<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1998
Or
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from to
---------------- ------------------
Commission file number 333-65049
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below Grey Wolf Drilling Company 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office Grey Wolf, Inc.
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10370 Richmond Ave., Suite 600
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Houston, Texas 77042-4136
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REQUIRED INFORMATION
The Grey Wolf Drilling Company 401(k) Plan (the "Plan") is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Therefore, in lieu of the requirements of Items 1-3 of Form 11-K, the financial
statements and schedules of the Plan, which have been prepared in accordance
with the financial reporting requirements of ERISA, are filed herewith.
Grey Wolf Drilling Company 401(k) Plan
Financial Statements and Supplemental Schedule
Year ended December 31, 1998
CONTENTS
Independent Auditors' Report
Financial Statements:
Statements of Net Assets Available for Plan Benefits as of
December 31, 1998 and 1997
Statement of Changes in Assets Available for Plan Benefits with Fund
Information for the year ended December 31, 1998.
Notes to Financial Statements
Supplemental Schedules:
Schedule I - Supplemental Schedule of Assets Held for Investment
Purposes as of December 31, 1998
Schedule II - Supplemental Schedule of Reportable Transactions for
the Year Ended December 31, 1998
2
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Grey Wolf Drilling Company 401(k) Plan:
We have audited the accompanying statements of net assets available for plan
benefits of Grey Wolf Drilling Company 401(k) Plan (the Plan) as of
December 31, 1998 and 1997 and the related statement of changes in net assets
available for plan benefits with fund information for the year ended
December 31, 1998. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Grey Wolf
Drilling Company 401(k) Plan as of December 31, 1998 and 1997, and the changes
in net assets available for benefits with fund information for the year ended
December 31, 1998 in conformity with generally accepted accounting principles.
Our audit of the Plan's financial statements as of and for the year ended
December 31, 1998 was performed for the purpose of forming an opinion on the
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The fund information
in the statement of changes in net assets available for plan benefits with fund
information is presented for purposes of additional analysis rather than to
present the changes in net assets available for plan benefits of each fund. The
supplemental schedules and fund information have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 29, 1999
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Assets:
Investments at fair value:
Scudder Stable Value Fund $ 9,199,658 * 5,912,183 *
Scudder Income Fund 311,400 190,040
Scudder Balanced Fund 659,563 399,251
Scudder Growth & Income Fund 1,877,113 * 1,478,806 *
Scudder Value Fund 448,122 --
Scudder Small Company Fund 306,091 12,001
Scudder International Fund 282,559 --
Grey Wolf Stock Fund 126,067 --
Loans receivable 547,531 123,735
------------ ------------
Total investments 13,758,104 8,116,016
------------ ------------
Contributions receivable:
Employee 169,843 633,586 *
Employer 101,650 382,760
------------ ------------
271,493 1,016,346
------------ ------------
Total assets 14,029,597 9,132,362
------------ ------------
Net assets available for benefits $ 14,029,597 9,132,362
============ ============
</TABLE>
* Represents 5% or more of net assets available for plan benefits.
See accompanying notes to financial statements.
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Statement of Changes in Net Assets Available for Plan Benefits with
Fund Information
For the year ended December 31, 1998
<TABLE>
<CAPTION>
SCUDDER SCUDDER SCUDDER
CASH STABLE SCUDDER SCUDDER GROWTH &
INVESTMENT VALUE INCOME BALANCED INCOME
TRUST FUND FUND FUND FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Additions:
Contributions:
Employee $ -- 2,120,956 58,630 132,659 253,522
Employer -- 1,266,700 31,715 75,523 145,068
Rollovers -- 257,521 10,971 12,156 26,783
----------- ----------- ----------- ----------- -----------
Total contributions -- 3,645,177 101,316 220,338 425,373
Investment income - net appreciation in
fair value of investments (including
interest and dividends) 828 540,095 17,798 112,508 151,287
Transfers of assets from merging plans -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total additions 828 4,185,272 119,114 332,846 576,660
Deductions:
Benefits paid to participants 8,120 (3,105,445) (42,490) (86,789) (444,798)
Plan expenses -- (3,919) (50) (181) (38)
----------- ----------- ----------- ----------- -----------
Total deductions 8,120 (3,109,364) (42,540) (86,970) (444,836)
Transfers between funds (8,948) 2,211,567 44,786 14,436 266,483
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
available for plan benefits -- 3,287,475 121,360 260,312 398,307
Net assets available for plan benefits:
Beginning of year -- 5,912,183 190,040 399,251 1,478,806
----------- ----------- ----------- ----------- -----------
End of year $ -- 9,199,658 * 311,400 659,563 1,877,113 *
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
SCUDDER SMALL COMPASS SCUDDER SCUDDER
VALUE VALUE INTERNATIONAL CONVERSION
FUND FUND FUND FUND
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Additions:
Contributions:
Employee $ 134,278 115,451 79,140 --
Employer 73,847 61,708 44,542 --
Rollovers 57,460 45,843 57,904 --
----------- ----------- ----------- -----------
Total contributions 265,585 223,002 181,586 --
Investment income - net appreciation in
fair value of investments (including
interest and dividends) 21,322 (20,765) 11,190 12,160
Transfers of assets from merging plans -- -- -- --
----------- ----------- ----------- -----------
Total additions 286,907 202,237 192,776 12,160
Deductions:
Benefits paid to participants (25,090) (18,457) (8,696) --
Plan expenses -- (31) (38) --
----------- ----------- ----------- -----------
Total deductions (25,090) (18,488) (8,734) --
Transfers between funds 186,305 110,341 98,517 (12,160)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
available for plan benefits 448,122 294,090 282,559 --
Net assets available for plan benefits:
Beginning of year -- 12,001 -- --
----------- ----------- ----------- -----------
End of year $ 448,122 306,091 282,559 --
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
GREY WOLF PARTICIPANT
STOCK LOAN
FUND FUND OTHER TOTAL
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Additions:
Contributions:
Employee 127,722 -- (463,743) 2,558,615
Employer 67,311 -- (281,110) 1,485,304
Rollovers $ 12,047 -- -- 480,685
----------- ----------- ----------- -----------
Total contributions 207,080 -- (744,853) 4,524,604
Investment income - net appreciation in
fair value of investments (including
interest and dividends) (244,063) -- -- 602,360
Transfers of assets from merging plans -- -- 3,083,953 3,083,953
----------- ----------- ----------- -----------
Total additions (36,983) -- 2,339,100 8,210,917
Deductions:
Benefits paid to participants (9,576) 423,796 -- (3,309,425)
Plan expenses -- -- -- (4,257)
----------- ----------- ----------- -----------
Total deductions (9,576) 423,796 -- (3,313,682)
Transfers between funds 172,626 -- (3,083,953) --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
available for plan benefits 126,067 423,796 (744,853) 4,897,235
Net assets available for plan benefits:
Beginning of year -- 123,735 1,016,346 9,132,362
----------- ----------- ----------- -----------
End of year $ 126,067 547,531 271,493 14,029,597
=========== =========== =========== ===========
</TABLE>
* Represents 5% or more of net assets available for plan benefits.
See accompanying notes to financial statements.
5
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) THE PLAN
The following brief description of the Grey Wolf, Inc. (the "Company" or
the "Sponsor") Grey Wolf Drilling Company 401(k) Plan is provided for
general informational purposes only. Participants should refer to the
plan agreement for a more complete description of the Plan's provisions.
GENERAL
Effective August 1, 1991, the DI Industries, Inc. Salary Deferral Plan
(the "DI Plan") was amended, to merge the defined contribution plans of
Butler Johnson, Inc., Cubby Drilling, Inc., and Western Oil Well Service
Company into the Plan. Additionally, the DI Plan's year end was changed
to December 31. The DI Plan was sponsored by DI Industries, Inc.
General American Life Insurance Company ("General American") served as
custodian of the DI Plan's assets.
On June 27, 1997, Drillers, Inc., a subsidiary of DI Industries, Inc.,
acquired Grey Wolf Drilling Company. The name of Drillers, Inc. changed
to Grey Wolf Drilling Company. Prior to the acquisition, DI Industries,
Inc. offered their employees a Salary Deferral Plan (the "DI Plan"),
while Grey Wolf Drilling Company offered to their employees a 401(k) and
Profit Sharing Plan (the "old Grey Wolf Plan").
Prior to the acquisition, the assets of the old Grey Wolf Plan were held
by Massachusetts Mutual Life Insurance Company ("Mass Mutual"), acting
as custodian. The assets of the DI Plan were held by General American
Life Insurance Company acting as custodian.
Beginning July 1, 1997, all contributions relating to former members of
the old Grey Wolf Plan were forwarded to General American. The assets
of the old Grey Wolf Plan held by Mass Mutual as of June 30, 1997,
however, were not transferred to General American as of July 1, 1997.
Contributions relating to the former members of the DI Plan were still
forwarded to General American.
Effective October 1, 1997, Grey Wolf Drilling Company changed custodians
from General American to Scudder Trust Company ("Scudder"), and the DI
Plan was amended into the Grey Wolf Drilling Company 401(k) Plan (the
"Plan"). As such, as of midnight September 30, 1997, the assets of both
the DI Plan and the old Grey Wolf Plan were transferred to Scudder.
CONTRIBUTIONS
The Plan provides for employee pretax contributions of up to 15% of
covered compensation, subject to the Internal Revenue Service ("IRS")
limitations. The Company matches 100% of each employee's contribution,
up to the first 3% of covered compensation, plus 50% of the next 3% of
covered compensation.
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
PARTICIPANT ACCOUNTS
Under the Plan each participant's account is credited with the
participant's contribution, the Company's matching contribution and an
allocation of investment income. Investment income allocations are based
on the participant's weighted average account balance during the period.
LOANS
Participants are allowed to borrow up to the lesser of $50,000 reduced
by the amount by which the highest outstanding balance of all loans to
the participant during the one-year period ending on the day before the
date on which the loan is made, exceeds the outstanding balance of all
loans to the participant on the date on which the loan is made; or 50%
of the participant's vested account balance, being $50,000 the maximum
amount of loan. Loans are granted for any reason.
INVESTMENT OPTIONS
The Plan offers the following seven Scudder investment funds in which
participants may invest:
[] STABLE VALUE FUnd - Consists of guaranteed investment contracts, money
market securities and treasury bills.
[] INCOME FUnd - Consists of intermediate and long-term, high-grade corporate
bonds.
[] BALANCED FUnd - Consists of seasoned stocks and investment-grade bonds.
[] GROWTH AND INCOME FUND - Consists of primarily common stocks and
convertible securities of established companies.
[] VALUE FUND - Consists of under valued common stocks of medium to large U.S.
companies.
[] SMALL COMPANY VALUE FUnd - Consists of under valued common stocks of
small U.S. companies.
[] INTERNATIONAL FUnd - Consists of primarily foreign stocks.
In addition, participants may invest on the Grey Wolf Stock Fund. This
fund consists of shares of Grey Wolf, Inc. stock.
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
VESTING
Participants become immediately vested in their contributions and the
related earnings. Vesting in the employer's matching contributions for
terminated employees is 0% for less than one year of service, graduating
to 100% for five or more years of service. Upon death or permanent total
disability, the participant or beneficiary becomes 100% vested in the
employer's contribution. In the event of termination, nonvested portions
of the employer's contributions are forfeited by participants and are
utilized to reduce future employer matching contributions.
PAYMENT OF BENEFITS
Upon termination of service, a participant with a vested account balance
not exceeding $5,000 shall receive a lump-sum amount equal to the amount
of the vested benefits in his or her account. If a participant's account
balance exceeds $5,000, the participant may elect distribution under the
following forms:
FOR ACCOUNT BALANCES (INCLUDING EARNINGS) ON AND AFTER
OCTOBER 1, 1997 - Vested account balances shall be
distributed in the form of a single lump sum cash payment, or
the participant may also choose to receive any Grey Wolf,
Inc. stock.
FOR ACCOUNT BALANCES (INCLUDING EARNINGS) AS OF SEPTEMBER 30,
1997, FOR FORMER PARTICIPANTS OF THE OLD GREY WOLF PLAN AND
THE DI PLAN - The participant can elect distribution under
one of the following methods: (a) joint and survivor annuity
if the participant is married, (b) lump sum in cash, or in
shares of Grey Wolf, Inc. stock, (c) installment payments and
(d) life annuity payments.
(2) SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
The financial statements are presented on the accrual basis of
accounting.
USE OF ESTIMATES
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 and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INVESTMENTS
Investments are stated at fair value as determined by the custodian.
Mutual fund asset values are determined by the custodian based on quoted
market prices in an active market. Any unrealized appreciation or
depreciation is recognized as a gain or loss currently. Participant
loans are valued at cost which approximates fair value.
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GREY WOLF DRILLING COMPANY 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
ADMINISTRATIVE EXPENSES
All administrative expenses of the Plan are paid by the Company.
BENEFITS PAYABLE
Benefits payments are recorded when paid.
(3) PLAN TERMINATION
The Plan has been established to continue indefinitely; however, the
Company has the right to terminate the Plan, in whole or in part,
subject to provisions of ERISA. In the event of termination, all amounts
credited to the accounts of the participants become fully vested and
shall be distributed upon satisfaction of all obligations of the Plan.
(4) TAX STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated August 11, 1997, that the Plan is designated in
accordance with applicable sections of the Internal Revenue Code ("IRC").
The Plan has been amended since receiving the determination letter.
However, the Plan administrator and the Plan's tax counsel believe that
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the IRS.
(5) FORFEITURES
Upon termination of a participant, the nonvested portion of a
participant's employer contributions account is forfeited. The Company
reserves the right to use the forfeited balance to reduce future
contributions by the employer.
(6) RELATED PARTY TRANSACTIONS
Certain of the Plan investments are managed by Scudder. Scudder is the
recordkeeper as defined by the amended Plan and, therefore, these
transactions qualify as party-in-interest.
9
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SCHEDULE I
GREY WOLF DRILLING COMPANY 401(k) PLAN
Item 27(a) - Supplemental Schedule of Assets Held for Investment Purposes
As of December 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, DESCRIPTION OF INVESTMENTS INCLUDING
BORROWER, LESSOR MATURITY DATE, RATE OF INTEREST, COST OF MARKET
OR SIMILAR PARTY COLLATERAL AND PAR OR MATURITY VALUE ACQUISITION VALUE
----------------- ------------------------------------- ----------- ------------
<S> <C> <C> <C> <C>
* Scudder (1) 9,199,658 shares of Stable Value Fund $ 9,199,658 9,199,658
* Scudder 23,520 shares of Income Fund 317,667 311,400
* Scudder 34,767 shares of Balanced Fund 605,455 659,563
* Scudder (1) 7,134 shares of Growth and Income Fund 1,973,151 1,877,113
* Scudder 18,908 shares of Value Fund 445,192 448,122
* Scudder 15,705 shares of Small Company Value
Fund 325,631 306,091
* Scudder 5,802 shares of International Fund 300,476 282,559
* Grey Wolf 161,200 shares of Grey Wolf Stock 354,004 126,067
Various participants Loans receivable bearing interest at 9.5%
with maturities ranging from 12 to 120
months 547,531 547,531
------------- ------------
$ 14,068,765 13,758,104
============= ============
</TABLE>
(1) Exceeds 5% of net assets.
* Party-in-interest.
See accompanying independent auditors' report.
10
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SCHEDULE II
GREY WOLF DRILLING COMPANY 401(k) PLAN
Item 27(d) - Supplemental Schedule of Reportable Transactions
For the year ended December 31, 1998
<TABLE>
<CAPTION>
DESCRIPTION OF ASSETS
(INCLUDE INTEREST NUMBER COST NET
IDENTITY OF RATE AND MATURITY OF PURCHASE SELLING OF GAIN
PARTY INVOLVED IN CASE OF LOAN) TRANSACTIONS PRICE PRICE ASSET (LOSS)
-------------- --------------------- ------------ ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
* Scudder Stable Value Fund 187 $ 7,167,236 - 7,167,236 -
* Scudder Stable Value Fund 298 - 3,917,634 3,917,634 -
* Scudder Growth and Income Fund 93 1,096,969 - 1,096,969 -
* Scudder Growth and Income Fund 177 - 607,450 610,731 (3,281)
* Scudder Conversion Fund 2 3,096,113 - 3,096,113 -
* Scudder Conversion Fund 1 - 3,096,113 3,096,113 -
</TABLE>
* Party-in-interest.
See accompanying independent auditors' report.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
GREY WOLF DRILLING COMPANY 401(k) PLAN
July 13, 1999 /s/ Donald J. Guedry, Jr.
----------------- ---------------------------------------
Donald J. Guedry, Jr.
Vice President & Treasurer for Grey Wolf, Inc.
And Grey Wolf Drilling Company 401(k) Plan
Administrative Committee Member
12
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 Consent of KPMG LLP
</TABLE>
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated June 29, 1999
on the financial statements and supplemental schedules of the Grey Wolf
Drilling Company 401(k) Plan as of December 31, 1998 and 1997 and for the year
ended December 31, 1998, included in this form 11-K, into the previously filed
Grey Wolf, Inc. Form S-8 Registration Statements (File No. 333-65049)
/s/ KPMG LLP
July 13, 1999
Houston, Texas
