===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
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 (I.R.S. Employer
of incorporation or Identification No.)
organization)
1360 POST OAK BOULEVARD
SUITE 1000
HOUSTON, TEXAS
77056
---------------------------------------------
(Address of principal executive offices)
(Zip code)
(713) 439-9400
---------------------------------------------
(Registrant's telephone number, including
area code)
NOT APPLICABLE
---------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No ____.
There were 52,655,635 shares of Common Stock, $.10 par value, of the registrant
outstanding as of October 31, 1997.
(Page 1 of 13)
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 36,295 $ 33,029
Receivables, net of allowance of $18,695 and $16,241......... 280,913 272,816
Inventories, net of allowance of $20,058 and $21,261......... 159,370 163,302
Deferred tax and other current assets........................ 43,969 36,287
---------- ----------
Total current assets....................................... 520,547 505,434
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST.......................... 1,225,390 1,254,686
Less -- Accumulated depreciation............................. 676,767 693,496
---------- ----------
548,623 561,190
---------- ----------
GOODWILL, NET................................................... 268,824 290,474
---------- ----------
OTHER ASSETS.................................................... 42,608 40,625
---------- ----------
$1,380,602 $1,397,723
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portion of long-term debt........ $ 2,538 $ 24,508
Accounts payable............................................. 53,651 65,713
Accrued income taxes......................................... 34,795 17,427
Other accrued liabilities.................................... 109,715 103,711
---------- ----------
Total current liabilities.................................. 200,699 211,359
---------- ----------
LONG-TERM DEBT.................................................. 213,862 291,266
---------- ----------
DEFERRED TAX LIABILITIES........................................ 35,251 34,728
---------- ----------
OTHER LONG-TERM LIABILITIES..................................... 15,691 18,010
---------- ----------
MINORITY INTERESTS ............................................. 213 752
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par; shares authorized 1,000,000; none
issued -- --
Common stock, $.10 par; shares authorized 80,000,000;
issued 52,674,209 and 52,172,796........................... 5,267 5,217
Paid-in capital.............................................. 648,868 639,679
Retained earnings............................................ 280,497 200,316
Cumulative translation adjustment............................ (18,556) (2,768)
Treasury stock, 37,412 and 28,269 common shares, at cost..... (1,190) (836)
---------- ----------
Total stockholders' equity................................. 914,886 841,608
---------- ----------
$1,380,602 $1,397,723
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Services and rentals.........$ 206,066 $ 191,158 $ 612,200 $ 528,171
Products..................... 68,316 67,912 196,130 183,522
---------- --------- ---------- ---------
Total revenues............. 274,382 259,070 808,330 711,693
---------- --------- ---------- ---------
COSTS AND EXPENSES:
Cost of services and rentals. 138,034 139,009 413,932 382,773
Cost of products............. 45,254 43,516 129,941 129,329
Selling, general and
administrative expenses.... 34,274 35,284 106,086 102,182
Research and development..... 1,227 1,573 6,196 4,856
Equity in earnings of
unconsolidated affiliates.. (702) (453) (1,754) (1,809)
Foreign currency (gain) loss,
net 98 47 398 (455)
Other expense, net........... 5,243 4,230 15,675 8,233
---------- --------- ---------- ---------
Total costs and expenses... 223,428 223,206 670,474 625,109
---------- --------- ---------- ---------
OPERATING INCOME................ 50,954 35,864 137,856 86,584
Interest expense............. 4,533 6,177 16,063 16,714
Interest income.............. (508) (466) (1,770) (1,456)
---------- --------- ---------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS....... 46,929 30,153 123,563 71,326
Income tax provision......... 16,462 10,250 43,325 23,038
Minority interests........... 33 75 57 85
---------- --------- ---------- ---------
NET INCOME......................$ 30,434 $ 19,828 $ 80,181 $ 48,203
========== ========= ========== =========
Weighted average common and
common equivalent shares
outstanding 53,066 52,396 52,773 51,988
========== ========= ========== =========
INCOME PER COMMON AND
COMMON EQUIVALENT SHARE......$ 0.57 $ 0.38 $ 1.52 $ 0.93
=========== ========== =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
====== ======== ======== ======== ======= =========
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 .................... $5,217 $639,679 $200,316 $ (2,768) $ (836) $ 841,608
Shares issued under employee
benefit plans ............................. 1 343 -- -- -- 344
Stock grants and options exercised .......... 49 8,846 -- -- (354) 8,541
Currency translation adjustment ............. -- -- -- (15,788) -- (15,788)
Net income .................................. -- -- 80,181 -- -- 80,181
------ -------- -------- -------- ------- ---------
BALANCE, SEPTEMBER 30, 1997 ................... $5,267 $648,868 $280,497 $(18,556) $(1,190) $ 914,886
====== ======== ======== ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED-IN THOUSANDS)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
1997 1996
NET INCOME .......................................... $ 80,181 $ 48,203
Income items not requiring (providing) cash:
Depreciation and amortization..................... 82,528 77,990
Gain on sales of assets........................... (11,883) (8,953)
Deferred income tax provision (benefit)........... 946 (223)
Other non-cash charges............................ (311) (945)
Increase (decrease) in cash from changes in
operating accounts:
Receivables, net................................ (54,606) (39,550)
Inventories, net................................ (28,745) (10,599)
Prepayments and other........................... 1,917 10,936
Accounts payable and accrued liabilities........ 36,263 12,598
Other long-term liabilities..................... (1,318) (13,546)
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES................ 104,972 75,911
-------- --------
Purchases of property, plant and equipment........... (100,891) (99,848)
Proceeds from sales of businesses.................... 66,368 19,168
Proceeds from other disposition of assets............ 22,038 13,898
Acquisitions, net of notes issued and cash acquired.. -- (16,339)
Other net cash flows from investing activities....... (3,711) (5,229)
-------- ---------
CASH USED IN INVESTING ACTIVITIES.................... (16,196) (88,350)
--------- --------
Borrowings under credit facilities................... 12,149 247,323
Repayment of borrowings.............................. (109,970) (236,950)
Payment of deferred loan costs....................... -- (4,801)
Net cash flows from currency hedging transactions.... 4,537 1,224
Proceeds from sale of stock to employee benefit
plans and stock option exercises.................. 9,239 9,922
-------- --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES...... (84,045) 16,718
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.............. (1,465) (185)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS................ 3,266 4,094
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....... 33,029 32,800
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD............. $ 36,295 $ 36,894
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.......................................... $ 12,119 $ 10,706
Income taxes, net of refunds received............. 11,098 7,394
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated financial statements of Weatherford Enterra, Inc. and its
subsidiaries (the "Company" or "Weatherford Enterra") included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
results of the interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading.
Certain reclassifications were made to previously reported amounts in the
consolidated financial statements and notes to make them consistent with the
current presentation format.
It is suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. No significant
accounting changes have occurred during the nine months ended September 30,
1997.
(2) INCOME PER COMMON AND COMMON EQUIVALENT SHARE. Income per common and common
equivalent share is computed on the basis of the weighted average number of
shares of common stock and common stock equivalents (if dilutive) outstanding
during the respective periods. Fully diluted earnings per share are equal to
primary earnings per share in all periods presented.
(3) INVENTORIES. Consolidated net inventories consist of the following (in
thousands):
SEPTEMBER 30, DECEMBER 31,
1997 1996
Spare parts and components..................... $ 51,072 $ 41,068
Raw materials.................................. 28,297 28,734
Work in process................................ 28,363 26,902
Finished goods................................. 51,638 66,598
---------- ----------
$ 159,370 $ 163,302
========== ==========
(4) DIVESTITURES. On June 12, 1997, the Company sold the business and assets of
CRC-Evans Pipeline International, Inc. ("CRC-Evans") and on June 30, 1997, the
Company sold Total Engineering Services Team, Inc. ("TEST"). On September 18,
1997, the Company sold the assets of its American Aero Cranes division,
completing the divestiture program announced in September 1996. Aggregate cash
proceeds from the transactions of $66.4 million, subject to adjustment, was used
primarily to repay bank debt.
(5) RECENTLY ISSUED ACCOUNTING STANDARDS. In June 1997, the Financial Accounting
Standards Board, ("FASB") issued Statement of Financial Accounting Standard
("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME, which establishes standards
for reporting and financial statement display of comprehensive income. This
Statement is effective for fiscal years beginning after December 15, 1997. The
Company will adopt this Statement on January 1, 1998. Had SFAS No. 130 been
adopted as of September 30, 1997, the year-to-date change in cumulative
translation adjustment would have been deducted from net imcome to calculate
comprehensive income.
6
<PAGE>
(6) SUBSEQUENT EVENT. On October 24, 1997, the Company amended its primary bank
credit facility, extending its $200 million revolving credit facility (the
"Revolving Credit Facility") through October 24, 2002, reducing interest rates
and fees and improving other terms and conditions. Amounts outstanding under the
Revolving Credit Facility accrue interest at a variable rate ranging from 0.25%
to 0.625% above a specified Eurodollar rate, based upon the senior unsecured
credit ratings assigned by Standard & Poor's and Moody's Investors Service. A
commitment fee ranging from 0.09% to 0.20% per annum is payable quarterly on the
unused portion of the Revolving Credit Facility. The Company is required under
the Revolving Credit Facility to maintain certain financial ratios, including a
maximum debt-to-capitalization ratio of 50%, which limits the Company's ability
to incur indebtedness.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BUSINESS REVIEW
Certain of the statements which follow represent forward-looking information.
These forward-looking statements, including without limitation statements with
respect to the Company's future results of operations, financial condition,
capital resources and industry condition, are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be significantly impacted by various factors
described herein and in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1996. These
factors include, without limitation, market prices and worldwide demand for oil
and natural gas, oil and natural gas exploration and production activity, and
general economic and political conditions. There can be no assurance that
anticipated developments will occur.
Weatherford Enterra is a diversified 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
industry segments are oilfield services, oilfield products and gas compression,
with operations in virtually every oil and gas exploration and production region
in the world. The Company's operating results include several other businesses
that the Company has sold in connection with a divestiture program announced in
September 1996.
RESULTS OF OPERATIONS
A summary of operating results by business segment is shown below (in
thousands):
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
REVENUES:
Oilfield services......$ 168,178 $ 130,330 $ 467,009 $ 371,382
Oilfield products...... 49,170 40,740 135,070 98,974
Gas compression........ 46,572 37,579 129,399 113,478
Other businesses....... 10,462 50,421 76,852 127,859
----------- ----------- ---------- ---------
Total................$ 274,382 $ 259,070 $ 808,330 $ 711,693
=========== =========== ========== =========
OPERATING INCOME:
Oilfield services......$ 41,421 $ 24,163 $ 108,747 $ 64,676
Oilfield products...... 11,890 7,167 28,514 14,789
Gas compression........ 3,589 335 9,698 6,053
Other businesses....... (1,691) 6,288 440 7,614
Corporate.............. (4,255) (2,089) (9,543) (6,548)
----------- ----------- ---------- ---------
Total................$ 50,954 $ 35,864 $ 137,856 $ 86,584
=========== =========== ========== =========
7
<PAGE>
OILFIELD SERVICES. Oilfield services operations are located worldwide near
oil and gas producing regions and consist of oilfield equipment rental, downhole
services including fishing and milling, and tubular running services including
the installation and testing of casing and tubing connections.
During the third quarter of 1997, revenues increased 29% to $168.2 million
and operating income grew 71% to $41.4 million compared to the third quarter of
1996, primarily as a result of increased demand and improved pricing in many
areas. In both the U.S. and international markets, oilfield service revenue
growth exceeded that of active drilling rig growth. Certain drilling techniques,
including re-entry, horizontal and directional drilling were important
contributors to revenue growth, particularly in North America. U.S. service
revenues increased 36% to $83.4 million, with significant revenue increases in
every U.S. region reflecting continued growth in land-based and Gulf of Mexico
drilling activity and improved pricing. International revenues increased 23% to
$84.8 million, reflecting increased activity in many areas, including Europe,
the Asia Pacific region and Canada.
During the first nine months of 1997, revenues increased 26% to $467.0
million and operating income grew 68% to $108.7 million compared to the first
nine months of 1996, primarily as a result of increased worldwide drilling
activity, improved pricing and the introduction of downhole services into
certain new markets.
OILFIELD PRODUCTS. Closely aligned with the oilfield services segment, the
oilfield products segment includes the manufacture, sale and service of
cementation products, liner hangers, gas lift equipment and equipment for resale
and used internally to provide oilfield services. The Company acquired the
business and assets of Nodeco AS, a Norwegian liner hanger manufacturer, and
Aarbakke AS (collectively "Nodeco") in May 1996.
During the third quarter of 1997, revenues increased 21% to $49.2 million and
operating income increased 66% to $11.9 million compared to the third quarter of
1996, primarily as a result of improved results in the Company's cementation
products and gas lift businesses. Cementation product sales improved
significantly during the third quarter of 1997, primarily reflecting increased
U.S. drilling activity, increased market share and the introduction of new
products. Manufacturing efficiencies achieved as a result of the higher volume
of product sales also contributed to the profitability improvement. Gas lift
results benefited from increased international shipments, particularly to the
Asia Pacific region and South America.
During the first nine months of 1997, revenues increased 37% to $135.1
million and operating income increased 93% to $28.5 million compared to the
first nine months of 1996. The improved results are primarily attributable to
increased volume of cementation product sales, operating efficiencies and the
inclusion of the Nodeco operations for the full nine-month period.
GAS COMPRESSION. The gas compression segment includes manufacturing,
packaging, renting, selling and providing parts and services for gas compressor
units over a broad horsepower range.
Revenues increased 24% to $46.6 million and operating income increased 971%
to $3.6 million during the third quarter of 1997 as compared to 1996, primarily
as a result of higher volume of packaged unit sales in Canada and higher U.S.
rental and service activity. Ongoing process improvements, offset partially by
the impact of a large, low-margin custom package shipment, contributed to an 8%
operating margin for the quarter, compared to 1% in the corresponding period in
1996.
Manufacturing and packaging revenues increased 29% to $22.1 million in the
third quarter of 1997 compared to $17.1 million in the third quarter of 1996.
Compressor rental and service revenues improved 20% over the third quarter of
1996 to $24.5 million, reflecting expansion and increased utilization of the
Company's compressor rental fleet. At September 30, 1997, the Company's rental
fleet was 430,000 horsepower with 86% utilization, compared to 79% utilization
at September 30, 1996.
8
<PAGE>
During the first nine months of 1997, gas compression revenues increased 14%
to $129.4 million and operating income improved 60% to $9.7 million compared to
the first nine months of 1996, reflecting expansion of the Company's compressor
rental fleet and increased service activity. Compressor rental and service
revenues improved 17% to $73.4 million, while manufacturing and packaging
revenues increased 11% to $56.0 million, comparing the first nine months of 1997
to the same period in 1996.
OTHER BUSINESSES. The Company had several non-core businesses that it has
sold. Such businesses include Barber Industries Limited, Enterra Patco Oilfield
Products, Inc., and Arrow Completion Systems, Inc., each of which was sold in
1996; CRC-Evans Pipeline International, Inc. ("CRC-Evans") and Total Engineering
Services Team, Inc. ("TEST"), which were sold in June 1997; and the American
Aero Cranes division, which was sold in September of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of revenue decreased to 12.5% in the
third quarter of 1997 from 13.6% in the third quarter of 1996, and to 13.1% in
the first nine months of 1997 from 14.4% for the same period of 1996, primarily
as a result of the increased revenues and continued cost efficiencies achieved.
RESEARCH AND DEVELOPMENT. Research and development costs of $1.2 million in
the third quarter of 1997 decreased 22% compared to the third quarter of 1996,
primarily as a result of customer reimbursement of certain prototype costs.
Research and development costs of $6.2 million in the first nine months of 1997
increased 28% compared to the corresponding period in 1996, primarily reflecting
the expansion of the Company's operations and development activities to support
its three 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. Compared to the corresponding periods in 1996, the Company's equity in
the earnings of these affiliates increased 55% to $702,000 in the third quarter
of 1997, primarily as a result of increased service activity in Saudi Arabia.
For each of the nine-month periods, the Company's equity in the earnings of
these affiliates was $1.8 million. The Company received cash dividends from its
50% or less-owned affiliates totaling $0.9 million and $1.2 million in the first
nine months of 1997 and 1996, 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 losses of $98,000 and
$398,000 in the third quarter and first nine months of 1997, respectively,
compared to a net loss of $47,000 and a net gain of $455,000 in the third
quarter and first nine months of 1996, respectively.
OTHER EXPENSE, NET. Other expense, net, increased to $5.2 million in the
third quarter of 1997 compared to $4.2 million in the third quarter of 1996, and
to $15.7 million in the first nine months of 1997 compared to $8.2 million in
the first nine months of 1996. The increase was attributable to several factors,
including losses recorded in 1997 related to the sales of non-core businesses,
adjustments to prior year estimates and higher goodwill amortization as a result
of the Nodeco acquisition.
INTEREST. Net interest expense decreased 30% to $4.0 million in the third
quarter of 1997 and 6% to $14.3 million for the first nine months of 1997,
compared to the corresponding periods in 1996, primarily as a result of lower
average debt balances outstanding at slightly higher average interest rates.
INCOME TAXES. Income tax provision as a percentage of income before income
taxes was 35% in the third quarter and first nine months of 1997 compared to 34%
and 32%, respectively, for the corresponding periods in 1996. The lower
effective tax rate in 1996 primarily resulted from the reversal in 1996 of
valuation allowances on certain deferred tax assets, including U.S. net
operating loss carryforwards and general business credit carryforwards.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations provided cash of $105.0 million during the first
nine months of 1997 compared to $75.9 million during the first nine months of
1996, primarily as a result of improved operating activity. Net income before
depreciation and amortization of $162.7 million in the first nine months of 1997
increased 29% when compared to the same period in 1996. Changes in working
capital and other operating accounts used cash of $46.5 million during the first
nine months of 1997 compared to $40.2 million in the same period of 1996.
Working capital increased to $319.8 million at September 30, 1997 compared to
$294.1 million at December 31, 1996. Capital expenditures, excluding the
acquisition of Nodeco in 1996, increased slightly to $100.9 million during the
nine months ended September 30, 1997 compared to $99.8 million for the same
period in 1996.
During 1997, the Company closed the sales of the American Aero Cranes
division, CRC-Evans and TEST, generating aggregate cash proceeds of $66.4
million, subject to adjustment, as part of a divestiture plan announced in
September 1996. Proceeds were used primarily to repay bank debt.
The Company's consolidated indebtedness decreased to $216.4 million at
September 30, 1997 from $315.8 million at December 31, 1996, primarily as a
result of the repayment of debt with the proceeds from the divestitures
mentioned above. The Company's ratio of total debt to total capitalization was
19% at September 30, 1997 compared to 27% at December 31, 1996.
The Company has $200 million of publicly-held 7 1/4% notes due May 15, 2006
(the "7 1/4% Notes"). Interest on the 7 1/4% Notes is payable semi-annually on
May 15 and November 15 of each year. The Company's debt ratings assigned by
Standard & Poor's and Moody's Investors Service are BBB+/Baa1.
On October 24, 1997, the Company amended its primary bank credit facility,
extending its $200 million revolving credit facility (the "Revolving Credit
Facility") through October 24, 2002, reducing interest rates and fees and
improving other terms and conditions. Amounts outstanding under the Revolving
Credit Facility accrue interest at a variable rate ranging from 0.25% to 0.625%
above a specified Eurodollar rate, based upon the senior unsecured credit
ratings assigned by Standard & Poor's and Moody's Investors Service. A
commitment fee ranging from 0.09% to 0.20% per annum is payable quarterly on the
unused portion of the Revolving Credit Facility. The Company is required under
the Revolving Credit Facility to maintain certain financial ratios, including a
maximum debt-to-capitalization ratio of 50% which limits the Company's ability
to incur indebtedness.
At September 30, 1997, the Company had $200 million available to borrow under
the Revolving Credit Facility. 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 $11.8 million of letters of credit and bid
and performance bonds outstanding at September 30, 1997.
The Company conducts a portion of its business in currencies other than the
U.S. dollar, including the Canadian dollar, major European currencies and
certain Latin American currencies. Although most of the revenues of the
Company's international 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.
10
<PAGE>
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 inflows totaling $4.5 million and $1.2 million during the first nine
months of 1997 and 1996, respectively.
Management believes the the combination of working capital, the unused
portion of the Revolving Credit Facility 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. 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.
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 war, political disruption, civil disturbance and policies that may
disrupt oil and gas exploration and production activities, restrict the movement
of funds, lead to U.S. government or international sanctions 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 resumed eventually in relation to market forces. Certain areas,
including the CIS, Algeria, Nigeria, and parts of the Middle East and Latin
America, 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.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
None.
(B) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEATHERFORD ENTERRA, INC.
(Registrant)
Date: NOVEMBER 13, 1997 By: /s/ NORMAN W. NOLEN
NORMAN W. NOLEN
Senior Vice President, Chief Financial
Officer & Treasurer
13
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