Business Context and Reporting Period
This Form 8-K, filed on May 29, 2009, by Nabors Industries Ltd., serves to retrospectively adjust the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The adjustments reflect the adoption of two accounting pronouncements effective January 1, 2009: FASB Staff Position APB No. 14-1 regarding convertible debt instruments and EITF No. 03-6-1 regarding participating securities in share-based payment transactions.
Key Financial Metrics and Adjustments
The filing details the direct impact of the accounting changes on historical consolidated financial statements for the years ended December 31, 2008, 2007, and 2006. Key adjusted metrics include:
- Net Income (2008): Adjusted downward from $551.2 million (as reported) to $475.7 million (as adjusted).
- Interest Expense (2008): Adjusted upward from $91.6 million to $196.7 million due to the amortization of the discount on convertible debt.
- Earnings Per Share (2008): Basic EPS adjusted from $1.98 to $1.69; Diluted EPS adjusted from $1.93 to $1.65.
- Long-Term Debt (Dec 31, 2008): Adjusted downward from $3,887.7 million to $3,600.5 million to reflect the separation of liability and equity components.
- Capital in Excess of Par Value (Dec 31, 2008): Adjusted upward from $1,705.9 million to $2,129.4 million.
- Retained Earnings (Dec 31, 2008): Adjusted downward from $3,910.3 million to $3,698.7 million.
Material Changes Versus Prior Periods
The adjustments apply retrospectively to 2007 and 2006 as well. For 2007, Net Income was adjusted from $930.7 million to $865.7 million, and Basic EPS decreased from $3.34 to $3.08. For 2006, Net Income was adjusted from $1,020.7 million to $973.7 million, and Basic EPS decreased from $3.52 to $3.35. The primary driver for these changes is the reclassification of convertible debt proceeds into liability and equity components, resulting in higher non-cash interest expense and a reduction in reported net income across all periods.
Guidance, Outlook, and Risks
This filing does not provide new guidance, outlook, or management commentary regarding future operations. It explicitly states that no attempt was made to reflect subsequent information or events beyond the accounting adjustments. The filing notes that more current information is available in the Quarterly Report on Form 10-Q for the period ended March 31, 2009. The adjustments impact Risk Factors, Selected Financial Data, and the Computation of Ratio of Earnings to Fixed Charges.
Investor Verification Checklist
- Verify the updated Net Income and EPS figures for 2008, 2007, and 2006 in the Company's amended Form 10-K.
- Review the reclassified balance sheet items, specifically the split between Long-Term Debt and Capital in Excess of Par Value.
- Confirm the impact of the increased non-cash interest expense on the Ratio of Earnings to Fixed Charges (Exhibit 12.1).
- Check the Q1 2009 Form 10-Q for the most recent operational and financial data, as this 8-K only addresses historical restatements.