|
Page(s)
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|
| Report of Independent Registered Public Accounting Firm |
1
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| Financial Statements | |
| Statements of Net Assets Available for Benefits as of December 31, 2006 and 2005 |
2
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|
Statements
of Changes in Net Assets Available for Benefits
|
|
| Years Ended December 31, 2006 and 2005 |
3
|
| Notes to Financial Statements |
4
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| Supplemental Schedule* | |
| Schedule H, Line 4i - Schedule of Assets (Held at End of Year) | |
| December 31, 2006 |
10
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2006
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|
2005
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|||||||
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ASSETS
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Investments,
at fair value
|
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|
|
|
|
||
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Common
stock of Unit Corporation
|
|
$
|
18,838,956
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|
$
|
20,383,167
|
|
|
Mutual
funds
|
|
|
24,082,714
|
|
|
12,289,394
|
|
|
Guaranteed
insurance contract
|
|
|
4,679,601
|
|
|
—
|
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|
Participant
loans
|
|
|
7,758
|
|
|
13,454
|
|
|
Total
investments at fair value
|
|
|
47,609,029
|
|
|
32,686,015
|
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Receivables
|
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|
|
|
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Employer’s
contribution
|
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4,006,447
|
|
|
2,790,283
|
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Employees’
contribution
|
|
|
155,152
|
|
|
120,605
|
|
|
Accrued
interest and dividends
|
|
|
—
|
|
|
27,970
|
|
|
Due
from brokers
|
|
|
—
|
|
|
12,138,778
|
|
|
Total
receivables
|
|
|
4,161,599
|
|
|
15,077,636
|
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Net
assets available for benefits, at fair value
|
|
|
51,770,628
|
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|
47,763,651
|
|
|
|
|||||||
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Adjustment
from fair value to contract value for
|
|
|
|||||
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fully
benefit-responsive investment contract
|
246,295
|
—
|
|||||
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Net
assets available for benefits
|
|
$
|
52,016,923
|
|
$
|
47,763,651
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|||||||
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Investment
income (loss)
|
|
|
|
|
|
||
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Interest
and dividend income
|
|
$
|
1,221,926
|
|
$
|
384,110
|
|
|
Net
appreciation (depreciation) in fair value
|
|
|
|||||
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of
investments
|
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|
(1,663,362
|
)
|
|
7,707,925
|
|
|
Total
investment income (loss)
|
|
(441,436
|
)
|
8,092,035
|
|
||
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|
|
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Contributions
|
|
|
|
|
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Employer
|
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4,195,266
|
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|
2,779,774
|
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Employee
|
|
|
4,795,350
|
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|
3,680,530
|
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Rollovers
|
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232,861
|
|
|
135,342
|
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Total
contributions
|
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|
9,223,477
|
|
|
6,595,646
|
|
| Transfer in related to merger (Note 1) |
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|
—
|
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1,520,063
|
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Deductions
|
|
||||||
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Distributions
|
(4,525,561
|
)
|
(6,930,286
|
)
|
|||
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Administrative
expenses
|
(3,208
|
)
|
—
|
||||
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Total
deductions
|
(4,528,769
|
) |
(6,930,286
|
)
|
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Net
increase
|
4,253,272
|
9,277,458
|
|||||
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Net
assets available for benefits
|
|||||||
|
Beginning
of the year
|
47,763,651
|
38,486,193
|
|||||
|
End
of the year
|
$
|
52,016,923
|
$
|
47,763,651
|
|||
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1.
|
Description of Plan |
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The
following description of the Unit Corporation Employees' Thrift
Plan (the
"Plan") provides only general information. Participants should
refer to the Plan for a more complete description of the Plan's
provisions.
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General
and Eligibility
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The
Plan is a defined contribution plan covering all eligible employees
of
Unit Corporation (the “Company”), the Plan sponsor. Principal
Trust Company, an affiliate of Principal Financial Group (collectively
“Principal”), serves as trustee for the Plan under a trust agreement dated
January 1, 2006. Previous to January 1, 2006, Bank of Oklahoma,
N.A., served as trustee for the Plan under a trust agreement dated
August
1, 1985. The Plan is subject to the provisions of the
Employment Retirement Income Security Act of 1974, as amended
(“ERISA”).
|
|
|
At
December 31, 2005, certain funds were liquidated prior to year
end and
are, therefore, shown as due from brokers at December 31,
2005.
|
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The Plan allows participation on the first day of any service month immediately upon the attainment of age 18 and completion of three months of service. |
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Contributions
|
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The
Plan allows participants to contribute up to 100% of their total
monthly
compensation (including overtime pay, bonuses and other extraordinary
compensation), subject to certain limitations. Participants who
are age 50 and above may also elect to make “catch-up”
contributions. Participants may also contribute amounts
representing distributions from other qualified defined benefit
or defined
contribution plans (“Rollovers”).
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The
Company may contribute to the Plan a specified percentage of participant
contributions as determined by the Board of Directors, limited
to 117% of
6% of participant compensation for 2006 and 2005,
respectively. The Company may also contribute an additional
amount from its net profits and accumulated net profits as determined
from
time to time by the Board of Directors. There were no such
contributions in 2006 or 2005. The allocation of this
distribution is also at the discretion of the Board of
Directors. The Company’s matching contributions for 2006 and
2005 were $4,195,266 and $2,779,774,
respectively.
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Transfers
In
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Effective
February 25, 2005, the Sauer Drilling 401(k) was merged into the
Unit
Corporation Employees’ Thrift Plan, which resulted in $1,490,565 in assets
transferred into the Plan during 2005. There were other
transfers totalling $29,498 in
2005.
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Participants’
Accounts
|
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|
Each
participant's account is credited with the participant's
contributions, the Company's contributions, if any, and Plan
earnings. Plan earnings are allocated based on account balances
as of the preceding valuation date, plus the proportionate allocation
of
contributions received since the previous valuation date. The benefit
to
which a participant is entitled is that which can be derived from
the
participant’s vested account.
|
| Vesting |
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Participants
are immediately vested in all contributions including employer
contributions, plus actual earnings
thereon.
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Payment
of Benefits
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Normal
retirement age is 65. Participants may generally elect the form
of payment from several options, including a lump sum payment,
installment
payments over a specified number of years not to exceed the participant's
remaining life expectancy, or by transferring to another plan
which is
qualified under Section 401(c) of the Internal Revenue
Code.
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|
|
The
participant's account balance is retained in the Plan until the
participant requests a payment due to termination, death, disability
or
retirement. At the Plan administrative committee's discretion
and with the terminated participant's consent, payment of such
vested
benefits may be made at an earlier
date.
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Withdrawals
|
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Participants
may withdraw their salary reduction contributions only upon termination,
attainment of age 59–1/2 or normal retirement age, or a limited hardship
ruling which has been authorized by the Plan administrative
committee. The vested portion of Company contributions may be
withdrawn only upon termination of employment or attainment of
age 59-1/2
if 100% vested.
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Participant
Loans
|
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Except
for loans outstanding in plans that are merged with the Plan, the
Plan
does not provide for loans to
participants.
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Investment
Options
|
|
|
During
2006 and 2005, the Plan provided for the participant contributions
to be
invested at the election of the participant into any combination
of
available options.
|
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The
Unit Corporation common stock fund, consisting solely of Unit Corporation
common stock, includes contributions from the Company and
participants. All Company matching contributions are initially
directed into the Unit Corporation Common Stock Fund. Once the
common
stock has been allocated to a participant’s account, the participant may
sell the common stock and allocate the proceeds to other investment
options.
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2.
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Summary
of Significant Accounting
Policies
|
|
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Basis
of Presentation
|
|
|
The
accompanying financial statements of the Plan are presented on
the accrual
method of accounting.
|
|
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Payment
of Benefits
|
|
|
Distributions
are recorded when paid to
participants.
|
|
|
New
Accounting Pronouncements
|
|
|
As
described in Financial Accounting Standards Board Staff Position,
FSP AAG
INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Contracts
Held by Certain Investment Companies Subject to the AICPA Investment
Company Guide and Defined-Contribution Health and Welfare and Pension
Plans (the “FSP”), investment contracts held by a
defined-contribution plan are required to be reported at fair
value. However, contract value is the relevant measurement
attribute for that portion of the net assets available for benefits
of a
defined-contribution plan attributable to fully benefit-responsive
investment contracts because contract value is the amount participants
would receive if they were to initiate permitted transactions under
the
terms of the plan. As required by the FSP, the Statement of Net
Assets Available for Benefits presents the fair value of the investment
contracts from fair value to contract value. The adoption of
this FSP did not have an effect on prior year balances as the Plan
held no
related investments at December 31, 2005. The Statement of
Changes in Net Assets Available for Benefits is prepared on a contract
value basis.
|
|
|
In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements”
(FAS No. 157). FAS No. 157 establishes a common definition
for fair value
to be applied to US GAAP guidance requiring use of fair
value, establishes
a framework for measuring fair value, and expands the disclosure
about
such fair value measurements. FAS No. 157 is effective for
fiscal years beginning after November 15, 2007. The Plan is
currently assessing the impact of FAS No. 157 on its net
assets and
changes in net assets available for
benefits.
|
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Investment
Valuation and Income Recognition
|
|
|
Investments
in Unit Corporation Common Stock are stated at current market value
as
established by quoted market prices in an active
market. Registered open-ended mutual funds are valued at the
net asset value of shares held by the Plan at
year end. Participant loans are valued at outstanding
principal balances, plus accrued interest, which approximates fair
value.
|
|
|
Effective
January 1, 2006, the Plan entered into a benefit-responsive investment
contract with Principal. Principal maintains the contributions
in a general account. The account is credited with earnings on
the underlying investments and charged for participant withdrawals
and
administrative expenses. Participants may ordinarily direct the
withdrawal or transfer of all or a portion of their investment
at the
contract value. However, the Company will be assessed a penalty
of 5% of the contract value if it were to discontinue the investment
contract without a 12-month notification to
Principal. Pursuant to the FSP, these investments in the
guaranteed insurance contracts ("GICs") are presented at fair value
in the
Statement of Net Assets Available for Benefits and in the table
of
investments held by the Plan representing 5% or more of the Plan's
net
assets (Note 4). In determining the net assets available for
benefits, the GICs are recorded at their contract values, which
are equal
to the principal balance plus accrued interest. There are no
reserves against the contract value for credit risk of the contract
issuer
or otherwise. The crediting interest rates are reset every
January 1 and July 1 as determined by Principal, and were 3.30%
for both
interest rate periods in 2006. The average yield for 2006 was
3.31%.
|
|
|
The
Plan presents in the statements of changes in net assets, the net
appreciation (depreciation) in the fair value of its investments
which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those
investments.
|
|
|
Purchases
and sales of securities are recorded on a trade-date
basis. Interest income is recorded on an accrual
basis. Dividends are recorded on the ex-dividend
date.
|
|
|
Administrative
Expenses
|
|
|
The
costs of administering the Plan are borne by the Company and are
not
reflected in the accompanying financial statements. Such costs
totalled approximately $35,300 and $59,300 for the years ended
December 31, 2006 and 2005,
respectively.
|
|
|
Use
of Estimates
|
|
|
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the
plan administrator to make significant estimates and assumptions
that
affect the reported amounts of net assets available for benefits
and, when
applicable, disclosures of contingent assets and liabilities at
the date
of the financial statements and the reported amounts of changes
in net
assets available for benefits during the reporting
period. Actual results could differ from those
estimates.
|
|
3.
|
Plan
Termination
|
|
|
Although
it has expressed no intention to do so, the Company has the right
under
the Plan to discontinue its contributions at any time and to terminate
the
Plan subject to the provisions of ERISA. In the event of Plan
termination, participant account balances will be distributed to
participants in accordance with the Plan
document.
|
|
4.
|
Investments
|
|
|
All
investments were held on behalf of the Plan by the trustee under
trust
agreements as described in Note 1. Investments held by the Plan
representing 5% or more of the Plan’s net assets are as
follows:
|
|
|
|
|
|
|
Fair
|
|
|
|
Shares
|
Value
|
||||||
|
|
|||||||
|
December
31, 2006
|
|
|
|
|
|
||
|
Mutual
funds
|
|
|
|
||||
|
Principal
Global Investors Lifetime
|
|
|
|||||
|
2030
Sel Fund
|
|
351,141
|
$
|
4,863,308
|
|
||
|
Columbus
Circle Investors LargeCap
|
|
|
|||||
|
Sel Fund
|
|
376,798
|
|
3,063,370
|
|
||
|
Neuberger
& Berman Genesis Trust Fund
|
|
84,335
|
|
4,025,317
|
|
||
|
Guaranteed
investment contract -
|
|
|
|
||||
|
Principal
Fixed Income 401(A)/(K)
|
|
362,315
|
|
4,679,601
|
*
|
||
|
Common
stock of Unit Corporation
|
|
388,833
|
|
18,838,956
|
|
||
|
|
|
|
|||||
|
*
Contract value is $4,925,896
|
|
|
|
||||
|
December
31,2005
|
|
||||||
|
Mutual
Funds
|
|||||||
|
American
Performance Cash
|
|||||||
|
Management
Fund
|
5,273,789
|
$
|
5,273,789
|
|
|||
|
Neuberger
& Berman Genesis Trust Fund
|
80,412
|
3,904,011
|
|||||
|
Common
stock of Unit Corporation
|
370,401
|
20,383,167
|
|||||
|
|
During
2006 and 2005, the Plan’s investments (including gains or losses on
investments bought and sold as well as held during the year)
appreciated
(depreciated) in value as
follows:
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|||||||
|
Mutual
funds
|
|
$
|
1,068,947
|
|
$
|
605,158
|
|
|
Common stock
|
|
|
(2,732,309
|
)
|
|
7,102,767
|
|
| Net appreciation (depreciation) in fair value of | |||||||
|
investments
|
|
$
|
(1,663,362
|
)
|
$
|
7,707,925
|
|
|
5.
|
Income Tax Status |
|
|
A
favorable determination of the qualification of the Plan under
Section 401
of the Internal Revenue Code and the tax exempt status of the
Trust under
Section 501 was received from the Internal Revenue Service
in August 2001
covering amendments to the Plan subsequent to its previous
determination
letter obtained in June 1998. There have been amendments since
the August 2001 determination letter. However, the plan
administrator believes that the Plan is currently designed
and being
operated in compliance with the applicable requirements of
the Internal
Revenue Code. Therefore, no provision for income taxes has been
included in the Plan’s financial
statements.
|
|
6.
|
Risks and Uncertainties |
|
|
The
Plan provides for various investment options in any combination
of stocks,
bonds, fixed income securities, mutual funds and other
investment
securities. Investment securities are exposed to various risks,
such as interest rate, market and credit risks. Due to the
level of risk associated with certain investment securities,
it is at
least reasonably possible that changes in the values of
investment
securities will occur in the near term and that such changes
could
materially affect participants' account balances and the
amounts reported
in the statement of net assets available for benefits and
the statement of
changes in net assets available for
benefits.
|
|
7.
|
Related Party Transactions |
|
|
Certain
Plan investments are mutual funds managed by
Principal. Principal is the custodian as defined by the Plan,
and therefore, these transactions qualify as party-in-interest
transactions. Participant loans are also considered
party-in-interest transactions. There were no fees paid by the
Plan for the investment management services for the years
ended December
31, 2006 and 2005.
|
|
|
Additionally,
certain Plan investments are shares of Unit Corporation
common
stock. These transactions represent investments in the Company
and, therefore, qualify as party-in-interest. The fair value of
this investment totaled $18,838,956 and $20,383,167
at December 31,
2006 and 2005, respectively. Purchases and sales of this common
stock totaled $8,376,465 and $7,181,921 in 2006,
respectively. Purchases and sales of this common stock totaled
$5,882,127 and $8,694,195 in 2005,
respectively.
|
|
8.
|
Reconciliation of Financial Statements to Form 5500 |
|
|
The
following is a reconciliation of total investment income
(loss) per the
financial statements to the Form 5000 at December 31, 2006
and
2005:
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
||
|
Total
investment income (loss) per the financial statements
|
|
$
|
(441,436
|
)
|
$
|
8,092,035
|
|
|
Adjustment
from contract value to fair value for
|
|
|
|
||||
|
fully benefit-responsive investment contract
|
|
|
(246,295
|
) |
|
—
|
|
|
Total
earnings on investments per the Form 5500
|
|
$
|
(687,731
|
) |
$
|
8,092,035
|
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||||||||
|
Description
of
|
Current
|
||||||||||||
|
Investment
|
Shares
|
Cost
|
Value
|
||||||||||
| Alliance Cap Management (Berstein) Large | |||||||||||||
|
Cap
Value Sel Fund
|
Mutual
Fund
|
77,145
|
|
$
|
—
|
|
$
|
1,181,083
|
|
||||
| Capital Research and Management AM Fds | |||||||||||||
|
Grth
Fd of AM F3 Fund
|
Mutual
Fund
|
12,011
|
—
|
389,766
|
|||||||||
|
Columbus
Circle Investors LargeCap Sel Fund
|
|
Mutual
Fund
|
|
|
376,798
|
|
—
|
|
|
3,063,370
|
|
||
| Dodge & Cox Balanced International Stock | |||||||||||||
|
Fund
|
Mutual
Fund
|
19,510
|
—
|
851,940
|
|||||||||
|
Dreyfus
Bond Market Index Investor Fund
|
|
Mutual
Fund
|
|
|
11,275
|
|
—
|
|
|
112,634
|
|
||
|
Fidelity
Adv Small Cap T Fund
|
Mutual
Fund
|
37,059
|
—
|
820,477
|
|||||||||
| Goldman Sachs Assets Management MidCap | |||||||||||||
|
Val Sel Fund
|
|
Mutual
Fund
|
|
|
80,399
|
|
—
|
|
|
1,120,787
|
|
||
|
Mellon
Equity MidCap Growth Sel Fund
|
|
Mutual
Fund
|
|
|
5,156
|
|
—
|
|
59,039
|
||||
|
Neuberger
& Berman Genesis Trust Fund
|
|
Mutual
Fund
|
|
|
84,335
|
|
—
|
|
4,025,317
|
|
|||
|
Neuberger
& Berman Partners Trust Fund
|
Mutual
Fund
|
80,439
|
—
|
1,928,919
|
|||||||||
|
PIMCO
Total Return Fund
|
|
Mutual
Fund
|
|
|
216,286
|
|
—
|
|
|
2,245,046
|
|
||
|
*
|
Principal Global Investors Lifetime Strategic | ||||||||||||
|
|
Income
Sel Fund
|
Mutual
Fund
|
1,456
|
—
|
17,995
|
||||||||
|
*
|
Principal Global Investors Lifetime 2010 Sel | ||||||||||||
|
|
Fund
|
Mutual
Fund
|
24,843
|
—
|
323,947
|
||||||||
|
*
|
Principal Global Investors Lifetime 2020 Sel | ||||||||||||
|
|
Fund
|
|
Mutual
Fund
|
|
|
18,419
|
|
—
|
|
|
250,311
|
|
|
|
*
|
Principal Global Investors Lifetime 2030 Sel | ||||||||||||
|
|
Fund
|
|
Mutual
Fund
|
|
351,141
|
|
—
|
|
4,863,308
|
|
|||
|
*
|
Principal Global Investors Lifetime 2040 Sel | ||||||||||||
|
|
Fund
|
Mutual
Fund
|
6,725
|
—
|
92,735
|
||||||||
|
*
|
Principal Global Investors Lifetime 2050 Sel | ||||||||||||
|
|
Fund
|
|
Mutual
Fund
|
|
|
3,308
|
|
—
|
|
|
44,453
|
|
|
|
*
|
Principal Global Investors SmallCap Value Sel | ||||||||||||
|
|
Fund
|
Mutual
Fund
|
|
|
53,062
|
|
—
|
|
|
1,009,240
|
|
||
|
*
|
Principal
Global Investors S&P 400 Index
|
Mutual
Fund
|
|
|
53,253
|
|
—
|
|
|
774,353
|
|
||
|
*
|
Principal
Global Investors S&P 500 Index
|
Mutual
Fund
|
90,258
|
—
|
907,994
|
||||||||
|
*
|
Principal
Fixed Income 401(A)/(K)
|
Guaranteed
Insurance
|
362,315
|
—
|
4,679,601
|
||||||||
|
Contract
|
|||||||||||||
|
*
|
Unit
Corporation
|
Common
Stock, $0.20
|
|
|
388,833
|
|
—
|
|
|
18,838,956
|
|
||
|
par
value
|
|||||||||||||
|
*
|
Participant
loans
|
Interest
rate of 6% to
|
|
|
—
|
|
—
|
|
7,758
|
||||
|
9% maturity
|
|||||||||||||
|
September
28, 2007
|
|||||||||||||
|
through
|
|
||||||||||||
|
January
15, 2009
|
|||||||||||||
|
$
|
47,609,029
|
|
|
|
* Represents
investments which qualify as
party-in-interest.
|
|
|
Column
(d) cost information is not applicable for participant-directed
investments.
|
|
23.1
|
Consent
of Independent Registered Public Accounting
Firm
|