<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 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 August 11, 1995,
38,669,378 shares of common stock, par value $.10 per share.
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1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------- -------------
1995 1994
----------- -------------
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............. $ 2,528 $ 1,628
Accounts receivable, net of allowance
of $2,084 and $2,066 at June 30, 1995
and December 31, 1994, respectively.. 21,876 16,864
Inventory.............................. 3,788 3,650
Rigs held for sale..................... 2,516 2,516
Prepaids and other current assets...... 4,841 4,080
Discontinued Operations................ 646 3,238
-------- --------
Total current assets................. 36,195 31,976
-------- --------
PROPERTY AND EQUIPMENT:
Land, buildings and improvements....... 3,499 4,044
Drilling and well service equipment.... 38,107 36,179
Furniture and fixtures................. 1,041 1,017
Less accumulated depreciation,
depletion and amortization........... (12,205) (10,454)
-------- --------
Net property and equipment............ 30,442 30,786
-------- --------
OTHER NONCURRENT ASSETS................ 142 98
-------- --------
TOTAL.................................. $ 66,779 $ 62,860
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------- -------------
1995 1994
----------- -------------
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt............. $ 6,361 $ 5,585
Accounts payable - trade......................... 12,642 7,240
Accrued workers' compensation (including $1,647
at June 30, 1995 and $1,229 at December 31,
1994 reimbursable to American Premier)......... 6,216 4,763
Payroll and related employee costs............... 1,037 1,081
Customer advances................................ 1,292 1,349
Other accrued liabilities........................ 3,455 1,296
-------- --------
Total current liabilities...................... 31,003 21,314
-------- --------
LONG-TERM DEBT LESS CURRENT MATURITIES........... 8,113 10,224
-------- --------
MINORITY INTEREST................................ 517 281
-------- --------
REDEEMABLE PREFERRED STOCK-
(ACQUISITION PAYABLE 1994)................. 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 June 30, 1995 and
December 31, 1994.............................. 3,867 3,867
Additional paid-in capital....................... 46,458 46,458
Deficit.......................................... (25,079) (21,184)
-------- --------
Total shareholders' equity....................... 25,246 29,141
-------- --------
TOTAL............................................ $ 66,779 $ 62,860
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ -------------------
JUNE 30, JUNE 30,
------------------ -------------------
1995 1994 1995 1994
-------- -------- --------- ---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
REVENUES:
Contract drilling..................... $23,151 $14,331 $45,497 $28,737
------- ------- ------- -------
COSTS AND EXPENSES:
Drilling operations................... 22,076 14,302 44,602 28,243
Depreciation, depletion and
amortization........................ 1,237 689 2,350 1,362
General and administrative............ 652 632 1,305 1,764
------- ------- ------- -------
Total costs and expenses.............. 23,965 15,623 48,257 31,369
------- ------- ------- -------
OPERATING LOSS........................ (814) (1,292) (2,760) (2,632)
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest income....................... 122 274 152 308
Interest expense...................... (412) (83) (758) (174)
Other, net............................ (18) 166 25 246
------- ------- ------- -------
Other income (expense), net.......... (308) 357 (581) 380
------- ------- ------- -------
NET LOSS FROM CONTINUING OPERATIONS... (1,122) (935) (3,341) (2,252)
DISCONTINUED OPERATIONS (Note 3)
Income (loss) from oil and
gas operations...................... 7 14 (4) 38
Loss from sale of oil
and gas properties.................. (550) - (550) -
------- ------- ------- -------
Income (loss) from discontinued
operations.......................... (543) 14 (554) 38
------- ------- ------- -------
NET LOSS.............................. $(1,665) $ (921) $(3,895) $(2,214)
======= ======= ======= =======
Loss per share from continuing
operations.......................... (.03) (.02) (.09) (.06)
Loss per share of common stock from
discontinued operations............. (.01) - (.01) -
------- ------- ------- -------
Net loss per share of common stock.... $ (.04) $(.02) $ (.10) $(.06)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING.. 38,669 38,584 38,669 38,500
======= ======= ======= =======
</TABLE>
4
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
----------------------
JUNE 30,
----------------------
1995 1994
---------- ----------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss............................... $(3,895) $(2,214)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation, depletion
and amortization................... 2,350 1,362
Gain on sale of assets............. (261) (282)
Provision for doubtful accounts.... 96 155
Net effect of changes in assets and
liabilities related to operating
accounts........................... 3,382 (3,313)
Discontinued operations................ 2,592 270
------- -------
Cash provided by (used in)
operating activities................. 4,264 (4,022)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions....... (2,571) (1,539)
Proceeds from disposal of property..... 542 418
------- -------
Cash used in investing
activities........................... (2,029) (1,121)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings........................ 1,524 2,690
Debt repayments........................ (2,859) (1,134)
Issuance of Common Stock............... - 200
------- -------
Cash provided by (used in) financing
activities.......................... (1,335) 1,756
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... 900 (3,387)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD.................. 1,628 4,898
------- -------
CASH AND CASH EQUIVALENTS:
END OF PERIOD........................ $ 2,528 $ 1,511
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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 June 30, 1995, and the results of
operations and cash flows for the periods indicated. The results of operations
for the three and six months ended June 30, 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.
Consolidated financial statement balances for 1994 have been reclassified to
treat as Discontinued Operations the Company's oil and gas producing properties
which were sold on August 9, 1995.
2. LOSS PER COMMON STOCK SHARE
The following table presents the weighted average number of shares of
common stock and common stock equivalents outstanding for the three and six
months ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------- ------ ------ ------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Weighted Average Shares of
Common Stock Outstanding..... 38,669 38,584 38,669 38,500
Stock Options
(Treasury Method)............ - - - -
------ ------ ------ ------
38,669 38,584 38,669 38,500
====== ====== ====== ======
</TABLE>
Stock options are not included in the computation for the three and six
months ended June 30, 1995 and 1994 since such inclusion would be antidilutive.
3. DISCONTINUED OPERATIONS
--
On June 7, 1995 the Company entered into an agreement to sell its producing
oil and gas properties, effective April 1, 1995, for a cash sales price of $4.2
million, subject to certain adjustments. The sell was closed August 9, 1995.
Proceeds from this transaction were used to pay off the company's production
term note which had an outstanding
6
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balance of $1,470,990, purchase two certificates of deposit totalling $1,412,411
as collateral for two letters of credit that are outstanding under the Company's
revolving line of credit, with the remainder of the proceeds, $1,335,054, used
for working capital purposes.
At June 30, 1995 all assets and liabilities associated with the oil and gas
properties are identified on the Consolidated Balance Sheet as Discontinued
Operations. The December 31, 1994 Consolidated Balance Sheet has been restated
with all assets and liabilities associated with the oil and gas properties
identified as Discontinued Operations.
The Consolidated Statements of Operations from the periods presented
identifies the income (loss) from oil and gas operations. As a result of the
sale of the oil and gas properties, the Company has recorded a $550,000 non-cash
loss.
4. 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 and six months ended June 30,
1995, and 1994, respectively. 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.
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>
7
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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.
5. 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.
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company had working capital of $5.2 million and $10.7 million at June
30, 1995 and December 31, 1994, respectively. The Company's current ratio
(current assets to current liabilities) at June 30, 1995 and December 31, 1994,
was 1.17 to 1.00 and 1.5 to 1.00, respectively. Cash and cash equivalents
increased from $1.6 million at December 31, 1994 to $2.5 million at June 30,
1995. Long-term debt was 32.1% and 35.1% of total capital at June 30, 1995 and
December 31, 1994, respectively.
At June 30, 1995, the Company was not in compliance with the minimum
working capital level of $7,000,000 required by the $10,000,000 NordlandsBanken
AS term loan agreement. The Company is currently in discussions with the bank
regarding the Company's proposal to restructure certain features of this term
loan; including, interim financial covenant requirements, deferral of monthly
principal payments, requirements to December 31, 1996 and amortization of the
current outstanding note principal balance of $9,444,000 over a three year term.
There is no assurance that such proposal will be accepted as requested by the
Company.
At June 30, 1995, the Company has $1,554,000 outstanding under it's $3 million
oil and gas production bank term note. This note was paid off on August 9,
1995, in connection with the sell of the Company's producing oil and gas
properties.
The Company also has a $2.5 million revolving bank line of credit which had
an original maturity date of September 15, 1995. At June 30, 1995, there was
$975,000 in loans outstanding and $1,412,000 letters of credit outstanding under
the $2.5 million line of credit. In connection with the sell of the Company's
producing oil and gas properties completed on August 9, 1995, a portion of the
cash proceeds was used to collateralize with Certificates of Deposit, the $1.4
million Letters of Credit discussed above. In addition, the $975,000 balance
outstanding under the revolving Line of Credit was converted to a term note with
$100,000 due on September 15, 1995, and $875,000 due October 15, 1995.
The Company has an overdraft facility with a bank in Argentina, which is
payable on demand, bearing interest at the current market rate
8
<PAGE>
in Argentina and secured by two drilling rigs. The overdraft facility had an
outstanding balance of $499,000 and $376,000 at June 30, 1995 and December 31,
1994, respectively.
During the six months ended June 30, 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 $2.6 million for the six months
ended June 30, 1995 and $1.5 million for the six months ended June 30, 1994.
Capital expenditures primarily related to the Company's foreign operations for
the six months ended June 30, 1995. For the six months ended June 30, 1994,
capital expenditures related to an exploratory well drilled by DI Energy and
domestic drilling equipment.
Cash provided by operating activity was $4.2 million for the six months
ended June 30, 1995 as compared to cash used by operating activities of $4
million for the six months ended June 30, 1994. The increase is primarily due
to changes in the accounts receivable, accounts payable, accrued liabilities,
inventory and prepaids generated from the increase in international activity and
the effect of discontinued operations.
As of the current date, management believes the Company will need
additional capital to supplement cash resources available from working capital,
cash flow from operations, proceeds from non-strategic asset sales and existing,
amended or replacement credit facilities to satisfy cash requirements in the
next twelve months at current operating plan 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 June 30, 1995
Compared to Three Months Ended
June 30, 1994
A comparison of June 30, 1995 and 1994 three months revenues and operating
expenses (also as percentage of respective divisions' revenues) for the
Company's continuing contract drilling operations follows:
9
<PAGE>
<TABLE>
<CAPTION>
(000's)
-------------------------------
(Unaudited)
-------------------------------
Quarter Ended June 30,
REVENUES 1995 1994
-------- --------- ---------
<S> <C> <C> <C> <C>
Contract Drilling:...
U.S.................. $10,842 $11,888
International
Mexico and Central
America 4,791 844
South America 7,518 1,599
------- -------
Consolidated Totals 23,151 14,331
------- -------
OPERATING COSTS
---------------
Contract Drilling:
U.S.................. 9,985 ( 92.1%) 11,660 (98.1%)
International
Mexico and Central
America 3,261 ( 68.1%) 615 (72.9%)
South America 8,830 (117.5%) 2,027 (126.8%)
------- ------
Consolidated Total 22,076 14,302
------- -------
OPERATING MARGIN..... $ 1,075 $ 29
---------------- ------- -------
</TABLE>
Consolidated revenues increased 61.5% to $23.2 million for the three months
ended June 30, 1995 compared to $14.3 million for the three months ended June
30, 1994. This increase was primarily due to the expansion in South America,
Mexico and Central America and increased revenues from the U.S. Domestic Western
Division. Revenues from the Company's South American operations increased by
$2.6 million during the three months ended June 30, 1995 due to the start-up in
Argentina, during January, 1995, of four drilling rigs to supplement the three
rigs then operating in Argentina. The additional increase of $3.3 million in
revenues from South American operations resulted from the acquisition of a
Venezuelan operating company effective September 1, 1994. Revenues from the
Company's Mexico and Central American operations increased by $3.9 million
during the three months ended June 30, 1995 over the three months ended June 30,
1994. The Mexico and Central America operation expanded from a one rig
operation in 1994 to a four rig operation in 1995. A revenue increase of
$520,000 from the U.S. Domestic Western Division was due to the utilization of
an additional workover rig used for horizontal re-entry workover operations.
This revenue increase was offset by a revenue decrease of $241,000 and $792,000
in the U.S. Domestic Northern and Eastern Divisions, respectively, due to
decreased rig utilization. A revenue decrease in the U.S. Domestic Foundation
Division of $385,000 was due to the phase out of this division.
Consolidated operating expenses increased 54.4% to $22.1 million for the
three months ended June 30, 1995 compared to $14.3 million for the three months
ended June 30, 1994. Operating expenses for the Company's South American
operations increased $6.8 million for the three months ended June 30, 1995
compared to the 1994 three month period as a result of the expansion of the
Argentina drilling rig fleet and
10
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acquisition of the Venezuela operating company discussed above. The increase in
percentage of South American operating expenses relative to revenues for the
three months ended June 30, 1995 is due to startup costs on the four rigs added
to Argentina. Operating expenses for the Mexico and Central American operations
were $3.2 million for the three months ended June 30, 1995 compared to $615,000
during the three months ended June 30, 1994. This was offset by a combined
decrease in operating expenses of $1.3 million in the U.S. Domestic Mid-
Continent, Northern and Eastern Divisions due to lower rig utilization and a
decrease of $654,000 due to phase out of the Foundation Division.
Depreciation, depletion and amortization increased 79.5% to $1.2 million
for three months ended June 30, 1995 compared to $689,000 for the three months
ended June 30, 1994. This increase was due to the acquisition of drilling
equipment for the International Division.
Interest expense increased to $412,000 for the three months ended June 30,
1995 compared to $83,000 for the three months ended June 30, 1994. The increase
was due to an increase in borrowings for expansion of the international
operations.
The loss from discontinued operations was $543,000. This primarily was the
result of the sell of the Company's oil and gas operations, completed August
9,1995.
Six Months Ended June 30, 1995
Compared to Six Months Ended
June 30, 1994
A comparison of June 30, 1995 and 1994 six months revenues and operating
expenses (also as percentage of respective divisions' revenues) for each of the
Company's operating divisions follows:
11
<PAGE>
<TABLE>
<CAPTION>
(000's)
-------------------------------
(Unaudited)
-------------------------------
Six Months Ended June 30,
--------------------------------
Quarter Ended June 30,
REVENUES 1995 1994
-------- --------- ---------
<S> <C> <C> <C> <C>
Contract Drilling:...
U.S................ $20,676 $22,783
International
Mexico and Central
America 7,695 844
South America 14,522 5,110
Export Sales 2,604 -
------- -------
Consolidated
Totals 45,497 28,737
------- -------
OPERATING COSTS
---------------
Contract Drilling:
U.S................. 19,776 ( 95.6%) 22,550 (99.9%)
International
Mexico and Central
America 6,224 ( 68.1%) 661 (78.3%)
South America 15,998 (110.1%) 5,032 (98.5%)
Export Sales 2,604 (100.0%) -
------- -------
Consolidated Totals 44,602 28,243
------- -------
OPERATING MARGIN..... $ 895 $ 494
---------------- ------- -------
</TABLE>
Consolidated revenues increased 58.3% to $45.5 million for the six months
ended June 30, 1995 compared to $28.7 million for the six months ended June 30,
1994. This increase was primarily due to the expansion in South America, Mexico
and Central America. Revenues from the Company's South American operations
increased by $2.9 million during the six months ended June 30, 1995 due to the
start-up in Argentina, during January, 1995, of four drilling rigs to supplement
the three rigs then operating in Argentina. The additional increase of $6.5
million in revenues from South American operations resulted from the acquisition
of a Venezuelan operating company effective September 1, 1994. Revenues from
the Company's Mexico and Central American operation increased by $6.9 million
during the six months ended June 30, 1995 compared to $844,000 during the six
months ended June 30, 1994. This increase resulted from the expansion of the
Mexico and Central America operation from a one rig operation to a four rig
operation. International export revenues for the six months ended June 30, 1995
were $2.6 million and resulted from materials sold for export to Central
America. A revenue increase of $1 million in the 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 $1.2 million in the Eastern Division due to lower rig utilization and a
decrease of $943,000 due to the phase out of the U.S. Domestic Foundation
Division.
Consolidated operating expenses increased 57.9% to $44.6 million
12
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for the six months ended June 30, 1995 compared to $28.2 million for the six
months ended June 30, 1994. Operating expenses for the Company's South American
operations increased $10.9 million for the six months ended June 30, 1995
compared to the 1994 six month period as a result of the expansion of the
Argentina drilling rig fleet and acquisition of the Venezuela operating company
discussed above. The increase in percentage of South American operating
expenses relative to revenues for the six months ended June 30, 1995 is due to
start-up costs on the four rigs added to Argentina. Operating expenses for the
Mexico and Central American operations were $6.2 million for the six months
ended June 30, 1995 compared to $661,000 during the six months ended June 30,
1994 this increase is due to the expansion of the drilling fleet. International
export operating expenses for the six months ended June 30, 1995 were $2.6
million, representing costs of materials sold for export to Central America.
The U.S. Domestic Foundation Division's operating expenses decreased $1.7
million due to the phase out of that division.
Depreciation, depletion and amortization increased 72.5% to $2.3 million
for six months ended June 30, 1995 compared to $1.4 million for the six months
ended June 30, 1994. This increase was due to the acquisition of drilling
equipment for the International Division.
Interest expense increased to $758,000 for the six months ended June 30,
1995 compared to $174,000 for the six months ended June 30, 1994. The increase
was due to an increase in borrowings for expansion of the international
operations.
The loss from discontinued operations was $554,000 for the six months ended
June 30, 1995. This primarily was the result of the sell of the Company's oil
and gas operations completed August 9, 1995.
7. INDUSTRY TRENDS
The weekly national count of working rigs in the United States as reported
by Baker Hughes Incorporated on August 4, 1995 was 732 compared to 771 on August
5, 1994. The 732 working rigs included 614 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 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
13
<PAGE>
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 projects in Mexico. The Company will continue to
market its services to expand into selected international markets.
Although certain consolidations have occurred within the land drilling
industry, an oversupply of land 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.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- No reports on Form 8-K wer filed during the three month period ended
June 30, 1995.
(a) Exhibit 11 - Computation of Loss per Common Stock Share.
(b) Exhibit 27 - Financial Data Schedule.
15
<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.
Date: August 14, 1995 By MAX M. DILLARD
-------------------------
Max M. Dillard
President
Date: August 14, 1995 By THOMAS L. EASLEY
-------------------------
Thomas L. Easley
Vice President & Chief Financial Officer
16
<PAGE>
Exhibit 11
DI INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER COMMON STOCK SHARE
(in thousands except per common stock share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
------- ------- ----- -------
Weighted average shares of
common stock outstanding................ 38,669 38,584 38,669 38,500
Stock options (treasury
stock method)........................... - (a) - (a) - (a) - (a)
------- ------- ------- -------
Weighted average shares of common
stock outstanding for fully
diluted earnings per share calculation.. 38,669 38,584 38,669 38,500
======= ======= ======= =======
Net loss.................................. $(1,665) $ (921) $(3,895) $(2,214)
======= ======= ======= =======
Loss per share of common stock
from continuing operations.............. (.03) (.02) (.09) (.06)
Loss per share of common stock
from discontinued operation............. (.01) - (.01) (.06)
------- ------- ------- -------
Loss per share of common stock............ $ (.04) $ (.02) $ (.10) $ (.06)
======= ======= ======= =======
</TABLE>
Note: Reference is made to Note 2 to Consolidated Financial Statements
regarding computation of per common stock share amounts.
(a) Stock options are not included since inclusion would be antidilutive
for the three and six months ended June 30, 1995 and 1994, respectively.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-mos 6-mos
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 2,528 1,628
<SECURITIES> 0 0
<RECEIVABLES> 21,876 16,864
<ALLOWANCES> 2,084 2,066
<INVENTORY> 3,788 3,650
<CURRENT-ASSETS> 36,195 31,976
<PP&E> 30,422 30,786
<DEPRECIATION> 12,205 10,454
<TOTAL-ASSETS> 66,779 62,860
<CURRENT-LIABILITIES> 31,003 21,314
<BONDS> 0 0
<COMMON> 3,867 3,867
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 66,779 62,860
<SALES> 45,497 28,737
<TOTAL-REVENUES> 45,497 28,737
<CGS> 44,602 28,243
<TOTAL-COSTS> 48,257 31,369
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 758 174
<INCOME-PRETAX> (3,895) (2,214)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,895) (2,214)
<EPS-PRIMARY> (.10) (.06)
<EPS-DILUTED> (.10) (.06)
</TABLE>
