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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): APRIL 22, 1998
EVI, INC.
(Exact name of registrant as specified in charter)
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-8400
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Page 1
Exhibit Index Appears on Page 12
<PAGE> 2
ITEM 5. OTHER EVENTS.
AMENDMENT TO MERGER AGREEMENT
On April 22, 1998, EVI, Inc., a Delaware corporation ("EVI"), and
Weatherford Enterra, Inc., a Delaware corporation ("Weatherford"), entered into
Amendment No. 2 (the "Merger Amendment") to the Agreement and Plan of Merger
(the "Merger Agreement") dated as of March 4, 1998, as amended by Amendment No.
1 dated April 17, 1998. The amendment to the Merger Agreement was effected to
reflect a change in the number of directors of the surviving corporation
following the proposed merger of Weatherford with and into EVI (the "Merger").
Under the Merger Agreement, as amended, the number of directors of the
surviving corporation will be eight, of which five will be named by EVI and
three will be named by Weatherford.
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PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth certain summary unaudited pro forma
condensed consolidated financial data of EVI and is based on the historical
financial data of EVI, Weatherford Enterra, Inc. ("Weatherford"), Christiana
Companies, Inc. ("Christiana"), Trico Industries, Inc. ("Trico"), BMW Monarch
(Lloydminster) Ltd. ("BMW Monarch") and BMW Pump Inc. (together, "BMW") and the
assets of GulfMark International, Inc. acquired by EVI on May 1, 1997 ("the
GulfMark Retained Assets"). The Unaudited Pro Forma Condensed Consolidated
Financial Statements of EVI have been prepared assuming the proposed merger of
Weatherford with and into EVI (the "Merger"), pursuant to an Agreement and Plan
of Merger dated as of March 4, 1998, as amended, between EVI and Weatherford, is
accounted for as a pooling of interests and give effect to the proposed Merger
by combining EVI's and Weatherford's results of operations for each of the three
years ended December 31, 1997 on a pooling-of-interests basis as if EVI and
Weatherford had been combined since inception. The Unaudited Adjusted Pro Forma
Condensed Consolidated Statement of Income further gives effect to (i) the
acquisition by EVI on May 1, 1997, of the GulfMark Retained Assets, (ii) the
issuance and sale of EVI's 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027 (the "Debentures") on November 10, 1997, (iii) the
acquisition by EVI on December 15, 1997, of $119,980,000 principal amount of
EVI's outstanding 10 1/4% Senior Notes due 2004 and 10 1/4% Senior Notes due
2004, Series B (collectively, the "Notes") from the holders of the Notes
pursuant to a cash tender offer and consent solicitation of the Company (the
"Tender Offer"), (iv) EVI's acquisition of Trico on December 2, 1997, (v) EVI's
acquisition of BMW on December 3, 1997 and (vi) EVI's proposed acquisition of
Christiana through a merger of a subsidiary of EVI with and into Christiana
("Christiana Acquisition") pursuant to an Agreement and Plan of Merger dated
December 12, 1996 (the "Christiana Merger Agreement"), by and among EVI,
Christiana and C2, Inc., a Wisconsin corporation ("C2"), and the sale by
Christiana, prior to the Christiana Acquisition, of two-thirds of its interest
in Total Logistic Control, LLC ("Logistic"), a wholly owned subsidiary of
Christiana, to C2 for approximately $10.7 million, as if these transactions had
occurred on January 1, 1997. The Unaudited Adjusted Pro Forma Condensed
Consolidated Balance Sheet presents the combined financial position of EVI and
Weatherford and gives effect to EVI's proposed merger with Christiana as if
these transactions had occurred on December 31, 1997. The pro forma amounts
presented do not include transaction costs related to the Merger which are
estimated to be approximately $25 million and other costs directly attributable
to the Merger which, in the aggregate, are expected to be between $90 million
and $110 million.
The pro forma information set forth below is not necessarily indicative
of the results that actually would have been achieved had such transactions been
consummated as of the aforementioned dates, or that may be achieved in the
future. All other 1997 and 1998 acquisitions by EVI are not material
individually or in the aggregate with same-year acquisitions; therefore, pro
forma information is not reflected. This information should be read in
conjunction with EVI's Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in its Annual Report on Form 10-K,
as amended, for the year ended December 31, 1997, and EVI's, GulfMark Retained
Assets', Trico's, BMW's, Christiana's and Weatherford's financial statements and
related notes thereto, all of which have been previously filed or are filed
herewith and are hereby incorporated herein by reference.
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UNAUDITED ADJUSTED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
EVI AND PRO FORMA EVI AND
WEATHERFORD ADJUSTMENTS WEATHERFORD
COMBINED -------------------------- COMBINED
PRO CHRISTIANA SALE OF PRO FORMA
FORMA(a) HISTORICAL LOGISTIC(b) CHRISTIANA ADJUSTED
----------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 74,211 $ 6,855 $ 33,280(c) $(20,858)(d)(e) $ 93,488
Accounts receivable, net.......................... 526,756 9,258 (9,258) -- 526,756
Inventories....................................... 455,811 -- -- -- 455,811
Prepaid expenses and other........................ 79,125 1,459 (1,459) -- 79,125
---------- -------- -------- -------- ----------
Total current assets........................ 1,135,903 17,572 22,563 (20,858) 1,155,180
---------- -------- -------- -------- ----------
Property, plant and equipment, net................ 870,163 73,881 (73,881) -- 870,163
Goodwill, net..................................... 669,449 5,514 (5,514) -- 669,449
Investment in EVI................................. -- 44,703 -- (44,703)(f) --
Investment in Logistic............................ -- -- 7,620(g) (3,919)(h) 3,701
Other assets...................................... 68,546 1,891 (1,891) -- 68,546
---------- -------- -------- -------- ----------
$2,744,061 $143,561 $(51,103) $(69,480) $2,767,039
========== ======== ======== ======== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of
long-term debt.................................. $ 37,421 $ 1,245 $ (1,245) $ -- $ 37,421
Accounts payable.................................. 220,637 4,729 (4,729) -- 220,637
Other accrued liabilities......................... 248,452 5,579 2,173(i) 1,288(e)(j) 257,492
---------- -------- -------- -------- ----------
Total current liabilities................... 506,510 11,553 (3,801) 1,288 515,550
---------- -------- -------- -------- ----------
Long-term debt.................................... 252,322 33,617 (33,617) -- 252,322
Deferred income taxes and other................... 121,370 23,626 (10,731)(i) 1,043(f)(k) 135,308
5% Convertible Subordinated Preferred Equivalent
Debentures...................................... 402,500 -- -- -- 402,500
Stockholders' equity:
Common stock...................................... 101,651(l) 5,209 -- (1,312)(e)(m)(n) 105,548
Capital in excess of par.......................... 1,005,387(l) 12,346 -- 144,527(e)(m)(n) 1,162,260
Retained earnings................................. 545,159 58,446 (2,954) (55,492)(d)(e)(m) 545,159
Foreign currency translation adjustment........... (38,494) -- -- -- (38,494)
Treasury stock, at cost........................... (152,344)(l) (1,236) -- (159,534)(m)(n) (313,114)
---------- -------- -------- -------- ----------
Total stockholders' equity.................. 1,461,359 74,765 (2,954) (71,811) 1,461,359
---------- -------- -------- -------- ----------
$2,744,061 $143,561 $(51,103) $(69,480) $2,767,039
========== ======== ======== ======== ==========
</TABLE>
4
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997(o) 1996(o) 1995(o)
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Products............................................ $1,147,692 $ 721,090 $ 513,206
Services and rentals................................ 821,397 746,180 612,597
---------- ---------- ----------
1,969,089 1,467,270 1,125,803
---------- ---------- ----------
Costs and expenses:
Cost of sales
Products......................................... 817,013 553,501 388,329
Services and rentals............................. 551,375 537,313 442,902
Selling, general and administrative................. 264,553 209,433 195,747
Acquisition-related costs and other unusual
charges.......................................... -- -- 88,182
---------- ---------- ----------
1,632,941 1,300,247 1,115,160
---------- ---------- ----------
Operating income...................................... 336,148 167,023 10,643
---------- ---------- ----------
Other income (expense):
Interest expense.................................... (43,273) (39,368) (33,504)
Interest income..................................... 8,329 4,168 2,249
Equity in earnings of unconsolidated affiliates..... 2,582 2,078 1,477
Other income (expense), net......................... 1,175 (1,227) 6,160
---------- ---------- ----------
(31,187) (34,349) (23,618)
---------- ---------- ----------
Income (loss) before income taxes..................... 304,961 132,674 (12,975)
Provision (benefit) for income taxes.................. 108,188 40,513 (4,707)
---------- ---------- ----------
Income (loss) from continuing operations.............. $ 196,773 $ 92,161 $ (8,268)
========== ========== ==========
Earnings (loss) per share from continuing operations:
Basic(p)............................................ $ 2.05 $ 1.03 $ (0.11)
Diluted(p).......................................... 2.02 1.01 (0.11)
Weighted average shares outstanding:
Basic............................................... 96,052 89,842 77,595
Diluted............................................. 97,562 90,981 77,595
</TABLE>
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UNAUDITED ADJUSTED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
EVI AND
WEATHERFORD BMW PUMP/
COMBINED GULFMARK BMW MONARCH
PRO RETAINED ASSETS TRICO COMBINED CHRISTIANA
FORMA(o) HISTORICAL(q) HISTORICAL(r) HISTORICAL(r) HISTORICAL
----------- --------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Products...................... $1,147,692 $ 818 $51,459 $103,847 $90,101
Services and rentals.......... 821,397 -- -- -- --
---------- ----- ------- -------- -------
1,969,089 818 51,459 103,847 90,101
---------- ----- ------- -------- -------
Costs and expenses:
Cost of sales
Products.................. 817,013 678 34,323 73,591 76,377
Services and rentals...... 551,375 -- -- -- --
Selling, general and
administrative.............. 264,553 688 15,346 15,450 9,103
---------- ----- ------- -------- -------
1,632,941 1,366 49,669 89,041 85,480
---------- ----- ------- -------- -------
Operating income................. 336,148 (548) 1,790 14,806 4,621
---------- ----- ------- -------- -------
Other income (expense):
Interest expense.............. (43,273) -- (493) (337) (2,991)
Interest income............... 8,329 -- -- -- 507
Equity in earnings of BMW
Monarch..................... -- -- 832 -- --
Equity in earnings of EVI..... -- -- -- -- 6,290
Equity in earnings of
Logistic.................... -- -- -- -- --
Equity in earnings of
unconsolidated affiliates... 2,582 -- -- -- --
Other income (expense), net... 1,175 -- (595) 65 (1,470)
---------- ----- ------- -------- -------
(31,187) -- (256) (272) 2,336
---------- ----- ------- -------- -------
Income (loss) before income
taxes........................... 304,961 (548) 1,534 14,534 6,957
Provision (benefit) for income
taxes........................... 108,188 100 797 5,748 2,763
---------- ----- ------- -------- -------
Income (loss) from continuing
operations...................... $ 196,773 $(648) $ 737 $ 8,786 $ 4,194
========== ===== ======= ======== =======
Earnings per share from
continuing operations:
Basic......................... $ 2.05(p)
Diluted....................... 2.02(p)
Weighted average shares
outstanding:
Basic......................... 96,052(dd)
Diluted....................... 97,562(dd)
<CAPTION>
PRO FORMA ADJUSTMENTS EVI AND
-------------------------------------------------------------------- WEATHERFORD
BMW PUMP/ COMBINED
DEBENTURE SENIOR NOTES BMW MONARCH PRO FORMA
OFFERING TENDER TRICO COMBINED CHRISTIANA(s) ADJUSTED
--------- ------------ ------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Products...................... $ -- $ -- $ -- $ -- $(90,101) $1,303,816
Services and rentals.......... -- -- -- -- -- 821,397
-------- ------- ------- ------- -------- ----------
-- -- -- -- (90,101) 2,125,213
-------- ------- ------- ------- -------- ----------
Costs and expenses:
Cost of sales
Products.................. -- -- 2,100(t) -- (76,377) 927,705
Services and rentals...... -- -- -- -- 551,375
Selling, general and
administrative.............. -- -- 1,364(u) (3,616)(u)(v) (9,103) 293,785
-------- ------- ------- ------- -------- ----------
-- -- 3,464 (3,616) (85,480) 1,772,865
-------- ------- ------- ------- -------- ----------
Operating income................. -- -- (3,464) 3,616 (4,621) 352,348
-------- ------- ------- ------- -------- ----------
Other income (expense):
Interest expense.............. (17,325)(w) 12,216(x) -- 373(y) 2,991 (48,839)
Interest income............... -- -- -- -- (507) 8,329
Equity in earnings of BMW
Monarch..................... -- -- (832)(z) -- -- --
Equity in earnings of EVI..... -- -- -- -- (6,290)(aa) --
Equity in earnings of
Logistic.................... -- -- -- -- 130 130
Equity in earnings of
unconsolidated affiliates... -- -- -- -- -- 2,582
Other income (expense), net... -- -- 538(bb) -- 1,470 1,183
-------- ------- ------- ------- -------- ----------
(17,325) 12,216 (294) 373 (2,206) (36,615)
-------- ------- ------- ------- -------- ----------
Income (loss) before income
taxes........................... (17,325) 12,216 (3,758) 3,989 (6,827) 315,733
Provision (benefit) for income
taxes........................... (6,064)(cc) 4,276(cc) (1,315)(cc) 1,396(cc) (2,676)(cc) 113,213
-------- ------- ------- ------- -------- ----------
Income (loss) from continuing
operations...................... $(11,261) $ 7,940 $(2,443) $ 2,593 $ (4,151) $ 202,520
======== ======= ======= ======= ======== ==========
Earnings per share from
continuing operations:
Basic......................... $ 2.11(p)
Diluted....................... 2.08(p)
Weighted average shares
outstanding:
Basic......................... 96,052(dd)
Diluted....................... 97,562(dd)
</TABLE>
6
<PAGE> 7
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
The following notes set forth the assumptions used in preparing the
unaudited pro forma financial statements. The pro forma adjustments are based on
estimates made by EVI's management using information currently available.
PRO FORMA ADJUSTMENTS
The adjustments to the accompanying Unaudited Adjusted Pro Forma Condensed
Consolidated Balance Sheets are described below:
(a) The EVI and Weatherford Combined Pro Forma Balance Sheet has been
prepared assuming the Merger is accounted for as a pooling of interests.
The EVI and Weatherford Combined Pro Forma Balance Sheet is based on the
consolidated financial statements of EVI and Weatherford.
(b) To reflect the sale of a two-thirds interest in Logistic by
Christiana to C2 for cash of $10.67 million and to reflect a $3.0 million
loss, net of taxes, due to the purchase price being less than the $15.5
million carrying value of the interest in Logistic. Such sale is in
accordance with the Christiana Merger Agreement as (i) Logistic is required
to distribute $23.0 million to Christiana, funded from borrowings of
Logistic (of which such borrowings are being effected to permit Christiana
to have sufficient cash to allow EVI to pay the cash consideration
contemplated by the Christiana Acquisition, (ii) Christiana is to sell its
two-thirds interest in Logistic to C2 for $10.67 million and (iii) EVI is
required to pay to the Christiana shareholders an amount of cash equal to
the cash of Christiana at the closing of the Christiana Acquisition less
$10.0 million and the amount of certain liabilities and tax benefits to be
maintained by Christiana for the benefit of EVI.
(c) To reflect an increase in Christiana's cash of $23.0 million from
a dividend from Logistic funded through Logistic's borrowings to meet the
required minimum cash levels per the Christiana Merger Agreement, and to
reflect the cash to Christiana of $10.67 million from its sale of the
two-thirds interest in Logistic less $0.4 million of cash held by Logistic.
(d) To reflect the cash payment by EVI of $19.8 million or $3.81 per
share to the holders of common stock of Christiana pursuant to the
Christiana Merger Agreement. The pro forma cash payment by EVI of $3.81 per
share is based on pro forma data presented herein; however, based on future
expected cash flows of Christiana, the payment to the Christiana
shareholders in the Christiana Acquisition is believed to be approximately
$3.60 per share. The difference of $0.21 per share relates to expected cash
flow timing differences between December 31, 1997 and the actual date
contemplated for the Christiana Acquisition.
(e) To reflect the exercise of the Christiana employee stock options
of 53,334 shares of common stock Christiana for $1.4 million in cash and
the cancellation of Christiana employee stock options for $2.5 million in
cash. The exercise and cancellation of Christiana employee stock options
generates a tax benefit of $1.2 million. Cash in this amount is required to
be retained by Christiana for the benefit of EVI.
(f) To eliminate Christiana's investment in EVI and related deferred
taxes.
(g) To reflect the remaining one-third interest in Logistic held by
Christiana. The investment represents a one-third interest of the net book
value of Logistic.
(h) Prior to Christiana's sale of its two-thirds interest in Logistic,
the pro forma net book value of Logistic was $23.1 million. After the sale
of Christiana's two-thirds interest in Logistic, the remaining net book
value of Logistic is $7.6 million. EVI reflects a reduction of $3.9 million
in the carrying value of Christiana's remaining one-third interest in
Logistic reflecting the excess fair value of the net tangible post merger
assets of Christiana over the cash and stock consideration being paid to
the Christiana shareholders.
7
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NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(i) To reclassify certain deferred tax liabilities of $8.8 million to
current federal taxes payable as a result of the sale by Christiana of its
two-thirds interest in Logistic.
(j) To record a $2.5 million liability for transaction costs related
to the Christiana Acquisition.
(k) To record a $10.0 million EVI liability to the Christiana
shareholders payable in five years pursuant to the Christiana Merger
Agreement.
(l) Reflects the issuance of 49,760,332 shares of EVI Common Stock in
exchange for all 52,379,297 shares of Weatherford Common Stock outstanding
at December 31, 1997, based upon the conversion rate of .95 of a share of
EVI Common Stock for each share of common stock of Weatherford
("Weatherford Common Stock"). The difference between the par value of
Weatherford Common Stock exchanged and the par value of the EVI Common
Stock issued upon consummation of the Merger is reflected as a decrease in
paid-in capital. Weatherford treasury stock as of December 31, 1997 is
reflected as a decrease in paid-in capital.
(m) To reflect the issuance of 3,897,462 shares of EVI Common Stock in
the Christiana Acquisition at a price of $41.25 per share, the market price
of the EVI Common Stock on December 15, 1997, and the acquisition of
3,897,462 shares of EVI Common Stock held by Christiana as a result of the
Christiana Acquisition. The shares of EVI Common Stock held by Christiana
have been classified as treasury shares.
(n) To eliminate the remaining common stock of Christiana of $5.3
million, capital in excess of par of $15.0 million, retained earnings of
$31.7 million and treasury stock of $1.2 million.
The adjustments to the accompanying Unaudited Adjusted Pro Forma Condensed
Consolidated Statements of Income are described below:
(o) The Unaudited Pro Forma Condensed Consolidated Statements of
Income of EVI and Weatherford Combined are based on the consolidated
financial statements of EVI and Weatherford. Pro forma 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. Pro forma adjustments for the years ended December 31, 1997
and 1996 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. Certain amounts
have been reclassified to conform presentation.
(p) The pro forma earnings per share from continuing operations is
computed on the basis of the combined weighted average number of common
shares of EVI and Weatherford for each period presented based upon the
conversion rate of .95 of a share of EVI Common Stock for each share of
Weatherford Common Stock.
(q) Reflects the results of the GulfMark Retained Assets, which were
acquired by EVI on May 1, 1997, from January 1, 1997, through March 31,
1997. Actual results of the GulfMark Retained Assets are included in EVI's
historical results from May 1, 1997.
(r) Reflects the results of Trico and BMW, which were acquired by EVI
on December 2, 1997 and December 3, 1997, respectively, from January 1,
1997 through September 30, 1997. Actual results of Trico and BMW are
included in EVI's historical results from their respective dates of
acquisitions.
(s) To eliminate Logistic's historical operating results, to reflect a
one-third equity interest in Logistic and to record the income tax
provision related to the one-third equity interest at the statutory rate.
8
<PAGE> 9
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(t) To eliminate the provision for environmental remediation, the
liability related to property retained by the prior shareholder of Trico.
(u) To record amortization expense relating to the estimated excess of
cost over fair value of tangible assets acquired in connection with the
Trico and BMW acquisitions. Such excess of cost over fair value of net
tangible assets acquired is being amortized over 40 years.
(v) To eliminate bonuses paid to the shareholders of BMW and
management fees paid to Trico by BMW Monarch that would not have been paid
by EVI.
(w) To adjust interest expense for the Debentures at the rate of 5%
per annum and to record amortization expense of related debt issuance costs
over the life of the Debentures.
(x) To reduce interest expense and amortization of debt issuance costs
to reflect the repayment of the Notes. EVI funded such repayment with a
portion of the proceeds from the Debentures.
(y) To reduce interest expense to reflect EVI's retirement of BMW's
indebtedness. EVI funded such retirement with a portion of the proceeds
from the Debentures.
(z) To eliminate Trico's equity in earnings of BMW Monarch.
(aa) To eliminate Christiana's equity in earnings of EVI.
(bb) To eliminate Trico's provision for estimated losses on property
held for sale as the property was retained by the prior shareholder of
Trico.
(cc) To record the income tax provision (benefit) related to the
effect of the pro forma adjustments at the statutory rate.
(dd) EVI's historical shares outstanding, pro forma post-merger shares
outstanding and basic weighted average pro forma post-merger shares
outstanding as of December 31, 1997, were 47,100,290, 96,860,622 and
96,050,625, respectively. Weatherford's historical shares outstanding at
December 31, 1997 was 52,379,297.
9
<PAGE> 10
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2.1 - Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.1 to
Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086,
filed March 9, 1998).
2.2 - Amendment No. 1 dated as of April 17, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.2 to
Form 8-K, File 1-13086, filed April 21, 1998).
2.3 - Amendment No. 2 dated as of April 22, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
as amended, by and between EVI, Inc. and Weatherford
Enterra, Inc.
23.1 - Consent of Arthur Andersen LLP, with respect to the
financial statements of Weatherford Enterra, Inc.
23.2 - Consent of Arthur Andersen LLP, with respect to the
financial statements of Christiana Companies, Inc.
99.1 - Consolidated Financial Statements of Weatherford Enterra,
Inc. as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997.
99.2 - Consolidated Financial Statements of Christiana Companies,
Inc. as of June 30, 1997 and 1996 and for each of the three
years in the period ended June 30, 1997, and as of December
31, 1997 and 1996 and for each of the six month periods
ended December 31, 1997 and 1996.
Page 10
<PAGE> 11
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, INC.
Dated: April 22, 1998 /s/ Frances R. Powell
----------------------------
Frances R. Powell
Vice President, Accounting
and Controller
Page 11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit
------ -------
<S> <C>
2.1 Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.1 to
Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086,
filed March 9, 1998).
2.2 Amendment No. 1 dated as of April 17, 1998, to the Agreement
and Plan of Merger dated as of March 4, 1998, by and between
EVI, Inc. and Weatherford Enterra, Inc. (incorporated by
reference to Exhibit No. 2.2 to Form 8-K, File 1-13086,
filed April 21, 1998).
2.3 Amendment No. 2 dated as of April 22, 1998, to the Agreement
and Plan of Merger dated as of March 4, 1998, as amended, by
and between EVI, Inc. and Weatherford Enterra, Inc.
23.1 Consent of Arthur Andersen LLP, with respect to the financial
statements of Weatherford Enterra, Inc.
23.2 Consent of Arthur Andersen LLP, with respect to the financial
statements of Christiana Companies, Inc.
99.1 Consolidated Financial Statements of Weatherford Enterra, Inc.
as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997.
99.2 Consolidated Financial Statements of Christiana Companies, Inc.
as of June 30, 1997 and 1996 and for each of the three years
in the period ended June 30, 1997, and as of December 31, 1997
and 1996 and for each of the six month periods ended December
31, 1997 and 1996.
</TABLE>
Page 12
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NO. 2
TO THE
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 2 dated as of April 22, 1998 (this "Amendment"), to
the Agreement and Plan of Merger dated as of March 4, 1998, as amended by
Amendment No. 1 to the Agreement and Plan of Merger dated April 17, 1998 (the
"Agreement"), is entered into by and between EVI, Inc., a Delaware corporation
("EVI"), and Weatherford Enterra, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, EVI and the Company have entered into the Agreement, pursuant
to which the Company will merge with and into EVI (the "Merger"), upon the terms
and subject to the conditions of the Agreement, and each issued and outstanding
share of the Company's common stock, $0.10 par value, not owned by the Company,
EVI or any wholly owned subsidiary of the Company or EVI will be converted into
.95 of a share of EVI's common stock, $1.00 par value;
WHEREAS, EVI and the Company wish to amend the Agreement as set forth
in this Amendment; and
WHEREAS, capitalized terms used herein but otherwise not defined herein
shall have the meanings given to such terms in the Agreement;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Section 1.5 of the Agreement is hereby amended in its entirety to
read as follows:
"SECTION 1.5. Directors.
(a) The number of directors of the Surviving Corporation shall
be eight, of which five shall be named by EVI and three shall be named
by the Company.
(b) The directors to be named by the Company have been
identified in writing to EVI. If, prior to the Effective Time of the
Merger, any of the Company's designees to the Board of Directors of the
Surviving Corporation shall decline or be unable to serve as a director
of the Surviving Corporation, the
<PAGE> 2
Company's other designees shall designate another person to serve in
such person's stead, subject to the approval of a majority of EVI's
Board of Directors at that time, which approval shall not be
unreasonably withheld.
(c) The directors to be named by EVI have been identified in
writing to the Company. If, prior to the Effective Time of the Merger,
any of EVI's designees to the Board of Directors of the Surviving
Corporation shall decline or be unable to serve as a director of the
Surviving Corporation, the Board of Directors of EVI shall designate
another person to serve in such person's stead.
(d) The directors to be named by the Company shall be from the
existing directors of the Company and shall be required to be approved
by EVI. The directors of the Surviving Corporation shall hold office in
accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation from the Effective Time of the Merger until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
(e) Subject to the fiduciary duties of the Board of Directors
of the Surviving Corporation, and the willingness of such persons to
serve as directors of the Surviving Corporation, the Board of Directors
of the Surviving Corporation shall submit as nominees for election to
the Board of Directors of the Surviving Corporation at the Annual
Meetings of Stockholders of the Surviving Corporation to be held
through the year 2000 the initial directors of the Surviving
Corporation as provided for herein."
2. Except as otherwise modified and amended by this Amendment, all
other terms and provisions of the Agreement shall remain in full force and
effect.
3. This Amendment may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument.
4. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed and delivered on its behalf as of the date first above
written.
EVI, INC.
By: /s/ Bernard J. Duroc-Danner
--------------------------------------------
Bernard J. Duroc-Danner
President and Chief Executive Officer
WEATHERFORD ENTERRA, INC.
By: /s/ Thomas R. Bates, Jr.
--------------------------------------------
Thomas R. Bates, Jr.
President and Chief Executive Officer
-3-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Current Report on Form 8-K of our report dated March 11, 1998
included in Weatherford Enterra, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and into EVI, 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 and 333-49527.
ARTHUR ANDERSEN LLP
Houston, Texas
April 21, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated August 1, 1997 on the consolidated financial
statements of Christiana Companies, Inc. into this Current Report on Form
8-K and into EVI, 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 and 333-49527.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
April 21, 1998
<PAGE> 1
EXHIBIT 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Weatherford Enterra, Inc.:
We have audited the accompanying consolidated balance sheets of Weatherford
Enterra, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements 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
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Weatherford Enterra, 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.
ARTHUR ANDERSEN LLP
Houston, Texas
March 11, 1998
<PAGE> 2
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 42,348 $ 33,029
Receivables, net of allowance of
$22,467 and $16,241 ....................................... 261,449 272,816
Inventories, net of allowance of
$16,671 and $21,261 ....................................... 169,048 163,302
Deferred tax assets ........................................... 11,266 20,090
Prepayments and other ......................................... 20,767 16,197
----------- -----------
Total current assets .............................. 504,878 505,434
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land .......................................................... 16,166 20,041
Buildings and improvements .................................... 93,033 101,114
Rental and service equipment .................................. 1,010,065 1,017,866
Machinery and other equipment ................................. 131,230 115,665
----------- -----------
1,250,494 1,254,686
Less -- Accumulated depreciation .............................. 682,048 693,496
----------- -----------
568,446 561,190
----------- -----------
GOODWILL, net ..................................................... 266,121 290,474
----------- -----------
OTHER ASSETS ...................................................... 38,550 40,625
----------- -----------
$ 1,377,995 $ 1,397,723
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portion of
long-term debt ............................................ $ 2,823 $ 24,508
Accounts payable .............................................. 63,808 65,713
Accrued compensation and employee
benefits .................................................. 29,752 29,885
Accrued income taxes .......................................... 30,404 17,427
Accrued taxes other than income
taxes ..................................................... 11,602 10,078
Accrued insurance ............................................. 10,329 11,283
Other accrued liabilities ..................................... 43,627 52,465
----------- -----------
Total current liabilities ......................... 192,345 211,359
----------- -----------
LONG-TERM DEBT .................................................... 209,124 291,266
----------- -----------
DEFERRED TAX LIABILITIES .......................................... 27,401 34,728
----------- -----------
OTHER LONG-TERM LIABILITIES ....................................... 14,999 18,762
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par; shares authorized 1,000,000; none
issued .................................................... -- --
Common stock, $.10 par; shares authorized 80,000,000;
issued 52,701,964 and 52,172,796 .......................... 5,270 5,217
Paid-in capital ............................................... 652,378 639,679
Retained earnings ............................................. 313,216 200,316
Cumulative translation adjustment ............................. (23,795) (2,768)
Treasury stock, 322,667 and 28,269
common shares, at cost .................................... (12,943) (836)
----------- -----------
Total stockholders' equity ........................ 934,126 841,608
----------- -----------
$ 1,377,995 $ 1,397,723
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 3
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Services and rentals ................ $ 821,397 $ 746,180 $ 612,597
Products ............................ 262,568 248,288 246,310
----------- ----------- -----------
Total revenues .......... 1,083,965 994,468 858,907
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of services and rentals ........ 551,375 537,313 442,902
Cost of products .................... 175,165 177,033 182,444
Selling, general and administrative
expenses ........................ 140,229 140,614 137,959
Research and development ............ 7,782 7,154 4,954
Equity in earnings of
unconsolidated affiliates ....... (2,582) (2,078) (1,477)
Foreign currency loss (gain),
net ............................. 1,782 (49) (74)
Other expense, net .................. 17,132 8,725 3,835
Acquisition-related costs and other
unusual charges ................. -- -- 88,182
----------- ----------- -----------
Total operating costs and
expenses ............ 890,883 868,712 858,725
----------- ----------- -----------
OPERATING INCOME ........................ 193,082 125,756 182
Interest expense ........................ 20,139 22,914 17,217
Interest income ......................... (2,630) (2,005) (2,081)
----------- ----------- -----------
Income (loss) before income taxes ....... 175,573 104,847 (14,954)
Income tax provision (benefit) .......... 62,673 34,774 (4,396)
----------- ----------- -----------
NET INCOME (LOSS) ....................... $ 112,900 $ 70,073 $ (10,558)
=========== =========== ===========
Basic earnings (loss) per common
share ............................... $ 2.15 $ 1.35 $ (0.21)
=========== =========== ===========
Diluted earnings (loss) per common
share ............................... $ 2.14 $ 1.35 $ (0.21)
=========== =========== ===========
Weighted average shares
outstanding ......................... 52,430 51,722 50,681
Diluted average shares outstanding ...... 52,837 52,097 50,681
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 4
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cumulative
Common Paid-in Retained Translation Treasury
Stock Capital Earnings Adjustment Stock Total
--------- --------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 .............. $ 5,058 $ 593,744 $ 140,801 $ (4,168) $ (801) $ 734,634
Shares issued under employee benefit
plans ................................ 1 187 -- -- -- 188
Stock grants and options exercised ...... 40 8,300 -- -- (60) 8,280
Currency translation adjustment ......... -- -- -- (1,701) -- (1,701)
Net loss ................................ -- -- (10,558) -- -- (10,558)
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1995 .............. 5,099 602,231 130,243 (5,869) (861) 730,843
Shares issued under employee benefit
plans ................................ 3 1,367 -- -- 419 1,789
Stock grants and options exercised ...... 40 9,636 -- -- (394) 9,282
Issuance of Common Stock in
acquisition .......................... 75 26,445 -- -- -- 26,520
Currency translation adjustment ......... -- -- -- 3,101 -- 3,101
Net income .............................. -- -- 70,073 -- -- 70,073
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1996 .............. 5,217 639,679 200,316 (2,768) (836) 841,608
Shares issued under employee benefit
plans ................................ 1 474 -- -- -- 475
Stock grants and options exercised ...... 52 12,225 -- -- (247) 12,030
Purchase of treasury stock .............. -- -- -- -- (11,860) (11,860)
Currency translation adjustment ......... -- -- -- (21,027) -- (21,027)
Net income .............................. -- -- 112,900 -- -- 112,900
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1997 .............. $ 5,270 $ 652,378 $ 313,216 $ (23,795) $ (12,943) $ 934,126
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 5
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
NET INCOME (LOSS) .............................. $ 112,900 $ 70,073 $ (10,558)
Income items not requiring
(providing) cash:
Depreciation and amortization .............. 110,810 105,857 95,957
Non-cash portion of
acquisition-related costs and
other unusual charges .................. -- -- 66,196
Deferred income tax provision
(benefit) .............................. 11,548 12,103 (20,781)
Gain on sales of assets, net ............... (16,704) (14,058) (12,503)
Other non-cash items, net .................. (3,079) (1,428) 409
Increase (decrease) in operating
cash flow resulting from:
Receivables, net .................... (37,229) (38,587) 16,277
Inventories, net .................... (39,681) (8,384) (12,603)
Payment of deferred loan costs ...... -- (4,820) (892)
Prepayments and other ............... 4,562 (922) (5,799)
Accounts payable and accrued
liabilities .................... 25,800 15,868 (46,307)
Other long-term liabilities ......... (2,194) (7,024) 9,477
--------- --------- ---------
CASH PROVIDED BY OPERATING
ACTIVITIES ................................. 166,733 128,678 78,873
--------- --------- ---------
Purchases of property, plant and equipment ..... (153,412) (148,656) (110,625)
Proceeds from sales of property,
plant and equipment ........................ 30,431 20,215 31,137
Proceeds from sales of businesses .............. 68,798 40,481 9,493
Acquisitions, net of notes issued and
cash acquired .............................. -- (16,278) (139,226)
Other net cash flows from investing activities . (6,384) (15,388) (9,245)
--------- --------- ---------
CASH USED IN INVESTING ACTIVITIES .............. (60,567) (119,626) (218,466)
--------- --------- ---------
Borrowings under credit facilities ............. 13,190 250,783 411,737
Repayment of borrowings ........................ (115,374) (271,565) (283,346)
Net cash flows from currency hedging
transactions ............................... 5,229 1,133 (2,719)
Purchase of treasury stock ..................... (11,860) -- --
Proceeds from stock option exercises,
sales of stock to employee benefit
plans and other ............................ 12,752 11,046 6,268
--------- --------- ---------
CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES ....................... (96,063) (8,603) 131,940
--------- --------- ---------
Effect of exchange rate changes on cash ........ (784) (220) 4,347
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 9,319 229 (3,306)
Cash and cash equivalents at
beginning of year .......................... 33,029 32,800 36,106
--------- --------- ---------
Cash and cash equivalents at end of year ....... $ 42,348 $ 33,029 $ 32,800
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest ................................... $ 19,588 $ 12,826 $ 14,396
Income taxes ............................... 38,016 14,652 17,741
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 6
WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. The accompanying consolidated financial statements
include the accounts of Weatherford Enterra, Inc. and its subsidiaries (the
"Company" or "Weatherford") after elimination of all significant intercompany
accounts and transactions. The Company accounts for its 50% or less-owned
affiliates using the equity method. Weatherford 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.
Accounting 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 and
the disclosure of contingent assets and liabilities at the balance sheet date
and the reported amounts of revenues and expenses during the reporting period.
While actual results could differ from these estimates, management believes that
the estimates are reasonable.
Cash and cash equivalents. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. The reported value of all financial instruments approximates market
value. Prepayments and other current assets at December 31, 1997 and 1996
included cash of approximately $3,436,000 and $1,656,000, 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.
Inventories. Inventories, net of allowances, are valued at the lower of cost
(first-in, first-out or average) or market and are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Spare parts and components .... $ 56,686 $ 41,068
Raw materials ................. 29,920 28,734
Work in process ............... 19,904 26,902
Finished goods ................ 62,538 66,598
-------- --------
$169,048 $163,302
======== ========
</TABLE>
Work in process and finished goods inventories include the costs of materials,
labor and plant overhead.
Property, plant and equipment. Property, plant and equipment is depreciated on a
straight-line basis over the estimated useful lives of the assets. Estimated
useful lives of assets are as follows:
Buildings and improvements............................... 5-45 years
Rental and service equipment............................. 3-15 years
Machinery and other equipment............................ 3-15 years
Expenditures for major additions and improvements are capitalized while minor
replacements, maintenance and repairs are charged to expense as incurred. When
property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the related accounts and any resulting gain or
loss is included in the consolidated statements of income. The Company evaluates
potential impairment of property, plant and equipment and other long-lived
assets on an ongoing basis as necessary whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
Goodwill. Goodwill represents the excess of the aggregate price paid by the
Company in acquisitions accounted for as purchases over the fair market value of
the net assets acquired. Goodwill is amortized on a straight-line basis
generally over a period of 40 years. The Company evaluates potential impairment
of goodwill on an ongoing basis as necessary whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
Goodwill amortization expense totaled $7,713,000, $7,044,000 and $5,852,000
during 1997, 1996 and 1995, respectively. Accumulated amortization at December
31, 1997 and 1996 was $22,536,000 and $14,199,000, respectively.
Income taxes. The Company applies the liability method of accounting for income
taxes. Accordingly, deferred tax assets and liabilities are determined based on
the estimated future tax effects of differences between the financial statement
and tax bases of assets and liabilities given the provisions of enacted tax
laws.
<PAGE> 7
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
$173,502,000 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.
Environmental expenditures. Environmental expenditures that relate to ongoing
business activities are expensed or capitalized, in accordance with the
Company's capitalization policy. Expenditures that relate to the remediation of
an existing condition caused by past operations, and which do not contribute to
current or future revenues, are expensed. Liabilities for these expenditures are
recorded when it is probable that obligations have been incurred and the costs
can be reasonably estimated. Estimates are based on currently available facts
and technology, presently enacted laws and regulations and the Company's prior
experience in remediation of contaminated sites. Liabilities included $5,203,000
and $10,263,000 of accrued environmental expenditures at December 31, 1997 and
1996, respectively.
Foreign currency translation. The functional currency for most of the Company's
international operations is the applicable local currency. The translation of
the foreign currencies into U.S. dollars is performed for balance sheet accounts
using exchange rates in effect at the balance sheet date and for income
statement accounts using a weighted average exchange rate for the period. The
gains or losses resulting from such translation are included as a separate
component of stockholders' equity. Gains or losses resulting from foreign
currency transactions are included in the consolidated statements of income.
Foreign exchange 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 $36,802,000 and $50,942,000, 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.
Revenue recognition. Revenues are generally recognized when services and rentals
are provided and when products and equipment are shipped. Proceeds from
customers for the cost of oilfield rental equipment that is damaged or lost
downhole are reflected as revenues.
Earnings (loss) per common share. In the fourth quarter of 1997, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share." Accordingly, the Company's reported per share results for prior
periods have been restated. Basic earnings (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of Common
Stock outstanding during the period. Diluted earnings per common share for 1997
and 1996 also assume the exercise of employee stock options under the treasury
stock method. Stock options are not included in the 1995 computation because to
do so would have been anti-dilutive.
A reconciliation of the numerators and denominators of the basic and diluted
earnings per common share computations follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
Per Share
Net Income Shares Amount
---------- ------ ----------
<S> <C> <C> <C>
1997:
Basic earnings per common
share .......................... $ 112,900 52,430 $ 2.15
=========
Employee stock options ......... -- 407
--------- ------
Diluted earnings per common
share .......................... $ 112,900 52,837 $ 2.14
========= ====== =========
1996:
Basic earnings per common
share .......................... $ 70,073 51,722 $ 1.35
=========
Employee stock options ......... -- 375
--------- ------
Diluted earnings per common
share .......................... $ 70,073 52,097 $ 1.35
========= ====== =========
1995:
Basic and diluted loss per
common share ................... $ (10,558) 50,681 $ (0.21)
========= ====== =========
</TABLE>
<PAGE> 8
Concentration of credit risk. The Company grants credit to its customers, which
are primarily in the oil and gas industry. Credit risk with respect to trade
accounts receivable is generally diversified due to the large number of entities
comprising the Company's customer base and their dispersion across many
different countries. The Company performs periodic credit evaluations of its
customers and generally does not require collateral. The Company monitors its
exposure for credit losses and maintains an allowance for anticipated losses
(see Note 10).
Stock-based compensation. SFAS No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to continue to account for stock-based compensation using
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees". Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted market price
of the Company's Common Stock at the date of grant over the option exercise
price (see Note 5).
New accounting pronouncements. In June 1997, the Financial Accounting Standards
Board (the "FASB") issued SFAS No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and financial statement display of
comprehensive income. SFAS No. 130 is effective January 1, 1998. Had SFAS No.
130 been adopted in 1997, the year-to-date change in cumulative translation
adjustment would have been added to net income to calculate comprehensive
income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which requires segment information to be
reported on a basis consistent with that used internally for evaluating resource
allocation and segment performance. The Company will adopt SFAS No. 131 in 1998
and is currently evaluating its method of reporting segment information.
In 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits", which standardizes disclosure requirements
for pensions and other postretirement benefits. The Company is required to adopt
SFAS No. 132 in 1998. Had the Company adopted SFAS No. 132 at December 31, 1997,
it would have had no impact on the consolidated financial statements.
Reclassifications. Certain reclassifications were made to previously reported
amounts in the consolidated financial statements and notes to make them
consistent with the current presentation.
(2) ACQUISITIONS, MERGERS AND DIVESTITURES
Results of operations for business combinations accounted for as purchases are
included in the accompanying consolidated financial statements since the date of
acquisition. With respect to business combinations accounted for as poolings of
interests, the consolidated financial statements have been restated for all
periods presented as if the companies had been combined since inception.
Nodeco. 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"), in a transaction accounted for as a purchase. 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 $14,393,000 net of cash acquired, issued
750,000 shares of its Common Stock and assumed all liabilities of Nodeco,
totaling $12,109,000.
Energy Industries. 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") in a
transaction accounted for as a purchase. 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. The Company paid
approximately $130,000,000 in cash and assumed certain liabilities totaling
approximately $12,485,000.
Enterra. 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 23,668,000
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 $59,900,000 (see Note 8).
Other acquisitions. During 1996 and 1995, the Company acquired several
businesses in addition to those mentioned above in transactions accounted for as
purchases. The impact of these acquisitions on reported results of operations,
on a pro forma basis, was not material to the Company's consolidated results of
operations.
<PAGE> 9
Divestitures. During 1997, 1996 and 1995, the Company sold certain non-core
businesses which did not fit into the long-term strategy of the Company. Such
businesses included CRC-Evans Pipeline International, Inc., Arrow Completion
Systems, Inc., Total Engineering Services Team, Inc. and several others (see
Note 9). Cash proceeds from these transactions totaled $68,798,000, $40,481,000
and $9,493,000 in 1997, 1996 and 1995, respectively, and were primarily used to
repay bank debt.
(3) DEBT
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
7 1/4% Notes ......................... $200,000 $200,000
Bank term loan ....................... -- 95,950
Foreign bank debt, denominated in
foreign currencies ............... 8,152 11,231
Other indebtedness ................... 3,795 8,593
-------- --------
211,947 315,774
Less -- Amounts due within one
year ............................. 2,823 24,508
-------- --------
$209,124 $291,266
======== ========
</TABLE>
The Company has outstanding $200,000,000 of 7 1/4% notes due May 15, 2006 (the
"7 1/4% Notes"). Interest on the 7 1/4% Notes is payable semi-annually on May 15
and November 15 of each year.
On October 24, 1997, the Company amended its primary bank credit facility,
extending its $200,000,000 revolving credit facility (the "Revolving Credit
Facility") through October 24, 2002, reducing interest rates and fees and
improving other terms and conditions. The balance outstanding under the bank
term loan was repaid earlier in 1997. Amounts outstanding under the Revolving
Credit 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 7 1/4% Notes. A commitment fee ranging from 0.09% to 0.20% per annum,
depending on the credit ratings assigned to the 7 1/4% Notes, is payable
quarterly on the unused portion of the Revolving Credit Facility. The Company is
required under the Revolving Credit Facility to maintain certain financial
ratios, including a maximum debt-to-capitalization ratio of 50%.
Maturities of the Company's debt at December 31, 1997 were as follows (in
thousands):
<TABLE>
<S> <C>
1998.......................................................... $2,823
1999.......................................................... 6,525
2000.......................................................... 579
2001.......................................................... 647
2002.......................................................... 682
Thereafter.................................................... 200,691
--------
$211,947
========
</TABLE>
At December 31, 1997, the Company had $200,000,000 available to borrow under the
Revolving Credit 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 $13,019,000 of letters of credit and bid
and performance bonds outstanding at December 31, 1997.
(4) INCOME TAXES
The components of income (loss) before income taxes were as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Foreign .......... $ 60,722 $ 52,529 $ 23,853
United States .... 114,851 52,318 (38,807)
--------- --------- ---------
$ 175,573 $ 104,847 $ (14,954)
========= ========= =========
</TABLE>
<PAGE> 10
The income tax provision (benefit) was comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Foreign .......................... $ 26,812 $ 18,729 $ 15,439
U.S. federal and state income
taxes ......................... 24,313 3,942 946
-------- -------- --------
Total current ............ 51,125 22,671 16,385
-------- -------- --------
Deferred:
Foreign .......................... 2,562 478 3,038
U.S. federal ..................... 8,986 11,625 (23,819)
-------- -------- --------
Total deferred ........... 11,548 12,103 (20,781)
-------- -------- --------
$ 62,673 $ 34,774 $ (4,396)
======== ======== ========
</TABLE>
The consolidated provision (benefit) for income taxes differs from the provision
(benefit) computed at the statutory U.S. federal income tax rate of 35% for the
following reasons (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Tax provision (benefit) at U.S. ..........
statutory rate ....................... $ 61,451 $ 36,696 $ (5,234)
Foreign income, taxed at more than
U.S. statutory rate .................. 8,120 715 7,687
Intercompany dividends ................... 1,001 -- 557
Benefit of U.S. NOL carryforwards and
other credits ........................ (7,719) (9,550) (15,299)
Nondeductible goodwill ................... 3,051 1,601 1,601
Nondeductible expenses related to
acquisitions ......................... -- -- 3,307
U.S. alternative minimum taxes and
state income taxes ................... 868 3,942 946
Other .................................... (4,099) 1,370 2,039
-------- -------- --------
$ 62,673 $ 34,774 $ (4,396)
======== ======== ========
</TABLE>
On the accompanying consolidated balance sheets, current deferred tax assets and
liabilities are netted within each tax jurisdiction. The components of the net
deferred tax assets (liabilities) shown on the consolidated balance sheets are
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current deferred tax assets .......... $ 11,470 $ 22,450
Valuation allowance, current ......... (204) (2,360)
Non-current deferred tax assets ...... 15,063 26,806
Valuation allowance, non-current ..... (2,300) (7,864)
-------- --------
Total deferred tax assets .... 24,029 39,032
-------- --------
Current deferred tax liabilities ..... (1,043) (2,867)
Non-current deferred tax
liabilities ...................... (27,401) (34,728)
-------- --------
Total deferred tax
liabilities ............... (28,444) (37,595)
-------- --------
Net deferred tax assets
(liabilities) .................... $ (4,415) $ 1,437
======== ========
</TABLE>
<PAGE> 11
The change in the valuation allowance in 1997 and 1996 primarily relates to
utilization of U.S. net operating loss ("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. The tax
effects of significant temporary differences giving rise to deferred tax assets
(liabilities) are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
NOL and tax credit carryforwards ............... $ 12,347 $ 24,990
Depreciation and amortization .................. (24,896) (18,939)
Financial reserves and accruals not
yet deductible ............................. 9,127 19,426
Other differences between financial
and tax bases of assets and liabilities .... 1,511 (13,816)
Valuation allowances ........................... (2,504) (10,224)
-------- --------
$ (4,415) $ 1,437
======== ========
</TABLE>
The Company has U.S. NOL carryforwards available to reduce future U.S. taxable
income of $6,973,000 expiring between 1999 and 2009, of which $2,558,000 is
limited pursuant to Section 382 of the U.S. Internal Revenue Code.
(5) COMMON STOCK AND STOCK-BASED COMPENSATION PLANS
Common Stock. In December 1997, the Board of Directors instituted a stock
repurchase program under which the Company is authorized to purchase up to
$100,000,000 of Common Stock from time to time in open market transactions or in
privately negotiated transactions. Pursuant to this program, the Company
purchased 289,200 shares of Common Stock in December 1997 at an average cost of
$41.01 per share. During the two-month period ended February 28, 1998, the
Company purchased 1,040,300 shares of Common Stock at an average cost of $35.98
per share.
Stock option plans. 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. Options generally become exercisable in
three annual installments, commencing one year after the date of grant.
Unexercised options expire ten years after the date of grant. In addition, the
Company has a Non-Employee Director Stock Option Plan (the "Director Option
Plan") pursuant to which each non-employee director receives upon initial
election as a director an option to purchase 2,500 shares and, at each annual
meeting thereafter, an additional option to purchase 2,000 shares of Common
Stock, in each case at fair market value. Options granted under the Director
Option Plan become exercisable six months after the date of grant, and
unexercised options expire ten years after the date of grant. Enterra had a
similar plan, pursuant to which directors of Enterra received immediately
exercisable options to purchase shares of Enterra common stock at fair market
value. All outstanding options under the Enterra director plan were exercised
prior to the Enterra merger.
The following table summarizes activity related to stock option plans of the
Company:
<TABLE>
<CAPTION>
Number of Shares
--------------------------
Non-Employee Weighted Average
Employees Directors Exercise Price
--------- ------------ ----------------
<S> <C> <C> <C>
Outstanding, December 31, 1994 ........... 978,935 59,150 $16.06
Granted .................................. 953,985 58,075 20.89
Exercised ................................ (220,284) (88,725) 16.02
Terminated ............................... (424,404) -- 17.03
--------- ---------
Outstanding, December 31, 1995 ........... 1,288,232 28,500 18.72
Granted .................................. 325,650 3,000 31.59
Exercised ................................ (238,665) (11,500) 19.09
Terminated ............................... (376,977) -- 21.93
--------- ---------
Outstanding, December 31, 1996 ........... 998,240 20,000 21.79
Granted .................................. 446,250 16,500 30.74
Exercised ................................ (375,697) (3,000) 19.52
Terminated ............................... (50,429) -- 26.02
--------- ---------
Outstanding, December 31, 1997 ........... 1,018,364 33,500 $26.41
========= =========
Shares available for future issuance,
December 31, 1997 ..................... 1,702,782 45,500
========= =========
Exercisable, December 31, 1995 ........... 432,494 21,000 $15.49
Exercisable, December 31, 1996 ........... 398,569 20,000 15.92
Exercisable, December 31, 1997 ........... 322,822 33,500 20.40
</TABLE>
<PAGE> 12
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$6.75 to $15.75 110,185 4.4 years $13.14 108,767 $13.16
17.50 to 19.75 190,924 6.8 years 18.97 148,461 19.10
21.30 to 30.63 353,893 8.0 years 28.99 20,266 23.04
30.75 to 31.56 396,862 8.6 years 31.37 78,828 32.15
--------- -------
$6.75 to $31.56 1,051,864 7.6 years $26.41 356,322 $20.40
========= =======
</TABLE>
The weighted average fair values of options granted during 1997, 1996 and 1995
were $12.96, $14.46 and $8.53 per share, respectively. The fair values were
estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1997, 1996 and 1995, respectively: expected
volatility of 42%, 50% and 52% (38% for options issued by Enterra prior to the
merger), risk free interest rates of 6.07%, 5.13% and 6.85% (7% for options
issued by Enterra prior to the merger), expected lives of four years and zero
dividend yield. If the fair value-based method of accounting under SFAS No. 123
had been applied, the Company's pro forma net income (loss) and diluted earnings
(loss) per share would have been, respectively, $110,765,000 and $2.10 in 1997,
$68,412,000 and $1.31 in 1996 and $(11,926,000) and $(0.23) in 1995. As the
disclosure requirements of SFAS No. 123 are not applicable to options granted
prior to 1995, the pro forma effects for 1997, 1996 and 1995 are not indicative
of the pro forma effects in future years.
In addition to the options in the above table, the Company granted options to
purchase 84,500, 45,337 and 34,200 shares of Common Stock in 1995, 1994 and
1991, respectively, to former directors and former employees of acquired
companies and to a former officer of the Company. These options were granted
pursuant to separate agreements and are not covered by an option plan. Exercises
of such options totaled 22,816, 16,483 and 40,334 shares in 1997, 1996 and 1995,
respectively, and 67,600 of such options were outstanding and exercisable at
December 31, 1997 at a weighted average exercise price of $25.75 per share.
Stock appreciation rights plan. The Company has a stock appreciation rights plan
(the "SAR Plan") pursuant to which certain officers and other key employees were
granted stock appreciation units ("SARs"). The SAR Plan was amended in 1992 to
provide that no additional grants would be made. SARs were awarded in connection
with stock options granted under one of the Company's stock option plans and can
be exercised only if the related stock option is exercised. Compensation expense
is recorded based on the increase in the market price of the Company's Common
Stock since the date of grant. At December 31, 1997, there were 15,543 SARs
outstanding, all of which were vested, at an average price of $10.41 per SAR.
During 1997, 1996 and 1995, the Company recognized compensation expense of
$700,000, $225,000 and $121,000, respectively, in connection with SARs.
Stock bonus plan. The Company has a stock bonus, pursuant to which officers and
certain other key employees of the Company may be granted shares of Common
Stock. The market value of shares granted under the Bonus Plan is recorded as
compensation expense on the date of grant. With respect to the Bonus Plan, the
Company granted 2,485 and 21,391 shares in 1997 and 1996, respectively, and
recognized compensation expense of $110,000 and $675,000 during 1997 and 1996,
respectively. The Company granted no shares under the Bonus Plan in 1995. There
were 1,303 shares available for future grants under the Bonus Plan at December
31, 1997.
Restricted stock plans. The Company has a restricted stock plan for certain
officers of the Company (the "Restricted Plan") and a restricted stock plan for
non-employee directors (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 lapse in three
equal annual installments, commencing one year after the date of grant. 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 consolidated balance sheets. The following table
provides a summary of activity related to the Restricted Stock Plans:
<PAGE> 13
<TABLE>
<CAPTION>
Number of Shares
---------------------------
Non-Employee
Employees Directors
----------- ------------
<S> <C> <C>
Outstanding, December 31, 1994 ........... 53,832 --
Granted (market price: $18.50 per
share) ............................... 29,500 --
Restrictions terminated .................. (47,193) --
----------- -----------
Outstanding, December 31, 1995 ........... 36,139 --
Granted (market price: $31.56 per
share) ............................... 31,000 --
Restrictions terminated .................. (37,735) --
----------- -----------
Outstanding, December 31, 1996 ........... 29,404 --
Granted (average market price: $32.08
per share) ........................... 91,041 10,838
Restrictions terminated .................. (27,030) --
----------- -----------
Outstanding, December 31, 1997 ........... 93,415 10,838
=========== ===========
Shares available for future grants at
December 31, 1997 .................... 38,396 239,162
=========== ===========
Compensation expense:
1997 ............................ $ 1,146,000 $ 120,000
1996 ............................ 418,000 --
1995 ............................ 392,000 --
Deferred compensation at December 31:
1997 ............................ $ 3,095,000 $ 352,000
1996 ............................ 1,445,000 --
</TABLE>
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 to
the ESPP totaled $162,000, $88,000 and $48,000 during 1997, 1996 and 1995,
respectively. There were 51,015 shares available for future purchases under the
ESPP at December 31, 1997.
(6) RETIREMENT AND EMPLOYEE BENEFIT PLANS
The Company has defined benefit and defined contribution pension plans covering
substantially all U.S. employees and certain 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 contribution pension plans
totaled $2,806,000, $3,200,000 and $4,489,000 in 1997, 1996 and 1995,
respectively. Pension expense related to the Company's defined benefit pension
plans included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<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>
<PAGE> 14
The following table sets forth the funded status of the Company's defined
benefit pension plans and the assumptions used in computing such information (in
thousands, except percentages):
<TABLE>
<CAPTION>
U.S. Plans Non-U.S. Plans
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<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>
(7) COMMITMENTS AND CONTINGENCIES
Aggregate minimum rental commitments under noncancelable operating leases with
lease terms in excess of one year as of December 31, 1997 were as follows (in
thousands):
<TABLE>
<S> <C>
1998..................................................... $10,535
1999..................................................... 11,449
2000..................................................... 6,596
2001..................................................... 5,235
2002 4,709
Thereafter............................................... 32,311
-------
$70,835
=======
</TABLE>
The Company incurred total rental expense under operating leases of $20,902,000,
$21,197,000 and $18,499,000 in 1997, 1996 and 1995, respectively.
The Company is involved in certain claims and lawsuits arising in the normal
course of business. In the opinion of management, the likelihood that uninsured
losses, if any, resulting from the ultimate resolution of these matters will
have a material adverse effect on the financial position, results of operations
or liquidity of the Company is remote.
(8) Acquisition-related costs and other unusual charges
During the second quarter of 1995, management of Enterra made certain strategic
decisions which resulted in $28,282,000 of unusual charges. Such charges
included a $10,041,000 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 $18,241,000 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 reductions of approximately 120
employees.
During the fourth quarter of 1995, the Company recorded expenses of $59,900,000
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
<PAGE> 15
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>
(9) SEGMENT INFORMATION
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
operates in three industry segments -- oilfield services, oilfield products and
gas compression. During 1996 and 1995, management of the Company made strategic
decisions to dispose of certain non-core businesses, which are presented
separately and described as "Other Businesses" (see Note 2).
Revenues by industry segment and geographic area include both revenues from
unaffiliated customers and intersegment revenues from related companies. The
price at which intercompany sales are made is generally based on the selling
price to unaffiliated customers less a discount or the direct product cost plus
a mark-up. Indirect expenses have been allocated to industry segments in
proportion to outside revenues.
Export sales from the United States to unaffiliated customers in other
geographic areas were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Europe/Commonwealth of Independent
States ................................ $15,839 $27,523 $10,904
Canada ................................ 10,754 11,334 14,729
Africa ................................ 9,162 26,079 17,792
Middle East ........................... 10,106 7,494 3,843
Asia-Pacific .......................... 9,535 12,364 11,242
Latin America ......................... 9,293 7,247 5,552
Other ................................. 11 2,714 1,403
------- ------- -------
$64,700 $94,755 $65,465
======= ======= =======
</TABLE>
<PAGE> 16
Information with respect to industry and geographic segments follows (in
thousands):
<TABLE>
<CAPTION>
Corporate
Oilfield Oilfield Gas Other and
Services Products Compression Businesses Eliminations Consolidated
-------- -------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1997:
Outside revenues .................. $ 645,906 $ 182,311 $ 178,896 $ 76,852 $ -- $1,083,965
Intersegment revenues ............. -- 27,895 -- -- (27,895) --
Operating income (loss) ........... 152,668 39,129 13,723 440 (12,878) 193,082
Identifiable assets ............... 664,655 203,342 441,758 -- 68,240 1,377,995
Depreciation and amortization ..... 75,582 8,265 21,666 1,541 3,756 110,810
Capital expenditures .............. 104,518 10,603 35,705 940 1,646 153,412
1996:
Outside revenues .................. $ 520,195 $ 149,713 $ 154,503 $ 170,057 $ -- $ 994,468
Intersegment revenues ............. -- 31,020 -- -- (31,020) --
Operating income (loss) ........... 93,644 23,388 7,833 8,849 (7,958) 125,756
Identifiable assets ............... 646,915 187,002 414,969 97,646 51,191 1,397,723
Depreciation and amortization ..... 70,552 6,264 23,554 4,787 700 105,857
Capital expenditures .............. 99,570 10,569 30,392 8,125 -- 148,656
1995:
Outside revenues .................. $ 470,085 $ 115,399 $ 94,386 $ 179,037 $ -- $ 858,907
Intersegment revenues ............. -- 20,537 -- 49 (20,586) --
Acquisition-related costs and other
unusual charges ............... 31,715 15,745 -- 11,711 29,011 88,182
Operating income (loss) ........... 41,849 (13,253) 7,788 2,010 (38,212) 182
Identifiable assets ............... 556,125 120,777 396,465 121,177 64,316 1,258,860
Depreciation and amortization ..... 65,217 5,519 14,421 9,070 1,730 95,957
Capital expenditures .............. 83,849 2,731 16,246 7,657 142 110,625
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
United Other and
States Canada Europe Africa International Eliminations
------ ------ ------ ------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997:
Outside revenues ................ $601,522 $104,983 $147,809 $ 70,037 $159,614 $ --
Intersegment revenues ........... 26,827 -- 19,917 5,601 1,901 (54,246)
Operating income (loss) ......... 132,958 17,346 32,424 14,658 8,574 (12,878)
Identifiable assets ............. 762,592 82,120 187,202 63,677 214,164 68,240
Capital expenditures ............ 84,829 12,381 17,286 10,919 26,351 1,646
1996:
Outside revenues ................ $579,024 $ 78,497 $145,126 $ 72,457 $119,364 $ --
Intersegment revenues ........... 27,966 566 9,848 5,452 1,860 (45,692)
Operating income (loss) ......... 72,042 12,557 19,470 15,028 14,617 (7,958)
Identifiable assets ............. 828,930 69,391 201,137 67,856 179,218 51,191
Capital expenditures ............ 85,729 12,105 15,955 9,437 25,430 --
1995:
Outside revenues ................ $471,672 $106,491 $110,065 $ 57,450 $113,229 $ --
Intersegment revenues ........... 10,091 167 6,049 -- 1,638 (17,945)
Acquisition-related costs
and other unusual charges .... 43,276 2,850 4,302 624 8,119 29,011
Operating income (loss) ......... 5,745 11,382 3,088 13,912 4,267 (38,212)
Identifiable assets ............. 790,625 73,368 141,673 40,299 148,579 64,316
Capital expenditures ............ 59,474 9,953 9,605 5,655 25,796 142
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Consolidated
------------
<S> <C>
1997:
Outside revenues ................. $1,083,965
Intersegment revenues ............ --
Operating income (loss) .......... 193,082
Identifiable assets .............. 1,377,995
Capital expenditures ............. 153,412
1996:
Outside revenues ................. $ 994,468
Intersegment revenues ............ --
Operating income (loss) .......... 125,756
Identifiable assets .............. 1,397,723
Capital expenditures ............. 148,656
1995:
Outside revenues ................. $ 858,907
Intersegment revenues ............ --
Acquisition-related costs
and other unusual charges .... 88,182
Operating income (loss) .......... 182
Identifiable assets .............. 1,258,860
Capital expenditures ............. 110,625
</TABLE>
(10) VALUATION ALLOWANCES
Activity in the Company's allowance for doubtful accounts, deducted from
receivables in the consolidated balance sheets, was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year ................ $ 16,241 $ 15,942 $ 11,240
Additions charged to costs and
expenses ................................ 12,858 4,122 6,499
Deductions for uncollectible receivables
written off ............................. (6,441) (4,842) (1,878)
Translation and other, net .................. (191) 1,019 81
-------- -------- --------
Balance at end of year ...................... $ 22,467 $ 16,241 $ 15,942
======== ======== ========
</TABLE>
Activity in the Company's allowance for obsolete or slow-moving inventories,
deducted from inventories in the consolidated balance sheets, was as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year .......... $ 21,261 $ 23,760 $ 16,470
Additions charged to costs and
expenses .......................... 2,987 897 10,683
Deductions for inventories written
off ............................... (7,041) (3,632) (3,520)
Translation and other, net ............ (536) 236 127
-------- -------- --------
Balance at end of year ................ $ 16,671 $ 21,261 $ 23,760
======== ======== ========
</TABLE>
<PAGE> 19
(11) Unaudited quarterly financial data (in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
1997:
Revenues ...................... $ 267,113 $ 266,835 $ 274,382 $ 275,635 $1,083,965
Gross profit .................. 85,542 87,821 91,094 92,968 357,425
Operating income .............. 40,882 46,020 50,954 55,226 193,082
Income before income taxes .... 35,449 41,185 46,929 52,010 175,573
Net income .................... 22,952 26,795 30,434 32,719 112,900
Basic earnings per share ...... $ 0.44 $ 0.51 $ 0.57 $ 0.63 $ 2.15
Diluted earnings per share .... 0.44 0.51 0.57 0.62 2.14
1996:
Revenues ...................... $ 218,841 $ 233,782 $ 259,070 $ 282,775 $ 994,468
Gross profit .................. 60,319 62,727 76,545 80,531 280,122
Operating income .............. 23,784 26,936 35,864 39,172 125,756
Income before income taxes .... 19,281 21,892 30,153 33,521 104,847
Net income .................... 13,477 14,898 19,828 21,870 70,073
Basic earnings per share ...... $ 0.26 $ 0.29 $ 0.38 $ 0.42 $ 1.35
Diluted earnings per share .... 0.26 0.29 0.38 0.42 1.35
</TABLE>
(12) SUBSEQUENT EVENT (UNAUDITED)
On March 4, 1998, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") providing for the merger of the Company into EVI, Inc.
("EVI"). Pursuant to the terms of the Merger Agreement, Weatherford stockholders
will receive 0.95 of a share of EVI common stock for each share of Weatherford
Common Stock. The transaction, which is expected to be accounted for as a
pooling of interests and to result in no immediate federal income tax
recognition for the Company's stockholders, is subject to the approval of the
stockholders of each of EVI and Weatherford as well as customary regulatory
approvals and other conditions to closing. The transaction is currently expected
to close in late spring or early summer of 1998. There can be no assurance that
this merger will be consummated.
<PAGE> 1
EXHIBIT 99.2
CHRISTIANA COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Public Accountants.................... 2
Consolidated Statements of Earnings for the years ended June
30, 1997, 1996, and 1995.................................. 3
Consolidated Balance Sheets as of June 30, 1997 and June 30,
1996...................................................... 4
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1997, 1996
and 1995.................................................. 5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995.............................. 6
Notes to Consolidated Financial Statements.................. 7
Quarterly Financial Information............................. 19
Consolidated Statements of Operations for the six months
ended December 31, 1997 and 1996 and the three months
ended December 31, 1997 and 1996.......................... 20
Consolidated Balance Sheets as of December 31, 1997 and June
30, 1997.................................................. 21
Consolidated Statements of Shareholders' Equity for the six
months ended December 31, 1997 and the year ended June 30,
1997...................................................... 22
Consolidated Statements of Cash Flow for the six months
ended December 31, 1997 and 1996.......................... 23
Notes to Consolidated Financial Statements.................. 24
</TABLE>
1
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Christiana Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Christiana
Companies, Inc. (a Wisconsin corporation) as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the years in the three year period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Christiana Companies, Inc. as of June 30, 1997 and 1996, and the results of its
consolidated operations and its cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 1, 1997
2
<PAGE> 3
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Product Sales....................................... $ -- $ -- $55,239,000
Warehousing and Logistic Services................... 84,208,000 77,170,000 71,642,000
----------- ----------- -----------
84,208,000 77,170,000 126,881,000
----------- ----------- -----------
Costs and Expenses:
Cost of Product Sales............................... -- -- 47,134,000
Warehousing and Logistic Expenses................... 70,973,000 65,418,000 57,684,000
Selling, General & Administrative Expenses.......... 8,656,000 7,531,000 11,739,000
----------- ----------- -----------
79,629,000 72,949,000 116,557,000
----------- ----------- -----------
Earnings From Operations.............................. 4,579,000 4,221,000 10,324,000
----------- ----------- -----------
Other Income (Expense):
Interest Income..................................... 516,000 531,000 942,000
Interest Expense.................................... (3,166,000) (3,096,000) (4,842,000)
Gain (Loss) on Disposal of Assets................... (765,000) 2,818,000 3,083,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (674,000) (208,000) (367,000)
----------- ----------- -----------
6,390,000 1,790,000 (1,184,000)
----------- ----------- -----------
Earnings Before Income Taxes and Minority Interest.... 10,969,000 6,011,000 9,140,000
Income Tax Provision.................................. 4,306,000 2,408,000 3,394,000
----------- ----------- -----------
Net Earnings Before Minority Interest................. 6,663,000 3,603,000 5,746,000
Minority Interest..................................... -- -- (684,000)
----------- ----------- -----------
Net Earnings.......................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
Earnings Per Share.................................... $ 1.30 $ 0.69 $ 0.96
=========== =========== ===========
Weighted Average Number of Shares Outstanding......... 5,136,630 5,186,679 5,275,947
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
CHRISTIANA COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents................................. $ 2,888,000 $ 3,728,000
Short-Term Investments.................................... 4,611,000 750,000
Accounts Receivable, Net.................................. 7,649,000 8,294,000
Inventories, Prepaids and Other Assets.................... 1,729,000 1,732,000
------------ ------------
Total Current Assets.............................. 16,877,000 14,504,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Mortgage Notes Receivable................................. 1,749,000 3,314,000
Rental Properties, Net.................................... -- 867,000
Fixed Assets, Net......................................... 75,604,000 81,283,000
Goodwill.................................................. 5,592,000 5,749,000
Other Assets.............................................. 1,277,000 1,670,000
------------ ------------
Total Long-Term Assets............................ 125,479,000 116,514,000
------------ ------------
TOTAL ASSETS...................................... $142,356,000 $131,018,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable.......................................... $ 3,526,000 $ 5,294,000
Accrued Liabilities....................................... 5,562,000 4,072,000
Short-Term Debt........................................... -- 1,354,000
Current Portion of Long-Term Debt......................... 3,531,000 1,295,000
------------ ------------
Total Current Liabilities......................... 12,619,000 12,015,000
------------ ------------
Long-Term Liabilities:
Long-Term Debt............................................ 36,149,000 44,013,000
Deferred Income Taxes..................................... 20,289,000 12,674,000
Other Liabilities......................................... 1,214,000 1,239,000
------------ ------------
Total Long-Term Liabilities....................... 57,652,000 57,926,000
------------ ------------
Total Liabilities................................. 70,271,000 69,941,000
------------ ------------
Shareholders' Equity:
Preferred Stock........................................... -- --
Common Stock.............................................. 5,196,000 5,196,000
Additional Paid-In capital................................ 12,022,000 12,022,000
Treasury Stock, at Cost................................... (1,236,000) (1,236,000)
Retained Earnings......................................... 56,103,000 45,095,000
------------ ------------
Total Shareholders' Equity........................ 72,085,000 61,077,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $142,356,000 $131,018,000
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(1)(2)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- --------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ---------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30,
1994.................. 5,440,899 $5,441,000 -- $ -- $18,217,000 $36,430,000 $60,088,000
Repurchase of Stock... (245,269) (245,000) -- -- (6,195,000) -- (6,440,000)
Net Earnings.......... -- -- -- -- -- 5,062,000 5,062,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1995.................. 5,195,630 $5,196,000 -- -- $12,022,000 $41,492,000 $58,710,000
Purchase of Treasury
Stock............... -- -- (59,000) (1,236,000) -- -- (1,236,000)
Net Earnings.......... -- -- -- -- -- 3,603,000 3,603,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1996.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000 $61,077,000
EVI Stock Issuance.... -- -- -- -- -- 4,345,000 4,345,000
Net Earnings.......... -- -- -- -- -- 6,663,000 6,663,000
--------- ---------- ------- ----------- ----------- ----------- -----------
Balance, June 30,
1997.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000 $72,085,000
========= ========== ======= =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Preferred stock: $10 par value, 1,000,000 shares authorized, none issued.
(2) Common stock: $1 par value, 12,000,000 shares authorized.
See notes to consolidated financial statements.
5
<PAGE> 6
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings....................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation and Amortization................... 7,155,000 7,159,000 8,207,000
(Gain) Loss on Disposal of Assets............... 765,000 (3,024,000) (3,213,000)
Deferred Income Tax (Benefit) Provision......... 4,813,000 (1,084,000) 1,462,000
Minority Interest............................... -- -- 684,000
Equity in Earnings of EVI, Inc.................. (10,479,000) (1,745,000) --
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable...... 645,000 (34,000) (2,240,000)
(Increase) Decrease in Inventories.............. (166,000) (191,000) 2,566,000
(Increase) Decrease in Prepaids and Other
Assets........................................ (303,000) 788,000 (485,000)
Increase in Accounts Payable and Accrued
Liabilities................................... 90,000 3,091,000 396,000
------------ ------------ ------------
Net Cash Provided By Operating Activities............ 9,183,000 8,563,000 12,439,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term Investments,
net Investments, Net............................ (3,861,000) 2,072,000 11,742,000
Capital Expenditures............................... (3,488,000) (19,715,000) (10,931,000)
Business Acquisitions, Net of Cash Acquired........ -- -- (13,291,000)
(Increase) Decrease in Mortgage Notes Receivable... 1,565,000 (109,000) 356,000
Decrease in Cash due to Merger of Prideco.......... -- -- (533,000)
Proceeds from Sales of Assets...................... 2,743,000 8,894,000 6,954,000
------------ ------------ ------------
Net Cash Used In Investing Activities................ (3,041,000) (8,858,000) (5,703,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (Payments) on Line of Credit, Net....... (1,354,000) (489,000) 501,000
Stock Repurchase................................... -- (1,236,000) (3,805,000)
Proceeds from Notes Payable........................ -- 9,011,000 4,125,000
Payments of Notes and Mortgages Payable............ (5,628,000) (3,638,000) (11,111,000)
------------ ------------ ------------
Net Cash Provided By (Used In) Financing
Activities......................................... (6,982,000) 3,648,000 (10,290,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ (840,000) 3,353,000 (3,554,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1.......... 3,728,000 375,000 3,929,000
------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30............ $ 2,888,000 $ 3,728,000 $ 375,000
============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Interest Paid...................................... $ 3,190,000 $ 3,228,000 $ 4,612,000
Income Taxes Paid.................................. $ 1,396,000 $ 2,579,000 $ 2,950,000
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THREE YEARS ENDED JUNE 30, 1997)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: At June 30, 1997, Christiana is engaged in
providing public refrigerated and dry (non-refrigerated) warehousing and
logistic services; and owning 3,897,462 shares of EVI, Inc. common stock which
represents an 8.5% ownership interest at that date.
Principles of Consolidation: The consolidated financial statements include
the accounts of Christiana Companies, Inc., ("Christiana") and its
majority-owned subsidiaries (together with Christiana referred to as the
"Company"). All material intercompany transactions have been eliminated.
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 and disclosure of contingent 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.
Short-Term Investments: As of June 30, 1997 and 1996, short-term
investments are classified as "available for sale" and include U.S. Treasury
securities and commercial paper maturing in less than one year. These
investments are carried at market, which approximates cost.
Accounts Receivable: Accounts receivable are presented net of a reserve for
bad debts of $233,000 and $253,000 at June 30, 1997 and 1996, respectively. The
provision for bad debts was $123,000 and $227,000 for the years ended June 30,
1997 and 1996, respectively. Deductions from the reserve were $143,000 and
$94,000 for the years ended June 30, 1997 and 1996, respectively.
Investment in EVI, Inc.: At June 30, 1997, the Company owned 3,897,462
shares of EVI, Inc. (NYSE:EVI) which represented 8.5% of the then outstanding
common stock. Based on the facts and circumstances associated with the
Investment in EVI, Inc., including the Company's Board of Directors
representation, and in accordance with the Accounting Principles Board Opinion
No. 18 the Company accounts for this investment under the equity method of
accounting. At June 30, 1997, these shares had a market value of $163,693,000.
Mortgage Notes Receivable: At June 30, 1997, mortgage notes receivable,
derived from condominium sales, totaled $1,749,000 and accrue interest at rates
ranging from 6.875% to 9.000%. The carrying value of the Company's mortgage
notes receivable approximates fair value.
The principal balance of mortgage notes receivable matures as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- --------------------------------------------------------------------
<S> <C> <C> <C>
1998................. $ 17,000 2001............. $ 16,000
1999................. 407,000 2002............. 63,000
2000................. 22,000 Thereafter....... 1,224,000
</TABLE>
During the years ended June 30, 1997 and 1996, mortgage notes receivable of
$1,882,000 and $286,000, respectively, were sold or prepaid.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated methods
for financial reporting purposes. The cost of major renewals and
7
<PAGE> 8
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
improvements are capitalized; repair and maintenance costs are expensed. A
summary of the cost of fixed assets and the estimated useful lives for financial
reporting purposes is as follows:
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------- ESTIMATED
1997 1996 USEFUL LIVES
------------ ------------ ------------
<S> <C> <C> <C>
Rental Properties.......................... $ -- $ 1,029,000 20-40 years
Less: Accumulated Depreciation........... -- (162,000)
------------ ------------
$ -- $ 867,000
============ ============
Fixed Assets:
Land..................................... $ 3,380,000 $ 3,416,000 --
Machinery and Equipment.................. 53,171,000 54,314,000 5-7 years
Buildings and Improvements............... 41,534,000 41,394,000 30-32 years
Construction-In-Progress................. 451,000 12,000 --
Less: Accumulated Depreciation........... (22,932,000) (17,853,000)
------------ ------------
$ 75,604,000 $ 81,283,000
============ ============
</TABLE>
Goodwill: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1997 and $157,000 in 1996). The accumulated amortization at June
30, 1997 and 1996 was $566,000 and $409,000, respectively. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life may warrant revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate that
goodwill should be evaluated for possible impairment, the Company uses an
estimate of the undiscounted cash flows over the remaining life of the goodwill
measuring whether the goodwill is recoverable.
Other Assets: Other Assets primarily represent deferred charges and cash
surrender value of officer's life insurance.
Long-lived Assets: During fiscal 1997, the Company adopted Statement of
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." Adoption of this standard did
not have a material impact on the Company's financial position or results of
operations.
Income Taxes: Deferred income taxes are provided on the temporary
differences in the carrying values of assets and liabilities for financial
reporting and income tax purposes.
Earnings Per Share: Earnings per share is computed on the basis of the
weighted average number of common shares outstanding. The Company has stock
options which are considered common stock equivalents for purposes of computing
earnings per share. The impact of these common stock equivalents is not
material.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with original maturities of less than ninety days to be cash
equivalents.
Reclassifications: Certain reclassifications have been made in the 1996
statements to conform with 1997 presentation.
Derivatives: Derivative financial instruments have been used by the Company
to manage its interest rate exposure on certain debt instruments. Amounts to be
received or paid under interest rate swap agreements are recognized as interest
income or expense in the periods in which they accrue. If interest rate swap
agreements are terminated due to the underlying debt being extinguished, any
resulting gain or loss is recognized as interest income or expense at the time
of termination.
8
<PAGE> 9
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. ACQUISITIONS
On June 30, 1995, Prideco, Inc. ("Prideco"), a majority-owned subsidiary of
the Company, merged with Grant Acquisition Company, a wholly-owned subsidiary of
EVI, Inc. In the merger, the Company's shares of Prideco were converted into
2,071,716 shares of Common Stock, $1.00 par value, of EVI. Prideco's results of
operations are included in the Company's Consolidated Statement of Earnings
through June 30, 1995, the date of the merger. Concurrent with the merger, the
Company acquired an additional 1,825,746 shares of EVI, Inc. common stock
directly from EVI and the minority shareholders of Prideco for an aggregate cash
price of $13,291,000.
On January 4, 1994, the Company acquired, by way of merger, The TLC Group,
Inc., a Zeeland, Michigan-based firm which provides fully integrated logistic
services including refrigerated and dry warehousing, transportation and
information services. The purchase price consisted of approximately $5,630,000
in cash, the issuance of 234,269 shares of Christiana common stock, an 8%
subordinated note in the amount of $1,764,000 and the assumption of its
liabilities. As part of this acquisition, the assets of The TLC Group were
revalued to their fair market value with the excess of purchase price over fair
value amounting to $5,991,000 being recorded as goodwill. This acquisition was
accounted for as a purchase and accordingly, the results of TLC's operations are
included in the consolidated financial statements of the Company since the date
of acquisition.
During fiscal 1995, the Company repurchased the 234,269 shares issued in
the TLC acquisition for $3,805,000 and a three year note in the amount of
$2,286,000.
The following summarizes the unaudited consolidated pro forma operating
results of the Company as if the merger of Prideco and the acquisition of EVI
shares had occurred at the beginning of fiscal year 1995.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1995
-------------------
<S> <C>
Revenues.................................................... $71,642,000
Net Earnings................................................ 4,173,000
Earnings Per Share.......................................... $ 0.79
</TABLE>
Pro forma results are not necessarily indicative of results that would have
occurred had the purchase been made at the beginning of the respective period,
or of results which may occur in the future.
9
<PAGE> 10
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. INDEBTEDNESS
The following is a summary of consolidated indebtedness:
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Christiana Corporate
Notes Payable........................................... $ 2,286,000 $ 2,286,000
Line of Credit.......................................... -- --
Total Logistic Control, LLC
Revolving Credit Agreement.............................. 31,248,000 35,248,000
Line of Credit.......................................... -- 1,354,000
Notes Payable, Equipment Related........................ 4,382,000 6,010,000
Subordinated Note....................................... 1,764,000 1,764,000
----------- -----------
Subtotal........................................ 39,680,000 46,662,000
Less: Current Portion of Long-Term Debt................... (3,531,000) (1,295,000)
Short-Term Debt..................................... -- (1,354,000)
----------- -----------
Long-Term Debt............................................ $36,149,000 $44,013,000
=========== ===========
</TABLE>
Christiana has a $15,000,000 unsecured line of credit, renewable annually.
Borrowings under this line bear interest at either the London Interbank Offered
Rate ("LIBOR") plus 125 basis points, or prime at the Company's option. No
compensating balances are required under the terms of this credit facility.
Notes payable attributable to Christiana Corporate are amounts due as a
result of repurchased common stock. The notes payable are unsecured and bear
interest at the rate of 7%.
Total Logistic Control, LLC has a revolving credit agreement that provides
for borrowings at June 30, 1997 up to $40,000,000. Borrowings under this
agreement mature on March 31, 2001 and bear interest, payable monthly at either
LIBOR plus 125 basis points, or a floating rate at the bank's prime rate (6.7%
at June 30, 1997) and are unsecured. At June 30, 1996 Wiscold's borrowings under
the original revolving credit were priced at LIBOR plus 175 basis points or
prime (7.10% at June 30, 1996) and were secured by Wiscold's assets. The
revolving credit agreement requires, among other things, that defined levels of
net worth and debt service coverage be maintained and restricts certain
activities including limitation on new indebtedness and the disposition of
assets. No compensating balances are required under the terms of this credit
facility.
On September 15, 1992, Wiscold entered into an interest rate swap agreement
with three commercial banks which expires on December 15, 1997. As of June 30,
1997, $12,650,000 of outstanding Wiscold debt was subject to the swap agreement.
The agreement effectively fixes the interest rate payable by Wiscold on this
portion of the debt at 5.3% plus an interest rate spread determined by Wiscold's
leverage ratio. As of June 30, 1997, the effective rate of this outstanding debt
was 6.55%.
Under the swap agreement, the Company is exposed to credit risk only in the
event of nonperformance by the commercial banks, which is not anticipated.
Total Logistic Control, LLC has a bank line of credit which permits
borrowings up to $5,000,000. Borrowings bear interest at either LIBOR plus 200
basis points, or the bank's prime rate, at TLC's option (7.69% and 7.48% at June
30, 1997 and 1996, respectively), and are secured by certain accounts
receivable. Notes payable relate to specific equipment purchases, primarily
transportation and material handling equipment and a new distribution facility,
and are secured by specified assets. These notes bear interest on both fixed and
floating terms ranging from 6.375% to 9.37%. No compensating balances are
required under the terms of these credit arrangements. TLC's subordinated note
bears interest at 8% and was incurred in the
10
<PAGE> 11
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
redemption of a former shareholder's ownership coincident with the sale to
Christiana. This obligation is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, TOTAL
- ---------- -----------
<S> <C> <C>
1998............................................ $ 3,531,000
1999............................................ 4,078,000
2000............................................ 5,193,000
2001............................................ 25,150,000
2002............................................ 1,728,000
Thereafter........................................ --
</TABLE>
The weighted average interest rate paid on short term borrowings, all of
which was attributable to TLC, was 7.46% and 8.21% for fiscal 1997 and 1996,
respectively. The carrying value of the Company's debt approximates fair value.
D. INCOME TAXES
The Income Tax Provision consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Current
Federal..................................... $ (442,000) $ 3,029,000 $1,866,000
State....................................... (65,000) 463,000 66,000
Deferred...................................... 4,813,000 (1,084,000) 1,462,000
---------- ----------- ----------
$4,306,000 $ 2,408,000 $3,394,000
========== =========== ==========
</TABLE>
The components of Deferred Income Taxes are:
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred Tax Assets:
Alternative Minimum Tax................................. $ -- $ 1,255,000
Other................................................... 1,612,000 1,431,000
----------- -----------
Total Deferred Tax Asset........................ $ 1,612,000 $ 2,686,000
----------- -----------
Deferred Tax Liabilities:
Condemnation Proceeds................................... $ 4,513,000 $ 5,259,000
Tax Over Book Depreciation.............................. 7,816,000 7,311,000
Equity in Earnings of EVI, Inc.......................... 4,767,000 649,000
EVI, Inc. Stock Issuance................................ 2,787,000 --
Installment Sale........................................ 407,000 676,000
Other................................................... 860,000 1,083,000
----------- -----------
Total Deferred Tax Liability.................... 21,150,000 14,978,000
----------- -----------
Net Deferred Tax Liability................................ $19,538,000 $12,292,000
=========== ===========
</TABLE>
11
<PAGE> 12
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Federal Income Tax Rate........................... 35% 34% 34%
Increase (Reduction) in Taxes Resulting From:
State Income Tax, Net.................................. 5 5 3
Municipal Bond Interest................................ -- -- (1)
Other, Net............................................. (1) 1 1
-- -- --
39% 40% 37%
== == ==
</TABLE>
E. EMPLOYEE BENEFIT PLANS
The Company has 295,000 shares of its common stock reserved for issuance
under a stock option plan, which permits the granting of options as well as
appreciation rights and awards. During fiscal 1997, options for a total of
40,000 shares were granted at exercise prices of $21.50 and $22.25. During
fiscal 1996, options for a total of 100,000 shares were granted at an exercise
price of $24.25 per share. At June 30, 1997 and 1996, 36.0% and 23.5%,
respectively, of total options granted were exercisable. The remaining options
are exercisable over the next seven years.
Changes in stock options outstanding are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
--------- ----------------
<S> <C> <C>
Balance, June 30, 1994.................................... 151,250 26.000 - 34.375
Options Granted......................................... 5,000 28.8125
Options Canceled........................................ 5,000 27.125
------- ----------------
Balance, June 30, 1995.................................... 151,250 26.000 - 34.375
Options Granted......................................... 100,000 24.250
Options Canceled........................................ 7,500 27.125 - 34.375
------- ----------------
Balance, June 30, 1996.................................... 243,750 24.250 - 34.375
Options Granted......................................... 40,000 21.500 - 22.250
------- ----------------
Balance, June 30, 1997.................................... 283,750 21.500 - 34.375
======= ================
</TABLE>
As of June 30, 1997, the total number of stock options outstanding and
those currently exercisable was 283,750 and 102,167, respectively. The
weighted-average exercise price of total stock options and those currently
exercisable was $27.145 and $28.950, respectively. Additionally, the
weighted-average contractual life of stock options outstanding as of June 30,
1997 was 2.7 years.
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123 and has been
determined as if the Company had accounted for its stock options under the fair
value method as provided there-in. The fair value of each option grant is
estimated on the date of the grant using an option pricing model with the
following weighted-average assumptions used for options issued in fiscal 1997
and 1996, respectively: risk-free interest rate of 6.5%; expected remaining
lives of 6 and 5 years; expected volatility of 25% and 20%; 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
12
<PAGE> 13
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
future years, because as provided by SFAS No. 123, only the effects of awards
granted after July 1, 1996 are considered in the pro forma calculation.
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
------------------------- -------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Earnings............................ $6,663,000 $6,282,000 $3,603,000 $3,330,000
Earnings Per Share...................... $ 1.30 $ 1.22 $ .69 $ .65
</TABLE>
The Company has 401(k) plans covering substantially all of its employees.
The costs under these plans have not been material. The Company does not provide
post employment medical or life insurance benefits.
F. COMMITMENTS
Total Logistic Control, LLC has operating leases for warehousing and office
facilities. Rental expense under these leases was $7,213,000, $5,479,000 and
$5,100,000 in fiscal 1997, 1996 and 1995, respectively. At June 30, 1997, future
minimum lease payments under these operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
<S> <C> <C>
1998............................................ $ 5,800,773
1999............................................ 4,513,455
2000............................................ 3,982,490
2001............................................ 2,993,435
2002............................................ 2,274,180
Thereafter...................................... 11,976,486
</TABLE>
G. ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share". This statement
establishes standards for computing and presenting earnings per share (EPS).
This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings per Share. The Company is
required to adopt this statement for financial statements issued for the years
ending after June 30, 1998; earlier application is not permitted. Pro forma
disclosure of EPS computed in accordance with SFAS No. 128 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Earnings Per Share As Reported.............................. $1.30 $0.69 $0.96
Pro Forma:
Basic Earnings Per Common Share........................... $1.30 $0.69 $0.96
Diluted Earnings Per Common Share......................... $1.29 $0.69 $0.96
</TABLE>
13
<PAGE> 14
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. MARKET SEGMENT INFORMATION
The Company was engaged in primarily two distinct lines of business,
namely, the manufacture of industrial products and the operation of warehousing,
logistic services and rental properties. On June 30, 1995, the Company's
manufacturing segment, Prideco, was merged with a unit of EVI, Inc.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Industrial Products.............................. $ -- $ -- $ 55,239,000
Warehousing and Logistic Services................ 84,208,000 77,170,000 71,642,000
------------ ------------ ------------
Total.................................... $ 84,208,000 $ 77,170,000 $126,881,000
============ ============ ============
Earnings from Operations
Industrial Products.............................. $ -- $ -- $ 4,226,000
Warehousing and Logistic Services................ 6,473,000 5,580,000 7,533,000
Corporate Expenses............................... (1,894,000) (1,359,000) (1,435,000)
------------ ------------ ------------
Total.................................... $ 4,579,000 $ 4,221,000 $ 10,324,000
============ ============ ============
Assets
Industrial Products.............................. $ -- $ -- $ --
Warehousing and Logistic Services................ 91,355,000 98,370,000 91,992,000
Corporate........................................ 51,001,000 32,648,000 29,750,000
------------ ------------ ------------
Total.................................... $142,356,000 $131,018,000 $121,742,000
============ ============ ============
Capital Expenditures
Industrial Products.............................. $ -- $ -- $ 682,000
Warehousing and Logistic Services................ 3,488,000 19,715,000 10,249,000
------------ ------------ ------------
Total.................................... $ 3,488,000 $ 19,715,000 $ 10,931,000
============ ============ ============
Depreciation and Amortization
Industrial Products.............................. $ -- $ -- $ 1,256,000
Warehousing and Logistic Services................ 7,148,000 7,144,000 6,885,000
Corporate........................................ 7,000 15,000 66,000
------------ ------------ ------------
Total.................................... $ 7,155,000 $ 7,159,000 $ 8,207,000
============ ============ ============
</TABLE>
There were no intersegment sales. Corporate assets consist primarily of
cash equivalents, short-term investments, marketable securities and residential
real estate.
14
<PAGE> 15
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
I. EVI, INC. SUMMARY FINANCIAL INFORMATION
The following represents summarized financial information for EVI, Inc. The
Company's investment is accounted for under the equity method. EVI's fiscal year
ends on December 31, 1996. For more information regarding EVI's financial
condition and operations, reference is made to the EVI's Form 10-K filed with
the Securities and Exchange Commission.
SUMMARIZED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current Assets.............................................. $558,681 $249,574
Noncurrent Assets........................................... 294,162 241,486
-------- --------
Total Assets...................................... $852,843 $491,060
======== ========
Current Liabilities......................................... $233,126 $ 97,116
Noncurrent Liabilities...................................... 165,633 165,878
Stockholders' Equity........................................ 454,084 228,066
-------- --------
$852,843 $491,060
======== ========
</TABLE>
SUMMARIZED INCOME STATEMENTS
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues................................................... $ 478,020 $ 351,587 $ 248,537
Expenses................................................... (431,733) (319,147) (229,068)
Other Expenses, Net........................................ (14,741) (16,049) (13,021)
--------- --------- ---------
Income Before Taxes........................................ 31,546 16,391 6,448
Taxes...................................................... (7,041) (5,080) (1,806)
--------- --------- ---------
Income from Continuing Operations.......................... 24,505 11,311 4,642
Discontinued Operations, Net of Taxes...................... 74,392 -- --
--------- --------- ---------
Income before Extraordinary Item........................... 98,897 11,311 4,642
Extraordinary Item......................................... (731) -- (3,784)
--------- --------- ---------
Net Income....................................... $ 98,166 $ 11,311 $ 858
========= ========= =========
</TABLE>
During fiscal 1997, EVI issued additional stock in a public offering. The
Company's share of the gain was $4,345,000 and is reflected as an increase in
retained earnings in the consolidated statement of Shareholders' Equity.
Included in the Company's retained earnings if $11,812,000 related to its'
investment in EVI.
15
<PAGE> 16
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. PARENT COMPANY ONLY STATEMENTS
Following are the Parent Company only Condensed Balance Sheet, Statement of
Operations and Statement of Cash Flows:
PARENT COMPANY ONLY STATEMENTS
CONDENSED BALANCE SHEET
AS OF JUNE 30, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash Equivalents and Short-Term Investments............... $ 7,276,000 $ 4,444,000
Accounts Receivable and Other Current Assets.............. 1,576,000 1,309,000
Long-Term Assets:
Investment in EVI, Inc.................................... 41,257,000 23,631,000
Investments in and Advances to Subsidiaries............... 33,551,000 34,071,000
Fixed Assets, Net......................................... 10,848,000 11,330,000
Other Assets.............................................. 1,039,000 1,035,000
----------- -----------
TOTAL ASSETS...................................... $95,547,000 $75,820,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities.................. $ 5,525,000 $ 1,884,000
Long-Term Liabilities:
Deferred Income Taxes..................................... 17,083,000 9,711,000
Other Liabilities......................................... 854,000 3,148,000
----------- -----------
Total Liabilities................................. 23,462,000 14,743,000
----------- -----------
Total Shareholders' Equity........................ 72,085,000 61,077,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $95,547,000 $75,820,000
=========== ===========
</TABLE>
16
<PAGE> 17
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
CONDENSED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
F
<S> <C> <C> <C>
Revenues:
Warehousing and Logistic Services................... $14,628,000 $11,432,000 $10,943,000
----------- ----------- -----------
14,628,000 11,432,000 10,943,000
----------- ----------- -----------
Costs and Expenses:
Warehousing and Logistic Services................... 8,554,000 7,692,000 6,682,000
Selling, General and Administrative Expenses........ 1,815,000 1,504,000 1,582,000
----------- ----------- -----------
10,369,000 9,196,000 8,264,000
----------- ----------- -----------
Earnings from Operations......................... 4,259,000 2,236,000 2,679,000
Other Income (Expense):
Interest Income (Expense), Net...................... 174,000 (426,000) 2,000
Equity in Earnings of EVI, Inc...................... 10,479,000 1,745,000 --
Other (Expense), Net................................ (3,975,000) (3,129,000) (2,683,000)
----------- ----------- -----------
Total Other Income (Expense)................ 6,678,000 (1,810,000) (2,681,000)
----------- ----------- -----------
Earnings Before Income Taxes.......................... 10,937,000 426,000 (2,000)
Income Tax Provision (Benefit)........................ 4,287,000 167,000 (648,000)
----------- ----------- -----------
Net Earnings (Loss) Before Equity in Undistributed
Net Earnings of Subsidiaries..................... 6,650,000 259,000 646,000
Equity in Undistributed Net Earnings of
Subsidiaries........................................ 13,000 3,344,000 4,416,000
----------- ----------- -----------
Net Earnings................................ $ 6,663,000 $ 3,603,000 $ 5,062,000
=========== =========== ===========
</TABLE>
17
<PAGE> 18
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PARENT COMPANY ONLY STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings...................................... $ 6,663,000 $ 3,603,000 $ 5,062,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Equity in Earnings of EVI, Inc................. (10,479,000) (1,745,000) --
Equity in Undistributed Net Income of
Subsidiaries................................. (13,000) (3,344,000) (4,416,000)
Depreciation and Amortization.................. 979,000 859,000 828,000
Deferred Income Tax Provision.................. 4,571,000 997,000 1,348,000
Net Changes in Assets and Liabilities.......... 1,076,000 (410,000) 1,868,000
------------ ----------- ------------
Net Cash Provided By (Used In) Operating
Activities........................................ 2,797,000 (40,000) 4,690,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term
Investments.................................... (3,861,000) 2,072,000 11,742,000
Capital Expenditures.............................. (512,000) (793,000) (143,000)
Investment In Subsidiaries........................ 546,000 3,691,000 (2,546,000)
Investment In EVI, Inc............................ -- -- (13,291,000)
------------ ----------- ------------
Net Cash Provided By (Used In) Investing
Activities........................................ (3,827,000) 4,970,000 (4,238,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Repurchase/Purchase of Treasury Stock....... -- (1,236,000) (3,805,000)
------------ ----------- ------------
Net Cash Used In Financing Activities............... -- (1,236,000) (3,805,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (1,030,000) 3,694,000 (3,353,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1......... 3,695,000 1,000 3,354,000
------------ ----------- ------------
ENDING CASH AND CASH EQUIVALENTS, JUNE 30........... $ 2,665,000 $ 3,695,000 $ 1,000
============ =========== ============
</TABLE>
18
<PAGE> 19
CHRISTIANA COMPANIES, INC.
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Revenues.................... $20,480,000 $20,342,000 $22,450,000 $20,936,000 $84,208,000
Earnings From Operations.... 1,489,000 1,525,000 1,093,000 472,000 4,579,000
Earnings Before Taxes....... 1,767,000 6,126,000* 1,671,000 1,405,000 10,969,000
Net Earnings................ 1,083,000 3,730,000 1,019,000 831,000 6,663,000
Basic Earnings Per Share.... $ 0.21 $ 0.73 $ 0.20 $ 0.16 $ 1.30
FISCAL 1996
Revenues.................... $19,937,000 $19,651,000 $19,416,000 $18,166,000 $77,170,000
Earnings From Operations.... 2,053,000 1,053,000 810,000 305,000 4,221,000
Earnings Before Taxes....... 2,694,000 1,249,000 1,510,000 558,000 6,011,000
Net Earnings................ 1,638,000 760,000 918,000 287,000 3,603,000
Basic Earnings Per Share.... $ 0.32 $ 0.14 $ 0.18 $ 0.05 $ 0.69
</TABLE>
- ---------------
* Includes $5,715,000 of gain on the sale of Mallard Drilling, an EVI
subsidiary.
19
<PAGE> 20
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Warehousing and logistic services... $46,714,000 $40,821,000 $23,667,000 $20,342,000
Costs and Expenses:
Warehousing and logistic services... 39,317,000 33,913,000 20,116,000 16,693,000
Selling, general and
administrative................... 4,342,000 3,895,000 2,113,000 2,124,000
----------- ----------- ----------- -----------
43,659,000 37,808,000 22,229,000 18,817,000
----------- ----------- ----------- -----------
Earnings from Operations.............. 3,055,000 3,013,000 1,438,000 1,525,000
Other Income (Expense):
Interest income..................... 248,000 257,000 116,000 124,000
Interest expense.................... (1,492,000) (1,667,000) (739,000) (799,000)
Gain (losses) on sales of real
estate........................... -- 279,000 -- (6,000)
Equity in earnings of EVI, Inc...... 3,447,000 7,636,000 1,509,000 6,746,000
Gain (loss) on disposal of assets... 7,000 (1,281,000) -- (1,281,000)
Other income (expenses), net........ (1,386,000) (346,000) (883,000) (183,000)
----------- ----------- ----------- -----------
824,000 4,878,000 3,000 4,601,000
----------- ----------- ----------- -----------
Earnings before income taxes.......... 3,879,000 7,891,000 1,441,000 6,126,000
Income tax provision.................. 1,536,000 3,079,000 583,000 2,396,000
----------- ----------- ----------- -----------
Net earnings.......................... $ 2,343,000 $ 4,812,000 $ 858,000 $ 3,730,000
=========== =========== =========== ===========
Basic earnings per common share
(Note 4)............................ $ 0.46 $ 0.94 $ 0.17 $ 0.73
=========== =========== =========== ===========
Diluted net earnings per common share
(Note 4)............................ $ 0.45 $ 0.94 $ 0.16 $ 0.73
=========== =========== =========== ===========
Average number of shares
outstanding......................... 5,136,699 5,136,630 5,136,788 5,136,630
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 21
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
------------ ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 3,373,000 2,888,000
Short-term investments...................................... 3,482,000 4,611,000
Accounts receivable......................................... 9,258,000 7,649,000
Prepaids and other current assets........................... 1,459,000 1,729,000
------------ ------------
Total Current Assets.............................. 17,572,000 16,877,000
------------ ------------
Long-Term Assets:
Investment in EVI, Inc.................................... 44,703,000 41,257,000
Mortgage notes receivable................................. 1,273,000 1,749,000
Fixed assets, net......................................... 73,881,000 75,604,000
Other long-term assets.................................... 6,132,000 6,869,000
------------ ------------
Total Long-Term Assets............................ 125,989,000 125,479,000
------------ ------------
$143,561,000 $142,356,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable.......................................... $ 4,729,000 $ 3,526,000
Accrued liabilities....................................... 5,579,000 5,562,000
Short term debt........................................... -- --
Current portion of long-term debt......................... 1,245,000 3,531,000
------------ ------------
Total Current Liabilities......................... 11,553,000 12,619,000
------------ ------------
Long-Term Liabilities:
Long-term debt............................................ 33,617,000 36,149,000
Deferred federal and state income taxes................... 22,434,000 20,289,000
Other liabilities......................................... 1,192,000 1,214,000
------------ ------------
Total Long-Term Liabilities....................... 57,243,000 57,652,000
------------ ------------
Total Liabilities................................. 68,796,000 70,271,000
------------ ------------
Shareholders' Equity:
Preferred stock........................................... -- --
Common stock, par value $1 per share; authorized
12,000,000 shares; issued 5,208,330.................... 5,209,000 5,196,000
Additional paid-in capital................................ 12,346,000 12,022,000
Less: Treasury Stock........................................ (1,236,000) (1,236,000)
Retained earnings........................................... 58,446,000 56,103,000
------------ ------------
Total Shareholders' Equity........................ 74,765,000 72,085,000
------------ ------------
$143,561,000 $142,356,000
============ ============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 22
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- ---------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $45,095,000
EVI stock issuance........ -- -- -- -- -- 4,345,000
Net earnings.............. -- -- -- -- -- 6,663,000
--------- ---------- -------- ----------- ----------- -----------
Balance, June 30, 1997.... 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $56,103,000
Common shares issued...... 12,700 13,000 -- -- 324,000 --
Net earnings
(Unaudited)............. -- -- -- -- -- 2,343,000
--------- ---------- -------- ----------- ----------- -----------
Balance, December 31,
1997.................... 5,208,330 $5,209,000 (59,000) $(1,236,000) $12,346,000 $58,446,000
========= ========== ======== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 23
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 2,343,000 $4,812,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,406,000 3,698,000
Loss (gain) on sale of assets.......................... (7,000) 1,001,000
Deferred income tax expenses........................... 2,145,000 3,134,000
Equity earnings of EVI, Inc............................ (3,447,000) (7,636,000)
Changes in assets and liabilities:
(Increase) in accounts receivable...................... (1,609,000) (329,000)
Decrease in other assets............................... 850,000 674,000
Increase (Decrease) in accounts payable and accrued
liabilities........................................... 1,197,000 (2,042,000)
----------- ----------
Net cash provided by operating activities................... 4,878,000 3,312,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. -- 1,482,000
Decrease in mortgage notes receivable..................... 476,000 1,472,000
(Increase) Decrease in short-term investments............. 1,129,000 (1,903,000)
Capital expenditures...................................... (1,518,000) (1,772,000)
----------- ----------
Net cash provided by (used in) investing activities......... 87,000 (721,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on long-term notes and credit
lines.................................................. -- 381,000
Payments of notes and loans payable....................... (4,817,000) (2,457,000)
Common stock issuance..................................... 337,000 --
----------- ----------
Net cash (used in) financing activities..................... (4,480,000) (2,076,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 485,000 515,000
BEGINNING CASH AND CASH EQUIVALENTS, July 1................. 2,888,000 3,728,000
----------- ----------
ENDING CASH AND CASH EQUIVALENTS, December 31............... $ 3,373,000 $4,243,000
=========== ==========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 1,450,000 $1,654,000
Income taxes paid......................................... $ 284,000 $ 381,000
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 24
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to fairly present the results
for the interim periods presented and should be read in conjunction with the
Company's 1997 Annual Report.
NOTE 2 -- EVI, INC. STOCK ISSUANCE
The Company accounts for its investment in EVI under the equity method of
accounting. In July 1996, the Company's share of the underlying net assets of
EVI increased $7,146,000 as a result of a public offering of EVI's common stock.
This was recorded as an increase of $4,345,000 in retained earnings, and a
$2,801,000 increase in deferred income taxes.
NOTE 3 -- MERGER AGREEMENT
The Company and EVI, Inc. executed a definitive merger agreement, dated
December 12, 1997, under which EVI will acquire all the outstanding common
shares of the Company. The terms of the merger provide that each Christiana
common share will be converted into approximately .74913 shares of EVI common
stock, cash in the approximate amount of $3.60, depending on the balance of
certain assets and liabilities at the time of closing and a contingent cash
payment of approximately $1.92 after five years, subject to the incurrence of
any indemnity claims by EVI during this period.
The merger transaction is subject to the approval of shareholders of both
EVI and the Company as well as customary regulatory approvals.
24
<PAGE> 25
CHRISTIANA COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1996
------------------------------ ------------------------------
PER PER
SHARE SHARE
INCOME SHARES AMT. INCOME SHARES AMT.
---------- --------- ----- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Net Income................................ $2,343,000 $4,812,000
Less: Preferred stock Dividends........... -- --
BASIC EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $2,343,000 5,136,699 $0.46 $4,812,000 5,136,630 $0.94
===== =====
Options issued to Employees............... 81,526 1,312
DILUTED EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $2,343,000 5,218,225 $0.45 $4,812,000 5,137,942 $0.94
========== ========= ===== ========== ========= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE THREE MONTHS
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1996
------------------------------ ------------------------------
PER PER
SHARE SHARE
INCOME SHARES AMT. INCOME SHARES AMT.
------ --------- ----- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Net Income................................ $858,000 $3,730,000
Less: Preferred stock Dividends........... -- --
BASIC EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $858,000 5,136,788 $0.17 $3,730,000 5,136,630 $0.73
===== =====
Options issued to Employees............... 85,451 3,274
DILUTED EARNINGS PER SHARE
Income available to common Stockholders
plus assumed Conversions................ $858,000 5,222,239 $0.16 $3,730,000 5,139,904 $0.73
======== ========= ===== ========== ========= =====
</TABLE>
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the year.
In fiscal 1997, the Company adopted SFAS No. 128, "Earnings per Share",
effective December 15, 1997. As a result, the Company's reported earnings per
share for fiscal 1996 were restated. The effect of this accounting change on
previously reported earnings per share (EPS) data was as follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
PER SHARE AMOUNTS 1996 1996
----------------- ------------ -------------
<S> <C> <C>
Primary EPS as reported.................................... $0.94 $0.73
Effect of SFAS No. 128..................................... -- --
Basic EPS as restated...................................... $0.94 $0.73
===== =====
Fully diluted EPS as reported.............................. $0.94 $0.73
Effect of SFAS No. 128..................................... -- --
Diluted EPS as restated.................................... $0.94 $0.73
===== =====
</TABLE>
25
