AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON May 14, 1996
REGISTRATION NUMBER 333-02641
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WEATHERFORD ENTERRA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1389 74-1681642
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
1360 POST OAK BOULEVARD, SUITE 1000
HOUSTON, TEXAS 77056
(713) 439-9400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
H. SUZANNE THOMAS
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
WEATHERFORD ENTERRA, INC.
1360 POST OAK BOULEVARD, SUITE 1000
HOUSTON, TEXAS 77056
(713) 439-9400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
CHARLES L. STRAUSS
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
(713) 651-5151
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Transaction described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
WEATHERFORD ENTERRA, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
------------------------------------- -----------------------------------------------------
<S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus........................... Cover of Registration Statement; Cross Reference
Sheet; Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Inside Front Cover Page of Prospectus; Available
Information; Incorporation by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information.......................... Summary; Risk Factors; Weatherford Enterra, Inc.;
Nodeco; The Transaction; Unaudited Pro Forma
Financial Information; Weatherford Selected Financial
Data; Nodeco Selected Financial Data
4. Terms of the Transaction............. The Transaction; Terms of the Transaction;
Comparative Rights of the Stockholders of Weatherford
and Nodeco AS
5. Pro Forma Financial Information...... Unaudited Pro Forma Financial Information;
Weatherford Selected Financial Data; Nodeco Selected
Financial Data
6. Material Contacts with the Company
Being Acquired....................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............ Not Applicable
8. Interests of Named Experts and
Counsel.............................. Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... Not Applicable
10. Information with Respect to S-3
Registrants.......................... Not Applicable
11. Incorporation of Certain Information
by Reference......................... Not Applicable
12. Information with Respect to S-2 or
S-3 Registrants...................... Not Applicable
13. Incorporation of Certain Information
by Reference......................... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants.......................... Available Information; Incorporation by Reference;
Weatherford Enterra, Inc.
15. Information with Respect to S-3
Companies............................ Not Applicable
16. Information with Respect to S-2 or
S-3 Companies........................ Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies...... Currency Translation; Exchange Rate Data; Nodeco;
Nodeco Selected Financial Data; Nodeco Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Nodeco Consolidated Financial
Statements
18. Information if Proxies, Consents or
Authorizations are to be Solicited... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer.... Outside Front Cover Page of Prospectus; The
Transaction; Incorporation by Reference
</TABLE>
PROSPECTUS
SUBJECT TO COMPLETION DATED MAY 13, 1996
WEATHERFORD ENTERRA, INC.
This Prospectus constitutes the prospectus of Weatherford Enterra, Inc.
("Weatherford') pursuant to the United States Securities Act of 1933, as amended
(the "Securities Act'), with respect to the issuance of 750,000 shares of the
common stock, $.10 par value, of Weatherford ("Weatherford Common Stock") in
connection with the purchase (the "Transaction") by Weatherford of all of the
assets of Nodeco AS, a Norwegian joint stock company ("Nodeco AS"), and Aarbakke
AS, a Norwegian joint stock company and a wholly-owned subsidiary of Nodeco AS
("Aarbakke", and together with Nodeco AS, the "Sellers"), pursuant to the
Purchase and Sale Agreement dated March 28, 1996 (the "Purchase and Sale
Agreement"), among Weatherford, Nodeco AS and Aarbakke.
Pursuant to the Purchase and Sale Agreement, the closing of the Transaction
is subject to certain conditions, including (i) the approval of the Transaction
by the requisite vote of the shareholders of each Seller as may be required
under Norwegian law or such Seller's governing documents, (ii) the approval of
Norwegian regulatory authorities, unless Weatherford, in its sole discretion,
waives such requirement, (iii) the declaration of the effectiveness of the
registration statement of which this Prospectus forms a part by the United
States Securities and Exchange Commission and the lack of any stop orders
suspending the effectiveness of such registration statement, (iv) the delivery
to Weatherford of guarantees executed by certain shareholders of Nodeco AS and
(v) the delivery to Weatherford by the Sellers of certain bills of sale, deeds,
assignments and other documents regarding the assets to be sold in the
Transaction.
------------------------
AN INVESTMENT IN WEATHERFORD COMMON STOCK AFTER THE TRANSACTION
INVOLVES CERTAIN RISKS. SEE "RISK FACTORS".
------------------------
THE SHARES OF WEATHERFORD COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE
TRANSACTION HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE NOT REQUESTED TO SEND US A PROXY.
THE DATE OF THIS PROSPECTUS IS ................ .., 1996.
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY WEATHERFORD OR BY ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY
THIS PROSPECTUS IN ANY JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY HEREOF NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF WEATHERFORD SINCE
THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
Weatherford is subject to the informational requirements of the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the United States Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by Weatherford with the
Commission can be inspected at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the regional offices of the Commission at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, New York, New York 10048. They also may be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies
of such material may be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
Weatherford has filed with the Commission a Registration Statement on Form
S-4 (herein, together with all amendments and exhibits thereto, referred to as
the "Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus constitutes the prospectus of
Weatherford filed as part of the Registration Statement and does not contain all
the information contained in the Registration Statement, certain portions of
which are omitted as permitted by the rules and regulations of the Commission.
For further information with respect to Weatherford and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, which may be inspected at the Commission's offices, without charge, or
copies of which may be obtained from the Commission upon payment of prescribed
fees.
INCORPORATION BY REFERENCE
Attached to this Prospectus as Appendices B, C, D and E, respectively, are
copies of (i) Weatherford's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "Annual Report"), (ii) Weatherford's Current Report on
Form 8-K dated December 29, 1995, as amended by Weatherford's Current Report on
Form 8-K/A dated February 27, 1996 (collectively, the "Current Report"), (iii)
Weatherford's Proxy Statement pertaining to its 1996 Annual Meeting of
Stockholders (the "Proxy Statement") and (iv) Weatherford's Registration
Statement on Form 8-A registering under the Exchange Act the Weatherford Common
Stock (the "Form 8-A"). The following information is hereby incorporated by
reference into this Prospectus: (i) the information included in Items 1, 2, 3,
6, 7, 8 and 9 of the Annual Report, (ii)the information incorporated by
reference from the Proxy Statement into Items 10, 11, 12 and 13 of the Annual
Report, (iii) the information contained in Item 7 of the Current Report and (iv)
the information contained in Item 1 of the Form 8-A.
All documents filed by Weatherford with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and before the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus or
in a document incorporated by reference in this Prospectus shall be deemed
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
2
Weatherford undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
herein, other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to
Weatherford Enterra, Inc., 1360 Post Oak Boulevard, Suite 1000, Houston, Texas
77056, Attention: Investor Relations, telephone number (713) 439-9400.
CURRENCY TRANSLATION
Nodeco reports its financial results in Norwegian kroner ("NOK"). Any
amounts with regard to Nodeco that are stated herein in United States dollars
are so stated solely for convenience at rates discussed in "Unaudited Pro Forma
Financial Information". Such amounts should not be construed as representations
that the NOK amounts actually represent such United States dollar amounts or
could be converted into United States dollars at this rate. On May 9, 1996, the
exchange rate based on the noon buying rate in New York City for cable transfers
of NOK expressed in United States dollars, as certified for customs purposes by
the Federal Reserve Bank of New York, was $0.1531 per one NOK. See "Exchange
Rate Data" for additional information regarding rates of exchange between NOK
and the United States dollar.
------------------------
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION................ 2
INCORPORATION BY REFERENCE........... 2
CURRENCY TRANSLATION................. 3
SUMMARY.............................. 4
THE COMPANIES.................... 4
THE TRANSACTION.................. 4
COMPARATIVE RIGHTS OF THE
STOCKHOLDERS OF WEATHERFORD AND
NODECO AS...................... 6
SUMMARY FINANCIAL INFORMATION.... 6
COMPARATIVE PER SHARE DATA....... 8
RISK FACTORS......................... 9
EXCHANGE RATE DATA................... 10
WEATHERFORD ENTERRA, INC............. 10
NODECO............................... 11
THE TRANSACTION...................... 12
GENERAL DESCRIPTION OF THE
TRANSACTION.................... 12
GOVERNMENTAL AND REGULATORY
APPROVALS...................... 12
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES TO NON-UNITED
STATES HOLDERS................. 13
ACCOUNTING TREATMENT............. 14
TERMS OF THE TRANSACTION............. 15
EFFECTIVE DATE OF THE
TRANSACTION.................... 15
ADJUSTMENTS TO CONSIDERATION..... 15
CONDITIONS TO CLOSING OF THE
TRANSACTION.................... 16
REPRESENTATIONS AND WARRANTIES OF
WEATHERFORD AND THE SELLERS.... 16
CONDUCT OF SELLERS' BUSINESS
PRIOR TO THE TRANSACTION....... 16
TERMINATION OR AMENDMENT OF
PURCHASE AND SALE AGREEMENT.... 17
INDEMNIFICATION.................. 17
NON-COMPETITION AGREEMENT........ 18
COMPARATIVE RIGHTS OF THE
STOCKHOLDERS OF WEATHERFORD AND
NODECO AS.......................... 18
SPECIAL VOTE REQUIRED FOR CERTAIN
COMBINATIONS................... 18
VOTE REQUIRED FOR EXTRAORDINARY
CORPORATE TRANSACTIONS......... 19
ELECTION AND APPOINTMENT OF
DIRECTORS...................... 19
INDEMNIFICATION OF BOARD
MEMBERS........................ 20
REMOVAL OF DIRECTORS............. 20
PREEMPTIVE RIGHTS................ 20
CALLING OF STOCKHOLDER
MEETINGS....................... 20
STOCKHOLDER MEETING QUORUM....... 20
DIRECTOR QUALIFICATION AND
NUMBER......................... 20
UNAUDITED PRO FORMA FINANCIAL
INFORMATION........................ 21
WEATHERFORD SELECTED FINANCIAL DATA.. 25
NODECO SELECTED FINANCIAL DATA....... 26
NODECO MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............. 27
BUSINESS DESCRIPTION............. 27
RESULTS OF OPERATIONS............ 27
LIQUIDITY AND CAPITAL
RESOURCES...................... 28
CURRENCY FLUCTUATIONS............ 29
LEGAL MATTERS........................ 29
EXPERTS.............................. 29
INDEX TO NODECO CONSOLIDATED
FINANCIAL STATEMENTS............... F-1
APPENDIX A: PURCHASE AND SALE
AGREEMENT.......................... A-1
3
SUMMARY
THE FOLLOWING CONTAINS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN A COMPLETE STATEMENT
OF ALL MATERIAL INFORMATION RELATING TO THE TRANSACTION AND THE PURCHASE AND
SALE AGREEMENT AND IS SUBJECT AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE PURCHASE AND SALE
AGREEMENT, WHICH IS ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.
CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS
PROSPECTUS.
THE COMPANIES
WEATHERFORD ENTERRA, INC. Weatherford is a diversified international energy
service and manufacturing company that provides a variety of services and
equipment to the exploration, production and transmission sectors of the oil and
gas industry. Weatherford's principal business segments include (i) the oilfield
services segment, which consists of renting specialized oilfield equipment,
providing fishing, well control assistance and other downhole services and
related tools, and providing tubular running services and related tools; (ii)
the energy products and services segment, which consists of manufacturing,
selling and servicing a variety of products, including cementation products,
power equipment, fishing and milling tools and heavy wall drill pipe, gas lift
valves, production and service packers and related equipment, electrical and
instrumentation control systems and pedestal-mounted marine cranes; (iii) the
gas compression segment, which consists of manufacturing, packaging, selling,
renting and servicing reciprocating natural gas compressors; and (iv) the
pipeline services segment, which consists of manufacturing, selling and renting
specialized pipeline equipment and services. Weatherford operates in virtually
every oil and gas exploration and production region in the world, with more than
330 locations in 47 countries, including the United States. The principal
executive offices of Weatherford are located at 1360 Post Oak Boulevard, Suite
1000, Houston, Texas 77056, and its telephone number at that address is
713-439-9400.
NODECO. Nodeco designs, manufactures, sells and rents oil and gas well
completion products primarily consisting of liner hanger equipment and related
services, as well as packers used in completions with electric submersible
pumps. Nodeco's primary markets for these products are the Norwegian and United
Kingdom sectors of the North Sea. Nodeco also provides products and services for
reservoir and wellbore monitoring and manufactures precision mechanical
components for customers that are primarily affiliated with the oil industry.
The principal executive offices of Nodeco are located at Haland Aust, P.O. Box
10, N-4341 Bryne, Norway, and its telephone number at that address is
47-51-48-24-24.
As used herein, the term "Subsidiaries" refers to Nodeco Limited and
Aarbakke Eiendom AS, 100% of the shares of which are owned by Nodeco AS, and
Subsurface Technology AS, 51% of the shares of which are owned by Nodeco AS. As
used herein, unless the context otherwise requires, "Nodeco" refers to Nodeco
AS, Aarbakke and the Subsidiaries. As used herein, unless the context otherwise
requires, "Weatherford" refers to Weatherford Enterra, Inc. and its
subsidiaries.
THE TRANSACTION
TERMS OF THE TRANSACTION. The Sellers have agreed to sell to Weatherford,
on the Effective Date (as hereinafter defined), all of the assets, contractual
rights and business of the Sellers at the Effective Date, including, but not
limited to, cash and cash equivalents, contracts, equipment, rental equipment,
goodwill, motor vehicles, real property, shares of the Subsidiaries owned by
Nodeco AS, inventory, intangible property, excess pension plan amounts, accounts
receivable, prepayments and existing legal claims (collectively, the "Assets").
As consideration for the sale of the Assets by the Sellers to Weatherford,
Weatherford will assume all liabilities of the Sellers (other than Net Debt (as
hereinafter defined) in excess of NOK 32 million at December 31, 1995), pay to
the Sellers the cash amount of NOK 117,649,250 (as adjusted as described below
under "Terms of the Transaction -- Adjustments to Consideration") and issue to
Nodeco AS 750,000 shares of Weatherford Common Stock.
4
GOVERNMENTAL AND REGULATORY APPROVAL. On April 2, 1996, Weatherford filed
an application with the Norwegian Ministry of Industry and Energy (the
"Ministry") for approval of the Transaction under the Norwegian Acquisition of
Business Act of 1994. Subsequent to the filing of the application, Weatherford
received and complied with several requests by the Ministry for further
information. See "The Transaction -- Governmental and Regulatory Approvals".
Weatherford and the Sellers are aware of no other material governmental or
regulatory approvals required for consummation of the Transaction.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. Certain non-United States
holders of Weatherford Common Stock may be subject to federal income or estate
tax consequences due to their ownership and disposition of Weatherford Common
Stock. See "The Transaction -- Certain U.S. Federal Income Tax Consequences to
Non-United States Holders".
ACCOUNTING TREATMENT. The Transaction will be accounted for using the
purchase method of accounting. Consequently, the results of operations of Nodeco
will be included with those of Weatherford from the Effective Date.
EFFECTIVE DATE OF THE TRANSACTION. The Purchase and Sale Agreement provides
that the Transaction will become effective on such date as the Sellers and
Weatherford may agree or upon the latest to occur of the following events: (i)
the fifth business day after Weatherford has notified the Sellers in writing
that the Commission has declared the Registration Statement effective under the
Securities Act, provided that no stop order is in effect on such day; (ii) the
first business day after any such stop order has been removed; (iii) the fifth
Norwegian business day after Weatherford has notified the Sellers in writing of
Ministry Approval (as hereinafter defined), unless Ministry Approval has been
waived by Weatherford, in its sole discretion; and (iv) the approval of the
shareholders of each Seller of the Transaction.
ADJUSTMENTS TO CONSIDERATION. The cash portion of the Purchase Price will
be adjusted to account for movements in the price of Weatherford Common Stock on
the New York Stock Exchange (the "NYSE") and the exchange rate between United
States dollars and Norwegian kroner from the date of the Purchase and Sale
Agreement to the Effective Date, subject to certain limitations. Under certain
circumstances, the Sellers shall be entitled to interest on the purchase price
for the Assets. Weatherford is permitted under certain circumstances to reduce
the purchase price for the Assets for any representations and warranties made by
the Sellers in the Purchase and Sale Agreement that are untrue, inaccurate,
misleading or breached. See "Terms of the Transaction -- Adjustments to
Consideration".
CONDITIONS TO CLOSING OF THE TRANSACTION. Pursuant to the Purchase and Sale
Agreement, the closing of the Transaction is subject to certain conditions,
including (i) the approval of the Transaction by the requisite vote of the
shareholders of each Seller as may be required under Norwegian law or such
Seller's governing documents, (ii) Ministry Approval, unless Weatherford, in its
sole discretion, waives such requirement, (iii) the declaration of the
effectiveness of the Registration Statement by the Commission and the lack of
any stop orders suspending the effectiveness of the Registration Statement, (iv)
the delivery to Weatherford of guarantees executed by certain shareholders of
Nodeco AS and (v) the delivery to Weatherford by the Sellers of certain bills of
sale, deeds, assignments and other documents regarding the Assets.
TERMINATION OR AMENDMENT OF PURCHASE AND SALE AGREEMENT. The Purchase and
Sale Agreement may be amended or supplemented only by an instrument in writing
signed on behalf of Weatherford and each Seller. The Sellers have the right to
terminate the Purchase and Sale Agreement if, prior to May 27, 1996, either (i)
the Commission has not declared the Registration Statement effective and all
stop orders have not been removed or (ii) Weatherford has not obtained Ministry
Approval, unless, in its sole discretion, Weatherford has waived such
requirement. If the Sellers do not exercise such right within five business days
following May 27, 1996, and an event referred to in either clause (i) or clause
(ii) above has not occurred prior to July 26, 1996, Weatherford or either Seller
may terminate the Purchase and Sale Agreement within five business days
following such date.
5
INDEMNIFICATION. The Purchase and Sale Agreement provides for
indemnification by the Sellers to Weatherford and the Subsidiaries against
Losses (as hereinafter defined) related to untrue, inaccurate, misleading or
breached representations or warranties made by the Sellers in the Purchase and
Sale Agreement and related to tax claims not included in the Nodeco Accounts (as
hereinafter defined). The Purchase and Sale Agreement provides for
indemnification by Weatherford to the Sellers against Losses related to (i)
untrue, inaccurate, misleading or breached representations or warranties made by
Weatherford in the Purchase and Sale Agreement, (ii) material inaccuracies or
omissions in the Registration Statement, (iii) failure by Weatherford to comply
with the Securities Act or other laws in the distribution of the Consideration
Shares (as hereinafter defined), (iv) failure by Weatherford to properly perform
the contracts being transferred to Weatherford as part of the Transaction, (v)
failure by Weatherford to satisfy the liabilities being assumed by it as part of
the Transaction and (vi) tax claims made against Nodeco before the Effective
Date. See "Terms of the Transaction -- Indemnification".
NON-COMPETITION AGREEMENT. In the Purchase and Sale Agreement, the Sellers
have agreed that, for a period of two years following the Effective Date,
neither the Sellers nor any affiliate of the Sellers will compete, directly or
indirectly, with Weatherford or any affiliate of Weatherford in designing,
manufacturing, selling, renting or running liner hangers, packers and gas lift
valves and systems. The Sellers also have agreed on behalf of the Sellers and
their affiliates not to solicit for employment any employee of Weatherford or
any affiliate of Weatherford, including any employee of either Seller or any
Subsidiary who becomes an employee of Weatherford or any affiliate of
Weatherford.
COMPARATIVE RIGHTS OF THE STOCKHOLDERS OF WEATHERFORD AND NODECO AS
Upon consummation of the Transaction, Nodeco AS will be a holder of shares
of Weatherford Common Stock. To the extent the shares of Weatherford Common
Stock held by Nodeco AS are distributed to the shareholders of Nodeco AS, in
connection with a liquidation of Nodeco AS or otherwise, holders of shares of
Nodeco AS will become holders of shares of Weatherford Common Stock. The shares
of Nodeco AS are governed by Norwegian law and the Articles of Association of
Nodeco AS. The rights of holders of Weatherford Common Stock are governed by the
law of the State of Delaware, Weatherford's Restated Certificate of
Incorporation and Weatherford's Bylaws. There are various differences between
the rights of shareholders of Nodeco AS and the rights of Weatherford
stockholders, including, among other things, the required vote for certain
business combinations and other significant matters. Furthermore, Weatherford's
Restated Certificate of Incorporation contains certain provisions that may have
the effect of deterring or making it more difficult for a third party to acquire
control of Weatherford. See "Comparative Rights of Stockholders of Weatherford
and Nodeco AS".
SUMMARY FINANCIAL INFORMATION
The following historical consolidated financial data of Weatherford and
Nodeco have been derived from their respective historical consolidated financial
statements and should be read in conjunction with such consolidated financial
statements and notes thereto, which are included elsewhere or incorporated by
reference in this Prospectus. See "Incorporation by Reference" and "Nodeco
Consolidated Financial Statements". The unaudited pro forma financial data have
been derived from the unaudited pro forma financial statements using the
purchase method of accounting and should be read in conjunction with such
unaudited pro forma financial statements and notes thereto, which are included
elsewhere in this Prospectus. For other information regarding pro forma
financial data, see "Unaudited Pro Forma Financial Information".
6
WEATHERFORD
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
OPERATING RESULTS:
YEAR ENDED DECEMBER 31,
----------------------------------------
1995(1) 1994(2) 1993(3)
------------ ------------ ------------
Revenues............................. $ 858,907 $ 676,749 $ 500,491
Acquisition-related costs and other
unusual charges.................... 88,182 2,500 4,000
Operating income..................... 182 65,704 49,671
Depreciation and amortization........ 95,957 71,037 50,449
Net income (loss).................... (10,558) 41,997 35,175
Net income (loss) per share.......... (0.21) 0.94 0.88
BALANCE SHEET DATA:
DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
Working capital...................... $ 267,380 $ 251,778 $ 221,834
Total assets......................... 1,258,860 1,153,970 635,602
Total debt........................... 329,266 196,672 21,253
Stockholders' equity................. 730,843 734,634 474,742
- ------------
(1) Includes acquisition-related costs and other unusual charges of $88,182,000,
or $1.17 per common share.
(2) Includes acquisition-related costs of $2,500,000, or $0.06 per common
share.
(3) Includes acquisition-related costs of $4,000,000, or $0.10 per common
share.
NODECO(1)
(AMOUNTS IN THOUSANDS OF NOK)
OPERATING RESULTS:
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Revenues............................. 173,950 134,583 122,512
Operating profit..................... 27,396 16,236 7,111
Depreciation......................... 10,385 9,246 9,563
Extraordinary gain (loss), net....... 1,370 -- (4,818)
Net income (loss)(2)................. 15,598 7,918 (4,067)
BALANCE SHEET DATA:
DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Working capital...................... 25,786 15,304 17,254
Total assets......................... 123,942 115,000 110,518
Long-term debt, including current
portion.............................. 28,278 45,788 51,664
Shareholders' equity(3).............. 44,908 29,020 26,414
- ------------
(1) The Nodeco Consolidated Financial Statements included elsewhere in this
Prospectus have been prepared in accordance with accounting principles
generally accepted in Norway ("Norwegian GAAP"), which vary in certain
significant respects from accounting principles generally accepted in the
United States ("US GAAP"). Principal differences between Norwegian GAAP and
US GAAP and a reconciliation of such differences are described in Notes 10
and 11 to Nodeco Consolidated Financial Statements.
(2) Net income in accordance with US GAAP was NOK 17,557,000 and NOK 7,547,000
for the years ended December 31, 1995 and 1994, respectively. See Note 11
to Nodeco Consolidated Financial Statements.
(3) Shareholders' equity in accordance with US GAAP was NOK 62,186,000 and NOK
49,277,000 at December 31, 1995 and 1994, respectively. See Note 11 to
Nodeco Consolidated Financial Statements.
7
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995:
<TABLE>
<CAPTION>
WEATHERFORD NODECO AS FURTHER
AS ADJUSTED NODECO(1) ADJUSTMENTS ADJUSTED
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues............................. $ 920,456 $ 27,554 $ -- $ 948,010
Operating income..................... 122,003 4,751 (1,483) 125,271
Net income........................... 71,727 2,781 (1,784) 72,724
Net income per share................. 1.41 1.41
BALANCE SHEET DATA AS OF DECEMBER 31, 1995:
<CAPTION>
NODECO AS FURTHER
WEATHERFORD NODECO(1) ADJUSTMENTS ADJUSTED
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Working capital...................... $ 267,380 $ 4,079 $ -- $ 271,459
Total assets......................... 1,258,860 22,746 31,312 1,312,918
Total debt........................... 329,266 4,897 14,212 348,375
Stockholders' equity................. 730,843 9,838 17,100 757,781
</TABLE>
- ------------
(1) Prepared in accordance with Norwegian GAAP together with adjustments
necessary to conform to US GAAP.
COMPARATIVE PER SHARE DATA
The four columns included in the following table set forth (i) the
historical loss per common and common equivalent share and the historical book
value per share data of Weatherford Common Stock; (ii) the historical income per
common and common equivalent share and the historical book value per share data
of Nodeco AS common shares; (iii) the unaudited pro forma income per common and
common equivalent share and the unaudited pro forma book value per share of
Weatherford Common Stock; and (iv) the equivalent unaudited pro forma income per
common and common equivalent share and the unaudited pro forma book value per
common share of Nodeco AS. The information presented in the table should be read
in conjunction with the unaudited pro forma financial statements and the
separate historical consolidated financial statements of Weatherford and Nodeco
and the notes thereto included elsewhere or incorporated by reference in this
Prospectus. See "Incorporation by Reference", "Unaudited Pro Forma Financial
Information" and "Nodeco Consolidated Financial Statements".
<TABLE>
<CAPTION>
PRO FORMA
PER PRO FORMA
HISTORICAL SHARE OF EQUIVALENT
--------------------- WEATHERFORD PER NODECO
WEATHERFORD NODECO COMMON STOCK COMMON SHARE
----------- ------ ------------ ------------
<S> <C> <C> <C> <C>
Income (loss) per common and common
equivalent share for the year ended
December 31, 1995.................. $ (0.21) $ 3.95 $ 1.41 $ 1.67
Book value per share as of December
31, 1995........................... 14.35 11.24 14.66 17.39
</TABLE>
As of March 27, 1996, the last trading day prior to the announcement by
Weatherford and Nodeco AS that they had reached an agreement concerning the
Transaction, the closing sale price of Weatherford Common Stock as reported by
the NYSE was $35.63 per share.
8
RISK FACTORS
NONPAYMENT OF DIVIDENDS. Weatherford has not declared or paid dividends
on the Weatherford Common Stock since December 1982 and does not anticipate
paying dividends on the Weatherford Common Stock at any time in the
foreseeable future.
INDUSTRY VOLATILITY. The oil and gas industry in which Weatherford and
Nodeco participate historically has experienced significant volatility. Demand
for Weatherford's and Nodeco'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 and workover activity
can fluctuate significantly in a short period of time, particularly in the
United States and Canada.
The willingness of oil and gas operators to make capital expenditures for
the exploration and production of oil and natural gas will continue to be
influenced by numerous factors over which Weatherford and Nodeco have no
control, including the prevailing and expected market prices for oil and
natural gas. Such prices are impacted by, among other factors, the ability of
the members of the Organization of Petroleum Exporting Countries ("OPEC") to
maintain price stability through voluntary production limits, the level of
production by non-OPEC countries, worldwide demand for oil and gas, general
economic and political conditions, costs of exploration and production,
availability of new leases and concessions, and governmental regulations
regarding, among other things, environmental protection, taxation, price
controls and product allocations. No assurance can be given as to the level of
future oil and gas industry activity or demand for Weatherford's and Nodeco's
services and products.
COMPETITION. Weatherford encounters substantial competition from
numerous small, single-site operators, larger concerns operating at multiple
locations and various well servicing companies. In addition, Nodeco encounters
substantial competition from several large companies that operate in the
Norwegian and United Kingdom sectors of the North Sea. Weatherford expects
that the substantial competition currently encountered by it and Nodeco will
not be reduced or eliminated if the Transaction is consummated.
POSSIBLE PRODUCT LIABILITY CLAIMS. Certain products manufactured or
leased by Weatherford or Nodeco are used in potentially hazardous drilling,
completion, production and workover applications that can cause personal
injury or loss of life as well as damage to property, equipment or the
environment and suspension of operations. Litigation arising from a
catastrophic occurrence at a location where Weatherford's or Nodeco's
equipment and services are used may in the future result in Weatherford or
Nodeco being named as a defendant in product liability or other lawsuits
asserting potentially large claims. Each of Weatherford and Nodeco maintains
insurance coverage that its management believes to be customary in the
industry for a company of its size against these hazards. However, insurance
may not provide complete protection against casualty losses and a successful
claim could have a material adverse effect on Weatherford or Nodeco. Further,
no assurance can be given that Weatherford or Nodeco will be able to maintain
adequate insurance in the future at rates considered reasonable.
RISKS RELATED TO INTERNATIONAL OPERATIONS. During 1995, approximately
53% of Weatherford's revenues were derived from sales and rentals outside of
the United States and Canada based upon the ultimate destination in which
equipment or services were sold, shipped or provided to the customer. Certain
of these operations are subject to special risks inherent in doing business
outside the United States, including risks of war, civil disturbances and
governmental activities that may limit or disrupt markets, restrict the
movement of funds or result in the deprivation of contract rights or the
taking of property without fair compensation. Certain areas, including
Algeria, Nigeria, Angola and parts of the Middle East have been subjected to
political disruption or social unrest in the past twelve months. International
operations also can be affected by laws and regulations limiting or
prohibiting exports to and operations in particular countries, including Iran,
Iraq and Libya. Government-owned petroleum companies in some of the countries
in which Weatherford operates have adopted policies (or are subject to
governmental policies) giving preference to the purchase of goods and services
from companies that are majority-owned by local nationals. As a result of such
policies, Weatherford relies on joint ventures, license arrangements and other
business combinations with local nationals in these countries. In addition,
political considerations may
9
disrupt the commercial relationships between Weatherford and government-owned
petroleum companies. Generally, business interruptions resulting from civil or
political disruptions negatively impact near-term results of operations;
however, management of Weatherford believes that 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 Weatherford. Weatherford expects that the risks encountered by
it in its international operations also would apply to Nodeco if the
Transaction is consummated.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS. Weatherford's and
Nodeco's businesses are affected both directly and indirectly by governmental
regulations relating to the oilfield service industry and the oil and gas
exploration and production industry in general, as well as by environmental
and safety regulations that specifically apply to such businesses. It is
likely that the trend of more expansive and stricter environmental laws and
regulations will continue, and that the costs of compliance with such laws and
regulations will continue to increase in the foreseeable future, for
Weatherford, Nodeco and their customers. There can be no assurance that the
cost of compliance with current environmental and safety regulations or future
changes in such laws and regulations will not have a material adverse effect
on Weatherford's and Nodeco's operations.
EXCHANGE RATE DATA
The following table sets forth, for the periods indicated, certain
exchange rates based on the high and low noon buying rates in New York City
for cable transfers in foreign currencies as certified for customs purposes by
the Federal Reserve Bank of New York. The rates quoted are the number of
United States dollars per one NOK. The average exchange rate is based on the
average of the exchange rates on the last day of each month during such
periods. On May 9, 1996, the exchange rate based on the noon buying rate in
New York City for cable transfers of NOK expressed in United States dollars,
as certified for customs purposes by the Federal Reserve Bank of New York, was
$0.1531 per one NOK.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Exchange rate at end of period....... $ 0.1582 $ 0.1478 $ 0.1328 $ 0.1439 $ 0.1671
Average exchange rate during
period............................. 0.1584 0.1426 0.1402 0.1599 0.1540
High exchange rate during period..... 0.1635 0.1613 0.1667 0.1815 0.1766
Low exchange rate during period...... 0.1468 0.1321 0.1328 0.1439 0.1399
</TABLE>
WEATHERFORD ENTERRA, INC.
Weatherford is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
Weatherford's principal business segments include (i) the oilfield services
segment, which consists of renting specialized oilfield equipment, providing
fishing, well control assistance and other downhole services and related
tools, and providing tubular running services and related tools; (ii) the
energy products and services segment, which consists of manufacturing, selling
and servicing a variety of products, including cementation products, power
equipment, fishing and milling tools and heavy wall drill pipe, gas lift
valves, production and service packers and related equipment, electrical and
instrumentation control systems and pedestal-mounted marine cranes; (iii) the
gas compression segment, which consists of manufacturing, packaging, selling,
renting and servicing reciprocating natural gas compressors; and (iv) the
pipeline services segment, which consists of manufacturing, selling and
renting specialized pipeline equipment and services. Weatherford operates in
virtually every oil and gas exploration and production region in the world,
with more than 330 locations in 47 countries, including the United States.
10
NODECO
Nodeco designs, manufactures, sells and rents oil and gas well completion
products primarily consisting of liner hanger equipment and related services,
as well as packers used in completions with electric submersible pumps.
Nodeco's primary markets for these products are the Norwegian and United
Kingdom sectors of the North Sea. Nodeco also provides products and services
for reservoir and wellbore monitoring and manufactures precision mechanical
components for customers that are primarily affiliated with the oil industry.
Liner hanger equipment is used in the drilling and completion of oil and
gas wells. While primarily used for the production casing string in deep,
deviated or horizontal wells, liner hangers also may be used for intermediate
casing sections of a well. Nodeco provides a broad range of liner hanger
equipment in diameters ranging from 4 1/2 inches to 18 5/8 inches. A variety
of accessories and configurations also are available including rotating and
non-rotating liner hangers, single and dual wiper plug systems, liner top
packers and installation and clean-out tools. Equipment is designed by Nodeco
to meet North Sea standards for the industry. In most situations, Nodeco
supplies a complete liner hanger package to the customer including Nodeco
liner hanger equipment and running tools, as well as cementing equipment
purchased from third parties, all of which are assembled and tested before
shipping to the customer. Nodeco employees also act as advisors at the
drilling rig when the equipment is installed. Two special products that Nodeco
markets as part of its liner hanger system are the Floating Junk Bonnet and
the Top-Drive Cementing Head. The Floating Junk Bonnet is a Nodeco innovation
(patents pending) that keeps debris from entering the liner hanger equipment
when it is being installed. The tool helps prevent sticking in the wellbore
and improves the setting performance of the liner hanger. The Top-Drive
Cementing Head is an attachment that allows the liner to be rotated by the Top
Drive System during cementing, thereby improving the cementation of the liner.
Electric submersible pump installations commonly are used in producing
wells in the United Kingdom sector of the North Sea as well as in numerous
other oil fields worldwide. Most of these completions use a packer to improve
the completion and the efficiency of the pump. Pump packers are
hydraulically-set, multiple-string tools that provide for production tubing
string, power cable, gas venting, gas or chemical injection and wireline
instrument access. The pump packers are retrievable to allow for frequent
workovers associated with electric submersible pumps. In 1990, Nodeco worked
jointly with BP Exploration to develop a proprietary resettable pump packer
that could be set, released and then reset to reduce workover costs. The
patented tool design allows near surface repairs to the power cable system
without requiring the pump packer to be retrieved to the surface, thereby
significantly reducing rig time and workover cost. Nodeco's patented "RR"
Resettable Pump Packer presently is manufactured in four main sizes ranging
from 7 inches to 13 3/8 inches, with up to five string capacity. Typically,
the pump packers are manufactured with 13% chrome materials, and a variety of
design modifications are available. Additional sizes are designed as customers
request them. Pump packers generate additional service revenues each time they
are retrieved from the well and require redressing and repair. As an addition
to the pump packer line, Nodeco recently developed a retrievable sump packer
that can be run in tandem with the pump packer.
Nodeco has a working relationship with a German manufacturer that has a
proprietary manufacturing process to produce a screen system to be used across
producing intervals. This special screen system allows the operator to
eliminate gravel packing as part of the completion process. The resulting well
completion produces with less differential pressure and has improved flow
characteristics.
Aarbakke, a wholly-owned subsidiary of Nodeco AS, is a manufacturing unit
that also provides precision machining services to third parties in Norway and
other countries. These services generally consist of manufacturing small and
large mechanical components. Approximately half of Aarbakke's production
capacity is used for third-party manufacturing, of which 80% relates to oil
industry activities.
Subsurface Technology AS, a 51% owned subsidiary of Nodeco AS
("SubTech"), provides consulting services related to production and reservoir
monitoring activities, as well as design, fabrication and installation of
systems for such activities. Systems designed and fabricated by SubTech for
customers have included downhole pressure and temperature monitoring equipment
and the associated surface data
11
acquisition equipment. Consulting studies performed by SubTech for customers
have evaluated the feasibility of various temperature and pressure monitoring
systems, reservoir subsidence monitoring, selective well stimulation
procedures and other concepts related to fluid measurement and other
production applications. SubTech's customers include many of the active
operators in the Norwegian sector of the North Sea, as well as other foreign
entities.
Historically, Nodeco has focused its marketing efforts on the North Sea
market, and Nodeco only recently has increased its international sales
efforts. Nodeco actively provides liner hanger equipment and services in all
sectors of the North Sea as well as certain other parts of the world. Until
recently, substantially all of Nodeco's pump packer sales have been to
operators in the United Kingdom sector of the North Sea, since no electric
submersible pump completions had been made in the Norwegian sector. Nodeco has
made recent sales of pump packers to certain Norwegian producers. Most of
Nodeco's machining services and reservoir monitoring consulting services are
provided to Norwegian customers. Nodeco's revenues derived from non-North Sea
markets originate primarily from other European countries, North and West
Africa and the Asia-Pacific region.
THE TRANSACTION
The detailed terms and conditions to the consummation of the Transaction
are contained in the Purchase and Sale Agreement, which is attached as
Appendix A to this Prospectus and is incorporated herein by reference. The
following discussion sets forth a description of certain material terms and
conditions of the Purchase and Sale Agreement. THE DESCRIPTION IN THIS
PROSPECTUS OF THE TERMS AND CONDITIONS TO THE CONSUMMATION OF THE TRANSACTION
IS QUALIFIED BY, AND MADE SUBJECT TO, THE MORE COMPLETE INFORMATION SET FORTH
IN THE PURCHASE AND SALE AGREEMENT.
GENERAL DESCRIPTION OF THE TRANSACTION
The Sellers have agreed to sell to Weatherford on the Effective Date the
Assets, consisting of all of the assets, contractual rights and business of
the Sellers at the Effective Date, including, but not limited to, cash and
cash equivalents, the benefits of the Sellers' outstanding contractual
obligations, equipment, rental equipment, goodwill, motor vehicles, real
property, shares of the Subsidiaries owned by Nodeco AS, inventory, intangible
property, all amounts allocated to the Sellers' collective pension plan as of
the Effective Date in excess of the liability under such plan as of the
Effective Date, accounts receivable, prepayments and existing legal claims. As
consideration for the sale of the Assets by the Sellers to Weatherford,
Weatherford will assume all liabilities of the Sellers (other than Net Debt in
excess of NOK 32 million), pay to the Sellers the cash amount of NOK
117,649,250 (as adjusted as described below under "Terms of the
Transaction -- Adjustments to Consideration") and issue to Nodeco AS 750,000
shares (the "Consideration Shares") of Weatherford Common Stock. The term "Net
Debt" is defined in the Purchase and Sale Agreement to mean the sum of
Nodeco's bank overdrafts, other short-term interest bearing liabilities,
mortgage and other long-term debt and subordinated loans less any cash and
cash equivalents as listed in the audited financial statements of Nodeco AS,
Aarbakke, each Subsidiary and Nodeco AS on a consolidated basis, in each case
at December 31, 1995 (collectively, the "Nodeco Accounts"). Weatherford has
agreed to offer each employee of the Sellers a similar position on similar
terms as that held at the Effective Date. In addition, Weatherford has agreed
to use its best efforts to list the Consideration Shares on the NYSE.
GOVERNMENTAL AND REGULATORY APPROVALS
The Transaction is subject to (i) the receipt of approval from the
Norwegian Ministry of Industry and Energy (the "Ministry") under the Norwegian
Acquisition of Business Act of 1994 ("NABA") without conditions that
materially alter the economic value to Weatherford of the Transaction or (ii)
the expiration of the applicable 30-day waiting period without a request by
the Ministry for further information (either (i) or (ii) referred to as
"Ministry Approval"), unless Weatherford, in its sole discretion, waives the
requirement of Ministry Approval. Transactions such as the Transaction are
reviewed by the Ministry to determine if the acquisition may have material
adverse effects, including employment effects, on a
12
company, its line of business or society as a whole. Weatherford filed an
application for Ministry approval on April 2, 1996. Subsequent to the filing of
the application, Weatherford received and complied with several requests by the
Ministry for further information.
Weatherford shall be entitled to terminate the Purchase and Sale
Agreement if Ministry Approval is not obtained, unless Weatherford, in its
sole discretion, waives the requirement of Ministry Approval. There can be no
assurance that the Ministry will not require further information in connection
with the Transaction or that the Ministry will approve the Transaction without
conditions that materially alter the economic value of the Transaction to
Weatherford.
Weatherford and the Sellers are aware of no other material governmental
or regulatory approvals required for consummation of the Transaction.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of
Weatherford Common Stock by non-United States holders. The following
discussion does not purport to be a complete analysis of all of the potential
tax considerations relating thereto. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
United States Internal Revenue Service ("IRS") rulings and judicial decisions
now in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations. This discussion does not purport to deal
with all aspects of federal income and estate taxation that may be relevant to
a particular non-United States holder's decision to own Weatherford Common
Stock. Neither Weatherford nor Nodeco has requested an opinion of legal
counsel or an IRS ruling regarding the federal income or estate tax
consequences of the ownership or disposition of Weatherford Common Stock by
non-United States holders. PROSPECTIVE NON-UNITED STATES HOLDERS OF
WEATHERFORD COMMON STOCK ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL AND NON-UNITED STATES TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF WEATHERFORD
COMMON STOCK.
As used herein, "non-United States holder" means a corporation,
individual or partnership that is, as to the United States, a foreign
corporation, a non-resident alien individual or a foreign partnership, or any
estate or trust that is not subject to United States taxation on income from
sources outside the United States and that is not effectively connected with
the conduct of a trade or business within the United States.
Dividends paid to a non-United States holder of Weatherford Common Stock
will be subject to withholding of United States federal income tax at a 30%
rate or such lower rate as may be specified by an applicable income tax
treaty. The United States federal income tax withholding rate on dividends
paid to a non-United States holder is limited to 15% under Article 8 of the
Norway-United States Income Tax Treaty (the "Treaty") provided the non-United
States holder (i) is a resident of Norway, within the meaning of the Treaty,
and (ii) does not have a permanent establishment in the United States with
respect to which the dividends are effectively connected. Under currently
effective Treasury Regulations, dividends paid to an address in a foreign
country are presumed to be paid to a resident of the country in determining
the applicability of a treaty for those purposes. Proposed Treasury
Regulations, if finally adopted, would require a non-United States holder to
file certain forms to obtain the benefit of any applicable tax treaty
providing for a lower rate of withholding tax on dividends. Those forms would
contain the holder's name and address and, subject to a de minimis exception,
an official statement by the competent authority in the foreign country (as
designated in the applicable tax treaty) attesting to the holder's status as a
resident thereof. However, except as may be otherwise provided in an
applicable income tax treaty, a non-United States holder will be taxed at
ordinary federal income tax rates (on a net income basis) on dividends that
are effectively connected with the conduct of a trade or business of the
non-United States holder within the United States and will not be subject to
the withholding tax described above. Certain certification requirements must
be complied with to claim an exemption from withholding on effectively
connected dividends. If the non-United States holder is a foreign corporation,
it also may be subject to a United States
13
branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty on effectively connected dividends. A non-United
States holder that is eligible for a reduced rate of United States withholding
tax pursuant to an income tax treaty may apply for a refund of any excess
amounts withheld by filing an appropriate claim for refund with the IRS.
Weatherford has not declared or paid dividends on Weatherford Common Stock
since December 1982 and does not anticipate paying dividends on Weatherford
Common Stock at any time in the foreseeable future.
Non-United States holders generally will not be subject to United States
federal income tax in respect of gain recognized on a disposition of
Weatherford Common Stock unless (i) the gain is effectively connected with a
trade or business conducted by the non-United States holder within the United
States (in which case the branch profits tax described in the preceding
paragraph also may apply if the holder is a foreign corporation), (ii) in the
case of a non-United States holder who is a non-resident alien individual and
holds Weatherford Common Stock as a capital asset, the holder is present in
the United States for 183 or more days in the taxable year of the disposition
and certain other conditions are met, (iii) the non-United States holder is
subject to tax pursuant to the provisions of the United States federal tax law
applicable to certain United States expatriates or (iv) Weatherford is or has
been a "United States real property holding corporation" for federal income
tax purposes and, if Weatherford Common Stock is considered "regularly traded"
during the year of the disposition of Weatherford Common Stock, the non-United
States holder held directly or indirectly at any time during the five-year
period ending on the date of disposition more than five percent of the
outstanding Weatherford Common Stock. Generally, this last rule for stock in
United States real property holding corporations takes precedence over relief
provided by tax treaties. However, non-United States holders who would be
subject to United States federal income tax with respect to gain recognized on
a sale or other disposition of Weatherford Common Stock should consult
applicable treaties, which may provide different rules.
Weatherford Common Stock that is owned or treated as being owned at the
time of death by a non-United States holder who is a non-resident alien
individual will be included in the holder's gross estate for United States
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
Generally, dividends paid to non-United States holders outside the United
States that are subject to the 30% or treaty-reduced rate of withholding tax
will be exempt from the 31% backup withholding tax. As a general matter,
information reporting and backup withholding will not apply to a payment by or
through a foreign office of a foreign broker of the proceeds of a sale of
Weatherford Common Stock effected outside the United States. However,
information reporting requirements (but not backup withholding) will apply to
a payment by or through a foreign office of a broker of the proceeds of a sale
of Weatherford Common Stock effected outside the United States where that
broker (i) is a United States person, (ii) is a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a
trade or business in the United States or (iii) is a "controlled foreign
corporation" as defined in the Code (generally, a foreign corporation
controlled by United States shareholders), unless the broker has documentary
evidence in its records that the holder is a non-United States holder and
certain conditions are met or the holder otherwise establishes an exemption.
Payment by a United States office of a broker of the proceeds of a sale of
Weatherford Common Stock is subject to both backup withholding and information
reporting unless the holder certifies to the payor in the manner required as
to its non-United States status under penalties of perjury or otherwise
establishes an exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, any amounts withheld under
the backup withholding rules will be allowed as a refund or credit against the
holder's United States federal income tax liability, if any, provided the
required information or appropriate claim for refund is filed with the IRS.
ACCOUNTING TREATMENT
The Transaction will be accounted for using the purchase method of
accounting. Consequently, the results of operations of Nodeco will be included
with those of Weatherford from the Effective Date.
14
TERMS OF THE TRANSACTION
EFFECTIVE DATE OF THE TRANSACTION
The Purchase and Sale Agreement provides that the Transaction will become
effective (the "Effective Date") on such date as the Sellers and Weatherford
may agree or upon the latest to occur of the following events: (i) the fifth
business day after Weatherford has notified the Sellers in writing that the
Commission has declared the Registration Statement effective under the
Securities Act, provided that no stop order is in effect on such day; (ii) the
first business day after any such stop order has been removed; (iii) the fifth
Norwegian business day after Weatherford has notified the Sellers in writing
of Ministry Approval, unless Ministry Approval has been waived by Weatherford,
in its sole discretion; and (iv) the approval of the Transaction by the
shareholders of each Seller.
ADJUSTMENTS TO CONSIDERATION
Subject to the adjustments described below, the purchase price (the
"Purchase Price") for the Assets shall consist of cash consideration of NOK
117,649,250 and the issuance to Nodeco AS of 750,000 shares of Weatherford
Common Stock. The cash portion of the Purchase Price will be adjusted to
account for movements in the price of Weatherford Common Stock on the NYSE and
the exchange rate between United States dollars and Norwegian kroner from the
date of the Purchase and Sale Agreement to the Effective Date, subject to
certain limitations. The adjustment to the cash consideration shall be made
according to the following formula:
NOK 142,350,750 - (Average Stock Price x 750,000 x Exchange Rate)
If the adjustment referred to above is a positive number, the cash
consideration will be increased by an amount equal to such positive number. If
the adjustment referred to above is a negative number, the cash consideration
will be reduced by an amount equal to such negative number. The term "Average
Stock Price" is defined as the average Weatherford Common Stock closing price
on the NYSE as reported by The Wall Street Journal for the ten business days
ending on the last business day prior to the Effective Date; provided, that
(i) if the average Weatherford Common Stock closing price for the ten business
days ending on the last business day prior to the Effective Date is greater
than $35 per share, then the "Average Stock Price" shall be exactly $35 per
share, (ii) if the average Weatherford Common Stock closing price for the ten
business days ending on the last business day prior to the Effective Date is
less than $25 per share, then the "Average Stock Price" shall be exactly $25
per share, and (iii) if the average Weatherford Common Stock closing price for
the ten business days ending on the last business day prior to the Effective
Date is less than $20 per share, then Weatherford shall have the option to
terminate the Purchase and Sale Agreement or pay an amount of additional cash
consideration equal to the product of (A) the amount by which $20 exceeds the
average Weatherford Common Stock closing price for the ten business days
ending on the last business day prior to the Effective Date and (B) 750,000
and (C) the Exchange Rate. The term "Exchange Rate" is defined as the average
NOK/United States dollar exchange rate as reported by Dagens Naeringsliv for the
ten business days ending on the last business day prior to the Effective Date;
provided, that (i) if the average NOK/United States dollar exchange rate for
the ten business days ending on the last business day prior to the Effective
Date is greater than NOK 6.4532 per United States dollar, then the "Exchange
Rate" shall be exactly 6.4532, and (ii) if the average NOK/United States
dollar exchange rate for the ten business days ending on the last business day
prior to the Effective Date is less than NOK 6.2002 per United States dollar,
then the "Exchange Rate" shall be exactly 6.2002.
The Sellers shall be entitled to interest on the Purchase Price at the
rate of five percent per annum for the period beginning on the sixth business
day after the Commission has declared the Registration Statement effective and
ending on the earlier to occur of (i) the last business day prior to the
Effective Date and (ii) May 27, 1996. If the Effective Date has not taken
place before May 27, 1996 and the Sellers do not exercise their option to
terminate the Purchase and Sale Agreement described under "-- Termination or
Amendment of Purchase and Sale Agreement", the Sellers shall be entitled to
interest on the Purchase Price at the rate of ten percent per annum for the
period beginning on May 28, 1996 and ending on the last business day prior to
the Effective Date.
15
If any representations and warranties provided by the Sellers to
Weatherford in the Purchase and Sale Agreement (including that the Sellers
have, to the best of their knowledge, provided all information relating to the
Sellers and the Subsidiaries and their respective affairs that would be
material to Weatherford for the valuation of the Assets and the business of
the Sellers) are untrue, inaccurate, misleading or breached, Weatherford shall
be entitled to reduce the cash portion of the Purchase Price by an amount (the
"Deficiency Amount") equal to the value at the Effective Date of the specific
Assets (or portions thereof) or specific assumed liabilities (or portions
thereof) that resulted in the representations and warranties being untrue,
inaccurate, misleading or breached; provided, that if the Deficiency Amount is
greater than NOK 44,000,000, Weatherford and the Sellers shall use their
reasonable best efforts to reach an agreement with respect to the Transaction
on mutually acceptable terms, or, after failure to reach such an agreement
within ten business days, any party shall be permitted to terminate the
Purchase and Sale Agreement. If any representations and warranties provided by
the Sellers to Weatherford in the Purchase and Sale Agreement are discovered
after the Effective Date to have been untrue, inaccurate, misleading or
breached at the Effective Date, the Sellers shall reimburse to Weatherford the
Deficiency Amount plus interest on such amount at the rate of eight percent
per annum from the Effective Date to the date of reimbursement.
CONDITIONS TO CLOSING OF THE TRANSACTION
Pursuant to the Purchase and Sale Agreement, the closing of the
Transaction is subject to certain conditions, including (i) the approval of
the Transaction by the requisite vote of the shareholders of each Seller as
may be required under Norwegian law or such Seller's governing documents, (ii)
Ministry Approval, unless Weatherford, in its sole discretion, waives such
requirement, (iii) the declaration of the effectiveness of the Registration
Statement by the Commission and the lack of any stop orders suspending the
effectiveness of the Registration Statement, (iv) the delivery of guarantees
in favor of Weatherford executed by certain shareholders of Nodeco AS and (v)
the delivery to Weatherford by the Sellers of certain bills of sale, deeds,
assignments and other documents regarding the Assets.
REPRESENTATIONS AND WARRANTIES OF WEATHERFORD AND THE SELLERS
In the Purchase and Sale Agreement, the Sellers have made various
representations and warranties relating to, among other things, their
businesses, properties and financial conditions, the accuracy of their
financial statements, the ownership of their assets, their compliance with
certain laws (including environmental) and permitting requirements, the status
of their contracts and the existence or absence of certain litigation. In the
Purchase and Sale Agreement, Weatherford has made various representations and
warranties relating to, among other things, its business and financial
condition, the accuracy of its recent filings with the Commission and its
financial statements contained therein, its compliance with certain laws and
permitting requirements and the existence or absence of certain litigation.
CONDUCT OF SELLERS' BUSINESS PRIOR TO THE TRANSACTION
Pursuant to the Purchase and Sale Agreement, the Sellers have agreed
that, from the date of the Purchase and Sale Agreement to the Effective Date,
they and the Subsidiaries will (i) conduct the business of the Sellers and the
Subsidiaries in the ordinary and usual course, consistent with past practices;
(ii) not issue shares of stock, or grant any options, warrants or other rights
to purchase such stock; (iii) not declare or pay any dividends; (iv) not
redeem any stock; (v) not amend the governing documents of either Seller or
any Subsidiary; (vi) not sell, pledge or dispose of any assets of either
Seller or any Subsidiary other than in the ordinary and usual course of
business, consistent with past practice; (vii) not grant any director, officer
or employee any increase in compensation or any severance or termination pay
in excess of what is consistent with prior business practice, except as
required by law; (viii) not establish any new, or increase any existing,
pension plans, profit sharing plans or employee benefits; (ix) not acquire any
corporation, partnership or other business organization; (x) not incur any
indebtedness other than in the usual and ordinary course of business
consistent with past practice; (xi) not grant any guarantee or financial
support of any kind to third parties other than in the usual and ordinary
course of business consistent with past practice; (xii) not enter into any
material contracts or engage in any transaction which, even though in the
ordinary and usual course of business, is not consistent with the prior
business practice of the Sellers or the
16
Subsidiaries; (xiii) not make any change in the accounting principles and
practices of the Sellers or the Subsidiaries; (xiv) not adopt or file a plan
of complete or partial liquidation, dissolution, merger or other
reorganization; (xv) not do anything that may cause the Sellers' warranties
contained in the Purchase and Sale Agreement to become incorrect; (xvi) make
all reasonable efforts to preserve intact all licenses and permits of the
Sellers and the Subsidiaries and maintain the business relationships of the
Sellers and the Subsidiaries; (xvii) pay any taxes (including social security
premiums) or other amounts owed and file any tax returns or other similar
filings required by applicable law; (xviii) use their best efforts to call and
hold meetings of the shareholders of the Sellers to approve the Transaction,
such meetings to be held as promptly as practicable following the declaration
by the Commission of the effectiveness of the Registration Statement; and
(xix) give full access to Weatherford at all reasonable times to the premises
and records of the Sellers and the Subsidiaries and furnish information
regarding the business of the Sellers and the Subsidiaries as requested by
Weatherford.
TERMINATION OR AMENDMENT OF PURCHASE AND SALE AGREEMENT
The Purchase and Sale Agreement may be amended or supplemented only by an
instrument in writing signed on behalf of Weatherford and each Seller. The
Sellers have the right to terminate the Purchase and Sale Agreement if, prior
to May 27, 1996, either (i) the Commission has not declared the Registration
Statement effective and all stop orders have not been removed or (ii)
Weatherford has not obtained Ministry Approval, unless, in its sole
discretion, Weatherford has waived such requirement. The Sellers may only
exercise such right of termination within five business days following May 27,
1996. If such right is not exercised, and an event referred to in either
clause (i) or clause (ii) above has not occurred prior to July 26, 1996,
Weatherford or either Seller may terminate the Purchase and Sale Agreement
within five business days following such date.
INDEMNIFICATION
The Purchase and Sale Agreement provides that the Sellers shall indemnify
and hold harmless Weatherford and the Subsidiaries for one year following the
Effective Date against all losses, claims, damages, liabilities, costs and
other expenses ("Losses") it or any Subsidiary may reasonably incur or become
subject to in connection with third party claims against Weatherford or any
Subsidiary related to events that occurred prior to the Effective Date, to the
extent such claim has not resulted in a reduction of the cash portion of the
Purchase Price by, or a reimbursement by the Sellers to Weatherford of, a
Deficiency Amount and to the extent such Losses arise out of, are based upon
or are in connection with any untrue, inaccurate, misleading or breached
representation or warranty made by the Sellers in the Purchase and Sale
Agreement. In addition, the Sellers shall indemnify and hold harmless
Weatherford and the Subsidiaries for a period of three years after the
Effective Date against all Losses they may reasonably incur or become subject
to, insofar as such Losses arise out of, are based upon or are in connection
with a claim by any taxing authority for any taxes allocated or attributable
to any period ending on or before December 31, 1995 that has not been included
in the Nodeco Accounts. The Sellers shall only be responsible for tax Losses
in excess of NOK 1,000,000 and for all other Losses in excess of NOK
4,000,000. The Sellers' maximum liability for all such Losses shall not exceed
NOK 75,000,000. Pursuant to the Purchase and Sale Agreement, certain
shareholders of Nodeco AS will guarantee the Sellers' indemnification
obligations.
The Purchase and Sale Agreement provides that Weatherford shall indemnify
and hold harmless the Sellers against all Losses they may reasonably incur or
become subject to under the Securities Act, the Exchange Act or otherwise,
insofar as such Losses arise out of, are based upon or are in connection with
(i) any untrue, inaccurate misleading or breached representation or warranty
made by Weatherford in the Purchase and Sale Agreement, (ii) any untrue
statement or omission of a material fact (or alleged untrue statement or
omission) contained in the Registration Statement or any prospectus included
therein, (iii) the failure of Weatherford to comply with the Securities Act or
any other law, rule or regulation with respect to the distribution of the
Consideration Shares, (iv) the non-performance or the defective or negligent
performance after the Effective Date by Weatherford of any contracts
transferred to Weatherford as part of the Transaction, to the extent such
non-performance or defective or negligent performance is not caused by
17
the Sellers' breach of any of their representations or warranties contained in
the Purchase and Sale Agreement, (v) the failure by Weatherford to satisfy any
of the liabilities assumed by it under the Purchase and Sale Agreement, or
(vi) a claim by any taxing authority for any taxes allocated or attributable
to any period ending before the Effective Date.
NON-COMPETITION AGREEMENT
In the Purchase and Sale Agreement, the Sellers have agreed that, for a
period of two years following the Effective Date, neither the Sellers nor any
affiliate of the Sellers will compete, directly or indirectly, with
Weatherford or any affiliate of Weatherford in designing, manufacturing,
selling, renting or running liner hangers, packers and gas lift valves and
systems. The Sellers also have agreed on behalf of the Sellers and their
affiliates not to solicit for employment any employee of Weatherford or any
affiliate of Weatherford, including any employee of either Seller or any
Subsidiary who becomes an employee of Weatherford or any affiliate of
Weatherford.
COMPARATIVE RIGHTS OF THE STOCKHOLDERS
OF WEATHERFORD AND NODECO AS
Upon consummation of the Transaction, Nodeco AS will be a holder of
shares of Weatherford Common Stock. To the extent the shares of Weatherford
Common Stock held by Nodeco AS are distributed to the shareholders of Nodeco
AS, in connection with a liquidation of Nodeco AS or otherwise, holders of
shares of Nodeco AS will become holders of shares of Weatherford Common Stock.
The shares of Nodeco AS are governed by Norwegian law and the Articles of
Association of Nodeco AS. The rights of holders of Weatherford Common Stock
are governed by the law of the State of Delaware, Weatherford's Restated
Certificate of Incorporation and Weatherford's Bylaws. Set forth below are the
principal differences between the shares of Nodeco AS and Weatherford Common
Stock.
SPECIAL VOTE REQUIRED FOR CERTAIN COMBINATIONS
Section 203 of the Delaware General Corporation Law (the "DGCL")
prohibits a corporation from engaging in a "business combination" (as
hereinafter defined) with an "interested stockholder" (defined generally to
mean a person who, together with his affiliates, owns, or if the person is an
affiliate of the corporation did own within the last three years, 15% or more
of the outstanding voting stock of the corporation) for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless (i) prior to the date of the business
combination, the board of directors of the corporation approved the business
combination or the transaction in which the stockholder became an interested
stockholder, (ii) as a result of the business combination, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced or (iii) on or subsequent to
the date of the business combination, the board of directors and the holders
of at least 66 2/3% of the outstanding voting stock not owned by the
interested stockholder approve the business combination. The DGCL defines a
"business combination" generally as: (i) a merger or consolidation with the
interested stockholder or with any other corporation if the merger or
consolidation is caused by the interested stockholder, (ii) a sale or other
disposition to or with an interested stockholder of assets with an aggregate
market value greater than or equal to 10% or more of either the aggregate
market value of all assets of the corporation or the aggregate market value of
all of the outstanding stock of the corporation; (iii) with certain
exceptions, any transaction resulting in the issuance or transfer by the
corporation or any majority-owned subsidiary of any stock of the corporation
or such subsidiary to the interested stockholder; (iv) any transaction
involving the corporation or a majority-owned subsidiary that has the effect
of increasing the proportionate share of the stock of the corporation or any
such subsidiary owned by the interested stockholder; or (v) any receipt by the
interested stockholder of the benefit of any loans or other financial benefits
provided by the corporation or any majority-owned subsidiary.
The DGCL permits a corporation to elect not to be governed by Section
203. Weatherford's Bylaws make such an election. However, Weatherford's
Restated Certificate of Incorporation and Bylaws contain provisions similar to
Section 203 that require a higher percentage of stockholders' vote to approve
a
18
Business Combination (as hereinafter defined). Pursuant to these provisions,
an "Interested Stockholder" is defined generally to mean the owner of more
than 20% of the voting power of the outstanding voting stock and any affiliate
of such person. The holders of at least 80% of the voting power of the then
outstanding shares of capital stock of Weatherford entitled to vote must
approve the Business Combination. The term "Business Combination" is defined
generally to include any of the following transactions in which an Interested
Stockholder is involved: (i) a merger or consolidation, (ii) a sale or other
disposition of assets having a fair market value of $1 million or more, (iii)
an issuance or transfer of any securities having a fair market value of $1
million or more, (iv) a plan of liquidation or dissolution or (v) certain
transactions that increase the proportionate share of the outstanding shares
of any class of equity or convertible securities owned by an Interested
Stockholder or any of its affiliates. The special stockholder voting
requirement of the fair price provisions is not applicable to a Business
Combination if either (i) a majority of the Continuing Directors (as
hereinafter defined) approves the Business Combination or (ii) certain minimum
price, form of consideration and procedural requirements are satisfied.
Weatherford's Restated Certificate of Incorporation generally defines
"Continuing Director" to mean a director who either (i) was unaffiliated with
the Interested Stockholder and was a member of the Weatherford Board of
Directors prior to the time that the Interested Stockholder became an
Interested Stockholder or (ii) was designated in the appropriate manner as a
Continuing Director by the other Continuing Directors.
Neither the Articles of Association of Nodeco AS nor Norwegian law
contains any provisions similar to that contained in Weatherford's Restated
Certificate of Incorporation regarding a special vote for certain business
combinations with "interested" stockholders.
VOTE REQUIRED FOR EXTRAORDINARY CORPORATE TRANSACTIONS
Under the DGCL, an amendment to a corporation's certificate of
incorporation requires the affirmative vote of the holders of a majority of
the outstanding stock of the corporation entitled to vote thereon and a
majority of the outstanding stock of each class entitled to vote thereon as a
class, unless the corporation's certificate of incorporation provides for a
higher percentage. The DGCL also provides that the holders of a majority of
the outstanding stock of the corporation entitled to vote thereon may approve
an agreement of merger or consolidation or the dissolution of a corporation.
Weatherford's Restated Certificate of Incorporation provides that the
affirmative vote of the holders of at least 80% of the outstanding stock
entitled to vote generally in the election of directors is required for
amendments to Weatherford's Restated Certificate of Incorporation relating to
written consents and special meetings of stockholders, relating to the number,
election, terms, increase in the number, vacancy, removal and limitation on
liability of directors, and relating to certain mergers, consolidations or
dissolutions of Weatherford that involve an Interested Stockholder. See
"-- Special Vote Required for Certain Business Combinations". Norwegian law
provides that certain extraordinary corporate transactions, such as an
amendment to the articles of association, an increase in the share capital of
the company, a merger, a voluntary liquidation or a sale of all of the assets
of a company in preparation of a liquidation, require the affirmative vote of
two-thirds of the shares entitled to vote at any meeting of the shareholders
held for such purpose.
ELECTION AND APPOINTMENT OF DIRECTORS
Under the DGCL, directors of a corporation shall be elected by the
stockholders of the corporation by a plurality of the votes of the shares
entitled to vote on the election of directors. In addition, Weatherford's
Bylaws permit the Board of Directors to fill any vacancy occurring in the
Board of Directors caused by death, resignation, retirement, disqualification
or removal from office of any director, or otherwise, or if any new
directorship is created by an increase in the authorized number of directors.
Norwegian law provides that the directors of a company shall be elected by the
stockholders of the company by a majority of the votes of the shares entitled
to vote at such meeting and that the board of directors of a company cannot
fill a vacancy on the board of directors.
19
INDEMNIFICATION OF BOARD MEMBERS
Weatherford's Restated Certificate of Incorporation contains a provision
that eliminates the personal monetary liability of a director to Weatherford
and its stockholders for breach of his fiduciary duty of care as a director to
the extent currently allowed under the DGCL. Weatherford also has entered into
an indemnification agreement with each of its directors. Neither Norwegian law
nor the Articles of Association of Nodeco AS contain any provisions concerning
indemnification by Nodeco AS of members of its board of directors.
REMOVAL OF DIRECTORS
Weatherford's Restated Certificate of Incorporation and Bylaws provide
that, subject to the rights of the holders of any outstanding shares of serial
preferred stock of Weatherford, no director may be removed from office, except
for cause and upon the affirmative vote of the holders of at least 80% of the
outstanding stock entitled to vote for the election of directors. Norwegian
law provides that directors of a Norwegian company can be removed by a
majority vote of the shares entitled to vote at any meeting of the
shareholders for such purpose.
PREEMPTIVE RIGHTS
Under Norwegian law, shareholders of a Norwegian company have preemptive
rights with respect to the issuance of additional share capital of the
company. The board of directors of a Norwegian company may propose, and the
shareholders may accept, voiding the preemptive rights with respect to any
given share issuance. Weatherford's Restated Certificate of Incorporation
specifically denies preemptive rights to the stockholders of Weatherford.
CALLING OF STOCKHOLDERS MEETINGS
Weatherford's Bylaws provide that special meetings of the stockholders of
Weatherford may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors, and only
by written notice given to the stockholders of Weatherford not less than 30
nor more than 60 days before such meeting. Norwegian law provides that
shareholder meetings may be called by the board of directors and can be
requested by a 10% shareholder, with notice to be delivered at least one week
prior to such meeting.
STOCKHOLDERS MEETING QUORUM
Weatherford's Bylaws provide that a vote of stockholders may be taken
only at a meeting at which a quorum of stockholders representing a majority of
the stock issued and outstanding and entitled to vote thereat is present.
Norwegian law contains no quorum requirement for a shareholder meeting of a
Norwegian company.
DIRECTOR QUALIFICATION AND NUMBER
The DGCL provides that the number of directors of a Delaware corporation
shall be fixed by, or in the manner provided in, the bylaws, unless such
number is changed by action of the majority of the directors. Weatherford's
Bylaws provide for the number of directors to be not less than six nor more
than 15. The Weatherford Board of Directors currently is set at ten directors.
The Articles of Association of Nodeco AS provide for the number of directors
to be not less than three nor more than seven as determined at a meeting of
the shareholders of Nodeco AS. The board of directors of Nodeco AS currently
is set at five directors.
20
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial statements are based upon (i) the
historical consolidated financial statements of Weatherford and Nodeco, which
are incorporated by reference or included elsewhere in this Prospectus, and
(ii) the unaudited historical combined statement of operations of the natural
gas compression businesses of Zapata Corporation ("Energy Industries") for the
period from January 1, 1995 through December 15, 1995, the date upon which
Weatherford acquired Energy Industries in a purchase business combination. The
historical consolidated financial statements of Nodeco prepared in accordance
with Norwegian GAAP together with adjustments necessary to conform with US
GAAP were utilized in preparing the Unaudited Pro Forma Financial Information
which, with respect to the Unaudited Pro Forma Balance Sheet, reflects the
December 31, 1995 exchange rate of NOK 6.3211 per United States dollar and,
with respect to the Unaudited Pro Forma Statement of Income, reflects the 1995
average exchange rate of NOK 6.3131 per United States dollar. The unaudited
pro forma financial statements were prepared assuming that the Transaction was
consummated with 750,000 shares of Weatherford Common Stock valued at $36.25
per share, cash consideration of $13,962,000 (or NOK 90,603,500), an exchange
rate of NOK 6.4893 per United States dollar and estimated transaction costs of
$250,000.
The Unaudited Pro Forma Balance Sheet was prepared assuming that the
Transaction was consummated as of December 31, 1995. The Unaudited Pro Forma
Statement of Income gives effect to (i) the proposed Transaction under the
purchase method of accounting, (ii) the acquisition by Weatherford of Energy
Industries under the purchase method of accounting and (iii) certain estimated
operational and financial combination benefits of $48,400,000 per year
resulting from Weatherford's October 5, 1995 merger with Enterra Corporation
(the "Enterra Merger") and $10,000,000 per year resulting from the December
15, 1995 acquisition of Energy Industries. The Unaudited Pro Forma Statement
of Income was prepared assuming that the transactions set forth above were
consummated as of January 1, 1995. The unaudited pro forma financial
statements have been prepared based upon assumptions deemed appropriate by
Weatherford and may not be indicative of actual results.
21
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -----------------------------
WEATHERFORD NODECO ADJUSTMENTS(1) ADJUSTED
----------- --------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 32,800 $ 1,053 $-- $ 33,853
Receivables, net................ 231,125 6,295 -- 237,420
Inventories, net................ 165,383 5,625 -- 171,008
Deferred tax assets and other... 34,054 -- -- 34,054
----------- --------- -------------- ------------
Total current assets....... 463,362 12,973 -- 476,335
----------- --------- -------------- ------------
Property, plant and equipment, net... 514,545 8,301 4,000 526,846
----------- --------- -------------- ------------
Goodwill, net........................ 259,450 1,194 27,312 287,956
----------- --------- -------------- ------------
Other assets......................... 21,503 278 -- 21,781
----------- --------- -------------- ------------
Total assets......................... $ 1,258,860 $ 22,746 $ 31,312 $ 1,312,918
=========== ========= ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current
portion of
long-term debt................ $ 36,976 $ 1,150 $-- $ 38,126
Accounts payable................ 52,157 3,556 -- 55,713
Accrued liabilities............. 106,849 4,188 -- 111,037
----------- --------- -------------- ------------
Total current
liabilities................ 195,982 8,894 -- 204,876
----------- --------- -------------- ------------
Long-term debt....................... 292,290 3,747 14,212 310,249
----------- --------- -------------- ------------
Deferred tax and other long-term
liabilities........................ 39,745 267 -- 40,012
----------- --------- -------------- ------------
Stockholders' equity:
Common stock.................... 5,099 1,000 (1,000) 5,174
75
Paid-in capital................. 602,231 -- 26,863 629,094
Retained earnings............... 130,243 8,838 (8,838) 130,243
Cumulative translation
adjustment.................... (5,869) -- -- (5,869)
Treasury stock.................. (861) -- -- (861)
----------- --------- -------------- ------------
Total stockholders'
equity..................... 730,843 9,838 17,100 757,781
----------- --------- -------------- ------------
Total liabilities and stockholders'
equity............................. $1,258,860 $ 22,746 $ 31,312 $ 1,312,918
=========== ========== ============= ============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
financial statements.
22
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ENERGY ENERGY ENTERRA INDUSTRIES
WEATHERFORD INDUSTRIES ADJUSTMENTS ADJUSTMENTS
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues............................. $ 858,907 $ 61,549 $ -- $--
----------- ---------- ----------- -----------
Costs and expenses:
Cost of sales and services......... 625,346 52,834 (33,880)(2) (7,000)(4)
Selling, general and administrative
expenses........................ 137,959 4,991 (14,520)(2) (3,000)(4)
Other (income) expense, net........ 7,238 (518) -- 721(5)
Acquisition-related costs and other
unusual charges................. 88,182 -- (59,900)(3) --
----------- ---------- ----------- -----------
Total costs and expenses...... 858,725 57,307 (108,300) (9,279)
----------- ---------- ----------- -----------
Operating income..................... 182 4,242 108,300 9,279
Interest expense................... 17,217 3,072 -- 6,028(6)
Interest income.................... (2,081) (370) -- --
----------- ---------- ----------- -----------
Income (loss) before income taxes and
minority interests................. (14,954) 1,540 108,300 3,251
Income tax provision (benefit)..... (4,616) 924 16,940(2) 753(7)
12,189(3)
----------- ---------- ----------- -----------
Income (loss) before minority
interests.......................... (10,338) 616 79,171 2,498
Minority interests................... (220) -- -- --
----------- ---------- ----------- -----------
Net income (loss).................... $ (10,558) $ 616 $ 79,171 $ 2,498
=========== ========= =========== ==========
Weighted average common and common
equivalent shares outstanding...... 50,989
===========
Income (loss) per common and common
equivalent share................... $ (0.21)
===========
<CAPTION>
NODECO AS FURTHER
AS ADJUSTED NODECO ADJUSTMENTS ADJUSTED
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues............................. $ 920,456 $27,554 $ -- $948,010
----------- ------- ----------- ----------
Costs and expenses:
Cost of sales and services......... 637,300 18,442 800(8) 656,542
Selling, general and administrative
expenses........................ 125,430 4,384 -- 129,814
Other (income) expense, net........ 7,441 (23) 683(8) 8,101
Acquisition-related costs and other
unusual charges................. 28,282 -- -- 28,282
----------- ------- ----------- ----------
Total costs and expenses...... 798,453 22,803 1,483 822,739
----------- ------- ----------- ----------
Operating income..................... 122,003 4,751 (1,483) 125,271
Interest expense................... 26,317 793 995(9) 28,105
Interest income.................... (2,451) (221) -- (2,672)
----------- ------- ----------- ----------
Income (loss) before income taxes and
minority interests................. 98,137 4,179 (2,478) 99,838
Income tax provision (benefit)..... 26,190 1,250 (694)(10) 26,746
Income (loss) before minority ----------- ------- ----------- ----------
interests.......................... 71,947 2,929 (1,784) 73,092
Minority interests................... (220) (148) -- (368)
----------- ------- ----------- ----------
Net income (loss).................... $ 71,727 $ 2,781 $(1,784) $ 72,724
========== ======= ========== ===========
Weighted average common and common
equivalent shares outstanding...... 50,989 750(1) 51,739
========== ========== ===========
Income (loss) per common and common
equivalent share................... $ 1.41 $ 1.41
========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
financial statements.
23
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. To record the issuance of 750,000 shares of Weatherford Common Stock
(valued at $36.25 per share) and borrowings used to finance the Transaction
and to reflect the allocation of the related purchase price.
2. To record certain estimated consolidation cost savings and
operational efficiencies, and the related tax effect, associated with the
Enterra Merger, primarily resulting from the combination of certain service
locations and the elimination of duplicate corporate functions.
3. To exclude nonrecurring expenses of $59,900,000 incurred by
Weatherford in conjunction with the Enterra Merger and the related tax effect
of $12,189,000. These nonrecurring expenses primarily represent transaction
costs, severance and termination agreement costs, facility closure costs and
the reduction in recorded value of certain assets that had diminished value in
the operations of the combined company.
4. To record certain estimated consolidation cost savings and
operational efficiencies associated with the acquisition of Energy Industries
on December 15, 1995, primarily resulting from the combination of certain
locations and the elimination of duplicate corporate functions.
5. To record the amortization of additional goodwill resulting from the
allocation of the purchase price of Energy Industries.
6. To record additional interest expense on the debt incurred by
Weatherford on its acquisition of Energy Industries.
7. To record income tax expense on the Energy Industries operations and
the effect of the Energy Industries adjustments discussed in Notes 4, 5 and 6
above.
8. To record additional depreciation and the amortization of additional
goodwill resulting from the allocation of the purchase price of the
Transaction.
9. To record additional interest expense on the debt to be incurred by
Weatherford to consummate the Transaction.
10. To record the income tax effect of the Nodeco adjustments discussed
in Notes 8 and 9 above.
24
WEATHERFORD SELECTED FINANCIAL DATA
The Weatherford Selected Financial Data should be read in conjunction with
Weatherford's Consolidated Financial Statements and the notes thereto, which are
incorporated by reference in this Prospectus. See "Incorporation by Reference".
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995(1) 1994(2) 1993(3) 1992 1991(4)
------------ ------------ ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................. $ 858,907 $ 676,749 $ 500,491 $ 374,203 $ 397,480
Acquisition-related costs and other
unusual charges.................... 88,182 2,500 4,000 -- 20,044
Operating income..................... 182 65,704 49,671 35,579 31,044
Depreciation and amortization........ 95,957 71,037 50,449 35,738 35,720
Net income (loss).................... (10,558) 41,997 35,175 26,760 14,234
Net income (loss) per share.......... $ (0.21) $ 0.94 $ 0.88 $ 0.73 $ 0.37
PERCENTAGE OF REVENUES:
Selling, general and administrative
expenses........................... 16.1% 17.1% 18.3% 22.6% 22.5%
Gross profit......................... 27.2% 27.9% 29.5% 33.2% 35.6%
Operating income..................... 0.0% 9.7% 9.9% 9.5% 7.8%
Net income (loss).................... (1.2)% 6.2% 7.0% 7.2% 3.6%
BALANCE SHEET DATA:
Working capital...................... $ 267,380 $ 251,778 $ 211,834 $ 197,526 $ 197,879
Total assets......................... 1,258,860 1,153,970 635,602 474,490 470,702
Total debt........................... 329,266 196,672 21,253 28,685 31,572
Stockholders' equity................. $ 730,843 $ 734,634 $ 474,742 $ 349,458 $ 334,002
Total debt-to-total capitalization... 31% 21% 4% 8% 9%
OTHER DATA:
Capital expenditures, excluding
acquisitions....................... $ 110,625 $ 114,018 $ 63,757 $ 38,259 $ 50,636
Weighted average shares
outstanding........................ 50,989 44,845 38,607 34,786 34,394
</TABLE>
- ------------
(1) Includes acquisition-related costs and other unusual charges of
$88,182,000, or $1.17 per common share.
(2) Includes acquisition-related costs of $2,500,000, or $0.06 per common
share.
(3) Includes acquisition-related costs of $4,000,000, or $0.10 per common
share.
(4) Includes acquisition-related costs and other unusual charges of
$20,044,000, or $0.58 per common share.
25
NODECO SELECTED FINANCIAL DATA
The Nodeco Selected Financial Data should be read in conjunction with
Nodeco's Consolidated Financial Statements and the notes thereto, which are
included elsewhere in this Prospectus. The Nodeco Consolidated Financial
Statements have been prepared in accordance with accounting principles
generally accepted in Norway ("Norwegian GAAP"), which vary in certain
significant respects from accounting principles generally accepted in the
United States ("US GAAP"). Principal differences between Norwegian GAAP and US
GAAP and a reconciliation of such differences are described in Notes 10 and 11
to Nodeco Consolidated Financial Statements. See "Nodeco Consolidated
Financial Statements".
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992(1) 1991(1)
--------- --------- --------- --------- ---------
(IN THOUSANDS OF NOK EXCEPT PER SHARE AMOUNTS,
PERCENTAGES AND EXCHANGE RATES)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................. 173,950 134,583 122,512 104,263 57,612
Operating profit..................... 27,396 16,236 7,111 8,126 3,943
Depreciation......................... 10,385 9,246 9,563 7,446 3,705
Extraordinary gain (loss), net....... 1,370 -- (4,818) -- --
Net income (loss)(2)................. 15,598 7,918 (4,067) 2,335 1,927
PERCENTAGE OF REVENUES:
Other operating costs................ 17.7% 20.7% 19.8% 23.3% 17.3%
Operating profit..................... 15.7% 12.1% 5.8% 7.8% 6.8%
Net income (loss).................... 9.0% 5.9% (3.3)% 2.2% 3.3%
BALANCE SHEET DATA:
Working capital...................... 25,786 15,304 17,254 21,448 23,917
Total assets......................... 123,942 115,000 110,518 105,257 57,244
Long-term debt, including current
portion............................ 28,278 45,788 51,664 48,272 12,024
Shareholders' equity(3).............. 44,908 29,020 26,414 29,801 28,638
Dividends declared per common
share.............................. -- 8.00 -- -- --
EXCHANGE RATE DATA (US$ PER NOK):
End of period........................ $ 0.1582 $ 0.1478 $ 0.1328 $ 0.1439 $ 0.1671
Average during period................ 0.1584 0.1426 0.1402 0.1599 0.1540
High during period................... 0.1635 0.1613 0.1667 0.1815 0.1766
Low during period.................... 0.1468 0.1321 0.1328 0.1439 0.1399
</TABLE>
- ------------
(1) The amounts for 1992 include the activity of Aarbakke AS, acquired in
1992, for the entire year. The amounts for 1991 do not include any
activity related to Aarbakke AS.
(2) Net income in accordance with US GAAP was NOK 17,557,000 and NOK 7,547,000
for the years ended December 31, 1995 and 1994, respectively.
(3) Shareholders' equity in accordance with US GAAP was NOK 62,186,000 and NOK
49,277,000 at December 31, 1995 and 1994, respectively.
26
NODECO MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS DESCRIPTION
Nodeco designs, manufactures, sells and rents oil and gas well completion
products primarily consisting of liner hanger equipment and related services, as
well as packers used in completions with electric submersible pumps.
Historically, Nodeco has focused its marketing efforts on the North Sea market,
and Nodeco only recently has increased its international sales efforts. Nodeco
actively provides liner hanger equipment and services in all sectors of the
North Sea as well as certain other parts of the world. Until recently,
substantially all of Nodeco's pump packer sales have been to operators in the
United Kingdom sector of the North Sea, since no electric submersible pump
completions had been made in the Norwegian sector. Nodeco has made sales of pump
packers to certain Norwegian producers.
Aarbakke, a wholly-owned subsidiary of Nodeco AS, is a manufacturing unit
that also provides precision machining services to third parties in Norway and
other countries. Approximately half of Aarbakke's production capacity is used
for third-party manufacturing, of which 80% relates to oil industry activities.
SubTech, a 51% owned subsidiary of Nodeco AS, provides consulting services
related to production and reservoir monitoring activities, as well as design,
fabrication and installation of systems for such activities, primarily for
customers in Norway.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS OF NOK EXCEPT
EXCHANGE RATES)
Product revenues..................... 118,646 87,005 83,624
Rental revenues...................... 30,488 24,018 20,067
Service revenues and other charges... 24,816 23,560 18,821
--------- --------- ---------
Total revenues.................. 173,950 134,583 122,512
========= ========= =========
PRODUCT REVENUES. Product revenues increased 36% to NOK 118.6 million in
1995 compared with NOK 87.0 million in 1994. The increase was primarily
attributable to increased volume of liner hanger sales in North and West Africa
(relatively new markets for Nodeco), increased pump packer sales in the United
Kingdom due to customer acceptance of the Resettable Pump Packer and increased
sales to third parties in contract manufacturing. Product revenues increased 4%
to NOK 87.0 million in 1994 compared with NOK 83.6 million in 1993, primarily as
a result of increased drilling activity in both the Norwegian and United Kingdom
sectors of the North Sea and increased sales of downhole temperature and
pressure gauges, which increase was partially offset by declines in liner hanger
sales in markets outside of the North Sea.
RENTAL REVENUES. Rental revenues increased 27% to NOK 30.5 million in 1995
compared with NOK 24.0 million in 1994, reflecting increased liner hanger
equipment rental activity in the North Sea. Rental revenues increased 20% to NOK
24.0 million in 1994 compared with NOK 20.1 million in 1993, primarily as a
result of increased rental activity of liner hanger and pump packer equipment.
SERVICE REVENUES AND OTHER CHARGES. Service revenues and other charges
increased 5% to NOK 24.8 million in 1995 compared with NOK 23.6 million in 1994,
primarily due to increased North Sea drilling activity. Service revenues and
other charges increased 25% to NOK 23.6 million in 1994 compared with NOK 18.8
million in 1993, primarily as a result of increased repair services related to
temperature and pressure gauges.
OPERATING COSTS. The costs attributable to raw materials, payments to
subcontractors and payroll increased approximately 30% in 1995 compared with
1994, primarily due to an increase in operating revenues, overall higher levels
of drilling activity in the North Sea and the need for additional employees to
27
meet increased demand. Operating costs changed relatively little in 1994
compared with 1993. Though Nodeco achieved cost savings in 1994 due to the
negotiation of more favorable purchase agreements, the costs associated with
slightly higher levels of drilling activity in the North Sea and the need for
additional employees generally offset such savings.
EXTRAORDINARY GAIN (LOSS). In 1995, Nodeco recognized a gain of NOK 2.3
million as a result of the sale of Bryne Petropark AS, a subsidiary which owns
real estate including the workshop and offices currently used by Nodeco AS. Such
gain was partially offset by an extraordinary loss of NOK 0.9 million,
representing costs incurred related to the termination of operations of Nodecore
AS, a subsidiary engaged in the coring business.
In 1993, Nodeco recognized an extraordinary loss of NOK 5.8 million related
to the termination of the operations of a subsidiary, Pressure Test Laboratories
AS, and the termination of robotic systems operations, which was partially
offset by a NOK 1.0 million gain on the forgiveness of a subsidiary's debt
related to a bank loan.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, Nodeco had working capital of NOK 25.8 million and a
current ratio of 1.46 to 1.0. Working capital increased 68% in 1995 compared
with 1994 due to increases in accounts receivable and inventory as a direct
result of the increased demand for Nodeco's products and services.
Nodeco had an aggregate of NOK 28.3 million in outstanding debt as of
December 31, 1995. Nodeco's outstanding debt is comprised of (i) secured
borrowings totaling NOK 28.1 million that bear interest at rates ranging from 6%
to 12% per annum and have maturity dates from 1996 through 2014 and (ii) one
subordinated loan of NOK 0.2 million that bears interest at 10% per annum and
matures in 1997. In addition, Nodeco had NOK 10.2 million in bank overdrafts
outstanding at December 31, 1995 that bear interest at rates ranging from 7.5%
to 9.25%. Such overdrafts were used to finance working capital requirements.
Sources of liquidity to finance commitments, working capital requirements and
future capital expenditures include cash of NOK 6.6 million and unused overdraft
facilities of approximately NOK 7.7 million as of December 31, 1995. Management
of Nodeco believes that the combination of working capital, the unused portion
of existing credit facilities and cash flows from operations provide Nodeco with
sufficient capital resources and liquidity to manage its day-to-day operations
and future investment in fixed assets at current levels of activity.
Net cash flows from operating activities decreased 58% to NOK 10.0 million
in 1995 compared with NOK 23.8 million in 1994, primarily due to increased
investment in working capital arising from an increase in product and rental
activities. Net cash flows from operating activities improved from a net outflow
of NOK 3.0 million in 1993 to a net inflow of NOK 23.8 million in 1994,
primarily reflecting improved net income of Nodeco and changes in working
capital.
Cash flows from investing activities generally are comprised of investment
in, and disposal of, fixed assets. Investment in fixed assets increased 99% to
NOK 20.6 million in 1995 compared with NOK 10.4 million in 1994, primarily due
to the purchase of new manufacturing equipment and additions to one of Nodeco's
plants. The increase reflects Nodeco's need for additional capacity to
accommodate the growth in sales volume over the last several years. The disposal
of fixed assets in 1995 of NOK 25.2 million was primarily related to the sale of
Bryne Petropark AS. Investment in fixed assets of NOK 10.4 million in 1994 was
relatively unchanged compared with NOK 10.5 million in 1993.
Net cash flows from financing activities in 1995 were affected by a
reduction of debt totaling NOK 31.3 million primarily as a result of the sale of
Bryne Petropark AS, partially offset by new borrowings totaling NOK 14.8 million
to finance working capital needs and investments in fixed assets. Net cash flows
from financing activities in 1994 were the result of a repayment of debt related
to payment of periodic installments of existing obligations. Nodeco also
declared an NOK 8 per share dividend in 1994. New debt in 1993 of NOK 18.5
million primarily consisted of drawdowns on Nodeco's overdraft facility to
finance working capital needs and investments in fixed assets.
28
CURRENCY FLUCTUATIONS
Nodeco conducts a portion of its business in currencies other than NOK,
including the United Kingdom pound sterling and the United States dollar.
Although most of the revenues of Nodeco's foreign operations are denominated in
the local currency, the effects of foreign currency fluctuations are largely
mitigated because expenses of such foreign operations also generally are
denominated in the same currency.
Nodeco occasionally enters into forward exchange contracts only as a hedge
against certain existing economic exposures and not for speculative trading
purposes. These contracts reduce exposure to currency movements affecting
existing assets and liabilities denominated in foreign currencies, with such
exposure resulting primarily from trade receivables and payables and
intercompany and external long-term loans. The future value of these contracts
and the related currency positions are subject to offsetting market risk
resulting from foreign currency exchange rate volatility. Settlement of forward
exchange rate contracts resulted in net cash outflows of approximately NOK
350,000 during 1993 and net cash inflows of approximately NOK 500,000 and NOK
250,000 during 1995 and 1994, respectively.
LEGAL MATTERS
The validity of the shares of Weatherford Common Stock to be issued in
connection with the Transaction will be passed upon by Fulbright & Jaworski
L.L.P., 1301 McKinney, Suite 5100, Houston, Texas 77010.
EXPERTS
The consolidated financial statements of Weatherford as of December 31,
1995 and 1994, and for each of the three years in the period ended December 31,
1995, and the combined financial statements of Zapata Energy Industries as of
and for the year ended September 30, 1995 attached to and incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are attached to and incorporated by reference in this Prospectus in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The consolidated financial statements of Nodeco AS as of December 31, 1995
and 1994 and for the years then ended included in this Prospectus have been so
included in reliance on the report of Price Waterhouse a.s., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
29
INDEX TO NODECO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants.... F-2
Consolidated Balance Sheet as of
December 31, 1995 and 1994......... F-3
Consolidated Income Statement for the
years ended December 31, 1995, 1994
and 1993 (1993 unaudited).......... F-4
Consolidated Statement of Cash Flows
for the years ended December 31,
1995, 1994 and 1993 (1993
unaudited)......................... F-5
Consolidated Statement of Changes in
Shareholders' Equity for the years
ended December 31, 1995, 1994 and
1993 (1993 unaudited).............. F-6
Notes to Consolidated Financial
Statements (1993 unaudited)........ F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Nodeco AS:
We have audited the accompanying consolidated balance sheet of Nodeco AS
and its subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity for the years then ended, all expressed in Norwegian Kroner. 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of Nodeco AS and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Norway.
Accounting principles generally accepted in Norway vary in certain
important respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
consolidated shareholders' equity expressed in Norwegian Kroner as of December
31, 1995 and 1994 and the determination of consolidated net income, also
expressed in Norwegian Kroner, for the years then ended to the extent summarized
in Note 11 to the consolidated financial statements.
PRICE WATERHOUSE A.S.
JAN EGIL HAGA
STATE AUTHORIZED PUBLIC ACCOUNTANT
Oslo, Norway
March 15, 1996, except as to
Notes 10 and 11 which are as
of April 12, 1996
F-2
NODECO AS
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS OF NOK)
ASSETS
Current assets:
Cash and bank deposits.......... 6,657 7,422
Accounts receivable............. 32,090 20,322
Other current receivables....... 7,700 5,703
Raw materials................... 3,914 2,687
Finished inventory.............. 31,645 22,329
--------- ---------
Total current assets....... 82,006 58,463
--------- ---------
Long-term assets:
Deferred tax assets............. 109 --
Rental equipment................ 14,424 12,975
Machinery, fixtures, vehicles,
etc............................ 17,968 13,672
Buildings....................... 8,712 26,381
Land............................ 674 3,173
Other long-term assets.......... 49 336
--------- ---------
Total long-term assets..... 41,936 56,537
--------- ---------
Total assets............... 123,942 115,000
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft.................. 10,226 6,189
Current portion of long-term
debt........................... 7,269 5,241
Accounts payable................ 12,254 12,490
Taxes withheld, holiday pay,
etc............................ 13,275 7,478
Income taxes payable............ 9,062 4,020
Dividends payable............... -- 4,938
Accrued expenses and other
current liabilities............ 4,134 2,803
--------- ---------
Total current
liabilities............. 56,220 43,159
--------- ---------
Long-term liabilities:
Deferred tax liability.......... 113 99
Secured loans................... 20,809 40,147
Subordinated loan............... 200 400
Other long-term liabilities..... -- 643
--------- ---------
Total long-term
liabilities............. 21,122 41,289
--------- ---------
Minority interest.................... 1,692 1,532
--------- ---------
Shareholders' equity:
Share capital, 632,265 and
617,265 shares authorized,
issued and outstanding, NOK 10
par value each................. 6,323 6,173
Other equity.................... 38,585 22,847
--------- ---------
Total shareholders'
equity.................. 44,908 29,020
--------- ---------
Total liabilities and
shareholders' equity.... 123,942 115,000
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
NODECO AS
CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
--------- --------- -----------
(UNAUDITED)
(IN THOUSANDS OF NOK)
Operating revenues:
Sales revenues.................. 118,646 87,005 83,624
Rental and service revenues..... 55,304 47,578 38,888
--------- --------- -----------
Total operating revenues... 173,950 134,583 122,512
--------- --------- -----------
Operating costs:
Cost of raw materials and
subcontractors................ 45,826 35,232 37,333
Payroll......................... 59,468 46,112 44,189
Other operating costs........... 30,875 27,757 24,316
Depreciation.................... 10,385 9,246 9,563
--------- --------- -----------
Total operating costs...... 146,554 118,347 115,401
--------- --------- -----------
Operating profit..................... 27,396 16,236 7,111
Financial income (expenses):
Financial income................ 1,399 1,046 1,135
Financial expenses.............. (4,631) (4,796) (8,043)
--------- --------- -----------
Income before extraordinary items.... 24,164 12,486 203
--------- --------- -----------
Extraordinary gain (loss):
Gain (loss) on disposal of
subsidiaries.................. 1,370 -- (5,818)
Forgiveness of debt............. -- -- 1,000
--------- --------- -----------
Extraordinary gain (loss),
net..................... 1,370 -- (4,818)
--------- --------- -----------
Income (loss) before income taxes.... 25,534 12,486 (4,615)
Provision (benefit) for income
taxes.............................. 9,001 3,978 (147)
--------- --------- -----------
Income (loss) before minority
interest........................... 16,533 8,508 (4,468)
Minority interest in consolidated
subsidiaries....................... 935 590 (401)
--------- --------- -----------
Net income (loss).................... 15,598 7,918 (4,067)
========= ========= ==========
The accompanying notes are an integral part of these financial statements.
F-4
NODECO AS
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS OF NOK)
Cash flows from operating activities:
Net income (loss)............... 15,598 7,918 (4,067)
Adjustments to reconcile to net
cash flows from operating
activities:
Gain on disposal of fixed
assets..................... (1,069) (173) (128)
Ordinary depreciation......... 10,642 9,378 9,563
Write-downs of fixed assets... -- -- 1,085
Forgiveness of debt........... -- -- (1,000)
Exchange gain on long-term
debt....................... (465) (634) (343)
Other items, net.............. 624 312 (1,220)
Change in inventories,
receivables and payables... (22,548) 2,886 (4,472)
Changes in accruals........... 7,233 4,149 (2,447)
---------- ---------- ----------
Net cash flows from
operating activities.... 10,015 23,836 (3,029)
---------- ---------- ----------
Cash flows from investing activities:
Investment in fixed assets...... (20,608) (10,359) (10,463)
Disposal of fixed assets........ 25,158 1,211 1,379
Change in other long-term
assets........................ -- (53) --
---------- ---------- ----------
Net cash flows from
investing activities.... 4,550 (9,201) (9,084)
---------- ---------- ----------
Cash flows from financing activities:
New long- and short-term debt... 14,817 4,379 18,536
Reduction of debt............... (31,272) (12,786) (6,776)
Dividends....................... -- (4,938) --
Paid in equity capital.......... 1,125 250 1,900
---------- ---------- ----------
Net cash flows from
financing activities.... (15,330) (13,095) 13,660
---------- ---------- ----------
Net change in cash for the year...... (765) 1,540 1,547
Cash balance at beginning of the
year............................... 7,422 5,882 4,335
---------- ---------- ----------
Cash balance at end of the year...... 6,657 7,422 5,882
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
NODECO AS
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1993 UNAUDITED)
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS OF NOK EXCEPT SHARE AMOUNTS)
SHARE CAPITAL
------------------ OTHER
SHARES AMOUNT EQUITY TOTAL
--------- ------ --------- ---------
Balance at December 31, 1992......... 612,265 6,123 23,678 29,801
Net loss........................ -- -- (4,067) (4,067)
Change in minority interest..... -- -- 557 557
Translation adjustments......... -- -- 123 123
--------- ------ --------- ---------
Balance at December 31, 1993......... 612,265 6,123 20,291 26,414
Net income...................... -- -- 7,918 7,918
Dividends....................... -- -- (4,938) (4,938)
Share issue..................... 5,000 50 200 250
Translation adjustments......... -- -- (624) (624)
--------- ------ --------- ---------
Balance at December 31, 1994......... 617,265 6,173 22,847 29,020
Net income...................... -- -- 15,598 15,598
Share issue..................... 15,000 150 975 1,125
Translation adjustments......... -- -- (835) (835)
--------- ------ --------- ---------
Balance at December 31, 1995......... 632,265 6,323 38,585 44,908
========= ====== ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED)
NOTE 1 ACCOUNTING POLICIES
GENERAL
The consolidated financial statements of Nodeco AS, a Norwegian
corporation, and its subsidiaries (the "Company" or "Nodeco AS") have been
prepared according to generally accepted accounting principles in Norway
(Norwegian GAAP) and are presented in Norwegian kroner (NOK).
Norwegian GAAP differs in certain significant respects from accounting
principles generally accepted in the United States (US GAAP). The significant
differences and the approximate related effects on the consolidated financial
statements as of December 31, 1995 and for the year then ended are set forth in
Note 11. The consolidated financial statements also include certain
reclassifications and disclosures in order to conform more closely to the form
and content required by the Securities and Exchange Commission of the United
States.
PRINCIPLES OF CONSOLIDATION
SUBSIDIARIES
The consolidated financial statements include Nodeco AS and each subsidiary
in which the Company owns or controls, either directly or indirectly, more than
50% of the equity capital. Intercompany transactions and balances have been
eliminated.
Businesses acquired generally are consolidated in accordance with the
purchase method. The purchase price for a subsidiary is allocated to
identifiable assets and liabilities based upon their estimated fair market
value, with any remaining amounts capitalized as goodwill.
Results of subsidiaries acquired or sold during the year are included in
the consolidated income statement from the date of acquisition or up to the date
of sale, respectively.
A business combination, accomplished solely by the exchange of equity,
which represents a uniting of ownership with another enterprise rather than an
acquisition, is accounted for in accordance with merger accounting. The recorded
assets and liabilities of the other enterprise are carried forward to the
combined accounts at their recorded amounts. The acquisition of Aarbakke AS
during 1992 was accounted for in accordance with this method.
TRANSLATION OF FOREIGN SUBSIDIARIES' FINANCIAL STATEMENTS
The functional currency of each foreign subsidiary is the local currency.
Revenues, expenses, gains and losses of foreign subsidiaries are translated into
Norwegian kroner using the average exchange rate for the period. Assets and
liabilities of foreign subsidiaries are translated into Norwegian kroner at the
exchange rate in effect at the balance sheet date. Translation differences
caused by fluctuations in exchange rates are charged or credited to
shareholders' equity.
REVENUE RECOGNITION PRINCIPLES
Revenue from sale of finished goods is recognized upon delivery. Revenue
from rental of equipment is recognized over the rental period. Service
revenues are recognized as the service is provided.
Provision is made for estimated bad debts. The allowance for bad debts is
NOK 155,000 at December 31, 1995 and 1994.
OTHER PRINCIPLES
INVENTORIES
Inventories are recorded at full cost under the first in first out (FIFO)
method. Provision is made for obsolete and slow moving inventory.
F-7
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
CURRENT ASSETS AND CURRENT LIABILITIES
Assets and liabilities which relate to the production cycle and accounts
receivable collectible within one year of the balance sheet date are classified
as current.
FIXED ASSETS
Fixed assets are stated at cost less accumulated depreciation. Depreciation
is provided principally by the straight line method over the estimated useful
lives of the various classes of assets. The following depreciation rates are
used:
Machinery, fixtures and vehicles..... 12-30%
Rental equipment..................... 20%
Buildings............................ 3-5%
FOREIGN CURRENCY TRANSACTIONS
Current assets and liabilities denominated in foreign currencies are
remeasured using the exchange rate as of each balance sheet date. Unrealized
gains and losses on current assets and liabilities are recognized.
Non-current liabilities denominated in foreign currencies are remeasured
using the higher of the exchange rate on the transaction date or on the balance
sheet date.
Net unrealized foreign currency transaction losses are included in
financial expense. Net unrealized foreign currency transaction gains on
non-current assets and non-current liabilities are not recognized.
Foreign currency gains and losses on forward exchange contracts that are of
a hedge nature are recognized as a component of the transaction being hedged.
LEASES
Leases of equipment are accounted for as operating leases, irrespective of
the terms of the leases. Rentals under these leases are expensed over the lease
term.
PENSIONS
Nodeco AS and its Norwegian subsidiaries sponsor pension plans for
substantially all of their employees. In accordance with Norwegian law, such
plans are funded through contributions to insurance companies that assume all
the liabilities for benefit payments. Employees earn benefits in accordance with
a defined benefits formula and the companies are charged yearly premiums for the
liabilities assumed by the insurance companies. The annual premiums to fund the
plans are expensed.
Employees of the Company's subsidiaries operating outside of Norway
participate in pension plans which are considered to be defined contribution
plans. Contributions to these plans are expensed.
CONTINGENCIES
An estimated loss from a contingency is charged to income if it is probable
that an asset has been impaired or a liability has been incurred at the date of
the financial statements and the amount of the loss can be reasonably estimated.
Disclosure is made for loss contingencies not meeting both those conditions if
there is a reasonable possibility that a material loss may be incurred.
No accruals are made for contingent gains.
INCOME TAXES
Deferred taxes are computed in accordance with the liability method, which
bases the estimated amount of future taxes to be refunded or payable on the
temporary differences between financial and tax bases of assets and liabilities
and on the prevailing tax laws as of the balance sheet date. The impact of any
F-8
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
tax rate or rule changes on deferred tax liabilities is recognized in the year
such changes are legally enacted. Deferred tax assets are only recognized to the
extent the Company has deferred tax liabilities.
EXTRAORDINARY ITEMS
Extraordinary items reflect transactions which are irregular and related to
transactions or decisions outside the normal course of business, unusual in
nature and not expected to occur often or regularly.
NOTE 2 MINORITY INTERESTS
An analysis of changes in the minority interest in consolidated
subsidiaries is as follows (in thousands of NOK):
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Balance at beginning of year......... 1,532 942 --
Dividend paid and other changes in
minority interest.................. (98) -- 1,391
Minority interest in the profit
(loss) for the year................ 935 590 (401)
Disposal of subsidiary............... (677) -- (48)
--------- --------- ---------
Balance at end of the year........... 1,692 1,532 942
========= ========= =========
NOTE 3 RESTRICTED BANK DEPOSITS
Included in cash and bank deposits are deposits restricted for payment of
employee withholding taxes aggregating NOK 1,354,000 and NOK 1,381,000 at
December 31, 1995 and 1994, respectively.
NOTE 4 OVERDRAFT FACILITY
Total overdraft facility amounts to NOK 17,920,000 and NOK 17,764,600 at
December 31, 1995 and 1994, respectively.
NOTE 5 INCOME TAXES
Income tax expense (benefit) consists of (in thousands of NOK):
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Current tax expense.................. 9,096 3,879 795
Deferred tax expense (benefit)....... (95) 99 (942)
--------- --------- ---------
Income tax expense (benefit)......... 9,001 3,978 (147)
========= ========= =========
Overseas taxation included above..... 2,026 1,235 795
========= ========= =========
Deferred tax expense (benefit) consists of changes in temporary differences
related to (in thousands of NOK):
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Inventories.......................... (924) (543) (1,038)
Fixed assets......................... (537) (289) (768)
Other items.......................... (294) 449 (888)
Limitation on deferred tax asset..... 1,660 482 1,752
--------- --------- ---------
Deferred tax expense (benefit)....... (95) 99 (942)
========= ========= =========
F-9
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
The deferred tax liability (asset) consists of temporary differences
related to (in thousands of NOK):
DECEMBER 31,
--------------------
1995 1994
--------- ---------
Inventories.......................... (2,432) (1,508)
Fixed assets......................... (824) (287)
Other items.......................... (633) (339)
Limitation on deferred tax asset..... 3,893 2,233
--------- ---------
Net deferred tax liability........... 4 99
========= =========
The tax expense (benefit) for the year differs from the amounts computed
when applying the Norwegian statutory tax rate of 28% to income before taxes as
a result of the following (all amounts in thousands of NOK):
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
Income (loss) before taxes........... 25,534 12,486 (4,615)
Statutory tax rate................... 28% 28% 28%
--------- --------- ---------
Estimated income tax provision
(benefit).......................... 7,150 3,496 (1,292)
Higher tax rates in foreign
jurisdictions and permanent
differences........................ 191 -- (607)
Limitation on deferred tax asset..... 1,660 482 1,752
--------- --------- ---------
Income tax expense (benefit)......... 9,001 3,978 (147)
========= ========= ==========
NOTE 6 FIXED ASSETS
An analysis of changes in fixed assets is as follows (amounts in
thousands of NOK):
<TABLE>
<CAPTION>
MACHINERY,
FIXTURES RENTAL
AND VEHICLES EQUIPMENT BUILDINGS LAND TOTAL
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Cost at January 1, 1995.............. 33,588 28,219 28,766 3,173 93,746
Translation difference............. (90) (470) -- -- (560)
Additions.......................... 8,746 8,791 3,071 -- 20,608
Disposals.......................... (186) (3,491) (21,907) (2,499) (28,083)
------------ --------- --------- --------- ---------
Cost at December 31, 1995............ 42,058 33,049 9,930 674 85,711
------------ --------- --------- --------- ---------
Depreciation at January 1, 1995...... 19,916 15,244 2,385 -- 37,545
Charge for year.................... 4,223 5,351 784 -- 10,358
Disposals.......................... (49) (1,970) (1,951) -- (3,970)
------------ --------- --------- --------- ---------
Depreciation at December 31, 1995.... 24,090 18,625 1,218 -- 43,933
------------ --------- --------- --------- ---------
Net book value at December 31,
1995................................. 17,968 14,424 8,712 674 41,778
=========== ========= ========= ========= =========
</TABLE>
F-10
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
MACHINERY,
FIXTURES RENTAL
AND VEHICLES EQUIPMENT BUILDINGS LAND TOTAL
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Cost at January 1, 1994.............. 28,591 24,351 28,598 2,972 84,512
Additions.......................... 5,232 4,758 168 201 10,359
Disposals.......................... (235) (890) -- -- (1,125)
------------ --------- --------- --------- ---------
Cost at December 31, 1994............ 33,588 28,219 28,766 3,173 93,746
------------ --------- --------- --------- ---------
Depreciation at January 1, 1994...... 15,912 11,242 1,392 -- 28,546
Charge for year.................... 4,048 4,043 993 -- 9,084
Disposals.......................... (44) (41) -- -- (85)
------------ --------- --------- --------- ---------
Depreciation at December 31, 1994.... 19,916 15,244 2,385 -- 37,545
------------ --------- --------- --------- ---------
Net book value at December 31,
1994............................... 13,672 12,975 26,381 3,173 56,201
=========== ========= ========= ========= =========
</TABLE>
A summary of investment in and disposal of fixed assets for each of the
five years in the period ended December 31, 1995 is as follows (in thousands of
NOK):
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT IN FIXED ASSETS:
Machinery, fixtures and vehicles..... 8,746 5,232 3,295 11,644 2,554
Rental equipment..................... 8,791 4,758 6,989 5,893 5,968
Development cost..................... -- -- -- -- 611
Buildings............................ 3,071 168 167 28,431 313
Land................................. -- 201 12 3,540 --
--------- --------- --------- --------- ---------
20,608 10,359 10,463 49,508 9,446
========= ========= ========= ========= =========
DISPOSAL OF FIXED ASSETS:
Machinery, fixtures and vehicles..... 136 228 133 433 46
Rental equipment..................... 262 983 1,246 1,076 --
Buildings............................ 22,260 -- -- 2,359 41
Land................................. 2,500 -- -- 1,141 --
--------- --------- --------- --------- ---------
25,158 1,211 1,379 5,009 87
========= ========= ========= ========= =========
</TABLE>
F-11
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
NOTE 7 DEBT
The Company's secured loans bear interest at 6% to 12% and are payable in
installments through 2014.
The Company's subordinated loan bears interest at 10% and matures in 1997.
The unused portion of the Company's secured overdraft facility was NOK
7,694,000 at December 31, 1995.
The book value of assets pledged as security for debt are as follows (in
thousands of NOK):
1995 1994
--------- ---------
Accounts receivable.................. 29,888 19,096
Other short-term receivables......... 4,402 5,490
Inventories.......................... 35,452 23,923
Machinery, fixtures, vehicles and
rental equipment..................... 32,097 25,113
Buildings............................ 8,073 26,380
Land................................. 472 2,972
--------- ---------
Total........................... 110,384 102,974
========= =========
NOTE 8 LEASE COMMITMENTS
Future minimum lease payments under noncancelable operating leases for
equipment and premises as of December 31, 1995 are as follows (in thousands of
NOK):
1996................................. 6,068
1997................................. 3,423
1998................................. 2,760
1999................................. 2,760
2000................................. 2,760
Thereafter........................... 2,765
---------
20,536
=========
NOTE 9 EXTRAORDINARY GAIN (LOSS)
In 1995 Nodeco AS ceased operations of its drilling services, performed by
its subsidiary Nodecore AS. Costs incurred relating to the termination of
operations were NOK 935,000 and are classified as extraordinary.
In 1995 Nodeco AS recognized a gain of NOK 2,305,000 on the sale of a
subsidiary which owns real estate. The gain is classified as extraordinary.
In 1993 a subsidiary of Nodeco AS was granted a forgiveness of debt related
to a bank loan. The gain on this transaction is classified as extraordinary.
In 1993 Nodeco AS terminated the operations related to a subsidiary,
Pressure Test Laboratories AS, and the operations related to robotic systems.
The results of these operations for 1993 and losses on disposal are classified
as extraordinary.
F-12
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
NOTE 10 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
FOLLOWED BY THE COMPANY AND U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The accompanying consolidated financial statements have been prepared in
accordance with Norwegian GAAP, which differs in certain respects from US GAAP.
These differences are reflected in the reconciliation provided in Note 11 and
principally relate to the following items:
BUSINESS COMBINATIONS
As described in Note 1, under Norwegian GAAP, the acquisition of Aarbakke
AS in 1992 was accounted for as a merger. Merger accounting is similar to the
pooling-of-interests method of accounting for acquisitions under US GAAP. The
requirements for merger accounting are, however, less restrictive than those for
pooling-of-interests. Under US GAAP, the acquisition of Aarbakke AS is accounted
for using the purchase method of accounting and the assets and liabilities of
Aarbakke AS are recorded at their fair value as of the date of the acquisition.
Also, under US GAAP the results of operations of Aarbakke AS are only included
in the consolidated financial statements of the Company from the date of the
acquisition. Goodwill recognized in accordance with US GAAP arising on the
acquisition of Aarbakke AS is amortized over 10 years.
LEASES
Under the terms of several leases for production equipment, substantially
all the risks and rewards of ownership of the leased assets are transferred to
the Company. Such leases have been accounted for as operational leases in the
Norwegian GAAP financial statements. Under US GAAP these leases are considered
to be capital leases whereby they are recorded as the acquisition of assets and
liabilities incurred.
DEFERRED TAX ASSET
Norwegian GAAP prohibits recognition of a net deferred tax asset. Under US
GAAP, deferred tax assets are recognized to the extent realization is considered
probable.
PENSIONS
In the Norwegian GAAP financial statements, pension cost is charged to
expense based upon premiums paid to an insurance company for funded plans.
Under US GAAP, pension cost is actuarially determined in accordance with
Statement of Financial Accounting Standards (SFAS) No. 87, "Employers"
Accounting for Pensions'.
EMPLOYEE STOCK OPTIONS
For purposes of Norwegian GAAP, Nodeco does not recognize any expense
related to employee stock options. Under US GAAP, in accordance with Accounting
Principles Board Statement No. 25, Nodeco measures compensation expense as the
difference between the option price and the fair value of the underlying stock
at the date the option is granted and accrues the expense
over the vesting period.
EXTRAORDINARY GAINS AND LOSSES
Under Norwegian GAAP, the criteria for classification of gains or losses as
extraordinary are less restrictive than the criteria applied under US GAAP.
Accordingly, an item which is considered to be extraordinary under Norwegian
GAAP may not be considered extraordinary under US GAAP. Under Norwegian GAAP,
extraordinary gains and losses are presented before income taxes. Under US GAAP,
extraordinary gains and losses are presented net of related income taxes. The
differences between Norwegian GAAP and US GAAP in the determination and
presentation of extraordinary items does not result in differences in net income
or shareholders' equity.
F-13
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
FOREIGN CURRENCY TRANSACTIONS
As described in Note 1, under Norwegian GAAP the Company follows a policy
of remeasuring non-current liabilities denominated in a foreign currency using
the higher of the exchange rate on the transaction date or on the balance sheet
date. Net unrealized gains on non-current assets and liabilities denominated in
foreign currency calculated on a portfolio basis are not recognized in income.
Under US GAAP, all assets and liabilities denominated in a foreign currency are
remeasured using the year-end exchange rate, and both unrealized gains and
unrealized losses are recognized currently in income.
DIVIDENDS
Under Norwegian law, dividends are payable out of annual earnings. The
amount of dividends is subject to approval by the Company's shareholders at the
annual general meeting, following the fiscal year to which the dividends relate.
Under Norwegian GAAP, dividends are accrued in the year of the earnings to which
they relate. Under US GAAP, dividends are recorded when declared. Accordingly,
under US GAAP, dividends are recorded in the year following the year in which
they are recorded under Norwegian GAAP.
CLASSIFICATION OF CASH FLOWS
For Norwegian GAAP purposes, Nodeco has presented the reduction in
consolidated assets and liabilities which results from the 1995 sale of its
subsidiary, Bryne Petropark AS, as cash flows related to operating, investing
and financing activities, depending upon the classification of the related
balance sheet items of such subsidiary. Under US GAAP, the total net proceeds
from the sale of such subsidiary are presented as one line item within cash
flows from investing activities. For US GAAP purposes, cash flows from
operating, investing and financing activities aggregate a positive NOK
10,783,000, a negative NOK 16,210,000 and a positive NOK 4,662,000,
respectively, for the year ended December 31, 1995.
F-14
NODECO AS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1993 UNAUDITED) -- (CONTINUED)
NOTE 11 RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY TO U.S.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The following is a summary of the estimated adjustments to shareholders'
equity and net income as of December 31, 1995 and 1994 and for the years then
ended that would be required if US GAAP had been applied instead of Norwegian
GAAP in the consolidated financial statements (in thousands of NOK):
As Of And For The
Year Ended December 31,
--------------------
1995 1994
--------- ---------
Net income in Norwegian GAAP
consolidated financial
statements......................... 15,598 7,918
Increase (decrease) due to:
Accounting for leases........... 1,334 1,143
Pension costs................... 374 --
Change in deferred tax asset.... 1,660 482
Difference in depreciation of
fixed assets acquired in the
Aarbakke AS purchase........... 260 (162)
Amortization of goodwill arising
from the Aarbakke AS
purchase....................... (1,118) (1,118)
Stock options................... -- (441)
Deferred taxes related to the
adjustments above.............. (551) (275)
--------- ---------
Net income in conformity with US
GAAP............................... 17,557 7,547
========= =========
Shareholders' equity in Norwegian
GAAP consolidated financial
statements......................... 44,908 29,020
Increase (decrease) due to:
Goodwill arising from the
Aarbakke AS purchase........... 7,545 8,663
Accounting for leases........... 6,639 5,304
Purchase accounting adjustments
related to fixed assets
acquired in the Aarbakke AS
purchase....................... 1,380 1,120
Dividends....................... -- 4,938
Pension costs................... 92 (282)
Deferred tax asset.............. 3,893 2,233
Deferred taxes related to the
adjustments above.............. (2,271) (1,719)
--------- ---------
Shareholders' equity in conformity
with US GAAP....................... 62,186 49,277
========= =========
F-15
APPENDIX A:
PURCHASE AND SALE AGREEMENT
A-1
PURCHASE AND SALE AGREEMENT
BETWEEN
NODECO AS AND AARBAKKE AS, AS SELLERS
AND
WEATHERFORD ENTERRA, INC., AS PURCHASER
RELATING TO THE BUSINESS, ASSETS AND LIABILITIES OF
NODECO AS AND AARBAKKE AS
LIST OF CONTENT
PAGE
----
1 DEFINITIONS AND INTERPRETATION... 1
2 SALE AND PURCHASE................ 3
3 CONSIDERATION.................... 4
4 DUE DILIGENCE.................... 5
5 EFFECTIVE DATE................... 5
6 APPROVAL BY THE MINISTRY OF
INDUSTRY AND ENERGY............. 6
7 SELLERS' COVENANTS............... 6
8 SELLERS' WARRANTIES AND
INDEMNIFICATION................. 7
9 PURCHASER'S WARRANTIES AND
INDEMNIFICATION................. 9
10 THE REGISTRATION STATEMENT; SALE
OF CONSIDERATION SHARES......... 10
11 THE CONTRACTS.................... 10
12 INDEMNITY BY THE PURCHASER....... 10
13 BOOKS AND RECORDS................ 11
14 NON-COMPETITION.................. 11
15 COSTS AND TAXES.................. 11
16 SUCCESSORS AND ASSIGNS........... 11
17 CHANGE OF NAME................... 12
18 BROKERAGES AND COMMISSIONS....... 12
19 ANNOUNCEMENTS.................... 12
20 NOTICES AND RECEIPTS............. 12
21 GENERAL PROVISIONS............... 12
22 ENTIRE AGREEMENT; THIRD PARTY
BENEFICIARIES................... 13
23 LAW AND JURISDICTION............. 14
Schedule 1: Audited Accounts for 1995 of each of the Sellers and each of the
Subsidiaries and for Nodeco on a consolidated basis ("Accounts")
Schedule 2: List of Equipment
Schedule 3: List of Motor Vehicles
Schedule 4: List of Property
Schedule 5: List of Rental Equipment
Schedule 6: Sellers' Warranties
Schedule 7: List of Shareholders
Schedule 8: List of Employees
Schedule 9: Purchaser's Warranties
Schedule 10: List of material contracts
Schedule 11: List of Intangible Property
Schedule 12: Excluded Assets
Schedule 13: Form of Shareholders' Guarantee
Schedule 14: Disclosure Letter
Schedule 15: Unaudited balance sheets as of January 31, 1996 and February
29, 1996 and unaudited profit and loss accounts for the one and
two months periods then ended ("unaudited financials") of Nodeco,
Aarbakke each Subsidiary and Nodeco on a consolidated basis.
i
This purchase and sale agreement (the "Agreement") is entered into on the
28th day of March 1996 by and between:
1 NODECO AS, Haland Haust, Postboks 10, N-4341 Bryne, Organisation No
917757984 ("Nodeco"), and
2 AARBAKKE AS, Kong Haakonsvei 4, N-4341 Bryne, Organisation No
870920962 ("Aarbakke")
(Nodeco and Aarbakke are collectively referred to as the "Sellers"
and are jointly and severally liable for Sellers' obligations under
this Agreement), and
3 WEATHERFORD ENTERRA, INC., 1360 Post Oak Blvd. Suite 1000,
Houston, Texas TX 77056, USA (the "Purchaser")
WHEREAS
A Nodeco is a Norwegian joint stock company that designs, manufactures
and sells oil and gas well completion products primarily consisting
of liner hanger equipment and related services as well as packers
used in completions with electric submersible pumps.
B Aarbakke is a wholly owned subsidiary of Nodeco.
C The Purchaser is a Houston, Texas-based diversified international
energy service and manufacturing company that provides products and
services around the world to the oil and gas exploration, production
and transmission industries.
D The Purchaser wishes to acquire the Business (as defined below) on a
going concern basis through the purchase of all of the Assets (as
defined below) and the assumption of all of the Assumed Liabilities
(as defined below).
NOW THEREFORE, the Parties (as defined below) have agreed as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:
"Accounts" means the audited balance sheets as of the Accounts Date
and audited profit and loss accounts for the year ended on the Accounts
Date of Nodeco, Aarbakke, each Subsidiary and Nodeco on a consolidated
basis and the notes and directors' report relating to them as set out in
Schedule 1.
"Accounts Date" means December 31, 1995.
"Assets" means all the assets (other than the Excluded Assets) and
contractual rights of the Sellers at the Effective Date whether reflected
on the Sellers' balance sheets included in the Accounts or not and
including, but not limited to, cash and cash equivalents, the Contracts,
the Equipment, the Rental Equipment, the Goodwill, the Motor Vehicles, the
Property, the Shares, the Stock, the Intangible Property and the
Outstanding Claims.
"Assumed Liabilities" means all liabilities (other than the Excluded
Liabilities) of the Sellers at the Effective Date whether or not reflected
on the Sellers' balance sheets included in the Accounts, and whether or not
accrued, absolute, contingent or otherwise.
"Business" means the business being carried on by the Sellers on the
Effective Date through the Assets and the Assumed Liabilities.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New
York, New York are authorised or obligated by law to close.
"Consideration Shares" means 750,000 shares of the Purchaser's common
stock, par value USD 0.10 per share, to be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and listed on the New York
Stock Exchange prior to the Effective Date.
1
"Contracts" means all the written or oral contracts related to the
Business to which the Sellers are a party.
"Disclosure Letter" means a letter of today's date from the Sellers to
the Purchaser, attached hereto as Schedule 14.
"Effective Date" means (a) the latest of (i) the fifth Business Day
after the Purchaser has notified the Sellers in writing that the Securities
and Exchange Commission ("SEC") has declared the Registration Statement (as
defined in Clause 5.3 hereof) effective under the Securities Act, provided
that on such fifth Business Day no stop order shall be in effect with
respect thereto, and (ii) the first Business Day after such stop order has
been removed (such notice of effectiveness or removal of a stop order to be
given by the Purchaser immediately after the SEC has declared the
Registration Statement effective or has removed such stop order) and (iii)
the fifth Norwegian business day after the Purchaser has notified the
Sellers in writing of Ministry Approval (such notice of approval to be
given by the Purchaser immediately after the Ministry Approval), and (iv)
the approval of the shareholders of each Seller of the sale of the Business
and Assets to the Purchaser; provided, however, that the Purchaser may, in
its sole discretion, waive the requirement of Ministry Approval, in which
case the Effective Date shall be the latest of (i), (ii) and (iv) above, or
(b) such other day as the Sellers and the Purchaser may agree.
"Employees" means the Sellers' employees as set out in Schedule 8.
"Equipment" means the tangible assets (other than Motor Vehicles and
the Stock) employed in or used for the purpose of the Business including,
but not limited to, the fixed and loose plant, machinery, furniture,
fittings, implements, tools, utensils, computer hardware and software and
other chattels wherever situated owned by the Sellers for the use in the
conduct of the Business as set out in Schedule 2.
"Excluded Assets" means the assets as set out in Schedule 12.
"Excluded Liabilities" means Net Debt in excess of NOK 32 mill. at
the Accounts Date.
"Goodwill" means the goodwill of the Sellers relating to the Business
including, but not limited to, the right of the Purchaser to represent
itself as carrying on the Business in succession of the Sellers.
"Intangible Property" means the patents, trademarks, service marks,
trade names and applications for any of the foregoing set out in Schedule
11.
"Ministry Approval" means approval by the Ministry of Industry and
Energy under the Norwegian Acquisition of Business Act of 1994 of the
purchase of the Business by the Purchaser without conditions that
materially alter the economic value to the Purchaser of the transaction or,
alternatively that the time limit under 10 of the Norwegian Acquisition of
Business Act of 1994 has elapsed without further notice from the Ministry
of Industry and Energy.
"Motor Vehicles" means the Motor Vehicles owned by the Sellers,
details of which are set out in Schedule 3.
"Net Debt" means the sum of Nodeco's (on a consolidated basis) bank
overdrafts, other short-term interest bearing liabilities, mortgage and
other long-term debt and subordinated loans less any cash and cash
equivalents as listed in the Accounts at the Accounts Date.
"Outstanding Claims" means the accounts receivable, prepayments and
existing legal claims, including unasserted claims, of the Sellers as of
the Effective Date.
"Parties" means the Purchaser and the Sellers.
"Products" means the products produced and sold by the Business.
"Property" means the real property owned, leased or rented by the
Sellers, details of which are set out in Schedule 4.
"Rental Equipment" means the equipment set out in Schedule 5.
2
"Shares" means 100% of the shares of Nodeco Limited, 100% of the
shares of Aarbakke Eiendom AS and 51% of the shares of Subsurface
Technology AS.
"Shareholders" means the shareholders as set out in Schedule 7.
"Stock" means the stock-in-trade owned by the Sellers in connection
with the Business at the Effective Date.
"Subsidiaries" means Nodeco Limited, Aarbakke Eiendom AS and
Subsurface Technology AS (owned 51% by Nodeco).
"Warranties" means the Sellers' warranties set out in Clause 8 of
this Agreement.
2 SALE AND PURCHASE
2.1 Subject to the assumption of the Assumed Liabilities by the Purchaser
and in consideration of the payment to the Sellers of the Purchase Price (as
defined in Section 3.1 hereof), the Sellers hereby sell and agree to transfer
the Assets and the Business to the Purchaser as a going concern on the Effective
Date, and the Purchaser agrees to purchase the Assets and the Business and to
assume the Assumed Liabilities on the Effective Date.
2.2 The Assets to be purchased by the Purchaser shall, for the sake of
clarification, include, but not be limited to:
a) cash and cash equivalents
b) the Equipment
c) the Rental Equipment
d) the Motor Vehicles
e) the Goodwill
f) the Outstanding Claims
g) the Property
h) the Shares
i) the Stock
j) the benefit (subject
to the burden) of the
Contracts
k) the Intangible
Property.
l) all amounts allocated to the Sellers' collective pension plan as
of the Effective Date in excess of the liability under the plan
at the Effective Date.
2.3 The Purchaser agrees to assume all the Assumed Liabilities as of the
Effective Date; which, for the sake of clarification includes, but is not
limited to:
(i) the employment contracts of all of the Sellers' employees as of
the Effective Date (including any and all liabilities for
holiday allowances, unpaid salaries and other benefits as of the
Effective Date),
(ii) the Sellers' collective pension plan as of the Effective Date,
(iii)the Sellers' lease agreements for the Sellers' property in
Haland Haust, Bryne and Nyland, Bryne,
(iv) any orders from customers received and accepted but not yet
delivered as of the Effective Date,
(v) any taxes allocated or attributable to any period up to the
Effective Date,
together with such other liabilities by way of obligations under the Contracts
or otherwise (other than the Excluded Liabilities), which, as of the Effective
Date, shall be considered as an integrated part of the Business as a going
concern.
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A list of all the Sellers' Employees as of the date hereof is set out in
Schedule 8 hereto setting out, inter alia, for each employee, the name of the
employee, the employee's age, the date the employee was employed by the Sellers,
the employee's salary (including profit sharing plans, incentive bonus plans or
other employee benefits) and the employee's position as of the date hereof. The
Purchaser undertakes to offer each employee a similar position on similar terms
as set out in Schedule 8 at the Effective Date and shall offer each employee a
new employment contract for this purpose prior to the Effective Date.
3 CONSIDERATION
3.1 The Purchase Price for the Assets and the Business (the "Purchase
Price") shall be NOK 260,000,000 (Norwegiankroner twohundredandsixtymillion)
representing the sum of the Cash Consideration and the Share Consideration as
set out in Clause 3.2, as adjusted in Clause 3.3; provided, however, that if the
average Purchaser common stock closing price (as determined below) exceeds USD
35.00 per share or is less than USD 25.00 per share, the Purchase Price shall
not equal NOK 260,000,000. In addition, the Purchaser shall assume the Assumed
Liabilities as of the Effective Date.
3.2 Subject to the adjustments described in Clause 3.3, the Purchase Price
shall consist of the following:
a) Cash Consideration: NOK 117,649,250
b) Share Consideration: Consideration Shares
3.3 Adjustments to Cash Consideration: The Purchaser and the Sellers agree
to adjust the Cash Consideration set forth above to be paid to Sellers to
compensate for movements in Purchaser's stock price and the NOK/USD exchange
rate between the date hereof and the Effective Date, subject to certain
limitations. Specifically, the Cash Consideration set forth above will be
adjusted at the Effective Date according to the following formula:
Adjustment to Cash Consideration =
NOK 142,350,750 -- (Average Stock Price x 750,000 x Exchange Rate)
If the adjustment referred to above is a positive number, the Cash
Consideration shall be increased by an amount equal to such positive number. If
the adjustment is a negative number, the Cash Consideration shall be decreased
by an amount equal to such negative number. On the Effective Date, the Purchaser
shall pay to the Sellers the Cash Consideration, as so adjusted.
"Average Stock Price" shall mean the average Purchaser common stock closing
price as reported in the New York Stock Exchange Composite Transaction List in
The Wall Street Journal for the 10 Business Days ending on the last Business Day
prior to the Effective Date, provided, however, that if the average Purchaser
common stock closing price for the 10 Business Days ending on the last Business
Day prior to the Effective Date is greater than USD 35.00 per share, the
"Average Stock Price" shall be USD 35.00; provided, further, that if the average
Purchaser common stock closing price for the 10 Business Days ending on the last
Business Day prior to the Effective Date is less than USD 25.00 per share, the
"Average Stock Price" shall be USD 25.00. Notwithstanding the foregoing, if the
average Purchaser common stock closing price for the 10 Business Days ending on
the last Business Day prior to the Effective Date is less than USD 20.00 per
share, the Purchaser may either (i) terminate this Agreement by notice to
Sellers or (ii) pay the following to Sellers at the Effective Date as additional
Cash Consideration:
(the amount by which USD 20.00 exceeds the average Purchaser common
stock closing price for the 10 Business Days ending on the last Business
Day prior to the Effective Date) x 750,000 x Exchange Rate.
"Exchange Rate" shall mean the average NOK/USD exchange rate as reported by
Dagens Naeringsliv for the 10 Business Days ending on the last Business Day
prior to the Effective Date; provided, however, that if the average NOK/USD
exchange rate for the 10 Business Days ending on the last Business Day prior to
the Effective Date is greater than 6.4532 NOK/USD, the "Exchange Rate" shall be
6.4532; provided,
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further, that if the average NOK/USD exchange rate for the 10 Business Days
ending on the last Business Day prior to the Effective Date is less than 6.2002
NOK/USD, the "Exchange Rate" shall be 6.2002.
3.4 Interest: The Sellers shall be entitled to interest on the Purchase
Price at the rate of 5% p a for the period beginning on the sixth Business Day
after the date the SEC has declared the Registration Statement effective under
the Securities Act and ending on the earlier of (i) the last Business Day prior
to the Effective Date and (ii) 60 days from the date hereof. In the event the
Effective Date has not taken place within 60 days from the date hereof and the
Sellers do not exercise the option to terminate this Agreement after 60 days
under Clause 5.4, the Sellers shall be entitled to interest on the Purchase
Price at the rate of 10% p a for a period beginning on the 61st day after the
date hereof and ending on the last Business Day prior to the Effective Date.
Interest accrued shall be paid by the Purchaser to the Sellers at the Effective
Date.
4 DUE DILIGENCE
The Purchaser and its advisers have had, prior to the date of this
Agreement, full access and opportunity to carry out a due diligence review of
the Sellers and the Subsidiaries. The Purchaser and any person authorised by it
have been given full access to the business, properties and the books and
records relating to such financial, accounting, tax, legal, employment and
customer related matters of the Sellers and the Subsidiaries as the Purchaser
has required.
5 EFFECTIVE DATE
5.1 The Parties agree that the Assets, Business and the Assumed Liabilities
shall be acquired by the Purchaser on the Effective Date.
Subject to the provisions of this Clause 5, the closing shall take place at
the offices of Norsk Vekst ASA in Oslo, Norway on the Effective Date.
The Sellers shall, on or prior to the Effective Date, deliver the following
documents to the Purchaser:
a) A certified copy of the Company Certificate (firmaattest) and
Articles of Association (vedtekter) of each of the Sellers and the
Subsidiaries.
b) Certified copies of minutes of a meeting of the Board of Directors
and of the shareholders' meeting of each of the Sellers authorising
the sale of the Business and the Assets to the Purchaser and the
assumption of the Assumed Liabilities by the Purchaser on the terms
and conditions set out in this Agreement.
5.2 On the Effective Date the Sellers shall also:
a) deliver to the Purchaser such notification to public registry, and
such bills of sale, deeds, assignments and similar instruments, as
shall be required to formally transfer ownership of the Assets to
the Purchaser duly executed by the Sellers;
b) make available for collection by the Purchaser the originals of
the Contracts (to the extent available in writing);
c) execute and deliver to the Purchaser deeds of assignment or novation
in the agreed terms (to the extent that the same may be legally or
equitably assignable or otherwise subject to Clause 11) of the
benefit (subject to the burden) of the Contracts including any
monies due or owing to the Sellers under the Contracts;
d) deliver to the Purchaser all the share certificates for the Shares
with duly executed transfers in favour of Purchaser;
e) deliver to the Purchaser a certificate from the Chairman of the
Board of Directors of Nodeco to the effect that each of the
statements in Schedule 6 is true and accurate on the Effective Date
and does not omit any material fact and that the Sellers have
complied with all covenants required to be complied with by them
prior to the Effective Date; and
f) deliver to the Purchaser duly executed Shareholders guarantees in
accordance with Schedule 13.
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5.3 On the Effective Date the Purchaser shall:
a) satisfy the Cash Consideration referred to in Clause 3.2, as
adjusted by Clause 3.3, by payment of the Cash Consideration as
adjusted, together with interest accrued on the Purchase Price, if
any, pursuant to Clause 3.4, to the Sellers nominated bank account;
b) deliver to Nodeco share certificates (without any restrictive
legends) issued in the name of Nodeco representing the Consideration
Shares together with the prospectus which will be included in the
Purchaser's Registration Statement on Form S-3 or other appropriate
form with respect to the Consideration Shares (the "Registration
Statement");
c) deliver to the Sellers counterparts of the documents referred to
in Clause 5.2.c duly executed and acknowledged as appropriate by
the Purchaser;
d) deliver to the Sellers a certified copy of minutes of the Board of
Directors of the Purchaser approving the entering into by the
Purchaser of this Agreement, the issuance of the Consideration
Shares to the Sellers, the payment of the Cash Consideration
referred to in Clause 3.2, as adjusted by Clause 3.3, the filing of
the Registration Statement with the SEC and the entering into of and
any other documents referred to in this Agreement;
e) deliver to the Sellers a certificate from the Secretary of the
Purchaser to the effect that each of the statements in Schedule 9 is
true and accurate on the Effective Date and does not omit any
material fact and that the Purchaser has complied with all covenants
required to be complied with by it prior to the Effective Date; and
f) deliver to the Sellers a confirmation of Ministry Approval,
unless the Purchaser, in its sole discretion, has waived the
requirement of Ministry Approval.
All the Assets are transferred "as is, where is" at the Effective Date.
5.4 In the event the SEC has not declared the Registration Statement
effective and all stop orders have not been removed within 60 days from the
signing of this Agreement, or, unless the Purchaser has waived the requirement
of Ministry Approval, in the event the Purchaser has not obtained Ministry
Approval within 60 days from signing of this Agreement, the Sellers shall have
the right to terminate this Agreement. The Sellers may only exercise such option
to terminate this Agreement by delivery to the Purchaser of a written notice to
such effect within 5 Business Days after such 60 day time limit has elapsed. In
the absence of such timely notice, a new period shall run for another 60 days
after which, in the event the SEC has not declared the Registration Statement
effective and all stop orders have not been removed within 120 days from the
signing of this Agreement, or, unless the Purchaser has waived the requirement
of Ministry Approval, in the event the Purchaser has not obtained Ministry
Approval within 120 days from signing of this Agreement, each Party shall have
the right to terminate this Agreement. Each Party may only exercise such option
to terminate this Agreement by delivery to the other Parties of a written notice
to such effect within 5 Business Days after such 120 days time limit has
elapsed.
6 APPROVAL BY THE MINISTRY OF INDUSTRY AND ENERGY
6.1 At the signing of this Agreement the Purchaser shall provide the
Sellers with a copy of the completed draft application for Ministry Approval in
form and substance acceptable to Nodeco.
The Purchaser undertakes to apply for Ministry Approval immediately after
signing of the Agreement. In the event further information is required by the
Ministry of Industry and Energy, the Parties shall co-operate in presenting such
information.
The Purchaser shall be entitled to terminate the Agreement in the event
Ministry Approval is not obtained, unless the Purchaser, in its sole discretion,
has waived the requirement of Ministry Approval.
7 SELLERS' COVENANTS
The Sellers hereby covenant and agree with the Purchaser that from the date
hereof until the Effective Date, the Sellers shall and shall cause each
Subsidiary to:
6
(i) conduct the business of the Sellers and the Subsidiaries in the
ordinary and usual course, consistent with past practices.
(ii) not without the Purchaser's prior approval, issue shares of the
Sellers' or the Subsidiaries' stock, grant any options,
warrants or other rights to purchase such stock; declare or pay
any dividends; redeem any stock; amend the Articles of
Association or the Bylaws of either Seller or any Subsidiary;
sell, pledge or dispose of any assets of either Seller or any
Subsidiary (other than in the ordinary and usual course of
business, consistent with past practice); grant to any
director, officer or employee any increase in compensation or
any severance or termination pay in excess of what is
consistent with prior business practice (except as required by
law); or establish any new or increase any existing pension
plans, profit sharing plans or employee benefits; acquire any
corporation, partnership or other business organisation; incur
any indebtedness other than in the ordinary and usual course of
business consistent with past practice; grant any guarantee or
financial support of any kind to third parties other than in
the ordinary and usual course of business consistent with past
practice; enter into any material contracts or engage in any
transaction which, even though in the ordinary and usual course
of business, is not consistent with the prior business practice
of the Sellers or the Subsidiaries; or make any changes in the
accounting principles and practises of the Sellers or the
Subsidiaries.
(iii) not adopt or file a plan of complete or partial liquidation,
dissolution, merger or other reorganisation.
(iv) not do anything that may cause the Sellers' warranties to become
incorrect.
(v) make all reasonable efforts to preserve intact all licenses and
permits of the Sellers and the Subsidiaries and maintain the
business relationships of the Sellers and the Subsidiaries.
(vi) pay any taxes (social security premiums included) or other
amounts owed and to file any tax returns or other similar filings
required by applicable law.
(vii) each Seller shall call and hold a meeting of its shareholders
at which meeting such shareholders will be asked to approve the
sale of the Business and the Assets to the Purchaser and the
assumption of the Assumed Liabilities by the Purchaser,
provided that each Seller shall use its best efforts to hold
such meeting as promptly as is practicable following the
declaration by the SEC of the effectiveness of the Registration
Statement.
The Purchaser shall be given full access at all reasonable times to the
premises and records of the Sellers and the Subsidiaries and the Sellers shall
upon request furnish information regarding the Business requested by the
Purchaser.
8 SELLERS' WARRANTIES AND INDEMNIFICATION
8.1 The Sellers warrant to the Purchaser that at the date hereof:
a) Each of the statements in the Schedules (except Schedules 9 and
13) is true and accurate and the Schedules do not omit any
material fact;
b) the Sellers have, to the best of their knowledge, provided all
information relating to the Sellers and the Subsidiaries and
their respective affairs which would be material to the Purchaser
for the valuation of the Business and the Assets;
8.2 If any one or more of the warranties in Clause 8.1 or in the Schedules
are untrue, inaccurate, misleading or breached at the Effective Date, the Cash
Consideration to be paid at the Effective Date shall be reduced by the
Deficiency Amount (as such term is defined below); provided that if the
Purchaser provides written notice to the Sellers, or the Sellers provide written
notice to the Purchaser, that the aggregate Deficiency Amount is in excess of
NOK 44,000,000, the Parties shall use their reasonable best efforts to reach an
agreement with respect to the sale of the Business to the Purchaser on mutually
acceptable terms; provided further that if the Parties are unable to reach such
an agreement within
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10 Business Days following delivery of any such notice, any Party may terminate
this Agreement by delivery to the other Parties of a written notice to such
effect within 5 Business Days after such 10 Business Day time limit has elapsed.
The "Deficiency Amount" shall equal, as applicable, the value at the Effective
Date of the specific Assets (or portions thereof) and the specific Assumed
Liabilities (or portions thereof) that resulted in the warranties in Clause 8.1
and the Schedules being untrue, inaccurate, misleading or breached; provided
that "Deficiency Amount" shall not include any indirect or consequential loss or
damage, including, but not limited to, loss of goodwill or similarly related
indirect losses or damages. If any one or more of the warranties in Clause 8.1
and the Schedules are untrue, inaccurate, misleading or breached at the
Effective Date, but such untrue, inaccurate, misleading or breached warranty is
not discovered until after the Effective Date, the Sellers shall promptly
reimburse to the Purchaser an amount equal to the Deficiency Amount, plus
interest on such amount at the rate of 8% per annum from the Effective Date
until the date of repayment.
To the extent that any third party presents a claim against the Purchaser
or any Subsidiary related to events that occurred prior to the Effective Date
and such claim has not resulted in the reduction of the Cash Consideration at
the Effective Date or a reimbursement by the Sellers to the Purchaser as
described in the immediately preceding paragraph, the Sellers shall indemnify
and hold harmless the Purchaser and the Subsidiaries, as the case may be,
against all losses, claims, damages, liabilities, costs or other expenses
("Losses") relating to such third party claims that the Purchaser or any
Subsidiary, as the case may be, may reasonably incur or become subject to,
insofar as such Losses (or actions in respect thereof) arise out of, are based
upon or are in connection with any untrue, inaccurate, misleading or breached
warranty made by the Sellers under Clause 8.1 or the Schedules, by reimbursing
the Purchaser an amount equal to such Losses, provided that Losses shall not
include any indirect or consequential loss or damage, including, but not limited
to, loss of goodwill or similarly related indirect losses or damages.
The Sellers shall without undue delay be notified of any third party claim
for which indemnification will be sought by the Purchaser or any Subsidiary
under this Agreement and the Sellers will have the right to assume control and
direct defence thereof using counsel selected by the Sellers provided that such
counsel shall not have a conflict with the Purchaser in connection with such
legal representation. The Parties shall cooperate with each other and provide
each other with access to relevant books and records in their possession. No
such third party claim shall be settled without the prior written consent of the
Sellers. If a firm written offer is made to settle any such third party claim
and the Sellers propose to accept such settlement, and the Purchaser refuses to
consent to such settlement, then the Sellers shall be excused from and the
Purchaser shall be solely responsible for all further defence of such third
party claim. The maximum liability for the Sellers relating to such third party
claim shall be the amount of the proposed settlement.
For a period of three years from the Effective Date, the Sellers will
indemnify and hold harmless the Purchaser and the Subsidiaries as the case may
be against any and all Losses (including deficiencies, taxes, interest and
penalties) they may reasonably incur or become subject to, insofar as such
Losses arise out of, are based upon or are in connection with a claim by any
taxing authority for any taxes allocated or attributable to any period ending on
or before the Accounts Date, which has not been included in the Accounts;
provided however, that this indemnity shall only apply if the Purchaser and the
Subsidiaries have given the Sellers the right to take all action to refute such
claim by such taxing authority.
The Sellers shall promptly reimburse each indemnified party for all legal
or other expenses reasonably incurred by it in connection with investigating or
defending any Losses, including any amounts paid in settlement of any litigation
commenced or threatened if such settlement is effected with a prior written
consent of the Sellers.
The liability of the Sellers under this Clause 8.2 (other than liability
under the fourth paragraph hereof) shall not arise unless the aggregate amount
of all claims (other than claims under the fourth paragraph hereof) exceeds NOK
4,000,000, in which event the liability of the Sellers shall be limited to the
amount in excess of NOK 4,000,000. The liability of the Sellers under the fourth
paragraph of this Clause 8.2 shall not arise unless the aggregate amount of all
claims under the fourth paragraph of this Clause 8.2 exceeds NOK
8
1,000,000, in which event the liability of the Sellers shall be limited to the
amount in excess of NOK 1,000,000.
8.3 The liabilities of the Sellers in respect of the warranties (except
those referred to in Clause 8.2, fourth paragraph above) shall terminate one
year after the Effective Date unless written notice of the matter complained of
(giving such details as shall be reasonably practicable) shall have been given
by the Purchaser to the Sellers prior to the expiry of such one year period.
8.4 The Sellers' liability under this clause shall under no circumstances
exceed in aggregate NOK 75 million. No claim shall be made in respect of
indirect or consequential loss or damage.
8.5 The Sellers shall not be liable for any claim under this Clause 8, when
the claim or the issues and circumstances giving rise to the claim is disclosed
to the Purchaser in the Accounts, in the Disclosure Letter or during the
Purchaser's due diligence review of the Sellers and its Subsidiaries, provided,
however, the Sellers can prove beyond reasonable doubt that such disclosure has
taken place.
8.6 The Sellers' liability under this clause shall be guaranteed by the
Shareholders in a joint but not several manner and in the form set forth in
Schedule 13 and none of the Shareholders shall be responsible towards the
Purchaser for more than its percentage of any claim presented which is equal to
its guarantee percentage as set out in Schedule 7.
8.7 The warranties in Clause 8.1 and the Schedules, and the remedies
available to the Purchaser in case of breach of warranties set out in this
Agreement, are exhaustive and the Sellers shall have no liability to the
Purchaser other than as set out in this Agreement.
9 PURCHASER'S WARRANTIES AND INDEMNIFICATION
9.1 The Purchaser warrants to the Sellers that at the date hereof each of
the statements in Schedule 9 is true and accurate and Schedule 9 does not omit
any material fact.
9.2 Purchaser shall indemnify and hold harmless each Seller against all
Losses it may reasonably incur or become subject to under the Securities Act,
the Securities Exchange Act of 1934, as amended, or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of, are based upon or are in
connection with (1) any untrue, inaccurate, misleading or breached warranty made
by the Purchaser under Clause 9.1 or Schedule 9; (2) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the prospectus included therein, or any amendments, supplements or
exhibits thereto or material incorporated by reference therein, or the omission
or alleged omission to state in such documents a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that the
Purchaser will not be liable under this clause (2) to the extent Losses are
based on an untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information relating to either
Seller or any Subsidiary furnished in writing by either Seller or any Subsidiary
to the Purchaser expressly for inclusion therein; or (3) the failure of the
Purchaser to comply with the Securities Act or any other law, rule or regulation
with respect to the distribution of the Consideration Shares to the Sellers.
The Purchaser shall without undue delay be notified of any third party
claim for which indemnification will be sought by either Seller under this
Agreement and the Purchaser will have the right to assume control and direct
defence thereof using counsel selected by the Purchaser provided that such
counsel shall not have a conflict with the Sellers in connection with such legal
representation. The Parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim shall be settled without a prior written approval of the
Purchaser. If a firm written offer is made to settle any such third party claim
and the Purchaser proposes to accept such settlement, and the Sellers refuse to
consent to such settlement, then the Purchaser shall be excused from and the
Sellers shall be solely responsible for all further defence of such third party
claim. The maximum liability for the Purchaser relating to such third party
claim shall be the amount of the proposed settlement.
9.3 Purchaser shall promptly reimburse each indemnified party for all legal
or other expenses reasonably incurred by it in connection with investigating or
defending any Losses, including any amounts
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paid in settlement of any litigation commenced or threatened if such settlement
is effected with the prior written consent of the Purchaser.
10 THE REGISTRATION STATEMENT; SALE OF CONSIDERATION SHARES
10.1 The Purchaser shall prepare and file with the SEC as soon as is
reasonably practicable after the date hereof the Registration Statement which
provides for the registration under the Securities Act of the Consideration
Shares to be issued to the Sellers pursuant hereto. The Purchaser shall use its
reasonable best efforts to (a) cause the Registration Statement to become
effective as promptly as practicable, (b) remove any stop order that may be
issued by the SEC with respect thereto, and (c) take all or any action necessary
or required under applicable federal or state securities laws in connection with
the issuance of the Consideration Shares to the Sellers pursuant hereto. The
Purchaser shall immediately notify the Sellers when the SEC has requested any
additional information regarding the Registration Statement, declared the
Registration Statement effective or issued or removed any stop order with
respect thereto. The Purchaser shall use its best efforts to cause the
Consideration Shares to be listed on the New York Stock Exchange.
10.2 Sellers agree to use their reasonable best efforts to sell any
Consideration Shares in an orderly manner and to provide Purchaser with prior
notice of its intention to sell such stock.
11 THE CONTRACTS
11.1 The Purchaser shall in respect of the period after the Effective Date
use its reasonable best efforts to meet its obligations under the Contracts.
Insofar as any consents or licences to the transfer or assignment of the benefit
and burden of the Contracts have not been obtained on the Effective Date, or if
such benefit or burden cannot effectively be so transferred or assigned to the
Purchaser except with the consent of or by an agreement with the other party or
parties thereto, then:
a) the Sellers shall use their reasonable best efforts to obtain the
consent of such other party or parties to the Contracts being
novated or assigned in terms reasonably acceptable to the
Purchaser; and
b) unless and until all of the Contracts shall have been so novated or
assigned, the Sellers shall provide to the Purchaser from the
Effective Date the benefit and burden of the Contracts as if the
same had been effectively novated or assigned to the Purchaser.
The Sellers do not warrant that the Contracts are assignable or
transferable and shall not be liable or responsible in the event any of the
Contracts are cancelled or terminated due to the Purchaser's acquisition of the
Business.
11.2 The Purchaser shall indemnify and hold harmless the Sellers against
any and all Losses they may reasonably incur or become subject to, insofar as
such Losses arise out of, are based upon or are in connection with the
non-performance or the defective or negligent performance after the Effective
Date by the Purchaser of any Contracts. The indemnification hereunder shall,
however, not apply if the Purchaser's non-performance or the defective or
negligent performance is caused by the Sellers by any breach of representations
or warranties set out in this Agreement or the schedules hereto.
11.3 After the Effective Date the Sellers will assist the Purchaser in
notifying all existing customers of the Business in writing (in such form and at
such times as the Purchaser may reasonably require) of the sale of the Business
to the Purchaser and the arrangements being made in respect thereof and the
Sellers will use their reasonable best efforts to obtain the written consent of
such customers to such arrangements.
12 INDEMNITY BY THE PURCHASER
In the event the Sellers receive any invoice or in the event a claim is
presented to the Sellers in any other way after the Effective Date and such
claim relates to the Assumed Liabilities, the Sellers shall without undue delay
send the invoice or written documents relating to the claim to the Purchaser and
the Purchaser shall pay the claim directly to the third party on the due date.
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The Purchaser shall indemnify and hold harmless the Sellers against all
Losses they may reasonably incur or become subject to, insofar as such Losses
arise out of, are based upon or are in connection with any of the Assumed
Liabilities under this Agreement. The Purchaser shall furthermore indemnify and
hold harmless the Sellers against all Losses (including deficiencies, taxes,
interest and penalties) they may reasonably incur or become subject to, insofar
as such Losses arise out of, are based upon or are in connection with a claim by
any taxing authority for any taxes allocated or attributable to any period
ending on or before the Effective Date; provided, however, that this indemnity
shall only apply if the Sellers have given the Purchaser the right to take all
action to refute such claim by such taxing authority.
The indemnification hereunder shall, however, not apply if the Loss is
caused by the Sellers by any breach of representations or warranties set out in
this Agreement or the schedules hereto.
13 BOOKS AND RECORDS
The Sellers shall on the Effective Date (insofar as the Sellers are not
required to retain the same under Norwegian law or otherwise) deliver to the
Purchaser all of the books, records, files, papers and other documents of the
Sellers and the Subsidiaries related to the Business and in particular the
Sellers shall deliver to the Purchaser the original executed copies of the
Contracts.
The Purchaser will for a period of ten years keep safely in Norway all such
books, records, files, papers and other documents related to the Business as the
Sellers shall transfer or cause to be transferred to the Purchaser and shall
afford the Sellers reasonable access thereto, during reasonable business hours
after notice, for as long as shall be necessary to enable the Sellers to deal
with its taxation and other liabilities in respect of the period up to the
Effective Date and will permit the Sellers and its servants, agents and
professional advisers upon reasonable notice to make copies at the Sellers'
expense of such books, records, files, papers and other documents for the
purpose of answering any query raised or disposing of any dispute in relation
thereto.
14 NON-COMPETITION
For a period of two years following the Effective Date neither the Sellers
nor any person, group, partnership, corporation or entity that controls or is
controlled by or under common control with the Sellers ("Seller Affiliate") will
compete, directly or indirectly, with the Purchaser or any person, group,
partnership, corporation or entity that controls or is controlled by or under
common control with the Purchaser ("Purchaser Affiliate") in designing,
manufacturing, selling, renting or running liner hangers, packers and gas lift
valves and systems. Furthermore, no Seller or Seller Affiliate will solicit for
employment any employee of the Purchaser or Purchaser Affiliate, including any
employee of a Seller or a Subsidiary who becomes an employee of the Purchaser or
a Purchaser Affiliate.
15 COSTS AND TAXES
Each party shall pay its own costs in relation to the negotiations leading
up to the sale and purchase of Assets contemplated by this Agreement and the
preparation and carrying into effect of this Agreement and of all other
documents referred to herein.
The Purchaser shall be liable for all costs and expenses with respect to
preparing, filing and printing the Registration Statement and distributing the
prospectus contained therein and listing the Consideration Shares on the New
York Stock Exchange and all fees, duties and administrative fees payable in
connection with the sale and the purchase of the Assets contemplated hereby,
including, but not limited to, any registration fees and taxes for the transfer
of the title to any of the Assets and any value added taxes.
16 SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties and the successors in interest to the parties, but shall not be
assignable by either party, except as provided for below.
11
The Purchaser shall be entitled to assign this Agreement to a Norwegian
subsidiary, but the Purchaser shall always remain jointly and severally liable
with its Norwegian subsidiary for all of the Purchaser's obligations and
liabilities under this Agreement.
17 CHANGE OF NAME
The Sellers shall change the name of each Seller not later than at the
Effective Date and undertake to send the relevant form to the Central Register
to have the name deregistered not later than two Business Days after the
Effective Date. The Purchaser shall be entitled to exclusive use of the name of
each Seller from and after the Effective Date.
18 BROKERAGES AND COMMISSIONS
No party, including Paine Webber Incorporated, is entitled to receive from
the Purchaser any finder's fee, brokerage or commission in connection with this
Agreement.
19 ANNOUNCEMENTS
19.1 No announcement concerning this sale and purchase or any ancillary
matter will be made before, on, or after the Effective Date, by any of the
parties hereto except as required by law, the Oslo Stock Exchange, the New York
Stock Exchange or with approval of the other parties (such approval not to be
unreasonably withheld or delayed). Each party agrees to notify the other party
prior to any announcement and provide the other Party the opportunity to review
prior to dissemination and to co-ordinate joint announcement efforts.
Notwithstanding the foregoing, the Parties will issue a joint press release
immediately after execution of this Agreement.
20 NOTICES AND RECEIPTS
20.1 Any notice or other documents to be provided under this Agreement may
be delivered or sent by registered mail or telex or telefax to the party to
receive such notice or document at its address appearing in this Agreement or at
such other address as it may have notified to the other parties in accordance
with this Clause.
The Sellers appoint Norsk Vekst AS, P.O.Box 1223 Vika, 0110 Oslo, telefax
(47) 22 83 89 29, as their agent for service of any indemnification claim or
notice.
Notice to the Purchaser shall also be sent to Advokatfirmaet Schj6dt,
attention: Erling Christiansen, Dronning Maudsgt 10, Postboks 2444, Solli,
N-0201 Oslo.
20.2 Any notice or document shall be deemed to have been served:
a) if delivered, at the time of delivery; or
b) if posted, at 10.00 a.m. on the fifth Business Day after it was
put into the post; or
c) if sent by telefax, at the expiration of 2 hours after the time
of receipt of the correct answerback or telefax confirmation, if
such answerback or confirmation is received before 3.00 p.m. or
any Business Day, and in any other case at 10.00 a.m. on the next
Business Day.
20.3 In proving service of a notice or document it shall be sufficient to
prove that delivery was made or that the envelope containing the notice or
document was properly addressed and posted as registered mail or that the
telefax message was properly addressed and the correct answerback or telefax
confirmation was received as the case may be.
21 GENERAL PROVISIONS
Reasonable efforts, consents, approvals and waivers. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable (a) to consummate and make
effective, in the most expeditious manner
12
practicable, the transactions contemplated by this Agreement, including, without
limitation, (i) the obtaining of all necessary consents, approvals or waivers
required in connection with the consummation of the transactions contemplated by
this Agreement (provided that no such consent, approval or waiver shall require
such party to take any action that would impair the value that such party
reasonably attributes to the transactions contemplated by this Agreement) and
(ii) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by this Agreement; and (b) to defend
any non-regulatory lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including, without limitation, seeking to have
any stay or temporary restraining order entered by any court or other
governmental entity vacated or reversed.
21.2 Amendment and Waiver. This Agreement may not be amended or
supplemented at any time, except by an instrument in writing signed on behalf of
each party hereto. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement shall not operate or be construed
as a waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
21.3 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated.
22 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES
22.1 This Agreement, the Schedules attached hereto and the Disclosure
Letter constitute the entire agreement and supersede all other prior agreements
and understandings, both oral and written, among the parties or any of them,
with respect to the subject matter hereof and neither this nor any documents
delivered in connection with this Agreement confers upon any person not a party
hereto any rights or remedies hereunder.
13
23 LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with the
laws of Norway and the Parties hereby irrevocable submit to the exclusive
jurisdiction of Oslo City Court.
Sellers' signatures: Purchaser's signature:
NODECO AS WEATHERFORD ENTERRA, INC.
By /s/ Lars A. Grinde By /s/ H. Suzanne Thomas
Name: Lars A. Grinde Name: H. Suzanne Thomas
Title: Attorney-in-Fact Title: Sr. Vice President, Secretary
and General Counsel
AARBAKKE AS
By /s/ Lars A. Grinde
Name: Lars A. Grinde
Title: Attorney-in-Fact
14
APPENDIX B:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM .......... TO ...........
COMMISSION FILE NUMBER 1-7867
WEATHERFORD ENTERRA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-1681642
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1360 POST OAK BOULEVARD, SUITE 1000 77056
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(713) 439-9400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Stock, $.10 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of the registrant's knowledge, in the Proxy Statement or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ].
The aggregate market value of the outstanding Common Stock of the
registrant held by non-affiliates of the registrant as of March 19, 1996,
based on the closing sale price of the Common Stock on the New York Stock
Exchange on said date, was $1,220,777,845.
There were 51,089,042 shares of Common Stock of the registrant
outstanding as of March 19, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement issued in connection with the 1996 Annual
Meeting of Stockholders are incorporated into Part III of this Report.
PART I
ITEM 1. BUSINESS.
INTRODUCTION TO BUSINESS
Weatherford Enterra, Inc. (formerly Weatherford International
Incorporated ("Weatherford")) was organized under the laws of the State of
Delaware in 1970. The "Company" or "Weatherford Enterra", as used herein,
refers to Weatherford Enterra, Inc. and its subsidiaries and affiliates,
unless the context indicates otherwise.
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company's principal business segments include (i) the oilfield services
segment, which consists of renting specialized oilfield equipment, providing
fishing, well control assistance and other downhole services and related
tools, and providing tubular running services and related tools; (ii) the
energy products and services segment, which consists of manufacturing, selling
and servicing a variety of products, including cementation products, power
equipment, fishing and milling tools and heavy wall drill pipe, gas lift
valves, production and service packers and related equipment, electrical and
instrumentation control systems and pedestal-mounted marine cranes; (iii) the
gas compression segment, which consists of manufacturing, packaging, selling,
renting and servicing reciprocating natural gas compressors; and (iv) the
pipeline services segment, which consists of manufacturing, selling and
renting specialized pipeline equipment and services. Weatherford Enterra
operates in virtually every oil and gas exploration and production region in
the world, with more than 330 locations in 47 countries, including the United
States.
Since 1991, the Company's management has implemented a business strategy
focused on offering a broader mix of services and products in domestic and
international markets, becoming a leading participant in each of its core
businesses and pursuing cost efficiencies in both its existing operations and
its newly-acquired businesses. Management has pursued this strategy through a
series of acquisitions, the most significant of which was the merger (the
"Enterra Merger") with Enterra Corporation ("Enterra") in October 1995,
pursuant to which all outstanding shares of Enterra common stock were
exchanged for approximately 23.7 million shares of the Company's Common Stock
(after giving effect to a contemporaneous one-for-two reverse stock split of
the Company's Common Stock). On December 15, 1995, the Company acquired the
assets of Energy Industries, Inc. and Zapata Energy Industries, L.P.
(collectively, "Energy Industries"), a gas compression business complementary
to the Company's existing gas compression business, for approximately $130
million, subject to adjustment, and the assumption of certain current
liabilities.
The Enterra Merger and the acquisition of Energy Industries provided
complementary products and services, increased the Company's worldwide market
share in its existing rental tool and fishing and downhole services
businesses, provided gas compression and pipeline services as new "core"
businesses, added several additional energy products and services businesses
and improved profitability and cash flow through anticipated annualized
consolidation savings in excess of $55 million.
Including the Enterra Merger and the acquisition of Energy Industries,
the Company has acquired 23 businesses since November 1991 for a total
consideration of approximately $950 million, of which approximately 75% has
been financed through the issuance of the Company's Common Stock. As a result
of these acquisitions, management believes it has positioned Weatherford
Enterra as a market leader in the oilfield services segment, the gas
compression segment and the pipeline services segment and in certain
businesses included in the energy products and services segment while
significantly expanding and diversifying the Company's geographic operations
and product and service offerings. The acquisitions have allowed the Company
to expand its product and service lines, improve its worldwide market position
and realize significant consolidation cost savings.
2
RECENT DEVELOPMENTS
The Company has entered into a letter of understanding with and currently
is engaged in negotiations relating to the possible acquisition of the assets
and business of Nodeco AS, a Norwegian company engaged in the energy products
business. There can be no assurance that a definitive agreement will be
reached or that such acquisition will be consummated.
The Company intends to file in the first quarter or early in the second
quarter of 1996 a shelf registration statement with the Securities and
Exchange Commission with regard to the possible issuance of public
indebtedness. The Company will determine whether to issue any such public
indebtedness based upon then existing market conditions; however, there can be
no assurance that the Company will issue any such public indebtedness.
FINANCIAL INFORMATION BY INDUSTRY SEGMENT
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 9 of Notes to Consolidated Financial
Statements contained elsewhere herein for additional information.
DESCRIPTION OF BUSINESS
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company operates in four industry segments -- oilfield services, energy
products and services, gas compression and pipeline services.
OILFIELD SERVICES. Weatherford Enterra rents a full line of specialized
equipment and tools and tubular goods for drilling, completion and workover of
oil and gas wells. Operators and drilling contractors often find it uneconomic
to maintain complete inventories of tools, drill pipe and other equipment and
therefore supplement such inventories by renting. Items rented include
pressure control equipment (such as blowout preventers, high-pressure valves,
accumulators, adapters and choke and kill manifolds); drill pipe, drill
collars and tubing; pipe handling equipment (such as elevators, spiders,
slips, tongs and kelly spinners); and fishing tools (such as milling tools,
casing cutters, jars, spears, overshots and whipstocks). Weatherford Enterra
also provides fishing, milling and cutting services, which consist of removing
or otherwise eliminating "fish" or "junk" in a well (such as cables, pipes,
casing, well bore tools or debris) that is causing an obstruction. An
essential step in the fishing operation is the proper selection and assembly
of the fishing string. Items that might be on a fishing string include jars,
subs, overshots (external), spears (internal), milling tools, casing cutters
and other tools for retrieving or eliminating the "fish". The Company also
provides pipe recovery electric wireline services and coring services. In
addition, Weatherford Enterra provides well control assistance services in
critical well situations (such as a well blow-out or a high pressure sour gas
well). Management believes that, based on total revenues, Weatherford Enterra
is the leading worldwide supplier of rental tools and provider of fishing and
other downhole services.
Weatherford Enterra provides services and equipment used to "make up"
threaded tubular connections and to "run" tubulars that are used during the
drilling, completion and workover of oil and gas wells. Tubulars include
casing, tubing, special high alloy chrome pipe and fiberglass reinforced pipe.
Casing is pipe installed (or run) in a wellbore to protect the structural
integrity of the wellbore and to seal various zones in the well. Tubing is
small diameter pipe run in a producing well through which oil and gas is
produced. These services and related equipment ensure the mechanical integrity
and leak-tight performance of tubular connections. In running tubulars,
Weatherford Enterra personnel operate power tongs (similar in principle to
hydraulic wrenches) and other related handling equipment, to connect the pipe
as it is placed in the well, ensuring a good connection and minimizing thread
damage. Management believes that, based on total revenues, the Company is the
leading worldwide provider of tubular running services.
3
ENERGY PRODUCTS AND SERVICES. Weatherford Enterra's energy products and
services business consists of the manufacture, sale and servicing of a variety
of products. The Company provides cementation products and trained cementation
engineers to perform computerized well program studies, submit cementation
proposals, finalize cementation plans and advise and assist during the
cementation process. The Company does not provide cement pumping services. The
Company's cementation products, marketed under the Weatherford trade name,
include cementing products used to center casing strings in the wellbore (such
as centralizers, wellbore wipers and scratchers); float equipment used in the
cementation of the casing string to prevent cement from flowing back into the
casing (such as guide shoes, float shoes and float collars); and stage tools
used to set cement in the annular space between the wellbore and the casing
string. The Company also sells various proprietary rubber and elastomer
products that have broad drilling and tubular thread protection applications,
in addition to applications in cementation services. Management believes that,
based on total revenues, the Company is the leading worldwide manufacturer and
supplier of cementation products.
Weatherford Enterra designs, manufactures, sells and services power tongs
and related pipe handling equipment used to provide tubular handling services;
tubular connection testing equipment used to verify the integrity of
connections; milling tools, cutters, overshots, whipstocks and wireline
equipment used to provide fishing and other downhole services; heavy wall
drill pipe; McMurry-Macco 3/5 gas lift and related equipment to increase the
flow of oil; and Arrow 3/5 packers and related equipment to control the flow
in oil and gas wells and to provide remedial stimulation and testing services
in oil and gas wells. Weatherford Enterra, through Total Engineering Services
Team, Inc. (TEST), provides electrical and instrumentation construction
services to the worldwide oil and gas production industry and designs, builds,
installs and services instrument control systems for electrical power
generation packages used on offshore production platforms and associated
offshore storage and handling facilities. The Company also designs,
manufactures, sells and services American AeroT pedestal-mounted hydraulic
cranes used on offshore production platforms, marine vessels and dockside
locations.
GAS COMPRESSION. Weatherford Enterra manufactures, packages, sells,
rents and services gas compression units used for increasing natural gas
pressure exiting the wellhead and within gas gathering systems, injecting
natural gas into oil wells to enhance oil recovery, injecting natural gas into
gas storage wells and other general uses such as cogeneration, seismic marine
surveys and natural gas fueling stations. The acquisition of Energy Industries
in December 1995 greatly expanded the Company's gas compression business
through the addition of larger horsepower units and manufacturing and
packaging capabilities. The Company is a major manufacturer of gas compressors
ranging from 26 horsepower to 7200 horsepower. Weatherford Enterra currently
offers an entire line of reciprocating gas compressors and is able to serve
the international marketplace. Management believes that the Company is the
second largest gas compressor rental company based on number of units and the
fourth largest based on available horsepower.
PIPELINE SERVICES. Weatherford Enterra's pipeline services business
consists of CRC-Evans 3/5 pipeline equipment, CRC-Evans automatic welding
services and Pipeline Induction Heat Ltd. ("PIH") services. The pipeline
equipment segment includes the manufacture of conventional line travel
pipeline construction equipment, the manufacture of specialized equipment for
pipe coating plants and pipe handling systems for offshore lay barges and the
manufacture of rehabilitation equipment for coating removal, surface
preparation and recoating pipelines. The automatic welding segment includes
the provision of proprietary automatic welding systems for use in pipeline
construction. PIH offers specialized field joint coating and heat treatment
services for use in pipeline construction. Management believes that, based on
revenues, the Company is the leading worldwide manufacturer and supplier of
conventional pipeline construction equipment.
PATENTS AND LICENSES
The Company has followed a policy of seeking U.S. and non-U.S. patents
and licenses for products and equipment that appear to have commercial
applications. The Company believes its
4
patents and licenses to be adequate for the conduct of its products and
services businesses and, while it considers them to be valuable in the
aggregate, the Company does not believe that its business is materially
dependent on its patents or licenses. In management's opinion, engineering and
production skills and application experience are more responsible for the
Company's market position than are patents or licenses.
SEASONALITY
Demand for the Company's oilfield services and energy products and
services is generally affected by the seasonality of drilling activity. Higher
activity generally is experienced in the spring, summer and fall. In the
United States and Europe, the lowest drilling activity occurs during the early
months of the year due to inclement weather; however, in Alaska and Canada,
activity generally slows in the spring and early summer due to difficulty in
moving equipment during the spring thaws. Weather conditions are not a
significant factor in other geographic areas in which the Company offers
oilfield services and energy products and services. Weather is not necessarily
a significant factor in the Company's gas compression segment, although
increased demand for gas during the winter months depletes gas reserves,
thereby increasing the need for gas compression services. The pipeline
services segment is generally affected by the weather due to constraints on
pipeline construction during winter months due to inclement weather conditions
and constraints during the spring and early summer due to spring thaws.
BACKLOG ORDERS
At December 31, 1995, the Company's backlog of orders for products and
equipment believed to be firm was approximately $63,800,000 compared to
approximately $81,400,000 at December 31, 1994. Substantially all of such
orders will be filled in 1996.
INTERNATIONAL AND U.S. OPERATIONS AND EXPORT SALES
The Company has manufacturing operations, either through direct ownership
(including joint ventures) or through license arrangements, in the United
States, Germany, Canada, Italy, The Netherlands and Saudi Arabia. The Company
has product and equipment sales or service operations in more than 330
locations in 47 countries (including the United States).
The Company's international operations traditionally have been more
stable and profitable than its U.S. operations. International revenues in
1995, 1994 and 1993 were $387,235,000 (45% of total revenues), $293,673,000
(43% of total revenues) and $215,328,000 (43% of total revenues),
respectively. Revenues for the United States segment included export sales to
international customers of $65,465,000, $63,211,000 and $49,388,000 in 1995,
1994 and 1993, respectively.
5
The following table sets forth the Company's revenues,
acquisition-related costs and other unusual charges, operating income and
identifiable assets attributable to each of its geographic segments. See Note
9 of Notes to Consolidated Financial Statements contained elsewhere herein for
additional information.
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
------------- ------------- -----------
(IN THOUSANDS)
REVENUES:
United States................. $ 471,672 $ 383,076 $ 285,163
Canada........................ 106,491 75,809 25,811
Europe........................ 110,065 84,830 73,291
Africa........................ 57,450 41,574 38,168
Other international........... 113,229 91,460 78,058
------------- ------------- -----------
$ 858,907 $ 676,749 $ 500,491
============= ============= ===========
ACQUISITION-RELATED COSTS AND OTHER
UNUSUAL CHARGES:
United States................. $ 43,276 $ 2,500 $ 4,000
Canada........................ 2,850 -- --
Europe........................ 4,302 -- --
Africa........................ 624 -- --
Other international........... 8,119 -- --
Corporate..................... 29,011 -- --
------------- ------------- -----------
$ 88,182 $ 2,500 $ 4,000
============= ============= ===========
OPERATING INCOME (LOSS):
United States................. $ 5,745 $ 28,924 $ 17,996
Canada........................ 11,382 15,502 4,920
Europe........................ 3,088 3,023 5,607
Africa........................ 13,912 11,204 6,726
Other international........... 4,267 12,490 22,239
Corporate..................... (38,212) (5,439) (7,817)
------------- ------------- -----------
$ 182 $ 65,704 $ 49,671
============= ============= ===========
IDENTIFIABLE ASSETS:
United States................. $ 790,625 $ 706,175 $ 324,730
Canada........................ 73,368 89,462 35,943
Europe........................ 141,673 125,365 65,975
Africa........................ 40,299 38,708 30,526
Other international........... 148,579 149,677 110,279
Corporate..................... 64,316 44,583 68,149
------------- ------------- -----------
$ 1,258,860 $ 1,153,970 $ 635,602
============= ============= ===========
The Company's international operations are subject to special
considerations inherent in doing business outside the United States, including
war, civil disturbances and governmental activities, which may limit or
disrupt markets, restrict the movement of funds or result in the deprivation
of contract rights or the taking of property without fair compensation.
Certain areas, including Algeria, Nigeria, Angola and parts of the Middle
East, have been subjected to political disruption or social unrest in the past
twelve months. International operations also can be affected by U.S. laws and
regulations limiting or prohibiting exports to, and operations in, certain
countries, including Iran, Iraq, Libya, Cuba and
6
Nigeria. Government-owned petroleum companies in some of the countries in
which the Company operates have adopted policies (or are subject to
governmental policies) giving preference to the purchase of goods and services
from companies that are majority-owned by local nationals. As a result of such
policies, the Company relies on joint ventures, license arrangements and other
business combinations with local nationals in these countries. In addition,
political considerations may disrupt the commercial relationships between the
Company and government-owned petroleum companies. Generally, business
interruptions resulting from civil or political disruptions negatively impact
near-term results of operations; however, management of the Company believes
that it is unlikely that any specific business disruption caused by existing
or foreseen civil or political instability will have a material adverse impact
on the financial condition or liquidity of the Company.
INDUSTRY CONDITIONS
The oil and gas industry in which the Company participates historically
has experienced significant volatility. Demand for the Company's oilfield
services and energy products and services 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 and workover activity can fluctuate
significantly in a short period of time, particularly in the United States and
Canada.
Drilling activity is largely dependent on the level and volatility of oil
and gas prices. For the years ended December 31, 1995, 1994 and 1993, average
worldwide drilling activity has remained relatively stable, at 1,711, 1,772
and 1,714 active rigs, respectively. Drilling activity outside of North
America increased 3% in 1995 and decreased 5% in 1994 when compared to the
prior year's average activity levels. U.S. drilling activity decreased 7% in
1995 and increased 3% in 1994 when compared to the prior year's average
activity levels. Canadian drilling activity increased significantly in 1994
when compared to the average activity level in 1993 and increased slightly in
1995 when compared to the average activity level in 1994, but decreased in the
last half of 1995.
The willingness of oil and gas operators to make capital expenditures for
the exploration and production of oil and natural gas will continue to be
influenced by numerous factors over which the Company has no control,
including the prevailing and expected market prices for oil and natural gas.
Such prices are impacted by, among other factors, the ability of the members
of the Organization of Petroleum Exporting Countries ("OPEC") to maintain
price stability through voluntary production limits, the level of production
by non-OPEC countries, worldwide demand for oil and gas, general economic and
political conditions, costs of exploration and production, availability of new
leases and concessions, and governmental regulations regarding, among other
things, environmental protection, taxation, price controls and product
allocations. However, worldwide exploration and production expenditures by the
oil and gas industry increased approximately 9% in 1995 when compared to 1994
and management of the Company anticipates expenditures to increase in 1996. No
assurance can be given as to the level of future oil and gas industry activity
or demand for the Company's oilfield services and energy products and
services.
Demand for the Company's gas compression equipment and services depends
primarily on demand for natural gas, the level and stability of natural gas
prices, natural gas production and consumption, construction of gathering and
storage systems, and the age and operating pressures of natural gas wells.
Demand for the Company's pipeline equipment and services depends on
various factors, including the price of oil and gas, the need for pipelines to
transport oil and gas to areas of high demand, the age and condition of
existing pipelines, political and economic influences, environmental and other
governmental regulations, and the demand for rehabilitation and repair of
existing pipeline systems. The existence of relatively few construction
projects for large diameter oil and gas pipelines at any time causes
substantial fluctuations in revenues from the sale or rental of equipment used
in connection
7
with such projects. Management of the Company anticipates that the
rehabilitation and repair of existing pipeline systems, many in existence
prior to 1970, should increase at some point in the future.
COMPETITION
OILFIELD SERVICES. The Company experiences significant price pressures
in the markets in which it offers rental tools and fishing and other services,
particularly in the U.S. markets. The principal methods of competition that
apply to the Company's rental tools and fishing and other services are price,
quality, availability and reputation. Weatherford Enterra competes with Baker
Hughes Incorporated in most of the markets in which it participates. In
addition, the Company competes with numerous small, single-site operators,
larger concerns operating at multiple locations and various well servicing
companies engaged in such businesses. Also, many customers own and operate
large inventories of equipment they might otherwise choose to rent and have
the ability to purchase additional equipment, as opposed to renting.
The Company historically has enjoyed a strong competitive position in
tubular running services in countries in which it operates outside the United
States, but has experienced increasing competition and price pressures outside
the U.S. market in recent years. The Company has experienced significant
competition and price pressures in the U.S. tubular running services market.
The principal methods of competition that apply to the Company's tubular
running services business are price, quality, reputation and range of services
offered. Weatherford Enterra competes with Frank's International, Inc. in all
of the U.S. markets and in some international markets in which the Company
participates. In addition, the Company competes with BJ Services Company in
several of the international markets in which the Company participates.
Several other small- to medium-sized companies compete with Weatherford
Enterra on a regional basis in the United States and in certain other
countries.
Management expects competition and customer price pressures to continue
in the foreseeable future in its international and U.S. oilfield services
markets.
ENERGY PRODUCTS AND SERVICES. The Company experiences significant
competition in the pricing of its cementation products. Management of the
Company believes that price will continue to be a significant factor
considered in customer purchasing decisions in the foreseeable future. The
principal methods of competition that apply to the Company's cementation
products business are price, quality, availability and reputation. The Company
competes with Halliburton Company and Davis-Lynch Inc. in most of the markets
in which it participates.
Weatherford Enterra has experienced competition in the pricing of
virtually all of its other energy products and services businesses. The
Company competes with small- to medium-sized companies as well as with larger
companies and subsidiaries of large public companies having significant
financial resources.
GAS COMPRESSION. The Company has experienced competition in the pricing
of its gas compression equipment and services. Management believes that by
manufacturing a significant portion of the components used in its compressor
systems, the Company has certain cost advantages over its competitors in the
rental business that do not have similar manufacturing capabilities. The
principal methods of competition are price, quality, reliability, delivery
time and reputation. Management believes that price will continue to be a
significant factor considered in customer purchasing and rental decisions in
the foreseeable future. The Company competes with Tidewater Inc. and Hanover
Compressors Company and various other small- to medium-sized companies.
PIPELINE SERVICES. The Company's CRC-Evans pipeline business competes
with various small-to medium-sized companies on a regional basis. However,
management believes that these companies do not offer the broad range of
products and services offered by the Company. The principal methods of
competition are product reliability and performance, delivery, service,
warranty and price.
8
CUSTOMERS
The Company had no one customer that accounted for 10% or more of its
revenues in 1995, 1994 or 1993.
EMPLOYEES
At December 31, 1995, the Company employed 6,451 persons, of whom 2,446
were in international locations and 4,005 were in the United States. Of the
6,451 employees, 3,719 were employed in the oilfield services segment, 1,436
in the energy products and services segment, 764 in the gas compression
segment and 295 in the pipeline services segment, with 237 in administrative
functions. The Company considers its employee relations to be satisfactory.
EXECUTIVE OFFICERS
The names of the executive officers of the Company and certain
information with respect to each of them are set forth below.
<TABLE>
<CAPTION>
NAME AGE OFFICES
- --------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Philip Burguieres...................... 52 Chairman of the Board, President and Chief
Executive Officer
James R. Burke......................... 58 Senior Vice President and President -- Products and
Equipment
M. E. Eagles........................... 56 Senior Vice President and President -- Services
Norman W. Nolen........................ 53 Senior Vice President, Chief Financial Officer and Treasurer
H. Suzanne Thomas...................... 42 Senior Vice President, Secretary and General Counsel
Steven C. Grant........................ 53 Vice President -- Corporate Development and Investor
Relations
Jon R. Nicholson....................... 42 Vice President -- Human Resources
</TABLE>
Mr. Burguieres was elected President and Chief Executive Officer of the
Company effective April 3, 1991, a director effective April 23, 1991, and
Chairman of the Board effective December 10, 1992. From January 1990 to
November 1990, he was Chairman of the Board, President and Chief Executive
Officer of Panhandle Eastern Corporation, a company that operates interstate
natural gas transmission systems. From January 1987 to November 1989, he was
Chairman of the Board, from January 1986 to November 1989, Chief Executive
Officer, and from April 1981 to November 1989, President and Chief Operating
Officer, of Cameron Iron Works, Inc., a manufacturer of oilfield equipment.
Mr. Burke, who joined the Company on December 12, 1991 as Senior Vice
President, Corporate Development and Marketing, became President of the
Products Division effective March 1, 1994, Senior Vice President and
Compression/Products President effective October 5, 1995 and Senior Vice
President and President -- Products and Equipment effective March 15, 1996.
From December 1989 to December 1991, he was an independent management
consultant. From June 1983 to December 1989, he was Vice President of
Corporate Development, and from 1976 to 1983, he was General Manager of a
manufacturing operation, of Cameron Iron Works, Inc.
Mr. Eagles, who joined the Company on March 1, 1993 as Executive Vice
President and President and General Manager of the Rental and Fishing Tool
Division, became Senior Vice President of the Company and President of the
Services Division effective March 1, 1994. From June 1992 until March 1993,
Mr. Eagles served as Senior Vice President of McDermott, Inc., a marine
engineering construction company, and President of McDermott Energy Services,
Inc.; and from November 1990 until June 1992, he served as Vice President of
Marketing of McDermott, Inc. Prior thereto, Mr. Eagles was
9
employed by Cameron Iron Works, Inc. for over 30 years and served as Vice
President of Sales and Marketing from October 1981 until November 1990.
Mr. Nolen joined the Company on April 29, 1991 as Senior Vice President,
Chief Financial Officer and Treasurer. From March 1990 to April 1991, he was
Vice President and Chief Financial Officer of Petro/Source Corporation, an oil
gathering and marketing company. From October 1980 to February 1990, he was
Corporate Treasurer of Cameron Iron Works, Inc.
Ms. Thomas, who joined the Company in January 1982 as Counsel, was
elected Secretary in March 1986, Vice President and General Counsel in July
1987 and Senior Vice President in December 1989. Ms. Thomas was responsible
for Human Resources from January 1992 until October 1995. Prior to joining the
Company, Ms. Thomas was an attorney with the law firm of Baker & Botts from
September 1978 to December 1981.
Mr. Grant joined the Company on October 5, 1995 as Vice
President -- Corporate Development and Investor Relations. Prior to joining
the Company, Mr. Grant was Enterra's Senior Vice President -- Corporate
Development since March 1991 and prior to that, since January 1988, was
Enterra's Senior Vice President -- Finance and Chief Financial Officer.
Mr. Nicholson, who joined the Company as Director of Human Resources in
February 1993, was elected Vice President-Human Resources effective October 5,
1995. From March 1992 until January 1993, he was a human resources consultant.
From July 1990 until March 1992, Mr. Nicholson served as President of Atlas
Bradford Corporation, an oilfield services company, and from December 1988
until June 1990, he served as Vice President of Human Resources of Baroid
Corporation, an oil services company.
ITEM 2. PROPERTIES.
The Company has numerous manufacturing facilities located in the United
States and various other countries used for the manufacture of energy products
and equipment, pipeline equipment and gas compressors, the principal of which
are:
<TABLE>
<CAPTION>
OWNED (O)
APPROXIMATE OR LEASED (L) -
LOCATION MANUFACTURED PRODUCTS SQUARE FEET EXPIRATION DATE
- ------------------------------------------------------------------------- ------------ ----------------
<S> <C> <C> <C>
Houston, Texas...................... Cranes, power tongs, power units and 157,169 O
accessories
Pearland, Texas..................... Fishing tools, milling tools, 149,706 O
cutters, overshots, wireline
equipment, whipstocks, heavy wall
drill pipe and coring equipment
Tulsa, Oklahoma..................... Pipeline equipment 145,000 O
Corpus Christi, Texas............... Gas compressors 90,000 O
Huntsville, Texas................... Production and service packers and 71,270 O
related equipment
Houma, Louisiana.................... Mechanical cementing products, float 109,761 O
equipment, stage tools, rubber
products and industrial valves
Hannover, Germany................... Mechanical cementing products, power 65,950 L-9/99
tongs, power units and accessories
and specialized bucking machines
</TABLE>
10
The Company believes that its manufacturing facilities will be suitable
and adequate to meet production demands anticipated during the next several
years. The Company's manufacturing facilities operated below capacity
throughout 1995.
In addition to its manufacturing plants, the Company leases its corporate
headquarters office and various administrative offices in Houston, Texas and
leases or owns numerous sales offices, warehouses, service centers, pipe yards
and stocking locations for its operations in the United States and
internationally. During the year ended December 31, 1995, the Company paid
real estate rentals in the aggregate amount of approximately $10,967,000.
The Company's operations generally do not require highly specialized
facilities, and suitable facilities generally are readily available on a lease
or purchase basis, as required.
ITEM 3. LEGAL PROCEEDINGS AND REGULATORY MATTERS.
The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings, other than ordinary routine litigation
incidental to its business and which is believed to be either covered by
insurance or not material in amount.
Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the public health and the environment, affect the Company's
operations, expenses and costs. The clear trend in environmental regulation is
to place more restrictions and limitations on activities that may impact the
environment, such as emissions of pollutants, generation and disposal of
wastes, and use and handling of chemical substances. Increasingly strict
environmental restrictions and limitations have resulted in increased
operating costs for the Company and other similar businesses throughout the
United States, and it is possible that the costs of compliance with
environmental laws and regulations will continue to increase, both for the
Company and its customers. In this regard, the Resource Conservation and
Recovery Act ("RCRA"), the principal federal statute governing the disposal of
solid and hazardous wastes, includes a statutory exemption that allows oil and
gas exploration and production wastes to be classified as non-hazardous waste.
A similar exemption is contained in many of the state counterparts to RCRA. If
oil and gas exploration and production wastes were required to be managed and
disposed of as hazardous waste, either as a result of changes in RCRA or the
imposition of more stringent state regulations, domestic oil and gas
producers, including many of the Company's customers, could be required to
incur substantial obligations with respect to such wastes. Because of the
potential impact on the Company's customers, any regulatory changes that
impose additional restrictions or requirements on the disposal of oil and gas
wastes could adversely affect demand for the Company's services and products.
In addition, the Company is subject to laws and regulations concerning
occupational health and safety. The Company believes that it is in substantial
compliance with the requirements of environmental and occupational health and
safety laws and regulations, but inasmuch as such laws and regulations are
frequently changed, the Company is unable to predict the ultimate impact of
such laws and regulations on the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 5, 1995, a special meeting was held at which the stockholders
of Weatherford were asked to vote on the Enterra Merger, the one-for-two
reverse stock split of Weatherford's Common Stock (the "Split") and the name
change to "Weatherford Enterra, Inc.", the amendment of the 1991 Stock Option
Plan (the "1991 Plan") to increase the number of shares authorized for
issuance thereunder and the amendment of the Restricted Stock Incentive Plan
(the "Restricted Plan") to increase the number of shares authorized for
issuance thereunder. The Weatherford stockholders approved all the proposals.
Of the shares of Weatherford Common Stock entitled to vote and present at the
meeting, (1) 43,333,279 shares were voted in favor of the Enterra Merger,
136,503 shares against and 159,683 shares abstained; (2) 47,110,740 shares
were voted in favor of the Split and the name change, 271,543 shares against
and 187,764 shares abstained; (3) 41,577,950 shares were voted in favor of the
amendment of the 1991 Plan, 1,098,493 shares against and 886,356 shares
abstained; and (4) 40,627,455 shares were voted in favor of the amendment of
the Restricted Plan, 1,949,341 shares against and 985,813 shares abstained.
11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock, $0.10 par value (the "Common Stock"), is
traded on the New York Stock Exchange under the symbol "WII". It previously
traded, until October 1994, on the American Stock Exchange. The following
table sets forth, on a per share basis for the periods indicated, the high and
low sale prices for the Common Stock as reported by the New York Stock
Exchange (and prior to October 19, 1994, by the American Stock Exchange). The
sale prices set forth below have been adjusted to reflect the Split effected
on October 5, 1995. (See Note 6 of the Notes to Consolidated Financial
Statements.)
HIGH LOW
--------- ---------
1994
First Quarter................... $ 22.25 $ 16.25
Second Quarter.................. 29.50 16.00
Third Quarter................... 28.00 23.25
Fourth Quarter.................. 25.50 16.50
1995
First Quarter................... 21.25 16.50
Second Quarter.................. 25.75 19.75
Third Quarter................... 30.00 23.50
Fourth Quarter.................. 29.50 21.25
1996
First Quarter (through March 19,
1996)......................... 35.88 26.00
On March 19, 1996, the closing sale price for the Common Stock as
reported by the New York Stock Exchange was $35.00. As of March 19, 1996,
there were approximately 4,217 record holders of Common Stock.
The Company has not declared or paid dividends on the Common Stock since
December 1982 and management does not anticipate paying dividends on the
Common Stock at any time in the foreseeable future.
12
ITEM 6. SELECTED FINANCIAL DATA.
The Selected Financial Data should be read in conjunction with the
Company's Consolidated Financial Statements and the notes thereto, included
elsewhere herein. The Company's Consolidated Financial Statements and the
financial information presented below have been restated for all periods
presented to include the accounts and results of operations of Enterra with
those of the Company. All per share amounts and numbers of shares of Common
Stock have been restated to reflect a contemporaneous one-for-two reverse
stock split. See Notes 2 and 6 of Notes to Consolidated Financial Statements
contained elsewhere herein for additional information.
<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995(1) 1994(2) 1993(3) 1992 1991(4)
------------- ------------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................. $ 858,907 $ 676,749 $ 500,491 $ 374,203 $ 397,480
Acquisition-related costs and other
unusual charges.................... 88,182 2,500 4,000 -- 20,044
Operating income..................... 182 65,704 49,671 35,579 31,044
Depreciation and amortization........ 95,957 71,037 50,449 35,738 35,720
Net income (loss).................... (10,558) 41,977 35,175 26,760 14,234
Net income (loss) per share.......... $ (0.21) $ 0.94 $ 0.88 $ 0.73 $ 0.37
PERCENTAGE OF REVENUES:
Selling, general and administrative
expenses........................... 16.1% 17.1% 18.3% 22.6% 22.5%
Gross profit......................... 27.2% 27.9% 29.5% 33.2% 35.6%
Operating income..................... 0.0% 9.7% 9.9% 9.5% 7.8%
Net income (loss).................... (1.2)% 6.2% 7.0% 7.2% 3.6%
BALANCE SHEET DATA:
Working capital...................... $ 267,380 $ 251,778 $ 211,834 $ 197,526 $ 197,879
Total assets......................... 1,258,860 1,153,970 635,602 474,490 470,702
Total debt........................... 329,266 196,672 21,253 28,685 31,572
Stockholders' equity................. 730,843 734,634 474,472 349,458 334,002
Total debt-to-total capitalization... 31% 21% 4% 8% 9%
OTHER DATA:
Capital expenditures, excluding
acquisitions....................... $ 110,625 $ 114,018 $ 63,757 $ 38,259 $ 50,636
Weighted average shares
outstanding........................ 50,989 44,845 38,607 34,786 34,394
</TABLE>
- ------------
(1) Includes acquisition-related costs and other unusual charges of
$88,182,000, or $1.17 per common share.
(2) Includes acquisition-related costs of $2,500,000, or $0.06 per common
share.
(3) Includes acquisition-related costs of $4,000,000, or $0.10 per common
share.
(4) Includes acquisition-related costs and other unusual charges of
$20,044,000, or $0.58 per common share.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should assist in an understanding of the
Company's financial position and results of operations for each of the three
years in the period ended December 31, 1995. The Consolidated Financial
Statements and notes thereto included elsewhere herein contain detailed
information that should be referred to in conjunction with this discussion.
BUSINESS REVIEW
Weatherford Enterra is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company's principal business segments are oilfield services, energy
products and services, gas compression and pipeline services. Weatherford
Enterra operates in virtually every oil and gas exploration and production
region in the world, with more than 330 locations in 47 countries.
In 1991, the Company's management implemented a business strategy focused
on offering a broader mix of services and products in domestic and
international markets, becoming a leading participant in each of its core
businesses and pursuing cost efficiencies in its existing operations and its
newly-acquired businesses. Management has pursued this strategy through a
series of acquisitions, having acquired 23 businesses since November 1991. As
a result of these acquisitions, management believes it has positioned the
Company as a market leader in its oilfield services, gas compression and
pipeline services segments and in certain businesses included in its energy
products and services segment. The acquisitions have allowed the Company to
expand its product and service lines, improve its worldwide market position
and realize significant consolidation cost savings.
On October 5, 1995, the Company completed the Enterra Merger, which
represents the Company's most significant business combination to date.
Management believes that the Enterra Merger strengthens the Company's position
as the worldwide leader in the rental and fishing tool services business. In
addition, the Enterra Merger adds gas compression, pipeline services and
several additional energy product and service businesses to the Company. In
connection with the Enterra Merger, the Company effected a one-for-two reverse
stock split and changed its name to "Weatherford Enterra, Inc." In this
report, all per share amounts and numbers of shares of Common Stock have been
restated to reflect the reverse stock split. Weatherford issued approximately
23,668,000 shares of Common Stock in exchange for all the outstanding shares
of Enterra common stock based on an exchange ratio of 0.845 of a share of
Weatherford Common Stock for each share of Enterra common stock outstanding.
The Enterra Merger was accounted for as a pooling of interests. Accordingly,
the consolidated financial statements have been restated for all periods
presented to include the accounts and results of operations of Enterra with
those of Weatherford, as if the two companies had been combined since
inception.
On December 15, 1995, the Company acquired substantially all of the
assets of Energy Industries, a natural gas compression business complementary
to the Company's gas compression business, for approximately $130,000,000 in
cash, subject to adjustment, and the assumption of certain liabilities
totaling approximately $12,485,000. The results of the Energy Industries
operations are included in the accompanying financial statements since the
date of acquisition.
Management believes that the Company will achieve operating efficiencies
and annualized consolidation cost savings in excess of $55,000,000 after
combining the operations of Weatherford, Enterra and Energy Industries, and
that most of the cost saving measures will be in place by the summer of 1996.
On August 12, 1994, Enterra entered the gas compression business and
several energy products businesses through its acquisition of the outstanding
common stock of Total Energy Services Company ("Total Energy") in exchange for
shares of Enterra common stock valued, in the aggregate, at
14
$213,570,000. Enterra also acquired the minority interests in two Total Energy
subsidiaries for $23,000,000 in cash, paid transaction costs and
employment-related obligations totaling approximately $15,000,000 and assumed
Total Energy's long-term debt of $75,000,000. Other significant acquisitions
within the past three years, all made by Weatherford, include the September
1994 merger with H & H Oil Tool Co., Inc. ("H & H") which was accounted for as
a pooling of interests, the April 1994 acquisition of the Rental Division of
Odfjell Drilling and Consulting Company ("Odfjell Rental") for $56,200,000 and
the assumption of certain contractual rights and obligations and the April
1993 acquisition of substantially all of the assets of Homco International,
Inc. and its subsidiaries (collectively, "Homco") for $97,500,000 in cash and
the assumption of certain liabilities totaling approximately $39,200,000. The
results of the Odfjell Rental and Homco operations are included in the
accompanying financial statements since the date of their respective
acquisition.
RESULTS OF OPERATIONS
A summary of operating results by business segment is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Oilfield services:
Rental and fishing/downhole services................................. $ 328,343 $ 300,214 $ 244,697
Tubular running services............................................. 130,387 109,503 105,715
Other oilfield services.............................................. 11,818 13,664 7,636
---------- ---------- ----------
Total oilfield services......................................... 470,548 423,381 358,048
---------- ---------- ----------
Energy products and services:
Cementation products................................................. 47,237 43,201 41,734
Other oilfield products.............................................. 118,394 66,283 30,653
Other products and services.......................................... 59,791 34,273 19,777
---------- ---------- ----------
Total energy products and services.............................. 225,422 143,757 92,164
---------- ---------- ----------
Gas compression:
Manufacturing, packaging, parts and services......................... 57,565 32,790 --
Rental............................................................... 36,821 13,355 --
---------- ---------- ----------
Total gas compression........................................... 94,386 46,145 --
---------- ---------- ----------
Pipeline services:
Rentals and services................................................. 46,227 32,240 30,825
Sales................................................................ 22,324 31,226 19,454
---------- ---------- ----------
Total pipeline services......................................... 68,551 63,466 50,279
---------- ---------- ----------
$ 858,907 $ 676,749 $ 500,491
========== ========== ==========
ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES:
Oilfield services.................................................... $ 31,715 $ 2,500 $ 4,000
Energy products and services......................................... 22,694 -- --
Gas compression -- -- --
Pipeline services.................................................... 4,762 -- --
Corporate............................................................ 29,011 -- --
---------- ---------- ----------
$ 88,182 $ 2,500 $ 4,000
========== ========== ==========
OPERATING INCOME (LOSS):
Oilfield services.................................................... $ 41,214 $ 52,665 $ 44,743
Energy products and services......................................... (14,210) 16,668 10,726
Gas compression...................................................... 7,788 4,047 --
Pipeline services.................................................... 3,602 (2,237) 2,019
Corporate............................................................ (38,212) (5,439) (7,817)
---------- ---------- ----------
$ 182 $ 65,704 $ 49,671
========== ========== ==========
</TABLE>
15
OILFIELD SERVICES. Revenues increased 11% in 1995 to $470,548,000
compared to $423,381,000 in 1994. International revenues increased 23% to
$245,698,000, primarily as a result of increased activity in certain markets,
including Latin America, Africa, the North Sea and Canada. During 1995, the
average international drilling rig count (excluding Canada) was 3% higher than
in 1994. United States revenues increased 1% to $224,850,000, despite a 7%
decline in the average U.S. drilling rig count. Operating income for the
oilfield services segment decreased in 1995 compared to 1994 as a result of
the acquisition-related costs and other unusual charges in 1995 discussed
below. Excluding such charges, operating income would have improved 32% to
$72,929,000, primarily as a result of the increased international activity and
cost savings achieved in consolidating the operations of H & H and Enterra
into the Company.
Oilfield services revenues increased 18% in 1994 to $423,381,000 compared
to $358,048,000 in 1993. International revenues increased 23% in 1994 to
$200,169,000, primarily as a result of expansion into Latin America, increased
drilling activity in Canada and the addition of the Odfjell Rental operations
acquired in April 1994. During 1994, the average international drilling rig
count (excluding Canada) was 5% lower in 1994 than in 1993. United States
revenues increased 14% in 1994 to $223,212,000 compared to 1993, reflecting
the addition of the Homco operations in April 1993 and several smaller
acquisitions. Operating income increased 18% in 1994 to $52,665,000, primarily
as a result of the increased activity in Canada, expansion into Latin America
and cost savings achieved in consolidating the operations of Homco.
ENERGY PRODUCTS AND SERVICES. Revenues increased 57% in 1995 to
$225,422,000 compared to $143,757,000 in 1994, primarily as a result of the
addition of the Total Energy businesses acquired in August 1994. Operating
income, excluding the acquisition-related costs and other unusual charges
discussed below, decreased 49% to $8,484,000, primarily as a result of
operating losses incurred in 1995 by the Arrow packer business acquired from
Total Energy.
Energy products and services revenues increased 56% in 1994 to
$143,757,000 compared to $92,164,000 in 1993, primarily as a result of the
addition of the Total Energy businesses in August 1994. Operating income
improved 55% to $16,668,000 due to the addition of the Total Energy businesses
and improved operating results from the cementation products business.
GAS COMPRESSION. The gas compression segment was acquired as part of the
Total Energy acquisition which was accounted for as a purchase, in August
1994. Consequently, comparisons of the operating results for the periods
presented are not meaningful. Compression rental revenues have remained fairly
stable since the business was acquired. Sales of packaged compression units,
particularly in Canada, declined significantly during the second half of 1995,
as many customers deferred the acquisition of units due to the relatively low
demand for natural gas. Canadian operations accounted for 45% of gas
compression revenues in 1995 compared to 55% for the period from August 12,
1994 through December 31, 1994. Market conditions for compressor sales are
expected to improve during 1996.
PIPELINE SERVICES. Revenues increased 8% in 1995 to $68,551,000 compared
to $63,466,000 in 1994. Rental and service revenues of $46,227,000 increased
43% compared to 1994 as a result of increased coating service revenues from a
large international pipeline construction project and increased automatic
welding unit rental and service revenue in Canada, Malaysia and North Africa.
Equipment sales revenue decreased $8,902,000, or 29%, primarily due to an
unusually large contract in 1994 to design and construct specialized equipment
to be installed on a large offshore pipe laying vessel (the "Contract"), which
yielded revenues of $10,000,000 but an operating loss of $4,200,000 in 1994.
Exclusive of the acquisition-related costs and other unusual charges discussed
below, operating income improved to $8,364,000 in 1995 compared to an
operating loss of $2,237,000 in 1994, primarily as a result of the higher
rental and service activity in 1995 and the $4,200,000 loss on the Contract in
1994.
16
Revenues for the pipeline services segment in 1994 increased 26% to
$63,466,000 compared to 1993, primarily as a result of revenues from the
Contract. Operating income decreased $4,256,000 to a loss of $2,237,000 in
1994, primarily due to losses incurred on the Contract.
GROSS PROFIT. The consolidated gross profit percentage was 27.2% in 1995
compared to 27.9% in 1994 and 29.5% in 1993. The decline is primarily
attributable to weakness in the gas compression segment and several businesses
in the energy products and services segment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of revenues decreased to 16.1% in 1995
from 17.1% in 1994 and 8.3% in 1993, primarily as a result of cost
efficiencies achieved in consolidating the operations of acquired businesses
into the Company. Management expects the selling, general and administrative
expense percentage to decrease further in 1996, as the operations of Enterra
and Energy Industries are fully consolidated into the Company.
RESEARCH AND DEVELOPMENT. Research and development costs of $4,954,000
in 1995 increased 5% compared to 1994. Research and development costs in 1994
of $4,735,000 increased 30% compared to 1993. The increases primarily
reflected the expansion of the Company's operations and development activities
to support all four of its principal business segments.
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES. The Company owns an
interest of 50% or less in several joint ventures, primarily in the oilfield
services segment. The Company's equity in the earnings of these affiliates was
$1,477,000 in 1995 compared to $1,169,000 in 1994 and $2,716,000 in 1993. The
increase of 26% in 1995 compared to 1994 was primarily attributable to
improved drilling activity in Saudi Arabia, and the decrease of 57% in 1994
compared to 1993 was primarily the result of increased competition and reduced
drilling activity in Saudi Arabia. The Company received cash dividends from
its 50% or less-owned affiliates totaling $1,666,000, $2,203,000 and
$3,622,000 in 1995, 1994 and 1993, respectively.
FOREIGN CURRENCY (GAIN) LOSS, NET. 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 foreign currency gains of $74,000 in 1995
compared to a net gain of $2,205,000 in 1994 and a net loss of $713,000 in
1993. A substantial portion of the gain in 1994 represented an unrealized
currency gain related to certain intercompany loans.
OTHER EXPENSE, NET. Other expense, net, increased to $3,835,000 in 1995
compared to $3,073,000 in 1994 and $906,000 in 1993. The increase in 1995 and
1994 was primarily attributable to the amortization of goodwill related to the
1994 acquisitions of Total Energy and Odfjell Rental, partially offset in 1995
by increased gains on sales of property, plant and equipment.
ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES. During the second
quarter of 1995, Enterra recorded unusual charges totaling $28,282,000
($26,000,000 of which was non-cash), representing writedowns to fair value of
certain businesses to be disposed of, asset writedowns related to certain
excess facilities, equipment and inventories, and estimated costs in
connection with the closure of certain pipeline businesses and the
consolidation of certain oilfield service administrative and operating
facilities. During the fourth quarter of 1995, the Company recorded expenses
of $59,900,000 ($40,196,000 of which was non-cash in 1995) related to the
Enterra Merger and the financial impact of management decisions related to the
future operations of the combined companies. These acquisition-related costs
primarily consisted of transaction costs, severance and termination agreements
with former officers and employees, facility closure costs primarily to
consolidate the oilfield services operations and administrative functions of
Enterra and Weatherford, and the reduction in recorded value of certain assets
that had diminished future value in the operations of the combined Company.
Weatherford recorded acquisition-related costs of $2,500,000 in the third
quarter of 1994 related to the H & H merger and $4,000,000 in the second
quarter of 1993 in connection with the Homco acquisition. The 1994 and 1993
acquisition-related costs primarily represented transaction costs of the
17
H & H merger and employee termination and facility closure costs to
consolidate the operations of H & H and Homco into Weatherford.
OPERATING INCOME. Operating income decreased substantially in 1995 to
$182,000 compared to $65,704,000 in 1994 and $49,671,000 in 1993, primarily as
a result of the acquisition-related costs and other unusual charges. Excluding
such charges, operating income would have been $88,364,000 in 1995 compared to
$68,204,000 in 1994 and $53,671,000 in 1993, reflecting the impact of the
Company's acquisitions and related cost savings.
INTEREST. Net interest expense increased to $15,136,000 in 1995 compared
to $6,888,000 in 1994 and $784,000 in 1993, primarily as a result of higher
average debt balances outstanding. The increased indebtedness primarily
related to the acquisitions of Energy Industries in December 1995, Total
Energy in August 1994, Odfjell Rental in April 1994 and Homco in April 1993.
INCOME TAXES. The income tax provision (benefit) consists of taxes on
foreign earnings, foreign taxes withheld on certain remittances from
international subsidiaries, U.S. alternative minimum and state taxes and the
recognition of deferred tax credits relating to financial statement losses
that are not currently deductible for tax purposes. The income tax provision
does not include U.S. regular federal income tax due to the availability of
U.S. net operating loss carryforwards. Income tax provision (benefit) as a
percentage of income (loss) before income taxes and minority interests was
31%, 29% and 28% for 1995, 1994 and 1993, respectively. The increase in the
effective tax rates was primarily a result of differences in the components
and tax rates applicable to foreign taxable income, and a result of
nondeductible goodwill amortization related to the Total Energy acquisition.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had cash and cash equivalents of
$32,800,000. The Company's operations provided cash of $78,873,000 during 1995
compared to $67,569,000 during 1994 and $44,649,000 in 1993. Operating cash
flow before changes in working capital accounts increased 16% to $118,720,000
in 1995 over 1994 and 31% to $102,010,000 in 1994 compared to 1993, reflecting
the impact of the acquisitions and growth in the Company's operations. Changes
in working capital and other operating accounts used cash of $39,847,000
during 1995 compared to $34,441,000 in 1994 and $33,291,000 in 1993. Working
capital of $267,380,000 at December 31, 1995 increased $15,602,000 from
December 31, 1994, primarily due to the Energy Industries acquisition, and
December 31, 1994 working capital of $251,778,000 increased $39,944,000 from
December 31, 1993 as a result of the acquisition of Total Energy.
Capital expenditures, excluding business acquisitions, decreased 3% to
$110,625,000 in 1995 compared to $114,018,000 in 1994, reflecting lower
capital spending in the oilfield services segment due to the consolidation of
the Weatherford and Enterra rental and service equipment inventories which was
partially offset by the capital requirements of the Total Energy operations
acquired in August 1994. Capital expenditures, excluding business
acquisitions, increased 79% in 1994 to $114,018,000, primarily to support the
growth of the Company's operations resulting from the acquisitions of Total
Energy, Odfjell Rental, H & H, Homco and other businesses. Management
anticipates that the Company's capital spending levels will continue to be
primarily influenced by market opportunities and growth in the Company's
operations.
In addition to the Enterra and H & H mergers and the acquisitions of
Energy Industries, Total Energy, Odfjell Rental and Homco, the Company has
made several other acquisitions, principally in its oilfield services and
energy products and services segments. The total cash consideration paid in
connection with these acquisitions, net of cash acquired and notes issued, was
$9,135,000, $12,046,000 and $21,964,000 in 1995, 1994 and 1993, respectively.
The Company's consolidated indebtedness increased to $329,266,000 at
December 31, 1995 from $196,672,000 at December 31, 1994, primarily as a
result of debt incurred in connection with the
18
acquisition of Energy Industries. The Company's total debt-to-total
capitalization ratio was 31% at December 31, 1995 compared to 21% at December
31, 1994.
In connection with the Enterra Merger, the Company entered into new bank
credit facilities (the "Facilities") consisting of a $200,000,000 term loan
(the "Term Loan") and a $200,000,000 revolving credit facility (the "Revolving
Credit Facility"). The Facilities replaced the previous primary bank credit
facilities of Weatherford and Enterra. The Term Loan is payable in 23 equal
quarterly installments commencing March 31, 1996. The Revolving Credit
Facility matures on September 30, 2000. Amounts outstanding under the
Facilities accrue interest at a variable rate ranging from 0.375% to 0.625%
above a specified Eurodollar rate, depending on the Company's total debt-to-
total capitalization ratio. The applicable interest rate on amounts
outstanding at December 31, 1995 was 6.4%. A commitment fee ranging from 0.15%
to 0.225% per annum, depending on the Company's total debt-to-total
capitalization ratio, is payable quarterly on the unused portion of the
Revolving Credit Facility. The Facilities agreement requires that the Company
maintain certain financial ratios and limits the Company's ability to incur
indebtedness, make investments and dispose of assets. At December 31, 1995,
the balances outstanding under the Term Loan and the Revolving Credit Facility
were $200,000,000 and $120,000,000, respectively, and the Company had
$80,000,000 available to borrow under the Revolving Credit Facility.
Subsequent to December 31, 1995, the Company has repaid $16,000,000 of the
balance outstanding under the Revolving Credit Facility. In addition, at
December 31, 1995, the Company had $11,822,000 available for borrowing under
working capital facilities of certain of its international subsidiaries. The
Company also has various credit facilities available only for stand-by letters
of credit and bid and performance bonds, pursuant to which funds are available
to the Company to secure performance obligations and certain retrospective
premium adjustments under insurance policies. The Company had a total of
$18,857,000 of letters of credit and bid and performance bonds outstanding at
December 31, 1995.
The Company conducts a portion of its business in currencies other than
the U.S. dollar, including the Canadian dollar, the German mark, the U.K.
pound sterling, the Norwegian krone, certain Latin American currencies and the
Italian lira. Although most of the revenues of the Company's foreign
operations are denominated in the local currency, the effects of foreign
currency fluctuations are largely mitigated because local expenses of such
foreign operations also generally are denominated in the same currency. 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 1995 and 1994 compared to 1993,
thereby increasing the amount of U.S. dollars reflected on the Company's 1995
and 1994 consolidated statements of income. Had the average exchange rates in
1995 and 1994 been the same as in 1993, revenues for 1995 would have been
approximately $9,000,000 lower and revenues for 1994 would have been virtually
unchanged. The impact on net income would not have been material.
The Company occasionally enters into forward exchange contracts only as a
hedge against certain existing economic exposures, and not for speculative or
trading purposes. These contracts reduce exposure to currency movements
affecting existing assets and liabilities denominated in foreign currencies,
such exposure resulting primarily from trade receivables and payables and
intercompany loans. The future value of these contracts and the related
currency positions are subject to offsetting market risk resulting from
foreign currency exchange rate volatility. Settlement of forward exchange
contracts resulted in net cash outflows totaling $2,719,000 and $1,036,000
during 1995 and 1994, respectively. The Company entered into no forward
exchange contracts during 1993.
The Company has entered into a letter of understanding with and currently
is engaged in negotiations relating to the possible acquisition of the assets
and business of Nodeco AS, a Norwegian company engaged in the energy products
business. The Company would fund any cash portion of such acquisition with
borrowings under the Revolving Credit Facility. There can be no assurance that
such acquisition will be consummated or, if consummated, that the terms
thereof will not change.
19
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 potential
acquisition mentioned above, the Company is currently considering several
other 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 other 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.
The Company intends to file in the first or second quarter of 1996 a
shelf registration statement with the Securities and Exchange Commission with
regard to the possible issuance of public indebtedness. Net proceeds from the
sale of any such public indebtedness would be used primarily to repay all or a
portion of the amounts then outstanding under the Facilities. The Company will
determine whether to issue any such public indebtedness based upon existing
market conditions; however, there can be no assurance that the Company will
issue any such public indebtedness.
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 that 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 Algeria, Nigeria, Angola and parts of the Middle
East, 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, management believes that 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.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Weatherford Enterra, Inc.:
We have audited the accompanying consolidated balance sheets of
Weatherford Enterra, Inc. (a Delaware corporation) and subsidiaries (the
"Company") as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Weatherford Enterra, Inc. and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 29, 1996
21
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
1995 1994
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....... $ 32,800 $ 36,106
Receivables, net of allowance of
$15,942 and $11,240............ 231,125 232,882
Inventories, net................ 165,383 153,191
Deferred tax assets............. 10,995 10,349
Prepayments and other........... 23,059 17,458
------------ ------------
Total current assets....... 463,362 449,986
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at
cost:
Land............................ 22,381 17,017
Buildings and improvements...... 85,229 81,203
Rental and service equipment.... 965,603 859,209
Machinery and other equipment... 108,357 132,811
------------ ------------
1,181,570 1,090,240
Less -- Accumulated
depreciation................... 667,025 627,941
------------ ------------
514,545 462,299
------------ ------------
GOODWILL, net........................ 259,450 221,397
------------ ------------
OTHER ASSETS......................... 21,503 20,288
------------ ------------
$ 1,258,860 $ 1,153,970
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt................. $ 306 $ 113
Current portion of long-term
debt........................... 36,670 17,813
Accounts payable................ 52,157 64,250
Accrued compensation and
employee benefits.............. 31,353 30,922
Accrued income taxes............ 4,650 8,104
Customer advances............... 6,272 17,994
Accrued insurance............... 9,435 11,850
Other accrued liabilities....... 55,139 47,162
------------ ------------
Total current
liabilities.................. 195,982 198,208
------------ ------------
LONG-TERM DEBT....................... 292,290 178,746
------------ ------------
DEFERRED TAX LIABILITIES............. 5,243 25,966
------------ ------------
OTHER LONG-TERM LIABILITIES.......... 33,348 14,371
------------ ------------
MINORITY INTERESTS................... 1,154 2,045
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par; shares
authorized 1,000,000, none
issued......................... -- --
Common stock, $.10 par; shares
authorized 80,000,000; issued
50,988,741 and 50,575,768..... 5,099 5,058
Paid-in capital................. 602,231 593,744
Retained earnings............... 130,243 140,801
Cumulative translation
adjustment..................... (5,869) (4,168)
Treasury stock, 41,260 and
51,202 common shares, at
cost........................... (861) (801)
------------ ------------
Total stockholders'
equity................... 730,843 734,634
------------ ------------
$ 1,258,860 $ 1,153,970
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
22
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995 1994 1993
----------- ----------- -----------
REVENUES............................. $ 858,907 $ 676,749 $ 500,491
COSTS AND EXPENSES:
Cost of sales and services......... 625,346 488,133 352,677
Selling, general and administrative
expenses........................ 137,959 115,978 91,591
Research and development........... 4,954 4,735 3,649
Equity in earnings of
unconsolidated affiliates....... (1,477) (1,169) (2,716)
Foreign currency (gain) loss,
net............................. (74) (2,205) 713
Other expense, net................. 3,835 3,073 906
Acquisition-related costs and other
unusual charges................. 88,182 2,500 4,000
----------- ----------- -----------
Total operating costs and
expenses..................... 858,725 611,045 450,820
----------- ----------- -----------
OPERATING INCOME..................... 182 65,704 49,671
Interest expense..................... 17,217 8,847 4,027
Interest income...................... (2,081) (1,959) (3,243)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS................. (14,954) 58,816 48,887
Income tax provision (benefit)....... (4,616) 16,958 13,635
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTERESTS.......................... (10,338) 41,858 35,252
Minority interests................... 220 (119) 77
----------- ----------- -----------
NET INCOME (LOSS).................... $ (10,558) $ 41,977 $ 35,175
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding...... 50,989 44,845 38,607
=========== =========== ===========
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE................... $ (0.21) $ 0.94 $ 0.88
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
23
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE TREASURY STOCK
PREFERRED ---------------- PAID-IN RETAINED TRANSLATION ---------------
STOCK SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT
--------- ------- ------ --------- -------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 as
previously reported................ $ 586 21,270 $2,127 $ 181,688 $(45,699) $ 1,195 24 $(272)
Adjustment for pooling of
interests.......................... -- 13,628 1,363 95,166 116,651 (3,347) -- --
--------- ------- ------ --------- -------- ----------- ------ ------
BALANCE, December 31, 1992........... 586 34,898 3,490 276,854 70,952 (2,152) 24 (272)
Shares issued under employee benefit
plans.............................. -- 46 4 982 -- -- -- --
Stock grants and options exercised... -- 410 41 6,729 -- -- 8 (170)
Issuance of Common Stock............. -- 4,675 468 92,028 -- -- -- --
Issuance of Common Stock in
acquisition........................ -- 80 8 2,075 -- -- -- --
Settlement of a note receivable from
a former officer................... -- -- -- 224 -- -- -- --
Conversion of Preferred Stock........ (572) 778 78 494 -- -- -- --
Redemption of Preferred Stock........ (14) -- -- (340) -- -- -- --
Currency translation adjustment...... -- -- -- -- -- (4,892) -- --
Net income........................... -- -- -- -- 35,175 -- -- --
Dividends on Preferred Stock
($12.47 per share)................. -- -- -- -- (7,303 ) -- -- --
--------- ------- ------ --------- -------- ----------- ------ ------
BALANCE, December 31, 1993........... -- 40,887 4,089 379,046 98,824 (7,044) 32 (442)
Shares issued under employee benefit
plans.............................. -- 9 1 178 -- -- -- --
Stock grants and options exercised... -- 131 13 1,905 -- -- 19 (359)
Issuance of Common Stock in
acquisition........................ -- 9,549 955 212,615 -- -- -- --
Currency translation adjustment...... -- -- -- -- -- 2,876 -- --
Net income........................... -- -- -- -- 41,977 -- -- --
--------- ------- ------ --------- -------- ----------- ------ ------
BALANCE, December 31, 1994........... -- 50,576 5,058 593,744 140,801 (4,168) 51 (801)
Shares issued under employee benefit
plans.............................. -- 8 1 187 -- -- -- --
Stock grants and options exercised... -- 405 40 8,300 -- -- (10) (60)
Currency translation adjustment...... -- -- -- -- -- (1,701) -- --
Net loss............................. -- -- -- -- (10,558 ) -- -- --
--------- ------- ------ --------- -------- ----------- ------ ------
BALANCE, December 31, 1995........... $ -- 50,989 $5,099 $ 602,231 $130,243 $(5,869) 41 $(861)
========= ======= ====== ========= ======== =========== ====== ======
</TABLE>
TOTAL
---------
BALANCE, December 31, 1992 as
previously reported................ $ 139,625
Adjustment for pooling of
interests.......................... 209,833
---------
BALANCE, December 31, 1992........... 349,458
Shares issued under employee benefit
plans.............................. 986
Stock grants and options exercised... 6,600
Issuance of Common Stock............. 92,496
Issuance of Common Stock in
acquisition........................ 2,083
Settlement of a note receivable from
a former officer................... 224
Conversion of Preferred Stock........ --
Redemption of Preferred Stock........ (354)
Currency translation adjustment...... (4,892)
Net income........................... 35,175
Dividends on Preferred Stock
($12.47 per share)................. (7,303)
---------
BALANCE, December 31, 1993........... 474,473
Shares issued under employee benefit
plans.............................. 179
Stock grants and options exercised... 1,559
Issuance of Common Stock in
acquisition........................ 213,570
Currency translation adjustment...... 2,876
Net income........................... 41,977
---------
BALANCE, December 31, 1994........... 734,634
Shares issued under employee benefit
plans.............................. 188
Stock grants and options exercised... 8,280
Currency translation adjustment...... (1,701)
Net loss............................. (10,558)
---------
BALANCE, December 31, 1995........... $ 730,843
=========
The accompanying notes are an integral part of these consolidated financial
statements.
24
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
1995 1994 1993
----------- ----------- -----------
NET INCOME (LOSS).................... $ (10,558) $ 41,977 $ 35,175
Income items not requiring
(providing) cash:
Depreciation and amortization... 95,957 71,037 50,449
Non-cash portion of
acquisition-related costs and
other
unusual charges............... 66,196 -- --
Deferred income tax provision
(benefit)..................... (20,781) 649 (214)
Gain on sales of assets, net.... (12,503) (9,559) (8,452)
Unrealized foreign currency
gain.......................... -- (2,843) --
Undistributed earnings of
affiliates.................... 189 868 905
Minority interests.............. 220 (119) 77
Increase (decrease) in operating
cash flow resulting from:
Receivables, net.............. 16,277 (32,345) (26,330)
Inventories, net.............. (12,603) (14,619) (2,921)
Payment of deferred loan
costs...................... (892) (818) (6,424)
Prepayments and other......... (5,799) (477) 1,194
Accounts payable and accrued
liabilities................ (46,307) 15,798 (961)
Other long-term liabilities... 9,477 (1,980) 2,151
----------- ----------- -----------
CASH PROVIDED BY OPERATING
ACTIVITIES......................... 78,873 67,569 44,649
----------- ----------- -----------
Purchases of property, plant and
equipment.......................... (110,625) (114,018) (63,757)
Acquisitions, net of notes issued and
cash acquired...................... (139,226) (105,850) (117,835)
Proceeds from sales of property,
plant and equipment................ 40,630 19,810 31,072
Other net cash flows from investing
activities......................... (9,245) (1,502) (2,052)
----------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES.... (218,466) (201,560) (152,572)
----------- ----------- -----------
Borrowings under credit facilities... 411,737 144,539 102,500
Repayment of borrowings.............. (283,346) (45,299) (110,462)
Proceeds from Common Stock issuance,
net of costs....................... -- -- 92,496
Net cash flows from currency hedging
transactions....................... (2,719) (1,036) --
Proceeds from stock option exercises,
sales of stock to employee
benefit plans and other............ 6,268 1,693 6,878
Preferred Stock dividends paid....... -- -- (7,303)
----------- ----------- -----------
CASH PROVIDED BY FINANCING
ACTIVITIES......................... 131,940 99,897 84,109
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH............................... 4,347 66 (1,076)
----------- ----------- -----------
DECREASE IN CASH AND CASH
EQUIVALENTS........................ (3,306) (34,028) (24,890)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 36,106 70,134 95,024
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 32,800 $ 36,106 $ 70,134
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest........................ $ 14,396 $ 6,380 $ 2,773
Income taxes.................... 17,741 14,236 12,136
Purchases of equipment financed by
debt............................... -- 3,213 625
The accompanying notes are an integral part of these consolidated financial
statements.
25
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
BASIS OF PRESENTATION. On October 5, 1995, Weatherford International
Incorporated ("Weatherford") completed a merger with Enterra Corporation
("Enterra") and changed its name to "Weatherford Enterra, Inc." (see Note 2).
The merger was accounted for as a pooling of interests; accordingly, the
accompanying consolidated financial statements have been restated to include
the results of Enterra for all periods presented. Contemporaneously with the
Enterra merger, Weatherford effected a one-for-two reverse stock split of its
Common Stock (see Note 6). In this report, all per common share amounts and
numbers of common shares have been restated to reflect the reverse stock
split.
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of Weatherford Enterra, Inc. and subsidiaries
(the "Company" or "Weatherford Enterra") after elimination of all significant
intercompany accounts and transactions. The Company accounts for its 50% or
less-owned affiliates using the equity method.
ACCOUNTING ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the
balance sheet date and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from such estimates.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. The reported value of all financial instruments approximates
market value. Prepayments and other current assets at December 31, 1995 and
1994 included cash of approximately $2,367,000 and $2,117,000, respectively,
which was restricted as a result of exchange controls in certain foreign
countries or cash collateral requirements for performance bonds, letters of
credit and customs bonds.
INVENTORIES. Inventories, net of allowances, are valued at the lower of
cost (first-in, first-out or average) or market and are summarized as follows
(in thousands):
1995 1994
----------- -----------
Spare parts and components........... $ 34,911 $ 45,894
Raw materials........................ 44,494 37,944
Work in process...................... 27,287 19,605
Finished goods....................... 58,691 49,748
----------- -----------
$ 165,383 $ 153,191
=========== ===========
Work in process and finished goods inventories include the costs of
materials, labor and plant overhead.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is
depreciated on a straight-line basis over the estimated useful lives of the
assets. Estimated useful lives of assets are as follows:
Buildings and improvements 5 - 45 years
Rental and service equipment 3 - 15 years
Machinery and other equipment 3 - 15 years
Expenditures for major additions and improvements are capitalized while minor
replacements, maintenance and repairs are charged to expense as incurred. When
property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the related accounts, and any resulting gain or
loss is included in the consolidated statements of income.
26
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL. Goodwill represents the excess of the aggregate price paid by
the Company in acquisitions accounted for as purchases over the fair market
value of the net assets acquired. Goodwill is amortized on a straight-line
basis generally over a period of 40 years. Management continually evaluates
whether events or circumstances have occurred that indicate the remaining
estimated useful life of goodwill may warrant revision or that the remaining
balance of goodwill may not be recoverable. Goodwill amortization expense
totaled $5,852,000, $2,970,000 and $191,000 during 1995, 1994 and 1993,
respectively. Accumulated amortization at December 31, 1995 and 1994 was
$9,808,000 and $3,956,000, respectively.
INCOME TAXES. The Company applies the liability method of accounting for
income taxes. Accordingly, deferred tax assets and liabilities are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities given the provisions of
enacted tax laws.
The Company does not provide federal income taxes on the undistributed
earnings of certain of its foreign subsidiaries because it believes these
amounts are permanently invested outside the United States. The cumulative
amount of such undistributed earnings on which federal taxes have not been
provided was $107,255,000 at December 31, 1995. If these foreign earnings were
to be ultimately remitted, certain foreign withholding taxes would be payable,
and U.S. federal income taxes payable at that time would be reduced by foreign
tax credits generated by the repatriation, net of operating loss carryforwards
and tax credit carryforwards.
ENVIRONMENTAL EXPENDITURES. Environmental expenditures that relate to
ongoing business activities are expensed or capitalized, in accordance with
the Company's capitalization policy. Expenditures that relate to the
remediation of an existing condition caused by past operations, and which do
not contribute to current or future revenues, are expensed. Liabilities for
these expenditures are recorded when it is probable that obligations have been
incurred and the costs can be reasonably estimated. Estimates are based on
currently available facts and technology, presently enacted laws and
regulations and the Company's prior experience in remediation of contaminated
sites. Liabilities included $17,743,000 and $9,371,000 of accrued
environmental expenditures at December 31, 1995 and 1994, respectively.
FOREIGN CURRENCY TRANSLATION. The functional currency for most of the
Company's international operations is the applicable local currency. The
translation of the foreign currencies into U.S. dollars is performed for
balance sheet accounts using exchange rates in effect at the balance sheet
date and for income statement accounts using a weighted average exchange rate
for the period. The gains or losses resulting from such translation are
included as a separate component of stockholders' equity. Gains or losses
resulting from foreign currency transactions are included in the consolidated
statements of income.
FOREIGN EXCHANGE CONTRACTS. The Company occasionally enters into foreign
exchange contracts only as a hedge against certain existing economic
exposures, and not for speculative or trading purposes. These contracts reduce
exposure to currency movements affecting existing assets and liabilities
denominated in foreign currencies, such exposure resulting primarily from
trade receivables and payables and intercompany loans. The future value of
these contracts and the related currency positions are subject to offsetting
market risk resulting from foreign currency exchange rate volatility. The
counterparties to the Company's foreign exchange contracts are creditworthy
multinational commercial banks. Management believes that the risk of
counterparty nonperformance is immaterial. At December 31, 1995 and 1994, the
Company had contracts maturing the following January to sell $56,594,000 and
$55,880,000, respectively, in Norwegian kroner, U.K. pounds sterling and Dutch
27
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
guilders. Had such respective contracts matured on December 31, 1995 and 1994,
the Company's required cash outlay would have been $38,000 and $461,000,
respectively.
REVENUE RECOGNITION. Revenues are recognized when services and rentals
are provided and when products and equipment are shipped. Proceeds from
customers for the cost of oilfield rental equipment that is involuntarily
damaged or lost downhole are reflected as revenues.
INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE. Income (loss) 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 periods. For purposes of this calculation,
dividends on the Company's $2.625 Convertible Exchangeable Cumulative
Preferred Stock (the "Preferred Stock") of $1,153,000 were deducted from net
income during 1993. Preferred Stock dividends in arrears paid in 1993 totaling
$6,150,000 had been deducted from net income for purposes of calculating
income per common and common equivalent share during the years in which the
arrearages accumulated. Fully diluted income per share is equal to primary
income per share in all periods presented.
CONCENTRATION OF CREDIT RISK. The Company grants credit to its
customers, which are primarily in the oil and gas industry. Credit risk with
respect to trade accounts receivable is generally diversified due to the large
number of entities comprising the Company's customer base and their dispersion
across many different countries. The Company performs periodic credit
evaluations of its customers and generally does not require collateral. The
Company monitors its exposure for credit losses and maintains an allowance for
anticipated losses (see Note 12).
RECLASSIFICATIONS. Certain reclassifications were made to previously
reported amounts in the consolidated financial statements and notes to make
them consistent with the current presentation format.
(2) ACQUISITIONS AND MERGERS --
Results of operations for business combinations accounted for as
purchases are included in the accompanying consolidated financial statements
since the date of acquisition. With respect to business combinations accounted
for as poolings of interests, the consolidated financial statements have been
restated for all periods presented as if the companies had been combined since
inception.
ENTERRA. On October 5, 1995, Weatherford completed a merger with
Enterra, a worldwide provider of specialized services and products to the oil
and gas industry through its oilfield, pipeline and gas compression services
businesses. After giving effect to a contemporaneous one-for-two reverse stock
split (see Note 6), Weatherford issued approximately 23,668,000 shares of
Common Stock in exchange for all the outstanding shares of Enterra common
stock based on an exchange ratio of 0.845 of a share of Weatherford Common
Stock for each share of Enterra common stock outstanding. The merger was
accounted for as a pooling of interests.
28
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of revenues and net income (loss) of the combined
entities as restated follows (in thousands):
JANUARY 1, 1995 YEAR ENDED DECEMBER 31,
THROUGH ------------------------
OCTOBER 5, 1995 1994 1993
---------------- ----------- -----------
Revenues:
Weatherford................. $312,466 $ 374,506 $ 335,434
Enterra..................... 348,573 302,243 165,057
---------------- ----------- -----------
Combined.................... $661,039 $ 676,749 $ 500,491
================ =========== ===========
Net Income (Loss):
Weatherford................. $ 28,621 $ 29,460 $ 21,990
Enterra..................... (3,609) 12,517 13,185
---------------- ----------- -----------
Combined.................... $ 25,012 $ 41,977 $ 35,175
================ =========== ===========
ENERGY INDUSTRIES. On December 15, 1995, the Company acquired
substantially all of the assets of the natural gas compression business of
Energy Industries, Inc. and Zapata Energy Industries, L.P. (collectively,
"Energy Industries") in a transaction accounted for as a purchase. Energy
Industries was engaged in the business of fabricating, selling, installing,
renting and servicing natural gas compressor units used in the oil and gas
industry. The Company paid approximately $130,000,000 in cash, subject to
adjustment, and assumed certain liabilities totaling approximately
$12,485,000.
H & H. On September 1, 1994, Weatherford completed a merger with H & H
Oil Tool Co., Inc. ("H & H"), a rental and fishing tool company operating in
California and the Rocky Mountain Region. The Company issued approximately
1,323,000 shares of Common Stock in exchange for all the outstanding shares of
H & H common stock based on an exchange ratio of 0.3945 of a share of Company
Common Stock for each share of H & H common stock outstanding. The merger was
accounted for as a pooling of interests. In connection with the H & H merger,
Weatherford repaid indebtedness of H & H totaling $1,595,000, which included a
$1,370,000 note payable to a shareholder of H & H. In addition, Weatherford
recorded acquisition-related costs totaling $2,500,000, primarily representing
transaction fees and employee termination and facility closure costs to
consolidate the H & H operations into Weatherford.
TOTAL ENERGY. On August 12, 1994, Enterra acquired all of the
outstanding common stock of Total Energy Services Company ("Total Energy") in
exchange for shares of Enterra common stock valued, in the aggregate, at
$213,570,000 in a transaction accounted for as a purchase. Total Energy was
primarily engaged in the businesses of designing, fabricating, selling,
installing and renting gas compressor units and of manufacturing and servicing
specialized oilfield equipment for use in the oil and gas industry. Enterra
also acquired the minority interests in two Total Energy subsidiaries for
$23,000,000 in cash, paid transaction costs and employment-related obligations
totaling approximately $15,000,000 and assumed Total Energy's long-term debt
of $75,000,000.
ODFJELL RENTAL. On April 15, 1994, Weatherford acquired the rental
assets and business of various companies comprising the Rental Division of
Odfjell Drilling and Consulting Company (collectively, "Odfjell Rental") in a
transaction accounted for as a purchase. Odfjell Rental was engaged in the
rental of oilfield tools to the oil and gas industry in Norway, the United
Kingdom, the Netherlands and Southeast Asia. Weatherford paid $56,200,000 in
cash and assumed certain contractual rights and obligations.
29
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma summary results of operations assume
that the acquisitions of Energy Industries, Total Energy and Odfjell Rental
occurred on January 1, 1994 (in thousands except per share amounts):
1995(1) 1994
----------- -----------
Revenues............................. $ 920,456 $ 903,060
Net income........................... $ 71,727 $ 85,887
Income per common and common
equivalent share................... $ 1.41 $ 1.69
- ------------
(1) Includes unusual charges of $28,282,000, or $0.24 per common share. See
Note 3.
The unaudited pro forma summary results of operations are not necessarily
indicative of results of operations that would have occurred had the
transactions taken place on January 1, 1994 or of future results of operations
of the combined businesses.
HOMCO. On April 1, 1993, Weatherford acquired substantially all of the
assets of Homco International, Inc. and its subsidiaries (collectively,
"Homco") in a transaction accounted for as a purchase. Homco's primary
businesses included rental tools and fishing tool services and manufactured
products. Weatherford paid Homco $97,500,000 in cash and assumed certain
liabilities totaling approximately $39,200,000. In connection with the Homco
acquisition, Weatherford recorded acquisition-related costs totaling
$4,000,000, primarily representing employee termination and facility closure
costs to consolidate the Homco operations into Weatherford. Between April 1,
1993 and December 31, 1993, the Company sold five Homco business lines for
total consideration of $25,853,000, consisting of cash of $17,353,000 and
notes receivable and marketable securities valued at approximately $8,500,000.
No gains or losses were recognized in connection with these sales.
OTHER ACQUISITIONS. During 1995, 1994 and 1993, the Company acquired
several businesses in addition to those mentioned above in transactions
accounted for as purchases. The impact of these acquisitions on reported
results of operations, on a pro forma basis, was not material to the Company's
consolidated results of operations.
(3) ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES --
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS No. 121 requires that long-lived assets and intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and that long-lived assets and intangibles to be disposed of be
reported at the lower of carrying amount or fair value net of selling costs.
SFAS No. 121 also establishes the procedures for review of recoverability, and
measurement of impairment if necessary, of long-lived assets and intangibles
to be held and used by an entity.
During the second quarter of 1995, the Company adopted SFAS No. 121 and
management of Enterra made certain strategic decisions which resulted in
$28,282,000 of unusual charges. Such charges included a $10,041,000 writedown
to fair value, based on management's estimation of net sales price, related to
three energy products and services businesses to be sold. Revenues and
operating income related to such businesses were $46,747,000 and $3,080,000 in
1995, $27,940,000 and $2,490,000 in 1994 and $1,024,000 and $231,000 in 1993,
respectively. On September 25, 1995, Enterra sold substantially all of the
fixed assets and inventory of one such business for cash of $9,494,000. At
December 31, 1995, the carrying value of the remaining businesses to be sold
was
30
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $18,500,000. One of these businesses was sold on January 31,
1996 for cash of $9,754,000, subject to adjustment.
The remaining second quarter unusual charges of $18,241,000 consisted
primarily of asset writedowns related to certain excess facilities, equipment
and inventories, and estimated costs in connection with the closure of certain
pipeline businesses and the consolidation of certain oilfield service
administrative and operating facilities. This restructuring resulted in
reductions of approximately 40 and 80 personnel in the pipeline and oilfield
services segment, respectively.
During the fourth quarter of 1995, the Company recorded expenses of
$59,900,000 related to the merger with Enterra and the financial impact of
management decisions related to the future operations of the combined
companies. The acquisition-related costs primarily consisted of transaction
costs, severance and termination agreements with former officers and
employees, facility closure costs primarily to consolidate the oilfield
service operations and administrative functions of Enterra and Weatherford
(reducing approximately 600 personnel), and the reduction in recorded value of
certain assets that had diminished future value in the operations of the
combined Company.
A summary of the 1995 acquisition-related costs and other unusual charges
follows (in thousands):
SECOND FOURTH
QUARTER QUARTER YEAR
------- ------- -------
Enterra merger transaction-related
costs.............................. $ -- $18,800 $18,800
Severance and termination costs...... 1,588 10,900 12,488
Facility closure and consolidation
costs.............................. 1,893 19,050 20,943
Writedowns of assets to be sold...... 10,041 2,240 12,281
Other asset writedowns............... 13,762 8,210 21,972
Other................................ 998 700 1,698
------- ------- -------
$28,282 $59,900 $88,182
======= ======= =======
Weatherford recorded acquisition-related costs of $2,500,000 in the third
quarter of 1994 related to the H & H merger and $4,000,000 in the second
quarter of 1993 in connection with the Homco acquisition (See Note 2). The
1994 and 1993 acquisition-related costs primarily represented transaction
costs of the H & H merger and employee termination and facility closure costs
to consolidate the operations of H & H and Homco into Weatherford.
(4) LONG-TERM DEBT --
Long-term debt consisted of the following (in thousands):
1995 1994
----------- -----------
Bank term loan....................... $ 200,000 $ 67,105
Bank revolving credit facility....... 120,000 122,500
Foreign bank debt, denominated in
foreign currencies................. 2,071 129
Industrial Revenue Bonds............. 3,085 3,310
Other indebtedness................... 3,804 3,515
----------- -----------
328,960 196,559
Less -- Amounts due within one
year............................... 36,670 17,813
----------- -----------
$ 292,290 $ 178,746
=========== ===========
31
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Enterra merger, the Company entered into new bank
credit facilities (the "Facilities") consisting of a $200,000,000 term loan
(the "Term Loan") and a $200,000,000 revolving credit facility (the "Revolving
Credit Facility"). The Facilities replaced the previous primary bank credit
facilities of Weatherford and Enterra. The Term Loan is payable in 23 equal
quarterly installments commencing March 31, 1996. The Revolving Credit
Facility matures on September 30, 2000. Amounts outstanding under the
Facilities accrue interest at a variable rate ranging from 0.375% to 0.625%
above a specified Eurodollar rate, depending on the Company's total debt-to-
total capitalization ratio. The applicable interest rate on amounts
outstanding at December 31, 1995 was 6.4%. A commitment fee ranging from 0.15%
to 0.225% per annum, depending on the Company's total debt-to-total
capitalization ratio, is payable quarterly on the unused portion of the
Revolving Credit Facility. The Facilities agreement requires that the Company
maintain certain financial ratios and limits the Company's ability to incur
indebtedness, make investments and dispose of assets.
The Industrial Revenue Bonds are payable in annual installments ranging
from $275,000 to $610,000, plus interest, through July 2002. The applicable
rate of interest on amounts outstanding at December 31, 1995 was 5.2%. The
Industrial Revenue Bonds are collateralized by a $3,142,000 irrevocable letter
of credit.
Maturities of the Company's long-term debt at December 31, 1995 were as
follows (in thousands):
1996................................. $ 36,670
1997................................. 38,022
1998................................. 36,001
1999................................. 35,605
2000................................. 155,392
Thereafter........................... 27,270
-----------
$ 328,960
===========
At December 31, 1995, the Company had $80,000,000 available to borrow
under the Revolving Credit Facility and $11,822,000 available for borrowing
under working capital facilities of certain of the Company's international
subsidiaries. In addition, the Company has various credit facilities available
only for stand-by letters of credit and bid and performance bonds, pursuant to
which funds are available to the Company to secure performance obligations and
certain retrospective premium adjustments under insurance policies. The
Company had a total of $18,857,000 of letters of credit and bid and
performance bonds outstanding at December 31, 1995.
(5) INCOME TAXES --
The components of income (loss) before income taxes and minority
interests were as follows (in thousands):
1995 1994 1993
----------- --------- ---------
Foreign.............................. $ 23,853 $ 35,233 $ 37,064
United States........................ (38,807) 23,583 11,823
----------- --------- ---------
$ (14,954) $ 58,816 $ 48,887
=========== ========= =========
32
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax provision (benefit) was comprised of the following (in
thousands):
1995 1994 1993
----------- --------- ---------
Current:
Foreign......................... $ 15,219 $ 13,790 $ 12,655
U.S. alternative minimum taxes
and
state income taxes........... 946 2,519 1,194
----------- --------- ---------
Total current............. 16,165 16,309 13,849
----------- --------- ---------
Deferred:
Foreign......................... 3,038 847 (769)
U.S. Federal.................... (23,819) (198) 555
----------- --------- ---------
Total deferred............ (20,781) 649 (214)
----------- --------- ---------
$ (4,616) $ 16,958 $ 13,635
=========== ========= =========
The consolidated provision for income taxes differs from the provision
computed at the statutory U.S. federal income tax rate of 35% for the
following reasons (in thousands):
1995 1994 1993
----------- --------- ---------
Tax provision at U.S. statutory
rate............................... $ (5,234) $ 20,399 $ 16,930
Foreign income, taxed at more (less)
than U.S.
statutory rate..................... 7,687 2,448 (938)
Intercompany dividends............... 557 1,479 665
Benefit of U.S. NOL carryforwards.... (15,299) (8,869) (3,667)
Nondeductible goodwill............... 1,601 692 45
Nondeductible expenses related to
acquisitions....................... 3,307 -- --
Other nondeductible expenses......... 1,819 394 236
Tax-exempt interest income........... -- (102) (449)
U.S. alternative minimum taxes and
state income taxes................. 946 517 813
----------- --------- ---------
$ (4,616) $ 16,958 $ 13,635
=========== ========= =========
On the accompanying consolidated balance sheets, current deferred tax
assets and liabilities are netted within each tax jurisdiction. The components
of the net deferred tax assets (liabilities) shown on the consolidated balance
sheets are as follows (in thousands):
1995 1994
--------- -----------
Current deferred tax assets.......... $ 20,850 $ 16,192
Valuation allowance, current......... (9,855) (4,358)
Non-current deferred tax assets...... 11,299 48,780
Valuation allowance, non-current..... (6,644) (26,625)
--------- -----------
Total deferred tax assets....... 15,650 33,989
--------- -----------
Current deferred tax liabilities..... (117) (1,486)
Non-current deferred tax
liabilities........................ (5,627) (48,120)
--------- -----------
Total deferred tax
liabilities........................ (5,744) (49,606)
--------- -----------
Net deferred tax assets
(liabilities)...................... $ 9,906 $ (15,617)
========= ===========
33
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The change in the valuation allowance in 1995 primarily relates to
current year utilization of U.S. net operating loss ("NOL") carryforwards and
management's assessment that future taxable income will be sufficient to
enable the Company to utilize remaining NOL carryforwards. The tax effects of
significant temporary differences giving rise to deferred tax assets
(liabilities) are as follows (in thousands):
1995 1994
----------- -----------
Net operating loss and tax credit
carryforwards...................... $ 40,056 $ 30,458
Depreciation and amortization........ (39,378) (37,332)
Financial reserves and accruals not
yet deductible..................... 16,804 16,770
Other differences between financial
and tax bases
of assets and liabilities.......... 8,923 5,470
Valuation allowances................. (16,499) (30,983)
----------- -----------
$ 9,906 $ (15,617)
=========== ===========
The Company has U.S. alternative minimum tax credit carryforwards of
approximately $3,674,000 which do not expire and can be used to reduce regular
tax to the extent it exceeds alternative minimum tax liability in future
years. The Company also has U.S. NOL carryforwards available to reduce future
U.S. taxable income of $47,780,000 expiring between 1999 and 2009 and general
business credit carryforwards available to reduce future U.S. federal income
taxes payable of $9,677,000 expiring between 1996 and 2000.
(6) CAPITAL STOCK --
COMMON STOCK. On October 5, 1995, contemporaneously with the Enterra
merger (see Note 2), the Company effected a one-for-two reverse stock split of
Company Common Stock. In this report, all per common share amounts and numbers
of common shares have been restated to reflect the reverse stock split. 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. On April 27, 1993, the Company completed the sale,
pursuant to a public offering, of 4,675,000 shares of Common Stock at a price
of $21.00 per share. The proceeds to the Company of $92,496,000, net of
underwriters' discount and expenses of $536,000, were substantially used to
repay indebtedness incurred in connection with the acquisition of Homco (See
Note 2).
PREFERRED STOCK. In the fourth quarter of 1993, the Company paid cash
dividends in arrears totaling $6,150,000, or $10.50 per preferred share, on
its Preferred Stock. These dividend arrearages accumulated during a 16-quarter
period from 1986 through 1989. On October 27, 1993, the Company announced that
it would redeem all shares of Preferred Stock outstanding on November 30, 1993
(the "Redemption Date") at a redemption price of $25.263 per preferred share.
Prior to the Redemption Date, holders of 571,693 shares of Preferred Stock
elected to convert such shares into 777,498 shares of Common Stock. The
remaining 14,012 shares of Preferred Stock were redeemed for an aggregate
redemption price of $354,000.
EMPLOYEE STOCK PLANS. The Company has a number of stock option plans
pursuant to which officers and other key employees may be granted options to
purchase shares of Common Stock. At December 31, 1995, there were 2,324,217
shares available for issuance under the plans, at fair market value. Options
generally become exercisable in three annual installments, beginning one year
after the date of grant. Unexercised options expire five or ten years after
the date of grant. Pursuant to the Enterra merger, the Company replaced all
options outstanding under Enterra's option plan with options to purchase an
equivalent number of shares of Company Common Stock. The Company has a Non-
34
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Director Stock Option Plan (the "Director Option Plan") pursuant to
which each non-employee director receives upon election as a director an
initial option to purchase 2,500 shares and, at each annual meeting
thereafter, an additional option to purchase 500 shares of Common Stock, in
each case at fair market value. At December 31, 1995, there were 60,000 shares
available for issuance under the Director Option Plan. Options become
exercisable six months after the date of grant, and unexercised options expire
ten years after the date of grant. Enterra had a similar plan, pursuant to
which directors of Enterra received immediately exercisable options to
purchase shares of Enterra common stock, at fair market value. All outstanding
options under the Enterra director plan were exercised prior to the Enterra
merger.
The following table summarizes activity related to stock option plans of
the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------------
NON-EMPLOYEE OPTION PRICE
EMPLOYEES DIRECTORS PER SHARE
--------- ------------ -------------------------
<S> <C> <C> <C>
Outstanding, December 31, 1992....... 1,176,929 35,913 $ 4.50 - $ 23.95
Granted......................... 187,125 10,562 10.14 - 24.71
Exercised....................... (363,341) (8,450) 4.50 - 23.95
Terminated...................... (33,770) -- 8.75 - 20.27
--------- ------------
Outstanding, December 31, 1993....... 966,943 38,025 5.63 - 24.71
Granted......................... 156,201 29,575 12.04 - 23.95
Exercised....................... (84,188) (8,450) 5.63 - 19.09
Terminated...................... (60,021) -- 6.75 - 19.75
--------- ------------
Outstanding, December 31, 1994....... 978,935 59,150 6.75 - 24.71
Granted......................... 953,985 57,575 18.50 - 26.00
Exercised....................... (220,284) (88,725) 8.75 - 23.08
Terminated...................... (424,404) -- 11.75 - 21.30
--------- ------------
Outstanding, December 31, 1995....... 1,288,232 28,000 6.75 - 26.00
========= ============
Exercisable, December 31, 1995....... 432,494 20,500 6.75 - 24.71
========= ============
</TABLE>
In addition to the options in the above table, the Company granted
options to purchase 34,200, 45,337 and 84,500 shares of Common Stock in 1991,
1994 and 1995, respectively, to former directors and former employees of
acquired companies and to a former officer of the Company. These options were
granted pursuant to separate agreements and are not covered by an option plan.
Exercises of such options totaled 4,400, 5,600 and 40,334 shares in 1993, 1994
and 1995, respectively, and 113,703 of such options were outstanding and
exercisable at December 31, 1995 at prices ranging from $10.14 to $25.75 per
share.
The Company has a Stock Appreciation Rights Plan (the "SAR Plan")
pursuant to which certain officers and other key employees were granted stock
appreciation units ("SAR's"). The SAR Plan was amended in 1992 to provide that
no additional grants would be made. SAR's were awarded in connection with
stock options granted under one of the Company's stock option plans and can be
exercised only if the related stock option is exercised. Compensation expense
is recorded based on the increase in the market price of the Company's Common
Stock since the date of grant. At December 31, 1995, there were 54,166 SAR's
outstanding, all of which were vested, at an average price of $10.46 per SAR.
During 1995, 1994 and 1993, the Company recognized compensation expense of
$121,000, $350,000 and $801,000, respectively, in connection with SAR's.
35
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a stock bonus plan (the "Bonus Plan") pursuant to which
officers and certain other key employees of the Company may be granted shares
of Common Stock. The market value of shares granted under the Bonus Plan is
recorded to compensation expense on the date of grant. With respect to the
Bonus Plan, the Company granted 9,875 shares and recognized compensation
expense of $195,000 during 1994. The Company granted no shares under the Bonus
Plan in 1995 and 1993. There were 25,179 shares available for future grants
under the Bonus Plan at December 31, 1995.
The Company has a restricted stock plan for certain officers of the
Company and previously had a restricted stock plan for non-employee directors
of the Company (collectively, the "Restricted Plans"), pursuant to which
shares of common stock may be granted. Shares granted under the Restricted
Plans are subject to certain restrictions on ownership and transferability
when granted. With respect to grants made to officers prior to 1993, such
restrictions generally lapse in four equal annual installments based on
continued employment. Beginning in 1993, restrictions on grants made to
officers lapse in part based on continued employment and in part based on
Company performance. With respect to grants made to non-employee directors,
such restrictions lapsed in three equal annual installments based on continued
service. The director Restricted Plan has expired by its terms. The
compensation related to the restricted stock grants is deferred and amortized
to expense on a straight-line basis over the period of time the restrictions
are in place, and the unamortized portion is classified as a reduction of
paid-in capital in the accompanying consolidated balance sheets. The following
table provides a summary of activity related to the Restricted Plans:
RESTRICTED PLAN
RESTRICTED PLAN FOR NON-EMPLOYEE
FOR OFFICERS DIRECTORS
---------------- -----------------
Outstanding, December 31, 1992....... 71,038 39,545
Granted (market price: $15.75
per share)................... 41,250 --
Forfeited....................... (5,000) (3,330)
Restrictions terminated......... (24,150) (21,924)
---------------- -----------------
Outstanding, December 31, 1993....... 83,138 14,291
Granted (market price: $19.75
per share)................... 25,450 --
Forfeited....................... (2,438) --
Restrictions terminated......... (52,318) (14,291)
---------------- -----------------
Outstanding, December 31,
1994......................... 53,832 --
Granted (market price: $18.50
per share)................... 29,500 --
Restrictions terminated......... (47,193) --
---------------- -----------------
Outstanding, December 31, 1995....... 36,139 --
================ =================
Shares available for future grants at
December 31, 1995.................. 160,437 --
================ =================
Compensation expense:
1995............................ $392,000 $ --
1994............................ 512,000 84,000
1993............................ 876,000 187,000
Deferred compensation at December 31:
1995............................ $884,000 $ --
1994............................ 730,000 --
The Company has an Employee Stock Purchase Plan (the "ESPP"), pursuant to
which eligible employees can purchase shares of Common Stock through payroll
deductions. The Company matches
36
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a specified percentage of the employee contributions made to the ESPP. Company
matching contributions to the ESPP totaled $48,000, $45,000 and $46,000 during
1995, 1994 and 1993, respectively. There were 72,377 shares available for
future purchases under the ESPP at December 31, 1995.
(7) RETIREMENT AND EMPLOYEE BENEFIT PLANS --
The Company has defined benefit and defined contribution pension plans
covering substantially all U.S. employees and certain international employees.
Plan benefits are generally based on years of service and average compensation
levels. The Company's funding policy is to contribute, at a minimum, the
annual amount required under applicable governmental regulations. With respect
to certain international plans, the Company has purchased irrevocable annuity
contracts to settle certain benefit obligations. Plan assets are invested
primarily in equity and fixed income mutual funds.
Pension expense related to the Company's defined contribution pension
plans totaled $4,489,000, $3,691,000 and $2,962,000 in 1995, 1994 and 1993,
respectively. Pension expense related to the Company's defined benefit pension
plans included the following components (in thousands):
1995 1994 1993
--------- --------- ---------
Service cost -- benefits earned
during the period.................. $ 692 $ 1,071 $ 650
Interest cost on projected benefit
obligation......................... 365 310 237
Actual return on plan assets......... (354) (47) (227)
Net amortization and deferral........ 115 (121) 107
--------- --------- ---------
$ 818 $ 1,213 $ 767
========= ========= =========
The following table sets forth the funded status of the Company's defined
benefit pension plans and the assumptions used in computing such information
(in thousands, except percentages):
U.S. PLANS NON-U.S. PLANS
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Actuarial present value of benefit
obligations:
Vested benefit obligation.......... $ 941 $ 426 $ 2,591 $ 2,170
========= ========= ========= =========
Accumulated benefit obligation..... $ 1,441 $ 689 $ 2,939 $ 2,402
========= ========= ========= =========
Projected benefit obligation....... $ 2,042 $ 1,075 $ 3,735 $ 2,992
Plan assets at fair value.......... 1,130 958 1,729 1,422
--------- --------- --------- ---------
Projected benefit obligation in
excess of plan assets............ (912) (117) (2,006) (1,570)
Unrecognized prior service cost.... 10 -- 183 183
Unrecognized net (gain) loss....... 481 (57) (732) (879)
Unrecognized transition obligation. -- -- 160 157
--------- --------- --------- ---------
Unfunded accrued pension cost...... (421) (174) (2,395) (2,109)
Adjustment for minimum liability... (21) -- -- --
--------- --------- --------- ---------
Pension liability.................. $ (442) $ (174) $ (2,395) $ (2,109)
========= ========= ========= =========
Assumed discount rates............. 7.25% 8.5% 6.8-8.0% 7.5-8.0%
Assumed rates of increase in
compensation levels.............. 4.0% 5.25% 4.0-5.0% 4.0-5.0%
Assumed expected long-term rate of
return on plan assets............ 8.0% 8.0% 8.0% 8.0%
37
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) COMMITMENTS AND CONTINGENCIES --
Aggregate minimum rental commitments under noncancelable operating leases
with lease terms in excess of one year as of December 31, 1995 were as follows
(in thousands):
1996................................. $ 11,570
1997................................. 7,363
1998................................. 6,255
1999................................. 5,490
2000................................. 4,345
Thereafter........................... 27,467
---------
$ 62,490
=========
The Company incurred total rental expense under operating leases of
$14,069,000, $15,329,000 and $13,689,000 in 1995, 1994 and 1993, respectively.
The Company is involved in certain claims and lawsuits arising in the
normal course of business. In the opinion of management, the likelihood that
uninsured losses, if any, resulting from the ultimate resolution of these
matters will have a material adverse effect on the financial position, results
of operations or liquidity of the Company is remote.
(9) SEGMENT INFORMATION --
The Company is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company operates in four industry segments -- oilfield services, energy
products and services, gas compression and pipeline services. Revenues by
industry segment and geographic area include both revenues from unaffiliated
customers and intersegment revenues from related companies. The price at which
intercompany sales are made is generally based on the selling price to
unaffiliated customers less a discount or the direct product cost plus a
mark-up. Indirect expenses have been allocated to industry segments in
proportion to outside revenues.
Export sales from the United States to unaffiliated customers in other
geographic areas were as follows (in thousands):
1995 1994 1993
--------- --------- ---------
Europe/Commonwealth of Independent
States............................. $ 10,904 $ 16,443 $ 8,014
Canada............................... 14,729 10,557 12,396
Africa............................... 17,792 9,605 820
Middle East.......................... 3,843 4,209 7,215
Asia-Pacific......................... 11,242 17,047 10,943
Latin America........................ 5,552 4,969 6,422
Other................................ 1,403 381 3,578
--------- --------- ---------
$ 65,465 $ 63,211 $ 49,388
========= ========= =========
38
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information with respect to industry and geographic segments follows (in
thousands):
<TABLE>
<CAPTION>
CORPORATE
OILFIELD ENERGY PRODUCTS GAS PIPELINE AND
SERVICES AND SERVICES COMPRESSION SERVICES ELIMINATIONS CONSOLIDATED
-------- --------------- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Outside revenues..................... $470,548 $ 225,422 $ 94,386 $68,551 $ -- $ 858,907
Intersegment revenues................ -- 20,586 -- -- (20,586) --
Acquisition-related costs and other
unusual charges.................... 31,715 22,694 -- 4,762 29,011 88,182
Operating income (loss).............. 41,214 (14,210) 7,788 3,602 (38,212) 182
Identifiable assets.................. 545,688 172,770 434,146 41,940 64,316 1,258,860
Depreciation and amortization........ 65,560 8,636 14,421 5,610 1,730 95,957
Capital expenditures................. 84,968 6,171 16,246 3,098 142 110,625
1994:
Outside revenues..................... $423,381 $ 143,757 $ 46,145 $63,466 $ -- $ 676,749
Intersegment revenues................ -- 11,748 -- -- (11,748) --
Acquisition-related costs............ 2,500 -- -- -- -- 2,500
Operating income (loss).............. 52,665 16,668 4,047 (2,237 ) (5,439) 65,704
Identifiable assets.................. 587,454 193,055 267,988 60,890 44,583 1,153,970
Depreciation and amortization........ 54,605 4,532 4,969 5,088 1,843 71,037
Capital expenditures................. 94,722 5,011 10,857 3,266 162 114,018
1993:
Outside revenues..................... $358,048 $ 92,164 $ -- $50,279 $ -- $ 500,491
Intersegment revenues................ -- 10,779 -- -- (10,779) --
Acquisition-related costs............ 4,000 -- -- -- -- 4,000
Operating income (loss).............. 44,743 10,726 -- 2,019 (7,817) 49,671
Identifiable assets.................. 429,105 80,972 -- 57,376 68,149 635,602
Depreciation and amortization........ 41,266 2,872 -- 4,920 1,391 50,449
Capital expenditures................. 56,988 3,681 -- 3,004 84 63,757
</TABLE>
<TABLE>
<CAPTION>
CORPORATE
UNITED OTHER AND
STATES CANADA EUROPE AFRICA INTERNATIONAL ELIMINATIONS
-------- -------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Outside revenues..................... $471,672 $106,491 $110,065 $57,450 $ 113,229 $ --
Intersegment revenues................ 10,091 167 6,049 -- 1,638 (17,945)
Acquisition-related costs and other
unusual charges.................... 43,276 2,850 4,302 624 8,119 29,011
Operating income (loss).............. 5,745 11,382 3,088 13,912 4,267 (38,212)
Identifiable assets.................. 790,625 73,368 141,673 40,299 148,579 64,316
Capital expenditures................. 59,474 9,953 9,605 5,655 25,796 142
1994:
Outside revenues..................... $383,076 $ 75,809 $ 84,830 $41,574 $ 91,460 $ --
Intersegment revenues................ 17,499 287 5,104 -- 1,372 (24,262)
Acquisition-related costs............ 2,500 -- -- -- -- --
Operating income (loss).............. 28,924 15,502 3,023 11,204 12,490 (5,439)
Identifiable assets.................. 706,175 89,462 125,365 38,708 149,677 44,583
Capital expenditures................. 68,903 8,989 12,309 1,581 22,099 137
1993:
Outside revenues..................... $285,163 $ 25,811 $ 73,291 $38,168 $ 78,058 $ --
Intersegment revenues................ 8,383 675 7,982 115 1,375 (18,530)
Acquisition-related costs............ 4,000 -- -- -- -- --
Operating income (loss).............. 17,996 4,920 5,607 6,726 22,239 (7,817)
Identifiable assets.................. 324,730 35,943 65,975 30,526 110,279 68,149
Capital expenditures................. 33,161 2,312 9,521 2,835 15,854 74
</TABLE>
CONSOLIDATED
------------
1995:
Outside revenues..................... $ 858,907
Intersegment revenues................ --
Acquisition-related costs and other
unusual charges.................... 88,182
Operating income (loss).............. 182
Identifiable assets.................. 1,258,860
Capital expenditures................. 110,625
1994:
Outside revenues..................... $ 676,749
Intersegment revenues................ --
Acquisition-related costs............ 2,500
Operating income (loss).............. 65,704
Identifiable assets.................. 1,153,970
Capital expenditures................. 114,018
1993:
Outside revenues..................... $ 500,491
Intersegment revenues................ --
Acquisition-related costs............ 4,000
Operating income (loss).............. 49,671
Identifiable assets.................. 635,602
Capital expenditures................. 63,757
39
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER(1) QUARTER QUARTER(2) YEAR(3)
-------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1995:
Revenues........................ $219,289 $ 211,079 $220,375 $ 208,164 $ 858,907
Gross profit.................... 61,898 55,239 62,456 53,968 233,561
Acquisition-related costs and
other
unusual charges.............. -- 28,282 -- 59,900 88,182
Operating income (loss)......... 24,324 (9,163) 25,227 (40,206) 182
Income (loss) before income
taxes
and minority interests....... 20,580 (12,902) 21,352 (43,984) (14,954)
Net income (loss)............... 14,439 (3,145) 13,148 (35,000) (10,558)
Net income (loss) per share..... $ 0.29 $ (0.06) $ 0.26 $ (0.68) $ (0.21)
1994:
Revenues........................ $138,282 $ 135,395 $181,624 $ 221,448 $ 676,749
Gross profit.................... 40,581 38,040 52,310 57,685 188,616
Acquisition-related costs....... -- -- 2,500 -- 2,500
Operating income................ 14,668 15,246 17,801 17,989 65,704
Income before income taxes
and minority interests....... 14,419 14,316 15,753 14,328 58,816
Net income...................... 10,291 10,720 10,604 10,362 41,977
Net income per share............ $ 0.25 $ 0.26 $ 0.23 $ 0.20 $ 0.94
</TABLE>
- ------------
(1) Includes unusual charges in 1995 of $28,282,000, or $0.24 per common
share. See Note 3.
(2) Includes acquisition-related costs in 1995 of $59,900,000, or $0.93 per
common share. See Note 3.
(3) Includes acquisition-related costs and other unusual charges in 1995 of
$88,182,000, or $1.17 per common share. See Note 3. Due to changes in the
weighted average common shares outstanding, the sums of the quarterly per
share amounts for 1995 do not equal earnings per share for the year.
(11) RELATED PARTY TRANSACTIONS The Company provides management services
under various gas compressor system fleet rental agency agreements with five
limited partnerships and two Subchapter S corporations. Certain of the
partners of the limited partnerships and shareholders and officers of the
Subchapter S corporations are employees of the Company. The Company recorded
management fee income under these agency agreements totaling $1,104,000 and
$386,000 during 1995 and 1994, respectively. Since the date of the Total
Energy acquisition (see Note 2), the limited partnerships and Subchapter S
corporations earned net revenues under these agency agreements, after
deducting the management fees, of $859,000 and $299,000 during 1995 and 1994,
respectively.
(12) ALLOWANCE FOR DOUBTFUL ACCOUNTS Activity in the Company's allowance
for doubtful accounts, deducted from receivables in the consolidated balance
sheets, was as follows (in thousands):
1995 1994 1993
--------- --------- ---------
Balance at beginning of year......... $ 11,240 $ 11,747 $ 6,301
Additions charged to costs and
expenses........................... 6,499 2,702 2,603
Deductions for uncollectible
receivables written off............ (1,878) (3,437) (1,085)
Acquired businesses.................. -- 164 3,945
Translation and other, net........... 81 64 (17)
--------- --------- ---------
$ 15,942 $ 11,240 $ 11,747
========= ========= =========
40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS.
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For certain information concerning directors of the Company, reference is
made to the information included under the caption "Election of Directors"
included in the definitive Proxy Statement, which relates to the Annual
Meeting of Stockholders of the Company to be held on May 17, 1996 (the "Proxy
Statement"), to be filed within 120 days after the close of the fiscal year,
which information is incorporated herein by such reference. For certain
information concerning executive officers of the Company, see the caption
"Executive Officers" in Item 1 elsewhere in this Report.
ITEM 11. EXECUTIVE COMPENSATION.
For information concerning this Item, reference is made to the caption
"Executive Compensation and Other Matters" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
For information concerning this Item, reference is made to the caption
"Ownership of Company Stock" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For information concerning this Item, reference is made to the caption
"Executive Compensation and Other Matters" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements of Weatherford Enterra, Inc.
and Subsidiaries:
Report of Arthur Andersen LLP, Independent Public Accountants, dated
February 29, 1996.
Consolidated Balance Sheets -- December 31, 1995 and 1994.
Consolidated Statements of Income for Each of the Three Years in the
Period Ended December 31, 1995.
Consolidated Statements of Stockholders' Equity for Each of the
Three Years in the Period Ended December 31, 1995.
Consolidated Statements of Cash Flows for Each of the Three Years in
the Period Ended December 31, 1995.
Notes to Consolidated Financial Statements.
2. Exhibits:
2.1 -- Amended and Restated Assets Purchase Agreement among Homco
International, Inc., A-1 Bit and Tool Co., Inc., A-1 Bit and
Tool Company B.V., A-1 Bit and Tool Company A/S, A-1 Bit and
Tool Company GmbH, A-1 Bit and Tool Company Pte., Ltd., Homco
Arabian Gulf, Inc., Homco International, Inc., W.R. Grace &
Company and Weatherford International Incorporated
(incorporated by reference to Exhibit 2.2 to the Company's
Form 10-K Annual Report for the year ended December 31, 1992
(File No. 1-7867)).
42
2.2 -- Agreement and Plan of Merger dated as of June 23, 1995, as
amended by Amendment No. 1 to Agreement and Plan of Merger
dated as of August 28, 1995, between Weatherford International
Incorporated and Enterra Corporation (incorporated by
reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-4 (Registration No. 33-62195)).
2.3 -- Amendment No. 2 to Agreement and Plan of Merger dated as of
October 5, 1995, between Weatherford International
Incorporated and Enterra Corporation (incorporated by
reference to Exhibit 2.2 to the Company's Current Report on
Form 8-K dated October 5, 1995 (File No. 1-7867)).
2.4 -- Agreement dated as of September 20, 1995, among Zapata
Corporation, Energy Industries, Inc., Zapata Energy
Industries, L.P., Enterra Corporation and Enterra Compression
Company (incorporated by reference to Exhibit 2 to Enterra
Corporation's Current Report on Form 8-K dated October 2, 1995
(File No. 1-8153)).
3.1 -- Corrected Restated Certificate of Incorporation of the
Company.
3.2 -- Bylaws of the Company, as amended through March 17, 1994
(incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated April 28, 1994 (File No.
1-7867)).
4.1 -- Credit Agreement dated as of October 5, 1995 among Weatherford
Enterra, Inc., Weatherford Enterra U.S., Inc.,
Weatherford/Lamb, Inc., Bank of America Illinois, as
Documentation Agent, Texas Commerce Bank National Association,
as Administrative Agent, Credit Lyonnais New York Branch, ABN
Amro Bank, N.V., Bank of Montreal, First Interstate Bank of
Texas, N.A., Arab Banking Corporation (B.S.C.) and the
financial institutions listed on the signature pages thereto
(incorporated by reference to Exhibit 4.1 to the Company's
Form 10-Q Quarterly Report for the quarter ended September 30,
1995 (File No. 1-7867)).
4.2 -- First Amendment to Credit Agreement dated as of December 29,
1995 among Weatherford Enterra, Inc., Weatherford Enterra,
U.S., Inc. Weatherford/Lamb, Inc., Weatherford Enterra U.S.,
Limited Partnership, Bank of America Illinois, as
Documentation Agent, Texas Commerce Bank National Association,
as Administrative Agent, Credit Lyonnais New York Branch, ABN
Amro Bank, N.V., Bank of Montreal, First Interstate Bank of
Texas, N.A., Arab Banking Corporation (B.S.C.) and the
financial institutions listed on the signature pages thereto.
4.3 -- Agreement dated as of June 23, 1995, as amended as of August
28, 1995, among Weatherford International Incorporated and
American Gas & Oil Investors, Limited Partnership, AmGO II,
Limited Partnership, AmGO III, Limited Partnership, First
Reserve Secured Energy Assets Fund, Limited Partnership, First
Reserve Fund V, Limited Partnership, First Reserve Fund V-2,
Limited Partnership, and First Reserve Fund VI, Limited
Partnership (collectively, the "First Reserve Funds"), and
First Reserve Corporation (incorporated by reference to
Exhibit 4.6 to the Company's Registration Statement on Form
S-4 (Registration No. 33-62195)).
*10.1-- 1987 Stock Option Plan (incorporated by reference to Exhibit
10.1 to the Company's Form 10-K Annual Report for the year
ended December 31, 1994 (File No. 1-7867)).
*10.2-- 1991 Stock Option Plan (incorporated by reference to Exhibit
10.2 to the Company's Form 10-K Annual Report for the year
ended December 31, 1994 (File No. 1-7867)).
*10.3-- Stock Appreciation Rights Plan (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-K Annual Report for the
year ended December 31, 1990 (File No. 1-7867)) and First
Amendment to Stock Appreciation Rights plan (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-K Annual
Report for the year ended December 31, 1994 (File No.
1-7867)).
43
*10.4-- Change of Control Agreements with Philip Burguieres, James
R. Burke, M.E. Eagles, Norman W. Nolen and H. Suzanne Thomas
(incorporated by reference to Exhibit 10.5 to the Company's
Form 10-K Annual Report for the year ended December 31, 1993
(File No. 1-7867)); James D. Green, Jon Nicholson and Weldon
W. Walker (incorporated by reference to Exhibit 10.4 to the
Company's Form 10-K Annual Report for the year ended December
31, 1994 (File No. 1-7867)); Philip D. Gardner, Robert A.
Seekely and F. Thomas Tilton (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q Quarterly Report for
the quarter ended March 31, 1995 (File No. 1-7867)); and
Steven C. Grant (incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q Quarterly Report for the quarter ended
September 30, 1995 (File No. 1-7867); First Amendment to
Change of Control Agreements with Philip Burguieres, James R.
Burke, M.E. Eagles, Norman W. Nolen, H. Suzanne Thomas, James
D. Green, Jon Nicholson and Weldon W. Walker (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q Quarterly
Report for the quarter ended March 31, 1995 (File No.
1-7867)); and Philip D. Gardner, Robert A. Seekely and F.
Thomas Tilton (incorporated by reference to Exhibit 10.2 to
the Company's Registration Statement on Form S-4 (Registration
No. 33-62195)); and Second Amendment to Change of Control
Agreements with Philip Burguieres, James R. Burke, M. E.
Eagles, Norman W. Nolen, H. Suzanne Thomas, James D. Green,
Jon Nicholson and Weldon W. Walker (incorporated by reference
to Exhibit 10.1 to the Company's Registration Statement on
Form S-4 (Registration No. 33-62195)).
*10.5-- Restricted Stock Incentive Plan, as amended December 13,
1990 (incorporated by reference to Exhibit 10.9 to the
Company's Form 10-K Annual Report for the year ended December
31, 1990 (File No. 1-7867)).
*10.6-- Indemnification Agreements with Thomas N. Amonett, William
E. Greehey, Robert K. Moses, Jr. and H. Suzanne Thomas
(incorporated by reference to Exhibit 10.10 to the Company's
Form 10-K Annual Report for the year ended December 31, 1987
(File No. 1-7867)); Philip Burguieres and Norman W. Nolen
(incorporated by reference to Exhibit 10.4 to the Company's
Form 10-Q Quarterly Report for the quarter ended June 30, 1991
(File No. 1-7867)); James R. Burke and John W. Johnson
(incorporated by reference to Exhibit 10.9 to the Company's
Form 10-K Annual Report for the year ended December 31, 1991
(File No. 1-7867)); M.E. Eagles (incorporated by reference to
Exhibit 10.8 to the Company's Form 10-K Annual Report for the
year ended December 31, 1992 (File No. 1-7867)); Weldon W.
Walker (incorporated by reference to Exhibit 10.7 to the
Company's Form 10-K Annual Report for the year ended December
31, 1994 (File No. 1-7867)); and John A. Hill, William E.
Macaulay, Robert L. Parker, Sr., R. Rudolph Reinfrank, Roger
M. Widmann and Steven C. Grant (incorporated by reference to
Exhibit 10.2 to the Company's Form 10-Q Quarterly Report for
the quarter ended September 30, 1995 (File No. 1-7867)).
*10.7-- Supplemental Executive Retirement Plan (incorporated by
reference to Exhibit 10.10 to the Company's Form 10-K Annual
Report for the year ended December 31, 1992 (File No.
1-7867)).
*10.8-- Executive Incentive Stock Bonus Plan, as amended December
31, 1992 (incorporated by reference to Exhibit 10.11 to the
Company's Form 10-K Annual Report for the year ended December
31, 1992 (File No. 1-7867)).
*10.9-- Non-Employee Director Retirement Plan (incorporated by
reference to Exhibit 10.12 to the Company's Form 10-K Annual
Report for the year ended December 31, 1992 (File No.
1-7867)).
*10.10-- Supplemental Savings Plan (incorporated by reference to
Exhibit 10.11 to the Company's Form 10-K Annual Report for the
year ended December 31, 1994 (File No. 1-7867)).
44
*10.11-- Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference to Exhibit 10.12 to the Company's
Form 10-K Annual Report for the year ended December 31, 1994
(File No. 1-7867)).
*10.12-- Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10.13 to the Company's Form 10-K Annual
Report for the year ended December 31, 1994 (File No.
1-7867)).
*10.13-- Consulting Agreement dated October 5, 1995 between
Weatherford Enterra, Inc. and D. Dale Wood (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q Quarterly
Report for the quarter ended September 30, 1995 (File No.
1-7867)).
22 -- Subsidiaries of the Company
24 -- Consent of Independent Public Accountants
27.1 -- Article 5 Financial Data Schedule
27.2 -- Article 5 Restated Financial Data Schedule
* Management contract or compensatory plan or arrangement
The Company will furnish to the Commission upon request a copy of each
other instrument with respect to the long-term debt of the Company and its
subsidiaries that defines the rights of holders of such debt or includes
provisions that provide for cross default under such instruments.
The Company will furnish a copy of any exhibit described above to the
beneficial holder of its securities upon receipt of a written request
therefor, provided that such request sets forth a good faith representation
that as of March 29, 1996, the record date for the Company's 1996 Annual
Meeting of Stockholders, such beneficial holder is entitled to vote at such
meeting, and provided further that such holder pays to the Company a fee
compensating the Company for its reasonable expenses in furnishing such
exhibits.
(b) Reports on Form 8-K:
A report on Form 8-K dated October 5, 1995 was filed on October 16,
1995 by the Company reporting the completion of the Enterra Merger.
A report on Form 8-K dated December 15, 1995 was filed on December
29, 1995 by the Company reporting the completion of the acquisition by
the Company of the assets of Energy Industries. Amendment No. 1 to Form
8-K on Form 8-K/A dated December 15, 1995 was filed on February 27, 1996
by the Company reporting the audited historical financial statements of
Energy Industries and the pro forma financial statements of the Company
including Energy Industries.
45
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, ON MARCH 20,
1996.
WEATHERFORD ENTERRA, INC.
By: PHILIP BURGUIERES
PHILIP BURGUIERES
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
----------------- ------------------------------------ --------------
PHILIP BURGUIERES Chairman of the Board, President and March 20, 1996
(PHILIP BURGUIERES) Chief Executive Officer (Principal
Executive Officer)
NORMAN W. NOLEN Senior Vice President, Chief March 20, 1996
(NORMAN W. NOLEN) Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
THOMAS N. AMONETT Director March 20, 1996
(THOMAS N. AMONETT)
WILLIAM E. GREEHEY Director March 20, 1996
(WILLIAM E. GREEHEY)
JOHN A. HILL Director March 20, 1996
(JOHN A. HILL)
JOHN W. JOHNSON Director March 20, 1996
(JOHN W. JOHNSON)
WILLIAM E. MACAULAY Director March 20, 1996
(WILLIAM E. MACAULAY)
ROBERT K. MOSES, JR. Director March 20, 1996
(ROBERT K. MOSES, JR.)
ROBERT L. PARKER SR. Director March 20, 1996
(ROBERT L. PARKER, SR.)
R. RUDOLPH REINFRANK Director March 20, 1996
(R. RUDOLPH REINFRANK)
ROGER M. WIDMANN Director March 20, 1996
(ROGER M. WIDMANN)
46
APPENDIX C:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: DECEMBER 15, 1995
(DATE OF EARLIEST EVENT REPORTED)
WEATHERFORD ENTERRA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-7867 74-1681642
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION)
</TABLE>
1360 POST OAK BOULEVARD, SUITE 1000
HOUSTON, TEXAS 77056-3098
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 439-9400
(NOT APPLICABLE)
- -----------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 15, 1995, Weatherford Enterra, Inc., a Delaware corporation
("Weatherford Enterra"), completed the acquisition (the "Acquisition") of
substantially all of the assets of the natural gas compression business of
Energy Industries, Inc., a Delaware corporation ("EI"), and Zapata Energy
Industries, L.P., a Delaware limited partnership ("ZEI"), for a purchase
price of approximately $130 million and the assumption of certain current
liabilities. EI and ZEI are sometimes collectively referred to herein as
"Zapata Energy Industries". The Agreement, dated as of September 20, 1995,
among Zapata Corporation, a Delaware corporation ("Zapata"), EI, ZEI, Enterra
Corporation, formerly a Delaware corporation ("Enterra"), and Enterra
Compression Company, a Delaware corporation, regarding the Acquisition has
been previously filed with the Securities and Exchange Commission (the
"Commission") as Exhibit 2 to Enterra's Current Report on Form 8-K dated
October 2, 1995 (Commission File Number 1-8153) and is incorporated herein by
reference. Enterra was merged with and into Weatherford International
Incorporated on October 5, 1995, and Weatherford Enterra is the surviving
corporation of the merger. Weatherford Enterra funded the Acquisition
through excess cash and borrowings from its existing revolving credit
facility with Bank of America Illinois, Texas Commerce Bank National
Association, Credit Lyonnais New York Branch, ABN Amro Bank, N.V., Bank of
Montreal, First Interstate Bank of Texas, N.A., Arab Banking Corporation
(B.S.C.) and the other financial institutions participating therein.
Prior to the Acquisition, Zapata Energy Industries was engaged in the
business of renting, fabricating, selling, installing and servicing natural gas
compressor packages used in the oil and gas industry. Weatherford Enterra
intends to continue to provide products and services, including the products
and services previously provided by Zapata Energy Industries, around the world
to the oil and gas exploration, production and transmission industries.
A joint press release of Weatherford Enterra and Zapata relating to the
closing of the Acquisition, dated December 15, 1995, is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial statements of Zapata Energy Industries for the periods
specified in Rule 3.05(b) of Regulation S-X are not currently available to
Weatherford Enterra and will be filed by Weatherford Enterra by an amendment
to this report as soon as practicable and in any event not later than 60 days
after this Current Report on Form 8-K must be filed.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information required pursuant to Article 11 of
Regulation S-X is not currently available to Weatherford Enterra and will be
filed by Weatherford Enterra by an amendment to this report as soon as
practicable and in any event not later than 60 days after this Current Report
on Form 8-K must be filed.
(c) EXHIBITS.
2.1 Agreement dated as of September 20, 1995, among Zapata Corporation,
Energy Industries, Inc., Zapata Energy Industries, L.P., Enterra
Corporation and Enterra Compression Company (incorporated by
reference to Exhibit 2 to Enterra Corporation's Current Report on
Form 8-K dated October 2, 1995 (Commission File No. 1-8153)).
99.1 Joint Press Release of Weatherford Enterra, Inc. and Zapata
Corporation dated December 15, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WEATHERFORD ENTERRA, INC.
Dated: December 29, 1995 /s/ H. SUZANNE THOMAS
---------------------------------------
H. Suzanne Thomas
Senior Vice President, Secretary
and General Counsel
EXHIBIT INDEX
2.1 Agreement dated as of September 20, 1995, among Zapata Corporation,
Energy Industries, Inc., Zapata Energy Industries, L.P., Enterra
Corporation and Enterra Compression Company (incorporated by reference
to Exhibit 2 to Enterra Corporation's Current Report on Form 8-K dated
October 2, 1995 (Commission File No. 1-8153)).
99.1 Joint Press Release of Weatherford Enterra, Inc. and Zapata
Corporation dated December 15, 1995.
EXHIBIT 99.1
[LOGO]
WEATHERFORD ENTERRA
NEWS RELEASE
For More Information Contact:
STEVE GRANT LAMAR MCINTYRE
(713) 439-9400 (713) 940-6100
WEATHERFORD ENTERRA, INC. ZAPATA CORPORATION
1360 POST OAK 1717 ST. JAMES PLACE
SUITE 1000 SUITE 500
HOUSTON, TX 77056 HOUSTON, TX 77056
JOINT PRESS RELEASE FOR IMMEDIATE DISTRIBUTION
WEATHERFORD ENTERRA AND ZAPATA COMPLETE ENERGY
INDUSTRIES TRANSACTION
Houston, Texas, December 15, 1995 -- Weatherford Enterra, Inc. (WII/NYSE) and
Zapata Corporation (ZOS/NYSE) today announced the closing of the transaction
whereby Weatherford Enterra purchased from Zapata the assets of its Energy
Industries gas compression division for approximately $130 million in cash and
the assumption of certain current liabilities of an operating nature.
Weatherford Enterra is a Houston, Texas-based diversified international energy
service and manufacturing company that provides products and services around the
world to the oil and gas exploration, production and transmission industries.
Zapata is currently transforming itself from the energy business into food
related businesses.
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
ON
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 15, 1995
(Date of earliest event reported)
WEATHERFORD ENTERRA, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7867 74-1681642
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1360 Post Oak Boulevard, Suite 1000
Houston, Texas 77056-3098
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 439-9400
(not applicable)
-------------------------------------------------------------
(Former name or former address, if changed since last report)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
EXPLANATION
As discussed in its Current Report on Form 8-K dated December 15,
1995 (the "Current Report"), as filed with the Securities and Exchange
Commission (the "Commission") on December 29, 1995, Weatherford Enterra,
Inc. completed the acquisition of substantially all of the assets of the
natural gas compression business of Energy Industries, Inc., a Delaware
corporation ("EI"), and Zapata Energy Industries, L.P., a Delaware
limited partnership ("ZEI"), for a purchase price of $130 million and
the assumption of certain current liabilities, pursuant to an Agreement
dated as of September 20, 1995, among Zapata Corporation, a Delaware
corporation, EI, ZEI, Enterra Corporation, formerly a Delaware
corporation, and Enterra Compression Company, a Delaware corporation.
Item 7 of the Current Report is hereby amended and restated in its
entirety as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The following Zapata Energy Industries Combined Financial
Statements as of September 30, 1995 are attached hereto as Exhibit 99.2
and are incorporated herein by reference.
- - Report of Independent Public Accountants
- - Zapata Energy Industries Combined Balance Sheet as of September 30, 1995
- - Zapata Energy Industries Combined Statement of Income and Changes in
Reinvested Earnings for the year ended September 30, 1995
- - Zapata Energy Industries Statement of Cash Flows for the year ended
September 30, 1995
- - Zapata Energy Industries Notes to Combined Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma consolidated statement of operations for the
year ended December 31, 1994 for Weatherford Enterra, Inc. is included in the
Registration Statement on Form S-4 (File No. 33-62195) of Weatherford
International Incorporated (the predecessor of Weatherford Enterra, Inc.) and
is incorporated herein by reference. The following Weatherford Enterra, Inc.
and Subsidiaries Unaudited Pro Forma Consolidated Financial Statements as of
September 30, 1995 are attached hereto as Exhibit 99.3 and are incorporated
herein by reference.
- - Weatherford Enterra, Inc. and Subsidiaries Unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 1995
- - Weatherford Enterra, Inc. and Subsidiaries Unaudited Pro Forma Consolidated
Statement of Income for the Nine Months Ended September 30, 1995
- - Weatherford Enterra, Inc. and Subsidiaries Notes to Unaudited Pro Forma
Consolidated Financial Statements
(c) EXHIBITS.
2.1 Agreement dated as of September 20, 1995, among Zapata Corporation,
Energy Industries, Inc., Zapata Energy Industries, L.P., Enterra
Corporation and Enterra Compression Company (incorporated by reference
to Exhibit 2 to the Enterra Corporation Current Report on Form 8-K
dated October 2, 1995 (Commission File No. 1-8153)).
* 27.1 Article 5 Financial Data Schedule.
** 99.1 Joint Press Release of Weatherford Enterra, Inc. and Zapata
Corporation dated December 15, 1995.
* 99.2 Zapata Energy Industries Combined Financial Statements as of September
30, 1995.
* 99.3 Weatherford Enterra, Inc. and Subsidiaries Unaudited Pro Forma
Consolidated Financial Statements as of September 30, 1995.
- ------------
* Filed herein.
** Previously filed.
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 hereunto duly authorized.
WEATHERFORD ENTERRA, INC.
Dated: February 27, 1996 /s/ NORMAN W. NOLEN
--------------------------------------
Norman W. Nolen
Senior Vice President, Chief Financial
Officer and Treasurer
EXHIBIT INDEX
2.1 Agreement dated as of September 20, 1995, among Zapata Corporation,
Energy Industries, Inc., Zapata Energy Industries, L.P., Enterra
Corporation and Enterra Compression Company (incorporated by reference
to Exhibit 2 to Enterra Corporation's Current Report on Form 8-K dated
October 2, 1995 (Commission File No. 1-8153)).
* 27.1 Article 5 Financial Data Schedule.
**99.1 Joint Press Release of Weatherford Enterra, Inc. and Zapata
Corporation dated December 15, 1995.
* 99.2 Zapata Energy Industries Combined Financial Statements as of September
30, 1995.
* 99.3 Weatherford Enterra, Inc. and Subsidiaries Unaudited Pro Forma
Consolidated Financial Statements as of September 30, 1995.
- -------------
* Filed herein.
** Previously filed.
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ZAPATA
ENERGY INDUSTRIES COMBINED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
MULTIPLIER ............................................. 1,000
PERIOD-TYPE ............................................ YEAR
FISCAL-YEAR-END ........................................ SEP-30-1995
PERIOD-START ........................................... OCT-01-1994
PERIOD-END ............................................. SEP-30-1995
CASH ................................................... 2763
SECURITIES ............................................. 0
RECEIVABLES ............................................ 7696
ALLOWANCES ............................................. (10)
INVENTORY .............................................. 21588
CURRENT-ASSETS ......................................... 32061
PP&E ................................................... 70,663
DEPRECIATION ........................................... (9101)
TOTAL-ASSETS ........................................... 113911
CURRENT-LIABILITIES .................................... 6309
BONDS .................................................. 0
PREFERRED-MANDATORY .................................... 0
PREFERRED .............................................. 0
COMMON ................................................. 3
OTHER-SE ............................................... 25533
TOTAL-LIABILITY-AND-EQUITY ............................. 113911
SALES .................................................. 66635
TOTAL-REVENUES ......................................... 66635
CGS .................................................... 50275
TOTAL-COSTS ............................................ 60682
OTHER-EXPENSES ......................................... 0
LOSS-PROVISION ......................................... 0
INTEREST-EXPENSE ....................................... 3420
INCOME-PRETAX .......................................... 3349
INCOME-TAX ............................................. 1400
INCOME-CONTINUING ...................................... 1949
DISCONTINUED ........................................... 0
EXTRAORDINARY .......................................... 0
CHANGES ................................................ 0
NET-INCOME ............................................. 1949
EPS-PRIMARY ............................................ 0
EPS-DILUTED ............................................ 0
EXHIBIT 99.2
ZAPATA ENERGY INDUSTRIES
COMBINED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Weatherford Enterra, Inc.:
We have audited the accompanying combined balance sheet of Zapata Energy
Industries as of September 30, 1995, and the related combined statements of
income and changes in reinvested earnings and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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 combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Zapata
Energy Industries as of September 30, 1995, and the combined results of their
operations and their combined cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
February 23, 1996
ZAPATA ENERGY INDUSTRIES
COMBINED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . $ 2,763
Receivables:
Trade, net of allowance of $10 . . . . . . . . . . 6,532
Sales-type lease . . . . . . . . . . . . . . . . . 1,154
Inventories, net of allowance of $310. . . . . . . . 21,588
Prepayments and other. . . . . . . . . . . . . . . . 24
--------
Total current assets . . . . . . . . . . . . . . . 32,061
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land . . . . . . . . . . . . . . . . . . . . . . . . 1,024
Buildings and improvements . . . . . . . . . . . . . 3,279
Rental and service equipment . . . . . . . . . . . . 63,679
Machinery and other equipment. . . . . . . . . . . . 2,681
--------
70,663
Less--Accumulated depreciation . . . . . . . . . . . 9,101
--------
61,562
--------
SALES-TYPE LEASE RECEIVABLES, NET OF CURRENT . . . . . 1,721
GOODWILL, NET. . . . . . . . . . . . . . . . . . . . . 18,402
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . 165
--------
Total assets . . . . . . . . . . . . . . . . . . . . $113,911
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt. . . . . . . . . . $ 743
Accounts payable . . . . . . . . . . . . . . . . . . 2,376
Accrued liabilities. . . . . . . . . . . . . . . . . 3,190
--------
Total current liabilities. . . . . . . . . . . . . 6,309
LONG-TERM DEBT, NET OF CURRENT . . . . . . . . . . . . 27,116
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 6,054
DUE TO ZAPATA CORPORATION. . . . . . . . . . . . . . . 48,896
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDER'S EQUITY:
Common stock, $1.00 par; 3,000 shares authorized,
issued and outstanding. . . . . . . . . . . . . . . 3
Capital in excess of par value . . . . . . . . . . . 20,787
Reinvested earnings. . . . . . . . . . . . . . . . . 4,746
--------
25,536
--------
Total liabilities and stockholder's equity . . . . $113,911
========
The accompanying notes are an integral part of
this combined financial statement.
2
ZAPATA ENERGY INDUSTRIES
COMBINED STATEMENT OF INCOME AND CHANGES IN REINVESTED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS)
REVENUES . . . . . . . . . . . . . . . . . . . . . . $ 66,635
--------
EXPENSES:
Operating . . . . . . . . . . . . . . . . . . . . 50,275
Depreciation and amortization . . . . . . . . . . 5,741
Selling, general and administrative . . . . . . . 4,666
--------
Total operating costs and expenses. . . . . . . 60,682
--------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 5,953
Interest expense. . . . . . . . . . . . . . . . . (3,420)
Interest income . . . . . . . . . . . . . . . . . 306
Other income. . . . . . . . . . . . . . . . . . . 510
--------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . 3,349
Provision for income taxes . . . . . . . . . . . . . (1,400)
--------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 1,949
========
REINVESTED EARNINGS, September 30, 1994. . . . . . . 2,797
--------
REINVESTED EARNINGS, September 30, 1995. . . . . . . $ 4,746
========
The accompanying notes are an integral part of
this combined financial statement.
3
ZAPATA ENERGY INDUSTRIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(IN THOUSANDS)
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 1,949
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization. . . . . . . . . . . . . . 5,741
Deferred income tax. . . . . . . . . . . . . . . . . . . 4,632
Gain on sale of heat exchanger division. . . . . . . . . (510)
Changes in assets and liabilities:
Decrease in trade receivables, net . . . . . . . . . . 770
Decrease in sales-type lease receivables . . . . . . . 1,212
Increase in inventories. . . . . . . . . . . . . . . . (4,474)
Decrease in prepayments and other. . . . . . . . . . . 360
Decrease in accounts payable and accrued liabilities . (1,294)
--------
CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . . 8,386
--------
CASH USED IN INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . . . . (12,697)
Acquisitions of equipment. . . . . . . . . . . . . . . . . (3,425)
Proceeds from sale of equipment. . . . . . . . . . . . . . 1,473
Proceeds from sale of heat exchanger division. . . . . . . 1,470
--------
CASH USED IN INVESTING ACTIVITIES. . . . . . . . . . . . . (13,179)
--------
CASH PROVIDED BY FINANCING ACTIVITIES:
Payments to Zapata Corporation, net. . . . . . . . . . . . (6,782)
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 13,898
Repayment of borrowings. . . . . . . . . . . . . . . . . . (1,238)
--------
CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . . . 5,878
--------
INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . 1,085
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . 1,678
--------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . $ 2,763
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 1,634
Income taxes . . . . . . . . . . . . . . . . . . . . . . 304
The accompanying notes are an integral part of
this combined financial statement.
4
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION---
The accompanying combined financial statements of Zapata Energy Industries
(Energy Industries or the Company) include the accounts of Zapata Rentals, Inc.,
Zapata Compression Investments, Inc. and Energy Industries, Inc., three wholly-
owned subsidiaries of Zapata Corporation (Zapata).
The Company is engaged in the business of renting, fabricating, selling,
and servicing natural gas compressor packages used in the oil and gas
industry. Rental service, equipment sales and service revenues accounted for
27%, 62% and 11%, respectively, of total revenues for the year ended
September 30, 1995. The Company is headquarted in Corpus Christi, Texas and
maintains a network of fifteen sales and service offices in the surrounding
four state area. Compression equipment is utilized in the production and
transportation of natural gas. Factors influencing compressor rental
operations include the number and age of producing gas wells, the ownership
of these properties and natural gas prices.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ---
PRINCIPLES OF COMBINATION. The financial statements are presented on a
combined basis because their business activities are performed as one entity.
All significant intercompany accounts and transactions have been eliminated in
combination.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
INVENTORIES. Inventories are valued at the lower of cost or market. Cost
is determined using the moving average method for parts inventories. The cost
of major component inventories is determined by using specific identification.
Inventories at September 30, 1995 are summarized as follows (in thousands):
Compressor equipment and components . . . . . . $ 7,768
Parts and materials . . . . . . . . . . . . . . 8,135
Work in process . . . . . . . . . . . . . . . . 5,995
Allowance . . . . . . . . . . . . . . . . . . . (310)
--------
$ 21,588
========
Work in process includes the costs of materials, labor and overhead.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is
depreciated on a straight-line basis over the estimated useful lives of the
assets. Estimated useful lives of assets are as follows:
5
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
USEFUL LIVES
(YEARS)
------------
Rental and service equipment. . . . . . . . . . . . . 15
Building and improvements . . . . . . . . . . . . . . 20
Machinery and other equipment . . . . . . . . . . . . 5 - 7
Depreciation expense for the year ended September 30, 1995 was $5,136,000.
Expenditures for major additions and improvements are capitalized while
minor replacements, maintenance and repairs are charged to expense as incurred.
When property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the related accounts, and any resulting gain or
loss is included in the combined statement of income.
GOODWILL. Goodwill represents the excess of the aggregate price paid by
the Company in acquisitions accounted for as purchases over the fair market
value of the net assets acquired. Goodwill is being amortized on a straight-
line basis over 40 years. Management continually evaluates whether events or
circumstances have occurred that indicate the remaining estimated useful life of
goodwill may warrant revision or that the remaining balance of goodwill may not
be recoverable. Goodwill amortization expense totaled $483,000 during 1995.
Accumulated amortization at September 30, 1995 was $926,000.
INCOME TAXES. The Company is included in Zapata's consolidated U.S.
federal income tax return; however, its income tax effects are reflected on a
separate company basis for financial reporting purposes. The Company applies the
liability method of accounting for income taxes. Accordingly, deferred tax
assets and liabilities are determined based on the estimated future tax effects
of differences between the financial statement and tax bases of assets and
liabilities given the provisions of enacted tax laws.
EQUIPMENT UNDER OPERATING LEASES AND HELD FOR LEASE. The Company leases
certain equipment to customers under agreements that contain an option to
purchase the equipment at any time. The option amount is computed based on the
original purchase price, less payments received, plus interest and insurance
covering the period from the inception of the lease to the date the option is
exercised. The lease payments are generally computed to pay-out the original
purchase price plus interest over approximately 36 months. Leases with
noncancelable lease terms greater than 18 months are considered sales-type
leases because by the end of the original lease term, the option price is
expected to be lower than the equipment's fair market value. Equipment leased
under agreements with noncancelable lease terms of less than 18 months and those
which do not include a purchase option are accounted for as operating leases and
included in the rental fleet in property, plant and equipment. Rental inventory
is depreciated over the estimated life based on a proportionate amount of rental
income receipts. Rental inventory depreciation expense totalled $122,000 in
1995.
CONCENTRATION OF CREDIT RISK. The Company sells, leases, and rents gas
compressors to customers in the oil and gas industry. The Company generally
does not require collateral. However, cash prepayments and security deposits
are required for accounts with indicated credit risks. The Company also bills
for progress payments from time to time on large dollar, long-term construction
projects. The Company maintains reserves for potential losses, and credit
losses have been within management's expectations.
At September 30, 1995, the Company had cash deposits concentrated primarily
in one bank.
6
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
REVENUES. Revenues are recognized as rental equipment is provided, as
services are performed, or as parts or equipment deliveries are made. In
some cases, revenue is recognized on large compressor equipment construction
when the project is completed, but before the equipment is actually shipped.
This practice is common when a customer agrees to take delivery and pay an
invoice for the equipment, but is not yet ready to take possession of the
equipment. Most rental contracts have an initial contract term of six to
twelve months and then continue on a month-to-month basis. Lease charges are
billed at the end of each month for the following month. Energy Industries
provides a limited warranty on certain equipment and services. The warranty
period varies depending on the equipment sold or service performed. A
liability for performance under warranty obligations is accrued based upon
the nature of the warranty and historical experience.
(3) ACQUISITIONS AND DISPOSITIONS ---
In January 1995, Energy Industries sold its heat exchanger division,
located in Garland, Texas, resulting in a net gain of $510,000 which is included
in the combined statement of income as other income. The Company received
$1,470,000 in cash, and entered into an alliance agreement structured to provide
Energy Industries with the heat exchangers necessary to perform its fabrication
operations. As part of the consideration of the sale, Energy Industries
received a $725,000 credit to be used against future purchases over the next
five years at a rate of 10% off of normal invoice price. The Company did not
record a gain associated with the $725,000 credit because management believed
that ultimate realization of the benefit was uncertain.
During February 1995, the company acquired the rental fleet of J-Brex
Company, located in Amarillo, Texas, for $725,000. Fourteen active rental units
were acquired in this transaction, and the Company entered into a three-year
rental alliance agreement which affords the Company the right of first refusal
on these and any future compressors J-Brex may need.
In April 1995, Energy Industries acquired the forty-four unit rental fleet
of Mountain Front Pipeline Company, Inc. located in Oklahoma and Arkansas.
Energy Industries purchased these units for $2,700,000, and entered into a
rental alliance agreement with Mountain Front, which affords the Company
exclusive rights for these and any future compressors for a period of up to
30 months.
(4) ACCRUED LIABILITIES ---
Accrued liabilities as of September 30, 1995 are summarized as follows (in
thousands):
State income taxes. . . . . . . . . . . . . . . . $ 367
Sales taxes . . . . . . . . . . . . . . . . . . . 359
Insurance . . . . . . . . . . . . . . . . . . . . 280
Maintenance . . . . . . . . . . . . . . . . . . . 280
Ad valorem taxes. . . . . . . . . . . . . . . . . 374
Accrued warranty. . . . . . . . . . . . . . . . . 302
Other accrued liabilities . . . . . . . . . . . . 1,228
-------
$ 3,190
=======
7
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT ---
Long-term debt at September 30, 1995 consists of the following (in
thousands):
Texas Commerce Bank revolving-term credit facility,
interest at prime or Eurodollar rates, 7.375% at
September 30, 1995, due in quarterly installments
beginning in 1997 through 1999, collateralized by
certain compression assets. . . . . . . . . . . . . . . $25,800
Other debt, interest ranging from 8.9% - 9.6% . . . . . 2,059
-------
Total debt . . . . . . . . . . . . . . . . . . . . . 27,859
Less current maturities . . . . . . . . . . . . . . . . 743
-------
Long-term debt . . . . . . . . . . . . . . . . . . . $27,116
=======
Interest expense on long-term debt totalled $1,720,000 in 1995.
At September 30, 1994, a line of credit was opened with Texas Commerce
Bank. This credit agreement provides the Company with a $30,000,000
revolving credit facility that converts after two years to a three-year
amortizing term loan. The debt bears interest at a variable rate, adjusted
periodically based on prime or Eurodollar interest rate.
The estimated fair value of total long term debt at September 30, 1995
approximates book value.
Maturities of the Company's long-term debt at September 30, 1995 are as
follows (in thousands):
1996. . . . . . . . . . . . . . . . . . . . . . .$ 743
1997. . . . . . . . . . . . . . . . . . . . . . . 8,990
1998. . . . . . . . . . . . . . . . . . . . . . . 9,153
1999. . . . . . . . . . . . . . . . . . . . . . . 8,928
2000. . . . . . . . . . . . . . . . . . . . . . . 45
-------
$27,859
=======
(6) INCOME TAXES ---
The components of the combined income tax provision are as follows (in
thousands):
8
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Income tax provision:
Current:
State. . . . . . . . . . . . . . . . . . . . $ 250
U.S. . . . . . . . . . . . . . . . . . . . . (3,482)
Deferred:
U.S. . . . . . . . . . . . . . . . . . . . . 4,632
-------
$ 1,400
=======
The combined provision for income taxes differs from the provision
computed at the statutory U.S. federal income tax rate of 34% in 1995 for
the following reasons (in thousands):
Tax provision at U.S. statutory rate. . . . . . . $ 1,139
State income taxes. . . . . . . . . . . . . . . . 250
Other . . . . . . . . . . . . . . . . . . . . . . 11
-------
$ 1,400
=======
The tax effects of significant temporary differences giving rise to
deferred tax assets (liabilities) are as follows (in thousands):
Deferred tax assets:
Financial reserves and accruals not yet
deductible . . . . . . . . . . . . . . . . . . $ 514
-------
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . $(5,358)
Other . . . . . . . . . . . . . . . . . . . . . (1,138)
-------
(6,496)
-------
Net deferred tax liability. . . . . . . . . . . $(5,982)
=======
(7) PROFIT SHARING PLAN ---
All qualified employees of the Company are covered under the Energy
Industries, Inc. Profit Sharing Plan. The Company matches an employee's
voluntary contribution on a dollar-for-dollar basis, up to 2% of the
employee's gross payroll. The Company can also elect to make an annual
contribution to the plan based on profits. These contributions are allocated
to the participants based on gross payroll. Contributions of $131,000 were
made under this discretionary profit sharing feature of the plan for the year
ended September 30, 1995.
(8) COMMITMENTS AND CONTINGENCIES ---
SALES-TYPE LEASE RECEIVABLES. Energy Industries provides a capital
lease financing option to its customers. Future minimum lease payments
receivable resulting from the sale of compression packages under sales-type
leases are due as follows (in thousands):
9
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1996 . . . . . . . . . . . . . . . . . . $ 1,154
1997 . . . . . . . . . . . . . . . . . . 699
1998 . . . . . . . . . . . . . . . . . . 647
1999 . . . . . . . . . . . . . . . . . . 358
2000 . . . . . . . . . . . . . . . . . . 17
--------
$ 2,875
========
Energy Industries periodically sells a portion of its lease receivables
to third party factoring companies. Certain of these receivables are sold
with partial recourse to the Company. At September 30, 1995, the total
amount of recourse to the Company on the unpaid balance of all previously
sold receivables was $1,685,000. During fiscal 1995, the Company sold a
total of $92,000 of these receivables. To date, the Company has not
experienced any significant recourse losses.
OPERATING LEASES RECEIVABLE. The Company maintains a fleet of natural gas
compressor packages for rental under operating leases. At September 30, 1995,
the net book value of such property was $55,826,000. Future minimum lease
payments receivable under remaining noncancelable operating leases as of
September 30, 1995 are as follows (in thousands):
1996 . . . . . . . . . . . . . . . . . . $ 5,554
1997 . . . . . . . . . . . . . . . . . . 2,514
1998 . . . . . . . . . . . . . . . . . . 806
--------
$ 8,874
========
OPERATING LEASES PAYABLE. The Company leases certain buildings and
service equipment under noncancelable operating leases. Aggregate minimum
rental commitments under noncancelable operating leases with lease terms in
excess of one year as of September 30, 1995 are as follows (in thousands):
1996 . . . . . . . . . . . . . . . . . $ 240
1997 . . . . . . . . . . . . . . . . . 273
1998 . . . . . . . . . . . . . . . . . 215
1999 . . . . . . . . . . . . . . . . . 78
------
$ 806
======
Rental expenses for operating leases were $755,000 for the year ended
September 30, 1995.
CLAIMS AND LITIGATION. The Company is defending various claims and
litigation arising in the normal course of business. In the opinion of
management, uninsured losses, if any, resulting from these matters will not have
a material adverse effect on the Company's results of operations or financial
position.
LONG-TERM SUPPLY AND DISTRIBUTION AGREEMENTS. The Company has commitments
under two long-term supply and distribution agreements as follows:
Energy Industries and Atlas Copco Airpower N.V. (Atlas Copco), a Belgian
corporation, entered into the following three agreements: Know-How license
agreement, Screw Compressor Development and Distribution agreement, and OEM
agreement (a supply agreement). Under such agreements, Atlas Copco
10
ZAPATA ENERGY INDUSTRIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
represents Energy Industries in countries and markets where the Company does
not have sales contracts or convenient access. Atlas Copco receives a
commission on sales that Energy Industries makes internationally, whether
they made the initial sales contact or not. The contract specifically
excludes sales to Canada and Mexico. The initial term of the contract was in
effect until July 15, 1995 and renews automatically for successive one year
terms unless terminated by one of the parties in advance. International
sales, excluding Canada and Mexico, were $992,345 and the Company paid Atlas
Copco $177,607 under such agreements for the year ended September 30, 1995.
Energy Industries is under contract with Energy Industries LTD (EIL), a
Canadian corporation, pursuant to which Energy Industries is required to
supply EIL with proprietary compressor components used in the fabrication of
gas compressor packages. Also, according to this agreement, EIL cannot buy
similar components from other manufacturers. The companies also are bound
by non-compete agreements in each other's respective country. This agreement
remains in effect through November 1996, after which time Energy Industries
will be obligated to sell compressor components to EIL until 2002, but not on
an exclusive basis in Canada. In addition, after 1996 either company may
compete in the other's country for sales of new compressor packages or any
other product or services. Sales to EIL pursuant to the agreement were
$4,685,333 for the year ended September 30, 1995.
(9) RELATED PARTY TRANSACTIONS ---
Energy Industries purchases Caterpillar engines and parts from Holt
Company of Texas (Holt), a corporation owned by the CEO of Energy Industries,
a major stockholder and director of Zapata. During 1995, Energy
Industries purchased $10,415,000 of parts and engines from Holt. At
September 30, 1995, Energy Industries owed Holt $326,000 related to these
purchases.
The Company's interest expense includes an allocation of interest
expense from Zapata totaling $1,700,000 for the year ended September 30,
1995. Interest expense of Zapata that was not directly attributable to or
related to other operations of Zapata was allocated to the Company based on a
ratio of the Company's net assets to the sum of total net assets of Zapata
plus general debt of Zapata. Additionally, Zapata performs certain
administrative functions for Energy Industries including insurance policy
placement, and income tax and legal support. These costs are charged to Energy
Industries based upon costs incurred in support of these activities.
(10) SUBSEQUENT EVENTS---
On December 15, 1995, substantially all of the assets of Energy
Industries were purchased by Weatherford Enterra, Inc. for a purchase price
of approximately $130,000,000, subject to adjustment, and the assumption of
certain current liabilities. Zapata used a portion of the proceeds from the
sale to repay all amounts outstanding under the Company's $30,000,000
revolving credit facility.
11
EXHIBIT 99.3
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements are
based upon (i) the unaudited supplemental condensed consolidated financial
statements of Weatherford Enterra, Inc. and subsidiaries and (ii) the
unaudited historical combined financial statements of Zapata Energy
Industries as of and for the nine month period ended September 30, 1995. The
Unaudited Pro Forma Consolidated Balance Sheet was prepared assuming that the
Zapata Energy Industries acquisition was consummated as of September 30,
1995. The Unaudited Pro Forma Consolidated Statement of Income was prepared
assuming that the Zapata Energy Industries acquisition was consummated as of
January 1, 1995. The Unaudited Pro Forma Consolidated Financial Statements
have been prepared based upon assumptions deemed appropriate by Weatherford
Enterra, Inc. and may not be indicative of actual results.
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ZAPATA
WEATHERFORD ENERGY
ENTERRA, INC. INDUSTRIES ADJUSTMENTS(1) PRO FORMA
------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,453 $ 2,763 $(15,000) $ 19,216
Receivables, net 239,082 7,686 - 246,768
Inventories, net 150,591 21,588 - 172,179
Other current assets 33,993 24 - 34,017
---------- -------- ------- ---------
Total current assets 455,119 32,061 (15,000) 472,180
Property, plant and equipment, net 456,100 61,562 - 517,662
Goodwill, net 212,627 18,402 26,655 257,684
Other assets 23,161 1,886 - 25,047
---------- -------- ------- ----------
Total assets $1,147,007 $113,911 $11,655 $1,272,573
========== ======== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion
of long-term debt $ 26,058 $ 743 $ (743) $ 26,058
Accounts payable 47,597 2,376 - 49,973
Accrued liabilities 106,889 3,190 - 110,079
---------- -------- ------- ----------
Total current liabilities 180,544 6,309 (743) 186,110
Long-term debt 171,195 27,116 120,000 291,195
(27,116)
Deferred tax and other long-term
liabilities 29,021 54,950 (54,950) 29,021
Stockholders' equity 766,247 25,536 (25,536) 766,247
---------- -------- ------- ----------
Total liabilities and stockholders' equity $1,147,007 $113,911 $11,655 $1,272,573
========== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of
the unaudited pro forma financial statements.
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ZAPATA
WEATHERFORD ENERGY
ENTERRA, INC. INDUSTRIES ADJUSTMENTS PRO FORMA
------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $644,199 $48,472 - $692,671
-------- ------- ------- --------
Costs and expenses:
Cost of sales and services 400,156 36,859 (3,561)(2) 433,454
Selling, general and administrative
expenses 114,977 3,248 (2,940)(2) 115,285
Depreciation and amortization 68,717 4,335 950 (3) 74,002
Other (income) expense, net (8,336) (510) - (8,846)
Unusual charges 28,297 - - 28,297
-------- ------- ------- --------
Total costs and expenses 603,811 43,932 (5,551) 642,192
-------- ------- ------- --------
Operating income 40,388 4,540 5,551 50,479
Interest, net 11,358 2,426 3,644 (4) 17,428
-------- ------- ------- --------
Income before income taxes and
minority interests 29,030 2,114 1,907 33,051
Income taxes 4,373 824 583 (5) 5,780
-------- ------- ------- --------
Income before minority interests 24,657 1,290 1,324 27,271
Minority interests (215) - - (215)
-------- ------- ------- --------
Net income $ 24,442 $1,290 $1,324 $27,056
======== ======= ======= ========
Weighted average common and
common equivalent shares outstanding 50,804 50,804
======== ========
Income per common and
common equivalent share $0.48 $0.53
======== ========
</TABLE>
The accompanying notes are an integral part of the unaudited
pro forma financial statements.
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. To record the expenditure of cash and borrowings used to finance the
Zapata Energy Industries acquisition, to reflect the allocation of the
related purchase price and to eliminate all liabilities and equity of Zapata
Energy Industries not acquired by Weatherford Enterra, Inc.
2. To record certain estimated consolidated cost savings and operational
efficiencies associated with the Zapata Energy Industries acquisition,
primarily resulting from the combination of certain locations and the
elimination of duplicate corporate functions.
3. To record additional depreciation expense and amortization of goodwill
resulting from the allocation of the purchase price of Zapata Energy
Industries.
4. To record additional interest expense on debt incurred in connection with
the Zapata Energy Industries acquisition.
5. To record additional income tax expense on the effect of the adjustments
discussed in Notes 2, 3 and 4 above.
APPENDIX D:
April 8, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Weatherford Enterra, Inc. on Friday, May 17, 1996, at 9:00 a.m. at The
Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs. Whether or not you plan to attend the Annual Meeting,
it is important that your shares be represented and voted. Please mark, date,
sign and return your proxy at your earliest convenience in the envelope
provided, which requires no postage if mailed in the United States. If you have
multiple stockholder accounts and receive more than one set of these materials,
please be sure to vote each proxy and return it in the respective postage-paid
envelope provided.
Thank you for your continued interest.
Very truly yours,
PHILIP BURGUIERES
Chairman, President and
Chief Executive Officer
WEATHERFORD ENTERRA, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1996
Notice is hereby given that the Annual Meeting of Stockholders of
Weatherford Enterra, Inc. (the "Company") will be held on Friday, May 17, 1996,
at 9:00 a.m. at The Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas, for the
following purposes:
(1) To elect three directors, each for a term of three years; and
(2) To consider and act upon any other matter which may properly come
before the meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock, $0.10 par value (the
"Common Stock"), at the close of business on March 29, 1996 (the "Record Date")
are entitled to notice of and to vote at the Annual Meeting or any adjournment
or postponement thereof. A list of the holders of record of Common Stock as of
the Record Date will be open to the examination of any such stockholder for any
purpose germane to the Annual Meeting after May 6, 1996 at the Company's offices
at 1360 Post Oak Boulevard, Suite 1000, Houston, Texas, during normal business
hours.
By Order of the Board of Directors,
H. SUZANNE THOMAS
Secretary
Houston, Texas
April 8, 1996
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN IF
YOU PLAN TO BE PRESENT, PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY AT
YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY VOTE EITHER IN
PERSON OR BY YOUR PROXY.
WEATHERFORD ENTERRA, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 17, 1996
TIME, DATE, PLACE AND PURPOSE
This Proxy Statement is being furnished to stockholders of Weatherford
Enterra, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of proxies for use at the Annual Meeting
of Stockholders (the "Meeting") to be held on Friday, May 17, 1996, at 9:00 a.m.
at The Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas, and at any
adjournment or postponement thereof, for the purposes set forth in the foregoing
Notice of Annual Meeting of Stockholders. This Proxy Statement and the form of
proxy are first being sent or delivered to stockholders on or about April 8,
1996. The Company's principal executive offices are located at 1360 Post Oak
Boulevard, Suite 1000, Houston, Texas 77056.
RECORD DATE AND VOTE REQUIRED
The securities of the Company entitled to vote at the Meeting consist of
shares of Common Stock, $0.10 par value (the "Common Stock"). At the close of
business on March 29, 1996 (the "Record Date"), there were outstanding and
entitled to vote 51,193,795 shares of Common Stock. The holders of record of
Common Stock on the Record Date will be entitled to one vote per share.
The holders of a majority of the total shares of Common Stock issued and
outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Meeting. The affirmative vote of a plurality of the total shares
of Common Stock present in person or represented by proxy and entitled to vote
at the Meeting is required for the election of directors, and the affirmative
vote of a majority of the total shares of Common Stock present in person or
represented by proxy and entitled to vote at the Meeting is required for the
approval of any other matters as may properly come before the Meeting or any
adjournment thereof.
The Annual Report to Stockholders for the year ended December 31, 1995 is
being furnished with this Proxy Statement to the holders of record of Common
Stock on the Record Date. The Annual Report to Stockholders does not constitute
a part of the proxy materials.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Meeting in accordance with the instructions contained therein. If a holder of
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted "for" the election of the
nominees for director named below. At the date of this Proxy Statement,
management of the Company knows of no other matters which are likely to be
brought before the Meeting. However, if any other matters should properly come
before the Meeting, the persons named in the enclosed proxy will have
discretionary authority to vote such proxy in accordance with their best
judgment on such matters. Checking the abstention box on the proxy card or
failing to return the proxy card has the same effect as voting against the
proposal. A stockholder who has executed and returned a proxy may revoke it at
any time before it is voted at the Meeting by executing and returning a proxy
bearing a later date, by filing written notice of such revocation with the
Secretary of the Company, stating that the proxy is revoked, or by attending the
Meeting and voting in person.
Under applicable stock exchange rules, brokers will not be permitted to
submit proxies authorizing a vote on a proposal in the absence of specific
instructions from beneficial owners. Broker non-votes will have the effect of
votes against a proposal. Under Delaware law, both abstentions and broker
non-votes contained on a returned proxy card will be considered present for
purposes of determining the existence of a quorum at the Meeting.
1
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers and employees
of the Company may solicit proxies from stockholders by personal interview,
telephone, telegram or otherwise. The Company will bear the costs of the
solicitation of proxies from its stockholders. Arrangements will also be made
with brokerage firms and other custodians, nominees and fiduciaries who hold the
voting securities of record for the forwarding of solicitation material to the
beneficial owners thereof. The Company will reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection therewith. The Company has also engaged the services of
Corporate Investor Communications, Inc., a proxy solicitation firm, to
distribute proxy solicitation materials to brokers, banks and other nominees and
to assist in the solicitation of proxies from its stockholders for an
anticipated fee of $3,000, plus mailing expenses in excess of $1,000.
OWNERSHIP OF COMMON STOCK
Principal Stockholders. The following table sets forth certain information
with respect to the Common Stock beneficially owned by persons who are known to
the Company to be the beneficial owners of more than five percent of the Common
Stock as of the Record Date. For purposes of this Proxy Statement, beneficial
ownership is defined in accordance with the rules of the Securities and Exchange
Commission (the "Commission") to mean generally the power to vote or dispose of
shares, regardless of any economic interest therein. The persons listed have
sole voting power and sole dispositive power with respect to all shares set
forth in the table unless otherwise specified in the footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
-------------------------
SHARES OWNED
DIRECTLY
NAME AND ADDRESS OF BENEFICIAL OWNER OR INDIRECTLY PERCENT
-------------------------------------------------------------- ------------- -------
<S> <C> <C>
First Reserve Corporation(2).................................. 9,474,431 18.5
475 Steamboat Road
Greenwich, CT 06830
FMR Corp. and Edward C. Johnson 3d(3......................... 5,859,724 11.4
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) Information with respect to beneficial ownership is based upon information
furnished by each stockholder or contained in filings made with the
Commission. To the Company's knowledge, none of such shares are deemed to be
beneficially owned because the holder has the right to acquire such shares
within 60 days.
(2) Based upon information contained in Amendment No. 2 to Schedule 13D dated
October 5, 1995, filed with the Commission. Represents shares owned by the
following funds (the "First Reserve Funds"), for each of which First Reserve
Corporation ("First Reserve") is the general partner: American Gas & Oil
Investors, Limited Partnership -- 1,684,532; AmGO II, Limited
Partnership -- 1,042,651; Am GO III, Limited Partnership -- 504,809; First
Reserve Secured Energy Assets Fund, Limited Partnership -- 1,963,409; First
Reserve Fund V, Limited Partnership -- 2,835,189; First Reserve Fund V-2,
Limited Partnership -- 708,470; and First Reserve Fund VI, Limited
Partnership -- 735,371. First Reserve, in its role as managing general
partner of the First Reserve Funds and acting on behalf of the First Reserve
Funds, has the power to cause each First Reserve Fund to dispose of or vote
shares of Common Stock held by it. The principal beneficial owners of the
common stock of First Reserve are its executive officers, including Messrs.
Hill and Macaulay.
(3) Based upon information contained in a joint Schedule 13G dated February 14,
1996, filed with the Commission by Edward C. Johnson 3d and by FMR Corp., on
behalf of itself and its subsidiaries, Fidelity Management & Research
Company (beneficial owner of 4,764,015 shares of the total outstanding
Common Stock), Fidelity American Special Situations Trust (beneficial owner
of 45,500 shares of the
2
total outstanding Common Stock) and Fidelity Management Trust (beneficial
owner of 1,095,709 shares of the total outstanding Common Stock). FMR Corp.
and Mr. Johnson each has sole dispositive power with respect to 5,859,724
shares. FMR Corp. has sole voting power with respect to 1,141,209 shares,
and Mr. Johnson has sole voting power with respect to none of the shares.
Security Ownership of Management. The following table sets forth certain
information with respect to the Company's Common Stock beneficially owned by
each of its directors and nominees for director, each of its executive officers
named in the Summary Compensation Table set forth in this Proxy Statement and by
all of its directors and executive officers as a group, as of the Record Date.
Such persons have sole voting power and sole dispositive power with respect to
all shares set forth in the table unless otherwise specified in the footnotes to
the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
------------------------
SHARES OWNED
DIRECTLY OR
NAME INDIRECTLY(2) PERCENT
--------------------------------------------------------------- ------------ -------
<S> <C> <C>
Directors and Nominees for Director
Thomas N. Amonett(3)......................................... 12,575 *
Philip Burguieres(4)......................................... 235,757 *
William E. Greehey(3)........................................ 20,588 *
John A. Hill(5).............................................. 9,474,431 18.5
John W. Johnson(3)(6)........................................ 81,171 *
William E. Macaulay(5)....................................... 9,474,431 18.5
Robert K. Moses, Jr.(3)(7)................................... 503,721 *
Robert L. Parker, Sr.(8)..................................... 43,426 *
R. Rudolph Reinfrank(8)...................................... 2,500 *
Roger M. Widmann(8).......................................... 2,500 *
Named Executive Officers
M.E. Eagles(9)............................................... 39,485 *
James R. Burke(10)........................................... 42,806 *
Norman W. Nolen(11).......................................... 41,959 *
H. Suzanne Thomas(12)........................................ 60,892 *
All Directors, Nominees and Executive Officers as a Group
(16 in number)(13)........................................... 10,603,140 20.6
</TABLE>
- ---------------
* Denotes ownership of less than one percent.
(1) Information with respect to beneficial ownership is based upon information
furnished by each director or executive officer of the Company or contained
in filings made with the Commission.
(2) Includes shares held under the Company's Employee Stock Purchase Plan (the
"ESPP") in the accounts of participants, as to which shares such
participants have sole voting power and no dispositive power prior to
withdrawal of such shares from the ESPP. Shares may be withdrawn from the
ESPP by a participant on March 31 of each year upon written notice by such
participant. Also includes shares held under the Company's 401(k) savings
plans in the accounts of participants, as to which shares such participants
have sole voting power and no dispositive power. Also includes shares
subject to acquisition within 60 days after the Record Date by such person
or group.
(3) Includes 3,000 shares subject to acquisition within 60 days pursuant to the
Director Option Plan (as defined hereinafter).
(4) Also Chairman, President and Chief Executive Officer of the Company.
Includes (a) 1,000 shares held by Mr. Burguieres' wife, with respect to
which he has no voting or dispositive power and (b) 500 shares held by Mr.
Burguieres' adult son supported by him, with respect to which he has sole
voting and dispositive power; Mr. Burguieres disclaims beneficial ownership
of all such shares. Also includes (a) 21,125 shares granted to Mr.
Burguieres pursuant to the Restricted Plan (as hereinafter defined),
3
with respect to which he has sole voting power and no dispositive power,
and (b) 117,501 shares subject to acquisition by Mr. Burguieres within 60
days pursuant to an Option Plan (as hereinafter defined).
(5) This figure represents the aggregate number of shares owned beneficially by
First Reserve, of which Mr. Hill is Chairman and Mr. Macaulay is President
and Chief Executive Officer. Both Messrs. Hill and Macaulay disclaim
beneficial ownership as to all such shares.
(6) Does not include 1,124,377 shares owned by Permian Mud Service, Inc.
("Permian"). Mr. Johnson is a director, officer and substantial beneficial
shareholder of Permian and therefore may be deemed to be a beneficial owner
of the shares of the Common Stock held by Permian; Mr. Johnson disclaims
beneficial ownership of all such shares. Includes (a) 6,000 shares held by
Mr. Johnson as a trustee of various trusts for his children, with respect
to which he has sole voting and dispositive power and (b) 120 shares held
as custodian for Mr. Johnson's children, with respect to which he has sole
voting and dispositive power; Mr. Johnson disclaims beneficial ownership of
all such shares.
(7) Includes (a) 625 shares held by Mr. Moses' adult son supported by him, with
respect to which Mr. Moses has no voting or dispositive power and (b) an
aggregate of 45,000 shares held in various trusts for Mr. Moses' children,
his brother and his sister, of which Mr. Moses is the trustee, with respect
to which Mr. Moses has sole voting and dispositive power; Mr. Moses
disclaims beneficial ownership of all such shares. Does not include (a) an
aggregate of 52,500 shares held in various trusts for Mr. Moses' children,
with respect to which Mr. Moses has no voting or dispositive power or (b)
1,851 shares held in a trust for Mr. Moses' son, with respect to which he
has no voting or dispositive power; since Mr. Moses is not a trustee of
such trusts and has no voting or dispositive power, he disclaims beneficial
ownership of all such shares.
(8) Includes 2,500 shares subject to acquisition within 60 days pursuant to the
Director Option Plan.
(9) Includes (a) 8,323 shares granted to Mr. Eagles pursuant to the Restricted
Plan with respect to which he has sole voting power and no dispositive
power and (b) 17,501 shares subject to acquisition by Mr. Eagles within 60
days pursuant to an Option Plan.
(10) Includes (a) 4,907 shares granted to Mr. Burke pursuant to the Restricted
Plan with respect to which he has sole voting power and no dispositive
power and (b) 18,833 shares subject to acquisition by Mr. Burke within 60
days pursuant to an Option Plan.
(11) Includes (a) 4,532 shares granted to Mr. Nolen pursuant to the Restricted
Plan with respect to which he has sole voting power and no dispositive
power and (b) 21,750 shares subject to acquisition by Mr. Nolen within 60
days pursuant to the Option Plans.
(12) Includes (a) 4,532 shares granted to Ms. Thomas pursuant to the Restricted
Plan with respect to which she has sole voting power and no dispositive
power and (b) 22,000 shares subject to acquisition by Ms. Thomas within 60
days pursuant to the Option Plans.
(13) See footnotes (3) through (12). Also includes 26,294 shares subject to
acquisition by certain executive officers not named in the table within 60
days pursuant to the Option Plans.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Restated Certificate of Incorporation and By-Laws provide
that the Board of Directors will consist of not less than six nor more than 15
persons, the exact number to be fixed from time to time by the Board of
Directors. The Board of Directors has fixed the authorized number of directors
at ten.
Directors are divided into three classes, as nearly equal in number as
possible. Each class is elected for a term of three years, so that the term of
office of one class of directors expires at every Annual Meeting.
NOMINEES FOR DIRECTOR
The Board of Directors has nominated three persons for election as
directors in the class whose term of office will expire at the Company's 1999
Annual Meeting of Stockholders or until their respective successors
4
are elected and qualified. The nominees are Philip Burguieres, William E.
Greehey and Roger M. Widmann. Messrs. Burguieres, Greehey and Widmann are
currently directors of the Company whose terms will expire at the Meeting. It is
the intention of the persons named in the enclosed proxy to vote such proxy for
the election of such nominees.
Management of the Company does not contemplate that any of such nominees
will become unavailable for any reason, but if that should occur before the
Meeting, proxies that do not withhold authority to vote for directors will be
voted for another nominee, or other nominees, in accordance with the best
judgment of the person or persons appointed to vote the proxy.
The enclosed form of proxy provides a means for the holders of Common Stock
to vote for all of the nominees listed therein, to withhold authority to vote
for one or more of such nominees or to withhold authority to vote for all of
such nominees. Each properly executed proxy received in time for the Meeting
will be voted as specified therein, or if a stockholder does not specify in his
or her executed proxy how the shares represented by his or her proxy are to be
voted, such shares shall be voted for the nominees listed therein or for other
nominees as provided above.
The following table sets forth for each nominee for election as director
all positions with the Company held by him, his age as of the Record Date and
the date on which he first became a director of the Company. Also set forth
below is information on his principal occupation. Unless otherwise indicated,
each person has held the position shown, or has been associated with the named
employer in an executive capacity, for more than five years.
<TABLE>
<CAPTION>
NAME COMPANY POSITION AGE DIRECTOR SINCE
------------------------- ------------------------------------- --- ----------------
<S> <C> <C> <C>
Philip Burguieres........ Director, Chairman, President and 52 April 23, 1991
Chief Executive Officer
William E. Greehey....... Director 59 May 25, 1984
Roger M. Widmann......... Director 56 October 5, 1995
</TABLE>
Mr. Burguieres has served as Chairman of the Board of the Company since
December 1992, and President and Chief Executive Officer and a director of the
Company since April 1991. From January 1990 to November 1990, he was Chairman of
the Board, President and Chief Executive Officer of Panhandle Eastern
Corporation, a Houston, Texas-based company that operates interstate natural gas
transmission systems. Mr. Burguieres held various positions with Cameron Iron
Works, a Houston, Texas-based company engaged in the manufacture of oilfield
equipment, from 1971 through November 1989. He served as Chairman of the Board
of Cameron from January 1987 to November 1989, Chief Executive Officer from
January 1986 to November 1989, and President and Chief Operating Officer from
April 1981 to November 1989. Mr. Burguieres has also been a director of
McDermott International, Inc., a New Orleans, Louisiana-based company engaged in
the fabrication of oilfield equipment, since March 1990; and a director of Texas
Commerce Bancshares, a Houston, Texas-based banking organization, since March
1987.
Mr. Greehey is Chairman of the Board and Chief Executive Officer of Valero
Energy Corporation, a San Antonio, Texas-based company that refines, trades and
markets oil and gas and manages natural gas transmission operations. He has also
been a director of Santa Fe Energy Resources, Inc., a Houston, Texas-based
company engaged in oil and gas exploration and production, since March 1991.
Mr. Widmann has been Senior Managing Director of Castle, Harlan & Widmann
Energy Partners, L.L.C. since September 1995. He held various senior positions
with Chemical Bank from 1986 until August 1995. He is also a director of Lydall,
Inc., a Connecticut-based corporation engaged in the manufacture of engineered
fiber materials, and previously was a member of the Board of Advisors of various
First Reserve Funds from 1981 through December 1995. Mr. Widmann was appointed
to the Company's Board of Directors on October 5, 1995, when the Company merged
with Enterra Corporation ("Enterra"). He was a director of Enterra from August
1994, when Enterra acquired Total Energy Services, Inc. ("Total"), and
previously served as a director of Total since September 1993.
5
INFORMATION CONCERNING OTHER DIRECTORS
The following table sets forth certain information for those directors
whose present terms will continue after the Meeting. Also set forth below is
information on his principal occupation. Unless otherwise indicated, each person
has held the position shown, or has been associated with the named employer in
an executive capacity, for more than five years.
<TABLE>
<CAPTION>
NAME COMPANY POSITION AGE DIRECTOR SINCE TERM EXPIRES
-------------------------- ---------------- --- ------------------ -------------
<S> <C> <C> <C> <C>
Thomas N. Amonett......... Director 52 May 27, 1974 1998
John A. Hill.............. Director 54 October 5, 1995 1997
John W. Johnson........... Director 51 November 19, 1991 1997
William E. Macaulay....... Director 50 October 5, 1995 1997
Robert K. Moses, Jr....... Director 55 May 12, 1978 1998
Robert L. Parker, Sr...... Director 72 October 5, 1995 1998
R. Rudolph Reinfrank...... Director 40 October 5, 1995 1998
</TABLE>
Mr. Amonett has served as President of Reunion Resources Company
(previously called Buttes Gas and Oil Company), a Houston, Texas-based company
primarily engaged in the manufacture of high volume, precision plastic products
and the providing of engineered plastic services and also oil and gas
exploration, development and production and wine grape vineyard development,
since July 1992. Previously he was Of Counsel with Fulbright & Jaworski L.L.P.,
Attorneys at Law, Houston, Texas, from September 1986 to July 1992. Prior
thereto, he was President and a director of Houston Oil Fields Company, an oil
and gas exploration and production company, from November 1982 to September
1986. He served as Chairman of the Board of the Company from May 1986 to May
1989. He has also served as a director of PetroCorp, Incorporated, a Houston,
Texas-based company engaged in the exploration and production of oil and natural
gas, since November 1993; and as a director of Team, Inc., a Houston,
Texas-based company engaged in environmental services, since 1994.
Mr. Hill is Chairman of the Board of First Reserve. He is a trustee of the
Putnam Funds and is a director of Snyder Oil Corporation, a Texas-based
corporation engaged in oil and gas exploration and production; Maverick Tube
Corporation, a Missouri corporation engaged in the manufacture of oilfield
tubulars, line pipe and structural steel; and PetroCorp, Incorporated, a
Houston, Texas-based corporation engaged in oil and gas exploration and
production, the last two being companies in which certain First Reserve Funds
have a substantial equity interest. Mr. Hill was appointed to the Board of
Directors on October 5, 1995, when the Company merged with Enterra. He was a
director of Enterra from August 1994, when Enterra acquired Total, and
previously served as a director of Total since June 1993.
Mr. Johnson is President and a director of Permian Mud Service, Inc., a
Houston, Texas-based company that manufactures and sells oilfield production
chemicals. He was a director of Petroleum Equipment Tools Co. ("Petco") from
March 1971 to November 1991, when Petco was acquired by merger with the Company.
He has also served as Chairman of the Board of Southwest Bank of Texas, N.A., a
Houston, Texas-based banking organization, since October 1982.
Mr. Macaulay is President and Chief Executive Officer of First Reserve. He
is a director of Maverick Tube Corporation, a Missouri corporation engaged in
the manufacture of oilfield tubulars, line pipe and structural steel; and
Hugoton Energy Corporation, a Kansas corporation engaged in oil and gas
exploration and production, each being a company in which certain First Reserve
Funds have a substantial equity interest. Mr. Macaulay was appointed to the
Company's Board of Directors on October 5, 1995, when the Company merged with
Enterra. He was appointed a director and Vice Chairman of Enterra in August
1994, when Enterra acquired Total, and previously served as a director of Total
since June 1993.
Mr. Moses is a private investor, principally in the oil and gas exploration
and oilfield services business, in Houston, Texas. He served as Chairman of the
Board of the Company from May 1989 to December 1992.
Mr. Parker is Chairman of Parker Drilling Company, a Tulsa, Oklahoma-based
contract drilling company that provides services worldwide to the oil and
natural gas industry. Previously, he also served as
6
Chief Executive Officer of that company. He is also a director of Bank of
Oklahoma Finance Corporation, Tulsa, N.A., a bank holding company; MAPCO, Inc.,
a diversified energy company; and Clayton Williams Energy, Inc., a company
engaged in exploration and production of oil and natural gas. Mr. Parker was
appointed to the Company's Board of Directors on October 5, 1995, when the
Company merged with Enterra. He served as a director of Enterra since 1980.
Mr. Reinfrank has been Managing Director of the Davis Companies and a
Managing General Partner of Davis Reinfrank Company, private investment firms,
since May 1993. From January 1988 through June 1993, Mr. Reinfrank was Executive
Vice President of Shamrock Holdings, Inc. From January 1990 through December
1992, Mr. Reinfrank also served as Managing Director of Trefoil Investors, Inc.
and Shamrock Capital Advisors, Inc. He is also a director of Parker Drilling
Company, a Tulsa, Oklahoma-based company that provides contract drilling
services worldwide to the oil and natural gas industry. Mr. Reinfrank was
appointed to the Company's Board of Directors on October 5, 1995, when the
Company merged with Enterra. He served as a director of Enterra since September
1992 and previously from 1987 through 1991.
FAMILY RELATIONSHIPS
There are no family relationships between any two directors or executive
officers.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held nine meetings during 1995. The
Board of Directors has an Audit Committee, a Compensation and Stock Plans
Committee (the "Compensation Committee") and an Executive and Nominating
Committee (the "Executive Committee").
The Audit Committee reviews with the Company's independent public
accountants the plan, scope and results of their annual audit and reviews the
planned internal audits, procedures followed and results of such audits
performed by the Company's internal audit department. The Audit Committee
selects an accounting firm as the independent auditors of the Company for each
fiscal year, subject to ratification by the full Board of Directors, and
considers in general all audit and non-audit services provided by such firm to
the Company. The Audit Committee was composed of Messrs. Amonett (Chairman),
Thomas C. Brown and W. Randolph Smith prior to October 5, 1995, and of Messrs.
Amonett (Chairman), Hill and Reinfrank on and after October 5, 1995. The Audit
Committee held two meetings during 1995.
The Compensation Committee approves all executive compensation, except the
compensation of the Chief Executive Officer, which is recommended by the
Compensation Committee but approved by the Board of Directors (excluding Mr.
Burguieres). The Compensation Committee also approves employee benefit plans,
establishes directors' fees (subject to approval by the Board of Directors) and
administers the Company's various stock option plans and other stock based
plans, various plans for which certain members of management are eligible and
certain plans for which non-employee directors are eligible. The Compensation
Committee was composed of Messrs. Greehey (Chairman), Brown and Moses prior to
October 5, 1995, and of Messrs. Greehey (Chairman), Moses and Widmann on and
after October 5, 1995. The Compensation Committee held one meeting during 1995
and acted from time to time pursuant to unanimous written consent.
The Executive Committee is authorized to act on all corporate matters for
which applicable law does not require participation by the full Board of
Directors. In practice, the Executive Committee generally acts in place of the
full Board when scheduling makes it impracticable to assemble the full Board.
All actions taken by the Executive Committee must be reported at the next
meeting of the full Board of Directors. The Executive Committee also evaluates
the size and composition of the Board of Directors, makes recommendations as to
candidates for election to the Board of Directors and recommends the structuring
of various committees of the Board. The Executive Committee does not ordinarily
consider director nominees recommended by stockholders. The Executive Committee
was composed of Messrs. Moses (Chairman), Amonett, Burguieres, Greehey and
Johnson prior to October 5, 1995, and of Messrs. Moses (Co-Chairman), Macaulay
(Co-Chairman), Burguieres, Johnson and Parker on and after October 5, 1995. The
Executive Committee held one meeting during 1995.
7
ATTENDANCE AT MEETINGS
Each of the directors of the Company attended at least 75 percent of the
aggregate of the meetings of the Board of Directors and committees of which he
was a member, except for Mr. Greehey who attended 70 percent of the meetings of
the Board of Directors and 100 percent of the meetings of the Executive
Committee and the Compensation Committee.
EXECUTIVE COMPENSATION
COMPENSATION AND STOCK PLANS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company, which
is composed of three independent outside directors, is responsible for setting
policies with respect to compensation of the Company's executive officers.
Compensation Philosophy and Overall Objectives of the Executive
Compensation Program. The Company's executive compensation program is designed
to attract, motivate and retain the executives needed to improve the Company's
performance and maximize stockholder value. Toward that end, the Compensation
Committee attempts to provide the Company's executives with a total target
compensation package (which includes base salary, annual incentive bonus,
long-term, equity-based incentive compensation and other executive benefits)
that, at expected levels of corporate performance, is competitive with packages
provided to executives of companies similar to the Company who hold comparable
positions or have similar qualifications.
The Compensation Committee determines competitive levels of compensation
for executive positions based on information obtained from compensation surveys
(general industry), proxy statements for a group of competitor companies
approved by the Compensation Committee (the "compensation peer group") and
recommendations of an independent compensation consultant retained by the
Company. Although some of the same companies are included in both groups, the
compensation peer group is not the same as the group of companies comprising the
S&P Oil Well Equipment & Services Stock Index used in the Performance Graph
included later in this Proxy Statement. In selecting the companies to survey for
compensation purposes, the Compensation Committee focused primarily on companies
with U.S. and international business operations; similar revenues, market
capitalization, employment levels and lines of business (including
manufacturing); and a management style and corporate culture similar to the
Company's.
The Company's pay-for-performance philosophy has resulted in compensation
packages that consist in large part of variable, performance-based components,
such as bonuses and stock-based awards, which can increase or decrease to
reflect changes in corporate or individual performance. Total target
compensation is slightly below the market median (50th percentile) based on
general industry data; this information is not available for the compensation
peer group. Actual total compensation is competitive with the market median
based on general industry data and below the market median for the compensation
peer group.
Executive Compensation Program Components. The Company uses cash- and
equity-based compensation to achieve its pay-for-performance philosophy and to
reward short- and long-term performance. The mix of base salary, annual
incentives and long-term incentives is reviewed periodically to ensure the
approximate mix.
Base Salary. The Compensation Committee's philosophy is to control fixed
compensation costs and to place greater emphasis on incentive compensation based
on results. The Company's base salaries are generally slightly below the market
median (50th percentile) for the general industry or marketplace salaries and
the salaries of the compensation peer group. Salaries for executives are
reviewed periodically (not more often than annually) and revised, if
appropriate, based on a variety of factors, including individual performance and
responsibility, general levels of market salary increases and the Company's
overall financial results, with emphasis on competitive salaries in the
marketplace.
Incentive Compensation. The Compensation Committee's philosophy is to use a
combination of annual and long-term compensation methods, including grants of
Common Stock under various plans. The
8
Compensation Committee believes that key employees should have a significant
portion of their total compensation paid in shares of Common Stock, as
significant equity ownership in the Company focuses executives on managing the
Company from the long-term perspective of an owner, with emphasis on enhanced
shareholder value. Key employees are strongly encouraged to retain shares of
Common Stock granted as part of their compensation.
Annual incentive bonuses -- Annual incentive bonuses are based on the
achievement of specified corporate goals. Targeted corporate goals are
established at the outset of each fiscal year by the Company's management and
are approved by the Compensation Committee. There is no specific weighting
assigned to these goals. A range of potential annual incentive awards, based on
general industry averages, has been established for each executive officer. The
Company's target annual incentive award levels are generally consistent with or
slightly below the median marketplace awards. Annual incentive bonuses may be
paid in cash, shares of Common Stock or a combination of cash and shares of
Common Stock.
The 1995 targeted corporate goals for earnings per share, earnings before
depreciation, interest and taxes, capital spending and selling, general and
administrative expenses as a percentage of revenues were exceeded, and the
Company achieved 96 percent of the 1995 targeted operating cash flow goal. The
Compensation Committee also considered the Company's relative performance
against other companies in the oilfield services industry, noting that the
Company ranked in the top 15 percent of 26 petroleum services companies on
various performance measures, including return on total capital, return on
revenues, return on equity and earnings before depreciation, interest and taxes.
Accordingly, annual incentive awards were made to the executive officers named
in the Summary Compensation Table amounting to approximately 81 percent of the
aggregate 1995 annual base salaries of such individuals. Such bonuses were paid
in a combination of cash and shares of Common Stock, except Mr. Burguieres,
whose entire bonus was paid in shares of Common Stock.
Long-term, equity-based incentive compensation -- The Company currently
provides long-term incentive compensation to executives in two forms: stock
options and restricted stock grants. Prior to March 1992, stock appreciation
rights ("SARs") were granted in tandem with stock options under the Company's
Stock Appreciation Rights Plan (the "SAR Plan"). Each type of incentive is
intended to track the Company's performance and reward achievement of long-term
objectives through stock price appreciation. The Company's overall stock option
and restricted stock grant levels are established by considering market data on
grant levels and an appropriate overall level of shares reserved for such plans
in the market. The Compensation Committee considers stock options or restricted
stock awards previously granted, industry practices, the executive's
accountability level and an assumed potential stock value when determining the
amount of individual long-term incentive compensation.
Options to purchase shares of Common Stock reward participants for
generating appreciation in the Company's stock price. Stock options are granted
under the Company's 1987 Stock Option Plan or the 1991 Stock Option Plan (an
"Option Plan" or, collectively, the "Option Plans") to key employees of the
Company, including the executive officers named in the Summary Compensation
Table, at the fair market value of the Common Stock on the date of grant. These
options vest in three equal installments beginning one year after the date of
grant and are exercisable for a term of five years or 10 years. The optionees
receive value from the options only if the Company's stock price appreciates
from the price on the grant date. As with options, holders of SARs (granted
prior to 1992, but still in effect) receive value only if the stock price
appreciates.
The Company's Restricted Stock Incentive Plan (the "Restricted Plan") is
designed to meet several objectives, which include increasing the actual share
ownership position of key executives, providing a strong emphasis on maintaining
and enhancing shareholder value and retaining executives during different stages
of the business cycle. Under the Restricted Plan, eligible employees are granted
shares of Common Stock that are subject to certain ownership restrictions. The
shares are non-transferable during the restricted period and are subject to
substantial risk of forfeiture if certain conditions are not met. The Restricted
Plan provides that restrictions will cease, at the Compensation Committee's
discretion, after continued employment for a specified period of time or upon
the occurrence of certain established goals. Ownership restrictions on shares
granted prior to 1993 will lapse after continued employment for a specified
period of time; for shares granted beginning in 1993, restrictions on certain
shares will lapse after continued employment for a specified period of
9
time and restrictions will lapse on the remaining shares upon the earlier of
certain corporate performance goals being achieved or after eight years,
whichever occurs first. The restricted stock is performance sensitive, as the
value of the shares granted varies based on the Company's stock price.
Other Benefits. The Company maintains various 401(k) savings plans,
pursuant to which the Company contributes various amounts based on each
employee's base salary as a matching contribution, in cash or shares of Common
Stock. The Company contributes two percent of base salary for each of the
executive officers named in the Summary Compensation Table. The Company also has
the ability to make discretionary contributions under these plans. The Company
maintains the Pension Plan (as defined hereinafter) for certain of its
employees, including the executive officers named in the Summary Compensation
Table. The Company also maintains certain plans that provide benefits to certain
executives and other managers that are supplemental to the benefits under the
401(k) savings plans and the Pension Plan.
Discussion of 1995 Compensation for the Chief Executive Officer. As
described above, the Company determines total compensation for all executives,
including Mr. Burguieres, considering both a pay-for-performance philosophy and
market rates of compensation. In determining Mr. Burguieres' compensation for
1995, the Compensation Committee considered the Company's financial performance
and corporate accomplishments, individual performance and compensation data of
general industry companies and the compensation peer group. The Compensation
Committee also reviewed more subjective factors, such as development and
implementation of a corporate strategy to enhance shareholder value. With
respect to establishing Mr. Burguieres' 1995 salary, emphasis was placed on
competitive salaries in the market place. With respect to Mr. Burguieres' 1995
bonus, the Compensation Committee considered the achievement of the Company's
1995 targeted corporate goals and the Company's relative performance against its
peers (as described hereinabove). With respect to the stock option and
restricted share grants, the Compensation Committee placed emphasis on grant
levels of general industry and the compensation peer group. Mr. Burguieres was
also paid in 1995 a special fee of $1,200,000 related to his efforts in
connection with the October 1995 merger of Weatherford International
Incorporated and Enterra Corporation. This amount was in addition to Mr.
Burguieres' annual incentive bonus.
Mr. Burguieres received a 7.7 percent salary increase for 1995. Mr.
Burguieres' bonus for 1995 was $420,000, paid in shares of Common Stock. This
award is equal to 100 percent of his 1995 base salary. Mr. Burguieres received
in March 1995 an option under an Option Plan to purchase 55,000 shares of Common
Stock and 28,000 shares under the Restricted Plan.
Policy Regarding Section 162(m) of the Internal Revenue Code. Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), generally
limits corporate deductions to $1,000,000 for compensation paid to a person who
on the last day of any fiscal year beginning on or after January 1, 1994 is
either the Chief Executive Officer or among the four most highly compensated
executive officers other than the Chief Executive Officer, provided there is an
exception for qualified performance-based compensation. Section 162(m) became
applicable to the Company, effective January 1, 1994.
The Option Plans currently qualify as performance-based compensation under
Internal Revenue Service rules. The Company's annual incentive bonuses and
awards granted under the Restricted Plan are based on performance measures, but
do not qualify as performance-based under the tax regulations. The Compensation
Committee requested and received a review by the independent compensation
consultant retained by the Company of the Company's compensation plans and
similar plans maintained by companies in the compensation peer group as regards
Section 162(m). The Compensation Committee has determined that is likely that
only one of the Company's executive officers will receive compensation in excess
of $1,000,000 in the near future. Accordingly, the Compensation Committee will
not necessarily limit executive compensation to compensation that is deductible
under Section 162(m). The Compensation Committee will continue to evaluate this
matter and consider alternatives to preserve the deductibility of compensation
payments and benefits to the extent reasonably practicable and consistent with
the Company's compensation objectives.
10
This Compensation Committee Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION AND STOCK PLANS COMMITTEE OF THE BOARD OF DIRECTORS
William E. Greehey, Chairman
Robert K. Moses, Jr.
Roger M. Widmann
SUMMARY COMPENSATION TABLE
The following table sets forth with respect to the Chief Executive Officer
and the four most highly compensated executive officers of the Company as to
whom total annual salary and bonuses for the year ended December 31, 1995
exceeded $100,000:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------------------------
(E) (F) (G) (H)
(A) (D) OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL (B) (C) BONUS COMPENSATION STOCK AWARDS UNDERLYING COMPENSATION
POSITION YEAR SALARY($) ($)(1) ($)(2) ($)(3) OPTIONS(#)(4) ($)(5)(6)
- ---------------------------- ---- --------- ------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip Burguieres 1995 420,000 420,000 -0- 259,000(7) 27,500 1,849,250(8)
Chairman of the 1994 390,000 312,000 -0- 246,875 27,500 9,653
Board, President and 1993 364,000 300,000 -0- 236,250 27,500 786
Chief Executive Officer
M.E. Eagles(9) 1995 245,000 180,000 -0- 101,750(11) 10,000 260,676
Senior Vice President 1994 230,000 150,000 50,638(10) 95,788 10,000 4,680
1993 183,300 120,000 -0- 157,500 7,500 -0-
James R. Burke 1995 182,000 125,000 -0- 74,000(12) 7,500 189,540
Senior Vice President 1994 168,000 100,000 -0- 53,325 6,000 4,880
1993 130,000 85,000 -0- 51,188 5,500 1,733
Norman W. Nolen 1995 155,000 108,000 -0- 55,500(13) 6,000 161,430
Senior Vice 1994 147,000 90,000 -0- 53,325 6,000 4,340
President, Chief 1993 140,000 85,000 -0- 51,188 5,500 2,800
Financial Officer and
Treasurer
H. Suzanne Thomas 1995 155,000 108,000 -0- 55,500(14) 6,000 161,435
Senior Vice 1994 147,000 90,000 -0- 53,325 5,500 4,340
President, Secretary 1993 140,000 85,000 -0- 51,188 5,500 2,800
and General Counsel
</TABLE>
- ---------------
(1) For 1995, Mr. Burguieres received 100% of his bonus in shares of Common
Stock issued under the Company's Executive Incentive Stock Bonus Plan (the
"Bonus Plan"), while other executives received 75% in cash and 25% in
shares of Common Stock. Bonuses paid for 1994 were paid in cash. For 1993,
Mr. Burguieres received 60% of his bonus in cash and 40% in shares of
Common Stock issued under the Bonus Plan, while other executives received
80% in cash and 20% in shares of Common Stock.
(2) Unless otherwise indicated, does not include the value of perquisites and
other benefits as the aggregate amount of such compensation for each named
officer does not exceed the lesser of $50,000 or 10% of that officer's
total reported annual salary and bonus.
(3) Dollar amount shown equals number of shares issued under the Restricted
Plan multiplied by the closing stock price on grant date. Dividends would
be paid on these shares in the event dividends are paid on the Common
Stock, which is not anticipated in the foreseeable future.
(4) Adjusted to reflect the one-for-two reverse stock split of the Common Stock
effected on October 5, 1995 (the "Split").
11
(5) Includes the amount of the Company match and discretionary contribution for
each executive officer under the Company's 401(k) Savings Plan and the
Supplemental Savings Plan, to the extent the officer was eligible and
participated in such plans.
(6) Includes the payment made to each executive officer in exchange for the
waiver of certain rights under each officer's Severance Agreement (as
hereinafter defined) required pursuant to the terms of the merger agreement
between Weatherford International Incorporated and Enterra Corporation (the
"Merger Agreement"). See "Employment Contracts and Termination of
Employment and Change of Control Arrangements".
(7) Held an aggregate of 17,000 shares under the Restricted Plan still subject
to restrictions as of December 31, 1995 with an aggregate total value of
$312,000; restrictions have lapsed, or will lapse, on 1,875 shares on each
of March 18, 1996 and 1997; on 6,250 shares on February 6, 1996; and on
1,750 shares on each of March 16, 1996, 1997, 1998 and 1999.
(8) Includes $1.2 million paid pursuant to the terms of the Merger Agreement.
(9) Joined the Company on March 1, 1993.
(10) Includes $30,058 paid in connection with the named executive's relocation
and $20,580 reimbursement for the payment of taxes thereon.
(11) Held an aggregate of 7,650 shares under the Restricted Plan still subject
to restrictions as of December 31, 1995 with an aggregate total value of
$137,650; restrictions have lapsed, or will lapse, on 1,250 shares on each
of March 18, 1996 and 1997; on 2,400 shares on February 6, 1996; on 687
shares on each of March 16, 1996 and 1997; and on 688 shares on each of
March 16, 1998 and 1999.
(12) Held an aggregate of 4,163 shares under the Restricted Plan still subject
to restrictions as of December 31, 1995 with an aggregate total value of
$76,467; restrictions have lapsed, or will lapse, on 406 shares on March
18, 1996; on 407 shares on March 18, 1997; on 1,350 shares on February 6,
1996; and on 500 shares on each of March 16, 1996, 1997, 1998 and 1999.
(13) Held an aggregate of 3,663 shares under the Restricted Plan still subject
to restrictions as of December 31, 1995 with an aggregate total value of
$67,217; restrictions have lapsed, or will lapse, on 406 shares on March
18, 1996; on 407 shares on March 18, 1997; on 1,350 shares on February 6,
1996; and on 375 shares on each of March 16, 1996, 1997, 1998 and 1999.
(14) Held an aggregate of 3,663 shares under the Restricted Plan still subject
to restrictions as of December 31, 1995 with an aggregate total value of
$67,217; restrictions have lapsed, or will lapse, on 406 shares on March
18, 1996; on 407 shares on March 18, 1997; on 1,350 shares on February 6,
1996; and on 375 shares on each of March 16, 1996, 1997, 1998 and 1999.
STOCK OPTION PLANS AND SAR PLAN
The Company currently maintains the Option Plans, such plans having
substantially the same terms and conditions, pursuant to which options to
purchase shares of the Company's Common Stock are outstanding or available for
future grants. All options to purchase Common Stock are granted by the
Compensation Committee, except for options granted to the Chief Executive
Officer, which are recommended by the Compensation Committee and approved by the
Board of Directors (excluding Mr. Burguieres).
All stock options have a term of five or 10 years and are exercisable at a
rate of one-third each year beginning one year after the grant date. The
exercise price is payable in cash, shares of Common Stock (subject to certain
limitations), broker-financed cashless exercises or some combination of these
approaches. No employee has any rights as a stockholder of any shares subject to
an option until the exercise price has been paid and the shares issued to the
employee.
The Company maintains the SAR Plan pursuant to which the Company could,
prior to March 20, 1992, grant SARs to eligible employees of the Company. The
SAR Plan was originally implemented to allow executives and certain other stock
option plan participants to tender their options to the Company in exchange for
cash equal to the "spread" in the option (in other words, the difference between
the market value of the Common Stock on the date of grant and the market value
of the Common Stock on the date the option is
12
exercised). Effective March 19, 1992, the SAR Plan was amended to provide that
no new awards may be made pursuant to such plan after that date. SARs awarded
under the SAR Plan prior to that date remain in effect and are not affected by
the amendment.
The following table sets forth certain information regarding stock options
granted during fiscal year 1995 to the persons named in the Summary Compensation
Table above. The hypothetical present values on the date of grant of stock
options granted in 1995 shown below are presented pursuant to the Commission's
rules and are calculated under a modified Black-Scholes Model (the "Model") for
pricing options. This hypothetical value of options trading in the stock market
bears little relationship to the compensation cost to the Company or potential
gain realized by an executive officer. The actual amount, if any, realized upon
exercise of stock options will depend upon the market price of the Company's
Common Stock relative to the exercise price per share of Common Stock at the
time the stock option is exercised. There is no assurance that the hypothetical
present value of stock options reflected in this table actually will be
realized.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANT VALUE
- ---------------------------------------------------------------------------------------------- -------------
(A) (B) (C) (D) (E) (F)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS GRANTED EMPLOYEES IN BASE PRICE PRESENT VALUE
NAME (#)(1)(2) FISCAL YEAR ($/SHARE)(1)(3) EXPIRATION DATE ($)
- -------------------- --------------- ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Philip Burguieres... 27,500 3.8 18.50 3/15/2005 323,412
M. E. Eagles........ 10,000 1.4 18.50 3/15/2005 117,605
James R. Burke...... 7,500 1.0 18.50 3/15/2005 88,203
Norman W. Nolen..... 6,000 .8 18.50 3/15/2005 70,563
H. Suzanne Thomas... 6,000 .8 18.50 3/15/2005 70,563
</TABLE>
- ---------------
(1) Adjusted to reflect the Split.
(2) Options granted in 1995 are exercisable starting 12 months after the grant
date, with one-third of the shares covered thereby becoming exercisable at
that time and an additional one-third becoming exercisable on each
successive anniversary date, with full vesting occurring on the third
anniversary date. Under the terms of the Option Plans, the Compensation
Committee retains the discretion, subject to plan limitations, to modify the
terms of outstanding options, including the exercise price and expiration
date in certain events.
(3) The exercise price and tax withholding obligations related to the exercise
may be paid by delivery of already-owned shares of Common Stock or by
offsetting a portion of the underlying shares, subject to certain
conditions.
(4) The present values on grant date are calculated under the Model modified to
give effect to the expected dividend rate of the Common Stock and
non-transferability factors such as timing, vesting, liquidity and
freely-traded status. The Model is a mathematical formula used to value
options traded on stock exchanges. This formula considers a number of
factors to estimate the option's present value, including the Common Stock's
volatility (based on 36 months of historical stock price trading data),
dividend rate (0%), exercise period of the option (10 years), interest rate
(risk free rate of 7.37%) and vesting schedule (adjusted for risk of
forfeiture during three-year vesting period).
13
The following table shows aggregate option and SAR exercises during fiscal
year 1995 and December 31, 1995 values for the Chief Executive Officer and the
four most highly compensated executive officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(D)
NUMBER OF SECURITIES (E)
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
(B) OPTIONS/SARS AT IN-THE-MONEY
SHARES (C) FY-END(2)(#) OPTIONS/SARS AT FY-END($)(1)
(A) ACQUIRED ON VALUE ----------------------------- --------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------------- -------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip Burguieres... 0 0 90,001/31,250 54,999/0 1,494,595/583,125 572,904/0
James R. Burke...... 0 0 12,500/5,125 13,333/0 203,893/102,807 138,370/0
M.E. Eagles......... 0 0 8,334/0 19,166/0 96,047/0 197,389/0
Norman W. Nolen..... 0 0 15,917/5,125 11,833/0 252,035/92,495 122,808/0
H. Suzanne Thomas... 0 0 16,167/7,750 11,833/0 262,691/140,465 122,808/0
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise date or year-end, as
appropriate, minus the exercise or base price of "in-the-money"
options/SARs.
(2) Adjusted to reflect the Split.
DEFINED BENEFIT PLAN
The Company maintains a defined benefit plan called the Weatherford Enterra
Pension Plan (the "Pension Plan") for U.S. employees of the Company and certain
of its subsidiaries, including executive officers, which was adopted as of
January 1, 1992.
The following table sets forth the estimated annual benefit payable upon
normal retirement at age 65 as a straight-life annuity to persons in specified
remuneration and years of service classifications.
<TABLE>
<CAPTION>
PENSION PLAN TABLE(1)
- ----------------------------------------------------------------------------------------------
ASSUMED
10-YEAR YEARS OF CREDITED SERVICE
FINAL ------------------------------------------------------------
AVERAGE PAY 15 20 25 30 35
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000....................... $ 13,500 $ 18,000 $ 22,500 $ 27,000 $ 31,500
200,000....................... 27,000 36,000 45,000 54,000 63,000
300,000....................... 40,500 54,000 67,500 81,000 94,500
400,000....................... 54,000 72,000 90,000 108,000 126,000
500,000....................... 67,500 90,000 112,500 135,000 157,500
600,000....................... 81,000 108,000 135,000 162,000 189,000
700,000....................... 94,500 126,000 157,500 189,000 220,500
800,000....................... 108,000 144,000 180,000 216,000 252,000
</TABLE>
- ---------------
(1) Estimated annual benefits shown above are overstated as they reflect the
higher accrual rate (.9%) based on final average pay both over and under a
participant's Covered Compensation (as defined below). Generally the accrual
rate is .45% plus an additional .45% for pay in excess of the lesser of 125%
of the participant's Covered Compensation and the current taxable wage base.
"Covered Compensation" is the average of the Social Security Wage Bases
during the 35-year period ending with the year the employee reached Social
Security Retirement Age. Benefits are not subject to deductions for Social
Security benefits or any other offset amounts. The pension limits imposed by
the Code are not reflected in this table.
The remuneration covered by the Pension Plan consists only of the salaries
paid to Pension Plan participants, as set forth in column (c) of the Summary
Compensation Table. Bonuses, including the bonuses set forth in column (d) of
that table, are excluded. Credited service for purposes of the Pension Plan is
all service with the Company after January 1, 1992. Each of Messrs. Burguieres,
Burke and Nolen and
14
Ms. Thomas has four years of credited service under the Pension Plan, and Mr.
Eagles has three years of credited service under the Pension Plan. The Pension
Plan provides for (i) normal retirement at age 65 with an early retirement
option at age 55 for eligible employees, (ii) a vested benefit after five years
of vesting service, (iii) retirement income of approximately 32 percent of final
average earnings after 35 years of credited service and (iv) spouse and
disability benefits.
The Company also maintains the Supplemental Executive Retirement Plan (the
"SERP"), adopted January 1, 1992, to supplement the retirement benefit to be
paid pursuant to the Pension Plan to certain employees designated by the
Compensation Committee, including the executive officers named in the Summary
Compensation Table. During 1995, the Code limited the pension under the Pension
Plan to $120,000 and limited the compensation used to calculate the pension to
$150,000; these amounts are indexed annually to the changes in Social Security
benefits. If the pension to certain employees would be limited by Section 415 of
the Code or if the participant's compensation used to calculate the pension
would be limited by the Code, such amounts otherwise payable to the Pension Plan
participant pursuant to the Pension Plan would be paid directly to such
participant by the Company in full, pursuant to the provisions of the SERP. The
purpose of the SERP is to pay each employee the full retirement benefit
otherwise payable to him or her but for the benefit limitations imposed by the
Code. In addition, bonuses, including the bonuses set forth in column (d) of the
Summary Compensation Table, are included in compensation for purposes of the
SERP.
COMPENSATION OF DIRECTORS
During 1995, all members of the Board of Directors who were not employees
of the Company were paid a quarterly retainer fee of $5,000 and a fee of $1,000
for attendance at each meeting of the Board of Directors. Additionally,
committee members were paid a fee of $1,000 for attendance at each meeting of a
committee of the Board of Directors on which they served.
The Company maintains the Non-Employee Director Retirement Plan, effective
January 1, 1994, pursuant to which each non-employee director who has completed
five years or more of service at the time he ceases to be a director will
receive an annual deferred compensation benefit equal to between 50 percent and
100 percent, depending on his years of service, of his annual cash retainer fee
paid for the year in which he ceases to be a director. The benefit will be paid
for the lesser of the number of months of his service as a director or 120
months.
The Company also maintains the Deferred Compensation Plan for Non-Employee
Directors, effective December 1, 1994, pursuant to which each non-employee
director can defer all or a portion of his retainer fee or meeting fees and
receive a market rate of return on such deferred amounts.
The Company also maintains the Non-Employee Director Stock Option Plan (the
"Director Option Plan"), effective March 16, 1995, pursuant to which each
non-employee director is granted a stock option to purchase 2,500 shares of
Common Stock at the time of his election to the Company's Board of Directors and
an option to purchase 500 shares of Common Stock at each annual meeting
thereafter for so long as he serves as a non-employee director. Such options are
granted at the fair market value of the Common Stock on the date of grant, vest
100 percent six months after the grant date and are exercisable for a term of 10
years. Messrs. Hill and Macaulay have refused grants under the Director Option
Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company currently has Change of Control Agreements (the "Severance
Agreements") with Messrs. Burguieres, Eagles, Burke and Nolen and Ms. Thomas.
The purpose of the Severance Agreements is to encourage the executive officers
to continue to carry out their duties with the Company in the event of a "change
of control" of the Company. Under each Severance Agreement, a change of control
of the Company is deemed to have occurred if (i) any person or group of persons
acting in concert becomes the beneficial owner of 20 percent or more of the
outstanding shares of Common Stock or the combined voting power of the Company's
voting securities, with certain exceptions; (ii) individuals who as of the date
of such agreement constitute the Board of Directors of the Company cease for any
reason to constitute at least a majority thereof; (iii) there occurs a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all
15
of the Company's assets, unless after the transaction, all or substantially all
of those persons who were the beneficial owners of Common Stock prior to the
transaction beneficially own more than 60 percent of the then outstanding common
stock of the resulting corporation, no person who did not own Common Stock prior
to the transaction beneficially owns 20 percent or more of the then outstanding
common stock of the resulting corporation, and at least a majority of the Board
of Directors of the corporation resulting from such transaction were members of
the Board of Directors of the Company at the time such Severance Agreement was
approved by the Board of Directors or executed; or (iv) the stockholders of the
Company approve a complete liquidation or dissolution of the Company.
Each of the Severance Agreements provides for severance payments in the
event of termination of the executive officer's employment within a specified
period after a change of control of the Company (three years for the Chief
Executive Officer and two years for the other executive officers), unless the
executive's employment is terminated by the Company or its successor for "cause"
or "disability", because of the executive's death or "retirement" or by the
executive's voluntary termination for other than "good reason", in each case as
such terms are defined in the Severance Agreement. The benefits may consist of
the following: (a) an amount equal to three times for the Chief Executive
Officer, and two times for the other executive officers, the highest salary plus
bonus paid to such executive in any of the five years preceding the year of
termination of employment; (b) salary and bonus (prorated based on the highest
bonus earned in the preceding three years) to the date of termination; (c) an
amount equal to the amount that would be payable if all unvested retirement plan
benefits were vested; (d) an amount equal to the amount that would have been
contributed as the Company match under the Company's 401(k) Savings Plan and the
Supplemental Savings Plan for three years for the Chief Executive Officer and
two years for the other executive officers; and (e) an amount equal to the
amount the executive would have received as a car allowance for three years for
the Chief Executive Officer and two years for the other executive officers. In
addition, if an executive is terminated within a specific period after a change
of control, all outstanding stock options granted under any of the Company's
Option Plans and all outstanding SARs issued under the SAR Plan would
automatically vest and the executive would have the right to either exercise
such options and SARs for seven months after his or her date of termination (or
until the stated termination of such options and SARs, if earlier) or to
surrender for cash all such options and SARs, unless to do so would cause a
transaction otherwise eligible for pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16 to be ineligible for such
treatment, in which case the executive would receive shares of Common Stock
equal in value to the cash he or she would have received. Ownership restrictions
on shares granted under the Restricted Plan would also be terminated in the
event of an executive's termination during this period. All health and medical
benefits would also be maintained after termination, for three years for the
Chief Executive Officer and two years for the other executive officers, if the
executive makes his or her required contribution. Under the Deficit Reduction
Act of 1984, severance payments that exceed a certain amount subject both the
Company and the executive to adverse U.S. Federal income tax consequences. Each
of the Severance Agreements provides that the Company shall pay the executive a
"gross-up payment" to ensure that the executive receives the total benefit
intended thereby.
Each of the Severance Agreements was amended in October 1995 as required by
the Merger Agreement to eliminate the executive officer's right to all
termination benefits owed thereunder, except for benefits related to his or her
outstanding stock options, SARs and shares granted under the Restricted Plan,
should the employee voluntarily terminate his or her employment without cause
during a 30-day period beginning one year after a change of control occurs. The
Company paid Messrs. Burguieres, Eagles, Burke and Nolen and Ms. Thomas, in
consideration for such amendments and the elimination of such benefits,
$630,000, $245,000, $182,000, $155,000 and $155,000, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Greehey, Brown and Moses served as members of the Compensation
Committee until October 5, 1995 and Messrs. Greehey, Moses, and Widmann served
thereafter during 1995. During 1995, no member of the Compensation Committee was
an officer or employee of the Company or any of its subsidiaries, or was
formerly an officer of the Company or any of its subsidiaries.
16
During 1995, no executive officer of the Company served as (i) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee, (ii) a director of another entity, one of whose
executive officers served on the Compensation Committee, or (iii) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Phoenix Energy Services, Inc. ("Phoenix") purchased on September 25, 1995
the assets and business of the Harrisburg-Woolley operations of Enterra for
approximately $14,500,000, subject to post-closing adjustments and the
assumption of operating liabilities. The offer to purchase the
Harrisburg-Woolley operations by Phoenix was part of a competitive bid process
conducted by Enterra. Certain First Reserve Funds own 97 percent of the
outstanding capital stock of Phoenix. First Reserve is the general partner of
each of such First Reserve Funds and has the power to cause each such First
Reserve Fund to dispose of or vote shares of Common Stock held by it. The
principal beneficial owners of the common stock of First Reserve are its
executive officers, including Messrs. Hill and Macaulay.
17
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on the Common Stock for a five-year period (December 31, 1990 to December
31, 1995) with the cumulative total return of the Standard & Poor's 500
Composite Stock Index (the "S&P 500 Index") and the Company's peer group. The
Company changed its peer group in fiscal 1995 to use a more readily available
and recognized published industry or line-of-business index. The 1995 peer group
consists of the 20 companies in the Standard & Poor's Oil Well Equipment &
Services Stock Index, specifically, the Company, BJ Services Company, Baker
Hughes Incorporated, Daniel Industries, Inc., Dresser Industries, Inc., Global
Marine, Inc., Halliburton Co., Helmerich & Payne, Inc., McDermott International,
Inc., Nabors Industries, Inc., Parker Drilling Co., Petroleum Geo -- Services
A/S, Production Operators Corporation, Rowan Companies, Inc., Schlumberger Ltd.,
Smith International, Inc., Sonat Offshore Drilling, Inc., Tidewater, Inc., Varco
International, Inc. and Western Atlas, Inc. (the "1995 Peer Group"). The 1994
peer group consisted of the 18 companies in the Value Line Investment Survey
Index for the Oilfield Services Group, specifically, BJ Services Company, Baker
Hughes Incorporated, Daniel Industries, Inc., Dresser Industries, Inc., Enterra
Corporation, Global Marine, Inc., Halliburton Co., Helmerich & Payne, Inc.,
McDermott International, Inc., Nabors Industries, Inc., Parker Drilling Co.,
Production Operators Corporation, Rowan Companies, Inc., Schlumberger Ltd.,
Smith International, Inc., Tidewater, Inc., Varco International, Inc. and
Western Atlas, Inc. (the "1994 Peer Group").
The graph assumes $100 was invested on December 31, 1990 in the Company's
Common Stock, the S&P 500 Index and the industry peer groups. Dividend
reinvestment has been assumed, and investment has been weighted to reflect
relative stock market capitalization.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
OF THE COMPANY'S COMMON STOCK, S&P 500 INDEX, THE 1994 PEER GROUP AND THE 1995
PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD COMPANY'S S&P 500 1995 PEER 1994 PEER
(FISCAL YEAR COVERED) COMMON STOCK INDEX GROUP GROUP
<S> <C> <C> <C> <C>
1990 $100 $100 $100 $100
1991 62 130 94 91
1992 81 140 92 92
1993 147 155 100 102
1994 134 157 92 94
1995 200 215 128 136
</TABLE>
* Prepared by Research Data Group
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A and 14C promulgated under the Exchange Act, or to the
liabilities of Section 18 of the Exchange Act.
18
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that the Company's directors,
executive officers and persons who own more than 10 percent of a registered
class of the Company's equity securities file with the Commission and the New
York Stock Exchange initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. In
addition, trusts in which a director, executive officer or greater than 10
percent stockholder is a trustee, and that person or a member of his or her
immediate family is a beneficiary, have a separate filing obligation even where
the individual reports in his or her own filings the trust's transactions and
holdings in equity securities of the Company. Directors, executive officers and
greater than 10 percent stockholders are required by Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of the
Section 16(a) reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended December 31, 1995,
all Section 16(a) filing requirements applicable to its directors, executive
officers and greater than 10 percent beneficial owners were complied with,
except that each of Philip Burguieres, M. E. Eagles, Norman W. Nolen and H.
Suzanne Thomas inadvertently filed the Form 4 due no later than November 10,
1995 on January 11, 1996.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as the Company's
principal independent public accountants for the current year. Representatives
of Arthur Andersen are expected to be present at the Meeting, with the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at the
Annual Meeting of Stockholders of the Company to be held in 1997 must be
received by the Company, addressed to the Secretary of the Company at P.O. Box
27608, Houston, Texas 77227-7608, no later than December 9, 1996, to be
considered for inclusion in the Proxy Statement and form of proxy relating to
that meeting.
19
[Weatherford Logo]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
FRIDAY, MAY 17, 1996
9:00 A.M.
THE RITZ-CARLTON
1919 BRIAR OAKS LANE
HOUSTON, TEXAS
APPENDIX E:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
WEATHERFORD INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-7867 74-1681642
(State of incorporation (Commission File Number) (I.R.S. Employer
or organization) Identification No.)
1360 Post Oak Boulevard
Suite 1000
Houston, Texas
77056-3098
(Address of principal executive offices)
(Zip code)
(713) 439-9400
(Registrant's telephone number, including area code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
----------------------- --------------------------
Common Stock, $0.10 Par Value New York Stock Exchange, Inc.
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of Class)
1
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES
TO BE REGISTERED
COMMON STOCK, $0.10 PAR VALUE
The capital stock of Weatherford International Incorporated (the
'Company' or 'Registrant') to be registered on the New York Stock Exchange,
Inc. (the 'Exchange'), is the Registrant's common stock, $0.10 par value per
share (the 'Common Stock'). The holders of Common Stock are entitled to one
vote for each share held on all matters submitted to a vote of stockholders,
including the election of directors, except as otherwise provided by law or by
resolution of the Board of Directors providing for the issuance of any series
of Serial Preferred Stock. The holders of Common Stock have no preemptive
rights to subscribe for or purchase any additional securities issued by the
Company. Subject to the preferential rights of the holders of Serial Preferred
Stock, if any series is outstanding, the holders of Common Stock are entitled
to share equally in dividends which may be declared by the Board of Directors
out of funds legally available therefor, and upon liquidation, dissolution or
winding up of the Company, to share equally in its assets available for
distribution to stockholders. The Company has not declared or paid any
dividends on Common Stock since December 1982 and does not anticipate paying
dividends at any time in the foreseeable future. The terms of the Company's
current credit arrangements with its lenders prohibit the payment of cash
dividends on the Common Stock. No liquidation or conversion rights are
conferred upon the holders of Common Stock. There are no redemption or sinking
funds provisions relating to, and no liability to further calls or to
assessments by the Registrant, on the Common Stock.
Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws could have the effect of preventing a change in control of the
Company in certain situations. These provisions generally provide for (a) the
classification of the Board of Directors of the Company into three classes
having staggered terms of three years each; (b) the removal of directors only
for cause and with the approval of holders of at least 80% of the then
outstanding voting stock entitled to vote for election of directors; (c) the
filing of any vacancy on the Board of Directors by the remaining directors
then in office; (d) the limitation of the number of directors to a minimum of
six and a maximum of fifteen, with the exact number to be determined by the
Board of Directors; (e) elimination of the stockholder written consent
procedure; (f) the calling of special meetings of stockholders only by the
Board of Directors; (g) the requirement that certain business combinations
involving the Company and any beneficial owner of 20% or more of the
outstanding voting securities of the Company be approved by holders of at
least 80% of the then outstanding shares of voting stock of the Company,
including those held by such beneficial owner, unless the business combination
is approved by the continuing directors then in office or certain minimum
price requirements are met; and (h) increasing the stockholder vote required
to amend, repeal or adopt any provision in a manner inconsistent with the
foregoing provisions to 80% or more of the then outstanding shares of voting
stock.
- 2 -
ITEM 2. EXHIBITS
1. All exhibits required by Instruction II to Item 2 will be
provided to the Exchange.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
WEATHERFORD INTERNATIONAL
INCORPORATED
(Registrant)
By /s/ H. SUZANNE THOMAS
H. Suzanne Thomas
Senior Vice President, Secretary and
General Counsel
Dated: September 19, 1994
- 3 -
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Weatherford's Restated Certificate of Incorporation contains a provision
that eliminates the personal monetary liability of a director to Weatherford and
its stockholders for breach of his fiduciary duty of care as a director to the
extent currently allowed under the Delaware General Corporation Law (the
"DGCL"). If a director were to breach the duty of care in performing his duties
as a director, neither Weatherford nor its stockholders could recover monetary
damages from the director, and the only course of action available to
Weatherford's stockholders would be equitable remedies, such as an action to
enjoin or rescind a transaction involving a breach of the fiduciary duty of
care. To the extent certain claims against directors are limited to equitable
remedies, this provision of Weatherford's Restated Certificate of Incorporation
may reduce the likelihood of derivative litigation and may discourage
stockholders or management from initiating litigation against directors for
breach of their duty of care. Additionally, equitable remedies may not be
effective in many situations. If a stockholder's only remedy is to enjoin the
completion of the Board of Directors' action, this remedy would be ineffective
if the stockholder does not become aware of a transaction or event until after
it has been completed. In such a situation, it is possible that the stockholders
and Weatherford would have no effective remedy against the directors. The
directors do not have liability for monetary damages for grossly negligent
business decisions (in violation of their duty of care), including decisions
made in connection with attempts to acquire Weatherford. Liability for monetary
damages remains for (i) any breach of the duty of loyalty to Weatherford or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of an
improper dividend or improper repurchase of Weatherford's stock under Section
174 of the DGCL or (iv) any transaction from which the director derived an
improper personal benefit. Weatherford's Restated Certificate of Incorporation
further provides that in the event the DGCL is amended to allow the further
elimination or limitation of the liability of directors, then the liability of
Weatherford's directors shall be limited to the fullest extent permitted by the
amended DGCL.
The DGCL permits a corporation to indemnify certain persons, including
officers and directors, who are (or are threatened to be made) parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of their being officers or directors of the
corporation. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by an indemnified officer or director, provided he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests and, in the case of criminal proceedings, provided he had no
reasonable cause to believe that his conduct was unlawful. The Bylaws of
Weatherford provide indemnification to the fullest extent allowed pursuant to
the foregoing provisions of the DGCL.
The DGCL further permits a corporation to indemnify certain persons,
including officers and directors, who are (or are threatened to be made) parties
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of their being officers
or directors of the corporation. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by the indemnified officer or
director, provided he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the corporation's best interests. However, no such
person will be indemnified as to matters for which he is found to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless, and only to the extent that, indemnification is ordered by a court. The
Bylaws of Weatherford provide indemnification to the fullest extent allowed
pursuant to the foregoing provisions of the DGCL.
Weatherford also has entered into an indemnification agreement with each of
its directors and certain of its officers. Each such indemnification agreement
provides for indemnification to the fullest extent permitted by the DGCL and for
the advancement of expenses, including attorneys' fees and other costs,
II-1
expenses and obligations, paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal) any
threatened, pending or completed action, suit or proceeding related to the fact
that such director or officer was serving for or at the request of Weatherford.
To the extent that the Board of Directors or the stockholders of Weatherford may
in the future wish to limit or repeal the ability of Weatherford to indemnify or
advance expenses to officers and directors, such repeal or limitation may not be
effective as to officers and directors who are parties to an indemnification
agreement, since their rights to full protection are contractually assured by
the indemnification agreement.
Delaware corporations also are authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. Weatherford
currently has in effect a directors' and officers' liability insurance policy
providing aggregate coverage in the amount of $10,000,000.
All of the foregoing indemnification provisions include statements that
such provisions are not to be deemed exclusive of any other right to indemnity
to which a director or officer may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
ITEM 21. EXHIBITS
The following exhibits are filed herewith unless otherwise indicated:
*2 -- Purchase and Sale Agreement dated March 28, 1996, among
Weatherford Enterra, Inc., Nodeco AS and Aarbakke AS.
4.1 -- Corrected Restated Certificate of Incorporation of
Weatherford Enterra, Inc., as amended through January 26,
1996 (incorporated by reference to Exhibit 3.1 to
Weatherford Enterra, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1995 (File No. 1-7867)).
4.2 -- Bylaws of Weatherford Enterra, Inc., as amended through
March 17, 1994 (incorporated by reference to Exhibit 3.1 to
Weatherford Enterra, Inc.'s Current Report on Form 8-K dated
April 28, 1994 (File No. 1-7867)).
4.3 -- Credit Agreement dated as of October 5, 1995, among
Weatherford Enterra, Inc., Weatherford Enterra U.S., Inc.,
Weatherford/Lamb, Inc., Bank of America Illinois, as
Documentation Agent, Texas Commerce Bank National
Association, as Administrative Agent, Credit Lyonnais New
York Branch, ABN Amro Bank, N.V., Bank of Montreal, First
Interstate Bank of Texas, N.A., Arab Banking Corporation
(B.S.C.) and the financial institutions listed on the
signature pages thereto (incorporated by reference to
Exhibit 4.1 to Weatherford Enterra, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995 (File
No. 1-7867)).
4.4 -- First Amendment to Credit Agreement dated as of December 29,
1995, among Weatherford Enterra, Inc., Weatherford Enterra
U.S., Inc., Weatherford/Lamb, Inc., Weatherford Enterra
U.S., Limited Partnership, Bank of America Illinois, as
Documentation Agent, Texas Commerce Bank National
Association, as Administrative Agent, Credit Lyonnais New
York Branch, ABN Amro Bank, N.V., Bank of Montreal, First
Interstate Bank of Texas, N.A., Arab Banking Corporation
(B.S.C.) and the financial institutions listed on the
signature pages thereto (incorporated by reference to
Exhibit 4.2 to Weatherford Enterra, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1995 (File No.
1-7867)).
4.5 -- Form of Indenture, between Weatherford Enterra, Inc. and
Bank of Montreal Trust Company, as Trustee (incorporated by
reference to Exhibit 4.1 to Weatherford Enterra, Inc.'s
Registration Statement on Form S-3 (Registration No.
333-02281)).
*5 -- Opinion of Fulbright & Jaworski L.L.P., regarding legality
of securities.
**23.1 -- Consent of Arthur Andersen LLP.
**23.2 -- Consent of Price Waterhouse a.s.
II-2
*23.3 -- Consent of Fulbright & Jaworski L.L.P. (contained in Exhibit
5).
*24 -- Powers of Attorney (included on page II-4 hereof).
____________
* Previously filed.
** Filed herewith.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form; and
(2) Every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act, and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this amendment no. 1 to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 13, 1996.
WEATHERFORD ENTERRA, INC.
By: H. SUZANNE THOMAS
H. Suzanne Thomas
Senior Vice President, General
Counsel And Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------- ----------------------------------- ---------------
* Chairman of the Board, President and Chief May 13, 1996
- ----------------- Executive Officer (Principal Executive
PHILIP BURGUIERES Officer)
* Senior Vice President, Chief Financial May 13, 1996
- --------------- Officer and Treasurer (Principal Financial
NORMAN W. NOLEN and Accounting Officer)
*
- ----------------- Director May 13, 1996
THOMAS N. AMONETT
*
- ------------------ Director May 13, 1996
WILLIAM E. GREEHEY
*
- ----------------- Director May 13, 1996
JOHN A. HILL
II-4
SIGNATURE TITLE DATE
- ------------------ --------- --------------
*
- --------------- Director May 13, 1996
JOHN W. JOHNSON
*
- ------------------- Director May 13, 1996
WILLIAM E. MACAULAY
*
- -------------------- Director May 13, 1996
ROBERT K. MOSES, JR.
*
- -------------------- Director May 13, 1996
R. RUDOLPH REINFRANK
*
- -------------------- Director May 13, 1996
ROGER W. WIDMANN
*By /s/ H. SUZANNE THOMAS May 13, 1996
H. Suzanne Thomas
As Attorney-in-Fact
II-5
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the attachment to
and incorporation by reference in this Amendment No. 1 to Registration Statement
on Form S-4 of our report dated February 29, 1996, included in Weatherford
Enterra, Inc.'s Form 10-K for the year ended December 31, 1995 and our report
dated February 23, 1996 included in Weatherford Enterra, Inc.'s Form 8-K/A dated
February 27, 1996 and to all references to our firm included in this Amendment
No. 1 to Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
May 13, 1996
EXHIBIT 23.2
CONSENT OF PRICE WATERHOUSE A.S.
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Weatherford Enterra, Inc. of our report
dated March 15, 1996 except as to Notes 10 and 11 which are as of April 12, 1996
relating to the consolidated financial statements of Nodeco AS, which appears in
such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE A.S.
JAN EGIL HAGA
State Authorized Public Accountant
Oslo, Norway
May 13, 1996
