<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, 1997
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. 38,556,124 shares
of Common Stock ($.01 par value) outstanding at August 8, 1997.
<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, 1997
and 1996 2
Consolidated Condensed Balance Sheets - June 30, 1997
and December 31, 1996 3
Consolidated Condensed Statements of Cash Flows -
Six Months ended June 30, 1997 and 1996
4
Notes to Consolidated Condensed Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
PART II - OTHER INFORMATION 12 14
</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,
1997, and the related consolidated condensed statements of operations for the
three months and six months ended June 30, 1997 and 1996, and the consolidated
condensed statements of cash flows for the six months ended June 30, 1997 and
1996. 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 15, 1997
1
<PAGE> 4
CAMCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Sales $156,319 $121,799 $279,751 $232,823
Services 70,826 63,484 142,878 120,108
-------- -------- -------- --------
227,145 185,283 422,629 352,931
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 82,228 66,722 144,451 126,775
Cost of services 48,804 44,054 99,819 83,886
-------- -------- -------- --------
131,032 110,776 244,270 210,661
-------- -------- -------- --------
Gross margin 96,113 74,507 178,359 142,270
Selling, general and administrative
expenses 55,476 48,106 104,185 91,955
Merger expenses 12,500 -- 12,500 --
Amortization of intangible assets 2,178 1,472 4,072 2,859
-------- -------- -------- --------
Operating income 25,959 24,929 57,602 47,456
Interest expense 1,962 2,011 3,878 4,043
Interest income (456) (577) (918) (1,362)
-------- -------- -------- --------
Income before provision for income
taxes 24,453 23,495 54,642 44,775
Provision for income taxes 8,681 7,902 19,060 14,894
-------- -------- -------- --------
Net income $ 15,772 $ 15,593 $ 35,582 $ 29,881
========= ======== ======== ========
Earnings per share before merger
expenses, net of tax $ .64 $ .41 $ 1.15 $ .78
Earnings per share $ .41 $ .41 $ .93 $ .78
Average common and common
equivalent shares outstanding 38,348 38,271 38,235 38,174
Cash dividends per common share $ .05 $ .05 $ .10 $ .10
</TABLE>
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,
1997 1996
----------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 41,116 $ 42,846
Accounts receivable, net 188,180 169,989
Inventories, net 195,149 169,007
Prepaid expenses and other 49,211 46,150
---------- ----------
Total current assets 473,656 427,992
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Land 4,995 4,360
Buildings 74,535 71,985
Machinery and equipment 240,578 234,641
Service equipment 346,539 313,997
---------- ----------
666,647 624,983
Accumulated depreciation (340,434) (316,221)
---------- ----------
Property, plant and equipment, net 326,213 308,762
---------- ----------
INTANGIBLE ASSETS, net 216,255 214,826
OTHER ASSETS 23,673 20,125
---------- ----------
Total assets $1,039,797 $ 971,705
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term and current portion of
long-term debt $ 10,558 $ 10,345
Accounts payable 51,119 47,595
Accrued liabilities 152,803 134,583
Income taxes payable 7,593 18,750
---------- ----------
Total current liabilities 222,073 211,273
---------- ----------
LONG-TERM DEBT 105,052 93,551
DEFERRED INCOME TAXES 33,087 24,742
OTHER LONG-TERM LIABILITIES 47,849 47,266
---------- ----------
Total liabilities 408,061 376,832
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.01 par value, 100,000,000
shares authorized, 38,528,519 and
38,471,908 shares issued 385 385
Additional paid-in capital 523,305 521,196
Retained earnings 152,543 115,024
Cumulative translation adjustment (14,440) (11,405)
Treasury stock, 1,150,239 and 1,264,528
shares at cost (30,057) (30,327)
---------- ----------
Total stockholders' equity 631,736 594,873
---------- ----------
Total liabilities and stockholders'
equity $1,039,797 $ 971,705
========== ==========
</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,
-----------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $35,582 $29,881
Adjustments to reconcile net income
to net cash provided by operating
activities, net of effects of
acquisitions --
Change in subsidiary year-end 342 --
Gain from sale of assets (139) (1,241)
Depreciation and amortization 30,444 25,132
Provision for deferred and other
taxes 7,102 3,454
(Increase) decrease in accounts receivable (16,402) 9,069
Increase in inventories (24,051) (5,858)
Increase (decrease) in accounts payable 4,753 (1,870)
Increase in accrued liabilities 24,201 20,926
Decrease in income taxes payable (11,776) (5,197)
Increase in other, net 1,968 1,098
------- -------
Net cash provided by operating activities 52,024 75,394
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (44,407) (21,457)
Proceeds from sale of property, plant
and equipment 223 4,678
Business acquisitions (11,753) --
Change in subsidiary year-end (6,496) --
Other -- (647)
------- -------
Net cash used in investing activities (62,433) (17,426)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in borrowings under credit facility -- (10,000)
Increase (decrease) in other debt 4,996 (12,238)
Dividends paid to stockholders (3,122) (3,848)
Proceeds from exercise of stock options 864 1,455
Change in subsidiary year-end 6,158 --
Other -- 398
------ -------
Net cash used in financing activities 8,896 (24,233)
------ -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (217) (88)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,730) 33,647
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 42,846 33,275
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $41,116 $66,922
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 2,981 $ 2,568
Cash paid for income taxes $23,596 $16,817
</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, 1997, and its results of operations
for the three months and six months ended June 30, 1997 and 1996, and its cash
flows for the six months ended June 30, 1997 and 1996. 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, 1996 and the Company's current Report on Form 8-K dated June 13,
1997. The results of operations for the three months and six months ended June
30, 1997 may not be indicative of the results for the full year.
Merger with Production Operators Corp.
On June 13, 1997, Camco acquired Production Operators Corp., a market
leader in total responsibility gas compression services. Under the terms of the
merger, Production Operators shareholders received 1.30 newly issued Camco
common shares for each Production Operators common share. The business
combination has been accounted for using the pooling of interests method of
accounting. Accordingly, the financial statements reflected in this document
have been prepared as if Camco and Production Operators were combined as of the
beginning of the earliest period presented. All costs of the merger, which were
$12.5 million, or $8.6 million net of tax benefits, were expensed during the
second quarter of 1997.
The difference between the par value of the Production Operators
common stock exchanged in the transaction and the par value of the Company's
common stock issued in the transaction is reflected as an increase in
additional paid- in capital. In addition, the amount recorded as deferred
compensation relating to the Production Operators Employee Stock Ownership Plan
and treasury stock of Production Operators has been offset against retained
earnings and additional paid-in capital, respectively.
5
<PAGE> 8
The average common shares outstanding have been computed by adjusting
the historical average outstanding common and common equivalent shares of the
Company for the shares issued in exchange for the outstanding Production
Operators common shares and for the dilutive effect of common stock equivalents
arising from the assumption of the Production Operators options.
As a result of the differing year ends of Camco and Production
Operators, results of operations for different period ends have been combined.
Camco's results of operations for the three months and six months ended June
30, 1996 have been combined with Production Operators' results of operations
for the three months and six months ended March 31, 1996, respectively.
Effective January 1, 1997, Production Operators' fiscal year end was changed to
conform to Camco's December 31 year end. Consequently, results of operations
for the three months and six months ended June 30, 1997 combine both Camco's
and Production Operators' results of operations for the comparable periods.
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,
1997 1996
----------- ------------
<S> <C> <C>
Raw materials $ 16,865 $ 18,405
Parts and components 64,754 54,786
Work in process 34,099 27,180
Finished Goods 79,431 68,636
-------- --------
$195,149 $169,007
======== ========
</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 $11.5 million and $11.9 million at June 30, 1997 and December 31,
1996, respectively.
Note 3. Commitments and Contingencies - Legal Proceedings
The Company is involved in certain lawsuits and claims arising in the
normal course of business, including claims by federal and local authorities
under various environmental protection laws. 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.
6
<PAGE> 9
Note 4. Pending Accounting Pronouncement (SFAS No. 128)
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128 "Earnings per Share" (SFAS No. 128) which is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Early adoption of SFAS No. 128 is not permitted. Upon adoption, all prior
period earnings per share data will be restated. The statement establishes new
standards for computing, presenting and disclosing earnings per share. The
following pro forma information presents basic and diluted earnings per share
in accordance with SFAS No. 128 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic EPS: Net income $15,772 $15,593 $35,582 $29,881
------- ------- ------- -------
Weighted average shares O/S 37,363 37,473 37,350 37,450
Earnings per share $ 0.42 $ 0.42 $ 0.95 $ 0.80
Diluted EPS: Net income $15,772 $15,593 $35,582 $29,881
------- ------- ------- -------
Weighted average shares O/S 38,348 38,271 38,325 38,174
Earnings per share $ 0.41 $ 0.41 $ 0.93 $ 0.78
Recap of weighted average common share equivalents (CSE) :
Weighted average shares 37,363 37,473 37,350 37,450
Common share equivalents (CSE's) 985 798 975 724
------- ------- ------- -------
38,348 38,271 38,325 38,174
</TABLE>
Information for the three and six months ended June 30, 1997 excludes 489,500
shares which would have had an antidilutive effect.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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 the
oil and gas drilling, completion, and production sectors of the oilfield
services industry. Many of the Company's products and services have recognized
names in the industry and are associated with technological innovation and
quality. The Company operates on a worldwide basis with its
7
<PAGE> 10
equipment and services being sold or used in approximately 50 countries. The
demand for the Company's products is 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.
Merger with Production Operators Corp.
On June 13, 1997, Camco International Inc., a Delaware corporation
(the "Company"), acquired Production Operators Corp, a Delaware corporation
("Production Operators"), through a merger (the "Merger") of a wholly owned
subsidiary of the Company with and into Production Operators. The Merger was
effected pursuant to an Agreement and Plan of Merger dated February 27, 1997
(the "Merger Agreement"), by and among the Company, Plane Acquisition Corp., a
wholly owned Delaware subsidiary of the Company ("Sub"), and Production
Operators. A total of 13,300,404 shares of the Company's common stock, $.01
par value (the "Common Stock"), was issued to the stockholders of Production
Operators as consideration for the acquisition. The principle followed in
fixing the exchange ratio in the Merger was based on negotiations between the
parties.
The business combination has been accounted for using the pooling of
interests method of accounting. Accordingly, the financial statements
reflected in this document have been prepared as if Camco and Production
Operators were combined as of the beginning of the earliest period presented.
All costs of the merger, which were $12.5 million, or $8.6 million net of tax
benefits, were expensed during the second quarter of 1997.
As a result of the differing year ends of Camco and Production
Operators, results of operations for different period ends have been combined.
Camco's results of operations for the three months and six months ended June
30, 1996 have been combined with Production Operators' results of operations
for the three months and six months ended March 31, 1996, respectively.
Effective January 1, 1997, Production Operators' fiscal year end was changed to
conform to Camco's December 31 year end. Consequently, results of operations
for the three months and six months ended June 30, 1997 combine both Camco's
and Production Operators' results of operations for the comparable periods.
8
<PAGE> 11
Results of Operations
Comparison of Quarter Ended June 30, 1997 to Quarter Ended June 30, 1996
Revenues for the quarter ended June 30, 1997 were $227.1 million, an
increase of $41.9 million from the comparable quarter in 1996. Product sales
in the second quarter were up $34.5 million compared to the second quarter last
year, primarily due to increased sales of completion products in North America,
Middle East and Africa and the Far East, increased drill bit sales in North
America and Europe, primarily in the former Soviet Union ("FSU"), and higher
electrical submersible pump ("ESP") sales in the Far East and North America,
primarily Canada. This increase in product sales was somewhat offset by lower
ESP sales in Europe, primarily the FSU.
Services revenues for the quarter increased $7.4 million over last
year's comparable quarter, primarily due to increased contract gas compression
revenues in North and South America and additional revenues in Europe which
were directly attributable to Lasalle Engineering, acquired by the Company in
September of 1996.
The Company earned 58% of its consolidated revenues in international
markets outside of the U.S. and Canada in the quarter ended June 30, 1997
compared to 57% in the same quarter last year. North American drilling activity
in the quarter ended June 30, 1997 was significantly higher than the comparable
quarter last year. The 1997 average second quarter U.S. rig count was 933, a
21% increase compared to last year, and the average Canadian rig count was 250
for the quarter, well above expected rig activity, which has historically
experienced a more significant decline during the seasonal spring thaw. This
increase in rig activity resulted in a 57% increase in drill bit revenues in
North America compared to the same quarter last year. North American product
sales were up a combined 24% in other business lines, including ESP revenues,
completion products sales and contract gas compression service revenues. These
increases were partially offset by lower completion service revenues in North
America in the quarter.
South American sales for the quarter increased 16% over the second
quarter of 1996, primarily due to increased completion and well services
revenues and contract gas compression service revenues. Revenues in the Middle
East and Africa were 28% higher than last year's second quarter, primarily due
to higher ESP and completion products sales. Far East revenues were up 50% due
to higher ESP and completion products sales, partially offset by lower drill
bit sales in that region. Revenues increased 16% in Europe, primarily due to
the acquisition of Lasalle and an increase in
9
<PAGE> 12
completion products sales. These gains in Europe were partially offset by
decreased ESP sales in the FSU compared to the same quarter last year.
Consolidated gross margin increased $21.6 million in the second
quarter this year to $96 million, or 42.3% of revenues, from $74.5 million, or
40.2% of revenues last year. This increase was primarily attributable to the
improvement in completion products and rock bit margins, a result of higher
volume, better pricing in certain markets and reduced manufacturing costs
resulting from higher production levels.
Selling, general and administrative expenses ("SG&A") increased $7.4
million to $55.5 million in the second quarter from $48.1 million in last
year's comparable quarter, but decreased by 1.5% as a percentage of sales.
SG&A costs decreased relative to revenues as a majority of the sales of
completion products and ESPs have a lower SG&A component than other business
lines of the Company.
Operating income, excluding $12.5 million in one-time transaction
costs related to the Production Operators acquisition, increased $13.5 million,
or 54%, from the second quarter of 1996 to $38.5 million in the second quarter
this year. Operating income after merger costs was $26 million, an increase of
$1 million over the same quarter last year. Improved gross margins on
significantly higher volume, combined with lower SG&A costs as a percentage of
sales accounted for most of the operating income increase. Net income in the
quarter was $15.8 million, or 41 cents per share, equal to last year after
considering merger expenses recognized this quarter. Operating earnings per
share, excluding the net merger expenses were 64 cents, up 56% compared to the
1996 second quarter.
Comparison of Six Months Ended June 30, 1997 to Six Months Ended June 30, 1996
Revenues were up 20% in the first half of 1997 to $422.6 million from
$352.9 million in the first half of 1996. Product sales were $279.8 million
this year, an increase of $47 million over the comparable period last year,
primarily due to increased drill bit sales, particularly in North America, and
higher completion products sales in Europe, Africa and North and South America.
This increase in product revenues was offset somewhat by lower sales of ESP's
in South America and Europe, primarily in the FSU, and decreased sales of drill
bits in South America and the Far East. Services revenues were up 19% to
$142.9 million for the six month period, primarily due to additional revenues
in Europe, directly attributable to Lasalle
10
<PAGE> 13
Engineering, acquired in September 1996, and increased contract gas compression
service revenues in North and South America.
North American revenues through June were up 17% over the first six
months of last year, primarily due to increased sales of completion products,
drill bits and gas compression service revenues in the U.S., partially offset
by lower completion and well services revenues. In addition, increased
activity levels in Canada resulted in higher drill bit and ESP sales during the
period.
South American revenues through the first six months of 1997 were
$67.5 million, up $7.6 million over last year's first half, due to increased
sales of completion products and services and improved contract gas compression
service revenues, slightly offset by lower drill bit and ESP sales. Revenues
in the Middle East and Africa improved by 20% over last year's comparable
period mostly due to a significant increase in completion products sales, ESP
sales and slightly higher drill bit sales. Far East sales were up 33% over the
comparable period last year with most of the increase due to higher sales of
ESP's and completion products, offset somewhat by lower drill bit sales. Sales
were up 28% in Europe this year, primarily due to the addition of Lasalle and
improved sales of completion products in the North Sea, partially offset by
lower ESP sales in the FSU.
Gross margin for the six months ended June 30, 1997 increased to
$178.4 million, or 42.2% of sales, from $142.3 million, or 40.3% last year.
Most of the margin increase was attributable to the improvement in completion
products and rock bit margins, due to increased volume, better pricing in
certain markets and lower manufacturing costs due to higher production levels.
SG&A increased $12.2 million in the first half of 1997 to $104.2
million, entirely due to the increased sales. SG&A as a percentage of sales
improved to 24.6%, from 26% last year. SG&A costs decreased relative to
revenues as a majority of the sales of completion products and ESPs have a
lower SG&A component than other business lines of the Company.
Operating income increased 21%, or $10.1 million from the first half
of 1996 to $57.6 million this year. Excluding $12.5 million in merger costs
resulting from the acquisition of Production Operators, operating income
increased by $22.6 million over the first half of 1996 to $70.1 million, a 48%
increase. Improved gross margins on significantly higher volume, combined with
the lower SG&A expense as a percentage of revenues, accounted for most of the
operating income increase. Net income through June 1997 was $35.6 million, up
$5.7 million, or 19%, net of
11
<PAGE> 14
$12.5 million in merger costs recognized during the period. Operating earnings
per share excluding the merger costs improved to $1.15 per share from 78 cents
last year, an increase of 49%.
Capital Resources and Liquidity
Cash provided by operating activities was $52 million during the six
months ended June 30, 1997, a decrease of $23.4 million from the prior year.
This decrease is primarily due to the substantial growth in business and the
resulting increase in working capital requirements. Cash in the first six
months of 1997 was used to fund $44.4 million in capital expenditures, pay
$11.8 million for acquisitions and pay dividends to stockholders of $3.1
million. After these expenditures, cash and cash equivalents as of June 30,
1997 amounted to $41 million, down slightly from last year end.
The Company believes that cash flow from operations combined with the
unused portion of the revolving credit facility should provide sufficient
capital resources and liquidity to meet debt service requirements under the
credit facilities and manage business needs.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 20, 1997 the Company held its regular Annual Meeting of
Stockholders for 1997 ("the Annual Meeting"). At the Annual Meeting, Robert L.
Howard, Gary D. Nicholson and Charles P. Siess, Jr. 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 such person:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Robert L. Howard 21,762,089 2,298,363
Gary D. Nicholson 21,761,847 2,298,605
Charles P. Siess, Jr. 21,736,929 2,323,523
</TABLE>
William A. Krause, William J. Johnson and Gilbert H. Tausch continue
their terms as directors of the Company.
The stockholders of the Company also approved the 1997 Long-Term
Incentive Plan with 13,978,406 votes cast for approval, 6,608,972 votes cast
against, 16,240 shares abstaining from voting and 1,386,568 broker nonvotes.
12
<PAGE> 15
The stockholders of the Company ratified the appointment of Arthur
Andersen LLP as the Company's independent auditors for the year ending December
31, 1997. The ratification of Arthur Andersen LLP as the Company's auditors
was approved with 21,980,992 votes cast for approval, 6,048 votes cast against
and 3,146 shares abstaining.
There were no broker nonvotes with respect to either the election of
Directors or the ratification of Arthur Andersen LLP as the Company's
independent auditors.
On June 13, 1997 the Company held a Special Meeting of Stockholders.
The stockholders of the Company approved the Agreement and Plan of Merger dated
February 27, 1997, by and among Camco, Plane Acquisition Corp., a wholly owned
subsidiary of Camco, and Production Operators Corp. with 18,675,926 votes cast
for approval, 38,790 votes cast against and 16,728 shares abstaining from
voting.
ITEM 5. OTHER INFORMATION
Private Securities Litigation Reform Act
In accordance with the provisions of the Private Securities Litigation
Reform Act of 1996, 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
forward-looking statements also relate to Camco's and Production Operators'
future prospects, developments and business strategies for their operations and
synergies that are possible from the Merger. These statements involve risks
and uncertainties that may cause actual future activities and results of
operations to be materially different from that suggested or described in this
report. These risks 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.
13
<PAGE> 16
Election and Retirement of Directors
Effective June 17, 1997 Lester Varn, Jr. was elected to the Board of
Directors of the Company.
Effective July 15, 1997 T. Don Stacy was elected to the Board of
Directors of the Company.
Effective July 15, 1997 Hugh H. Goerner retired from the Board of
Directors of the Company.
14
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger dated as of February 27, 1997 by and
among Camco International Inc., Plane Acquisition Corp. (incorporated
by reference to Exhibit No.2.1 to Form 8-K, File 1-10718, filed March
7, 1997)
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).
15.1 Letter Regarding Unaudited Interim Financial Information.
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit
No. 21.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
February 27, 1997
Item 5. Other Events Relating to proposed acquisition of Production
Operators
June 13, 1997
Item 2. Acquisition of Production Operators
Item 5. Other Events-certain selected pro forma quarterly financial
information for the Company and Production Operators
Item 7. Financial Statements of Business Acquired
15
<PAGE> 18
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 13, 1997
By: /s/ BRUCE F. LONGAKER, JR.
-------------------------------------
Bruce F. Longaker, Jr.
Vice-President Finance and
Corporate Controller
(Principal Accounting Officer)
August 13, 1997
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
No.
<S> <C> <C>
15.1 Letter Regarding Unaudited Interim
Financial Information. 18
27.1 Financial Data Schedule. 19
</TABLE>
17
<PAGE> 1
Exhibit 15.1
To Camco International Inc.:
We are aware that Camco International Inc. has incorporated by reference in its
Registration Statements No. 33-78666, No.33-78668, No. 333-09299, No. 333-
14817, No. 333-18129, No. 333-27041 and No. 333-29065 on its Form 10-Q for the
quarter ended June 30, 1997, which includes our report dated July 15, 1997,
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
July 15, 1997
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 41,116
<SECURITIES> 0
<RECEIVABLES> 188,180
<ALLOWANCES> 0
<INVENTORY> 195,149
<CURRENT-ASSETS> 473,656
<PP&E> 666,647
<DEPRECIATION> (340,434)
<TOTAL-ASSETS> 1,039,797
<CURRENT-LIABILITIES> 222,073
<BONDS> 0
0
0
<COMMON> 385
<OTHER-SE> 631,351
<TOTAL-LIABILITY-AND-EQUITY> 631,736
<SALES> 279,751
<TOTAL-REVENUES> 422,629
<CGS> 144,451
<TOTAL-COSTS> 244,270
<OTHER-EXPENSES> 120,757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,960
<INCOME-PRETAX> 54,642
<INCOME-TAX> 19,060
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,582
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
</TABLE>
