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
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the quarterly period ended July 31, 1994.
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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)
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 . No X .
1<PAGE>
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 August 31, 1994
Common Stock, par value $.25 183,794,107
2<PAGE>
INDEX
Page
Number
Part I. Financial Information
Management's Representation 3
Consolidated Condensed Statements of Earnings
for the three months and the nine months ended
July 31, 1994 and 1993 4
Consolidated Condensed Balance Sheets
as of July 31, 1994 and October 31, 1993 5
Consolidated Condensed Statements of Cash Flows
for the nine months ended July 31, 1994 and 1993 6
Notes to Consolidated Condensed Financial Statements 7-14
Management's Discussion and Analysis of Financial
Conditions and Results of Operations 15-19
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 20
Signature 20
Exhibit Index
Exhibit 27 Financial Data Schedule
3<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
July 31, 1994 and October 31, 1993, the results of operations
for the three months and the nine months ended July 31, 1994
and 1993, and cash flows for the nine months ended July 31,
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.
4<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions Except Per Share Data)
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
(Unaudited) (Unaudited)
Sales and service revenues.... $1,145.6 $1,276.9 $3,781.6 $3,647.4
Cost of sales and services... (888.9) (953.4) (2,914.4) (2,760.3)
Gross earnings.............. 256.7 323.5 867.2 887.1
Earnings from major
unconsolidated joint
ventures.................... 0.4 13.0 6.8 52.3
Selling, engineering,
administrative and general
expenses.................... (206.8) (243.1) (662.0) (717.6)
Special credits (charges)..... .- 4.1 8.9 (68.1)
Earnings from operations.... 50.3 97.5 220.9 153.7
Other income (deductions)
Interest expense, net....... (2.2) (8.8) (9.3) (19.0)
Gain on sale of interest
in Western Atlas........... .- .- 275.7 .-
Gain on Mexican affiliates
public offering............ .- .- 11.0 .-
Retiree medical benefit plan
curtailment................ .- .- .- 12.8
Other, net.................. 2.3 2.5 11.2 14.6
Total...................... 0.1 (6.3) 288.6 8.4
Earnings before income taxes
and minority interest...... 50.4 91.2 509.5 162.1
Income taxes................... (14.0) (34.8) (211.1) (62.1)
Minority interest.............. (1.2) (12.4) (17.1) (23.8)
Net earnings................ $ 35.2 $ 44.0 $ 281.3 $ 76.2
Earnings per common share...... $ .20 $ .25 $ 1.61 $.44
Cash dividends per common
share....................... $ .17 $ .15 $ .49 $ .45
Average common shares
outstanding................. 175.4 174.4 175.2 174.2
5<PAGE>
See accompanying Notes to Consolidated Condensed Financial
Statements.
6<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
July 31,
1994 October 31,
(Unaudited) 1993
ASSETS
Current Assets
Cash and cash equivalents............. $ 383.6 $272.8
Notes and accounts receivable, net.... 761.6 854.8
Inventories, net...................... 620.4 728.3
Deferred income taxes................. 98.3 100.9
Other current assets.................. 36.7 46.5
Total Current Assets................ 1,900.6 2,003.3
Notes receivable from Western Atlas..... 200.0 .-
Investments in and receivables from
major unconsolidated joint ventures... 150.5 414.4
Intangibles, net........................ 602.6 610.7
Deferred income taxes................... 201.1 210.9
Other assets............................ 183.4 189.7
Property, plant and equipment - at cost 2,124.9 2,340.3
Accumulated depreciation and amortization 1,265.6 1,398.6
Total Properties - Net.............. 859.3 941.7
Total Assets...................... $4,097.5 $4,370.7
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Short-term debt and current portion
of long-term debt................... $ 43.2 $ 306.8
Accounts payable...................... 354.2 367.8
Advances from customers on contracts.. 264.6 288.3
Accrued compensation and benefits..... 214.9 234.9
Income taxes.......................... 142.1 102.3
Other current liabilities............. 358.2 399.2
Total Current Liabilities........... 1,377.2 1,699.3
Employee retirement benefit obligations 671.3 707.6
Long-term debt.......................... 459.9 486.7
Deferred compensation, insurance
reserves and other liabilities........ 97.2 108.4
Minority interest....................... 69.2 154.9
Shareholders' Investment
Common shares......................... 43.9 43.7
Capital in excess of par value........ 375.2 366.7
Retained earnings..................... 1,117.6 951.0
Cumulative translation adjustments.... (96.1) (130.2)
Pension liability adjustment.......... (13.8) (13.8)
7<PAGE>
1,426.8 1,217.4
Less: Treasury shares, at cost....... 4.1 3.6
Total Shareholders' Investment...... 1,422.7 1,213.8
Total Liabilities and
Shareholders' Investment........ $4,097.5 $4,370.7
See accompanying Notes to Consolidated Condensed Financial
Statements.
8<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
Nine Months Ended
July 31,
1994 1993
(Unaudited)
Cash flows from operating activities:
Net earnings........................... $ 281.3 $ 76.1
Adjustments to reconcile net earnings
to cash flow:
Gain on sale of interest in
Western Atlas, net of tax....... (146.5) .-
Retiree medical benefit
plan changes.................... .- (12.8)
Depreciation and amortization..... 159.0 154.8
Earnings from major
unconsolidated joint ventures... (6.8) (51.9)
Cash received from major unconsolidated
joint ventures.................. 18.7 20.7
Minority interest in earnings..... 17.1 23.8
Cash advanced to minority partner (27.4) (24.5)
Change in working capital*........ (89.8) (82.0)
Change in non-current assets and
liabilities* (13.7) (12.3)
Net cash provided by
operating activities........ 191.9 91.9
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........... (106.2) .-
Business acquisitions less cash and cash
equivalents acquired of $38.2....... .- (294.1)
Capital expenditures.................. (118.8) (116.1)
Net cash provided by (used by)
investing activities.............. 293.0 (410.2)
Cash flows from financing activities:
Proceeds from issuance of 6.25% Notes .- 298.2
Proceeds from issuance of 8% Senior Notes .- 146.0
(Decrease) increase in short-term debt (248.1) 195.5
Redemption of debentures.............. .- (62.5)
Decrease in other long-term debt...... (42.3) (128.5)
Dividends paid........................ (84.9) (74.8)
Net cash (used by) provided by financing
activities........................ (375.3) 373.9
9<PAGE>
Effect of translation adjustments on cash 1.2 (6.2)
Net increase in cash and cash equivalents 110.8 49.4
Cash and cash equivalents, beginning
of period............................. 272.8 176.5
Cash and cash equivalents, end of period $ 383.6 $ 225.9
*Change is net of effect of businesses divested and purchased.
See accompanying Notes to Consolidated Condensed Financial
Statements.
10<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 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 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.
Baroid has ceased filing periodic reports with the Securities
and Exchange Commission. Baroid's 8% Senior Notes remain
outstanding, and the Notes are now fully guaranteed by Dresser
(See Note D). Because the Notes remain outstanding, summarized
financial information of Baroid is presented as follows (in
millions):
Baroid Corporation July 31, 1994 October 31, 1993
Current assets.............. 415.3 $ 388.4
Noncurrent assets........... 374.1 340.4
Total....................$ 789.4 $ 728.8
Current liabilities......... 309.7 $ 272.1
Noncurrent liabilities...... 179.7 186.5
Shareholders' investment.... 300.0 270.2
Total..................... 789.4 $ 728.8
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
11<PAGE>
Revenues.................... $ 225.6$ 212.1 $ 662.6 $ 591.7
Gross earnings.............. $ 66.2$ 55.0 $ 182.9 $ 144.8
Earnings from operations.... $ 17.6$ 17.3 $ 56.0 $ 34.7
Other income (deductions)... (5.6) (4.0) (11.7) (5.6)
Earnings before taxes
and minority interests.... 12.0 13.3 44.3 29.1
Income taxes................ (3.6) (3.7) (15.5) (9.0)
Minority interest........... (.6) (.5) .9 (1.0)
Net earnings................ $ 7.8 $ 9.1 $ 29.7 $ 19.1
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 1994
(Unaudited)
Separate results of Baroid for the periods prior to the merger
are shown in the 1993 summarized financial information above
and in the following summary (in millions):
Three Months Ended
January 31, 1994
Revenues........................ $ 225.3
Gross earnings.................. $ 65.5
Earnings from operations........ $ 25.4
Other income (deductions)....... (1.9)
Earnings before taxes
and minority interests......... 23.5
Income taxes.................... (8.7)
Minority interest............... 1.1
Net earnings.................... $ 15.9
12<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 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):
July 31, October 31,
1994 1993
Western Atlas International, Inc. $ .- $ 278.2
Ingersoll-Dresser Pump Company... 150.5 136.2
$ 150.5 $ 414.4
Summarized earnings statement information for major
unconsolidated joint ventures is as follows (in millions):
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
Ingersoll-Dresser Pump Company
(49% owned)
Net sales......... $ 190.4 $ 199.0 $ 572.5 $ 600.4
Gross profit...... $ 40.7 $ 45.2 $ 128.0 $ 127.6
Net income........ $ 2.2 $ 3.0 $ 21.5 $ (1.4)
The Company's
share of pre-tax
earnings......... $ .4 $ 1.9 $ 6.8 $ 19.8
Western Atlas International, Inc.
(29.5% owned until
January 28, 1994)
Net sales......... $ .- $ 263.6 $ .- $ 851.1
Gross profit.......$ .- $ 59.4 $ .- $ 188.8
Net income........ $ .- $ 22.1 $ .- $ 66.5
The Company's
share of pre-tax
earnings......... $ .- $ 11.1 $ .- $ 32.5
The Company's share of earnings for Ingersoll-Dresser Pump for
nine months ended July 31, 1993 included $21.3 million 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
13<PAGE>
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 recognized a
gain of $275.7 million, before taxes.
14<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 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):
July 31, October 31,
1994 1993
Finished products and work in
process........................ $ 488.5 $ 584.8
Raw materials and supplies....... 131.9 143.5
$ 620.4 $ 728.3
NOTE D - DEBT
Short-term debt at July 31, 1994 consisted of $43.2 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.
On February 17, 1994, the Company 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.
On August 5, 1994, the Company completed a consent solicitation
whereby the holders of the Notes consented to certain
amendments to the Indenture which removed various restrictive
covenants. In return, Dresser fully and unconditionally
guaranteed payment of principal and interest on the Notes.
Baroid entered into a three year reverse interest rate swap
beginning May 7, 1993 and ending May 7, 1996. Under terms of
the swap agreement, the Company receives a fixed interest
payment of 4.9% and pays six-month LIBOR for the prior six
months on $150 million. During the first year of the swap,
the Company received interest of $1.1 million greater than it
paid under the swap agreement. The effect of the reverse
interest rate swap is to convert the first three years of the
8% Senior Notes from a fixed rate obligation to a floating rate
15<PAGE>
obligation (composed of a fixed payment of 3.1% plus a floating
payment based on six-month LIBOR for the prior six months). If
on the set date six-month LIBOR is less than 4.9%, the Company
will pay an effective floating rate of less than 8.0% and
conversely if six-month LIBOR is greater than 4.9%, the Company
will pay an effective floating rate greater than 8.0%. On
September 13, 1994, six-month LIBOR was approximately 5.5%.
This same rate on the next set date (November 7, 1994) would result
in a payment of approximately $.4 million for the six months then
ended, which is in addition to the 8% due holders of the
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 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 in the Parker & Parsley litigation
filed by Glyn Snell, et. al., were settled in June 1994,
whereby the Company paid $7.5 million in
16<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
NOTE E - SPECIAL CREDITS AND CHARGES (CONTINUED)
August 1994.
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. This charge and the Parker & Parsley
settlement gain noted above resulted in a net special credit of
$8.9 million for the nine months ended July 31, 1994.
The 1993 special charges include $65.0 million in the nine
months ended July 31, 1993, to cover settlement, legal fees and
expenses related to the Parker & Parsley litigation.
In addition, the Company recorded $7.2 million of
special charges in the nine months ended July 31, 1993 for
employee termination costs associated with restructuring
certain operations and $4.1 million of special credits in the
three months and nine months ended July 31, 1993 from
curtailment of retiree medical benefits resulting from employee
termination associated with plant closings.
NOTE F - DIVIDENDS
On July 21, 1994, the Company declared a quarterly dividend of
$.17 per share of common stock payable September 20, 1994 to
shareholders of record on September 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 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,
17<PAGE>
1994, the jury returned a verdict awarding the plaintiffs
compensatory damages of $6.5 million and punitive damages of
$4.0 million.
18<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
NOTE G - LITIGATION AND CONTINGENCIES (CONTINUED)
Litigation (Continued)
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 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
81 Superfund sites. Primary responsibility for nine of these
sites was assumed by INDRESCO Inc. The Company has entered
into agreements to settle the Bio-Ecology site for $.9 million
and the Gulf Coast Vacuum site for $.4 million. The Bio-
Ecology agreement is before the Court for approval. The Gulf
Coast Vacuum administrative settlement is pending public notice
and execution by the United States Environmental Protection
Agency. At two of the remaining 70 sites, Operating Industries
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 $.2 million. Based upon the Company's historical
experience with similar claims and management's understanding
of the facts and circumstances relating to the sites other than
Bio-Ecology, Gulf Coast Vacuum, Operating Industries and PAB
Oil and Chemical, management believes that the other situations
will be resolved without material effect on the Company's
19<PAGE>
financial position or results of operations.
20<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
NOTE H - INFORMATION BY INDUSTRY SEGMENT (IN MILLIONS)
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
Sales and service revenues*
Oilfield Services.............$ 338.8$ 424.9 $1,156.6 $1,159.9
Hydrocarbon Processing Industry
Dresser-Rand................ 260.9 272.8 887.0 797.9
Other operations............ 281.0 277.2 843.0 818.8
541.9 550.0 1,730.0 1,616.7
Engineering Services.......... 266.0 303.3 897.7 882.4
Eliminations.................. (1.1) (1.3) (2.7) (11.6)
Total sales and service
revenues.................... $1,145.6 $1,276.9 $3,781.6$3,647.4
Operating profit and earnings
before taxes
Oilfield Services
Consolidated operations.....$ 23.5$ 35.9 $ 103.3$ 77.5
Western Atlas operations.... .- 11.1 .- 32.5
Special credits .- 0.6 .- 0.6
23.5 47.6 103.3 110.6
Hydrocarbon Processing Industry
Dresser-Rand operations..... 4.1 17.9 33.4 45.4
Ingersoll-Dresser Pump
operations................ 0.4 1.9 6.8 19.8
Other operations............ 33.0 31.9 93.7 78.6
Special credits (charges)... .- 3.4 .- (3.8)
37.5 55.1 133.9 140.0
Engineering Services
Operations.................. 13.4 23.1 44.3 48.8
Gain on Mexican affiliate's
public offering........... .- .- 11.0 .-
13.4 23.1 55.3 48.8
Total segment operating profit 74.4 125.8 292.5 299.4
General corporate expenses...... (14.7) (13.9) (45.6) (46.0)
Other nonsegment expenses, net.. (7.1) (11.9) (15.7) (20.1)
Special credits (charges)....... .- .- 8.9 (65.0)
Gain on sale of interest in
Western Atlas................. .- .- 275.7 .-
Gain on sale of interest in M-I
Drilling Fluids............... .- .- 3.0 .-
Retiree medical benefit plan
changes....................... .- .- .- 12.8
Interest expense, net........... (2.2) (8.8) (9.3) (19.0)
Earnings before taxes.........$ 50.4$ 91.2 $ 509.5$ 162.1
* Amounts do not include the Company's share of revenues for
the major unconsolidated joint ventures as follows:
21<PAGE>
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
Western Atlas (29.5%)........$ .-$ 77.6 $ .- $ 250.9
Ingersoll-Dresser Pump (49%). 93.2 97.5 280.5 294.2
$ 93.2$ 175.1 $ 280.5 $ 545.1
22<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JULY 31, 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. The
merger became effective on August 5, 1994 following approval by
Wheatley's shareholders and appropriate government agencies.
As a result of the merger, 0.70 shares of Dresser common stock
has been exchanged for each of Wheatley's approximately 12
million shares outstanding. The merger is being accounted for
as a pooling of interests.
Supplemental unaudited financial information assuming the
merger had occurred on November 1, 1993 is as follows (in
millions, except earnings per share):
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
Revenues.................... $1,188.1 $1,296.0$3,893.7$3,703.3
Gross earnings.............. $ 271.5 $ 329.4$ 906.6$ 903.1
Earnings from operations.... $ 55.4 $ 99.8$ 234.5$ 159.7
Other income (deductions)... (0.6) (6.3) 286.0 8.3
Earnings before taxes
and minority interests.... 54.8 93.5 520.5 168.0
Income taxes................ (15.7) (35.7) (215.7) (64.3)
Minority interest........... (1.2) (12.4) (17.1) (23.8)
Net earnings................ $ 37.9 $ 45.4$ 287.7$ 79.9
Earnings per share.......... $ .21 $ .25$ 1.58$ .44
July 31, 1994
Current assets.............. $1,972.2
Noncurrent assets........... 2,302.8
Total..................... $4 275.0
Current liabilities......... $1,397.5
Noncurrent liabilities...... 1,359.1
Shareholders' investment.... 1,518.4
Total..................... $4,275.0
The Company currently expects to record approximately $15
million of special charges in the fourth quarter of 1994 for
expenses associated with the merger, including professional
fees and costs related to eliminating duplicate facilities.
23<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED July 31, 1994
Results of Operations - Three Months and Nine Months Ended July
31, 1994 Compared to 1993
Net earnings (after-tax) are summarized as follows:
Three Months Ended July 31,
1994 1993
Amount Per Share Amount Per Share
Earnings before special items 35.2 $ .20 $ 41.5 $ .24
Restructuring credits .- .- 2.5 .01
Net earnings $ 35.2 $ .20 $ 44.0 $ .25
Nine Months Ended July 31,
1994 1993
Amount Per Share Amount Per Share
Earnings before special items $127.4 $ .73 $119.0 $.68
Parker & Parsley lawsuit
recovery (settlement) 11.6 .06 (40.9) (.23)
Drill Bit lawsuit settlement (6.0) (.03) .- .-
Restructuring charges .- . - (1.9) (.01)
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 $ 281.3 $ 1.61 $ 76.2 $ .44
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 $65.0 million in the nine 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.
As explained in Note B to Consolidated Condensed Financial
Statements, the Company sold its interest in Western Atlas
International, Inc. in January 1994, and recognized a pre-tax
gain of $275.7 million.
24<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED July 31, 1994
Results of Operations - Three Months and Nine Months Ended July
31, 1994 Compared to 1993 (Continued)
Operations
Sales and service revenues for the current quarter of $1,145.6
million were down $131.3 million (10.3%) from the prior year
quarter. The Oilfield Services Segment was down $86.1 million
primarily due to $99.6 million of 1993 sales of M-I Drilling
Fluids. Engineering Services Segment was down $37.3 million.
Gross earnings and the gross earnings ratio were down $66.8
million and 2.9%, respectively, for the current quarter
compared with the 1993 quarter. These decreases were also
primarily due to the prior year sales of M-I Drilling Fluids.
Sales and service revenues for the nine months of 1994 of
$3,781.6 million were up $134.2 million (3.7%) from the prior
year nine months. The Hydrocarbon Processing Segment
contributed $113.3 million of the increase primarily from the
Dresser-Rand operations which had higher sales of $89.1
million. Gross earnings and the gross earnings ratio were down
$19.9 million and 1.4%, respectively, for the nine months. The
decrease attributable to 1993 sales of M-I Drilling Fluids was
partially offset by margins on higher sales of other
operations.
Earnings before special items for the third quarter were down
$6.3 million versus the prior year, but up $8.4 million for the
first nine months of 1994 compared to last year. Segment
Operating Profit excluding the impact of Western Atlas was down
$40.3 million for the third quarter compared with the 1993
quarter but was up $25.6 million for the nine months compared
to the prior year nine months primarily due to a strong first
quarter in 1994.
Earnings from unconsolidated joint ventures were down $12.6
million for the three months and $45.5 million for the nine
months. The Company has not recognized any earnings from
Western Atlas operations in 1994, but had $11.1 million and
$32.5 million of such earnings in the three months and nine
months, respectively, of 1993. The 1993 nine month results
also included $21.3 million of non-recurring earnings
recognized in the first two quarters 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.
25<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED July 31, 1994
Results of Operations - Three Months and Nine Months Ended July
31, 1994 Compared to 1993 (Continued)
Selling, engineering, administrative and general expenses are
lower in the three months and nine 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 from the proceeds of the sale of interests in M-I
Drilling Fluids and Western Atlas. This more than offset the
effect of 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 Nine Months
1994 1993 1994 1993
Interest expense $ (11.2) $ (13.0) $ (34.8) $ (31.0)
Interest income 9.0 4.2 25.5 12.0
$ (2.2) $ (8.8) $ (9.3) $ (19.0)
The current year higher year-to-date effective tax rate (41.4%
versus 38.3%) is attributable to a higher effective tax rate on
the Company's gain on the sale of its interest in Western
Atlas. The higher rate on the Western Atlas gain is
attributable to tax on a lower tax basis in the Company's
investment in Western Atlas. Absent the tax on the Western
Atlas gain, the Company's year-to-date effective tax rate on
continuing operations is approximately 35%. The lower tax rate
for the three months ended July 31 is a result of the revision
of the estimated tax rate for the full fiscal year. In prior
years a similar revision did not occur until the fourth
quarter.
Segment Results
See details of segment revenues and operating profit in Note H
to Consolidated Condensed Financial Statements.
Oilfield Services
Consolidated Oilfield Services operations' revenues and
operating profits for the current quarter were down $86.1
million and $12.4 million, respectively, from the same 1993
quarter. The decreases included revenues of $99.6 million and
operating profits of $6.1 million of M-I Drilling Fluids in the
1993 quarter. The Baroid Drilling Fluids and Sperry-Sun
Drilling Services operations both 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
26<PAGE>
the United States and the North Sea. The Security and DBS
drill bit businesses had lower sales and operating profits as a
result of a slowdown in international drilling and the
absorption of one-time costs. The Bredero Price pipe coating
operation had lower revenues and operating profit due to
project delays.
27<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED July 31, 1994
Segment Results (Continued)
Oilfield Services (Continued)
Revenues were essentially the same as the prior year on a year-
to-date basis. A $141.9 million reduction in sales due to the
sale of M-I Drilling Fluids was offset by increases from the
inclusion in 1994 of the full nine months for Bredero Price and
TK Valve which were acquired in 1993 and increases by Baroid
Drilling Fluids, Sperry-Sun and Sub Sea. Year-to-date
operating profits were up $25.8 million. The inclusion of
Bredero Price for the full nine months in 1994 added to
operating profit. An increase in North American drilling
activity favorably impacted both Baroid Drilling Fluids and
Sperry-Sun.
On August 5, 1994, the Company and Wheatley TXT Corp. completed
the merger of Wheatley into the Company. See Note I to
Consolidated Condensed Financial Statements for more
information. The Wheatley merger adds 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. See Note I to
Consolidated Condensed Financial Statements.
Hydrocarbon Processing Industry
In the current quarter, Dresser-Rand had lower revenues and
operating profits reflecting a continued low level of inter-
national activity due to persistent economic and political un-
certainty in many markets. For the nine months, Dresser-Rand's
revenues were up due to favorable demand for aftermarket parts
and service as well as high levels of steam turbine shipments
and rental unit activity in the first quarter of 1994. Year-
to-date operating profits were down reflecting a slow-down in
market conditions. Dresser-Rand's backlog was $656.8 million
at July 31, 1994 compared to $652.3 million at April 30, 1994
and $872.6 million at October 31, 1993.
Ingersoll-Dresser Pump (IDP) had lower revenues in the three
months and nine months compared to the prior year, reflecting
the continued slow-down in international markets. Dresser's
earnings from IDP in 1994 were down in the nine months
primarily because 1993 included $21.3 million 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 nine months compared to the prior year periods.
The Wayne dispensing systems operations had substantial
increases in revenues and operating profits reflecting better
market demand in the U.S. The Mono Pump, Waukesha, Instrument,
Roots and DMD operations also contributed to the increases.
The Valve and Controls Division had lower revenues and
operating profits due to slower market conditions in Europe.
28<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUARTER ENDED July 31, 1994
Segment Results (Continued)
Engineering Services
The M. W. Kellogg Company's revenues decreased $37.3 million or
12% in the current quarter compared to the prior year quarter
reflecting lower activity levels as several major projects move
toward completion. Year-to-date revenues remained slightly
ahead of the prior year.
Kellogg's operating profit was down $9.7 million for the
quarter and $4.5 million year-to-date. Kellogg's backlog at
July 31, 1994 was $1.90 billion compared with $1.94 billion at
April 30, 1994 and $2.5 billion at October 31, 1993.
Liquidity, Capital Resources and Financial Condition
The Company's liquidity and overall financial condition
improved during the nine months ended July 31, 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 $290.4 million and to
make $106.2 million of tax payments attributable to the gain on
sale of Western Atlas. The balance of cash and cash
equivalents of $383.6 million was $110.8 million higher than at
October 31, 1993 primarily due to the remainder of the
proceeds. Approximately $23.1 million of additional taxes
attributable to the gain on sale of Western Atlas will be paid
in October.
The Company's ratio of total debt to total debt and
shareholders' investment improved to 26/74 at July 31, 1994
compared to 40/60 at October 31, 1993. The Company continues
to have access to additional capital resources should the need
arise. Management believes that the cash balance of $383.6
million and availability of $125.0 million under existing 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. On August 5, 1994, the Company completed a
consent solicitation whereby the holders of the Notes agreed to
amendments to the Note Indentures removing various restrictive
covenants. In return, Dresser guaranteed the Notes (see Note D
to Consolidated Condensed Financial Statements).
Litigation and Environmental Issues
As noted in the discussion of operations, the Company has
settled certain insurance claims concerning the 1993 settlement
of the Parker & Parsley litigation. Also, juries have 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.
29<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
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: September 14, 1994
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this Amendment No. 1 to report on Form 10-Q/A
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: October 6, 1994
30<PAGE>
EXHIBIT INDEX
Exhibit Description
27 Financial Data Schedule. (Pursuant to Item
601(c)(iv) of Regulation S-X, the Financial Data
Schedule is not deemed to be "filed" for purposes of
Section 11 of the Securities Act of 1933, as amended,
or Section 18 of the Securities Exchange Act of 1934,
as amended.)
31<PAGE>
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