<PAGE>
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 June 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _________________ to _____________________
Commission file number: 0-26388
FALCON DRILLING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0351754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 W. Loop South
Suite 1800
Houston, Texas 77027
(Address of Principal (Zip Code)
Executive offices)
Registrant's telephone number, including area code: (713) 623-8984
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 [_]
The number of shares outstanding of the issuer's common stock, as of July 31,
1996: 35,355,917
1
<PAGE>
FALCON DRILLING COMPANY, INC.
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Item Number Description Page Number
- ----------- ------------- -----------
<C> <S> <C>
Part I-
1 Financial Statements-
Condensed Consolidated Balance Sheets
as of June 30, 1996 (unaudited), and
December 31, 1995 3
Unaudited Condensed Consolidated
Statements of Operations for the
Three Months and Six Months Ended
June 30, 1996 and 1995 4
Unaudited Condensed Consolidated
Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995 5
Notes to Unaudited Condensed
Consolidated Financial Statements 6
2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 17
Part II-
6 Exhibits and Reports on Form 8-K 21
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,953 $ 9,016
Accounts receivable, net of allowance
for doubtful accounts of $375 at June
30, 1996, and December 31, 1995 65,325 38,000
Other current assets 2,937 4,888
-------- --------
Total current assets 78,215 51,904
EQUIPMENT AND PROPERTY:
Drilling rigs and equipment 432,875 295,004
Vessels and other equipment 5,540 3,903
-------- --------
438,415 298,907
Less- Accumulated depreciation (45,941) (33,299)
-------- --------
392,474 265,608
OTHER ASSETS 16,157 23,511
-------- --------
Total assets $486,846 $341,023
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 41,420 $ 31,326
Income tax payable 167 141
Debt due within one year 3,432 3,999
-------- --------
Total current liabilities 45,019 35,466
LONG-TERM DEBT, less current portion 304,504 179,362
DEFERRED INCOME TAXES 14,359 10,679
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
100,000,000 shares authorized;
35,335,917 and 35,244,384 shares
issued and outstanding at June 30,
1996, and December 31, 1995,
respectively 353 352
Additional paid-in capital 113,289 112,853
Accumulated earnings 9,322 2,311
-------- --------
Total stockholders' equity 122,964 115,516
-------- --------
Total liabilities and
stockholders' equity $486,846 $341,023
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
3
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------ ------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 73,946 $ 39,419 $ 130,080 $ 80,636
COSTS AND EXPENSES:
Operating costs 47,634 27,907 85,778 56,215
General and administrative expenses 4,313 3,828 8,881 6,834
Depreciation 7,045 3,801 13,078 7,406
----------- ----------- ----------- -----------
OPERATING INCOME 14,954 3,883 22,343 10,181
OTHER (INCOME) EXPENSE:
Interest expense 6,387 4,694 12,097 8,704
Amortization of deferred costs 706 726 1,301 1,222
Other (income) expense, net (1,553) (1,291) (2,184) (1,617)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST 9,414 (246) 11,129 1,872
INCOME TAX PROVISION (BENEFIT) 3,398 (416) 4,118 304
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 6,016 170 7,011 1,568
MINORITY INTEREST - 708 - 1,111
----------- ----------- ----------- -----------
NET INCOME (LOSS) 6,016 (538) 7,011 457
PREFERRED STOCK DIVIDENDS
AND ACCRETION - 101 - 202
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHARES $ 6,016 $ (639) $ 7,011 $ 255
=========== =========== =========== ===========
NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES USED IN COMPUTING EARNINGS
PER SHARE 36,036,062 15,922,500 35,966,388 26,878,107
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $.17 ($.04) $.19 $.01
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
4
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------------
1996 1995
---------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,011 $ 457
Adjustments to reconcile net income to
net cash provided by operating
activities-
Depreciation and amortization 14,378 8,628
Realized gain on sale of assets (227) (770)
Minority interest in earnings of
subsidiary - 1,111
Provision for deferred income taxes 3,679 304
Changes in assets and liabilities-
Accounts receivable, trade (27,325) 407
Other assets 3,198 (774)
Accounts payable and accrued
liabilities 10,120 (4,985)
--------- --------
Net cash provided by
operating activities 10,834 4,378
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and property (140,129) (7,463)
Refunds (deposits) made for drill
pipe, rigs and equipment 8,826 -
Proceeds from the sale of equipment
and property 413 3,019
--------- --------
Net cash used in investing
activities (130,890) (4,444)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt 164,000 56,000
Payments of outstanding debt (39,425) (27,368)
Issuance of common stock 437
Debt issuance costs (4,019) (2,093)
--------- --------
Net cash provided by
financing activities 120,993 26,539
--------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 937 26,473
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,016 4,868
--------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 9,953 $ 31,341
========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 10,156 $ 6,918
Income taxes paid $ 30 $ 387
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
5
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION
AND SIGNIFICANT ACTIVITIES:
The accompanying unaudited condensed consolidated financial statements of
the Company for the three months and six months ended June 30, 1996 and 1995,
have been prepared without an audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to present
fairly the financial position, results of operations and cash flows for all
periods presented have been made. Operating results for the interim periods are
not necessarily indicative of the results that can be expected for a full year.
It is suggested that these interim condensed consolidated financial statements
be read in conjunction with the audited financial statements and the notes
thereto included in the Company's latest annual report filed on Form 10-K.
During March 1996, the Company completed the offering and sale of $120 million
principal amount of 8-7/8% Series A Senior Notes due 2003, resulting in net
proceeds of $116 million to the Company after deducting offering-related
expenses.
The Company holds a 37.5 percent effective interest in a Venezuelan joint
venture which operates two barge drilling rigs in Venezuela. The Company
accounts for its interests in the Venezuelan joint venture under the cost method
as Falcon does not currently exercise significant influence over the venture.
Through December 31, 1995, the Company had received cash distributions of
approximately $1.5 million of which $600,000 was recorded as a reduction of the
investment in the joint venture in order to reduce the investment to zero, and
the balance was recognized as revenues. During the three and six months ended
June 30, 1996, the Company had received additional cash distributions of
approximately $397,000 and $787,000, respectively which were recorded as
revenues in the condensed consolidated statement of operations.
6
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. EARNINGS PER COMMON SHARE:
Net income per share of common stock has been computed on the basis of the
weighted average number of common shares outstanding during the period and,
where dilutive, the effect of common stock contingently issuable, which arises
primarily from the exercise of stock options and warrants. Accrued dividends on
the Series B redeemable preferred stock as well as the accretion of the
difference between the value of the Series B redeemable preferred stock at the
date of issue and the redemption value have been deducted from net income for
purposes of calculating net income applicable to common shares for the three and
six months ended June 30, 1995. The Company redeemed the Series B redeemable
preferred stock in December 1995. Fully diluted earnings per share are
considered to be equal to primary earnings per share in all periods presented
because the effects of potentially dilutive securities that are not common stock
equivalents were either antidilutive or immaterial.
The following table presents the computation of common and common equivalent
shares used in computing primary earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- ------------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Weighted average shares of common stock
outstanding 35,311,648 15,922,500 35,300,594 15,922,500
Weighted average of common stock
equivalents 1,067,628 - 1,030,027 12,093,077
Effect of shares issuable pursuant to
stock option plans using the
treasury stock method (343,213) - (364,233) (1,137,470)
---------- ---------- ---------- ----------
Shares used in computing earnings per
share 36,036,062 15,922,500 35,966,388 26,878,107
========== ========== ========== ==========
</TABLE>
3. PRO FORMA RESULTS OF OPERATIONS:
The Company completed the acquisition of the remaining 50 percent interest in
Blake Workover in August 1995. Pro forma net income (loss) applicable to common
shares of the Company for the three-month and six-month period ended June 30,
1995, was $(235,000) and $921,000 respectively, and net income (loss) per common
share was $(.03) and $.03 respectively assuming the Company had completed the
acquisition of Blake Workover and had issued the 1,199,000 shares of common
stock that were issued in connection with the acquisition of the remaining 50
percent interest in Blake Workover as of January 1, 1995. Pro forma revenues
remained the same for all periods presented. The effects of the Blake Workover
acquisition and the issuance of the common stock have been reflected in the
Company's historic balance sheet and results of operations beginning August
1995.
7
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. LONG-TERM DEBT:
The Company had the following debt outstanding as of June 30, 1996, and
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
<S> <C> <C>
(UNAUDITED)
8-7/8% Senior Notes, due 2003 $120,000 $ -
9-3/4% Senior Notes, due 2001 110,000 110,000
Floating Rate Notes, bearing interest
at LIBOR plus 3.5%, redeemable in
varying amounts beginning in 1998 10,000 10,000
12-1/2% Senior Subordinated Notes, due
2005 50,000 50,000
Borrowings pursuant to a credit
agreement with two banks, at LIBOR
plus 2.5% or 1% over the higher of the
prime rate or the federal funds rate
plus .5%, secured by certain accounts
receivable 12,000 5,000
Note payable to a bank, at LIBOR plus
1.5% through maturity at December 31,
1999 1,389 1,969
Notes payable by affiliates, secured by
certain rigs, at 7.0%, due in varying
amounts commencing July 1994 with
final payment due June 30, 1999 1,214 1,392
-------- --------
Secured promissory note payable to
Grace Offshore Company at 8.7%,
secured by certain FALRIG Partnership
jackup rigs, principal payments of
$1,667 due March 31, 1997 and 1998 3,333 5,000
-------- --------
307,936 183,361
Less- Amounts due within one year (3,432) (3,999)
-------- --------
$304,504 $179,362
======== ========
</TABLE>
The 9-3/4% Senior Notes (the Notes) mature on January 15, 2001, and bear
interest at a rate of 9.75 percent, payable semiannually on January 15 and July
15. The Company has the option to redeem up to 30 percent of the Notes through
January 15, 1997, at a redemption price of 109 percent of the principal amount
thereof, with the proceeds of the sale and issuance of capital stock of the
Company, provided that at least $50 million in aggregate principal of the Notes
remains outstanding following redemption. Upon the occurrence of a Change of
Control of the Company, as defined in the Indenture, each Noteholder will have
the right to require the Company to repurchase all of such Noteholder's Notes in
whole or in part at a purchase price in cash equal to 101 percent of the
principal amount thereof.
The 8-7/8% Senior Notes (the 8-7/8% Notes) mature on March 15, 2003, and bear
interest at a rate of 8.875 percent, payable semiannually on March 15 and
September 15. Beginning March 15, 2000, the Company may redeem the 8-7/8% Notes
at annually declining redemption prices beginning at 104.4375 percent of the
principal amount of such notes. Upon change in control of the Company, as
defined in the Indenture, the Company will be required to make an offer to
purchase the 8-7/8% Notes at 101 percent of the principal amount thereof.
8
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The 12-1/2% Senior Subordinated Notes (the Subordinated Notes) mature on March
15, 2005, and bear interest at a rate of 12.5 percent, payable semiannually on
March 15 and September 15. The Company has the option to redeem up to 30
percent of the Subordinated Notes through March 15, 1998, at a redemption price
of 111.5 percent of the principal amount of such notes with the proceeds of a
public offering of the Company's capital stock, provided that at least $35
million in aggregate principal of the Subordinated Notes remains outstanding
immediately after giving effect to such redemption. Beginning March 15, 2000,
the Company may redeem the Subordinated Notes at annually declining redemption
prices beginning at 104.688 percent of the principal amount of such notes. Upon
change in control of the Company, as defined in the Indenture, the Company will
be required to make an offer to purchase the Subordinated Notes at 101 percent
of the principal amount thereof. The Subordinated Notes are senior unsecured
obligations of the Company subordinated in right of payment to all other
existing or future senior indebtedness of the Company.
The Floating Rate Notes bear interest at LIBOR plus 3.5 percent and are
redeemable at face value plus unpaid accrued interest at the option of the
Company; provided, any such redemption, if less all such notes, must be of at
least $5.0 million principal amount of such notes. If not previously redeemed,
principal amounts of the Floating Rate Notes are due in payments of $1.0
million, $2.0 million and $2.0 million in January 1998, 1999, and 2000,
respectively, with the balance due January 24, 2001.
In order to provide an additional source of funds, the Company has a revolving
credit facility with two banks providing for borrowings of up to $25.0 million,
which is secured by the Company's accounts receivable. The Company had $12.0
million outstanding under this credit facility as of June 30, 1996.
Approximately $13.0 million of borrowings were available under this facility at
June 30, 1996, based on the Company's eligible borrowing base, as defined. This
facility provides that amounts borrowed will bear interest at floating rates
based on LIBOR plus 2.5 percent or 1 percent over the greater of the prime rate
or the federal funds rate plus 2.5 percent.
5. COMMITMENTS AND CONTINGENCIES:
The Company is currently involved in various lawsuits and other contingencies
arising out of operations in the normal course of business. In the opinion of
management, uninsured losses, if any, in excess of those accrued will not have a
material adverse effect on the Company's consolidated financial position or
results of operations. The Company is self-insured for the deductible portion
of its insurance coverage and participates in an insurance cooperative for most
of its coverage. Most of its insurance provides for premium adjustments based
on claims experience. Future events, claims or assessments may increase the
Company's costs for such coverage. In the opinion of management, adequate
accruals have been made based on known and estimated exposures.
The Company has multiyear employment agreements with several of its officers.
The employment agreements provide for annual salaries and discretionary bonuses
to be determined by the board of directors.
The Company entered into contingent profits interest agreements during 1992
associated with certain acquisitions. The agreements require annual payments of
15 percent of an agreed-upon amount to be paid to the previous rig owners and a
former mortgage holder. This agreed-upon amount can be generally described as
domestic barge net income less overhead, depreciation and interest attributable
to these operations. These payments, if any, continue through 1997 or until
payment of $5 million is made. There have been no required payments under these
agreements through June 30, 1996.
9
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1994 a subsidiary of the Company (Raptor) acquired an interest in a joint
venture (the Chenier JV) engaged in the development of drilling prospects in the
general areas of the Company's barge drilling operations and, in one instance,
has participated with several other companies in the funding of seismic
activities in south Louisiana. The Company's historical expenditures and
commitments to date for the funding and exploratory efforts of the Chenier JV
activities are approximately $3.4 million. In June 1996, the joint venture
distributed these properties to Raptor and the other joint venturer, and Raptor
sold a portion of the properties so distributed to it for $1,177,804 in cash and
a promissory note in the amount of $734,696. The promissory note bears interest
at two percent over prime, and is payable out of a percentage of revenues from
the properties sold, but in all events no later than June 1, 1999. There is
currently no production from the properties sold. The consideration received by
Raptor represented, in part the assumption by the purchaser of certain loans
that Raptor had made to the other joint venturer. At June 30, 1996,
approximately $1.7 million of the Company's historical expenditures remained in
other assets.
In September 1995, the Company purchased a dynamically positioned drillship, the
Peregrine I, for a purchase price of $9.8 million. At June 30, 1996, the
Peregrine I was in Singapore undergoing refurbishment and upgrade at a cost
estimated by the Company of $35.2 million, of which approximately $32.1 million
had been incurred and included in rigs and equipment at June 30, 1996.
6. SUPPLEMENTAL GUARANTOR INFORMATION:
The Company's obligations under the 9-3/4% Notes and the Floating Rate Notes are
unconditionally guaranteed by each of the Company's directly held subsidiaries
and certain of the Company's indirectly held subsidiaries on a joint and several
basis.
The Indenture under which the 9-3/4% Notes were issued provides for subsidiaries
acquired subsequent to the issuance of the 9-3/4% Notes to be designated as
guarantors of the 9-3/4% Notes. The Indenture also provides that 12 specified
barge rigs are to be nonrecourse rigs, whereby the Company has the option to
transfer such nonrecourse barge rigs to nonrecourse subsidiaries at any time
provided, however, that the Company may, at its option and at any time,
designate up to two of its barge rigs in substitution for any two of the
designated nonrecourse barge rigs. In addition, up to two of the Company's
jackup rigs may be designated nonrecourse rigs provided certain financial tests
are met. Nonrecourse subsidiaries are not required to provide guarantees of the
9-3/4% Notes and Floating Rate Senior Notes and are not subject to certain of
the Indenture covenants.
During December 1994, the Company transferred three nonrecourse barge rigs to a
newly formed nonguarantor subsidiary, Falcon Drilling de Venezuela, Inc. During
March 1995, Falcon Drilling de Venezuela, Inc., was merged into a guarantor
subsidiary of the Company in connection with the issuance of the Subordinated
Notes, and the three barge rigs previously designated as nonrecourse rigs ceased
being nonrecourse rigs. The following condensed consolidating financial
statements are presented for purposes of complying with the reporting
requirements of the parent company and the subsidiaries which are guarantors
under the 9-3/4% Notes and Floating Rate Notes. The financial statements at
June 30, 1996, and December 31, 1995, include Eilert-Olsen Investments, Inc., as
a nonguarantor subsidiary. The Company believes that separate financial
statements and other disclosures of the guarantors are not material to the
investors.
Upon occurrence of an event of default (as defined) under a revolving credit
facility with two banks, the ability of certain subsidiaries of the Company to
make distributions or other transfers to the Company will be restricted.
10
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET--JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,776 $ 1,177 $ - $ - $ 9,953
Accounts receivable, net 22,743 42,582 - - 65,325
Other current assets (39) 2,976 - - 2,937
-------- -------- ------------ ------------ --------
Total current assets 31,480 46,735 - - 78,215
EQUIPMENT AND PROPERTY, net 74,838 315,034 2,603 - 392,475
OTHER NONCURRENT ASSETS - 16,156 - - 16,156
INTERCOMPANY AND INVESTMENT IN
SUBSIDIARIES AND JOINT VENTURES, net 334,348 - - (334,348) -
-------- ------------ ------------ ------------ --------
Total assets $440,666 $377,925 $2,603 $(334,348) $486,846
======== ======== ============ ============ ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 15,701 $ 25,886 $ - $ - $ 41,587
Current maturities of long-term debt - 3,055 377 - 3,432
-------- -------- ------------ ------------ --------
Total current liabilities 15,701 28,941 377 - 45,019
LONG-TERM DEBT, net 302,001 1,667 836 - 304,504
DEFERRED INCOME TAXES - 14,359 - - 14,359
PREFERRED STOCK - - - - -
STOCKHOLDERS' EQUITY:
Partnership capital - 56,672 - (56,672) -
Common stock 353 - - - 353
Preferred stock, Series A 0 - - - -
Additional paid-in capital 113,289 244,344 1,779 (246,123) 113,289
Accumulated earnings (deficit) 9,322 31,942 (389) (31,553) 9,322
-------- -------- ------------ ------------ --------
Total stockholders' equity 122,964 332,958 1,390 (334,348) 122,964
-------- -------- ------------ ------------ --------
Total liabilities and stockholders'
equity $440,666 $377,925 $2,603 $(334,348) $486,846
======== ======== ============ ============ ========
</TABLE>
11
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEET--DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
ASSETS COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------- ------------
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 141 $ 8,875 $ - $ - $ 9,016
Accounts receivable, net 11,953 26,047 - - 38,000
Other current assets 2,524 2,364 - - 4,888
-------- -------- ------------ ------------ --------
Total current assets 14,618 37,286 - - 51,904
EQUIPMENT AND PROPERTY, net 18,598 244,313 2,697 - 265,608
OTHER ASSETS 137 23,374 - - 23,511
INTERCOMPANY AND INVESTMENT IN
SUBSIDIARIES AND JOINT VENTURES, net 268,118 - - (268,118) -
-------- -------- ------ ------------ --------
Total assets $301,471 $304,973 $2,697 $(268,118) $341,023
======== ======== ====== ============ ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 8,985 $ 22,482 $ - $ - $ 31,467
Debt and other obligations due within
one year 1,969 1,666 364 - 3,999
-------- -------- ------ ------------ --------
Total current liabilities 10,954 24,148 364 - 35,466
LONG-TERM DEBT, net 175,000 3,334 1,028 - 179,362
DEFERRED INCOME TAXES - 10,679 - - 10,679
STOCKHOLDERS' EQUITY:
Partnership capital - 56,672 - (56,672) -
Common stock 352 - - - 352
Additional paid-in capital 112,854 191,921 1,603 (193,525) 112,853
Accumulated earnings (deficit) 2,311 18,219 (298) (17,921) 2,311
-------- -------- ------ ------------ --------
Total stockholders' equity 115,517 266,812 1,305 (268,118) 115,516
-------- -------- ------ ------------ --------
Total liabilities and stockholders'
equity $301,471 $304,973 $2,697 $(268,118) $341,023
======== ======== ====== ============ ========
</TABLE>
12
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 7,164 $122,916 $ - $ - $130,080
COSTS AND EXPENSES:
Operating costs 4,749 81,029 - - 85,778
General and administrative 264 8,617 - - 8,881
Depreciation 647 12,336 95 - 13,078
-------- -------- ----- ------------ --------
OPERATING INCOME 1,504 20,934 (95) - 22,343
OTHER (INCOME) EXPENSE:
Interest expense 11,870 178 49 - 12,097
Other (income) expense, net 144 (1,027) - - (883)
Equity in income of subsidiaries (13,632) - - 13,632 -
-------- ------------ ------------ ------------ --------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST 3,122 21,783 (144) (13,632) 11,129
INCOME TAX PROVISION (BENEFIT) (3,889) 8,060 (53) - 4,118
-------- -------- ----- ------------ --------
INCOME (LOSS) BEFORE
MINORITY INTEREST 7,011 13,723 (91) (13,632) 7,011
MINORITY INTEREST - - - - -
NET INCOME (LOSS) $ 7,011 $ 13,723 $ (91) $(13,632) $ 7,011
======== ======== ===== ============ ========
</TABLE>
13
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 4,547 $74,908 $1,181 $ - $80,636
COSTS AND EXPENSES:
Operating costs 2,482 52,136 1,597 - 56,215
General and administrative expenses 219 6,615 - - 6,834
Depreciation 233 6,960 213 - 7,406
------- ------- ------ ------- -------
OPERATING INCOME 1,613 9,197 (629) - 10,181
OTHER (INCOME) EXPENSE:
Interest expense 8,295 369 123 (83) 8,704
Other (income) expense, net 294 (778) 6 83 (395)
Equity in income of subsidiaries (5,309) - - 5,309 -
------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST (1,667) 9,606 (758) (5,309) 1,872
INCOME TAX PROVISION (BENEFIT) (3,235) 3,842 (303) - 304
------- ------- ------ ------------ -------
NET INCOME (LOSS) BEFORE MINORITY INTEREST 1,568 5,764 (455) (5,309) 1,568
MINORITY INTEREST 1,111 - - - 1,111
------- ------- ------- ------- -------
NET INCOME (LOSS) $ 457 $ 5,764 $ (455) $(5,309) $ 457
======= ======= ====== ======= =======
</TABLE>
14
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,011 $ 13,723 $ (91) $(13,632) $ 7,011
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities-
Equity in unconsolidated
subsidiaries (13,632) - - 13,632 -
Depreciation and amortization 791 13,493 95 - 14,379
Realized gain on the sale of assets - (227) - - (227)
Deferred income tax provision - 3,679 - - 3,679
Changes in current assets and
current liabilities and
intercompany balance (60,009) 45,827 175 - (14,007)
-------- -------- ------------ ------------ ---------
Net cash provided by (used in)
operating activities (65,839) 76,495 179 - 10,835
-------- -------- ------------ ------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and property (57,769) (82,360) - - (140,129)
Refunds on drill pipe, rigs and
equipment, net of deposits 8,826 - - - 8,826
Sale of equipment and property - 413 - - 413
--------- -------- ----------- ------------ ---------
Net cash provided by (used in)
investing activities (48,943) (81,947) - - (130,890)
-------- -------- ------------ ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt 164,000 - - - 164,000
Proceeds from sale of stock 460 - - - 460
Payments of outstanding debt (37,000) (2,246) (179) - (39,425)
Stock issuance costs (24) - - - (24)
Debt issuance costs (4,019) - - - (4,019)
-------- ------------ ------------ ------------ ---------
Net cash provided by (used in)
financing activities 123,417 (2,246) (179) - 120,992
-------- -------- ------------ ------------ ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,635 (7,698) - - 937
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 141 8,875 - - 9,016
-------- -------- ------------ ----------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,776 $ 1,177 $ - $ - $ 9,953
======== ======== ============ ============ =========
</TABLE>
15
<PAGE>
FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FALCON DRILLING GUARANTOR NONGUARANTOR
COMPANY, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 457 $ 5,764 $(455) $(5,309) $ 457
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities-
Equity in unconsolidated
subsidiaries (5,309) - - 5,309 -
Depreciation and amortization 528 7,887 213 - 8,628
Realized gain on the sale of assets - (770) - - (770)
Minority interest in earnings of
subsidiary 1,111 - - - 1,111
Changes in current assets and
current liabilities and
intercompany balances (50,603) 45,146 409 - (5,048)
-------- -------- ------------ ------------ --------
Net cash provided by (used in)
operating activities (53,816) 58,027 167 - 4,378
-------- -------- ------------ ------------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and property - (7,463) - - (7,463)
Sale of equipment and property - 3,019 - - 3,019
-------- -------- ------------ ------------ --------
Net cash provided used in financing
activities - (4,444) - - (4,444)
--------- -------- ------------ ------------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt 56,000 - - - 56,000
Payments of outstanding debt - (27,201) (167) - (27,368)
Debt issuance costs (2,093) - - - (2,093)
-------- ------------ ------------ ------------ --------
Net cash provided by (used in)
financing activities 53,907 (27,201) (167) - 26,539
-------- -------- ------------ ------------ --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 91 26,382 - - 26,473
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR - 4,868 - - 4,868
--------- -------- ------------ ------------ --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 91 $ 31,250 $ - $ - $ 31,341
========= ======== ============ ============ ========
</TABLE>
16
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's financial condition and historical results of operations have been
significantly affected by a series of acquisitions that have resulted in the
Company's current fleet of barge and offshore rigs. As of August 8, 1996, the
Company's rig fleet was composed of 77 total rigs - 45 barge drilling rigs, nine
barge workover rigs, 16 jackup drilling rigs, three submersible drilling rigs,
three dynamically-positioned deepwater drillships and one semisubmersible
drilling rig. Included in these totals are one jackup drilling rig, one barge
drilling rig, and two barge workover rigs leased from third parties and two
partially-owned barge drilling units in a Venezuelan joint venture company.
Nineteen of the Company's 77 rigs have been acquired since December 31, 1994.
Changes in the number of active rigs (rigs marketed or under term contract) and
their geographic locations significantly affect the Company's capital
expenditure requirements, working capital requirements and results of
operations. Domestically, as of December 31, 1995, the Company had active 19
barge drilling rigs, seven barge workover rigs, 14 jackup drilling rigs and one
submersible drilling rig. Internationally, as of December 31, 1995, the Company
had active five drilling barges and one submersible drilling rig all in
Venezuela. Since December 31, 1995, the Company's active rig fleet has changed
significantly. Domestically, as of August 8, 1996, the Company had active 25
barge drilling rigs, nine barge workover rigs, 15 jackup drilling rigs and two
submersible drilling rigs. Internationally, as of August 8, 1996, the Company
had three drilling barges in Venezuela (in addition to two rigs owned by a joint
venture in which the Company has a 37.5% interest), one jackup drilling rig in
Nigeria, one dynamically-positioned deepwater drillship in Brazil and one
dynamically-positioned deepwater drillship in Australia. In addition, the
Company's other dynamically-positioned deepwater drillship was completing
refurbishment and is expected to commence operations in Brazil during September
1996.
Revenues. The Company's revenues are determined primarily by (a) the number of
rigs it has available for service and (b) demand for contract drilling and
workover services, which affects the number of days the Company's fleet is
utilized and the day rates it receives. In response to changes in demand, the
Company has modified and mobilized previously cold stacked rigs into
international markets, particularly Venezuela. In addition, the Company may, in
the future, in response to changes in demand, withdraw a rig from active service
or may reactivate a previously stacked rig, which could decrease or increase
revenues, respectively.
Operating Costs. Operating costs include all direct costs and expenditures
associated with operating active rigs and cold stacking inactive rigs. These
costs and expenditures vary based on rig utilization and the number of rigs
actively marketed by the Company. These costs and expenditures include rig
labor costs, repair, maintenance and supply expenditures, insurance costs, fuel
costs, mobilization and other costs related to operating drilling and workover
rigs.
Operating Income. Operating income is primarily affected by revenue factors,
but is also a function of varying levels of operating expenses. Changes in day
rates do not affect operating expenses. Significant changes in rig utilization
can change the level of operating expenses from period to period as the Company
may adjust the level of its actively marketed rig fleet to more closely match
anticipated level of demand. The general and administrative expenses, which
generally include the costs of the Company's shore-based support functions, also
affect operating income. These costs generally do not vary significantly from
period to period unless the Company materially expands its asset base, nor do
they vary over short periods of time with rig utilization. Depreciation, which
is determined by the level of the Company's capital expenditures and
depreciation practices, is the other major determinant of operating income.
FINANCIAL CONDITION
Rig acquisitions and financings completed along with the increase in the number
of active units described above were responsible for the significant changes in
the Company's financial position between December 31, 1995 and June 30, 1996.
Significant among the acquisitions and financings subsequent to year end 1995
were:
17
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
1) The purchase of two dynamically-positioned deepwater drillships and the
upgrade of a third for approximately $98 million.
2) The purchase of one jackup drilling rig, one barge drilling rig and one
submersible drilling rig for approximately $23 million.
3) The upgrade and activation of eight barge drilling and workover rigs for
approximately $10 million.
4) The charter to the Company of one jackup drilling rig, one barge
drilling rig and two barge workover rigs.
5) The placement during March 1996 of $120 million of senior unsecured
notes.
RESULTS OF OPERATIONS - FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996
AND 1995
Comparative data relating to the Company's revenues and operating expenses by
major areas of operations are listed below:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues-
Domestic barge drilling $26,459 $17,096 $ 44,548 $35,156
Domestic barge workover 4,192 4,436 8,214 7,298
International shallow-water drilling 8,571 7,334 18,572 14,226
Offshore drilling 27,868 10,553 49,412 23,956
Drillships 6,856 - 9,334 -
------- -------- -------- --------
$73,946 $39,419 $130,080 $80,636
======= ======= ======== =======
Operating costs-
Domestic barge drilling $17,090 $11,744 $ 30,326 $24,179
Domestic barge workover 3,742 2,317 6,521 3,867
International shallow-water drilling 4,079 3,347 9,685 6,457
Offshore drilling 18,245 10,499 33,350 21,712
Drillships 4,478 - 5,896 -
------- -------- -------- --------
$47,634 $27,907 $ 85,778 $56,215
======= ======= ======== =======
Rig operating income-
Domestic barge drilling $ 9,369 $ 5,352 $ 14,222 $10,977
Domestic barge workover 450 2,119 1,693 3,431
International shallow-water drilling 4,492 3,987 8,887 7,769
Offshore drilling 9,623 54 16,062 2,244
Drillships 2,378 - 3,438 -
------- -------- -------- --------
26,312 11,512 44,302 24,421
General and administrative expenses 4,313 3,828 8,881 6,834
Depreciation expense 7,045 3,801 13,078 7,406
------- ------- -------- -------
Operating income $14,954 $ 3,883 $ 22,343 $10,181
======= ======= ======== =======
</TABLE>
18
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Revenues. Revenues increased $34.5 million and $49.4 million during the three
and six month periods ended June 30, 1996, respectively, as compared to the
corresponding periods in 1995. The increase in revenues reflects: (i) an
increase in the number of units marketed and the overall utility of the domestic
barge drilling rigs for both periods; (ii) higher utilization and day rates
during both periods for the offshore drilling rigs and the acquisition of five
jackup rigs in September 1995; and (iii) the acquisitions of the drillships
Peregrine II and Peregrine III, which began operations in February and June,
1996, respectively.
Operating Costs. Rig operating costs increased $19.7 million and $29.6 million
during the three and six month periods, respectively, primarily as a result of
increased rig activity and fleet size.
Operating Income. Operating income increased $11.1 million and $12.2 million
during the three and six month periods, respectively, due primarily to increases
in rig operating income. The increases in rig operating income were partially
offset in both periods by: (i) increases in general and administrative expenses
due primarily to increased shorebase activity in Venezuela and Brazil; and (ii)
increases in depreciation expense resulting from rig and drillship acquisitions.
Interest Expense. Interest expense was $1.7 million and $3.4 million higher
during the three and six month periods primarily due primarily to the issuance
of $120.0 million in 8-7/8% Senior Notes in March, 1996.
Other Income, net. Other income increased $.3 million and $.6 million during
the three and six month periods primarily as a result of interest income earned
on the Company's available cash balances.
Net Income. Net income applicable to common shares increased $6.7 million in
both the three and six month periods ended June 30, 1996, as compared to the
corresponding periods in 1995 as a result of improved operating results and the
addition of the drillship operations, all of which more than offset increases in
depreciation, interest expense, and general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $10.8 million for the six months
ended June 30, 1996, compared to $4.4 million for the comparable prior period.
The $6.4 million increase in net cash provided by operating activities was the
result of improved operating results, partially offset by an increase in the
receivables component of working capital at June 30, 1996. Operating results
improved primarily as a result of improved margins and increased capacity and
utilization. Accounts receivable increased primarily as a result of the
Company's expanded operations.
Net cash used in investing activities was $130.9 million compared to $4.4
million for the comparable prior period. The increase of $126.5 million was due
to increased expenditures related to the expansion of the Company's rig fleet
including approximately $97.8 million expended in connection with the
acquisition and startup of the Company's dynamically-positioned deepwater
drillships the Peregrine I, II, and III, and approximately $21.7 million for the
acquisition of the drilling barge Gus Androes, submersible drilling rig Real
Explorer, and the jackup rig, D.K. McIntosh, now renamed Falcon Rig 55, Falrig
78, and Falrig 83, respectively. In addition during the period ended June 30,
1996, the Company incurred expenditures totaling approximately $20.6 million in
connection with the acquisition of drill pipe, top drives and other equipment
compared to $7.5 million during the comparable prior period. Included in the
$97.8 million of expenditures related to the Company's drillship acquisitions
was approximately $32.1 million for the upgrade of the Peregrine I. The Company
currently expects the total upgrade and acquisition cost of this unit to be
approximately $45.0 million compared to a previously estimated $37.0 million.
The increased upgrade cost was primarily the result of increased shipyard time
due to delays in equipment deliveries and additional rig upgrades which have
increased the water depth capability and were not included in the previous
estimate.
19
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Net cash provided by financing activities was $121.0 million for the six months
ended June 30, 1996, compared to $26.5 million for the comparable prior period.
The increase in net cash provided by financing activities was primarily due to
an increase in long term debt placed by the Company during the six months ended
June 30, 1996. On March 4, 1996, the Company issued $120.0 million of 8-7/8%
senior notes due in 2003. On March 16, 1995, the Company issued $50.0 million
of 12-1/2% of senior subordinated notes due in 2005.
During the remainder of 1996, the Company currently expects to incur additional
capital expenditures of approximately $14.0 million including an advance in the
amount of approximately $8.0 million for purchase of a hull and certain other
equipment to be used in the construction of the drillship Peregrine IV which the
Company anticipates funding via a third party equipment lessor. In addition,
the Company will likely incur approximately $6.0 million of expenditures for
drill pipe, rig enhancements and other equipment. As of June 30, 1996, the
Company had cash and credit availability under its working capital line of
credit totaling approximately $23.0 million. The Company believes that its
available funds, together with cash generated from operations, will be
sufficient to fund its capital expenditures, working capital and debt service
requirements. Although substantially all of the Company's marketed rigs are
currently under contract, most of its contracts are well-to-well and will expire
prior to year end 1996. A significant decline in demand for oil & gas drilling
or a significant increase in the supply of rigs could therefore adversely impact
the Company's cash flow from operations. Should these circumstances occur and
persist for a material length of time, there could be no assurance that the
Company's cash flow from operations would remain adequate to meet its
requirements and the Company would likely scale back the scope of its operations
and dispose of excess or nonessential assets.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On June 4, 1996, suit was instituted against the Company by Mr. Dwight Nunley in
the United States District Court for the Western District of Louisiana. The
suit alleges that certain barge rigs being used in Lake Maracaibo, Venezuela
violate a patent held by Mr. Nunley and incorporate in their design certain
proprietary information owned by Mr. Nunley. Of the rigs in question, three are
owned by the Company and two are owned by a joint venture in which the Company
has a 37.5% interest. Mr. Nunley seeks to recover damages that he estimates to
be in excess of $10 million, to have such damages trebled, to recover his
attorneys' fees, and to have the Company enjoined from using the rigs in
question. The Company believes Mr. Nunley's claims are without merit and
intends to vigorously contest such claims.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 29, 1996, the annual meeting of shareholders of the Company was held in
Houston, Texas. At the meeting James R. Latimer, III and William R. Ziegler
were re-elected as directors. Purnendu Chatterjee, Kenneth Hannan, Douglas A.P.
Hamilton, Paul B. Loyd, Jr. and Steven A. Webster, the other directors of the
Company, continued as directors of the Company, although Mr. Loyd resigned as a
director on June 7, 1996. The vacancy created by Mr. Loyd's resignation has not
been filled. In addition to the election of directors, the shareholders
approved certain amendments to the 1994 and 1995 stock option plans of the
Company, as described in the proxy statement furnished to the shareholders and
hereby incorporated by reference, and ratified the appointment of Arthur
Andersen L.L.P. as independent auditors for the Company for the 1996 fiscal
year.
The results of the vote on the matters described above are as follows:
(a) The following number of votes were cast or withheld in the election of the
persons named below as directors of the Company:
<TABLE>
<CAPTION>
For Against Abstain Withheld
---------- ------- ------- --------
<S> <C> <C> <C> <C>
James R. Latimer, III 28,385,677 0 21,000 0
---------- - ------ -
William R. Ziegler 28,385,677 0 21,000 0
---------- - ------ -
</TABLE>
(b) The following number of votes were cast or withheld with respect to the
approval of amendments to the 1994 and 1995 Stock Option Plans of the
Company:
<TABLE>
<CAPTION>
For Against Abstain Withheld
---------- ------- ------- --------
<S> <C> <C> <C> <C>
28,127,282 192,590 4,105 82,700
---------- ------- ----- ------
</TABLE>
(c) The following number of votes were cast or withheld with respect to the
ratification of the appointment of Arthur Andersen & Co. as independent
auditors of the Company for the current fiscal year:
<TABLE>
<CAPTION>
For Against Abstain Withheld
---------- ------- ------- --------
<S> <C> <C> <C> <C>
28,406,172 100 405 0
---------- ------- ------- --------
</TABLE>
21
<PAGE>
PART II - OTHER INFORMATION - (CONTINUED)
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -------------
27 Falcon Drilling Company, Inc. and
Subsidiaries Financial Data Schedule
(b) No reports were filed on Form 8-K during the period.
22
<PAGE>
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.
Falcon Drilling Company, Inc.
Date: August 12, 199696 /s/ Robert F. Fulton
--------------------
Robert F. Fulton
Principal Financial Officer
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM
1-FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,953
<SECURITIES> 0
<RECEIVABLES> 65,700
<ALLOWANCES> (375)
<INVENTORY> 0
<CURRENT-ASSETS> 78,215
<PP&E> 438,415
<DEPRECIATION> (45,951)
<TOTAL-ASSETS> 486,846
<CURRENT-LIABILITIES> 45,019
<BONDS> 304,504
0
0
<COMMON> 353
<OTHER-SE> 122,611
<TOTAL-LIABILITY-AND-EQUITY> 486,846
<SALES> 0
<TOTAL-REVENUES> 73,946
<CGS> 0
<TOTAL-COSTS> 58,992
<OTHER-EXPENSES> (1,553)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,387
<INCOME-PRETAX> 9,414
<INCOME-TAX> 3,398
<INCOME-CONTINUING> 6,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,016
<EPS-PRIMARY> $.17
<EPS-DILUTED> $.17
</TABLE>
