UNITED STATES |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended |
OR |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission File Number 1-8097 |
ENSCO International Incorporated |
DELAWARE (State or other jurisdiction of incorporation or organization) 500 North Akard Street Suite 4300 Dallas, Texas (Address of principal executive offices) | 76-0232579 (I.R.S. Employer Identification No.) 75201-3331 (Zip Code) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o 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: Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý There were
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ENSCO INTERNATIONAL INCORPORATEDINDEX TO FORM 10-QFOR THE QUARTER ENDED | |
FORWARD-LOOKING STATEMENTS
Forward-looking statements include words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "could," "may," "might," "should," "will" and words and phrases of similar impact. The forward-looking statements include statements regarding: |
• | future operations, industry trends or conditions and the business environment, | |
• | future levels of, or trends in, day rates, utilization, revenues, operating expenses, capital expenditures, insurance, financing and funding, | |
• | the likely outcome of legal proceedings or claims, | |
• | future construction (including construction in progress), enhancement, upgrade or repair of rigs, | |
• | future mobilization, relocation or other movement of rigs, and | |
• | future availability or suitability of rigs. |
The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including those described under "Item 1A. Risk Factors" in Part I, and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, of our Annual Report on Form 10-K for the year ended December 31, 2006, as updated in this report. |
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Three Months Ended | |||||||
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June 30, | |||||||
2007 | 2006 | ||||||
OPERATING REVENUES | $ | 548.6 | $ | 475.2 | |||
OPERATING EXPENSES | |||||||
Contract drilling | 168.8 | 146.4 | |||||
Depreciation and amortization | 46.8 | 44.1 | |||||
General and administrative | 19.1 | 10.5 | |||||
234.7 | 201.0 | ||||||
OPERATING INCOME | 313.9 | 274.2 | |||||
OTHER INCOME (EXPENSE) | |||||||
Interest income | 6.3 | 2.7 | |||||
Interest expense, net | (.8) | (4.9) | |||||
Other, net | 2.3 | (1.2) | |||||
7.8 | (3.4) | ||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 321.7 | 270.8 | |||||
PROVISION FOR INCOME TAXES | |||||||
Current income tax expense | 68.1 | 78.9 | |||||
Deferred income tax benefit | (.8) | (2.1) | |||||
67.3 | 76.8 | ||||||
INCOME FROM CONTINUING OPERATIONS | 254.4 | 194.0 | |||||
INCOME FROM DISCONTINUED OPERATIONS, NET | -- | .7 | |||||
NET INCOME | $ | 254.4 | $ | 194.7 | |||
EARNINGS PER SHARE - BASIC | |||||||
Continuing operations | $ | 1.72 | $ | 1.27 | |||
Discontinued operations | -- | .00 | |||||
$ | 1.72 | $ | 1.27 | ||||
EARNINGS PER SHARE - DILUTED | |||||||
Continuing operations | $ | 1.72 | $ | 1.26 | |||
Discontinued operations | -- | .00 | |||||
$ | 1.72 | $ | 1.27 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||
Basic | 147.6 | 152.9 | |||||
Diluted | 148.3 | 153.6 | |||||
CASH DIVIDENDS PER SHARE | $ | .025 | $ | .025 |
Three Months Ended | |||||||
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March 31, | |||||||
2007 | 2006 | ||||||
OPERATING REVENUES | $ | 514.1 | $ | 381.6 | |||
OPERATING EXPENSES | |||||||
Contract drilling | 162.8 | 127.9 | |||||
Depreciation and amortization | 45.1 | 42.0 | |||||
General and administrative | 16.0 | 10.4 | |||||
223.9 | 180.3 | ||||||
OPERATING INCOME | 290.2 | 201.3 | |||||
OTHER INCOME (EXPENSE) | |||||||
Interest income | 6.2 | 2.3 | |||||
Interest expense, net | (1.1 | ) | (4.2 | ) | |||
Other, net | 4.5 | (1.7 | ) | ||||
9.6 | (3.6 | ) | |||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE | 299.8 | 197.7 | |||||
PROVISION FOR INCOME TAXES | |||||||
Current income tax expense | 69.3 | 55.2 | |||||
Deferred income tax benefit | (1.8 | ) | (1.7 | ) | |||
67.5 | 53.5 | ||||||
INCOME FROM CONTINUING OPERATIONS | 232.3 | 144.2 | |||||
DISCONTINUED OPERATIONS | |||||||
Income from discontinued operations, net | -- | .8 | |||||
Gain on disposal of discontinued operations, net | -- | 4.2 | |||||
-- | 5.0 | ||||||
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | 232.3 | 149.2 | |||||
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR ADOPTION OF SFAS 123(R), NET | -- | .6 | |||||
NET INCOME | $ | 232.3 | $ | 149.8 | |||
EARNINGS PER SHARE - BASIC | |||||||
Continuing operations | $ | 1.55 | $ | .94 | |||
Discontinued operations | -- | .03 | |||||
Cumulative effect of accounting change | -- | .00 | |||||
$ | 1.55 | $ | .98 | ||||
EARNINGS PER SHARE - DILUTED | |||||||
Continuing operations | $ | 1.54 | $ | .94 | |||
Discontinued operations | -- | .03 | |||||
Cumulative effect of accounting change | -- | .00 | |||||
$ | 1.54 | $ | .97 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||
Basic | 149.9 | 152.9 | |||||
Diluted | 150.7 | 153.7 | |||||
CASH DIVIDENDS PER COMMON SHARE | $ | .025 | $ | .025 | |||
The accompanying notes are an integral part of these financial statements. |
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March 31, | December 31, | ||||
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2007 | 2006 | ||||
(Unaudited) | |||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | $ 620.4 | $ 565.8 | |||
Accounts receivable, net | 385.5 | 338.8 | |||
Other | 80.6 | 82.6 | |||
Total current assets | 1,086.5 | 987.2 | |||
PROPERTY AND EQUIPMENT, AT COST | 4,247.6 | 4,129.5 | |||
Less accumulated depreciation | 1,212.1 | 1,169.1 | |||
Property and equipment, net | 3,035.5 | 2,960.4 | |||
GOODWILL | 336.2 | 336.2 | |||
OTHER ASSETS, NET | 51.8 | 50.6 | |||
$4,510.0 | $4,334.4 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
CURRENT LIABILITIES | |||||
Accounts payable | $ 18.7 | $ 12.4 | |||
Accrued liabilities | 239.6 | 205.4 | |||
Current maturities of long-term debt | 167.1 | 167.1 | |||
Total current liabilities | 425.4 | 384.9 | |||
LONG-TERM DEBT | 308.5 | 308.5 | |||
DEFERRED INCOME TAXES | 349.5 | 356.5 | |||
OTHER LIABILITIES | 82.2 | 68.5 | |||
COMMITMENTS AND CONTINGENCIES | |||||
STOCKHOLDERS' EQUITY | |||||
Preferred stock, $1 par value, 20.0 million shares authorized and none issued | -- | -- | |||
Common stock, $.10 par value, 250.0 million shares authorized, | |||||
179.0 million and 178.7 million shares issued | 17.9 | 17.9 | |||
Additional paid-in capital | 1,642.5 | 1,621.3 | |||
Retained earnings | 2,228.8 | 1,994.5 | |||
Accumulated other comprehensive loss | (4.8 | ) | (5.5 | ) | |
Treasury stock, at cost, 29.4 million shares and 26.9 million shares | (540.0 | ) | (412.2 | ) | |
Total stockholders' equity | 3,344.4 | 3,216.0 | |||
$4,510.0 | $4,334.4 | ||||
Six Months Ended | |||||||
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June 30, | |||||||
2007 | 2006 | ||||||
OPERATING REVENUES | $ | 1,062.7 | $ | 856.8 | |||
OPERATING EXPENSES | |||||||
Contract drilling | 331.6 | 274.3 | |||||
Depreciation and amortization | 91.9 | 86.1 | |||||
General and administrative | 35.1 | 20.9 | |||||
458.6 | 381.3 | ||||||
OPERATING INCOME | 604.1 | 475.5 | |||||
OTHER INCOME (EXPENSE) | |||||||
Interest income | 12.5 | 5.0 | |||||
Interest expense, net | (1.9) | (9.1) | |||||
Other, net | 6.8 | (2.9) | |||||
17.4 | (7.0) | ||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE | 621.5 | 468.5 | |||||
PROVISION FOR INCOME TAXES | |||||||
Current income tax expense | 137.4 | 134.1 | |||||
Deferred income tax benefit | (2.6) | (3.8) | |||||
134.8 | 130.3 | ||||||
INCOME FROM CONTINUING OPERATIONS | 486.7 | 338.2 | |||||
DISCONTINUED OPERATIONS | |||||||
Gain from discontinued operations, net | -- | 1.5 | |||||
Gain on disposal of discontinued operations, net | -- | 4.2 | |||||
-- | 5.7 | ||||||
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | 486.7 | 343.9 | |||||
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR ADOPTION OF SFAS 123(R), NET | -- | .6 | |||||
NET INCOME | $ | 486.7 | $ | 344.5 | |||
EARNINGS PER SHARE - BASIC | |||||||
Continuing operations | $ | 3.27 | $ | 2.21 | |||
Discontinued operations | -- | .04 | |||||
Cumulative effect of accounting change | -- | .00 | |||||
$ | 3.27 | $ | 2.25 | ||||
EARNINGS PER SHARE - DILUTED | |||||||
Continuing operations | $ | 3.26 | $ | 2.20 | |||
Discontinued operations | -- | .04 | |||||
Cumulative effect of accounting change | -- | .00 | |||||
$ | 3.26 | $ | 2.24 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||
Basic | 148.8 | 152.9 | |||||
Diluted | 149.4 | 153.6 | |||||
CASH DIVIDENDS PER SHARE | $ | .05 | $ | .05 |
The accompanying notes are an integral part of these financial statements. |
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Three Months Ended March 31, | |||||
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2007 | 2006 | ||||
OPERATING ACTIVITIES | |||||
Net income | $232.3 | $149.8 | |||
Adjustments to reconcile net income to net cash provided | |||||
by operating activities of continuing operations: | |||||
Depreciation and amortization | 45.1 | 42.0 | |||
Deferred income tax provision | (1.8 | ) | (1.7 | ) | |
Share-based compensation expense | 10.3 | 4.2 | |||
Excess tax benefit from share-based compensation | (1.1 | ) | (.9 | ) | |
Amortization of other assets | 1.4 | 1.6 | |||
Net (gain) loss on asset dispositions | (.2 | ) | 1.0 | ||
Income from discontinued operations, net | -- | (.8 | ) | ||
Gain on disposal of discontinued operations, net | -- | (4.2 | ) | ||
Cumulative effect of accounting change, net | -- | (.6 | ) | ||
Other | .2 | .4 | |||
Changes in operating assets and liabilities: | |||||
Increase in accounts receivable | (46.7 | ) | (24.7 | ) | |
Decrease (increase) in other assets | .4 | (6.2 | ) | ||
Increase in accounts payable | 6.4 | 6.0 | |||
Increase in accrued and other liabilities | 33.4 | 51.2 | |||
Net cash provided by operating activities of continuing operations | 279.7 | 217.1 | |||
INVESTING ACTIVITIES | |||||
Additions to property and equipment | (106.0 | ) | (245.4 | ) | |
Net proceeds from disposal of discontinued operations | -- | 10.0 | |||
Proceeds from disposition of assets | 1.6 | 1.2 | |||
Net cash used in investing activities | (104.4 | ) | (234.2 | ) | |
FINANCING ACTIVITIES | |||||
Repurchase of common stock | (127.6 | ) | (11.7 | ) | |
Cash dividends paid | (3.8 | ) | (3.9 | ) | |
Proceeds from exercise of share options | 9.8 | 12.9 | |||
Excess tax benefit from share-based compensation | 1.1 | .9 | |||
Other | (.2 | ) | (.1 | ) | |
Net cash used in financing activities | (120.7 | ) | (1.9 | ) | |
Effect of exchange rate changes on cash and cash equivalents | (.0 | ) | .7 | ||
Net cash provided by operating activities of discontinued operations | -- | .9 | |||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 54.6 | (17.4 | ) | ||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 565.8 | 268.5 | |||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $620.4 | $251.1 | |||
June 30, | December 31, | ||||
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2007 | 2006 | ||||
(Unaudited) | |||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | $ | 547.0 | $ | 565.8 | |
Accounts receivable, net | 445.3 | 338.8 | |||
Other | 90.8 | 82.6 | |||
Total current assets | 1,083.1 | 987.2 | |||
PROPERTY AND EQUIPMENT, AT COST | 4,405.4 | 4,129.5 | |||
Less accumulated depreciation | 1,257.7 | 1,169.1 | |||
Property and equipment, net | 3,147.7 | 2,960.4 | |||
GOODWILL | 336.2 | 336.2 | |||
OTHER ASSETS, NET | 53.1 | 50.6 | |||
$ | 4,620.1 | $ | 4,334.4 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
CURRENT LIABILITIES | |||||
Accounts payable | $ | 18.8 | $ | 12.4 | |
Accrued liabilities | 223.9 | 205.4 | |||
Current maturities of long-term debt | 167.1 | 167.1 | |||
Total current liabilities | 409.8 | 384.9 | |||
LONG-TERM DEBT | 299.9 | 308.5 | |||
DEFERRED INCOME TAXES | 347.6 | 356.5 | |||
OTHER LIABILITIES | 83.0 | 68.5 | |||
COMMITMENTS AND CONTINGENCIES | |||||
STOCKHOLDERS' EQUITY | |||||
Preferred stock, $1 par value, 20.0 million shares authorized, | |||||
none issued | -- | -- | |||
Common stock, $.10 par value, 250.0 million shares authorized, | |||||
180.0 million and 178.7 million shares issued | 18.0 | 17.9 | |||
Additional paid-in capital | 1,675.5 | 1,621.3 | |||
Retained earnings | 2,479.5 | 1,994.5 | |||
Accumulated other comprehensive loss | (3.1) | (5.5) | |||
Treasury stock, at cost, 32.0 million shares and 26.9 million shares | (690.1) | (412.2) | |||
Total stockholders' equity | 3,479.8 | 3,216.0 | |||
$ | 4,620.1 | $ | 4,334.4 | ||
The accompanying notes are an integral part of these financial statements. |
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Six Months Ended | |||||
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June 30, | |||||
2007 | 2006 | ||||
OPERATING ACTIVITIES | |||||
Net income | $ | 486.7 | $ | 344.5 | |
Adjustments to reconcile net income to net cash | |||||
provided by operating activities of continuing operations: | |||||
Depreciation and amortization | 91.9 | 86.1 | |||
Deferred income tax provision | (2.6) | (3.8) | |||
Share-based compensation expense | 24.3 | 9.0 | |||
Excess tax benefit from share-based compensation | (4.7) | (1.6) | |||
Amortization of other assets | 3.1 | 3.2 | |||
Net loss on asset dispositions | .3 | 5.4 | |||
Income from discontinued operations, net | -- | (1.5) | |||
Gain on disposal of discontinued operations, net | -- | (4.2) | |||
Cumulative effect of accounting change, net | -- | (.6) | |||
Other | .4 | .6 | |||
Changes in operating assets and liabilities: | |||||
Increase in accounts receivable | (106.5) | (101.2) | |||
Increase in other assets | (12.0) | (5.6) | |||
Increase (decrease) in accounts payable | 6.4 | (2.5) | |||
Increase in accrued liabilities | 45.1 | 30.1 | |||
Net cash provided by operating activities of continuing operations | 532.4 | 357.9 | |||
INVESTING ACTIVITIES | |||||
Additions to property and equipment | (290.3) | (283.3) | |||
Net proceeds from disposal of discontinued operations | -- | 10.0 | |||
Proceeds from disposition of assets | 3.2 | 1.9 | |||
Net cash used in investing activities | (287.1) | (271.4) | |||
FINANCING ACTIVITIES | |||||
Reduction of long-term borrowings | (8.6) | (8.6) | |||
Cash dividends paid | (7.5) | (7.7) | |||
Proceeds from exercise of stock options | 25.3 | 20.7 | |||
Excess tax benefit from share-based compensation | 4.7 | 1.6 | |||
Repurchase of common stock | (272.4) | (52.2) | |||
Other | (5.5) | (.5) | |||
Net cash used by financing activities | (264.0) | (46.7) | |||
Effect of exchange rate changes on cash and cash equivalents | (.1) | (.1) | |||
Net cash provided by operating activities of discontinued operations | -- | 1.6 | |||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (18.8) | 41.3 | |||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 565.8 | 268.5 | |||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 547.0 | $ | 309.8 | |
The accompanying notes are an integral part of these financial statements. |
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We prepared the accompanying condensed consolidated financial statements of ENSCO International Incorporated and subsidiaries (the "Company") in accordance with U.S. generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC")included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, 2006 consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by U.S. generally accepted accounting principles. Certain previously reported amounts have been reclassified to The financial data for the three-month Results of operations for the three-month Note 2 - Earnings Per Share For the three-month and six-month periods ended |
2007 | 2006 | Three Months | Six Months | |||||||||||||
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Ended June 30, | Ended June 30, | |||||||||||||||
Weighted average common shares-basic | 149.9 | 152.9 | ||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Weighted average common shares - basic | 147.6 | 152.9 | 148.8 | 152.9 | ||||||||||||
Potentially dilutive common shares: | ||||||||||||||||
Non-vested share awards | .3 | .1 | .0 | -- | -- | -- | ||||||||||
Share options | .5 | .7 | .7 | .7 | .6 | .7 | ||||||||||
Weighted average common shares-diluted | 150.7 | 153.7 | ||||||||||||||
Weighted average common shares - diluted | 148.3 | 153.6 | 149.4 | 153.6 |
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Options to purchase Note 3 - Share-Based Employee Compensation During the three-month period ended June 30, 2007, we granted 503,250 share options to our employees, officers and directors as annual equity awards made pursuant to our 2005 Long-Term Incentive Plan, and for equity awards granted to new or recently promoted employees. Share options granted to officers and employees generally become exercisable in 25% increments over a four-year period and, to the extent not exercised, expire on the seventh anniversary of the date of grant. Share options granted to non-employee directors are immediately exercisable and to the extent not exercised, expire on the seventh anniversary of the date of grant. The following table summarizes the value of share options granted during the three-month period ended June 30, 2007: |
Weighted-average grant-date fair value of share options granted (per share) | $ | 20.52 | |||
Weighted-average exercise price of share options granted (per share) | $ | 60.68 |
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Risk-free interest rate | 4.9% | ||||
Expected life (in years) | 4.7 | ||||
Expected volatility | 29.8% | ||||
Dividend yield | .2% |
During the three-month period ended June 30, 2007, we granted 424,115 non-vested share awards to our employees, officers and directors for annual equity awards made pursuant to our 2005 Long-Term Incentive Plan, and for equity awards granted to new or recently promoted employees. Annual grants of non-vested share awards generally vest at a rate of 20% per year and grants of non-vested share awards to new or recently promoted employees generally vest at a rate of 10% or 20% per year, and have voting and dividend rights effective on the date of grant. Additionally during the second quarter of 2007, we granted 92,000 non-vested share awards in connection with a retirement agreement entered into in February of 2007 with our former CEO and non-executive Chairman of our Board of Directors, the cost of which was recognized through his May 22, 2007 retirement date. These awards will vest at a rate of one-third per year upon each of the first three anniversaries of the former CEO and Chairman's retirement date. Non-vested share awards are measured using the market value of our common stock |
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On March 14, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of up to $500.0 million of our outstanding common stock. During the six-month period ended June 30, 2007, we repurchased approximately 5.0 million shares of our common stock at a cost of $272.4 million (an average cost of $54.53 per share). At June 30, 2007 and December 31, 2006, the outstanding shares of our common stock, net of treasury shares, were 148.0 million and 151.8 million, respectively. Note |
Three Months Ended | Six Months Ended | |||||||||||||||||
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June 30, | June 30, | |||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income | $232.3 | $149.8 | $254.4 | $194.7 | $486.7 | $344.5 | ||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||
Net change in fair value of derivatives | 1.8 | (.1 | ) | 1.7 | 2.0 | 3.5 | 1.9 | |||||||||||
Reclassification of unrealized gains and losses on | ||||||||||||||||||
derivatives from other comprehensive income | ||||||||||||||||||
(loss) into net income | (1.1 | ) | 1.2 | -- | .3 | (1.1) | 1.5 | |||||||||||
Net other comprehensive income (loss) | .7 | 1.1 | 1.7 | 2.3 | 2.4 | 3.4 | ||||||||||||
Comprehensive income | $233.0 | $150.9 | $256.1 | $197.0 | $489.1 | $347.9 | ||||||||||||
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Net unrealized gains to be reclassified to contract drilling expense | $ | 4.1 | ||||
Net unrealized losses to be reclassified to interest expense | ( | |||||
Net unrealized gains to be reclassified to earnings | $ | 3.2 | ||||
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Note 7 - Discontinued Operations On December 27, 2006, we sold the ENSCO 25 platform rig for $13.7 million and recognized a pre-tax gain of $5.0 million. The operating results of ENSCO 25 have been reclassified as discontinued operations in the condensed consolidated The ENSCO 29 platform rig sustained substantial damage as a consequence of Hurricane Katrina in September 2005. On January 5, 2006, beneficial ownership of ENSCO 29 effectively transferred to our insurance underwriters |
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Three Months Ended | Six Months Ended | ||||
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June 30, 2006 | June 30, 2006 | ||||
Revenues | $3.6 | $7.7 | |||
Operating expenses and other | 2.5 | 5.4 | |||
Operating income before income taxes | 1.1 | 2.3 | |||
Income tax expense | (.4 | ) | (.8 | ) | |
Gain on disposal of discontinued operations, net | -- | 4.2 | |||
Income from discontinued operations | $ .7 | $5.7 | |||
There is no debt or interest expense allocated to our discontinued operations. Note 8 - ContingenciesFollowing recent disclosures by other offshore oil service companies announcing internal investigations focusing on the legality of amounts paid to and by customs brokers in connection with temporary importation of rigs and vessels into Nigeria, the Audit Committee of our Board of Directors and management have commenced an internal investigation of our payments to customs brokers relating to the temporary importation of ENSCO 100, our only rig operating offshore Nigeria. The purpose of our investigation is to determine whether any of the payments made to or by our customs brokers were inappropriate under the U.S. Foreign Corrupt Practices Act ("FCPA"). Our Audit Committee has engaged Miller & Chevalier, a Washington, D.C. law firm with significant experience in investigating and advising upon FCPA matters, to assist the Audit Committee and management in the internal investigation. As is customary for companies operating offshore Nigeria, we engaged independent customs brokers to process ENSCO 100 temporary importation permits and renewals thereof (including periodic exportation and re-entries). One of the customs brokers that our subsidiary in Nigeria used to obtain these permits and renewals also provided services to other offshore oil service companies that have commenced similar investigations. Following consultation with outside legal counsel, notification to the Audit Committee, and notification to KPMG LLP, our independent registered public accounting firm, we voluntarily notified the United States Securities and Exchange Commission and the United States Department of Justice that an internal investigation is underway and that we intend to cooperate fully with both agencies. The internal investigation has only recently commenced, and we are unable to predict whether either agency will initiate a separate investigation of this matter or, if an agency investigation is initiated, what potential corrective measures, sanctions or other remedies, if any, the agencies may seek against us or any of our employees. This matter is not expected to have any material effect on or disrupt our current operations in Nigeria because ENSCO 100 is scheduled to complete its contract commitment and depart Nigeria before its temporary importation clearance expires on September 3, 2007. At this time, we cannot predict the effect of this matter upon any potential future operations in Nigeria. Inasmuch as our internal investigation commenced only recently, we are unable to predict the outcome of the investigation or to determine whether or the extent to which we may be exposed to any resulting potential liability or significant additional expense. |
12 |
Our liability insurance underwriters have issued a reservation of rights letter raising issues regarding the applicability of coverage for the potential ENSCO 29 wreckage and debris removal costs. We contest any assertion that the ENSCO 29 wreckage and debris removal is not subject to coverage under the liability insurance policies and intend to pursue all available remedies in the event our liability insurance underwriters deny coverage. While we believe it is likely that any ENSCO 29 wreckage and debris removal costs incurred will be fully covered by insurance, a $1.2 million provision, representing the portion of the $5.0 million low range of the estimated removal cost we believe is subject to liability insurance coverage, was recognized during the third quarter of 2006. |
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In August 2004, we and certain current and former subsidiaries were named as defendants, along with numerous other third party companies as co-defendants, in three multi-party lawsuits filed in the Circuit Courts of Jones County (Second Judicial District) and Jasper County (First Judicial District), Mississippi. The lawsuits sought an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986. In compliance with the Mississippi Rules of Civil Procedure, as decided by the Mississippi Supreme Court in Harold's Auto Parts, Inc. v. Flower Mangialardi, 889 So. 2d 493 We Legislation known as the U.K. Working Time Directive was introduced in August 2003 and may be applicable to our employees and employees of other drilling contractors that work offshore in U.K. territorial waters or in the U.K. sector of the North Sea. Certain trade unions representing offshore employees have claimed that drilling contractors are not in compliance with the U.K. Working Time Directive in respect of paid time off (vacation time) for employees working offshore on a rotational basis (generally equal time working and off) In addition to the foregoing, we and our subsidiaries are named defendants in certain other lawsuits incidental to our business and are involved from time to time as parties to governmental proceedings, including matters related to taxation, |
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RESULTS OF OPERATIONS The following analysis highlights our consolidated operating results |
Three Months Ended | Six Months Ended | ||||||||||||||||
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June 30, | June 30, | ||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Revenues | $514.1 | $381.6 | $548.6 | $475.2 | $1,062.7 | $856.8 | |||||||||||
Operating expenses | |||||||||||||||||
Contract drilling | 162.8 | 127.9 | 168.8 | 146.4 | 331.6 | 274.3 | |||||||||||
Depreciation and amortization | 45.1 | 42.0 | 46.8 | 44.1 | 91.9 | 86.1 | |||||||||||
General and administrative | 16.0 | 10.4 | 19.1 | 10.5 | 35.1 | 20.9 | |||||||||||
Operating income | 290.2 | 201.3 | 313.9 | 274.2 | 604.1 | 475.5 | |||||||||||
Other income (expense), net | 9.6 | (3.6) | 7.8 | (3.4 | ) | 17.4 | (7.0 | ) | |||||||||
Provision for income taxes | 67.5 | 53.5 | 67.3 | 76.8 | 134.8 | 130.3 | |||||||||||
Income from continuing operations | 232.3 | 144.2 | 254.4 | 194.0 | 486.7 | 338.2 | |||||||||||
Income from discontinued operations, net | -- | 5.0 | -- | .7 | -- | 5.7 | |||||||||||
Cumulative effect of accounting change, net | -- | .6 | -- | -- | -- | .6 | |||||||||||
Net income | $232.3 | $149.8 | $254.4 | $194.7 | $ 486.7 | $344.5 |
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The following is an analysis of our revenues, contract drilling expense, rig utilization and average day rates from continuing operations |
2007 | 2006 | ||||||||||
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Revenues | |||||||||||
Jackup rigs: | |||||||||||
Asia Pacific | $198.8 | $116.3 | |||||||||
Europe/Africa | 148.2 | 104.1 | |||||||||
North and South America | 144.2 | 147.0 | |||||||||
Total jackup rigs | 491.2 | 367.4 | |||||||||
Semisubmersible rig - North America | 17.7 | 9.1 | |||||||||
Barge rig - Asia Pacific | 5.2 | 5.1 | |||||||||
Total | $514.1 | $381.6 | |||||||||
Contract Drilling Expense | |||||||||||
Jackup rigs: | |||||||||||
Asia Pacific | $ 60.9 | $ 43.8 | |||||||||
Europe/Africa | 47.7 | 39.1 | |||||||||
North and South America | 44.8 | 36.4 | |||||||||
Total jackup rigs | 153.4 | 119.3 | |||||||||
Semisubmersible rig - North America | 6.1 | 5.8 | |||||||||
Barge rig - Asia Pacific | 3.3 | 2.8 | |||||||||
Total | $162.8 | $127.9 | |||||||||
Three Months Ended | Six Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
June 30, | June 30, | ||||||||
2007 | 2006 | 2007 | 2006 | ||||||
Revenues | |||||||||
Jackup rigs: | |||||||||
Asia Pacific | $223.6 | $139.5 | $ 422.4 | $255.8 | |||||
Europe/Africa | 173.3 | 121.9 | 321.5 | 226.0 | |||||
North and South America | 129.2 | 191.7 | 273.4 | 338.7 | |||||
Total jackup rigs | 526.1 | 453.1 | 1,017.3 | 820.5 | |||||
Semisubmersible rig - North America | 18.0 | 17.0 | 35.7 | 26.1 | |||||
Barge rig - Asia Pacific | 4.5 | 5.1 | 9.7 | 10.2 | |||||
Total | $548.6 | $475.2 | $1,062.7 | $856.8 | |||||
Contract Drilling Expense | |||||||||
Jackup rigs: | |||||||||
Asia Pacific | $ 63.5 | $ 55.9 | $ 124.4 | $ 99.7 | |||||
Europe/Africa | 52.3 | 35.3 | 100.0 | 74.4 | |||||
North and South America | 43.9 | 45.5 | 88.7 | 81.9 | |||||
Total jackup rigs | 159.7 | 136.7 | 313.1 | 256.0 | |||||
Semisubmersible rig - North America | 6.6 | 6.9 | 12.7 | 12.7 | |||||
Barge rig - Asia Pacific | 2.5 | 2.8 | 5.8 | 5.6 | |||||
Total | $168.8 | $146.4 | $ 331.6 | $274.3 | |||||
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Three Months Ended | Six Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2007 | 2006 | June 30, | ||||||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||||||
Rig Utilization(1) | ||||||||||||||||||||
Jackup rigs: | ||||||||||||||||||||
Asia Pacific | 99% | 96% | 99% | 98% | 99% | 97% | ||||||||||||||
Europe/Africa | 95% | 100% | 100% | 100% | 98% | 100% | ||||||||||||||
North and South America | 85% | 81% | 82% | 95% | 84% | 88% | ||||||||||||||
Total jackup rigs | 93% | 91% | 93% | 97% | 93% | 94% | ||||||||||||||
Semisubmersible rig - North America | 97% | 59% | 97% | 98% | 97% | 79% | ||||||||||||||
Barge rig - Asia Pacific | 100% | 100% | 80% | 96% | 90% | 98% | ||||||||||||||
Total | 93% | 90% | 93% | 97% | 93% | 94% | ||||||||||||||
Average day rates(2) | ||||||||||||||||||||
Average Day Rates:(2) | ||||||||||||||||||||
Jackup rigs: | ||||||||||||||||||||
Asia Pacific | $120,728 | $ 80,383 | $134,929 | $ 88,351 | $127,839 | $ 84,518 | ||||||||||||||
Europe/Africa | 182,536 | 134,061 | 195,211 | 144,510 | 189,208 | 139,548 | ||||||||||||||
North and South America | 117,858 | 115,960 | 113,696 | 129,664 | 115,846 | 123,322 | ||||||||||||||
Total jackup rigs | 133,238 | 103,379 | 142,895 | 114,289 | 138,077 | 109,085 | ||||||||||||||
Semisubmersible rig - North America | 195,740 | 189,191 | 200,188 | 187,296 | 197,977 | 187,873 | ||||||||||||||
Barge rig - Asia Pacific | 56,509 | 55,870 | 65,788 | 57,109 | 59,948 | 56,479 | ||||||||||||||
Total | $132,843 | $104,913 | $143,153 | $116,690 | $137,984 | $111,146 | ||||||||||||||
(1) |
(2) | Average day rates are derived by dividing contract drilling revenue by the aggregate number of contract days, adjusted to exclude certain types of non-recurring reimbursable revenue and lump sum revenue and contract days associated with certain mobilizations, demobilizations, shipyard contracts and standby contracts. |
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Number of Rigs | ||||||||||
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June 30, | June 30, | |||||||||
Number of Rigs | 2007 | 2006 | ||||||||
2007 | 2006 | |||||||||
Jackup rigs: | ||||||||||
Asia Pacific(1)(2) | 19 | 17 | 19 | 17 | ||||||
Europe/Africa | 9 | 9 | ||||||||
North and South America(1) | 16 | 17 | ||||||||
Europe/Africa(3) | 10 | 9 | ||||||||
North and South America(1)(3) | 15 | 17 | ||||||||
Under construction(2) | -- | 1 | ||||||||
Total jackup rigs | 44 | 43 | 44 | 44 | ||||||
Semisubmersible rig - North America | 1 | 1 | ||||||||
Semisubmersible rigs: | ||||||||||
North America | 1 | 1 | ||||||||
Under construction | 4 | 2 | ||||||||
Total semisubmersible rigs | 5 | 3 | ||||||||
Barge rig - Asia Pacific | 1 | 1 | 1 | 1 | ||||||
Total(3) | 46 | 45 | ||||||||
Total(4) | 50 | 48 | ||||||||
(1) | During the third quarter of 2006, we mobilized ENSCO 84 from the Gulf of Mexico to Qatar. |
(2) | Upon completion of its construction in the first quarter of 2007, we accepted delivery of ENSCO 108, an ultra-high specification jackup rig that |
(3) | During the second quarter of 2007, we mobilized ENSCO 105 from the Gulf of Mexico to Tunisia. |
(4) | The total number of rigs |
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For the six months ended June 30, 2007, revenues for the Asia Pacific jackup rigs increased by $166.6 million, or 65%, as compared to the prior year period. The increase in revenues was primarily due to a 51% increase in average day rates and the increased size of the Asia Pacific fleet. The increase in average day rates resulted from stronger demand and limited rig availability as noted above. Contract drilling expense increased by $24.7 million, or 25%, as compared to the prior year period due partially to the increase in the size of the fleet as well as increased personnel costs, mobilization expense, and repair and maintenance |
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For the six months ended June 30, 2007, revenues for the Europe/Africa jackup rigs increased by $95.5 million, or 42%, from the prior year period. The increase in revenues was primarily attributable to a 36% increase in the average day rates, and to a lesser extent, the addition of ENSCO 105 to the Europe/Africa jackup fleet in April 2007. The improvement in average day rates was attributable to improved demand resulting from increased spending by oil and gas companies. Contract drilling expense increased by $25.6 million, or 34%, from the prior year period due to the addition of ENSCO 105 and to increased personnel costs, reimbursable expenses, and repair and maintenance expense, all of which were partially offset by a reduction in mobilization expense. |
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For the six months ended June 30, 2007, revenues for the North and South America jackup rigs North America Semisubmersible Rig For the six months ended June 30, 2007, revenues for ENSCO 7500 increased $9.6 million, or 37%, primarily due to a 5% increase in the average day rate and an increase in utilization to 97% in 2007 from Depreciation and Amortization Depreciation and amortization expense for the |
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General and Administrative General and administrative expense General and administrative expense for the six-month period ended June 30, 2007 increased by $14.2 million, or 68%, as compared to the prior year period. The increase was primarily attributable to a $10.7 million expense we incurred during the period in connection with the retirement agreement noted above and to a general increase in salary and share-based employee compensation expense as compared to the prior year period. These increases were partially offset by a one-time discretionary $1.1 million cash contribution made during the first quarter of 2006 to the ENSCO 2005 Supplemental Executive Retirement Plan account of our new Chief Executive Officer for pension and other benefits forfeited under his previous employment. |
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Three Months Ended | Six Months Ended | |||||||||||||
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June 30, | June 30, | |||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||
Interest income | $ 6.2 | $ 2.3 | $ 6.3 | $ 2.7 | $ 12.5 | $ 5.0 | ||||||||
Interest expense, net: | ||||||||||||||
Interest expense | (8.6 | ) | (8.7 | ) | (8.2 | ) | (9.5 | ) | (16.8 | ) | (18.2 | ) | ||
Capitalized interest | 7.5 | 4.5 | 7.4 | 4.6 | 14.9 | 9.1 | ||||||||
(1.1 | ) | (4.2 | ) | (.8 | ) | (4.9 | ) | (1.9 | ) | (9.1 | ) | |||
Other, net | 4.5 | (1.7 | ) | 2.3 | (1.2 | ) | 6.8 | (2.9 | ) | |||||
$ 9.6 | $ (3.6 | ) | $ 7.8 | $(3.4 | ) | $ 17.4 | $ (7.0 | ) | ||||||
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Provision for Income Taxes The income tax provision for the three-month period ended June 30, 2007 decreased by $9.5 million as compared to the prior year quarter. The decrease was attributable to a reduction in the effective tax rate due primarily to an increase in the relative portion of our earnings generated by foreign subsidiaries whose earnings are being permanently reinvested and taxed at lower rates. Additionally, the current quarter and prior year quarter effective tax rates were impacted by a $2.3 million net benefit and $4.6 million net expense, respectively, attributable to the resolution of certain tax issues relating to prior periods. The provision for income taxes for the LIQUIDITY AND CAPITAL RESOURCES Although our business is very cyclical, we historically have relied on our cash flow from continuing operations to meet liquidity needs and fund the majority of our cash requirements. Our management believes we have maintained a strong financial position through the disciplined and conservative use of debt. A substantial amount of our cash flow is invested in the expansion and enhancement of our fleet of drilling rigs. During the six-month period ended June 30, 2007, our primary sources of cash included $532.4 million generated from continuing operations and $25.3 million from the exercise of share options. Our primary use of cash for the same period included $290.3 million for the construction, enhancement and other improvement of drilling rigs and $272.4 million for the repurchase of common stock. |
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Detailed explanations of our liquidity and capital resources for the Cash Flow Our cash flow from continuing operations and capital expenditures on continuing operations |
Six Months Ended | ||||||||||
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June 30, | ||||||||||
2007 | 2006 | 2007 | 2006 | |||||||
Cash flow from continuing operations | $279.7 | $217.1 | $532.4 | $357.9 | ||||||
Capital expenditures on continuing operations | ||||||||||
New construction | $ 66.2 | $175.9 | $216.3 | $181.3 | ||||||
Enhancements | 15.4 | 47.0 | 31.9 | 67.2 | ||||||
Minor upgrades and improvements | 24.4 | 22.5 | 42.1 | 34.8 | ||||||
$106.0 | $245.4 | $290.3 | $283.3 |
On June 7, 2007, we entered into an agreement with Keppel FELS Limited ("KFELS") in Singapore to construct ENSCO 8503 for a total project construction cost of approximately $427.0 million, with delivery expected in the third quarter of 2010. ENSCO 8503 is our fourth ultra-deepwater semisubmersible rig in the ENSCO 8500 SeriesTM. The first three ENSCO 8500 SeriesTM rigs (ENSCO 8500, ENSCO 8501 and ENSCO 8502) are under construction by KFELS with expected deliveries in the second quarter of 2008, first quarter of 2009 and fourth quarter of 2009 respectively. The ENSCO 8500 and ENSCO 8501 are subject to long term drilling contracts of four years and three and one-half years, respectively. |
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We currently expect that capital expenditures in 2007 will include approximately |
On June 7, 2007, we entered into an agreement to construct ENSCO 8503 for a total contractual commitment of approximately $403.4 million. Of this amount, we project that $86.0 million is due in 2007, an aggregate $198.9 million is due in the years 2008 and 2009, and $118.5 million is due in the year 2010. We expect to fund this commitment from our existing cash and cash equivalents and future operating cash flow. The contractual obligations disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2006, did not include unrecognized tax benefits. We adopted the recognition and disclosure provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109," on January 1, 2007 and had $19.3 million of unrecognized tax benefits upon adoption. Substantially all of our unrecognized tax benefits relate to uncertain tax positions that are not currently under review by taxing authorities and we are therefore unable to specify the future periods in which we may be obligated to settle such amounts. |
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March 31, | December 31, | June 30, | December 31, | |||||||
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2007 | 2006 | 2007 | 2006 | |||||||
Long-term debt | $ 308.5 | $ 308.5 | $ 299.9 | $ 308.5 | ||||||
Total capital* | 3,652.9 | 3,524.5 | 3,779.7 | 3,524.5 | ||||||
Long-term debt to total capital | 8.4 | % | 8.8 | % | 7.9 | % | 8.8 | % | ||
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On March 14, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of up to $500.0 million of Liquidity |
March 31, | December 31, | June 30, | December 31, | |||||||
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2007 | 2006 | 2007 | 2006 | |||||||
Cash and cash equivalents | $620.4 | $565.8 | $547.0 | $565.8 | ||||||
Working capital | 661.1 | 602.3 | 673.3 | 602.3 | ||||||
Current ratio | 2.6 | 2.6 | 2.6 | 2.6 |
We expect to fund our short-term liquidity needs, including contractual obligations, anticipated capital expenditures and stock repurchases, as well as any working capital requirements, from our cash and cash equivalents and operating cash flow. |
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We historically have |
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The preparation of our financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires our management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our significant accounting policies are included in Note 1 to the Consolidated Financial Statements for the year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Property and Equipment At |
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For additional information concerning the useful lives of our drilling rigs, including an analysis of the impact of various changes in useful life assumptions, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2006. |
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We evaluate the carrying value of our property and equipment, primarily our drilling rigs, when events or changes in circumstances indicate that the carrying value of such rigs may not be recoverable. Generally, extended periods of idle time and/or inability to contract rigs at economical rates are an indication that a rig may be impaired. However, the offshore drilling industry is highly cyclical and it is not unusual for rigs to be unutilized or underutilized for significant periods of time and subsequently resume full or near full utilization when business cycles change. Likewise, during periods of supply and demand imbalance, rigs are frequently contracted at or near cash break-even rates for extended periods of time until demand comes back into balance with supply. Impairment situations may arise with respect to specific individual rigs, groups of rigs, such as a specific type of drilling rig, or rigs in a certain geographic location. Our rigs are mobile and may generally be moved from markets with excess supply, if economically feasible. Our jackup rigs and We test goodwill for impairment on an annual basis, or when events or changes in circumstances indicate that a potential impairment exists. The goodwill impairment test requires us to identify reporting units and estimate the fair value of those units as of the testing date. If the estimated fair value of a reporting unit exceeds its carrying value, its goodwill is considered not impaired. If the estimated fair value of a reporting unit is less than its carrying value, we estimate the implied fair value of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to such excess. In the event we dispose of drilling rig operations that constitute a business, goodwill would be allocated in the determination of gain or loss on sale. Based on our goodwill impairment analysis performed as of December 31, 2006, there was no impairment of goodwill. Asset impairment evaluations are, by nature, highly subjective. In most instances they involve expectations of future cash flows to be generated by our drilling rigs, and are based on our management's assumptions and judgments regarding future industry conditions and operations, as well as our management's estimates of future expected utilization, contract rates, expense levels and capital requirements of our drilling rigs. The estimates, assumptions and judgments used by our management in the application of our asset impairment policies reflect both historical experience and an assessment of current operational, industry, economic and political environments. The use of different estimates, assumptions, judgments and expectations regarding future industry conditions and operations would likely result in materially different carrying values of assets and operating results. |
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We conduct operations and earn income in numerous international countries and are subject to the laws of tax jurisdictions within those countries, as well as U.S. federal and state tax laws. At The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), and are based on our management's assumptions and estimates regarding future operating results and levels of taxable income, as well as our management's judgments regarding the interpretation of the provisions of SFAS 109. Carryforwards and tax credits are assessed for realization as a reduction of future taxable income by using a more-likely-than-not determination. A U.S. deferred tax liability has not been recognized for undistributed earnings of our non-U.S. subsidiaries because it is not practicable to estimate. Should we elect to make a distribution of these earnings, or be deemed to have made a distribution of them through application of various provisions of the Internal Revenue Code, we may be subject to additional U.S. income taxes. |
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We operate in many international jurisdictions where tax laws relating to the offshore drilling industry are not well developed. In jurisdictions where available statutory law and regulations are incomplete or underdeveloped, we obtain professional guidance and consider existing industry practices before utilizing tax planning strategies and meeting our tax obligations. Tax returns are routinely subject to audit in most jurisdictions and tax liabilities are frequently finalized through a negotiation process. While we historically have |
• | During recent years the portion of our overall operations conducted in international tax jurisdictions has been increasing and we currently anticipate this trend will continue. | |
• | In order to utilize tax planning strategies and conduct international operations efficiently, our subsidiaries frequently enter into transactions with affiliates which generally are | |
• | We may conduct future operations in certain tax jurisdictions where tax laws are not well developed and it may be difficult to secure adequate professional guidance. | |
• | Tax laws, regulations, agreements and treaties change frequently, requiring us to modify existing tax strategies to conform to such changes. |
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In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS 159"). SFAS 159 permits entities to choose to measure certain financial assets and liabilities and other eligible items at fair value, which are not otherwise currently required to be measured at fair value. Under SFAS 159, the decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. Entities electing the fair value option would be required to recognize changes in fair value in earnings and to expense upfront cost and fees associated with the item for which the fair value option is elected. If we elect the fair value option provided for in this standard, we would adopt SFAS 159 on January 1, 2008. We have not yet determined whether we will elect the option provided for in this standard, or the impact that the elective adoption may have on our consolidated financial position, operating results or cash flows. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, provides a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and expands the disclosures required for fair value measurements. SFAS 157 applies to other accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. We do not expect this statement will have a material effect on our consolidated financial position, operating results or cash flows. |
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In August 2004, we and certain current and former subsidiaries were named as defendants, along with numerous other third party companies as co-defendants, in three multi-party lawsuits filed in the Circuit Courts of Jones County (Second Judicial District) and Jasper County (First Judicial District), Mississippi. The lawsuits sought an unspecified amount of monetary damages on behalf of individuals alleging personal injury or death, primarily under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986. In compliance with the Mississippi Rules of Civil Procedure, as decided by the Mississippi Supreme Court in Harold's Auto Parts, Inc. v. Flower Mangialardi, 889 So. 2d 493 We In addition to the foregoing, we and our subsidiaries are named defendants in certain other lawsuits incidental to our business and are involved from time to time as parties to governmental proceedings, including matters related to taxation, all arising in the ordinary course of business. Although the outcome of lawsuits or other proceedings involving us and our subsidiaries cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, management does not expect these matters to have a material effect on our financial position, operating results or cash flows. |
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Issuer Purchases of Equity Securities | Issuer Purchases of Equity Securities | Issuer Purchases of Equity Securities | ||||||||||||||||||||||||||
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Total Number | Approximate | Approximate | ||||||||||||||||||||||||||
of Shares | Dollar Value of | Total Number | Dollar | |||||||||||||||||||||||||
Average | Purchased as | Shares that | of Shares | Value of | ||||||||||||||||||||||||
Total | Price | Part of Publicly | May Yet Be | Average | Purchased as | Shares that | ||||||||||||||||||||||
Number of | Paid | Announced | Purchased | Total | Price | Part of Publicly | May Yet Be | |||||||||||||||||||||
Shares | per | Plans or | Under Plans | Number of | Paid | Announced | Purchased | |||||||||||||||||||||
Shares | per | Plans or | Under Plans | |||||||||||||||||||||||||
Period | Period | Purchased | Share | Programs | or Programs | Period | Purchased | Share | Programs | or Programs | ||||||||||||||||||
January 1 - January 31 | 616,900 | $48.32 | 616,900 | $310,200,000 | ||||||||||||||||||||||||
February 1 - February 28 | 381,195 | 50.25 | 380,000 | 291,100,000 | ||||||||||||||||||||||||
March 1 - March 31 | 1,506,658 | 52.38 | 1,503,100 | 212,400,000 | ||||||||||||||||||||||||
April 1 - April 30 | 830,000 | $54.97 | 830,000 | $166,743,000 | ||||||||||||||||||||||||
May 1 - May 31 | 945,843 | 58.23 | 880,000 | $115,602,000 | ||||||||||||||||||||||||
June 1 - June 30 | 808,372 | 61.10 | 785,800 | $ 67,577,000 | ||||||||||||||||||||||||
Total | 2,504,753 | $51.05 | 2,500,000 | $212,400,000 | 2,584,215 | $58.08 | 2,495,800 |
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(i) | Election of Class III Directors, each for a three-year term: | |
Votes For | Votes Against | Votes Abstain | |||||
---|---|---|---|---|---|---|---|
David M. Carmichael | 128,263,359 | 513,662 | 915,556 | ||||
Thomas L. Kelly II | 127,446,995 | 1,348,936 | 896,647 | ||||
Rita M. Rodriguez | 128,259,837 | 527,371 | 905,369 | ||||
The terms of the following directors continued after the meeting: Gerald W. Haddock, Morton H. Meyerson, Daniel W. Rabun, Paul E. Rowsey, III and Joel V. Staff. |
(ii) | Ratification of the Audit Committee's appointment of KPMG LLP as the Company's independent accountants for 2007: | |
Votes For | Votes Against | Votes Abstain |
---|---|---|
128,089,388 | 784,805 | 818,385 |
There are no broker non-votes for this item. |
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Exhibit |
3.1 | Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit A to the Company's Definitive Proxy Statement filed with the Commission on March 21, 2005, File No. 1-08097). | |
3.2 | Revised and Restated Bylaws of the Company, effective November 9, 2004 (incorporated by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated November 9, 2004, File No. 1-08097). | |
4.1 | Certificate of Designation of Series A Junior Participating Preferred Stock of the Company (incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on Form 10-K/A (Amendment No. 1) for the year ended December 31, 1995, File No. 1-08097). | |
4.2 | Indenture, dated November 20, 1997, between the Company and Bankers Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated November 24, 1997, File No. 1-08097). | |
4.3 | First Supplemental Indenture, dated November 20, 1997, between the Company and Bankers Trust Company, as trustee, supplementing the Indenture dated as of November 20, 1997 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated November 24, 1997, File No. 1-08097). | |
4.4 | Form of Note (incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated November 24, 1997, File No. 1-08097). | |
4.5 | Form of Debenture (incorporated by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K dated November 24, 1997, File No. 1-08097). | |
10.1 | ||
*15.1 | Letter regarding unaudited interim financial information. | |
*31.1 | Certification of the Chief Executive Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
*31.2 | Certification of the Chief Financial Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
**32.1 | Certification of the Chief Executive Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
**32.2 | Certification of the Chief Financial Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* Filed herewith. |
**Furnished herewith. |
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ENSCO INTERNATIONAL INCORPORATED | ||
Date: | /s/ J. W. SWENT J. W. Swent Senior Vice President - Chief Financial Officer | |
/s/ H. E. MALONE, JR. H. E. Malone, Jr. Vice President - Finance | ||
/s/ DAVID A. ARMOUR David A. Armour Controller | ||
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