<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the plan year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-18312
--------------------------------
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
TUBOSCOPE VETCO INTERNATIONAL INC. 401(K) THRIFT SAVINGS PLAN
(RESTATEMENT EFFECTIVE JANUARY 1, 1993)
2835 Holmes Road
Houston, Texas 77051
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
TUBOSCOPE INC.
2835 Holmes Road
Houston, TX 77051
1
<PAGE>
REQUIRED INFORMATION
Tuboscope Vetco International Inc. 401(k) Thrift Savings Plan Financial
Statements and Schedules prepared in accordance with financial reporting
requirements of the Employee Retirement income Security Act of 1974, as amended
("ERISA").
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Administrator of the Plan has duly caused this annual report to
be signed on its behalf by the undersigned, hereunto duly authorized.
TUBOSCOPE VETCO INTERNATIONAL INC.
401(K) THRIFT SAVINGS PLAN
/s/ KENNETH L. NIBLING
Dated: June 26, 1998 By: ______________________________
Kenneth L. Nibling,
Administrator
2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
<C> <S> <C>
23.1 Consent of Ernst and Young LLP 4
99.1 Tuboscope Vetco International Inc. 401(k) Thrift Savings Plan 5
Financial Statements and Schedules prepared in accordance with
financial reporting requirements of ERISA.
</TABLE>
3
<PAGE>
Exhibit 23.1
CONSENT OF ERNST AND YOUNG LLP
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (Registration No. 333-43385) pertaining to the Tuboscope Vetco
International Inc. 401(k) Thrift Savings Plan of our report dated June 19, 1998
with respect to the financial statements and schedules of the Tuboscope Vetco
International Inc. 401(k) Thrift Savings Plan included in this Annual Report
(Form 11-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Houston, Texas
June 24, 1998
4
<PAGE>
Exhibit 99.1
TUBOSCOPE, INC. VETCO INTERNATIONAL INC. 401(k) THRIFT SAVINGS PLAN FINANCIAL
STATEMENTS AND SCHEDULES PREPARED IN ACCORDANCE WITH THE FINANCIAL REPORTING
REQUIREMENTS OF ERISA
5
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Financial Statements and Supplemental Schedules
Year ended December 31, 1997
Contents
Report of Independent Auditors............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits.............................. 2
Statement of Changes in Net Assets Available for Benefits With
Fund Information........................................................... 3
Notes to Financial Statements................................................ 4
Supplemental Schedules
Item 27(a) - Schedule of Assets Held for Investment Purposes.................10
Item 27(d) - Schedule of Reportable Transactions.............................11
<PAGE>
Report of Independent Auditors
Administrative Committee
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan (the
"Plan") as of December 31, 1997 and 1996, and the related statement of changes
in net assets available for benefits for the year ended December 31, 1997. These
financial statements are the responsibility of the Plan'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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974 and are not
a required part of the basic financial statements. The fund information in the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the changes in net assets
available for benefits of each fund. The supplemental schedules and fund
information have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
June 19, 1998
1
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31
1997 1996
----------- -----------
<S> <C> <C>
Assets
Investments at fair value (Note 2):
Aim Weingarten Fund $ 2,662,570 $ 2,061,684
Aurora National Life Assurance Co. Guaranteed
Investment Contract (Note 4) 3,253,820 6,301,198
Davis New York Venture Fund 2,683,975 437,254
Merrill Lynch Basic Value Fund 4,624,104 3,080,057
Merrill Lynch Capital Fund 3,661,497 2,985,789
Merrill Lynch Corporate Bond Fund 1,717,389 1,145,467
Merrill Lynch Global Allocation Fund 2,626,072 2,126,257
Merrill Lynch Retirement Preservation Trust 10,481,166 7,233,555
Tuboscope Vetco International, Inc. common stock 3,299,424 1,010,516
Participant loans 2,086,892 1,498,926
----------- -----------
TOTAL INVESTMENTS 37,096,909 27,880,703
Cash 674 -
Receivables:
Participant contributions 212,257 83,386
Employer contributions 82,597 16,920
Accrued interest and dividends 18,039 14,357
----------- -----------
Total receivables 312,893 114,663
----------- -----------
Total assets 37,410,476 27,995,366
Liabilities
Liability for securities purchased 5,082 57,236
----------- -----------
Total liabilities 5,082 57,236
----------- -----------
Net assets available for benefits $37,405,394 $27,938,130
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Statement of Changes in Net Assets Available for Benefits With Fund Information
Year ended December 31, 1997
<TABLE>
<CAPTION>
Participant-Directed
--------------------------------------------------------------------------
Merrill Lynch Merrill Merrill
AIM Retirement Lynch Lynch
Company Weingarten Preservation Corporate Capital
Stock Fund Trust Bond Fund Fund
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Participant contributions $ 4,318 $ 332,954 $ 495,535 $ 164,891 $ 352,830
Employer contributions in stock (Note 1) 702,886 -- -- -- --
Rollover contributions 12,461 5,770 45,450 9,489 11,729
Investment income -- 378,639 826,302 96,611 304,613
Net appreciation (depreciation) in
fair value of investments 992,872 169,460 -- 29,205 328,543
Other 3,252 1,748 22,900 1,200 3,166
--------------------------------------------------------------------------
Total additions 1,715,789 888,571 1,390,187 301,396 1,000,881
Deductions from net assets attributed to:
Benefits paid to participants 86,773 166,745 3,023,075 85,798 114,240
Administrative expenses 3,251 2,392 29,747 1,711 3,132
--------------------------------------------------------------------------
Total deductions 90,024 169,137 3,052,822 87,509 117,372
Transfers from other qualified plans -- -- 2,140,196 431,878 27,556
--------------------------------------------------------------------------
Net increase prior to
interfund transfers, net 1,625,765 719,434 477,561 645,765 911,065
Interfund transfers, net 728,820 (127,794) (308,581) (79,742) (246,513)
--------------------------------------------------------------------------
Net increase (decrease) 2,354,585 591,640 168,980 566,023 664,552
Net assets available for
benefits at beginning of year 1,027,436 2,070,930 13,566,006 1,151,366 2,996,945
--------------------------------------------------------------------------
Net assets available for
benefits at end of year $3,382,021 $2,662,570 $13,734,986 $1,717,389 $3,661,497
==========================================================================
<CAPTION>
----------------------------------------------------
Merrill
Merrill Lynch Davis
Lynch Global New York
Basic Value Allocation Venture Participant
Fund Fund Fund Loans Other Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Participant contributions $ 426,014 $ 313,353 $ 314,935 $ $212,257 $2,617,087
Employer contributions in stock (Note 1) -- -- -- -- -- 702,886
Rollover contributions 28,291 6,427 15,256 -- 48,633 183,506
Investment income 347,958 335,256 119,170 147,229 3,682 2,559,460
Net appreciation (depreciation) in
fair value of investments 618,180 (88,631) 330,825 -- -- 2,380,454
Other 3,217 2,421 1,408 -- (2,954) 36,358
---------------------------------------------------------------------------
Total additions 1,423,660 568,826 781,594 147,229 261,618 8,479,751
Deductions from net assets attributed to:
Benefits paid to participants 278,873 168,066 158,960 116,286 (7,146) 4,191,670
Administrative expenses 3,221 2,421 1,408 -- -- 47,283
---------------------------------------------------------------------------
Total deductions 282,094 170,487 160,368 116,286 (7,146) 4,238,953
Transfers from other qualified plans 476,543 213,172 1,523,086 414,035 -- 5,226,466
---------------------------------------------------------------------------
Net increase prior to
interfund transfers, net 1,618,109 611,511 2,144,312 444,978 268,764 9,467,264
Interfund transfers, net (86,264) (120,748) 97,831 142,988 3 --
---------------------------------------------------------------------------
Net increase (decrease) 1,531,845 490,763 2,242,143 587,966 268,767 9,467,264
Net assets available for
benefits at beginning of year 3,092,259 2,135,309 441,832 1,498,926 (42,879) 27,938,130
---------------------------------------------------------------------------
Net assets available for
benefits at end of year $4,624,104 $2,626,072 $2,683,975 $2,086,892 $225,888 $37,405,394
===========================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
December 31, 1997
1. Description of the Plan
General
The Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan (the "Plan")
is a defined contribution plan which covers domestic employees of Tuboscope
Vetco International, Inc. (the "Company") and certain subsidiaries. Employees
are eligible upon hiring or rehiring by the Company.
Effective January 1, 1997, the Plan was amended to merge the following tax-
qualified plans into the Plan: Hydra-Rig, Inc./Drexel Oilfield Services, Inc.
401(k) Profit Sharing Plan and Trust; Vetco Pipeline Services, Inc. 401(k)
Retirement/Savings Plan; and Gauthier Brothers Rentals, Inc. 401(k) Profit
Sharing Plan. Assets were transferred into the Plan in conjunction with the
mergers and are reflected on the financial statements as transfers from other
qualified plans.
The following brief description of the Plan is provided for general information
purposes only. Participants should refer to the Summary Plan Description for a
more complete description of the Plan's provisions.
Participant Contributions
The Plan allows participants to contribute from 1% to 20% of their gross salary
through a combination of before-tax and after-tax dollars, subject to limits
prescribed by law. Participants may contribute 1% to 10% of their gross salary
with before-tax dollars and 1% to 10% of their gross salary with after-tax
dollars.
Participants may elect to have their contributions allocated in 10% increments
to one or more of the following options: AIM Weingarten Fund, Merrill Lynch
Retirement Preservation Trust ("RPT"), Merrill Lynch Corporate Bond Fund,
Merrill Lynch Capital Fund, Merrill Lynch Basic Value Fund, Merrill Lynch Global
Allocation Fund, Davis New York Venture Fund, and effective February 1997,
Company Stock. Participants may no longer elect to allocate contributions to the
Guaranteed Investment Contract ("GIC") and all transactions related to the GIC
have been included with the RPT for financial statement purposes. See Note 4 for
discussion of the GIC.
4
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
1. Description of the Plan (continued)
I. Employer Contributions
----------------------
The Plan calls for matching contributions by the Company of one-fourth of each
participant's contributions, up to a maximum of 1 1/2% of the participant's
salary. Effective August 1, 1997, the Plan was amended to allow for matching
contributions by the Company of one-half of each participant's contributions, up
to a maximum of 3% of the participant's salary.
Matching contributions are made by the Company in Tuboscope Vetco International,
Inc. common stock ("Company Stock") and are valued at the fair market value as
of the date of contribution to the Plan.
Participant Loans
Participants are allowed to borrow a minimum of $1,000 and a maximum of $50,000.
The amount of a loan may not exceed 50% of the value of the participant's
deferred compensation account and vested employee's contributions account. The
security for a loan extended under the Plan is 50% of the value of the
borrower's vested account balance as determined immediately after the loan is
extended. The administrative committee determines a reasonable interest rate to
be applied uniformly and charged on outstanding loans. The term of a loan is
limited to five years unless the loan is used to acquire the borrower's
principal residence.
Vesting
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the participant's employer contributions account, including
actual earnings thereon, is based upon years of continuous service. A
participant vests 20% each year and is 100% vested after five years of credited
service. Full vesting in the participant's employer contributions will also
occur at death, age 60, disability, retirement, or the termination or
discontinuation of the Plan. Forfeitures may be applied to reduce the employer's
contribution.
5
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
1. Description of the Plan (continued)
Payment of Benefits
Upon termination of service, each participant can receive his/her vested amount
in one lump-sum payment or, in certain cases, the participant may defer
withdrawals. In addition, active service withdrawals may be taken at age 59 1/2
and at age 62 in 10% increments once each calendar quarter.
Administrative Expenses
Certain administrative expenses such as legal fees and audit fees are paid by
the Company. The Plan pays all other administrative expenses.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right to
discontinue contributions at any time and to terminate the Plan subject to the
provisions of the Employee Retirement Income Security Act of 1974. In the event
of Plan termination, participants will become fully vested.
2. Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting. Benefit payments to participants are recorded upon distribution.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes and
schedules. Actual results could differ from those estimates.
6
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
2. Summary of Accounting Policies (continued)
Investment Valuation and Income Recognition
Mutual fund investments and Company Stock are valued at fair value, which is
determined using quoted market prices. The Aurora National Life Assurance
Company Guaranteed Investment Contract ("Aurora") is stated at contract value
(see Note 4). The Merrill Lynch Retirement Preservation Trust and participant
loans are valued at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
3. Federal Income Taxes
The Plan has received a favorable determination letter from the Internal Revenue
Service dated October 31, 1995 regarding its qualification status under Section
401(a) of the Internal Revenue Code (the "Code") for exemption from federal
income taxes. Once qualified, the Plan is required to operate in conformity with
the Code to maintain its qualification. The Company is not aware of any course
of action or series of events that have occurred that might adversely affect the
Plan's qualified status.
4. Executive Life Insurance Company Fund
Certain of the Plan's assets were invested in an Executive Life Insurance
Company ("ELIC") GIC. ELIC was placed into conservatorship on April 11, 1991 by
the California Insurance Commissioner. The decision of the California Insurance
Commissioner to place the funds into conservatorship and subsequent court orders
have restricted the participants' ability to contribute funds to or withdraw
funds from this investment since that time.
On September 3, 1993, Aurora assumed and reinsured the GIC. Aurora adjusts its
estimate of the GIC balance annually for interest earned and account value
adjustments.
In April 1994, the Company elected to opt-in to the ELIC Rehabilitation Plan
with a benefit-responsive guaranteed investment contract. Under the terms of the
ELIC Rehabilitation Plan, current employees who are contract holders must remain
in the Plan with no withdrawals or transfers of funds permitted until September
1998.
7
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
4. Executive Life Insurance Company Fund (continued)
In August 1995, the Superior Court of Los Angeles, California, rendered a
nonappealable court order stating that all priority litigation ELIC contracts
would be treated as normal annuity contracts. The consequences of this decision
included raising the Plan from a class six to a class five standing in the
conservatorship proceedings. Therefore, the Plan will be eligible to receive its
full percentage of the ELIC Rehabilitation Plan settlement amount from Aurora in
1998.
In May 1997, $3.2 million was transferred from Aurora to the RPT for ELIC funds
which were being held on behalf of the Plan. Because the litigation related to
the ELIC was settled in 1995, funds representing all terminated participants'
balances as of April 11, 1991 can now be distributed by the Plan. All active
participants' total ELIC balances and the terminated participants' interests
earned since April 11, 1991 on ELIC balances will not be paid out until the
contract expires in September 1998. Letters were sent to terminated employees
describing their options for distribution of their April 11, 1991 ELIC balances.
These options are either to be paid out immediately or to wait until their
entire balance can be distributed in September 1998. Funds received from Aurora
and deposited in the RPT account can be reallocated to other investment options
as directed by participants.
The GIC is valued at contract value. The net average yield was 4.97% and 5.13%
for 1997 and 1996, respectively. The rate of credited interest for any period of
time will be determined by Aurora and may be changed periodically. The net
crediting interest rate was 5.34% and 5.18% at December 31, 1997 and 1996,
respectively. The value of the GIC is subject to the financial stability of
Aurora.
5. Year 2000 Issue (Unaudited)
The Company has developed a plan to modify its internal information technology
to be ready for the year 2000 and has begun converting critical data processing
systems. The project also includes determining whether third-party service
providers have reasonable plans in place to become year 2000-compliant. The
Company currently expects the project to be substantially complete by early 1999
and does not expect this project to have a significant effect on the Plan's
operations.
8
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Notes to Financial Statements
6. Subsequent Events
Effective January 1, 1998, the Plan was amended as follows:
1) Participants may contribute up to 20% of their gross salary in any
combination of before-tax and after-tax contributions.
2) The Company may, in its sole discretion, contribute to the Plan for
each participant who elected to defer compensation or make voluntary
contributions to the Plan an additional contribution of one-half of the
participant's deferred compensation and one-half of the participant's
voluntary contributions, up to a maximum of 1% of the participant's
salary.
In September 1998, it is anticipated that the remaining assets in the ELIC GIC
will be transferred to the RPT for distribution to former employees or for
active participants who may allocate the funds to their desired investment
options.
9
<PAGE>
Supplemental Schedules
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Item 27(a) - Schedule of Assets Held for Investment Purposes
December 31, 1997
EIN: 74-1473942 PN: 001
<TABLE>
<CAPTION>
Identity of Current
Issue Description of Investment Cost Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
*Tuboscope Vetco
International, Inc. Common Stock $ 1,922,399 $ 3,299,424
*Merrill Lynch Retirement Preservation 10,481,166 10,481,166
Trust
*Merrill Lynch Global Allocation Fund
Class A 2,585,262 2,626,072
*Merrill Lynch Corporate Bond Fund
Investment Grade Class A 1,743,493 1,717,389
*Merrill Lynch Capital Fund, Class A 3,167,103 3,661,497
*Merrill Lynch Basic Value Fund 3,580,232 4,624,104
Aurora National Life
Assurance Company Guaranteed Investment 3,253,820 3,253,820
Contract
AIM Management Weingarten Fund 2,454,757 2,662,570
Davis New York Venture Fund 2,363,046 2,683,975
*Participant loans Varying maturity dates,
bearing interest at prime
plus 1% (interest rates
ranging from 7%-10%) - 2,086,892
--------------------------------
$31,551,278 $37,096,909
================================
</TABLE>
* Party-in-interest
10
<PAGE>
Tuboscope Vetco International, Inc. 401(k) Thrift Savings Plan
Item 27(d) - Schedule of Reportable Transactions
Year ended December 31, 1997
EIN: 74-1473942 PN: 001
<TABLE>
<CAPTION>
Current
Value of
Number Asset on
Identity of of Purchase Selling Cost of Transaction
Party Involved Description Transactions Price Price Asset Date Net Gain
- ----------------------------------------------------------------------------------------------------------------------------
Category (iii) Series of transactions in excess of 5% of net assets available for benefits
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch Retirement Preservation 482 $10,444,481 $ - $10,444,481 $10,444,481 $ -
Trust
346 - 7,196,870 7,196,870 7,196,870 -
Merrill Lynch Basic Value Fund 203 1,583,815 - 1,583,815 1,583,815 -
345 - 621,162 485,556 621,162 135,606
Davis New York Venture Fund 143 2,282,979 - 2,282,979 2,282,979 -
178 - 367,083 320,797 367,083 46,286
</TABLE>
11
