-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9e6aS9J2rcCcu2mrHhs7l9toUvXnm4NQndYzHT5MImNi4aoBi+7zPhiPY1vpzNp qUm+a9Z4NJCs03E0one/1g== 0000008411-03-000042.txt : 20030813 0000008411-03-000042.hdr.sgml : 20030813 20030813160423 ACCESSION NUMBER: 0000008411-03-000042 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATWOOD OCEANICS INC CENTRAL INDEX KEY: 0000008411 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 741611874 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13167 FILM NUMBER: 03841352 BUSINESS ADDRESS: STREET 1: 15835 PARK TEN PL DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 2817497845 MAIL ADDRESS: STREET 1: 15835 PARK TEN PL DR STREET 2: SUITE 200 CITY: HOUSTON STATE: TX ZIP: 77084 10-Q 1 f10q063003.txt FORM 10-Q JUNE 30, 2003 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ---------------- Form 10-Q |X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED JUNE 30, 2003 COMMISSION FILE NUMBER 1-13167 |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ATWOOD OCEANICS, INC. (Exact name of registrant as specified in its charter) TEXAS 74-1611874 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 15835 Park Ten Place Drive 77084 Houston, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: 281-749-7800 --------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filings requirements for the past 90 days. Yes X No___ ---- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes X No __. Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of July 31, 2003: 13,847,051 shares of Common Stock, $1 par value. - ------------------------------------------------------------------------------- ATWOOD OCEANICS, INC. FORM 10-Q For the Quarter Ended June 30, 2003 INDEX Part I. Financial Information Item 1. Unaudited Condensed Financial Statements Page a) Condensed Statements of Operations For the Three Months and Nine Months Ended June 30, 2003 and 2002....4 b) Condensed Balance Sheets As of June 30, 2003 and September 30, 2002...........................5 c) Condensed Cash Flow Statements For the Nine Months Ended June 30, 2003 and 2002.....................7 d) Notes to Condensed Financial Statements..............................8 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations..............................11 Item 3. Quantitative and Qualitative Disclosures about Market Risk........14 Item 4. Controls and Procedures...........................................14 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K..................................15 Signatures...................................................................17 PART I. FINANCIAL INFORMATION ATWOOD OCEANICS, INC. AND SUBSIDIARIES This Form 10-Q for the quarterly period ended June 30, 2003 includes "forwarding-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended. All statements other than statements of historical facts included in this Form 10-Q regarding the Company's financial position, business strategy, budgets and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements involve risks and uncertainties that may cause the Company's actual future activities and results of operation to be materially different from those suggested or described in the Form 10-Q. PART I. ITEM I - FINANCIAL STATEMENTS ATWOOD OCEANICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended Nine Months Ended June 30, June 30, ---------------------------- ----------------------------- 2003 2002 2003 2002 --------- ----------- -------- -------- (Unaudited) (Unaudited) REVENUES: Contract drilling $ 41,847 $ 37,402 $106,761 $118,376 -------- -------- -------- -------- COSTS AND EXPENSES: Contract drilling 27,635 19,493 71,094 58,912 Depreciation 6,783 5,958 18,025 18,501 General and administrative 3,023 2,336 8,822 7,500 -------- -------- -------- -------- 37,441 27,787 97,941 84,913 -------- -------- -------- -------- OPERATING INCOME 4,406 9,615 8,820 33,463 -------- -------- -------- -------- OTHER INCOME (EXPENSE): Interest expense (2,239) (501) (2,950) (1,387) Interest income 40 60 139 200 -------- -------- -------- -------- (2,199) (441) (2,811) (1,187) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 2,207 9,174 6,009 32,276 PROVISION FOR INCOME TAXES 2,289 3,042 4,554 11,156 -------- -------- -------- -------- NET INCOME (LOSS) $ (82) $ 6,132 $ 1,455 $ 21,120 ======== ======== ======== ======== EARNINGS PER SHARE: Basic $ (.01) $ .44 $ .11 $1.53 Diluted $ (.01) $ .44 $ .10 $1.51 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic 13,847 13,834 13,846 13,839 Diluted 13,847 14,048 13,903 13,984 The accompanying notes are an integral part of these condensed consolidated financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS ATWOOD OCEANICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, September 30, 2003 2002 --------- ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,950 $ 27,055 Accounts receivable, net 33,260 28,776 Inventories of materials and supplies, at lower of average cost or market 11,757 9,134 Deferred tax assets 223 223 Prepaid expenses 1,757 6,625 -------- -------- Total Current Assets 59,947 71,813 -------- -------- PROPERTY AND EQUIPMENT, at cost: Drilling vessels, equipment and drill pipe 658,055 583,241 Other 9,226 9,156 -------- -------- 667,281 592,397 Less-accumulated depreciation 230,669 224,000 -------- -------- Net Property and Equipment 436,612 368,397 -------- -------- DEFERRED COSTS AND OTHER ASSETS 10,702 4,320 -------- -------- $507,261 $444,530 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS ATWOOD OCEANICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, September 30, 2003 2002 --------- -------------- (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term note payable $ 121 $ 5,023 Current maturities of long-term debt 18,000 --- Accounts payable 3,752 5,584 Accrued liabilities 8,801 13,809 -------- -------- Total Current Liabilities 30,674 24,416 -------- -------- LONG-TERM DEBT, net of current maturities: 172,000 115,000 -------- -------- DEFERRED CREDITS: Income taxes 16,420 15,545 Other 10,569 13,436 -------- -------- 26,989 28,981 -------- -------- SHAREHOLDERS' EQUITY: Preferred stock, no par value; 1,000,000 shares authorized, none outstanding --- --- Common stock, $1 par value; 20,000,000 shares authorized with 13,847,000 and 13,845,000 shares issued and outstanding in 2003 and 2002, respectively 13,847 13,845 Paid-in-capital 57,282 57,274 Retained earnings 206,469 205,014 -------- -------- Total Shareholders' Equity 277,598 276,133 -------- -------- $507,261 $444,530 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
PART I. ITEM I - FINANCIAL STATEMENTS ATWOOD OCEANICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine Months Ended June 30, --------------------------------- 2003 2002 -------- -------- (Unaudited) CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 1,455 $21,120 ------- ------- Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation 18,025 18,501 Amortization 2,039 318 Deferred federal income tax provision 875 2,250 Changes in assets and liabilities: Increase in accounts receivable (4,484) (6,006) Increase (decrease) in accounts payable and accrued liabilities (6,171) 976 Net mobilization fees (6,805) (2,903) Other (2,238) (1,452) -------- -------- 1,241 11,684 -------- -------- Net cash provided by operating activities 2,696 32,804 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (87,371) (67,798) Proceeds from sale of Rig 200 500 --- Other (38) --- -------- ------- Net cash used by investing activities (86,909) (67,798) -------- ------- CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from credit facilities 247,500 60,000 Principal payments on debt (177,402) --- Proceeds from exercises of stock options 10 181 -------- ------- Net cash provided by financing activities 70,108 60,181 -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,105) 25,187 CASH AND CASH EQUIVALENTS, at beginning of period 27,055 12,621 -------- ------- CASH AND CASH EQUIVALENTS, at end of period $ 12,950 $37,808 ========= ======= - --------------------------- Supplemental disclosure of cash flow information: Cash paid during the period for domestic and foreign income taxes $ 6,805 $ 9,605 ======== ======= Cash paid during the period for interest, net of amounts capitalized $ 2,298 $ 1,415 ======== ======= The accompanying notes are an integral part of these condensed consolidated financial statements.
PART I. ITEM 1 - FINANCIAL STATEMENTS ATWOOD OCEANICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. UNAUDITED INTERIM INFORMATION The unaudited interim condensed consolidated financial statements as of June 30, 2003 and for each of the three month and nine month periods ended June 30, 2003 and 2002, included herein, have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The year end condensed balance sheet data was derived from the Audited Financial Statements as of September 30, 2003. Although these financial statements and related information have been prepared without audit, and certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, management believes that the note disclosures are adequate to make the information not misleading. The interim financial results may not be indicative of results that could be expected for a full year. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report to Shareholders for the year ended September 30, 2002. In the opinion of the Company's management, the unaudited interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company for the periods presented. 2. EARNINGS PER COMMON SHARE The computation of basic and diluted earnings per share is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended -------------------------------- ----------------------------------- Net Income Per Share Net Per Share (Loss) Shares Amount Income Shares Amount ------ ------ --------- ------ ------ --------- June 30, 2003: Basic earnings per share $ (82) 13,847 $ (.01) $ 1,455 13,846 $ .11 Effect of dilutive securities- Stock Options --- --- --- --- 57 (.01) ------- ------- ------- ------- ------ ------ Diluted earnings per share $ (82) 13,847 $ (.01) $ 1,455 13,903 $ .10 ======== ======= ======= ======= ====== ====== June 30, 2002: Basic earnings per share $ 6,132 13,843 $ .44 $21,120 13,839 $ 1.53 Effect of dilutive securities - Stock Options --- 205 --- --- 145 (.02) ------- ------ ------- ------- ------ ------ Diluted earnings per share $ 6,132 14,048 $ .44 $21,120 13,984 $ 1.01 ======= ====== ======= ======= ====== =======
3. LONG-TERM DEBT On April 1, 2003, the Company executed a $225 million senior secured credit agreement with a bank group to refinance all of its existing indebtedness of $172.5 million and to provide for on-going working capital and general corporate needs. On June 27, 2003, the credit agreement was amended to increase the total amounts available to $250 million. As amended, the credit agreement includes a $150 million term loan facility and a $100 million revolving loan facility. The term loan will be repaid commencing on December 31, 2003 in 4 quarterly installments of $6 million and 14 quarterly installments of $9 million. All outstanding borrowings under the revolving loan facility mature on April 1, 2008. Loans under both facilities will bear interest at varying rates ranging from 1.5% to 2.75% over LIBOR. The interest rate at July 31, 2003 is approximately 3.9%. The credit agreement contains financial covenants, with the most restrictive requirement being the ratio of outstanding debt to earnings before interest, taxes and depreciation, which is currently allowed to be 5.75, reducing to 4.75 at March 31, 2004, to 4.00 at June 30, 2004 and to 3.00 at December 31, 2004 and thereafter. The credit agreement also places restrictions on dispositions of any material assets, paying cash dividends or repurchasing outstanding common stock and incurring any additional indebtedness. The Company is currently in compliance with all financial covenants. The bank group's collateral for the credit agreement consists primarily of preferred mortgages on all of the Company's active drilling fleet. Currently, the Company has borrowed $150 million under the term loan facility and $43 million under the revolving loan facility. 4. ACCOUNTING FOR STOCK-BASED COMPENSATION In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure on amendment of SFAS No. 123". SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation" to provide alternative methods of transition for a voluntary change to the fair value based method of stock-based employee compensation. In addition, the statement amends the disclosure requirements of SFAS No. 123 to require pertinent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company does not intend to adopt the fair value based method of stock-based compensation. Accordingly, no compensation costs have been recognized in net income from the granting of options pursuant to its stock option plans, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Had compensation costs been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except for per share amounts): hree Months Ended Nine Months Ended June 30, June 30, ------------------------- -------------------------- 2003 2002 2003 2002 ----- ---- ----- ---- Net (loss) income, as reported $ (82) $6,132 $1,455 $21,120 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (537) (416) (1,612) (1,248) ------ ------ ------- ------- Pro Forma, net income $ (619) $5,716 $ (157) $19,8721 ====== ====== ======= ======== Earnings per share: Basic - as reported $ (.01) $ .44 $ .11 $ 1.53 Basic - pro forma $ (.04) $ .41 $ (.01) $ 1.43 Diluted - as reported $ (.01) $ .44 $ .10 $ 1.51 Diluted - pro forma $ (.04) $ .41 $ (.01) $ 1.42
5. INCOME TAXES The Company's current tax provision for fiscal year 2003 virtually all relates to taxes in foreign jurisdictions, with the Company not incurring taxable income in the United States necessary to utilize foreign tax credits. Due to the low level of earnings in the US, in addition to losses in certain non-taxable jurisdictions the Company's effective tax rate will exceed the US statutory rate. Factors that can contribute to the fluctuation of the effective tax rate include, but are not limited to: country of rig operation, country of rig ownership, length of contract, and type of income tax assessment. PART I. ITEM 2 ATWOOD OCEANICS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS All non-historical information set forth herein is based upon expectations and assumptions deemed reasonable by the Company. The Company can give no assurance that such expectations and assumptions will prove to be correct, and actual results could differ materially from the information presented herein. The Company's periodic reports filed with the SEC should be consulted for a description of risk factors associated with an investment in the Company. MARKET OUTLOOK Worldwide utilization of offshore drilling units continues to remain in the high -70% to low - 80% range. The continuing disconnect between relatively high commodity prices and soft market conditions reflects increased conservatism by exploration and production companies due to a number of factors including weak capital markets, increased focus on reducing debt, and a host of geopolitical uncertainties (for example, those in Iraq, Venezuela and Nigeria), which have curtailed drilling. Semisubmersible utilization remains the weakest sector of the drilling market, while utilization of jack-up drilling units is one of the stronger sectors of the market mainly as a result of increased demand in the Gulf of Mexico, Asia Pacific and Mexico. Despite soft market conditions during the first three quarters of fiscal year 2003, the Company was able to maintain a relatively high level of equipment utilization, with management continuing to emphasize utilization over higher dayrates. One of the Company's seven core upgraded drilling units, the ATWOOD HUNTER, is currently stacked in Egypt while waiting for its next contract opportunity. The ATWOOD SOUTHERN CROSS is expected to complete its current contract in early August 2003 and with no ongoing contract commitments, is expected to also be stacked in Egypt thereafter. Three of the Company's upgraded drilling units, the ATWOOD FALCON, VICKSBURG and SEAHAWK, are contractually committed into fiscal year 2004. The current contracts for the ATWOOD EAGLE and RICHMOND could terminate during the fourth quarter of fiscal year 2003; however, both units have opportunities for continuous work. The shipyard portion of the construction of the ATWOOD BEACON was completed in May 2003, at which time, commissioning and testing commenced. To date, commissioning and testing continues. Once completed and loading of client and third-party equipment, the rig will be relocated to Malaysia in early August 2003 to commence a three-well plus options contract. Since the current political uncertainties and soft market conditions have resulted in a lower level of dayrates on some of the Company's drilling units and the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS are expected to incur significant idle time in the fourth quarter of fiscal year 2003, operating cash flows and net income for fiscal year 2003 are expected to be significantly below results for fiscal year 2002. Based on these assumptions, the Company expects to incur a loss between $4 and $6 million in the fourth quarter of fiscal year 2003 and, thus, have a loss for fiscal year 2003. The current near-term outlook has not weakened the Company's optimism about the longer-term outlook and fundamentals of the offshore drilling market. With seven upgraded drilling units plus a new jack-up drilling unit the Company believes it will be well positioned in an improving market environment for an increase in earnings and cash flows. RESULTS OF OPERATIONS Contract revenues for the three months and nine months ended June 30, 2003 increased 12% and decreased 10%, respectively, compared to the three months and nine months ended June 30, 2002. A comparative analysis of contract revenues is as follows: CONTRACT REVENUES (In Millions) --------------------------------------------------------------------------- Three Months Ended Nine Months Ended June 30, June 30, ----------------------------------- --------------------------------- 2003 2002 Variance 2003 2002 Variance ----- ----- -------- ------ ------ -------- ATWOOD EAGLE $ 7.7 $ 1.9 $ 5.8 $ 10.6 $ 15.2 $ (4.6) ATWOOD FALCON 9.6 8.3 1.3 25.4 26.6 (1.2) RICHMOND 2.2 1.0 1.2 6.3 5.3 1.0 VICKSBURG 6.3 5.9 0.4 18.6 17.0 1.6 SEAHAWK 5.9 5.9 --- 16.9 16.6 0.3 ATWOOD SOUTHERN CROSS 4.9 6.0 (1.1) 12.8 17.2 (4.4) ATWOOD HUNTER 4.8 8.0 (3.2) 14.8 19.0 (4.2) OTHER 0.4 0.4 --- 1.4 1.5 (0.1) ----- ----- ---- ------ ------ ------ $41.8 $37.4 $ 4.4 $106.8 $118.4 $(11.6) ===== ===== ===== ====== ====== ======
The ATWOOD EAGLE was fully employed during the third quarter of fiscal year 2003 compared to a partial quarter of operations in the prior fiscal year as the rig began its upgrade in April 2002. However, year-to-date, the ATWOOD EAGLE has been employed only four months during the fiscal year as compared to almost eight months in the prior fiscal year at a lower dayrate. The average dayrate for the ATWOOD FALCON was approximately $105,000 for the current quarter as compared to approximately $90,000 for the same quarter in fiscal year 2002. The increase in revenue for the RICHMOND was due to the rig undergoing shipyard repairs for approximately 35 days during the third quarter of fiscal year 2002 compared to being fully employed during the third quarter of fiscal year 2003. Due to the softness of the Mediterranean market, the average dayrates for both the ATWOOD HUNTER and ATWOOD SOUTHERN CROSS were approximately $55,000 for the third quarter of fiscal year 2003 as compared to approximately $90,000 and $65,000, respectively, for the same quarter in fiscal year 2002. For fiscal year-to-date, the ATWOOD HUNTER also had an average dayrate of approximately $55,000 compared to having dayrates for most of fiscal 2003 in the $90,000's. Additionally, year-to-date revenues for the ATWOOD SOUTHERN CROSS are down due to two months of planned maintenance and upgrades to meet Italian standards compared to being fully utilized in the same year-to-date period in the prior fiscal year. Contract drilling costs for the three months and nine months ended June 30, 2003 increased 42% and 21%, respectively, as compared to the same periods in the prior fiscal year. An analysis of contract drilling costs by rig is as follows: CONTRACT DRILLING COSTS (In Millions) --------------------------------------------------------------------------- Three Months Ended Nine Months Ended June 30, June 30, -------------------------------- --------------------------------- 2003 2002 Variance 2003 2002 Variance ----- ----- -------- ------ ------ -------- ATWOOD EAGLE $ 6.8 $ 1.2 $ 5.6 $ 8.9 $ 9.0 $ (0.1) ATWOOD FALCON 5.8 3.0 2.8 15.5 7.9 7.6 ATWOOD SOUTHERN CROSS 3.9 2.8 1.1 11.9 7.8 4.1 SEAHAWK 2.2 2.1 0.1 7.6 6.2 1.4 RICHMOND 2.2 2.2 --- 6.3 7.5 (1.2) VICKSBURG 2.2 2.4 (0.2) 7.0 6.9 0.1 ATWOOD HUNTER 3.3 4.0 (0.7) 10.1 9.0 1.1 OTHER 1.2 1.8 (0.6) 3.8 4.6 (0.8) --- ----- ----- ----- ----- ----- $27.6 $19.5 $ 8.1 $71.1 $58.9 $12.2 ===== ===== ===== ===== ===== =====
The ATWOOD EAGLE was fully employed during the third quarter of fiscal year 2003 compared to a partial quarter of operations in the prior fiscal year as the rig began its upgrade in April 2002. The rig is currently operating in Angola, where operating costs are higher than in the Mediterranean, its previous location, due to additional start-up costs, increased shorebase and travel expenses and continuing amortization of its mobilization to Angola. The ATWOOD FALCON finished operations in Australia during June 2003, where operating costs are higher than Southeast Asia, its previous location, due to an increase in personnel-related costs, which, along with amortization of its mobilization expense to Australia, accounts for its increase in drilling costs for both the fiscal quarter and fiscal year-to-date. The increase in costs for the ATWOOD SOUTHERN CROSS resulted from the amortization of the planned maintenance and upgrade costs to meet Italian operating standards, as well as higher costs of operating in Italy for travel, shorebase operations and rentals for both the fiscal quarter and fiscal year-to-date. The increase in fiscal year-to-date costs for the SEAHAWK is primarily due to a higher level of repair and maintenance expenses compared to prior year, while the decrease in fiscal year-to-date costs for the RICHMOND is due to the shipyard repairs incurred during the prior fiscal year. The higher level of costs for the ATWOOD HUNTER in the third quarter of the prior fiscal year was due to amortization of its mobilization costs to Egypt which was completed in first quarter of the current fiscal year. An analysis of depreciation expense by rig for the three months and nine months ended June 30, 2003 as compared to the same periods in the prior fiscal year is as follows: DEPRECIATION EXPENSE ---------------------------------------------------------------------------------------------------- (In Millions) Three Months Ended Nine Months Ended June 30, June 30, ---------------------------------- ---------------------------------- 2003 2002 Variance 2003 2002 Variance ----- ----- -------- ----- ----- -------- ATWOOD EAGLE $ 1.3 $ 0.9 $ 0.4 $ 1.7 $ 2.2 $(0.5) RICHMOND 0.5 0.4 0.1 1.4 1.2 0.2 SEAHAWK 1.2 1.1 0.1 3.5 3.6 (0.1) ATWOOD HUNTER 1.3 1.3 --- 4.0 2.9 1.1 ATWOOD SOUTHERN CROSS 1.0 1.0 --- 3.0 2.9 0.1 VICKSBURG 0.6 0.6 --- 1.9 1.8 0.1 ATWOOD FALCON 0.7 0.7 --- 1.9 2.0 (0.1) OTHER 0.2 0.7 (0.5) 0.6 1.9 (1.3) ----- ----- ----- ----- ----- ----- $ 6.8 $ 6.7 $ 0.1 $18.0 $18.5 $(0.5) ===== ===== ===== ===== ----- =====
The Company does not recognize depreciation expense during the period a rig is out of service for a significant upgrade, which accounts for the increase in expense for the ATWOOD EAGLE for the third quarter of fiscal year 2003. However, year-to-date expense is less than the prior fiscal year due to only four months of operations in the current fiscal year compared to almost eight months of operations in the prior fiscal year pre-upgrade. Other depreciation expense decreased due to the fact that RIG-200 was fully depreciated to its salvage value in the third quarter of fiscal year 2002, and thus had no depreciation expense in the quarter ended June 30, 2003 compared to two months of expense during the same period for the prior fiscal year. The Company sold its interest in RIG-200 in June 2003. The Company's current tax provision for fiscal year 2003 virtually all relates to taxes in foreign jurisdictions, with the Company not incurring taxable income in the United States necessary to utilize foreign tax credits. Due to the low level of earnings in the US, in addition to losses in certain non-taxable jurisdictions the Company's effective tax rate will exceed the US statutory rate. Factors that can contribute to the fluctuation of the effective tax rate include, but are not limited to: country of rig operation, country of rig ownership, length of contract, and type of income tax assessment. LIQUIDITY AND CAPITAL RESOURCES During the first nine months of fiscal year 2003, the Company utilized $75 million in net borrowings from its credit facilities, $14 million cash on hand, and approximately $3 million net cash provided by operating activities to invest $25 million in completing the upgrade of the ATWOOD EAGLE, to invest $54 million in the construction of the ATWOOD BEACON, to fund approximately $8 million of other capital expenditures and to repay approximately $5 million in short-term notes payable. The increase in interest expense for the current quarter as compared to prior year is due to a $1.2 million write off of unamortized financing costs related to the previous credit facility. With the completion of the ATWOOD EAGLE upgrade, the Company has completed its $339 million fleet upgrade on time and within cost estimates. Currently, the Company's only significant on-going capital project relates to the completion of the construction of the ATWOOD BEACON, with approximately $10 to $12 million remaining to be funded. The Company presently has no plans to incur any upgrade costs on the SEASCOUT during fiscal year 2003. Upon execution of the senior secured credit agreements on April 1, 2003, the Company borrowed $190 million (with an outstanding balance of $193 million as of July 31, 2003), of which $172.5 million was used to repay amounts outstanding under the Company's previous credit facilities. The credit agreement places restrictions on dispositions of any material assets, paying cash dividends or repurchasing outstanding common stock and incurring any additional indebtedness, in addition to containing financial covenant requirements. Currently, the Company is in compliance with all financial covenants which includes among others, the ratio of outstanding debt to earnings before interest, taxes and depreciation. With continuing soft market conditions and a net loss expected for the fourth quarter of fiscal year 2003, there is no guarantee that the Company will maintain compliance with all of its financial covenant requirements, which, if compliance is not maintained, could have a material adverse impact on the Company's financial position. The bank group's collateral for the credit agreement consists primarily of preferred mortgages on all of the Company's active drilling fleet. Currently, the Company has an additional $57 million of borrowing capacity under its current credit facilities, a significant portion of which, if the Company maintains a high utilization of its drilling equipment, should not be needed for general operating purposes. The Company will continue to periodically review and adjust its planned capital expenditures and financing of such expenditures in light of current market conditions. PART I. ITEM 3 ATWOOD OCEANICS, INC. AND SUBSIDIARIES QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk, including adverse changes in interest rates and foreign currency exchange rates as discussed below. INTEREST RATE RISK With the interest rate on the Company's long-term debt under its current credit facilities at a floating rate, the outstanding long-term debt of $190 million at June 30, 2003 approximates carrying value. The impact on annual cash flow of a 10% change in the floating rate (approximately 37 basis points) would be approximately $0.7 million. The Company did not have any open derivative contract relating to its floating rate debt at June 30, 2003. FOREIGN CURRENCY RISK Certain of the Company's subsidiaries have monetary assets and liabilities that are denominated in a currency other than their functional currencies. Based on June 30, 2003 amounts, a decrease in the value of 10% in the foreign currencies relative to the U.S. dollar from the year-end exchange rates would result in a foreign currency transaction loss of approximately $0.2 million. The Company did not have any open derivative contracts relating to foreign currencies at June 30, 2003. PART I. ITEM 4 ATWOOD OCEANICS, INC. AND SUBSIDIARIES CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's 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 the Company's disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in its periodic SEC filings are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company believes 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) Change in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ATWOOD OCEANICS, INC. AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1.1 Restated Articles of Incorporation dated January 21, 1972 (Incorporated herein by reference to Exhibit 3.1.1 of the Company's Form 10-K for the year ended September 30, 2002) 3.1.2 Articles of Amendment filed March 28, 1975 (Incorporated herein by reference to Exhibit 3.1.2 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated herein by reference to Exhibit 3.1.3 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated herein by reference to Exhibit 3.1.4 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.5 Certificate of Designations of Series A Junior Participating Preferred Stock of Atwood Oceanics, Inc. dated October 17, 2002 (Incorporated herein by reference to Exhibit 3.1.5 of the Company's Form 10-K for the year ended September 30, 2002). *3.2 Bylaws, as amended and restated dated January 1, 1993. 4.1 Rights Agreement dated effective October 18, 2002 between the Company and Continental Stock & Transfer & Trust Company (Incorporated herein by reference to Exhibit 4.1 of the Company's Form 8-A filed October 21, 2002). 10.1 Credit Agreement dated effective April 1, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K filed April 7, 2003). 10.2 Pooled Assignment and First Amendment dated effective June 27, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K filed July 30, 2003). 10.3 Second Amendment and Agreement dated effective June 27, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.2 of the Company's Form 8-K filed July 30, 2003). *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 (b) Reports on Form 8-K 1) On April 1, 2003, the Company filed a report on Form 8-K announcing that it executed a $225 million senior secured credit facility. 2) On April 7, 2003, the Company filed a report on Form 8-K attaching a signed copy of the credit facility executed on April 1, 2003 and announcing that the ATWOOD HUNTER was awarded a one well contract. 3) On April 29, 2003, the Company furnished a report on Form 8-K announcing its earnings for the quarter ended March 31, 2003, along with supporting information. 4) On May 16, 2003, the Company furnished a report on Form 8-K announcing that the ATWOOD SOUTHERN CROSS had completed its contract and was preparing to commence a new contract and that the ATWOOD HUNTER had completed its work in Egypt and was preparing to drill one well in Israel. 5) On June 4, 2003, the Company furnished a report on Form 8-K announcing that the ATWOOD FALCON had been awarded a contract in Japan and providing updates on the operating status of the RICHMOND and ATWOOD EAGLE. 6) On June 5, 2003, the Company filed a report on Form 8-K announcing that the Company had sold its 50% interest in RIG-200 to Helmerich & Payne International Drilling, Co. 7) On June 16, 2003 the Company furnished a report on Form 8-K announcing that the ATWOOD BEACON had been awarded a contract in Malaysia. 8) On June 27, 2003, the Company filed a report on Form 8-K announcing that it closed the general syndication of its senior secured credit facility dated as of April 1, 2003, with the facility increased from $225 million to $250 million. 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: August 5, 2003 /s/JAMES M. HOLLAND James M. Holland Senior Vice President, Chief Financial Officer and Chief Accounting Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1.1 Restated Articles of Incorporation dated January 21, 1972 (Incorporated herein by reference to Exhibit 3.1.1 of the Company's Form 10-K for the year ended September 30, 2002) 3.1.2 Articles of Amendment filed March 28, 1975 (Incorporated herein by reference to Exhibit 3.1.2 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.3 Articles of Amendment dated March 10, 1992 (Incorporated herein by reference to Exhibit 3.1.3 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.4 Articles of Amendment dated November 6, 1997 (Incorporated herein by reference to Exhibit 3.1.4 of the Company's Form 10-K for the year ended September 30, 2002). 3.1.5 Certificate of Designations of Series A Junior Participating Preferred Stock of Atwood Oceanics, Inc. dated October 17, 2002 (Incorporated herein by reference to Exhibit 3.1.5 of the Company's Form 10-K for the year ended September 30, 2002). *3.2 Bylaws, as amended and restated dated January 1, 1993. 4.1 Rights Agreement dated effective October 18, 2002 between the Company and Continental Stock & Transfer & Trust Company (Incorporated herein by reference to Exhibit 4.1 of the Company's Form 8-A filed October 21, 2002). 10.1 Credit Agreement dated effective April 1, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K filed April 7, 2003). 10.2 Pooled Assignment and First Amendment dated effective June 27, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.1 of the Company's Form 8-K filed July 30, 2003). 10.3 Second Amendment and Agreement dated effective June 27, 2003 between the Company, Atwood Oceanics Pacific Limited, Nordea Bank Finland plc, New York Branch, as administrative agent and the lenders thereto from time to time (Incorporated herein by reference to Exhibit 99.2 of the Company's Form 8-K filed July 30, 2003). *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 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)) 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) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]; 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: August 5, 2003 /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)) 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) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]; 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: August 5, 2003 /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 June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John R. Irwin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented. Date: August 5, 2003 /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 June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James M. Holland, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented. Date: August 5, 2003 /s/JAMES M. HOLLAND James M. Holland Senior Vice President and Chief Financial Officer EX-3.(II) 3 bylaws.txt EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF ATWOOD OCEANICS, INC. JANUARY 01, 1993 BY-LAWS OF ATWOOD OCEANICS, INC. ARTICLE I OFFICES Section 1. Registered Office. Until the Board of Directors otherwise determines, the registered office of the Corporation required by the Texas Business Corporation Act to be maintained in the State of Texas, shall be the principal place of business of the Corporation, but such registered office may be changed from time to time by the Board of Directors in the manner provided by law and need not be identical to the principal place of business of the Corporation. Section 2. Other Offices. The Corporation may also have offices at such other places or locations, 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 Section 1. 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 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. Each annual meeting of the shareholders, respectively, shall be held at the registered office of the Corporation, or at such other place within or without the State of Texas as may be determined by the Board of Directors. Section 2. Special Meetings Each special meeting of the shareholders shall be held, respectively, at the registered office of the Corporation, or at such other place within or without the State of Texas as may be determined by the Board of Directors. However, any special meeting may be held at any place within or within or without the State of Texas designated in a waiver or waivers of notice signed by all of the shareholders. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation may be called by the Chairman of the Board of Directors or the President or the Board of Directors or the holders of not less than 1/10 of all shares entitled to vote at the meetings. A request for such a special meeting shall be directed to the Secretary of the Corporation and such request shall state the purpose or purposes of the proposed meeting. Section 3. Notices of Shareholders' Meetings. Written or printed notice stating the place, day and hour of each meeting of the shareholders, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more than fifty (50) days before the date of the meeting either personally or by mail, by or at the direction of the President, a Vice President, the Secretary, or the officer or person or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. Section 4. Quorum of Shareholders. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a Quorum at a meeting of shareholders. The vote of the holders of a majority of the shares entitled to vote and thus represented at a meeting at which a quorum is present shall be the act of the shareholders' meeting, unless the vote of a greater number is required by law, the Articles of Incorporation or these By-Laws. Section 5. Adjournments of Annual and Special Meetings of the Shareholders. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend any meeting of the shareholders in person or by proxy; then the holders of a majority of the votes of the shareholders present, in person or by proxy, and entitled to vote thereat, may adjourn any such meeting from time to time without notice, other than by announcement at the meeting, until holders of the amount of stock requisite to constitute a quorum shall be present at the particular meeting or at any adjournment or adjournments thereof, in person or by proxy. The holders of a majority of the votes of the shareholders present, in person or by proxy, and entitled to vote at any meeting, may also adjourn any annual or special meeting of the shareholders from time to time and without notice other than by announcement at the 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. At any such adjourned meeting at which a quorum is present, in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally notified or called. Section 6. 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 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 7. Attendance and Proxies. Each shareholder entitled to vote at the particular shareholders' meeting may attend such meeting and vote in person or may attend such meeting by proxy, and vote by such proxy, appointed by instrument in writing subscribed by the shareholder or by such shareholder's duly authorized agent or attorney-in-fact and filed with the Secretary of the Corporation before or at the time of the particular meeting, and the attendance or the vote at any such meeting of a proxy of any such shareholder so appointed shall for all purposes be considered as attendance or vote in person of such shareholder. No proxy shall be valid after eleven (11) months from the date of its execution unless a longer period is expressly provided in the proxy. Each proxy shall be revocable unless expressly provided therein to be irrevocable, and in no event shall it remain irrevocable for a period of more than eleven (11) months. Section a. 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 Articles of Incorporation 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. Section 9. Voting of Shares Owned 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 Corporation Act as may be applicable in any instance. Section 10. 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 11. 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 Corporation Act or by the Articles of Incorporation 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 12. List of Shareholders. A complete list of shareholders entitled to vote at each shareholders' meeting or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares held by each, shall be prepared by the Secretary and kept on file at the registered office of the Corporation and subject to inspection by any shareholder during usual business hours for a period of at least ten (10) days prior to such meeting and shall be produced and kept open at such meeting and at all times during such meeting shall be subject to inspection by any shareholder. Section 13. 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. 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 Articles of Incorporation 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 Articles of Incorporation 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 Articles of Incorporation or by these fly-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 4 of Article IX of these By-Laws. 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 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. 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 Company. 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 other communication signed 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 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 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 Articles of Incorporation or by these By-Laws. Section 16. 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 17. 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 person of his choice to act, and such person shall act as Secretary at the meeting. Section 18. 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 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. Directors' and Officers' Interests in Contracts. No contract or other transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any firm or partnership of which one or more of its directors or officers are members or employees or in which they are otherwise interested, or between the Corporation and any corporation or association or other entity in which one or more of this Corporation's directors or officers are shareholders, members, directors, officers or employees or in which they are otherwise interested, shall be void or voidable by reason of or as a result of such connection with or holding an office or offices as director or officer or as directors or officers of this Corporation or such interest in or in connection with such other firm, partnership, corporation, association or other entity, notwithstanding the presence of such director or directors, officer or officers, at the meeting of the Board of Directors of this Corporation which acts upon or in reference to any contract or other transaction, and notwithstanding his or their participation in such action, if (i) the fact of such interest shall be disclosed or known to the Board of Directors and the Board of Directors shall authorize, approve or ratify such contract or other transaction by vote of a majority of the Directors present, such interested Director or Directors to be counted in determining whether a quorum is present, but not to be counted in calculating the majority necessary to carry such vote, or if (ii) the fact of such interest shall be disclosed or known to the shareholders and the shareholders either by written consent or by vote of holders of record of a majority of all the outstanding shares of stock entitled to vote shall authorize, approve or ratify such contract or other transaction; nor shall any Director or officer be responsible to, or liable to account to, the Corporation for any profits realized by or from or through any such contract or other transaction of the Corporation so authorized, ratified or approved, by reason of such interest or his being or having been a Director or officer, or both, of this Corporation. Nothing herein contained shall create responsibility or liability in or in connection with any such event or events or prevent the authorization, ratification or approval of such contracts or other transactions in any other manner permitted by law or by statute. This section shall not be construed to invalidate any contract or other transaction which would otherwise be valid under the common statutory law applicable thereto. Section 3. Indemnification of Directors and Officers. Any person who is or was a Director or Officer of the Corporation, or a Director, Officer, partner, venturer, employee, agent or similar functionary of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves or served as such at the request of the Corporation, shall be indemnified by the Corporation against any and all liability and reasonable expense (including but not limited to counsel fees and disbursements and amounts paid in settlement or in satisfaction of judgments or as fines or penalties) to the extent mandated or authorized by Article 2.02-1 of the Texas Business Corporation Act. ARTICLE V COMMITTEES OF DIRECTORS 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 in reference to amending the Articles of Incorporation, approving a merger or consolidation, recommending to the shareholders the sale, lease or exchange of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof, amending, altering or repealing the By-Laws of the corporation or adopting new By-Laws for the corporation, filling vacancies in the Board of Directors or any such committee, filling any directorship to be filled by reason of an increase in the number of directors, electing or removing officers or members of any such committee, fixing the compensation of any member of such committee or altering or repealing any resolution of the Board of Directors which by its terms provides that it shall not be so amendable or repealable, and, unless such resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of shares of the corporation. 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. Minutes of all such meetings shall be kept and presented to the Board of Directors upon request. 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, a Treasurer, and such number of Vice Presidents, and such number of Assistant Secretaries and Assistant Treasurers, as the Board may from time to time 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 may appoint such other officers, agents and factors as it 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 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 create contract rights. Section 5. Vacancies. A vacancy in any office may be filled by the vote of a majority of the 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. 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. 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 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. 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 officers absence or inability to act. 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 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, 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 Corporation Act. 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. 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, fifty (50) 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 fifty (50) 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. 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 and Waiver of Notice. Whenever any notice whatever is required to be given to any shareholder or director under the provisions of the Texas Business Corporation Act or under the provisions of these By-Laws or the Articles of Incorporation of this Corporation, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed postpaid wrapper addressed to the person or persons entitled thereto at their post office addresses, respectively, as same appear on the books or other records of the Corporation, and such notice shall be deemed to have been given on the day of such mailing, but said notice shall be deemed to be sufficient and to have been given and received if given in any other manner or by any other means authorized or provided for elsewhere in these By-Laws. A waiver or waivers of notice, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Section 4. Resignations. Any director or officer may resign at any time. Each such resignation shall be made in writing 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 5. 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 6. 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. Section 7. 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 8. 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 9. 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. Section 10. 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 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 is delegated to the Board of Directors by the adoption of this By-Law by the Shareholders. The foregoing is certified as a true and correct copy of the By-Laws of Atwood Oceanics, Inc., as of this 6th day of January , 1993. By: By: John R. Irwin, James H. Holland. Secretary -----END PRIVACY-ENHANCED MESSAGE-----