<PAGE>
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
================================================================================
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 1-7867
------
WEATHERFORD INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 74-1681642
------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1360 POST OAK BOULEVARD
SUITE 1000
HOUSTON, TEXAS
77056
----------------------------------------
(Address of principal executive offices)
(Zip code)
(713) 439-9400
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed 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 ____.
---
There were 54,307,078 shares of Common Stock, $.10 par value, of the registrant
outstanding as of July 31, 1995, including 30,057 and 22,979 shares,
respectively, deemed to be outstanding pending the exchange of shares of common
stock of Petroleum Equipment Tools Co. and H & H Oil Tool Co., Inc., but
excluding 103,153 shares classified as Treasury Stock.
(Page 1 of 15)
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 12,826 $ 22,324
Receivables, net of allowance of $7,872 and $7,610....... 111,379 104,424
Inventories, net of allowance of $9,925 and $9,352....... 53,622 54,381
Deferred tax assets...................................... 1,224 1,148
Prepayments and other.................................... 8,082 7,251
-------- --------
Total current assets.................................... 187,133 189,528
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST.................... 565,458 544,199
Less -- Accumulated depreciation......................... 345,053 329,043
-------- --------
220,405 215,156
-------- --------
GOODWILL, NET............................................. 36,558 34,970
-------- --------
OTHER ASSETS.............................................. 15,735 14,309
-------- --------
$459,831 $453,963
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt.......................................... $ 124 $ 113
Current portion of long-term debt........................ 16,302 16,262
Accounts payable......................................... 15,579 27,299
Accrued income taxes..................................... 7,642 6,329
Other accrued liabilities................................ 41,532 49,586
-------- --------
Total current liabilities............................... 81,179 99,589
-------- --------
LONG-TERM DEBT............................................ 57,343 55,701
-------- --------
DEFERRED TAX LIABILITIES.................................. 2,667 2,597
-------- --------
OTHER LONG-TERM LIABILITIES............................... 14,094 13,876
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par; shares authorized 1,000,000;
none issued............................................. - -
Common stock, $.10 par; shares authorized 80,000,000;
issued 54,391,513 and 54,256,434........................ 5,440 5,426
Paid-in capital.......................................... 277,723 277,114
Retained earnings (deficit).............................. 16,830 (1,552)
Cumulative translation adjustment........................ 5,386 2,013
Treasury stock, 103,153 and 102,404 common shares, at
cost.................................................... (831) (801)
-------- --------
304,548 282,200
-------- --------
$459,831 $453,963
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE>
WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- ---------------------
1995 1994 1995 1994
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES:
International...................... $53,129 $45,141 $102,625 $ 86,495
United States...................... 44,924 46,463 96,462 93,902
------- ------- -------- --------
Total revenues................... 98,053 91,604 199,087 180,397
------- ------- -------- --------
COSTS AND EXPENSES:
Cost of sales and services......... 70,931 64,740 144,246 128,406
Selling, general and
administrative expenses.......... 14,087 14,864 28,365 29,091
Research and development........... 953 749 1,771 1,384
Equity in earnings of
unconsolidated affiliates........ (374) (413) (899) (771)
Foreign currency (gain) loss, net.. (236) (2,361) (269) (2,027)
Other (income) expense, net........ (1,314) 25 (1,826) (96)
------- ------- -------- --------
Total costs and expenses......... 84,047 77,604 171,388 155,987
------- ------- -------- --------
OPERATING INCOME:
International...................... 9,371 6,789 18,152 13,926
United States...................... 5,511 5,781 11,423 9,907
Corporate.......................... (876) 1,430 (1,876) 577
------- ------- -------- --------
Total operating income........... 14,006 14,000 27,699 24,410
Interest expense................... 1,787 1,445 3,608 2,163
Interest income.................... (168) (273) (382) (496)
------- ------- -------- --------
INCOME BEFORE INCOME TAXES.......... 12,387 12,828 24,473 22,743
Income taxes....................... 3,161 3,109 6,091 5,840
------- ------- -------- --------
NET INCOME.......................... $ 9,226 $ 9,719 $ 18,382 $ 16,903
======= ======= ======== ========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING................. 54,664 54,367 54,527 54,320
======= ======= ======== ========
INCOME PER COMMON AND
COMMON EQUIVALENT
SHARE.............................. $ 0.17 $ 0.18 $ 0.34 $ 0.31
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED CUMULATIVE
COMMON PAID-IN EARNINGS TRANSLATION TREASURY
STOCK CAPITAL (DEFICIT) ADJUSTMENT STOCK TOTAL
------ -------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994.. $5,426 $277,114 $(1,552) $2,013 $(801) $282,200
Shares issued under
employee benefit plans... 1 94 - - - 95
Stock grants and options
exercised................ 13 515 - - (30) 498
Currency translation
adjustment............... - - - 3,373 - 3,373
Net income................ - - 18,382 - - 18,382
------ -------- -------- ----------- -------- --------
BALANCE, JUNE 30, 1995...... $5,440 $277,723 $16,830 $5,386 $(831) $304,548
====== ======== ======== =========== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-4-
<PAGE>
WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED-IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------------
1995 1994
---------- ---------
<S> <C> <C>
NET INCOME........................................................ $ 18,382 $ 16,903
Income items not requiring (providing) cash:
Depreciation and amortization................................... 22,586 17,393
Undistributed earnings of affiliates............................ (116) (379)
Gain on disposal of property, plant and equipment, net.......... (3,062) (1,707)
Unrealized foreign currency gain................................ - (2,346)
Deferred income tax benefit..................................... (165) -
Increase(decrease) in cash from changes in operating accounts:
Receivables, net.............................................. (4,559) (4,392)
Inventories, net.............................................. 2,373 (7,890)
Payment of deferred loan costs................................ - (748)
Prepayments and other......................................... (711) (1,986)
Accounts payable and accrued liabilities...................... (20,234) 913
Other long-term liabilities................................... (82) (1,833)
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES............................. 14,412 13,928
-------- --------
Purchases of property, plant and equipment........................ (24,786) (16,094)
Acquisitions, net of notes issued and cash acquired............... (1,868) (65,969)
Proceeds from disposition of assets............................... 6,217 2,113
Other net cash flows from investing activities.................... (895) 1,656
-------- --------
CASH USED IN INVESTING ACTIVITIES................................. (21,332) (78,294)
-------- --------
Proceeds from bank borrowings..................................... 13,655 80,029
Repayments of indebtedness........................................ (12,105) (18,884)
Net cash flows from currency hedging transactions................. (3,780) -
Proceeds from sale of stock to employee benefit plans and stock
option exercises................................................ 593 933
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................... (1,637) 62,078
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH........................... (941) 332
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS............................. (9,498) (1,956)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 22,324 21,905
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................... $ 12,826 $ 19,949
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest........................................................ $ 2,703 $ 1,201
Income taxes.................................................... 4,603 1,934
Purchase of equipment financed by debt............................ - 300
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated financial statements of Weatherford International
Incorporated and its subsidiaries (the "Company" or "Weatherford") included
herein have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the information furnished reflects all adjustments,
consisting only of normal recurring adjustments, which are necessary for a
fair presentation of the results of the interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading.
Certain reclassifications were made to previously reported amounts in the
consolidated financial statements and notes to make them consistent with the
current presentation format.
It is suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994. No significant
accounting changes have occurred during the six months ended June 30, 1995.
(2) INCOME PER COMMON AND COMMON EQUIVALENT SHARE. Income per common and
common equivalent share is computed on the basis of the weighted average
number of shares of common stock and common stock equivalents (if dilutive)
outstanding during the respective periods. Fully diluted earnings per
share are equal to primary earnings per share in all periods presented.
(3) PROPOSED ENTERRA MERGER. On June 23, 1995, the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the
merger of Enterra Corporation ("Enterra") with and into the Company (the
"Enterra Merger"). Pursuant to the Merger Agreement, each of the
approximately 27,800,000 shares of Enterra common stock will be exchanged
for 1.69 shares of Weatherford Common Stock (0.845 of a share of
Weatherford Common Stock after giving effect to a contemporaneous one-for-
two reverse stock split). The transaction will be accounted for as a
pooling of interests. The Enterra Merger, which is subject to the approval
of Weatherford and Enterra shareholders, is expected to close October 5,
1995.
Enterra is a worldwide provider of specialized services and products to the
oil and gas industry through its oilfield, pipeline and compression services and
equipment businesses. For the year ended December 31, 1994, Enterra had
revenues of $302,243,000 and net income of $12,517,000. During the second
quarter of 1995, Enterra recognized $28,281,000 in unusual charges, primarily
representing asset write-downs, staff reductions and operational consolidations.
Assuming the Enterra Merger and the reverse stock split mentioned above were
consummated, unaudited pro forma condensed consolidated results of operations
would have been as follows (in thousands except per share amounts):
-6-
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- ------------------
1995 1994 1995 1994
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues..................... $208,642 $134,064 $425,775 $269,939
Net income(loss)............. $ (3,145) $ 10,720 $ 11,294 $ 21,011
Income(loss) per common and
common equivalent share... $ (0.06) $ 0.26 $ 0.22 $ 0.51
</TABLE>
(4) INVENTORIES. Consolidated net inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
<S> <C> <C>
Spare parts and components................. $17,912 $17,593
Raw materials.............................. 4,771 4,984
Work in process............................ 4,631 5,211
Finished goods............................. 26,308 26,593
------- -------
$53,622 $54,381
======= =======
</TABLE>
(5) SUMMARIZED FINANCIAL INFORMATION OF 50% OR LESS-OWNED AFFILIATES. The
Company owns a 49% interest in each of two Saudi Arabian companies and an
Abu Dhabi joint venture, which are included in other assets in the
accompanying consolidated balance sheets. The Company owned a 50% interest
in a U.S. partnership that was dissolved in 1994. Summarized financial
information for these affiliates is as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets...................... $3,772 $3,591
Non-current assets.................. 1,074 947
------ ------
Total assets...................... $4,846 $4,538
====== ======
Current liabilities................. $1,547 $1,462
Non-current liabilities............. 381 391
------ ------
Total liabilities................. $1,928 $1,853
====== ======
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1995 1994
------ ------
INCOME STATEMENT DATA:
Revenues............................ $4,108 $5,518
Gross profit........................ 2,091 1,885
Net income.......................... 1,833 1,565
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS REVIEW
Weatherford is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the oil and gas
industry. Weatherford's principal businesses consist of providing tubular
handling services, renting specialized oilfield equipment and providing fishing
services and related tools, and manufacturing and selling cementation products
and other equipment. Weatherford operates in virtually every oil and gas
exploration and production region in the world.
Weatherford has grown significantly through acquisition in recent years,
having acquired 20 businesses since November 1991. As a result of these
acquisitions, the Company is an industry leader in each of its three principal
businesses and has expanded its product and service lines, improved its U.S.
market position and realized significant consolidation cost savings.
The following table sets forth the Company's revenues attributable to each of
its principal businesses (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Oilfield services and rentals:
Tubular handling services $ 61,692 $ 54,000 $109,503 $105,715 $103,360
Rental tools and fishing
tool services 85,833 82,290 170,387 130,943 53,651
Other services 7,466 5,570 12,264 14,118 8,819
-------- -------- -------- -------- --------
Total services & rentals 154,991 141,860 292,154 250,776 165,830
-------- -------- -------- -------- --------
Oilfield products and equipment:
Cementation products 21,518 21,024 43,201 41,734 30,160
Other products and equipment 22,578 17,513 36,959 40,573 26,974
-------- -------- -------- -------- --------
Total products & equipment 44,096 38,537 80,160 82,307 57,134
-------- -------- -------- -------- --------
Total revenues $199,087 $180,397 $372,314 $333,083 $222,964
======== ======== ======== ======== ========
</TABLE>
Demand for the Company's services and products depends primarily upon the
number of oil and gas wells being drilled, the depth and drilling conditions of
such wells, the volume of production, the number of well completions and the
level of workover activity. Drilling activity is largely dependent on the level
and volatility of oil and natural gas prices. The following table sets forth
selected statistics reflecting industry conditions and the Company's financial
results:
-8-
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------
1995 1994 1994 1993 1992
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Average rig count (a):
United States...................... 695 745 775 754 721
International...................... 988 983 997 960 959
------ ------ ------ ------ ------
Worldwide.......................... 1,683 1,728 1,772 1,714 1,680
Revenue per rig (in thousands)(b):
United States...................... $ 139 $ 126 $ 240 $ 233 $ 115
International...................... 104 88 187 164 146
Worldwide.......................... 118 104 210 194 133
</TABLE>
--------
(a) Calculated by averaging rig count figures as published by Baker Hughes
Incorporated.
(b) Calculated by dividing revenues by average rig count.
FINANCIAL CONDITION
On June 23, 1995, the Company entered into the Merger Agreement providing for
the Enterra merger. Pursuant to the Merger Agreement, each of the approximately
27,800,000 shares of Enterra common stock will be exchanged for 1.69 shares of
Weatherford Common Stock (0.845 of a share of Weatherford Common Stock after
giving effect to a contemporaneous one-for-two reverse stock split). The
transaction will be accounted for as a pooling of interests. The Enterra Merger,
which is subject to the approval of Weatherford and Enterra shareholders, is
expected to close October 5, 1995.
The Company's operations provided cash of $14,412,000 during the first six
months of 1995 compared to $13,928,000 during the first six months of 1994. Net
income before depreciation and amortization of $40,968,000 in the first six
months of 1995 increased $6,672,000 when compared to the same period in 1994.
Changes in working capital and other operating accounts used cash of $23,213,000
during the first six months of 1995 compared to $15,936,000 in the same period
of 1994, primarily as a result of increased payments in 1995 related to capital
assets and inventories purchased in the fourth quarter of 1994.
Capital expenditures increased to $24,786,000 during the six months ended
June 30, 1995 compared to $16,094,000 for the same period in 1994. The increase
was primarily attributable to the international segment, where the Company
expanded its operations during 1994 with acquisitions in the North Sea, the
Asia-Pacific Region and South America.
The Company's consolidated indebtedness increased slightly from $72,076,000
at December 31, 1994 to $73,769,000 at June 30, 1995. The Company's total debt-
to-total capitalization ratio improved to 19% at June 30, 1995 compared to 20%
at December 31, 1994.
The Company has a $75,000,000 Term Loan (the "Term Loan") and a $50,000,000
Revolving Credit Facility (the "Revolving Credit Facility"; collectively, the
"Facilities"). Management anticipates that the Facilities will be replaced in
connection with the Enterra Merger. The Term Loan is repayable in equal
quarterly installments through March 31, 1999. The balance outstanding at March
31, 1996 under the Revolving Credit Facility will be repayable in equal
quarterly installments through March 31, 1999. Amounts outstanding under the
Facilities accrue interest at a variable rate, depending on the
-9-
<PAGE>
Company's total debt-to-total capitalization ratio. The applicable interest rate
on amounts outstanding at June 30, 1995 was 7.1%. The Facilities are secured by
the stock of certain of the Company's significant subsidiaries. The Company is
required under the Facilities agreement to maintain certain financial ratios and
is limited thereby in its ability to pay dividends on and repurchase Common
Stock, incur indebtedness, make investments, and dispose of, pledge or otherwise
transfer assets of the Company. At June 30, 1995, the balances outstanding under
the Term Loan and the Revolving Credit Facility were $59,211,000 and
$10,000,000, respectively. At June 30, 1995, the Company had $40,000,000
available to borrow under the Revolving Credit Facility and $11,074,000
available for borrowing under working capital facilities of certain of its
international subsidiaries.
The Company has entered into forward exchange contracts as a hedge against
certain existing economic exposures. The market value gains and losses
recognized on the hedges offset foreign currency transaction gains and losses
recognized on the related exposures. Settlement of forward exchange contracts
resulted in net cash outflows totaling $3,780,000 during the first six months of
1995.
Management believes the combination of working capital, the unused portion of
existing credit facilities and cash flows from operations provide the Company
with sufficient capital resources and liquidity to manage its routine
operations. The Company continues to seek opportunities to enhance its
competitiveness through strategic acquisitions. In addition to the Enterra
Merger, the Company is currently considering several potential acquisitions,
which are at various stages of negotiation or due diligence. Management
believes that any borrowings made in connection with any such acquisitions will
not have a materially adverse impact on the Company's liquidity. Management
believes that it is premature to provide specific information with respect to
any such possible acquisitions because of the status of, and possible adverse
impact on, negotiations, and because, in any event, there can be no assurance
that any of such possible acquisitions will be consummated.
Like most multinational oilfield service companies, the Company has
operations in certain international areas, including parts of the Middle East,
North and West Africa, Latin America, the Asia-Pacific Region and the
Commonwealth of Independent States (the "CIS"), that are inherently subject to
risks of civil disturbance and political activities which may disrupt oil and
gas exploration and production activities, restrict the movement of funds or
limit access to markets for periods of time. Historically, the economic impact
of such disruptions has been temporary and oil and gas exploration and
production activities have eventually resumed in relation to market forces.
Certain areas, including the CIS, Algeria and Nigeria, have been subjected to
political disruption or social unrest in the past twelve months. Generally,
business interruptions resulting from civil or political disruptions negatively
impact near-term results of operations; however, in the opinion of management,
it is unlikely that any specific business disruption caused by existing or
foreseen civil or political instability will have a materially adverse impact on
the financial condition or liquidity of the Company.
The Company has not declared dividends on Common Stock since December 1982
and management does not anticipate paying dividends on Common Stock at any time
in the foreseeable future. The Company's ability to pay dividends on Common
Stock is restricted by the terms of the Facilities.
RESULTS OF OPERATIONS
SECOND QUARTER 1995 COMPARED TO SECOND QUARTER 1994. Revenues increased 7%
from $91,604,000 in the second quarter of 1994 to $98,053,000 in the second
quarter of 1995. International revenues increased $7,988,000, or 18%, to
$53,129,000 compared to $45,141,000 during the second quarter of 1994, primarily
due to increased activity in the North Sea, Latin America
-10-
<PAGE>
and Africa. During the second quarter of 1995, the average international rig
count (excluding Canada) was 3% higher than in the same period of 1994. United
States revenues decreased $1,539,000, or 3%, to $44,924,000 in the second
quarter of 1995 compared to $46,463,000 for the same period of 1994, primarily
as a result of lower drilling activity. The average U.S. drilling rig count was
8% lower in the second quarter of 1995 than in the second quarter of 1994.
Gross profit increased $258,000, or 1%, to $27,122,000 from $26,864,000 when
comparing the second quarter of 1995 to the second quarter of 1994. As a
percentage of revenues, gross profit declined from 29.3% to 27.7%, reflecting
differences in the revenue mix geographically and with respect to the services
and products provided.
Selling, general and administrative expenses decreased $777,000, or 5%, to
$14,087,000 in the second quarter of 1995 compared to $14,864,000 in the second
quarter of 1994, primarily as a result of cost savings achieved in consolidating
the operations of H & H Oil Tool Co., Inc. ("H & H"), a U.S. rental and fishing
tool company acquired in September 1994 and accounted for as a pooling of
interests. As a percentage of revenues, selling, general and administrative
expenses improved from 16.2% to 14.4%, reflecting the impact of revenue growth
and the consolidation cost savings.
Research and development costs increased 27% from $749,000 in the second
quarter of 1994 to $953,000 in the second quarter of 1995, primarily reflecting
the expansion of the Company's development activities to support its three
principal businesses.
The Company owns a 49% interest in each of two Saudi Arabian companies and an
Abu Dhabi joint venture. The Company owned a 50% interest in a U.S. partnership
that was dissolved in 1994. The Company's equity in the earnings of these
affiliates decreased $39,000 to $374,000 in the second quarter of 1995,
primarily as a result of the dissolution of the U.S. partnership during 1994
offset by improved operating results in Saudi Arabia.
As a result of the fluctuation of the U.S. dollar against the major foreign
currencies in which the Company conducts business, the Company recorded net
exchange transaction gains of $236,000 in the second quarter of 1995 compared to
net exchange transaction gains of $2,361,000 in the second quarter of 1994. A
substantial portion of the 1994 gain represented an unrealized currency gain
related to certain intercompany loans.
Other (income) expense improved from a net expense of $25,000 in the second
quarter of 1994 to income of $1,314,000 in the same period of 1995, primarily as
a result of increased gains on sales of used rental equipment in the normal
course of business.
Operating income was virtually unchanged, increasing $6,000 to $14,006,000 in
the second quarter of 1995 compared to $14,000,000 in the same period in 1994,
primarily as a result of lower selling, general and administrative expenses and
higher other income in the second quarter of 1995, which offset the large
currency gain in the second quarter of 1994.
Net interest expense increased by $447,000 to $1,619,000 in the second quarter
of 1995 compared to $1,172,000 in the second quarter of 1994, primarily as a
result of higher market interest rates in 1995.
The income tax provision consists of taxes on foreign earnings, foreign taxes
withheld on certain remittances from international subsidiaries, U.S.
alternative minimum taxes and U.S. state income taxes. The income tax provision
does not include U.S. regular federal income tax due to the availability of U.S.
net operating loss carryforwards. The consolidated income tax provision
increased to $3,161,000 during the second quarter of 1995 compared to $3,109,000
in the second quarter of 1994. The
-11-
<PAGE>
Company's overall effective tax rate increased from 24% to 26%, primarily
reflecting higher earnings in certain international jurisdictions.
The Company conducts a portion of its business in currencies other than the
U.S. dollar, including the German mark, the U.K. pound sterling, the Norwegian
krone and the Canadian dollar. As a result of a weaker U.S. dollar, the
weighted average currency exchange rates used to translate the statements of
income of the Company's international subsidiaries were generally lower during
the second quarter of 1995 compared to the same period in 1994, thereby
increasing the amount of U.S. dollars reflected on the Company's 1995
consolidated statements of income. Had the second quarter 1995 average exchange
rates been the same as in the second quarter of 1994, revenues for the second
quarter of 1995 would have been approximately $3,275,000 lower. The impact on
net income would not have been material.
SIX MONTHS 1995 COMPARED TO SIX MONTHS 1994. Revenues increased 10% from
$180,397,000 in the first six months of 1994 to $199,087,000 in the first six
months of 1995. International revenues increased $16,130,000, or 19%, to
$102,625,000 compared to $86,495,000 during the first six months of 1994,
primarily as a result of the inclusion of the Odfjell Rental Operations acquired
in April 1994, several smaller 1994 acquisitions and increased service activity
in certain markets, including the North Sea, Latin America and Africa. During
the first six months of 1995, the average international rig count was virtually
unchanged compared to the same period of 1994. United States revenues increased
3% to $96,462,000 from $93,902,000 during the first six months of 1994,
primarily due to a large export sale of products during the first quarter of
1995 totaling $5,867,000, offset by the impact of lower U.S. drilling activity.
The average U.S. drilling rig count was 7% lower during the first six months of
1995 compared to the same period in 1994.
Gross profit increased $2,850,000, or 6%, to $54,841,000 from $51,991,000 when
comparing the first six months of 1995 to the same period in 1994. The
consolidated gross profit percentage decreased from 28.8% to 27.5%, reflecting
differences in the revenue mix geographically and with respect to the services
and products provided.
Selling, general and administrative expenses decreased $726,000, or 3%, to
$28,365,000 in the first six months of 1995 compared to $29,091,000 in the first
six months of 1994, primarily as a result of the cost savings achieved in
consolidating the operations of H & H. As a percentage of revenues, selling,
general and administrative expenses improved from 16.1% to 14.2%, reflecting the
impact of revenue growth and the consolidation cost savings.
Research and development costs increased $387,000, or 28%, to $1,771,000 in
the first six months of 1995 compared to $1,384,000 in the first six months of
1994, primarily reflecting the expansion of the Company's development activities
to support its three principal businesses.
The Company owns a 49% interest in each of two Saudi Arabian companies and an
Abu Dhabi joint venture. The company owned a 50% interest in a U.S. partnership
that was dissolved in 1994. The Company's equity in the earnings of these
affiliates increased $128,000, or 17%, to $899,000 in the first six months of
1995, primarily as a result of improved operating results in Saudi Arabia.
As a result of the fluctuation of the U.S. dollar against the major foreign
currencies in which the Company conducts business, the Company recorded net
exchange transaction gains of $269,000 in the first six months of 1995 compared
to net exchange transaction gains of $2,027,000 in the same period in 1994. A
substantial portion of the 1994 gain represented an unrealized currency gain
related to certain intercompany loans.
-12-
<PAGE>
Other (income) expense improved from income of $96,000 in the first six
months of 1994 to $1,826,000 in the same period of 1995, primarily as a result
of increased gains on sales of used rental equipment in the normal course of
business.
Operating income increased $3,289,000, or 14%, to $27,699,000 through the
first six months of 1995 compared to $24,410,000 in the same period in 1994,
primarily as a result of the improved gross profit, selling, general and
administrative expenses and other income, partially offset by the large currency
gain in 1994.
Net interest expense increased by $1,559,000, or 94%, to $3,226,000 in the
first six months of 1995 compared to $1,667,000 in the first six months of 1994,
primarily as a result of higher average debt balances outstanding in 1995 and
higher market interest rates.
The income tax provision consists of taxes on foreign earnings, foreign taxes
withheld on certain remittances from international subsidiaries, U.S.
alternative minimum taxes and U.S. state income taxes. The income tax provision
does not include U.S. regular federal income tax due to the availability of U.S.
net operating loss carryforwards. The consolidated income tax provision
increased to $6,091,000 during the first six months of 1995 compared to
$5,840,000 in the first six months of 1994, primarily reflecting higher pretax
earnings in certain international jurisdictions. The Company's overall
effective tax rate decreased from 26% for the first six months of 1994 to 25%
for the first six months of 1995.
The Company conducts a portion of its business in currencies other than the
U.S. dollar, including the German mark, the U.K. pound sterling, the Norwegian
krone and the Canadian dollar. As a result of a weaker U.S. dollar, the
weighted average currency exchange rates used to translate the statements of
income of the Company's international subsidiaries were generally lower during
the first six months of 1995 compared to the same period in 1994, thereby
increasing the amount of U.S. dollars reflected on the Company's 1995
consolidated statements of income. Had the average exchange rates in the first
six months of 1995 been the same as in the first six months of 1994, revenues
for the first six months of 1995 would have been approximately $5,577,000 lower.
The impact on net income would not have been material.
-13-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(27) Article 5
Financial Data Schedule
(B) Reports on Form 8-K
A report on Form 8-K dated June 23, 1995 was filed by the Company
reporting the Company's execution of a definitive agreement to
merge with Enterra Corporation. Pursuant to the merger, the Company
will be the surviving corporation and each Enterra shareholder will
receive 1.69 Weatherford shares (or 0.845 shares after giving effect
to the two-for-one reverse stock split to be effected
contemporaneously with the merger).
-14-
<PAGE>
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.
WEATHERFORD INTERNATIONAL INCORPORATED
(Registrant)
Date: August 11, 1995 By: /s/ NORMAN W. NOLEN
------------------------------------
NORMAN W. NOLEN
Senior Vice President, Chief Financial
Officer & Treasurer
-15-
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<PERIOD-START> JAN-01-1995
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