<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number: 1-9245
--------------------
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)
281-874-0035
(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____
The number of shares of Common Stock, par value $.10 per share,
outstanding as of April 30, 1998 was 100,835,668.
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<PAGE> 2
NABORS INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997 2
Condensed Consolidated Statements of
Income for the Three Months Ended
March 31, 1998 and 1997 3
Condensed Consolidated Statements of
Changes in Stockholders' Equity for the Three
Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March
31, 1998 and 1997 5
Notes to Condensed Consolidated
Financial Statements 6
Report of Independent Accountants 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
<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>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,032 $ 5,623
Marketable securities 6,529 6,983
Accounts receivable, net 219,698 243,061
Inventory and supplies 24,101 21,305
Prepaid expenses and other current assets 26,294 26,359
----------- -----------
Total current assets 277,654 303,331
Property, plant and equipment, net 972,894 923,402
Marketable securities 33,185 29,529
Other long-term assets 25,985 25,044
----------- -----------
Total assets $ 1,309,718 $ 1,281,306
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 9,783 $ 6,091
Short-term borrowings 26,338 55,360
Trade accounts payable and accrued liabilities 162,719 166,614
Income taxes payable 19,149 12,695
----------- -----------
Total current liabilities 217,989 240,760
Long-term obligations 222,268 226,299
Other long-term liabilities 18,905 16,810
Deferred income taxes 32,442 30,097
----------- -----------
Total liabilities 491,604 513,966
----------- -----------
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 101,305 and 101,325 10,131 10,133
Authorized Class B shares 8,000; none issued or outstanding -- --
Capital in excess of par value 410,955 400,120
Accumulated other comprehensive income:
Cumulative translation adjustment (4,522) (4,130)
Net unrealized gain on marketable securities 11,441 10,800
Retained earnings since May 1, 1988 393,273 353,581
Less treasury stock, at cost, 489 common shares (3,164) (3,164)
----------- -----------
Total stockholders' equity 818,114 767,340
----------- -----------
Total liabilities and stockholders' equity $ 1,309,718 $ 1,281,306
----------- -----------
</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
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
--------- ---------
<S> <C> <C>
Revenues $ 286,774 $ 238,683
--------- ---------
Operating expenses:
Direct costs 188,447 177,466
General and administrative expenses 20,105 17,278
Depreciation and amortization 21,203 15,737
--------- ---------
Operating expenses 229,755 210,481
--------- ---------
Operating income 57,019 28,202
--------- ---------
Other income (expense):
Interest expense (3,739) (3,156)
Interest income 747 1,077
Other income, net 9,992 6,823
--------- ---------
Other income 7,000 4,744
--------- ---------
Income before income taxes 64,019 32,946
--------- ---------
Income taxes:
Current 11,065 3,964
Deferred 13,262 7,541
--------- ---------
Income taxes 24,327 11,505
--------- ---------
Net income $ 39,692 $ 21,441
--------- ---------
Earnings per share:
Basic $ .39 $ .22
--------- ---------
Diluted $ .36 $ .21
--------- ---------
Weighted average number of shares outstanding:
Basic 100,805 95,914
--------- ---------
Diluted 113,803 110,775
--------- ---------
</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 CHANGES
IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
CAPITAL STOCK IN EXCESS OTHER TOTAL
----------------- OF PAR COMPREHENSIVE RETAINED TREASURY STOCKHOLDERS'
SHARES PAR VALUE VALUE INCOME EARNINGS STOCK EQUITY
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996 95,225 $ 9,523 $309,388 $4,448 $216,832 $(3,164) $537,027
-------------------------------------------------------------------------------------
Comprehensive income:
Net income 21,441 21,441
Translation adjustment (464) (464)
Unrealized loss on marketable
securities (115) (115)
-------------------------------------------------------------------------------------
Total comprehensive income -- -- -- (579) 21,441 -- 20,862
-------------------------------------------------------------------------------------
Issuance of common shares for stock
options exercised 73 7 434 441
Issuance of common shares for
warrants exercised 1,500 150 8,100 8,250
Reclassification of pre-quasi-
reorganization tax benefit 1,843 (1,843) --
Tax benefit recognized on
exercised stock option deductions 7,141 7,141
-------------------------------------------------------------------------------------
Balances, March 31, 1997 96,798 $ 9,680 $326,906 $3,869 $236,430 $(3,164) $573,721
-------------------------------------------------------------------------------------
Balances, December 31, 1997 101,325 $10,133 $400,120 $6,670 $353,581 $(3,164) $767,340
-------------------------------------------------------------------------------------
Comprehensive income:
Net Income 39,692 39,692
Translation adjustment (392) (392)
Unrealized loss on marketable
securities (net of tax of $345) 641 641
-------------------------------------------------------------------------------------
Total comprehensive income -- -- -- 249 39,692 -- 39,941
-------------------------------------------------------------------------------------
Issuance of common shares for
stock options exercised 33 3 243 246
Tax benefit recognized on exercised
stock option deductions 11,587 11,587
Return and retirement of common shares
held in escrow in connection with
Adcor acquisition (53) (5) (995) (1,000)
-------------------------------------------------------------------------------------
Balances, March 31, 1998 101,305 $10,131 $410,955 $6,919 $393,273 $(3,164) $818,114
-------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE> 6
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 78,997 $ 22,911
-------- --------
Cash flows from investing activities:
Purchases of marketable securities, available for sale -- (4,803)
Exercise of warrants -- 3,220
Cash paid for acquisitions, net (719) --
Cash received from disposition of long-term assets and business 22,533 1,959
Capital expenditures (76,280) (36,654)
-------- --------
Net cash used for investing activities (54,466) (36,278)
-------- --------
Cash flows from financing activities:
Increase in restricted cash (7) (9)
Decrease in long-term borrowings, net (339) (14,552)
(Decrease) increase in short-term borrowings, net (29,022) 1,177
Common stock transactions 246 8,691
-------- --------
Net cash used for financing activities (29,122) (4,693)
-------- --------
Net decrease in cash and cash equivalents (4,591) (18,060)
Cash and cash equivalents, beginning of period 5,623 86,153
-------- --------
Cash and cash equivalents, end of period $ 1,032 $ 68,093
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 7
8
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Interim Financial Information
The unaudited condensed consolidated financial statements of Nabors
Industries, Inc. (collectively with its subsidiaries, the "Company") are
prepared in conformity with generally accepted accounting principles ("GAAP"),
but do not purport to be a complete presentation inasmuch as all note
disclosures required by GAAP are not included. Reference is made to the
Company's 1997 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 March 31, 1998 and the results of its operations and its cash flows for
the periods ended March 31, 1998 and 1997. Interim results for the three months
ended March 31, 1998 are not necessarily indicative of results which will be
realized for the full year ending December 31, 1998.
Fiscal Year Change
The Company changed its fiscal year end from September 30 to December
31, effective for the fiscal year beginning January 1, 1998. The three month
transition period from October 1, 1997 through December 31, 1997 (the
"Transition Period") preceded the start of this new fiscal year period. The
condensed consolidated financial statements for the three months ended March 31,
1998 reflect the results of the Company for the first quarter of the new fiscal
year.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130") Reporting Comprehensive Income, at the beginning of fiscal year
1998. SFAS 130 establishes standards for reporting and presentation of
comprehensive income and its components. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. In accordance with the
provisions of SFAS 130, the Company has presented the components of
comprehensive income in its condensed consolidated statements of changes in
stockholders' equity.
Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), Earnings Per Share, at the beginning of the Transition Period.
Under the provisions of SFAS 128, primary earnings per share and fully diluted
earnings per share are replaced by basic earnings per share and diluted earnings
per share. In accordance with SFAS 128, all prior period earnings per share
amounts presented have been restated.
Basic earnings per share for all periods presented equal net income
divided by the weighted average number of shares of common stock ("Shares")
outstanding during the period, and exclude Shares held in treasury. Diluted
earnings per share for all periods presented reflect the assumed conversion of
the $172.5 million, 5% Convertible Subordinated Notes due 2006, issued on May
28, 1996
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<PAGE> 8
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(the "5% Notes"). As a result, net income, plus $1.4 million of after tax
interest expense incurred on the 5% Notes, is divided by the weighted average
Shares outstanding, after giving effect to dilutive stock options and warrants,
as well as 9.5 million Shares assumed to be issued on conversion of the 5%
Notes.
Note 2 Dispositions
During January 1998, the Company completed the sale of all of the
capital stock of its wholly owned subsidiary, J.W. Gibson Well Service Company
("Gibson"), to a subsidiary of Key Energy Group, Inc. ("Key"). The assets of
Gibson consisted of 74 active well servicing and workover rigs, associated
auxiliary equipment, trucks, inventory, and several yards and related
facilities. As consideration for the sale of Gibson, the Company received
approximately $20.0 million plus the value of Gibson's working capital in cash,
100,000 shares of Key common stock and 265,000 warrants to acquire common stock
of Key at an exercise price of $18.00 per share, and recorded a pre-tax gain of
$13.7 million.
Note 3 Capital Stock
During the three months ended March 31, 1998, options to acquire 33,900
Shares were exercised at prices ranging from $6.25 to $17.00 per Share.
During the three months ended March 31, 1998, 53,333 Shares
that had been held in escrow in connection with the Company's acquisition of
Adcor-Nicklos Drilling Company in January 1997 were returned to the Company and
retired.
Note 4 Income Taxes
The effective tax rate during the three months ended March 31, 1998 was
38%, as compared to an effective tax rate of 35% for the prior year period. The
increase in the effective tax rate for the current year is the result of
increased foreign taxes.
Note 5 Commitments and Contingencies
Capital Expenditures
As of March 31, 1998, the Company had capital expenditure purchase
commitments outstanding for drilling equipment of approximately $52.9 million.
Contingencies
The Company is a defendant or otherwise involved in a number of
lawsuits in the ordinary course of its business. In the opinion of management,
the Company's ultimate liability with respect to these pending lawsuits is not
expected to have a significant or material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
7
<PAGE> 9
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Year 2000
A number of computer programs in use today were written using two
digits rather than four digits to define the applicable year. Any computer
programs that have date sensitive functionality may recognize a date of "00" as
the year 1900 rather than the year 2000. This could result in miscalculations or
system failures causing disruptions of operations.
It is the Company's goal to ensure that all of the critical systems and
process that are under its direct control remain functional. However, there may
be certain systems or processes relied on by the Company that are outside of its
control, and there can be no assurance that these systems or processes will
remain functional. In the opinion of management, the costs to modify its current
systems will not have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
8
<PAGE> 10
Report of Independent Accountants
To the Stockholders and Board of Directors
of Nabors Industries, Inc.
We have reviewed the accompanying condensed consolidated financial statements of
Nabors Industries, Inc. and Subsidiaries as of March 31, 1998 and for the three
months then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements for them to be in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Houston, Texas
April 15, 1998
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
This discussion covers the three months ended March 31, 1998, which is
the first quarter of the new fiscal year beginning January 1, 1998. The Company
changed its fiscal year end from September 30 to December 31, effective for the
fiscal year beginning January 1, 1998.
Company revenues for the first quarter of fiscal 1998 ("Current
Quarter") totaled $286.8 million, representing a $48.1 million, or 20% increase
over the prior year period. Operating income and net income totaled $57.0
million and $39.7 million ($.36 per diluted share) during the Current Quarter,
respectively, representing an increase of 102% and 85% compared to the prior
year period. The significant improvement in operating results during the Current
Quarter was primarily the result of higher dayrates in almost all of the
Company's operating areas. Throughout 1997, the Company experienced increases in
rig pricing as a result of a convergence in the supply and the demand for
quality rigs on a worldwide basis. The results for the US Lower 48 operation
improved significantly over the prior year period despite fewer rigs operating
and the sale of the Company's J.W. Gibson ("Gibson") workover and well servicing
operation during January 1998. Although the recent drops in pricing levels for
crude oil have adversely affected the Company's US Lower 48 rig count as
compared to the prior year period, rig pricing during the Current Quarter
remained higher as compared to the prior year period. The Alaska and Canada
operations both achieved new highs in operating results, while the International
operation matched the high achieved in a previous quarter. Net income during the
Current Quarter was positively affected by a gain recognized on the sale of
Gibson, however, a higher effective tax rate reduced net income.
The Company's US Lower 48 operation was adversely impacted during the
Current Quarter by lower crude oil prices. As compared to the quarter ended
December 31, 1997, the US Lower 48 operation averaged 29 fewer rigs operating,
primarily in the shallower mechanical category. If the weakness in crude oil
prices deepens or continues for an extended period, there is a possibility of
further deterioration in rig utilization and downward pressure on current rig
dayrates for the Company's US Lower 48 operation. Additionally, the Company's
other business units could be adversely impacted as well.
The following tables set forth certain financial information with
respect to the Company by geographical area:
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997 Increase (Decrease)
-------- -------- -------------------
(In thousands, except percentages)
<S> <C> <C> <C> <C>
Revenues:
North America $ 234,358 $199,140 $35,218 18%
International 52,416 39,543 12,873 33%
--------- -------- -------
Total revenues 286,774 238,683 48,091 20%
--------- -------- -------
Operating income:
North America 48,681 24,280 24,401 100%
International 11,899 6,832 5,067 74%
Corporate expenses (3,561) (2,910) (651) (22%)
--------- -------- -------
Total operating income $ 57,019 $ 28,202 $28,817 102%
--------- -------- -------
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
------------------------ -------------------------
Rig Rig Rig Rig
Rig activity(1): Years(2) Utilization Years(2) Utilization
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
North America 215.4 58% 223.9 63%
International 31.0 60% 31.1 59%
----- -----
Total rig activity 246.4 59% 255.0 62%
----- -----
</TABLE>
(1) Excludes labor contracts and Gibson workover and well servicing rigs,
which were sold in January 1998.
(2) Rig years represents a measure of the number of equivalent rigs
operating during a given period. For example, one rig operating 182
days during a 365-day period represents 0.5 rig years.
North America. North America revenues totaled $234.4 million during the
Current Quarter, representing an 18% increase over the prior year period. The
increase was primarily attributable to a significant increase in revenues for
the Company's Alaska and US Lower 48 operations during the Current Quarter. The
Alaska drilling operation performed at record levels during the Current Quarter
as a result of increased equivalent rig years and improved dayrates. Revenues
for Peak Oilfield Services, the Company's Alaskan construction and logistics
joint venture, also improved during the Current Quarter as a result of increased
activity. US Lower 48 revenues increased during the Current Quarter despite a
decline in equivalent rig years and the sale of the Gibson workover and well
servicing operation during January 1998. The increase in US Lower 48 revenues
was the result of higher dayrates for virtually all classes of rigs as compared
to the prior year period. Additionally, the Company increased its US Lower 48
fleet of premium, deep drilling, silicon-controlled rectifier (SCR) rigs through
a number of acquisitions during 1997. Deep drilling SCR rigs typically command
higher dayrates than shallower mechanical rigs. The decline in US Lower 48
equivalent rig years during the Current Quarter was in the shallower mechanical
rig category, which was partially offset by a greater number of SCR rigs working
as compared to the prior year period. Revenues for the Gulf of Mexico operation
also increased during the Current Quarter on the strength of improved dayrates
for the Company's platform workover rigs, jackup workover rigs and platform
drilling rigs. Equivalent rig years for the Company's Gulf of Mexico operation
were essentially flat as compared to the prior year period. Canada operation
revenues increased during the Current Quarter due to an improvement in dayrates
and utilization resulting from increased demand. Equivalent North America rig
years decreased to 215.4 years during the Current Quarter as compared to 223.9
years during the prior year period.
International. International revenues totaled $52.4 million during the
Current Quarter, representing a 33% increase over the prior year period. Middle
Eastern revenues increased significantly during the Current Quarter as a result
of new contracts for two rigs in Saudi Arabia, which commenced operations during
March 1997. Additionally, increased drilling activity in Yemen and the United
Arab Emirates further increased revenues for the Company's Middle Eastern
operations. International revenues were also positively impacted by a new one
rig contract in Gabon, which commenced operations during December 1997, and a
platform workover rig operating offshore Cameroon. South and Central American
revenues increased during the Current Quarter as the impact of a decline in
equivalent rig years in Venezuela was more than offset by higher dayrates there.
Mitigating these increases was the completion of a one rig contract in Laos
during 1997. Equivalent international rig years, excluding labor contracts, were
31.0 years during the Current Quarter as compared to 31.1 years in the prior
year period.
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The following table sets forth selected consolidated financial
information of the Company expressed as a percentage of total operating
revenues:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
------ -------
<S> <C> <C>
Revenues 100.0% 100.0%
------ -------
Operating expenses:
Direct costs 65.7% 74.4%
General and administrative
expenses 7.0% 7.2%
Depreciation and
amortization 7.4% 6.6%
------ -------
Operating expenses 80.1% 88.2%
------ -------
Operating income 19.9% 11.8%
Other income 2.4% 2.0%
------ -------
Income before income taxes 22.3% 13.8%
Income taxes 8.5% 4.8%
------ -------
Net income 13.8% 9.0%
------ -------
</TABLE>
Direct costs as a percentage of revenues decreased to 66% during the
Current Quarter, as compared to 74% during the prior year period. The resulting
increase in the gross margin percentage during the Current Quarter is the result
of improved margins for essentially all of the Company's operations on the
strength of improved dayrates. Although the Company incurred a temporary, but
high, level of extra costs associated with retaining crews and stacking rigs in
the US Lower 48 during the Current Quarter, US Lower 48 margins were
significantly higher than the prior year period as a result of improved dayrates
realized during the Current Quarter and some adverse footage costs incurred
during the prior year period. Depreciation expense as a percentage of revenues
increased during the Current Quarter as a result of capital expenditures and a
number of acquisitions completed during 1997.
Other income increased during the Current Quarter as a result of a
$13.7 million pre-tax gain recognized on the sale of the Gibson operation during
January 1998. As consideration for the sale of Gibson, the Company received
approximately $20.0 million, plus the value of working capital in cash, 100,000
shares of Key Energy Group, Inc. ("Key") common stock and 265,000 warrants to
acquire common stock of Key at an exercise price of $18.00 per share. Other
income during the prior year period consisted primarily of realized and
unrealized gains on marketable securities.
The effective tax rate during the Current Quarter was 38%, as compared
to an effective tax rate of 35% for the prior year period. The increase in the
effective tax rate for the Current Quarter is the result of increased foreign
taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash from operations and has
substantial borrowing capacity under various credit facility arrangements.
Additionally, the Company has access to public debt and equity capital markets.
The Company's senior debt rating as provided by Moody's Investor Service remains
at "A3".
The Company had working capital of $59.7 million as of March 31, 1998,
representing a $2.9 million decrease as compared to December 31, 1997. The
Company's ratio of funded debt to funded debt plus stockholders' equity,
commonly referred to as the debt to capital ratio, was 0.24:1 as of March 31,
1998 as compared to 0.27:1 as of December 31, 1997. The improvement in the debt
to capital ratio is the result of a $29.0 million reduction in short-term
borrowings, as well as increased stockholders' equity resulting primarily from
the Company's earnings.
Net cash provided by operating activities totaled $79.0 million during
the Current Quarter, compared to $22.9 million during the prior year comparable
period. During the Current Quarter and prior year period, net income was
increased for non-cash items such as depreciation and deferred taxes. During the
Current Quarter, cash was provided from
12
<PAGE> 14
changes in the Company's working capital accounts, while changes in the
Company's working capital accounts reduced cash in the prior year period.
Net cash used for investing activities totaled $54.5 million during the
Current Quarter compared to $36.3 million during the prior year period. Cash
paid for capital expenditures represented the primary use of cash during both
the Current Quarter and the prior year period. During the Current Quarter, cash
was provided from the disposition of long-term assets and business, primarily
the sale of Gibson.
Financing activities used cash totaling $29.1 million during the
Current Quarter compared to $4.7 million during the prior year period. During
the Current Quarter, cash was used to reduce short-term borrowings. During the
prior year period, cash used to reduce long-term borrowings was partially offset
by cash provided by common stock transactions.
The Company's cash and cash equivalents and short-term investments in
marketable securities totaled $7.6 million as of March 31, 1998. In addition,
the Company had long-term investments in marketable securities of $33.2 million.
The Company currently has credit facility arrangements with various banks
totaling $254.7 million. As of March 31, 1998, remaining availability, after
borrowings on the facilities and outstanding letters of credit, totaled
approximately $210.3 million.
The Company has a universal shelf registration statement on Form S-3
filed with the Securities and Exchange Commission to allow the Company to offer,
from time to time, up to $300.0 million in debt securities, preferred stock,
common stock, depository shares or warrants, and for secondary sales not
involving the Company of up to $50.0 million.
As of March 31, 1998, the Company had capital expenditure purchase
commitments outstanding for drilling equipment of approximately $52.9 million.
The current cash and cash equivalents, short-term investments, credit
facility position, projected cash flow generated from current operations, and
cash provided by the sale of Gibson are expected to adequately finance the
Company's sustaining capital and debt service requirements for the next twelve
months.
OTHER MATTERS
This Quarterly Report on Form 10-Q includes certain statements that may
be deemed to be "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this Form 10-Q that address activities, events or
developments that the Company or its management "expects", "projects",
"believes" or "anticipates" will or may occur in the future, including such
matters as future capital expenditures and investments in the acquisition and
refurbishment of rigs (including the amount and nature thereof), repayment of
debt, expansion and other development trends of the contract drilling industry,
business strategies, expansion and growth of operations and other such matters
are forward-looking statements. These statements are based on certain
assumptions and analyses made by management of the Company in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate in the
circumstances. Such statements are subject to a number of risks and
uncertainties, including those discussed in this report, general economic and
business conditions, prices of crude oil and natural gas, foreign exchange and
currency fluctuations, the business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or regulations and
other factors, many of which are beyond the control of the Company. Any such
statements are not guarantees of future performance, and actual results or
developments may differ materially from those projected in the forward-looking
statements.
The Company's businesses depend, to a large degree, on 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, also could materially affect the Company's financial
condition, results of operations and cash flows.
13
<PAGE> 15
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1998 Annual Meeting of Shareholders held on March 3,
1998, 87,908,053 shares of common stock were present in person or by proxy,
constituting 87.18% of the outstanding common stock of the Company entitled to
vote. The sole matter voted upon at the Annual Meeting was as follows:
Election of Directors: Two Class I directors were elected to the Board
of Directors of the Company to serve for a three-year term, until 2001:
Richard A. Stratton
Votes cast in favor: 87,610,918
Votes withheld: 297,135
Hans W. Schmidt
Votes cast in favor: 87,605,200
Votes withheld: 302,853
Class II Directors, Messrs. Anthony G. Petrello, Myron M. Sheinfeld and
Martin J. Whitman, continued in office with terms expiring in 1999.
Class III Directors, Messrs. Gary T. Hurford, Eugene M. Isenberg and
Jack Wexler, continued in office with terms expiring in 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement Re: Computation of Per Share Earnings
15.1 Awareness Letter of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three
months ended March 31, 1998.
14
<PAGE> 16
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 - Finance (principal financial
and accounting officer)
Dated: May 15, 1998
15
<PAGE> 17
INDEX TO EXHIBITS
11 Statement Re: Computation of Per Share Earnings
15.1 Awareness Letter of Independent Accountants
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
NABORS INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Basic:
Weighted average number of shares outstanding 100,805 95,914
-------- --------
Net income $ 39,692 $ 21,441
-------- --------
Per share amount $ .39 $ .22
-------- --------
Diluted:
Weighted average number of shares outstanding 100,805 95,914
Net effect of dilutive stock options and warrants-based
on the treasury stock method using
average market price 3,481 5,344
Assumed conversion of 5% convertible notes 9,517 9,517
-------- --------
Total 113,803 110,775
-------- --------
Net income $ 39,692 $ 21,441
Add 5% convertible note interest, net
of tax effect 1,348 1,402
-------- --------
Total $ 41,040 $ 22,843
-------- --------
Per share amount $ .36 $ .21
-------- --------
</TABLE>
<PAGE> 1
EXHIBIT 15.1
Coopers & Lybrand L.L.P. Awareness Letter
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Nabors Industries, Inc. and Subsidiaries
Registration Statements on Form S-8 and Form S-3
We are aware that our report dated April 15, 1998 on our review of the interim
condensed consolidated financial information of Nabors Industries, Inc. and
Subsidiaries for the three months ended March 31, 1998 and included in this Form
10-Q is incorporated by reference in the Company's registration statements on
Form S-8 (Registration Numbers 333-11313, 33-87324, 33-87322, 33-47521, 33-45097
and 33-39316) and on Form S-3 (Registration Numbers 333-20501 and 333-25233).
Pursuant to Rule 436 (c) under the Securities Act of 1933, this report should
not be considered a part of the registration statement prepared or certified by
us within the meanings of Section 7 and 11 of the Act.
Coopers & Lybrand L.L.P.
Houston, Texas
May 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,032
<SECURITIES> 6,529
<RECEIVABLES> 219,698
<ALLOWANCES> 0
<INVENTORY> 24,101
<CURRENT-ASSETS> 277,654
<PP&E> 1,324,155
<DEPRECIATION> 351,261
<TOTAL-ASSETS> 1,309,718
<CURRENT-LIABILITIES> 217,989
<BONDS> 222,268
0
0
<COMMON> 10,131
<OTHER-SE> 807,983
<TOTAL-LIABILITY-AND-EQUITY> 1,309,718
<SALES> 286,774
<TOTAL-REVENUES> 286,774
<CGS> 188,447
<TOTAL-COSTS> 188,447
<OTHER-EXPENSES> 41,308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,739
<INCOME-PRETAX> 64,019
<INCOME-TAX> 24,327
<INCOME-CONTINUING> 39,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,692
<EPS-PRIMARY> .39
<EPS-DILUTED> .36
</TABLE>
