<PAGE>
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
[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).
2
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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.
3
<PAGE>
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.
5
<PAGE>
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
<PAGE>
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
7
<PAGE>
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
<PAGE>
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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<PAGE>
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 February 3, 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 February 3, 1995.
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. (Incorporated
by reference to Exhibit 10.4 to Registrant's Form 10-K for the
year ended October 31, 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 Long Term Performance Plan for Selected Employees of The M.W.
Kellogg Company. (Incorporated by reference to Exhibit 10(s) to
Registrant's Form 10-K for the year ended October 31, 1991).
10.19 Annual Incentive Plan for Selected Employees of the M.W. Kellogg
Company. (Incorporated by reference to Exhibit 10(t) to
Registrant's Form 10-K for the year ended October 31, 1991).
10.20 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.
(Incorporated by reference to Exhibit 10.26 to Registrant's
Form 10-K for the year ended October 31, 1994).
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. (Incorporated
by reference to Exhibit 21 to Registrant's Form 10-K for the year
ended October 31, 1994).
*23 Consent of Price Waterhouse LLP.
24 Powers of Attorney. (Incorporated by reference to Exhibit 24
to Registrant's Form 10-K for the year ended October 31, 1994).
27 Financial Data Schedule. (Incorporated by reference to
Exhibit 27 to Registrant's Form 10-K for the year ended
October 31, 1994).
* Filed Herewith
<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 Form 10-K/A, Amendment No. 1 to Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
February 3, 1995
