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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
COMMISSION FILE NUMBER: 000-49887
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NABORS INDUSTRIES LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-0363970
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2ND FL. INTERNATIONAL TRADING CENTRE
WARRENS
PO BOX 905E
ST. MICHAEL, BARBADOS N/A
(Address of principal executive offices) (Zip Code)
(246) 421-9471
(Registrant's telephone number, including area code)
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____
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The number of common shares par value $.001 per share, outstanding as
of September 30, 2002 was 144,417,743. In addition, our subsidiary, Nabors
Exchangeco (Canada) Inc., has 599,220 exchangeable shares outstanding as of
September 30, 2002 that are exchangeable for Nabors common shares on a
one-for-one basis.
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NABORS INDUSTRIES LTD. AND SUBSIDIARIES
INDEX
PAGE NO.
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Explanatory Note.........................................................................1
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 2002 and December 31, 2001...........................................2
Consolidated Statements of
Income for the Three months and Six months ended
June 30, 2002 and 2001........................................................3
Consolidated Statements of Cash
Flows for the Six months ended
June 30, 2002 and 2001........................................................4
Consolidated Statements of
Changes in Stockholders' Equity for the Six
months ended June 30, 2002 and 2001...........................................5
Notes to Consolidated Financial Statements.....................................6
Report of Independent Accountants.............................................20
Item 4. Controls and Procedures.......................................................21
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K..............................................21
Signatures..............................................................................24
Certifications..........................................................................25
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A to the Quarterly Report on Form 10-Q of
Nabors Industries Ltd., a Bermuda exempted company, for the quarterly period
ended June 30, 2002 is filed to amend Part I, Item 1 and, in particular, to
amend the consolidated balance sheet as of June 30, 2002 and the condensed
consolidated financial information presented in Note 10 of the Notes to the
Consolidated Financial Statements. We refer to Nabors Industries Ltd. as Nabors
or the Company in this report.
The amendment to the consolidated balance sheet as of June 30, 2002 revises the
classification of $483.1 million of the Company's long-term obligations to
short-term. This revision is necessary since the Company's zero coupon
convertible senior debentures due 2020 can be put back to the Company on June
20, 2003 and as such should be classified as current liabilities on June 30,
2002. We had previously disclosed the existence of the June 20, 2003 put in our
Annual Report on Form 10-K for the year ended December 31, 2001, in both the
contractual cash obligations table of Management's Discussion and Analysis of
Financial Condition and Results of Operations and in Note 7 to the Consolidated
Financial Statements, including the maturity of long-term obligations table. See
Note 4 of the Notes to the Consolidated Financial Statements.
The amendment to the condensed consolidating financial information contained in
Note 10 has no impact on the Company's consolidated balance sheets, consolidated
statements of income, consolidated statements of cash flows or statements of
changes in stockholders' equity. These adjustments relate to intercompany
transactions within our consolidated group of companies that were eliminated in
consolidation.
Although several adjustments were made, the significant majority of the
adjustment amount reflects two entries that reduce Nabors Delaware's investment
in consolidated affiliates and Nabors Delaware's stockholders' equity by $1.1
billion and $1.2 billion, respectively. These balances were ultimately
eliminated in consolidation, with no impact on the Company's consolidated
balance sheets.
The first adjustment reflects the retirement of Nabors Delaware's common stock
that was exchanged for Nabors' common stock in connection with the Company's
recent corporate reorganization (see Note 1 of the Notes to the Consolidated
Financial Statements). This adjustment resulted in a reduction in Nabors
Delaware's investment in consolidated affiliates and stockholders' equity of
$1.98 billion. The second adjustment increased Nabors Delaware's investment in
consolidated affiliates and stockholders' equity by $.87 billion to record
Nabors Delaware's equity in the earnings of its subsidiaries for periods prior
to December 31, 2001.
This Amendment also includes a new Item 4 to Part I, as required by the
transition provisions of SEC Release Nos. 33-8124 and 34-46427 adopted effective
August 29, 2002, and the rules adopted under such releases.
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
2002 2001
(Restated,
Note 4)
------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents $ 143,033 $ 198,443
Marketable securities 409,550 343,169
Accounts receivable, net 297,261 361,086
Inventory and supplies 16,592 18,515
Deferred income taxes 27,456 28,145
Prepaid expenses and other current assets 93,431 81,588
----------- -----------
Total current assets 987,323 1,030,946
Marketable securities 236,915 377,025
Property, plant and equipment, net 2,787,503 2,433,247
Goodwill, net 304,377 199,048
Other long-term assets 116,660 111,649
----------- -----------
Total assets $ 4,432,778 $ 4,151,915
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 486,652 $ 2,510
Trade accounts payable 107,628 131,821
Accrued liabilities 136,950 168,022
Income taxes payable 31,447 27,777
----------- -----------
Total current liabilities 762,677 330,130
Long-term debt 1,099,096 1,567,616
Other long-term liabilities 100,731 110,902
Deferred income taxes 306,431 285,401
----------- -----------
Total liabilities 2,268,935 2,294,049
----------- -----------
Commitments and contingencies (Note 6)
Stockholders' equity:
Common shares par value $.001 and $.10, respectively per share:
Authorized common shares 400,000;
issued 144,368 and 147,711, respectively 144 14,771
Capital in excess of par value 1,265,901 1,091,536
Accumulated other comprehensive income 22,283 3,260
Retained earnings 875,515 1,001,079
Less treasury stock, at cost, 0 and 6,822 common shares -- (252,780)
----------- -----------
Total stockholders' equity 2,163,843 1,857,866
----------- -----------
Total liabilities and stockholders' equity $ 4,432,778 $ 4,151,915
----------- -----------
The accompanying notes are an integral part of these
consolidated financial statements.
2
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2002 2001 2002 2001
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues and other income:
Operating revenues $ 346,088 $ 601,484 $ 721,959 $1,132,404
Earnings from unconsolidated affiliates 10,430 9,996 21,396 20,243
Interest income 8,142 15,676 17,393 28,936
Other income, net 2,649 3,056 3,146 12,324
--------- --------- --------- ----------
Total revenues and other income 367,309 630,212 763,894 1,193,907
--------- --------- --------- ----------
Costs and other deductions:
Direct costs 238,190 366,034 487,623 706,356
General and administrative expenses 32,824 33,814 65,490 66,900
Depreciation and amortization 47,984 50,746 91,665 94,476
Interest expense 14,418 14,513 29,033 26,977
--------- --------- --------- ----------
Total costs and other deductions 333,416 465,107 673,811 894,709
--------- --------- --------- ----------
Income before income taxes 33,893 165,105 90,083 299,198
--------- --------- --------- ----------
Income taxes:
Current 2,514 11,388 6,957 26,323
Deferred 5,959 49,702 15,764 85,722
--------- --------- --------- ----------
Total income taxes 8,473 61,090 22,721 112,045
--------- --------- --------- ----------
Net income $ 25,420 $ 104,015 $ 67,362 $ 187,153
--------- --------- --------- ----------
Earnings per share:
Basic $ .18 $ .71 $ .47 $ 1.28
Diluted $ .17 $ .63 $ .45 $ 1.14
Weighted average number of common shares outstanding:
Basic 143,188 146,539 142,079 146,617
--------- --------- --------- ----------
Diluted 150,451 173,309 148,556 171,796
--------- --------- --------- ----------
The accompanying notes are an integral part of these
consolidated financial statements.
3
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
2002 2001
--------- ---------
(IN THOUSANDS)
Cash flows from operating activities:
Net income $ 67,362 $ 187,153
Adjustments to net income:
Depreciation and amortization 91,665 94,476
Deferred income taxes 15,764 85,722
Deferred financing costs amortization 2,196 430
Discount amortization on zero coupon debentures 15,270 14,787
Losses (gains) on disposition of long-term assets 828 (4,988)
Gains on marketable securities (2,950) (7,215)
Foreign currency transaction gains (2,307) (297)
Equity in earnings from unconsolidated affiliates, net of dividends (13,511) (17,442)
Loss on early extinguishment of debt 202 --
Other (15) 411
Increase (decrease), net of effects from acquisitions, from changes in:
Accounts receivable 86,883 (127,863)
Inventory and supplies 1,940 (302)
Prepaid expenses and other current assets (10,882) (3,878)
Other long-term assets 5,565 (11,467)
Trade accounts payable and accrued liabilities (52,059) 20,261
Income taxes payable (1,281) 1,440
Other long-term liabilities (9,985) 9,729
--------- ---------
Net cash provided by operating activities 194,685 240,957
--------- ---------
Cash flows from investing activities:
Purchases of marketable securities, available-for-sale (24,253) (441,279)
Sales of marketable securities, available-for-sale 94,526 28,193
Cash received from dispositions of long-term assets 4,923 7,486
Cash paid for acquisitions of businesses, net (116,668) --
Capital expenditures (198,072) (319,797)
--------- ---------
Net cash used for investing activities (239,544) (725,397)
--------- ---------
Cash flows from financing activities:
Decrease (increase) in restricted cash 867 (33)
Proceeds from long-term borrowings -- 840,338
Reduction of long-term borrowings (21,462) (3,556)
Debt issuance costs -- (12,879)
Common stock transactions 8,328 7,724
Treasury stock transactions -- (111,580)
--------- ---------
Net cash (used for) provided by financing activities (12,267) 720,014
--------- ---------
Effect of exchange rate changes on cash and cash equivalents 1,716 6
--------- ---------
Net (decrease) increase in cash and cash equivalents (55,410) 235,580
Cash and cash equivalents, beginning of period 198,443 197,312
--------- ---------
Cash and cash equivalents, end of period $ 143,033 $ 432,892
--------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
4
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(UNAUDITED)
ACCUMULATED OTHER
COMPREHENSIVE INCOME
-----------------------------
UNREALIZED
GAINS
COMMON SHARES CAPITAL IN (LOSSES) CUMULATIVE TOTAL
----------------- EXCESS OF ON MARKETABLE TRANSLATION RETAINED TREASURY STOCKHOLDERS'
(IN THOUSANDS) SHARES PAR VALUE PAR VALUE SECURITIES ADJUSTMENT EARNINGS STOCK EQUITY
----------------------------------------------------------------------------------------------------
Balances, December 31, 2000 147,155 $ 14,715 $1,145,847 $ 15,897 $ (8,803) $ 643,629 $ (4,817) $1,806,468
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Comprehensive income:
Net income 187,153 187,153
Translation adjustment 559 559
Unrealized losses on
marketable securities,
net of income taxes:
Unrealized holding
losses arising
during the period,
net of income
tax benefit of $1,097 (1,868) (1,868)
Less: reclassification
adjustment for gains
included in net
income, net of income
taxes of $1,848 (3,146) (3,146)
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Total comprehensive
income - - - (5,014) 559 187,153 - 182,698
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Issuance of common shares for
stock options exercised 521 52 7,672 7,724
Tax effect of stock
option deductions (20,398) (20,398)
Repurchase of common shares (42,311) (69,269) (111,580)
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Subtotal 521 52 (55,037) - - - (69,269) (124,254)
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Balances, June 30, 2001 147,676 $ 14,767 $1,090,810 $ 10,883 $ (8,244) $ 830,782 $ (74,086) $1,864,912
----------------------------------------------------------------------------------------------------
Balances, December 31, 2001 147,711 $ 14,771 $1,091,536 $ 12,410 $ (9,150) $1,001,079 $(252,780) $1,857,866
----------------------------------------------------------------------------------------------------
Comprehensive income:
Net income 67,362 67,362
Translation adjustment 23,866 23,866
Unrealized losses on
marketable securities,
net of income taxes:
Unrealized holding
losses arising
during the period,
net of income
tax benefit of $2,410 (4,103) (4,103)
Less: reclassification
adjustment for gains
included in net
income, net of income
taxes of $434 (740) (740)
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Total comprehensive
income - - - (4,843) 23,866 67,362 - 86,385
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Issuance of common shares for
stock options exercised 641 64 8,264 8,328
Issuance of common shares in
connection with the Bayard
warrants exercised 18 2 (2) -
Issuance of common shares in
connection with Enserco
acquisition 2,638 264 162,497 162,761
Nabors Exchangeco shares
exchanged 182 18 (18) -
Tax effect of stock
option deductions 48,503 48,503
Retirement of treasury stock (6,822) (682) (59,172) (192,926) 252,780 -
Change in par value (14,293) 14,293 -
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Subtotal (3,343) (14,627) 174,365 - - (192,926) 252,780 219,592
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Balances, June 30, 2002 144,368 $ 144 $1,265,901 $ 7,567 $ 14,716 $ 875,515 - $2,163,843
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The accompanying notes are an integral part of these
consolidated financial statements.
5
NABORS INDUSTRIES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 RECENT CORPORATE REORGANIZATION
Effective June 24, 2002, Nabors Industries Ltd., a Bermuda exempted
company (Nabors), became the successor to Nabors Industries, Inc., a Delaware
corporation (Nabors Delaware), following a corporate reorganization. The
reorganization was accomplished through the merger of an indirect, newly formed
Delaware subsidiary owned by Nabors into Nabors Delaware. Nabors Delaware was
the surviving company in the merger and became a wholly-owned, indirect
subsidiary of Nabors. Upon consummation of the merger, all outstanding shares of
Nabors Delaware common stock automatically converted into the right to receive
Nabors common shares, with the result that the shareholders of Nabors Delaware
on the date of the merger became the shareholders of Nabors. Nabors and its
subsidiaries continue to conduct the businesses previously conducted by Nabors
Delaware and its subsidiaries. The reorganization has been accounted for as a
reorganization of entities under common control and accordingly, it did not
result in any changes to the consolidated amounts of assets, liabilities and
stockholders' equity.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The unaudited consolidated financial statements of Nabors are prepared
in conformity with accounting principles generally accepted in the United States
of America, or US GAAP. Nabors is the successor to Nabors Delaware following a
corporate reorganization, as described in Note 1. Pursuant to the rules and
regulations of the US Securities and Exchange Commission, certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with US GAAP have been omitted. Therefore, these
financial statements should be read along with our Annual Report on Form 10-K
and Current Report on Form 8-K dated as of August 20, 2002 for the year ended
December 31, 2001. In our management's opinion, the consolidated financial
statements contain all adjustments necessary to present fairly our financial
position as of June 30, 2002, and the results of our operations, for each of the
three-month and six-month periods ended June 30, 2002 and 2001 and our
consolidated statements of changes in stockholders' equity and of cash flows for
each of the six-month periods ended June 30, 2002 and 2001, in accordance with
US GAAP. Interim results for the six months ended June 30, 2002 may not be
indicative of results that will be realized for the full year ending December
31, 2002.
Our independent accountants have performed a review of, and issued a
report on, these consolidated interim financial statements in accordance with
standards established by the American Institute of Certified Public Accountants.
Pursuant to Rule 436(c) under the US Securities Act of 1933, this report should
not be considered a part of any registration statement prepared or certified
within the meanings of Sections 7 and 11 of the Securities Act.
Principles of Consolidation
Our consolidated financial statements include the accounts of Nabors
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Investments in entities where we have the ability to exert significant
influence, but where we do not control their operating and financial policies,
are accounted for using the equity method. Our share of the net income of these
entities is recorded as earnings from unconsolidated affiliates in the
consolidated statements of income, and our investment in these entities is
carried as a single amount in the consolidated balance sheets. Investments in
net assets of affiliated entities accounted for using the equity method totaled
$58.9 million and $55.1 million as of June 30, 2002 and December 31, 2001,
respectively, and are included in other long-term assets in the consolidated
balance sheets.
Reclassifications
Certain immaterial reclassifications have been made to prior periods to
conform to the current period presentation, with no effect on our consolidated
financial position, results of operations or cash flows (See Recent Accounting
Pronouncements).
Property, Plant and Equipment
Effective October 1, 2001, we changed the depreciable lives of our
drilling and workover rigs from 4,200 to 4,900 active days, our jackup rigs from
4,200 to 8,030 active days and certain other drilling equipment to better
reflect the estimated useful lives of these assets. The effect of this change in
accounting estimate was accounted for on a prospective
6
basis beginning October 1, 2001 and increased net income by approximately $5.1
million ($.03 per diluted share) for the current quarter and approximately $10.7
million ($.07 per diluted share) for the six months ended June 30, 2002.
Foreign Currency Risk
We operate in a number of international areas and are involved in
transactions denominated in currencies other than US dollars, which exposes us
to foreign exchange rate risk. The most significant exposures arise in
connection with our operations in Canada and Saudi Arabia, which usually are
substantially unhedged. In Saudi Arabia, upon renewal of our contracts, we have
been converting riyal-denominated contracts to US dollar-denominated contracts
in order to reduce our exposure to the Saudi riyal even though that currency has
been pegged to the US dollar at a rate of 3.745 Saudi riyal to 1.00 US dollar
since 1986. We cannot guarantee that we will be able to convert future
riyal-denominated contracts to US dollar-denominated contracts or that the riyal
exchange rate will continue in effect as in the past.
At various times, we utilize local currency borrowings (foreign
currency denominated debt), the payment structure of customer contracts and
foreign exchange contracts to selectively hedge our exposure to exchange rate
fluctuations in connection with monetary assets, liabilities, cash flows and
commitments denominated in certain foreign currencies. A foreign exchange
contract is a foreign currency transaction, defined as an agreement to exchange
different currencies at a given future date and at a specified rate.
On March 26, 2002, in anticipation of closing the Enserco acquisition
discussed in Note 3, we entered into two foreign exchange contracts with a total
notional value of Cdn. $115.9 million and maturity dates of April 29, 2002.
Additionally, on April 9, 2002, we entered into a third foreign exchange
contract with a notional value of Cdn. $50.0 million maturing April 29, 2002.
The notional amounts of these contracts were used to fund the cash portion of
the Enserco acquisition purchase price. The notional amounts of these contracts
represented the amount of foreign currency purchased at maturity and did not
represent our exposure on these contracts. Although such contracts served as an
economic hedge against our foreign currency risk related to the cash portion of
the acquisition cost, we accounted for these contracts as speculative as
required by Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and therefore
marked them to market as of March 31, 2002. We recorded a US $.17 million loss
in our statement of income as of March 31, 2002. Upon maturity of these foreign
exchange contracts on April 29, 2002, we recognized a gain of approximately US
$1.95 million in our statement of income for the three months ended June 30,
2002.
Recent Accounting Pronouncements
SFAS No. 142, "Goodwill and Other Intangible Assets", addresses the
accounting for goodwill and other intangible assets after an acquisition. The
most significant changes made by SFAS 142 are: (1) goodwill and intangible
assets with indefinite lives no longer will be amortized; (2) goodwill and
intangible assets with indefinite lives must be tested for impairment at least
annually; and (3) the amortization period for those intangible assets with
finite lives no longer will be limited to 40 years. The effect of no longer
amortizing goodwill would have increased net income by approximately $1.1
million ($.01 per diluted share) for the prior year quarter and approximately
$2.3 million ($.01 per diluted share) for the six months ended June 30, 2001.
We adopted SFAS 142 effective January 1, 2002 and during the current
quarter, we performed our initial goodwill impairment assessment as required. As
part of that assessment, we determined that our 11 business units represent our
reporting units as defined by SFAS 142. We determined the aggregate carrying
values and fair values of all such reporting units, both of which were measured
as of the January 1, 2002 adoption date. We calculated the fair value of each
reporting unit based on discounted cash flows and determined there was no
goodwill impairment.
We adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", effective January 1, 2002, as required. This statement
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. Due to the nature of our business, this new accounting
pronouncement had no impact on our reported results of operations or financial
position.
We adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections", effective
April 1, 2002. Due to the nature of our business, Financial Accounting Standards
Board (FASB) 44, 64 and Amendment of FASB 13 are not applicable. SFAS 145
eliminates SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt",
and states that gains and losses from the extinguishment of debt should be
classified as extraordinary items only if they meet the criteria in Accounting
Principles Board (APB) Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". APB
30 defines extraordinary items as events and transactions that are distinguished
by their unusual nature and by the infrequency of their occurrence. Accordingly,
we no longer classify gains and losses from extinguishment of debt that are
usual and frequent as extraordinary items and we reclassified to other income
any similar debt extinguishment items that had been reported as extraordinary
items in prior accounting periods. In conjunction with adopting SFAS 145 we
reclassified an extraordinary loss recorded during the first quarter of the year
totaling $.13 million, net of taxes of $.08 million, to other income with the
related income tax component
7
reclassified to income tax expense.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement will require us to
recognize costs associated with exit or disposal activities when they are
incurred rather than when we commit to an exit or disposal plan. Examples of
costs covered by this guidance include lease termination costs, employee
severance costs that are associated with a restructuring, discontinued
operations, plant closings or other exit or disposal activities. The provisions
of this statement are effective for fiscal years beginning after December 31,
2002 and will impact any exit or disposal activities initiated after January 1,
2003. This statement does not currently impact Nabors.
We adopted Emerging Issues Task Force (EITF) No. 01-14, "Income
Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses
Incurred", in the current quarter. Previously, we recognized reimbursements
received as a reduction to the related direct costs. EITF 01-14 requires that
reimbursements received be included in operating revenues and "out-of-pocket"
expenses be included in direct costs. Accordingly, reimbursements received from
our customers have been reclassified to revenues for all periods presented. The
effect of adopting EITF 01-14 increased operating revenues and direct costs from
previously reported amounts by $12.9 million and $16.7 million for the three
months ended June 30, 2002 and 2001, and $28.0 million and $33.8 million for the
six months ended June 30, 2002 and 2001, respectively.
NOTE 3 ACQUISITIONS
On March 18, 2002, we acquired, for cash, 20.5% of the issued and
outstanding shares of Enserco Energy Service Company, Inc., a Canadian
publicly-held corporation, for Cdn. $15.50 per share for a total price of Cdn.
$83.2 million (US $52.6 million). At March 31, 2002, our investment in Enserco
was accounted for using the equity method of accounting.
On April 26, 2002, we completed our acquisition of Enserco by
purchasing their remaining outstanding shares for Cdn. $15.65 per share by
paying cash of Cdn. $100.1 million (US $64.1 million) and by issuing 2,638,526
shares of Nabors Delaware common stock and 910,556 shares of exchangeable stock
of Nabors Exchangeco (Canada) Inc., an indirect wholly-owned Canadian subsidiary
of Nabors Delaware. The Nabors Exchangeco shares are exchangeable for Nabors
common shares on a one-for-one basis. Additionally, these exchangeable shares
have essentially identical rights as Nabors common shares, including but not
limited to voting rights and the right to receive dividends, if any. The value
of the Nabors Delaware and Nabors Exchangeco shares issued totaled Cdn. $254.2
million, or US $162.8 million. Enserco's results of operations were consolidated
into ours commencing on April 26, 2002. In addition, we assumed Enserco debt
totaling Cdn. $33.4 million (US $21.3 million). The Enserco purchase price has
been allocated based on preliminary estimates of the fair market value of assets
acquired and liabilities assumed as of the acquisition date and resulted in
goodwill of approximately US $100 million. The purchase price allocation for the
Enserco acquisition is subject to adjustment as additional information becomes
available and will be finalized by December 31, 2002.
Enserco provided land drilling, well-servicing and workover services in
Canada and operated a fleet of 193 well-servicing rigs and 30 drilling rigs on
the acquisition date. The Enserco acquisition increases our position in Canada
with assets that are relatively new and in excellent condition, allowing us to
provide services to many of our key US customers who have increased their
presence in Canada as it has become even more strategic to the North American
gas supply market.
In late June 2002, Nabors acquired the RBF 209 for approximately $21
million. This 200 foot, mat support, cantilever jackup has been renamed Nabors
Rig 659. It is being upgraded at a cost of approximately $4.5 million for work
on a 4.5 year contract in Mexico for PEMEX commencing September 2002.
NOTE 4 LONG-TERM DEBT - REVISED
During the six months ended June 30, 2002, we purchased $.6 million
face value of our 8-5/8% senior subordinated notes due April 2008 in the open
market at a price of 108%. In addition, we purchased $4.7 million face value of
our 6.8% senior unsecured notes due April 2004 in the open market at a price of
104%. Upon settlement of these transactions, we paid $5.7 million and recognized
a pretax loss of approximately $.2 million, resulting from the repurchases of
these notes at prices higher than the amounts recorded on our books.
Additionally, we paid off Cdn. $21.0 million (US $13.2 million) of the debt
assumed in the Enserco acquisition. In the first quarter of 2002, we made a $2.5
million scheduled principal payment relating to our medium-term notes.
As a result of the reorganization, discussed in Note 1, we may have
failed to comply with a covenant contained in our $200 million credit facility
agreement and a related $30 million letter of credit facility. At the time of
the default, there were no outstanding borrowings on the $200 million unsecured
revolving credit facility and approximately $23 million outstanding on the
related letter of credit facility. Since the $200 million credit facility was
scheduled to mature on September 5, 2002 and we had cash, short-term and
long-term marketable securities balances as of July 31, 2002 totaling $814.3
million, we have notified the bank that we are terminating the facility. We plan
on replacing this credit facility with a similar facility during the fourth
quarter of 2002. The bank has provided a waiver on the letter of credit
facility.
During June 2000, we completed a private placement of zero coupon
convertible senior debentures due 2020. On issuance, the aggregate principal
amount of the debentures at maturity totaled $825 million. The debentures were
issued at a discount with net proceeds to Nabors, after expenses, totaling
approximately $495.0 million. The debentures can be put to us on June 20, 2003,
June 20, 2008 and June 20, 2013 for a purchase price equal to the issue price
plus accrued original issue discount to the date of repurchase. Based on the
ability of the debenture holders to exercise their put option on June 20, 2003,
we have revised the classification of the outstanding principal amount of the
debentures of $483.1 million as of June 30, 2002 from long-term obligations to
current liabilities in the consolidated balance sheet as of June 30, 2002.
NOTE 5 COMMON SHARES
In conjunction with our acquisition of Enserco during April, Nabors
Delaware issued 2,638,526 shares of Nabors Delaware common stock and 910,556
shares of exchangeable stock of Nabors Exchangeco (Canada) Inc. that are now
exchangeable for our common shares on a one-for-one basis (Note 3). The
exchangeable stock has been recorded as an increase in capital in excess of par
value. Subsequent to the acquisition 181,789 Exchangeco shares have been
exchanged, resulting in approximately 728,767 exchangeable shares outstanding as
of June 30, 2002.
As a result of the corporate reorganization (Note 1), the authorized
share capital of Nabors consists of 400 million common shares, par value $.001
per share, and 25 million preferred shares, par value $.001 per share. Common
shares issued were 144,368,390 at $.001 par value at June 30, 2002 compared to
144,368,390 at $.10 par value immediately preceding the reorganization. The
decrease in par value of common stock from $.10 to $.001 is recorded as an
increase to capital in excess of par value and a decrease in common shares in
our Consolidated Financial Statements.
In conjunction with the reorganization, 6.8 million shares of treasury
stock outstanding were retired, as Bermuda law does not recognize the concept of
treasury stock. The effect of this retirement reduced common shares by $.7
million, capital in excess of par value by $59.2 million and retained earnings
by $192.9 million.
NOTE 6 COMMITMENTS AND CONTINGENCIES
Capital Expenditures
As of June 30, 2002, we had outstanding capital expenditure purchase
commitments of approximately $36.0 million primarily for rig-related enhancing
and sustaining capital expenditures.
Contingencies
Self Insurance Accruals. Nabors is self-insured for certain losses
relating to workers' compensation, general liability, property damage and
employee medical benefits. Effective April 1, 2002, our exposure (that is our
deductible) per occurrence ranges from $1.0 million for workers' compensation to
between $2.0 million and $5.0 million for employer liability, Jones Act and
general liability and $10.0 million for rig physical damage. Therefore, we are
self-insured for rigs with replacement values less than $10.0 million. As a
result, if a Nabors' rig with a net book value of $9.0 million were destroyed,
we would record a $9.0 million loss in the period in which the loss event
occurred. In previous years, we had physical damage insurance for essentially
all of our rigs, with a substantially lower deductible of $.25 million per
occurrence. Thus, historically we have not recorded material losses in our
financial statements related to the destruction of one of our rigs. We have
purchased stop-loss coverage in order to limit our aggregate exposure to certain
physical damage claims for insured rigs, that is those rigs with replacement
values in excess of $10.0 million. The effect of this coverage is that our
maximum physical damage loss on insured rigs would be $20.0 million plus $1.0
million per occurrence. There is no assurance that such coverage will adequately
protect Nabors against liability from all potential consequences.
Litigation. In Verdin v. R&B Falcon Drilling USA, Inc., et al., Civil
Action No. G-00-488, in the United States District Court for the Southern
District of Texas, Galveston Division, the class action lawsuit against our
offshore drilling subsidiaries alleging, among other things, conspiracy to
depress wages and benefits paid to our offshore employees, we have reached a
settlement, which was approved by the court on April 22, 2002. The settlement
payment was made in the second quarter, and the amount paid by Nabors'
subsidiaries was not material to Nabors.
8
On May 23, 2002, Steve Rosenberg, an individual shareholder of the
company, filed a complaint against the company and its directors in the United
States District Court for the Southern District of Texas (Civil Action No.
02-1942), alleging that Nabors' May 10, 2002 proxy statement/prospectus
contained certain material misstatements and omissions in violation of federal
securities laws and state law. Nabors' May 10, 2002 proxy statement/prospectus
was sent to shareholders in connection with the special meeting to consider and
vote on Nabors' proposed reorganization and effective reincorporation in
Bermuda. The AFL-CIO moved to intervene in Civil Action No. 02-1942 and filed a
complaint containing similar allegations. On June 5, 2002, Marilyn Irey, an
individual shareholder of the company, filed a complaint in the United States
District Court for the Southern District of Texas (Civil Action No. 02-2108)
that is nearly identical to Steve Rosenberg's complaint. The three shareholders
requested that the Court either enjoin the closing of the shareholder vote on
the scheduled date or the effectuation of the reorganization. In addition, two
of the shareholders (Steve Rosenberg and Marilyn Irey) purported to bring a
class action on behalf of all shareholders, alleging that Nabors and its
directors violated their state law fiduciary duties by making these alleged
misstatements and omissions. These two shareholders, on behalf of their
purported class, seek monetary damages for their state law claims. Since the
beginning of the litigation, two of the shareholders (Steve Rosenberg and the
AFL-CIO) have amended their complaints, but have not added any substantive
allegations.
On June 13, 2002, the Court granted the AFL-CIO's motion to intervene.
On June 15, 2002, the Court denied a motion for temporary restraining order
brought by two of the shareholders (Steve Rosenberg and the AFL-CIO) in their
attempts to prevent the closing of Nabors' reorganization and its effective
reincorporation in Bermuda. On July 2, 2002, the Court granted an agreed motion
to consolidate Civil Action No. 02-2108 into Civil Action No. 02-1942. Nabors
and its directors have moved to dismiss the lawsuits of all three shareholders,
and that motion is currently pending. Nabors and its directors believe that the
allegations in this lawsuit are without merit, and Nabors and its directors will
defend vigorously the claims brought against them. We are unable, however, to
predict the outcome of this action or the costs to be incurred in connection
with its defense and there can be no assurance that this litigation will be
resolved in our favor.
Nabors and its subsidiaries are defendants or otherwise involved in a
number of other lawsuits in the ordinary course of their business. In the
opinion of management, Nabors' ultimate liability with respect to these pending
lawsuits is not expected to have a significant or material adverse effect on
Nabors' consolidated financial position, cash flows or results of operations.
NOTE 7 EARNINGS PER SHARE
A reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations is as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2002 2001 2002 2001
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net income (numerator):
Net income - basic $ 25,420 $104,015 $ 67,362 $187,153
Add interest expense on assumed conversion of our
zero coupon convertible senior debentures,
net of tax (1):
$825 million due 2020 -- 2,009 -- 4,005
$1.381 billion due 2021 -- 3,311 -- 5,311
-------- -------- -------- --------
Adjusted net income - diluted $ 25,420 $109,335 $ 67,362 $196,469
-------- -------- -------- --------
Earnings per share:
Basic $ .18 $ .71 $ .47 $ 1.28
Diluted $ .17 $ .63 $ .45 $ 1.14
Shares (denominator):
Weighted average number of shares outstanding-basic (1) 143,188 146,539 142,079 146,617
Net effect of dilutive stock options and warrants based
on the treasury stock method 7,263 8,140 6,477 8,438
Assumed conversion of our zero coupon
convertible senior debentures (2):
$825 million due 2020 -- 8,859 -- 8,859
$1.381 billion due 2021 -- 9,771 -- 7,882
-------- -------- -------- --------
Weighted average number of shares outstanding-diluted 150,451 173,309 148,556 171,796
-------- -------- -------- --------
(1) Includes the weighted average number of common shares of Nabors and the
weighted average number of exchangeable shares of Nabors Exchangeco
(Canada) Inc. issued as part of the Enserco acquisition.
(2) Diluted earnings per share for the three months and six months ended June
30, 2001 reflects the assumed conversion of our $825 million and $1.381
billion zero coupon convertible senior debentures, as the conversion in
those periods would have been dilutive. Diluted earnings per share for the
three months and six months ended June 30, 2002 does not reflect the
assumed conversion of our $825 million and $1.381 billion zero coupon
convertible senior debentures, as the conversion in those periods would
have been anti-dilutive.
9
NOTE 8 SUPPLEMENTAL INCOME STATEMENT INFORMATION
Other income, net includes the following:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2002 2001 2002 2001
-------- -------- -------- --------
(IN THOUSANDS)
Gains on marketable securities $ 475 $ 3,354 $ 2,950 $ 7,215
(Losses) gains on disposition of long-term assets (722) (189) (828) 4,988
Foreign currency transaction gains (losses) 2,524 (185) 2,307 297
Corporate reorganization expense (1,316) -- (3,358) --
Other 1,688 76 2,075 (176)
-------- -------- -------- --------
$ 2,649 $ 3,056 $ 3,146 $ 12,324
-------- -------- -------- --------
NOTE 9 SEGMENT INFORMATION
The following table sets forth financial information with respect to our
reportable segments:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
(IN THOUSANDS)
Operating revenues and Earnings from
unconsolidated affiliates:
Contract drilling(1) $ 326,173 $ 572,687 $ 684,605 $ 1,075,921
Manufacturing and logistics(2) 40,214 74,168 79,933 138,940
Other(3) (9,869) (35,375) (21,183) (62,214)
----------- ----------- ----------- -----------
Total $ 356,518 $ 611,480 $ 743,355 $ 1,152,647
----------- ----------- ----------- -----------
Income derived from operating activities:(4)
Contract drilling(1) $ 39,719 $ 145,846 $ 100,889 $ 259,059
Manufacturing and logistics(2) 7,235 27,769 16,441 50,701
Other(5) (9,434) (12,729) (18,753) (24,845)
----------- ----------- ----------- -----------
Total $ 37,520 $ 160,886 $ 98,577 $ 284,915
Interest expense (14,418) (14,513) (29,033) (26,977)
Interest income 8,142 15,676 17,393 28,936
Other income, net 2,649 3,056 3,146 12,324
----------- ----------- ----------- -----------
Income before income taxes $ 33,893 $ 165,105 $ 90,083 $ 299,198
----------- ----------- ----------- -----------
JUNE 30, DECEMBER 31,
2002 2001
----------- -----------
Total assets:
Contract drilling (6) $ 3,271,637 $ 2,872,534
Manufacturing and logistics (7) 310,448 311,629
Other (5) 850,693 967,752
----------- -----------
Total $ 4,432,778 $ 4,151,915
----------- -----------
(1) Includes Earnings from unconsolidated affiliates, accounted for by the
equity method, of $7.1 million and $4.2 million for the three-month periods
ended June 30, 2002 and 2001, and $13.5 million and $8.4 million for the
six-month periods ended June 30, 2002 and 2001, respectively.
(2) Includes Earnings from unconsolidated affiliates, accounted for by the
equity method, of $3.3 million and $5.8 million for the three-month periods
ended June 30, 2002 and 2001, and $7.9 million and $11.8 million for the
six-month periods ended June 30, 2002 and 2001, respectively.
(3) Includes the elimination of inter-segment manufacturing and logistics
sales.
(4) Income derived from operating activities is computed by: subtracting direct
costs, general and administrative expenses, and depreciation and
amortization expense from Operating revenues and then adding Earnings from
unconsolidated affiliates. Such amounts should not be used as a substitute
to those amounts reported under accounting principles generally accepted in
the United States of America. However, management does evaluate the
performance of its business units and the consolidated company based on
income derived from operating activities because it believes that this
financial measure is an accurate reflection of the ongoing profitability of
our company.
(5) Includes the elimination of inter-segment transactions and unallocated
corporate expenses, assets and capital expenditures.
(6) Includes $26.5 million and $22.3 million of investments in unconsolidated
affiliates, accounted for by the equity method, at June 30, 2002 and
December 31, 2001, respectively.
(7) Includes $32.4 million and $32.8 million of investments in unconsolidated
affiliates, accounted for by the equity method, at June 30, 2002 and
December 31, 2001, respectively.
10
NOTE 10 CONDENSED CONSOLIDATING FINANCIAL INFORMATION - REVISED
In connection with the corporate reorganization on June 24, 2002 as
discussed in Note 1, Nabors fully and unconditionally guaranteed all of the
issued public debt securities of Nabors Delaware at the effective time of the
merger. The following condensed consolidating financial information is included
so that separate financial statements of Nabors Delaware are not required to be
filed with the U.S. Securities and Exchange Commission. The condensed
consolidating financial statements present Nabors' and Nabors Delaware's
investments in their subsidiaries using the equity method of accounting. Nabors
was formed on December 11, 2001 and as such is not presented for the three and
six months ended June 30, 2001.
The following condensed consolidating financial information presents:
condensed consolidating balance sheets as of June 30, 2002 and December 31, 2001
and the related income statements for the three and six months ended June 30,
2002 and 2001 and cash flow statements for the six months ended June 30, 2002
and 2001 of (a) Nabors, Parent-Guarantor after June 24, 2002 and
Non-Parent/Non-Guarantor prior to June 24, 2002, (b) Nabors Delaware, issuer of
existing debt, (c) the non-guarantor subsidiaries, (d) consolidating adjustments
necessary to consolidate Nabors and its subsidiaries and (e) Nabors on a
consolidated basis.
The following information has been revised from that previously filed to reflect
certain adjustments. This revision has no impact on the Company's consolidated
balance sheets, consolidated statements of income, consolidated statements of
cash flows or statements of changes in stockholders' equity. These adjustments
relate to intercompany transactions within our consolidated group of companies
that were eliminated in consolidation.
Although several adjustments were made, the significant majority of the
adjustment amount reflects two entries that reduce Nabors Delaware's investment
in consolidated affiliates and Nabors Delaware's stockholders' equity by $1.1
billion and $1.2 billion, respectively. These balances were ultimately
eliminated in consolidation, with no impact on the Company's consolidated
balance sheets.
The first adjustment reflects the retirement of Nabors Delaware's common stock
that was exchanged for Nabors' common stock in connection with the Company's
recent corporate reorganization (see Note 1 of the Notes to the Consolidated
Financial Statements). This adjustment resulted in a reduction in Nabors
Delaware's investment in consolidated affiliates and stockholders' equity of
$1.98 billion. The second adjustment increased Nabors Delaware's investment in
consolidated affiliates and stockholders' equity by $.87 billion to record
Nabors Delaware's equity in the earnings of its subsidiaries for periods prior
to December 31, 2001.
Condensed Consolidating Balance Sheets
June 30, 2002
---------------------------------------------------------------------------
Nabors Nabors Other
(Parent/ Delaware Subsidiaries Consolidating
Guarantor) (Issuer) (Non-Guarantor) Adjustments Total
---------- ---------- --------------- ------------- ----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ 25 $ 12 $ 142,996 $ -- $ 143,033
Marketable securities -- -- 409,550 -- 409,550
Accounts receivable, net -- -- 297,261 -- 297,261
Inventory and supplies -- -- 16,592 -- 16,592
Prepaid expenses and other current
assets -- 25 120,862 -- 120,887
---------- ---------- ---------- ------------ ----------
Total current assets 25 37 987,261 -- 987,323
Marketable securities -- -- 236,915 -- 236,915
Investments in affiliates 176,910 1,764,777 2,226,001 (4,108,791) 58,897
Property, plant and equipment, net -- -- 2,787,503 -- 2,787,503
Goodwill, net -- -- 304,377 -- 304,377
Intercompany receivables 1,986,957 1,953,133 -- (3,940,090) --
Other long-term assets -- 11,042 46,721 -- 57,763
---------- ---------- ---------- ------------ ----------
Total assets $2,163,892 $3,728,989 $6,588,778 $ (8,048,881) $4,432,778
========== ========== ========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt -- 483,087 3,565 -- 486,652
Trade accounts payable -- 20 107,608 -- 107,628
Accrued liabilities -- 2,564 134,386 -- 136,950
Income taxes payable -- (189) 31,636 -- 31,447
---------- ---------- ---------- ------------ ----------
Total current liabilities -- 485,482 277,195 -- 762,677
Long-term debt -- 1,051,373 47,723 -- 1,099,096
Other long-term liabilities -- -- 100,731 -- 100,731
Deferred income taxes -- 28,291 278,140 -- 306,431
Intercompany payables 49 -- 3,940,041 (3,940,090) --
---------- ---------- ---------- ------------ ----------
Total liabilities 49 1,565,146 4,643,830 (3,940,090) 2,268,935
---------- ---------- ---------- ------------ ----------
Stockholders' equity 2,163,843 2,163,843 1,944,948 (4,108,791) 2,163,843
---------- ---------- ---------- ------------ ----------
Total liabilities and stockholders'
equity $2,163,892 $3,728,989 $6,558,778 $ (8,048,881) $4,432,778
========== ========== ========== ============ ==========
11
December 31, 2001
-------------------------------------------------------------------------
Nabors Nabors Other
(Non-Parent/ Delaware Subsidiaries Consolidating
Non-Guarantor) (Issuer) (Non-Guarantor) Adjustments Total
-------------- ---------- --------------- ------------- ----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 2,201 $ 196,242 $ -- $ 198,443
Marketable securities -- -- 343,169 -- 343,169
Accounts receivable, net -- -- 361,086 -- 361,086
Inventory and supplies -- -- 18,515 -- 18,515
Prepaid expenses and other current
assets -- 417 109,316 -- 109,733
--------- ---------- ---------- ----------- ----------
Total current assets -- 2,618 1,028,328 -- 1,030,946
Marketable securities -- -- 377,025 -- 377,025
Investments in affiliates 13 1,467,127 55,141 (1,467,140) 55,141
Property, plant and equipment, net -- -- 2,433,247 -- 2,433,247
Goodwill, net -- -- 199,048 -- 199,048
Intercompany receivables -- 1,931,893 -- (1,931,893) --
Other long-term assets -- 13,574 42,934 -- 56,508
--------- ---------- ---------- ----------- ----------
Total assets $ 13 $3,415,212 $4,135,723 $(3,399,033) $4,151,915
========= ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt -- -- 2,510 -- 2,510
Trade accounts payable -- 23 131,798 -- 131,821
Accrued liabilities -- 4,372 163,650 -- 168,022
Income taxes payable -- (189) 27,966 -- 27,777
--------- ---------- ---------- ----------- ----------
Total current liabilities -- 4,206 325,924 -- 330,130
Long-term debt -- 1,523,915 43,701 -- 1,567,616
Other long-term liabilities -- -- 110,902 -- 110,902
Deferred income taxes -- 29,225 256,176 -- 285,401
Intercompany payables 1 -- 1,931,892 (1,931,893) --
--------- ---------- ---------- ----------- ----------
Total liabilities 1 1,557,346 2,668,595 (1,931,893) 2,294,049
--------- ---------- ---------- ----------- ----------
Stockholders' equity 12 1,857,866 1,467,128 (1,467,140) 1,857,866
--------- ---------- ---------- ----------- ----------
Total liabilities and stockholders'
equity $ 13 $3,415,212 $4,135,723 $(3,399,033) $4,151,915
========= ========== ========== =========== ==========
12
Condensed Consolidating Income Statements
Three months ended June 30, 2002
----------------------------------------------------------------------
Nabors Nabors Other
(Parent/ Delaware Subsidiaries Consolidating
Guarantor) (Issuer) (Non-Guarantor) Adjustments Total
---------- ---------- --------------- ------------- ---------
(IN THOUSANDS)
Revenues and other income:
Operating revenues $ -- $ -- $ 346,088 $ -- $ 346,088
Earnings from unconsolidated affiliates -- -- 10,430 -- 10,430
Earnings from consolidated affiliates 22,166 25,396 25,436 (72,998) --
Interest income -- (5) 8,147 -- 8,142
Intercompany interest income 3,261 13,516 -- (16,777) --
Other income, net -- 633 2,016 -- 2,649
--------- --------- --------- --------- ---------
Total revenues and other income 25,427 39,540 392,117 (89,775) 367,309
--------- --------- --------- --------- ---------
Costs and other deductions:
Direct costs -- -- 238,190 -- 238,190
General and administrative expenses 7 126 32,691 -- 32,824
Depreciation and amortization -- -- 47,984 -- 47,984
Interest expense -- 13,954 464 -- 14,418
Intercompany interest expense -- -- 16,777 (16,778) --
--------- --------- --------- --------- ---------
Total costs and other deductions 7 14,080 336,106 (16,777) 333,416
--------- --------- --------- --------- ---------
Income before income taxes 25,420 25,460 56,011 (72,998) 33,893
--------- --------- --------- --------- ---------
Income taxes:
Current -- -- 2,514 -- 2,514
Deferred -- 24 5,935 -- 5,959
--------- --------- --------- --------- ---------
Total income taxes -- 24 8,449 -- 8,473
--------- --------- --------- --------- ---------
Net income $ 25,420 $ 25,436 $ 47,562 $ (72,998) $ 25,420
========= ========= ========= ========= =========
13
Three months ended June 30, 2001
------------------------------------------------------
Nabors Other
Delaware Subsidiaries Consolidating
(Issuer) (Non-Guarantor) Adjustments Total
--------- --------------- ------------- ---------
(IN THOUSANDS)
Revenues and other income:
Operating revenues $ -- $ 601,484 $ -- $ 601,484
Earnings from unconsolidated affiliates -- 9,996 -- 9,996
Earnings from consolidated affiliates 100,066 -- (100,066) --
Interest income 16 15,660 -- 15,676
Intercompany interest income 20,581 -- (20,581) --
Other income, net (280) 3,336 -- 3,056
--------- --------- ---------- ---------
Total revenues and other income 120,383 630,476 (120,647) 630,212
--------- --------- ---------- ---------
Costs and other deductions:
Direct costs -- 366,034 -- 366,034
General and administrative expenses 73 33,741 -- 33,814
Depreciation and amortization -- 50,746 -- 50,746
Interest expense 13,976 537 -- 14,513
Intercompany interest expense -- 20,581 (20,581) --
--------- --------- ---------- ---------
Total costs and other deductions 14,049 471,639 (20,581) 465,107
--------- --------- ---------- ---------
Income before income taxes 106,334 158,837 (100,066) 165,105
--------- --------- ---------- ---------
Income taxes:
Current -- 11,388 -- 11,388
Deferred 2,319 47,383 -- 49,702
--------- --------- ---------- ---------
Total income taxes 2,319 58,771 -- 61,090
--------- --------- ---------- ---------
Net income $ 104,015 $ 100,066 $ (100,066) $ 104,015
========= ========= ========== =========
14
Six months ended June 30, 2002
----------------------------------------------------------------------
Other
Nabors Nabors Subsidiaries
(Parent/ Delaware (Non- Consolidating
Guarantor) (Issuer) Guarantor) Adjustments Total
--------- --------- ------------ ------------- ---------
(IN THOUSANDS)
Revenues and other income:
Operating revenues $ -- $ -- $ 721,959 $ -- $ 721,959
Earnings from unconsolidated affiliates -- -- 21,396 -- 21,396
Earnings from consolidated affiliates 64,113 68,972 67,383 (200,468) --
Interest income -- 15 17,378 -- 17,393
Intercompany interest income 3,261 27,464 -- (30,725) --
Other income, net -- (1,780) 4,926 -- 3,146
--------- --------- --------- --------- ---------
Total revenues and other income 67,374 94,671 833,042 (231,193) 763,894
--------- --------- --------- --------- ---------
Costs and other deductions:
Direct costs -- -- 487,623 -- 487,623
General and administrative expenses 12 268 65,210 -- 65,490
Depreciation and amortization -- -- 91,665 -- 91,665
Interest expense -- 27,954 1,079 -- 29,033
Intercompany interest expense -- -- 30,725 (30,725) --
--------- --------- --------- --------- ---------
Total costs and other deductions 12 28,222 676,302 (30,725) 673,811
--------- --------- --------- --------- ---------
Income before income taxes 67,362 66,449 156,740 (200,468) 90,083
--------- --------- --------- --------- ---------
Income taxes:
Current -- -- 6,957 -- 6,957
Deferred -- (934) 16,698 -- 15,764
--------- --------- --------- --------- ---------
Total income taxes -- (934) 23,655 -- 22,721
--------- --------- --------- --------- ---------
Net income $ 67,362 $ 67,383 $ 133,085 $(200,468) $ 67,362
========= ========= ========= ========= =========
15
Six months ended June 30, 2001
-------------------------------------------------------------
Other
Nabors Subsidiaries
Delaware (Non- Consolidating
(Issuer) Guarantor) Adjustments Total
--------- ------------ ------------- -----------
(IN THOUSANDS)
Revenues and other income:
Operating revenues $ -- $1,132,404 $ -- $1,132,404
Earnings from unconsolidated affiliates -- 20,243 -- 20,243
Earnings from consolidated affiliates 178,940 -- (178,940) --
Interest income 33 28,903 -- 28,936
Intercompany interest income 39,944 -- (39,944) --
Other income, net (969) 13,293 -- 12,324
--------- ---------- --------- ----------
Total revenues and other income 217,948 1,194,843 (218,884) 1,193,907
--------- ---------- --------- ----------
Costs and other deductions:
Direct costs -- 706,356 -- 706,356
General and administrative expenses 191 66,709 -- 66,900
Depreciation and amortization -- 94,476 -- 94,476
Interest expense 25,781 1,196 -- 26,977
Intercompany interest expense -- 39,944 (39,944) --
--------- ---------- --------- ----------
Total costs and other deductions 25,972 908,681 (39,944) 894,709
--------- ---------- --------- ----------
Income before income taxes 191,976 286,162 (178,940) 299,198
--------- ---------- --------- ----------
Income taxes:
Current -- 26,323 -- 26,323
Deferred 4,823 80,899 -- 85,722
--------- ---------- --------- ----------
Total income taxes 4,823 107,222 -- 112,045
--------- ---------- --------- ----------
Net income $ 187,153 $ 178,940 $(178,940) $ 187,153
========= ========== ========= ==========
16
Condensed Consolidating Cash Flow Statements
Six months ended June 30, 2002
----------------------------------------------------------------------
Other
Nabors Nabors Subsidiaries
(Parent/ Delaware (Non- Consolidating
Guarantor) (Issuer) Guarantor) Adjustments Total
---------- ---------- ------------ ------------- ---------
(IN THOUSANDS)
Net cash provided by (used for) operating
activities $ 25 $ (5,469) $ 200,129 $ -- $ 194,685
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of marketable securities,
available-for-sale -- -- (24,253) -- (24,253)
Sales of marketable securities,
available-for-sale -- -- 94,526 -- 94,526
Cash received from disposition of
long-term assets -- -- 4,923 -- 4,923
Cash paid for acquisitions of
businesses, net -- -- (116,668) -- (116,668)
Capital expenditures -- -- (198,072) -- (198,072)
--------- --------- --------- --------- ---------
Net cash used for investing activities -- -- (239,544) -- (239,544)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Decrease in restricted cash -- -- 867 -- 867
Reduction of long-term borrowings -- (5,048) (16,414) -- (21,462)
Common stock transactions -- 8,328 -- -- 8,328
--------- --------- --------- --------- ---------
Net cash provided by (used for) financing
activities -- 3,280 (15,547) -- (12,267)
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash and
cash equivalents -- -- 1,716 -- 1,716
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 25 (2,189) (53,246) -- (55,410)
Cash and cash equivalents, beginning of period -- 2,201 196,242 -- 198,443
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period $ 25 $ 12 $ 142,996 $ -- $ 143,033
========= ========= ========= ========= =========
17
Six months ended June 30, 2001
----------------------------------------------------
Other
Nabors Subsidiaries
Delaware (Non- Consolidating
(Issuer) Guarantor) Adjustments Total
--------- ------------ ------------- ---------
(IN THOUSANDS)
Net cash (used for) provided by operating activities $(723,551) $ 964,508 $ -- $ 240,957
--------- --------- --------- ---------
Cash flows from investing activities:
Purchases of marketable securities, available-for-sale -- (441,279) -- (441,279)
Sales of marketable securities, available-for-sale -- 28,193 -- 28,193
Cash received from disposition of long-term assets -- 7,486 -- 7,486
Capital expenditures -- (319,797) -- (319,797)
--------- --------- --------- ---------
Net cash used for investing activities -- (725,397) -- (725,397)
--------- --------- --------- ---------
Cash flows from financing activities:
Increase in restricted cash -- (33) -- (33)
Proceeds from long-term borrowings 840,338 -- -- 840,338
Reduction of long-term borrowings -- (3,556) -- (3,556)
Debt issuance costs (12,879) -- -- (12,879)
Common stock transactions 7,724 -- -- 7,724
Treasury stock transactions (111,580) -- -- (111,580)
--------- --------- --------- ---------
Net cash provided by (used for) financing activities 723,603 (3,589) -- 720,014
--------- --------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents -- 6 -- 6
--------- --------- --------- ---------
Net increase in cash and cash equivalents 52 235,528 -- 235,580
Cash and cash equivalents, beginning of period 2,118 195,194 -- 197,312
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 2,170 $ 430,722 $ -- $ 432,892
========= ========= ========= =========
NOTE 11 SUBSEQUENT EVENTS
Share and Debt Repurchase Programs
On July 17, 2002, the Board of Directors of Nabors authorized the
continuation of the share repurchase program that had begun under Nabors
Delaware, and provided that the amount of Nabors common shares authorized for
purchase by Nabors going forward was up to $400 million. Under the Nabors
Delaware program, Nabors Delaware had acquired an aggregate of approximately
$248.0 million of Nabors Delaware common stock, or 6.2 million shares. Pursuant
to Bermuda law, any shares, when purchased, will be treated as cancelled, the
amount of Nabors' issued capital will be diminished by the nominal value of
those shares repurchased and retained earnings will be reduced by the
incremental difference between the cost of issuance and the cost of the shares
repurchased. A repurchase of shares will not have the effect of reducing the
amount of Nabors' authorized share capital. Additionally, the Board approved the
repurchase of up to $400 million of outstanding debt securities of Nabors and
its subsidiaries. These amounts may be increased or decreased at the discretion
of the Board, depending upon market conditions and consideration of the best
interest of shareholder value. Repurchases may be conducted either on the open
market, negotiated transactions, or by other means, from time to time, depending
upon market conditions and other factors.
On July 23, 2002, we entered into a private transaction with a
counterparty in which we sold 1.0 million European-style put options for $2.6
million with a maturity date of October 23, 2002. If the price of our common
shares is below $26.5698 on the maturity date, we anticipate that the
counterparty will exercise the put option which will result in, at our option
(1) our purchase of 1.0 million of our common shares at a price of $26.5698 per
share or (2) our payment, in cash or Nabors common shares, of an amount equal to
the difference between $26.5698 and our stock price on October 23, 2002
multiplied by 1.0 million. If the price of our common shares is above $26.5698
on the maturity date, we anticipate that the counterparty will let the option
expire. In either case, we retain the $2.6 million in proceeds which was
recorded as an increase in capital in excess of par value in July 2002.
On August 2, 2002, Nabors acquired, through a subsidiary, 91,000 of its
common shares in the open market for $27.30 per share for an aggregate price,
including commissions, of $2.5 million. The shares will be recorded by the
subsidiary as an investment in Nabors, and will be eliminated in consolidation.
So long as the Nabors common shares are held by a subsidiary, they will be
issued and outstanding and will have the same rights as other outstanding
shares.
18
Interest Rate Hedge Transaction
On July 24, 2002, we entered into an interest rate hedge transaction
with a third party financial institution to manage and mitigate interest rate
risk exposure relative to a contemplated debt financing transaction of an
indeterminate amount. Under the agreement, we agreed to receive (pay) cash from
(to) the counterparty based on the difference between 4.43% and the 10-year
Treasury rate on August 23, 2002, based on a $100.0 million notional amount with
semi-annual interest payments over a 10-year maturity. In accordance with SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, we will account for this transaction as a cash flow hedge.
Proposed Acquisition of Ryan Energy Technologies, Inc.
On August 12, 2002, Nabors entered into an arrangement agreement with
Ryan Energy Technologies, Inc., Canadian corporation that provides drilling
technology and services and data management solutions for the energy industry.
Pursuant to the agreement, Nabors, through a Canadian subsidiary, will offer
Cdn. $1.85 for each Ryan common share. Ryan shareholders will have the option to
elect to receive Cdn. $1.85 in cash or the equivalent value in exchangeable
shares of Nabors Exchangeco (Canada) Inc., which shares will be exchangeable for
Nabors common shares. The exchangeable shares will have the same voting rights,
dividend entitlements and other attributes as Nabors common shares, will be
exchangeable, at each shareholder's option, on a one-for-one basis, into Nabors
common shares and will be listed on the Toronto Stock Exchange. The exchangeable
shares will be automatically exchanged upon the occurrence of certain events.
The transaction is to be effected by way of a Plan of Arrangement.
The arrangement agreement has been unanimously approved by the Board of
Directors of Ryan and the Plan of Arrangement will require the approval of the
Court of Queen's Bench of Alberta and the approval of at least 66 2/3% of the
Ryan shareholders and optionholders, voting as a single class, at a meeting to
be held for that purpose. The Board of Directors of Ryan has received an opinion
from its financial advisor, Peters & Co. Limited, that the consideration under
the arrangement is fair, from a financial point of view, to the Ryan
shareholders. The arrangement agreement contains certain closing conditions,
including Nabors being satisfied regarding certain due diligence reviews of
Ryan's technology, customary non-solicitation provisions and a termination fee
payable by Ryan of Cdn. $1.75 million under certain circumstances. Nabors
retains the right to match competing proposals should they arise.
Certain shareholders and optionholders of Ryan who own or control an
aggregate of 4,454,058 Ryan common shares and 450,000 options to acquire Ryan
common shares, which constitute approximately 21% of the outstanding common
shares of Ryan (diluted for in-the-money options), have agreed, subject to the
terms and conditions of those agreements, to vote their Ryan common shares and
options in favor of the arrangement. As a result of such agreements, Nabors may
be considered to have acquired ownership, control or direction over such shares.
Nabors did not previously own or exercise control or direction over any
securities of Ryan.
19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Nabors Industries Ltd.:
We have reviewed the accompanying consolidated balance sheet of Nabors
Industries Ltd. and its subsidiaries as of June 30, 2002, after the revisions
discussed in Notes 4 and 10, and the related consolidated statements of income
for each of the three-month and six-month periods ended June 30, 2002 and 2001
and the consolidated statements of changes in stockholders' equity and of cash
flows for the six-month periods ended June 30, 2002 and 2001. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We previously audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2001, and the related consolidated statements of income, changes in
stockholders' equity and of cash flows for the year then ended (not presented
herein), and in our report dated January 23, 2002, except for Note 16, as to
which the date is March 18, 2002, and Notes 1, 2, 7, 12 and 15, as to which the
date is August 20, 2002, we expressed an unqualified opinion on those
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
July 17, 2002, except for Note 11, as to which the
date is August 13, 2002, and Notes 4 and 10, as
to which the date is October 10, 2002
20
ITEM 4. CONTROLS AND PROCEDURES
There have not been any significant changes in Nabors' internal
controls or in other factors that could significantly affect Nabors' internal
controls subsequent to our previous evaluation of internal controls.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger among Nabors Industries, Inc.,
Nabors Acquisition Corp. VIII, Nabors Industries Ltd. and
Nabors US Holdings Inc. (incorporated by reference to Annex I
to the proxy statement/prospectus included in Nabors
Industries Ltd.'s Registration Statement on Form S-4
(Registration No. 333-76198) filed with the SEC on May 10,
2002).
2.2 Amended and Restated Acquisition Agreement, dated as of March
18, 2002, by and between Nabors Industries, Inc. and Enserco
Energy Service Company Inc. (incorporated by reference to
Exhibit 2.1 to Nabors Industries, Inc. Registration Statement
No. 333-85228).
2.3 Form of Plan of Arrangement Under Section 192 of the Canada
Business Corporations Act Involving and Affecting Enserco
Energy Service Company Inc. and its Securityholders (included
in Schedule B to Exhibit 2.2).
3.1 Memorandum of Association of Nabors Industries Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002).
3.2 Amended and Restated Bye-laws of Nabors Industries
Ltd.(incorporated by reference to Annex III to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No.
333-76198) filed with the SEC on May 10, 2002).
3.3 Form of Resolutions of the Board of Directors of Nabors
Industries Ltd. authorizing the issue of the Special Voting
Preferred Share (incorporated by reference to Exhibit 3.3 to
Nabors Industries Ltd. Registration Statement No.
333-85228-99).
4.1 Form of Provisions Attaching to the Exchangeable Shares of
Nabors Exchangeco (Canada) Inc. (included as Appendix 1 to
Exhibit 2.3).
4.2 Form of Support Agreement between Nabors Industries, Inc.,
3064297 Nova Scotia Company and Nabors Exchangeco (Canada)Inc.
(included as Schedule E to Exhibit 2.2).
21
+4.3 Form of Acknowledgement of Novation to Nabors Industries,Inc.,
Nabors Exchangeco (Canada) Inc., Computershare Trust Company
of Canada and 3064297 Nova Scotia Company executed by Nabors
Industries Ltd. (incorporated by reference to Exhibit 4.3 to
Nabors Industries Ltd. Registration Statement No.
333-85228-99).
+4.4 Fourth Supplemental Indenture dated as of June 21, 2002 among
Nabors Holding Company as issuer, Nabors Industries, Inc. as
guarantor, Nabors Industries Ltd. as guarantor, and HSBC Bank
USA, as trustee, with respect to Nabors Holding Company's
8-5/8% senior subordinated notes due 2008.
+4.5 First Supplemental Indenture, dated as of June 21, 2002, among
Nabors Industries, Inc. as issuer, Nabors Industries Ltd. as
guarantor, and Bank One, N.A., as trustee, with respect to
Nabors Industries, Inc.'s zero coupon convertible senior
debentures due 2020.
+4.6 Second Supplemental Indenture, dated as of June 21, 2002 among
Nabors Industries, Inc., as issuer, Nabors Industries Ltd. as
guarantor, and Bank One, N.A. as trustee, with respect to
Nabors Industries, Inc.'s zero coupon convertible senior
debentures due 2021.
+4.7 Supplemental Indenture No. 2, dated as of June 21, 2002,
between Nabors Industries, Inc., Nabors Industries Ltd. and
Wells Fargo Bank Minnesota, National Association, with respect
to Nabors Industries Inc.'s 6.8% notes due 2004.
+10.1 First Amendment to Amended and Restated Employment Agreement
between Nabors Industries, Inc., Nabors Industries Ltd. and
Eugene M. Isenberg dated as of June 24, 2002.
+10.2 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M.
Isenberg dated as of July 17, 2002.
+10.3 First Amendment to Amended and Restated Employment Agreement
between Nabors Industries, Inc., Nabors Industries Ltd. and
Anthony G. Petrello dated as of June 24, 2002.
+10.4 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Anthony G.
Petrello dated as of June 17, 2002.
+10.5 First Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Richard A.
Stratton dated as of June 24, 2002.
22
+10.6 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Richard A.
Stratton dated as of July 17, 2002.
15.1 Awareness Letter of Independent Accountants
+99.1 Nabors Industries Ltd. Corporate Governance Principles adopted
July 17, 2002.
99.2 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 USC Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
-------------
+ Previously filed with Nabors Industries Ltd.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002, filed with the U.S. Securities and
Exchange Commission on August 14, 2002 (File No. 000-49887)
(b) Reports on Form 8-K
o Report by Nabors Industries, Inc. on Form 8-K filed with the
Securities and Exchange Commission on April 18, 2002, with
respect to Nabors Delaware's press release announcing the
results of its first quarter 2002.
o Report by Nabors Industries, Inc. on Form 8-K filed with the
Securities and Exchange Commission on June 14, 2002, with
respect to Nabors Delaware's press release announcing the
results of its special meeting of stockholders.
o Report by Nabors Industries, Inc. on Form 8-K filed with the
Securities and Exchange Commission on June 25, 2002, with
respect to Nabors Delaware's reorganization as a Bermuda
company.
o Report by Nabors Industries Ltd. on Form 8-K filed with the
Securities and Exchange Commission on June 25, 2002 with
respect to the completion of Nabors' corporate reorganization,
and the related press release.
o Report by Nabors Industries Ltd. on Form 8-K filed with the
Securities and Exchange Commission on June 26, 2002 with
respect to the registration of Nabors Bermuda's common shares
under Section 12(b) of the Securities Exchange Act of 1934, as
amended.
o Report by Nabors Industries Ltd. on Form 8-K filed with the
Securities and Exchange Commission on July 18, 2002, with
respect to Nabors' press release announcing results for the
three months and six months ended June 30, 2002.
o Report by Nabors Industries Ltd. on Form 8-K filed with the
Securities and Exchange Commission on August 20, 2002, with
respect to the amendment of the Annual Report on Form 10-K
filed by Nabors Delaware as of December 31, 2001.
23
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.
NABORS INDUSTRIES LTD.
/s/ Anthony G. Petrello
--------------------------------------
Anthony G. Petrello
President & Chief Operating Officer
/s/ Bruce P. Koch
--------------------------------------
Bruce P. Koch
Vice President - Finance (principal
financial and accounting officer)
Dated: October 10, 2002
24
CERTIFICATIONS
I, Eugene M. Isenberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Nabors
Industries Ltd.;
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.
Date: October 10, 2002
/s/ Eugene M. Isenberg
-----------------------
Eugene M. Isenberg
Chairman & Chief Executive Officer
I, Bruce P. Koch, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Nabors
Industries Ltd.;
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.
Date: October 10, 2002
/s/ Bruce P. Koch
-----------------
Bruce P. Koch
Vice President - Finance (principal financial and accounting officer)
25
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger among Nabors Industries, Inc., Nabors
Acquisition Corp. VIII, Nabors Industries Ltd. and Nabors US
Holdings Inc. (incorporated by reference to Annex I to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No. 333-76198)
filed with the SEC on May 10, 2002).
2.2 Amended and Restated Acquisition Agreement, dated as of March 18,
2002, by and between Nabors Industries, Inc. and Enserco Energy
Service Company Inc. (incorporated by reference to Exhibit 2.1 to
Nabors Industries, Inc. Registration Statement No. 333-85228).
2.3 Form of Plan of Arrangement Under Section 192 of the Canada
Business Corporations Act Involving and Affecting Enserco Energy
Service Company Inc. and its Securityholders (included in Schedule
B to Exhibit 2.2).
3.1 Memorandum of Association of Nabors Industries Ltd. (incorporated
by reference to Annex II to the proxy statement/prospectus
included in Nabors Industries Ltd.'s Registration Statement on
Form S-4 (Registration No. 333-76198) filed with the SEC on May
10, 2002).
3.2 Amended and Restated Bye-laws of Nabors Industries
Ltd.(incorporated by reference to Annex III to the proxy
statement/prospectus included in Nabors Industries Ltd.'s
Registration Statement on Form S-4 (Registration No. 333-76198)
filed with the SEC on May 10, 2002).
3.3 Form of Resolutions of the Board of Directors of Nabors Industries
Ltd. authorizing the issue of the Special Voting Preferred Share
(incorporated by reference to Exhibit 3.3 to Nabors Industries
Ltd. Registration Statement No. 333-85228-99).
4.1 Form of Provisions Attaching to the Exchangeable Shares of Nabors
Exchangeco (Canada) Inc. (included as Appendix 1 to Exhibit 2.3).
4.2 Form of Support Agreement between Nabors Industries, Inc., 3064297
Nova Scotia Company and Nabors Exchangeco (Canada)Inc. (included
as Schedule E to Exhibit 2.2).
4.3 Form of Acknowledgement of Novation to Nabors Industries, Inc.,
Nabors Exchangeco (Canada) Inc., Computershare Trust Company of
Canada and 3064297 Nova Scotia Company executed by Nabors
Industries Ltd. (incorporated by reference to Exhibit 4.3 to
Nabors Industries Ltd. Registration Statement No. 333-85228-99).
+4.4 Fourth Supplemental Indenture dated as of June 21, 2002 among
Nabors Holding Company as issuer, Nabors Industries, Inc. as
guarantor, Nabors Industries Ltd. as guarantor, and HSBC Bank USA,
as trustee, with respect to Nabors Holding Company's 8-5/8% senior
subordinated notes due 2008.
+4.5 First Supplemental Indenture, dated as of June 21, 2002, among
Nabors Industries, Inc. as issuer, Nabors Industries Ltd. as
guarantor, and Bank One, N.A., as trustee, with respect to Nabors
Industries, Inc.'s zero coupon convertible senior debentures due
2020.
+4.6 Second Supplemental Indenture, dated as of June 21, 2002 among
Nabors Industries, Inc., as issuer, Nabors Industries Ltd. as
guarantor, and Bank One, N.A. as trustee, with respect to Nabors
Industries, Inc.'s zero coupon convertible senior debentures due
2021.
+4.7 Supplemental Indenture No. 2, dated as of June 21, 2002, between
Nabors Industries, Inc., Nabors Industries Ltd. and Wells Fargo
Bank Minnesota, National Association, with respect to Nabors
Industries Inc.'s 6.8% notes due 2004.
+10.1 First Amendment to Amended and Restated Employment Agreement
between Nabors Industries, Inc., Nabors Industries Ltd. and Eugene
M. Isenberg dated as of June 24, 2002.
+10.2 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M. Isenberg
dated as of July 17, 2002.
+10.3 First Amendment to Amended and Restated Employment Agreement
between Nabors Industries, Inc., Nabors Industries Ltd. and
Anthony G. Petrello dated as of June 24, 2002.
+10.4 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Anthony G. Petrello
dated as of June 17, 2002.
+10.5 First Amendment to Employment Agreement between Nabors Industries,
Inc., Nabors Industries Ltd. and Richard A. Stratton dated as of
June 24, 2002.
+10.6 Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Richard A. Stratton
dated as of July 17, 2002.
15.1 Awareness Letter of Independent Accountants
+99.1 Nabors Industries Ltd. Corporate Governance Principles adopted
July 17, 2002.
99.2 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
----------
+ Previously filed with Nabors Industries Ltd.'s Quarterly Report on Form
10-Q for the quarter ended June 30, 2002, filed with the U.S. Securities
and Exchange Commission on August 14, 2002 (File No. 000-49887).