<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------------------------
For the Quarter ended: Commission file No.:
March 31, 2000 1-4601
- -------------------- --------------------
SCHLUMBERGER N.V.
(SCHLUMBERGER LIMITED)
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-0684746
-------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
277 PARK AVENUE
NEW YORK, NEW YORK, U.S.A. 10172
42 RUE SAINT-DOMINIQUE
PARIS, FRANCE 75007
PARKSTRAAT 83
THE HAGUE,
THE NETHERLANDS 2514 JG
-------------------- -------------
(Addresses of principal executive (Zip Codes)
offices)
Registrant's telephone number: (212) 350-9400
Indicate by check mark whether 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 for
the past 90 days.
YES X NO
- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 2000
----- -----------------------------
COMMON STOCK, $0.01 PAR VALUE 569,059,240
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1 :Financial Statements
- ----------------------------
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
(Unaudited)
(Stated in thousands except per share amounts)
Three Months Ended March 31,
----------------------------------
2000 1999 (3)
REVENUE:
Operating $ 2,137,442 $ 2,117,304
Interest & other income 76,110 164,111
------------ ------------
2,213,552 2,281,415
------------ ------------
Expenses:
Cost of goods sold and services 1,633,623 1,775,577
Research & engineering 131,042 131,843
Marketing 103,009 103,283
General 104,234 99,190
Interest 63,096 44,954
------------ ------------
2,035,004 2,154,847
------------ ------------
Income from continuing operations
before taxes 178,548 126,568
Taxes on income 42,390 57,525
------------ ------------
Income from continuing operations (1) 136,158 69,043
Income from discontinued operations,
net of tax (2) - 20,124
------------ ------------
Net Income $ 136,158 $ 89,167
============ ============
Basic Earnings Per Share
Continuing Operations $ 0.24 $ 0.12
Discontinued Operations - 0.04
------------ ------------
Net Income $ 0.24 $ 0.16
============ ============
Diluted Earnings Per Share
Continuing Operations (1) $ 0.24 $ 0.12
Discontinued Operations (2) - 0.04
------------ ------------
Net Income $ 0.24 $ 0.16
============ ============
Average Shares Outstanding 566,886 546,377
============ ============
Average Shares Outstanding
assuming dilution 576,541 559,914
============ ============
Depreciation and amortization
included in expenses $ 254,290 $ 252,008
============ ============
Dividends declared per share $ 0.1875 $ 0.1875
============ ============
-2-
<PAGE>
1) The three month 1999 results from Continuing Operations include a pretax
charge of $147 million partially offset by a pretax gain of $103 million
(net -$58 million after tax, $0.10 per share - diluted), consisting of the
following:
- - A charge of $118 million ($118 million after tax) related to the downsizing
of its global Oilfield Services activities, including $108 million of
severance cost and $10 million for asset impairments.
- - A charge of $29 million ($20 million after tax) related to RMS and Test &
Transactions, consisting principally of $16 million of severance cost at
several RMS facilities resulting from a downturn in business and $5 million
of asset write-downs.
- - A credit of $103 million ($80 million after tax) from the gain on the sale of
financial instruments received in connection with the 1998 sale of RPS.
The pretax gain on the sale of financial instruments is included in Interest &
other income.
The pretax charge of $147 million is classified in Cost of goods sold and
services.
2) Discontinued Operations in 1999 include the operating results of the spun-
off Sedco Forex business and an after-tax charge of $33 million ($0.06 per
share- diluted) for severance costs ($13 million) and legal claims.
3) Restated for comparative purposes.
See Notes to Consolidated Financial Statements
-3-
<PAGE>
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED BALANCE SHEET
--------------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Mar. 31, Dec. 31,
2000 1999
ASSETS --------------- ------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and short-term investments $ 4,299,436 $ 4,389,837
Receivables less allowance for doubtful accounts
(2000 - $88,542; 1999 - $89,030) 2,542,726 2,429,842
Inventories 1,306,558 1,268,500
Deferred taxes on income 289,636 259,257
Other current assets 273,538 258,532
--------------- ------------------
8,711,894 8,605,968
LONG-TERM INVESTMENTS, HELD TO MATURITY 733,491 726,496
INVESTMENTS IN AFFILIATED COMPANIES 549,833 535,434
FIXED ASSETS:
Property, plant and equipment 9,683,266 9,639,274
Less accumulated depreciation (6,187,818) (6,078,534)
--------------- ------------------
3,495,448 3,560,740
EXCESS OF INVESTMENT OVER NET ASSETS OF
COMPANIES PURCHASED less amortization 1,352,945 1,333,681
DEFERRED TAXES ON INCOME 193,818 209,597
OTHER ASSETS 135,052 109,276
--------------- ------------------
$ 15,172,481 $ 15,081,192
=============== ==================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,216,185 $ 2,282,884
Estimated liability for taxes on income 406,107 383,159
Bank loans 437,238 444,221
Dividend payable 106,796 106,653
Long-term debt due within one year 164,260 257,571
--------------- ------------------
3,330,586 3,474,488
LONG-TERM DEBT 3,281,077 3,183,174
POSTRETIREMENT BENEFITS 458,760 451,466
OTHER LIABILITIES 262,222 251,036
--------------- ------------------
7,332,645 7,360,164
--------------- ------------------
STOCKHOLDERS' EQUITY:
Common stock 1,850,160 1,820,186
Income retained for use in the business 7,946,514 7,916,612
Treasury stock at cost (1,824,636) (1,878,612)
Translation adjustment (132,202) (137,158)
--------------- ------------------
7,839,836 7,721,028
--------------- ------------------
$ 15,172,481 $ 15,081,192
=============== ==================
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended
March 31,
Cash flows from operating activities: 2000 1999
--------- --------
<S> <C> <C>
Net income from continuing operations $ 136,158 $ 69,043
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 254,290 252,008
Earnings of companies carried at equity,
less dividends received (Dividends:
2000 - $0; 1999 - $455) (3,601) (2,476)
Provision for losses on accounts receivable 10,768 10,976
Change in operating assets and liabilities:
(Increase) decrease in receivables (145,558) 94,468
(Increase) in inventories (49,811) (29,533)
(Increase) decrease in deferred taxes on income (30,379) 4,529
(Decrease) in accounts payable and accrued
liabilities (42,949) (166,399)
Increase (decrease) in estimated liability
for taxes on income 24,584 (9,204)
Charge - 57,568
Other - net 496 31,097
------- -------
Net cash provided by operating activities 153,998 312,077
------- -------
Cash flows from investing activities:
Purchase of fixed assets (210,612) (225,109)
Sales/retirements of fixed assets 28,794 (12,702)
Decrease in investments 94,393 72,596
Sale of financial instruments - 203,572
Business acquired (27,728) -
(Increase) decrease in other assets (31,414) 2,831
Discontinued operations - (78,176)
------- -------
Net cash used in investing activities (146,567) (36,988)
------- -------
Cash flows from financing activities:
Dividends paid (106,112) (102,396)
Proceeds from exercise of stock options 83,950 21,185
Proceeds from issuance of long-term debt 385,461 556,983
Payments of principal on long-term debt (353,374) (600,077)
Net (decrease) in short-term debt (4,354) (123,355)
------- -------
Net cash provided by (used in) financing activities 5,571 (247,660)
------- -------
Net increase in cash 13,002 27,429
Cash, beginning of period 132,589 105,321
--------- ---------
Cash, end of period $ 145,591 $ 132,750
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-5-
<PAGE>
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
STOCKHOLDERS' EQUITY
--------------------
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Common Stock
---------------------------- Retained Translation Comprehensive
Issued In Treasury Income Adjustment Income
------------ --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $1,820,186 $ (1,878,612) $7,916,612 $ (137,158) $ -
Net Income 136,158 136,158
Translation adjustment 4,956 4,956
Dividends declared (106,256)
Shares sold to optionees 29,974 53,976
------------ --------------- ------------ ------------- --------------
Balance, March 31, 2000 $1,850,160 $ (1,824,636) $7,946,514 $ (132,202) $ 141,114
============ =============== ============ ============= ==============
</TABLE>
See Notes to Consolidated Financial Statements
-6-
<PAGE>
SCHLUMBERGER LIMITED
--------------------
(Schlumberger N.V., Incorporated in the Netherlands Antilles)
and Subsidiary Companies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations have been made in the
accompanying interim financial statements. The Company's significant accounting
policies are summarized in its 1999 Annual Report. These policies have been
consistently applied during the interim period presented in this report. The
results of operations for the three month period ended March 31, 2000 are not
necessarily indicative of the results of operations that may be expected for the
entire year.
EARNINGS PER SHARE
- ------------------
The following is a reconciliation from basic earnings per share to diluted
earnings per share for the first quarter of 2000:
(Stated in thousands except per share amounts)
Average
Net Shares Earnings
First Quarter Income Outstanding per Share
- ------------- ---------- ----------- ---------
Basic $136,158 566,886 $0.24
Effect of dilution:
Options 9,655 -
---------- --------- ----------
$136,158 576,541 $0.24
========== ========= ==========
1999 FOURTH QUARTER CHARGE
- --------------------------
In December 1999, Schlumberger recorded a pretax charge of $77 million related
to the asset impairments ($56 million) and severance costs ($13 million - 300
people) for reductions in the marine seismic fleet and restructuring of its land
drilling activity.
At March 31, 2000, $8 million of the severance costs (200 people) and
substantially all charges related to the asset impairments had been incurred.
-7-
<PAGE>
DISCONTINUED OPERATIONS
- -----------------------
Discontinued operations, in 1999, reflect the net operating results after taxes
of Schlumberger's offshore contract drilling business, Sedco Forex, which was
spun-off in December 1999.
Summarized financial information for the discontinued operations for the three
months ended March 31, 1999 is as follows:
Operating revenue $ 189 million
Income before taxes $ 16 million
Income after taxes $ 20 million
CONTINGENCIES
- -------------
The Consolidated Balance Sheet includes accruals for the estimated future costs
associated with certain environmental remediation activities related to the past
use or disposal of hazardous materials. Substantially all such costs relate to
divested operations and to facilities or locations that are no longer in
operation. Due to a number of uncertainties, including uncertainty of timing,
the scope of remediation, future technology, regulatory changes and other
factors, it is possible that the ultimate remediation costs may exceed the
amounts estimated. However, in the opinion of management, such additional costs
are not expected to be material relative to consolidated liquidity, financial
position or future results of operations.
In addition, Schlumberger and its subsidiaries are party to various other legal
proceedings. Although the ultimate disposition of these proceedings is not
presently determinable, in the opinion of Schlumberger, any liability that might
ensue would not be material in relation to the consolidated liquidity, financial
position or future results of operations.
INVESTMENTS IN AFFILIATED COMPANIES
- -----------------------------------
Investments in affiliated companies include Schlumberger's 40% investment of
$417 million in the MI Drilling Fluids joint venture.
-8-
<PAGE>
SEGMENT INFORMATION
- -------------------
<TABLE>
<CAPTION>
(Stated in millions)
North Latin Europe Other Elims/ Total Elims/
First Quarter 2000 America America CIS/W. Afr. Eastern Other OFS RMS T&T Other Consolidated
- ------------------ -------- ------- ----------- ------- ------- ------ ---- ----- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $511 $249 $338 $380 $50 $1,528 $324 $307 $(22) $2,137
=======================================================================================================
Segment Income $38 $4 $13 $54 $7 $116 $7 $2 $3 $128
Income Tax Expense 24 5 11 10 6 56 4 (2) (16) 42
-------------------------------------------------------------------------------------------------------
Pretax Segment Income $62 $9 $24 $64 $13 $172 $11 $0 $(13) $170
---------------------------------------------------------------------------------------
Interest Income 71
Interest Expense $(1) (62)
--------------
Pretax Income $179
-------------------------------------------------------------------------------------------------------
North Latin Europe Other Elims/ Total Elims/
First Quarter 1999 America America CIS/W. Afr. Eastern Other OFS RMS T&T Other Consolidated
- ------------------ -------- ------- ----------- ------- ------- ------ ---- ----- ------- --------------
Revenue $388 $214 $432 $430 $39 $1,503 $345 $270 $ (1) $2,117
=======================================================================================================
Segment Income $11 $3 $27 $70 $0 $111 $1 $6 $(4) $114
Income Tax Expense (1) 6 3 14 18 3 44 5 2 (8) 43
-------------------------------------------------------------------------------------------------------
Pretax Segment Income $17 $6 $41 $88 $3 $155 $6 $8 $(12) $157
---------------------------------------------------------------------------------------
Interest Income 55
Interest Expense $(3) (42)
Sale of Financial Inst. 103
Charge & Other (146)
--------------
Pretax Income $127
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Income tax expense excludes a net charge of $14 million related to the
charge.
Nonoperating expenses, such as certain intersegment charges and interest expense
(except as shown above), are not included in segment operating income.
-9-
<PAGE>
BUSINESS REVIEW
- ---------------
<TABLE>
<CAPTION>
(Stated in millions)
Resource
Oilfield Management Test &
Services Services Transactions (2)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 2000 1999 % chg 2000 1999 % chg 2000 1999 % chg
-------- -------- ------ ------ ----- ------ ----- ------ ---------
Operating Revenue $1,528 $1,503 2% $324 $345 (6)% $307 $270 14%
Pretax Operating
Income (1) $172 $ 155 11% $11 $6 101% $ - $ 8 -
</TABLE>
(1) Pretax operating income represents income before taxes, excluding
interest expense, interest income and the first quarter 1999 net charge.
(2) Test & Transactions results include Schlumberger Omnes, formerly a joint
venture, which was 100% acquired during the third quarter of 1999.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations.
- --------------
First Quarter 2000 Compared to First Quarter 1999
-------------------------------------------------
First quarter operating revenue of $2.14 billion was 1% higher versus last year.
Income from continuing operations was $136 million ($0.24 per
share-diluted) compared with $127 million ($0.23 per share -
diluted) last year, before the 1999 first quarter net charge.
Earnings per share, excluding goodwill amortization was $0.27 per
share (diluted) compared with $0.26 per share (diluted and before the
1999 first quarter net charge) for the same period last year.
Oilfield Services revenue increased 2% versus the first quarter of
1999 as the worldwide M-I rig count grew 25%. Compared with the
fourth quarter of 1999, revenue increased 1%.
Resource Management Services revenue was 6% lower than in the first
quarter last year. Excluding the adverse effect of currency exchange
rates, revenue increased 2%.
Test & Transactions revenue increased 14% versus the same period last year.
OILFIELD SERVICES
Oilfield Services operating revenue in the first quarter increased 1%
sequentially and 2% versus the same period last year, mainly due to
the improved activity levels in North America. The worldwide M-I rig
count increased 5% sequentially and 25% year over year.
Pretax operating income in the first quarter increased 11% versus the
same period last year, despite a substantial loss from Reservoir
Evaluation Seismic activity as compared with last year. Pretax
operating income grew 4% versus the prior quarter. Compared with the
same period last year, revenue increased in North and South America
and decreased in all other major geographical regions. Oilfield
-10-
<PAGE>
Services geographical results include Camco activity.
In January, Schlumberger launched a new energy business-to-business
e-commerce portal, www.IndigoPool.com, offering the first
Internet-based global service for acquisitions and divestitures of
oil and gas properties. Through IndigoPool.com, oil and gas
companies, regulatory agencies and brokers are able to market their
properties on-line to a worldwide audience, with secure access to
commercial and proprietary data sets, scaleable property marketing
services and virtual data interpretation centers. In addition,
customers will have access to evaluation tools, consulting services
and industry-related news.
The Merak division of GeoQuest and Wood Mackenzie, a division of
Deutsche Bank AG, formed a strategic alliance to jointly develop
economic analysis and data mapping software for the oil and gas
industry, providing customers with a common set of advanced tools and
expert information for a range of activities from scoping and
planning of exploration opportunities to the planning of commercial
projects and financial appraisals.
In late March, Schlumberger introduced the land component of the
revolutionary Q* seismic data acquisition and processing system at a
special event in Bahrain. The new Q-Land* digital land seismic system
offers significant improvements in the imaging of reservoirs to show
details that are not visible using conventional technology.
North America
- -------------
In North America, first quarter revenue of $511 million increased 5%
sequentially and 32% compared with the first quarter of 1999 as the
M-I rig count increased 49% year over year. Pretax operating income
increased 14% sequentially and 275% year over year. Compared with
last year, revenue increased across all oilfield services with
Reservoir Evaluation Wireline and pressure pumping services posting
the highest levels of growth. The continued shift toward natural gas
drilling led to increased activity in all areas except Alaska, with
both the lower 48 states and Canada up substantially versus the same
quarter last year. Positive pricing trends continued throughout the
region due to the introduction of new value-added technology and to
increasing demand. First quarter revenue for well productivity-related
services showed improvement over the prior as a result of pricing
changes and the launch of the new PowerSTIM* well optimization service
in the US.
Latin America
- -------------
In Latin America, first quarter revenue of $249 million decreased 3%
sequentially but increased 17% year over year as the M-I rig count
increased 15% versus the same period last year. Pretax operating
income showed strong improvement sequentially and increased 30% year
over year. Revenue in all geographic regions increased by double
digits versus last year, with Venezuela posting the largest increase.
Marine seismic revenue showed a second straight quarter of
improvement, with significant sales of Brazilian multiclient surveys.
The Schlumberger Electrical Hydraulic Deepwater Control System (E/H
DWCS* system) was used in conjunction with a SenTREE*-3 subsea test
tree system to perform a 114-hour "full package" exploration test
campaign in 5896 feet (1797 meters) of water offshore Brazil. This
second successful job for the E/H DWCS system highlighted the
-11-
<PAGE>
advances in deepwater subsea technology and equipment reliability
that continue to bring benefits to the industry and permit testing
operations to be safely performed in water depths up to 10,000 feet
[3048 meters].
The Burgos Alliance Project, focusing on the optimization of drilling
and completion techniques for gas in northern Mexico, continued to
reduce the cycle time required to drill and complete wells. The
techniques and technologies developed in this project can be
successfully employed in the expanding gas drilling activity in other
geographic markets as well.
Europe/CIS/West Africa
- ----------------------
Quarterly revenue of $338 million increased 3% sequentially but
declined 22% year over year. The M-I rig count was up 10% versus the
fourth quarter of 1999, and down 1% over the same period last year,
excluding the CIS. Pretax operating income decreased 12% sequentially
and 42% year over year. Geographically, the CIS was the only area
reporting a revenue increase year over year, driven primarily by well
productivity related services. All other areas were down versus last
year, with Reservoir Evaluation Seismic services posting the largest
decline.
The successful use of 3D multicomponent seismic data to significantly
reduce well construction costs was demonstrated in a value sharing
drilling project in the North Sea. The superior quality of the 3D/4C
seismic data resulted in a much clearer image of the subsurface,
enabling a joint team to accurately identify and plan around
potential drilling hazards between the surface and the target
reservoir. The well was subsequently drilled and completed
successfully, without the costly adverse drilling events that had
plagued previous wells in the field.
Other Eastern Hemisphere
- ------------------------
Quarterly revenue of $380 million was flat sequentially and down 12%
year over year, while the M-I rig count declined 8% year over year.
Pretax operating income declined 16% sequentially and 27% year over
year. Compared with the same period last year, well intervention
services and data and consulting services showed appreciable growth.
Activity related to maximizing well productivity continued to
increase throughout the region, highlighted by the successful
introduction of CoilFRAC* stimulation technology in Indonesia -- the
first application outside North America. CoilFRAC technology provides
cost-effective service using coiled tubing to access new or bypassed
productive zones for hydraulic fracturing.
RESOURCE MANAGEMENT SERVICES
Resource Management Services (RMS) revenue and orders decreased 6%
versus the first quarter of 1999. Excluding the adverse effect of
currency exchange rates, revenue and orders increased 2%. Pretax
operating income in the first quarter rose, mainly due to gains in
the UK, the US and South America.
In North America, revenue grew 3% compared with the first quarter of
1999, while orders rose 12%, spurred by the increased interest in the
Centron* static electricity meter with built-in communication and
networking capabilities. Increased shipments of the Protectus* large
-12-
<PAGE>
industrial meter and of radio-frequency (RF) remote-read R900* and
R300* meter interface units also helped the increase in revenue for
the quarter. In February, Schlumberger agreed to acquire the assets
of CellNet Data Systems, Inc., a market-leading provider of telemetry
services for the development and deployment of large-scale automatic
meter reading systems. The acquisition is being handled through a
Chapter 11 procedure and is subject to final approval by the
bankruptcy court. Schlumberger also acquired an exclusive utility
industry license to Metricom Inc.'s UtiliNet RF technology to enhance
the ability of RMS to provide a broader array of high-end data
collection and control systems solutions to its electric, water and
gas clients.
In Europe, revenue in the first quarter declined 14% versus the first
quarter of 1999, with orders down 20% over the same period. In
continental Europe, the devaluation of the Euro against the dollar
accounted for most of the revenue decline. While electricity business
revenue was generally weaker due to continued pressure on prices, the
gas business in the UK was up significantly.
In South America, revenue grew 16% versus last year led by a
significant increase in Brazil, where the January 1999 currency
devaluation adversely impacted activity in the first half of last
year. Orders in South America were up by 33%. In Asia, revenue rose
27% compared with the same period last year, while improved economic
conditions helped orders increase by 61%.
Revenue from the RMS integrated solutions business grew 10% during
the quarter compared with last year, with increased momentum seen
across all regions. The RMS integrated solutions activities include
packaged meter, data and revenue management services for energy
suppliers, network operators and consumers, in addition to
consulting, project design, implementation, management, maintenance,
operation and financial services.
TEST & TRANSACTIONS
Test & Transactions first quarter orders increased 51% compared with
the same quarter last year and 51% versus last quarter. The increase
in orders includes a major contribution from the Omnes contract to
manage the Schlumberger global network. Revenue, including Omnes,
increased 14% compared with the same quarter last year and fell 6%
compared with the prior quarter.
Smart Cards & Terminals orders increased 31% year over year and 25%
compared with the fourth quarter of 1999. Revenue increased 13%
versus the same quarter of last year but was off 8% versus a
seasonally strong prior quarter. For the third consecutive quarter,
sales and orders for smart cards were led by strong demand from the
Global System for Mobile (GSM) communications market in both Asia and
Europe. The recent introduction of the Simera card (open Java*
programmable SIM card) has resulted in market share gains in all
regions. European SIM (subscriber identity module) card sales for the
quarter doubled over last year. Asian SIM card activity showed
continued strong growth, with significant orders and revenue from
China. Payphone activity improved in both the Middle East and Asia.
Automated Test Equipment (ATE) orders for the first quarter,
including SABER* (Schlumberger Advanced Business Engineering
-13-
<PAGE>
Resources) and service activities, improved 24% versus the same
quarter last year and 61% compared with last quarter. The growth in
orders over last quarter is attributable to the strong demand from
Europe and Taiwan for SOC (system on a chip) test systems, initial
orders for Rambus** production test systems and entry into the
front-end wafer inspection market. Revenue for the first quarter
decreased 18% versus the same quarter last year and 12% compared with
the prior quarter. The revenue decline is primarily due to reduced
demand for high-end logic systems. SABER continued to report record
revenue and orders. SABER orders were strongest in North America due
to the regional density of fabless design companies engaging its
services.
Omnes orders in the first quarter were characterized by strong
activity in North America, South America and Asia and reflected
growing requirements for services related to local and wide area
network (LAN and WAN) activity and firewall security. Omnes revenue
for the quarter increased 12% versus last quarter.
INCOME STATEMENT
Interest and other income decreased by $88 million from the same period last
year as a $15 million increase in interest income, resulting from higher average
investment balances and investment returns, was offset by the first quarter 1999
gain of $103 million on the sale of financial instruments relating to the sale
of Retail Petroleum Systems. Gross margin increased from 16% to 24% as 1999
included $147 million of charges. Excluding these charges, gross margin in 1999
was 23%. Research and engineering and Marketing expenses remained flat over
last year. General expense, expressed as a percentage of operating revenue,
increased from 4.6% to 4.9%. Interest expense increased $18 million as an
increase in average borrowing rates offset the effect of slightly lower average
debt balances. Effective tax rate of 24% decreased two percentage points from
last year.
ACQUISITIONS
- ------------
In January 2000, Schlumberger acquired Telweb, Inc., an Internet access company
based in Quebec, Canada. The acquisition was accounted for using the purchase
method of accounting and costs in excess of net assets acquired were $28
million, which is being amortized on a straight-line basis over 10 years.
NEW ACCOUNTING STANDARDS
- ------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
that Schlumberger recognize all derivative instruments as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The standard is effective in the year 2001 for Schlumberger.
Schlumberger uses derivative instruments such as interest rate swaps, currency
swaps, forward currency contracts and foreign currency options. Forward currency
contracts provide a hedge against currency fluctuations on assets/liabilities
denominated in other than a functional currency. Options are usually entered
into to hedge against currency variations on firm commitments generally
involving the construction of long-lived assets. Schlumberger does not
anticipate that the implementation of the new standard in 2001 will have a
material effect on the consolidated financial position and results of
operations.
-14-
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------
Schlumberger cautions that, except for historical information, statements in
this Form 10-Q report and elsewhere may constitute forward-looking statements.
These include statements as to expectations, beliefs and future financial
performance, such as statements regarding business prospects in the key
industries in which Schlumberger operates and growth opportunities for
Schlumberger in those industries. These statements involve a number of risks,
uncertainties, assumptions and other factors that could cause actual results to
differ materially from those in the forward-looking statements. Such factors
include: the extent and duration of the recovery in oil prices; continuing
customer commitment to certain key oilfield projects; changes in E&P spending by
major oil companies; the extent and timing of utilities' investment in
integrated solutions to utility management; noncancellation of key long-term
services and solutions contracts; growth in demand for smart cards in e-commerce
and Internet-enabled solutions and for RDRAM memory devices and high-end logic
devices produced by Schlumberger test equipment customers; general economic and
business conditions in key regions of the world; and changes in business
strategy or development plans relating to targeted Schlumberger growth
opportunities.
Item 3: Quantitative and Qualitative Disclosure about Market Risk.
- ------------------------------------------------------------------
Schlumberger does not believe it has a material exposure to financial market
risk. Schlumberger manages the exposure to interest rate by using a mix of debt
maturities and variable- and fixed-rate debt together with interest rate swaps,
where appropriate, to fix or lower borrowing costs. With regard to foreign
currency fluctuations, Schlumberger enters into various contracts, which change
in value as foreign exchange rates change, to protect the value of external and
intercompany transactions in foreign currencies. Schlumberger does not enter
into foreign currency or interest rate transactions for speculative purposes.
* Mark of Schlumberger
** Rambus is a registered trademark of Rambus, Inc.
PART II. OTHER INFORMATION
---------------------------
Item 4: Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
-15-
<PAGE>
a)The Annual General Meeting of Stockholders of the Registrant ("the
Meeting") was held on April 12, 2000.
b)At the Meeting, the number of Directors was fixed at 12 and the following-
named 12 individuals were elected to comprise the entire Board of Directors of
the Registrant, each to hold office until the next Annual General Meeting of
Stockholders and until a director's successor is elected and qualified or
until a director's death, resignation or removal. All of the nominees were
directors who were previously elected by the stockholders.
Don E. Ackerman
D. Euan Baird
John Deutch
Victor E. Grijalva
Denys Henderson
Andre Levy-Lang
William T. McCormick, Jr.
Didier Primat
Nicolas Seydoux
Linda Gillespie Stuntz
Sven Ullring
Yoshihiko Wakumoto
c)The Meeting also voted (i) to approve the Company's Consolidated Balance Sheet
as at December 31, 1999, its Consolidated Statement of Income for the year
ended December 31, 1999, and the declaration of dividends reflected in the
Company's 1999 Annual Report to Stockholders; and (ii) to approve the
appointment of PricewaterhouseCoopers LLP as independent public accountants to
audit the accounts of the Company for the year 2000.
The votes cast for the election of directors, for the approval of financial
statements and dividends and for the approval of the appointment of
PricewaterhouseCoopers LLP were as follows:
<TABLE>
<CAPTION>
For Withheld
----------- ----------
<S> <C> <C>
Don E. Ackerman 451,697,104 1,942,633
D. Euan Baird 451,829,074 1,810,663
John Deutch 451,624,079 2,015,658
Victor E. Grijalva 451,828,323 1,811,414
Denys Henderson 435,716,427 17,923,310
Andre Levy-Lang 451,764,138 1,875,599
William T. McCormick, Jr. 451,845,903 1,793,834
Didier Primat 451,834,352 1,805,385
Nicolas Seydoux 451,775,662 1,864,075
Linda Gillespie Stuntz 451,850,931 1,788,806
Sven Ullring 451,821,755 1,817,982
Yoshihiko Wakumoto 451,749,822 1,889,915
</TABLE>
-16-
<PAGE>
For Against Abstain
--- ------- ---------
Financials: 438,061,676 486,751 15,091,310
- ----------
PricewaterhouseCoopers: 451,219,969 563,264 1,856,504
- ----------------------
Item 6: Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K: None
-17-
<PAGE>
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 thereunto duly authorized and in his capacity as principal
financial officer.
Schlumberger Limited
(Registrant)
Date: May 10, 2000 /s/ Jack Liu
------------ ---------------
Jack Liu
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
-18-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,299,436
<SECURITIES> 0
<RECEIVABLES> 2,542,726
<ALLOWANCES> (88,542)
<INVENTORY> 1,306,558
<CURRENT-ASSETS> 8,711,894
<PP&E> 9,683,266
<DEPRECIATION> (6,187,818)
<TOTAL-ASSETS> 15,172,481
<CURRENT-LIABILITIES> 3,330,586
<BONDS> 0
0
0
<COMMON> 1,850,160
<OTHER-SE> 5,989,676
<TOTAL-LIABILITY-AND-EQUITY> 15,172,481
<SALES> 997,984
<TOTAL-REVENUES> 2,137,442
<CGS> 596,762
<TOTAL-COSTS> 1,633,623
<OTHER-EXPENSES> 401,381
<LOSS-PROVISION> 10,768
<INTEREST-EXPENSE> 63,096
<INCOME-PRETAX> 178,548
<INCOME-TAX> 42,390
<INCOME-CONTINUING> 136,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,158
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
</TABLE>
