<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1993.
Commission file number 1-4003
DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-0813641
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
POST OFFICE BOX 718 75221 (P.O. Box)
2001 ROSS AVENUE, DALLAS, TEXAS 75201
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)(214) 740-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, Par Value 25c Per New York Stock Exchange, Inc.
Share Pacific Stock Exchange Incorporated
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Pacific Stock Exchange Incorporated
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No /x/
---- -----
The aggregate market value of the voting stock (based on the closing price on
the New York Stock Exchange as of January 25, 1994) held by non-affiliates of
the registrant was approximately $3,690 million.
As of January 25, 1994, there were 175,283,941 shares of Dresser Industries,
Inc. Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Sections of Registrant's Notice of 1994 Annual Meeting of Shareholders and Proxy
Statement (Part III).
<PAGE>
PART I
Item 1. Business of Dresser.
- ------ -------------------
Dresser Industries, Inc., together with its subsidiaries (hereinafter
"Dresser" or "Registrant" or the "Company") is a global supplier serving the
total hydrocarbon energy stream, both upstream and downstream. Registrant's
highly engineered and integrated products and technical services are primarily
utilized in oil and gas drilling, production and transmission; gas distribution
and power generation; gas processing; petroleum refining and marketing; and
petrochemical production. Dresser was incorporated under the laws of Delaware
in 1956 as a successor to a Pennsylvania corporation organized in 1938 by the
consolidation of S. R. Dresser Manufacturing Company and Clark Bros. Company.
Both were carrying on businesses founded in 1880. Dresser's executive offices
are located at 2001 Ross Avenue, Dallas, Texas 75201 (telephone number 214/740-
6000).
For the fiscal year ended October 31, 1993, consolidated sales and service
revenues of Registrant amounted to $4,216 million. A majority of such revenues
was derived from the sale of products and services to energy-oriented
industries, including oil and gas exploration, drilling and production, gas
transmission and distribution; petroleum and chemical processing; production of
electricity; and marketing of petroleum products.
Registrant's operations are divided into three industry segments: Oilfield
Services; Hydrocarbon Processing Industry; and Engineering Services.
Effective February 1, 1993, Registrant acquired the stock of Bredero Price
Holding B.V. and its subsidiary companies ("Bredero Price"), a Netherlands based
company that provides pipe coating for both onshore and offshore markets. These
operations are included in the Oilfield Services segment.
Effective April 1, 1993, Registrant acquired TK Valve & Manufacturing, Inc.
("TK Valve"), a Texas corporation that supplies ball valves for the oil and gas
production and transmission industry. These operations are also included in the
Oilfield Services segment.
On December 8, 1993, Registrant announced an agreement to sell its 29.5%
interest in Western Atlas International, Inc. to a wholly owned subsidiary of
Litton Industries, Inc. The sale closed on January 28,1994.
On January 19, 1994 shareholders of Registrant voted to approve the merger
(the "Merger") of BCD Acquisition Corporation ("BCD"), a wholly owned subsidiary
of Registrant, into Baroid Corporation ("Baroid"). The Merger was effective
January 21, 1994 (the "Effective Date"), pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated September 7, 1993, among Registrant, BCD
and Baroid. Shareholders of Baroid on the Effective Date will receive
37,286,662 million shares of Registrant's Common Stock in exchange for all of
the issued and outstanding shares of Baroid. In addition, approximately 3.6
million shares of Registrant's Common Stock are reserved for issuance upon
exercise of outstanding warrants to purchase Baroid common stock and for
issuance pursuant to certain benefit plans assumed by Registrant. For
financial reporting purposes, the Merger will be treated as a pooling of
interests combination. Baroid operations include drilling fluids, drilling
services and products and offshore services businesses. Further information
concerning Baroid is included under the caption "Baroid" and Note R to the
Consolidated Financial Statements.
In connection with the Merger, Registrant and Baroid announced December 23,
1993, that they reached an agreement with the Antitrust Division of the
Department of Justice (the "Antitrust Division")
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pursuant to which Registrant must dispose of either its 64% interest in M-I
Drilling Fluids Company or Baroid Drilling Fluids Inc., a wholly-owned
subsidiary of Baroid. In addition, Registrant must also dispose of the United
States diamond drill bit business of DB Stratabit, Inc. ("DBS") and grant to the
purchaser a non-exclusive license to manufacture steel-bodied diamond drill bits
worldwide. Divestiture of the drilling fluids business must occur by June 1,
1994 and the diamond drill bit transaction must occur by July 1, 1994.
On January 27, 1994, Registrant announced that it has agreed in principle
to sell its interest in M-I Drilling Fluids Company to Smith International, Inc.
The completion of the transaction is subject to the negotiation and execution of
a definitive agreement, approval from both the Smith and Dresser Boards of
Directors, the consent of minority partner Halliburton Company and certain
regulatory approvals.
Baroid operations are conducted principally through subsidiaries as
follows:
Drilling Fluids
- ---------------
Baroid Drilling Fluids Inc. provides specially formulated fluids used in
the drilling process to lubricate and cool the drill bit, seal porous well
formations, remove rock cuttings and control downhole pressure. Baroid Drilling
Fluids Inc. is a worldwide integrated producer and distributor of drilling
fluids.
Drilling Services and Products
- ------------------------------
Sperry-Sun Drilling Services Inc. ("Sperry-Sun") rents specialized steering
and measurement-while-drilling ("MWD") tools and provides directional drilling
services for oil and gas wells throughout the world. DBS provides diamond drill
bits and coring products and services to the oil and gas industry worldwide.
Offshore Services
- -----------------
Sub Sea International Inc. ("Sub Sea") provides diving and underwater
engineering services to the oil and gas industry to inspect, construct, maintain
and repair offshore drilling rigs and platforms, underwater pipelines and other
offshore oil and gas facilities. Unmanned, remotely operated vehicles ("ROVs")
are often used to perform these services. Sub Sea designs, manufactures and
deploys ROVs. Sub Sea also owns and operates marine equipment which performs
pipeline installation, burial and inspection and maintenance and repair work on
platforms in offshore oil and gas fields.
The Information by Industry Segment is included in Note P to Consolidated
Financial Statements on pages 50-52 and in Management's Discussion and Analysis
on pages 12-20. This information includes sales and service revenues, operating
profit or loss and identifiable assets attributable to each of Registrant's
business segments for each of the past three fiscal years. This information
should be read in conjunction with the consolidated financial statements, notes
and accountant's report appearing in Item 8 of this report.
OILFIELD SERVICES
Registrant's oilfield services segment supplies products and services
essential to oil and gas exploration, drilling and production. These products
and services include drilling fluid systems, rock bits, production tools, pipe
coating and resource exploration services.
Drilling Fluid Systems and Related Services. M-I Drilling Fluids Company,
a Texas general partnership in which Registrant has a 64% interest, provides a
variety of drilling fluid systems and markets such fluids and related services
for use in connection with drilling oil and gas wells. M-I markets drilling
fluid systems and related services through its sales force to major domestic and
international oil companies,
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independent drilling operators and contractors and foreign government-owned
companies. Through its Swaco Geolograph operations, M-I designs, builds and
markets a broad line of detection and control equipment used during drilling,
often in conjunction with the above described fluid systems, and shakers,
desilters, degassers and centrifuges used to remove solids and gas prior to re-
use of the fluids. Total net revenues for M-I were $398.6 million in 1993,
$384.1 million in 1992 and $443.5 million in 1991.
Pipe Coating. Bredero Price, acquired in February 1993, provides pipe
coating services for use both in on-shore and offshore pipelines, primarily in
Europe and Asia.
Rock Bits. Registrant produces a full line of oilfield and mining rock
bits which are marketed under the Security trademark and are used in drilling
oil and gas wells and in the mining industry.
Production Tools. Registrant's Guiberson AVA Division produces and markets
a broad line of tools which are sold to the completion, production and workover
segments of the oil production industry.
Drilling and well servicing contractors provide the primary market for bits
and tools.
Resource Exploration Services. Western Atlas International, Inc.
("Western Atlas"), an unconsolidated affiliate in which Registrant owns 29.5% of
the outstanding shares, performs seismic services; integrated reservoir
description services; data reduction and interpretation; core and fluids
analysis; wireline logging; and provides specialized oilfield services
equipment. Primary customers are the energy industry and governments worldwide.
On December 8, 1993, Registrant announced it will sell its interest in Western
Atlas to an affiliate of Litton Industries, Inc. for $558 million.
HYDROCARBON PROCESSING INDUSTRY
This segment designs, manufactures and markets highly engineered products
and systems for energy producers, transporters, processors, distributors and
users throughout the world. Products and systems of this segment include
compressors, turbines, electrical generator systems, pumps, power systems,
measurement and control devices, and gasoline dispensing systems.
Compressors. Dresser-Rand Company, a New York general partnership in which
Registrant has a 51% interest, manufactures industrial and aircraft derivative
gas turbines, centrifugal compressors, axial compressors, reciprocating
compressors, axial expanders, single and multi-stage steam turbines, and
electric motors and generators. Gas turbines, motors, and steam turbines are
used to drive compressors, generators and pumps with applications in many
markets including: cogeneration, power generation, natural gas gathering,
processing, transmission and distribution, natural gas injection, petrochemical
plants, and refineries. An extensive line of centrifugal compressors is used in
a multitude of services including: gas injection, gas lift, gas processing,
transmission and distribution, urea and ammonia production, ethylene and
liquified natural gas (LNG) production, coal gasification, refinery services and
other petrochemical processes. Axial compressors are used in coal gasification,
blast furnace, nitric acid and refinery services. Axial expanders are used in
power recovery applications, nitric acid plants and refinery processes.
Dresser-Rand also manufactures and supplies water cooled reciprocating
compressors. Separate compressor lines are manufactured and marketed for the
process, enhanced oil recovery, natural gas, and industrial air commercial
markets and special shipboard air compressors for the Navy.
Dresser-Rand's single and multi-stage mechanical drive steam turbines are
used to power pumps, fans, blowers, reciprocating compressors and centrifugal
compressors; steam turbine generator sets provide electric power for co-
generation and alternate fuel markets; electric motors (synchronous and
induction type);
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and electric generators are used with reciprocating engine, hydroturbine, steam
turbine and gas turbine drivers. Dresser-Rand also manufactures and markets
cryogenic expanders, combined with single stage compressors or generators, to
recover energy from production of low temperature process gases used in air
separation hydrocarbon facilities. The primary markets for such products are
petroleum, petrochemical, chemical, paper and sugar industries, and engineering
firms which design plants for such industries.
The Consolidated statement of earnings for 1993 includes the $1,118.1
million of Dresser-Rand's sales revenues. Sales revenues for Dresser-Rand were
not included in the consolidated statements of earnings for 1992 and 1991 while
it was only 50% owned by Registrant.
Pumps. Effective October 1, 1992, Registrant's Pump operations (excepting
Mono Pump and Peabody) were combined with the Pump operations of Ingersoll-Rand
Company into Ingersoll-Dresser Pump Company, a Delaware general partnership in
which Registrant has a 49% interest. Ingersoll-Rand Company holds a 51%
interest in Ingersoll-Dresser Pump Company. Ingersoll-Dresser Pump Company
designs, develops, manufactures and markets centrifugal pumps which are used for
critical applications in energy processing and petrochemical markets as well as
in utility and municipal water and waste water markets. Ingersoll-Dresser Pump
also manufactures heavy duty process pumps, submersible pumps, vertical turbine
pumps, standard end-suction pumps, horizontal split-case and multistage pumps
designed for general industrial, pipeline and high pressure services. Such
pumps have a wide variety of applications in oil and gas production and
refining, chemical and petrochemical processing, marine, sugar, agricultural,
mining and mineral processing, utilities and general industry. Registrant's
consolidated statements of earnings include net revenues for the Pump businesses
transferred to Ingersoll-Dresser Pump Company of $517.5 million for eleven
months for 1992 and $553.1 million for 1991.
Registrant's Mono Pump operations produce progressing cavity pumps for
handling viscous fluids.
Power Systems. Registrant's Waukesha Engine Division produces heavy-duty
reciprocating gas and diesel engines and packaged engine driven generator sets.
Roots, the developer of the rotary lobe blower, offers a full line of low
to medium pressure air and gas handling blowers along with vacuum pumps. These
include rotary lobe and screw-type positive displacement products and several
turbomachinery (centrifugal) lines. The primary markets served by Roots are
waste water treatment, pneumatic conveying, paper, chemical and general
industrial.
Control Products. Control products encompass an assortment of sensing,
indicating, transducing, transmitting and controlling devices. Instruments,
valves and meters sold under registered trademarks - ASHCROFT, CONSOLIDATED,
DEWRANCE, DURAGAUGE, DURATEMP, DURATRAN, EBRO, HANCOCK, HEISE, MASONEILAN
and WILLY - measure and control pressure, temperature, level and flow of liquids
and gases. These products are sold primarily to the process, power and gas
distribution industries. Specialty products include gas meters, pipe fittings,
couplings and repair devices for sale to the gas and water utilities and other
industrial markets under the registered DRESSER trademark.
Marketing Systems. Registrant manufactures and sells a variety of gasoline
and diesel fuel dispensing systems and automated control systems under the Wayne
trade name.
ENGINEERING SERVICES
Registrant's wholly owned subsidiary, The M. W. Kellogg Company, provides
engineering, construction and related services, primarily to the hydrocarbon
process industries. Sales and service revenues
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for The M.W. Kellogg Company were $1,209.3 million, $1,558.8 million, and
$1,594.2 million for 1993, 1992 and 1991 respectively.
BACKLOG
The backlog of unfilled orders at October 31, 1993, 1992 and 1991 is
included in Management's Discussion and Analysis on page 18.
SALES AND DISTRIBUTION
Registrant's products and services are marketed through various channels.
In the United States, sales are generally made through a group or division sales
organization or through independent distributors. Sales in Canada are usually
effected through a division of a Canadian subsidiary. Sales in other countries
are made directly by a United States division or subsidiary, through foreign
subsidiaries or affiliates, and through distributor arrangements or with the
assistance of independent sales agents.
COMPETITION AND ECONOMIC CONDITIONS
Dresser's products are sold in highly competitive markets, and its sales
and earnings can be affected by changes in competitive prices, fluctuations in
the level of activity in major markets, or general economic conditions.
FOREIGN OPERATIONS
Registrant maintains manufacturing, marketing or service facilities serving
more than 75 foreign countries. Global distribution of products and services is
accomplished through more than 290 subsidiary and affiliated companies engaged
in various production, manufacturing, service, and marketing functions, and
through foreign representatives serving the principal market areas of the world.
The Information by Geographic Area is included in Note P to Consolidated
Financial Statements on pages 50-52.
Registrant's foreign operations are subject to the usual risks which may
affect such operations. Such risks include unsettled political conditions in
certain areas, exposure to possible expropriation or other governmental actions,
operating in highly inflationary environments, and exchange control and currency
problems.
RESEARCH, DEVELOPMENT AND PATENTS
Registrant's divisions, subsidiaries and affiliates conduct research and
development activities in laboratories and test facilities within their
particular fields for the purposes of improving existing products and developing
new ones to meet the needs of their customers. In addition, research and
development programs are directed toward development of new products and
services for diversification or expansion. For the fiscal years ended October
31, 1993, 1992 and 1991, Registrant spent $81.5 million, $11 million and $9.4
million, respectively, for research and development activities.
At December 1, 1993, Registrant and its subsidiaries and affiliates owned
1,536 patents and had pending 503 patent applications, covering various products
and processes. They also were licensed under patents owned by others.
Registrant does not consider that any patent or group of patents relating to a
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particular product or process is of material importance when judged from the
standpoint of Registrant's total business.
EMPLOYEES
As of October 31, 1993, Registrant had approximately 15,700 employees in
the United States (a decrease of approximately 12% from October 31, 1992), of
whom approximately 5,500 were members of 10 unions represented by 21 bargaining
units. As of the same date, Registrant had approximately 10,200 employees at
foreign locations of whom approximately 4,500 were members of unions. During
fiscal 1993, Registrant experienced one strike which lasted for 44 days.
Relations between Registrant and its employees are generally considered to be
satisfactory.
EXECUTIVE OFFICERS OF REGISTRANT
The names and ages of all executive officers of Registrant, all positions
and offices with Registrant presently held by each person named and their
business experience during the last five years are stated below:
<TABLE>
<CAPTION>
Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
<S> <C> <C>
John J. Murphy (62) Chairman of the Board and Chief
Chairman of the Board, Chief Executive Officer of Registrant since
Executive Officer and Director August 1983; President of Registrant,
August 1982 - March 1992.
B. D. St. John (62) Vice Chairman of Registrant since
Vice Chairman and Director March 1992; Chief Financial Officer
of Registrant since October 1993;
Executive Vice President -
Administration of Registrant,
November 1982 - March 1992.
William E. Bradford (59) President and Chief Operating Officer
President, Chief Operating Officer of Registrant since March 1992;
and Director President and Chief Executive Officer
of Dresser-Rand Company, February
1988 - March 1992; Senior Vice
President - Operations of Registrant,
March 1984 - March 1992.
James L. Bryan (57) Senior Vice President - Operations
Senior Vice President - Operations since January 1994; Vice President -
Operations of Registrant May 1990 -
January 1994; President and Chief
Executive Officer of M-I Drilling
Fluids Company, December 1986 - May
1990.
Donald C. Vaughn (57) Chairman of the Board, President and
Senior Vice President - Operations Chief Executive Officer of The M.W.
Kellogg Company since March 1983;
Senior Vice President - Operations of
Registrant since January 1992.
</TABLE>
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Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
<TABLE>
<CAPTION>
<S> <C> <C>
Clint E. Ables (54) Vice President - General Counsel of
Vice President - General Counsel Registrant since October 1993; Vice
President - Corporate Development of
Registrant November 1992 - October
1993; Senior Counsel - Corporate
Ventures of Registrant, July 1986 -
November 1992.
Paul M. Bryant (47) Vice President - Human Resources of
Vice President - Human Resources Registrant since May 1993; Vice
President - Human Resources of
Dresser-Rand Company, January 1987 -
May 1993.
George A. Helland (56) Vice President of Registrant since
Vice President March 1993; Deputy Assistant
Secretary for Export Assistance,
United States Department of Energy,
September 1990 - January 1993;
Principal, Innova Partners, Inc.,
January 1988 - September 1990;
Independent Consultant, May 1985 -
September 1990.
Ardon B. Judd, Jr. (57) Vice President - Washington Counsel
Vice President - Washington of Registrant since September 1986.
Counsel
George H. Juetten (46) Vice President - Controller of
Vice President - Controller Registrant since May 1993; Audit
Partner, Price Waterhouse,
independent public accountants, July
1980 - May 1993.
Rebecca R. Morris (48) Vice President - Corporate Counsel of
Vice President - Corporate Counsel Registrant since January 1994 and
and Secretary Secretary of Registrant since
November 1990; Corporate Counsel of
Registrant June 1987 - January 1994.
David R. Smith (47) Vice President - Tax of Registrant
Vice President - Tax since January 1994; Director of Tax
of Registrant October 1987 - January
1994.
Paul W. Willey (56) Treasurer of Registrant since May
Treasurer 1984.
</TABLE>
OFFICER EMPLOYED BY JOINT VENTURE COMPANY
<TABLE>
<CAPTION>
Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
<S> <C> <C>
Ben R. Stuart (59) President and Chief Executive Officer
Senior Vice President - of Dresser-Rand Company since March
Operations 1992; Senior Vice President
- Operations of Registrant since March
1992; Vice President - Operations of
Registrant August 1988 - March 1992.
</TABLE>
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All officers are elected annually by the Board of Directors at a meeting
following the Annual Meeting of Shareholders. The officers serve at the
pleasure of the Board of Directors and can be removed at any time by the Board.
Item 2. Properties
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Registrant, together with its subsidiaries and affiliates, has more than 65
manufacturing plants, ranging in size from approximately 3,000 square feet to in
excess of 980,000 square feet and totaling more than 10.8 million square feet,
located in the United States, Canada, and various other foreign countries. The
majority of the manufacturing sites are owned in fee. In addition, sales
offices, warehouses, service centers and stock points are maintained, almost all
in leased space, in the United States, Canada and certain other foreign
countries. The properties are believed to be generally well maintained,
adequate for the purposes for which they are used, and capable of supporting a
higher level of market demand.
During fiscal 1993 M-I Drilling Fluids Company also had 24 grinding and/or
other facilities for beneficiating mineral ores, containing approximately 287
acres in plant site property.
The following are the locations of the principal facilities of Registrant
and its majority owned joint ventures for each industry segment as of October
31, 1993.
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
INDUSTRY SEGMENT AND LOCATION PRODUCT AREA (SQUARE FEET)
----------------------------- ------------------ -------------
<S> <C> <C>
Oilfield Services
Wharton, Texas (Drilling Fluids) 62,170
Appleton, Wisconsin (Drilling Fluids) 84,561 (1)
Oklahoma City, Oklahoma (Drilling Fluids) 97,135
Dallas, Texas (Rock Bits) 294,000
Dallas, Texas (Production Tools) 278,500
Hydrocarbon Processing Industry
Manchester, England (Mono Pumps) 490,000
Victoria, Australia (Mono Pumps) 162,000
Connersville, Indiana (Power Systems) 445,040
Huddersfield, England (Power Systems) 159,561
Waukesha, Wisconsin (Power Systems) 901,395
Appingedam, Netherlands (Power Systems) 136,934
Painted Post, New York (Compressors) 982,000
Broken Arrow, Oklahoma (Compressors) 125,000
Wythenshawe, England (Compressors) 306,000
Olean, New York (Compressors) 896,000
Lethbridge, Alberta, Canada (Compressors) 78,000
Houston, Texas (Compressors) 135,000 (1)
LeHavre, France (Compressors) 538,000
Kongsberg, Norway (Compressors) 135,000 (1)
Wellsville, New York (Steam Turbines) 389,000
</TABLE>
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<TABLE>
<CAPTION>
Approximate
Floor Area
Industry Segment and Location Product Area (Square Feet)
----------------------------- ------------ -------------
<S> <C> <C>
Hydrocarbon Processing Industry (con.)
Minneapolis, Minnesota (Motors) 350,000
Skelmersdale, England (Control Products) 177,000 (1)
Uxbridge, England (Control Products) 105,942
Avon, Massachusetts (Control Products) 121,000
Canton, Massachusetts (Control Products) 40,590
Montebello, California (Control Products) 82,856 (1)
Alliance, Ohio (Control Products) 60,000
Bradford, Pennsylvania (Control Products) 517,000
Houston, Texas (Control Products) 105,000 (1)
Jacarei, Brazil (Control Products) 80,699
Conde, France (Control Products) 187,244
Barcelona, Spain (Control Products) 56,400
Burlington, Ontario, Canada (Control Products) 53,000
Naples, Italy (Control Products) 87,791
Stratford, Connecticut (Control Products) 335,000
Berea, Kentucky (Control Products) 105,000
Alexandria, Louisiana (Control Products) 308,640
Dumfermline, Scotland (Pitreavie) (Control Products) 150,000
Dumfermline, Scotland (Halbeath) (Control Products) 75,000
Salisbury, Maryland (Marketing Systems) 376,905 (1)
Austin, Texas (Marketing Systems) 103,491
Malmo, Sweden (Marketing Systems) 267,635 (1)
Einbeck, Germany (Marketing Systems) 80,505 (1)
Rio de Janeiro, Brazil (Marketing Systems) 185,073 (1)
Bonnyrigg, Scotland (Marketing Systems) 42,500
Markham, Ontario, Canada (Marketing Systems) 55,631 (1)
</TABLE>
- ----------------
(1) all or a portion of these facilities are leased.
M-I Drilling Fluids Company, a partnership in which Registrant has a 64%
interest, has mineral rights to proven and prospective reserves of barite,
bentonite and lignite. Such rights included leaseholds and mining claims and
property owned in fee. The principal deposit of barite is located in Nevada,
with deposits also located in Ireland and Scotland. Reserves of bentonite are
located in Wyoming and Greece. Based on the number of tons of each of the above
minerals mined in fiscal 1993, M-I Drilling Fluids Company estimates its
reserves, which it considers to be proven, to be sufficient for operation for a
period of 15 years or more.
Registrant has an undivided one-half interest in lead deposits located in
Missouri. The lead ore is mined and concentrated under contract with Cominco
American Incorporated, a U. S. subsidiary of Cominco Ltd., a Canadian company,
as Operator. Based on recent assessment by the Operator, measured and
indicative reserves total approximately 2.75 million tons grading 8.32% lead,
1.21% zinc and 0.27% copper. A reduced
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production, remnant mining phase began in 1993. Reduced grade of ore produced
in recent months and the depressed price of lead and zinc have combined to limit
projected mine life to the second half of 1994.
Item 3. Legal Proceedings.
- ------ -----------------
The Company is involved in various legal proceedings. Information called
for by this Item is included in Note L to the Consolidated Financial Statements
on pages 41-44.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the quarter ended October 31, 1993.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- ------ -----------------------------------------------------------------
Matters.
-------
Registrant is listed on the New York and Pacific Stock Exchanges. The
stock symbol is DI. The quarterly market prices for Registrant's Common Stock,
traded principally on the New York Stock Exchange, were as follows for the two
most recent fiscal years:
<TABLE>
<CAPTION>
First Second Third Fourth Year
------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
1993 High.. $18.75 21.88 25.13 25.38 25.38
1993 Low... $17.25 17.88 20.25 20.00 17.25
1992 High.. $21.25 22.00 23.63 21.75 23.63
1992 Low... $16.25 18.75 19.50 18.00 16.25
</TABLE>
Dividends on Registrant's Common Stock are declared by the Board of
Directors and normally paid to shareholders as of the record date during the
third week of March, June, September and December.
The cash dividends paid per share of common stock for the first quarter of
fiscal 1993 and for the 1993 and 1992 fiscal years were:
<TABLE>
<CAPTION>
First Second Third Fourth Year
----- ------ ----- ------ ----
<S> <C> <C> <C> <C> <C>
1993.. .15 .15 .15 .15 .60
1992.. .15 .15 .15 .15 .60
</TABLE>
As of January 25, 1994, there were approximately 25,700 shareholders of the
Registrant's Common Stock.
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Item 6. Selected Consolidated Financial Data
- ------- ------------------------------------
The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and notes thereto included in this
report.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
Sales and
service
revenues 4,216.0 3,797.0 3,970.3 3,732.0 3,346.6
Earnings from
continuing
operations
before
extraordinary
items
and accounting
changes 126.7 69.9 132.0 139.3 144.4
Per share .92 .52 .98 1.03 1.07
Total assets 3,641.9 3,187.8 3,090.4 3,104.8 2,878.6
Long-term debt 308.3 24.5 92.3 227.2 238.2
Cash dividends
declared 82.4 81.1 80.6 71.3 60.8
Per share .60 .60 .60 .525 .45
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations 1993 Compared to 1992
- -------------------------------------------
Earnings from continuing operations in 1993 increased $57 million to $127
million. The increase is attributable to the acquisition of Bredero Price,
improved earnings in Oilfield Services and Engineering Services operations and
changes implemented to reduce costs associated with retiree medical benefit
plans.
Revenues increased from $3.8 billion to $4.2 billion. The consolidation of
Dresser-Rand's financial statements in 1993 was the primary reason for the
increase. In 1992, Dresser-Rand was accounted for using the equity method.
Earnings from operations were $219 million in 1993 compared to $126 million in
1992. Both 1993 ($74.1 million) and 1992 ($70.0 million) included Special
Charges. The 1993 charge was primarily due to the settlement of the Parker &
Parsley litigation ($65 million) while in 1992 the charges were mainly
attributable to restructuring, particularly the Ingersoll-Dresser Pump joint
venture. Excluding the Special Charges, Earnings from Operations were $293
million in 1993 and $196 million in 1992. In 1993, Earnings from Operations
included 100% of Dresser-Rand's results, which added $46 million compared to
1992. In addition, the Company and its joint ventures amended retiree medical
benefit plans, thereby reducing the related 1993 expense by some $26 million
compared to 1992. Also during 1993, Ingersoll-Dresser Pump Company
12
<PAGE>
Results of Operations 1993 Compared to 1992 (Continued)
- -------------------------------------------------------
sold the inventory the Company contributed to the joint venture, allowing the
release of the associated LIFO inventory reserves of $21 million. This gain is
reflected as a component of the earnings from the joint venture. See the
Industry Segment Analysis beginning on page 15 for a discussion of the results
for each segment.
Other income increased from $18 million in 1992 to $32 million in 1993 because
of a $13 million gain resulting from a plan change in retiree medical benefits
for younger employees. Reduced interest expense resulting from the redemption
of sinking fund debentures in 1992 was offset by interest on debt incurred to
finance acquisitions.
The effective tax rate declined to 33% in 1993 from 45% in 1992 as a result of
reduced losses in foreign countries with no tax benefit, increased utilization
of foreign tax credits and a $9 million benefit associated with a change in the
tax rate from 34% to 35%.
The consolidation of Dresser-Rand in 1993 resulted in an increase in minority
interest representing our partner's 49% share of Dresser-Rand's earnings.
Results of Operations 1992 Compared to 1991
- -------------------------------------------
Earnings from continuing operations were $70 million in 1992, down from $132
million in 1991. The decrease reflected the after-tax special charge of $50
million for restructuring and the increased expense for retiree medical benefits
of $21 million net of tax.
Revenues declined to $3.8 billion from $4.0 billion in 1991, with slightly lower
revenues in each segment accounting for the reduction.
Earnings from operations before Special Charges in 1992 of $196 million were $51
million lower than the $247 million recorded in 1991. The change in accounting
for retiree medical benefits in 1992 accounted for $32 million of the reduction.
See the Industry Segment Analysis beginning on page 15 for a discussion of the
results for each segment.
Other income amounted to $18 million in 1992 versus net expense of $2.3 million
in 1991. The redemption of high rate sinking fund debentures reduced interest
expense by $8 million. Also in 1992, the Company sold a partial interest in M.
W. Kellogg's United Kingdom subsidiary resulting in a $15.5 million gain.
The effective tax rate increased to 45% in 1992 from 38% in 1991. A reduction
in utilization of foreign tax credits and increased foreign losses with no
corresponding tax benefit caused the increase.
13
<PAGE>
Results of Operations 1992 Compared to 1991 (Continued)
- -------------------------------------------------------
In 1992, the Company spun-off its industrial products operations (INDRESCO) and
made the decision to dispose of its Environmental Products business. The
results of these operations are reflected as Discontinued Operations in the 1992
and 1991 financial statements.
In 1992, the Company adopted two new accounting standards relating to retiree
medical benefits and income taxes. The combined net effect of these changes was
a one time non-cash charge of $394 million or $2.91 per share, which is
reflected as the Cumulative Effect of Accounting Changes in the 1992 Statement
of Earnings.
Legal and Environmental Matters
- -------------------------------
During 1993, the Company settled litigation involving Parker & Parsley for a
cash payment of $58 million. See Note L - Commitments and Contingencies for
further discussion of this settlement and other pending legal matters. Note L
also includes disclosure of environmental clean-up situations in which the
Company is involved.
Cash Flow and Financial Position
- --------------------------------
Dresser's overall financial position remains strong at October 31, 1993. During
1993, the Company redeemed the last of its 11-3/4% debentures and issued $300
million of 6.25% Notes due 2000. The ratio of debt to total capitalization was
36%, which is consistent with the Company's objective of 35% debt and 65%
equity. Available cash and short-term credit lines, combined with cash provided
by operations, should be adequate to finance known requirements.
Cash provided by operations before payments associated with the Parker & Parsley
settlement of $58 million was adequate to cover capital expenditures of $140
million and dividends of $82 million. The proceeds from the $300 million of
6.25% Notes issued during the year, together with $200 million of commercial
paper borrowings, was used to finance the acquisition of Bredero Price and TK
Valve ($267 million), repay long-term debt ($80 million) and pay the settlement
of the Parker & Parsley litigation ($58 million).
Capital expenditures increased in 1993 by $51 million to $140 million. Most of
the increase was due to the consolidation of Dresser-Rand in 1993. Dresser-
Rand's capital expenditures amounted to $58 million in 1993 compared to the Pump
Operations capital expenditures of $13 million in 1992. Capital expenditures
planned for 1994 approximate $140 million.
14
<PAGE>
Industry Segment Analysis
- -------------------------
See details of financial information by Industry Segment on pages 18 to 20.
Oilfield Services Segment
- -------------------------
Consolidated revenues in 1993 included $209 million from the operations of
Bredero Price and TK Valve, which were acquired in early 1993. Excluding
revenues of the acquired operations, segment revenues in 1993 were essentially
unchanged from 1992. The favorable impact of higher North American drilling
activity on the sales volume of M-I Drilling Fluids (owned 64% by Dresser),
Guiberson AVA Division and Security Division was substantially offset by the
impact of lower international drilling activity.
Excluding the operating profit of Bredero Price and TK Valve, 1993 operating
profit of consolidated operations increased $16 million or 93% over 1992.
Higher M-I Drilling Fluids profit reflected higher domestic sales volume and the
benefit of operating cost reductions for a full year. Operating profit improved
in both the Security and Guiberson AVA divisions.
Oilfield Services results in 1992 were significantly affected by lower U.S.
drilling activity compared to 1991. Consolidated revenues were down 13% from
1991, resulting in operating profit $45 million under 1991. Operating expense
reductions made during 1992 only partly offset the impact of lower sales volume
in M-I Drilling Fluids, Security Division and Guiberson AVA Division. In 1992,
special charges of $17 million were recorded for restructuring to reduce
consolidated oilfield services operations to a size appropriate to the lower
level of domestic exploration, drilling and production activity.
Western Atlas International, owned 29.5% by Dresser, benefited from better North
American activity and continuing expanded international markets in 1993. On 10%
lower revenues, the Company's share of operating profit increased to $39 million
or 11% from 1992, which showed a similar increase over 1991. The Company has
agreed to sell its interest in Western Atlas International to the majority
partner in early 1994 for $558 million.
The merger of Dresser with Baroid, a worldwide supplier of oilfield services and
equipment with sales of $850 million, will significantly expand the Company's
range of products and services to Oilfield customers. See Note R to
Consolidated Financial Statements for information which gives effect to the
merger.
15
<PAGE>
Industry Segment Analysis (Continued)
- -------------------------------------
Hydrocarbon Processing Industry Segment
- ---------------------------------------
Changes in ownership and the formation of a major joint venture have
significantly affected the comparison of revenues and operating profit in the
Hydrocarbon Processing Segment. Dresser increased its ownership in Dresser-Rand
Company from 50% to 51% as of October 1, 1992. As a result, Dresser-Rand is
included as a consolidated subsidiary in 1993 and as a major joint venture in
1992 and 1991. Ingersoll-Dresser Pump Company was formed as of October 1, 1992
with Dresser owning 49%. Ingersoll-Dresser Pump is included as a major joint
venture in 1993. Dresser's Pump business, which was transferred to Ingersoll-
Dresser Pump, is included as consolidated Pump Operations in 1992 and 1991.
Revenues for 1993 of consolidated operations other than Dresser-Rand and Pump
Operations decreased 4% from 1992. A 12% decrease in sales in the Valve and
Controls Division was primarily due to depressed market conditions in key
international markets and to the strength of the dollar compared to other
currencies.
Operating profit of the consolidated operations other than Dresser-Rand and Pump
Operations of $128 million was 2% under 1992. A strong performance in 1993 by
the Wayne Division with earnings up $15 million from 1992 offset a 23% decline
for Valve and Controls. Earnings in international markets, principally Europe,
were down in 1993 compared to the prior year. Also, inventory reductions in
1992, which resulted in a favorable LIFO impact of $9 million, did not recur in
1993.
In 1992, consolidated sales excluding Dresser-Rand and Pump Operations were down
slightly from 1991 with no significant changes in any one division. Earnings in
1992 increased $13 million compared to 1991. Strong earnings for the Wayne
Division, improvements in the Instrument and Valve and Controls divisions and
the LIFO benefit referred to above were the primary reasons for the increase.
Dresser-Rand, reported as a consolidated operation in 1993, had sales of $1.1
billion, which were 13% lower than in 1992. In 1992, sales which were not
included in Dresser's consolidated revenues increased from $1.2 billion in 1991
to $1.3 billion. Operating profit for each of the last three years was $90
million in 1993, $86 million in 1992 and $94 million in 1991. Expenses
associated with the change in accounting for retiree medical costs reduced
earnings by $14 million and $20 million in 1993 and 1992, respectively, compared
to 1991.
16
<PAGE>
Industry Segment Analysis (Continued)
- -------------------------------------
Hydrocarbon Processing Industry Segment (Continued)
- ---------------------------------------------------
Ingersoll-Dresser Pump Company operated at break-even in 1993, as the joint
venture with Ingersoll-Rand rationalized the operations of the two former
separate businesses. Also a significant portion of the joint venture's market
is the European Community, which was in the midst of a recession in 1993.
Operating profit for 1993 consists primarily of a $21 million release of LIFO
inventory reserves related to inventory contributed to the joint venture by the
Company, which was sold to third parties during the year. The Company's
separate Pump Operations contributed earnings of $32 million and $36 million in
1992 and 1991, respectively.
Special charges of $7 million were recorded in 1993 related to plant closing and
other restructuring in the Wayne and Valve and Control operations, primarily in
Europe, and similar actions at Dresser-Rand. In 1992, special charges related
to the restructuring of Pump Operations ($35 million) and restructuring and
special warranty claims in other Hydrocarbon Processing operations ($14
million).
Engineering Services Segment
- ----------------------------
Revenues in 1993 of $1.2 billion decreased 22% from 1992. In 1992, revenues
were 2% under 1991. The decline in revenues reflected reduced hydrocarbon
processing activity in certain international areas and slow growth and project
delays in the U.S. In 1991, revenues included a $22 million payment received by
The M. W. Kellogg Company for its retained interest in a foreign project.
Engineering Services operating profit in 1993 increased $8 million from 1992; in
1992 operating profit was $15 million over 1991. In 1992, M. W. Kellogg
realized a $15 million gain from the sale of a partial interest in its U.K.
subsidiary. Operating profit in 1991 included the $22 million in revenue for
the retained interest in a foreign project. Increased operating profit on lower
revenues is due to enhanced gross margins on large international projects
involving technologies in which M. W. Kellogg possesses expertise.
17
<PAGE>
Backlog of Unfilled Orders
- --------------------------
<TABLE>
<CAPTION>
October 31,
------------------------------
1993 1992 1991
-------- -------- --------
(In millions)
<S> <C> <C> <C>
Consolidated backlog
Oilfield Services $ 185.7 $ 14.4 $ 5.6
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand (100%) 872.6 1,066.5 .-
Pump Operations .- .- 286.9
Consolidated operations - other 254.7 259.9 271.4
-------- -------- --------
1,127.3 1,326.4 558.3
-------- -------- --------
Engineering Services 2,478.1 1,634.7 1,495.2
-------- -------- --------
Eliminations (4.4) (3.8) (1.7)
-------- -------- --------
Total consolidated $3,786.7 $2,971.7 $2,057.4
======== ======== ========
Share of backlog of major joint ventures
Dresser-Rand (50%) $ .- $ .- $ 496.5
Ingersoll-Dresser Pump Company (49%) 178.9 219.3 .-
-------- -------- --------
$ 178.9 $ 219.3 $ 496.5
======== ======== ========
</TABLE>
INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT
ACCOUNTANTS
The following financial information by Industry Segment for the years ended
October 31, 1993, 1992 and 1991 is an integral part of Note P to Consolidated
Financial Statements.
The Company increased its ownership in Dresser-Rand Company from 50% to 51% as
of October 1, 1992. As a result, Dresser-Rand is included as a consolidated
subsidiary in 1993 and as a major joint venture operation in 1992 and 1991.
Ingersoll-Dresser Pump Company was formed as of October 1, 1992 with the Company
owning 49%. Ingersoll-Dresser is included as a major joint venture investment
in 1993. The Company's Pump business that was transferred to Ingersoll-Dresser
is included as Pump Operations in 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
(In millions)
<S> <C> <C> <C>
Consolidated sales and service revenues
Oilfield Services $ 782.8 $ 564.8 $ 650.9
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand (100%) 1,118.1 .- .-
Pump Operations .- 517.5 553.1
Consolidated operations - other 1,118.7 1,162.3 1,180.3
-------- -------- --------
2,236.8 1,679.8 1,733.4
-------- -------- --------
Engineering Services 1,209.3 1,558.8 1,594.2
-------- -------- --------
Eliminations (12.9) (6.4) (8.2)
-------- -------- --------
Total consolidated sales
and service revenues $4,216.0 $3,797.0 $3,970.3
======== ======== ========
Share of sales and service revenues
of major joint ventures
Western Atlas (29.5%) $ 320.4 $ 354.5 $ 343.1
Dresser-Rand (50%) .- 645.2 595.1
Ingersoll-Dresser Pump (49%) 372.9 39.7 .-
-------- -------- --------
$ 693.3 $1,039.4 $ 938.2
======== ======== ========
</TABLE>
18
<PAGE>
INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT
ACCOUNTANTS (CONTINUED)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
(In millions)
<S> <C> <C> <C>
Operating profit and earnings
before taxes
Oilfield Services
Consolidated operations $ 74.4 $ 16.8 $ 62.0
Western Atlas operations 39.2 35.2 32.7
Special charges .6 (17.1) (1.6)
-------- -------- --------
114.2 34.9 93.1
-------- -------- --------
Hydrocarbon Processing
Industry
Dresser-Rand 89.5 43.2 47.1
Pump Operations 21.2 31.5 35.8
Consolidated operations - other 127.9 131.1 118.0
Special charges (7.5) (49.3) (3.3)
-------- -------- --------
231.1 156.5 197.6
-------- -------- --------
Engineering Services 75.8 67.6 53.0
-------- -------- --------
Total operating profit 421.1 259.0 343.7
General corporate expenses (69.1) (65.8) (62.6)
Other nonsegment expenses (35.1) (33.2) (22.7)
Special charges (67.2) (3.6) .-
Retiree medical benefit plan
changes 12.8 .- .-
Interest income (expense), net (11.4) (12.9) (19.0)
-------- -------- --------
Earnings before taxes $ 251.1 $ 143.5 $ 239.4
======== ======== ========
Identifiable assets
Oilfield Services
Consolidated operations $ 850.0 $ 432.2 $ 438.4
Western Atlas investment 278.2 259.0 236.0
-------- -------- --------
1,128.2 691.2 674.4
-------- -------- --------
Hydrocarbon Processing
Industry
Dresser-Rand
assets/investment 756.7 733.7 126.9
Pump investment/assets 140.0 147.8 279.7
Consolidated
operations - other 608.2 634.9 707.6
-------- -------- --------
1,504.9 1,516.4 1,114.2
-------- -------- --------
Engineering Services 510.7 470.7 395.9
-------- -------- --------
Eliminations (22.0) (21.5) (21.5)
-------- -------- --------
Total identifiable assets 3,121.8 2,656.8 2,163.0
Investment in INDRESCO .- .- 399.2
Corporate assets 520.1 531.0 528.2
-------- -------- --------
Total assets $3,641.9 $3,187.8 $3,090.4
======== ======== ========
Consolidated capital
expenditures
Oilfield Services $ 31.4 $ 21.0 $ 35.1
-------- -------- --------
Hydrocarbon Processing
Industry
Dresser-Rand (100%) 57.5 .- .-
Pump Operations .- 12.7 11.5
Consolidated operations - other 33.6 40.3 50.4
-------- -------- --------
91.1 53.0 61.9
-------- -------- --------
Engineering Services 2.8 13.1 23.7
-------- -------- --------
Corporate 14.5 1.4 8.0
-------- -------- --------
Total consolidated
capital expenditures $ 139.8 $ 88.5 $ 128.7
======== ======== ========
</TABLE>
19
<PAGE>
INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT
ACCOUNTANTS (CONTINUED)
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- ------
(In millions)
<S> <C> <C> <C>
Share of capital expenditures of
major joint ventures
Western Atlas (29.5%) $ 46.7 $ 70.7 $58.7
Dresser-Rand (50%) .- 65.4 24.0
Ingersoll-Dresser Pump (49%) 11.3 . .
------ ------ -----
Total $ 58.0 $136.1 $82.7
====== ====== =====
Consolidated depreciation and amortization
Oilfield Services $ 30.1 $ 21.1 $18.0
------ ------ -----
Hydrocarbon Processing Industry
Dresser-Rand (100%) 64.4 .- .-
Pump Operations .3 13.4 13.2
Consolidated operations - other 33.8 33.0 31.3
------ ------ -----
98.5 46.4 44.5
------ ------ -----
Engineering Services 20.8 20.9 18.7
------ ------ -----
Corporate 9.2 10.2 8.3
------ ------ -----
Total consolidated depreciation
and amortization $158.6 $ 98.6 $89.5
====== ====== =====
Share of depreciation and amortization
of major joint ventures
Western Atlas (29.5%) $ 39.6 $ 37.0 $30.0
Dresser-Rand (50%) .- 17.8 19.2
Ingersoll-Dresser Pump (49%) 10.8 . .
------ ------ -----
$ 50.4 $ 54.8 $49.2
====== ====== =====
</TABLE>
20
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
Report of Management
The consolidated financial statements of Dresser Industries, Inc. have been
prepared by management and have been audited by independent accountants. The
management of the Company is responsible for the financial information and
representations contained in the financial statements and other sections of this
Annual Report on Form 10-K. Management believes that the financial statements
have been prepared in conformity with generally accepted accounting principles
appropriate under the circumstances to reflect, in all material respects, the
substance of events and transactions that should be included. In preparing the
financial statements, it is necessary that management make informed estimates
and judgments based on currently available information of the effects of certain
events and transactions.
In meeting its responsibility for the reliability of the financial statements,
management depends on the Company's internal control structure. This internal
control structure is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with management's
authorization and are properly recorded. In designing control procedures,
management recognizes that errors or irregularities may occur. Also, estimates
and judgments are required to assess and balance the relative cost and expected
benefits of the controls. Management believes that the Company's internal
control structure provides reasonable assurance that errors or irregularities
that could be material to the financial statements are prevented or would be
detected within a timely period by employees in the normal course of performing
their assigned functions.
The Board of Directors pursues its oversight role for the accompanying financial
statements through its Audit and Finance Committee, which is composed solely of
directors who are not officers or employees of the Company. The Committee meets
with management and the internal auditors to review the work of each and to
monitor the discharge by each of its responsibilities. The Committee also meets
with the independent accountants and internal auditors, without management
present, to discuss internal control structure, auditing and financial reporting
matters.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Dresser Industries, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(A)(1) and (2) and 14(D) on page F-2 present fairly, in
all material respects, the financial position of Dresser Industries, Inc. and
its subsidiaries at October 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1993, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Notes A, G and M to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions, and Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, both
effective as of November 1, 1991.
/s/ Price Waterhouse
PRICE WATERHOUSE
Dallas, Texas
December 9, 1993
22
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
In Millions Except Per Share Data -
- -----------------------------------
Years Ended October 31 1993 1992 1991
---------------------- -------- -------- --------
<S> <C> <C> <C>
Sales................................. $3,006.7 $2,240.5 $2,376.4
Service revenues...................... 1,209.3 1,556.5 1,593.9
-------- -------- --------
Total sales and service revenues..... 4,216.0 3,797.0 3,970.3
-------- -------- --------
Cost of sales......................... 2,088.5 1,469.2 1,548.6
Cost of services...................... 1,081.8 1,452.8 1,494.3
-------- -------- --------
Total costs of sales and services.... 3,170.3 2,922.0 3,042.9
-------- -------- --------
Gross earnings....................... 1,045.7 875.0 927.4
Earnings from major joint ventures.... 60.6 80.6 79.8
Selling, engineering, administrative
and general expenses................. (813.4) (760.0) (760.6)
Special charges....................... (74.1) (70.0) (4.9)
-------- -------- --------
Earnings from operations............. 218.8 125.6 241.7
-------- -------- --------
Other income (deductions)
Interest expense..................... (27.4) (29.7) (38.6)
Interest earned...................... 16.0 16.8 19.6
Retiree medical benefit plan
curtailment......................... 12.8 .- .-
Other, net........................... 30.9 30.8 16.7
-------- -------- --------
Total other income, net............. 32.3 17.9 (2.3)
-------- -------- --------
Earnings before income taxes and
other items below................... 251.1 143.5 239.4
Income taxes.......................... (81.7) (64.4) (91.6)
Minority interest..................... (42.7) (9.2) (15.8)
-------- -------- --------
Earnings from continuing operations.. 126.7 69.9 132.0
Discontinued operations............... .- (35.3) 9.2
-------- -------- --------
Earnings before extraordinary items
and accounting changes.............. 126.7 34.6 141.2
Extraordinary items................... .- (6.3) 5.6
Cumulative effect of accounting
changes.............................. .- (393.8) .-
-------- -------- --------
Net earnings (loss)................. $ 126.7 $ (365.5) $ 146.8
======== ======== ========
Earnings per common share.............
Earnings from continuing
operations.......................... $ .92 $ .52 $ .98
Discontinued operations.............. .- (.26) .07
Earnings before extraordinary -------- -------- --------
items and accounting changes........ .92 .26 1.05
Extraordinary items.................. .- (.05) .04
Cumulative effect of accounting
changes............................. .- (2.91) .-
-------- -------- --------
Net earnings (loss)................ $ .92 $ (2.70) $ 1.09
======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
23
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In Millions - October 31 1993 1992
- ------------------------ -------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....... $ 239.1 $ 155.2
Notes and accounts receivable... 674.9 627.4
-------- --------
Less allowance for doubtful
receivables.................... 28.6 22.4
-------- --------
646.3 605.0
Inventories
Finished products and
work in process............... 484.0 498.0
Raw materials and supplies..... 108.4 46.5
-------- --------
592.4 544.5
Deferred income taxes........... 100.9 71.8
Prepaid expenses................ 36.2 30.1
-------- --------
Total Current Assets........... 1,614.9 1,406.6
-------- --------
Investments and Other Assets
Investments in and receivables
from major joint ventures...... 414.4 406.8
Intangibles less accumulated
amortization of $67.1 in 1993
and $51.3 in 1992.............. 561.9 364.1
Other assets.................... 135.1 123.2
Deferred income taxes........... 229.2 229.8
-------- --------
Total Investments and
Other Assets.................. 1,340.6 1,123.9
-------- --------
Property, Plant and Equipment -
at cost
Land and land improvements..... 67.5 67.0
Buildings...................... 311.2 298.6
Machinery and equipment........ 1,357.9 1,293.9
-------- --------
1,736.6 1,659.5
Less accumulated depreciation... 1,050.2 1,002.2
-------- --------
Total Properties - Net......... 686.4 657.3
-------- --------
Total Assets.................. $3,641.9 $3,187.8
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
24
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In Millions - October 31 1993 1992
- ------------------------ -------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Short-term debt and current
portion of long-term debt............... $ 230.8 $ 95.9
Accounts payable......................... 269.8 278.1
Advances from customers on
contracts............................... 288.3 262.2
Accrued compensation and
benefits................................ 197.8 217.6
Accrued warranty costs................... 57.9 76.7
Income taxes............................. 100.9 119.0
Other accrued liabilities................ 287.1 220.5
-------- --------
Total Current Liabilities............... 1,432.6 1,270.0
-------- --------
Employee Retirement Benefit
Obligations.............................. 707.6 698.3
Long-Term Debt............................ 308.3 24.5
Deferred Compensation, Insurance
Reserves and Other Liabilities........... 98.5 94.8
Minority Interest......................... 151.3 150.8
Shareholders' Investment -
Preferred shares, 10,000,000 authorized
Common shares, $0.25 par value
Authorized: 400,000,000
Issued: 166,596,116.................... 41.6 41.6
Capital in excess of par value........... 434.7 439.0
Retained earnings........................ 954.6 911.7
Cumulative translation
adjustments............................. (87.9) (41.1)
Pension liability adjustment............. (13.8) (4.0)
-------- --------
1,329.2 1,347.2
Less treasury shares, at cost............ 385.6 397.8
-------- --------
Total Shareholders' Investment.......... 943.6 949.4
-------- --------
Commitments and Contingencies
Total Liabilities and
Shareholders' Investment................ $3,641.9 $3,187.8
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
In Millions - Years Ended October 31 1993 1992 1991
- ------------------------------------ ------- -------- --------
<S> <C> <C> <C>
Common Shares, Par Value
Beginning of year.................... $ 41.6 $ 41.6 $ 41.6
------- -------- --------
End of year.......................... $ 41.6 $ 41.6 $ 41.6
======= ======== ========
Capital in Excess of Par Value
Beginning of year.................... $ 439.0 $ 419.4 $ 423.3
Shares issued in connection
with an acquisition................. .- 23.3 .-
Shares issued under benefit
and dividend reinvestment
plans............................... (4.3) (3.7) (3.9)
------- -------- --------
End of year.......................... $ 434.7 $ 439.0 $ 419.4
======= ======== ========
Retained Earnings
Beginning of year.................... $ 911.7 $1,760.5 $1,694.3
Net earnings (loss).................. 126.7 (365.5) 146.8
Distribution of
INDRESCO Inc. shares................ .- (402.2) .-
Dividends on common shares
at $.60 a share..................... (82.4) (81.1) (80.6)
Other................................ (1.4) .- .-
------- -------- --------
End of year.......................... $ 954.6 $ 911.7 $1,760.5
======= ======== ========
Cumulative Translation Adjustments
Beginning of year.................... $ (41.1) $ (27.3) $ 11.4
Translation rate changes............. (46.8) (2.1) (38.7)
Distribution of
INDRESCO Inc. shares................ .- (11.7) .-
------- -------- --------
End of year.......................... $ (87.9) $ (41.1) $ (27.3)
======= ======== ========
Pension Liability Adjustment
Beginning of year.................... $ (4.0) $ (3.0) $ (1.7)
Additional minimum pension
liability........................... (9.8) (1.0) (1.3)
------- -------- --------
End of year.......................... $ (13.8) $ (4.0) $ (3.0)
Treasury Shares, at Cost ======= ======== ========
Beginning of year................... $(397.8) $ (430.0) $ (405.2)
Shares purchased..................... .- .- (36.0)
Shares issued in connection
with an acquisition................. .- 20.0 .-
Shares issued under benefit
and dividend reinvestment
plans............................... 12.2 12.2 11.2
------- -------- --------
End of year.......................... $(385.6) $ (397.8) $ (430.0)
======= ======== ========
Total Shareholders'
Investment, End of year............ $ 943.6 $ 949.4 $1,761.2
======= ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In Millions - Years Ended October 31 1993 1992 1991
- ------------------------------------ ------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................... $ 126.7 $(365.5) $ 146.8
------- ------- -------
Adjustments to reconcile net
earnings (loss) to cash flow
provided by operating activities:
Cumulative effect of accounting
changes............................. .- 393.8 .-
Special charges for restructuring..... .- 49.0 .-
Discontinued operations
losses (earnings)................... .- 35.3 (9.2)
Retiree benefit curtailment gain...... (12.8) .- .-
Depreciation and amortization......... 158.6 98.6 89.5
Gain on business disposals............ .- (18.2) (3.5)
Cash received from
partnership operations.............. 10.0 3.0 65.0
Earnings from major joint ventures.... (60.6) (80.6) (79.8)
Minority interest in earnings......... 42.7 9.2 15.8
Decrease (increase) in inventories.... (66.0) 14.1 (12.7)
Increase (decrease) in accounts
payable and accrued liabilities..... (29.1) 22.4 (15.9)
Increase in advances from
customers on contracts.............. 55.1 44.6 33.8
Increase (decrease) in
income taxes payable................ (31.6) (33.5) 29.9
Other, net............................ (33.2) 8.6 (18.4)
------- ------- -------
Total adjustments................... 33.1 546.3 94.5
------- ------- -------
Net cash provided by operating
activities............................ 159.8 180.8 241.3
------- ------- -------
Cash flows from investing activities:
Business acquisitions................... (266.7) (1.9) (32.0)
Capital expenditures.................... (139.8) (88.5) (128.7)
Cash contributed to joint
venture operations..................... .- (8.7) .-
Advances (to) from discontinued
operations............................. 5.0 (24.4) (35.6)
Proceeds from disposals of assets....... .- 23.1 12.8
------- ------- -------
Net cash used by investing activities.. (401.5) (100.4) (183.5)
------- ------- -------
Cash flows from financing activities:
Increase(decrease) in short-term debt... 200.5 16.3 (6.5)
Proceeds from issuance of 6.25% notes... 298.2 .- .-
Redemption of debentures................ (62.5) (133.1) .-
Decrease in other long-term debt........ (17.6) (6.8) (5.3)
Dividends paid.......................... (82.4) (81.1) (80.6)
Purchases of common shares, net......... .- .- (36.0)
------- ------- -------
Net cash provided (used) by financing
activities............................ 336.2 (204.7) (128.4)
------- ------- -------
Effect of translation adjustments
on cash................................. (10.6) 1.6 (7.9)
------- ------- -------
Net increase (decrease) in cash
and cash equivalents.................... 83.9 (122.7) (78.5)
Cash and cash equivalents,
beginning of year....................... 155.2 277.9 356.4
------- ------- -------
Cash and cash equivalents,
end of year............................. $ 239.1 $ 155.2 $ 277.9
======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies
- -------------------------------------------------------------------------------
Consolidation
- -------------
All majority-owned subsidiaries are consolidated and all material intercompany
accounts and transactions are eliminated. Investments in 20% to 50% owned
partnerships and affiliates are reported at cost adjusted for the Company's
equity in undistributed earnings.
Revenue Recognition
- -------------------
Revenues and earnings from long-term construction contracts are recognized on
the percentage-of-completion method, measured generally on a cost incurred
basis. Estimated contract costs include allowances for completion risks,
process and schedule guarantees and warranties that generally are not finally
determinable until the latter stages of a contract. Estimated contract earnings
are reviewed and revised periodically as the work progresses. The cumulative
effect of any estimated loss is charged against earnings in the period in which
such losses are identified. Revenues from sale of products other than from
long-term construction contracts are recorded when the products are shipped.
Inventories
- -----------
Inventories are valued at the lower of cost or market. The cost of most U.S.
inventories produced by divisions of the Parent Company and wholly-owned
subsidiaries is determined using the last-in, first-out (LIFO) method. The
valuation of inventories not on LIFO, principally foreign inventories and
inventories of consolidated joint venture companies, is determined using either
the first-in, first-out (FIFO) or average cost method.
Property, Plant and Equipment
- -----------------------------
Fixed assets are depreciated over the estimated service life. Most assets are
depreciated on a straight-line basis. Certain assets with service lives of more
than 10 years are depreciated on accelerated methods. Accelerated depreciation
methods are also used for tax purposes, wherever permitted. Due to the large
number of asset classes, it is not practicable to state the rates used in
computing the provisions for depreciation. Maintenance and repairs are expensed
as incurred. Betterments are capitalized.
Intangibles
- -----------
The difference between purchase price and fair values at date of acquisition of
net assets of businesses acquired is amortized on a straight-line basis over the
estimated periods benefited, not exceeding 40 years.
28
<PAGE>
Note A - Summary of Significant Accounting Policies (Continued)
- --------------------------------------------------- ---------------------------
Postretirement Benefits
- -----------------------
Effective November 1, 1991, postretirement benefits other than pensions are
accounted for in accordance with Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other than Pensions (SFAS
106). Under SFAS 106, the Company accrues the estimated cost of these benefits
during the employees' active service period. The Company previously expensed
the cost of these benefits as claims and premiums were paid. See Note M for
additional information.
Income Taxes
- ------------
Effective November 1, 1991, income taxes are accounted for in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109). Under SFAS 109, the Company accounts for income taxes by the asset
and liability method. Previously the Company deferred the tax effects of timing
differences between financial reporting and taxable income. The asset and
liability method requires the recognition of deferred tax assets and liabilities
for the future tax consequences of temporary differences between the financial
statement basis and the tax basis of assets and liabilities.
Taxes on the minority interest's share of domestic partnership earnings of
consolidated entities are provided at the Company's effective domestic tax rate.
See Note G for additional information.
Translation of Foreign Currencies
- ---------------------------------
For subsidiaries in countries which do not have highly inflationary economies,
asset and liability accounts are translated at rates in effect at the balance
sheet date, and revenue and expense accounts are translated at rates
approximating the actual rates on the dates of the transactions. Translation
adjustments are included as a separate component of shareholders' investment.
For subsidiaries in countries with highly inflationary economies, inventories,
cost of sales, property, plant and equipment and related depreciation are
translated at historical rates. Other asset and liability accounts are
translated at rates in effect at the balance sheet date, and revenues and
expenses excluding cost of sales and depreciation are translated at rates
approximating the actual rates on the dates of the transactions. Translation
adjustments are reflected in the statement of earnings.
Financial Instruments - Fair Value and Off-Balance-Sheet Risk
- -------------------------------------------------------------
The carrying amounts of cash and cash equivalents, short-term investments and
accounts and notes payable approximate fair value because of the short maturity
of those instruments. The carrying amount of long-term debt is approximately
equal to fair value based on market information.
29
<PAGE>
Note A - Summary of Significant Accounting Policies (Continued)
- --------------------------------------------------- ---------------------------
Financial Instruments - Fair Value and Off-Balance-Sheet Risk (Continued)
- -------------------------------------------------------------------------
The Company has cash and cash equivalents held in currencies other than local
currencies, and receivables and payables to be settled in currencies other than
local currencies. These financial assets and liabilities create exposure to
potential foreign exchange gains and losses arising on future changes in
currency exchange rates. The Company protects against such risks by entering
into forward exchange contracts. The Company does not engage in speculation,
nor does the Company typically hedge nontransaction-related balance sheet
exposure. At October 31, 1993, the Company had $237 million of forward exchange
contracts outstanding, 98% of which were in European currencies. The fair value
of foreign exchange contracts is based on year-end quoted rates for contracts
with similar terms and maturity dates. However, such fair values are offset by
gains and losses on the assets and liabilities hedged by such contracts, so that
there is no significant difference between the recorded value and fair value of
the Company's net foreign exchange position.
Reclassification of Prior Years
- -------------------------------
Prior years' financial statements have been reclassified to conform to 1993
presentations.
Note B - Cash Flow Statement
- -------------------------------------------------------------------------------
Cash and cash equivalents include cash on hand and investments with maturities
of three months or less at time of original purchase. Supplemental information
about cash payments and significant noncash investing and financing activities
is as follows (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
----- ------ ------
<S> <C> <C> <C>
Cash payments for income taxes.......... $94.6 $ 83.7 $69.8
===== ====== =====
Cash payments for interest on
debt................................... $19.8 $ 30.8 $34.1
===== ====== =====
Cash payments for interest on
tax settlements........................ $14.0 $ .- $17.3
===== ====== =====
Acquisition of AVA International Corp.
Assets acquired........................ $ 54.4
Liabilities assumed.................... (9.2)
Common Shares issued from
Treasury............................. (43.3)
------
Net cash paid....................... $ 1.9
======
</TABLE>
30
<PAGE>
Note C - Major Unconsolidated Joint Ventures
- -------------------------------------------------------------------------------
Ingersoll-Dresser Pump Company
Effective October 1, 1992, the Company and Ingersoll-Rand Company formed a joint
venture comprised of the pump businesses of the two companies including all
standard and engineered pump operations except the Company's Mono Pump
subsidiaries. The new company, Ingersoll-Dresser Pump Company, is a general
partnership owned 49% by the Company and 51% by Ingersoll-Rand Company. The
Company contributed approximately $151 million of net assets, including reserves
for restructuring and retiree benefits other than pensions, in exchange for its
ownership interest. The operating results of the contributed Dresser Pump
business prior to October 1, 1992 are fully consolidated in the Company's
statement of earnings. The Company's share of operating results for the month
of October, 1992 and all of 1993 are included in earnings from major joint
ventures.
Summarized financial information is as follows (in millions):
<TABLE>
<CAPTION>
October 31,
----------------
INGERSOLL-DRESSER PUMP COMPANY 1993 1992
- ------------------------------ ------ ------
<S> <C> <C>
Current assets...................................... $357.7 $435.8
Noncurrent assets................................... 183.2 180.6
------ ------
Total assets...................................... $540.9 $616.4
====== ======
Current liabilities................................. $218.0 $251.8
Noncurrent liabilities.............................. 46.9 59.8
Owners' equity -
Contributed capital and retained earnings......... 311.6 309.8
Cumulative translation adjustment................. (35.6) (5.0)
------ ------
276.0 304.8
------ ------
Total liabilities and owners' equity.............. $540.9 $616.4
====== ======
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Month of
Ended October
October 31, 1993 1992
---------------- --------
<S> <C> <C>
Net sales........................................... $761.0 $ 81.0
====== ======
Gross profit........................................ $159.1 $ 16.3
====== ======
Income from continuing operations
before extraordinary items........................ $ 3.3 $ 1.8
====== ======
Net income.......................................... $ 3.3 $ 1.8
====== ======
The Company's investment............................ $136.2 $147.8
====== ======
The Company's share of pre-tax earnings............. $ 21.4 $ 2.2
====== ======
</TABLE>
The Company's share of pre-tax earnings includes $21.3 million from the release
of LIFO inventory valuation reserves related to inventory contributed to the
joint venture by the Company and sold by Ingersoll-Dresser Pump Company to third
parties.
31
<PAGE>
Note C - Major Unconsolidated Joint Ventures (Continued)
- -------------------------------------------------------------------------------
In connection with the Ingersoll-Dresser Pump Company joint venture agreement,
the Company granted to Ingersoll-Rand Company an option to purchase 51% of the
stock of Mono Group Limited for a price equal to 51% of its book value,
including the unamortized goodwill, at the exercise date. The option period
begins October 1, 1994, and expires April 30, 1995. If the option to purchase
is exercised by Ingersoll-Rand Company, both Ingersoll-Rand and the Company have
agreed to contribute their respective Mono Group Limited shares to the
Ingersoll-Dresser Pump Company as a contribution of capital to the partnership.
Western Atlas International, Inc.
- ---------------------------------
Western Atlas International, Inc. is a joint venture that was formed May 1, 1987
when the Company and Litton Industries combined their respective Atlas Wireline
division and Western Geophysical division. On December 8, 1993, the Company
announced an agreement to sell its 29.5% interest in Western Atlas
International, Inc. to a wholly-owned subsidiary of Litton Industries. See Note
R for additional information.
Summarized financial information is as follows (in millions):
<TABLE>
<CAPTION>
September 30,
------------------
1993 1992
-------- --------
<S> <C> <C>
WESTERN ATLAS INTERNATIONAL, INC.
Current assets............................... $ 430.7 $ 459.4
Noncurrent assets............................ 778.2 770.8
-------- --------
Total assets............................... $1,208.9 $1,230.2
======== ========
Current liabilities.......................... $ 170.9 $ 214.0
Noncurrent liabilities....................... 94.3 151.6
Shareholders' investment..................... 943.7 864.6
-------- --------
Total liabilities and
shareholders' investment................. $1,208.9 $1,230.2
======== ========
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
September 30,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales.......................... $1,086.8 $1,201.8 $1,167.2
======== ======== ========
Gross profit....................... $ 236.2 $ 243.8 $ 222.6
======== ======== ========
Income from continuing operations
before extraordinary items....... $ 81.9 $ 74.3 $ 68.9
======== ======== ========
Net income......................... $ 79.6 $ 74.3 $ 68.9
======== ======== ========
The Company's investment
and receivable................... $ 278.2 $ 259.0 $ 236.0
======== ======== ========
The Company's share of
pre-tax earnings................. $ 39.2 $ 35.2 $ 32.7
======== ======== ========
</TABLE>
32
<PAGE>
Note C - Major Unconsolidated Joint Ventures (Continued)
- -------------------------------------------------------------------------------
Dresser-Rand Company
- --------------------
The Company owned 50% of Dresser-Rand from its inception on January 1, 1987
through September 30, 1992. Effective October 1, 1992, the Company acquired an
additional 1% ownership interest. Since the Company now owns 51% of Dresser-
Rand, it is included as a fully consolidated subsidiary with a 49% minority
interest for 1993.
Summarized financial information for the periods when equity accounting was
applied is as follows (in millions):
<TABLE>
<CAPTION>
Twelve Months Ended
September 30,
-------------------
1992 1991
-------- --------
<S> <C> <C>
DRESSER-RAND COMPANY
Net sales................................ $1,290.3 $1,190.2
======== ========
Gross profit............................. $ 244.8 $ 242.9
======== ========
Income from continuing operations
before extraordinary items............. $ 74.7 $ 74.7
======== ========
Net income............................... $ 77.8 $ 83.6
======== ========
The Company's share of pre-tax earnings.. $ 43.2 $ 47.1
======== ========
</TABLE>
Note D - Business Combinations
- -------------------------------------------------------------------------------
Effective February 1, 1993 the Company acquired all the outstanding stock of
Bredero Price Holding B.V., a Netherlands corporation, from Koninklijke Begemann
Groep N.V. for approximately $161.5 million in cash. Bredero Price is a
multinational company that provides pipe coating for both onshore and offshore
markets.
Effective April 1, 1993, the Company acquired TK Valve & Manufacturing, Inc.
from Sooner Pipe & Supply Corporation, Tulsa, Oklahoma for approximately $143.5
million in cash. TK Valve supplies ball valves for the oil and gas production
and transmission industry.
The purchase price exceeded the fair value of the net assets acquired by
approximately $122 million for Bredero Price and approximately $92 million for
TK Valve. Both acquisitions were accounted for as purchases. The resulting
goodwill is being amortized on a straight-line basis over 40 years. The
Consolidated Statement of Earnings includes the results of operations of Bredero
Price from February 1, 1993 and TK Valve from April 1, 1993.
33
<PAGE>
Note D - Business Combinations (Continued)
- -------------------------------------------------------------------------------
The following unaudited pro forma summary presents information as if the
acquisitions had occurred at the beginning of each fiscal year. The pro forma
information is provided for information purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred nor is it necessarily indicative of future results of
operations of the combined enterprises (in millions except per share amounts):
<TABLE>
<CAPTION>
Unaudited
Years Ended
October 31,
-------------------
1993 1992
-------- --------
<S> <C> <C>
Sales and service revenues.......... $4,305.7 $4,055.6
======== ========
Earnings before extraordinary item
and accounting changes............. $ 135.2 $ 64.4
======== ========
Net earnings (loss)................. $ 135.2 $ (335.7)
======== ========
Per share:
Earnings before extraordinary
item and accounting changes........ $ .98 $ .48
======== ========
Net earnings........................ $ .98 $ (2.48)
======== ========
</TABLE>
In 1992, the Company acquired all of the shares of AVA International Corp. (AVA)
in exchange for 1.9 million shares of the Company's common stock with a value of
$43.3 million and $1.9 million cash. AVA produces well completion products that
are sold primarily in foreign markets. The transaction, which was accounted for
as a purchase, resulted in goodwill of $39.3 million which is being amortized on
a straight-line basis over 40 years. The pro forma effect of the AVA
acquisition was not significant.
Note E - Long-Term Contracts
- -------------------------------------------------------------------------------
Consistent with industry practice, service revenues and cost of services include
the value of materials, equipment and labor contracts furnished by customers and
for which the Company is responsible for the ultimate acceptability of
performance of the project based on such material, equipment or labor. The
value of such items was $112.4 million, $114.0 million and $471.7 million for
the years ended October 31, 1993, 1992 and 1991, respectively.
Amounts billed in excess of revenues recognized to date are included in current
liabilities under advances from customers on contracts.
Note F - Inventories
- -------------------------------------------------------------------------
Inventories on the LIFO method were $77.9 million and $73.9 million at October
31, 1993 and 1992, respectively. Under the average cost method, inventories
would have increased by $92.2 million and $98.8 million at October 31, 1993 and
1992, respectively.
34
<PAGE>
Note F - Inventories (Continued)
- ---------------------------------------------------------------------
During 1992, the Company experienced significant quantity reductions in LIFO
inventories which were carried at lower costs that prevailed in prior years.
Quantity reductions reduced the cost of sales by $14.6 million and increased
earnings, net of tax, by $9.5 million or $.06 per share in 1992.
Inventories are stated net of progress payments received on contracts of $175.7
million and $118.9 million at October 31, 1993 and 1992, respectively.
Note G - Income Taxes
- -------------------------------------------------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS
109), Accounting for Income Taxes, as of November 1, 1991. The 1992 Statement of
Earnings includes a charge of $40.8 million for the cumulative effect of the
change. Prior year financial statements were not restated when SFAS 109 was
adopted.
The domestic and foreign components of earnings before income taxes of
continuing operations consist of the following (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Domestic.................................... $137.5 $ 64.7 $144.4
Foreign..................................... 113.6 78.8 95.0
------ ------ ------
Total earnings before
income taxes............................ $251.1 $143.5 $239.4
====== ====== ======
</TABLE>
The components of the provision for income taxes of continuing operations are
as follows (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Current
U.S. Federal.............................. $ 46.6 $ 45.4 $ 51.9
State..................................... 3.2 2.0 4.1
Foreign................................... 47.7 41.5 47.2
------ ------ ------
97.5 88.9 103.2
------ ------ ------
Deferred
U.S. Federal.............................. (19.0) (28.4) (9.3)
Foreign................................... 3.2 3.9 (2.3)
------ ------ ------
(15.8) (24.5) (11.6)
------ ------ ------
Total income tax provision................ $ 81.7 $ 64.4 $ 91.6
====== ====== ======
</TABLE>
Under the provisions of SFAS 109, the tax benefits of loss and credit
carryforwards can be recognized in the period they arise if certain realization
criteria are met. As a result of these provisions, the tax benefits
attributable to approximately $40 million domestic carryforwards and $28 million
of foreign carryforwards were reflected as a reduction in the 1992 cumulative
effect charge referred to above.
35
<PAGE>
Note G - Income Taxes (Continued)
- ---------------------------------------------------------------------
The 1991 current taxes of $103.2 contain a charge of $5.6 million equivalent to
income taxes which would have been incurred had net operating loss carryforwards
not been available. The income tax benefits resulting from utilizing the
operating loss carryforwards are presented as an extraordinary item in 1991.
Since the Company plans to continue to finance foreign operations and expansion
through reinvestment of undistributed earnings of its foreign subsidiaries
(approximately $537 million at October 31, 1993), no provisions are generally
made for U.S. or additional foreign taxes on such earnings. When the Company
identifies exceptions to the general reinvestment policy, additional taxes are
provided.
The following is a reconciliation of income taxes at the U.S. Federal income tax
rate (34.8% for 1993 and 34% for 1992 and 1991) to the provision for income
taxes for continuing operations reflected in the Consolidated Statements of
Earnings (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Provision for income taxes at
statutory rates................ $ 87.5 $ 48.8 $ 81.4
Minority interest's share of
domestic partnership earnings (7.9) (3.1) (4.8)
Enacted tax rate change.......... (8.7) .- .-
Withholding taxes and foreign
income taxes on branch
profits........................ 16.2 15.1 11.2
Utilization of foreign tax
credits........................ (20.6) (15.1) (19.7)
Foreign losses not benefited..... 8.8 12.4 7.7
Foreign taxes in excess of
U.S. rate on foreign
earnings....................... 2.5 2.1 7.4
Additional taxes for
repatriation of foreign
earnings....................... 4.1 4.9 7.4
Benefit of tax basis of
property in excess of
book value..................... .- (1.4) (3.4)
State and local income taxes,
net of U.S. Federal income
tax benefit.................... 2.1 1.3 2.3
Other............................ (2.3) (.6) 2.1
------ ------ ------
Provision for income taxes..... $ 81.7 $ 64.4 $ 91.6
====== ====== ======
</TABLE>
36
<PAGE>
Note G - Income Taxes (Continued)
- -------------------------------------------------------------------
Deferred income tax benefits result from the recognition of temporary
differences. Temporary differences are differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements
that will result in differences between income for tax purposes and income for
financial statement purposes in future years. The deferred income tax
provisions (credits) related to the following (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Post retirement benefits..................... $ 5.4 $(11.2) $ .-
Litigation settlement........................ (24.3) .- .-
Restructuring costs.......................... 9.4 (17.3) .-
Enacted tax rate change...................... (8.7) .- .-
Other items including warranty,
insurance and similar accruals.............. 2.4 4.0 (11.6)
------ ------ ------
Total deferred taxes...................... $(15.8) $(24.5) $(11.6)
====== ====== ======
</TABLE>
The components of the net deferred tax asset as of October 31, 1993, were as
follows (in millions):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Deferred tax assets:
Post retirement benefits.................... $195.8 $201.2
Warranty reserves........................... 15.1 14.1
Restructuring costs......................... 7.9 17.3
Insurance reserves.......................... 33.7 32.4
Bad debt.................................... 18.4 19.4
Pension..................................... 5.7 9.0
Deferred compensation....................... 12.8 12.8
Litigation settlement....................... 24.3 .-
Net operating loss carryforwards............ 18.7 17.6
Other items................................. 54.2 21.3
Valuation allowance......................... (34.7) (30.5)
------ ------
Total deferred tax asset.................. 351.9 314.6
Deferred tax liability - Depreciation....... (21.8) (13.0)
------ ------
Net deferred tax asset....................... $330.1 $301.6
====== ======
</TABLE>
At October 31, 1993, the Company had foreign operating loss carryforwards of
approximately $54 million that had not been benefited. The tax benefit of these
losses is recorded as a deferred tax asset and offset with a corresponding
valuation allowance. These losses are available to reduce the future tax
liabilities of their respective foreign entity. Approximately $42 million of
these losses will carryforward indefinitely while the remaining amounts expire
at various dates from 1994 to 2002.
The net change of $4.2 million in the valuation allowance for deferred tax
assets related all to changes in foreign loss carryforwards.
37
<PAGE>
Note H - Short-Term Debt
- ------------------------------------------------------------------
Short-term debt at October 31, 1993 consisted of $216 million of domestic
commercial paper maturing on December 31, 1993 and $13.5 million of primarily
foreign bank loans.
The Company has short-term committed bank lines of credit totalling $250 million
of which $216.0 million support commercial paper. Such lines provide for
borrowings at the prevailing interest rates. The lines of credit may be used by
the Company and certain foreign subsidiaries, and include Eurodollars and
foreign currencies. The lines of credit may be terminated at the option of the
banks or the Company.
Loan arrangements have been established with banks outside the United States,
under which the Company's foreign subsidiaries may borrow on an overdraft and
short-term note basis. At October 31, 1993, the amount available and unused
under these arrangements aggregated $114.2 million.
Note I - Long-Term Debt
- ------------------------------------------------------------------
Long-term debt is summarized as follows (in millions):
<TABLE>
<CAPTION>
1993 1992
------ -----
<S> <C> <C>
Notes, 6 1/4%, due 2000 $300.0 $ .-
Sinking fund debentures,
11 3/4%, due 2007................. .- 62.5
Notes payable under institutional
loan agreements, 8%, due in
annual installments to
June 1997......................... .- 11.3
Other loan agreements, 3 1/2% to
11 7/8%, due in installments to
2003.............................. 9.6 17.7
------ -----
309.6 91.5
Less portion due within one year... 1.3 67.0
------ -----
$308.3 $24.5
====== =====
</TABLE>
In June 1993, the Company made a public offering of debt securities in the form
of $300.0 million of 6.25% Notes due 2000 from which the Company received $298.2
million in proceeds. The proceeds were used to retire short-term debt that was
issued to acquire Bredero Price Holding B.V. and TK Valve & Manufacturing, Inc.
(See Note D). The interest is payable semi-annually on May 15 and November 15.
During 1992 the Company redeemed $133.1 million of Sinking Fund Debentures at
redemption prices ranging from 100% to 106% of principal amount. On November 2,
1992, the Company redeemed the remaining $62.5 million in principal amounts of
its 11 3/4% Sinking Fund Debentures due 2007 at a redemption price of 105.68%.
The resulting loss was accrued as of October 31, 1992. The $9.8 million total
losses on the debenture redemptions above are reported net of taxes of $3.5
million as an extraordinary loss in the 1992 Statement of Earnings.
38
<PAGE>
Note J - Employee Incentive Plans
- -------------------------------------------------------------------------------
Stock Compensation Plan
- -----------------------
The Company's shareholders have approved the 1992 Stock Compensation Plan which
includes a Stock Option Program, a Restricted Incentive Stock Program and a
Performance Stock Unit Program.
The Stock Option Program provides for the granting of options to officers and
key employees for purchase of the Company's common shares. The Plan is
administered by the Executive Compensation Committee of the Board of Directors,
whose members are not eligible for grants under the Plan. No option can be for
a term of more than ten years from date of grant. The option price is
recommended by the committee, but cannot be less than 100% of the average of the
high and low prices of the shares on the New York Stock Exchange on the day the
options are granted. The exercise price for options granted during 1993
increases on the annual anniversary dates of grant.
Changes in outstanding options during the three years ended October 31, 1993 and
options exercisable at October 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Outstanding at November 1, 1990 478,806
Granted at $20.3125 142,800
Exercised at $9.125 to $21.250 (91,956)
Canceled or expired (3,900)
---------
Outstanding at October 31, 1991 525,750
Granted at $19.125 to $20.000 220,449
Exercised at $9.125 to $21.250 (116,505)
Canceled or expired (43,845)
---------
Outstanding at October 31, 1992 585,849
Granted at $17.375 to $21.000 1,110,000
Exercised at $9.125 to $21.250 (166,959)
Canceled or expired (10,143)
---------
Outstanding at October 31, 1993 1,518,747
=========
Exercisable at $9.125 to $25.1563 574,027
=========
</TABLE>
Shares reserved for granting of future options under the 1992 plan were
8,814,762 shares at October 31, 1993.
Deferred Compensation Plan
- --------------------------
Under the Deferred Compensation Plan, a portion of the incentive compensation
for officers and key employees can be deferred in the form of common stock units
or in cash for payment after retirement or termination of employment. Payments
are made either in common shares of the Company or in cash at the equivalent
market value of the common stock units at the option of the employee. Deferred
compensation was $38.9 million at October 31, 1993 and $39.8 million at October
31, 1992.
39
<PAGE>
Note K - Capital Shares
- -------------------------------------------------------------------------------
Changes in issued common shares during the three years ended October 31, 1993
are as follows:
<TABLE>
<S> <C>
Shares at October 31, 1990 166,585,516
Issued under employee benefit and
dividend reinvestment plans 10,600
-----------
Shares at October 31, 1991 166,596,116
-----------
Shares at October 31, 1992 166,596,116
-----------
Shares at October 31, 1993 166,596,116
===========
</TABLE>
Changes in common shares held in treasury during the three years ended October
31, 1993 are as follows:
<TABLE>
<S> <C>
Treasury shares at October 31, 1990 31,011,271
Purchased 1,912,029
Issued under dividend reinvestment plans (631,637)
----------
Treasury shares at October 31, 1991 32,291,663
Issued in connection with the acquisition
of a business (1,925,354)
Issued under benefit and dividend
reinvestment plans (697,009)
----------
Treasury shares at October 31, 1992 29,669,300
Issued under benefit and dividend
reinvestment plans (685,705)
----------
Treasury shares at October 31, 1993 28,983,595
==========
</TABLE>
Preferred Stock Purchase Rights
- -------------------------------
In 1990, the Company issued one new Preferred Stock Purchase Right for each
outstanding share of the Company's Common Stock. The Rights will expire in 2000
unless they are redeemed earlier.
The Rights will generally not be exercisable until after 10 days (or such later
time as the Board of Directors may determine) from the earlier of a public
announcement that a person or group has, without Board approval, acquired
beneficial ownership of 15% or more of the Company's Common Stock or the
commencement of, or public announcement of an intent to commence, a tender or
exchange offer which, if successful, would result in the offeror acquiring 30%
or more of the Company's Common Stock. Once exercisable, each Right would
entitle its holder to purchase 1/100 of a share of the Company's Series A Junior
Preferred Stock at an exercise price of $90, subject to adjustment in certain
circumstances.
If the Company is acquired in a merger or other business combination not
previously approved by the Company's Continuing Directors, each Right then
exercisable would entitle its holder to purchase at the exercise price that
number of shares of the surviving company's common stock which has a market
value equal to twice the Right's exercise price. In addition, if any person or
group (with certain exceptions) were to acquire beneficial ownership of 15% or
more of the Company's Common Stock (unless pursuant to a transaction approved by
the Company's Continuing Directors), each Right would entitle all rightholders,
other than the 15% stockholder or group, to purchase that number of Series A
Junior Preferred Stock having a market value equal to twice the Right's price.
40
<PAGE>
Note K - Capital Shares (Continued)
- -------------------------------------------------------------------------------
Preferred Stock Purchase Rights (Continued)
- -------------------------------------------
The Rights may be redeemed by the Company for $.01 per Right until the tenth day
after a person or group has obtained beneficial ownership of 15% or more of the
Company's Common Stock (or such later date as the Continuing Directors may
determine).
The Rights are not considered to be common stock equivalents because there is no
indication that any event will occur which would cause them to become
exercisable.
Note L - Commitments and Contingencies
- -------------------------------------------------------------------------------
Parker & Parsley Litigation
- ---------------------------
The Company was involved in litigation brought by Parker & Parsley Petroleum
Company and related plaintiffs in 1989. On April 19, 1993, the Company entered
into an agreement in principle to settle with the plaintiffs in the Parker &
Parsley litigation, whereby the Company, without admitting any wrong doing,
agreed to pay $57.5 million to settle all current and future claims brought
forth by the plaintiffs. The settlement was paid on May 26, 1993. Legal
actions arising from the same facts filed by Glyn Snell, et. al., and working
interest owners who did not participate in the Parker & Parsley case (Texas Ten
vs. Dresser et. al.) remain outstanding.
The Company recorded a Special Charge of $65.0 million in 1993 to cover the
Parker & Parsley settlement, legal fees and other expenses related to the Parker
& Parsley litigation, the Glyn Snell, et. al. litigation, and the working
interest owners litigation.
The Company believes that it has insurance coverage for the amounts that it has
paid or will pay pursuant to the above-described settlement of the litigation,
and in fact $13.5 million has been received from certain insurance carriers.
However, other insurance carriers have denied coverage, and the Company is
engaged in litigation with these carriers seeking recovery of the costs and
expenses incurred by the Company in the defense and settlement of the
litigation. The Company's claim includes the $57.5 million settlement, as well
as all unreimbursed costs and expenses incurred by the Company in defending the
action. The insurance carriers had previously sued seeking a declaration that
the claims asserted by the Company are not covered by the relevant insurance
policies. The carrier's action has been abated in favor of the action brought
by the Company. Discovery in the action is proceeding. Trial is currently
scheduled for April, 1994. The Company also believes it has insurance coverage
with respect to claims made in the suits brought by royalty owners and working
interest owners. The amount and timing of any recoveries from the insurance
carriers cannot be determined with certainty. Any recoveries will be recognized
when amounts can be determined with certainty.
41
<PAGE>
Note L - Commitments and Contingencies (Continued)
- -------------------------------------------------------------------------------
Asbestosis Litigation
- ---------------------
The Company has approximately 42,800 pending claims (approximately 12,000 filed
in 1993) in which it is alleged that third parties sustained injuries and
damages resulting from inhalation of asbestos fibers used in products
manufactured by the Company and its predecessor companies. The Company has
never been a miner or processor of asbestos but did produce a few refractory
products that contained some asbestos. Approximately 50% of the pending claims
allege injury as a result of exposure to such products, while the other 50% of
the claimants allege injury as a result of exposure to asbestos gaskets and
packings used in other products manufactured by the Company.
Since 1976, the Company has tried, settled or summarily disposed of
approximately 13,000 such claims for a total cost of $29 million including legal
fees. The Company has entered into agreements with insurance carriers with
respect to such claims. Management has no reason to believe the carriers will
not be able to meet their obligations pursuant to the agreements. Under the
agreements, insurance covers 60%-67% of legal fees and any settlements or
awards. The net cost to the Company after recoveries from the carriers has been
approximately $10 million. Of the 13,000 claims settled, approximately 80%
relate to cases involving refractory products. Any future refractory product
claims filed are the responsibility of INDRESCO Inc. pursuant to an agreement
entered into at the time of the spin-off. The Company has provided for the
estimated exposure, based on past experience, for the remaining open cases
involving refractory products. The Company has also provided for estimated
exposure relating to non-refractory product claims. However, the Company has
less experience in settling such claims. Generally when settlements have been
made, the amounts involved are substantially lower than the claims involving
refractory products.
In 1993, the Company did sustain an adverse judgment in cases filed by employees
of Ingalls Shipyard in Pascagoula, Mississippi. The Company's share of damages
awarded in six cases amounted to $3.8 million plus 10% add on for punitive
damages. The judgment does not conform to the Company's past experience and was
not in accord with the evidence. The court has entered judgment in the case and
the Company has filed the appropriate post trial motions. The court has not
ruled on the motions. If relief is denied, the Company will appeal the
decision. Any ultimate loss would be covered by the agreement with the
insurance carriers and would not result in a net loss exceeding approximately $1
million. Management recognizes the uncertainties of litigation and the
possibility that a series of adverse rulings could materially impact operating
results. However, based upon the Company's historical experience with similar
claims, the time elapsed since the Company discontinued sale of products
containing asbestos, and management's understanding of the facts and
circumstances which gave rise to such claims, management believes that the
pending asbestos claims will be resolved without material effect on the
Company's financial position or results of operations.
42
<PAGE>
Note L - Commitments and Contingencies (Continued)
- -------------------------------------------------------------------------------
Quantum Chemical Litigation
- ---------------------------
In October 1992, Quantum Chemical Corporation ("Quantum") brought suit against
the Company's wholly owned subsidiary, The M. W. Kellogg Company ("Kellogg"),
alleging that Kellogg negligently failed to provide an adequate design for an
ethylene facility which Kellogg designed and constructed for Quantum and
fraudulently misrepresented the state of development of its Millisecond Furnace
technology to be used in the facility. Quantum is seeking $200 million in
actual damages and punitive damages equal to twice the actual damages claimed.
Kellogg has answered denying the claim and has filed a counterclaim against
Quantum alleging libel, slander, breach of contract and fraud. Discovery in the
action is proceeding, and trial is set for April 11, 1994. Management believes
the Quantum lawsuit is totally without merit and will be resolved without
material adverse effect on the Company's financial position or results of
operations.
Other Litigation
- ----------------
The Company and its subsidiaries are involved in certain other legal actions and
claims arising in the ordinary course of business. Management recognizes the
uncertainties of litigation and the possibility that one or more adverse rulings
could materially impact operating results. However, based upon the nature of
and management's understanding of the facts and circumstances which gave rise
to such actions and claims, management believes that such litigation and claims
will be resolved without material effect on the Company's financial position or
results of operations.
Environmental Matters
- ---------------------
The Company is identified as a potentially responsible party in 67 Superfund
sites. Primary responsibility for eight of these sites was assumed by INDRESCO
Inc. at the time of the INDRESCO spin-off in 1992 (See Note O). At three of the
67 sites, Fisher-Calo, Bio-Ecology, and Operating Industries, the Company may be
responsible for remediation costs ranging between $200,000 and $1 million. The
Company previously has entered into de minimis settlements in respect of several
other Superfund sites. 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 Fisher-Calo, Bio-Ecology, and Operating
Industries, management believes that the other situations will be resolved at
nominal cost to the Company.
Other
- -----
The Company and certain subsidiaries are contingently liable as guarantors of
obligations aggregating approximately $200 million at October 31, 1993, of which
$170.0 million were guarantees of loans to Komatsu Dresser Company, a
partnership in which INDRESCO Inc. (See Note O) has an ownership interest.
Obligations to guarantee loans to Komatsu Dresser Company expired November 1,
1993. The Company has no further obligations regarding Komatsu Dresser Company.
43
<PAGE>
Note L - Commitments and Contingencies (Continued)
- -------------------------------------------------------------------------------
Other (Continued)
- -----------------
Total rental and lease expense charged to earnings was $74.7 million in 1993,
$66.4 million in 1992 and $73.7 million in 1991. At October 31, 1993, the
aggregate minimum annual obligations under noncancelable leases were: $36.4
million for 1994; $28.4 million for 1995; $20.7 million for 1996; $11.6 million
for 1997; $9.1 million for 1998; and $49.8 million for all subsequent years.
The lease obligations related primarily to general and sales office space and
warehouses.
Note M - Postretirement and Postemployment Benefits
- -------------------------------------------------------------------------------
Benefits Other than Pensions
- ----------------------------
The Company sponsors a number of plans providing health and life insurance
benefits for retired U.S. bargaining and non-bargaining employees meeting
eligibility requirements. Although certain plans are contributory, the Company
has generally absorbed the majority of the costs. The Company funds the benefit
plans as claims and premiums are paid.
The Company adopted Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefit Plans Other than Pensions (SFAS
106), for its U.S. benefit plans as of November 1, 1991. The Company elected to
recognize this change in accounting on the immediate recognition basis. The
cumulative effect as of November 1, 1991, reflected in the Statement of Earnings
for the year ended October 31, 1992 as cumulative effect of an accounting
change, was as follows (in millions, except per share amount):
<TABLE>
<CAPTION>
<S> <C>
Accrued postretirement benefit $ 644.0
Amount applicable to minority interests (101.0)
-------
543.0
Income tax benefit (190.0)
-------
Decrease in net earnings $ 353.0
=======
Decrease in earnings per common share $ 2.61
=======
</TABLE>
The effects of postretirement benefits for non-U.S. employees, which supplement
foreign government plans, are not significant under SFAS 106.
During fiscal 1993, the Company, Dresser-Rand and Ingersoll-Dresser Pump Company
adopted amendments to certain postretirement medical benefit plans, primarily
the non-union plans. The major amendments included the elimination of benefits
for younger employees and the introduction of limits on the amount of future
cost increases which will be absorbed by the companies. These amendments
resulted in a curtailment gain of $12.8 million which was recognized in 1993 and
unrecognized gains of $208.3 million which will be recognized as a reduction in
benefit expense on a straight line basis over the periods ranging from 12 years
to 18 years.
44
<PAGE>
Note M - Postretirement and Postemployment Benefits (Continued)
- -------------------------------------------------------------------------------
Benefits Other than Pensions (Continued)
- ----------------------------------------
The liability of the U.S. plans at October 31, 1993 and 1992 was as follows (in
millions):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $306.6 $411.1
Fully eligible active plan participants 72.0 102.7
Other active plan participants 121.1 163.7
------ ------
Total accumulated postretirement
benefit obligation 499.7 677.5
Unamortized gains from plan amendments 198.5 .-
Unrecognized net loss (28.2) .-
------ ------
Accrued postretirement benefit liability $670.0 $677.5
====== ======
</TABLE>
Accrued compensation and benefits on the Balance Sheet include the current
portion of the benefit liability.
The net periodic postretirement benefit expense for the years ended October 31,
1993 and 1992 included the following components (in millions):
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Service cost for benefits earned $ 7.6 $11.8
Interest cost on accumulated postretirement
benefit obligation 40.4 53.0
Net amortization of unrecognized gain (9.8) .-
----- -----
Net periodic postretirement benefit cost $38.2* $64.8*
===== =====
Actual benefits paid $22.1 $22.7
===== =====
</TABLE>
*Includes $14.3 million in 1993 and $20 million in 1992 for Dresser-Rand
Company which was not consolidated in 1992.
Assumptions used to calculate the Accumulated Postretirement Benefit Obligation
were as follows:
<TABLE>
<S> <C>
Discount rate -
October 31, 1993........................ 7.0%
October 31, 1992........................ 8.5%
</TABLE>
Health care trend rate (weighted based on participant count) -
October 31, 1993 - 13% for 1993 declining to 5.5% in 2003 and level
thereafter.
October 31, 1992 - 15% for 1992 declining to 6.0% in 2006 and level
thereafter.
The above changes in assumptions and changes in circumstances and experience
resulted in an unrecognized net loss of $(28.2) million.
45
<PAGE>
Note M - Postretirement and Postemployment Benefits (Continued)
- -------------------------------------------------------------------------------
Benefits Other than Pensions (Continued)
- ----------------------------------------
A one percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
October 31, 1993 by approximately $44 million and would increase the net
postretirement benefit cost for 1993 by approximately $5 million.
Defined Benefit Pension Plans
- -----------------------------
The Company has numerous defined benefit pension plans covering substantially
all employees in the United States. The benefits for the U.S. plans covering
the salaried employees are based primarily on years of service and employees'
qualifying compensation during the final years of employment. The benefits for
the U.S. plans covering the hourly employees are based primarily on years of
service. The U.S. plans are funded in accordance with the requirements of
applicable laws and regulations. The U.S. plan assets are invested in cash,
short-term investments, equities, fixed-income instruments and real estate at
October 31, 1993.
The Company has additional defined benefit pension plans for employees outside
the United States. The benefits under these plans are based primarily on years
of service and compensation levels. The Company funds these plans in amounts
sufficient to meet the minimum funding requirements under governmental
regulations, plus such additional amounts as the Company may deem appropriate.
The Company recognized a minimum pension liability for underfunded plans. The
minimum liability is equal to the excess of the accumulated benefit obligation
over plan assets. A corresponding amount is recognized as either an intangible
asset or a reduction of shareholders' investment. The Company had recorded
additional liabilities of $39.9 million and $19.5 million, intangible assets of
$15.9 million and $12.6 million, and adjustments to shareholders' investment,
net of income taxes, of $13.8 million and $4.0 million, as of October 31, 1993
and 1992, respectively.
Pension expense includes the following (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits earned... $ 19.4 $ 18.2 $ 15.9
Interest cost on projected
benefit obligation................ 36.9 32.7 27.1
Actual return on plan assets....... (36.0) (35.0) (26.8)
Net amortization and deferral...... .7 (1.6) (4.2)
------ ------ ------
Net pension expense............... $ 21.0 $ 14.3 $ 12.0
====== ====== ======
</TABLE>
Cash contributions to the plans in 1993 were $38.7 million.
46
<PAGE>
Note M - Postretirement and Postemployment Benefits (Continued)
- -------------------------------------------------------------------------------
Defined Benefit Pension Plans (Continued)
- -----------------------------------------
The funded status of the plans on the August 1 measurement dates was as follows
(in millions):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
PLANS (PRIMARILY FOREIGN) WITH ASSETS
EXCEEDING ACCUMULATED BENEFITS
Actuarial present value of
benefit obligations:
Vested benefit obligation............ $ 116.6 $ 117.3
======= =======
Accumulated benefit obligation...... $ 119.5 $ 120.1
======= =======
Projected benefit obligation............ $ 134.5 $ 134.3
Plan assets at fair value............... 212.6 201.4
------- -------
Projected benefit obligation
under plan assets...................... 78.1 67.1
Unrecognized net gain................... (16.7) (5.0)
Prior service cost not yet
recognized in net periodic
pension cost........................... 2.0 3.7
Unrecognized transition net asset....... (21.1) (26.6)
------- -------
Prepaid pension costs recognized
as of August 1......................... $ 42.3 $ 39.2
======= =======
PLANS (PRIMARILY DOMESTIC) WITH
ACCUMULATED BENEFITS EXCEEDING ASSETS
Actuarial present value of benefit
obligations:
Vested benefit obligation............ $ 268.0 $ 191.4
======= =======
Accumulated benefit obligation....... $ 291.8 $ 209.0
======= =======
Projected benefit obligation............ $ 364.6 $ 298.8
Plan assets at fair value............... 212.8 160.4
------- -------
Projected benefit obligation
over plan assets....................... (151.8) (138.4)
Unrecognized net loss................... 56.5 26.5
Prior service cost not yet
recognized in net periodic
pension expense........................ 24.1 23.5
Unrecognized transition net
obligation............................. 5.3 6.0
Adjustment required to recognize
minimum liability...................... (39.9) (19.5)
------- -------
Pension liability recognized as of
August 1............................... $(105.8) $(101.9)
======= =======
</TABLE>
On the Balance Sheet, other assets include prepaid pension costs and accrued
compensation and benefits include the current portion of the pension
liabilities.
47
<PAGE>
Note M - Postretirement and Postemployment Benefits (Continued)
- -------------------------------------------------------------------------------
Defined Benefit Pension Plans (Continued)
- -----------------------------------------
Contributions made in August and October 1993 to the trust for the pension plans
decreased the liability for plans with accumulated benefits exceeding assets by
$7.2 million.
The actuarial assumptions used in determining funded status of the plans were as
follows:
<TABLE>
<CAPTION>
U.S. PLANS 1993 1992
------------- -------------
<S> <C> <C>
Discount rate................................... 7.0% 8.75%
Expected long-term rate of
return on assets............................... 8.5% to 9.0% 8.5% to 9.0%
Rate of increase in
compensation levels............................ 3.5% to 4.0% 5.0% to 5.5%
FOREIGN PLANS 1993 1992
------------ ------------
Discount rate................................... 5.0% to 10.5% 5.0% to 12.5%
Expected long-term rate of
return on assets............................... 7.5% to 12.0% 7.5% to 13.5%
Rate of increase in
compensation levels............................ 3.0% to 7.5% 3.0% to 11.0%
</TABLE>
The changes in assumptions in 1993 increased the projected benefit obligation by
approximately $40 million.
Defined Contribution Plans
- --------------------------
The Company has defined contribution plans for most of its U.S. salaried
employees. Under these plans, eligible employees may contribute amounts through
payroll deductions supplemented by employer contributions for investment in
various funds established by the plans. The cost of these plans was $12.5
million, $8.8 million and $7.1 million in 1993, 1992 and 1991, respectively.
Postemployment Benefits
- -----------------------
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, Employers' Accounting for Postemployment
Benefits (SFAS 112), which requires that accrual accounting be used for the cost
of benefits provided to former or inactive employees who have not yet retired.
Such benefits include salary continuation, disability, severance and health
care. Under SFAS 112, the cost of benefits must be accrued either over the
employee's service period or at the date of an event that gives rise to the
benefits. SFAS 112 must be adopted by the Company no later than fiscal year
1995.
The Company currently accrues the cost of some benefits covered by SFAS 112 but
not all. SFAS 112 requires a cumulative catch-up charge to earnings upon
adoption. The Company has not determined the amount of the cumulative
adjustment. The Company expects to adopt SFAS 112 in the first quarter of
fiscal 1995.
48
<PAGE>
Note N - Supplementary Earnings Statement Information and Special Charges
- -------------------------------------------------------------------------------
Earnings per common share are based on the average number of common shares
outstanding during each period. The average common shares outstanding were
137.3 million in 1993, 135.5 million in 1992 and 134.2 million in 1991. Common
stock equivalents do not have a material effect on earnings per share.
Depreciation of property, plant and equipment charged to earnings amounted to
$141.5 million in 1993, $87.5 million in 1992 and $78.9 million in 1991. The
increase in 1993 is primarily due to the consolidation of Dresser-Rand.
Amortization of intangibles was $17.2 million in 1993, $11.1 million in 1992 and
$10.6 million in 1991 and is included in selling, engineering, administrative
and general expenses.
Engineering, research and development costs were $152.9 million in 1993, and
$94.0 million in 1992 and 1991. Research and development costs, as defined by
Statement of Financial Accounting Standards No. 2, charged to earnings were
$81.5 million in 1993, $11.0 million in 1992 and $9.4 million in 1991. The
increases in 1993 costs are primarily due to the consolidation of Dresser-Rand.
The components of other income (deductions), net on the Consolidated Statements
of Earnings are as follows (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
----- ------ ------
<S> <C> <C> <C>
Gain on business disposal.. $ .- $ 18.2 $ 3.5
Equity earnings............ 15.7 10.3 7.3
Other income............... 12.3 13.2 19.0
Foreign exchange........... 2.9 (10.9) (13.1)
----- ------ ------
$30.9 $ 30.8 $ 16.7
===== ====== ======
</TABLE>
Special Charges
- ---------------
The Company recorded special charges totalling $74.1 million in 1993. The
charges included $65.0 million to cover settlement, legal fees and expenses of
the Parker & Parsley and related litigation (See Note L) and $13.2 million for
restructuring and termination costs partially offset by a $4.1 million gain from
curtailment of retiree medical benefits. The curtailments resulted from
employee terminations associated with plant closings. The special charges
reduced segment operating profit by $6.9 million and the remaining $67.2 million
was reflected as nonsegment expenses.
In 1992, the Company recorded special charges totalling $70.0 million. The
charges provided $35.0 million for the restructuring of the pump joint venture,
$25.0 million for restructuring and termination costs in other operations, and
$10.0 million primarily for the settlement of special warranty claims. The
special charges reduced segment earnings of Oilfield Services by $17.1 million
and Hydrocarbon Processing Industry by $49.3 million. The remaining $3.6
million was reflected as nonsegment expenses.
49
<PAGE>
Note O - Discontinued Operations
- -------------------------------------------------------------------------------
In 1992, the Company decided to dispose of its Environmental Products business
and recorded a $12.0 million charge for the estimated costs of disposal and
future operating losses.
Effective August 1, 1992, the Company divested its industrial products and
equipment businesses including its 50% interest in Komatsu Dresser Company. The
divestiture/spin-off was accomplished by a distribution of one INDRESCO share
for every five shares of the Company's common stock.
The results of operations net of income taxes for Environmental Products
(including the $12 million charge in 1992) and for the INDRESCO businesses are
reported as discontinued operations.
Summarized information on the Discontinued Operations is as follows (in
millions):
<TABLE>
<CAPTION>
1992 1991
------ ------
<S> <C> <C>
Net sales $469.0 $709.9
====== ======
Earnings (loss) before
income taxes $(39.2) $ 13.4
Income tax expense (benefit) (3.9) 5.6
------ ------
Net earnings (loss) before
extraordinary item (35.3) 7.8
Tax benefits from loss
carryforwards .- 1.4
------ ------
Net earnings (loss) $(35.3) $ 9.2
====== ======
</TABLE>
Note P - Information by Industry Segment and Geographic Area
- -------------------------------------------------------------------------------
The Company's industry segments are outlined below. See Notes C and O for
information about changes in joint venture operations and discontinued
operations.
Oilfield Services
-----------------
The Segment provides products and technical services utilized in the worldwide
search for and development of crude oil and natural gas through exploration,
drilling and production activities. Principal products and services of
consolidated operations include drilling fluid systems, rock bits, downhole
production tools, pipe coating and ball valves. The Western Atlas
unconsolidated joint venture, which the Company has agreed to sell as
discussed in Note R, provides integrated reservoir description services,
seismic services, core analysis and wireline logging services. The Bredero
Price and TK Valve & Manufacturing acquired operations are included in this
segment (See Note D).
50
<PAGE>
Note P - Information by Industry Segment and Geographic Area (Continued)
- -------------------------------------------------------------------------------
Hydrocarbon Processing Industry
-------------------------------
The Segment provides highly engineered products, which are essential to the
transportation and processing of various hydrocarbon raw materials, the
conversion of the hydrocarbon raw materials into higher value-added energy
forms and the marketing of refined products. Principal products, services and
systems of consolidated operations include compressors, turbines, diesel
engines, measurement and control devices, gas meters, piping specialties and
gasoline dispensing systems along with related repair services. The
Ingersoll-Dresser Pump unconsolidated joint venture provides pumps along with
related repair services.
Engineering Services
--------------------
The Segment, which consists of the M. W. Kellogg Company, is involved in the
design, engineering and construction of energy-related complexes throughout
the world.
Total revenues include sales and services to unaffiliated customers and either
intersegment sales and services or intergeographic area sales and services. The
intersegment and intergeographic area sales and services are accounted for at
prices which approximate arm's length market prices.
Operating profit consists of total revenues less total operating expenses and
includes equity earnings or losses from unconsolidated affiliates. General
corporate expenses, foreign exchange gains or losses, interest income and
expense, and other income and expenses (including administrative and general
expenses applicable to divested operations) not identifiable with a segment have
been excluded in determining operating profit. Identifiable assets are those
assets that are identified with particular segments. Corporate assets are
principally cash and cash equivalents and deferred income tax benefits.
Industry Segment Financial Information
- --------------------------------------
The financial information by industry segment for the years ended October 31,
1993, 1992 and 1991 is included in Item 7., Management's Discussion and Analysis
on pages 18 to 20 of this report, and is an integral part of this Note to
Consolidated Financial Statements.
51
<PAGE>
Note P - Information by Industry Segment and Geographic Area (Continued)
- -------------------------------------------------------------------------------
Geographic Area Financial Information
- -------------------------------------
The financial information by Geographic Area for the years ended October 31,
1993, 1992 and 1991 is as follows (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Sales and service revenues
United States..................... $2,314.4 $2,233.3 $2,218.0
Canada............................ 116.3 81.0 96.4
Latin America..................... 185.6 115.2 135.6
Europe............................ 986.0 911.4 944.7
Mid East, Far East and Africa 613.7 456.1 575.6
Intergeographic area sales
and service revenues
United States..................... 252.8 146.1 149.4
Canada............................ 3.4 2.8 1.6
Latin America..................... .7 2.1 1.8
Europe............................ 78.6 40.0 43.0
Mid East, Far East and Africa..... 24.3 31.2 24.9
Eliminations....................... (359.8) (222.2) (220.7)
-------- -------- --------
Total sales and service revenues $4,216.0 $3,797.0 $3,970.3
======== ======== ========
Operating profit
United States...................... 179.8 $ 61.9 $ 179.1
Canada............................. 12.8 4.1 10.4
Latin America...................... 8.1 15.1 9.8
Europe............................. 77.9 43.1 52.4
Mid East, Far East and Africa...... 81.7 54.9 24.0
Adjustments and Eliminations....... .2 (.7) (11.8)
-------- -------- --------
Subtotal.......................... 360.5 178.4 263.9
-------- -------- --------
Major Joint Ventures
United States...................... 24.8 19.7 35.1
Canada............................. .8 2.9 1.5
Latin America...................... .7 5.7 11.7
Europe............................. 17.8 34.6 24.0
Mid East, Far East and Africa...... 16.5 17.7 7.5
-------- -------- --------
Subtotal.......................... 60.6 80.6 79.8
-------- -------- --------
Total operating profit.......... $ 421.1 $ 259.0 $ 343.7
======== ======== ========
Identifiable assets
United States...................... $1,888.8 $1,769.6 $1,375.0
Canada............................. 65.9 74.3 55.9
Latin America...................... 154.9 194.9 100.9
Europe............................. 880.2 603.1 628.4
Mid East, Far East and Africa...... 287.5 146.3 141.5
Adjustments and eliminations....... (155.5) (131.4) (138.7)
-------- -------- --------
Total identifiable assets......... $3,121.8 $2,656.8 $2,163.0
======== ======== ========
United States export sales
Canada............................. $ 40.6 $ 26.0 $ 38.4
Latin America...................... 165.1 108.0 71.2
Europe............................. 44.4 29.6 19.1
Mid East, Far East and Africa...... 371.4 243.1 179.3
-------- -------- --------
Total United States export sales.. $ 621.5 $ 406.7 $ 308.0
======== ======== ========
</TABLE>
52
<PAGE>
Note Q - Quarterly Financial Data (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended
------------------------------------------
January 31 April 30 July 31 October 31
---------- -------- -------- ----------
In millions, except per share data
<S> <C> <C> <C> <C>
1993
Net sales and
service revenues.............. $ 923.7 $1,067.2 $1,064.8 $1,160.3
Gross earnings................. 209.0 260.6 267.3 308.8
Net earnings................. $ 19.5 $ 2.7 $ 34.8 $ 69.7
======= ======== ======== ========
Earnings per common share...... $ .14 $ .02 $ .26 $ .50
======= ======== ======== ========
1992
Net sales and service
revenues...................... $ 891.0 $ 938.3 $ 957.6 $1,010.1
Gross earnings................. 194.5 206.2 227.8 246.5
Net earnings (loss)
Continuing operations......... 10.2 13.7 29.3 16.7*
Discontinued operations....... (6.0) 1.3 (12.0) (18.6)**
------- -------- -------- --------
Subtotal before
extraordinary items and
accounting changes........... 4.2 15.0 17.3 (1.9)
Extraordinary items........... .- (3.7) .- (2.6)
Cumulative effect of
accounting changes........... (393.8) .- .- .-
------- -------- -------- --------
Total net
earnings(loss)............... $(389.6) $ 11.3 $ 17.3 $ (4.5)
======= ======== ======== ========
Earnings (loss) per common
share
Continuing operations........ $ .08 $ .10 $ .21 $ .13
Discontinued operations...... (.04) .01 (.09) (.14)
------- -------- -------- --------
Subtotal before
extraordinary items
and accounting changes..... .04 .11 .12 (.01)
Extraordinary items.......... . - (.03) . - (.02)
Cumulative effect of
accounting changes.......... (2.91) . - . - . -
------- -------- -------- --------
Total net earnings
(loss).................. $ (2.87) $ .08 $ .12 $ (.03)
======= ======== ======== ========
</TABLE>
* Includes after-tax special charges for restructuring costs, termination
costs and special warranty claims of $36.0 million.
** Includes $12.0 million for the estimated costs of disposal and future
operating losses.
53
<PAGE>
Note R - Subsequent Events (Unaudited)
- -------------------------------------------------------------------------------
Merger with Baroid Corporation
- ------------------------------
On September 7, 1993, the Company and Baroid Corporation (Baroid) announced an
agreement to merge the two companies. The agreement provides that, upon
consummation of the merger, stockholders of Baroid will receive 0.40 shares of
Dresser common stock for each share of issued and outstanding Baroid common
stock and Baroid will become a wholly-owned subsidiary of Dresser.
The merger will be accounted for as a pooling of interests. Supplemental
unaudited earnings statement information assuming the merger had occurred on
November 1, 1990, is as follows (in millions except earnings per share):
<TABLE>
<CAPTION>
Unaudited
Years Ended October 31,
-----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales and service revenues........ $5,043.8 $4,551.8 $4,681.1
======== ======== ========
Earnings before extraordinary items
and accounting changes............... $ 128.2 $ 56.9 $ 129.6
Extraordinary items................... .- (6.3) 6.1
Cumulative effect of
accounting changes................... .- (393.8) .-
-------- -------- --------
Net earnings (loss)................... $ 128.2 $ (343.2) $ 135.7
======== ======== ========
Per share:
Earnings before extraordinary items
and accounting changes.............. $ .74 $ .34 $ .75
Extraordinary items.................. .- (.04) .04
Cumulative effect of
accounting changes.................. .- (2.29) .-
-------- -------- --------
Net earnings (loss)................... $ .74 $ (1.99) $ .79
======== ======== ========
</TABLE>
Expenses associated with the merger of approximately $30.0 million less a tax
benefit of $2.9 million, for a net special charge of $27.1 million or $0.16 per
share, have been reflected in the combined results of operations for the year
ended October 31, 1993 shown above.
The above supplemental unaudited earnings statement information includes Baroid
information for the twelve months ended October 31, 1993, December 31, 1992 and
December 31, 1991.
Following the merger, the Company is required by the United States Department of
Justice to dispose of either its 64% general partnership interest in M-I
Drilling Fluids Company or its 100% interest in Baroid Drilling Fluids Inc.
prior to June 1, 1994. Dresser has not yet determined which drilling fluids
company will be divested but is at present negotiating with interested parties.
M-I Drilling Fluids Company revenues were $398 million and earnings before taxes
were $25 million for the year ended October 31, 1993 and Baroid Drilling Fluids
Inc. revenues were $372 million and earnings before taxes were $39 million for
the same period.
54
<PAGE>
Note R - Subsequent Events (Unaudited) (Continued)
- -------------------------------------------------------------------------------
Sale of Interest in Western Atlas International, Inc.
- -----------------------------------------------------
On December 8, 1993, Dresser and Litton Industries, Inc. announced an agreement
for the sale of Dresser's 29.5% interest in Western Atlas International, Inc. to
a wholly-owned subsidiary of Litton for $358 million in cash and $200 million in
7 1/2% notes due over seven years. The sale is expected to close in January,
1994 and will result in an after-tax gain of approximately $150 million that
Dresser will recognize in the first quarter of fiscal year 1994.
55
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
PART III
Item 10. Directors and Executive Officers of Registrant.
- ------- ----------------------------------------------
Certain information required by this Item is incorporated by reference to
Dresser's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this report (the "Dresser Proxy Statement").
Item 11. Executive Compensation.
- ------- ----------------------
The information required by this Item is incorporated by reference to the
Dresser Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
The information required by this Item is incorporated by reference to the
Dresser Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
The information required by this Item is incorporated by reference to the
Dresser Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------- ---------------------------------------------------------------
(a) List of Financial Statements, Financial Statement Schedules and
Exhibits.
(1) and (2) - Response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Response to this portion of Item 14 is submitted as a separate
section of this report.
(b) Reports on Form 8-K.
None.
(c) Exhibits - Response to this portion of Item 14 is submitted as a
separate section to this report. Management contracts or
compensatory plans or arrangements in which Directors or executive
officers participate are included in Exhibits 10.1 - 10.27.
56
<PAGE>
(d) Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate section of this report.
Separate financial statements for the formerly unconsolidated
Dresser-Rand Company are filed because under the Rules of the
Securities and Exchange Commission it constituted a significant
subsidiary as of October 31, 1991. The financial statements of
Dresser-Rand Company, together with the report of Price Waterhouse
dated November 12, 1992, appearing on pages 3 through 17 of the
accompanying Consolidated Financial Statements of Dresser-Rand
Company are incorporated by reference in this report. With the
exception of the aforementioned information, the Consolidated
Financial Statements of Dresser-Rand Company is not to be deemed
filed as a part of this Form 10-K Annual Report.
UNDERTAKINGS
For the purpose of complying with the rules governing registration statements
on Form S-8 under the Securities Act of 1933 (as amended effective July 31,
1990), the undersigned Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's registration
statements on Form S-8 Nos. 2-76847 (filed April 5, 1982), 2-81536 (filed
January 28, 1983), 33-26099 (filed December 21, 1988), 33-30821 (filed August
28, 1989), and 33-48165 (filed May 27, 1992):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the provisions of the Company's Restated Certificate of
Incorporation, as amended, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on, January 28, 1994.
DRESSER INDUSTRIES, INC.
By: /s/ George H. Juetten
---------------------
George H. Juetten,
Vice President - Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on January 28, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
*JOHN J. MURPHY Chairman of the Board and Director
(John J. Murphy) (Principal Executive Officer)
/s/ George H. Juetten Vice President - Controller
(George H. Juetten) (Principal Accounting Officer)
*B. D. ST. JOHN Vice Chairman of the Board
(B. D. St. John) (Principal Financial Officer)
*WILLIAM E. BRADFORD
(William E. Bradford, Director) (J. Landis Martin, Director)
*SAMUEL B. CASEY, JR. *W. GEORGE NANCARROW
(Samuel B. Casey, Jr., Director) (W. George Nancarrow, Director)
*LIONEL H. OLMER
(Lawrence S. Eagleburger, Director) (Lionel H. Olmer, Director)
*RAWLES FULGHAM
(Rawles Fulgham, Director) (Jay A. Precourt, Director)
*JOHN A. GAVIN *A. KENNETH PYE
(John A. Gavin, Director) (A. Kenneth Pye, Director)
*RAY L. HUNT *RICHARD W. VIESER
(Ray L. Hunt, Director) (Richard W. Vieser, Director)
*BY:/s/ Stanley E. McGlothlin
-------------------------
Stanley E. McGlothlin
(Attorney-In-Fact)
</TABLE>
<PAGE>
FORM 10-K
ITEM 14(A)(1) AND (2) AND ITEM 14(D)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED OCTOBER 31, 1993
DRESSER INDUSTRIES, INC.
DALLAS, TEXAS
F-1
<PAGE>
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of independent
accountants are included in Item 8:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Independent Accountants 22
Consolidated Statements of Earnings(Loss)--
Years ended October 31, 1993, 1992, and 1991 23
Consolidated Balance Sheets--
October 31, 1993 and 1992 24-25
Consolidated Statements of Shareholders' Investment--
Years ended October 31, 1993, 1992 and 1991 26
Consolidated Statements of Cash Flows--
Years ended October 31, 1993, 1992, and 1991 27
Notes to Consolidated Financial Statements 28-55
</TABLE>
The following consolidated financial statement schedules of Dresser Industries,
Inc. and report of independent accountants are included herein:
Schedule II-- Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
than Related Parties
Schedule VIII-- Valuation and Qualifying Accounts
Schedule IX-- Short-Term Borrowings
Schedule X-- Supplementary Income Statement Information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-2
<PAGE>
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
Separate financial statements for the formerly unconsolidated Dresser-Rand
Company are filed because it constituted a significant subsidiary as of October
31, 1991. Effective October 1, 1992, Dresser-Rand Company became a majority-
owned consolidated subsidiary. The following consolidated financial statements
of Dresser-Rand Company and report of independent accountants are included
herein:
Financial Highlights
Operations Review
Report of Independent Accountants
Consolidated Statements of Operations--
Years ended September 30, 1992, 1991 and 1990
Consolidated Balance Sheets--
September 30, 1992 and 1991
Consolidated Statements of Partners' Equity--
Years ended September 30, 1992, 1991 and 1990
Consolidated Statements of Cash Flows--
Years ended September 30, 1992, 1991 and 1990
Notes to Consolidated Financial Statements
Dresser-Rand Company Form 10-K Financial Schedules are included herein as
follows:
Report of Independent Accountants on Financial Statement Schedules
Schedule V-- Property, Plant and Equipment
Schedule VI-- Accumulated Depreciation, Depletion, and
Amortization of Property, Plant and Equipment
Schedule VIII-- Valuation and Qualifying Accounts
Schedule IX-- Short-Term Borrowings
Schedule X-- Supplementary Income Statement Information
All other Dresser-Rand Company schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and therefore
have been omitted.
F-3
<PAGE>
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
Separate financial statements are not presented for any of the other
unconsolidated affiliates because none constitutes a significant subsidiary.
Summarized financial statement information for Ingersoll-Dresser Pump Company
(49% owned) and Western Atlas International, Inc. (29.5% owned) is presented in
Note C to Consolidated Financial Statements included in Item 8. Other 20% to
50% owned unconsolidated affiliates are not material.
F-4
<PAGE>
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties
Dresser Industries, Inc. and Subsidiaries
(Millions of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
---------------------- ---------- --------- --------------------- ----------------------
Balance Deductions
at --------------------- Balance at End
Beginning Amounts of Period
Year Ended of Amounts Written ----------------------
October 31 Name of Debtor Period Additions Collected Off Current Not Current
- ---------- ---------------------- --------- --------- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 Western Atlas
International, Inc. 10.0 - 10.0 - - -
1993 Ingersoll-Dresser
Pump Company - 6.1 - - 6.1 -
1992 Western Atlas
International, Inc. - 10.0 - - 10.0 -
1991 Dresser-Rand Company 17.8 32.2 50.0 - - -
</TABLE>
Note: Amounts receivable for purchases subject to the usual trade terms and
other such items arising in the ordinary course of business are excluded.
F-5
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Col. C
----------------------
Col. A Col. B Additions Col. D Col. E
------------ ---------- ----------------------- ---------- ----------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
DESCRIPTIONS of Period Expenses Accounts Deductions Period
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE DEDUCTED FROM ASSETS
TO WHICH THEY APPLY
Year ended October 31, 1993
For doubtful receivables classified as current assets......... $22.4 $ 7.3 $5.2(A) $6.3(D) $28.6
===== ===== ==== ==== =====
For deferred tax asset valuation allowance classified as
noncurrent assets............................................ $30.5 $ 4.2 $ .- $ - $34.7
===== ===== ==== ==== =====
Year ended October 31, 1992
For doubtful receivables classified as current assets......... $19.5 $ 5.9 $2.9(B) $5.9(D) $22.4
===== ===== ==== ==== =====
For deferred tax asset valuation allowance classified as
noncurrent assets............................................ $ .- $30.5 $ .- $ - $30.5
===== ===== ==== ==== =====
Year ended October 31, 1991
For doubtful receivables classified as current assets......... $21.2 $ (.1) $2.4(C) $4.0(D) $19.5
===== ===== ==== ==== =====
</TABLE>
Notes:
(A) Primarily reclassification from other accrued liabilities, and addition of
accounts due to acquisition.
(B) Primarily addition of accounts due to acquisition of additional interest,
partially offset by removal of companies accounts contributed to
Ingersoll-Dresser Pump Company.
(C) Primarily reclassification from other noncurrent liabilities, and
reclassification to reserve for accounts receivable from unconsolidated
affiliate.
(D) Receivable write-offs and reclassifications, net of recoveries.
F-6
<PAGE>
SCHEDULE IX - SHORT-TERM BORROWINGS
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ --------- -------- ----------- ----------- ----------
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Balance at Average Outstanding Outstanding Rate
CATEGORY OF AGGREGATE End Interest During the During the During the
SHORT-TERM BORROWINGS of Period Rate (A) Year Year (B) Year (C)
- --------------------- ---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1993
Notes payable to banks $ 13.5 9.2% $ 19.5 $ 14.8 9.1%
Commercial paper 216.0 3.2% 442.8 (D) 224.0 (D) 3.2%
Year ended October 31, 1992
Notes payable to banks $ 13.9 11.6% $ 30.3 $ 18.7 12.2%
Commercial paper 15.0 3.2% 16.0 3.0 3.2%
Year ended October 31, 1991
Notes payable to banks $ 12.6 13.8% $ 19.1 $ 12.4 14.4%
</TABLE>
Notes:
(A) The rates do not include the hyperinflationary countries as those rates
include factors to offset monetary devaluations which cannot be separated
from the true interest rate.
(B) The average borrowings are based on the amounts outstanding at each
quarter-end.
(C) The rates were computed by dividing actual interest expense for the year
by the average debt outstanding during the year. Hyperinflationary
country debt and interest rates were excluded as in (A).
(D) Includes $300 million that was classified as long-term debt in April,
1993, since it was being refinanced.
F-7
<PAGE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
-----------------------------
Year Ended October 31
-----------------------------
ITEM 1993 1992 1991
---- ----- ----- -----
<S> <C> <C> <C>
Maintenance and repairs $73.3 $50.6 $58.6
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals * * *
Taxes, other than payroll and
income taxes * * *
Royalties * * *
Advertising costs * * *
</TABLE>
*Amounts are not presented because such amounts are less than 1% of total net
sales and service revenues.
F-8
<PAGE>
DRESSER-RAND COMPANY
(A PARTNERSHIP)
CONSOLIDATED FINANCIAL STATEMENTS
* * * * *
SEPTEMBER 30, 1992 AND 1991
<PAGE>
DRESSER-RAND COMPANY
<TABLE>
<CAPTION>
CONTENTS: Page
- -------- ----
<S> <C>
Financial Highlights 1
Operations Review 2
Report of Independent Accountants 3
Statements of Operations 4
Balance Sheets 5
Statements of Partners' Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8
Partnership Information 18
</TABLE>
<PAGE>
DRESSER-RAND COMPANY
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------
Dollars in millions
<TABLE>
<CAPTION>
1992 1991 1990
-------- ------- -------
<S> <C> <C> <C>
Years ended September 30,
Net sales.................... $1,290.4 1,190.2 1,017.4
Operating income............. $ 91.4 94.0 69.9
Net income................... $ 77.8 83.6 57.2
At September 30,
Partners' equity............. $ 354.8 266.4 335.3
Working capital.............. $ 99.6 112.4 194.3
Current ratio................ 1.3 1.3 1.8
Average number of days
outstanding in receivables.. 35.0 41.0 50.0
Average number of months
supply of inventory,
net of advance and
progress payments........... 1.8 2.6 3.1
Debt-to-total
capitalization rate......... .5% 1.8% 1.9%
</TABLE>
-1-
<PAGE>
DRESSER-RAND
------------
OPERATIONS REVIEW
Dresser-Rand reported revenues of $1.3 billion in 1992, up slightly from 1991.
The 1992 earnings before taxes and extraordinary item of $93.5 million were
essentially flat to the prior year. Earnings before tax reflect a 7.2% return
on sales.
Bookings in 1992 of $1.3 billion were the same as last year. The larger
projects were received in Europe and the Middle East. Dresser-Rand also booked
a large compression services contract in Venezuela with Maraven to be performed
over 1993-94. Backlog at year-end was $1.1 billion.
Turbo products bookings activity, while down from the record year in 1991,
included orders for gas processing and transmission applications in Abu Dhabi,
the North Sea and Czechoslovakia. Other applications involved the upgrading of
refineries for reformulated gasoline requirements. Turbo was also successful on
several oil production projects in the Americas. Turbo Division has enhanced
its competitive position with Memorandums of Understanding with European Gas
Turbines Ltd. for the joint marketing of gas turbine driven compressor packages,
and with MAN/GHH for the manufacturing and marketing of axial flow compressors.
The Engine Process Compressor Division benefitted from an overall increase in
the worldwide market for motor driven process reciprocating compressors. The
European markets were particularly strong, while the North American market
softened in the last half of the year. Domestic gas price recovery has shown
improvement in the compression services segments. In 1993, we see increased
natural gas production as an opportunity for the reciprocating product and
continued impact of environmentally driven projects in the North American
refining market.
Steam Turbine, Motor and Generator Division capitalized on the expansion of the
power generation market in the pulp and paper industry through several major
orders for turbine generators. The Electric Machinery operation also benefitted
from higher demand by utilities, municipal projects, and offshore turbine
activity. The petrochemical and refining markets were the major source of Steam
Turbine business in the European markets. The worldwide petrochemical/refining
markets require steam turbines to drive pumps and compressors, and provide a
solid booking base in the future.
We continue to register our worldwide manufacturing facilities under the ISO
9000 series, including those in the U.S. We received ISO registration at our
Wellsville, New York, Steam Turbine facility in late 1992. All of our major
units should achieve registration in 1993.
Selective partnering and the practical application of employee quality training
remain key parts of Dresser-Rand's focus of providing total customer
satisfaction by being the best in product design, manufacture, and customer
service.
-------------------------------------
Ben R. Stuart
President and Chief Executive Officer
November, 1992
-2-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and
Management Committee of
Dresser-Rand Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners' equity and cash flows present
fairly, in all material respects, the financial position of Dresser-Rand Company
(a Dresser Industries, Inc. and Ingersoll-Rand Company partnership) and its
subsidiaries at September 30, 1992 and 1991, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1992, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse
PRICE WATERHOUSE
Hackensack, New Jersey
November 12, 1992
-3-
<PAGE>
DRESSER-RAND COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended September 30,
In thousands 1992 1991 1990
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................. $1,290,389 $1,190,222 $1,017,379
---------- ---------- ----------
Costs and expenses:
Cost of products sold............... 1,045,573 947,330 811,486
Selling, general and
administrative..................... 153,406 148,873 136,034
---------- ---------- ----------
1,198,979 1,096,203 947,520
---------- ---------- ----------
Operating income...................... 91,410 94,019 69,859
Interest expense...................... (1,653) (1,583) (1,720)
Interest income....................... 2,013 2,198 1,688
Other income (expense), net........... 1,689 (468) (3,485)
---------- ---------- ----------
Income before income taxes
and extraordinary item............... 93,459 94,166 66,342
---------- ---------- ----------
Income tax expense:
Taxes payable....................... 15,636 10,594 9,192
Tax effect of loss
carryforwards......................
3,094 8,907 4,197
---------- ---------- ----------
18,730 19,501 13,389
---------- ---------- ----------
Income before extraordinary
item................................. 74,729 74,665 52,953
Extraordinary item-realization of
operating loss carryforwards......... 3,094 8,907 4,197
---------- ---------- ----------
Net income for the year............... $ 77,823 $ 83,572 $ 57,150
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
DRESSER-RAND COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
In thousands 1992 1991
- ------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 19,590 $ 24,148
Accounts receivable, less allowance
for doubtful accounts of $7,808 in 1992
and $10,010 in 1991............................ 159,600 169,364
Inventories..................................... 255,190 267,103
Prepaid expenses and other current assets 11,609 7,526
Due from Partners.............................. 21,665 4,117
-------- --------
Total current assets......................... 467,654 472,258
Property, plant and equipment, at cost
less accumulated depreciation.................... 246,003 148,124
Other assets..................................... 11,998 9,557
Intangible assets................................ 8,056 9,800
-------- --------
Total assets................................. $733,711 $639,739
======== ========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Short-term borrowings.......................... $ 1,080 $ 2,866
Accounts payable................................ 103,934 108,040
Customers' advance payments.................... 59,624 81,385
Accrued liabilities:
Compensation and benefits.................... 32,754 30,681
Income and other taxes....................... 25,210 13,004
Pensions..................................... 10,943 15,104
Warranty costs............................... 60,430 47,636
Other........................................ 74,037 61,128
-------- --------
Total current liabilities.................... 368,012 359,844
Noncurrent liabilities........................... 10,924 13,517
-------- --------
Total liabilities............................ 378,936 373,361
-------- --------
Partners' equity:
Contributed capital............................. 197,755 197,755
Pension liability adjustments.................. (3,044) (3,914)
Cumulative translation adjustments............. 13,148 3,444
Retained earnings............................... 146,916 69,093
-------- --------
Total Partners' equity....................... 354,775 266,378
-------- --------
Commitments and contingencies - Note 10
Total liabilities and Partners'
equity...................................... $733,711 $639,739
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
DRESSER-RAND COMPANY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
Years ended September 30,
In thousands 1992 1991 1990
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Contributed capital:
Beginning of year............................. $197,755 $ 345,755 $345,755
Return of Partners' capital................... -- (148,000) --
-------- --------- --------
End of year................................... 197,755 197,755 345,755
-------- --------- --------
Pension liability adjustments:
Beginning of year............................. (3,914) (4,148) --
Pension liability adjustments................. 870 234 (4,148)
-------- --------- --------
End of year................................... (3,044) (3,914) (4,148)
-------- --------- --------
Cumulative translation
adjustments:
Beginning of year............................. 3,444 8,151 2,075
Translation adjustments....................... 9,704 (4,707) 6,076
-------- --------- --------
End of year................................... 13,148 3,444 8,151
-------- --------- --------
Retained earnings(deficit):
Beginning of year............................. 69,093 (14,479) (71,629)
Net income for the year....................... 77,823 83,572 57,150
-------- --------- --------
End of year................................... 146,916 69,093 (14,479)
-------- --------- --------
Total Partners' equity.......................... $354,775 $ 266,378 $335,279
======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
DRESSER-RAND COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended September 30,
In thousands 1992 1991 1990
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income for the year...................... $ 77,823 $ 83,572 $ 57,150
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 35,630 38,351 36,977
Gain on sale of property, plant and
equipment............................... (114) (374) (54)
Other noncash items........................ 6,075 (3,910) 1,643
(Increase) decrease in assets:
Accounts receivable..................... 18,967 12,572 (39,521)
Inventories............................. 74,238 (57,865) (49,869)
Customers' advance and progress
payments.............................. (74,676) 56,965 69,009
Prepaid expenses and other current
assets................................ (3,532) 419 640
Other assets............................ (2,375) (119) (697)
Increase (decrease) in liabilities:
Accounts payable........................ (11,356) 18,335 11,614
Accrued liabilities:
Compensation and benefits............. 513 3,473 6,157
Income and other taxes................ 9,915 1,042 (1,427)
Pensions.............................. (4,161) 274 5,111
Warranty costs........................ 8,673 8,066 13,083
Other................................. 8,776 8,652 11,376
Noncurrent liabilities.................. (2,309) (6,231) (10,350)
--------- --------- --------
Net cash provided by operating
activities.......................... 142,087 163,222 110,842
--------- --------- --------
Cash flows from investing activities:
Capital expenditures......................... (130,765) (48,033) (36,512)
Proceeds from sale of property, plant and
equipment.................................. 3,384 2,250 3,780
--------- --------- --------
Net cash used in investing activities... (127,381) (45,783) (32,732)
--------- --------- --------
Cash flows from financing activities:
Repayments of short-term borrowings, net..... (2,004) (230) (745)
Return of Partners' capital.................. -- (108,000) --
Account balance with Partners, net........... (17,260) (627) (39,446)
(Decrease) in notes due Partners............. -- -- (36,000)
--------- --------- --------
Net cash used in financing activities... (19,264) (108,857) (76,191)
--------- --------- --------
Net increase (decrease) in cash and cash
equivalents................................... (4,558) 8,582 1,919
Cash and cash equivalents at beginning of year. 24,148 15,566 13,647
--------- --------- --------
Cash and cash equivalents at end of year....... $ 19,590 $ 24,148 $ 15,566
========= ========= ========
</TABLE>
Noncash financing activity:
During 1991, amounts due from partners of $40,000,000 were reclassified as a
return of Partners' capital.
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
DRESSER-RAND COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FORMATION, OWNERSHIP AND OPERATIONS
On December 31, 1986, Dresser Industries, Inc. and Ingersoll-Rand Company (the
Partners) entered into a partnership agreement for the formation of Dresser-Rand
Company (the Company), a New York general partnership (the partnership) owned
equally by Dresser Industries, Inc. (Dresser) and Ingersoll-Rand Company
(Ingersoll-Rand). The Partners contributed substantially all of the operating
assets (excluding domestic cash and accounts receivable) and certain related
liabilities which comprised their worldwide reciprocating compressor, steam
turbine, and turbo-machinery businesses in exchange for an equal ownership
interest. The net assets contributed by the Partners were recorded by the
Company at amounts approximating their historical values. The Company commenced
operations on January 1, 1987, and principally serves the petroleum, gas,
petrochemical, chemical, and electric power industries on a worldwide basis.
Effective October 1, 1992, Dresser contributed $8,035,000 to the Company and
ownership interests became 51 percent Dresser and 49 percent Ingersoll-Rand. At
the same time, the Company's fiscal year was changed to end on October 31.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the accompanying
consolidated financial statements are set forth below.
Basis of Presentation
The consolidated financial statements include the accounts of all wholly-owned
and majority-owned subsidiaries. Investments in affiliates owned 50% or less
are accounted for on the equity method. The Company's equity in the net
earnings of these affiliates was not material. All material intercompany items
have been eliminated in consolidation.
Cash Equivalents
Cash equivalents are stated at cost which approximates market. For purposes of
the Consolidated Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Inventories
Inventories are stated at cost, which is not in excess of net realizable value,
and are valued principally using the first-in, first-out (FIFO) method.
Property and Depreciation
Property, plant and equipment is recorded at cost, and is depreciated over the
estimated useful lives of the various classes
-8-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of assets. Depreciation is computed principally using accelerated methods,
except for U.S. fixed assets with a service life of ten years or less, which are
depreciated on a straight-line basis.
Intangible Assets
Costs in excess of values assigned to the underlying net assets of businesses
acquired by the Partners which were contributed to the Company are being
amortized on a straight-line basis over periods not exceeding 40 years. Such
amortization amounted to $1,744,000 in 1992, 1991 and 1990.
Income Taxes
The Company is a partnership and generally does not provide for U.S. income
taxes since all partnership income and losses are allocated to the Partners for
inclusion in their respective income tax returns. Income taxes are provided on
the taxable earnings of U.S. and foreign subsidiaries, including deferred taxes
arising from timing differences between financial and tax reporting of income
and expense items.
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" was issued in February 1992. The statement requires the Company to make
changes in accounting for income taxes no later than fiscal year 1994. Based on
a preliminary review of the provisions of this statement, the Company does not
believe its implementation will have a material effect on income or retained
earnings.
Revenue Recognition and Warranties
Revenue from the sale of products and estimated provisions for warranty costs
are recorded for financial reporting purposes generally when the products are
shipped. Service and equipment rental revenues are accrued as earned.
Research, Engineering and Development Costs
Expenses for research and development activities, including engineering costs,
are expensed as incurred and amounted to $67,074,000 in 1992, $63,768,000 in
1991, and $55,583,000 in 1990.
Foreign Currency
Assets and liabilities of foreign entities operating in other than highly
inflationary economies are translated at current exchange rates, and income and
expenses are translated using average-for-the-year exchange rates. Adjustments
resulting from translation are recorded in Partners' equity and will be included
in net earnings only upon sale or liquidation of the underlying foreign
investment.
For foreign subsidiaries operating in highly inflationary economies, inventory
and property balances and related income statement accounts are translated using
historical exchange rates and resulting gains and losses are credited or charged
to earnings.
-9-
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company enters into forward foreign exchange contracts as a hedge against
movements on the Company's assets and liabilities exposed to foreign exchange
rate fluctuations. Gains and losses are recognized currently in income, and the
resulting credit or debit offsets foreign exchange gains or losses on those
assets and liabilities.
Foreign currency translation and exchange gains (losses) recorded in other
income (expense) in the accompanying Consolidated Statements of Operations
amounted to $995,000 in 1992, $2,321,000 in 1991, and $(783,000) in 1990.
NOTE 3 - INVENTORIES
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1992 1991
-------- --------
<S> <C> <C>
Raw materials and supplies..................... $ 57,864 $ 66,011
Finished products and work in process.......... 197,326 201,092
-------- --------
$255,190 $267,103
======== ========
</TABLE>
Finished products and work in process inventories are stated after deducting
customer progress payments of $117,022,000 in 1992 and $162,910,000 in 1991.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1992 1991
-------------------
<S> <C> <C>
Land...................................................... $ 5,301 $ 5,345
Buildings and improvements................................ 104,951 90,226
Machinery and equipment................................... 422,626 311,108
Furniture and fixtures.................................... 13,409 12,674
-------- --------
546,287 419,353
Accumulated depreciation.................................. (300,284) (271,229)
-------- --------
$246,003 $ 148,124
======== =========
</TABLE>
Depreciation expense was $33,886,000 in 1992, $36,607,000 in 1991, and
$35,233,000 in 1990.
NOTE 5 - SHORT-TERM BORROWINGS
Short-term borrowings consist primarily of foreign bank loans. At September 30,
1992, the Company had no U.S. bank loans or lines of credit for short-term
borrowing facilities. Credit facilities have been arranged with banks outside
the United States under which the Company's foreign operating units may borrow
in the local currency or other currencies on an overdraft and short-term note
basis. The amount of available lines of credit under these arrangements
aggregated $55,355,000, of which $55,109,000 were unused at September 30, 1992.
At September 30, 1992, the weighted average interest rate on outstanding
borrowings was 11.75%.
-10-
<PAGE>
NOTE 5 - SHORT-TERM BORROWINGS (CONTINUED)
Under the terms of the partnership agreement, the Company must obtain the
consent of the Partners for any borrowing if, after giving effect to such
borrowing, aggregate indebtedness equals or exceeds 33-1/3% of the sum of the
Company's indebtedness and the Partners' capital accounts.
NOTE 6 - TRANSACTIONS WITH AFFILIATES
In the normal course of business, the Company engages in sales and purchases of
manufactured products with the Partners and their affiliates. There are also
various licensing, subcontracting, and servicing arrangements among the parties
pursuant to the partnership and other agreements. Some of the agreements had
planned expiration dates while others continue at the option of the Company or
the Partners. Costs and charges under these arrangements are generally at
normal and competitive market rates. In addition, certain administrative
services of nominal value are provided at no cost to the Company.
A summary of transactions with the Partners and their affiliates is as follows
(in thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
-------------------------
<S> <C> <C> <C>
Product sales.................................. $29,000 $57,000 $44,000
Product purchases.............................. 22,000 23,000 17,000
Net billings and other charges
for services provided......................... 3,100 3,600 3,100
</TABLE>
Amounts due from Partners consist of trade accounts and advances. The trade
accounts represent the net balance arising from the sale or purchase of
equipment and services to and from the Partners and do not accrue interest.
Advances, which primarily represent cash in excess of the immediate working
capital needs of the partnership, do not bear interest and have no repayment
terms. Amounts due from (to) Partners are as follows (in thousands):
<TABLE>
<CAPTION>
Ingersoll-
Dresser Rand Total
------- ------- -------
<S> <C> <C> <C>
September 30, 1992
- ------------------
Trade accounts........................ $ 775 $(1,110) $ (335)
------- ------- -------
Advances.............................. 11,000 11,000 22,000
------- ------- -------
$11,775 $ 9,890 $21,665
======= ======= =======
September 30, 1991
- ------------------
Trade accounts........................ $ 4,256 $ (139) $ 4,117
======= ======= =======
</TABLE>
One partner continues to operate a foreign manufacturing company on behalf of
the Company. Net gains(losses) of $644,000 in 1992, $(383,000) in 1991, and
$701,000 in 1990 relating to this operation are included in the accompanying
Consolidated Statements of Operations.
-11-
<PAGE>
NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS
Pension Plans
The Company has noncontributory pension plans covering substantially all U.S.
and Canadian employees. In addition, pension or retirement indemnity coverage
is provided for the majority of employees in other countries.
The Company's U.S. salaried employees generally receive benefits based on years
of service and qualifying compensation on a final average earnings formula.
Benefit plans covering hourly employees generally have flat benefit formulas
based primarily on years of service. These plans, with some modifications, have
been adopted by the Company as a continuation of prior coverage under defined
benefit and contribution plans sponsored by the Partners. The Company also
maintained a defined contribution plan covering employees at one of its domestic
facilities which was terminated in July 1990. Foreign plans provide benefits
based on earnings and years of service.
The Company's policy is to fund sufficient amounts to maintain the plans on a
sound actuarial basis. Such amounts could be in excess of pension costs
expensed, subject to the limitations imposed by current tax regulations.
The components of pension costs are as follows (in thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
---------------------------
<S> <C> <C> <C>
Service cost for benefits earned
during the year........................... $ 6,828 $ 6,417 $ 3,808
Interest cost on projected benefit
obligation................................ 8,175 7,293 5,691
Actual return on plan assets................ (5,478) (3,486) (2,394)
Net amortization and deferral............... 2,402 2,577 1,899
Cost of defined contribution plans.......... 362 126 763
------- ------- -------
Net pension cost............................ $12,289 $12,927 $ 9,767
======= ======= =======
The primary assumptions used to determine the net pension cost were as follows:
Discount Rate:
U.S....................................... 8.5% 8.5% 8.5%
Foreign................................... 10.1% 10.3% 10.7%
Expected long-term rate of return on
plan assets:
U.S....................................... 8.5% 8.5% 8.5%
Foreign................................... 11.8% 11.9% 11.3%
</TABLE>
A merit salary scale with a 5% inflation factor was used to project future
compensation levels as a basis for 1992, 1991 and 1990 U.S. pension cost. For
the foreign plans, rates of 6.2%, 6.4% and 6.6% were used to project future
compensation levels for 1992, 1991 and 1990, respectively.
-12-
<PAGE>
NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS (CONTINUED)
The Company credited $1,556,000 in 1990 to operations for plan curtailments and
termination benefits associated with the termination of employees at plant
facilities closed.
Plan assets are invested primarily in fixed income and equity securities. Plans
where assets exceed accumulated benefits are immaterial. The funded status of
employee pension benefit plans is as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
1992 1991
-------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $ 57,251 $ 53,214
Nonvested benefit obligation....................... 7,683 4,795
-------- --------
Accumulated benefit obligation....................... 64,934 58,009
Additional amount for projected
compensation increases............................. 42,972 35,950
-------- --------
Total projected benefit obligation................... 107,906 93,959
Plan assets at fair value............................ 71,697 50,243
-------- --------
Projected benefit obligation in excess of assets..... 36,209 43,716
Unrecognized net obligation existing at date of
adoption of SFAS 87................................ (10,854) (11,516)
Unrecognized net loss................................ ( 8,174) (9,699)
Unrecognized prior service cost...................... (10,493) (11,393)
Adjustment required to recognize minimum liability. 7,709 8,584
-------- --------
Accrued pension cost................................. $ 14,397 $ 19,692
======== ========
</TABLE>
In addition to the above accrued pension cost, the Company has accrued
$3,676,000 and $3,997,000 ($3,160,000 and $3,481,000 included in noncurrent
liabilities) at September 30, 1992 and 1991, respectively, for pension costs
relating to a plan maintained by a former employing partner.
Pension expense for foreign operations, computed under Statement of Financial
Accounting Standards No. 87 (SFAS 87), amounted to $1,920,000 in 1992,
$2,380,000 in 1991 and $1,219,000 in 1990. In addition, the Company incurred a
cost of $362,000 in 1992, $147,000 in 1991 and $145,000 in 1990 related to
foreign defined contribution plans.
The provisions of SFAS 87 require the recognition of a liability in the amount
of the Company's unfunded accumulated benefit obligation with an equal amount
recognized as an intangible asset or as a separate component (reduction) of
equity; such amounts are adjusted each year based on actuarial valuations. As
of September 30, 1992, the Company has recognized a noncurrent liability of
$7,709,000, an intangible asset of $4,665,000 (included in other assets) and a
charge to equity of $3,044,000. These amounts are $875,000, $5,000 and
$870,000, respectively, lower than those reported as of September 30, 1991.
Retiree Benefits
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits for retired employees. Most employees who
retire are eligible for these benefits. The cost of retiree health care is
recognized as an
-13-
<PAGE>
NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS (CONTINUED)
expense as claims are paid, and the cost of retiree life insurance
is recognized by expensing the annual insurance premiums. These costs were
$2,901,000 in 1992, $2,836,000 in 1991 and $1,840,000 in 1990.
In December 1990 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106 "Employers Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106). Effective for fiscal years beginning
after December 15, 1992, this new statement requires accrual of postretirement
benefits (such as health care and life insurance) during the years an employee
provides services. The Company expects to adopt SFAS 106 in the first quarter
of 1993 and estimates the accumulated liability for postretirement benefits to
be $160,000,000 on a pre-tax basis. Upon adoption, the Company will record this
amount as a one time charge against earnings. The annual pre-tax postretirement
benefit expense for fiscal 1993 is estimated to be $17,000,000.
Savings and Investment Plans
The Company also sponsors certain savings and investment plans. The cost for
these plans amounted to $2,410,000 in 1992, $2,255,000 in 1991, and $2,039,000
in 1990.
NOTE 8 - INCOME TAXES
The components of income before income taxes and extraordinary item are as
follows (in thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
-------- -------- -------
<S> <C> <C> <C>
U.S................................................ $53,767 $61,707 $40,032
Foreign............................................ 39,692 32,459 26,310
------- ------- -------
$93,459 $94,166 $66,342
======= ======= =======
The provision for income taxes
is as follows (in thousands):
U.S. - current................................. $ 2,454 $ 1,463 $ 31
- deferred................................ 38 (62) 636
Foreign - current................................. 15,456 9,509 8,389
- deferred................................ (2,312) (316) 136
------- ------- -------
$15,636 $10,594 $ 9,192
======= ======= =======
</TABLE>
-14-
<PAGE>
NOTE 8 - INCOME TAXES (CONTINUED)
An analysis of the difference between the U.S. statutory rate and the effective
rate is as follows:
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
----- ----- -----
<S> <C> <C> <C>
U.S. statutory rate............................. 34.0% 34.0% 34.0%
Tax on foreign income
less than the U.S.
statutory rate................................ (2.1) (5.1) (2.2)
Partnership income allocated
directly to Partners.......................... (17.8) (17.8) (18.7)
Utilization of foreign tax
credits....................................... 3.0 1.5 --
Other........................................... (0.4) (1.3) 0.8
----- ----- -----
Effective tax rate.............................. 16.7% 11.3% 13.9%
===== ===== =====
</TABLE>
Current taxes of $17,910,000 in 1992, $10,972,000 in 1991, and $8,420,000 in
1990 do not include charges of $3,094,000, $8,907,000, and $4,197,000,
respectively, equivalent to income taxes which would have been incurred had
operating loss carryforwards not been available. The income tax benefit
resulting from realization of the operating loss carryforwards is presented as
an extraordinary item in the accompanying Consolidated Statements of Operations.
For tax purposes the Company has net operating loss carryforwards of
$22,014,000, of which $4,741,000 carryforward indefinitely, and the remaining
amounts expire at various dates through 1998.
NOTE 9 - INFORMATION BY GEOGRAPHIC AREA
The Company operates in one industry segment consisting of the design,
manufacture, and marketing of energy processing and conversion equipment. There
are no significant concentrations of credit risk in trade receivables at
September 30, 1992. Customers are not concentrated in any specific geographic
region and no single customer accounted for 10 percent or more of net sales.
Identifiable assets are those assets that are identified with particular
geographic areas and operations. General corporate assets consist principally
of property, plant and equipment.
-15-
<PAGE>
NOTE 9 - INFORMATION BY GEOGRAPHIC AREA (CONTINUED)
The financial information by geographic area is as follows (in thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES
- ---------
United States.......................... $ 768,158 $ 671,814 $ 593,412
Europe................................. 422,704 419,559 333,895
Other foreign.......................... 99,527 98,849 90,072
Transfers between geographic areas:
United States.......................... 142,865 146,139 102,308
Europe................................. 7,497 5,417 4,732
Other foreign.......................... 2,049 2,469 2,331
Adjustments and eliminations........... (152,411) (154,025) (109,371)
---------- ---------- ----------
Total net sales...................... $1,290,389 $1,190,222 $1,017,379
========== ========== ==========
OPERATING INCOME
- ----------------
United States.......................... $ 68,404 $ 72,242 $ 48,856
Europe................................. 32,123 22,450 23,045
Other foreign.......................... 7,658 13,554 10,320
---------- ---------- ----------
108,185 108,246 82,221
General corporate expenses............. (16,775) (14,227) (12,362)
---------- ---------- ----------
Total operating income............... $ 91,410 $ 94,019 $ 69,859
========== ========== ==========
IDENTIFIABLE ASSETS
- -------------------
United States.......................... $ 416,080 $ 360,509 $ 414,644
Europe................................. 173,059 137,554 129,247
Other foreign.......................... 140,589 55,933 54,253
General corporate assets............... 3,983 4,358 3,056
---------- ---------- ----------
Total identifiable assets............ $ 733,711 $ 558,354 $ 601,200
========== ========== ==========
</TABLE>
Foreign sales of U.S. manufactured products were $475,074,000 in 1992,
$351,635,000 in 1991, and $231,621,000 in 1990. These sales represent the
customer value of the transfers between geographic areas, primarily to Europe,
and domestic exports sold directly to foreign customers of $299,824,000 in 1992,
$170,677,000 in 1991, and $102,202,000 in 1990.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
All principal manufacturing facilities are owned by the Company. Certain
office, warehouse and light manufacturing facilities, transportation vehicles,
and data processing equipment are leased. Future minimum lease payments
required under noncancellable operating leases with initial terms in excess of
one year are as follows (in thousands):
<TABLE>
<S> <C>
September 30,
1993............................ $ 9,626
1994............................ 6,280
1995............................ 3,250
1996............................ 2,076
1997............................ 1,291
Thereafter...................... 1,438
-------
Total minimum lease payments.. $23,961
=======
</TABLE>
-16-
<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
- ---------------------------------------------------
Total rental expense amounted to $16,312,000 in 1992, $13,305,000 in 1991, and
$13,934,000 in 1990. Capital lease commitments of the Company are not
significant.
In the normal course of business, the Company issues direct and indirect
guarantees, primarily contract performance bonds and letters of credit.
Management believes these guarantees will not adversely affect the consolidated
financial statements.
The Company is involved in various litigation and claims arising in the normal
course of business. Based on advice of counsel, management believes that
recovery or liability with respect to these matters will not have a material
effect on the consolidated financial position or results of operations of the
Company.
NOTE 11 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- -----------------------------------------------------------
Cash paid during the year for interest and income taxes was as follows (in
thousands):
<TABLE>
<CAPTION>
Years ended September 30,
1992 1991 1990
-----------------------------
<S> <C> <C> <C>
Interest.............................. $1,953 $ 1,508 $1,363
====== ======= ======
Income taxes.......................... $9,696 $10,272 $8,523
====== ======= ======
</TABLE>
-17-
<PAGE>
DRESSER-RAND COMPANY
EXECUTIVE OFFICES
1 BARON STEUBEN PLACE
CORNING, NY 14830
(607)937-6400
OFFICERS
- -----------------------------------------------
BEN R. STUART
President and Chief Executive Officer
JOHN A. HELDMAN
Vice President and Chief Financial Officer
PAUL M. BRYANT
Vice President, Human Resources
EUGENE H. MOORE
Vice President, General Counsel
MANAGEMENT COMMITTEE
- -----------------------------------------------
THEODORE H. BLACK
Chairman of the Board and Chief Executive Officer
Ingersoll-Rand Company
WILLIAM E. BRADFORD
President and Chief Operating Officer
Dresser Industries, Inc.
JOHN J. MURPHY
Chairman of the Board and Chief Executive Officer
Dresser Industries, Inc.
JAMES E. PERRELLA
President
Ingersoll-Rand Company
BEN R. STUART
President and Chief Executive Officer of the Company
AUDIT COMMITTEE
- -----------------------------------------------
Consists of three (3) Directors each from Dresser Industries, Inc. and
Ingersoll-Rand Company, for a total of six (6) Audit Committee members.
-18-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To The Partners of
Dresser-Rand Company
Our audits of the consolidated financial statements referred to in our
report dated November 12, 1992, appearing on page 3 of the 1992
consolidated financial statements of Dresser-Rand Company, also included
an audit of the financial statement schedules listed in item 14 (d) of
this Form 10-K. In our opinion, these financial statement schedules
present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ Price Waterhouse
PRICE WATERHOUSE
Hackensack, NJ
November 12, 1992
<PAGE>
DRESSER-RAND COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at
Beginning Additions Retirements Balance at
Classification of period at cost and sales Other(*) end of period
- -------------- ---------- --------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
1992
- ----
Land............ $ 5,345 $ -- $ 283 $ 239 $ 5,301
Buildings and
improvements... 90,226 13,989 1,158 1,894 104,951
Machinery and
equipment...... 311,108 116,118 11,722 7,122 422,626
Furniture and
fixtures....... 12,674 658 164 241 13,409
-------- -------- ------- ------- --------
$419,353 $130,765 $13,327 $ 9,496 $546,287
======== ======== ======= ======= ========
1991
- ----
Land............ $ 5,483 $ 116 $ 148 $ (106) $ 5,345
Buildings and
improvements... 84,144 7,752 502 (1,168) 90,226
Machinery and
equipment...... 286,872 38,502 11,070 (3,196) 311,108
Furniture and
fixtures....... 12,037 1,663 686 (340) 12,674
-------- -------- ------- ------- --------
$388,536 $ 48,033 $12,406 $(4,810) $419,353
======== ======== ======= ======== ========
1990
- ----
Land............ $ 5,627 $ -- $ 373 $ 229 $ 5,483
Buildings and
improvements... 77,515 5,493 1,159 2,295 84,144
Machinery and
equipment...... 259,588 29,012 7,559 5,831 286,872
Furniture and
fixtures....... 9,707 2,007 143 466 12,037
-------- -------- ------- ------- --------
$352,437 $ 36,512 $ 9,234 $ 8,821 $388,536
======== ======== ======= ======= ========
(*) Other primarily represents reclassifications among categories and the
effects of foreign currency translation.
<PAGE>
DRESSER-RAND COMPANY
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990
(AMOUNTS IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
Additions
Balance at charged to
beginning costs and Retirements Balance at
Classification of period expenses and sales Other(*) end of period
- -------------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992
- ----
Buildings and
improvements... $ 48,862 $ 4,148 $ 563 $ 976 $ 53,423
Machinery and
equipment...... 213,406 28,467 9,353 4,113 236,633
Furniture and
fixtures....... 8,961 1,271 141 137 10,228
-------- ------- ------- ------- --------
$271,229 $33,886 $10,057 $ 5,226 $300,284
======== ======= ======= ======= ========
1991
- ----
Buildings and
improvements... $ 45,967 $ 3,968 $ 414 $ (659) $ 48,862
Machinery and
equipment...... 193,607 31,422 9,512 (2,111) 213,406
Furniture and
fixtures....... 8,596 1,217 604 (248) 8,961
-------- ------- ------- ------- --------
$248,170 $36,607 $10,530 $(3,018) $271,229
======== ======= ======= ======= ========
1990
- ----
Buildings and
improvements... $ 40,247 $ 5,143 $ 593 $ 1,170 $ 45,967
Machinery and
equipment...... 165,684 28,806 4,781 3,898 193,607
Furniture and
fixtures....... 7,095 1,284 134 351 8,596
-------- ------- ------- ------- --------
$213,026 $35,233 $ 5,508 $ 5,419 $248,170
======== ======= ======= ======= ========
(*) Other primarily represents reclassifications among categories and the
effects of foreign currency translation.
<PAGE>
DRESSER-RAND COMPANY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990
(AMOUNTS IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
Balance at Additions
beginning charged Balance at
Classification of period to income Deductions Other(*) end of period
- -------------- ---------- --------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Doubtful accounts
- -----------------
1992........... $10,010 $ 1,239 $ 1,231 $(2,210) $ 7,808
======= ======= ======== ======== ========
1991........... $ 8,886 $ 4,864 $ 2,135 $(1,605) $ 10,010
======= ======= ======= ======== ========
1990........... $ 5,471 $ 3,838 $ 711 $ 288 $ 8,886
======= ======= ======= ======== ========
</TABLE>
(*) Other primarily represents reclassifications among categories and the
effects of foreign currency translation.
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Weighted Weighted
average Maximum Average average
Category of interest amount amount interest
aggregate Balance rate at outstanding outstanding rate
short-term at end of end of during during during
borrowings period period the period the period the period
- ----------- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1992
- ----
U.S.
bank loans.... -- -- -- -- --
Foreign bank
loans and
other......... $ 1,080 11.75% $ 6,108 $ 2,075 9.87%
1991
- ----
U.S.
bank loans.... -- -- -- -- --
Foreign bank
loans and
other......... $ 2,866 10.87% $ 6,067 $ 2,761 10.25%
1990
- ----
U.S.
bank loans.... -- -- -- -- --
Foreign bank
loans and
other......... $ 3,019 8.99% $ 6,059 $ 3,261 9.66%
</TABLE>
The average amounts outstanding were determined based on the sum of the month-
end amounts outstanding divided by the number of months in the period. The
weighted average interest rates were based on the sum of the quarter-end rates
divided by the number of quarters in the period.
<PAGE>
DRESSER-RAND COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990
(AMOUNTS IN THOUSANDS)
CHARGED TO COSTS AND EXPENSES
1992 1991 1990
-------------------------------
Maintenance and repairs....... $22,473 $22,691 $21,481
======= ======= =======
Amounts for preoperating costs and similar deferrals, royalties, advertising
costs, and taxes other than payroll and income taxes are not presented because
such amounts are less than one percent of total net sales.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- --------------------------------------------- ----
<S> <C> <C>
3.1 Restated Certificate of Incorporation of
Registrant and amendments thereto.
(Incorporated by reference to Exhibit 3(a)
to Registrant's Form 10-K for the year ended
October 31, 1991).
*3.2 By-Laws, as amended, of Registrant.
4.1 Rights Agreement dated August 16, 1990,
between Registrant and Harris Trust Company
of New York as Rights Agent. (Incorporated
by reference to Exhibit 1 to Registration
Statement on Form 8-A filed on August 30,
1990, as amended by Amendment No.1 on Form 8
filed on October 3, 1990).
4.2 Form of Indenture, dated as of June 1, 1993,
between Dresser Industries, Inc. and
NationsBank of Texas, N.A., as Trustee, for
unsecured debentures, notes and other
evidences of indebtedness. (Incorporated by
reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-3
(Registration No. 33-59562).
10.1 Dresser Industries, Inc. Deferred
Compensation Plan. (Incorporated by
reference to Exhibit A to Registrant's Proxy
Statement dated February 11, 1966, filed
pursuant to Regulation 14A, File No. 1-4003).
10.2 Dresser Industries, Inc. Short-Term Deferred
Compensation Plan. (Incorporated by
reference to Exhibit 10(b) to Registrant's
Form 10-K for the year ended October 31,
1992).
10.3 Dresser Industries, Inc. Retirement Income
Plan under ERISA, as amended effective May
1, 1984, and Amendments No. 1, 2 and 3
thereto. (Incorporated by reference to
Exhibit 10(d) to Registrant's Form 10-K for
the year ended October 31, 1986).
10.4 Dresser Industries, Inc. Consolidated
Salaried Retirement Plan, as amended by
restatement effective May 1, 1989.
(Incorporated by reference to Exhibit 10(d)
to Registrant's Form 10-K for the year ended
October 31, 1992).
*10.5 Amendments No. 1, 2 and 3 to the Dresser
Industries, Inc. Consolidated Salaried
Retirement Plan, as amended by restatement
effective May 1, 1989.
10.6 Form of relinquishment of Severance
Compensation Agreement. (Incorporated by
reference to Exhibit 10(f) to Registrant's
Form 10-K for the year ended October 31,
1992).
10.7 Incentive Compensation Plan for the Officers
and Headquarters Staff of Dresser
Industries, Inc. (Incorporated by reference
to Exhibit 10(g) to Registrant's Form 10-K
for the year ended October 31, 1992).
</TABLE>
- ----------
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- --------------------------------------------- ----
<S> <C> <C>
10.8 Dresser Industries, Inc. 1982 Stock Option
Plan. (Incorporated by reference to Exhibit
A to Registrant's Proxy Statement dated
February 12, 1982, filed pursuant to
Regulation 14A, File No. 1-4003).
10.9 ERISA Excess Benefit Plan for Salaried
Employees of Dresser Industries, Inc. and
Its Participating Subsidiaries Who Are Not
Represented by a Recognized Union, and
Amendments No. 1 and 2 thereto.
(Incorporated by reference to Exhibit 10(k)
to Registrant's Form 10-K for the year ended
October 31, 1990).
10.10 ERISA Compensation Limit Benefit Plan for
Executives of Dresser Industries, Inc.
(Incorporated by reference to Exhibit 10(l)
to Registrant's Form 10-K for the year ended
October 31, 1989).
10.11 Supplemental Executive Retirement Plan for
Top Executives of Dresser Industries, Inc.,
as amended by restatement effective May 1,
1992 (renamed Supplemental Executive
Retirement Plan of Dresser Industries, Inc.
effective August 1, 1993). (Incorporated by
reference to Exhibit 10(l) to Registrant's
Form 10-K for the year ended October 31,
1992).
*10.12 Amendment No. 1 to the Supplemental
Executive Retirement Plan of Dresser
Industries, Inc.
10.13 Dresser Industries, Inc., Performance Stock
Unit Plan. (Incorporated by reference to
Exhibit 10(l) to Registrant's Form 10-K for
the year ended October 31, 1985).
10.14 Dresser Industries, Inc. Deferred
Compensation Plan for Non-employee
Directors, as amended. (Incorporated by
reference for Exhibit 10(n) to Registrant's
Form 10-K/A for the year ended October 31,
1992).
10.15 Dresser Industries, Inc. 1989 Restricted
Incentive Stock Plan. (Incorporated by
reference to Exhibit A to Registrant's Proxy
Statement dated February 10, 1989, filed
pursuant to Regulation 14A, File No. 1-4003).
*10.16 Dresser Industries, Inc. 1989 Director
Retirement Plan, as amended by restatement
effective July 15, 1993.
*10.17 Form of Election for Deferral of 1989
Director Retirement Plan Awards pursuant to
the Dresser Industries, Inc. 1989 Director
Retirement Plan.
</TABLE>
- ----------
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- --------------------------------------------- ----
<S> <C> <C>
10.18 The M. W. Kellogg Company Retirement Plan,
and Amendments No. 1, 2 and 3 thereto.
(Incorporated by reference to Exhibit 10(r)
to Registrant's Form 10-K for the year ended
October 31, 1990).
10.19 Amendment No. 4 to The M. W. Kellogg Company
Retirement Plan. (Incorporated by reference
to Exhibit 10(r) to Registrant's Form 10-K
for the year ended October 31, 1991).
10.20 Long Term Performance Plan for Selected
Employees of The M. W. Kellogg Company.
(Incorporated by reference to Exhibit 10(s)
to Registrant's Form 10-K for the year ended
October 31, 1991).
10.21 Annual Incentive Plan for Selected Employees
of The M. W. Kellogg Company. (Incorporated
by reference to Exhibit 10(t) to
Registrant's Form 10-K for the year ended
October 31, 1991).
10.22 Dresser Industries, Inc. 1992 Stock
Compensation Plan. (Incorporated by
reference to Exhibit A to Registrant's Proxy
Statement dated February 7, 1992, filed
pursuant to Regulation 14A, File No. 1-4003).
*10.23 Amendment No.1 to Dresser Industries, Inc.
1992 Stock Compensation Plan.
10.24 Dresser-Rand Company President and Chief
Executive Officer Fiscal Year 1992 Incentive
Plan. (Incorporated by reference to
Exhibit 10(v) to Registrant's Form 10-K for
the year ended October 31, 1992).
10.25 Dresser-Rand Company Retirement Savings
Plan. (Incorporated by reference to
Exhibit 10(x) to Registrant's Form 10-K for
the year ended October 31, 1992).
10.26 Dresser-Rand Company Pension Plan.
(Incorporated by reference to Exhibit 10(y)
to Registrant's Form 10-K for the year ended
October 31, 1992).
10.27 Dresser Industries, Inc. Deferred Savings
Plan. (Incorporated by reference to
Exhibit 10(z) to Registrant's Form 10-K for
the year ended October 31, 1992).
*21 Subsidiaries of Registrant at October 31,
1993.
*23 Consent of Price Waterhouse.
*24 Powers of Attorney.
</TABLE>
- ----------
* Filed Herewith
<PAGE>
EXHIBIT 3.2
BY-LAWS Effective 11/21/91
As amended and effective
OF 1/21/94 and 3/17/94
DRESSER INDUSTRIES, INC.
ARTICLE I
---------
Section 1. Principal Office in Delaware.
- ---------- -----------------------------
The principal office shall be in the City of Wilmington, County of New Castle,
and the name of the resident agent in charge thereof is the Corporation Trust
Company, Corporation Trust Center, 1208 Orange Street, Wilmington, Delaware
19801.
Section 2. Other Offices.
- ---------- --------------
The Company may also have offices at such other places, either within or
without the State of Delaware, as the Board of Directors may from time to time
appoint or as the business of the Company may require.
ARTICLE II
----------
Section 1. Annual Meeting of Shareholders.
- ---------- -------------------------------
The Annual Meeting of Shareholders of the Company shall be held at the
principal office of the Company, Dallas, Texas, or at such other place within or
without the State of Texas at such time and on such date in the months of March,
April or May of each year as the Directors may determine. In the absence of a
determination by the Directors, the Annual Meeting of Shareholders shall be held
at the principal office of the Company, Dallas, Texas at 10:00 a.m. on the third
Thursday in March of each year, if not a legal holiday or, if a legal holiday,
then on the next succeeding business day. The Directors shall be elected at the
Annual Meeting and such other business transacted as may properly be brought
before the meeting.
Section 2. Special Meetings of Shareholders.
- ---------- ---------------------------------
Special meetings of the shareholders for any purpose or purposes may be called
at any time by the Chairman of the Board, the Vice Chairman or the President or
a majority of the Board of Directors, and each such special meeting unless
another place is designated by a resolution of the Board of Directors, shall be
held at the office of the Company in Dallas, Texas. At any time, upon written
request of any person entitled to call a special meeting, it shall be the duty
of the Secretary to call such special meeting of the shareholders to be held at
such time as the Secretary may fix. The call of said special meeting shall
state
1
<PAGE>
the time and place of said meeting if said meeting is to be held at some place
other than the office of the Company, and the purpose or purposes of the
proposed meeting.
Section 3. Notice of Meetings of Shareholders.
- ---------- -----------------------------------
Written or printed notice of the time, place and purpose or purposes of the
Annual Meetings and of each special meeting of the shareholders shall be given
by or at the direction of the person authorized to call the meeting to each
shareholder of record entitled to vote at the meeting, at his last known address
as the same appears upon the books of the Company, not more than sixty (60) days
prior to the date of the meeting. It shall also be the duty of the Secretary to
provide for any further or additional notice that may be required by law. When
a meeting is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned meeting
other than by announcement at the meeting at which such adjournment is taken.
Section 4. Quorum.
- ---------- -------
At any meeting of the shareholders, the presence in person or by proxy of the
holders of a majority of the outstanding shares entitled to vote at such meeting
shall constitute a quorum for all purposes, unless otherwise provided by these
By-Laws, the Certificate of Incorporation or by law. The shareholders present
at a duly organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. If a meeting cannot be organized because a quorum has not attended,
those present may, except as otherwise provided by law, adjourn the meeting to
such time and place, without further notice, as they may determine, but in the
case of any meeting called for the election of Directors, those who attend the
second of such adjourned meetings, although less than a quorum as fixed in this
section of the By-Laws or in the Certificate of Incorporation, shall
nevertheless constitute a quorum for the purpose of electing Directors.
Section 5. Organization.
- ---------- -------------
Meetings of the shareholders shall be called to order by the Chairman of the
Board or in his absence by the Vice Chairman or in the absence of both by the
President of the Company. Such person shall act as Chairman of the meeting or,
in the absence of the Chairman of the Board, the Vice Chairman and the President
or with the consent of each of them if present in person, the meeting may elect
any shareholder present or the duly authorized proxy of any shareholder to act
as Chairman of the meeting.
The Secretary of the Company or, in his absence, any Assistant Secretary in
attendance, shall act as Secretary of all meetings of shareholders, but if
neither the Secretary nor any Assistant Secretary be present thereat the
presiding officer may appoint any person to act as Secretary of the meeting and
to keep the record of the proceedings.
2
<PAGE>
Section 6. Inspectors of Election.
- ---------- -----------------------
Three Inspectors of Election may be appointed by the Board of Directors before
or at each meeting of the shareholders of the Company at which an election of
Directors shall take place. If no such appointment shall have been made, or if
the Inspectors appointed by the Board of Directors shall refuse to act or fail
to attend, then the appointment shall be made by the presiding officer at the
meeting. The Inspectors shall receive and take in charge all proxies and
ballots, and shall decide all questions concerning the qualification of voters,
the validity of proxies, the acceptance and rejection of votes, and shall count
the votes cast and shall make a report of the results thereof to the meeting and
make such reports to the presiding officer with respect to the foregoing as he
may request.
Section 7. Order of Business.
- ---------- ------------------
The order of business at all meetings of shareholders, unless otherwise
determined by a vote of the holders of a majority of the shares entitled to vote
at said meeting present in person or represented by proxy, shall be determined
by the presiding officer.
Section 8. Voting.
- ---------- -------
Except as otherwise provided in the Certificate of Incorporation, every
shareholder of record shall have the right at every shareholders' meeting to one
(1) vote for every share standing in his name on the books of the Company.
Every shareholder may vote either in person or by proxy. Every proxy shall be
executed in writing by the shareholder or by his duly authorized attorney-in-
fact and filed with the Secretary of the Company. The proxy, unless coupled
with an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the revocation of
the proxy shall not be effective until written notice thereof has been given to
the Secretary of the Company. No unrevoked proxy may be voted on after three
(3) years from the date of its execution unless the proxy provides for a longer
period. A proxy shall not be revoked by the death or incapacity of the maker
unless before the vote is counted or the authority is exercised, written notice
of such death or incapacity is given to the Secretary of the Company. A
shareholder shall not sell his vote or execute a proxy to any person for any sum
of money or anything of value.
The stock transfer books of the Company shall be the evidence of the ownership
of the shares of stock for the purpose of voting. All elections shall be held
and all questions shall be decided by a plurality vote, except as otherwise
required by these By-Laws, the Certificate of Incorporation or by law.
3
<PAGE>
Section 9. Voting Lists.
- ---------- -------------
The agent having charge of the transfer books for the shares of this Company
shall make, at least ten (10) days before each election of Directors, a complete
list of the shareholders entitled to vote at said election, arranged in
alphabetical order, with the address of, and the number of shares held by each,
which list shall be open at the place where said election is to be held for ten
(10) days and shall be subject to inspection by any shareholder of the Company
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the Meeting. The original share ledger or
transfer book or duplicates thereof shall be the only evidence as to who are
shareholders entitled to examine such list or share ledger or transfer book or
to vote in person or by proxy at any meeting of the shareholders.
ARTICLE III
-----------
Directors
---------
Section 1. Number and Term of Office.
- ---------- --------------------------
The business and affairs of the Company shall be managed by or under the
direction of a Board of Directors, twelve (12) [effective 1/21/94 "fourteen
(14)" and effective 3/17/94 "thirteen (13)"] in number, which number may be
altered from time to time by amendment of these By-Laws, but the said number
shall never be less than three (3). Said Directors need not be shareholders.
Section 2. Election of Directors.
- ---------- ----------------------
The Directors shall be elected by the shareholders at the annual meeting of
said shareholders and shall hold their offices until their successors are
elected and qualified in their stead. Vacancies in the Board of Directors, from
any cause whatsoever, including any increase in the number of Directors, shall
be filled by a majority of the remaining members of the Board, though less than
a quorum, and each person so elected shall be a Director until his successor is
elected by the shareholders, who may make such selection at the next annual
meeting of the shareholders or at any special meeting called for that purpose
and held prior thereto. All elections of Directors shall be by ballot.
Section 3. Place of Meetings.
- ---------- ------------------
The meetings of the Board of Directors shall be at such place, within or
without the State of Delaware, as the majority of the Directors may from time to
time appoint or as may be designated in the notice calling the meeting.
4
<PAGE>
Section 4. Organization Meeting of the Board.
- ---------- ----------------------------------
After each annual election of Directors, the newly elected Directors shall
meet for the purpose of organization, the election and appointment of officers,
and the transaction of such other business at such time and place as shall be
fixed by the written consent of a majority of the Directors or as shall be
specified in the notice given hereinafter provided for special meetings of the
Board of Directors.
Section 5. Regular Meetings.
- ---------- -----------------
Regular meetings of the Board of Directors shall be held at such times and
places as the Board of Directors shall from time to time designate, and the
Board in fixing the time and place of such meetings may provide that no notice
thereof shall be necessary.
Section 6. Special Meetings.
- ---------- -----------------
Special meetings of the Board of Directors shall be held whenever called by
the Chairman of the Board or the Vice Chairman or the President or by a majority
of the Directors or a majority of the Executive Committee for the time being in
office. Special meetings of the Board of Directors shall be held at such times
and places as shall be set forth in the call of the meeting.
Section 7. Notice of Directors' Meetings.
- ---------- ------------------------------
The Secretary of the Company shall give notice to each Director of each
regular or special meeting by mailing the same at least two (2) days before the
meeting to his last known address, or by telegraphing or telephoning the same
not less than one (1) day before the meeting, which notice shall state the time
and place and general purpose or purposes of the meeting. No notice of any
meeting shall be necessary if every Director shall be either present or shall
have consented thereto by letter, cablegram, radiogram or telegram.
If at any meeting there is less than a quorum, a majority of those present at
such meeting may adjourn the same.
When a meeting is adjourned, it shall not be necessary to give any notice of
the adjourned meeting or of the business to be transacted at an adjourned
meeting other than by an announcement at the meeting at which such adjournment
is taken.
Section 8. Quorum.
- ---------- -------
One-Third (1/3) of the Directors in office shall constitute a quorum for the
transaction of business, and the acts of a majority of the Directors present at
a meeting at which a quorum is present shall be the acts of the Board of
Directors.
5
<PAGE>
Section 9. Order of Business.
- ---------- ------------------
The order of business at all meetings of the Board of Directors, unless
otherwise determined by the affirmative vote of a majority of the members
present at any meeting, shall be determined by the presiding officer.
Section 10. Compensation of the Directors.
- ----------- ------------------------------
The Directors may receive a stated compensation for their services as
Directors, and by resolution of the Board a fixed fee and the expenses incident
to attendance at each meeting of the Board or any Committee thereof may be
determined. Nothing herein contained shall be construed to preclude any
Director from serving the Company in any other capacity as an officer, agent or
otherwise and receiving compensation therefor.
Section 11. Action Without a Meeting.
- ----------- -------------------------
Unless otherwise restricted by the Certificate of Incorporation or these By-
Laws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any Committee thereof may be taken without a meeting, if
prior to such action a written consent thereto is signed by all members of the
Board or of such Committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or Committee.
ARTICLE IV
----------
Executive Committee
-------------------
Section 1. Number.
- ---------- -------
The Company may have an Executive Committee appointed by the Board of
Directors which shall consist of at least three (3) members and shall be made up
of members of the Board of Directors. The Board of Directors may designate one
of the members thereof as Chairman of the Executive Committee.
Section 2. Vacancies.
- ---------- ----------
Vacancies occurring in the Executive Committee for any cause may be filled at
any meeting of the Board of Directors.
Section 3. Executive Committee to Report to Board.
- ---------- ---------------------------------------
All actions by the Executive Committee shall be reported to the Board at its
meeting next succeeding such action and shall be subject to revision or
alteration by the Board; provided, however, that rights of third parties shall
not be affected by any revision or alteration.
6
<PAGE>
Section 4. Procedure.
- ---------- ----------
The Executive Committee shall fix its own rules of procedure and shall meet
where and as provided by such rules or by resolution of the Board. The presence
of a majority shall be necessary to constitute a quorum for the transaction of
business and in every case an affirmative vote by a majority of all of the
members of the Committee present shall be necessary.
Section 5. Powers.
- ---------- -------
During the intervals between the meetings of the Board of Directors, the
Executive Committee shall possess and may exercise the power and authority to
declare dividends and all other powers of the Board in the management and
direction of the business and the conduct of the affairs of the Company in such
manner as the Executive Committee shall deem for the best interests of the
Company in all cases where specific direction shall not have been given by the
Board, and shall have power to authorize the seal of the Company to be affixed
to all instruments and documents which may require it.
ARTICLE V
---------
Other Committees
----------------
From time to time the Board of Directors may appoint any other committee or
committees for any lawful purposes whatsoever, which shall have such powers as
shall be specified in the resolution of appointment.
ARTICLE VI
----------
Officers
--------
Section 1. Executive and Other Officers.
- ---------- -----------------------------
The officers of the Company shall include a Chairman of the Board, a
President, a Treasurer and a Secretary, all of whom shall be elected by the
Board of Directors. The Board may also elect a Vice Chairman. Other than the
Chairman of the Board, the Vice Chairman and the President, it shall not be
necessary for officers of the Company to be Directors. The Board of Directors
shall have authority from time to time to elect or appoint one or more Vice
Presidents, any one or more of whom may be designated Executive Vice Presidents
or Senior Vice Presidents, a General Counsel, one or more Assistant Secretaries
and one or more Assistant Treasurers. Any person may fill one or more offices,
except the offices of President and Secretary. The Board of Directors may
appoint such other agents of the Company as it may deem necessary for the
transaction of the business of the Company and prescribe their several duties,
or may by resolution authorize the Chairman of the Board or the President or any
Vice President to appoint agents of the Company and to prescribe the duties of
agents so
7
<PAGE>
appointed by them. All agents appointed pursuant to such authorization may be
removed by any of the persons so designated. All officers and agents elected or
appointed by the Board of Directors shall be subject to removal by the Board at
any time, with or without cause. The Board of Directors shall fix the
compensation to be paid to the officers and agents of the Company elected or
appointed by the Board and take from them such bonds with security for the
discharge of their duties and responsibilities as the Directors may see fit.
All vacancies among the officers from any cause whatsoever shall be filled by
the Board of Directors.
Section 2. Election of Officers.
- ---------- ---------------------
A Chairman of the Board of Directors, a President, a Secretary and a Treasurer
shall be elected by the Directors of the Company at their first meeting after
the annual meeting of the Shareholders.
Section 3. The Chairman of the Board.
- ---------- --------------------------
The Chairman of the Board shall be the Chief Executive Officer of the Company.
He shall preside at all meetings of the shareholders and of the Board of
Directors. He shall also preside at all meetings of the Executive Committee if
the position of Chairman of the Committee shall be vacant or at any such
meetings from which the Chairman of the Executive Committee is absent. Subject
to the direction of the Board of Directors and the Executive Committee, the
Chairman of the Board shall have general charge of the business and affairs of
the Company. He shall also do and perform such other duties as from time to
time may be assigned to him by the Board of Directors or by the Executive
Committee.
Section 4. The Vice Chairman of the Board.
- ---------- -------------------------------
The Vice Chairman of the Board, if there be one, shall preside at meetings of
shareholders and of the Board of Directors from which the Chairman of the Board
is absent. He shall also do and perform such other duties as from time to time
may be assigned to him by the Board of Directors, by the Executive Committee or
by the Chairman of the Board.
Section 5. The President.
- ---------- --------------
The President shall preside at all meetings of the Board of Directors and of
the shareholders if the offices of Chairman of the Board and Vice Chairman shall
be vacant or at any such meetings from which the Chairman of the Board and the
Vice Chairman are absent. Subject to the direction of the Board of Directors,
the Executive Committee and the Chairman of the Board, he shall have general
charge of those operations of the Company as assigned by the Chairman of the
Board. He shall also do and perform such other duties as from time to time may
be assigned to him by the Board of Directors, the Executive Committee or the
Chairman of the Board.
8
<PAGE>
Section 6. Vice President.
- ---------- ---------------
The Vice President or Vice Presidents, in the event there is more than one,
shall do and perform such duties as from time to time may be assigned to him or
them by the Board of Directors, the Executive Committee, the Chairman of the
Board or the Vice Chairman or the President.
Section 7. Secretary.
- ---------- ----------
The Secretary shall keep minutes of all proceedings of the Board and of the
Executive Committee and the minutes of all meetings of shareholders in books
provided for that purpose. He shall attend to the giving and serving of all
notices for the Company; he shall have charge of such books and papers as the
Board may direct; he shall have custody of the seal of the Company and shall
affix the same to any instrument or document which requires the seal of the
Company, and he shall in general perform all duties incident to the office of
Secretary, subject to the control of the Board. He shall also perform such
other duties as may be assigned to him by the Board.
Section 8. Treasurer.
- ---------- ----------
Subject to the direction of the Vice President - Finance, the Treasurer shall
have custody and control of all of the funds and securities of the Company,
shall be responsible for all moneys and other property of the Company in his
custody and shall perform all duties incident to the office of Treasurer. He
shall do and perform such other duties as may from time to time be assigned to
him by the Vice President - Finance. If required by the Board, he shall give a
bond for the faithful discharge of his duties in such sum as the Board may
require.
Section 9. General Counsel.
- ---------- ----------------
The General Counsel shall do and perform such duties as from time to time may
be assigned to him by the Board of Directors, the Executive Committee, the
Chairman of the Board, the Vice Chairman or the President.
ARTICLE VII
-----------
Capital Stock
-------------
Section 1. Share Certificates.
- ---------- -------------------
Every holder of stock of this Company shall be entitled to have a certificate
signed by or in the name of the Company by the Chairman or Vice Chairman of the
Board of Directors or the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
and sealed with the corporate seal, which
9
<PAGE>
seal may be facsimile engraved or printed, certifying the number of shares owned
by such holder in the Company. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Company with the same effect as
if he or she were such officer, transfer agent, or registrar at the date of
issue.
The certificates of stock of the Company shall be in such form as shall be
approved by the Board. Such certificates shall be successive in number and the
names and addresses of all persons owning shares of capital stock of the Company
with the number of shares owned by each and the date or dates of issue of the
shares of stock held by each, shall be entered on the books kept for that
purpose by the proper agents of the Company.
The Company shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it has actual or other
notice thereof.
Section 2. Old Certificates to be Cancelled.
- ---------- ---------------------------------
Except in case of lost, stolen or destroyed certificates, and in that case
only after conforming to the requirements hereinafter provided, no new
certificates shall be issued until the former certificate for the shares
represented thereby shall have been surrendered and cancelled.
Any person claiming a certificate of stock to be lost, stolen or destroyed
shall make an affidavit of that fact and shall furnish to the Company and/or its
Transfer Agent or Agents, Registrar or Registrars, a Bond of Indemnity with one
(1) or more sureties in an amount satisfactory to the Board of Directors. The
affidavit and Bond of Indemnity shall be in such form and said Bond shall have
such surety or sureties as the Board of Directors may require; provided,
however, that the Board of Directors may authorize officers of the Company to
approve the form of the affidavit and Bond of Indemnity and the sufficiency of
the surety or sureties thereon. Upon the furnishing and approval of said
affidavit and Bond of Indemnity, a new certificate may be issued of the same
tenor and for the same number of shares as the one alleged to be lost, stolen or
destroyed. In the event such lost, stolen or destroyed certificate shall
represent five (5) or less shares of the Common Stock of the Company, the Board
of Directors may, in its discretion, accept a personal indemnity bond in a form
satisfactory to the Board of Directors, in lieu of the Bond of Indemnity
hereinabove referred to. If required by the Board, a final order or decree of a
court of competent jurisdiction of the right of any such person to receive a new
certificate shall be procured.
10
<PAGE>
Section 3. Transfer of Shares of Stock.
- ---------- ----------------------------
Shares of stock shall be transferred only on the books of the Company by the
holder thereof or by his attorney thereunto duly authorized upon the surrender
and cancellation of certificates for a like number of shares, subject, however,
to all payments due or to become due thereon.
Section 4. Regulations.
- ---------- ------------
The Board of Directors may make such regulations as it may deem expedient
concerning the issue, transfer and registration of stock.
Section 5. Transfer Agent and Registrar.
- ---------- -----------------------------
The Board of Directors may appoint a Transfer Agent or Transfer Agents to
make, and a Registrar or Registrars to record transfers of shares.
Section 6. Fixing Closing Dates.
- ---------- ---------------------
The Board of Directors may fix in advance a date not exceeding sixty (60) days
preceding the date of any meeting of shareholders, or the date fixed for the
payment of any dividend or distribution, or the date for the allotment of
rights, or the date when any change or conversion or exchange of shares will be
made or go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting, or any
adjournment thereof, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to exercise the
rights in respect to any such change, conversion, or exchange of shares, or in
connection with the obtaining of the count of the shareholders for any purpose.
In such case, only such shareholders as shall be shareholders of record on the
date so fixed shall be entitled to notice of, and to vote at, such meeting, or
any adjournment thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights or give such consents, as
the case may be, notwithstanding any transfer of any shares on the books of the
Company after any record date fixed, as aforesaid. The Board of Directors may
close the books of the Company against transfer of shares during the whole or
any part of such period, and, in such case, written or printed notice thereof
shall be mailed at least ten (10) days before the closing thereof to each
shareholder of record at the address appearing on the records of the Company or
supplied by him to the Company for the purpose of notice. While the stock
transfer books of the Company are closed, no transfer of shares shall be made
thereon. In the event that the Board of Directors shall not in advance of a
meeting of shareholders have closed the transfer books, or have fixed a record
date for the determination of the shareholders entitled to notice of or to vote
at any meeting of the shareholders, no shares of stock, which have been
transferred on the books of the Company within twenty (20) days next preceding
such meeting, shall be entitled to notice or shall be voted at any such
meeting.
11
<PAGE>
ARTICLE VIII
------------
Board to Declare Dividends
--------------------------
Subject to the provisions of the Certificate of Incorporation and of the laws
of the State of Delaware, the Board of Directors, in its discretion, from time
to time may declare stock dividends and cash dividends out of any fund legally
available therefor as shall appear advisable to the Directors. Such dividends
shall be paid at such time after the declaration as the Directors may fix.
ARTICLE IX
----------
Execution and Signing of Documents
----------------------------------
Except as otherwise provided by the Board of Directors, deeds, contracts,
leases, agreements and other documents shall be signed by the Chairman of the
Board, or the Vice Chairman, or the President, or any Vice President and, when a
seal is required, sealed with the Company's seal and attested by the Secretary,
or any Assistant Secretary, or the Treasurer, or any Assistant Treasurer.
Except as otherwise provided by the Board of Directors, promissory notes,
debentures and bonds shall be signed by the Chairman of the Board, or the Vice
Chairman, or the President, or any Vice President, together with the Treasurer,
or any Assistant Treasurer, or Secretary, or any Assistant Secretary. Checks on
the Company's bank accounts may be signed by such officer or officers or other
agents as the Board of Directors may from time to time authorize or designate,
or the Board of Directors may by resolution authorize officers of the Company to
designate the agents who may sign checks on the Company's bank accounts. In any
case where the signatures of two officers are required on any document or other
instrument executed on behalf of the Company, such signatures must be those of
two different persons.
ARTICLE X
---------
Miscellaneous
-------------
Section 1. Seal.
- ---------- -----
The corporate seal of this Company shall be circular in form and shall bear
the name of the corporation and the words "Corporate Seal, Delaware".
Section 2. Inspection of Books.
- ---------- --------------------
The Board of Directors shall determine from time to time whether the accounts
and books of the Company, or any of them shall be open to the inspection of
shareholders, and if permitted, when and under what conditions and regulations
the accounts and books of the
12
<PAGE>
Company or any of them shall be open to the inspection of shareholders, and the
shareholders' rights in this respect shall be restricted and limited
accordingly.
Section 3. Notices.
- ---------- --------
Whenever the provisions of the law, the Certificate of Incorporation or these
By-Laws require notice to be given to any Director, officer or shareholder, such
provision shall not be construed as requiring personal notice, and such notice
may be given in writing by depositing the same in a post office or letter box in
a post-paid, sealed wrapper addressed to such Director, officer or shareholder
at his or her address as the same appears in the books of the Company, and the
time when the same shall be mailed shall be deemed to be the time of the giving
of such notice.
A waiver of any notice in writing signed by a shareholder, Director or
officer, whether before or after the time stated in said waiver, shall be deemed
equivalent to such notice.
ARTICLE XI
----------
Amendment
---------
The Board of Directors is expressly authorized to make, alter or repeal By-
Laws of the corporation, provided, however, that alterations, amendments or
repeals of the By-Laws may be made by the holders of a majority of the shares
outstanding and entitled to vote at any meeting, if the notice of such meeting
contains a statement of the proposed alteration, amendment or repeal.
13
<PAGE>
EXHIBIT 10.5
AMENDMENT 1
TO THE
DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED RETIREMENT PLAN
AMENDED AND RESTATED AS OF MAY 1, 1989
1. Effective May 1, 1992, the title to Article XII of the Plan shall be
changed to read "ARTICLE XII - JOINT VENTURES, SALES, AND SPIN-OFFS."
2. Effective May 1, 1992, a new Section 12.13 shall be added to read as
follows:
SECTION 12.13 SPIN-OFF INTO THE DRESSER INDUSTRIES, INC. RETIREMENT INCOME
PLAN FOR INDUSTRIAL OPERATIONS
As of May 1, 1992, this Plan shall be divided into two plans. The first plan
shall be a continuation of this Plan the "Dresser Industries, Inc.
Consolidated Salaried Retirement Plan," referred to hereafter in this Section
12.13 as the "First Dresser Plan." The second plan shall be the "Dresser
Industries, Inc. Retirement Income Plan for Industrial Operations," referred
to hereafter in this Section 12.13 as the "Second Dresser Plan." Dresser
Industries, Inc. shall assume the sponsorship of the Second Dresser Plan and
shall continue the sponsorship of the First Dresser Plan.
Subject to the provisions of Section 10.08, the liabilities and Trust assets
of the Plan between the First Dresser Plan and the Second Dresser Plan. The
liabilities allocated to the Second Dresser Plan shall be for the benefits
accrued under the Plan as of April 30, 1992, for Participants (active and
inactive) who will be assigned to the Industrial Operations of the Company.
All other Plan liabilities shall remain the obligation of this First Dresser
Plan.
Employees of the following list of Participant groups will be assigned to the
Second Dresser Plan:
1. Industrial Tool Division
2. Harbison-Walker Refractories
3. Jeffrey Division
4. Marion Division
5. Komatsu Dresser Company
6. Dresser Finance Corporation
Page 1
<PAGE>
7.Certain Dresser Corporate Headquarters Employees designated by the Company
in writing to the Committee
Trust assets shall be allocated proportionately between the Second Dresser
Plan and the First Dresser Plan based on the amount that the Actuary
determines to be the present value on a Plan termination basis of benefits
accrued for the Participants (active and inactive) in the Participant groups
listed above and all other Participants. To the extent that Trust assets
exceed the value of benefits accrued, such excess shall also be allocated
proportionately. The Actuary's allocation of Trust assets shall be subject
to the provisions of Section 10.08.
The division of the Plan into two plans shall not cause any Participant to
incur a Severance from Service Date. Benefits shall not commence or be
payable under either plan until there is a Severance from Service Date from
the First Dresser Plan for the respective Dresser Industries, Inc. Employees
or until there is a Severance from Service Date under section 1.46 of the
Second Dresser Plan for respective employees covered under that plan.
Page 2
<PAGE>
AMENDMENT NO. 2
TO THE DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED RETIREMENT PLAN
AS AMENDED BY RESTATEMENT EFFECTIVE MAY 1, 1989
1. Effective July 31, 1993, a new Section 11.16 is added, to read as follows:
"SECTION 11.16 HOURLY EMPLOYEES OF WAYNE DIVISION, AUSTIN, TEXAS. Effective
July 31, 1993, the Dresser Industries, Inc. Pension Plan for Hourly Employees
of Wayne Division, Austin, Texas ("The Wayne Plan"), shall be merged into
this Plan and shall be treated as if it were a Predecessor Plan. Subject to
the provisions of this Section 11.16, pension benefits for employee
participants of The Wayne Plan who have not incurred a severance from service
date (as defined in section 1.37 of that plan) as of May 1, 1993, shall
become Participants of this Plan. Also effective on July 31, 1993, this Plan
shall assume the obligations for benefits for inactive participants
(retirees, surviving spouses, beneficiaries, other annuitants, transferred
participants, and vested terminated participants) of The Wayne Plan.
As of July 31, 1993, the trust assets of The Wayne Plan shall be transferred
to the Trust Fund for this Plan. From that time forward, The Wayne Plan
trust assets shall be amalgamated into the Trust Fund and shall no longer be
separately identifiable as for the exclusive benefit of the participants in
The Wayne Plan; but, of course, shall, subject to the provisions of Article
VIII of this Plan, be used for the exclusive benefit of all Participants
under this Plan, including former participants in The Wayne Plan.
The pension benefits for active participants of The Wayne Plan on May 1,
1993, shall be determined under the formula stated in paragraph (a) of
Section 4.01 of this Plan. Credited Service used in the calculation of such
benefits shall be the number of years of benefit accrual service to July 31,
1993, under section 3.03 of The Wayne Plan (not including service before June
1, 1975, as stated in that plan), plus years of Credited Service accrued
under this Plan after July 31, 1993. Aggregate years of Credited Service
shall not exceed 35 years.
In addition to pension benefits accrued and accruing under this Plan prior to
this merger of The Wayne Plan into this Plan, the pension benefits for
participants in
1
<PAGE>
The Wayne Plan who transferred to salaried status and who are active
Participants under this Plan as of July 31, 1993, shall be calculated by
including, subject to the 35-year maximum on Credited Service, benefit
accrual service as of the date of transfer as Credited Service under this
Plan and using Final Average Monthly Earnings and Covered Compensation as of
the Severance from Service Date. All pension benefits for such Participants
for Credited Service before transfer to salaried status shall be calculated
under the formula stated in paragraph (a) of Section 4.01.
Active participants of The Wayne Plan described in the third paragraph of
this Section 11.16, and transferred participants described in the immediately
preceding paragraph shall have a minimum Accrued Benefit under Section 4.01
of this Plan equal to the normal retirement benefit under section 1.24 of The
Wayne Plan based on the benefit accrued as of July 31, 1993. That is a
monthly amount of the dollar multiplier in effect at the date of transfer for
transferred participants or $15.00 for active participants times benefit
accrual service under The Wayne Plan as of July 31, 1993. If a Participant is
eligible for and elects Immediate Early Retirement under Section 4.02, this
minimum benefit shall be the Actuarial Equivalent of the benefit payable at
Normal Retirement Age.
With regard to this minimum benefit, provided such benefit is less than $10
per month, the first $1,750 of any lump sum settlement of the benefit in
accordance with Section 10.04 shall be based on Actuarial Equivalent factors.
Also, in the event of settlement of any benefit upon Plan termination, the
first $1,750 of a lump sum settlement of the benefit in accordance with
Section 10.04 shall be based on Actuarial Equivalent factors.
2. Effective October 7, 1992, a new Section 12.14 is added, to read as follows:
"SECTION 12.14 INGERSOLL-DRESSER PUMP COMPANY. Following are provisions
describing the benefits payable from the Plan for Participants who were
Employees of the Company as of October 7, 1992, who become employees of
Ingersoll-Dresser Pump Company ("the Pump JV") on October 8, 1992, or
thereafter, pursuant to the Employee Relations Agreement Between Dresser
Industries, Inc. and Ingersoll-Rand Company and Ingersoll-Dresser Pump
Company ("the Agreement") effective as of October 1, 1992.
Each formerly active Plan Participant shall be considered an inactive Plan
Participant and the benefit amount payable from the Plan shall be computed
according to the provisions of the appropriate section of Article IV of
2
<PAGE>
this Plan as in effect on October 7, 1992, in the case of a Plan Participant
who transfers employment directly from the Company to the Pump JV on October
8, 1992, considering the date of transfer as the Severance from Service Date
for purposes of computing Credited Service and Final Average Monthly
Earnings. For any Plan Participant who transfers employment directly from the
Company to the Pump JV after October 8, 1992, the date of such transfer shall
be considered the Severance from Service Date for purposes of computing
Credited Service and Final Average Monthly Earnings in Article IV. Provided,
further, that each such former Employee's service with the Pump JV commencing
on such Employee's first day of employment with the Pump JV shall be counted
as Continuous Service under this Plan for the purpose of determining Vesting
Service (which determines eligibility for Plan participation, eligibility for
retirement benefits, and eligibility for appropriate early retirement
reduction factors), and no inactive Plan Participant shall be eligible to
commence benefits under this Plan until such inactive Plan Participant
terminates employment with the Pump JV, or any successor thereof.
For those transferred Plan Participants who transferred on October 8, 1992,
and who as of that date (1) have combined age and Vesting Service equal to 65
or more, (2) have reached or passed their 50th birthday, and (3) have at
least ten years of Vesting Service, shall have an additional Grandfather
Benefit as defined below:
The Grandfather Benefit is the excess, if any, of (X) over the sum of (Y)
plus (Z), where all benefits are expressed in a life only annuity form and
where:
(X) is the benefit calculated under the applicable, respective
formulas of this Plan counting service and compensation with the Pump
JV after transfer to the Pump JV along with service and compensation
with the Company prior to transfer to the Pump JV in the determination
of Credited Service and Final Average Monthly Earnings,
(Y) is the benefit described in the second paragraph of this Section
12.14, and
(Z) is the sum of the benefits listed in (i), (ii), and (iii) below as
of the date the Participant terminates employment from the Pump JV:
(i) The benefits payable from the Pump JV tax qualified defined
benefit plan(s).
3
<PAGE>
If such benefits cannot commence at the same time as
benefits commence under this Plan but are to be paid in a
monthly form at a future date, then benefits will not be
reduced under this (i) until the Participant attains Age 65.
If such benefits cannot commence in a monthly form of
payment at the same time as benefits commence under this
Plan and such benefits are received in a single sum payment,
then benefits under this (i) shall be the Actuarial
Equivalent of such single sum payment as if paid in a life
only form commencing at the same time benefits from this
Plan commence.
(ii) The actuarial equivalent of the amount payable from the
Ingersoll-Dresser Pump Company Retirement Account Plan. For
purposes of this subparagraph, the "actuarial equivalent"
shall be based on the mortality table specified in Section
1.02 and the New PBGC Rate specified in Section 10.04, and
(iii) The actuarial equivalent of the company match amount payable
from the Ingersoll-Dresser Pump Company Savings and
Investment Plan. For purposes of this subparagraph, the
"actuarial equivalent" shall be based on the mortality table
specified in Section 1.02 and the New PBGC Rate specified in
Section 10.04.
If benefits from this Plan are payable in other than the life only form,
the above adjustments in the life only form shall be made before
converting benefits from this Plan into such other form in accordance
with Article V of this Plan.
The Grandfather Benefit shall be vested in the manner prescribed in
Section 4.05 for all other benefits payable from this Plan."
4
<PAGE>
AMENDMENT NO. 3 TO THE
DRESSER INDUSTRIES, INC. CONSOLIDATED
SALARIED RETIREMENT PLAN
1. A new Section 4.12 is added, effective October 1, 1993, to read as follows:
"SECTION 4.12 SPECIAL VOLUNTARY TERMINATION BENEFITS. A supplemental
pension benefit shall be payable according to the provisions of the
Eligibility, Amount, Form of Benefit, Timing of Payment, and Special
Provisions for Calculating a Lump-Sum Cash Out sub-sections of this Section
4.12 of the Plan.
(a) Eligibility: The supplemental pension benefit shall be payable to each
Participant in the Plan who is employed at the downtown Dallas
headquarters or at the Richardson Computer Center who voluntarily
terminates employment on October 16, 1993. Any such Participant must
have at least five years of Vesting Service as of October 16, 1993.
The Surviving Spouse of an eligible Participant (1) who has not
notified the Company in writing to voluntarily terminate on October 16,
1993, but dies prior to October 1, 1993, or (2) who has notified the
Company in writing of his intent to so voluntarily terminate on October
16, 1993, but who dies prior to that date, shall have the Spouse's
Death Benefit otherwise payable under Sections 4.06 or 4.07 of the Plan
determined in a manner consistent with the addition of age and service
had the Participant survived to October 16, 1993, as provided in the
following subsections of this Section 4.12.
(b) Amount: The amount of the supplemental pension benefit shall be
calculated by first applying the provisions of Section 4.01(a), (b),
and (c) of the plan and granting three more years of Credited Service
than would otherwise be used under Section 4.01(a). Notwithstanding
the preceding sentence, the maximum number of years of Credited Service
stated in Section 4.01 shall continue to be applicable. In then
applying the provisions of Section 4.02, 4.03, or 4.05, as the case may
be, the early retirement factors shall be at an age three years older
than would otherwise be used. The resulting amount of benefit shall
then be reduced by (1) the benefit that would otherwise be payable from
this Plan in the absence of this
1
<PAGE>
Section 4.12 and (2) the benefit that an insurance company became
obligated to pay (modified appropriately for retirement before Normal
Retirement Age) as provided in Section 4.01(d) of this Plan. In the
determination of the supplemental pension benefit, the Final Average
Monthly Earnings shall be determined as of October 16, 1993. The
result of the calculations of this subsection (b) shall be the
supplemental pension benefit in the Life-Only benefit form.
(c) Form of Benefit: Except in the case of a Participant who elects a
Lump-Sum Cash Out option, the supplemental pension benefit shall
commence and continue to be paid for the same period of time and in the
same manner and form as the Normal Retirement benefit, Immediate Early
Retirement benefit, Deferred Early Retirement benefit, or deferred
vested benefit, whichever is applicable with regard to a particular
Participant, and shall be paid together with other benefits under this
Plan. Notwithstanding the preceding sentence, the supplemental pension
benefit shall commence, if applicable, according to the next subsection
of this Section 4.12.
(d) Timing of Payment: In addition to providing three additional years of
service and three additional years of age for the purpose of benefit
calculation, three additional years of age and Vesting Service for the
purpose of eligibility for payment of benefits are granted. Thus, the
references to "Age 55" in Sections 4.02, 4.05, 4.06 and 4.07 shall be
changed to "Age 52" for Participants meeting the eligibility
requirements stated above and electing to voluntarily terminate
employment on October 16, 1993; any benefit that would otherwise be
payable only at age 65 shall be payable at any time between age 62 and
age 65, as the Participant shall elect. Similarly, in Sections 4.02
and 4.07, the references to "Age 65" shall be changed to "Age 62" and
the references to "ten or more years of Vesting Service" shall be
changed to "seven or more years of Vesting Service" for such
Participants.
(e) Special Provisions for Calculating a Lump-Sum Cash Out: For purposes
of calculating a lump-sum benefit in accordance with Section 10.04 of
this Plan, there shall be no adjustment in the Participant's age in
finding the actuarial equivalent present value factor. However, in the
calculation of the lump-sum cash out amount for a
2
<PAGE>
Participant who is eligible for deferred vested benefits under Section
4.05 of this Plan, the factor for a benefit deferred to age 62 shall be
used instead of a factor for a benefit deferred to age 65. In
addition, three additional years of Interest of the Participant's
contributions to the Prior Plan, at the annual rate of 5%, shall be
payable as part of the lump-sum cash out.
For a Participant who becomes eligible for an immediate early
retirement benefit under Section 4.02, who would not otherwise be
eligible for an immediate early retirement benefit under that Section
were it not for this Section 4.12, the lump-sum cash out shall be
calculated as follows: The Actuarial Equivalent of the Accrued Benefit
under the Plan that is eligible for payment as a lump sum before
application of this Section 4.12 shall be subtracted from the immediate
annuity benefit under the Life-Only Option that could be paid as a lump
sum after the application of this Section 4.12. The lump-sum value of
this difference, calculated in accordance with the rules of Section
10.04 shall then be added to the lump-sum cash out benefit that would
otherwise be payable from the Plan before the application of this
Section 4.12. The resulting amount shall then be the amount payable
under the Lump-Sum Cash Out option of this Plan."
2. Section 12.14 is amended entirely, effective July 31, 1993, to read as
follows:
"SECTION 12.14 INGERSOLL-DRESSER PUMP COMPANY. Following are provisions
describing the benefits payable from the Plan for Participants who were
Employees of the Company as of October 7, 1992, who become employees of
Ingersoll-Dresser Pump Company ("the Pump JV") on October 8, 1992, or
thereafter, pursuant to the Employee Relations Agreement Between Dresser
Industries, Inc. and Ingersoll-Rand Company and Ingersoll-Dresser Pump
Company ("the Agreement") effective as of October 1, 1992.
Each formerly active Plan Participant shall be considered an inactive Plan
Participant and the benefit amount payable from the Plan shall be computed
according to the provisions of the appropriate section of Article IV of this
Plan as in effect on October 7, 1992, in the case of a Plan Participant who
transfers employment directly from the Company to the Pump JV on October 8,
1992, considering the date of transfer as the Severance from Service Date
for purposes of computing Credited Service and Final Average Monthly
Earnings. Provided, however,
3
<PAGE>
that any Bonuses paid by the Pump JV and the Company to any such Plan
Participant between October 8, 1992, and December 31, 1992, shall be
considered as having been paid on October 7, 1992, for purposes of
determining Final Average Monthly Earnings under this Plan. For any Plan
Participant who transfers employment directly from the Company to the Pump
JV after October 8, 1992, the date of such transfer shall be considered the
Severance from Service Date for purposes of computing Credited Service and
Final Average Monthly Earnings in Article IV. Provided, further, that each
such former Employee's service with the Pump JV commencing on such
Employee's first day of employment with the Pump JV shall be counted as
Continuous Service under this Plan for the purpose of determining Vesting
Service (which determines eligibility for Plan participation, eligibility
for retirement benefits, and eligibility for appropriate early retirement
reduction factors), and no inactive Plan Participant shall be eligible to
commence benefits under this Plan until such inactive Plan Participant
terminates employment with the Pump JV, or any successor thereof.
For those transferred Plan Participants who transferred on October 8, 1992,
and who as of that date (1) have combined age and Vesting Service equal to
65 or more, (2) have reached or passed their 50th birthday, and (3) have at
least ten years of Vesting Service, shall have an additional Grandfather
Benefit as defined below:
The Grandfather Benefit is the excess, if any, of (X) over the sum of (Y)
plus (Z), where all benefits are expressed in a life only annuity form and
where:
(X) is the benefit calculated under the applicable, respective
formulas of this Plan counting service and compensation with the Pump
JV after transfer to the Pump JV along with service and compensation
with the Company prior to transfer to the Pump JV in the determination
of Credited Service and Final Average Monthly Earnings,
(Y) is the benefit described in the second paragraph of this Section
12.14, and
(Z) is the sum of the benefits listed in (i), (ii), and (iii) below as
of the date the Participant terminates employment from the Pump JV:
(i) The benefits payable from the Pump JV tax qualified defined
benefit plan(s).
4
<PAGE>
If such benefits cannot commence at the same time as
benefits commence under this Plan but are to be paid in a
monthly form at a future date, then benefits will not be
reduced under this (i) until the Participant attains Age 65.
If such benefits cannot commence in a monthly form of
payment at the same time as benefits commence under this
Plan and such benefits are received in a single sum payment,
then benefits under this (i) shall be the Actuarial
Equivalent of such single sum payment as if paid in a life
only form commencing at the same time benefits from this
Plan commence.
(ii) The actuarial equivalent of the amount payable from the
Ingersoll-Dresser Pump Company Retirement Account Plan. For
purposes of this subparagraph, the "actuarial equivalent"
shall be based on the mortality table specified in Section
1.02 and the New PBGC Rate specified in Section 10.04, and
(iii) The actuarial equivalent of the company match amount payable
from the Ingersoll-Dresser Pump Company Savings and
Investment Plan. For purposes of this subparagraph, the
"actuarial equivalent" shall be based on the mortality table
specified in Section 1.02 and the New PBGC Rate specified in
Section 10.04.
If benefits from this Plan are payable in other than the life only form,
the above adjustments in the life only form shall be made before
converting benefits from this Plan into such other form in accordance
with Article V of this Plan.
The Grandfather Benefit shall be vested in the manner prescribed in
Section 4.05 for all other benefits payable from this Plan."
5
<PAGE>
EXHIBIT 10.12
AMENDMENT NO. 1
TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR TOP EXECUTIVES OF DRESSER INDUSTRIES, INC.,
AS AMENDED BY RESTATEMENT EFFECTIVE MAY 1, 1992
1. Effective August 1, 1993, the name of the Plan shall be changed from the
"Supplemental Executive Retirement Plan for Top Executives of Dresser
Industries, Inc." to the "Supplemental Executive Retirement Plan of Dresser
Industries, Inc."
2. Effective May 1, 1993, Section 3.1, Eligibility, is amended by adding a new
sentence at the end of such Section, to read as follows:
"Furthermore, an employee of the Company who has been an employee of a
Dresser joint venture company shall be covered for purposes of protecting
pension benefits to the extent provided in Section 4.3."
3. Effective May 1, 1993, Section 4.3, Restoration of Benefits Lost Due to
Transfer to a Joint Venture Company, is amended by adding a new sentence at
the end of the first paragraph of such Section, to read as follows:
"This Plan shall also pay such additional benefit to an employee of the
Company who does not meet the eligibility requirements of Section 3.1 at
the time of transfer to a joint venture company but who subsequently
transfers back to Dresser in a position described in Section 3.1, provided
such employee meets the other eligibility requirements of Section 3.1 for a
benefit under this Section 4.3."
<PAGE>
EXHIBIT 10.16
DESCRIPTION OF THE PLAN
GENERAL
The 1989 Director Retirement Plan ("Plan") was unanimously approved by the
disinterested (nonparticipating) members of the Board of Directors of Dresser on
August 17, 1989 and unanimously amended by such disinterested directors on July
15, 1993. The Plan has not been submitted to or acted upon by the shareholders
of Dresser.
The principal purposes of the Plan are to provide current compensation in
lieu of retirement benefits to those members of Dresser's Board of Directors who
are not also employees of Dresser, to assist Dresser in attracting and retaining
outside directors with experience and ability on a basis competitive with
industry practices, and to associate more fully the interests of such directors
with those of Dresser's shareholders.
The shares of Common Stock granted and delivered under the Plan shall be
treasury shares. The maximum number of shares to be issued under the Plan is
200,000.
The number and kind of shares issuable under the Plan, or which may be
awarded to any participant, shall be adjusted appropriately in the event of
stock dividends, stock splits, recapitalization, mergers, consolidations,
combinations or exchanges of shares or other similar corporate changes.
ELIGIBILITY
Directors of Dresser who are not employees of Dresser ("Eligible
Directors") are eligible to receive awards. Directors of Dresser who are also
employed by Dresser ("Employee Directors") are not eligible during the period of
such employment to receive any awards under the Plan.
Since the composition of Dresser's Board of Directors is subject to change,
it is impossible to determine the total number of participants in the plan or
the number of awards which may be granted. However, as of July 15, 1993, there
were nine Directors eligible for participation.
ADMINISTRATION
The Plan is administered by the Employee Directors. The Plan vests
authority in the Employee Directors to administer and interpret the Plan. The
costs and expenses of administering the Plan shall be borne by Dresser and not
charged against any award or to any participant.
The Employee Directors shall have authority to administer and interpret the
Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration
-1-
<PAGE>
of the Plan and for the conduct of its business as the Employee Directors deem
necessary or advisable. The Employee Directors' interpretations of the Plan,
and all actions taken and determinations made by the Employee Directors pursuant
to the powers vested in them hereunder, shall be by unanimous decision and shall
be conclusive and binding on all parties concerned, including Dresser, its
shareholders and any participant.
AWARDS
Awards under the Plan shall consist of grants of validly issued, fully paid
and nonassessable shares of Dresser Common Stock in each odd-numbered year
commencing in 1989. The number of shares of Dresser Common Stock to be granted
to a participant (the "Periodic Award") shall be determined by dividing (i) the
number which is equal to 60% of the result of multiplying the annual rate of
cash annual retainer payable by Dresser to such participant for such
participant's services as a director on August 1 following the end of the period
for which the award is made (which retainer amount was increased to $28,000 per
year effective August 1, 1993), times the quotient of the greater of 12 or the
number of months served by such director during the period divided by 12, by
(ii) the average of the high and low per share sale prices for Dresser Common
Stock on the New York Stock Exchange on the last trading day of the week prior
to the week in which the grant is to be made or the immediately preceding
trading day, and rounding the quotient thereof to the nearest whole number.
Awards shall be granted automatically in each odd-numbered year and the date of
grant of each award will be the date of the regularly scheduled meeting of
Dresser's Board of Directors next following August 1 of each such year. The
first Periodic Award was for the twelve months ended August 1, 1989, and each
subsequent Award shall be for the 24 months ended the immediately preceding
August 1.
RIGHTS AS SHAREHOLDER
A participant under the Plan shall have none of the rights of an owner of
Common Stock in respect of shares to be awarded, unless and until certificates
for such shares of Common Stock are issued to the participant.
No employee of Dresser shall have any claim or right to be granted an award
under the Plan.
ADDITIONAL PROVISIONS OF THE PLAN
DEATH, DISABILITY OR RETIREMENT
In the event of the death, disability or retirement of a participant prior
to the granting of a Periodic Award in respect of the 24 month period in which
such event occurred, an Award shall be granted in respect of such period to the
retired participant or his or her estate in an amount proportionate to the
participant's service during such period rounded to the nearest whole number of
years. Such Award shall be determined by dividing (i) the number
-2-
<PAGE>
which is equal to 60% of the total cash annual retainer payable by Dresser to
such participant for such participant's services as a director at the end of the
period of such participant's service by (ii) the average of the high and low per
share sale prices for Dresser Common Stock on the New York Stock Exchange on the
last trading day of the week prior to the week in which the grant is to be made
or the immediately preceding trading day, and rounding the quotient thereof to
the nearest whole number. If any participant shall cease to be a director for
any reason other than death, disability or retirement, his or her rights to any
Award in respect of the 24 months during which such cessation occurred shall
terminate.
WITHHOLDING TAXES
Dresser shall have the right to require the payment (through withholding
from the participant's retainer or otherwise) of any withholding taxes required
by federal, state, or local law in respect of any Periodic or other Award.
ASSIGNMENT OR TRANSFER
No rights to receive awards under the Plan shall be assignable or
transferable by a participant except by will or the laws of descent and
distribution.
FUNDING
The Plan shall be unfunded. Dresser shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any award under the Plan.
AMENDMENTS AND TERMINATIONS
The Employee Directors may at any time terminate or amend the Plan in whole
or in part (provided that the Plan shall not be amended more than once in any
period of six months), but no such action shall adversely affect any rights or
obligations with respect to any awards theretofore granted under the Plan.
Notwithstanding the foregoing, Employee Directors shall not have the power to
amend the Plan as to who is eligible for awards, the formula for calculating the
number of shares granted, and the date of grants.
EMPLOYEE DIRECTORS
The Plan is administered by the Employee Directors. The Employee Directors
are not eligible to participate in the Plan.
On July 15, 1993, the names and addresses of the Employee Directors were
as follows:
-3-
<PAGE>
<TABLE>
<CAPTION>
NAMES ADDRESSES
----- ---------
<S> <C>
W. E. Bradford Dresser Industries, Inc.
P. O. Box 718
Dallas, Texas 75221
John J. Murphy Dresser Industries, Inc.
P. O. Box 718
Dallas, Texas 75221
B. D. St. John Dresser Industries, Inc.
P. O. Box 718
Dallas, Texas 75221
</TABLE>
Each Employee Director serves, as a Director, at the pleasure of the
Shareholders of Dresser and, as an employee, at the pleasure of the Board of
Directors.
-4-
<PAGE>
EXHIBIT 10.17
ELECTION FORM
DEFERRAL OF 1989 DIRECTOR RETIREMENT PLAN AWARD
-----------------------------------------------
TO: Rebecca R. Morris
Secretary
Dresser Industries, Inc.
1600 Pacific Avenue
Dallas, TX 75201
1. Percentage
----------
I hereby elect to defer up to 100% of the stock award due to me as a
Dresser Industries, Inc. Director for the period from August 1, 1993 to
July 31, 1995 (the "Deferred Stock Award"), as indicated below. I
understand that the portion of my stock that I defer will be converted into
phantom shares of Dresser Industries, Inc. Common Stock. Phantom shares
are payable in cash.
(Indicate the percentage of stock award to be deferrred,
if any. Deferrals must be made in 10% increments.)
______ % of the stock award
2. Payment
-------
I elect my payment period to commence on:
(circle one) 1/1 4/1 7/1 10/1 in ______
(Year)
Note: Deferrals may not be made for less than one year. Payment terms must be
specified at least 6 months prior to and in the taxable year prior to the
commencement of the payment period.
__________________________________ ________________
(Signature) (Date)
<PAGE>
EXHIBIT 10.23
AMENDMENT NO. 1 TO
THE DRESSER INDUSTRIES, INC.
1992 STOCK COMPENSATION PLAN
Effective August 1, 1993, Part B, Section 4 of the Plan, relating to
restricted incentive stock, is amended by restating the introductory paragraph
and subsection (a) thereof as follows:
"The Committee shall grant Restricted Incentive Stock Awards to Eligible
Employees with respect to nonqualified stock options or incentive stock options
granted to them by the Company under Part A. Stock Option Program of the Plan
("Stock Options"). From the date of such grant the Eligible Employee shall be
a Participant. Each grant of a Restricted Incentive Stock Award shall entitle
the Participant to receive, for every five shares of such nonqualified or
incentive stock options granted to such Participant, one share of Stock upon
exercise of the underlying nonqualified or incentive stock options. As to
Restricted Incentive Stock Awards granted on or after August 1, 1993, related
Restricted Stock shall be issued only if at the time of exercise such
Participant is actively employed by the Company, a Subsidiary or an Affiliated
Company and is not Disabled. The Committee shall grant Restricted Incentive
Stock Awards to optionees in order to encourage them to hold shares of Stock
following exercise of Stock Options. Each Restricted Incentive Stock Award
shall contain the following terms, conditions and restrictions and such
additional terms, conditions and restrictions as may be determined by the
Committee, provided, however, that no Restricted Incentive Stock Award shall be
subject to additional terms, conditions and restrictions which are more
favorable to a Participant than the terms, conditions and restrictions set forth
elsewhere in this Program.
<PAGE>
(a) Issuance of Restricted Incentive Stock. Restricted Incentive Stock shall
be issued as follows:
(i) Provided that the Company shall receive written acceptance by the
Participant of the Restrictions and other terms and conditions
described in the Program on the date of exercise of a Stock Option,
and provided that as to Restricted Incentive Stock Awards granted on
or after August 1, 1993, the Participant is actively employed on such
date of exercise and is not Disabled, a Participant shall be issued,
pursuant to a Restricted Incentive Stock Award, one share of
Restricted Stock for every five Option Shares.
(ii) The Company, at the direction of the Committee, shall hold
certificates evidencing shares of Stock granted pursuant to a
Restricted Incentive Stock Award and the related Option shares, or
alternatively, deliver the certificates to the Participant."
<PAGE>
EXHIBIT 21
Exhibit 21. Parents and Subsidiaries
- ----------------------------------------------------------
There is furnished a list of subsidiaries of Dresser Industries, Inc.
as of October 31, 1993.
See Note (a).
<TABLE>
<CAPTION>
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- -------------------------------------- ----------------- -----------
<S> <C> <C>
AVA International Corp. Texas 100%
AVA Italiana S.r.L. Italy 100%
AVA Norway A/S Norway 100%
AVA S.A.R.L. France 100%
BCD Acquisition Corporation Delaware 100%
Bredero Price Holding B.V. Netherlands 100%
Bredero Price Coatings Pty. Ltd. Australia 100%
Bredero Price GmbH Germany 100%
Bredero Price International B.V. Netherlands 100%
Bredero Price International, Inc. Texas 100%
Bredero Price Middle East Limited Cyprus 100%
Bredero Price (Nigeria) Limited Nigeria 60%
Bredero Price Services Limited England 100%
Bredero Price (Thailand) Limited Thailand 100%
Bredero Price (West Africa) Limited Cyprus 60%
Bredero Norway B.V. Netherlands 100%
Bredero Price Europipe A/S Norway 100%
Chalfont Limited Cyprus 100% (1)
Imavag Limited Cyprus 100%
Kapeq Trading Limited Cyprus 100% (2)
P.T. Bredero Price Indonesia Indonesia 75%
SIF-Isopipe S.A. France 100%
SIF Overseas Trading Limited Cyprus 100% (1)
Uniglobe Engineering Limited Cyprus 100%
Vosnoc Limited Cyprus 100% (1)
Dresser AG Liechtenstein 100%
Dresser Anstalt Liechtenstein 100%
Dresser Australia Pty. Ltd. Australia 100%
Dresser Singapore Pte. Ltd. Singapore 100%
Colville Trading Pte. Ltd. Singapore 100% (3)
Magcobar Manufacturing Nigeria Limited Nigeria 60%
P.T. Dresser Magcobar Indonesia Indonesia 60%
Dresser Canada, Inc. Canada 100%
M-I Drilling Fluids Canada, Inc. Canada 64%
Dresser Congo S.A.R.L. Congo 100%
Dresser Foreign Sales Corporation Limited Guam 100%
Dresser Holding, Inc. Delaware 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1993
Page 2
<TABLE>
<CAPTION>
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ----------------------------------------- ----------------- -----------
<S> <C> <C>
Dresser (Holdings) Limited England 100% (4)
AVA (U.K.) Limited England 100%
Dresser Holmes Limited England 100%
Lodge Sturtevant Limited England 100%
Dresser U.K. Limited England 100%
Dresser U.K. Pensions Limited England 100%
Mono Group Limited Scotland 100%
Mono Pumps Limited England 100%
Mono Pumps (Australia) Pty. Limited Australia 100%
Mono Pumps (New Zealand) Limited New Zealand 100%
M. W. Kellogg (Eastern Hemisphere)
Limited England 100%
M. W. Kellogg Limited England 55%
KESA Limited England 100%
K.R.S.A. Limited England 100%
Kellogg Construction Limited England 100%
Kellogg Offshore Limited England 100%
Kellogg Plant Services Limited England 100%
M. W. Kellogg International Limited England 100%
M. W. Kellogg (Pensions) Limited England 100%
MWKL Field Services Limited Cayman Islands 100%
Dresser Industria e Comercio Ltda. Brazil 100%
Wayne Compressores Ltda. Brazil 100%
Dresser International, Ltd. Delaware 100%
Dresser Investments N.V. Netherlands Antilles 100%
Dresser Korea, Inc. Korea 100%
Dresser Minerals International, Inc. Texas 100%
Dresser-Nagano, Inc. Delaware 71.4%
Dresser Norge A/S Norway 100%
Dresser Oilfield Gabon S.a.r.L. Gabon 95% (5)
Dresser-Rand Company (Partnership) New York 51%
Dresser-Rand Canada, Inc. Canada 100%
Dresser-Rand Compression Services, S.A. Switzerland 100%
Dresser-Rand Holding Company Delaware 100%
Dresser-Rand B.V. Netherlands 100%
Dresser-Rand GmbH Germany 100%
Dresser-Rand Japan Ltd. Japan 100%
Dresser-Rand Overseas Sales Company Delaware 100%
Dresser-Rand (U.K.) Ltd. England 100%
Dresser-Rand Sales Company, S.A. Switzerland 100%
Dresser-Rand Services, S.a.r.L. Switzerland 100%
Dresser-Rand de Venezuela S.A. Venezuela 100%
Turbodyne Electric Power Corporation Delaware 100%
Dresser-Rand International B.V. Netherlands 100%
Dresser-Rand Italia S.r.L. Italy 100%
Dresser-Rand Machinery Repair Belgie N.V. Belgium 100%
Dresser Rand de Mexico, S.A. de C.V. Mexico 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1993
Page 3
<TABLE>
<CAPTION>
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ----------------------------------------- ----------------- -----------
<S> <C> <C>
Dresser-Rand Power, Inc. Delaware 100%
Dresser-Rand Comercio e Industria
Ltda. Brazil 100%
Dresser-Rand A/S Norway 100%
Dresser-Rand (SEA) Pte. Ltd. Singapore 100%
Dresser-Rand S.A. France 100%
Dresser-Rand Services B.V. Netherlands 100%
Dresser Services, Inc. Delaware 100%
Dresser de Venezuela, C.A. Venezuela 100%
M-I Drilling Fluids Company (Partnership) Texas 64%
Baritina de Bolivia Ltda. Bolivia 98% (6)
Dresser AG Zug Switzerland 100%
Dresser do Brasil, Ltda. Brazil 93% (7)
Far East Engineering Technology Limited Thailand 100%
M-I Australia Pty. Ltd. Australia 100% (8)
M-I Bur Cayman Islands 100%
M-I Drilling Fluids Company GmbH Austria 100%
M-I Drilling Fluids Foreign Sales
Corporation, Ltd. Guam 100%
M-I Drilling Fluids International, B.V. Netherlands 100%
Mykobar Mining Company. S.A. Greece 100%
M-I Drilling Fluids International, Inc. Texas 100%
M-I Drilling Fluids (Singapore) Pte. Ltd. Singapore 100%
M-I Drilling Fluids de Venezuela C.A. Venezuela 99.3% (9)
M-I Gabon S.A. Gabon 90%
M-I Great Britain Limited England 100%
M-I Italiana S.p.A. Italy 100%
M-I Kazakstan Ltd. C.I.S. 100%
M-I Norge A/S Norway 100%
M-I Overseas Limited Cayman Islands 100%
Magcobar (Ireland) Limited Ireland 100%
Foynes Manufacturing Limited Ireland 100%
Management & Engineering Resources Company Bermuda 100% (10)
Radio Magcobar, Inc. Texas 100%
Swaco Geolograph Limited England 100%
Swaco Geolograph Norge A/S Norway 100%
M. W. Kellogg Company, The Delaware 100%
Kellogg Capital Corporation Delaware 100%
Kellogg Pan American Corporation C.A. Venezuela 100%
M. W. Kellogg Holdings, Inc. Delaware 100%
Aromatics Plant Services Limited Delaware 100%
Intercontinental Services Limited Virgin Islands 100%
KCI Constructors, Inc. Delaware 100%
KRW Energy Systems Inc. Delaware 80%
Kellogg China Consultants Inc. Delaware 100%
Kellogg China Inc. Delaware 100%
Kellogg Development Corporation Delaware 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1993
Page 4
<TABLE>
<CAPTION>
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- --------------------------------------------- ----------------- -----------
<S> <C> <C>
Kellogg Far East, Inc. Delaware 100%
Kellogg ISL Limited Cayman Islands 100%
Kellogg India Limited Delaware 100%
Kellogg Indonesia, Inc. Delaware 100%
Kellogg International Corporation Delaware 100%
Kellogg International Services Corporation Delaware 100%
Kellogg International Services Limited Cayman Islands 100%
Kellogg Iran, Inc. Delaware 100%
Kellogg Iraq Limited Delaware 100%
Kellogg Italy, Inc. Delaware 100%
Kellogg Korea, Inc. Delaware 100%
Kellogg Malaysia, Inc. Delaware 100%
Kellogg (Malaysia) Sdn. Bhd. Malaysia 100%
Kellogg Mexico, Inc. Delaware 100%
Kellogg Middle East Limited Delaware 100%
Kellogg Middle East Services Inc. Delaware 100%
Kellogg Nigeria Inc. Delaware 100%
Kellogg Overseas Construction Corporation Delaware 100%
Kellogg Overseas Corporation Delaware 100%
Kellogg Overseas Services Corporation Panama 100%
Kellogg Pan American Corporation Delaware 100%
Kellogg Plant Services Inc. Delaware 100%
Kellogg Rust Services Inc. Delaware 100%
Kellogg Rust Synfuels, Inc. Delaware 100%
Kellogg Saudi Arabia Limited Delaware 100%
Kellogg Services, Inc. Delaware 100%
Kuwait Kellogg Ltd. Delaware 100%
M. W. Kellogg Company Limited Canada 100%
M. W. Kellogg Constructors Inc. Delaware 100%
Pullman Incorporated Capital Corporation Delaware 100%
Pullman Kellogg Algeria Inc. Delaware 100%
Pullman Kellogg Plant Services Algeria,
Inc. Delaware 100%
Societe Kellogg Delaware 100%
Malaysian Barite Sdn. Bhd. Malaysia 100%
Masoneilan International, Inc. Delaware 100%
Dresser B.V. Netherlands 100% (11)
Dresser Europe S.A. Belgium 100%
Dresser Industrial Products B.V. Netherlands 100%
AVA Netherlands B.V. Netherlands 100%
Dresser Japan Ltd. Japan 100%
Dresser Netherlands B.V. Netherlands 100%
Dresser Wayne AB Sweden 100%
Dresser Produits Industriels France 100%
Kellogg France, S.A. France 100%
Masoneilan S.p.A. Italy 100%
Masoneilan HP + HP GmbH Germany 100%
Masoneilan Internacional, S.A. de C.V. Mexico 100%
</TABLE>
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1993
Page 5
<TABLE>
<CAPTION>
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ------------------------------------------ ----------------- -----------
<S> <C> <C>
Masoneilan S.A. Spain 75% (12)
Masoneilan (S.E.A.) Pte. Ltd. Singapore 100%
P.T. Security Mulia Indonesia Indonesia 70%
Property and Casualty Insurance, Limited Bermuda 100%
Property and Casualty Insurance Ltd. - U.S. Vermont 100%
T K Valve & Manufacturing, Inc. Texas 100%
T K Valve Holding Limited England 100%
T K Valve Limited England 100%
T K Valve (Abu Dhabi) Limited Scotland 100%
T K Valve (Europe) Limited Scotland 100%
T K Valve (Borneo) Limited Scotland 100%
Tecman Services Limited Cyprus 51% (13)
T K Valve (Singapore) Pte. Ltd. Singapore 100%
T K Valve, Inc. Texas 100%
T K Valve (Canada) Ltd. Canada 100%
Triconos Mineros S.A. Chile 100%
Turbo Productos Dresser S.A. de C.V. Mexico 100%
Worthington Corporation Delaware 100%
Worthington do Brasil, Inc. Delaware 100%
Worthington Pump Inc. Delaware 100%
Worthington Colombiana, S.A. Colombia 93% (14)
Worthington GmbH Austria 100%
</TABLE>
(a) The names of certain subsidiaries of Registrant have been omitted since the
unnamed subsidiaries considered in the aggregate as a single subsidiary
would not constitute a significant subsidiary.
(1) Shares held in trust by Abacus (Nominees) Limited (99.9%) and Abacus
(Cyprus) Limited (.1%).
(2) Shares held in trust by Abacus (Cyprus) Limited (50%) and Abacus (Nominees)
Limited (50%).
(3) Shares held in trust by Asiaciti Management Pte. Ltd. for the benefit of
Dresser Singapore Pte. Ltd.
(4) Represented by common voting shares. 100% of issued preferred voting
shares are owned by Dresser Canada, Inc.
(5) Remaining 5% owned by Dresser Minerals International, Inc.
(6) Remaining 2% owned by M-I Overseas Limited.
(7) Remaining 7% owned by M-I Overseas Limited.
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1993
Page 6
( 8) Represented by common voting shares. M-I Drilling Fluids Company owns
all but one of these issued ordinary shares which is owned by M-I Drilling
Fluids International B.V. 100% of the issued Class A preferred shares
(non-voting) owned by M-I Drilling Fluids Company. M-I Drilling Fluids
Canada, Inc. owns 100% of the issued Class B preferred shares (non-voting
with 1 exception).
( 9) Remaining .7% owned by M-I Overseas Limited.
(10) Interest actually held by Reid Finance Limited and eight nominees for the
benefit of M-I Drilling Fluids Company.
(11) 100% of issued voting preference shares held by Dresser Anstalt.
(12) Remaining 25% owned by Dresser Produits Industriels.
(13) Remaining 49% held by T K Valve Limited's agent, Pipeline Equipment
Benelux B.V.
(14) Remaining 7% owned by Dresser Minerals International, Inc. (1.8%); Dresser
International, Ltd. (1.8%); Dresser Industries, Inc. (1.7%); Worthington
Corporation (1%); and Dresser Holding, Inc.(.7%).
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (numbers 2-76847,
2-81536, 33-26099, 33-30821 and 33-48165), Form S-3 (numbers 2-91309, 33-47832
and 33-59562) and Form S-4 (number 33-50563) of Dresser Industries, Inc. of our
report dated December 9, 1993 appearing on page 22 of the Dresser Industries
Inc. Annual Report on Form 10-K and of our report dated November 12, 1992
relating to the financial statements of Dresser-Rand Company as of September 30,
1992 and 1991 and for the two years in the period ended September 30, 1992
appearing on page 3 of the 1992 consolidated financial statements of
Dresser-Rand Company included in this Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedules of
Dresser-Rand Company, which appears on page 87 of this Form 10-K.
/s/ Price Waterhouse
PRICE WATERHOUSE
Dallas, Texas
January 25, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ John J. Murphy
-------------------
John J. Murphy, Chairman of the
Board and Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ B. D. St. John
------------------
B. D. St. John
Vice Chairman and Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, her true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for her and in her name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set her hand this 20th day of January, 1994.
/s/ William E. Bradford
-----------------------
W. E. Bradford
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/Samuel B. Casey, Jr.
-----------------------
Samuel B. Casey, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ Rawles Fulgham
------------------
Rawles Fulgham
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ John A. Gavin
-----------------
John A. Gavin
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ Ray L. Hunt
---------------
Ray L. Hunt
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ W. George Nancarrow
-----------------------
W. George Nancarrow
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ Lionel H. Olmer
-------------------
Lionel H. Olmer
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ A. Kenneth Pye
------------------
A. Kenneth Pye
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"),
hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual
Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each or either
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each or either of them, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company
has hereunto set his hand this 20th day of January, 1994.
/s/ Richard W. Vieser
---------------------
Richard W. Vieser
Director
