Item 3. Legal Proceedings
The Company is one of the defendants in certain litigation brought in July 1984 by the Cheyenne-Arapaho Tribes of Oklahoma in the U.S. District Court for the Western District of Oklahoma, seeking to set aside two communitization agreements with respect to three leases involving tribal lands in which the Company previously owned interests and to have those leases declared expired. In June 1989, the U.S. District Court entered an interim order in favor of the plaintiffs. On appeal, the U.S. Court of Appeals for the Tenth Circuit upheld the decision of the trial court and petitions for rehearing of that decision were denied. Petitions for writs of certiorari filed by the parties with the U.S. Supreme Court have been denied, and the case has been remanded to the trail court for determination of damages.
In November 1988, a lawsuit was filed in the U.S. District Court for the Southern District of West Virginia against Reading & Bates Coal Co., a wholly owned subsidiary of the Company, by SCW Associates, Inc. claiming breach of an alleged agreement to purchase the stock of Belva Coal Company, a wholly owned subsidiary of Reading & Bates Coal Co. with coal properties in West Virginia. When those coal properties were sold in July 1989 as part of the disposition of the Company's coal operations, the purchasing joint venture indemnified Reading & Bates Coal Co. and the Company against any liability Reading & Bates Coal Co. might incur as the result of this litigation. A judgment for the plaintiff of $32,000 entered in February 1991 was satisfied and Reading & Bates Coal Co. was indemnified by the purchasing joint venture. On October 31, 1990, SCW Associates, Inc., the plaintiff in the above-referenced action, filed a separate ancillary action in the Circuit Court, Kanawha County, West Virginia against the Company and a wholly owned subsidiary of Reading & Bates Coal Co., Caymen Coal, Inc. (former owner of the Company's West Virginia coal properties), as well as the joint venture, Mr. William B. Sturgill personally (former President of Reading & Bates Coal Co.), three other companies in which the Company believes Mr. Sturgill holds an equity interest, two employees of the joint venture, First National Bank of Chicago and First Capital Corporation. The lawsuit seeks to recover compensatory damages of $50 million and punitive damages of $50 million for alleged tortious interference with the contractual rights of the plaintiff and to impose a constructive trust on the proceeds of the use and/or sale of the assets of Caymen Coal, Inc. as they existed on October 15, 1988. The Company and its indirect subsidiary intend to defend their interests vigorously. The Company believes the damages alleged by the plaintiff in this action are highly exaggerated. In any event, the Company believes that it has valid defenses and that it will prevail in this litigation.
On January 26, 1993, Kerr-McGee Corporation ("Kerr-McGee") filed an action against the Company and Reading & Bates Drilling Co., a subsidiary of the Company, in the U.S. District Court, Western District of Louisiana. On March 23, 1993, the complaint was amended to add Mobil Oil Exploration & Producing Southeast, Inc. as an additional party plaintiff in this action. In this action the plaintiffs are seeking to recover an unspecified amount for damages to a two well platform and related production equipment, facilities and pipelines, in South Timbalier Island Block 34, allegedly caused by the Company's semisubmersible drilling unit "JACK BATES" (ex "ZANE BARNES") after that drilling unit had been set adrift in the Gulf of Mexico by Hurricane Andrew in August 1992. The Company also has received notice that Tennessee Gas Pipeline Company has asserted a claim with respect to damage to a gas riser pipe and related equipment also located at Kerr-McGee's platform in South Timbalier Island Block 34. On April 8, 1993, Murphy Exploration & Production Company ("Murphy"), a subsidiary of Murphy Oil Corporation, filed a similar claim in the U. S. District Court, Eastern District of Louisiana, with respect to its 12 well platform located in South Timbalier Island Block 86. The Court has granted the Company's motion to transfer and has entered an order transferring this case to the U. S. District Court, Western District of Louisiana. The Murphy action has now been consolidated with the Kerr-McGee action. The Company and its subsidiary believe they have valid defenses with respect to the claims asserted and intend to defend their interests vigorously. In December 1992, the Company provided a $10 million letter of undertaking from the Company's protection and indemnity association and a $34 million bond (secured to the extent of approximately $32.3 million by indemnities from the Company's excess liability underwriters and approximately $1.7 million by a standby letter of credit issued for account of the Company) to Kerr-McGee and Murphy to secure their claims and avoid the attachment of the "JACK BATES" prior to its departure from the United States for a drilling contract with Agip S.p.A. The Company is not aware of any other claims that may arise against it as a result of Hurricane Andrew. The Company believes it has adequate liability insurance to protect the Company and its subsidiary from any material liability that might result from these claims.
On April 13, 1993, the All American Marine Slip, acting as managing general agent on behalf of the lead underwriters on the Company's primary loss of hire insurance policy, denied the Company's loss of hire claim with respect to the damages to the "JACK BATES" caused by Hurricane Andrew amounting to approximately $9.1 million, demanded arbitration under the policy with respect to the policy coverage dispute and filed an action in the U. S. District Court, Southern District of New York (the "New York action"), seeking a declaratory judgment and order compelling the Company to arbitrate the dispute. On April 16, 1993, the Company filed an action in the U. S. District Court, Southern District of Texas (the "Texas action"), seeking compensatory and punitive damages for bad faith and unfair dealing by the All American Marine Slip under the Texas Insurance Code and Texas Deceptive Practices Act. On April 23, 1993, the All American Marine Slip amended its complaint in the New York Action to seek damages for alleged tortious interference with contract and abuse of process by the Company's having filed the Texas action. On July 7, 1993, the Company and the All American Marine Slip agreed to submit all claims in the New York action and the Texas action to arbitration in New York, preserving all rights of both parties (other than the right to a jury trial). As a result the New York action and the Texas action (the latter having been transferred to New York pursuant to court order) have been placed on the suspense docket pending arbitration. On August 6, 1993, the Company agreed with certain underwriters at Lloyds and ILU companies, representing 57.5% of the insurers on the Company's primary loss of hire insurance policy, to settle their respective shares of the Company's loss of hire claim in exchange for payment to the Company of an aggregate of approximately $3.4 million. The effect of that settlement leaves the All American Marine Slip representing lead underwriters with respect to the remaining 42.5% of the Company's loss of hire claim subject to arbitration. On December 6, 1993, the arbitration panel entered an interim award that the Company had proved a valid claim under its loss of hire policy and on December 30, 1993 entered a final award holding that the amount of the Company's claim under the policy was $7,296,000 and that the amount owed by the remaining 42.5% of insurers was $3,100,800, plus interest at the rate of 6.5% per annum from August 1, 1993 until paid. In its final award the arbitration panel also held there was no bad faith on the part of the insurers and that each party bear its own legal costs. The court in the New York action has entered an order confirming the award and is expected to enter a judgment shortly.
The Company is involved in these and various other legal actions arising in the normal course of business. After taking into consideration the evaluation of such actions by counsel for the Company, management is of the opinion that outcome of known claims and litigation will not have a material adverse effect on the Company's business or consolidated financial position or results of operations. See Note F of Notes to Consolidated Financial Statements.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Company during the fourth quarter of fiscal year 1993.
PART II
Item 5.

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock is traded on the New York and Pacific Stock Exchanges under the symbol "RB". The following table shows for the periods indicated the high and low sales prices of the Common Stock as reported on the New York Stock Exchange Composite Transactions Tape.
There were approximately 7,812 holders of record of the Company's Common Stock as of February 28, 1994.
The Company's Non-voting Convertible Class B Common Stock (the "Class B Stock") was issued to the Company's bank debt holders and lease lenders in conjunction with the restructuring in 1989 (the "1989 Restructuring") and to The Dow Chemical Company in the settlement relating to Scotdril Offshore Company. As a result of the 1991 Recapitalization, all of the Company's outstanding Class B Stock was converted into Common Stock, leaving none of the remaining 41.1 million authorized shares issued or outstanding at December 31, 1993 and 1992.
The Company has not paid dividends on the Common Stock since the first quarter of 1986 and management does not expect any dividends will be declared or paid in the foreseeable future. The Company's credit facility agreement with ING Bank prohibits the Company from declaring or paying dividends on the Common Stock in any one year in excess of 50% of its cumulative net income subsequent to March 29, 1991, the date of the first drawdown under such financing.
Item 6.

Item 6. Selected Financial Data
READING & BATES CORPORATION AND SUBSIDIARIES
(in thousands except per share amounts)
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
FINANCIAL CONDITION
1989 Restructuring and 1991 Recapitalization
Since September 1989, the Company has completed a series of transactions restructuring and substantially reducing its long-term debt and lease obligations, disposing of business lines unrelated to offshore contract drilling and rebuilding its equity capital. In September 1989, the Company effected a financial and business restructuring (the "1989 Restructuring"), which involved (i) the conversion of approximately $462.6 million of the Company's existing bank and lease obligations into the Company's Class B Stock, (ii) the restructuring of approximately $363 million face amount of remaining bank and lease obligations, (iii) the dispositions of the Company's non-drilling petroleum and coal operations, with the proceeds used to repay additional bank and lease obligations, (iv) the reclassification into Common Stock of all of the Company's outstanding preferred stock and (v) an exchange offer which reduced the Company's existing obligations in respect of certain outstanding subordinated debentures by approximately $32.4 million.
In March 1991, the Company effected a further recapitalization (the "1991 Recapitalization"), which involved (i) the issuance of approximately 39.6 million shares of Common Stock and the incurrence of approximately $76.2 million in new or restructured bank and lease obligations to replace approximately $364.6 million in existing bank and lease obligations remaining after the 1989 Restructuring, (ii) the conversion into Common Stock of all outstanding Class B Stock and (iii) the settlement of the Company's remaining obligations under its Supplemental Executive Retirement Plan for cash and shares of Common Stock (the "SERP Settlement"). See Notes B and C of Notes to Consolidated Financial Statements.
Postretirement Benefits
Effective January 1, 1991, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The statement requires employers to recognize the cost of providing postretirement benefits to employees over the employees' service periods. The Company elected to expense the entire "Accumulated Projected Benefit Obligation" at January 1, 1991, of $18,860,000, or $.50 per share as shown separately in the Consolidated Statement of Operations under "Cumulative effect of change in accounting principle". The Company's policy had been to expense retiree benefit costs as they were paid. Effective April 1, 1992, the Company modified its postretirement benefits. The effect of these modifications significantly reduced the Company's postretirement benefit costs and accumulated benefit obligation, and resulted in a $6.8 million curtailment gain recognized in the Company's results of operations (included in Other, net) for the year ended December 31, 1992. Postretirement benefit cost for the years ended December 31, 1993, 1992 and 1991 was $658,000, $567,000 and $22,126,000, respectively. See Note K of Notes to Consolidated Financial Statements.
Iran Settlement
In June 1991, the Company received $3.7 million for the settlement of a claim filed by a subsidiary of the Company against the National Iranian Oil Company pertaining to seven land rigs which were located in Iran. The settlement has been accounted for as an extraordinary gain in the Consolidated Statement of Operations. See Note A of Notes to Consolidated Financial Statements.
Sale of RCC
In August 1991, the Company sold all of the stock of its wholly owned subsidiary Resources Conservation Company ("RCC"), the water treatment segment of its business, for a sales price of $9.7 million. As a result of the sale, the Company recorded a gain of $3.2 million which is included in discontinued operations. The net assets and results of operations of RCC have been reclassified in the consolidated financial statements as discontinued operations. The divestment of RCC allows the Company to concentrate on its core business, offshore drilling. See Note I of Notes to Consolidated Financial Statements.
Private Placement
In September 1991, the Company effected a private placement (the "1991 Placement") of approximately 1.7 million shares of Common Stock Subject to Redemption and approximately 6,857 shares of a new class of preferred stock (the "Redeemable Preferred Stock") pursuant to which the Company raised proceeds of approximately $27.1 million in cash. The proceeds were utilized to fund a portion of the Arcade Acquisition. The 1991 Placement was effected at a price of $8.75 per share of Common Stock Subject to Redemption and $1,750 per share of Redeemable Preferred Stock. In June 1992, each share of the Redeemable Preferred Stock was converted into Common Stock in accordance with its terms.
Pursuant to the Subscription Agreements entered into in connection with the 1991 Placement, as amended (the "Subscription Agreements"), the Company agreed to use its best efforts to register for resale the shares so issued and guaranteed in effect that any selling holder of such shares would receive a specified minimum net share price upon resale, if any, during the 90-day period following the effectiveness of such registration. In October 1992, without registering the 1991 Placement shares for resale, the Company entered into agreements with the holders of such shares that superseded the provisions of the Subscription Agreements, under which the Company would repurchase all such shares at $11.05 per share. All of the shares issued in the 1991 Placement were repurchased using approximately $34.3 million of the proceeds of the Company's October 1992 public offering. See Note L of Notes to Consolidated Financial Statements.
Carnegie/"SONNY VOSS" Financing
In 1991, the Company entered into a NOK 150 million ($24.6 million using the then prevailing exchange rate of NOK 5.9579 = US$1.00) margin loan from Carnegie International Limited ("Carnegie"). The loan proceeds were utilized to fund a portion of the Arcade Acquisition. The loan, as extended, was repaid when due on March 31, 1992 with substantially all of the proceeds realized from the sale/leaseback of one of the Company's jack-up drilling units, the "SONNY VOSS". As part of this transaction the Company received approximately $27.7 million in cash and agreed to lease the drilling unit for 42 months. The leaseback is accounted for as an operating lease and a deferred gain of $6.3 million was recorded and is being amortized over the life of the lease.
Income Tax Refund
In August 1992, the Company received cash of $14.2 million and recognized interest income of $10.6 million and income tax benefits of $1.9 million, net of $1.7 million of income tax benefits that had been previously recognized. The Company's consolidated federal tax returns for the tax years from September 30, 1974 to December 31, 1981 were then examined by the Internal Revenue Service (the "IRS").
The Joint Committee on Taxation approved a settlement agreement between the Company and the IRS for those years which provided the Company with such tax refund. See Note J of Notes to Consolidated Financial Statements.
Reverse Stock Split
On October 2, 1992, the Company effected a one-for-five reverse stock split of the Common Stock. On the Consolidated Balance Sheet, "Common Stock" was reduced and "Capital in excess of par value" was increased to reflect this change. All share and per share amounts have been restated. See Note M of Notes to Consolidated Financial Statements.
Public Offerings
In October 1992, the Company completed a public offering (the "1992 Offering") of 8 million shares of its Common Stock (including shares issued pursuant to an underwriter's over-allotment) pursuant to which the Company raised gross proceeds of approximately $40 million in cash (net proceeds of approximately $38.1 million). The proceeds were utilized to repurchase 272,123 shares of Common Stock issued in the SERP Settlement and 3,102,857 shares of Common Stock issued in the 1991 Placement and accounted for as Common Stock Subject to Redemption in the Company's financial statements and for general corporate purposes. See Note M of Notes to Consolidated Financial Statements.
In July 1993, the Company effected a public offering (the "1993 Offering") of 2,990,000 shares of $1.625 Convertible Preferred Stock, par value $1.00 per share (the "Preferred Stock"), pursuant to which the Company raised gross proceeds of approximately $74.7 million in cash (net proceeds of approximately $71.2 million). A portion of the proceeds was utilized to repay indebtedness under Facilities C and F of the ING Facility, approximately $5.5 million and $11.6 million, respectively. The remaining proceeds will be used by the Company for working capital and general corporate purposes. The Preferred Stock is convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion rate of 2.899 shares of Common Stock for each share of Preferred Stock (equivalent to a conversion price of $8.625 per share of Common Stock), subject to adjustment in certain events. Annual dividends are $1.625 per share and are cumulative and are payable quarterly commencing September 30, 1993. The Preferred Stock is redeemable at any time on and after September 30, 1996, a option of the Company, in whole or in part, at a redemption price of $26.1375 per share, and thereafter at prices decreasing ratably annually to $25.00 per share on and after September 30, 2003, plus accrued and unpaid dividends. The holders of the Preferred Stock do not have any voting rights, except as required by applicable law, and except that, among other things, whenever accrued and unpaid dividends on the Preferred Stock are equal to or exceed the equivalent of six quarterly dividends payable on the Preferred Stock, the holders of the Preferred Stock will be entitled to elect two directors to the Board until the dividend arrearage has been paid in full. The term of office of all directors so elected will terminate immediately upon such payment. The Preferred Stock has a liquidation preference of $25.00 per share, plus accrued and unpaid dividends. The Company has declared and paid all cumulative dividends accrued on the Preferred Stock through December 31, 1993.
Tender Offer
Consistent with the Company's strategy to acquire Drilling and Shipping, during the first quarter of 1993, the Company acquired additional shares of Shipping which, together with the shares already owned, exceeded 45% of the total outstanding shares of Shipping, and as a result the Company was obligated under Norwegian securities law to make and the Company made a tender offer for the remaining outstanding shares of Shipping at NOK 1.0 per share. The tender offer expired April 7, 1993 with approximately 20 million shares being tendered. The Company also acquired an additional 6% of Drilling's outstanding shares and an additional 18.8% of Shipping's outstanding shares in the second, third and fourth quarters of 1993. As of December 31, 1993, the Company, directly and indirectly, controlled 67.7% and 82.6% of the outstanding shares of Drilling and Shipping, respectively. The Company had obtained an additional borrowing capacity from ING Bank, Facility F, to finance the tender offer and the additional purchases of Shipping and Drilling shares. Facility F was repaid in July 1993 from a portion of the proceeds of the 1993 Offering, see above. See "Business Developments".
Shelf Registration
In October 1993, pursuant to a registration rights agreement entered into in connection with the 1991 Recapitalization, the Company effected a shelf registration of 31,533,614 shares of its outstanding Common Stock, par value $.05 per share, held by certain stockholders. Pursuant to such registration rights agreement, the Company is generally obligated to maintain such shelf registration continuously in effect for a period of one year following initial effectiveness (currently, through October 1994). To the Company's knowledge, as of February 28, 1994, a total of 23,834,957 shares were registered for resale at any time pursuant to such shelf registration statement. The Company will not receive any proceeds from any sale of such shares by any selling stockholder.
Miscellaneous
On March 19, 1992, and at the Annual Meeting of Stockholders held on May 20, 1992, the Company's Board of Directors and stockholders, respectively, approved the Company's 1992 Long-Term Incentive Plan (the "1992 Plan"). The 1992 Plan provides for grants of stock options, stock appreciation rights, stock awards and cash awards, which may be granted singularly, in combination or in tandem. The 1992 Plan is unfunded insofar as the plan provides for awards of cash, Common Stock or rights thereto. An aggregate of 1,000,000 shares of Common Stock are available for awards granted wholly or partly in Common Stock. The Company has granted restricted stock awards under the 1992 Plan to each of Messrs. Angel, Loyd and Rhein, of 90,000 shares, 120,000 shares and 90,000 shares of Common Stock, respectively. Such shares awarded are restricted as to transfer until vested pursuant to a schedule whereby 1/24th of the total number of shares is vested per calendar quarter from June 30, 1992 through March 31, 1998 (subject to certain conditions). See Note N of Notes to Consolidated Financial Statements.
The Company changed its method of accounting for income taxes in accordance with Statement of Financial Accounting Standards No. 96, Accounting for Income Taxes ("SFAS 96"), effective January 1, 1991. The cumulative effect of the accounting change at January 1, 1991 was not material. In February 1992, Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109") was issued and supersedes substantially all existing income tax pronouncements. The Company adopted SFAS 109 effective January 1, 1993. The cumulative effect of the accounting change at January 1, 1993 was not material to the Company's consolidated results of operations or financial position. See Note A of Notes to Consolidated Financial Statements.
In October 1993, the Company announced that Mr. J. T. Angel, President and Chief Operating Officer, as well as a member of the Board of Directors, resigned from those positions in order to pursue other business interests. In the fourth quarter of 1993, the Company recorded a charge of approximately $1.1 million against earnings related to a severance agreement with Mr. Angel.
For a discussion of certain legal proceedings see Part I, Item 3.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Following the 1991 Recapitalization, the Company has met all of its financial obligations through funds from cash provided by operations, drawings under the ING Facility, the proceeds of the 1991 Placement subsequently retired with the proceeds from the 1992 Offering, short-term borrowings repaid with the proceeds of asset sales or sale/leaseback transactions, proceeds from the 1993 Offering and certain other nonrecurring cash items. Cash provided by operating activities during 1993 amounted to approximately $26.5 million, a decrease of $11.1 million from 1992. Cash provided by operating activities during 1992 amounted to approximately $37.6 million, an increase of $33.2 million from 1991, primarily due to the consolidation of the results of Drilling, receipt of certain nonrecurring cash items and increased utilization of the tender fleet, offset by decreased utilization of the semisubmersible fleet.
Cash used in investing activities during 1993 amounted to approximately $29.4 million compared to cash provided from investing activities in 1992 of approximately $47.1 million and cash used in investing activities in 1991 of approximately $78.8 million. During 1993, the Company used approximately $20.6 million of cash to purchase additional shares of stock in Shipping and Drilling. Since the first quarter of 1992, the Company has consolidated the results of Shipping and Drilling, which resulted in an increase in cash of $47.3 million (which is subject to restrictions on availability as described below under "Drilling"). Also, in March 1992, the Company entered into a sale/leaseback transaction of the "SONNY VOSS" drilling unit that provided approximately $27.7 million of cash.
Cash provided by financing activities was approximately $30.1 million during 1993, compared to cash used in financing activities of approximately $32.5 million in 1992. During 1993, the Company received approximately $71.2 million of net proceeds from the 1993 Offering, received approximately $11.6 million from the ING Facility and made principal payments of approximately $50.6 million and paid dividends of $2.1 million on the Preferred Stock. Cash used in financing activities was approximately $32.5 million during 1992, compared to cash provided by financing activities of approximately $59.6 million in 1991. During 1992, the Company made principal payments of approximately $34.8 million, repurchased and retired Common Stock Subject to Redemption (issued in the 1991 Placement) using approximately $35.7 million and received approximately $38.1 million net proceeds from the 1992 Offering. See "Financial Condition".
Liquidity of the Company should be considered in light of the significant fluctuations in demand experienced by drilling contractors as rapid changes in oil and gas producers' expectations and budgets occur. These fluctuations can rapidly impact the Company's liquidity as supply and demand factors directly affect utilization and dayrates, which are the primary determinants of cash flow from the Company's operations. Despite continued weakness in the offshore drilling business, the Company's management currently expects that its cash flow from operations, in combination with cash on hand, will be sufficient to satisfy the Company's 1994 working capital needs, dividends on the Preferred Stock, planned investments, capital expenditures, debt, lease and other obligations. At December 31, 1993, approximately $23.6 million of total consolidated cash and cash equivalents of $80.4 million were restricted from the Company's use outside of Drilling's activities.
Capital Expenditures and Deferred Charges
Planned capital expenditures and deferred charges (including mobilization, demobilization and contract preparation costs not recoverable from the Company's customers or claim proceeds from insurance underwriters) for 1994 are expected to aggregate approximately $15 million principally for upgrades or replacement of equipment either to fulfill obligations under existing contracts or to improve the marketability of certain of the Company's drilling units and for mobilization of the Company's drilling units between drilling sites. Certain projects currently being considered by the Company would require, if they materialize, capital expenditures or other cash requirements not included in the above estimate. In addition to planned capital expenditures referred to above, the Company will also continue to review acquisitions of drilling units from time to time and will also consider further investments in floating production equipment. See "Item 1. Business - Business Strategy".
ING Facility and Continuing Leases
The ING Facility, as amended, includes a term loan with an original balance of approximately $30 million ("Facility A") which provides for payment of principal in eight equal semiannual installments of $3.75 million beginning on June 30, 1993, with interest payments at a varying rate equal to the London Interbank Offered Rate ("LIBOR") plus 1.5% (LIBOR was 3.5% as of December 31, 1993). In addition to Facility A, the ING Facility also includes up to $30 million of working capital financing in the form of three credit facilities ("Facility C", "Facility D" and "Facility E"), and pursuant to an amendment (described below), financing for additional purchases of shares of Shipping and Drilling ("Facility F"). Facility C is in the form of an overdraft account, available until June 1, 1994, up to a maximum of $15 million ($2.7 million was utilized as of December 31, 1993). Interest on amounts outstanding under Facility C is paid quarterly at the prime rate of Citibank, N.A. (6.00% as of December 31, 1993) plus 1.25%. Facility D is in the form of a $5 million stand-by letter of credit which collateralizes a $15 million note payable relating to the "HARVEY H. WARD" drilling unit. Facility E is in the form of stand-by letters of credit aggregating $10 million, which support bid, performance and other bonds needed by the Company in the ordinary course of its business. Facility F consisted of revolving credit and/or stand-by letters of credit that were to be available to the Company until January 1, 1995, in an amount not to exceed $15.5 million, for the purchase of shares of Shipping and Drilling. In March 1993, the Company received approximately $11.6 million from Facility F and in July 1993 the Company repaid Facility F from proceeds from the 1993 Offering. In August 1993, ING Bank agreed to provide a temporary $10 million letter of credit facility, available until June 30, 1997, to cover import duties for drilling equipment in Indonesia. At December 31, 1993, no amounts had been drawn down by the Company. See Notes B, D and E of Notes to Consolidated Financial Statements.
In addition to the credit facilities described above, in June 1991, ING Bank acquired certain interests in two promissory notes issued in connection with the sale and leaseback to the Company of the "C. E. THORNTON" and the "GEORGE H. GALLOWAY" drilling units (the "Continuing Leases"). Those interests entitle ING Bank, effective June 28, 1991, to receive the charter hire payable by the Company under the basic terms of the operating leases covering those drilling units. The present value of the Company's obligations under the Continuing Leases at such date amounted to approximately $45 million. The charter hire payable under the Continuing Leases, which provide for use of the two rigs by the Company through 1995, is measured by a deemed principal amount of $45 million, payable in nine equal semiannual installments of approximately $4.4 million, commencing in June 1993 and a final installment in December 1997 of approximately $5.2 million, bearing interest quarterly at LIBOR plus 1.9375%. See Notes B and F of Notes to Consolidated Financial Statements.
Pursuant to the Company's request and upon payment of fees to ING Bank totalling $1 million by the Company, the ING Facility and the Continuing Leases were amended (a) as of June 30, 1992, to (i) defer the principal installments on Facility A of $3 million each, and the principal elements of the lease payments of approximately $3.7 million each, that would otherwise have been due in June and December of 1992 (such principal installments and principal elements being added, on a pro-rata basis, to the remaining principal installments of Facility A of the ING Facility and principal elements of the Continuing Leases, respectively), and (ii) reduce certain consolidated net worth covenants, and (b) as of February 23, 1993, upon the pledging of additional security, to add Facility F and extend Facility C from June 1, 1993 to June 1, 1994, as described above.
Substantially all of the Company's assets that do not serve as collateral for other obligations of the Company collateralize the ING Facility. Also, the Company has pledged to ING Bank all of its shares of Drilling and Shipping to collateralize the Company's obligations to ING Bank under the ING Facility. The terms of the amended ING Facility, among other things (i) require the Company to meet certain financial covenants, (ii) prohibit the encumbrance of the Company's assets, (iii) restrict the declaration or payment of dividends by the Company to not more than 50% of cumulative net income from the date of the first drawdown under the ING Facility, (iv) prohibit the Company from engaging in any merger or consolidation or the sale of all or substantially all of its assets or the acquisition of all or substantially all of the assets of any entity, (v) prohibit the Company from incurring indebtedness (with certain exceptions including unsecured debt subordinated to the ING Facility), (vi) prohibit the Company from creating or acquiring new subsidiaries, (vii) prohibit the Company from prepaying indebtedness other than to ING Bank, (viii) prohibit the sale, transfer or assignment of any of the rigs and (ix) restrict the Company's ability to advance funds to, guarantee obligations of, or under certain circumstances, acquire additional shares of, Shipping or Drilling. It is also an event of default under the ING Facility if there should occur a material adverse change in the financial or business condition of the Company or certain of its subsidiaries. Thus, the Company has very limited means of securing additional working capital through additional borrowings or credit facilities without the consent of ING Bank. At the present time the Company anticipates that it will meet all of such covenants or obtain necessary waivers, with the amendments to the ING Facility and Continuing Leases described above, for 1994. The ability of the Company to meet all of its financial covenants under the ING Facility on an ongoing basis or obtain waivers in the future will be subject to economic conditions then prevailing in the offshore drilling industry and the Company's relative performance.
Drilling
As of December 31, 1993, Drilling had a $61.5 million term loan payable to The Chase Manhattan Bank, N.A. as agent for a syndicate of banks (including itself). The payment terms of this bank obligation currently provide for repayment of principal in 19 semiannual installments which commenced in August 1991. The Company has not guaranteed repayment of such obligation. Drilling has also entered into an interest rate swap agreement, which is combined with the bank credit facility for payment purposes (as set forth below). The principal amount of the loan, when combined with the swap agreement, bears interest at a rate of 10.69% on an amount of principal equal to $42.1 million currently, such amount reducing on a semiannual basis to $30.6 million in 1996, and at LIBOR plus 1.75% on the remaining balance. The loan is collateralized by the drilling units "HENRY GOODRICH" and "SONAT ARCADE FRONTIER". The loan agreement requires Drilling to meet certain financial conditions, including maintaining current assets of at least twice the level of current liabilities and liquid assets of at least $10 million, maintaining a ratio of operating cash flow (including actual and projected cash flows) to interest charges of at least 1.75 to 1 and maintaining a ratio of total liabilities to tangible net worth of no more than 1 to 1. Additionally, the loan agreement (i) restricts the payment of dividends by Drilling to not more than 50% of net earnings after tax per year, (ii)prohibits Drilling from making loans, granting credit, giving any guarantee or indemnity to or for the benefit of any other person or assuming any liability with respect to any obligation of any other person, (iii) prohibits Drilling from engaging in any merger or consolidation and (iv) prohibits the encumbrance of Drilling's assets or the sale of such assets other than at fair market value, in each case without the prior written consent of the banks party to the loan agreement holding a majority of the outstanding balance. It is also an event of default if there should occur a material adverse change in the financial or business condition of Drilling. Pursuant to a series of waivers, for the period from May 1, 1992 to May 1, 1993, the bank syndicate waived the requirement that Drilling comply with the actual operating cash flow ratio covenant. For the period from January 1, 1992, to April 30, 1993, the bank syndicate waived the requirement that Drilling comply with the projected operating cash flow ratio covenant. In connection with the most recent waiver, Drilling was required to (i) pay a fee to the bank syndicate of approximately $.1 million on April 30, 1993 and (ii) prepay the last two semiannual installments (totalling $8 million), and the interest rate was increased to LIBOR plus 1.875% for the remainder of the loan. Since May 1, 1993, Drilling has not requested any additional waivers. Drilling expects to meet its repayment obligations under the facility through cash flow generated from operations and current working capital. At December 31, 1993, Drilling held $23.6 million in cash and cash equivalents available to satisfy such obligations, but otherwise subject to the restrictions on use of such cash and cash equivalents set out in such loan agreement. The ability of Drilling to meet all of its financial covenants under its obligations on an ongoing basis or obtain waivers thereof in the future will be subject to economic conditions then prevailing in the offshore drilling industry and Drilling's relative performance. See Note D of Notes to Consolidated Financial Statements.
Shipping
The near term liquidity of Shipping is directly dependent on the shipping market. In the event that shipping revenues are not sufficient to cover Shipping's working capital requirements, Shipping will have to seek additional working capital financing. The Company has extended working capital loans amounting to approximately $12.3 million as of December 31, 1993 to Shipping, on an intercompany loan basis, in order for Shipping to repay a $4.3 million short- term bank facility in October 1992 and to meet its current obligations. The Company anticipates it may be necessary to extend additional working capital loans and/or guaranties to Shipping (which would require the consent of ING Bank if the aggregate amount extended exceeds $15 million including the loans referred to above) in order for Shipping to meet its obligations as they become due. As of December 31, 1993, a wholly owned subsidiary of Shipping had a $19.5 million loan payable to Scandinaviska Enskilda Banken, London Branch (70%) and Den norske Bank (30%). The payment terms of this bank obligation provide for repayment of principal in eleven semiannual installments of approximately $.9 million each which commenced in March 1992 and a final installment of approximately $13.3 million due September 1997. The note bears interest at LIBOR plus 1.625% and is collateralized by the vessel "IRON MASTER", a guarantee by Shipping and a pledge of the shares of Gade Shipping Corporation, a subsidiary of Shipping and the owner of such vessel. The loan agreement requires that Shipping maintain a minimum tangible net worth of NOK 200 million and that the ratio of total debt to total assets be no more than 60%. The loan agreement also contains a provision that permits the majority banks thereunder to accelerate the maturity of the debt if, in the reasonable opinion of such banks, a material adverse change occurs in the financial condition of Shipping. In May and June 1992, Shipping received correspondence from the majority banks asserting the existence of a material adverse change in the financial condition of Shipping. Shipping responded in June 1992 to the effect that there has been no such material adverse change and supplied additional financial information requested by the banks. No action was taken to accelerate the indebtedness and no further correspondence asserting the existence of a material adverse change has been received. Based on current and reasonably foreseeable circumstances, the Company believes that the likelihood of acceleration based on this provision of the loan agreement is remote. Also at December 31, 1993, Shipping had two capitalized lease obligations to a subsidiary of Unibank totalling approximately $17.6 million relating to the vessels "ARCADE EAGLE" and "ARCADE FALCON". Under the terms of the captial leases, Shipping must maintain a value-adjusted tangible net worth greater than NOK 300 million and the ratio of debt to such value-adjusted tangible net worth must be less than 1.5 to 1. Payments on the obligations are due quarterly and the effective yield on the obligations is the Unibank Eurodeposit rate (3.1875% at December 31, 1993) plus 1.5%. Aggregate principal payments under the capital leases are $1.8 million for 1994; $2.1 million for 1995; $2.4 million for 1996; $3 million for 1997 and $3.4 million for 1998. As of December 31, 1993, $37.1 million of long-term debt of Shipping (including current portion) is included in the Company's Consolidated Financial Statements as a component of net liabilities of discontinued operations included in other noncurrent liabilities. No assurance can be given that Shipping will be able to meet all of its financial covenants under its obligations on an ongoing basis in the future (or obtain waivers thereof) based on economic conditions then prevailing in the shipping and offshore drilling industries.
RESULTS OF OPERATIONS
The Company reported net income for 1993 of $4.7 million ($.05 earnings per share after preferred stock dividends of $2.1 million) compared to net income of $3.4 million ($.04 loss per share after $5.3 million of accretion in redemption price of redeemable stocks) for 1992. The results for 1993 and 1992 include net losses of $2.7 million and $5.9 million, respectively, from the results of Drilling and Shipping (with its shipping operation being accounted for as a discontinued operation).
The Company reported a net loss for 1991 of $30.4 million ($.85 per share after $1.9 million of accretion in redemption price of redeemable stocks), which included an extraordinary gain of $3.7 million ($.10 per share) and a cumulative effect of change in accounting principle of $18.9 million ($.50 per share). In August 1991, the Company sold its water treatment segment, Resources Conservation Company.
Operating revenues are primarily a function of dayrates and utilization. The $27.1 million increase in 1993 over 1992 is primarily due to the increased utilization of the semisubmersible and jack-up fleets.
The $29.9 million increase in 1992 over 1991 is primarily due to the consolidation of Drilling and the increased utilization of the tender fleet, offset by decreased utilization of the semisubmersible fleet. Average dayrates for the Company's drilling units for the years ended December 31, 1993, 1992 and 1991 are shown below by class (in thousands):
Drilling unit utilization measured in terms of the number of days the units were earning revenues to the total days the units were owned or leased by the Company (the operating method) for the years ended December 31, 1993, 1992 and 1991 is shown below by class:
The utilization trends experienced by the Company are generally consistent with those experienced by the industry.
Operating expenses as a percentage of revenues decreased by 8.8% in 1993 compared to 1992 due to revenues increasing by 17.3% while operating expenses increased by 3.1%, primarily due to improved operating leverage, as described below.
Operating expenses as a percentage of revenues increased by 7.1% in 1992 compared to 1991 primarily due to the consolidation of Drilling and increased labor costs which were partially offset by a $3.8 million net gain relating to a crane accident on the "W. D. KENT" drilling tender.
Operating expenses do not necessarily fluctuate in proportion to changes in operating revenues due to the continuation of personnel on board and equipment maintenance when the Company's drilling units are stacked. It is only during prolonged stacked periods that the Company is significantly able to reduce labor costs and equipment maintenance expense. Additionally, labor costs fluctuate due to the geographic diversification of the Company's drilling units and the mix of labor between expatriates and nationals as stipulated in the drilling contracts. Labor costs have increased in the last three fiscal years primarily due to higher salary levels, inflation and the decline of the U.S. dollar relative to certain foreign currencies of countries where the Company operates. Equipment maintenance expenses fluctuate depending upon the type of activity the drilling unit is performing and the age and condition of the equipment. Scheduled maintenance of equipment and overhauls are performed on a basis of number of hours operated in accordance with the Company's preventive maintenance program.
Depreciation and amortization expense decreased $3.2 million in 1993 compared to 1992 despite an increase in fleet utilization. The decrease is primarily due to a change in the estimated useful lives of the fourth generation semisubmersible fleet from an average 16 years to 25 years which resulted in a decrease in depreciation expense of approximately $6.8 million for the year ended December 31, 1993. This change was made to reflect the estimated period during which such assets will remain in service.
Depreciation and amortization expense increased $10.8 million in 1992 compared to 1991 primarily due to the consolidation of Drilling and the increased utilization of the tender fleet, offset by lower utilization of the semisubmersible fleet.
General and administrative expenses increased $1.3 million in 1993 compared to 1992 primarily due to $1.1 million of termination benefits that were incurred in 1993.
General and administrative expenses increased $.6 million in 1992 compared to 1991 primarily due to a $2.6 million increase due to the consolidation of Drilling offset by $3.2 million of termination benefits that were accrued in 1991.
Interest expense decreased $2.4 million in 1993 compared to 1992 primarily due to the decrease in the average principal debt balance outstanding during each year as a result of the repayment of scheduled principal payments on the Company's long-term obligations. Noncash interest expense attributable to amortization of discount and deferrals associated with the Company's 8% Senior Subordinated Convertible Debentures due 1998 and the 8% Convertible Subordinated Debentures due 1995 of Reading & Bates Energy Corporation N.V., a subsidiary of the Company, for the year ended December 31, 1993 was $3.1 million.
Interest expense decreased $.8 million in 1992 compared to 1991 primarily as a result of the 1991 Recapitalization. Offsetting this reduction is a $7.5 million increase due to the consolidation of Drilling. Noncash interest expense attributable to amortization of discount and deferrals associated with the Company's 8% Senior Subordinated Convertible Debentures due 1998 and the 8% Convertible Subordinated Debentures due 1995 of Reading & Bates Energy Corporation N.V., a subsidiary of the Company, for the year ended December 31, 1992 was $2.7 million.
The increase in interest income for 1992 is primarily due to the receipt of $10.6 million in 1992 of interest on a United States federal income tax refund and a $2.1 million increase due to the consolidation of Drilling.
The decrease in equity in earnings from 1991 is due to the inclusion of the Company's equity in earnings of Drilling and Shipping of $1.5 million in 1991. The Company began consolidating Drilling's and Shipping's results of operations as of January 1, 1992.
For 1992, other, net included a $6.8 million curtailment gain as a result of the Company modifying its postretirement benefits.
For 1991, other, net included $5.4 million of expenses related to the 1991 Recapitalization offset by a net of $.5 million of other income.
The reduction in income tax expense for 1992 is primarily due to a $1.9 million United States federal income tax refund received in 1992 and a deferred income tax benefit of $1.2 million recognized as a result of consolidating Drilling.
Income tax expense was recognized for the years ended December 31, 1992 and 1991 despite losses from continuing operations before income taxes of $5.3 million and $14.2 million, respectively. These expenses resulted from income tax expense incurred with respect to certain foreign operations.
The impact of inflation on the Company's operations for the three years ended December 31, 1993 has not been material.
Item 8.

Item 8. Financial Statements and Supplementary Data
READING & BATES CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders Reading & Bates Corporation
We have audited the accompanying consolidated balance sheets of Reading & Bates Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, cash flows and stockholders' equity (deficit) for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Reading & Bates Corporation and Subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/Arthur Andersen & Co.
Houston, Texas February 14, 1994
READING & BATES CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders Reading & Bates Corporation
We have audited the consolidated statement of operations, cash flows and stockholders' equity (deficit) of Reading & Bates Corporation and Subsidiaries for the year ended December 31, 1991. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Reading & Bates Corporation and Subsidiaries for the year ended December 31, 1991 inconformity with generally accepted accounting principles.
As discussed in Note K to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 in 1991.
/s/Coopers & Lybrand
Houston, Texas March 25, 1992
READING & BATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET December 31, 1993 and 1992 (dollars in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
READING & BATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET December 31, 1993 and 1992 (dollars in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
READING & BATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (in thousands except per share amounts)
The accompanying notes are an integral part of the consolidated financial statements.
READING & BATES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
The accompanying notes are an integral part of the consolidated financial statements.
READING & BATES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Three Years Ended December 31, 1993 (in thousands)
The accompanying notes are an interal part of the consolidated financial statement
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts of Reading & Bates Corporation ("Reading & Bates") and its subsidiaries, including Arcade Shipping AS ("Shipping") and Arcade Drilling AS ("Drilling") (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated.
In 1992, Reading & Bates acquired control of Shipping and Drilling, former- ly unconsolidated investees. As a result, effective with the first quarter of 1992, Reading & Bates began to consolidate the accounts of the drilling operations of Shipping and Drilling into its consolidated financial statements. At December 31, 1993, Reading & Bates owned approximately 82.6% of the outstanding stock entitled to vote of Shipping and approximately 21.4% of the outstanding stock of Drilling. Shipping owns approximately 46.2% of the outstanding stock of Drilling (see Note G).
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash and cash equivalents. At December 31, 1993, $23.6 million of the cash and cash equivalents balance related to Drilling. Such cash and cash equivalents balance is available to Drilling for all purposes subject to certain debt covenants under a credit facility provided by The Chase Manhattan Bank, N.A. which require the maintenance of a minimum of $10 million in liquid assets and, under certain circumstances, prohibit Drilling from paying dividends or granting loans (including to the Company). Financing activities associated with the 1991 Recapitalization (see Notes B and C) and revolving credit agreements are presented on a net basis in the Consolidated Statement of Cash Flows.
MATERIALS AND SUPPLIES INVENTORY - Materials and supplies are stated at the lower of average cost or market.
INVESTMENTS AND ADVANCES - The Company uses the equity method of accounting for earnings (losses) of unconsolidated investees.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at historical cost as adjusted at August 31, 1989 in the quasi- reorganization. Reading & Bates' drilling units are depreciated under the units-of-production method. Drilling's drilling units are depreciated under the straight-line method. Estimated useful lives for drilling equipment range from three to twenty-five years. Gain (loss) on disposal of properties is credited (charged) to income. Effective January 1, 1993, the Company changed its estimate of the useful lives of its fourth generation semisubmersible fleet from an average of 16 years to 25 years. This change was made to reflect the estimated period during which such assets will remain in service. For the year ended December 31, 1993, the change had the effect of reducing depreciation expense by approximately $6.8 million and increasing net income by approximately $6.8 million or $.12 per share.
EXCESS COSTS OVER NET ASSETS ACQUIRED - Excess costs over net assets acquired represented the cost of the Shipping and Drilling acquisitions exceeding the values assigned to their net tangible assets and was being amortized on a straight-line basis over 20 years. At December 31, 1992, accumulated amortization was $.5 million. Excess costs over net assets acquired has been eliminated primarily as a result of the Company purchasing shares of Shipping and Drilling at a lower average cost per share than their net book value per share.
INCOME TAXES - Deferred income taxes are recognized for revenues and expenses reported in different years for financial statement purposes and income tax purposes. In accordance with Statement of Financial Accounting Standards No. 96, Accounting for Income Taxes, the Company changed its method of accounting for income taxes effective January 1, 1991. The cumulative effect of the accounting change at January 1, 1991 was not material. In February 1992, Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS 109") was issued and supersedes substantially all existing income tax pronouncements. The Company adopted SFAS 109 effective January 1, 1993. The cumulative effect of the accounting change at January 1, 1993 was not material to the Company's consolidated results of operations or financial position.
REVENUE RECOGNITION - Revenues from drilling contracts are recognized as they are earned. Proceeds associated with the early termination of a contract for a drilling unit are recorded as deferred income and recognized as drilling contract revenues over the remaining term of the contract or until such time as the drilling unit begins a new contract. There were no such amounts deferred at December 31, 1993 or 1992.
CAPITALIZED INTEREST - The Company capitalizes interest applicable to the construction of assets. No interest was capitalized during 1993 or 1992.
FOREIGN CURRENCY TRANSACTIONS - The Company may enter into forward exchange contracts to hedge various commitments and anticipated transactions. The net gains and losses resulting from these and other foreign currency transactions included in determining income amounted to a net gain of $.1 million in 1993, a net loss of $1.2 million in 1992 and a net loss of $.2 million in 1991.
EXTRAORDINARY GAIN - In June 1991, the Company received $3.7 million for the settlement of a claim filed by a subsidiary of the Company against the National Iranian Oil Company pertaining to seven land rigs which were located in Iran. The settlement has been accounted for as an extraordinary gain in the Consolidated Statement of Operations.
EARNINGS (LOSS) PER SHARE - Net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the year. Net income (loss) applicable to common stockholders has been adjusted for dividends on preferred stock and accretion in redemption price of redeemable stocks. The effects of common equivalent shares were antidilutive and, accordingly, no adjustment was made for these common equivalent shares. Common shares and per share amounts for all periods presented have been adjusted to reflect the one-for-five reverse stock split on October 2, 1992. The computation of fully diluted earnings per share is not presented as the results are antidilutive.
CONCENTRATION OF CREDIT RISK - The Company maintains cash balances with commercial banks throughout the world. The Company also invests in commercial paper of companies with strong credit ratings, in interest-bearing deposits with major banks and in U.S. government backed securities. These investments generally mature within three months and, therefore, bear minimal risk. At December 31, 1993, the Company had investments in commercial paper of one company, certificates of deposit with three banks and an investment in U.S. government backed securities. At December 31, 1992, the Company had investments in certificates of deposit with three banks. The Company has not incurred any material losses related to these investments in either 1993 or 1992.
The Company's revenues were generated primarily from its eighteen drilling units. Revenues can be generated from a small number of customers which are primarily major U.S. oil and gas companies or their subsidiaries and foreign government-owned oil and gas companies. The Company performs ongoing credit evaluations of its customers' financial conditions and generally requires no collateral from its customers. The Company's allowance for doubtful accounts was $373,000 and $308,000 at December 31, 1993 and 1992, respectively.
INDUSTRY CONDITIONS - Results of operations and financial condition of the Company should be considered in light of the significant fluctuations in demand experienced by drilling contractors as rapid changes in oil and gas producers' expectations, budgets and drilling plans occur. These fluctuations can rapidly impact the Company's results of operations and financial condition as supply and demand factors directly affect utilization and dayrates, which are the primary determinants of cash flow from the Company's operations.
LIQUIDITY - As of December 31, 1993, the Company's total consolidated cash and cash equivalents were $80.4 million. Of this amount, approximately $23.6 million is restricted from the Company's use outside of Drilling. The Company's management currently expects that its cash flow from operations, in combination with cash on hand, will be sufficient to satisfy the Company's 1994 working capital needs, dividends on preferred stock, planned investments, capital expenditures, debt, lease and other obligations.
NONCASH INVESTING AND FINANCING ACTIVITIES - Noncash activities in 1991 associated with the Company's 1991 Recapitalization and related quasi-reorganization are discussed in Notes B and C.
(B) RECAPITALIZATION
The Company's plan of recapitalization (the "1991 Recapitalization") was approved by the stockholders at a special meeting held on March 26, 1991, and the 1991 Recapitalization was closed on March 29, 1991. As a result of the 1991 Recapitalization, approximately 39.6 million shares of Common Stock and approximately $76.2 million in newly issued senior secured obligations were issued to replace the approximately $364.6 million in obligations issued under the Master Restructuring Agreement in the Company's 1989 restructuring that were outstanding on March 28, 1991. A $50 million contingent obligation under the Master Restructuring Agreement was eliminated. The new senior secured obligations consisted of a note for approximately $31.2 million and $45 million in lease obligations. The $31.2 million note was issued to ING Bank under a newly established credit facility (the "ING Facility") whereby the proceeds of the new loan were used to pay cash in such amount to certain creditors. The $45 million in collateralized lease rental obligations resulting from amendments to long-term operating leases for two of the Company's offshore drilling units (the "Continuing Leases") continue to be classified as operating leases. Certain interests of the lease parties in the Continuing Leases were assigned to ING Bank during the second quarter of 1991. Substantially all of the Company's assets that do not serve as collateral for other obligations of the Company collateralize the Company's obligations resulting from the 1991 Recapitalization.
The debt incurred under the ING Facility together with the restructured obligations under the Continuing Leases, totalling $76.2 million, represented all of the Company's long-term obligations as of March 29, 1991, other than $33.7 million in face amount of obligations on the Company's 8% Senior Subordinated Convertible Debentures due 1998 and the Company's 8% Convertible Subordinated Debentures due 1995 and $21.5 million of other long-term obligations.
Assuming the 1991 Recapitalization had occurred at the beginning of the year, January 1, 1991, the net loss per share for 1991 would have been $.49 per share.
(C) QUASI-REORGANIZATION
The 1991 Recapitalization was accounted for as a quasi-reorganization. In accordance with quasi-reorganization accounting principles, the Company adjusted certain debt obligations and transferred the accumulated deficit to "Capital in excess of par value" as of March 31, 1991. Following is a summary of significant adjustments resulting from the 1991 Recapitalization and quasi-reorganization accounting (in thousands):
(D) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1993 and 1992 consisted of the following (in thousands):
In February 1993, the ING Facility with ING Bank was amended and an additional credit facility was created ("Facility F") to finance the purchase of additional shares of Shipping and Drilling. Facility F consisted of revolving credit and/or stand-by letters of credit that were to be available to the Company until January 1, 1995, in an amount not to exceed $15.5 million. In March 1993, the Company received approximately $11.6 million from Facility F and in July 1993 the Company repaid Facility F from proceeds from a preferred stock offering (see Note M). In August 1993, ING Bank agreed to provide a temporary $10 million letter of credit facility, available until June 30, 1997, to cover import duties for drilling equipment in Indonesia. At December 31, 1993, no amounts had been drawn down by the Company.
Aggregate annual maturities of long-term obligations, excluding the unamortized discount on the New and Old Debentures, for the five years ending December 31, 1998 and thereafter are as follows: 1994, $20,234,000; 1995, $36,229,000; 1996, $18,250,000; 1997, $15,015,000; 1998, $31,605,000 and $8,000,000 thereafter.
(E) SHORT-TERM OBLIGATIONS
Short-term obligations at December 31, 1993 and 1992 consisted of the following (in thousands):
The Company has a $15 million revolving credit facility in the form of an overdraft account maintained with ING Bank ("Facility C"). A substantial portion of collections on the Company's receivables is paid into the account and is applied automatically against any outstanding balance. Facility C is used primarily for working capital requirements. Overdraft borrowing is available under Facility C (as amended) through June 1, 1994. Facility C bears interest at prime (6.00% at December 31, 1993) plus 1.25%. The amount of unused revolving credit borrowing available under Facility C at December 31, 1993 was approximately $12.3 million.
(F) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES - At December 31, 1993, the Company had purchase commitments of $5.3 million for equipment on drilling units.
OPERATING LEASES - Aggregate future minimum rental payments relating to operating leases for the five years ending December 31, 1998 and thereafter are as follows (in thousands):
The Continuing Leases expire December 31, 1995, yet payments continue through December 31, 1997 as a result of the terms negotiated under the 1991 Recapitalization. The amended payment terms of the Continuing Leases provide for repayment of principal in nine equal semiannual installments of $4.4 million which commenced on June 30, 1993, one payment of $5.2 million on December 31, 1997 and quarterly interest payments at LIBOR (3.5% at December 31, 1993) plus 1.9375%.
During 1992, the Company entered into a sale/leaseback of the "SONNY VOSS". Proceeds received of $27.7 million resulted in a gain of $6.3 million which was deferred and is being amortized over the lease term of 42 months.
Total rent expense for the years ended December 31, 1993, 1992 and 1991 was as follows (in thousands):
Certain operating leases contain renewal options and have options to purchase the asset at fair market value at the end of the lease term.
LITIGATION - The Company is one of the defendants in certain litigation brought in July 1984 by the Cheyenne-Arapaho Tribes of Oklahoma in the U.S. District Court for the Western District of Oklahoma, seeking to set aside two communitization agreements with respect to three leases involving tribal lands in which the Company previously owned interests and to have those leases declared expired. In June 1989, the U.S. District Court entered an interim order in favor of the plaintiffs. On appeal, the U.S. Court of Appeals for the Tenth Circuit upheld the decision of the trial court and petitions for rehearing of that decision were denied. Petitions for writs of certiorari filed by the parties with the U.S. Supreme Court have been denied, and the case has been remanded to the trial court for determination of damages.
In November 1988, a lawsuit was filed in the U.S. District Court for the Southern District of West Virginia against Reading & Bates Coal Co., a wholly owned subsidiary of the Company, by SCW Associates, Inc. claiming breach of an alleged agreement to purchase the stock of Belva Coal Company, a wholly owned subsidiary of Reading & Bates Coal Co. with coal properties in West Virginia. When those coal properties were sold in July 1989 as part of the disposition of the Company's coal operations, the purchasing joint venture indemnified Reading & Bates Coal Co. and the Company against any liability Reading & Bates Coal Co. might incur as the result of this litigation. A judgment for the plaintiff of $32,000 entered in February 1991 was satisfied and Reading & Bates Coal Co. was indemnified by the purchasing joint venture. On October 31, 1990, SCW Associates, Inc., the plaintiff in the above-referenced action, filed a separate ancillary action in the Circuit Court, Kanawha County, West Virginia against the Company and a wholly owned subsidiary of Reading & Bates Coal Co., Caymen Coal, Inc. (former owner of the Company's West Virginia coal properties), as well as the joint venture, Mr. William B. Sturgill personally (former President of Reading & Bates Coal Co.), three other companies in which the Company believes Mr. Sturgill holds an equity interest, two employees of the joint venture, First National Bank of Chicago and First Capital Corporation. The lawsuit seeks to recover compensatory damages of $50 million and punitive damages of $50 million for alleged tortious interference with the contractual rights of the plaintiff and to impose a constructive trust on the proceeds of the use and/or sale of the assets of Caymen Coal, Inc. as they existed on October 15, 1988. The Company and its indirect subsidiary intend to defend their interests vigorously. The Company believes the damages alleged by the plaintiff in this action are highly exaggerated. In any event, the Company believes that it has valid defenses and that it will prevail in this litigation.
On January 26, 1993, Kerr-McGee Corporation ("Kerr-McGee") filed an action against the Company and Reading & Bates Drilling Co., a subsidiary of the Company, in the U.S. District Court, Western District of Louisiana. On March 23, 1993, the complaint was amended to add Mobil Oil Exploration & Producing Southeast, Inc. as an additional party plaintiff in this action. In this action the plaintiffs are seeking to recover an unspecified amount for damages to a two well platform and related production equipment, facilities and pipelines, in South Timbalier Island Block 34, allegedly caused by the Company's semisubmersible drilling unit "JACK BATES" (ex "ZANE BARNES") after that drilling unit had been set adrift in the Gulf of Mexico by Hurricane Andrew in August 1992. The Company also has received notice that Tennessee Gas Pipeline Company has asserted a claim with respect to damage to a gas riser pipe and related equipment also located at Kerr-McGee's platform in South Timbalier Island Block 34. On April 8, 1993, Murphy Exploration & Production Company ("Murphy"), a subsidiary of Murphy Oil Corporation, filed a similar claim in the U. S. District Court, Eastern District of Louisiana, with respect to its 12 well platform located in South Timbalier Island Block 86. The Court has granted the Company's motion to transfer and has entered an order transferring this case to the U. S. District Court, Western District of Louisiana. The Murphy action has now been consolidated with the Kerr-McGee action. The Company and its subsidiary believe they have valid defenses with respect to the claims asserted and intend to defend their interests vigorously. In December 1992, the Company provided a $10 million letter of undertaking from the Company's protection and indemnity association and a $34 million bond (secured to the extent of approximately $32.3 million by indemnities from the Company's excess liability underwriters and approximately $1.7 million by a standby letter of credit issued for account of the Company) to Kerr-McGee and Murphy to secure their claims and avoid the attachment of the "JACK BATES" prior to its departure from the United States for a drilling contract with Agip S.p.A. The Company is not aware of any other claims that may arise against it as a result of Hurricane Andrew. The Company believes it has adequate liability insurance to protect the Company and its subsidiary from any material liability that might result from these claims.
On April 13, 1993, the All American Marine Slip, acting as managing general agent on behalf of the lead underwriters on the Company's primary loss of hire insurance policy, denied the Company's loss of hire claim with respect to the damages to the "JACK BATES" caused by Hurricane Andrew amounting to approximately $9.1 million, demanded arbitration under the policy with respect to the policy coverage dispute and filed an action in the U.S. District Court, Southern District of New York (the "New York action"), seeking a declaratory judgment and order compelling the Company to arbitrate the dispute. On April 16, 1993, the Company filed an action in the U. S. District Court, Southern District of Texas (the "Texas action"), seeking compensatory and punitive damages for bad faith and unfair dealing by the All American Marine Slip under the Texas Insurance Code and Texas Deceptive Practices Act. On April 23, 1993, the All American Marine Slip amended its complaint in the New York Action to seek damages for alleged tortious interference with contract and abuse of process by the Company's having filed the Texas action. On July 7, 1993, the Company and the All American Marine Slip agreed to submit all claims in the New York action and the Texas action to arbitration in New York, preserving all rights of both parties (other than the right to a jury trial). As a result the New York action and the Texas action (the latter having been transferred to New York pursuant to court order) have been placed on the suspense docket pending arbitration. On August 6, 1993, the Company agreed with certain underwriters at Lloyds and ILU companies, representing 57.5% of the insurers on the Company's primary loss of hire insurance policy, to settle their respective shares of the Company's loss of hire claim in exchange for payment to the Company of an aggregate of approximately $3.4 million. The effect of that settlement leaves the All American Marine Slip representing lead underwriters with respect to the remaining 42.5% of the Company's loss of hire claim subject to arbitration. On December 6, 1993, the arbitration panel entered an interim award that the Company had proved a valid claim under its loss of hire policy and on December 30, 1993 entered a final award holding that the amount of the Company's claim under the policy was $7,296,000 and that the amount owed by the remaining 42.5% of insurers was $3,100,800, plus interest at the rate of 6.5% per annum from August 1, 1993 until paid. In its final award the arbitration panel also held there was no bad faith on the part of the insurers and that each party bear its own legal costs. The court in the New York action has entered an order confirming the award and is expected to enter a judgment shortly.
The Company is involved in these and various other legal actions arising in the normal course of business. After taking into consideration the evaluation of such actions by counsel for the Company, management is of the opinion that the outcome of known claims and litigation will not have a material adverse effect on the Company's business or consolidated financial position or results of operations.
EMPLOYMENT CONTRACTS - The Company has committed under employment contracts to provide two key executives with severance benefits totalling approximately $3.2 million which vest in September 2003 or earlier if the executive both reduces his ownership of the Company's common stock below a specified level and resigns. The Company amortizes the cost of the severance benefits over the ten year period from September 1993 to September 2003, unless the executive reduces his stock ownership and resigns prior to September 2003 in which case the unamortized severance cost would be expended.
LETTERS OF CREDIT - The Company has a $15 million letter of credit facility obtained in connection with the 1991 Recapitalization. At December 31, 1993 and 1992, $14.3 million and $11.4 million of the facility, respectively, had been drawn down by the Company. The Company also had an additional $4.9 million and $1.7 million letter of credit outstanding at December 31, 1993 and 1992, respectively.
(G)INVESTMENT IN ARCADE
ARCADE ACQUISITION - In June 1991, as part of its strategy of emphasizing geographic diversification, "fourth generation" semisubmersible drilling technology and consolidation of the offshore drilling industry, the Company began acquiring the stock of Shipping and Drilling (the "Arcade Acquisition"). Both Shipping and Drilling are Norwegian companies listed on the Oslo Stock Exchange. Drilling owns the "HENRY GOODRICH" and the "SONAT ARCADE FRONTIER", two fourth generation semisubmersible drilling units. Shipping has two principal lines of operations, the shipping operations which includes owning and chartering vessels and the drilling operations which principally consist of the ownership of approximately 46.2% of the outstanding stock of Drilling. The Company is pursuing its plan to dispose of Shipping's shipping operations (see Note I). The Arcade Acquisition has been funded through a margin loan from Carnegie International Limited, a private placement of both preferred and common stocks (see Note L), the Company's working capital and a revolving credit facility from ING Bank. The Company has obtained majority representation on the board of directors of both Shipping and Drilling, and Paul B. Loyd, Jr. the Company's Chairman and Chief Executive Officer, has been elected chairman of each board. Beginning with the first quarter of 1992, the Company began to consolidate the accounts of Drilling and Shipping into the consolidated financial statements of the Company. As of December 31, 1993, the Company had acquired approximately 82.6% of the outstanding stock of Shipping and directly acquired approximately 21.4% of the outstanding stock of Drilling, at an accumulated cost of approximately $88.6 million. In January 1994, the Company purchased additional shares of Drilling increasing the Company's direct ownership of Drilling to 21.9%.
The following unaudited pro forma selected financial data for the three years ended December 31, 1993 show the consolidated data as if the investments, as of December 31, 1993, in Drilling and Shipping, related financing activities and the 1991 Recapitalization had occurred on January 1, 1991, (in thousands except per share amounts):
(H) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1993 and 1992 were as follows (in thousands):
The components of "OTHER NONCURRENT LIABILITIES" at December 31, 1993 and 1992 were as follows (in thousands):
(I) DISCONTINUED OPERATIONS
SHIPPING - As discussed in Note G, the Company began to consolidate the accounts of Shipping's continuing operations and Drilling in the first quarter of 1992. Shipping is engaged in two principal business segments, shipping operations and drilling operations. The Company is pursuing its plan to dispose of Shipping's shipping operations. Shipping's assets held for sale at December 31, 1993, consisting of vessels, tankers and chartering contracts, were $55.3 million and related liabilities totalled $59.5 million, including $37.1 million of long-term obligations and a $17.3 million reserve for losses on ultimate disposal and operations until disposal. Accordingly, the net position of the shipping operations in the accompanying balance sheet at December 31, 1993 and 1992 was $4.2 million and $.9 million, respectively. Operating revenues and net loss of discontinued operations not included in the Consolidated Statement of Operations for the year ended December 31, 1993 were $14.8 million and $4.6 million, respectively. Operating revenues and net loss of discontinued operations not included in the Consolidated Statement of Operations for the year ended December 31, 1992 were $34.1 million and $3.2 million, respectively.
WATER TREATMENT - On August 30, 1991, the Company sold all of the stock of its wholly owned subsidiary Resources Conservation Company ("RCC"), the water treatment segment of its business, for a sales price of $9.7 million. As a result of the sale, the Company recorded a gain of $3.2 million which is included in discontinued operations. The results of operations of RCC have been reclassified in the accompanying consolidated financial statements as discontinued operations.
For the year ended December 31, 1991, income from discontinued operations consisted of the following (in thousands):
(J) INCOME TAXES
The Company's consolidated federal tax returns for the tax years from September 30, 1974 to December 31, 1981 have been examined by the Internal Revenue Service (the "IRS"). A settlement agreement between the Company and the IRS for those tax years provided the Company with a tax refund of approximately $3.6 million plus related interest of approximately $10.6 million. The Company received cash of $14.2 million and as a result recognized interest income and income tax benefits of $12.5 million in the third quarter of 1992.
Income taxes for the years ended December 31, 1993, 1992 and 1991 consisted of the following (in thousands):
Components of loss before income taxes for the years ended December 31, 1993, 1992 and 1991 were as follows (in thousands):
The effective tax rate, as computed on income before taxes and including discontinued operations, differs from the statutory U.S. income tax rate for the years ended December 31, 1993, 1992 and 1991 due to the following:
Income taxes of $4,008,000, $102,000 and $3,208,000 were recognized in 1993, 1992 and 1991, respectively, despite losses from continuing operations before income taxes. The expense resulted primarily from income tax expense incurred with respect to certain foreign operations. The Company was limited in utilization of tax benefits from investment tax credits prior to 1986 and operating losses in 1993, 1992 and 1991.
Deferred income taxes result from those transactions which affect financial and taxable income in different years. The nature of these transactions (all of which were long-term) and the income tax effect of each as of December 31, 1993 and 1992 was as follows (in thousands):
Valuation allowance is necessary to reflect the anticipated expiration of net operating loss carryforwards prior to their utilization.
The 1991 Recapitalization resulted in an ownership change for federal income tax purposes. As a result of this ownership change, the amount of net operating loss and other tax attribute carryforwards generated prior to the ownership change which may be utilized to offset federal taxable income is limited by the Internal Revenue Code to approximately $2.7 million annually. Net tax operating losses of $13,615,000 arising in 1991 subsequent to the ownership change are not subject to this limitation. Any tax benefits due to the utilization of carryforwards which were generated prior to the 1991 Recapitalization will be reported as a credit to "Capital in excess of par value".
(K) 1991 CHANGE IN ACCOUNTING PRINCIPLE
In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. The Company's employees may become eligible for these benefits if they reach normal or early retirement age while working for the Company and if they have accumulated fifteen years of service. Health care costs are paid as they are incurred. Life insurance benefits are provided through an insurance company whose premiums are based on benefits paid during the year. The Company's policy had been to expense retiree health care costs as they were incurred. Effective January 1, 1991, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions ("SFAS 106"). The statement requires employers to recognize the cost of providing postretirement benefits to employees over the employees' service periods. The Company elected to expense the entire "Accumulated Projected Benefit Obligation" at January 1, 1991, of $18,860,000, or $.50 per share as shown separately in the Consolidated Statement of Operations under "Cumulative effect of change in accounting principle".
Effective April 1, 1992, the Company modified its postretirement benefits. The effect of these modifications significantly reduced the Company's postretirement benefit costs and accumulated benefit obligation, and resulted in a $6.8 million curtailment gain recognized in the Company's results of operations (included in Other, net) for the year ended December 31, 1992 primarily due to the change in attribution period. Other modifications include employee cost-sharing through increases in deductibles and out-of-pocket limits and increased service period requirements.
Postretirement benefit costs for the years ended December 31, 1993 and 1992 included the following (in thousands):
The health care cost trend rates used to measure the expected cost in 1994 for medical, dental and vision benefits were 12%, 8% and 6%, respectively, each graded down to an ultimate trend rate of 5.5% to be achieved in the year 2021. The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation was 7.5% and 4.5%, respectively. The effect of a one-percentage- point increase in health care cost trend rates for future periods would increase the service cost and interest cost portion of net periodic postretirement benefit cost approximately 15.4%. The accumulated postretirement benefit obligation would increase by approximately 15%.
The amounts recognized in the Company's Consolidated Balance Sheet at December 31, 1993 and 1992 was as follows (in thousands):
(L) PRIVATE PLACEMENT
In September 1991, the Company effected a private placement of approximately 1.7 million shares of Common Stock Subject to Redemption and approximately 6,857 shares of a new class of preferred stock (10,000 shares authorized) (the "Redeemable Preferred Stock") pursuant to which the Company raised proceeds of approximately $27.1 million in cash. The proceeds were utilized to fund a portion of the Arcade Acquisition (see Note G). Each share of the Redeemable Preferred Stock was convertible into 200 shares of Common Stock, was entitled to dividend rights equal to those of the common shares into which it was convertible and had one vote per share. The private placement was effected at a price of $8.75 per share of Common Stock Subject to Redemption and $1,750 per share of Redeemable Preferred Stock. In June 1992, each share of the Redeemable Preferred Stock (6,857.143 shares) was converted into 200 shares of Common Stock Subject to Redemption (1,371,428 shares). Pursuant to the Subscription Agreements entered into in connection with the private placement, as amended (the "Subscription Agreements"), the Company had agreed to use its best efforts to cause a registration statement with respect to Common Stock Subject to Redemption, including shares to be issued upon the conversion of the Redeemable Preferred Stock (the "Private Placement Shares") to become effective under the federal securities laws no later than May 29, 1992 and had guaranteed that any selling holder of Private Placement Shares would receive a specified minimum net share price on resale. In October 1992, without registering the Private Placement Shares, the Company entered into agreements with the holders of the Private Placement Shares that superseded the provisions of the Subscription Agreements under which the Company would repurchase all of such shares at $11.05 per share. All of the outstanding Private Placement Shares were repurchased by the Company in the fourth quarter of 1992 with approximately $34.3 million of the proceeds from a public offering of common stock (see Note M). The carrying value of the Redeemable Preferred Stock and the Common Stock Subject to Redemption was initially recorded at the issue price (net of issuance costs) and was being increased by periodic accretions to retained earnings, based on the interest method, of the difference between the issuance price ($8.75 per common share equivalent) and the estimated redemption value.
(M) CAPITAL SHARES
CONVERTIBLE PREFERRED STOCK - In July 1993, the Company effected a public offering of 2,990,000 shares of $1.625 Convertible Preferred Stock, par value $1.00 per share (the "Preferred Stock"), pursuant to which the Company raised gross proceeds of approximately $74.7 million in cash (net proceeds of approximately $71.2 million). The proceeds were utilized to repay indebtedness under Facilities C and F of the ING Facility, approximately $5.5 million and $11.6 million, respectively. The remaining proceeds will be used by the Company for working capital and general corporate purposes. The Preferred Stock is convertible at the option of the holder at any time into shares of the Company's Common Stock at a conversion rate of 2.899 shares of Common Stock for each share of Preferred Stock (equivalent to a conversion price of $8.625 per share of Common Stock), subject to adjustment in certain events. Annual dividends are $1.625 per share and are cumulative and are payable quarterly commencing September 30, 1993. The Preferred Stock is redeemable at any time on and after September 30, 1996, at the option of the Company, in whole or in part, at a redemption price of $26.1375 per share, and thereafter at prices decreasing ratably annually to $25.00 per share on and after September 30, 2003, plus accrued and unpaid dividends. The holders of the Preferred Stock do not have any voting rights, except as required by applicable law and except that, among other things, whenever accrued and unpaid dividends on the Preferred Stock are equal to or exceed the equivalent of six quarterly dividends payable on the Preferred Stock, the holders of the Preferred Stock will be entitled to elect two directors to the Board until the dividend arrearage has been paid in full. The term of office of all directors so elected will terminate immediately upon such payment. The Preferred Stock has a liquidation preference of $25.00 per share, plus accrued and unpaid dividends.
COMMON STOCK - At the Company's Annual Meeting of Stockholders held on May 20, 1992, the Company's stockholders approved an increase in the number of authorized shares of Common Stock of the Company from 275,000,000 to 425,000,000, which was effected on September 16, 1992.
On October 2, 1992, following stockholder approval, the Company effected a one-for-five reverse stock split. On the Consolidated Balance Sheet, "Common Stock" was reduced and "Capital in excess of par value" was increased to reflect this change.
In October 1992, the Company effected a public offering of 8 million shares of Common Stock pursuant to which the Company raised gross proceeds of approximately $40 million in cash (net proceeds of approximately $38.1 million). The proceeds were utilized to repurchase 272,123 shares of Common Stock which had been issued for the settlement of the Company's Supplemental Executive Retirement Plan obligation (the "SERP Shares"), to repurchase 3,102,857 Private Placement Shares (See Note L) and for general corporate purposes. As of November 6, 1992, all of the 272,123 SERP Shares and all of the 3,102,857 Private Placement Shares had been repurchased by the Company. Supplemental earnings per share for the year ended December 31, 1992 would have been $.06 per share which assumes the public offering and the repurchase of the SERP Shares and the Private Placement Shares, described above, both occurred on January 1, 1992.
As of December 31, 1993, authorized, unissued shares of Common Stock were reserved for issuance as follows:
NON-VOTING CONVERTIBLE CLASS B COMMON STOCK - At December 31, 1993 and 1992, none of the remaining 41.1 million authorized shares were outstanding.
Class A (Cumulative Convertible) Capital Stock (the "Class A Stock") has been included with "Capital in excess of par value" due the $880 outstanding at December 31, 1993 and 1992.
(N) CAREER STOCK AND STOCK OPTION PLANS
On March 19, 1992, and at the Annual Meeting of Stockholders on May 20, 1992, the Company's Board of Directors and stockholders, respectively, approved the Company's 1992 Long-Term Incentive Plan (the "1992 Plan"). The 1992 Plan provides for grants of stock options, stock appreciation rights, stock awards and cash awards, which may be granted singly, in combination or in tandem. The 1992 Plan is unfunded insofar as the plan provides for awards of cash, Common Stock or rights thereto. An aggregate of 1,000,000 shares of Common Stock is available for awards granted wholly or partly in Common Stock. The Company has granted Restricted Stock Awards under the 1992 Plan totalling 300,000 shares of Common Stock. Such shares awarded are restricted as to transfer until vested pursuant to a schedule whereby 1/24th of the total number of shares is vested per calendar quarter from June 30, 1992 through March 31, 1998 (subject to certain conditions). The market value at the date of grant of the Common Stock granted was recorded as unearned compensation and is amortized to expense over the periods during which the restrictions lapse or shares vest. Unearned compensation is shown as a reduction of stockholders' equity.
On November 29, 1990, and at a special meeting on March 26, 1991, the Company's Board of Directors and stockholders, respectively, approved the Company's 1990 Stock Option Plan. The plan is intended to provide an incentive that will allow the Company to retain in its employ, persons of the training, experience and ability necessary for the development and financial success of the Company. The plan authorized options with respect to 1,966,000 shares of Common Stock to be granted to certain employees of the Company at an option price of $9.65625 per share. On May 18, 1993, the option price was adjusted to $7.375. On September 25, 1991, options with respect to all 1,966,000 shares were granted. As of December 31, 1993, 33,700 options had been exercised and 1,155,100 shares were vested. Total adjusted compensation under the plan of approximately $1,581,000 represents the excess of market price at the measurement dates over the option price multiplied by the number of options granted. This amount is to be recognized as expense over the four year vesting period which commenced in March 1991. Compensation recognized under the plan for the three years ending December 31, 1993, 1992 and 1991 totalled approximately $507,000, $117,000 and $293,000, respectively. The plan will terminate on March 29, 2001.
(O) RETIREMENT AND SAVINGS PLANS
PENSION PLANS - The Company has three noncontributory pension plans. Substantially all of its employees are covered by one or more of these plans. Plan benefits are primarily based on years of service and average high thirty-six month compensation.
The Reading & Bates Pension Plan (the "Domestic Plan") is qualified under the Employee Retirement Income Security Act (ERISA). It is the Company's policy to fund this plan not less than the minimum required by ERISA. It is the Company's policy to contribute to the Reading & Bates Offshore Pension Plan (the "Offshore Plan") an amount equal to the normal cost plus amounts sufficient to amortize the initial unfunded actuarial liability and subsequent unfunded liability caused by plan or assumption changes over thirty years. The unfunded liability arising from actuarial gains and losses is funded over fifteen years. The Offshore Plan is a nonqualified plan and is not subject to ERISA funding requirements. The Domestic and Offshore Plans invest in cash equivalents, fixed income and equity securities.
The Reading & Bates Retirement Benefit Replacement Plan (the "Replacement Plan") is a self-administered unfunded excess benefit plan. All members of the Domestic Plan or the Reading & Bates Savings Plan are potential participants in the Replacement Plan.
Pension costs, including discontinued operations, for the years ended December 31, 1993, 1992 and 1991 was $534,000, $111,000, and $16,000, respectively. The 1991 sale of the Company's water treatment operations reduced the number of active employees covered under the Domestic and Replacement Plans. This reduction also resulted in a curtailment of these plans. When a curtailment occurs, the pension liability associated with the future service of the terminated employees is immediately recognized as a gain. A net curtailment gain of $410,000 associated with the sale of the water treatment operations was included in discontinued operations in 1991.
Pension costs (benefit) for the years ended December 31, 1993, 1992 and 1991 included the following components (in thousands):
The funded status of the plans at December 31, 1993 was as follows (in thousands):
The additional minimum liability is shown as a reduction of stockholders' equity.
Employees of discontinued operations are covered under the plans from their employment dates through the date of sale of the discontinued operation.
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations was 7.5% and 4.5%, respectively. The weighted average expected long-term rate of return on assets was 10.25%.
SAVINGS PLANS - The Company established a thrift plan in 1969 for salaried and hourly paid employees. Effective August 1, 1988, the plan was amended and restated creating two plans and the name was changed to the Reading & Bates Savings Plan and the Reading & Bates Offshore Savings Plan. Under the plans, an employee may contribute up to 10% of base salary (subject to certain limitations) and the Company will make matching contributions at a rate of $.50 for each dollar contributed by the employee up to 6% of the employee's base salary. Employees may direct the investment of their contributions and the contributions of the Company in various plan options.
Twenty-five percent of the Company's contribution vests after two years of an employee's service with the Company, 50% after three years, 75% after four years and 100% after five years. Compensation costs (including discontinued operations) under the plans amounted to $502,000 in 1993, $381,000 in 1992 and $940,000 in 1991.
(P) RELATED PARTY TRANSACTIONS
Drilling has a rig management agreement with Sonat Offshore Drilling Inc. ("Sonat"), a major shareholder of Drilling, for the operation and marketing of both of its drilling units. For each of the years ending December 31, 1993 and 1992, Drilling paid to Sonat approximately $2.5 million for such management services. In addition, Drilling has a bareboat charter agreement with Sonat for one of its drilling units. For the years ended December 31, 1993 and 1992, Drilling received from Sonat approximately $14.7 million and $3.8 million, respectively for such bareboat charter. At December 31, 1993 and 1992, Drilling had a net receivable from Sonat of $6 million and $5.2 million, respectively.
Certain principal stockholders of the Company and entities related thereto were investors in the Company's private placement in September 1991 (see Note L). BCL Investment Partnership, L.P. ("BCL") purchased 114,285 shares of Common Stock Subject to Redemption for $1 million, and Danielson Holding Corporation ("Danielson") and its affiliate, National American Insurance Company of California ("NAICC"), together purchased all of the Redeemable Preferred Stock for $4 million and $8 million, respectively. BCL owned, as of December 31, 1993, approximately 33.9% of the Common Stock, and Paul B. Loyd, Jr., the Company's Chairman and Chief Executive Officer controls one of the five general partners of BCL. Danielson and NAICC may be deemed affiliates of R&B Investment Partnership, L.P. (the "WHR Partnership") which beneficially owned, as of December 31, 1993, approximately 20.8% of the Common Stock. C. Kirk Rhein, Jr., the Company's Vice Chairman, is a general partner of the general partner of various partnerships which are stockholders of the Company, including the WHR Partnership. Upon the repurchase of the Private Placement Shares in November 1992, BCL, Danielson and NAICC received approximately $1.3 million, $5.1 million and $10.1 million, respectively, for the Private Placement Shares held by each of them.
Fees totalling approximately $700,000 and $167,000, respectively, were paid by the Company in October 1991 to an investment firm, a principal of which is a member of the Board of Directors of the Company and an affiliate of the WHR Partnership, and to Venture Capital Investors, an affiliate of an entity with an indirect interest in BCL, for their efforts in securing unaffiliated participating investors in the private placement of the Company's Redeemable Preferred Stock and Common Stock Subject to Redemption (see Note L).
In 1991, the Company paid to ING Bank an arrangement fee of $1.8 million, of which $900,000 was payable as a finder's fee to Capercaillie Holdings, Inc., an affiliate of BCL, in connection with a credit facility extended to the Company by ING Bank.
(Q) OPERATIONS BY GEOGRAPHIC AREA
The Company, together with its 50% or less owned unconsolidated investees, operates principally in international offshore contract drilling of oil and gas wells. For the year ended December 31, 1993, revenues from three customers of $39.6 million, $37.7 million and $20.3 million accounted for 22%, 20% and 11%, respectively, of the Company's total operating revenues. For the year ended December 31, 1992, revenues from two customers of $40.9 million and $27.8 million accounted for 26% and 18%, respectively, of the Company's total operating revenues. For the year ended December 31, 1991, revenues from three customers of $38.6 million, $27.9 million and $14.1 million accounted for 30%, 22% and 11%, respectively, of the Company's total operating revenues. Results of operations of the water treatment and shipping segments are not included in the geographic information as they have been included in discontinued operations.
GEOGRAPHIC AREAS (in thousands)
READING & BATES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the two years ended December 31, 1993, are as follows (in thousands except for per share amounts):
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
On November 25, 1992 the Company engaged Arthur Andersen & Co. as its independent public accountants replacing Coopers & Lybrand. There were no disagreements with Coopers & Lybrand regarding accounting principles and practices for the two fiscal years ended December 31, 1991, and the subsequent interim period, however, its report for the year ended December 31, 1990 contained a paragraph regarding the Company's ability to continue as a going concern. That qualification was removed in Coopers & Lybrand's report for the year ended December 31, 1991. The decision to change accountants was approved by the Company's audit committee of the board of directors.
PART III
The information called for by Part III of Form 10-K is incorporated by reference from the Registrant's Proxy Statements relating to its annual meeting of Stockholders to be held May 10, 1994, which will be filed by the Registrant with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year. Also reference is made to the information contained under the captioned "Executive Officers of Registrant" contained in Part I hereof.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements:
Reports of Independent Public Accountants Consolidated Balance Sheet as of December 31, 1993 and 1992 Consolidated Statement of Operations for the years ended December 31, 1993, 1992 and 1991 Consolidated Statement of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Consolidated Statement of Stockholders' Equity (Deficit) for the years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements Supplemental Consolidated Financial Information (unaudited)
2. Schedules:
Reports of Independent Public Accountants Schedule II - Amounts Receivable from Related Parties Schedule V - Property and Equipment Schedule VI - Accumulated Depreciation and Amortization of Property and Equipment Schedule IX - Short-term Obligations Schedule X - Supplementary Consolidated Statement of Operations Information All other schedules are omitted because they are not required or are not applicable.
3. Exhibits:
Exhibit 3.1 - The Registrant's Restated Certificate of Incorporation, as amended through October 2, 1992. (Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 3.2 - The Registrant's Certificate of Designations of $1.625 Convertible Preferred Stock ($1.00 par value). (Filed as Exhibit (a) to Amendment No. 1 to the Registrant's Form 8-A/A dated July 22, 1993 and incorporated herein by reference.)
Exhibit 3.3 - The Registrant's Bylaws. (Filed as Exhibit 4.2 to the Company's Registration No. 33-44237 and incorporated herein by reference.)
Exhibit 4.1 - Indenture relating to the Registrant's 8% Senior Subordinated Convertible Debentures due 1998 dated as of August 29, 1989, between the Registrant and IBJ Schroder Bank & Trust Company, as Trustee. (Filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for 1989 and incorporated herein by reference.)
Exhibit 4.2 - Form of the Registrant's registered 8% Senior Subordinated Convertible Debentures due 1998. (Filed as Exhibit 4.2 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.3 - Form of the Registrant's bearer 8% Senior Subordinated Convertible Debentures due 1998. (Filed as Exhibit 4.3 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.4 - Indenture dated as of December 1, 1980 among Reading & Bates Energy Corporation N.V., the Registrant, as Guarantor, and U.S. Trust Company, as Successor Trustee, relating to the 8% Convertible Subordinated Debentures due 1995 issued by Reading & Bates Energy Corporation N.V., and guaranteed by the Registrant. (Filed as Exhibit 4.4 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.5 - Form of 8% Convertible Subordinated Debentures due 1995 issued by Reading & Bates Energy Corporation N.V., and guaranteed by the Registrant. (Filed as Exhibit 4.5 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.6 - Form of the Registrant's Common Stock Certificate. (Filed as Exhibit 4.6 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.7 - Form of Preferred Stock Certificate for $1.625 Convertible Preferred Stock ($1.00 par value). (Filed as Exhibit 4.4 to Registration No. 33-65476 and incorporated herein by reference.)
Exhibit 4.8 - Registration Rights Agreement dated as of March 29, 1991 among the Registrant, Holders as referred therein and members of Offering Committee as referred therein. (Filed as Exhibit 4.22 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.9 - Amendment No. 1, dated as of September 1, 1992, to the Registration Rights Agreement filed as Exhibit 4.7 hereto. (Filed as Exhibit 4.18 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.10 - Amendment No. 2, dated as of June 1, 1993, to the Registration Rights Agreement. (Filed as Exhibit 4.8 to Registration No. 33-65476 and incorporated herein by reference.)
Exhibit 4.11 - Agreement dated as of March 27, 1991 among the Registrant, R&B Rig Investment Partners, L.P., R&B MODU Investment Associates, L.P., M&W Investment Partners, L.P., and BCL Investment Partners, L.P. (Filed as Exhibit 4.24 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.12 - Termination Agreement dated as of September 14, 1993 between the Registrant and BCL Investment Partners, L.P.
Exhibit 4.13 - Agreement dated March 29, 1991 between the Registrant and R&B Investment Partnership, L.P. (Filed as Exhibit 4.25 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.14 - Amendment No. 1 dated as of January 1, 1992 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.15 - Amendment No. 2 dated as of January 1, 1992 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.16 - Termination Agreement dated as of September 14, 1993 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.17 - Preferred Stock Subscription Agreement dated as of September 3, 1991 between Registrant and the subscribers, as amended. (Filed as Exhibit 4.12 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.18 - Subscription Agreement dated as of September 3, 1991 between Registrant and the subscribers, as amended. (Filed as Exhibit 4.14 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.19 - Agreement dated as of October 15, 1992 between the Registrant and the Subscribers as defined therein. (Filed as Exhibit 10.63 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 4.20 - Common Stock Issuance Agreement dated April 19, 1991 between the Company and J. W. Bates, Jr., as amended. (Filed as Exhibit 4.15 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.21 - Common Stock Issuance Agreement dated April 15, 1991 between the Company and R. A. Tappmeyer, as amended. (Filed as Exhibit 4.16 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.22 - Common Stock Issuance Agreement dated April 1991 between the Company and C. E. Thornton, as amended. (Filed as Exhibit 4.17 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.1 - Amended and Restated Lease Restructuring Agreement dated as of March 29, 1991 among the Registrant, other obligors, the Lessors, the Lease Lenders, the Lease Trustees, the Lease Lenders, the Lease Trustees, the Lease Equity Participant and 						 the Lease Agent, all as named therein. (Filed as Exhibit 4.26 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.2 - Bareboat Charter Party Amendment No. 2 dated March 29, 1991 between The Connecticut National Bank, as Owner Trustee and Reading & Bates Drilling Co., a subsidiary of the Registrant, as Charterer. (Filed as Exhibit 4.27 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.3 - Bareboat Charter Party Amendment No. 3 dated as of March 29, 1991 between The Connecticut National Bank, as Owner Trustee and Reading & Bates Exploration Co., a subsidiary of the Registrant, as Charterer. (Filed as Exhibit 4.28 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.4 - Amendment No. 1 to Trust Indenture and First Preferred Ship Mortgage dated as of March 29, 1991 between Reading & Bates Exploration Co., a subsidiary of the Registrant, and State Street Bank and Trust Company of Connecticut, National Association, as Indenture Trustee. (Filed as Exhibit 4.29 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.5 - Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading and Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.30 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.6 - Amendment No. 1, dated as of May 24, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.32 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.7 - Amendment No. 2, dated as of June 28, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.33 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.8 - Amendment No. 3, dated as of August 30, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.34 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.9 - Amendment No. 4, dated as of June 30, 1992, to the Credit Facility Agreement dated as of March 27, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co. and Reading and Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V. (formerly known as NMB Postbank Groep N.V.). (Filed as Exhibit 10.61 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.10 - Amendment No. 5, dated as of February 23, 1993, to the Credit Facility Agreement dated as of March 27, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co., and Reading and Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 10.11 - Agreement dated August 18, 1993 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading & Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.12 - Pledge Agreement dated August 18, 1993 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading & Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.13* - Reading & Bates 1990 Stock Option Plan. (Filed as Appendix A to the Company's Proxy Statement dated April 26, 1993 and incorporated herein by reference.)
Exhibit 10.14* - 1992 Long-Term Incentive Plan of Reading & Bates Corporation. (Filed as Exhibit B to the Registrant's Proxy Statement dated April 27, 1992 and incorporated herein by reference.)
Exhibit 10.15* - Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and C. A. Donabedian.
Exhibit 10.16* - Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and J. W. McLean.
Exhibit 10.17* - Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and R. L. Sandmeyer.
Exhibit 10.18* - Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and S. A. Webster.
Exhibit 10.19 - Pledge of shares of stock of Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading and Bates, Inc., to NMB Postbank Groep N.V. and/or its affiliates or trustees acting on behalf of any of the foregoing. (Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.20 - Agreement dated as of August 31, 1991 among Registrant, Arcade Shipping AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.21* - Employment Agreement dated as of November 1, 1991 between the Registrant and L. E. Voss, Jr. (Filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.22* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and L. E. Voss, Jr.
Exhibit 10.23* - Employment Agreement dated as of November 1, 1991 between the Registrant and T. W. Nagle. (Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.24* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and T. W. Nagle.
Exhibit 10.25* - Employment Agreement dated as of November 1, 1991 between the Registrant and C. R. Ofner. (Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.26* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and C. R. Ofner.
Exhibit 10.27* - Employment Agreement dated as of November 1, 1991 between the Registrant and D. L. McIntire. (Filed as Exhibit 10.37 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.28* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and D. L. McIntire.
Exhibit 10.29* - Employment Agreement dated as of November 1, 1991 between the Registrant and W. K. Hillin. (Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.30* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and W. K. Hillin.
Exhibit 10.31* - Employment Agreement dated as of January 1, 1992 between the Registrant and Paul B. Loyd, Jr. (Filed as Exhibit 10.42 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.32* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of January 1, 1992 between the Registrant and Paul B. Loyd, Jr.
Exhibit 10.33* - Employment Agreement dated as of January 1, 1992 between the Registrant and C. Kirk Rhein, Jr. (Filed as Exhibit 10.43 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.34* - Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of January 1, 1992 between the Registrant and C. Kirk Rhein, Jr.
Exhibit 10.35* - Employment Agreement dated as of January 1, 1992 between the Registrant and J. T. Angel. (Filed as Exhibit 10.44 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.36* - Agreement amending Employment Agreement dated October 7, 1993 between the Registrant and J. T. Angel.
Exhibit 10.37 - Galloway Waiver Agreement dated as of May 31, 1991 among the Noteholders, the Owner Trustee and the Indenture Trustee named therein. (Filed as Exhibit 10.45 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.38 - Thornton Waiver Agreement dated as of May 31, 1991 among the Noteholders, the Owner Trustee and the Indenture Trustee named therein. (Filed as Exhibit 10.46 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.39 - Galloway Rescission Agreement dated as of June 28, 1991 among Reading & Bates Drilling Co., the Registrant, the Noteholders, the Owner Trustee, the Indenture Trustee and the Owner Participant named therein. (Filed as Exhibit 10.47 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 10.40 - Galloway Assignment Agreement dated as of June 28, 1991 between the Holders named therein and the NMB Postbank Groep N.V. (Filed as Exhibit 10.48 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.41 - Thornton Rescission Agreement dated as of June 28, 1991 among Reading & Bates Exploration Co., the Registrant, the Noteholders, the Owner Trustee, the Indenture Trustee and the Owner Participant named therein. (Filed as Exhibit 10.49 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 10.42 - Thornton Assignment Agreement dated as of June 28, 1991 between the Holders named therein and NMB Postbank Groep N.V. (Filed as Exhibit 10.50 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.43 - Facility Agreement dated February 21, 1991 between Arcade Drilling AS, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. (Filed as Exhibit 10.51 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.44 - Hull 515 Rig Management Agreement dated October 26, 1990 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.52 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.45 - HG Rig Management Agreement dated October 26, 1990 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.53 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.46 - Modification Agreement dated as of May 27, 1992 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.54 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 10.47 - Credit Facility Letter dated May 12, 1992 between Arcade Shipping AS and The Chase Manhattan Bank, N.A., as amended on May 14, 1992. (Filed as Exhibit 10.55 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 10.48 - Letter Agreement dated May 12, 1992 between the Registrant and The Chase Manhattan Bank, N.A. regarding undertakings with respect to a credit facility issued as of the same date to Arcade Shipping AS. (Filed as Exhibit 10.56 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.49 - Charter Payments Agreement dated as of September 30, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading and Bates, Inc. and NMB Postbank Groep, N.V. (Filed as Exhibit 10.57 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.50 - Amendment No. 1, dated as of June 30, 1992, to Charter Payments Agreement dated as of September 30, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co., Reading and Bates, Inc. and Internationale Nederlanden Bank N.V. (formerly known as NMB Postbank Groep N.V.). (Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 10.51 - Floating Rate Loan Facility Agreement dated September 19, 1991 between Gade Shipping Corporation, Skandinaviska Enskilda Banken, London Branch and Den norske Bank AS. (Filed as Exhibit 10.58 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.52 - Bareboat Charter dated September 4, 1991 between K/S UL Arcade and Arcade Shipping AS (regarding motorvessel "ARCADE FALCON"). (Filed as Exhibit 10.59 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.53 - Bareboat Charter dated September 4, 1991 between K/S UL Arcade and Arcade Shipping AS (regarding motorvessel "ARCADE EAGLE"). (Filed as Exhibit 10.60 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.54 - ISDA Interest and Currency Exchange Agreement dated as of October 26, 1990 between the Chase Manhattan Bank, N.A. and K/S Frontier Drilling, and Novation Agreement with respect thereto dated February 28, 1991. (Filed as Exhibit 10.62 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 11 - Computation of Earnings Per Common Share
Exhibit 16 - Letter re Change in Certifying Accountant (filed as Exhibit 16.1 to the Company's Form 8-K dated December 2, 1992 and incorporated herein by reference).
Exhibit 21 - Schedule of Subsidiaries of the Company
Exhibit 23.1 - Consent of Arthur Andersen & Co.
Exhibit 23.2 - Consent of Coopers & Lybrand
Exhibit 99 - Annual Report on Form 11-K with respect to Reading & Bates Savings Plan.
Instruments with respect to certain long-term obligations of the Company are not being filed as exhibits hereto as the securities authorized thereunder do not exceed 10% of the Company's total assets. The Company agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon its request.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
During the three months ending December 31, 1993 five Current Reports on Form 8-K were filed. A Current Report on Form 8-K dated October 12, 1993 announcing the resignation of J.T. Angel, dated October 21, 1993 announcing the Company's 3rd quarter 1993 earnings, dated November 5, 1993 announcing that AGIP S.p.A. did not exercise their remaining options under a contract with the "JACK BATES", dated November 18, 1993 announcing the mobilization of the "M.G. HULME, JR." from the Mediterranean Sea to the Gulf of Mexico, and dated December 9, 1993 announcing that the Company had received a letter of intent for a drilling contract in the Gulf of Mexico for the "M.G. HULME, JR.".
READING & BATES CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedule Number Description - -------- ------------------------------------------------
Reports of Independent Public Accountants
II. Amounts Receivable from Related Parties
V. Property and Equipment
VI. Accumulated Depreciation and Amortization of Property and Equipment
IX. Short-term Obligations
X. Supplementary Consolidated Statement of Operations Information
Note: All other schedules are omitted because they are not applicable or not required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders Reading & Bates Corporation
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Reading & Bates Corporation as of and for the years ended December 31, 1993 and 1992 included in this Form 10-K and have issued our report thereon dated February 14, 1994. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedules listed in the index of financial statement schedules set forth in item 14(a)(2) hereof for the years ended December 31, 1993 and 1992, are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
/s/ARTHUR ANDERSEN & CO.
Houston, Texas February 14, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders Reading & Bates Corporation
Our report on the consolidated financial statements of Reading & Bates Corporation and Subsidiaries is included on page 31 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in Item 14(a)(2) of this Form 10-K as of and for the year ended December 31, 1991.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
/s/Coopers & Lybrand
Houston, Texas March 25, 1992
READING & BATES CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
For the Three Years Ended December 31, 1993 (in thousands)
READING & BATES CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
For the Three Years Ended December 31, 1993 (in thousands)
READING & BATES CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
For the Three Years Ended December 31, 1993 (in thousands)
READING & BATES CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM OBLIGATIONS
For the Three Years Ended December 31, 1993 (in thousands)
READING & BATES CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
For the Three Years Ended December 31, 1993 (in thousands)
Depreciation and amortization of intangible assets, taxes other than payroll and income taxes and advertising costs were each less than 1% of consolidated revenues.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized on March 9, 1994.
READING & BATES CORPORATION
By /s/Paul B. Loyd, Jr. ------------------------ Paul B. Loyd, Jr. President, Chief Executive Officer, Chairman and Director
Pursuant to the requirements of Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on March 9,1994.
By /s/ Paul B. Loyd Jr. By /s/ Willem Cordia ------------------------- ------------------------- Paul B. Loyd, Jr. Willem Cordia President, Chief Executive Officer, Director Chairman and Director
By /s/ C. Kirk Rhein, Jr. By /s/ Charles A. Donabedian -------------------------- ------------------------- C. Kirk Rhein, Jr. Charles A. Donabedian Vice Chairman and Director Director
By /s/ T. W. Nagle By /s/ J. W. McLean ------------------------- ------------------------- T. W. Nagle J. W. McLean Vice President and Chief Director Financial Officer Principal Accounting Officer
By /s/ Ted Kalborg By /s/ A. L. Chavkin ------------------------- ------------------------- Ted Kalborg A. L. Chavkin Director Director
By /s/ Steven A. Webster By /s/ Robert L. Sandmeyer ------------------------- ------------------------- Steven A. Webster Robert L. Sandmeyer Director Director
EXHIBIT INDEX
Exhibit Number Description
Exhibit 3.1 The Registrant's Restated Certificate of Incorporation, as amended through October 2, 1992. (Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 3.2 The Registrant's Certificate of Designations of $1.625 Convertible Preferred Stock ($1.00 par value). (Filed as Exhibit (a) to Amendment No. 1 to the Registrant's Form 8-A/A dated July 22, 1993 and incorporated herein by reference.)
Exhibit 3.3 The Registrant's Bylaws. (Filed as Exhibit 4.2 to the Company's Registration No. 33-44237 and incorporated herein by reference.)
Exhibit 4.1 Indenture relating to the Registrant's 8% Senior Subordinated Convertible Debentures due 1998 dated as of August 29, 1989, between the Registrant and IBJ Schroder Bank & Trust Company, as Trustee. (Filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for 1989 and incorporated herein by reference.)
Exhibit 4.2 Form of the Registrant's registered 8% Senior Subordinated Convertible Debentures due 1998. (Filed as Exhibit 4.2 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.3 Form of the Registrant's bearer 8% Senior Subordinated Convertible Debentures due 1998. (Filed as Exhibit 4.3 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.4 Indenture dated as of December 1, 1980 among Reading & Bates Energy Corporation N.V., the Registrant, as Guarantor, and U.S. Trust Company, as Successor Trustee, relating to the 8% Convertible Subordinated Debentures due 1995 issued by Reading & Bates Energy Corporation N.V., and guaranteed by the Registrant. (Filed as Exhibit 4.4 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.5 Form of 8% Convertible Subordinated Debentures due 1995 issued by Reading & Bates Energy Corporation N.V., and guaranteed by the Registrant. (Filed as Exhibit 4.5 to Registration No. 33-28580 and incorporated herein by reference.)
Exhibit 4.6 Form of the Registrant's Common Stock Certificate. (Filed as Exhibit 4.6 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.7 Form of Preferred Stock Certificate for $1.625 Convertible Preferred Stock ($1.00 par value). (Filed as Exhibit 4.4 to Registration No. 33-65476 and incorporated herein by reference.)
Exhibit 4.8 Registration Rights Agreement dated as of March 29, 1991 among the Registrant, Holders as referred therein and members of Offering Committee as referred therein. (Filed as Exhibit 4.22 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.9 Amendment No. 1, dated as of September 1, 1992, to the Registration Rights Agreement filed as Exhibit 4.7 hereto. (Filed as Exhibit 4.18 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.10 Amendment No. 2, dated as of June 1, 1993, to the Registration Rights Agreement. (Filed as Exhibit 4.8 to Registration No. 33-65476 and incorporated herein by reference.)
Exhibit 4.11 Agreement dated as of March 27, 1991 among the Registrant, R&B Rig Investment Partners, L.P., R&B MODU Investment Associates, L.P., M&W Investment Partners, L.P., and BCL Investment Partners, L.P. (Filed as Exhibit 4.24 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.12 Termination Agreement dated as of September 14, 1993 between the Registrant and BCL Investment Partners, L.P.
Exhibit 4.13 Agreement dated March 29, 1991 between the Registrant and R&B Investment Partnership, L.P. (Filed as Exhibit 4.25 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 4.14 Amendment No. 1 dated as of January 1, 1992 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.15 Amendment No. 2 dated as of January 1, 1992 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.16 Termination Agreement dated as of September 14, 1993 between the Registrant and R&B Investment Partnership, L.P.
Exhibit 4.17 Preferred Stock Subscription Agreement dated as of September 3, 1991 between Registrant and the subscribers, as amended. (Filed as Exhibit 4.12 to Registration No. 33- 51120 and incorporated herein by reference.)
Exhibit 4.18 Subscription Agreement dated as of September 3, 1991 between Registrant and the subscribers, as amended. (Filed as Exhibit 4.14 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.19 Agreement dated as of October 15, 1992 between the Registrant and the Subscribers as defined therein. (Filed as Exhibit 10.63 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.20 Common Stock Issuance Agreement dated April 19, 1991 between the Company and J. W. Bates, Jr., as amended. (Filed as Exhibit 4.15 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.21 Common Stock Issuance Agreement dated April 15, 1991 between the Company and R. A. Tappmeyer, as amended. (Filed as Exhibit 4.16 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 4.22 Common Stock Issuance Agreement dated April 1991 between the Company and C. E. Thornton, as amended. (Filed as Exhibit 4.17 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.1 Amended and Restated Lease Restructuring Agreement dated as of March 29, 1991 among the Registrant, other obligors, the Lessors, the Lease Lenders, the Lease Trustees, the Lease Lenders, the Lease Trustees, the Lease Equity Participant and the Lease Agent, all as named therein. (Filed as Exhibit 4.26 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.2 Bareboat Charter Party Amendment No. 2 dated March 29, 1991 between The Connecticut National Bank, as Owner Trustee and Reading & Bates Drilling Co., a subsidiary of the Registrant, as Charterer. (Filed as Exhibit 4.27 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.3 Bareboat Charter Party Amendment No. 3 dated as of March 29, 1991 between The Connecticut National Bank, as Owner Trustee and Reading & Bates Exploration Co., a subsidiary of the Registrant, as Charterer. (Filed as Exhibit 4.28 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.4 Amendment No. 1 to Trust Indenture and First Preferred Ship Mortgage dated as of March 29, 1991 between Reading & Bates Exploration Co., a subsidiary of the Registrant, and State Street Bank and Trust Company of Connecticut, National Association, as Indenture Trustee. (Filed as Exhibit 4.29 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.5 Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading and Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.30 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.6 Amendment No. 1, dated as of May 24, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.32 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.7 Amendment No. 2, dated as of June 28, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.33 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.8 Amendment No. 3, dated as of August 30, 1991, to the Credit Facility Agreement dated as of March 29, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading & Bates, Inc. and Resources Conservation Company, subsidiaries of the Registrant, and NMB Postbank Groep, N.V. (Filed as Exhibit 4.34 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.9 Amendment No. 4, dated as of June 30, 1992, to the Credit Facility Agreement dated as of March 27, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co. and Reading and Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V. (formerly known as NMB Postbank Groep N.V.). (Filed as Exhibit 10.61 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.10 Amendment No. 5, dated as of February 23, 1993, to the Credit Facility Agreement dated as of March 27, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co., and Reading and Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 10.11 Agreement dated August 18, 1993 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading & Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.12 Pledge Agreement dated August 18, 1993 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading & Bates, Inc., subsidiaries of the Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.13 Reading & Bates 1990 Stock Option Plan. (Filed as Appendix A to the Company's Proxy Statement dated April 26, 1993 and incorporated herein by reference.)
Exhibit 10.14 1992 Long-Term Incentive Plan of Reading & Bates Corporation. (Filed as Exhibit B to the Registrant's Proxy Statement dated April 27, 1992 and incorporated herein by reference.)
Exhibit 10.15 Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and C. A. Donabedian.
Exhibit 10.16 Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and J. W. McLean.
Exhibit 10.17 Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and R. L. Sandmeyer.
Exhibit 10.18 Director Stock Option Agreement dated as of September 14, 1993 between the Registrant and S. A. Webster.
Exhibit 10.19 Pledge of shares of stock of Reading & Bates Drilling Co., Reading & Bates Exploration Co., and Reading and Bates, Inc., to NMB Postbank Groep N.V. and/or its affiliates or trustees acting on behalf of any of the foregoing. (Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for 1990 and incorporated herein by reference.)
Exhibit 10.20 Agreement dated as of August 31, 1991 among Registrant, Arcade Shipping AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.21 Employment Agreement dated as of November 1, 1991 between the Registrant and L. E. Voss, Jr. (Filed as Exhibit 10.34 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.22 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and L. E. Voss, Jr.
Exhibit 10.23 Employment Agreement dated as of November 1, 1991 between the Registrant and T. W. Nagle. (Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for 1991 andincorporated hereinby reference.)
Exhibit 10.24 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and T. W. Nagle.
Exhibit 10.25 Employment Agreement dated as of November 1, 1991 between the Registrant and C. R. Ofner. (Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.26 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and C. R. Ofner.
Exhibit 10.27 Employment Agreement dated as of November 1, 1991 between the Registrant and D. L. McIntire. (Filed as Exhibit 10.37 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.28 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and D. L. McIntire.
Exhibit 10.29 Employment Agreement dated as of November 1, 1991 between the Registrant and W. K. Hillin. (Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for 1991 and incorporated herein by reference.)
Exhibit 10.30 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of November 1, 1991 between the Registrant and W. K. Hillin.
Exhibit 10.31 Employment Agreement dated as of January 1, 1992 between the Registrant and Paul B. Loyd, Jr. (Filed as Exhibit 10.42 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.32 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of January 1, 1992 between the Registrant and Paul B. Loyd, Jr.
Exhibit 10.33 Employment Agreement dated as of January 1, 1992 between the Registrant and C. Kirk Rhein, Jr. (Filed as Exhibit 10.43 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.34 Amendment No. 1, dated as of October 1, 1993, to the Employment Agreement dated as of January 1, 1992 between the Registrant and C. Kirk Rhein, Jr.
Exhibit 10.35 Employment Agreement dated as of January 1, 1992 between the Registrant and J. T. Angel. (Filed as Exhibit 10.44 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.36 Agreement amending Employment Agreement dated October 7, 1993 between the Registrant and J. T. Angel.
Exhibit 10.37 Galloway Waiver Agreement dated as of May 31, 1991 among the Noteholders, the Owner Trustee and the Indenture Trustee named therein. (Filed as Exhibit 10.45 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.38 Thornton Waiver Agreement dated as of May 31, 1991 among the Noteholders, the Owner Trustee and the Indenture Trustee named therein. (Filed as Exhibit 10.46 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.39 Galloway Rescission Agreement dated as of June 28, 1991 among Reading & Bates Drilling Co., the Registrant, the Noteholders, the Owner Trustee, the Indenture Trustee and the Owner Participant named therein. (Filed as Exhibit 10.47 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.40 Galloway Assignment Agreement dated as of June 28, 1991 between the Holders named therein and the NMB Postbank Groep N.V. (Filed as Exhibit 10.48 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.41 Thornton Rescission Agreement dated as of June 28, 1991 among Reading & Bates Exploration Co., the Registrant, the Noteholders, the Owner Trustee, the Indenture Trustee and the Owner Participant named therein. (Filed as Exhibit 10.49 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.42 Thornton Assignment Agreement dated as of June 28, 1991 between the Holders named therein and NMB Postbank Groep N.V. (Filed as Exhibit 10.50 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.43 Facility Agreement dated February 21, 1991 between Arcade Drilling AS, Chase Investment Bank Limited and The Chase Manhattan Bank, N.A. (Filed as Exhibit 10.51 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.44 Hull 515 Rig Management Agreement dated October 26, 1990 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.52 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.45 HG Rig Management Agreement dated October 26, 1990 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.53 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.46 Modification Agreement dated as of May 27, 1992 between Arcade Drilling AS and Sonat Offshore Drilling Inc. (Filed as Exhibit 10.54 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.47 Credit Facility Letter dated May 12, 1992 between Arcade Shipping AS and The Chase Manhattan Bank, N.A., as amended on May 14, 1992. (Filed as Exhibit 10.55 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.48 Letter Agreement dated May 12, 1992 between the Registrant and The Chase Manhattan Bank, N.A. regarding undertakings with respect to a credit facility issued as of the same date to Arcade Shipping AS. (Filed as Exhibit 10.56 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.49 Charter Payments Agreement dated as of September 30, 1991 among the Registrant, Reading & Bates Drilling Co., Reading & Bates Exploration Co., Reading and Bates, Inc. and NMB Postbank Groep, N.V. (Filed as Exhibit 10.57 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.50 Amendment No. 1, dated as of June 30, 1992, to Charter Payments Agreement dated as of September 30, 1991 among the Registrant, Reading and Bates Drilling Co., Reading and Bates Exploration Co., Reading and Bates, Inc. and Internationale Nederlanden Bank N.V. (formerly known as NMB Postbank Groep N.V.). (Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for 1992 and incorporated herein by reference.)
Exhibit 10.51 Floating Rate Loan Facility Agreement dated September 19, 1991 between Gade Shipping Corporation, Skandinaviska Enskilda Banken, London Branch and Den norske Bank AS. (Filed as Exhibit 10.58 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.52 Bareboat Charter dated September 4, 1991 between K/S UL Arcade and Arcade Shipping AS (regarding motorvessel "ARCADE FALCON"). (Filed as Exhibit 10.59 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.53 Bareboat Charter dated September 4, 1991 between K/S UL Arcade and Arcade Shipping AS (regarding motorvessel "ARCADE EAGLE"). (Filed as Exhibit 10.60 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 10.54 ISDA Interest and Currency Exchange Agreement dated as of October 26, 1990 between the Chase Manhattan Bank, N.A. and K/S Frontier Drilling, and Novation Agreement with respect thereto dated February 28, 1991. (Filed as Exhibit 10.62 to Registration No. 33-51120 and incorporated herein by reference.)
Exhibit 11 Computation of Earnings Per Common Share
Exhibit 16 Letter re Change in Certifying Accountant (filed as Exhibit 16.1 to the Company's Form 8-K dated December 2, 1992 and incorporated herein by reference).
Exhibit 21 Schedule of Subsidiaries of the Company
Exhibit 23.1 Consent of Arthur Andersen & Co.
Exhibit 23.2 Consent of Coopers & Lybrand
Exhibit 99 Annual Report on Form 11-K with respect to Reading & Bates Savings Plan. (To be filed by amendment.)