UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the quarterly period ended July 31, 1997.
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-4003
DRESSER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware C 75-0813641
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P. O. Box 718
2001 Ross 75221 (P. O. Box)
Dallas, Texas 75201
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code - 214/740-6000.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the
past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at August 31, 1997
Common Stock, par value $.25 175,396,208
INDEX
Page
Number
Part I. Financial Information
Management's Representation 3
Condensed Consolidated Statements of Earnings
for the three months and nine months ended
July 31, 1997 and 1996 4
Condensed Consolidated Balance Sheets
as of July 31, 1997 and October 31, 1996 5
Condensed Consolidated Statements of Cash Flows
for the nine months ended July 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7-11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-15
Part II. Other Information 16
Signature 17
Exhibit Index
Exhibit 10.1 Dresser Industries, Inc. Restricted Stock
Grant Plan for 1997
Exhibit 10.2 Dresser Industries, Inc. Long-Term
Incentive and Retention Plan
Exhibit 27 Financial Data Schedule
MANAGEMENT'S REPRESENTATION
The condensed consolidated financial statements included herein
have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes
that the disclosures are adequate to make the information
presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements, the notes to consolidated
financial statements, and management's discussion and analysis
included in the Company's 1996 Annual Report on Form 10-K.
In the opinion of the Company, all adjustments have been
included that were necessary to present fairly the financial
position of Dresser Industries, Inc. and subsidiaries as of
July 31, 1997 and October 31, 1996, the results of operations
for the three months and the nine months ended July 31, 1997
and 1996, and cash flows for the nine months ended July 31,
1997 and 1996. These adjustments consisted of normal recurring
adjustments. The results of operations for such interim
periods do not necessarily indicate the results for the full
year.
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Millions Except Per Share Data)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 1,872.3 $ 1,638.0 $ 5,348.1 $ 4,730.5
Cost of revenues (1,435.1) (1,268.4) (4,142.4) (3,690.7)
Gross earnings 437.2 369.6 1,205.7 1,039.8
Selling, engineering, admini-
strative and general
expenses (272.3) (244.7) (797.4) (724.8)
Other income (deductions)
Interest expense, net (14.5) (12.7) (44.5) (33.6)
Non-recurring items (9.7) - (9.7) -
Other, net (1.4) 0.5 (4.1) (3.9)
Earnings before items
below 139.3 112.7 350.0 277.5
Income taxes (48.7) (38.4) (122.5) (94.4)
Minority interest (9.1) (6.0) (19.1) (11.0)
Net earnings $ 81.5 $ 68.3 $ 208.4 $ 172.1
Earnings per common
share $ .47 $ .38 $ 1.19 $ .95
Cash dividends per
common share $ .17 $ .17 $ .51 $ .51
Average common shares
outstanding 175.2 178.4 175.8 180.5
See accompanying Notes to Condensed Consolidated Financial
Statements.
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions)
<CAPTION>
July 31, October 31,
ASSETS 1997 1996
(Unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 131.1 $ 232.4
Notes and accounts receivable, net 1,151.3 1,152.1
Inventories, net 968.8 913.6
Deferred income taxes 82.7 83.8
Other current assets 80.3 87.6
Total Current Assets 2,414.2 2,469.5
Investments in and receivables from
unconsolidated affiliates 183.2 182.5
Goodwill, net 835.3 870.6
Deferred income taxes 206.3 184.0
Other assets 186.6 181.2
Property, plant and equipment - at cost 2,797.2 2,836.7
Accumulated depreciation and amortization 1,638.5 1,574.3
Total properties, net 1,158.7 1,262.4
Total Assets $4,984.3 $5,150.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 59.1 $ 86.0
Accounts payable 519.2 570.6
Contract advances 382.1 459.8
Accrued compensation and benefits 262.4 250.4
Income taxes 119.8 111.3
Other current liabilities 327.1 383.7
Total Current Liabilities 1,669.7 1,861.8
Employee retirement and postemployment
benefit obligations 648.2 676.3
Long-term debt 754.3 756.3
Deferred compensation, insurance
reserves and other liabilities 131.1 118.0
Minority interest 165.5 155.6
Shareholders' Equity
Common shares 46.2 46.2
Capital in excess of par value 451.8 454.8
Retained earnings 1,506.4 1,420.8
Cumulative translation adjustments (110.6) (81.5)
Pension liability adjustment (6.9) (6.9)
1,886.9 1,833.4
Less treasury shares, at cost 271.4 251.2
Total Shareholders' Equity 1,615.5 1,582.2
Total Liabilities and
Shareholders' Equity $4,984.3 $5,150.2
Actual common shares outstanding 175.3 175.6
See accompanying Notes to Condensed Consolidated Financial
Statements.
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<CAPTION>
Nine Months Ended
July 31,
1997 1996
(Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 208.4 $ 172.1
Adjustments to reconcile net earnings
to cash flow:
Depreciation and amortization 191.9 167.0
Equity earnings from
unconsolidated affiliates (29.2) (20.2)
Minority interest 19.1 11.0
Contract advances (77.7) 128.0
Changes in working capital (206.8) (251.5)
Other - net (6.9) (.9)
Net cash provided by operating
activities 98.8 205.5
Cash flows from investing activities:
Capital expenditures (186.6) (223.7)
Business acquisitions (3.6) (26.2)
Proceeds from sales of assets 127.9 12.4
Net cash used by investing
activities (62.3) (237.5)
Cash flows from financing activities:
Dividends paid (89.6) (92.3)
Purchases of common shares for
Treasury (41.9) (191.4)
Issuance of common shares 17.3 18.0
Increase (decrease) in short-term debt (26.9) 213.4
Decrease in long-term debt (2.1) (1.8)
Net cash used by financing
activities (143.2) (54.1)
Effect of translation adjustments on
cash 5.4 (3.7)
Net decrease in cash and cash
equivalents (101.3) (89.8)
Cash and cash equivalents,
beginning of period 232.4 248.7
Cash and cash equivalents,
end of period $ 131.1 $ 158.9
See accompanying Notes to Condensed Consolidated Financial
Statements. Certain reclassifications of prior years' data
have been made to conform to 1997 presentation.
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
(Unaudited)
Note A - Information by Industry Segment (In Millions)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
Revenues
Petroleum Products and
<S> <C> <C> <C> <C>
Services $ 700.0 $ 554.1 $1,947.3 $1,542.2
Engineering Services
M. W. Kellogg Operations 465.7 391.0 1,367.4 1,249.4
Energy Equipment
Compression and Pumping 314.4 315.8 902.2 856.2
Measurement 167.3 154.3 482.5 456.1
Flow Control 154.8 157.8 443.1 453.7
Power Systems 80.7 70.4 225.9 213.9
717.2 698.3 2,053.7 1,979.9
Eliminations (10.6) (5.4) (20.3) (41.0)
Total revenues $1,872.3 $1,638.0 $5,348.1 $4,730.5
Operating profit
Petroleum Products and
Services $ 87.2 $ 61.4 $ 234.6 $ 171.4
Engineering Services 26.9 24.7 77.7 65.6
Energy Equipment
Compression and Pumping 27.4 26.7 59.0 56.0
Measurement 18.6 12.8 45.5 34.0
Flow Control 19.8 17.8 45.8 46.6
Power Systems 8.4 9.8 21.9 22.2
74.2 67.1 172.2 158.8
Total segment
operating profit 188.3 153.2 484.5 395.8
Amortization of acquisition
intangibles (7.6) (7.3) (23.0) (23.5)
General corporate expenses (17.2) (20.5) (57.3) (61.2)
Interest expense, net (14.5) (12.7) (44.5) (33.6)
Nonrecurring items (9.7) - (9.7) -
Earnings before taxes and
minority interest $ 139.3 $ 112.7 $ 350.0 $ 277.5
</TABLE>
Note B - Unconsolidated Affiliated Companies
The Company has several investments in less than majority owned
affiliates. A summary of the impact of these investments on
the condensed consolidated financial statements follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 30,
1997 1996 1997 1996
Share of earnings of uncon-
solidated affiliates
Ingersoll-Dresser Pump
<S> <C> <C> <C> <C>
(49% owned) $ 7.0 $ 4.7 $ 22.1 $ 16.4
Other affiliates 3.1 1.7 7.1 3.8
$ 10.1 $ 6.4 $ 29.2 $ 20.2
</TABLE>
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
Investments in and receivables
from unconsolidated affiliates
Ingersoll-Dresser Pump
<S> <C> <C>
(49% owned) $ 130.8 $ 132.5
Other affiliates 52.4 50.0
$ 183.2 $ 182.5
</TABLE>
Note C - Inventories
The determination of inventory values and cost of sales under
the LIFO method for interim financial results is based on
management's estimates of expected year-end inventories.
Inventories include the following (in millions):
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
Finished products and work in
<S> <C> <C>
process $ 748.2 $ 699.4
Raw materials and supplies 220.6 214.2
$ 968.8 $ 913.6
</TABLE>
Note D - Dividends
On July 17, 1997, the Company announced a 12% increase in the
quarterly dividend to $.19. At the same time, the Company
declared a quarterly dividend at the new amount per share of
common stock payable on September 22, 1997, to shareholders of
record on September 2, 1997.
Note E - Litigation and Contingencies
The Company is involved in certain legal actions and claims
arising in the ordinary course of business. See Note J -
Commitments and Contingencies - in the Company's 1996 Annual
Report on Form 10-K for a complete discussion of these matters.
A discussion of significant changes subsequent to October 31,
1996 follows.
General Litigation
On August 28, 1997, the Eleventh Circuit Federal Court of
Appeals issued its decision in favor of the Company by
reversing the trial court's decision in a lawsuit brought by
parties who purchased a construction equipment dealership from
a third party in 1988. The Court held that the trial court
judge should have granted the Company's motion for summary
judgment and reversed the plaintiff's awarded judgment of $6.5
million for compensatory damages and $4.0 million for punitive
damages.
Asbestosis Litigation
The Company has approximately 80,200 pending claims at July 31,
1997, with approximately 7,500 new claims filed and
approximately 2,400 claims resolved during the third quarter of
the fiscal year. Approximately 37,000 claims are currently
being carried as pending until the settlements or dismissals
are final. Resolution of these claims will reduce the number
of pending claims at July 31, 1997, by approximately 44% for
refractory product claims and 47% for non-refractory product
claims.
Management recognizes the uncertainties of litigation and the
possibility that one or more adverse rulings could materially
impact operating results. However, based upon the nature of
and management's understanding of the facts and circumstances
which gave rise to such actions and claims, management believes
that such litigation and claims will be resolved without
material effect on the Company's financial position or results
of operations.
Note F - Baroid Financial Information
Dresser Industries, Inc. (Dresser) merged with Baroid
Corporation (Baroid) on January 21, 1994. Baroid has ceased
filing periodic reports with the Securities and Exchange
Commission. Baroid's 8% Senior Notes (the Notes)remain
outstanding and are fully guaranteed by the Company. As long
as the Notes remain outstanding, summarized financial
information of Baroid is required to be presented as follows
(in millions):
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
Baroid Corporation
<S> <C> <C>
Current assets $ 914.0 $ 796.2
Noncurrent assets 482.2 578.9
Total $1,396.2 $1,375.1
Current liabilities $ 372.3 $ 377.7
Noncurrent liabilities 359.2 429.2
Shareholders' equity 664.7 568.2
Total $1,396.2 $1,375.1
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $ 531.4 $ 424.6 $1,435.7 $1,157.4
Gross earnings $ 148.8 $ 117.3 $ 403.1 $ 327.3
Earnings from operations $ 71.3 $ 50.5 $ 183.9 $ 141.7
Other income (deductions) (7.9) (2.3) (15.6) (13.9)
Earnings before taxes
and minority interests 63.4 48.2 168.3 127.8
Income taxes (22.2) (16.3) (58.9) (43.4)
Minority interest .7 (.3) .4 (.5)
Net earnings $ 41.9 $ 31.6 $ 109.8 $ 83.9
</TABLE>
Note G - Other Developments
During the third quarter of 1997, the Company completed the
sale of certain assets of its Sub Sea International Unit to
Global Industries, Ltd. for $102 million in cash, which
resulted in a pretax loss of $9.7 million, or $.03 per share on
an after-tax basis.
Subsequent to July 31, 1997, the Company and Shaw Industries
Ltd. of Toronto, Ontario, agreed to a long-term extension of
their strategic pipecoating alliance, Bredero-Shaw, initially
formed in 1996. In connection with the new agreement, Shaw
agreed to pay the Company $50 million over a four year period.
This transaction will result in a one-time, pretax gain of
$41.7 million in the fourth quarter of 1997, or $0.15 per
share.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 1997 COMPARED TO 1996
CONSOLIDATED OPERATIONS
Earnings per share for the third quarter, including a non-recurring
loss of $.03 per share from the recent sale of certain assets of the
Company's Sub Sea operations, increased 24% to $.47 per share.
Excluding the nonrecurring items, earnings improved 32% to $.50
per share. Revenues for the quarter increased 14% to $1.9 billion and
operating profit increased 23% to $188.3 million.
Earnings per share for the first nine months of 1997 totaled
$1.19, including the non-recurring loss of $.03 per share.
Excluding the non-recurring items, year-to-date earnings were
$1.22 per share, an increase of 28% above the prior year.
Revenues of $5.3 billion increased 13% and operating profit of
$484.5 million was 22% higher than the prior year.
Drilling and production operations continue to operate in
strong market conditions where rig count is up 16% worldwide.
In addition, global project activity is high for production and
processing facilities, particularly related to natural gas.
Strong demand for LNG, pipeline, petrochemical and fertilizer
infrastructure is reflected in the Company's growing backlog
for equipment, process technology and project management. A
record backlog of $5.4 billion was 15% higher than the level a
year ago.
Selling, engineering, administrative and general expenses of
$272.3 million for the quarter and $797.4 million for the nine
months were 11% and 10% higher than the prior year periods,
respectively. The increase was primarily due to higher levels
of business activity.
Net interest expense of $14.5 million in the quarter and $44.5
million for the nine months was up 14% and 32%, respectively,
from the 1996 periods, due primarily to an increase in average
borrowing levels and a higher interest rate on new long-term
debt versus the previously issued commercial paper.
During the quarter, the Company completed the sale of certain
assets of the Sub Sea operations, as noted above, and
recognized a non-recurring pretax loss of $9.7.
The estimated income tax rate for the nine months ended July
31, 1997, is 35%, compared to 34% for last year.
On August 7, 1997, the Company extended the strategic alliance
with Shaw Industries, Ltd. This transaction will result in a
one-time pretax gain of $41.7 million in the fourth quarter of
1997, or $0.15 per share.
INDUSTRY SEGMENT ANALYSIS
See Note A to Condensed Consolidated Financial Statements for
details of financial information by Industry Segment.
PETROLEUM PRODUCTS AND SERVICES SEGMENT
Revenues of $700.0 million for the quarter and $1,947.3 million
for the nine months were both 26% higher than those of the 1996
periods. Operating profit increased 42% to $87.2 million for
the quarter and 37% to $234.6 million for the nine months.
The revenue and operating profit gains for the quarter outpaced
gains in rig activity. Worldwide rig count increased 16% led
by a 28% increase in North America. In addition, offshore rig
count was up 4%. Baroid Drilling Fluids, Sperry-Sun and
Security DBS saw substantial volume increases in both the
quarter and the nine month periods. Improved pricing and
product mix also contributed to higher earnings.
Bredero-Shaw, Sub Sea and Wellstream had significantly higher
revenues in both the quarter and the nine months. Bredero-Shaw
and Wellstream had improved profits in both periods. Pipeline
activity in the North Sea, Far East and the U.S. contributed to
the improved performance of the Bredero-Shaw pipecoating
business. Wellstream benefitted from subsea completion
activity in the North Sea and offshore Brazil. Sub Sea
continues to have good results in the North Sea, but has been
negatively impacted by market conditions in the Gulf of Mexico.
ENGINEERING SERVICES SEGMENT
For the quarter, M. W. Kellogg's operating profit increased 9%
to $26.9 million and revenues increased 19% to $465.7 million.
For the nine months, operating profit was up 18% to $77.7
million and revenues were up 9% to $1.4 billion. The profit
improvement for the quarter and the nine months reflected
higher activity on LNG and ammonia projects in Africa, the Mid
East and Latin America, with earnings also benefitting from
successful milestones being reached on several projects
completed or nearing completion in the U.S., the Far East and
South America. Bid and proposal costs continue to run at high
levels, reflecting the continuing strength of demand for
hydrocarbon processing infrastructure. Backlog at July 31,
1997 was $3.2 billion, 29% higher than a year ago.
ENERGY EQUIPMENT SEGMENT
Segment operating profit for the quarter of $74.2 million was
up 11% and revenues of $717.2 million were up 3%. For the nine
months, segment operating profit of $172.2 million and revenues
of $2.1 billion were up 8% and 4%, respectively. Segment
backlog was $1.8 billion, up 5% from a year ago.
Compression and Pumping
Revenues and operating profits for the quarter were essentially
the same as last year with an increase in earnings from
Ingersoll-Dresser Pump more than offsetting lower revenues and
earnings by Dresser-Rand. For the nine months, both revenues
and operating profits were up 5%. The revenue gain was
attributable to Dresser-Rand, while the earnings increase was
primarily from Ingersoll-Dresser Pump. Dresser-Rand's earnings
continue to be affected by lower margin complete machine sales
that were partially offset by higher contract compression
activity in South America. The Ingersoll-Dresser Pump earnings
improvement is attributable to the U.S. operations of the
Engineered Products Group.
Measurement
Operating profits were up 45% while revenues rose 8% in the
quarter. In the nine months, operating profits were up 34%
while revenues rose 6%. Successful product introductions and
lower U.S. cost structure in the Wayne fuel dispenser business
and higher volume in the DMD gas meter business accounted for
the majority of the increases.
Flow Control
Operating profits for the quarter were up 11% while revenues
were essentially flat versus 1996. The earnings improvement
resulted from higher volume, better product mix and improved
margins by the Energy Valve Division. For the nine months,
earnings were essentially the same as 1996 while revenues were
down slightly.
Power Systems
Quarterly revenues increased 15%, but operating profits were
down 14% from last year. Nine-month revenues were up 6% while
operating profits were essentially the same as last year.
Waukesha Engine operations experienced lower original equipment
volumes offset by higher service parts activity. The Roots
Blower operations benefitted from higher volume and improved
product mix.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's overall financial condition remained strong at
July 31, 1997. Since the beginning of the year, the Company
used $101.3 million more cash than was generated by operations.
Major expenditures included $186.6 million for capital
expenditures, $89.6 million for dividends, and $41.9 million
for purchases of the Company's common shares. In addition,
$206.8 million of cash was used to finance working capital,
primarily for increases in inventories and decreases in
payables and accrued expenses. Cash flow from operating
activities for the nine months was $98.8 million compared to
$205.5 million last year. The change between years was
primarily due to planned decreases in contract advances at M.
W. Kellogg this year versus significant increases last year.
During the third quarter of 1997, the Company completed the
sale of certain assets of its Sub Sea International Unit to
Global Industries, Ltd. for $102 million in cash. The proceeds
received were used to pay down commercial paper.
Total debt was $813.4 million as of July 31, 1997, compared to
$842.3 million at October 31, 1996. Total debt was 34% of
total book capitalization as of July 31, 1997 versus 35% at
October 31, 1996. Net debt was 9% of market capitalization at
July 31, 1997 and October 31, 1996.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is currently involved in a number of lawsuits and
has also been identified as a potentially responsible party in
a number of Superfund sites. Note E to Condensed Consolidated
Financial Statements includes significant changes subsequent to
October 31, 1996.
In accordance with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company notes
that the statements in this Form 10-Q and elsewhere, which are
forward-looking and which provide other than historical
information, involve risks and uncertainties that may impact
the Company's results of operations. These forward-looking
statements include, among others, statements concerning the
Company's general business strategies, financing decisions,
corporate structure, backlog, operating trends, industry
trends, cost reduction strategies and their results,
expectations for funding capital expenditures and operations in
future periods. The Company also continues to face many risks
and uncertainties including: litigation, environmental laws,
operations in high risk countries, technological and structural
changes in the industries served by the Company, changes in the
price of oil and natural gas, changes in capital spending by
customers in the hydrocarbon industry for exploration,
development, production, processing and refining and pipeline
delivery networks. The risks and uncertainties inherent in
these forward-looking statements could cause actual results to
differ materially from those expressed in or implied by these
statements.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) On July 17, 1997, certain executive officers
were awarded a total of 20,000 restricted shares
of the Company's $.25 par value Common Stock
pursuant to the Dresser Industries, Inc.
Restricted Stock Grant Plan For 1997. Shares
issued pursuant to the Plan are not registered.
Upon termination of employment, participants
will forfeit all unvested restricted stock.
Participants will vest in their entire award
upon approved retirement, disability or change
in control of the Company. Assuming continued
employment, participants will vest in one-fourth
of the shares on each of the second and fourth
anniversary and vest in the remaining one-half
on the sixth anniversary of the award.
Consideration received by the Registrant will
consist of continued employment through the
vesting dates previously stated.
In issuing the above securities, the Company
relied on the exemption from the registration
and prospectus delivery requirements provided by
Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.1 Dresser Industries, Inc.
Restricted Stock Grant Plan For 1997
Exhibit 10.2 Dresser Industries, Inc. Long-Term
Incentive and Retention Plan
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the three months
ended July 31, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
DRESSER INDUSTRIES, INC.
By: /s/ Kenneth J. Kotara
Kenneth J. Kotara
Controller
Dated: September 12, 1997
EXHIBIT INDEX
Exhibit Description
10.1 Dresser Industries, Inc. Restricted Stock Grant Plan
For 1997
10.2 Dresser Industries, Inc. Long-Term Incentive and
Retention Plan
27 Financial Data Schedule. (Pursuant to Item
601(c)(iv) of Regulation S-K, the Financial Data
Schedule is not deemed to be "filed" for purposes of
Section 11 of the Securities Act of 1933, as amended,
or Section 18 of the Securities Exchange Act of 1934,
as amended.)
DRESSER INDUSTRIES, INC.
RESTRICTED STOCK GRANT PLAN FOR 1997
EFFECTIVE JULY 17, 1997
DRESSER INDUSTRIES, INC.
RESTRICTED STOCK GRANT PLAN FOR 1997
ARTICLE 1: PREAMBLE
Effective as of July 17, 1997, Dresser Industries, Inc.
establishes the Dresser Industries, Inc. Restricted Stock Grant Plan.
This Plan is intended to be a bonus program, as described in 29 CFR
Section 2510.3-2(c), and, accordingly, is not a plan described in the
Employee Retirement Income Security Act of 1974.
ARTICLE 2: DEFINITIONS
Words and phrases appearing in this Plan shall have the
respective meanings set forth in this Article, unless the context
clearly indicates to the contrary.
(a) CHANGE IN CONTROL.
(1) The sale of all or a majority of Dresser's assets;
(2) Dresser's liquidation or dissolution;
(3) The purchase by any persons or entities of beneficial
ownership of at least 30 percent of Dresser's common stock (or 30
percent of the combined voting power of Dresser's then outstanding
voting securities entitled to vote generally in the election of
directors); or
(4) The approval by Dresser's stockholders of a
reorganization, merger, or consolidation, the result of which is that
the persons or entities which were stockholders immediately before the
transaction do not own more than 50 percent of the combined voting
power of the surviving entity's then outstanding voting securities
entitled to vote generally in the election of directors.
(b) DISABILITY. Any physical or mental condition which renders a
Participant incapable of performing the work for which the Participant
was employed by Dresser or similar work for Dresser, as certified in
writing by a doctor of medicine and as approved by Dresser.
(c) DRESSER. Dresser Industries, Inc., a Delaware corporation.
(d) PARTICIPANT. An individual to whom Restricted Stock is
awarded under this Plan. A management employee who terminates
employment shall cease to be a Participant, notwithstanding the
designation in Article 3.
(e) PLAN. Dresser Industries, Inc. Restricted Stock Grant Plan.
(f) RESTRICTED STOCK. Dresser common stock, restricted in the
manner described in Article 4.
ARTICLE 3: ELIGIBILITY
Individuals designated by the Board of Directors of Dresser
Industries, Inc. as Participants shall participate in the Plan.
ARTICLE 4: RESTRICTED STOCK
As soon as practicable after July 17, 1997, each Participant
shall receive an award of 10,000 shares of Restricted Stock. Stock
certificates evidencing this award shall be registered on Dresser's
books in the name of the Participant. Each certificate evidencing
Restricted Stock shall bear an appropriate legend referring to the
terms, conditions and restrictions described in the Plan. Any attempt
to dispose of such shares of Restricted Stock in contravention of such
terms, conditions and restrictions shall be invalid. If a
Participant's employment terminates, the Participant shall forfeit all
non-vested Restricted Stock.
A Participant will vest in all 10,000 shares of Restricted Stock
upon:
(a) The Participant's termination of employment after attainment
of age 65, or such earlier time as the Executive Compensation
Committee of Dresser's Board of Directors may determine;
(b) The Participant's Disability; or
(c) A Change in Control.
If the Participant remains in Dresser's employ on the date
indicated in the schedule below, that Participant will vest in shares
of Restricted Stock as follows:
IF THE PARTICIPANT THE PARTICIPANT WILL VEST IN
IS EMPLOYED ON: THIS NUMBER OF SHARES OF
RESTRICTED STOCK
July 17, 1999 2,500
July 17, 2001 2,500
July 17, 2003 5,000
A Participant holding non-vested Restricted Stock shall be
entitled to all rights (except transferability) of a shareholder of
Dresser common stock, including the right to vote the shares of
Restricted Stock and the right to receive dividends on those shares.
Subject to Article 7, once a Participant vests in Restricted
Stock, all restrictions shall lapse.
ARTICLE 5: ADMINISTRATION
The Executive Compensation Committee of the Board of Directors of
Dresser Industries, Inc. shall have full discretionary authority to
interpret and apply the terms of this Plan document, including the
authority to determine whether Restricted Stock is forfeitable under
the provisions of this Plan. This grant of authority shall be broadly
construed and shall include the authority to find facts, to reach
conclusions of law, to interpret and apply ambiguous terms, and to
supply missing terms reasonably necessary to interpret the Plan.
ARTICLE 6: AMENDMENT OR TERMINATION
The Plan may be amended or terminated in whole or in part by
Dresser's Board of Directors in its sole discretion, provided that
such amendment or termination shall not cause the forfeiture of
Restricted Stock vested in a Participant prior to the date of
amendment or termination.
ARTICLE 7: RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall confer on a Participant any right to
continue in Dresser's employment or in any way affect Dresser's right
to terminate the Participant's employment without prior notice at any
time for any or no reason.
ARTICLE 8: WITHHOLDING
Dresser shall meet the tax withholding obligations imposed by any
government with respect to grants of Restricted Stock, or the lapse of
restrictions on such stock. To meet this obligation, Dresser may
withhold from other cash payments due the Participant. If the amount
so withheld is not sufficient, Dresser will withhold from any
distribution of stock released to the Participant in accordance with
Article 4 a number of shares with a market value not less than the
withholding obligation and cancel (in whole or in part) the shares so
withheld in order to reimburse Dresser for the payment of withholding
taxes.
ARTICLE 9: FORCE AND EFFECT
The various provisions of this Plan are severable in their
entirety. Any determination of invalidity or unenforceability of any
one provision shall have no effect on the continuing force and effect
of the remaining provisions.
ARTICLE 10: PREVAILING LAWS
This Plan shall be construed and enforced in accordance with and
governed by the laws of the State of Texas, to the extent not governed
by the laws of the State of Delaware applicable to corporations and
the issuance of stock by Delaware corporations.
IN WITNESS WHEREOF, this Plan is executed as of the day and year
written below by Dresser's duly authorized officer, effective as of
July 17, 1997.
Dated:
DRESSER INDUSTRIES, INC.
By:
Title:
DRESSER INDUSTRIES, INC.
LONG-TERM INCENTIVE AND RETENTION PLAN
Effective July 17, 1997
<PAGE>
DRESSER INDUSTRIES, INC.
LONG-TERM INCENTIVE AND RETENTION PLAN
ARTICLE 1: PREAMBLE
Effective as of July 17, 1997, Dresser Industries, Inc.
establishes the Dresser Industries, Inc. Long-Term Incentive and
Retention Plan. This Plan is intended to be a bonus program, as
described in 29 CFR Section 2510.3-2(c), and, accordingly, is not a
plan described in the Employee Retirement Income Security Act of 1974.
This plan is also intended to qualify as a "performance-based" program
under Section 162(m) of the Internal Revenue Code. As such, the Plan
will be submitted for shareholder approval.
ARTICLE 2: DEFINITIONS
Words and phrases appearing in this Plan shall have the
respective meanings set forth in this Article, unless the context
clearly indicates to the contrary.
(a) AVERAGE PRICE. The price per share on a Trading Day
determined by adding the high and low prices for the Trading Day and
dividing their sum by two.
(b) CHANGE IN CONTROL.
(1) The sale of all or a majority of Dresser's assets;
(2) Dresser's liquidation or dissolution;
(3) The purchase by any persons or entities of beneficial
ownership of at least 30 percent of Dresser's common stock (or 30
percent of the combined voting power of Dresser's then outstanding
voting securities entitled to vote generally in the election of
directors); or
(4) The approval by Dresser's stockholders of a
reorganization, merger, or consolidation, the result of which is that
the persons or entities which were stockholders immediately before the
transaction do not own more than 50 percent of the combined voting
power of the surviving entity's then outstanding voting securities
entitled to vote generally in the election of directors.
(c) DISABILITY. Any physical or mental condition which renders
a Participant incapable of performing the work for which the
Participant was employed by Dresser or similar work for Dresser, as
certified in writing by a doctor of medicine and as approved by
Dresser.
(d) DRESSER. Dresser Industries, Inc., a Delaware corporation.
(e) PARTICIPANT. An individual to whom Restricted Stock is
awarded under this Plan. A management employee who terminates
employment shall cease to be a Participant, notwithstanding the
designation in Article 3.
(f) PERFORMANCE SHARE. A hypothetical share of Dresser common
stock, as described in the Plan.
(g) PERFORMANCE YEAR. The calendar year.
(h) PLAN. Dresser Industries, Inc. Long-Term Incentive and
Retention Plan.
(i) RESTRICTED STOCK. Dresser common stock, restricted in the
manner described in Article 6.
(j) SHARE PRICE TARGET. The target price of a share of Dresser
common stock, determined according to the following chart:
PERFORMANCE YEAR SHARE PRICE TARGET
1997 $39.00
1998 $45.00
1999 $53.00
2000 $61.00
The Share Price Target shall be adjusted, if necessary, to take into
account any stock splits.
(k) TRADING DAY. A day on which Dresser common stock is traded
on the New York Stock Exchange.
ARTICLE 3: ELIGIBILITY
Individuals designated by the Board of Directors of Dresser
Industries, Inc. as Participants shall participate in the Plan.
The grants described in the Plan are made subject to shareholder
approval of the Plan.
ARTICLE 4: PERFORMANCE SHARES
As soon as practicable after July 17, 1997, each Participant
shall receive a grant of 50,000 Performance Shares. Generally,
Performance Shares shall be converted to Restricted Stock in
accordance with Article 5, as long as the objective performance goals
of that Article are met. Unless specifically provided for by the
Executive Compensation Committee of the Board of Directors,
unconverted Performance Shares shall be forfeited upon the earlier of:
(a) Termination of the Participant's employment for any reason;
or
(b) January 1, 2001.
ARTICLE 5: PERFORMANCE GOALS
If the performance goal for a Performance Year or subsequent
Performance Years is/are met, a Participant's Performance Shares shall
be converted to Restricted Stock as soon as practicable following the
designated Performance Year in accordance with the following schedule:
PERFORMANCE YEAR PERFORMANCE SHARES CONVERTED
1997 5,000
1998 10,000
1999 15,000
2000 20,000
However, if a Share Price Target is met in advance of the
designated Performance Year, Performance Shares shall be earned at
that time, but will not be converted until immediately following the
DESIGNATED Performance Year.
A performance goal is met for a Performance Year, if the average price
per share of Dresser common stock exceeds the Share Price Target:
(a) At least 90 Trading Days (not necessarily consecutive)
within the Performance Year; or
(b) At least 20 Trading Days (not necessarily consecutive)
within a period of 30 consecutive Trading Days, which ends on or
before the last day of the Performance Year.
If the performance goal for the Performance Year is not met, 50
percent of the Performance Shares which would have been converted to
Restricted Stock shall be forfeited. The remainder of these
Performance Shares shall be added to the schedule of Performance
Shares for the next Performance Year. This carryover shall continue
on this basis each year until the plan concludes January 1, 2001.
ARTICLE 6: RESTRICTED STOCK
Stock certificates evidencing the award of Restricted Stock in
accordance with Article 5 shall be registered on Dresser's books in
the name of the Participant on the date Performance Shares are
converted to Restricted Stock. Each certificate evidencing Restricted
Stock shall bear an appropriate legend referring to the terms,
conditions and restrictions described in the Plan. Any attempt to
dispose of such shares of Restricted Stock in contravention of such
terms, conditions and restrictions shall be invalid.
All restrictions on a share of Restricted Stock shall lapse after
a period ending on the earliest of:
(a) The third anniversary of the date the share was issued;
(b) The Participant's termination of employment after attainment
of age 65;
(c) The Participant's Disability;
(d) A Change in Control; or
(e) Such earlier date as the Board of Directors may determine.
If a Participant's employment terminates before the end of this
period of restriction, the Participant shall forfeit the Restricted
Stock.
During the period of restriction, the Participant shall be
entitled to all other rights of a shareholder of Dresser common stock,
including the right to vote the shares of Restricted Stock and the
right to receive dividends on those shares. Subject to Article 10,
once the restriction period ends, the Participant shall be entitled to
physical custody of the stock, which, at such time, shall become fully
transferable.
ARTICLE 7: ADMINISTRATION
The Executive Compensation Committee of the Board of Directors of
Dresser Industries, Inc. shall have full discretionary authority to
interpret and apply the terms of this Plan document. This grant of
authority shall be broadly construed and shall include the authority
to find facts, to reach conclusions of law, to interpret and apply
ambiguous terms, and to supply missing terms reasonably necessary to
interpret the Plan.
ARTICLE 8: AMENDMENT OR TERMINATION
The Plan may be amended or terminated in whole or in part by
Dresser's Board of Directors in its sole discretion, provided that
such amendment or termination shall not cause the forfeiture of
Restricted Stock awarded to a Participant prior to the date of
amendment or termination. In addition, shareholder approval is
required for any material amendment of the Plan.
ARTICLE 9: RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall confer on a Participant any right to
continue in Dresser's employment or in any way affect Dresser's right
to terminate the Participant's employment without prior notice at any
time for any or no reason.
ARTICLE 10: WITHHOLDING
Dresser shall meet the tax withholding obligations imposed by any
government with respect to grants of Restricted Stock, or the lapse of
restrictions on such stock. To meet this obligation, Dresser may
withhold from other cash payments due the Participant. If the amount
so withheld is not sufficient, Dresser will withhold from any
distribution of stock released to the Participant in accordance with
Article 6 a number of shares with a market value not less than the
withholding obligation and cancel (in whole or in part) the shares so
withheld in order to reimburse Dresser for the payment of withholding
taxes.
ARTICLE 11: FORCE AND EFFECT
The various provisions of this Plan are severable in their
entirety. Any determination of invalidity or unenforceability of any
one provision shall have no effect on the continuing force and effect
of the remaining provisions.
ARTICLE 12: PREVAILING LAWS
This Plan shall be construed and enforced in accordance with and
governed by the laws of the State of Texas, to the extent not governed
by the laws of the State of Delaware applicable to corporations and
the issuance of stock by Delaware corporations.
IN WITNESS WHEREOF, this Plan is executed as of the day and year
written below by Dresser's duly authorized officer, effective as of
July 17, 1997.
Dated:
DRESSER INDUSTRIES, INC.
By:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 131,100
<SECURITIES> 0
<RECEIVABLES> 1,151,300
<ALLOWANCES> 0
<INVENTORY> 968,800
<CURRENT-ASSETS> 2,414,200
<PP&E> 2,797,200
<DEPRECIATION> 1,638,500
<TOTAL-ASSETS> 4,984,300
<CURRENT-LIABILITIES> 1,669,700
<BONDS> 754,300
0
0
<COMMON> 46,200
<OTHER-SE> 1,569,300
<TOTAL-LIABILITY-AND-EQUITY> 4,984,300
<SALES> 5,318,900
<TOTAL-REVENUES> 5,348,100
<CGS> 4,142,400
<TOTAL-COSTS> 4,939,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,000
<INCOME-PRETAX> 350,000
<INCOME-TAX> 122,500
<INCOME-CONTINUING> 208,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208,400
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
