<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10718
CAMCO INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3517570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7030 Ardmore, Houston, Texas 77054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 747-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 24,281,628 shares
of Common Stock ($.01 par value) outstanding at July 30, 1996.
<PAGE> 2
CAMCO INTERNATIONAL INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
<S> <C>
PART I - FINANCIAL INFORMATION:
Report of Independent Public Accountants 1
Consolidated Condensed Statements of Operations-
Three Months and Six Months ended June 30, 1996
and 1995 2
Consolidated Condensed Balance Sheets - June 30,
1996 and December 31, 1995 3
Consolidated Condensed Statements of Cash Flows -
Six Months ended June 30, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5-6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-11
PART II - OTHER INFORMATION 11-12
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Camco International Inc.:
We have reviewed the accompanying consolidated condensed balance sheet of Camco
International Inc. (a Delaware corporation) and subsidiaries as of June 30,
1996, and the related consolidated condensed statements of operations for the
three months and six months ended June 30, 1996 and 1995, and the consolidated
condensed statements of cash flows for the six months ended June 30, 1996 and
1995. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
July 16, 1996
1
<PAGE> 4
CAMCO INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
REVENUES:
Sales $121,799 $106,403 $232,823 $212,454
Services 41,741 28,348 76,241 62,080
-------- -------- -------- --------
163,540 134,751 309,064 274,534
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 66,722 58,461 126,775 115,095
Cost of services 30,802 22,581 57,138 49,844
-------- -------- -------- --------
97,524 81,042 183,913 164,939
-------- -------- -------- --------
Gross margin 66,016 53,709 125,151 109,595
Selling, general and administrative
expenses 46,316 42,061 88,359 81,926
Amortization of intangible assets 1,472 1,486 2,859 2,901
-------- -------- -------- --------
Operating income 18,228 10,162 33,933 24,768
Interest expense, net 831 789 1,490 1,439
-------- -------- -------- --------
Income before provision for income
taxes 17,397 9,373 32,443 23,329
Provision for income taxes 5,917 2,617 10,732 6,484
-------- -------- -------- --------
Net income $ 11,480 $ 6,756 $ 21,711 $ 16,845
======== ======== ======== ========
Net income per share $ .46 $ .28 $ .87 $ .69
======== ======== ======== ========
Average common and common equivalent
shares outstanding 24,904 24,538 24,823 24,472
Cash dividends paid per common share $ .05 $ .05 $ .10 $ .10
The accompanying notes are an integral part of these consolidated
condensed financial statements.
2
<PAGE> 5
CAMCO INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 66,284 $ 32,290
Accounts receivable, net 128,270 134,406
Inventories 144,781 137,953
Prepaid expenses and other 30,554 30,117
--------- ---------
Total current assets 369,889 334,766
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 3,915 3,919
Buildings 61,280 61,754
Machinery and equipment 204,044 196,265
Service equipment 61,102 60,479
--------- ---------
330,341 322,417
Accumulated depreciation (201,087) (188,559)
--------- ---------
Property, plant and equipment, net 129,254 133,858
--------- ---------
INTANGIBLE ASSETS, net 178,239 181,262
OTHER ASSETS 11,850 11,381
--------- ---------
Total assets $ 689,232 $ 661,267
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term and current portion of long-term debt $ 10,895 $ 12,179
Accounts payable 32,309 29,847
Accrued liabilities 106,416 92,459
Income taxes payable 6,287 11,973
--------- ---------
Total current liabilities 155,907 146,458
--------- ---------
LONG-TERM DEBT 60,765 71,998
DEFERRED INCOME TAXES 7,898 7,045
OTHER LONG-TERM LIABILITIES 46,322 37,948
--------- ---------
Total liabilities 270,892 263,449
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.01 par value, 100,000,000 shares authorized,
25,228,115 and 25,193,917 shares issued 252 252
Additional paid-in capital 439,629 438,947
Retained earnings 14,776 (4,375)
Cumulative translation adjustment (18,843) (18,576)
Treasury stock, 948,112 and 1,000,000 shares at cost (17,474) (18,430)
--------- ---------
Total stockholders' equity 418,340 397,818
--------- ---------
Total liabilities and stockholder's equity $ 689,232 $ 661,267
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE> 6
CAMCO INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,711 $ 16,845
Adjustments to reconcile net income to net cash
provided by operating activities, net of
effects of acquisition -
Gain from sale of assets -- (2,022)
Depreciation and amortization 17,515 16,763
Provision for deferred and other taxes 858 374
(Increase) decrease in accounts receivable 6,058 (3,712)
Increase in inventories (6,957) (14,670)
Increase (decrease) in accounts payable 2,547 (530)
Decrease in income taxes payable (5,659) (8,923)
Increase (decrease) in accrued liabilities and other 20,047 (723)
-------- --------
Net cash provided by operating activities 56,120 3,402
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,971) (7,722)
Proceeds from sale of property, plant and equipment 700 7,632
Business acquisition -- (5,750)
-------- --------
Net cash used in investing activities (8,271) (5,840)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in borrowings under revolving credit facility (10,000) --
Decrease in other debt (2,516) (2,419)
Dividends paid to stockholders (2,427) (2,409)
Proceeds from exercise of stock options 1,176 344
-------- --------
Net cash used in financing activities (13,767) (4,484)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (88) 534
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 33,994 (6,388)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,290 35,971
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 66,284 $ 29,583
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,490 $ 1,439
Cash paid for income taxes $ 15,801 $ 15,221
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE> 7
CAMCO INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General
In the opinion of Camco International Inc. and subsidiaries (the
"Company") management, the accompanying unaudited consolidated condensed
financial statements include all adjustments necessary to present fairly the
Company's financial position as of June 30, 1996, and its results of operations
for the three months and six months ended June 30, 1996 and 1995, and its cash
flows for the six months ended June 30, 1996 and 1995. Although the Company
believes that the disclosures are adequate to make the information presented
not misleading, certain information and footnote disclosures normally included
in annual consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. These consolidated condensed financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. The results of operations for the three months and six
months ended June 30, 1996 may not be indicative of the results for the full
year.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Note 2. Inventories
Consolidated inventories, net of allowances, are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Raw materials $ 18,137 $ 17,013
Parts and components 46,367 37,983
Work in process 19,781 15,670
Finished Goods 60,496 67,287
-------- --------
$144,781 $137,953
======== ========
</TABLE>
Work in process and finished goods inventories include the cost of
materials, labor and plant overhead. The excess of current costs, determined
using the FIFO basis, over the carrying values of LIFO inventories was
approximately $11.9 million and $10.0 million at June 30, 1996 and December 31,
1995, respectively.
5
<PAGE> 8
Note 3. Commitments and Contingencies - Legal Proceedings
The Company is involved in certain lawsuits and claims, including
claims by federal and local authorities under various environmental protection
laws, arising in the normal course of business. In the opinion of management,
uninsured losses, if any, resulting from the ultimate resolution of these
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
General
The Company is one of the world's leading providers of oilfield
equipment and services for numerous specialty applications in key phases of oil
and gas drilling, completion and production, maintenance and improvement. The
demand for the Company's products are particularly affected by international
and domestic drilling activity, the worldwide price for oil and other factors
affecting the exploration and development of oil and natural gas. Such
additional factors include worldwide economic conditions, supply and demand for
oil and natural gas, seasonal trends and political stability in the oil
producing countries.
Operating income for the three and six months ended June 30, 1996, was
$18.2 million and $33.9 million, respectively, compared to $10.2 million and
$24.8 million for the three and six months ended June 30, 1995. The
substantial increases in operating income were primarily attributable to
increased sales of electrical submersible pumps (ESPs), increased international
drilling activity, higher Canadian sales relating to the Company's acquisition
of Site Oil Tools in 1995, strong demand in the North Sea, improved operations
in Nigeria and an overall improvement in market activity. The Company also
benefitted from low levels of indebtedness and cost savings programs
implemented in prior periods. The Company currently expects that 1996 results
will continue to benefit from these market trends. Results, however, will be
dependent upon market conditions, in particular, the level of international and
domestic drilling activity and prevailing prices of oil and natural gas.
6
<PAGE> 9
Second Quarter Ended June 30, 1996 Compared to Second Quarter Ended June 30,
1995
Revenues for the quarter ended June 30, 1996 were $163.5 million, an
increase of $28.8 million from the comparable quarter in 1995. Product sales
in the second quarter were up $15.4 million compared to last year, primarily
due to increased completion product sales and higher ESP sales, particularly in
the Former Soviet Union (the "FSU"). Service revenues were up $13.4 million,
primarily due to increased activity levels in Africa, Canada and the United
States.
United States and Canadian revenues of $61.5 million were up 16% in
the second quarter compared to the same quarter last year, primarily due to
higher completion product and oil tool services sales by the Company's SITE Oil
Tool division in Canada and increased ESP sales and services by the Company's
Reda division. Sales were up 32% in the Middle East and Africa to $27.9
million, primarily due to increased completion products and services sales and
higher ESP revenues. Sales in Europe increased $14.4 million from the prior
year to $32.1 million, principally due to higher ESP sales to the FSU and
higher drilling and completion activity in the North Sea. South American
revenues were up 11% to $28 million, most of the increase attributable to
higher ESP sales. Far East revenues declined $3 million from last year to
$14.1 million, primarily due to lower ESP sales.
Consolidated gross margin increased $12.3 million to $66 million, or
40.4% of sales from $53.7 million, or 39.9% of sales in the comparable quarter
last year. Most of the increase is due to higher volume and a significant
improvement in completion products and services margins due to a favorable
product mix.
Selling, general and administrative expenses ("SG&A") were $4.3
million higher than the comparable quarter last year, primarily due to the
sales increase. SG&A, as a percentage of sales, improved to 28.3% compared to
31.2% in the second quarter of last year.
Operating income was $18.2 million in the second quarter, an increase
of $8 million, or 79% over the same quarter last year. Improved gross margin
on significantly higher revenues accounts for most of the operating income
increase. Net income increased $4.7 million to $11.5 million for the quarter,
despite a higher
7
<PAGE> 10
consolidated effective tax rate in the current quarter due to increased
profitability in higher foreign tax jurisdictions. Earnings per share
increased 64% from 28 cents in the second quarter last year to 46 cents in the
current quarter.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues were up 13% in the first half of 1996 to $309.1 million from
$274.5 million in the first half of 1995. Product sales increased $20.4
million this year to $232.8 million, mostly due to higher sales of completion
products and ESPs. Service revenues were up 23% to $76.2 million for the six
month period, primarily due to a significant increase in Nigerian activity, an
increase in ESP related service revenues and higher oil tool service revenues
in Canada, a direct result of the SITE Oil Tool division acquisition in March
1995.
United States and Canada revenues during the first half of 1996 were
11% higher than last year at $118.5 million. The increase year over year is
primarily attributable to increased completion product and oil tool services
sales by SITE in Canada and a significant increase in ESP sales in both the
U.S. and Canada. Sales in the Middle East and Africa increased 38% over last
year to $55.2 million during the first six months of the current year, again
due to higher completion products and services sales and higher ESP revenues.
Sales were up 29% in Europe to $54.8 million in the first half of 1996,
primarily due to higher ESP sales to the FSU and a significant increase in
drill bit and completion product sales, particularly in the North Sea. Far
East sales were down 13% from the prior year at $28.1 million, almost entirely
due to lower ESP sales in the region.
Consolidated gross margin increased on both an absolute basis due to
higher sales, and as a percentage of sales due to improved products and
services margins during the first half of 1996. Gross margin was up $15.6
million over the comparable period last year to $125.2 million. Increased
gross margins in the service business as well as higher completion product and
drill bit margins raised the consolidated gross margin to 40.5% of sales, a
half percent improvement compared to last year.
SG&A increased $6.4 million in the first half of 1996 to $88.4
million, or 28.6% of sales. The increase in SG&A is directly
8
<PAGE> 11
attributable to the significant increase in sales. As a result of the
substantial increase in sales combined with improved gross margins, operating
income increased $9.2 million in the first half of 1996 to $33.9 million, an
increase of 37% over the prior year.
Net income increased $4.9 million, or 29%, to $21.7 million in the
first half of this year despite a higher tax provision resulting from increased
profitability in higher foreign tax jurisdictions. Excluding the gain on the
sale of the Company's safety division, STOP, included in last year's six month
results, net income from operations was up 42% this year. Earnings per share
was 87 cents in the first half of 1996 compared with 63 cents last year,
excluding the 6 cents per share gain related to the sale of the safety
division.
Foreign Operations
The Company operates in approximately 50 countries worldwide.
International operations of the Company are subject to certain risks inherent
in doing business outside the United States, including risks of war, civil
disturbances and governmental actions, which may limit or disrupt markets and
restrict the movement of funds. In addition, political conditions in certain
foreign countries where the Company operates may disrupt the normal commercial
relationship between the Company and the respective national oil companies.
Continuing political instability and governmental control of currency exchange
and movement has caused disruption in certain areas in which the Company
operates such as the FSU, Nigeria and Venezuela.
The FSU continues to experience political uncertainty and a shortage of
hard currency to finance exploration and production programs. While the
Company expects continuing sales of equipment, primarily ESPs into the FSU, the
amount and timing of sales of ESPs and other products in the FSU for the
remainder of 1996 are currently uncertain due to the lack of available
financing. The political and economic situation in the FSU is expected to
continue to impact results, in particular, those of the Company's Reda
division, until such time that financing for purchases in the FSU becomes more
readily available.
Camco has significant operations in Nigeria, including coiled tubing
services, wireline services and equipment sales and services. In recent years,
Nigeria has experienced considerable
9
<PAGE> 12
political instability, high inflation and a significant decline in business
activity. In addition, the Nigerian naira ("the naira") devalued significantly
during the first quarter 1995, adversely impacting the Company's operating
income. Any future devaluation of the naira could further reduce the Company's
income. Although activity levels have improved somewhat during the last year,
the business environment in Nigeria remains volatile and uncertain.
Additionally, there is currently pending before the U.S. Congress proposed
legislation regarding trade with Nigeria, which, if enacted, could adversely
affect the Company's future business in Nigeria.
Camco has significant equipment sales in Venezuela and also provides
coiled tubing and wireline services. In recent years, Venezuela has
experienced political instability, high inflation and considerable economic
pressure on the allocation of hard currency to the oil production sector. In
December 1995, the Venezuelan bolivar (the "B") devalued by approximately 41%
versus the U.S. dollar, reducing the Company's operating income. In April
1996, the Venezuelan government lifted all foreign currency exchange controls,
and the B devalued by an additional 40%, further reducing the Company's
operating income. Since the most recent devaluation, the exchange rate has
remained relatively stable. However, any subsequent devaluation of the B could
adversely impact the Company's future earnings.
International sales are expected to continue to represent a
substantial portion of the Company's total revenues. Although there can be no
assurance that the Company will not experience adverse effects from political
and economic events outside the United States similar to those currently being
experienced in the FSU, Nigeria and Venezuela, the Company believes that the
diversified nature of the Company's international activities reduces the risk
to the Company taken as a whole.
Capital Resources and Liquidity
Cash provided by operating activities was $56.1 million during the six
months ended June 30, 1996, an increase of $52.7 million from the prior year.
The majority of the increase in cash flow is attributable to a significant
reduction in working capital requirements in the first half of 1996 compared to
last year. Although sales and service activity levels were substantially
higher this year, trade receivables have been reduced while accrued
10
<PAGE> 13
liabilities associated with ongoing business operations have increased. During
the first six months of 1996, cash was used to fund $9 million in capital
expenditures, reduce debt by $12.5 million and pay dividends to stockholders of
$2.4 million, or 10 cents per share. After these expenditures cash and cash
equivalents increased $34 million to a balance of $66.3 million at June 30,
1996.
The Company currently has budgeted approximately $18 million in
capital expenditures for the remainder of 1996 relating to selective expansion
of manufacturing capacity and service equipment investments to meet long-term
contract commitments and market requirements. In addition, the Company also
contemplates the use of its capital resources for acquisitions to expand its
products and services offerings or expand its geographic operations, or both.
The Company believes that cash flow from operations combined with the
unused portion of the revolving credit facility should provide it with
sufficient capital resources and liquidity to meet its debt service
requirements under the credit facilities and manage its business needs.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 14, 1996 the Company held its regular Annual Meeting of
Stockholders for 1996 ("the Annual Meeting"). At the Annual Meeting, Hugh A.
Goerner and William A. Krause were reelected to three-year terms. The
following table sets forth the number of shares that voted for, and for which
votes were withheld for the election of each of such person:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Hugh H. Goerner 21,172,728 3,135,557
William A. Krause 21,173,842 3,134,443
</TABLE>
Gary D. Nicholson, Charles P. Siess, Jr., Robert L. Howard, William J.
Johnson and Gilbert H. Tausch continue their terms as directors of the Company.
11
<PAGE> 14
The stockholders of the Company approved an amendment to the
Nonemployee Director Stock Option Plan with 18,236,237 votes cast for approval,
2,442,791 votes cast against and 566,596 shares abstaining from voting.
The stockholders of the Company ratified the appointment of Arthur
Andersen LLP as the Company's independent auditors for the year ending December
31, 1996. The ratification of Arthur Andersen LLP as the Company's auditors
was approved with 21,209,452 votes cast for approval, 23,179 votes cast against
and 12,993 shares abstaining.
There were no broker nonvotes with respect to either the election of
Directors, the amendments to the Nonemployee Stock Option Plan for Nonemployee
Directors or the ratification of Arthur Andersen LLP as the Company's
independent auditors.
ITEM 5. OTHER INFORMATION
Private Securities Litigation Reform Act
In accordance with the provisions of the Private Securities Litigation
Reform Act of 1995, the cautionary statements set forth herein identify
important factors that could cause actual results to differ materially from
those in any forward-looking statements contained in this report. Such trends
and factors include changes in the price of oil and gas, changes in the
domestic and international rig count, global trade policies, domestic and
international drilling activities, world-wide political stability and economic
growth, currency fluctuations, including currency fluctuations and monetary
restrictions in Venezuela and other countries, government export and import
policies, technological advances involving the Company's products, the
Company's successful execution of internal operating plans, performance issues
with key suppliers and subcontractors, collective bargaining labor disputes,
regulatory uncertainties and legal proceedings.
12
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation (incorporated by reference
to Exhibit No. 3.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993)
3.2 By-laws (incorporated by reference to Exhibit No. 3.4 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-70036)).
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated
Certificate of Incorporation and By-laws of the Company defining the
rights of holders of Common Stock.
4.2 Form of Common Stock Certificate (incorporated by reference to
Exhibit No. 4.2 to the Company's Registration Statement on Form S-1
(Reg. No. 33-70036)).
4.3 Rights Agreement dated as of December 15, 1994, between Camco
International Inc., and First Chicago Trust Company of New York, as
Rights Agent, which includes as exhibits, the form of Right
Certificate and the Summary of Rights to Purchase Common Shares
(incorporated by reference to Exhibit No. 1 to the Company's
Registration Statement of Form 8-A dated December 19, 1994).
10.1 Nonemployee Directors Stock Option Plan as amended.
10.2 Camco Thrift Plan, as amended (incorporated by reference to
Exhibit No. 4.6 to the Company's Registration Statement on Form S-8
(Reg. No. 333-09299))
15.1 Letter Regarding Unaudited Interim Financial Information.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ GARY D. NICHOLSON
------------------------------------
Gary D. Nicholson
Chairman of the Board of Directors
President and Chief Executive Officer
(Principal Executive Officer)
August 9, 1996
By: /s/ BRUCE F. LONGAKER JR.
------------------------------------
Bruce F. Longaker Jr.
Vice-President Finance and
Corporate Controller
(Principal Accounting Officer)
August 9, 1996
<PAGE> 17
INDEX TO EXHIBITS
10.1 Nonemployee Directors Stock Option Plan as amended
(incorporated by reference to Exhibit No. 10.1 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-70036)).
15.1 Letter Regarding Unaudited Interim Financial Information.
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
CAMCO INTERNATIONAL INC.
AMENDED AND RESTATED STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
ARTICLE I
PURPOSES
The purposes of the Camco International Inc. Amended and Restated Stock
Option Plan for Nonemployee Directors (the "Plan") are to attract and retain the
services of experienced and knowledgeable nonemployee directors of Camco
International Inc. (the "Corporation") and to provide an incentive for such
directors to increase their proprietary interests in the Corporation's long-term
success and progress.
ARTICLE II
SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Article VI hereof, the total
number of shares of the Corporation's common stock, par value $.01 per share
(the "Common Stock"), which may be delivered upon the exercise of options
granted under the Plan is 250,000 (the "Shares"). The Shares shall be shares of
Common Stock presently authorized but unissued or subsequently acquired by the
Corporation. In the event that an option for Shares granted under the Plan shall
terminate, expire or be canceled or forfeited without being exercised in whole
or in part, new options for Shares may be granted covering such unexercised
shares.
ARTICLE III
ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the Board
of Directors of the Corporation (the "Board") or any designated committee
thereof. Subject to the terms of the Plan, the Plan Administrator shall have the
power to construe the provisions of the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. No member of the Plan
Administrator shall participate in any vote by the Plan Administrator on any
matter materially affecting the rights of any such member under the Plan.
ARTICLE IV
PARTICIPATION IN THE PLAN
1. Initial and Annual Grants. Beginning on the Annual Meeting of
Stockholders of the Corporation to be held in 1996, each member of the Board
elected, or appointed, who is not otherwise an employee of the Corporation or
subsidiary corporation (an "Eligible Director") shall automatically receive an
initial grant of an option to purchase 10,000 shares, such grant to be received
on the 30th day following such member's initial election or appointment to the
Board or upon such member's reelection (the "Election Grant"), and shall also
receive an annual grant of an option (the "Annual Grant") to purchase 5,000
shares on the 30th day following each Annual Meeting of Stockholders (as
described in the Corporation's By-laws), provided such member continues to be a
member of the Board on such 30th day.
2. One-Time Grants. In addition to the options to be granted pursuant to
Section 1 of this Article IV, the following Eligible Directors shall receive a
one-time grant of an option (a "One-Time Grant") to purchase that number of
shares set forth opposite the Eligible Director's name, such grant to be
received upon approval
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<PAGE> 2
of this Amended and Restated Plan by the stockholders of the Corporation
(provided such member continues to be a member of the Board on such day):
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO
ELIGIBLE DIRECTORS OPTION
------------------ ----------------
<S> <C>
Class I Directors
Robert L. Howard........................................... 6,666
Charles P. Siess, Jr. ..................................... 6,666
Class II Directors
William J. Johnson......................................... 10,000
Gilbert H. Tausch.......................................... 10,000
Class III Directors
Hugh H. Goerner............................................ 3,333
William A. Krause.......................................... 3,333
</TABLE>
ARTICLE V
OPTION TERMS
Each option granted to an Eligible Director under the Plan and the
issuances of Shares thereunder shall be subject to the following terms:
1. Option Agreement
Each option to acquire Shares granted under the Plan shall be evidenced by
an option agreement (an "Agreement") duly executed on behalf of the Corporation.
Each Agreement shall comply with and be subject to the terms and conditions of
the Plan. Any Agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Plan Administrator.
2. Option Exercise Price
The option exercise price for an option granted under the Plan shall be the
fair market value of the Shares covered by the option at the time the option is
granted. For purposes of the Plan, "fair market value" on a date shall be the
average of the high and low sales prices at which the Common Stock was sold on
such date on the New York Stock Exchange or, if no Common Stock was traded on
such date, on the next preceding date on which Common Stock was so traded.
3. Vesting and Exercisability
(a) Subject to paragraph (c) of this Section 3, each option granted
pursuant to Section 1 of Article IV shall become fully vested and become
nonforfeitable in three equal annual installments (rounding to the nearest Share
for the first two installments, with the remaining balance vesting on the third
installment) beginning on the first anniversary of the date of the grant of the
option, provided that an installment shall vest only if the optionee has
continued to serve as an Eligible Director until the applicable anniversary.
(b) Subject to paragraph (c) of this Section 3, options granted pursuant
Section 2 of Article IV shall become fully vested and nonforfeitable as follows:
(i) with respect to options granted to a Class I Eligible Director,
3,333 shares subject to option shall vest six months following the date on
which the Plan is approved by stockholders of the Corporation, with the
balance vesting on the first anniversary of the date of such approval,
provided that an installment shall vest only if the optionee has continued
to serve as an Eligible Director until the applicable vesting date;
(ii) with respect to options granted to a Class II Eligible Director,
3,333 shares shall vest six months following the date on which the Plan is
approved by the stockholders of the Corporation, with the remaining
two-thirds of the shares vesting in equal annual installments (rounding to
the nearest share for
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<PAGE> 3
the first installment, with the remaining balance vesting on the second
installment) beginning on the first anniversary date of the date of such
approval, provided that an installment shall vest only if the optionee has
continued to serve as an Eligible Director until the applicable date; and
(iii) with respect to options granted to a Class III Eligible
Director, such option shall vest six months following the date on which the
Plan is approved by the stockholders of the Corporation.
(c) Notwithstanding the provisions on vesting set forth in paragraphs (a)
and (b) of this Section 3, an option shall become fully vested and become
nonforfeitable immediately upon the death, disability or retirement of the
optionee or upon the occurrence of a Change of Control; provided that in no
event will any director be entitled to receive any payment in excess of the
amount permitted to be paid without penalty under Section 4999 of the Internal
Revenue Code of 1986, as amended, and clause (ii) above shall not apply upon the
occurrence of a Change of Control to any option granted to a participant if, in
connection with a Change of Control pursuant to clause (1) of the definition
thereof, such participant is the Person or forms part of the Person referred to
in such clause (1). A "Change of Control" shall be deemed to have occurred if
(1) any Person (as defined below) is or becomes the Beneficial Owner (as defined
below) of securities of the Corporation representing 30% or more of the Voting
Power (as defined below), (2) there shall occur a change in the composition of a
majority of the Board within any period of four consecutive years which change
shall not have been approved by a majority of the Board as constituted
immediately prior to the commencement of such period, (3) at any meeting of the
stockholders of the Corporation called for the purpose of electing directors,
more than one of the persons nominated by the Board for election as directors
shall fail to be elected or (4) the stockholders of the Corporation approve a
merger, consolidation, sale of substantially all assets or other reorganization
of the Corporation, other than a reincorporation, in which the Corporation does
not survive.
(d) For purposes of this Section 3, (i) "Person" shall have the meaning set
forth in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as in effect on September 1, 1993, (ii) "Beneficial Owner" shall have the
meaning set forth in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934 on September 1, 1993; and (iii) "Voting Power" shall mean the voting power
of the outstanding securities of the Corporation having the right under ordinary
circumstances to vote at an election of the Board.
(e) For purposes of the Plan "retirement" means cessation as a director of
the Corporation other than on account of any act of (i) fraud or intentional
misrepresentation or (ii) embezzlement, misappropriation or conversion of assets
or opportunities of the Corporation or any direct or indirect majority-owned
subsidiary of the Corporation.
4. Time and Manner of Exercise of Option
Each vested option may be exercised in whole or in part at any time and
from time to time; provided, however, that no fewer than 100 Shares (or the
remaining Shares then purchasable under the option, if less than 100 Shares) may
be purchased upon any exercise of options rights hereunder and that only whole
Shares will be issued pursuant to the exercise of any option.
Any vested option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by (i) payment
in full for such Shares, which payment may be in whole or in part (A) in cash or
by check or (B) in shares of Common Stock already owned by the person exercising
the option or (ii) an election to pay in full for such Shares by having the
Corporation withhold shares of Common Stock otherwise issuable to such person as
a result of the exercise of such option ("cashless exercise"). Shares of common
Stock so delivered or withheld shall be valued at fair market value at the time
of such exercise.
5. Terms of Options
Each option shall expire ten (10) years from the date of the granting
thereof, but shall be subject to earlier termination in the event that an
optionee ceases to be a director of the Corporation for any reason other than
the retirement, death or disability of the optionee or upon a Change of Control.
Upon the retirement or
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<PAGE> 4
disability of the optionee or upon a Change of Control, the vested options
granted to such optionee may be exercised by him or her only within thirty-six
months after the date such optionee ceases to be a director of the Corporation.
Upon the death of the optionee prior to retirement or disability or a Change of
Control, the vested options granted to such optionee may be exercised only
within twelve months thereafter. In the event of the death of an optionee,
whether during the optionee's service as a director or during the period
referred to in the second preceding sentence, the vested options granted to such
optionee shall be exercisable by the legal representatives or the estate of such
optionee, by any such person or persons whom the optionee shall have designated
in writing on forms prescribed by and filed with the Corporation or, if no such
designation has been made, by the person or persons to whom the optionee's
rights have passed by will or the laws of descent and distribution.
6. Transferability
During an optionee's lifetime, a vested option may be exercised only by the
optionee. Options granted under the Plan and the rights and privileges conferred
thereby shall not be subject to execution, attachment or similar process and may
not be transferred, assigned, pledged or hypothecated in any manner (whether by
operation of law or otherwise) other than by will or by the applicable laws of
descent and distribution except that, to the extent permitted by applicable law
and Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), a recipient of an option may designate in
writing during the optionee's lifetime a beneficiary to receive and exercise
options in the event of the optionee's death (as provided in Section 5). Any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
option under the Plan or of any right or privilege conferred thereby, contrary
to the provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, shall be null and void.
7. Participant's or successor's Rights as Stockholder
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares.
8. Limitation as to Directorship
Neither the Plan not the granting of an option nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an optionee has a right to continue as a
director for any period of time or at any particular rate of compensation.
9. Regulatory Approval and Compliance
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by the
Plan Administrator, and without complying, to the Plan Administrator's complete
satisfaction, with all rules and regulations under Federal, state or local law
deemed applicable by the Plan Administrator.
10. Withholding
Whenever the Corporation proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Corporation shall have the right to
require the holder to pay an amount in cash or to retain or sell without notice,
or demand surrender of, shares of Common Stock in value sufficient to satisfy
and Federal, state or local withholding tax liability ("Withholding Tax") prior
to the delivery of any certificate for such shares (or remainder of shares if
Common Stock is retained to satisfy such tax liability). Whenever under the Plan
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy any Federal, state or local withholding tax liability.
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<PAGE> 5
Whenever Common Stock is so retained or surrendered to satisfy Withholding
Tax, the value of shares of Common Stock so retained or surrendered shall be the
fair market value on the date that the amount of the Withholding tax is to be
determined, and the value of shares of Common Stock so sold shall be the actual
net proceeds (after deduction of commissions) received by the Corporation from
such sale.
ARTICLE VI
CAPITAL ADJUSTMENTS
The aggregate number and class of Shares for which options may be granted
under the Plan, the number and class of Shares covered by each Election Grant,
the Annual Grant and the One-Time Grant and each outstanding option and the
exercise price per Share thereof (but not the total price) shall all be
appropriately adjusted by the Plan Administrator for any stock dividends, stock
splits, recapitalizations, combinations, exchanges of shares, mergers,
consolidation, liquidations, split-ups, split-offs, spin-offs, or other similar
changes in capitalization, or any distribution to stockholders, including a
rights offering, other than regular cash dividends, changes in the outstanding
stock of the Corporation by reason of any increase or decrease in the number of
issued shares of Common Stock resulting form a split-up or consolidation of
shares or any similar capital adjustment or the payment of any stock dividend,
any share repurchase at a price in excess of the market price of the Common
Stock at the time such repurchase is announced or other increase or decrease in
the number of such shares, provided that counsel to the Corporation has
determined that such adjustment will not contravene the requirements of Rule
16b-3(c)(2)(ii) of the Exchange Act.
In the event of any adjustment in the number of Shares covered by any
option, any fractional Shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full Shares
resulting from such adjustment.
ARTICLE VII
EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation; none of such expenses shall be charged to any
optionee.
ARTICLE VIII
EFFECTIVE DATE AND DURATION OF THE PLAN
The amendments to the Corporation's Stock Option Plan for Nonemployee
Directors (the "Initial Plan") provided for in the Plan shall become effective
upon approval of the Corporation's stockholders and shall apply to all options
granted on or after the date of such approval. All grants of options under the
Initial Plan shall continue to be subject to the terms of the Initial Plan. The
Plan shall continue in effect until December 31, 2003, or such earlier date as
it is terminated by action of the Board or the Corporation's stockholder(s), but
such termination shall not affect the then outstanding terms of any options.
ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that (i) no amendment shall increase
the number of Shares that may be issued under the Plan, other than pursuant to
Article VI, without stockholder approval and (ii) to the extent required to
qualify the Plan under Rule 16b-3 promulgated under Section 16(b) of the
Exchange Act, no amendment may be made more than once every six (6) months.
A-5
<PAGE> 1
Exhibit 15.1
August 9, 1996
To Camco International Inc.:
We are aware that Camco International Inc. has incorporated by reference in its
Registration Statement No. 33-78666, No. 33-78668 and No. 333-09299 its Form
10-Q for the quarter ended June 30, 1996, which includes our report dated April
16, 1996, covering the unaudited interim financial information contained
therein. Pursuant to Regulation C of the Securities Act of 1933, that report
is not considered a part of the Registration Statements prepared or certified
by our firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
ARTHUR ANDERSEN, LLP
Houston, Texas
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 66,284
<SECURITIES> 0
<RECEIVABLES> 128,270
<ALLOWANCES> 0
<INVENTORY> 144,781
<CURRENT-ASSETS> 369,889
<PP&E> 330,341
<DEPRECIATION> (201,087)
<TOTAL-ASSETS> 689,232
<CURRENT-LIABILITIES> 155,907
<BONDS> 0
<COMMON> 252
0
0
<OTHER-SE> 418,088
<TOTAL-LIABILITY-AND-EQUITY> 689,232
<SALES> 232,823
<TOTAL-REVENUES> 309,064
<CGS> 126,775
<TOTAL-COSTS> 183,913
<OTHER-EXPENSES> 91,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,490
<INCOME-PRETAX> 32,443
<INCOME-TAX> 10,732
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,711
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
