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 September 30, 1998
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) (Zip Code)
Registrant's telephone number, including area code: (214)922-1500
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 twelve 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
There were 1,000 shares of Common Stock, $.10 par value, of the registrant
outstanding as of November 12, 1998.
<PAGE>
DUAL HOLDING COMPANY
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet
September 30, 1998 and December 31, 1997 3
Consolidated Statement of Operations
Three months ended September 30, 1998, and 1997 4
Consolidated Statement of Operations
Nine months ended September 30, 1998, and 1997 5
Consolidated Statement of Cash Flows
Nine months ended September 30, 1998, and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
Separate financial statements of the subsidiaries of Dual Holding Company (the
"Company") that guarantee the Company's Senior Subordinated Notes due 2004 (the
"Notes") are not included herein. Such subsidiary guarantors are jointly and
severally liable with respect to the Company's obligations pursuant to such
Notes, and the aggregate total assets, equity and net income (loss) of such
subsidiary guarantors are substantially equivalent to the total assets, equity
and net income (loss) of the Company on a consolidated basis. The total assets,
equity and net income (loss) of subsidiaries of the Company not guaranteeing the
Notes on a combined basis are not significant compared to the respective amounts
reported in the Consolidated Financial Statements of the Company and its
subsidiaries.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED BALANCE SHEET
(In thousands, except for share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents.............................. $ 7,806 $ 10,071
Accounts receivable, net............................... 8,613 12,108
Prepaid expenses and other............................. 9,055 9,009
-------- --------
Total current assets............................. 25,474 31,188
-------- --------
PROPERTY AND EQUIPMENT, AT COST.......................... 444,459 326,670
Less accumulated depreciation.......................... 46,425 32,923
-------- --------
Property and equipment, net...................... 398,034 293,747
-------- --------
OTHER ASSETS, NET........................................ 109,080 110,524
-------- --------
$532,588 $435,459
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Payable to ENSCO...................................... $ 10,481 $ 5,633
Accounts payable...................................... 406 661
Accrued liabilities................................... 25,530 22,471
-------- --------
Total current liabilities........................ 36,417 28,765
-------- --------
LONG-TERM DEBT.......................................... 98,293 98,762
NOTES PAYABLE TO ENSCO................................... 70,000 -
DEFERRED INCOME TAXES.................................... 23,552 14,545
OTHER LIABILITIES........................................ 11,668 14,490
STOCKHOLDER'S EQUITY
Common stock ($.10 par value, 10,000 shares
authorized, 1,000 shares issued and
outstanding)......................................... - -
Additional paid-in capital............................ 264,824 264,824
Retained earnings...................................... 27,834 14,073
-------- --------
Total stockholder's equity...................... 292,658 278,897
-------- --------
$532,588 $435,459
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
------------- -------------
OPERATING REVENUES
<S> <C> <C>
Contract drilling................................... $ 10,985 $ 16,745
ENSCO charter fees.................................. 10,776 9,757
-------- --------
21,761 26,502
-------- --------
OPERATING EXPENSES
Contract drilling..................................... 4,735 8,084
Depreciation and amortization......................... 5,687 7,256
ENSCO administrative charge.......................... 1,200 1,200
-------- --------
11,622 16,540
-------- --------
OPERATING INCOME........................................ 10,139 9,962
OTHER INCOME (EXPENSE)
Interest income....................................... 256 358
Interest expense, net................................ (1,764) (3,179)
Other, net........................................... (26) (18)
-------- --------
(1,534) (2,839)
-------- --------
INCOME BEFORE INCOME TAXES............................. 8,605 7,123
PROVISION FOR INCOME TAXES
Current income taxes................................. (3,101) (70)
Deferred income taxes................................ 5,414 652
-------- --------
2,313 582
-------- --------
NET INCOME.............................................. $ 6,292 $ 6,541
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
-------------- -------------
OPERATING REVENUES
<S> <C> <C>
Contract drilling....................................... $ 36,320 $ 45,709
ENSCO charter fees...................................... 28,399 20,544
-------- --------
64,719 66,253
-------- --------
OPERATING EXPENSES
Contract drilling....................................... 17,639 27,698
Depreciation and amortization........................... 15,736 20,603
ENSCO administrative charge............................. 3,600 3,600
-------- --------
36,975 51,901
-------- --------
OPERATING INCOME.......................................... 27,744 14,352
OTHER INCOME (EXPENSE)
Interest income.......................................... 765 919
Interest expense, net................................... (6,769) (9,078)
Other, net.............................................. (121) (19)
-------- --------
(6,125) (8,178)
-------- --------
INCOME BEFORE INCOME TAXES................................ 21,619 6,174
PROVISION FOR INCOME TAXES
Current income taxes.................................... (1,149) 626
Deferred income taxes.................................. 9,007 756
-------- --------
7,858 1,382
-------- --------
NET INCOME ................................................ $ 13,761 $ 4,792
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
------------- -------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income.................................................. $ 13,761 $ 4,792
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 15,736 20,603
Deferred income taxes.................................... 9,007 756
Other.................................................... (384) (350)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............ 3,495 (757)
(Increase) decrease in prepaid expenses
and other.......................................... (754) 3,870
Increase in accounts payable............................ 4,448 943
Decrease in accrued and other liabilities.............. (9,213) (8,147)
-------- --------
Net cash provided by operating activities.................. 36,096 21,710
-------- --------
INVESTING ACTIVITIES
Additions to property and equipment......................... (108,480) (58,099)
Proceeds from sale of assets................................ 119 22,608
-------- --------
Net cash used by investing activities.................... (108,361) (35,491)
-------- --------
FINANCING ACTIVITIES
Long-term borrowings from ENSCO............................ 70,000 -
Long-term borrowings........................................ - 15,000
Reduction of long-term borrowings........................... - (250)
Reduction in restricted cash................................ - 1,075
-------- --------
Net cash provided by financing activities................. 70,000 15,825
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (2,265) 2,044
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................ 10,071 9,397
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD...................... $ 7,806 $ 11,441
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DUAL HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited Financial Statements
The consolidated financial statements included herein have been prepared by Dual
Holding Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (which consist of normal recurring adjustments) which
are necessary for a fair presentation of the financial position, results of
operations, and of cash flows for the interim periods presented. The Company is
a wholly-owned subsidiary of ENSCO International Incorporated ("ENSCO").
It is recommended that these financial statements be read in conjunction with
the Company's consolidated financial statements and notes thereto for the year
ended December 31, 1997 included in the Company's Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Note 2 - Change in Depreciable Lives
During the latter part of 1997, the Company performed an engineering and
economic study of the Company's asset base. As a result of this study, the
Company, effective January 1, 1998, extended the depreciable lives of its
drilling rigs by an average of four years. The Company believes that this change
provides a better matching of the revenues and expenses of the Company's assets
over their anticipated useful lives. The effect of this change on the Company's
financial results for the three and nine months ended September 30, 1998 was to
reduce depreciation expense by approximately $2.1 million and $6.7 million,
respectively.
Note 3 - Related Party Transactions
At September 30, 1998, the Company's three jackup rigs and seven platform rigs
in the Gulf of Mexico were under bareboat charter to a wholly-owned subsidiary
of ENSCO to achieve certain operating and marketing efficiencies. The terms of
the bareboat charter agreements with ENSCO provide for fixed daily rates to be
paid to the Company. If a rig is idle for more than 30 consecutive days, the
charter rate is reduced by 50% of the normal rate. The bareboat charter
agreements may be terminated with one month's prior notice by either party.
On March 31, 1998 and June 30, 1998, the Company executed promissory notes with
ENSCO and borrowed $25 million on each of these dates. On September 30, 1998,
the Company executed a third promissory note and borrowed an additional $20.0
million from ENSCO. The purpose of the loans is to provide additional cash to
the Company for capital upgrades made to the Company's drilling rigs. The terms
of the loans provide for payment of the principal amount and interest on or
before March 31, 2000, June 30, 2000 and September 30, 2000, respectively. The
notes bear interest at 5% per annum.
The Company has 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 of $400,000 for these services, which the Company
believes is reasonable for the services provided.
The Company is a guarantor of ENSCO's $185 million revolving credit agreement
established in May 1998. As of September 30, 1998 there were no borrowings
outstanding under this credit agreement.
Note 4 - Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income." The adoption of this
statement had no effect on the Company's financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS ENVIRONMENT
The Company currently has five jackup rigs and one platform rig located in the
Asia Pacific region. The platform rig is not owned by the Company, but is
operated under a management contract. The Company's remaining three jackup rigs
and seven platform rigs are located in the Gulf of Mexico and are contracted to
ENSCO under bareboat charter agreements.
RESULTS OF OPERATIONS
Revenues
Contract Drilling
For the quarter ended September 30, 1998, revenues for the Company's five jackup
rigs and one platform rig located in the Asia Pacific region decreased by $5.8
million or 34% as compared to the prior year quarter. This decrease is due
primarily to downtime for two jackup rigs that were in the shipyard for
enhancements during most of the third quarter and one additional jackup rig that
was idle the entire third quarter. The enhancements to the two rigs in the
shipyard were completed in mid-September and mid-October 1998 and currently
these rigs are projected to remain idle for the fourth quarter of 1998. The
other rig that was idle during the third quarter of 1998 returned to work in
October 1998.
For the nine months ended September 30, 1998, revenues for contract drilling
services decreased by $9.4 million or 21% from the prior year period. This
decrease is due primarily to shipyard downtime for two rigs during most of the
first nine months of 1998, additional rig idle time and the sale of the
Company's 49% interest in one jackup rig to ENSCO in May 1997.
ENSCO Charter Fees
ENSCO charter fees for the quarter and nine months ended September 30, 1998
increased by $1.0 million, or 10%, and by $7.9 million, or 38%, from the prior
year periods, respectively. These increases are due primarily to increased
utilization resulting from less shipyard downtime and increased charter fees
resulting from higher jackup rig values and capital additions to the platform
rigs. Offsetting the improvement in revenues was the sale of one previously
chartered jackup rig to ENSCO in December 1997.
Contract Drilling Expenses
For the quarter and nine months ended September 30, 1998, contract drilling
operating expenses decreased by $3.3 million, or 41%, and by $10.1 million, or
36%, due primarily to decreased utilization resulting from two rigs undergoing
shipyard enhancements during the first nine months of the current year. The
current year expenses also include the reversal of $1.0 million in the third
quarter of 1998 related to the favorable settlement of a foreign personnel tax
matter and the reversal of $1.0 million in the first quarter of 1998 previously
accrued for the settlement of maritime claims. Additionally, the Company sold
its 49% interest in one jackup rig to ENSCO in May 1997, which resulted in
additional expense decreases for the current year nine month period.
Depreciation and Amortization
Depreciation and amortization expense decreased by $1.6 million, or 22%, and
$4.9 million, or 24%, for the three and nine month periods ended September 30,
1998, respectively, as compared with the prior year periods. These decreases are
due primarily to the sale of the two jackup rigs to ENSCO in 1997 and the impact
of a change in the estimated depreciable lives of the Company's drilling rigs
effective January 1, 1998. See Note 2 to the financial statements of the Company
included herein "Change in Depreciable Lives."
Interest Expense, Net
Interest expense decreased from the prior year periods due primarily to higher
capitalized interest in the current year periods and to lower average debt
outstanding for the first six months of the current year versus the comparable
prior year period.
Provision for Income Taxes
The current portion of the provision for income taxes for the quarter and nine
months ended September 30, 1998 includes the reversal of $2.7 million previously
accrued for a foreign tax matter that was settled in the Company's favor.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
The Company's cash provided by operations and cash used for capital expenditures
for the nine months ended September 30, 1998 and 1997 were as follows (in
thousands):
1998 1997
-------- --------
Cash provided by operations $ 36,096 $ 21,710
======== ========
Capital expenditures $108,480 $ 58,099
======== ========
Cash flow from operations increased by $14.4 million for the nine months ended
September 30, 1998 as compared with the prior year period. The increase in cash
flow from operations is primarily due to the increase in operating margin for
the first nine months of 1998, to a reduction in interest expense and to the net
change in various working capital accounts.
Capital expenditures for the nine months ended September 30, 1998 represent
enhancements to the Company's jackup rigs and platform rigs. During the third
quarter of 1998 the Company had two jackup rigs and one platform rig in
shipyards for enhancements. The enhancements to one jackup rig were completed in
September 1998, and the enhancements to the platform rig were completed in
August 1998. The enhancements to the remaining jackup rig were completed in
October 1998.
Financing and Capital Resources
The Company's liquidity position at September 30, 1998 and December 31, 1997 is
summarized in the table below (in thousands, except ratios):
September 30, December 31,
1998 1997
------------- ------------
Cash $ 7,806 $ 10,071
Working capital (10,943) 2,423
Current ratio .7 1.1
Management believes that the Company may need to supplement its cash flow from
operations in the remaining quarter of 1998 with additional borrowings or asset
sales in connection with ENSCO in order to meet its capital expenditure
requirements. The Company anticipates that capital expenditures for rig upgrades
and sustaining operations will approximate $130.0 million for the full year
1998. The Company's 1999 capital expenditures are currently projected to be
approximately $20.0 million.
MARKET RISK
The Company uses financial instruments, on a limited basis, to hedge against its
exposure to changes in foreign currencies. The Company does not use financial
instruments for trading purposes. Management believes that the Company's hedging
activities do not expose the Company to any material interest rate risk, foreign
currency exchange rate risk, commodity price risk or any other market rate or
price risk.
YEAR 2000 UPDATE
The Company's Year 2000 issues are being addressed in conjunction with ENSCO's
Worldwide Year 2000 Plan. The following disclosure from ENSCO's Form 10-Q for
the quarter ended September 30, 1998 addresses ENSCO's Year 2000 status.
The Company has completed its assessment of its critical information technology
(IT) systems and non-IT systems and has developed and initiated a plan to
address deficiencies. The Company believes that it is on schedule to
successfully implement the required systems and equipment modifications
necessary to make the Company's critical systems Year 2000 compliant by
mid-1999.
The Company's critical IT systems are comprised primarily of a general ledger
accounting software package and related application modules, a fixed asset
system, payroll system and requisition system. The assessment of the Company's
IT systems found that some of the IT systems were not Year 2000 compliant.
Changes to make these systems Year 2000 compliant are being made in conjunction
with the Company's planned upgrade cycle, which should be completed by mid-1999.
Non-IT systems are comprised primarily of computer controlled equipment and
electronic devices, including equipment with embedded microprocessors which are
used to operate equipment on the Company's drilling rigs and marine vessels.
Additionally, telephone systems and other office based electronic equipment are
considered in the assessment of non-IT systems. With respect to drilling rig and
marine vessel based systems, the Company's assessment indicates that there will
be no disruption in the operations of its drilling rigs and marine vessels as a
result of the Year 2000 problem. The Company plans to conduct testing of its
drilling rig based equipment with manufacture representatives during the fourth
quarter of 1998 to verify the current assessment. With respect to other office
based non-IT systems, the Company's assessment found that it will be necessary
to replace or modify some existing equipment, which should be completed by
mid-1999.
The total cost to make all systems and equipment Year 2000 compliant is
currently estimated at $250,000, exclusive of software and systems that are
being upgraded in the normal business cycle. Approximately $50,000 has been
spent in modifying and upgrading systems and equipment to date.
The Company has initiated and/or received communication from most significant
suppliers, customers and financial service providers on the Year 2000 issue.
This communication has been used to determine the extent to which the Company is
vulnerable to these third parties' failure to remedy their own Year 2000 issues.
Although there is currently no indication that these business partners will not
achieve their Year 2000 compliance plans, there can be no guarantee that the
systems of other companies on which the Company relies will be timely converted.
Additionally, there can be no guarantee that the Company will not experience
Year 2000 problems. If the Company or its business partners experience Year 2000
compliance problems, material adverse business consequences could result. The
Company believes that the most likely negative effects, if any, could include
delays in payments to the Company from customers or payments by the Company to
suppliers and disruptions in shipments of equipment and materials required to
operate the Company's drilling rigs and marine vessels.
Based on the Company's current assessment of its IT systems, non-IT systems and
business partners, the Company has not, to date, developed a contingency plan
for Year 2000 issues. The Company will continue to monitor its decision on
contingency planning and such a plan will be developed if and when it is
considered prudent to do so.
NEW ACCOUNTING PRONOUNCEMENT
In June 30, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires companies to record derivatives
on the balance sheet as assets and liabilities, measured at fair value. Gains
and losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. This statement is not expected to have a material impact
on the Company's consolidated financial statements. This statement is effective
for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged.
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) the 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 and 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 from time to time in the Company's reports to the Securities and
Exchange Commission, which include the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed with this Report
Exhibit No.
4.1 Promissory Note with ENSCO International Incorporated, dated
September 30, 1998.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Quarterly
Report on Form 10-Q being submitted to the Securities and
Exchange Commission.)
(b) Reports on Form 8-K
None.
<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.
Dual Holding Company
Date: November 12, 1998 /s/ C. Christopher Gaut
----------------- --------------------------------
C. Christopher Gaut
President
(Principal Executive Officer and
Financial Officer)
/s/ H.E. Malone
---------------------------------
Secretary
(Principal Accounting Officer)
PROMISSORY NOTE
September 30, 1998
Dallas, Texas
$20,000,000.00
For value received, Dual Holding Company ("Maker"), a Delaware corporation,
promises to pay to the order of ENSCO International Incorporated ("Payee"), the
principal amount of Twenty Million Dollars ($20,000,000.00), with interest as
follows:
1. All payments are to be made at the office of Payee, located at 2700
Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202.
2. The principal amount and interest of this Promissory Note are payable in
full on or before September 30, 2000.
3. The principal amount shall bear interest at the rate of five percent (5%)
per annum, compounded annually.
4. This Promissory Note may be prepaid in part or in full at any time without
penalty.
5. Maker agrees to pay on demand all costs of collection, legal expenses, and
attorney's fees incurred or paid by any holder in collecting or enforcing
this Promissory Note on default.
6. No delay or omission on the part of any Holder in exercising any right
under this Promissory Note will operate as a waiver of such right or of any
other right under this Promissory Note. A waiver on any one occasion will
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
7. As used in this Promissory Note, the term "Holder" means Payee or other
indorsee of this Promissory Note who is in possession of it. If this Note
is signed by more than one person in the capacity of Maker, it shall be the
joint and several liabilities of these persons.
8. It is expressly acknowledged that this Promissory Note is subordinate in
right of payment to the Securities and to the Senior Indebtedness as such
terms are defined in the Trust Indenture between Maker, certain Subsidiary
Guarantors and Shawmut Bank, National Association, Trustee, dated January
15, 1994, and as thereafter supplemented.
Dual Holding Company, Maker
/s/ C. Christopher Gaut
------------------------------
C. Christopher Gaut, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1998 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,806
<SECURITIES> 0
<RECEIVABLES> 8,613
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,474
<PP&E> 444,459
<DEPRECIATION> 46,425
<TOTAL-ASSETS> 532,588
<CURRENT-LIABILITIES> 36,417
<BONDS> 168,293
0
0
<COMMON> 0
<OTHER-SE> 292,658
<TOTAL-LIABILITY-AND-EQUITY> 532,588
<SALES> 0
<TOTAL-REVENUES> 64,719
<CGS> 0
<TOTAL-COSTS> 17,639
<OTHER-EXPENSES> 19,336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,769
<INCOME-PRETAX> 21,619
<INCOME-TAX> 7,858
<INCOME-CONTINUING> 13,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,761
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
