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 January 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 February 28, 1997
Common Stock, par value $.25 176,258,349
INDEX
Page
Number
Part I. Financial Information
Management's Representation 3
Condensed Consolidated Statements of Earnings
for the three months ended January 31, 1997
and 1996 4
Condensed Consolidated Balance Sheets
as of January 31, 1997 and October 31, 1996 5
Condensed Consolidated Statements of Cash Flows
for the three months ended January 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
Changes in Securities 16
Exhibits and Reports on Form 8-K 16
Signature 16
Exhibit Index
Exhibit 10.1 Agreement with George Helland dated
January 10, 1997
Exhibit 10.2 Agreement with John Gavin for the period
February 1, 1997 - January 31, 1998
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 January 31, 1997
and October 31, 1996, the results of operations for the three
months ended January 31, 1997 and 1996, and cash flows for the
three months ended January 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
January 31,
1997 1996
(Unaudited)
<S> <C> <C>
Revenues $ 1,704.5 $ 1,462.9
Cost of revenues (1,342.7) (1,142.5)
Gross earnings 361.8 320.4
Selling, engineering, administrative
and general expenses (258.0) (237.2)
Other income (deductions)
Interest expense, net (14.8) (10.0)
Other, net (2.2) (0.3)
Earnings before items below 86.8 72.9
Income taxes (30.4) (24.8)
Minority interest (4.3) (1.5)
Net earnings $ 52.1 $ 46.6
Earnings per common share $ 0.30 $ 0.26
Cash dividends per common share $ 0.17 $ 0.17
Average common shares outstanding 175.8 181.8
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions)
<CAPTION>
January 31, October 31,
ASSETS 1997 1996
Current Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 199.8 $ 232.4
Notes and accounts receivable, net 1,110.8 1,152.1
Inventories, net 896.5 913.6
Deferred income taxes 85.8 83.8
Other current assets 91.8 87.6
Total Current Assets 2,384.7 2,469.5
Investments in and receivables from
unconsolidated affiliates 186.5 182.5
Goodwill, net 863.9 870.6
Deferred income taxes 185.1 181.2
Other assets 190.8 184.0
Property, plant and equipment - at cost 2,868.2 2,836.7
Accumulated depreciation and amortization 1,610.3 1,574.3
Net Property 1,257.9 1,262.4
Total Assets $5,068.9 $5,150.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 123.7 $ 86.0
Accounts payable 531.1 570.6
Contract advances 447.9 459.8
Accrued compensation and benefits 217.5 250.4
Income taxes 114.2 111.3
Other current liabilities 359.3 383.7
Total Current Liabilities 1,793.7 1,861.8
Employee retirement and postemployment
benefit obligations 664.1 676.3
Long-term debt 760.7 756.3
Deferred compensation, insurance
reserves and other liabilities 119.7 118.0
Minority interest 150.3 155.6
Shareholders' Equity
Common shares 46.2 46.2
Capital in excess of par value 455.2 454.8
Retained earnings 1,413.1 1,420.8
Cumulative translation adjustments (82.5) (81.5)
Pension liability adjustment (6.9) (6.9)
1,825.1 1,833.4
Less treasury shares, at cost 244.7 251.2
Total Shareholders' Equity 1,580.4 1,582.2
Total Liabilities and
Shareholders' Equity $5,068.9 $5,150.2
Actual common shares outstanding 176.2 175.6
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<CAPTION>
Three Months Ended
January 31,
1997 1996
(Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 52.1 $ 46.6
Adjustments to reconcile net earnings
to cash flow:
Depreciation and amortization 62.4 54.5
Equity earnings from
unconsolidated affiliates (11.0) (10.4)
Minority interest 4.3 1.5
Changes in working capital (105.2) (68.7)
Other - net (3.2) (3.2)
Net cash (used) provided by
operating activities (.6) 20.3
Cash flows from investing activities:
Capital expenditures (49.6) (84.2)
Business acquisitions (3.6) (14.7)
Proceeds from sales of assets .5 12.2
Net cash used by investing
activities (52.7) (86.7)
Cash flows from financing activities:
Dividends paid (29.9) (30.9)
Purchases of common shares for
Treasury - (17.3)
Issuance of common shares 6.8 3.3
Increase in short-term debt 37.7 34.4
Increase(decrease)in long-term debt 4.4 (6.3)
Net cash provided (used) by
financing activities 19.0 (16.8)
Effect of translation adjustments on
cash 1.7 (2.2)
Net decrease in cash and cash
equivalents (32.6) (85.4)
Cash and cash equivalents,
beginning of period 232.4 248.7
Cash and cash equivalents,
end of period $ 199.8 $ 163.3
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
<TABLE>
Note A - Information by Industry Segment (In Millions)
<CAPTION>
Three Months Ended
January 31,
1997 1996
Revenues
Petroleum Products and Services
<S> <C> <C>
Drilling and Production Operations $ 426.9 $ 353.4
Kellogg Oil and Gas Services 175.8 112.8
602.7 466.2
Engineering Services
M. W. Kellogg Operations 457.2 392.0
Energy Equipment
Compression and Pumping 291.4 275.5
Measurement 151.0 147.7
Flow Control 145.3 145.8
Power Systems 60.7 64.5
648.4 633.5
Eliminations (3.8) (28.8)
Total revenues $1,704.5 $1,462.9
Operating profit
Petroleum Products and Services
Drilling and Production Operations $ 60.5 $ 50.3
Kellogg Oil and Gas Services 11.5 2.6
72.0 52.9
Engineering Services 26.4 19.1
Energy Equipment
Compression and Pumping 9.6 14.1
Measurement 11.2 9.4
Flow Control 10.3 12.4
Power Systems 0.6 3.2
31.7 39.1
Total segment operating profit 130.1 111.1
Amortization of acquisition intangibles (7.6) (8.4)
General corporate expenses (20.8) (19.8)
Interest expense, net (14.9) (10.0)
Earnings before taxes and minority
interest $ 86.8 $ 72.9
</TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
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
January 31,
1997 1996
Share of earnings of unconsolidated
affiliates
Ingersoll-Dresser Pump (49%
<S> <C> <C>
owned) $ 9.2 $ 9.2
Other affiliates 1.8 1.2
$ 11.0 $ 10.4
</TABLE>
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
Investments in and receivables
from unconsolidated affiliates
Ingersoll-Dresser Pump (49%
<S> <C> <C>
owned) $ 136.8 $ 132.5
Other affiliates 49.7 50.0
$ 186.5 $ 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.
<TABLE>
<CAPTION>
Inventories include the following (in millions):
January 31, October 31,
1997 1996
Finished products and work in
<S> <C> <C>
process $ 681.8 $ 699.4
Raw materials and supplies 214.7 214.2
$ 896.5 $ 913.6
</TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
Note D - Dividends
On November 21, 1996, the Company declared a quarterly dividend of
$.17 per share of common stock payable on December 20, 1996 to
shareholders of record on December 2, 1996.
On January 16, 1997, the Company declared a quarterly dividend of
$.17 per share of common stock payable on March 20, 1997 to
shareholders of record on March 3, 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.
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 sought $200 million in actual damages and twice that
amount in punitive damages. Kellogg answered denying the claim
and filed a counterclaim against Quantum alleging libel, slander,
breach of contract and fraud. The case was tried during 1995. On
November 30, 1995 the jury returned a verdict finding that there
was no fraud on the part of Kellogg, that Quantum's claim was
barred by the statute of limitations, that Quantum is liable for
the $4.3 million in breach of contract damages, that Quantum is
liable for $4.1 million in damages for theft of trade secrets, and
that Quantum is liable for $3.0 million of Kellogg's legal fees.
Quantum has filed a motion for a new trial and the case is now on
appeal. The Company has not recognized any income related to the
jury verdict.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
Asbestosis Litigation
The Company has approximately 73,100 pending claims at January 31,
1997, with approximately 4,700 new claims filed and approximately
600 claims resolved during the first quarter of the fiscal year.
Certain settlements previously reported, covering approximately
30,500 claims, are carried as pending until releases are signed.
Resolution of these claims will reduce the number of pending claims
at January 31, 1997, by approximately 35% for refractory product
claims and 43% 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>
January 31, October 31,
1997 1996
Baroid Corporation
<S> <C> <C>
Current assets $ 830.4 $ 796.2
Noncurrent assets 582.4 578.9
Total $1,412.8 $1,375.1
Current liabilities $ 380.0 $ 377.7
Noncurrent liabilities 451.1 429.2
Shareholders' equity 581.7 568.2
Total $1,412.8 $1,375.1
</TABLE>
<TABLE>
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1997
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
1997 1996
<S> <C> <C>
Revenues $ 429.9 $ 357.9
Gross earnings $ 122.8 $ 105.0
Earnings from operations $ 52.7 $ 46.8
Other income (deductions) (5.0) (7.1)
Earnings before taxes
and minority interests 47.7 39.7
Income taxes (16.7) (13.5)
Minority interest .1 (.2)
Net earnings $ 31.1 $ 26.0
The above information includes Baroid Corporation's oilfield services
operations which are reported in Drilling and Production operations and
the Sub Sea operations which are reported in Kellogg Oil and Gas
Services.
</TABLE>
Note G - Subsequent Event
On March 5, 1997, the Company signed a letter of intent to sell
certain assets of its Sub Sea International Division to Global
Industries, Ltd. for approximately $110 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED JANUARY 31, 1997
COMPARED TO 1996
CONSOLIDATED OPERATIONS
First quarter 1997 earnings per share increased 15% to $.30 versus
$.26 in the 1996 first quarter. Revenues of $1.7 billion were 16%
higher and segment operating profit of $130.1 million was 17%
higher than in the 1996 first quarter.
The results for the first quarter reflected the strong demand
prevailing in oil and natural gas drilling, production and
processing markets. January 31, 1997 consolidated backlog was
$4.7 billion, 20% higher than a year ago.
Selling, engineering, administrative and general expenses of
$258.0 million for the quarter were 12% higher than the prior
year. The increase was primarily due to increased expenses
associated with higher levels of business activity.
Net interest expense of $14.9 million in the quarter was up 49%
from the 1996 period due primarily to an increase in total
borrowings and a higher interest rate on new long-term debt versus
the previously issued commercial paper.
The estimated income tax rate for the three months ended
January 31, 1997 is 35% compared to 34% for the three months ended
January 31, 1996.
INDUSTRY SEGMENT ANALYSIS
See Note A to Condensed Consolidated Financial Statements for
details of financial information by Industry Segment.
PETROLEUM PRODUCTS AND SERVICES SEGMENT
Segment revenues grew 29% to $602.7 million compared to $466.2
million last year. Operating profit rose by 36% to $72.0 million
versus $52.9 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Drilling and Production Operations
Revenues increased 21% to $426.9 million and operating profit
increased 20% to $60.5 million. These gains compared favorably
with the higher level of drilling activity represented by a 12%
increase in world-wide rig count. Baroid Drilling Fluids had
increases in both North American and International markets as a
result of improved quality of wells and increased market share.
Sperry-Sun had significant growth in Canada and Latin America.
The formation evaluation while drilling business is running at
full capacity, and the directional drilling business continues to
be a major growth contributor. The Security DBS drill bit business
showed significant improvement over last year's quarter,
reflecting better pricing and market share, particularly for fixed
cutter bits.
Kellogg Oil and Gas Services
Revenues of $175.8 million were up 56% from last year, and
operating profit of $11.5 million was over four times the 1996
quarter. Bredero Shaw's revenues doubled and operating profits
nearly tripled, driven by contracts in Norway, Malaysia and
Indonesia. Wellstream's revenues for flexible pipe grew by 70%
and operating profit tripled. Wellstream's U.S. plant is running
at full capacity. A new plant is under construction in the U.K.
to provide flexible pipe for the North Sea and other European
projects. Sub Sea's revenues were essentially the same as a year
ago, but operating profit was lower due to adverse market
conditions in the Gulf of Mexico. The Company recently announced
a letter of intent to sell certain assets not associated with
deepwater remotely operated vehicles (ROVs). The sale will allow
management to focus on the core ROV and subsea engineering
business.
ENGINEERING SERVICES SEGMENT
M. W. Kellogg Operations
Revenues for M. W. Kellogg rose to $457.2 million, a gain of 17%,
and operating profit improved 38% to $26.4 million. Activity
levels were high for fertilizer, LNG and oil and gas production
projects underway in Latin America, the Middle East, Africa and
the United States. The substantial completion of projects in
the Far East and South America also contributed to the increase
in earnings. Backlog at the end of the quarter was $2.6 billion,
49% higher than the level of a year ago. Inquiry levels and prospects
continue to be high in virtually all product lines and geographical regions.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENERGY EQUIPMENT SEGMENT
Segment revenues of $648.4 million were slightly higher than last
year while operating profit of $31.7 million was down 19%. The
weakness in profits was shared by three of the four business
lines.
Compression and Pumping
Revenues increased 6% but operating profit fell reflecting a
higher proportion of low margin complete machine shipments at
Dresser-Rand that was somewhat mitigated by higher aftermarket and
contract compression activity. Earnings from Ingersoll-Dresser
Pump increased due to the benefit of cost control improvements and
an improving market for engineered products. Mono Pumps generated
improved revenue and operating profit.
Measurement
Revenues increased slightly and operating profit rose 19% due to
stronger performances by the Wayne and DMD divisions.
Flow Control
Revenues were flat compared to the prior year and operating profit
declined due to lower margin project business and lower
aftermarket activity in its control valve operation. Energy Valve
results were stronger due to improved margins.
Power Systems
Revenues and profit both declined reflecting lower volumes due to
the impact of a work slowdown at Waukesha that has since been
resolved. Roots revenues and earnings were up due to an improved
mix of higher margin aftermarket sales.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's overall financial condition remained strong at
January 31, 1997. Since the beginning of the year, the Company
used approximately $74.7 million more cash than the operations
generated resulting in an increase in short-term borrowings of
$37.7 million. Major expenditures included $49.6 million for
capital expenditures and $29.9 million for dividends. In
addition, $105.2 million of cash was used to finance working
capital, primarily for decreases in payables and accrued expenses.
Total debt was $884.4 million as of January 31, 1997, compared to
$842.3 million at October 31, 1996. Total debt was 36% of total
book capitalization as of January 31, 1997, compared to 35% as of
October 31, 1996. Net debt was 12% of market capitalization at
January 31, 1997, versus 9% at October 31, 1996.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is currently involved in a number of lawsuits and has
also been identified as a potentially responsible party in a
number of Superfund sites. Note E to Condensed Consolidated
Financial Statements includes significant changes subsequent to
October 31, 1996.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(c) In December 1996, the Company issued 2,153 shares of Common
Stock ($.25 par value) to two executive officers and directors
of the Company in connection with exercises of stock options.
Under the terms of the Company's 1989 Restricted Incentive
Stock Plan (Plan), one restricted share will be issued for
every five shares of the related stock option exercised.
Stock issued pursuant to the Plan are not registered. No
consideration for the unregistered shares was exchanged.
In January 1997, the Company issued 1,812 shares of Common
Stock to one executive officer and director of the Company
pursuant to the Plan discussed above. No consideration for
the unregistered shares was exchanged.
Effective January 16, 1997, the Company issued 45,000
shares of Common Stock ($.25 par value) to two executive
officers and directors of the Company pursuant to the
Special 1997 Restricted Incentive Stock Grant (Grant).
Shares issued pursuant to the Grant are not registered.
No consideration for the unregistered shares was exchanged.
In issuing the above securities, the Company relied on the
exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933 (the Securities
Act) provided by Section 4(2) of the Securities Act.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.1 Agreement with George Helland dated
January 10, 1997
Exhibit 10.2 Agreement with John Gavin for the period
February 1, 1997 - January 31, 1998
Exhibit 27 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DRESSER INDUSTRIES, INC.
By: /s/ Kenneth J. Kotara
Kenneth J. Kotara
Controller
Dated: March 14, 1997
EXHIBIT INDEX
Exhibit 10.1 Agreement with George Helland dated January 10, 1997
Exhibit 10.2 Agreement with John Gavin for the period February 1, 1997 -
January 31, 1998
Exhibit 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. LETTERHEAD]
January 10, 1997
Mr. George A. Helland
Dresser Trading
3000 N. Sam Houston Parkway, East
Houston, Texas 77032
Dear George:
The purpose of this Letter Agreement is to confirm the
elimination of your position within Dresser effective
March 31, 1997 (herein after Separation Date or Last Day
of Work). This action is being taken to align complete
responsibility for all phases of Dresser Trading/NIS
Operations' services and product marketing to the
individual operating units.
As you will note, this Letter Agreement consists of three
sections - Section I sets forth the terms and conditions
of termination and Section II sets forth provisions
whereby any actual or potential claims that you may have
against the Company are amicably resolved, and Section
III sets forth the Consulting Agreement. The provisions
of this Letter Agreement shall be effective only if you
accept these provisions.
For the purpose of Section I of this Agreement, "Company"
is deemed to be Dresser Industries, Inc. For the purpose
of Sections II and III of this letter, "Company" is
deemed to be Dresser Industries, Inc. and its parent,
subsidiary and affiliated companies as well as all
predecessor companies and their parent, subsidiary and
affiliated companies.
SECTION I - TERMS AND CONDITIONS OF TERMINATION:<PAGE>
A. Your termination shall be effective March 31, 1997.
B. You will receive four weeks severance pay in the
amount of $16,539.00 on March 31, 1997.
*C. You will receive additional severance in nine
monthly installments of $16,791.00 beginning April
1, 1997. In addition, you will receive $1,000.00
per day for actual services rendered. All of these
payments are subject to satisfactorily complying
with the terms and conditions of this Agreement.
*D. For the purposes of the Dresser Stock Option Plan
only, your termination will be characterized as a
"retirement". In addition, we will recommend to
the Board of Directors that you receive a pro rata
share of any applicable 1997 bonus.
E. You will receive payment for all unused 1997
vacation in accordance with Company policy.
*F. The Company will make available to you the services
of an Outplacement Company of your choice.
G. Following your Separation Date, you are entitled to
continue medical and dental coverage through April
30, 1997 in the applicable Company plan pursuant to
which you have been enrolled. Additional coverage
may be provided to you in accordance with the rules
of the Consolidated Omnibus Budget Reconciliation
Act ("COBRA"). If you elect this continued COBRA
coverage, the coverage is at your expense in
accordance with the terms and conditions and costs
to be furnished to you.
H. Information concerning retirement accounts and/or
401(k) Plan accounts will be furnished to you no
later than March 31, 1997. Exercise of your
outstanding Stock Options and distribution of your
Deferred Compensation account will be according to
the plan rules.
I. All other benefits cease on March 31, 1997.
J. On or before your Last Day of Work, you shall
return all Company property, including, but not
limited to, keys, credit cards, access cards,
manuals, proposals, agreements, customer lists<PAGE>
(except you may retain a copy for personal use),
employee lists and confidential and proprietary
information and all copies thereof.
K. During your employment and following your
termination of employment, through December 31,
1997.
i) you shall not disclose any confidential
and proprietary information of the
Company, including, but not limited to,
proposals, agreements, product plans
and designs, pricing, marketing and
sales plans, research and development
projects or plans, customer lists and
employee lists,
ii) you shall continue to be bound by the
provisions concerning confidential and
proprietary information and inventions
as set forth in agreements that you
have entered into with the Company or
any predecessor company or any of their
parent, subsidiary or affiliated
companies. Following your termination
of employment, you shall not use any
confidential or proprietary information
of the Company, and
(iii) you will not accept employment with any
of Dresser's current and direct
competitors without first seeking
Dresser Industries' concurrence, as
further described in Section III,
Paragraph I.
L. The payments to be made to you, as set forth in
this letter, is subject to applicable withholding
and deductions. Some or all of the payments and
transactions described in this letter will create
tax liability for which you will have
responsibility.
SECTION II - RELEASE OF CLAIMS<PAGE>
A. While it is our expectation that you do not have
any claims against the Company, in an effort to be
certain that any actual or potential claims that
you have or may have are resolved amicable
forthwith, we shall extend to you the benefits as
set forth above in this letter if, and only if, you
agree to release the Company from any and all
actual and potential claims as provided in Section
II and you comply with the terms and conditions of
this letter including the satisfactory performance
of your work assignments through your Last Day of
Work as set forth in Sections I and III. You are
encouraged to seek the advice of an attorney prior
to accepting the provisions of this letter.
B. If you agree to the release of claims as set forth
in Section II and so indicate your agreement by
signing and returning this letter to the
undersigned, and if you comply with the terms and
conditions of this letter, including the
satisfactory performance of your work assignments
through your Last Day of Work as set forth in
Sections I and III, the following will be provided:
i) The additional consideration set forth in
Section I, asterisk items, C. , D. and F.
above, shall be provided.
ii) payment of the 1997 bonus will be paid as
soon as practical after calculation at fiscal
year end.
C. In consideration of the payments to be made to you
and other benefits to be provided to you as set
forth in this letter, you hereby irrevocably and
unconditionally release the Company, and the
successors, assigns, employees, officers, and
directors of the Company (except as to breach of
the terms of this Agreement), from and against any
and all claims, liabilities, demands and causes of
action, known or unknown, suspected or unsuspected,
that you have or may have by reason of any action,
statement, representation, omission, transaction or<PAGE>
event occurring up to and including your Separation
Date resulting from or in any way connected with
your employment or termination of employment by the
Company, including, but not limited to, any claims
arising under the Age Discrimination In Employment
Act, the Older Workers Benefit Protection Act,
Title VII of the Civil Rights Act of 1964, and any
other federal, state or local statutes, ordinances
and regulations or common law.
D. You shall have forty (40) days from the date of
this letter to accept the terms and conditions set
forth in this letter. If you agree with and accept
such terms and conditions, please sign and date the
enclosed copy of this letter and return it to the
undersigned by said date. You shall have the right
to revoke your acceptance within seven days after
the date you execute this letter. Your revocation
shall be in writing and must be received by the
undersigned within such seven day period in order
to be effective. If you do not revoke acceptance
within such seven day period, your acceptance of
the terms and conditions of Sections I, II and III
shall become effective eight days after you execute
this letter.
E. You understand and agree that you:
i) have forty (40) days from the date of this
letter to consider its terms.
ii) have carefully read and fully understand all
of the provisions of this release.
iii) are releasing the Company from any and all
actual or potential claims you have against
the Company relating to or in any way
connected with your employment and
termination of employment by the Company
(except as to breach of the terms of this
Agreement), including the claims and
potential claims set forth in this Section
II, and that the term "Company" includes not
only Dresser Industries, Inc. but also <PAGE>
a) Dresser Industries Inc.'s parent,
subsidiary and affiliated companies; b) all
predecessor companies; and c) all parent,
subsidiary and affiliated companies of such
predecessor companies.
iv) understand that this is a legally binding
document.
v) knowingly and voluntarily intend to be
legally bound by this release.
vi) will not receive the benefits afforded to you
pursuant to Sections II & III, if you do not
comply with the terms and conditions of this
letter, including the satisfactory
performance of your work assignments through
your Last Day of Work as set forth in Section
I.
vii) were advised to consider the terms of the
release and to consult with an attorney of
your choice prior to executing the release.
viii) have a full seven (7) days following
execution of this release to revoke your
acceptance of the release as this release
does not become effective unless you sign
this letter, have not revoked your acceptance
and your right to revoke acceptance has
expired.
ix) in executing this release, are not relying on
any statements or representations, whether
written or oral, made by the Company or any
employee or officer of the Company except as
specifically set forth in this letter.
F. You represent that you have not filed any claim,
charge or complaint against the Company and will
not file such claim, charge or complaint against
the Company regarding any matter covered by the
release set forth above.
G. This letter sets forth the entire understanding and
agreement regarding your termination and supersedes
all previous and contemporaneous negotiations,<PAGE>
discussions, agreements and understanding.
H. You shall not disclose the benefits afforded to you
pursuant to this letter in whole or in part to
anyone except your attorney family and other
professional advisors and except as may be required
by law.
I. This release is governed by the laws of the State
of Texas.
SECTION III - CONSULTING AGREEMENT
The purpose of this section is to set forth the agreement
we have reached under which you will render consulting
services to Dresser Industries, Inc. effective April 1,
1997.
A. The term of this Consulting Agreement is April 1,
1997 through December 31, 1997, and may be renewed
for successive yearly or monthly periods by mutual
written consent. However, this agreement may be
terminated at the close of any month by written
notice, with good cause stated, at least five days
prior to the end of the month. For the purpose of
Company termination, "good cause" will mean the
causing of harm to Dresser or competing with
Dresser during the term of this Consulting
Agreement without the permission of Dresser.
B. During the term of this Consulting Agreement and
any extension, you will perform minimal services
not intended to interfere with any other employment
you may obtain, as directed by me or other
officials of the Company. Your services will
consist of rendering advice and assistance
regarding Dresser Trading/NIS Operations. The
exact topics or subjects of your services, and the
time to be devoted thereto, will be determined by
me or such other officials of the Company as I may
designate, and such instructions will be furnished
to you in writing.<PAGE>
C. For satisfactorily rendering such consulting
services, you will be paid the additional severance
and daily rate as set forth in Section I. C.
D. You will be reimbursed for reasonable and necessary
travel and living expenses that you incur in
rendering requested services hereunder, as defined
in expense reimbursement policies. Expenses will
be reimbursed no less frequently than monthly upon
presentation of completed expense reports on forms
normally used by the Company (including all
required receipts).
E. You warrant that entering into this agreement will
not conflict with any obligations you may have
arising under any other contract or by operation of
law.
F. You understand and agree that you are not an agent
or employee of the Company by virtue of this
agreement and, accordingly, are not eligible for
regular group or travel insurance or any other
employee benefits.
G. You also understand and agree that all drawings,
designs, reports, computations, calculations,
working papers, computer programs, manuals and
documents of every kind received or prepared by you
under the terms of this agreement or as a result of
the relationship with the Company created by this
agreement will be and will remain the sole property
of the Company, and all copies will be delivered to
the Company upon request. The Company will have
full and unlimited right to use all of the same,
including use of any preexisting proprietary rights
owned by you to the extent such proprietary rights
are incorporated in the same by you, without any
claim or right thereto on your part for any
additional compensation.
H. You agree to make prompt and full disclosure to the
Company or its nominee of all inventions,
discoveries, innovations, work products and<PAGE>
developments, whether or not patentable or
copyrightable, made or conceived by you in whole or
in part during the terms of this agreement and
which relate to, or arise out of, any developments,
services or products with which you have been
concerned under this agreement. You hereby assign
and agree to assign to the Company, its successors,
assigns, or nominees your entire right, title and
interest in and to said inventions, discoveries,
innovations, work products and developments. You
will, at our request, execute any and all
instruments and documents which we may deem
necessary or expedient to assign and convey to us,
our successors, assigns or nominees, the sole and
exclusive right, title and interest in and to any
such inventions, discoveries, innovations, work
products and developments, together with the
instruments and documents deemed necessary or
expedient by us in order to apply for, obtain, and
maintain Letters Patent and copyrights of the
United States and foreign countries therefore, in
full compliance with applicable requirements. You
agree to cooperate fully with the Company, its
successors, assigns, or nominees in the prosecution
of applications filed to obtain said Letters Patent
and copyrights and in the maintenance of or in any
litigation or other legal or administrative
proceedings involving same. You agree that your
obligation to execute any and all such instruments
and documents and to render such cooperation shall
continue after the termination of this agreement.
It is understood that all expenses of applying for
and obtaining Letters Patent and copyrights shall
be borne by the Company. Further, the Company
agrees to reimburse you for the time spent and
reasonable traveling and other out-of-pocket
expenses which you incur in connection with any
steps which you take pursuant to the provisions of
this paragraph, provided such time has been spent<PAGE>
and such expenses were incurred at the prior
written request or with the prior written approval
of the Company.
I. You agree that you will not during the term of this
Agreement serve any interest or do any act or thing
which conflict with the interests of the Company or
any of its subsidiaries, the determination by the
Company of its interest and those of its
subsidiaries, and any conflict therewith, to be
final and conclusive.
J. Finally, it is recognized that some of the work you
will be called upon to perform hereunder, as well
as information furnished you by us in connection
therewith, is highly confidential. Accordingly,
any and all such information developed or secured
during the performance of services under this
agreement shall be considered by you to be
confidential and the exclusive property of the
Company and shall not, now or at any time
hereafter, be published, stated, or used by you for
any purpose without the Company's prior written
consent. If you agree to perform consulting
services as outlined above, please so indicate by
signing and returning to me the copy of this letter
provided for that purpose.
We trust that the benefits afforded to you in this letter
will assist in a reasonable transitioning of your
employment. We wish you the very best of luck in your
future endeavors. If you have any questions concerning
this letter, please do not hesitate to contact me.
Sincerely,
DRESSER INDUSTRIES, INC.
/S/ DONALD C. VAUGHN<PAGE>
Donald C. Vaughn, President and COO
ACCEPTED BY:
/S/ GEORGE A. HELLAND 17 Feb 1997
George A. Helland Date <PAGE>
[DRESSER INDUSTRIES, INC. LETTERHEAD]
January 29, 1997
Mr. John Gavin
10263 Century Woods Drive
Los Angeles, CA 90067
Dear Jack:
The purpose of this letter is to seek your written approval to
extend the term of the Agreement under which you agreed to serve
on the Dresser Industries de Mexico Advisory Board. If you agree,
the term of the Agreement shall be extended to January 31, 1998.
All other provisions of the Agreement shall remain in full force
and effect.
Please indicate your agreement by signing in the space provided
below and returning to me the copy of this letter provided for
that purpose.
Sincerely,
DRESSER INDUSTRIES, INC.
By: /S/ DONALD C. VAUGHN
Donald C. Vaughn
Date: 01/29/97
ACCEPTED:
/S/ JOHN GAVIN
John Gavin<PAGE>
Date: 2/6/97<PAGE>
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