SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
TO
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended
April 30, 1994 Commission File Number 1-4003
DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware C 75-0813641
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P. O. Box 718
2001 Ross 75221 (P. O. Box)
Dallas, Texas 75201
(Address of principal executive (Zip Code)
offices)
<PAGE>
Registrant's telephone number, including area code - 214-740-6000
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, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 31, 1994
Common Stock, par value $.25 175,422,010
INDEX
Page
Number
Part I. Financial Information
Management's Representation 3
Consolidated Condensed Statements of Earnings
for the three months and the six months ended
April 30, 1994 and 1993 4
Consolidated Condensed Balance Sheets
as of April 30, 1994 and October 31, 1993 5
Consolidated Condensed Statements of Cash Flows
for the six months ended April 30, 1994 and 1993 6
Notes to Consolidated Condensed Financial Statements 7-13
Management's Discussion and Analysis of Financial
Conditions and Results of Operations 14-18
Part II. Other Information
Reports on Form 8-K 19
Signature 19
<PAGE>
MANAGEMENT'S REPRESENTATION
The consolidated condensed financial statements included herein
have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. 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. The Company believes that the
disclosures are adequate to make the information presented not
misleading. These consolidated condensed financial statements
should be read in conjunction with (1) the consolidated financial
statements, the notes to consolidated financial statements and
management's discussion and analysis included in the Company's 1993
Annual Report on Form 10-K and (2) the supplemental consolidated
financial statements, the notes to supplemental consolidated
financial statements and management's discussion and analysis
included in the Company's Amendment No. 1 on Form 8-K/A dated
March 10, 1994 to Current Report on Form 8-K dated January 21,
1994.
In the opinion of the Company, all adjustments have been included
that were necessary to present fairly the financial position of
Dresser Industries, Inc. and subsidiaries as of April 30, 1994 and
October 31, 1993, the results of operations for the three months
and the six months ended April 30, 1994 and 1993, and cash flows
for the six months ended April 30, 1994 and 1993. These adjustments
consisted of normal recurring adjustments. The results of
operations for such interim periods do not necessarily indicate the
results for the full year.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions Except Per Share Data)
Three Months Ended Six Months Ended
April 30, April 30,
1994 1993 1994 1993
(Unaudited) (Unaudited)
Sales and service revenues. $1,278.5 $1,252.2 $2,636.0 $2,370.5
Cost of sales and services. (986.1) (946.2)(2,029.7)(1,811.1)
Gross earnings.......... 292.4 306.0 606.3 559.4
Earnings from major
unconsolidated joint
ventures................. 2.5 26.3 8.6 42.1
Selling, engineering,
administrative and general
expenses................. (225.1) (242.6) (457.1) (477.8)
Special credits (charges).. 18.4 (65.2) 8.9 (72.2)
Earnings from operations. 88.2 24.5 166.7 51.5
Other income (deductions)
Interest expense, net.... (1.1) (6.4) (7.1) (10.2)
Gain on sale of interest
in Western Atlas........ (1.0) .- 275.7 .-
Gain on Mexican affiliates
public offering......... .- .- 11.0 .-
Retiree medical benefit plan
curtailment............. .- .- .- 12.8
Other, net............... 8.8 6.9 12.8 16.8
Total................... 6.7 .5 292.4 19.4
Earnings before income taxes
and minority interest... 94.9 25.0 459.1 70.9
Income taxes................ (35.1) (10.1) (197.1) (27.3)
Minority interest........... (7.1) (6.5) (15.9) (11.4)
Net earnings............. $ 52.7 $ 8.4 $ 246.1 $ 32.2
Earnings per common share...$ .30 $ .05 $ 1.41 $ .19 <PAGE>
Cash dividends per common
share.................... $ .17 $ .15 $ .32 $ .30
Average common shares
outstanding.............. 175.4 174.3 175.1 174.1
See accompanying Notes to Consolidated Condensed Financial
Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
April 30,
1994 October 31,
(Unaudited) 1993
ASSETS
Current Assets
Cash and cash equivalents................ $ 398.6 $ 272.8
Notes and accounts receivable, net....... 788.0 854.8
Inventories, net......................... 610.8 728.3
Deferred income taxes.................... 98.0 100.9
Other current assets..................... 38.9 46.5
Total Current Assets................... 1,934.3 2,003.3
Notes receivable from Western Atlas........ 200.0 .-
Investments in and receivables from major
unconsolidated joint ventures............ 145.8 414.4
Intangibles, net........................... 606.3 610.7
Deferred income taxes...................... 202.2 210.9
Other assets............................... 176.7 189.7
Property, plant and equipment - at cost.... 2,099.5 2,340.3
Accumulated depreciation and amortization.. 1,241.3 1,398.6
Total Properties - Net................. 858.2 941.7
Total Assets......................... $4,123.5 $4,370.7
LIABILITIES AND SHAREHOLDERS' INVESTMENT <PAGE>
Current Liabilities
Short-term debt and current portion
of long-term debt..................... $ 42.2 $ 306.8
Accounts payable........................ 318.4 367.8
Advances from customers on contracts.... 251.9 288.3
Accrued compensation and benefits....... 214.5 240.3
Income taxes............................ 189.7 102.3
Other current liabilities............... 366.0 399.2
Total Current Liabilities............. 1,382.7 1,704.7
Employee retirement benefit obligations... 674.8 707.6
Long-term debt............................ 459.9 486.7
Deferred compensation, insurance
reserves and other liabilities.......... 96.9 103.0
Minority interest......................... 83.6 154.9
Shareholders' Investment
Common shares........................... 43.9 43.7
Capital in excess of par value.......... 374.2 366.7
Retained earnings....................... 1,142.0 951.0
Cumulative translation adjustments...... (116.6) (130.2)
Pension liability adjustment............ (13.8) (13.8)
1,429.7 1,217.4
Less: Treasury shares, at cost......... 4.1 3.6
Total Shareholders' Investment........ 1,425.6 1,213.8
Total Liabilities and Shareholders'
Investment........................ $4,123.5 $4,370.7
See accompanying Notes to Consolidated Condensed Financial
Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
Six Months Ended
April 30,
1994 1993
(Unaudited) <PAGE>
Cash flows from operating activities:
Net earnings.............................. $ 246.1 $ 32.2
Adjustments to reconcile net earnings
to cash flow:
Gain on sale of interest in
Western Atlas, net of tax........... (146.5) .-
Special (credits) charges............. (18.4) 72.2
Retiree medical benefit plan changes.. .- (12.8)
Depreciation and amortization......... 105.3 102.7
Earnings from major
unconsolidated joint ventures....... (8.6) (42.1)
Cash received from major unconsolidated
joint ventures...................... 9.8 6.1
Minority interest in earnings......... 15.9 11.4
Cash advanced to minority partner..... (18.0) (22.5)
(Increase) decrease in receivables*... (43.9) 41.4
Decrease (increase) in inventories*... 23.7 (13.1)
(Decrease) in accounts payable
and accrued liabilities*............ (63.7) (106.4)
(Decrease) increase in advances from
customers on contracts*............. (35.2) 18.1
Increase (decrease)in income taxes
payable*............................ 8.9 (50.8)
Other - net*.......................... 16.3 17.8
Net cash provided by operating activities. 91.7 54.2
Cash flows from investing activities:
Proceeds of sale of interest in Western Atlas 358.0 .-
Proceeds of sale of interest
in M-I Drilling Fluids................. 160.0 .-
Income taxes paid on gain on sale of
interest in Western Atlas.............. (56.2) .-
Business acquisitions less cash and cash
equivalents acquired of $38.2.......... .- (274.0)
Capital expenditures..................... (79.4) (63.6)
Net cash provided by (used by)
investing activities................. 382.4 (337.6) <PAGE>
Cash flows from financing activities:
(Decrease) increase in short-term debt... (249.3) 392.9
Redemption of debentures................. .- (62.5)
(Decrease) increase in long-term debt.... (42.0) 30.7
Dividends paid........................... (55.1) (49.5)
Net cash (used by) provided by financing
activities........................... (346.4) 311.6
Effect of translation adjustments on cash.. (1.9) (4.7)
Net increase in cash and cash equivalents.. 125.8 23.5
Cash and cash equivalents, beginning
of period................................ 272.8 176.5
Cash and cash equivalents, end of period... $ 398.6 $ 200.0
*Change is net of effect of businesses divested and purchased.
See accompanying Notes to Consolidated Condensed Financial
Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 30, 1994
(Unaudited)
NOTE A - BASIS OF PRESENTATION
On January 21, 1994, the Company merged with Baroid Corporation
(Baroid). Dresser issued 0.4 share of its common stock for each
share of outstanding Baroid common stock. The "Company" as used in
these consolidated condensed financial statements refers to Dresser
and its subsidiaries including Baroid.
The merger has been accounted for as a pooling of interests. The
1994 financial statements and other financial information include
Baroid from November 1, 1993. The 1993 financial statements and
other financial information have been restated to include Baroid <PAGE>
from November 1, 1992.
In connection with the merger, the Antitrust Division of United
States Department of Justice and the Company reached agreement that
the Company would dispose of either its 64% general partnership
interest in M-I Drilling Fluids Company (M-I) or its 100% Interest
in Baroid Drilling Fluids Inc. by June 1, 1994. The Company
completed the sale of its 64% interest in M-I to Smith
International, Inc. for $160 million in cash effective February 28,
1994. The Company recognized a $3.0 million pre-tax gain on the
sale in the three months ended April 30, 1994.
Separate results of the entities for the periods prior to the
merger are as follows (in millions):
Three Months Ended Six Months Ended
April 30, 1993 April 30, 1993
Dresser Baroid Dresser Baroid
Revenues................. $1,067.2 $ 185.0 $1,990.9 $ 379.6
Gross earnings........... $ 260.6 $ 45.4 $ 469.6 $ 89.8
Earnings from operations. $ 14.2 $ 10.3 $ 34.1 $ 17.4
Other income (deductions) 2.9 (2.4) 21.0 (1.6)
Earnings before taxes
and minority interests. 17.1 7.9 55.1 15.8
Income taxes............. (7.9) (2.2) (22.0) (5.3)
Minority interest........ (6.5) .- (10.9) (.5)
Net earnings............. $ 2.7 $ 5.7 $ 22.2 $ 10.0
Three Months Ended
January 31, 1994
Dresser Baroid
Revenues................. $1,132.2 $ 225.3
Gross earnings........... $ 248.4 $ 65.5
Earnings from operations. $ 53.1 $ 25.4
Other income (deductions) 287.6 (1.9)
Earnings before taxes <PAGE>
and minority interests. 340.7 23.5
Income taxes............. (154.0) (8.0)
Minority interest........ (9.9) 1.1
Net earnings............. $ 176.8 $ 16.6
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE B - MAJOR UNCONSOLIDATED JOINT VENTURES
The Company's investment in and receivables from major
unconsolidated joint ventures consists of the following (in
millions):
April 30, October 31,
1994 1993
Western Atlas International, Inc. $ .- $ 278.2
Ingersoll-Dresser Pump Company... 145.8 136.2
$ 145.8 $ 414.4
Summarized earnings statement information for major unconsolidated
joint ventures is as follows (in millions):
Three Months Ended Six Months Ended
April 30, April 30,
1994 1993 1994 1993
Ingersoll-Dresser Pump Company
(49% owned)
Net sales......... $ 185.1 $ 192.4 $ 382.1 $ 394.8
Gross profit...... $ 37.8 $ 42.5 $ 87.3 $ 82.4
Net income........ $ 3.2 $ 2.1 $ 19.3 $ (1.6)
The Company's
share of pre-tax <PAGE>
earnings......... $ 2.5 $ 15.4 $ 8.6 $ 20.7
Western Atlas International, Inc.
(29.5% owned until
January 28, 1994)
Net sales......... $ .- $ 285.4 $ .- $ 587.5
Gross profit.......$ .- $ 62.9 $ .- $ 129.4
Net income........ $ .- $ 22.5 $ .- $ 44.4
The Company's
share of pre-tax
earnings......... $ .- $ 10.9 $ .- $ 21.4
The Company's share of earnings for Ingersoll-Dresser Pump for the
three months and the six months ended April 30, 1993 included $13.8
million and $21.3 million, respectively, of earnings related to the
release of LIFO inventory reserves associated with inventories
contributed to the joint venture by the Company and sold by
Ingersoll-Dresser Pump to third parties.
On January 28, 1994, the Company sold its 29.5% interest in Western
Atlas International, Inc. to a wholly-owned subsidiary of Litton
Industries for $358 million in cash and $200 million in 7 1/2%
notes due over seven years. The Company has recognized a gain of
$275.7 million, before taxes.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE C - INVENTORIES
The determination of inventory values and cost of sales under the
LIFO method for interim financial results are based on management's
estimates of expected year-end inventories.
Inventories include the following (in millions): <PAGE>
April 30, October 31,
1994 1993
Finished products and work in
process........................ $ 481.8 $ 584.8
Raw materials and supplies....... 129.0 143.5
$ 610.8 $ 728.3
NOTE D - DEBT
Short-term debt at April 30, 1994 consisted of $40.7 million of
borrowings from U.S. and foreign banks. At October 31, 1993 short-
term debt included $216.0 million of domestic commercial paper as
well as $74.0 million of borrowings from U.S. and foreign banks.
The commercial paper and certain bank borrowings have been repaid
in 1994.
The Company's long-term debt includes $150 million of 8% Senior
Notes which Baroid sold in April, 1993 via a public offering. The
Baroid Notes contain certain covenants that restrict certain types
of transactions between Baroid and Dresser and between Baroid and
other parties. On February 17, 1994, Baroid gave notice to the
holders of the Notes of the holder's right to require the Company
to purchase all or any portion of the holder's Notes for a cash
purchase price equal to 101% of the principal amount plus accrued
and unpaid interest. No holder exercised such option. Dresser
currently intends to propose, to the holders of the Notes, certain
amendments to the Indenture whereby Dresser will fully and
unconditionally guarantee payment of principal and interest on the
Notes in return for modifications to make the covenants similar to
those applicable to Dresser's 6.25% Notes.
NOTE E - SPECIAL CREDITS AND CHARGES
In April 1994, the Company entered into settlement agreements with
the remaining insurance carriers relating to the $65 million
settlement of the Parker & Parsley litigation. The Company had
previously received approximately $13.5 million from other <PAGE>
insurance carriers in connection with the litigation. Pursuant to
the recent settlement agreements, the Company received
approximately $33.8 million, which, after legal fees and a
provision for other potential litigation settlements, resulted in a
gain of $18.4 million which was recognized in the quarter ending
April 30, 1994. Legal actions arising from the same facts filed by
Glyn Snell, et. al., and working interest owners who did not
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE E - SPECIAL CREDITS AND CHARGES (CONTINUED)
participate in the Parker & Parsley case remain outstanding.
Management expects the court to approve settlement of the Glyn
Snell, et. al. litigation following a hearing scheduled in June
1994. Management believes that adequate provisions have been made
for these remaining outstanding actions.
In the first quarter of 1994, the Company recorded a special charge
of $9.5 million for the settlement of litigation related to Drill
Bit pricing. These items resulted in a net special credit of $8.9
million for the six months ended April 30, 1994.
The 1993 special charges include $58.0 million and $65.0 million in
the three months and the six months ended April 30, 1993,
respectively, to cover settlement, legal fees and expenses related
to the Parker & Parsley litigation, as well as foreseeable costs
and expenses in connection with suits brought by royalty owners and
working interest owners arising from the same facts as present in
the Parker & Parsley litigation. The other $7.2 million of special
charges in the 1993 periods are for employee termination costs
associated with restructuring certain operations.
NOTE F - DIVIDENDS <PAGE>
On May 19, 1994, the Company declared a quarterly dividend of $.17
per share of common stock payable June 20, 1994 to shareholders of
record on June 1, 1994.
NOTE G - LITIGATION AND CONTINGENCIES
Litigation
In 1988, certain individuals purchased from a third party a
construction equipment dealership which sold Dresser products. The
Company was not a party to the transaction, except to the extent
that it was a party to the Distributorship Agreement with the
dealership. The dealership was purchased prior to the announcement
by the Company of the intent to form the Komatsu Dresser joint
venture. The plaintiffs sued the Company claiming that the Company
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE G - LITIGATION AND CONTINGENCIES (CONTINUED)
Litigation (Continued)
failed to disclose to them its intent to enter into the joint
venture and that the value of the dealership, which they
subsequently sold at a loss, was impaired by the formation of the
joint venture. In April, 1994, the jury returned a verdict
awarding the plaintiffs compensatory damages of $6.5 million and
punitive damages of $4.0 million.
The purchasers of the Company's former hand tool division sued the
Company for fraud in connection with the October 1983 transaction
alleging, among other things, that the Company knowingly failed to
disclose certain alleged liabilities associated with the hand tool
business. The plaintiffs previously had been awarded in <PAGE>
arbitration a $1.3 million adjustment to the purchase price paid by
them to acquire the division. In May, 1994, the jury returned a
verdict awarding the plaintiffs $4 million in compensatory damages
and $50 million in punitive damages.
In both cases, the Company is preparing appropriate post-trial
motions, and if relief is denied by the trial court, the Company
intends to appeal. Based on a review of the current facts and
circumstances and discussions with legal counsel, management has
provided for what is believed to be a reasonable estimate of the
exposure to loss associated with these matters. While
acknowledging the uncertainties of litigation, management believes
that these matters will be resolved without a material effect on
the Company's financial position or results of operation.
Environmental Matters
The Company is identified as a potentially responsible party in 75
Superfund sites. Primary responsibility for nine of these sites
was assumed by INDRESCO Inc. At four of the remaining 66 sites,
Bio-Ecology, Operating Industries, Gulf Coast Vacuum, and PAB Oil
and Chemical, the Company may be responsible for remediation costs
currently estimated at between $.3 million and $1 million each.
The Company previously has entered into settlements in respect of
fourteen Superfund sites at a total cost of $.2 million. Based
upon the Company's historical experience with similar claims and
management's understanding of the facts and circumstances relating
to the sites other than Bio-Ecology, Operating Industries, Gulf
Coast Vacuum, and PAB Oil and Chemical, management believes that
the other situations will be resolved without material effect on
the Company's financial position or results of operations.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE H - INFORMATION BY INDUSTRY SEGMENT (IN MILLIONS) <PAGE>
Three Months Ended Six Months Ended
April 30, April 30,
1994 1993 1994 1993
Sales and service revenues*
Oilfield Services........ $ 365.1 $ 401.6 $ 817.8 $ 735.0
Hydrocarbon Processing Industry
Dresser-Rand............ 282.5 286.4 626.1 525.1
Other operations........ 293.5 279.6 562.0 541.6
576.0 566.0 1,188.1 1,066.7
Engineering services...... 338.3 288.3 631.7 579.1
Eliminations.............. (.9) (3.7) (1.6) (10.3)
Total sales and service
revenues................$1,278.5 $1,252.2 $2,636.0 $2,370.5
Operating profit and earnings
before taxes
Oilfield Services
Consolidated operations $ 27.7 $ 29.3$ 79.6 $ 41.6
Western Atlas operations .- 10.9 .- 21.4
27.7 40.2 79.6 63.0
Hydrocarbon Processing Industry
Dresser-Rand operations 15.4 20.7 29.3 27.5
Ingersoll-Dresser Pump
operations............ 1.1 13.8 6.4 17.9
Other operations........ 35.4 27.4 60.7 46.7
Special Charges......... .- (7.2) .- (7.2)
51.9 54.7 96.4 84.9
Engineering services
Operations.............. 15.6 16.4 30.9 25.7
Gain on Mexican affiliate's
public offering....... .- .- 11.0 .-
15.6 16.4 41.9 25.7
Total segment operating
profit.................. 95.2 111.3 217.9 173.6 <PAGE>
General corporate expenses.. (15.0) (16.4) (30.9) (32.1)
Other nonsegment expenses,
net....................... (4.6) (5.5) (8.4) (8.2)
Special credits (charges)... 18.4 (58.0) 8.9 (65.0)
Gain on sale of interest in
Western Atlas............. (1.0) .- 275.7 .-
Gain on sale of interest in
M-I Drilling Fluids....... 3.0 .- 3.0 .-
Retiree medical benefit plan
changes................... .- .- .- 12.8
Interest expense, net....... (1.1) (6.4) (7.1) (10.2)
Earnings before taxes..... $ 94.9 $ 25.0$ 459.1 $ 70.9
* Amounts do not include the Company's share of revenues for the
major unconsolidated joint ventures as follows:
Three Months Ended Six Months Ended
April 30, April 30,
1994 1993 1994 1993
Western Atlas (29.5%)... $ .- $ 84.2$ .- $ 173.3
Ingersoll-Dresser
Pump (49%)............ 90.7 95.2 187.3 193.4
$ 90.7 $ 179.4 $ 187.3 $ 366.7
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
NOTE I - SUBSEQUENT EVENT
On June 1, 1994, the Company and Wheatley TXT Corp. (Wheatley)
signed an agreement to merge Wheatley into a wholly owned
subsidiary of the Company in a tax free transaction valued at <PAGE>
approximately $195 million. The merger will be accounted for as a
pooling of interests. The terms of the agreement call for the
exchange of seven tenths of a share of Dresser common stock for
each share of Wheatley common stock, provided that the average
daily price of Dresser stock is between $20 and $27 per share
during a specified period prior to the approval of the merger by
Wheatley shareholders. If the average daily price of Dresser
shares is above or below the specified range during the period, the
conversion rate will be adjusted but will not be greater than .7368
or less than .6750. The Company expects the transaction to be
completed by late July or early August, 1994.
The Boards of Directors of both Dresser and Wheatley have approved
the merger. The merger requires the approvals of Wheatley's
shareholders and appropriate government agencies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 30, 1994
Results of Operations - Three Months and Six Months Ended April 30,
1994 Compared to 1993
Net earnings (after-tax) are summarized as follows:
Three Months Ended April 30,
1994 1993
Amount Per Share Amount Per Share
Earnings before special
items $ 39.8 $ .23 $ 49.2 $ .28
Parker & Parsley lawsuit
recovery (settlement) 11.6 .06 (36.5) (.21)
Restructuring charges .- . - (4.3) (.02)
Gain on sale of interest in
Western Atlas (.6) . - .- . - <PAGE>
Gain on sale of interest in
M-I Drilling Fluids 1.9 .01 .- . -
Net earnings $ 52.7 $ .30 $ 8.4 $ .05
Six Months Ended April 30,
1994 1993
Amount Per Share Amount Per Share
Earnings before special
items $ 92.2 $ .53 $ 77.4 $ .44
Parker & Parsley lawsuit
recovery (settlement) 11.6 .06 (40.9) (.23)
Drill Bit lawsuit settlement (6.0) (.03) .- . -
Restructuring charges .- . - (4.3) (.02)
Gain on sale of interest in
Western Atlas 146.4 .84 .- . -
Gain on sale of interest in
M-I Drilling Fluids 1.9 .01 .- . -
Net earnings $ 246.1 $ 1.41 $ 32.2 $ .19
Unusual Items
In April, 1994, the Company recognized a $18.4 million pre-tax gain
from the settlement of a coverage dispute with certain insurance
carriers regarding the 1993 Parker & Parsley litigation settlement
on which the Company recorded pre-tax charges of $58.0 million in
the three months of 1993 and $65.0 million in the six months of
1993. See Notes E and G to Consolidated Condensed Financial
Statements.
As explained in Note A to Consolidated Condensed Financial
Statements, the Company sold its interest in M-I Drilling Fluids
Company effective February 28, 1994 and recorded a pre-tax gain of
$3.0 million in the current quarter.
The Company sold its interest in Western Atlas International, Inc.
and recognized a pre-tax gain of $276.7 million in the first
quarter of 1994 and adjusted the gain to $275.7 million during the
current quarter. <PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 30, 1994
Results of Operations - Three Months and Six Months Ended April 30,
1994 Compared to 1993 (Continued)
Operations
Sales and service revenues for the current quarter of $1,278.5
million were up $26.3 million (2%) from the prior year quarter.
Increases in the Hydrocarbon Processing Industry and Engineering
Services segments were offset by a decrease in the Oilfield
Services segment which was lower mainly due to the sale of M-I
Drilling Fluids.
Sales and service revenues for the six months of 1994 of $2,636.0
million were up $265.5 million (11.2%) from the prior year six
months. All segments had increases.
Earnings before special items for the second quarter were down $9.4
million compared to the prior year but up $14.8 million for the
first six months of 1994 compared to last year. Segment operating
profit for the second quarter, excluding Western Atlas and LIFO
inventory adjustments (see below), was essentially the same as the
prior year quarter after being up $67.4 million in the first
quarter.
Currently, however, international exploration and drilling activity
is slow and hydrocarbon processing projects are being delayed due
to the uncertain oil price outlook. This could affect the
performance of some of the operating units in upcoming quarters.
Earnings from unconsolidated joint ventures were down $23.8 million
for the three months and $33.5 million for the six months. The
Company did not recognize any earnings from Western Atlas
operations in 1994, but had $10.9 million and $21.4 million of such
earnings in the three months and six months, respectively, of 1993. <PAGE>
The 1993 periods also included $13.8 million in the three months
and $21.3 million in the six months of non-recurring earnings from
the release of LIFO inventory reserves related to inventories
contributed to Ingersoll-Dresser Pump Company and sold to third
parties by Ingersoll-Dresser Pump.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 30, 1994
Results of Operations - Three Months and Six Months Ended April 30,
1994 Compared to 1993 (Continued)
Selling, engineering, administrative and general expenses are lower
in the three months and six months of 1994 than in the 1993
periods. The decreases are primarily due to the sale of M-I
Drilling Fluids.
Net interest expense is lower in the 1994 periods than in 1993
primarily due to interest income on a higher level of investments
resulting from the sale of interests in M-I Drilling Fluids and
Western Atlas that more than offset higher interest rates on debt
resulting from the issuance of $450 million of long term debt in
1993 which replaced lower rate short-term borrowings as follows (in
Millions):
Three Months Six Months
1994 1993 1994 1993
Interest expense $ (11.0) $ (9.8) $ (23.6) $ (18.0)
Interest income 9.9 3.4 16.5 7.8
$ (1.1) $ (6.4) $ (7.1) $ (10.2)
Segment Results
See details of segment revenues and operating profit in Note H to
Consolidated Condensed Financial Statements. <PAGE>
Oilfield Services
With the Baroid merger, the Oilfield Services Segment now includes
the following businesses: Drilling Fluids, Drilling Services and
Products, Pipe Coating, Underwater Engineering Services, Drill
Bits, Production Tools and Ball Valves.
Consolidated Oilfield Services operations' revenues and operating
profits for the current quarter were down $36.5 million and $1.6
million, respectively, from the same 1993 quarter. Revenues and
operating profits were down $57.0 million and $5.0 million,
respectively, as a result of M-I Drilling Fluids being sold as of
February 28, 1994. The Baroid Drilling Fluids and Sperry-Sun
Drilling Services operations had higher revenues and operating
profits primarily due to higher drilling activity in the Gulf of
Mexico and Canada and improved prices. The Sub Sea underwater
engineering operations had higher revenues as a result of increased
work in Australia; however, operating profit was lower due to
higher than anticipated job costs and increased engineering and
operational staff expenses both in the United States and the North
Sea. The Bredero Price pipe coating operation had lower revenues
due to the prior year sale of a pipe coating plant.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 30, 1994
Segment Results (Continued)
Oilfield Services (Continued)
On a year-to-date basis, revenues and operating profits for the
consolidated Oilfield Services operations were up $82.8 million and
$38.0 million, respectively. Current revenues included the full
six months for Bredero Price and TK Value which were acquired in
1993. These revenues more than offset a reduction due to the sale
of M-I Drilling Fluids in 1994. The inclusion of Bredero Price for
the full six months of 1994 added $13.5 million to operating
profits. The remainder of the increases in revenues and operating <PAGE>
profits were primarily from Baroid Drilling Fluids and Sperry Sun
Drilling Services operations which were favorably impacted by
increased North American drilling activity.
On June 1, 1994, the Company and Wheatley TXT Corp. signed an
agreement to merge Wheatley into a wholly owned subsidiary of the
Company. See Note I to Consolidated Condensed Financial Statements
for more information. The Wheatley merger will add pumps, valves,
metering equipment and other products used in the production of oil
and gas. Giving effect to recent acquisitions, Wheatley had pro
forma sales of $161.6 million and net earnings of $8.2 million for
its fiscal year ended February 28, 1994.
Hydrocarbon Processing Industry
In the current quarter, Dresser-Rand had lower revenues and
operating profits reflecting a low level of international activity
due to persistent economic and political uncertainty in many
markets. Somewhat offsetting that trend was relatively strong
demand for equipment for natural gas activity in the U.S. For the
six months, Dresser-Rand's revenues were up due to favorable demand
for aftermarket parts and service as well as high levels of steam
turbine segments and rental unit activity in the first quarter of
1994. Year-to-date operating profits were essentially flat
reflecting a slow-down in market conditions.
Ingersoll-Dresser Pump (IDP) had lower revenues in the three months
and six months compared to the prior year, reflecting the continued
slow-down in international markets. Dresser's earnings from IDP in
1994 were down in both the three months and the six months
primarily because 1993 included $13.8 million and $21.3 million,
respectively, of earnings from the release of LIFO reserves related
to inventories contributed to IDP by Dresser and sold to third
parties by IDP.
The other Hydrocarbon Processing Industry operations had improved
revenues and operating profits for both the three months and the
six months when compared to the prior year periods. The Mono Pump,
Wayne, Waukesha, Instrument, Roots and DMD operations all <PAGE>
contributed to the increases reflecting better market demand in the
U.S. The Valve and Controls Division had lower revenues and
operating profits due to slower market conditions in Europe.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED APRIL 30, 1994
Segment Results (Continued)
Engineering Services
The M. W. Kellogg Company's operations had strong revenue increases
in both the current quarter and the year-to-date versus the prior
year periods. Kellogg's operating profit was essentially flat for
the quarter but was up year-to-date due to a favorable mix of
projects for refineries, LNG plants and ammonia plants in the first
quarter of 1994.
Liquidity, Capital Resources and Financial Condition
The Company's liquidity and overall financial condition improved
during the six months ended April 30, 1994. As shown on the
Statements of Cash Flows, the Company received cash proceeds
totaling $518.0 million from the sales of interests in Western
Atlas International, Inc. and M-I Drilling Fluids. The Company
used the proceeds to reduce debt $291.4 million and to make a $56.2
million tax payment attributable to the gain on sale of Western
Atlas. The balance of cash and cash equivalents was $125.8 million
higher than at October 31, 1993 primarily due to the remainder of
the proceeds. Approximately $73.1 million of additional taxes
attributable to the gain on sale of Western Atlas will be paid
later in the year.
The Company's ratio of total debt to total debt and shareholders'
investment improved to 26/74 at April 30, 1994 compared to 40/60 at
October 31, 1993. The Company continues to have access to
additional capital resources should the need arise. Management <PAGE>
believes that available cash and lines of credit, combined with
cash provided by operations, will be adequate to finance known
requirements.
Baroid Corporation issued 8% Senior Notes in April 1993 via a
public offering. The Company intends to propose amendments to the
Note Indenture whereby Dresser will guarantee the Notes in exchange
for modification of certain covenants (See Note D to Consolidated
Condensed Financial Statements).
Litigation and Environmental Issues
As noted in the discussion of operations, during the quarter the
Company settled certain insurance claims concerning the 1993
settlement of the Parker & Parsley litigation. Also during the
quarter, juries awarded damages to the plaintiffs in two lawsuits
against the Company. See Notes E and G to Consolidated Condensed
Financial Statements for further discussion of these legal matters.
Note G also includes disclosure of environmental clean-up
situations in which the Company is involved.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
The following report was filed on Form 8-K during the
quarter for which this report is filed:
(1) A report on Form 8-K/A dated March 10 for Item 7 was
filed to amend a report on Form 8-K dated January 21,
1994. The amended report included Management's
Discussion and Analysis of Financial Condition and
Results of Operations, Supplemental Consolidated
Financial Statements and Unaudited Pro Forma Combined
Condensed Financial Statements.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DRESSER INDUSTRIES, INC.
By: /s/ George H. Juetten
George H. Juetten
Vice President - Controller
Dated: June 24, 1994
<PAGE>
