<PAGE> 1
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 December 31, 1995
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 1-9245
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NABORS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 93-0711613
----------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 W. Greens Road, Suite 1200, Houston, Texas 77067
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
713-874-0035
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if change since last
report)
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
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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.
Number of shares of common stock outstanding as of January 31, 1996
totaled 84,722,790.
<PAGE> 2
NABORS INDUSTRIES, INC.
INDEX
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Page No.
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Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1995 and September 30, 1995 2
Condensed Consolidated Statements of
Income and Retained Earnings for the Three
Months Ended December 31, 1995 and 1994 3
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended December
31, 1995 and 1994 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,754 $ 12,038
Marketable securities 9,765 3,296
Accounts receivable, net 128,959 132,482
Inventory and supplies 16,635 14,079
Prepaid expenses and other current assets 18,726 21,550
------------- ----------------
Total current assets 180,839 183,445
Property, plant and equipment, net 396,852 383,713
Marketable securities 10,808 9,645
Other long-term assets 9,605 6,718
------------- ----------------
Total assets $ 598,104 $ 583,521
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 11,935 $ 11,158
Short-term borrowings 33,924 30,684
Trade accounts payable 42,766 53,891
Accrued liabilities 50,517 48,944
Income taxes payable 5,778 5,876
------------- ----------------
Total current liabilities 144,920 150,553
Long-term obligations 57,271 51,478
Other long-term liabilities 7,010 8,784
Deferred income taxes 4,373 3,956
------------- ----------------
Total liabilities 213,574 214,771
------------- ----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share:
Authorized 10,000 shares; none issued or outstanding - -
Capital stock, par value $.10 per share:
Authorized common shares 200,000;
issued and outstanding 85,321 and 85,017 8,532 8,502
Authorized Class B shares 8,000, none issued or outstanding - -
Capital in excess of par value 232,601 229,267
Cumulative translation adjustment (3,078) (2,670)
Net unrealized gain on marketable securities 1,516 354
Retained earnings since May 1, 1988 149,753 138,091
Less treasury stock, at cost, 755 common shares (4,794) (4,794)
------------- ----------------
Total stockholders' equity 384,530 368,750
------------- ----------------
Total liabilities and stockholders' equity $ 598,104 $ 583,521
============= ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Revenues $ 164,338 $ 126,002
--------------- ---------------
Operating expenses:
Direct costs 124,459 93,745
General and administrative expenses 12,538 11,639
Depreciation and amortization 10,009 6,963
--------------- ---------------
Operating expenses 147,006 112,347
--------------- ---------------
Operating income 17,332 13,655
--------------- ---------------
Other income (expense):
Interest expense (1,967) (1,948)
Interest income 250 586
Gain (loss) on sales of long-term assets 159 (79)
Other income, net 1,446 1,337
--------------- ---------------
Other expense (112) (104)
--------------- ---------------
Income before income taxes 17,220 13,551
Income taxes 1,958 2,478
--------------- ---------------
Net income 15,262 11,073
Reclassification of pre-quasi-
reorganization tax benefit (3,600) (3,103)
Retained earnings, beginning of period 138,091 95,165
--------------- ---------------
Retained earnings, end of period $ 149,753 $ 103,135
=============== ===============
Earnings per share $ .17 $ .13
--------------- ---------------
Weighted average number of shares outstanding 90,457 86,727
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
1995 1994
--------------- ----------------
<S> <C> <C>
Net cash provided by operating activities $ 15,967 $ 6,565
--------------- ----------------
Cash flows from investing activities:
Purchases of marketable securities, trading (5,585) -
Purchases of marketable securities, held-to-maturity - (7,736)
Maturities of marketable securities, held-to-maturity - 15,928
Cash paid for acquisition (5,768) -
Capital expenditures (21,061) (17,757)
Proceeds from sales of long-term assets and insurance claims 989 414
--------------- ----------------
Net cash used for investing activities (31,425) (9,151)
--------------- ----------------
Cash flows from financing activities:
Decrease in restricted cash 575 270
Increase (decrease) in long-term borrowings, net 6,570 (6,694)
Increase (decrease) in short-term borrowings, net 3,240 (3,048)
Common and treasury stock transactions (211) (1,497)
--------------- ----------------
Net cash provided by (used for) financing activities 10,174 (10,969)
--------------- ----------------
Net decrease in cash and cash equivalents (5,284) (13,555)
Cash and cash equivalents, beginning of period 12,038 22,563
--------------- ----------------
Cash and cash equivalents, end of period $ 6,754 $ 9,008
=============== ================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE> 6
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Interim Financial Information
The unaudited condensed consolidated financial statements of
Nabors Industries, Inc. (the "Company" or "Nabors") are prepared in conformity
with generally accepted accounting principles, but do not purport to be a
complete presentation inasmuch as all note disclosures required are not
included. Reference is made to the Company's 1995 Annual Report on Form 10-K
for additional note disclosures.
In the opinion of management, the condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of December 31, 1995 and the results of its operations and its
cash flows for the respective periods ended December 31, 1995 and 1994.
Interim results for the three months ended December 31, 1995 are not
necessarily indicative of results which will be realized for the full year
ending September 30, 1996.
Note 2 Capital Stock
During the three month period ended December 31, 1995, 285,600
options were exercised at prices ranging from $1.07 to $6.875 per share. In
addition, 19,268 common shares were issued upon vesting under a stock award
plan.
During October 1995, the Company purchased for $1.0 million
650,000 warrants that the Company had previously issued in connection with the
purchase of several drilling rigs in April 1994. The warrants were
excercisable until April 1996 at $7.92 per share.
Note 3 Commitments and Contingencies
Capital Expenditures
As of December 31, 1995, the Company had capital expenditure
commitments totaling approximately $10.3 million.
Contingencies
A petition was filed on March 4, 1994, in the 61st Judicial
Court, of Harris County, Texas, against Nealwell Drilling Limited ("Nealwell")
and Sundowner Offshore Services, Inc. ("Sundowner"), asserting that Nealwell
breached a contract, and Sundowner tortiously interfered with alleged contract
rights of Primrose Drilling Ventures, Ltd., when Sundowner purchased a jackup
workover rig from Nealwell for $2.0 million in cash. Sundowner was merged with
Nabors during October 1994. Primrose has alleged approximately $34.5 million
in actual damages, as well as exemplary damages not less than its actual
damages. Company management believes that the litigation instituted by
Primrose is without merit and intends to vigorously defend all claims of
Primrose. The case is in the discovery stages.
The Company is a defendant or otherwise involved in a number
of lawsuits. In the opinion of management, the Company's ultimate liability
with respect to these lawsuits is not expected to have a significant or
material adverse effect on the Company's consolidated financial position or
results of operations.
5
<PAGE> 7
ITEM 2.
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Quarter of Fiscal 1996 Compared to First Quarter of Fiscal 1995
Company revenues for the first quarter of fiscal 1996
("Current Quarter") totaled $164.3 million, representing a $38.3 million, or
30% increase over the prior year comparable quarter. Operating income during
the Current Quarter totaled $17.3 million compared to $13.7 million during the
prior year quarter. Net income totaled $15.3 million ($.17 per share) during
the Current Quarter compared to $11.1 million ($.13 per share) during the prior
year quarter. The significant improvement in operating results was due
primarily to improved results of the Company's operations in the US Lower 48,
Alaska and Venezuela.
The following tables set forth financial information with
respect to the Company and its subsidiaries on a consolidated basis by
geographical area :
<TABLE>
<CAPTION>
First Quarter
--------------------------------------------------------------------------------------------
Increase
1995 1994 (Decrease)
-------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
North America $123,199 75% $89,704 71% $33,495 37%
International 41,139 25% 36,298 29% 4,841 13%
-------------------------- -------------------------- --------------------------
Total revenues 164,338 100% 126,002 100% 38,336 30%
-------------------------- -------------------------- --------------------------
Operating income
North America 14,055 70% 11,792 73% 2,263 19%
International 5,972 30% 4,411 27% 1,561 35%
-------------------------- -------------------------- --------------------------
20,027 100% 16,203 100% 3,824 24%
Corporate expenses (2,695) (2,548) (147) (6%)
-------- ------- --------------------------
Total operating income $17,332 $13,655 $ 3,677 27%
======== ======= ==========================
</TABLE>
<TABLE>
<CAPTION>
First Quarter
--------------------------------------------------------------------------------------------
1995 1994
----------------------------------------- ------------------------------------------------
Rig Rig Rig Rig
Years Utilization Years Utilization
--------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Rig activity(1)
North America 147.8 60% 121.2 57%
International 26.9 60% 23.2 58%
--------------------- --------------------- --------------------- --------------------
174.7 60% 144.4 57%
===================== ===================== ===================== ====================
</TABLE>
(1) Excludes labor contracts.
North America (including Canada) revenues totaled $123.2
million during the Current Quarter, representing a 37% increase over the prior
year comparable quarter. The increase was primarily attributable to a 48%
increase in revenues for the Company's US Lower 48 operations resulting in part
from increased equivalent rig years associated with the addition of the Delta
Drilling Company rigs acquired in January 1995 and the completion of a greater
number of turnkey contracts during the Current Quarter. Average per day
revenues for the US Lower 48 were also positively impacted by the Current
Quarter turnkey contracts as per day revenues associated with turnkey contracts
are typically higher than daywork or footage contracts. Revenues for the Gulf
of Mexico operations increased by 23% during the Current Quarter due to
increased equivalent rig years for the Company's platform drilling rigs and
increased equivalent
6
<PAGE> 8
rig years for the Company's platform workover rigs resulting from the addition
of the newly constructed Super Sundowner XV and XVI rigs, which commenced
operations in February and September 1995, respectively. Additionally,
Sundowner XII was redeployed from Australia to the Gulf of Mexico in May 1995.
Alaska revenues increased by 41% as a result of three additional rigs working
during the Current Quarter as compared to the prior year quarter. Equivalent
rig years for North America during the Current Quarter totaled 147.8 years as
compared to 121.2 years during the prior year comparable quarter.
International revenues totaled $41.1 million during the
Current Quarter, representing a 13% increase over the prior year comparable
quarter. Equivalent international rig years totaled 26.9 years during the
Current Quarter, as compared with 23.2 years in the prior year comparable
quarter. Revenues for the Company's South and Central America operations
increased by 37% during the Current Quarter primarily due to increased
activity in Venezuela where equivalent rig years totaled 13.8 years as compared
to 9.3 years during the prior year comparable quarter. Equivalent labor
contract years in Venezuela were 4.0 years in both the Current Quarter and the
prior year comparable quarter. Additionally, South and Central America
revenues were positively impacted by the commencement of a one rig drilling
contract in Colombia during the Current Quarter. Revenues for the Company's
Middle Eastern, CIS and other international operations were flat as compared to
the prior year comparable period as equivalent rig years totaled 10.7 years as
compared to 11.8 years for the prior year. UK North Sea revenues increased by
9% during the Current Quarter as a result of three additional labor contracts
as compared to the prior year comparable quarter.
The following table sets forth selected consolidated financial
information of the Company expressed as a percentage of total operating
revenues:
<TABLE>
<CAPTION>
First Quarter
---------------------------
1995 1994
----- -----
<S> <C> <C>
Revenues 100.0% 100.0%
----- -----
Operating expenses:
Direct costs 75.7% 74.4%
General and administrative expenses 7.7% 9.2%
Depreciation and amortization 6.1% 5.5%
----- -----
Operating expenses 89.5% 89.1%
----- -----
Operating income 10.5% 10.9%
Other expense (0.0%) (0.1%)
----- -----
Income before income taxes 10.5% 10.8%
Income taxes 1.2% 2.0%
----- -----
Net income 9.3% 8.8%
===== =====
</TABLE>
Direct costs as percentage of revenues increased during the
Current Quarter as compared to the prior year comparable quarter. The decrease
in operating margins is largely due to a greater percentage of the Company's
total revenues during the Current Quarter being generated by the Company's US
Lower 48 operations. The contracts in the US Lower 48 are usually at a lower
gross margin percentage than international and Alaska contracts. Selling,
general and administrative expenses as a percentage of revenues decreased
during the Current Quarter due to the increase in revenues for the US Lower 48
operations, as these expenses were spread over a larger revenue base.
In December 1995 the Venezuela bolivar devalued by
approximately 71% as compared to the US dollar due to the deterioration in that
country's economic condition. As a result of the devaluation, the Company
recognized a translation gain of $.3 million during the Current Quarter as the
Company had a bolivar denominated net monetary liability position.
The income tax provision decreased during the Current Quarter
due to an increased percentage of the Company's pretax earnings being generated
by the Company's US operations, as substantially all of this income is offset
by available US Federal net operating loss carryforwards.
7
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $5.3 million during the
Current Quarter compared to a decrease of $13.6 million during the prior year
comparable quarter.
Net cash provided by operating activities totaled $16.0
million during the Current Quarter compared to $6.6 million during the prior
year comparable quarter. During the Current Quarter and prior year comparable
quarter, net income, as adjusted for non-cash items such as depreciation, was
partially offset by the negative impact on cash from changes in the Company's
working capital accounts.
Net cash used for investing activities totaled $31.4 million
during the Current Quarter compared to $9.2 million during the prior year
comparable quarter. Capital expenditures, cash paid for an acquisition in
Alaska and purchases of marketable securities represented the primary uses of
cash during the Current Quarter. During the prior year comparable quarter,
capital expenditures and the purchase of marketable securities represented the
primary uses of cash, partially offset by maturities of marketable securities.
Financing activities provided cash totaling $10.2 million
during the Current Quarter compared to $11.0 million in cash used during the
prior year comparable quarter. During the Current Quarter cash was provided by
long- term and short-term borrowings, as well as a decrease in restricted cash.
In the prior year quarter, cash was used for scheduled principal payments on
long-term obligations, a reduction in short-term borrowings, and common stock
transactions.
The Company's cash and cash equivalents and short-term
investments in marketable securities totaled $16.5 million as of December 31,
1995. In addition, the Company had long-term investments in marketable
securities of $10.8 million as of December 31, 1995. The Company currently has
credit facility arrangements with a number of banks totaling $53.7 million.
These credit facilities are limited at any given time to receivables of certain
of the Company's subsidiaries. As of December 31, 1995, remaining
availability, after borrowings on the facilities and outstanding letters of
credit, totaled approximately $8.8 million.
As of December 31, 1995, the Company had capital expenditure
commitments totaling approximately $10.3 million.
The current cash and cash equivalents, short-term investments,
credit facility position, and projected cash flow generated from current
operations are expected to adequately finance the Company's non-discretionary
capital and debt service requirements for the next twelve months.
OTHER MATTERS
The Company's financial condition and results of operations
are dependent upon the level of spending by oil and gas companies for
exploration, development and production activities. Therefore, a sustained
increase or decrease in the price of oil or natural gas, which could have a
material impact on exploration, development and production activities, could
materially affect the Company's financial condition and results of operations.
Generally, a sustained change in the price of oil would have a greater impact
on the Company's Alaska and International operations, while a sustained change
in the price of natural gas would have a greater impact on the US Lower 48,
Gulf of Mexico, and Canadian operations.
8
<PAGE> 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1995.
SIGNATURES
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.
NABORS INDUSTRIES, INC.
/s/ Anthony G. Petrello
--------------------------------------
Anthony G. Petrello
President and Chief Operating Officer
/s/ Bruce P. Koch
--------------------------------------
Bruce P. Koch
Vice President of Finance
Dated: February 14, 1996
10
<PAGE> 11
INDEX TO EXHIBITS
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,754
<SECURITIES> 9,765
<RECEIVABLES> 128,959
<ALLOWANCES> 0
<INVENTORY> 16,635
<CURRENT-ASSETS> 180,839
<PP&E> 617,974
<DEPRECIATION> 221,122
<TOTAL-ASSETS> 598,104
<CURRENT-LIABILITIES> 144,920
<BONDS> 0
<COMMON> 8,532
0
0
<OTHER-SE> 375,998
<TOTAL-LIABILITY-AND-EQUITY> 598,104
<SALES> 164,338
<TOTAL-REVENUES> 164,338
<CGS> 124,459
<TOTAL-COSTS> 124,459
<OTHER-EXPENSES> 22,547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,967
<INCOME-PRETAX> 17,220
<INCOME-TAX> 1,958
<INCOME-CONTINUING> 15,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,262
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
