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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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 0-22078
Dual Holding Company
(Exact name of registrant as specified in its charter)
DELAWARE 51-0327704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2792
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 922-1500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The registrant meets the conditions set forth in General Instruction I(1)(a) and
(b) and is therefore filing this Form with the reduced disclosure format.
Aggregate market value of voting stock held by non-affiliates of the
registrant: None
Number of shares outstanding at March 23, 1998: Common Stock: 1,000
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<PAGE>
TABLE OF CONTENTS
PAGE
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PART ITEMS 1-2. BUSINESS AND PROPERTIES.............................. 1
I General.............................................. 1
Contract Drilling Operations......................... 1
Jackup Rigs.......................................... 1
Platform Rigs........................................ 2
Contracts............................................ 2
Major Customers...................................... 2
Industry Conditions and Competition.................. 2
Governmental Regulation.............................. 3
Environmental Matters................................ 3
Operational Risks and Insurance...................... 4
International Operations............................. 4
Other Properties..................................... 5
Employees............................................ 5
ITEM 3. LEGAL PROCEEDINGS.................................... 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.............................................. 5
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PART ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
II RELATED STOCKHOLDER MATTERS.......................... 6
ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL
AND OPERATIONS DATA.................................. 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 6
General.............................................. 6
Merger............................................... 6
Results of Operations................................ 7
Liquidity and Capital Resources...................... 9
Year 2000 Issue......................................10
Forward-Looking Statements...........................11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................29
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PART ITEMS 10-13.
III DIRECTORS AND EXECUTIVE OFFICERS, EXECUTIVE
COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS...............30
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PART ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
IV REPORTS ON FORM 8-K..................................31
SIGNATURES .....................................................33
- i -
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
General
Dual Holding Company ("Dual" or the "Company") is a domestic and international
offshore drilling contractor. The Company currently owns or operates a fleet of
16 offshore drilling rigs, consisting of eight jackup rigs and eight platform
rigs. The Company's strategy is to market and operate quality jackup and
platform drilling rigs in geographically diverse markets.
On June 12, 1996, the Company was acquired by ENSCO International Incorporated
("ENSCO") in a purchase acquisition (the "Merger"), and became a wholly-owned
subsidiary of ENSCO on that date. See Note 2 to the Consolidated Financial
Statements.
The Company was formerly known as DUAL DRILLING COMPANY prior to the Merger.
From 1990 to 1993, the Company was wholly-owned by Dual Invest AS ("Dual
Invest"), a Norwegian corporation. In August 1993, the Company completed an
initial public offering of shares of its common stock, which reduced Dual
Invest's ownership interest in the Company to approximately 59.6% of the
Company's outstanding common stock.
In June 1997, the Company sold its 49% interest in a jointly-owned jackup
rig to ENSCO and in December 1997 sold another jackup rig to ENSCO. See
Note 3 to the Consolidated Financial Statements.
Contract Drilling Operations
The Company's fleet of 16 offshore drilling rigs are located in North America
and the Asia Pacific region. At December 31, 1997, the Company's North America
drilling rigs consist of three jackup rigs and seven platform rigs located in
the Gulf of Mexico. The Company's Asia Pacific jackup rigs consist of two jackup
rigs located offshore Qatar, one offshore Malaysia and two in a shipyard in
Singapore undergoing modifications and enhancements. The Company operates one
platform rig off the coast of China, which is not owned but managed by the
Company.
Financial information regarding the Company's geographic operations is presented
in Note 9 to the Consolidated Financial Statements included in "Item 8.
Financial Statements and Supplementary Data." Additional financial information
regarding the Company's operations is presented in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Jackup Rigs
Jackup rigs are mobile self-elevating drilling platforms equipped with legs that
can be lowered to the ocean floor to provide a foundation for supporting a
drilling platform and to allow the drilling platform to be elevated above the
water. The entire drilling platform is self-contained with the rig hull
<PAGE>
incorporating the drilling equipment and derrick, the jacking system for the
legs, crew quarters, storage and loading facilities, helicopter landing pad and
related equipment. All of the Company's jackup rigs are of the independent leg
design which are the most versatile and can accommodate most drilling sites on
which a jackup rig can be used.
Platform Rigs
A platform rig consists of drilling equipment and machinery arranged in modular
packages which are transported to, assembled, and then installed on fixed
offshore platforms owned by the customer. Fixed offshore platforms are steel
tower-like structures which stand on the ocean floor, with the top portion, or
platform, being above the water level and providing the foundation upon which
the platform rig is placed. A self-contained platform rig contains living
quarters for the crew, power generating units, and facilities for storing
drilling fluid and well tubular supplies to sustain drilling operations between
resupplyings.
Contracts
The drilling services provided by the Company are conducted on a contract basis.
The Company generally provides services on a "daywork" basis. Under daywork
contracts, the Company receives a fixed amount per day for drilling the well and
the customer bears a major portion of the out-of-pocket costs of drilling. The
customer may pay the cost of moving the equipment to and from the job site and
assembling and dismantling the equipment.
Effective June 13, 1996, the Company's domestic drilling rigs in the Gulf of
Mexico were bareboat chartered to a wholly-owned subsidiary of ENSCO to achieve
operating and marketing efficiencies. The terms of the bareboat charter
agreements provide for fixed daily rates to be paid to the Company, which the
Company believes are reasonable and representative of the environment in which
the rigs operate. Each respective bareboat charter rate is increased for any
capital expenditures made by the Company for a chartered rig and the rate is
reduced to 50% of the normal rate if a rig is idle for more than 30 consecutive
days. The bareboat charter agreements provide for automatic yearly extensions
but may be terminated with one month's prior notice. At December 31, 1997, the
Company had three jackup rigs and seven platform rigs under bareboat charter to
ENSCO.
Major Customers
The Company's customer base consists of ENSCO, major international oil and gas
companies, independent oil and gas companies and government-owned oil and gas
companies. In 1997, the Company's customers which individually accounted for 10%
or more of the Company's consolidated revenues consisted of ENSCO (32%), Oil &
Natural Gas Corporation (20%), Maersk Oil Qatar AS (20%) and Petronas Carigali
Sdn. Bhd. (11%).
Industry Conditions and Competition
The market for offshore drilling services is largely determined by the supply of
and demand for equipment. From the mid-1980s to the early 1990s, demand for
offshore drilling equipment was generally flat, while the over supply of
offshore drilling rigs gradually decreased, primarily due to attrition.
<PAGE>
Between 1994 and the end of 1997, demand has steadily improved and, as a result,
day rates and utilization for offshore drilling rigs have increased.
Technological advancements, such as three dimensional seismic, extended reach
drilling, and multilateral drilling techniques, have improved the economics of
finding and developing oil and gas reserves. As a result, oil companies have
increased their exploration and production budgets, which has led to increased
demand for offshore drilling services. Nearly all actively marketed offshore
drilling rigs in the world are currently under contract, and the demand for high
quality rigs exceeds supply in many markets.
The contract drilling business is highly competitive and Dual competes with
other drilling contractors on the basis of quality of service, price, equipment
suitability and availability, reputation and technical expertise. Competition is
usually on a regional basis, but drilling rigs are mobile and may be moved from
one region to another in response to demand. Drilling operations are generally
conducted throughout the year with some seasonal declines in winter months.
Governmental Regulation
The Company's business is affected by political developments and by federal,
state, foreign and local laws and regulations that relate directly to the oil
and gas industry. The industry is also affected by changing tax laws, price
controls and other laws affecting the energy business. The adoption of laws and
regulations curtailing exploration and development drilling for oil and gas for
economic, environmental or other policy reasons adversely affects the Company's
operations by limiting available drilling and other opportunities in the energy
service industry, as well as increasing the costs of operations.
The Company and its rigs are subject to federal, state, local and foreign laws
and regulations relating to engineering, design, structural, safety and
operational and inspection standards.
Environmental Matters
The Company's operations are subject to federal, state and local laws and
regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. Laws and regulations
specifically applicable to the Company's business activities could impose
significant liability on the Company for damages, clean-up costs and penalties
in the event of the occurrence of oil spills or similar discharges of pollutants
into the environment in the course of the Company's operations, although, to
date, such laws and regulations have not had a material adverse effect on the
Company's results of operations, nor has the Company experienced an accident
that has exposed it to material liability for discharges of pollutants into the
environment. In addition, events in recent years have heightened environmental
concerns about the oil and gas industry in general. From time to time,
legislative proposals have been introduced which would materially limit or
prohibit offshore drilling in certain areas. To date, no proposals which would
materially limit or prohibit offshore drilling in the Company's principal areas
of operation have been enacted into law. If laws are enacted or other
governmental action is taken that restrict or prohibit offshore drilling in the
Company's areas of operation or impose environmental protection requirements
that materially increase the cost of offshore exploration, development or
production of oil and gas, the Company could be materially adversely affected.
<PAGE>
The United States Oil Pollution Act of 1990 ("OPA 90") and similar legislation
in Texas, Louisiana and other coastal states address oil spill prevention and
control and significantly expand liability exposure across all segments of the
oil and gas industry. OPA 90, such similar legislation and related regulations
impose a variety of obligations on the Company related to the prevention of oil
spills and the liability for resulting damages. OPA 90 imposes strict and, with
limited exceptions, joint and several liability upon each responsible party for
oil removal costs and a variety of damages. OPA 90 imposes ongoing financial
responsibility requirements. A failure to comply with OPA 90 may subject a party
to civil or criminal enforcement action.
Operational Risks and Insurance
Contract drilling and oil and gas operations are subject to various risks
including blowouts, craterings, fires and explosions, each of which could result
in damage to or destruction of drilling rigs and oil and gas wells, personal
injury and property damage, suspension of operations or environmental damage
through oil spillage or extensive, uncontrolled fires. The Company generally
insures its drilling rigs for amounts not less than the estimated fair market
value thereof. The Company also maintains liability insurance coverage in
amounts and scope which the Company believes are comparable to the levels of
coverage carried by other energy service companies. To date, the Company has not
experienced difficulty in obtaining insurance coverage. While the Company
believes its insurance coverages are customary for the energy service industry,
the occurrence of a significant event not fully insured against could have a
material adverse effect on the Company. Also, there can be no assurance that any
particular insurance claim will be paid or that the Company will be able to
procure adequate insurance coverage at commercially reasonable rates in the
future.
International Operations
A significant portion of the Company's operations are conducted in foreign
countries. Revenues from international operations were 67% of the Company's
total revenues in 1997. The Company's international operations are subject to
political, economic, and other uncertainties, such as the risks of expropriation
of its equipment, expropriation of a customer's property or drilling rights,
repudiation of contracts, adverse tax policies, general hazards associated with
international sovereignty over certain areas in which the Company operates and
fluctuations in international economies.
The Company's international operations also face the risk of fluctuating
currency values and exchange controls. Occasionally the countries in which the
Company operates have enacted exchange controls. Historically, the Company has
been able to limit these risks by obtaining compensation in U.S. dollars or
freely convertible international currency, and to the extent possible, by
limiting acceptance of foreign currency to amounts which match its expenditure
requirements in such currencies.
The Company currently has operations in Asian countries that have experienced
substantial devaluations of their currency compared to the U.S. dollar over the
last several months. However, as the Company's drilling contracts stipulate
payment in U.S. dollars, the Company has experienced no significant losses due
to the devaluation of such currencies.
<PAGE>
Other Properties
Prior to the Merger the Company leased office space for its corporate
headquarters in Dallas, Texas. This space is no longer occupied by the Company
and has been sublet under the lease agreement which extends through February
1999. The Company leases minimal office and materials storage space in India,
Malaysia and Saudi Arabia.
Employees
As of December 31, 1997, the Company had no employees. In connection with the
Merger, all of the Company's employees who were retained became employees of
ENSCO. The Company has a Master Services Agreement with ENSCO for shorebase and
corporate support services under which the Company pays ENSCO a monthly fee of
$400,000 for accounting, treasury, human resources, engineering, insurance
administration, management information systems, purchasing, safety and legal
services. Either party may cancel this agreement upon 30 days notice. In
addition, ENSCO provides contract labor for all of the Company's international
drilling rigs at cost.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently not involved in any litigation which, in the opinion of
management, would have a material adverse effect on its financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not required under the reduced disclosure format.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the common stock of the Company is owned by ENSCO. The shares were
acquired by ENSCO on June 12, 1996 as a result of the Merger in a transaction
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to section 4(2) thereof. As such, there is no established
public trading market for the Company's common stock.
The Company has never declared any cash dividends on its common stock and does
not anticipate paying dividends on the common stock in the foreseeable future.
The Company's ability to pay dividends is restricted by certain provisions
contained in the indenture to which its publicly traded notes were issued. See
Note 4 to the Consolidated Financial Statements.
ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATIONS DATA
Not required under the reduced disclosure format.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information presented herein is only intended to present a narrative
analysis of material changes in operating results and financial position between
fiscal years 1997 and 1996. This reduced analysis is in accordance with the
reduced disclosure format set forth in General Instruction I(1)(a) and (b).
GENERAL
The Company owns offshore drilling rigs which are contracted for use in the Gulf
of Mexico and the Asia Pacific region. Worldwide drilling activity increased
significantly in 1997 as compared to 1996 with current demand absorbing
substantially all of the rigs that are in working condition and being actively
marketed in the major offshore drilling markets throughout the world.
MERGER
On June 12, 1996, the Company was acquired by ENSCO. The Merger was approved on
that date by the stockholders of the Company who received 0.625 shares of ENSCO
common stock (1.25 shares adjusted for the two-for-one split of ENSCO's common
stock effective September 15, 1997) for each share of the Company's common
stock. The Company's stockholders of record as of June 12, 1996 received, in the
aggregate, approximately 10.1 million shares of ENSCO common stock (20.1 million
shares post split) valued at approximately $218.4 million.
In conjunction with the Merger, the Company charged $22.0 million against
operating results for certain items. These items included compensation paid in
the ordinary course of business as well as other costs directly related to the
Merger. These expenses are included as Change in Control expenses in the
<PAGE>
consolidated statement of operations for the period January 1, 1996 to June 12,
1996. See Note 2 to the Company's Consolidated Financial Statements.
Effective June 13, 1996, each of the Company's domestic rigs in the Gulf of
Mexico were bareboat chartered to a wholly-owned subsidiary of ENSCO to achieve
operating and marketing efficiencies. At December 31, 1997, the Company had
three jackup rigs and seven platform rigs under bareboat charter to ENSCO. The
terms of the bareboat charter agreements provide for fixed daily rates to be
paid to the Company, which the Company believes are reasonable and
representative of the environment in which the rigs operate. Each respective
bareboat charter rate is increased for any capital expenditures made by the
Company on a chartered rig and the rate is reduced to 50% of the normal rate if
a rig is idle for more than 30 consecutive days. The bareboat charter agreements
provide for automatic yearly extensions but may be terminated with one month's
prior notice.
RESULTS OF OPERATIONS
For purposes of comparative analysis between fiscal years 1997 and 1996, the
1996 results presented below include the combined results of the Company during
the period (January 1, 1996 to June 12, 1996) prior to the Merger ("Predecessor"
entity) as well as the period (June 13, 1996 to December 31, 1996) subsequent to
the Merger ("Successor" entity). The financial statements of the Predecessor and
Successor entities are not comparable in certain respects because of differences
between the cost bases of the assets and liabilities held by the Predecessor
entity compared to that of the Successor entity, as well as the effect on the
Successor's operations for adjustments to depreciation and amortization,
interest income, interest expense, and income taxes.
The schedule below provides a summary of the Company's operating results for the
years indicated (in thousands, except utilization data).
1997 1996
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(Combined)
Revenues
Jackup Rigs - North America $24,444 $35,201
Jackup Rigs - Asia Pacific 58,946 44,549
Platform Rigs 7,464 17,417
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Total $90,854 $97,167
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Operating Margin*
Jackup Rigs - North America $22,629 $20,267
Jackup Rigs - Asia Pacific 25,585 16,121
Platform Rigs 7,229 4,868
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Total $55,443 $41,256
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Utilization 72% 89%
* Defined as operating revenues less operating expenses, exclusive of
depreciation and amortization, change in control, and general and
administrative expenses.
<PAGE>
1997 Compared to 1996
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In 1997, revenues decreased $6.3 million, or 6%, due primarily to the charter
contracts the Company has with ENSCO for the jackup rigs and platform rigs
located in the Gulf of Mexico. Under the charter contracts, ENSCO pays the
Company a day rate for the use of the rigs and ENSCO is responsible for all
operating costs associated with those rigs. As a result, the day rates received
by the Company under the charter contracts are lower to reflect the cost savings
as no operating expenses are incurred by the Company for those rigs. In 1996,
the rigs in the Gulf of Mexico were under charter contracts with ENSCO for only
the period subsequent to the Merger, whereas in 1997 such rigs were under
charter for the entire year.
Also contributing to the 1997 decrease in revenues was a reduction in
utilization, primarily related to the Company's platform rigs. The decrease in
utilization for the platform rigs was primarily a result of shipyard downtime
for modifications and enhancements. Although the platform rigs were generally
not under contract with third parties while in the shipyard, they continued to
receive a reduced charter rate as provided for under the charter agreement with
ENSCO.
Offsetting the decrease in revenues in 1997 from the North America jackup rigs
and platform rigs is increased revenues from the Asia Pacific jackup rigs due to
higher day rates resulting from improved market conditions. Also, during the
first quarter of 1997 the Company transferred one jackup rig from the Gulf of
Mexico to the Asia Pacific region and received a significant increase in its day
rate. The improved Asia Pacific revenues were somewhat offset by lower
utilization in 1997 due to shipyard downtime and the sale of the Company's 49%
interest in a jointly-owned jackup rig to ENSCO in June 1997. The lower
utilization in 1997 is the result of shipyard downtime for modifications and
enhancements. Two jackup rigs formerly working off the coast of India are
currently in a shipyard in Singapore for modifications and enhancements and are
expected to remain there until mid-1998.
The Company's operating margin improved $14.2 million, or 34%, in 1997 as
compared to 1996 due primarily to the significantly improved market conditions
for the Asia Pacific rigs in 1997. In addition, the increase in operating
margins for the North America jackup rigs and platform rigs are reflective of
the improved market conditions.
Depreciation and amortization expense in 1997 increased by $5.8 million, or 26%,
as compared to 1996 due primarily to a full year's depreciation and amortization
associated with the increase in drilling rig values and goodwill recorded in the
Merger.
Change in Control expenses of $22.0 million recorded in the Predecessor entity's
consolidated statement of operations for the period from January 1, 1996 to June
12, 1996 relates to compensation paid in the ordinary course of business as well
as other costs incurred by the Company directly related to the Merger. See Note
2 to the Company's Consolidated Financial Statements.
General and administrative expenses (inclusive of the ENSCO administrative
charge)decreased $1.6 million, or 25%, in 1997 as compared to 1996 as a result
of the Merger. In connection with the Merger, the Company entered into a
Management Services Agreement with ENSCO for shorebase and corporate support
services under which the Company pays ENSCO a monthly fee of $400,000 for
<PAGE>
accounting, treasury, human resources, engineering, insurance administration,
management information systems, purchasing, safety and legal services. The 1996
results reflect only a partial year under this arrangement.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
- ----------------------------------
The Company's cash provided by operations and used by capital expenditures for
the years ended December 31, 1997 and 1996 were as follows (in thousands):
1997 1996
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(Combined)
Cash provided by operations $34,975 $13,942
Capital expenditures 76,345 31,758
Cash flow from operations increased by $21.0 million in 1997 as compared to
1996. The increase in cash flow from operations is primarily due to improved
operating results.
Capital expenditures in 1997 were primarily for enhancements and ongoing capital
improvements to the Company's drilling rigs. Capital expenditures in 1996
primarily related to the purchase of a jackup rig located in the Gulf of Mexico
for $21.3 million. The remaining 1996 capital expenditures were for ongoing
capital improvements to the Company's drilling rigs.
Net cash used by investing activities was $40.5 million in 1997 as compared to
$31.6 million in 1996, primarily representing capital expenditures offset, in
part, by proceeds from asset sales. In June 1997, the Company sold its 49%
interest in a jointly-owned jackup rig to ENSCO and in December 1997 sold
another jackup rig to ENSCO. The proceeds from these asset sales that are
included in investing activity cash flows reflect only the net book values of
the assets sold. The proceeds received in excess of the net book values are
reflected as a contribution of capital and are included as cash flows from
financing activities.
Net cash provided by financing activities was $6.2 million in 1997, as compared
to net cash used by financing activities of $15.8 million in 1996. The 1997 cash
provided by financing activities includes approximately $40.4 million of the
proceeds received from the sale of two jackup rigs to ENSCO, representing the
proceeds received in excess of the net book value of those rigs. The 1997 and
1996 financing cash flows include approximately $35.3 million and $14.7 million,
respectively, of cash used for the net reduction of long-term borrowings.
<PAGE>
Financing and Capital Resources
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The Company's long-term debt, total capital and debt to capital ratios are
summarized below (in thousands, except percentages):
1997 1996
---------- ----------
Long-term debt $ 98,762 $134,387
Total capital 377,659 356,882
Long-term debt to total capital 26% 38%
The Company's long-term debt at December 31, 1997 consists of the Company's
9.875% Senior Subordinated Notes (the "Notes") due January 2004. At December 31,
1996, the Company also had outstanding $35.0 million under a revolving credit
facility (the "Sub-Facility") established under ENSCO's $150.0 million revolving
credit facility with a group of international banks (the "Facility"). The
Facility and Sub-Facility were retired in November 1997 in conjunction with
ENSCO's sale of $300.0 million in public debt. ENSCO is currently in
negotiations to secure a new revolving line of credit for approximately $150.0
million, a portion of which would be allocated to the Company under a separate
sub-facility.
The Company's liquidity position is summarized below (in thousands, except
ratios):
1997 1996
---------- ----------
Cash and cash equivalents $10,071 $ 9,397
Working capital 2,423 14,219
Current ratio 1.1 1.8
Management believes that the Company may need to supplement its cash flow from
operations in 1998 with additional borrowings in order to meet its planned
capital expenditures. The Company anticipates that capital expenditures for rig
upgrades and sustaining operations could exceed $100.0 million in 1998 as
several modification and enhancement projects are currently in progress, and
others are anticipated. As mentioned above, ENSCO is currently in negotiations
to secure a new $150.0 million revolving credit facility, a portion of which
would be allocated to the Company under a separate sub-facility. The Company may
also borrow funds from ENSCO if necessary. Management believes that the
Company's cash flow from operations and the additional resources mentioned
above, if necessary, will be adequate to fund the Company's short-term and
long-term liquidity needs.
YEAR 2000 ISSUE
The Company's Year 2000 issues are being evaluated in conjunction with ENSCO's
worldwide evaluation of its Year 2000 issues. ENSCO has developed a task force
that is currently working to ascertain and resolve the potential problems
associated with the Year 2000 and the processing of date sensitive information
by the Company's and ENSCO's computer systems. Based on preliminary information,
the Company believes that the systems and programming changes necessary to
address the Year 2000 issues will be implemented successfully and does not
expect the cost of such changes to have a material impact on the Company's
financial position, results of operations or cash flows in future periods.
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. Generally, forward-looking
statements include words or phrases such as "management anticipates," "the
Company believes," "the Company anticipates" and words and phrases of similar
impact, and include but are not limited to statements regarding future
operations and business environment. The forward-looking statements are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The factors that could cause actual results to differ materially
from the forward looking statements include the following: (i) industry
conditions and competition, (ii) cyclical nature of the industry, (iii)
worldwide expenditures for oil and gas drilling, (iv) operational risks and
insurance, (v) risks associated with operating in foreign jurisdictions, (vi)
environmental liabilities which may arise in the future which are not covered by
insurance or indemnity, (vii) the impact of current and future laws and
government regulation, as well as repeal or modification of same, affecting the
oil and gas industry and the Company's operations in particular, and (viii) the
risks described elsewhere, herein and from time to time in the Company's reports
to the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
- -----------------------------
Financial Statements: Page
- --------------------- ----
Reports of Independent Accountants ................................. 12
Consolidated Balance Sheet at December 31, 1997 and 1996 ........... 13
Consolidated Statement of Operations for the year ended December
31, 1997, the periods June 13, 1996 to December 31, 1996 and
January 1, 1996 to June 12, 1996 and the year ended
December 31, 1995................................................ 14
Consolidated Statement of Cash Flows for the year ended December
31, 1997, the periods June 13, 1996 to December 31, 1996 and
January 1, 1996 to June 12, 1996 and the year ended December 31,
1995............................................................. 15
Notes to Consolidated Financial Statements.......................... 16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholder and Board of Directors of Dual Holding Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and of cash flows listed under Item 8 of
this Form 10-K present fairly, in all material respects, the financial position
of Dual Holding Company and its subsidiaries (Successor entity) at December 31,
1997 and 1996, and the results of their operations and their cash flows for the
year ended December 31, 1997 and the period June 13, 1996 to December 31, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Successor entity's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Dallas, Texas
January 28, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholder and Board of Directors of Dual Holding Company
In our opinion, the accompanying consolidated statements of operations and of
cash flows listed under Item 8 of this Form 10-K present fairly, in all material
respects, the results of operations and cash flows of Dual Holding Company and
its subsidiaries (Predecessor entity) for the period January 1, 1996 to June 12,
1996 and the year ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Predecessor entity's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Dallas, Texas
January 28, 1997
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDARIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED BALANCE SHEET
(in thousands, except for share amounts)
DECEMBER 31,
-------------------
1997 1996
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 10,071 $ 9,397
Accounts receivable, net............................ 12,108 11,713
Other current assets................................ 9,009 10,009
-------- --------
Total current assets............................. 31,188 31,119
-------- --------
PROPERTY AND EQUIPMENT, AT COST ........................ 326,670 285,536
Less accumulated depreciation....................... (32,923) (12,053)
-------- --------
Property and equipment, net...................... 293,747 273,483
-------- --------
OTHER ASSETS, NET....................................... 110,524 99,655
-------- --------
$435,459 $404,257
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Payable to ENSCO.................................... $ 5,633 $ 859
Accounts payable.................................... 661 408
Accrued liabilities and other....................... 22,471 15,633
-------- --------
Total current liabilities........................ 28,765 16,900
-------- --------
LONG-TERM DEBT.......................................... 98,762 134,387
DEFERRED INCOME TAXES................................... 14,545 19,485
OTHER LIABILITIES....................................... 14,490 10,990
COMMITMENTS AND CONTINGENCIES...........................
STOCKHOLDER'S EQUITY
Common stock ($.10 par value, 10,000 shares
authorized, 1,000 shares issued and
outstanding)..................................... - -
Additional paid in capital.......................... 264,824 218,431
Retained earnings................................... 14,073 4,064
-------- --------
Total stockholder's equity....................... 278,897 222,495
-------- --------
$435,459 $404,257
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDARIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
JUNE 13, JANUARY 1,
YEAR ENDED 1996 TO 1996 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 12, DECEMBER 31,
1997 1996 1996 1995
------------- ------------- ------------- -------------
SUCCESSOR SUCCESSOR PREDECESSOR PREDECESSOR
OPERATING REVENUES
<S> <C> <C> <C> <C>
Drilling services....................... $ 61,362 $ 33,085 $ 53,542 $ 85,889
ENSCO charter fees...................... 29,492 10,540 - -
-------- -------- -------- --------
90,854 43,625 53,542 85,889
-------- -------- -------- --------
OPERATING EXPENSES
Operating costs......................... 35,411 18,565 37,346 60,229
Depreciation and amortization........... 27,882 13,351 8,768 19,608
Change in control....................... - - 22,005 -
General and administrative.............. - - 3,757 7,563
ENSCO administrative charge............. 4,800 2,640 - -
-------- -------- -------- --------
68,093 34,556 71,876 87,400
-------- -------- -------- --------
OPERATING INCOME (LOSS)................... 22,761 9,069 (18,334) (1,511)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest income......................... 1,152 757 846 2,400
Interest expense, net................... (11,911) (6,864) (6,484) (14,705)
Gain on sale of assets, net............. - - - 5,127
Other, net.............................. (52) (42) 268 336
-------- -------- -------- --------
(10,811) (6,149) (5,370) (6,842)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES......... 11,950 2,920 (23,704) (8,353)
PROVISION (BENEFIT) FOR INCOME TAXES...... 1,941 (1,144) 628 885
-------- -------- -------- --------
NET INCOME (LOSS)......................... $ 10,009 $ 4,064 $(24,332) $ (9,238)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDARIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
JUNE 13, JANUARY 1,
YEAR ENDED 1996 TO 1996 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, JUNE 12, DECEMBER 31,
1997 1996 1996 1995
----------- ----------- ----------- -----------
SUCCESSOR SUCCESSOR PREDECESSOR PREDECESSOR
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss)......................... $ 10,009 $ 4,064 $(24,332) $ (9,238)
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation and amortization............. 27,882 13,351 8,768 19,608
Deferred income tax provision (benefit)... (2,910) (2,725) (645) (892)
Gain on disposition of assets............. - - (167) (5,127)
Recognition of deferred income............ - - (2,941) (4,191)
Recognition of deferred expense........... - 29 1,357 1,597
Non-cash compensation expense............. - - 9,667 -
Other..................................... (453) (352) 58 -
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable......................... (400) 9,943 (3,985) (3,067)
(Increase) decrease in other
current assets..................... 972 (654) 5,584 (424)
Increase (decrease) in accounts
payable............................ 4,855 (699) (4,777) 485
Increase (decrease) in accrued
liabilities........................ (4,980) (9,372) 11,770 (1,192)
-------- -------- -------- ---------
Net cash provided (used) by
operating activities............... 34,975 13,585 357 (2,441)
-------- -------- -------- ---------
INVESTING ACTIVITIES
Additions to property and equipment....... (76,345) (8,609) (23,149) (30,668)
Cash segregated for rig purchases......... - - - 22,000
Proceeds from sale of assets.............. 35,812 1,622 208 38,804
Other..................................... - - (1,688) (288)
-------- -------- -------- ---------
Net cash provided (used) by
investing activities................... (40,533) (6,987) (24,629) 29,848
-------- -------- -------- ---------
FINANCING ACTIVITIES
Proceeds from long-term borrowings........ 15,000 45,000 - -
Reduction of long-term borrowings......... (50,250) (57,097) (2,586) (4,299)
Proceeds in excess of net book value of
assets sold to ENSCO.................... 40,407 - - -
Cash received (pledged) for letters
of credit............................... 1,075 6,367 (7,443) -
Other..................................... - - - (203)
-------- -------- -------- ---------
Net cash provided (used) by financing
activities............................ 6,232 (5,730) (10,029) (4,502)
-------- -------- -------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.......................... 674 868 (34,301) 22,905
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.................................... 9,397 8,529 42,830 19,925
-------- -------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..... $ 10,071 $ 9,397 $ 8,529 $ 42,830
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
- --------------------------------------
Dual Holding Company was acquired by ENSCO on June 12, 1996, at which time the
Company became a wholly-owned subsidiary of ENSCO. See Note 2 "Merger." The
Company engages in the offshore contract drilling business and currently owns or
operates a fleet of 16 offshore drilling rigs.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. The consolidated financial statements included herein present
the results of the Company for periods prior to the Merger ("Predecessor"
entity) as well as for periods subsequent to the Merger ("Successor" entity).
The financial statements of the Predecessor and Successor entities are not
comparable in certain respects because of differences between the cost bases of
the assets and liabilities held by the Predecessor compared to that of the
Successor as well as the effect on the Successor's operations for adjustments to
depreciation and amortization, interest income, interest expense, and income
taxes. The following significant accounting policies apply to both the
Predecessor entity and the Successor entity unless otherwise noted.
Pervasiveness of Estimates
- --------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and related revenues and
expenses, and disclosure of gain and loss contingencies at the date of the
financial statements. Actual results could differ from those estimates.
Cash Equivalents
- ----------------
The Company considers all highly liquid investments to be cash equivalents if
they have maturities of three months or less at the date of purchase.
Foreign Currency Translation
- ----------------------------
The U.S. dollar is the functional currency for all of the Company's foreign
operations. Exchange gains and losses were not significant in any period
presented.
Property and Equipment
- ----------------------
Under the Successor entity, depreciation on drilling rigs and related equipment
is computed using the straight line method over estimated useful lives ranging
from 4 to 12 years. Depreciation of other equipment is computed using the
straight line method over estimated useful lives ranging from 2 to 6 years.
<PAGE>
Maintenance and repair costs are charged to expense as incurred. Major renewals
and improvements are capitalized. Upon retirement or replacement of assets, the
related cost and accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in income.
Goodwill
- --------
Goodwill arising from the acquisition by ENSCO is amortized on the straight-line
basis over a period of 40 years. See Note 2 "Merger." Prior to the Merger, the
Company had goodwill resulting from the acquisition by Dual Invest in June 1990
that was written-off in 1996 as a result of purchase accounting. Amortization of
goodwill was $2.7 million for the year ended December 31, 1997, $1.2 million for
the period June 13, 1996 to December 31, 1996, $770,000 for the period January
1, 1996 to June 12, 1996, and $1.7 million for the year ended December 31, 1995.
Goodwill, net of accumulated amortization, was $110.4 million and $99.4 million
at December 31, 1997 and 1996, respectively, and is included in Other Assets,
Net. Accumulated amortization of goodwill at December 31, 1997 and 1996 was $3.9
million and $1.2 million, respectively. On a periodic basis the Company
estimates the undiscounted future cash flows to be generated by the Company's
operations to ensure the carrying value of goodwill has not been impaired.
Impairment of Assets
- --------------------
The Company evaluates the carrying value of its long-lived assets, including
property and equipment and goodwill, when events or changes in circumstances
indicate that the carrying value of such assets may be impaired. The
determination of impairment is based upon expectations of undiscounted cash
flows, before interest, of the related asset.
Revenue Recognition
- -------------------
The Company's drilling contracts generally provide for payment on a day rate
basis, and revenues are recognized as the work is performed.
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the anticipated future
tax effects of temporary differences between the financial statement basis and
the tax basis of the Company's assets and liabilities using the enacted tax
rates in effect at year end. A valuation allowance for deferred tax assets is
recorded when it is more likely than not that the benefit from the deferred tax
asset will not be realized. The Company is included in the ENSCO U.S.
consolidated tax return. Current and deferred taxes are calculated as if the
Company was a separate taxpayer.
Reclassifications
- -----------------
Certain previously reported amounts have been reclassified to conform to the
1997 presentation.
<PAGE>
2. MERGER
On June 12, 1996, the Company was acquired by ENSCO in a purchase acquisition.
The Merger was approved on that date by the stockholders of the Company who
received 0.625 shares of ENSCO common stock (1.25 shares adjusted for the
two-for-one split of ENSCO's common stock effective September 15, 1997) for each
share of the Company's common stock. The Company's stockholders of record as of
June 12, 1996 received, in the aggregate, approximately 10.1 million shares of
ENSCO common stock (20.1 million shares post split) valued at approximately
$218.4 million.
In conjunction with the Merger, the Company charged $22.0 million against
operating results for certain items. These items include compensation paid in
the ordinary course of business as well as other costs directly related to the
Merger process. The primary items comprising the $22.0 million of operating
charges were as follows (in thousands):
Cashless exercise of stock options $ 9,667
Compensation and severance payments
to employees 8,773
Fee paid to investment advisor 3,000
Other 565
-------
Total $22,005
=======
The Company used the purchase method of accounting to record the Merger. The
excess of the purchase price over the net assets acquired (goodwill)
approximated $114.3 million and is being amortized over 40 years. The Company
completed its final purchase price allocation and determination of goodwill,
deferred taxes and other accounts in the second quarter of 1997. In connection
with the Merger, the name of the Company was changed from DUAL DRILLING COMPANY
to Dual Holding Company and the capital structure of the Company was changed.
Prior to the Merger, the Company was authorized to issue 50.0 million shares of
its $.01 par value common stock, of which 16.1 million shares were outstanding
as of June 12, 1996, and 10.0 million shares of its preferred stock, of which
none were outstanding as of June 12, 1996. Under the terms of the Company's
restated certificate of incorporation filed June 12, 1996, the Company is
authorized to issue 10,000 shares of its $.10 par value common stock. At
December 31, 1997 and 1996, the Company had issued 1,000 shares of its $.10 par
value common stock, all of which were held by ENSCO.
The following unaudited pro forma information shows the consolidated results of
operations for the years ended December 31, 1996 and 1995 based upon adjustments
to the historical financial statements of the Company to give effect to the
Merger as if such Merger had occurred on January 1, 1995 (in thousands):
1996 1995
--------- ---------
Operating revenues $97,167 $91,016
Operating income (loss) 9,966 (1,958)
Net income (loss) 145 (12,363)
<PAGE>
The pro forma consolidated results of operations are not necessarily indicative
of the actual results that would have occurred had the acquisition occurred on
January 1, 1995, or of results that may occur in the future.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 consists of the
following (in thousands):
1997 1996
-------- --------
Drilling rigs and equipment $298,893 $282,130
Other 200 65
Work in progress 27,577 3,341
-------- --------
$326,670 $285,536
======== ========
In June 1997, the Company sold its 49% interest in a jointly-owned jackup rig to
ENSCO for $20.8 million. The sales price of the rig was based on a fair market
appraisal by a third party and representative of the 51% of the jackup rig
purchased by ENSCO from an unrelated party in May 1997. The proceeds from the
sale to ENSCO exceeded the Company's net book value of the rig by approximately
$9.2 million which has been recorded to paid in capital.
In December 1997, the Company sold a jackup rig to ENSCO for $55.0 million. The
sales price of the rig was based on an independent appraisal of fair market
value. The proceeds from the sale exceeded the Company's net book value of the
rig by approximately $31.2 million which has been recorded to paid in capital.
In September 1996, the Company retired two platform rigs located off the coast
of California. The rigs were dismantled and their major components were sold to
ENSCO at fair market value as spare capital assets. No gain or loss was
recognized on this transaction.
In May 1996, the Company purchased a jackup rig located in the Gulf of Mexico,
which the Company previously operated under a charter agreement, for $21.3
million. Proceeds from certain asset sales in 1995 that were previously
disclosed as restricted for purchase of replacement assets or repurchase of
indebtedness were used to purchase the rig.
4. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consists of the following (in
thousands):
1997 1996
-------- --------
Senior Subordinated Notes due 2004 $ 98,762 $ 99,387
Revolving credit facility - 35,000
-------- --------
$ 98,762 $134,387
======== ========
In January 1994, the Company completed an offering of 9.875% Senior Subordinated
Notes (the "Notes") with an aggregate principal amount of $100.0 million. The
Notes are due January 2004 and interest is payable semiannually. The Notes are
unsecured obligations of the Company, and are guaranteed by substantially all of
the Company's principal subsidiaries. The Notes' indenture contains certain
covenants, including limitation on restricted payments, indebtedness,
<PAGE>
disposition of proceeds of asset sales, transactions with affiliates, payments
of dividends and other payment restrictions, sale/leaseback transactions and
restrictions on mergers, consolidations and transfer of assets. The Notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after January 15, 1999.
In July 1996, the Company redeemed $5.0 million (face amount) of the Notes
pursuant to an offer required to be made under the terms of the Notes following
the Merger. Additionally, as of December 31, 1996, ENSCO had purchased $23.2
million (face amount) of the Notes on the open market. The full $95.0 million
(face amount) of the Company's Notes and related premium are shown as
outstanding in the Company's consolidated balance sheet as of December 31, 1997
and 1996.
At December 31, 1996, the Company had $35.0 million outstanding under a
revolving credit facility (the "Sub-Facility") established under ENSCO's $150.0
million revolving credit facility with a group of international banks (the
"Facility"). The Facility and Sub-Facility were retired in November 1997 in
conjunction with ENSCO's sale of $300.0 million in public debt. The interest
rate on the Sub-Facility was tied to London Interbank Offered Rates and at
December 31, 1996 was 6.785% on the $35.0 million outstanding. The Sub-Facility
was collateralized by certain of the Company's jackup rigs, which had a combined
net book value of $100.2 million at December 31, 1996.
5. STOCKHOLDER'S EQUITY (in thousands)
<TABLE>
<CAPTION>
$.10 par $.10 par $.01 par $.01 par
Common Common Common Common Additional Retained
Stock Stock Stock Stock Paid-In Earnings Treasury
Shares Amount Shares Amount Capital (Deficit) Stock
------ ------ ------ ------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,1994....... - $ - 15,766 $ 158 $173,793 $(24,148) $ (419)
Net Loss........................ - - - - - (9,238) -
------ ------ ------ ----- -------- -------- -------
BALANCE AT DECEMBER 31, 1995...... - - 15,766 158 173,793 (33,386) (419)
Cashless exercise of stock
options....................... - - 1,048 10 20,166 - -
Purchase of treasury stock...... - - (710) - - - (13,583)
Net loss through June 12, 1996.. - - - - (24,332) -
Change of control............... 1,000 - (16,104) (168) 24,472 57,718 14,002
Net income June 13, 1996 to
December 31, 1996............. - - - - - 4,064 -
----- ------ ------ ----- -------- -------- -------
BALANCE AT DECEMBER 31, 1996...... 1,000 - - - 218,431 4,064 -
Net income...................... - - - - - 10,009 -
Proceeds in excess of net book
value of assets sold to ENSCO,
including tax effects......... - - - - 46,393 - -
----- ------ ------ ----- -------- -------- -------
BALANCE AT DECEMBER 31, 1997...... 1,000 $ - - $ - $264,824 $ 14,073 $ -
===== ====== ====== ===== ======== ======== =======
</TABLE>
6. EMPLOYEE BENEFIT PLANS
Incentive Stock Plans
- ---------------------
Prior to the Merger, the Company's 1993 Long-Term Incentive Plan (the "1993
Plan") provided for the granting of any or all of the following types of awards:
(i) stock options, including incentive stock options and non-qualified stock
options, (ii) stock appreciation rights ("SARs"), in tandem with stock options
or freestanding, (iii) restricted stock, (iv) performance share awards, and (v)
stock value equivalent awards. In conjunction with the Merger, the 1993 Plan was
terminated and all outstanding shares granted pursuant to the 1993 Plan were
exchanged for ENSCO common stock.
<PAGE>
Stock Options - The table below summarizes the transactions relating to
stock options. (shares in thousands)
<TABLE>
<CAPTION>
1996 1995
---------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ ------ ------ ------
<S> <C> <C> <C> <C>
Outstanding, beginning of year.................. 1,059 $10.04 830 $12.75
Granted......................................... - - 1,059 10.04
Exercised....................................... (1,048) 10.04 - -
Exchanged for ENSCO common stock in Merger...... (11) 9.83 - -
Canceled or forfeited........................... - - (830) 12.75
----- ------ ------ ------
Outstanding, end of year........................ - $ - 1,059 $10.04
===== ====== ====== ======
</TABLE>
In August 1995, the Compensation Committee of the Company's Board of Directors
(the "Committee") approved the cancellation of 806,000 then outstanding
management options and the issuance of 951,000 options. The options cancelled
had been granted by the Committee in August 1993 (270,000 options) and October
1994 (536,000 options) at exercise prices of $14.000 and $12.125, respectively.
The options granted in August 1995 were issued at $10, the market price of the
common stock on the date of the grant.
In connection with the Merger, the 1993 Plan was amended to allow for the
cashless exercise of outstanding stock options prior to the Merger date or the
exchange of options for shares of ENSCO common stock on the Merger date. As a
result of this change, the Company recorded a charge of approximately $9.7
million which is included in Change in Control expense in the consolidated
statement of operations.
Under Statement of Financial Accounting Standards ("SFAS") No. 123, the Company
is required to disclose information related to net income and earnings per share
as if it had accounted for its employee stock options under the fair value
provisions of that statement. For the options granted by the Company in 1995,
the Company determined that such grants accounted for under the provisions of
the SFAS No. 123 did not have a material impact on net income or earnings per
share in 1995. As discussed above, the Company amended the 1993 Plan in
connection with the Merger which resulted in a charge recorded by the Company in
accordance with the provisions of Opinion 25 and related authoritative
interpretations. The Company determined that the expense recognized under SFAS
No. 123 in 1996 would not have been materially different than that recognized
under Opinion 25.
Defined Contribution Plan
- -------------------------
Effective June 30, 1996, the DUAL DRILLING COMPANY Thrift and 401(k) Retirement
and Savings Plan (the "Retirement Plan") was frozen. All participants who
remained employees of the Company after the Merger were allowed to become
participants in the ENSCO Savings Plan. As soon as regulatory approvals are
obtained, the Retirement Plan will be merged into the ENSCO Savings Plan. Costs
incurred by the Company for matching contributions under the Retirement Plan
were approximately $300,000 and $600,000 for the years ended December 31, 1996
and 1995, respectively.
<PAGE>
Supplemental Executive Retirement Plan
- --------------------------------------
In June 1993, the Company implemented the Supplemental Executive Retirement Plan
(the "Plan"), a defined benefit pension plan covering certain of its executive
officers. In conjunction with the Merger, the Company, ENSCO and the Plan
participants agreed to terminate the Plan and distribute an aggregate $2.3
million to the participants. As such, the Company recorded pension cost related
to the Plan of approximately $1.7 million in 1996, of which $1.2 million is
recorded in Change in Control expenses in the consolidated statement of
operations. The $2.3 million termination liability was paid to the participants
in January 1997.
7. INCOME TAXES
The Company had income (loss) of $(3.7) million, $(13.8) million, $(33.6)
million and $(6.7) million from its operations before income taxes in the United
States and income (loss) of $15.7 million, $16.7 million, $9.9 million and
$(1.7) million from its operations before income taxes in foreign countries for
the year ended December 31, 1997, periods June 13, 1996 to December 31, 1996,
January 1, 1996 to June 12, 1996 and for the year ended December 31, 1995,
respectively.
The provisions for income taxes for the years ended December 31, 1997, 1996 and
1995 are summarized as follows (in thousands):
1997 1996 1995
------------ ------------------------- -----------
Successor Predecessor
--------- -----------
Current:
Federal........... $ - $ - $ - $ -
State............. - - - 24
Foreign........... 4,851 1,581 1,273 1,753
------- ------- ------ ------
Total current... 4,851 1,581 1,273 1,777
------- ------- ------ ------
Deferred:
Federal........... (3,066) (4,113) (645) -
Foreign........... 156 1,388 - (892)
------- ------- ------ ------
Total deferred.. (2,910) (2,725) (645) (892)
------- ------- ------ ------
Total................ $ 1,941 $(1,144) $ 628 $ 885
======= ======= ====== ======
<PAGE>
Deferred income tax assets and liabilities as of December 31, 1997 and 1996
are summarized as follows (in thousands):
1997 1996
------- -------
Deferred tax assets:
Domestic:
Foreign tax credit carryforward......... $ 5,108 $ -
Deferred compensation................... - 4,045
Net operating loss carryforward......... 22,407 17,153
Liabilities not deductible for tax
purposes............................. 3,217 3,225
Other................................... 2,614 2,829
Foreign:
Net operating loss carryforward......... - 90
------- -------
Gross deferred tax assets.................. 33,346 27,342
Valuation allowance........................ - -
------- -------
Net deferred tax assets.................... $33,346 $27,342
======= =======
Deferred tax liabilities:
Domestic:
Excess of net book basis over tax basis. $31,492 $33,429
Deferred installment gain............... 3,186 3,186
Undistributed foreign earnings.......... 771 771
Foreign:
Excess of net book basis over tax basis. 5,353 5,288
------- -------
Total deferred tax liability............... 40,802 42,674
Less: Net deferred tax assets............. (33,346) (27,342)
------- -------
Net deferred tax liability................. 7,456 15,332
Add: Current deferred tax asset........... 7,089 4,153
------- -------
Long term deferred tax liability........... $14,545 $19,485
======= =======
The following is a reconciliation of the provision for income taxes calculated
at the U.S. federal income tax rate to the income taxes reflected in the
consolidated statement of operations:
1997 1996 1995
---------- ----------------------- --------
Successor Predecessor
--------- -----------
Current:
Income tax expense (benefit)
at U.S. federal tax rate.... $ 4,182 $ 1,022 $(8,296) $(2,924)
Increase (decrease) in tax
resulting from:
Effects of foreign taxes.. 1,190 (2,804) 1,845 1,868
Goodwill amortization..... 942 434 272 604
Change in valuation
allowance............... - - 6,807 2,082
Utilization of NOLs....... (3,078) - - -
Items not related to
current year operations. (670) - - (946)
Other..................... (625) 204 - 201
------- ------- ------- ------
Income tax expense
(benefit)................ $ 1,941 $(1,144) $ 628 $ 885
======= ======= ======= ======
<PAGE>
At December 31, 1997, the Company had regular and alternative minimum tax net
operating loss carryforwards of approximately $64.0 million and $37.2 million,
respectively, and foreign tax credit carryforwards of $5.1 million. If not
utilized, the regular and alternative minimum tax net operating loss
carryforwards expire in 2009 and 2010. The foreign tax credit carryforward
expires in 2001 and 2002.
As a result of the Merger, the Company is now included in the ENSCO U.S.
consolidated tax return. The Merger also results in the utilization of the
Company's net operating loss carryforwards being subject to limitations imposed
by the Internal Revenue Code of 1986. However, the Company does not expect such
limitations to have an effect upon its ability to utilize its net operating loss
carryforwards.
It is the policy of the Company to consider that income generated in foreign
subsidiaries is permanently invested. A significant portion of the Company's
undistributed foreign earnings at December 31, 1997 were generated by controlled
foreign corporations. A portion of the undistributed foreign earnings were
taxed, for U.S. tax purposes, in the year that such earnings arose. Upon
distribution of foreign earnings in the form of dividends or otherwise, the
Company may be subject to additional U.S. income taxes. However, deferred taxes
related to the future remittance of these funds are not expected to be
significant to the financial statements of the Company.
8. COMMITMENTS AND CONTINGENCIES
Leases and Contracts
- --------------------
The Company is obligated under leases for certain of its offices and equipment.
Rental expense relating to operating leases was $865,000 for the year ended
December 31, 1997, $532,000 for the period June 13 through December 31, 1996,
$407,000 for the period January 1 through June 12, 1996, and $1.1 million for
the year ended December 31, 1995. Future minimum rental payments under the
Company's noncancellable operating lease obligations having initial or remaining
lease terms in excess of one year are as follows: $470,500 in 1998 and $52,900
in 1999.
The Company makes payments to ENSCO under a Master Services Agreement for
support services for the Company's operations. See Note 10 "Related Party
Transactions."
Insurance
- ---------
Prior to the Merger, the Company was self-insured for its maritime claims
exposure that provided for self-insured limits of up to $500,000 for each claim.
Effective June 12, 1996, the Company's insurance coverage was increased to
levels consistent with ENSCO's policies which, among other things, limits the
exposure to maritime claims to $25,000 for each claim. Based on current
information, the Company has provided adequate reserves for such claims.
Letters of Credit
- -----------------
The Company, from time to time, maintains legally restricted cash balances as
collateral for letters of credit issued by banks for providing bid bonds and
<PAGE>
performance bonds required on drilling contracts in which the Company may bid or
be awarded. These restricted cash balances aggregated $1.1 million at December
31, 1996 and are included in Other Current Assets. There were no letters of
credit outstanding at December 31, 1997.
At December 31, 1997, there were no other contingencies, claims, or lawsuits
against the Company, which, in the opinion of management, would have a material
effect on its financial condition or results of operations.
9. GEOGRAPHIC REGION INFORMATION AND MAJOR CUSTOMERS
The Company's eight jackup rigs and eight platform rigs (including one which is
managed but not owned) are located in the Gulf of Mexico and throughout the Asia
Pacific region. Business levels for the Company and for the offshore contract
drilling industry, in general, are significantly affected by worldwide
expenditures for oil and gas drilling. Expenditures for oil and gas drilling
activity fluctuate based upon many factors, including world economic conditions,
the legislative environment in the U.S. and other major countries, production
levels and other activities of OPEC and other oil and gas producers, and the
impact that these and other events have on the current and expected future
pricing of oil and natural gas.
The following shows geographic information for the year ended December 31, 1997,
the Successor period June 13, 1996 to December 31, 1996, the Predecessor period
January 1, 1996 to June 12, 1996, and the year ended December 31, 1995(in
thousands):
<TABLE>
<CAPTION>
GEOGRAPHIC REGION
North Asia Corporate
America Pacific & Other Total
--------- --------- ---------- ---------
1997
----
<S> <C> <C> <C> <C>
Revenues................................. $ 30,277 $ 60,577 $ - $ 90,854
Operating income (loss).................. 14,662 12,899 (4,800) 22,761
Identifiable assets...................... 269,784 165,595 80 435,459
June 13, 1996 - December 31, 1996 (Successor)
---------------------------------------------
Revenues................................. $ 19,093 $ 24,532 $ - $ 43,625
Operating income (loss).................. 8,314 3,395 (2,640) 9,069
Identifiable assets...................... 280,968 123,289 - 404,257
January 1, 1996 - June 12, 1996 (Predecessor)
---------------------------------------------
Revenues................................. $ 32,424 $ 21,118 $ - $ 53,542
Operating income (loss).................. 2,189 5,239 (25,762) (18,334)
1995
----
Revenues................................. $ 47,106 $ 38,783 $ - $ 85,889
Operating income (loss).................. 358 5,694 (7,563) (1,511)
Identifiable assets...................... 180,069 123,500 193 303,762
</TABLE>
For the year ended December 31, 1997, revenues from ENSCO were 32% of the
Company's total revenues, revenues from two customers were each 20% of total
revenues and revenues from one customer was 11% of total revenues.
For the period June 13, to December 31, 1996, revenues from ENSCO were 24%, and
revenues from the other customers were 23%, 15% and 13% of the Company's total
revenues.
<PAGE>
For the period January 1, to June 12, 1996, revenues from one customer was 15%
of the Company's total revenues and revenues from two customers were each 13% of
the Company's total revenues.
For the year ended December 31, 1995, revenues from three customers were 17%,
14% and 11% of total revenues.
10. RELATED PARTY TRANSACTIONS
Effective June 13, 1996, each of the Company's domestic rigs, currently
consisting of three jackup rigs and seven platform rigs, were bareboat chartered
to ENSCO Offshore Company ("ENSCO Offshore"), a wholly owned subsidiary of
ENSCO, to achieve certain operating and marketing efficiencies. The terms of the
bareboat charter agreements with ENSCO Offshore provide for fixed daily rates to
be paid to the Company, which the Company believes are reasonable and
representative of the environment in which the rigs operate. Each respective
bareboat charter rate is increased for any capital expenditures made by the
Company on a chartered rig and the rate is reduced to 50% of the normal rate if
a rig is idle for more than 30 consecutive days. The initial term of the
bareboat charter agreements is one year, with automatic one year extensions,
unless either party gives at least one month's prior notice of termination.
Revenues relating to the bareboat charter agreements were $29.5 million for the
year ended December 31, 1997 and $10.5 million for the period June 13, 1996 to
December 31, 1996.
On June 13, 1996, the Company entered into a Master Services Agreement with
ENSCO. Under the terms of the Master Services Agreement, ENSCO provides certain
shorebase and corporate support services for the Company's domestic and foreign
operations. The Company pays ENSCO a monthly fee for these services under the
Master Services Agreement, which the Company believes is reasonable for the
services provided. The administrative expense related to the Master Services
Agreement was $4.8 million for the year ended December 31, 1997 and $2.6 million
for the period from June 13, 1996 to December 31, 1996.
ENSCO holds a portion of the Company's Notes as of December 31, 1996. See Note 4
"Long-Term Debt." Interest expense relating to the Notes held by ENSCO was $2.3
million and $1.2 million for the years ended December 31, 1997 and 1996,
respectively.
11. SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Balance Sheet Information. Accounts receivable, net at
- -------------------------------------------
December 31, 1997 and 1996 consists of the following (in thousands):
1997 1996
------- -------
Trade..................................... $12,406 $11,518
Other..................................... 109 343
------- -------
12,515 11,861
Allowance for doubtful accounts........... (407) (148)
------- -------
$12,108 $11,713
======= =======
<PAGE>
Other current assets at December 31, 1997 and 1996 consists of the following (in
thousands):
1997 1996
------- -------
Current deferred tax asset................ $ 7,089 $ 4,153
Prepaid taxes ............................ 1,146 1,416
Prepaid expenses.......................... 114 774
Inventory................................. 440 -
Supplemental executive retirement plan.... - 2,292
Deposits.................................. 109 1,224
Other..................................... 111 150
------- -------
$ 9,009 $10,009
======= =======
Accrued liabilities at December 31, 1997 and 1996 consists of the following (in
thousands):
1997 1996
------- -------
Operating expenses........................ $ 1,671 $ 3,305
Taxes..................................... 8,201 2,378
Insurance................................. 2,500 2,500
Accrued interest.......................... 4,326 4,825
Accrued work in progress.................. 4,952 -
Supplemental executive retirement plan.... - 2,264
Deferred revenue.......................... 755 -
Other..................................... 66 361
------- -------
$22,471 $15,633
======= =======
Consolidated Statement of Operations Information. Maintenance and repairs
- -----------------------------------------------------
expense for the years ended December 31, 1997, 1996 and 1995 are as follows (in
thousands):
1997 1996 1995
-------- ----------------------- ---------
Successor Predecessor
--------- -----------
Maintenance and repairs.. $3,497 $3,029 $5,911 $10,295
Consolidated Statement of Cash Flows Information. The 1996 consolidated
- -----------------------------------------------------
statement of cash flows excludes the non cash issuance of common stock in
the merger of the Company with ENSCO as described in Note 2 "Merger."
Cash paid for interest and income taxes for the years ended December 31, 1997,
1996 and 1995 is as follows (in thousands):
1997 1996 1995
----------- ----------------------- ---------
Successor Predecessor
--------- -----------
Interest, net of amount
capitalized................. $12,450 $6,326 $6,915 $14,147
Income taxes................. 2,884 1,317 1,696 2,011
<PAGE>
Fair Value of Financial Instruments. The following disclosure of the
- ----------------------------------------
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgement is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
The carrying amounts and estimated fair values of financial instruments at
December 31, 1997 and 1996 are as follows (in thousands):
December 31, 1997 December 31, 1996
------------------ --------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ---------- -------- ----------
Long-term debt, including current
Maturities....................... $98,762 $102,876 $134,387 $137,867
The estimated fair values were determined as follows:
Quoted market price for the Notes and interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for bank debt issues.
The estimated fair value of the Company's cash and cash equivalents, short-term
investments, receivables, trade payables and other liabilities approximated
their carrying values at December 31, 1997 and 1996.
Concentration of Credit Risk. Financial instruments which subject the Company to
- -----------------------------
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. The Company's trade receivables are predominantly from
major international oil companies and government-owned oil companies. The
Company's cash and cash equivalents are maintained in major banks and high grade
investments. As a result, the Company believes the credit risk in such
instruments is minimal.
12. UNAUDITED QUARTERLY FINANCIAL INFORMATION
A summary of unaudited quarterly consolidated financial information for 1997 is
as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues............................ $17,874 $21,877 $26,502 $24,601 $90,854
Operating expenses.................. 11,573 8,041 8,084 7,713 35,411
------- ------- ------- ------- -------
Operating margin.................... 6,301 13,836 18,418 16,888 55,443
Depreciation and amortization....... 6,358 6,989 7,256 7,279 27,882
General and administrative.......... 1,200 1,200 1,200 1,200 4,800
------- ------- ------- ------- -------
Operating income.................... (1,257) 5,647 9,962 8,409 22,761
Interest income..................... 323 238 358 233 1,152
Interest expense, net............... 2,947 2,952 3,179 2,833 11,911
Other income (expense).............. (11) 10 (18) (33) (52)
------- ------- ------- ------- -------
Income before taxes................. (3,892) 2,943 7,123 5,776 11,950
Provision for income taxes.......... 553 247 582 559 1,941
------- ------- ------- ------- -------
Net income.......................... $(4,445) $ 2,696 $ 6,541 $ 5,217 $10,009
======= ======= ======= ======= =======
</TABLE>
<PAGE>
The 1997 second and third quarter results have been restated to reclassify the
gain and related income tax effects recorded in connection with the sale of the
Company's 49% interest in a jackup rig to ENSCO in June 1997 to paid in capital.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Not required under the reduced disclosure format.
ITEM 11. EXECUTIVE COMPENSATION
Not required under the reduced disclosure format.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not required under the reduced disclosure format.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not required under the reduced disclosure format.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial statements, financial statement schedules and exhibits filed as
part of this report:
Page
----
(1) Financial Statements of Dual Holding Company
Reports of Independent Accountants 12
Consolidated Balance Sheet 13
Consolidated Statement of Operations 14
Consolidated Statement of Cash Flows 15
Notes to the Consolidated Financial Statements 16
(2) Exhibits
The following instruments are included as exhibits to this report.
Exhibits incorporated by reference are so indicated by parenthetical
information.
EXHIBIT NO. DESCRIPTION
2 - Agreement and Plan of Merger among ENSCO International
Incorporated, DDC Acquisition Company and DUAL DRILLING
COMPANY dated March 21, 1996 (incorporated by reference
to exhibit (C)(1) to the Company's Form 8-K as filed
with the Securities and Exchange Commission on April 1,
1996).
2.1 - Principal Stockholders Agreement between ENSCO
International Incorporated and Dual Invest AS dated
March 21, 1996 (incorporated by reference to Appendix D
to the ENSCO (File No. 1-8097) Registration Statement
on Form S-4, as amended, filed with the Securities and
Exchange Commission on May 10, 1996).
2.2 - Amendment No. 1 to Agreement and Plan of Merger dated
May 7, 1996, between ENSCO International Incorporated,
DDC Acquisition Company and DUAL DRILLING COMPANY
(incorporated by reference to exhibit 2.2 of Amend-
ment No. 1 to the ENSCO International Incorporated
Registration Statement on Form S-4 filed May 10, 1996,
Registration No. 333-3411).
3 - Certificate of Merger of DDC Acquisition Company
merging into DUAL DRILLING COMPANY (incorporated by
reference to exhibit No. 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996).
3.1 - Certificate of Incorporation of DDC Acquisition
Company, as amended (incorporated by reference to
exhibit No. 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1996).
<PAGE>
EXHIBIT NO. DESCRIPTION
10 - Form of Standard Bareboat Charter between ENSCO
Offshore Company and the Company (incorporated by
reference to exhibit No. 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996).
10.1 - Form of Standard Platform Charter between ENSCO
Offshore Company and the Company (incorporated by
reference to exhibit No. 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996).
10.2 - Master Services Agreement between ENSCO International
Incorporated and the Company (incorporated by reference
to exhibit No. 10.4 to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June
30, 1996).
10.3 - DUAL DRILLING COMPANY Employees Tax Deferred/Thrift
Savings Plan and Trust (filed as exhibit 10.2 to the
Company's Registration Statement on Form S-1 (No.
33-64550) and incorporated herein by reference).
10.4 - Office Lease, dated as of October 21, 1988, between
Sherry Lane Associates and DUAL DRILLING COMPANY (filed
as exhibit 10.14 to the Company's Registration
Statement on Form S-1 (No. 33-64550) and incorporated
herein by reference).
10.5 - Indenture dated January 15, 1994, between DUAL DRILLING
COMPANY and Merrill Lynch & Co., with respect to the
issuance of Senior Subordinated Notes due 2004.
*27.1 - Financial Data Schedule
- ---------------
* Filed herewith
(b) No Current Reports on Form 8-K were filed by the Company during the
fourth quarter of the year ended December 31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1998.
Dual Holding Company
(Registrant)
By: /s/ C. CHRISTOPHER GAUT
---------------------------
C. Christopher Gaut
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ C. CHRISTOPHER GAUT President and Director March 23, 1998
----------------------------- (Principal Executive
C. Christopher Gaut Officer and Financial
Officer)
/s/ WILLIAM S. CHADWICK, JR. Vice President and March 23, 1998
----------------------------- Director
William S. Chadwick, Jr.
/s/ H. E. MALONE Secretary and Director March 23, 1998
----------------------------- (Principal Accounting
H. E. Malone Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000907245
<NAME> DUAL HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,071
<SECURITIES> 0
<RECEIVABLES> 12,515
<ALLOWANCES> 407
<INVENTORY> 440
<CURRENT-ASSETS> 31,188
<PP&E> 326,670
<DEPRECIATION> 32,923
<TOTAL-ASSETS> 435,459
<CURRENT-LIABILITIES> 28,765
<BONDS> 98,762
0
0
<COMMON> 0
<OTHER-SE> 278,897
<TOTAL-LIABILITY-AND-EQUITY> 435,459
<SALES> 0
<TOTAL-REVENUES> 90,854
<CGS> 0
<TOTAL-COSTS> 35,411
<OTHER-EXPENSES> 32,682
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,911
<INCOME-PRETAX> 11,950
<INCOME-TAX> 1,941
<INCOME-CONTINUING> 10,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,009
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
