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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported): January 31, 1997
DI INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 1-8226
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER)
74-2144774
(IRS EMPLOYER IDENTIFICATION NO.)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
713/435-6100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
450 GEARS ROAD, SUITE 625
HOUSTON, TEXAS 77067
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The following sets forth the Statement of Net Assets Acquired and
Liabilities Assumed of Flournoy Drilling Company as of December 31, 1996
and the Statement of Revenues and Certain Expenses for the year ended
December 31, 1996, including the notes thereto and the related report of
KPMG Peat Marwick LLP.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Drillers, Inc.
We have audited the accompanying statement of net assets acquired and
liabilities assumed of Flournoy Drilling Company (the Company), which are to be
sold pursuant to the Asset Purchase Agreement (the Agreement) between the
Company and Drillers, Inc., (a wholly-owned subsidiary of DI Industries, Inc.)
dated as of December 31, 1996, as described in note 1, as of December 31, 1996,
and the related statement of revenues and certain expenses for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of DI Industries, Inc. Material amounts, described in note
1 to the financial statements, that would not be comparable to those resulting
from the proposed future operations of the assets are excluded, and the
statements are not intended to be a complete presentation of the revenues and
expenses of the assets.
In our opinion, the above-mentioned financial statements present fairly, in all
material respects, the statement of net assets acquired and liabilities assumed
of the Company, at December 31, 1996, which are to be sold pursuant to the
Agreement referred to above, and the related statement of revenues and certain
expenses, as defined above, for the year then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
February 26, 1997
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FLOURNOY DRILLING COMPANY
STATEMENT OF NET ASSETS ACQUIRED AND LIABILITIES ASSUMED
December 31, 1996
Cash ....................................................... $2,636,982
Property and equipment:
Land .................................................... 306,719
Drilling rigs and other property and equipment -
less accumulated depreciation of $24,153,831 ......... 5,055,099
----------
Net property and equipment ........................ 5,361,818
----------
Net assets ........................................ 7,998,800
----------
Liabilities assumed:
Note payable ............................................ 832,779
Deferred revenue ........................................ 2,636,982
----------
Total liabilities ................................. 3,469,761
----------
Net assets ........................................ $4,529,039
==========
See notes to financial statements.
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FLOURNOY DRILLING COMPANY
STATEMENT OF REVENUES AND CERTAIN EXPENSES
For the year ended December 31, 1996
Revenues ............................................... $42,850,066
Certain expenses
Drilling ............................................ 33,970,033
Depreciation ........................................ 1,654,726
General and administrative .......................... 2,994,497
Interest ............................................ 87,105
-----------
Total expenses ................................ 38,706,361
-----------
Revenues in excess of certain expenses ................. $ 4,143,705
===========
See notes to financial statements.
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FLOURNOY DRILLING COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of assets acquired and liabilities assumed of
Flournoy Drilling Company (the Company) include only those accounts
related to the assets to be sold to Drillers, Inc. (DI), pursuant to the
Asset Purchase Agreement (the Agreement), dated as of December 31, 1996
between the Company and DI.
The Company engages principally in the contract drilling of oil and gas
wells primarily for independent and major integrated oil companies. The
assets being acquired consist primarily of 13 land rigs currently working
in South Texas, 17 rig hauling trucks, a yard and office facility in
Alice, Texas and various other equipment and drill pipe. All rigs are
owned by the Company.
Operating revenues and certain expenses are presented on the accrual basis
of accounting. The accompanying financial statements are not
representative of the actual operations for the period presented since
certain indirect expenses have been excluded. Expenses excluded consist of
interest, gain and/or loss on sales of rigs and drilling equipment, other
insignificant costs not directly related to the acquired assets as well as
all the assets associated with the Company's oil and gas properties.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets at the date of the
financial statements and the reported amount of revenues and certain
expenses during the reporting period. Actual results could differ from
these estimates.
DRILLING RIGS AND OTHER PROPERTY AND EQUIPMENT
Drilling rigs and other property and equipment are carried at cost.
Maintenance and repairs are charged to income currently while betterments
are capitalized.
For financial reporting purposes, depreciation is provided on the
straight-line method over the remaining estimated useful lives from the
date the asset is placed into service. The estimated useful lives of the
Company's land drilling rigs is 5 years. Other property and equipment are
estimated to have useful lives ranging from 5 to 39 years.
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FLOURNOY DRILLING COMPANY
NOTES TO FINANCIAL STATEMENTS
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment when changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used be
reported at the lower of carrying amount or fair value. Assets to be
disposed of and assets not expected to provide any future service
potential to the Company are recorded at the lower of carrying amount or
fair value less cost to sell. The adoption of SFAS No. 121 did not have an
effect on the Company's financial position or results of operations.
REVENUE RECOGNITION
Income from dayrate drilling contracts is recognized as earned. In
connection with such drilling contracts, the Company may receive lump-sum
fees for the mobilization of equipment and personnel.
Mobilization costs and revenues also are recognized as earned.
Income from turnkey contracts is recognized utilizing a completed contract
method. Provisions for future losses on turnkey contracts are recognized
when it becomes apparent that contract drilling expenses to be incurred on
a specific contract will exceed the revenue from the contract.
(2) DRILLING RIGS AND OTHER PROPERTY AND EQUIPMENT
Cost and accumulated depreciation of drilling rigs and other property and
equipment are summarized as follows:
December 31,
1996
------------
Drilling rigs and equipment .......................... $ 24,789,679
Trucks and automobiles ............................... 2,710,846
Buildings ............................................ 979,785
Office equipment and other ........................... 728,620
------------
29,208,930
Less accumulated depreciation ........................ (24,153,831)
------------
Total ..................................... $ 5,055,099
============
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FLOURNOY DRILLING COMPANY
NOTES TO FINANCIAL STATEMENTS
(3) NOTE PAYABLE
Note payable, interest at prime (8.25% at December 31, 1996), payable in
monthly installments of $33,333 plus interest, due December 1998,
guaranteed by the major stockholders and secured by assets with book value
of approximately $7,500,000.
(4) TRANSACTIONS WITH AFFILIATES
The Company performed drilling contracting services for an affiliate
during the period. Revenues on the drilling contracting services to the
affiliate were $1,131,794.
(5) OMITTED HISTORICAL EXPENSES (UNAUDITED)
As discussed in note 1, interest on debt not assumed as well as gain or
loss on the sales of rigs and drilling equipment are not directly related
to the acquired assets and liabilities assumed and therefore have been
excluded from the accompanying financial statements. Such excluded amounts
approximated $10,304 and $33,732 for the period ended December 31, 1996.
In addition, all assets, liabilities and revenues and expenses of the
Company's oil and gas properties have been excluded.
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(b) PRO FORMA FINANCIAL INFORMATION
DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements of
DI Industries, Inc. ("DI" or the "Company") are based upon the historical
consolidated financial statements of the Company as of and for the year ended
December 31, 1996. These historical financial statements have been adjusted for
certain items as discussed in the notes to these unaudited pro forma
consolidated financial statements.
On January 31, 1997, DI Industries, Inc. completed the acquisition of the
operating assets of Flournoy Drilling Company ("Flournoy") and elected Mr.
Lucien Flournoy, the founder of Flournoy, to the Company's Board of Directors.
This acquisition was pursuant to a definitive asset purchase agreement based on
arms length negotiations among the parties. The assets were acquired for
12,426,000 shares of common stock, par value $0.10 per share, and cash on hand
of approximately $800,000 which was utilized to repay certain of Flournoy's
debt. The assets acquired include 13 land drilling rigs, 17 rig hauling trucks,
a yard and office facility in Alice, Texas and various other equipment and drill
pipe. The Company hired the majority of Flournoy's operating personnel. Flournoy
utilized and the Company intends to utilize these assets in contract oil and gas
land drilling services. The Company agreed to issue additional shares of DI's
common stock to Flournoy's shareholders if, and to the extent that on January
31, 1998, the aggregate market value of one-half of the shares received by the
Flournoy shareholders, plus the gross proceeds from any sales of DI's common
stock by the Flournoy shareholders prior to January 31, 1998 is, in total, less
than $12.43 million.
On December 31, 1996 the Company completed the acquisition of the South
Texas operating assets of Diamond M Onshore, Inc. ("Diamond M"), a wholly owned
subsidiary of Diamond Offshore Drilling, Inc., pursuant to a definitive asset
purchase agreement. The Company acquired the assets for approximately $26
million in cash which includes ten land drilling rigs, all of which are
currently operating, 19 rig hauling trucks, a yard and office facility in Alice,
Texas and various other drill pipe and equipment.
The Company also entered into a loan facility (the "Facility") dated as of
December 31, 1996 with Bankers Trust Company, ING (US) Capital Corporation and
NordlandsBanken AS which provided the funds to acquire the assets of Diamond M.
The Facility provides for an initial $35 million reducing revolving line of
credit which reduces by $5.0 million on each anniversary date until maturity on
December 31, 1999. The Facility is secured by substantially all of the Company's
assets and calls for quarterly interest payments on the outstanding balance at
either LIBOR plus 3% or the lending institution's prime rate plus 2%. Prior to
and as a condition of closing the Facility, the Company paid off its existing
credit facility with NordlandsBanken AS in the amount of approximately $9.5
million.
In connection with closing the Facility, the Company also completed a
private placement of 1.75 million shares of the Company's common stock for
approximately $4.12 million to four funds managed by Wexford Management LLC.
These proceeds were utilized to repay a $4.0 million note plus accrued interest
of $132,000. The Company also agreed to issue more shares of the Company's
common stock to the extent the Wexford funds hold value less than $4.12 million
on December 30, 1997.
On October 3, 1996 the Company acquired of all the South Texas operating
assets of Mesa Drilling, Inc. ("Mesa") in exchange for 5,500,000 shares of the
Company's common stock. The assets acquired consist of six
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diesel electric SCR drilling rigs, three of which are currently operating in
South Texas. The other three rigs are currently stacked.
On August 29, 1996 the Company closed two separate transactions
(collectively the "Mergers") resulting in a $25 million equity infusion and the
acquisition of deep drilling equipment.
In the first transaction, R. T. Oliver, Inc. ("RTO") and Land Rig
Acquisition Corporation ("LRAC") merged into a new subsidiary of the Company
with the capital stock of RTO and LRAC being exchanged for 39,423,978 shares of
the Company's common stock. In addition, warrants were issued to acquire up to
1,720,000 additional shares of DI common stock, the exercise of which is
contingent upon the occurrence of certain events. Subsequently, warrants
representing 1,108,000 shares have been canceled. This transaction resulted in
the acquisition of 18 inactive, deep capacity land drilling rigs which includes
five 3,000 horsepower and nine 2,000 horsepower land rigs which are rated for
depths of 25,000 feet or greater.
In the second transaction, Somerset Investment Corp. ("Somerset"), was
merged into the Company. The stock of Somerset was exchanged for 39,423,978
shares of DI common stock and warrants to acquire up to 1,720,000 shares of DI
common stock, the exercise of which is contingent upon the occurrence of certain
events. Subsequently, warrants representing 1,108,000 shares have been canceled.
This merger transaction resulted in a $25 million equity infusion into the
Company.
On June 24, 1996, the Company closed a transaction whereby it sold all of
the operational assets of Western Oil Well Service Co. ("Western"), a
wholly-owned subsidiary of the Company, for $3.95 million in cash. Western
provided oil and gas well workover services principally in Montana, Utah and
North Dakota. Pursuant to the sale, the buyer assumed all of Western's existing
leases, primarily for vehicles, which totaled $251,000 at closing. The Company
recorded a gain of $2.8 million in the second quarter of 1996 as a result of the
sale. This gain is not reflected in the attached unaudited pro forma
consolidated financial statements as the gain was non recurring in nature.
The Unaudited Pro Forma Consolidated Balance Sheet assumes the Flournoy
acquisition occurred on December 31, 1996 while the other events noted above
occurred prior to December 31, 1996 and are included in DI's historical balance
sheet as of December 31, 1996. The Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996 assumes all of the above
transactions occurred on January 1, 1996.
The unaudited pro forma consolidated financial statements should be read
in conjunction with the (i) consolidated financial statements of the Company
included in the Company's Annual Report on Form 10-K as of and for the year
ended December 31, 1996, (ii) the Statement of Net Assets Acquired and
Liabilities Assumed of Flournoy Drilling Company as of December 31, 1996 and the
Statement of Revenues and Certain Expenses of Flournoy Drilling Company for the
year ended December 31, 1996 included under Item 7(a) to this Form 8-K. Pro
forma financial data is not necessarily indicative of future operations of the
Company due to numerous factors, including changes in utilization rates for
drilling rigs, changes in the rates received for drilling services and future
equipment sales and acquisitions.
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DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
FLOURNOY
HISTORICAL PRO FORMA
HISTORICAL FLOURNOY ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ........... $ 6,162 $ 2,637 $ (1,000)(a) $ 7,799
Restricted cash - insurance deposits 1,000 -- -- 1,000
Accounts receivable, net of allowance
of $ 1,333 ........................ 15,866 -- -- 15,866
Rig inventory and supplies .......... 936 -- -- 936
Assets held for sale ................ 557 -- -- 557
Prepaids and other current assets ... 3,690 -- -- 3,690
--------- ------- --------- ---------
Total current assets ................ 28,211 2,637 (1,000) 29,848
--------- ------- --------- ---------
Property and equipment:
Land, buildings and improvements .... 4,312 307 293(a) 4,912
Drilling and well service equipment . 95,059 5,055 35,848(a) 135,962
Furniture and fixtures .............. 1,088 -- -- 1,088
--------- ------- --------- ---------
100,459 5,362 36,141 141,962
Accumulated depreciation and
amortization ...................... (11,983) -- -- (11,983)
--------- ------- --------- ---------
Net property and equipment ....... 88,476 5,362 36,141 129,979
--------- ------- --------- ---------
Other noncurrent assets ................ 1,132 -- -- 1,132
--------- ------- --------- ---------
$ 117,819 $ 7,999 $ 35,141 $ 160,959
========= ======= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 613 $ 833 $ (833)(a) $ 613
Trade accounts payable .............. 11,826 -- -- 11,826
Accrued workers' compensation ....... 1,502 -- -- 1,502
Payroll and related employee costs .. 3,340 -- -- 3,340
Customer advances ................... 2,466 2,637 -- 5,103
Other accrued liabilities ........... 2,269 -- -- 2,269
--------- ------- --------- ---------
Total current liabilities ......... 22,016 3,470 (833) 24,653
--------- ------- --------- ---------
Long-term debt less current
maturities ........................... 26,846 -- -- 26,846
Other long-term liabilities and
minority interest .................... 3,299 -- -- 3,299
Deferred income taxes .................. 248 -- 9,437(a) 9,685
Series A preferred stock - mandatory
redeemable ........................... 764 -- -- 764
Commitments and contingent liabilities
Stockholders' equity:
Common stock, $.10 par value;
300,000 shares authorized;
125,043 issued and outstanding ... 12,504 -- 1,243(a) 13,747
Additional paid-in capital .......... 99,301 4,529 25,294(a) 129,124
Deficit ............................. (46,755) -- -- (46,755)
Cumulative translation adjustments .. (404) -- -- (404)
--------- ------- --------- ---------
Total stockholders' equity ....... 64,646 4,529 26,537 95,712
--------- ------- --------- ---------
$ 117,819 $ 7,999 $ 35,141 $ 160,959
========= ======= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
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DI INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
(In thousands except per share data)
<TABLE>
<CAPTION>
WESTERN MERGERS MESA DIAMOND
HISTORICAL PRO FORMA PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL
DI ADJUSTMENTS ADJUSTMENTS MESA ADJUSTMENTS DIAMOND ADJUSTMENTS FLOURNOY
-------- ----------- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Contract drilling ................. $ 81,767 $(3,206)(b) $ -- $4,693 $-- $22,675 $-- $ 42,850
Costs and expenses:
Drilling operations ............... 80,388 (3,029)(b) 84(c) 3,428 -- 19,405 -- 33,970
Depreciation, depletion and
amortization ................... 4,689 (117)(b) -- -- 648(e) 759 2,691(f) 1,655
General and administrative ........ 4,274 (254)(b) -- -- -- 476 (217)(g) 2,994
Non-recurring charges ............. 6,131 -- -- -- -- -- -- --
-------- ------- ----- ------ ----- ------- ------- --------
Total costs and expenses ....... 95,482 (3,400) 84 3,428 648 20,640 2,474 38,619
-------- ------- ----- ------ ----- ------- ------- --------
Operating income (loss) ............. (13,715) 194 (84) 1,265 (648) 2,035 (2,474) 4,231
-------- ------- ----- ------ ----- ------- ------- --------
Other income (expense):
Interest income ................... 505 -- -- -- -- -- -- --
Interest expense .................. (1,220) 4(b) -- -- -- -- (1,182)(h) (87)
Gain (loss) on sale of assets ..... 3,078 (2,775)(b) --
Minority interest and other ....... 475 -- -- -- -- -- -- --
-------- ------- ----- ------ ----- ------- ------- --------
Other income (expense), net .... 2,838 (2,771) -- -- -- -- (1,182) (87)
-------- ------- ----- ------ ----- ------- ------- --------
Income (loss) before income taxes ... (10,877) (2,577) (84) 1,265 (648) 2,035 (3,656) 4,144
Income taxes ........................ 845 -- -- -- -- -- -- --
-------- ------- ----- ------ ----- ------- ------- --------
Net income (loss) ................... (11,722) (2,577) (84) 1,265 (648) 2,035 (3,656) 4,144
Series B preferred stock subscription
dividend requirement .............. (402) -- 402(d)
-------- ------- ----- ------ ----- ------- ------- --------
Net income (loss) applicable to
common stock ...................... $(12,124) $(2,577) $ 318 $1,265 $(648) $ 2,035 $(3,656) $ 4,144
======== ======= ===== ====== ===== ======= ======= ========
Net loss per common share ........... $ (0.18) -- -- -- -- -- -- --
========
Weighted average common shares
outstanding ......................... 67,495 -- -- -- -- -- -- --
========
</TABLE>
FLOURNOY
PRO FORMA
ADJUSTMENTS PRO FORMA
----------- ----------
Revenues:
Contract drilling ................. $-- $ 148,779
Costs and expenses:
Drilling operations ............... -- 134,246
Depreciation, depletion and
amortization ................... 2,650(i) 12,975
General and administrative ........ (800)(j) 6,473
Non-recurring charges ............. -- 6,131
------- ---------
Total costs and expenses ....... 1,850 159,825
------- ---------
Operating income (loss) ............. (1,850) (11,046)
------- ---------
Other income (expense):
Interest income ................... -- 505
Interest expense .................. 87(k) (2,398)
Gain (loss) on sale of assets ..... -- 303
Minority interest and other ....... -- 475
------- ---------
Other income (expense), net .... 87 (1,115)
------- ---------
Income (loss) before income taxes ... (1,763) (12,161)
Income taxes ........................ -- 845
------- ---------
Net income (loss) ................... (1,763) (13,006)
Series B preferred stock subscription
dividend requirement ..............
------- ---------
Net income (loss) applicable to
common stock ...................... $(1,763) $ (13,006)
======= =========
Net loss per common share ........... -- $ (0.09)
======= =========
Weighted average common shares
outstanding ......................... -- 137,469
======= =========
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
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DI INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The following sets forth the explanations and assumptions used in
preparing the Unaudited Pro Forma Consolidated Balance Sheet of DI Industries,
Inc. (the "Company") as of December 31, 1996 and the Unaudited Pro Forma
Consolidated Statement of Operations for the year then ended.
The unaudited pro forma consolidated financial statements should be read
in conjunction with the (i) consolidated financial statements of the Company
included in the Company's Annual Report on Form 10-K as of and for the year
ended December 31, 1996, (ii) the Statements of Net Assets Acquired and
Liabilities Assumed of Flournoy Drilling Company as of December 31, 1996 and the
Statement of Revenues and Certain Expenses of Flournoy Drilling Company for the
year ended December 31, 1996 included under Item 7(a) to this Form 8-K. Pro
forma financial data is not necessarily indicative of future operations of the
Company due to numerous factors, including changes in utilization rates for
drilling rigs, changes in the rates received for drilling services and future
equipment sales and acquisitions.
(2) ADJUSTMENT TO THE HISTORICAL FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet assumes the Flournoy
acquisition occurred on December 31, 1996 while the other events noted above
occurred prior to December 31, 1996 and are included in DI's historical balance
sheet as of December 31, 1996. The Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996 assumes all of the above
transactions occurred on January 1, 1996.
The following assumptions and pro forma adjustments have been made to the
historical balance sheet of the Company:
(a) To reflect the purchase of the assets of Flournoy Drilling Company
for 12,426,000 shares of the Company's common stock and the payment
of approximately $800,000 to retire the Flournoy debt. Also assumes
the payment of approximately $200,000 in transaction costs which
were capitalized as part of the cost of the acquisition.
The following assumptions and pro forma adjustments have been made to the
historical statement of operations of the Company:
(b) To reflect the effect on the revenue and expenses items of the
Company due to the sale of the operational assets of Western.
(c) To adjust operating expense for the estimated cost to store the rigs
acquired in the Mergers.
(d) To provide for the liquidation of the series B preferred stock
subscription and related dividend requirement in connection with the
Mergers.
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DI INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(e) To reflect the additional depreciation expense associated with the
acquisition of the Mesa assets. Pro forma depreciation was
calculated on a straight line basis over the estimated useful lives
of the assets.
(f) To reflect the additional depreciation expense associated with the
acquisition of the Diamond M assets. Pro forma depreciation was
calculated on a straight line basis over the estimated useful lives
of the assets.
(g) To reflect the elimination of general and administrative expenses of
Diamond M allocated by its parent, Diamond Offshore Drilling, Inc.
less the additional general and administrative expenses estimated by
the Company for an additional corporate accounting employee.
(h) To reflect the estimated additional interest expense associated with
the borrowings under the Facility to purchase the Diamond M assets
and the amortization of the deferred loan costs associated with the
Facility less the reduction in interest expense for retirement of
the $4 million dollar term loan and the payment of the Company's
term loan with NordlandsBanken AS. Pro Forma amortization is
calculated on a straight line basis over the term of the Facility.
(i) To reflect the additional depreciation expense associated with the
acquisition of the Flournoy assets. Pro forma depreciation was
calculated on a straight line basis over the estimated useful lives
of the assets.
(j) To reflect the elimination of general and administrative expenses of
Flournoy for the cost of the founder and president of Flournoy and
one other employee who did not join the Company.
(k) To reflect the elimination of interest expense of Flournoy on the
debt that was repaid by the Company at closing.
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(c) EXHIBITS
The following exhibit is filed with the Form 8-K in accordance with the
provisions of Item 601 of Regulation S-K promulgated under the Securities Act of
1933, as amended:
2.1* Asset Purchase Agreement dated December 31, 1996, between Flournoy
Drilling Company and Drillers, Inc.
* Previously filed.
[Signature Page Follows]
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 11, 1997 DI INDUSTRIES, INC.
BY: /s/ T. SCOTT O'KEEFE
T. Scott O'Keefe
Senior Vice President and
Chief Financial Officer
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