===========================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-5587
READING & BATES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-0642271
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
901 Threadneedle, Suite 200, Houston, Texas 77079
(Address of principal executive offices)(Zip Code)
(713)496-5000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if
changed since last report.)
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___
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK
AT APRIL 13, 1995 : 59,721,973
=============================================================
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
-----------------------------
Company or Group of Companies for Which Report is Filed:
Reading & Bates Corporation and Subsidiaries
The financial statements for the three months ended March 31,
1995 and 1994, include, in the opinion of the Company, all
adjustments (which consist only of normal recurring
adjustments) necessary to present fairly the financial
position and results of operations for such periods. The
financial data for the three months ended March 31, 1995
included herein have been subjected to a limited review by
Arthur Andersen LLP, the registrant's independent public
accountants, whose report is included herein. Results of
operations for the three months ended March 31, 1995 are not
necessarily indicative of results of operations which will be
realized for the year ending December 31, 1995. The
financial statements should be read in conjunction with the
Company's Form 10-K for the year ended December 31, 1994.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- -----------
(unaudited)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 23,057 $ 42,319
Accounts receivable:
Trade, net 42,328 34,430
Other 3,436 2,952
Materials and supplies inventory 9,703 8,421
Other current assets 3,547 4,038
--------- ---------
Total current assets 82,071 92,160
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 777,842 775,189
Other 6,437 6,270
--------- ---------
Total property and equipment 784,279 781,459
Accumulated depreciation
and amortization (296,886) (291,140)
--------- ---------
Net property and equipment 487,393 490,319
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 4,051 3,584
--------- ---------
TOTAL ASSETS $ 573,515 $ 586,063
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
MARCH 31, DECEMBER 31,
1995 1994
-------- ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term obligations $ 5,690 $ 12,222
Long-term obligations
due within one year 44,152 44,099
Accounts payable - trade 12,497 12,398
Accrued liabilities 16,607 16,763
Income taxes 6,585 6,580
--------- ---------
Total current liabilities 85,531 92,062
LONG-TERM OBLIGATIONS 76,553 81,937
OTHER NONCURRENT LIABILITIES 43,662 42,958
DEFERRED INCOME TAXES 2,977 3,075
--------- ---------
Total liabilities 208,723 220,032
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 43,958 43,871
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value 2,990 2,990
Common stock, $.05 par value 2,986 2,986
Capital in excess of par value 337,611 337,406
Accumulated deficit
from March 31, 1991 (21,568) (19,984)
Other (1,185) (1,238)
--------- ---------
Total stockholders' equity 320,834 322,160
--------- ---------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 573,515 $ 586,063
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING REVENUES $ 47,975 $ 42,357
-------- --------
COSTS AND EXPENSES:
Operating expenses 31,911 28,625
Depreciation and amortization 7,433 6,920
General and administrative 4,081 4,415
-------- --------
Total costs and expenses 43,425 39,960
-------- --------
OPERATING INCOME 4,550 2,397
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (3,814) (3,113)
Interest income 425 751
Other, net (210) (392)
-------- --------
Total other income (expense) (3,599) (2,754)
-------- --------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE AND MINORITY INTEREST 951 (357)
INCOME TAX EXPENSE 1,163 908
-------- --------
LOSS AFTER INCOME TAX EXPENSE AND
BEFORE MINORITY INTEREST (212) (1,265)
MINORITY INTEREST (157) (226)
-------- --------
NET LOSS (369) (1,491)
DIVIDENDS ON PREFERRED STOCK 1,215 1,215
-------- --------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $ (1,584) $ (2,706)
======== ========
NET LOSS PER COMMON SHARE $ (.03) $ (.05)
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (369) $ (1,491)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 7,433 6,920
Loss (gain) on dispositions of
property and equipment 171 (255)
Recognition of deferred expenses 2,655 430
Minority interest in income of
consolidated subsidiaries 157 226
Changes in assets and liabilities:
Accounts receivable, net (8,191) 4,811
Materials and supplies inventory (1,282) (271)
Deferred charges and other assets (2,659) (1,311)
Accounts payable - trade 99 (2,107)
Accrued liabilities (749) (366)
Accrued interest 1,643 1,488
Accrued lease expense - 1,033
Income taxes 5 102
Deferred income taxes (98) -
Other, net 682 695
-------- --------
Net cash (used in) provided
by operating activities (503) 9,904
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 166 120
Purchases of property and equipment (4,806) (4,262)
Business acquisitions (300) (1,139)
Increase in investments in and advances
to unconsolidated investees (139) (224)
-------- --------
Net cash used in investing
activities (5,079) (5,505)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on)
short-term obligations (6,532) (2,735)
Principal payments on long-term
obligations (5,933) (5,433)
Dividends paid on preferred stock (1,215) (1,215)
-------- --------
Net cash used in financing
activities (13,680) (9,383)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (19,262) (4,984)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 42,319 80,385
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 23,057 $ 75,401
======== ========
Supplemental Cash Flow Disclosures:
Interest paid $ 2,551 $ 1,892
Income taxes paid $ 1,258 $ 839
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A) COMMITMENTS AND CONTINGENCIES
LITIGATION - On March 17, 1995, an action was filed
by Louis Silverman, individually and on behalf of all
other shareholders of Reading & Bates Corporation
similarly situated, against the Company and the
individual members of its board of directors in the
Court of Chancery of the State of Delaware, New Castle
County. On April 7, 1995 three additional actions were
filed on behalf of Congregation Beth Joseph, Harry Lewis
and Mortimer Shulman against the Company and its
directors in the Court of Chancery of the State of
Delaware. In each of the four actions, the plaintiff
alleges, inter alia, that the directors breached their
fiduciary duties by rejecting the previously announced
unsolicited merger proposal made by Sonat Offshore
Drilling Inc. and by adopting the previously announced
shareholder rights plan. Each of the named plaintiffs
in the four actions purports to be an owner of the
Company's Common Stock and seeks to represent a class of
shareholders of the Company who are similarly situated.
Each of the plaintiffs seeks injunctive relief, damages
in unspecified amounts and certain other relief,
including costs and expenses. The Company believes each
of the plaintiff's claims in these four actions are
groundless and that it has meritorious defenses in each
action. The Company intends to defend each action
vigorously.
B) OTHER NONCURRENT LIABILITIES
The components of "OTHER NONCURRENT LIABILITIES"
were as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -----------
<S> <C> <C>
Postretirement benefit obligations $ 16,127 $ 15,950
Net liabilities associated
with discontinued operations 6,977 7,003
Pension obligations 6,585 6,994
Accrued interest expense related to
the 8% Senior Subordinated
Convertible Debentures due
December 1998 10,791 10,419
Other 3,182 2,592
-------- --------
Total $ 43,662 $ 42,958
======== ========
</TABLE>
C) CAPITAL SHARES
On March 15, 1995, the Company's board of directors
declared a dividend of one preferred share purchase right
(a "Right") for each outstanding share of the Company's
Common Stock outstanding on March 31, 1995 (the"Record
Date"). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of
Series B Junior Participating Preferred Stock, par value
$1.00 per share (the "Preferred Shares") of the Company at
a price of $30.50, subject to adjustment. The Rights will
not become exercisable until 10 days after a public
announcement that a person or group has acquired 10% or
more of the Company's Common Stock (thereby becoming an
"Acquiring Person") or the commencement of a tender or
exchange offer upon consummation of which such person or
group would own 10% or more of the Company's Common Stock
(the earlier of such dates being called the "Distribution
Date"). Rights will be issued for all shares of the
Company's Common Stock issued and outstanding on the
Record Date. Until the Distribution Date, the Rights will
be evidenced by the certificates representing the
Company's Common Stock and will be transferrable only with
the Company's Common Stock. In the event that any person
or group becomes an Acquiring Person, each Right, other
than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter entitle
its holder to purchase shares of the Company's Common
Stock having a market value of two times the exercise
price of the Right. After any person or group has become
an Acquiring Person and prior to the acquisition by such
person or group of 50% or more of the outstanding shares
of Common Stock, the Company's board of directors may
exchange each Right (other than Rights of the Acquiring
Person), in whole or in part, at an exchange ratio of one
Common Share or one one-hundredth of a Preferred Share per
Right. If after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its
assets or earning power are sold, each Right will entitle
its holder to purchase, at the Right's then current
exercise price, that number of shares of common stock of
the acquiring company which at the time of such
transaction will have a market value of two times the
exercise price of the Right. The board of directors of
the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right at any time prior to
such time as any person or group becomes an Acquiring
Person. The Rights expire on March 31, 2005. Preferred
Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a
preferential quarterly dividend payment equal to the
greater of $1 per share or 100 times the dividend declared
per Common Share. Liquidation preference will be equal to
the greater of $100 per share or 100 times the payment
made per Common Share. Each Preferred Share will have one
vote, voting together with the Common Stock.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have reviewed the accompanying consolidated balance
sheet of Reading & Bates Corporation (a Delaware corporation)
and Subsidiaries as of March 31, 1995, and the related
consolidated statements of operations and cash flows for the
three months ended March 31, 1995 and 1994. These financial
statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based upon our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
/s/Arthur Andersen LLP
Houston, Texas
April 19, 1995
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
MATERIAL CHANGES IN FINANCIAL CONDITION
On February 28, 1995, the Company announced that it had
received an unsolicited merger proposal from Sonat Offshore
Drilling Inc. ("Sonat Offshore") providing for the
acquisition of 100% of the common stock of the Company for a
combination of Sonat Offshore common stock and $100 million
in cash. As proposed by Sonat Offshore, the Company's
shareholders would have, at their election, received either
(i) .357 shares of Sonat Offshore common stock or (ii) $7.50
of cash for each share of the Company. To the extent that
the election resulted in an under- or oversubscription as to
the $100 million of cash, a proration formula would have been
utilized. The Company engaged Morgan Stanley & Co.
Incorporated to act as its financial advisor with respect to
evaluating the Sonat Offshore proposal. On March 16, 1995,
the Company announced that its board of directors had
rejected the Sonat Offshore proposal on the basis that it was
not in the best interests of the Company and its
shareholders. On April 18, 1995, Sonat Offshore announced
that the merger discussions had broken off following the
rejection by the Company of Sonat Offshore's proposal.
On March 15, 1995, the Company's board of directors
declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of the Company's Common
Stock outstanding on March 31, 1995 (the "Record Date").
Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series B Junior
Participating Preferred Stock, par value $1.00 per share (the
"Preferred Shares") of the Company at a price of $30.50,
subject to adjustment. The Rights will not become
exercisable until 10 days after a public announcement that a
person or group has acquired 10% or more of the Company's
Common Stock (thereby becoming an "Acquiring Person") or the
commencement of a tender or exchange offer upon consummation
of which such person or group would own 10% or more of the
Company's Common Stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued for
all shares of the Company's Common Stock issued and
outstanding on the Record Date. Until the Distribution Date,
the Rights will be evidenced by the certificates representing
the Company's Common Stock and will be transferrable only
with the Company's Common Stock. In the event that any
person or group becomes an Acquiring Person, each Right,
other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter entitle its
holder to purchase shares of the Company's Common Stock
having a market value of two times the exercise price of the
Right. After any person or group has become an Acquiring
Person and prior to the acquisition by such person or group
of 50% or more of the outstanding shares of Common Stock, the
Company's board of directors may exchange each Right (other
than Rights of the Acquiring Person), in whole or in part, at
an exchange ratio of one Common Share or one one-hundredth of
a Preferred Share per Right. If after a person or group has
become an Acquiring Person, the Company is acquired in a
merger or other business combination transaction or 50% or
more of its assets or earning power are sold, each Right will
entitle its holder to purchase, at the Right's then current
exercise price, that number of shares of common stock of the
acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the
Right. The board of directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per
Right at any time prior to such time as any person or group
becomes an Acquiring Person. The Rights expire on March 31,
2005. Preferred Shares purchasable upon exercise of the
Rights will not be redeemable. Each Preferred Share will be
entitled to a preferential quarterly dividend payment equal
to the greater of $1 per share or 100 times the dividend
declared per Common Share. Liquidation preference will be
equal to the greater of $100 per share or 100 times the
payment made per Common Share. Each Preferred Share will have
one vote, voting together with the Common Stock.
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, budgets and drilling plans 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. As of March 31, 1995,
approximately $15 million of total consolidated cash and cash
equivalents of $23.1 million are 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 and other sources, including
short-term loans, debt rescheduling, new debt, new equity,
asset disposals and/or by delaying a portion of planned
capital or other expenditures, will be sufficient to satisfy
the Company's 1995 working capital needs, dividends on
preferred stock, capital expenditures on its existing fleet,
debt, lease and other payment obligations. In view of the
Company's debt repayment schedule for the balance of 1995,
amounting in the aggregate to $39.2 million (including that
of Drilling), the Company expects certain debt rescheduling
and/or other financing will likely be required in 1995.
Management is constantly evaluating alternatives available to
the Company and believes that sufficient flexibility exists
to meet any liquidity shortfalls.
The Company intends to continue to modernize and expand
its fleet, in order to meet the requirements of competitive
conditions and the changing needs of its customers. In this
regard, the Company has from time to time in the past engaged
in, and currently continues to engage in, preliminary
discussions with other industry participants with respect to
business combinations that would potentially strengthen its
competitive position in the offshore drilling industry.
Moreover, the Company continues to consider the selective
acquisition of existing rigs, directly or through business
combination transactions. In addition, the Company's wholly
owned subsidiary, Reading & Bates Development Co.
("Development") 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. Development recently
entered into a letter of intent with Enserch Exploration,
Inc. to acquire approximately a 20% working interest in
Enserch Exploration's Green Canyon 254 Project in the U.S.
Gulf of Mexico. Subject to the rights of the working
interest owners under the joint operating agreement, the
Company's third-generation semisubmersible "M. G. HULME, JR."
would also receive a three year drilling contract, plus
options, for the field's development drilling upon completion
of an upgrade of the unit for operations in up to 3,300 feet
of water, and the Company would convert its second-generation
semisubmersible "RIG 41", or an equivalent unit, to a
floating production vessel. The project, if successful, would
have a very substantial impact on the Company's future
earnings and cash flow, as the Company's estimated revenues
from its total involvement in this project should exceed $350
million over a 5 to 7 year project life. The Company
continues to consider selective expansion in floating
production through additional management contracts, alliances
with other companies, the acquisition of floating production
equipment and/or participation in field development projects.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED
TO THREE MONTHS ENDED MARCH 31, 1994
The Company's net loss for the three months ended March
31, 1995 was $.4 million ($.03 per share after preferred
stock dividends of $1.2 million) compared with a net loss of
$1.5 million ($.05 per share after preferred stock dividends
of $1.2 million) for the same period of 1994. Income from
operations for the three months ended March 31, 1995 was $4.6
million compared to income from operations of $2.4 million in
1994. The Company's utilization for the three months ended
March 31, 1995 and 1994 was 86% and 77%, respectively.
Operating revenues are primarily a function of dayrates
and utilization. The $5.6 million increase in operating
revenues for the three months ended March 31, 1995 over the
same period in 1994 is due to the increased utilization of
the jackup and semisubmersible fleets. The primary factor for
the increase was the fourth-generation semisubmersible "JACK
BATES" which operated the entire three months ended March 31,
1995 compared to the same period in 1994 where the rig was
either stacked or under tow from the Mediterranean to
offshore Indonesia. Included in operating revenues for the
three months ended March 31, 1994 is $1.8 million of
operating revenues generated from the operation of the "SONNY
VOSS" which in December 1994 was removed from the Company's
fleet as a result of the Company negotiating an early release
from its remaining lease obligation. Also, included in
operating revenues for the three months ended March 31, 1994
is $2.4 million of operating revenues due to the settlement
of the loss of hire claim relating to the "JACK BATES"
casualty caused by Hurricane Andrew in 1992. The net effect
of the "JACK BATES" loss of hire settlement and physical
damage claims on the Company's results of operations for the
three months ended March 31, 1994 was income of $2.2 million.
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. In general, labor
costs increase primarily due to higher salary levels and
inflation. 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 in accordance with the Company's preventive
maintenance program.
The $3.3 million increase in operating expenses for the
three months ended March 31, 1995 over the same period in
1994 is primarily due to the increased utilization of the
"JACK BATES" during the three months ended March 31, 1995.
As mentioned above, the "JACK BATES" was under tow to
offshore Indonesia during the three months ended March 31,
1994 which resulted in lower operating expenses since during
mobilization periods net mobilization expenses are normally
deferred and amortized over the following contract. In
addition, two of the Company's jackups moved into geographic
areas with higher operating costs. Included in operating
expenses for the three months ended March 31, 1994 is $1.7
million of operating expenses (net of a $.4 million credit
due to the recognition of the deferred gain on the
sale/leaseback) generated from the operation of the "SONNY
VOSS" which in December 1994 was removed from the Company's
fleet as a result of the Company negotiating an early release
from its remaining lease obligation. Also, included in
operating expenses for the three months ended March 31, 1994
is $1.5 million of lease expense relating to two of the
Company's jackups. In September 1994, the Company purchased
certain notes and interests relating to the lease debt
outstanding associated with the operating leases of the two
jackups.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
--------------------------
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. Subsequently, the court
entered an order dismissing the Company's indirect
subsidiary. The Company intends to defend its interests
vigorously and 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 March 17, 1995, an action was filed by Louis Silverman,
individually and on behalf of all other shareholders of
Reading & Bates Corporation similarly situated, against the
Company and the individual members of its board of directors
in the Court of Chancery of the State of Delaware, New Castle
County. On April 7, 1995 three additional actions were filed
on behalf of Congregation Beth Joseph, Harry Lewis and
Mortimer Shulman against the Company and its directors in the
Court of Chancery of the State of Delaware. In each of the
four actions, the plaintiff alleges, inter alia, that the
directors breached their fiduciary duties by rejecting the
previously announced unsolicited merger proposal made by
Sonat Offshore Drilling Inc. and by adopting the previously
announced shareholder rights plan. Each of the named
plaintiffs in the four actions purports to be an owner of the
Company's Common Stock and seeks to represent a class of
shareholders of the Company who are similarly situated. Each
of the plaintiffs seeks injunctive relief, damages in
unspecified amounts and certain other relief, including costs
and expenses. The Company believes each of the plaintiff's
claims in these four actions are groundless and that it has
meritorious defenses in each action. The Company intends to
defend each action vigorously.
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.
Item 6(a). Exhibits
--------------------
Exhibit 11 - Computation of Earnings Per Common Share,
Primary and Fully Diluted.
Exhibit 15 - Letter regarding unaudited interim
financial information.
Exhibit 27 - Financial Data Schedule. (Exhibit 27 is
being submitted as an exhibit only in the
electronic format of this Quarterly
Report on Form 10-Q being submitted to
the Securities and Exchange Commission.)
Item 6(b). Reports on Form 8-K
------------------------------
There were eight Current Reports on Form 8-K filed
during the three months ended March 31, 1995. A
Current Report on Form 8-K was filed January 9, 1995
disclosing the Company's early termination of the
bareboat charter of the "SONNY VOSS" ; filed February
16, 1995 disclosing the Company's fourth quarter and
yearend 1994 earnings; filed February 24, 1995
disclosing the termination of the letter of intent to
establish a joint venture with DeepTech International
Inc.; filed February 28, 1995 disclosing the Company's
receipt of an unsolicited merger proposal from Sonat
Offshore Drilling Inc.; filed March 2, 1995 disclosing
the Company's receipt of contract commitments for two
of its third-generation semisubmersibles; filed March
3, 1995 disclosing the Company's amended and restated
by-laws; filed March 7, 1995 disclosing the Company's
appointment of Morgan Stanley & Co. Incorporated to
serve as financial advisors; and filed March 16, 1995
disclosing the Company's Rights Agreement dated March
15, 1995 and the rejection of Sonat Offshore Drilling
Inc.'s merger proposal.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
READING & BATES CORPORATION
By /s/T. W. Nagle
------------------------
T. W. Nagle
Vice President and Chief
Financial Officer
Date: April 21, 1995
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------------------
11 Computation of Earnings Per Common Share, Primary
and Fully Diluted.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule. (Exhibit 27 is being
submitted as an exhibit only in the electronic
format of this Quarterly Report on Form 10-Q being
submitted to the Securities and Exchange Commission.)
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>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Weighted average number of common
shares outstanding 59,713,311 55,488,570
========== ==========
Net loss $ (369) $ (1,491)
Less dividends paid on $1.625
Convertible Preferred Stock (1,215) (1,215)
---------- ----------
Adjusted net loss applicable to
common shares outstanding -
assuming no dilution $ (1,584) $ (2,706)
========== ==========
Net loss per common share -
assuming no dilution $ (.03) $ (.05)
========== ==========
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of
common shares outstanding 59,713,311 55,488,570
Assume conversion of securities:
$1.625 Convertible
Preferred Stock 8,668,010 8,668,010
8% Senior Subordinated
Convertible Debentures 783,686 743,457
8% Convertible Subordinated
Debentures 16,661 16,661
---------- ----------
Adjusted common shares
outstanding - fully diluted 69,181,668 64,916,698
========== ==========
Adjusted net loss applicable
to common shares outstanding
- assuming no dilution $ (1,584) $ (2,706)
Adjustments:
Interest on 8% Senior
Subordinated Convertible
Debentures 739 636
Interest on 8% Convertible
Subordinated Debentures 536 502
Dividends paid on $1.625
Convertible Preferred Stock 1,215 1,215
---------- ----------
Adjusted net income (loss)
applicable to common shares
outstanding - assuming full
dilution $ 906 $ (353)
========== ==========
Net income (loss) per common
share - assuming full
dilution (antidiluive) $ .01 $ (.01)
========== ==========
</TABLE>
Exhibit 15
----------
Reading & Bates Corporation
We are aware that Reading & Bates Corporation has
incorporated by reference in its Registration Statements No.
33-44237, No. 33-50828 , No. 33-50565 and No. 33-56029 its
Form 10-Q for the quarter ended March 31, 1995, which
includes our report dated April 19, 1995 covering the
unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statement
prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11
of the Act.
/s/Arthur Andersen LLP
Houston, Texas
April 19, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Reading & Bates Corporation for the three months
ended March 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 23,057
<SECURITIES> 0
<RECEIVABLES> 46,137
<ALLOWANCES> 373
<INVENTORY> 9,703
<CURRENT-ASSETS> 82,071
<PP&E> 784,279
<DEPRECIATION> 296,886
<TOTAL-ASSETS> 573,515
<CURRENT-LIABILITIES> 85,531
<BONDS> 0
<COMMON> 2,986
2,990
0
<OTHER-SE> 320,838
<TOTAL-LIABILITY-AND-EQUITY> 573,515
<SALES> 0
<TOTAL-REVENUES> 47,975
<CGS> 0
<TOTAL-COSTS> 31,911
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,814
<INCOME-PRETAX> 951
<INCOME-TAX> 1,163
<INCOME-CONTINUING> (369)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (369)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> .01
</TABLE>
