<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION FROM __________________ TO __________________
COMMISSION FILE NUMBER 1-8226
DI INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2144774
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 GEARS ROAD, SUITE 625, HOUSTON, TEXAS 77067
(Address of principal executive offices)
(Zip Code)
(713) 874-0202
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of May 12, 1995,
38,669,378 shares of common stock, par value $.10 per share.
===============================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- -------------
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............. $ 972 $ 2,141
Accounts receivable, net of allowance
of $2,106 and $2,066 at March 31, 1995
and December 31, 1994 respectively.... 18,092 17,459
Inventory.............................. 2,605 3,650
Rigs held for sale..................... 2,516 2,516
Prepaids and other current assets...... 3,101 4,100
------- -------
Total current assets................. 27,286 29,866
------- -------
PROPERTY AND EQUIPMENT:
Land, buildings and improvements....... 4,035 4,044
Drilling and well service equipment.... 37,340 36,179
Furniture and fixtures................. 1,003 1,097
Oil and gas properties - using
full-cost accounting.................. 9,199 9,188
------- -------
Total property and equipment......... 51,577 50,508
Less accumulated depreciation,
depletion and amortization............ 15,943 14,789
------- -------
Net property and equipment........ 35,634 35,719
------- -------
OTHER NONCURRENT ASSETS................ 152 98
------- -------
TOTAL.................................. $63,072 $65,683
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- -------------
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt............. $ 5,642 $ 6,845
Accounts payable - trade......................... 8,441 7,527
Accrued workers' compensation (including $1,383
at March 31, 1995 and $1,229 at December 31,1994
reimbursable to American Premier)............... 4,171 4,763
Payroll and related employee costs............... 1,865 1,081
Customer advances................................ 1,697 1,354
Suspended oil and gas royalties payable.......... 243 279
Other accrued liabilities........................ 2,015 1,434
-------- --------
Total current liabilities...................... 24,074 23,283
-------- --------
LONG-TERM DEBT LESS CURRENT MATURITIES........... 9,932 11,078
-------- --------
MINORITY INTEREST................................ 255 281
-------- --------
PREFERRED STOCK - ACQUISITION PAYABLE............ 1,900 1,900
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value; 1,000
shares authorized, none issued
Common stock, $.10 par value; 75,000
shares authorized; 38,669 issued
and outstanding at March 31, 1995 and
December 31, 1994............................... 3,867 3,867
Additional paid-in capital....................... 46,458 46,458
Deficit.......................................... (23,414) (21,184)
-------- --------
Total shareholders' equity....................... 26,911 29,141
-------- --------
TOTAL............................................ $ 63,072 $ 65,683
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
REVENUES:
Contract drilling............. $22,346 $14,406
Oil and gas................... 462 607
------- -------
Total revenues................ 22,808 15,013
------- -------
COSTS AND EXPENSES:
Drilling operations........... 22,526 14,228
Lease operating expense....... 221 266
Depreciation, depletion and
amortization................ 1,279 926
General and administrative.... 726 896
------- -------
Total costs and expenses...... 24,752 16,316
------- -------
OPERATING LOSS................ (1,944) (1,303)
------- -------
OTHER INCOME (EXPENSE):
Interest income............... 38 42
Interest expense.............. (367) (112)
Other, net.................... 43 80
------- -------
Other income (expense), net.. (286) 10
------- -------
NET LOSS...................... $(2,230) $(1,293)
======= =======
LOSS PER SHARE................ $(.06) $(.03)
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK...... 38,669 38,416
======= =======
</TABLE>
3
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... $(2,230) $(1,293)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation, depletion
and amortization.................... 1,279 926
Gain on sale of assets............... (16) (74)
Provision for doubtful accounts...... 45 110
Net effect of changes in assets and
liabilities related to operating
accounts.............................. 3,280 (573)
------- -------
Cash provided by (used in)
operating activities.................. 2,358 (904)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions....... (1,207) (487)
Proceeds from disposal of property..... 28 183
------- -------
Cash used in investing
activities............................ (1,179) (304)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings........................ - 669
Debt repayments........................ (2,348) (742)
------- -------
Cash provided by (used in) financing
activities............................ (2,348) 858
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... (1,169) 679
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD................... 2,141 3,420
------- -------
CASH AND CASH EQUIVALENTS:
END OF PERIOD......................... $ 972 $ 4,099
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements have been
prepared by DI Industries, Inc.("the Company") in accordance with the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, which are of a normal recurring nature, necessary to present
fairly the Company's financial position as of March 31, 1995, and the results of
operations and cash flows for the periods indicated. The results of operations
for the three months ended March 31, 1995 and 1994 are not necessarily
indicative of the results for any other period or for the year as a whole.
These consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's Transition Report on Form 10-K for the nine months ended
December 31, 1994.
2. LOSS PER SHARE
The following table presents the weighted average number of shares of
common stock and common stock equivalents outstanding for the three months ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
------ ------
(In thousands)
<S> <C> <C>
Weighted Average Shares of
Common Stock Outstanding... 38,669 38,416
Stock Options
(Treasury Method).......... - -
------ ------
38,669 38,416
====== ======
</TABLE>
Stock options are not included in the computation for the three months
ended March 31, 1995 and 1994 since such inclusion would be antidilutive.
3. ACCOUNTING FOR INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective April 1, 1993. This Statement
supersedes Accounting Principles Board Opinion No. 11. Adopting SFAS No. 109
does not effect the Company's loss for the three months ended March 31, 1995, or
loss for the three months ended March 31, 1994. Based on an analysis of the
Company's gross deferred tax asset (taking into consideration applicable
statutory carryforward periods and other limitations), the Company has
determined that the recognition criteria set forth in SFAS No. 109, "Accounting
For Income Taxes", are not met and, accordingly, the gross deferred tax asset is
reduced fully by a valuation allowance.
5
<PAGE>
Deferred income taxes reflect the gross tax effect of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes, and (b) operating loss and tax credit carryforwards.
The tax effects of the significant items comprising the Company's net
deferred tax asset as of January 1, 1995 are as follows:
<TABLE>
<CAPTION>
January 1,
----------
1995
----------
<S> <C>
Deferred tax asset:
Reserves not currently deductible.. $1,902
Operating loss carryforwards 5,534
Tax credit carryforwards........... 2,400
------
9,836
Deferred tax liability:
Differences between book and tax
basis of property.................. 5,984
------
3,852
Valuation allowance (3,852)
------
Net deferred tax asset $ -
======
</TABLE>
The analysis of the likelihood of realizing the gross deferred tax asset
will be reviewed and updated periodically. Any required adjustment to the
valuation allowance will be made in the period in which the developments on
which they are based become known.
4. CONTINGENT LIABILITIES
The Company is involved in litigation incidental to the conduct of its
business, none of which management believes is, individually or in the
aggregate, material to the Company's consolidated financial condition or results
of operations.
5. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company had working capital of $3.2 million and $6.6 million at March
31, 1995 and December 31, 1994, respectively. The Company's current ratio
(current assets to current liabilities) at March 31, 1995 and December 31, 1994,
was 1.13 to 1.00 and 1.29 to 1.00, respectively. Cash and cash equivalents
decreased from $2.1 million at December 31, 1994 to $1.0 million at March 31,
1995. At March 31, 1995, the Company was not in compliance with the minimum
working capital level required by the outstanding $10,000,000 NordlandsBanken AS
term loan agreement. As of May 15, 1995, the bank had indicated by verbal
agreement waiver of such covenant non-compliance and written waiver was obtained
on May 22, 1995. Also at March 31, 1995, the Company was not in compliance with
the current ratio, net worth ratio and tangible net worth level required by the
Company's $3,000,000 oil and gas production bank term loan and its $2,500,000
bank revolving line of credit. Borrowings outstanding at March 31, 1995 under
these two credit facilities were $1,927,000 and $975,000, respectively. The
bank's waiver of such covenants' non-compliance was obtained May 22, 1995.
Long-term debt was 36.9% and 38% of total capital at March 31, 1995 and
December 31, 1994, respectively. At March 31, 1995 the Company had $1.9 million
outstanding under its $3 million term note. The $3 million term note is being
amortized monthly based on available revenue from the Company's oil and gas
producing properties, with a minimum amount payable each six-month period.
During the quarter ending March 31, 1995, approximately $280,000 of principal
was paid on the term note.
6
<PAGE>
The Company also has a $2.5 million revolving line of credit which is due
on September 15, 1995. At March 31, 1995, there was $975,000 in loans
outstanding and $1.4 million letters of credit under the $2.5 million line of
credit. The Company anticipates that the $2.5 million revolving line of credit
will be renewed or replaced by a comparable facility.
The Company has an overdraft facility with a bank in Argentina, which is
payable on demand, bearing interest at the current market rate in Argentina and
secured by two drilling rigs. The overdraft facility had an outstanding
balance of $395,000 and $376,000 at March 31, 1995 and December 31, 1994,
respectively.
During the three months ended March 31, 1995, the Company's debt repayments
include $1.7 million to Anson Drilling Company of Colombia, S.A. for partial
payment of the acquired drilling operations in Venezuela.
Capital expenditures were approximately $1.2 million for the three months
ended March 31, 1995 and $487,000 for the three months ended March 31, 1994.
Capital expenditures primarily related to the Company's foreign operations for
the three months ended March 31, 1995. For the three months ended March 31,
1994, capital expenditures related to an exploratory well drilled by DI Energy
and domestic drilling equipment.
Cash provided by operating activity was $2.3 million for the three months
ended March 31, 1995 as compared to cash used by operating activities of
$904,000 for the three months ended March 31, 1994. The increase is primarily
due to changes in the accounts receivable, accounts payable, inventory and
prepaids generated from the increase in international activity.
Management believes the Company will have sufficient cash resources
available from working capital, cash flow from operations, proceeds from non-
strategic asset sales and existing or replacement credit facilities to satisfy
cash requirements in the next twelve months at current operating levels. Capital
requirements for significant new international projects would require funding
from supplemental sources such as joint venture partner participation, bank
project financing or other debt/equity sources; the availability of which is not
assured at this time and which would be subject to negotiated terms and
conditions.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995
Compared to Three Months Ended
March 31, 1994
A comparison of March 31, 1995 and 1994 quarterly revenues and operating
expenses (also as a percentage of the respective division's revenues) for each
of the Company's operating divisions follows:
<TABLE>
<CAPTION>
(000)
(unaudited)
Quarter Ended
----------------------------
3/31/95 3/31/95
--------- ---------
<S> <C> <C> <C> <C>
REVENUES
Contract Drilling:
Domestic U.S. $ 9,834 % $10,895 %
International--
Mexico and Central America 2,904 --
South America 7,004 3,511
Export Sales 2,604 --
Oil and Gas Exploration &
Production 462 607
--------- ---------
Consolidated Totals 22,808 15,013
--------- ---------
OPERATING COSTS
Contract Drilling:
U.S. 9,674 (98.4%) 11,051 (101.4%)
International--
Mexico and Central America 2,963 (102.0%) 48 (--)
South America 7,285 (104.0%) 3,131 (43.8%)
Export Sales 2,604 (100.0%) -- (--)
Oil and Gas Exploration &
Production 221 (47.8%) 266 (89.2%)
--------- ---------
Consolidated Totals 22,747 (99.7%) 14,494 (96.5%)
--------- ---------
OPERATING MARGIN $ 61 $ 519
--------- ---------
</TABLE>
Consolidated revenues increased 51.9% to $22.8 million for the three months
ended March 31, 1995 compared to $15 million for the three months ended March
31, 1994. This increase was primarily due to expansion in South America, Mexico
and Central America and increased revenues in the Mid-Continent Division.
Revenues from the Company's South American operations increased by a $.3 million
during the three months ended March 31, 1995 due to the start-up in Argentina,
during January, 1995, of four drilling rigs transferred from the Company's
domestic fleet to supplement the three rigs then operating in Argentina. The
additional increase of $3.2 million in revenues from South American operations
resulted from the acquisition of a Venezuelan operating company effective
September 1, 1995. Revenues from the Company's Mexico and Central American
operation were $2.9 million during the three months ended March 31, 1995. The
Mexico and Central America operation was substantially inactive during the three
months ended March 31, 1994. International export revenues for the three months
ended March 31, 1995 were $2.6 million and resulted from materials sold for
export to Costa Rica. A revenue increase of $1 million in the Company's Mid-
Continent Division was due to increased rig utilization in Louisiana and East
Texas and a large turnkey contract in Louisiana. This revenue increase was
partially offset by a revenue decrease in the Foundation Division of $500,000
due to phase out of this division.
7
<PAGE>
Operating expenses increased 56.9% to $22.7 million for the three months
ended March 31, 1995 compared to $14.5 million for the three months ended
March 31, 1994. Operating expenses for the Company's South American operations
increased $4.2 million for the three months ended March 31, 1995 compared to the
1994 three month period as a result of the expansion of the Argentina drilling
rig fleet and acquisition of a Venezuela operating company discussed above. The
increase in percentage of South American operating expenses relative to revenues
for the three months ended March 31, 1995 is due to startup costs on the four
rigs added to Argentina. Operating expenses for the Mexico and Central American
operations were $3.0 million for the three months ended March 31, 1995. The
Mexico and Central American operation was substantially inactive during the
three months ended March 31, 1994. International export operating expenses for
the three months ended March 31, 1995 were $2.6 million, representing costs of
materials sold for export to Costa Rica. The Foundation Division's operating
expenses decreased $1 million due to the phase out of this division.
Depreciation, depletion and amortization increased 38.1% to $1.3 million
for three months ended March 31, 1995 compared to $926,000 for the three months
ended March 31, 1994. This increase was due to the acquisition of drilling
equipment for the International Division.
General and administrative expenses decreased 19% to $726,000 for the three
months ended March 31, 1995 compared to $896,000 for the three months ended
March 31, 1994. This was the result of legal expenses incurred during the three
months ended March 31, 1994.
Interest expense increased 227.7% to $367,000 for the three months ended
March 31, 1995 compared to $112,000 for the three months ended March 31, 1994.
The increase was due to an increase in borrowing for the international
operations.
6. INDUSTRY TRENDS
The weekly national count of working rigs in the United States as reported
by Baker Hughes Incorporated on May 5, 1995 was 669 compared to 719 on May 5,
1994. The 669 working rigs included 554 working land rigs which are in the
Company's area of competition.
The significant decline in oil and gas prices in the mid-1980's has
severely depressed oil and gas exploration activities and reduced demand for the
Company's oil and gas drilling services. A continuation of such deterioration
could have an ongoing negative effect on the Company's future operating results.
The decline in drilling activity has resulted in an oversupply of drilling
equipment and has created intense
8
<PAGE>
competition, particularly in the price received for contract drilling services
by drilling contractors. Demand for oil and gas drilling services will continue
to be dependent upon the present and anticipated sales price of oil and gas,
which is subject to conditions such as consumer demand, events in the Middle
East, weather and other factors that are not controlled by the Company.
There has been an increase in the demand for oil and gas drilling services
in South America. In response to this, during 1992, the Company commenced
drilling activities in Argentina and expanded into Venezuela during 1994. The
Company also formed a majority-owned subsidiary to perform geothermal drilling
in Central America and has completed projects in Guatemala, El Salvador and is
currently working on a project in Mexico. The Company will continue to market
its services to expand into selected international markets.
Although certain consolidations have occurred within the drilling industry,
an oversupply of drilling rigs still exists. There is a general shortage in the
industry of used drill pipe, and the cost of obtaining new and used drill pipe
is substantially higher than in prior periods and is currently escalating. At
present, the Company does not have a shortage of drill pipe or other equipment
but, depending on rig utilization, may need to purchase additional drill pipe
for rigs in service.
The depressed conditions in the oil and gas drilling industry have also
caused a substantial portion of the labor force with drilling experience to
leave the industry. As a result of the continuing overcapacity in the drilling
industry and the Company's practice during recent years of first laying off
employees with the least amount of drilling experience, the Company has not
experienced significant shortages of trained labor. However, an increase in
demand for contract drilling services could cause shortages of trained
employees.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of Loss per Share.
Exhibit 27 - Financial Data Schedule
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DI INDUSTRIES, INC.
/s/ Max M. Dillard
Date: July 14, 1995 By_________________________
Max M. Dillard
President
/s/ Thomas L. Easley
Date: July 14, 1995 By_________________________
Thomas L. Easley
Chief Financial Officer
11
<PAGE>
Exhibit 11
DI INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER SHARE
(in thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
<S> <C> <C>
1995 1994
------- -------
Weighted average shares of
common stock outstanding... 38,669 38,416
Stock options (treasury
stock method).............. -(a) -(a)
------- -------
Weighted average shares for
fully diluted earnings
per share calculation...... 38,669 38,416
======= =======
Net loss..................... $(2,230) $(1,293)
======= =======
Loss per share............... $ (.06) $ (.03)
======= =======
</TABLE>
Note: Reference is made to Note 2 to Consolidated Financial Statements
regarding computation of per share amounts.
(a) Stock options are not included since inclusion would be antidilutive
for the three months ended March 31, 1995 and 1994, respectively.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<CASH> 972 2,141
<SECURITIES> 0 0
<RECEIVABLES> 18,092 17,459
<ALLOWANCES> 2,106 2,066
<INVENTORY> 2,605 3,650
<CURRENT-ASSETS> 27,286 29,866
<PP&E> 51,577 50,508
<DEPRECIATION> 15,943 14,789
<TOTAL-ASSETS> 63,072 65,683
<CURRENT-LIABILITIES> 24,074 23,283
<BONDS> 0 0
<COMMON> 3,867 3,867
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 63,072 65,683
<SALES> 22,808 15,013
<TOTAL-REVENUES> 22,808 15,013
<CGS> 22,747 14,494
<TOTAL-COSTS> 24,752 16,316
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 367 112
<INCOME-PRETAX> (2,230) (1,293)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,230) (1,293)
<EPS-PRIMARY> (.06) (.03)
<EPS-DILUTED> (.06) (.03)
</TABLE>
