in the PRT will
have on the long-term demand for offshore drilling rigs in the U.K. sector of
the North Sea or on the Company.
Operating Risks and Insurance
The Company's contract drilling operations are subject to the many hazards
inherent in the offshore drilling industry. In the drilling of oil and gas
wells, especially exploratory wells where little is known of the subsurface
formations, there always exists a possibility of encountering unexpected
conditions of extreme pressure and temperature and the risk of a blowout,
cratering and fires that could cause injury or death to personnel,
substantial damages to the property of the Company and others, pollution, and
suspension of drilling operations. The Company's offshore drilling equipment
is also subject to hazards inherent in marine operations, either while on site
or under tow, such as capsizing, grounding, collision, damage from heavy weather
or sea conditions and unsound location. The Company may also be subject to
liability for oil spills, reservoir damage and other accidents that could cause
substantial damage. The Company maintains such insurance protection as it deems
prudent, including physical damage or loss and liability insurance on its
offshore drilling rigs. In addition, the Company generally seeks to obtain
indemnity agreements whenever possible from the Company's customers, requiring
such customers to hold the Company harmless in the event of loss of production,
reservoir damage or liability for pollution that originates below the water
surface. When obtained, such contractual indemnification protection may not in
all cases be supported by adequate insurance maintained by the customer. There
is no assurance that such insurance or contractual indemnity protection will be
sufficient or effective under all circumstances or against all hazards to which
the Company may be subject. The principal hazards against which the Company may
not be fully insured or indemnified are environmental liabilities which may
result from a blowout or similar accident or a liability resulting from
reservoir damage alleged to be caused by the negligence of the Company.
Further, there is no assurance that the Company will be able to obtain adequate
insurance coverage at the rates it deems reasonable in the future. Recognizing
these risks, the Company has various programs that are designed to promote a
safe environment for its personnel and equipment.
The Company's foreign operations are also subject to certain political,
economic and other uncertainties, including, among others, risks of war,
expropriation, nationalization, renegotiation or nullification of existing
contracts, taxation policies, foreign exchange restrictions, changing political
conditions, international monetary fluctuations and other hazards arising out of
foreign governmental sovereignty over certain areas in which the Company
conducts operations. Currently, when conducting foreign drilling operations in
areas the Company perceives as politically unstable, the Company may (i)
negotiate contracts providing for indemnification against expropriation and
certain other political risks or (ii) purchase insurance covering such risks,
to the extent available and practical. The Company believes it is adequately
covered by insurance, but no assurance can be given with respect to the
availability of such insurance at acceptable rates in the future. Since 1979,
the Company has not experienced any material losses associated with the above-
described political risks.
Employees
At January 31, 1994, the Company had approximately 1,600 employees.
Although a shortage of trained labor would be likely if demand for contract
drilling services, including those performed by the Company, rapidly increases,
management believes the effects upon the Company would be mitigated as a result
of the manner in which it reduced its work force in response to declines during
the recent downturn in industry drilling activity. Specifically, the Company
followed a practice of laying off less experienced, lower-level employees before
others. The Company does not consider a possibility of a shortage of qualified
personnel currently to be a factor in its business due to depressed industry
conditions. Retention might become more difficult without significant increases
in compensation, however, if demand for contract drilling services, including
those performed by the Company, increases rapidly. The Company does not have
any material collective bargaining agreements.
Regulation S-K Item 401(b)
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each
executive officer of the Company. Unless otherwise indicated, each has served
in the positions set forth for more than five years. Executive officers are
elected for a term of one year. There are no family relationships between any
of the persons named.
<TABLE>
<CAPTION>
Positions and Offices
Name and Age Presently Held with the Registrant
<S> <C>
P. B. Loyd, Jr., 47 <F1> Chairman, Director, President and
Chief Executive Officer
C. K. Rhein, Jr., 41 <F2> Vice Chairman and Director
W. K. Hillin, 52 <F3> Senior Vice President, General Counsel and Secretary
T. W. Nagle, 43 <F4> Vice President and Chief Financial Officer
L. E. Voss, Jr., 54 <F5> Vice President - Operations
C. R. Ofner, 48 <F6> Vice President - Business Development
D. L. McIntire, 56 <F7> Vice President - Human Resources
<FN>
<F1> Mr. Loyd was named President for the Company in October 1993, Chairman
and Chief Executive Officer for the Company in June 1991 and has been a
Director since April 1991. Mr. Loyd controls one of the five general
partners of BCL Investment Partnership, L.P., a major stockholder of the
Company, and has been President of Loyd & Associates, Inc., a financial
consulting firm, since 1989. Mr. Loyd was Chief Executive Officer and a
Director of Chiles-Alexander International, Inc. from 1987 to 1989,
President and a Director of Griffin-Alexander Drilling Company from
1984 to 1987 and prior to that, a Director and Chief Financial Officer
of Houston Offshore International, all of which are companies in the
offshore drilling industry.
<F2> Mr. Rhein was named Vice Chairman for the Company in June 1991 and has
been a Director since April 1991. Mr. Rhein has also been President, Chief
Executive Officer and Director of Danielson Holding Corporation, a
financial services holding company, and a Director of National American
Insurance Company of California, an insurance company, since 1990. Since
1987, he has been a Managing Director of Whitman Heffernan Rhein & Co.,
Inc., and a general partner of WHR Management Company, L.P., which manages
various partnerships which are stockholders of the Company. Prior to
April 1, 1987, he was a partner in the law firm of Anderson Kill Olick
& Oshinsky, P.C.
<F3> Mr. Hillin was named Vice President - Legal for Reading & Bates Drilling
Co. ("RBDC"), a wholly owned subsidiary of the Company, in 1978. In March
1986 he was named Vice President - Legal with the Company, was appointed
Vice President - Finance and Legal in January 1988, was appointed Senior
Vice President - Finance and Administration in November 1988 and in July
1990 was also appointed General Counsel and Secretary. He was appointed
to his present position with the Company in August 1991.
<F4> Mr. Nagle was named Director - Finance and Administration for RBDC in June
1985. In January 1989, he was named Director - Business Development for
the Company. In April 1990, he was named Director - Support Services for
RBDC. He was appointed to his present position with the Company in August
1991.
<F5> Mr. Voss was named Vice President - Operations Far East for RBDC in March
1982 and Vice President and General Manager - North and South America for
RBDC in January 1987. In April 1988, he was appointed Vice President and
General Manager - Worldwide Operations and Engineering and was appointed
Senior Vice President - Operations in April 1990. He was appointed to his
present position with the Company in August 1991 and was appointed
President of RBDC in May 1992.
<F6> Mr. Ofner was named Vice President and General Manager for RBDC in January
1987. In April 1988, he was appointed Vice President and Regional Manager
and was appointed Senior Vice President - Sales and Marketing in April
1990. He was appointed to his present position with the Company in August
1991.
<F7> Mr. McIntire was named Director - Human Resources for RBDC in April 1986,
Manager - Personnel Operations in January 1989 and Director - Human
Resources for the Company in January 1990. He was appointed to his
present position with the Company in August 1991.
</TABLE>
Item 3. Legal Proceedings
The Company is one of the defendants in certain litigation brought in July
1984 by the Cheyenne-Arapaho Tribes of Oklahoma in the U.S. District Court for
the Western District of Oklahoma, seeking to set aside two communitization
agreements with respect to three leases involving tribal lands in which the
Company previously owned interests and to have those leases declared expired. In
June 1989, the U.S. District Court entered an interim order in favor of the
plaintiffs. On appeal, the U.S. Court of Appeals for the Tenth Circuit upheld
the decision of the trial court and petitions for rehearing of that decision
were denied. Petitions for writs of certiorari filed by the parties with the
U.S. Supreme Court have been denied, and the case has been remanded to the trail
court for determination of damages.
In November 1988, a lawsuit was filed in the U.S. District Court for the
Southern District of West Virginia against Reading & Bates Coal Co., a wholly
owned subsidiary of the Company, by SCW Associates, Inc. claiming breach of an
alleged agreement to purchase the stock of Belva Coal Company, a wholly owned
subsidiary of Reading & Bates Coal Co. with coal properties in West Virginia.
When those coal properties were sold in July 1989 as part of the disposition of
the Company's coal operations, the purchasing joint venture indemnified Reading
& Bates Coal Co. and the Company against any liability Reading & Bates Coal Co.
might incur as the result of this litigation. A judgment for the plaintiff of
$32,000 entered in February 1991 was satisfied and Reading & Bates Coal Co. was
indemnified by the purchasing joint venture. On October 31, 1990, SCW
Associates, Inc., the plaintiff in the above-referenced action, filed a separate
ancillary action in the Circuit Court, Kanawha County, West Virginia against the
Company and a wholly owned subsidiary of Reading & Bates Coal Co., Caymen Coal,
Inc. (former owner of the Company's West Virginia coal properties), as well as
the joint venture, Mr. William B. Sturgill personally (former President of
Reading & Bates Coal Co.), three other companies in which the Company believes
Mr. Sturgill holds an equity interest, two employees of the joint venture,
First National Bank of Chicago and First Capital Corporation. The lawsuit seeks
to recover compensatory damages of $50 million and punitive damages of $50
million for alleged tortious interference with the contractual rights of the
plaintiff and to impose a constructive trust on the proceeds of the use and/or
sale of the assets of Caymen Coal, Inc. as they existed on October 15, 1988.
The Company and its indirect subsidiary intend to defend their interests
vigorously. The Company believes the damages alleged by the plaintiff in this
action are highly exaggerated. In any event, the Company believes that it has
valid defenses and that it will prevail in this litigation.
On January 26, 1993, Kerr-McGee Corporation ("Kerr-McGee") filed an action
against the Company and Reading & Bates Drilling Co., a subsidiary of the
Company, in the U.S. District Court, Western District of Louisiana. On March
23, 1993, the complaint was amended to add Mobil Oil Exploration & Producing
Southeast, Inc. as an additional party plaintiff in this action. In this action
the plaintiffs are seeking to recover an unspecified amount for damages to a two
well platform and related production equipment, facilities and pipelines, in
South Timbalier Island Block 34, allegedly caused by the Company's
semisubmersible drilling unit "JACK BATES" (ex "ZANE BARNES") after that
drilling unit had been set adrift in the Gulf of Mexico by Hurricane Andrew in
August 1992. The Company also has received notice that Tennessee Gas Pipeline
Company has asserted a claim with respect to damage to a gas riser pipe and
related equipment also located at Kerr-McGee's platform in South Timbalier
Island Block 34. On April 8, 1993, Murphy Exploration & Production Company
("Murphy"), a subsidiary of Murphy Oil Corporation, filed a similar claim in
the U. S. District Court, Eastern District of Louisiana, with respect to its
12 well platform located in South Timbalier Island Block 86. The Court has
granted the Company's motion to transfer and has entered an order transferring
this case to the U. S. District Court, Western District of Louisiana. The
Murphy action has now been consolidated with the Kerr-McGee action. The Company
and its subsidiary believe they have valid defenses with respect to the claims
asserted and intend to defend their interests vigorously. In December 1992, the
Company provided a $10 million letter of undertaking from the Company's
protection and indemnity association and a $34 million bond (secured to the
extent of approximately $32.3 million by indemnities from the Company's excess
liability underwriters and approximately $1.7 million by a standby letter of
credit issued for account of the Company) to Kerr-McGee and Murphy to secure
their claims and avoid the attachment of the "JACK BATES" prior to its
departure from the United States for a drilling contract with Agip S.p.A. The
Company is not aware of any other claims that may arise against it as a result
of Hurricane Andrew. The Company believes it has adequate liability insurance
to protect the Company and its subsidiary from any material liability that might
result from these claims.
On April 13, 1993, the All American Marine Slip, acting as managing general
agent on behalf of the lead underwriters on the Company's primary loss of hire
insurance policy, denied the Company's loss of hire claim with respect to the
damages to the "JACK BATES" caused by Hurricane Andrew amounting to
approximately $9.1 million, demanded arbitration under the policy with respect
to the policy coverage dispute and filed an action in the U. S. District Court,
Southern District of New York (the "New York action"), seeking a declaratory
judgment and order compelling the Company to arbitrate the dispute. On April
16, 1993, the Company filed an action in the U. S. District Court, Southern
District of Texas (the "Texas action"), seeking compensatory and punitive
damages for bad faith and unfair dealing by the All American Marine Slip under
the Texas Insurance Code and Texas Deceptive Practices Act. On April 23, 1993,
the All American Marine Slip amended its complaint in the New York Action to
seek damages for alleged tortious interference with contract and abuse of
process by the Company's having filed the Texas action. On July 7, 1993, the
Company and the All American Marine Slip agreed to submit all claims in the
New York action and the Texas action to arbitration in New York, preserving all
rights of both parties (other than the right to a jury trial). As a result the
New York action and the Texas action (the latter having been transferred to New
York pursuant to court order) have been placed on the suspense docket pending
arbitration. On August 6, 1993, the Company agreed with certain underwriters at
Lloyds and ILU companies, representing 57.5% of the insurers on the Company's
primary loss of hire insurance policy, to settle their respective shares of the
Company's loss of hire claim in exchange for payment to the Company of an
aggregate of approximately $3.4 million. The effect of that settlement leaves
the All American Marine Slip representing lead underwriters with respect to the
remaining 42.5% of the Company's loss of hire claim subject to arbitration. On
December 6, 1993, the arbitration panel entered an interim award that the
Company had proved a valid claim under its loss of hire policy and on December
30, 1993 entered a final award holding that the amount of the Company's claim
under the policy was $7,296,000 and that the amount owed by the remaining 42.5%
of insurers was $3,100,800, plus interest at the rate of 6.5% per annum from
August 1, 1993 until paid. In its final award the arbitration panel also held
there was no bad faith on the part of the insurers and that each party bear its
own legal costs. The court in the New York action has entered an order
confirming the award and is expected to enter a judgment shortly.
The Company is involved in these and various other legal actions arising in
the normal course of business. After taking into consideration the evaluation
of such actions by counsel for the Company, management is of the opinion that
outcome of known claims and litigation will not have a material adverse effect
on the Company's business or consolidated financial position or results of
operations. See Note F of Notes to Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Company
during the fourth quarter of fiscal year 1993.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
The Company's Common Stock is traded on the New York and Pacific Stock
Exchanges under the symbol "RB". The following table shows for the periods
indicated the high and low sales prices of the Common Stock as reported on the
New York Stock Exchange Composite Transactions Tape.
<TABLE>
<CAPTION>
1993 1992 <F1>
-------------- --------------
Quarter High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First 8 4 9 3/8 6 1/4
Second 8 5/8 6 3/8 8 3/4 6 7/8
Third 10 5/8 6 1/8 8 1/8 6 1/4
Fourth 10 3/8 6 1/4 7 4
<FN>
<F1> High and low sales prices have been adjusted for the one-for-five reverse
stock split effected on October 2, 1992.
</TABLE>
There were approximately 7,812 holders of record of the Company's Common
Stock as of February 28, 1994.
The Company's Non-voting Convertible Class B Common Stock (the "Class B
Stock") was issued to the Company's bank debt holders and lease lenders in
conjunction with the restructuring in 1989 (the "1989 Restructuring") and to The
Dow Chemical Company in the settlement relating to Scotdril Offshore Company.
As a result of the 1991 Recapitalization, all of the Company's outstanding Class
B Stock was converted into Common Stock, leaving none of the remaining 41.1
million authorized shares issued or outstanding at December 31, 1993 and 1992.
The Company has not paid dividends on the Common Stock since the first
quarter of 1986 and management does not expect any dividends will be declared or
paid in the foreseeable future. The Company's credit facility agreement with
ING Bank prohibits the Company from declaring or paying dividends on the Common
Stock in any one year in excess of 50% of its cumulative net income subsequent
to March 29, 1991, the date of the first drawdown under such financing.
Item 6. Selected Financial Data
READING & BATES CORPORATION
AND SUBSIDIARIES
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1993 1992 1991<F1> 1990<F2> 1989<F2><F3>
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues <F4> $183,752 $156,659 $126,800 $113,015 $111,088
======== ======== ======== ======== ========
Income (loss) from
continuing operations $ 4,656 $ 3,402 $(17,385) $(53,831) $(60,520)
======== ======== ======== ======== ========
Income from discontinued
operations $ - $ - $ 2,156 $ 518 $ 66
======== ======== ======== ======== ========
Cumulative effect and
extraordinary item <F5> $ - $ - $(15,135) $ 2,899 $ -
======== ======== ======== ======== ========
Net income (loss) $ 4,656 $ 3,402 $(30,364) $(50,414) $(60,454)
======== ======== ======== ======== ========
Income (loss) from
continuing operations
per share <F6><F7> $ .05 $ (.04) $ (.51) $ (7.26) $ (10.43)
======== ======== ======== ======== ========
Income from discontinued
operations per
share <F6> $ - $ - $ .06 $ .07 $ .01
======== ======== ======== ======== ========
Cumulative effect and
extraordinary item
per share <F5><F6> $ - $ - $ (.40) $ .39 $ -
======== ======== ======== ======== ========
Net income (loss) per
share <F6><F7> $ .05 $ (.04) $ (.85) $ (6.80) $ (10.42)
======== ======== ======== ======== ========
Total assets $612,474 $614,628 $443,521 $384,561 $411,252
======== ======== ======== ======== ========
Long-term obligations
(including current
portion) and redeemable
stocks $116,796 $143,385 $ 95,510 $327,470 $310,322
======== ======== ======== ======== ========
Dividends declared on
Common Stock $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
<FN>
<F1> The Company's financial position at December 31, 1991 and the net loss
for the year then ended reflect the 1991 Recapitalization and the
related quasi-reorganization. See Notes B and C of Notes to
Consolidated Financial Statements.
<F2> Restated for discontinued operations. See Note I of Notes to
Consolidated Financial Statements.
<F3> The Company's financial position at December 31, 1989 and the net loss
for the year then ended reflect the 1989 Restructuring and the related
quasi-reorganization. See "Financial Condition" under Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
<F4> Certain amounts prior to 1991 have been reclassified for comparative
purposes. Such reclassifications had no effect on the net loss or the
overall financial condition of the Company.
<F5> Year ended December 31, 1991 includes a $18,860,000 expense ($.50 per
share) for cumulative effect of change in accounting principle.
See Note K of Notes to Consolidated Financial Statements.
<F6> Years prior to 1992 have been restated to reflect the one-for-five
reverse stock split on October 2, 1992.
<F7> In computing earnings per share for the year ended December 31, 1993,
net income was decreased by $2.1 million of dividends on preferred
stock. In computing earnings per share for the years ended December 31,
1992 and 1991, net income (loss) was decreased (increased) by $5.3
million and $1.9 million, respectively, of accretion in redemption price
of redeemable stocks.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
1989 Restructuring and 1991 Recapitalization
Since September 1989, the Company has completed a series of transactions
restructuring and substantially reducing its long-term debt and lease
obligations, disposing of business lines unrelated to offshore contract drilling
and rebuilding its equity capital. In September 1989, the Company effected a
financial and business restructuring (the "1989 Restructuring"), which involved
(i) the conversion of approximately $462.6 million of the Company's existing
bank and lease obligations into the Company's Class B Stock, (ii) the
restructuring of approximately $363 million face amount of remaining bank and
lease obligations, (iii) the dispositions of the Company's non-drilling
petroleum and coal operations, with the proceeds used to repay additional bank
and lease obligations, (iv) the reclassification into Common Stock of all of the
Company's outstanding preferred stock and (v) an exchange offer which reduced
the Company's existing obligations in respect of certain outstanding
subordinated debentures by approximately $32.4 million.
In March 1991, the Company effected a further recapitalization (the "1991
Recapitalization"), which involved (i) the issuance of approximately 39.6
million shares of Common Stock and the incurrence of approximately $76.2 million
in new or restructured bank and lease obligations to replace approximately
$364.6 million in existing bank and lease obligations remaining after the 1989
Restructuring, (ii) the conversion into Common Stock of all outstanding Class B
Stock and (iii) the settlement of the Company's remaining obligations under its
Supplemental Executive Retirement Plan for cash and shares of Common Stock (the
"SERP Settlement"). See Notes B and C of Notes to Consolidated Financial
Statements.
Postretirement Benefits
Effective January 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions. The statement requires employers to recognize the cost of
providing postretirement benefits to employees over the employees' service
periods. The Company elected to expense the entire "Accumulated Projected
Benefit Obligation" at January 1, 1991, of $18,860,000, or $.50 per share as
shown separately in the Consolidated Statement of Operations under "Cumulative
effect of change in accounting principle". The Company's policy had been to
expense retiree benefit costs as they were paid. Effective April 1, 1992, the
Company modified its postretirement benefits. The effect of these modifications
significantly reduced the Company's postretirement benefit costs and accumulated
benefit obligation, and resulted in a $6.8 million curtailment gain recognized
in the Company's results of operations (included in Other, net) for the year
ended December 31, 1992. Postretirement benefit cost for the years ended
December 31, 1993, 1992 and 1991 was $658,000, $567,000 and $22,126,000,
respectively. See Note K of Notes to Consolidated Financial Statements.
Iran Settlement
In June 1991, the Company received $3.7 million for the settlement of a
claim filed by a subsidiary of the Company against the National Iranian Oil
Company pertaining to seven land rigs which were located in Iran. The
settlement has been accounted for as an extraordinary gain in the Consolidated
Statement of Operations. See Note A of Notes to Consolidated Financial
Statements.
Sale of RCC
In August 1991, the Company sold all of the stock of its wholly owned
subsidiary Resources Conservation Company ("RCC"), the water treatment segment
of its business, for a sales price of $9.7 million. As a result of the sale,
the Company recorded a gain of $3.2 million which is included in discontinued
operations. The net assets and results of operations of RCC have been
reclassified in the consolidated financial statements as discontinued
operations. The divestment of RCC allows the Company to concentrate on its
core business, offshore drilling. See Note I of Notes to Consolidated
Financial Statements.
Private Placement
In September 1991, the Company effected a private placement (the "1991
Placement") of approximately 1.7 million shares of Common Stock Subject to
Redemption and approximately 6,857 shares of a new class of preferred stock (the
"Redeemable Preferred Stock") pursuant to which the Company raised proceeds of
approximately $27.1 million in cash. The proceeds were utilized to fund a
portion of the Arcade Acquisition. The 1991 Placement was effected at a price
of $8.75 per share of Common Stock Subject to Redemption and $1,750 per share
of Redeemable Preferred Stock. In June 1992, each share of the Redeemable
Preferred Stock was converted into Common Stock in accordance with its terms.
Pursuant to the Subscription Agreements entered into in connection with the
1991 Placement, as amended (the "Subscription Agreements"), the Company agreed
to use its best efforts to register for resale the shares so issued and
guaranteed in effect that any selling holder of such shares would receive a
specified minimum net share price upon resale, if any, during the 90-day period
following the effectiveness of such registration. In October 1992, without
registering the 1991 Placement shares for resale, the Company entered into
agreements with the holders of such shares that superseded the provisions of the
Subscription Agreements, under which the Company would repurchase all such
shares at $11.05 per share. All of the shares issued in the 1991 Placement were
repurchased using approximately $34.3 million of the proceeds of the Company's
October 1992 public offering. See Note L of Notes to Consolidated Financial
Statements.
Carnegie/"SONNY VOSS" Financing
In 1991, the Company entered into a NOK 150 million ($24.6 million using
the then prevailing exchange rate of NOK 5.9579 = US$1.00) margin loan from
Carnegie International Limited ("Carnegie"). The loan proceeds were utilized to
fund a portion of the Arcade Acquisition. The loan, as extended, was repaid
when due on March 31, 1992 with substantially all of the proceeds realized from
the sale/leaseback of one of the Company's jack-up drilling units, the "SONNY
VOSS". As part of this transaction the Company received approximately $27.7
million in cash and agreed to lease the drilling unit for 42 months. The
leaseback is accounted for as an operating lease and a deferred gain of $6.3
million was recorded and is being amortized over the life of the lease.
Income Tax Refund
In August 1992, the Company received cash of $14.2 million and recognized
interest income of $10.6 million and income tax benefits of $1.9 million, net of
$1.7 million of income tax benefits that had been previously recognized. The
Company's consolidated federal tax returns for the tax years from September 30,
1974 to December 31, 1981 were then examined by the Internal Revenue Service
(the "IRS").
The Joint Committee on Taxation approved a settlement agreement between the
Company and the IRS for those years which provided the Company with such tax
refund. See Note J of Notes to Consolidated Financial Statements.
Reverse Stock Split
On October 2, 1992, the Company effected a one-for-five reverse stock split
of the Common Stock. On the Consolidated Balance Sheet, "Common Stock" was
reduced and "Capital in excess of par value" was increased to reflect this
change. All share and per share amounts have been restated. See Note M of Notes
to Consolidated Financial Statements.
Public Offerings
In October 1992, the Company completed a public offering (the "1992
Offering") of 8 million shares of its Common Stock (including shares issued
pursuant to an underwriter's over-allotment) pursuant to which the Company
raised gross proceeds of approximately $40 million in cash (net proceeds of
approximately $38.1 million). The proceeds were utilized to repurchase
272,123 shares of Common Stock issued in the SERP Settlement and 3,102,857
shares of Common Stock issued in the 1991 Placement and accounted for as
Common Stock Subject to Redemption in the Company's financial statements
and for general corporate purposes. See Note M of Notes to Consolidated
Financial Statements.
In July 1993, the Company effected a public offering (the "1993 Offering")
of 2,990,000 shares of $1.625 Convertible Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), pursuant to which the Company raised gross
proceeds of approximately $74.7 million in cash (net proceeds of approximately
$71.2 million). A portion of the proceeds was utilized to repay
indebtedness under Facilities C and F of the ING Facility, approximately
$5.5 million and $11.6 million, respectively. The remaining proceeds will be
used by the Company for working capital and general corporate purposes.
The Preferred Stock is convertible at the option of the holder at any
time into shares of the Company's Common Stock at a conversion rate of 2.899
shares of Common Stock for each share of Preferred Stock (equivalent to a
conversion price of $8.625 per share of Common Stock), subject to adjustment in
certain events. Annual dividends are $1.625 per share and are cumulative and
are payable quarterly commencing September 30, 1993. The Preferred Stock
is redeemable at any time on and after September 30, 1996, a option of the
Company, in whole or in part, at a redemption price of $26.1375 per share, and
thereafter at prices decreasing ratably annually to $25.00 per share on and
after September 30, 2003, plus accrued and unpaid dividends. The holders of the
Preferred Stock do not have any voting rights, except as required by applicable
law, and except that, among other things, whenever accrued and unpaid dividends
on the Preferred Stock are equal to or exceed the equivalent of six quarterly
dividends payable on the Preferred Stock, the holders of the Preferred Stock
will be entitled to elect two directors to the Board until the dividend
arrearage has been paid in full. The term of office of all directors so elected
will terminate immediately upon such payment. The Preferred Stock has a
liquidation preference of $25.00 per share, plus accrued and unpaid dividends.
The Company has declared and paid all cumulative dividends accrued on the
Preferred Stock through December 31, 1993.
Tender Offer
Consistent with the Company's strategy to acquire Drilling and Shipping,
during the first quarter of 1993, the Company acquired additional shares of
Shipping which, together with the shares already owned, exceeded 45% of the
total outstanding shares of Shipping, and as a result the Company was obligated
under Norwegian securities law to make and the Company made a tender offer
for the remaining outstanding shares of Shipping at NOK 1.0 per share. The
tender offer expired April 7, 1993 with approximately 20 million shares being
tendered. The Company also acquired an additional 6% of Drilling's outstanding
shares and an additional 18.8% of Shipping's outstanding shares in the second,
third and fourth quarters of 1993. As of December 31, 1993, the Company,
directly and indirectly, controlled 67.7% and 82.6% of the outstanding shares of
Drilling and Shipping, respectively. The Company had obtained an additional
borrowing capacity from ING Bank, Facility F, to finance the tender offer and
the additional purchases of Shipping and Drilling shares. Facility F was repaid
in July 1993 from a portion of the proceeds of the 1993 Offering, see above. See
"Business Developments".
Shelf Registration
In October 1993, pursuant to a registration rights agreement entered into
in connection with the 1991 Recapitalization, the Company effected a shelf
registration of 31,533,614 shares of its outstanding Common Stock, par value
$.05 per share, held by certain stockholders. Pursuant to such registration
rights agreement, the Company is generally obligated to maintain such shelf
registration continuously in effect for a period of one year following initial
effectiveness (currently, through October 1994). To the Company's knowledge,
as of February 28, 1994, a total of 23,834,957 shares were registered for resale
at any time pursuant to such shelf registration statement. The Company will not
receive any proceeds from any sale of such shares by any selling stockholder.
Miscellaneous
On March 19, 1992, and at the Annual Meeting of Stockholders held on May
20, 1992, the Company's Board of Directors and stockholders, respectively,
approved the Company's 1992 Long-Term Incentive Plan (the "1992 Plan"). The
1992 Plan provides for grants of stock options, stock appreciation rights, stock
awards and cash awards, which may be granted singularly, in combination or in
tandem. The 1992 Plan is unfunded insofar as the plan provides for awards of
cash, Common Stock or rights thereto. An aggregate of 1,000,000 shares of
Common Stock are available for awards granted wholly or partly in Common Stock.
The Company has granted restricted stock awards under the 1992 Plan to each of
Messrs. Angel, Loyd and Rhein, of 90,000 shares, 120,000 shares and 90,000
shares of Common Stock, respectively. Such shares awarded are restricted as to
transfer until vested pursuant to a schedule whereby 1/24th of the total number
of shares is vested per calendar quarter from June 30, 1992 through March 31,
1998 (subject to certain conditions). See Note N of Notes to Consolidated
Financial Statements.
The Company changed its method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 96, Accounting
for Income Taxes ("SFAS 96"), effective January 1, 1991. The cumulative effect
of the accounting change at January 1, 1991 was not material. In February 1992,
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS 109") was issued and supersedes substantially all existing income tax
pronouncements. The Company adopted SFAS 109 effective January 1, 1993. The
cumulative effect of the accounting change at January 1, 1993 was not material
to the Company's consolidated results of operations or financial position.
See Note A of Notes to Consolidated Financial Statements.
In October 1993, the Company announced that Mr. J. T. Angel, President and
Chief Operating Officer, as well as a member of the Board of Directors, resigned
from those positions in order to pursue other business interests. In the fourth
quarter of 1993, the Company recorded a charge of approximately $1.1 million
against earnings related to a severance agreement with Mr. Angel.
For a discussion of certain legal proceedings see Part I, Item 3.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Following the 1991 Recapitalization, the Company has met all of its
financial obligations through funds from cash provided by operations, drawings
under the ING Facility, the proceeds of the 1991 Placement subsequently retired
with the proceeds from the 1992 Offering, short-term borrowings repaid with the
proceeds of asset sales or sale/leaseback transactions, proceeds from the 1993
Offering and certain other nonrecurring cash items. Cash provided by operating
activities during 1993 amounted to approximately $26.5 million, a decrease of
$11.1 million from 1992. Cash provided by operating activities during 1992
amounted to approximately $37.6 million, an increase of $33.2 million from 1991,
primarily due to the consolidation of the results of Drilling, receipt of
certain nonrecurring cash items and increased utilization of the tender fleet,
offset by decreased utilization of the semisubmersible fleet.
Cash used in investing activities during 1993 amounted to approximately
$29.4 million compared to cash provided from investing activities in 1992 of
approximately $47.1 million and cash used in investing activities in 1991 of
approximately $78.8 million. During 1993, the Company used approximately $20.6
million of cash to purchase additional shares of stock in Shipping and Drilling.
Since the first quarter of 1992, the Company has consolidated the results of
Shipping and Drilling, which resulted in an increase in cash of $47.3 million
(which is subject to restrictions on availability as described below under
"Drilling"). Also, in March 1992, the Company entered into a sale/leaseback
transaction of the "SONNY VOSS" drilling unit that provided approximately $27.7
million of cash.
Cash provided by financing activities was approximately $30.1 million
during 1993, compared to cash used in financing activities of approximately
$32.5 million in 1992. During 1993, the Company received approximately $71.2
million of net proceeds from the 1993 Offering, received approximately $11.6
million from the ING Facility and made principal payments of approximately $50.6
million and paid dividends of $2.1 million on the Preferred Stock. Cash used in
financing activities was approximately $32.5 million during 1992, compared to
cash provided by financing activities of approximately $59.6 million in 1991.
During 1992, the Company made principal payments of approximately $34.8 million,
repurchased and retired Common Stock Subject to Redemption (issued in the 1991
Placement) using approximately $35.7 million and received approximately $38.1
million net proceeds from the 1992 Offering. See "Financial Condition".
Liquidity of the Company should be considered in light of the significant
fluctuations in demand experienced by drilling contractors as rapid changes in
oil and gas producers' expectations and budgets occur. These fluctuations can
rapidly impact the Company's liquidity as supply and demand factors directly
affect utilization and dayrates, which are the primary determinants of cash flow
from the Company's operations. Despite continued weakness in the offshore
drilling business, the Company's management currently expects that its cash flow
from operations, in combination with cash on hand, will be sufficient to satisfy
the Company's 1994 working capital needs, dividends on the Preferred Stock,
planned investments, capital expenditures, debt, lease and other obligations.
At December 31, 1993, approximately $23.6 million of total consolidated cash and
cash equivalents of $80.4 million were restricted from the Company's use outside
of Drilling's activities.
Capital Expenditures and Deferred Charges
Planned capital expenditures and deferred charges (including mobilization,
demobilization and contract preparation costs not recoverable from the Company's
customers or claim proceeds from insurance underwriters) for 1994 are expected
to aggregate approximately $15 million principally for upgrades or replacement
of equipment either to fulfill obligations under existing contracts or to
improve the marketability of certain of the Company's drilling units and for
mobilization of the Company's drilling units between drilling sites. Certain
projects currently being considered by the Company would require, if they
materialize, capital expenditures or other cash requirements not included in the
above estimate. In addition to planned capital expenditures referred to above,
the Company will also continue to review acquisitions of drilling units from
time to time and will also consider further investments in floating production
equipment. See "Item 1. Business - Business Strategy".
ING Facility and Continuing Leases
The ING Facility, as amended, includes a term loan with an original balance
of approximately $30 million ("Facility A") which provides for payment of
principal in eight equal semiannual installments of $3.75 million beginning on
June 30, 1993, with interest payments at a varying rate equal to the London
Interbank Offered Rate ("LIBOR") plus 1.5% (LIBOR was 3.5% as of December 31,
1993). In addition to Facility A, the ING Facility also includes up to $30
million of working capital financing in the form of three credit facilities
("Facility C", "Facility D" and "Facility E"), and pursuant to an amendment
(described below), financing for additional purchases of shares of Shipping
and Drilling ("Facility F"). Facility C is in the form of an overdraft
account, available until June 1, 1994, up to a maximum of $15 million ($2.7
million was utilized as of December 31, 1993). Interest on amounts outstanding
under Facility C is paid quarterly at the prime rate of Citibank, N.A. (6.00%
as of December 31, 1993) plus 1.25%. Facility D is in the form of a $5 million
stand-by letter of credit which collateralizes a $15 million note payable
relating to the "HARVEY H. WARD" drilling unit. Facility E is in the form of
stand-by letters of credit aggregating $10 million, which support bid,
performance and other bonds needed by the Company in the ordinary course of its
business. Facility F consisted of revolving credit and/or stand-by letters of
credit that were to be available to the Company until January 1, 1995, in an
amount not to exceed $15.5 million, for the purchase of shares of Shipping and
Drilling. In March 1993, the Company received approximately $11.6 million from
Facility F and in July 1993 the Company repaid Facility F from proceeds from the
1993 Offering. In August 1993, ING Bank agreed to provide a temporary $10
million letter of credit facility, available until June 30, 1997, to cover
import duties for drilling equipment in Indonesia. At December 31, 1993, no
amounts had been drawn down by the Company. See Notes B, D and E of
Notes to Consolidated Financial Statements.
In addition to the credit facilities described above, in June 1991, ING
Bank acquired certain interests in two promissory notes issued in connection
with the sale and leaseback to the Company of the "C. E. THORNTON" and the
"GEORGE H. GALLOWAY" drilling units (the "Continuing Leases"). Those interests
entitle ING Bank, effective June 28, 1991, to receive the charter hire payable
by the Company under the basic terms of the operating leases covering those
drilling units. The present value of the Company's obligations under the
Continuing Leases at such date amounted to approximately $45 million. The
charter hire payable under the Continuing Leases, which provide for use of the
two rigs by the Company through 1995, is measured by a deemed principal amount
of $45 million, payable in nine equal semiannual installments of
approximately $4.4 million, commencing in June 1993 and a final installment in
December 1997 of approximately $5.2 million, bearing interest quarterly at LIBOR
plus 1.9375%. See Notes B and F of Notes to Consolidated Financial Statements.
Pursuant to the Company's request and upon payment of fees to ING Bank
totalling $1 million by the Company, the ING Facility and the Continuing Leases
were amended (a) as of June 30, 1992, to (i) defer the principal installments on
Facility A of $3 million each, and the principal elements of the lease payments
of approximately $3.7 million each, that would otherwise have been due in June
and December of 1992 (such principal installments and principal elements being
added, on a pro-rata basis, to the remaining principal installments of Facility
A of the ING Facility and principal elements of the Continuing Leases,
respectively), and (ii) reduce certain consolidated net worth covenants, and
(b) as of February 23, 1993, upon the pledging of additional security, to add
Facility F and extend Facility C from June 1, 1993 to June 1, 1994, as described
above.
Substantially all of the Company's assets that do not serve as collateral
for other obligations of the Company collateralize the ING Facility. Also, the
Company has pledged to ING Bank all of its shares of Drilling and Shipping to
collateralize the Company's obligations to ING Bank under the ING Facility.
The terms of the amended ING Facility, among other things (i) require the
Company to meet certain financial covenants, (ii) prohibit the encumbrance of
the Company's assets, (iii) restrict the declaration or payment of dividends
by the Company to not more than 50% of cumulative net income from the date of
the first drawdown under the ING Facility, (iv) prohibit the Company from
engaging in any merger or consolidation or the sale of all or substantially all
of its assets or the acquisition of all or substantially all of the assets of
any entity, (v) prohibit the Company from incurring indebtedness (with certain
exceptions including unsecured debt subordinated to the ING Facility), (vi)
prohibit the Company from creating or acquiring new subsidiaries, (vii) prohibit
the Company from prepaying indebtedness other than to ING Bank, (viii) prohibit
the sale, transfer or assignment of any of the rigs and (ix) restrict the
Company's ability to advance funds to, guarantee obligations of, or under
certain circumstances, acquire additional shares of, Shipping or Drilling. It
is also an event of default under the ING Facility if there should occur a
material adverse change in the financial or business condition of the Company
or certain of its subsidiaries. Thus, the Company has very limited means of
securing additional working capital through additional borrowings or credit
facilities without the consent of ING Bank. At the present time the Company
anticipates that it will meet all of such covenants or obtain necessary waivers,
with the amendments to the ING Facility and Continuing Leases described above,
for 1994. The ability of the Company to meet all of its financial covenants
under the ING Facility on an ongoing basis or obtain waivers in the future will
be subject to economic conditions then prevailing in the offshore drilling
industry and the Company's relative performance.
Drilling
As of December 31, 1993, Drilling had a $61.5 million term loan payable to
The Chase Manhattan Bank, N.A. as agent for a syndicate of banks (including
itself). The payment terms of this bank obligation currently provide for
repayment of principal in 19 semiannual installments which commenced in August
1991. The Company has not guaranteed repayment of such obligation. Drilling
has also entered into an interest rate swap agreement, which is combined with
the bank credit facility for payment purposes (as set forth below). The
principal amount of the loan, when combined with the swap agreement, bears
interest at a rate of 10.69% on an amount of principal equal to $42.1 million
currently, such amount reducing on a semiannual basis to $30.6 million in 1996,
and at LIBOR plus 1.75% on the remaining balance. The loan is collateralized by
the drilling units "HENRY GOODRICH" and "SONAT ARCADE FRONTIER". The loan
agreement requires Drilling to meet certain financial conditions, including
maintaining current assets of at least twice the level of current liabilities
and liquid assets of at least $10 million, maintaining a ratio of operating cash
flow (including actual and projected cash flows) to interest charges of at least
1.75 to 1 and maintaining a ratio of total liabilities to tangible net worth of
no more than 1 to 1. Additionally, the loan agreement (i) restricts the payment
of dividends by Drilling to not more than 50% of net earnings after tax per
year, (ii)prohibits Drilling from making loans, granting credit, giving any
guarantee or indemnity to or for the benefit of any other person or assuming any
liability with respect to any obligation of any other person, (iii) prohibits
Drilling from engaging in any merger or consolidation and (iv) prohibits the
encumbrance of Drilling's assets or the sale of such assets other than at fair
market value, in each case without the prior written consent of the banks party
to the loan agreement holding a majority of the outstanding balance. It is also
an event of default if there should occur a material adverse change in the
financial or business condition of Drilling. Pursuant to a series of waivers,
for the period from May 1, 1992 to May 1, 1993, the bank syndicate waived the
requirement that Drilling comply with the actual operating cash flow ratio
covenant. For the period from January 1, 1992, to April 30, 1993, the bank
syndicate waived the requirement that Drilling comply with the projected
operating cash flow ratio covenant. In connection with the most recent waiver,
Drilling was required to (i) pay a fee to the bank syndicate of approximately
$.1 million on April 30, 1993 and (ii) prepay the last two semiannual
installments (totalling $8 million), and the interest rate was increased to
LIBOR plus 1.875% for the remainder of the loan. Since May 1, 1993, Drilling
has not requested any additional waivers. Drilling expects to meet its
repayment obligations under the facility through cash flow generated from
operations and current working capital. At December 31, 1993, Drilling held
$23.6 million in cash and cash equivalents available to satisfy such
obligations, but otherwise subject to the restrictions on use of such cash and
cash equivalents set out in such loan agreement. The ability of Drilling to meet
all of its financial covenants under its obligations on an ongoing basis or
obtain waivers thereof in the future will be subject to economic conditions
then prevailing in the offshore drilling industry and Drilling's relative
performance. See Note D of Notes to Consolidated Financial Statements.
Shipping
The near term liquidity of Shipping is directly dependent on the shipping
market. In the event that shipping revenues are not sufficient to cover
Shipping's working capital requirements, Shipping will have to seek additional
working capital financing. The Company has extended working capital loans
amounting to approximately $12.3 million as of December 31, 1993 to Shipping, on
an intercompany loan basis, in order for Shipping to repay a $4.3 million short-
term bank facility in October 1992 and to meet its current obligations. The
Company anticipates it may be necessary to extend additional working capital
loans and/or guaranties to Shipping (which would require the consent of ING Bank
if the aggregate amount extended exceeds $15 million including the loans
referred to above) in order for Shipping to meet its obligations as they become
due. As of December 31, 1993, a wholly owned subsidiary of Shipping had a $19.5
million loan payable to Scandinaviska Enskilda Banken, London Branch (70%) and
Den norske Bank (30%). The payment terms of this bank obligation provide for
repayment of principal in eleven semiannual installments of approximately $.9
million each which commenced in March 1992 and a final installment of
approximately $13.3 million due September 1997. The note bears interest at
LIBOR plus 1.625% and is collateralized by the vessel "IRON MASTER", a
guarantee by Shipping and a pledge of the shares of Gade Shipping Corporation,
a subsidiary of Shipping and the owner of such vessel. The loan agreement
requires that Shipping maintain a minimum tangible net worth of NOK 200
million and that the ratio of total debt to total assets be no more than 60%.
The loan agreement also contains a provision that permits the majority
banks thereunder to accelerate the maturity of the debt if, in the reasonable
opinion of such banks, a material adverse change occurs in the financial
condition of Shipping. In May and June 1992, Shipping received correspondence
from the majority banks asserting the existence of a material adverse change in
the financial condition of Shipping. Shipping responded in June 1992 to the
effect that there has been no such material adverse change and supplied
additional financial information requested by the banks. No action was taken to
accelerate the indebtedness and no further correspondence asserting the
existence of a material adverse change has been received. Based on current and
reasonably foreseeable circumstances, the Company believes that the likelihood
of acceleration based on this provision of the loan agreement is remote. Also
at December 31, 1993, Shipping had two capitalized lease obligations to a
subsidiary of Unibank totalling approximately $17.6 million relating to the
vessels "ARCADE EAGLE" and "ARCADE FALCON". Under the terms of the captial
leases, Shipping must maintain a value-adjusted tangible net worth greater than
NOK 300 million and the ratio of debt to such value-adjusted tangible net worth
must be less than 1.5 to 1. Payments on the obligations are due quarterly and
the effective yield on the obligations is the Unibank Eurodeposit rate (3.1875%
at December 31, 1993) plus 1.5%. Aggregate principal payments under the capital
leases are $1.8 million for 1994; $2.1 million for 1995; $2.4 million for 1996;
$3 million for 1997 and $3.4 million for 1998. As of December 31, 1993, $37.1
million of long-term debt of Shipping (including current portion) is included in
the Company's Consolidated Financial Statements as a component of net
liabilities of discontinued operations included in other noncurrent liabilities.
No assurance can be given that Shipping will be able to meet all of its
financial covenants under its obligations on an ongoing basis in the future (or
obtain waivers thereof) based on economic conditions then prevailing in the
shipping and offshore drilling industries.
<PAGE>
RESULTS OF OPERATIONS
The Company reported net income for 1993 of $4.7 million ($.05 earnings per
share after preferred stock dividends of $2.1 million) compared to net income of
$3.4 million ($.04 loss per share after $5.3 million of accretion in redemption
price of redeemable stocks) for 1992. The results for 1993 and 1992 include net
losses of $2.7 million and $5.9 million, respectively, from the results of
Drilling and Shipping (with its shipping operation being accounted for as a
discontinued operation).
The Company reported a net loss for 1991 of $30.4 million ($.85 per share
after $1.9 million of accretion in redemption price of redeemable stocks), which
included an extraordinary gain of $3.7 million ($.10 per share) and a cumulative
effect of change in accounting principle of $18.9 million ($.50 per share). In
August 1991, the Company sold its water treatment segment, Resources
Conservation Company.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1993 1992 1991
--------- -------- ---------
<S> <C> <C> <C>
Operating Revenues (in thousands) $ 183,752 $ 156,659 $ 126,800
========= ========= =========
</TABLE>
Operating revenues are primarily a function of dayrates and utilization.
The $27.1 million increase in 1993 over 1992 is primarily due to the increased
utilization of the semisubmersible and jack-up fleets.
The $29.9 million increase in 1992 over 1991 is primarily due to the
consolidation of Drilling and the increased utilization of the tender fleet,
offset by decreased utilization of the semisubmersible fleet. Average dayrates
for the Company's drilling units for the years ended December 31, 1993, 1992
and 1991 are shown below by class (in thousands):
<TABLE>
<CAPTION>
Years Ended
Average Dayrates December 31,
-------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Jack-Ups $ 24.6 $ 28.3 $ 26.9
Semisubmersibles 50.5 43.5 38.5
Drilling Tenders 26.9 26.3 27.0
Total Fleet 31.7 31.7 29.0
</TABLE>
Drilling unit utilization measured in terms of the number of days the units
were earning revenues to the total days the units were owned or leased by the
Company (the operating method) for the years ended December 31, 1993, 1992 and
1991 is shown below by class:
<TABLE>
<CAPTION>
Years Ended
Drilling Unit Utilization December 31,
-----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Jack-Ups 84% 71% 89%
Semisubmersibles 80% 64% 76%
Drilling Tenders 100% 100% 18%
Total Fleet 85% 72% 78%
</TABLE>
The utilization trends experienced by the Company are generally consistent
with those experienced by the industry.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operating Expenses (in thousands) $ 117,596 $ 114,010 $ 83,306
========= ========= =========
Operating Expenses as Percentage
of Revenues 64.0% 72.8% 65.7%
===== ===== =====
</TABLE>
Operating expenses as a percentage of revenues decreased by 8.8% in 1993
compared to 1992 due to revenues increasing by 17.3% while operating expenses
increased by 3.1%, primarily due to improved operating leverage, as described
below.
Operating expenses as a percentage of revenues increased by 7.1% in 1992
compared to 1991 primarily due to the consolidation of Drilling and increased
labor costs which were partially offset by a $3.8 million net gain relating to
a crane accident on the "W. D. KENT" drilling tender.
Operating expenses do not necessarily fluctuate in proportion to changes in
operating revenues due to the continuation of personnel on board and equipment
maintenance when the Company's drilling units are stacked. It is only during
prolonged stacked periods that the Company is significantly able to reduce labor
costs and equipment maintenance expense. Additionally, labor costs fluctuate
due to the geographic diversification of the Company's drilling units and the
mix of labor between expatriates and nationals as stipulated in the drilling
contracts. Labor costs have increased in the last three fiscal years primarily
due to higher salary levels, inflation and the decline of the U.S. dollar
relative to certain foreign currencies of countries where the Company operates.
Equipment maintenance expenses fluctuate depending upon the type of activity the
drilling unit is performing and the age and condition of the equipment.
Scheduled maintenance of equipment and overhauls are performed on a basis of
number of hours operated in accordance with the Company's preventive maintenance
program.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Depreciation and Amortization
(in thousands) $ 29,758 $ 32,978 $ 22,200
======== ======== ========
</TABLE>
Depreciation and amortization expense decreased $3.2 million in 1993
compared to 1992 despite an increase in fleet utilization. The decrease is
primarily due to a change in the estimated useful lives of the fourth generation
semisubmersible fleet from an average 16 years to 25 years which resulted in a
decrease in depreciation expense of approximately $6.8 million for the year
ended December 31, 1993. This change was made to reflect the estimated period
during which such assets will remain in service.
Depreciation and amortization expense increased $10.8 million in 1992
compared to 1991 primarily due to the consolidation of Drilling and the
increased utilization of the tender fleet, offset by lower utilization of the
semisubmersible fleet.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
General and Administrative
Expenses (in thousands) $ 18,086 $ 16,834 $ 16,202
======== ======== ========
</TABLE>
General and administrative expenses increased $1.3 million in 1993 compared
to 1992 primarily due to $1.1 million of termination benefits that were incurred
in 1993.
General and administrative expenses increased $.6 million in 1992 compared
to 1991 primarily due to a $2.6 million increase due to the consolidation of
Drilling offset by $3.2 million of termination benefits that were accrued in
1991.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Interest Expense (in thousands) $ 13,818 $ 16,266 $ 17,114
======== ======== ========
</TABLE>
Interest expense decreased $2.4 million in 1993 compared to 1992 primarily
due to the decrease in the average principal debt balance outstanding during
each year as a result of the repayment of scheduled principal payments on the
Company's long-term obligations. Noncash interest expense attributable to
amortization of discount and deferrals associated with the Company's 8% Senior
Subordinated Convertible Debentures due 1998 and the 8% Convertible Subordinated
Debentures due 1995 of Reading & Bates Energy Corporation N.V., a subsidiary of
the Company, for the year ended December 31, 1993 was $3.1 million.
Interest expense decreased $.8 million in 1992 compared to 1991 primarily
as a result of the 1991 Recapitalization. Offsetting this reduction is a $7.5
million increase due to the consolidation of Drilling. Noncash interest expense
attributable to amortization of discount and deferrals associated with the
Company's 8% Senior Subordinated Convertible Debentures due 1998 and the 8%
Convertible Subordinated Debentures due 1995 of Reading & Bates Energy
Corporation N.V., a subsidiary of the Company, for the year ended December 31,
1992 was $2.7 million.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Interest Income (in thousands) $ 2,070 $ 12,935 $ 457
======== ======== ========
</TABLE>
The increase in interest income for 1992 is primarily due to the receipt of
$10.6 million in 1992 of interest on a United States federal income tax refund
and a $2.1 million increase due to the consolidation of Drilling.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1993 1992 1991
------- ------ -------
<S> <C> <C> <C>
Equity in Earnings (Losses) of
Unconsolidated Investees
(in thousands) $ (224) $ 259 $ 2,250
======= ====== ========
</TABLE>
The decrease in equity in earnings from 1991 is due to the inclusion of the
Company's equity in earnings of Drilling and Shipping of $1.5 million in 1991.
The Company began consolidating Drilling's and Shipping's results of operations
as of January 1, 1992.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
Other Income (Expenses),
Net (in thousands) $ (284) $ 4,976 $ (4,862)
======= ======= ========
</TABLE>
For 1992, other, net included a $6.8 million curtailment gain as a result
of the Company modifying its postretirement benefits.
For 1991, other, net included $5.4 million of expenses related to the 1991
Recapitalization offset by a net of $.5 million of other income.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Income Taxes (in thousands) $ 4,008 $ 102 $ 3,208
======= ======= =======
</TABLE>
The reduction in income tax expense for 1992 is primarily due to a $1.9
million United States federal income tax refund received in 1992 and a deferred
income tax benefit of $1.2 million recognized as a result of consolidating
Drilling.
Income tax expense was recognized for the years ended December 31, 1992
and 1991 despite losses from continuing operations before income taxes of $5.3
million and $14.2 million, respectively. These expenses resulted from income
tax expense incurred with respect to certain foreign operations.
The impact of inflation on the Company's operations for the three years
ended December 31, 1993 has not been material.
Item 8. Financial Statements and Supplementary Data
READING & BATES CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have audited the accompanying consolidated balance sheets of Reading &
Bates Corporation (a Delaware corporation) and Subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of operations, cash flows
and stockholders' equity (deficit) for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Reading & Bates
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/Arthur Andersen & Co.
Houston, Texas
February 14, 1994
READING & BATES CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have audited the consolidated statement of operations, cash flows and
stockholders' equity (deficit) of Reading & Bates Corporation and Subsidiaries
for the year ended December 31, 1991. 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Reading & Bates Corporation and Subsidiaries for the year ended December 31,
1991 inconformity with generally accepted accounting principles.
As discussed in Note K to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 106 in 1991.
/s/Coopers & Lybrand
Houston, Texas
March 25, 1992
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1993 and 1992
(dollars in thousands)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 80,385 $ 53,122
Accounts receivable:
Trade, net 36,536 31,645
Other 3,880 3,553
Materials and supplies inventory 8,709 8,153
Other current assets 4,842 4,700
-------- --------
Total current assets 134,352 101,173
-------- --------
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED INVESTEES 212 624
-------- --------
PROPERTY AND EQUIPMENT:
Drilling 746,418 750,058
Other 5,778 5,201
-------- --------
752,196 755,259
Accumulated depreciation and amortization (277,534) (253,867)
-------- --------
Net property and equipment 474,662 501,392
-------- --------
EXCESS COSTS OVER NET ASSETS ACQUIRED - 8,904
-------- --------
DEFERRED CHARGES AND OTHER ASSETS 3,248 2,535
-------- --------
TOTAL ASSETS $612,474 $614,628
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1993 and 1992
(dollars in thousands)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations $ 2,735 $ 13,482
Long-term obligations due within one year 20,234 28,234
Accounts payable - trade 7,656 4,697
Accrued liabilities 21,066 22,390
Income taxes 4,931 4,737
-------- --------
Total current liabilities 56,622 73,540
LONG-TERM OBLIGATIONS 96,562 115,151
OTHER NONCURRENT LIABILITIES 68,433 70,607
DEFERRED INCOME TAXES 2,807 2,419
-------- --------
Total liabilities 224,424 261,717
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 68,507 107,488
-------- --------
STOCKHOLDERS' EQUITY:
$1.625 convertible preferred stock, $1.00 par value:
Authorized 2,990,000 shares, issued and
outstanding 2,990,000 shares at December 31,
1993 (liquidation preference, $74,750) 2,990 -
Common stock, $.05 par value:
Authorized 425,000,000 shares, issued and
outstanding 55,488,588 shares at December 31,
1993, 55,501,905 at December 31, 1992 2,774 2,775
Capital in excess of par value 312,916 244,654
Retained earnings (deficit) from March 31, 1991
(deficit of $108,056 as of March 31, 1991
eliminated in quasi-reorganization) 2,021 (583)
Other (1,158) (1,423)
-------- --------
Total stockholders' equity 319,543 245,423
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $612,474 $614,628
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES $183,752 $156,659 $126,800
-------- -------- --------
COSTS AND EXPENSES:
Operating expenses 117,596 114,010 83,306
Depreciation and amortization 29,758 32,978 22,200
General and administrative 18,086 16,834 16,202
-------- -------- --------
165,440 163,822 121,708
-------- -------- --------
OPERATING INCOME (LOSS) 18,312 (7,163) 5,092
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (13,818) (16,266) (17,114)
Interest income 2,070 12,935 457
Equity in earnings (losses) of
unconsolidated investees (224) 259 2,250
Other, net (284) 4,976 (4,862)
-------- -------- --------
(12,256) 1,904 (19,269)
INCOME (LOSS) FROM CONTINUING OPERATIONS -------- -------- --------
BEFORE INCOME TAX EXPENSE, MINORITY
INTEREST, EXTRAORDINARY GAIN AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 6,056 (5,259) (14,177)
INCOME TAX EXPENSE 4,008 102 3,208
MINORITY INTEREST INCOME (EXPENSE) 2,608 8,763 -
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY GAIN AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4,656 3,402 (17,385)
-------- -------- --------
DISCONTINUED OPERATIONS LESS APPLICABLE
INCOME TAXES:
Loss from operations - - (1,090)
Gain on disposal - - 3,246
-------- -------- --------
- - 2,156
-------- -------- --------
EXTRAORDINARY GAIN - - 3,725
-------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - (18,860)
-------- -------- --------
NET INCOME (LOSS) 4,656 3,402 (30,364)
DIVIDENDS ON PREFERRED STOCK 2,052 - -
ACCRETION IN REDEMPTION PRICE OF
REDEEMABLE STOCKS - 5,275 1,862
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ 2,604 $ (1,873) $(32,226)
======== ======== ========
EARNINGS (LOSS) PER SHARE:
Continuing operations $ .05 $ (.04) $ (.51)
Discontinuing operations - - .06
Extraordinary gain - - .10
Cumulative effect of change
in accounting principle - - (.50)
-------- -------- --------
NET INCOME (LOSS) PER SHARE $ .05 $ (.04) $ (.85)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,656 $ 3,402 $(30,364)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 29,758 32,978 22,200
(Gain) loss on dispositions of
property and equipment (1,900) (4,326) 172
Recognition of deferred expenses 2,654 2,147 844
Equity in (earnings) losses of
unconsolidated investees 224 (259) (2,250)
Postretirement benefits curtailment gain - (6,769) -
Minority interest in loss of
consolidated subsidiaries (2,608) (8,763) -
Income from discontinued operations - - (2,156)
Cumulative effect of change
in accounting principle - - 18,860
Changes in assets and liabilities:
Accounts receivable (3,828) 10,867 (11,480)
Materials and supplies inventory (556) 1,405 (1,052)
Deferred charges and other assets (3,509) 1,551 (2,382)
Accounts payable - trade 2,959 (313) (185)
Accrued interest 3,418 3,189 9,785
Accrued lease expense (5,014) 3,500 5,762
Income taxes 194 (1,616) (652)
Deferred income taxes 388 (1,668) 684
Other, net (292) 2,247 (3,397)
-------- -------- --------
Net cash provided by operating activities 26,544 37,572 4,389
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 1,088 28,311 1,122
Capital expenditures (10,149) (13,809) (16,566)
Decrease (increase) in investments
in and advances to unconsolidated
investees 187 286 (63,379)
Business acquisitions (20,558) 32,332 -
-------- -------- --------
Net cash provided by (used in)
investing activities (29,432) 47,120 (78,823)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds from
short-term obligations (10,747) (23,059) 36,541
Proceeds from long-term obligations 11,624 - 31,183
Net proceeds from issuance of
preferred stock 71,184 - -
Net proceeds from issuance of
redeemable stocks - - 26,243
Net proceeds from issuance of
Common Stock - 38,064 -
Principal payments on long-term
obligations (39,858) (11,734) (34,351)
Dividends paid on preferred stock (2,052) - -
Repurchase and retirement of
redeemable and common stocks - (35,749) -
-------- -------- --------
Net cash provided by (used in)
financing activities 30,151 (32,478) 59,616
-------- -------- --------
CASH PROVIDED BY DISCONTINUED
OPERATIONS - - 8,610
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 27,263 52,214 (6,208)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 53,122 908 7,116
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 80,385 $ 53,122 $ 908
======== ======== =========
Supplemental Cash Flow Disclosures:
Interest paid $ 10,649 $ 14,035 $ 7,329
Income taxes paid $ 3,648 $ 4,741 $ 3,255
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
READING & BATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Preferred Stocks
-----------------------------------
Redeemable Convertible
--------------- ---------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balances at December 31, 1990 - $ - - $ -
Net loss
Quasi-reorganization and
recapitalization adjustments
SERP Settlement
Private placement 7 12,000
Accretion of redeemable stocks 823
Activity in Company stock plans
Conversion of debentures
Conversion of Class B Stock
Other (28)
---- ------- ----- -----
Balances at December 31, 1991 7 12,795
Net income
Public offering
Accretion of redeemable stocks 1,097
Conversion of redeemable stock (7) (13,892)
Repurchase of redeemable stock
Activity in Company stock plans
Other
---- ------- ------ ------
Balances at December 31, 1992 - - - -
Net income
Public offering 2,990 2,990
Dividends paid on preferred stock
Conversion of debentures
Activity in Company stock plans
Additional minimum liability
Other
---- ------- ----- ------
Balances at December 31, 1993 - $ - 2,990 $2,990
==== ======= ===== ======
</TABLE>
Page 2
<TABLE>
<CAPTION>
Common Stocks
----------------------------------------------
Subject to
Redemption Common Class B
---------------- -------------- -------------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1990 - $ - 5,091 $ 255 12,300 $ 615
Net loss
Quasi-reorganization and
recapitalization adjustments 41,603 2,080 (9,902) (495)
SERP Settlement 272 14
Private placement 1,731 15,150
Accretion of redeemable stocks 1,039
Activity in Company stock plans
Conversion of debentures 37 2
Conversion of Class B Stock 479 23 (2,398) (120)
Other (879)
----- ------- ------ ------ ------ ----
Balances at December 31, 1991 1,731 15,310 47,482 2,374 - -
Net income
Public Offering 8,000 400
Accretion of redeemable stocks 4,178
Conversion of redeemable stock 1,371 13,892
Repurchase of redeemable stock (3,102) (33,380)
Activity in Company stock plans 300 15
Other (280) (14)
----- ------- ------ ------ ------- ----
Balances at December 31, 1992 - - 55,502 2,775 - -
Net income
Public offering
Dividends paid on preferred stock
Conversion of debentures
Activity in Company stock plans 34 2
Additional minimum liability
Other (47) (3)
----- ------- ------ ------ ------ ----
Balances at December 31, 1993 - $ - 55,489 $2,774 - $ -
===== ======= ====== ====== ====== ====
</TABLE>
Page 3
<TABLE>
<CAPTION>
Capital in Retained
Excess of Earnings
Par Value (Deficit) Other
--------- --------- --------
<S> <C> <C> <C>
Balances at December 31, 1990 $ 48,458 $ (74,540) $ (66)
Net loss (30,364)
Quasi-reorganization and
recapitalization adjustments 156,008 108,056
SERP Settlement 2,367
Private placement
Accretion of redeemable stocks (1,862)
Activity in Company stock plans 66
Conversion of debentures 530
Converstion of Class B Stock 97
Other (708)
--------- --------- --------
Balances at December 31, 1991 206,752 1,290 -
Net income 3,402
Public Offering 37,663
Acretion of redeemable stocks (5,275)
Conversion of redeemable stock
Repurchase of redeemable stock
Activity in Company stock plans 2,645 (1,423)
Other (2,406)
--------- --------- --------
Balances at December 31, 1992 244,654 (583) (1,423)
Net income 4,656
Public offering 68,194
Dividends paid on preferred stock (2,052)
Conversion of debentures 3
Activity in Company stock plans 754 848
Additional minimum liability (583)
Other (689)
--------- --------- --------
Balances at December 31, 1993 $ 312,916 $ 2,021 $ (1,158)
========= ========= ========
</TABLE>
The accompanying notes are an interal part of the consolidated financial
statement
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the
accounts of Reading & Bates Corporation ("Reading & Bates") and its
subsidiaries, including Arcade Shipping AS ("Shipping") and Arcade Drilling
AS ("Drilling") (collectively, the "Company"). All significant intercompany
accounts and transactions have been eliminated.
In 1992, Reading & Bates acquired control of Shipping and Drilling, former-
ly unconsolidated investees. As a result, effective with the first quarter
of 1992, Reading & Bates began to consolidate the accounts of the drilling
operations of Shipping and Drilling into its consolidated financial statements.
At December 31, 1993, Reading & Bates owned approximately 82.6% of the
outstanding stock entitled to vote of Shipping and approximately 21.4% of the
outstanding stock of Drilling. Shipping owns approximately 46.2% of the
outstanding stock of Drilling (see Note G).
CASH AND CASH EQUIVALENTS - The Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash and cash equivalents. At December 31, 1993, $23.6 million of the
cash and cash equivalents balance related to Drilling. Such cash and cash
equivalents balance is available to Drilling for all purposes subject to certain
debt covenants under a credit facility provided by The Chase Manhattan Bank,
N.A. which require the maintenance of a minimum of $10 million in liquid
assets and, under certain circumstances, prohibit Drilling from paying
dividends or granting loans (including to the Company). Financing activities
associated with the 1991 Recapitalization (see Notes B and C) and revolving
credit agreements are presented on a net basis in the Consolidated Statement of
Cash Flows.
MATERIALS AND SUPPLIES INVENTORY - Materials and supplies
are stated at the lower of average cost or market.
INVESTMENTS AND ADVANCES - The Company uses the equity
method of accounting for earnings (losses) of unconsolidated investees.
PROPERTY AND EQUIPMENT - Property and equipment are
recorded at historical cost as adjusted at August 31, 1989 in the quasi-
reorganization. Reading & Bates' drilling units are depreciated under the
units-of-production method. Drilling's drilling units are depreciated under the
straight-line method. Estimated useful lives for drilling equipment range from
three to twenty-five years. Gain (loss) on disposal of properties is credited
(charged) to income. Effective January 1, 1993, the Company changed its
estimate of the useful lives of its fourth generation semisubmersible fleet from
an average of 16 years to 25 years. This change was made to reflect the
estimated period during which such assets will remain in service. For the year
ended December 31, 1993, the change had the effect of reducing depreciation
expense by approximately $6.8 million and increasing net income by
approximately $6.8 million or $.12 per share.
EXCESS COSTS OVER NET ASSETS ACQUIRED - Excess costs
over net assets acquired represented the cost of the Shipping and Drilling
acquisitions exceeding the values assigned to their net tangible assets and was
being amortized on a straight-line basis over 20 years. At December 31,
1992, accumulated amortization was $.5 million. Excess costs over net assets
acquired has been eliminated primarily as a result of the Company purchasing
shares of Shipping and Drilling at a lower average cost per share than their
net book value per share.
INCOME TAXES - Deferred income taxes are recognized for revenues
and expenses reported in different years for financial statement purposes and
income tax purposes. In accordance with Statement of Financial Accounting
Standards No. 96, Accounting for Income Taxes, the Company changed its
method of accounting for income taxes effective January 1, 1991. The
cumulative effect of the accounting change at January 1, 1991 was not
material. In February 1992, Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("SFAS 109") was issued and supersedes
substantially all existing income tax pronouncements. The Company adopted
SFAS 109 effective January 1, 1993. The cumulative effect of the accounting
change at January 1, 1993 was not material to the Company's consolidated
results of operations or financial position.
REVENUE RECOGNITION - Revenues from drilling contracts are
recognized as they are earned. Proceeds associated with the early termination
of a contract for a drilling unit are recorded as deferred income and
recognized as drilling contract revenues over the remaining term of the
contract or until such time as the drilling unit begins a new contract. There
were no such amounts deferred at December 31, 1993 or 1992.
CAPITALIZED INTEREST - The Company capitalizes interest
applicable to the construction of assets. No interest was capitalized during
1993 or 1992.
FOREIGN CURRENCY TRANSACTIONS - The Company may enter
into forward exchange contracts to hedge various commitments and anticipated
transactions. The net gains and losses resulting from these and other foreign
currency transactions included in determining income amounted to a net gain
of $.1 million in 1993, a net loss of $1.2 million in 1992 and a net loss of $.2
million in 1991.
EXTRAORDINARY GAIN - In June 1991, the Company received
$3.7 million for the settlement of a claim filed by a subsidiary of the Company
against the National Iranian Oil Company pertaining to seven land rigs which
were located in Iran. The settlement has been accounted for as an
extraordinary gain in the Consolidated Statement of Operations.
EARNINGS (LOSS) PER SHARE - Net income (loss) per share is
computed by dividing net income (loss) applicable to common stockholders by
the weighted average number of common shares outstanding during the year.
Net income (loss) applicable to common stockholders has been adjusted for
dividends on preferred stock and accretion in redemption price of redeemable
stocks. The effects of common equivalent shares were antidilutive and,
accordingly, no adjustment was made for these common equivalent shares.
Common shares and per share amounts for all periods presented have been
adjusted to reflect the one-for-five reverse stock split on October 2, 1992. The
computation of fully diluted earnings per share is not presented as the results
are antidilutive.
CONCENTRATION OF CREDIT RISK - The Company maintains
cash balances with commercial banks throughout the world. The Company
also invests in commercial paper of companies with strong credit ratings, in
interest-bearing deposits with major banks and in U.S. government backed
securities. These investments generally mature within three months and,
therefore, bear minimal risk. At December 31, 1993, the Company had
investments in commercial paper of one company, certificates of deposit with
three banks and an investment in U.S. government backed securities. At
December 31, 1992, the Company had investments in certificates of deposit
with three banks. The Company has not incurred any material losses related
to these investments in either 1993 or 1992.
The Company's revenues were generated primarily from its eighteen
drilling units. Revenues can be generated from a small number of customers
which are primarily major U.S. oil and gas companies or their subsidiaries and
foreign government-owned oil and gas companies. The Company performs
ongoing credit evaluations of its customers' financial conditions and generally
requires no collateral from its customers. The Company's allowance for
doubtful accounts was $373,000 and $308,000 at December 31, 1993 and
1992, respectively.
INDUSTRY CONDITIONS - Results of operations and financial
condition of the Company should be considered in light of the significant
fluctuations in demand experienced by drilling contractors as rapid changes in
oil and gas producers' expectations, budgets and drilling plans occur. These
fluctuations can rapidly impact the Company's results of operations and
financial condition as supply and demand factors directly affect utilization and
dayrates, which are the primary determinants of cash flow from the
Company's operations.
LIQUIDITY - As of December 31, 1993, the Company's total
consolidated cash and cash equivalents were $80.4 million. Of this amount,
approximately $23.6 million is restricted from the Company's use outside of
Drilling. The Company's management currently expects that its cash flow
from operations, in combination with cash on hand, will be sufficient to satisfy
the Company's 1994 working capital needs, dividends on preferred stock,
planned investments, capital expenditures, debt, lease and other obligations.
NONCASH INVESTING AND FINANCING ACTIVITIES - Noncash activities in
1991 associated with the Company's 1991 Recapitalization and related
quasi-reorganization are discussed in Notes B and C.
(B) RECAPITALIZATION
The Company's plan of recapitalization (the "1991 Recapitalization")
was approved by the stockholders at a special meeting held on March 26,
1991, and the 1991 Recapitalization was closed on March 29, 1991. As a
result of the 1991 Recapitalization, approximately 39.6 million shares of
Common Stock and approximately $76.2 million in newly issued senior
secured obligations were issued to replace the approximately $364.6 million in
obligations issued under the Master Restructuring Agreement in the Company's
1989 restructuring that were outstanding on March 28, 1991. A $50 million
contingent obligation under the Master Restructuring Agreement was
eliminated. The new senior secured obligations consisted of a note for
approximately $31.2 million and $45 million in lease obligations. The
$31.2 million note was issued to ING Bank under a newly established credit
facility (the "ING Facility") whereby the proceeds of the new loan were used
to pay cash in such amount to certain creditors. The $45 million in
collateralized lease rental obligations resulting from amendments to long-term
operating leases for two of the Company's offshore drilling units (the
"Continuing Leases") continue to be classified as operating leases. Certain
interests of the lease parties in the Continuing Leases were assigned to ING
Bank during the second quarter of 1991. Substantially all of the Company's
assets that do not serve as collateral for other obligations of the Company
collateralize the Company's obligations resulting from the 1991
Recapitalization.
The debt incurred under the ING Facility together with the restructured
obligations under the Continuing Leases, totalling $76.2 million, represented
all of the Company's long-term obligations as of March 29, 1991, other than
$33.7 million in face amount of obligations on the Company's 8% Senior
Subordinated Convertible Debentures due 1998 and the Company's 8%
Convertible Subordinated Debentures due 1995 and $21.5 million of other
long-term obligations.
Assuming the 1991 Recapitalization had occurred at the beginning of
the year, January 1, 1991, the net loss per share for 1991 would have been
$.49 per share.
(C) QUASI-REORGANIZATION
The 1991 Recapitalization was accounted for as a quasi-reorganization.
In accordance with quasi-reorganization accounting principles, the Company
adjusted certain debt obligations and transferred the accumulated deficit to
"Capital in excess of par value" as of March 31, 1991. Following is a
summary of significant adjustments resulting from the 1991 Recapitalization
and quasi-reorganization accounting (in thousands):
<TABLE>
<CAPTION>
Capital in
Common Class B Excess of Accumulated
Stock Stock Par Value Deficit
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
Adjustments:
Restructuring of debt and
lease obligations $ 2,080 $ (495) $ 267,488 $ -
Decrease in debentures
discount rate - - (3,424) -
Elimination of accumulated
deficit - - (108,056) 108,056
--------- ----- --------- ---------
Net adjustments 2,080 (495) 156,008 108,056
Balance before adjustments 280 495 49,025 (108,056)
--------- ----- --------- ---------
Balance after adjustments $ 2,360 $ - $ 205,033 $ -
========= ====== ========= =========
</TABLE>
(D) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1993 and 1992 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Bank Obligations:
ING Bank <F1> $ 22,500 $ 30,000
Chase Manhattan <F2> 61,500 78,500
Variable rate note payable <F3> 6,750 9,750
8% Senior Subordinated Convertible Debentures due
December 1998 ("New Debentures") <F4> 7,947 7,086
8% Convertible Subordinated Debentures due December
1995 ("Old Debentures") <F4> 13,116 12,332
Notes payable <F5> 4,983 5,717
--------- ---------
Total 116,796 143,385
Less long-term obligations due within one year (20,234) (28,234)
--------- ---------
Long-term obligations $ 96,562 $ 115,151
========= =========
<FN>
<F1> The amended payment terms of Facility A of the ING Facility with
ING Bank provide for repayment of principal in eight equal
semiannual installments which commenced on June 30, 1993 and
interest payments at a varying rate equal to the London Interbank
Offered Rate ("LIBOR")(3.5% at December 31, 1993) plus 1.5%.
The terms of the ING Facility require the Company to meet certain
covenants including, among others, maintaining minimum levels of
consolidated tangible net worth and current ratios, and a minimum
ratio level of earnings to interest expense and lease rentals and
maintaining a level of consolidated indebtedness below a certain
maximum. It is also an event of default under the ING Facility if
there should occur a material adverse change in the financial or
business condition of the Company or certain of its subsidiaries. The
ING Facility is collateralized by vessel mortgages on eleven of the
drilling units owned by the Company, related assignments of
insurance and drilling contracts, receivables and the shares of stock of
the principal subsidiaries of the Company. Pursuant to the
Company's request in 1992 ING Bank agreed, upon payment of a fee
of $.5 million by the Company, to amend the ING Facility and
certain long-term operating leases with respect to the Continuing
Leases as follows: (i) to defer the principal installments on Facility
A of $3 million each, and the principal elements of the lease
payments under the Continuing Leases of approximately $3.7 million
each, that would otherwise have been due in June and December of
1992, such principal installments and principal lease elements to be
added, on a pro-rata basis, to the remaining principal installments of
Facility A under the ING Facility and principal elements of the
Continuing Leases, respectively, and (ii) to reduce the net worth
covenant to $200 million at December 31, 1992 and to $225 million
at December 31, 1993 and $250 million thereafter.
<F2> The payment terms of this bank obligation of Drilling provide for
repayment of principal in nineteen semiannual installments which
commenced in August 1991. Drilling has also entered into an interest
rate swap agreement, which is combined with the bank credit facility
for payment purposes (as set forth below). The fair value at
December 31, 1993 of the interest rate swap is estimated to be $5.5
million which represents the estimated amount Drilling would pay to
terminate the agreement, taking into consideration current interest
rates as quoted from the parties to the agreement. The principal
amount of the loan, when combined with the swap agreement, bears
interest at a rate of 10.69% on $42.1 million at December 31, 1993,
such amount reducing on a semiannual basis to $30.6 million in 1996,
and at LIBOR (3.5% at December 31, 1993) plus 1.75% on the
remaining balance and is collateralized by the drilling units "HENRY
GOODRICH" and "SONAT ARCADE FRONTIER", related
assignments of insurance and drilling contracts, and receivables. The
loan agreement requires Drilling to meet certain financial conditions
including, among others, minimum current ratio levels, liquid assets
and a ratio of operating cash flow to interest charges and maintaining
a ratio level of total liabilities to tangible net worth below a certain
maximum. It is also an event of default should circumstances arise
which give reasonable grounds in the opinion of the bank syndicate
for the belief that Drilling may not (or may be unable to) perform or
comply with its obligation. Pursuant to a series of waivers, for the
period from May 1, 1992, to May 1, 1993, the bank syndicate
waived the requirement that Drilling comply with the actual operating
cash flow ratio covenant. For the period from January 1, 1992, to
April 30, 1993, the bank syndicate waived the requirement that
Drilling comply with the projected operating cash flow ratio
covenant. In connection with the most recent waiver, Drilling was
required to (i) pay a fee to the bank syndicate of approximately $.1
million due on April 30, 1993 and (ii) obtain a letter of intent or
contract from certain Norwegian operations for the "SONAT
ARCADE FRONTIER" by April 30, 1993 or prepay the last two
semiannual installments (totalling $8 million), in which latter case
the interest rate would increase to LIBOR plus 1.875% for the
remainder of the loan. As of March 17, 1993, Drilling had entered
into a contract for the drilling rig but not one specified by the bank
syndicate, the $8 million prepayment was reclassified from long-term
to current in anticipation of a possible prepayment request. Such
prepayment was made on April 30, 1993 and the interest rate has
since been increased. Since May 1, 1993, Drilling has not requested any
additional waivers.
<F3> The variable rate note payable bears interest at the prime rate (6% at
December 31, 1993) plus 1% and is payable in twenty equal quarterly
installments from June 1991 through March 1996. The note is
collateralized by a drilling unit and by a $5 million letter of credit.
The loan agreement limits the payment of dividends and the creation
of additional indebtedness (of one of the Company's subsidiaries) and
requires the maintenance of certain levels of working capital and net
worth. An event of default shall occur should there be a material
adverse change in the financial or business condition of the Company
or one of its subsidiaries.
<F4> The Old Debentures are convertible into the Company's Common
Stock at $900 per share. The New Debentures are convertible into
the Company's Common Stock at $37.035 per share. The accrued
interest expense associated with the Old Debentures was $100,000 at
December 31, 1993 and 1992. Long-term accrued interest associated
with the New Debentures at December 31, 1993 and 1992, was
$8,930,000 and $7,443,000, respectively. The New Debentures were
recorded at, and the remaining Old Debentures were adjusted to,
amounts equal to the net present value of their respective future cash
payments required, discounted at 15%, which is the interest rate the
Company believes it would have been required to pay to obtain
financing of a similar nature from other sources. The face amount of
the Old Debentures and the related unamortized discount at December
31, 1993 totalled $14,995,000 and $1,879,000, respectively. The
face amount of the Old Debentures and the related unamortized
discount at December 31, 1992 totalled $14,995,000 and $2,663,000,
respectively. The face amount of the New Debentures and the related
unamortized discount at December 31, 1993 totalled $18,605,000 and
$10,658,000, respectively. The face amount of the New Debentures
and the related unamortized discount at December 31, 1992 totalled
$18,608,000 and $11,522,000, respectively. During 1993, $3,500
(face amount) of New Debentures plus accrued interest through
December 31, 1992 were converted into 130 shares of the Company's
Common Stock. During 1992, a total of $5,000 (face amount) of
New Debentures plus accrued interest through December 31, 1991
were converted into 178 shares of the Company's Common Stock.
<F5> The Company suspended payments on debt collateralized by bank
letters of credit in 1987 and, as a result, such letters of credit were
drawn and the related obligations and accrued interest were paid.
One such obligation provided for a prepayment penalty of $6,450,000
which was accrued by the Company in 1987. During the first quarter
of 1989, an agreement was reached with the original creditor which
allows the Company, under two notes, to pay interest only on 65% of
the prepayment penalty ("Note 1") through December 1991 and to
repay 70% of the principal of Note 1 in equal quarterly installments
from March 1992 through December 1995 with a final payment due
in March 1997. The remaining 35% ("Note 2") and accrued interest
thereon will be forgiven if all principal and interest payments are
made when due on Note 1, but otherwise will be due in April 1997.
Both notes bear interest at 6.5% until March 29, 1992, and thereafter
at 13.5%. Interest on Note 1 is payable quarterly. The Company
reclassified $6,450,000 from accrued liabilities to long-term
obligations as of March 31, 1989.
</TABLE>
In February 1993, the ING Facility with ING Bank was amended and an
additional credit facility was created ("Facility F") to finance the purchase of
additional shares of Shipping and Drilling. Facility F consisted of revolving
credit and/or stand-by letters of credit that were to be available to the
Company until January 1, 1995, in an amount not to exceed $15.5 million. In
March 1993, the Company received approximately $11.6 million from Facility
F and in July 1993 the Company repaid Facility F from proceeds from a
preferred stock offering (see Note M). In August 1993, ING Bank agreed to
provide a temporary $10 million letter of credit facility, available until June
30, 1997, to cover import duties for drilling equipment in Indonesia. At
December 31, 1993, no amounts had been drawn down by the Company.
Aggregate annual maturities of long-term obligations, excluding the
unamortized discount on the New and Old Debentures, for the five years
ending December 31, 1998 and thereafter are as follows: 1994, $20,234,000;
1995, $36,229,000; 1996, $18,250,000; 1997, $15,015,000; 1998,
$31,605,000 and $8,000,000 thereafter.
(E) SHORT-TERM OBLIGATIONS
Short-term obligations at December 31, 1993 and 1992 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
ING Bank revolving credit facility $ 2,735 $ 13,482
======== ========
</TABLE>
The Company has a $15 million revolving credit facility in the form of
an overdraft account maintained with ING Bank ("Facility C"). A substantial
portion of collections on the Company's receivables is paid into the account
and is applied automatically against any outstanding balance. Facility C is
used primarily for working capital requirements. Overdraft borrowing is
available under Facility C (as amended) through June 1, 1994. Facility C
bears interest at prime (6.00% at December 31, 1993) plus 1.25%. The
amount of unused revolving credit borrowing available under Facility C at
December 31, 1993 was approximately $12.3 million.
(F) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES - At December 31, 1993, the Company
had purchase commitments of $5.3 million for equipment on drilling units.
OPERATING LEASES - Aggregate future minimum rental payments
relating to operating leases for the five years ending December 31, 1998 and
thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 Thereafter
-------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Drilling units $ 15,394 $ 13,662 $ 9,718 $ 10,041 $ - $ -
All other 1,082 954 722 687 687 -
-------- -------- -------- -------- ------- -------
Total $ 16,476 $ 14,616 $ 10,440 $ 10,728 $ 687 $ -
======== ======== ======== ======== ======= =======
</TABLE>
The Continuing Leases expire December 31, 1995, yet payments
continue through December 31, 1997 as a result of the terms negotiated under
the 1991 Recapitalization. The amended payment terms of the Continuing
Leases provide for repayment of principal in nine equal semiannual
installments of $4.4 million which commenced on June 30, 1993, one payment
of $5.2 million on December 31, 1997 and quarterly interest payments at
LIBOR (3.5% at December 31, 1993) plus 1.9375%.
During 1992, the Company entered into a sale/leaseback of the
"SONNY VOSS". Proceeds received of $27.7 million resulted in a gain of
$6.3 million which was deferred and is being amortized over the lease term of
42 months.
Total rent expense for the years ended December 31, 1993, 1992
and 1991 was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Minimum rentals $ 12,655 $ 11,601 $ 9,811
Less sublease rentals - (60) (144)
-------- -------- --------
Net rental expense $ 12,655 $ 11,541 $ 9,667
======== ======== ========
</TABLE>
Certain operating leases contain renewal options and have options to
purchase the asset at fair market value at the end of the lease term.
LITIGATION - The Company is one of the defendants in certain
litigation brought in July 1984 by the Cheyenne-Arapaho Tribes of Oklahoma
in the U.S. District Court for the Western District of Oklahoma, seeking to set
aside two communitization agreements with respect to three leases involving
tribal lands in which the Company previously owned interests and to have
those leases declared expired. In June 1989, the U.S. District Court entered an
interim order in favor of the plaintiffs. On appeal, the U.S. Court of Appeals
for the Tenth Circuit upheld the decision of the trial court and petitions for
rehearing of that decision were denied. Petitions for writs of certiorari filed
by the parties with the U.S. Supreme Court have been denied, and the case has
been remanded to the trial court for determination of damages.
In November 1988, a lawsuit was filed in the U.S. District Court for the
Southern District of West Virginia against Reading & Bates Coal Co., a
wholly owned subsidiary of the Company, by SCW Associates, Inc. claiming
breach of an alleged agreement to purchase the stock of Belva Coal Company,
a wholly owned subsidiary of Reading & Bates Coal Co. with coal properties
in West Virginia. When those coal properties were sold in July 1989 as part
of the disposition of the Company's coal operations, the purchasing joint
venture indemnified Reading & Bates Coal Co. and the Company against any
liability Reading & Bates Coal Co. might incur as the result of this litigation.
A judgment for the plaintiff of $32,000 entered in February 1991 was satisfied
and Reading & Bates Coal Co. was indemnified by the purchasing joint
venture. On October 31, 1990, SCW Associates, Inc., the plaintiff in the
above-referenced action, filed a separate ancillary action in the Circuit Court,
Kanawha County, West Virginia against the Company and a wholly owned
subsidiary of Reading & Bates Coal Co., Caymen Coal, Inc. (former owner of
the Company's West Virginia coal properties), as well as the joint venture,
Mr. William B. Sturgill personally (former President of Reading & Bates Coal
Co.), three other companies in which the Company believes Mr. Sturgill holds
an equity interest, two employees of the joint venture, First National Bank of
Chicago and First Capital Corporation. The lawsuit seeks to recover
compensatory damages of $50 million and punitive damages of $50 million for
alleged tortious interference with the contractual rights of the plaintiff and
to impose a constructive trust on the proceeds of the use and/or sale of the
assets of Caymen Coal, Inc. as they existed on October 15, 1988. The Company
and its indirect subsidiary intend to defend their interests vigorously. The
Company believes the damages alleged by the plaintiff in this action are highly
exaggerated. In any event, the Company believes that it has valid defenses
and that it will prevail in this litigation.
On January 26, 1993, Kerr-McGee Corporation ("Kerr-McGee") filed an
action against the Company and Reading & Bates Drilling Co., a subsidiary of
the Company, in the U.S. District Court, Western District of Louisiana. On
March 23, 1993, the complaint was amended to add Mobil Oil Exploration &
Producing Southeast, Inc. as an additional party plaintiff in this action. In
this action the plaintiffs are seeking to recover an unspecified amount for
damages to a two well platform and related production equipment, facilities and
pipelines, in South Timbalier Island Block 34, allegedly caused by the
Company's semisubmersible drilling unit "JACK BATES" (ex "ZANE
BARNES") after that drilling unit had been set adrift in the Gulf of Mexico by
Hurricane Andrew in August 1992. The Company also has received notice
that Tennessee Gas Pipeline Company has asserted a claim with respect to
damage to a gas riser pipe and related equipment also located at Kerr-McGee's
platform in South Timbalier Island Block 34. On April 8, 1993, Murphy
Exploration & Production Company ("Murphy"), a subsidiary of Murphy Oil
Corporation, filed a similar claim in the U. S. District Court, Eastern District
of Louisiana, with respect to its 12 well platform located in South Timbalier
Island Block 86. The Court has granted the Company's motion to transfer and
has entered an order transferring this case to the U. S. District Court, Western
District of Louisiana. The Murphy action has now been consolidated with the
Kerr-McGee action. The Company and its subsidiary believe they have valid
defenses with respect to the claims asserted and intend to defend their
interests vigorously. In December 1992, the Company provided a $10 million
letter of undertaking from the Company's protection and indemnity association
and a $34 million bond (secured to the extent of approximately $32.3 million by
indemnities from the Company's excess liability underwriters and
approximately $1.7 million by a standby letter of credit issued for account of
the Company) to Kerr-McGee and Murphy to secure their claims and avoid the
attachment of the "JACK BATES" prior to its departure from the United States
for a drilling contract with Agip S.p.A. The Company is not aware of any
other claims that may arise against it as a result of Hurricane Andrew. The
Company believes it has adequate liability insurance to protect the Company
and its subsidiary from any material liability that might result from these
claims.
On April 13, 1993, the All American Marine Slip, acting as managing
general agent on behalf of the lead underwriters on the Company's primary
loss of hire insurance policy, denied the Company's loss of hire claim with
respect to the damages to the "JACK BATES" caused by Hurricane Andrew
amounting to approximately $9.1 million, demanded arbitration under the
policy with respect to the policy coverage dispute and filed an action in the
U.S. District Court, Southern District of New York (the "New York action"),
seeking a declaratory judgment and order compelling the Company to arbitrate
the dispute. On April 16, 1993, the Company filed an action in the U. S.
District Court, Southern District of Texas (the "Texas action"), seeking
compensatory and punitive damages for bad faith and unfair dealing by the All
American Marine Slip under the Texas Insurance Code and Texas Deceptive
Practices Act. On April 23, 1993, the All American Marine Slip amended its
complaint in the New York Action to seek damages for alleged tortious
interference with contract and abuse of process by the Company's having filed
the Texas action. On July 7, 1993, the Company and the All American
Marine Slip agreed to submit all claims in the New York action and the Texas
action to arbitration in New York, preserving all rights of both parties (other
than the right to a jury trial). As a result the New York action and the Texas
action (the latter having been transferred to New York pursuant to court order)
have been placed on the suspense docket pending arbitration. On August 6,
1993, the Company agreed with certain underwriters at Lloyds and ILU
companies, representing 57.5% of the insurers on the Company's primary loss
of hire insurance policy, to settle their respective shares of the Company's
loss of hire claim in exchange for payment to the Company of an aggregate of
approximately $3.4 million. The effect of that settlement leaves the All
American Marine Slip representing lead underwriters with respect to the
remaining 42.5% of the Company's loss of hire claim subject to arbitration.
On December 6, 1993, the arbitration panel entered an interim award that the
Company had proved a valid claim under its loss of hire policy and on
December 30, 1993 entered a final award holding that the amount of the
Company's claim under the policy was $7,296,000 and that the amount owed
by the remaining 42.5% of insurers was $3,100,800, plus interest at the rate
of 6.5% per annum from August 1, 1993 until paid. In its final award the
arbitration panel also held there was no bad faith on the part of the insurers
and that each party bear its own legal costs. The court in the New York
action has entered an order confirming the award and is expected to enter
a judgment shortly.
The Company is involved in these and various other legal actions arising
in the normal course of business. After taking into consideration the
evaluation of such actions by counsel for the Company, management is of the
opinion that the outcome of known claims and litigation will not have a
material adverse effect on the Company's business or consolidated financial
position or results of operations.
EMPLOYMENT CONTRACTS - The Company has committed under employment
contracts to provide two key executives with severance benefits totalling
approximately $3.2 million which vest in September 2003 or earlier if
the executive both reduces his ownership of the Company's common stock
below a specified level and resigns. The Company amortizes the cost of the
severance benefits over the ten year period from September 1993 to September
2003, unless the executive reduces his stock ownership and resigns prior to
September 2003 in which case the unamortized severance cost would be
expended.
LETTERS OF CREDIT - The Company has a $15 million letter of credit
facility obtained in connection with the 1991 Recapitalization. At December
31, 1993 and 1992, $14.3 million and $11.4 million of the facility,
respectively, had been drawn down by the Company. The Company also had
an additional $4.9 million and $1.7 million letter of credit outstanding at
December 31, 1993 and 1992, respectively.
(G)INVESTMENT IN ARCADE
ARCADE ACQUISITION - In June 1991, as part of its strategy of
emphasizing geographic diversification, "fourth generation" semisubmersible
drilling technology and consolidation of the offshore drilling industry, the
Company began acquiring the stock of Shipping and Drilling (the "Arcade
Acquisition"). Both Shipping and Drilling are Norwegian companies listed on
the Oslo Stock Exchange. Drilling owns the "HENRY GOODRICH" and the
"SONAT ARCADE FRONTIER", two fourth generation semisubmersible
drilling units. Shipping has two principal lines of operations, the shipping
operations which includes owning and chartering vessels and the drilling
operations which principally consist of the ownership of approximately 46.2%
of the outstanding stock of Drilling. The Company is pursuing its plan to
dispose of Shipping's shipping operations (see Note I). The Arcade Acquisition
has been funded through a margin loan from Carnegie International Limited, a
private placement of both preferred and common stocks (see Note L), the
Company's working capital and a revolving credit facility from ING Bank.
The Company has obtained majority representation on the board of directors of
both Shipping and Drilling, and Paul B. Loyd, Jr. the Company's Chairman
and Chief Executive Officer, has been elected chairman of each board.
Beginning with the first quarter of 1992, the Company began to consolidate the
accounts of Drilling and Shipping into the consolidated financial statements of
the Company. As of December 31, 1993, the Company had acquired
approximately 82.6% of the outstanding stock of Shipping and directly
acquired approximately 21.4% of the outstanding stock of Drilling, at an
accumulated cost of approximately $88.6 million. In January 1994, the
Company purchased additional shares of Drilling increasing the Company's
direct ownership of Drilling to 21.9%.
<TABLE>
<CAPTION>
1992
---------
<S> <C>
Details of business acquisitions as shown
on the Consolidated Statement of Cash
Flows for the first year of consolidation
were as follows (in thousands):
Fair value of assets acquired $ 285,303
Less liabilities assumed 95,374
Less minority interest 108,458
---------
81,471
Less investments in unconsolidated investees
at December 31, 1991 65,707
---------
Cash paid in during the year ended
December 31, 1992 15,764
Cash acquired 48,096
---------
Net cash acquired from business acquisitions $ 32,332
=========
</TABLE>
The following unaudited pro forma selected financial data for the three
years ended December 31, 1993 show the consolidated data as if the investments,
as of December 31, 1993, in Drilling and Shipping, related financing activities
and the 1991 Recapitalization had occurred on January 1, 1991, (in thousands
except per share amounts):
<TABLE>
<CAPTION>
(unaudited)
Years Ended December 31,
---------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues $ 183,752 $ 156,659 $ 172,795
========= ========= =========
Income (loss) from continuing
operations $ 3,430 $ 1,198 $ (5,038)
========= ========= =========
Net income (loss) $ 3,430 $ 1,198 $ (18,017)
========= ========= =========
Earnings (loss) per share $ .02 $ .02 $ (.33)
========= ========= =========
</TABLE>
(H) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1993 and 1992
were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Lease expense payable $ 8,839 $ 8,839
Accrued expenses - general 8,433 8,133
Workers' compensation 204 1,848
Accrued interest expense 1,329 1,643
Other 2,261 1,927
-------- -------
Total $ 21,066 $ 22,390
======== ========
</TABLE>
The components of "OTHER NONCURRENT LIABILITIES" at
December 31, 1993 and 1992 were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Long-term operating lease obligation $ 19,558 $ 24,572
Postretirement benefit obligations 15,256 15,227
Pension obligations 9,382 9,918
Accrued interest expense related to
the New Debentures 8,930 7,443
Net liabilities associated with
discontinued operations 11,177 7,819
Deferred Income 3,072 4,844
Other 1,058 784
-------- --------
Total $ 68,433 $ 70,607
======== ========
</TABLE>
(I) DISCONTINUED OPERATIONS
SHIPPING - As discussed in Note G, the Company began to consolidate the
accounts of Shipping's continuing operations and Drilling in the first quarter
of 1992. Shipping is engaged in two principal business segments, shipping
operations and drilling operations. The Company is pursuing its plan to dispose
of Shipping's shipping operations. Shipping's assets held for sale at December
31, 1993, consisting of vessels, tankers and chartering contracts, were $55.3
million and related liabilities totalled $59.5 million, including $37.1 million
of long-term obligations and a $17.3 million reserve for losses on ultimate
disposal and operations until disposal. Accordingly, the net position of the
shipping operations in the accompanying balance sheet at December 31, 1993 and
1992 was $4.2 million and $.9 million, respectively. Operating revenues and net
loss of discontinued operations not included in the Consolidated Statement of
Operations for the year ended December 31, 1993 were $14.8 million and $4.6
million, respectively. Operating revenues and net loss of discontinued
operations not included in the Consolidated Statement of Operations for the year
ended December 31, 1992 were $34.1 million and $3.2 million, respectively.
WATER TREATMENT - On August 30, 1991, the Company sold all of
the stock of its wholly owned subsidiary Resources Conservation Company
("RCC"), the water treatment segment of its business, for a sales price of $9.7
million. As a result of the sale, the Company recorded a gain of $3.2 million
which is included in discontinued operations. The results of operations of RCC
have been reclassified in the accompanying consolidated financial statements as
discontinued operations.
For the year ended December 31, 1991, income from discontinued
operations consisted of the following (in thousands):
<TABLE>
<CAPTION>
1991
--------
<S> <C>
Revenues $ 10,451
========
Loss from operations before
income tax expense $ (1,089)
Income tax expense (1)
--------
Loss from operations (1,090)
Gain on disposal (no income tax effect) 3,246
--------
Income from discontinued operations $ 2,156
========
</TABLE>
(J) INCOME TAXES
The Company's consolidated federal tax returns for the tax years from
September 30, 1974 to December 31, 1981 have been examined by the Internal
Revenue Service (the "IRS"). A settlement agreement between the Company and
the IRS for those tax years provided the Company with a tax refund of
approximately $3.6 million plus related interest of approximately $10.6 million.
The Company received cash of $14.2 million and as a result recognized interest
income and income tax benefits of $12.5 million in the third quarter of 1992.
Income taxes for the years ended December 31, 1993, 1992 and 1991
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Current:
Foreign $ 3,620 $ 3,707 $ 2,524
State - - -
Federal - (1,937) -
------- ------- -------
Total current 3,620 1,770 2,524
Deferred 388 (1,668) 684
------- ------- -------
Total $ 4,008 $ 102 $ 3,208
======= ======= =======
</TABLE>
Components of loss before income taxes for the years ended December
31, 1993, 1992 and 1991 were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Continuing operations:
Domestic $(22,056) $ (6,824) $(31,303)
Foreign 28,112 1,565 17,126
-------- -------- --------
Total continuing operations 6,056 (5,259) (14,177)
-------- -------- --------
Discontinued operations:
Domestic - - 2,156
Foreign - - -
-------- -------- --------
Total discontinued operations - - 2,156
-------- -------- --------
Total $ 6,056 $ (5,259) $(12,021)
======== ======== ========
</TABLE>
The effective tax rate, as computed on income before taxes and including
discontinued operations, differs from the statutory U.S. income tax rate for
the years ended December 31, 1993, 1992 and 1991 due to the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35 % 34 % (34)%
Limitation on recognition
of tax benefits (35) (34) 34
State tax expense - - -
U.S. federal refund - (37) -
Foreign tax expense 60 48 21
Other 6 (9) 6
---- ---- ----
Effective rate 66 % 2 % 27 %
==== ==== ====
</TABLE>
Income taxes of $4,008,000, $102,000 and $3,208,000 were recognized in
1993, 1992 and 1991, respectively, despite losses from continuing operations
before income taxes. The expense resulted primarily from income tax expense
incurred with respect to certain foreign operations. The Company was limited in
utilization of tax benefits from investment tax credits prior to 1986 and
operating losses in 1993, 1992 and 1991.
Deferred income taxes result from those transactions which affect financial
and taxable income in different years. The nature of these transactions (all of
which were long-term) and the income tax effect of each as of December 31,
1993 and 1992 was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Deferred tax liability - depreciation $ 85,178 $ 83,035
-------- --------
Deferred tax assets:
Rig leases (31,802) (37,160)
Postretirement benefits (7,193) (5,002)
Net operating loss carryforwards (57,004) (45,620)
Valuation allowance 13,740 7,169
Other (112) (3)
-------- --------
Total deferred tax assets (82,371) (80,616)
-------- --------
Net deferred tax liability $ 2,807 $ 2,419
======== ========
</TABLE>
Valuation allowance is necessary to reflect the anticipated expiration of
net operating loss carryforwards prior to their utilization.
The 1991 Recapitalization resulted in an ownership change for federal
income tax purposes. As a result of this ownership change, the amount of net
operating loss and other tax attribute carryforwards generated prior to the
ownership change which may be utilized to offset federal taxable income is
limited by the Internal Revenue Code to approximately $2.7 million annually.
Net tax operating losses of $13,615,000 arising in 1991 subsequent to the
ownership change are not subject to this limitation. Any tax benefits due to
the utilization of carryforwards which were generated prior to the 1991
Recapitalization will be reported as a credit to "Capital in excess of par
value".
(K) 1991 CHANGE IN ACCOUNTING PRINCIPLE
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees. The Company's
employees may become eligible for these benefits if they reach normal or early
retirement age while working for the Company and if they have accumulated
fifteen years of service. Health care costs are paid as they are incurred. Life
insurance benefits are provided through an insurance company whose premiums
are based on benefits paid during the year. The Company's policy had been to
expense retiree health care costs as they were incurred. Effective January 1,
1991, the Company adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions
("SFAS 106"). The statement requires employers to recognize the cost of
providing postretirement benefits to employees over the employees' service
periods. The Company elected to expense the entire "Accumulated Projected
Benefit Obligation" at January 1, 1991, of $18,860,000, or $.50 per share as
shown separately in the Consolidated Statement of Operations under "Cumulative
effect of change in accounting principle".
Effective April 1, 1992, the Company modified its postretirement benefits.
The effect of these modifications significantly reduced the Company's
postretirement benefit costs and accumulated benefit obligation, and resulted in
a $6.8 million curtailment gain recognized in the Company's results of
operations (included in Other, net) for the year ended December 31, 1992
primarily due to the change in attribution period. Other modifications include
employee cost-sharing through increases in deductibles and out-of-pocket limits
and increased service period requirements.
Postretirement benefit costs for the years ended December 31, 1993 and
1992 included the following (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- -------
<S> <C> <C>
Service cost - benefits earned during the year $ 258 $ 312
Interest cost on projected benefit obligations 1,128 998
Amortization (benefit) cost -
Accumulated Projected Benefit Obligation (728) (743)
-------- -------
Total postretirement benefit costs $ 658 $ 567
======== =======
</TABLE>
The health care cost trend rates used to measure the expected cost in 1994
for medical, dental and vision benefits were 12%, 8% and 6%, respectively, each
graded down to an ultimate trend rate of 5.5% to be achieved in the year 2021.
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation was 7.5% and 4.5%, respectively. The effect of a one-percentage-
point increase in health care cost trend rates for future periods would increase
the service cost and interest cost portion of net periodic postretirement
benefit cost approximately 15.4%. The accumulated postretirement benefit
obligation would increase by approximately 15%.
The amounts recognized in the Company's Consolidated Balance Sheet at
December 31, 1993 and 1992 was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- ---------
<S> <C> <C>
Plan assets at fair value $ - $ -
Accumulated postretirement benefit obligation:
Retirees 12,940 7,640
Actives eligible for retirement 726 350
Other actives 3,333 1,274
Unrecognized prior service cost 4,911 5,859
Unrecognized cumulative net (loss) gain (5,080) 649
Other (986) -
-------- --------
Postretirement benefit liability recognized
in the Consolidated Balance Sheet $ 15,844 $ 15,772
======== ========
</TABLE>
(L) PRIVATE PLACEMENT
In September 1991, the Company effected a private placement of
approximately 1.7 million shares of Common Stock Subject to Redemption and
approximately 6,857 shares of a new class of preferred stock (10,000 shares
authorized) (the "Redeemable Preferred Stock") pursuant to which the Company
raised proceeds of approximately $27.1 million in cash. The proceeds were
utilized to fund a portion of the Arcade Acquisition (see Note G). Each share
of the Redeemable Preferred Stock was convertible into 200 shares of Common
Stock, was entitled to dividend rights equal to those of the common shares into
which it was convertible and had one vote per share. The private placement was
effected at a price of $8.75 per share of Common Stock Subject to Redemption
and $1,750 per share of Redeemable Preferred Stock. In June 1992, each share
of the Redeemable Preferred Stock (6,857.143 shares) was converted into 200
shares of Common Stock Subject to Redemption (1,371,428 shares). Pursuant to
the Subscription Agreements entered into in connection with the private
placement, as amended (the "Subscription Agreements"), the Company had
agreed to use its best efforts to cause a registration statement with respect to
Common Stock Subject to Redemption, including shares to be issued upon the
conversion of the Redeemable Preferred Stock (the "Private Placement Shares")
to become effective under the federal securities laws no later than May 29, 1992
and had guaranteed that any selling holder of Private Placement Shares would
receive a specified minimum net share price on resale. In October 1992, without
registering the Private Placement Shares, the Company entered into agreements
with the holders of the Private Placement Shares that superseded the provisions
of the Subscription Agreements under which the Company would repurchase all of
such shares at $11.05 per share. All of the outstanding Private Placement
Shares were repurchased by the Company in the fourth quarter of 1992 with
approximately $34.3 million of the proceeds from a public offering of common
stock (see Note M). The carrying value of the Redeemable Preferred Stock and
the Common Stock Subject to Redemption was initially recorded at the issue
price (net of issuance costs) and was being increased by periodic accretions to
retained earnings, based on the interest method, of the difference between the
issuance price ($8.75 per common share equivalent) and the estimated redemption
value.
(M) CAPITAL SHARES
CONVERTIBLE PREFERRED STOCK - In July 1993, the Company effected a
public offering of 2,990,000 shares of $1.625 Convertible Preferred Stock,
par value $1.00 per share (the "Preferred Stock"), pursuant to which the
Company raised gross proceeds of approximately $74.7 million in cash (net
proceeds of approximately $71.2 million). The proceeds were utilized to repay
indebtedness under Facilities C and F of the ING Facility, approximately $5.5
million and $11.6 million, respectively. The remaining proceeds will be used by
the Company for working capital and general corporate purposes. The Preferred
Stock is convertible at the option of the holder at any time into shares of the
Company's Common Stock at a conversion rate of 2.899 shares of Common
Stock for each share of Preferred Stock (equivalent to a conversion price of
$8.625 per share of Common Stock), subject to adjustment in certain events.
Annual dividends are $1.625 per share and are cumulative and are payable
quarterly commencing September 30, 1993. The Preferred Stock is redeemable at
any time on and after September 30, 1996, at the option of the Company, in
whole or in part, at a redemption price of $26.1375 per share, and thereafter at
prices decreasing ratably annually to $25.00 per share on and after September
30, 2003, plus accrued and unpaid dividends. The holders of the Preferred Stock
do not have any voting rights, except as required by applicable law and except
that, among other things, whenever accrued and unpaid dividends on the Preferred
Stock are equal to or exceed the equivalent of six quarterly dividends payable
on the Preferred Stock, the holders of the Preferred Stock will be entitled to
elect two directors to the Board until the dividend arrearage has been paid in
full. The term of office of all directors so elected will terminate immediately
upon such payment. The Preferred Stock has a liquidation preference of $25.00
per share, plus accrued and unpaid dividends.
COMMON STOCK - At the Company's Annual Meeting of Stockholders
held on May 20, 1992, the Company's stockholders approved an increase in the
number of authorized shares of Common Stock of the Company from
275,000,000 to 425,000,000, which was effected on September 16, 1992.
On October 2, 1992, following stockholder approval, the Company
effected a one-for-five reverse stock split. On the Consolidated Balance Sheet,
"Common Stock" was reduced and "Capital in excess of par value" was increased
to reflect this change.
In October 1992, the Company effected a public offering of 8 million
shares of Common Stock pursuant to which the Company raised gross proceeds
of approximately $40 million in cash (net proceeds of approximately $38.1
million). The proceeds were utilized to repurchase 272,123 shares of Common
Stock which had been issued for the settlement of the Company's Supplemental
Executive Retirement Plan obligation (the "SERP Shares"), to repurchase
3,102,857 Private Placement Shares (See Note L) and for general corporate
purposes. As of November 6, 1992, all of the 272,123 SERP Shares and all of
the 3,102,857 Private Placement Shares had been repurchased by the Company.
Supplemental earnings per share for the year ended December 31, 1992 would
have been $.06 per share which assumes the public offering and the repurchase
of the SERP Shares and the Private Placement Shares, described above, both
occurred on January 1, 1992.
As of December 31, 1993, authorized, unissued shares of Common Stock
were reserved for issuance as follows:
<TABLE>
<S> <C>
Issuance under stock option plan (net of forfeitures) 1,804,000
Issuance under long-term incentive plan 700,000
Conversion of Preferred Stock 8,668,010
Conversion of 8% Senior Subordinated
Convertible Debentures 944,391
Conversion of 8% Convertible
Subordinated Debentures 16,661
Conversion of Class A Stock 75
----------
Total 12,133,137
==========
</TABLE>
NON-VOTING CONVERTIBLE CLASS B COMMON STOCK - At December 31, 1993 and
1992, none of the remaining 41.1 million authorized shares were outstanding.
Class A (Cumulative Convertible) Capital Stock (the "Class A Stock") has
been included with "Capital in excess of par value" due the $880 outstanding
at December 31, 1993 and 1992.
(N) CAREER STOCK AND STOCK OPTION PLANS
On March 19, 1992, and at the Annual Meeting of Stockholders on May
20, 1992, the Company's Board of Directors and stockholders, respectively,
approved the Company's 1992 Long-Term Incentive Plan (the "1992 Plan"). The
1992 Plan provides for grants of stock options, stock appreciation rights, stock
awards and cash awards, which may be granted singly, in combination or in
tandem. The 1992 Plan is unfunded insofar as the plan provides for awards of
cash, Common Stock or rights thereto. An aggregate of 1,000,000 shares of
Common Stock is available for awards granted wholly or partly in Common
Stock. The Company has granted Restricted Stock Awards under the 1992 Plan
totalling 300,000 shares of Common Stock. Such shares awarded are restricted
as to transfer until vested pursuant to a schedule whereby 1/24th of the total
number of shares is vested per calendar quarter from June 30, 1992 through
March 31, 1998 (subject to certain conditions). The market value at the date of
grant of the Common Stock granted was recorded as unearned compensation and
is amortized to expense over the periods during which the restrictions lapse or
shares vest. Unearned compensation is shown as a reduction of stockholders'
equity.
On November 29, 1990, and at a special meeting on March 26, 1991, the
Company's Board of Directors and stockholders, respectively, approved the
Company's 1990 Stock Option Plan. The plan is intended to provide an incentive
that will allow the Company to retain in its employ, persons of the training,
experience and ability necessary for the development and financial success of
the Company. The plan authorized options with respect to 1,966,000 shares of
Common Stock to be granted to certain employees of the Company at an option
price of $9.65625 per share. On May 18, 1993, the option price was adjusted to
$7.375. On September 25, 1991, options with respect to all 1,966,000 shares
were granted. As of December 31, 1993, 33,700 options had been exercised and
1,155,100 shares were vested. Total adjusted compensation under the plan of
approximately $1,581,000 represents the excess of market price at the
measurement dates over the option price multiplied by the number of options
granted. This amount is to be recognized as expense over the four year
vesting period which commenced in March 1991. Compensation recognized under
the plan for the three years ending December 31, 1993, 1992 and 1991
totalled approximately $507,000, $117,000 and $293,000, respectively. The
plan will terminate on March 29, 2001.
(O) RETIREMENT AND SAVINGS PLANS
PENSION PLANS - The Company has three noncontributory pension plans.
Substantially all of its employees are covered by one or more of these plans.
Plan benefits are primarily based on years of service and average high
thirty-six month compensation.
The Reading & Bates Pension Plan (the "Domestic Plan") is qualified
under the Employee Retirement Income Security Act (ERISA). It is the
Company's policy to fund this plan not less than the minimum required by
ERISA. It is the Company's policy to contribute to the Reading & Bates
Offshore Pension Plan (the "Offshore Plan") an amount equal to the normal cost
plus amounts sufficient to amortize the initial unfunded actuarial liability and
subsequent unfunded liability caused by plan or assumption changes over thirty
years. The unfunded liability arising from actuarial gains and losses is funded
over fifteen years. The Offshore Plan is a nonqualified plan and is not subject
to ERISA funding requirements. The Domestic and Offshore Plans invest in cash
equivalents, fixed income and equity securities.
The Reading & Bates Retirement Benefit Replacement Plan (the
"Replacement Plan") is a self-administered unfunded excess benefit plan. All
members of the Domestic Plan or the Reading & Bates Savings Plan are potential
participants in the Replacement Plan.
Pension costs, including discontinued operations, for the years ended
December 31, 1993, 1992 and 1991 was $534,000, $111,000, and $16,000,
respectively. The 1991 sale of the Company's water treatment operations reduced
the number of active employees covered under the Domestic and Replacement
Plans. This reduction also resulted in a curtailment of these plans. When
a curtailment occurs, the pension liability associated with the future service
of the terminated employees is immediately recognized as a gain. A net
curtailment gain of $410,000 associated with the sale of the water treatment
operations was included in discontinued operations in 1991.
Pension costs (benefit) for the years ended December 31, 1993, 1992 and
1991 included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during
the year $ 1,354 $ 1,375 $ 1,299
Interest cost on projected benefit
obligation 4,328 4,125 3,860
Actual return on plan assets (3,694) (3,399) (7,621)
Net amortization and deferral (1,454) (1,990) 2,478
------- ------- -------
Net pension costs $ 534 $ 111 $ 16
======= ======= =======
</TABLE>
The funded status of the plans at December 31, 1993 was as follows (in
thousands):
<TABLE>
<CAPTION>
Domestic Offshore Replacement
Plan Plan Plan
--------- --------- ---------
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 39,602 $ 10,078 $ 2,136
Nonvested benefit obligation 1,506 553 77
--------- --------- ---------
Accumulated benefit obligation 41,108 10,631 2,213
Effect of projected future
compensation levels 3,461 1,454 156
--------- --------- ---------
Projected benefit obligation 44,569 12,085 2,369
Plan assets at fair value 38,129 8,470 -
--------- --------- ---------
Projected benefit obligation
in excess of plan assets 6,440 3,615 2,369
Unrecognized cumulative net
(loss) gain (8,277) (2,712) 4,433
Prior service cost unrecognized
in pension cost 2,550 476 297
Unrecognized net implementation
asset (obligation) 2,755 199 (3,193)
Additional minimum liability - 583 -
--------- --------- ---------
Accrued pension cost $ 3,468 $ 2,161 $ 3,906
========= ========= =========
</TABLE>
The additional minimum liability is shown as a reduction of
stockholders' equity.
Employees of discontinued operations are covered under the plans from
their employment dates through the date of sale of the discontinued operation.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations was 7.5% and 4.5%, respectively. The weighted
average expected long-term rate of return on assets was 10.25%.
SAVINGS PLANS - The Company established a thrift plan in 1969 for
salaried and hourly paid employees. Effective August 1, 1988, the plan was
amended and restated creating two plans and the name was changed to the
Reading & Bates Savings Plan and the Reading & Bates Offshore Savings Plan.
Under the plans, an employee may contribute up to 10% of base salary (subject
to certain limitations) and the Company will make matching contributions at a
rate of $.50 for each dollar contributed by the employee up to 6% of the
employee's base salary. Employees may direct the investment of their
contributions and the contributions of the Company in various plan options.
Twenty-five percent of the Company's contribution vests after two years
of an employee's service with the Company, 50% after three years, 75% after
four years and 100% after five years. Compensation costs (including
discontinued operations) under the plans amounted to $502,000 in 1993,
$381,000 in 1992 and $940,000 in 1991.
(P) RELATED PARTY TRANSACTIONS
Drilling has a rig management agreement with Sonat Offshore Drilling
Inc. ("Sonat"), a major shareholder of Drilling, for the operation and marketing
of both of its drilling units. For each of the years ending December 31, 1993
and 1992, Drilling paid to Sonat approximately $2.5 million for such
management services. In addition, Drilling has a bareboat charter agreement
with Sonat for one of its drilling units. For the years ended December 31,
1993 and 1992, Drilling received from Sonat approximately $14.7 million and
$3.8 million, respectively for such bareboat charter. At December 31, 1993
and 1992, Drilling had a net receivable from Sonat of $6 million and $5.2
million, respectively.
Certain principal stockholders of the Company and entities related
thereto were investors in the Company's private placement in September 1991
(see Note L). BCL Investment Partnership, L.P. ("BCL") purchased 114,285
shares of Common Stock Subject to Redemption for $1 million, and Danielson
Holding Corporation ("Danielson") and its affiliate, National American
Insurance Company of California ("NAICC"), together purchased all of the
Redeemable Preferred Stock for $4 million and $8 million, respectively. BCL
owned, as of December 31, 1993, approximately 33.9% of the Common Stock,
and Paul B. Loyd, Jr., the Company's Chairman and Chief Executive Officer
controls one of the five general partners of BCL. Danielson and NAICC may
be deemed affiliates of R&B Investment Partnership, L.P. (the "WHR
Partnership") which beneficially owned, as of December 31, 1993,
approximately 20.8% of the Common Stock. C. Kirk Rhein, Jr., the
Company's Vice Chairman, is a general partner of the general partner of
various partnerships which are stockholders of the Company, including the
WHR Partnership. Upon the repurchase of the Private Placement Shares in
November 1992, BCL, Danielson and NAICC received approximately $1.3
million, $5.1 million and $10.1 million, respectively, for the Private Placement
Shares held by each of them.
Fees totalling approximately $700,000 and $167,000, respectively, were
paid by the Company in October 1991 to an investment firm, a principal of
which is a member of the Board of Directors of the Company and an affiliate of
the WHR Partnership, and to Venture Capital Investors, an affiliate of an entity
with an indirect interest in BCL, for their efforts in securing unaffiliated
participating investors in the private placement of the Company's Redeemable
Preferred Stock and Common Stock Subject to Redemption (see Note L).
In 1991, the Company paid to ING Bank an arrangement fee of $1.8
million, of which $900,000 was payable as a finder's fee to Capercaillie
Holdings, Inc., an affiliate of BCL, in connection with a credit facility
extended to the Company by ING Bank.
(Q) OPERATIONS BY GEOGRAPHIC AREA
The Company, together with its 50% or less owned unconsolidated
investees, operates principally in international offshore contract drilling of
oil and gas wells. For the year ended December 31, 1993, revenues from three
customers of $39.6 million, $37.7 million and $20.3 million accounted for
22%, 20% and 11%, respectively, of the Company's total operating revenues.
For the year ended December 31, 1992, revenues from two customers of $40.9
million and $27.8 million accounted for 26% and 18%, respectively, of the
Company's total operating revenues. For the year ended December 31, 1991,
revenues from three customers of $38.6 million, $27.9 million and $14.1
million accounted for 30%, 22% and 11%, respectively, of the Company's total
operating revenues. Results of operations of the water treatment and shipping
segments are not included in the geographic information as they have been
included in discontinued operations.
GEOGRAPHIC AREAS (in thousands)
<TABLE>
<CAPTION>
Mediter-
ranean-
United Southeast Middle Other
1993: States Asia East Europe Foreign Total
- ---- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 10,878 $ 54,119 $ 53,777 $ 50,292 $14,686 $183,752
======== ======== ======== ======== ======= ========
Operating (loss)
profit $(17,265) $ 13,769 $ 17,654 $ 6,524 $(2,654) $ 18,028
======== ======== ======== ======== =======
Interest expense, net 11,748
Equity in losses of
unconsolidated
investees $ - $ (13) $ - $ (211) $ - (224)
======== ======== ======== ======== ======= -------
Income before income
taxes and minority
interest $ 6,056
========
Identifiable assets $ 95,176 $139,522 $112,879 $240,973 $23,712 $612,262
======== ======== ======== ======== =======
Investments in and advances
to unconsolidated
investees $ 2 $ 182 $ - $ 28 $ - 212
======== ======== ======== ======== ======= --------
Total assets $612,474
========
</TABLE>
<TABLE>
<CAPTION>
Mediter-
ranean-
United Southeast Middle Other
1992: States Asia East Europe Foreign Total
- ---- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 8,095 $ 46,636 $ 42,330 $ 45,835 $13,763 $156,659
======== ======== ======== ======== ======= ========
Operating (loss)
profit $(12,103) $ 11,238 $ 7,988 $ (7,815) $(1,495) $ (2,187)
======== ======== ======== ======== =======
Interest expense, net 3,331
Equity in earnings
of unconsolidated
investees $ 4 $ 234 $ - $ - $ 21 259
======== ======== ======== ======== ======= --------
Loss before income taxes
and minority interest $ (5,259)
========
Identifiable assets $108,428 $111,981 $111,201 $276,307 $ 6,087 $614,004
======== ======== ======== ======== =======
Investments in and
advances to
unconsolidated
investees $ 4 $ 570 $ - $ 50 $ - 624
======== ======== ======== ======== ======= --------
Total assets $614,628
========
</TABLE>
<TABLE>
<CAPTION>
Mediter-
ranean-
United Southeast Middle Other
1991: States Asia East Europe Foreign Total
- ---- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $ 16,105 $ 39,994 $ 45,063 $ 11,764 $13,874 $126,800
======== ======== ======== ======== ======= ========
Operating (loss)
profit $(19,453) $ 6,199 $ 12,908 $ 2,197 $(1,621) $ 230
======== ======== ======== ======== =======
Interest expense, net 16,657
Equity in earnings (losses)
of unconsolidated
investees $ 656 $ (145) $ - $ 1,532 $ 207 2,250
======== ======== ======== ======== ======= --------
Loss from continuing
operations before income
taxes, extraordinary gain
and cumulative effect of
change in accounting
principle $(14,177)
========
Identifiable assets $ 96,326 $122,967 $113,919 $ 30,995 $ 9,668 $373,875
======== ======== ======== ======== =======
Investments in and advances
to unconsolidated
investees $ 2,744 $ 662 $ - $ 65,741 $ 499 69,646
======== ======== ======== ======== ======= --------
Total assets $443,521
========
</TABLE>
READING & BATES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the two years ended December 31,
1993, are as follows (in thousands except for per share amounts):
<TABLE>
<CAPTION>
Quarter
------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1993:
- ----
Operating revenues $ 35,939 $ 48,307 $ 51,429 $ 48,077 $ 183,752
Gross income <F1> $ 4,184 $ 10,962 $ 12,737 $ 8,231 $ 36,114
Net income (loss) $ (2,188) $ 2,239 $ 5,118 $ (513) $ 4,656
Net income (loss) per
share applicable to
common stockholders $ (.04) $ .04 $ .08 $ (.03) $ .05
1992:
- ----
Operating revenues $ 40,416 $ 38,081 $ 41,254 $ 36,908 $ 156,659
Gross income <F1> $ 4,376 $ 7,280 $ 2,918 $ 73 $ 14,647
Net income (loss) $ (1,567) $ (527) $ 10,109 $ (4,613) $ 3,402
Net income (loss) per
share applicable to
common stockholders $ (.06) $ (.04) $ .17 $ (.10) $ (.04)
<FN>
<F1> Gross income represents operating revenues less operating expenses,
depreciation and amortization, and other, net.
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On November 25, 1992 the Company engaged Arthur Andersen & Co. as its
independent public accountants replacing Coopers & Lybrand. There were no
disagreements with Coopers & Lybrand regarding accounting principles and
practices for the two fiscal years ended December 31, 1991, and the subsequent
interim period, however, its report for the year ended December 31, 1990
contained a paragraph regarding the Company's ability to continue as a going
concern. That qualification was removed in Coopers & Lybrand's report for the
year ended December 31, 1991. The decision to change accountants was approved
by the Company's audit committee of the board of directors.
PART III
The information called for by Part III of Form 10-K is incorporated by
reference from the Registrant's Proxy Statements relating to its annual
meeting of Stockholders to be held May 10, 1994, which will be filed by
the Registrant with the Securities and Exchange Commission no later than
120 days after the close of the fiscal year. Also reference is made to
the information contained under the captioned "Executive Officers of
Registrant" contained in Part I hereof.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements:
Reports of Independent Public Accountants
Consolidated Balance Sheet as of December 31, 1993 and 1992
Consolidated Statement of Operations for the years ended December 31,
1993, 1992 and 1991
Consolidated Statement of Cash Flows for the years ended December 31,
1993, 1992 and 1991
Consolidated Statement of Stockholders' Equity (Deficit) for the years
ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Supplemental Consolidated Financial Information (unaudited)
2. Schedules:
Reports of Independent Public Accountants
Schedule II - Amounts Receivable from Related Parties
Schedule V - Property and Equipment
Schedule VI - Accumulated Depreciation and Amortization of
Property and Equipment
Schedule IX - Short-term Obligations
Schedule X - Supplementary Consolidated Statement of Operations
Information
All other schedules are omitted because they are not required or are not
applicable.
3. Exhibits:
Exhibit 3.1 - The Registrant's Restated Certificate of
Incorporation, as amended through October 2, 1992.
(Filed as Exhibit 3.1 to the Company's Annual
Report on Form 10-K for 1992 and incorporated
herein by reference.)
Exhibit 3.2 - The Registrant's Certificate of Designations of
$1.625 Convertible Preferred Stock ($1.00 par
value). (Filed as Exhibit (a) to Amendment No. 1
to the Registrant's Form 8-A/A dated July 22, 1993
and incorporated herein by reference.)
Exhibit 3.3 - The Registrant's Bylaws. (Filed as Exhibit 4.2 to
the Company's Registration No. 33-44237 and
incorporated herein by reference.)
Exhibit 4.1 - Indenture relating to the Registrant's 8% Senior
Subordinated Convertible Debentures due 1998
dated as of August 29, 1989, between the Registrant
and IBJ Schroder Bank & Trust Company, as
Trustee. (Filed as Exhibit 4.1 to the Company's
Annual Report on Form 10-K for 1989 and
incorporated herein by reference.)
Exhibit 4.2 - Form of the Registrant's registered 8% Senior
Subordinated Convertible Debentures due 1998.
(Filed as Exhibit 4.2 to Registration No. 33-28580
and incorporated herein by reference.)
Exhibit 4.3 - Form of the Registrant's bearer 8% Senior
Subordinated Convertible Debentures due 1998.
(Filed as Exhibit 4.3 to Registration No. 33-28580
and incorporated herein by reference.)
Exhibit 4.4 - Indenture dated as of December 1, 1980 among
Reading & Bates Energy Corporation N.V., the
Registrant, as Guarantor, and U.S. Trust Company,
as Successor Trustee, relating to the 8%
Convertible Subordinated Debentures due 1995
issued by Reading & Bates Energy Corporation N.V.,
and guaranteed by the Registrant. (Filed as
Exhibit 4.4 to Registration No. 33-28580 and
incorporated herein by reference.)
Exhibit 4.5 - Form of 8% Convertible Subordinated Debentures
due 1995 issued by Reading & Bates Energy
Corporation N.V., and guaranteed by the Registrant.
(Filed as Exhibit 4.5 to Registration No. 33-28580
and incorporated herein by reference.)
Exhibit 4.6 - Form of the Registrant's Common Stock Certificate.
(Filed as Exhibit 4.6 to Registration No. 33-51120
and incorporated herein by reference.)
Exhibit 4.7 - Form of Preferred Stock Certificate for $1.625
Convertible Preferred Stock ($1.00 par value).
(Filed as Exhibit 4.4 to Registration No.
33-65476 and incorporated herein by reference.)
Exhibit 4.8 - Registration Rights Agreement dated as of March 29,
1991 among the Registrant, Holders as referred
therein and members of Offering Committee as
referred therein. (Filed as Exhibit 4.22 to the
Company's Annual Report on Form 10-K for 1990
and incorporated herein by reference.)
Exhibit 4.9 - Amendment No. 1, dated as of September 1, 1992, to
the Registration Rights Agreement filed as Exhibit
4.7 hereto. (Filed as Exhibit 4.18 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 4.10 - Amendment No. 2, dated as of June 1, 1993, to the
Registration Rights Agreement. (Filed as Exhibit
4.8 to Registration No. 33-65476 and incorporated
herein by reference.)
Exhibit 4.11 - Agreement dated as of March 27, 1991 among the
Registrant, R&B Rig Investment Partners, L.P.,
R&B MODU Investment Associates, L.P., M&W
Investment Partners, L.P., and BCL Investment
Partners, L.P. (Filed as Exhibit 4.24 to the
Company's Annual Report on Form 10-K for 1990
and incorporated herein by reference.)
Exhibit 4.12 - Termination Agreement dated as of September 14,
1993 between the Registrant and BCL Investment
Partners, L.P.
Exhibit 4.13 - Agreement dated March 29, 1991 between the
Registrant and R&B Investment Partnership, L.P.
(Filed as Exhibit 4.25 to the Company's Annual
Report on Form 10-K for 1990 and incorporated
herein by reference.)
Exhibit 4.14 - Amendment No. 1 dated as of January 1, 1992
between the Registrant and R&B Investment
Partnership, L.P.
Exhibit 4.15 - Amendment No. 2 dated as of January 1, 1992
between the Registrant and R&B Investment
Partnership, L.P.
Exhibit 4.16 - Termination Agreement dated as of September 14,
1993 between the Registrant and R&B Investment
Partnership, L.P.
Exhibit 4.17 - Preferred Stock Subscription Agreement dated as of
September 3, 1991 between Registrant and the
subscribers, as amended. (Filed as Exhibit 4.12 to
Registration No. 33-51120 and incorporated herein
by reference.)
Exhibit 4.18 - Subscription Agreement dated as of September 3,
1991 between Registrant and the subscribers, as
amended. (Filed as Exhibit 4.14 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 4.19 - Agreement dated as of October 15, 1992 between the
Registrant and the Subscribers as defined therein.
(Filed as Exhibit 10.63 to Registration No. 33-
51120 and incorporated herein by reference.)
Exhibit 4.20 - Common Stock Issuance Agreement dated April 19,
1991 between the Company and J. W. Bates, Jr., as
amended. (Filed as Exhibit 4.15 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 4.21 - Common Stock Issuance Agreement dated April 15,
1991 between the Company and R. A. Tappmeyer, as
amended. (Filed as Exhibit 4.16 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 4.22 - Common Stock Issuance Agreement dated April 1991
between the Company and C. E. Thornton, as
amended. (Filed as Exhibit 4.17 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 10.1 - Amended and Restated Lease Restructuring
Agreement dated as of March 29, 1991 among the
Registrant, other obligors, the Lessors, the Lease
Lenders, the Lease Trustees, the Lease Lenders, the
Lease Trustees, the Lease Equity Participant and
the Lease Agent, all as named therein. (Filed
as Exhibit 4.26 to the Company's Annual Report on
Form 10-K for 1990 and incorporated herein by
reference.)
Exhibit 10.2 - Bareboat Charter Party Amendment No. 2 dated
March 29, 1991 between The Connecticut National
Bank, as Owner Trustee and Reading & Bates
Drilling Co., a subsidiary of the Registrant, as
Charterer. (Filed as Exhibit 4.27 to the Company's
Annual Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.3 - Bareboat Charter Party Amendment No. 3 dated as of
March 29, 1991 between The Connecticut National
Bank, as Owner Trustee and Reading & Bates
Exploration Co., a subsidiary of the Registrant, as
Charterer. (Filed as Exhibit 4.28 to the Company's
Annual Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.4 - Amendment No. 1 to Trust Indenture and First
Preferred Ship Mortgage dated as of March 29, 1991
between Reading & Bates Exploration Co., a
subsidiary of the Registrant, and State Street Bank
and Trust Company of Connecticut, National
Association, as Indenture Trustee. (Filed as
Exhibit 4.29 to the Company's Annual Report on
Form 10-K for 1990 and incorporated herein by
reference.)
Exhibit 10.5 - Credit Facility Agreement dated as of March 29,
1991 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co., Reading and
Bates, Inc. and Resources Conservation Company,
subsidiaries of the Registrant, and NMB Postbank
Groep, N.V. (Filed as Exhibit 4.30 to the
Company's Annual Report on Form 10-K for 1990
and incorporated herein by reference.)
Exhibit 10.6 - Amendment No. 1, dated as of May 24, 1991, to the
Credit Facility Agreement dated as of March 29,
1991 among the Registrant, Reading & Bates
Drilling Co., Reading & Bates Exploration Co.,
Reading & Bates, Inc. and Resources Conservation
Company, subsidiaries of the Registrant, and NMB
Postbank Groep, N.V. (Filed as Exhibit 4.32 to the
Company's Annual Report on Form 10-K for 1991
and incorporated herein by reference.)
Exhibit 10.7 - Amendment No. 2, dated as of June 28, 1991, to the
Credit Facility Agreement dated as of March 29,
1991 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co., Reading &
Bates, Inc. and Resources Conservation Company,
subsidiaries of the Registrant, and NMB Postbank
Groep, N.V. (Filed as Exhibit 4.33 to the
Company's Annual Report on Form 10-K for 1991
and incorporated herein by reference.)
Exhibit 10.8 - Amendment No. 3, dated as of August 30, 1991, to
the Credit Facility Agreement dated as of March 29,
1991 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co., Reading &
Bates, Inc. and Resources Conservation Company,
subsidiaries of the Registrant, and NMB Postbank
Groep, N.V. (Filed as Exhibit 4.34 to the
Company's Annual Report on Form 10-K for 1991
and incorporated herein by reference.)
Exhibit 10.9 - Amendment No. 4, dated as of June 30, 1992, to the
Credit Facility Agreement dated as of March 27,
1991 among the Registrant, Reading and Bates
Drilling Co., Reading and Bates Exploration Co. and
Reading and Bates, Inc., subsidiaries of the
Registrant, and Internationale Nederlanden Bank
N.V. (formerly known as NMB Postbank Groep
N.V.). (Filed as Exhibit 10.61 to Registration No.
33-51120 and incorporated herein by reference.)
Exhibit 10.10 - Amendment No. 5, dated as of February
23, 1993, to the Credit Facility
Agreement dated as of March 27, 1991
among the Registrant, Reading and Bates
Drilling Co., Reading and Bates
Exploration Co., and Reading and Bates,
Inc., subsidiaries of the Registrant, and
Internationale Nederlanden Bank N.V.
(Filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for 1992
and incorporated herein by reference.)
Exhibit 10.11 - Agreement dated August 18, 1993 among
the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co.,
and Reading & Bates, Inc., subsidiaries
of the Registrant, and Internationale
Nederlanden Bank N.V.
Exhibit 10.12 - Pledge Agreement dated August 18, 1993
among the Registrant, Reading & Bates
Drilling Co., Reading & Bates
Exploration Co., and Reading & Bates,
Inc., subsidiaries of the Registrant, and
Internationale Nederlanden Bank N.V.
Exhibit 10.13* - Reading & Bates 1990 Stock Option
Plan. (Filed as Appendix A to the
Company's Proxy Statement dated April
26, 1993 and incorporated herein by
reference.)
Exhibit 10.14* - 1992 Long-Term Incentive Plan of
Reading & Bates Corporation. (Filed as
Exhibit B to the Registrant's Proxy
Statement dated April 27, 1992 and
incorporated herein by reference.)
Exhibit 10.15* - Director Stock Option Agreement dated
as of September 14, 1993 between the
Registrant and C. A. Donabedian.
Exhibit 10.16* - Director Stock Option Agreement dated
as of September 14, 1993 between the
Registrant and J. W. McLean.
Exhibit 10.17* - Director Stock Option Agreement dated
as of September 14, 1993 between the
Registrant and R. L. Sandmeyer.
Exhibit 10.18* - Director Stock Option Agreement dated
as of September 14, 1993 between the
Registrant and S. A. Webster.
Exhibit 10.19 - Pledge of shares of stock of Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., and Reading and Bates,
Inc., to NMB Postbank Groep N.V.
and/or its affiliates or trustees acting on
behalf of any of the foregoing. (Filed as
Exhibit 10.33 to the Company's Annual
Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.20 - Agreement dated as of August 31, 1991
among Registrant, Arcade Shipping AS
and Sonat Offshore Drilling Inc. (Filed
as Exhibit 10.40 to the Company's
Annual Report on Form 10-K for 1991
and incorporated herein by reference.)
Exhibit 10.21* - Employment Agreement dated as of
November 1, 1991 between the
Registrant and L. E. Voss, Jr. (Filed as
Exhibit 10.34 to the Company's Annual
Report on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.22* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and L. E. Voss, Jr.
Exhibit 10.23* - Employment Agreement dated as of
November 1, 1991 between the
Registrant and T. W. Nagle. (Filed as
Exhibit 10.35 to the Company's Annual
Report on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.24* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and T. W. Nagle.
Exhibit 10.25* - Employment Agreement dated as of
November 1, 1991 between the
Registrant and C. R. Ofner. (Filed as
Exhibit 10.36 to the Company's Annual
Report on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.26* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and C. R. Ofner.
Exhibit 10.27* - Employment Agreement dated as of
November 1, 1991 between the
Registrant and D. L. McIntire. (Filed as
Exhibit 10.37 to the Company's Annual
Report on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.28* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and D. L. McIntire.
Exhibit 10.29* - Employment Agreement dated as of
November 1, 1991 between the
Registrant and W. K. Hillin. (Filed as
Exhibit 10.38 to the Company's Annual
Report on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.30* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and W. K. Hillin.
Exhibit 10.31* - Employment Agreement dated as of
January 1, 1992 between the Registrant
and Paul B. Loyd, Jr. (Filed as Exhibit
10.42 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.32* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of January 1, 1992 between the
Registrant and Paul B. Loyd, Jr.
Exhibit 10.33* - Employment Agreement dated as of
January 1, 1992 between the Registrant
and C. Kirk Rhein, Jr. (Filed as Exhibit
10.43 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.34* - Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of January 1, 1992 between the
Registrant and C. Kirk Rhein, Jr.
Exhibit 10.35* - Employment Agreement dated as of
January 1, 1992 between the Registrant
and J. T. Angel. (Filed as Exhibit 10.44
to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.36* - Agreement amending Employment
Agreement dated October 7, 1993
between the Registrant and J. T. Angel.
Exhibit 10.37 - Galloway Waiver Agreement dated as of
May 31, 1991 among the Noteholders,
the Owner Trustee and the Indenture
Trustee named therein. (Filed as Exhibit
10.45 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.38 - Thornton Waiver Agreement dated as of
May 31, 1991 among the Noteholders,
the Owner Trustee and the Indenture
Trustee named therein. (Filed as Exhibit
10.46 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.39 - Galloway Rescission Agreement dated as
of June 28, 1991 among Reading & Bates
Drilling Co., the Registrant, the
Noteholders, the Owner Trustee, the
Indenture Trustee and the Owner
Participant named therein. (Filed as
Exhibit 10.47 to Registration No. 33-
51120 and incorporated herein by
reference.)
Exhibit 10.40 - Galloway Assignment Agreement dated
as of June 28, 1991 between the Holders
named therein and the NMB Postbank
Groep N.V. (Filed as Exhibit 10.48 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.41 - Thornton Rescission Agreement dated as
of June 28, 1991 among Reading & Bates
Exploration Co., the Registrant, the
Noteholders, the Owner Trustee, the
Indenture Trustee and the Owner
Participant named therein. (Filed as
Exhibit 10.49 to Registration No. 33-
51120 and incorporated herein by
reference.)
Exhibit 10.42 - Thornton Assignment Agreement dated
as of June 28, 1991 between the Holders
named therein and NMB Postbank Groep
N.V. (Filed as Exhibit 10.50 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.43 - Facility Agreement dated February 21,
1991 between Arcade Drilling AS, Chase
Investment Bank Limited and The Chase
Manhattan Bank, N.A. (Filed as Exhibit
10.51 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.44 - Hull 515 Rig Management Agreement
dated October 26, 1990 between Arcade
Drilling AS and Sonat Offshore Drilling
Inc. (Filed as Exhibit 10.52 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.45 - HG Rig Management Agreement dated
October 26, 1990 between Arcade
Drilling AS and Sonat Offshore Drilling
Inc. (Filed as Exhibit 10.53 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.46 - Modification Agreement dated as of May
27, 1992 between Arcade Drilling AS
and Sonat Offshore Drilling Inc. (Filed
as Exhibit 10.54 to Registration No. 33-
51120 and incorporated herein by
reference.)
Exhibit 10.47 - Credit Facility Letter dated May 12,
1992 between Arcade Shipping AS and
The Chase Manhattan Bank, N.A., as
amended on May 14, 1992. (Filed as
Exhibit 10.55 to Registration No. 33-
51120 and incorporated herein by
reference.)
Exhibit 10.48 - Letter Agreement dated May 12, 1992
between the Registrant and The Chase
Manhattan Bank, N.A. regarding
undertakings with respect to a credit
facility issued as of the same date to
Arcade Shipping AS. (Filed as Exhibit
10.56 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.49 - Charter Payments Agreement dated as of
September 30, 1991 among the
Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co.,
Reading and Bates, Inc. and NMB
Postbank Groep, N.V. (Filed as Exhibit
10.57 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.50 - Amendment No. 1, dated as of June 30,
1992, to Charter Payments Agreement
dated as of September 30, 1991 among
the Registrant, Reading and Bates
Drilling Co., Reading and Bates
Exploration Co., Reading and Bates, Inc.
and Internationale Nederlanden Bank
N.V. (formerly known as NMB Postbank
Groep N.V.). (Filed as Exhibit 10.36 to
the Company's Annual Report on Form
10-K for 1992 and incorporated herein by
reference.)
Exhibit 10.51 - Floating Rate Loan Facility Agreement
dated September 19, 1991 between Gade
Shipping Corporation, Skandinaviska
Enskilda Banken, London Branch and
Den norske Bank AS. (Filed as Exhibit
10.58 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.52 - Bareboat Charter dated September 4,
1991 between K/S UL Arcade and
Arcade Shipping AS (regarding
motorvessel "ARCADE FALCON").
(Filed as Exhibit 10.59 to Registration
No. 33-51120 and incorporated herein by
reference.)
Exhibit 10.53 - Bareboat Charter dated September 4,
1991 between K/S UL Arcade and
Arcade Shipping AS (regarding
motorvessel "ARCADE EAGLE").
(Filed as Exhibit 10.60 to Registration
No. 33-51120 and incorporated herein by
reference.)
Exhibit 10.54 - ISDA Interest and Currency Exchange
Agreement dated as of October 26, 1990
between the Chase Manhattan Bank,
N.A. and K/S Frontier Drilling, and
Novation Agreement with respect thereto
dated February 28, 1991. (Filed as
Exhibit 10.62 to Registration
No. 33-51120 and incorporated herein by
reference.)
Exhibit 11 - Computation of Earnings Per Common Share
Exhibit 16 - Letter re Change in Certifying Accountant (filed as
Exhibit 16.1 to the Company's Form 8-K dated
December 2, 1992 and incorporated herein by
reference).
Exhibit 21 - Schedule of Subsidiaries of the Company
Exhibit 23.1 - Consent of Arthur Andersen & Co.
Exhibit 23.2 - Consent of Coopers & Lybrand
Exhibit 99 - Annual Report on Form 11-K with respect to Reading
& Bates Savings Plan.
Instruments with respect to certain long-term obligations of the Company
are not being filed as exhibits hereto as the securities authorized thereunder
do not exceed 10% of the Company's total assets. The Company agrees to furnish
a copy of each such instrument to the Securities and Exchange Commission upon
its request.
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to the requirements of Item 14(c) of
Form 10-K.
(b) Reports on Form 8-K
During the three months ending December 31, 1993 five Current
Reports on Form 8-K were filed. A Current Report on Form 8-K
dated October 12, 1993 announcing the resignation of J.T. Angel,
dated October 21, 1993 announcing the Company's 3rd quarter 1993
earnings, dated November 5, 1993 announcing that AGIP S.p.A. did
not exercise their remaining options under a contract with the "JACK
BATES", dated November 18, 1993 announcing the mobilization of
the "M.G. HULME, JR." from the Mediterranean Sea to the Gulf of
Mexico, and dated December 9, 1993 announcing that the Company
had received a letter of intent for a drilling contract in the Gulf of
Mexico for the "M.G. HULME, JR.".
READING & BATES CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule
Number Description
- -------- ------------------------------------------------
Reports of Independent Public Accountants
II. Amounts Receivable from Related Parties
V. Property and Equipment
VI. Accumulated Depreciation and Amortization of Property and
Equipment
IX. Short-term Obligations
X. Supplementary Consolidated Statement of Operations Information
Note: All other schedules are omitted because they are not applicable or
not required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of Reading & Bates
Corporation as of and for the years ended December 31, 1993 and 1992
included in this Form 10-K and have issued our report thereon dated
February 14, 1994. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements taken as a whole.
The schedules listed in the index of financial statement schedules set
forth in item 14(a)(2) hereof for the years ended December 31, 1993 and
1992, are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing
procedures applied in the audits of basic consolidated financial
statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
/s/ARTHUR ANDERSEN & CO.
Houston, Texas
February 14, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
Reading & Bates Corporation
Our report on the consolidated financial statements of
Reading & Bates Corporation and Subsidiaries is included on page
31 of this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial
statement schedules listed in Item 14(a)(2) of this Form 10-K as
of and for the year ended December 31, 1991.
In our opinion, the financial statement schedules referred
to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/Coopers & Lybrand
Houston, Texas
March 25, 1992
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Deductions Balance at end
Balance at --------------------- of period
beginning Amounts Collectibility -------------------
Name of Debtor of period Additions Collected Allowances Current Noncurrent
- ------------- --------- --------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993:
Sonat Offshore
Drilling Inc. $ 5,257 $ 15,497 $ 14,651 $ - $ 5,103 $ 1,000
======= ======== ======== ====== ======= =======
1992:
Sonat Offshore
Drilling
Inc. <F1> $ - $ 5,257 $ - $ - $ 4,257 $ 1,000
======= ======== ======== ====== ======= =======
1991: $ - $ - $ - $ - $ - $ -
======= ======== ======== ====== ======= =======
___________________________________
<FN>
<F1> The addition in 1992 is the result of the Company consolidating Arcade
Drilling AS in the first quarter of 1992. The receivable from Sonat
Offshore Drilling Inc., a major shareholder of the Company's consolidated
subsidiary Arcade Drilling AS, is the result of a bareboat charter
agreement relating to the HENRY GOODRICH.
</TABLE>
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Balance at Other changes Balance
beginning Additions ------------------- at end
Classification of period at cost Retirements Add<F1> Deduct<F2> of period
- -------------- --------- --------- ----------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1993:
Drilling $750,058 $ 9,161 $ 8,203 $ - $ 4,598 $746,418
Other 5,201 988 411 - - 5,778
-------- -------- -------- -------- ------- --------
Total $755,259 $ 10,149 $ 8,614 $ - $ 4,598 $752,196
======== ======== ======== ======== ======= ========
1992:
Drilling $542,683 $ 13,284 $ 39,052 $233,143 $ - $750,058
Other 4,416 525 104 364 - 5,201
-------- -------- -------- -------- ------- --------
Total $547,099 $ 13,809 $ 39,156 $233,507 $ - $755,259
======== ======== ======== ======== ======= ========
1991:
Drilling $532,481 $ 15,877 $ 5,675 $ - $ - $542,683
Other 3,922 689 195 - - 4,416
-------- -------- -------- -------- ------- --------
Total $536,403 $ 16,566 $ 5,870 $ - $ - $547,099
======== ======== ======== ======== ======= ========
- -----------------------------------
<FN>
Estimated useful lives are as follows: Drilling - 3 to 25 years; and
Other - 3 to 10 years.
<F1> Due to the consolidation of Arcade Drilling AS effective January 1,
1992.
<F2> Due to the Company purchasing shares of Arcade Drilling AS at a lower
average cost per share than previous shares acquired by the Company.
</TABLE>
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Other changes Balance
beginning costs and --------------- at end
Classification of period expenses Retirements Add<F1> Deduct of period
- -------------- ---------- --------- ----------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993:
Drilling $250,446 $ 29,018 $ 5,793 $ - $ - $273,671
Other 3,421 740 298 - - 3,863
-------- -------- -------- ------- ------- --------
Total $253,867 $ 29,758 $ 6,091 $ - $ - $277,534
======== ======== ======== ======= ======= ========
1992:
Drilling $223,528 $ 32,030 $ 16,577 $11,465 $ - $250,446
Other 2,910 421 76 166 $ - $ 3,421
-------- -------- -------- ------- ------- --------
Total $226,438 $ 32,451 $ 16,653 $11,631 $ - $253,867
======== ======== ======== ======= ======= ========
1991:
Drilling $205,528 $ 21,804 $ 3,804 $ - $ - $223,528
Other 2,651 396 137 - - 2,910
-------- -------- -------- ------- ------- --------
Total $208,179 $ 22,200 $ 3,941 $ - $ - $226,438
======== ======== ======== ======= ======= ========
- ---------------------------
<FN>
<F1> Due to the consolidation of Arcade Drilling AS effective January 1,
1992.
</TABLE>
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM OBLIGATIONS
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of aggregate at End Interest During the During the During the
short-term obligations of Period Rate Period Period <F1> Period<F2>
- ---------------------- --------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993:
Revolving credit
facility <F3> $ 2,735 7.25% $ 14,417 $ 2,995 7.26%
Year Ended December 31,
1992:
Revolving credit
facility <F3> $ 13,482 7.25% $ 13,482 $ 5,187 7.46%
Year Ended December 31,
1991:
Margin loan <F3> $ 24,562 12.69% $ 24,562 $ 22,577 12.9%
Revolving credit
facility <F3> $ 11,979 7.75% $ 13,739 $ 9,392 9.2%
- --------------------------------
<FN>
<F1> Average amount outstanding during the period is computed by dividing
the total daily outstanding principal balances by the number of days
in the period.
<F2> Weighted average interest rate during the period is computed by
dividing the actual annualized short-term interest expense by the
average short-term obligations outstanding.
<F3> See Note E of Notes to Consolidated Financial Statements for
description of terms of short-term obligations.
</TABLE>
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY CONSOLIDATED
STATEMENT OF OPERATIONS INFORMATION
For the Three Years Ended December 31, 1993
(in thousands)
<TABLE>
<CAPTION>
Charged to costs and expenses
Item 1993 1992 1991
- ----------------------------- ------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs $18,149 $17,980 $15,275
======= ======= =======
Amortization of deferred drilling expenses $ 2,420 $ 1,875 $ 844
======= ======= =======
</TABLE>
Depreciation and amortization of intangible assets, taxes other than
payroll and income taxes and advertising costs were each less than 1% of
consolidated revenues.
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 by the undersigned, thereunto duly authorized on March 9, 1994.
READING & BATES CORPORATION
By /s/Paul B. Loyd, Jr.
------------------------
Paul B. Loyd, Jr.
President, Chief Executive Officer,
Chairman and Director
Pursuant to the requirements of Securities Exchange Act of 1934,this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on March 9,1994.
By /s/ Paul B. Loyd Jr. By /s/ Willem Cordia
------------------------- -------------------------
Paul B. Loyd, Jr. Willem Cordia
President, Chief Executive Officer, Director
Chairman and Director
By /s/ C. Kirk Rhein, Jr. By /s/ Charles A. Donabedian
-------------------------- -------------------------
C. Kirk Rhein, Jr. Charles A. Donabedian
Vice Chairman and Director Director
By /s/ T. W. Nagle By /s/ J. W. McLean
------------------------- -------------------------
T. W. Nagle J. W. McLean
Vice President and Chief Director
Financial Officer
Principal Accounting Officer
By /s/ Ted Kalborg By /s/ A. L. Chavkin
------------------------- -------------------------
Ted Kalborg A. L. Chavkin
Director Director
By /s/ Steven A. Webster By /s/ Robert L. Sandmeyer
------------------------- -------------------------
Steven A. Webster Robert L. Sandmeyer
Director Director
EXHIBIT INDEX
Exhibit
Number Description
Exhibit 3.1 The Registrant's Restated Certificate of
Incorporation, as amended through
October 2, 1992. (Filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-K
for 1992 and incorporated herein by
reference.)
Exhibit 3.2 The Registrant's Certificate of
Designations of $1.625 Convertible
Preferred Stock ($1.00 par value). (Filed
as Exhibit (a) to Amendment No. 1 to the
Registrant's Form 8-A/A dated July 22,
1993 and incorporated herein by
reference.)
Exhibit 3.3 The Registrant's Bylaws. (Filed as
Exhibit 4.2 to the Company's Registration
No. 33-44237 and incorporated herein by
reference.)
Exhibit 4.1 Indenture relating to the Registrant's 8%
Senior Subordinated Convertible Debentures
due 1998 dated as of August 29, 1989,
between the Registrant and IBJ Schroder
Bank & Trust Company, as Trustee. (Filed
as Exhibit 4.1 to the Company's Annual
Report on Form 10-K for 1989 and
incorporated herein by reference.)
Exhibit 4.2 Form of the Registrant's registered 8%
Senior Subordinated Convertible Debentures
due 1998. (Filed as Exhibit 4.2 to
Registration No. 33-28580 and incorporated
herein by reference.)
Exhibit 4.3 Form of the Registrant's bearer 8% Senior
Subordinated Convertible Debentures due
1998. (Filed as Exhibit 4.3 to
Registration No. 33-28580 and incorporated
herein by reference.)
Exhibit 4.4 Indenture dated as of December 1, 1980
among Reading & Bates Energy Corporation
N.V., the Registrant, as Guarantor, and
U.S. Trust Company, as Successor Trustee,
relating to the 8% Convertible
Subordinated Debentures due 1995 issued
by Reading & Bates Energy Corporation
N.V., and guaranteed by the Registrant.
(Filed as Exhibit 4.4 to Registration
No. 33-28580 and incorporated herein by
reference.)
Exhibit 4.5 Form of 8% Convertible Subordinated
Debentures due 1995 issued by Reading &
Bates Energy Corporation N.V., and
guaranteed by the Registrant. (Filed as
Exhibit 4.5 to Registration No. 33-28580
and incorporated herein by reference.)
Exhibit 4.6 Form of the Registrant's Common Stock
Certificate. (Filed as Exhibit 4.6 to
Registration No. 33-51120 and incorporated
herein by reference.)
Exhibit 4.7 Form of Preferred Stock Certificate for
$1.625 Convertible Preferred Stock ($1.00
par value). (Filed as Exhibit 4.4 to
Registration No. 33-65476 and incorporated
herein by reference.)
Exhibit 4.8 Registration Rights Agreement dated as of
March 29, 1991 among the Registrant,
Holders as referred therein and members of
Offering Committee as referred therein.
(Filed as Exhibit 4.22 to the Company's
Annual Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 4.9 Amendment No. 1, dated as of September 1,
1992, to the Registration Rights Agreement
filed as Exhibit 4.7 hereto. (Filed as
Exhibit 4.18 to Registration No. 33-51120
and incorporated herein by reference.)
Exhibit 4.10 Amendment No. 2, dated as of June 1,
1993, to the Registration Rights
Agreement. (Filed as Exhibit 4.8 to
Registration No. 33-65476 and
incorporated herein by reference.)
Exhibit 4.11 Agreement dated as of March 27, 1991
among the Registrant, R&B Rig
Investment Partners, L.P., R&B MODU
Investment Associates, L.P., M&W
Investment Partners, L.P., and BCL
Investment Partners, L.P. (Filed as
Exhibit 4.24 to the Company's Annual
Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 4.12 Termination Agreement dated as of
September 14, 1993 between the
Registrant and BCL Investment
Partners, L.P.
Exhibit 4.13 Agreement dated March 29, 1991
between the Registrant and R&B
Investment Partnership, L.P. (Filed
as Exhibit 4.25 to the Company's
Annual Report on Form 10-K for 1990
and incorporated herein by
reference.)
Exhibit 4.14 Amendment No. 1 dated as of January
1, 1992 between the Registrant and
R&B Investment Partnership, L.P.
Exhibit 4.15 Amendment No. 2 dated as of January
1, 1992 between the Registrant and
R&B Investment Partnership, L.P.
Exhibit 4.16 Termination Agreement dated as of
September 14, 1993 between the
Registrant and R&B Investment
Partnership, L.P.
Exhibit 4.17 Preferred Stock Subscription
Agreement dated as of September 3,
1991 between Registrant and the
subscribers, as amended. (Filed as
Exhibit 4.12 to Registration No. 33-
51120 and incorporated herein by
reference.)
Exhibit 4.18 Subscription Agreement dated as of
September 3, 1991 between Registrant
and the subscribers, as amended.
(Filed as Exhibit 4.14 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 4.19 Agreement dated as of October 15,
1992 between the Registrant and the
Subscribers as defined therein.
(Filed as Exhibit 10.63 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 4.20 Common Stock Issuance Agreement
dated April 19, 1991 between the
Company and J. W. Bates, Jr., as
amended. (Filed as Exhibit 4.15 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 4.21 Common Stock Issuance Agreement
dated April 15, 1991 between the
Company and R. A. Tappmeyer, as
amended. (Filed as Exhibit 4.16 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 4.22 Common Stock Issuance Agreement
dated April 1991 between the Company
and C. E. Thornton, as amended.
(Filed as Exhibit 4.17 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.1 Amended and Restated Lease
Restructuring Agreement dated as of
March 29, 1991 among the Registrant,
other obligors, the Lessors, the
Lease Lenders, the Lease Trustees,
the Lease Lenders, the Lease
Trustees, the Lease Equity
Participant and the Lease Agent, all
as named therein. (Filed as Exhibit
4.26 to the Company's Annual Report
on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.2 Bareboat Charter Party Amendment
No. 2 dated March 29, 1991 between
The Connecticut National Bank, as
Owner Trustee and Reading & Bates
Drilling Co., a subsidiary of the
Registrant, as Charterer. (Filed as
Exhibit 4.27 to the Company's Annual
Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.3 Bareboat Charter Party Amendment
No. 3 dated as of March 29, 1991
between The Connecticut National
Bank, as Owner Trustee and Reading &
Bates Exploration Co., a subsidiary
of the Registrant, as Charterer.
(Filed as Exhibit 4.28 to the
Company's Annual Report on Form 10-K
for 1990 and incorporated herein by
reference.)
Exhibit 10.4 Amendment No. 1 to Trust Indenture
and First Preferred Ship Mortgage
dated as of March 29, 1991 between
Reading & Bates Exploration Co., a
subsidiary of the Registrant, and
State Street Bank and Trust Company
of Connecticut, National
Association, as Indenture Trustee.
(Filed as Exhibit 4.29 to the
Company's Annual Report on Form 10-K
for 1990 and incorporated herein by
reference.)
Exhibit 10.5 Credit Facility Agreement dated as
of March 29, 1991 among the
Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration
Co., Reading and Bates, Inc. and
Resources Conservation Company,
subsidiaries of the Registrant, and
NMB Postbank Groep, N.V. (Filed as
Exhibit 4.30 to the Company's Annual
Report on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.6 Amendment No. 1, dated as of May 24,
1991, to the Credit Facility
Agreement dated as of March 29, 1991
among the Registrant, Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates,
Inc. and Resources Conservation
Company, subsidiaries of the
Registrant, and NMB Postbank Groep,
N.V. (Filed as Exhibit 4.32 to the
Company's Annual Report on Form 10-K
for 1991 and incorporated herein by
reference.)
Exhibit 10.7 Amendment No. 2, dated as of June
28, 1991, to the Credit Facility
Agreement dated as of March 29, 1991
among the Registrant, Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates,
Inc. and Resources Conservation
Company, subsidiaries of the
Registrant, and NMB Postbank Groep,
N.V. (Filed as Exhibit 4.33 to the
Company's Annual Report on Form 10-K
for 1991 and incorporated herein by
reference.)
Exhibit 10.8 Amendment No. 3, dated as of August
30, 1991, to the Credit Facility
Agreement dated as of March 29, 1991
among the Registrant, Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., Reading & Bates,
Inc. and Resources Conservation
Company, subsidiaries of the
Registrant, and NMB Postbank Groep,
N.V. (Filed as Exhibit 4.34 to the
Company's Annual Report on Form 10-K
for 1991 and incorporated herein by
reference.)
Exhibit 10.9 Amendment No. 4, dated as of June
30, 1992, to the Credit Facility
Agreement dated as of March 27, 1991
among the Registrant, Reading and
Bates Drilling Co., Reading and
Bates Exploration Co. and Reading
and Bates, Inc., subsidiaries of the
Registrant, and Internationale
Nederlanden Bank N.V. (formerly
known as NMB Postbank Groep N.V.).
(Filed as Exhibit 10.61 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.10 Amendment No. 5, dated as of
February 23, 1993, to the Credit
Facility Agreement dated as of March
27, 1991 among the Registrant,
Reading and Bates Drilling Co.,
Reading and Bates Exploration Co.,
and Reading and Bates, Inc.,
subsidiaries of the Registrant, and
Internationale Nederlanden Bank N.V.
(Filed as Exhibit 10.10 to the
Company's Annual Report on Form 10-K
for 1992 and incorporated herein by
reference.)
Exhibit 10.11 Agreement dated August 18, 1993
among the Registrant, Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., and Reading &
Bates, Inc., subsidiaries of the
Registrant, and Internationale
Nederlanden Bank N.V.
Exhibit 10.12 Pledge Agreement dated August 18,
1993 among the Registrant, Reading &
Bates Drilling Co., Reading & Bates
Exploration Co., and Reading &
Bates, Inc., subsidiaries of the
Registrant, and Internationale
Nederlanden Bank N.V.
Exhibit 10.13 Reading & Bates 1990 Stock Option
Plan. (Filed as Appendix A to the
Company's Proxy Statement dated
April 26, 1993 and incorporated
herein by reference.)
Exhibit 10.14 1992 Long-Term Incentive Plan of
Reading & Bates Corporation. (Filed
as Exhibit B to the Registrant's
Proxy Statement dated April 27, 1992
and incorporated herein by
reference.)
Exhibit 10.15 Director Stock Option Agreement
dated as of September 14, 1993
between the Registrant and C. A.
Donabedian.
Exhibit 10.16 Director Stock Option Agreement
dated as of September 14, 1993
between the Registrant and J. W.
McLean.
Exhibit 10.17 Director Stock Option Agreement
dated as of September 14, 1993
between the Registrant and R. L.
Sandmeyer.
Exhibit 10.18 Director Stock Option Agreement
dated as of September 14, 1993
between the Registrant and S. A.
Webster.
Exhibit 10.19 Pledge of shares of stock of Reading
& Bates Drilling Co., Reading &
Bates Exploration Co., and Reading
and Bates, Inc., to NMB Postbank
Groep N.V. and/or its affiliates or
trustees acting on behalf of any of
the foregoing. (Filed as Exhibit
10.33 to the Company's Annual Report
on Form 10-K for 1990 and
incorporated herein by reference.)
Exhibit 10.20 Agreement dated as of August 31,
1991 among Registrant, Arcade
Shipping AS and Sonat Offshore
Drilling Inc. (Filed as Exhibit
10.40 to the Company's Annual Report
on Form 10-K for 1991 and
incorporated herein by reference.)
Exhibit 10.21 Employment Agreement dated as of
November 1, 1991 between the
Registrant and L. E. Voss, Jr.
(Filed as Exhibit 10.34 to the
Company's Annual Report on Form 10-K
for 1991 and incorporated herein by
reference.)
Exhibit 10.22 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and L. E. Voss, Jr.
Exhibit 10.23 Employment Agreement dated as of
November 1, 1991 between the
Registrant and T. W. Nagle. (Filed
as Exhibit 10.35 to the Company's
Annual Report on Form 10-K for 1991
andincorporated hereinby reference.)
Exhibit 10.24 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and T. W. Nagle.
Exhibit 10.25 Employment Agreement dated as of
November 1, 1991 between the
Registrant and C. R. Ofner. (Filed
as Exhibit 10.36 to the Company's
Annual Report on Form 10-K for 1991
and incorporated herein by
reference.)
Exhibit 10.26 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and C. R. Ofner.
Exhibit 10.27 Employment Agreement dated as of
November 1, 1991 between the
Registrant and D. L. McIntire.
(Filed as Exhibit 10.37 to the
Company's Annual Report on Form 10-K
for 1991 and incorporated herein by
reference.)
Exhibit 10.28 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and D. L. McIntire.
Exhibit 10.29 Employment Agreement dated as of
November 1, 1991 between the
Registrant and W. K. Hillin. (Filed
as Exhibit 10.38 to the Company's
Annual Report on Form 10-K for 1991
and incorporated herein by
reference.)
Exhibit 10.30 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of November 1, 1991 between
the Registrant and W. K. Hillin.
Exhibit 10.31 Employment Agreement dated as of
January 1, 1992 between the
Registrant and Paul B. Loyd, Jr.
(Filed as Exhibit 10.42 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.32 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of January 1, 1992 between
the Registrant and Paul B. Loyd, Jr.
Exhibit 10.33 Employment Agreement dated as of
January 1, 1992 between the
Registrant and C. Kirk Rhein, Jr.
(Filed as Exhibit 10.43 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.34 Amendment No. 1, dated as of October
1, 1993, to the Employment Agreement
dated as of January 1, 1992 between
the Registrant and C. Kirk Rhein,
Jr.
Exhibit 10.35 Employment Agreement dated as of
January 1, 1992 between the
Registrant and J. T. Angel. (Filed
as Exhibit 10.44 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.36 Agreement amending Employment
Agreement dated October 7, 1993
between the Registrant and J. T.
Angel.
Exhibit 10.37 Galloway Waiver Agreement dated as
of May 31, 1991 among the
Noteholders, the Owner Trustee and
the Indenture Trustee named therein.
(Filed as Exhibit 10.45 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.38 Thornton Waiver Agreement dated as
of May 31, 1991 among the
Noteholders, the Owner Trustee and
the Indenture Trustee named therein.
(Filed as Exhibit 10.46 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.39 Galloway Rescission Agreement dated
as of June 28, 1991 among Reading &
Bates Drilling Co., the Registrant,
the Noteholders, the Owner Trustee,
the Indenture Trustee and the Owner
Participant named therein. (Filed
as Exhibit 10.47 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.40 Galloway Assignment Agreement dated
as of June 28, 1991 between the
Holders named therein and the NMB
Postbank Groep N.V. (Filed as
Exhibit 10.48 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.41 Thornton Rescission Agreement dated
as of June 28, 1991 among Reading &
Bates Exploration Co., the
Registrant, the Noteholders, the
Owner Trustee, the Indenture Trustee
and the Owner Participant named
therein. (Filed as Exhibit 10.49 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.42 Thornton Assignment Agreement dated
as of June 28, 1991 between the
Holders named therein and NMB
Postbank Groep N.V. (Filed as
Exhibit 10.50 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.43 Facility Agreement dated February
21, 1991 between Arcade Drilling AS,
Chase Investment Bank Limited and
The Chase Manhattan Bank, N.A.
(Filed as Exhibit 10.51 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.44 Hull 515 Rig Management Agreement
dated October 26, 1990 between
Arcade Drilling AS and Sonat
Offshore Drilling Inc. (Filed as
Exhibit 10.52 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.45 HG Rig Management Agreement dated
October 26, 1990 between Arcade
Drilling AS and Sonat Offshore
Drilling Inc. (Filed as Exhibit
10.53 to Registration No. 33-51120
and incorporated herein by
reference.)
Exhibit 10.46 Modification Agreement dated as of
May 27, 1992 between Arcade Drilling
AS and Sonat Offshore Drilling Inc.
(Filed as Exhibit 10.54 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.47 Credit Facility Letter dated May 12,
1992 between Arcade Shipping AS and
The Chase Manhattan Bank, N.A., as
amended on May 14, 1992. (Filed as
Exhibit 10.55 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.48 Letter Agreement dated May 12, 1992
between the Registrant and The Chase
Manhattan Bank, N.A. regarding
undertakings with respect to a
credit facility issued as of the
same date to Arcade Shipping AS.
(Filed as Exhibit 10.56 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.49 Charter Payments Agreement dated as
of September 30, 1991 among the
Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration
Co., Reading and Bates, Inc. and NMB
Postbank Groep, N.V. (Filed as
Exhibit 10.57 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.50 Amendment No. 1, dated as of June
30, 1992, to Charter Payments
Agreement dated as of September 30,
1991 among the Registrant, Reading
and Bates Drilling Co., Reading and
Bates Exploration Co., Reading and
Bates, Inc. and Internationale
Nederlanden Bank N.V. (formerly
known as NMB Postbank Groep N.V.).
(Filed as Exhibit 10.36 to the
Company's Annual Report on Form 10-K
for 1992 and incorporated herein by
reference.)
Exhibit 10.51 Floating Rate Loan Facility
Agreement dated September 19, 1991
between Gade Shipping Corporation,
Skandinaviska Enskilda Banken,
London Branch and Den norske Bank
AS. (Filed as Exhibit 10.58 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.52 Bareboat Charter dated September 4,
1991 between K/S UL Arcade and
Arcade Shipping AS (regarding
motorvessel "ARCADE FALCON").
(Filed as Exhibit 10.59 to
Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.53 Bareboat Charter dated September 4,
1991 between K/S UL Arcade and
Arcade Shipping AS (regarding
motorvessel "ARCADE EAGLE"). (Filed
as Exhibit 10.60 to Registration No.
33-51120 and incorporated herein by
reference.)
Exhibit 10.54 ISDA Interest and Currency Exchange
Agreement dated as of October 26,
1990 between the Chase Manhattan
Bank, N.A. and K/S Frontier
Drilling, and Novation Agreement
with respect thereto dated February
28, 1991. (Filed as Exhibit 10.62
to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 11 Computation of Earnings Per Common Share
Exhibit 16 Letter re Change in Certifying Accountant
(filed as Exhibit 16.1 to the Company's
Form 8-K dated December 2, 1992 and
incorporated herein by reference).
Exhibit 21 Schedule of Subsidiaries of the Company
Exhibit 23.1 Consent of Arthur Andersen & Co.
Exhibit 23.2 Consent of Coopers & Lybrand
Exhibit 99 Annual Report on Form 11-K with respect to
Reading & Bates Savings Plan. (To be
filed by amendment.)
Exhibit 4.12
TERMINATION AGREEMENT
Termination Agreement dated as of September 14, 1993
between Reading & Bates Corporation, a Delaware
corporation ("R&B"), and BCL Investment Partners, L.P., a
Delaware limited partnership (the "Partnership").
R&B, the Partnership, R&B Rig Investment Partners,
L.P. ("Rig"), R&B MODU Investment Associates, L.P.
("MODU") and M&W Investment Partners, L.P. ("M&W") are
parties to an agreement dated as of March 27, 1991.
Subsequent to March 27, 1991, Rig, MODU and M&W have been
merged into and become a part of the Partnership. R&B
and the Partnership have mutually agreed to terminate the
Agreement, effective as of the date of this Termination
Agreement, on the terms set out below:
1. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings
ascribed to them in the Agreement.
2. Effective as of September 14, 1993 the
Agreement is terminated, and neither party
shall thereafter have any obligation to the
other thereunder.
3. Notwithstanding the termination of the
Agreement, the Partnership's Designees to the
Board shall continue to serve as directors in
the same manner as other directors and
Partnership's Designee currently serving as
Chairman and Chief Executive Officer of R&B
will continue to serve in such capacity
pursuant to the terms of a separate employment
agreement between R&B and the Partnership's
Designee.
IN WITNESS WHEREOF, the parties have executed this
Termination Agreement as of the date first shown above.
READING & BATES CORPORATION
By: /s/Tim W. Nagle
Its: Vice President and Chief
Financial Officer
BCL INVESTMENT PARTNERS, L.P.
By: GREENWING INVESTMENTS, INC.,
GENERAL PARTNER
By: /s/Frank A. Wojtek
Its: Vice President
Exhibit 4.14
AMENDMENT NO. 1
This Amendment No. 1 dated as of January 1, 1992 to that
Agreement (the "Agreement") dated as of March 27, 1991 between
Reading & Bates Corporation, a Delaware corporation ("R&B"), and
R&B Investment Partnership, L.P., a Delaware limited partnership
(the "Partnership").
The parties have agreed to, and do hereby, amend the
Agreement to make provisions regarding the compensation and
benefits attributable to the service of any Designee of the
Partnership as an officer or director of R&B, as follows:
1. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the
Agreement.
2. In the event any Designee of the Partnership receives
compensation or benefits from R&B attributable to
services as an officer or director of R&B on or after
January 1, 1992, the parties agree that any and all
such compensation and benefits payable by R&B to the
Designee shall be paid to, or otherwise provided for
the benefit of, the Partnership. For purposes hereof
"compensation" and "benefits" shall not include any
rights to indemnification or any directors and officers
liability insurance coverage provided by the Company to
such Designee.
3. Except as amended by this Amendment No. 1, the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 as of the date first above written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Paul B. Loyd, Jr.
Chairman and Chief Executive
Officer
R&B INVESTMENT PARTNERSHIP, L.P.
By: WHR Management Company, L.P.
By: /s/C. Kirk Rhein, Jr.
C. Kirk Rhein, Jr.
General Partner
Exhibit 4.15
AMENDMENT NO. 2
This Amendment No. 2 dated as of January 1, 1992 to
that Agreement (the "Agreement") dated as of March 27,
1991 between Reading & Bates Corporation, a Delaware
corporation ("R&B" or the "Company"), and R&B Investment
Partnership, L.P., a Delaware limited partnership (the
"Partnership").
The parties have agreed to, and do hereby, amend the
Agreement, to correct the provisions of Amendment No. 1
dated as of January 1, 1992 to the Agreement, regarding
the attribution of compensation and benefits relating to
the service of any Designee of the Partnership as an
officer or director of R&B, as follows:
1. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed
to them in the Agreement.
2. Pursuant to the instruction of the Partnership,
all compensation or benefits from R&B attributable
to services by a Designee of the Partnership as an
officer or director of R&B that have been paid or
which are or shall become payable by R&B from and
after January 1, 1992 have been or will be paid to,
or otherwise provided for the benefit of, WHR
Management Company, L.P., the general partner of the
Paratnership (the "General Partner"). For purposes
hereof, "compensation" and "benefits" shall not
include any rights to indemnification or any
directors' and officers' liability insurance
coverage provided by the Company to such Designee.
3. This Amendment No. 2 supersedes and replaces in
all respects, effective on and as of January 1,
1992, Amendment No. 1 to the Agreement.
4. Except as amended by this Amendment No. 2, the
Agreement shall remain in full force and effective.
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 2 on August 3, 1992.
The Company:
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Paul B. Loyd, Jr.
Chairman & Chief Executive Officer
The Partnership:
R&B INVESTMENT PARTNERSHIP, L.P.
By: WHR MANAGEMENT COMPANY, L.P.
By: /s/James P. Heffernan
James P. Heffernan
General Partner
Agreed to and acknowledged by the General Partner:
WHR MANAGEMENT COMPANY, L.P.
By: /s/C. Kirk Rhein, Jr.
C. Kirk Rhein, Jr.
General Partner
Exhibit 4.16
TERMINATION AGREEMENT
Termination Agreement dated as of September 14, 1993
between Reading & Bates Corporation, a Delaware
corporation ("R&B"), and R&B Investment Partnership,
L.P., a Delaware limited partnership (the "Partnership").
R&B and the Partnership are parties to an agreement
dated as of March 27, 1991, as amended (the "Agreement"),
and by mutual agreement the parties have agreed to
terminate the Agreement, effective as of the date of this
Termination Agreement, on the terms set out below:
1. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings
ascribed to them in the Agreement.
2. Effective as of September 14, 1993 the
Agreement is terminated, and neither party
shall thereafter have any obligation to the
other thereunder.
3. Notwithstanding the termination of the Agree-
ment, the Partnership's Designees to the Board
shall continue to serve as directors in the
same manner as other directors and
Partnership's Designee currently serving as
Vice Chairman of R&B will continue to serve in
such capacity pursuant to the terms of a
separate employment agreement between R&B and
the Partnership's Designee. Pursuant to prior
instructions of the Partnership, all
compensation or benefits from R&B attributable
to services by a Designee of the Partnership as
an officer or director of R&B that have been
paid or which are or shall become payable by
R&B from or after January 1, 1992 have been or
will be paid to, or otherwise provided for the
benefit of, WHR Management Company, L.P., the
general partner of the Partnership (the
"General Partner"). For purposes hereof,
"compensation" and "benefits" shall not include
any rights to indemnification or any directors
and officers liable to insurance coverage
provided by R&B to such Designee.
IN WITNESS WHEREOF, the parties have executed this
Termination Agreement as of the date first shown above.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman & Chief Executive
Officer
R&B INVESTMENT PARTNERSHIP, L.P.
By: WHR MANAGEMENT COMPANY, L.P.
By: /s/James P. Heffernan
James P. Heffernan
General Partner
Agreed to and acknowledged by the General Partner:
WHR MANAGEMENT COMPANY, L.P.
By: /s/C. Kirk Rhein, Jr.
C. Kirk Rhein, Jr.
General Partner
Exhibit 10.11
AGREEMENT
The undersigned,
A. Internationale Nederlanden Bank N.V., which has its registered
office in Amsterdam, The Netherlands, acting herein through its
branch at Amsterdam South East, The Netherlands, hereinafter
referred to as the "Bank" and
B. Reading & Bates Corporation, a corporation organized and
existing under the laws of the State of Delaware ("RBC").
Reading & Bates Drilling Co. ("RBD"), Reading & Bates
Exploration Co. ("RBX"), Reading and Bates Inc. ("RBI"), RBD.
RBX and RBI each being corporations organized and existing under
the laws of the State of Oklahoma
RBC, RBD, RBX and RBI hereinafter individually referred to as a
"Borrower" and jointly as the "Borrowers";
WHEREAS:
- The Bank has granted certain credit facilities to the Borrowers
pursuant to a Credit Facility Agreement dated as of March 27,
1991 (as amended. the "Credit Facility").
- In addition to the Credit Facility, the Bank is prepared to
offer the Borrowers an additional letter of credit facility for
customs bonds to Indonesia (the "L/C Facility"), which L/C
Facility has been described in a term sheet dated.......... (the
"Term Sheet") and shall be incorporated into the Credit
Facility; and
- in order to accommodate the Borrowers, the Bank is prepared, on
a temporary basis, until the restatement of the Credit Facility
has been completed which shall, among other things, incorporate
the L/C Facility. to issue letters of credit on a full
indemnification basis, secured by pledged account deposits of
the Borrowers at our Amsterdam Branch, in an amount equal to
120% of the countervalue in US Dollars of the aggregate of the
face amount in Indonesia Rhupias of all letters of credit of the
Borrowers outstanding under the L/C Facility.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good
and valuable consideration the parties hereto have agreed as
follows:
1. On the terms and subject to the conditions hereof, the Bank
hereby agrees that it will issue letters of credit in Indonesian
Rhupias under the L/C Facility at the request of the Borrowers
which, in the aggregate principal amount, do not exceed the
countervalue of USD 10,000,000 (say: United States Dollars ten
million), with expiration dates on or before June 30, 1997 for
the account of the Borrowers. The letters of credit shall be
substantially in the form attached hereto as Exhibit A (the
"Letters of Credit").
2. RBC, RBD, RBX, RBI jointly and severally agree to indemnity the
Bank for and to reimburse the Bank a sum equal to any amount
paid out by the Bank as a result of any drawing under the
Letters of Credit issued pursuant to Section 1 hereof.
3. The Bank shall issue the Letters of Credit upon at least 5
Banking Day's irrevocable prior written notice from the
Borrowers and upon receipt by the Bank of:
(a) this Agreement duly executed by the Borrowers and the
Bank;
(b) the Pledge Agreement referred to below, duly executed by
the Borrowers and the Bank;
(c) a certified copy of the resolutions of the Board of
Directors of the Borrowers approving the execution,
delivery and performance by the Borrowers of this
Agreement and the Pledge Agreement;
(d) any consents necessary from governmental or other
authorities. persons or entities for the execution,
delivery and performance by the Borrowers of this
Agreement and the Pledge Agreement;
(e) a bring down certificate substantially in the form of
Exhibit B attached to this Agreement.
4. As security for the payment or repayment of all amounts which
the Borrowers may owe to the Bank (or its successor or assignee)
hereunder or pursuant to issued Letters of Credit and the
indemnification as described above, now or at any time in the
future, each of the Borrowers will pledge to the Bank, pursuant
to the Pledge Agreement between the Borrowers and the Bank,
substantially in the form of Exhibit C attached hereto (the
"Pledge Agreement"), the credit balances in favour of each of
the Borrowers which are present now or at any time in the future
on deposit with Internationale Nederlanden Bank N.V.. Amsterdam
Branch in the following specified accounts: 02.14.45.184 of RBX,
02.14.45.168 of RBD, 02.14.45.257 of RBI and 02.14.41.790,
02.20.37.683, and 02.19.94.625 of RBC (the "Pledged accounts").
5. The Pledge Agreement shall extend to all proceeds of the Pledged
Accounts of the Borrowers with the Bank.
6. Without the consent of the Bank. the Borrowers shall not have
access to the Pledged Accounts for the amount equal to 120% of
the countervalue in US Dollars of the aggregate of the face
value amount in Indonesian Rhupias of all Letters of Credit.
The Bank shall, however, give consent to the Borrowers' full
access to the Pledged Accounts after the L/C Facility is
incorporated into the Credit Facility.
7. The Borrowers shall pay to the Bank upon demand of the Bank a
sum equal to any amount paid out by the Bank in pursuance or
purported pursuance of its obligations under the Letters of
Credit (a "Letter of Credit Payment"). A certificate submitted
by the Bank to the Borrowers as to the amount of any Letter of
Credit Payment made by the Bank shall (save for manifest error)
be conclusive and binding on the Borrowers for all purposes.
The Bank shall not concern itself with the regularity or
propriety of any
demand made under the Letters of Credit provided that such
demand is made in the manner called for in the Letters of Credit
and (subject to such proviso) it shall not be a defense to a
claim of the Bank under this Section 7 that the Bank could have
resisted the payment in respect of which such claim is made.
8. If the Borrowers fail to pay when due any sum payable hereunder.
the Bank is entitled. for the duration of the Pledge Agreement,
to debit such amounts from the Pledged Accounts as may be
required to repay the full amount of debt owed by the Borrowers
to the Bank pursuant to issued Letters of Credit and the
indemnification set forth in Section 2 above.
9. The Borrower shall pay to the Bank:
(a) an arrangement fee of 50% of the fee for the new L/C
Facility as mentioned in the Term Sheet, being an amount
of USD 75,000 payable on the date of this agreement. The
remaining 50% of the arrangement fee as mentioned in the
Term Sheet is payable on the date of completion of the
restatement of the Credit Facility; and
(b) a letter of credit fee, calculated at the rate of 1/2% per
annum of the amount of the Letters of Credit from the date
the Letters of Credit are issued until the expiration date
of this Agreement, payable quarterly in arrears; and
(c) all costs, charges and expenses (including reasonable fees
and disbursements of the Bank's lawyers) incurred by the
Bank in connection to the preparation, execution and
enforcement of this Agreement.
10. This Agreement and the Pledge Agreement referred to herein shall
be governed by Dutch law. Any disputes relating to it shall be
brought before the competent Dutch court, unless the Bank, as
plaintiff, chooses to institute proceedings before the foreign
court competent to hear the case in respect of the Borrowers, as
defendants
IN WITNESS WHEREOF, the parties hereto have duly executed this
agreement on August 18, 1993.
Internationale Nederlanden Bank N.V. Reading & Bates Corporation
Branch: Amsterdam
By:/s/L. A. Van Stijn By:/s/T. W. Nagle
Name:L. A. Van Stijn Name:T. W. Nagle
Title:Deputy General Manager Title:Vice President and Chief
Financial Officer
Reading & Bates Drilling Co.
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President
Reading & Bates Inc
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President and Treasurer
Reading & Bates Exploration Co
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President and Treasurer
Exhibit 10.12
PLEDGE AGREEMENT
The undersigned,
A. Internationale Nederlanden Bank N.V., which has its
registered office in Amsterdam, The Netherlands, acting
herein through its branch at Amsterdam South East, The
Netherlands, hereinafter referred to as the "Bank" and
B. Reading & Bates Corporation, a corporation organized
and existing under the laws of the State of Delaware
("RBC"), Reading & Bates Drilling Co. ("RBD"),
Reading & Bates Exploration Co. ("RBX"), Reading and
Bates Inc. ("RBI"), RBD, RBX and RBI each being
corporations organized and existing under the laws
of the State of Oklahoma
RBC, RBD, RBX and RBI hereinafter individually
referred to as a "Pledgor" and jointly as the
"Pledgors";
As security for the payment or repayment of all
amounts which the Borrowers as defined in the
Agreement for the L/C Facility for customs bonds to
Indonesia dated as of............ may owe to the
Bank (or its successor or assignee) hereunder or
pursuant to issued Letters of Credit and the
indemnification as described above, now or at any
time in the future, each of the Pledgors hereby
pledges, in advance if necessary, to the Bank the
credit balances in favour of each of the Pledgors
which are present now or at any time in the future
on deposit with Internationale Nederlanden Bank
N.V., Amsterdam Branch in the following specified
accounts: 02.14.45.184 of RBX, 02.14.45.168 of RBD,
02.14.45.257 of RBI, and 02.14.41.790 of RBC (the
"Pledged accounts").
The pledge referred to above shall be effected by
the signature of this pledge agreement and shall
thereafter on each occasion be effected by - and at the
moment of - the crediting of the abovementioned account(s)
in favour of the Pledgor with any amount as his credit
balance as referred to above, such crediting shall also,
where necessary, serve as a notice to the Bank of the
pledging of the credit amount.
The Pledge Agreement shall extend to all proceeds of
the Pledged Accounts of the Pledgors with the Bank.
Without the consent of the Bank, the Pledgors shall
not have access to the Pledged Accounts for the amount
equal to 120% of the countervalue in US Dollars of the
aggregate of the face value amount in Indonesian Rhupias
of all Letters of Credit. The Bank shall, however, give
consent to the Pledgors' full access to the Pledged
Accounts after the L/C Facility is incorporated into the
Credit Facility.
This Agreement shall be governed by Dutch law. Any
disputes relating to it shall be brought before the
competent Dutch court, unless the Bank, as plaintiff,
chooses to institute proceedings before the foreign court
competent to hear the case in respect of the Pledgors, as
defendants
IN WITNESS WHEREOF, the parties hereto have duly
executed this agreement on August 18, 1993.
Internationale Nederlanden Bank N.V. Reading & Bates Corporation
Branch: Amsterdam
By:/s/L. A. Van Stijn By:/s/T. W. Nagle
Name:L. A. Van Stijn Name:T. W. Nagle
Title:Deputy General Manager Title:Vice President and
Chief Financial Officer
Reading & Bates Drilling Co.
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President
Reading & Bates Exploration Co
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President and
Treasurer
Reading & Bates Inc
By:/s/T. W. Nagle
Name:T. W. Nagle
Title:Vice President and
Treasurer
Exhibit 10.15
READING & BATES CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement")
between Reading & Bates Corporation, a Delaware
corporation ("Company") and C. A. Donabedian
("Optionee"),
WITNESSETH:
WHEREAS, the Company has selected the Optionee,
a director of the Company, to receive a nonqualified stock
option as an incentive to the Optionee to remain a
director of the Company and contribute to the performance
of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these
premises, it is hereby agreed as follows:
1. On the terms and subject to the conditions
herein, the Company hereby grants to the Optionee an
option for a term of ten years ending on September 14,
2003 ("Option Period") to purchase from the Company 5,000
shares ("Option Shares") of the Company's Common Stock, at
a price equal to $8.50 per share, the closing price for
such Common Stock on the New York Stock Exchange Composite
Transactions Tape on September 13, 1993.
2. This Option shall not be exercisable,
except upon the death or disability of the Optionee, until
after 6 months immediately following the date this Option
is granted, and thereafter shall, subject to the terms of
this Agreement, be exercisable for Common Stock during the
balance of the Option Period.
3. The option herein granted may be exercised
by the Optionee by giving written notice to the Secretary
of the Company setting forth the number of Option Shares
with respect to which the option is to be exercised,
accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the
address to which the certificate for such shares is to be
mailed. Payment shall be by means of cash, certified
check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after
receipt of such written notification and payment, the
Company shall deliver to the Optionee certificates for the
number of Option Shares with respect to which such option
has been so exercised.
4. Subject to approval of the Company, which
shall not be unreasonably withheld, the Optionee may pay
for any Option Shares with respect to which the option
herein granted is exercised by tendering to the Company
other shares of Common Stock at the time of the exercise
or partial exercise hereof. The certificates representing
such other shares of Common Stock must be accompanied by a
stock power duly executed with signature guaranteed. The
value of the Common Stock so tendered shall be its Fair
Market Value.
5. If the Optionee ceases to be a director of
the Company during the Option Period, any unexercised
options granted to him hereunder may only be exercised by
him during a three month period beginning on the date he
ceases to be a director (or by his executor(trix) or
personal representative during a one year period beginning
on the date of the Optionee's death).
6. The option herein granted shall not be
assignable or transferable by the Optionee, except by will
or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended from time to
time, or Title I of the Employment Retirement Income
Security Act, or the rules thereunder. During the lifetime
of the Optionee, such option shall be exercisable only by
him. No transfer of the option herein granted shall be
effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy
of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance
by the transferee or transferees of the terms and
conditions hereof.
7. The Optionee shall have no rights as a
stockholder with respect to any Option Shares until the
date of issuance of a certificate for Option Shares
purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote
at meetings of the stockholders of the Company.
8. The Company may make such provisions as it
may deem appropriate for the withholding of any taxes
which it determines is required in connection with the
option herein granted. The Optionee may pay all or any
portion of the taxes required to be withheld by the
Company or paid by the Optionee in connection with the
exercise of all or any portion of the option herein
granted by electing to have the Company withhold shares of
Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value equal to the
amount required to be withheld or paid. The Optionee must
make the foregoing election on or before the date that the
amount of tax to be withheld is determined ("Tax Date").
Any such election is irrevocable and subject to
disapproval by the Committee. As Optionee is subject to
the short-swing profits recapture provisions of Section
16(b) of the Exchange Act, any such election may not be
made within six months of the grant of this option (except
in the event of death or disability).
9. Upon the acquisition of any shares pursuant
to the exercise of the option herein granted, the Optionee
will enter into such written representations, warranties
and agreements as the Company may reasonably request in
order to comply with applicable securities laws or with
this Agreement.
10. The certificates representing the Option
Shares purchased by exercise of an option will be stamped
or otherwise imprinted with a legend in such form as the
Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer
instructions, as appropriate, with respect to such shares.
11. Unless otherwise provided herein, every
notice hereunder shall be in writing and shall be given by
registered or certified mail. All notices of the exercise
by the Optionee of any option hereunder shall be directed
to Reading & Bates Corporation, Attention: Secretary, at
the Company's current address. Any notice given by the
Company to the Optionee directed to him at his address on
file with the Company shall be effective to bind any other
person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the
Optionee of the existence, maturity or termination of any
of the Optionee's rights hereunder and the Optionee shall
be deemed to have familiarized himself with all matters
contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
12. Whenever the term "Optionee" is used herein
under circumstances applicable to any other person or
persons to whom this award, in accordance with the
provisions of Paragraph 6, may be transferred, the word
"Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also
include the feminine gender for all purposes.
13. Notwithstanding any of the other provisions
hereof, the Optionee agrees that he will not exercise the
option herein granted, and that the Company will not be
obligated to issue any shares pursuant to this Agreement,
if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the
Optionee or by the Company of any provision of any law or
regulation of any governmental authority or any national
securities exchange.
14. In the event of a corporate merger or other
business combination in which the Company is not the
surviving entity, the Company agrees to exert reasonable
efforts to obtain from the surviving entity a grant to the
Optionee of the economic equivalent number of the voting
shares of common stock of, or participating interests in,
the surviving entity, based on the terms of such merger or
other business combination, in substitution for the Option
Shares hereunder, and in such event the price per share
set out in Section 2 hereof shall be adjusted to reflect
substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any
such merger or other business combination. However, if
the Company is unable to obtain such a grant for the
Optionee, neither the Company nor the surviving entity
have any liability to Optionee with respect to same.
IN WITNESS WHEREOF, this Agreement is executed
this 7th day of October, 1993, effective as of the
14th day of September, 1993.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
OPTIONEE
/s/Charles A. Donabedian
Exhibit 10.16
READING & BATES CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement")
between Reading & Bates Corporation, a Delaware
corporation ("Company") and J. W. McClean
("Optionee"),
WITNESSETH:
WHEREAS, the Company has selected the Optionee,
a director of the Company, to receive a nonqualified stock
option as an incentive to the Optionee to remain a
director of the Company and contribute to the performance
of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these
premises, it is hereby agreed as follows:
1. On the terms and subject to the conditions
herein, the Company hereby grants to the Optionee an
option for a term of ten years ending on September 14,
2003 ("Option Period") to purchase from the Company 5,000
shares ("Option Shares") of the Company's Common Stock, at
a price equal to $8.50 per share, the closing price for
such Common Stock on the New York Stock Exchange Composite
Transactions Tape on September 13, 1993.
2. This Option shall not be exercisable,
except upon the death or disability of the Optionee, until
after 6 months immediately following the date this Option
is granted, and thereafter shall, subject to the terms of
this Agreement, be exercisable for Common Stock during the
balance of the Option Period.
3. The option herein granted may be exercised
by the Optionee by giving written notice to the Secretary
of the Company setting forth the number of Option Shares
with respect to which the option is to be exercised,
accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the
address to which the certificate for such shares is to be
mailed. Payment shall be by means of cash, certified
check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after
receipt of such written notification and payment, the
Company shall deliver to the Optionee certificates for the
number of Option Shares with respect to which such option
has been so exercised.
4. Subject to approval of the Company, which
shall not be unreasonably withheld, the Optionee may pay
for any Option Shares with respect to which the option
herein granted is exercised by tendering to the Company
other shares of Common Stock at the time of the exercise
or partial exercise hereof. The certificates representing
such other shares of Common Stock must be accompanied by a
stock power duly executed with signature guaranteed. The
value of the Common Stock so tendered shall be its Fair
Market Value.
5. If the Optionee ceases to be a director of
the Company during the Option Period, any unexercised
options granted to him hereunder may only be exercised by
him during a three month period beginning on the date he
ceases to be a director (or by his executor(trix) or
personal representative during a one year period beginning
on the date of the Optionee's death).
6. The option herein granted shall not be
assignable or transferable by the Optionee, except by will
or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended from time to
time, or Title I of the Employment Retirement Income
Security Act, or the rules thereunder. During the lifetime
of the Optionee, such option shall be exercisable only by
him. No transfer of the option herein granted shall be
effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy
of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance
by the transferee or transferees of the terms and
conditions hereof.
7. The Optionee shall have no rights as a
stockholder with respect to any Option Shares until the
date of issuance of a certificate for Option Shares
purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote
at meetings of the stockholders of the Company.
8. The Company may make such provisions as it
may deem appropriate for the withholding of any taxes
which it determines is required in connection with the
option herein granted. The Optionee may pay all or any
portion of the taxes required to be withheld by the
Company or paid by the Optionee in connection with the
exercise of all or any portion of the option herein
granted by electing to have the Company withhold shares of
Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value equal to the
amount required to be withheld or paid. The Optionee must
make the foregoing election on or before the date that the
amount of tax to be withheld is determined ("Tax Date").
Any such election is irrevocable and subject to
disapproval by the Committee. As Optionee is subject to
the short-swing profits recapture provisions of Section
16(b) of the Exchange Act, any such election may not be
made within six months of the grant of this option (except
in the event of death or disability).
9. Upon the acquisition of any shares pursuant
to the exercise of the option herein granted, the Optionee
will enter into such written representations, warranties
and agreements as the Company may reasonably request in
order to comply with applicable securities laws or with
this Agreement.
10. The certificates representing the Option
Shares purchased by exercise of an option will be stamped
or otherwise imprinted with a legend in such form as the
Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer
instructions, as appropriate, with respect to such shares.
11. Unless otherwise provided herein, every
notice hereunder shall be in writing and shall be given by
registered or certified mail. All notices of the exercise
by the Optionee of any option hereunder shall be directed
to Reading & Bates Corporation, Attention: Secretary, at
the Company's current address. Any notice given by the
Company to the Optionee directed to him at his address on
file with the Company shall be effective to bind any other
person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the
Optionee of the existence, maturity or termination of any
of the Optionee's rights hereunder and the Optionee shall
be deemed to have familiarized himself with all matters
contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
12. Whenever the term "Optionee" is used herein
under circumstances applicable to any other person or
persons to whom this award, in accordance with the
provisions of Paragraph 6, may be transferred, the word
"Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also
include the feminine gender for all purposes.
13. Notwithstanding any of the other provisions
hereof, the Optionee agrees that he will not exercise the
option herein granted, and that the Company will not be
obligated to issue any shares pursuant to this Agreement,
if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the
Optionee or by the Company of any provision of any law or
regulation of any governmental authority or any national
securities exchange.
14. In the event of a corporate merger or other
business combination in which the Company is not the
surviving entity, the Company agrees to exert reasonable
efforts to obtain from the surviving entity a grant to the
Optionee of the economic equivalent number of the voting
shares of common stock of, or participating interests in,
the surviving entity, based on the terms of such merger or
other business combination, in substitution for the Option
Shares hereunder, and in such event the price per share
set out in Section 2 hereof shall be adjusted to reflect
substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any
such merger or other business combination. However, if
the Company is unable to obtain such a grant for the
Optionee, neither the Company nor the surviving entity
have any liability to Optionee with respect to same.
IN WITNESS WHEREOF, this Agreement is executed
this 11th day of October, 1993, effective as of the
14th day of September, 1993.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
OPTIONEE
/s/J. W. McClean
Exhibit 10.17
READING & BATES CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement")
between Reading & Bates Corporation, a Delaware
corporation ("Company") and Robert L. Sandmeyer
("Optionee"),
WITNESSETH:
WHEREAS, the Company has selected the Optionee,
a director of the Company, to receive a nonqualified stock
option as an incentive to the Optionee to remain a
director of the Company and contribute to the performance
of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these
premises, it is hereby agreed as follows:
1. On the terms and subject to the conditions
herein, the Company hereby grants to the Optionee an
option for a term of ten years ending on September 14,
2003 ("Option Period") to purchase from the Company 5,000
shares ("Option Shares") of the Company's Common Stock, at
a price equal to $8.50 per share, the closing price for
such Common Stock on the New York Stock Exchange Composite
Transactions Tape on September 13, 1993.
2. This Option shall not be exercisable,
except upon the death or disability of the Optionee, until
after 6 months immediately following the date this Option
is granted, and thereafter shall, subject to the terms of
this Agreement, be exercisable for Common Stock during the
balance of the Option Period.
3. The option herein granted may be exercised
by the Optionee by giving written notice to the Secretary
of the Company setting forth the number of Option Shares
with respect to which the option is to be exercised,
accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the
address to which the certificate for such shares is to be
mailed. Payment shall be by means of cash, certified
check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after
receipt of such written notification and payment, the
Company shall deliver to the Optionee certificates for the
number of Option Shares with respect to which such option
has been so exercised.
4. Subject to approval of the Company, which
shall not be unreasonably withheld, the Optionee may pay
for any Option Shares with respect to which the option
herein granted is exercised by tendering to the Company
other shares of Common Stock at the time of the exercise
or partial exercise hereof. The certificates representing
such other shares of Common Stock must be accompanied by a
stock power duly executed with signature guaranteed. The
value of the Common Stock so tendered shall be its Fair
Market Value.
5. If the Optionee ceases to be a director of
the Company during the Option Period, any unexercised
options granted to him hereunder may only be exercised by
him during a three month period beginning on the date he
ceases to be a director (or by his executor(trix) or
personal representative during a one year period beginning
on the date of the Optionee's death).
6. The option herein granted shall not be
assignable or transferable by the Optionee, except by will
or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended from time to
time, or Title I of the Employment Retirement Income
Security Act, or the rules thereunder. During the lifetime
of the Optionee, such option shall be exercisable only by
him. No transfer of the option herein granted shall be
effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy
of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance
by the transferee or transferees of the terms and
conditions hereof.
7. The Optionee shall have no rights as a
stockholder with respect to any Option Shares until the
date of issuance of a certificate for Option Shares
purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote
at meetings of the stockholders of the Company.
8. The Company may make such provisions as it
may deem appropriate for the withholding of any taxes
which it determines is required in connection with the
option herein granted. The Optionee may pay all or any
portion of the taxes required to be withheld by the
Company or paid by the Optionee in connection with the
exercise of all or any portion of the option herein
granted by electing to have the Company withhold shares of
Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value equal to the
amount required to be withheld or paid. The Optionee must
make the foregoing election on or before the date that the
amount of tax to be withheld is determined ("Tax Date").
Any such election is irrevocable and subject to
disapproval by the Committee. As Optionee is subject to
the short-swing profits recapture provisions of Section
16(b) of the Exchange Act, any such election may not be
made within six months of the grant of this option (except
in the event of death or disability).
9. Upon the acquisition of any shares pursuant
to the exercise of the option herein granted, the Optionee
will enter into such written representations, warranties
and agreements as the Company may reasonably request in
order to comply with applicable securities laws or with
this Agreement.
10. The certificates representing the Option
Shares purchased by exercise of an option will be stamped
or otherwise imprinted with a legend in such form as the
Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer
instructions, as appropriate, with respect to such shares.
11. Unless otherwise provided herein, every
notice hereunder shall be in writing and shall be given by
registered or certified mail. All notices of the exercise
by the Optionee of any option hereunder shall be directed
to Reading & Bates Corporation, Attention: Secretary, at
the Company's current address. Any notice given by the
Company to the Optionee directed to him at his address on
file with the Company shall be effective to bind any other
person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the
Optionee of the existence, maturity or termination of any
of the Optionee's rights hereunder and the Optionee shall
be deemed to have familiarized himself with all matters
contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
12. Whenever the term "Optionee" is used herein
under circumstances applicable to any other person or
persons to whom this award, in accordance with the
provisions of Paragraph 6, may be transferred, the word
"Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also
include the feminine gender for all purposes.
13. Notwithstanding any of the other provisions
hereof, the Optionee agrees that he will not exercise the
option herein granted, and that the Company will not be
obligated to issue any shares pursuant to this Agreement,
if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the
Optionee or by the Company of any provision of any law or
regulation of any governmental authority or any national
securities exchange.
14. In the event of a corporate merger or other
business combination in which the Company is not the
surviving entity, the Company agrees to exert reasonable
efforts to obtain from the surviving entity a grant to the
Optionee of the economic equivalent number of the voting
shares of common stock of, or participating interests in,
the surviving entity, based on the terms of such merger or
other business combination, in substitution for the Option
Shares hereunder, and in such event the price per share
set out in Section 2 hereof shall be adjusted to reflect
substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any
such merger or other business combination. However, if
the Company is unable to obtain such a grant for the
Optionee, neither the Company nor the surviving entity
have any liability to Optionee with respect to same.
IN WITNESS WHEREOF, this Agreement is executed
this 8th day of October, 1993, effective as of the
14th day of September, 1993.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
OPTIONEE
/s/Robert L. Sandmeyer
Exhibit 10.18
READING & BATES CORPORATION
DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement")
between Reading & Bates Corporation, a Delaware
corporation ("Company") and Steven A. Webster
("Optionee"),
WITNESSETH:
WHEREAS, the Company has selected the Optionee,
a director of the Company, to receive a nonqualified stock
option as an incentive to the Optionee to remain a
director of the Company and contribute to the performance
of the Company, on the terms and subject to the conditions
provided herein;
NOW THEREFORE, for and in consideration of these
premises, it is hereby agreed as follows:
1. On the terms and subject to the conditions
herein, the Company hereby grants to the Optionee an
option for a term of ten years ending on September 14,
2003 ("Option Period") to purchase from the Company 5,000
shares ("Option Shares") of the Company's Common Stock, at
a price equal to $8.50 per share, the closing price for
such Common Stock on the New York Stock Exchange Composite
Transactions Tape on September 13, 1993.
2. This Option shall not be exercisable,
except upon the death or disability of the Optionee, until
after 6 months immediately following the date this Option
is granted, and thereafter shall, subject to the terms of
this Agreement, be exercisable for Common Stock during the
balance of the Option Period.
3. The option herein granted may be exercised
by the Optionee by giving written notice to the Secretary
of the Company setting forth the number of Option Shares
with respect to which the option is to be exercised,
accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the
address to which the certificate for such shares is to be
mailed. Payment shall be by means of cash, certified
check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after
receipt of such written notification and payment, the
Company shall deliver to the Optionee certificates for the
number of Option Shares with respect to which such option
has been so exercised.
4. Subject to approval of the Company, which
shall not be unreasonably withheld, the Optionee may pay
for any Option Shares with respect to which the option
herein granted is exercised by tendering to the Company
other shares of Common Stock at the time of the exercise
or partial exercise hereof. The certificates representing
such other shares of Common Stock must be accompanied by a
stock power duly executed with signature guaranteed. The
value of the Common Stock so tendered shall be its Fair
Market Value.
5. If the Optionee ceases to be a director of
the Company during the Option Period, any unexercised
options granted to him hereunder may only be exercised by
him during a three month period beginning on the date he
ceases to be a director (or by his executor(trix) or
personal representative during a one year period beginning
on the date of the Optionee's death).
6. The option herein granted shall not be
assignable or transferable by the Optionee, except by will
or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended from time to
time, or Title I of the Employment Retirement Income
Security Act, or the rules thereunder. During the lifetime
of the Optionee, such option shall be exercisable only by
him. No transfer of the option herein granted shall be
effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy
of such evidence as the Committee may deem necessary to
establish the validity of the transfer and the acceptance
by the transferee or transferees of the terms and
conditions hereof.
7. The Optionee shall have no rights as a
stockholder with respect to any Option Shares until the
date of issuance of a certificate for Option Shares
purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote
at meetings of the stockholders of the Company.
8. The Company may make such provisions as it
may deem appropriate for the withholding of any taxes
which it determines is required in connection with the
option herein granted. The Optionee may pay all or any
portion of the taxes required to be withheld by the
Company or paid by the Optionee in connection with the
exercise of all or any portion of the option herein
granted by electing to have the Company withhold shares of
Common Stock, or by delivering previously owned shares of
Common Stock, having a fair market value equal to the
amount required to be withheld or paid. The Optionee must
make the foregoing election on or before the date that the
amount of tax to be withheld is determined ("Tax Date").
Any such election is irrevocable and subject to
disapproval by the Committee. As Optionee is subject to
the short-swing profits recapture provisions of Section
16(b) of the Exchange Act, any such election may not be
made within six months of the grant of this option (except
in the event of death or disability).
9. Upon the acquisition of any shares pursuant
to the exercise of the option herein granted, the Optionee
will enter into such written representations, warranties
and agreements as the Company may reasonably request in
order to comply with applicable securities laws or with
this Agreement.
10. The certificates representing the Option
Shares purchased by exercise of an option will be stamped
or otherwise imprinted with a legend in such form as the
Company or its counsel may require with respect to any
applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer
instructions, as appropriate, with respect to such shares.
11. Unless otherwise provided herein, every
notice hereunder shall be in writing and shall be given by
registered or certified mail. All notices of the exercise
by the Optionee of any option hereunder shall be directed
to Reading & Bates Corporation, Attention: Secretary, at
the Company's current address. Any notice given by the
Company to the Optionee directed to him at his address on
file with the Company shall be effective to bind any other
person who shall acquire rights hereunder. The Company
shall be under no obligation whatsoever to advise the
Optionee of the existence, maturity or termination of any
of the Optionee's rights hereunder and the Optionee shall
be deemed to have familiarized himself with all matters
contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
12. Whenever the term "Optionee" is used herein
under circumstances applicable to any other person or
persons to whom this award, in accordance with the
provisions of Paragraph 6, may be transferred, the word
"Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also
include the feminine gender for all purposes.
13. Notwithstanding any of the other provisions
hereof, the Optionee agrees that he will not exercise the
option herein granted, and that the Company will not be
obligated to issue any shares pursuant to this Agreement,
if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the
Optionee or by the Company of any provision of any law or
regulation of any governmental authority or any national
securities exchange.
14. In the event of a corporate merger or other
business combination in which the Company is not the
surviving entity, the Company agrees to exert reasonable
efforts to obtain from the surviving entity a grant to the
Optionee of the economic equivalent number of the voting
shares of common stock of, or participating interests in,
the surviving entity, based on the terms of such merger or
other business combination, in substitution for the Option
Shares hereunder, and in such event the price per share
set out in Section 2 hereof shall be adjusted to reflect
substantially the same economic equivalent value of the
Option Shares to the Optionee immediately prior to any
such merger or other business combination. However, if
the Company is unable to obtain such a grant for the
Optionee, neither the Company nor the surviving entity
have any liability to Optionee with respect to same.
IN WITNESS WHEREOF, this Agreement is executed
this 7th day of October, 1993, effective as of the
14th day of September, 1993.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
OPTIONEE
/s/Steven A. Webster
Exhibit 10.22
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of November 1, 1991 between Reading & Bates Corporation
(the "Company") and L. E. Voss, Jr. (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
2. Section 4(a)(ii) is amended by substituting the
phrase "for the remainder of the Employment
Period, or such longer period as any plan,
program, practice or policy may provide," for
the phrase "for three months following the Date
of Termination" in the first line, and
substituting the following sentence for the last
sentence thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/L. E. Voss, Jr.
L. E. Voss, Jr.
Exhibit 10.24
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of November 1, 1991 between Reading & Bates Corporation
(the "Company") and T. W. Nagle (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
2. Section 4(a)(ii) is amended by substituting the
phrase "for the remainder of the Employment
Period, or such longer period as any plan,
program, practice or policy may provide," for
the phrase "for three months following the Date
of Termination" in the first line, and
substituting the following sentence for the last
sentence thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/T. W. Nagle
T. W. Nagle
Exhibit 10.26
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of November 1, 1991 between Reading & Bates Corporation
(the "Company") and C. R. Ofner (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
2. Section 4(a)(ii) is amended by substituting the
phrase "for the remainder of the Employment
Period, or such longer period as any plan,
program, practice or policy may provide," for
the phrase "for three months following the Date
of Termination" in the first line, and
substituting the following sentence for the last
sentence thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/C. R. Ofner
C. R. Ofner
Exhibit 10.28
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of November 1, 1991 between Reading & Bates Corporation
(the "Company") and D. L. McIntire (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
2. Section 4(a)(ii) is amended by substituting the
phrase "for the remainder of the Employment
Period, or such longer period as any plan,
program, practice or policy may provide," for
the phrase "for three months following the Date
of Termination" in the first line, and
substituting the following sentence for the last
sentence thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/D. L. McIntire
D. L. McIntire
Exhibit 10.30
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of November 1, 1991 between Reading & Bates Corporation
(the "Company") and W. K. Hillin (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
2. Section 4(a)(ii) is amended by substituting the
following sentence for the last sentence
thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/W. K. Hillin
W. K. Hillin
Exhibit 10.32
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of January 1, 1992 between Reading & Bates Corporation
(the "Company") and Paul B. Loyd, Jr. (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 3(b) of the Agreement is deleted and
replaced with the following:
"(b) Cause. The Company may terminate
the Executive's employment during the
Employment Period for Cause. For purposes
of this Agreement, 'Cause' shall mean (i)
dishonesty by Executive which results in
substantial personal enrichment at the
expense of the Company or (ii)
demonstratively willful repeated violations
of Executive's obligations under this
Agreement which are intended to result in
material injury to the Company. For
purposes of this Agreement, no act or
failure to act on the part of the Executive
shall be deemed 'willful' unless done or
admitted to be done by the Executive not in
good faith and without reasonable belief
that his action or omission was in the best
interests of the Company."
2. Section 3(c) of the Agreement is amended by
adding the following subsections to the
definition of "Good Reason", as follows:
"...; or (vi) any determination by such
Executive that termination of his
employment with the Company is, in his sole
opinion, in the best interests of the
Company or the Executive [and in such event
(A) the Date of Termination is not less
than 180 days (or such shorter period as
may be mutually agreed between the
Executive and the Company) following the
giving of the Notice of Termination as
provided in Section 11(b) of this Agreement
and (B) Greenwing Investments, Inc. shall
have disposed of (including, without
limitation, by means of a distribution to
its stockholders) not less than 50% of the
Company's common stock beneficially owned,
directly or indirectly, by such entity as
of October 11, 1993 ]; or
(vii) the occurrence of October 11, 2003."
3. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
4. Section 4(a)(ii) is amended by substituting the
following sentence for the last sentence
thereof:
"For purposes of determining eligibility of
the Executive for retiree benefits pursuant
to such plans, practices, programs and
policies and for purposes of determining
Vesting Service (as defined in the Reading
& Bates Pension Plan) under the Reading &
Bates Pension Plan and the Reading & Bates
Retirement Benefit Replacement Plan, the
Executive shall be considered to have
remained employed until the end of the
Employment Period and to have retired on
the last day of such period."
5. Section 9 of the Agreement is deleted and
replaced with the following:
"9. Change of Control. For the
purpose of this Agreement, a 'Change of
Control' shall mean when any 'Person', as
such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of
1934, as amended (the 'Exchange Act')
(other than (i) the Executive, (ii) the
Company or any of its subsidiaries or
Affiliates (as that term is defined in the
Exchange Act), (iii) any Person subject, as
of the date of this Agreement or at any
prior time, to the reporting or filing
requirements of Section 13(d) of the
Exchange Act with respect to the securities
of the Company or any Affiliate, (iv) any
trustee or other fiduciary holding or
owning securities under an employee benefit
plan of the Company, (v) any underwriter
temporarily holding or owning securities of
the Company, or (vi) any corporation owned
directly or indirectly by the current
stockholders of the Company in
substantially the same proportion as their
then ownership of stock of the Company)
becomes, after the date of this Agreement,
the 'beneficial owner' (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty-two and one-half
percent (22.5%) or more of the combined
voting power of the Company's then
outstanding securities."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Tim W. Nagle
Its: Vice President and Chief
Financial Officer
/s/Paul B. Loyd, Jr.
Paul B. Loyd, Jr.
Exhibit 10.34
AMENDMENT NO. 1
Amendment No. 1 dated as of October 1, 1993 to the
Employment Agreement (the "Employment Agreement") dated as
of January 1, 1992 between Reading & Bates Corporation
(the "Company") and C. Kirk Rhein, Jr. (the "Executive").
Capitalized terms used herein shall be as defined in
the Employment Agreement.
For good and valuable consideration, the receipt and
sufficiency whereof are acknowledged, the parties agree to
amend the Employment Agreement, effective as of October 1,
1993, as follows:
1. Section 3(b) of the Agreement is deleted and
replaced with the following:
"(b) Cause. The Company may terminate
the Executive's employment during the
Employment Period for Cause. For purposes
of this Agreement, 'Cause' shall mean (i)
dishonesty by Executive which results in
substantial personal enrichment at the
expense of the Company or (ii)
demonstratively willful repeated violations
of Executive's obligations under this
Agreement which are intended to result in
material injury to the Company. For
purposes of this Agreement, no act or
failure to act on the part of the Executive
shall be deemed 'willful' unless done or
admitted to be done by the Executive not in
good faith and without reasonable belief
that his action or omission was in the best
interests of the Company."
2. Section 3(c) of the Agreement is amended by
adding the following subsections to the
definition of "Good Reason", as follows:
"...; or (vi) any determination by such
Executive that termination of his
employment with the Company is, in his sole
opinion, in the best interests of the
Company or the Executive [and in such event
(A) the Date of Termination is not less
than 180 days (or such shorter period as
may be mutually agreed between the
Executive and the Company) following the
giving of the Notice of Termination as
provided in Section 11(b) of this Agreement
and (B) Whitman Heffernan & Rhein Workout
Fund, L.P. shall have disposed of
(including, without limitation, by means of
a distribution to its stockholders) not
less than 50% of the Company's common stock
beneficially owned, directly or indirectly,
by such entity as of October 11, 1993 ]; or
(vii) the occurrence of October 11, 2003."
3. Section 4(a)(i)B is amended by substituting
"October 31, 1997" for "October 31, 1994".
4. Section 9 of the Agreement is deleted and
replaced with the following:
"9. Change of Control. For the
purpose of this Agreement, a 'Change of
Control' shall mean when any 'Person', as
such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of
1934, as amended (the 'Exchange Act')
(other than (i) the Executive, (ii) the
Company or any of its subsidiaries or
Affiliates (as that term is defined in the
Exchange Act), (iii) any Person subject, as
of the date of this Agreement or at any
prior time, to the reporting or filing
requirements of Section 13(d) of the
Exchange Act with respect to the securities
of the Company or any Affiliate, (iv) any
trustee or other fiduciary holding or
owning securities under an employee benefit
plan of the Company, (v) any underwriter
temporarily holding or owning securities of
the Company, or (vi) any corporation owned
directly or indirectly by the current
stockholders of the Company in
substantially the same proportion as their
then ownership of stock of the Company)
becomes, after the date of this Agreement,
the 'beneficial owner' (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing twenty-two and one-half
percent (22.5%) or more of the combined
voting power of the Company's then
outstanding securities."
IN WITNESS WHEREOF, the parties have caused this
Amendment No. 1 to be executed as of the date first above
written.
READING & BATES CORPORATION
By: /s/Paul B. Loyd, Jr.
Its: Chairman and Chief Executive
Officer
/s/C. Kirk Rhein, Jr.
C. Kirk Rhein, Jr.
Exhibit 10.36
October 6, 1993
Mr. J. T. Angel
621 Rancho Bauer Drive
Houston, Texas 77079
Dear Terry:
On behalf of Reading & Bates Corporation (the "Company"),
its direct and indirect subsidiaries and affiliated
companies, we accept your resignation as a director and/or
officer of each such entity, effective as of the date
shown above. Unless otherwise defined herein, capitalized
terms shall have the meanings ascribed to them in that
Employment Agreement dated as of January 1, 1992 between
you and the Company (the "Agreement").
It is understood and agreed, as between you and the
Company, that you have tendered your resignation, and the
Company has accepted same, on the following basis:
1. The Company agrees to pay the compensation under
Section 4(a)(i), and provide the benefits
specified under Section 4(a)(ii), of the
Agreement in accordance with the terms of the
Agreement, as if a Change of Control has
occurred and you have given your Notice of
Termination during the Window Period in
accordance with the provisions of the Agreement.
Further the Company will deliver to you, free of
restrictions, the shares of Restricted Stock of
the Company specified in Section 7 of the
Restricted Stock Award Agreement dated as of
April 1, 1992 between you and the Company, as if
such a Change of Control has occurred. The Date
of Termination of the Agreement shall be the
date first shown above. You have indicated the
possibility that you may prefer not to take your
compensation in a lump sum amount, and we are
willing to discuss any other payment arrangement
you may suggest.
2. In consideration of the Company's agreement to
provide you with the compensation and benefits
under the Agreement as if such a Change of
Control has occurred, you hereby release, acquit
and forever discharge the Company, its agents,
officers, directors, and employees, from any and
all liability or potential liability in any
manner related to your employment or status as
an employee, officer or director of the Company,
its direct or indirect subsidiaries and
affiliated companies, except that such release
shall not extend to the compensation to be paid
and benefits to be provided to you under the
terms and conditions of the Agreement and the
shares of Restricted Stock to be provided under
the Restricted Stock Award Agreement , as set
out above.
If the foregoing correctly reflects the agreement reached,
please indicate your acceptance in the space provided
below and return one fully executed copy of this letter to
us for our files.
Very truly yours,
/s/Paul B. Loyd, Jr.
Paul B. Loyd, Jr.
Chairman and Chief
Executive Officer
PBL:hi
Accepted and agreed this
7th day of October, 1993.
/s/J. T. Angel
J. T. Angel
Exhibit 11
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE, PRIMARY AND FULLY DILUTED
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average number of common
shares outstanding 55,497,487 49,017,535 37,968,432
========== ========== ==========
Income (loss) from continuing
operations before extraordinary gain
and cumulative effect of change in
accounting principle $ 4,656 $ 3,402 $ (17,385)
Adjustments:
Less: Dividends paid on $1.625
Convertible Preferred Stock (2,052) - -
Accretion in redemption price
of redeemable stocks - (5,275) (1,862)
---------- ---------- ----------
Adjusted income (loss) from continuing
operations before extraordinary gain
and cumulative effect of change in
accounting principle 2,604 (1,873) (19,247)
Income from discontinued operations - - 2,156
Extraordinary gain - - 3,725
Cumulative effect of change in
accounting principle - - (18,860)
---------- ---------- ----------
Adjusted net income (loss) applicable
to common shares outstanding -
assuming no dilution $ 2,604 $ (1,873) $ (32,226)
========== ========== ==========
Earnings (loss) per common share:
Adjusted income (loss) from
continuing operations $ .05 $ (.04) $ (.51)
Income from discontinued operations - - .06
Extraordinary gain - - .10
Cumulative effect of change in
accounting principle - - (.50)
---------- ---------- ----------
Net earnings (loss) per common
share - assuming no dilution $ .05 $ (.04) $ (.85)
========== ========== ==========
</TABLE>
<PAGE>
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE, PRIMARY AND FULLY DILUTED
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average number of common
shares outstanding 55,497,487 49,017,535 37,968,432
Assume conversion of securities:
8% Senior Subordinated Convertible
Debentures 703,270 663,208 623,180
8% Convertible Subordinated Debentures 16,661 16,661 16,661
$1.625 Convertible Preferred Stock 3,704,684 - -
Redeemable Preferred Stock - - 434,912
Common Stock Subject to Redemption - - 527,373
Carnegie subscription agreement - - 1,975,610
---------- ---------- ----------
Adjusted common shares outstanding
- fully diluted 59,922,102 49,697,404 41,546,168
========== ========== ==========
Adjusted net income (loss) applicable
to common shares outstanding
- assuming no dilution $ 2,604 $ (1,873) $ (32,226)
Adjustments:
Interest on 8% Senior Subordinated
Convertible Debentures 2,351 2,029 1,149
Interest on 8% Convertible
Subordinated Debentures 1,983 1,875 1,194
Dividends paid on $1.625
Convertible Preferred Stock 2,052 - -
Accretion in redemption price
of redeemable stocks - - 1,862
---------- ---------- ----------
Adjusted net income (loss)
applicable to common shares
outstanding - assuming full
dilution $ 8,990 $ 2,031 $ (28,021)
========== ========== ==========
Net income (loss) per common
share - assuming full
dilution (antidilutive) $ .15 $ .04 $ (.67)
========== ========== ==========
</TABLE>
<PAGE>
Exhibit 21
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE OF CONSOLIDATED SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 31, 1993
The following table and text sets forth the subsidiaries of
the Company and of such subsidiaries:
State or
Jurisdiction of
Name Incorporation
SUBSIDIARIES WHOLLY OWNED BY READING & BATES CORPORATION
Reading & Bates Coal Co. Nevada
Reading & Bates Development Co. Delaware
Reading & Bates Drilling Co. Oklahoma
Reading & Bates Petroleum Co. Texas
Reading & Bates Management Services, Inc. Delaware
SUBSIDIARIES WHOLLY OWNED BY READING & BATES DRILLING CO.
RB Drilling Co. Oklahoma
RB Drilling Services, Inc. Oklahoma
Reading & Bates (U.K.) Limited United Kingdom
RB Onshore Services, Inc. Texas
RB Offshore, Inc. Nevada
HRB Rig Corporation Oklahoma
Reading and Bates Borneo Drilling Co., Ltd. Oklahoma
Reading & Bates Drilling Contractors, Inc. Oklahoma
Reading & Bates Drilling Limited Oklahoma
Reading & Bates Enterprises Co. Texas
Reading & Bates Exploration Co. Oklahoma
Reading and Bates, Inc. Oklahoma
Reading & Bates International
Energy Services B.V. Netherlands
Reading & Bates Offshore, Limited Oklahoma
Rig Logistics, Inc. Nevada
SUBSIDIARY WHOLLY OWNED BY READING AND BATES, INC.
Reading & Bates Energy Corporation N.V. Netherlands
Antilles
SUBSIDIARIES WHOLLY OWNED BY READING & BATES ENTERPRISES CO.
Shore Services, Inc. Texas
SUBSIDIARIES WHOLLY OWNED BY READING & BATES INTERNATIONAL ENERGY
SERVICES B.V.
Reading & Bates, B.V. Netherlands
SUBSIDIARIES WHOLLY OWNED BY READING & BATES COAL CO.
Appalachian Permit Co. Kentucky
Bismarck Coal Inc. Kentucky
Caymen Coal Inc. West Virginia
SUBSIDIARIES WHOLLY OWNED BY BISMARCK COAL INC.
Certicoals, Incorporated West Virginia
SUBSIDIARIES WHOLLY OWNED BY READING & BATES (U.K.) LIMITED
Reading & Bates (Caledonia) Limited United Kingdom
The Company owns 82.64% of Arcade Shipping AS, incorporated
in Norway, and 21.89% of Arcade Drilling AS, also incorporated in
Norway. Arcade Shipping AS owns 46.2% of Arcade Drilling AS and
both companies are included in the consolidated financial
statements for the years ended December 31,1993 and 1992.
Reading & Bates Drilling Co. owns 25% of China Nanhai-
Reading & Bates Drilling Co., Ltd., incorporated in the People's
Republic of China.
Reading and Bates Borneo Drilling Co., Ltd. owns 49.99% of
Reading & Bates (M) Sdn. Berhad, incorporated in Malaysia.
All of the above companies are included in the consolidated
financial statements.
<PAGE>
Exhibit 23.1
Page 1 of 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation of our reports dated February 14, 1994,
on the December 31, 1993 and 1992 Consolidated Financial Statements and
Schedules of Reading & Bates Corporation included in this Form 10-K into the
Company's previously filed Registration Statements (file no.s 33-44237, 33-
50828 and 33-50565).
/s/Arthur Andersen & Co.
Houston, Texas
March 9, 1994
Exhibit 23.2
Page 1 of 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation of our reports dated March 25, 1992, on
the December 31, 1991 Consolidated Financial Statements and Financial
Statement Schedules of Reading & Bates Corporation included in this Form 10-K
into the Company's previously filed Registration Statements (file no.s 33-
44237, 33-50828 and 33-50565).
/s/Coopers & Lybrand
Houston, Texas
March 9, 1994
