<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): JUNE 13, 1997
CAMCO INTERNATIONAL INC.
(Exact name of registrant as specified in charter)
DELAWARE 1-10718 13-3517570
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
7030 ARDMORE
HOUSTON, TEXAS 77054
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 747-4000
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 13, 1997, Camco International Inc., a Delaware corporation
(the "Company"), effected the acquisition of 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. Approximately 13.3 million shares of the Company's
common stock, $.01 par value (the "Common Stock"), will be issued to the prior
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.
Under the terms of the Merger Agreement, Lester Varn, Jr., a former
director of Production Operators, has been elected as a Class III director of
the Company and Carl W. Knobloch, Jr., former Chairman of the Board of
Production Operators, has been appointed as a non-voting advisory director of
the Company. Additionally, under the terms of the Merger Agreement, Mr.
Knobloch has been retained as a consultant to the Company for a term of three
years.
A copy of the press release announcing the closing of the Merger is
filed as Exhibit 99.1 and is hereby incorporated herein by reference.
ITEM 5. OTHER EVENTS
Certain selected unaudited pro forma quarterly financial information
for the Company and Production Operators for the year ended December 31, 1996,
is attached hereto as Exhibit 99.4 and is provided to assist in an
understanding of the quarterly results on a pro forma basis. Such pro forma
financial information has been prepared on the same basis as the pro forma
financial information set forth in Item 7 hereof and should be read in
connection therewith, including the notes thereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The financial statements of Production Operators for the periods
specified in Rule 3-05(b) of Regulation S-X, as previously filed with the
Securities and Exchange Commission as part of Production Operators' Annual
Report on Form 10-K/A for the fiscal year ended September 30, 1996, and
Quarterly Report on Form 10-Q for the period ended March 31, 1997, are attached
hereto and filed herewith as Exhibits 99.2 and 99.3 and are incorporated herein
by reference.
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(b) Pro Form Financial Information.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
POOLING OF INTERESTS
The Unaudited Pro Forma Financial Statements (the "Pro Forma
Statements") have been prepared assuming the Merger is accounted for as a
pooling of interests. Accordingly, the Pro Forma Statements have been prepared
as if Camco and Production Operators were combined as of the beginning of the
earliest period presented.
The Unaudited Pro Forma Balance Sheet as of March 31, 1997 and
Unaudited Pro Forma Statements of Operations for the years ended December 31,
1996, 1995 and 1994, are based on the consolidated financial statements of
Camco and Production Operators and include, in the opinion of Camco and
Production Operators managements, all adjustments necessary to present fairly
the results of such periods. The Unaudited Pro Forma Statements of Operations
for the three months ended March 31, 1997 and 1996, and each of the three years
in the period ended December 31, 1996, 1995 and 1994 have been derived from, and
should be read in conjunction with, the audited consolidated financial
statements of Camco included in Camco's Annual Report on Form 10-K for the year
ended December 31, 1996 and Camco's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, and the audited consolidated financial statements
and unaudited interim consolidated financial statements of Production Operators
included in this Form 8-K as Exhibits 99.2 and 99.3. No provision has been
reflected in the unaudited pro forma financial statements for any direct cash
costs related to the Merger, which are currently expected to be approximately
$12 million.
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 years ended December 31, 1996, 1995 and 1994
and the three months ended March 31, 1996 have been combined with Production
Operators' results of operations for years ended September 30, 1996, 1995 and
1994 and the three months ended December 31, 1995, respectively. Effective
January 1, 1997, Production Operators' fiscal year end was changed to conform
to Camco's fiscal year end. As a result, pro forma results of operations for
the three months ended March 31, 1997 combine Camco's and Production Operators'
results of operations for such period.
------------------
The Pro Forma Statements are presented for illustrative purposes only
and are not necessarily indicative of actual results of operations or financial
position that would have been achieved had the Merger been consummated at the
beginning of the earliest period presented, or had the operations of Production
Operators been consolidated during the periods presented. Neither are they
necessarily indicative of future results.
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CAMCO INTERNATIONAL INC. AND PRODUCTION OPERATORS CORP COMBINED
UNAUDITED ADJUSTED PRO FORMA BALANCE SHEET
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
March 31,
1997
CURRENT ASSETS: -----------
<S> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 38,086
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 187,134
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 175,494
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 27,031
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . 17,901
-----------
Total current assets . . . . . . . . . . . . . . . . . . 445,646
-----------
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation . . 320,327
INTANGIBLE ASSETS, net. . . . . . . . . . . . . . . . . . . . . . 215,750
OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,466
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 1,006,189
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . $ 10,658
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 49,974
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . 125,823
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 16,100
-----------
Total current liabilities. . . . . . . . . . . . . . . . 202,555
-----------
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . 111,504
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 32,731
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . 45,244
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . 392,034
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
38,500,338 shares issued. . . . . . . . . . . . . . . . . . . . 385
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 522,536
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . 137,967
Cumulative translation adjustment. . . . . . . . . . . . . . . . (16,355)
Treasury stock, 1,167,663 shares at cost. . . . . . . . . . . . . (30,378)
-----------
Total stockholders' equity. . . . . . . . . . . . . . . 614,155
-----------
Total liabilities and stockholders' equity. . . . . . . $ 1,006,189
===========
The accompanying notes are an integral part of these pro forma financial statements.
</TABLE>
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CAMCO INTERNATIONAL INC. AND PRODUCTION OPERATORS CORP
UNAUDITED ADJUSTED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales .......................................... $123,432 $111,024 $503,235 $459,733 $466,620
Services........................................ 72,052 56,624 261,300 208,199 184,894
-------- -------- -------- -------- --------
195,484 167,648 764,535 667,932 651,514
-------- -------- -------- -------- --------
COST AND EXPENSES:
Cost of sales................................... 62,223 60,053 270,712 253,268 275,716
Cost of services................................ 51,015 39,832 188,394 153,096 143,134
-------- -------- -------- -------- --------
113,238 99,885 459,106 406,364 418,850
-------- -------- -------- -------- --------
Gross margin.................................. 82,246 67,763 305,429 261,568 232,664
Selling, general and administrative expenses.... 48,709 43,849 191,706 177,491 165,799
Amortization of intangible assets............... 1,894 1,387 6,460 6,022 6,036
-------- -------- -------- -------- --------
Operating income.............................. 31,643 22,527 107,263 78,055 60,829
Interest expense................................ 1,916 2,032 7,842 8,888 5,946
Interest income................................. (462) (785) (3,303) (3,754) (2,020)
-------- -------- --------- -------- --------
Income before provision for income taxes,
income (loss) from discontinued operations
and cumulative effect of
change in accounting principle................ 30,189 21,280 102,724 72,921 56,903
Provision for income taxes...................... 10,379 6,992 34,720 22,626 17,438
-------- -------- -------- -------- --------
Income before income (loss) from discontinued
operations and cumulative effect of change
in accounting principle....................... 19,810 14,288 68,004 50,295 39,465
Income (loss) from discontinued operations...... -- -- -- (7,151) 1,005
Cumulative effect of change in accounting
principle..................................... -- -- -- -- 200
-------- -------- -------- -------- --------
Net income...................................... $ 19,810 $ 14,288 $ 68,004 $ 43,144 $ 40,670
======== ======== ======== ======== ========
EARNINGS PER SHARE:
Income before income (loss) from discontinued
operations and cumulative effect of change
in accounting principle....................... $ O.52 $ 0.37 $ 1.78 $ 1.33 $ 1.06
Income (loss from discontinued operations....... -- -- -- (0.19) 0.03
Cumulative effect of change in accounting
principle..................................... -- -- -- -- --
-------- -------- -------- -------- --------
Net income...................................... $ O.52 $ 0.37 $ 1.78 $ 1.14 $ 1.03
======== ======== ======== ======== ========
Average common and common equivalent shares
outstanding................................... 38,105 38,078 38,230 37,780 38,344
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BASIS OF PRESENTATION
On June 13, 1997, Camco and Production Operators effected the
definitive agreement pursuant to which Camco acquired Production Operators.
Under the terms of the agreement, Production Operators shareholders received
1.30 newly issued Camco Common shares for each Production Operators share. The
business combination will be accounted for using the pooling of interests
method of accounting. There are no adjustments necessary to conform the
accounting policies of Camco and Production Operators.
PRO FORMA ADJUSTMENTS
The difference between the par value of the Production Operators
Common Stock to be exchanged in the Merger and the par value of the Camco
Common Stock issuable in the Merger is reflected as an increase in additional
paid-in capital. In addition, the amount recorded as deferred compensation
relating to Production Operators Employee Stock Ownership Plan ($1.86 million)
and treasury stock ($.595 million) of Production Operators has been offset
against retained earnings and additional paid-in capital, respectively.
PRO FORMA EARNINGS (LOSS) PER SHARE
The pro forma average common shares outstanding have been computed by
adjusting the historical average outstanding common and common equivalent shares
of Camco for the shares assumed to be 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.
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(c) Exhibits.
2.1 - Agreement and Plan of Merger dated as of February 27,
1997, by and among Camco International Inc., Plane
Acquisition Corp. and Production Operators Corp
(incorporated by reference to Exhibit No. 2.1 to Form 8-K,
File 1-10718, filed March 7, 1997).
2.2 - Irrevocable Proxy dated February 27, 1997 (incorporated by
reference to Exhibit No. 2.2 to Form 8- K, File 1-10718,
filed March 7, 1997).
23.1 - Consent of Arthur Andersen LLP, with respect to the
financial statements of Production Operators Corp.
99.1 - Press Release of the Company dated June 13, 1997,
announcing the closing of the Merger.
99.2 - Financial Statements of Production Operators Corp for the
fiscal year ended September 30, 1996.
99.3 - Financial Statements of Production Operators Corp for
the period ended March 31, 1997.
99.4 - Selected Quarterly Financial Information of Camco
International Inc. and Production Operators Corp.
Page 7
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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 hereunto duly authorized.
CAMCO INTERNATIONAL INC.
Dated: June 27, 1997 /s/ RONALD R. RANDALL
----------------------------------------
Ronald R. Randall
Vice President, General Counsel
and Secretary
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INDEX TO EXHIBITS
Number Exhibit
2.1 - Agreement and Plan of Merger dated as of February 27,
1997, by and among Camco International Inc., Plane
Acquisition Corp. and Production Operators Corp
(incorporated by reference to Exhibit No. 2.1 to Form 8-K,
File 1-10718, filed March 7, 1997).
2.2 - Irrevocable Proxy dated February 27, 1997 (incorporated by
reference to Exhibit No. 2.2 to Form 8- K, File 1-10718,
filed March 7, 1997).
23.1 - Consent of Arthur Andersen LLP, with respect to the
financial statements of Production Operators Corp.
99.1 - Press Release of the Company dated June 13, 1997,
announcing the closing of the Merger.
99.2 - Financial Statements of Production Operators Corp for
the fiscal year ended September 30, 1996.
99.3 - Financial Statements of Production Operators Corp for
the period ended March 31, 1997.
99.4 - Selected Quarterly Financial Information of Camco
International Inc. and Production Operators Corp.
Page 9
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion
and incorporation by reference of our report dated November 20, 1996 included in
Production Operator Corp's Form 10-K/A for the year ended September 30, 1996,
into this Form 8-K of Camco International Inc. and into Camco International
Inc.'s previously filed Registration Statement File Nos. 33-78666, 33-78668,
333-09299, 333-14817, 333-18129, 333-23739 and 333-29065.
ARTHUR ANDERSEN LLP
Houston, Texas
June 26, 1997
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
Contact: Herbert S. Yates
Senior Vice President - Finance
(713) 749-5680
Houston, TX., June 13, 1997 ... Camco International Inc. (NYSE: CAM) announced
that its acquisition of Production Operators Corp (NASDAQ: PROP) was completed
today following the approval of the stockholders of each company at special
meetings held today.
Camco International Inc. is a worldwide oilfield equipment and service company
providing specialized products and services in drilling, well completion,
production and well services for the oil and gas industry. Camco's trade names
include Camco Coiled Tubing Services, Camco Products, Camco Wireline, Hycalog,
Lasalle Engineering, Lawrence Technology, Production Operators, Reda, Reed Tool
and Site Oil Tools.
<PAGE> 1
EXHIBIT 99.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF PRODUCTION OPERATORS CORP:
We have audited the accompanying consolidated balance sheets of
Production Operators Corp (a Delaware Corporation) and subsidiary
as of September 30, 1996 and 1995, and the related consolidated
statements of income, stockholders' investment and cash flows
for each of the three years in the period ended September 30,
1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Production Operators Corp and subsidiary as of
September 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Houston, Texas
November 20, 1996
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands except per share data)
<TABLE>
<CAPTION>
for the years ended September 30, 1996 1995 1994
<S> <C> <C> <C>
REVENUES
Sales and services $90,536 $71,245 $59,338
Other income 1,267 1,556 2,073
91,803 72,801 61,411
COSTS AND EXPENSES
Cost of sales and services 39,636 33,210 29,250
Depreciation and amortization 15,949 10,855 8,686
General and administrative expenses 7,721 6,651 6,659
Interest and debt expenses 1,965 1,100 --
65,271 51,816 44,595
Income before income taxes 26,532 20,985 16,816
Provision for income taxes 9,036 7,008 5,824
Income from continuing operations 17,496 13,977 10,992
Discontinued Operations
Operating income (loss), net of income taxes -- (449) 1,005
Provision for disposal, net of income taxes -- (6,702) --
Income (loss) from discontinued operations -- (7,151) 1,005
Income before cumulative effect of change in
accounting principle 17,496 6,826 11,997
Cumulative effect of change in accounting
principle (SFAS No. 109) -- -- 200
Net income $17,496 $ 6,826 $12,197
NET INCOME PER SHARE
Primary and fully diluted
Income from continuing operations $ 1.70 $ 1.37 $ 1.08
Income (loss) from discontinued operations -- (.70) .10
Cumulative effect of change in accounting
principle (SFAS No. 109) -- -- .02
Net income $ 1.70 $ .67 $ 1.20
Weighted average shares outstanding 10,291 10,203 10,180
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 3
CONSOLIDATED BALANCE SHEETS (dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,466 $ 985
Marketable securities 201 202
Receivables, net:
Sales and services 20,388 16,492
Construction - work in progress 4,592 6,835
Inventories - at cost:
Compressor parts and supplies 6,486 4,852
Construction - work in progress 2,433 2,452
Prepaid expenses and other 5,866 4,956
Current tax benefit -- 2,785
Net assets of discontinued operations -- 8,981
Total current assets 41,432 48,540
Property and equipment:
Land and buildings 8,374 8,244
Compression and processing equipment 257,700 232,908
Pipelines 154 6,164
Other equipment 8,019 7,065
274,247 254,381
Less accumulated depreciation
and amortization (100,940) (91,386)
173,307 162,995
Long-term receivable and other assets 7,952 8,697
$ 222,691 $ 220,232
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 8,361 $ 9,967
Accrued liabilities 13,084 7,829
Income taxes payable 1,283 --
Total current liabilities 22,728 17,796
Senior term notes 23,131 46,005
Deferred income taxes 21,178 17,781
Stockholders' investment 155,654 138,650
$ 222,691 $ 220,232
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (dollars in thousands)
<TABLE>
<CAPTION>
$1 Par Additional Deferred
Common Paid-In Retained Compensation Treasury
three years ended Stock Capital Earnings ESOP Stock Total
September 30,1996
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1993
10,258,901 shares
(204,582 in treasury) $10,259 $70,849 $47,544 $(3,917) $(1,770) $122,965
Net income -- -- 12,197 -- -- 12,197
Cash dividends of $.24 per -- -- (2,417) -- -- (2,417)
share
Exercise of options to purchase
17,992 shares (182 shares -- 81 -- -- 150 231
surrendered in payment)
Deferred compensation
relating to ESOP Plan -- -- -- 628 -- 628
Tax benefits from dividends
on ESOP shares -- -- 38 -- -- 38
Stock awards - 2,325 shares -- 58 -- -- 6 64
BALANCE, SEPTEMBER 30, 1994
10,258,901 shares
(184,447 in treasury) 10,259 70,988 57,362 (3,289) (1,614) 133,706
Net income -- -- 6,826 -- -- 6,826
Cash dividends of $.26 per -- -- (2,627) -- -- (2,627)
share
Exercise of options to
purchase 50,358 shares -- 123 -- -- 441 564
Deferred compensation
relating to ESOP Plan -- -- -- 87 -- 87
Tax benefits from dividends
on ESOP shares -- -- 40 -- -- 40
Stock awards - 2,438 shares -- 45 -- -- 9 54
BALANCE, SEPTEMBER 30, 1995
10,258,901 shares
(131,651 in treasury) 10,259 71,156 61,601 (3,202) (1,164) 138,650
Net income -- -- 17,496 -- -- 17,496
Cash dividends of $.28 per -- -- (2,846) -- -- (2,846)
share
Exercise of options to purchase
55,661 shares (4,602 shares -- 830 -- -- 343 1,173
surrendered in payment)
Deferred compensation
relating to ESOP Plan -- -- -- 862 -- 862
Tax benefits from dividends
on ESOP shares -- -- 43 -- -- 43
Stock awards - 9,224 shares -- 237 -- -- 39 276
BALANCE, SEPTEMBER 30, 1996
10,258,901 shares
(71,368 in treasury) $10,259 $72,223 $76,294 $ (2,340) $ (782) $155,654
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
<TABLE>
<CAPTION>
for the years ended September 30, 1996 1995<F1> 1994<F1>
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from clients $ 96,061 $ 73,772 $ 70,755
Cash paid to suppliers and employees (51,070) (45,114) (48,804)
Interest paid (1,945) (1,620) (259)
Income tax paid (2,039) (4,138) (3,177)
Interest and dividends received 531 717 938
Net refund of federal, state and local taxes 786 -- --
Cash received on claims and other income 684 721 533
43,008 24,338 19,986
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment (28,315) (63,272) (41,217)
Proceeds from sale of property, equipment
and marketable securities 12,197 6,440 16,299
Purchase of securities -- (677) (640)
Other (2,390) (4,503) (690)
(18,508) (62,012) (26,248)
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to (reductions of) net borrowings
on long-term senior notes (22,874) 40,005 6,000
Dividends paid (2,846) (2,627) (2,417)
Reduction of ESOP bank loan -- -- (435)
Decrease in deferred compensation
under Company's ESOP Plan 862 87 628
Cash received upon exercise of stock options 1,012 491 204
Cash bonus paid upon exercise of stock options (114) (315) (113)
Repurchases of stock awards (59) (19) (21)
(24,019) 37,622 3,846
Net increase (decrease) in cash and cash equivalents 481 (52) (2,416)
Cash and cash equivalents at beginning of year 985 1,037 3,453
Cash and cash equivalents at end of year $ 1,466 $ 985 $ 1,037
<F1>Consolidated Statements of Cash Flows for 1995 and 1994 have not been
restated to remove the effect of discontinued operations.
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 6
<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES (dollars in thousands)
for the years ended September 30, 1996 1995<F1> 1994<F1>
<S> <C> <C> <C>
Net income $ 17,496 $ 6,826 $12,197
ADJUSTMENTS
Depreciation, depletion and amortization 15,949 14,216 13,710
Provision for deferred income taxes 3,397 3,963 2,305
Provision for tax benefits on stock option
exercises and ESOP dividends 318 427 178
Gain on sale of property, equipment and
marketable securities (2,462) (1,434) (1,723)
Increase in receivables (481) (6,920) (2,753)
Increase in prepaid expenses and other (910) (3,259) (706)
(Increase) decrease in inventories (1,615) (65) 1,309
(Increase) decrease in long-term receivable
and other assets 3,295 1,913 (4,854)
Increase (decrease) in accounts payable (1,606) 3,640 (2,921)
Increase (decrease) in accrued liabilities 5,255 (38) 2,684
(Increase) decrease in current tax benefit 2,785 (1,452) --
Increase (decrease) in income taxes payable 1,283 (279) 675
Cumulative effect of change in accounting principle -- -- (200)
Issuance of stock awards 335 74 85
Other (31) 24 --
Loss on disposal of discontinued operations -- 6,702 --
25,512 17,512 7,789
Net cash provided by operating activities $ 43,008 $ 24,338 $19,986
The accompanying notes are an integral part of these
consolidated financial statements.
<F1>Reconciliation of Net Income to Cash Flows from Operating Activities for
1995 and 1994 has not been restated to remove the effect of discontinued
operations.
</TABLE>
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996, 1995 and 1994
1. Statement of Significant Accounting Policies and
Other Matters
PRINCIPLES OF CONSOLIDATION
Consolidated financial statements include the accounts of Production
Operators Corp (the Company) and its operating subsidiary, Production
Operators, Inc., together with its subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
BUSINESS SEGMENTS
The Company presently conducts its operations in a single business segment,
contract gas handling services. Prior to fiscal year 1995, the Company had
operated in two business segments consisting of contract gas handling
services, including enhanced oil recovery (EOR), in the oil field services
industry and oil and gas producing operations. Due to the decline in the
size of the EOR area and the same basic business focus of operating
compression equipment, EOR results are included in contract gas handling
services beginning in fiscal 1995. As of September 30, 1995, the Company
announced that a plan was adopted to exit the oil and gas producing
business and to dispose of all existing oil and gas producing properties.
Accordingly, the results of operations and net assets for oil and gas
producing activities have been reclassified in the consolidated financial
statements, except for the Consolidated Statements of Cash Flows, as
discontinued operations for all periods presented. Reference is made to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 9 for additional information.
Approximately 42% of the Company's revenues from sales and services during
the year ended September 30, 1996 were from two clients, each of which
accounted for 10% or more of total revenues. Revenues from the Williams
Companies accounted for approximately 32% of the Company's revenues,
the majority of which is under ten-year operating agreements. Petroleos
de Venezuela and its affiliates accounted for approximately 10% of the
Company's revenues, the majority of which is under long-term contracts
with one or more of their operating affiliates. During the two previous
fiscal years ended September 30, 1995 and 1994, approximately 34% and 27%,
respectively, of the Company's revenues were from its two largest clients.
The Company's revenues are derived principally from sales to clients in the
oil and gas industry, including sales to state-owned foreign operating
entities. This industry concentration has the potential to impact the
Company's exposure to credit risk, either positively or negatively, because
clients may be similarly affected by changes in economic or other
conditions. The creditworthiness of this client base is strong and the
Company has not experienced significant credit losses on its receivables.
<PAGE> 8
The Company may be exposed to the risk of foreign currency exchange losses
in connection with its operations. These losses would be the result of
holding net monetary assets denominated in the foreign currency during
periods when it is devaluing compared to the U.S. dollar. Such exchange
rate losses have not been and are not expected to be material principally
because substantially all contracts require payments from clients in U.S.
dollars. Additionally, only minimal foreign currency balances are
maintained.
REVENUE RECOGNITION
Revenues from sales and services are recognized as the products are
delivered and services are performed.
INCOME TAXES
Effective October 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under
SFAS No. 109 entities are required to measure and report deferred income
taxes to reflect the tax consequences on future years of temporary
differences between net carrying values and tax bases of assets and
liabilities as of the end of each reporting period. The adoption of the
new standard resulted in a cumulative positive adjustment to income of
$200,000 in the first quarter of fiscal 1994.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased having a
maturity of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities are comprised of U.S. Treasury obligations which are
stated at the lower of cost or market.
RECEIVABLES
Receivables are stated net of allowance for doubtful accounts of $156,000
at September 30, 1996 and $159,000 at September 30, 1995.
INVENTORIES
Inventories consist of (1) parts and supplies recorded at the lower of
average cost or market and (2) work in progress which reflects the cost of
materials and services related to construction activities. Cost is
determined using the average cost method.
<PAGE> 9
ACCRUED LIABILITIES
Accrued liabilities include $6.1 million of prepayments of certain
contractual arrangements for the fabrication of client owned units and
related services as of September 30, 1996. As of September 30, 1995,
accrued liabilities include $2.2 million of reserve for discontinued
operations. No other single component of accrued liabilities in either
period exceeded 5% of total current liabilities.
RETAIL STORE PROPERTIES
The Company owns five retail store properties, which are leased under
agreements that provided rental income of $562,000, $559,000 and $545,000
for the fiscal years ended September 30, 1996, 1995 and 1994, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN
In July 1993 the Company's Board of Directors authorized a loan to the
Employee Stock Ownership Plan (ESOP) for the purchase by the ESOP of up to
200,000 shares of Production Operators Corp common stock. The loan is
collateralized during its seven year term by the shares acquired with the
proceeds under a promissory note dated August 1, 1993 executed by the
trustees of the ESOP in favor of the Company. At September 30, 1996 and
1995, the ESOP had borrowings outstanding under the note in the amount of
$2,340,000 and $3,202,000, respectively. Under the terms of the ESOP, the
Company is obligated to make contributions to the ESOP which are used to
repay the loan to the Company. Therefore, during the term of the loan, the
Company holds a note receivable from the ESOP and, concurrently, is
required to make future payments to the ESOP for deferred compensation
obligations in the same amount. Since the Company has not refinanced the
note through a bank, neither the note receivable nor the corresponding
liability is reflected in the consolidated balance sheets.
DEPRECIATION
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives. The ranges of
annual depreciation percentages are as follows: buildings, 3% to 4%;
compressor units, 8% to 10%; and other equipment, 10% to 50%. Maintenance
and repair costs are expensed as incurred.
NET INCOME PER SHARE
Primary and fully diluted net income per share amounts are computed based
on the weighted average number of shares of common stock outstanding during
the year and include the effect of shares issuable under outstanding stock
options.
<PAGE> 10
2. Income Taxes
The Company and its subsidiary file a consolidated federal income tax
return. The consolidated provision for federal and state income taxes on
continuing operations consists of the following:
<TABLE>
<CAPTION>
(thousands) for the years ended September 30, 1996 1995 1994
<S> <C> <C> <C>
Currently payable
International $ -- $ -- $ --
U.S. 5,321 2,618 3,600
5,321 2,618 3,600
Deferred
International 1,966 834 --
U.S. 1,749 3,556 2,224
3,715 4,390 2,224
Total provision $9,036 $7,008 $5,824
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of revenues and expenses for tax and financial statement purposes. The
primary components of the Company's deferred tax liability are as follows:
<TABLE>
<CAPTION>
(thousands) September 30, 1996 1995 1994
<S> <C> <C> <C>
Differences in depreciable and $21,096 $16,828 $15,191
amortizable basis
Income accrued for financial reporting, not
yet reported for tax 752 891 1,027
Other (670) 62 (125)
Total deferred tax liability $21,178 $17,781 $16,093
</TABLE>
The tax provisions of $9,036,000, $7,008,000 and $5,824,000 for the years
ended September 30, 1996, 1995 and 1994, respectively, were different from
the amounts resulting from multiplying income before income taxes by the
applicable statutory tax rates. The reasons for these differences are as
follows:
<TABLE>
<CAPTION>
percent of pretax income for years
ended September 30, 1996 1995 1994
<S> <C> <C> <C>
Federal income tax at statutory rates 34.0% 34.0% 34.0%
Investment tax credits, net of recapture -- (1.5) .3
State taxes, net of federal benefit 2.2 1.5 2.4
International rate differential (.1) (.1) (1.4)
Reduction in International deferred tax rates (2.9) -- --
Other items, net .9 (.5) (.7)
Effective tax rate 34.1% 33.4% 34.6%
</TABLE>
At September 30, 1996 the Company had no investment tax credit carryovers.
In fiscal 1994 the Company adopted SFAS 109 which required a change in the
method used to compute deferred income taxes. Such adoption did not have a
material effect on the Company's financial position or results of
operations.
3. Indebtedness
The Company has an unsecured revolving credit facility with two banks
totaling $50,000,000. The credit agreement is scheduled to expire on
December 31, 1999, at which time any outstanding borrowings would become
due and payable. Borrowings under the facility bear interest at either the
prime rate or 43.75 basis points above the London Interbank Offering Rate
(LIBOR). The Company is required to pay an annual commitment fee of 17.5
basis points on the unused portion of the facility. At September 30, 1996
the Company had borrowings of $19,500,000 under the agreement.
The agreement contains provisions which, among other things, limit total
borrowings to a multiple of cash flow and require the maintenance of a
minimum financial ratio of debt to tangible net worth. The agreement also
contains restrictions on additional indebtedness, creation of liens and
sale of assets. At September 30, 1996 the Company was in compliance with
these requirements.
At September 30, 1996 the Company had unsecured lines of credit with three
banks totaling $30,000,000. These facilities bear interest generally at
the lesser of the prime or commercial paper rates and have a maturity date
as agreed to between the Company and the banks at the time of advance of
funds. Such maturities are typically between one and ninety days and are
generally repaid from the unsecured revolving credit facility. Accordingly,
these lines of credit have been classified as long-term obligations in the
accompanying consolidated financial statements. At September 30, 1996
the Company had borrowings of $3,631,000 under these agreements.
<PAGE> 11
4. Common Stock and Related Matters
At September 30, 1996 there were 15,000,000 shares of $1.00 par value
common stock and 500,000 shares of no par value preference stock
authorized. No shares of preference stock have been issued.
5. Employee Thrift, Stock Ownership and Profit Sharing Plans
The Company has a contributory thrift plan (401(k) savings plan) under
which the contributions of participating employees are matched by the
Company to the extent of 50% of the employee's qualified savings. The
Company's contributions to this plan for the years ended September 30,
1996, 1995 and 1994 were $323,000, $327,000 and $306,000, respectively.
The Company's ESOP, established in 1989, covers all full-time employees of
the Company's domestic subsidiaries. ESOP contributions are made at the
discretion of the Company's Board of Directors. The amounts contributed to
the ESOP by the Company for the years ended September 30, 1996, 1995 and
1994 amounted to $891,000, $818,000 and $785,000, respectively. Dividends
received by the ESOP Trust and applied to reduction of the ESOP term loan
amounted to $126,000, $119,000 and $113,000 for the years ended September
30, 1996, 1995 and 1994, respectively.
The Company has a noncontributory profit sharing plan covering all
full-time employees of the Company's domestic subsidiaries. Concurrent
with the establishment of the ESOP in fiscal 1989, contributions to the
profit sharing plan were suspended until all indebtedness related to the
ESOP has been paid. At September 30, 1996 the ESOP had borrowings
outstanding in the amount of $2,340,000.
6. Stock Options
Under the Company's long-term incentive plan, the option price or
restricted stock value is the fair market value of its shares on the date
of grant. Stock options generally are exercisable at the rate of 25% per
year beginning one year after the date of grant and expire ten years after
grant date. Restricted stock vests beginning one year after grant date and
is fully vested three years after grant date. No accounting recognition is
given to stock options until they are exercised, at which time the option
price received and related tax benefit are credited to the equity account
and shares are issued. The fair market value of restricted stock at the
time of grant is charged to reported earnings over the vesting period. At
September 30, 1996 stock options and restricted stock were held by 27
employees.
<PAGE> 12
The following is a summary of stock options and restricted stock:
<TABLE>
<CAPTION>
1996 Shares Price
<S> <C> <C>
Options outstanding October 1, 1995 385,540 $ 4.375-$31.50
Options and restricted stock granted 51,477 31.375- 35.00
Options canceled -- -- - --
Restricted stock vested (622)
Options exercised (55,661) 6.25 - 28.25
Options outstanding
September 30, 1996 380,734 4.375- 35.00
Shares reserved for future grants 331,383
1995 Shares Price
Options outstanding October 1, 1994 350,346 $ 4.375-$31.50
Options and restricted stock granted 85,552 23.875- 31.50
Options canceled -- -- - --
Options exercised (50,358) 4.375- 17.00
Options outstanding
September 30, 1995 385,540 4.375- 31.50
Shares reserved for future grants 382,860
</TABLE>
Options are granted under the 1992 Long-Term Incentive Plan which received
shareholder approval at the Company's February 1993 annual meeting. The
1992 Plan has a 10-year term and authorizes 700,000 shares for future
grants.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 ("SFAS No. 123"), a new standard on accounting for stock based
compensation. This standard establishes a fair value based method of
accounting for stock compensation plans and encourages companies to adopt
SFAS No. 123 in place of the existing accounting method which requires
expense recognition only in situations where stock compensation plans award
intrinsic value to recipients at the date of grant. Companies that do not
follow SFAS No. 123 for accounting purposes must make annual proforma
disclosures of its effects. Adoption of the standard by the Company is
required in fiscal 1997, although earlier implementation is permitted. The
Company plans to continue its current accounting for stock based
compensation and only adopt SFAS No. 123 proforma disclosures. The Company
does not believe that when adopted SFAS No. 123 will have a material impact
on its financial position and results of operations.
7. Commitments and Contingencies
The oil and gas industry has experienced increased scrutiny by federal and
state agencies regarding various environmental issues. Management is of
the opinion that the Company has no material exposure at this time.
The Company leases vehicles under operating leases. Total operating lease
rental expense was $1,083,000 for fiscal 1996. Aggregate future rentals
subject to noncancelable leases are as follows: 1997 - $1,017,000; 1998 -
$532,000 and 1999 - $365,000.
<PAGE> 13
8. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(thousands except per share data) First Second Third Fourth
Quarters in Fiscal Year Ended
September 30, 1996
<S> <C> <C> <C> <C>
Revenues $22,124 $21,743 $22,868 $25,068
Income before income taxes 6,234 6,098 6,874 7,326
Net income 4,057 4,113 4,534 4,792
Net income per share $ .40 $ .40 $ .44 $ .46
Quarters in Fiscal Year Ended
September 30, 1995
Revenues $16,810 $17,465 $18,658 $19,868
Income (loss) after tax
Continuing operations 3,167 3,152 3,576 4,082
Discontinued operations (89) (115) (42) (6,905)
Net income (loss) 3,078 3,037 3,534 (2,823)
Income (loss) per share after tax
Continuing operations $ .31 $ .31 $ .35 $ .40
Discontinued operations (.01) (.01) -- (.67)
Total .30 .30 .35 (.27)
</TABLE>
9. Discontinued Operations
As of September 30, 1995, oil and gas production activities were classified
as discontinued operations. In connection with this discontinuance, the
Company recorded a fourth quarter charge of $6.7 million, net of related
income tax benefits and expected future operating losses of $3.6 million.
This provision included a writedown of oil and gas properties to net
realizable value and the estimated costs of disposing of these operations,
less the expected applicable tax benefits. Also included in the
discontinuation was a plan to dispose of or reapply the Comanche Creek
pipeline which, prior to fiscal 1995, had been reported in the Company's
enhanced oil recovery operations. In fiscal 1996 all property sales were
concluded with no further adjustments required. Proceeds from these sales
(cash and other consideration) were $8.9 million in fiscal 1996 and $.7
million in fiscal 1995.
Operating results of the discontinued operations were as follows:
<TABLE>
<CAPTION>
(thousands) for the years ended September 30, 1996 1995 1994
<S> <C> <C> <C>
Operating revenues $ 2,482 $ 9,198 $14,055
Income (loss) from operations (65) (690) 1,516
Income tax expense (benefit) (22) (241) 511
Income (loss) after income taxes $ (43) $ (449) $ 1,005
</TABLE>
10. Geographic Operating Areas
Financial data by geographic operating areas is summarized as follows:
<TABLE>
<CAPTION>
Revenues Income before tax Identifiable Assets
Years Ended September 30, Years Ended September 30, Years Ended September 30,
(thousands) 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C>
North America $73,347 $63,515 $21,753 $18,479 $175,500 $180,413
South America 18,456 9,286 4,779 2,506 47,191 39,819
Totals $91,803 $72,801 $26,532 $20,985 $222,691 $220,232
</TABLE>
North America consists primarily of the United States, but also includes
Canada, which represents 2% or less of the total amounts shown for each
period. Prior to 1995 the Company did not have significant operations in
geographic areas other than North America.
<PAGE> 1
EXHIBIT 99.3
FINANCIAL STATEMENTS
PRODUCTION OPERATORS CORP AND SUBSIDIARY
The condensed consolidated financial statements included
herein have been prepared by Production Operators Corp,
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The term "Company" as
used herein refers to Production Operators Corp and its
operating subsidiary, Production Operators, Inc., together
with its subsidiaries, unless the context otherwise
indicates. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make the information presented
not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto
included in the Company's latest annual report on Form l0-K/A.
In the opinion of the Company all adjustments, consisting
only of normal recurring adjustments, necessary to present
fairly the financial position of the Company as of March 31,
1997, and the results of their operations for the six months
ended March 31, 1997 and 1996 and their cash flows for the
six months ended March 31, 1997 and 1996 have been included.
The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
<PAGE> 2
PRODUCTION OPERATORS CORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND SEPTEMBER 30, 1996
(000'S OMITTED)
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . $ 2,226 $ 1,466
Marketable securities . . . . . . . . . . 201 201
Receivables:
Sales and services, net of reserve of
$203 at March 31, 1997 and $156 at
September 30, 1996 . . . . . . . . . . 20,801 20,388
Construction work in progress . . . . . 4,185 4,592
Inventories - at cost:
Compressor parts and supplies . . . . . 6,635 6,486
Construction work in progress . . . . . 1,721 2,433
Prepaid expenses and other. . . . . . . . 6,530 5,866
--------- --------
Total current assets . . . . . . . . 42,299 41,432
Property and equipment, at cost, net of
accumulated depreciation and
amortization of $107,372 at March 31,
1997 and $100,940 at September 30, 1996. . 187,428 173,307
Long-term receivable and other assets . . . 12,323 7,952
-------- --------
$242,050 $222,691
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable. . . . . . . . . . . . . $ 7,705 $ 8,361
Accrued liabilities . . . . . . . . . . . 6,795 13,084
Income taxes payable. . . . . . . . . . . 997 1,283
-------- --------
Total current liabilities. . . . . . 15,497 22,728
Senior term notes . . . . . . . . . . . . . 36,084 23,131
Deferred income taxes . . . . . . . . . . . 24,106 21,178
------- --------
Stockholders' investment:
Common stock. . . . . . . . . . . . . . . 10,259 10,259
Additional paid-in capital. . . . . . . . 72,646 72,223
Retained earnings . . . . . . . . . . . . 85,913 76,294
Deferred compensation - ESOP. . . . . . . (1,860) (2,340)
Treasury stock. . . . . . . . . . . . . . (595) (782)
-------- --------
Total stockholders' investment . . . . 166,363 155,654
-------- --------
$242,050 $222,691
========= ========
</TABLE>
<PAGE> 3
PRODUCTION OPERATORS CORP AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED-000'S OMITTED EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
March 31, March 31,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues from sales and
services and other income . . . . $28,181 $21,743 $54,928 $43,867
------- ------- ------- -------
Costs and expenses:
Cost of sales and services . . . 12,294 9,362 24,240 19,131
Depreciation and amortization. . 4,590 3,890 8,988 7,617
General and administrative
expenses. . . . . . . . . . . . 1,874 1,790 3,777 3,596
Interest and debt expenses . . . 517 603 921 1,191
------- ------- ------- -------
19,275 15,645 37,926 31,535
------- ------- ------- -------
Income before income taxes . . . . 8,906 6,098 17,002 12,332
Provision for income taxes . . . . 3,143 1,985 5,975 4,162
------- ------- ------- -------
Net income . . . . . . . . . . . . $ 5,763 $ 4,113 $11,027 $ 8,170
======= ======= ======= =======
Net income per share:
Primary and fully diluted: $ .56 $ .40 $ 1.07 $ .80
Weighted average shares
outstanding . . . . . . . . . . . 10,342 10,282 10,327 10,270
Dividends per share. . . . . . . . $ .07 $ .07 $ .14 $ .14
Average shares outstanding upon
which dividends were accrued. . . 10,205 10,149 10,204 10,148
</TABLE>
<PAGE> 4
PRODUCTION OPERATORS CORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED-000'S OMITTED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers. . . . . . . . . . $ 51,140 $ 45,813
Cash paid to suppliers and employees. . . . . . (33,938) (25,063)
Interest paid . . . . . . . . . . . . . . . . . (920) (1,078)
Income tax paid . . . . . . . . . . . . . . . . (3,156) (1,016)
Interest and dividends received . . . . . . . . 94 253
Other income. . . . . . . . . . . . . . . . . . 387 365
-------- --------
13,607 19,274
-------- --------
Cash flows from investing activities:
Net additions to property and equipment . . . . (24,200) (12,486)
Proceeds from sale of property and equipment. . 5,144 3,978
Other . . . . . . . . . . . . . . . . . . . . . (6,066) (647)
-------- --------
(25,122) (9,155)
-------- --------
Cash flows from financing activities:
Additions to (reduction of) net borrowings
on long-term senior notes. . . . . . . . . . . 12,953 (9,722)
Dividends paid. . . . . . . . . . . . . . . . . (1,429) (1,421)
Reduction of deferred compensation under
Company's ESOP Plan. . . . . . . . . . . . . . 480 495
Cash received upon exercise of stock options. . 363 279
Cash bonus paid upon exercise of stock options. (59) (49)
Repurchases of stock awards . . . . . . . . . . (33) (48)
-------- --------
12,275 (10,466)
-------- --------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . 760 (347)
Cash and cash equivalents at beginning of year. . 1,466 985
-------- --------
Cash and cash equivalents at end of quarter . . . $ 2,226 $ 638
======== ========
</TABLE>
<PAGE> 5
PRODUCTION OPERATORS CORP AND SUBSIDIARY
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED-000'S OMITTED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . .$11,027 $ 8,170
------- -------
Adjustments:
Depreciation, depletion and amortization. . . . . 8,988 7,617
Provision for deferred income tax . . . . . . . . 2,928 2,596
Provision for tax benefits on stock option
exercises and ESOP dividends . . . . . . . . . . 177 88
Issuance of stock awards. . . . . . . . . . . . . 183 228
Provision for bad debts . . . . . . . . . . . . . 47 13
Gain on sale of property and equipment. . . . . . (2,365) (1,241)
Increase (decrease) in receivables. . . . . . . . (1,768) 3,011
Decrease in inventories . . . . . . . . . . . . . 563 1,099
Increase in prepaid expenses and other. . . . . . (664) (516)
Decrease in long-term receivable and
other assets . . . . . . . . . . . . . . . . . . 1,722 1,568
Decrease in accounts payable. . . . . . . . . . . (656) (4,417)
Increase (decrease) in accrued liabilities. . . . (6,289) 596
Decrease in current tax benefit . . . . . . . . . -- 462
Decrease in income taxes payable. . . . . . . . . (286) --
------- -------
2,580 11,104
------- -------
Net cash provided by operating activities . . . . .$13,607 $19,274
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 99.4
CAMCO INTERNATIONAL INC. AND PRODUCTION OPERATORS
UNAUDITED ADJUSTED PRO FORMA STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1996 1996 1996 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Sales 111,024 121,799 126,601 143,811
Services 56,624 63,484 63,570 77,622
------- ------- ------- -------
167,648 185,283 190,171 221,433
------- ------- ------- -------
COST AND EXPENSES:
Cost of sales 60,053 66,722 67,978 75,959
Cost of services 39,832 44,054 46,685 57,823
------- ------- ------- -------
99,885 110,776 114,663 133,782
------- ------- ------- -------
Gross margin 67,763 74,507 75,508 87,651
Selling, general and administrative expenses 43,849 48,106 46,518 53,233
Amortization of intangible assets 1,387 1,472 1,603 1,998
------- ------- ------- -------
Operating income 22,527 24,929 27,387 32,420
Interest expense, net 1,247 1,434 849 1,009
------- ------- ------- -------
Income before provision for income taxes 21,280 23,495 26,538 31,411
Provision for income taxes 6,992 7,902 9,086 10,740
------- ------- ------- -------
Net income 14,288 15,593 17,452 20,671
======= ======= ======= =======
EARNINGS PER SHARE:
Net income 0.37 0.41 0.46 0.54
Average common and common equivalent
shares outstanding 38,078 38,271 38,324 38,265
</TABLE>
