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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
________________________________
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 1-8097
ENSCO INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 76-0232579
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2792
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 922-1500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------- -----------------------------------------
Common Stock, par value $.10 New York Stock Exchange
Preferred Share Purchase Right New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of February 20, 1996, 60,656,735 shares of the registrant's common stock
were outstanding. The aggregate market value of the common stock (based
upon the closing price on the New York Stock Exchange on February 20, 1996
of $26.375) of ENSCO International Incorporated held by nonaffiliates of
the registrant at that date was approximately $1,132,454,065.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company's definitive proxy statement, which
involves the election of directors and is to be filed under the Securities
Exchange Act of 1934 within 120 days of the end of the Company's fiscal
year on December 31, 1995, are incorporated by reference into Part III
hereof. Except for those portions specifically incorporated by reference
herein, such document shall not be deemed to be filed with the Commission
as part of this Form 10-K.
PART II
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Board of Directors and Stockholders of ENSCO International Incorporated
In our opinion, based upon our audits and the report of other auditors,
the accompanying consolidated balance sheet and the related consolidated
statements of income and of cash flows present fairly, in all material
respects, the financial position of ENSCO International Incorporated and
its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. 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 audits. We did not audit the financial
statements of the Company's Venezuelan operations for the year ended
December 31, 1993, which statements reflect total revenues of $28,970,000
for the year then ended. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for the Company's
Venezuelan operations, is based solely on the report of the other auditors.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits and report of other
auditors provide a reasonable basis for the opinion expressed above.
As discussed in Note 10, in 1993 the Company changed its method of
accounting for postretirement benefits other than pensions.
/s/ PRICE WATERHOUSE
- -------------------------
Dallas, Texas
February 2, 1996
_____________________________________________________________________________
To the Stockholders of ENSCO Drilling Venezuela, Inc. (Venezuelan Branch):
We have examined the statements of income and deficit and cash flows
(not presented separately herein) of ENSCO DRILLING VENEZUELA, INC.
(Venezuelan Branch) for the period from March 15, 1993 (start-up of
operations) to December 31, 1993. Our examination was made in accordance
with generally accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
As indicated in the note 2-a, on August 9, 1991, the Venezeulan
Federation of Public Accountants issued Statement of Accounting Principles
No. 10 which establishes the norms for the preparation of financial
statements adjusted for the effects of inflation. This statement is
applicable to the years beginning after December 31, 1992. Company
Management has decided not to present the supplementary financial state-
ments adjusted for the effects of inflation for the period ended December
31, 1993, which is a requirement according to the aforementioned statement.
In our opinion, except for the matter mentioned in the preceding
paragraph, the statements of income and deficit and cash flows referred to
above present fairly the results of operations and cash flows of ENSCO
DRILLING VENEZUELA, INC. (Venezuelan Branch) for the period from March 15,
1993 (start-up of operations) to December 31, 1993, in conformity with
generally accepted accounting principles in Venezuela.
KRYGIER, MONTILLA & ASOCIADOS
/s/ JOSE G. MOROS H.
- -----------------------------
Jose G. Moros H.
C.P.C. No. 8203
February 18, 1994
____________________________________________________________________________
To the Stockholders of ENSCO Drilling (Caribbean), Inc. (Venezuelan Branch):
We have examined the statements of income and deficit and cash flows
(not presented separately herein) of ENSCO DRILLING (CARIBBEAN), INC.
(Venezuelan Branch) for the year ended December 31, 1993. Our examination
was made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
As indicated in the note 2-a, on August 9, 1991, the Venezuelan
Federation of Public Accountants issued Statement of Accounting Principles
No. 10 which establishes the norms for the preparation of financial state-
ments adjusted for the effects of inflation. This statement is applicable
to the years beginning after December 31, 1992. Company Management has
decided not to present the supplementary financial statements adjusted for
the effects of inflation for the year ended December 31, 1993, which is a
requirement according to the aforementioned statement.
In our opinion, except for the matter mentioned in the preceding
paragraph, the statements of income and deficit and cash flows referred
to above present fairly the results of operations and cash flows of ENSCO
DRILLING (CARIBBEAN), INC. (Venezuelan Branch) for the year ended December
31, 1993, in conformity with generally accepted accounting principles in
Venezuela applied on a consistent basis.
KRYGIER, MONTILLA & ASOCIADOS
/s/ JOSE G. MOROS H.
- -----------------------------
Jose G. Moros H.
C.P.C. No. 8203
February 18, 1994
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except for share amounts)
December 31,
-------------------
1995 1994
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . $ 77,064 $147,851
Short-term investments . . . . . . . . . . . . 5,000 5,869
Accounts and notes receivable, net . . . . . . 60,796 36,479
Prepaid expenses and other . . . . . . . . . . 22,893 17,593
Net assets of discontinued operations . . . . . -- 7,862
Total current assets . . . . . . . . . . . . 165,753 215,654
INVESTMENT IN EQUITY AFFILIATE . . . . . . . . . -- 6,970
PROPERTY AND EQUIPMENT, AT COST . . . . . . . . . 818,266 652,573
Less accumulated depreciation . . . . . . . . . 185,334 129,129
Property and equipment, net . . . . . . . . . 632,932 523,444
OTHER ASSETS . . . . . . . . . . . . . . . . . . 22,766 27,022
$821,451 $773,090
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . $ 8,936 $ 12,509
Accrued liabilities . . . . . . . . . . . . . . 45,820 33,223
Current maturities of long-term debt . . . . . 32,052 40,750
Total current liabilities . . . . . . . . . . 86,808 86,482
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 159,201 162,466
DEFERRED INCOME TAXES . . . . . . . . . . . . . . 26,800 22,989
OTHER LIABILITIES . . . . . . . . . . . . . . . . 17,393 13,203
COMMITMENTS AND CONTINGENCIES . . . . . . . . . .
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 125.0 million
shares authorized, 66.9 million and 66.6
million shares issued . . . . . . . . . . . . 6,689 6,657
Additional paid-in capital . . . . . . . . . . 615,644 612,318
Accumulated deficit . . . . . . . . . . . . . (23,598) (71,657)
Restricted stock (unearned compensation) . . . (5,263) (5,518)
Cumulative translation adjustment . . . . . . . (1,086) (1,210)
Treasury stock at cost, 6.3 million and 5.6
million shares . . . . . . . . . . . . . . . (61,137) (52,640)
Total stockholders' equity . . . . . . . . 531,249 487,950
$821,451 $773,090
======== ========
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
Year Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
REVENUES
Contract drilling . . . . . . . . . . $240,775 $207,781 $192,120
Marine transportation . . . . . . . . 38,339 37,670 35,290
279,114 245,451 227,410
OPERATING EXPENSES
Contract drilling . . . . . . . . . . 132,558 110,224 114,624
Marine transportation . . . . . . . . 23,402 25,105 24,832
Depreciation and amortization . . . . 58,390 51,798 41,181
General and administrative . . . . . . 9,569 9,252 11,726
223,919 196,379 192,363
OPERATING INCOME . . . . . . . . . . . . 55,195 49,072 35,047
OTHER INCOME (EXPENSE)
Interest income . . . . . . . . . . . 6,310 5,252 2,816
Interest expense . . . . . . . . . . . (16,564) (13,377) (9,917)
Income from equity affiliates . . . . 200 607 432
Other, net . . . . . . . . . . . . . . 2,198 (1,233) (27)
(7,856) (8,751) (6,696)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE . . . . . . . . . . . . . . . 47,339 40,321 28,351
PROVISION FOR INCOME TAXES . . . . . . . (3,397) (3,759) (5,942)
MINORITY INTEREST . . . . . . . . . . . (2,179) (2,984) (6,932)
INCOME FROM CONTINUING OPERATIONS . . . . 41,763 33,578 15,477
INCOME FROM DISCONTINUED OPERATIONS . . 6,296 3,593 3,556
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE . . . . . . . . . . 48,059 37,171 19,033
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF MINORITY INTEREST . . . . . . -- -- (2,542)
NET INCOME . . . . . . . . . . . . . . . 48,059 37,171 16,491
PREFERRED STOCK DIVIDEND REQUIREMENTS . -- (2,135) (4,260)
INCOME APPLICABLE TO COMMON STOCK . . . . $ 48,059 $ 35,036 $ 12,231
INCOME PER COMMON SHARE:
Continuing operations . . . . . . . . $ .69 $ .55 $ .28
Discontinued operations . . . . . . . .10 .06 .09
Cumulative effect of accounting change -- -- (.07)
$ .79 $ .61 $ .30
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . 60,527 57,843 40,325
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
------------------------------------------
1995 1994 1993
-------- -------- --------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,059 $ 37,171 $ 16,491
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 58,390 51,798 27,556
Deferred income tax provision (benefit) . . . . . . . . . . . . (431) (878) 3,199
Amortization of other assets . . . . . . . . . . . . . . . . . . 3,383 3,205 2,627
Gain on sale of discontinued operations . . . . . . . . . . . . (5,161) -- (2,122)
Net cash provided by discontinued operations . . . . . . . . . . 135 2,859 3,626
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,221) 2,689 1,422
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . . . . . (23,438) 11,964 13,851
(Increase) decrease in prepaid expenses and other . . . . . . 4,314 (7,546) (2,113)
Increase (decrease) in accounts payable . . . . . . . . . . . (3,834) 5,287 (1,781)
Increase (decrease) in accrued and other liabilities . . . . 4,369 2,668 (6,366)
Net cash provided by operating activities . . . . . . . . 84,565 109,217 56,390
INVESTING ACTIVITIES
Additions to property and equipment . . . . . . . . . . . . . . . . (143,230) (150,358) (81,796)
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . -- -- 36,819
Net proceeds from sales of discontinued operations . . . . . . . . . 11,790 652 12,275
(Purchase) sale of short-term investments, net . . . . . . . . . . . 869 (5,869) --
Proceeds from disposition of assets . . . . . . . . . . . . . . . . 1,125 23,160 372
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,383) (1,835) (4,889)
Net cash used by investing activities . . . . . . . . . . (131,829) (134,250) (37,219)
FINANCING ACTIVITIES
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . 24,043 114,698 159,113
Reduction of long-term borrowings . . . . . . . . . . . . . . . . . (40,749) (64,641) (72,364)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . (7,211) (2,426) --
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . -- (2,135) (4,260)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 (668) 921
Net cash provided (used) by financing activities . . . . . (23,523) 44,828 83,410
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,787) 19,795 102,581
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . . . . . 147,851 128,056 25,475
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . . . . . $ 77,064 $147,851 $128,056
The accompanying notes are an integral part of these financial statements.
ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
ORGANIZATION AND BASIS OF PRESENTATION
ENSCO International Incorporated (the "Company"), a Delaware
corporation, was incorporated in August 1987, and is the successor by
merger to Blocker Energy Corporation. At the Company's Annual Meeting of
Stockholders held on May 23, 1995, the stockholders approved the change in
the name of the Company from Energy Service Company, Inc. to ENSCO
International Incorporated. The accompanying consolidated financial
statements include the accounts of the Company and its majority owned
subsidiaries. The Company's investments in 50% or less owned affiliates
are accounted for under the equity method. See Note 4 "Investment in
Equity Affiliate." All significant intercompany accounts and transactions
have been eliminated.
In August 1993, the Company completed the step acquisition (the
"Penrod Acquisition") of Penrod Holding Corporation ("Penrod"). See Note
2 "Acquisition." The Company has included the income from continuing
operations of Penrod in its consolidated statement of income beginning
January 1, 1993 and has presented the preacquisition earnings related to
the 64% of Penrod which it did not own prior to August 1993 as Minority
Interest.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company's consolidated statement of cash flows for the year ended
December 31, 1993 includes the cash and cash equivalents acquired in the
Penrod Acquisition, net of acquisition costs, plus the cash provided by
operating activities of Penrod subsequent to the Penrod Acquisition. The
cash flows from investing and financing activities of Penrod subsequent to
the Penrod Acquisition, including additions to property and equipment,
long-term borrowings, and repayments of long-term borrowings, are also
included in the Company's consolidated statement of cash flows for the year
ended December 31, 1993. The cash provided by operating activities of
Penrod prior to the Penrod Acquisition and the cash flows from investing
and financing activities of Penrod prior to the Penrod Acquisition have not
been included in the Company's consolidated statement of cash flows for the
year ended December 31, 1993.
For purposes of the consolidated balance sheet and statement of cash
flows, the Company considers highly liquid debt instruments to be cash
equivalents if they have maturities of three months or less at the date of
purchase.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of the majority of the
Company's foreign subsidiaries. The financial statements of these
subsidiaries, as well as the financial statements of certain foreign
subsidiaries that operate in highly inflationary economies, are remeasured
in U.S. dollars based on a combination of both current and historical
exchange rates. Gains and losses caused by the remeasurement process
applicable to these foreign subsidiaries are reflected in the consolidated
statement of income. Translation losses were $422,000, $1.3 million and
$1.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
SHORT-TERM INVESTMENTS
Short-term investments are comprised of debt instruments having
maturities of greater than three months and less than one year at the date
of purchase and are stated at cost due to the Company's intent and ability
to hold the investments to maturity. The aggregate fair value of short-
term investments at December 31, 1995 approximates cost. As of December
31, 1995, short-term investments consisted of debt instruments issued by U.
S. government agencies.
PROPERTY AND EQUIPMENT
Depreciation on drilling rigs and related equipment and marine vessels
acquired after 1990 is computed using the straight line method over
estimated useful lives ranging from 4 to 15 years. Depreciation for other
equipment and for buildings and improvements is computed using the straight
line method over estimated useful lives ranging from 2 to 6 years and 2 to
30 years, respectively. Depreciation on drilling rigs and related
equipment and marine vessels acquired prior to 1991 is computed using the
units-of-production method over estimated useful lives ranging from 10 to
15 years. Under the units-of-production method, depreciation is based on
the utilization of the drilling rigs and vessels with a minimum provision
when the rigs or vessels are idle.
In connection with the Company's rig upgrade program in 1995, the
remaining useful lives of certain of the Company's jackup rigs, for which
major enhancements were performed, has been extended to twelve years from
the time each respective rig left the shipyard to better reflect their
remaining economic lives. The effect of this change in estimate was to
increase net income for the year ended December 31, 1995 by $892,000, or
$.01 per share.
Maintenance and repair costs are charged to expense as incurred.
Major renewals and improvements are capitalized. Upon retirement or
replacement of assets, the related cost and accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in
income.
GOODWILL
Goodwill arising from the acquisition of Penrod in 1993 and Argosy
Offshore, Ltd. in 1991 is amortized on the straight-line basis over periods
of 40 years and 10 years, respectively. See Note 2 "Acquisition." During
1995, goodwill from the Penrod Acquisition was reduced primarily for
adjustments to deferred taxes. See Note 11 "Income Taxes." Goodwill, net
of accumulated amortization, was $7.3 million and $21.2 million at December
31, 1995 and 1994, respectively, and is included in Other Assets.
IMPAIRMENT OF ASSETS
In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," which did not
have an impact upon the Company. As required, the Company evaluates the
realizability of its long-lived assets, including property and equipment
and goodwill, based upon expectations of undiscounted cash flows and
operating income.
INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes," the
effects of which were applied retroactively to the beginning of 1990. SFAS
No. 109 requires the Company to compute deferred income taxes based upon
the amount of taxes payable in future years after considering changes in
tax rates and other statutory provisions that will be in effect in those
years. The provision for income taxes includes federal, foreign, state and
local income taxes currently payable and those deferred because of
temporary differences between the financial statement and tax bases of
assets and liabilities. See Note 11 "Income Taxes."
MINORITY INTEREST
ENSCO Drilling (Caribbean), Inc. ("Caribbean") has been included in
the Company's consolidated financial statements for all years presented.
In March 1995, the Company purchased an additional 15% equity interest in
Caribbean from the minority shareholder. The purchase, which was effective
January 1, 1995, increased the Company's ownership interest in Caribbean
from 70% to 85%. In consideration for the additional 15% interest in
Caribbean acquired, the Company makes payments to the minority shareholder
that are based upon, in general, the utilization of existing Caribbean
rigs. In addition, in the event of a future sale of any rigs currently
owned by Caribbean, the minority shareholder is entitled to an additional
15% of the net proceeds upon sale. The minority shareholders' interest
included in the Company's consolidated balance sheet at December 31, 1995
and 1994 was $5.2 million and $4.1 million, respectively, and is included
in Other Liabilities.
The Company's consolidated financial statements include Penrod, which
was a 36% owned affiliate prior to the Company's acquisition of the
remaining interest in August 1993. See Note 2 "Acquisition." Minority
interest expense for the year ended December 31, 1993 included $4.5 million
related to the preacquisition earnings of Penrod.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results
could differ from those estimates.
INCOME PER COMMON SHARE
Income per common share has been computed based on the weighted
average number of common shares outstanding during the applicable period
after recognition of minority interest charges and preferred stock dividend
requirements. All weighted average share and per share amounts have been
restated to reflect the one share for four shares reverse stock split
("reverse stock split") which was effective June 1, 1994. See Note 8
"Stockholders' Equity."
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform
to the 1995 presentation.
2. ACQUISITION
-----------
In August 1993, the Company acquired the remaining 64% of the common
stock of Penrod not then beneficially owned by the Company. In exchange
for the common stock of Penrod, the Company issued 25.5 million net shares
(102.1 million net shares prior to the reverse stock split) of its common
stock valued at approximately $227.9 million. The exchange was based upon
one common share of the Company's common stock (after the reverse stock
split) for each share of Penrod common stock.
The Company accounted for the Penrod Acquisition, under the rules of
purchase accounting, as a step acquisition. Under a step acquisition, the
acquiring company purchases its controlling interest in the acquired
company through a series of transactions at different time intervals. A
partial step-up or step-down in basis of the acquired company's assets is
recognized in the consolidated financial statements of the acquirer each
time an additional interest is acquired. The purchase by the Company of
the remaining 64% of Penrod was recorded at the price paid at the time of
purchase, while the prior 36% ownership of Penrod obtained by the Company
in prior transactions remained at historical cost.
3. PROPERTY AND EQUIPMENT
----------------------
Property and equipment at December 31, 1995 and 1994 consisted of the
following (in thousands):
1995 1994
-------- --------
Drilling rigs and equipment . . $713,311 $562,722
Marine vessels . . . . . . . . . 77,795 66,729
Other . . . . . . . . . . . . . 11,154 9,871
Work in progress . . . . . . . . 16,006 13,251
-------- --------
$818,266 $652,573
======== ========
In March 1995, the Company purchased a jackup rig located in the North
Sea and simultaneously entered into a bareboat charter agreement with the
seller, which is expected to terminate in February 1996. The purchase
price consisted of $12.8 million paid at closing and an additional $13.0
million to be paid at the end of the bareboat charter period.
In November 1995, the Company purchased the remaining 50% interest in
a jackup rig from its joint venture partner in Mexico. See Note 4
"Investment in Equity Affiliate." In December 1995, the Company purchased
six supply vessels in two separate transactions for aggregate consideration
of $8.8 million. Four of the supply vessels acquired were previously
operated under operating lease agreements. See Note 5 "Leases." The
Company's additions to property and equipment for the year ended December
31, 1995 also included $109.7 million in connection with major
modifications and enhancements of rigs and vessels.
In February 1994, the Company purchased two jackup rigs located in the
North Sea and simultaneously entered into bareboat charter agreements with
the seller, which were terminated on December 31, 1994. The purchase price
consisted of $50.0 million paid at closing, $4.2 million which was credited
against the bareboat charter payments during the fourth quarter of 1994 and
$1.8 million paid in December 1994 upon termination of the bareboat charter
contracts.
The Company's additions to property and equipment for the years ended
December 31, 1994 and 1993 included $62.2 million and $65.7 million,
respectively, in connection with the construction of eight barge drilling
rigs, of which four were delivered to Venezuela in March through June of
1993 and the remaining four were delivered to Venezuela in July through
September of 1994. The rigs immediately commenced operations under five-
year drilling contracts with Lagoven, S.A. ("Lagoven"), an affiliate of the
Venezuelan national oil company. The contracts afford Lagoven the option
to buy the barge drilling rigs during or at the end of the five-year
contracts.
In November and December of 1994, the Company sold three of its land
rigs and related equipment located in the Middle East for $7.5 million. In
June 1994, the Company completed the sale of its United States land rig
operations consisting of twelve land rigs and related equipment, as well as
an office building and yard, for $15.5 million, consisting of cash, a
promissory note and receivables. No significant gains or losses resulted
from the 1994 land rig sales. In November 1993, the Company transferred
three inactive land rigs to work in progress in connection with the
construction of four barge drilling rigs which began operating in July
through September of 1994 in Venezuela. The rigs had a net book value of
$6.8 million at the date of transfer to work in progress.
4. INVESTMENT IN EQUITY AFFILIATE
------------------------------
Investment in equity affiliate at December 31, 1994 consisted
primarily of the Company's 50% interest in a joint venture that owned a
jackup rig operating in the territorial waters of Mexico. In November
1995, the joint venture was effectively dissolved and the Company purchased
the joint venture partner's interest in the jackup rig for total
consideration of $4.2 million. The Company's investment in the joint
venture of $6.6 million, at the date of the purchase, was reclassified to
property and equipment in the Company's consolidated balance sheet. For
the years ended December 31, 1995, 1994 and 1993, the Company recorded
income of $200,000, $700,000 and $561,000, respectively, in Income from
Equity Affiliates from its beneficial ownership in the joint venture. The
Company received distributions from the joint venture of $425,000 in 1995
and $2.2 million in 1994, of which $1.1 million of the 1994 distribution
represented a return of capital. No distributions were received from the
joint venture in 1993.
5. LEASES
------
The Company is obligated under leases for certain of its offices and
equipment. In December 1995, the Company purchased four supply vessels
which were previously operated pursuant to ten-year operating lease
agreements. See Note 3 "Property and Equipment."
Rental expense relating to operating leases was $3.1 million, $3.3
million and $3.7 million for the years ended December 31, 1995, 1994 and
1993, respectively. Future minimum rental payments under the Company's
noncancellable operating lease obligations having initial or remaining
lease terms in excess of one year are as follows: $2.7 million in 1996;
$2.4 million in 1997; $1.9 million in 1998; $1.3 million in 1999; $680,000
in 2000 and $100,000 thereafter.
6. LONG-TERM DEBT
--------------
Long-term debt at December 31, 1995 and 1994 consists of the following
(in thousands):
1995 1994
-------- --------
Secured term loans
(non-recourse to the Company) . . . $102,709 $127,799
Secured term loans . . . . . . . . . . . 88,544 75,417
-------- --------
191,253 203,216
Less current maturities . . . . . . . . (32,052) (40,750)
-------- --------
Total long-term debt . . . . . . . . . . $159,201 $162,466
======== ========
A subsidiary of the Company entered into two financing arrangements,
totalling $143.0 million, with a subsidiary of a Japanese corporation in
connection with the construction of eight barge drilling rigs delivered to
Venezuela in 1993 and 1994. The financing arrangements consist of eight
secured term loans, one for each barge drilling rig. The eight secured
term loans bear interest at an average fixed rate of 8.17% and are each
repayable in 60 equal monthly installments of principal and interest ending
in mid-1998 through the first part of 2000. The term loans are each
secured by a specific barge drilling rig, which had a combined net book
value of $124.2 million at December 31, 1995, and the charter contract on
each rig. The secured term loans are expected to be repaid from the cash
flow generated by the eight barge drilling rigs and are without recourse to
the Company.
In September 1995, the Company amended and restated its original
$100.0 million loan arrangement, which consisted of a $60.0 million secured
term loan and a $40.0 million revolving line of credit, with a group of
large international banks. The amended and restated facility is structured
as a $130.0 million, six year, revolving credit facility ("Facility"), of
which $66.0 million was drawn as of December 31, 1995. The Company incurs
a 0.5% annual commitment fee on the undrawn portion of the Facility.
Availability under the Facility is reduced by $6.0 million on a semi-annual
basis with the remaining outstanding balance due in October 2001. The
Facility carries a floating interest rate tied to London InterBank Offered
Rates ("LIBOR") for which the margin on the Facility may increase by up to
0.5% based upon the Company's debt ratio. As of December 31, 1995, the
interest rate on the Facility was 7.16% per annum. The Company has entered
into interest rate swap agreements with two of the lender banks that
effectively change the interest rate on $32.0 million of the outstanding
Facility from a floating rate to a fixed rate of 7.48%, absent any increase
in the margin level of the Facility associated with the Company's debt
ratio, through October 2000. In January 1996, the Company entered into
another interest rate swap agreement, effective April 1996, with one of
the lender banks that effectively changes the interest rate on an
additional $16.0 million of the outstanding Facility from a floating rate
to a fixed rate of 6.84%, absent any increase in the margin level of the
Facility associated with the Company's debt ratio, through October 2000.
The Facility is collateralized by certain of the Company's jackup rigs,
which had a combined net book value of $278.8 million at December 31, 1995.
The facility requires that the Company maintain specified minimum balances
of cash and working capital, maintain certain operating cash flows and not
exceed a certain debt to total asset ratio, and it includes certain
limitations on dividends and requires that the appraised value of the rigs
securing the facility exceed the amount drawn under the facility by a
specified factor.
In October 1993, the Company entered into a $25.0 million loan
agreement with a financial institution. The seven year secured term loan
bears interest at a fixed rate of 7.91% per annum, repayable in 28 equal
quarterly installments ending October 15, 2000. The term loan is
collateralized by certain of the Company's marine transportation vessels
which had a combined net book value of $38.5 million at December 31, 1995.
The loan agreement requires that the Company maintain a specified minimum
tangible net worth and that the Company not exceed a certain ratio of
liabilities to tangible net worth.
In December 1995, in connection with the purchase of four supply
vessels that were previously leased, the Company entered into a $4.7
million loan agreement with the seller. The five year secured term loan
bears interest at a fixed rate of 7.75% per annum, repayable in 20 equal
quarterly installments ending January 2001. The term loan is
collateralized by the four supply vessels purchased which had a combined
net book value of $4.5 million at December 31, 1995.
In March 1994, the Company redeemed its convertible subordinated
debentures consisting of $5.1 million principal amount of 8.25% convertible
subordinated debentures.
The Company maintains legally restricted cash balances with a bank as
collateral for a letter of credit issued by the bank related to an
insurance arrangement. These restricted cash balances aggregated $1.3
million at December 31, 1995 and are included in prepaid expenses and
other.
Maturities of long-term debt are as follows: $32.1 million in 1996;
$34.7 million in 1997; $29.5 million in 1998; $23.3 million in 1999; $5.5
million in 2000 and $66.2 million thereafter.
7. PREFERRED STOCK
---------------
In August 1994, the Company issued a redemption notice for the
2,839,110 outstanding shares of its $1.50 Cumulative Convertible
Exchangeable Preferred Stock ("$1.50 Preferred Stock"), which was also the
number of shares outstanding at December 31, 1993. Holders of 2,807,147
shares of the $1.50 Preferred Stock elected to convert each of their shares
into approximately 1.786 shares of the Company's common stock. Such
conversion resulted in the issuance of 5,012,762 shares of the Company's
common stock. Holders of the remaining 31,963 shares of the $1.50
Preferred Stock elected to redeem their shares which resulted in a cash
payment of $799,000. Dividends on the $1.50 Preferred Stock were
cumulative and payable quarterly when declared at a rate of $1.50 per annum
per share.
8. STOCKHOLDERS' EQUITY
--------------------
The Company's stockholders approved a one share for four shares
reverse stock split of the Company's common stock at the Company's Annual
Meeting of Stockholders held on May 24, 1994. All references in the
financial statements to weighted average common shares outstanding, income
per common share amounts and the 1994 share amounts in the table below have
been restated to reflect the reverse stock split. The aggregate par value
of the Company's common stock was reduced and additional paid-in capital
was increased to reflect the decreased aggregate par value of the Company's
common stock outstanding subsequent to the reverse stock split.
In December 1994, the Company's Board of Directors authorized the
repurchase of up to $50.0 million of the Company's common stock. As of
December 31, 1995, the Company had repurchased 800,800 shares of its common
stock, of which 201,400 were repurchased in December 1994 and 599,400
shares were repurchased in the first half of 1995. No shares were
repurchased in the second half of 1995. Management anticipates that any
future repurchases of the Company's common stock will be funded from the
Company's cash flow from operations and working capital.
At the Company's Annual Meeting of Stockholders held on August 10,
1993, the Company's stockholders approved an increase in the number of
authorized shares of common stock ($.10 par value) of the Company from 62.5
million (250.0 million prior to the reverse stock split) to 125.0 million
(500.0 million prior to the reverse stock split).
In March 1988, in connection with borrowings under a secured loan
facility, the Company issued warrants to purchase 625,000 shares (2.5
million shares prior to the reverse stock split) at prices between $15.00
and $18.00 per share ($3.75 and $4.50 per share prior to the reverse stock
split). The warrants were extinguished in October 1993 at the time the
secured loans were repaid.
A summary of activity in the various stockholders' equity accounts for
each of the three years in the period ended December 31, 1995 is as follows
(in thousands):
RESTRICTED
COMMON STOCK ADDITIONAL STOCK
------------------------ PAID-IN ACCUMULATED (UNEARNED TREASURY
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION) STOCK
--------- --------- --------- ----------- ------------- ---------
(in thousands)
BALANCE, December 31, 1992 122,100 $ 12,210 $259,636 $(118,924) $(6,546) $ (2,634)
Net income -- -- -- 16,491 -- --
Common stock issued under
employee benefits plans, net 437 44 1,026 -- (55) (351)
Common stock issued
in acquisition 122,212 12,221 260,438 -- -- (44,828)
Preferred stock dividends -- -- -- (4,260) -- --
Amortization of unearned
compensation -- -- -- -- 987 --
Reorganization adjustments -- -- 449 -- -- --
Exercise/extinguishment
of options/warrants 248 25 (774) -- -- --
BALANCE, December 31, 1993 244,997 24,500 520,775 (106,693) (5,614) (47,813)
Net income -- -- -- 37,171 -- --
Common stock issued under
employee benefits plans, net 309 31 3,491 -- (941) (2,401)
Preferred stock dividends -- -- -- (2,135) -- --
Amortization of unearned
compensation -- -- -- -- 1,037 --
Conversion of preferred stock 5,013 501 69,677 -- -- --
Repurchase of common stock -- -- -- -- -- (2,426)
Reverse stock split (183,748) (18,375) 18,375 -- -- --
BALANCE, December 31, 1994 66,571 6,657 612,318 (71,657) (5,518) (52,640)
Net income -- -- -- 48,059 -- --
Common stock issued under
employee benefits plans, net 320 32 3,326 -- (857) (1,286)
Repurchase of common stock -- -- -- -- -- (7,211)
Amortization of unearned
compensation -- -- -- -- 1,112 --
BALANCE, December 31, 1995 66,891 $ 6,689 $615,644 $ (23,598) $(5,263) $(61,137)
/TABLE
Foreign currency translation adjustments, which are accumulated as a
separate component of stockholders' equity, result from changes in the
exchange rate of certain foreign subsidiaries which maintain their
financial statements in the local currency. Translation adjustment activity
was insignificant for all years presented.
On February 21, 1995, the Board of Directors of the Company adopted a
shareholder rights plan and declared a dividend of one preferred share
purchase right (a "Right") for each share of the Company's common stock
outstanding on March 6, 1995. Each Right initially entitles its holder to
purchase 1/100th of a share of the Company's Series A Junior Participating
Preferred Stock for $50.00, subject to adjustment. The Rights generally
will not become exercisable until 10 days after a public announcement that
a person or group has acquired 15% or more of the Company's common stock
(thereby becoming an "Acquiring Person") or the commencement of a tender or
exchange offer upon consummation of which such person or group would own
15% or more of the Company's common stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued with all shares of
the Company's common stock issued from March 6, 1995 to the Distribution
Date. Until the Distribution Date, the Rights will be evidenced by the
certificates representing the Company's common stock and will be
transferrable only with the Company's common stock. If any person or group
becomes an Acquiring Person, each Right, other than Rights beneficially
owned by the Acquiring Person (which will thereupon become void), will
thereafter entitle its holder to purchase, at the Right's then current
exercise price, shares of the Company's common stock having a market value
of two times the exercise price of the Right. If, after a person or group
has become an Acquiring Person, the Company is acquired in a merger or
other business combination transaction or 50% or more of its assets or
earning power are sold, each Right (other than Rights owned by an Acquiring
Person which will have become void) will entitle its holder to purchase, at
the Rights then current exercise price, that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent) which at the time of such transaction will have
a market value of two times the exercise price of the Right. After any
person or group has become an Acquiring Person, the Company's Board of
Directors may, under certain circumstances, exchange each Right (other than
Rights of the Acquiring Person) for shares of the Company's common stock
having a value equal to the difference between the market value of the
shares of the Company's common stock receivable upon exercise of the Right
and the exercise price of the Right. The Company will generally be
entitled to redeem the Rights for $.01 per Right at any time until 10 days
after a public announcement that a 15% position has been acquired. The
Rights expire on February 21, 2005.
9. EMPLOYEE BENEFIT PLANS
----------------------
EMPLOYEE STOCK OPTIONS
The Company has an employee stock option plan as part of the ENSCO
Incentive Plan (the "Incentive Plan"). The maximum number of shares with
respect to which awards may be made pursuant to the Incentive Plan is 6.3
million. Of the 6.3 million shares, a minimum of 625,000 are reserved for
issuance of incentive stock grants and a minimum of 625,000 are reserved
for issuance as profit sharing grants.
The exercise price of stock options under the Incentive Plan is the fair
market value of the stock at the date the option is granted. Accordingly,
no compensation expense is recognized by the Company with respect to such
grants. Non-qualified options are generally exercisable one year after
grant. Incentive stock options generally become exercisable in 25%
increments over a four-year period. To the extent not exercised, options
expire generally on the fifth anniversary of the date of grant.
A summary of stock option transactions, restated for the reverse stock
split, under the Incentive Plan is as follows (in thousands, except per
share amounts):
Outstanding December 31, 1992 . . . . . . . 1,046
Granted ($12.00 per share) . . . . . . 310
Exercised ($4.75 to $11.00 per share) (89)
Forfeited . . . . . . . . . . . . . . (192)
Outstanding December 31, 1993 . . . . . . . 1,075
Granted ($15.69 per share) . . . . . . 213
Exercised ($4.75 to $16.00 per share) (244)
Forfeited . . . . . . . . . . . . . . (39)
Outstanding December 31, 1994 . . . . . . . 1,005
Granted ($16.31 per share) . . . . . . 512
Exercised ($4.75 to $15.69 per share) (262)
Forfeited . . . . . . . . . . . . . . (134)
Outstanding December 31, 1995 . . . . . . . 1,121
At December 31, 1995, 377,000 options were exercisable at prices
ranging from $4.75 to $15.69 per share. Under the Incentive Plan, 2.3
million shares were available for grant as options or incentive grants at
December 31, 1995.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," which establishes accounting and
reporting standards for various stock based compensation plans. SFAS No.
123 encourages the adoption of a fair value based method of accounting for
employee stock options, but permits continued application of the accounting
method prescribed by Accounting Principles Board Opinion No. 25 ("Opinion
25"), "Accounting for Stock Issued to Employees." Entities that continue
to apply the provisions of Opinion 25 must make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting had been applied. The Company will adopt SFAS No. 123 in 1996
and currently expects to continue to account for its employee stock options
in accordance with the provisions of Opinion 25.
INCENTIVE STOCK GRANTS
Key employees, who are in a position to contribute materially to the
Company's growth and development and to its long-term success, are eligible
for incentive stock grants under the Incentive Plan through February 8,
1998. Shares of common stock subject to incentive grants shall vest on
such a basis as determined by a committee of the Board of Directors.
Through 1995, incentive stock grants for 1.2 million shares of common stock
were granted, of which 637,250 were vested at December 31, 1995. During
1995, 1994 and 1993, incentive stock grants for 52,500 shares, 60,000
shares and 12,500 shares (50,000 shares prior to the reverse stock split),
respectively, were granted. During 1993, 10,000 shares (40,000 shares
prior to the reverse stock split) were forfeited. The remaining
outstanding incentive stock grants vest as follows: 94,750 in each of the
years 1996 through 1998, 92,250 in each of the years 1999 and 2000, 11,250
in each of the years 2001 through 2004 and 5,250 in 2005. The Company
charged $1.1 million, $1.0 million and $1.0 million to operations in each
of the years 1995, 1994 and 1993, respectively, related to incentive stock
grants. The unvested portion of the incentive stock grants is classified
in the Stockholders' Equity section of the consolidated balance sheet as
Restricted Stock (Unearned Compensation).
SAVINGS PLAN
The Company has a profit sharing plan (the "ENSCO Savings Plan") which
covers eligible employees with more than one year of service, as defined.
Profit sharing contributions require Board of Directors approval and may be
in cash or grants of the Company's common stock. The Company recorded
profit sharing contribution provisions for the years ended December 31,
1995, 1994 and 1993 of $1.7 million, $1.1 million and $500,000,
respectively.
The ENSCO Savings Plan includes a 401(k) savings plan feature which
allows eligible employees with more than three months of service to make
tax deferred contributions to the plan. The Company makes matching
contributions based on the amount of employee contributions and rates set
annually by the Company's Board of Directors. Matching contributions
totalled $702,000, $307,000 and $64,000 in 1995, 1994 and 1993,
respectively. The Company has reserved 500,000 shares of common stock for
issuance as matching contributions under the ENSCO Savings Plan.
SELECT EXECUTIVE RETIREMENT PLAN
The Company implemented the Select Executive Retirement Plan (the
"SERP") effective April 1, 1995 to provide a tax deferred savings plan for
certain highly compensated employees whose participation in the 401(k)
savings plan features of the ENSCO Savings Plan is restricted due to
funding and contribution limitations of the Internal Revenue Code. The
SERP is an unfunded plan and eligibility for participation is determined by
the Company's Board of Directors. The contribution and Company matching
provisions of the SERP are identical to the ENSCO Savings Plan, except that
each participant's contributions and matching contributions under the SERP
are further limited by contribution amounts, if any, under the 401(k)
savings plan feature of the ENSCO Savings Plan. Matching contributions
totalled $22,000 in 1995 and the SERP liability of $139,000 is included in
Other Liabilities at December 31, 1995.
EMPLOYEE RETIREMENT PLAN
Eligible former Penrod employees participate in a noncontributory
defined benefit employee retirement plan. However, the plan was frozen
effective December 31, 1990. Accordingly, no additional participants may
join the plan and no additional benefits have been accrued for participants
subsequent to December 31, 1990. The Company's policy is to fund the plan
based on the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and tax considerations. The Company has recorded a
plan termination liability, net of plan assets, of $4.5 million, which is
included in Other Liabilities at December 31, 1995. Management intends to
terminate the plan when it is in the best financial interest of the Company
by purchasing annuities or otherwise providing for participants under the
plan. Net periodic pension expense for all years presented was
insignificant. The Company does not expect to incur any future charges or
additional liabilities in connection with the plan prior to its
termination.
EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the Company's employee stock purchase plan (the
"Stock Purchase Plan"), eligible employees could acquire shares of common
stock through payroll deductions of not more than 10% of their base annual
compensation. The price at which shares were purchased was 85% of the
lower of the fair market value for such shares on the first or last day of
each plan year. The Stock Purchase Plan was terminated effective June 30,
1993. For the 1993 plan year, 4,585 shares (18,340 shares prior to the
reverse stock split) were sold at $3.84 per share ($.96 per share prior to
the reverse stock split).
10. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
---------------------------------------------------
Effective January 1, 1993, Penrod adopted Statement of Financial
Accounting Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 106 requires the
accrual, during the year the employee renders the service, of the estimated
cost of providing postretirement non-pension benefit payments. SFAS No.
106 allows recognition of the cumulative effect of the liability in the
year of adoption or the amortization of the obligation over a period of up
to twenty years. Penrod elected to recognize this change in accounting on
the immediate recognition basis. The cumulative effect, after taxes and
minority interest, on the Company resulting from Penrod's adoption of SFAS
No. 106 was $2.5 million ($.07 per share after the reverse stock split).
Effective January 1, 1994, the Company's medical plan was amended such that
eligible Penrod retirees and eligible future retirees of the Company could
participate in the Company's medical plan. Retirees participating in the
Company's medical plan make contributions to the plan at a level that is
intended to fund the cost of all retiree medical claims. The Company's
current and contemplated employee benefit plans do not require the
recognition of a liability for postretirement benefits under SFAS No. 106.
11. INCOME TAXES
------------
The Company had income of $33.2 million, $26.8 million and $8.2 million
from its operations before income taxes in the United States and income of
$14.1 million, $13.5 million, and $20.2 million from its operations before
income taxes in foreign countries for the years ended December 31, 1995,
1994 and 1993, respectively.
The provisions for income taxes for the years ended December 31, 1995,
1994 and 1993 are summarized as follows (in thousands):
1995 1994 1993
------- ------- -------
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 1,340 $ 1,047 $ 495
Foreign . . . . . . . . . . . . . . . . . . . 2,488 3,591 1,898
Total current . . . . . . . . . . . . . . 3,828 4,638 2,393
Deferred:
Federal . . . . . . . . . . . . . . . . . . . 900 (650) --
Foreign . . . . . . . . . . . . . . . . . . . 5,169 2,771 3,100
Total deferred . . . . . . . . . . . . . 6,069 2,121 3,100
Effect of enacted rate change on pre quasi-
reorganization net operating loss carryforwards . -- -- 449
Deferred tax asset valuation allowance . . . . . . . (6,500) (3,000) --
Total . . . . . . . . . . . . . . . . . . . . $ 3,397 $ 3,759 $ 5,942
Deferred income tax assets (liabilities) as of December 31, 1995 and
1994 are summarized as follows (in thousands):
1995 1994
--------- ---------
Deferred income tax benefits:
Net operating loss carryforwards . . . . . . . $ 84,884 $104,151
Liabilities not deductible for tax purposes . 3,382 3,251
Safe harbor leases . . . . . . . . . . . . . . 5,805 6,474
Investment tax credit carryforward . . . . . . 2,683 3,584
Unfunded pension liability . . . . . . . . . . 1,560 1,785
Other . . . . . . . . . . . . . . . . . . . . 3,651 2,743
Gross deferred tax assets . . . . . . . . . . 101,965 121,988
Less: Valuation allowance . . . . . . . . . . (9,972) (47,936)
Deferred tax assets, net of valuation
allowance . . . . . . . . . . . . . . . . . 91,993 74,052
Deferred tax liabilities:
Property . . . . . . . . . . . . . . . . . . . (100,380) (92,477)
Tax gain recognized on transfer of assets . . (587) (4,052)
Other . . . . . . . . . . . . . . . . . . . . (1,863) (638)
Gross deferred tax liabilities . . . . . . . . (102,830) (97,167)
Net deferred tax liabilities . . . . . . . $ (10,837) $(23,115)
Net current deferred tax asset (liability) . . . . . $ 9,663 $ (126)
Net noncurrent deferred tax asset . . . . . . . . . 6,300 --
Net noncurrent deferred tax liability . . . . . . . (26,800) (22,989)
Net deferred tax liability . . . . . . . . $ (10,837) $(23,115)
/TABLE
The valuation allowance decreased by $38.0 million in 1995, of which
$13.3 million was recorded as an adjustment to goodwill, and by $13.7
million in 1994, of which $1.6 million was recorded as an adjustment to
goodwill, due to the expected utilization of net operating losses that were
previously projected to expire unutilized. As of December 31, 1995, the
Company expects to realize the full benefit of all of the net operating
loss carryforwards of Penrod that originated prior to the Penrod
Acquisition. Any future adjustments to the valuation allowance related to
the projected utilization or nonutilization of the net operating loss
carryforwards of Penrod that originated prior to the Penrod Acquisition
will be allocated to goodwill.
The consolidated effective income tax rate for the years ended December
31, 1995, 1994 and 1993 differs from the United States statutory income tax
rate as follows:
1995 1994 1993
------ ------ ------
Statutory income tax rate . . . . . . . 35.0% 35.0% 35.0%
Utilization of net operating loss
carryforwards . . . . . . . . . . . (26.7) (30.3) (9.4)
Change in valuation allowance . . . . . (13.7) (7.4) -
Foreign taxes . . . . . . . . . . . . 7.8 9.8 (7.2)
Alternative minimum tax . . . . . . . . 2.8 2.6 -
Enacted future rate change . . . . . . - - 1.6
Other . . . . . . . . . . . . . . . . 2.0 (0.4) 1.0
Effective income tax rate . . . . . . . 7.2% 9.3% 21.0%
At December 31, 1995, the Company had regular and alternative minimum
tax net operating loss carryforwards of approximately $236.0 million and
$166.2 million, respectively, and investment tax credit and minimum tax
credit carryforwards of $2.7 million and $1.5 million, respectively. If
not utilized, the regular and alternative minimum tax net operating loss
carryforwards expire from 1999 through 2007, and the investment tax credit
carryforwards expire from 1996 through 2000. The minimum tax credit
carryforwards do not expire. As a result of the Penrod Acquisition, the
utilization of a portion of the Company's net operating loss carryforwards
are subject to limitations imposed by the Internal Revenue Code of 1986.
However, the Company does not expect such limitations to have an effect
upon its ability to utilize its net operating loss carryforwards.
It is the policy of the Company to consider that income generated in
foreign subsidiaries is permanently invested. A significant portion of the
Company's undistributed foreign earnings at December 31, 1995 were
generated by controlled foreign corporations. A portion of the
undistributed foreign earnings were taxed, for U.S. tax purposes, in the
year that such earnings arose. Upon distribution of foreign earnings in
the form of dividends or otherwise, the Company may be subject to
additional U.S. income taxes. However, deferred taxes related to the
future remittance of these funds are not expected to be significant to the
financial statements of the Company.
12. COMMITMENTS AND CONTINGENCIES
-----------------------------
Prior to October 1990, Penrod was self-insured for the majority of its
maritime claims exposure. During the period from October 1990 to the
August 1993 acquisition date, Penrod had insurance coverage which limited
its maritime claims exposure to a maximum of the $25,000 deductible for
each claim, plus a fluctuating aggregate of $500,000 to $1.5 million which
is in excess of the $25,000 claim deductible for each policy year. Penrod
is also a defendant in lawsuits with certain of its insurers and the
administrator of its self-insurance program, and personal injury and
maritime liability lawsuits filed by present and former employees.
Management of the Company has provided reserves for such claims as it
considers appropriate given the facts currently known.
On February 13, 1991, Penrod filed an action against TransAmerican
Natural Gas Corporation ("TransAmerican") which is presently pending in the
U.S. District Court Southern District of Texas, Houston Division, seeking
damages for breach of contract. On August 21, 1991, TransAmerican filed an
action against Penrod in the 133rd Judicial District Court, Harris County,
Texas, seeking damages for breach of contract and tort claims. Management
of the Company believes that the outcome of this litigation will be
favorable to the Company.
At December 31, 1995, there were no other contingencies, claims, or
lawsuits against the Company which, in the opinion of management, would
have a material effect on its financial condition or results of operations.
In mid-January 1996, one of the Company's jackup rigs located in the
U.S. Gulf of Mexico experienced damage as it was preparing to jack up on a
new location. The jackup rig was mobilized to a shipyard where it is
currently undergoing repairs and is expected to be available for work in
mid-1996. The Company is fully insured for damage to, loss of, and/or
salvage operations related to the jackup rig and the Company expects that
all such costs incurred will be recoverable from its insurance coverage.
13. SEGMENT INFORMATION
-------------------
Contract drilling and marine transportation are the Company's operating
segments. The Company's contract drilling segment is currently comprised
of 24 offshore jackup rigs, of which 18 are located in the U.S. Gulf of
Mexico and six in the North Sea, and 10 barge drilling rigs located in
Venezuela. The marine transportation segment currently consists of 37
vessels, all of which are located in the U.S. Gulf of Mexico. The
Company's operations are integral to the exploration, development and
production of oil and gas. Business levels for the Company, and its
corresponding operating results, are significantly affected by worldwide
expenditures for oil and gas drilling, particularly in the U.S. Gulf of
Mexico where the Company has a large concentration of its rigs and vessels.
Expenditures for oil and gas drilling activity fluctuate based upon many
factors, including world economic conditions, the legislative environment
in the U.S. and other major countries, production levels and other
activities of OPEC and other oil and gas producers and the impact that
these and other events have on the current and expected future pricing of
oil and natural gas.
The following shows industry segment and geographic region information
for the years ended December 31, 1995, 1994 and 1993 (in thousands):
INDUSTRY SEGMENT
------------------------------------------------
MARINE
CONTRACT TRANS- CORPORATE
DRILLING PORTATION & OTHER TOTAL
--------- --------- --------- --------
1995
- ----
Revenues . . . . . . . . . . . . . . . $240,775 $ 38,339 $ -- $279,114
Operating income (loss) . . . . . . . . 48,022 7,848 (675) 55,195
Income from equity affiliate . . . . . 200 -- -- 200
Identifiable assets . . . . . . . . . . 649,503 66,685 105,263 821,451
Capital expenditures . . . . . . . . . 135,137 7,167 926 143,230
Depreciation and amortization . . . . . 52,160 5,820 410 58,390
1994
- ----
Revenues . . . . . . . . . . . . . . . $207,781 $ 37,670 $ -- $245,451
Operating income (loss) . . . . . . . . 44,597 5,455 (980) 49,072
Income (loss) from equity affiliates . 700 (93) -- 607
Identifiable assets . . . . . . . . . . 553,205 56,142 155,881 765,228
Capital expenditures . . . . . . . . . 142,848 6,951 559 150,358
Depreciation and amortization . . . . . 45,421 5,815 562 51,798
1993
- ----
Revenues . . . . . . . . . . . . . . . $192,120 $ 35,290 $ -- $227,410
Operating income (loss) . . . . . . . . 34,921 3,458 (3,332) 35,047
Income (loss) from equity affiliates . 561 (129) -- 432
Identifiable assets . . . . . . . . . . 532,045 59,210 89,714 680,969
Capital expenditures . . . . . . . . . 79,664 1,920 212 81,796
Depreciation and amortization . . . . . 34,452 5,449 1,280 41,181
/TABLE
GEOGRAPHIC REGION
------------------------------------------------------------------------
NORTH SOUTH NORTH MIDDLE EAST CORPORATE
AMERICA AMERICA SEA & OTHER & OTHER TOTAL
--------- --------- --------- ----------- --------- --------
1995
- ----
Revenues . . . . . . . . . . . . . . . $157,614 $ 61,975 $ 59,525 $ -- $ -- $279,114
Operating income (loss) . . . . . . . . 23,061 26,538 7,040 (769) (675) 55,195
Income from equity affiliate. . . . . . 200 -- -- -- -- 200
Identifiable assets . . . . . . . . . . 358,552 152,785 201,772 3,079 105,263 821,451
1994
- ----
Revenues . . . . . . . . . . . . . . . $155,118 $ 52,532 $ 30,635 $ 7,166 $ -- $245,451
Operating income (loss) . . . . . . . . 28,838 20,954 4,868 (4,608) (980) 49,072
Income (loss) from equity affiliates . 700 -- -- (93) -- 607
Identifiable assets . . . . . . . . . . 330,733 163,042 104,669 10,903 155,881 765,228
1993
- ----
Revenues . . . . . . . . . . . . . . . $146,610 $ 42,628 $ 27,384 $10,788 $ -- $227,410
Operating income (loss) . . . . . . . . 28,710 15,108 (1,364) (4,075) (3,332) 35,047
Income (loss) from equity affiliates . 561 -- -- (129) -- 432
Identifiable assets . . . . . . . . . . 388,133 121,254 59,678 22,189 89,715 680,969
Identifiable assets excluded net assets of discontinued operations of
$7.9 million and $8.3 million at December 31, 1994 and 1993, respectively.
During 1995, revenues from two customers were in excess of 10% of the
Company's total revenues. Revenues from one customer were $62.0 million,
or 22% of total revenues, all of which was from the contract drilling
segment. Revenues from another customer were $34.3 million, or 12% of
total revenues, all of which was from the contract drilling segment.
During 1994, revenues from two customers were in excess of 10% of the
Company's total revenues. Revenues from one customer were $48.2 million,
or 20%, of total revenues, all of which was from the contract drilling
segment. Revenues from another customer were $35.1 million, or 14%, of
total revenues. Of such amount, $33.7 million was from the contract
drilling segment and $1.4 million was from the marine transportation
segment.
During 1993, revenues from one customer were $29.0 million, or 13% of
total revenues, all of which was from the contract drilling segment.
14. TRANSACTIONS WITH RELATED PARTIES
---------------------------------
During 1993, the Company recorded $500,000 of Other Income related to
fees received from a partnership, owned 42% by the Company, for management
services provided by the Company.
The Company paid or accrued legal fees to a firm of which a director
of the Company was a partner in 1993 totalling $369,000. The Company has a
$675,000 note receivable from a director of the Company in connection with
the sale of 168,750 shares (675,000 shares prior to the reverse stock
split) of restricted common stock in 1988. The note, which may be settled
at a formula price in shares of restricted stock of the Company purchased
by the director, is due July 1997 and is noninterest bearing as long as the
payor remains a director of the Company. At December 31, 1995 and 1994,
the note was recorded as a reduction of additional paid-in capital.
15. SUPPLEMENTAL FINANCIAL INFORMATION
----------------------------------
CONSOLIDATED BALANCE SHEET INFORMATION. Accounts and notes
receivable, net at December 31, 1995 and 1994 consists of the following (in
thousands):
1995 1994
------- -------
Trade . . . . . . . . . . . . . . . . . $55,993 $33,865
Other . . . . . . . . . . . . . . . . . 5,268 3,396
------- -------
61,261 37,261
Allowance for doubtful accounts . . . . (465) (782)
------- -------
$60,796 $36,479
======= =======
Prepaid expenses and other at December 31, 1995 and 1994 consists of
the following (in thousands):
1995 1994
------- -------
Tax asset . . . . . . . . . . . . . . . $ 9,663 $ -
Prepaid expenses . . . . . . . . . . . 6,319 5,183
Inventory . . . . . . . . . . . . . . . 2,259 2,859
Other . . . . . . . . . . . . . . . . . 4,652 9,551
------- -------
$22,893 $17,593
======= =======
Accrued liabilities at December 31, 1995 and 1994 consists of the
following (in thousands):
1995 1994
------- -------
Operating expenses . . . . . . . . . . $14,740 $ 8,081
Deferred purchase payment . . . . . . . 13,000 -
Payroll . . . . . . . . . . . . . . . . 7,957 6,337
Taxes . . . . . . . . . . . . . . . . . 3,592 6,157
Insurance . . . . . . . . . . . . . . . 2,837 6,789
Other . . . . . . . . . . . . . . . . . 3,694 5,859
------- -------
$45,820 $33,223
======= =======
CONSOLIDATED STATEMENT OF INCOME INFORMATION. Maintenance and
repairs and taxes, other than payroll and income taxes, for the years ended
December 31, 1995, 1994 and 1993 are as follows (in thousands):
1995 1994 1993
------- ------- -------
Maintenance and repairs . . . . $18,203 $17,637 $21,564
Taxes, other than payroll and
income taxes . . . . . . . . 967 666 838
CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION. The 1995
consolidated statement of cash flows excludes noncash activities related to
a deferred purchase payment on a jackup rig acquired as described in Note 3
"Property and Equipment," the transfer of the Company's investment in a
joint venture to property and equipment as described in Note 4 "Investment
in Equity Affiliate," the incurrence of long-term debt associated with the
purchase of four supply vessels as described in Note 6 "Long-Term Debt,"
adjustments to goodwill as described in Note 11 "Income Taxes" and
consideration received related to the sale of the Company's technical
services segment as described in Note 16 "Discontinued Operations."
Noncash activities in 1994, which have also been excluded from the
consolidated statement of cash flows, consisted of consideration received
related to the sale of the United States land rig operations as described
in Note 3 "Property and Equipment," the conversion of the $1.50 Preferred
Stock into common stock of the Company as described in Note 7 "Preferred
Stock" and an adjustment to goodwill as described in Note 11 "Income
Taxes." Noncash activities were insignificant in 1993.
Cash paid for interest and income taxes for the years ended December
31, 1995, 1994 and 1993 is as follows (in thousands):
1995 1994 1993
------- ------- -------
Interest . . . . . . . . . . . $15,078 $ 9,940 $ 5,682
Income taxes . . . . . . . . . 5,006 3,104 232
FAIR VALUE OF FINANCIAL INSTRUMENTS. The following disclosure of
the estimated fair value of financial instruments is made in accordance
with the requirements of Statement of Financial Accounting Standards No.
107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies.
However, considerable judgement is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts. The carrying amounts and estimated fair
values at December 31, 1995 and 1994 are as follows (in thousands):
December 31, 1995 December 31, 1994
---------------------- ----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . $ 5,000 $ 5,000 $ 5,869 $ 5,862
Liabilities - long-term debt, including current maturities . . . . . 191,253 191,358 203,216 200,557
Nonfinancial instruments - other liabilities . . . . . . . . . . . . 17,393 17,393 13,203 13,203
Interest rate swaps - liability position . . . . . . . . . . . . . . -- 408 -- --
The estimated fair values were determined as follows:
SHORT-TERM INVESTMENTS --- The estimated fair value of short-term
investments is based on current interest rates for investments with
similar characteristics.
LONG-TERM DEBT --- Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities
are used to estimate fair value for debt issues.
OTHER LIABILITIES --- The estimated fair value of other liabilities is
determined by discounting the expected future cash outflows relating to the
other liabilities using long-term borrowing rates available to the Company.
INTEREST RATE SWAPS --- The estimated fair value of interest rate swaps is
based on the difference in the present value of the floating rate future
receipts and fixed rate future payments.
16. DISCONTINUED OPERATIONS
-----------------------
TECHNICAL SERVICES OPERATIONS
Effective September 30, 1995, the Company exited the technical services
business through the sale of substantially all of the assets of its wholly
owned subsidiary, ENSCO Technology Company. The sales price consisted of
$11.8 million in cash, a promissory note for $3.6 million, a convertible
promissory note for $2.5 million and the assumption of $1.9 million of
liabilities. The promissory note and the convertible promissory note bear
interest at prime and are repayable in equal annual principal installments
over a five year period. Interest on the promissory note and the
convertible promissory note is payable quarterly. The convertible
promissory note may be exchanged, at the option of the Company, into equity
of the purchaser.
As a result of the sale, the Company's financial statements have been
reclassified to present the net assets and operating results of the
Company's technical services operations segment as a discontinued
operation. Prior years have been reclassified for comparative purposes.
Included in the 1995 Income from Discontinued Operations is a gain on the
sale discussed above of $5.2 million and income from operations for the
nine months ended September 30, 1995 of $1.1 million. Revenues from the
technical services operations were $13.4 million, $16.5 million and $18.8
million in 1995, 1994 and 1993, respectively.
SUPPLY OPERATIONS
In 1993, the Company completed a series of transactions that resulted
in the sale of substantially all of the Company's supply business conducted
by its wholly owned subsidiary ENSCO Tool and Supply Company. The Company
sold substantially all of the assets of the international supply, tubular
services and engineered products business lines of its supply operations
segment on July 1, 1993. The sales price consisted of $1.0 million in cash
and approximately $3.9 million in notes issued by the purchaser. The notes
were repaid in full in December 1993. In a separate transaction
consummated June 30, 1993, the Company sold all of the shares of capital
stock of Petroil Services Corporation, ENSCO Tool and Supply (Peru) S.A.
and the Egyptian American Technical Services Company owned by the Company
for $5.0 million in cash. Additionally, substantially all of the Company's
remaining supply operations segment real estate was sold in 1993 for
approximately $2.4 million in cash, net of sales costs.
As a result of these transactions, the Company's financial statements
have been reclassified to present the net assets and operating results of
the Company's supply operations segment as a discontinued operation.
Included in the 1993 Income from Discontinued Operations is a gain on the
sales discussed above of $2.1 million (which includes a provision of $1.3
million for operations during the phase out period which began July 1,
1993) and income from operations for the six months ended June 30, 1993 of
$200,000. Revenues from the supply operations segment were $22.2 million in
1993. Substantially all of the remaining assets and liabilities of the
supply business were sold, liquidated or settled in 1994.
17. SUBSEQUENT EVENT
----------------
On January 25, 1996, the Company entered into a letter of intent with
DUAL DRILLING COMPANY ("Dual") under which the Company would acquire Dual,
subject to certain conditions. Dual operates a fleet of 20 offshore
drilling rigs, including 10 jackup rigs and 10 self-contained platform
rigs. Twelve of Dual's rigs are located in the U.S., with three jackup
rigs and seven platform rigs currently located in the U.S. Gulf of Mexico
and two platform rigs off the coast of California. The remainder of the
fleet operates in international waters, with rigs currently located
offshore India, Mexico, Qatar, Indonesia and China. Under the proposed
transaction, Dual's common stockholders would receive 0.625 shares of the
Company's common stock for each share of Dual common stock, which would
result in the issuance of approximately 9.9 million shares of the Company's
common stock. The Company expects to account for the combination as a
purchase acquisition. The transaction is subject to execution of
definitive agreements, approval by the stockholders of Dual and requisite
governmental and other approvals. Subject to the satisfaction of these
conditions, closing of the transaction is expected before June 30, 1996.
18. UNAUDITED QUARTERLY FINANCIAL DATA
----------------------------------
A summary of unaudited quarterly consolidated financial information
for 1995 and 1994 is as follows (in thousands, except per share amounts):
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Total
---- ------- ------- ------- ------- --------
Revenues
Contract drilling . . . . . . . . . . . . $53,900 $53,949 $61,162 $71,764 $240,775
Marine transportation . . . . . . . . . . 7,230 8,476 10,631 12,002 38,339
61,130 62,425 71,793 83,766 279,114
Operating expenses
Contract drilling . . . . . . . . . . . . 30,479 30,458 34,413 37,208 132,558
Marine transportation . . . . . . . . . . 5,616 5,706 6,066 6,014 23,402
36,095 36,164 40,479 43,222 155,960
Operating margin . . . . . . . . . . . . . . . 25,035 26,261 31,314 40,544 123,154
Depreciation and amortization . . . . . . . . . 13,546 14,307 14,702 15,835 58,390
General and administrative . . . . . . . . . . 2,143 2,478 2,209 2,739 9,569
Operating income . . . . . . . . . . . . . . . 9,346 9,476 14,403 21,970 55,195
Interest income . . . . . . . . . . . . . . . . 2,149 1,652 986 1,523 6,310
Interest expense . . . . . . . . . . . . . . . (4,391) (4,104) (3,912) (4,157) (16,564)
Other income . . . . . . . . . . . . . . . . . 943 400 874 181 2,398
Income from continuing operations before
income taxes and minority interest . . . . 8,047 7,424 12,351 19,517 47,339
Provision for income taxes . . . . . . . . . . (39) (145) (1,242) (1,971) (3,397)
Minority interest . . . . . . . . . . . . . . . (602) (596) (508) (473) (2,179)
Income from continuing operations . . . . . . . 7,406 6,683 10,601 17,073 41,763
Income from discontinued operations . . . . . . 216 401 5,679 -- 6,296
Net income . . . . . . . . . . . . . . . . . . $ 7,622 $ 7,084 $16,280 $17,073 $ 48,059
Income per common share
Continuing operations . . . . . . . . . . $ .12 $ .11 $ .18 $ .28 $ .69
Discontinued operations . . . . . . . . . .01 .01 .09 -- .10
$ .13 $ .12 $ .27 $ .28 $ .79
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter Total
---- ------- ------- ------- ------- --------
Revenues
Contract drilling . . . . . . . . . . . . $52,015 $54,048 $48,964 $52,754 $207,781
Marine transportation . . . . . . . . . . 8,504 9,149 10,128 9,889 37,670
60,519 63,197 59,092 62,643 245,451
Operating expenses
Contract drilling . . . . . . . . . . . . 27,296 28,607 26,606 27,715 110,224
Marine transportation . . . . . . . . . . 5,400 5,736 7,441 6,528 25,105
32,696 34,343 34,047 34,243 135,329
Operating margin . . . . . . . . . . . . . . . 27,823 28,854 25,045 28,400 110,122
Depreciation and amortization . . . . . . . . . 12,068 12,902 13,214 13,614 51,798
General and administrative . . . . . . . . . . 2,151 2,342 2,160 2,599 9,252
Operating income . . . . . . . . . . . . . . . 13,604 13,610 9,671 12,187 49,072
Interest income . . . . . . . . . . . . . . . . 1,062 929 1,267 1,994 5,252
Interest expense . . . . . . . . . . . . . . . (2,706) (2,609) (3,533) (4,529) (13,377)
Other income (expense) . . . . . . . . . . . . 165 (653) 340 (478) (626)
Income from continuing operations before
income taxes and minority interest . . . . 12,125 11,277 7,745 9,174 40,321
Provision for income taxes . . . . . . . . . . (1,175) (1,047) (685) (852) (3,759)
Minority interest . . . . . . . . . . . . . . . (838) (645) (583) (918) (2,984)
Income from continuing operations . . . . . . . 10,112 9,585 6,477 7,404 33,578
Income from discontinued operations . . . . . . 1,285 950 296 1,062 3,593
Net income . . . . . . . . . . . . . . . . . . 11,397 10,535 6,773 8,466 37,171
Preferred stock dividend requirements . . . . . (1,065) (1,065) (5) -- (2,135)
Income applicable to common stock . . . . . . . $10,332 $ 9,470 $ 6,768 $ 8,466 $ 35,036
Income per common share
Continuing operations . . . . . . . . . . $ .16 $ .15 $ .11 $ .12 $ .55
Discontinued operations . . . . . . . . . .02 .02 .01 .02 .06
$ .18 $ .17 $ .12 $ .14 $ .61
The first and second quarter results for 1995 and also the 1994 results
for all periods were reclassified to reflect the accounting for the
technical services operation as a discontinued operation. The effect of
this change had no impact upon net income, income applicable to common
stock or income per common share. See Note 16 "Discontinued Operations."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
FILED AS PART OF THIS REPORT:
(1) Financial Statements of ENSCO International Incorporated Page
Report of Independent Accountants - Price Waterhouse LLP 23
Report of Independent Accountants - Krygier, Montilla &
Asociados . . . . . . . . . . . . . . . . . . . . . . . 24
Report of Independent Accountants - Krygier, Montilla &
Asociados . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Balance Sheet . . . . . . . . . . . . . . . 26
Consolidated Statement of Income . . . . . . . . . . . . 27
Consolidated Statement of Cash Flows . . . . . . . . . . 28
Notes to Consolidated Financial Statements . . . . . . . 29
(2) Exhibits
The following instruments are included as exhibits to this
Report. Exhibits incorporated by reference are so indicated by
parenthetical information.
EXHIBIT NO. DOCUMENT
----------- --------
3.1 - Certificate of Incorporation of the Company, as restated
(incorporated by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
3.2 - Certificate of Amendment to Certification of Incorporation
(incorporated by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995).
3.3 - Certificate of Amendment of Restated Certificate of Incorpor-
ation (filed herewith).
3.4 - Bylaws of the Company, as amended (incorporated by reference
to Exhibit 3.2 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1992, File No. 1-8097).
3.5 - Certificate of Designation of $1.50 Cumulative Convertible
Exchangeable Preferred Stock (incorporated by reference to
Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1988, File No. 1-8097).
4.1 - Purchase Agreement dated March 28, 1988 among the Company,
ENSCO Marine Company, Prudential-Bache Energy Growth Fund,
L.P. G-2 and Prudential-Bache Energy Growth Fund, L.P. G-3
relating to $26,000,000 aggregate principal amount of Senior
Secured Notes of ENSCO Marine Company and warrants to
purchase 2,500,000 shares of the Company's Common Stock
(incorporated by reference to Exhibit 4.3 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-8097).
4.2 - Form of 6% Convertible Subordinated Debenture due April 15,
2003 (incorporated by reference to Exhibit 4.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1988, File No. 1-8097).
4.3 - Form of Indenture relating to Registrant's 6% Convertible
Subordinated Debentures (incorporated by reference to
Exhibit 4.4 to the Registrant's Quarterly Report on Form 10-
Q for the quarter ended March 31, 1988, File No. 1-8097).
4.4 - Certificate of Designation of $1.50 Cumulative Convertible
Exchangeable Preferred Stock (as set forth in Exhibit 3.3).
4.5 - Form of Rights Agreement dated as of February 21, 1995
between the Company and American Stock Transfer & Trust
Company, as Rights Agent, which includes as Exhibit A the
Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of ENSCO International
Incorporated, as Exhibit B the Form of Right Certificate,
and as Exhibit C the Summary of Rights to Purchase Shares of
Preferred Stock of ENSCO International Incorporated
(incorporated by reference to Exhibit 4 to Registrant's
Current Report on Form 8-K dated February 21, 1995, File No.
1-8097).
4.6 - Certificate of Designations of Series A Junior Participating
Preferred Stock of the Company (filed herewith).
10.1 - ENSCO Incentive Plan, as amended (incorporated by reference
to Exhibit 10.1 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993, File No. 1-8097).
10.2 - Employee Stock Purchase Plan of the Company (incorporated by
reference to Exhibit 10.5 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1988, File No.
1-8097).
10.3 - Restricted Stock Agreement effective as of June 10, 1987
between Morton H. Meyerson and Blocker Energy Corporation
(incorporated by reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-8097).
10.4 - Restricted Stock Agreement effective as of May 31, 1988
between Morton H. Meyerson and the Company (incorporated by
reference to Exhibit 19.2 to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1988,
File No. 1-8097).
10.5 - Termination of Pledge Agreement and Amendment of Restricted
Stock Agreement, dated March 1, 1991, by and between Morton
H. Meyerson and the Company (incorporated by reference to
Exhibit 10.108 to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1990, File No. 1-8097).
10.6 - First Amendment, dated March 1, 1991, to the Promissory Note
dated July 19, 1988 in the original principal amount of
$675,000 between Morton H. Meyerson and the Company
(incorporated by reference to Exhibit 10.109 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 1-8097).
10.7 - Lease Agreement between the Company as tenant and Freeman
Ross, Ltd. as landlord for the Company's corporate office
space at First Interstate Bank Tower at Fountain Place, 1445
Ross Avenue, Dallas, Texas (incorporated by reference to
Exhibit 28.5 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1990, File No. 1-8097).
10.8 - Supplemental Compensation Agreement, dated March 1, 1991,
between Morton H. Meyerson and the Company (incorporated by
reference to Exhibit 10.110 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
10.9 - Construction and Purchase Agreement dated as of February 3,
1992 between Nissho Iwai Hong Kong Corporation Limited as
Purchaser and ENSCO Drilling Company as Contractor
(incorporated by reference to Exhibit 10.21 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.10 - Sale and Financing Agreement dated as of February 3, 1992
between ENSCO Drilling Venezuela, Inc. as Purchaser and
Nissho Iwai Hong Kong Corporation Limited as Seller
(incorporated by reference to Exhibit 10.22 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.11 - Shelf Registration Agreement by and among the Company,
SOLVation Inc., Energy Management Corporation, SEGA
Associates, L.P., Smith Factors Inc., The Summit Trust
Company, as Trustee, Natural Gas Partners, L.P., The Goldman
Sachs Group, L.P., Permian Equities Inc., and others dated
as of May 6, 1993 (incorporated by reference to Exhibit 28.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, File No. 1-8097).
10.12 - Stock Exchange Agreement by and among the Company, ENSCO
Engineering Company, SOLVation Inc., Natural Gas Partners,
L.P., Goldman Sachs Group, L.P., Permian Equities Inc., NGP
No. I, L.P., and the Summit Trust Company, as Trustee dated
as of May 6, 1993 (incorporated by reference to Exhibit 28.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, File No. 1-8097).
10.13 - Loan Agreement dated October 14, 1993, by and among ENSCO
Marine Company and The CIT Group/Equipment Financing, Inc.
(incorporated by reference to Exhibit 10.27 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 1-8097).
10.14 - Construction and Purchase Agreement dated November 12, 1993,
by and between ENSCO Drilling Company and Nissho Iwai Hong
Kong Corporation Limited (incorporated by reference to
Exhibit 10.28 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8097).
10.15 - Sale and Financing Agreement dated November 12, 1993, by and
between Nissho Iwai Hong Kong Corporation Limited and ENSCO
Drilling Venezuela, Inc. (incorporated by reference to
Exhibit 10.29 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8097).
10.16 - Credit Facility Agreement dated December 15, 1993, by and
among ENSCO Offshore Company and ENSCO Offshore U.K.
Limited, as borrowers, and Christiania Bank OG Kreditkasse,
London Branch, den Norske Bank A.S., New York Branch, Banque
Indosuez, and Meespierson N.V., as the Banks (incorporated
by reference to Exhibit 10.30 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993,
File No. 1-8097).
10.17 - Partial Satisfaction of Mortgage, dated November 29, 1994,
between Wilmington Trust Company, as trustee for the benefit
of The CIT Group/Equipment Financing, Inc., and ENSCO Marine
Company (incorporated by reference to Exhibit No. 10.30 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994, File No. 1-8097).
10.18 - Modification and Amendment of First Preferred Fleet Ship
Mortgage, dated January 23, 1995, by ENSCO Marine Company
and Wilmington Trust Company, as trustee for the benefit of
The CIT Group/Equipment Financing, Inc. (incorporated by
reference to Exhibit No. 10.31 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994,
File No. 1-8097).
10.19 - Amendment No. 1, dated November 1, 1994, to Credit Facility
Agreement dated December 15, 1993 among ENSCO Offshore
Company and ENSCO Offshore U.K. Limited, as borrowers, and
Christiana Bank OG Kreditkasse, London Branch, den Norske
Bank A.S., New York Branch, Banque Indosuez and Meespierson
N.V., as the banks (incorporated by reference to Exhibit No.
10.32 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994, File No. 1-8097).
10.20 - Amended and Restated Credit Facility Agreement dated
September 27, 1995 by and among ENSCO Offshore Company and
ENSCO Offshore U.K. Limited, as borrowers, and Christiana
Bank OG Kreditkasse, New York Branch, and den Norske Bank
AS, New York Branch, as the Banks (incorporated by reference
to Exhibit No. 10.33 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, File No.
1-8097).
10.21 - Amendment No. 2, dated September 27, 1995, to the First
Preferred Fleet Mortgage dated December 17, 1993, as
amended, by ENSCO Offshore Company and Bankers Trust
Company, as trustee for the benefit of Christiana Bank OG
Kreditkasse, New York Branch, and den Norske Bank AS, New
York Branch (incorporated by reference to Exhibit No. 10.34
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 1-8097).
10.22 - Letter of intent dated January 25, 1996 between the Company
and DUAL DRILLING COMPANY (incorporated by reference to
Exhibit 99.5 to the Registrant's Current Report on Form 8-K
dated January 25, 1996, File No. 1-8097).
10.23 - Select Executive Retirement Plan of the Company (incorpor-
ated by reference to Exhibit 10.23 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995).
10.24 - Second Amendment, dated September 14, 1995, to the
Promissory Note dated July 19, 1988 in the original
principal amount of $675,000 between Morton H. Meyerson and
the Company (incorporated by reference to Exhibit 10.24 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
21 - Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
23 - Consent of Price Waterhouse LLP (incorporated by reference
to Exhibit 23 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
24 - Consent of Krygier, Montilla & Asociados (filed herewith).
27 - Financial Data Schedule - December 31, 1995 (incorporated by
reference to Exhibit 27 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.
27.1 - Financial Data Schedule - September 30, 1994 (Restated)
(incorporated by reference to Exhibit 27.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995.
27.2 - Financial Data Schedule - December 31, 1994 (Restated)
(incorporated by reference to Exhibit 27.2 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995.
27.3 - Financial Data Schedule - March 31, 1995 (Restated) (incor-
porated by reference to Exhibit 27.3 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995.
27.4 - Financial Data Schedule - June 30, 1995 (Restated) (incor-
porated by reference to Exhibit 27.4 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995.
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EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following is a list of all executive compensation plans and
arrangements required to be filed as an exhibit to this Form 10-K:
1. ENSCO Incentive Plan, as amended (filed as Exhibit 10.1 hereto and
incorporated by reference to Exhibit 10.1 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 1-8097).
2. Employee Stock Purchase Plan of the Company (filed as Exhibit 10.2
hereto and incorporated by reference to Exhibit 10.5 of the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988, File No. 1-8097).
3. Restricted Stock Agreement effective as of June 10, 1987 between
Morton H. Meyerson and the Company (filed as Exhibit 10.3 hereto
and incorporated by reference to Exhibit 10.6 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992,
File No. 1-8097).
4. Restricted Stock Agreement effective as of May 31, 1988 between
Morton H. Meyerson and the Company (filed as Exhibit 10.4 hereto
and incorporated by reference to Exhibit 19.2 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30,
1988, File No. 1-8097).
5. Termination of Pledge Agreement and Amendment of Restricted Stock
Agreement, dated March 1, 1991, by and between Morton H. Meyerson
and the Company (filed as Exhibit 10.5 hereto and incorporated by
reference to Exhibit 10.108 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990, File No. 1-8097).
6. First Amendment, dated March 1, 1991, to the Promissory Note dated
July 19, 1988 in the original principal amount of $675,000 between
Morton H. Meyerson and the Company (filed as Exhibit 10.6 hereto
and incorporated by reference to Exhibit 10.109 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
7. Supplemental Compensation Agreement, dated March 1, 1991, between
Morton H. Meyerson and the Company (filed as Exhibit 10.8 hereto
and incorporated by reference to Exhibit 10.110 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
File No. 1-8097).
8. Select Executive Retirement Plan of the Company (filed as Exhibit
10.23 hereto and incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995, File No.
1-8097).
9. Second Amendment, dated September 14, 1995, to the Promissory Note
dated July 19, 1988 in the original principal amount of $675,000
between Morton H. Meyerson and the Company (filed as Exhibit 10.24
hereto and incorporated by reference to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995, File No.
1-8097).
The Company will furnish to the Securities and Exchange Commission upon
request, all constituent instruments defining the rights of holders of
long-term debt of the Company not filed herewith as permitted by paragraph
4(iii)(A) of Item 601 of Regulation S-K.
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed by the Company during the
fourth quarter of the year ended December 31, 1995.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) and Form S-3 under the Securities Act of
1933, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into registrant's
Registration Statements on Form S-8 Nos. 33-40282 filed May 2, 1991, 33-
41294 filed June 19, 1991, 33-35862 filed July 13, 1990, 33-32447 filed
December 5, 1989 and 33-14714 filed June 1, 1987 and Form S-3 Nos. 33-
64642, 33-49590 filed July 13, 1992 (as amended by Amendment No. 1 filed
July 31, 1992), 33-46500 filed March 18, 1992 (as amended by Amendment No.
1 filed May 7, 1992), 33-43756 filed November 12, 1991 (as amended by
Amendment No. 1 filed December 19, 1991) and 33-42965 filed September 25,
1991 (as amended by Amendment No. 1 and 2 filed October 29, 1991 and
November 18, 1991, respectively):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on
May 8, 1996.
ENSCO INTERNATIONAL INCORPORATED
(Registrant)
By /s/ C. CHRISTOPHER GAUT
------------------------------------
C. Christopher Gaut
Vice President and
Chief Financial Officer
By /s/ H. E. MALONE
-------------------------------------
H. E. Malone
Vice President, Chief Accounting
Officer and Controller