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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
ON
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): JUNE 15, 1998
EVI WEATHERFORD, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-13086 04-2515019
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
5 POST OAK PARK, SUITE 1760,
HOUSTON, TEXAS 77027-3415
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-8400
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Exhibit Index Appears on Page 57
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EXPLANATORY NOTE
This Amendment No. 1 on Form 8-K/A of EVI Weatherford, Inc., a Delaware
corporation ("EVI"), amends EVI's Form 8-K dated June 15, 1998, to amend and
restate Item 5 in its entirety. Certain March 31, 1998 expenses have been
reclassified to conform with 1997 presentation.
ITEM 5. OTHER EVENTS
BUSINESS COMBINATION
On May 27, 1998, EVI, Inc. ("EVI") and Weatherford Enterra, Inc.
("Weatherford") merged pursuant to an Agreement and Plan of Merger dated March
4, 1998, as amended, between EVI and Weatherford, with EVI being the surviving
corporation (the "Merger"). Under the terms of the Merger, the name of the
combined company was changed to EVI Weatherford, Inc. (together with its
subsidiaries, the "Company"). Under the terms of the Merger, the stockholders
of Weatherford received 0.95 of a share of EVI common stock, $1.00 par value
("Common Stock"), in exchange for each outstanding share of Weatherford common
stock outstanding immediately prior to the Merger. The Merger has been
accounted for as a pooling of interests and the supplemental consolidated
financial statements of EVI have been restated to include the accounts of EVI
and Weatherford. The following sets forth Management's Discussion and Analysis
of Financial Condition and Results of Operations of the Company on a restated
basis. The discussion should be read in conjunction with the restated
Supplemental Consolidated Financial Statements of the Company filed with this
report. The supplemental financial statements contained herein, together with
the following Supplemental Selected Financial Data and Management's Discussion
and Analysis of Financial Condition and Results of Operations, are supplemental
to the historical Financial Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations previously filed by EVI prior
to the Merger and supersede the previously filed pro forma financial statements
filed by EVI reflecting the Merger.
SUPPLEMENTAL SELECTED FINANCIAL DATA
The following table sets forth certain supplemental selected historical
consolidated financial data of the Company and should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Supplemental Consolidated Financial Statements and Notes
thereto included elsewhere herein. The following information may not be deemed
indicative of future operating results of the Company. The information presented
has been restated to reflect the Company's May 1997 two-for-one stock split and
the adoption of Statement of Financial Accounting Standards No. 128 ("SFAS No.
128"), Earnings Per Share.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues .................................... $ 1,969,089 $ 1,467,270 $ 1,125,803 $ 858,993 $ 671,470
Operating Income ............................ 335,992 169,101 12,120 70,952 59,342
Income (Loss) From Continuing
Operations............................... 196,773 92,161 (8,268) 36,046 35,231
Basic Earnings (Loss) Per Share From
Continuing Operations.................... 2.04 1.03 (0.10) 0.53 0.58
Diluted Earnings (Loss) Per Share
From Continuing Operations .............. 2.01 1.01 (0.10) 0.53 0.58
Total Assets ................................ 2,737,910 2,243,633 1,710,568 1,464,804 885,981
Long-Term Debt .............................. 252,322 417,976 416,473 303,854 56,580
5% Convertible Subordinated Preferred
Equivalent Debentures..................... 402,500 -- -- -- --
Stockholders' Equity ........................ 1,458,549 1,292,704 958,337 845,287 582,187
Cash Dividends Per Share .................... -- -- -- -- --
</TABLE>
GENERAL
The Company is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the exploration,
production and transmission sectors of the oil and gas industry. The Company's
principal industry segments consist of (i) drilling products, (ii) completion
and oilfield products and services and (iii) artificial lift and compression
products and services. The Company operates in virtually every oil and gas
exploration and production region in the world.
The Company's drilling products segment manufactures (i) drill pipe and other
drilling products, (ii) premium engineered connections and associated tubulars
and (iii) marine connectors and related accessories. The Company's drilling
products are designed and engineered for high performance applications. Drill
pipe, as well as drill collars, heavyweights and kellys manufactured by the
Company, serve as the principal mechanical drilling tools used to drill an oil
or natural gas well. These products constitute all components of the drill
stem used to drill a well from the rig to the drill bit. The Company's premium
tubulars consist of premium tubing, liner and casing and, together with the
Company's line of premium engineered connections, are used for the production
of oil and natural gas in harsh downhole environments. The Company's marine
connector product line consists of downhole conductors for offshore
applications and are used to define the original architecture of an offshore
well and to support subsea applications.
The Company's completion and oilfield products and services segment
manufactures, sells and services cementation products and liner hangers and
equipment used to provide oilfield services. Other products manufactured by
this segment include hydraulic power tongs and related equipment used to
provide tubular running services, milling tools, whipstocks and weighted drill
pipe used in rental and downhole services and sold to customers. This segment
also provides oilfield equipment rental, downhole services and tubular running
services. The Company's rental equipment includes specialized pressure control
equipment, drill string equipment, handling tools, stabilizers and other
equipment and tools used in the drilling, completion and workover of oil and
gas wells. Downhole services include fishing, milling, whipstock installation
and retrieval, well control assistance, plugging and abandonment services, pipe
recovery wireline services, foam services and internal casing patch
installation.
The Company's artificial lift and compression segment (i) designs,
manufactures and services a complete line of artificial lift equipment and (ii)
manufactures, packages, rents and sells parts and services for gas compressor
units over a broad horsepower range. The Company's artificial lift product
line includes a wide range of downhole pumps, surface pump drive units, gas
lift equipment, hydraulic lift products and progressing cavity pumps. The
Company's gas compressor units are used for increasing natural gas pressure to
facilitate gas flow from the wellhead and through gas gathering systems and
processing plants and injecting natural gas into oil wells to enhance recovery
and into gas storage wells. Other general applications include cogeneration,
seismic marine surveys and natural gas fueling stations.
The Company has achieved significant growth in recent years through a
consistent strategy of synergistic acquisitions and internal development.
Acquisitions have focused on the acquisition of name brand products, geographic
expansion, the development of complete product lines and savings through
consolidation. Internal development has focused on product development and
geographic expansion. The Company's growth strategy has
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resulted in the Company becoming the largest manufacturer of drill pipe, drill
collars and heavyweight drill pipe in the world, the largest provider of
premium tubular connectors in North America and one of the largest providers of
artificial lift equipment in the world. The Company is the leading worldwide
supplier of rental tools and fishing and other downhole services and the
leading worldwide provider of tubular running services. To the Company's
knowledge, none of its competitors has as broad a product line of rod lift and
progressing cavity pumps.
MARKET TRENDS
The demand for the Company's products and services is affected by the price
and demand of natural gas, the level of oil and gas exploration, production and
consumption, the number of oil and gas wells being drilled, the depth and
drilling conditions of such wells, the volume of production, the number of well
completions, the level of workover activity, the construction of gathering and
storage systems and the age and operating pressures of natural gas wells.
Exploration and production activities are affected by worldwide economic
conditions, supply and demand for oil and natural gas, seasonal trends and the
political stability of oil producing countries. Drilling and workover activity
can fluctuate significantly in a short period of time, particularly in the
United States and Canada.
The oil and gas industry has been substantially volatile over the years, due
in large part to volatility in the prevailing prices of oil and natural gas.
In 1996 and much of 1997, the oil and gas service industry experienced a
general improvement in product demand and pricing as relatively stable and
improved oil and or natural gas prices combined with a strong world economy to
increase exploration and development activity worldwide. This trend, together
with a decline in the worldwide inventory of used drill pipe, benefited the
Company and its results in 1997 and 1996. Demand for the Company's compressor
packages improved in 1997 due to stronger and more stable natural gas prices
and trend of major oil companies outsourcing certain services and selling many
of their oil and gas properties in the United States to smaller producers.
The willingness of oil and gas operators to make capital expenditures for the
exploration and production of oil and natural gas will continue to be
influenced by numerous factors over which the Company has no control, including
the prevailing and expected market prices for oil and natural gas. Such prices
are impacted by, among other factors, worldwide demand for oil and gas, costs
of exploration and production, general economic and political conditions,
availability of new leases and concessions, the ability of the members of the
Organization of Petroleum Exporting Countries ("OPEC") to maintain price
stability through voluntary production limits, the level of production by
non-OPEC countries, and governmental regulations regarding, among other things,
environmental protection, taxation, price controls and product allocations.
The worldwide price of oil has declined significantly since late 1997, with
prices having dropped as much as 40% to under $13 per barrel for spot
deliveries, and prices for natural gas have weakened slightly on a year to year
basis. These declines have been attributed to, among other things, an excess
supply of oil in the world markets, reduced domestic demand associated with an
unseasonably warm winter and the potential for lower worldwide demand due to
the impact of the economic downturn in Southeast Asia. With lower oil prices,
the Company and others in the industry have begun to experience a softening in
demand for their products and services, in particular, products and services
associated with exploration activity and oil production. Although the Company
continues to have a backlog for drill pipe, there has begun a softening in
demand from the strong demand that existed in 1997. In addition, lower prices
have impacted demand for products and services associated with the production
of heavy oil and oil from marginal wells. These declines have been somewhat
offset by improvements from consolidation and other cost savings and greater
market penetration for the Company's oilfield services and compression
products. These current market conditions are expected to have an effect on
results over the next twelve months. A prolonged period of low priced oil can
be expected to adversely affect the demand throughout the industry, including
those products manufactured and services provided by the Company. In such a
case, the Company's revenues and income could be similarly affected.
Although the short-term outlook in the industry remains uncertain, absent a
significant downturn in the U.S. and world economies, the Company believes that
market conditions in the industry should improve over the long term as the
demand and supply becomes more in balance. The timing of such recovery,
however, cannot be predicted with certainty.
1998 AND 1997 ACQUISITIONS
In the first quarter of 1998, the Company completed three acquisitions
consisting of (i) Houston Well Screen, a leading provider of downhole sand
control screens, for cash of approximately $27.6 million, (ii) Taro Industries
Limited ("Taro"), a Canadian provider of well monitoring, gas compression and
drilling equipment distribution, for 0.8 million shares of Common Stock and
(iii) Ampscot Equipment Ltd. ("Ampscot"), a Canadian manufacturer of
conventional pumping units, for cash of approximately $57.1 million. The
Company also acquired a business that
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expanded its tubular products operations for a total consideration of $30.0
million, including liabilities. The 1998 acquisitions were accounted for using
the purchase method of accounting.
The Company also completed a number of strategic acquisitions during 1997
directed at an expansion of the Company's core operations. These acquisitions
included: (i) TA Industries, Inc. ("TA"), a manufacturer of premium couplings
and casing, in April 1997 for cash of approximately $44.1 million and assumed
debt of $19.7 million, (ii) XLS Holding, Inc. ("XL"), a manufacturer of high
performance connectors for marine applications such as conductors, risers and
offshore structural components, in August 1997 for 0.9 million shares of the
Company's Common Stock, (iii) Trico Industries, Inc. ("Trico"), a manufacturer
and distributor of sub-surface pumps, sucker rods, accessories and hydraulic
lift systems, in December 1997 for cash of approximately $105.0 million and
assumed debt of $8.7 million, (iv) BMW Pump, Inc. ("BMW Pump") and BMW Monarch
(Lloydminster) Ltd. ("BMW Monarch"), a Canadian-based manufacturer and supplier
of progressing cavity pumps, in December 1997 for cash of approximately $96.8
million and assumed debt of $14.3 million, and (v) various small acquisitions,
for total cash of approximately $82.2 million, intended to expand the
Company's manufacturing capabilities, geographic scope and breadth of product
lines. The acquisition of XL was accounted for as an immaterial pooling of
interests. The other 1997 acquisitions were accounted for using the purchase
method of accounting. The results of operations of all 1997 acquisitions have
been included in the Company's operating results since their respective dates
of acquisitions.
The Company's operating results include several immaterial and non-core
businesses that the Company has sold through previously announced divestiture
programs. These businesses included the Harrisburg/Woolley division, which was
sold in 1995; Barber Industries Limited and Enterra Patco Oilfield Products,
Inc., each of which was sold in 1996; and CRC-Evans Pipeline International,
Inc. ("CRC-Evans"), Total Engineering Services Team, Inc. ("TEST") and the
American Aero Cranes division ("Cranes"), each of which was sold in 1997.
The Company recorded goodwill of approximately $303.9 million and $94.5
million in the year ended December 31, 1997 and the first quarter of 1998,
respectively, in connection with acquisitions. These acquisitions
substantially increased the Company's market share in various products and
expanded its geographic distribution capabilities. The charge associated with
the amortization of goodwill and other intangibles was $15.0 million and $5.0
million for the year ended December 31, 1997 and the first quarter of 1998,
respectively, and is expected to be approximately $21.9 million for the year
ended December 31, 1998.
SECOND QUARTER 1998 MERGER RELATED COSTS
In the second quarter of 1998, the Company estimates that it will report
approximately $60.0 million, net of taxes, in unusual charges associated with
the Merger. Such costs consist of transaction costs, severance and
termination payments to former officers and employees, facility closure costs
and costs associated with the closure of excess and duplicative distribution
and service locations primarily due to integrating EVI's businesses with
Weatherford's businesses and the impairment of various assets as a result of
the combination of operations and rationalization of product lines and the
elimination of certain products, services and operations as a result of the
changes in the operations of the Company following the Merger.
RESULTS OF OPERATIONS
A summary of operating results by industry segment is shown below:
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
--------------------------- -----------------------------------------------
1998 1997 1997 1996 1995
---------- ----------- ----------- ----------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Drilling Products ............... $ 190,845 $ 117,303 $ 611,715 $ 337,312 $ 149,462
Completion and Oilfield
Products and Services ......... 229,762 226,245 929,001 824,639 759,309
Artificial Lift and Gas
Compression ................... 152,853 87,705 428,373 305,319 217,032
----------- ----------- ----------- ----------- -----------
$ 573,460 $ 431,253 $ 1,969,089 $ 1,467,270 $ 1,125,803
=========== =========== =========== =========== ===========
MERGER-RELATED COSTS AND
AND OTHER UNUSUAL CHARGES
Drilling Products ............... $ -- $ -- $ -- $ -- $ --
Completion and Oilfield
Products and Services ......... -- -- -- -- 59,171
Artificial Lift and Gas
Compression ................... -- -- -- -- --
Corporate ....................... -- -- -- -- 29,011
----------- ----------- ----------- ----------- -----------
$ -- $ -- $ -- $ -- $ 88,182
=========== =========== =========== =========== ===========
OPERATING INCOME (LOSS):
Drilling Products ............... $ 45,702 $ 21,291 $ 120,830 $ 42,573 $ 14,425
Completion and Oilfield
Products and Services ......... 56,537 45,641 215,412 146,332 5,116
Artificial Lift and Gas
Compression ................... 16,589 8,620 37,566 19,500 16,276
Corporate ....................... (8,228) (8,564) (37,816) (39,304) (23,697)
----------- ----------- ----------- ----------- -----------
$ 110,600 $ 66,988 $ 335,992 $ 169,101 $ 12,120
=========== =========== =========== =========== ===========
</TABLE>
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THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
General
Net income for the first quarter 1998 was $61.1 million on revenues of
$573.5 million, as compared to net income for the first quarter 1997 of $37.9
million on revenues of $431.3 million. The increases in revenues and net
income reflect continued revenue and margin improvement in the Company's
drilling products segment as well as the beneficial effect of the Company's
1997 and 1998 acquisitions. The net effect of these acquisitions on revenues
and net income for the quarter ended March 31, 1998, compared to the first
quarter of 1997 was an increase in revenues of $122.0 million and an increase
in income from continuing operations of $10.4 million.
The Company incurred research and development costs of $3.4 million in the
first quarter of 1998 as compared to $3.6 million in the first quarter of 1997.
Expenditures relate to the development of new products for drilling products to
support high performance applications and for service equipment designs to
support the oilfield products and services businesses.
Of the Company's first quarter 1998 sales, 49%, 7%, 7%, 22% and 10%,
respectively, were attributable to sales in the U.S., Europe, Africa, Canada
and Latin America, respectively. U.S. sales for the first quarter of 1998
included sales to U.S. distributors and other U.S. companies for ultimate use
outside the U.S.
Drilling Products Segment
The Company's drilling products segment reported revenues and operating
income of $190.8 million and $45.7 million, respectively, for the first quarter
1998, up from $117.3 million and $21.3 million, respectively, for the first
quarter 1997. These improvements were primarily due to continued strong demand
and backlog for drill pipe and other drilling tools, increased sales of premium
tubular products and the effects of the Company's acquisition of TA and XL.
Premium tubular revenues increased to approximately $80.1 million in the first
quarter of 1998 up from approximately $58.9 million for 1997. The net effect
of the acquisitions of TA and XL on revenues and operating income in this
segment for the quarter ended March 31, 1998, compared to the first quarter of
1997 was an increase in revenues of $30.4 million and an increase in operating
income of $4.7 million.
Cost of goods sold declined as a percentage of revenues from 76.0% in
1997 to 70.2% in 1998, due to increased pricing on the Company's products and
reduced costs resulting from the expansion of the Company's Mexico tool joint
facility, which provided savings of at least $1.2 million in the first quarter
of 1998. Selling, general and administrative expenses as a percentage of
revenues represented 5.8% for the first quarter 1998 and 1997.
Backlog for tubular products at March 31, 1998, was approximately $352.1
million. The Company currently expects that over $264.0 million of this
backlog will be shipped by December 31, 1998, with the remainder to be shipped
within the first six months of 1999. There can be no assurance that in light
of current market conditions this level of backlog will continue and any
material changes in demand for drilling products and rig utilization could
affect the demand for the Company's drill pipe.
Completion and Oilfield Products and Services Segment
The Company's completion and oilfield products and services segment
reported revenues and operating income of $229.8 million and $56.5 million,
respectively, for the first quarter 1998, up from $226.2 million and $46.5
million,
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respectively, for the first quarter 1997. These improvements reflect the
increase in North America drilling activity and increased market share.
North American service revenues increased 15% to $96.6 million in the
first quarter of 1998 compared to the same period in 1997, with the most
significant revenue increases occurring in Canada, South and West Texas and the
Rocky Mountain region. Revenues in Canada increased 24.5% for 1998 over the
first quarter of 1997. Comparing the same periods, the average North America
drilling rig count improved 16%, and the average workover rig count declined
14%. Excluding Canada, international oilfield service revenues increased 10.7%
in the first quarter of 1998 compared to the first quarter of 1997 while the
average international rig count increased 1%.
Cost of goods sold and services and rentals declined as a percentage of
revenues from 68.0% in the first quarter of 1997 to 64.3% in the first quarter
of 1998, as a result of improved pricing in certain areas and increased volume.
Selling, general and administrative expenses for the first quarter of 1998 as a
percentage of revenues was 11.4% compared to 12.1% for the first quarter of
1997.
Artificial Lift and Compression Segment
The Company's artificial lift and compression segment reported revenues
and operating income of $152.9 million and $16.6 million, respectively, for the
first quarter 1998, up from $87.7 million and $8.6 million, respectively, for
the first quarter 1997. These improvements were due to the Company's 1997 and
1998 acquisitions and growth in the Latin American markets. The 1997 and 1998
acquisitions generated revenues and operating income for this segment of $76.7
million and $10.6 million, respectively, in the first quarter of 1998. The
improvements attributable to the businesses acquired in these acquisitions were
partially offset by substantial declines in demand for the Company's progressing
cavity pump line of artificial lift products and the manufacturing and packaging
of compressors due to lower oil prices and an associated drop in heavy oil
drilling activity primarily in Canada and other marginal oil production
activity.
Cost of goods sold declined as a percentage of revenues from 73.0% in the
first quarter 1997 to 65.6% in the first quarter 1998, as a result of an
improvement in the segment's cost structure and from the December 1997
acquisitions of Trico, BMW Pump and BMW Monarch and the 1998 acquisitions of
Taro and Ampscot and the expansion and increased utilization of the Company's
compressor rental fleet. Selling, general and administrative expenses for the
first quarter 1998 as a percentage of revenues was 23.5% compared to 17.2% for
the first quarter 1997. The increase in selling, general and administrative
expenses for this segment reflects higher costs associated with overlapping
operations at various acquired companies pending the consolidation of those
operations and increased amortization of goodwill and other intangibles relating
to the Company's 1997 and first quarter 1998 acquisitions in this segment. The
Company intends to continue to focus on reducing selling, general and
administrative expenses in this segment through the integration of acquired
operations.
Other
Corporate expenses as a percentage of revenues for the first quarter 1998
were 1.4% as compared to 2.0% for the first quarter 1997. The percentage
decrease from 1997 was primarily attributable to the growth in 1998 revenues.
Interest expense for the first quarter 1998 was $12.0 million compared to
$10.5 million for the first quarter 1997. The increase in interest expense in
the first quarter 1998, as compared to the first quarter 1997, reflects the
issuance by the Company of $402.5 million principal amount of its 5%
Convertible Subordinated Preferred Equivalent Debentures due 2027 (the
"Debentures") issued in November 1997, a portion of which was utilized to
purchase substantially all of the $120.0 million principal amount of the Senior
Notes. The remaining proceeds from the issuance of the Debentures were used to
fund acquisitions and reduce bank debt.
The Company's effective tax rate on net income for the first quarter 1998
was 37.6% as compared to 35.3% for the first quarter 1997. The higher effective
tax rate in 1998 reflects the utilization of substantially all of the Company's
U.S. net operating loss and tax credit carryforwards in 1997 and differences in
the components and tax rates applicable to foreign taxable income.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
General
Income from continuing operations for 1997 was $196.8 million on revenues
of $1,969.1 million as compared to income from continuing operations for 1996
of $92.2 million on revenues of $1,467.3 million. The increases in revenues
and income from continuing operations reflect the strength in the Company's
markets and the effect of the 1997 acquisitions and a full year of the 1996
acquisitions. The 1997 acquisitions benefited 1997 revenues by $166.5 million
and income from continuing operations by $12.3 million. The 1996 acquisitions
benefited 1997 revenues by $269.2 million and income from continuing operations
by $24.5 million. Revenues associated with disposed
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businesses were $76.9 million and $157.8 million in 1997 and 1996,
respectively. Net income associated with the disposed businesses were $8.3
million and $9.6 million in 1997 and 1996, respectively.
Net income for 1997 was $187.8 million compared to $165.8 million for
1996. The Company recorded in 1997 an extraordinary charge of $9.0 million,
net of taxes, related to the acquisition by the Company on December 15, 1997,
of $119,980,000 principal amount of the Company's outstanding 10 1/4% Senior
Notes due 2004 and 10 1/4% Senior Notes due 2004, Series B (collectively, the
"Senior Notes") from the holders of the Senior Notes pursuant to a cash tender
offer and consent solicitation of the Company (the "Tender Offer"). In 1996,
the Company reported income of $7.5 million, net of taxes, from discontinued
operations related to the Company's Mallard Bay contract drilling division
("Mallard Division"), which was sold in November 1996, and a gain of $66.9
million, net of taxes of $44.6 million, related to the disposition.
Additionally, the Company incurred an extraordinary charge of $0.7 million, net
of taxes, for the early extinguishment of debt in 1996.
Revenues during 1997 increased approximately 34% from 1996 primarily as a
result of the various acquisitions described above, the impact of consolidation,
restructuring and higher average sales prices. Cost of goods sold and services
and rentals as a percentage of revenues declined from 74.3% of total revenues in
1996 to 69.6% in 1997 due to stronger prices and sales of higher margin products
and services. Selling, general and administrative costs attributable to
segments as a percentage of total revenues was flat between 1997 and 1996
despite increased amortization of intangibles and costs associated with the
assimilation of acquired businesses.
Research and development costs of $11.8 million in 1997 increased 29% over
1996. This increase primarily reflects the expansion of the Company's
operations and the development of new products for drilling products to support
high performance applications and for service equipment designs to support the
oilfield products and services businesses.
Of the Company's 1997 sales, 52%, 9%, 4%, 14% and 8%, respectively, were
attributable to sales in the U.S., Europe, Africa, Canada and Latin America,
respectively and for 1996 represented 49%, 13%, 7%, 11% and 8%, respectively.
U.S. sales for 1997 and 1996 included sales to U.S. distributors and other
U.S. companies for ultimate use outside the U.S.
In the fourth quarter of 1996, the Company adopted a plan to close its
Bastrop, Texas tool joint manufacturing facility and to combine its two packer
facilities through the closure of one facility in Arlington, Texas. In
connection with these decisions, the Company incurred a charge of $5.8 million
associated with these closures. Of this charge, $4.3 million related to the
tool joint facility closure and relocation of equipment from this facility and
$1.5 million related to the consolidation of its packer facilities and the
closure of one of the plants. The Company incurred $3.8 million in 1996 for
costs associated with these actions during 1996, including costs relating to
the relocation of equipment at its Bastrop facility to other facilities. The
Company also accrued $2.0 million as part of the $5.8 million charge for exit
costs that it expected to be incurred in 1997 relating to a closure of its
Bastrop and Arlington facilities. These costs included $0.8 million for
severance and termination costs, $0.9 million for the reduction in the carrying
value of its Bastrop facility in light of the intended disposition of the
facility and $0.3 million for the termination of the Arlington lease.
Approximately 400 employees were affected by these closures. The Company had
substantially completed the closure of both the Bastrop and Arlington
facilities by the end of the second quarter of 1997 and incurred substantially
all charges related to the closing of these facilities.
Drilling Products Segment
The Company's drilling products segment reported revenues and operating
income of $611.7 million and $120.8 million, respectively, for 1997, up from
$337.3 million and $42.6 million, respectively, for 1996. These improvements
were primarily due to increased demand for drill pipe and other drilling tools,
strength in premium tubular activity and the Company's acquisition of TA, a
premium tubular couplings and accessories manufacturer in April 1997, and the
third quarter acquisition of XL, a manufacturer of marine connectors. The
increase in demand for drill pipe reflected higher domestic and international
drilling activity, in particular offshore drilling. Premium tubular revenues
increased to approximately $307.9 million during 1997 up from approximately
$157.8 million for 1996. The increase in premium tubular revenues reflected
strong demand in the Gulf of Mexico and the acquisition of TA. During 1997,
the acquisitions of TA, XL and various small acquisitions benefited 1997
revenues and operating income in this segment by $96.8 million and $16.1
million, respectively.
Cost of goods sold declined as a percentage of revenues from 81.3% in 1996
to 73.7% in 1997, due to increased pricing on the Company's products and
reduced costs resulting from the expansion of the Company's Mexico tool joint
facility. The Company expects annual cost savings of approximately $7.0
million relating to the expansion and consolidation of the Mexico facility. In
the third quarter of 1997, the Mexico facility became fully operational,
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which benefited operations in the second half of 1997. Selling, general and
administrative expenses for 1997 as a percentage of revenues was 6.6% compared
to 6.1% for 1996 and reflected higher selling, general and administrative
expenses associated with the operations of TA as well as the increase in the
amortization of goodwill and other intangibles.
Completion and Oilfield Products and Services Segment
The Company's completion and oilfield products and services segment reported
revenues and operating income of $929.0 million and $215.4 million,
respectively, for 1997, up from $824.6 million and $146.3 million, respectively,
for 1996. Included in operating income for this segment was a net loss of $2.7
million realized in 1997 on the sale of various non-core assets. Excluding this
loss, operating income would have increased 49% in 1997 over 1996. These
improvements reflected improvements in the sale of completion products and
oilfield services due to improved market conditions, primarily as a result of
increased drilling activity, improved pricing and the introduction of downhole
services into new markets.
Total oilfield services revenues increased 26% from $527.4 million in 1996
to $665.5 million in 1997, reflecting increased volume of activity and improved
pricing resulting from a 15% increase in worldwide drilling activity, as
reported by Baker Hughes Incorporated. The increased use of certain drilling
techniques, such as re-entry, multi-lateral, horizontal and directional
drilling, were also important contributors to revenue growth in 1997,
particularly in North America. U.S. oilfield service revenues increased 33% to
$317.7 million, while U.S. average rig count increased 21%. Revenues in Canada
increased 31%, while average Canadian rig count increased 39%. Excluding
Canada, international oilfield service revenues increased 18% compared to an
average rig count increase of 2%. International revenue increases are primarily
attributable to increased volume of rental and service activity, some pricing
improvement and the introduction of downhole services into new markets.
Completion product revenues increased 31% to $186.6 million in 1997 compared
to $139.4 million in 1996, excluding revenues of $76.9 million and $157.8
million associated with disposed businesses in 1997 and 1996, respectively.
Cementation product sales increased 32% over 1996, primarily reflecting
increased U.S. drilling activity, increased market share and the introduction of
new products. Liner hanger sales and service revenues increased 66% in 1997 over
1996, which included the results of Nodeco AS and Aarbakke AS (collectively,
"Nodeco") from the date they were acquired in May 1996. Gas lift product sales
and service revenues remained consistent with 1996 levels. Completion products
operating income increased $15.7 million, or 67%, from 1996 to 1997, primarily
as a result of the increased volume of cementation product sales, operating
efficiencies and the inclusion of the Nodeco operations for the full year of
1997.
Cost of goods sold and services and rentals declined as a percentage of
revenues from 71.7% in 1996 to 66.1% in 1997, as a result of improved pricing
in certain areas and increased volume. Selling, general and administrative
expenses for 1997 as a percentage of revenues were 11.0% compared to 10.8% for
1996.
Artificial Lift and Compression Segment
The Company's artificial lift and compression segment reported revenues and
operating income of $428.4 million and $37.6 million, respectively, for 1997,
up from $305.3 million and $19.5 million, respectively, for 1996. These
improvements were primarily due to increased sales of artificial lift equipment
in the Canadian and South American markets, in particular for the Company's
progressing cavity pump product lines. Sales of and operating income
attributable to artificial lift equipment were also materially benefited by
acquisitions in 1997. During 1997, the acquisitions of Trico, BMW Monarch and
BMW Pump and various small acquisitions benefited 1997 revenues and operating
income in this segment by $64.9 million and $6.8 million, respectively.
Revenues from sales and rental of compression equipment increased 16% to
$178.9 million in 1997, compared to $154.5 million in 1996. Manufacturing and
packaging revenues increased 21% to $78.2 million in 1997 compared to 1996,
primarily as a result of a higher volume of packaged unit sales in Canada.
Compressor rental and service revenues improved 12% to $100.7 million compared
to 1996, reflecting the expansion and increased utilization of the Company's
compressor rental fleet, which comprised over 440,000 horsepower at December
31, 1997.
Cost of goods sold and services and rentals declined as a percentage of
revenues from 73.8% in 1996 to 71.5% in 1997, as a result of an improvement in
the segment's domestic cost structure and from the December 1997 acquisitions
of Trico, BMW Pump and BMW Monarch. Selling, general and administrative
expenses for 1997 as a percentage of revenues was 19.8% compared to 19.8% for
1996 in spite of higher amortization and combination expenses. The Company
will continue in 1998 to focus on reducing selling, general and administrative
expenses through the integration of acquired operations.
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During 1996, the Company began the construction of a new Canadian
manufacturing plant to produce continuous rods, which is expected to expand
capacity by over 150%. The continuous rod expansion was completed late in the
fourth quarter of 1997. The new Canadian plant will also manufacture rotors
and stators for its progressing cavity pumps pursuant to an exclusive license
and technology transfer arrangement with Netzsch providing for customary
royalty on sales of these products manufactured using this technology.
Production of rotors and stators at this facility commenced in March 1998.
Other
Corporate expenses as a percentage of revenues for 1997 were 1.9% as
compared to 2.7% for 1996. The percentage decrease from 1996 was primarily
attributable to the growth in 1997 revenues.
The Company owns an interest of 50% or less in several joint ventures,
primarily in the oilfield services segment. The Company's equity in the
earnings of these affiliates was $2.6 million in 1997 compared to $2.1 million
in 1996. This increase was primarily attributable to increased drilling
activity in Saudi Arabia. The Company received cash dividends from its 50% or
less-owned affiliates totaling $1.3 million and $1.6 million in 1997 and 1996,
respectively.
Interest expense for 1997 was $43.3 million compared to $39.4 million for
1996. The increase in interest expense in 1997, as compared to 1996, reflects
the Company's increase in indebtedness during 1997 and the Company's $402.5
million principal amount of the Debentures issued in November 1997. This
increase in interest expense was offset by repayments of indebtedness with cash
provided from the sale of non-core businesses. Interest expense for 1998 is
expected to increase from 1997 levels as a result of the November 1997 issuance
of the Debentures. The increase in 1998 will be partially offset due to the
December 1997 acquisition of approximately $119.98 million principal amount of
the Senior Notes.
In 1997, the Company benefited from a one-time pre-tax gain of $3.4 million
relating to the sale by the Company of the Parker Drilling Company ("Parker")
common stock received in connection with the disposition of the Mallard
Division.
Other income, net, for 1997 was $0.6 million which primarily consisted of
gain on sales of fixed assets of $2.8 million offset by foreign currency losses
of $1.8 million due to the fluctuation of the U.S. dollar against the major
foreign currencies in which the Company conducts business. The net foreign
currency loss recorded in 1997 primarily resulted from the strengthening of the
U.S. dollar against European, Asian and Latin American currencies.
Additionally, the Company recorded foreign currency gains of $49,000 in 1996.
The income tax provision consists of taxes on foreign earnings, foreign
taxes withheld on certain remittances from international subsidiaries, U.S.
federal and state taxes, the recognition of general business tax credits
currently available to reduce U.S. federal income tax, and the recognition of
future taxable amounts. The Company's effective tax rate on income from
continuing operations for 1997 was approximately 35% as compared to 31% for
1996. The 1996 effective rate was favorably impacted by a $4.0 million tax
benefit resulting from the Company's $6.4 million settlement in October 1996
with the United States Internal Revenue Service (the "I.R.S.") in connection
with the dissolution in October 1990 of an oil and gas joint venture. The
Company also recorded in 1996 a tax charge of approximately $44.6 million
associated with the Company's gain on the sale of its Mallard Division.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
General
Income from continuing operations for 1996 was $92.2 million on revenues of
$1,467.3 million, as compared to a loss from continuing operations for 1995 of
$8.3 million on revenues of $1,125.8 million. Revenues during 1996 increased
approximately 30% from 1995 as a result of various acquisitions and improved
market conditions. The increase in income from continuing operations for 1996
was primarily attributable to increased sales and margins of drill pipe and
other drilling products. During 1996, the acquisitions of Nodeco, Geremia,
Superior Tube Limited ("Superior"), Tubular Corporation of America ("TCA") and
ENERPRO International, Inc. ("ENERPRO"), in addition to various small 1996
acquisitions benefited 1996 revenues by $112.4 million and income from
continuing operations by $8.7 million. Revenues associated with disposed
businesses were $157.8 million and $174.9 million in 1996 and 1995,
respectively. Income from continuing operations associated with the disposed
businesses was $9.6 million in 1996 and a net loss of $1.7 million in 1995.
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<PAGE> 10
Net income for the year ended December 31, 1996, was $165.8 million
compared to net income of $0.4 million for the year ended December 31, 1995.
Included in net income for 1996 was a one-time gain, net of taxes of $44.6
million, of $66.9 million from the November 1996 sale by the Company of Mallard
Division for cash of approximately $306.9 million and 3.1 million shares of
Parker preferred stock that were subsequently converted into 3.1 million shares
of Parker common stock in December 1996 and sold in 1997. Also included in net
income for 1996 was income from discontinued operations, net of taxes, of $7.5
million related to the operations of the contract drilling division.
During the second quarter of 1995, Enterra Corporation, a corporation
previously merged with Weatherford in 1995, ("Enterra") recorded unusual
charges totaling $28.3 million, representing writedowns to fair value of
certain businesses to be disposed of, asset writedowns related to certain
excess facilities, equipment and inventories, and estimated costs in connection
with the closure of certain pipeline businesses and the consolidation of
certain oilfield service administrative and operating facilities. During the
fourth quarter of 1995, the Company recorded expenses of $59.9 million related
to the Enterra merger and the financial impact of management decisions related
to the future operations of the combined companies. These acquisition-related
costs primarily consisted of transaction costs, severance and termination
agreements with former officers and employees, facility closure costs primarily
to consolidate the oilfield services operations and administrative functions of
Enterra and the Company, and the reduction in recorded value of certain assets
that had diminished future value in the operations of the combined company.
The Company incurred research and development costs of $9.2 million in 1996
increased 42.0% over 1995. This increase primarily reflects the expansion of
the Company's operations and the development of new products for drilling
products to support high performance applications and for service equipment
designs to support the oilfield products and services businesses.
Of the Company's 1996 sales, 49%, 13%, 7%, 11% and 8%, respectively, were
attributable to sales in the U.S., Europe, Africa, Canada and Latin America,
respectively and for 1995 represented 50%, 12%, 7%, 15% and 7%, respectively.
U.S. sales for 1996 and 1995 included sales to U.S. distributors and other
U.S. companies for ultimate use outside the U.S.
Drilling Products Segment
Sales of drilling products in 1996 were $337.3 million compared to $149.5
million in 1995. Operating income associated with the drilling products
segment in 1996 was $42.6 million as compared to $14.4 million in 1995.
Results in the fourth quarter of 1996 include a $4.3 million charge
attributable to the close of the Company's Bastrop tool joint facility and
relocation of its equipment to other facilities. Results for 1996 reflected a
73% increase in sales of drill pipe and a 27% increase in sales of premium
tubulars. The increase in drill pipe sales reflected an overall increase in
demand for drill pipe and the Company's June 1995 acquisition of Prideco, Inc.
The increase in demand for drill pipe was due to increased drilling activity,
particularly offshore, and a continuing decline in the supply of used drill
pipe inventory, against which the Company historically competed. The increase
in sales of premium tubular products reflected the acquisitions of ENERPRO, TCA
and Superior and an increase in demand associated with increased natural gas
and deep offshore exploration and production activity. During 1996, the
acquisitions of ENERPRO, TCA, and Superior benefited 1996 revenues by $66.8
million and operating income by $8.0 million.
Cost of goods sold and services and rentals declined as a percentage of
revenues from 83.7% in 1995 to 81.3% in 1996, as a result of an improvement in
the segment's cost structure due to an increase in volume and the
consolidation of manufacturing processes. In the third and fourth quarters of
1996, the Company implemented price increases on drill pipe, which the Company
began to receive as its 1996 backlog was filled. Price improvements, however,
were partially offset by an increase in the price of raw materials,
particularly "green" tubing, the primary material used by the Company in the
production of its tubular goods. Selling, general and administrative expenses
for 1996 as a percentage of revenues were 6.1% compared to 6.7% for 1995.
Completion and Oilfield Products and Services Segment
The Company's completion and oilfield products and services segment reported
revenues and operating income of $824.6 million and $146.3 million,
respectively, for 1996, up from $759.3 million and $5.1 million, respectively,
for 1995. Included in operating income for this segment were charges of $59.2
million in 1995, relating to the merger with Enterra Corporation. Excluding
these charges, operating income would have increased 128% in 1996 over 1995.
This improvement was primarily due to the increase in higher drilling levels,
the introduction of fishing and other downhole services into certain markets in
North and West Africa and Latin America in 1996, the introduction of new
cementation products and
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<PAGE> 11
increased pricing on services and rentals. The 1996 segment revenues and
operating income were also benefited by $30.3 million and $4.5 million,
respectively, from the Nodeco acquisition.
Revenues for the oilfield services increased 12% to $527.4 million in 1996
as compared to 1995. International service revenues increased 16% to $285.9
million, while U.S. service revenues increased 7% to $241.1 million. The
increase in international service revenues is primarily attributable to
increased activity in Canada, the North Sea, North and West Africa and Latin
America. The increase in Canada is consistent with the 17% increase in the
average drilling rig count over 1995. The average international drilling rig
count, excluding Canada, increased 5% over the prior year, which contributed to
the increase in international service revenues. International service revenues
also benefited from the introduction of fishing and other downhole services
into certain markets in North and West Africa and Latin America in 1996. U.S.
service revenues were positively impacted by an increase in the average 1996
U.S. drilling rig count of 7% over 1995, as well as price increases announced
by the Company in August 1996 affecting most U.S. services and rentals.
Excluding the impact of the acquisition-related costs and other unusual charges
in 1995, operating income for oilfield services increased 27% to $93.6 million
in 1996 as compared to 1995. This increase is attributable to the increase in
revenues experienced in 1996, along with cost savings achieved from the higher
levels of activity and from efficiencies resulting from consolidating the
operations of the Company. These increases were partially offset by additional
costs incurred to introduce fishing and other downhole services into the markets
discussed above.
Completion product revenues, excluding revenues associated with disposed
businesses, increased 30% to $186.6 million in 1996 compared to 1995,
reflecting improved operating results from all manufacturing businesses. The
Company acquired the business and assets of Nodeco, a Norwegian liner hanger
manufacturer, in May 1996. The Nodeco operations contributed $18.4 million, or
16%, to the revenue increase. Cementation product sales improved significantly
over the prior year due to an increase in market share and the higher levels of
drilling activity worldwide. Excluding the impact of the acquisition-related
costs and other unusual charges discussed below, operating income increased over
800% to $23.4 million compared to 1995. Approximately $4.0 million of the
increase in operating income is attributable to the Nodeco operations. The
remaining increase is due to the increase in revenues, combined with
manufacturing efficiencies achieved as a result of the higher volume of product
sales.
Cost of goods sold and services and rentals declined as a percentage of
revenues from 73.3% in 1995 to 71.7% in 1996, as a result of the 1996
acquisition, cost savings achieved from the higher levels of activity and from
efficiencies resulting from consolidating the operations of the Company. These
increases were partially offset by additional costs incurred to introduce
fishing and other downhole services into the markets discussed above. Selling,
general and administrative expenses for 1996 as a percentage of revenues were
10.8% compared to 14.7% for 1995.
Artificial Lift and Compression Products Segment
Revenues and operating income at the Company's artificial lift and
compression products segment were $305.3 million and $19.5 million,
respectively, for 1996, compared to $217.0 million and $16.3 million,
respectively, for 1995. As described above, the production equipment segment
recorded a charge of $1.5 million in the fourth quarter of 1996 associated with
the consolidation of two packer manufacturing facilities improved market
conditions and the effects of acquisitions. During 1996, the acquisitions of
Geremia, in addition to various small 1996 acquisitions, benefited 1996
revenues by $15.3 million and operating income by $1.6 million.
Revenues from sales and rentals of compression products and services
increased 64% to $154.5 million in 1996 as compared to 1995, primarily as a
result of the acquisition of the natural gas compression business and assets of
Energy Industries, Inc. and Zapata Energy Industries, L.P. (collectively,
"Energy Industries") in December 1995. This increase was offset by a weaker
market for sales of gas compressor packages, which resulted in a lower volume
of manufacturing and packaging sales as well as lower prices for packaged
compressors. Operating income attributable to compression products and
services increased only slightly over 1995 due to the weaker market,
inefficiencies incurred in consolidating the packaging operations of Energy
Industries into the Company's existing gas compression business, and
amortization of goodwill arising from the Energy Industries acquisition.
Other
Corporate expenses as a percentage of revenues for 1996 were 2.7% as
compared to 2.1% for 1995. The percentage decrease in 1996 was primarily
attributable to the growth in revenues from the Company's drilling products
segment.
The Company owns an interest of 50% or less in several joint ventures,
primarily in the oilfield services segment. The Company's equity in the
earnings of these affiliates was $2.1 million in 1996 compared to $1.5
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million in 1995. This increase was primarily attributable to increased
drilling activity in Saudi Arabia. The Company received cash dividends from its
50% or less-owned affiliates totaling $1.6 million and $1.7 million in 1996 and
1995, respectively.
Interest expense for 1996 of $39.4 million was comparable to $33.5 million
for 1995.
Other expense, net, was $1.2 million in 1996 which primarily represents
various financing costs of the Company. The 1995 other income, net, of $6.1
million consists of a gain on sale of assets.
The Company's effective tax rate on income from continuing operations for
1996 was approximately 31%. The effective rate was favorably impacted by a
$4.0 million tax benefit in the fourth quarter of 1996 resulting from the
Company's $6.4 million settlement in October 1996 with the United States I.R.S.
in connection with the dissolution in October 1990 of an oil and gas joint
venture. The Company also recorded a tax charge of approximately $44.6 million
associated with the Company's gain on the sale of its Mallard Division in
November 1996.
NEW ACCOUNTING PRONOUNCEMENTS
In 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings per Share,
which replaces primary earnings per share with basic earnings per share and
requires dual presentation of basic and diluted earnings per share. The
Company adopted SFAS No. 128 in the fourth quarter of fiscal 1997. Historical
earnings per share data has been restated to reflect the adoption of SFAS No.
128.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS No. 130 establishes
standards for the reporting of comprehensive income and its components in a
full set of general-purpose financial statements and is effective for years
beginning after December 15, 1997. The Company adopted SFAS No. 130 in the
first quarter of 1998. Had SFAS No. 130 been adopted as of December 31, 1997,
the primary adjustments and reclassifications to reflect net income on a
comprehensive income basis for the years presented would have consisted of
foreign currency translation adjustments and the effect of unrealized and
realized gains on marketable securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 ("SFAS No. 131"), Disclosures About Segments of an Enterprise and Related
Information. SFAS No. 131, effective for years beginning after December 15,
1997, requires segment information to be reported on a basis consistent with
that used internally for evaluating segment performance and deciding how to
allocate resources to segments. The Company will adopt SFAS No. 131 in 1998
and is reviewing its segments in light of SFAS No. 131.
In 1998, the FASB issued Statement of Accounting Standards No. 132 ("SFAS No.
132"), Employers' Disclosures About Pensions and Other Postretirement Benefits.
SFAS No. 132 standardizes disclosure requirements for pensions and other
postretirement benefits. SFAS No. 132 will be effective for years beginning
after December 15, 1997. Had the Company adopted SFAS No. 132 as of December
31, 1997, it would have had no material impact on the consolidated financial
statements of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $74.2
million compared to $257.0 million at December 31, 1996. The reduction in cash
and cash equivalents since December 31, 1996, was primarily attributable to the
acquisition of the Senior Notes pursuant to the Tender Offer for $119.98
million, the use of approximately $321.5 million in cash to acquire new
businesses, the reduction of bank debt of $96.0 million and tax payments of
approximately $62.8 million relating to the 1996 sale of the Mallard Division.
The reduction in cash was partially offset by the net proceeds of $390.9
million relating to the sale of the Debentures in November 1997 and $68.8
million cash proceeds generated from the 1997 divestitures of CRC-Evans, TEST
and Cranes.
At December 31, 1997, the Company had outstanding $24.2 million in borrowings
under its working capital facilities compared to $2.9 million at December 31,
1996. In addition, the Company had outstanding approximately $27.9 million and
$28.1 million in letters of credit at December 31, 1997 and December 31, 1996,
respectively.
At March 31, 1998, the Company had cash and cash equivalents of $42.5 million
reflecting the use of cash primarily for acquisitions. At March 31, 1998, the
Company had outstanding $133.6 million in borrowings under its working capital
facilities. In addition, the Company had outstanding approximately $27.6
million in letters of credit at March 31, 1998.
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In April 1997, the Company sold its investment in Parker common stock
pursuant to a public offering effected by Parker. The net proceeds received by
the Company were approximately $23.4 million.
In November 1997, the Company completed a private placement of $402.5 million
principal amount of the Debentures. The net proceeds from the Debentures were
$390.9 million. The Debentures bear interest at an annual rate of 5% and are
convertible into Common Stock at a price of $80 per share. The Debentures are
redeemable by the Company at any time on or after November 4, 2000, at
redemption prices provided for in the indenture related to the Debentures, and
are subordinated in right of payment of principal and interest to the prior
payment in full of certain existing and future senior indebtedness of the
Company. The Company also has the right to defer payments of interest on the
Debentures by extending the quarterly interest payment period on the Debentures
for up to 20 consecutive quarters at anytime when the Company is not in default
in the payment of interest.
In December 1997, Weatherford purchased 289,200 shares of its common stock in
the open market for approximately $11.9 million and in February 1998 purchased
an additional 1,040,300 shares of its common stock for approximately $37.4
million.
On May 27, 1998, the Company amended its credit facility to consolidate EVI's
and Weatherford's then existing credit facilities into a single facility. The
new credit facility provides for borrowings of up to an aggregate of $250.0
million, consisting of a $200.0 million U.S. credit facility and a $50.0
million Canadian credit facility and terminated both of EVI's and Weatherford's
working capital facilities. Borrowings under the new credit facility bear
interest at a variable rate based on prime or LIBOR and are unsecured. In
addition, the Company's credit facility contains customary affirmative and
negative covenants, including debt incurrence tests, interest coverage ratio,
negative pledges, acquisitions over certain levels and certain dispositions of
assets.
The Company conducts a portion of its business in currencies other than the
U.S. dollar, including the Canadian dollar, major European currencies and
certain Latin American currencies. Although most of the revenues of the
Company's international operations are denominated in the local currency, the
effects of foreign currency fluctuations are largely mitigated because local
expenses of such foreign operations also generally are denominated in the same
currency. Changes in the value of the U.S. dollar relative to these foreign
currencies affect the weighted average currency exchange rates used to
translate the statements of income of the Company's international subsidiaries
into U.S. dollars. The impact of exchange rate fluctuations during the first
quarter of 1998, the year ended 1997, 1996 and 1995 did not have a material
effect on reported amounts of revenues or net income. The increase in the
value of the U.S. dollar against most major currencies during 1997 caused the
cumulative translation adjustment, a reduction in stockholders' equity, to
increase by $27.0 million.
The Company enters into forward exchange contracts only as a hedge against
certain existing economic exposures, and not for speculative or trading
purposes. These contracts reduce exposure to currency movements affecting
existing assets and liabilities denominated in foreign currencies, such
exposure resulting primarily from trade receivables and payables and
intercompany loans. The future value of these contracts and the related
currency positions are subject to offsetting market risk resulting from foreign
currency exchange rate volatility. Settlement of forward exchange contracts
resulted in net cash inflows totaling $0.8 million and $5.2 million during the
first three months of 1998 and for the year ended December 31, 1997,
respectively.
Like most multinational oilfield service companies, the Company has
operations in certain international areas, including parts of the Middle East,
North and West Africa, Latin America, the Asia-Pacific region and the
Commonwealth of Independent States (the "CIS"), that are inherently subject to
risks of war, political disruption, civil disturbance and policies that may
disrupt oil and gas exploration and production activities, restrict the
movement of funds, lead to U.S. government or international sanctions or limit
access to markets for periods of time Historically, the economic impact of
such disruptions has been temporary and oil and gas exploration and production
activities have resumed eventually in relation to market forces. Certain
areas, including the CIS, Algeria, Nigeria, and parts of the Middle East, the
Asia Pacific region and Latin America, have been subjected to political
disruption or social unrest in the past twelve months. Generally, business
interruptions resulting from civil or political disruptions negatively impact
near-term results of operations; however, management believes that it is
unlikely that any specific business disruption caused by existing or foreseen
civil or political instability will have a materially adverse impact on the
financial condition or liquidity of the Company.
The Company's current sources of capital are its current cash, cash generated
from operations and borrowings under its working capital line of credit. The
Company believes that the current reserves of cash and short-term investments,
access to its existing credit line and internally generated cash from
operations are sufficient to finance the projected cash requirements of its
current and future operations. The Company is continually reviewing
acquisitions in its
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<PAGE> 14
markets. Depending upon the size, nature and timing of an acquisition, the
Company could require additional capital in the form of either debt, equity or
a combination of both.
Substantially all of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations.
CAPITAL EXPENDITURES
Capital expenditures for property, plant and equipment by the Company during
the year ended December 31, 1997, totaled approximately $213.0 million and
primarily related to drill pipe and tubing, fishing tools, tubular service
equipment, compression rental equipment and plant expansions in Canada. In 1997,
the Company completed the expansion of the Veracruz, Mexico tool joint
manufacturing facility, and the Company recorded the obligation of $16.3 million
under its lease to reflect the terms thereof.
Capital expenditures for property, plant and equipment by the Company during
the quarter ended March 31, 1998, totaled approximately $49.4 million and was
primarily related to ongoing routine capital expenditures for 1998. Ongoing
routine capital expenditures for the remainder of 1998 are estimated to be
approximately $200.0 million. Capital expenditures are expected to be funded
with available cash, cash flow from operations and, if desirable, borrowings
under its existing line of credit and other facilities.
In 1997, the Company began modifying its computer system programming to
process transactions in the year 2000. Anticipated spending for this
modification will be expensed as incurred and is not expected to be material.
CHRISTIANA AND GULFMARK MERGERS
In December 1997, the Company entered into a merger agreement with Christiana
Companies, Inc. ("Christiana") and C2, Inc., Wisconsin corporations, pursuant
to which approximately 3.9 million shares of Common Stock will be issued to the
stockholders of Christiana in a merger of a subsidiary of the Company with and
into Christiana ("Christiana Merger"). Prior to the Christiana Merger,
Christiana is required to sell two-thirds of its interest in Total Logistic
Control ("Logistic"), a wholly owned subsidiary of Christiana, to C2, Inc. for
approximately $10.7 million. Following the Logistic sale, the remaining assets
of Christiana will consist of (i) approximately 3.9 million shares of Common
Stock, (ii) a one-third interest in Logistic and (iii) cash and other assets
with a book value of approximately $10.0 million and (iv) subject to early
payment under certain circumstances, a contingent cash payment of up to $10.0
million payable five years after the effective date of the merger to the extent
such funds are not required to satisfy contingent claims against Christiana.
It is anticipated that Christiana will have no material debt as of the
consummation of the Christiana Merger, but will have various tax liabilities
which will be paid with the remaining cash balance in Christiana after the
Christiana Merger. Because the number of shares of Common Stock issuable in
the proposed Christiana Merger approximates the number of shares of Common
Stock currently held by Christiana, the Christiana Merger is expected to have
no material effect on the outstanding number of shares of Common Stock or
equity of the Company.
The Christiana Merger is subject to various conditions, including approval by
the stockholders of the Company and Christiana. Although there can be no
assurance that the Christiana Merger will close, the Company currently
anticipates that the acquisition will be consummated shortly after receipt of
the approval of the Christiana Merger by the shareholders of the Company and
Christiana, and the approval of the Logistic sale by the stockholders of
Christiana.
On May 1, 1997, the Company acquired GulfMark International, Inc. ("GulfMark")
pursuant to a merger in which approximately 4.4 million shares of Common Stock
were issued to the stockholders of GulfMark. Prior to the merger, GulfMark
effected a spin-off to its stockholders of its marine transportation services
business. The retained assets of GulfMark that were acquired by the Company in
the transaction consisted of approximately 4.4 million shares of Common Stock,
an erosion control business and certain other miscellaneous assets. Because
the number of shares of Common Stock issued in the GulfMark acquisition
approximated the number of shares of Common Stock held by GulfMark prior to the
acquisition, the GulfMark acquisition had no material effect on the outstanding
number of shares of Common Stock or equity of the Company. The shares of
Common Stock received pursuant to this transaction are classified as "Treasury
Stock, at Cost" in the accompanying Supplemental Consolidated Balance Sheet.
14
<PAGE> 15
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
sales, earnings, margins, production levels and costs, expected savings from
acquisitions and plant expansions, demand for products, product deliveries,
market trends in the oil and gas industry and the oilfield service sector
thereof, research and development, environmental and other expenditures,
currency fluctuations and various business trends. See Market Trends.
Forward-looking statements may be made by management orally or in writing
including, but not limited to, this Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of the
Company's filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and the Securities Act of 1933.
Actual results and trends in the future may differ materially depending on a
variety of factors including, but not limited to, whether and for how long the
current pricing trend for oil will continue and the effect thereof on the
demand and price of the Company's products, changes in the price of oil and
gas, changes in the domestic and international rig count, global trade
policies, domestic and international drilling activities, the impact of the
economic downturn in Southeast Asia on the worldwide economies and associated
demand for oil, world-wide political stability and economic growth, including
currency fluctuations, government export and import policies, technological
advances involving the Company's products, the Company's successful execution
of internal operating plans and manufacturing consolidations and
restructurings, performance issues with key suppliers and subcontractors, the
ability of the Company to maintain price increases and market shares, raw
material costs changes, collective bargaining labor disputes, regulatory
uncertainties and legal proceedings. Future results will also be dependent
upon the ability of the Company to successfully integrate the operations of
Weatherford with the Company, as well as its ability to continue to identify
and complete successful acquisitions at acceptable prices, integrate those
acquisitions with the Company's other operations and penetrate existing and new
markets.
15
<PAGE> 16
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents ............................. $ 42,500 $ 74,211
Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $25,300 and $23,473, Respectively ...... 536,816 524,929
Inventories ........................................... 499,387 455,811
Other Current Assets .................................. 101,199 79,125
----------- -----------
1,179,902 1,134,076
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION ....................... 886,351 866,813
GOODWILL, NET ............................................... 755,962 668,475
OTHER ASSETS ................................................ 87,230 68,546
----------- -----------
$ 2,909,445 $ 2,737,910
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under Revolving
Lines of Credit .................................... $ 133,638 $ 24,243
Current Maturities of Long-Term Debt .................. 14,405 13,178
Accounts Payable ...................................... 201,948 218,810
Accrued Salaries and Benefits ......................... 42,325 63,656
Current Tax Liabilities ............................... 59,906 44,317
Other Accrued Liabilities ............................. 151,819 138,965
----------- -----------
604,041 503,169
----------- -----------
LONG-TERM DEBT .............................................. 252,527 252,322
DEFERRED INCOME TAXES AND OTHER ............................. 138,035 121,370
5% CONVERTIBLE SUBORDINATED PREFERRED
EQUIVALENT DEBENTURES ................................. 402,500 402,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $1 Par Value, Authorized 250,000 Shares,
Issued 101,507 and 101,958, Respectively ........... 101,507 101,958
Capital in Excess of Par Value ........................ 1,052,109 1,018,024
Treasury Stock, at Cost ............................... (203,130) (165,287)
Retained Earnings ..................................... 603,491 542,348
Cumulative Foreign Currency Translation Adjustment .... (41,635) (38,494)
----------- -----------
1,512,342 1,458,549
----------- -----------
$ 2,909,445 $ 2,737,910
=========== ===========
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated condensed financial statements.
16
<PAGE> 17
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
REVENUES:
Products .......................................... $ 363,396 $ 219,979
Services and Rentals .............................. 210,064 211,274
--------- ---------
Total Revenues ................................. 573,460 431,253
COSTS AND EXPENSES:
Cost of Products .................................. 249,066 162,793
Cost of Services and Rentals ...................... 133,106 144,198
Selling, General and Administrative Attributable
to Segments .................................... 73,240 49,219
Corporate General and Administrative .............. 8,228 8,564
Equity in Earnings of Unconsolidated Affiliates.... (780) (509)
--------- ---------
OPERATING INCOME ........................................ 110,600 66,988
--------- ---------
OTHER INCOME (EXPENSE):
Interest Income ................................... 648 3,280
Interest Expense .................................. (12,011) (10,545)
Other, Net ........................................ (1,275) (1,102)
--------- ---------
INCOME BEFORE INCOME TAXES .............................. 97,962 58,621
PROVISION FOR INCOME TAXES .............................. 36,819 20,718
--------- ---------
NET INCOME .............................................. $ 61,143 $ 37,903
========= =========
EARNINGS PER SHARE:
Basic ............................................. $ 0.63 $ 0.40
========= =========
Diluted ........................................... $ 0.63 $ 0.39
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic ............................................. 96,761 95,302
========= =========
Diluted ........................................... 97,625 96,704
========= =========
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated condensed financial statements.
17
<PAGE> 18
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................. $ 61,143 $ 37,903
Adjustments to Reconcile Net Income to Net Cash
Used by Operating Activities:
Depreciation and Amortization ............................ 41,940 34,023
Gain on Sale of Property, Plant and Equipment ............ (3,473) (2,868)
Deferred Income Tax Provision ............................ 2,627 2,279
Change in Operating Assets and Liabilities, Net of Effects
of Businesses Acquired ................................. (81,669) (73,977)
--------- ---------
Net Cash Provided (Used) by Operating Activities ....... 20,568 (2,640)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Income Taxes Paid on Gain on Disposal of Discontinued
Operations ............................................... -- (62,808)
Acquisition of Businesses, Net of Cash Acquired ............ (78,056) (30,179)
Capital Expenditures for Property, Plant and Equipment ..... (49,403) (30,289)
Proceeds from Sale of Property, Plant and Equipment ........ 6,715 7,595
Other, Net ................................................. 3,928 305
--------- ---------
Net Cash Used by Investing Activities .................... (116,816) (115,376)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Lines of Credit, Net ............ 109,395 3,904
Repayments on Term Debt, Net ............................... (9,637) (12,834)
Proceeds from Exercise of Stock Options .................... 2,208 2,900
Acquisitions of Treasury Stock ............................. (37,686) (425)
Currency Hedging Transactions, Net ......................... 822 2,409
--------- ---------
Net Cash Provided (Used) by Financing Activities ......... 65,102 (4,046)
--------- ---------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH ......................... (565) (1,190)
NET DECREASE IN CASH AND CASH EQUIVALENTS ........................ (31,711) (123,252)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................. 74,211 256,995
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................... $ 42,500 $ 133,743
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid .............................................. $ 7,288 $ 8,880
Income Taxes Paid, Net of Refund ........................... $ 12,922 $ 67,349
</TABLE>
The accompanying notes are an integral part of these supplemental
consolidated condensed financial statements.
18
<PAGE> 19
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) General
The unaudited supplemental consolidated condensed financial statements
included herein have been prepared by EVI Weatherford, Inc. (the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
These supplemental financial statements reflect all adjustments which the
Company considers necessary for the fair presentation of such supplemental
financial statements for the interim periods presented. Although the Company
believes that the disclosures in these financial statements are adequate to make
the interim information presented not misleading, certain information relating
to the Company's organization and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted. These supplemental financial
statements should be read in conjunction with the restated supplemental audited
consolidated financial statements and notes thereto included herein for the year
ended December 31, 1997. The results of operations for the three month period
ended March 31, 1998 are not necessarily indicative of the results expected for
the full year.
On May 27, 1998, EVI, Inc. ("EVI") completed a merger with Weatherford
Enterra, Inc. ("Weatherford") and changed its name to EVI Weatherford, Inc. (See
Note 4). The merger was accounted for as a pooling of interests; accordingly,
the accompanying supplemental financial statements have been restated to include
the results of Weatherford for all periods presented. Certain classifications of
prior year balances have been made to conform such amounts to corresponding 1998
classifications.
(2) Comprehensive Income
Comprehensive income as defined by Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income, is net income plus direct
adjustments to stockholders' equity. The cumulative translation adjustment of
certain foreign entities is the only such direct adjustment recorded by the
Company.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Comprehensive income:
Net income ................................ $ 61,143 $ 37,903
Cumulative translation adjustment ......... (3,141) (9,185)
------------ ------------
Total comprehensive income .................. $ 58,002 $ 28,718
============ ============
</TABLE>
(3) Inventories
Inventories by category are as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components ................ $ 273,249 $ 238,349
Work in process ............................. 64,762 66,402
Finished goods .............................. 161,376 151,060
------------ ------------
$ 499,387 $ 455,811
============ ============
</TABLE>
Work in process and finished goods inventories include the cost of
material, labor and plant overhead.
19
<PAGE> 20
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(4) Acquisitions
On May 27, 1998, EVI, Inc. completed a Merger with Weatherford, merging
Weatherford with and into the Company pursuant to an expected tax free merger in
which the stockholders of Weatherford will receive 0.95 of a share of the
Company's Common Stock in exchange for each outstanding share of Weatherford
common stock. Based on the number of shares of Weatherford common stock
outstanding as of May 27, 1998, approximately 48.9 million shares will be issued
in the Merger. In addition, approximately 1.4 million shares of Common Stock
have been reserved for issuance by the Company for outstanding options under
Weatherford's compensation and benefit plans. The Merger was accounted for as a
pooling of interests; accordingly, the accompanying supplemental financial
statements have been restated to include the results of Weatherford for all
periods presented.
The separate results of EVI and Weatherford and the combined company were
as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Operating Revenues
EVI ....................... $ 316,840 $ 164,640
Weatherford ............... 259,729 267,113
Merger adjustments ........ (3,109) (500)
----------- -----------
Combined ..................... $ 573,460 $ 431,253
=========== ===========
Net Income (Loss)
EVI ....................... $ 31,277 $ 14,345
Weatherford ............... 30,487 22,952
Merger adjustments ........ (621) 606
----------- -----------
Combined ..................... $ 61,143 $ 37,903
=========== ===========
</TABLE>
Merger adjustments include the elimination of intercompany revenues of $3.1
million and $0.5 million, respectively, and cost of sales of $2.2 million and
$0.5 million, respectively, for the three months ended March 31, 1998 and 1997.
Merger adjustments for the three months ended March 31, 1997 also include the
elimination of expenses of $0.9 million recorded by Weatherford on the sale of
Arrow Completion Systems, Inc. to EVI in December 1996.
On February 19, 1998, the Company acquired Ampscot Equipment Ltd., an
Alberta corporation ("Ampscot") for approximately $57.1 million in cash. Ampscot
is a Canadian-based manufacturer of pumping units.
On January 15, 1998, the Company completed the acquisition of Taro
Industries Limited ("Taro"), an Alberta corporation, in which approximately 0.8
million shares of the Company's common stock, $1.00 par value ("Common Stock"),
have been issued or are reserved for issuance to the shareholders of Taro in
exchange for their shares of Taro stock. Taro is a Canadian provider of well
automation, gas compression, and drilling equipment distribution.
On January 12, 1998, the Company completed the acquisition of the Houston
Well Screen group of companies ("Houston Well Screen") from Van der Horst
Limited, a Singapore company, for a net purchase price of approximately $27.6
million in cash. The Houston Well Screen acquisition includes the purchase of
Van der Horst USA Inc., which is the holding company of Houston Well Screen
Company and of Houston Well Screen Asia Pte Ltd. which has operations in
Singapore and Indonesia. Houston Well Screen makes wedge-wire screen products
for use in oil and gas production and other applications.
On December 3, 1997, the Company completed the acquisition of all of the
outstanding shares of BMW Monarch (Lloydminster) Ltd. ("BMW Monarch") and BMW
Pump, Inc. ("BMW Pump") for aggregate consideration of approximately $96.8
million in cash and $14.3 million in assumed debt. On December 2, 1997, the
Company completed the acquisition of all of the capital stock of Trico
Industries, Inc., ("Trico") in exchange for $105.0 million in cash and the
assumption of $8.7 million of debt.
20
<PAGE> 21
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The acquisitions discussed above, with the exception of Weatherford, were
accounted for using the purchase method of accounting. Results of operations for
business combinations accounted for as purchases are included in the
accompanying supplemental consolidated financial statements since the date of
acquisition. With respect to business combination accounted for as a pooling of
interests, the consolidated financial statements have been restated for all
periods presented as if the companies had been combined since inception.
(5) Long-Term Debt
In February 1998, the Company entered into a new credit agreement which
provides for borrowings of up to an aggregate of $250.0 million, consisting of a
$200.0 million U.S. credit facility and a $50.0 million Canadian credit facility
and terminated its prior working capital facilities. Borrowings under the new
credit facility bear interest at a variable rate based on either prime or LIBOR
and are secured by pledges of various stock of the Company's domestic and
foreign subsidiaries. In addition, certain of the Company's domestic
subsidiaries are guarantors of the facility.
In May 1998, the Company amended the $250.0 million revolving credit
facility and terminated its $200.0 million revolving credit facility (See Note
10).
(6) Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year. Diluted
earnings per common share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year adjusted
for the dilutive effect of the incremental shares that would have been
outstanding under the Company's stock option plans. The effect of the Company's
5% Convertible Subordinated Preferred Equivalent Debentures due 2027 (the
"Debentures") on diluted earnings per share is anti-dilutive and, thus, has no
impact.
The following reconciles basic and diluted weighted average shares:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Basic weighted average number of
shares outstanding ........................ 96,761 95,302
Dilutive effect of stock option plans ....... 864 1,402
-------- --------
Dilutive weighted average number of
shares outstanding ........................ 97,625 96,704
======== ========
</TABLE>
(7) Supplemental Cash Flow Information
The following summarizes investing activities relating to acquisitions:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Fair value of assets, net of cash acquired .. $ 63,489 $ 20,477
Goodwill .................................... 94,430 20,109
Total liabilities ........................... (48,968) (10,407)
Common Stock issued ......................... (30,895) --
-------- --------
Cash consideration, net of cash acquired .... $ 78,056 $ 30,179
======== ========
</TABLE>
21
<PAGE> 22
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(8) Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), Disclosures About Segments of an Enterprise and Related
Information, in the first quarter of 1998. SFAS No. 131 requires segment
information to be reported on a basis consistent with that used internally for
evaluating segment performance and deciding how to allocate resources to
segments. Quarterly disclosures are not required in the first year of adoption.
The adoption of SFAS No. 131 has not resulted in a change in the manner the
Company reports segment information and related disclosures.
In 1998 the FASB issued Statement of Accounting Standards No. 132 ("SFAS
No. 132"), Employers' Disclosures About Pensions and Other Postretirement
Benefits. SFAS No. 132 standardizes annual disclosure requirements for pensions
and other postretirement benefits. SFAS No. 132 is effective for years beginning
after December 15, 1997. SFAS No. 132 has no impact on the consolidated
condensed financial statements of the Company.
(9) Reclassifications and Restatements
Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1998 classifications.
(10) Subsequent Events
In December 1997, the Company entered into a merger agreement with
Christiana Companies, Inc. ("Christiana") and C2, Inc., Wisconsin corporations,
pursuant to which approximately 3.9 million shares of Common Stock will be
issued to the stockholders of Christiana in a merger of a subsidiary of the
Company with and into Christiana.
22
<PAGE> 23
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
("Christiana Merger"). Prior to the Christiana Merger, Christiana is required to
sell two-thirds of its interest in Total Logistic Control ("Logistic"), a wholly
owned subsidiary of Christiana, to C2, Inc. for approximately $10.7 million.
Following the Logistic sale, the remaining assets of Christiana will consist of
(i) approximately 3.9 million shares of Common Stock, (ii) a one-third interest
in Logistic, (iii) cash and other assets with a book value of approximately
$10.0 million and (iv) a contingent cash payment of up to $10.0 million payable
five years after the effective date of the merger to the extent such funds are
not required to satisfy contingent claims against Christiana. It is anticipated
that Christiana will have no material debt as of the consummation of the
Christiana Merger, but will have various tax liabilities which will be paid with
the remaining cash balance in Christiana after the Christiana Merger. Because
the number of shares of Common Stock issuable in the proposed Christiana Merger
approximates the number of shares of Common Stock currently held by Christiana,
the Christiana Merger is expected to have no material effect on the outstanding
number of shares of Common Stock or equity of the Company.
The Christiana Merger is subject to various conditions, including approval
by the stockholders of the Company and Christiana and the receipt of required
regulatory approvals. Although there can be no assurance that the Christiana
Merger will close, the Company currently anticipates that the acquisition will
be consummated shortly after receipt of such regulatory approvals and the
approval of the Christiana Merger by the shareholders of the Company and
Christiana. The Company currently expects that a meeting of its stockholders to
consider the Christiana Merger will be held in the third quarter of 1998.
In May 1998, the Company amended its $250.0 million revolving credit
facility and terminated its $200.0 million revolving credit facility. Amounts
outstanding under the amended facility accrue interest at a variable rate based
on either prime or LIBOR and are secured by pledges of various stock of the
Company's domestic and foreign subsidiaries. In addition, certain of the
Company's domestic subsidiaries are guarantors of the facility. A commitment fee
ranging from 0.09% to 0.20% per annum, depending on the credit ratings assigned
to the 7 1/4% Senior Notes, is payable quarterly on the unused portion of the
facility. The facility contains customary affirmative and negative covenants
relating to working capital, earnings and net worth.
In the second quarter of 1998, the Company estimates that it will report
approximately $60.0 million, net of taxes, in unusual charges associated with
the Merger. Such costs primarily consists of transactions costs, severance and
termination payments to former officers and employees, facility closure costs
and costs associated with the closure of excess and duplicative distribution
and service locations primarily due to integrating EVI's businesses with
Weatherford's businesses and the impairment of various assets as a result of
the combination of operations and rationalization of product lines and the
elimination of certain products, services and operations as a result of the
changes in the operations of the Company following the Merger.
23
<PAGE> 24
INDEX TO SUPPLEMENTAL FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL STATEMENT
SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants........................................... 25
Supplemental Consolidated Balance Sheets - December 31, 1997 and 1996.............. 26
Supplemental Consolidated Statements of Income, for each of the three years
in the period ended December 31, 1997............................................ 27
Supplemental Consolidated Statements of Stockholders' Equity, for each of
the three years in the period ended December 31, 1997............................ 28
Supplemental Consolidated Statements of Cash Flows, for each of the three
years in the period ended December 31, 1997...................................... 29
Notes to Supplemental Consolidated Financial Statements............................ 30
Supplemental Financial Statement Schedule:
II. Valuation and Qualifying Accounts and Allowances........................... 54
</TABLE>
All other schedules are omitted because they are not required or because the
required information is included in the financial statements or notes thereto.
24
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EVI Weatherford, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of EVI Weatherford, Inc. (formerly EVI, Inc.) (a Delaware corporation) and
subsidiaries as of December 31, 1997 and 1996, and the related supplemental
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. These supplemental
consolidated financial statements and the schedule referred to below reflect a
restatement of the Company's previously reported amounts for the merger with
Weatherford Enterra, Inc. ("Weatherford"), see Note 1. These supplemental
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these supplemental consolidated financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of EVI Weatherford, Inc. and subsidiaries as of December 31, 1997 and
1996 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
supplemental consolidated financial statements taken as a whole. The
supplemental Financial Statement Schedule listed in Part II - Item 8 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic supplemental
consolidated financial statements. The supplemental Financial Statement Schedule
has been subjected to the auditing procedures applied in our audits of the basic
supplemental consolidated financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic supplemental consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
June 15, 1998
25
<PAGE> 26
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents ................................................ $ 74,211 $ 256,995
Accounts Receivable, Net of Allowance for Uncollectible Accounts
of $23,473,000 in 1997 and $16,824,000 in 1996 ......................... 524,929 389,633
Inventories .............................................................. 455,811 320,933
Deferred Tax Asset ....................................................... 44,904 47,733
Other Current Assets ..................................................... 34,221 46,486
----------- -----------
1,134,076 1,061,780
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land, Buildings and Other Property ....................................... 228,178 172,192
Rental and Service Equipment ............................................. 1,010,065 1,017,866
Machinery and Equipment .................................................. 393,317 283,758
----------- -----------
1,631,560 1,473,816
Less: Accumulated Depreciation .......................................... 764,747 741,804
----------- -----------
866,813 732,012
----------- -----------
GOODWILL, NET ................................................................. 668,475 390,252
OTHER ASSETS .................................................................. 68,546 59,589
----------- -----------
$ 2,737,910 $ 2,243,633
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term Borrowings .................................................... $ 24,243 $ 4,451
Current Portion of Long-Term Debt ........................................ 13,178 28,130
Accounts Payable ......................................................... 218,810 144,161
Accrued Salaries and Benefits ............................................ 63,656 41,702
Current Tax Liability .................................................... 44,317 99,343
Other Accrued Liabilities ................................................ 138,965 122,754
----------- -----------
503,169 440,541
----------- -----------
LONG-TERM DEBT ................................................................ 252,322 417,976
DEFERRED INCOME TAXES AND OTHER ............................................... 121,370 92,412
5% CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES.................... 402,500 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $1 Par Value, Authorized 250,000 Shares, Issued
101,958 Shares in 1997 and 95,493 Shares in 1996 ....................... 101,958 95,493
Capital in Excess of Par Value ........................................... 1,018,024 854,055
Treasury Stock, at Cost .................................................. (165,287) (3,405)
Retained Earnings ........................................................ 542,348 355,660
Cumulative Foreign Currency Translation Adjustment ....................... (38,494) (11,480)
Unrealized Gain on Marketable Securities ................................. -- 2,381
----------- -----------
1,458,549 1,292,704
----------- -----------
$ 2,737,910 $ 2,243,633
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
26
<PAGE> 27
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C>
REVENUES:
Products ................................................... $ 1,097,823 $ 704,350 $ 513,039
Service and Rentals ........................................ 871,266 762,920 612,764
----------- ----------- -----------
1,969,089 1,467,270 1,125,803
COSTS AND EXPENSES:
Cost of Products ........................................... 790,314 542,181 388,061
Cost of Service and Rentals ................................ 580,812 548,633 443,170
Selling, General and Administrative Attributable to
Segments ................................................. 226,737 170,129 172,050
Corporate General and Administrative ....................... 37,816 39,304 23,697
Equity in Earnings of Unconsolidated Affiliates ............ (2,582) (2,078) (1,477)
Merger-Related Costs and Unusual Charges ................... -- -- 88,182
----------- ----------- -----------
1,633,097 1,298,169 1,113,683
----------- ----------- -----------
OPERATING INCOME ................................................ 335,992 169,101 12,120
OTHER INCOME (EXPENSE):
Interest Income ............................................ 8,329 4,168 2,249
Interest Expense ........................................... (43,273) (39,368) (33,504)
Gain on Sale of Marketable Securities ...................... 3,352 -- --
Other, Net ................................................. 561 (1,227) 6,160
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ...................................... 304,961 132,674 (12,975)
PROVISION (BENEFIT) FOR INCOME TAXES ............................ 108,188 40,513 (4,707)
----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS ............................... 196,773 92,161 (8,268)
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAXES ............................................... -- 7,468 8,709
GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS,
NET OF TAXES ............................................... -- 66,924 --
EXTRAORDINARY CHARGE, NET OF TAXES .............................. (9,010) (731) --
----------- ----------- -----------
NET INCOME ...................................................... $ 187,763 $ 165,822 $ 441
=========== =========== ===========
BASIC EARNINGS PER SHARE:
Income From Continuing Operations .......................... $ 2.04 $ 1.03 $ (0.10)
Income From Discontinued Operations ........................ -- 0.08 0.11
Gain on Disposal of Discontinued Operations ................ -- 0.75 --
Extraordinary Charge ....................................... (0.09) (0.01) --
----------- ----------- -----------
Net Income Per Share ....................................... $ 1.95 $ 1.85 $ 0.01
=========== =========== ===========
Basic Weighted Average Shares Outstanding .................. 96,052 89,842 77,595
=========== =========== ===========
DILUTED EARNINGS PER SHARE:
Income From Continuing Operations .......................... $ 2.01 $ 1.01 $ (0.10)
Income From Discontinued Operations ........................ -- 0.08 0.11
Gain on Disposal of Discontinued Operations ................ -- 0.74 --
Extraordinary Charge ....................................... (0.09) (0.01) --
----------- ----------- -----------
Net Income Per Share ....................................... $ 1.92 $ 1.82 $ 0.01
=========== =========== ===========
Diluted Weighted Average Shares Outstanding ................ 97,562 90,981 77,595
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
27
<PAGE> 28
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK CAPITAL IN CURRENCY
--------------------------- EXCESS OF RETAINED TRANSLATION
SHARES $1 PAR PAR EARNINGS ADJUSTMENT
----------- ----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994,
as Previously Reported .................. 25,508 $ 25,508 $ 42,388 $ 48,856 $ (4,536)
Adjustment for Pooling of Interests ....... 48,048 48,048 550,754 140,541 (4,168)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 .............. 73,556 73,556 593,142 189,397 (8,704)
Net Income ................................ -- -- -- 441 --
Shares Issued in Connection
with Acquisition ........................ 4,510 4,510 30,765 -- --
Shares Issued Under Employee
Benefit Plans ........................... 8 8 180 -- --
Options Exercised ......................... 511 511 8,485 -- --
Issuance of Common Stock .................. 6,900 6,900 65,748 -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. -- -- -- -- --
Foreign Currency
Translation Adjustment .................. -- -- -- -- (4,080)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 .............. 85,485 85,485 698,320 189,838 (12,784)
Net Income ................................ -- -- -- 165,822 --
Shares Issued in Connection
with Acquisitions ....................... 2,339 2,339 48,395 -- --
Shares Issued Under Employee
Benefit Plans ........................... 29 29 1,342 -- --
Options Exercised ......................... 740 740 12,038 -- --
Issuance of Common Stock .................. 6,900 6,900 93,960 -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. -- -- -- -- --
Foreign Currency
Translation Adjustment .................. -- -- -- -- 1,304
Unrealized Gain on
Marketable Securities ................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 .............. 95,493 95,493 854,055 355,660 (11,480)
Net Income ................................ -- -- -- 187,763 --
Effect of Immaterial Pooling .............. 946 946 (717) (1,075) --
Replacement Shares (Shares
Acquired) from GulfMark
Merger ................................. 4,471 4,471 142,788 -- --
Shares Issued Under Employee
Benefit Plans ........................... 11 11 464 -- --
Options Exercised ......................... 1,037 1,037 12,635 -- --
Tax Benefit Associated with
Options Exercised ....................... -- -- 8,799 -- --
Purchase of Treasury Stock ................ -- -- -- -- --
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. -- -- -- -- --
Foreign Currency
Translation Adjustment .................. -- -- -- -- (27,014)
Realized Gain on Sale of
Marketable Securities ................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 .............. 101,958 $ 101,958 $ 1,018,024 $ 542,348 $ (38,494)
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
TREASURY STOCK GAIN ON TOTAL
---------------------------- MARKETABLE STOCKHOLDERS'
SHARES AMOUNT SECURITIES EQUITY
----------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Balance at December 31, 1994,
as Previously Reported .................. (188) $ (1,303) $ -- $ 110,913
Adjustment for Pooling of Interests ....... (48) (801) -- 734,374
----------- ----------- ----------- -----------
Balance at December 31, 1994 .............. (236) (2,104) -- 845,287
Net Income ................................ -- -- -- 441
Shares Issued in Connection
with Acquisition ........................ -- -- -- 35,275
Shares Issued Under Employee
Benefit Plans ........................... -- -- -- 188
Options Exercised ......................... 10 (60) -- 8,936
Issuance of Common Stock .................. -- -- -- 72,648
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. (39) (358) -- (358)
Foreign Currency
Translation Adjustment .................. -- -- -- (4,080)
----------- ----------- ----------- -----------
Balance at December 31, 1995 .............. (265) (2,522) -- 958,337
Net Income ................................ -- -- -- 165,822
Shares Issued in Connection
with Acquisitions ....................... -- -- -- 50,734
Shares Issued Under Employee
Benefit Plans ........................... 20 419 -- 1,790
Options Exercised ......................... (8) (394) -- 12,384
Issuance of Common Stock .................. -- -- -- 100,860
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. (44) (908) -- (908)
Foreign Currency
Translation Adjustment .................. -- -- -- 1,304
Unrealized Gain on
Marketable Securities ................... -- -- 2,381 2,381
----------- ----------- ----------- -----------
Balance at December 31, 1996 .............. (297) (3,405) 2,381 1,292,704
Net Income ................................ -- -- -- 187,763
Effect of Immaterial Pooling .............. -- -- -- (846)
Replacement Shares (Shares
Acquired) from GulfMark
Merger ................................. (4,471) (147,259) -- --
Shares Issued Under Employee
Benefit Plans ........................... -- -- -- 475
Options Exercised ......................... (5) (247) -- 13,425
Tax Benefit Associated with
Options Exercised ....................... -- -- -- 8,799
Purchase of Treasury Stock ................ (275) (11,860) -- (11,860)
Purchase of Treasury Stock,
at Cost, for Executive
Deferred Compensation Plan .............. (48) (2,516) -- (2,516)
Foreign Currency
Translation Adjustment .................. -- -- -- (27,014)
Realized Gain on Sale of
Marketable Securities ................... -- -- (2,381) (2,381)
----------- ----------- ----------- -----------
Balance at December 31, 1997 .............. (5,096) $ (165,287) $ -- $ 1,458,549
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
28
<PAGE> 29
EVI WEATHERFORD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (in thousands)
Net Income......................................................... $ 187,763 $ 165,822 $ 441
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Non-cash Portion of Acquisition-related Costs and Other
Unusual Charges................................................ -- -- 66,196
Depreciation and Amortization.................................... 142,931 121,830 108,060
Net Income from Discontinued Operations.......................... -- (7,468) (8,709)
Gain on Disposal of Discontinued Operations, Net................. -- (66,924) --
Gain on Sale of Assets, Net...................................... (20,056) (14,058) (12,503)
Extraordinary Charge on Prepayment of Debt, Net.................. 9,010 731 --
Deferred Income Tax Provision (Benefit) from Continuing
Operations..................................................... 35,459 4,138 (18,672)
Provision for Uncollectible Accounts Receivable.................. 13,248 4,608 6,751
Change in Assets and Liabilities, Net of Effects of Businesses
Acquired:
Accounts Receivable............................................ (113,009) (63,562) (6,326)
Inventories.................................................... (108,837) (24,680) (45,679)
Other Current Assets........................................... (2,742) 1,547 (11,082)
Accounts Payable............................................... 37,135 33,064 (29,262)
Payment of Deferred Loan Costs................................. -- (4,820) (892)
Accrued Salaries and Benefits and Other........................ (10,710) (10,123) (10,246)
Other Assets................................................... (5,031) (2,697) 1,661
Other, Net..................................................... (13,019) (17,437) 10,911
------------ ------------ ------------
Net Cash Provided by Continuing Operations................... 152,142 119,971 50,649
Net Cash Provided by Discontinued Operations................. -- 8,294 10,745
------------ ------------ ------------
Net Cash Provided by Operating Activities.................... 152,142 128,265 61,394
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired.................... (321,477) (80,077) (147,331)
Capital Expenditures for Property, Plant and Equipment............. (212,992) (172,725) (120,934)
Proceeds from Sales of Businesses................................. 68,798 326,016 9,493
Proceeds from Sales of Property, Plant and Equipment............... 30,431 20,215 31,137
Acquisitions and Capital Expenditures of Discontinued Operations... -- (63,136) (22,884)
Income Taxes Paid on Disposal of Discontinued Operations........... (62,808) -- --
Proceeds From Sale of Marketable Securities........................ 23,352 -- --
Other, Net......................................................... (6,384) (15,388) (9,245)
------------ ------------ ------------
Net Cash Provided (Used) by Investing Activities............... (481,080) 14,905 (259,764)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Long-term Debt, Net.................................... 390,911 197,824 --
Issuance of Common Stock, Net...................................... -- 100,860 72,648
Purchase of Treasury Stock......................................... (14,376) (908) (358)
Tender of Senior Notes............................................. (119,980) -- --
Proceeds from Stock Option Exercises............................... 16,352 14,148 6,924
Termination Costs on Retirement of Debt............................ (10,752) (1,125) --
Borrowings (Repayments) Under Revolving Lines of Credit, Net....... 21,319 (121,656) (17,616)
Borrowings (Repayments) on Term Debt, Net.......................... (126,425) (115,761) 130,462
Other Financing Activities, Net.................................... (10,111) 4,978 (713)
------------ ------------ ------------
Net Cash Provided by Financing Activities...................... 146,938 78,360 191,347
------------ ------------ ------------
Effect of Exchange Rate on Cash.................................... (784) (220) 4,347
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................................ (182,784) 221,310 (2,676)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.......................... 256,995 35,685 38,361
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................ $ 74,211 $ 256,995 $ 35,685
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
supplemental consolidated financial statements.
29
<PAGE> 30
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On May 27, 1998, EVI, Inc. ("EVI") completed a merger with Weatherford
Enterra, Inc. ("Weatherford") and changed its name to EVI Weatherford, Inc. (See
Note 2). The merger was accounted for as a pooling of interests; accordingly,
the accompanying financial statements have been restated to include the results
of Weatherford for all periods presented. Certain reclassifications of prior
year balances have been made to conform such amounts to corresponding 1997
classifications.
NATURE OF OPERATIONS
The Company is a leading manufacturer and supplier of oilfield equipment
and services, providing downhole tubular running services and rental tools,
artificial lift, gas compression and completion system products to the oil and
gas industry throughout the world.
PRINCIPLES OF CONSOLIDATION
The supplemental consolidated financial statements include the accounts of
EVI Weatherford, Inc. and all majority-owned subsidiaries (the "Company"). All
material intercompany accounts and transactions have been eliminated in
consolidation. The Company accounts for its 50% or less-owned affiliates using
the equity method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INVENTORIES
Inventories are valued using the first-in, first-out ("FIFO") method and
are stated at the lower of cost or market.
MARKETABLE SECURITIES
Investments in marketable securities are accounted for in accordance with
Statement of Financial Accounting Standards No. 115 ("SFAS No. 115") and
accordingly, these investments are recorded at their fair market value with
unrealized gains or losses recorded as a separate component of stockholders'
equity. The Company has classified these investments in Other Current Assets as
available for sale with any other than temporary decline in fair value of
securities charged to earnings. In April 1997, the Company sold its marketable
securities, comprised of approximately 3.1 million shares of Parker Drilling
Company ("Parker") common stock, pursuant to a public offering effected by
Parker. As a result, the Company received net proceeds of approximately $23.4
million and recognized a pre-tax gain of approximately $3.4 million.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost. Maintenance and repairs
are expensed as incurred. The costs of renewals, replacements and betterments
are capitalized. Depreciation on fixed assets is computed using the
straight-line method over the estimated useful lives for the respective
categories. The Company evaluates potential impairment of property, plant and
equipment and other long-lived assets on an ongoing basis as necessary whenever
events or circumstances indicate that carrying amounts may not be recoverable.
The useful lives of the major classes of property, plant and equipment are as
follows:
30
<PAGE> 31
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
LIFE
--------------
<S> <C>
Buildings and other property....................... 5 - 45 years
Rental and service equipment....................... 3 - 15 years
Machinery and equipment............................ 3 - 20 years
</TABLE>
INTANGIBLE ASSETS AND AMORTIZATION
The Company's intangible assets are comprised primarily of goodwill and
identifiable intangible assets, principally patents and technology licenses. The
Company reviews intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of any applicable assets may not
be recoverable. In assessing recoverability of such assets, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss is recognized. Management believes that there have
been no events or circumstances which warrant revision to the remaining useful
life or which affect the recoverability of goodwill. The goodwill is being
amortized on a straight-line basis over the lesser of the estimated useful life
or 40 years. Other identifiable intangible assets, included as a component of
other assets, are amortized on a straight-line basis over the years expected to
be benefited, ranging from 5 to 15 years.
Amortization expense for goodwill and other intangible assets was
approximately $15.0 million, $10.8 million and $8.4 million for 1997, 1996 and
1995, respectively. Accumulated amortization for goodwill at December 31, 1997
and 1996 was $30.1 million and $17.7 million, respectively.
STOCK-BASED COMPENSATION
The intrinsic value method of accounting is used for stock-based employee
compensation whereby no compensation expense is recognized when the exercise
price of an employee stock option is equal to the market price of the Company's
common stock, $1.00 par value, (the "Common Stock") on the grant date. See Note
9 for pro forma information required under Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), Accounting for Stock-Based Compensation.
FOREIGN CURRENCY TRANSLATION
The functional currency for most of the Company's international operations
is the applicable local currency. Results of operations for foreign subsidiaries
with functional currencies other than the U.S. dollar are translated using
average exchange rates during the period. Assets and liabilities of these
foreign subsidiaries are translated using the exchange rates in effect at the
balance sheet date and the resulting translation adjustments are included as a
separate component of stockholders' equity. Currency transaction gains and
losses are reflected in income for the period.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts only as a hedge against
certain existing economic exposures, and not for speculative or trading
purposes. These contracts reduce exposure to currency movements affecting
existing assets and liabilities denominated in foreign currencies, such exposure
resulting primarily from trade receivables and payables and intercompany loans.
The future value of these contracts and the related currency positions are
subject to offsetting market risk resulting from foreign currency exchange rate
volatility. The counterparties to the Company's foreign exchange contracts are
creditworthy multinational commercial banks. Management believes that the risk
of counterparty nonperformance is immaterial. At December 31, 1997 and 1996, the
Company had contracts maturing within the next 60 days to sell $36.8 million and
$50.9 million, respectively, in Norwegian kroner, U.K. pounds sterling, Canadian
dollars and Dutch guilders. Had such respective contracts matured on December
31, 1997 and 1996, the Company's required cash outlay would have been minimal.
31
<PAGE> 32
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCOUNTING FOR INCOME TAXES
Under Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
Accounting for Income Taxes, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.
The Company does not provide federal income taxes on the undistributed
earnings of certain of its foreign subsidiaries because it believes these
amounts are permanently invested outside the United States. The cumulative
amount of such undistributed earnings on which federal taxes have not been
provided was $173.5 million at December 31, 1997. If these foreign earnings were
to be ultimately remitted, certain foreign withholding taxes would be payable
and U.S. federal income taxes payable at that time would be reduced by foreign
tax credits generated by the repatriation.
REVENUE RECOGNITION
The Company recognizes revenue as products are shipped or accepted by the
customer and when service and rentals are provided. Proceeds from customers for
the cost of oilfield rental equipment that is damaged or lost downhole are
reflected as revenues.
EARNINGS PER SHARE
In 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No.
128 which replaces primary earnings per share with basic earnings per share and
requires dual presentation of basic and diluted earnings per share. The Company
adopted SFAS No. 128 in the fourth quarter of fiscal 1997. All historical
earnings per share data included herein has been restated to reflect the
adoption of SFAS No. 128.
Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year. Diluted
earnings per common share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year adjusted
for the dilutive effect of the incremental shares that would have been
outstanding under the Company's stock option plans (see Note 9). The effect of
the 5% Convertible Subordinated Preferred Equivalent Debentures (the
"Debentures") on diluted earnings per share is anti-dilutive and, thus, has no
impact.
The following reconciles basic and diluted weighted average shares:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996 1995
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Basic weighted average number of
shares outstanding ........................ 96,052 89,842 77,595
Dilutive effect of stock option plans ....... 1,510 1,139 --
------ ------ ------
Dilutive weighted average number of
shares outstanding ........................ 97,562 90,981 77,595
====== ====== ======
</TABLE>
FUTURE REPORTING REQUIREMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS No. 130
establishes standards for the reporting of comprehensive income and its
components in a full set of general-purpose financial statements and is
effective for years beginning after December 15, 1997. The Company will adopt
SFAS No. 130 in the first quarter of 1998. Had SFAS No. 130 been
32
<PAGE> 33
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
adopted as of December 31, 1997, the primary adjustments and reclassifications
to reflect net income on a comprehensive income basis for the years presented
would have consisted of foreign currency translation adjustments and the effect
of unrealized and realized gains on marketable securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("SFAS No. 131"), Disclosures About Segments of an Enterprise and
Related Information. SFAS No. 131, effective for years beginning after December
31, 1997, requires segment information to be reported on a basis consistent with
that used internally for evaluating segment performance and deciding how to
allocate resources to segments. The Company will adopt SFAS No. 131 in 1998 and
is reviewing its segments in light of SFAS No. 131.
In 1998 the FASB issued Statement of Accounting Standards No. 132 ("SFAS
No. 132"), Employers' Disclosures About Pensions and Other Postretirement
Benefits. SFAS No. 132 standardizes disclosure requirements for pensions and
other postretirement benefits. SFAS No. 132 will be effective for years
beginning after December 15, 1997. Had the Company adopted SFAS No. 132 as of
December 31, 1997, it would have had no impact on the consolidated financial
statements of the Company.
2. ACQUISITIONS
On May 27, 1998, EVI completed a merger with Weatherford and changed its
name to EVI Weatherford, Inc., merging Weatherford with and into EVI pursuant to
an expected tax free merger (the "Merger") in which the stockholders of
Weatherford receive 0.95 of a share of the Company's Common Stock in exchange
for each outstanding share of Weatherford common stock. Based on the number of
shares of Weatherford common stock outstanding as of May 27, 1998, approximately
48.9 million shares will be issued in the Merger. In addition, approximately 1.4
million shares of Common Stock have been reserved for issuance by the Company
for outstanding options under Weatherford's compensation and benefit plans. The
Merger was accounted for as a pooling of interests; accordingly, the
accompanying supplemental financial statements have been restated to include the
results of Weatherford for all periods presented.
The separate results of EVI and Weatherford and the combined company were
as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997 1996 1995
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Operating Revenues
EVI ............................ $ 892,264 $ 478,020 $ 271,675
Weatherford .................... 1,083,965 994,468 858,907
Merger adjustments ............. (7,140) (5,218) (4,779)
----------- ----------- -----------
Combined .......................... $ 1,969,089 $ 1,467,270 $ 1,125,803
=========== =========== ===========
Extraordinary Charge, Net of
Taxes
EVI ............................ $ 9,010 $ 731 $ --
Weatherford .................... -- -- --
----------- ----------- -----------
Combined .......................... $ 9,010 $ 731 $ --
=========== =========== ===========
Net Income (Loss)
EVI ............................ $ 74,685 $ 98,166 $ 11,311
Weatherford .................... 112,900 70,073 (10,558)
Merger adjustments ............. 178 (2,417) (312)
----------- ----------- -----------
Combined .......................... $ 187,763 $ 165,822 $ 441
=========== =========== ===========
</TABLE>
Merger adjustments include the elimination of intercompany revenues of $7.1
million, $5.2 million and $4.8 million, respectively, and cost of sales of $5.7
million, $4.2 million and $4.3 million, respectively, for the years ended
December 31, 1997, 1996 and 1995. Merger adjustments for the years ended
December 31, 1997 and 1996
33
<PAGE> 34
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
also include the elimination of expenses of $1.7 million and a gain of $2.7
million, respectively, recorded by Weatherford on the sale of Arrow Completion
Systems, Inc. to EVI in December 1996.
On December 3, 1997, the Company completed the acquisition of all of the
outstanding shares of BMW Monarch (Lloydminster) Ltd. ("BMW Monarch") and BMW
Pump, Inc. ("BMW Pump") for aggregate consideration of approximately $96.8
million in cash, including a final working capital adjustment, and $14.3 million
in assumed debt. BMW Pump is a Canadian-based manufacturer of progressing cavity
pumps and BMW Monarch is a Canadian supplier of progressing cavity pumps as well
as other production related oilfield products.
On December 2, 1997, the Company completed the acquisition of all of the
capital stock of Trico Industries, Inc., ("Trico") in exchange for $105.0
million in cash and the assumption of $8.7 million of debt. Trico is a
Texas-based manufacturer and distributor of sub-surface reciprocating pumps,
sucker rods, accessories and hydraulic lift systems.
On August 25, 1997, the Company completed the acquisition of XLS Holding,
Inc. ("XL") in a transaction accounted for as a pooling of interests. XL
designs, manufactures and markets high performance connectors for marine
applications such as conductors, risers and offshore structural components. In
connection with the acquisition, the Company issued approximately 0.9 million
shares of Common Stock in exchange for all of the equity interests of XL. As the
effect of this business combination is not significant, prior period financial
statements were not restated.
On May 1, 1997, the Company acquired GulfMark International, Inc.
("GulfMark") pursuant to a merger in which approximately 4.4 million shares of
Common Stock were issued to the stockholders of GulfMark. Prior to the merger,
GulfMark effected a spin-off to its stockholders of its marine transportation
services business. The retained assets of GulfMark that were acquired by the
Company in this transaction consisted of approximately 4.4 million shares of
Common Stock, an erosion control company and certain other miscellaneous assets.
The 4.4 million shares of Common Stock acquired are classified as "Treasury
Stock, at Cost" on the accompanying consolidated balance sheet. Because the
number of shares of Common Stock issued in the GulfMark acquisition approximated
the number of shares of Common Stock held by GulfMark prior to the acquisition,
the GulfMark acquisition had no material effect on the outstanding number of
shares of Common Stock or equity of the Company.
On April 14, 1997, the Company acquired TA Industries, Inc. ("TA"), a
manufacturer of premium couplings and premium accessories, for approximately
$44.1 million in cash and $19.7 million of assumed debt.
On May 23, 1996, the Company acquired the business and assets of Nodeco AS,
a Norwegian company, and its wholly-owned subsidiary, Aarbakke AS (collectively,
"Nodeco"). Nodeco designs, manufactures, sells and rents oil and gas well
completion products primarily consisting of liner hanger equipment and related
services, as well as pump packers. The Company paid cash of approximately $14.4
million and issued 0.7 million shares of its Common Stock.
On December 15, 1995, the Company acquired substantially all of the assets
of the natural gas compression business of Energy Industries, Inc. and Zapata
Energy Industries, L.P. (collectively, "Energy Industries") for approximately
$130.0 million in cash. Energy Industries was engaged in the business of
fabricating, selling, installing, renting and servicing natural gas compressor
units used in the oil and gas industry.
On October 5, 1995, the Company completed a merger with Enterra Corporation
("Enterra"), a worldwide provider of specialized services and products to the
oil and gas industry through its oilfield, pipeline and gas compression services
businesses. The Company issued approximately 22.5 million shares of Common Stock
in exchange for all the outstanding shares of Enterra common stock. The merger
was accounted for as a pooling of interests. In connection with the Enterra
merger, the Company recorded acquisition-related costs totaling $59.9 million.
The Company has also effected various other 1997, 1996 and 1995
acquisitions for a total consideration of approximately $82.2 million, $61.6
million and $13.2 million, respectively.
34
<PAGE> 35
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The acquisitions discussed above, with the exception of Weatherford, XL and
Enterra, were accounted for using the purchase method of accounting. The results
of operations of all such acquisitions are included in the Supplemental
Consolidated Statements of Income from their respective dates of acquisition.
The 1997 and 1996 acquisitions are not material individually nor in the
aggregate for each applicable year, therefore pro forma information is not
presented.
3. SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the Supplemental Consolidated Statements of Cash Flows, the
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. Other current assets at December
31, 1997 and 1996 included cash of approximately $3.4 million and $1.7 million,
respectively, which was restricted as a result of exchange controls in certain
foreign countries or cash collateral requirements for performance bonds, letters
of credit and customs bonds.
Cash paid during the years ended December 31, 1997, 1996, and 1995 for
interest and income taxes (net of refunds) was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Interest paid .......................... $ 43,389 $ 28,068 $ 29,650
Income taxes paid, net of refunds ...... 121,302 21,367 19,270
</TABLE>
During the years ended December 31, 1997, 1996 and 1995 there were noncash
investing activities of $24.4 million, $1.7 million and $3.6 million,
respectively, relating to capital leases.
The following summarizes investing activities relating to acquisitions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Fair value of assets, net of cash acquired ....... $ 212,731 $ 109,565 $ 149,196
Goodwill ......................................... 306,648 95,688 71,852
Total liabilities ................................ (197,902) (74,442) (38,442)
Common Stock issued .............................. -- (50,734) (35,275)
--------- --------- ---------
Cash consideration, net of cash acquired ......... $ 321,477 $ 80,077 $ 147,331
========= ========= =========
</TABLE>
During the year ended December 31, 1997, there were noncash financing
activities of $8.8 million relating to tax benefits received from the exercise
of nonqualified stock options. These benefits were recorded as a reduction of
income taxes payable and an increase to additional paid-in capital.
4. INVENTORIES
Inventories by category are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Raw materials, components and supplies ...... $238,349 $167,415
Work in process ............................. 66,402 47,791
Finished goods .............................. 151,060 105,727
-------- --------
$455,811 $320,933
======== ========
</TABLE>
Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.
35
<PAGE> 36
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PLANT CLOSURES
The Company adopted a plan to close its Bastrop, Texas tool joint
manufacturing facility and to combine its two packer facilities through the
closure of one facility in Arlington, Texas in the fourth quarter of 1996. In
connection with these decisions, the Company incurred a charge of $5.8 million
associated with these closures. Of this charge, $4.3 million related to the tool
joint facility closure and relocation of equipment from this facility and $1.5
million related to the consolidation of its packer facilities and the closure of
one of the plants. The Company incurred $3.8 million in 1996 for costs
associated with these actions during 1996, including costs relating to the
relocation of equipment at its Bastrop facility to other facilities. The Company
also accrued $2.0 million as part of the $5.8 million charge for exit costs that
it expected to be incurred in 1997 relating to the closure of its Bastrop and
Arlington facilities. Such costs included $0.8 million for severance and
termination costs, $0.9 million for the reduction in the carrying value of its
Bastrop facility in light of the intended plan of disposition of the facility
and $0.3 million for the termination of the Arlington lease. Approximately 400
employees were affected by these closures. The closure of both the Bastrop and
Arlington facilities had been substantially completed by June 1997.
6. ACQUISITION-RELATED AND OTHER UNUSUAL CHARGES
During the second quarter of 1995, management of Enterra made certain
strategic decisions which resulted in $28.3 million of unusual charges. Such
charges included a $10.0 million writedown to fair value, based on management's
estimation of net sales price, related to three businesses to be sold. The
remaining second quarter unusual charges of $18.2 million consisted primarily of
asset writedowns related to certain excess facilities, equipment and
inventories, as well as estimated costs in connection with the closure of
certain pipeline businesses and the consolidation of certain oilfield service
administrative and operating facilities. This restructuring resulted in
reduction of approximately 120 employees.
During the fourth quarter of 1995, the Company recorded expenses of $59.9
million related to the merger with Enterra and the financial impact of
management decisions related to the future operations of the combined company.
The acquisition-related costs primarily consisted of transaction costs,
severance and termination agreements with former officers and employees,
facility closure costs primarily to consolidate the oilfield service operations
and administrative functions (reducing approximately 600 employees), and the
reduction in recorded value of certain assets that had diminished future value
in the operations of the combined company.
A summary of the 1995 acquisition-related costs and other unusual charges
follows (in thousands):
<TABLE>
<S> <C>
Enterra merger transaction-related costs ......... $18,800
Severance and termination costs .................. 12,488
Facility closure and consolidation costs ......... 20,943
Writedowns of assets to be sold .................. 12,281
Other asset writedowns ........................... 21,972
Other ............................................ 1,698
-------
$88,182
=======
</TABLE>
7. DISCONTINUED OPERATIONS AND DISPOSITIONS
On November 11, 1996, the Company completed the sale of its contract
drilling segment which was comprised of the Mallard Bay contract drilling
division ("Mallard Division") to Parker, in exchange for cash of approximately
$306.9 million and approximately 3.1 million shares of Parker common stock
valued by the Company at approximately $20.0 million. The Company reported a net
gain on the disposal of the Mallard Division of $66.9 million, net of taxes of
$44.6 million.
36
<PAGE> 37
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The results of operations for the Mallard Division are reflected in the
accompanying Supplemental Consolidated Statements of Income as "Discontinued
Operations, Net of Taxes". Condensed results of the Mallard Division
discontinued operations were as follows:
<TABLE>
<CAPTION>
ELEVEN
MONTHS ENDED YEAR ENDED
NOVEMBER 11, DECEMBER 31,
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Revenues ............................. $81,310 $79,912
------- -------
Income before income taxes ........... 11,490 14,029
Provision for income taxes ........... 4,022 5,320
------- -------
Net income ........................... $ 7,468 $ 8,709
======= =======
</TABLE>
During 1997, 1996 and 1995, the Company also sold certain non-core
businesses. Such businesses included CRC-Evans Pipeline International, Inc.,
Total Engineering Services Team, Inc. and several others. Cash proceeds from
these transactions totaled $68.8 million, $19.2 million and $9.5 million in
1997, 1996 and 1995, respectively, and were primarily used to repay bank debt.
8. DEBT
SHORT-TERM BORROWINGS AND REVOLVING CREDIT FACILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Revolving credit facilities ..................................... $24,243 $ 2,924
Other ........................................................... -- 1,527
------- --------
$24,243 $ 4,451
======= ========
Weighted average interest rate on short-term borrowings
outstanding during the year ................................... 6.57% 6.98%
Average borrowings during the year .............................. $39,674 $ 69,378
Maximum borrowings outstanding during the year .................. $47,688 $120,000
</TABLE>
In June 1996, the Company entered into a $120.0 million working capital
facility and terminated the Company's prior U.S. working capital facility which
resulted in an extraordinary charge of approximately $0.7 million, net of taxes
of $0.4 million. Borrowings under this facility accrued interest at a variable
rate based on prime or LIBOR, 8.75% at December 31, 1997, and are due on demand.
At December 31, 1997, no debt was outstanding on this facility, however,
approximately $5.5 million had been used to support outstanding letters of
credit.
In October 1997, the Company amended its $200.0 million revolving credit
facility, reducing interest rates and fees and improving other terms and
conditions. Amounts outstanding under this facility accrue interest at a
variable rate, ranging from 0.25% to 0.625% above a specified Eurodollar rate,
depending on the credit ratings assigned to the Company's 7 1/4% Senior Notes.
The facility contains customary affirmative and negative covenants relating to
working capital, earnings and net worth. At December 31, 1997, no debt was
outstanding on this facility.
The Company also has various credit facilities available only for stand-by
letters of credit and bid and performance bonds, pursuant to which funds are
available to the Company to secure performance obligations and certain
retrospective premium adjustments under insurance policies. The Company had a
total of $13.1 million of such letters of credit and bid and performance bonds
outstanding at December 31, 1997.
In August 1997, the Company entered into a Canadian line of credit
agreement which provides for up to $31.5 million ($45.0 million Canadian). The
facility contains customary affirmative and negative covenants relating to
working capital, earnings and net worth. Borrowings accrued interest at a
variable rate, approximately
37
<PAGE> 38
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5.46% at December 31, 1997 and were due on demand. At December 31, 1997, the
Company had $24.2 million outstanding under this facility.
In February 1998, the Company entered into a new $250.0 million working
capital facility, consisting of a $200.0 million U.S. and a $50.0 million
Canadian credit facilities, and terminated both the $120.0 million U.S. and
$31.5 million Canadian working capital facilities.
In May 1998, the Company amended the $250.0 million revolving credit
facility and terminated its $200.0 million revolving credit facility (See Note
15).
LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Debentures with an effective interest rate of 5%, due 2027 ................ $402,500 $ --
======== ========
Senior Notes with an effective interest rate of 7.25% , due 2006 .......... $200,000 $200,000
Senior Notes with an effective interest rate of 10.25%, due 2004 .......... 20 120,000
Bank term loan ............................................................ -- 95,950
Industrial Revenue Bonds with variable interest rates, 3.85%
and 4.46% at December 31, 1997, due 2002 ................................ 10,840 2,810
Foreign bank debt, denominated in foreign currencies ...................... 8,152 11,231
Capital lease obligations under various agreements ........................ 28,376 9,256
Other ..................................................................... 18,112 6,859
-------- --------
265,500 446,106
Less: amounts due in one year ............................................. 13,178 28,130
-------- --------
Long-term debt ............................................................ $252,322 $417,976
======== ========
</TABLE>
The following is a summary of scheduled long-term debt maturities by year
(in thousands):
<TABLE>
<S> <C>
1998 ............................................................ $ 13,178
1999 ............................................................ 15,488
2000 ............................................................ 8,432
2001 ............................................................ 5,322
2002 ............................................................ 13,036
Thereafter ...................................................... 612,544
--------
$668,000
========
</TABLE>
In November 1997, the Company completed a private placement of $402.5
million principal amount of 5% Convertible Subordinated Preferred Equivalent
Debentures (the "Debentures"). The net proceeds from the Debentures were $390.9
million. The Debentures are convertible at a price of $80 per share of Common
Stock. The Debentures are redeemable by the Company at any time on or after
November 4, 2000, at redemption prices described therein, and are subordinated
in right of payment of principal and interest to the prior payment in full of
certain existing and future senior indebtedness of the Company. The Company also
has the right to defer payments of interest on the Debentures by extending the
quarterly interest payment period on the Debentures for up to 20 consecutive
quarters at anytime when the Company is not in default in the payment of
interest. As evidenced by market transactions, the estimated fair value of the
Debentures was $368.8 million as of December 31, 1997.
The Company has outstanding $200.0 million of 7 1/4% Senior Notes due May
15, 2006 (the "7 1/4% Senior Notes). The 7 1/4% Senior Notes are unsecured
obligations of the Company. Interest on the 7 1/4% Senior Notes is payable
semi-annually on May 15 and November 15 of each year. Based on the borrowing
rates available to the Company, the fair value of the 7 1/4% Senior Notes
approximates the carrying value at December 31, 1997 and 1996.
38
<PAGE> 39
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In December 1997, the Company completed a cash tender offer and consent
solicitation (the "Tender Offer") relating to the Company's outstanding $120.0
million 10 1/4% Senior Notes due 2004 (the "Senior Notes"). An aggregate of
$119.98 million principal amount of the Senior Notes were validly tendered by
the Company pursuant to the Tender Offer. The prepayment of the Senior Notes
resulted in an extraordinary charge, net of taxes of $5.6 million, of $9.0
million, or $0.09 per basic share, for the year ended December 31, 1997. The
extraordinary charge consists of prepayment fees, other professional fees and
the write off of unamortized debt issuance costs. At December 31, 1996, the
estimated fair value of the Senior Notes was $126.0 million.
In connection with the Company's acquisition of Enterra on October 5, 1995,
and Trico on December 2, 1997, the Company assumed $3.5 million and $8.7 million
of Variable Rate Demand Industrial Development Revenue Refunding Bonds (the
"Bonds"), respectively. Contract terms require principal and interest payments
to maturity, occurring in December 2002. In connection with the Bonds, the
Company has letters of credit of $11.7 million.
Upon the completion of the expansion of the Veracruz, Mexico tool joint
manufacturing facility, the Company recorded the obligation of $16.3 million
under its lease to reflect the terms thereof.
9. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES
In May 1998, the Company's Restated Certificate of Incorporation was
amended and restated to increase the authorized number of shares of Common Stock
from 80.0 million to 250.0 million.
PREFERRED STOCK
The Company is authorized to issue up to 3.0 million shares of $1.00 par
value preferred stock. As of December 31, 1997, none had been issued.
STOCK SPLIT
At the Company's annual stockholders meeting on May 6, 1997, the
stockholders approved a two-for-one split of the Common Stock, through a stock
dividend and related amendment to the Company's Restated Certificate of
Incorporation that increased the number of authorized shares of Common Stock
from 40.0 million shares to 80.0 million shares. As a result of the stock split,
all stock and per share data contained herein have been restated to reflect the
effect of the two-for-one stock split.
PUBLIC STOCK OFFERINGS
On July 25, 1996, the Company completed a public offering of 6.9 million
shares of Common Stock. The net proceeds of this offering were approximately
$100.9 million. The Company also completed a public offering early in the fourth
quarter of 1995, of 6.9 million shares of Common Stock. The net proceeds of that
offering were approximately $72.6 million.
STOCK REPURCHASE PLAN
In December 1997, the Weatherford Board of Directors instituted a stock
repurchase program under which up to $100.0 million of Weatherford common stock
could be purchased in open market transactions or in privately negotiated
transactions. Pursuant to this program, Weatherford purchased approximately 0.3
million shares of its common stock in December 1997. During 1998, Weatherford
purchased approximately 1.0 million shares of its common stock. In connection
with the Weatherford Merger, the stock repurchase program has been discontinued.
39
<PAGE> 40
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION
STOCK OPTION PLANS
In May 1981, the Company's stockholders approved the Company's Employee
Stock Option Plan ("Option Plan"), a non-qualified stock option plan. The plan
expired in May 1991.
The Company has a number of stock option plans pursuant to which officers
and other key employees may be granted options to purchase shares of Common
Stock at fair market value on the date of grant. The Company maintains a
Non-Employee Director Stock Option Plan ("Director Plan"), a non-qualified stock
option plan. Under the Director Plan, options to purchase up to 1.0 million
shares may be granted to non-employee directors of the Company. Options to
purchase 10,000 shares of Common Stock are automatically granted to each
non-employee director on the date of their initial election and their
reelection. At December 31, 1997, approximately 0.6 million were available for
granting of such options. Weatherford had a similar plan, pursuant to which the
non-employee directors of Weatherford received options exercisable six months
after the date of grant.
The Company also has in effect a 1992 Employee Stock Option Plan ("ESO
Plan"). Under the ESO Plan, options to purchase up to an aggregate of 2.0
million shares of Common Stock may be granted to officers and key employees of
the Company (including directors who are also key employees) and its
subsidiaries. At December 31, 1997, approximately 0.3 million were available for
granting of such options.
Stock options vest after one to five years and expire after ten years from
the date of grant. Information about the above stock option plans, including
predecessor plans, for the three years ended December 31, 1997, is set forth
below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER RANGE OF EXERCISE
OF EXERCISE PRICE
SHARES PRICES PER SHARE
--------- ------------------- ---------
<S> <C> <C> <C> <C>
Options outstanding, December 31, 1994................ 2,265,653 $ 1.35 - $ 23.47 $ 10.74
Granted ........................................ 1,215,457 6.98 - 24.70 17.46
Exercised........................................ (419,031) 1.35 - 21.93 12.23
Terminated....................................... (403,184) 11.16 - 20.24 16.18
---------
Options outstanding, December 31, 1995................ 2,658,895 4.69 - 24.70 12.39
Granted ........................................ 882,218 13.07 - 33.73 19.19
Exercised........................................ (597,121) 5.75 - 21.92 12.41
Terminated....................................... (358,128) 17.58 - 29.98 20.83
---------
Options outstanding, December 31, 1996................ 2,585,864 4.69 - 33.73 13.61
Granted ........................................ 741,613 27.81 - 32.19 29.05
Exercised........................................ (903,898) 4.69 - 33.73 11.36
Terminated....................................... (47,908) 11.49 - 29.98 24.72
--------- --------
Options outstanding, December 31, 1997................ 2,375,671 4.69 - 32.19 $ 19.08
========= ========
Options exercisable as of December 31, 1997........... 948,906 4.69 - 14.63 $ 13.28
========= ========
</TABLE>
The 2.3 million options outstanding at December 31, 1997, have a range of
weighted average remaining contractual lives of 5.1 to 7.6 years. The 0.9
million options exercisable at December 31, 1997, have a range of weighted
average remaining contractual lives of 4.0 to 7.5 years. The range of weighted
average fair value of the options granted in 1997, 1996 and 1995 are from $12.96
to $17.49 and from $8.89 to $14.46 and from $5.24 to $8.53, respectively.
In addition to the options in the above table, the Company granted options
in 1995 and prior years to former directors, employees of acquired companies and
to a former officer of Weatherford covered by separate agreements and not
covered in an option plan. At December 31, 1997, approximately 0.1 million
shares were outstanding and exercisable at a weighted average exercise price of
$24.46. The Company also has a stock bonus plan (the "Bonus Plan"), whereby
officers and certain key employees may be granted shares of Common Stock. At
December 31,
40
<PAGE> 41
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1997, substantially all options were granted, exercised or terminated. During
1997 and 1996, the Company recognized compensation expense with respect to the
Bonus Plan of $0.1 million and $0.7 million, respectively. The Company granted
no shares under the Bonus Plan in 1995.
Prior to 1992, the Company granted stock appreciation rights ("SARs") in
connection with options. At December 31, 1997, approximately 16,000 SARs were
outstanding at an average price of $10.41. The SAR Plan was amended in 1992 to
provide that no additional grants would be made. During 1997, 1996 and 1995, the
Company recognized compensation expense of approximately $0.7 million, $0.2
million and $0.1 million, respectively.
PRO FORMA COMPENSATION EXPENSE
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its stock options under the fair value method as provided therein. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 5.1% to 6.9%; expected lives of four to
seven years; expected volatility of 42% to 52% and no expected dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value-based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net income for future years, because
as provided by SFAS No. 123, only the effects of awards granted after January 1,
1995 are considered in the pro forma calculation.
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ------------------------ -----------------------
AS AS AS
REPORTED PRO FORMA REPORTED PRO FORMA REPORTED PRO FORMA
---------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (in thousands)...... $ 187,763 $ 183,281 $ 165,822 $ 162,933 $ 441 $ (1,259)
Basic earnings per share....... 1.95 1.91 1.85 1.81 0.01 (0.02)
Diluted earnings per share..... 1.92 1.88 1.82 1.79 0.01 (0.02)
</TABLE>
RESTRICTED STOCK PLANS
Weatherford had a restricted stock plan for certain officers of Weatherford
(the "Restricted Plan") and a restricted stock plan for non-employee directors
of Weatherford (the "Director Restricted Plan"; collectively, the "Restricted
Stock Plans"), pursuant to which shares of Common Stock may be granted. Shares
granted under the Restricted Stock Plans are subject to certain restrictions on
ownership and transferability when granted. Restrictions applicable to shares
granted under the Restricted Plan lapse in part based on continued employment
and in part based on Company performance. Restrictions applicable to shares
granted under the Director Restricted Plan were removed in connection with the
Weatherford Merger and the Plan terminated. The compensation related to the
restricted stock grants is deferred and amortized to expense on a straight-line
basis over the period of time the restrictions are in place, and the unamortized
portion is classified as a reduction of paid-in capital in the accompanying
Supplemental Consolidated Balance Sheets.
41
<PAGE> 42
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table provides a summary of activity related to the Restricted
Stock Plans:
<TABLE>
<CAPTION>
NON-EMPLOYEE
EMPLOYEE DIRECTOR
SHARES SHARES
-------- --------
<S> <C> <C>
Restricted shares outstanding, December 31, 1994 ................ 51,140 --
Granted .................................................... 28,025 --
Terminated ................................................. (44,833) --
--------
Restricted shares outstanding, December 31, 1995 ................ 34,332 --
Granted .................................................... 29,450 --
Terminated ................................................. (35,848) --
--------
Restricted shares outstanding, December 31, 1996 ................ 27,934 --
Granted .................................................... 86,489 10,296
Terminated ................................................. (25,679) --
-------- --------
Restricted shares outstanding, December 31, 1997 ................ 88,744 10,296
======== ========
Shares available for future grant as of December 31, 1997 ....... 36,476 227,204
======== ========
Compensation Expense (in thousands):
1997 $ 1,146 $ 120
1996 418 --
1995 392 --
Deferred Compensation at December 31 (in thousands):
1997 $ 3,095 $ 352
1996 1,445 --
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan (the "ESPP"), pursuant to
which eligible employees can purchase shares of Common Stock through payroll
deductions. The Company matches a specified percentage of the employee
contributions made to the ESPP. Company matching contributions totaled
approximately $162,000, $88,000 and $48,000 during 1997, 1996 and 1995,
respectively. There were approximately 51,015 shares available for future
purchases under the ESPP at December 31, 1997.
EXECUTIVE DEFERRED COMPENSATION PLAN
In May 1992, the Company's stockholders approved the Executive Deferred
Compensation Stock Ownership Plan (the "EDC Plan"). Under the EDC Plan, a
portion of the compensation for certain key employees of the Company and its
subsidiaries, including officers and employee directors, can be deferred for
payment after retirement or termination of employment.
The Company has established a grantor trust to fund the benefits under the
EDC Plan. The funds provided to such trust are invested by a trustee independent
of the Company primarily in Common Stock of the Company which is purchased by
the trustee on the open market. The assets of the trust are available to satisfy
the claims of all general creditors of the Company in the event of bankruptcy or
insolvency. Accordingly, the Common Stock held by the trust has been
consolidated for accounting purposes and is included in the accompanying
Supplemental Consolidated Statements of Stockholders' Equity as "Treasury Stock,
at Cost" and reflected as such on the Supplemental Consolidated Balance Sheets.
42
<PAGE> 43
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. INCOME TAXES
The components of income (loss) before income taxes were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Domestic .................................... $ 202,297 $ 71,354 $ (42,029)
Foreign ..................................... 102,664 61,320 29,054
--------- --------- ---------
$ 304,961 $ 132,674 $ (12,975)
========= ========= =========
</TABLE>
The Company's income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Current
U.S. federal and state income taxes ....... $ 39,623 $ 14,801 $ (2,791)
Foreign ................................... 33,106 21,574 16,756
-------- -------- --------
Total Current ........................... $ 72,729 $ 36,375 $ 13,965
-------- -------- --------
Deferred
U.S. federal .............................. $ 23,405 $ 2,410 $(23,836)
Foreign ................................... 12,054 1,728 5,164
-------- -------- --------
Total Deferred .......................... $ 35,459 $ 4,138 $(18,672)
-------- -------- --------
$108,188 $ 40,513 $ (4,707)
======== ======== ========
</TABLE>
Total income tax provision (benefit) was recorded as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Income (loss) from continuing operations .... $ 108,188 $ 40,513 $ (4,707)
Discontinued operations ..................... -- 4,022 5,320
Gain on disposal of discontinued operations . -- 44,600 --
Extraordinary charge ........................ (5,640) (394) --
--------- --------- ---------
$ 102,548 $ 88,741 $ 613
========= ========= =========
</TABLE>
The difference between the tax provision at the statutory federal income
tax rate and the tax provision attributable to income from continuing operations
before income taxes for the three years ended December 31, 1997 is analyzed
below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate ................................. 35.0% 35.0% 35.0%
Effect of state income tax (net) and Alternative Minimum Tax ...... 0.3 3.1 (8.1)
Effect of non-deductible expenses ................................. 1.4 1.6 (41.8)
Utilization of net operating loss carryforward .................... (2.7) (7.3) 128.6
Effect of foreign income tax, net ................................. 2.7 -- (63.3)
Foreign losses benefited .......................................... -- (0.4) 1.2
Foreign Sales Corporation benefit ................................. (0.3) 0.2 0.6
Research and development credit benefit ........................... -- -- 1.5
Benefit of tax dispute settlement ................................. -- (2.9) --
Other ............................................................. (0.9) 1.2 (17.4)
-------- -------- --------
35.5% 30.5% 36.3%
======== ======== ========
</TABLE>
Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations.
43
<PAGE> 44
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The change in the valuation allowance in 1997 and 1996 primarily relates to
the utilization of U.S. net operating losses ("NOL") and tax credit
carryforwards and management's assessment that future taxable income will be
sufficient to enable the Company to utilize remaining NOL and tax credit
carryforwards.
Deferred tax assets and liabilities are classified as current or noncurrent
according to the classification of the related asset or liability for financial
reporting. The components of the net deferred tax asset (liability) were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Domestic and foreign operating losses ........................ $ 15,709 $ 32,495
Accrued liabilities and reserves ............................. 44,122 56,402
Foreign taxes on unremitted foreign earnings ................. 16,985 7,443
Tax benefit transfer leases acquired ......................... 3,991 4,807
Other differences between financial and tax basis ............ 1,126 --
Valuation allowance .......................................... (4,716) (12,854)
-------- --------
Total deferred tax assets ...................................... $ 77,217 $ 88,293
-------- --------
Deferred tax liabilities:
Property and equipment ....................................... $(56,747) $(40,391)
Unremitted foreign earnings .................................. (23,517) (7,971)
Differences between financial and tax basis of inventory ..... (12,010) (11,191)
Other differences between financial and tax basis ............ (4,593) (21,508)
-------- --------
Total deferred tax liability ................................... (96,867) (81,061)
-------- --------
Net deferred tax asset (liability) ............................. $(19,650) $ 7,232
======== ========
</TABLE>
At December 31, 1997, the Company had $10.5 million of U.S. net operating
losses which were generated by certain subsidiaries prior to their acquisition.
The use of these pre-acquisition operating losses is subject to limitations
imposed by the Internal Revenue Code and is also restricted to the taxable
income of the subsidiaries generating the losses. These U.S. carryforwards, if
not utilized will expire between 1999 and 2009.
On October 11, 1996, the Company entered into a $3.9 million tax settlement
plus accrued interest of $2.5 million with the United States Internal Revenue
Service ("I.R.S.") relating to a dispute regarding the tax impact to the Company
upon the dissolution of an oil and gas joint venture in 1990. The tax liability
with respect to the dissolution had been previously provided for as a deferred
tax liability in the Company's consolidated financial statements. This
settlement resulted in the Company recognizing a $4.0 million tax benefit in
1996 due to the elimination of certain previously accrued deferred taxes that
will no longer be required to be paid as a result of this settlement.
12. RETIREMENT AND EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering certain U.S.
employees and international employees. Plan benefits are generally based on
years of service and average compensation levels. The Company's funding policy
is to contribute, at a minimum, the annual amount required under applicable
governmental regulations. With respect to certain international plans, the
Company has purchased irrevocable annuity contracts to settle certain benefit
obligations. Plan assets are invested primarily in equity and fixed income
mutual funds.
Pension expense related to the Company's defined benefit pension plans
included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the period ................. $ 961 $ 1,248 $ 692
Interest cost on projected benefit obligation ................... 386 427 365
Actual return on plan assets .................................... (391) (466) (354)
Net amortization and deferral ................................... 48 213 115
------- ------- -------
$ 1,004 $ 1,422 $ 818
======= ======= =======
</TABLE>
44
<PAGE> 45
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the funded status of the Company's defined
benefit pension plans and the assumptions used in computing such information:
<TABLE>
<CAPTION>
U.S. PLANS NON-U.S. PLANS
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ............................. $ 1,356 $ 1,257 $ 3,053 $ 2,933
======= ======= ======= =======
Accumulated benefit obligation ........................ $ 1,599 $ 1,902 $ 3,531 $ 3,388
======= ======= ======= =======
Projected benefit obligation .......................... $ 1,599 $ 2,026 $ 4,261 $ 4,192
Plan assets at fair value ............................. 1,487 1,383 2,553 2,194
------- ------- ------- -------
Projected benefit obligation in excess of
plan assets ......................................... (112) (643) (1,708) (1,998)
Unrecognized prior service cost ....................... (620) (637) 124 158
Unrecognized net (gain) loss .......................... 457 592 (758) (775)
Unrecognized transition obligation .................... -- -- 81 125
------- ------- ------- -------
Unfunded accrued pension cost ......................... (275) (688) (2,261) (2,490)
Adjustment for minimum liability ...................... -- (9) -- --
------- ------- ------- -------
Pension liability ..................................... $ (275) $ (697) $(2,261) $(2,490)
======= ======= ======= =======
Assumed discount rates ................................ 7.25% 7.25% 6.0%-8.0% 6.5%-8.0%
Assumed rates of increase in compensation
levels .............................................. 4.0% 4.0% 3.7%-5.0% 3.7%-5.0%
Assumed expected long-term rate of return
on plan assets ...................................... 8.0% 8.0% 8.0% 8.0%
</TABLE>
The Company also has defined contribution plans covering certain of its
employees. Expense related to these plans totaled $3.6 million, $3.7 million and
$4.7 million in 1997, 1996 and 1995, respectively.
13. DISPUTES, LITIGATION AND CONTINGENCIES
LITIGATION AND OTHER DISPUTES
The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance. Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation would not have a material adverse effect on the
Company's consolidated financial position or its results of operations with or
without consideration of insurance coverage.
INSURANCE
The Company is partially self-insured for employee health insurance claims
and for workers' compensation claims for certain of its employees. Although the
Company believes that adequate reserves have been provided for expected
liabilities arising from its self-insured obligations, it is reasonably possible
that management's estimates of these liabilities will change over the near term
as circumstances develop.
14. COMMITMENTS
The Company is committed under various noncancelable operating leases which
primarily relate to office space and equipment. Total lease expense incurred
under noncancelable operating leases was approximately $27.9 million, $26.4
million and $22.3 million for the years ended December 31, 1997, 1996, and 1995,
respectively.
45
<PAGE> 46
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum rental commitments under these noncancelable operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 19,260
1999........................................................ 18,543
2000........................................................ 10,595
2001........................................................ 7,707
2002........................................................ 5,829
Thereafter.................................................. 37,666
----------
$ 99,600
==========
</TABLE>
In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL") pursuant to which OCTL
manufactures drill pipe and premium tubulars for the Company on an exclusive
basis at OCTL's plant in India.
15. RELATED PARTY TRANSACTIONS
The Company incurred legal fees of $2.7 million, $2.2 million and $1.2
million during 1997, 1996 and 1995, respectively, with a law firm in which a
director of the Company is a partner.
In 1997, the Company paid Lehman Brothers Inc., an affiliate of Lehman
Brothers Holdings Inc., a major stockholder of the Company, approximately $2.0
million for dealer management fees associated with the Tender Offer of the
Senior Notes and the Debenture offering. The Company incurred fees of
approximately $6.7 million associated with the Company's public offering and the
disposition of the Mallard Division in 1996, and underwriting fees of $4.0
million associated with its public offering in 1995. The fee arrangements
associated with these transactions were on terms standard in the industry.
16. SUBSEQUENT EVENTS
On December 12, 1997, the Company entered into an agreement to acquire
Christiana Companies, Inc. ("Christiana") pursuant to a tax free merger (the
"Christiana Merger"), in which approximately 3.9 million shares of the Company's
Common Stock will be issued to the stockholders of Christiana. Prior to the
Christiana Merger, Christiana will sell two-thirds of its interest (the
"Logistic Sale") in Total Logistic Control, LLC ("Logistic"), to C2, Inc. for
consideration of approximately $10.7 million. Following the Logistic Sale, the
remaining assets of Christiana will consist of (i) approximately 3.9 million
shares of the Company's Common Stock, (ii) a one-third interest in Logistic,
(iii) cash and other assets with a book value of approximately $10.0 million and
(iv) a contingent cash payment of up to $10.0 million payable no earlier than
five years after the effective date of the Christiana Merger to the extent such
funds are not required to satisfy contingent claims against Christiana. Because
the number of shares of Common Stock to be issued in the acquisition approximate
the number of shares to be acquired, the Christiana Merger will have no material
impact on the outstanding number of shares or equity of the Company.
The Christiana Merger is subject to various conditions, including approval
by the stockholders of the Company and Christiana and the receipt of required
regulatory approvals and the expiration or termination of all waiting periods
(and extensions thereof) under the Hart-Scott-Rodino Act. Although there can be
no assurance that the Christiana Merger will close, the Company currently
anticipates that the acquisition will be consummated shortly after receipt of
such regulatory approvals and the approval of the Christiana Merger by the
stockholders of the Company and Christiana, and the approval of the Logistic
Sale by the stockholders of Christiana.
On January 12, 1998, the Company completed the acquisition of the Houston
Well Screen group of companies ("HWS") from Van der Horst Limited, a Singapore
company, for a net purchase price of approximately $27.6 million in cash. The
HWS acquisition includes the purchase of Van der Horst USA Inc., which is the
holding company of Houston Well Screen Company and of Houston Well Screen Asia
Pte Ltd. which has operations in Singapore and Indonesia. HWS makes wedge-wire
screen products for use in oil and gas production and other applications.
46
<PAGE> 47
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On January 15, 1998, the Company completed the acquisition of Taro
Industries Limited ("Taro"), an Alberta corporation in which approximately 0.8
million shares of the Company's Common Stock have been issued to the
shareholders of Taro in exchange for their shares of Taro stock. Taro is a
Canadian provider of well automation, gas compression, and drilling equipment
distribution and will be integrated into the Company's production equipment
segment.
On February 19, 1998, the Company completed the acquisition of Ampscot
Equipment Ltd., an Alberta corporation ("Ampscot") for approximately $57.1
million in cash. Ampscot is a Canadian-based manufacturer of pumping units.
In February 1998, the Company entered into a new credit agreement which
provides for borrowings of up to an aggregate of $250.0 million, consisting of a
$200.0 million U.S. credit facility and a $50.0 million Canadian credit facility
and terminated both the $120.0 million and $31.5 million Canadian working
capital facilities.
In May 1998, the Company amended its $250.0 million revolving credit
facility and terminated its $200.0 million revolving credit facility. Amounts
outstanding under the amended facility accrue interest at a variable rate based
on either prime or LIBOR and are secured by pledges of various stock of the
Company's domestic and foreign subsidiaries. In addition, certain of the
Company's domestic subsidiaries are guarantors of the facility. A commitment fee
ranging from 0.09% to 0.20% per annum, depending on the credit ratings assigned
to the 7 1/4% Senior Notes, is payable quarterly on the unused portion of the
facility. The facility contains customary affirmative and negative covenants
relating to working capital, earnings and net worth.
In the second quarter of 1998, the Company estimates that it will report
approximately $60.0 million, net of taxes, in unusual charges associated with
the Merger. Such costs primarily consists of transactions costs, severance and
termination payments to former officers and employees, facility closure costs
and costs associated with the closure of excess and duplicative distribution
and service locations primarily due to integrating EVI's businesses with
Weatherford's businesses and the impairment of various assets as a result of
the combination of operations and rationalization of product lines and the
elimination of certain products, services and operations as a result of the
changes in the operations of the Company following the Merger.
47
<PAGE> 48
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. SEGMENT INFORMATION
BUSINESS SEGMENTS
Financial information by industry segment for each of the three years ended
December 31, 1997, is summarized below. Identifiable assets exclude net assets
relating to the Mallard Division of approximately $95.5 million at December 31,
1995. Corporate assets principally include cash and cash equivalents and tax
assets and liabilities.
<TABLE>
<CAPTION>
COMPLETION ARTIFICIAL
AND OILFIELD DRILLING LIFT AND
SERVICES PRODUCTS COMPRESSION CORPORATE TOTAL
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997 (in thousands)
Sales to unaffiliated customers ...... $ 929,001 $ 611,715 $ 428,373 $ -- $1,969,089
Operating income (loss) .............. 215,412 120,830 37,566 (37,816) 335,992
Identifiable assets .................. 919,198 674,388 1,064,612 79,712 2,737,910
Depreciation and amortization ........ 84,882 23,610 30,591 3,848 142,931
Capital expenditures and other
acquisitions of property,
plant, and equipment ............. 124,402 107,071 90,351 2,970 324,794
1996
Sales to unaffiliated customers ...... $ 824,639 $ 337,312 $ 305,319 $ -- $1,467,270
Operating income (loss) .............. 146,332 42,573 19,500 (39,304) 169,101
Identifiable assets .................. 952,445 386,245 614,584 290,359 2,243,633
Depreciation and amortization ........ 80,582 11,046 29,419 783 121,830
Capital expenditures and other
acquisitions of property,
plant, and equipment ............. 121,024 62,008 55,503 68 238,603
1995
Sales to unaffiliated customers ...... $ 759,309 $ 149,462 $ 217,032 $ -- $1,125,803
Acquisition-related costs and
other unusual charges .............. 59,171 -- -- 29,011 88,182
Operating income (loss) .............. 5,116 14,425 16,276 (23,697) 12,120
Identifiable assets .................. 916,831 218,201 406,953 73,092 1,615,077
Depreciation and amortization ........ 79,381 7,170 19,690 1,819 108,060
Capital expenditures and other
acquisitions of property,
plant, and equipment ............. 93,863 25,422 24,559 160 144,004
</TABLE>
During 1996, the Company incurred a charge of $5.8 million associated with
plant closures. Of this charge, $4.3 million related to the closure of a tool
joint facility within the drilling products segment and $1.5 million related to
the closure of a packer facility within the completion and oilfield services
segment. Operating income for 1996 for the drilling products and completion and
oilfield services segments include accruals included within the $5.8 million
charge of $1.5 million and $0.5 million, respectively, for such plant closures.
48
<PAGE> 49
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAJOR CUSTOMERS AND CREDIT RISK
Substantially all of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letter of credit or similar
arrangements.
In 1997, 1996 and 1995, there was no individual customer who accounted for
10% of consolidated revenues.
49
<PAGE> 50
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOREIGN OPERATIONS AND EXPORT SALES
The Company's equipment and services are used in approximately 84 countries
by U.S. customers operating abroad and by foreign customers. Sales of equipment
and services outside the United States accounted for 52%, 53% and 52% of total
revenues in 1997, 1996 and 1995, respectively, based upon the ultimate
destination in which equipment or services were sold, shipped or provided to the
customer by the Company.
Financial information by geographic segment for each of the three years
ended December 31, 1997, is summarized below. Intergeographic revenues are
accounted for at prices that approximate arm's length market prices. Certain
prior year balances have been restated to conform with current year
presentation.
<TABLE>
<CAPTION>
FOREIGN
------------------------------------------------------
UNITED LATIN
STATES CANADA AMERICA EUROPE AFRICA OTHER ELIMINATIONS TOTAL
----------- --------- --------- --------- --------- -------- ------------ ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
Operating revenues from
unaffiliated customers..... $ 1,205,633 $ 257,478 $ 118,762 $ 149,223 $ 70,037 $ 167,956 $ -- $1,969,089
Transfers between
geographic areas........... 46,868 11,664 52,092 19,917 5,601 1,901 (138,043) --
----------- --------- --------- --------- --------- -------- ---------- ----------
Total revenues............... 1,252,501 269,142 170,854 169,140 75,638 169,857 (138,043) 1,969,089
Operating income ............ 237,919 38,298 9,844 31,123 18,240 13,446 (12,878) 335,992
Identifiable assets.......... 1,529,432 410,475 303,118 188,133 63,677 174,835 68,240 2,737,910
Export sales of U.S.
companies.................. -- 26,293 38,280 28,414 16,229 69,923 -- 179,139
1996
Operating revenues from
unaffiliated customers..... $ 928,956 $ 143,610 $ 74,109 $ 148,094 $ 72,457 $ 100,044 $ -- $1,467,270
Transfers between.
geographic areas........... 29,856 566 12,505 9,848 5,452 1,860 (60,087) --
----------- --------- --------- --------- --------- -------- ---------- ----------
Total revenues............... 958,812 144,176 86,614 157,942 77,909 101,904 (60,087) 1,467,270
Operating income............. 102,992 19,264 11,823 18,526 17,773 6,681 (7,958) 169,101
Identifiable assets.......... 1,458,554 159,000 189,689 201,137 67,856 116,206 51,191 2,243,633
Export sales of U.S.
companies.................. -- 14,309 36,296 43,924 30,206 80,385 -- 205,120
1995
Operating revenues from
unaffiliated customers..... $ 691,983 $ 144,066 $ 49,521 $ 110,065 $ 57,450 $ 72,718 $ -- $1,125,803
Transfers between
geographic areas........... 14,631 167 14,973 6,049 -- 1,879 (37,699) --
----------- --------- --------- --------- --------- -------- ---------- ----------
Total revenues............... 706,614 144,233 64,494 116,114 57,450 74,597 (37,699) 1,125,803
Acquisition-related costs
and other unusual
charges.................. 43,276 2,850 259 4,302 624 7,860 29,011 88,182
Operating income............. 13,416 15,694 9,642 2,027 15,389 (5,836) (38,212) 12,120
Identifiable assets.......... 1,074,720 103,565 86,748 141,673 40,299 103,756 64,316 1,615,077
Export sales of U.S.
companies.................. -- 21,711 25,394 28,977 19,605 32,781 -- 128,468
</TABLE>
50
<PAGE> 51
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tabulation sets forth unaudited quarterly financial data for
1997 and 1996.
<TABLE>
<CAPTION>
1ST QTR. (1) 2ND QTR. (1) 3RD QTR. (1) 4TH QTR. TOTAL
---------- ---------- ---------- ---------- ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1997
Revenues......................... $ 431,253 $ 476,999 $ 509,718 $ 551,119 $ 1,969,089
Gross Profit..................... 124,262 139,813 158,264 175,624 597,963
SG&A 57,783 64,651 66,683 75,436 264,553
Operating Income................. 66,988 75,705 92,283 101,016 335,992
Interest Expense................. (10,545) (10,603) (10,125) (12,000) (43,273)
Income from Continuing
Operations..................... 37,903 45,741 53,726 59,403 196,773
Net Income....................... 37,903 45,741 53,726 50,393 (2) 187,763
Depreciation and Amortization..... 34,023 35,744 36,203 36,961 142,931
Basic EPS:
Income from Continuing
Operations.................... $ 0.40 $ 0.48 $ 0.56 $ 0.61 $ 2.04
Net Income...................... 0.40 0.48 0.56 0.52 (2) 1.95
Diluted EPS:
Income from Continuing
Operations.................... 0.39 0.47 0.55 0.60 2.01
Net Income..................... 0.39 0.47 0.55 0.51 (2) 1.92
1996
Revenues......................... $ 308,685 $ 332,110 $ 392,060 $ 434,415 $ 1,467,270
Gross Profit..................... 79,385 85,125 104,056 107,890 376,456
SG&A 48,537 49,707 52,361 58,828 209,433
Operating Income................. 31,349 36,273 52,148 49,331 169,101
Interest Expense................. (8,900) (9,757) (10,322) (10,389) (39,368)
Income from Continuing
Operations..................... 15,182 18,017 26,586 32,376 92,161
Net Income....................... 16,782 (3) 19,034 (3)(4) 29,428 (3) 100,578 (3)(5) 165,822
Depreciation and Amortization.... 28,712 29,382 30,867 32,869 121,830
Basic EPS:
Income from Continuing
Operations................... $ 0.18 $ 0.21 $ 0.29 $ 0.34 $ 1.03
Net Income..................... 0.20 (3) 0.22 (3)(4) 0.32 (3) 1.05 (3)(5) 1.85
Diluted EPS:
Income from Continuing
Operations................... 0.18 0.21 0.28 0.34 1.01
Net Income..................... 0.20 (3) 0.22 (3)(4) 0.31 (3) 1.04 (3)(5) 1.82
</TABLE>
(1) The first, second and third quarters of 1997 quarterly financial data has
been restated from amounts previously reported in the Company's respective
Forms 10-Q to reclassify certain amounts to conform with prior periods'
presentation and to classify the Veracruz, Mexico facility as a capital
lease to reflect the current terms thereof.
(2) Includes the extraordinary charge, net of taxes, of approximately $9.0
million related to the repayment of the Senior Notes in the fourth quarter
of 1997.
51
<PAGE> 52
EVI WEATHERFORD, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) Includes income from discontinued operations, net of taxes, of
approximately $1.6 million, $1.7 million, $2.8 million and $1.3 million
recorded in the first, second, third and fourth quarters of 1996,
respectively.
(4) Includes the extraordinary charge, net of taxes, of approximately $0.7
million recorded in the second quarter of 1996.
(5) Includes the gain on disposal of discontinued operations, net of taxes, of
approximately $66.9 million recorded in the fourth quarter of 1996.
52
<PAGE> 53
EVI WEATHERFORD, INC. AND SUBSIDIARIES
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
53
<PAGE> 54
SCHEDULE II
EVI WEATHERFORD, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADDITIONS
----------------------------------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES COLLECTIONS DEDUCTIONS PERIOD
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Allowance for uncollectible accounts
receivable........................ $ 16,824 $ 13,248 $ 112 $ (6,711) $ 23,473
YEAR ENDED DECEMBER 31, 1996:
Allowance for uncollectible accounts
receivable........................ $ 16,304 $ 4,608 $ 4 $ (4,092) $ 16,824
YEAR ENDED DECEMBER 31, 1995
Allowance for uncollectible accounts
receivable........................ $ 11,791 $ 6,751 $ 92 $ (2,330) $ 16,304
</TABLE>
54
<PAGE> 55
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
4.1 - Amended and Restated Credit Agreement dated as of May 27,
1998, among EVI Weatherford, Inc., EVI Oil Tools Canada
Ltd., Chase Bank of Texas, National Association, as U.S.
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent and Canadian Agent, ABN AMRO Bank,
N.V., as Syndication Agent, and the other Lenders defined
therein, including the forms of Notes (incorporated by
reference to Exhibit No. 4.1 to Form 8-K, File 1-13086,
filed June 16, 1998).
23.1 - Consent of Arthur Andersen LLP with respect to the
restated financial statements of EVI Weatherford, Inc.
27.1 - Financial Data Schedule (incorporated by reference to
Exhibit No. 27.1 to Form 8-K, File 1-13086, filed
June 16, 1998).
27.2 - Financial Data Schedule (incorporated by reference to
Exhibit No. 27.2 to Form 8-K, File 1-13086, filed
June 16, 1998).
55
<PAGE> 56
SIGNATURES
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 hereunto duly authorized.
EVI WEATHERFORD, INC.
Dated: July 20, 1998 /s/ James G. Kiley
---------------------------------------
James G. Kiley
Vice President and
Chief Financial Officer
56
<PAGE> 57
INDEX TO EXHIBITS
Number Exhibit
------ -------
4.1 Amended and Restated Credit Agreement dated as of May 27,
1998, among EVI Weatherford, Inc., EVI Oil Tools Canada
Ltd., Chase Bank of Texas, National Association, as U.S.
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent and Canadian Agent, ABN AMRO Bank, N.V.,
as Syndication Agent, and the other Lenders defined therein,
including the forms of Notes (incorporated by reference to
Exhibit No. 4.1 to Form 8-K, File 1-13086, filed
June 16, 1998).
23.1 Consent of Arthur Andersen LLP with respect to the restated
financial statements of EVI Weatherford, Inc.
27.1 Financial Data Schedule (incorporated by reference to
Exhibit No. 27.1 to Form 8-K, File 1-13086, filed
June 16, 1998).
27.2 Financial Data Schedule (incorporated by reference to
Exhibit No. 27.2 to Form 8-K, File 1-13086, filed
June 16, 1998).
57
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
Current Report on Form 8-K/A of EVI Weatherford, Inc. (formerly EVI, Inc.) of
our report dated June 15, 1998 on the supplemental consolidated financial
statements of EVI Weatherford, Inc. as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997, and to the
incorporation by reference of such report into EVI Weatherford, Inc.'s
previously filed Registration Statement File Nos. 33-31662, 33-56384, 33-56386,
33-65790, 33-64349, 333-13531, 333-24133, 333-39587, 333-44345, 333-45207,
333-49527 and 333-53633.
ARTHUR ANDERSEN LLP
Houston, Texas
July 20, 1998
