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Page(s)
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Report
of Independent Registered Public Accounting Firm
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1
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Financial
Statements
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Statements
of Net Assets Available for Benefits as of December 31, 2007 and
2006
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2
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Statements
of Changes in Net Assets Available for Benefits
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Years
Ended December 31, 2007 and 2006
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3
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Notes
to Financial Statements
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4
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Supplemental
Schedule*
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Schedule
H, Line 4i - Schedule of Assets (Held at End of Year)
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December
31, 2007
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10
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Signatures
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11
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Exhibit
Index
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12
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Exhibit
23.1 - Consent of Independent Registered Public Accounting
Firm
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2007
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2006
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||||||
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ASSETS
|
|||||||
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Investments,
at fair value
|
|||||||
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Common
stock of Unit Corporation
|
$
|
19,524,587
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$
|
18,838,956
|
|||
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Mutual
funds
|
30,812,626
|
24,082,714
|
|||||
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Investment
contract
|
5,421,852
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4,679,601
|
|||||
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Participant
loans
|
2,860
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7,758
|
|||||
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Total
investments at fair value
|
55,761,925
|
47,609,029
|
|||||
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Receivables
|
|||||||
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Employer
contributions
|
4,418,305
|
4,006,447
|
|||||
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Employee
contributions
|
147,594
|
155,152
|
|||||
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Transfer
in related to merger (Note 1)
|
2,091,557
|
—
|
|||||
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Total
receivables
|
6,657,456
|
4,161,599
|
|||||
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Net
assets available for benefits, at fair value
|
62,419,381
|
51,770,628
|
|||||
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Adjustment
from fair value to contract value for
|
|||||||
|
fully
benefit-responsive investment contract
|
285,360
|
246,295
|
|||||
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Net
assets available for benefits
|
$
|
62,704,741
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$
|
52,016,923
|
|||
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2007
|
2006
|
||||||
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Investment
income (loss)
|
|||||||
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Interest
and dividend income
|
$
|
2,052,169
|
$
|
1,221,926
|
|||
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Net
appreciation (depreciation) in fair value
|
|||||||
|
of
investments
|
367,257
|
(1,663,362
|
)
|
||||
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Total
investment income (loss)
|
2,419,426
|
(441,436
|
)
|
||||
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Contributions
|
|||||||
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Employer
|
4,418,305
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4,195,266
|
|||||
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Employee
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5,484,421
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4,795,350
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|||||
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Rollovers
|
213,057
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232,861
|
|||||
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Total
contributions
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10,115,783
|
9,223,477
|
|||||
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Transfer
in related to merger (Note 1)
|
2,091,557
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—
|
|||||
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Deductions
|
|||||||
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Distributions
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(3,938,821
|
)
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(4,525,561
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)
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|||
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Administrative
expenses
|
(127
|
)
|
(3,208
|
)
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|||
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Total
deductions
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(3,938,948
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)
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(4,528,769
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)
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|||
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Net
increase in assets available for benefits
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10,687,818
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4,253,272
|
|||||
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Net
assets available for benefits
|
|||||||
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Beginning
of the year
|
52,016,923
|
47,763,651
|
|||||
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End
of the year
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$
|
62,704,741
|
$
|
52,016,923
|
|||
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1.
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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. The Plan is subject to the provisions of the
Employment Retirement Income Security Act of 1974, as amended
(“ERISA”).
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The
Plan allows participation on the first day of any 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 99% 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,
limited to $5,000 for 2007. 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. The Company's
contribution may be in the form of cash or shares of the Company's common
stock. For each of 2007 and 2006, the Company's contribution
equaled 117% of 6% of a participant’s compensation. 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 2007 or
2006. The allocation of this contribution is also at the
discretion of the Board of Directors. The Company’s matching
contributions for 2007 and 2006 was made in shares of the Company's common
stock valued at $4,418,305 and $4,195,266,
respectively.
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Transfers
In
|
|
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During
June 2007, Leonard Hudson Drilling Co., Inc. (LHD) was acquired by Unit
Drilling Company, a subsidiary of Unit Corporation. Beginning
in June of 2007, LHD participants were eligible to participate in the Plan
while loan balances and plan assets remained in the LHD plan through
December 31, 2007. Effective December 31, 2007, the LHD
Employee Savings Trust Plan was merged into the Plan resulting in
$1,774,738 in non-loan assets and $316,819 in loans being received by the
Plan during January 2008. These amounts were recorded as a
receivable by the plan at December 31, 2007 based on the effective date of
the merger. As of December 31, 2007, $57,681 of the loans were
in default status.
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Participants’
Accounts
|
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Each
participant's account is credited with the participant's
contributions and an allocation of the Company's contributions, if any,
and earnings. Earnings with respect to each participant’s
account are credited directly to such participant’s account. The benefit
to which a participant is entitled is that which can be derived from the
participant’s vested account.
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Vesting
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Participants
are immediately vested in all contributions including employer
contributions, plus actual earnings on those
contributions.
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Payment
of Benefits
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The
normal retirement age under the terms of the Plan is
62. 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 individual retirement plan,
account or contract which is an eligible retirement plan under Section
402(c)(1)(B) 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 on termination of
employment, 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 on termination of employment or
attainment of age 59-1/2.
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Participant
Loans
|
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Except
for loans outstanding in plans that are merged into the Plan, the Plan
does not provide for loans to
participants.
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Investment
Options
|
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During
2007 and 2006, the Plan allowed participant contributions to be invested
(at the election of the participants) into one or more of a number of
available investment options.
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The
Unit Corporation common stock fund, consisting solely of Unit Corporation
common stock, includes elective contributions from the participants
as well as matching Company contributions made in Company common
stock. All Company matching contributions made in shares of
Company common stock 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
|
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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.
|
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New
Accounting Pronouncements
|
|
In
September 2006, the Financial Accounting Standards Board (the “FASB”)
issued Financial Accounting Standard 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. FASB Staff Position (FSP) 157-2,
delayed the effective date of FAS No. 157 for nonfinancial assets and
liabilities beginning January 1, 2009. 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 on the New York Stock
Exchange. 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. Under the 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, this investment is 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 investment contract is recorded at its
contract value, which is 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 3.25% and 3.10% for interest rate periods January 1,
2007 through June 30, 2007 and July 1, 2007 through December 31, 2007,
respectively, compared to an interest rate of 3.30% for both interest rate
periods in 2006. The average yield for 2007 was 3.23% compared
to 3.31% in 2006.
|
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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
Company bears the costs of administering the Plan and they are not
reflected in the accompanying financial
statements.
|
|
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 terms of the
Plan.
|
|
4.
|
Investments
|
|
All
investments are held by the Plan trustee on behalf of the Plan under a
trust agreement. Investments representing 5% or more of the Plan’s net
assets are as follows:
|
|
Fair
|
|||||||
|
Shares
(#)
|
Value
|
||||||
|
December
31, 2007
|
|||||||
|
Mutual
funds
|
|||||||
|
Principal
Global Investors Lifetime 2030 Sel Fund
|
412,566
|
$
|
5,763,550
|
||||
|
Columbus
Circle Investors LargeCap Sel Fund
|
429,070
|
4,204,890
|
|||||
|
Neuberger
& Berman Genesis Trust Fund
|
108,501
|
5,346,940
|
|||||
|
Investment
contract - Principal Fixed Income 401(A)/(K)
|
406,868
|
5,421,852
|
*
|
||||
|
Common
stock of Unit Corporation
|
422,153
|
19,524,587
|
|||||
|
*
Contract value is $5,707,212
|
|||||||
|
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
|
|||||
|
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
|
|||||||
|
During
2007 and 2006, the Plan’s investments (including gains or losses on
investments purchased and sold as well as held during the year)
appreciated (depreciated) in value as
follows:
|
|
2007
|
2006
|
||||||
|
Mutual funds
|
$
|
648,210
|
$
|
918,980
|
|||
|
Investment
contract
|
174,994
|
149,967
|
|||||
|
Common stock
|
(455,947
|
)
|
(2,732,309
|
)
|
|||
|
Net appreciation (depreciation) in fair value of
|
|||||||
|
investments
|
$
|
367,257
|
$
|
(1,663,362
|
)
|
||
|
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 after 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 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,
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 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 and the investment contract 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, 2007 and 2006.
|
|
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 transactions. The
fair value of this investment totaled $19,524,587 and $18,838,956 at
December 31, 2007 and 2006, respectively. Purchases and
sales of Company common stock totaled $9,964,063 and $8,419,324 in 2007,
respectively, and totaled $8,376,465 and $7,181,921 in 2006,
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 5500 at December 31, 2007 and
2006:
|
|
2007
|
2006
|
||||||
|
Total
investment income (loss) per the financial statements
|
$
|
2,419,426
|
$
|
(441,436
|
)
|
||
|
Add: prior
year adjustment from fair value to contract value
|
|||||||
|
for fully benefit-responsive investment contract
|
246,295
|
—
|
|||||
|
Less: adjustment
from contract value to fair value
|
|||||||
|
for fully benefit-responsive investment
contract
|
—
|
(246,295
|
)
|
||||
|
Total
investment income (loss) per the Form 5500
|
$
|
2,665,721
|
$
|
(687,731
|
)
|
|
At
December 31, 2006, the Form 5500 presented the investment contract at fair
value. At December 31, 2007, the investment contract is
presented at contract value in both the financial statements and the Form
5500.
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||||||||
|
Identity
of Issue, Borrower, Lessor,
|
Description
of
|
Current
|
|||||||||||
|
or
Similar Party
|
Investment
|
Shares
|
Cost
|
Value
|
|||||||||
|
Alliance
Cap Management (Berstein) Large
|
|||||||||||||
|
Cap
Value Sel Fund
|
Mutual
Fund
|
78,663
|
$
|
—
|
$
|
1,065,889
|
|||||||
|
Capital
Research and Management AM Fds
|
|||||||||||||
|
Grth
Fd of AM F3 Fund
|
Mutual
Fund
|
21,511
|
—
|
721,034
|
|||||||||
|
Columbus
Circle Investors LargeCap Sel Fund
|
Mutual
Fund
|
429,070
|
—
|
4,204,890
|
|||||||||
|
Dodge
& Cox Balanced International Stock
|
|||||||||||||
|
Fund
|
Mutual
Fund
|
39,957
|
—
|
1,838,803
|
|||||||||
|
Dreyfus
Bond Market Index Investor Fund
|
Mutual
Fund
|
18,932
|
—
|
192,349
|
|||||||||
|
Fidelity
Adv Small Cap T Fund
|
Mutual
Fund
|
46,458
|
—
|
1,116,388
|
|||||||||
|
Goldman
Sachs Assets Management MidCap
|
|||||||||||||
|
Val Sel Fund
|
Mutual
Fund
|
96,775
|
—
|
1,220,329
|
|||||||||
|
Mellon
Equity MidCap Growth Sel Fund
|
Mutual
Fund
|
24,593
|
—
|
277,652
|
|||||||||
|
Neuberger
& Berman Genesis Trust Fund
|
Mutual
Fund
|
108,501
|
—
|
5,346,940
|
|||||||||
|
Neuberger
& Berman Partners Trust Fund
|
Mutual
Fund
|
85,291
|
—
|
2,157,857
|
|||||||||
|
PIMCO
Total Return Fund
|
Mutual
Fund
|
223,044
|
—
|
2,384,338
|
|||||||||
|
*
|
Principal
Global Investors Lifetime Strategic
|
||||||||||||
|
Income
Sel Fund
|
Mutual
Fund
|
7,328
|
—
|
86,910
|
|||||||||
|
*
|
Principal
Global Investors Lifetime 2010 Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
35,988
|
—
|
461,006
|
|||||||||
|
*
|
Principal
Global Investors Lifetime 2020 Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
32,489
|
—
|
440,880
|
|||||||||
|
*
|
Principal
Global Investors Lifetime 2030 Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
412,566
|
—
|
5,763,550
|
|||||||||
|
*
|
Principal
Global Investors Lifetime 2040 Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
13,948
|
—
|
195,413
|
|||||||||
|
*
|
Principal
Global Investors Lifetime 2050 Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
10,848
|
—
|
147,646
|
|||||||||
|
*
|
Principal
Global Investors SmallCap Value Sel
|
||||||||||||
|
Fund
|
Mutual
Fund
|
58,138
|
—
|
938,346
|
|||||||||
|
*
|
Principal
Global Investors S&P 400 Index
|
Mutual
Fund
|
68,928
|
—
|
1,000,828
|
||||||||
|
*
|
Principal
Global Investors S&P 500 Index
|
Mutual
Fund
|
116,495
|
—
|
1,199,898
|
||||||||
|
*
|
Principal
Global Investors S&P 600 Index
|
Mutual
Fund
|
3,126
|
—
|
51,680
|
||||||||
|
*
|
Principal
Fixed Income 401(A)/(K)
|
Investment
Contract
|
406,868
|
—
|
5,421,852
|
||||||||
|
*
|
Unit
Corporation
|
Common
Stock, $0.20
|
422,153
|
—
|
19,524,587
|
||||||||
|
par
value
|
|||||||||||||
|
*
|
Participant
loans
|
Interest
rate of 6%
|
—
|
—
|
2,860
|
||||||||
|
maturity
|
|||||||||||||
|
January
15, 2009
|
|||||||||||||
| Total |
$
|
55,761,925
|
|
* 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
|