<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, 1994.
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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock, Par Value 25 cents Per Share New York Stock Exchange, Inc.
Pacific Stock Exchange Incorporated
Baroid Corporation 8% Guaranteed Senior New York Stock Exchange, Inc.
Notes due 2003
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, 1995) held by non-affiliates of
the registrant was approximately $3,584 million.
As of January 25, 1995, there were 184,187,751 shares of Dresser Industries,
Inc. Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Sections of Registrant's Notice of 1995 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 supplier of highly engineered
products, technical services and project management for hydrocarbon energy-
related activities that are primarily utilized in oil and gas drilling,
production and transmission; gas distribution; power generation; gas
processing; petroleum refining and marketing; and petrochemical production.
Demand for Dresser's products and services are generally determined by global
demand for energy and oil and gas by-products. 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, 1994, consolidated revenues of
Registrant amounted to $5,330.7 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 January 28, 1994, Registrant sold its 29.5% interest in Western
Atlas International, Inc. to a wholly owned subsidiary of Litton Industries,
Inc.
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. Shareholders of Baroid received 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 was treated as a pooling of interests. Baroid operations
include drilling fluids, drilling services and products and offshore services
businesses, and are included in the Oilfield Services segment. Further
information concerning Baroid is included in the description of the Oilfiled
Services segment and in Notes B, C and R to the Consolidated Financial
Statements.
In connection with the Merger, Registrant and Baroid reached an agreement
with the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to which Registrant sold its 64% interest in M-I Drilling
Fluids Company, effective February 28, 1994, to Smith International, Inc. In
addition, pursuant to the agreement, Registrant sold the United States diamond
drill bit business of DB Stratabit (USA), Inc. ("DBS") to International
Superior Products, Inc. ("International") effective July 28, 1994, and granted
to International (i) a non-exclusive license to manufacture steel bodied and
matrix bits inside the United States and (ii) a non-exclusive license to
manufacture steel bodied bits outside the United States (except in the
People's Republic of China).
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On August 5, 1994, shareholders of Wheatley TXT Corp. ("Wheatley") voted
to approve the merger (the "Merger") of WTXT Acquisition Corporation ("WTXT"),
a wholly owned subsidiary of Registrant, into Wheatley. The Merger was
effective August 5, 1994 (the "Effective Date"), pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") dated May 31, 1994, among Registrant,
WTXT and Wheatley. Shareholders of Wheatley on the Effective Date received
8.3 million shares of Registrant's Common Stock in exchange for all of the
issued and outstanding shares of Wheatley. In addition, approximately 350,000
shares of Registrant's Common Stock are reserved for issuance pursuant to
certain benefit plans assumed by Registrant. For financial reporting
purposes, the Merger was treated as a pooling of interests. Wheatley
operations include pumps, valves, metering equipment and other products used
in oil and gas production. Further information concerning Wheatley is included
under the caption "Completion and Production Tools" and Notes B, C and R to
the Consolidated Financial Statements.
On September 21, 1994, Registrant and Ingersoll-Rand Company announced
that they had completed the sale of each of their 50% interests in IRI
International Corporation, a manufacturer of mobile drilling rigs
headquartered in Pampa, Texas, to Energy Service International Limited.
Registrant acquired, effective November 17, 1994, through a wholly owned
Subsidiary, Subtec Asia Limited ("Subtec") and subsidiaries from Tamase
Technical Maritime Services S.A. Subtec, operating primarily in the Mid and
Far East, produces underwater technology services to the oil and gas
industry. Subtec operations are included in the Oilfield Services segment.
The Information by Industry Segment is included in Note R to Consolidated
Financial Statements on pages 74-75 and in Management's Discussion and Analysis
on pages 26-31. 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
Dresser's oilfield services segment supplies products and services for oil
and gas exploration, drilling, production and transmission. These products and
services include project management and integrated well services and products,
drilling fluid systems, drilling services and products, underwater services,
drill bits, completion and production tools and equipment and pipe coatings.
Demand for these products and services is directly affected by energy prices
and drilling activity.
INTEGRATED SERVICES/PRODUCTS AND PROJECT MANAGEMENT
Dresser Drilling and Production Services is a marketing arm and project
manager for Dresser's oilfield services operations. This organization was
formed in 1994 to provide oil and gas producers with project management
capabilities and the integrated services and products required to drill and
complete wells more efficiently. Dresser Drilling and Production Services
activities include well planning, project management and the procurement of
wellsite drilling, completion and production services and equipment.
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DRILLING FLUIDS
Baroid Drilling Fluids, Inc. provides oil and gas producers 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. It also provides completion fluids and wellsite services. Total net
revenues for Drilling Fluids were $554.0 in 1994, $777.8 million in 1993, and
$723.7 million in 1992. Revenues include $147.0 million in 1994, $401.2
million in 1993 and $386.6 in 1992 for M-I Drilling Fluids Company which was
sold effective February 28, 1994.
DRILLING SERVICES AND PRODUCTS
Sperry-Sun Drilling Services Inc. supplies oil and gas producers with
directional and measurement-while-drilling (MWD) services and directional
drilling equipment including mud motors, downhole steering and surveying
instruments, and geological and drilling data monitoring.
UNDERWATER SERVICES
Sub Sea International Inc. provides production companies and offshore rig
operators with diving and underwater engineering services. Sub Sea equipment
is used to inspect, construct, maintain and repair offshore drilling rigs and
platforms, underwater pipelines and other offshore oil and gas facilities. Sub
Sea designs, manufactures and deploys remotely operated vehicles (ROVs) which
are often used to perform these services.
DRILL BITS
Security DBS produces and markets to oil and gas producers and mining
operators a complete line of roller-cone, polycrystalline diamond cutter (PDC)
and natural diamond drill bits for use in drilling oil and gas wells and
provides coring and hole enlargement services. Security DBS also makes a
variety of downhole oilfield drilling tools and a full line of premium blast
hole bits for the mining market.
COMPLETION AND PRODUCTION TOOLS
Dresser Oilfield Valves designs, manufactures and markets Wheatley and Tom
Wheatley valves, Texsteam valves, actuators and chemical injection pumps, and
TK ball valves. These products are used primarily in the production of oil and
gas.
Axelson Guiberson/AVA consists of Axelson surface safety equipment and
downhole rod pumps and sucker rods as well as Guiberson/AVA's broad range of
completion and production products, including sub-surface safety valves, gravel
pack, downhole hydraulic pumps, tubing converged perforating equipment,
production packers and swab cups. These products are also used in the
production of oil and gas.
Dresser Wheatley Canada is involved in the manufacturing of Wheatley
valves and pumps but also represents in Canada the Axelson, Texsteam, Tom
Wheatley and Clif Mock (meters, measurement equipment and sampling systems)
products of Wheatley.
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PIPE COATINGS
Bredero Price provides a broad range of pipe coatings and related services
to protect pipelines above ground, below ground and offshore in major oil and
gas producing areas of the world.
HYDROCARBON PROCESSING INDUSTRY
Dresser's Hydrocarbon Processing Industry segment designs, manufactures
and markets highly engineered products and systems for oil and gas producers,
transporters, processors, distributors and users throughout the world. Products
and systems of this segment include compressors, turbines, generators, electric
motors, pumps, engines and power systems, valves and controls, instruments,
meters and pipe couplings, blowers and gasoline dispensing systems. Demand for
these products is directly effected by global economic activity, which
influences demand for transportation fuels, petrochemicals, plastics,
fertilizers, chemicals and by-products of oil and gas.
COMPRESSORS
Dresser-Rand Company, a New York partnership in which Dresser has a 51%
interest, manufactures turbines, compressors, electric motors, generators and
turbine-generator sets utilized in gas processing, refining and petrochemical
activities. Dresser-Rand also is a producer of gas injection compression
systems that enhance oil production and the manufacturer of powerful pipeline
boosters for the transmission of natural gas.
The Consolidated Statements of Earnings for 1994, 1993 and 1992 include
$1,234.5 million, $1,118.1 million and $40.3 million, respectively, of Dresser-
Rand's revenues. Revenues for 1992 are only Dresser's share of the earnings
from Dresser-Rand. Dresser-Rand's revenues for 1992 were not included in the
consolidated statements of earnings for 1992 while it was only 50% owned by
Registrant.
PUMPS
Effective October 1, 1992, Dresser's Pump operations (except Mono Pumps)
were combined with the Pump operations of Ingersoll-Rand Company to form
Ingersoll-Dresser Pump Company, a partnership in which Dresser has a 49%
interest. Ingersoll-Dresser Pump Company develops, manufactures and markets
centrifugal pumps 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. Registrant's consolidated statements of
earnings include net revenues for the Pump businesses transferred to Ingersoll-
Dresser Pump Company of $527.6 million for eleven months for 1992.
Dresser's wholly owned Mono Pump operations produce progressing cavity
pumps for handling viscous fluids. These pumps have hydrocarbon energy-related
applications and are also utilized by the waste water, mining, paper, food and
chemical industries.
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POWER SYSTEMS
Dresser's Waukesha Engine Division produces spark-ignited, gas and diesel
fueled engines and power systems. The division's products are used throughout
the world in the gathering and storage of natural gas and as drivers for crude
oil pumping and prime movers for electrical power generation and cogeneration.
Roots 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.
Among the many operations utilizing Roots products are natural gas processing
plants, refineries, chemical plants, flue gas desulphurization facilities and
waste water treatment plants.
CONTROL PRODUCTS
Dresser's Instrument Division designs and manufactures instruments for
pressure and temperature measurement and control. These products are utilized
by the oil, gas and power industries and a variety of customers in industrial
and commercial markets.
The Valve and Controls Division includes Dresser's Masoneilan and
Industrial Valve operations. Masoneilan produces automated process control
valves, instruments, level instruments and regulators. Industrial Valve
manufactures Consolidated, Dewrance and Hancock safety, safety relief and line
valves. Both the Masoneilan and Industrial Valve operations primarily serve
process and power markets.
DMD products include gas meters, pipe fittings, couplings and repair
devices utilized by the gas and water utilities and other industrial markets.
MARKETING SYSTEMS
Dresser's Wayne Division manufactures and sells fully integrated vehicle
fueling systems serving the retail petroleum marketing industry. These
advanced systems include a variety of gasoline pumps and dispensers as well as
equipment for point-of-sale functions including dispensing control, electronic
fund transfer and management systems.
ENGINEERING SERVICES
Dresser's wholly owned subsidiary, The M.W. Kellogg Company, provides
engineering, construction and related services primarily to the hydrocarbon
process industries. M.W. Kellogg provides its own proprietary technologies and
the advanced technologies of others to facilitate the environmentally
acceptable conversion of raw hydrocarbon and other chemicals into value-added
end products. Kellogg's services include the development of processes,
engineering design, construction and procurement for energy-related complexes
in the U.S. and international regions. Kellogg participates in projects
involving liquefied natural gas (LNG) plants and receiving terminals, refining
and petrochemical activities, ammonia/fertilizer facilities and the
retrofitting of all kinds of energy-related complexes for environmental
purposes. Revenues for The M.W. Kellogg Company were $1,265.2 million,
$1,215.3 million, and $1,561.5 million for 1994, 1993, and 1992, respectively.
6
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BACKLOG
The backlog of unfilled orders at October 31, 1994, 1993 and 1992 is
included in Management's Discussion and Analysis on pages 23-24.
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 Canadian subsidiaries. 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 ssistance 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 80 foreign countries. Global distribution of products and
services is accomplished through more than 370 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 R to Consolidated
Financial Statements on pages 74-75 and in Management's Discussion and Analysis
on pages 26-31.
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, 1994, 1993 and 1992, Registrant spent $102.5 million, $98.5
million and $31.1 million, respectively, for research and development
activities.
At December 1, 1994, Registrant and its subsidiaries and affiliates owned
2,055 patents and had pending 819 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
particular product or process is of material importance when judged from the
standpoint of
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Registrant's total business.
EMPLOYEES
As of October 31, 1994, Registrant had approximately 17,600 employees in
the United States (an increase of approximately 12% from October 31, 1993), of
whom approximately 5,700 were members of 10 unions represented by 25 bargaining
units. As of the same date, Registrant had approximately 11,600 employees at
foreign locations of whom approximately 3,300 were members of unions. During
fiscal 1994, Registrant experienced no contract negotiation strikes in the
United States. 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:
Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
John J. Murphy (63) Chairman of the Board and Chief
Chairman of the Board, Chief Executive Officer of Registrant
Executive Officer and since August 1983; President of
Director Registrant, August 1982 - March
1992.
B. D. St. John (63) Vice Chairman of Registrant since
Vice Chairman and Director March 1992; Executive Vice
President - Administration of
Registrant, November 1982 - March
1992.
William E. Bradford (60) President and Chief Operating
President, Chief Operating Officer of Registrant since March
Officer and Director 1992; 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 (58) Senior Vice President - Operations
Senior Vice President - since January 1994; Vice President
Operations - 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 (58) Chairman of the Board, President
Senior Vice President - and Chief Executive Officer of The
Operations M.W. Kellogg Company since March
1983; Senior Vice President -
Operations of Registrant since
January 1992.
8
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Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
Clint E. Ables (55) 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 (48) 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 (57) 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. (58) Vice President - Washington Counsel
Vice President - Washington of Registrant since September 1986.
Counsel
George H. Juetten (47) 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 (49) Vice President - Corporate Counsel
Vice President - Corporate Counsel of Registrant since January 1994
and Secretary and Secretary of Registrant since
November 1990; Corporate Counsel of
Registrant June 1987 - January 1994.
David R. Smith (48) Vice President - Tax of Registrant
Vice President - Tax since January 1994; Director of Tax
of Registrant, October 1987 -
January 1994.
Paul W. Willey (57) Treasurer of Registrant since May
Treasurer 1984.
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OFFICER EMPLOYED BY JOINT VENTURE COMPANY
Principal Occupation During
---------------------------
Name, Age and Position Past Five Years
---------------------- ---------------
Ben R. Stuart (60) President and Chief Executive
Senior Vice President - Officer of Dresser-Rand Company
Operations since March 1992; Senior Vice
President - Operations of
Registrant since March 1992; Vice
President - Operations of
Registrant, August 1988 - March
1992.
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
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 1,500,000 square feet and totaling more than 14 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 1994 Baroid Drilling Fluids, Inc. had 20 grinding and/or
other facilities for beneficiating mineral ores, containing approximately
1,200 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, 1994:
<TABLE>
<CAPTION>
Approximate
Floor Area
Industry Segment and Location Product Area (Square Feet)
----------------------------- ------------ -------------
<S> <C> <C>
Oilfield Services
Aberdeen, Scotland (Underwater Services) 111,000
Dallas, Texas (Drill Bits) 294,000
Dallas, Texas (Completion & Production Tools) 278,500
Houston, Texas (Completion & Production Tools) 45,000 (1)
Longview, Texas (Completion & Production Tools) 235,000
Colorado Springs, Colorado (Completion & Production Tools) 97,000
Kuantan, Malaysia (Pipe Coatings) 852,832 (1)
</TABLE>
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<TABLE>
<CAPTION>
Approximate
Floor Area
Industry Segment and Location Product Area (Square Feet)
----------------------------- ------------ -------------
<S> <C> <C>
Zhanjisng, China (Pipe Coatings) 116,251 (1)
Layyah, Sharjah, U.A.E. (Pipe Coatings) 1,233,070 (1)
Oilfield Services (continued)
Warri, Nigeria (Pipe Coatings) 1,568,173 (1)
Hydrocarbon Processing Industry
Manchester, England (Mono Pumps) 242,000
Victoria, Australia (Mono Pumps) 145,000
Connersville, Indiana (Power Systems) 376,790
Huddersfield, England (Power Systems) 159,561
Waukesha, Wisconsin (Power Systems) 764,557
Appingedam, Netherlands (Power Systems) 136,935
Painted Post, New York (Compressors) 982,000
Broken Arrow, Oklahoma (Compressors) 129,000
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
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) 62,000
Bradford, Pennsylvania (Control Products) 450,000
Houston, Texas (Control Products) 110,000 (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) 153,850
Dumfermline, Scotland (Halbeath) (Control Products) 116,737
</TABLE>
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<TABLE>
<CAPTION>
Approximate
Floor Area
Industry Segment and Location Product Area (Square Feet)
----------------------------- ------------ -------------
<S> <C> <C>
Salisbury, Maryland (Marketing Systems) 370,395 (1)
Austin, Texas (Marketing Systems) 103,491
Malmo, Sweden (Marketing Systems) 233,533 (1)
Hydrocarbon Processing Industry (continued)
Einbeck, Germany (Marketing Systems) 80,505 (1)
Rio de Janeiro, Brazil (Marketing Systems) 129,166 (1)
Bonnyrigg, Scotland (Marketing Systems) 60,000
Markham, Ontario, Canada (Marketing Systems) 55,631 (1)
--------
<FN>
(1) all or a portion of these facilities are leased.
</TABLE>
Baroid Drilling Fluids, Inc. has mineral rights to proven and prospective
reserves of barite and bentonite. Such rights included leaseholds and mining
claims and property owned in fee either directly by Baroid Drilling Fluids,
Inc. or by its wholly owned subsidiary Bentonite Corporation. The principal
deposit of barite is located in Nevada, with deposits also located in Missouri
and Georgia. Reserves of bentonite are located in Wyoming, Montana and South
Dakota. Based on the number of tons of each of the above minerals consumed in
fiscal 1994, Baroid Drilling Fluids, Inc. estimates its reserves, which it
considers to be proven, to be sufficient for operation for a period of 10 years
or more.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings. Information called
for by this Item is included in Note M to the Consolidated Financial Statements
on pages 59-64.
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, 1994.
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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>
1994 High. . . . . $ 22.75 24.875 23.875 22.25 24.875
1994 Low . . . . . $ 18.625 20.50 20.375 19.00 18.625
1993 High. . . . . $ 18.75 21.88 25.13 25.38 25.38
1993 Low . . . . . $ 17.25 17.88 20.25 20.00 17.25
</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 1994 and 1993
fiscal years were:
<TABLE>
<CAPTION>
First Second Third Fourth Year
-----------------------------------------
<S> <C> <C> <C> <C> <C>
1994 . . . . . . . $ .15 .17 .17 .17 .66
1993 . . . . . . . $ .15 .15 .15 .15 .60
</TABLE>
As of January 25, 1995, there were approximately 22,650 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>
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues 5,330.7 5,202.3 4,723.3 4,860.0 4,457.3
Earnings from
continuing
operations
before extra-
ordinary items
and accounting
changes 361.8 133.6 97.7 143.5 167.0
Per share 1.98 .74 .55 .81 .99
Total assets 4,323.6 4,445.6 3,901.9 3,784.9 3,841.3
Long-term debt 460.6 492.2 148.5 259.6 409.3
Cash dividends
declared 116.5 100.2 96.3 96.8 89.3
Per share* .66 .60 .60 .60 .525
<FN>
*Dresser historical dividends.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MERGERS
On January 21, 1994, Dresser merged with Baroid Corporation (Baroid). On August
5, 1994, Dresser merged with Wheatley TXT Corp. (Wheatley). The "Company" as
used in this discussion refers to Dresser and its subsidiaries including Baroid
and Wheatley. The mergers have been accounted for as pooling of interests.
Financial data, statistical data, financial statements and discussion of
financial information included in this report have been restated to reflect the
financial position and results of operations as if the mergers had occurred on
November 1, 1989. See Notes B and C to Consolidated Financial Statements for
more information about the mergers.
14
<PAGE>
OVERVIEW (CONTINUED)
SPECIAL ITEMS
During the last three years, the Company has entered into a number of unusual or
nonrecurring transactions, including mergers, divestitures and restructuring of
existing operations. The impact of these transactions is described below. The
discussions of results of operations will focus on earnings excluding these
transactions.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
- ----------- -------- -------- -------
<S> <C> <C> <C>
Earnings before special items $ 221.6 $ 211.4 $ 147.7
Gain on sale of interest in
Western Atlas 146.5 - -
Parker & Parsley litigation -
insurance recovery/settlement 11.6 (41.6) -
Merger expenses -
Wheatley/Baroid (7.9) (30.6) -
Restructuring and other
special charges (10.0) (5.6) (50.0)
-------- -------- --------
Earnings from continuing
operations 361.8 133.6 97.7
Discontinued operations - - (35.3)
Extraordinary items - - (6.3)
Accounting changes - - (393.8)
-------- -------- --------
Net earnings (loss) $ 361.8 $ 133.6 $ (337.7)
-------- -------- --------
-------- -------- --------
Per Share 1994 1993 1992
- --------- -------- -------- --------
Earnings before special items $ 1.21 $ 1.17 $ .83
Gain on sale of interest in
Western Atlas .80 - -
Parker & Parsley litigation -
insurance recovery/settlement .06 (.23) -
Merger expenses -
Wheatley/Baroid (.04) (.17) -
Restructuring and other
special charges (.05) (.03) (.28)
-------- -------- ---------
Earnings from continuing
operations 1.98 .74 .55
Discontinued operations - - (.20)
Extraordinary items - - (.03)
Accounting changes - - (2.21)
-------- -------- --------
Net earnings (loss) $ 1.98 $ .74 $ (1.89)
-------- -------- --------
-------- -------- --------
</TABLE>
15
<PAGE>
OVERVIEW (CONTINUED)
SPECIAL ITEMS (CONTINUED)
The Company sold its 29.5% interest in Western Atlas International in January
1994 and recognized a pre-tax gain of $275.7 million. (See Note D to
Consolidated Financial Statements.)
The Company recorded pre-tax charges of $65.0 million in 1993 for settlement of
the Parker & Parsley litigation. (See Note O to Consolidated Financial
Statements.) In April 1994, the Company recognized a $18.4 million pre-tax gain
from the settlement of a coverage dispute with certain insurance carriers
regarding the Parker & Parsley litigation.
The Company recorded pre-tax expenses of $10.7 million in August 1994 related to
the Wheatley merger and $31.0 million in October 1993 related to the Baroid
merger. (See Notes B and O to Consolidated Financial Statements.)
The Company recorded pre-tax expenses of $15.7 million in 1994, $9.1 million in
1993 and $70.0 million in 1992 for restructuring costs and other special items.
The 1992 charges included $35.0 million for restructuring the Ingersoll-Dresser
Pump joint venture. (See Note O to Consolidated Financial Statements.)
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
Consolidated Statement of Earnings. (See Note P to Consolidated Financial
Statements.)
The Company incurred losses totaling $9.8 million (pre-tax) in 1992 in
connection with the redemption of its debentures. These losses are reported as
an extraordinary item in the 1992 Statement of Earnings. (See Note J to
Consolidated 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 $2.21 per share, which is
reflected as the Cumulative Effect of Accounting Changes in the 1992
Consolidated Statement of Earnings. (See Notes H and N to Consolidated
Financial Statements.)
16
<PAGE>
RESULTS OF OPERATIONS
GENERAL OPERATING ENVIRONMENT
Dresser is a fully integrated manufacturer and supplier of products and services
to customers in the oil and gas industry. The Company produces a broad range of
highly engineered products for hydrocarbon exploration, drilling, production,
transmission and processing activities. Dresser also provides engineering,
procurement and project management services for all aspects of the energy
business. Operations are organized into three segments: Oilfield Services,
Hydrocarbon Processing Industry and Engineering Services. See Note R to
Consolidated Financial Statements for a summary of the products and services
included in each segment.
Demand for Oilfield Services Segment products and services is directly affected
by energy prices and drilling activity. Demand for the products and services
offered by the Hydrocarbon Processing Industry Segment and Engineering Services
Segment is affected by global and regional economic activity, which influences
demand for processing capacity for the manufacture of transportation fuel,
petrochemicals, plastics, fertilizers, chemicals and other by-products of oil
and gas.
In fiscal 1994, drilling activity increased 11% over the prior year in North
America, due largely to strong natural gas prices early in the year.
Internationally, drilling activity fell 5% reflecting a number of influences,
including the low price of oil and political uncertainty in various regions of
the world. In 1994, ongoing construction activity for hydrocarbon processing
projects continued at relatively high levels. However, a slowdown in 1993 and
early 1994 in new projects resulted in lower backlogs at several operations,
including Dresser-Rand and M.W. Kellogg.
CONSOLIDATED RESULTS
1994 COMPARED TO 1993
Revenues were $5.3 billion in 1994 compared to $5.2 billion in 1993. Oilfield
Services revenues were lower primarily due to the inclusion of both M-I Drilling
Fluids and Baroid Drilling Fluids in 1993, while 1994 included M-I Drilling
Fluids for only four months. That decrease was more than offset by higher
revenues by the other two segments. Revenues include the Company's share of
earnings of unconsolidated affiliates, which was down $53 million in 1994 mostly
attributable to $39 million in 1993 for Western Atlas.
17
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
1994 COMPARED TO 1993 (continued)
Excluding the special items described above, net earnings increased $10 million
to $221 million. Segment operating profit for 1994 was $40 million lower
compared to 1993. However, 1993 included the results of Western Atlas ($39
million), the impact of a full year of M-I Drilling Fluids earnings ($16
million) and the favorable impact of a LIFO inventory adjustment ($21 million)
at Ingersoll-Dresser Pump (IDP). Accordingly, comparable 1994 segment operating
profit increased $36 million, reflecting high levels of drilling activity in
North America and strong levels of demand for certain of the Company's
hydrocarbon processing equipment. See the Industry Segment Analysis below for a
discussion of the results of each segment.
General Corporate Expenses declined $19 million to $69 million, reflecting lower
self insurance costs and lower ongoing expenses associated with previously
divested businesses. Net interest expense declined $10 million primarily due to
the investment of the proceeds from the sale of Western Atlas and M-I Drilling
Fluids. Other items impacting comparability of 1994 to 1993 include a non-
recurring gain of $12.8 million in 1993 resulting from a change in the Company's
Retiree Medical Benefit Plan and an increase in goodwill amortization of $5.6
million in 1994 associated with the Bredero Price, TK Valve and Axelson
acquisitions.
The effective tax rate applicable to earnings before taxes and special items
declined to 28% from 33% in 1993, a reduction of $30 million. The lower
effective rate resulted primarily from the recognition of tax benefits
applicable to losses associated with receivables from IRI International. The
effective tax rate should return to the 33%-35% level in 1995.
Minority interest expense was $11 million lower in 1994 primarily due to the
sale of M-I Drilling Fluids Company, which had a 36% minority owner.
18
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
1993 COMPARED TO 1992
Revenues increased from $4.7 billion in 1992 to $5.2 billion in 1993. 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.
Excluding special items, 1993 net earnings increased $63.7 million to $211.4
million, and segment operating profit increased $121.4 million compared to 1992.
The consolidation of Dresser-Rand in 1993 added $46 million to segment operating
profit. The Company and its joint ventures amended retiree medical benefit
plans in 1993, thus reducing the related expense by $17 million compared to
1992. Also during 1993, the Company recorded a favorable IDP LIFO inventory
adjustment of $21 million. Excluding these items, 1993 segment operating profit
increased $37 million due to the acquisition of Bredero Price and stronger
results in the Oilfield Services Segment and Engineering Services Segment
partially offset by a decline in the 1993 results of Ingersoll-Dresser Pump
versus the operations of Dresser Pump Operation in 1992. See the Industry
Segment Analysis below for a discussion of the results for each segment.
The non-recurring gain resulting from the amendment to retiree medical plan
mentioned above added $13 million to 1993 earnings versus 1992. 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 applicable to earnings before taxes and special items
declined to 33% in 1993 from 39% in 1992. 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 U.S. corporate income tax rate
from 34% to 35%, caused the reduction. Despite the reduction in the effective
tax rate, the increase in earnings before taxes and special items from $257
million to $382 million resulted in an increased tax charge of $26 million.
The consolidation of Dresser-Rand in 1993 resulted in an increase in minority
interest representing a 49% share of Dresser-Rand's earnings.
19
<PAGE>
INDUSTRY SEGMENT ANALYSIS
See details of financial information by Industry Segment and Geographic Area
following the industry segment discussion and the backlog table.
OILFIELD SERVICES
Segment revenues of $1.65 billion were down $86 million in 1994 compared to
1993. Excluding the revenues of M-I Drilling Fluids, which was sold in February
1994, revenues increased 13%, or $168 million. The increase in 1994 revenues
was due to the acquisition of Axelson in December 1993 and an 11% increase in
North American drilling activity in 1994 versus 1993. Segment revenues from
North American markets increased 33% in 1994, reflecting strength in the Gulf of
Mexico and Canada.
Operating profit of $156.8 million in 1994 was $33 million lower than 1993.
Excluding $39 million of 1993 earnings from Western Atlas and $16 million lower
earnings from M-I Drilling Fluids, segment earnings were up $22 million. The
strong performance in North American drilling markets led to substantial
increases in operating profit for Sperry-Sun and Baroid Drilling Fluids. The
acquisition of Axelson as well as a $9 million reduction in overhead costs
resulting from the Baroid merger also contributed to the increase. These
improvements more than offset the decline in operating profit from international
markets and lower earnings attributable to costs associated with the combination
of Guiberson AVA with Axelson and Security with DBS. Management believes that
steps taken during 1994 at these operations will result in improved performances
next year.
Despite the recent strength of the North American drilling markets,
approximately 60% of 1994 segment revenues and operating profit were derived
from markets outside North America. This is primarily due to the performance of
the Bredero Price pipe coating business, which is entirely outside of North
America.
Segment revenues were $1.7 billion in 1993 compared to $1.4 billion in 1992.
The increase included $211 million of 1993 revenues of Bredero Price and TK
Valve, which were purchased in 1993. An increase in revenues from North
American sources to 39% of total segment revenues from 35% was directly related
to increased drilling activity in North America, particularly the Gulf of
Mexico. A decline in revenues from drilling activities outside of North America
was offset by the addition of Bredero Price and TK Valve.
20
<PAGE>
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
OILFIELD SERVICES (CONTINUED)
Operating profit before special charges in 1992 increased from $112 million to
$189 million in 1993. The above-mentioned increase in North America drilling
activity contributed to the substantial increase in segment operating profit and
more than offset a decline in operating profit due to lower international
drilling activity. All drilling-related businesses contributed to the
improvement, particularly Sperry-Sun and Baroid Drilling Fluids. The addition
of Bredero Price and TK Valve during 1993 accounted for approximately half of
the total increase in segment operating profit.
In 1993, approximately 60% of segment revenues and approximately 70% of segment
operating profit were from markets outside North America.
HYDROCARBON PROCESSING INDUSTRY
DRESSER-RAND - Revenues of $1.2 billion in 1994 increased 10% from a year
earlier due primarily to a 20% increase in revenues from markets outside North
America, particularly in the Eastern Hemisphere. This primarily reflected the
workoff of prior-year backlog of centrifugal products and compression
services. Operating profit continued strong at $71.9 million but was down from
$87.6 million in 1993 due to restructuring and early retirement costs as well
as margin pressure on complete-unit sales.
Bookings in 1994 were level with the prior year at $1 billion. Key markets
contributing to 1994 bookings included Uzbekistan, China, Argentina, Thailand,
Egypt and Denmark.
Revenues from North American markets were 39% in 1994 compared to 44% in 1993.
Operating profit from North America was essentially unchanged, with strong
results from the field gas market offsetting a decline in the centrifugal
product market. Internationally, significant improvements in operating
profit in Venezuela and the North Sea only partially offset declines in
continental Europe and the Middle East resulting from margin pressure
on complete unit sales.
21
<PAGE>
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
HYDROCARBON PROCESSING INDUSTRY (CONTINUED)
Dresser-Rand's revenues were $1.1 billion in 1993 and operating profit was $87
million, and were fully consolidated after the Company acquired an additional
1% interest. On a basis comparable to 1993, revenues were $1.3 billion in
1992 and operating profit was approximately $84 million. In 1993,
approximately 55% of Dresser-Rand revenues and operating profit were from
sources outside the United States.
INGERSOLL-DRESSER PUMP (IDP) - Earnings from the 49% owned joint venture were
$9 million in 1994 and $17 million in 1993. However, 1993 included $21
million of earnings from the release of LIFO inventory reserves related to
inventory contributed to IDP by the Company and sold by IDP to third parties.
IDP's revenues were $752 million in 1994 versus $761 million in 1993. IDP's
improved operating results reflect the impact of restructuring during the
start-up period. IDP operated at a small loss in 1993, excluding the $21
million LIFO adjustment, as compared to a profit for the Company's separate
Pump Operations of $27 million in 1992. This decline resulted primarily from
a recession in Europe (a major market for IDP), and the discontinuity
associated with the combination and rationalization of the separate Pump
Operations of Dresser and Ingersoll-Rand.
OTHER OPERATIONS - Revenues of $1.2 billion were up $48 million (4%) from 1993,
and operating profit of $143 million was up $16 million (13%) from 1993. All
operations except Valve and Controls, which felt the lingering impact of an
economic recession in Europe, had higher revenues and operating profit. During
1994 the Valve and Controls Division downsized its European operations to
reflect a changing market. Approximately 55% of segment revenues were from
outside North America with about 26% being from Europe in both years. A record
performance for the Wayne Division accounted for most of the increase in
operating profit.
In comparing 1993 with 1992, revenues were down $34 million (3%) and operating
profit was down $3 million (2%). Revenues from outside North America were 45%
in 1993 and 44% in 1992 with Europe accounting for 27% in 1993 and 32% in 1992.
A strong performance in 1993 by the Wayne Division with earnings up $15 million
from 1992 offsets a 23% decline in Valve and Controls earnings principally in
Europe. Also, inventory reductions in 1992, which resulted in a favorable LIFO
impact of $9 million, did not recur in 1993.
22
<PAGE>
INDUSTRY SEGMENT ANALYSIS (CONTINUED)
ENGINEERING SERVICES (M.W. KELLOGG COMPANY)
Revenues in 1994 were $1.27 billion compared with $1.22 billion in 1993 and
$1.56 billion in 1992. From 1992 to 1994, revenues from outside North America
increased from 39% to 81% of the total, reflecting the significance of large
international projects to which M.W. Kellogg provides process and execution
technology differentiation, particularly in the areas of refining, ammonia and
liquefied natural gas. In 1994, 44% of revenues came from the Mid East, Far
East and Africa area and 30% came from Latin America. The Mid East, Far East
and Africa area produced 45% of 1993 revenues and 28% of 1992 revenues.
Operating profit was $85.5 million in 1994, $85.7 million in 1993 and $76.2
million in 1992. Operating profit for 1994 included a $11.0 million gain
associated with an initial public offering by a Mexican affiliate. Operating
profit in 1992 included a $15.5 million gain from the sale of a partial interest
in a United Kingdom subsidiary. The nature of M.W. Kellogg's business presents
ongoing opportunities for equity investments, which historically have produced
similar gains. In 1992, operating profit was split between North American and
international markets. However, in 1993 and 1994, substantially all operating
profit was derived from international sources, particularly the Far East, North
Africa and Latin America.
BACKLOG OF UNFILLED ORDERS
Backlog at the end of 1994 of $1.6 billion was down $.9 billion from the end of
1993, reflecting a slowdown during 1994 in the number of new awards for global
hydrocarbon processing projects. Toward the end of 1994, global project
activity began to improve. M.W. Kellogg, Dresser-Rand and Bredero Price
currently have outstanding bids for a number of major projects that may be
awarded during 1995.
23
<PAGE>
BACKLOG OF UNFILLED ORDERS (CONTINUED)
<TABLE>
<CAPTION>
October 31,
-----------------------------
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
CONSOLIDATED BACKLOG
Oilfield Services $ 183.6 $ 196.6 $ 24.8
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand (100%) 661.0 872.6 1,066.5
Other 280.1 254.7 259.9
-------- -------- --------
941.1 1,127.3 1,326.4
-------- -------- --------
Engineering Services 1,626.1 2,478.1 1,634.7
-------- -------- --------
Eliminations (2.1) (4.4) (3.8)
-------- -------- --------
Total consolidated $2,748.7 $3,797.6 $2,982.1
-------- -------- --------
-------- -------- --------
SHARE OF BACKLOG OF
Ingersoll-Dresser
Pump Company (49%) $ 188.3 $ 178.9 $ 219.3
-------- -------- --------
-------- -------- --------
</TABLE>
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's liquidity and overall financial condition improved substantially
during 1994. Cash provided by operating activities of $354 million exceeded
capital expenditures and dividends by $50 million. Management does not expect
capital expenditures, which were $187 million in 1994, to change significantly
in 1995. Net cash provided by operations in 1994 was $180 million higher than
in 1993. Included in 1994 receipts were $57 million from a large engineering
and construction contract and $23 million from insurance companies concerning
the Parker & Parsley litigation settlement. During 1993, the Company paid $58
million related to the Parker & Parsley settlement, and income exceeded cash
collections by $43 million on a large engineering and construction contract.
Excluding the $80 million of unusual 1994 receipts and the $101 million of
unusual 1993 payments, cash flow from operations would have been $274 million
and $275 million in 1994 and 1993, respectively. In addition, the Company
received cash proceeds totaling $612 million, net of $106 million of taxes paid,
from the sales of interests in Western Atlas International, Inc. and M-I
Drilling Fluids. Management does not expect to generate cash from sales of
major business units in the foreseeable future. The Company paid off
approximately $300 million of short-term commercial paper and Baroid and
Wheatley debt. As a result, the balance of cash and cash equivalents of $515
million at October 31, 1994 was $315 million higher than at October 31, 1993.
24
<PAGE>
Liquidity, Capital Resources and Financial Condition (continued)
The Company's ratio of total debt to total debt and shareholders' equity
improved to 23/77 at October 31, 1994 compared to 39/61 at October 31, 1993.
Management believes that the cash on hand of $515 million and $302 million of
existing lines of credit, combined with cash that will be provided by future
operations, will be adequate to finance known requirements. During 1994, the
Company's debt ratings were upgraded by Standard and Poors from A- to A for
long-term debt and from A-2 to A-1 for commercial paper. Management believes
that the Company's strong financial condition and favorable credit ratings will
allow the Company to borrow additional funds should the need arise.
Legal and Environmental Matters
The Company was involved for several years in litigation brought by Parker &
Parsley Petroleum Company and related parties and in negotiations with its
insurance carriers. The Parker & Parsley litigation was settled in 1993 and the
related litigation and the insurance coverage disputes were settled in 1994.
(See Note O to Consolidated Financial Statements.)
The Company is currently involved in a number of lawsuits. See Note M to
Consolidated Financial Statements for information on these lawsuits and
evaluation of the Company's exposure. The Company has been identified as a
potentially responsible party in a number of Superfund sites. Note M to
Consolidated Financial Statements includes a review and evaluation of the
claims.
25
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
The following financial information by Industry Segment and Geographic Area for
the years ended October 31, 1994, 1993 and 1992 is an integral part of Note R to
Consolidated Financial Statements.
Certain reclassifications have been made to prior-year data to conform to the
1994 presentation. In addition, geographic operating income is now presented on
a point of destination basis as the Company believes this presentation more
accurately reflects the economics of doing business on a global basis.
INDUSTRY SEGMENT FINANCIAL INFORMATION
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 an unconsolidated affiliate in 1992. Ingersoll-
Dresser Pump Company was formed as of October 1, 1992 with the Company owning
49%. Ingersoll-Dresser is included as an unconsolidated affiliate in 1993 and
1994. The Company's Pump business that was transferred to Ingersoll-Dresser is
included as Pump Operations in 1992.
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Oilfield Services $1,653.3 $1,739.5 $1,441.5
--------- -------- ---------
Hydrocarbon Processing Industry
Dresser-Rand 1,234.5 1,118.1 40.3
Ingersoll-Dresser Pump/
Pump Operations 8.8 17.1 527.6
Other Operations 1,172.8 1,125.1 1,158.8
--------- -------- ---------
2,416.1 2,260.3 1,726.7
--------- -------- ---------
Engineering Services 1,265.2 1,215.3 1,561.5
--------- -------- ---------
Eliminations (3.9) (12.8) (6.4)
--------- -------- ---------
Total revenues $5,330.7 $5,202.3 $4,723.3
--------- -------- ---------
--------- -------- ---------
</TABLE>
26
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Share of revenues
of major joint ventures
Western Atlas (29.5%) $ - $ 320.4 $ 354.5
Dresser-Rand (50%) - - 645.2
Ingersoll-Dresser Pump (49%) 368.6 372.9 39.7
-------- -------- --------
$ 368.6 $ 693.3 $1,039.4
-------- -------- --------
-------- -------- --------
OPERATING PROFIT AND EARNINGS BEFORE TAXES
Oilfield Services
Consolidated Operations $ 156.8 $ 150.0 $ 76.4
Western Atlas Operations - 39.2 35.2
Special charges - .6 (17.1)
-------- -------- --------
156.8 189.8 94.5
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand operations 71.9 87.6 40.3
Ingersoll Dresser Pump/
Pump Operations 8.8 17.1 27.3
Other Operations 143.4 127.3 130.1
Special charges (6.2) (7.5) (49.3)
-------- -------- --------
217.9 224.5 148.4
-------- -------- --------
Engineering Services
Operations 74.5 85.7 76.2
Gain on Mexican affiliate's
public offering 11.0 - -
-------- -------- --------
85.5 85.7 76.2
-------- -------- --------
Total operating profit 460.2 500.0 319.1
Amortization of acquisition
intangibles* (27.4) (21.8) (12.9)
General corporate expenses (69.1) (88.3) (86.9)
Special charges (1.8) (98.2) (3.6)
Gain on sale of interest in
Western Atlas 275.7 - -
Retiree benefit curtailment
gain - 12.8 -
Interest expense, net (18.2) (27.8) (28.3)
-------- -------- --------
Earnings before taxes $ 619.4 $ 276.7 $ 187.4
-------- -------- --------
-------- -------- --------
</TABLE>
27
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
* AMORTIZATION OF ACQUISITION
INTANGIBLES BY SEGMENT
Oilfield Services $ 12.6 $ 7.8 $ 3.6
Hydrocarbon Processing Industry 4.5 4.3 (.9)
Engineering Services 10.3 9.7 10.2
-------- -------- --------
$ 27.4 $ 21.8 $ 12.9
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS
Oilfield Services
Consolidated Operations $1,218.5 $1,320.3 $1,013.3
Western Atlas investment - 278.2 259.0
-------- -------- --------
1,218.5 1,598.5 1,272.3
Hydrocarbon Processing Industry -------- -------- --------
Dresser-Rand 709.1 748.9 725.6
Ingersoll-Dresser Pump
investment 155.1 140.0 147.8
Other Operations 644.8 535.7 562.3
-------- -------- --------
1,509.0 1,424.6 1,435.7
-------- -------- --------
Engineering Services 204.8 273.8 220.2
-------- -------- --------
Eliminations (44.2) (21.9) (21.5)
-------- -------- --------
Total identifiable assets 2,888.1 3,275.0 2,906.7
Acquisition intangible assets* 668.4 626.7 429.2
Corporate assets 767.1 543.9 566.0
-------- -------- --------
Total assets $4,323.6 $4,445.6 $3,901.9
-------- -------- --------
-------- -------- --------
* ACQUISITION INTANGIBLE ASSETS
BY SEGMENT
Oilfield Services $ 365.6 $ 312.7 $ 104.5
Hydrocarbon Processing Industry 85.5 80.3 80.7
Engineering Services 217.3 233.7 244.0
-------- -------- --------
$ 668.4 $ 626.7 $ 429.2
-------- -------- --------
-------- -------- --------
</TABLE>
28
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
CAPITAL EXPENDITURES
Oilfield Services $ 108.4 $ 82.1 $ 66.2
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand 39.2 57.5 -
Pump Operations - - 12.7
Other Operations 35.1 33.6 40.3
-------- -------- --------
74.3 91.1 53.0
-------- -------- --------
Engineering Services 2.1 2.8 13.1
-------- -------- --------
Corporate 2.3 17.0 2.4
-------- -------- --------
Total capital expenditures $ 187.1 $ 193.0 $ 134.7
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION
Oilfield Services $ 87.6 $ 79.3 $ 68.0
-------- -------- --------
Hydrocarbon Processing Industry
Dresser-Rand (100%) 65.4 64.4 -
Pump Operations - .3 13.4
Other Operations 35.2 33.8 33.0
-------- -------- --------
100.6 98.5 46.4
-------- -------- --------
Engineering Services 18.8 20.8 20.9
-------- -------- --------
Corporate 9.3 13.2 13.9
-------- -------- --------
Total depreciation
and amortization $ 216.3 $ 211.8 $ 149.2
-------- -------- --------
-------- -------- --------
</TABLE>
29
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
GEOGRAPHIC AREA FINANCIAL INFORMATION
The financial information by Geographic Area is as follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
REVENUES BY
POINT OF ORIGIN
United States . . . . . . $3,061.8 $2,917.8 $2,648.9
Canada . . . . . . . . . 242.5 180.5 124.6
Latin America . . . . . . 409.8 252.1 177.4
Europe . . . . . . . . . 1,399.7 1,316.4 1,239.1
Mid East, Far East and
Africa . . . . . . . . 753.4 895.3 755.5
Eliminations . . . . . . (536.5) (359.8) (222.2)
-------- -------- --------
Total revenues . . . . $5,330.7 $5,202.3 $4,723.3
-------- -------- --------
-------- -------- --------
REVENUES BY
POINT OF DESTINATION
United States . . . . . . $1,801.4 $2,044.0 $2,083.6
Canada . . . . . . . . . 261.9 210.4 143.6
Latin America . . . . . . 722.3 439.7 284.8
Europe . . . . . . . . . 1,069.2 1,075.1 1,199.9
Mid East, Far East and
Africa . . . . . . . . 1,475.9 1,433.1 1,011.4
-------- -------- --------
Total revenues . . . . $5,330.7 $5,202.3 $4,723.3
-------- -------- --------
-------- -------- --------
UNITED STATES EXPORT SALES
Canada . . . . . . . . . . $ 52.5 $ 41.4 $ 26.8
Latin America . . . . . . . 291.1 184.4 129.9
Europe . . . . . . . . . . 82.5 51.0 36.5
Mid East, Far East
and Africa . . . . . . . 512.6 388.6 255.4
-------- -------- --------
Total United States
export sales . . . . $ 938.7 $ 665.4 $ 448.6
-------- -------- --------
-------- -------- --------
</TABLE>
30
<PAGE>
INDUSTRY SEGMENT AND GEOGRAPHIC AREA FINANCIAL INFORMATION - COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
GEOGRAPHIC AREA FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING PROFIT
United States . . . . . . . $ 170.8 $ 152.9 $ 11.3
Canada . . . . . . . . . . 31.2 26.2 21.9
Latin America . . . . . . . 53.4 32.6 36.2
Europe . . . . . . . . . . 58.0 103.1 103.8
Mid East, Far East and
Africa . . . . . . . . . 146.8 185.2 145.9
-------- -------- --------
Total operating profit . $ 460.2 $ 500.0 $ 319.1
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS
United States . . . . . . . $1,523.6 $1,817.4 $1,704.8
Canada . . . . . . . . . . 85.6 100.4 102.1
Latin America . . . . . . . 182.0 196.2 234.6
Europe . . . . . . . . . . 964.7 904.2 791.7
Mid East, Far East
and Africa . . . . . . . 260.9 412.3 204.9
Adjustments and
eliminations . . . . . . (128.7) (155.5) (131.4)
-------- -------- --------
Total identifiable assets $2,888.1 $3,275.0 $2,906.7
-------- -------- --------
-------- -------- --------
</TABLE>
31
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management
Report of Independent Accountants - Price Waterhouse LLP
Consolidated Statements of Earnings (Loss)
Years Ended October 31, 1994, 1993 and 1992
Consolidated Balance Sheets -
October 31, 1994 and 1993
Consolidated Statements of Shareholders' Equity -
October 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows -
Years Ended October 31, 1994, 1993 and 1992
Note A - Summary of Significant Accounting Policies
Note B - Basis of Presentation and Baroid Financial
Information
Note C - Acquisitions and Divestitures
Note D - Unconsolidated Affiliated Companies
Note E - Cash Flow Data
Note F - Long-Term Contracts
Note G - Inventories
Note H - Income Taxes
Note I - Short-Term Debt
Note J - Long-Term Debt
Note K - Employee Incentive Plans
Note L - Capital Shares
Note M - Commitments and Contingencies
Note N - Postretirement Benefits
Note O - Supplementary Information and Special Charges
Note P - Discontinued Operations
Note Q - Financial Instruments
Note R - Information by Industry Segment and
Geographic Area (Financial information is included
in Item 7. of this report.)
Note S - Quarterly Financial Data (Unaudited)
32
<PAGE>
REPORT OF MANAGEMENT
The consolidated financial statements of Dresser Industries, Inc. and
subsidiaries 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 report. 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 consolidated 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 consolidated 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 consolidated 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
consolidated 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.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Dresser Industries, Inc.
In our opinion, the consolidated financial statements and financial statement
schedule 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, 1994 and 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1994, 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 H and N 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 LLP
PRICE WATERHOUSE LLP
Dallas, Texas
December 2, 1994
34
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
Years Ended October 31,
--------------------------------
IN MILLIONS, EXCEPT PER SHARE DATA 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . $3,562.3 $3,494.3 $2,697.0
Service revenues. . . . . . . . . . . . 1,745.0 1,631.9 1,933.9
Share of earnings of unconsolidated
affiliates . . . . . . . . . . . . . 23.4 76.1 92.4
-------- -------- --------
Total revenues . . . . . . . . . . . 5,330.7 5,202.3 4,723.3
-------- -------- --------
-------- -------- --------
Cost of sales . . . . . . . . . . . . . 2,538.2 2,386.2 1,722.7
Cost of services . . . . . . . . . . . 1,533.5 1,452.0 1,799.9
-------- -------- --------
Total costs of sales and
services . . . . . . . . . . . . . 4,071.7 3,838.2 3,522.6
-------- -------- --------
-------- -------- --------
Gross earnings . . . . . . . . . . . 1,259.0 1,364.1 1,200.7
Selling, engineering, administrative
and general expenses . . . . . . . . (896.7) (973.8) (919.8)
Special charges . . . . . . . . . . . . (8.0) (105.1) (70.0)
Other income (deductions)
Interest expense . . . . . . . . . . (49.3) (44.5) (47.4)
Interest earned . . . . . . . . . . . 31.1 16.7 19.1
Gain on sale of interest in
Western Atlas . . . . . . . . . . 275.7 - -
Gain on affiliate's public offering . 11.0 - -
Other, net . . . . . . . . . . . . . (3.4) 19.3 4.8
-------- -------- --------
Earnings before income taxes and
other items below . . . . . . . . 619.4 276.7 187.4
Income taxes . . . . . . . . . . . . . (224.7) (98.8) (79.4)
Minority interest . . . . . . . . . . . (32.9) (44.3) (10.3)
-------- -------- --------
Earnings from continuing operations 361.8 133.6 97.7
Discontinued operations . . . . . . . . - - (35.3)
-------- -------- --------
Earnings before extraordinary items
and accounting changes . . . . . . 361.8 133.6 62.4
Extraordinary items . . . . . . . . . . - - (6.3)
Cumulative effect of accounting
changes . . . . . . . . . . . . . . . - - (393.8)
-------- -------- --------
Net earnings (loss). . . . . . . . . $ 361.8 $ 133.6 $ (337.7)
-------- -------- --------
-------- -------- --------
Earnings (loss) per common share
Earnings from continuing operations . $ 1.98 $ .74 $ .55
Discontinued operations . . . . . . . - - (.20)
-------- -------- --------
Earnings before extraordinary
items and accounting changes . . . 1.98 .74 .35
Extraordinary items . . . . . . . . . - - (.03)
Cumulative effect of accounting
changes . . . . . . . . . . . . . - - (2.21)
-------- -------- --------
Net earnings (loss) . . . . . . . . . $ 1.98 $ .74 $ (1.89)
-------- -------- --------
-------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
35
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
------------------
IN MILLIONS 1994 1993
------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . $ 515.0 $ 200.1
Notes and accounts receivable. . . . . . 896.2 904.0
Less allowance for doubtful
receivables. . . . . . . . . . . . . . 30.4 33.3
------- -------
865.8 870.7
Inventories
Finished products and
work in process. . . . . . . . . . . 529.9 597.9
Raw materials and supplies . . . . . . 143.2 153.3
------- -------
673.1 751.2
Deferred income taxes. . . . . . . . . . 74.9 101.8
Prepaid expenses . . . . . . . . . . . . 68.2 131.6
------- -------
Total Current Assets . . . . . . . . . 2,197.0 2,055.4
------- -------
Investments in and receivables
from unconsolidated affiliates . . . . . 240.4 491.4
Intangibles less accumulated
amortization of $94.7 in 1994
and $71.5 in 1993. . . . . . . . . . . 657.4 612.0
Deferred income taxes. . . . . . . . . . . 193.2 207.9
Other assets . . . . . . . . . . . . . . . 106.0 113.5
Property, Plant and Equipment, at cost
Land and land improvements . . . . . . . 90.5 122.2
Buildings. . . . . . . . . . . . . . . . 376.2 399.1
Machinery and equipment. . . . . . . . . 1,778.3 1,854.1
------- -------
2,245.0 2,375.4
Less accumulated depreciation. . . . . . . 1,315.4 1,410.0
------- -------
Total Properties, net . . . . . . . . . 929.6 965.4
------- -------
Total Assets . . . . . . . . . . . . $4,323.6 $4,445.6
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
36
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31,
------------------
IN MILLIONS 1994 1993
------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt and current
portion of long-term debt . . . . . . . $ 36.6 $ 308.3
Accounts payable . . . . . . . . . . . . . 361.6 372.4
Contract advances . . . . . . . . . . . . 265.4 288.3
Accrued compensation and benefits. . . . . 230.7 235.0
Accrued warranty costs . . . . . . . . . . 59.6 57.9
Income taxes . . . . . . . . . . . . . . . 92.7 102.4
Other accrued liabilities. . . . . . . . . 320.2 345.9
------- -------
Total Current Liabilities. . . . . . . . 1,366.8 1,710.2
------- -------
Employee Retirement Benefit Obligations. . . 668.2 707.6
Long-Term Debt . . . . . . . . . . . . . . . 460.6 492.2
Deferred Compensation, Insurance
Reserves and Other Liabilities . . . . . . 112.1 108.5
Minority Interest. . . . . . . . . . . . . . 83.6 154.9
Commitments and Contingencies
Shareholders' Equity -
Preferred shares, 10 million authorized. . - -
Common shares, $0.25 par value
Authorized: 400 million
Issued: 184.0 million. . . . . . . . . . 46.0 45.2
Capital in excess of par value . . . . . . 448.6 407.3
Retained earnings. . . . . . . . . . . . . 1,212.6 967.3
Cumulative translation adjustment. . . . . (63.1) (130.2)
Pension liability adjustment . . . . . . . (7.6) (13.8)
------- -------
1,636.5 1,275.8
Less treasury shares, at cost. . . . . . . 4.2 3.6
------- -------
Total Shareholders' Equity, net. . . . . 1,632.3 1,272.2
------- -------
Total Liabilities and
Shareholders' Equity . . . . . . . . . . $4,323.6 $4,445.6
------- -------
------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
37
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended October 31,
--------------------------------
IN MILLIONS, EXCEPT PER SHARE DATA 1994 1993 1992
--------------------------------
<S> <C> <C> <C>
COMMON SHARES, PAR VALUE
Beginning of year. . . . . . . . . . . . . . . . . $ 45.2 $ 45.2 $ 45.2
Sale of common stock . . . . . . . . . . . . . . . .5 - -
Shares issued under benefit and
dividend reinvestment plans. . . . . . . . . . . .3 - -
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $ 46.0 $ 45.2 $ 45.2
------- ------- -------
------- ------- -------
CAPITAL IN EXCESS OF PAR VALUE
Beginning of year. . . . . . . . . . . . . . . . . $ 407.3 $ 410.2 * $ 390.3
Sale of common stock . . . . . . . . . . . . . . . 29.5 - -
Shares issued in an acquisition. . . . . . . . . . - - 23.3
Shares issued under benefit and
dividend reinvestment plans. . . . . . . . . . . 11.8 (2.9) (3.2)
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $ 448.6 $ 407.3 $ 410.4
------- ------- -------
------- ------- -------
RETAINED EARNINGS
Beginning of year. . . . . . . . . . . . . . . . . $ 967.3 $ 935.3 * $1,772.0
Net earnings (loss). . . . . . . . . . . . . . . . 361.8 133.6 (337.7)
INDRESCO Inc. spinoff. . . . . . . . . . . . . . . - - (402.2)
Dividends on common shares** . . . . . . . . . . . (116.5) (100.2) (96.3)
Other. . . . . . . . . . . . . . . . . . . . . . . - (1.4) -
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $1,212.6 $ 967.3 $ 935.8
------- ------- -------
------- ------- -------
CUMULATIVE TRANSLATION ADJUSTMENTS
Beginning of year. . . . . . . . . . . . . . . . . $ (130.2) $ (68.2)* $ (41.8)
Translation rate changes . . . . . . . . . . . . . 67.1 (62.0) (24.7)
INDRESCO Inc. spinoff. . . . . . . . . . . . . . . - - (11.7)
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $ (63.1) $ (130.2) $ (78.2)
------- ------- -------
------- ------- -------
PENSION LIABILITY ADJUSTMENT
Beginning of year. . . . . . . . . . . . . . . . . $ (13.8) $ (4.0) $ (3.0)
Current year adjustment. . . . . . . . . . . . . . 6.2 (9.8) (1.0)
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $ (7.6) $ (13.8) $ (4.0)
------- ------- -------
------- ------- -------
TREASURY SHARES, AT COST
Beginning of year. . . . . . . . . . . . . . . . . $ (3.6) $ (15.8) $ (48.0)
Shares issued in an acquisition. . . . . . . . . . - - 20.0
Shares issued (redeemed) under
benefit and dividend
reinvestment plans . . . . . . . . . . . . . . . (.6) 12.2 12.2
------- ------- -------
End of year. . . . . . . . . . . . . . . . . . . . $ (4.2) $ (3.6) $ (15.8)
------- ------- -------
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY, END OF YEAR. . . . . . . $1,632.3 $1,272.2 $1,293.4
------- ------- -------
------- ------- -------
<FN>
* Beginning of year balance is not the same as end of prior year
due to duplication of Baroid activity for November and December
of 1993.
** Dresser $.66 per share in 1994 and Dresser $.60 per share, Baroid $.20 per
share and Wheatley $.04 per share in 1993 and 1992.
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
38
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended October 31,
--------------------------------
IN MILLIONS 1994 1993 1992
--------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss). . . . . . . . . . . . . . . . $ 361.8 $ 133.6 $ (337.6)
------- ------- --------
Adjustments to reconcile net
earnings (loss) to cash flow:
Depreciation and amortization. . . . . . . . . 216.3 211.8 149.2
Retiree benefit curtailment gain . . . . . . . - (12.8) -
Special charges. . . . . . . . . . . . . . . . 8.0 31.0 49.0
Earnings from unconsolidated
affiliates . . . . . . . . . . . . . . . . . (23.4) (76.1) (92.4)
Dividends and advances from
unconsolidated affiliates. . . . . . . . . . 28.6 23.2 9.5
Minority interest less cash
advanced to partner. . . . . . . . . . . . . (4.3) 14.8 10.3
Gain on sale of interest in
Western Atlas, net of tax. . . . . . . . . . (146.5) - -
Change in working capital. . . . . . . . . . . (70.4) (185.0) (9.5)
Other, net . . . . . . . . . . . . . . . . . . (16.0) 33.1 (32.6)
Cumulative effect of accounting
changes. . . . . . . . . . . . . . . . . . . - - 393.8
Discontinued operations losses . . . . . . . . - - 35.3
------- ------- --------
Total adjustments. . . . . . . . . . . . . (7.7) 40.0 512.6
------- ------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . 354.1 173.6 175.0
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds of sales of interests in -
Western Atlas - net of taxes paid. . . . . . . . 451.8 - -
M-I Drilling Fluids. . . . . . . . . . . . . . . 160.0 - -
Capital expenditures . . . . . . . . . . . . . . . (187.1) (193.0) (134.6)
Proceeds from disposal of assets . . . . . . . . . 6.0 20.9 83.2
Business acquisitions. . . . . . . . . . . . . . . (85.5) (337.5) (1.9)
Cash of acquired businesses. . . . . . . . . . . . - 38.3 -
Advances to discontinued operations. . . . . . . . - 5.0 (24.4)
------- ------- --------
Net cash provided (used) by
investing activities. . . . . . . . . . . . . . 345.2 (466.3) (77.7)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common shares. . . . . . . . . . . . . . . 30.0 - -
Proceeds from issuance of
long-term debt . . . . . . . . . . . . . . . . . - 538.4 64.1
Decrease in long-term debt . . . . . . . . . . . . (46.4) (301.3) (235.2)
(Decrease) increase in short-term debt . . . . . . (256.9) 217.2 7.1
Dividends paid . . . . . . . . . . . . . . . . . . (116.5) (100.2) (96.3)
------- ------- --------
Net cash provided (used) by
financing activities . . . . . . . . . . . . . (389.8) 354.1 (260.3)
------- ------- --------
EFFECT OF TRANSLATION ADJUSTMENTS
ON CASH . . . . . . . . . . . . . . . . . . . . . 5.4 (12.2) 1.0
------- ------- --------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . 314.9 49.2 (162.0)
CASH AND CASH EQUIVALENTS -
Beginning of year. . . . . . . . . . . . . . . . . 200.1 150.9* 322.2
------- ------- --------
End of year. . . . . . . . . . . . . . . . . . . . $ 515.0 $ 200.1 $ 160.2
------- ------- --------
------- ------- --------
<FN>
* Beginning of year balance is not the same as end of prior year due to
duplication of Baroid activity for November and December of 1993.
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
39
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
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. Estimated losses
are charged against earnings in the period in which such losses are identified.
Revenues from sale of products and services other than from long-term
construction contracts are recorded when the products are shipped or the
services performed.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of most
inventories is determined using either the first-in, first-out (FIFO) method or
the average cost method. The cost of certain U.S. inventories is determined
using the last-in, first-out (LIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Fixed assets are stated at cost. Depreciation is computed principally by the
straight-line method over the estimated useful lives of 10 to 40 years for
buildings and 3 to 20 years for machinery and equipment. 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. Maintenance and repairs are expensed as incurred. Major
improvements are capitalized.
40
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
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.
In the event facts and circumstances indicate the carrying amount of goodwill
associated with an acquisition is impaired, the carrying amount will be reduced
to an amount representing the estimated undiscounted future cash flows before
interest to be generated by the operation.
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' equity.
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.
RECLASSIFICATION OF PRIOR YEARS
Prior year financial statements have been reclassified to conform to 1994
presentations.
NOTE B - BASIS OF PRESENTATION AND BAROID FINANCIAL INFORMATION
BAROID AND WHEATLEY MERGERS
On January 21, 1994, a wholly owned subsidiary of Dresser Industries, Inc.
(Dresser) merged with Baroid Corporation (Baroid). Dresser issued 0.4 shares of
its common stock for each share of outstanding Baroid common stock. On August
5, 1994, a wholly owned subsidiary of Dresser merged with Wheatley TXT Corp.
(Wheatley).
41
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - BASIS OF PRESENTATION AND BAROID FINANCIAL INFORMATION (CONTINUED)
BAROID AND WHEATLEY MERGERS (CONTINUED)
Dresser issued 0.7 shares of its common stock for each share of outstanding
Wheatley common stock. Dresser issued 37.3 million shares in exchange for the
Baroid shares and 8.3 million shares in exchange for the Wheatley shares. The
"Company" as used in these consolidated financial statements refers to Dresser
and its subsidiaries including Baroid and Wheatley.
The mergers have been accounted for as poolings of interests. These
consolidated financial statements reflect the financial position and results of
operations of the combined companies as if the mergers had occurred on November
1, 1991. The Consolidated Statement of Earnings for 1992 includes Dresser and
Wheatley for the twelve months ended October 31, 1992, and Baroid for the twelve
months ended December 31, 1992. The Consolidated Statements of Earnings for
1993 and 1994 include twelve months ended October 31, 1993 for Dresser, Baroid
and Wheatley. Baroid sales of $138.5 million and net earnings of $4.2 million
for the months of November and December of 1992 are included in the Consolidated
Statements of Earnings for both 1992 and 1993.
BAROID FINANCIAL INFORMATION
Baroid has ceased filing periodic reports with the Securities and Exchange
Commission. Baroid's 8% Senior Notes remain outstanding, and the Notes are
fully guaranteed by Dresser (See Note J). Because the Notes remain outstanding,
summarized financial information of Baroid is presented as follows (in
millions):
<TABLE>
<CAPTION>
October 31, October 31,
Baroid Corporation 1994 1993
- ------------------ ----------- -----------
<S> <C> <C>
Current assets. . . . . . . . . . . . . $ 468.9 $ 388.4
Noncurrent assets . . . . . . . . . . . 362.0 340.4
-------- --------
Total . . . . . . . . . . . . . . . . $ 830.9 $ 728.8
-------- --------
-------- --------
Current liabilities . . . . . . . . . . $ 229.5 $ 272.1
Noncurrent liabilities. . . . . . . . . 281.7 186.5
Shareholders' equity. . . . . . . . . . 319.7 270.2
-------- --------
Total . . . . . . . . . . . . . . . . $ 830.9 $ 728.8
-------- --------
-------- --------
</TABLE>
42
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - BASIS OF PRESENTATION AND BAROID FINANCIAL INFORMATION (CONTINUED)
BAROID FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Twelve Months Ended
----------------------------
October December
----------------- --------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . .$ 923.2 $ 832.3 $ 759.7
------- ------- -------
------- ------- -------
Gross earnings. . . . . . . . .$ 245.8 $ 206.3 $ 197.5
------- ------- -------
------- ------- -------
Earnings from operations. . . .$ 78.2 $ 56.9 $ 46.6
Other income (deductions) . . . (17.8) (40.1) (11.3)
------- ------- -------
Earnings before taxes
and minority interests. . . . 60.4 16.8 35.3
Income taxes. . . . . . . . . . (19.8) (13.8) (11.9)
Minority interest . . . . . . . 1.9 (1.5) (1.1)
------- ------- -------
Net earnings. . . . . . . . . .$ 42.5 $ 1.5 $ 22.3
------- ------- -------
------- ------- -------
</TABLE>
A provision of $30 million for merger expenses is included in other income
(deductions) in 1993.
NOTE C - ACQUISITIONS AND DIVESTITURES
MERGERS OF DRESSER INDUSTRIES, INC., BAROID CORPORATION AND WHEATLEY TXT
CORPORATION
During 1994, Dresser merged with Baroid Corporation and with Wheatley TXT Corp.
Each merger was accounted for as a pooling of interests. See Note B for more
information. Separate results of the operations of the three companies are
summarized below (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Revenues
Dresser. . . . . . . . . . $4,255.5 $4,290.5 $3,886.0
Baroid . . . . . . . . . . 923.2 832.3 759.7
Wheatley . . . . . . . . . 152.0 79.5 77.6
------- ------- -------
Combined . . . . . . . . . $5,330.7 $5,202.3 $4,723.3
------- ------- -------
------- ------- -------
1994 1993 1992
------- ------- -------
Earnings from continuing
operations
Dresser. . . . . . . . . $ 316.8 $ 126.7 $ 69.9
Baroid . . . . . . . . . 42.5 1.5 22.3
Wheatley . . . . . . . . 2.5 5.4 5.5
------- ------- -------
Combined . . . . . . . . $ 361.8 $ 133.6 $ 97.7
------- ------- -------
------- ------- -------
Discontinued operations
Dresser. . . . . . . . . . $ - $ - $ (35.3)
------- ------- -------
------- ------- -------
</TABLE>
43
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - ACQUISITIONS AND DIVESTITURES (CONTINUED)
MERGERS OF DRESSER INDUSTRIES, INC., BAROID CORPORATION AND WHEATLEY TXT
CORPORATION (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Earnings before extraordinary
items and accounting changes
Dresser. . . . . . . . . $ 316.8 $ 126.7 $ 34.6
Baroid . . . . . . . . . 42.5 1.5 22.3
Wheatley . . . . . . . . 2.5 5.4 5.5
------- ------- -------
Combined . . . . . . . . $ 361.8 $ 133.6 $ 62.4
------- ------- -------
------- ------- -------
Extraordinary items
Dresser. . . . . . . . . . $ - $ - $ (6.3)
------- ------- -------
------- ------- -------
Cumulative effect of
accounting changes
Dresser. . . . . . . . . $ - $ - $ (393.8)
------- ------- -------
------- ------- -------
Net earnings (loss)
Dresser. . . . . . . . . . $ 316.8 $ 126.7 $ (365.5)
Baroid . . . . . . . . . . 42.5 1.5 22.3
Wheatley . . . . . . . . . 2.5 5.4 5.5
------- ------- -------
Combined . . . . . . . . . $ 361.8 $ 133.6 $ (337.7)
------- ------- -------
------- ------- -------
</TABLE>
As discussed in Note O, non-recurring expenses of $31 million attributable to
the Baroid merger have been included in the combined results of operations for
the year ended October 31, 1993, and non-recurring expenses of $10.7 million
attributable to the Wheatley merger have been included in the combined results
of operations for the year ended October 31, 1994.
OTHER ACQUISITIONS
In December 1993, Wheatley acquired Axelson, Inc. for $79.4 million cash and
acquired Tom Wheatley Valve Company for $6.1 million cash, a $1.7 million
promissory note and liabilities assumed of $2.0 million. Axelson is a
manufacturer of downhole rod pumps and safety equipment used in the production
of oil and Tom Wheatley Valve Company produces valves for the oil and gas
industry. These acquisitions were accounted for as purchases, and their results
of operations are included in the Consolidated Statement of Earnings from the
acquisition dates. The pro forma effect of these acquisitions is not
significant.
44
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - ACQUISITIONS AND DIVESTITURES (CONTINUED)
OTHER ACQUISITIONS (CONTINUED)
Effective February 1, 1993, Dresser 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, Dresser 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.
The following unaudited pro forma summary presents information as if the Bredero
Price and TK Valve 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
1993 1992
-------- --------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . $5,292.0 $4,981.9
------- -------
------- -------
Earnings before extraordinary item
and accounting changes . . . . . . . $ 142.1 $ 92.3
------- -------
------- -------
Net earnings (loss). . . . . . . . . . $ 142.1 $ (307.8)
------- -------
------- -------
Per share:
Earnings before extraordinary
item and accounting changes. . . . $ .79 $ .52
------- -------
------- -------
Net earnings (loss). . . . . . . . . $ .79 $ (1.73)
------- -------
------- -------
</TABLE>
45
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - ACQUISITIONS AND DIVESTITURES (CONTINUED)
OTHER ACQUISITIONS (CONTINUED)
On January 29, 1993 Baroid issued 17.7 million shares of its common stock,
equivalent to 7.1 million of the Company's shares, in exchange for all of the
outstanding common stock of Sub Sea International Inc. (Sub Sea). Sub Sea
provides diving services, engineering and unmanned, remotely operated underwater
vehicles to inspect, construct, maintain and repair offshore drilling rigs and
platforms, underwater pipelines and other offshore oil and gas facilities.
The acquisition of Sub Sea was accounted for as a pooling of interests, and the
financial statements for periods prior to the Sub Sea merger have been restated
to reflect the financial position and results of operations of the combined
companies as if they had merged on November 1, 1991.
In 1993, Baroid acquired three small businesses and Wheatley acquired one small
business for cash totaling $32.5 million. These acquisitions were accounted for
as purchases, and their results of operations are included in the Consolidated
Statement of Earnings from the acquisition dates. The pro forma effect of these
acquisitions is not significant.
In 1992, Dresser 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 acquisition is
not significant.
DIVESTITURES
Western Atlas International, Inc. was formed May 1, 1987 when the Company and
Litton Industries combined their respective Dresser Atlas and Resources Group
operations. On January 28, 1994, the Company sold its 29.5% interest in Western
Atlas International, Inc. to a wholly-owned subsidiary of Litton Industries for
$358 million in cash and $200 million in 7.5% notes. The 7.5% notes were paid
in full in September, 1994. The Company recognized a gain of $275.7 million
($146.7 million net of tax) on the sale.
46
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - ACQUISITIONS AND DIVESTITURES (CONTINUED)
DIVESTITURES (CONTINUED)
Following the Baroid merger (See Note B) and in accordance with an agreement
reached with the Antitrust Division of United States Department of Justice, the
Company sold its 64% interest in M-I Drilling Fluids Company to Smith
International, Inc. for $160 million in cash effective February 28, 1994. The
Company recognized a $2.6 million pre-tax gain on the sale.
In September 1994, the Company sold its 50% interest in IRI International
Corporation and recognized a pre-tax gain of $4.6 million. Due to the sale, the
Company was able to recognize $17.5 million of tax benefits applicable to
previously unrecognized losses associated with receivables from IRI.
NOTE D - UNCONSOLIDATED AFFILIATED COMPANIES
The Company has several investments in less than majority owned affiliates and
the nature and extent of these investments change over time. A summary of the
impact of these investments on the consolidated financial statements follows (in
millions):
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Share of earnings of
unconsolidated affiliates
Ingersoll-Dresser Pump $ 8.8 $ 17.1 $ 2.2
Western Atlas (See Note C) - 39.2 35.2
Dresser-Rand - - 40.3
Other affiliates 14.6 19.8 14.7
------- ------- -------
$ 23.4 $ 76.1 $ 92.4
------- ------- -------
------- ------- -------
Dividends received $ 13.1 $ 13.5 $ 7.1
------- ------- -------
------- ------- -------
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Investments in and receivables
from unconsolidated affiliates
Ingersoll-Dresser Pump $ 155.1 $ 136.2
Western Atlas (See Note C) - 278.2
Other affiliates 85.3 77.0
------- -------
$ 240.4 $ 491.4
------- -------
------- -------
</TABLE>
The Company's share of earnings for Ingersoll-Dresser Pump and Dresser-Rand
includes adjustments made by the Company for differences in the timing of
adoption of accounting changes and for expenses retained by the Company.
47
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)
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 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
Consolidated Statement of Earnings. The Company's share of operating results
for the month of October, 1992 and all of 1993 and 1994 is included in share of
earnings of unconsolidated affiliates.
Summarized financial information is as follows (in millions):
<TABLE>
<CAPTION>
October 31,
1994 1993
-------- --------
<S> <C> <C>
Current assets . . . . . . . . . . . . $ 354.4 $ 357.7
Noncurrent assets. . . . . . . . . . . 180.9 183.2
------- -------
Total assets . . . . . . . . . . . $ 535.3 $ 540.9
------- -------
------- -------
Current liabilities. . . . . . . . . . $ 170.8 $ 218.0
Noncurrent liabilities . . . . . . . . 47.2 46.9
Partner's equity -
Contributed capital and retained
earnings . . . . . . . . . . . . . 344.7 311.6
Cumulative translation adjustment. . (27.4) (35.6)
------- -------
317.3 276.0
------- -------
Total liabilities and partner's
equity . . . . . . . . . . . . . . $ 535.3 $ 540.9
------- -------
------- -------
<CAPTION>
Years Ended
October 31,
------------------
1994 1993
-------- ---------
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . $ 752.2 $ 761.0
------- -------
------- -------
Gross profit . . . . . . . . . . . . . $ 170.9 $ 159.1
------- -------
------- -------
Income from continuing operations
and before extraordinary items . . . $ 30.3 $ 3.3
------- -------
------- -------
Net income . . . . . . . . . . . . . . $ 30.3 $ 3.3
------- -------
------- -------
</TABLE>
48
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - UNCONSOLIDATED AFFILIATED COMPANIES (CONTINUED)
INGERSOLL-DRESSER PUMP COMPANY (CONTINUED)
The Company's share of pre-tax earnings for 1993 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.
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 unamortized goodwill, at the exercise date. That option is scheduled
to expire on April 30, 1995. The Company and Ingersoll-Rand have agreed to
amend the joint venture agreement to extend the exercise period to April 30,
1997, and to change the date at which the option price is determined. Under the
amendment, the option price will be the amount at January 31, 1995 or at the end
of the month during which Ingersoll-Rand gives notice of its intention to
exercise the option, whichever amount is lower. 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.
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 and since then Dresser-Rand is included as a
fully consolidated subsidiary with a 49% minority interest.
Summarized financial information for the period when equity accounting was
applied is as follows (in millions):
<TABLE>
<CAPTION>
Year Ended
September 30,
1992
-------------
<S> <C>
Net sales. . . . . . . . . . . . . . . . . $1,290.3
-------
-------
Gross profit . . . . . . . . . . . . . . . $ 244.8
-------
-------
Income from continuing operations
before extraordinary items . . . . . . . $ 74.7
-------
-------
Net income . . . . . . . . . . . . . . . . $ 77.8
-------
-------
</TABLE>
49
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - CASH FLOW DATA
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>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash payments for
income taxes . . . . . . . $ 210.3 $ 116.7 $ 105.2
------- ------- ------
------- ------- ------
Cash payments for
interest on debt . . . . . $ 46.3 $ 40.2 $ 48.1
------- ------- ------
------- ------- ------
Cash payments for interest
on tax settlements . . . . $ 1.3 $ 14.0 $ -
------- ------- ------
------- ------- ------
Acquisition of Businesses
Assets acquired. . . . . . $ 54.4
Liabilities assumed. . . . (9.2)
Common Shares issued from
Treasury . . . . . . . . (43.3)
------
Net cash paid. . . . . $ 1.9
------
------
</TABLE>
The increase in cash payments for income taxes in 1994 is due to a $106.2
million payment for the gain on sale of the 29.5% interest in the Western Atlas
joint venture.
Working capital changes on the Consolidated Statements of Cash Flows were as
follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
(Increase) decrease in
receivables. . . . . . . . $ (74.7) $ (41.7) $ (38.2)
(Increase) decrease in
inventories. . . . . . . . 15.3 (85.4) 12.8
(Increase) decrease in
deferred taxes and
prepaid expenses . . . . . 84.6 (78.1) (34.6)
Increase (decrease) in
accrued liabilities and
accounts payable . . . . . (59.5) (1.4) 43.7
Increase (decrease) in
contract advances. . . . . (24.4) 55.1 44.6
Increase (decrease) in
income taxes payable . . . (11.7) (33.5) (37.8)
------ ------ ------
$ (70.4) $(185.0) $ (9.5)
------ ------ ------
------ ------ ------
</TABLE>
50
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - 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 and labor. The
value of such items was $138.7 million, $112.4 million and $114.0 million for
the years ended October 31, 1994, 1993 and 1992, respectively.
Amounts billed in excess of revenues recognized to date are included in current
liabilities under contract advances.
NOTE G - INVENTORIES
Inventories on the LIFO method were $94.7 million and $77.9 million at October
31, 1994 and 1993, respectively. Under the average cost method, inventories
would have increased by $96.8 million and $92.2 million at October 31, 1994 and
1993, respectively.
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 $126.1
million and $175.7 million at October 31, 1994 and 1993, respectively.
Note H - 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 Consolidated
Statement of Earnings includes a charge of $40.8 million or $.24 per share for
the cumulative effect of the change.
51
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES (CONTINUED)
The domestic and foreign components of earnings before income taxes of
continuing operations consist of the following (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Domestic . . . . . . . . . . $ 494.2 $ 135.7 $ 79.4
Foreign. . . . . . . . . . . 125.2 141.0 108.0
------- ------- -------
Total earnings before
income taxes . . . . . . $ 619.4 $ 276.7 $ 187.4
------- ------- -------
------- ------- -------
</TABLE>
The components of the provision for income taxes of continuing operations are as
follows (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current
U.S. Federal . . . . . . . $ 129.5 $ 49.6 $ 48.9
State. . . . . . . . . . . 5.1 3.2 2.0
Foreign. . . . . . . . . . 60.1 59.9 54.6
------- ------- -------
194.7 112.7 105.5
------- ------- -------
Deferred
U.S. Federal . . . . . . . 33.7 (19.1) (28.8)
Foreign. . . . . . . . . . (3.7) 5.2 2.7
------- ------- -------
30.0 (13.9) (26.1)
------- ------- -------
Total income tax provision $ 224.7 $ 98.8 $ 79.4
------- ------- -------
------- ------- -------
</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 in the 1992 charge to earnings referred
to above.
Since the Company plans to continue to finance foreign operations and expansion
through reinvestment of undistributed earnings of its foreign subsidiaries
(approximately $750 million at October 31, 1994), 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.
52
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES (CONTINUED)
The following is a reconciliation of income taxes at the U.S. Federal income tax
rate (35% for 1994, 34.8% for 1993 and 34% for 1992) to the effective provision
for income taxes for continuing operations reflected in the Consolidated
Statements of Earnings (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Provision for income taxes
at statutory rates . . . . . . . . $ 216.8 96.3 63.7
Minority interest's share of
domestic partnership earnings. . . (3.8) (7.9) (3.1)
Enacted tax rate change. . . . . . . - (8.7) -
Withholding taxes and
foreign income taxes
on branch profits. . . . . . . . . 20.6 16.2 15.1
Utilization of foreign
tax credits. . . . . . . . . . . . (24.8) (25.2) (15.1)
Foreign losses not benefited . . . . 10.4 8.8 12.4
Foreign taxes in excess of U.S. . .
rate on foreign earnings . . . . . 2.2 5.4 2.9
Additional taxes for
repatriation of foreign
earnings . . . . . . . . . . . . . - 4.1 4.9
Nondeductible merger expenses. . . . - 7.9 -
Book/tax basis differential
of acquired property . . . . . . . 4.7 - (1.4)
Alternative minimum tax credit . . . (7.3) - -
Book/tax basis differences
on Western Atlas divesture . . . . 27.5 - -
Change in valuation allowance
attributable to:
IRI divestiture. . . . . . . . . (17.5) - -
Baroid domestic operations . . . (17.3) - -
State and local income taxes,
net of U.S. Federal income
tax benefit. . . . . . . . . . . . 3.3 2.1 1.3
Other. . . . . . . . . . . . . . . . 9.9 (.2) (1.3)
------- ------- -------
Provision for income taxes . . . . $ 224.7 $ 98.8 $ 79.4
------- ------- -------
------- ------- -------
</TABLE>
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) relate to the following (in millions):
53
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Post retirement benefits . . $ (2.8) $ 5.8 $ (11.2)
Reserve for litigation
settlement . . . . . . 22.4 (24.3) -
Restructuring costs. . . . . 12.3 6.1 (17.3)
Enacted tax rate change. . . - (8.7) -
Bad debt . . . . . . . . . . 20.2 .7 -
Decrease in valuation
allowance on prior year's
temporary differences. . . (34.8) - -
Other items including
warranty, insurance and
similar accruals . . . . . 12.7 6.5 2.4
------- ------- -------
Total deferred taxes . . $ 30.0 $ (13.9) $ (26.1)
------- ------- -------
------- ------- -------
</TABLE>
The components of the net deferred tax asset as of October 31, were as follows
(in millions):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Post retirement benefits . . . . . . $ 213.6 $ 210.8
Warranty reserves. . . . . . . . . . 10.4 10.1
Inventory. . . . . . . . . . . . . . 22.5 34.8
Restructuring costs. . . . . . . . . .2 12.5
Insurance reserves . . . . . . . . . 33.8 36.3
Bad debt . . . . . . . . . . . . . . 2.8 23.0
Pension. . . . . . . . . . . . . . . 1.8 6.5
Deferred compensation. . . . . . . . 18.8 18.7
Reserve for litigation settlement. . 1.9 24.3
Net operating loss carryforwards . . 22.6 26.2
Other items. . . . . . . . . . . . . 21.1 28.1
Valuation allowance. . . . . . . . . (21.9) (54.3)
------ ------
Total deferred tax asset . . . . . 327.6 377.0
Deferred tax liability:
Depreciation and amortization. . . . (55.5) (65.8)
Other items. . . . . . . . . . . . . (4.0) (1.5)
------ ------
Total deferred liability . . . . . (59.5) (67.3)
------ ------
Net deferred tax asset . . . . . . . . $ 268.1 $ 309.7
------ ------
------ ------
</TABLE>
At October 31, 1994, the Company had foreign operating loss carryforwards of
approximately $60 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
54
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES (CONTINUED)
liabilities of their respective foreign entity. Approximately $35 million of
these losses will carryforward indefinitely while the remaining amounts expire
at various dates from 1995 to 2004.
The net change of $32.4 million in the valuation allowance for deferred tax
assets relates to reductions in the valuation allowance for the IRI divestiture,
the elimination of the Baroid group domestic valuation allowance due to its
inclusion in the Dresser Industries, Inc. consolidated income tax return, offset
by an increase in the valuation allowance for foreign loss carryforwards.
NOTE I - SHORT-TERM DEBT
Short-term debt at October 31, 1994 consists of $33.1 million of borrowings from
U.S. and foreign banks.
The Company has short-term committed U.S. bank lines of credit totaling $125
million. Such lines provide for borrowings at prevailing prime 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, 1994 the amount available and unused
under these arrangements aggregated $176.5 million.
NOTE J - LONG-TERM DEBT
Long-term debt is summarized as follows (in millions):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Notes, 6.25%, due 2000 . . . . . . . . $ 300.0 $ 300.0
Senior notes, 8%, due 2003 . . . . . . 149.1 149.0
Bank credit facility . . . . . . . . . - 21.0
Canadian credit facility, 4.6% . . . . - 6.9
Revolving credit facility, 8%. . . . . - 10.2
Other loan agreements, 3.5% to
11.75%, due in installments to
2002 . . . . . . . . . . . . . . . . 15.0 21.9
------ ------
464.1 509.0
Less portion due within one year . . . 3.5 16.8
------ ------
$ 460.6 $ 492.2
------ ------
------ ------
</TABLE>
55
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - LONG-TERM DEBT (CONTINUED)
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 and TK Valve (See Note C). The interest is
payable semi-annually on May 15 and November 15.
During 1992 and 1993, the Company redeemed $195.6 million of Sinking Fund
Debentures. Losses totaling $9.8 million were recorded net of taxes of $3.5
million as an extraordinary loss in the 1992 Consolidated Statement of Earnings.
The Company's long-term debt includes $150 million of 8% Senior Notes which
Baroid sold in April, 1993 via a public offering. On August 5, 1994, the
Company completed a consent solicitation whereby the holders of the Notes
consented to certain amendments to the Indenture which conformed various
restrictive covenants to the Company's 6.25% notes. In return, Dresser fully and
unconditionally guaranteed payment of principal and interest on the Notes.
Baroid entered into a three year reverse interest rate swap beginning May 7,
1993 and ending May 7, 1996. Under terms of the swap agreement, the Company
receives a fixed interest payment of 4.9% and pays six-month LIBOR for the prior
six months on $150 million. The effect of the reverse interest rate swap is to
convert the first three years of the 8% Senior Notes from a fixed rate
obligation to a floating rate obligation (composed of a fixed payment of 3.1%
plus a floating payment based on six-month LIBOR for the prior six months). If
on the date to set the interest rate, six-month LIBOR is less than 4.9%, the
Company pays an effective floating rate of less than 8.0% and conversely if six-
month LIBOR is greater than 4.9% the Company pays an effective floating rate
greater than 8.0%. The effect of the swap is accrued monthly based upon current
LIBOR estimates. The swap agreement increased interest expense $1.0 million in
1994 and decreased interest expense $1.2 million in 1993.
Maturities of long-term debt in the fiscal years after October 31, 1994 are as
follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Through 1999 . . . . . . . . . . . $ 10.0
After 1999 . . . . . . . . . . . . 454.1
------
$ 464.1
------
</TABLE>
56
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - EMPLOYEE INCENTIVE PLANS
STOCK COMPENSATION PLAN
Dresser's 1992 Stock Compensation Plan 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 prices for options granted during 1993 and
1994 increase on the annual anniversary dates of grants.
Baroid and Wheatley had performance incentive plans that provided for granting
options to purchase common stock. In connection with the merger, Dresser
assumed the outstanding options to purchase stock on the same terms and
conditions as were applicable under the Baroid and Wheatley plans. Such options
were converted into 1.5 million Dresser options upon the closings of the
mergers.
Changes in outstanding options during the three years ended October 31, 1994 and
options exercisable at October 31, 1994, reflecting assumed Baroid and Wheatley
options, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Outstanding at November 1, 1991. . . . . . . . .1,927,860
Granted at $12.650 to $20.000. . . . . . . . . 496,449
Exercised at $4.475 to $21.250 . . . . . . . . (200,538)
Canceled or expired. . . . . . . . . . . . . . (231,853)
---------
Outstanding at October 31, 1992. . . . . . . . .1,991,918
Adjustment for year-end change . . . . . . . . 56,000
Granted at $14.375 to $21.000. . . . . . . . .1,692,850
Exercised at $4.475 to $21.250 . . . . . . . . (348,630)
Canceled or expired. . . . . . . . . . . . . . (106,373)
---------
Outstanding at October 31, 1993. . . . . . . . .3,285,765
Granted at $17.375 to $21.000. . . . . . . . . 662,263
Exercised at $5.583 to $21.980 . . . . . . . . (419,445)
Canceled or expired. . . . . . . . . . . . . . (475,631)
---------
Outstanding at October 31, 1994. . . . . . . . .3,052,952
---------
---------
Exercisable at $4.481 to $26.477 . . . . . . . .1,495,416
---------
---------
</TABLE>
57
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - EMPLOYEE INCENTIVE PLANS (CONTINUED)
At October 31, 1994, a total of 8.5 million Dresser common shares were reserved
for granting of future options under the 1992 plan.
NOTE L - CAPITAL SHARES
Changes in issued common shares during the three years ended October 31, 1994
are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Shares at November 1, 1991 . . . . . . . . . . . 180,744
Issued under employee benefit and
dividend reinvestment plans. . . . . . . . . 66
-------
Shares at October 31, 1992 . . . . . . . . . . . 180,810
Issued under employee benefit and
dividend reinvestment plans. . . . . . . . . 152
-------
Shares at October 31, 1993 . . . . . . . . . . . 180,962
Sold in a public offering by Wheatley. . . . . 2,100
Issued under employee benefit and
dividend reinvestment plans. . . . . . . . . 986
-------
Shares at October 31, 1994 . . . . . . . . . . . 184,048
-------
-------
</TABLE>
Changes in common shares held in treasury during the three years ended
October 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Treasury shares at November 1, 1991. . . . . . . 3,498
Issued in connection with the purchase
of AVA International . . . . . . . . . . . . (1,925)
Issued under benefit and dividend
reinvestment plans . . . . . . . . . . . . . (697)
-------
Treasury shares at October 31, 1992. . . . . . . 876
Issued under benefit and dividend
reinvestment plans . . . . . . . . . . . . . (686)
-------
Treasury shares at October 31, 1993 . . . . . . 190
Exchanged under benefit and dividend
reinvestment plans . . . . . . . . . . . . . 6
-------
Treasury shares at October 31, 1994 . . . . . . 196
-------
-------
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS PLAN
The Company has a plan under which it issues one Preferred Stock Purchase Right
for each outstanding share of the Company's Common Stock. The Rights expire in
2000 unless they are redeemed earlier.
58
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - CAPITAL SHARES (CONTINUED)
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.
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 M - COMMITMENTS AND CONTINGENCIES
LITIGATION
In 1988, certain individuals purchased from a third party a construction
equipment dealership which sold Dresser products. The Company was not a party
to the transaction, except to the extent that it was a party to the
Distributorship Agreement with the dealership. The dealership was purchased
prior to the announcement by the Company of the intent to form the Komatsu
Dresser joint
59
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION (CONTINUED)
venture. The plaintiffs sued the Company claiming that the Company failed to
disclose to them its intent to enter into the joint venture and that the value
of the dealership, which they subsequently sold at a loss, was impaired by the
formation of the joint venture. In April, 1994, the jury returned a verdict
awarding the plaintiffs compensatory damages of $6.5 million and punitive
damages of $4.0 million. This case has been appealed to the U.S. Court of
Appeals, Eleventh Circuit.
The purchasers of the Company's former hand tool division sued the Company for
fraud in connection with the October 1983 transaction alleging, among other
things, that the Company knowingly failed to disclose certain alleged
liabilities associated with the hand tool business. The plaintiffs previously
had been awarded in arbitration a $1.3 million adjustment to the purchase price
paid by them to acquire the division. In May, 1994, the jury returned a verdict
awarding the plaintiffs $4 million in compensatory damages and $50 million in
punitive damages. On October 13, 1994, the Court ordered a reduction of damages
from $54 million to $12 million. The Company filed a notice of appeal on
November 7, 1994.
Based on a review of the current facts and circumstances, management has
provided for what is believed to be a reasonable estimate of the exposure to
loss associated with these matters. While acknowledging the uncertainties of
litigation, management believes that these matters will be resolved without a
material effect on the Company's financial position or results of operations.
ASBESTOSIS LITIGATION
The Company has approximately 40,000 pending claims (approximately 3,000 new
claims filed in fiscal 1994 compared to 12,000 filed in fiscal 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. Approximately half of the pending claims allege
injury as a result of exposure to asbestos contained in refractory products with
the other half alleging injury as a result of exposure to asbestos gaskets and
packings used in other products manufactured by the Company.
60
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ASBESTOSIS LITIGATION (CONTINUED)
Since 1976, the Company has tried, settled or summarily disposed of
approximately 19,000 such claims for a total cost of $40 million including legal
fees. The Company has entered into agreements with insurance carriers covering
approximately 60% of the pending claims, including all refractory claims,
approximately 75% of all claims settled, and is in negotiation with insurance
carriers for coverage of the remainder of the claims. Management has no reason
to believe the carriers will not be able to meet their obligations pursuant to
the agreements which based on current estimates is approximately $25 million.
Under the agreements, insurance covers approximately 67% of legal fees and any
settlements or awards. The net cost to the Company after recoveries from the
carriers has been approximately $13 million. Of the 19,000 claims settled,
approximately 70% relate to cases involving refractory products. Refractory
product claims filed subsequent to July 31, 1992, 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 sustained 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 case currently is on appeal to the
Mississippi Supreme Court. Any ultimate loss would be covered by the agreement
with the insurance carriers described above.
On December 19, 1994, the Company sustained an adverse judgement in Baltimore,
Maryland in which the Company's share of damages awarded was $.9 million. The
trial is not yet concluded. In later stages of the trial the jury will decide
the amount of punitive damages. The Company believes there are serious errors
in the trial to date and intends to contest final verdicts vigorously on post-
trial motions and by appeal if necessary. Any ultimate loss would be covered by
the agreement with the insurance carriers described above.
61
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ASBESTOSIS LITIGATION (CONTINUED)
Subsequent to October 31, 1994 and during the first quarter of 1995,
approximately 6,000 new non-refractory cases have been filed against the Company
in Texas. While no investigation of these cases has occurred due to their
recent nature, the Company does not believe they will be different from its
other non-refractory cases which have traditionally been settled for
substantially less than its refractory cases.
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.
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 has
been completed, and a trial date is expected to be set during early 1995.
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.
ENVIRONMENTAL MATTERS
The Company is identified as a potentially responsible party in 85 Superfund
sites. Primary responsibility for nine of these sites was assumed by INDRESCO
Inc. The Company has entered into an agreement to settle the Bio-Ecology site
for $.9 million, and the agreement is before the Court for approval. At two of
the remaining
62
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ENVIRONMENTAL MATTERS (CONTINUED)
sites, Operating Industries and PAB Oil and Chemical, the Company may be
responsible for remediation costs currently estimated at between $.3 million and
$1 million each. The Company previously has entered into settlements in respect
of eighteen Superfund sites at a total cost of $.4 million. Based upon the
Company's historical experience with similar claims and management's
understanding of the facts and circumstances relating to the sites other than
Bio-Ecology, Operating Industries and PAB Oil and Chemical, management believes
that the other situations will be resolved without material effect on the
Company's financial position or results of operations.
SHAREHOLDER LITIGATION
On December 17, 1993, a shareholder filed a purported class action against
Baroid, certain Baroid Directors, and Dresser. The Complaint alleges, among
other things, that the directors of Baroid breached their fiduciary duties to
Baroid stockholders by approving a merger agreement which provided for the
acquisition of Baroid by Dresser at an allegedly inadequate price. Plaintiff
charges Dresser with aiding and abetting this alleged breach of fiduciary duty.
Plaintiff seeks, among other forms of relief, damages in an unspecified amount.
On February 28, 1994, all defendants moved to dismiss the Complaint. To date,
plaintiff has not responded to defendant's motion to dismiss. Based upon
management's knowledge of the facts and circumstances which gave rise to the
action and the contents of the proxy statements furnished to shareholders of
both Dresser and Baroid and the overwhelming approval of the merger by
shareholders of both companies, management believes the action 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 is 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.
63
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED)
OTHER LITIGATION (CONTINUED)
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.
OTHER
The Company and certain subsidiaries are contingently liable as guarantors of
obligations aggregating approximately $20 million at October 31, 1994.
Total rental and lease expense charged to earnings was $99.0 million in 1994,
$100.4 million in 1993 and $89.4 million in 1992. At October 31, 1994, the
aggregate minimum annual obligations under noncancelable leases were: $49.3
million for 1995; $35.3 million for 1996; $21.0 million for 1997; $14.2 million
for 1998; $12.4 million for 1999; and $53.0 million for all subsequent years.
The lease obligations related primarily to general and sales office space and
warehouses.
NOTE N - POSTRETIREMENT 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 Consolidated
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):
64
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
BENEFITS OTHER THAN PENSIONS (CONTINUED)
<TABLE>
<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 . . . . . . . $ 2.05
-------
-------
</TABLE>
During 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 are being recognized as a reduction
in benefit expense on a straight line basis over periods ranging from 12 years
to 18 years.
The liability of the U.S. plans at October 31, 1994 and 1993 was as follows (in
millions):
<TABLE>
<CAPTION>
1994 1993
------- --------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . $ 268.9 $ 306.6
Fully eligible, active plan
participants . . . . . . . . . . . 43.8 72.0
Other active plan participants . . . 62.1 121.1
------ -------
Total accumulated postretirement
benefit obligation . . . . . . . 374.8 499.7
Unamortized gains from plan
amendments . . . . . . . . . . . . 188.7 198.5
Unrecognized net gain (loss) . . . . 80.5 (28.2)
------ -------
Accrued postretirement benefit liability $ 644.0 $ 670.0
------ -------
------ -------
</TABLE>
Accrued compensation and benefits on the Consolidated Balance Sheet include the
current portion of the benefit liability.
65
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
BENEFITS OTHER THAN PENSIONS (CONTINUED)
The net periodic postretirement benefit expense for the years ended October 31,
1994, 1993 and 1992 included the following components (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
Service cost for benefits
earned . . . . . . . . . . . $ 4.5 $ 7.6 $ 11.8
Interest cost on accumulated
postretirement benefit
obligation . . . . . . . . . 27.1 40.4 53.0
Net amortization of
unrecognized gain. . . . . . (15.7) (9.8) -
------- ------- -------
Net periodic postretirement
benefit cost*. . . . . . . . $ 15.9 $ 38.2 $ 64.8
------- ------- -------
------- ------- -------
Actual benefits paid . . . . . $ 24.8 $ 22.1 $ 22.7
------- ------- -------
------- ------- -------
<FN>
*Includes $8.1 million in 1994, $14.3 million in 1993 and $20 million in 1992
for Dresser-Rand Company which was not consolidated in 1992.
</TABLE>
Assumptions used to calculate the Accumulated Postretirement Benefit Obligation
were as follows:
Discount rate -
October 31, 1994 . . . . . . 8.25%
October 31, 1993 . . . . . . 7.0%
October 31, 1992 . . . . . . 8.5%
Health care trend rate (weighted based on participant count) -
October 31, 1994 - 12% for 1994 declining to 5.5% in 2003 and level
thereafter.
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 gain of $80.5 million at October 31, 1994 and an
unrecognized net loss of $(28.2) million at October 31, 1993.
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, 1994 by
66
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
BENEFITS OTHER THAN PENSIONS (CONTINUED)
approximately $29 million and would increase the net postretirement benefit cost
for 1994 by approximately $3 million.
DEFINED BENEFIT PENSION PLANS
The Company has numerous defined benefit pension plans covering certain
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, 1994.
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' equity. The Company had recorded
additional liabilities of $34.5 million and $39.9 million, intangible assets of
$21.6 million and $15.9 million, and adjustments to shareholders' equity, net of
income taxes, of $7.6 million and $13.8 million as of October 31, 1994 and 1993,
respectively.
Pension expense includes the following (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost for benefits earned $ 22.8 $ 19.4 $ 18.2
Interest cost on projected
benefit obligation . . . . . . 38.2 36.9 32.7
Actual return on plan assets . . (42.0) (36.0) (35.0)
Net amortization and deferral. . 2.5 .7 (1.6)
------- ------ -------
Net pension expense. . . . . . . $ 21.5 $ 21.0 $ 14.3
------- ------ -------
------- ------ -------
</TABLE>
67
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
DEFINED BENEFIT PENSION PLANS (CONTINUED)
Cash contributions to the plans in 1994 were $28.8 million.
The funded status of the plans on the measurement dates of October 31, 1994 and
August 1, 1993 was as follows (in millions):
<TABLE>
<CAPTION>
PLANS (PRIMARILY FOREIGN) WITH ASSETS
EXCEEDING ACCUMULATED BENEFITS
1994 1993
-------- --------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation . . . . . $ 136.2 $ 116.6
------- -------
------- -------
Accumulated benefit obligation. . . $ 138.1 $ 119.5
------- -------
------- -------
Projected benefit obligation . . . . . $ 158.3 $ 134.5
Plan assets at fair value. . . . . . . 236.9 212.6
------- -------
Projected benefit obligation
under plan assets. . . . . . . . . . 78.6 78.1
Unrecognized net (gain) loss . . . . . (10.3) (16.7)
Prior service cost not yet recognized
in net periodic pension cost . . . . 2.1 2.0
Unrecognized transition net asset. . . (20.3) (21.1)
------- -------
Prepaid pension costs recognized
as of the measurement dates. . . . . $ 50.1 $ 42.3
------- -------
------- -------
PLANS (PRIMARILY DOMESTIC) WITH
ACCUMULATED BENEFITS EXCEEDING ASSETS
1994 1993
------- -------
Actuarial present value of benefit
obligations:
Vested benefit obligation . . . . . $ 271.4 $ 268.0
------- -------
------- -------
Accumulated benefit obligation. . . $ 288.2 $ 291.8
------- -------
------- -------
Projected benefit obligation . . . . . $ 371.6 $ 364.6
Plan assets at fair value. . . . . . . 230.8 212.8
------- -------
Projected benefit obligation
over plan assets . . . . . . . . . . (140.8) (151.8)
Unrecognized net loss. . . . . . . . . 48.6 56.5
Prior service cost not yet recognized
in net periodic pension expense. . . 26.7 24.1
Unrecognized transition obligation . . 6.9 5.3
Adjustment required to recognize
minimum liability. . . . . . . . . . (34.5) (39.9)
------- -------
Pension liability recognized as of
the measurement dates. . . . . . . . $ (93.1) $ (105.8)
------- -------
------- -------
</TABLE>
68
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
DEFINED BENEFIT PENSION PLANS (CONTINUED)
On the Consolidated Balance Sheet, "Other assets" include prepaid pension costs
and "Accrued compensation and benefits" include the current portion of the
pension liabilities.
The actuarial assumptions used in determining funded status of the plans were as
follows:
<TABLE>
<CAPTION>
U.S. PLANS 1994 1993
-------------- ------------
<S> <C> <C>
Discount rate. . . . . . 8.25% 7.0%
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 5.5% 3.5% to 4.0%
FOREIGN PLANS 1994 1993
-------------- ------------
Discount rate. . . . . . 6.5% to 12.5% 5.0% to 10.5%
Expected long-term rate of
return on assets . . . 6.0% to 13.5% 7.5% to 12.0%
Rate of increase in
compensation levels. . 4.5% to 11.0% 3.0% to 7.5%
</TABLE>
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 $11.7
million, $17.5 million and $11.3 million in 1994, 1993 and 1992, 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. The Company currently accrues the cost of some benefits covered by
SFAS 112 but not all.
69
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE N - POSTRETIREMENT BENEFITS (CONTINUED)
POSTEMPLOYMENT BENEFITS (CONTINUED)
The Company will adopt SFAS 112 in the first quarter of 1995, and will incur a
charge to earnings of approximately $25 million ($16 million, net of tax or
$.09 per share) for the cumulative effect of the accounting change.
NOTE O - SUPPLEMENTARY 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
182.8 million in 1994, 180.4 million in 1993 and 178.4 million in 1992. Common
stock equivalents do not have a material effect on earnings per share.
Depreciation of property, plant and equipment charged to earnings amounted to
$190.7 million in 1994, $189.6 million in 1993 and $133.1 million in 1992. The
increase from 1992 to 1993 is primarily due to the consolidation of Dresser-
Rand.
Amortization of intangibles was $25.6 million in 1994, $22.2 million in 1993 and
$16.1 million in 1992 and is included in selling, engineering, administrative
and general expenses.
Research and development costs charged to earnings were $102.5 million in 1994,
$98.5 million in 1993 and $31.1 million in 1992. The increases in 1993 costs
compared to 1992 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>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Gain on business disposals $ 7.1 $ - $ 18.2
Retiree medical benefit
plan changes - 12.8 -
Gains on sales of assets 3.1 4.8 -
Foreign exchange
gain (loss) (13.6) 1.7 (13.4)
-------- -------- --------
$ (3.4) $ 19.3 $ 4.8
-------- -------- --------
-------- -------- --------
</TABLE>
70
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE O - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES (CONTINUED)
Special charges consist of the following (in millions):
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Parker & Parsley - insurance
recovery/litigation
settlement $ (18.4) $ 65.0 $ -
Drill bit pricing litigation 9.5 - -
Restructuring charges 6.2 13.2 70.0
Merger expenses 10.7 31.0 -
Retiree medical plan
curtailment gain - (4.1) -
------- ------- -------
$ 8.0 $ 105.1 $ 70.0
------- ------- -------
------- ------- -------
</TABLE>
In 1993, the Company recorded expenses of $65.0 million to cover settlement,
legal fees and expenses of the Parker & Parsley and related litigation. In April
1994, the Company entered into settlement agreements with certain insurance
carriers relating to the $65 million Parker & Parsley settlement. The Company
had previously received approximately $13.5 million from other insurance
carriers in connection with the litigation. Pursuant to the settlement
agreements, the Company received approximately $33.8 million, which, after legal
fees and a provision for other potential litigation settlements, resulted in a
gain of $18.4 million. Legal actions arising from the same facts in the Parker
& Parsley litigation filed by Glyn Snell, et. al., were settled in June 1994,
whereby the Company paid $7.5 million in August 1994.
The Company paid $9.5 million in February 1994 for the settlement of drill bit
pricing litigation.
In the fourth quarter of 1994, the Company accrued expenses of $6.2 million
primarily for personnel reduction costs associated with restructuring its Valve
and Controls operations. Of the costs, $2.5 million was paid in 1994 and $3.7
million will be paid in 1995. The Company expects annual cost savings of $7.6
million in 1995 and $9.1 million thereafter.
Also, in the fourth quarter of 1994, the Company recorded expenses associated
with the Wheatley merger (See Note C) totaling $10.7 million, including
professional fees and costs related to eliminating duplicate facilities.
71
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE O - SUPPLEMENTARY INFORMATION AND SPECIAL CHARGES (CONTINUED)
In 1993, the Company recorded expenses of $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. These special charges reduced segment operating
profit by $6.9 million and the remaining $67.2 million was reflected as
nonsegment expenses.
The 1993 Special Charges also included expenses associated with the Baroid
merger (See Notes B and C) totaling $31 million and consisting of the following
(in millions):
<TABLE>
<S> <C>
Employee severance costs $ 11.3
Foreign taxes associated with change of
ownership. . . . . . . . . . . . . . . . . 8.0
Professional fees. . . . . . . . . . . . . . 5.0
Write-off of debt issuance cost. . . . . . . 3.7
Advisory fees paid to Baroid officers. . . . 3.0
-------
$ 31.0
-------
-------
</TABLE>
Baroid's Board of Directors concluded that the Advisory fee of $3 million was
warranted in view of the time and service required of certain officers to
negotiate and bring about the Merger and the fact that, as a result of their
time and service, no investment banker was needed or hired by Baroid to
represent Baroid in negotiating the Merger. Such amounts were determined to be
reasonable in relation to avoided costs of investment banking fees.
In 1992, the Company recorded expenses totaling $70.0 million. The expenses
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.
NOTE P - 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. The Company sold its Environmental Products business
to FLS Miljo A/S, a Danish company.
72
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE P - DISCONTINUED OPERATIONS
In March 1992, Baroid completed the sale of its Atlas Bradford subsidiary for
approximately $10.2 million in cash. In July 1992, Baroid completed the sale of
its Shaffer subsidiary for approximately $36 million in cash. Estimated future
losses of Atlas Bradford and Shaffer were accrued in the estimated loss on
disposition of $16.0 million that was provided for in 1991.
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 Discontinued Operations is as follows (in millions):
<TABLE>
1992
---------
<S> <C>
Net revenues . . . . . . . . . . . . . $ 499.5
--------
--------
Loss before income taxes . . . . . . . $ (39.2)
Income tax expense (benefit) . . . . . (3.9)
--------
Net loss . . . . . . . . . . . . . . $ (35.3)
--------
--------
</TABLE>
NOTE Q - FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments other than long-term debt
approximates fair value because of the short maturity of those instruments. The
carrying amounts of long-term debt were approximately $33.4 million higher than
its fair value at October 31, 1994 and approximately $25.0 million less than its
fair value at October 31, 1993. The estimated cost to terminate the interest
rate swap (See Note J) was $5.5 million at October 31, 1994. Fair values of the
debt and the cost to terminate the interest rate swap were determined by
reference to market interest rates.
The Company has cash and cash equivalents held in currencies other than local
currencies, and current and future receivables and payables to be settled in
currencies other than local currencies. These financial assets, liabilities and
commitments create exposure to potential foreign exchange gains and losses
arising on future
73
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE Q - FINANCIAL INSTRUMENTS (CONTINUED)
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 balance sheet exposure. The
fair value of foreign exchange contracts is based on year-end quoted rates for
contracts with similar terms and maturity dates. At October 31, 1994, the
Company had $248 million of forward exchange contracts outstanding, 73% of which
were in European currencies, 20% of which were in Japanese Yen, and 7% of which
were in other currencies. The fair value of the Company's foreign exchange
contracts is not significant.
NOTE R - INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The Company's industry segments are outlined below. See Notes B, D and P for
information about the mergers of Dresser, Baroid and Wheatley and changes in
joint venture operations.
OILFIELD SERVICES
The Segment provides products and services for oil and gas exploration,
drilling, production and transmission. Principal products and services of
consolidated operations include drilling fluid systems, drill bits,
measurement-while-drilling services, directional drilling services, downhole
production tools, pipe coating, ball valves and underwater pre-drilling and
production services. The Western Atlas unconsolidated joint venture, in
which the Company sold its interest in 1994, provided integrated reservoir
description services, seismic services, core analysis and wireline logging
services.
HYDROCARBON PROCESSING INDUSTRY
The Segment designs, manufactures and markets highly engineered products for
oil and gas producers, transporters, processors, distributors and users.
Principal products, services and systems of consolidated operations include
compressors, turbines, generators, electric motors, engines and power
systems, valves and controls, instruments, meters, pipe couplings, blowers
and gasoline dispensing systems along with related repair services. The
Ingersoll-Dresser Pump unconsolidated joint venture provides pumps along
with related repair services.
74
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE R - INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA (CONTINUED)
ENGINEERING SERVICES
The Segment consists of the M. W. Kellogg Company which provides
engineering, construction and related services primarily to the hydrocarbon
process industries. M.W. Kellogg provides its own proprietary technologies
and the advanced technologies of others to facilitate the environmentally
acceptable conversion of raw hydrocarbons and other chemicals into value-
added end products. Services include the development of processes,
engineering design, construction and procurement for energy-related
complexes. Kellogg participates in projects involving liquefied natural gas
(LNG) plants and receiving terminals, refining and petrochemical activities,
ammonia/fertilizer facilities and the retrofitting of energy-related
complexes for environmental purposes.
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. The intersegment and
intergeographic area revenues are eliminated. Revenues also include royalties
and share of earnings or losses of unconsolidated affiliates.
Operating profit consists of total revenues less total operating expenses and
includes share of earnings or losses from unconsolidated affiliates. General
corporate expenses, amortization of acquisition intangibles, interest income and
expense, and other income and expenses 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 AND GEOGRAPHIC AREA FINANCIAL INFORMATION
The Financial Information by Industry Segment and Geographic Area for the years
ended October 31, 1994, 1993 and 1992 is included in Management's Discussion and
Analysis included elsewhere in this report and is an integral part of this Note
to Consolidated Financial Statements.
75
<PAGE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE S - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------
January 31 April 30 July 31 October 31
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
IN MILLIONS, EXCEPT PER SHARE DATA
1994
Net revenues . . . . . $1,396.2 $1,324.6 $1,193.8 $1,416.1
Gross earnings . . . . 335.8 314.2 277.8 331.2
Net earnings . . . . $ 195.3(1) $ 54.5 $ 30.2 $ 81.8(2)
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per
common share . . . . $ 1.08 $ .29 $ .16 $ .45
-------- -------- -------- --------
-------- -------- -------- --------
1993
Net revenues . . . . . $1,153.3 $1,300.8 $1,313.5 $1,434.7
Gross earnings . . . . 278.2 342.0 347.0 396.9
Net earnings . . . . $ 24.9 $ 9.5 $ 45.3 $ 53.9(3)
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per
common share . . . . $ .14 $ .05 $ .25 $ .30
-------- -------- -------- --------
-------- -------- -------- --------
<FN>
(1) Includes gain on sale of interest in Western Atlas joint venture of $147
million.
(2) Includes gain on sale of interest in IRI International of $22.1 million and
Wheatley merger expense of $7.9 million.
(3) Includes expenses incurred for merger of Baroid Corporation of $30.6
million.
</TABLE>
76
<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.
77
<PAGE>
(d) Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate section of this 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), 33-48165 (filed May 27, 1992), 33-52067 (filed January 28, 1994) and
33-52989 (filed April 6, 1994), and to the Post-Effective Amendments on Form
S-8 to Registration Statement on Form S-4 Nos. 33-50563 (filed February 4,
1994) and 33-54099 (filed August 31, 1994):
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.
78
<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 27, 1995.
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 27, 1994.
SIGNATURE TITLE
--------- -----
*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 *RAY L. HUNT
(William E. Bradford, Director) (Ray L. Hunt, Director)
*SAMUEL B. CASEY, JR. *J. LANDIS MARTIN
(Samuel B. Casey, Jr., Director) (J. Landis Martin, Director)
*LAWRENCE S. EAGLEBURGER *LIONEL H. OLMER
(Lawrence S. Eagleburger, Director) (Lionel H. Olmer, Director)
*RAWLES FULGHAM *JAY A. PRECOURT
(Rawles Fulgham, Director) (Jay A. Precourt, Director)
*JOHN A. GAVIN *RICHARD W. VIESER
(John A. Gavin, Director) (Richard W. Vieser, Director)
*By: /s/ Stanley E. McGlothlin
Stanley E. McGlothlin
(Attorney-In-Fact)
<PAGE>
FORM 10-K
ITEM 14(A)(1) AND (2) AND ITEM 14(D)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED OCTOBER 31, 1994
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:
Page
Number
-------
Report of Independent Accountants . . . . . . . . . . . . . . 34
Consolidated Statements of Earnings(Loss)--
Years ended October 31, 1994, 1993, and 1992. . . . . . . . 35
Consolidated Balance Sheets--
October 31, 1994 and 1993 . . . . . . . . . . . . . . . . . 36
Consolidated Statements of Shareholders' Equity--
Years ended October 31, 1994, 1993 and 1992 . . . . . . . . 38
Consolidated Statements of Cash Flows--
Years ended October 31, 1994, 1993, and 1992. . . . . . . . 39
Notes to Consolidated Financial Statements. . . . . . . . . . 40
The following consolidated financial statement schedule of Dresser Industries,
Inc. is included herein:
Schedule II--Valuation and Qualifying Accounts
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.
Separate financial statements are not presented for any of the unconsolidated
affiliates because none constitutes a significant subsidiary.
Summarized financial statement information for Ingersoll-Dresser Pump Company
(49% owned) and for the other unconsolidated affiliates in the aggregate is
presented in Note D to Consolidated Financial Statements included in Item 8.
F-2
<PAGE>
SCHEDULE II - 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, 1994
For doubtful receivables classified
as current assets . . . . . . . . . . . $ 33.3 $ 6.4 $ 1.1 $ 10.4 (C) $ 30.4
------- ------- ------- ------- -------
------- ------- ------- ------- -------
For deferred tax asset valuation
allowance classified as noncurrent
assets. . . . . . . . . . . . . . . . . $ 54.3 $ - $ - $ 32.4 $ 21.9
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Year ended October 31, 1993
For doubtful receivables classified
as current assets . . . . . . . . . . . $ 27.0 $ 7.5 $ 5.2 (A) $ 6.4 (C) $ 33.3
------- ------- ------- ------- -------
------- ------- ------- ------- -------
For deferred tax asset valuation
allowance classified as noncurrent
assets. . . . . . . . . . . . . . . . . $ 42.9 $ 11.4 $ - $ - $ 54.3
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Year ended October 31, 1992
For doubtful receivables classified
as current assets . . . . . . . . . . . $ 22.5 $ 7.5 $ 2.9 (B) $ 5.9 (C) $ 27.0
------- ------- ------- ------- -------
------- ------- ------- ------- -------
For deferred tax asset valuation
allowance classified as noncurrent
assets. . . . . . . . . . . . . . . . . $ - $ 42.9 $ - $ - $ 42.9
------- ------- ------- ------- -------
------- ------- ------- ------- -------
<FN>
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) Receivable write-offs and reclassifications, net of recoveries.
</TABLE>
F-3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
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. (Incorporated by reference
to Exhibit 3(b) to Registrant's Form 10-K for the year ended
October 31, 1992).
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 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).
4.3 Form of Indenture between Baroid Corporation and Texas Commerce
Bank National Association, as Trustee, for 8% Senior Notes due
2003. (Incorporated by reference to Exhibit 4.01 to the
Registration Statement on Form S-3 of Baroid Corporation,
Registration No. 33-60174).
4.4 Form of Supplemental Indenture between Dresser Industries,
Inc., Baroid Corporation and Texas Commerce Bank National
Association, as Trustee, for 8% Guaranteed Senior Notes due
2003. (Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-4 filed by Baroid Corporation, Registration
No. 33-53077).
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, 1994.
10.5 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).
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
- ------- -----------
10.6 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).
10.7 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).
10.8 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).
10.9 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).
10.10 Amendment No. 1 to the Supplemental Executive Retirement Plan of
Dresser Industries, Inc. (Incorporated by reference to Exhibit
10.12 to Registrant's Form 10-K for the year ended October 31,
1993).
10.11 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).
10.12 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).
10.13 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).
10.14 Dresser Industries, Inc. 1989 Director Retirement Plan, as
amended by restatement effective July 15, 1993. (Incorporated
by reference to Exhibit 10.16 to Registrant's Form 10-K for the
year ended October 31, 1993).
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
- ------- -----------
10.15 Form of Election for Deferral of 1989 Director Retirement Plan
Awards pursuant to the Dresser Industries, Inc. 1989 Director
Retirement Plan. (Incorporated by reference to Exhibit 10.17
to Registrant's Form 10-K for the year ended October 31, 1993).
10.16 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).
10.17 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).
10.18 The M. W. Kellogg Company Long Term Performance Plan.
(Incorporated by reference to Exhibit D to Registrant'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).
10.19 The M. W. Kellogg Company Annual Incentive Plan. (Incorporated
by reference to Exhibit C to Registrant'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).
10.20 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).
10.21 Amendments No.1 and 2 to Dresser Industries, Inc. 1992 Stock
Compensation Plan. (Incorporated by reference to Exhibit A to
Registrant'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).
10.22 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).
10.23 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).
10.24 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).
10.25 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).
* Filed Herewith
<PAGE>
INDEX TO EXHIBITS (CONT.)
EXHIBIT DESCRIPTION
- ------- -----------
*10.26 The M. W. Kellogg Company Executive Benefits Program.
10.27 The 1995 Executive Incentive Compensation Plan. (Incorporated
by reference to Exhibit B to Registrant'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).
*21 Subsidiaries of Registrant at October 31, 1994.
*23 Consent of Price Waterhouse LLP.
*24 Powers of Attorney.
*27 Financial Data Schedule.
* Filed Herewith
<PAGE>
DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED
RETIREMENT PLAN
As Amended
Effective May 1, 1994
<PAGE>
DRESSER INDUSTRIES, INC.
CONSOLIDATED SALARIED RETIREMENT PLAN
AS AMENDED, EFFECTIVE MAY 1, 1994
INDEX
PREAMBLE: EFFECTIVE DATES . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
.01 Accrued Benefit. . . . . . . . . . . . . . . . . . . . . . . . 1
.02 Actuarial (or Actuarially) Equivalent. . . . . . . . . . . . . 2
.03 Actuary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
.04 Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
.05 Annuity Starting Date. . . . . . . . . . . . . . . . . . . . . 2
.06 Associated Company . . . . . . . . . . . . . . . . . . . . . . 3
.07 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . 3
.08 Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
.09 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
.10 Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
.11 Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
.12 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 4
.13 Continuous Service . . . . . . . . . . . . . . . . . . . . . . 6
.14 Covered Compensation . . . . . . . . . . . . . . . . . . . . . 7
.15 Credit Service . . . . . . . . . . . . . . . . . . . . . . . . 8
.16 Early Retirement Date. . . . . . . . . . . . . . . . . . . . . 9
.17 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 9
.18 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
.19 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
.20 Employment Commencement Date . . . . . . . . . . . . . . . . . 10
.21 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
.22 Final Average Monthly Earnings . . . . . . . . . . . . . . . . 10
.23 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . 11
.24 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . 12
.25 Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
.26 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
.27 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . . 12
.28 Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
.29 Named Fiduciary. . . . . . . . . . . . . . . . . . . . . . . . 13
.30 Normal Retirement Age. . . . . . . . . . . . . . . . . . . . . 13
.31 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . 13
.32 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . 13
.33 Period of Absence. . . . . . . . . . . . . . . . . . . . . . . 13
.34 Period of Service. . . . . . . . . . . . . . . . . . . . . . . 13
.35 Period of Severance. . . . . . . . . . . . . . . . . . . . . . 14
.36 Permitted Percentage . . . . . . . . . . . . . . . . . . . . . 14
.37 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
.38 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
.39 Predecessor Plan . . . . . . . . . . . . . . . . . . . . . . . 14
.40 Previous Plan. . . . . . . . . . . . . . . . . . . . . . . . . 15
.41 Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 15
.42 Qualified Domestic Relations Order . . . . . . . . . . . . . . 15
.43 Reemployment Commencement Date . . . . . . . . . . . . . . . . 17
.44 Related Entity . . . . . . . . . . . . . . . . . . . . . . . . 17
.45 Severance from Service Date. . . . . . . . . . . . . . . . . . 17
.46 Social Security Pension. . . . . . . . . . . . . . . . . . . . 18
.47 Social Security Retirement Age . . . . . . . . . . . . . . . . 19
.48 Total Disability or Totally Disabled . . . . . . . . . . . . . 19
.49 Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
.50 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 21
.51 Vesting Service. . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II - PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . 22
.01 Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III - CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 23
.01 Employer Contributions . . . . . . . . . . . . . . . . . . . . 23
.02 Participant Contributions. . . . . . . . . . . . . . . . . . . 23
.03 Refund of Nondeductible Employer Contributions . . . . . . . . 23
ARTICLE IV - BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
.01 Normal Retirement. . . . . . . . . . . . . . . . . . . . . . . 25
.02 Immediate Early Retirement . . . . . . . . . . . . . . . . . . 32
.03 Deferred Early Retirement. . . . . . . . . . . . . . . . . . . 35
.04 Disability Benefits. . . . . . . . . . . . . . . . . . . . . . 36
.05 Other Termination Benefits . . . . . . . . . . . . . . . . . . 39
.06 Spouse's Death Benefit for Persons Participating in
Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 41
.07 Spouse's Death Benefit for Persons Not Participating in
Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 42
.08 Established Benefits . . . . . . . . . . . . . . . . . . . . . 43
.09 Nonduplication . . . . . . . . . . . . . . . . . . . . . . . . 44
.10 Postponed Retirement Benefit . . . . . . . . . . . . . . . . . 45
.11 Notice 88-131 and Revenue Procedure 89-65. . . . . . . . . . . 46
ARTICLE V - OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
.01 Standard Benefit Form. . . . . . . . . . . . . . . . . . . . . 48
.02 Options Available. . . . . . . . . . . . . . . . . . . . . . . 48
(a) Life-Only Option. . . . . . . . . . . . . . . . . . . . . 48
(b) Joint and Survivorship Options. . . . . . . . . . . . . . 49
(c) Guaranteed Period Option. . . . . . . . . . . . . . . . . 49
(d) Level Income Option . . . . . . . . . . . . . . . . . . . 49
-ii-
<PAGE>
.03 Making Elections . . . . . . . . . . . . . . . . . . . . . . . 50
.04 Lump-Sum Payment . . . . . . . . . . . . . . . . . . . . . . . 52
.05 Distribution Rules . . . . . . . . . . . . . . . . . . . . . . 53
.06 Consent to Benefit Commencement. . . . . . . . . . . . . . . . 56
ARTICLE VI - ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 57
.01 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
.02 Committee Operations . . . . . . . . . . . . . . . . . . . . . 57
.03 Committee Duties and Powers. . . . . . . . . . . . . . . . . . 57
.04 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
.05 Disqualification . . . . . . . . . . . . . . . . . . . . . . . 58
.06 Plan Manager . . . . . . . . . . . . . . . . . . . . . . . . . 58
.07 For the Protection of the Committee and Manager. . . . . . . . 59
.08 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
.09 Qualified Domestic Relations Orders. . . . . . . . . . . . . . 59
.10 Withholding on Distributions . . . . . . . . . . . . . . . . . 60
.11 Rollover Provisions. . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VII - EMPLOYERS. . . . . . . . . . . . . . . . . . . . . . . . . . 61
.01 Current. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
.02 New Employers. . . . . . . . . . . . . . . . . . . . . . . . . 61
.03 Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . 61
.04 Terminating Participation. . . . . . . . . . . . . . . . . . . 61
.05 Corporate Changes. . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VIII - AMENDMENT OR TERMINATION. . . . . . . . . . . . . . . . . . 63
.01 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 63
.02 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 63
.03 Insufficient Funds and Allocation Thereof. . . . . . . . . . . 66
ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 68
.01 Spendthrift. . . . . . . . . . . . . . . . . . . . . . . . . . 68
.02 No Employment Contract . . . . . . . . . . . . . . . . . . . . 68
.03 Communications . . . . . . . . . . . . . . . . . . . . . . . . 68
.04 Employee Data and Verification . . . . . . . . . . . . . . . . 69
.05 Incompetents . . . . . . . . . . . . . . . . . . . . . . . . . 69
.06 Presumptions . . . . . . . . . . . . . . . . . . . . . . . . . 69
.07 Nondiscrimination. . . . . . . . . . . . . . . . . . . . . . . 70
.08 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 70
.09 Advisors Not Fiduciaries . . . . . . . . . . . . . . . . . . . 70
.10 Purchase of Annuity Contracts. . . . . . . . . . . . . . . . . 70
.11 Recovery of Payments Made by Mistake . . . . . . . . . . . . . 71
.12 Representations Contrary to Plan . . . . . . . . . . . . . . . 71
-iii-
<PAGE>
ARTICLE X - SPECIAL RULES. . . . . . . . . . . . . . . . . . . . . . . . . 72
.01 Reemployment . . . . . . . . . . . . . . . . . . . . . . . . . 72
.02 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . 74
.03 Military Service . . . . . . . . . . . . . . . . . . . . . . . 75
.04 Lump-Sum Cash Out. . . . . . . . . . . . . . . . . . . . . . . 76
.05 Pre- and Post-Plan Termination Restrictions. . . . . . . . . . 80
.06 Absolute Limitation. . . . . . . . . . . . . . . . . . . . . . 81
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . 81
(b) Collective Treatment. . . . . . . . . . . . . . . . . . . 91
(c) Annual Benefit Limit. . . . . . . . . . . . . . . . . . . 91
(d) Overall Limit . . . . . . . . . . . . . . . . . . . . . . 92
(e) Special Rules Applicable to Computation of Overall Limit. 93
.07 Claims and Appeals Procedures. . . . . . . . . . . . . . . . . 94
.08 Plan Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 94
.09 Special Transfer or Reemployment Situations. . . . . . . . . . 95
.10 Employment Past Normal Retirement Date and Return to . . . . . 96
Active Employment
.11 Top-Heavy Requirements . . . . . . . . . . . . . . . . . . . . 98
.12 Sales, Transfers and Other Dispositions. . . . . . . . . . . . 99
ARTICLE XI - COORDINATION WITH PREDECESSOR PLANS . . . . . . . . . . . . . 101
.01 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
.02 Predecessor Plans Frozen as of April 30, 1986. . . . . . . . . 101
.03 Marion Power Shovel. . . . . . . . . . . . . . . . . . . . . . 103
.04 McGraw-Edison Companies. . . . . . . . . . . . . . . . . . . . 107
.05 Waukesha Engine Division . . . . . . . . . . . . . . . . . . . 108
.06 Reliance Insurance Company . . . . . . . . . . . . . . . . . . 109
.07 International-Hough Division . . . . . . . . . . . . . . . . . 110
.08 Galino: Power Transmission: And Electra Motors Service
Coordination Frozen as of 5/1/86 . . . . . . . . . . . . . . . 110
.09 Jeffrey Benefit Frozen as of 5/1/86. . . . . . . . . . . . . . 112
.10 Pilot Retirement Provisions. . . . . . . . . . . . . . . . . . 113
.11 Bay State Abrasives. . . . . . . . . . . . . . . . . . . . . . 116
.12 Dresser-Rand Company, Acquisition of Machinery Repair
Division, Boston, Massachusetts. . . . . . . . . . . . . . . . 116
.13 Acquisition of Norris City Operation . . . . . . . . . . . . . 117
.14 Acquisition of Baker Hughes Tool Diamond
Products Company . . . . . . . . . . . . . . . . . . . . . . . 118
.15 Early Retirement Factors for Predecessor Plan Benefits
Components . . . . . . . . . . . . . . . . . . . . . . . . . . 118
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ARTICLE XII - JOINT VENTURES AND SALES . . . . . . . . . . . . . . . . . . 122
.01 Ideco Joint Venture. . . . . . . . . . . . . . . . . . . . . . 122
.02 M-I Drilling Fluids Co.. . . . . . . . . . . . . . . . . . . . 123
.03 Dresser-Rand Company . . . . . . . . . . . . . . . . . . . . . 125
.04 Kongsberg Dresser Power, Inc.. . . . . . . . . . . . . . . . . 127
.05 Western Atlas. . . . . . . . . . . . . . . . . . . . . . . . . 128
.06 Swaco Geolograh. . . . . . . . . . . . . . . . . . . . . . . . 130
.07 B-J Titan. . . . . . . . . . . . . . . . . . . . . . . . . . . 133
.08 Dresser Leasing Sale . . . . . . . . . . . . . . . . . . . . . 134
.09 Reliance Standard Life . . . . . . . . . . . . . . . . . . . . 135
.10 Bay State Abrasives/General Abrasive Divestiture . . . . . . . 136
.11 Komatsu Dresser Company. . . . . . . . . . . . . . . . . . . . 136
.12 Leroi Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 138
.13 Environmental Products Sale. . . . . . . . . . . . . . . . . . 139
EXHIBIT A
List of Current Employer Corporations Under Section 7.01. . . . . . . 140
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PREAMBLE: EFFECTIVE DATES
Dresser Industries, Inc. hereby adopts and publishes a restatement of the
Dresser Industries, Inc. Consolidated Salaried Retirement Plan (the "Plan"), as
amended effective May 1, 1989, except where otherwise noted, as herein set forth
and as it may be amended from time to time. This is a pension plan for those of
its salaried employees who perform services in or for its operations within the
United States of America and certain U.S. citizens and residents employed
abroad. Any person whose benefit amount was determined under a previous version
of this Plan shall continue to have benefits computed under such previous
version, without regard to whether benefit payments have actually commenced as
of the Effective Date.
Any terms used herein in a particular gender or number shall, unless the
context clearly indicates otherwise, be construed to include other genders or
numbers.
ARTICLE I - DEFINITIONS
The following words and phrases used herein shall have the following
meaning unless a different meaning is clearly required by the context.
1.01 "Accrued Benefit" shall mean, as of any date, the benefit to which the
Participant would be entitled in the form of a single life annuity at his
Normal Retirement Date were he to retire or incur a Severance from
Service Date on the date in question and be fully vested. Provided,
however, the Accrued Benefit shall be limited as provided in Section 4.11
of this Plan. Further provided, if the Participant is an Employee after
his Normal Retirement Age, his Accrued Benefit shall be the benefit to
which the Participant would be entitled in the form of a single life
annuity if he were to retire on the date in question.
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1.02 "Actuarial (or Actuarially) Equivalent", when used with respect to a
specified benefit payable in a form other than a lump-sum provided for in
Section 10.04, the amount of benefit of a different type or payable from
a different age which can be provided at the same cost as such specified
benefit (including any survivor benefits related thereto), using an
interest rate assumption of 5% per annum and unisex mortality rates
derived from the 1971 Group Annuity Mortality Table weighted 90% male and
10% female as to active and retired Participants. Solely for the purpose
of defining Actuarial Equivalent for lump-sum calculations, factors
stated in Section 10.04 shall apply. Section 1.42 defines Actuarial
Equivalent for purposes of calculations related to Qualified Domestic
Relations Orders.
1.03 "Actuary" shall mean the actuary or actuarial firm or firms used by the
Company or an Insurer hereunder to compute contributions and values under
this Plan. The Actuary shall be an Enrolled Actuary within the meaning
of ERISA.
1.04 "Age" shall mean a person's age on the most recent anniversary of his
birth. For this purpose, February 28 is deemed the anniversary of
February 29 each year that is not a leap year. This definition of Age is
intended only for use when determining eligibility for normal and early
retirement, as well as spouse's death benefits. However, for computing
Actuarial Equivalence and to determine early retirement reduction
factors, exact age in years and months is calculated.
1.05 "Annuity Starting Date" means:
(a) the first day of the first period for which a benefit is payable as
an annuity,
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(b) in the case of a benefit not payable in the form of an annuity, the
first day on which the events have occurred which entitle the
Participant to such benefit, or
(c) where a benefit is to be received by reason of Total Disability, the
first day of the first period for which a benefit is to be received
by reason of disability shall be treated as the Annuity Starting
Date only if such benefit is not an auxiliary benefit. An auxiliary
benefit is a benefit as defined in Section 1.401(a)-20 Q&A 10(c)(1)
of the regulations under the Code.
1.06 "Associated Company" shall mean any corporation which is a member of a
controlled group of corporations (within the meaning of section 414(b) of
the Code) which includes the Company, any trade or business under common
control (within the meaning of section 414(c) of the Code) and on or
after May 1, 1983 shall include any organization which is a member of an
affiliated service group (within the meaning of section 414(m) of the
Code) and any other entity required to be aggregated with the Company
under section 414(o).
1.07 "Beneficiary" shall mean the person or persons last designated by the
Participant in writing to the Manager or his appointee to receive any
death benefits that may become payable hereunder. If no such designation
is made, Beneficiary shall mean the person or persons entitled to receive
the proceeds of the principal group life insurance program maintained for
the Participant by his Employer. If a Beneficiary is no longer living
when death benefits would otherwise become payable to him, they shall be
paid to any alternate Beneficiary designated as above by the Participant.
Where no designated or deemed Beneficiary is alive on
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the date for payment of death benefits, they shall be paid as described
in Section 9.06. As to a married Participant or unless otherwise
required under a Qualified Domestic Relations Order, the Beneficiary
shall be the spouse of the Participant on the earlier of the Annuity
Starting Date or the date of death unless the Participant has elected a
non-spouse Beneficiary with written spousal consent as witnessed by a
Plan representative or Notary Public and provided on the form and in the
manner prescribed by the Company.
1.08 "Board" shall mean the Board of Directors of the Company.
1.09 "Code" shall mean the Internal Revenue Code of 1986 and any amendments
thereto.
1.10 "Committee" shall mean the Employee Benefits Committee of the Company.
1.11 "Company" shall mean Dresser Industries, Inc.
1.12 "Compensation" shall mean for any calendar year an Employee's base
salary, overtime, gain sharing payment, profit sharing payment, non-
deferred incentive awards, special awards, or bonuses ("Bonus") accrued
for the Fiscal Year ending in that calendar year, foreign service
allowance, severance pay received while on a leave of absence, and
amounts received under the Short Term Deferred Compensation Plan, as
these items are reported on such Employee's W-2 for that calendar year
(or in the case of non-deferred Bonus, will be so reported for the
following calendar year), and shall include amounts contributed for that
calendar year by an Employer on behalf of an Employee pursuant to a
salary reduction agreement for qualified benefits under a cafeteria plan
described in section 125 of
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the Code or as a deferral under a cash or deferred arrangement described
in section 401(k) of the Code. For these purposes, an Employee's
earnings shall include salary or other items paid (or Bonus accrued) by
any and all Employers except that earnings shall not include any amounts
attributable to the exercise of any option under any Company stock option
plan, any amounts paid under a Dresser performance unit/share plan or
incentive stock unit plan, or any amounts received as cash pay
attributable to any "BenefitsPay" credits under the Dresser Industries,
Inc. BenefitsPay program.
Effective January 1, 1992, for periods after December 31, 1991,
Compensation shall include the Bonus in the calendar year in which paid,
rather than the Bonus accrued for the Fiscal Year ending in the calendar
year for which Compensation is being determined.
In addition to other applicable limitations which may be set forth in the
Plan and notwithstanding any other contrary provision of the Plan,
Compensation taken into account under the Plan for the Plan Year
beginning May 1, 1989 shall not exceed $200,000 for the 1989 calendar
year and any prior calendar year if such calendar year Compensation is
used to determine the Accrued Benefit after April 30, 1989. Each
calendar year of Compensation taken into account in calculating Final
Average Monthly Earnings in Plan Years beginning on or after May 1, 1990,
shall be adjusted for changes in the cost of living after 1989 as
provided in section 415(d) of the Code. If any Plan Year contains fewer
than twelve (12) calendar months, the $200,000 or the adjusted limit is
an amount equal to the compensation limit in effect on the first day of
the calendar year in which a plan year begins (or with which a plan year
may correspond, if the plan
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year is changed) multiplied by the ratio obtained by dividing the number
of full months in the short period by twelve (12).
If an Employee accepts employment directly from the Company with an
employer that is a joint venture between the Company and one or more
other companies and such former Employee returns to the Company as an
Employee, then components of such Employee's compensation from the joint
venture that are analogous to components of Compensation under this Plan
shall be considered Compensation under this Plan.
1.13 "Continuous Service" shall mean, except as it may be modified by Articles
XI and XII:
(a) for periods before May 1, 1976, continuous, uninterrupted time as an
employee (including time while participation is suspended or while
on leave of absence), or as then provided in Section 10.03 regarding
military service, from original date of hire, with an Employer and
any Related Entity, or any predecessor thereof, as reflected on
Company records, plus
(b) for periods after April 30, 1976, Periods of Service beginning with
the Employment Commencement Date or May 1, 1976, whichever is later
and ending on his Severance from Service Date (see also Section
10.01 for special rules in cases of reemployment); plus
(c) service with an Associated Company and, on or after May 1, 1984,
service as a Leased Employee.
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1.14 "Covered Compensation" shall mean for any calendar year, one-twelfth of
the average (without indexing) of the Social Security Wage Base in effect
for each calendar year during the 35-year period ending with the last day
of the calendar year in which the Participant attains (or will attain)
Social Security Retirement Age, rounded to the nearest $600, as shown in
regulations published by the Internal Revenue Service. In determining a
Participant's Covered Compensation for any calendar year, the Social
Security Wage Base in effect for the current calendar year and any
subsequent calendar year will be assumed to be the same as that in effect
as of the beginning of the calendar year for which the determination is
being made. A Participant's Covered Compensation for a calendar year
ending before the 35-year period ending with the last day of the calendar
year in which the Participant attains his or her Social Security
Retirement Age is based on a projection of the Social Security Wage Base
in effect as of the beginning of the calendar year. A Participant's
Covered Compensation for any calendar year after such 35-year period is
the Participant's Covered Compensation for the calendar year during which
the Participant attained his or her Social Security Retirement Age.
Therefore, Covered Compensation does not change after the Participant
attains his or her Social Security Retirement Age. For any Participant
to whom subsection (a)(6) of Section 1.45 applies or for any Participant
who becomes eligible to receive a monthly disability pension as provided
by Section 4.04, the calendar year of the determination of Covered
Compensation shall be the last calendar year in which the Participant
received compensation from the Employer. Therefore, such Covered
Compensation for such calendar year shall include the Social Security
Wage Base in effect as of the beginning of the last calendar year in
which the Participant received compensation from the Employer for such
last calendar year and for each subsequent calendar year until the end of
the 35-year period.
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1.15 "Credited Service" shall mean, except as it may be modified by Articles
XI and XII, the Continuous Service of an Employee excluding the
following:
(a) Continuous Service prior to the date participation in the Prior Plan
or any Predecessor Plan or Previous Plan actually began, if such
participation did not begin on the earliest date such participation
could have begun, due to action or inaction by the Employee,
including an Employee's being eligible but declining to contribute
to the Prior Plan;
(b) Continuous Service before May 1, 1986, if the Participant was not
participating in the Prior Plan as of April 30, 1986, because he was
eligible to, but declined to participate in the Prior Plan.
(c) Continuous Service with a predecessor prior to the date of
acquisition if after March 1, 1972 by the Company or Related Entity,
or if later, except as otherwise provided in the Plan, the date
employees of operations so acquired are first granted the right to
participate in this Plan;
(d) Continuous Service after becoming a Participant, during the time
when a Participant is on an authorized leave of absence commencing
prior to March 1, 1986 or on layoff, or is otherwise suspended from
participation under Section 10.02;
(e) Continuous Service after becoming a Participant, attributable to the
part of any authorized leave of absence that commences after
February 28, 1986 that is in excess of 12 months.
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<PAGE>
(f) Continuous Service prior to becoming an Employee, in the case of an
individual changing his status ineligible employee to Employee, as
provided in Section 4.09(a).
(g) Continuous Service after attainment of Age 65 and prior to May 1,
1986.
(h) Continuous Service after Age 60 and before Age 65 if such service
was before May 1, 1986.
1.16 "Early Retirement Date" shall mean the first day of the first month
following the month in which a Participant, Age 55 or over but not yet
having attained Age 65, and having met the service requirements for early
retirement benefits set out in Section 4.02, has a Severance from Service
Date.
1.17 "Effective Date" shall mean May 1, 1989.
1.18 "Employee" shall mean any person employed by an Employer, who is not (a)
compensated strictly on an hourly basis, (b) a nonresident alien, (c)
employed by an operation located in Puerto Rico, or (d) in a unit of
employees covered by a collective bargaining agreement unless such
collective bargaining agreement specifically provides for participation
in this Plan, but shall include U.S. citizens, and resident aliens
employed by domestic subsidiaries or by foreign subsidiaries with respect
to which the Company has entered into appropriate agreements under
section 3121 of the Code (covering such employees for Social Security
purposes), provided other nongovernmental retirement benefits are not
being provided by any other employer for such person for such service,
all as provided
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<PAGE>
in section 406 or 407 of the Code (whichever may be applicable).
Effective for services performed after December 31, 1986, notwithstanding
any other provisions of the Plan, for purposes of the pension
requirements of section 414(n)(3) of the Code, Employees shall include
Leased Employees. Notwithstanding the foregoing, if such Leased
Employees constitute less than twenty percent (20%) of the non-highly
compensated work force of the Company and Associated Company(ies) within
the meaning of section 414(n)(5)(C)(ii) of the Code, the term "Employee"
shall not include those Leased Employees covered by a plan described in
section 414(n)(5) of the Code unless otherwise provided by the terms of
the Plan.
1.19 "Employer" shall mean the Company and each other corporation that joins
this Plan and sponsors it for some or all of its Employees.
1.20 "Employment Commencement Date" shall mean the date on which the Employee
first performs an Hour of Service for an Employer, Related Entity or any
predecessor thereof, as reflected on company records.
1.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and all amendments thereto.
1.22 "Final Average Monthly Earnings" shall mean the highest total
Compensation of a Participant for any five consecutive complete calendar
years out of the last ten consecutive complete calendar years of active
employment prior to a Participant's Severance from Service Date that such
Participant was a Participant in this Plan or in a Prior Plan (but not in
a Predecessor Plan) divided by 60. For any Participant with less than
five consecutive complete calendar years of employment with an
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Employer, the total Compensation shall be divided by the number of months
and fractional parts of a month in the period of employment to determine
the Final Average Monthly Earnings as of the Severance from Service
Date. For determining an Accrued Benefit as of any date, other than a
Severance from Service Date (e.g., a date at which the Plan benefit
formula changed), for which a Participant has less than five consecutive
complete calendar years of employment under this Plan, Compensation
shall be adjusted to include, if necessary, a one-twelfth pro rata
portion of the first and last calendar year of Compensation in the
calculation period multiplied by the number of completed months in the
first and last calendar years in the calculation period, rather than
determining the sum of the actual monthly Compensation for the period of
employment used in the calculation.
Effective January 1, 1991, for any Participant with a Severance From
Service Date on and after January 1, 1991, the determination of Final
Average Monthly Earnings shall also include Compensation of a
Participant from January 1 to the Severance from Service Date of the
calendar year in which the Severance from Service Date occurs. This
period shall be deemed to be an eleventh complete calendar year.
Therefore, the Final Average Monthly Earnings shall mean, in effect, the
highest total Compensation for any five consecutive complete calendar
years out of the last eleven consecutive complete calendar years of
active employment prior to a Participant's Severance from Service Date.
1.23 "Fiscal Year" shall mean, in the case of each Employer, the accounting
year, for tax purposes, of that Employer.
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1.24 "Hour of Service" means each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for the Employer, and
all other hours required to be counted under Department of Labor
regulation section 2530.200b-2.
1.25 "Insurer" shall mean any insurance company that is or may be used to fund
some or all benefits hereunder, and/or to issue annuities for payment of
benefits.
1.26 "Interest" shall mean, for periods prior to May 1, 1988, interest
compounded annually at 5%; provided, however, if interest at a lesser
rate was provided in a Prior Plan or any Predecessor or Previous Plan or
under any insurance contract, such lower rate shall be used for periods
provided in such Plans or contracts as to contributions thereunder. For
periods on or after May 1, 1988, interest shall be compounded annually at
the rate of 120% of the Federal mid-term rate (as in effect under section
1274 of the Code.)
1.27 "Leased Employee" shall mean any person who performs service for the
Company and Associated Companies on a substantially full-time basis for
at least one year pursuant to an agreement with a leasing organization,
unless such services are not of a type historically performed by
Employees in the Employer's line of business or are performed on a
temporary project with an ascertainable termination date under
circumstances in which it is not customary to hire permanent Employees.
A Leased Employee within the meaning of section 414(n)(2) of the Code
shall become a Participant in, or accrue benefits under, the Plan based
on service as a Leased Employee only as provided in provisions of the
Plan other than this Section 1.27.
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1.28 "Manager" shall mean the individual employee of the Company from time to
time designated by the Committee to perform routine administration of the
Plan under Section 6.06.
1.29 "Named Fiduciary" shall mean the Company, for purposes of ERISA.
1.30 "Normal Retirement Age" shall mean effective May 1, 1988, the date the
Participant has both attained Age 65 and either accrued five (5) years of
Vesting Service or reached the fifth anniversary of participation in the
Plan, at which time such Participant shall have a fully vested interest
in his Accrued Benefit.
1.31 "Normal Retirement Date" shall mean the first day of the month coincident
with or next following the date the Participant shall attain the Normal
Retirement Age.
1.32 "Participant" shall mean any Employee, except a Leased Employee, of an
Employer who participates herein.
1.33 "Period of Absence" shall mean the period of time commencing with the
start of an Employee's absence from service for any reason other than a
quit, discharge, retirement, death, or Total Disability and ending with
the earlier of his Severance from Service Date or the first subsequent
date on which he performs an Hour of Service for an Employer.
1.34 "Period of Service" shall mean a period of service commencing on the
Employee's Employment Commencement Date or Reemployment Commencement
Date, whichever is applicable and ending on his Severance from Service
Date. Where an Employee has more than one Period of Service, they shall
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be aggregated. However, see the exceptions provided in Section 10.01 for
certain reemployment situations.
1.35 "Period of Severance" shall mean the period of time commencing on the
Severance from Service Date and ending on the date on which the Employee
again performs an Hour of Service.
1.36 "Permitted Percentage" shall mean the percentage applied to the
Participant's Final Average Monthly Earnings in excess of Covered
Compensation in order to determine the Participant's monthly pension as
described in Section 4.01. The Permitted Percentage varies based on the
Participant's Social Security Retirement Age. If the Social Security
Retirement Age is 65, the Permitted Percentage is .75%; if Age 66, .70%;
if Age 67, .65%.
1.37 "Plan" shall mean the Dresser Industries, Inc. Consolidated Salaried
Retirement Plan.
1.38 "Plan Year" shall mean the year ending April 30.
1.39 "Predecessor Plan" shall mean any qualified retirement plan that covered
employees of operations acquired on or after March 1, 1972, by the
Company, or a domestic subsidiary thereof, as in effect on the date of
acquisition, the participants of which are eligible to participate in
this Plan to the extent provided in Article XI. Plan provisions that
relate to Predecessor Plans are provided for in Article XI.
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1.40 "Previous Plan" shall mean any qualified retirement plan that covered
employees of operations acquired before March 1, 1972, by the Company, as
in effect on the date of acquisition, once such plan was amended and
restated into a Prior Plan.
1.41 "Prior Plan" shall mean the Dresser Industries, Inc. Retirement Income
Plan Under ERISA as amended and restated most recently, effective May 1,
1984 including all amendments thereto, or the Dresser Industries, Inc.
Retirement Income Plan as it existed April 30, 1976.
1.42 "Qualified Domestic Relations Order" shall mean any judgment, decree or
order pursuant to a state domestic relations or community property law
which relates to the provision of child support or marital property
rights, which creates or recognizes the existence of an alternate payee's
right to (or assigns to an alternate payee the right to) receive all or
part of a Participant's Accrued Benefit, and meets the requirements of
(a) and (b) below, as interpreted in accordance with section 414(p) of
the Code:
(a) Such order specifies:
(1) the name and last known mailing address of the Participant and
each alternate payee;
(2) the amount or the percentage of the Participant's accrued
benefit to be paid to each alternate payee, or the manner in
which such amount or percentage is to be determined;
(3) the number of payments or period to which the order applies;
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(4) each plan to which such order applies.
(b) Such order does not require the Plan to:
(1) provide any type or form of benefit or option not otherwise
provided under the Plan;
(2) provide increased benefits; or
(3) pay to an alternate payee amounts required to be paid to
another alternate payee under a prior Qualified Domestic
Relations Order.
Solely for the purpose of determining the portion of the
Participant's benefit to be allocated to the alternate payee, for
calculations as of a date on or after May 1, 1989 Actuarial
Equivalent calculations shall be based on the assumed interest rate
and assumed mortality rates described in the third paragraph of
Section 10.04, which are used to determine the single sum value of
certain nonforfeitable accrued benefits. For all other purposes
relating to both the Participant's and alternate payee's benefit,
Actuarial Equivalencies shall be as defined in Section 1.02.
In no event shall the Actuarial Equivalent present value of all
benefits payable to all parties under a qualified order exceed the
Actuarial Equivalent present value of the Accrued Benefits of the
Participant otherwise payable under this Plan.
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1.43 "Reemployment Commencement Date" shall mean the first date during, and
hence ending, a Period of Severance, on which the Employee performs an
Hour of Service for an Employer.
1.44 "Related Entity" shall mean each domestic or foreign corporation,
partnership, joint venture or other business organization, other than an
Employer, in which Dresser Industries, Inc., has, either directly or
indirectly, a substantial ownership interest.
1.45 "Severance from Service Date" shall mean, except as otherwise provided in
Section 10.12 and Article 12:
(a) the earliest of the date on which an Employee: (1) quits; (2)
retires; (3) is discharged; (4) dies; (5) in the case of a Period of
Absence other than one described in (6) below, reaches the first
anniversary of the first date of a Period of Absence, if without
pay, or if later, the last day in a Period of Absence for which
Compensation is actually paid; or (6) in the case of a Period of
Absence due to an authorized leave of absence commencing after
February 28, 1986, the last day of such authorized leave of absence;
provided, however, that
(b) for absences from work for maternity or paternity reasons solely for
purposes of Section 10.01, Severance from Service Date shall mean
the second anniversary of the first date of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons shall mean an absence (1) by reason of the
pregnancy of the individual, (2) by reason of the birth of a child
of the individual, (3) by reason of the
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placement of a child with the individual in connection with the
adoption of such child by such individual, or (4) for purposes of
caring for such child for a period beginning immediately following
such birth or placement.
A Severance from Service Date shall also occur under certain
circumstances described in Section 4.04 covering Disability Benefits.
1.46 "Social Security Pension" shall mean the amount of primary retirement
benefits under the Social Security Act, as well as the amount of
retirement benefits under the Canada Pension Plan, Quebec Pension Plan
and (Canadian) Old Age Security Act (or any replacement legislation), to
which a Participant is, was, or will be entitled (without consideration
of the excess earnings deduction) upon proper application at his
attainment of Age 65, computed in case of retirement on or after
attainment of Age 65 as the benefit payable on the basis of law in effect
at actual retirement age and (i) in case of a Severance from Service Date
prior to attainment of Age 65, (ii) in the case of a Participant who
becomes eligible to receive a monthly disability pension as provided in
Section 4.04 or (iii) in the case of a Participant to whom subsection
(a)(6) of Section 1.45 applies, on the basis of the law in effect as of
the last date the Participant receives compensation, but assuming that he
will continue to receive until his attainment of Age 65 compensation
which would be treated as wages under the respective legislative
provisions at the same rate as he was receiving such compensation in the
last full calendar year in which he was actively rendering services to
his Employer. The Employer may use an estimated salary history for any
preemployment periods for which it does not have actual salary
information for a Participant, provided that all of the following rules
are satisfied:
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(a) The estimation is made by applying the actual change in the average
wages from year to year as determined by the Social Security
Administration.
(b) Notice is given to each Participant (1) of his right to supply his
actual salary history and of the financial consequences of failing
to supply such history and (2) that the Participant can obtain his
actual salary history from the Social Security Administration.
(c) Notice is provided that the benefit for a Participant who supplies
documentation of his actual salary history will be adjusted to
reflect the recomputed offset based on that history (although post-
separation earnings will still be projected for Participants who
retire or separate from service prior to attainment of Age 65).
Such documentation must be provided no later than one year after the
later of the date of separation from service (by retirement or
otherwise) and the time when the Participant is notified of the
benefit to which he or she is entitled.
1.47 "Social Security Retirement Age" shall mean Age 65 if the Participant was
born before January 1, 1938; Age 66 if the Participant was born after
December 31, 1937 but before January 1, 1955; and Age 67 if the
Participant was born after December 31, 1954, as provided under Code
section 401(1)(5)(D)(iii) and regulations thereunder.
1.48 "Total Disability" or "Totally Disabled" shall mean
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(a) in the first 24 months of a period of Total Disability, the
inability of any Employee as a direct result of disease, pregnancy
related condition or injury to perform the material duties of his or
her own occupation; except that if he or she starts work at a
reasonable occupation he or she will no longer be deemed Totally
Disabled.
(b) after the first 24 months of a period of Total Disability, the
inability of an Employee as a direct result of disease, pregnancy
related condition or injury to perform the duties of any reasonable
occupation.
For purposes of this Section, a reasonable occupation shall mean any
gainful activity for which the Employee is, or may reasonably become
suited, by education, training or experience, but excluding work
under an approved rehabilitation program or a partial disability
employment program.
The Committee shall make the determination of Total Disability upon
consideration of medical evidence submitted to it (which shall
include or consist of the report of a licensed physician retained by
the Company).
The Committee may accept, as evidence of Total Disability and the
continuation of Total Disability, payment of long-term disability
benefits under a group insurance or welfare plan sponsored by the
Employer of the Employee. An individual will cease to be Totally
Disabled when and if (prior to the date on which the Employee would
terminate long-term disability benefits under the group insurance
program for which the Employee is eligible, whether or not the
Employee actually participated in
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such program) the Committee determines (as described above) that the
Employee's condition has changed so that the Employee is capable of
performing the duties of a position as described in (a) or (b)
above.
1.49 "Trust" shall mean the trust agreement between the Company and The
Northern Trust Company, Chicago, Illinois, as Trustee, dated the first
day of July, 1977 and entitled the "DRESSER INDUSTRIES, INC. MASTER
RETIREMENT TRUST AGREEMENT", as may be amended from time to time, and any
additional or successor trust agreement utilized as a funding media for
this Plan.
1.50 "Trust Fund" shall mean funds held pursuant to the Trust.
1.51 "Vesting Service" shall mean Continuous Service except that there shall
be excluded (a) any leave of absence prior to May 1, 1976, (b) any
service during which the Participant was eligible but declined to
contribute to the Prior Plan, and (c) any service prior to becoming a
participant in the Prior, Previous or Predecessor Plans, where such
participation did not begin when the person was first eligible to join.
See also Section 10.01 for special rules in cases of reemployment.
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ARTICLE II - PARTICIPATION
SECTION 2.01. MEMBERS. Employees who were Participants in this Plan
immediately before this amendment and restatement of the Plan as of May 1, 1989,
shall continue to be Participants in the Plan as long as they continue to meet
all of the other requirements to be a Participant. Each other Employee, except a
Leased Employee, shall begin participation in this Plan on the first day of the
first month on which he shall have satisfied all of the following requirements:
(a) He shall be then actively employed by an Employer in a business unit
not excluded by the Employer,
(b) He shall have completed at least one year of Continuous Service.
(c) He is not a resident alien actively participating in another pension
plan sponsored by an Employer or a Related Entity.
Provided, however, Employees who were hired on and after August 1, 1983 and
prior to May 1, 1988, and who had attained Age 60 as of their Employment
Commencement Date became eligible to participate effective May 1, 1988 if such
Employees had not had a Severance from Service Date on or before May 1, 1988.
Prior to May 1, 1988, such Employees were not eligible to participate in the
Plan.
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ARTICLE III - CONTRIBUTIONS
SECTION 3.01. EMPLOYER CONTRIBUTIONS. Each Employer shall periodically
contribute to the Trust Fund amounts determined by the Company, on the basis of
periodic reports of studies made by the Actuary, to be necessary and appropriate
to fund the normal and past service liabilities of the benefits to be provided
to Employees of that Employer under this Plan. This shall be the funding policy
of the Company. Employer contributions shall be made in amounts sufficient but
not limited to the amount necessary to satisfy the minimum funding standards of
ERISA unless a waiver of such requirements has been granted under ERISA. The
obligation to make Employer contributions is not contractual, and is
specifically subject to amendment or termination, as provided in Sections 8.01
and 8.02. Employer contributions shall be paid over to the Insurer or Trust
Fund at such times as may appear practicable and appropriate to the Company, in
keeping with the purposes of the Plan and the requirements of ERISA. Funds and
investments of the Plan may be subject to direction and control by the Pension
Investment Committee of the Company.
SECTION 3.02. PARTICIPANT CONTRIBUTIONS. No Participant shall be required or
permitted to make contributions under this Plan.
SECTION 3.03. REFUND OF NONDEDUCTIBLE EMPLOYER CONTRIBUTIONS. Notwithstanding
anything to the contrary:
(a) any contribution made to the Plan by the Employer by a mistake of fact
shall be returned to the Employer without interest but reduced by any
investment loss attributable thereto, as soon as practicably possible
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following discovery of the mistake, but not later than one year after
the discovery of the mistake;
(b) all contributions made to the Plan by the Employer are conditioned
upon qualification of the Plan under the Code and, if the Plan
receives an adverse determination with respect to its request for
qualification, then all contributions shall be returned to the
Employer without interest but reduced by any investment loss
attributable thereto, within one year after such determination, but
only if application for the determination is made by the time
prescribed by law for filing the Employer's return for the taxable
year in which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe; and
(c) each contribution made to the Plan by the Employer is conditioned upon
the current deductibility of the contribution under section 404 of the
Code and, to the extent the deduction is not allowed for the year
claimed, the contribution shall be returned to the Employer (to the
extent disallowed), without interest but reduced by any investment
loss attributable thereto, as soon as practicably possible following
disallowance of the deduction, but not later than one year after
disallowance.
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ARTICLE IV - BENEFITS
SECTION 4.01. NORMAL RETIREMENT. Each Participant shall have a nonforfeitable
interest in the Accrued Benefit upon reaching Normal Retirement Age. Subject to
the minimum benefit stated in the last paragraph of this Section 4.01, such
Participant shall upon reaching the Normal Retirement Date be entitled to
receive a basic monthly pension that, in the Life-Only benefit form, is equal to
the sum of the benefits provided in subsection (a) plus the greater of the
benefit provided in subsections (b)(1) plus (c)(1), or subsections (b)(2) plus
(c)(2), with that result reduced by the benefit described in subsection (d), as
follows:
(a) For any Employee who is a Participant on or after December 1, 1990, as
to Credited Service attributable to Periods of Service on and after
December 1, 1990, the sum of (i) .85% of the Participant's Final
Average Monthly Earnings and (ii) the Permitted Percentage of the
Participant's Final Average Monthly Earnings in excess of Covered
Compensation multiplied by the Participant's number of years (and
fractions thereof, including only completed months) of Credited
Service after December 1, 1990, to a maximum total of 35 years of
Credited Service for all Periods of Service combined. When
determining the maximum to be applied to Credited Service after
December 1, 1990, for a Participant who has earned Credited Service
before December 1, 1990, the 35 year maximum shall first include all
years of Credited Service attributable to Periods of Service prior to
December 1, 1990. Therefore, if a Participant has accrued 35 years of
service as of December 1, 1990, no additional service shall accrue
after December 1, 1990 for benefit calculation purposes.
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(b) On and after May 1, 1989 and prior to December 1, 1990 as to Credited
Service attributable to Periods of Service on and after May 1, 1989
and prior to December 1, 1990, (1) and (2) are calculated as follows:
(1) a benefit determined as described in (a) above of this Section
4.01, but based only on Credited Service attributable to Periods
of Service on and after May 1, 1989 and prior to December 1,
1990, subject to the 35 year maximum as described in Section
4.01(a) above.
(2) a benefit determined according to the provisions of this Plan as
in effect on April 30, 1989, but based only on the Final Average
Monthly Earnings and the Social Security Pension calculated as of
December 1, 1990 (or Severance from Service Date, if earlier) and
on Credited Service attributable to Periods of Service on and
after May 1, 1989 and prior to December 1, 1990.
Further provided, for any Participant determined to be a highly
compensated Employee within the meaning of section 414(q)(1)(A)
or (B) of the Code as of April 30, 1989, only paragraph (1) above
of this Section 4.01(b) shall apply. Further provided, for any
Participant determined to be a highly compensated Employee as of
April 30, 1990, who had not been deemed a highly compensated
employee as of April 30, 1989, such Participant's benefit prior
to May 1, 1990 shall be determined in the manner described above
for any nonhighly compensated employee and only paragraph (1)
above of this Section 4.01(b) shall apply as to Periods of
Service on
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and after May 1, 1990. In addition, for any Participant who was
not a Plan Participant as of April 30, 1989 and who became a Plan
Participant on or after May 1, 1989 and prior to December 1,
1990, such Participant's benefit shall be determined using only
subsections (a) and (b)(1) of this Section 4.01; subsections
(b)(2) and (c) shall not apply to such a Plan Participant.
(c) For any Participant who was a Plan Participant as of April 30,
1989, as to Credited Service, if any, attributable to Periods of
Service prior to April 30, 1989, (1) and (2) are calculated as
follows:
(1) an amount equal to the adjusted accrued benefit as defined
below determined as of April 30, 1989 under the terms of the
Plan as in effect on April 30, 1989 but based on the Final
Average Monthly Earnings and the Social Security Pension
calculated as of April 30, 1989, with the resulting adjusted
accrued benefit multiplied by the ratio than 1 (one)) of
Final Average Monthly Earnings computed at the Severance
from Service Date divided by Final Average Monthly Earnings
computed as of April 30, 1989. For this purpose, the
adjusted accrued benefit is determined in all aspects
according to the terms of the Plan as in effect on April 30,
1989, except for the following modifications:
(A) For Credited Service between May 1, 1986 and May 1,
1989, 1.43% instead of 1.50% shall be multiplied times
the Participant's April 30, 1989 monthly Social
Security Pension.
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The percentage of the Participant's April 30, 1989
Final Average Monthly Earnings shall remain 1.50%.
(B) For Credited Service prior to May 1, 1986, 1.59%
instead of 1-2/3% shall be multiplied times the
Participant's April 30, 1989 monthly Social Security
Pension. The percentage of the Participant's April 30,
1989 Final Average Monthly Earnings shall remain 2.0%.
(C) In particular, the amount of pension provided for a
Participant's Continuous Service prior to the merger of
a Predecessor Plan into the Prior Plan or this Plan or
the offset of Predecessor Plan benefits from this Plan,
shall be the amount of pension as defined in Article XI
of this Plan with respect to each Predecessor Plan.
Further provided, the maximum offset allowed in
paragraph (l)(A) or (l)(B) above for the Social
Security Pension shall be 50% of the Final Average
Earnings portion of the benefit amount determined in
paragraph (l)(A) or (l)(B) above without regard to the
offset for the Social Security Pension.
(2) a benefit determined according to the provisions of this
Plan as in effect on April 30, 1989, but based on the Final
Average Monthly Earnings and the Social Security Pension
calculated as of December 1, 1990 (or Severance from Service
Date, if earlier) and on Credited Service attributable to
Periods of Service prior to May 1,
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1989. Further provided, for any Participant determined to
be a highly compensated Employee within the meaning of
section 414(q)(1)(A) or (B) of the Code as of April 30,
1989, only paragraph (1) above of this Section 4.01(c) shall
apply.
Further provided, for any Participant determined to be a
highly compensated Employee as of April 30, 1990, who had
not been deemed a highly compensated employee as of April
30, 1989, such Participant's benefit prior to May 1, 1990
shall be determined in the manner described above for any
nonhighly compensated employee and only paragraph (1) above
of this Section 4.01(c) shall apply as to Periods of Service
on and after May 1, 1990.
(d) Monthly amounts, if any, that an insurance company became obligated to
pay the Participant, measured in the form of a Life-Only benefit with
a modified cash refund feature where applicable, upon attainment of
Normal Retirement Date under the terms of any annuity contract or,
contracts that were (i) purchased upon the termination of the Dresser
Industries, Inc. Retirement Income Plan Under ERISA or (ii) purchased
upon the termination of the Dresser Industries, Inc. Retirement Income
Plan for Salaried Employees of Marion Power Shovel Division on April
30, 1986 with respect to benefits accrued under such plans as of April
30, 1986, or (iii) purchased from any other insurer to provide
benefits under the Prior Plan.
Notwithstanding any other provisions of this Section 4.01, a
Participant shall not be entitled to an amount under subsections (b)(2)
plus (c)(2) for
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Credited Service up to December 1, 1990 which exceeds the amount that would
have been calculated if only subsections (a) and (b) of subsection 4.01 of
this Plan as in effect on April 30, 1989 were applicable and respective
periods of credited service under the Predecessor Plan had been considered
respective periods of Credited Service under this Plan up to December 1,
1990. For the purpose of this maximum benefit calculation, respective
periods of credited service under the Predecessor Plan shall be deemed to
be respective periods of Credited Service under this Plan.
Notwithstanding any other provisions of this Section 4.01, the maximum
monthly amount determined under the sum of subsections (b)(2) and (c)(2)
above for Credited Service up to December 1, 1990 as measured under the
Life-only benefit form shall be 2% of a Participant's Final Average Monthly
Earnings less 1-2/3% of the monthly Social Security Pension, multiplied by
the number of years (and fractions thereof for completed months) of
Credited Service accrued prior to December 1, 1990, to a maximum of 30.
For the purpose of this maximum benefit calculation, respective periods of
credited service under the Predecessor Plan shall be deemed to be
respective periods of Credited Service under this Plan.
Notwithstanding any other provisions of this Section 4.01, a
Participant who was covered by a Predecessor Plan shall not be entitled to
an adjusted accrued benefit determined under subsection (c)(l) for Credited
Service up to May 1, 1989 which exceeds the sum of (i) and (ii); where (i)
equals, for Periods of Service prior to May 1, 1986, 2% of a Participant's
Final Average Monthly Earnings as of April 30, 1989 less 1.59% of the
monthly April 30, 1989 Social Security Pension multiplied by the number of
years (and fractions thereof for completed months) of Credited Service
accrued prior to May 1, 1986 to a
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maximum of 30, and multiplied by the ratio (not less than 1 (one)) of Final
Average Monthly Earnings computed at Severance from Service Date divided by
Final Average Monthly Earnings computed as of April 30, 1989, and (ii)
equals, for Periods of Service between May 1, 1986 and May 1, 1989, 1.5% of
Participant's Final Average Monthly Earnings as of April 30, 1989 less
1.43% of the monthly April 30, 1989 Social Security Pension multiplied by
the number of years (and fractions thereof for completed months) of
Credited Service accrued between May 1, 1986 and May 1, 1989 to a maximum
of 35 years applied to all combined years of Credited Service accrued prior
to May 1, 1989, including Credited Service prior to May 1, 1986 and
multiplied by the ratio (not less than 1 (one)) of Final Average Monthly
Earnings computed at Severance from Service Date divided by Final Average
Monthly Earnings computed as of April 30, 1989. For the purpose of this
maximum adjusted accrued benefit calculation, credited service under the
Predecessor Plan shall be deemed to be Credited Service under this Plan.
Notwithstanding any other provisions of this Section 4.01, the maximum
adjusted accrued benefit determined under subsection (c)(1) above for
Credited Service up to May 1, 1989 as measured under the Life-only benefit
form shall be 2% of a Participant's final Average Monthly Earnings as of
April 30, 1989 less 1.59% of the monthly April 30, 1989 Social Security
Pension, multiplied by the number of years (and fractions thereof for
completed months) of Credited Service accrued prior to May 1, 1989, to a
maximum of 30 and multiplied by the ratio (not less than 1 (one)) of Final
Average Monthly Earnings computed at Severance from Service Date divided by
Final Average Monthly Earnings computed as of April 30, 1989. For the
purpose of this maximum adjusted accrued benefit
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calculation, credited service under the Predecessor Plan shall be deemed to
be Credited Service under this Plan.
Notwithstanding any other provisions of this Section 4.01, the
Participant shall be entitled to a minimum monthly Pension, that in the
Life-Only benefit form, is equal to the Accrued Benefit calculated as of
April 30, 1989 using the Participant's Final Average Monthly Earnings,
Credited Service, and monthly Social Security Pension calculated as of that
date under the terms of this Plan in effect on that date.
SECTION 4.02. IMMEDIATE EARLY RETIREMENT. Each Participant whose Severance
from Service Date precedes his Normal Retirement Date but is after he attains
Age 55 and who (1) commenced participation in the Dresser Industries, Inc.
Retirement Income Plan Under ERISA prior to August 1, 1983, (2) commenced
participation in the Dresser Industries, Inc. Retirement Income Plan Under ERISA
on or after August 1, 1983 but prior to May 1, 1986 and has 5 years or more of
Vesting Service, or (3) commences participation in this Plan on or after May 1,
1986 and has 10 years or more of Vesting Service, may elect to receive a basic
monthly pension effective as of his Early Retirement Date.
Subject to the minimum benefit stated in the last paragraph of this Section
4.02, the amount of such basic monthly benefit in the Life-Only benefit form
shall be an amount computed under the benefit formula of Section 4.01 hereof,
but reduced as follows according to the applicable subsections of 4.01 specified
below:
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4.01(a), (b)(1), (b)(2), (c)(1)(A) The amount of benefit determined under
and the component of (c)(2) with applicable subsections (referenced to
respect to service after May 1, 1986 the left) of Section 4.01 of this Plan
shall be reduced to an Actuarial
Equivalent amount, considering the age
of the Participant on his Early
Retirement Date.
4.01(c)(1)(B) and the component of The Final Average Earnings component of
(c)(2) with respect to service before the benefit determined under
May 1, 1986 applicable subsections (referenced to
the left) of Section 4.01 of this Plan
shall be reduced by 1/4th of 1% thereof
for each full month by which the
Participant is less than Age 65 on his
Early Retirement Date, but not more than
60 such months, and (if applicable) 1/6
of 1% thereof for each full month by
which he is then less than Age 60.
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4.01(c)(1)(B) and the component of The Social Security component of the
(c)(2) with respect to service before benefit determined under applicable
May 1, 1986 subsections (referenced to the left) of
Section 4.01 of this Plan shall be
reduced by .5556% for each full month by
which the Participant is less than Age
65 on his Early Retirement Date, but not
by more than 60 such months, and (if
applicable) by .2778% thereof for each
full month by which he is less than Age
60.
4.01(c)(1)(C) and the component of The early retirement factors specified
(c)(2) with respect to any in Article XI for the respective
Predecessor Plan(s) Predecessor Plan shall be used to reduce
the component of the benefit defined in
applicable subsections (referenced to
the left) of Section 4.01 of this Plan
4.01(d) The early retirement factors with
respect to a Participant's benefits used
by the insurance company referred to in
subsection (d) of Section 4.01 of this
Plan shall be used for component (d) of
the Participant's benefit.
In the event of the applicability of the second or third paragraphs of
Section 4.01 of this Plan, relating to maximum benefits, the maximum early
retirement benefit payable
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under this Plan shall be determined by using the age adjustment factors
applicable to the respective components of the benefit set out in this Section
to the components of the benefit defining such maximum benefits.
Application for and receipt of benefits under this section by a Participant
who is Totally Disabled shall cause a permanent cessation of any salary
continuance and long-term disability benefits under Employer sponsored programs
that such Participant otherwise would have been entitled to receive.
Such benefit shall be payable in the Life-Only form or the surviving spouse
benefit form as provided in Section 5.01, unless an optional benefit form is
elected under Section 5.02.
Notwithstanding any other provision of this Section 4.02, the Participant
shall be entitled to a minimum monthly benefit, that in the Life-Only benefit
form, is equal to the benefit under Section 4.02 of this Plan in effect on April
30, 1989, based on Credited Service and Final Average Monthly Earnings as of
that date defined under the terms of the Plan as of that date. The
Participant's age and Vesting Service as of his Severance from Service Date
shall be used in the calculation of this minimum monthly benefit.
SECTION 4.03. DEFERRED EARLY RETIREMENT. Each other Participant whose
Severance from Service Date occurs before his Normal Retirement Date and who
meets one of the early retirement eligibility alternatives set out in Section
4.02 shall receive a basic monthly pension payable beginning on the first day of
the month coincident with or following his attainment of Age 65. The amount of
such basic monthly pension shall be Actuarially Equivalent to the basic monthly
pension to which he would have been entitled at his Early Retirement Date under
Section 4.02 had such
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Section then been applicable. Such benefit shall be payable in the Life-Only or
surviving spouse benefit form as provided in Section 5.01, unless another option
is elected under Section 5.02. Should such person die prior to the Annuity
Starting Date, his surviving spouse (if any) shall receive a life income of 50%
of the monthly reduced benefit (as computed under Section 4.02) which he would
have been entitled to receive had he commenced receiving benefits during the
month of his death in the standard benefit form for a person who is married as
of the date benefits commence (as described in Section 5.01). A Participant who
is entitled to basic monthly benefits under this Section may elect to receive
benefits Actuarially Equivalent to those payable at Age 65, at any time after
his Severance from Service Date but prior to his attaining Age 65.
SECTION 4.04. DISABILITY BENEFITS. As to periods prior to October 1, 1990,
each Participant who becomes Totally Disabled and who remains so disabled until
he attains Age 65, shall be deemed then to have a Severance from Service Date
and shall receive a basic monthly pension payable on the first day of each month
after attaining Age 65 up to and including the month in which he dies.
Provided, however, that this Section 4.04 shall not be applicable to a
Participant who is eligible for an Early Retirement benefit under Section 4.02
or 4.03 and elects to retire under Section 4.02 or 4.03. The amount of such
pension shall be the benefit that would have been payable to him had he
continued to be actively employed in covered employment by his Employer until he
attained Age 65 at an amount of annual compensation equal to his Compensation
for the last complete calendar year for which he received regular compensation
from his Employer.
As to periods after September 30, 1990, each Participant who becomes
Totally Disabled, who remains disabled and who continues to receive salary
continuance or benefits under his Employer's long term disability program (or
would have received
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benefits had he been a participant in such program) until he attains Normal
Retirement Age may thereafter elect to retire and receive a basic monthly
pension payable beginning on the first day of any subsequent month he chooses
and continuing each month thereafter up to and including the month in which he
dies. An election to receive such pension benefits shall cause a permanent
cessation of any salary continuance and long term disability benefits under
Employer sponsored programs that such Participant otherwise would have been
entitled to receive. Provided further, a Totally Disabled Participant who has
attained Normal Retirement Age and has not earlier elected to receive benefits
hereunder, shall automatically be retired and begin receiving a basic monthly
pension hereunder beginning the month following the month in which long term
disability benefit payments under an Employer sponsored long term disability
program ceases, or would have ceased if the Participant had been a participant
in such program. Provided, however, that this Section 4.04 shall not be
applicable to a Participant who is eligible for an Early Retirement benefit
under Section 4.02 or 4.03 and elects to retire under Section 4.02 or 4.03. The
amount of such pension shall be the benefit that would have been payable to him
had he continued to be actively employed in covered employment by his Employer
during the period prior to benefit commencement for which he receives salary
continuance benefits from his Employer plus (i) the period during which he
receives benefits under his Employer's long term disability program if he is a
participant under such program or (ii) during the period for which he would have
received long term disability payments had he been a participant in such
program, based on an amount of annual compensation equal to his Compensation for
the last complete calendar year for which he received regular compensation from
his Employer. Such a Participant shall also receive Vesting Service and
Credited Service during such period.
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As to periods after September 30, 1990, each such Participant who becomes
Totally Disabled and continues to be so disabled, but whose salary continuance
and long term disability benefits are exhausted (or would have been exhausted if
he had been a participant in the long term disability program) before attainment
of Normal Retirement Age, shall incur a Severance from Service Date upon such
exhaustion for purposes of computing Credited Service and Final Average Monthly
Earnings, but such a Participant shall continue to accumulate Continuous Service
for the purpose of benefit eligibility until he attains Normal Retirement Age;
whereupon he shall receive a basic monthly pension payable beginning in the
month subsequent to the month of attainment of Normal Retirement Age and
continuing each month thereafter up to and including the month in which he dies.
Provided, however, that this Section 4.04 shall not be applicable to a
Participant who is eligible for an Early Retirement benefit under Sections 4.02
or 4.03 and elects to retire under Section 4.02 or 4.03. The amount of such
pension shall be the benefit that would have been payable to him (without regard
to any requirements as to years of Vesting Service) had he continued to be
actively employed in covered employment by his Employer during the period prior
to Severance from Service Date, based on an amount of annual compensation equal
to his Compensation for the last complete calendar year for which he received
regular compensation from his Employer.
The benefit shall be payable in the Life-Only form or the surviving spouse
benefit form as provided in Section 5.01, unless an election is made under
Section 5.02. A person who ceases to be Totally Disabled and thereupon becomes
employed by an Employer in covered employment shall continue participation in
the Plan on the basis of his new employment and retain Credited Service for his
term of disability. Such a resumption of employment for a Related Entity or in
a non-covered unit shall result in a suspension of participation under Section
10.02, but without loss of Credited Service for
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his term of Total Disability. Cessation of Total Disability before attainment
of Normal Retirement Age but without resumption of employment by an Employer or
Related Entity shall result in a Severance from Service Date as of the date such
recovery is determined by the Committee to have occurred, for all purposes
hereunder. Continued participation under this provision is conditioned upon a
Participant's submission from time to time, if and when so requested by the
Committee, to examination by a licensed physician selected by the Committee.
This Section shall apply to any former participant in a Previous Plan that
covered employees of any operation acquired before March 1, 1972 by the Company,
and was amended and restated into the May 1, 1976 "Dresser Industries, Inc.
Retirement Income Plan," who as of May 1, 1976 had not attained Age 65, but who
had previously terminated active employment while participating in such Previous
Plan because he was Permanently Disabled (as defined in such Previous Plan),
provided he continues to be Permanently Disabled (as defined in such Previous
Plan) on May 1, 1976, is not entitled to current benefits under such Previous
Plan, and can expect equal or greater benefits under this provision than under
such Previous Plan's provision for disability, and otherwise qualifies under
this Section; such benefit to be in lieu of any and all benefits otherwise
payable under such Previous Plan.
SECTION 4.05. OTHER TERMINATION BENEFITS. Each Participant who incurs a
Severance from Service Date and who does not and will not qualify for benefits
under any of the above Sections shall (except as provided in Section 10.03
regarding military service) receive deferred vested benefits under this Section.
Each such Participant shall be entitled to a basic monthly pension payable in
the Life-Only or surviving spouse benefit form, or such other forms as selected
under Section 5.02, beginning on the Participant's Normal Retirement Date. The
amount of such basic monthly pension shall
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be determined as the Participant's Accrued Benefit multiplied by the appropriate
factor determined by the Participant's years of Vesting Service as of his
Severance from Service Date, as follows:
<TABLE>
<CAPTION>
Full Years of Percentage of
Vesting Service Accrued Benefit Vested
--------------- ----------------------
<S> <C>
less than 5 0%
5 or more 100%
</TABLE>
A Participant who is entitled to elect a lump sum settlement of any portion
of his monthly benefits under Section 10.04 shall, unless he elects otherwise as
provided in Section 10.04, receive such benefits as an immediate annuity
effective on the first of the month coincident with or next following the
Participant's Severance from Service Date in the standard benefit form of
Section 5.01 in an amount that is Actuarially Equivalent (except as otherwise
specified in Section 11.11) to those payable at age 65. Provided however,
effective for Participants with a Severance from Service Date on or after
March 31, 1992, if the Participant elects the single sum settlement option under
the Prior Plan or Predecessor Plan and if a portion of the benefit from the Plan
is not eligible for single sum settlement option, then the Participant shall be
entitled to elect that benefits under this Plan be in a deferred standard
benefit form or to be able to cash out to the extent allowed under Section
10.04, with a deferred standard benefit form for the remainder, subject to any
spousal consent requirements. Participants with a Severance from Service Date
before March 31, 1992, who elect a single sum settlement option under the Prior
Plan or Predecessor Plan must elect to receive benefits under this Plan in a
single sum settlement option to the extent allowed under Section 10.04. Any
Participant who has met the service requirements under the Plan for eligibility
for early retirement benefits may elect to receive benefits Actuarially
Equivalent (except as
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otherwise specified in Section 11.11) to those payable at age 65 at any time
after attainment of Age 55.
SECTION 4.06. SPOUSE'S DEATH BENEFIT FOR PERSONS PARTICIPATING IN PRIOR PLAN.
In the case of a Participant who was a participant (including a permanently
disabled participant) in the Prior Plan as of April 30, 1986, if he has
completed five or more years of Vesting Service and dies before the Annuity
Starting Date, or if a Participant has less than five years of Vesting Service,
commenced participation in a Prior Plan prior to August 1, 1983 and dies after
attaining Age 55 but prior to his Annuity Starting Date while employed, there
shall be payable to his surviving spouse either:
(a) a monthly benefit for life equal to 50% of the monthly reduced benefit
to which the Participant would have been entitled if such Participant
had terminated employment on the earlier of the date of his actual
termination of employment or the date of his death, survived to Age
55, retired at Age 55 with the surviving spouse benefit form under
Section 5.01 and died immediately thereafter, or
(b) in the case of a Participant who dies after attaining Age 55, such
Participant had retired with the surviving spouse benefit form under
Section 5.01 on the day before such Participant's death.
Unless the spouse elects to delay payment as provided in Section 5.06,
payment shall commence to the spouse in the month following the month in
which the Participant dies, or if later, in the case of a Participant dying
before Age 55, in the month in which the Participant would have attained
Age 55 and shall be payable
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the first day of each month thereafter up to and including the month in
which the surviving spouse dies.
SECTION 4.07. SPOUSE'S DEATH BENEFIT FOR PERSONS NOT PARTICIPATING IN PRIOR
PLAN. In the case of a Participant who was not a participant (or a permanently
disabled participant) in the Prior Plan as of April 30, 1986, if he has
completed five or more years of Vesting Service and dies before the Annuity
Starting Date, there shall be payable to his surviving spouse one of the
following:
(a) for a Participant who has completed ten or more years of Vesting
Service and dies prior to attaining Age 55, a monthly benefit for life
equal to 50% of the monthly reduced benefit to which the Participant
would have been entitled if such Participant had terminated employment
on the earlier of the date of his actual termination of employment or
the date of his death, survived to earliest retirement age, retired at
such earliest retirement age with the surviving spouse benefit form
under Section 5.01 and died immediately thereafter, or
(b) for a Participant who has completed ten or more years of Vesting
Service and dies after attaining Age 55, a benefit that would have
been payable had such Participant retired with the surviving spouse
benefit form under Section 5.01 on the day before such Participant's
death, or
(c) for a Participant who has completed less than ten years of Vesting
Service, a monthly benefit for life equal to 50% of the monthly
benefit to which the Participant would have been entitled if such
Participant had terminated employment on the earlier of the date of
his actual termination of
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employment or the date of his death, survived to Age 65, retired at
Age 65 with the surviving spouse benefit form under Section 5.01 and
died immediately thereafter.
In the case of a Participant who has completed ten or more years of Vesting
Service at the time of death, unless the spouse elects to delay payment as
provided in Section 5.06, payment shall commence to the spouse in the month
following the month in which the Participant dies, or if later, in the case of a
Participant dying before Age 55, in the month in which the Participant would
have attained Age 55. In the case of a Participant who has completed less than
ten years of Vesting Service at the time of death, payment shall commence to the
spouse in the month in which the Participant would have attained Age 65. In
either case, payments to the spouse shall continue payable the first day of each
month thereafter up to and including the month in which the surviving spouse
dies. The spouse shall be permitted to delay payment to the extent permitted in
Section 5.06.
SECTION 4.08. ESTABLISHED BENEFITS. Except as otherwise provided in Section
2.01, each Participant in the Previous Plan, any Prior Plan, any Predecessor
Plan and/or previous statements of this Plan whose benefit payments thereunder
commenced, whose active employment ceased or whose transfer to employment not
affording eligibility for participation in this Plan occurred prior to the
effective date of the amendment and restatement of such plan into this Plan,
shall receive only the benefits then provided under the relevant plan and shall
not receive any benefits under the provisions of this restatement of the Plan.
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SECTION 4.09. NONDUPLICATION.
(a) In the case of persons who become Participants after having changed
employment status from that of ineligible employee to that of
Employee, Credited Service for purposes of determining benefits shall
include only Continuous Service after the date such person became an
Employee hereunder, but all service as an employee shall be included
as Continuous Service for purposes of determining eligibility to
participate in this Plan and Vesting Service. Such a Participant
shall, in addition to other benefits provided under this Plan, be
entitled to receive under this Plan an amount equal to benefits
accrued to him, subject to the vesting provisions of this Plan, to the
date of such change in employment status in any other nongovernmental,
tax-qualified defined benefit pension plan to which any Employer (or
predecessor thereof) has contributed, less any amounts (or Actuarially
Equivalent amounts) which such Participant is entitled to receive
under the provisions of such other plan or plans. In determining the
amount of benefits accrued under such other plan or plans (other than
the merged plans provided for in Article XI) for a Participant whose
benefits under this Plan commence prior to his Normal Retirement Date,
the accrued benefit from such other plan or plans shall be multiplied
by the appropriate early retirement percentage factor applicable to
the Social Security component of the benefit, as indicated in Section
4.02, considering the age of the Participant at the time benefits
commence.
Further provided that for any Participant who had changed status from
ineligible employee to "Employee" under the Prior Plan and who was a
participant in the Prior Plan as of April 30, 1986, the benefits
accrued under
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the Prior Plan as of April 30, 1986, in respect of service as an
ineligible employee prior to entering the Prior Plan shall be
determined under this Plan as if such benefits were deemed to be 100%
vested. The excess of such 100% vested accrued benefit as of April
30, 1986 over the benefit provided under the Prior Plan in respect of
such service as an ineligible employee shall be paid to such
Participant from this Plan.
(b) In the case of all other Participants, benefits otherwise payable
under this Plan will be reduced to the extent of benefits provided by
contributions of the Company or a Related Entity to another qualified
nongovernmental defined benefit pension plan and actually payable for
the same periods of employment as are payable under this Plan.
SECTION 4.10. POSTPONED RETIREMENT BENEFIT. Each Participant who continues in
employment past the Normal Retirement Date may elect to retire and commence
receiving a basic monthly pension calculated in the manner set out in Section
4.01 of this Plan but including Credited Service and Compensation after the
Normal Retirement Date but prior to the Severance from Service Date. In any
case benefit payments must commence no later than April 1 of the calendar year
after the calendar year in which the Participant attains Age 70-1/2, unless the
Participant was 70-1/2 before January 1, 1988.
The benefit payable on this first required beginning date shall be
determined using the benefit accrued as of the prior December 31. The benefit
payable thereafter shall be recalculated and adjusted effective on each January
1 after the first required beginning date to include the additional compensation
and Credited Service earned
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during each calendar year. The form of benefit payment that is already in
effect for such a Participant shall also apply to all subsequent recalculations
and adjustments.
SECTION 4.11. NOTICE 88-131 AND REVENUE PROCEDURE 89-65. Notwithstanding any
other contrary provision of the Plan, in calculating the Accrued Benefit
(including the right to any optional benefit provided under the Plan) of any
Plan Participant who was a highly compensated employee for the Plan Year
beginning May 1, 1989, within the meaning of section 414(q)(1)(A) or (B) of the
Code, such highly compensated employee shall accrue no additional benefit under
the Plan on or after May 1, 1989, to the extent that such additional benefit
accrual exceeds the benefit which would otherwise accrue in accordance with the
terms of the Plan subsequent to December 1, 1990, the implementation date of the
restatement of the Plan to comply with the Tax Reform Act of 1986 (TRA '86) and
amended to comply with Income Tax Regulations section 1.401(b)-l(b)(2)(ii). In
determining highly compensated employees, the Plan will use the calendar year
election as defined in Regulation 1.414(q)-1T. Until December 1, 1990, no such
highly compensated employee received from the Plan after January 31, 1989, any
amount in excess of such employee's Accrued Benefit under the Plan as of April
30, 1989.
In addition, in calculating the Accrued Benefit for the Plan Year beginning
May 1, 1990 (including the right to any optional benefit provided under the
Plan) of any additional highly compensated employee who had not been deemed a
highly compensated employee as of April 30, 1989 within the meaning of section
414(q)(1)(A) or (B) of the Code, such highly compensated employee shall accrue
no additional benefit under the Plan on or after May 1, 1990, to the extent that
such additional benefit accrual exceeds the benefit which would otherwise accrue
in accordance with the terms of the Plan subsequent to December 1, 1990, the
date of implementation to comply with
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those qualification requirements described in Income Tax Regulations section
1.401(b)-l(b)(2)(ii). Until December 1, 1990, no such highly compensated
employee received from the Plan after April 30, 1990, any amount in excess of
such employee's Accrued Benefit under the Plan as of April 30, 1990.
In addition, the Accrued Benefit determined as of December 1, 1990 of Plan
Participants other than highly compensated employees (within the meaning of
section 414(q)(1)(A) or (B) of the Code), shall be the larger of the Accrued
Benefit determined (1) under the Plan as in effect just prior to the date of the
restatement or (2) under the Plan as it was so restated.
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ARTICLE V - OPTIONS
SECTION 5.01. STANDARD BENEFIT FORM. In the case of a Participant who is not
married on the Annuity Starting Date, the standard benefit form shall be the
basic monthly pension under Article IV (including where applicable, amounts
based on benefits accrued under a Predecessor Plan) payable for the lifetime of
the Participant. This is the Life-Only benefit form. In the case of a
Participant who is married on the Annuity Starting Date, the standard benefit
form shall be a reduced monthly pension payable for the lifetime of the
Participant, with one-half of such reduced monthly pension to continue to his
spouse for her lifetime (provided she was his spouse on the Annuity Starting
Date) should she survive the Participant. This is the surviving spouse benefit
form. The amount of benefit payable under this surviving spouse benefit form
shall be Actuarially Equivalent to the basic monthly pension determined under
Article IV, including where applicable, amounts based on benefits accrued under
a Predecessor Plan.
SECTION 5.02. OPTIONS AVAILABLE. Each optional benefit form unless otherwise
provided, shall have a value that is Actuarially Equivalent to the relinquished
benefit on the Annuity Starting Date, and shall consist of the optional benefit
selected, in the manner provided in Section 5.03, from the following list:
(a) LIFE-ONLY OPTION. A Participant who is married on the Annuity
Starting Date may elect to receive benefits in the Life-Only form
described in Section 5.01, in which case his surviving spouse will not
be entitled to any monthly benefit after his death. This form may
only be elected with written spousal consent as witnessed by a Plan
representative or Notary Public.
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(b) JOINT AND SURVIVORSHIP OPTIONS. A Participant who is married on the
Annuity Starting Date may elect to reduce his monthly pension so that
his spouse, should she survive him, will receive for her lifetime an
amount equal to 100% or 66.67% of the reduced monthly pension to which
the Participant is entitled. Such election shall not require spousal
consent.
(c) GUARANTEED PERIOD OPTION. A Participant may elect to receive reduced
monthly pension benefits so that pension payments will continue for
the Participant's lifetime but at least for a total of 60, 120 or 180
months (as the Participant shall have elected) and should the
pensioned Participant die before receiving all guaranteed payments,
remaining monthly payments after his death shall be made to his
Beneficiary. As to a married Participant, this form may only be
elected with written spousal consent as witnessed by a Plan
representative or Notary Public.
(d) LEVEL INCOME OPTION. Participants whose Annuity Starting Date is
prior to the date on which the Social Security Pension is to commence
and whose monthly pension payment would be equal to or exceed the
expected Social Security Pension, may elect to have monthly payments
under this Plan adjusted to coordinate with the Social Security
Pension in such a way that total monthly payments from both sources
will remain approximately equal before and after the Social Security
Pension commences (except that Social Security increases after pension
payments commence will not affect pension payments). The Social
Security amount used to determine the Level Income pension will be
based on the Participant's retirement age, date of birth and assumed
and actual earnings history. This benefit form
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may be elected in conjunction with any other option. As to a married
Participant, this form may only be elected with written spousal
consent as witnessed by a Plan representative or Notary Public.
SECTION 5.03. MAKING ELECTIONS. An election by a Participant to have his
benefits paid under one or more of the optional benefit forms provided in this
Article in lieu of the standard benefit form described in Section 5.01 shall be
effective only if made on a form authorized by the Committee, which is
completed, signed and delivered to the Manager or his appointee within 90 days
before the Annuity Starting Date and no later than the date scheduled for the
first benefit payment under Article IV. Notwithstanding the preceding sentence,
to the extent necessary to permit the election to be made within this time
period, the date scheduled for the first benefit payment under Article IV may be
delayed until the first day of the first month not sooner than 14 days after
receipt of the properly executed election form but not later than 90 days after
the Participant has been furnished full particulars of the financial effects on
his pension of such election. Any election to select options under Section
5.02(a), (c) or (d) shall be accompanied by written spousal consent as witnessed
by a Plan representative or Notary Public. For the purpose of this election,
the Participant shall be furnished with an explanation of the full particulars
of the financial effects on the pension amount of such election which shall
include a general description of the material features and an explanation of the
relative values of the optional forms of benefit available under the Plan in a
manner that shall satisfy the notice requirements of Code section 417(a)(3) and
related regulations. This explanation shall be provided no less than 30 days or
more than 90 days before the Annuity Starting Date.
In addition, the Manager shall endeavor to voluntarily furnish to each
Participant general information similar to the information referred to in the
preceding sentence nine
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months before his Normal Retirement Date or as soon as practicable before or
after his Early Retirement Date. Such a general explanation of the options and
their financial effects will be provided to each Participant about nine months
before his 55th birthday. If the Participant has no living spouse on the
Annuity Starting Date, benefits shall not be payable under the surviving spouse
benefit form or the Joint and Survivorship Options benefit form.
Any election made under this Section may be revoked by written notice to
the Employer, on a form authorized by the Committee, including written spousal
consent as required during the period in which such election could have been
made; and after such election has been revoked, another election may be made, in
the same manner as the earlier election, during such period.
Notwithstanding any of the above provisions of this Section 5.03 to the
contrary, if a Participant elects an optional form of benefit other than a
single sum settlement under the provisions of the Prior Plan, a Predecessor Plan
or the Dresser Industries, Inc. Retirement Income Plan for Salaried Employees of
Marion Power Shovel Division, as the case may be, then the optional form of
benefit under this Plan shall be the same as the optional form of benefit under
the Prior Plan, Predecessor Plan or the Dresser Industries, Inc. Retirement
Income Plan for Salaried Employees of Marion Power Shovel Division, to the
extent that this Plan provides for such option. If the Participant elects a
single sum settlement option under the Prior Plan or Predecessor Plan and if the
entire benefit from this Plan is eligible for a single sum settlement option
under Section 10.04, then such benefit shall be paid under such single sum
settlement option, subject to the other provisions of this Section 5.03.
Effective for Participants with a Severance from Service Date on or after March
31, 1992, if the Participant elects the single sum settlement option under the
Prior Plan or Predecessor Plan and if a portion of the benefit from this Plan is
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not eligible for a single sum settlement option, then the entire benefit under
this Plan shall be paid subject to the other provisions of this Section 5.03
under any of the optional forms provided for under this Article V, including the
lump-sum cash out to the extent allowed under Section 10.04. Participants with
a Severance from Service Date before March 31, 1992, who elect a single sum
settlement option under the Prior Plan or Predecessor Plan must elect to receive
benefits under this Plan in a single-sum settlement option to the extent allowed
under Section 10.04. Provided however, if a Participant has elected an option
under the Prior Plan, Predecessor Plan or the Dresser Industries, Inc.
Retirement Income Plan for Salaried Employees of Marion Power Shovel Division
that corresponds to one of the options available under Sections 5.02(a) or (c)
or 5.04 and the written spousal consent required for the options under Sections
5.02(a) or (c) or elect such option is not obtained, then the only option
available under this Plan shall be the standard benefit form provided for in
Section 5.01.
Subject to the other conditions for making elections under this Section
5.03, a Participant who retires and is reemployed must continue the option that
was in effect upon his initial retirement. Notwithstanding the preceding
sentence, such Participant may elect a lump-sum settlement as to the benefit
accrued after re-employment subject to the restrictions of Section 10.04. Also,
in the case of a Participant whose marital status has changed as of his
subsequent retirement, when compared to his initial retirement, such Participant
may elect any benefit form available in Article V or Section 10.04 as to the
benefit accrued after re-employment.
SECTION 5.04. LUMP-SUM PAYMENT. Section 10.04 contains provisions relating to
the payment of lump-sum benefits under the Plan.
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SECTION 5.05. DISTRIBUTION RULES.
(a) Notwithstanding anything in the Plan to the contrary, the payment of
benefits to a Participant hereunder shall begin not later than the
60th day after the close of the Plan Year in which the latest of the
following events occurs:
(1) the date on which such Participant attains Age 65;
(2) the tenth anniversary of the date on which such Participant began
participation in the Plan; and
(3) the date on which such Participant terminates his employment
hereunder (a Participant described in Section 4.04 who is
receiving salary continuance or Long Term Disability benefits
shall not be considered to have terminated employment for
purposes of this Section 5.05);
provided, however, that if the application of subsection (b) of this
Section would require an earlier date, the payment of benefits to such
Participant shall begin not later than such earlier date.
(b) The payment of benefits to a Participant hereunder shall begin not
later than April 1 of the calendar year following the calendar year in
which such Participant attains Age 70-1/2. This subparagraph (b)
shall not apply to any Participant who reached age 70-1/2 before
January 1, 1988.
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(c) The entire interest of a Participant must be distributed:
(1) over the life of the Participant;
(2) over the joint and survivor lives of the Participant and his
Beneficiary;
(3) over a period not extending beyond the life expectancy of the
Participant; or
(4) over the joint and survivor life expectancies of the Participant
and his Beneficiary.
For purposes of this subsection (c), life expectancy shall be computed
by use of the expected return multiples in Treas. Reg. Section 1.72-9,
or, in the case of payments under a contract issued by an insurance
company, the period computed by the use of the mortality tables of
such company.
(d) An annuity or endowment contract issued by an insurance company which
provides for nonincreasing payments over one of the periods specified
in subsection (c) beginning not later than April 1 following the close
of the taxable year of the Participant in which he attains Age 70-1/2,
shall be deemed to satisfy the requirements of subsection (b).
(e) If the Participant dies after distribution of his interest has
commenced, the remaining portion of such interest will continue to be
distributed at least as
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rapidly as under the method of distribution being used prior to the
Participant's death.
(f) If a Participant who is eligible to receive retirement benefits dies
before distribution commences, the Participant's interest shall
commence to a designated Beneficiary within one year after the
Participant's death. If the designated Beneficiary is the
Participant's surviving spouse, the date distributions are required to
begin under this paragraph shall not be later than the date on which
the Participant would have attained Age 70-1/2 and, if the spouse dies
before payments begin, subsequent distributions shall be made as if
the spouse had been the Participant.
(g) If the amount of payment required to commence by a certain date in
accordance with the Plan cannot be ascertained by such date, or if the
Committee does not have sufficient information to enable it to make
distribution, or if it is not possible to make payment on such date
because the Committee has been unable to locate the Participant or
Beneficiary after making reasonable efforts to do so, a payment
retroactive to such date may be made no later than 60 days after the
earliest date on which the amount of such payment can be ascertained
under the Plan, or sufficient information is obtained, or the date on
which the Participant or Beneficiary is located, whichever is
applicable.
(h) After the Annuity Starting Date except as otherwise provided under
Section 5.03 or Section 10.04, neither partial nor a total single-sum
distributions may be made, regardless of the present value of the
nonforfeitable accrued benefit.
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(i) Any distribution from the Plan will be made in accordance with Code
Section 401(a)(9) and any related regulations, including but not
limited to 1.401(a)(9)-2. In the event that distributions made in
accordance with Code Section 401(a)(9) or any related regulations
shall conflict with any other Plan provisions, this Section 5.05(i)
shall rule.
SECTION 5.06. CONSENT TO BENEFIT COMMENCEMENT. If, at the time of
distribution, the Actuarial Equivalent present value of the Participant's or the
Participant's surviving spouse benefit under the Plan exceeds $3,500, the
written consent of the Participant or the written consent of the Participant's
surviving spouse if the Participant has died, shall be required if such
commencement is before the time the Participant attains or would have attained
Age 65 under the Plan. Such consent must be obtained not more than 90 days
before the commencement of said benefits.
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ARTICLE VI - ADMINISTRATION
SECTION 6.01. GENERAL. Administration and interpretation of the Plan shall be
the ultimate responsibility of the Company, which shall be the Named Fiduciary.
The Company may choose to act on these matters through the Committee, which may,
however, delegate routine administrative and interpretative matters to the
Manager, all as provided herein. In addition, the Company may delegate
investment responsibility regarding the Trust Fund to a committee appointed for
that purpose and/or to independent investment managers retained for that
purpose.
SECTION 6.02. COMMITTEE OPERATIONS. The Committee shall be the Employee
Benefits Committee of the Company as such may be constituted from time to time
by the Board. Committee action may be by unanimous written approval or by
resolution of a majority of the existing members at any meeting held by them.
The Committee shall determine its own structure and procedures.
SECTION 6.03. COMMITTEE DUTIES AND POWERS. The Committee shall have the sole
duty and power to direct administration of the Plan, including the
interpretation, construction and reconciliation of its provision, the resolution
of all questions that may arise hereunder, the authorization or promulgation of
any procedures, rules or forms that may appear to be necessary or desirable, and
the adoption of any tables, charts, formulae or actuarial assumption or reports
that it chooses to utilize in administering the Plan.
The Committee shall have the duty to verify the computation and payment
order of benefits by a Trustee or Insurer in the case of a basic monthly pension
that exceeds $3,000. The duty and power to compute and order payments of lesser
amounts shall be delegated to the Manager pursuant to Section 6.06 unless
specifically withheld or
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withdrawn by the Committee. The Committee shall endeavor to treat alike all
Participants similarly situated, but any action taken in good faith shall be
binding upon all persons.
SECTION 6.04. RELIANCE. The Committee may rely upon facts or documents
presented by the Participant to the Company or to the Committee regarding such
Participant, and may rely upon the advice of counsel, who may be counsel for the
Company, and may rely upon any opinion, certificate, valuation or other report,
or any tables, assumptions, formulae, or other recommendation or determination
rendered by an Actuary hired by the Company for that purpose.
SECTION 6.05. DISQUALIFICATION. No Committee member may participate in the
resolution of any claim for benefits that may result from his participation in
the Plan.
SECTION 6.06. PLAN MANAGER. The Manager shall be one or more employees of the
Company and shall be appointed by the Committee, to serve at its pleasure, to
supervise and carry out administrative details. The duties and powers of the
Plan Manager shall consist of the following functions, plus such other duties
and powers as may be delegated from time to time by resolution of the Committee
delivered to the Manager, or minus any specifically withheld in the same manner.
The recording secretary for the Committee shall keep its files and minutes. The
Manager shall, within any limitations that may be or have been imposed by
actions of the Company or its agreements with the Trustee, act to coordinate
necessary or desirable communications between the Committee, the Company, the
Employer, the Employees, Participants and other interested parties. He shall
distribute and explain booklets, forms, and procedures related to the Plan,
compute and order payment of benefits within the limitations provided in Section
6.3 and may apply the Plan provisions or decisions of the
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Committee to the resolution of any questions that may arise in the course of his
functions, so long as the resolution of such questions does not involve a
substantial or basic policy that should be referred to the Committee. In
carrying out his nondiscretionary functions he may utilize the employees of any
Employer or Related Entity as appointees for gathering or disseminating
information. Decisions of the Manager made in good faith shall be conclusive
and binding upon all parties who may be affected thereby, subject always to
review, and modification or reversal, by the Committee, or as prescribed under
ERISA.
SECTION 6.07. FOR THE PROTECTION OF THE COMMITTEE AND MANAGER. Neither the
Committee, nor any member thereof, nor the Manager shall jointly or severally be
liable for any action taken in good faith and in the performance of their duties
under the Plan, except as required under ERISA.
SECTION 6.08. EXPENSES. All expenses incident to the operation,
administration, termination or protection of the Plan and Trust Fund, including
but not limited to actuarial fees, accounting fees, premiums to the Pension
Benefit Guaranty Corporation (PBGC), and Trustee's fees may be paid by the
Company. Alternatively, the Company may instruct that items as in the judgment
of the Committee are determined to be proper plan expenses under ERISA shall be
paid by the Trustee from the Trust Fund.
SECTION 6.09. QUALIFIED DOMESTIC RELATIONS ORDERS. The Committee shall
maintain reasonable written procedures to determine whether a domestic relations
order is a Qualified Domestic Relations Order and to administer such orders.
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SECTION 6.10. WITHHOLDING ON DISTRIBUTIONS. Distributions under this Plan
shall be subject to federal income tax withholding as prescribed by section 3405
of the Code and the regulations thereunder.
SECTION 6.11. ROLLOVER PROVISIONS. A written explanation of the tax
consequences of a qualifying rollover distribution shall be provided to each
Participant in accordance with section 402 of the Code.
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ARTICLE VII - EMPLOYERS
SECTION 7.01. CURRENT. The corporations named in "Exhibit A", attached hereto,
shall constitute Employers under this Plan as of the Effective Date or such
other date as is specifically indicated; provided, however, employees of any
division or other departmental unit thereof that is so noted as an exception in
such list shall not be eligible to participate in this Plan unless such
exception is specifically limited in duration.
SECTION 7.02. NEW EMPLOYERS. Any corporation more than 50% of the voting stock
of which is owned directly or indirectly by the Company may join and become an
Employer hereunder by resolution of its board of directors. Any other
corporation may, with the consent of the Board, join and become an Employer
hereunder by resolution of its board of directors. Except as provided in
Section 7.05, in any such case the joining Employer may in such resolution
exclude employees of any designated division or other departmental operating
unit thereof; but in the absence of such limitations or other limitations
inherent in this Plan, it shall extend to cover all eligible Employees, but
unless otherwise provided in Article XI, Credited Service can include only
Continuous Service with the adopting Employer after the effective date of such
resolution.
SECTION 7.03. DELEGATION. Each adopting corporation by its adoption delegates
to the Company the power to act on its behalf in all matters regarding the Plan
and Trust, and adopts as its funding medium such trust agreements or insurance
contracts as may be selected by the Company.
SECTION 7.04. TERMINATING PARTICIPATION. Any Employer whose relationship to
the Company changes (by change of stock ownership or otherwise) so
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that the Board determines that the business reasons for its continuing to be
joined in sponsoring this Plan no longer exists, shall, upon notification of
such determination by the Board, terminate such joint sponsorship by terminating
the Plan for its employees or by continuing the Plan for its employees in a
separately stated document, with funding under a separate trust, as determined
by its board of directors. In either event, the Trust Fund and/or insurance
funds shall be segregated for such terminating Employer in the manner outlined
in Section 8.02 in the case of termination or partial termination of the Plan or
in Section 10.08 in the case of merger, consolidation, or other transfer of Plan
assets.
SECTION 7.05. CORPORATE CHANGES. If all or a part of an Employer's business
shall by merger or otherwise become a part of another Employer, all the affected
Employees' coverage hereunder shall continue uninterrupted. If an Employer
shall by merger or otherwise succeed to all or a part of the business of a non-
Employer and shall continue such business as a separate, identifiable division
or other business unit, coverage under this Plan of the employees so acquired
shall not occur until approved by resolution of the Employer's board of
directors. If all or a part of an Employer's business shall by sale or
otherwise become operated by a non-Employer, such part shall be treated as a
terminating Employer under Section 7.04 unless the successor is eligible to and
does thereupon become a new Employer under Section 7.02 hereof as to all its
Employees (or as to the Employees in such acquired business operation if they
are in a separate, identifiable business unit), in which event coverage for such
Employees will continue uninterrupted.
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ARTICLE VIII - AMENDMENT OR TERMINATION
SECTION 8.01. AMENDMENTS. The Company may at any time amend this Plan, such
amendment to be effective as of the date therein specified, provided that no
such amendment shall reduce the value of Accrued Benefits of Participants as of
such effective date except as otherwise permitted by ERISA. Notwithstanding the
foregoing, a retroactive amendment may be made at any time (a) if necessary to
obtain or retain qualification of the Plan under the Internal Revenue Code, or
to comply with ERISA or any other laws, rules or regulations, or (b) if
otherwise permitted.
Any amendment that has a non-substantive effect on the Accrued Benefits of
any Participant or Beneficiary or that makes nondiscretionary legally required
changes shall be by resolution of either the Board or the Company's Employee
Benefits Committee. Any other amendment, including an amendment that has a
substantive effect on the Accrued Benefits of any Participant or Beneficiary,
shall be by resolution of the Board, except that the Board may by resolution
approve such changes to the Plan and authorize the Employee Benefits Committee
to have prepared and to adopt such amendment of the Plan that accomplishes the
approved changes. Any person dealing with the Plan or the Company may rely on
actions taken either by the Employee Benefits Committee or the Board with regard
to amending the Plan, and shall not be required to inquire into the authority of
either party in acting to amend the Plan.
SECTION 8.02. TERMINATION. Subject to the qualified joint and survivor and the
pre-retirement annuity requirements set out in Articles IV and V, the Company
and each other Employer reserve the right to terminate the Plan at any time as
to its employees or any departmental unit thereof. In the event of termination
or partial termination of the Plan, which may be by formal action or by complete
discontinuance of Company
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contribution, all Accrued Benefits, to the extent funded on the date of such
event, shall become vested and nonforfeitable and the assets then remaining in
the Trust Fund, subject to provision for expenses of administration or
liquidation, shall be allocated in the manner and order described in the
following paragraphs:
(a) First, an amount equal to the value of that portion of each
individual's Accrued Benefit which is derived from Participant's
contributions, if any, which were not mandatory.
(b) Second, an amount equal to that portion of each individual's Accrued
Benefit which is derived from Participant's contributions, if any,
which were mandatory, which is in excess of Accrued Benefits
previously paid to the Participant and the joint annuitant or
Beneficiary of a deceased Participant.
(c) Third, an amount equal to the value of the Accrued Benefits (excluding
any increases in such Accrued Benefits resulting from Plan amendments
during the preceding five (5) years) accrued to all Participants,
their joint annuitants and Beneficiaries:
(1) to whom Accrued Benefits have been in pay status for at least
three (3) years prior to the date of Plan termination (taking the
lowest Accrued Benefit in pay status during any three (3) year
period used), and
(2) to whom Accrued Benefits (other than those described in the
foregoing subparagraph) would have been in pay status had an
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eligible Participant actually retired on a retirement date at
least three (3) years prior to the date of Plan termination, as
if such Accrued Benefits had commenced under the normal form of
Accrued Benefit payment under the Plan as of the beginning of
such period.
(d) Fourth, an amount equal to the value of Accrued Benefits not provided
above, for all Participants entitled to any additional Accrued
Benefits under the foregoing paragraph and for all Participants, if
any, entitled to Accrued Benefits pursuant to Section 4.05, or who
would be entitled to such Accrued Benefits if their employment were
terminated on the date of Plan termination, to the extent such Accrued
Benefits are guaranteed by the Pension Benefit Guaranty Corporation.
(e) Fifth, an amount equal to the value of Accrued Benefits for all
Participants, if any, entitled to Accrued Benefits pursuant to Section
4.05, or who would be entitled to such Accrued Benefits if their
employ were terminated on the date of Plan termination, to the extent
such vested Accrued Benefits have not been provided for under the
foregoing paragraph (d); provided, however, that if such amounts are
insufficient to satisfy in full Accrued Benefits hereunder, the
allocation provided within the second paragraph of Section 8.03 shall
apply.
(f) Sixth, an amount equal to the value of Accrued Benefits for all other
Participants not provided for above.
The payment of Accrued Benefits referred to in this Section may be
implemented through the continuance of any existing trust or establishment of a
new trust, through
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the continuance of any insured annuity contract, through the purchase by the
Trust of an insured annuity contract, through lump-sum payment to the
Participant or Beneficiary of the amount allocated to him under the provisions
of this Section, with such lump-sum determined based on mortality and interest
assumptions in effect by the PBGC for plan terminations as of such termination
date, or through a combination of these methods, except that different methods
shall not be used within the same class of nonguaranteed Accrued Benefits
described under Section 4044(a) of ERISA, all as determined by the Committee to
the extent allowed by regulations. If any assets remain after provision for
satisfaction of all liabilities of the Plan in the event of termination, they
shall be returned to the Company.
SECTION 8.03. INSUFFICIENT FUNDS AND ALLOCATION THEREOF. If assets shall be
insufficient to provide in full the Accrued Benefits of the entire class of
individuals described within paragraphs (a), (b), (c), (e) or (f) of Section
8.02, the available assets for such class shall be allocated among the
Participants of that class and their joint annuitants and Beneficiaries, pro
rata among such individuals on the basis of the present value (as of the Plan
termination date) of their respective Accrued Benefits as described in such
paragraph, and not previously provided for under the Trust Agreement.
If the assets available for allocation under paragraph (d) of Section 8.02
are insufficient to satisfy in full the Accrued Benefits of participants
described within that paragraph, the available assets for such class shall be
allocated on the basis of the Accrued Benefits of Participants of that class and
their joint annuitants and Beneficiaries, not previously provided for under the
Trust Agreement, based upon the Plan as in effect at the beginning of the five
(5) year period ending on the date of Plan termination; or, if additional assets
remain available for allocation under such paragraph
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(d), the available assets shall be allocated on the basis of the Plan as amended
by the next succeeding Plan amendment effective during such five (5) year
period, under which the assets available for allocation are sufficient to
satisfy in full the Accrued Benefits of the class of individuals described in
paragraph (d) of Section 8.02; and, any assets thereafter remaining to be
allocated under such paragraph (d) shall be allocated on the basis of the Plan
as amended by the next succeeding Plan amendment effective during such five (5)
year period.
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ARTICLE IX - MISCELLANEOUS
SECTION 9.01. SPENDTHRIFT. No right or interest of any kind in this Plan, or
the Trust Fund and/or insurance funds, shall be assignable or transferable by
any Participant, his spouse or his Beneficiary and no such right or interest
shall be subject to offset, adjustment, encumbrance, garnishment, attachment,
execution or levy of any kind, voluntary or involuntary. This paragraph shall
also apply to the creation, assignment, or recognition of a right to any benefit
payable with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a Qualified Domestic Relations Order which
is entered on or after January 1, 1985. A domestic relations order entered
before January 1, 1985 will be treated as a Qualified Domestic Relations Order
if payment of benefits pursuant to the order has commenced as of such date and
may be treated as a Qualified Domestic Relations Order if payment of benefits
has not commenced as of such date, even though the order does not satisfy the
requirements of section 414(p) of the Code.
SECTION 9.02. NO EMPLOYMENT CONTRACT. The existence of this Plan shall not
diminish the rights of any Employer to discharge or discipline any employee nor
otherwise constitute a contractual commitment to retain any employee in its
employ.
SECTION 9.03. COMMUNICATIONS. All notices, requests, elections or other
communications must be in writing to be effective. Communications from a
Participant or any other recipient or potential recipient of benefits hereunder
shall be effective only upon receipt by the Manager or his designee, and
communications or payments to a Participant, his spouse or his Beneficiary shall
be effective upon its deposit in the United States mail with proper stamp
attached and addressed to such person's last known address.
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SECTION 9.04. EMPLOYEE DATA AND VERIFICATION. The Committee, the Manager and
the Employer each may in administering this Plan utilize the employment records
maintained by any Employer and any Related Entity or predecessor and any facts
stated in any communication received from the Participant, his spouse or
Beneficiary, whether such communication relates directly to this Plan or not.
However, evidence sufficient to reasonably verify any pertinent facts, including
but not limited to matters such as the age, condition or continued existence of
a current or projected benefit recipient, may be required as a condition
precedent to continued accrual of Credited Service or payment of benefits.
SECTION 9.05. INCOMPETENTS. Whenever it shall appear to the Committee that an
individual entitled to benefit payments under this Plan is not capable of
handling his financial affairs, such payments may instead be made to any
individual or institution that the Committee believes will utilize such payments
for the benefit of such individual, and such payment will constitute full
payment of benefits to such individual.
SECTION 9.06. PRESUMPTIONS. If the existence and location of an individual
apparently entitled to benefits hereunder cannot be determined and verified by
reasonable effort within two years after the request for verification of such
facts was mailed in registered form to the individual at his last known address,
such individual shall be presumed to have died as of the first day such benefit
payments were due but unpayable. If on account of the death (verified or
presumed) of a Participant, his spouse and/or his Beneficiary there is no
designated person to whom benefits can be paid, they shall be paid to the
Participant's estate, if one exists. If no such estate is formulated within
twelve months after verification of death, or the two-year period noted earlier
where death is presumed, unpaid benefits shall be treated as abandoned and used,
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together with forfeitures under this Plan, to reduce future Employer
contributions, unless and until proper claim therefor is made by an individual
entitled thereto under this Plan.
SECTION 9.07. NONDISCRIMINATION. In the exercise of discretion in interpreting
and administering this Plan, the Committee and the Manager shall strive for
uniform and equitable treatment of Participants, but they shall not be bound to
treat every similar circumstance identically.
SECTION 9.08. GOVERNING LAW. This Plan shall be governed by ERISA and any
provision herein that would be contrary thereto shall be construed and
interpreted by the Committee in such a manner as to comply with ERISA while
still retaining insofar as practicable the original purpose of such provision.
In matters not within the purview of ERISA, the law of the State of Texas shall
apply.
SECTION 9.09. ADVISORS NOT FIDUCIARIES. The Company and the Committee and
other Plan fiduciaries may solicit the advice of attorneys, actuaries,
accountants, and other professionals and may rely upon their advice in the
performance of duties under the Plan. No such advisor shall be considered a
fiduciary by virtue of having advised a fiduciary but shall be a fiduciary only
to the extent he expressly accepts that role.
SECTION 9.10. PURCHASE OF ANNUITY CONTRACTS. From time to time the Plan may
purchase or cause to be purchased individual or group annuity contracts covering
all or part of the Plan's liability to one or more Plan Participants or
Beneficiaries. The purchase of such a contract shall be in full discharge of
the liability covered by the contract, and neither the Plan nor the Committee
nor the Company shall be responsible for the subsequent failure of the insurance
company or companies issuing or underwriting the contract to pay benefits for
any reason, including insolvency.
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SECTION 9.11. RECOVERY OF PAYMENTS MADE BY MISTAKE. Notwithstanding anything to
the contrary, a Participant or Beneficiary is entitled only to those benefits
provided by the Plan and promptly shall return any payment made by mistake of
fact or law or any other error, unless recovered by adjustment in the monthly
payments.
SECTION 9.12. REPRESENTATIONS CONTRARY TO PLAN. No employee, supervisor,
officer or director of the Company has authority to alter, vary or modify the
terms of the Plan, except in writing through the Plan's formal amendment
procedures set forth in Section 8.01. No representation contrary to the terms
of the Plan and formal amendments thereto shall be binding on the Plan, the
Trustee, the Committee, or the Company.
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ARTICLE X - SPECIAL RULES
SECTION 10.01. REEMPLOYMENT. The general rule is that an Employee who has a
Severance from Service Date followed by a Reemployment Commencement Date will
have his two (or more) periods of employment or service combined for all
purposes under the Plan, except that if he fails to pay into the Plan within
five years after his Reemployment Commencement Date an amount equal to any lump-
sum distribution (plus Interest thereon) that he received at severance, his
benefits hereunder will be reduced to reflect this early distribution. Such
reduction shall be the Actuarial Equivalent of any payments received from the
Plan since the Participant's Severance from Service Date plus Interest on such
payments. Provided, however, for Participants who subsequently have a Severance
from Service Date on or after May 1, 1992, and who previously had a single-sum
settlement of any portion of their benefits upon an Early Retirement Date, such
reduction shall be determined by recalculating the original early retirement
benefit with respect to the portion previously paid in a single sum settlement
and assuming it would be paid on the new benefit commencement date and then
subtracting such amount from the newly calculated benefit amount. However, the
following modifications to this general rule shall apply:
(a) If the Reemployment Commencement Date of an Employee occurs within
twelve months after the last day on which the Participant completed an
Hour of Service within the meaning of Department of Labor regulation
section 2530.200-2(a), any intervening Period of Severance shall be
added to his Period of Service, (that is Continuous Service and
Vesting Service, but not Credited Service).
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(b) Subject to subparagraph (c) below, if an Employee entitled to Vesting
Service under the Plan has less than five years of Vesting Service on
his Severance from Service Date, his prior Period of Service (that is
Continuous Service, Vesting Service and Credited Service) shall be
disregarded for all purposes of this Plan.
(c) The Employee's prior Continuous Service, Vesting Service, Credited
Service, and Period of Service shall be reinstated if the Employee's
Reemployment Commencement Date occurs before his Period of Severance
equals or exceeds the greater of five years or the amount of the
Employee's Vesting Service completed prior to his most recent
Severance from Service Date.
Any Employee whose Severance from Service Date was prior to May 1, 1986 and
whose Reemployment Commencement Date is after April 30, 1986, and who has
service prior to May 1, 1986 restored according to the above rules shall have
benefits provided by this Plan, the Prior Plan, and the MPS defined in Section
11.03 as if such plans were a single plan. To the extent benefits from the
Prior Plan or the MPS Plan cannot be restored under such plans, such benefits
shall be restored under this Plan. All optional forms of payments with respect
to Accrued Benefits shall be determined in accordance with Article V and Section
10.04 of the this Plan, and vesting in the Employer provided portion of such
Accrued Benefit shall be determined in accordance with Section 4.05 of this
Plan. The benefits described in this paragraph are subject to the provisions of
Section 10.09.
Reemployed Participant options shall be governed by the last paragraph of
Section 5.03.
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SECTION 10.02. TRANSFERS. The participation of an Employee who changes
employment from one Employer to covered employment under another Employer
without any intervening period shall continue uninterrupted. A Participant who
remains employed but ceases to be an Employee (i.e., changes his status) or a
Participant whose employment with an Employer ceases but who is immediately
thereafter employed by a Related Entity, or a Participant who is transferred to
a business unit of his Employer that is excluded from coverage hereunder, shall
have his participation in this Plan (accrual of benefits) suspended so long as
his uncovered employment or ineligible status continues. Upon his resumption of
services in covered employment or eligible status therein, his participation
shall immediately resume, in which case his intervening nonparticipation service
time shall be counted as Continuous Service for eligibility and vesting
purposes, but not as Credited Service for benefit accrual purposes. Otherwise,
upon cessation of employment resulting in a Severance from Service Date from all
Employers and Related Entities, the Participant previously suspended from
participation shall be entitled to his frozen Accrued Benefit hereunder, if any,
as though he had ceased employment with his last Employer as of his Severance
from Service Date. That is, service during suspension of participation will not
be considered to increase his Accrued Benefit, although it will be considered
Vesting Service. Simultaneous covered employment by a Participant for two or
more Employers shall be combined and treated as a single employment for purposes
of the Participant's eligibility and benefits, but each Employer shall make a
ratable proportion of Employer's contributions. An employee who is a
participant in the Dresser Canada, Inc. Retirement Income Plan, who transfers to
employment in which he is eligible to participate in this Plan, shall
participate hereunder and receive benefits as though his Continuous Service,
Vesting Service and Credited Service included such service under the other plan,
and he shall receive no benefits under the other plan. Conversely, an employee
other than a U.S. citizen or resident alien transferring
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employment to Canadian operations will transfer from this Plan to such other
plan and will receive all benefits under the other plan and none under this
Plan, the intent being in each case to have benefits paid only from the plan
covering the employee at termination or retirement for all service under both
plans.
SECTION 10.03. MILITARY SERVICE. A Participant who ceases active employment to
serve in the Armed Forces of the United States (whether such service is
voluntary or involuntary) shall be treated as having begun a Period of Absence
as of the date he reports for military duty, which will result in a Severance
from Service Date, unless he returns to employment within twelve months, in
which case the person will be entitled to benefits in accordance with Plan
provisions. If such a former Participant does not return to employment within
twelve months,
(a) but honorably is released or discharged and has a Reemployment
Commencement Date with any Employer business unit thereof within 90
days thereafter, he shall be treated as having been on an authorized
leave of absence for purposes of Section 1.45, his participation shall
resume upon such Reemployment Commencement Date, and his period of
military service shall be included as Continuous and Credited Service
hereunder (at the Compensation level he had attained when he left for
military service) for all purposes of this Plan;
(b) but honorably is released or discharged and becomes employed by a
Related Entity or by an Employer in noncovered service, within 90 days
thereafter, he shall receive Continuous and Credited Service for his
military service time, as prescribed for Participants returning to
covered
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employment; in other respects and for the period of reemployment he
shall be treated as prescribed in Section 10.02; or
(c) and is not honorably released or discharged or does not return to
employment with any Employer or Related Entity within 90 days after
honorable release or discharge, he shall be charged with a Severance
from Service Date as of the first anniversary of his military service
and shall be treated as any other Participant who has incurred a
Period of Severance.
Notwithstanding anything to the contrary, the purpose of this Section 10.03
is to comply with the Veterans' Reemployment Rights Act, 38 U.S.C. 52021 ET
SEQ., as amended, and this Section shall be construed and applied in a
manner consistent with said Act.
SECTION 10.04. LUMP-SUM CASH OUT. In the event that any benefit otherwise
payable under this Plan to any recipient (after all reductions described in
Article IV) would at the time of termination have a lump-sum value based on the
New PBGC rate of $3,500 or less, payment of such benefit to said recipient shall
be made in a lump-sum calculated using the New PBGC rate, in lieu of payment of
monthly benefits. For purposes of this Section, if the present value of an
Employee's vested Accrued Benefit is zero, the Employee shall be deemed to have
received a distribution of such vested Accrued Benefit. For purposes of this
Section, "New PBGC rate" shall mean, if the resulting lump-sum value of the
benefit is less than or equal to $25,000, the interest rate or rates which would
be used by the Pension Benefit Guaranty Corporation as of the first day of the
Plan Year in which distribution occurs for purposes of determining benefits
under the Plan if the Plan had terminated on the date distribution commences
with insufficient assets to provide benefits guaranteed by the PBGC on that
date, or if
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such lump-sum value exceeds $25,000, 120 percent of the aforestated rate,
provided the resulting lump-sum value using the 120 percent rate shall not be
less than $25,000.
If the lump-sum value of a Participant's benefit, based on the New PBGC
rate, would be greater than $3,500, the Participant may, at his or her written
election without Committee consent, receive the portion of his or her benefits
payable under the Plan attributable to service prior to May 1, 1986 (as
described in Section 4.01, including the reduction in Section 4.01(d)) in an
immediate lump-sum benefit in lieu of monthly benefits. In addition, if an
amount is payable because of benefits granted after the Participant's Annuity
Starting Date and the lump sum value based on the New PBGC rate is less than or
equal to $3,500 and the Participant previously received his entire benefit from
the Plan as a single-sum settlement, the Participant may at his or written
election without Committee consent, receive such benefits in an immediate lump-
sum benefit in lieu of monthly benefits. In addition, at the time a
Participant's benefit is adjusted under the Level Income Option of Section 5.02
when Social Security benefits were assumed to commence, such Participant may
elect as provided in the preceding sentence to receive the entire benefit in a
lump-sum if the lump-sum value based on the New PBGC rate is less than or equal
to $3,500. The election for a lump-sum by a married Participant shall not be
valid unless the Participant's spouse consents to such election in writing, the
request is witnessed by a Plan representative or notary public, and the spouse's
consent acknowledges the effect of the election. Such an election shall be
valid only if made on a form authorized by the Committee, which is completed,
signed and delivered to the Employer within 90 days before benefits are to
commence. The Participant shall be furnished with actual figures indicating the
financial effect of such election on his benefits in the form and manner that
shall satisfy the requirements of section 417(a)(3) of the Code and related
regulations. Except as otherwise specifically provided in Section 5.03 or this
Section 10.04, if a Participant has elected to begin and
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has begun receiving monthly benefits or failed to elect a lump-sum cash out
during the earliest period that it was available, he or she may not thereafter
elect a lump-sum cash out. Such financial information shall be furnished as
soon as administratively feasible but no less than 30 days or more than 90 days
before the Annuity Starting Date. Such an election may be revoked by written
notice to the Employer prior to payment of the lump-sum benefit, and another
election may be made within the period for making such an election, accompanied
by written spousal consent as required. The election period shall begin 90 days
before benefits are to commence and shall end as of the Annuity Starting Date.
Notwithstanding the preceding sentence, to the extent necessary to permit the
election to be made within this time period, the date scheduled for the benefit
payment may be delayed until the first day of the first month not sooner than 14
days after receipt of the properly executed election form but not later than 90
days after the Participant has been furnished full particulars of the financial
effects on his pension of such election.
A lump-sum benefit described in the second paragraph of this Section shall
be the single sum value of the non-forfeitable accrued benefit as of a
Participant's retirement or other termination date, using whichever of the
following three sets of interest rate factors and benefit calculation methods
yields the greatest benefit; (1) an interest rate based on the highest 15 year
or next longer U.S. Treasury bond yield, compounded annually, as reported in the
WALL STREET JOURNAL or any successor publication on the first publication date
on which the yield is quoted following the last working day of the month prior
to the month in which the Participant terminates, and based on the present value
of a life annuity and the 1971 Group Annuity Mortality Table weighted 90% males
and 10% females, (2) an interest rate equal to the latest published interest
rate as of such date of retirement or other termination, based on the highest 15
year or next longer U.S. Treasury bond yield, compounded annually, as reported
in the WALL STREET JOURNAL
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or any successor publication, but not less than 10.5%, and using the present
value of an annuity certain for the period equal to the Participant's life
expectancy according to the 1971 Group Annuity Mortality Table weighted 90%
males and 10% females, or (3) an interest rate equal to the Old PBGC rate, and
based on the present value of a life annuity and the 1971 Group Annuity
Mortality Table weighted 90% males and 10% females. For purposes of this
section, the Old PBGC rate shall mean the interest rate used by the Pension
Benefit Guaranty Corporation to value immediate annuities for plans terminating
as of the first day of the Plan Year that contains the proposed payment data.
Any Participant who has elected a lump-sum cash out as described in the
second paragraph of this Section 10.04 (relating to benefits attributable to
service prior to May 1, 1986) may also elect a lump-sum cash out of any vested
benefits under the Plan attributable to service after April 30, 1986 (as
described in Section 4.01(b)) in an immediate lump-sum benefit based on the Old
PBGC rate, in lieu of monthly benefits. However, this election shall be
available only if the lump-sum value of such benefit, based on the Old PBGC
rate, is less than $10,000 at the time of termination. The spousal consent
requirement and other administrative rules and procedures set out in the second
paragraph of this Section shall also be applicable to elections under this
paragraph.
If the lump-sum benefit payable is in respect of service before May 1, 1986
only, then the lump-sum shall be a least as large as the lump-sum value of the
benefit in respect of such service using the New PBGC rate. If the lump-sum
benefit payable is in respect of service before and after May 1, 1986, then the
lump-sum shall be at least as large as the lump-sum value of the benefit in
respect of such service using the New PBGC rate.
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SECTION 10.05. PRE AND POST PLAN TERMINATION RESTRICTIONS. Benefits from this
Plan shall be limited to the extent required under section 1.401(a)(4)-5 of
regulations under the Code.
Notwithstanding the preceding sentence, if the referenced regulations are
revised or withdrawn or the effective date is delayed, these provisions shall be
modified to comply with any such changes or delay in effective date.
(a) Notwithstanding anything to the contrary, in the event of Plan
termination, the benefit of any highly compensated employee and any
highly compensated former employee as defined in section 414(q) of the
Code is limited to a benefit that is nondiscriminatory under section
401(a)(4) of the Code. The Plan Administrator shall reduce the
benefit of any highly compensated employee or highly compensated
former employee to the extent required to meet this requirement.
(b) The annual payments to an Employee described in subsection (c) of this
Section 10.05 shall be restricted to an amount equal to the payments
that would be made on behalf of the Employee under a single life
annuity that is the Actuarial Equivalent of the Employee's Accrued
Benefit under the Plan. The restrictions in this subsection (b) do
not apply, however, if:
(1) After payment to a Participant described in subsection (c) of
this Section 10.05 of all benefits described in subsection (d) of
this Section 10.05, the value of Plan assets equals or exceeds
110 percent of the value of current liabilities, as defined in
section 412(1)(7) of the Code or
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(2) The value of the benefit described in subsection (d) of this
Section 10.05 for a Participant described in subsection (c) of
this Section 10.05 is less than 1 (one) percent of the value of
current liabilities before distribution, or
(3) The value of the benefit described in subsection (d) of this
Section 10.05 for a Participant described in subsection (c) of
this Section 10.05 falls into the category of benefits payable
under the first paragraph of Section 10.04.
(c) The Participant whose benefits are restricted on distribution include
the 25 highly compensated employees and the 25 highly compensated
former employees with the greatest compensation in the current Plan
Year and in any prior Plan Year.
(d) For purposes of this Section 10.05, "benefit" includes loans in excess
of the amounts set forth in section 72(p)(2)(A) of the Code, any
periodic income, any withdrawal values payable to a living Employee,
any death benefits not provided for by insurance on the Employee's
life, and any lump-sum benefits.
SECTION 10.06. ABSOLUTE LIMITATION. Following are provisions describing the
limitations on benefits under this Plan:
(a) DEFINITIONS. For purposes of this Section 10.06, the following
definitions and interpretations shall apply:
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(1) "Adjustment Factor" shall mean the cost of living adjustment
factor prescribed by the Secretary of the Treasury under section
415(d) of the Code for years beginning after December 31, 1987,
applied to such items and in such manner as the Secretary shall
prescribe.
(2) "Annual Additions" shall mean the sum, credited to a
Participant's account under a defined contribution plan for any
Limitation Year, of (A) Employer contributions, (B) forfeitures,
if any, (C) employee contributions (excluding rollover
contributions), and (D) amounts, if any, described in Code
sections 415(1)(1) and 419A(d)(2).
(3) "Annual Benefit" shall mean:
(A) A benefit which is payable annually in the form of a single
life annuity under the Plan with no ancillary benefits.
Such benefit does not include any benefits attributable to
employee contributions.
(B) The annual benefit attributable to mandatory employee
contributions, determined by using the factors described in
section 411(c)(2)(B) of the Code and the regulations
thereunder, shall not be taken into account in determining
the annual benefit. However, mandatory employee
contributions shall be considered a separate defined
contribution plan maintained by the Employer.
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(C) When there is a transfer of assets or liabilities from one
qualified plan to another, the annual benefit attributable
to the assets transferred shall not be taken into account by
the transferee plan in applying the limitations of section
415 of the Code. The annual benefit payable on account of
the transfer for any individual that is attributable to the
assets transferred will be equal to the annual benefit
transferred on behalf of such individual multiplied by a
fraction, the numerator of which is the total assets
transferred and the denominator of which is the total
liabilities transferred, provided, however, that the
fraction shall never be greater than the value 1.000.
(D) A retirement benefit payable in any form other than a single
life annuity shall be actuarially adjusted to an equivalent
single life annuity beginning at the same age, in accordance
with rules determined by the Commissioner of Internal
Revenue so that it is the Actuarial Equivalent of a single
life annuity. However, the following values are not taken
into account:
(i) The value of a qualified joint and survivor annuity
(as defined in section 401(a)(11)(G)(iii) of the Code
and the regulations thereunder) provided by the Plan
to the extent that such value exceeds the sum of (a)
the value of a single life annuity beginning on the
same date and (k) the value of any post-retirement
death
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benefits which would have been payable even if the
annuity was not in the form of a joint and survivor
annuity;
(ii) The value of benefits that are not directly related
to retirement benefits (such as pre-retirement
disability and death benefits and post-retirement
medical benefits);
(iii) The value of benefits provided by the Plan which
reflect post-retirement cost-of-living increases to
the extent that such increases are in accordance with
section 415(d) of the Code and the regulations
thereunder.
(E) If the retirement benefit of a Participant commences BEFORE
the Participant's Social Security Retirement Age, the
Maximum Permissible Amount shall be adjusted so that it is
the Actuarial Equivalent of an annual benefit of $90,000,
multiplied by the Adjustment Factor, as prescribed by the
Secretary of the Treasury, beginning at the Social Security
Retirement Age, based on an interest rate assumption which
is not less than the greater of the interest rate assumption
under the Plan or five percent (5%) per year. The
adjustment made in the preceding sentence shall be made in
such manner as the Secretary of the Treasury may prescribe
which is consistent with the reduction for old age insurance
benefits
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commencing before the Social Security Retirement Age under
the Social Security Act.
(F) If the retirement benefit of a Participant commences AFTER
the Participant's Social Security Retirement Age, the
Maximum Permissible Amount shall be adjusted so that it is
the Actuarial Equivalent of a benefit of $90,000 beginning
at the Social Security Retirement Age, multiplied by the
Adjustment Factor as provided by the Secretary of the
Treasury, based on an interest rate assumption which is not
greater than the lesser of the interest rate assumption
under the Plan or an assumption of five percent (5%) per
year.
(G) If a Participant has completed less than ten years of
participation, the Participant's accrued benefit shall not
exceed the Maximum Permissible Amount as adjusted by
multiplying such amount by a fraction, the numerator of
which is the Participant's number of years (or part thereof)
of participation in the Plan, and the denominator of which
is ten. If a Participant has completed less than ten years
of service with the Company or an Associated Company, the
limitations described in sections 415(b)(1)(B) and 415(b)(4)
of the Code shall be adjusted by multiplying such amounts by
a fraction, the numerator of which is the Participant's
number of years of service (or part thereof), and the
denominator of which is ten. In no event shall the two
immediately preceding sentences reduce the limitations
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provided under section 415(b)(1) and (4) of the Code to an
amount less than one-tenth of the applicable limitation (as
determined without regard to the two immediately preceding
sentences).
(H) For purposes of subsections (E) and (F) of this Section
10.06(a)(3), actuarial equivalence shall be calculated by
employing a five percent (5%) interest rate assumption.
(4) "Earnings", with respect to a Limitation Year:
(A) includes amounts paid or made available to a Participant
(regardless of whether the Participant was such during the
entire Limitation Year):
(i) as wages, salaries, fees for professional service,
and other amounts received for personal services
actually rendered in the course of employment with
any Employer including but not limited to
commissions, compensation for services on the basis
of a percentage of profits and bonuses;
(ii) for purposes of (i) above, earned income from sources
outside the United States (as defined in section
911(b) of the Code), whether or not excludable from
gross income under section 911 or deductible under
section 913 of the Code;
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(iii) amounts described in sections 104(a)(3), 105(a) and
105(h) of the Code, but only to the extent that these
amounts are includable in the gross income of the
Participant;
(iv) amounts described in section 105(d) of the Code,
whether or not these amounts are excludable from the
gross income of the Participant under that section;
(v) amounts paid or reimbursed by the Employer for moving
expenses incurred by the Participant, but only to the
extent that these amounts are not deductible by the
Employer under section 217 of the Code;
(vi) the value of a non-qualified stock option granted to
a Participant by the Employer, but only to the extent
that the value of the option is includable in the
gross income of the Participant for the taxable year
in which granted; the amount includable in the gross
income of a Participant upon making the election
described in section 83(b) of the Code.
(B) does not include:
(i) contributions made by the Employer to a plan of
deferred compensation to the extent that, before the
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application of the limitations of section 415 of the
Code to that plan, the contributions are not
includable in the gross income of the Participant for
the taxable year in which contributed. In addition,
Employer contributions made on behalf of a
Participant to a simplified employee pension
described in section 408(k) of the Code are not
considered as Earnings for the taxable year in which
contributed to the extent such contributions are
deductible by the Participant under section
219(b)(2) of the Code. Additionally, any
distributions from a plan of deferred compensation
are not considered as Earnings, regardless of whether
such amounts are includable in the gross income of
the Participant when distributed. However, any
amounts received by a Participant pursuant to an
unfunded non-qualified plan shall be considered as
Earnings in the year such amounts are includable in
the gross income of the Participant;
(ii) amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property)
held by a Participant either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture (see section 83 of the Code and
the regulations thereunder);
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(iii) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified or
incentive stock option;
(iv) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not
under a salary reduction agreement)toward the
purchase of an annuity described in section 403(b) of
the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
(5) "Employer" shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in
section 414(b) as modified by section 415(h) of the Code) which
includes the Company or any trades or businesses (whether or not
incorporated) which are under common control (as defined in
section 414(c) as modified by section 415(h) of the Code) with
the Company.
(6) "Limitation Year" shall mean a calendar year.
(7) "Maximum Permissible Amount" shall mean, for a Limitation Year
with respect to any Participant, the lesser of the amounts
described in subparagraphs (A) and (B) below, subject to the
rules of subparagraphs (C), (D) and (E) below:
(A) $90,000, or
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(B) 100% of the Participant's Earnings for the Participant's
high three consecutive years of service.
(C) As of January 1 of each calendar year commencing with the
calendar year 1988, or such other year as designated by the
Commissioner of Internal Revenue, the dollar limitation set
forth in subparagraph (A) above shall be adjusted
automatically to equal the dollar limitation as determined
by the Commissioner of Internal Revenue for that calendar
year under section 415(d)(1)(A) of the Code. This adjusted
dollar limitation applies for the Limitation Year ending
with that calendar year. It is applicable to employees who
are Participants in the Plan and to employees who have
retired or otherwise terminated their service under the Plan
with a nonforfeitable right to accrued benefits, regardless
of whether they have actually begun to receive such
benefits. The annual benefit payable to a terminated
Participant which is otherwise limited by the dollar
limitation shall be increased to take into account the
adjustment of the dollar limitation. The Maximum
Permissible Amounts for each calendar year 1988, 1989, 1990,
1991, and 1992 are $94,023, $98,064, $102,582, $108,963, and
$112,221 respectively.
(D) With regard to Participants who have separated from service
with a nonforfeitable right to an accrued benefit, the
Earnings limitation described in subparagraph (B) above
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applicable to Limitation Years commencing on or after
January 1, 1976 shall be adjusted annually by the Adjustment
Factor. For any Limitation Year beginning after the
separation occurs, the adjustment of the Earnings limitation
is made as specified in regulations and rules prescribed by
the Commissioner of Internal Revenue.
(8) "Projected Annual Benefit" shall mean the annual benefit to which
a Participant would be entitled under the Plan on the assumption
that he continues employment until the normal retirement age (or
current age, if that is later) thereunder, that his Earnings
continue at the same rate as in effect for the Limitation Year
under consideration until such age, and that all other relevant
factors used to determine benefits under the Plan remain constant
as of the current Limitation Year for all future Limitation
Years.
(b) COLLECTIVE TREATMENT. For purposes of applying the limitations of
sections 415(b), (c) and (e) of the Code applicable to a Participant
for a particular Limitation Year, all qualified defined contribution
plans (without regard to whether a plan has been terminated) ever
maintained by the Employer will be treated as one defined contribution
plan and all qualified defined benefit plans (without regard to
whether a plan has been terminated) ever maintained by the Employer
will be treated as part of this Plan.
(c) ANNUAL BENEFIT LIMIT. The annual benefit to which a Participant is
entitled at any time under all defined benefit plans may not, during
the Limitation Year, exceed the Maximum Permissible Amount. If the
annual benefit
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would but for this Section 10.06(c) exceed the Maximum Permissible
Amount during the Limitation Year, the rate of benefit accrual under
all defined benefit plans shall be frozen or reduced to the extent
necessary to prevent the Annual Benefit from exceeding the Maximum
Permissible Amount. Provided, however, that if the Accrued Benefit of
a Participant who was a participant in a plan of a prior employer
exceeds the benefit limitations under section 415(b) of the Code (as
modified by subsection 10.06(a)(2)(E), (F) and (G)), then for purposes
of section 415(b) and (e) of the Code, the Maximum Permissible Amount
with respect to such individual shall be equal to such Accrued
Benefit.
(d) OVERALL LIMIT. For any Participant of this Plan who at any time
participated in a defined contribution plan of the Employer, the rate
of benefit accrual by such Participant in this Plan during the
Limitation Year will be reduced to the extent necessary to prevent the
sum of the following two fractions, computed as of the close of the
Limitation Year, from exceeding 1.0:
FRACTION (1)
------------
Projected annual benefit of the Participant under this Plan.
------------------------------------------------------------
The lesser of (1) the product of 1.25, multiplied by the dollar
limitation in effect under Section 10.06(a)(6)(A) for such Limitation
Year, or (2) the product of (A) 1.4 multiplied by (B) the amount which
may be taken into account under Section 10.06(a)(6)(B) with respect to
such Participant for such Limitation Year.
FRACTION (2)
------------
Sum of Annual Additions to such Participant's account under all
defined contribution plans in such Limitation Year.
---------------------------------------------------------------
The sum of the lesser of the following amounts determined for such
year of service with the Employer: (1) the product of 1.25, multiplied
by the dollar limitation in effect under section 415(c)(1)(A) of the
Code for such Limitation Year, or (2) the product of (A) 1.4,
multiplied by (B) 25% of the Participant's Earnings for such
Limitation Year.
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(e) SPECIAL RULES APPLICABLE TO COMPUTATION OF OVERALL LIMIT.
(1) For purposes of applying the defined contribution plan fraction
in Section 10.06(d) for any Limitation Year beginning after
December 31, 1975, the following rules shall apply with respect
to Limitation Years before January 1, 1976:
(A) The aggregate amount taken into account in determining the
numerator of such fraction is deemed not to exceed the
aggregate amount taken into account in determining the
denominator of this fraction.
(B) The amount taken into account for purposes of Section
10.06(a)(1)(C)(i) is an amount equal to the excess of the
aggregate amount of the Participant's contributions for such
years during which he was an active Participant in the plan,
over 10% of the Participant's aggregate Earnings for all
such years, multiplied by a fraction, the numerator of which
is one and the denominator of which is the number of years
beginning before January 1, 1976, during which the
Participant participated in the plan. Participant
contributions made on or after October 2, 1973 shall be
taken into account for purposes of the preceding sentence
only to the extent that the amount of such contributions is
permissible under a plan as in effect on that date.
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(2) In any case where the sum of the fractions in Section 10.06(d) is
greater than 1.0 calculated as of the close of the last
Limitation Year beginning before January 1, 1983 for a
Participant, in accordance with regulations prescribed by the
Commissioner of Internal Revenue pursuant to section 235(g)(3) of
TEFRA, an amount shall be subtracted from the numerator of the
defined contribution plan fraction so that the sum of such
fractions do not exceed 1.0 for such Limitation Year.
SECTION 10.07. CLAIMS AND APPEALS PROCEDURE. Pursuant to procedures established
by the Committee, claims for benefits shall be made on prescribed forms and
notice in writing shall be provided to any benefit applicant whose claim for
benefits under the Plan has been denied. Such notice shall set forth the
specific reason for such denial as well as reference to provisions of the Plan
on which the denial is based, written in a manner calculated to be understood by
the applicant. Provided review is requested in writing within 65 days after
written notification of the denial of such claim was issued, such person or
persons as are appointed by the Company shall review the decision denying the
claim, giving particular attention to items raised in the review request, and
communicate to the claimant the results of the specific reason therefor,
including a reference to provisions of the Plan on which the decision was based.
The results shall be communicated to the claimant within 60 days after receipt
of a request for review unless special circumstances require a longer period,
but not later than 120 days after receipt of a request for review.
SECTION 10.08. PLAN MERGERS. In the event of a planned merger or consolidation
of the Plan with any other plan of deferred compensation maintained or to be
established for the benefit of all or some of the Participants of this Plan, or
a planned
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transfer in whole or in part of the assets or liabilities of the Trust Fund to
another trust fund held under another plan, the merger, consolidation, or
transfer of the assets of the Trust Fund applicable to Participants in this Plan
shall occur only if:
(a) each Participant would (if the Plan then terminated) receive a benefit
immediately after the merger, consolidation, or transfer that is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer if the Plan
had then terminated, or unless the requirements of Code section 414(1)
are otherwise satisfied;
(b) the Company and/or any new or successor employer of the affected
Participants shall authorize such events, and, in the case of the new
or successor employer of the affected Participants, it shall assume
the liabilities with respect to such Participants inclusion in the new
employer's plan; and
(c) such other plan and trust shall be qualified under section 401 and 501
of the Code.
SECTION 10.09. SPECIAL TRANSFER OR REEMPLOYMENT SITUATIONS. Separate periods of
service may be combined as set forth in Sections 10.01, 10.02, or 10.03;
however, any benefit payable from the Plan based on such combined Periods of
Service shall be reduced to reflect any lump-sum distribution which may have
been made at the Severance from Service Date unless the Participant pays into
the Plan within five years after his Reemployment Commencement Date an amount
equal to such lump-sum distribution (plus Interest from the date of distribution
to the date of repayment).
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The amount of such repayment shall become the Participant's basis amount.
This basis amount shall not change after the date of repayment and any future
distribution in a lump sum form of the benefit with respect to service which is
reinstated due to the repayment shall not be less than the amount of such
repayment without adjustment for interest after the date of repayment.
SECTION 10.10. EMPLOYMENT PAST NORMAL RETIREMENT DATE AND RETURN TO ACTIVE
EMPLOYMENT. Provided that appropriate notification is given, all benefit
payments even though duly applied for and otherwise payable under this Plan
shall be permanently withheld for any calendar months prior to the April 1
following the calendar year in which a Participant attains Age 70-1/2 and during
which a Participant continues after his Normal Retirement Date in employment
described in the immediately succeeding sentence; provided, however, in the
event the provisions of this Section 10.10 shall conflict with the provisions of
Section 5.05(i), Section 5.05(i) shall rule. Also, subject to notification
requirements, all such payments shall be suspended and permanently withheld
during any months in which a pensioner receives payment from the Company, or
effective May 1, 1992, any subsidiary 80% or more owned by the Company, directly
or indirectly for any hours of service performed (or payment for vacation,
holiday, illness, disability, layoff, jury duty, military leave or leave of
absence) on each of eight or more days during a calendar month. Payments shall
commence or resume, whichever is the case, no later than the first day of the
third calendar month after the calendar month in which the Employee or pensioner
does not receive payment as described above on each of eight or more days;
provided that the initial payment upon resumption shall include the payment
scheduled to occur in the calendar month when payments resume and any amounts
withheld during the period between the cessation of
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employment and the resumption of payments, less any amounts which are subject to
offset.
Any Participant or pensioner whose benefits are being permanently withheld
under provisions of this Section shall be afforded the right to review described
in Section 10.07 of the Plan. In addition, any Participant or pensioner may
request and receive a determination from the Committee whether specific
contemplated employment will be service which would result in permanent
withholding of benefits. Such a request for determination shall be submitted in
writing to the Company and the procedure described in Section 10.07 of the Plan
shall be followed in handling the request.
Provided, however, that upon resumption of monthly benefit payments after a
suspension, there shall be deducted from such payments any amounts previously
paid by the Plan during calendar months in which the Participant or pensioner
was employed as described in the first paragraph of this Section. The amount of
such deduction shall not, however, exceed in any one month 25 percent of the
month's total benefit payment which would otherwise have been due, except that
such 25 percent limitation shall not apply to the initial payment described in
this paragraph.
Further provided, that no payments shall be withheld unless the Participant
or pensioner is notified of the withholding by personal delivery or first class
mail during the first calendar month in which such payments are to be withheld.
The notification shall describe the specific reasons why benefits are being
withheld, a general description of this Plan provision providing for permanent
withholding, a copy of this provision, a statement to the effect that applicable
Department of Labor regulations may be found in section 2530.203-3 of the Code
of Federal Regulations, and a statement that any Participant or pensioner whose
benefits are being so withheld may request and receive a
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review under provisions of Section 10.07 of this Plan. Furthermore, if there is
to be an offset for any suspendible amounts actually paid during periods of
employment described in the first paragraph of this Section, the notification
shall identify specifically the periods of employment, the suspendible amounts
which are subject to offset, and the manner in which such suspendible amounts
are to be offset.
SECTION 10.11. TOP-HEAVY REQUIREMENTS. Notwithstanding any other provision of
the Plan, the following rules shall apply, if as of the determination date
(which shall be the last day of the preceding Plan Year), based on valuations as
of such date, the present value of the cumulative accrued benefits under this
Plan, (using assumptions set out in Section 1.02) and of accounts under any
defined contribution plan, of key employees (as defined in section 416(i) of the
Code) exceeds 60% of a similar sum for all employees under each such plan in
which a key employee participates and each other plan of the Employer which
enables any such plan to meet the requirements of section 401(a)(4) or 410 of
the Code, taking into account for this purpose amounts distributed within the
preceding five years. However, accounts and benefits shall not be taken into
account with respect to any individual who has not performed services for any
Employer at any time during the five-year period ending on the determination
date.
(a) Compensation for any Employee shall not be taken into account under
the Plan in excess of $200,000.
(b) All present and all future accrued benefits under the Plan shall be
immediately 100% vested.
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(c) A non-key employee Participant's minimum accrued benefit, when
expressed as an annual benefit, shall be 2% of the Participant's
average annual compensation for the period of five consecutive years
during which he had the greatest aggregate compensation multiplied by
the Participant's years of participation service occurring after April
30, 1984, in which the Plan is top-heavy; however, such minimum
benefit shall not be greater than the five-year average compensation
multiplied by 20%. The minimum accrued benefit of this subsection (c)
shall be provided to a non-key employee Participant regardless of the
non-key employee Participant's level of compensation and regardless of
whether the non-key employee Participant is employed on any specified
date.
(d) For purposes of applying the provisions of section 415 of the Code to
a key employee Participant, the dollar limitations in the defined
benefit plan fraction and the defined contribution plan fraction shall
be multiplied by 1.0 rather than 1.25, and no benefits may be accrued
for a Participant over the 1.0 limit.
The provisions of this Section 10.11 shall be interpreted in accordance
with the provisions of section 416 of the Code and any regulations thereunder,
which are hereby expressly incorporated by reference.
SECTION 10.12. SALES, TRANSFERS AND OTHER DISPOSITIONS. Except as provided in
Article 12 of the Plan, a Participant who ceases to be employed by the Employer
because of a joint venture creation, sale, transfer or other disposition
involving all or part of the Employer's business, and who continues employment
with the successor employer pursuant to the terms of such transaction, shall be
considered to
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have a Severance from Service Date on the date his employment with the Employer
ceases for all purposes under the Plan except for purposes of determining
entitlement to benefit commencement under the Plan. Any such Participant shall
not be treated as having a Severance from Service Date for purposes of
entitlement to commence benefits under the Plan until such Participant
terminates employment with such successor employer (including subsequent
successors thereto).
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ARTICLE XI - COORDINATION WITH PREDECESSOR PLANS
SECTION 11.01. GENERAL. Unless specifically stated otherwise in this Article
XI, a Plan Participant who was a member of a Predecessor Plan that was merged
into the Prior Plan shall be entitled to benefits for periods of service under
the Predecessor Plan that are derived solely from the annuity purchased in
respect of such Predecessor Plan service from the insurance company or companies
upon the termination as of April 30, 1986, of The Dresser Industries, Inc.
Retirement Income Plan Under ERISA or the termination as of April 30, 1986, of
the Dresser Industries, Inc. Retirement Income Plan for Salaried Employees of
Marion Power Shovel Division.
SECTION 11.02. PREDECESSOR PLANS FROZEN AS OF APRIL 30, 1986. Except as
otherwise provided in this section, plan Participants who as of April 30, 1986,
upon termination of the Prior Plan, have annuities purchased from an insurance
company or companies in respect of the following Predecessor Plans or employment
periods, shall have their pension benefit in respect of such service limited to
such purchased annuity:
1. B & W Employee Retirement Plan applicable to the Advanced Composites
Department of Babcock and Wilcox Company
2. The Bay States Abrasives Restated Pension Plan
3. The Retirement Plan for Employees of Cardinal Chemical, Inc. and
Cardinal Products, Inc.
4. Consolidated Galion Salaried Employees Pension Plan
5. Electra Motors Division Employees Pension Plan
6. Felker Manufacturing Company Pension Plan
7. Envirotech Pension Plan applicable to active employees of Fluid Ionic
Systems Division
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8. Dresser Industries, Inc. General Abrasive Division Pension Plan for
Salaried Employees
9. Pension Plan for Salaried Employees of Glasrock Products, Inc.
10. The Power Transmission Equipment Salaried Employee Pension Plan
11. The Consolidated Jeffrey Salaried Employees Pension Plan
12. Lane-Wells Retirement Plan
13. The M & H Valve Pension Plan
14. Geosource
15. Di-Chem
16. Dresser Titan Spinoff to Hughes Tool Partnership
17. Fann Operations
18. Jeffrey Chain Operations
Notwithstanding the preceding, any Plan Participant whose purchased annuity
with respect to periods of service under the above Predecessor Plans or
employment periods is limited as of April 30, 1986, due to the provision of the
Prior Plan that the maximum pension from the Prior Plan and the Predecessor Plan
shall not be greater than the benefit had credited service under the Predecessor
Plan been credited service under the Prior Plan may have additional benefit
provided under this Plan with respect to periods of service under the
Predecessor Plan. Such additional benefit shall be provided in the event that,
at the time of the Participant's actual Severance from Service Date, the Prior
Plan limitation referred to above results in a larger pension with service under
the Predecessor Plan. Such incremental amount of pension with respect to
periods of service under the Predecessor Plan shall be provided from this Plan.
Further provided, however, with respect to any Plan Participant who is
entitled to benefits provided by Section 11.02, B&W EMPLOYEE RETIREMENT PLAN
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MERGER (ACD), of the Prior Plan, any benefit adjustment due to the cost of
living factor which may be determined on and after May 1, 1986, shall be paid
from this Plan.
SECTION 11.03. MARION POWER SHOVEL. As of May 1, 1986, the Dresser Industries,
Inc. Retirement Income Plan for Salaried Employees of Marion Power Shovel
Division (the "MPS Plan") is treated as if it were a Predecessor Plan that has
been merged into this Plan. Subject to the provisions of this Section 11.03,
Pension benefits for Participants who were active employee participants of the
MPS Plan as of April 30, 1986, or who were active employee participants of the
Dresser Industries, Inc. Retirement Income Plan Under ERISA as of that date who
had a frozen benefit after transfer out of the MPS Plan shall be comprised of
the benefit components enumerated in subsections (a), (b)(l), (b)(2), (c)(l) and
(c)(2), and minus subsection (d) of Section 4.01. Benefit component (c)(l) in
the preceding sentence shall be applied without regard to Participants' Credited
Service prior to May 1, 1986.
When applying the said provisions of Section 4.01(c)(1) to former MPS Plan
Participants who are active Participants of this Plan after April 30, 1989, the
following special provision shall apply: This Plan in effect on April 30, 1989
provided an additional benefit component (a') which, effective May 1, 1989,
shall be modified as stated below:
(a') shall be a benefit commencing at Normal Retirement Date or later
actual retirement date on the Life-Only form equal to 1.5% times
average compensation times years of credited service in the MPS Plan
to April 30, 1986, minus 50% of the Participant's Social Security
Pension multiplied by the ratio of the Participant's service in the
MPS Plan to April 30, 1986, to the Participant's service he would have
completed had his Severance from Service Date been his Normal
Retirement Date. For purposes of benefit
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component (a'), the terms compensation, average compensation, and
service shall be defined as those terms are defined in Sections 1.11,
1.05, and 1.30 of the MPS Plan as of April 30, 1986.
In the calculation of (a'), average compensation and the Participant's
Social Security Pension shall be calculated as of April 30, 1989. The resulting
benefit amount shall be multiplied times the ratio (not less than 1 (one)) of
the Participant's average compensation at Severance from Service Date divided by
average compensation at April 30, 1989.
The total of the Participant's pension benefit from components (a') of this
Section 11.03 and from Section 4.01 shall be subject to the maximum limitations
of Section 4.01. Notwithstanding those limitations, the pension benefit from
this Plan when added to the pension benefit from the Prior Plan shall not be
less than (a') as defined and adjusted above.
Former Participants of the MPS Plan who became Participants of this Plan as
of May 1, 1986, shall be eligible for Immediate or Deferred Early Retirement
Benefits after the attainment of Age 55 and completion of at least 10 years of
Vesting Service. In the event of early retirement, pension benefit components of
subsections (a'), (b)(1), (b)(2), (c)(1) and (c)(2) of Section 4.01 shall be
subject to the reductions specified in Section 4.02. Subsection (d) of Section
4.01 shall be subject to the reductions in the respective annuity contract.
Benefit component (a') shall be multiplied by the appropriate percentage from
the following table, depending upon the age of the Participant at Early
Retirement Date:
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<PAGE>
<TABLE>
<CAPTION>
Age at Early Benefit
RETIREMENT DATE PERCENTAGE
<S> <C>
65 100%
64 93.3
63 86.7
62 80.0
61 73.3
60 66.7
59 63.3
58 60.0
57 56.7
56 53.3
55 50.0
</TABLE>
The above percentages shall be interpolated on a straight line basis using
completed months to determine a Participant's fractional age for purposes of
interpolation.
A Participant who was an active Participant in the MPS Plan as of April 30,
1986, who becomes "Disabled" as defined immediately below and after completing
at least 15 years of Vesting Service shall be entitled to receive a pension
benefit equal in amount to the benefit component in subsection (d) of Section
4.01 reduced by 50% of the disability benefit that such Participant is eligible
for from Social Security. Such benefit shall be further reduced by any other
statutory benefits received by reason of occupational disability pursuant to any
state or federal law. Such benefit shall commence at the time the Participant
first becomes Disabled and shall continue until the earliest of the following
dates:
(a) The date the Participant ceases to be Disabled, or
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<PAGE>
(b) The benefit component of subsection (d) of Section 4.01 commences to
the Participant from the insurance company used to purchase annuity
benefits upon the termination of the MPS Plan as of April 30, 1986.
For purposes of this Section 11.03, the term "Disabled" shall mean total
disability by bodily or mental injury or disease so as to be prevented thereby
from engaging in any occupation or employment for remuneration or profit,
provided:
(a) Such total disability shall have continued for a period of at least
six consecutive months and, in the opinion of a qualified physician
selected by the Company, will be permanent and continuous during the
remainder of the Participant's life; and
(b) Such disability:
(1) was not contracted, suffered, or incurred while the Participant
was engaged in, or did not result from his having engaged in, a
criminal enterprise, or
(2) did not result from his habitual drunkenness or addiction to
narcotics, or
(3) did not result from an intentionally self-inflicted injury, or
(4) did not result from service in the Armed Forces of any country
which prevents a return to employment with the Company and for
which the Participant receives a military pension.
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<PAGE>
Participants who are entitled to benefits under Section 4.05 shall have the
component (a') of their benefit amount multiplied by the same factors specified
in this Section 11.03 for Immediate Early Retirement in the event such benefits
are to commence before Normal Retirement Date.
Surviving Spouse benefits under this Plan in respect of active Participants
who were active Participants of the MPS Plan as of April 30, 1986 shall be as
provided in Section 4.07 of this Plan.
The vesting provisions of Section 4.05 of this Plan shall apply.
SECTION 11.04. MCGRAW-EDISON COMPANIES. The "Inflation Benefit" for
Participants who became Prior Plan Participants upon the acquisition of certain
operations of McGraw-Edison Company as provided in Section 11.30 of the Prior
Plan shall continue to be provided under this Plan subject to the provisions of
this Section 11.04. When Section 4.01(c)(1) of this Plan is applied to
determine the Inflation Benefit, final average monthly earnings and the
applicable Social Security pension shall be calculated as of April 30, 1989.
The resulting benefit amount shall be multiplied times the ratio (not less than
l(one)) of the Participant's final average monthly earnings at Severance from
Service Date divided by final average monthly earnings at April 30, 1989. In
the application of the formula as of April 30, 1989, the maximum offset allowed
for the Social Security pension shall be 50% of the portion of the Participant's
benefit based solely on his final average monthly earnings. The Participant's
"final average monthly earnings" and the applicable "Social Security pension"
shall be determined according to the definitions of those terms in the
applicable prior McGraw-Edison plan at the respective dates of acquisition of
those operations.
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All other provisions with respect to the Inflation Benefit shall be as
stated in Section 11.30 of the Prior Plan, except the vesting provisions of
Section 4.05 of this Plan shall apply instead of the vesting provisions of the
respective McGraw Plan, which were applicable prior to May 1, 1989.
SECTION 11.05. WAUKESHA ENGINE DIVISION. Subject to the further provisions of
this Section 11.05, increases in a Participant's Accrued Benefit after the
termination of the Prior Plan as of April 30, 1986, in subsection 4.01(c)(1)(C)
which result from increases in a Participant's final average monthly earnings
after April 30, 1986, shall continue to be provided under this Plan in the same
manner as the Prior Plan with respect to Participants who became Prior Plan
Participants upon the merger of the Pension Plan for Salaried Employees of
Waukesha Engine Division, Waukesha, Wisconsin and Clinton, Iowa (the "Waukesha
Predecessor Plan") into the Prior Plan. However, when Section 4.01(c)(1)(C) of
this Plan is applied to determine such increases, final average monthly earnings
shall be calculated as of April 30, 1989. The resulting benefit amount shall be
multiplied times the ratio (not less than l(one)) of the Participant's final
average monthly earnings at Severance from Service Date divided by final average
monthly earnings at April 30, 1989. In addition, Participants in the Prior Plan
as of April 30, 1986, who had a frozen benefit after transfer out of the
Waukesha Predecessor Plan prior to the merger of that Plan into the Prior Plan
shall have such frozen benefit determined in accordance with the following two
sentences. The benefits so provided under this Section 11.05 shall be included
in the pension benefit component of subsection (c)(1) of Section 4.01. The
Participant's final average monthly earnings shall be calculated as defined in
the Waukesha Predecessor Plan as of April 30, 1989 and as of the Participant's
Severance from Service Date.
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All other provisions pertaining to the pension benefit component of
subsection (c)(l)(C) of Section 4.01 with respect to Waukesha Predecessor Plan
Participants shall be governed by Section 11.23 of the Prior Plan, except the
vesting provisions of Section 4.05 of this Plan shall apply instead of the
vesting provisions of Section 11.23 of the Prior Plan.
SECTION 11.06. RELIANCE INSURANCE COMPANY. Subject to the further provisions of
this Section 11.06, increases in a Participant's Accrued Benefit after the
termination of the Prior Plan as of April 30, 1986 in subsection 4.01(c)(1)(C)
which result from increases in a Participant's final average monthly earnings
after April 30, 1986, shall continue to be provided under this Plan in the same
manner as the Prior Plan with respect to Participants who became Prior Plan
Participants upon the merger of the Retirement Plan of Reliance Insurance
Company (the "Reliance Predecessor Plan") into the Prior Plan. However, when
Section 4.01(c)(1)(C) of this Plan is applied to determine such increases, final
average monthly earnings shall be calculated as of April 30, 1989. The resulting
benefit amount shall be multiplied times the ratio (not less than l(one)) of the
Participant's final average monthly earnings at Severance from Service Date
divided by final average monthly earnings at April 30, 1989. The Participant's
final average monthly earnings shall be as defined in the Reliance Predecessor
Plan as of April 30, 1989, and as of the Participant's Severance from Service
Date.
All other provisions pertaining to the pension benefit component of
subsection (c)(l)(C) of Section 4.01 with respect to the Reliance Predecessor
Plan shall be governed by Section 11.19 of the Prior Plan, except the vesting
provisions of Section 4.05 of this Plan shall apply instead of the vesting
provisions of Section 11.19 of the Prior Plan.
Article XII also contains provisions applicable to the Reliance Predecessor
Plan.
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SECTION 11.07. INTERNATIONAL-HOUGH DIVISION. Subject to the further provisions
of this Section 11.07, increases in a Participant's Accrued Benefit after the
termination of the Prior Plan as of April 30, 1986 in subsection 4.01(c)(1)(C),
which resulted from increases in a Participant's Final Average Monthly Earnings
after April 30, 1986, shall continue to be provided under this Plan in the same
manner as the Prior Plan with respect to Participants who became Prior Plan
Participants upon the inclusion of former International Harvester employees in
the Prior Plan when such employees became employees of the International-Hough
Division or related operations on or after November 1, 1982, but prior to July
1, 1983. However, Section 4.01(c)(1) shall be applied to determine such
increases.
All other provisions pertaining to the coordination of pension benefits
between this Plan and the Predecessor Plan for former International-Hough
employees shall be governed by Section 11.13 of the Prior Plan, except the
vesting provisions of Section 4.05 of this Plan shall apply instead of the
vesting provisions of Section 11.13 of the Prior Plan.
Article XII also contains provisions applicable to former International-
Hough employees.
SECTION 11.08. GALION: POWER TRANSMISSION: AND ELECTRA MOTORS SERVICE
COORDINATION FROZEN AS OF 5/1/86. As of May 1, 1986, the combined 30-year
limitation of Section 11.07 of the Prior Plan limiting credited service under
the Consolidated Galion Salaried Employees Pension Plan (the "Galion Plan") and
the Prior Plan shall be frozen such that "Credited Service" in the Prior Plan
shall be fixed and remain constant at the number of years credited as of April
30, 1986. As of May 1, 1986,
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the pension benefit for service prior to May 1, 1976, for each Participant whose
benefit under the Galion Plan was merged into the Prior Plan as of the latter
date shall be frozen as if such Participant's Severance from Service Date
occurred on the former Date. The calculation of such benefit shall be in
accordance with Section 11.07 of the Prior Plan. The accrued benefit with
respect to the Galion Plan shall then be fixed and remain constant on or after
May 1, 1986, based on the determination of the benefit as of April 30, 1986.
With respect to the pension benefit component of subsection 4.01(c)(1)(C)
and for purposes of the 35-year maximum on Credited Service for the pension
benefit in Section 4.01, the number of years of "Credited Service" under the
Prior Plan as of April 30, 1986, shall be the number of years of Credited
Service completed by the Participant in the Prior Plan over the period from May
1, 1976, through April 30, 1986.
As of May 1, 1986, the combined 30-year limitation of Section 11.18 of the
Prior Plan limiting credited service under the Power Transmission Equipment
Salaried Employees Pension Plan (the "Power Transmission Plan") and the Prior
Plan shall be frozen such that "Credited Service" in the Prior Plan shall be
fixed and remain constant at the number of years credited as of April 30, 1986.
As of May 1, 1986, the pension benefit for service prior to May 1, 1976, for
each Participant whose benefit under the Power Transmission Plan was merged into
the Prior Plan as of the latter date shall be frozen as if such Participant's
Severance from Service Date occurred on the former Date. The calculation of
such benefit shall be in accordance with Section 11.18 of the Prior Plan. The
accrued benefit with respect to the Power Transmission Plan shall then be fixed
and remain constant on or after May 1, 1986, based on the determination of the
benefit as of April 30, 1986.
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With respect to the pension benefit component of subsection 4.01(c)(1)(C)
and for purposes of the 35-year maximum on Credited Service for the pension
benefit in Section 4.01, the number of years of "Credited Service" under the
Prior Plan as of April 30, 1986, shall be the number of years of service
credited to the Participant in the Prior Plan as of April 30, 1986.
As of May 1, 1986, the combined 30-year limitation of Section 11.08 of the
Prior Plan limiting Credited Service under the Electra such Participant's
Severance from Service Date occurred on the former date. The calculation of
such benefit shall be in accordance with Section 11.14 of the Prior Plan. The
accrued benefit with respect to the Jeffrey Plan shall then be fixed and remain
constant on and after May 1, 1986, based on the determination of such benefit as
of April 30, 1986.
With respect to the pension benefit component of subsection 4.01(c)(1)(C)
and for purposes of the 35-year maximum on Credited Service for the pension
benefit in Section 4.01, the number of years of "Credited Service" under the
Prior Plan as of April 30, 1986, shall be the number of years of Credited
Service completed by the Participant in the Prior Plan over the period from May
1, 1976, through April 30, 1986.
SECTION 11.09. JEFFREY BENEFIT FROZEN AS OF 5/1/86. As of May 1, 1986, the
pension benefit for service prior to May 1, 1976, for each Participant whose
benefit under the Consolidated Jeffrey Salaried Employees Pension Plan (the
"Jeffrey Plan") was merged into the Prior Plan as of the latter date shall be
frozen as if such Participant's Severance from Service Date occurred on the
former date. The calculation of such benefit shall be in accordance with
Section 11.14 of the Prior Plan. The accrued benefit with respect to the
Jeffrey Plan shall then be fixed and remain constant on and after May 1, 1986,
based on the determination of such benefit as of April 30, 1986.
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With respect to the pension benefit component of subsection 4.01(c)(1)(C)
and for purposes of the 35-year maximum on Credited Service for the pension
benefit in Section 4.01, the number of years of "Credited Service" under the
Prior Plan as of April 30, 1986, shall be the number of years of Credited
Service completed by the Participant in the Prior Plan over the period from May
1, 1976, through April 30, 1986.
SECTION 11.10. PILOT RETIREMENT PROVISIONS. Effective May 1, 1989, benefits
accrued, including any special early retirement factors, under this Plan for
Participants who are employed by an Employer or the Company in a capacity which
includes the ability to command an aircraft while in flight on or after May 1,
1986 and who have not had a Severance from Service Date as of May 1, 1989, shall
be as determined in accordance with Article IV of this Plan without adjustment
or recalculation, except as follows: Such benefits accrued shall be at least
equal to the benefit determined as of April 30, 1989 for such Participants
according to the following provisions describing the method to determine such
April 30, 1989 benefits accrued:
(a) A Participant who attains Age 60, who is employed by an Employer or
the Company in a capacity which includes as part thereof, the duty to,
the responsibility for, or the ability to assume, command of an
aircraft while in flight and who elects to retire or who is retired by
the Employer or Company by reason of a physical disability for which
benefits are not payable under any long term disability plan
maintained by the Employer or Company or by reason of a
disqualification from the Company employment position requirements
respecting the command of an aircraft shall be eligible for a monthly
pension benefit computed as follows:
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For each Participant a basic monthly pension equal to the amount
specified in Section 4.01. Provided, however, that for purposes
of determining Social Security Pension, such amount shall be
determined in accordance with the provisions of Section 1.46
applicable to a Participant with a Severance from Service Date
prior to attainment of Age 65 but without the assumption that
compensation will continue until attainment of Age 65.
Such monthly pension shall commence on the first day of the month
coincident with or next following the date on which the Participant
attains Age 60.
In the case of a Participant who continues in employment with the
Employer or Company after he attains Age 60, such Participant's
monthly pension benefit shall be equal to the greater of (1) the
monthly pension benefit computed above, which would have been payable
if the Participant had retired at Age 60, or (2) the monthly pension
benefit computed under Section 4.01 or Section 4.02 of the Plan,
whichever is applicable, considering the Participant's Age and years
of Credited Service at the time of actual retirement.
(b) A Participant who attains at least Age 55 but prior to Age 60 and who,
except for attaining Age 60, meets the eligibility requirements
described in this Section 11.10, above, shall be eligible for a
monthly pension benefit computed as follows:
For each Participant, a basic monthly pension equal to the amount
defined in Section 4.01 with the component of such benefit in
respect of Credited Service prior to May 1, 1986 reduced by 1/4th
of 1% for each full month by which he is less than Age 60 on his
actual retirement date and the benefit component for Credited
Service from May 1, 1986 through
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April 30, 1989 reduced to an Actuarial Equivalent amount with
such Actuarial Equivalent based on no reduction on or after Age
60. Provided, however, that for purposes of determining Social
Security Pension, such amount shall be determined in accordance
with the provisions of Section 1.46 applicable to Participant
with a Severance from Service Date prior to attainment of Age 65
but assuming that compensation will continue until attainment of
Age 60.
Such monthly pension shall commence on the first day of the month
coincident with or next following the Participant's actual retirement
date.
In the case of a Participant whose employment terminates and who
retires after attaining Age 55 and prior to attaining Age 65 and a
time when he was not employed in a capacity described in this Section
11.10, but was employed in such capacity at the time he attained Age
55, such Participant's monthly pension shall be equal to the greater
of: (1) the monthly pension computed above, which would have been
payable if the Participant had retired on the last date he was
employed in such capacity, or (2) the monthly pension computed under
Section 4.02 considering the Participant's Age and years of Credited
Service at the time of actual retirement.
(c) A Participant whose employment terminates prior to attaining Age 55
and at a time when he was employed in a capacity described in this
Section 11.10, above, or who was not employed in such capacity on or
after attaining Age 55, shall have his monthly pension, if any,
determined under Article IV of the Plan and shall not be eligible for
any benefits described in this Section.
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SECTION 11.11. BAY STATE ABRASIVES. Section 11.03 of the Prior Plan provides
the formula for determining the Accrued Benefit as of April 30, 1986 related to
subsection (c)(l)(C) of Section 4.01 of this Plan. In subsection (a)(2) of
Section 11.03 of the Prior Plan, a minimum monthly benefit is provided for each
full year of credited service as defined in The Bay States Abrasives Restated
Pension Plan (the "Predecessor Plan") as of June 30, 1974. For any active
Participant or transferred Participant with frozen benefits in this Plan who is
entitled to such minimum monthly benefits and who has an Hour of Service on or
after November 1, 1987 and whose Severance from Service Date occurs on or after
November 1, 1987, the minimum monthly benefit multiplier shall be $14.00. This
$14.00 benefit multiplier so provided hereunder shall be included in the pension
benefit component of subsection 4.01(c)(1)(C) and shall continue to be reduced
as provided in subsection (d). All other provisions pertaining to the pension
benefit component of subsection 4.01(c)(1)(C) with respect to Predecessor Plan
participants shall be governed by Section 11.03 of the Prior Plan, except the
vesting provisions of Section 4.05 of this Plan shall apply instead of the
vesting provisions of Section 11.03 of the Prior
SECTION 11.12. DRESSER-RAND COMPANY, ACQUISITION OF MACHINERY REPAIR DIVISION,
BOSTON, MASSACHUSETTS. Following are provisions describing the benefits payable
from the Plan for employees of the Dresser-Rand Company's (DR) Machinery Repair
Division in Boston, Massachusetts, who accepted employment with the Company as
of July 1, 1989. Any such employee who joined DR effective January 1, 1987 or a
later date of transfer prior to July 1, 1989 with periods of Continuous Service
with the Company prior to January 1, 1987 or a later date of direct transfer
from the Company to DR, shall have such periods aggregated with periods of
Continuous Service subsequent to July 1, 1989 for all purposes under this Plan.
Section
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12.03 explains the benefits earned under this Plan for such periods of
employment with the Company.
Each such employee who accepted employment with the Company shall become an
active Participant of this Plan as of July 1, 1989, subject to the eligibility
provisions of Section 2.01. The benefits for each such Participant under this
Plan for all periods of Credited Service shall be determined according to all
terms of this Plan as amended effective May 1, 1989. Benefits provided in
Section 12.03 shall no longer be applicable to such Participants. Benefits
under this Plan shall be determined solely under this Section 11.12 and the
applicable sections of Article IV.
Employment with DR between January 1, 1987 and July 1, 1989 shall be
counted as Continuous Service under this Plan but shall not be counted as
Credited Service under this Plan. Continuous Service shall be counted toward
Vesting Service which determines eligibility for retirement benefits,
participation in the Plan and appropriate early retirement factors.
SECTION 11.13. ACQUISITION OF NORRIS CITY OPERATION. Following are provisions
describing the benefits payable from the Plan for Participants who are former
employees of The Norris City Products Corporation, (NCPC), a subsidiary of Ajax
Engineering Corporation, who accepted employment with the Predecessor Company as
of March 1, 1990. Each such Employee became an active Participant of this Plan
as of March 1, 1990, subject to the eligibility provisions of Section 2.01. The
benefits for each such Participant under this Plan shall be based only on
Credited Service after March 1, 1990 and shall be determined according to the
terms of the DIICSR Plan as amended effective May 1, 1989 and only on the
formula stated in Plan Sections 4.01(a), (b)(1), and (b)(2). Employment with
NCPC shall be counted as Continuous Service under this Plan
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but shall not be counted as Credited Service under this Plan. Continuous
Service shall be counted toward Vesting Service which determines eligibility for
retirement benefits and participation in the Plan.
SECTION 11.14. ACQUISITION OF BAKER HUGHES TOOL DIAMOND PRODUCTS COMPANY.
Following are provisions describing the benefits payable from the Plan for
Participants who are former employees of the Baker Hughes Tool Diamond Products
Company (BHTDPC) who accepted employment with the Predecessor Company as of
August 1, 1990. Each such Employee became an active Participant of the DIISCR
Plan as of August 1, 1990 subject to the eligibility provisions of Section 2.01.
The benefits for each such Participant under this Plan shall be based only on
Credited Service after August 1, 1990 and shall be determined solely according
to the terms of this Plan only on the formula stated in Plan Sections 4.01 (a),
(b)(1) and (b)(2).
Employment with BHTDPC prior to August 1, 1990 shall be counted as
Continuous Service under this Plan but shall not be counted as Credited Service
under this Plan. Continuous Service shall be counted toward Vesting Service
which determines eligibility for retirement benefits and participation in the
Plan.
SECTION 11.15. EARLY RETIREMENT FACTORS FOR PREDECESSOR PLAN BENEFIT COMPONENTS.
The early retirement factors for Predecessor Plan Participants whose Predecessor
Plan benefits are determined under Section 4.02 shall be determined from
subparagraph (a) below. Early retirement factors for Participants for benefits
which are based on Section 4.05 shall be determined from subparagraph (b) below.
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(a) The applicable pension benefit component of subsection 4.01(c)(1)(C)
shall be reduced by multiplying such component by the applicable early
retirement factor in the event that the Participant's Severance from
Service Date occurs after Age 55 and such benefits commence prior to
the Participant's Normal Retirement Date. Such factors shall be
applied in accordance with the respective section of Article XI of the
Prior Plan. The following Table A provides a summary of the factors.
The Table A shall be a summary only. The specific provisions that
govern determination of benefits shall be the respective section of
Article XI of the Prior Plan.
(b) The applicable pension benefit component of Section 4.01 (c)(l)(C)
shall be reduced by multiplying such component by the applicable early
retirement factor in the event that the Participant's Severance from
Service Date occurs before the Participant's Age 55. These factors
shall be applied in accordance with the respective section of Article
XI of the Prior Plan. The following Table B provides a summary of the
factors. The Table B shall be a summary only. The specific
provisions that govern determination of benefits shall be the
respective section of Article XI of the Prior Plan.
TABLE A
<TABLE>
<CAPTION>
Age at
Commencement
of Benefits A B C D E F G H I J K
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 .5000 .5000 .5000 .7900 .4310 .5500 .6500 .4641 .4000 .6000 .3333
56 .5333 .5330 .5333 .820 .4720 .5800 .7000 .4973 .4600 .6400 .4000
57 .5667 .5670 .5667 .8500 .5160 .6100 .7500 .5336 .5200 .6800 .4667
58 .6000 .6000 .6000 .8800 .5580 .6400 .8000 .5735 .5800 .7200 .5333
59 .6333 .6330 .6400 .9100 .6000 .6700 .8500 .6173 .6400 .7600 .6000
60 .6667 .6670 .7000 .9400 .6460 .7000 .9000 .8500 .7000 .8000 .6667
61 .7333 .7330 .7600 .9700 .7180 .7600 .9200 .8800 .7600 .8400 .7333
62 .8000 .8000 .8200 1.0000 .7900 .8200 .9400 .9100 .8200 .8800 .8000
63 .8667 .8670 .8800 1.0000 .8620 .8800 .9600 .9400 .8800 .9200 .8667
64 .9333 .9330 .9400 1.0000 .9340 .9400 .9800 .9700 .9400 .9600 .9333
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
</TABLE>
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The above factor sets shall apply to the respective Predecessor Plan as follows:
SET PREDECESSOR PLAN (S)
- --------------------------------------------------------------------------------
A MIC/MMIC Employees (Turbodyne, Electric Machinery, Worthington Pump &
Compressor & Masoneilan, and Service Division)
B Marion Power Shovel
C Bay States Abrasives
D International-Hough (offset to Prior Plan benefit if retirement eligible
and satisfied the age requirement at acquisition date)
E International-Hough (offset to Prior Plan benefit if not retirement
eligible or did not meet age requirement at acquisition date)
F Reliance Insurance Company, other than rule of 85
G Reliance Insurance Company rule of 85
H Waukesha
I Turbodyne (Wellsville)
J B&W (less than 15 years service or does not meet rule of 75, factor is 1.0
if both requirements are met)
K Electric Machinery; Worthington Pump and Compressor; Masoneilan Division;
McGraw Edison Service Division
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TABLE B
<TABLE>
<CAPTION>
Age at
Commencement
of Benefits A B C D E F
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 .4199 .5000 .5000 .4310 .4000 .3333
56 .4538 .5333 .5330 .4720 .4600 .4000
57 .4912 .5667 .5670 .5160 .5200 .4667
58 .5327 .6000 .6000 .5580 .5800 .5333
59 .5788 .6333 .6330 .6000 .6400 .6000
60 .6302 .6667 .6670 .6460 .7000 .6667
61 .6877 .7333 .7330 .7180 .7600 .7333
62 .7522 .8000 .8000 .7900 .8200 .8000
63 .8248 .8667 .8670 .8620 .8800 .8667
64 .9069 .9333 .9330 .9340 .9400 .9333
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
</TABLE>
The above factor sets shall apply to the respective Predecessor Plan as follows:
SET PREDECESSOR PLAN (S)
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A Bay State Abrasives, Reliance Insurance Company, B&W, and Waukesha
B MIC/MMIC Employees (Turbodyne, Electric Machinery, Worthington Pump &
Compressor & Masonelian, and Service Division)
C Marion Power Shovel
D International-Hough (offset to Prior Plan benefit)
E Turbodyne (Wellsville)
F Electric Machinery; Worthington Pump and Compressor; Masoneilan Division;
McGraw Edison Service Division
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ARTICLE XII - JOINT VENTURES AND SALES
SECTION 12.01. IDECO JOINT VENTURE. Increases in a Participant's accrued
benefit under the Prior Plan that would have taken place after the termination
of the Prior Plan as of April 30, 1986 in accordance with subsection
11.29(b)(3)(B) of the Prior Plan had the Prior Plan not terminated shall be
provided under this Plan with respect to Participants who became "Eligible
Retained Employees" as defined in Section 11.29 of the Prior Plan upon the
incorporation of IRI International Corporation by Ingersoll-Rand Company and the
Company pursuant to the Stockholder Agreement among Ingersoll-Rand Company,
Ingersoll-Rand Oilfield Products Company, and the Company dated as of July 30,
1985.
There shall be no benefits under Section 4.01 of this Plan for such
Participants. An Eligible Retained Employees' benefits under this Plan and the
Prior Plan shall be determined solely by reference to this Section 12.01 and
Section 11.29 of the Prior Plan.
Further provided that for the purposes of calculating the increases in a
Participant's accrued benefit that shall be payable under this Plan,
(i) "Average Annual Compensation" and "Compensation" shall be as defined
in Section 11.29 of the Prior Plan, Social Security Pension shall be
as defined in Section 1.46 of this Plan. Average Annual Compensation
and the Social Security Pension shall be calculated as of April 30,
1989 and the formula in subsection 11.29(b)(3)(B) of the Prior Plan
shall be applied. The resulting benefit amount shall be multiplied
times the ratio (not less than l(one)) of the Participant's Average
Annual Compensation at Severance from Service Date divided by the
Participant's Average Annual
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Compensation at April 30, 1989. In application of this formula as of
April 30, 1989, the maximum offset allowed for the Social Security
Pension shall be 50% of the Participant's benefit based solely on his
Average Annual Compensation
(ii) when calculating the benefit in accordance with subsection
11.29(b)(3)(A) of the Prior Plan, the sum of the benefit amount as
determined (i) under the vesting schedule provisions of Section 4.05
of this Plan plus (ii) the vested benefit provided by the Prior Plan,
and when calculating the benefit in accordance with subsection
11.29(b)(3)(B) of the Prior Plan, the benefit amount shall be the
vested benefit amount based on 100% vesting after completion of ten
(10) years of Vesting Service as defined in Section 11.29 of the Prior
Plan. Effective May 1, 1989 for Participants who complete an Hour of
Service on or after May 1, 1989, the 10 years is reduced to five (5)
years.
Notwithstanding any other provision of the plan, the accrued benefit of any
Participant who was an "Eligible Retained Employee" as defined in Section 11.29
of the Prior Plan shall be frozen effective January 1, 1995. Provided, further,
that any such Participant shall have his Continuous Service under the Plan
frozen on January 1, 1995 and shall not be eligible to receive benefits from
this Plan until such Participant terminates employment with IRI International,
Inc., or any successor thereof.
SECTION 12.02. M-I DRILLING FLUIDS CO. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of December 11,
1986 who become employees of the M-I Drilling Fluids Co. ("M-I") on December 12,
1986, or thereafter, pursuant to the Organizational Agreement between the
Company
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and Halliburton Company which established the M-I Drilling Fluids Co., effective
December 12, 1986. M-I is a general partnership organized under the laws of the
State of Texas.
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 as in
effect on January 1, 1987 in the case of a Plan Participant who transfers
employment directly from the Company to M-I before January 1, 1987, considering
the date of transfer as the Severance from Service Date for the purpose of
computing Credited Service, but considering December 31, 1986 as the date of
transfer for the purpose of measuring Final Average Monthly Earnings. For any
Plan Participant who transfers employment directly from the Company to M-I after
December 31, 1986, 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 M-I commencing on such Employee's first day of
employment with M-I shall be counted as Continuous Service under this Plan for
the purpose of determining Vesting Service (which determines eligibility for
retirement benefits) and eligibility for Plan participation and no participant
shall be eligible to commence benefits under this Plan until such participant
terminates employment with M-I, or any successor thereof.
For those transferred Plan Participants who transfer on and after December
12, 1986 but not later than April 1, 1987 and whose combined age and Vesting
Service as of December 12, 1986 equals or exceeds seventy-five (75), an
additional benefit shall be payable from this Plan based on Credited Service
accrued as of December 11, 1986. This
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benefit shall be called the "75 Benefit". The amount of the 75 Benefit shall be
the excess of (ii) over (i) as follows:
(i) the benefit accrued as of December 31, 1986 under this Plan, utilizing
Compensation prior to January 1, 1987 for purposes of computing Final
Average Monthly Earnings and the Social Security Pension
(ii) the benefit accrued as of December 31, 1986 under this Plan
considering compensation (as defined in Section 1.12 of this Plan)
with M-I on and after December 31, 1986 and up to April 30, 1989 to be
Plan Compensation, plus, where necessary, Plan Compensation prior to
January 1, 1987 for purposes of computing Final Average Monthly
Earnings and the Social Security Pension.
For any Participant to whom this 75 Benefit applies, the provisions of
subsection (c)(l) of Section 4.01 of this Plan shall apply to the calculation in
subparagraph (ii) above. The adjustments to the monthly Social Security Pension
offsets in Section 4.01(c)(1)(A) and (B) shall apply. The adjustments shall
also apply to the calculation of the benefit amount stated in the second
paragraph of this Section 12.02 for Participants who are covered by this 75
Benefit. This 75 Benefit shall be vested in the manner prescribed in Section
4.05 for all other benefits payable from this Plan. The respective last
paragraphs of Sections 4.01 and 4.02 shall apply to the benefit determined under
this Section 12.02.
SECTION 12.03. DRESSER-RAND COMPANY. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of December 31,
1986 who became employees of the Dresser-Rand Company ("DR") on January 1, 1987,
pursuant to the Organizational Agreement between the Company and
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Ingersoll-Rand which established the Dresser-Rand Company effective January 1,
1987. DR is a general partnership organized under the laws of the State of New
York.
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 as in
effect on January 1, 1987 but considering December 31, 1986 as the Severance
from Service Date for the purpose of computing Credited Service and Final
Average Monthly Earnings. For any Plan Participant who transfers employment
directly from the Company to DR after January 1, 1987, 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 DR commencing on such
Employee's first day of employment with DR shall be counted as Continuous
Service under this Plan for the purpose of determining Vesting Service (which
determines eligibility for retirement benefits) and eligibility for Plan
participation and no participant shall be eligible to commence benefits under
this Plan until such participant terminates employment with DR, or any successor
thereof.
For any Plan Participant who has a Retirement Date prior to April 1, 1987
but who has transferred employment to DR effective January 1, 1987, the
retirement benefit (including benefits accrued from January 1, 1987 to
Retirement Date, or March 31, 1987, if later) shall be paid from this Plan.
However, the benefit accruals from January 1, 1987 to Retirement Date (with no
accruals after March 31, 1987) shall be computed according to the benefit
formula in accordance with provisions of this Plan.
The plan established by DR for salaried employees shall transfer, as soon
as practicable, to this Plan an aggregate single sum present value of the
benefits accrued
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<PAGE>
from January 1, 1987 through the respective Retirement Dates for such retired
participants calculated using the principles of Financial Accounting Standards
Board Statement 87 and calculated in the same manner and under the same
actuarial assumptions as provided in the latest applicable valuation report for
the Plan with an interest rate of 8.75% per annum.
The transfer of assets and liabilities provided above shall be subject to
the provisions of Plan Section 10.08.
SECTION 12.04. KONGSBERG DRESSER POWER. INC. Effective June 21, 1985, certain
Employees of the Company who were Participants in the Dresser Industries, Inc.
Retirement Income Plan Under ERISA (the "Prior Plan") were transferred to
employment with Kongsberg Dresser Power, Inc.
Each active Employee of the Company who was covered by the Prior Plan and
who on or after June 21, 1985 was transferred to covered employment with
Kongsberg Dresser Power, Inc. continued to be an "Employee" as defined in
Section 1.16 of the Prior Plan and continued to be an active Participant in the
Prior Plan. Each such Employee continued to accrue Continuous Service and
Credited Service according to the provisions of the Prior Plan with respect to
service with Kongsberg Dresser Power, Inc. Compensation from Kongsberg Dresser
Power, Inc. was considered Plan Compensation in the Prior Plan, and each such
Employee continued to make contributions to the Prior Plan in accordance with
Section 3.01 of the Prior Plan.
When the Prior Plan was terminated as of April 30, 1986, Employees who were
Participants of the Prior Plan automatically became Participants of this Plan
effective May 1, 1986 if such Participants met the other requirements of Section
2.01. Effective
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<PAGE>
January 1, 1987, Employees of Kongsberg Dresser Power, Inc. became employees of
the Dresser-Rand Company (DR) pursuant to the Organizational Agreement between
the Company and Ingersoll-Rand which established the Dresser-Rand Company,
effective January 1, 1987. At that time, Kongsberg Employees who were Plan
Participants were allowed a one-time option to participate in the defined
contribution plan sponsored by Kongsberg Dresser Power, Inc. or to participate
in the plan established by DR for salaried employees. For those Employees who
elected to participate in such DR Plan, the provisions of Section 12.02 shall
apply.
SECTION 12.05. WESTERN ATLAS. Following are provisions describing the benefits
payable from the Plan for Employees of the Company as of April 30, 1987 who
become employees of Western Atlas International, Inc. ("W-A") on May 1, 1987, or
thereafter, pursuant to the Amalgamation Agreement between the Company and
Litton Industries, Inc. which established Western Atlas, Inc., effective May 1,
1987.
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 as in
effect on April 30, 1987 in the case of a Plan Participant who transfers
employment directly from the Company to W-A on May 1, 1987 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 W-A after May 1, 1987,
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 W-A commencing on such Employee's first day of
employment with W-A shall be counted as Continuous Service under this Plan for
the purpose of determining Vesting
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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 W-A, or any successor thereof.
For those transferred Plan Participants who transfer on May 1, 1987 and
whose combined age and service as of May 1, 1987 equals or exceeds seventy-five
(75), an additional benefit shall be payable from this Plan based on Credited
Service accrued as of April 30, 1987. This benefit shall be called the "75
Benefit". The amount of the 75 Benefit shall be the excess of (ii) over (i) as
follows:
(i) the benefit accrued as of April 30, 1987 under this Plan, utilizing
Compensation prior to May 1, 1987 for purposes of computing Final
Average Monthly Earnings and the Social Security Pension;
(ii) the benefit accrued as of April 30, 1987 under this Plan considering
compensation (as defined in Section 1.12 of this Plan) with W-A on and
after April 30, 1987 and up to April 30, 1989 to be Plan Compensation
for purposes of computing Final Average Monthly Earnings and the
Social Security Pension.
For any Participant to whom this 75 Benefit applies, the provisions of
subsection (c)(1) of Section 4.01 of this Plan shall apply to the calculation in
subparagraph (ii) above. The adjustments to the monthly Social Security Pension
offsets in Section 4.01(c)(1)(A) and (B) shall apply. The adjustments shall
also apply to the calculation of the benefit amount stated in the second
paragraph of this Section 12.05 for Participants who are covered by this 75
Benefit. This 75 Benefit shall be vested in the manner
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<PAGE>
prescribed in Section 4.05 for all other benefits payable from this Plan. The
respective last paragraphs of Sections 4.01 and 4.02 shall apply to the benefit
determined under this Section 12.05.
SECTION 12.06. SWACO GEOLOGRAPH. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of August 31,
1987 who became employees of the SWACO Geolograph Company (SGC) on September 1,
1987, pursuant to the Organization Agreement between the Company and Geolograph-
Pioneer, Inc. which established the SWACO Geolograph Company effective
September 1, 1987. SGC was a general partnership organized under the laws of
the State of Texas.
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 as in
effect on August 31, 1987 in the case of a Plan Participant who transferred
employment directly from the Company to SGC on September 1, 1987, considering
August 31, 1987 as the Severance from Service Date for the purpose of computing
Credited Service in Article IV. Final Average Monthly Earnings shall consider
earnings with SGC through December 31, 1987, for purposes of Article IV. For
any Plan Participant who transferred employment directly from the Company to SGC
after September 1, 1987, and before November 1, 1989 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 SGC commencing on such
Employee's first day of employment with SGC 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
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<PAGE>
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 SGC, or any successor
thereof.
For those transferred Plan Participants who transferred on September 1,
1987, whose severance from service from SGC occurs on or after the 61st day
following August 31, 1987, and whose combined age and Vesting Service as of
September 1, 1987 equaled or exceeded seventy-five (75), an additional benefit
shall be payable from this Plan based on Credited Service accrued as of August
31, 1987. This benefit shall be called the "75 Benefit". The amount of the 75
Benefit shall be the excess of (ii) over (i) as follows:
(i) the benefit accrued as of August 31, 1987 provided in accordance with
the paragraph immediately preceding;
(ii) the benefit accrued as of August 31, 1987 under this Plan considering
compensation (as defined in Section 1.12 of this Plan) with SGC on and
after September 1, 1987 and up to April 30, 1989 to be Plan
Compensation for purposes of computing Final Average Monthly Earnings
and the Social Security Pension.
For any Participant to whom this 75 Benefit applies, the provisions of
subsection (c)(1) of section 4.01 of this Plan shall apply to the calculation in
subparagraph (ii) above. The adjustments to the monthly Social Security offsets
in Section 4.01(c)(1)(A) and (B) shall apply. The adjustments shall also apply
to the calculation of the benefit amount stated in the second paragraph of this
Section 12.06 for Participants who are covered by this 75 Benefit. This 75
Benefit shall be vested in the manner prescribed in
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<PAGE>
Section 4.05 for all other benefits payable from this Plan. The respective last
paragraphs of Sections 4.01 and 4.02 shall apply to the benefit determined under
this Section 12.06.
Effective November 1, 1989, the Company acquired SGC and all employees of
SGC became Employees of the Company. The SWACO Division of the Company was
formed. Each employee of SGC as of October 31, 1989 became an active Plan
Participant of this Plan, subject to the eligibility provisions of Section 2.01.
The benefits for each such Participant under this Plan for any Credited Service
attributable to Periods of Service from November 1, 1989 to May 7, 1990 shall be
determined according to all terms of this Plan as amended effective May 1, 1989.
Employment from September 1, 1987 through October 31, 1989 with SGC shall be
counted as Continuous Service under this Plan but shall not be counted as
Credited Service under this Plan.
Effective May 7, 1990, for all pension purposes, employees of the SWACO
Division of the Company became employees of M-I (as defined in Section 12.02) on
May 7, 1990 pursuant to the Organization Agreement between the Company and
Halliburton Company effective May 1, 1990.
As of May 7, 1990, each formerly active Plan Participant is considered an
inactive Plan Participant and the benefit amount payable shall be computed
according to the provisions of the appropriate Section of Article IV as in
effect on May 7, 1990 in the case of a Plan Participant who transfers employment
directly from the Company to M-I on May 7, 1990, considering May 7, 1990 as the
Severance from Service Date for the purpose of computing Credited Service in
Article IV. Final Average Monthly Earnings shall consider earnings with the
Company through May 7, 1990, for purposes of Article IV. For any Plan
Participant who transfers employment directly from the Company to M-I after May
7, 1990, the date of such transfer shall be considered the Severance from
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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 M-I commencing on such Employee's first day of
employment with M-I 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 M-I, or any successor
thereof.
The 75 Benefit of this Section 12.06 shall continue to apply to
Participants originally covered by it on September 1, 1987, with respect to
their service to that date.
SECTION 12.07. B-J TITAN. As of April 1, 1985, the BJ-Titan Services Company
("BJ-Titan") was established. Section 11.27 of the Prior Plan contains
provisions describing the benefits payable from the Prior Plan for former
employees of the Company as of March 31, 1985 who became employees of BJ-Titan
on April 1, 1985, or thereafter, pursuant to a business venture agreement
between the Company and Hughes Tool Company ("Hughes") and certain Hughes
affiliates. B-J Titan was organized as a general partnership under the laws of
the State of Texas.
Between April 1, 1985, and July 21, 1988 employees who were transferred
both to and from BJ-Titan by the Company and Hughes and certain Hughes'
affiliates, in accordance with the written agreement between BJ-Titan, the
Company and Hughes, shall be credited for vesting and retirement plan
eligibility purposes with all service with each employer as if each employer was
a member of the same controlled group. Therefore, for any Employee or former
Employee who was directly transferred to B-J Titan from the Company or Hughes
(or the affiliates of either), or directly from B-J Titan
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<PAGE>
to the Company or Hughes (or the affiliates of either) between April 1, 1985,
and July 21, 1988 service with B-J Titan, Hughes, or the affiliates of either
shall be counted as Continuous Service under this Plan and the Prior 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). No such former Employee shall
be eligible to commence any benefits under this Plan until such former Employee
terminates employment with B-J Titan, the Company, Hughes, or their affiliates,
or any successor thereof.
On July 21, 1988, B-J Titan became a part of Baker Hughes. The respective
employees who were accruing vesting and retirement plan eligibility service with
B-J Titan immediately before July 21, 1988 shall continue to accrue such service
under this Section 12.07 as Baker Hughes employees.
SECTION 12.08. DRESSER LEASING SALE. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of October 31,
1987 who accepted employment with the Sovran Financial Corporation (the "Buyer")
on November 1, 1987 pursuant to the August 13, 1987 Agreement between the
Company and the Buyer, effective November 1, 1987. The Buyer is a Virginia
Corporation.
Each former Employee who accepts such employment shall be referred to as a
Transferred Employee. For a Transferred Employee, October 31, 1987 shall be
considered the Severance from Service Date for the purpose of computing Credited
Service, Final Average Monthly Earnings and the Social Security Pension and,
hence, determining the Accrued Benefit as of October 31, 1987, under the Plan
under the terms of the Plan as in effect on October 31, 1987. Provided,
further, that each such former
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<PAGE>
Employee's service with the Buyer commencing on such Employee's first day of
employment with the Buyer shall be counted as Continuous Service under this Plan
for the purpose of determining Vesting Service (which determines eligibility for
retirement benefits, determination of early retirement factors, and eligibility
for Plan participation) and no such Participant shall be eligible to commence
benefits under this Plan until such Participant terminates employment with
Sovran Financial Corporation, or any successor thereof.
SECTION 12.09. RELIANCE STANDARD LIFE. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of November 6,
1987 who accepted employment with the RSL Holding Company, Inc. (the "Buyer") on
November 7, 1987 pursuant to the May 29, 1987 Agreement between the Company and
the Buyer, effective November 7, 1987. The Buyer is a Delaware Corporation.
Each former Employee who accepts such employment shall be referred to as a
Transferred Employee. For a Transferred Employee, November 6, 1987 shall be
considered the Severance from Service Date for the purpose of computing Credited
Service, Final Average Monthly Earnings and the Social Security Pension and,
hence, determining the Accrued Benefit as of November 6, 1987 under the Plan
under the terms of the Plan as in effect on November 6, 1987. Provided,
further, that each such former Employee's service with the Buyer commencing on
such Employee's first day of employment with the Buyer shall be counted as
Continuous Service under this Plan for the purpose of determining Vesting
Service (which determines eligibility for retirement benefits, determination of
early retirement factors, and eligibility for Plan participation) and no such
Participant shall be eligible to commence benefits under this Plan until such
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Participant terminates employment with RSL Holding Company, Inc., or any
successor thereof.
SECTION 12.10. BAY STATE ABRASIVES/GENERAL ABRASIVE DIVESTITURE. Following are
provisions describing the benefits payable from the Plan for Employees of the
Company as of June 30, 1988 who accept employment with Abrasive Industries Inc.
(the "Buyer") as of July 1, 1988 pursuant to the May 20, 1988 Agreement between
the Company and the Buyer, effective July 1, 1988.
Each Employee of the Company as of June 30, 1988 who accepts such
employment shall be a "Transferred Participant". For a Transferred Participant,
June 30, 1988 shall be considered the Severance from Service Date for the
purpose of computing Credited Service, Final Average Monthly Earnings and the
Social Security Pension and, hence, determining the Accrued Benefit as of June
30, 1988 under the Plan under the terms of the Plan as then in effect.
Provided, further, that each such Transferred Participant's service with the
Buyer commencing on such Participant's first day of employment with the Buyer
shall be counted as Continuous Service under this Plan for the purpose of
determining Vesting Service (which determines eligibility for retirement
benefits, determination of early retirement factors, and eligibility for Plan
participation) and no such Participant shall be eligible to receive benefits
under this Plan until such Participant terminates employment with Abrasive
Industries Inc., or any successor thereof.
SECTION 12.11. KOMATSU DRESSER COMPANY. Following are provisions describing the
benefits payable from the Plan for Employees of the Company as of August 31,
1988 who became employees of Komatsu Dresser Company ("KDC") on September 1,
1988 or thereafter, pursuant to the Joint Venture Agreement between
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Dresser Finance Corporation and Komatsu America Corp. which established the
Komatsu Company effective September 1, 1988. KDC is a general partnership
organized under the laws of the State of Illinois.
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 as in
effect on August 31, 1988 in the case of a Plan Participant who transfers
employment directly from the Company to KDC on September 1, 1988, but
considering August 31, 1988 as the Severance from Service Date for the purpose
of computing Credited Service, Final Average Monthly Earnings and the Social
Security Pension and, hence, determining the Accrued Benefit as of August 31,
1988 under the Plan. For any Plan Participant who transfers employment directly
from the Company to KDC after September 1, 1988, the date of such transfer shall
be considered the Severance from Service Date for purposes of computing Credited
Service, Final Average Monthly Earnings and the Social Security Pension, and
hence, determining the Accrued Benefit as of the date of transfer from the Plan.
Provided, further, that each such former Employee's service with KDC commencing
on such Employee's first day of employment with KDC shall be counted as
Continuous Service under this Plan for the purpose of determining Vesting
Service (which determines eligibility for retirement benefits, Plan
participation and appropriate early retirement factors) and no such Participant
shall be eligible to receive benefits under this Plan until such Participant
terminates employment with KDC, or any successor thereof.
Further provided, the early retirement factors applied to the Accrued
Benefit as of the date of transfer, when such Accrued Benefit is paid, shall not
be less than the appropriate factors in the Plan as in effect on such date of
transfer.
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For authorized leaves of absence from KDC that occur prior to December 1,
1991, the provisions of Section 1.45(a)(6) of this Plan shall be applicable for
purpose of determining the Participant's Vesting Service as if such authorized
leave of absence had been from the Company. If such authorized leave of absence
from KDC exceeds one year, the monthly retirement income benefit shall be
subject to the provisions of Section 4.05 at the expiration of such authorized
leave of absence.
SECTION 12.12. LEROI SALE. Following are provisions describing the benefits
payable from the Plan for Employees of the Company as of October 10, 1991 who
became employees of Compressor Technologies, Inc. ("CTI") on October 11, 1991
pursuant to the October 11, 1991 sale agreement between Dresser Industries, Inc.
and CTI.
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 as in
effect on October 10, 1991 in the case of a Plan Participant who accepts
employment with CTI on October 11, 1991, but considering October 10, 1991 as the
Severance from Service Date for the purpose of computing Credited Service, Final
Average Monthly Earnings and the Covered Compensation and, hence, determining
the Accrued Benefit as of October 10, 1991 under the Plan. Provided, further,
that each such former Employee's service with CTI commencing on such Employee's
first day of employment with CTI shall be counted as Continuous Service under
this Plan for the purpose of determining Vesting Service (which determines
eligibility for retirement benefits, Plan participation and appropriate early
retirement factors) and no such Participant shall be eligible to receive
benefits
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<PAGE>
under this Plan until such Participant terminates employment with CTI, or any
successor thereof.
SECTION 12.13. ENVIRONMENTAL PRODUCTS SALE. Following are provisions describing
the benefits payable from the Plan for Employees of the Company as of August 31,
1994, who became employees of BEC Finance Corporation ("BEC") on September 1,
1994. 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 as in
effect on August 31, 1994 in the case of a Plan Participant who accepts
employment with BEC on September 1, 1994, but considering August 31, 1994 as the
Severance from Service Date for the purpose of computing Continuous Service,
Credited Service, Final Average Monthly Earnings and the Covered Compensation
and, hence, determining the Accrued Benefit as of August 31, 1994 under the
Plan. Provided, further, that such Participant shall not be eligible to receive
benefits under this Plan until such Participant terminates employment with BEC,
or any successor thereof.
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EXHIBIT A
LIST OF CURRENT EMPLOYER CORPORATIONS UNDER SECTION 7.01
(As of May 1, 1994)
Dresser Industries, Inc.
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<PAGE>
EXHIBIT 10.26
M. W. KELLOGG
EXECUTIVE BENEFITS PROGRAM
PLAN PURPOSE
The Company recognized that certain benefits and perquisites, not currently
provided to a broad group of employees, should be made available to selected
key executives by means of a flexible perquisite program. The purposes of this
program are to:
- Provide unique and competitive perquisites to program participants.
- Permit a certain amount of individual preference in the selection of
these perquisites.
- Limit the perquisites to those generally related to business.
- Provide the perquisites in a tax-effective and cost effective manner.
- Provide a basis group of perquisites that is sufficiently
comprehensive so that a reasonable level of personal security is
provided. The executive can, therefore, focus on his business
responsibilities rather than be distracted by personal financial
concerns.
PLAN CONCEPT
The overall perquisite program consists of two separate and distinct perquisite
lists; a basic (non-choice) list and an optional (choice-related) list. The
basic list consists of the perquisites which the company would like to provide
to all plan participants. Under the choice list, participants have the
opportunity to choose, within specified limits, among a predetermined set of
available perquisites.
Each participant will be assigned an individual flexible perquisite account
which may be used to select choice-related perquisites. At the beginning of
each plan year (January 1), each flexible perquisite account will be credited
with an amount equal to a specified percent of the participant's base salary in
effect at the beginning of the plan year.
<PAGE>
CHOICE RELATED
In addition to basic (non-choice) perquisites, executive may choose from among
certain perquisites which are, by their nature, included in the participant's
personal taxable income. The amounts in a participant's flexible perquisite
account actually expended during a year will be included by the company in
reporting taxable income for the participant.
- INDIVIDUAL INCOME TAX PREPARATION AND FINANCIAL COUNSELING
Description: : The Company will reimburse the participant
for the cost of securing professional
assistance in the review and planning of
his/her personal financial planning services
which may include:
- Estate planning
- Preparation of wills and trusts,
- Investment counseling,
- Financial seminars,
- Tax planning,
- Preparation of tax returns
The full cost of these services is charged
against the participant's flexible perquisite
account.
Tax Consequences :
Employee : The total financial and tax counseling fees
are includable in the executive's gross
income. However some of these fees may be
deductible by the executive.
<PAGE>
DATE
ADDRESS
Dear:
The M. W. Kellogg Company has adopted an executive perquisite plan which is
extended to key executives.
I am pleased to inform you that you will be a participant in this program, and
the attached position paper should summarize the plan highlights for you.
Briefly, the plan consists of two sets of benefits - a basic program which
applies to all participant, and an optional program which may be tailored to fit
you individual needs.
The basic benefits program consists of the following items and generally
represents non-taxable perquisites to the executive:
- Insured excess Medical Executive Reimbursement Plan (MERP) - see
attached booklet. This coverage includes reimbursement for your
annual executive physical.
- Supplemental long-term disability
- Business luncheon club or athletic club membership
- International first-class air travel
The optional program of perquisites may be "purchased" with flexible perquisite
dollars which amount to four (4) percent of your base salary. To the extent
that you spend these perquisite dollars, they become taxable income to you,
although it is obvious that there is more leverage in perquisite dollars than
there is in ordinary income. Perquisite dollars in addition to your base
salary, and you may "shop" among the following items:
- Individual income tax preparation & financial counseling
- Personal liability insurance
- Supplemental life insurance
- Educational aid for dependent children
Accounting for these procedures will be done via a modified expense procedure.
Attached is a copy of the form which should be used to submit expenses to my
office for approval. The financial department will accumulate your expenditures
and report them as income on your W-2 .
You need to coordinate the provisions of this program with your elections under
Flexplan, and questions should be directed to my office. This plan supersedes
any executive medical and life coverages previously provided.
D. L. Bartlett
Attachments
<PAGE>
EXHIBIT 21. PARENTS AND SUBSIDIARIES
There is furnished a list of subsidiaries of Dresser Industries, Inc.
as of October 31, 1994.
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 Italiana S.r.L. Italy 100%
AVA Norway A/S Norway 100%
AVA S.A.R.L. France 100%
Baroid Corporation Delaware 100%
Baroid Drilling Fluids, Inc. Delaware 100%
American Thai Barite Limited Thailand 100%
Atlantic Minerals and Products Corporation Florida 100%
Sperry Sun International, Inc. Delaware 78.26% (2)
Grape Holding B.V. Netherlands 100%
NL do Brazil Ltda. Brazil 100%
Sperry Sun Drilling Services (Cyprus)
Ltd. Cyprus 100%
Sperry-Sun Saudia Company Limited Saudi Arabia 75% (1)
Baroid Industrial Minerals, Inc. Delaware 100%
Bentonite Corporation Delaware 100%
Petrotech Environmental Services, Inc. Delaware 100%
Baroid Drilling Chemical Products Limited Nigeria 60% (1)
Baroid International Inc. Delaware 100%
Baroid, S.A. de C.V. Mexico 51%
NL Baroid (Cameroon) S.A.R.L. Cameroun 100%
Baroid of Nigeria Limited Nigeria 60% (1)
Baroid Rus Energy Services Russia 100%
Baroid Sales Export Corporation Delaware 100%
Baroid Trading International, Inc. Nevada 100%
Baroid de Venezuela, S.A. Venezuela 97.4% (3)
Basin Surveys, Inc. West Virginia 100%
Compania Transandina de Exportacion, Inc. Delaware 100%
Industrial Reactor Laboratories, Inc. New York 100%
Baroid Equipment, Inc. California 100%
Baroid Equipment Canada, Inc. California 100%
SW Servicing, Inc. Delaware 100%
Baroid International Trading Corporation Delaware 100%
Baroid Australia Pty. Limited Australia 90%
Baroid Corporation A/S Norway 100%
Baroid Corporation of Canada, Ltd. Canada 100%
Baroid Group (Partnership) Canada 54% (4)
DB Stratabit (Canada) Ltd. Canada 100%
Baroid (Far East) Pte. Ltd. Singapore 100%
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 2
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
Baroid International, S.p.A. Italy 100%
DB Stratabit Italia S.r.l. Italy 100%
Baroid Pigmina Industrial e Comercial Ltda. Brazil 100%
Baroid S.A.R.L. Tunisia 100%
Pacific Petroleum Products, Inc. Delaware 92.6%
Minerales Andinos, S.A. Peru 100%
Petroleum Information & Equipment Services
Pte. Ltd. Singapore 100%
Societe de Developpement de Barytine Morocco 100%
Sperry-Sun de Ecuador S.A. Ecuador 100%
Baroid Management Company Delaware 100%
Baroid Technology, Inc. Delaware 100%
Canadian Baroid Sales Ltd. Canada 100%
DB Stratabit, Inc. Delaware 100%
DB Stratabit B.V. Netherlands 100%
DB Stratabit GmbH Germany 100%
DB Stratabit (M.E.) E.C. Bahrain 100%
DB Stratabit Pte. Ltd. Singapore 100%
DB Stratabit S.A. Belgium 100%
DB Stratabit S.A. France 100%
DBS-Tunisie Tunisia 100%
DB Stratabit S.A.R.L. Tunisia 100%
DB Stratabit (USA) Inc. Delaware 100%
Industrias DB Stratabit, C.A. Venezuela 100%
Xinjiang DB Stratabit Bit and Tool
Company Ltd. China 60%
Sperry-Sun Drilling Services, Inc. Delaware 100%
Cochran-Dean Company Texas 100%
Drilling Services International, Inc. Delaware 100%
NL Acme Tool, Inc. Delaware 100%
Baroid GmbH Germany 100%
Sperry-Sun de Venezuela, S.A. Venezuela 100%
Tre-Tech, Inc. Delaware 100%
Sub Sea International Inc. Delaware 100%
Sub Sea do Brasil-Servicos Submarinos Ltda. Brazil 90% (5)
Sub Sea International Australia, Inc. Delaware 100%
Sub Sea International New Zealand Inc. Delaware 100%
Sub Sea Offshore (B) Berhad Brunei 70%
Sub Sea Offshore Espana, S.A. Spain 100%
Sub Sea Offshore (Holdings) Limited United Kingdom 100%
Camera Alive United Kingdom 100%
Sub Sea Offshore Limited United Kingdom 100%
Sub Sea Norge A.S. Norway 100%
SubSea Offshore Pte. Ltd. Singapore 100%
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 3
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
Sub Sea Survey Limited Scotland 50% (6)
Sub Sea Offshore, Inc. Delaware 100%
Sub Sea Offshore (Nigeria) Limited Nigeria 75% (7)
Sub Sea Overseas, Inc. Panama 100%
Sub Sea Underwater Associates, Inc. Delaware 51%
Sub Sea Worldwide, Inc. Panama 100%
Bredero Price Holding B.V. Netherlands 100%
Bredero Price Coaters (Thailand) Limited Thailand 100%
Bredero Price Coatings Pty. Ltd. Australia 100%
Bredero Price Colombia B.V. Netherlands 100%
Bredero Price GmbH Germany 100%
Bredero Price International B.V. Netherlands 100%
Zhanjiang Zhonghai Bredero Price
Coasters Inc. China 60%
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 (West Africa) Limited Cyprus 60%
Bredero Norway B.V. Netherlands 100%
Bredero Price Norway A/S Norway 100%
Chalfont Limited Cyprus 100% (8)
Kapeq Trading Limited Cyprus 100% (9)
P.T. Bredero Price Indonesia Indonesia 75%
SIF-Isopipe S.A. France 100%
SIF Overseas Trading Limited Cyprus 100% (8)
Uniglobe Engineering Limited Cyprus 100%
Vosnoc Limited Cyprus 100% (8)
Dresser AG Liechtenstein 100%
Dresser Anstalt Liechtenstein 100%
Dresser Australia Pty. Ltd. Australia 100%
Dresser Singapore Pte. Ltd. Singapore 100%
Magcobar Manufacturing Nigeria Limited Nigeria 60%
P.T. Dresser Magcobar Indonesia Indonesia 60%
Dresser Argentina S.A. Argentina 100%
Dresser Canada, Inc. Canada 100%
Dresser Congo S.A.R.L. Congo 100%
Dresser Corporation Nevada 100%
Dresser Far East, Inc. Delaware 100%
Dresser Foreign Sales Corporation Limited Guam 100%
Dresser Holding, Inc. Delaware 100%
Dresser (Holdings) Limited England 100% (10)
AVA (U.K.) Limited England 100%
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 4
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
Baroid Corporation Limited United Kingdom 100%
Baroid Limited United Kingdom 100%
DB Stratabit Limited United Kingdom 100%
Strata Bit Limited Scotland 100%
Dresser Drilling and Production
Services Limited United Kingdom 100%
Sperry-Sun (U.K.) Limited United Kingdom 100%
Dresser Holmes Limited England 100%
George Street Parade 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%
MWKL Middle East Limited England 100%
T K Valve Holdings 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%
T K Valve (Singapore) Pte. Ltd. Singapore 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% (11)
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 5
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
Dresser-Rand Company (Partnership) New York 51%
Dresser-Rand Argentina S.A. Argentina 100%
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%
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%
Dresser Venn Co., Ltd. Japan 65%
Fann Instrument Company Delaware 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 Cardon, C.A. Venezuela 100%
Kellogg China Consultants Inc. Delaware 100%
Kellogg China Inc. Delaware 100%
Kellogg Development Corporation Delaware 100%
Kellogg Far East, Inc. Delaware 100%
Kellogg ISL Limited Cayman Islands 100%
Kellogg India Limited Delaware 100%
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 6
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
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%
Subtec Middle East Limited Delaware 100%
Societe Kellogg Delaware 100%
Masoneilan International, Inc. Delaware 100%
Colville Trading Pte. Ltd. Singapore 100% (12)
Dresser B.V. Netherlands 100% (13)
Dresser Europe S.A. Belgium 100%
Ebro-Electronic GmbH Germany 100% (14)
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%
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 7
% of Voting
State or Other Securities
Sovereign Power owned by
Under the Laws of Immediate
Name Which Organized Parent
- ---------------------------------------------- ------------------- -----------
Masoneilan HP + HP GmbH Germany 100%
Masoneilan Internacional, S.A. de C.V. Mexico 100%
Masoneilan S.A. Spain 75% (15)
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 (Canada) Ltd. Canada 100%
T K Valve, Inc. Texas 100%
Triconos Mineros S.A. Chile 100%
Wheatley TXT Corp. Delaware 100%
Axelson Canada, Inc. Delaware 100%
Axelson, Inc. Delaware 100%
Axelson Pump Company Delaware 100%
Clif Mock Company Delaware 100%
Mock Limited United Kingdom 100%
Texsteam Inc. Delaware 100%
Tom Wheatley Valve Company Delaware 100%
Wheatley Corporation Delaware 100%
Wheatley Gaso Inc. Delaware 100%
Wheatley Canada Ltd. Canada 100%
Wheatley Pump Incorporated Delaware 100%
Worthington Corporation Delaware 100%
Worthington do Brasil, Inc. Delaware 100%
Worthington Pump Inc. Delaware 100%
Ingersoll-Dresser Pumps de Colombia, S.A. Colombia 93% (16)
<FN>
( 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 NL Industries, Inc.
( 2) Remaining 21.74% owned by Sperry-Sun Drilling Services Inc.
( 3) Remaining 2.7% held by various individuals.
( 4) Remaining owned by Canadian Branch of Baroid Equipment Canada, Inc. (30.7%)
and by DB Stratabit (Canada) Ltd. (15.3%).
<PAGE>
EXHIBIT 21 - OCTOBER 31, 1994
Page 8
( 5) Remaining 10% owned by Sub Sea International Australia Inc.
( 6) Remaining 50% owned by Sub Sea Offshore (Holdings) Limited.
( 7) Shares held in trust by Seun Oyefess (99%) and Mrs. Olympia Abeka Oyefess
(1%).
( 8) Shares held in trust by Abacus (Nominees) Limited (99.9%) and Abacus
(Cyprus) Limited (.1%).
( 9) Shares held in trust by Abacus (Cyprus) Limited (50%) and Abacus (Nominees)
Limited (50%).
(10) Represented by common voting shares. 100% of issued preferred voting
shares are owned by Dresser Canada, Inc.
(11) Remaining 5% owned by Dresser Minerals International, Inc.
(12) Remaining 50% held by Worthington Corporation.
(13) 100% of issued voting preference shares held by Dresser Anstalt.
(14) Shareholding interest actually held by German Branch of Dresser Europe S.A.
(15) Remaining 25% owned by Dresser Produits Industriels.
(16) 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%).
</TABLE>
<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-3 (Nos. 2-91309, 33-
47832, 33-59562 and 33-50563) and the Registration Statements on Form S-8 (Nos.
2-76847, 2-81536, 33-26099, 33-30821, 33-48165, 33-52067, 33-52989, 33-50563,
and 33-54099) of Dresser Industries, Inc. of our report dated December 2, 1994
appearing on page 34 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
January 25, 1995
<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, 1994, 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 19th day of January, 1995.
/s/ W. 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, 1994, 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 19th day of January, 1995.
/s/ Samuel B. Casey
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, 1994, 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 19th day of January, 1995.
/s/ Lawrence S. Eagleburger
Lawrence S. Eagleburger
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, 1994, 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 19th day of January, 1995.
/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, 1994, 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 19th day of January, 1995.
/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, 1994, 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 19th day of January, 1995.
/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, 1994, 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 19th day of January, 1995.
/s/ J. Landis Martin
J. Landis Martin
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, 1994, 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 19th day of January, 1995.
/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, 1994, 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 19th day of January, 1995.
/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, 1994, 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 19th day of January, 1995.
/s/ Jay A. Precourt
Jay A. Precourt
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, 1994, 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 19th day of January, 1995.
/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, 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, 1994, 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 19th day of January, 1995.
/s/ Richard W. Vieser
Richard W. Vieser
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Dresser Industries, Inc. and Subsidiaries Consolidated Statements of Earnings
(Loss) and Consolidated Balance Sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 515,000
<SECURITIES> 0
<RECEIVABLES> 896,200
<ALLOWANCES> 30,400
<INVENTORY> 673,100
<CURRENT-ASSETS> 2,197,000
<PP&E> 2,245,000
<DEPRECIATION> 1,315,400
<TOTAL-ASSETS> 4,323,600
<CURRENT-LIABILITIES> 1,366,800
<BONDS> 460,600
<COMMON> 46,000
0
0
<OTHER-SE> 1,586,300
<TOTAL-LIABILITY-AND-EQUITY> 4,323,600
<SALES> 5,307,300
<TOTAL-REVENUES> 5,330,700
<CGS> 4,071,700
<TOTAL-COSTS> 4,968,400
<OTHER-EXPENSES> 8,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,300
<INCOME-PRETAX> 619,400
<INCOME-TAX> 224,700
<INCOME-CONTINUING> 361,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 361,800
<EPS-PRIMARY> 1.98
<EPS-DILUTED> 1.98
</TABLE>
