SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the quarterly period ended April 30, 1994.
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-10624
Baroid Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 76-0319642
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2001 Ross Avenue, Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
(214) 740-6000
(Registrant's Telephone Number, Including Area Code)
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934, during the preceding 12 months,
and (2) has been subject to such filing requirements within the
past 90 days. Yes X No
On January 21, 1994, Baroid Corporation merged into a wholly-owned
subsidiary of Dresser Industries, Inc. ("Dresser"). Pursuant to
meeting the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q, Baroid is filing this Form 10-Q with the
reduced disclosure format permitted in General Instruction (H)(2)
of Form 10-Q.
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BAROID CORPORATION AND SUBSIDIARIES
INDEX
Page(s)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - April 30, 1994
and October 31, 1993 3-4
Consolidated Statements of Income -
Three months and six months ended
April 30, 1994 and 1993 5
Consolidated Statement of
Stockholder's Equity - Six
months ended April 30, 1994 6
Consolidated Statements of Cash Flows -
Six months ended April 30, 1994 and 1993 7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 13
Item 6. Exhibits and Reports on Form 8-K. 14
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BAROID CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS April 30, October 31,
1994 1993*
(In thousands)
Current assets:
Cash $ 27,936 $ 33,678
Accounts and notes receivable 209,862 208,516
Inventories 146,367 135,887
Prepaid expenses 13,735 10,355
Total current assets 397,900 388,436
Other assets:
Investment in joint ventures 34,246 34,537
Goodwill 52,014 48,800
Other 14,073 20,033
Total other assets 100,333 103,370
Property and equipment:
Land 39,290 53,111
Buildings 78,816 81,079
Machinery and equipment 491,326 460,763
Construction in progress 6,398 8,771
615,830 603,724
Less accumulated depreciation
and amortization (355,849) 348,429
Net property and equipment 259,981 255,295
$758,214 $747,101
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BAROID CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Unaudited)
April 30, October 31,
1994 1993*
(In thousands)
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable $ 24,750 $ 60,484
Current maturities of long-term debt 706 15,469
Payable to Dresser Industries, Inc. 82,679 -
Accounts payable 100,296 98,066
Accrued liabilities 82,835 96,686
Income taxes 2,961 1,384
Total current liabilities 294,227 272,089
Noncurrent liabilities:
Long-term debt 151,656 178,364
Deferred income taxes 18,234 18,309
Other 2,775 4,513
Total noncurrent liabilities 172,665 201,186
Minority interest 1,859 3,599
Stockholder's equity:
Common stock - -
Additional paid-in capital 319,682 316,163
Currency translation adjustments (43,837) (42,316)
Retained earnings (deficit) 13,618 (3,620)
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Total stockholder's equity 289,463 270,227
$758,214 $747,101
* Restated.
See accompanying notes to consolidated financial statements.
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BAROID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended
April 30,
1994 1993 1994 1993
(In thousands)
Revenues and other income:
Net sales $211,755 $184,981 $437,012 $379,562
Equity in earnings
of joint ventures 770 445 1,463 1,741
Other, net 2,490 3,033 7,072 8,030
215,015 188,459 445,547 389,333
Costs and expenses:
Cost of sales 163,492 141,690 326,200 293,639
Selling, general
and administrative 38,259 35,159 78,28 272,383
Interest 4,450 3,703 8,726 7,498
206,201 180,552 413,208 373,520
Income before income
taxes and minority
interest 8,814 7,907 32,339 15,813
Provision for income
taxes 3,261 2,178 11,965 5,297
Income before
minority interest 5,553 5,729 20,374 10,516
Minority interest (435) 64 (1,505) 496
Net income $ 5,988 $ 5,665 $ 21,879 $ 10,020
See accompanying notes to consolidated financial statements.
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BAROID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(Unaudited)
Additional Currency Retained Total
Common paid-in translation earnings stockholder's
stock capital adjustments (deficit) equity
(In thousands)
Balance at
October 31,
1993 $- $316,163 $(42,316) $(3,620) $270,227
Net income - - - 21,879 21,879
Dividends - - - (4,641) (4,641)
Currency
translation
adjustments - - (1,521) - (1,521)
Other - 3,519 - - 3,519
Balance at
April 30,
1994 $ - $319,682 $(43,837) $13,618 $289,463
See accompanying notes to consolidated financial statements.
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BAROID CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months ended
April 30,
1994 1993
(In thousands)
Cash flows from operating activities:
Net income $ 22,389 $ 10,020
Adjustments:
Depreciation and amortization 25,171 23,738
Deferred income taxes (682) (346)
Minority interest (1,505) 496
Undistributed earnings of
joint ventures, net 3,098 2,541
Advances from
Dresser Industries, Inc. 82,679 -
Change in assets and
liabilities, net (20,605) (37,664)
Total adjustments 88,156 (11,235)
Net cash provided (used) by
operating activities 110,545 (1,215)
Cash flows from investing activities:
Capital expenditures (36,810) (19,634)
Acquisition of business units 158 (7,215)
Other, net - 3,074
Net cash used by investing
activities (36,652) (23,775)
Cash flows from financing activities:
Notes payable and long-term debt:
Additions 53,714 215,789
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Principal payments (131,435) (182,983)
Dividends paid (4,641) (8,361)
Other, net 3,600 254
Net cash provided (used) by
financing activities (78,762) 24,699
Cash:
Net decrease from operating, investing
and financing activities (4,869) (291)
Net change due to currency translation (873) (261)
Balance at beginning of period 33,678 21,322
Balance at end of period $ 27,936 $ 20,770
Supplemental disclosures:
Cash paid for:
Interest $ 8,750 $ 10,739
Income taxes $ 10,463 $ 10,499
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BAROID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of presentation:
The consolidated balance sheet at April 30, 1994 and the
consolidated statements of income, cash flows and stockholder's
equity for the interim periods ended April 30, 1994 and 1993, have
been prepared by the Company, without audit. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the consolidated financial
position, results of operations and cash flows have been made.
The results of operations for the interim periods are not
necessarily indicative of the operating results for a full year or
of future operations.
On January 21, 1994, Baroid merged into BCD Acquisition
Corporation ("BCD"), a wholly-owned subsidiary of Dresser
Industries, Inc. ("Dresser").
Pursuant to the merger, Baroid's Amended and Restated
Certificate of Incorporation was further amended to authorize the
issuance of 1,000 shares of common stock, par value $0.01 per
share. 100 shares were issued pursuant to the merger. The
financial statements for all periods presented were restated to
give effect to Baroid's new capital structure.
On March 30, 1994, the Company changed the end of its fiscal
year from December 31 to October 31.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. The accompanying consolidated financial statements
should be read in conjunction with the Company's consolidated
financial statements included in its Annual Report on Form 10-K
for the year ended December 31, 1993.
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Note 2 - Acquisition activities:
On January 29, 1993, Baroid issued 17,718,550 shares of its
common stock in exchange for all of the outstanding common stock
of Sub Sea. Sub Sea operates in the offshore services segment of
the oil and gas industry. Sub Sea provides diving services,
engineering and unmanned, remotely operated underwater vehicles to
inspect, construct, maintain and repair offshore drilling rigs and
platforms, underwater pipelines and other offshore oil and gas
facilities. Sub Sea also owns and operates marine equipment which
performs pipeline installation, burial and inspection, and
maintenance and repair work on platforms.
The acquisition of Sub Sea has been accounted for as a
pooling of interests. Financial statements for periods ended
April 30, 1993 reflect the results of operations of the combined
companies as if the combination had occurred on November 1, 1992.
In January 1993, the Company acquired the assets of a survey
business for the offshore services segment for $3.6 million and
the assets of an industrial barite business for the drilling
fluids segment for $3.6 million.
In July 1993, the Company acquired the bentonite mining
operations of Tremont Corporation for $20.4 million. Bentonite is
a clay often used in drilling fluids, as well as other application
s.
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Note 3 - Business segments:
Three months ended Six months ended
April 30, April 30,
1994 1993 1994 1993
(In thousands)
Net sales:
Drilling fluids $ 86,423 $ 80,496 $183,703 $172,552
Drilling services
and products 83,247 74,742 176,856 149,561
Offshore services 42,085 29,743 76,453 57,449
$211,755 $184,981 $437,012 $379,562
Operating income:
Drilling fluids $ 7,637 $ 6,251 $ 19,822 $ 14,969
Drilling services
and products 6,160 4,464 18,344 8,199
Offshore services 407 1,574 3,750 3,344
Total operating
income 14,204 12,289 41,916 26,512
General corporate, net (940) (679) (851) (3,201)
Interest expense (4,450) (3,703) (8,726) (7,498)
$ 8,814 $ 7,907 $ 32,339 $ 15,813
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Note 4 - Inventories:
April 30, December 31,
1994 1993
(In thousands)
Raw materials $ 31,238 $ 26,169
Work in process 3,738 3,702
Finished products 105,453 103,602
Supplies 5,938 5,644
$146,367 $139,117
Note 5 - Investment in joint ventures:
Summarized results of operations of joint ventures is presented
below.
Three months ended
April 30,
1994 1993 1994 1993
(In thousands)
Net sales $28,547 $30,532 $60,710 $61,147
Operating income 2,415 2,343 4,285 6,349
Net income 2,305 1,510 4,530 5,397
The Company's
equity in earnings 770 445 1,463 1,741
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Note 6 - Long-term debt:
April 30, December 31,
1994 1993
(In thousands)
Senior Notes $149,094 $149,060
Bank Credit Facility - 26,000
Canadian Credit Facility - 6,795
Revolving credit facilities - 7,404
Other 3,268 6,488
152,362 195,747
Less current maturities 706 12,679
$151,656 $183,068
In April 1993, the Company completed a public offering for
the sale of $150 million principal amount of 8% Senior Notes Due
2003 (the "Senior Notes"). The net proceeds of the offering were
approximately $146 million and were used to repay a portion of the
outstanding borrowings under its $250 million credit facility (the
"Bank Credit Facility"). Interest is payable semiannually in
April and October with principal due April 2003.
The Senior Notes contain certain covenants that restrict
certain types of transactions between Baroid and Dresser and
between Baroid and other parties. On February 17, 1994, Baroid
gave notice to the holders of the Notes of the holder's right to
require the Company to purchase all or any portion of the holder's
Notes for a cash purchase price equal to 101% of the principal
amount plus accrued and unpaid interest. No holder exercised such
option. Dresser currently intends to propose, to the holders of
the Notes, certain amendments to the Indenture whereby Dresser
will fully and unconditionally guarantee payment of principal and
interest on the Notes in return for modifications to make the
covenants similar to those applicable to Dresser's 6.25% Notes.
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In May 1993, the Company entered into interest rate swap
agreements which effectively exchanged the fixed rate Senior Notes
into variable interest rates on a total notional principal amount
of $150 million over the three-year term of the agreements. Under
the terms of these agreements, the Company will receive a fixed
annual rate of 4.9%, and pay six month LIBOR adjusted semi-
annually. The differential paid or received on the interest rate
swap agreements is recognized as an adjustment to interest
expense.
Advances from Dresser during the periods from January 21 to
April 30, 1994 were used to reduce long-term debt. The Bank
Credit Facility was terminated by the Company in January 1994.
Note 7 - Commitments and Contingencies:
For descriptions of certain legal proceedings and other
contingencies related to the Company, reference is made to (i)
Part II, Item 1 -- "Legal Proceedings" of this report and (ii)
Note 17 to the Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December
31, 1993.
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Item 2. Management's Discussion and Analysis of Financial Conditi
on and Results of Operations.
Pursuant to meeting the conditions set forth in General
Instructions H(1)(a) and (b) of Form 10-Q, this Item has been
omitted as permitted by General Instructions H(2)(a) of Form 10-Q.
This omission is permitted provided that management provides
a narrative analysis of the results of operations explaining the
reasons for material changes between the current year-to-date
period and the corresponding period of the preceding year.
Drilling Fluids
North American sales increased significantly in 1994,
primarily due to much higher drilling activity in the Gulf of
Mexico. Higher drilling activity also contributed to pricing
improvements.
International operations decreased in 1994 due primarily to a
weakening of the markets in western Africa and certain non-
recurring sales made in the Middle East in 1993. European
earnings were slightly improved in 1994 as the result of more
widespread use of Petrofree.
The 1994 results also include the bentonite mining business
acquired in 1993. See Note 2 to the Consolidated Financial
Statements.
Drilling Services and Products
Sperry-Sun also benefited from increased drilling activity,
particularly in the Gulf of Mexico and Canada, which also resulted
in improved prices.
DBS revenues were down slightly in 1994 compared to 1993, but
costs were slightly higher due to issues associated with the
divestiture of certain assets pursuant to a U.S. Department of
Justice decree. The combination of these two factors resulted in
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a significant decrease in DBS earnings comparing 1994 to 1993.
Offshore Services
Revenues increased substantially as the result of additional
services provided in Australia in 1994. Earnings were negatively
impacted in 1994 by higher than anticipated job costs and increased
engineering and operational staff expenses both in the United
States and North Sea.
Other
Although the Company's operating results in the first half
were quite strong relative to prior-year performance, current
international exploration and drilling activity is slow due to
the significant oil price volatility in recent months, and the
uncertain oil price outlook. This could affect the performance of
the business segments in upcoming quarters.
Corporate expenses are reduced in 1994 due to a sales tax
refund which was received during the period.
Interest expense is higher in 1994 compared to 1993 primarily
due to the incremental effects of the Senior Notes, which were
sold in April 1993. See Note 6 to the Consolidated Financial
Statements.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Note 17 to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 for a description of certain
legal proceedings.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
None.
(b) Reports on Form 8-K:
A report dated March 30, 1994 was filed for Item 8.
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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 thereunto duly authorized.
BAROID CORPORATION
(Registrant)
Date: June 13, 1994 By/s/ George H. Juetten
George H. Juetten
Vice President - Controller
(Principal Accounting Officer)
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