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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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Form 10-Q
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2006
COMMISSION FILE NUMBER 1-13167
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
ATWOOD OCEANICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1611874
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15835 Park Ten Place Drive 77084
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
281-749-7800
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filings
requirements for the past 90 days. Yes X No___
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One):
Large accelerated filer X Accelerated filer ___ Non-accelerated filer ___
---
Indicate by check mark whether the registrant is a Shell company (as defined in
Rule 12b-2 of the Exchange Act.) Yes___ No_X__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 9, 2006: 31,034,172 shares of common stock, $1 par value
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ATWOOD OCEANICS, INC.
FORM 10-Q
For the Quarter Ended March 31, 2006
INDEX
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements Page
a) Unaudited Condensed Consolidated Statements of
Operations For the Three and Six Months Ended March 31,
2006 and 2005.................................................6
b) Unaudited Condensed Consolidated Balance Sheets As of
March 31, 2006 and September 30, 2005.........................7
c) Unaudited Condensed Consolidated Statements of Cash
Flows For the Six Months Ended March 31, 2006 and 2005........8
d) Unaudited Condensed Consolidated Statement of Changes in
Shareholders' Equity for the Six Months Ended March 31, 2006..9
e) Notes to Unaudited Condensed Consolidated Financial
Statements...................................................10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................17
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.......................................................25
Item 4. Controls and Procedures....................................26
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.........27
Item 5. Other Information...........................................28
Item 6. Exhibits ..................................................29
Signature..................................................................30
Exhibits...................................................................31
2
PART I. FINANCIAL INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
This Form 10-Q for the quarterly period ended March 31, 2006 includes
statements about Atwood Oceanics, Inc. (which together with its subsidiaries is
identified as the "Company," "we" or "our," unless the context requires
otherwise) which are not historical facts (including any statements concerning
plans and objectives of management for future operations or economic
performance, or assumptions related thereto) which are forward-looking
statements. In addition, we and our representatives may from to time to time
make other oral or written statements which are also forward-looking statements.
These forward-looking statements are made based upon management's current
plans, expectations, estimates, assumptions and beliefs concerning future events
impacting us and therefore involve a number of risks and uncertainties. We
caution that forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied in the
forward-looking statements.
Important factors that could cause our actual results of operations or our
actual financial conditions to differ include, but are not necessarily limited
to:
- our dependence on the oil and gas industry;
- the operational risks involved in drilling for oil and gas;
- changes in rig utilization and dayrates in response to the level of
activity in the oil and natural gas industry, which is significantly
affected by indications and expectations regarding the level and
volatility of oil and natural gas prices, which in turn are affected by
such things as political, economic and weather conditions affecting or
potentially affecting regional or worldwide demand for oil and natural
gas, actions or anticipated actions by OPEC, inventory levels,
deliverability constraints, and future market activity;
- the extent to which customers and potential customers continue to pursue
deepwater drilling;
- exploration success or lack of exploration success by our customers
and potential customers;
- the highly competitive and cyclical nature of our business, with periods
of low demand and excess rig availability;
- the impact of the war with Iraq or other military operations, terrorist
acts or embargoes elsewhere;
- our ability to enter into and the terms of future drilling contracts;
- the availability of qualified personnel;
- our failure to retain the business of one or more significant customers;
- the termination or renegotiation of contracts by customers;
3
- the availability of adequate insurance at a reasonable cost;
- the occurrence of an uninsured loss;
- the risks of international operations, including possible economic,
political, social or monetary instability, and compliance with foreign
laws;
- the effect public health concerns could have on our international
operations and financial results;
- compliance with or breach of environmental laws;
- the incurrence of secured debt or additional unsecured indebtedness or
other obligations by us or our subsidiaries;
- the adequacy of sources of liquidity;
- currently unknown rig repair needs and/or additional opportunities to
accelerate planned maintenance expenditures due to presently
unanticipated rig downtime;
- higher than anticipated accruals for performance-based compensation due
to better than anticipated performance by us, higher than anticipated
severance expenses due to unanticipated employee terminations, higher
than anticipated legal and accounting fees due to unanticipated
financing or other corporate transactions and other factors that could
increase general and administrative expenses;
- the actions of our competitors in the oil and gas drilling industry,
which could significantly influence rig dayrates and utilization;
- changes in the geographic areas in which our customers plan to operate,
which in turn could change our expected effective tax rate;
- changes in oil and natural gas drilling technology or in our competitors'
drilling rig fleets that could make our drilling rigs less competitive or
require major capital investments to keep them competitive;
- rig availability;
- the effects and uncertainties of legal and administrative proceedings
and other contingencies;
- the impact of governmental laws and regulations and the uncertainties
involved in their administration, particularly in some foreign
jurisdictions;
- changes in accepted interpretations of accounting guidelines and other
accounting pronouncements and tax laws; and
- the risks involved in the construction, upgrade and repair of our
drilling units.
4
You should also read the risk factors set forth in our Form 10K for the year
ended September 30, 2005 filed with the Securities and Exchange Commission, or
SEC. Undue reliance should not be placed on these forward-looking statements,
which are applicable only on the date hereof. Neither we nor our representatives
have a general obligation to revise or update these forward-looking statements
to reflect events or circumstances that arise after the date hereof or to
reflect the occurrence of unanticipated events.
5
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------- -------------------------------
2006 2005 2006 2005
REVENUES:
Contract drilling $ 67,529 $ 39,801 $ 122,943 $ 78,787
Business interruption proceeds - 1,216 - 7,656
-------- -------- --------- --------
67,529 41,017 122,943 86,443
-------- -------- --------- --------
COSTS AND EXPENSES:
Contract drilling 37,270 23,601 71,040 48,804
Depreciation 6,207 6,639 12,597 13,165
General and administrative 4,605 3,019 10,598 6,590
-------- -------- --------- ---------
48,082 33,259 94,235 68,559
-------- -------- --------- ---------
OPERATING INCOME 19,447 7,758 28,708 17,884
-------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense, net of capitalized interest (1,467) (1,727) (3,207) (3,745)
Gain on sale of equipment - - 9,275 -
Interest income 338 69 569 104
-------- -------- --------- ---------
(1,129) (1,658) 6,637 (3,641)
-------- -------- --------- ----------
INCOME BEFORE INCOME TAXES 18,318 6,100 35,345 14,243
PROVISION FOR INCOME TAXES 2,689 1,389 5,193 882
-------- -------- --------- --------
NET INCOME $ 15,629 $ 4,711 $ 30,152 $ 13,361
======== ======== ========= =========
EARNINGS PER COMMON SHARE (NOTE 2):
Basic $ 0.51 $ 0.15 $ 0.98 $ 0.44
Diluted 0.50 0.15 0.96 0.43
AVERAGE COMMON SHARES OUTSTANDING (NOTE 2)
Basic 30,926 30,426 30,832 30,292
Diluted 31,446 31,284 31,327 31,064
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, September 30,
2006 2005
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,080 $ 18,982
Accounts receivable, net of an allowance of 57,101 39,865
$385 and $189 at March 31, 2006 and
September 30, 2005, respectively
Income tax receivable 1,110 3,278
Inventories of materials and supplies 19,007 15,640
Deferred tax assets 980 3,080
Prepaid expenses and other 4,232 11,208
----------------- -----------------
Total Current Assets 105,510 92,053
----------------- -----------------
NET PROPERTY AND EQUIPMENT 414,808 390,778
----------------- -----------------
ASSET HELD FOR SALE - 9,017
----------------- -----------------
DEFERRED COSTS AND OTHER ASSETS 4,385 3,846
----------------- -----------------
$ 524,703 $ 495,694
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable $ 36,000 $ 36,000
Accounts payable 6,316 6,473
Accrued liabilities 20,340 11,088
Deferred Credits 155 2,598
----------------- -----------------
Total Current Liabilities 62,811 56,159
----------------- -----------------
LONG-TERM DEBT,
net of current maturities: 36,000 54,000
----------------- -----------------
36,000 54,000
----------------- -----------------
OTHER LONG TERM LIABILITIES:
Deferred income taxes 18,350 20,140
Deferred credits and other 6,892 3,258
----------------- -----------------
25,242 23,398
----------------- -----------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value;
1,000 shares authorized, none outstanding - -
Common stock, $1 par value, 50,000 shares
authorized with 31,010 and 30,682 issued
and outstanding at March 31, 2006 and
September 30, 2005, respectively 31,010 30,682
Paid-in capital 113,678 105,645
Retained earnings 255,962 225,810
----------------- -----------------
Total Shareholders' Equity 400,650 362,137
----------------- -----------------
$ 524,703 $ 495,694
================= =================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended March 31,
-----------------------------------
2006 2005
---------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 30,152 $ 13,361
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 12,597 13,165
Amortization of debt issuance costs 402 402
Amortization of deferred items 9,311 675
Provision for doubtful accounts 196 -
Deferred income tax expense 310 900
Stock option compensation expense 2,275 -
Tax benefit from the exercise of stock options (620) -
Gain on disposal of assets (9,275) -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (17,432) 4,811
Decrease in income tax receivable 2,168 -
Increase in inventory (3,367) (1,012)
Decrease in prepaid expenses and other 691 9,191
Decrease (increase) in deferred costs and other assets (3,967) 543
Increase (decrease) in accounts payable 463 (5,541)
Increase (decrease) in accrued liabilities 9,252 (7,867)
Increase (decrease) in deferred credits and other liabilities 1,191 (1,754)
Other increases 4 105
------- --------
Net cash provided by operating activities 34,351 26,979
------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (43,516) (19,386)
Collection of insurance receivable - 8,400
Proceeds from sale of assets 25,177 0
------- --------
Net cash used by investing activities (18,339) (10,986)
------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from stock offering - 53,607
Proceeds from exercise of stock options 5,466 5,930
Tax benefit from the exercise of stock options 620 -
Proceeds from debt - 10,000
Principal payments on debt (18,000) (78,000)
------- --------
Net cash used by financing activities (11,914) (8,463)
------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,098 7,530
CASH AND CASH EQUIVALENTS, at beginning of period $ 18,982 $ 16,416
-------- --------
CASH AND CASH EQUIVALENTS, at end of period $ 23,080 $ 23,946
-------- --------
--------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
PART I. ITEM I - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------
Total
Common Stock Paid-in Retained Stockholders'
(In thousands) Shares Amount Capital Earnings Equity
--------------------------------------------------------------------------------------------------------------------
September 30, 2005 30,682 $ 30,682 $ 105,645 $ 225,810 $ 362,137
Net income - - - 30,152 30,152
Stock issued under benefit plans 4 4 - - 4
Exercise of employee stock options 324 324 5,138 - 5,462
Tax benefit from the exercise of
employee stock options - - 620 - 620
Stock option compensation expense - - 2,275 - 2,275
------ -------- --------- --------- ---------
March 31, 2006 31,010 $ 31,010 $ 113,678 $ 255,962 $ 400,650
====== ======== ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
PART I. ITEM 1 - FINANCIAL STATEMENTS
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
The unaudited interim condensed consolidated financial statements as of
March 31, 2006, and for each of the three and six month periods ended March 31,
2006 and 2005, included herein, have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. The year end condensed consolidated balance sheet data was
derived from the audited financial statements as of September 30, 2005. Although
these financial statements and related information have been prepared without
audit, and certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, we believe that the note disclosures
are adequate to make the information not misleading. The interim financial
results may not be indicative of results that could be expected for a full year.
We suggest that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in our Annual Report to Shareholders for the year ended September 30,
2005. In our opinion, the unaudited interim financial statements reflect all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair statement of our financial position and results of operations for the
periods presented.
2. CAPITAL STOCK
On March 2, 2006, the Board of Directors declared a two-for-one stock split
of our common stock effected in the form of a 100% common stock dividend. All
shareholders of record on March 24, 2006 received one additional share of common
stock for each share held on that date. The additional shares of common stock
were distributed in the form of a stock dividend on April 7, 2006. All share and
per share amounts in the accompanying condensed consolidated financial
statements and related notes have been adjusted to reflect the stock split for
all periods presented.
3. SHARE-BASED COMPENSATION
Effective October 1, 2005, we adopted Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment", or SFAS 123(R), using the modified
prospective application transition method. Under this method, stock-based
compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the requisite service
period (generally the vesting period of the equity grant). In addition,
stock-based compensation cost recognized includes compensation cost for unvested
stock-based awards as of October 1, 2005. Prior to October 1, 2005, we accounted
for share-based compensation in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", or APB No. 25. No
share-based employee compensation cost has been reflected in net income prior to
October 1, 2005. Before that date, we reported the entire tax benefit related to
the exercise of stock options as an operating cash flow. SFAS 123(R) requires us
to report the tax benefit from the tax deduction that is in excess of recognized
compensation costs (excess tax benefits) as a financing cash flow rather than as
an operating cash flow.
10
Under our Amended and Restated 2001 Stock Incentive Plan, or the 2001 Plan,
up to 2,000,000 shares of common stock may be issued to eligible participants in
the form of restricted stock awards or upon exercise of stock options granted
pursuant to the 2001 Plan. Awards of restricted stock and grants of stock
options may be made under the 2001 Plan through September 5, 2011. We also have
another stock incentive plan, the 1996 Plan, under which there are outstanding
stock options. However, no additional options or restricted stock will be
awarded under the 1996 plan.
A summary of share and stock option data for our two stock incentive plans
as of March 31, 2006 is as follows:
2001 1996
Plan Plan
------------ ------------
Shares available for future awards or grants 806,000 -
Outstanding stock option grants 965,400 484,050
Outstanding restricted stock awards 77,600 -
Awards of restricted stock and stock options have both been granted under
our stock incentive plans as of March 31, 2006. We deliver newly issued shares
of common stock for restricted stock awards and upon exercise of stock options.
All stock incentive plans currently in effect have been approved by the
shareholders of our outstanding common stock.
The impact of adopting SFAS 123(R) has had the following effect on our
consolidated financial statements (in thousands, except per share amounts):
Three Months Ended Six Months Ended
------------------ ------------------
March 31, 2006:
Increase in contract drilling expenses $ 150 $ 300
Increase in general and administrative expenses 1,325 1,975
Decrease in income tax provision (464) (691)
------- -------
Decrease of net income $ 1,011 $ 1,584
======= =======
Decrease in earnings per share:
Basic $ 0.03 $ 0.05
Diluted $ 0.03 $ 0.05
Decrease in cash flows from operations $ (45) $ (620)
Increase in cash flow from financing activities 45 620
------- -------
Net change in cash and cash equivalents $ - $ -
======= =======
We recognize compensation expense on grants of share-based compensation
awards on a straight-line basis over the required service period for each award.
As of March 31, 2006, total unrecognized compensation cost related to
share-based compensation awards was approximately $8.8 million, net of estimated
forfeitures, which we expect to recognize over a weighted average period of
approximately 2.5 years.
11
Stock Options
Under our stock incentive plans, the exercise price of each stock option
equals the fair market value of one share of our common stock on the date of
grant, with all outstanding options having a maximum term of 10 years. Options
vest ratably over a period from the end of the first to the fourth year from the
date of grant under the 2001 Plan and from the end of the second to the fifth
year from the date of grant under the 1996 Plan. Each option is for the purchase
of one share of our common stock.
The per share weighted average fair value of stock options granted during
the six months ended March 31, 2006 and 2005 was $35.39 and $20.44,
respectively. We estimated the fair value of each stock option on the date of
grant using the Black-Scholes pricing model and the following assumptions:
Six Months Ended
March 31,
------------------------
2006 2005
------------------------
Risk-Free Interest Rate 4.46% 4.27%
Expected Volatility 42% 35%
Expected Life (Years) 6 6
Dividend Yield None None
The average risk-free interest rate is based on the five-year U.S. treasury
security rate in effect as of the grant date. We determined expected volatility
using a 6-year historical volatility figure and determined the expected term of
the stock options using 15 years of historical data. The expected dividend yield
is based on the expected annual dividend as a percentage of the market value of
our common stock as of the grant date.
A summary of stock option activity during the six months ended March 31,
2006 is as follows:
Wtd. Avg.
Wtd. Avg. Remaining Aggregate
Number of Exercise Contractual Intrinsic
Options Price Life (Years) Value (000s)
----------- ---------- ------------- ------------
Outstanding at October 1, 2005 1,703,300 $17.64
Granted 106,000 $37.15
Exercised (323,250) $16.90 $8,908
Forfeited (36,600) $22.64
---------
Outstanding at March 31, 2006 1,449,450 $19.11 6.8 $45,518
=========
Exercisable at March 31, 2006 849,200 $16.71 5.9 $28,700
=========
12
Restricted Stock
We have also awarded restricted stock to certain employees and to our
non-employee directors. The awards of restricted stock to employees are subject
to three year vesting, and all restricted stock awards to date are restricted
from transfer for three years form the date of grant. We value restricted stock
awards at the closing market value of our common stock on the date of grant.
A summary of restricted stock activity for the six months ended March 31,
2006, is as follows:
Aggregate
Number of Wtd. Avg. Intrinsic
Shares Fair Value Value (000s)
----------- ------------ -------------
Outstanding at October 1, 2005 - ---
Granted 82,000 $ 37.15
Forfeited (4,400) $ 37.15
------
Outstanding at March 31, 2006 77,600 $ 37.15 $1,037
======
As of March 31, 2006, none of the restrictions have lapsed on these stock
awards. Pursuant to the amendments to our 2001 Plan approved by our shareholders
on February 9, 2006, during the quarter ended March 31, 2006, our non-employee
directors were automatically granted restricted stock awards as detailed in our
definitive proxy statement sent to our shareholders relating to our annual
shareholders meeting and filed with the SEC on January 13, 2006. These
restricted stock awards resulted in 4,220 shares of our common stock being
issued to our non-employee directors.
Prior Year Pro Forma Expense
The following table illustrates the effect on net income and earnings per
share as if the fair value-based method provided by SFAS 123(R) had been applied
for all outstanding and unvested awards for periods prior to our adoption of
SFAS 123(R) as of October 1, 2005 (in thousands, except per share amounts):
Three Months Ended Six Months Ended
------------------ ----------------
March 31, 2005:
Net income, as reported $4,711 $13,361
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all
awards, net of related tax effects 648 1,296
------- -------
Pro Forma, net income $4,063 $12,065
======= =======
Earnings per share:
Basic - as reported $0.15 $0.44
Basic - pro forma $0.13 $0.40
Diluted - as reported $0.15 $0.43
Diluted - pro forma $0.13 $0.39
13
4. EARNINGS PER COMMON SHARE
The computation of basic and diluted earnings per share is as follows
(in thousands, except per share amounts):
Three Months Ended Six Months Ended
------------------ ----------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
-------- ------ ---------- -------- -------- ----------
March 31, 2006:
Basic earnings per share $ 15,629 30,926 $ 0.51 $ 30,152 30,832 $ 0.98
Effect of dilutive securities:
Stock optionsk options --- 520 $ (0.01) --- 495 $ (0.02)
-------- -------- ------- -------- ------- --------
Diluted earnings per share $ 15,629 31,446 $ 0.50 $ 30,152 31,327 $ 0.96
======== ======== ======= ========= ======= =======
March 31, 2005:
Basic earnings per share $ 4,711 30,426 $ 0.15 $ 13,361 30,292 $ 0.44
Effect of dilutive securities:
Stock optionsk options --- 858 $ (0.00) --- 772 $ (0.01)
-------- ------- ------- -------- ------ -------
Diluted earnings per share $ 4,711 31,284 $ 0.15 $ 13,361 31,064 $ 0.43
======== ======= ======= ======== ====== =======
The calculation of diluted earnings per share for the three and six month
period ending March 31, 2006, excludes consideration of potential common shares
related to 101,000 stock options because such options were anti-dilutive. These
options could potentially dilute basic earnings per share in the future.
14
5. PROPERTY AND EQUIPMENT
A summary of property and equipment by classification is as follows (in
thousands):
March 31, September 30,
2006 2005
------------- ---------------
Drilling vessels and related equipment
Cost $ 659,955 $ 624,118
Accumulated depreciation (248,649) (236,736)
--------- ---------
Net book value 411,306 387,382
--------- ---------
Drill pipe
Cost 11,114 10,742
Accumulated depreciation (8,834) (8,407)
--------- ---------
Net book value 2,280 2,335
--------- --------
Furniture and other
Cost 7,615 7,395
Accumulated depreciation (6,393) (6,334)
--------- ---------
Net book value 1,222 1,061
--------- ---------
NET PROPERTY AND EQUIPMENT $ 414,808 $ 390,778
========= =========
In October 2005, we sold our semisubmersible hull, SEASCOUT, for $10.0
million (net after certain expenses) and our spare 15,000 P.S.I. BOP Stack for
$15.0 million, resulting in an aggregate gain of approximately $9.3 million for
both of these assets. We had no operations or revenues associated with these
assets prior to their sale.
15
6. INCOME TAXES
Virtually all of our tax provision for each of the three and six months
ended March 31, 2006 and 2005, relates to taxes in foreign jurisdictions.
Accordingly, due to the high level of operating income earned in certain
nontaxable and deemed profit tax jurisdictions during the three and six months
ended March 31, 2006, our effective tax rate for the second quarter and
year-to-date period of fiscal year 2006 is significantly less than the U.S.
statutory rate.
During the first quarter of fiscal year 2005, we received a $1.7 million
tax refund in Malaysia related to a previously reserved tax receivable. In
addition, we earned revenue from our loss of hire insurance coverage on the
ATWOOD BEACON in a zero tax jurisdiction. As a result, our effective tax rate
for the three and six months ended March 31, 2005, was significantly less than
the U.S. statutory rate.
7. COMMITMENTS AND CONTINGENCIES
On May 3, 2006, we received notice from the Malaysian tax authorities
regarding alleged non-compliance with withholding tax provisions of the
Malaysian Income Tax Act for years of assessment 2001 to 2004. The alleged
under-withholding of tax approximates $2.1 million, which is subject to a 100%
penalty. We believe that we are in compliance with all withholding tax
provisions of the Malaysian Income Tax Act for years of assessment 2001 through
2004 and, thus, no additional withholding taxes are payable. We plan to
vigorously contest these assertions by the Malaysian tax authorities. While we
cannot predict or provide assurance as to the final outcome of these
allegations, we do not expect them to have a material adverse effect on our
consolidated financial position, results of operations or cash flows.
We are party to a number of lawsuits which are ordinary, routine litigation
incidental to our business, the outcome of which, individually, or in the
aggregate, is not expected to have a material adverse effect on our financial
position, results of operations, or cash flows.
16
PART I. ITEM 2
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
All non-historical information set forth herein is based upon expectations
and assumptions we deem reasonable. We can give no assurance that such
expectations and assumptions will prove to be correct, and actual results could
differ materially from the information presented herein. Our periodic reports
filed with the SEC, including our Annual Report on Form 10-K for the year ended
September 30, 2005, should be consulted for a description of risk factors
associated with an investment in our common stock.
MARKET OUTLOOK
There continues to be very strong demand for offshore drilling equipment,
with all of our eight drilling units having contractual dayrate commitments that
are the highest in their respective histories. Currently, we have 100% of
available rig days for the remainder of fiscal year 2006 contracted, with
contracted rig days for fiscal years 2007 and 2008 at 95% and 65%, respectively.
A comparison of the average per day revenues for fiscal year 2005 and for the
first six months of fiscal year 2006 for each of our eight drilling units to
their current highest contracted dayrate commitment is as follows:
Average Per Day Revenues for
----------------------------------
Percentage
First Six Current Highest Change from
Fiscal Months Contracted First Six
Year Fiscal Year Dayrate Months Fiscal
2005 2006 Commitment Year 2006
--------------- -------------- ------------------- ------------------
ATWOOD HUNTER $61,000 $123,000 $245,000 99%
ATWOOD EAGLE 95,000 118,000 420,000 256%
ATWOOD FALCON 82,000 74,000 200,000 170%
ATWOOD SOUTHERN CROSS 42,000 92,000 290,000 215%
ATWOOD BEACON 66,000 71,000 133,500 88%
VICKSBURG 65,000 80,000 154,000 93%
SEAHAWK 45,000 41,000 68,430 67%
RICHMOND 33,000 45,000 80,000 78%
The ATWOOD HUNTER is currently working under a two-year contractual
commitment with Woodside Energy Limited ("Woodside") at a dayrate of
$240,000/$245,000. Woodside farmed-out the first two wells to be drilled under
this commitment to Burullus Gas ("BG"). The rig is currently drilling the first
well under the BG commitment and is expected to complete the BG work in June
2006. Following the completion of this work the rig is expected to be moved to
sheltered water offshore Egypt to undergo certain planned maintenance (estimated
to take two days) prior to being relocated to Mauritania to commence working for
Woodside. The ATWOOD EAGLE has contractual commitments offshore Australia with
Woodside and BHP Billiton Petroleum at dayrates ranging from $150,000 to
$180,000 (except for a one-well commitment at a dayrate of $109,000 which is
expected to be drilled in the fourth quarter of fiscal year 2006) that could
extend to the end of fiscal year 2007. Immediately following the completion this
work, the rig has a one-well commitment at a dayrate of $360,000 and a one-year
commitment at a dayrate of $420,000; however, before the middle of October 2006,
17
this one-year commitment could be extended to a two or three year
commitment at a dayrate of $405,000. The ATWOOD FALCON has a contractual
commitment offshore Malaysia with Shell that extends to July 2009 at dayrates
ranging between $90,000 and $200,000. This contractual commitment requires the
rig to undergo an upgrade to extend its water depth drilling capabilities from
3,700 to 5,000 feet. The customer is contractually obligated to pay $24 million
of the upgrade costs (expected to be around $32 million) along with payment of
approximately $90,000 per day during the upgrade period. The ATWOOD SOUTHERN
CROSS is currently working offshore Italy at a dayrate of $70,000 on a drilling
program that is expected to extend into September 2006. Immediately upon
completion of this drilling program, we expect to relocate the rig to the Black
Sea to work for three customers at dayrates ranging from $125,000 to $290,000.
This work could extend into the first quarter of fiscal year 2008. Currently,
the ATWOOD BEACON is working offshore Vietnam at a dayrate of $77,000 to
$110,000 on a drilling program that could extend to September 2006. Immediately
upon completion of its current drilling program, we plan to have the final
section of legs installed on the ATWOOD BEACON at a shipyard in Singapore before
relocating to India to commence a 25-month contract at dayrates ranging form
$113,000 to $133,500. The VICKSBURG is currently working offshore Southeast Asia
at a dayrate of $87,000. It has contract commitments offshore Malaysia and
Cambodia at dayrates ranging from $82,000 to $94,500 that should extend into the
fourth quarter of fiscal year 2007. Immediately upon completion of these
commitments, the rig has a two-year commitment in Thailand at a dayrate of
$154,000. The SEAHAWK is currently in a shipyard in Southeast Asia undergoing an
upgrade expected to cost around $20 million. Following this upgrade, the rig is
expected to be relocated to offshore West Africa to commence (estimated in
August 2006) a 730 day (plus four six-month options) drilling program at an
operating dayrate of $68,430. Our only rig in the U.S. Gulf of Mexico, the
RICHMOND, has a current contract commitment which could extend into the third
quarter of fiscal year 2007. After completing its current well at a dayrate of
$45,000, all remaining firm work under this contract is expected to be drilled
at a dayrate of $80,000.
The current strong market environment is not only supporting high equipment
utilization and historical high dayrates for all of our eight drilling units,
but also has resulted in a significant increase in our operating costs. Included
in the ATWOOD SOUTHERN CROSS' total operating costs for the quarter and six
months ended March 31, 2006 are amortized mobilization costs of $6.0 million and
$8.8 million, respectively, compared to none for the same periods in fiscal year
2005. For the second half of fiscal year 2006, we currently expect daily
operating costs for our bottom supported units (the RICHMOND, VICKSBURG and
ATWOOD BEACON) to be around $30,000 per day. For the remainder of the fiscal
year, we expect daily operating costs for the ATWOOD FALCON to be around
$40,000, the ATWOOD HUNTER to be between $45,000 and $50,000, and the ATWOOD
SOUTHERN CROSS to be between $40,000 and $45,000. We expect the ATWOOD EAGLE's
daily operating costs to average between $75,000 and $80,000. The daily
operating costs of the SEAHAWK when it returns to work in August 2006 offshore
West Africa is expected to average between $35,000 and $40,000 and possibly
higher during initial start-up. Despite the anticipated increase in operating
costs, we expect our operating margin for fiscal year 2006 to be approximately
50%.
We continue to evaluate growth opportunities, and on March 1, 2006, our
wholly-owned subsidiary, Atwood Oceanics Pacific Limited, executed a definitive
construction agreement with Keppel AmFELS, Inc. to construct a mobile self
elevating LeTourneau SUPER 116E design jack-up. This new rig is being
constructed in Brownsville, Texas, with delivery expected to occur no later than
September 30, 2008. We estimate the total cost of construction (including
administrative and overhead costs and capitalized interest) will be
approximately around $160 million. A copy of the construction agreement is filed
18
as Exhibit 4.2 hereto. We intend to finance the construction of the new rig
primarily from expected cash on hand balances, however, if and when necessary,
the $100 million revolving portion of our Credit Facility may provide some
funding for the new rig. As of May 10, 2006 and taking into account a borrowing
in April 2006, we have $10 million outstanding under the revolving portion of
our Credit Facility.
RESULTS OF OPERATIONS
Revenues for the three and six months ended March 31, 2006 increased 65%
and 42%, respectively, compared to the three and six months ended March 31,
2005. A comparative analysis of revenues is as follows:
REVENUES
(In millions)
---------------------------------------------------------------------------
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------------
2006 2005 Variance 2006 2005 Variance
----------- --------- ----------- ------------ --------- ----------
ATWOOD SOUTHERN CROSS $ 10.7 $ 2.7 $ 8.0 $ 16.7 $ 6.3 $ 10.4
ATWOOD HUNTER 12.1 5.2 6.9 22.4 10.8 11.6
ATWOOD EAGLE 13.4 9.4 4.0 21.4 17.9 3.5
VICKSBURG 7.8 6.1 1.7 14.5 12.0 2.5
RICHMOND 4.1 2.7 1.4 8.1 5.4 2.7
ATWOOD BEACON 7.1 5.9 1.2 13.0 12.3 0.7
ATWOOD FALCON 6.6 5.4 1.2 13.4 13.1 0.3
SEAHAWK 2.9 2.8 0.1 7.5 7.2 0.3
AUSTRALIA MANAGEMENT
CONTRACTS 2.8 0.8 2.0 5.9 1.4 4.5
------- ------ ------ ------ ------ ------
$ 67.5 $ 41.0 $ 26.5 $122.9 $ 86.4 $ 36.5
======= ====== ====== ====== ====== ======
19
The ATWOOD SOUTHERN CROSS recognized $5.2 million and $8.1 million from the
amortization of up front mobilization fees which were previously received during
the three months and six months ended March 31, 2006, respectively compared to
none in the prior fiscal year. The increase in revenues for the current quarter
was also due to rig utilization of approximately 90% at $70,000 per day compared
to approximately 85% utilization at an average dayrate of $36,000 during the
second quarter of fiscal year 2005. The increase for the current year-to-date
period was also due to rig utilization of approximately 70% at an average
dayrate of $68,000 compared to approximately 90% utilization at an average
dayrate of $38,000 during the prior fiscal year-to-date period. The increase in
revenue for the three and six months ended March 31, 2006, for the ATWOOD HUNTER
was primarily due to starting a new contract offshore of Egypt approximately
November 1, 2005, at a dayrate of $125,000 while earning a dayrate of $62,000
for the first month of fiscal year 2006 and all of the prior fiscal year. The
increase in revenue for the current quarter and year-to-date period ended March
31, 2006, for the ATWOOD EAGLE was also due to starting a new contract during
the current quarter at dayrates ranging from $150,000 to $180,000 while only
earning an average dayrate of $105,000 for the second quarter of the prior
fiscal year. The increase in revenue for the VICKSBURG was due to an increase in
average dayrates from $62,000 and $63,000 during the quarter and year-to-date
period ended March 31, 2005, respectively, to $85,000 and $80,000 during the
quarter and year-to-date period ended March 31, 2006. The increase in revenue
for the RICHMOND was also due to an increase in average dayrates from $30,000
during each of the three and six months ended March 31, 2005, respectively, to
$45,000 and $43,000 during the three and six months ended March 31, 2006. During
the current quarter, the ATWOOD BEACON earned $78,000 per day compared to
$66,000 during the second quarter of the prior fiscal year while the ATWOOD
FALCON earned $73,000 per day at 100% utilization during the current quarter
compared to $68,000 at approximately 80% utilization for the comparable prior
year quarter. Second quarter and year-to-date fiscal year 2006 revenues for the
SEAHAWK were comparable to the same periods in the prior fiscal year. As one of
our managed platform rigs in Australia commenced a new drilling program during
the current quarter, service activities for our management contracts for the
three and six months ended March 31, 2006 have increased accordingly.
Contract drilling costs for the three and six months ended March 31, 2006,
increased 58% and 46%, respectively, compared to the three and six months ended
March 31, 2005. An analysis of contract drilling costs by rig is as follows:
20
CONTRACT DRILLING COSTS
(In millions)
--------------------------------------------------------------------------
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ -----------------------------------
2006 2005 Variance 2006 2005 Variance
----------- --------- ----------- ----------- --------- -----------
ATWOOD SOUTHERN CROSS $ 10.6 $ 2.2 $ 8.4 $ 16.1 $ 5.2 $ 10.9
ATWOOD HUNTER 3.9 2.7 1.2 7.7 5.6 2.1
ATWOOD BEACON 2.8 1.9 0.9 5.1 4.3 0.8
ATWOOD EAGLE 6.2 5.5 0.7 12.2 10.8 1.4
ATWOOD FALCON 3.5 2.8 0.7 7.2 6.1 1.1
VICKSBURG 2.5 2.0 0.5 6.0 4.4 1.6
RICHMOND 2.5 2.1 0.4 4.9 4.2 0.7
SEAHAWK 1.7 2.4 (0.7) 4.1 4.8 (0.7)
AUSTRALIA MANAGEMENT
CONTRACTS 2.4 0.8 1.6 5.2 1.5 3.7
OTHER 1.2 1.2 - 2.5 1.9 0.6
------ ------ ------ ------ ------ ------
$ 37.3 $ 23.6 $ 13.7 $ 71.0 $ 48.8 $ 22.2
====== ====== ====== ====== ====== ======
In addition to the items discussed below, the increase in fleetwide
drilling costs was primarily attributable to three areas: rising personnel costs
due to wage increases, rising insurance costs due to increased premiums and
increase repairs and maintenance expenses due to the amount and timing of
various repairs and maintenance projects. The increase in drilling costs for the
ATWOOD SOUTHERN CROSS also resulted from $6.0 million and $8.8 million of
mobilization expense amortization in the first quarter and year-to-date periods
of fiscal year 2006, while there was none during the prior fiscal year. The
increase in drilling costs for the ATWOOD HUNTER also includes higher agent
commissions due to increased revenues for the three and six months ended March
31, 2006, compared to the three and six months ended March 31, 2005. Operating
costs for the ATWOOD FALCON were lower during the second quarter of the prior
fiscal year, due to a ten day mobilization to Japan. Before relocating to its
next contract, the VICKSBURG entered a shipyard for approximately five days
during the first quarter of the current fiscal year to undergo planned
inspections and maintenance. The decrease in drilling costs for the SEAHAWK is
primarily due to approximately one month of lower operating costs during the
current quarter as the rig entered a shipyard in Malaysia for an upgrade in
preparation for its next contract in West Africa. As previously mentioned, one
of our managed platform rigs in Australia commenced a new drilling program
during current quarter, and service activities for our management contracts for
the three and six months ended March 31, 2006, have increased accordingly. Other
drilling costs for the year-to-date period ended March 31, 2006, have also
increased due to the recording of $0.3 million of stock option compensation
expense for field personnel during the current quarter compared to none in the
prior fiscal year.
21
An analysis of depreciation expense by rig for the three and six months
ended March 31, 2006, compared to the three months ended March 31, 2005, is as
follows:
DEPRECIATION EXPENSE
(In millions)
----------------------------------------------------------------------
Three Months Ended March 31, Six Months Ended March 31,
---------------------------------- ---------------------------------
2006 2005 Variance 2006 2005 Variance
---------- --------- ----------- --------- --------- ----------
ATWOOD BEACON $ 1.3 $ 1.3 $ - $ 2.7 $ 2.5 $ 0.2
ATWOOD FALCON 0.7 0.7 - 1.4 1.4 -
VICKSBURG 0.7 0.7 - 1.4 1.3 0.1
RICHMOND 0.3 0.2 0.1 0.5 0.5 -
ATWOOD EAGLE 1.2 1.2 - 2.3 2.3 -
ATWOOD HUNTER 1.3 1.3 - 2.7 2.7 -
SEAHAWK 0.1 0.1 - 0.3 0.2 0.1
ATWOOD SOUTHERN CROSS 0.6 1.1 (0.5) 1.3 2.2 (0.9)
OTHER 0.0 0.0 0.0 0.0 0.1 (0.1)
----- ----- ------ ------ ----- -------
$ 6.2 $ 6.6 $ (0.4) $ 12.6 $13.2 $ (0.6)
===== ====== ====== ====== ===== =======
In accordance with our company policy, no depreciation expense was recorded
during the month of December 2005 and part of January 2006 for the SOUTHERN
CROSS as the rig was undergoing a life enhancing upgrade whereby the useful life
of the rig was extended from approximately two to five years in January 2006.
General and administrative expenses for the second quarter and year-to-date
period of fiscal year 2006 increased compared to the second quarter and
year-to-date period of the prior fiscal year primarily due recording
approximately $1.3 million and $2.0 million of stock option compensation
expense, respectively. Year-to-date amounts for the current fiscal year also
include an approximate $0.6 million increase in annual bonus compensation, and
$1.2 million increase in professional fees primarily related to Sarbanes-Oxley
Act compliance and higher audit fees. We expect our general and administrative
expenses to remain at a higher level than reported in prior periods due to stock
option compensation expense as described in Note 3 to our unaudited financial
statements included in this report. Although the level of our outstanding debt
has been reduced significantly from the prior fiscal year, interest expense has
only decreased slightly due to rising interest rates.
Virtually all of our tax provision for each of the three and six months
ended March 31, 2006 and 2005, relates to taxes in foreign jurisdictions.
Accordingly, due to the high level of operating income earned in certain
nontaxable and deemed profit tax jurisdictions during the current quarter and
year-to-date period ended March 31, 2006, our effective tax rate for both
periods of approximately 15% is significantly less than the U.S. statutory rate.
Our effective tax rate for the six months ended March 31, 2005 of approximately
6% resulted primarily from receiving during the first quarter of first quarter
of fiscal year 2005 a $1.7 million tax refund in Malaysia related to a
previously reserved tax receivable. Excluding any discrete items that may be
incurred, we expect our effective tax rate to be approximately 10-15% for fiscal
year 2006.
22
We expect to reverse a $1.8 million tax contingent liability in the third
quarter of fiscal year 2006 due to the expiration of a statute of limitations in
a foreign jurisdiction. In addition, there are certain events in other foreign
jurisdictions, relating to prior fiscal years, that may also result in a
favorable tax effect during the current fiscal year. If any of these events
occur, we will reduce our tax provision in the applicable quarterly period. See
also "Recent Development" in this Part I, Item 2.
LIQUIDITY AND CAPITAL RESOURCES
Since we operate in a very cyclical industry, maintaining high equipment
utilization in up, as well as down, cycles is a key factor in generating cash to
satisfy current and future obligations. For fiscal years 2000 through 2005, net
cash provided by operating activities ranged from a low of approximately $13.7
million in fiscal year 2003 to a high of approximately $62.3 million in fiscal
year 2001. Our operating cash flows are primarily driven by our operating
income, which reflects dayrates and rig utilization. With currently having 100%
and 95% of our available operating rig days committed for fiscal years 2006 and
2007, respectively, at historically high dayrates, we anticipate significant
improvement in cash flows and earnings during fiscal years 2006 and 2007. Other
than our expected capital expenditures of $90 million to $95 million (including
funding for the construction of the new jack-up rig), the only additional firm
cash commitment for fiscal year 2006, outside of funding current rig operations,
is our required quarterly repayments under the term portion of our senior
secured Credit Facility which will total $36 million for fiscal year 2006. We
expect to generate sufficient cash flows from operations to satisfy most of
these obligations; however, some funding from the revolving portion of our
Credit Facility may be required.
As of March 31, 2006, we had $72 million outstanding under the term portion
of our Credit Facility, with approximately $99 million of available borrowing
capacity under the $100 million revolving portion of our Credit Facility;
however, in April 2006, we borrowed $10 million under the revolving portion of
our Credit Facility. We are in compliance with all financial covenants under our
Credit Facility at March 31, 2006, and expect to remain in compliance with all
financial covenants during the remainder of fiscal year 2006. Aside from the
financial covenants, no other provisions exist in the Credit Facility that could
result in acceleration of the April 1, 2008 maturity date.
At December 31, 2005, the collateral for our Credit Facility consists
primarily of preferred mortgages on all eight of our active drilling units (with
an aggregate net book value at March 31, 2006 totaling approximately $376
million). We are not required to maintain compensating balances; however, we are
required to pay a fee of approximately 0.70% per annum on the unused portion of
the revolving loan facility and certain other administrative costs.
In October 2005, we sold our semisubmersible hull, SEASCOUT, for $10
million (net after certain expenses) and our spare 15,000 P.S.I. BOP Stack for
approximately $15 million. The gain on the sales of these assets totaled
approximately $9.3 million in the aggregate. The $25.2 million in cash from
these sales increased our cash and cash equivalents on hand to approximately
$43.7 million at December 31, 2005; however, with approximately $25 million
expended to-date on construction of the new jack-up rig and approximately $6
million on the ATWOOD SOUTHERN CROSS equipment upgrades, cash and cash
equivalents on hand declined to approximately $23 million at March 31, 2006.
23
Our accounts receivable have increased by $17.2 million since September 30,
2005, primarily due to our increased rig utilization, higher dayrates, and also
due to winding down contracts with certain customers. Our portfolio of accounts
receivable is comprised of major international corporate entities with stable
payment experience. Historically, we have not encountered significant difficulty
in collecting receivables and typically do not require collateral for our
receivables. We have a $0.4 million allowance for doubtful accounts at March 31,
2006 relating to one specific client.
Our accrued liabilities have increased by $9.3 million since September 30,
2005, primarily due to purchases related to the current upgrade in progress for
the SEAHAWK compared no upgrades in progress at prior fiscal year end.
RECENT DEVELOPMENT
On May 3, 2006, we received notice from the Malaysian tax authorities
regarding alleged non-compliance with withholding tax provisions of the
Malaysian Income Tax Act for years of assessment 2001 to 2004. The alleged
under-withholding of tax approximates $2.1 million, which is subject to a 100%
penalty. We believe that we are in compliance with all withholding tax
provisions of the Malaysian Income Tax Act for years of assessment 2001 through
2004 and, thus, no additional withholding taxes are payable. We plan to
vigorously contest these assertions by the Malaysian tax authorities. While we
cannot predict or provide assurance as to the final outcome of these
allegations, we do not expect them to have a material adverse effect on our
consolidated financial position, results of operations or cash flows.
24
PART I. ITEM 3
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including adverse changes in interest rates
and foreign currency exchange rates as discussed below.
INTEREST RATE RISK
With the interest rate on our long-term debt under our Credit Facility at a
floating rate, the outstanding debt of $72 million at March 31, 2006
approximates its fair value. The impact on annual cash flow of a 10% change in
the floating rate (approximately 70 basis points) would be approximately $0.5
million, which we do not believe to be material. We did not have any open
derivative contracts relating to our floating rate debt at March 31, 2006.
FOREIGN CURRENCY RISK
Certain of our subsidiaries have monetary assets and liabilities that are
denominated in a currency other than their functional currencies. Based on March
31, 2006 amounts, a decrease in the value of 10% in the foreign currencies
relative to the U.S. dollar from the year-end exchange rates would result in a
foreign currency transaction loss of approximately $0.6 million. Thus, we
consider our current risk exposure to foreign currency exchange rate movements,
based on net cash flows, to be immaterial. We did not have any open derivative
contracts relating to foreign currencies at March 31, 2006.
25
PART I. ITEM 4
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures as of the end of the period covered by this report have been
designed and are effective at the reasonable assurance level so that
the information required to be disclosed by us in our periodic SEC
filings is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. We believe that a
controls system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the controls system
are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a
company have been detected.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred
during the fiscal quarter covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
26
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our annual meeting of shareholders was held on February 9, 2006, at which
the shareholders voted on the election of six director nominees, all of whom
were incumbent directors and who were re-elected. In addition to voting on
election of six director nominees, the shareholders voted on a proposal to
increase authorized shares of common stock of the Company from 20,000,000 shares
to 50,000,000 shares; a proposal to adopt the amended and restated 2001 stock
incentive plan; and a proposal to adopt the amended and restated certificate of
formation. All of these proposals were approved by shareholders. No other
matters were presented for a vote at the annual meeting. Of the 13,790,312
shares of common stock present in person or by proxy, the number of shares voted
for or against in connection with the election of each director and the three
proposals are as follows:
ELECTION OF DIRECTORS
NAME CAST FOR VOTES WITHHELD
----------------- ----------- --------------
Deborah A. Beck 13,484,247 306,065
Robert W. Burgess 13,484,352 305,960
George S. Dotson 13,460,677 329,635
Hans Helmerich 13,442,252 348,060
John R. Irwin 13,519,619 270,693
William J. Morrissey 12,970,611 819,701
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK FROM 20,000,000 TO 50,000,000
SHARES
VOTES FOR VOTES AGAINST VOTES WITHHELD
---------- ------------- --------------
13,326,118 430,381 33,813
PROPOSAL TO ADOPT THE AMENDED AND RESTATED 2001 STOCK INCENTIVE PLAN
VOTES FOR VOTES AGAINST VOTES WITHHELD
---------- ------------- --------------
10,851,414 558,455 2,380,443
A copy of the Amended and Restated 2001 Stock Incentive Plan is filed as Exhibit
10.1 hereto.
27
PROPOSAL TO ADOPT THE AMENDED AND RESTATED CERTIFICATE OF FORMATION
VOTES FOR VOTES AGAINST VOTES WITHHELD
--------- ------------- --------------
13,707,405 42,904 40,003
A copy of the Amended and Restated Certificate of Formation, including the
increase of authorized shares of common stock, as filed with the Texas Secretary
of State is filed as Exhibit 3.1 hereto.
ITEM 5. OTHER INFORMATION
Effective as of May 5, 2006, our Board of Directors adopted the Second
Amended and Restated By-Laws of the Company. The By-laws were amended and
restated to make conforming and modernizing changes reflecting the approval by
our shareholders of the Amended and Restated Certificate of Formation and our
early election to be governed by the recently enacted Texas Business
Organizations Code. A copy of the Second Amended and Restated By-Laws is filed
as Exhibit 3.2 hereto.
28
PART II. OTHER INFORMATION
ATWOOD OCEANICS, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS
(a) Exhibits
3.1 Amended and Restated Certificate of Formation dated February
9, 2006 (Incorporated herein by reference to Exhibit
3.1 of our Form 8-K filed February 14, 2006).
*3.2 Second Amended and Restated By-Laws, dated May 5, 2006.
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
4.2 Certificate of Adjustment dated as of March 17, 2006
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-K filed March 23, 2006).
10.1 Amended and Restated Atwood Oceanics, Inc. 2001 Stock
Incentive Plan (Incorporated herein by reference to Appendix D
to our definitive proxy statement on Form DEF14A filed January
13, 2006).
10.2 Construction Agreement dated March 1, 2006 between Atwood
Oceanics Pacific Limited and Keppel AmFels, Inc. dated March
1, 2006 (Incorporated herein by reference to Exhibit 10.1 to
our Form 8-K filed March 2, 2006).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATWOOD OCEANICS, INC.
(Registrant)
Date: May 10, 2006 /s/JAMES M. HOLLAND
-------------------
James M. Holland
Senior Vice President, Chief Financial Officer,
Chief Accounting Officer and Secretary
30
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Amended and Restated Certificate of Formation dated February
9, 2006 (Incorporated herein by reference to Exhibit
3.1 of our Form 8-K filed February 14, 2006).
*3.2 Second Amended and Restated By-Laws, dated May 5, 2006.
4.1 Rights Agreement dated effective October 18, 2002 between the
Company and Continental Stock & Transfer & Trust Company
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-A filed October 21, 2002).
4.2 Certificate of Adjustment dated as of March 17, 2006
(Incorporated herein by reference to Exhibit 4.1 of our Form
8-K filed March 23, 2006).
10.1 Amended and Restated Atwood Oceanics, Inc. 2001 Stock
Incentive Plan (Incorporated herein by reference to Appendix D
to our definitive proxy statement on Form DEF14A filed January
13, 2006).
10.2 Construction Agreement dated March 1, 2006 between Atwood
Oceanics Pacific Limited and Keppel AmFels, Inc. dated March
1, 2006 (Incorporated herein by reference to Exhibit 10.1 to
our Form 8-K filed March 2, 2006).
*31.1 Certification of Chief Executive Officer
*31.2 Certification of Chief Financial Officer
*32.1 Certificate of Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of Sarbanes - Oxley Act of 2002.
*Filed herewith
31
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
BY-LAWS OF
ATWOOD OCEANICS, INC.
MAY 5, 2006
TABLE OF CONTENTS
ARTICLE I OFFICES...........................................................1
Section 1. Registered Office......................................1
Section 2. Other Offices..........................................1
ARTICLE II SHAREHOLDERS......................................................1
Section 1. Meetings...............................................1
Section 2. Annual Meeting.........................................2
Section 3. Special Meetings.......................................2
Section 4. Notices of Shareholders' Meetings......................2
Section 5. Quorum of Shareholders.................................3
Section 6. Adjournments of Annual and Special Meetings of the
Shareholders............................3
Section 7. Meetings of the Shareholders...........................3
Section 8. Attendance and Proxies.................................4
Section 9. Voting of Shares.......................................5
Section 10. Voting of Shares Owned by Another Corporation..........6
Section 11. Shares Held by Fiduciaries, Receivers, Pledgees........6
Section 12. Decisions at Meetings of Shareholders..................6
Section 13. List of Shareholders...................................7
Section 14. Action Without Meeting.................................8
Section 15. Telephone or Remote Communications....................10
Section 16. Record Date...........................................10
ARTICLE III BOARD OF DIRECTORS..............................................11
Section 1. Board of Directors....................................11
Section 2. Number of Directors...................................11
Section 3. Election and Term.....................................11
Section 4. Resignation...........................................11
Section 5. Vacancy and Increase..................................12
Section 6. Removal...............................................12
Section 7. Offices and Records...................................12
Section 8. Meeting of Directors..................................12
Section 9. First Meeting.........................................12
Section 10. Election of Officers..................................13
Section 11. Regular Meetings......................................13
Section 12. Special Meetings......................................13
Section 13. Notice................................................13
Section 14. Business to be Transacted.............................13
Section 15. Quorum - Adjournment if Quorum is not Present.........14
Section 16. Action Without Meeting................................14
Section 17. Compensation..........................................15
Section 18. Order of Business.....................................15
Section 19. Presumption of Assent.................................16
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ARTICLE IV FFICERS' AND DIRECTORS' SERVICES,
CONFLICTING INTERESTS AND INDEMNIFICATION...........................16
Section 1. Services..............................................16
Section 2. Interested Directors..................................17
Section 3. Indemnification and Expense Advances..................18
Section 4. Rights Not Exclusive..................................18
Section 5. Powers Not Exclusive..................................18
Section 6. Applicability.........................................18
Section 7. Insurance.............................................19
ARTICLE V COMMITTEES OF DIRECTORS..........................................19
Section 1. Committees of Directors...............................19
ARTICLE VI OFFICERS.........................................................19
Section 1. Principal Officers....................................19
Section 2. Additional Officers...................................20
Section 3. Terms of Offices......................................20
Section 4. Removal...............................................20
Section 5. Vacancies.............................................20
Section 6. Powers and Duties of Officers.........................20
Section 7. Chairman of the Board.................................20
Section 8. The President.........................................21
Section 9. Vice Presidents.......................................21
Section 10. Treasurer.............................................22
Section 11. Assistant Treasurers..................................22
Section 12. Secretary.............................................23
Section 13. Assistant Secretaries.................................23
Section 14. Securities of other Corporations......................24
ARTICLE VII BOOKS, DOCUMENTS AND ACCOUNTS..................................24
ARTICLE VIII CAPITAL STOCK..................................................24
Section 1. Stock Certificates....................................24
Section 2. Transfers.............................................25
Section 3. Registered Holders....................................25
Section 4. New Certificates......................................26
Section 5. Dividends.............................................26
Section 6. Record Dates and Closing of Transfer Books............27
Section 7. Regulations...........................................27
ARTICLE IX MISCELLANEOUS PROVISIONS.......................................28
Section 1. Fiscal Year...........................................28
Section 2. Seal..................................................28
Section 3. Notice................................................28
Section 4. Waiver of Notice......................................29
Section 5. Resignations..........................................30
Section 6. Telephone and Similar Meetings........................30
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Section 7. Securities of Other Corporations......................30
Section 8. Depositories..........................................30
Section 9. Signing of Checks, Notes, etc.........................31
Section 10. Persons...............................................31
Section 11. Laws and Statutes.....................................31
Section 12. Headings..............................................32
ARTICLE X AMENDMENTS......................................................32
Section 1. Amendment of By-Laws..................................32
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SECOND AMENDED AND RESTATED
BY-LAWS OF
ATWOOD OCEANICS, INC.
ARTICLE I
OFFICES
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Section 1. Registered Office. Until the Board of Directors otherwise determines,
the registered office and registered agent of Atwood Oceanics, Inc., a Texas
corporation (the "Corporation") will be as set forth in the Corporation's
Amended and Restated Certificate of Formation. The Corporation may change its
registered office, registered agent, or both by filing a statement of change
with the Secretary of State of the State of Texas.
Section 2. Other Offices. The Corporation may also have offices at such other
places, both within or without the State of Texas, as the Board of Directors
may, by resolution, from time to time determine or the business of the
Corporation may require.
ARTICLE II
SHAREHOLDERS
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Section 1. Meetings. All meetings of the shareholders for the election of
directors will be held at such time and place, within or outside the State of
Texas, as may be fixed from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of shareholders for any other purpose will
be held at a time and place, within or without the State of Texas, as shall be
designated by the Board of Directors or as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof. The Board of Directors
may determine that any meeting may be held solely by means of remote
communication in accordance with Texas law.
Section 2. Annual Meeting. The annual meeting of the shareholders shall be held
on the second Thursday of February in each year at 10:00 A.M. Central Standard
Time, if not a legal holiday, and if a legal holiday, then at the same hour of
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the day on the next succeeding business day, for the purpose of electing
directors and for the transaction of any and all such other business as may
properly be brought before or submitted to the meeting. Any and all business of
any nature or character whatsoever may be transacted, and action may be taken
thereon, at any annual meeting, except as otherwise provided by law or by these
By-Laws.
Section 3. Special Meetings. Special meetings of the shareholders
(unless otherwise prescribed by law, the Amended and Restated Certificate of
Formation, or these By-Laws) may be called by the Chairman of the Board of
Directors or the President or the holders of not less than 10% of all the shares
issued, outstanding, and entitled to vote. The request will state the purposes
of the proposed meeting. Business transacted at all special meetings will be
confined to the purposes stated in the notice of the meeting unless all
shareholders entitled to vote are present and consent otherwise.
Section 4. Notices of Shareholders' Meetings. Written or printed notice stating
the place, day and hour of any meeting of the shareholders, the means of any
remote communications by which shareholders may be considered present and may
vote at the meeting and, in case of a special meeting, the purposes for which
the meeting is called will be delivered not less than ten (10) days nor more
than sixty (60) days before the date of the meeting. The notice will be
delivered in person, by electronic transmission, or by mail at the direction of
the President, a Vice President, the Secretary, or any other officer or person
calling the meeting to each shareholder of record entitled to vote at the
meeting. If mailed, the notice will be deemed delivered when deposited in the
United States mail, addressed to the shareholder at the shareholder's address as
it appears on the stock transfer books of the Corporation, with postage prepaid.
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If transmitted by facsimile or electronic message, the notice will be deemed
delivered when the facsimile or electronic message is successfully transmitted.
Section 5. Quorum of Shareholders. The holders of at least a majority of the
shares issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
law, the Amended and Restated Certificate of Formation or these By-Laws. If a
quorum is present at any shareholders' meeting, the vote of the holders of a
majority of the shares entitled to vote, present in person or represented by
proxy, shall decide any question brought before such meeting, unless the
question is one upon which a different vote is required by law or by the Amended
and Restated Certificate of Formation.
Section 6. Adjournments of Annual and Special Meetings of the Shareholders. If,
however, a quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person or
represented by proxy, may adjourn the meeting from time to time, without notice
(other than announcement at the meeting), until a quorum shall be present or
represented. When a quorum is assembled for such an adjourned meeting, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
Section 7. Meetings of the Shareholders. The President of the Corporation, or in
the event of his absence or omission or refusal to so act, a Vice President of
the Corporation, shall call each meeting of the shareholders to order and shall
act as Chairman of such meeting. If for any reason whatever, neither the
President nor a Vice President of the Corporation acts or will act as the
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Chairman of the meeting of the shareholders, then the shareholders present, in
person or by proxy, and entitled to vote thereat may by majority vote appoint a
Chairman who shall act as Chairman of the meeting.
The Secretary of the Corporation, or in the event of his absence,
omission or refusal to act, an Assistant Secretary, shall act as Secretary of
each meeting of the shareholders. If for any reason whatever, neither the
Secretary nor an Assistant Secretary acts or will act as Secretary of the
meeting of shareholders, then the Chairman of the meeting or, if he fails to do
so, the shareholders present, either in person or by proxy, and entitled to vote
thereat may by majority vote appoint any person to act as Secretary of the
meeting.
Section 8. Attendance and Proxies. Each outstanding share of the Corporation's
capital stock, regardless of class or series, will be entitled to one vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or series are limited
or denied by the Amended and Restated Certificate of Formation. At any meeting
of the shareholders, every shareholder having the right to vote will be entitled
to vote in person or by proxy executed in writing by the shareholder and bearing
a date not more than eleven months before the meeting, unless the proxy provides
for a longer period. A telegram, telex, cablegram, or similar transmission by
the shareholder or a photographic, photostatic, facsimile, or similar
reproduction of a writing executed by the shareholder will be treated as any
execution in writing. Any electronic transmission must contain or be accompanied
by information for which it can be determined that the transmission was
authorized by the shareholder. Each proxy will be revocable unless expressly
provided that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. Each proxy will
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be filed with the secretary of the Corporation before or at the time of the
meeting. Voting for directors will be in accordance with Article III of these
By-Laws. Voting on any question or in any election may be by voice vote or show
of hands unless the presiding officer orders or any shareholder demands that
voting be by written ballot.
Section 9. Voting of Shares. At each meeting of the shareholders, each
outstanding share, regardless of class, standing in the shareholder's name on
the stock and transfer books shall be entitled to one (1) vote, subject however,
to the provisions of Section 6 of Article VIII of these By-Laws, and excepting
only as may be otherwise provided or required by law, on each matter submitted
to a vote at such meeting, unless the voting rights of the shares of any class
or classes are limited or denied by the Amended and Restated Certificate of
Formation as permitted by law. Treasury shares, shares of its own stock owned by
another corporation, the majority of the voting stock of which is owned or
controlled by it, and shares of its own stock held by a corporation in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
At any election for directors of the Corporation, each and every
shareholder entitled to vote may cumulate his votes and give one candidate a
number of votes equal to the number of directors to be elected, multiplied by
the number of votes to which his shares are entitled; or each shareholder may
distribute his votes on the same principle among as many candidates for
directors as the shareholder thinks fit.
Any shareholder who intends to cumulate his votes must give written
notice of this intention to the Secretary of the Corporation on or before the
day preceding the election at which the shareholder intends to cumulate his
votes.
The candidates for directors receiving the highest number of votes, up
to the number of directors to be elected, are elected.
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Section 10. Voting of Shares Owned by Another Corporation. Shares of stock of
this Corporation standing in the names of another corporation, domestic or
foreign, on the books and records of this Corporation and having voting rights
may be voted by such officer, agent or proxy as the By-Laws of such other
corporation may authorize, or, in the absence of such authorization, as the
Board of Directors of such other corporation may determine, subject to such
provisions of the Texas Business Organizations Code as may be applicable in
any instance.
Section 11. Shares Held by Fiduciaries, Receivers, Pledgees. Shares held by an
administrator, executor, guardian, or conservator, may be voted by him so long
as such shares forming a part of an estate are in the possession and forming a
part of the estate being served by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him unless such share shall have been
transferred into his name as trustee. Shares standing in the name of a receiver
on the books and records of this Corporation may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without such shares being transferred into his name if appropriate authority so
to do be contained in an appropriate order of the court by which such receiver
was appointed. A shareholder whose shares are pledged shall be entitled to vote
such shares until such shares have been transferred on the books and records of
the Corporation into the name of the pledgee, unless in the transfer by the
pledgor on the books and records of the Corporation, he shall have expressly
empowered the pledgee to vote such shares, and thereafter the pledgee shall be
entitled to vote the share so transferred.
Section 12. Decisions at Meetings of Shareholders. At all meetings of the
shareholders all questions, business and matters, except those the manner of
deciding which is otherwise expressly governed by the Texas Business
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Organizations Code or by the Amended and Restated Certificate of Formation or by
these By-Laws, shall be decided by the vote of the holders of a majority of the
votes of the shareholders of the Corporation present in person or by proxy, and
entitled to vote, a quorum being present. All voting shall be viva voce, except
that upon the determination of the officer or person presiding at the meeting or
upon the demand of any qualified voter or his proxy, voting on any further
question, matter or business at such meeting shall be by ballot. In the event
any business, question or matter is so voted upon by ballot, then each ballot
shall be signed by the shareholder voting, or by his proxy and shall state the
number of shares so voted.
Section 13. List of Shareholders. The officer or agent who has charge of the
stock transfer books of the Corporation shall prepare and make, at least eleven
(11) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, showing the address and the type and number of
shares held by each shareholder and number of votes to which each shareholder is
entitled (if different from the number of shares). Such list shall be kept on
file at the registered office or the principal place of business of the
Corporation and shall be open to inspection by any shareholder at any time
during usual business hours, for a period of at least ten (10) days prior to
such meeting.
Alternatively, the list of the shareholders may be kept on a reasonably
accessible electronic network, if the information required to gain access to the
list is provided with the notice of the meeting. The Corporation is not required
to include any electronic contact information of any shareholder on the list. If
the Corporation elects to make the list available on an electronic network, the
Corporation shall take reasonable steps to ensure that the information is
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available only to shareholders of the Corporation. Such list shall also be
produced and kept open at the time and place of such meeting during the whole
time thereof, and may be inspected by any shareholder who is present. If the
meeting is held by means of remote communication, the list must be open to the
examination of any shareholder for the duration of the meeting on a reasonably
accessible electronic network, and the information required to access the list
must be provided to shareholders with the notice of the meeting. The original
stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer book or to vote at any
such meeting of shareholders.
Section 14. Action Without Meeting.
a. Any action required by law to be taken at any annual or special meeting
of the shareholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall have been signed by the holder or holders of all the shares
entitled to vote with respect to the action that is subject of the consent.
b. Every written consent of the shareholders shall bear the date of
signature of each shareholder who signs the consent. No written consent shall be
effective to take the action that is the subject of the consent unless, within
sixty (60) days after the date of the earliest dated consent delivered to the
Corporation as provided below, a consent or consents signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take the action that is the subject of the consent are delivered to
the Corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the Corporation having custody of the books
in which proceedings of meetings of the shareholders are recorded. Such delivery
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shall be made by hand or by certified or registered mail, return receipt
requested, and in the case of delivery to the Corporation's principal place of
business, shall be addressed to the President of the Corporation.
c. A telegram, telex, cablegram, or other electronic transmission by a
shareholder consenting to an action to be taken is considered to be written,
signed, and dated for the purposes of this Section if the transmission sets
forth or is delivered with information from which the Corporation can determine
that the transmission was transmitted by the shareholder and the date on which
the shareholder transmitted the transmission. The date of transmission is the
date on which the consent was signed. Consent given by telegram, telex,
cablegram, or other electronic transmission may not be considered delivered
until the consent is reproduced in paper form and the paper form is delivered to
the Corporation at its registered office in Texas or its principal place of
business, or to an officer or agent of the Corporation having custody of the
book in which proceedings of shareholder meetings are recorded. Notwithstanding
Subsection (b) of this Section, consent given by telegram, telex, cablegram, or
other electronic transmission may be delivered to the principal place of
business of the Corporation or to an officer or agent of the Corporation having
custody of the book in which proceedings of shareholder meetings are recorded to
the extent and in the manner provided by resolution of the Board of Directors of
the Corporation. Any photographic, photostatic, facsimile, or similarly reliable
reproduction of a consent in writing signed by a shareholder may be substituted
or used instead of the original writing for any purpose for which the original
writing could be used, if the reproduction is a complete reproduction of the
entire original writing.
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d. Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
Section 15. Telephone or Remote Communications. Shareholders may participate in
and hold a shareholders' meeting by means of conference telephone or other means
of remote communication equipment by means of which all persons participating in
the meeting can hear each other. Participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, if (i) the Corporation implements reasonable measures to
verify that each person considered present and permitted to vote at the meeting
by means of remote communication is a shareholder; (ii) the Corporation
implements reasonable measures to provide the shareholders at the meeting by
means of remote communication a reasonable opportunity to participate in the
meeting and to vote on matters submitted to the shareholders, including an
opportunity to read or hear the proceedings of a meeting substantially
concurrently with the proceedings; and (iii) the Corporation maintains a record
of any shareholder vote or other action taken at the meeting by means of remote
communication.
Section 16. Record Date. The Board of Directors shall have the power to close
the stock transfer books of the Corporation or, in lieu thereof, to fix a record
date for the determination of the shareholders entitled to notice of or to vote
at any meeting of the shareholders and at any adjournment or adjournments
thereof and to fix a record date for any other purpose or purposes as provided
in Section 6 of Article VIII of these By-Laws.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. Board of Directors. The business, property and affairs of the
Corporation shall be managed and controlled by the Board of Directors and,
subject to such restrictions, if any, as may be imposed by law, the Amended and
Restated Certificate of Formation or by these By-Laws, the Board of Directors
may, and are fully authorized to, exercise all the powers of the Corporation.
Directors need not be residents of the State of Texas or shareholders of the
Corporation.
In addition to the powers and authority expressly conferred on the
Board of Directors by law, the Amended and Restated Certificate of Formation or
amendment thereof, by these By-Laws or any amendment thereof, the Board may
exercise all the powers of the Corporation and do all such lawful acts and
things as may be done by the Corporation which are not by the laws of the State
of Texas or by the Amended and Restated Certificate of Formation or by these
By-Laws directed or required to be exercised or done by the shareholders.
Section 2. Number of Directors. The number of directors shall be established,
and may be increased or decreased from time to time, by resolution of the Board
of Directors of the Corporation, provided, however, that the number of directors
shall never be less than three (3).
Section 3. Election and Term. Except as otherwise provided in Section 5 of this
Article III, all directors (the number of which shall be established by the
Board of Directors as provided by Section 2 of this Article III, shall be
elected at each annual meeting to hold office for one year and until their
successors are elected and qualified.
Section 4. Resignation. Any director or officer of the Corporation may resign at
any time as provided in Section 5 of Article IX of these By-Laws.
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Section 5. Vacancy and Increase. Any vacancy or vacancies occurring in the Board
of Directors may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office and until his successor shall have been elected and
qualified. In case of any increase in the number of directors, the additional
director or directors shall be elected at either an annual meeting or at a
special meeting of the shareholders called for that purpose.
Section 6. Removal. The directors of the Corporation, and each of them, may be
removed from office from time to time and at any time with or without cause, by
the shareholders entitled to vote, at any meeting thereof at which a quorum is
present, by the vote of a two-thirds majority of the votes of the shareholders
present in person or by proxy and entitled to vote thereat; and any vacancy or
vacancies in the Board of Directors resulting therefrom may be filled by the
remaining directors, though less than a quorum.
Section 7. Offices and Records. The directors may have or establish one or more
offices of the Corporation and keep the books and records of the Corporation,
except as otherwise provided by statue, in such place or places in the State of
Texas or outside the State of Texas, as the Board of Directors may from time to
time determine.
Section 8. Meeting of Directors. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Texas.
Section 9. First Meeting. Each newly elected Board of Directors may hold its
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of the stockholders, and no notice of such meeting shall be necessary.
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Section 10. Election of Officers. At the first meeting of the Board of Directors
in each year at which a quorum shall be present, held next after the annual
meeting of shareholders, the Board of Directors shall proceed to the election of
the officers of the Corporation.
Section 11. Regular Meetings. There shall be regularly scheduled quarterly
meetings of the Board of Directors of the Corporation. Notice of such regular
meetings shall not be required.
Section 12. Special Meetings. Special meetings of the Board of Directors shall
be held whenever and wherever called or provided to be held by the President or
by any three of the Directors for the time being in office, and at the place,
day and hour determined by the officer or the three directors calling or
providing for the holding of the particular meeting, in each instance, and such
determination may be conclusively evidenced in a call, waiver of notice or by
an electronic transmission signed or delivered by such officer or such three
directors.
Section 13. Notice. The Secretary or an Assistant Secretary shall, but in the
event of the absence of the Secretary or an Assistant Secretary or the failure,
inability, refusal or omission on the part of the Secretary or an Assistant
Secretary so to do, any other officer of the Corporation may, give notice of
each special meeting, and of the place, day and hour of the particular meeting,
in person or by mail, or by telephone, telegraph, electronic transmission or
other means of communication, at least three (3) days before the meeting of each
director. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 14. Business to be Transacted. Neither the business to be transacted at,
nor the purpose or purposes of, any regular or special meeting of the Board of
Directors need be specified in the notice or any waiver or waivers of notice of
such meeting. Any and all business of any nature or character whatsoever may be
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transacted and action may be taken thereon at any such first meeting or at any
other meeting, regular or special, of the Board of Directors. At any meeting at
which every director shall be present, even though without any notice, any
business may be transacted.
Section 15. Quorum - Adjournment if Quorum is not Present. A majority of the
number of directors fixed by these By-Laws shall constitute a quorum (provided,
a majority of those present are citizens of the United States) for the
transaction of any and all business, but if at any meeting, regular or special,
or any first meeting, of the Board of Directors there be less than a quorum
present, a majority of those present, or if only one director be present, then
such director, may adjourn the meeting from time to time without notice, other
than by announcement at the meeting, until a quorum shall be present at the
meeting. A majority of the directors present at any meeting of the Board of
Directors, or if only one director be present, then such director, may adjourn
any meeting of the Board from time to time without notice, other than by
announcement at such meeting of the time and place at which the meeting will
reconvene, until the transaction of any and all business submitted or proposed
to be submitted to such meeting or any adjournment or adjournments thereof shall
have been completed. The act of a majority of the directors present at any
meeting of the Board of Directors at which a quorum is in attendance shall
constitute the act of the Board of Directors unless the act of a greater number
is required by the Amended and Restated Certificate of Formation or by these
By-Laws.
Section 16. Action Without Meeting. Unless otherwise restricted by law or the
Amended and Restated Certificate of Formation, any action required or permitted
to be taken at a meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a consent in writing setting forth the action
so taken shall be signed by all members of the Board of Directors or committee
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thereof, as the case may be. A telegram, telex, cablegram or other electronic
transmission by a director consenting to an action to be taken and transmitted
by a director is considered written, signed, and dated for the purposes of this
Article III if the transmission sets forth or is delivered with information from
which the Corporation can determine that the transmission was transmitted by the
director and the date on which the director transmitted the transmission. Such
consent shall have the same force and effect as a unanimous vote at a meeting of
the Board of Directors or the committee, as the case may be, duly called and
held.
Section 17. Compensation. Directors, as such, shall not be entitled to
receive any fixed sums or stated salaries for their services, but, by resolution
of the Board, a fixed sum and expenses of attendance, if any, may be provided
and allowed by the Board of Directors for attendance at meetings of the Board,
whether regular or special, or first meetings; provided that nothing herein
contained shall, or shall be construed so as to, preclude any director from
serving the Corporation in any other capacity or receiving compensation
therefor. Members of special or standing committees may be allowed a fixed sum
and expenses of attendance, if any, at committee meetings.
Section 18. Order of Business. At all meetings of the Board of Directors
business shall be transacted in such order as from time to time the Board of
Directors may determine. At all meetings of the Board of Directors a Chairman
shall be chosen by the Board from among the directors present and such Chairman
so chosen shall preside at the meeting.
The Secretary of the Corporation, or in his absence, an Assistant
Secretary, shall act as Secretary of the meetings of the Board of Directors, but
in the absence of the Secretary and an Assistant Secretary, or if for any reason
neither acts as Secretary thereof, the presiding officer shall appoint any
15
person of his choice to act, and such person shall act as Secretary at the
meeting.
Section 19. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
OFFICERS' AND DIRECTORS' SERVICES, CONFLICTING INTERESTS AND INDEMNIFICATION
Section 1. Services. No director shall be required to devote his time or any
particular portion of his time or render services or any particular services
exclusively to this Corporation. Each and every Director shall be entirely free
to engage, participate and invest in any and all such businesses, enterprises
and activities, either similar or dissimilar to the business, enterprise and
activities of this Corporation, without breach of duty to this Corporation or to
its shareholders and without accountability or liability to this Corporation or
to its shareholders in any event or under any circumstances or conditions.
Each and every Director shall be entirely free to act for, serve and
represent any other corporation or corporations, entity or entities, and any
person or persons, in any capacity or capacities, and be or become a director or
officer, or both, of any other corporation or corporations, entity or entities,
irrespective of whether or not the business, purposes, enterprises and
16
activities, or any of them, thereof be similar or dissimilar to the business,
purposes, enterprises and activities, or any of them, of this Corporation,
without breach of duty to this Corporation or to its shareholders and without
accountability or liability of any character or description to this Corporation
or to its shareholders in any event or under any circumstances or conditions.
Section 2. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers or between the
Corporation and any other entity in which one or more of the Corporation's
directors or officers is a managerial official or has a financial interest will
be void or voidable (a) for this reason; (b) because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
that authorizes the contract or transaction; or (c) because his vote authorizes
the contract or transaction if (i) the material facts of his relationship or
interest and of the contract or transaction are disclosed or are known to the
board of directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors or committee members, even though the
disinterested directors or committee members are less than a quorum; (ii) the
material facts of his relationship or interest and of the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved, or ratified by the
Board of Directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee that authorizes the contract
or transaction.
17
Section 3. Indemnification and Expense Advances. The Corporation
is authorized to, and shall, indemnify and advance expenses to directors of the
Corporation in the manner prescribed in, and to the maximum extent permissible
under, the Texas Business Organizations Code. The Corporation shall indemnify
and advance expenses to officers, employees and agents of the Corporation in the
same manner and to the same extent that it indemnifies and advances expenses to
directors of the Corporation.
Section 4. Rights Not Exclusive. The indemnification provided by this Article IV
shall not be deemed exclusive of any other rights to which any person in any
capacity referred to in Section 3 of this Article IV may be entitled under any
bylaw, agreement, vote of the shareholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in any other capacity while holding such office. Such indemnification
shall continue as to a person who has ceased to act in any capacity referred to
in Section 3 of this Article IV and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 5. Powers Not Exclusive. The indemnification provided by this Article IV
shall not be deemed exclusive of any other power to indemnify or right to
indemnification which the Corporation or any person in any capacity referred to
in Section 3 of this Article IV may have or acquire under the law including,
without limitation, the Texas Business Organizations Code, or any amendment
thereto or substitute therefor.
Section 6. Applicability. The provisions of this Article VI shall be applicable
to claims, actions, suits or other proceedings referred to in the Texas Business
Organizations Code, made or commenced after the adoption hereof, whether arising
from conduct or act or omission occurring before or after the adoption hereof.
18
Section 7. Insurance. The Corporation may, at the discretion of the Board of
Directors, purchase and maintain insurance on behalf of the Corporation and any
person whom it has power to indemnify pursuant to the Texas Business
Organizations Code, the Amended and Restated Certificate of Formation, or these
By-Laws, or otherwise.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 1. Committees of Directors. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members an Executive Committee and one or more other committees, each of
which, to the extent provided in such resolution, shall have and may exercise
all of the authority of the Board of Directors, except that no such committee
shall have the authority of the Board of Directors when the action of the Board
of Directors is required or the authority of the committee is limited by
statute. Vacancies in the membership of a committee (whether by death,
resignation, removal or any other manner) may be filled by resolution of the
Board of Directors. No notice of any meeting of any committee shall be required,
and a majority of the members of the committee shall constitute a quorum for the
transaction of business. The designation of such a committee and the delegation
thereto of authority shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed upon it or him by law.
ARTICLE VI
OFFICERS
Section 1. Principal Officers. The officers of the Corporation shall be chosen
by the Board of Directors. The officers shall be a President, a Secretary,
Treasurer, and such number of Vice Presidents, and such number of Assistant
Secretaries and Assistant Treasurers, as the Board may from time to time
19
determine or elect. Any person may hold two or more offices at the same time,
except that the President and Secretary shall not be the same person.
Section 2. Additional Officers. The Board of Directors may appoint such other
officers, agents and factors as shall deem necessary.
Section 3. Terms of Offices. Each officer shall hold his office until his
successor shall have been duly elected and qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
Section 4. Removal. Any officer or agent or member of the Executive Committee
or any other committee elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests
of the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself contract rights.
Section 5. Vacancies. A vacancy in any office may be filled by the vote of a
majority of the Board of Directors then in office for the unexpired portion of
the term of such office. Section 6. Powers and Duties of Officers. The officers
so chosen shall perform the duties and exercise the powers expressly conferred
or provided for in these By-Laws, as well as the usual duties and powers
incident to such office, and such other duties and powers as may be assigned to
them from time to time- by the Board of Directors or by the President.
Section 7. Chairman of the Board. The Board of Directors may select from among
its members a Chairman of the Board who may, if so selected, preside at all
meetings of the Board of Directors and approve the minutes of all proceedings,
thereat, and he shall be available to consult with and advise the officers of
the Corporation with respect to the conduct of the business and affairs of the
Corporation.
20
Section 8. The President. The President, subject to the control of the Board of
Directors, shall be the chief executive officer of the Corporation and shall
have general executive charge, management and control of the affairs, properties
and operations of the Corporation in the ordinary course of its business, with
all such duties, powers and authority with respect to such affairs, properties
and operations as may be reasonably incident to such responsibilities; he may
appoint or employ and discharge employees and agents of the Corporation and fix
their compensation; he may take, execute, acknowledge and deliver any and all
contracts, leases, deeds, conveyances, assignments, bills of sale, transfers,
releases and receipts, any and all mortgages, deeds of trust, indentures,
pledges, chattel mortgages, liens and hypothecations, and any and all bonds,
debentures and notes, and any and all other obligations and encumbrances and any
and all other instruments, documents and papers of any kind or character for and
on behalf of and in the name of the Corporation, and, with the Secretary or an
Assistant Secretary, he may sign all certificates for shares of the capital
stock of the Corporation; he shall do and perform such other duties and have
such additional authority and powers as from time to time may be assigned to or
conferred upon him by the Board of Directors. The President shall be a citizen
of the United States of America.
Section 9. Vice Presidents. Each Vice President shall have such powers and
duties as may be conferred upon or assigned to him by the Board of Directors and
shall in the order of their seniority have and exercise the powers of the
President during that officer's absence or inability to act; provided however
that in the event that the foregoing functions to confer the powers of the
President upon a Vice President who is not a citizen of the United States of
America, then such Vice President shall not assume the Powers of the President
and such responsibility shall be assumed by the next senior Vice President or
other officer who is a United States citizen. Any action taken by a Vice
21
President on the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
Section 10. Treasurer. The Treasurer shall have custody of all the funds and
securities of the Corporation which come into his hands. When necessary or
proper, he may endorse on behalf of the Corporation, for collection, checks,
notes and other obligations and shall deposit the same to the credit of the
Corporation in such bank or banks or depositories as shall be selected or
designated by or in the manner prescribed by the Board of Directors. He may sign
all receipts and vouchers for payments made to the Corporation, either alone or
jointly with such officer as may be designated by the Board of Directors.
Whenever required by the Board of Directors he shall render a statement of his
cash account. He shall enter or cause to be entered, punctually and regularly,
on the books of the Corporation to be kept by him or under his supervision or
direction for that purpose, full and accurate accounts of all moneys received
and paid out by, for or on account of the Corporation. He shall at all
reasonable times exhibit his books and accounts and other financial records to
any director of the Corporation during business hours. He shall have such other
powers and duties as may be conferred upon or assigned to him by the Board of
Directors. The Treasurer shall perform all acts incident to the position of
Treasurer subject always to the control of the Board of Directors. He shall, if
required by the Board of Directors, give such bond for the faithful discharge of
his duties in such form and amounts as the Board of Directors may require.
Section 11. Assistant Treasurers. Each Assistant Treasurer shall have the usual
powers and duties pertaining to his office, together with such other powers and
duties as may be conferred upon or assigned to him by the Board of Directors.
22
The Assistant Treasurers shall have and exercise the powers of the Treasurer
during that officer's absence or inability to act.
Section 12. Secretary. The Secretary (1) shall keep the minutes of all meetings
of the Board of Directors and the minutes of all meetings of the shareholders,
in books provided for that purpose, (2) shall attend to the giving and serving
of all notices, (3) may sign with the President or Vice President in the name
of the Corporation and/or attest the signatures of either to all contracts,
conveyances, transfers, assignments, encumbrances, authorizations and all other
instruments, documents and papers, of any and every description whatsoever, of
or executed for or on behalf of the Corporation and affix the seal of the
Corporation thereto, (4) may sign with the President or a Vice President all
certificates for shares of the capital stock of the Corporation and affix the
corporate seal of the Corporation thereto, (5) shall have charge of and maintain
and keep or supervise and control the maintenance and keeping the stock
certificate books, transfer books and stock ledgers and such other books and
papers as the Board of Directors may authorize, direct or provide for, all of
which shall at all reasonable times be open to the inspection of any director,
upon request, at the office of the Corporation during business hours, (6) shall,
in general, perform all the duties incident to the office of Secretary, and (7)
shall have such other powers and duties as may be conferred upon or assigned to
him by the Board of Directors; subject always to the control of the Board of
Directors.
Section 13. Assistant Secretaries. Each Assistant Secretary shall have the usual
powers and duties pertaining to his office, together with such other powers and
duties as may be conferred upon or assigned to him by the Board of Directors or
the Secretary. The Assistant Secretaries shall have and exercise the powers of
the Secretary during that officer's absence or inability to act.
23
Section 14. Securities of other Corporations. The President or any Vice
President or Secretary or Treasurer of the Corporation shall have the power
and authority to transfer, endorse for transfer, vote, consent or take any
other action with respect to any securities of another issuer which may be
held or owned by the Corporation and to make, execute and deliver any waiver,
proxy or consent with respect to any such securities.
ARTICLE VII
BOOKS, DOCUMENTS AND ACCOUNTS
The Board of Directors shall have power to keep the books, documents
and accounts of the Corporation outside of the State of Texas; except that a
record of its shareholders, giving the names and addresses of all shareholders
and the number and class of shares held by each shall be kept at its registered
office or principal place of business, or at the office of its transfer agent or
registrar and the original or a duplicate stock ledger shall at all times be
kept within the State of Texas.
ARTICLE VIII
CAPITAL STOCK
Section 1. Stock Certificates. The certificates for shares of the capital stock
of the Corporation shall be in such form as shall be approved by the Board of
Directors. They shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued and shall exhibit the holder's name
and the number of shares. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the President, or a Vice President, and the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation, with the seal of the Corporation or a facsimile thereof impressed
or printed thereon. Where any such certificate is countersigned by a transfer
24
agent, or registered by a registrar, either of which is other than the
Corporation itself or an employee of the Corporation, the signatures of the
President or Vice President and the Secretary or Assistant Secretary upon a
certificate may be facsimiles, engraved or printed. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been used or placed on any such certificate or certificates shall have
ceased to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate is, or such
certificates are, issued, such certificate or certificates may nevertheless be
issued and delivered by the Corporation as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures have been used thereon was or were such officer or officers at the
time of issuance thereof, and with the same effect as if he or they were such
officer or officers at the date of issuance thereof.
Section 2. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by the laws of the State of Texas and in these By-Laws.
Transfers of stock shall be made on the books of the corporation only by the
person named in the certificate, or by his attorney or attorneys-in-fact,
legal representative or legal representatives, duly and lawfully authorized in
writing, and upon the surrender of the certificate therefor, which shall be
cancelled before the new certificate, certificates in the aggregate, for a like
number of shares shall be issued.
The Board of Directors may appoint a transfer agent or registrar for
each class of stock, and may require all stock certificates to bear the
signature of such transfer agent and of such registrar or either of them.
Section 3. Registered Holders. The Corporation shall be entitled to treat the
person in whose name any share of stock or any warrant, right or option is
registered as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to, or interest in, such share, warrant,
25
right or option on the part of any other person, whether or not the Corporation
shall have notice thereof, save as may be expressly provided otherwise by the
laws of the State of Texas.
Section 4. New Certificates. The Corporation may, in its sole discretion,
issue a new certificate for shares of its stock in the place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the
Board of Directors may, in its discretion, require the owner of the lost or
destroyed certificate, or his legal representative or representatives, to give
the Corporation such statement under oath or other evidence of such loss or
destruction as the Board may desire, and a bond in form, amount and with such
surety or sureties as the Board of Directors may prescribe or determine, and
sufficient, in the sole judgment of the Board, to indemnify and protect the
Corporation against any and all claims, liabilities, costs and expenses that
may be made or asserted against it or which it may suffer or incur or pay, on
account of the alleged loss of any such certificate or the issuance of such
new certificate. A new certificate may be issued without requiring any bond
when, in the sole discretion of the Board, it is proper so to do.
Section 5. Dividends. The Board of Directors may declare dividends as and when
the Board deems expedient and as may be permitted by law and under the
provisions of the Texas Business Organizations Code. Before declaring any
dividend there may be reserved out of the earned surplus such sum or sums as the
Board of Directors, from time to time in the absolute discretion of the
directors, deems proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends, or for such other purposes as the
Board may deem conducive to the interests of the Corporation, and the Board may
abolish any such reserve in the manner in which it was created.
26
Section 6. Record Dates and Closing of Transfer Books. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, sixty (60) days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer books
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which the notice of the meeting is mailed or
the date on which the resolution of the Board of Directors' declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders.
Section 7. Regulations. The Board of Directors shall have power and authority to
make all such rules and regulations as they may deem expedient concerning the
issue, transfer and registration or the replacement for certificates of shares
of the capital stock of the Corporation.
27
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be such as the
Board of Directors shall, by resolution, provide or establish or such as the
President shall determine subject to approval of the Board.
Section 2. Seal. The seal of the Corporation shall be in such form as the
Board of Directors shall prescribe, and may be used by causing it or a
facsimile thereof to be impressed, or affixed, or printed, or reproduced or in
any other manner.
Section 3. Notice.
Any notice to directors, shareholders and committee members shall be in writing
and may be delivered personally, or by mail to the directors, shareholders or
committee members at their respective addresses appearing on the books and share
transfer records of the Corporation. Notice to shareholders shall be deemed to
be given at the time when the same shall be so delivered or mailed. Notice to
directors and committee members may also be given by nationally recognized
overnight delivery or courier service, and shall be deemed given when such
notice shall be received by the proper recipient or, if earlier, (i) in the case
of an overnight delivery or courier service, one (1) day after such notice is
sent by such overnight delivery or courier service; (ii) in the case of
telegraph, when deposited at a telegraph office for transmission and all
appropriate fees therefore have been paid; and (iii) in the case of mailing by
U.S. mail, three (3) days after such notice is mailed as described above. On
consent of a shareholder, director or committee member, notice from the
Corporation may be given to the shareholder, director or committee member by
electronic transmission. The shareholder, director or committee member may
specify the form of electronic transmission to be used to communicate notice.
The shareholder, director or committee member may revoke this consent by written
notice to the Corporation. The consent is deemed to be revoked if the
28
Corporation is unable to deliver by electronic transmission two consecutive
notices, and the person responsible for delivering notice on behalf of the
Corporation knows that delivery of these two electronic transmissions was
unsuccessful. The inadvertent failure to treat the unsuccessful transmissions as
a revocation of consent does not invalidate a meeting or other action. Notice by
electronic transmission is deemed given when the notice is (i) transmitted to a
facsimile number provided by the shareholder, director or committee member for
the purpose of receiving notice; (ii) transmitted to an electronic mail address
provided by the shareholder, director or committee member for the purpose of
receiving notice; (iii) posted on an electronic network and a message is sent to
the shareholder, director or committee member at the address provided by the
shareholder, director or committee member for the purpose of alerting the
shareholder, director or committee member of a posting; or (iv) communicated to
the shareholder, director or committee member by any other form of electronic
transmission consented to by the shareholder, director or committee member.
Section 4. Waiver of Notice. Whenever any notice is required to be given by law,
the Amended and Restated Certificate of Formation or these By-Laws, a waiver
thereof in writing signed by the person or persons entitled to such notice, or a
waiver by electronic transmission by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. The business to be transacted at a regular or special
meeting of the shareholders, directors, or members of a committee of directors
or the purpose of a meeting is not required to be specified in a written waiver
of notice or a waiver by electronic transmission unless required by the Amended
and Restated Certificate of Formation. Attendance of a director at any meeting
of the Board of Directors or any committee thereof, and attendance of a
shareholder at any meeting of the shareholders shall constitute a waiver of
notice of such meeting, except where a director or shareholder attends for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 5. Resignations. Any director or officer may resign at any time.
Each such resignation may be made in writing or by electronic transmission and
shall take effect at the time specified therein, or, if no time be specified,
at the time of its receipt by either the Board of Directors or the President or
the Secretary. The acceptance of a resignation shall not be necessary to make
it effective, unless expressly so provided in the resignation.
Section 6. Telephone and Similar Meetings. Shareholders, directors, and
committee members may participate in and hold meetings by means of conference
telephone or other similar means of remote communication equipment such that all
participants in the meeting can communicate with each other. Participation in
such a meeting will constitute presence in person at the meeting, except when a
person participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting had not been lawfully called or convened.
Section 7. Securities of Other Corporations. The President or any Vice President
of the Corporation shall have power and authority to transfer, endorse for
transfer, vote, consent or take any other action with respect to any securities
of another issuer which may be held or owned by the Corporation and to make,
execute and deliver any waiver, proxy or consent with respect to any such
securities.
Section 8. Depositories. Funds of the Corporation not otherwise employed shall
be deposited from time to time in such banks or other depositories as either the
Board of Directors or the President or the Treasurer may select or approve.
30
Section 9. Signing of Checks, Notes, etc. In addition to and cumulative of, but
in nowise limiting or restricting, any other provision or provisions of these
By-Laws which confer any authority relative thereto, all checks, drafts and
other orders for the payment of money or moneys out of funds of the Corporation
and all notes and other evidences of indebtedness of the Corporation shall be
signed on behalf of the Corporation, in such manner, and by such officer or
officers, person or persons, as shall from time to time be determined or
designated by or pursuant to resolution or resolutions of the Board of
Directors; provided, however, that if, when, after and as authorized or provided
for by resolution or resolutions of the Board of Directors the signature or
signatures of any such officer or officers, person or persons, may be facsimile
or facsimiles, engraved or printed, and shall have the same force and effect and
bind the Corporation as though such officer or officers, person or persons, had
signed the same personally, and, in event of the death, disability, removal or
resignation of any such officer or officers, person or persons, if the Board of
Directors shall so determine or provide, as though and with the same effect as
if such death, disability, removal or resignation had not occurred.
Section 10. Persons. Wherever used or appearing in these By-Laws, pronouns of
the masculine gender shall include the persons of the female sex as well as the
neuter gender and the singular shall include the plural wherever appropriate.
Section 11. Laws and Statutes. Wherever used or appearing in these By-Laws, the
words "law" or "laws" or "statute" or "statutes", respectively, shall mean and
refer to laws and statutes, or a law or a statute, of the State of Texas, to the
extent only that such is or are expressly applicable, except where otherwise
expressly stated or the context requires that such words not be so limited.
31
Section 12. Headings. The headings of the Articles and Sections of these By-Laws
are inserted for convenience of reference only and shall not be deemed to be a
part thereof or used in the construction or interpretation thereof.
ARTICLE X
AMENDMENTS
Section 1. Amendment of By-Laws. The By-Laws of the Corporation may be altered,
amended or repealed or new By-Laws may be adopted by either the unanimous action
of the Board of Directors or the shareholders. Such equal power to alter, amend,
or repeal the By-Laws or adopt new By-Laws was delegated to the Board of
Directors by the adoption of this By-Law by the shareholders.
32
The foregoing is certified as a true and correct copy of the By-Laws of
Atwood Oceanics, Inc., as of this 5th of May, 2006.
By: /s/ John R. Irwin
John R. Irwin, President
By: /s/ James M. Holland
James M. Holland, Secretary
33
EXHIBIT 31.1
CERTIFICATIONS
I, John R. Irwin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Designed such internal control over financial reporting to
be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: May 10, 2006
/s/ JOHN R. IRWIN
----------------
John R. Irwin
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATIONS
I, James M. Holland, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Atwood
Oceanics, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;
(b) Designed such internal control over financial reporting to
be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
and
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: May 10, 2006
/s/ JAMES M. HOLLAND
James M. Holland
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the "Company")
on Form 10-Q for the period ended March 31, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, John R. Irwin,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: May 10, 2006 /s/ JOHN R. IRWIN
-----------------
John R. Irwin
President and Chief Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atwood Oceanics, Inc. (the "Company")
on Form 10-Q for the period ended March 31, 2006, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, James M. Holland,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company for the periods presented.
Date: May 10, 2006 /s/JAMES M. HOLLAND
-------------------
James M. Holland
Senior Vice President and
Chief Financial Officer