10-Q 1 f10q033103.txt -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ---------------- Form 10-Q |X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED 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 ------------------------------------------------------------------------------- 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