<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 SEPTEMBER 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 November 10, 1995,
38,669,378 shares of common stock, par value $.10 per share.
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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>
SEPTEMBER 30 DECEMBER 31,
------------- -------------
1995 1994
------------- -------------
(UNAUDITED) (AUDITED)
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................. $ 3,021 $ 1,628
Restricted cash........................... 1,617 -
Accounts receivable, net of allowance
of $2,142 and $2,066 at September 30,
1995 and December 31, 1994, respectively. 22,802 16,864
Inventory................................. 2,529 3,650
Rigs held for sale........................ 2,516 2,516
Prepaids and other current assets......... 4,378 4,080
Discontinued Operations................... 80 3,238
-------- --------
Total current assets......................... 36,943 31,976
-------- --------
PROPERTY AND EQUIPMENT:
Land, buildings and improvements.......... 3,507 4,044
Drilling and well service equipment....... 39,850 36,179
Furniture and fixtures.................... 1,072 1,017
Less accumulated depreciation,
depletion and amortization............... (13,161) (10,454)
-------- --------
Net property and equipment.............. 31,268 30,786
-------- --------
OTHER NONCURRENT ASSETS................... 131 98
-------- --------
TOTAL..................................... $ 68,342 $ 62,860
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------- -------------
1995 1994
-------------- -------------
(UNAUDITED) (AUDITED)
-------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt............. $ 3,391 $ 5,585
Accounts payable - trade......................... 14,999 7,240
Accrued workers' compensation (including $1,858
at September 30, 1995 and $1,229 at December 31,
1994 reimbursable to American Premier).......... 5,117 4,763
Payroll and related employee costs............... 2,552 1,081
Customer advances................................ 537 1,349
Other accrued liabilities........................ 4,203 1,296
-------- --------
Total current liabilities...................... 30,799 21,314
-------- --------
LONG-TERM DEBT LESS CURRENT MATURITIES........... 11,191 10,224
-------- --------
MINORITY INTEREST................................ 556 281
-------- --------
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 September 30, 1995 and
December 31, 1994............................... 3,867 3,867
Additional paid-in capital....................... 46,458 46,458
Deficit.......................................... (26,429) (21,184)
-------- --------
Total shareholders' equity....................... 23,896 29,141
-------- --------
TOTAL............................................ $ 68,342 $ 62,860
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Contract drilling..................... $27,106 $17,215 $72,603 $45,929
------- ------- ------- -------
COSTS AND EXPENSES:
Drilling operations................... 26,658 16,670 71,260 45,408
Depreciation, depletion and
amortization........................ 1,254 765 3,604 2,121
General and administrative............ 759 617 2,064 1,868
------- ------- ------- -------
Total costs and expenses.............. 28,671 18,052 76,928 49,397
------- ------- ------- -------
OPERATING LOSS........................ (1,565) (837) (4,325) (3,468)
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Gain on currency exchange............. 521 - 521 -
Interest income....................... 77 17 229 322
Interest expense...................... (392) (64) (1,150) (250)
Gain on sale.......................... 164 12 424 294
Minority Interest..................... (39) - (274) (22)
------- ------- ------- -------
Other income (expense), net......... 331 (35) (250) 344
------- ------- ------- -------
NET LOSS FROM CONTINUING OPERATIONS... (1,234) (872) (4,575) (3,124)
DISCONTINUED OPERATIONS (Note 3)
Income (loss) from oil and
gas operations...................... - 49 (4) 87
Loss from sale of oil
and gas properties.................. (116) - (666) -
------- ------- ------- -------
Income (loss) from discontinued
operations.......................... (116) 49 (670) 87
------- ------- ------- -------
NET LOSS.............................. $(1,350) $ (823) $(5,245) $(3,037)
======= ======= ======= =======
Loss per share from continuing
operations.......................... (.03) (.02) (.12) (.08)
Loss per share of common stock from
discontinued operations............. - - (.02) -
------- ------- ------- -------
Net loss per share of common stock.... $(.03) $(.02) $(.14) $(.08)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING.. 38,669 38,584 38,669 38,585
======= ======= ======= =======
</TABLE>
4
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DI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPTEMBER 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... $(5,245) $(3,037)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation, depletion
and amortization................... 3,604 2,121
Gain on sale of assets............. (424) (294)
Provision for doubtful accounts.... 255 185
Net effect of changes in assets and
liabilities related to operating
accounts........................... 6,551 (4,477)
Discontinued operations................ 3,158 621
------- -------
Cash provided by (used in)
operating activities................. 7,899 (4,881)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions....... (4,487) (5,011)
Proceeds from disposal of property..... 825 435
------- -------
Cash used in investing
activities........................... (3,662) (4,576)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt borrowings........................ 2,142 7,510
Debt repayments........................ (3,369) (2,027)
Issuance of Common Stock............... - 200
------- -------
Cash provided by (used in) financing
activities.......................... (1,227) 5,683
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... 3,010 (3,774)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD.................. 1,628 4,898
------- -------
CASH AND CASH EQUIVALENTS:
END OF PERIOD (including Restricted
Cash of $1,617 at September 30, 1995) $ 4,638 $ 1,124
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
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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 September 30, 1995, and the
results of operations and cash flows for the periods indicated. The results of
operations for the three and nine months ended September 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 nine
months ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 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 38,585
Stock Options
(Treasury Method)......... - - - -
------ ------ ------ -------
38,669 38,584 38,669 38,585
====== ====== ====== =======
</TABLE>
Stock options are not included in the computation for the three and nine
months ended September 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 sale 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 were then outstanding under the
Company's revolving line of credit, with the remainder of the proceeds,
$1,335,054, used for working capital purposes.
At September 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 $660,000 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 nine months ended September
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 $6.1 million and $10.7 million at
September 30, 1995 and December 31, 1994, respectively. The Company's current
ratio (current assets to current liabilities) at September 30, 1995 and December
31, 1994, was 1.20 to 1.00 and 1.5 to 1.00, respectively. Cash and cash
equivalents increased from $1.6 million at December 31, 1994 to $4.6 million at
September 30, 1995 inclusive of $1.6 million of restricted cash securing letters
of credit at such date. Long-term debt was 46.8% and 35.1% of total capital at
September 30, 1995 and December 31, 1994, respectively.
At September 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 loan agreement was amended
subsequent to September 30, 1995 to provide for deferral of monthly principal
payments of $277,777 until January 12, 1997. The remaining note principal
balance of $9,444,000 which has been classified as a non-current liability at
September 30, 1995 will be amortized in 36 equal monthly installments commencing
January 12, 1997.
The Company also had a $2.5 million revolving bank line of credit which had
an original maturity date of September 15, 1995. In connection with the sale 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, $1.4 million of Letters of Credit. In addition, the $875,000 balance
outstanding under the revolving Line of Credit on August 9, 1995 was converted
to a term note with $300,000 due on October 18, 1995, and the remaining
outstanding principal balance due November 30, 1995.
The Company also has a revolving line of credit for $1.1 million due
December 12, 1995. The balance outstanding, at September 30, 1995 was $1
million. The line of credit is collateralized by certificates of deposit by
certain Company shareholders.
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 $350,000 and $376,000 at September 30, 1995 and December 31, 1994,
respectively.
During the nine months ended September 30, 1995, the Company's debt
8
<PAGE>
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 $4.5 million for the nine months
ended September 30, 1995 and approximately $5 million for the nine months ended
September 30, 1994. Capital expenditures primarily related to the Company's
foreign operations for the nine months ended September 30, 1995 and 1994. For
the nine months ended September 30, 1994, capital expenditures included $3
million for the acquisition of a Venezuelan operating company effective
September 1, 1994.
Cash provided by operating activity was $7.9 million for the nine months
ended September 30, 1995 as compared to cash used by operating activities of
$4.9 million for the nine months ended September 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 of approximately $3.1
million.
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 September 30, 1995
Compared to Three Months Ended
September 30, 1994
A comparison of September 30, 1995 and 1994 quarterly revenues and
operating expenses (also as percentage of respective divisions' revenues) for
the Company's operating divisions follows:
9
<PAGE>
<TABLE>
<CAPTION>
(000's)
----------------------------------
(Unaudited)
----------------------------------
Quarter Ended September 30,
----------------------------------
1995 1994
------- -------
<S> <C> <C> <C> <C>
REVENUES
Contract Drilling:
U.S. $11,903 $14,873
International
Mexico and Central
America 4,392 317
South America 9,201 2,025
Export Sales 1,610 --
------- -------
Consolidated Totals 27,106 17,215
------- -------
OPERATING COSTS
Contract Drilling:
U.S. 10,763 ( 90.4%) 14,385 ( 96.7%)
International
Mexico and Central
America 4,065 ( 92.6%) 285 ( 89.9%)
South America 10,138 (110.2%) 2,000 ( 98.8%)
Export Sales and Other 1,692 -
------- -------
Consolidated Total 26,658 16,670
------- -------
OPERATING MARGIN $ 448 $ 545
======= =======
</TABLE>
Consolidated revenues increased 57.5% to $27.1 million for the three months
ended September 30, 1995 compared to $17.2 million for the three months ended
September 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 $1.5 million during the three months ended September 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 $5.7 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
$4.1 million during the three months ended September 30, 1995 compared to $.3
million during the three months ended September 30, 1994. The Mexico and Central
America operation expanded from a one rig operation to a four rig operation in
1995. International export revenue for the three months ended September 30, 1995
were $1.6 million and resulted from materials sold for export to Costa Rica. The
revenue increase of $.5 million from the 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 $1.8
million in the Company's Gulf Coast District operations. This decreased due to
decreased rig utilization and lower contract prices.
Consolidated operating expenses increased 59.9% to $26.7 million for the
three months ended September 30, 1995 compared to $16.7 million for
10
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the three months ended September 30, 1994. Operating expenses for the Company's
South American operations increased $2.4 million for the three months ended
September 30, 1995 compared to the 1994 three month period as a result of the
expansion of the Argentina drilling rig fleet and $5.7 million due to the
acquisition of the Venezuela operating company discussed above. Operating
expenses for the Mexico and Central American operations were $4.1 million for
the three months ended September 30, 1995 compared to $.3 million during the
three months ended September 30, 1994. International export operating expenses
and other primarily for the three months ended September 30, 1995 were $1.6
million, representing costs of materials sold for export to Costa Rica. This was
offset by a decrease in operating expenses of $1.6 million in the U.S. Domestic
Gulf Coast District due to lower rig utilization and a decrease of $.8 million
due to phase out of the Foundation Division.
Depreciation, depletion and amortization increased 76.1% to $1.3 million
for three months ended September 30, 1995 compared to $712,000 for the three
months ended September 30, 1994. This increase was due to the acquisition of
drilling equipment for the International Division.
Gain on currency exchange of $521,000 for the three months ended September
30, 1995 is the result of currency exchange transactions related to the
Venezuelan operations.
Interest expense increased to $392,000 for the three months ended September
30, 1995 compared to $64,000 for the three months ended September 30, 1994. The
increase was due to an increase in borrowing for the international operations.
The loss from discontinued operations was $116,000 for the three months
ended September 30, 1995 as compared to income of $49,000 for the three months
ended September 30, 1994. This was the result of the disposal of the Company's
oil and gas operations.
Nine Months Ended September 30, 1995
Compared to Nine Months Ended
September 30, 1994
A comparison of September 30, 1995 and 1994 nine 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)
----------------------------------
Quarter Ended September 30,
----------------------------------
1995 1994
------- -------
<S> <C> <C> <C> <C>
Contract Drilling:
U.S. $32,576 $37,633
International
Mexico and Central
America 12,087 1,161
South America 23,726 7,135
Export Sales 4,214 --
------- -------
Consolidated Totals 72,603 45,929
------- -------
OPERATING COSTS
Contract Drilling:
U.S. 30,269 ( 92.9%) 37,430 (99.5%)
International
Mexico and Central
America 10,289 ( 85.1%) 946 (81.5%)
South America 26,136 (110.4%) 7,032 (98.6%)
Export Sales and Other 4,566 (108.4%) --
------- -------
Consolidated Totals 71,260 45,408
------- -------
OPERATING MARGIN $ 1,343 $ 521
------- -------
</TABLE>
Consolidated revenues increased 58.1% to $72.6 million for the nine months
ended September 30, 1995 compared to $45.9 million for the nine months ended
September 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 $4.4 million during the nine months ended September 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 $12.2 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 $10.9 million during the nine months ended September 30, 1995
over the $1.2 million during the nine months ended September 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 nine months ended September 30, 1995 were $4.2 million and resulted from
materials sold for export to Costa Rica. The Western Division had a $1.1 million
increase due to the utilization of a horizontal re-entry rig which was inactive
during the nine months ended September 30, 1994. Revenues from the Company's
East Texas and Louisiana operations increased $2 million due to increased rig
utilization and a large turnkey contract. This was offset by a revenue decrease
of $2.9 million in the Company's Gulf Coast operations and $1.2 million in the
Eastern Division due to decreased rig utilization. The Foundation Division had
a revenue decrease of $974,000
12
<PAGE>
due to the phase out of this division.
Consolidated operating expenses increased 56.9% to $71.2 million for the
nine months ended September 30, 1995 compared to $45.4 million for the nine
months ended September 30, 1994. Operating expenses for the Company's South
American operations increased $19.1 million for the nine months ended September
30, 1995 compared to the 1994 nine 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 nine months ended September 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 $10.3 million for the nine
months ended September 30, 1995 compared to $946,000 during the nine months
ended September 30, 1994 this increase is due to the expansion of the drilling
fleet. International export operating expenses and other for the nine months
ended September 30, 1995 were $4.6 million, primarily representing costs of
materials sold for export to Costa Rica. Operating expenses from the Company's
East Texas and Louisiana operations increased $1.7 million due to increased rig
utilization and a large turnkey contract. This was offset by a decreased of $3.5
million in the Company's Gulf Coast operations and $849,000 in the Eastern
Division due to decreased rig utilization. The Foundation Division's operating
expenses decreased $2.5 million due to the phase out of that division.
Depreciation, depletion and amortization increased 74.3% to $3.6 million
for nine months ended September 30, 1995 compared to $2.1 million for the nine
months ended September 30, 1994. This increase was due to the acquisition of
drilling equipment for the International Division.
Gain on currency exchange of $521,000 for the nine months ended September
30, 1995 is the result of currency exchange transactions related to the
Venezuelan operations.
Interest expense increased to $1.2 million for the nine months ended
September 30, 1995 compared to $250,000 for the nine months ended September 30,
1994. The increase was due to an increase in borrowings for expansion of the
international operations.
The loss from discontinued operations was $670,000 for the nine months
ended September 30, 1995 as compared to income of $87,000 for the nine months
ended September 30, 1994. The loss is was the result of the disposal of the
Company's oil and gas operations.
7. INDUSTRY TRENDS
The weekly national count of working rigs in the United States as reported
by Baker Hughes Incorporated on November 3, 1995 was 764 compared to 824 on
November 4, 1994. The 764 working rigs included 643 working land rigs which are
in the Company's area of competition.
13
<PAGE>
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
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 were filed during the three month
period ended September 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.
/s/ Max M. Dillard
Date: November 14, 1995 By_________________________
Max M. Dillard
President
/s/ Thomas L. Easley
Date: November 14, 1995 By_________________________
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 Nine Months Ended
September 30, September 30,
---------------------------- -----------------------
1995 1994 1995 1994
------- ------ -------- -------
<S> <C> <C> <C> <C>
Weighted average shares of
common stock outstanding................ 38,669 38,584 38,669 38,585
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 38,585
======= ======= ======= =======
Net loss.................................. $(1,350) $ (823) $(5,245) $(3,037)
======= ======= ======= =======
Loss per share of common stock
from continuing operations.............. (.03) (.02) (.12) (.08)
Loss per share of common stock
from discontinued operation............. -- -- (.02) --
------- ------- ------- -------
Loss per share of common stock............ $ (.03) $ (.02) $ (.14) $ (.08)
======= ======= ======= =======
</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 nine months ended September 30, 1995 and 1994, respectively.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1994
<CASH> 3,621 1,628
<SECURITIES> 0 0
<RECEIVABLES> 22,802 16,864
<ALLOWANCES> 2,142 2,066
<INVENTORY> 2,529 3,650
<CURRENT-ASSETS> 36,943 31,976
<PP&E> 31,268 30,786
<DEPRECIATION> 13,161 10,454
<TOTAL-ASSETS> 68,342 62,860
<CURRENT-LIABILITIES> 30,799 21,314
<BONDS> 0 0
<COMMON> 3,867 3,867
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 68,342 62,860
<SALES> 72,603 45,929
<TOTAL-REVENUES> 72,603 45,929
<CGS> 71,260 45,408
<TOTAL-COSTS> 76,928 49,397
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,150 250
<INTEREST-EXPENSE> (5,245) (3,037)
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,245) (3,037)
<EPS-PRIMARY> (.14) (.08)
<EPS-DILUTED> (.14) (.08)
</TABLE>
