<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------------------
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NUMBER 0-16703
CLIFFS DRILLING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0248934
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1200 SMITH STREET, SUITE 300
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip Code)
(713) 651-9426
(Registrant's Telephone Number, Including Area Code)
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 of Common Stock outstanding as of May 7, 1998: 15,916,462
(Exhibit Index Located on Page 18)
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CLIFFS DRILLING COMPANY
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations (Unaudited) -
CLIFFS DRILLING COMPANY
Three Months Ended March 31, 1998 and 1997................................................3
Consolidated Balance Sheets (Unaudited) -
CLIFFS DRILLING COMPANY
March 31, 1998 and December 31, 1997......................................................4
Consolidated Statements of Cash Flows (Unaudited) -
CLIFFS DRILLING COMPANY
Three Months Ended March 31, 1998 and 1997................................................5
Notes to Interim Consolidated Financial Statements (Unaudited)................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...............................................9
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.............................................................16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................16
SIGNATURES....................................................................................17
EXHIBIT INDEX.................................................................................18
</TABLE>
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CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------
1998 1997
----------- ----------
(In thousands, except
per share amounts)
<S> <C> <C>
REVENUES:
Revenues ............................................................. $ 97,636 $ 60,283
Income from Equity Investments ....................................... 140 593
-------- --------
97,776 60,876
COSTS AND EXPENSES:
Operating Expenses ................................................... 60,292 40,520
Depreciation, Depletion and Amortization ............................. 7,302 3,876
General and Administrative Expense ................................... 2,149 1,904
-------- --------
69,743 46,300
-------- --------
OPERATING INCOME .......................................................... 28,033 14,576
OTHER INCOME (EXPENSE):
Loss on Disposition of Assets ........................................ (5) (103)
Interest Income ...................................................... 553 368
Interest Expense ..................................................... (5,074) (3,977)
Exchange Rate Gain (Loss) ............................................ (325) 80
Other, net ........................................................... (148) (240)
-------- --------
INCOME BEFORE INCOME TAXES ................................................ 23,034 10,704
INCOME TAX EXPENSE ........................................................ 8,062 3,746
-------- --------
NET INCOME ................................................................ $ 14,972 $ 6,958
======== ========
NET INCOME PER COMMON SHARE:
Basic ................................................................ $ 0.95 $ 0.46
======== ========
Diluted .............................................................. $ 0.93 $ 0.45
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic ................................................................ 15,838 15,135
======== ========
Diluted .............................................................. 16,044 15,372
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
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CLIFFS DRILLING COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
ASSETS (In thousands, except
share information)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ................................................. $ 55,207 $ 28,122
Accounts Receivable, net of allowance for doubtful accounts of $200 and
$352 at March 31, 1998 and December 31, 1997, respectively ............ 52,788 53,341
Notes and Other Receivables, Current ...................................... 4,398 10,190
Inventories ............................................................... 8,695 7,551
Drilling Contracts in Progress ............................................ 7,878 16,503
Prepaid Insurance ......................................................... 1,586 1,772
Other Prepaid Expenses .................................................... 8,142 6,595
--------- ---------
Total Current Assets ................................................ 138,694 124,074
PROPERTY AND EQUIPMENT, AT COST:
Rigs and Related Equipment ................................................ 476,674 453,915
Other ..................................................................... 16,576 15,373
--------- ---------
493,250 469,288
Less: Accumulated Depreciation, Depletion and Amortization ............... (107,991) (100,061)
--------- ---------
Net Property and Equipment .......................................... 385,259 369,227
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES ...................... 2,174 1,828
DEFERRED CHARGES AND OTHER .................................................... 4,832 5,022
--------- ---------
TOTAL ASSETS ........................................................ $ 530,959 $ 500,151
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable .......................................................... $ 35,714 $ 33,171
Accrued Interest .......................................................... 7,798 2,673
Other Accrued Expenses .................................................... 35,119 30,414
--------- ---------
Total Current Liabilities ........................................... 78,631 66,258
10.25% SENIOR NOTES ........................................................... 203,439 203,606
DEFERRED INCOME TAXES ......................................................... 16,303 14,335
OTHER LIABILITIES ............................................................. 1,104 23
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value, 30,000,000 shares authorized; 16,322,332 and
16,321,932 shares issued and 15,913,925 and 15,906,880 shares
outstanding at March 31, 1998 and December 31, 1997, respectively ....... 163 163
Paid-in Capital ........................................................... 182,638 182,420
Retained Earnings ......................................................... 55,914 40,942
Less: Restricted Stock ................................................... (2,180) (2,467)
Treasury Stock, at cost, 408,407 and 415,052 shares at March 31,
1998 and December 31, 1997, respectively ......................... (5,053) (5,129)
--------- ---------
Total Shareholders' Equity .......................................... 231,482 215,929
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................... $ 530,959 $ 500,151
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
4
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CLIFFS DRILLING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------
1998 1997
---------- ---------
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income ...................................................... $ 14,972 $ 6,958
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Depreciation, Depletion and Amortization ..................... 7,302 3,876
Deferred Income Tax Expense .................................. 1,968 3,601
Mobilization Expense Amortization ............................ 195 25
Loss on Disposition of Assets ................................ 5 103
Amortization of Debt Issue Costs ............................. 227 187
Amortization of Restricted Stock ............................. 154 23
Amortization of Debt Premium ................................. (168) --
Other ........................................................ 147 77
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable ...................................... 6,345 (9,694)
Inventories .............................................. (1,144) 154
Drilling Contracts in Progress ........................... 8,627 13,573
Prepaid Insurance and Other Prepaid Expenses ............. (1,556) 2,664
Investments in and Advances to Unconsolidated Affiliates . (346) (593)
Accounts Payable and Other ............................... 13,462 2,438
-------- --------
Net Cash Provided By Operating Activities ......... 50,190 23,392
INVESTING ACTIVITIES:
Capital Expenditures ............................................ (23,750) (19,877)
Acquisition of Rigs and Related Equipment ....................... -- (28,500)
Proceeds from Sale of Property and Equipment .................... 677 279
Collection of Notes Receivable .................................. -- 355
-------- --------
Net Cash Used In Investing Activities ............. (23,073) (47,743)
FINANCING ACTIVITIES:
Debt Issue Costs ................................................ (32) --
Proceeds from Exercise of Stock Options ......................... -- 96
-------- --------
Net Cash Provided By (Used In) Financing Activities (32) 96
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ 27,085 (24,255)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 28,122 39,181
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 55,207 $ 14,926
======== ========
</TABLE>
See accompanying notes to interim consolidated financial statements.
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CLIFFS DRILLING COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments) necessary to present a fair statement
of the results for the periods included herein have been made and the
disclosures contained herein are adequate to make the information presented not
misleading. Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Cliffs Drilling Company (the
"Company") annual report on Form 10-K for the year ended December 31, 1997.
2. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share," ("SFAS No. 128"). SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is similar to the previously reported fully diluted earnings
per share. The earnings per share amounts and weighted average number of common
and common equivalent shares outstanding for the three months ended March 31,
1997 have been restated as required to comply with SFAS No. 128.
Earnings per share and weighted average shares for the three months ended
March 31, 1997 have been retroactively adjusted to reflect a two-for-one stock
split effected in the form of a 100% stock dividend effective May 22, 1997.
3. NOTES PAYABLE
Long-term debt at March 31, 1998 consists solely of 10.25% Senior Notes due
2003 (the "Senior Notes") in the aggregate principal amount of $200.0 million
and debt premium, net of amortization, of $3.4 million. In addition to the
$150.0 million of Senior Notes sold during 1996, the Company sold $50.0 million
of Senior Notes on August 7, 1997 at a premium of $3.9 million. Considering the
premium, the effective interest rate on the $50.0 million Senior Notes is 9.5%.
Interest on the Senior Notes is payable semi-annually during each May and
November. The Senior Notes do not require any payments of principal prior to
their stated maturity on May 15, 2003, but the Company is required to make
offers to purchase Senior Notes upon the occurrence of certain events as defined
in the indenture, such as asset sales or a change of control of the Company.
On or after May 15, 2000, the Senior Notes are redeemable at the option of
the Company, in whole or in part, at a price of 105% of principal if redeemed
during the twelve months beginning May 15, 2000, at a price of 102.5% of
principal if redeemed during the twelve months beginning May 15, 2001, or at a
price of 100% of principal if redeemed after May 15, 2002, in each case together
with interest accrued to the redemption date. Notwithstanding the foregoing, the
Company may at its option use all or a portion of the proceeds from a public
equity offering consummated on or prior to May 15, 1999, to redeem up to $50.0
million principal amount of the Senior Notes at a redemption price equal to 110%
of the principal amount, provided that at least $150.0 million in
6
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aggregate principal amount of the Senior Notes remain outstanding immediately
after such redemption.
The Senior Notes are senior unsecured obligations of the Company, ranking
pari passu in right of payment with all senior indebtedness and senior to all
subordinated indebtedness. The Senior Notes are unconditionally guaranteed (the
"Subsidiary Guarantees") on a senior unsecured basis by the Company's principal
subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary Guarantees rank
pari passu in right of payment with all senior indebtedness of the Subsidiary
Guarantors and senior to all subordinated indebtedness of the Subsidiary
Guarantors. The Subsidiary Guarantees may be released under certain
circumstances. The Senior Notes and the Subsidiary Guarantees are effectively
subordinated to all secured indebtedness, including amounts outstanding under
the Company's $35.0 million revolving credit facility ("Revolving Credit
Facility") with ING (U.S.) Capital Corporation ("ING"). The Subsidiary
Guarantees provide that each Subsidiary Guarantor will unconditionally
guarantee, jointly and severally, the full and prompt performance of the
Company's obligations under the indenture and the Senior Notes. Each Subsidiary
Guarantor is 100% owned by the Company.
The indenture under which the Senior Notes are issued imposes significant
operating and financial restrictions on the Company. Such restrictions affect,
and in many respects limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, make capital expenditures, create
liens, sell assets and make dividends or other payments.
Separate financial statements and other disclosures concerning the
Subsidiary Guarantors are not presented because management has determined such
financial statements and other disclosures are not material to investors. The
assets, equity, income and cash flows of the non-guarantor subsidiaries on an
individual and combined basis are less than 1% of the consolidated assets,
equity, income and cash flows, respectively, of the Company and are
inconsequential. The combined condensed financial information of the Company's
Subsidiary Guarantors is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
<S> <C> <C>
Current Assets .............................. $ 26,228 $ 31,872
Non-Current Assets .......................... 244,945 214,462
---------- ----------
Total Assets ........................... $ 271,173 $ 246,334
========== ==========
Current Liabilities ......................... $ 22,657 $ 21,417
Non-Current Liabilities ..................... 204,102 189,004
Equity ...................................... 44,414 35,913
---------- ----------
Total Liabilities and Equity ........... $ 271,173 $ 246,334
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
---------- ----------
(In thousands)
<S> <C> <C>
Revenues .................................... $ 36,016 $ 17,008
Operating Income ............................ $ 10,663 $ 6,839
Net Income .................................. $ 8,501 $ 2,535
</TABLE>
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4. COMPREHENSIVE INCOME
During the first quarter of 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income," ("SFAS No.
130"). SFAS No. 130 establishes new rules for the reporting and disclosure of
comprehensive income and its components in a full set of financial statements.
To the extent the Company has comprehensive income, it would present these items
in a statement of changes in shareholders' equity. However, the Company had no
items of comprehensive income during the first quarters of 1998 and 1997 and
therefore, comprehensive income is equal to net income for both periods.
5. SEGMENT REPORTING
In 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information," ("SFAS
No. 131"). SFAS No. 131 changes the reporting of segment information in annual
financial statements and also requires reporting selected segment information in
interim financial reports to shareholders. SFAS No. 131 is effective for years
beginning after December 15, 1997 and is not expected to have a significant
impact on the Company's consolidated financial statements and related
disclosures upon adoption.
6. CHANGE IN PRESENTATION
Certain financial statement items have been reclassified in the prior year
to conform with the current year presentation.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Form 10-Q regarding the
Company's financial position, business strategy, budgets and plans and
objectives of management for future operations are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed under the captions "General" and "Liquidity and
Capital Resources" within this item and elsewhere in this Form 10-Q.
GENERAL
Activity in the contract drilling industry and related oil service
businesses has improved due to increased worldwide demand for drilling rigs and
related services. Over the past several years, the supply of offshore drilling
rigs has declined while the demand for such rigs has increased, resulting in
increases in worldwide utilization rates. The financial condition and results of
operations of the Company and other drilling contractors are dependent upon the
price of oil and natural gas, as demand for their services is primarily
dependent upon the level of spending by oil and gas companies for exploration,
development and production activities. Crude oil and natural gas prices have
continued to fluctuate over the last several years. During the last few months,
crude oil prices have declined from 1997 levels. This price volatility creates
some market uncertainties, despite the overall improvement in oil and gas market
fundamentals. The Company's daywork drilling operations have benefited from the
tight supply of jack-up drilling rigs both in the U.S. Gulf of Mexico and
internationally. Increased exploration activity coupled with a reduction in rig
availability has resulted in increasing dayrates and utilization of the
Company's drilling rigs. The same factors have positively and negatively
affected the Company's engineering services business segment, in that increased
exploration activity has caused an increase in demand for the Company's
engineering services; however, reduced rig availability has made it more
difficult for the Company to contract drilling rigs required for performance of
turnkey drilling operations.
The oil and gas industry has experienced extreme market cycles over the
past decade. The Company has endeavored to mitigate the effect of this
volatility by diversifying its scope of operations. To achieve its strategic
objective, the Company established separate but related lines of business in
daywork drilling, engineering services and mobile offshore production unit
("MOPU") operations. The Company also has pursued foreign drilling and
production opportunities in order to expand geographically. Each of the
Company's business segments will continue to be affected, however, by the
unsettled energy markets, which are influenced by a variety of factors,
including general economic conditions, the extent of worldwide oil and gas
production and demand therefor, government regulations and environmental
concerns.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
The Company recognized net income of $15.0 million in the first quarter of
1998 compared to net income of $7.0 million in the first quarter of 1997.
Revenues increased $36.9 million and operating income increased $13.5 million in
the same period. These increases were partially offset by $1.1 million of
increased interest expense associated with the Senior Notes and $4.3 million of
increased income taxes. Improved operating results from the Company's daywork
drilling and engineering services business segments contributed to the increases
in revenues and operating income.
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------- Increase
1998 1997 (Decrease)
-------- -------- ----------
(In thousands)
<S> <C> <C> <C>
Revenues:
Daywork Drilling .............. $ 60,972 $ 34,144 $ 26,828
Engineering Services .......... 43,629 26,701 16,928
MOPU Operations ............... 2,328 1,592 736
Oil and Gas ................... 130 169 (39)
Eliminations .................. (9,283) (1,730) (7,553)
-------- -------- --------
Consolidated .............. $ 97,776 $ 60,876 $ 36,900
======== ======== ========
Operating Income (Loss):
Daywork Drilling .............. $ 22,180 $ 14,217 $ 7,963
Engineering Services .......... 7,174 1,582 5,592
MOPU Operations ............... 968 721 247
Oil and Gas ................... (39) 5 (44)
Corporate Office .............. (2,250) (1,949) (301)
-------- -------- --------
Consolidated .............. $ 28,033 $ 14,576 $ 13,457
======== ======== ========
</TABLE>
Daywork Drilling
Daywork drilling revenues increased $26.8 million and operating income
increased $8.0 million in the first quarter of 1998 compared to the first
quarter of 1997. The increases in revenues and operating income were primarily
due to 7 rigs which commenced operations or were acquired subsequent to the
first quarter of 1997. Improvements in dayrates for the Company's jack-up and
land drilling rigs also contributed to the increases in revenues and operating
income.
One jack-up rig is currently in the shipyard undergoing conversion from a
MOPU to a drilling rig and is contracted to work offshore Venezuela for a
one-year term once the conversion is completed. The rig is expected to commence
operations during the third quarter of 1998.
The Company operates its drilling rigs on both a term and a spot
(well-to-well) basis. Drilling rigs contracted on a term basis generally work in
various international locations, while drilling rigs contracted on a spot basis
generally work in the U.S. Gulf of Mexico. The following table summarizes
revenues, utilization and average dayrates for significant classes of the
Company's drilling rigs:
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------- Increase
1998 1997 (Decrease)
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Daywork Drilling Revenues(1):
Jack-up Rigs:
International ..................... $ 15,697 $ 8,728 $ 6,969
Domestic .......................... 25,716 16,510 9,206
Land Rigs ........................... 12,282 6,102 6,180
Platform / Workover Rigs ............ 6,532 1,161 5,371
Other (2) ........................... 745 1,643 (898)
---------- ---------- ----------
Total ......................... $ 60,972 $ 34,144 $ 26,828
========== ========== ==========
Average Rig Utilization(3):
Jack-up Rigs:
International ..................... 100% 99%
Domestic .......................... 100% 99%
Land Rigs ........................... 88% 100%
Platform / Workover Rigs ............ 100% 100%
Average Dayrates(4):
Jack-up Rigs:
International ..................... $ 31,251 $ 26,100
Domestic .......................... 34,530 26,351
Land Rigs ........................... 15,257 10,907
Platform / Workover Rigs ............ 13,717 12,300
</TABLE>
- ------------------
(1) Includes revenues earned from affiliates.
(2) Includes joint venture operations in Trinidad in the first quarter of 1997
and joint venture operations in Mexico and labor maintenance contracts in
the first quarters of 1997 and 1998.
(3) Utilization rates are based upon the number of actively marketed rigs in
the fleet and exclude rigs which are unavailable for operations during
periods of refurbishment and upgrade.
(4) Daywork drilling revenues, less non-recurring revenues, divided by
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.
Engineering Services
Engineering services revenues increased $16.9 million and operating income
increased $5.6 million in the first quarter of 1998 compared to the first
quarter of 1997. The Company completed 6 turnkey contracts in the first quarter
of 1998 compared to 3 turnkey contracts in the first quarter of 1997. Four of
the 6 contracts completed during the first quarter of 1998 were international
contracts in Venezuela compared to 2 international contract completions in the
first quarter of 1997. Three domestic turnkey contracts incurred losses in the
first quarter of 1998 which reduced reported margins.
International operating margins are currently stronger than domestic
margins due to improved drilling efficiencies and reductions in lost time well
activities. Domestic turnkey contractors continue to bid wells very
aggressively, resulting in intense competition which has adversely affected the
Company's domestic turnkey margins, as well as margins of other competitors.
In April, 1998, the Company signed a contract with PDVSA Exploration and
Production, the Venezuelan government-owned oil company ("PDVSA"), to drill 60
turnkey wells in Venezuela. Aggregate revenues for the 60 wells are expected to
range from approximately $450 million to
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$500 million depending upon, among other things, various options to be elected
by PDVSA. The program is expected to extend over approximately three and
one-half years and will utilize 7 of the Company's land drilling rigs which are
currently located in Venezuela. No assurance can be given that all 60 wells will
ultimately be drilled or that the program can be completed within the intended
time frame. As a consequence of this expanded program in Venezuela, the Company
will be reducing its domestic turnkey business as personnel are reassigned to
Venezuela.
At March 31, 1998, the Company had 3 turnkey wells in progress in Venezuela
and one turnkey well in progress in the U.S. Gulf of Mexico.
MOPU Operations
MOPU revenues increased $.7 million and operating income increased $.2
million in the first quarter of 1998 compared to the first quarter of 1997. The
increases in revenues and operating income were primarily due to operations
associated with one MOPU which did not operate in the first quarter of 1997,
partially offset by the loss of earnings from another unit which is currently in
the shipyard undergoing conversion to a jack-up drilling rig.
The Company currently owns 4 MOPUs, all of which are under contract and
currently operating.
Oil and Gas
Oil and gas revenues and operating income decreased slightly in the first
quarter of 1998 compared to the first quarter of 1997 primarily due to decreased
oil and natural gas prices. The Company does not expect any significant activity
related to oil and gas exploration and production activities during 1998.
Corporate Overhead
Corporate overhead increased $.3 million in the first quarter of 1998
compared to the first quarter of 1997. The increase was primarily due to
increased costs associated with the various rig acquisitions completed since
May, 1996 and other employment-related costs.
Other Income (Expense) and Income Taxes
The Company recognized $13.1 million of other expense, including income
taxes, in the first quarter of 1998 compared to $7.6 million of other expense in
the first quarter of 1997. The net increase resulted primarily from a $1.1
million increase in interest expense associated with the Senior Notes and an
increase in income taxes of $4.3 million. See "Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $27.1 million from $28.1 million at
December 31, 1997 to $55.2 million at March 31, 1998. The increase resulted from
$50.2 million provided by operating activities, offset in part by $23.1 million
used in investing activities.
Operating Activities
Net cash of $50.2 million provided by operating activities included $25.4
million provided by working capital and other activities. "Accounts Receivable"
decreased from December 31, 1997 to March 31, 1998 due primarily to the receipt
of refundable taxes associated with the acquisition of 3 rigs in Trinidad on
December 29, 1997. "Drilling Contracts in Progress" decreased due to the
completion of the 5 turnkey contracts that were in progress at December 31,
1997. "Accounts Payable and Other" increased primarily due to the timing of
interest payments associated with the Senior Notes and Federal income taxes
estimated to be payable.
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Investing Activities
Net cash of $23.1 million used in investing activities during the first
quarter of 1998 included capital expenditures totaling $10.3 million used to
fund the reactivation of 2 land drilling rigs acquired in January, 1997 for
operations on Venezuelan turnkeys, $4.0 million for the conversion of a MOPU to
a drilling rig and $9.5 million spent on upgrade and renovation activities on
other drilling rigs and MOPUs.
On December 29, 1997, the Company completed the acquisition of 2 offshore
platform drilling rigs, one self-propelled jack-up drilling/workover rig and
substantially all of the assets used in the offshore contract drilling business
in Trinidad (the "Well Services Acquisition") previously operated by Well
Services (Marine) Ltd. ("Well Services"). The purchase price totaled $44.0
million, consisting of cash of $23.5 million and the issuance by the Company of
437,939 shares of Common Stock, $0.01 par value per share ("Common Stock").
Additional contingent cash consideration may be paid to the sellers if certain
post-closing criteria are met. The outcome of the contingency is not
determinable at this time, and relates to the ultimate valuation of the assets
acquired. The 2 platform rigs and the jack-up drilling/workover rig are
currently operating under contracts in Trinidad.
The Company is currently converting one of its MOPUs to a jack-up drilling
rig at an estimated cost of $20.0 million. The Company expects to complete the
conversion during the second quarter of 1998 and commence operations pursuant to
a one-year contract during July, 1998. No assurance can be given that the
conversion will be completed within the expected time frame or within the
current cost estimate.
The Company has capital expenditure plans totaling approximately $28
million during the remainder of 1998. Of this total, $5.5 million relates to
costs remaining to complete the conversion of a MOPU to a jack-up drilling rig
which commenced in 1997, $5.0 million relates to planned upgrades of a platform
rig obtained in the Well Services Acquisition and $17.5 million relates
primarily to other drilling rig capital expenditures and drill pipe purchases.
The Company intends to fund these capital expenditures with available cash and
internally-generated cash flow.
Financing Activities
Long-term debt at March 31, 1998 consists solely of Senior Notes in the
aggregate principal amount of $200.0 million and debt premium, net of
amortization, of $3.4 million. In addition to the $150.0 million of Senior Notes
sold during 1996, the Company sold $50.0 million of Senior Notes on August 7,
1997 at a premium of $3.9 million. Considering the premium, the effective
interest rate on the $50.0 million Senior Notes is 9.5%. Interest on the Senior
Notes is payable semi-annually during each May and November. The Senior Notes do
not require any payments of principal prior to their stated maturity on May 15,
2003, but the Company is required to make offers to purchase Senior Notes upon
the occurrence of certain events as defined in the indenture, such as asset
sales or a change of control of the Company.
On or after May 15, 2000, the Senior Notes are redeemable at the option of
the Company, in whole or in part, at a price of 105% of principal if redeemed
during the twelve months beginning May 15, 2000, at a price of 102.5% of
principal if redeemed during the twelve months beginning May 15, 2001, or at a
price of 100% of principal if redeemed after May 15, 2002, in each case together
with interest accrued to the redemption date. Notwithstanding the foregoing, the
Company may at its option use all or a portion of the proceeds from a public
equity offering consummated on or prior to May 15, 1999, to redeem up to $50.0
million principal amount of the Senior Notes at a redemption price equal to 110%
of the principal amount, provided that at least $150.0 million in aggregate
principal amount of the Senior Notes remain outstanding immediately after such
redemption.
The Senior Notes are senior unsecured obligations of the Company, ranking
pari passu in right of payment with all senior indebtedness and senior to all
subordinated indebtedness. The Senior Notes are unconditionally guaranteed on a
senior unsecured basis by the Subsidiary Guarantors,
13
<PAGE> 14
and the Subsidiary Guarantees rank pari passu in right of payment with all
senior indebtedness of the Subsidiary Guarantors and senior to all subordinated
indebtedness of the Subsidiary Guarantors. The Subsidiary Guarantees may be
released under certain circumstances. The Senior Notes and the Subsidiary
Guarantees are effectively subordinated to all secured indebtedness, including
amounts outstanding under the Revolving Credit Facility. The Subsidiary
Guarantees provide that each Subsidiary Guarantor will unconditionally
guarantee, jointly and severally, the full and prompt performance of the
Company's obligations under the indenture and the Senior Notes. Each Subsidiary
Guarantor is 100% owned by the Company.
The indenture under which the Senior Notes are issued imposes significant
operating and financial restrictions on the Company. Such restrictions affect,
and in many respects limit or prohibit, among other things, the ability of the
Company to incur additional indebtedness, make capital expenditures, create
liens, sell assets and make dividends or other payments.
The Company currently maintains a $35.0 million Revolving Credit Facility
with ING. The Revolving Credit Facility matures on May 31, 1998, and the Company
is currently negotiating a renewal of same. At March 31, 1998, the Company had
no indebtedness outstanding under the Revolving Credit Facility, but had $2.4
million in letters of credit outstanding, thereby leaving $32.6 million
available under the credit facility.
Exchange Rate Gains and Losses
Approximately 65% of the Company's revenues and a substantial portion of
its operating income were sourced from its foreign operations in the first
quarter of 1998. These operations are subject to customary political and foreign
currency risks in addition to operational risks. The Company has attempted to
reduce these risks through insurance and the structure of its contracts. The
Company may be exposed to the risk of foreign currency losses in connection with
its foreign operations. Such losses are the result of holding net monetary
assets (cash and receivables in excess of payables) denominated in foreign
currencies during periods of a strengthening U.S. dollar. The Company's foreign
exchange gains and losses are primarily attributable to the Venezuelan Bolivar.
The effects of these transactions are reported as "Exchange Rate Gain (Loss)" in
the Consolidated Statements of Operations. The Company does not speculate in
foreign currencies or maintain significant foreign currency cash balances. The
Company will continue to be exposed to future foreign currency gains and losses
if the currency continues to be volatile. Despite the political and economic
risks in Venezuela, the Company believes that the country continues to be a
favorable market for its services.
Cautionary Statements
The ability of the Company to fund working capital, capital expenditures
and debt service in excess of cash on hand will depend upon the success of the
Company's domestic and foreign operations. To the extent that internal sources
are insufficient to meet those cash requirements, the Company can draw on its
available credit facility or seek other debt or equity financing; however, the
Company can give no assurance that the Revolving Credit Facility will be renewed
or that such other debt or equity financing would be available on terms
acceptable to the Company.
In any case, the satisfaction of long-term capital requirements will depend
upon successful implementation by the Company of its business strategy and
future results of operations. Management believes it has successfully
implemented the strategy to achieve results of operations commensurate with its
immediate and near-term liquidity requirements.
14
<PAGE> 15
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, many
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its accounting software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Company does not believe that operational equipment
programming modifications are necessary. The Company has determined that it will
replace certain accounting software rather than invest in the modification of
existing programs. The replacement software and related installation are
estimated to cost approximately $1.5 million, which will be capitalized.
The software conversion is estimated to be completed not later than
December 31, 1998. The Company presently believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not timely completed, the
Year 2000 Issue could have a material impact on operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there is no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the cost and extent of training
associated with needed conversions and similar uncertainties.
15
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the first three months of 1998, 6,645 shares of the Company's Common
Stock held by the Company as treasury shares were sold to the Cliffs Drilling
Company 401(k) Savings Plan at an aggregate price of $254,937, with individual
transactions at market prices on the various dates of sale ranging from $33 5/8
to $42 3/8 per share. These sales were made in reliance on an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended,
inasmuch as these sales constituted transactions by the issuer not involving a
public offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
Restated Financial Data Schedules to reflect the adoption of SFAS No.
128, "Earnings Per Share" for each period during the latest three
fiscal years and for interim periods of the latest two fiscal years:
27.1 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1997.
27.2 Restated Financial Data Schedule for the Six Months Ended June
30, 1997.
27.3 Restated Financial Data Schedule for the Three Months Ended
March 31, 1997.
27.4 Restated Financial Data Schedule for the Year Ended December
31, 1996.
27.5 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1996.
27.6 Restated Financial Data Schedule for the Six Months Ended June
30, 1996.
27.7 Restated Financial Data Schedule for the Three Months Ended
March 31, 1996.
27.8 Restated Financial Data Schedule for the Year Ended December
31, 1995.
(b) Reports on Form 8-K
A report dated December 29, 1997 was filed by the Company on Form
8-K which reported that the Company completed the acquisition of 2
offshore platform drilling rigs, one self-propelled jack-up
drilling/workover rig and substantially all of the assets used in the
offshore contract drilling business of Well Services.
16
<PAGE> 17
SIGNATURES
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.
CLIFFS DRILLING COMPANY
Date: May 7, 1998 By: /s/ Edward A. Guthrie
---------------------- --------------------------------
Edward A. Guthrie
Vice President - Finance
Date: May 7, 1998 By: /s/ Cindy B. Taylor
---------------------- --------------------------------
Cindy B. Taylor
Vice President - Controller
and Secretary
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<S> <C>
27 Financial Data Schedule.
27.1 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1997.
27.2 Restated Financial Data Schedule for the Six Months Ended June
30, 1997.
27.3 Restated Financial Data Schedule for the Three Months Ended
March 31, 1997.
27.4 Restated Financial Data Schedule for the Year Ended December
31, 1996.
27.5 Restated Financial Data Schedule for the Nine Months Ended
September 30, 1996.
27.6 Restated Financial Data Schedule for the Six Months Ended June
30, 1996.
27.7 Restated Financial Data Schedule for the Three Months Ended
March 31, 1996.
27.8 Restated Financial Data Schedule for the Year Ended December
31, 1995.
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 55,207
<SECURITIES> 0
<RECEIVABLES> 57,386
<ALLOWANCES> 200
<INVENTORY> 8,695
<CURRENT-ASSETS> 138,694
<PP&E> 493,250
<DEPRECIATION> 107,991
<TOTAL-ASSETS> 530,959
<CURRENT-LIABILITIES> 78,631
<BONDS> 203,439
0
0
<COMMON> 163
<OTHER-SE> 231,319
<TOTAL-LIABILITY-AND-EQUITY> 530,959
<SALES> 97,776
<TOTAL-REVENUES> 97,776
<CGS> 60,292
<TOTAL-COSTS> 69,743
<OTHER-EXPENSES> (75)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,074
<INCOME-PRETAX> 23,034
<INCOME-TAX> 8,062
<INCOME-CONTINUING> 14,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,972
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 51,214
<SECURITIES> 0
<RECEIVABLES> 63,262
<ALLOWANCES> 95
<INVENTORY> 6,653
<CURRENT-ASSETS> 142,881
<PP&E> 395,621
<DEPRECIATION> 94,855
<TOTAL-ASSETS> 450,377
<CURRENT-LIABILITIES> 53,759
<BONDS> 203,774
0
0
<COMMON> 159
<OTHER-SE> 177,902
<TOTAL-LIABILITY-AND-EQUITY> 450,377
<SALES> 189,466
<TOTAL-REVENUES> 189,466
<CGS> 108,061
<TOTAL-COSTS> 128,643
<OTHER-EXPENSES> (2,329)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,572
<INCOME-PRETAX> 50,580
<INCOME-TAX> 17,703
<INCOME-CONTINUING> 32,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,877
<EPS-PRIMARY> 2.17
<EPS-DILUTED> 2.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,702
<SECURITIES> 0
<RECEIVABLES> 53,254
<ALLOWANCES> 716
<INVENTORY> 6,060
<CURRENT-ASSETS> 79,826
<PP&E> 372,321
<DEPRECIATION> 89,865
<TOTAL-ASSETS> 372,627
<CURRENT-LIABILITIES> 43,810
<BONDS> 150,000
0
0
<COMMON> 157
<OTHER-SE> 163,154
<TOTAL-LIABILITY-AND-EQUITY> 372,627
<SALES> 121,346
<TOTAL-REVENUES> 121,346
<CGS> 71,885
<TOTAL-COSTS> 84,403
<OTHER-EXPENSES> (2,514)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,786
<INCOME-PRETAX> 31,671
<INCOME-TAX> 11,085
<INCOME-CONTINUING> 20,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,586
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,926
<SECURITIES> 0
<RECEIVABLES> 44,279
<ALLOWANCES> 797
<INVENTORY> 5,653
<CURRENT-ASSETS> 79,225
<PP&E> 345,601
<DEPRECIATION> 84,857
<TOTAL-ASSETS> 352,811
<CURRENT-LIABILITIES> 44,419
<BONDS> 150,000
0
0
<COMMON> 80
<OTHER-SE> 149,325
<TOTAL-LIABILITY-AND-EQUITY> 352,811
<SALES> 60,876
<TOTAL-REVENUES> 60,876
<CGS> 40,520
<TOTAL-COSTS> 46,300
<OTHER-EXPENSES> (105)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,977
<INCOME-PRETAX> 10,704
<INCOME-TAX> 3,746
<INCOME-CONTINUING> 6,958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,958
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITE ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 39,181
<SECURITIES> 0
<RECEIVABLES> 34,585
<ALLOWANCES> 797
<INVENTORY> 5,807
<CURRENT-ASSETS> 110,202
<PP&E> 299,753
<DEPRECIATION> 83,279
<TOTAL-ASSETS> 339,546
<CURRENT-LIABILITIES> 41,981
<BONDS> 150,000
0
0
<COMMON> 80
<OTHER-SE> 142,088
<TOTAL-LIABILITY-AND-EQUITY> 339,546
<SALES> 133,109
<TOTAL-REVENUES> 133,109
<CGS> 91,984
<TOTAL-COSTS> 108,672
<OTHER-EXPENSES> (6,246)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,265
<INCOME-PRETAX> 21,418
<INCOME-TAX> 6,996
<INCOME-CONTINUING> 14,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,422
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 43,101
<SECURITIES> 0
<RECEIVABLES> 36,797
<ALLOWANCES> 797
<INVENTORY> 5,420
<CURRENT-ASSETS> 111,132
<PP&E> 297,716
<DEPRECIATION> 89,860
<TOTAL-ASSETS> 331,538
<CURRENT-LIABILITIES> 41,544
<BONDS> 150,000
0
0
<COMMON> 79
<OTHER-SE> 133,995
<TOTAL-LIABILITY-AND-EQUITY> 331,538
<SALES> 86,353
<TOTAL-REVENUES> 86,353
<CGS> 58,878
<TOTAL-COSTS> 69,976
<OTHER-EXPENSES> (4,462)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,464
<INCOME-PRETAX> 15,375
<INCOME-TAX> 5,381
<INCOME-CONTINUING> 9,994
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,994
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 45,585
<SECURITIES> 0
<RECEIVABLES> 33,758
<ALLOWANCES> 797
<INVENTORY> 5,023
<CURRENT-ASSETS> 95,248
<PP&E> 286,331
<DEPRECIATION> 86,454
<TOTAL-ASSETS> 307,869
<CURRENT-LIABILITIES> 24,014
<BONDS> 150,000
0
0
<COMMON> 78
<OTHER-SE> 129,407
<TOTAL-LIABILITY-AND-EQUITY> 307,869
<SALES> 42,856
<TOTAL-REVENUES> 42,856
<CGS> 30,073
<TOTAL-COSTS> 36,064
<OTHER-EXPENSES> (3,540)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,586
<INCOME-PRETAX> 8,746
<INCOME-TAX> 3,061
<INCOME-CONTINUING> 5,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,685
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.44
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE BALANCE SHEETS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 21,936
<SECURITIES> 0
<RECEIVABLES> 23,745
<ALLOWANCES> 797
<INVENTORY> 4,793
<CURRENT-ASSETS> 56,941
<PP&E> 151,862
<DEPRECIATION> 84,852
<TOTAL-ASSETS> 128,540
<CURRENT-LIABILITIES> 21,672
<BONDS> 0
0
0
<COMMON> 66
<OTHER-SE> 104,954
<TOTAL-LIABILITY-AND-EQUITY> 128,540
<SALES> 29,078
<TOTAL-REVENUES> 29,078
<CGS> 21,846
<TOTAL-COSTS> 24,747
<OTHER-EXPENSES> (1,387)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 5,692
<INCOME-TAX> 1,992
<INCOME-CONTINUING> 3,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,700
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 26,405
<SECURITIES> 0
<RECEIVABLES> 13,779
<ALLOWANCES> 797
<INVENTORY> 4,114
<CURRENT-ASSETS> 58,197
<PP&E> 149,475
<DEPRECIATION> 83,525
<TOTAL-ASSETS> 128,962
<CURRENT-LIABILITIES> 24,338
<BONDS> 0
28,750
0
<COMMON> 45
<OTHER-SE> 73,970
<TOTAL-LIABILITY-AND-EQUITY> 128,962
<SALES> 83,289
<TOTAL-REVENUES> 83,289
<CGS> 67,713
<TOTAL-COSTS> 80,273
<OTHER-EXPENSES> (5,435)
<LOSS-PROVISION> 400
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 7,852
<INCOME-TAX> 2,406
<INCOME-CONTINUING> 5,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,446
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>