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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
Form 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JUNE 30, 2003
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
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 and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___ ----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes X No __.
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of July 31, 2003: 13,847,051 shares of Common Stock, $1 par
value.
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended June 30, 2003
INDEX
Part I. Financial Information
Item 1. Unaudited Condensed Financial Statements Page
a) Condensed Statements of Operations
For the Three Months and Nine Months Ended June 30, 2003 and 2002....4
b) Condensed Balance Sheets
As of June 30, 2003 and September 30, 2002...........................5
c) Condensed Cash Flow Statements
For the Nine Months Ended June 30, 2003 and 2002.....................7
d) Notes to Condensed Financial Statements..............................8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations..............................11
Item 3. Quantitative and Qualitative Disclosures about Market Risk........14
Item 4. Controls and Procedures...........................................14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K..................................15
Signatures...................................................................17
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
This Form 10-Q for the quarterly period ended June 30, 2003 includes
"forwarding-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended. All statements other than statements of
historical facts included in this Form 10-Q regarding the Company's financial
position, business strategy, budgets and plans and objectives of management for
future operations are forward-looking statements. These forward-looking
statements involve risks and uncertainties that may cause the Company's actual
future activities and results of operation to be materially different from those
suggested or described in the Form 10-Q.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- -----------------------------
2003 2002 2003 2002
--------- ----------- -------- --------
(Unaudited)
(Unaudited)
REVENUES:
Contract drilling $ 41,847 $ 37,402 $106,761 $118,376
-------- -------- -------- --------
COSTS AND EXPENSES:
Contract drilling 27,635 19,493 71,094 58,912
Depreciation 6,783 5,958 18,025 18,501
General and administrative 3,023 2,336 8,822 7,500
-------- -------- -------- --------
37,441 27,787 97,941 84,913
-------- -------- -------- --------
OPERATING INCOME 4,406 9,615 8,820 33,463
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (2,239) (501) (2,950) (1,387)
Interest income 40 60 139 200
-------- -------- -------- --------
(2,199) (441) (2,811) (1,187)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
2,207 9,174 6,009 32,276
PROVISION FOR INCOME TAXES 2,289 3,042 4,554 11,156
-------- -------- -------- --------
NET INCOME (LOSS) $ (82) $ 6,132 $ 1,455 $ 21,120
======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ (.01) $ .44 $ .11 $1.53
Diluted $ (.01) $ .44 $ .10 $1.51
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 13,847 13,834 13,846 13,839
Diluted 13,847 14,048 13,903 13,984
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, September 30,
2003 2002
--------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,950 $ 27,055
Accounts receivable, net 33,260 28,776
Inventories of materials and supplies,
at lower of average cost or market 11,757 9,134
Deferred tax assets 223 223
Prepaid expenses 1,757 6,625
-------- --------
Total Current Assets 59,947 71,813
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and drill pipe 658,055 583,241
Other 9,226 9,156
-------- --------
667,281 592,397
Less-accumulated depreciation 230,669 224,000
-------- --------
Net Property and Equipment 436,612 368,397
-------- --------
DEFERRED COSTS AND OTHER ASSETS 10,702 4,320
-------- --------
$507,261 $444,530
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, September 30,
2003 2002
--------- --------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term note payable $ 121 $ 5,023
Current maturities of long-term debt 18,000 ---
Accounts payable 3,752 5,584
Accrued liabilities 8,801 13,809
-------- --------
Total Current Liabilities 30,674 24,416
-------- --------
LONG-TERM DEBT, net of current maturities: 172,000 115,000
-------- --------
DEFERRED CREDITS:
Income taxes 16,420 15,545
Other 10,569 13,436
-------- --------
26,989 28,981
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized, none outstanding --- ---
Common stock, $1 par value;
20,000,000 shares authorized with 13,847,000
and 13,845,000 shares issued and outstanding
in 2003 and 2002, respectively 13,847 13,845
Paid-in-capital 57,282 57,274
Retained earnings 206,469 205,014
-------- --------
Total Shareholders' Equity 277,598 276,133
-------- --------
$507,261 $444,530
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended June 30,
---------------------------------
2003 2002
-------- --------
(Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,455 $21,120
------- -------
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation 18,025 18,501
Amortization 2,039 318
Deferred federal income tax provision 875 2,250
Changes in assets and liabilities:
Increase in accounts receivable (4,484) (6,006)
Increase (decrease) in accounts payable and accrued
liabilities (6,171) 976
Net mobilization fees (6,805) (2,903)
Other (2,238) (1,452)
-------- --------
1,241 11,684
-------- --------
Net cash provided by operating activities 2,696 32,804
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (87,371) (67,798)
Proceeds from sale of Rig 200 500 ---
Other (38) ---
-------- -------
Net cash used by investing activities (86,909) (67,798)
-------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from credit facilities 247,500 60,000
Principal payments on debt (177,402) ---
Proceeds from exercises of stock options 10 181
-------- -------
Net cash provided by financing activities 70,108 60,181
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (14,105) 25,187
CASH AND CASH EQUIVALENTS, at beginning of period 27,055 12,621
-------- -------
CASH AND CASH EQUIVALENTS, at end of period $ 12,950 $37,808
========= =======
- ---------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for domestic
and foreign income taxes $ 6,805 $ 9,605
======== =======
Cash paid during the period for interest,
net of amounts capitalized $ 2,298 $ 1,415
======== =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
PART I. ITEM 1 - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
The unaudited interim condensed consolidated financial statements as of
June 30, 2003 and for each of the three month and nine month periods ended June
30, 2003 and 2002, included herein, have been prepared by the Company in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. The year end condensed balance sheet data
was derived from the Audited Financial Statements as of September 30, 2003.
Although these financial statements and related information have been prepared
without audit, and certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, management believes that the note
disclosures are adequate to make the information not misleading. The interim
financial results may not be indicative of results that could be expected for a
full year. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's Annual Report to Shareholders for
the year ended September 30, 2002. In the opinion of the Company's management,
the unaudited interim financial statements reflect all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the financial position and results of operations of the Company for the periods
presented.
2. EARNINGS PER COMMON SHARE
The computation of basic and diluted earnings per share is as follows (in
thousands, except per share amounts):
Three Months Ended Nine Months Ended
-------------------------------- -----------------------------------
Net
Income Per Share Net Per Share
(Loss) Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
June 30, 2003:
Basic earnings per share $ (82) 13,847 $ (.01) $ 1,455 13,846 $ .11
Effect of dilutive securities-
Stock Options --- --- --- --- 57 (.01)
------- ------- ------- ------- ------ ------
Diluted earnings per share $ (82) 13,847 $ (.01) $ 1,455 13,903 $ .10
======== ======= ======= ======= ====== ======
June 30, 2002:
Basic earnings per share $ 6,132 13,843 $ .44 $21,120 13,839 $ 1.53
Effect of dilutive securities -
Stock Options --- 205 --- --- 145 (.02)
------- ------ ------- ------- ------ ------
Diluted earnings per share $ 6,132 14,048 $ .44 $21,120 13,984 $ 1.01
======= ====== ======= ======= ====== =======
3. LONG-TERM DEBT
On April 1, 2003, the Company executed a $225 million senior secured credit
agreement with a bank group to refinance all of its existing indebtedness of
$172.5 million and to provide for on-going working capital and general corporate
needs. On June 27, 2003, the credit agreement was amended to increase the total
amounts available to $250 million. As amended, the credit agreement includes a
$150 million term loan facility and a $100 million revolving loan facility. The
term loan will be repaid commencing on December 31, 2003 in 4 quarterly
installments of $6 million and 14 quarterly installments of $9 million. All
outstanding borrowings under the revolving loan facility mature on April 1,
2008. Loans under both facilities will bear interest at varying rates ranging
from 1.5% to 2.75% over LIBOR. The interest rate at July 31, 2003 is
approximately 3.9%. The credit agreement contains financial covenants, with the
most restrictive requirement being the ratio of outstanding debt to earnings
before interest, taxes and depreciation, which is currently allowed to be 5.75,
reducing to 4.75 at March 31, 2004, to 4.00 at June 30, 2004 and to 3.00 at
December 31, 2004 and thereafter. The credit agreement also places restrictions
on dispositions of any material assets, paying cash dividends or repurchasing
outstanding common stock and incurring any additional indebtedness. The Company
is currently in compliance with all financial covenants. The bank group's
collateral for the credit agreement consists primarily of preferred mortgages on
all of the Company's active drilling fleet.
Currently, the Company has borrowed $150 million under the term loan
facility and $43 million under the revolving loan facility.
4. ACCOUNTING FOR STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure on amendment of SFAS No. 123". SFAS No.
148 amends SFAS No. 123, "Accounting for Stock-Based Compensation" to provide
alternative methods of transition for a voluntary change to the fair value based
method of stock-based employee compensation. In addition, the statement amends
the disclosure requirements of SFAS No. 123 to require pertinent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company does not intend to adopt the fair value based method of
stock-based compensation. Accordingly, no compensation costs have been
recognized in net income from the granting of options pursuant to its stock
option plans, as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of grant.
Had compensation costs been determined based on the fair value at the grant
dates consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below (in thousands, except for per share amounts):
hree Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------------
2003 2002 2003 2002
----- ---- ----- ----
Net (loss) income, as reported $ (82) $6,132 $1,455 $21,120
Deduct: Total stock-based
employee compensation
expense determined under fair
value based method for all
awards, net of related tax effects (537) (416) (1,612) (1,248)
------ ------ ------- -------
Pro Forma, net income $ (619) $5,716 $ (157) $19,8721
====== ====== ======= ========
Earnings per share:
Basic - as reported $ (.01) $ .44 $ .11 $ 1.53
Basic - pro forma $ (.04) $ .41 $ (.01) $ 1.43
Diluted - as reported $ (.01) $ .44 $ .10 $ 1.51
Diluted - pro forma $ (.04) $ .41 $ (.01) $ 1.42
5. INCOME TAXES
The Company's current tax provision for fiscal year 2003 virtually all
relates to taxes in foreign jurisdictions, with the Company not incurring
taxable income in the United States necessary to utilize foreign tax credits.
Due to the low level of earnings in the US, in addition to losses in certain
non-taxable jurisdictions the Company's effective tax rate will exceed the US
statutory rate. Factors that can contribute to the fluctuation of the effective
tax rate include, but are not limited to: country of rig operation, country of
rig ownership, length of contract, and type of income tax assessment.
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions deemed reasonable by the Company. The Company can give no
assurance that such expectations and assumptions will prove to be correct, and
actual results could differ materially from the information presented herein.
The Company's periodic reports filed with the SEC should be consulted for a
description of risk factors associated with an investment in the Company.
MARKET OUTLOOK
Worldwide utilization of offshore drilling units continues to remain in the
high -70% to low - 80% range. The continuing disconnect between relatively high
commodity prices and soft market conditions reflects increased conservatism by
exploration and production companies due to a number of factors including weak
capital markets, increased focus on reducing debt, and a host of geopolitical
uncertainties (for example, those in Iraq, Venezuela and Nigeria), which have
curtailed drilling. Semisubmersible utilization remains the weakest sector of
the drilling market, while utilization of jack-up drilling units is one of the
stronger sectors of the market mainly as a result of increased demand in the
Gulf of Mexico, Asia Pacific and Mexico. Despite soft market conditions during
the first three quarters of fiscal year 2003, the Company was able to maintain a
relatively high level of equipment utilization, with management continuing to
emphasize utilization over higher dayrates.
One of the Company's seven core upgraded drilling units, the ATWOOD HUNTER,
is currently stacked in Egypt while waiting for its next contract opportunity.
The ATWOOD SOUTHERN CROSS is expected to complete its current contract in early
August 2003 and with no ongoing contract commitments, is expected to also be
stacked in Egypt thereafter. Three of the Company's upgraded drilling units, the
ATWOOD FALCON, VICKSBURG and SEAHAWK, are contractually committed into fiscal
year 2004. The current contracts for the ATWOOD EAGLE and RICHMOND could
terminate during the fourth quarter of fiscal year 2003; however, both units
have opportunities for continuous work. The shipyard portion of the construction
of the ATWOOD BEACON was completed in May 2003, at which time, commissioning and
testing commenced. To date, commissioning and testing continues. Once completed
and loading of client and third-party equipment, the rig will be relocated to
Malaysia in early August 2003 to commence a three-well plus options contract.
Since the current political uncertainties and soft market conditions have
resulted in a lower level of dayrates on some of the Company's drilling units
and the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS are expected to incur
significant idle time in the fourth quarter of fiscal year 2003, operating cash
flows and net income for fiscal year 2003 are expected to be significantly below
results for fiscal year 2002. Based on these assumptions, the Company expects to
incur a loss between $4 and $6 million in the fourth quarter of fiscal year 2003
and, thus, have a loss for fiscal year 2003. The current near-term outlook has
not weakened the Company's optimism about the longer-term outlook and
fundamentals of the offshore drilling market. With seven upgraded drilling units
plus a new jack-up drilling unit the Company believes it will be well positioned
in an improving market environment for an increase in earnings and cash flows.
RESULTS OF OPERATIONS
Contract revenues for the three months and nine months ended June 30, 2003
increased 12% and decreased 10%, respectively, compared to the three months and
nine months ended June 30, 2002. A comparative analysis of contract revenues is
as follows:
CONTRACT REVENUES
(In Millions)
---------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------------------- ---------------------------------
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ------ ------ --------
ATWOOD EAGLE $ 7.7 $ 1.9 $ 5.8 $ 10.6 $ 15.2 $ (4.6)
ATWOOD FALCON 9.6 8.3 1.3 25.4 26.6 (1.2)
RICHMOND 2.2 1.0 1.2 6.3 5.3 1.0
VICKSBURG 6.3 5.9 0.4 18.6 17.0 1.6
SEAHAWK 5.9 5.9 --- 16.9 16.6 0.3
ATWOOD SOUTHERN CROSS 4.9 6.0 (1.1) 12.8 17.2 (4.4)
ATWOOD HUNTER 4.8 8.0 (3.2) 14.8 19.0 (4.2)
OTHER 0.4 0.4 --- 1.4 1.5 (0.1)
----- ----- ---- ------ ------ ------
$41.8 $37.4 $ 4.4 $106.8 $118.4 $(11.6)
===== ===== ===== ====== ====== ======
The ATWOOD EAGLE was fully employed during the third quarter of fiscal year
2003 compared to a partial quarter of operations in the prior fiscal year as the
rig began its upgrade in April 2002. However, year-to-date, the ATWOOD EAGLE has
been employed only four months during the fiscal year as compared to almost
eight months in the prior fiscal year at a lower dayrate. The average dayrate
for the ATWOOD FALCON was approximately $105,000 for the current quarter as
compared to approximately $90,000 for the same quarter in fiscal year 2002. The
increase in revenue for the RICHMOND was due to the rig undergoing shipyard
repairs for approximately 35 days during the third quarter of fiscal year 2002
compared to being fully employed during the third quarter of fiscal year 2003.
Due to the softness of the Mediterranean market, the average dayrates for both
the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS were approximately $55,000 for the
third quarter of fiscal year 2003 as compared to approximately $90,000 and
$65,000, respectively, for the same quarter in fiscal year 2002. For fiscal
year-to-date, the ATWOOD HUNTER also had an average dayrate of approximately
$55,000 compared to having dayrates for most of fiscal 2003 in the $90,000's.
Additionally, year-to-date revenues for the ATWOOD SOUTHERN CROSS are down due
to two months of planned maintenance and upgrades to meet Italian standards
compared to being fully utilized in the same year-to-date period in the prior
fiscal year.
Contract drilling costs for the three months and nine months ended June 30,
2003 increased 42% and 21%, respectively, as compared to the same periods in the
prior fiscal year. An analysis of contract drilling costs by rig is as follows:
CONTRACT DRILLING COSTS
(In Millions)
---------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ------ ------ --------
ATWOOD EAGLE $ 6.8 $ 1.2 $ 5.6 $ 8.9 $ 9.0 $ (0.1)
ATWOOD FALCON 5.8 3.0 2.8 15.5 7.9 7.6
ATWOOD SOUTHERN CROSS 3.9 2.8 1.1 11.9 7.8 4.1
SEAHAWK 2.2 2.1 0.1 7.6 6.2 1.4
RICHMOND 2.2 2.2 --- 6.3 7.5 (1.2)
VICKSBURG 2.2 2.4 (0.2) 7.0 6.9 0.1
ATWOOD HUNTER 3.3 4.0 (0.7) 10.1 9.0 1.1
OTHER 1.2 1.8 (0.6) 3.8 4.6 (0.8)
--- ----- ----- ----- ----- -----
$27.6 $19.5 $ 8.1 $71.1 $58.9 $12.2
===== ===== ===== ===== ===== =====
The ATWOOD EAGLE was fully employed during the third quarter of fiscal year
2003 compared to a partial quarter of operations in the prior fiscal year as the
rig began its upgrade in April 2002. The rig is currently operating in Angola,
where operating costs are higher than in the Mediterranean, its previous
location, due to additional start-up costs, increased shorebase and travel
expenses and continuing amortization of its mobilization to Angola. The ATWOOD
FALCON finished operations in Australia during June 2003, where operating costs
are higher than Southeast Asia, its previous location, due to an increase in
personnel-related costs, which, along with amortization of its mobilization
expense to Australia, accounts for its increase in drilling costs for both the
fiscal quarter and fiscal year-to-date. The increase in costs for the ATWOOD
SOUTHERN CROSS resulted from the amortization of the planned maintenance and
upgrade costs to meet Italian operating standards, as well as higher costs of
operating in Italy for travel, shorebase operations and rentals for both the
fiscal quarter and fiscal year-to-date. The increase in fiscal year-to-date
costs for the SEAHAWK is primarily due to a higher level of repair and
maintenance expenses compared to prior year, while the decrease in fiscal
year-to-date costs for the RICHMOND is due to the shipyard repairs incurred
during the prior fiscal year. The higher level of costs for the ATWOOD HUNTER in
the third quarter of the prior fiscal year was due to amortization of its
mobilization costs to Egypt which was completed in first quarter of the current
fiscal year.
An analysis of depreciation expense by rig for the three months and nine
months ended June 30, 2003 as compared to the same periods in the prior fiscal
year is as follows:
DEPRECIATION EXPENSE
----------------------------------------------------------------------------------------------------
(In Millions)
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ----- ----- --------
ATWOOD EAGLE $ 1.3 $ 0.9 $ 0.4 $ 1.7 $ 2.2 $(0.5)
RICHMOND 0.5 0.4 0.1 1.4 1.2 0.2
SEAHAWK 1.2 1.1 0.1 3.5 3.6 (0.1)
ATWOOD HUNTER 1.3 1.3 --- 4.0 2.9 1.1
ATWOOD SOUTHERN CROSS 1.0 1.0 --- 3.0 2.9 0.1
VICKSBURG 0.6 0.6 --- 1.9 1.8 0.1
ATWOOD FALCON 0.7 0.7 --- 1.9 2.0 (0.1)
OTHER 0.2 0.7 (0.5) 0.6 1.9 (1.3)
----- ----- ----- ----- ----- -----
$ 6.8 $ 6.7 $ 0.1 $18.0 $18.5 $(0.5)
===== ===== ===== ===== ----- =====
The Company does not recognize depreciation expense during the period a rig
is out of service for a significant upgrade, which accounts for the increase in
expense for the ATWOOD EAGLE for the third quarter of fiscal year 2003. However,
year-to-date expense is less than the prior fiscal year due to only four months
of operations in the current fiscal year compared to almost eight months of
operations in the prior fiscal year pre-upgrade. Other depreciation expense
decreased due to the fact that RIG-200 was fully depreciated to its salvage
value in the third quarter of fiscal year 2002, and thus had no depreciation
expense in the quarter ended June 30, 2003 compared to two months of expense
during the same period for the prior fiscal year. The Company sold its interest
in RIG-200 in June 2003.
The Company's current tax provision for fiscal year 2003 virtually all
relates to taxes in foreign jurisdictions, with the Company not incurring
taxable income in the United States necessary to utilize foreign tax credits.
Due to the low level of earnings in the US, in addition to losses in certain
non-taxable jurisdictions the Company's effective tax rate will exceed the US
statutory rate. Factors that can contribute to the fluctuation of the effective
tax rate include, but are not limited to: country of rig operation, country of
rig ownership, length of contract, and type of income tax assessment.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal year 2003, the Company utilized $75
million in net borrowings from its credit facilities, $14 million cash on hand,
and approximately $3 million net cash provided by operating activities to invest
$25 million in completing the upgrade of the ATWOOD EAGLE, to invest $54 million
in the construction of the ATWOOD BEACON, to fund approximately $8 million of
other capital expenditures and to repay approximately $5 million in short-term
notes payable. The increase in interest expense for the current quarter as
compared to prior year is due to a $1.2 million write off of unamortized
financing costs related to the previous credit facility.
With the completion of the ATWOOD EAGLE upgrade, the Company has completed
its $339 million fleet upgrade on time and within cost estimates. Currently, the
Company's only significant on-going capital project relates to the completion of
the construction of the ATWOOD BEACON, with approximately $10 to $12 million
remaining to be funded. The Company presently has no plans to incur any upgrade
costs on the SEASCOUT during fiscal year 2003.
Upon execution of the senior secured credit agreements on April 1, 2003,
the Company borrowed $190 million (with an outstanding balance of $193 million
as of July 31, 2003), of which $172.5 million was used to repay amounts
outstanding under the Company's previous credit facilities. The credit agreement
places restrictions on dispositions of any material assets, paying cash
dividends or repurchasing outstanding common stock and incurring any additional
indebtedness, in addition to containing financial covenant requirements.
Currently, the Company is in compliance with all financial covenants which
includes among others, the ratio of outstanding debt to earnings before
interest, taxes and depreciation. With continuing soft market conditions and a
net loss expected for the fourth quarter of fiscal year 2003, there is no
guarantee that the Company will maintain compliance with all of its financial
covenant requirements, which, if compliance is not maintained, could have a
material adverse impact on the Company's financial position. The bank group's
collateral for the credit agreement consists primarily of preferred mortgages on
all of the Company's active drilling fleet. Currently, the Company has an
additional $57 million of borrowing capacity under its current credit
facilities, a significant portion of which, if the Company maintains a high
utilization of its drilling equipment, should not be needed for general
operating purposes. The Company will continue to periodically review and adjust
its planned capital expenditures and financing of such expenditures in light of
current market conditions.
PART I. ITEM 3
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including adverse changes in
interest rates and foreign currency exchange rates as discussed below.
INTEREST RATE RISK
With the interest rate on the Company's long-term debt under its current
credit facilities at a floating rate, the outstanding long-term debt of $190
million at June 30, 2003 approximates carrying value. The impact on annual cash
flow of a 10% change in the floating rate (approximately 37 basis points) would
be approximately $0.7 million. The Company did not have any open derivative
contract relating to its floating rate debt at June 30, 2003.
FOREIGN CURRENCY RISK
Certain of the Company's subsidiaries have monetary assets and liabilities
that are denominated in a currency other than their functional currencies. Based
on June 30, 2003 amounts, a decrease in the value of 10% in the foreign
currencies relative to the U.S. dollar from the year-end exchange rates would
result in a foreign currency transaction loss of approximately $0.2 million. The
Company did not have any open derivative contracts relating to foreign
currencies at June 30, 2003.
PART I. ITEM 4
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of the end of the period covered by this report have been designed
and are functioning effectively to provide reasonable assurance that the
information required to be disclosed by the Company in its periodic SEC filings
are recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. The Company believes that a controls
system, no matter how well designed and operated, cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
(b) Change in Internal Control over Financial Reporting
No change in the Company's internal control over financial reporting
occurred during the Company's fiscal quarter covered by this report that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1.1 Restated Articles of Incorporation dated January 21, 1972 (Incorporated
herein by reference to Exhibit 3.1.1 of the Company's Form 10-K for the
year ended September 30, 2002)
3.1.2 Articles of Amendment filed March 28, 1975 (Incorporated herein by
reference to Exhibit 3.1.2 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated herein by
reference to Exhibit 3.1.4 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating Preferred
Stock of Atwood Oceanics, Inc. dated October 17, 2002 (Incorporated
herein by reference to Exhibit 3.1.5 of the Company's Form 10-K for the
year ended September 30, 2002).
*3.2 Bylaws, as amended and restated dated January 1, 1993.
4.1 Rights Agreement dated effective October 18, 2002 between the Company
and Continental Stock & Transfer & Trust Company (Incorporated herein
by reference to Exhibit 4.1 of the Company's Form 8-A filed October 21,
2002).
10.1 Credit Agreement dated effective April 1, 2003 between the Company,
Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York
Branch, as administrative agent and the lenders thereto from time to
time (Incorporated herein by reference to Exhibit 99.1 of the Company's
Form 8-K filed April 7, 2003).
10.2 Pooled Assignment and First Amendment dated effective June 27, 2003
between the Company, Atwood Oceanics Pacific Limited, Nordea Bank
Finland plc, New York Branch, as administrative agent and the lenders
thereto from time to time (Incorporated herein by reference to Exhibit
99.1 of the Company's Form 8-K filed July 30, 2003).
10.3 Second Amendment and Agreement dated effective June 27, 2003 between
the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc,
New York Branch, as administrative agent and the lenders thereto from
time to time (Incorporated herein by reference to Exhibit 99.2 of the
Company's Form 8-K filed July 30, 2003).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*Filed herewith
(b) Reports on Form 8-K
1) On April 1, 2003, the Company filed a report on Form 8-K announcing
that it executed a $225 million senior secured credit facility.
2) On April 7, 2003, the Company filed a report on Form 8-K attaching a
signed copy of the credit facility executed on April 1, 2003 and
announcing that the ATWOOD HUNTER was awarded a one well contract.
3) On April 29, 2003, the Company furnished a report on Form 8-K
announcing its earnings for the quarter ended March 31, 2003, along
with supporting information.
4) On May 16, 2003, the Company furnished a report on Form 8-K announcing
that the ATWOOD SOUTHERN CROSS had completed its contract and was
preparing to commence a new contract and that the ATWOOD HUNTER had
completed its work in Egypt and was preparing to drill one well in
Israel.
5) On June 4, 2003, the Company furnished a report on Form 8-K announcing
that the ATWOOD FALCON had been awarded a contract in Japan and
providing updates on the operating status of the RICHMOND and ATWOOD
EAGLE.
6) On June 5, 2003, the Company filed a report on Form 8-K announcing that
the Company had sold its 50% interest in RIG-200 to Helmerich & Payne
International Drilling, Co.
7) On June 16, 2003 the Company furnished a report on Form 8-K announcing
that the ATWOOD BEACON had been awarded a contract in Malaysia.
8) On June 27, 2003, the Company filed a report on Form 8-K announcing
that it closed the general syndication of its senior secured credit
facility dated as of April 1, 2003, with the facility increased from
$225 million to $250 million.
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.
ATWOOD OCEANICS, INC.
(Registrant)
Date: August 5, 2003 /s/JAMES M. HOLLAND
James M. Holland
Senior Vice President,
Chief Financial Officer and
Chief Accounting Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1.1 Restated Articles of Incorporation dated January 21, 1972 (Incorporated
herein by reference to Exhibit 3.1.1 of the Company's Form 10-K for the
year ended September 30, 2002)
3.1.2 Articles of Amendment filed March 28, 1975 (Incorporated herein by
reference to Exhibit 3.1.2 of the Company's Form 10-K for the year ended
September 30, 2002).
3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of the Company's Form 10-K for the year ended
September 30, 2002).
3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated herein by
reference to Exhibit 3.1.4 of the Company's Form 10-K for the year ended
September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating Preferred
Stock of Atwood Oceanics, Inc. dated October 17, 2002 (Incorporated
herein by reference to Exhibit 3.1.5 of the Company's Form 10-K for the
year ended September 30, 2002).
*3.2 Bylaws, as amended and restated dated January 1, 1993.
4.1 Rights Agreement dated effective October 18, 2002 between the Company
and Continental Stock & Transfer & Trust Company (Incorporated herein by
reference to Exhibit 4.1 of the Company's Form 8-A filed October 21,
2002).
10.1 Credit Agreement dated effective April 1, 2003 between the Company,
Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York
Branch, as administrative agent and the lenders thereto from time to
time (Incorporated herein by reference to Exhibit 99.1 of the Company's
Form 8-K filed April 7, 2003).
10.2 Pooled Assignment and First Amendment dated effective June 27, 2003
between the Company, Atwood Oceanics Pacific Limited, Nordea Bank
Finland plc, New York Branch, as administrative agent and the lenders
thereto from time to time (Incorporated herein by reference to Exhibit
99.1 of the Company's Form 8-K filed July 30, 2003).
10.3 Second Amendment and Agreement dated effective June 27, 2003 between the
Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New
York Branch, as administrative agent and the lenders thereto from time
to time (Incorporated herein by reference to Exhibit 99.2 of the
Company's Form 8-K filed July 30, 2003).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*Filed herewith
EXHIBIT 31.1
CERTIFICATIONS
I, John R. Irwin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) [Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986]; and
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and (b) Any fraud, whether or
not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting.
Date: August 5, 2003
/s/ JOHN R. IRWIN
John R. Irwin
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATIONS
I, James M. Holland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) [Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986]; and
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and (b) Any fraud, whether or
not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting.
Date: August 5, 2003
/s/ JAMES M. HOLLAND
James M. Holland
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the "Company")
on Form 10-Q for the period ended June 30, 2003, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, John R. Irwin,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: August 5, 2003 /s/ JOHN R. IRWIN
John R. Irwin
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the "Company")
on Form 10-Q for the period ended June 30, 2003, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, James M. Holland,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: August 5, 2003 /s/JAMES M. HOLLAND
James M. Holland
Senior Vice President and
Chief Financial Officer