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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2003
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act. Yes X No __.
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of April 30, 2003: 13,847,051 shares of Common Stock $1 par
value
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended March 31, 2003
INDEX
Part I. Financial Information
Item 1. Unaudited Financial Statements Page
a) Statements of Operations
For the Three Months and Six Months Ended March 31, 2003 and 2002.....4
b) Balance Sheets
As of March 31, 2003 and September 30, 2002...........................5
c) Cash Flow Statements
For the Six Months Ended March 31, 2003 and 2002......................7
d) Notes to Financial Statements.........................................8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations............................10
Item 3. Quantitative and Qualitative Disclosures about Market Risk......14
Item 4. Controls and Procedures.........................................15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.............15
Item 6. Exhibits and Reports on Form 8-K................................16
Signatures....................................................................17
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
The unaudited interim financial statements as of March 31, 2003 and for
each of the three month and six month periods ended March 31, 2003 and 2002,
included herein, have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulations S-X. Accordingly, although these financial statements and related
information have been prepared without audit, and certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
management believes that the note disclosures are adequate to make the
information not misleading. The interim financial results may not be indicative
of results that could be expected for a full year. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report to Shareholders for the year ended September 30, 2002.
This Form 10-Q for the quarterly period ended March 31, 2003 includes
"forwarding-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended. All statements other than statements of
historical facts included in this Form 10-Q regarding the Company's financial
position, business strategy, budgets and plans and objectives of management for
future operations are forward-looking statements. These forward-looking
statements involve risks and uncertainties that may cause the Company's actual
future activities and results of operation to be materially different from those
suggested or described in the Form 10-Q.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------- -----------------------------
2003 2002 2003 2002
-------- -------- --------- --------
(Unaudited) (Unaudited)
REVENUES:
Contract drilling $ 35,073 $ 43,740 $ 64,914 $ 80,974
-------- -------- -------- --------
COSTS AND EXPENSES:
Contract drilling 24,114 23,205 43,459 39,419
Depreciation 5,850 6,720 11,242 12,543
General and administrative 3,119 2,494 5,799 5,164
-------- -------- -------- ---------
33,083 32,419 60,500 57,126
-------- -------- -------- ---------
OPERATING INCOME 1,990 11,321 4,414 23,848
-------- -------- -------- ---------
OTHER INCOME (EXPENSE):
Interest expense (598) (683) (711) (886)
Interest income 36 77 99 140
-------- -------- -------- ---------
(562) (606) (612) (746)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
1,428 10,715 3,802 23,102
PROVISION FOR INCOME TAXES 841 3,885 2,265 8,114
-------- -------- -------- --------
NET INCOME $ 587 $ 6,830 $ 1,537 $ 14,988
======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ .04 $ .49 $ .11 $1.08
Diluted $ .04 $ .49 $ .11 $1.07
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 13,845 13,834 13,846 13,835
Diluted 13,900 13,978 13,903 13,948
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, September 30,
2003 2002
---------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,266 $ 27,055
Accounts receivable, net 30,803 28,776
Inventories of materials and supplies,
at lower of average cost or market 10,632 9,134
Deferred tax assets 223 223
Prepaid expenses 3,239 6,625
-------- --------
Total Current Assets 60,163 71,813
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Drilling vessels, equipment and drill pipe 648,850 583,241
Other 9,204 9,156
-------- --------
658,054 592,397
Less-accumulated depreciation 235,191 224,000
-------- --------
Net Property and Equipment 422,863 368,397
-------- --------
DEFERRED COSTS AND OTHER ASSETS 11,990 4,320
-------- ---------
$495,016 $444,530
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, September 30,
2003 2002
---------- -------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term note payable $ 1,430 $ 5,023
Accounts payable 3,028 5,584
Accrued liabilities 11,599 13,809
--------- ---------
Total Current Liabilities 16,057 24,416
--------- ---------
LONG-TERM DEBT, net of current maturities: 172,500 115,000
--------- ---------
DEFERRED CREDITS:
Income taxes 15,895 15,545
Other 12,884 13,436
--------- ---------
28,779 28,981
--------- ---------
HAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000,000 shares authorized, none outstanding --- ---
Common stock, $1 par value;
20,000,000 shares authorized with 13,847,000
and 13,845,000 shares issued and outstanding
in 2003 and 2002, respectively 13,847 13,845
Paid-in-capital 57,282 57,274
Retained earnings 206,551 205,014
-------- ---------
Total Shareholders' Equity 277,680 276,133
-------- ---------
$495,016 $444,530
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended March 31,
----------------------------------
2003 2002
-------- -------
(Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 1,537 $ 14,988
-------- --------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 11,242 12,543
Amortization 373 224
Deferred federal income tax provision 350 1,500
Changes in assets and liabilities:
Increase in accounts receivable (2,027) (18,558)
Increase (decrease) in accounts payable and accrued
liabilities (4,097) 2,414
Net mobilization fees (7,794) (2,410)
Other 1,087 (365)
-------- --------
(866) (4,652)
-------- --------
Net cash provided by operating activities 671 10,336
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (66,384) (35,251)
Other 7 ---
-------- --------
Net cash used by investing activities (66,377) (35,251)
-------- --------
CASH FLOW FROM FINANCING ACITIVITES:
Proceeds from credit facilities 57,500 40,000
Principal payments on debt (3,688) ---
Proceeds from exercises of stock options 10 57
-------- --------
Net cash provided by financing activities 53,917 40,057
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (11,789) 15,142
CASH AND CASH EQUIVALENTS, at beginning of period 27,055 12,621
-------- --------
CASH AND CASH EQUIVALENTS, at end of period $ 15,266 $ 27,763
======== ========
=========================
Supplemental disclosure of cash flow information:
Cash paid during the quarter for domestic
and foreign income taxes $ 3,310 $ 4,912
======= ========
Cash paid during the quarter for interest,
net of amounts capitalized $ --- $ 1,005
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. ITEM 1 - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
In the opinion of the Company's management, the unaudited interim financial
statements reflect all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the financial position and
results of operations of the Company for the periods presented. For interim
periods, the Company records income taxes using the expected effective tax rate
for the year.
2. EARNINGS PER COMMON SHARE
The computation of basic and diluted earnings per share is as follows
(in thousands, except per share amounts):
Three Months Ended Six Months Ended
-------------------------------- ---------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------- ------ --------- ------- ------ ----------
March 31, 2003:
Basic earnings per share $ 587 13,845 $ .04 $ 1,537 13,846 $ .11
Effect of dilutive securities-
Stock Options --- 55 --- --- 57 ---
------- ------ ----- ------- ------ -----
Diluted earnings per share $ 587 13,900 $ .04 $ 1,537 13,903 $ .11
======= ====== ===== ======= ====== =====
March 31, 2002:
Basic earnings per share $ 6,830 13,834 $ .49 $14,988 13,835 $1.08
Effect of dilutive securities -
Stock Options --- 144 --- --- 113 (.01)
------- ------ ----- ------- ------ -----
Diluted earnings per share $ 6,830 13,978 $ .49 $14,988 13,948 $1.07
======= ====== ===== ======= ====== =====
3. LONG-TERM DEBT
On April 1, 2003, the Company executed a $225 million senior secured credit
agreement with a bank group to refinance all of its existing indebtedness of
$172.5 million and to provide for on-going working capital and general corporate
needs. The new credit agreement includes a $150 million term loan facility and a
$75 million revolving loan facility. The term loan will be repaid commencing on
December 31, 2003 in 4 quarterly installments of $6 million and 14 quarterly
installments of $9 million. All outstanding borrowings under the revolving loan
facilities mature on April 1, 2008. Loans under both facilities will bear
interest at varying rates ranging from 1.5% to 2.5% over LIBOR, depending upon
the ratio of outstanding debt to earnings before interest, taxes and
depreciation, which is currently allowed to be 5.0, reducing to 4.0 at December
31, 2003 and to 3.0 at December 31, 2004 and thereafter. The credit agreement
places restrictions on disposing of any material assets, paying cash dividends
or repurchasing outstanding common stock and incurring any additional
indebtedness, in addition to containing financial covenant requirements. The
bank group's collateral for the credit agreement consists primarily of preferred
mortgage on all of the Company's active drilling fleet.
Currently, the Company has borrowed $150 million under the term loan
facility and $40 million under the revolving loan facility. The Company is in
compliance with all financial covenants.
4. ACCOUNTING FOR STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure on amendment of SFAS No. 123. "SFAS"
No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation" to
provide alternative methods of transition for a voluntary change to the fair
value based method of stock-based employee compensation. In addition, the
statement amends the disclosure requirements of SFAS No. 123 to require
pertinent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company does not intend to adopt the fair
value based method of stock-based compensation. Accordingly, no compensation
costs have been recognized in net income from the granting of options pursuant
to its stock option plans, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. Had compensation costs been determined based on the fair value at
the grant dates for awards made since fiscal 1996 consistent with the method of
SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands, except for per
share amounts):
Three Months Ended Six Months Ended
March 31, March 31,
------------------- --------------------
2003 2002 2003 2002
----- ---- ----- ----
Net income, as reported $ 587 $ 6,830 $ 1,537 $14,988
Deduct: Total stock-based
employee compensation
expense determined under fair
value based method for all
awards, net of related tax effects (537) (412) (1,075) (823)
------- ------- ------- -------
Pro Forma, net income $ 50 $ 6,418 $ 462 $14,165
======= ======= ======= =======
Earnings per share:
Basic - as reported $ .04 $ .49 $ .11 $ 1.08
Basic - pro forma $ -- $ .46 $ .03 $ 1.02
Diluted - as reported $ .04 $ .49 $ .11 $ 1.07
Diluted - pro forma $ -- $ .46 $ .03 $ 1.02
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions deemed reasonable by the Company. The Company can give no
assurance that such expectations and assumptions will prove to be correct, and
actual results could differ materially from the information presented herein.
The Company's periodic reports filed with the SEC should be consulted for a
description of risk factors associated with an investment in the Company.
MARKET OUTLOOK
The worldwide offshore demand for drilling units continues to be impacted
by political uncertainties and soft market conditions. Thus far in fiscal year
2003, the Company has maintained a relatively high level of equipment
utilization with all of its active drilling units currently employed. Management
will continue to emphasize utilization, over higher dayrates; however, with only
the VICKSBURG and SEAHAWK having contact terms that extend into fiscal 2004, no
assurance can be given that some idle time will not be incurred by some of the
Company's drilling units during the remainder of fiscal year 2003.
The ATWOOD EAGLE, following its upgrade and relocation to Angola, commenced
drilling operations in early March 2003 under a contract with ESSO Exploration
Angola (Block 15) Limited which provides for three firm wells at a dayrate of
$86,000, plus options for four additional wells. The ATWOOD HUNTER, which has
worked continuously in Egypt since December 2001 and earned an average dayrate
of approximately $94,000 during fiscal year 2002 compared to its current dayrate
of $37,000, has a commitment, following completion of its current contract, to
drill one well off the coast of Israel at a dayrate of $80,000. The ATWOOD
FALCON, following completion of its work in Australia (estimated June 2003),
will be relocated to Malaysia to drill one well for Sarawak Shell at a dayrate
of $83,000. The current contracts for the ATWOOD SOUTHERN CROSS and RICHMOND are
expected to terminate in May and June 2003, respectively. Management is pursuing
additional short-term contract commitments for both drilling units. The
construction of the ATWOOD BEACON continues on schedule. The shipyard portion of
the construction should be completed in May 2003. Additional equipment
commissioning and testing may be carried out until July 2003 depending on the
schedule for commencing operations. The Company is in discussions for a
short-term contract for the rig to commence operations in July/August 2003.
Since the current political uncertainties and soft market conditions have
resulted in a lower level of dayrates on some of the Company's drilling units,
revenues, operating cash flows and net income for fiscal year 2003 are expected
to be below results for fiscal year 2002. The current near-term outlook has not
weakened the Company's optimism about the longer-term outlook and fundamentals
of the offshore drilling market. The Company has completed its $339 million
fleet upgrade program of its current seven active drilling units that began in
1996. The Company looks forward to fiscal year 2004 when all seven of these
units, plus the ATWOOD BEACON, should be available for work throughout the
entire year and in an improving market, this could provide the potential basis
for an increase in earnings and cash flows.
RESULTS OF OPERATIONS
Contract revenues for the three months and six months ended March 31, 2003
decreased 20% compared to the three months and six months ended March 31, 2002.
A comparative analysis of contract revenues is as follows:
CONTRACT REVENUES
(In Millions)
--------------------------------------------------------------
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ------ ----- --------
RICHMOND $ 2.1 $ 1.0 $ 1.1 $ 4.1 $ 4.3 $ (0.2)
SEAHAWK 5.8 5.2 0.6 11.0 10.8 0.2
ATWOOD SOUTHERN CROSS 5.5 5.3 0.2 7.9 11.2 (3.3)
VICKSBURG 5.9 5.8 0.1 12.3 11.0 1.3
ATWOOD FALCON 8.9 8.9 --- 15.9 18.3 (2.4)
ATWOOD EAGLE 2.9 8.0 (5.1) 2.9 13.3 (10.4)
ATWOOD HUNTER 3.5 9.0 (5.5) 9.9 11.0 (1.1)
OTHER 0.5 0.5 --- 0.9 1.1 (0.2)
----- ----- ----- ----- ----- ------
$35.1 $43.7 $(8.6) $64.9 $81.0 $(16.1)
===== ===== ===== ===== ===== ======
The increase in revenue for the RICHMOND was due to the rig undergoing
shipyard repairs for approximately 35 days during the second quarter of fiscal
year 2002 compared to being fully employed during the second quarter of fiscal
2003. The SEAHAWK continues to have a consistent level of operations under its
long-term contract in Malaysia with variations in revenue based upon the price
of oil. Following completion of its upgrade in November 2002, the ATWOOD EAGLE
arrived in Angola in late February 2003 and commenced drilling operation in
early March 2003 compared to being fully employed during the first two quarters
of fiscal 2002. The average dayrate for the ATWOOD HUNTER was approximately
$40,000 for the second quarter of fiscal year 2003 as compared to approximately
$100,000 for the same quarter in fiscal year 2002.
Contract drilling costs for the three months and six months ended March 31, 2003
increased 4% and 10%, respectively, as compared to the same periods in the prior
fiscal year. An analysis of contract drilling costs by rig is as follows:
CONTRACT DRILLING COSTS
(In Millions)
-------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------- ------------------------------
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ----- ---- --------
ATWOOD FALCON $ 5.6 $ 2.7 $ 2.9 $ 9.7 4.9 4.8
ATWOOD SOUTHERN CROSS 4.2 2.5 1.7 8.0 5.0 3.0
SEAHAWK 3.0 2.0 1.0 5.4 4.1 1.3
VICKSBURG 2.3 2.3 --- 4.8 4.5 0.3
ATWOOD HUNTER 3.3 4.3 (1.0) 6.8 5.0 1.8
RICHMOND 2.0 3.4 (1.4) 4.1 5.3 (1.2)
ATWOOD EAGLE 2.2 4.5 (2.3) 2.2 7.8 (5.6)
OTHER 1.5 1.5 --- 2.5 2.8 (0.3)
----- ----- ----- ----- ----- -----
$24.1 $23.2 $ 0.9 $43.5 $39.4 $ 4.1
===== ===== ===== ===== ===== =====
The ATWOOD FALCON is currently operating in Australia, where operating
costs are higher than Southeast Asia, it's previous location, due to an increase
in personnel-related costs, which, along with amortization of its mobilization
expense to Australia, accounts for its increase in drilling costs. The increase
in costs for the ATWOOD SOUTHERN CROSS resulted from the amortization of the
planned maintenance and upgrade costs to meet Italian operating standards, as
well as higher costs of operating in Italy for travel, shorebase operations and
rentals. The SEAHAWK experienced higher repairs and maintenance costs in the
second quarter of fiscal year 2003 as compared to the same period in the prior
year. The higher level of costs for the ATWOOD HUNTER in the second quarter of
the prior fiscal year was due to amortization of its mobilization costs to Egypt
which was completed in first quarter of the current fiscal year. The RICHMOND
incurred certain shipyard repairs during the second quarter of the fiscal year
2002 which accounts for the decrease in its operating costs in the second
quarter of fiscal year 2003. The ATWOOD EAGLE operated for only one month in the
quarter ended March 31, 2003 compared to a full quarter of operations for the
same period in the prior fiscal year.
An analysis of depreciation expense by rig for the three months and six
months ended March 31, 2003 as compared to the same periods in the prior fiscal
year is as follows:
DEPRECIATION EXPENSE
(In Millions)
---------------------------------------------------------------
Three Months Ended Six Months Ended
March 31, March 31,
2003 2002 Variance 2003 2002 Variance
----- ----- -------- ----- ----- --------
RICHMOND $ 0.5 $ 0.4 $ 0.1 $ 0.9 $ 0.8 $ 0.1
ATWOOD HUNTER 1.3 1.3 --- 2.7 1.5 1.2
ATWOOD SOUTHERN CROSS 1.0 1.0 --- 2.0 2.0 ---
VICKSBURG 0.6 0.6 --- 1.2 1.2 ---
ATWOOD FALCON 0.7 0.7 --- 1.3 1.4 (0.1)
SEAHAWK 1.2 1.2 --- 2.3 2.5 (0.2)
ATWOOD EAGLE 0.4 1.0 (0.6) 0.4 1.9 (1.5)
OTHER 0.2 0.5 (0.3) 0.4 1.2 (0.8)
----- ----- ----- ----- ----- -----
$ 5.9 $ 6.7 $(0.8) $11.2 $12.5 $(1.3)
===== ===== ===== ===== ===== =====
The Company does not recognize depreciation expense during the period a rig
is out of service for a significant upgrade, which accounts for the decrease in
expense for the ATWOOD EAGLE for the second quarter of fiscal 2003. Other
depreciation expense decreased due to the fact that RIG-200 was fully
depreciated to its salvage value in the third quarter of fiscal year 2002, and
thus had no depreciation expense in the quarter ended March 31, 2003 compared to
two months of expense during the same period for the prior fiscal year.
The Company's effective tax rate for the fiscal year 2003 is expected to be
approximately 60% compared to an effective tax rate of 27% for fiscal year 2002.
The anticipated higher effective tax rate for fiscal year 2003 results from
expected lower pre-tax earnings coupled with excess foreign tax credits.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of fiscal year 2003, the Company utilized $57.5
million borrowed under its then - existing credit facilities, $12 million cash
on hand, and $0.5 million net cash provided by operating activities to invest
$23.5 million in completing the upgrade of the ATWOOD EAGLE, to invest $36.5
million in the construction of the ATWOOD BEACON, to fund approximately $6
million of other capital expenditures and to repay approximately $4 million in
short-term notes payable. Despite an increase in long-term debt, interest
expense for the second quarter of fiscal year 2003 remained relatively
consistent as compared to the second quarter of fiscal year 2002 due to an
increase in capitalized interest costs from $200,000 to $1.8 million.
With the completion of the ATWOOD EAGLE upgrade, the Company has completed
its $339 million fleet upgrade on time and within cost estimates. Currently, the
Company's only significant on-going capital project relates to the completion of
the construction of the ATWOOD BEACON, with approximately $25 to $30 million
remaining to be funded. The Company presently has no plans to incur any upgrade
costs on the SEASCOUT during fiscal year 2003.
Upon execution of the $225 million senior secured credit agreements on
April 1, 2003, the Company borrowed $190 million, of which $172.5 million was
used to repay amounts outstanding under the Company's previous credit
facilities. The credit agreement places restrictions on disposing of any
material assets, paying cash dividends or repurchasing outstanding common stock
and incurring any additional indebtedness, in addition to containing financial
covenant requirements. The bank group's collateral for the credit agreement
consists primarily of preferred mortgage on all of the Company's active drilling
fleet. The Company has an additional $35 million of borrowing capacity under its
current credit facilities, a significant portion of which, if the Company
maintains a high utilization of its drilling equipment, should not be needed for
general operating purposes. The Company will continue to periodically review and
adjust its planned capital expenditures and financing of such expenditures in
light of current market conditions.
PART I. ITEM 3
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including adverse changes in
interest rates and foreign currency exchange rates as discussed below.
INTEREST RATE RISK
All of the $172.5 million of long-term debt outstanding at March 31, 2003,
was floating rate debt. All of this debt was retired on April 1, 2003 when the
Company executed a $225 million senior secured credit agreement with a bank
group. The Company has currently borrowed $190 million under the new credit
agreement, which is also all floating rate debt. Since the Company's current
credit agreement is floating rate debt, interest cost will fluctuate based on
interest rate changes. Because the interest rate on the Company's long-term debt
at March 31, 2003 was at a floating rate, the fair value of the Company's
long-term debt approximated carrying value as of March 31, 2003. With the
interest rate on the Company's long-term debt under its current credit
facilities also at a floating rate, the current outstanding long-term debt of
$190 million also approximate carrying value. The impact on annual cash flow of
a 10% change in the floating rate (approximately 52 basis points) would be
approximately $0.9 million. The Company did not have any open derivative
contract relating to its floating rate debt at March 31, 2003.
FOREIGN CURRENCY RISK
Certain of the Company's subsidiaries have monetary assets and liabilities
that are denominated in a currency other than their functional currencies. Based
on March 31, 2003 amounts, a decrease in the value of 10% in the foreign
currencies relative to the U.S. dollar from the year-end exchange rates would
result in a foreign currency transaction loss of approximately $0.3 million. The
Company did not have any open derivative contracts relating to foreign
currencies at March 31, 2003.
PART I. ITEM 4
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. The Company's disclosure controls
and procedures are designed to ensure that information required to be disclosed
by the Company in its periodic SEC filings is recorded, processed and reported
within the time period specified in the SEC's rules and forms. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic SEC
filings. There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the evaluation.
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on February 13, 2003,
at which the shareholders voted on the election of six directors. Of the
12,916,572 shares of Common Stock present in person or by proxy, the number of
shares voted for or against in connection with the election of each director are
as follows:
NAME CAST FOR VOTES WITHHELD
- -------- ---------- ---------------
Deborah A. Beck 12,513,921 402,651
Robert W. Burgess 12,514,021 402,551
George S. Dotson 11,907,818 1,008,754
Hans Helmerich 11,907,818 1,008,754
John R. Irwin 12,381,566 535,006
William J. Morrissey 12,513,821 402,751
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1.1 Restated Articles of Incorporation dated January 21, 1972
(Incorporated herein by reference to Exhibit 3.1.1 of the
Company's Form 10-K for the year ended September 30, 2002)
3.1.2 Articles of Amendment filed March 28, 1975 (Incorporated
herein by reference to Exhibit 3.1.2 of the Company's
Form 10-K for the year ended September 30, 2002).
3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated
herein by reference to Exhibit 3.1.3 of the Company's
Form 10-K for the year ended September 30, 2002).
3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated
herein by reference to Exhibit 3.1.4 of the Company's
Form 10-K for the year ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17, 2002
(Incorporated herein by reference to Exhibit 3.1.5 of the
Company's Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated (Incorporated herein by
reference to Exhibit 3.2 of the Company's Form 10-K for
the year ended September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002
between the Company and Continental Stock & Transfer & Trust
Company (Incorporated herein by reference to Exhibit 4.1 of
the Company's Form 8-A filed October 21, 2002).
*99.1.1 Certificate of Chief Executive Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*99.1.2 Certificate of Chief Financial Officer pursuant to Section 906 of
Sarbanes - Oxley Act of 2002.
*Filed herewith
(b) Reports on Form 8-K
1) On January 30, 2003, the Company furnished a report on Form 8-K
announcing its earnings for the quarter ended December 31, 2002,
along with supporting information.
2) On February 5, 2003, the Company furnished a report on Form 8-K
announcing that the ATWOOD HUNTER was awarded a one well contract
and that the ATWOOD FALCON will drill two option wells.
3) On February 18, 2003, the Company furnished a report on Form 8-K
announcing the ATWOOD EAGLE had completed its tow to Angola.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: May 14, 2003 /s/JAMES M. HOLLAND
-------------------
James M. Holland
Senior Vice President,
Chief Financial Officer
and Chief Accounting Officer
CERTIFICATIONS
I, John R. Irwin, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation Date";
and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation date;
5) The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: May 14, 2003
/s/JOHN R. IRWIN
John R. Irwin
Chief Executive Officer
I, James M. Holland, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the "Evaluation
Date"; and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Dated: May 14, 2003
/s/JAMES M. HOLLAND
James M. Holland
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1.1 Restated Articles of Incorporation dated January 21, 1972
(Incorporated herein by reference to Exhibit 3.1.1 of the Company's
Form 10-K for the year ended September 30, 2002)
3.1.2 Articles of Amendment dated March 28, 1975 (Incorporated herein by
reference to Exhibit 3.1.2 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated herein by
reference to Exhibit 3.1.3 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated herein by
reference to Exhibit 3.1.4 of the Company's Form 10-K for the year
ended September 30, 2002).
3.1.5 Certificate of Designations of Series A Junior Participating
Preferred Stock of Atwood Oceanics, Inc. dated October 17, 2002
(Incorporated herein by reference to Exhibit 3.1.5 of the Company's
Form 10-K for the year ended September 30, 2002).
3.2 Bylaws, as amended and restated (Incorporated herein by reference
to Exhibit 3.2 of the Company's Form 10-K for the year ended
September 30, 1993).
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of the Company's
Form 8-A filed October 21, 2002).
*99.1.1 Certificate of Chief Executive Officer pursuant to Section 906
of Sarbanes - Oxley Act of 2002.
*99.1.2 Certificate of Chief Financial Officer pursuant to Section 906
of Sarbanes - Oxley Act of 2002.
*Filed herewith
EXHIBIT 99.1.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John R.
Irwin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company
for the periods presented.
Date: May 14, 2003 /s/ JOHN R. IRWIN
John R. Irwin
President and Chief
Executive Officer
EXHIBIT 99.1.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
M. Holland, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company
for the periods presented.
Date: May 14, 2003 /s/JAMES M. HOLLAND
James M. Holland
Senior Vice President and
Chief Financial Officer