<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 2, 1998
------------
NATIONAL-OILWELL, INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-12317 76-0475815
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(Address of Principal (Zip Code)
Executive Offices)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (713) 960-5100
- -------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
This amendment to the Company's Form 8-K dated June 2, 1998 filed with the
Securities and Exchange Commission on June 17, 1998 amends and restates
Items 2, 7(a) and 7(b) in their entirety.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective May 29, 1998, National-Oilwell, Inc. (the "Company") acquired all
of the outstanding capital stock of Phoenix Energy Products Holdings, Inc.
("Phoenix") for a purchase price of approximately $115 million. In
addition, the Company assumed $10 million in subordinated notes and
replaced approximately $31 million in Phoenix bank debt. Phoenix
manufactures and sells several lines of products that are complementary to
those of the Company, including fluid end expendable products, solids
control equipment and pipe handling tools. The Company paid for the stock
and funded the replacement of the debt by issuing a short-term promissory
note to the seller in the amount of approximately $102 million and by
borrowing under its existing bank credit facility (the "Senior Credit
Facility").
On June 26, 1998, the Company sold $150 million in 6 7/8% senior unsecured
notes (the "Notes") and used the net proceeds of $148.9 million to repay
the short-term promissory note, the subordinated notes of Phoenix and a
portion of the outstanding indebtedness under the Company's Senior Credit
Facility. The Notes were not registered under the Securities Act of 1933,
as amended (the "Act"), and were sold in reliance on exemptions under the
Act. The Company plans to file a registration statement that will provide
for the exchange of the Notes for notes that are registered under the Act.
The seller of Phoenix and holder of the short-term promissory note, Phoenix
Energy Services, L.L.C., is an affiliate of First Reserve Corporation,
which is the beneficial owner of approximately 16.2% of the outstanding
common stock of the Company. Two of National-Oilwell's directors are
affiliated with First Reserve Corporation.
Financial statements of Phoenix and certain pro forma financial information
are filed herewith.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Consolidated balance sheet of Phoenix Energy Products
Holdings, Inc. as of December 31, 1997 and the related
consolidated statements of income, shareholder's equity and
cash flows for the year then ended, and related notes to
consolidated financial statements.
(b) Pro Forma Financial Information (unaudited).
Pro forma consolidating statements of operations for the year
ended December 31, 1997 and the six months ended June 30,
1998.
(c) Exhibits.
2.1 Stock Purchase Agreement for the Purchase and Sale of
Phoenix Energy Products Holdings, Inc. by and between
National-Oilwell, Inc. and Phoenix Energy Services,
L.L.C., dated May 13, 1998.*
2.2 First Amendment to Stock Purchase Agreement effective
as of May 29, 1998.*
23.1 Consent of Ernst & Young LLP.
99.1 Press release of the Company issued June 2, 1998.*
---------------
* Filed on Form 8-K on June 17, 1998
<PAGE> 4
ITEM 7(a)
CONSOLIDATED FINANCIAL STATEMENTS
PHOENIX ENERGY PRODUCTS HOLDINGS, INC.
YEAR ENDED DECEMBER 31, 1997
<PAGE> 5
CONSOLIDATED FINANCIAL STATEMENTS
PHOENIX ENERGY PRODUCTS HOLDINGS, INC.
YEAR ENDED DECEMBER 31, 1997
<PAGE> 6
Phoenix Energy Products Holdings, Inc.
Consolidated Financial Statements
Year ended December 31, 1997
<TABLE>
CONTENTS
<S> <C>
Report of Independent Auditors...............................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheet...................................................2
Consolidated Statement of Income.............................................4
Consolidated Statement of Shareholders Equity................................5
Consolidated Statement of Cash Flows.........................................6
Notes to Consolidated Financial Statements...................................7
</TABLE>
<PAGE> 7
Report of Independent Auditors
Board of Directors
Phoenix Energy Products Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Phoenix Energy
Products Holdings, Inc. (the "Company"), as of December 31, 1997, and the
related consolidated statements of income, shareholder's equity, and cash flows
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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Phoenix
Energy Products Holdings, Inc., at December 31, 1997, and the consolidated
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
ERNST AND YOUNG LLP
June 9, 1998
1
<PAGE> 8
Phoenix Energy Products Holdings, Inc.
Consolidated Balance Sheet
December 31, 1997
(In Thousands, Except Share Amounts)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 866
Restricted cash 419
Trade receivables, net of allowance of $537 15,072
Receivables from affiliate 12,668
Inventories 25,455
Other current assets 687
Current deferred income taxes 1,019
----------
Total current assets 56,186
Property, plant, and equipment, net 13,386
Goodwill, net 8,272
Patents, net 2,466
Other 1,336
----------
Total assets $ 81,646
==========
</TABLE>
2
<PAGE> 9
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 3,152
Accrued liabilities 6,120
Taxes payable 325
Current portion of long-term debt 1,934
----------
Total current liabilities 11,531
Long-term debt 46,365
Deferred income taxes 576
Shareholder's equity:
Preferred stock, $1 par value:
500 shares authorized, no shares issued
and outstanding --
Common stock, $.01 par value:
1,500 shares authorized, 100 shares issued
and outstanding --
Additional paid-in capital 17,069
Cumulative translation adjustment (49)
Retained earnings 6,154
----------
Total shareholder's equity 23,174
----------
Total liabilities and shareholder's equity $ 81,646
==========
</TABLE>
See accompanying notes.
3
<PAGE> 10
Phoenix Energy Products Holdings, Inc.
Consolidated Statement of Income
Year ended December 31, 1997
(In Thousands)
<TABLE>
<S> <C>
Net sales $ 82,431
Cost of sales 54,343
----------
Gross profit 28,088
Selling, general, and administrative expense 18,160
----------
Operating income 9,928
Other (income) expense:
Interest income from affiliate (2,016)
Interest expense 5,005
Other 125
----------
3,114
----------
Income before income taxes 6,814
Provision for income taxes 2,486
----------
Net income $ 4,328
==========
</TABLE>
See accompanying notes.
4
<PAGE> 11
Phoenix Energy Products Holdings, Inc.
Consolidated Statement of Shareholder's Equity
(In Thousands, Except Share Amounts)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
----------------------- PAID-IN TRANSLATION RETAINED
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 .......... 100 $ -- $ 16,069 $ 27 $ 1,826 $ 17,922
Capital contribution ............. -- -- 1,000 -- -- 1,000
Translation adjustment ........... -- -- -- (76) -- (76)
Net income ....................... -- -- -- -- 4,328 4,328
----------------------------------------------------------------------------------------
Balance at December 31, 1997......... 100 $ -- $ 17,069 $ (49) $ 6,154 $ 23,174
========================================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 12
Phoenix Energy Products Holdings, Inc.
Consolidated Statement of Cash Flows
Year ended December 31, 1997
(In Thousands)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 4,328
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 1,990
Provision for inventory obsolescence 624
Provision for deferred income taxes 380
Gain on sale of property, plant, and equipment (89)
Changes in operating assets and liabilities, net of effects of acquisitions:
Restricted cash (419)
Trade receivables (2,144)
Receivable from affiliate (4,335)
Inventories (4,298)
Other current assets (26)
Accounts payable (1,129)
Accrued liabilities 1,708
Taxes payable 48
Other assets and liabilities, net (854)
----------
Net cash used in operating activities (4,216)
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (1,428)
Proceeds from sale of property, plant, and equipment 176
----------
Net cash used in investing activities (1,252)
FINANCING ACTIVITIES
Proceeds from long-term debt 27,455
Payments on long-term debt (26,596)
Net borrowings on revolvers 3,124
Capital contribution 1,000
----------
Net cash provided by financing activities 4,983
----------
Change in cash and cash equivalents (485)
Cash and cash equivalents at beginning of year 1,351
----------
Cash and cash equivalents at end of year $ 866
==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 816
==========
Interest $ 1,711
==========
</TABLE>
See accompanying notes.
6
<PAGE> 13
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 1997
(In Thousands, Except Share Amounts)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Phoenix Energy Products Holdings, Inc. (the "Company"), manufactures,
distributes, and sells products worldwide which are used primarily in the
petroleum industry. The Company is a wholly owned subsidiary of Phoenix Energy
Services, LLC ("PESI").
BASIS OF PRESENTATION
In October 1997, the Company was incorporated and in November 1997 issued 100
shares of its common stock to PESI in exchange for all of the common stock of
Phoenix Energy Products, Inc. ("PEPI"), which was a wholly owned subsidiary of
PESI. This transfer of ownership was accounted for as a reorganization of
entities under common control, similar to a pooling of interests. Accordingly,
the accompanying consolidated financial statements include the results of PEPI
for the entire year of 1997.
In November 1996, Phoenix Drilling Services, Inc. ("PDSI"), which is an indirect
wholly owned subsidiary of PESI, purchased Russell Sub-Surface ("Russell"), a
company located in the United Kingdom. In October 1997, the ownership of Russell
was transferred to PEPI. This transfer of ownership was accounted for as a
reorganization of entities under common control, similar to a pooling of
interests. Accordingly, the accompanying consolidated financial statements
include the results of Russell for the entire year of 1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company and its wholly owned
subsidiaries. Significant intercompany accounts and transactions have been
eliminated in consolidation.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The Company provides for
depreciation principally by the straight-line method over the estimated useful
lives of 20 years for buildings, 8 to 12 years for machinery and equipment, and
3 to 8 years for furniture and fixtures. Depreciation expense was approximately
$1,416.
7
<PAGE> 14
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
GOODWILL
Goodwill represents the excess of costs over the fair value of net assets
acquired and is amortized on a straight-line basis over 40 years. The Company
periodically assesses the recoverability of goodwill and takes into account
whether the goodwill should be completely or partially written off or the
amortization period accelerated. Accumulated amortization at December 31, 1997
was $383.
OTHER ASSETS
Other assets consist primarily of costs related to debt financing and noncompete
agreements. The debt financing costs are being amortized over the term of the
related debt and the noncompete agreement over the term of the agreement of two
years.
PATENTS
Patents are carried at cost less accumulated amortization, which is calculated
on a straight-line basis over the estimated life of the patent. Accumulated
amortization at December 31, 1997 was $338.
STOCK COMPENSATION ARRANGEMENTS
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees.
REVENUE RECOGNITION
Revenues are recognized when products are delivered to customers.
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Deferred income taxes are determined by the liability method in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amortization used for income tax purposes
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of trade receivables from customers engaged in
oil and gas exploration and production. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. The Company maintains reserves for potential losses, and such losses
have been within management's expectations.
8
<PAGE> 15
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 amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
2. INVENTORIES
Inventories at December 31, 1997 consisted of the following:
<TABLE>
<S> <C>
Finished products $ 22,845
Work-in-process 2,386
Materials and supplies 2,468
----------
27,699
Less reserve for obsolete inventory 2,244
----------
$ 25,455
==========
</TABLE>
9
<PAGE> 16
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at December 31, 1997 consisted of the following:
<TABLE>
<S> <C>
Land $ 638
Buildings 3,858
Machinery and equipment 8,821
Furniture and fixtures 2,191
Construction-in-progress 451
----------
15,959
Less accumulated depreciation 2,573
----------
$ 13,386
==========
</TABLE>
4. LONG-TERM DEBT
The components of the Company's debt at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Credit Agreement:
Revolving Credit Facilities $ 10,811
Term Loan A 18,300
Term Loan B 9,150
----------
38,261
Subordinated notes 10,000
Other 38
----------
48,299
Less current portion 1,934
----------
$ 46,365
==========
</TABLE>
The Credit Agreement provides for Revolving Credit Facilities for both PEPI and
PDSI totaling $20,000 through April 30, 2003. Borrowing availability is
determined based on a percentage of eligible accounts receivable and inventory.
The interest rate on the Revolving Credit Facilities is prime plus 0.25% or
LIBOR plus 1.75% (8.75% and 7.375%, respectively, at December 31, 1997). A
commitment fee of 0.375% is charged on the unused portion.
4. LONG-TERM DEBT (CONTINUED)
The Credit Agreement also provides for Term Loan A, payable quarterly beginning
June 30, 1998 through April 30, 2003, and Term Loan B, payable quarterly
beginning June 30, 1998 through April 30, 2003. Interest rates on Term Loans A
and B are at prime plus 0.25% and 0.75% or at LIBOR plus 1.75% and 2.25%,
respectively. The term loans require prepayments from certain asset disposal
proceeds and from up to 50% of excess cash flow (as defined).
The Credit Agreement is secured by all assets of PEPI and PDSI. In addition, the
Company and the parent of PDSI have guaranteed all of the indebtedness and
pledged the stock of the Company and PDSI, respectively. In connection with the
Credit Agreement, PDSI also borrowed a total of $16,050 on terms and
10
<PAGE> 17
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
conditions essentially the same as those described above. PEPI has guaranteed
the indebtedness of PDSI in connection with the Credit Agreement. On March 17,
1998, PDSI sold substantially all of its assets and retired all of its
indebtedness owed under the Credit Agreement. At that time, the Credit Agreement
was amended to remove the requirement to use up to 50% of excess cash flow to
make principal payments on the term loans, modify the related financial
covenants, and reduce the Revolving Credit Facility to $18,000.
The amended Credit Agreement contains financial covenants regarding minimum
tangible net worth, maximum capital expenditures, minimum fixed charge coverage
ratios, and maximum funded debt coverage ratios. The amended Credit Agreement
also restricts PEPI's ability to, among other things, pay dividends, make
acquisitions and investments, incur debt and liens, and change its capital
structure or business.
PEPI borrowed $10,000 under subordinated note agreements with the primary
shareholder of the Company. These subordinated notes accrue interest at 10% and
mature December 31, 2001. PEPI and PDSI are both jointly and severally liable
for the subordinated debt outstanding under these agreements, all of which is
reflected on the books of the Company. On March 17, 1998, PDSI sold
substantially all of its assets and was released from its obligations under the
subordinated notes.
Maturities of long-term debt for the next five years are $1,934 in 1998, $2,989
in 1999, $3,599 in 2000, $4,209 in 2001, and $2,439 in 2002.
See Note 9 for additional long-term debt information.
11
<PAGE> 18
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES
Significant components of the provision for income taxes were as follows:
<TABLE>
<S> <C>
Current:
Federal $ 2,517
State 199
Foreign 150
----------
2,866
Deferred:
Federal (380)
State --
Foreign --
----------
(380)
----------
Total provision $ 2,486
==========
</TABLE>
The reconciliation of income taxes computed at the federal statutory rates to
income tax expense was:
<TABLE>
<S> <C>
Tax at statutory rate $ 2,317
State income taxes 199
Foreign tax 150
Effect of permanent differences (180)
----------
$ 2,486
==========
</TABLE>
Significant components of the Company's deferred tax liabilities and assets were
as follows:
<TABLE>
<S> <C>
Deferred tax liability:
Property, plant, and equipment $ 576
Deferred tax assets:
Accounts receivable 183
Inventory 836
----------
1,019
----------
Net deferred tax assets $ 443
==========
</TABLE>
12
<PAGE> 19
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
Undistributed earnings of PEPI's foreign subsidiary totaled approximately $1,450
at December 31, 1997, of which $713 relates to earnings during the year ended
December 31, 1997. Those earnings are considered to be indefinitely reinvested
and, accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes (subject to
an adjustment for foreign tax credits) and withholding taxes payable to the
foreign country. Determination of the amount of unrecognized deferred U.S.
income tax liability is not practicable because of the complexities associated
with its hypothetical calculation; however, unrecognized foreign tax credit
carryforwards would be available to reduce some portion of the U.S. liability.
6. RELATED PARTY TRANSACTIONS
The Company provides administrative support and other services to PDSI and
shares certain manufacturing facilities with PDSI. In 1997, the Company charged
PDSI $947 for administrative support services and $240 for usage of
manufacturing facilities, based on management's estimate of PDSI's proportionate
share of such costs. These charges are reflected in the Company's consolidated
statement of income as a reduction in the applicable expense.
As a result of the above charges and shared cash management, the Company's
assets include a $12,668 receivable from PDSI (see Note 9). The Company charged
PDSI approximately $2,016 related to this receivable during 1997.
7. COMMITMENTS AND CONTINGENCIES
The Company leases office space, transportation equipment, and other property
under noncancelable operating leases with third parties. Rental expense under
such operating leases totaled $614. Future minimum lease commitments under
noncancelable operating leases at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 568
1999 416
2000 284
2001 8
2002 2
----------
$ 1,278
==========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is involved in various legal proceedings in the normal course of
business. Although a successful claim for which the Company is not fully insured
could have a material effect on the Company's financial condition, management is
of the opinion that it maintains insurance at levels generally consistent with
industry standards to insure itself against the normal risk of operations.
At December 31, 1997, approximately $419 of cash is used to collateralize
performance and bid bonds issued in the form of letters of credit.
13
<PAGE> 20
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
8. EMPLOYEE BENEFITS
The Company has a profit sharing plan pursuant to Section 401(k) of the Internal
Revenue Code (the "Code"), whereby substantially all of its employees may
contribute a percentage of compensation, but not in excess of the maximum
allowed under the Code. The plan provides, at the Company's option, for a
matching contribution of an undefined amount and/or a discretionary contribution
by the Company to the plan. To date, the Company has not made any matching or
discretionary contributions under this plan.
9. SUBSEQUENT EVENT
On March 17, 1998, substantially all of the assets of PDSI were sold. In
connection with this sale, PDSI was released from its obligations relating to
the subordinated notes, and all of PDSI's obligations under the Credit Agreement
were satisfied. Approximately $9,800 of the receivables from affiliate was
collected and the remaining balance will be collected as PDSI collects its
outstanding accounts receivable. In connection with the sale of the Company's
stock discussed below, all collections of the receivable from PDSI after June 2,
1998 will be remitted to the Company's former parent, PESI.
On June 2, 1998, the stock of the Company was sold to National-Oilwell, Inc.,
for approximately $102,000 in a short-term note and $14,000 in cash.
14
<PAGE> 21
Phoenix Energy Products Holdings, Inc.
Notes to Consolidated Financial Statements (continued)
10. YEAR 2000 DISCLOSURE (UNAUDITED)
The Year 2000 issue is the result of certain computer programs being written
utilizing two digits rather than four to define the applicable year. Any
programs used by the Company that have time-sensitive calculations may recognize
the date "00" as the year 1900 instead of the year 2000. This error could lead
to a system failure or miscalculations causing disruptions in operations,
including potentially an inability to process transactions, send invoices, or
engage in normal business activities.
The Company has not conducted an extensive review of the Year 2000 issue.
However, the Company utilizes two primary management information systems. Based
on a preliminary assessment, one of the systems is already Year 2000-compliant,
and the other system can be updated with a newer version offered by the software
vendor (subject to modifications by the Company) which is also Year
2000-compliant. During 1998, the Company plans to review its alternatives with
respect to its non-Year-2000-compliant management information systems.
The Company has not conducted investigations with its significant suppliers to
determine whether their Year 2000 issues will have an impact on the Company's
operations. The Company does not currently share electronic information with
suppliers. During 1998, management plans to determine the overall impact, both
direct and indirect, relating to Year 2000 issues by primary vendors and
suppliers.
15
<PAGE> 22
ITEM 7(b)
PAGE 1 OF 3
UNAUDITED PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NATIONAL- PHOENIX ENERGY PRO FORMA PRO FORMA
OILWELL SERVICES ADJUSTMENTS COMBINED
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 1,005,572 $ 82,431 $ 1,088,003
Cost of revenues 799,367 54,343 (1,000)(4) 852,710
----------- ----------- ----------- -----------
Gross profit 206,205 28,088 1,000 235,293
Selling, general and administrative 108,306 18,160 (3,000)(4) 126,154
2,688 (3)
Special charge 10,660 -- 10,660
----------- ----------- ----------- -----------
Operating income 87,239 9,928 1,312 98,479
-- --
Interest and financial costs (6,196) (5,005) (8,050)(2) (19,251)
Interest income 1,524 2,016 3,540
Other income (expense), net (85) (125) (210)
----------- ----------- ----------- -----------
Income before income taxes
and extraordinary loss 82,482 6,814 (6,738) 82,558
Provision for income taxes 31,201 2,486 (1,532)(5) 32,155
----------- ----------- ----------- -----------
Net income before extraordinary loss 51,281 4,328 (5,206) 50,403
Extraordinary loss, net of tax benefit 623 -- 623
Net income $ 50,658 $ 4,328 $ (5,206) $ 49,780
=========== =========== =========== ===========
Net income per share:
Basic
Net income before
extraordinary loss $ 1.00 $ 0.98
Extraordinary loss (0.01) (0.01)
----------- -----------
Net income $ 0.99 $ 0.97
=========== ===========
Net income per share:
Diluted
Net income before
extraordinary loss $ 0.99 $ 0.97
Extraordinary loss (0.01) (0.01)
----------- -----------
Net income $ 0.98 $ 0.96
=========== ===========
Weighted average shares outstanding:
Basic 51,124 51,124
=========== ===========
Diluted 51,956 51,956
=========== ===========
</TABLE>
<PAGE> 23
ITEM 7(b)
PAGE 2 OF 3
UNAUDITED PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NATIONAL- PHOENIX ENERGY PRO FORMA PRO FORMA
OILWELL SERVICES(a) ADJUSTMENTS COMBINED
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 596,695 $ 33,459 $ 630,154
Cost of revenues 459,095 21,363 (416)(4) 480,042
--------------- --------------- --------------- ---------------
Gross profit 137,600 12,096 416 150,112
Selling, general and administrative 62,421 10,124 (1,250)(4) 70,622
1,120 (3)
(1,793)(1)
--------------- --------------- --------------- ---------------
Operating income 75,179 1,972 2,339 79,490
Interest and financial costs (3,496) (1,510) (3,354)(2) (8,360)
Interest income 499 -- 499
Other income (expense), net (539) 35 (504)
--------------- --------------- --------------- ---------------
Income before income taxes 71,643 497 (1,015) 71,125
Provision for income taxes 26,695 200 39 (5) 26,934
--------------- --------------- --------------- ---------------
Net income $ 44,948 $ 297 $ (1,054) $ 44,191
=============== =============== =============== ===============
Net income per share:
Basic $ 0.86 $ 0.85
=============== ===============
Diluted $ 0.86 $ 0.85
=============== ===============
Weighted average shares outstanding:
Basic 51,973 51,973
=============== ===============
Diluted 52,275 52,275
=============== ===============
</TABLE>
(a) Includes operations of Phoenix from January 1 through May 29, 1998
<PAGE> 24
ITEM 7(b)
PAGE 3 OF 3
NOTES TO UNAUDITED PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(1) To record the reversal of non-recurring charges incurred in conjunction
with the Phoenix acquisition.
(2) To record the estimated increase in interest expense that would have
accompanied the higher level of debt.
(3) To record the additional goodwill amortization expense related to the
Phoenix acquisition.
(4) To record the estimated combination benefits of the acquisition, including
reduction in redundant manufacturing and administrative costs and closures
of certain Phoenix facilities.
(5) To reflect the income tax (benefit) associated with the above adjustments
and the operations of Phoenix.
<PAGE> 25
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.
By: /s/ Steven W. Krablin
-------------------------------
Steven W. Krablin
Vice President and
Chief Financial Officer
Dated: August 14, 1998
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits
<S> <C>
2.1 Stock Purchase Agreement for the Purchase and Sale of
Phoenix Energy Products Holdings, Inc. by and between
National-Oilwell, Inc. and Phoenix Energy Services,
L.L.C., dated May 13, 1998.*
2.2 First Amendment to Stock Purchase Agreement effective
as of May 29, 1998.*
23.1 Consent of Ernst & Young LLP.
99.1 Press release of the Company issued June 2, 1998.*
</TABLE>
-----------------
* Filed on Form 8-K on June 17, 1998
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of National-Oilwell, Inc. of our report dated June 9, 1998 with
respect to the consolidated financial statements of Phoenix Energy Products
Holdings, Inc. included in this Current Report (Form 8-K/A).
<TABLE>
<CAPTION>
Form Description
- ---- -----------
<S> <C>
S-8 Stock Award and Long Term Incentive Plan, Value Appreciation and
Incentive Plan A and Value Appreciation and Incentive Plan B (No.
333-15859)
S-8 National-Oilwell Retirement and Thrift Plan (No. 333-46459)
S-8 Post Effective Amendment No. 3 to the Registration Statement on Form S-4
filed on Form S-8 pertaining to the Dreco Energy Services Ltd. Amended
and Restated 1989 Employee Incentive Stock Option Plan, as amended, and
Employment and Compensation Arrangements Pursuant to Private Stock
Option Agreements (No. 333-32191) S-3 Post Effective Amendment No. 4 to
Form S-4 filed on Form S-3 (No. 333-32191)
S-3 Post Effective Amendment No. 4 to Form S-4 filed on Form S-3 (No. 333-32191)
</TABLE>
ERNST & YOUNG LLP
Houston, Texas
August 14, 1998
