SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 15, 2002
UNIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Oklahoma 1-9260 73-1283193
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
1000 Kensington Tower, Suite 1000
Tulsa, Oklahoma 74136
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
918/493-7700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(Not Applicable)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
The undersigned hereby amends its Form 8-K filed August 27, 2002 to include
the historical financial statements of the CDC Drilling Company Combined
Financial Statements and the related pro forma financial information.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
Set forth below are the financial statements appearing in
this report:
Page in
CDC Drilling Company This Report
------------------------------------------ -----------
Report of Independent Accountants . . . . . . . . .F-1
Combined Balance Sheets of CDC Drilling
Company as of June 30, 2001 and
March 31, 2002 (unaudited). . . . . . . . . . . .F-2
Combined Statements of Operations of
CDC Drilling Company for the Year Ended
June 30, 2001 and the Nine Months Ended
March 31, 2002 and 2001 (unaudited) . . . . . . .F-3
Combined Statements of Owner's Equity of
CDC Drilling Company for the Year Ended
June 30, 2001 and the Nine Months Ended
March 31, 2002 (unaudited). . . . . . . . . . . .F-4
Combined Statement of Cash Flows of
CDC Drilling Company for the Year Ended
June 30, 2001 and the Nine Months Ended
March 31, 2002 and 2001 (unaudited) . . . . . . .F-5
Notes to Combined Financial Statements
of CDC Drilling Company . . . . . . . . . . . . .F-6
(b) Pro Forma Financial Information
Set forth below is the pro forma financial
information appearing in this report:
Unaudited Pro Forma Consolidated Condensed
Balance Sheet as of June 30, 2002 . . . . . . . .P-1
Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the Year Ended
December 31, 2001 . . . . . . . . . . . . . . . .P-3
Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the Six
Months Ended June 30, 2002. . . . . . . . . . . .P-4
Notes to Unaudited Pro Forma Consolidated
Condensed Financial Statements. . . . . . . . . .P-5
Signatures. . . . . . . . . . . . . . . . . . . . .P-10
(c) Exhibits
23.1 Consent of Independent Auditors
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
CDC Drilling Company
We have audited the accompanying combined balance sheet of CDC Drilling Company
(see Note 1) as of June 30, 2001 and the related combined statements of
operations, owner's equity and cash flows for the year ended June 30, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of CDC Drilling Company
(See Note 1) at June 30, 2001 amd the combined results of its operations and its
cash flows for the year ended June 30, 2001, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young
May 15, 2002, except for the matter
described in the fourth paragraph
of Note 1 for which the date is
June 26, 2002
Tulsa, Oklahoma
F-1
UNIT CORPORATION AND SUBSIDIARIES
CDC DRILLING COMPANY
COMBINED BALANCE SHEETS
(Note 1)
June 30, March 31,
2001 2002
---------- ----------
ASSETS (Unaudited)
------ (In thousands)
Current Assets:
Accounts receivable, net $ 13,418 $ 12,235
Note receivable 100 100
Income tax receivable - 2,484
Deferred tax asset 160 592
Other current assets 75 270
---------- ----------
Total current assets 13,753 15,681
---------- ----------
Property and Equipment:
Drilling equipment, net of
accumulated depreciation 54,476 64,812
Transportation and other equipment,
net of accumulated depreciation 889 1,076
---------- ----------
55,365 65,888
---------- ----------
Total Assets $ 69,118 $ 81,569
========== ==========
LIABILITIES AND OWNER'S EQUITY
------------------------------
Current Liabilities:
Accounts payable $ 3,333 $ 2,037
Payable to affiliate 4,574 862
Accrued liabilities 978 1,597
Income tax payable 145 -
Note payable to shareholder 14,665 27,447
---------- ----------
Total current liabilities 23,695 31,943
---------- ----------
Deferred Income Taxes 2,931 6,095
---------- ----------
Commitments and Contingencies
Owner's Equity:
Common stock, $1 par value, 50,000
shares authorized, 1,000 shares
outstanding at March 31, 2002 and
June 30, 2001 1 1
Additional contributed capital 40,592 37,339
Retained earnings 1,899 6,191
---------- ----------
Total owner's equity 42,492 43,531
---------- ----------
Total Liabilities and Owner's Equity $ 69,118 $ 81,569
========== ==========
The accompanying notes are an integral part of the financial statements.
F-2
UNIT CORPORATION AND SUBSIDIARIES
CDC DRILLING COMPANY
COMBINED STATEMENTS OF OPERATIONS
(Note 1)
Year Nine Months Nine Months
Ended Ended Ended
June 30, March 31, March 31,
2001 2002 2001
---------- ---------- ----------
(Unaudited)
(In thousands, except per
share amounts)
Revenues:
Contract drilling $ 24,216 $ 42,628 $ 11,080
Other 36 351 25
---------- ---------- ----------
24,252 42,979 11,105
---------- ---------- ----------
Operating Expenses:
Contract drilling 16,192 27,520 8,354
Depreciation 2,859 5,452 1,584
General and administrative 1,469 1,940 1,001
Other operating expenses 213 879 102
---------- ---------- ----------
20,733 35,791 11,041
---------- ---------- ----------
Income From Operations 3,519 7,188 64
---------- ---------- ----------
Other Income (Expenses):
Interest expense - (433) (1)
Other income 4 5 -
---------- ---------- ----------
4 (428) (1)
---------- ---------- ----------
Income Before Income Taxes 3,523 6,760 63
---------- ---------- ----------
Income Tax Provision (Benefit):
Current (1,385) (264) (978)
Deferred 2,711 2,732 1,001
---------- ---------- ----------
1,326 2,468 23
---------- ---------- ----------
Net Income $ 2,197 $ 4,292 $ 40
========== ========== ==========
Basic and Diluted Earnings per Share $ 2,197 $ 4,292 $ 40
========== ========== ==========
Weighted Average Shares Outstanding 1,000 1,000 1,000
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
F-3
UNIT CORPORATION AND SUBSIDIARIES
CDC DRILLING COMPANY
COMBINED STATEMENTS OF OWNER'S EQUITY
(Note 1)
Common Stock Retained
--------------- Additional Earnings
Shares Contributed (Accumulated
Issued Amount Capital Deficit) Total
------ ------ ----------- ------------ ---------
(In thousands)
Balance, June 30,
2000 1 $ 1 $ 10,418 $ (298) $ 10,121
Net income - - - 2,197 2,197
Net contributions - - 30,174 - 30,174
------ ------ ----------- ------------ ---------
Balance, June 30,
2001 1 1 40,592 1,899 42,492
Net income
(unaudited) - - - 4,292 4,292
Net distributions
(unaudited) - - (3,253) - (3,253)
------ ------ ----------- ------------ ---------
Balance, March 31,
2002 (unaudited) 1 $ 1 $ 37,339 $ 6,191 $ 43,531
====== ====== =========== ============ =========
The accompanying notes are an integral part of the financial statements.
F-4
UNIT CORPORATION AND SUBSIDIARIES
CDC DRILLING COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(Note 1)
Nine Nine
Year Months Months
Ended Ended Ended
June 30, March 31, March 31,
2001 2002 2001
---------- ---------- ----------
(Unaudited)
(In thousands)
Cash Flows From Operating Activities:
Net Income $ 2,197 $ 4,292 $ 40
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 2,859 5,452 1,584
Bad debt expense 204 338 -
Deferred income tax expense 2,711 2,732 1,001
Non-cash interest expense - 433 -
Other - (63) 165
Changes in operating assets and
liabilities:
Accounts receivable (13,454) 845 (6,287)
Note receivable (100) - -
Income tax receivable - (2,484) -
Other current assets (7) (195) (642)
Accounts payable and payable to
affiliates (546) (4,270) (18)
Accrued liabilities 871 619 568
Income taxes payable 145 (145) -
---------- ---------- ----------
Net cash provided by (used in)
operating activities (5,120) 7,554 (3,589)
---------- ---------- ----------
Cash Flows Used In Investing Activities:
Additions to property and equipment (9,545) (8,326) (8,012)
---------- ---------- ----------
Net cash used in investing
activities (9,545) (8,326) (8,012)
---------- ---------- ----------
Cash Flows From Financing
Activities:
Proceeds from borrowings 14,665 12,349 11,601
Cash distributions to affiliate - (11,577) -
---------- ---------- ----------
Net cash provided by
financing activities 14,665 772 11,601
---------- ---------- ----------
Net Increase in Cash and Cash Equivalents - - -
Cash and Cash Equivalents at Beginning
of Period - - -
---------- ---------- ----------
Cash and Cash Equivalents at End
of Period $ - $ - $ -
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
F-5
UNIT CORPORATION AND SUBSIDIARIES
CDC DRILLING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
June 30, 2001
(Information as of March 31, 2002 and for the nine months
ended March 31, 2002 and 2001 is unaudited)
Note 1 - Summary of Accounting Policies
- ---------------------------------------
Business and Basis of Presentation
CDC Drilling Company (formerly Cactus Drilling Company), an Oklahoma
corporation, provides land contract drilling services for the oil and gas
industry, primarily in Oklahoma and Texas. The term "CDC" refers to CDC Drilling
Company. CDC, which has no subsidiaries, commenced drilling operations in June,
2000.
The accompanying combined financial statements and notes thereto present
the combined financial position, results of operations and cash flows of CDC
Drilling Company, adjusted to add the contribution of the historical net cost
basis and expenses directly associated with drilling rigs owned by
Kaiser-Francis Oil Company ("Kaiser-Francis"), a company controlled by the sole
shareholder of CDC (collectively, the "Company"). The net cost basis of drilling
rigs which are used exclusively by CDC to provide contract drilling services is
the historical cost of such drilling rigs to Kaiser-Francis. These statements
include allocations of expenses indirectly attributable to the Company, as
described in Note 6. As a result, the statements may not be indicative of the
financial position or operating results of the Company had it been operated as a
separate, stand-alone company. These combined financial statements present the
business sold in the transaction described below.
In April 2002, the drilling rigs to be sold were transferred into CREC Rig
Acquisition Company, L.L.C., which is held by a charitable income trust
established by Kaiser-Francis.
On June 26, 2002, definitive agreements were signed under which
substantially all of the assets included within these combined financial
statements would be sold. The agreement includes an option whereby the acquirer
has the exclusive first option to purchase any additional rigs constructed by
Kaiser-Francis or a successor entity in the three years following closing. If
the acquirer declines this option, then Kaiser-Francis may sell the rigs to
another company or transfer the rigs to a subsidiary or affiliate for its use.
The March 31, 2002 and 2001 financial statements have not been audited by
independent auditors but include all adjustments consisting of only those of a
normal recurring nature, which, in the opinion of the Company's management, are
necessary to present fairly its financial position as of March 31, 2002 and its
results of operations and cash flows for the nine months ended March 31, 2002
and 2001. Results for the nine months ended March 31, 2002 are not necessarily
indicative of results to be expected for the full year 2002 or for any future
period.
F-6
Note 1 - Summary of Accounting Policies (continued)
- ---------------------------------------------------
The contact drilling business is subject to cyclical business fluctuation,
which often results in irregular rig utilization. 68 percent of the Company's
2001 revenues were derived from five customers, of which one made up 24 percent
of 2001 revenues.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Company to make
estimates and assumptions that effect the amounts reported in financial
statements and the accompanying notes. Actual results may differ from such
estimates.
Property and Equipment
Property and equipment are stated at cost. Parts inventory is accounted for
at cost using the specific identification method. Drilling, transportation and
other equipment is depreciated using the straight-line method over estimated
useful lives ranging from three to twelve years. Maintenance and repairs are
charged to operations as incurred; renewals and betterments are capitalized to
appropriate property and equipment accounts.
Long-lived assets are reviewed for impairment whenever events or
circumstances provide evidence that suggests the carrying amount of the asset
may not be recoverable. The determination of whether an impairment loss has
occurred is based on management's estimate of the future undiscounted cash flows
expected to result from the use of the asset and its eventual disposition. If
the expected future cash flows are less than the carrying amount of the assets,
an impairment loss is recognized. The amount of any impairment loss is
determined by estimating the fair value of the assets and recording a loss to
the extent the carrying value exceeds the fair value of the asset.
Accounts Receivable
Accounts receivable relate primarily to billings for contract drilling,
mobilization and demobilization, and reimbursement of specific contract
expenses. The Company reviews the financial condition of potential customers
prior to signing drilling agreements but otherwise does not normally require
collateral. The Company's allowance for doubtful accounts receivable was
$204,000 at June 30, 2001.
Revenue Recognition
Contract drilling revenues are primarily generated through day rate-basis
contracts, which are recognized as income when services are performed. The
Company also receives lump-sum fees for the mobilization and demobilization of
equipment and personnel to contract drilling locations. Mobilization and
demobilization revenue is recognized over the term of the drilling contract.
Related costs are recorded as incurred.
F-7
Note 1 - Summary of Accounting Policies (continued)
- ---------------------------------------------------
Derivatives
The Company does not utilize financial derivative instruments to hedge its
market risks.
Income Taxes
CDC files a separate tax return for its operations. The revenues and
expenses directly associated with drilling rigs owned by Kaiser-Francis are
included in the Kaiser-Francis tax return. The tax provision included in these
financial statements is prepared on a combined basis considering the tax sharing
agreement described in Note 4.
The Company utilizes the asset and liability method under which deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax liabilities consists primarily of the excess of net book
basis over remaining tax basis.
Comprehensive Income
The Company applies the provisions of Statements of Financial Standards
(FAS) No. 130, Reporting Comprehensive Income. However, there was no other
comprehensive income during the periods presented.
Fair Value of Financial Instruments
The carrying amounts of the Company's accounts receivable, note receivable
and payable to affiliate approximate fair value due to the short-term maturities
of these assets and liabilities. The carrying amount of the note payable to
stockholder approximates fair value since it carries a variable interest rate.
Recent Accounting Standards
In June 2001, the Financial Accounting Standards Board issued FAS No. 143,
Accounting for Asset Retirement Obligations, and in August 2001, FAS No. 144,
Accounting for Impairment of Disposal of Long-Lived Assets. These statements
will be effective for the Company on July 1, 2002. Management is currently
evaluating the impact of FAS Nos. 143 and 144 on the Company's financial
position and results of operations.
F-8
Note 2 - Property and Equipment
- -------------------------------
Investments in property and equipment at June 30, 2001 were as follows
(amounts in thousands):
Drilling Equipment
Operating rigs and related equipment $ 62,368
Rigs under construction and parts inventory 7,390
----------
69,758
Transportation Equipment 922
Furniture, Fixtures and Other 84
----------
70,764
Less - Accumulated Depreciation (15,399)
----------
$ 55,365
==========
The Company capitalized interest of approximately $433,000 for the year
ended June 30, 2001. The Company capitalized interest of $117,000 and $245,000
for the nine month periods ended March 31, 2002 and 2001, respectively
(unaudited).
Net property and equipment contributed by Kaiser-Francis, comprised of rigs
included in these combined financial statements, amounted to $36.6 million for
the year ended June 30, 2001 and $8.2 million and $21.0 million for the nine
month periods ended March 31, 2002 and 2001, respectively (unaudited).
Note 3 - Note Payable to Shareholder
- ------------------------------------
On July 1, 2000, the Company entered into an unsecured demand note payable
to George B. Kaiser, the sole shareholder of CDC. Discretionary loans up to a
total of $50 million can be borrowed under the terms of this note. There is no
stated termination date under this arrangement. Interest is calculated monthly
based on an interest rate equal to LIBOR plus 1 percent (effective rate of 5.1
percent at June 30, 2001). As discussed in Note 6, since the Company maintains
no cash balance, interest and other disbursements by CDC increase the note
payable balance. Interest added to the note payable balance was approximately
$433,000 for the year ended June 30, 2001 and $557,000 and $254,000 for the nine
month periods ended March 31, 2002 and 2001, respectively (unaudited).
F-9
Note 4 - Income Taxes
- ---------------------
Deferred tax assets and liabilities consist of the following at June 30,
2001 (amounts in thousands):
Deferred Tax Assets:
Accruals not deducted for tax purposes $ 160
Deferred Tax Liabilities:
Excess of basis in property and equipment
for financial reporting purposes over
the tax basis (2,931)
----------
$ (2,771)
==========
A reconciliation of the Company's income tax provision computed by applying
the statutory federal income tax rate to the Company's income before income
taxes for the year ended June 30, 2001 is presented in the following table
(amounts in thousands):
United States Federal Income Tax Provision at
Statutory Rate of 35 Percent $ 1,233
Increases Resulting From:
State income taxes 75
Other 18
----------
$ 1,326
==========
The Company has a tax sharing arrangement with Kaiser-Francis with respect
to the rigs and other balances recorded on Kaiser-Francis' books and combined in
these financial statements as described in Note 1. Under the arrangement, the
Company is allocated benefits by Kaiser-Francis for any tax benefits utilized by
Kaiser-Francis, net of any tax liability assumed by Kaiser-Francis. Included in
net contributions (distributions) to additional contributed capital are
reimbursements by Kaiser-Francis for net operating losses of the rigs and other
balances recorded on Kaiser-Francis' books of $1,597,000 for 2001.
The Company paid income taxes of $67,000 during the year ended June 30,
2001 and $2.5 million (unaudited) during the nine months ended March 31, 2002
related to CDC.
F-10
Note 5 - Employee Benefit Plans
- -------------------------------
In July 2001, the Company created 401(k) plans in which eligible salaried
and hourly employees could participate. The Company matches a portion of
employee contributions, and contributed $37,000 to the plans during the nine
months ended March 31, 2002. There are no other employee benefit plans.
Note 6 - Related Party Transactions
- -----------------------------------
Kaiser-Francis provides certain management and administrative functions,
including accounting, data processing and human resources administration for the
Company. For these services, the Company paid approximately $342,000 for the
year ended June 30, 2001 and $299,000 and $256,000 for the nine months ended
March 31, 2002 and 2001, respectively (unaudited). Kaiser-Francis allocated
these indirect cost to the Company based primarily on estimates of time spent by
corporate personnel. Cost incurred by Kaiser-Francis that are directly
identifiable to the Company are charged directly to the Company, amounting to
approximately $122,000 for the year ended June 30, 2001, and $137,000 and
$76,000 for the nine months ended March 31, 2002 and 2001, respectively
(unaudited).
Additionally, CDC billed $535,000 for the year ended June 30, 2001 and
$555,000 (unaudited) for the nine months ended March 31, 2002 for drilling
services performed for Kaiser-Francis.
The Company has a cash management arrangement with Kaiser-Francis. Daily,
the Company's operating cash accounts are transferred into a Kaiser-Francis
master account. The net activity relating to this cash management arrangement is
included in the note payable to shareholder (see Note 3).
Intermountain Oilfield Trucking Company, L.L.C. (Intermountain), a company
effectively controlled by the sole shareholder of CDC, was engaged by CDC to
move oil and gas well drilling rigs and oil field equipment during 2001. During
2001, the Company paid Intermountain $39,000. At June 30, 2001, $54,000 is
included in payable to affiliate. CDC also loaned $100,000 to a third party
owner of Intermountain in the form of a secured note bearing interest at prime
plus 3 percent, due March 23, 2002. As of May 15, 2002, this note was unpaid and
therefore past due.
F-11
Note 7 - Commitments and Contingencies
- --------------------------------------
Rigs under construction at June 30, 2001 amounted to $5.3 million. In order
for these rigs to become operational, approximately $7.0 million was
subsequently expended. All rigs under construction at June 30, 2001 were
substantially complete by the end of October, 2001.
The Company has entered into a three year operating lease agreement with
noncancellable terms for office, shop and yard facilities. Future minimum lease
payments are $108,000 $108,000 and $90,000 for the years ended June 30, 2002,
2003 and 2004. Rental expense for office, shop and yard facilities was $27,000
for the year ended June 30, 2001.
The company is involved in no legal proceedings nor has contingent
liabilities other than those which the Company considers ordinary and incidental
to the contract drilling business. The Company believes any risks of liability
are adequately covered by insurance.
F-12
UNIT CORPORATION AND SUBSIDIARIES
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of June 30, 2002
CDC
Drilling Pro Forma
Unit Company Adjustments
Corporation Combined (Note 3) Pro Forma
---------- ---------- ---------- ----------
(In thousands)
Assets:
- -------
Current Assets:
Cash and cash equivalents $ 1,458 $ - $ - $ 1,458
Accounts receivable 27,817 10,602 (10,602) (a) 27,817
Notes Receivable - 100 (100) (a) -
Materials and supplies 6,908 - - 6,908
Income tax receivable - 1,925 (1,925) (a) -
Other 3,745 1,236 (1,236) (a) 3,745
---------- ---------- ---------- ----------
Total current assets 39,928 13,863 (13,863) 39,928
---------- ---------- ---------- ----------
Property and Equipment:
Total cost 691,425 86,863 30,267 (b) 808,555
Less accumulated
depreciation, depletion,
amortization and
impairment 321,123 23,193 (23,193) (b) 321,123
---------- ---------- ---------- ----------
Net property and
equipment 370,302 63,670 53,460 487,432
---------- ---------- ---------- ----------
Other Assets 8,261 - 9,861 (b) 18,122
---------- ---------- ---------- ----------
Total Assets $ 418,491 $ 77,533 $ 49,458 $ 545,482
========== ========== ========== ==========
The accompanying notes are an integral part of the pro
forma consolidated condensed financial statements.
P-1
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET - CONTINUED
As of June 30, 2002
CDC
Drilling Pro Forma
Unit Company Adjustments
Corporation Combined (Note 3) Pro Forma
---------- ---------- ---------- ----------
(In thousands)
LIABILITIES AND SHAREHOLDER'S
EQUITY
- -----------------------------
Current Liabilities:
Current portion of
long-term liabilities
and debt $ 1,375 $ - $ - $ 1,375
Accounts payable 16,265 3,184 (3,184) (a) 16,265
Accrued liabilities 9,927 1,316 (1,316) (a) 9,927
Note payable to
shareholder - 29,431 (29,431) (a) -
---------- ---------- ---------- ----------
Total current
liabilities 27,567 33,931 (33,931) 27,567
---------- ---------- ---------- ----------
Long-Term Debt 20,000 - 4,500 (c) 24,500
---------- ---------- ---------- ----------
Other Long-Term Liabilities 4,364 - - 4,364
---------- ---------- ---------- ----------
Deferred Income Taxes 78,381 5,761 (5,761) (a) 78,381
---------- ---------- ---------- ----------
Shareholder's Equity:
Preferred stock, $1.00 par
value, 5,000,000 shares
authorized, none issued - - - -
Common stock $.20 par
value, 75,000,000 shares
authorized, 36,114,300
and 43,334,300 (pro
forma) shares issued and
outstanding, respectively 7,223 1 1,443 (d) 8,667
Capital in excess of par
value 142,926 33,439 87,608 (d) 263,973
Retained earnings 138,030 4,401 (4,401) (a) 138,030
---------- ---------- ---------- ----------
Total shareholder's
equity 288,179 37,841 84,650 410,670
---------- ---------- ---------- ----------
Total Liabilities and
Shareholder's Equity $ 418,491 $ 77,533 $ 49,458 $ 545,482
========== ========== ========== ==========
The accompanying notes are an integral part of the
pro forma consolidated condensed financial statements.
P-2
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2001
CDC
Drilling
Company Pro Forma
Unit Combined Adjustments
Corporation (Note 2) (Note 3) Pro Forma
---------- ---------- ---------- ----------
(In thousands except per share amounts)
Revenues:
Contract drilling $ 167,042 $ 51,878 $ - $ 218,920
Oil and natural gas 90,237 - - 90,237
Other 1,900 47 - 1,947
---------- ---------- ---------- ----------
Total revenues 259,179 51,925 - 311,104
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 91,006 31,896 1,735 (f) 124,637
Depreciation and
amortization 13,888 5,611 233 (e) 19,732
Oil and natural gas:
Operating costs 22,196 - - 22,196
Depreciation,
depletion
and amortization 22,116 - - 22,116
General and administrative 8,476 2,105 (2,105) (f) 8,476
Interest 2,818 264 (12) (g) 3,070
---------- ---------- ---------- ----------
Total expenses 160,500 39,876 (149) 200,227
---------- ---------- ---------- ----------
Income Before Income Taxes 98,679 12,049 149 110,877
---------- ---------- ---------- ----------
Income Tax Expense 35,913 4,450 57 (h) 40,420
---------- ---------- ---------- ----------
Net Income $ 62,766 $ 7,599 $ 92 $ 70,457
========== ========== ========== ==========
Net Income Per Common
Share (Note 4):
Basic $ 1.75 $ 1.63
========== ==========
Diluted $ 1.73 $ 1.62
========== ==========
The accompanying notes are an integral part of the pro
forma consolidated condensed financial statements.
P-3
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2002
CDC
Drilling
Company Pro Forma
Unit Combined Adjustments
Corporation (Note 2) (Note 3) Pro Forma
---------- ---------- ---------- ----------
(In thousands except per share amounts)
Revenues:
Contract drilling $ 52,555 $ 22,329 $ - $ 74,884
Oil and natural gas 30,629 - - 30,629
Other 299 240 - 539
---------- ---------- ---------- ----------
Total revenues 83,483 22,569 - 106,052
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 39,269 18,683 2,889 (f) 60,841
Depreciation 5,739 4,249 (944) (e) 9,044
Oil and natural gas:
Operating costs 10,109 - - 10,109
Depreciation,
depletion
and amortization 11,257 - - 11,257
General and administrative 4,042 3,088 (3,088) (f) 4,042
Interest 516 360 (293) (g) 583
---------- ---------- ---------- ----------
Total expenses 70,932 26,380 (1,436) 95,876
---------- ---------- ---------- ----------
Income (Loss) Before Income
Taxes 12,551 (3,811) 1,436 10,176
---------- ---------- ---------- ----------
Income Tax Expense (Benefit) 4,801 (1,414) 546 (h) 3,933
---------- ---------- ---------- ----------
Net Income (Loss) $ 7,750 $ (2,397) $ 890 $ 6,243
========== ========== ========== ==========
Net Income Per Common
Share (Note 4):
Basic $ 0.21 $ 0.14
========== ==========
Diluted $ 0.21 $ 0.14
========== ==========
The accompanying notes are an integral part of the pro
forma consolidated condensed financial statements.
P-4
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - THE ACQUISITION
- ------------------------
On August 15, 2002, Unit Corporation completed the acquisition of CREC Rig
Acquisition Company LLC and CDC Drilling Company (combined "CDC"). Both of the
acquisitions were stock purchase transactions. Under the terms of these
transactions (the "CDC Acquisition"), Unit issued 6,819,748 shares of common
stock and paid $3,813,053 for all the outstanding shares of CREC Rig Acquisition
Company LLC and issued 400,252 shares of common stock and paid $686,947 for all
the outstanding shares of CDC Drilling Company. The consideration paid in both
transactions was determined through arms-length negotiations between the
parties.
The calculation and allocation of the total consideration paid for the
acquisition are as follows (in thousands):
Calculation of Consideration Paid:
Unit Corporation common stock
(7,220,000 shares at $16.96556 per share) $ 122,491
Cash 4,500
----------
Total consideration $ 126,991
==========
Allocation of Total Consideration Paid:
Equipment $ 117,130
Goodwill 9,861
----------
Total consideration $ 126,991
==========
P-5
NOTE 2 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited Pro Forma Consolidated Condensed Financial
Statements are presented to reflect the consummation of the CDC Acquisition. The
unaudited Pro Forma Consolidated Condensed Balance Sheet is presented as if the
acquisition, accounted for under the purchase method, occurred as of June 30,
2002. The unaudited Pro Forma Consolidated Condensed Statements of Operations
are presented as if the acquisition occurred on January 1, 2001 and may not be
indicative of the results that would have occurred if the acquisition had been
effective on the dates indicated or of the results that may be obtained in the
future. Since CDC had a fiscal year end of June 30, CDC's Combined results of
operations for the six months ended June 30, 2002 and the twelve months ended
December 31, 2001 were derived from unaudited information for the six months
ended June 30, 2002 and the combined six month periods ending June 30, 2001 and
December 31, 2001, respectively. The accompanying pro forma financial statements
should be read in conjunction with the historical financial statements and notes
to financial statements of both Unit Corporation and CDC Drilling Company.
NOTE 3 - PRO FORMA ADJUSTMENTS
- ------------------------------
The accompanying unaudited Pro Forma Consolidated Condensed Financial
Statements include the following adjustments:
(a) Adjustments to remove certain assets, liabilities and shareholder's
equity of CDC at June 30, 2002, which were not acquired by Unit
Corporation.
(b) Property and equipment was adjusted to the fair market value
of the assets acquired from CDC of $117,130,000, which was derived
from an independent appraisal, and other assets was increased
$9,861,000 for goodwill.
(c) Increase in long-term debt for the additional liability incurred
for payment of $4.5 million cash.
(d) Adjustments to common stock and additional paid in capital
represent the issuance of 7,220,000 shares of common stock to the
sellers. The 7,220,000 shares were valued at $16.96556 per share.
The stock was valued using the average of the closing prices for
the period beginning 4 days before to 4 days after the acquisition
announcement date of March 21, 2002.
P-6
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
(e) Adjustment provides depreciation expense computed on the
$117,130,000 fair market value of the acquired assets.
Depreciation and amortization of drilling equipment was calculated
using the units-of-production method based on a useful life of 15
years for the acquired rigs, including a minimum provision of 20
percent of the active depreciation rate when the equipment is
idle. Depreciation for drill pipe and drill collars was calculated
using the composite method, which calculates depreciation by
footage actually drilled compared to total estimated remaining
footage. Depreciation of other property and equipment was computed
using the straight-line method over the estimated useful lives of
the assets ranging from 3 to 10 years.
(f) Adjustments were made to reduce general and administrative expense
for amounts CDC was billed for services provided by Kaiser-Francis
for management and administrative functions, including accounting,
data processing and human resources administration. Employees
already working in the same capacity for Unit's existing rig fleet
will provide these services. The remaining directly related
general and administrative expense was reclassified to drilling
operating expense to conform with Unit Corporation's financial
statements.
(g) Interest expense was adjusted to reflect the interest on the $4.5
million in additional long-term debt incurred in the acquisition
less the debt on note payable to shareholder.
(h) The adjustment to income tax expense represents the increase in
taxes associated with the pro forma adjustments based on the
statutory (federal and state) tax rate.
P-7
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
NOTE 4 - NET INCOME PER COMMON SHARE
- ------------------------------------
The following data shows the amounts used in computing earnings per share.
For the Year Ended
December 31, 2001
---------------------------------------------
WEIGHTED
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ------------- ------------
Basic Earnings per
Common Share $ 62,766,000 35,967,000
Effect of Pro Forma
Adjustments 7,691,000 7,220,000
-------------- -------------
Basic Pro Forma
Earnings per
Common Share 70,457,000 43,187,000 $ 1.63
============
Effect of Dilutive
Stock Options - 291,000
-------------- -------------
Diluted Pro Forma
Earnings per
Common Share $ 70,457,000 43,478,000 $ 1.62
============== ============= ============
Options to purchase 153,000 shares of common stock at an average price of
$16.79 were excluded from the computation of diluted pro forma earnings per
share because the option exercise prices were greater than the average market
price on common shares for the year ended December 31, 2001.
P-8
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
For the Six Months Ended
June 30, 2002
-------------------------------------------
WEIGHTED
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ------------- ------------
Basic Earnings per
Common Share $ 7,750,000 36,072,000
Effect of Pro Forma
Adjustments (1,507,000) 7,220,000
-------------- -------------
Basic Pro Forma
Earnings per Common
Share 6,243,000 43,292,000 $ 0.14
============
Effect of Dilutive
Stock Options - 264,000
-------------- -------------
Diluted Pro Forma
Earnings per
Common Share $ 6,243,000 43,556,000 $ 0.14
============== ============= ============
Options to purchase 174,000 shares of common stock at an average price of
$17.19 were excluded from the computation of diluted pro forma earnings per
share because the option exercise prices were greater than the average market
price on common shares for the six months ended June 30, 2002.
P-9
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 hereunto duly authorized.
UNIT CORPORATION
Dated: September 20, 2002 By: /s/ LARRY D. PINKSTON
----------------------------
Larry D. Pinkston
Chief Financial Officer
Treasurer and
Vice President
P-10
(c) Exhibits
Exhibit Number Description of Exhibits
-----------------------
23.1 -- Consent of Independent Auditors
P-11