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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): NOVEMBER 30, 2000
BAKER HUGHES INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-9397 76-0207995
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
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3900 ESSEX LANE
HOUSTON, TEXAS 77027-5177
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 439-8600
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 30, 2000, Baker Hughes Incorporated, a Delaware corporation
(the "Company"), consummated the transactions contemplated by the Master
Formation Agreement dated September 6, 2000 (the "MFA"), among the Company,
Schlumberger Limited, a Netherlands Antilles corporation ("Schlumberger"), and
certain wholly owned subsidiaries of Schlumberger. Under the terms of the MFA,
the Company and Schlumberger created a venture by transferring the seismic
fleets, data processing assets, exclusive and nonexclusive multi-client surveys
and other assets of the Company's Western Geophysical division and
Schlumberger's Geco-Prakla. The Company and Schlumberger respectively own 30%
and 70% of the venture, which will operate under the name Western GECO. Other
than the Western GECO venture, neither the Company nor any of its affiliates,
directors or officers or any associates of any its directors or officers has any
material relationships with Schlumberger.
Pursuant to the MFA, the Company received $493.4 million of cash from
Schlumberger for the transfer of a portion of the Company's ownership in Western
GECO and the sale of certain assets. The Company contributed $15.0 million in
working capital to Western GECO, consisting of a $6.6 million cash credit from
Schlumberger and $8.4 million of accounts receivable. The consideration received
by the Company was negotiated at arms' length. In the transaction, the Company
retained certain working capital and other assets of its Western Geophysical
division, valued at approximately $100 million. The Company disposed of a
portion of such assets prior to closing and expects to liquidate the balance to
further reduce the Company's outstanding debt. The Company's cash proceeds from
the transaction were used to reduce debt.
As soon as practicable after November 30, 2004, the Company or
Schlumberger will make a cash true-up payment to the other party based on a
formula comparing the ratio of the net present value of sales revenue from each
party's contributed multiclient seismic libraries during the four year period
ending November 30, 2004 and the ratio of the net book value of those libraries
on the date of closing. The maximum payment that either party is required to
make as a result of this adjustment is $100.0 million.
The Company does not expect to recognize any gain or loss resulting from
the initial formation of the venture due to the Company's material continued
involvement in the operations of Western GECO. The Company is expected to incur
fees and expenses of approximately $6 million to $12 million in connection with
the transaction.
Regulatory approval of the transaction is currently pending in certain
jurisdictions, including the United Kingdom.
The description of the MFA set forth herein does not purport to be complete
and is qualified in its entirety by the provisions of the MFA, which is filed as
Exhibit 2.1 hereto and is incorporated herein by reference. The related
Shareholders' Agreement, Closing Agreement and the press release announcing the
completion of the transactions contemplated by the MFA are filed as Exhibits
10.1, 10.2 and 99.1, respectively, hereto and are hereby incorporated by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the Year Ended December 31, 1999
Unaudited Pro Forma Consolidated Condensed Statement of
Operations for the Nine Months Ended September 30, 2000
2
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Unaudited Pro Forma Consolidated Condensed Statement of
Financial Position as of September 30, 2000
Notes to Unaudited Pro Forma Consolidated Condensed Financial
Statements
(c) Exhibits.
2.1 Master Formation Agreement dated September 6, 2000, among
Schlumberger, the Company and certain wholly owned
subsidiaries of Schlumberger (incorporated by reference to
Exhibit 2.1 of the Current Report of the Company on Form
8-K dated September 7, 2000, SEC File No. 1-9397).
10.1 Shareholders' Agreement dated November 30, 2000, among
Schlumberger, the Company and the other parties listed on
the signature pages thereto.
10.2 Closing Agreement dated November 30, 2000, among
Schlumberger, the Company and certain wholly owned
subsidiaries of Schlumberger.
99.1 Press Release of the Company dated November 30, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAKER HUGHES INCORPORATED
By: /s/ Daniel J. Churay
--------------------------
Daniel J. Churay
Assistant Secretary
Date: December 14, 2000
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BAKER HUGHES INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
On November 30, 2000, the Company and Schlumberger created a venture by
transferring the seismic fleets, data processing assets, exclusive and
nonexclusive multi-client surveys and other assets of the Company's Western
Geophysical division and Schlumberger's Geco-Prakla. The Company and
Schlumberger respectively own 30% and 70% of the venture, which will operate
under the name Western GECO. In conjunction with the transaction, the Company
received $493.4 million of cash from Schlumberger in exchange for the transfer
of a portion of the Company's ownership in Western GECO and the sale of certain
assets. The Company contributed $15.0 million in working capital to Western
GECO, consisting of a $6.6 million cash credit from Schlumberger and $8.4
million of accounts receivable. In the transaction, the Company retained certain
working capital and other assets of its Western Geophysical division, valued at
approximately $100 million. The Company disposed of a portion of such assets
prior to closing and expects to liquidate the balance to further reduce the
Company's outstanding debt. The Company's cash proceeds from the transaction
were used to reduce debt.
The Company does not expect to recognize any gain or loss resulting from
the initial formation of the venture due to the Company's material continued
involvement in the operations of Western GECO. The Company is expected to incur
fees and expenses of approximately $6 million to $12 million in connection with
the transaction.
The accompanying unaudited pro forma consolidated condensed financial
statements illustrate the effects of the disposition of assets of Western
Geophysical on the Company's results of operations and financial position. The
unaudited pro forma consolidated condensed statements of operations for the year
ended December 31, 1999 and the nine months ended September 30, 2000 are based
on the historical statements of operations and assume that the disposition had
occurred as of the beginning of the periods presented. The unaudited pro forma
consolidated condensed statement of financial position as of September 30, 2000
is based on the unaudited historical statement of financial position of the
Company and assumes that the disposition took place on that date.
The accompanying unaudited pro forma consolidated condensed financial
statements are intended to present only the disposition of the assets of the
Company's Western Geophysical division and the related receipt of cash and its
use. Provision of unaudited pro forma consolidated condensed financial
statements depicting the venture formation is impracticable because financial
statements of the business contributed by Schlumberger are currently not
available. The Company will file unaudited pro forma consolidated condensed
financial statements in an amendment to this Current Report on Form 8-K to
reflect the formation of the venture as soon as practicable, but not later than
60 days after this Report is required to be filed.
Certain information normally included in the financial statements prepared
in accordance with generally accepted accounting principles has been condensed
or omitted pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The unaudited pro forma consolidated condensed financial
statements should be read in conjunction with the historical consolidated
financial statements of the Company and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's Annual
Report on Form 10-K and its Quarterly Reports on Form 10-Q previously filed with
the SEC.
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BAKER HUGHES INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
WESTERN
BAKER HUGHES GEOPHYSICAL PRO FORMA PRO
INCORPORATED DIVISION ADJUSTMENTS FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 4,546.7 $ 947.4 $ - $ 3,599.3
------------ ------------ ------------ ------------
Costs and expenses:
Costs of revenues 3,677.7 929.2 - 2,748.5
Selling, general and administrative 655.0 50.6 - 604.4
Merger related costs (1.6) - - (1.6)
Unusual charge (credit) 8.8 42.9 - (34.1)
------------ ------------ ------------ ------------
Total 4,339.9 1,022.7 - 3,317.2
------------ ------------ ------------ ------------
Operating income (loss) 206.8 (75.3) - 282.1
Interest expense (159.0) - 25.7 (a) (133.3)
Interest income 5.0 0.6 - 4.4
Unrealized gain on trading securities 31.5 - - 31.5
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 84.3 (74.7) 25.7 184.7
Income taxes (32.0) (1.9) (9.2)(b) (39.3)
------------ ------------ ------------ ------------
Income (loss) from continuing operations 52.3 (76.6) 16.5 145.4
Loss from discontinued operations, net of
tax (19.0) - - (19.0)
------------ ------------ ------------ ------------
Net income (loss) $ 33.3 $ (76.6) $ 16.5 $ 126.4
============ ============ ============ ============
Basic earnings per share:
Income (loss) from continuing operations $ 0.16 $ 0.44
Discontinued operations, net of tax (0.06) (0.06)
------------ ------------
Net income (loss) $ 0.10 $ 0.38
============ ============
Diluted earnings per share:
Income (loss) from continuing operations $ 0.16 $ 0.44
Discontinued operations, net of tax (0.06) (0.06)
------------ ------------
Net income (loss) $ 0.10 $ 0.38
============ ============
</TABLE>
See notes to unaudited pro forma consolidated condensed financial statements.
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BAKER HUGHES INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
WESTERN
BAKER HUGHES GEOPHYSICAL PRO FORMA PRO
INCORPORATED DIVISION ADJUSTMENTS FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 3,605.3 $ 577.3 $ - $ 3,028.0
------------ ------------ ------------ ------------
Costs and expenses:
Costs of revenues 2,781.0 520.8 - 2,260.2
Selling, general and administrative 511.7 35.1 - 476.6
Unusual credit (20.1) (14.9) - (5.2)
------------ ------------ ------------ ------------
Total 3,272.6 541.0 - 2,731.6
------------ ------------ ------------ ------------
Operating income 332.7 36.3 - 296.4
Interest expense (126.0) (3.8) 23.0 (a) (99.2)
Interest income 1.9 0.4 - 1.5
Gain on trading securities 14.1 - - 14.1
------------ ------------ ------------ ------------
Income from continuing operations before
income taxes 222.7 32.9 23.0 212.8
Income taxes (76.7) (18.0) (8.3)(b) (67.0)
------------ ------------ ------------ ------------
Income from continuing operations 146.0 14.9 14.7 145.8
Loss from discontinued operations, net of
tax - - - -
------------ ------------ ------------ ------------
Net income $ 146.0 $ 14.9 $ 14.7 $ 145.8
============ ============ ============ ============
Basic earnings per share:
Income from continuing operations $ 0.44 $ 0.44
Discontinued operations, net of tax - -
------------ ------------
Net income $ 0.44 $ 0.44
============ ============
Diluted earnings per share:
Income from continuing operations $ 0.44 $ 0.44
Discontinued operations, net of tax - -
------------ ------------
Net income $ 0.44 $ 0.44
============ ============
</TABLE>
See notes to unaudited pro forma consolidated condensed financial statements.
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BAKER HUGHES INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 2000
(IN MILLIONS)
<TABLE>
<CAPTION>
DISPOSAL OF
CERTAIN ASSETS
OF WESTERN
BAKER HUGHES GEOPHYSICAL PRO FORMA
INCORPORATED DIVISION ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 53.2 $ - $ 493.4 (c) $ 53.2
(493.4)(e)
Accounts receivable, net 1,128.4 (5.6) (8.4)(d) 1,114.4
Inventories 833.0 (0.7) - 832.3
Net assets of discontinued operations 218.1 - - 218.1
Other current assets 212.5 (14.2) - 198.3
------------ ------------ ------------ ------------
Total current assets 2,445.2 (20.5) (8.4) 2,416.3
Investment in Western GECO - 1,274.4 (493.4)(c) 789.4
8.4 (d)
Property, net 1,909.6 (423.0) - 1,486.6
Goodwill and other intangibles, net 1,641.4 (261.2) - 1,380.2
Multiclient seismic data and other assets 1,005.9 (692.0) - 313.9
------------ ------------ ------------ ------------
Total assets $ 7,002.1 $ (122.3) $ (493.4) $ 6,386.4
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 399.1 $ (8.6) $ - $ 390.5
Short-term borrowings and current portion of
long-term debt 8.9 (0.5) - 8.4
Accrued employee compensation 261.4 (11.9) - 249.5
Other current liabilities 275.0 (12.0) - 263.0
------------ ------------ ------------ ------------
Total current liabilities 944.4 (33.0) - 911.4
Long-term debt 2,640.6 (0.3) (493.4)(e) 2,146.9
Deferred income taxes 73.1 - - 73.1
Deferred revenue and other long-term liabilities 268.0 (89.0) - 179.0
Stockholders' equity:
Common stock 331.9 - - 331.9
Capital in excess of par value 3,025.0 - - 3,025.0
Accumulated deficit (19.5) - - (19.5)
Accumulated other comprehensive loss (261.4) - - (261.4)
------------ ------------ ------------ ------------
Total stockholders' equity 3,076.0 - - 3,076.0
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 7,002.1 $ (122.3) $ (493.4) $ 6,386.4
============ ============ ============ ============
</TABLE>
See notes to unaudited pro forma consolidated condensed financial statements.
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BAKER HUGHES INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following pro forma adjustments have been made to the historical
financial statements of the Company:
(a) To reduce interest expense using the weighted average interest rate for the
Company's commercial paper of 5.20% for the year ended December 31, 1999
and 6.23% for the nine months ended September 30, 2000 as a result of the
assumed repayment of outstanding indebtedness as of the beginning of the
periods presented.
(b) To provide for additional U.S. income taxes at the statutory rate of 36%
for the reduction in interest expense for the periods presented.
(c) To record cash received in exchange for the transfer of a portion of the
Company's ownership in Western GECO and the sale of certain assets.
(d) To record the contribution of required working capital by the Company to
Western GECO.
(e) To record the application of cash received to repay outstanding
indebtedness.
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INDEX TO EXHIBITS
2.1 Master Formation Agreement dated September 6, 2000, among
Schlumberger, the Company and certain wholly owned subsidiaries
of Schlumberger (incorporated by reference to Exhibit 2.1 of the
Current Report of the Company on Form 8-K dated September 7,
2000, SEC File No. 1-9397).
10.1 Shareholders' Agreement dated November 30, 2000, among
Schlumberger, the Company and the other parties listed on the
signature pages thereto.
10.2 Closing Agreement dated November 30, 2000, among Schlumberger,
the Company and certain wholly owned subsidiaries of
Schlumberger.
99.1 Press Release of the Company dated November 30, 2000.
