<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 September 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. 38,526,732 shares of
Common Stock ($.01 par value) outstanding at November 4, 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 Nine Months ended
September 30, 1997 and 1996 2
Consolidated Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 3
Consolidated Condensed Statements of Cash Flows -
Nine Months ended September 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 12-13
</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 September 30,
1997, and the related consolidated condensed statements of operations for the
three months and nine months ended September 30, 1997 and 1996, and the
consolidated condensed statements of cash flows for the nine months ended
September 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.
Houston, Texas
October 21, 1997
1
<PAGE> 4
CAMCO INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 161,930 $ 126,601 $ 441,681 $ 359,424
Services 77,128 63,570 220,006 183,678
---------- ---------- ---------- ----------
239,058 190,171 661,687 543,102
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 85,727 67,978 230,178 194,753
Cost of services 53,682 46,685 153,501 130,571
---------- ---------- ---------- ----------
139,409 114,663 383,679 325,324
---------- ---------- ---------- ----------
Gross margin 99,649 75,508 278,008 217,778
Selling, general and administrative expenses 54,409 46,518 158,594 138,473
Merger expenses -- -- 12,500 --
Amortization of intangible assets 2,201 1,603 6,273 4,462
---------- ---------- ---------- ----------
Operating income 43,039 27,387 100,641 74,843
Interest expense, net 1,460 849 4,420 3,530
---------- ---------- ---------- ----------
Income before provision for income taxes 41,579 26,538 96,221 71,313
Provision for income taxes 14,556 9,086 33,616 23,980
---------- ---------- ---------- ----------
Net income $ 27,023 $ 17,452 $ 62,605 $ 47,333
========== ========== ========== ==========
Earnings per share before merger expenses,
net of tax $ .70 $ .46 $ 1.85 $ 1.24
Earnings per share $ .70 $ .46 $ 1.63 $ 1.24
Weighted-average common and common
equivalent shares outstanding 38,652 38,324 38,448 38,225
Cash dividends paid per common share $ .05 $ .05 $ .15 $ .15
</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>
September 30, December 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 57,391 $ 42,846
Accounts receivable, net 198,798 169,989
Inventories, net 198,330 169,007
Prepaid expenses and other 49,715 46,150
------------ ------------
Total current assets 504,234 427,992
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 5,055 4,360
Buildings 76,412 71,985
Machinery and equipment 245,849 234,641
Service equipment 354,744 313,997
------------ ------------
682,060 624,983
Accumulated depreciation (346,804) (316,221)
------------ ------------
Property, plant and equipment, net 335,256 308,762
------------ ------------
INTANGIBLE ASSETS, net 213,491 214,826
OTHER ASSETS 36,698 20,125
------------ ------------
Total assets $ 1,089,679 $ 971,705
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term and current portion of long-term debt $ 10,558 $ 10,345
Accounts payable 53,399 47,595
Accrued liabilities 161,312 134,583
Income taxes payable 15,999 18,750
------------ ------------
Total current liabilities 241,268 211,273
------------ ------------
LONG-TERM DEBT 113,306 93,551
DEFERRED INCOME TAXES 34,243 24,742
OTHER LONG-TERM LIABILITIES 44,572 47,266
------------ ------------
Total liabilities 433,389 376,832
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.01 par value, 100,000,000 shares authorized,
38,571,657 and 38,471,908 shares issued 386 385
Additional paid-in capital 524,009 521,196
Retained earnings 177,952 115,024
Cumulative translation adjustment (16,955) (11,405)
Treasury stock, 1,098,445 and 1,264,528 shares at cost (29,102) (30,327)
------------ ------------
Total stockholders' equity 656,290 594,873
------------ ------------
Total liabilities and stockholders' equity $ 1,089,679 $ 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>
Nine Months
Ended September 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 62,605 $ 47,333
Adjustments to reconcile net income to net cash
provided by operating activities, net
of effects of acquisition -
Gain form sale of assets (234) (2,856)
Depreciation and amortization 46,386 38,972
Provision for deferred and other taxes 8,152 3,894
Increase in accounts receivable (28,365) (3,263)
Increase in inventories (27,942) (9,206)
Increase (decrease) in accounts payable 7,467 (251)
Increase in accrued liabilities 32,710 38,591
Decrease in income taxes payable (3,151) (6,419)
Change in subsidiary year-end 342 --
Increase in other, net 301 9,226
---------- ----------
Net cash provided by operating activities 98,271 116,021
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (66,885) (36,329)
Proceeds from sale of property, plant and equipment 386 11,032
Business acquisitions (11,753) (29,473)
Investment in joint ventures (15,495) --
Change in subsidiary year-end (6,496) --
Other -- (1,622)
---------- ----------
Net cash used in investing activities (100,243) (56,392)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in borrowings under revolving credit facility 5,000 (10,000)
Increase (decrease) in other debt 8,155 (23,990)
Dividends paid to stockholders (4,992) (5,774)
Proceeds from exercise of stock options 2,507 2,197
Change in subsidiary year-end 6,158 --
Other -- 474
---------- ----------
Net cash provided by (used in) financing activities 16,828 (37,093)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (311) 20
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,545 22,556
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 42,846 33,275
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,391 $ 55,831
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 5,334 $ 5,385
Cash paid for income taxes $ 29,106 $ 25,016
</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 September 30, 1997, and its results of
operations for the three months and nine months ended September 30, 1997 and
1996, and its cash flows for the nine months ended September 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 nine months ended
September 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 nine months ended
September 30, 1996 have been combined with Production Operators' results of
operations for the three months and nine months ended June 30, 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 nine months ended September 30, 1997 combine
both Camco's and Production Operators' results of operations for 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>
September 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $ 17,432 $ 18,405
Parts and components 64,620 54,786
Work in process 33,944 27,180
Finished Goods 82,334 68,636
---------- ----------
$ 198,330 $ 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 $11.8 million and $11.9 million at September 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 Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic EPS: Net income $ 27,023 $ 17,452 $ 62,605 $ 47,333
---------- ---------- ---------- ----------
Weighted average shares O/S 37,369 37,500 37,389 37,463
Earnings per share $ 0.72 $ 0.47 $ 1.67 $ 1.26
Diluted EPS: Net income $ 27,023 $ 17,452 $ 62,605 $ 47,333
---------- ---------- ---------- ----------
Weighted average shares O/S 38,652 38,324 38,448 38,225
Earnings per share $ 0.70 $ 0.46 $ 1.63 $ 1.24
Recap of weighted average common share equivalents (CSE):
---------------------------------------------------------
Weighted average shares 37,369 37,500 37,389 37,463
Common share equivalents (CSE's) 1,283 824 1,059 762
---------- ---------- ---------- ----------
38,652 38,324 38,448 38,225
</TABLE>
SFAS No. 130, "Reporting Comprehensive Income", was issued in June
1997. The Company will adopt SFAS No. 130 in the first quarter of 1999. Had SFAS
No. 130 been adopted as of September 30, 1997, net income, as reported, would
have been adjusted by changes in cumulative foreign currency translation
adjustment.
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 the
oil and gas drilling, completion, and production sectors of the oilfield
services industry. Many of the
7
<PAGE> 10
Company's products and services have recognized names in the industry and are
associated with technological innovation and quality. Camco operates on a
worldwide basis with its 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 nine months ended
September 30, 1996 have been combined with Production Operators' results of
operations for the three months and nine months ended June 30, 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 nine months ended September 30, 1997 combine
both Camco's and Production Operators' results of operations for comparable
periods.
8
<PAGE> 11
Results of Operations
Third Quarter Ended September 30, 1997 Compared to Third Quarter
Ended September 30, 1996
Revenues for the quarter ended September 30, 1997 were $239 million, an
increase of $48.9 million from the comparable quarter in 1996. Product revenues
in the third quarter were up $35.3 million compared to last year, principally
due to increased sales of electrical submersible pumps ("ESPs") in Southeast
Asia, the former Soviet Union ("FSU") and Europe, increased sales of completion
products in South America, Southeast Asia , Europe and Canada, increased rock
bit sales in Canada and the U.S., and increased sales of PDC bits in the U.S.
The increase in product revenues was somewhat offset by decreased rock bit sales
to Southeast Asia and lower PDC bit sales in South America. Services revenues
were up $13.6 million over last year's comparable quarter, primarily due to
increased contract gas compression revenues in the U.S. and South America,
increased completion services in South America and Africa, increased ESP
services in Southeast Asia and South America, and additional revenues
attributable to Lasalle Engineering which was acquired in September 1996.
Worldwide drilling activity continued at higher than expected levels,
particularly in the U.S. and Canada, where third quarter rig counts averaged
990, up 33% over last years third quarter in the U.S. and 399, a 45% increase
over last year's third quarter in Canada. As a result of this increased rig
activity, North American rock bit revenues were up 49% over the third quarter of
1996. Overall, U.S. and Canada revenues increased 21.5% from last years third
quarter to $107 million this quarter, primarily due to higher oil tool services
sales by the Company's SITE Oil Tool division in Canada, increased sales of both
PDC and rock bits, increased ESP sales and services, and higher revenues from
contract gas compression services in the U.S. These increases were partially
offset by lower completion service revenues in the U.S. this quarter.
South American sales in the third quarter were $38.4 million, an
increase of 22.7% over the third quarter of 1996, primarily due to increased
completion products sales and services, contract gas compression revenues, and
ESP sales and services. Sales were up 20.7% in Africa and the Middle East to
$31.2 million, primarily due to increased ESP and rock bit revenues, as well as
increased sales of completion products in the Middle East and completion
services in Africa. Far East revenues increased significantly from $12.5 million
in last year's third quarter to $21.5 million this third quarter, principally
due to increased sales of ESP's and completion products. European sales
increased $8.5 million quarter
9
<PAGE> 12
over quarter to $41.1 million, due to increased sales in all product lines as
well as the acquisition of Lasalle in September, 1996.
Consolidated gross margin increased $24.1 million to $99.6 million, or
41.7% of sales from $75.5 million, or 39.7% of revenues in the comparable
quarter last year. Margins improved in all business lines with most of the
increase attributable to the improvement in completion products and services,
ESP, and rock bits, resulting from higher volume, selective price increases in
certain markets and lower manufacturing costs due to higher production levels.
Selling, general and administrative expenses ("SG&A") increased to
$54.4 million this quarter from $46.5 million in last year's third quarter. As a
percentage of sales, SG&A costs decreased by 1.7% from last year's third quarter
as expenses did not increase to the same extent as revenues, primarily due to
increased sales of completion products and ESPs which have lower SG&A components
than the Company's other business lines.
Operating income was $43 million in the third quarter, an increase of
$15.7 million, or 57% higher than the same quarter last year. Improved gross
margins on significantly higher volume accounted for most of the operating
income increase. Net income increased $9.6 million to $27 million for the
quarter, with earnings per share of 70 cents, a 52% increase over last year's
third quarter.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Revenues were up 21.8% in the first nine months of 1997 to $661.7
million from $543.1 million in the comparable period of 1996. Product sales
increased $82.3 million this year to $441.7 million, primarily due to higher
sales of rock bits in North America, increased completion product sales
worldwide, and higher ESP sales in North America, Europe, the Middle East and
Southeast Asia. Service revenues were $220 million this year, an increase of
$36.3 million over the comparable period last year, mostly due to increased
contract gas compression revenues in the U.S. and South America, increased ESP
related service revenues, and the additional revenues attributable to Lasalle
Engineering, acquired in September 1996.
United States and Canada revenues through the first nine months of 1997
were 18.9% higher than last year at $288.7 million. The year over year increase
is principally due to significant increases in sales of rock bits, ESPs,
completion equipment and
10
<PAGE> 13
contract gas compression revenues. These increases were somewhat offset by
decreased U.S. completion service revenues this year. On the strength of higher
sales of completion products and services and increased contract gas compression
revenues, South American sales through September of 1997 were $105.9 million, or
16.1% higher than last year.
Sales in the Middle East and Africa improved by 20.2% over last year's
comparable period to $97.4 million, mostly due to higher sales of completion
products and increased ESP sales and services. Far East sales improved to $58.9
million this year, 45.1% higher than last year to date, almost entirely due to
significantly higher sales of completion products and ESP's. Sales were up 26.8%
in Europe to $110.9 million for the nine month period this year, principally due
to the addition of Lasalle and improved sales of completion products, partially
offset by decreased sales of ESP's to the FSU.
Gross margin for the nine months ended September 30, 1997 increased to
$278 million, up $60.2 million from last year. Consolidated gross margin as a
percent of sales has increased by 2% over last year to 42%, with most of the
margin increase attributable to completion products, ESP's and rock bits. This
margin increase in 1997 is a direct result of higher volume, selective price
increases in certain markets and lower manufacturing costs due to higher
production levels.
SG&A increased $20.1 million through September 1997 to $158.6 million,
but was down as a percentage of sales from 25.5% last year to 24% this year to
date. SG&A costs did not increase relative to the revenue increase as a major
portion of the sales increase was in completion products and ESPs which have
lower SG&A components than the Company's other business lines.
Operating income, as a result of the significant increase in sales
combined with improved gross margins, increased $25.8 million in the first nine
months of 1997 to $100.6 million, an increase of 34.5% over the prior year.
Excluding $12.5 million in transaction costs resulting from the merger with
Production Operators, operating income increased to $113.1 million, a 51.2%
increase over last year. Net income for the first nine months was $62.6 million,
up $15.3 million, or 32.3%. Earnings per share were $1.63, a 39 cent increase
year over year.
11
<PAGE> 14
Capital Resources and Liquidity
Cash provided by operating activities was $98.3 million during the nine
months ended September 30, 1997, a decrease of $17.8 million from the prior
year. This decrease in cash flow is primarily a result of the substantial
increase in activity levels this year and the resulting increase in working
capital requirements. During the first nine months of 1997, cash was used to
fund $66.9 million in capital expenditures, pay $11.8 million for acquisitions
and pay dividends to stockholders of $5 million. After these expenditures, cash
and cash equivalents increased $14.5 million to a balance of $57.4 million at
September 30, 1997.
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 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.
12
<PAGE> 15
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
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)
November 14, 1997
By: /s/ BRUCE F. LONGAKER, JR.
-----------------------------------
Bruce F. Longaker, Jr.
Vice-President Finance and
Corporate Controller
(Principal Accounting Officer)
November 14, 1997
14
<PAGE> 17
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>
15
<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 September 30, 1997, which includes our report dated October 21, 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
October 21, 1997
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 57,391
<SECURITIES> 0
<RECEIVABLES> 198,798
<ALLOWANCES> 0
<INVENTORY> 198,330
<CURRENT-ASSETS> 504,234
<PP&E> 682,060
<DEPRECIATION> (346,804)
<TOTAL-ASSETS> 1,089,679
<CURRENT-LIABILITIES> 241,268
<BONDS> 0
0
0
<COMMON> 386
<OTHER-SE> 655,904
<TOTAL-LIABILITY-AND-EQUITY> 656,290
<SALES> 441,681
<TOTAL-REVENUES> 661,687
<CGS> 230,178
<TOTAL-COSTS> 383,679
<OTHER-EXPENSES> 177,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,420
<INCOME-PRETAX> 96,221
<INCOME-TAX> 33,616
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,605
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
</TABLE>
