<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
SCHLUMBERGER LIMITED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
^^ ^^
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO OF SCHLUMBERGER]
Schlumberger Limited
277 Park Avenue
New York, New York 10172-0266
------------
42, rue Saint-Dominique
75007 Paris, France
------------
Parkstraat 83,
2514 JG The Hague
The Netherlands
NOTICE OF ANNUAL GENERAL MEETING OF STOCKHOLDERS
To Be Held April 12, 2000
March 8, 2000
The Annual General Meeting of Stockholders of Schlumberger Limited
(Schlumberger N.V.) will be held at the Avila Beach Hotel, Penstraat 130,
Willemstad, Curacao, Netherlands Antilles, on Wednesday, April 12, 2000 at
10:30 in the morning (Curacao time), for the following purposes:
1. To elect 12 directors.
2. To report on the course of business during the year ended December 31,
1999, to adopt and 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 by the Board of
Directors as reflected in the Company's 1999 Annual Report to Stockholders.
3. To approve the appointment of PricewaterhouseCoopers LLP as independent
public accountants to audit the accounts of the Company for 2000.
Action will also be taken upon such other matters as may come properly before
the meeting.
The close of business on February 24, 2000 has been fixed as the record date
for the meeting. All holders of common stock of record at the close of
business on that date are entitled to vote at the meeting.
By order of the Board of
Directors,
JAMES L. GUNDERSON
Secretary
<PAGE>
PROXY STATEMENT
March 8, 2000
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Schlumberger Limited (Schlumberger N.V.) ("the Company")
of proxies to be voted at the 2000 Annual General Meeting of Stockholders. The
approximate mailing date of this proxy statement is March 8, 2000. Business at
the meeting is conducted in accordance with the procedures determined by the
Chairman of the meeting and is generally limited to matters properly brought
before the meeting by or at the direction of the Board of Directors or by a
stockholder in accordance with specified requirements requiring advance notice
and disclosure of relevant information.
The Schlumberger 1999 Annual Report to Stockholders has been mailed under
separate cover. 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 supplemental financial information with respect to dividends
included in the Annual Report are incorporated by reference as part of this
proxy soliciting material.
The Company will bear the cost of furnishing proxy material to all
stockholders and of soliciting proxies by mail and telephone. D. F. King &
Co., Inc. has been retained by the Company to assist in the solicitation of
proxies for a fee estimated at $10,000 plus reasonable expenses. The Company
will reimburse brokerage firms, fiduciaries and custodians for their
reasonable expenses in forwarding the solicitation material to the beneficial
owners.
Voting Procedure
Each stockholder of record at the close of business on February 24, 2000 is
entitled to one vote for each share registered in the stockholder's name. On
that date there were outstanding shares of common stock of
Schlumberger, excluding shares held in treasury.
Fifty percent of the outstanding shares, exclusive of shares held in
treasury, must be present in person or by proxy to constitute a quorum for the
holding of the meeting. Abstentions and broker non-votes are counted for
determining the presence of a quorum but are not counted as votes cast in the
tabulation of votes on any matter brought before the meeting.
Shares cannot be voted at the meeting unless the owner of record is present
in person or is represented by proxy. Schlumberger is incorporated in the
Netherlands Antilles and, as required by the Schlumberger Deed of
Incorporation, meetings of stockholders must be held in Curacao. The enclosed
proxy card is a means by which a stockholder may authorize the voting of
shares at the meeting. It may be revoked at any time by written notice to the
Secretary of the Company before it is voted. If it is not revoked, the shares
represented will be voted in accordance with the proxy.
1
<PAGE>
1. Election of Directors
It is intended to fix the number of directors at 12 and to elect a Board of
Directors of 12 members, 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. Each of the
nominees is now a director and was previously elected by the stockholders.
Unless instructed otherwise, the proxies will be voted for the election of the
12 nominees named below. If any nominee is unable or unwilling to serve,
proxies may be voted for another person designated by the Board of Directors.
The Board knows of no reason why any nominee will be unable or unwilling to
serve if elected.
A majority of the votes cast is required to elect each of the nominees for
director.
The Board of Directors Recommends a Vote FOR All Nominees.
The Board of Directors' nominees for election to the Board, together with
information furnished by them with respect to their business experience, and
other information regarding them, are set forth below:
<TABLE>
<CAPTION>
Nominee, Age and Director
Five-Year Business Experience Since
----------------------------- --------
<S> <C>
DON E. ACKERMAN, 66; Private Investor since 1991.(1)................. 1982
D. EUAN BAIRD, 62; Chairman and Chief Executive Officer since October
1986.(2)............................................................ 1986
JOHN DEUTCH, 61; Institute Professor, Massachusetts Institute of
Technology, Cambridge, Massachusetts since January 1997; Director of
U.S. Central Intelligence May 1995 to December 1996; Deputy
Secretary of Defense April 1994 to May 1995; Undersecretary of
Defense (Acquisition and Technology) March 1993 to 1994; Director of
Schlumberger Limited, May 1987 to 1993.(3).......................... 1997
VICTOR E. GRIJALVA, 61; Vice Chairman since April 1998; Executive
Vice President, Oilfield Services from 1994 to April 1998; Executive
Vice President for Wireline, Testing & Anadrill from 1992 to 1994.
(4)................................................................. 1998
DENYS HENDERSON, 67; Chairman, The Rank Group Plc., a diversified
leisure services concern, since March 1995; Chairman, Dalgety PLC,
January 1997 through December 31, 1998; Chairman, Zeneca Group PLC,
June 1993 to May 1995; Chairman, Imperial Chemical Industries PLC
("ICI"), June 1993 through April 1995; Chairman and Chief Executive
Officer, ICI, April 1987 to June 1993, all in the United Kingdom.... 1995
ANDRE LEVY-LANG, 62; Independent Investor since November, 1999;
Chairman of the Executive Board of Paribas, an international banking
group, May 1998 to August 1999; Chairman of the Board of Management
of Compagnie Financiere de Paribas from June 1990 until May 1998,
Paris. (5).......................................................... 1992
WILLIAM T. McCORMICK, JR., 55; Chairman and Chief Executive Officer,
CMS Energy Corp., a diversified energy company, Dearborn,
Michigan.(6)........................................................ 1990
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Nominee, Age and Director
Five-Year Business Experience Since
----------------------------- --------
<S> <C>
DIDIER PRIMAT, 55; President, Primwest Holding N.V., an investment
management company, Curacao, N.A. (7)................................ 1988
NICOLAS SEYDOUX, 60; Chairman and Chief Executive Officer, Gaumont, a
French film-making enterprise, Paris.(7)............................. 1982
LINDA GILLESPIE STUNTZ, 45; Partner, law firm of Stuntz, Davis &
Staffier P.C., since February 1995; Partner, law firm of Van Ness
Feldman, P.C., March 1993 to February 1995, both in Washington, D. C.
(8).................................................................. 1993
SVEN ULLRING, 64; President and Chief Executive Officer, Det Norske
Veritas, provider of safety, quality and reliability services to
maritime, offshore and other industries, Hovik, Norway............... 1990
YOSHIHIKO WAKUMOTO, 68; Adviser to Toshiba Corporation, a technology
company centered on electronics and energy, since July 1996; member
of Board of Toshiba from July 1988 to June 1996; Executive Vice
President of Toshiba, July 1992 through June 1996, with
responsibility for corporate planning, group companies and
information systems (1992 to 1995), and international affairs (1996),
all in Tokyo. (9).................................................... 1997
</TABLE>
- --------
(1) Mr. Ackerman is Chairman of the Board and a member of the Audit Committee
of Genicom Corporation, which is in the business of computer peripherals,
electronic components, and computer related services.
(2) Mr. Baird is a director of Paribas, Paris, France. He is a trustee of
Haven Capital Management Trust.
(3) Mr. Deutch is a director of Citigroup, a banking and insurance
organization; CMS Energy Corp., a diversified energy company; Cummins
Engine Company, Inc., a manufacturer of diesel engines and components;
ARIAD Pharmaceuticals which is engaged in the discovery of novel
pharmaceuticals; and Raytheon Corporation, an electronics manufacturer.
Mr. Deutch's adult son, Paul Deutch, is employed by a unit of
Schlumberger. The employment of Mr. Deutch's son was not influenced by
John Deutch's position as a director of the company.
(4) Mr. Grijalva is Chairman of the Board of Directors of Transocean Sedco
Forex Inc., an offshore drilling company.
(5) Mr. Levy-Lang is a director and member of the Compensation Committee of
AGF, a French insurance company. On January 4, 1996, Mr. Levy-Lang was
notified by a French judge that he was placed under official investigation
("mise en examen") as part of an ongoing inquiry regarding irregularities
uncovered in the 1991 financial statements of Ciments Francais, S. A.,
which was at that time a subsidiary of Compagnie Financiere de Paribas.
(6) Mr. McCormick is a director of Bank One, Inc., a regional bank holding
company, and Rockwell International Inc., a diversified producer of, among
others, electronic, industrial automation and avionics products.
(7) Mr. Primat and Mr. Seydoux are cousins.
3
<PAGE>
(8) Mrs. Stuntz is a director of American Electric Power Company, Inc., an
electric and power holding company. She is Chairman of its Finance
Committee and is a member of its Executive, Directors, Nuclear Oversight
and Public Policy Committees.
(9) Mr. Wakumoto is Vice President (part-time executive member of the Board)
of The Japan Foundation, a nonprofit institution funded by the Japanese
Government and incorporated under a special enactment.
Security Ownership of Certain Beneficial Owners and Management
The following table lists the shares of Schlumberger common stock
beneficially owned as of January 31, 2000 by all directors and nominees, by
each of the named executive officers, and by the directors and officers as a
group. Except as footnoted, each individual has sole voting and investment
power over the shares listed by that individual's name. As of January 31,
2000, no nominee for director owned more than 1% of the outstanding shares of
the Company's common stock, except Mr. Primat who owned 4.3%. All 24 directors
and executive officers as a group owned 5.3% of the outstanding shares of the
Company at January 31, 2000.
<TABLE>
<CAPTION>
Name Shares
- ---- ------
<S> <C>
Don E. Ackerman.................................................. 2,000
D. Euan Baird.................................................... 2,117,664(1)
John Deutch...................................................... 3,600(2)
Andrew Gould..................................................... 244,790(3)
Victor E. Grijalva............................................... 789,781(4)
Denys Henderson.................................................. 5,000
Andre Levy-Lang.................................................. 4,000
Jack Liu......................................................... 134,832(5)
William T. McCormick, Jr. ....................................... 10,000
Irwin Pfister.................................................... 243,881(6)
Didier Primat.................................................... 24,556,236(7)
Nicolas Seydoux.................................................. 251,524(8)
Linda Gillespie Stuntz........................................... 5,000(9)
Sven Ullring..................................................... 3,305
Yoshihiko Wakumoto............................................... 2,000
All directors and executive officers as a group (24 persons)..... 29,709,962(10)
</TABLE>
- --------
(1) Includes 699,955 shares held in a revocable grantor trust and 1,417,709
shares which may be acquired by Mr. Baird within 60 days through the
exercise of stock options.
(2) Includes 600 shares owned by Mr. Deutch's wife, as to which he disclaims
beneficial ownership.
(3) Includes 230,790 shares which may be acquired by Mr. Gould within 60 days
through the exercise of stock options.
4
<PAGE>
(4) Includes 600 shares owned by Mr. Grijalva's daughter, as to which he
disclaims beneficial ownership, and 670,389 shares which may be acquired
by Mr. Grijalva within 60 days through the exercise of stock options.
(5) Includes 128,583 shares which may be acquired by Mr. Liu within 60 days
through the exercise of stock options.
(6) Includes 242,878 shares which may be acquired by Mr. Pfister within 60
days through the exercise of stock options.
(7) Includes 560,000 shares as to which Mr. Primat shares investment power,
13,996,136 shares held by Mr. Primat as Executor of the Estate of
Francoise Primat as to which he has sole voting and investment power and
5,000,000 shares held for account of the minor children of Mr. Primat as
to which he has joint voting and investment power.
(8) Includes 15,364 shares owned by Mr. Seydoux's wife as to which he shares
voting and investment power.
(9) Includes 3,000 shares as to which Mrs. Stuntz shares voting power.
(10) Includes 3,772,534 shares which may be acquired by executive officers as
a group because they have the right to acquire such shares within 60 days
through the exercise of stock options.
Board and Committees
Schlumberger has an Audit, a Compensation, a Finance and a Nominating
Committee.
The Audit Committee assesses and monitors the corporate control environment
and recommends for appointment by the Board of Directors, subject to approval
by the stockholders, a firm of independent certified public accountants whose
duty is to examine the Schlumberger consolidated financial statements. The
Audit Committee confers with the independent accountants and periodically
reports to and advises the Board concerning the scope of the independent
accountants' examinations and similar matters relating to Schlumberger
accounting practices and internal accounting controls. The Audit Committee
also advises the Board concerning the fees of the independent accountants.
Mr. Ullring is Chairman of the Audit Committee, and Messrs. Ackerman and Levy-
Lang and Mrs. Stuntz are the other members.
The Compensation Committee reviews and approves the compensation of the
officers of the Company, advises on compensation and benefits matters and
administers the Company's stock option plans. Mr. Ackerman is Chairman of the
Compensation Committee. Messrs. Henderson, McCormick and Seydoux are the other
members.
The Finance Committee advises on various matters, including dividend and
financial policies, the borrowing of money, the purchase and sale of
securities and the investment and reinvestment of surplus funds. The Finance
Committee periodically reviews the administration of the Schlumberger employee
benefit plans and those of its subsidiaries. Messrs. Baird, Deutch, Grijalva,
Levy-Lang, Primat and Wakumoto are the members of the Finance Committee.
5
<PAGE>
The Nominating Committee recommends to the Board the number and names of
persons to be proposed by the Board for election as directors at the annual
general meetings of stockholders. It may also recommend to the Board persons
to be appointed by the Board or to be elected by the stockholders to fill any
vacancies which occur on the Board. Mr. McCormick is Chairman of the
Nominating Committee, and Messrs. Baird, Seydoux and Ullring are the other
members. The Nominating Committee will consider nominees recommended by
stockholders who may submit nominations to Chairman, Nominating Committee,
care of the Secretary, Schlumberger Limited, 277 Park Avenue, New York, New
York 10172-0266.
During 1999 the Board of Directors held five meetings. The Audit Committee
met twice; the Compensation Committee met four times; the Finance Committee
met twice, and the Nominating Committee met three times. All present directors
attended at least 75% of the aggregate of the meetings of the Board and of the
committees of the Board on which such directors served, except for Denys
Henderson who attended two-thirds of all such meetings.
Directors who are employees of Schlumberger do not receive compensation for
serving on the Board or on committees of the Board. Board members who are not
employees receive annual fees of $40,000 each and additional annual fees of
$10,000 as members of each of the committees on which they serve, except that
the Chairmen of the Audit, Compensation and Nominating Committees each receive
an annual fee of $20,000, rather than the $10,000 annual fee for committee
service.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows the compensation paid by the Company and its
subsidiaries to the Chief Executive Officer and to the next four most highly
compensated executive officers for the fiscal years ending December 31, 1999,
1998, and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Awards
------
Annual Compensation
------------------------------- Securities
Name and Underlying All Other
Principal Position Year Salary ($)(1) Bonus ($)(1) Options (#) (4) (5) Compensation ($) (6)
------------------ ---- ------------ ----------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
D. E. Baird ............ 1999 1,500,000 1,000,000 0 105,000
Chairman and 1998 1,500,000 600,000 0 270,000
Chief Executive Officer 1997 1,500,000 1,500,000 549,500 323,000
V.E. Grijalva........... 1999 800,000 420,000 0 52,000
Vice Chairman 1998 800,000 240,000 0 112,500
1997 600,000 450,000 219,800 129,000
A. Gould................ 1999 589,102(2) 310,915 54,950 36,691
Executive Vice 1998
President, 499,154 152,284 43,960 63,198
Oilfield Services
I. Pfister.............. 1999 500,000 290,000(3) 54,949 39,719
Executive Vice 1998
President, 500,000 150,000 0 72,000
Test & Transactions 1997 420,411 300,000 137,375 55,112
J. Liu.................. 1999 400,000 165,000 54,949 22,250
Executive Vice 1998
President, 265,000 45,000 54,949 24,900
Finance
</TABLE>
- --------
(1) Salary and bonus amounts include cash compensation earned and received and
any amounts deferred under the Schlumberger Restoration Savings Plan.
(2) Mr. Gould is paid in French francs.
(3) Includes an award of $150,000 in connection with the sale of the Retail
Petroleum Systems business.
(4) Shares were increased by a factor of 1.099 to reflect the spin-off of
Sedco Forex.
(5) The Company has granted no stock appreciation rights or restricted stock.
(6) The 1999 amounts disclosed in this column include:
(a) Company contributions to Schlumberger Profit Sharing Plans
(b) Company unfunded credits to the Schlumberger Supplementary Benefit Plan
(c) Company unfunded matching credits to the Schlumberger Restoration
Savings Plan
<TABLE>
<CAPTION>
(a)($) (b)($) (c)($)
------ ------ ------
<S> <C> <C> <C>
Mr. Baird............................................... 8,000 38,800 58,200
Mr. Grijalva............................................ 8,000 17,600 26,400
Mr. Gould............................................... 36,691 N/A N/A
Mr. Pfister............................................. 8,000 12,688 19,031
Mr. Liu................................................. 8,000 5,700 8,550
</TABLE>
The Company's matching credits under the Schlumberger Restoration Savings
Plan are vested one-third at three years of service, two-thirds at four
years, fully at five years or upon reaching the earliest of age 60, death,
or change of control. The amounts credited under the Schlumberger
Restoration Savings Plan will be paid upon termination or retirement, death,
disability, or change in control.
7
<PAGE>
Stock Option Grants Table
The following table sets forth certain information concerning options granted
during 1999 to the Chief Executive Officer and the next four most highly
compensated executive officers. Shown are hypothetical gains that could be
realized for the respective options, based on assumed rates of annual compound
stock price appreciation of 5% and 10% from the date the options were granted
over the ten-year term of the options. Any amount realized upon exercise of
the options will depend upon the market price of Schlumberger common stock at
the time the option is exercised relative to the exercise price of the option.
There is no assurance that the amounts reflected in this table will be
realized.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants (1) Option Term
--------------------------------------------------------- ---------------------
Number of
Securities % of Total
Underlying Options Granted
Options to Employees in Exercise Price Expiration
Name Granted (#) (2) Fiscal Year ($/SH) (3) Date 5%($) 10%($)
- ---- --------------- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
D. E. Baird............. 0 -- -- -- -- --
V. E. Grijalva.......... 0 -- -- -- --
A. Gould................ 54,950 0.91 44.843 1/19/09 1,549,674 3,927,177
I. Pfister.............. 54,949 0.91 44.843 1/19/09 1,549,645 3,927,105
J. Liu.................. 54,949 0.91 44.843 1/19/09 1,549,645 3,927,105
</TABLE>
- --------
(1) The number of shares granted was increased and the exercise price was
decreased by a factor of 1.099 to reflect the spin-off of Sedco Forex.
(2) The Company has not granted any stock appreciation rights. Options become
exercisable in installments of 20% each year following the date of grant.
All outstanding stock options become fully exercisable prior to
liquidation or dissolution of the Company or prior to any reorganization,
merger or consolidation of the Company where the Company is not the
surviving corporation unless such merger, reorganization or consolidation
provides for the assumption of such stock options.
(3) The exercise price of the options is equal to the average of the high and
the low per share prices of the common stock on the options' dates of
grant and may be paid in cash or by tendering shares of common stock.
Applicable tax obligations may be paid in cash or by the withholding of
shares of common stock.
8
<PAGE>
Stock Option Exercises and December 31, 1999 Stock Option Value Table
The following table shows certain information concerning options exercised
during 1999 by the Chief Executive Officer and by the next four most highly
compensated executive officers and the number and value of unexercised options
at December 31, 1999. Schlumberger has not granted stock appreciation rights.
The values of unexercised in-the-money stock options at December 31, 1999 as
shown below are presented pursuant to Securities and Exchange Commission
rules. Any amount realized upon exercise of stock options will depend upon the
market price of Schlumberger common stock at the time the stock option is
exercised. There is no assurance that the values of unexercised in-the-money
options reflected in this table will be realized.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
Value FY-End (#) (2) FY-End ($) (2) (3)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercises (#) ($) (1) Unexercisable Unexercisable
- ---- ---------------- ---------- ------------- ------------------
<S> <C> <C> <C> <C>
D. E. Baird....... 350,000 11,283,771 1,329,790/ 31,909,893/
483,559 4,054,684
V. E. Grijalva.... 0 -- 615,439/ 14,588,692/
230,790 2,585,979
A. Gould.......... 0 -- 206,612/ 4,745,350/
156,058 1,290,291
I. Pfister........ 0 -- 209,908/ 4,213,500/
181,332 1,737,127
J. Liu............ 0 -- 100,010/ 2,147,114/
147,262 1,513,678
</TABLE>
- --------
(1) Market value of stock on date of exercise less exercise price.
(2) Shares increased and exercise price decreased by a factor of 1.099 to
reflect the spin-off of Sedco Forex.
(3) Closing price of stock on December 31, 1999 ($56.125) less exercise price.
9
<PAGE>
Pension Plans
Schlumberger and certain of its subsidiaries maintain pension plans for
employees, including executive officers, providing for lifetime pensions upon
retirement after a specified number of years of service. Employees may
participate in one or more pension plans in the course of their careers with
the Company or its subsidiaries, in which case they become entitled to a
pension from each plan based upon the benefits accrued during the years of
service related to each plan. These plans are funded on an actuarial basis
through cash contributions made by the Company or its subsidiaries. Certain of
the plans also permit or require contributions by employees.
Benefits under the international staff pension plans of the Company and
certain of its subsidiaries are based on a participant's pensionable salary
(generally, base salary plus incentive) for each year in which the employee
participates in the plans and the employee's length of service with the
Company or the subsidiary. Since January 1, 1993, the benefit earned has been
3.2% of pensionable salary for each year of service. Benefits are payable upon
normal retirement age, at or after age 55, or upon early retirement. Estimated
annual benefits from these plans payable upon retirement are: $33,714 for Mr.
Baird; $57,139 for Mr. Grijalva; $276,635 for Mr. Gould, assuming pensionable
salary continues at the December 31, 1999 level for Mr. Gould, and $47,875 for
Mr. Liu.
Benefits under the U.S. tax qualified pension plans of the Company and
certain of its subsidiaries are based on an employee's admissible compensation
(generally, base salary plus incentive) for each year in which an employee
participates in the U.S. plans and the employee's length of service with the
Company or the subsidiary. From January 1, 1989, the benefit earned has been
1.5% of admissible compensation for service prior to the employee's completion
of 15 years of active service and 2% of admissible compensation for service
after completion of 15 years of active service. The Company has adopted a
supplementary benefit plan for eligible employees, including executive
officers. Amounts under the supplementary plan are accrued under an unfunded
arrangement to pay each individual the additional amount which would have been
payable under the plans if the amount had not been subject to limitations
imposed by law on maximum annual benefit payments and on annual compensation
recognized to compute plan benefits. Estimated annual benefits from the plans
payable upon retirement are: $16,066 for Mr. Gould, and, assuming admissible
compensation continues at the December 31, 1999 levels, estimated annual
benefits payable from the U.S. plans and the supplementary benefit plan are:
$633,069 for Mr. Baird; $291,336 for Mr. Grijalva; $236,521 for Mr. Pfister,
and $159,529 for Mr. Liu.
10
<PAGE>
Corporate Performance Graph
The following graph compares the yearly percentage change in the cumulative
total stockholder return on Schlumberger common stock, assuming reinvestment
of dividends on the last day of the month of payment into common stock of
Schlumberger, with the cumulative total return on the published Standard &
Poor's 500 Stock Index and the cumulative total return on Value Line's
Oilfield Services Industry Group over the preceding five-year period. The
following graph is presented pursuant to Securities and Exchange Commission
rules. Schlumberger believes that while total stockholder return is an
important corporate performance indicator, it is subject to the vagaries of
the market. In addition to the creation of stockholder value, the Schlumberger
executive compensation program is based on financial and strategic results and
the other factors set forth and discussed in the Compensation Committee Report
beginning on page 12.
SLB S&P 500 Industry Peer Index
- --------------------------------------------------------------
12/31/94 100 100 100
12/31/95 141 138 155
12/31/96 206 169 240
12/31/97 337 226 371
12/31/98 196 290 179
12/31/99 268 351 265
Assumes $100 invested on December 31, 1994 in Schlumberger Limited stock, in
the S&P 500 Index and in Value Line's 1999 Oilfield Services Industry Index.
Reflects reinvestment of dividends on the last day of the month of payment,
and reinvestment of the 1999 year-end distribution in connection with the
spin-off of Sedco Forex, and annual reweighting of the Industry Peer Index
portfolio.
11
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is comprised entirely
of outside directors who review and approve compensation programs applicable
to executive officers. Specific awards for these officers are approved by the
committee.
Three programs continue to provide the core compensation vehicles for
executive officers:
--Base Salaries
--Annual Cash Incentive Awards
--Stock Option Grants
For many years, Schlumberger has emphasized career opportunities by
recruiting from colleges and universities in countries where Schlumberger
works (more than 70 countries throughout the world), supporting mobility and
maintaining competitive compensation programs which are based on an employee's
contribution and potential rather than country of origin.
Thus, the three programs noted above are applicable not only to executive
officers, but to thousands of managerial, professional and technical employees
of Schlumberger. At all levels, employees enjoy competitive base salaries.
Participation in an annual cash incentive program is added to the compensation
package as employees advance, with the size of incentive opportunity
increasing as one progresses in the organization.
Within the first few years of employment, those with strong performance as
well as outstanding potential may be awarded stock option grants, which are
discretionary in nature.
In this way, an increasing portion of the successful employee's total
compensation becomes leveraged against yearly results and Company long-term
appreciation due to the expanding role played by cash incentives and stock
options in the total compensation package.
The Company's subsidiaries also have profit sharing plans that provide
annual deferred awards based on the results of the fiscal year for the
subsidiary sponsoring the plan. These awards also tend to increase the portion
of total compensation which is leveraged against business results.
Base salaries are reviewed annually for competitiveness against a database
of comparator company information provided by outside compensation
consultants. The companies in the database reflect those broad industry
segments in which Schlumberger competes -- oil-related, high technology and
high volume manufacturing. The companies in the database may change slightly
from year to year due to mergers and acquisitions as well as the normal
movement of companies into and out of the database at their own volition. The
same companies used for executive officer base salary ranges are used for
professional and managerial employees of Schlumberger throughout the world.
12
<PAGE>
The comparator companies used for compensation purposes are different from
those in the Corporate Performance Graph (the Value Line Oilfield Services
Industry Group). The Value Line companies do not constitute a source of
recruits nor do they reflect all the industry segments in which Schlumberger
operates.
While executive officer base salary levels are studied annually, they are
adjusted less frequently. Except for significant changes in responsibility, an
executive officer's base salary may be increased only every three to five
years and then by a significant amount. This has allowed the Company to focus
primarily on variable compensation during periods of low inflation.
Consistent with this policy, Andrew Gould's salary was increased on his
promotion to Executive Vice President with responsibility for the entire
Oilfield Services group. One named executive officer was appointed in 1999,
Jack Liu, to succeed Arthur Lindenauer as Executive Vice President, Finance.
Annual cash incentive awards for each executive officer are payable early in
the calendar (fiscal) year and reflect performance against targets or
objectives established early in the preceding year.
For all executive officers, incentive awards are calculated as a percent of
the base salary paid for the completed calendar year. The percent varies among
executive officer positions to reflect the differing levels of potential
impact on Company results. For 1999, the incentive award ranges were:
--0 to 100% for Mr. Baird
--0 to 75% for Messrs. Grijalva, Gould and Pfister
--0 to 60% for Mr. Liu
With exceptional results, the incentive ranges can be exceeded.
One-half of the incentive potential for each executive officer is a function
of performance against financial targets for the Company or the business
sector for which the executive officer is responsible. In 1999, the Company
objectives were divided between specific numerical targets and earnings; the
business sector target is net income for that sector.
The second half of the incentive potential is a reflection of performance
against various objectives of each executive officer. Objectives may be
strategic or personal and may relate solely to the completed fiscal year or be
interim measures against longer-term objectives. Achievement against
objectives is determined subjectively.
The continued downturn in the oil business in 1999 affected the financial
results and the incentive awards of three named executive officers (Messrs.
Grijalva, Gould and Liu). Their total cash compensation for 1999 is at or
below the median of available comparator market data. Mr. Pfister's incentive
is based on financial results of Automated Test Equipment, Smart Cards and
Terminals, and the sale of Retail Petroleum Systems, the results of which were
finalized in 1999. Based on results, Mr. Pfister's total cash compensation is
at the median of comparator market data.
13
<PAGE>
Stock option grants were awarded in 1999 on a general basis throughout
Schlumberger to professional, managerial and technical employees deemed
eligible for consideration. Such reviews are conducted every 18 months to two
years. Grants are awarded on an entirely discretionary basis to individuals
demonstrating exceptional performance in their current positions as well as
the likelihood of continuing high quality performance in the future. In
addition, grants typically are awarded between general reviews to recognize
promotions, substantial changes in responsibility, and significant individual
or team achievements. The 1999 grants emphasized high potential employees
early in their careers with Schlumberger.
Of the named executive officers, Messrs. Gould, Pfister and Liu were awarded
stock option grants in 1999.
The stock option grants awarded by the Company are uniform in their terms
for executive officers as well as all other optionees -- 10-year term, vesting
in 20% steps at the first through fifth anniversary of grant date, and option
price equal to fair market value on date of grant.
The Company does not utilize below-market options, stock appreciation
rights, phantom stock, restricted stock, performance units or reload options.
Section 162(m) of the Internal Revenue Code limits the deductibility of
certain compensation expenses in excess of $1,000,000 per individual. The
committee does not believe that the cash compensation payable in excess of
this amount for fiscal year 1999 will result in any material loss of tax
deduction. Therefore, the committee has elected not to follow the provisions
of Section 162(m) with regard to cash compensation. The Company's stock option
plans are believed to be in compliance with the provisions of Section 162(m).
Bases for the Compensation of the Chief Executive Officer
The same database of companies used for comparison purposes to review base
salaries of other executive officers (and managerial employees throughout the
Schlumberger universe) is studied to consider the base salary of the Chief
Executive Officer. The database reflects the industry segments in which the
Company operates -- oil-related, high technology and high volume
manufacturing.
The Chief Executive Officer's salary remained at $1,500,000 during 1999.
The potential cash incentive award for Mr. Baird for 1999 was 100% of base
salary. As with other executive officers with corporate responsibility, one-
half of this award potential was a measure of performance against specific
financial targets for the Company. These financial targets were not fully
achieved in 1999 so payment on this half of the incentive award is in
proportion to the results.
The second half of the award potential reflects the committee's evaluation
of Mr. Baird's performance against strategic objectives established early in
1999 for the calendar year. These objectives were a combination of market
growth, acquisition, and organizational changes. Disclosure of specific
measures applied to evaluate achievement of Mr. Baird's objectives could
adversely affect the Company's competitive position.
14
<PAGE>
The total cash incentive awarded Mr. Baird for 1999 performance was
$1,000,000. In combination with base salary, this places him at the median of
available comparator market data.
Mr. Baird has no employment agreement with the Company.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE SCHLUMBERGER
BOARD OF DIRECTORS
Don E. Ackerman, Chairman William T. McCormick, Jr.
Denys Henderson Nicolas Seydoux
15
<PAGE>
2. Financial Statements
The Company's Consolidated Balance Sheet as at December 31, 1999, its
Consolidated Statement of Income for the year ended December 31, 1999, as
audited by PricewaterhouseCoopers LLP, and the amount of dividends declared by
the Board of Directors during 1999 are submitted to the stockholders pursuant
to the Schlumberger Deed of Incorporation.
A majority of the votes cast is required for the adoption and approval of
the financial results as set forth in the financial statements and of the
declaration of dividends by the Board of Directors as reflected in the 1999
Annual Report to Stockholders.
The Board of Directors Recommends a Vote FOR Item 2.
3. Appointment of Auditors
PricewaterhouseCoopers LLP have been selected by the Board of Directors as
independent public accountants to audit the accounts of the Company for the
year 2000. The Schlumberger by-laws provide that the selection of auditors is
subject to approval by the stockholders, and a majority of the votes cast is
required for such approval. A representative of PricewaterhouseCoopers LLP
will attend the 2000 Annual General Meeting and will have the opportunity to
make a statement and respond to questions.
The Board of Directors Recommends a Vote FOR Item 3.
16
<PAGE>
Stockholder Proposals for 2001 Annual General Meeting
In order for a stockholder proposal to be considered for inclusion in the
proxy statement for the 2001 Annual General Meeting of Stockholders, written
proposals must be received by the Secretary of the Company, 277 Park Avenue,
New York, New York 10172-0266, no later than November 8, 2000. Pursuant to the
rules under the Securities Exchange Act of 1934, the Company may use
discretionary authority to vote with respect to stockholder proposals
presented in person at the 2001 Annual General Meeting if the stockholder
making the proposal has not given notice to the Company by January 22, 2001.
Other Matters
Stockholders may obtain a copy of Form 10-K filed with the United States
Securities and Exchange Commission without charge by writing to the Secretary
of the Company at 277 Park Avenue, New York, New York 10172-0266.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any additional matter should be presented properly, it is intended
that the enclosed proxy will be voted in accordance with the discretion of the
persons named in the proxy.
Please sign, date, and return the accompanying proxy in the enclosed
envelope at your earliest convenience.
By order of the Board of Directors,
James L. Gunderson
Secretary
New York, N.Y.
March 8, 2000
17
<PAGE>
[LOGO OF SCHLUMBERGER]
NOTICE OF
ANNUAL GENERAL MEETING
OF STOCKHOLDERS
AND
PROXY STATEMENT
APRIL 12, 2000
----------------------------------
Please sign your proxy card and
return it in the enclosed
envelope so that you may be
represented at the Meeting.
----------------------------------
<PAGE>
Schlumberger Limited (Schlumberger N.V.)
Proxy Solicitation on Behalf of the Board of Directors
Annual General Meeting of Stockholders
P The undersigned, having received the Notice and Proxy Statement for
the Annual General Meeting of Stockholders and the 1999 Annual Report to
Stockholders, hereby appoints A.L.A. Bosnie, Aede Gerbranda, Jan A. Koning,
and M.P. Weber-Dommisse and each of them, proxies, with power of
R substitution, to vote in the manner indicated on the reverse side hereof,
and with discretionary authority as to any other matters that may properly
come before the meeting, all my (our) shares of record of Schlumberger
Limited (Schlumberger N.V.) at the Annual General Meeting of Stockholders
O to be held at the Avila Beach Hotel, Penstraat 130, Willemstad, Curacao,
Netherlands Antilles on April 12, 2000, and at any adjournment or
adjournments thereof.
X
If no other indication is made, the proxies will vote FOR the election of
Y the director nominees and FOR Proposals 2 and 3.
- ------------- -------------
SEE REVERSE Continued and to be signed on reverse side SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
[X] Please mark
votes as in
this example.
Unless you indicate otherwise, this proxy will be voted in accordance with the
Board of Directors' recommendations.
Directors recommend a vote FOR items 1, 2 and 3.
<TABLE>
<S> <C>
1. Election of 12 Directors
Nominees: D.E. Ackerman, D.E. Baird, FOR AGAINST ABSTAIN
J. Deutch, V.E. Grijalva, D. Henderson, 2. Adoption and approval of Financials [_] [_] [_]
A. Levy-Lang, W.T. McCormick, Jr., and Dividends
D. Primat, N. Seydoux, L.G. Stuntz,
S. Ullring, Y. Wakumoto
FOR WITHHELD 3. Approval of Auditors [_] [_] [_]
ALL [_] [_] FROM ALL
NOMINEES NOMINEES
For, except vote withheld from the
following nominees(s):
[_] ___________________________________
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please sign names exactly as printed hereon. If signing as attorney,
administrator, executor, guardian or trustee, please give full title
as such. Please sign, date and return in the enclosed envelope.
Signature:____________________ Date:_________ Signature:________________________ Date:_____________
</TABLE>
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(Stated in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
--------------- ------------ -------------
<S> <C> <C> <C>
Revenue
Operating $ 8,394,947 $10,725,030 $10,652,097
Interest and other income 356,758 173,006 103,092
----------- ----------- -----------
8,751,705 10,898,036 10,755,189
----------- ----------- -----------
Expenses
Cost of goods sold
and services 6,748,839 8,414,383 7,847,796
Research & engineering 522,240 556,882 509,562
Marketing 433,871 467,592 433,911
General 383,695 427,775 412,614
Interest 192,954 137,211 75,677
----------- ----------- -----------
8,281,599 10,003,843 9,279,560
----------- ----------- -----------
Income before taxes 470,106 894,193 1,475,629
Taxes on income 140,772 276,231 388,401
----------- ----------- -----------
Income from
continuing operations 329,334 617,962 1,087,228
Discontinued operations,
net of tax 37,360 396,237 297,321
----------- ----------- -----------
Net Income $ 366,694 $ 1,014,199 $ 1,384,549
=========== =========== ===========
Basic earnings per share:
Continuing operations $ 0.60 $ 1.14 $ 2.02
Discontinued operations 0.07 0.72 0.55
----------- ----------- -----------
Net Income $ 0.67 $ 1.86 $ 2.57
=========== =========== ===========
Diluted earnings per share:
Continuing operations $ 0.58 $ 1.10 $ 1.94
Discontinued operations 0.07 0.71 0.53
----------- ----------- -----------
Net Income $ 0.65 $ 1.81 $ 2.47
=========== =========== ===========
Average shares outstanding 548,680 544,338 539,330
Average shares outstanding
assuming dilution 563,789 561,855 559,653
</TABLE>
See the Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
1
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Stated in thousands)
December 31, 1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and short-term investments $ 4,389,837 $ 3,956,694
Receivables less allowance for doubtful accounts
(1999-$89,030; 1998-$89,556) 2,429,842 2,968,070
Inventories 1,268,500 1,333,131
Deferred taxes on income 259,257 295,974
Other current assets 258,532 251,355
------------ ------------
8,605,968 8,805,224
Investments in Affiliated Companies 535,434 84,844
Long-term Investments, held to maturity 726,496 855,172
Fixed Assets less accumulated depreciation 3,560,740 4,694,465
Excess of Investment Over Net Assets
of Companies Purchased less amortization 1,333,681 1,302,678
Deferred Taxes on Income 209,597 202,630
Other Assets 109,276 132,916
------------ ------------
$ 15,081,192 $ 16,077,929
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 2,282,884 $ 2,539,954
Estimated liability for taxes on income 383,159 480,123
Bank loans 444,221 708,978
Dividend payable 106,653 102,891
Long-term debt due within one year 257,571 86,722
------------ ------------
3,474,488 3,918,668
Long-term Debt 3,183,174 3,285,444
Postretirement Benefits 451,466 432,791
Other Liabilities 251,036 321,951
------------ ------------
7,360,164 7,958,854
------------ ------------
Stockholders' Equity
Common stock 1,820,186 1,539,408
Income retained for use in the business 7,916,612 8,882,455
Treasury stock at cost (1,878,612) (2,221,308)
Translation adjustment (137,158) (81,480)
------------ ------------
7,721,028 8,119,075
------------ ------------
$ 15,081,192 $ 16,077,929
============ ============
</TABLE>
See the Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
2
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Stated in thousands)
Year Ended December 31, 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities: -- -- --
Net income $ 366,694 $ 1,014,199 $ 1,384,549
Adjustments to reconcile net income
to net cash provided by operating activities:
Discontinued operations 213,676 136,206 110,780
Depreciation and amortization 1,020,862 1,011,582 924,223
Earnings of companies carried at equity,
less dividends received (1999-$3,401;
1998-$4,996; 1997-$4,934) (13,904) (9,576) (1,270)
Provision for losses on accounts receivable 37,943 36,861 27,871
Charges 128,508 368,499 --
Other adjustments -- (58) (2,278)
Change in operating assets and liabilities:
Decrease (increase) in receivables 265,588 (20,507) (647,470)
Increase in inventories (43,635) (122,622) (220,813)
(Increase) decrease in deferred taxes (21,672) (75,959) 32,140
(Decrease) increase in accounts payable
and accrued liabilities (181,731) (72,940) 175,664
(Decrease) increase in estimated liability
for taxes on income (69,338) 79,677 51,215
Other-net (182,426) (116,784) 25,916
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,520,565 2,228,578 1,860,527
----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (792,001) (1,462,620) (1,404,323)
Sales/retirements of fixed assets & other 68,005 111,262 97,390
Drilling fluids joint venture (325,000) -- --
(Purchase) sale of
other businesses (135,338) 61,662 (28,233)
Increase in investments (295,075) (2,292,163) (867,894)
Sale of financial instruments 203,572 -- --
(Increase) decrease in other assets (43,166) 4,660 19,453
Discontinued operations (291,953) (424,749) (13,411)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,610,956) (4,001,948) (2,197,018)
----------- ----------- -----------
Cash flows from financing activities:
Dividends paid (410,494) (388,379) (377,636)
Proceeds from employee stock purchase plan 70,765 70,461 50,055
Proceeds from exercise of stock options 103,084 68,780 97,899
Exercise of stock warrants 449,625 -- --
Proceeds from issuance of long-term debt 1,062,935 2,909,156 925,579
Payments of principal on long-term debt (916,242) (863,966) (419,962)
Net (decrease) increase in short-term debt (242,014) (64,756) 50,831
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 117,659 1,731,296 326,766
----------- ----------- -----------
Net increase (decrease) in cash 27,268 (42,074) (9,725)
Cash, beginning of year 105,321 147,395 157,120
----------- ----------- -----------
CASH, END OF YEAR $ 132,589 $ 105,321 $ 147,395
=========== =========== ===========
</TABLE>
See the Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
3
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock (Dollar amounts stated in thousands)
------------------------------------------------------------------- Income
Issued In Treasury Retained for
-------------------------------------------------- Translation Use in the Comprehensive
Shares Amount Shares Amount Adjustment Business Income
------------ ------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1997 661,842,453 $1,307,717 124,661,624 $2,315,946 $ (25,626) $7,255,108 $ 925,243
==============
Translation
adjustment (37,706) (37,706)
Sales to optionees less
shares exchanged 395,950 37,316 (3,323,223) (61,743)
Employee stock
purchase plan 1,399,623 50,055
Net income 1,384,549 1,384,549
IVS acquisition 16,324 (238,812) (4,438)
Tax benefit on
stock options 16,600
Change in subsidiary
year-end 612 4,560
Dividends declared
($0.75 per share) (378,575)
------------ ------------ ----------- ------------ ----------- ------------ ------------
Balance,
December 31, 1997 663,638,026 1,428,624 121,099,589 2,249,765 (63,332) 8,265,642 $ 1,346,843
==============
Translation
adjustment (18,148) (18,148)
Sales to optionees less
shares exchanged 796,992 40,323 (1,531,607) (28,457)
Employee stock
purchase plan 1,266,840 70,461
Net income 1,014,199 1,014,199
Dividends declared
($0.75 per share) (397,386)
------------ ------------ ----------- ------------ ----------- ------------ ------------
Balance,
December 31, 1998 665,701,858 1,539,408 119,567,982 2,221,308 (81,480) 8,882,455 $ 996,051
===========
Translation
adjustment (55,678) (55,678)
Sales to optionees less
shares exchanged 28,100 41,931 (3,291,288) (61,153)
Employee stock
purchase plan 1,324,848 70,765
Net income 366,694 366,694
Dividends declared
($0.75 per share) (414,210)
Sedco Forex spin-off (918,327)
Exercise of stock
warrants 168,082 (15,153,018) (281,543)
------------ ------------ ----------- ------------ ----------- ------------ ------------
Balance,
December 31, 1999 667,054,806 $ 1,820,186 101,123,676 $1,878,612 $ (137,158) $7,916,612 $ 311,016
============ ============ =========== ============ =========== ============ ============
</TABLE>
See the Notes to Consolidated Financial Statements
Schlumberger Limited (Schlumberger N.V., Incorporated in the Netherlands
Antilles) and Subsidiary Companies.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Accounting Policies
The Consolidated Financial Statements of Schlumberger Limited and its
subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States.
DISCONTINUED OPERATIONS
On December 31, 1999, Schlumberger completed the spin-off of its offshore
contract drilling business, Sedco Forex, to its stockholders and the subsequent
merger of Sedco Forex and Transocean Offshore Inc., which changed its name to
Transocean Sedco Forex Inc. following the merger. The results for the Sedco
Forex operations spun off by Schlumberger are reported as Discontinued
Operations for all periods presented in the Consolidated Statement of Income.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of majority-owned
subsidiaries. Significant 20% - 50% owned companies are carried on the equity
method and classified in Investments in Affiliated Companies. The pro rata share
of Schlumberger after-tax earnings is included in Interest and other income.
Equity in undistributed earnings of all 50%-owned companies on December 31, 1999
was not material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. While actual
results could differ from these estimates, management believes that the
estimates are reasonable.
REVENUE RECOGNITION
Generally, revenue is recognized after services are rendered or products are
shipped.
TRANSLATION OF NON-US CURRENCIES
Oilfield Services' functional currency is primarily the US dollar. Resource
Management Services' and Test & Transactions' functional currencies are
primarily local currencies. All assets and liabilities recorded in functional
currencies other than US dollars are translated at current exchange rates. The
resulting adjustments are charged or credited directly to the Stockholders'
Equity section of the Consolidated Balance Sheet. Revenue and expenses are
translated at the weighted-average exchange rates for the period. All realized
and unrealized transaction gains and losses are included in income in the period
in which they occur. Schlumberger policy is to hedge against unrealized gains
and losses on a monthly basis. Included in the 1999 results were transaction
losses of $12 million, compared with losses of $6 million and $10 million in
1998 and 1997, respectively.
Currency exchange contracts are entered into as a hedge against the effect of
future settlement of assets and liabilities denominated in other than the
functional currency of the individual businesses. Gains or losses on the
contracts are recognized when the currency exchange rates fluctuate, and the
resulting charge or credit partially offsets the unrealized currency gains or
losses on those assets and liabilities. On December 31, 1999, contracts and
options were outstanding for the US dollar equivalent of $110 million in various
foreign currencies. These contracts mature on various dates in 2000 and 2001.
Investments
Both short-term and long-term investments held to maturity are stated at cost
plus accrued interest, which approximates market, and comprise primarily
eurodollar time deposits, certificates of deposit and commercial paper,
euronotes and eurobonds, substantially all denominated in US dollars.
Substantially all the investments designated as held to maturity that were
purchased and sold during the year had original maturities of less than three
months. Short-term investments that are designated as trading are stated at
market. The unrealized gains/losses on such securities on December 31, 1999 were
not significant.
For purposes of the Consolidated Statement of Cash Flows, Schlumberger does not
consider short-term investments to be cash equivalents as they generally have
original maturities in excess of three months.
5
<PAGE>
Short-term investments at December 31, 1999 and 1998, were $4.26 billion and
$3.85 billion, respectively.
Inventories
Inventories are stated principally at average cost or at market, if lower.
Inventory consists of materials, supplies, finished goods and nonexclusive
proprietary seismic surveys.
Excess of Investment Over Net Assets of Companies Purchased
Cost in excess of net assets of purchased companies (goodwill) is amortized on a
straight-line basis over 5 to 40 years. Accumulated amortization was $516
million and $434 million on December 31, 1999 and 1998, respectively. Of the
goodwill on December 31, 1999, 40% is being amortized over 40 years, 11% is
being amortized over 28 years, 23% is being amortized over 25 years and 26% is
being amortized over periods of up to 25 years.
Fixed Assets and Depreciation
Fixed assets are stated at cost less accumulated depreciation, which is provided
for by charges to income over the estimated useful lives of the assets using the
straight-line method. Fixed assets include the manufacturing cost (average cost)
of oilfield technical equipment manufactured by subsidiaries of Schlumberger.
Expenditures for renewals, replacements and improvements are capitalized.
Maintenance and repairs are charged to operating expenses as incurred. Upon sale
or other disposition, the applicable amounts of asset cost and accumulated
depreciation are removed from the accounts and the net amount, less proceeds
from disposal, is charged or credited to income.
Capitalized Interest
Schlumberger capitalizes interest expense during the new construction or upgrade
of qualifying assets. Interest expense capitalized in 1999 and 1998 was $5
million and $7 million, respectively. No interest expense was capitalized in
1997.
Impairment of Long-lived Assets
Schlumberger reviews the carrying value of its long-lived assets, including
goodwill, whenever events or changes in circumstances indicate that the
historical cost-carrying value of an asset may no longer be appropriate.
Schlumberger assesses recoverability of the carrying value of the asset by
estimating the future net cash flows expected to result from the asset,
including eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset's carrying value and fair value.
Taxes on Income
Schlumberger and its subsidiaries compute taxes on income in accordance with the
tax rules and regulations of the many taxing authorities where the income is
earned. The income tax rates imposed by these taxing authorities vary
substantially. Taxable income may differ from pretax income for financial
accounting purposes. To the extent that differences are due to revenue or
expense items reported in one period for tax purposes and in another period for
financial accounting purposes, an appropriate provision for deferred income
taxes is made.
Approximately $3.2 billion of consolidated income retained for use in the
business on December 31, 1999 represented undistributed earnings of consolidated
subsidiaries and the pro rata Schlumberger share of 20%-50% owned companies. No
provision is made for deferred income taxes on those earnings considered to be
indefinitely reinvested or earnings that would not be taxed when remitted.
Tax credits and other allowances are credited to current income tax expense
using the flow-through method of accounting.
Earnings Per Share
Basic earnings per share is calculated by dividing net income by the average
number of common shares outstanding during the year. Diluted earnings per share
is calculated by dividing net income by the average number of common shares
outstanding assuming dilution, the calculation of which assumes that all stock
options and warrants which are in the money are exercised at the beginning of
the period and the proceeds used, by Schlumberger, to purchase shares at the
average market price for the period. The following is a reconciliation from
basic earnings per share to diluted earnings per share from continuing
operations for each of the last three years:
6
<PAGE>
(Stated in thousands except per share amounts)
<TABLE>
<CAPTION>
Income from Average
Continuing Shares Earnings
Operations Outstanding Per Share
------------- ------------ -----------
<S> <C>
1999
Basic $329,334 548,680 $ 0.60
Effect of dilution:
Options 7,916
Warrants 7,193
-------- -------- --------
Diluted $329,334 563,789 $ 0.58
======== ======== ========
1998
Basic $617,962 544,338 $ 1.14
Effect of dilution:
Options 9,723
Warrants 7,794
-------- -------- --------
Diluted $617,962 561,855 $ 1.10
======== ======== ========
1997
Basic $1,087,228 539,330 $ 2.02
Effect of dilution:
Options 12,185
Warrants 8,138
-------- --------
Diluted $1,087,228 559,653 $ 1.94
========== ======== ========
</TABLE>
Research & Engineering
All research and engineering expenditures are expensed as incurred, including
costs relating to patents or rights that may result from such expenditures.
1999 and 1998 Charges--CONTINUING OPERATIONS
Schlumberger recorded the following charges in continuing operations in 1999 and
1998:
In December 1999, a pre-tax charge of $77 million ($71 million after tax, $0.13
per share - diluted), classified in Cost of goods sold and services, consisting
primarily of the following:
o A charge of $31 million ($26 million after tax) including $23 million of
asset impairments and $8 million of severance costs related to reductions
in the marine seismic fleet due to depressed market conditions.
o A charge of $38 million ($37 million after tax) including $33 million of
asset impairments and $5 million of severance costs related to the
restructuring of its land drilling activity following the spin-off of its
offshore drilling business to stockholders.
In March 1999, 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:
o A charge of $118 million ($118 million after tax) related to the downsizing
of its global Oilfield Services activities, including $108 million of
severance costs and $10 million for asset impairments.
o A charge of $29 million ($20 million after tax) related to RMS and Test &
Transactions, consisting
7
<PAGE>
principally of $16 million of severance costs at several RMS facilities
resulting from a downturn in business and $5 million of asset write-downs.
o 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.
In September 1998, a pretax charge of $432 million ($368 million after tax,
$0.65 per share - diluted), classified in Cost of goods sold and services,
consisting primarily of the following:
o A charge of $314 million ($257 million after tax) related to Oilfield
Services, including severance costs of $69 million; facility closure costs
of $61 million; operating assets write-offs of $137 million; and $43
million of customer receivable reserves where collection was considered
doubtful due to the customers' financial condition and/or country risk.
This charge was due to the reduction in business activity.
o A charge of $48 million ($63 million after tax) for merger-related costs
in connection with the acquisition of Camco.
o A charge of $61 million ($43 million after tax) related to RMS and Test &
Transactions, consisting primarily of $21 million of severance and $40
million of environmental costs resulting from a reassessment of ongoing
future monitoring and maintenance requirements at locations no longer in
operation.
Severance costs included in the September 1998 charge (6200 people; $90 million)
and the March 1999 charge (4700 people; $124 million) have been paid. The actual
number of employees terminated was slightly higher than originally planned;
however, this had no material impact on the actual severance costs paid as
compared with the amount originally accrued. The December 1999 charge included
severance costs of $13 million (300 people) of which $5 million had been paid at
December 31, 1999.
The $61 million of facility closure costs accrued in 1998 have substantially
been paid in accordance with the original plan.
Discontinued Operations
On December 31, 1999, Schlumberger completed the spin-off of its offshore
contract drilling business, Sedco Forex, to its stockholders and the subsequent
merger of Sedco Forex and Transocean Offshore Inc., which changed its name to
Transocean Sedco Forex Inc. following the merger. The spin-off was approved by
stockholders on December 10, 1999.
Upon completion of the merger, Schlumberger stockholders held approximately 52%
of the ordinary shares of Transocean Sedco Forex Inc., and Transocean Offshore
Inc. shareholders held the remaining 48%. Schlumberger retained no ownership in
the combined company.
In the spin-off, Schlumberger stockholders received one share of Sedco Forex for
each share of Schlumberger owned on the record date of December 20, 1999. In the
merger, each Sedco Forex share was exchanged for 0.1936 ordinary share of
Transocean Sedco Forex Inc. Stockholders received cash in lieu of fractional
shares.
Results for the Sedco Forex operations spun off by Schlumberger for this
transaction are reported as discontinued operations for all periods presented in
the Consolidated Statement of Income.
Discontinued Operations on the Consolidated Statement of Income includes the
operating results of the spun-off Sedco Forex business and the following
charges:
o In December 1999, an after-tax charge of $50 million ($0.09 per share -
diluted) for costs directly associated with the spin-off.
o In March 1999, an after-tax charge of $33 million ($0.06 per share -
diluted) for severance costs ($13 million) and legal claims.
o In September 1998, an after-tax charge of $12 million ($0.02 per share -
diluted) for severance costs.
8
<PAGE>
As a result of the spin-off, Schlumberger Income Retained for Use in the
Business was reduced by $918 million representing the spun-off net assets of
Sedco Forex ($1.23 billion) less payments received in settlement of intercompany
balances between Schlumberger and Sedco Forex ($313 million). The net assets
spun off included $1.3 billion of fixed assets.
Pursuant to Accounting Principles Board Opinion (APB) No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, the revenue and expenses of Sedco Forex have been excluded from
the respective captions in the Consolidated Statement of Income. The net
operating results of Sedco Forex have been reported, net of applicable income
taxes, as Discontinued Operations.
Summarized financial information for the discontinued operations, is as follows:
(Stated in millions)
1999 1998 1997
--------- --------- ---------
Operating revenue $ 648 $ 1,091 $ 891
Income before taxes $ 29 $ 428 $ 329
Income after taxes $ 37 $ 396 $ 297
======== ======== ========
Acquisitions
During 1999, subsidiaries of Schlumberger acquired Merak, a market leader in
petroleum software solutions; Secure Oil Tools, a leader in multilateral
completions; and substantially all of the assets of Panther Software
Corporation, a provider of hardware and software products and services for
managing large volumes of seismic data. These acquisitions were accounted for
using the purchase method of accounting. Costs in excess of net assets acquired
were $106 million which are being amortized on a straight-line basis over 7 to
20 years.
In the third quarter of 1999, the Omnes joint venture, created in 1995 between
Schlumberger and Cable & Wireless, was restructured into two separate business
units. Under the agreement, equal ownership and access to products, technology
and intellectual property was given to both parent companies. Schlumberger
retained ownership of the Omnes name. Omnes is now a fully operational company
within Test & Transactions.
On August 31, 1998, the merger of Schlumberger Technology Corporation, a wholly
owned subsidiary of Schlumberger, and Camco International Inc. was completed.
Under the terms of the merger agreement, approximately 38.2 million shares of
Camco common stock were exchanged for 45.1 million shares of Schlumberger common
stock at the exchange rate of 1.18 shares of Schlumberger stock for each share
of Camco. Based on the Schlumberger average price of $47-7/8 on August 28, the
transaction was valued at $2.2 billion. The business combination was accounted
for using the pooling-of-interests method of accounting.
During 1997, subsidiaries of Schlumberger acquired Interactive Video Systems,
Inc., a metrology solutions provider for the front-end semiconductor fabrication
equipment market, and S.A. Holditch and Associates, Inc., a petroleum and
geoscience consulting services company. These acquisitions were accounted for
using the purchase method of accounting. Costs in excess of net assets acquired
were $38 million which are being amortized on a straight-line basis over periods
of 5 and 15 years, respectively.
Investments in Affiliated Companies
In the third quarter of 1999, Schlumberger and Smith International Inc. entered
into an agreement whereby their drilling fluids operations were combined to form
a joint venture. Under the terms of the agreement, Schlumberger contributed its
non-US drilling fluids business and a total of $325 million to the joint
venture. Schlumberger owns a 40% interest in the joint venture and records
income using the equity method of accounting. The total investment on December
31, 1999 was $414 million. The equity income for 1999 is not material.
9
<PAGE>
Investments
The Consolidated Balance Sheet reflects the Schlumberger investment portfolio
separated between current and long term, based on maturity. Except for $130
million of investments which are considered trading on December 31, 1999 ($125
million in 1998), it is the intent of Schlumberger to hold the investments until
maturity.
Long-term investments mature as follows: $133 million in 2001, $358 million in
2002 and $235 million thereafter.
On December 31, 1999, there were no interest rate swap arrangements outstanding
related to investments. Interest rate swap arrangements had no material effect
on consolidated interest income.
Fixed Assets
A summary of fixed assets follows:
(Stated in millions)
December 31, 1999 1998
------- -------
Land $ 68 $ 78
Buildings &
Improvements 1,086 1,108
Machinery &
Equipment 8,485 10,472
------- -------
Total cost 9,639 11,658
Less accumulated
depreciation 6,078 6,964
------- -------
$ 3,561 $ 4,694
======= =======
The decreases in cost and accumulated depreciation reflect the assets of the
Sedco Forex offshore contract drilling business, which was spun off on December
30, 1999 (see Discontinued Operations on page xx).
The estimated useful lives of Buildings & Improvements are primarily 30 to 40
years. For Machinery & Equipment, 13% is being depreciated over 16 to 25 years,
14% over 10 to 15 years and 73% over 2 to 9 years.
10
<PAGE>
Long-term Debt
A summary of long-term debt by currency follows:
(Stated in millions)
December 31, 1999 1998
------ ------
US dollar $2,369 $2,284
Euro 335 --
Japanese yen 146 125
Canadian dollar 105 80
Italian lira 76 91
UK pound 20 270
French franc -- 201
German mark -- 160
Other 132 74
------ ------
$3,183 $3,285
====== ======
The majority of the long-term debt is at variable interest rates; the
weighted-average interest rate of the debt outstanding on December 31, 1999 was
5.9%. Such rates are reset every six months or sooner. The carrying value of
long-term debt on December 31, 1999 approximates the aggregate fair market
value.
Long-term debt on December 31, 1999, is due as follows: $92 million in 2001, $57
million in 2002, $2,322 million in 2003, $424 million in 2004 and $288 million
thereafter.
On December 31, 1999, interest rate swap arrangements outstanding were: pay
fixed/receive floating on US dollar debt of $600 million; pay floating/receive
fixed on US dollar debt of $214 million; pay fixed/receive floating on Japanese
yen debt of $107 million. Also outstanding on December 31, 1999 was a hedge in
the notional amount of $76 million against the US 10-year Treasury Note interest
rate. These arrangements mature at various dates to August 2008. Interest rate
swap arrangements had no material effect on consolidated interest expense in
1999 and no impact in 1998. The likelihood of nonperformance by the other
parties to the arrangements is considered to be remote.
Lines of Credit
On December 31, 1999, the principal US subsidiary of Schlumberger had an
available unused Revolving Credit Agreement with a syndicate of banks. The
Agreement provided that the subsidiary may borrow up to $1 billion until August
2003 at money market-based rates (6.1% on December 31, 1999) of which $375
million was outstanding on December 31, 1999; on December 31, 1998, there was no
outstanding amount. In addition, on December 31, 1999 and 1998, Schlumberger and
its subsidiaries also had available unused lines of credit of approximately $793
million and $630 million, respectively. Commitment and facility fees are not
material.
Capital Stock
Schlumberger is authorized to issue 1,000,000,000 shares of common stock, par
value $0.01 per share, of which 565,931,130 and 546,133,876 shares were
outstanding on December 31, 1999 and 1998, respectively. Schlumberger is also
authorized to issue 200,000,000 shares of cumulative preferred stock, par value
$0.01 per share, which may be issued in series with terms and conditions
determined by the Board of Directors. No shares of preferred stock have been
issued. Holders of common stock and preferred stock are entitled to one vote for
each share of stock held.
In January 1993, Schlumberger acquired the remaining 50% interest in the Dowell
Schlumberger group of companies. The purchase price included a warrant, expiring
in 7.5 years and valued at $100 million, to purchase 15,153,018 shares of
Schlumberger common stock at an exercise price of $29.672 per share. The warrant
was exercised by Dow Chemical on December 16, 1999.
11
<PAGE>
Stock Compensation Plans
As of December 31, 1999, Schlumberger had two types of stock-based compensation
plans, which are described below. Schlumberger applies APB Opinion 25 and
related Interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its stock option plans and its stock
purchase plan. Had compensation cost for the stock-based Schlumberger plans been
determined based on the fair value at the grant dates for awards under those
plans, consistent with the method of SFAS 123, Schlumberger net income and
earnings per share would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
(Stated in millions except per share amounts)
1999 1998 1997
---- ------- --------
<S> <C> <C> <C>
Net income
As reported $ 367 $ 1,014 $ 1,385
Pro forma $ 260 $ 882 $ 1,315
Basic earnings
per share
As reported $ 0.67 $ 1.86 $ 2.57
Pro forma $ 0.47 $ 1.62 $ 2.44
Diluted earnings
per share
As reported $ 0.65 $ 1.81 $ 2.47
Pro forma $ 0.46 $ 1.57 $ 2.35
</TABLE>
Stock Options Plans
During 1999, 1998, 1997 and in prior years, officers and key employees were
granted stock options under Schlumberger stock option plans. For all of the
stock options granted, the exercise price of each option equals the market price
of Schlumberger stock on the date of grant; an option's maximum term is ten
years, and options generally vest in 20% increments over five years.
As required by SFAS 123, the fair value of each grant is estimated on the date
of grant using the multiple option Black-Scholes option-pricing model with the
following weighted-average assumptions used for 1999, 1998 and 1997: Dividend of
$0.75; expected volatility of 25%-29% for 1999 grants, 21%-25% for 1998 grants
and 21% for 1997 grants; risk-free interest rates for the 1999 grants of
4.92%-5.29% for officers and 4.80%-6.25% for the 1999 grants to all other
employees; risk-free interest rates for the 1998 grant to officers of
5.59%-5.68% and 4.35%-5.62% for the 1998 grants to all other employees;
risk-free interest rates for 1997 grants of 6.19% for officers and 5.80%-6.77%
for all other employees; and expected option lives of 7.14 years for officers
and 5.28 years for other employees for 1999 grants, 6.98 years for officers and
5.02 years for other employees for 1998 grants and 7.27 years for officers and
5.09 years for other employees for 1997 grants.
12
<PAGE>
A summary of the status of the Schlumberger stock option plans as of December
31, 1999, 1998 and 1997, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1999/1/ 1998/1/ 1997/1/
---- ---- ----
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 30,310,579 $ 42.50 31,542,758 $ 39.81 28,904,607 $ 28.57
Granted 6,012,168 $ 54.04 2,027,812 $ 62.57 7,497,432 $ 73.09
Exercised (3,634,790) $ 28.68 (2,527,380) $ 24.15 (4,238,496) $ 24.77
Forfeited (1,074,033) $ 52.50 (732,611) $ 47.61 (620,785) $ 32.55
----------- ---------- ---------
Outstanding at
year-end 31,613,924 $ 37.91 30,310,579 $ 42.50 31,542,758 $ 39.81
=========== ========== =========
Options exercisable
at year-end 16,396,821 15,914,440 12,754,955
Weighted-average
fair value of options
granted during the year $ 17.72 $ 22.24 $ 23.02
</TABLE>
/1/Shares and exercise price have been restated to reflect adjustments made as a
result of the spin-off of Sedco Forex, in accordance with EITF Issue 90-9,
"Changes to Fixed Employee Stock Option Plans as Result of Equity
Restructuring."
The following table summarizes information concerning currently outstanding and
exercisable options by three ranges of exercise prices on December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Number Weighted-average Number
Range of outstanding remaining Weighted-average exercisable Weighted-average
exercise prices as of 12/31/99 contractual life exercise price as of 12/31/99 exercise price
- --------------- ------------------------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.831 - $30.710 12,692,062 4.21 $27.403 10,985,705 $27.061
$30.795 - $55.619 12,062,599 7.87 $46.746 3,262,756 $39.519
$55.875 - $82.348 6,859,263 7.94 $78.828 2,148,360 $84.037
--------- ---------
31,613,924 6.42 $45.942 16,396,821 $37.005
---------- ----------
</TABLE>
Employee Stock Purchase Plan
Under the Schlumberger Discounted Stock Purchase Plan, Schlumberger is
authorized to issue up to 22,012,245 shares of common stock to its employees.
Under the terms of the Plan, employees can choose each year to have up to 10% of
their annual earnings withheld to purchase Schlumberger common stock. The
purchase price of the stock is 85% of the lower of its beginning or end of the
Plan year market price. Under the Plan, Schlumberger sold 1,324,848, 1,266,840
and 1,399,623 shares to employees in 1999, 1998 and 1997, respectively.
Compensation cost has been computed for the fair value of the employees'
purchase rights, which was estimated using the Black-Scholes model with the
following assumptions for 1999, 1998 and 1997: Dividend of $0.75; expected life
of one year; expected volatility of 40% for 1999, 34% for 1998 and 28% for 1997;
and risk-free interest rates of 5.33% for 1999, 4.44% for 1998 and 5.64% for
1997. The weighted-average fair value of those purchase rights granted in 1999,
1998 and 1997, was $19.829, $19.817 and $17.845, respectively.
Income Tax Expense
Schlumberger and its subsidiaries operate in more than 100 taxing jurisdictions
where statutory tax rates generally vary from 0% to 50%.
13
<PAGE>
Pretax book income from continuing operations subject to US and non-US income
taxes for each of the three years ending December 31, was as follows:
<TABLE>
<CAPTION>
(Stated in millions)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
United States $ (172) $ 24 $ 482
Outside United States 642 870 994
---------- ---------- ---------
Pretax income $ 470 $ 894 $1,476
=========== =========== ========
</TABLE>
Schlumberger had net deductible temporary differences of $1.1 billion on
December 31, 1999 and $1.2 billion on December 31, 1998. Significant temporary
differences pertain to postretirement medical benefits, fixed assets, employee
benefits and inventory.
The components of consolidated income tax expense from continuing operations
were as follows:
(Stated in millions)
1999 1998 1997
---- ---- ----
Current:
United States--Federal $ (74) $ 124 $ 93
United States--State (7) 15 19
Outside United States 206 225 244
----- ----- -----
$ 125 $ 364 $ 356
----- ----- -----
Deferred:
United States--Federal $ 14 $ (68) $ 18
United States--State 1 (7) (2)
Outside United States 1 (13) 16
----- ----- -----
$ 16 $ (88) $ 32
----- ----- -----
Consolidated taxes on income $ 141 $ 276 $ 388
===== ===== =====
Effective tax rate 30% 31% 26%
===== ===== =====
For the three years, the variations from the US statutory federal tax rate (35%)
and Schlumberger effective tax rates were due to several factors, including the
effect of the US operating loss carryforward in 1997 and a substantial
proportion of operations in countries where taxation on income is lower than in
the US.
In the third quarter of 1996, with increasing profitability and a strong outlook
in the US, Schlumberger recognized 50% of the US income tax benefit related to
its US subsidiary's tax loss carryforward and all temporary differences. This
resulted in a credit of $360 million. In the second quarter of 1997,
Schlumberger released the remaining valuation allowance related to its US
subsidiary's tax loss carryforward and all temporary differences. The resulting
reduction in income tax expense was not significant.
Leases and Lease Commitments
Total rental expense was $303 million in 1999, $304 million in 1998 and $265
million in 1997. Future minimum rental commitments under noncancelable leases
for years ending December 31 are: $111 million in 2000; $99 million in 2001; $86
million in 2002; $62 million in 2003; and $52 million in 2004. For the ensuing
three five-year periods, these commitments decrease from $79 million to $4
million. The minimum rentals over the remaining terms of the leases aggregate to
$43 million.
14
<PAGE>
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.
Segment Information
Schlumberger operates three reportable segments: Oilfield Services (OFS),
Resource Management Services (RMS) and Test & Transactions (T&T).
The Schlumberger OFS segment falls into four clearly defined economic and
geographical areas and is evaluated on the following basis: First, North America
(NAM) is a major self-contained market. Second, Latin America (LAM) comprises
regional markets that share a common dependence on the United States. Third,
Europe is another major self-contained market that includes West Africa and the
CIS, whose economy is increasingly linked to that of Europe. Fourth, Other
Eastern includes the remainder of the Eastern Hemisphere, which consists of many
countries at different stages of economic development that share a common
dependence on the oil and gas industry. Camco is managed as a separate unit
within OFS.
The OFS segment provides virtually all exploration and production services
required during the life of an oil and gas reservoir. Schlumberger believes that
all the products/services are interrelated and expects similar performance from
each. The RMS segment is essentially a global provider of measurement solutions,
products and systems for electricity, gas and water utilities worldwide. The T&T
segment supplies technology products, services and system solutions to the
semiconductor, banking, telecommunications, transportation and health care
industries. The segment consists of Automated Test Equipment, Smart Cards &
Terminals and Omnes. Services and products are described in more detail on page
xx of this report.
15
<PAGE>
Financial information for the years ended December 31, 1999, 1998 and 1997, by
segment, is as follows:
<TABLE>
<CAPTION>
(stated in millions)
----------------------------------------------------------------------------------------------
Europe/ Other Elims/
1999 NAM LAM CIS / W. Afr. Eastern Camco Other
----------------------------------------------------------------------------------------------
<S> <C>
Revenue .................................. $ 1,470 $ 850 $ 1,360 $ 1,394 $ 749 $ 46
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Income ........................... $ 68 $ 5 $ 67 $ 215 $ 74 $ (27)
Income Tax Expense (1) ................... 35 22 32 45 38 2
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income .................... $ 103 $ 27 $ 99 $ 260 $ 112 $ (25)
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income ..........................
Interest Expense ......................... $ (6) $ (1)
First & Fourth Quarter Charges ...........
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax Income ............................
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Assets ........................... $ 1,354 $ 884 $ 1,348 $ 1,217 $ 1,168 $ 1,434
Corporate Assets .........................
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets .............................
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation /Amortization ............... $ 193 $ 134 $ 216 $ 217 $ 72 $ 39
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ..................... $ 160 $ 118 $ 121 $ 133 $ 107 $ 50
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total Elims/
OFS RMS T&T Other Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenue ..................................... $ 5,869 $ 1,375 $ 1,183 $ (32) $ 8,395
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Income .............................. $ 402 $ 6 $ 30 $ (25) $ 413
Income Tax Expense (1) ...................... 174 9 (3) (47) 133
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income ....................... $ 576 $ 15 $ 27 $ (72) $ 546
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Income .............. 228
Interest Expense ............. $ (1) $ (1) (184)
First & Fourth Quarter Charges (720)
- ------------------------------------------------------------------------------------------------------------------------------------
Pretax Income ................ $ 470
- ------------------------------------------------------------------------------------------------------------------------------------
Segment Assets ............... $ 7,405 $ 1,006 $ 989 $ -- $ 9,400
Corporate Assets ............. $ 5.681
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets ................. $ 15,081
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation /Amortization ... $ 871 $ 88 $ 48 $ 14 $ 1,021
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ......... $ 689 $ 49 $ 44 $ 10 $ 792
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 1999 Income tax expense excludes a credit of $8 million related to the First
& Fourth Quarter Changes.
16
<PAGE>
<TABLE>
<CAPTION>
(stated in millions)
Europe Other Elims/
1998 NAM LAM CIS / W. Afr. Eastern Camco Other
------------------------------------------------------------------------------------------
<S> <C>
Revenue ...................... $ 2,035 $ 1,113 $ 1,907 $ 1,826 $ 896 $ 19
- ----------------------------------------------------------------------------------------------------------------------------
Segment Income ............... $ 165 $ 115 $ 211 $ 402 $ 116 $ (55)
Income Tax Expense (2) ....... 93 44 58 92 62 3
- ----------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income ........ $ 258 $ 159 $ 269 $ 494 $ 178 $ (52)
- ----------------------------------------------------------------------------------------------------------------------------
Interest Income ..............
Interest Expense ............. $ (9)
Third Quarter Charge .........
- ----------------------------------------------------------------------------------------------------------------------------
Pretax Income ................
- ----------------------------------------------------------------------------------------------------------------------------
Segment Assets ............... $ 1,094 $ 933 $ 1,523 $ 1,483 $ 1,089 $ 967
Corporate Assets .............
Discontinued Operations Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total Assets .................
- ----------------------------------------------------------------------------------------------------------------------------
Depreciation /Amortization ... $ 204 $ 113 $ 205 $ 203 $ 75 $ 65
- ----------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ......... $ 107 $ 269 $ 342 $ 293 $ 131 $ 179
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 Total Elims/
OFS RMS T&T Other CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue ...................... $ 7,796 $ 1,465 $ 1,226 $ 238 $ 10,725
- ---------------------------------------------------------------------------------------------------------------------------
Segment Income ............... $ 954 $ 32 $ 55 $ (92) $ 949
Income Tax Expense (2) ....... 352 18 18 (48) 340
- ---------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income ........ $ 1,306 $ 50 $ 73 $ (140) $ 1,289
- ---------------------------------------------------------------------------------------------------------------------------
Interest Income .............. 164
Interest Expense ............. $ (1) (127)
Third Quarter Charge ......... (432)
- ---------------------------------------------------------------------------------------------------------------------------
Pretax Income ................ 894
- ---------------------------------------------------------------------------------------------------------------------------
Segment Assets ............... $ 7,089 $ 1,184 $ 1,069 $ -- $ 9,342
Corporate Assets ............. 5,316
Discontinued Operations Assets 1,420
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets ................. $16,078
- ---------------------------------------------------------------------------------------------------------------------------
Depreciation /Amortization ... $ 865 $ 87 $ 48 $ 12 $ 1,012
- ---------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ......... $ 1,321 $ 61 $ 53 $ 28 $ 1,463
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2)1998 income tax expense excludes a credit of $64 million related to the
Third Quarter Charge.
<TABLE>
<CAPTION>
(stated in millions)
Europe/ Other Elims/
1997 NAM LAM CIS / W. Afr. Eastern Camco Other
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ...................... $ 2,168 $ 1,019 $ 1,863 $ 1,745 $ 869 $ (10)
- -------------------------------------------------------------------------------------------------------------------------------
Segment Income ............... $ 265 $ 154 $ 250 $ 384 $ 99 $ (79)
Income Tax Expense ........... 113 45 48 83 54 3
- -------------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income ........ $ 378 $ 199 $ 298 $ 467 $ 153 $ (76)
- -------------------------------------------------------------------------------------------------------------------------------
Interest Income ..............
Interest Expense ............. $ (5)
- -------------------------------------------------------------------------------------------------------------------------------
Pretax Income ................
- -------------------------------------------------------------------------------------------------------------------------------
Segment Assets ............... $ 1,451 $ 852 $ 1,370 $ 1,339 $ 1,042 $ 843
Corporate Assets .............
Discontinued Operations Assets
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets .................
- -------------------------------------------------------------------------------------------------------------------------------
Depreciation/Amortization .... $ 187 $ 92 $ 191 $ 174 $ 62 $ 68
- -------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ......... $ 280 $ 216 $ 305 $ 313 $ 96 $ 51
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total Elims/
OFS RMS T&T Other CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue ...................... $ 7,654 $ 1,569 $ 1,066 $ 363 $ 10,652
- -------------------------------------------------------------------------------------------------------------------------------
Segment Income ............... $ 1,073 $ 47 $ 73 $ (129) $ 1,064
Income Tax Expense ........... 346 24 30 (12) 388
- -------------------------------------------------------------------------------------------------------------------------------
Pretax Segment Income ........ $ 1,419 $ 71 $ 103 $ (141) $ 1,452
- -------------------------------------------------------------------------------------------------------------------------------
Interest Income .............. 94
Interest Expense ............. $ (1) (70)
- -------------------------------------------------------------------------------------------------------------------------------
Pretax Income ................ $ 1,476
- -------------------------------------------------------------------------------------------------------------------------------
Segment Assets ............... $ 6,897 $ 1,219 $ 1,088 $ -- $ 9,204
Corporate Assets ............. 2,966
Discontinued Operations Assets 1,016
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets ................. $13,186
- -------------------------------------------------------------------------------------------------------------------------------
Depreciation/Amortization .... $ 774 $ 93 $ 44 $ 13 $ 924
- -------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures ......... $ 1,261 $ 67 $ 63 $ 13 $ 1,404
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Corporate assets largely comprise short-term and long-term investments.
During the three years ended December 31, 1999, no single customer exceeded 10%
of consolidated revenue.
The accounting policies of the segments are the same as those described in
Summary of Accounting Policies.
Oilfield Services' net income eliminations include: certain headquarters
administrative costs which are not allocated geographically, goodwill
amortization, and certain costs maintained at the OFS level.
Nonoperating expenses, such as certain intersegment charges and interest expense
(except as shown above), are not included in segment operating income.
Schlumberger did not have revenue from third-party customers in its country of
domicile during the last three years. In each of the three years, only revenue
in the US exceeded 10% of consolidated revenue. Revenue in the US in 1999, 1998
and 1997 was $2.5 billion, $3.4 billion and $3.5 billion, respectively.
Pension and Other Benefit Plans
US Pension Plans
Schlumberger and its US subsidiary sponsor several defined benefit pension plans
that cover substantially all employees. The benefits are based on years of
service and compensation on a career-average pay basis. These plans are fully
funded with a trustee in respect to past and current service. Charges to expense
are based upon costs computed by independent actuaries. The funding policy is to
annually contribute amounts that are allowable for federal income tax purposes.
These contributions are intended to provide for benefits earned to date and
those expected to be earned in the future.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 1999 were 7%, 4.5% and 9%, respectively. In
1998, the assumptions were 7.5%, 4.5% and 9%, respectively. In 1997, the
assumptions were 8%, 4.5% and 8.5%, respectively.
Net pension cost in the US for 1999, 1998 and 1997, included the following
components:
(Stated in millions)
1999 1998 1997
------ ------ ------
Service cost-benefits
earned during the period $ 45 $ 39 $ 33
Interest cost on projected
benefit obligation 73 68 61
Expected return on plan assets
(actual return: 1999-$211;
1998-$167; 1997-$165) (86) (77) (63)
Amortization of
transition asset (2) (2) (2)
Amortization of prior
service cost/other 6 3 4
---- ---- ----
Net pension cost $ 36 $ 31 $ 33
==== ==== ====
Effective January 1, 1998, Schlumberger and its subsidiaries amended their
pension plans to improve retirement benefits for retired employees. The funded
status on December 31, 1997, reflects the amendment.
18
<PAGE>
The change in the projected benefit obligation, plan assets and funded status of
the plans on December 31, 1999 and 1998, was as follows:
(Stated in millions)
1999 1998
------ ------
Projected benefit obligation
at beginning of the year $ 1,060 $ 906
Service cost 45 39
Interest cost 73 68
Actuarial (gains) losses (70) 86
Benefits paid (56) (46)
Amendments -- 2
Special termination benefits -- 9
Other -- (4)
Projected benefit obligation ------- -------
at end of the year $ 1,052 $ 1,060
------- -------
Plan assets at market value
at beginning of the year $ 1,119 $ 978
Actual return on plan assets 211 167
Employer contribution 2 20
Benefits paid (56) (46)
Plan assets at market value ------- -------
at end of the year $ 1,276 $ 1,119
------- -------
Excess of assets over
projected benefit obligation 224 59
Unrecognized net gain (395) (198)
Unrecognized prior service cost 44 50
Unrecognized net asset
at transition date (2) (4)
------- -------
Pension liability $ (129) $ (93)
======= =======
The assumed discount rate, the rate of compensation increases and the expected
long-term rate of return on plan assets used to determine the projected benefit
obligations were 7.75%, 4.5% and 9%, respectively, in 1999, and 7%, 4.5% and 9%
respectively, in 1998. Plan assets on December 31, 1999, consisted of common
stocks ($843 million), cash or cash equivalents ($152 million), fixed income
investments ($197 million) and other investments ($84 million). Less than 1% of
the plan assets on December 31, 1999, were represented by Schlumberger common
stock.
Non-US Pension Plans
Outside the US, subsidiaries of Schlumberger sponsor several defined benefit and
defined contribution plans that cover substantially all employees who are not
covered by statutory plans. For defined benefit plans, charges to expense are
based upon costs computed by independent actuaries. These plans are
substantially fully funded with trustees in respect to past and current service.
For all defined benefit plans, pension expense was $19 million, $17 million and
$15 million in 1999, 1998 and 1997, respectively. The only significant defined
benefit plan is in the UK.
The assumed discount rate, compensation increases and return on plan assets used
to determine pension expense in 1999 were 7%, 4% and 9%, respectively. In 1998,
the assumptions were 7.5%, 5% and 9%, respectively. In 1997, the assumptions
were 8%, 5% and 8.5%, respectively.
19
<PAGE>
Net pension cost in the UK plan for 1999, 1998 and 1997 (translated into US
dollars at the average exchange rate for the periods), included the following
components:
(Stated in millions)
1999 1998 1997
------ ------ ------
Service cost-benefits
earned during the period $ 22 $ 18 $ 16
Interest cost on projected
benefit obligation 15 18 15
Expected return on plan assets
(actual return: 1999-$96;
1998-$22; 1997-$28) (33) (30) (25)
Amortization of transition
asset and other (6) (6) (5)
---- ---- ----
Net pension cost $ (2) $-- $ 1
==== ==== ====
The change in the projected benefit obligation, plan assets and funded status of
the plan (translated into US dollars at year-end exchange rates) was as follows:
(Stated in millions)
1999 1998
------ ------
Projected benefit obligation
at beginning of the year $ 229 $ 239
Service cost 22 18
Interest cost 15 18
Actuarial losses (gains) 36 (37)
Benefits paid (12) (9)
Projected benefit obligation ----- -----
at end of the year $ 290 $ 229
----- -----
Plan assets at market value
at beginning of the year $ 366 $ 350
Actual return on plan assets 96 22
Employer contribution 4 3
Benefits paid (12) (9)
Plan assets at market value ----- -----
at end of the year $ 454 $ 366
----- -----
Excess of assets over
projected benefit obligation 164 137
Unrecognized net gain (135) (114)
Unrecognized prior service cost 2 3
Unrecognized net asset
at transition date (3) (4)
----- -----
Pension asset $ 28 $ 22
===== =====
The assumed discount rate and rate of compensation increases used to determine
the projected benefit obligation were 6.5% and 4%, respectively, in 1999, and 7%
and 4%, respectively, in 1998; the expected long-term rate of return on plan
assets was 9% in 1999 and 1998. Plan assets consisted of common stocks ($339
million), cash or cash equivalents ($90 million) and fixed income investments
($25 million). None of the plan assets represented Schlumberger common stock.
20
<PAGE>
For defined contribution plans, funding and cost are generally based upon a
predetermined percentage of employee compensation. Charges to expense in 1999,
1998 and 1997, were $24 million, $25 million and $25 million, respectively.
Other Deferred Benefits
In addition to providing pension benefits, Schlumberger and its subsidiaries
have other deferred benefit programs. Expenses for these programs were $73
million, $128 million and $127 million in 1999, 1998 and 1997, respectively.
Health Care Benefits
Schlumberger and its US subsidiary provide health care benefits for certain
active employees. The cost of providing these benefits is recognized as expense
when incurred and aggregated $53 million, $54 million and $46 million in 1999,
1998 and 1997, respectively. Outside the US, such benefits are mostly provided
through government-sponsored programs.
Postretirement Benefits Other Than Pensions
Schlumberger and its US subsidiary provide certain health care benefits to
former employees who have retired under the US pension plans.
The principal actuarial assumptions used to measure costs were a discount rate
of 7% in 1999, 7.5% in 1998 and 8% in 1997. The overall medical cost trend rate
assumption beginning December 31, 1996, was 9% graded to 5% over the next six
years and 5% thereafter. Previously the overall assumption had been 10% graded
to 6% over the next six years and 6% thereafter.
Net periodic postretirement benefit cost in the US for 1999, 1998 and 1997,
included the following components:
(Stated in millions)
1999 1998 1997
------ ------ ------
Service cost-benefits
earned during the period $ 11 $ 11 $ 9
Interest cost on accumulated
postretirement benefit
obligation 23 22 22
Amortization of unrecognized
net gain and other (3) (6) (6)
---- ---- ----
$ 31 $ 27 $ 25
==== ==== ====
21
<PAGE>
The change in accumulated postretirement benefit obligation and funded status on
December 31, 1999 and 1998 was as follows:
(Stated in millions)
1999 1998
------ ------
Accumulated postretirement
benefit obligation
at beginning of the year $ 354 $ 313
Service cost 11 11
Interest cost 23 22
Actuarial (gains) losses (52) 18
Benefits paid (16) (11)
Acquisition -- 1
Accumulated postretirement ----- -----
benefit obligation
at end of the year 320 354
Unrecognized net gain 124 74
Unrecognized prior service cost 4 5
Postretirement benefit ----- -----
liability on December 31 $ 448 $ 433
===== =====
The components of the accumulated postretirement benefit obligation on December
31, 1999 and 1998 were as follows:
(Stated in millions)
1999 1998
------ ------
Retirees $161 $165
Fully eligible 45 48
Actives 114 141
---- ----
$320 $354
==== ====
22
<PAGE>
The assumed discount rate used to determine the accumulated postretirement
benefit obligation was 7.75% for 1999 and 7% for 1998.
If the assumed medical cost trend rate was increased by one percentage point,
health care cost in 1999 would have been $39 million, and the accumulated
postretirement benefit obligation would have been $372 million on December 31,
1999.
If the assumed medical cost trend rate was decreased by one percentage point,
health care cost in 1999 would have been $26 million, and the accumulated
postretirement benefit obligation would have been $278 million on December 31,
1999.
23
<PAGE>
Supplementary Information
Operating revenue and related cost of goods sold and services for continuing
operations comprised the following:
Year ended (Stated in millions)
December 31, 1999 1998 1997
-------- -------- --------
Operating revenue
Sales $ 3,822 $ 4,623 $ 4,703
Services 4,573 6,102 5,949
------- ------- -------
$ 8,395 $10,725 $10,652
======= ======= =======
Direct operating costs
Goods sold $ 2,461 $ 2,916 $ 2,949
Services 4,288 5,498 4,899
------- ------- -------
$ 6,749 $ 8,414 $ 7,848
======= ======= =======
Cash paid for interest and income taxes for continuing operations was as
follows:
Year ended (Stated in millions)
December 31, 1999 1998 1997
------ ------ ------
Interest $ 200 $ 128 $ 77
Income taxes $ 182 $ 299 $ 296
Accounts payable and accrued liabilities are summarized as follows:
Year ended (Stated in millions)
December 31, 1999 1998
------ ------
Payroll, vacation and
employee benefits $ 564 $ 582
Trade 663 820
Taxes, other than income 169 176
Other 887 962
------ ------
$2,283 $2,540
====== ======
Interest and other income includes interest income, principally from short-term
and long-term investments, of $235 million, $167 million and $99 million for
1999, 1998 and 1997, respectively, and in 1999, a gain of $103 million on the
sale of financial instruments.
24
