-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V0LkxiGF3jcKy7W8TfODEX3gZf/VoeGEFvBdPYozRnaazri0QK1KgPjDWc+4rYpa q34nyr3GZgmxIrMZGwrASA== 0000890566-97-002423.txt : 19971115 0000890566-97-002423.hdr.sgml : 19971115 ACCESSION NUMBER: 0000890566-97-002423 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEATHERFORD ENTERRA INC CENTRAL INDEX KEY: 0000029302 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 741681642 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07867 FILM NUMBER: 97717266 BUSINESS ADDRESS: STREET 1: 1360 POST OAK BLVD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7134399400 MAIL ADDRESS: STREET 1: 1360 POST OAK BLVD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77056 FORMER COMPANY: FORMER CONFORMED NAME: WEATHERFORD INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DIXEL INDUSTRIES INC DATE OF NAME CHANGE: 19750618 10-Q 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q =============================================================================== (Mark one) [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 For the transition period from ____________ to __________ Commission file number 1-7867 WEATHERFORD ENTERRA, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-1681642 ------------------------------- ----------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 1360 POST OAK BOULEVARD SUITE 1000 HOUSTON, TEXAS 77056 --------------------------------------------- (Address of principal executive offices) (Zip code) (713) 439-9400 --------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE --------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 ____. There were 52,655,635 shares of Common Stock, $.10 par value, of the registrant outstanding as of October 31, 1997. (Page 1 of 13) PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31, 1997 1996 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents.................................... $ 36,295 $ 33,029 Receivables, net of allowance of $18,695 and $16,241......... 280,913 272,816 Inventories, net of allowance of $20,058 and $21,261......... 159,370 163,302 Deferred tax and other current assets........................ 43,969 36,287 ---------- ---------- Total current assets....................................... 520,547 505,434 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, AT COST.......................... 1,225,390 1,254,686 Less -- Accumulated depreciation............................. 676,767 693,496 ---------- ---------- 548,623 561,190 ---------- ---------- GOODWILL, NET................................................... 268,824 290,474 ---------- ---------- OTHER ASSETS.................................................... 42,608 40,625 ---------- ---------- $1,380,602 $1,397,723 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt and current portion of long-term debt........ $ 2,538 $ 24,508 Accounts payable............................................. 53,651 65,713 Accrued income taxes......................................... 34,795 17,427 Other accrued liabilities.................................... 109,715 103,711 ---------- ---------- Total current liabilities.................................. 200,699 211,359 ---------- ---------- LONG-TERM DEBT.................................................. 213,862 291,266 ---------- ---------- DEFERRED TAX LIABILITIES........................................ 35,251 34,728 ---------- ---------- OTHER LONG-TERM LIABILITIES..................................... 15,691 18,010 ---------- ---------- MINORITY INTERESTS ............................................. 213 752 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred stock, $1 par; shares authorized 1,000,000; none issued -- -- Common stock, $.10 par; shares authorized 80,000,000; issued 52,674,209 and 52,172,796........................... 5,267 5,217 Paid-in capital.............................................. 648,868 639,679 Retained earnings............................................ 280,497 200,316 Cumulative translation adjustment............................ (18,556) (2,768) Treasury stock, 37,412 and 28,269 common shares, at cost..... (1,190) (836) ---------- ---------- Total stockholders' equity................................. 914,886 841,608 ---------- ---------- $1,380,602 $1,397,723 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED - IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 REVENUES: Services and rentals.........$ 206,066 $ 191,158 $ 612,200 $ 528,171 Products..................... 68,316 67,912 196,130 183,522 ---------- --------- ---------- --------- Total revenues............. 274,382 259,070 808,330 711,693 ---------- --------- ---------- --------- COSTS AND EXPENSES: Cost of services and rentals. 138,034 139,009 413,932 382,773 Cost of products............. 45,254 43,516 129,941 129,329 Selling, general and administrative expenses.... 34,274 35,284 106,086 102,182 Research and development..... 1,227 1,573 6,196 4,856 Equity in earnings of unconsolidated affiliates.. (702) (453) (1,754) (1,809) Foreign currency (gain) loss, net 98 47 398 (455) Other expense, net........... 5,243 4,230 15,675 8,233 ---------- --------- ---------- --------- Total costs and expenses... 223,428 223,206 670,474 625,109 ---------- --------- ---------- --------- OPERATING INCOME................ 50,954 35,864 137,856 86,584 Interest expense............. 4,533 6,177 16,063 16,714 Interest income.............. (508) (466) (1,770) (1,456) ---------- --------- ---------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS....... 46,929 30,153 123,563 71,326 Income tax provision......... 16,462 10,250 43,325 23,038 Minority interests........... 33 75 57 85 ---------- --------- ---------- --------- NET INCOME......................$ 30,434 $ 19,828 $ 80,181 $ 48,203 ========== ========= ========== ========= Weighted average common and common equivalent shares outstanding 53,066 52,396 52,773 51,988 ========== ========= ========== ========= INCOME PER COMMON AND COMMON EQUIVALENT SHARE......$ 0.57 $ 0.38 $ 1.52 $ 0.93 =========== ========== =========== =========
The accompanying notes are an integral part of these consolidated financial statements. 3 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED - IN THOUSANDS)
CUMULATIVE COMMON PAID-IN RETAINED TRANSLATION TREASURY STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL ====== ======== ======== ======== ======= ========= BALANCE, DECEMBER 31, 1996 .................... $5,217 $639,679 $200,316 $ (2,768) $ (836) $ 841,608 Shares issued under employee benefit plans ............................. 1 343 -- -- -- 344 Stock grants and options exercised .......... 49 8,846 -- -- (354) 8,541 Currency translation adjustment ............. -- -- -- (15,788) -- (15,788) Net income .................................. -- -- 80,181 -- -- 80,181 ------ -------- -------- -------- ------- --------- BALANCE, SEPTEMBER 30, 1997 ................... $5,267 $648,868 $280,497 $(18,556) $(1,190) $ 914,886 ====== ======== ======== ======== ======= =========
The accompanying notes are an integral part of these consolidated financial statements. 4 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED-IN THOUSANDS) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 NET INCOME .......................................... $ 80,181 $ 48,203 Income items not requiring (providing) cash: Depreciation and amortization..................... 82,528 77,990 Gain on sales of assets........................... (11,883) (8,953) Deferred income tax provision (benefit)........... 946 (223) Other non-cash charges............................ (311) (945) Increase (decrease) in cash from changes in operating accounts: Receivables, net................................ (54,606) (39,550) Inventories, net................................ (28,745) (10,599) Prepayments and other........................... 1,917 10,936 Accounts payable and accrued liabilities........ 36,263 12,598 Other long-term liabilities..................... (1,318) (13,546) -------- -------- CASH PROVIDED BY OPERATING ACTIVITIES................ 104,972 75,911 -------- -------- Purchases of property, plant and equipment........... (100,891) (99,848) Proceeds from sales of businesses.................... 66,368 19,168 Proceeds from other disposition of assets............ 22,038 13,898 Acquisitions, net of notes issued and cash acquired.. -- (16,339) Other net cash flows from investing activities....... (3,711) (5,229) -------- --------- CASH USED IN INVESTING ACTIVITIES.................... (16,196) (88,350) --------- -------- Borrowings under credit facilities................... 12,149 247,323 Repayment of borrowings.............................. (109,970) (236,950) Payment of deferred loan costs....................... -- (4,801) Net cash flows from currency hedging transactions.... 4,537 1,224 Proceeds from sale of stock to employee benefit plans and stock option exercises.................. 9,239 9,922 -------- -------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES...... (84,045) 16,718 --------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH.............. (1,465) (185) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS................ 3,266 4,094 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....... 33,029 32,800 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD............. $ 36,295 $ 36,894 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.......................................... $ 12,119 $ 10,706 Income taxes, net of refunds received............. 11,098 7,394 The accompanying notes are an integral part of these consolidated financial statements. 5 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) The consolidated financial statements of Weatherford Enterra, Inc. and its subsidiaries (the "Company" or "Weatherford Enterra") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished reflects all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods. 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. However, the Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes to make them consistent with the current presentation format. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. No significant accounting changes have occurred during the nine months ended September 30, 1997. (2) INCOME PER COMMON AND COMMON EQUIVALENT SHARE. Income per common and common equivalent share is computed on the basis of the weighted average number of shares of common stock and common stock equivalents (if dilutive) outstanding during the respective periods. Fully diluted earnings per share are equal to primary earnings per share in all periods presented. (3) INVENTORIES. Consolidated net inventories consist of the following (in thousands): SEPTEMBER 30, DECEMBER 31, 1997 1996 Spare parts and components..................... $ 51,072 $ 41,068 Raw materials.................................. 28,297 28,734 Work in process................................ 28,363 26,902 Finished goods................................. 51,638 66,598 ---------- ---------- $ 159,370 $ 163,302 ========== ========== (4) DIVESTITURES. On June 12, 1997, the Company sold the business and assets of CRC-Evans Pipeline International, Inc. ("CRC-Evans") and on June 30, 1997, the Company sold Total Engineering Services Team, Inc. ("TEST"). On September 18, 1997, the Company sold the assets of its American Aero Cranes division, completing the divestiture program announced in September 1996. Aggregate cash proceeds from the transactions of $66.4 million, subject to adjustment, was used primarily to repay bank debt. (5) RECENTLY ISSUED ACCOUNTING STANDARDS. In June 1997, the Financial Accounting Standards Board, ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME, which establishes standards for reporting and financial statement display of comprehensive income. This Statement is effective for fiscal years beginning after December 15, 1997. The Company will adopt this Statement on January 1, 1998. Had SFAS No. 130 been adopted as of September 30, 1997, the year-to-date change in cumulative translation adjustment would have been deducted from net imcome to calculate comprehensive income. 6 (6) SUBSEQUENT EVENT. On October 24, 1997, the Company amended its primary bank credit facility, extending its $200 million revolving credit facility (the "Revolving Credit Facility") through October 24, 2002, reducing interest rates and fees and improving other terms and conditions. Amounts outstanding under the Revolving Credit Facility accrue interest at a variable rate ranging from 0.25% to 0.625% above a specified Eurodollar rate, based upon the senior unsecured credit ratings assigned by Standard & Poor's and Moody's Investors Service. A commitment fee ranging from 0.09% to 0.20% per annum is payable quarterly on the unused portion of the Revolving Credit Facility. The Company is required under the Revolving Credit Facility to maintain certain financial ratios, including a maximum debt-to-capitalization ratio of 50%, which limits the Company's ability to incur indebtedness. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. BUSINESS REVIEW Certain of the statements which follow represent forward-looking information. These forward-looking statements, including without limitation statements with respect to the Company's future results of operations, financial condition, capital resources and industry condition, are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be significantly impacted by various factors described herein and in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1996. These factors include, without limitation, market prices and worldwide demand for oil and natural gas, oil and natural gas exploration and production activity, and general economic and political conditions. There can be no assurance that anticipated developments will occur. Weatherford Enterra is a diversified energy service and manufacturing company that provides a variety of services and equipment to the exploration, production and transmission sectors of the oil and gas industry. The Company's principal industry segments are oilfield services, oilfield products and gas compression, with operations in virtually every oil and gas exploration and production region in the world. The Company's operating results include several other businesses that the Company has sold in connection with a divestiture program announced in September 1996. RESULTS OF OPERATIONS A summary of operating results by business segment is shown below (in thousands): FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 REVENUES: Oilfield services......$ 168,178 $ 130,330 $ 467,009 $ 371,382 Oilfield products...... 49,170 40,740 135,070 98,974 Gas compression........ 46,572 37,579 129,399 113,478 Other businesses....... 10,462 50,421 76,852 127,859 ----------- ----------- ---------- --------- Total................$ 274,382 $ 259,070 $ 808,330 $ 711,693 =========== =========== ========== ========= OPERATING INCOME: Oilfield services......$ 41,421 $ 24,163 $ 108,747 $ 64,676 Oilfield products...... 11,890 7,167 28,514 14,789 Gas compression........ 3,589 335 9,698 6,053 Other businesses....... (1,691) 6,288 440 7,614 Corporate.............. (4,255) (2,089) (9,543) (6,548) ----------- ----------- ---------- --------- Total................$ 50,954 $ 35,864 $ 137,856 $ 86,584 =========== =========== ========== ========= 7 OILFIELD SERVICES. Oilfield services operations are located worldwide near oil and gas producing regions and consist of oilfield equipment rental, downhole services including fishing and milling, and tubular running services including the installation and testing of casing and tubing connections. During the third quarter of 1997, revenues increased 29% to $168.2 million and operating income grew 71% to $41.4 million compared to the third quarter of 1996, primarily as a result of increased demand and improved pricing in many areas. In both the U.S. and international markets, oilfield service revenue growth exceeded that of active drilling rig growth. Certain drilling techniques, including re-entry, horizontal and directional drilling were important contributors to revenue growth, particularly in North America. U.S. service revenues increased 36% to $83.4 million, with significant revenue increases in every U.S. region reflecting continued growth in land-based and Gulf of Mexico drilling activity and improved pricing. International revenues increased 23% to $84.8 million, reflecting increased activity in many areas, including Europe, the Asia Pacific region and Canada. During the first nine months of 1997, revenues increased 26% to $467.0 million and operating income grew 68% to $108.7 million compared to the first nine months of 1996, primarily as a result of increased worldwide drilling activity, improved pricing and the introduction of downhole services into certain new markets. OILFIELD PRODUCTS. Closely aligned with the oilfield services segment, the oilfield products segment includes the manufacture, sale and service of cementation products, liner hangers, gas lift equipment and equipment for resale and used internally to provide oilfield services. The Company acquired the business and assets of Nodeco AS, a Norwegian liner hanger manufacturer, and Aarbakke AS (collectively "Nodeco") in May 1996. During the third quarter of 1997, revenues increased 21% to $49.2 million and operating income increased 66% to $11.9 million compared to the third quarter of 1996, primarily as a result of improved results in the Company's cementation products and gas lift businesses. Cementation product sales improved significantly during the third quarter of 1997, primarily reflecting increased U.S. drilling activity, increased market share and the introduction of new products. Manufacturing efficiencies achieved as a result of the higher volume of product sales also contributed to the profitability improvement. Gas lift results benefited from increased international shipments, particularly to the Asia Pacific region and South America. During the first nine months of 1997, revenues increased 37% to $135.1 million and operating income increased 93% to $28.5 million compared to the first nine months of 1996. The improved results are primarily attributable to increased volume of cementation product sales, operating efficiencies and the inclusion of the Nodeco operations for the full nine-month period. GAS COMPRESSION. The gas compression segment includes manufacturing, packaging, renting, selling and providing parts and services for gas compressor units over a broad horsepower range. Revenues increased 24% to $46.6 million and operating income increased 971% to $3.6 million during the third quarter of 1997 as compared to 1996, primarily as a result of higher volume of packaged unit sales in Canada and higher U.S. rental and service activity. Ongoing process improvements, offset partially by the impact of a large, low-margin custom package shipment, contributed to an 8% operating margin for the quarter, compared to 1% in the corresponding period in 1996. Manufacturing and packaging revenues increased 29% to $22.1 million in the third quarter of 1997 compared to $17.1 million in the third quarter of 1996. Compressor rental and service revenues improved 20% over the third quarter of 1996 to $24.5 million, reflecting expansion and increased utilization of the Company's compressor rental fleet. At September 30, 1997, the Company's rental fleet was 430,000 horsepower with 86% utilization, compared to 79% utilization at September 30, 1996. 8 During the first nine months of 1997, gas compression revenues increased 14% to $129.4 million and operating income improved 60% to $9.7 million compared to the first nine months of 1996, reflecting expansion of the Company's compressor rental fleet and increased service activity. Compressor rental and service revenues improved 17% to $73.4 million, while manufacturing and packaging revenues increased 11% to $56.0 million, comparing the first nine months of 1997 to the same period in 1996. OTHER BUSINESSES. The Company had several non-core businesses that it has sold. Such businesses include Barber Industries Limited, Enterra Patco Oilfield Products, Inc., and Arrow Completion Systems, Inc., each of which was sold in 1996; CRC-Evans Pipeline International, Inc. ("CRC-Evans") and Total Engineering Services Team, Inc. ("TEST"), which were sold in June 1997; and the American Aero Cranes division, which was sold in September of 1997. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses as a percentage of revenue decreased to 12.5% in the third quarter of 1997 from 13.6% in the third quarter of 1996, and to 13.1% in the first nine months of 1997 from 14.4% for the same period of 1996, primarily as a result of the increased revenues and continued cost efficiencies achieved. RESEARCH AND DEVELOPMENT. Research and development costs of $1.2 million in the third quarter of 1997 decreased 22% compared to the third quarter of 1996, primarily as a result of customer reimbursement of certain prototype costs. Research and development costs of $6.2 million in the first nine months of 1997 increased 28% compared to the corresponding period in 1996, primarily reflecting the expansion of the Company's operations and development activities to support its three principal business segments. EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES. The Company owns an interest of 50% or less in several joint ventures, primarily in the oilfield services segment. Compared to the corresponding periods in 1996, the Company's equity in the earnings of these affiliates increased 55% to $702,000 in the third quarter of 1997, primarily as a result of increased service activity in Saudi Arabia. For each of the nine-month periods, the Company's equity in the earnings of these affiliates was $1.8 million. The Company received cash dividends from its 50% or less-owned affiliates totaling $0.9 million and $1.2 million in the first nine months of 1997 and 1996, respectively. FOREIGN CURRENCY (GAIN) LOSS, NET. As a result of the fluctuation of the U.S. dollar against the major foreign currencies in which the Company conducts business, the Company recorded net foreign currency losses of $98,000 and $398,000 in the third quarter and first nine months of 1997, respectively, compared to a net loss of $47,000 and a net gain of $455,000 in the third quarter and first nine months of 1996, respectively. OTHER EXPENSE, NET. Other expense, net, increased to $5.2 million in the third quarter of 1997 compared to $4.2 million in the third quarter of 1996, and to $15.7 million in the first nine months of 1997 compared to $8.2 million in the first nine months of 1996. The increase was attributable to several factors, including losses recorded in 1997 related to the sales of non-core businesses, adjustments to prior year estimates and higher goodwill amortization as a result of the Nodeco acquisition. INTEREST. Net interest expense decreased 30% to $4.0 million in the third quarter of 1997 and 6% to $14.3 million for the first nine months of 1997, compared to the corresponding periods in 1996, primarily as a result of lower average debt balances outstanding at slightly higher average interest rates. INCOME TAXES. Income tax provision as a percentage of income before income taxes was 35% in the third quarter and first nine months of 1997 compared to 34% and 32%, respectively, for the corresponding periods in 1996. The lower effective tax rate in 1996 primarily resulted from the reversal in 1996 of valuation allowances on certain deferred tax assets, including U.S. net operating loss carryforwards and general business credit carryforwards. 9 LIQUIDITY AND CAPITAL RESOURCES The Company's operations provided cash of $105.0 million during the first nine months of 1997 compared to $75.9 million during the first nine months of 1996, primarily as a result of improved operating activity. Net income before depreciation and amortization of $162.7 million in the first nine months of 1997 increased 29% when compared to the same period in 1996. Changes in working capital and other operating accounts used cash of $46.5 million during the first nine months of 1997 compared to $40.2 million in the same period of 1996. Working capital increased to $319.8 million at September 30, 1997 compared to $294.1 million at December 31, 1996. Capital expenditures, excluding the acquisition of Nodeco in 1996, increased slightly to $100.9 million during the nine months ended September 30, 1997 compared to $99.8 million for the same period in 1996. During 1997, the Company closed the sales of the American Aero Cranes division, CRC-Evans and TEST, generating aggregate cash proceeds of $66.4 million, subject to adjustment, as part of a divestiture plan announced in September 1996. Proceeds were used primarily to repay bank debt. The Company's consolidated indebtedness decreased to $216.4 million at September 30, 1997 from $315.8 million at December 31, 1996, primarily as a result of the repayment of debt with the proceeds from the divestitures mentioned above. The Company's ratio of total debt to total capitalization was 19% at September 30, 1997 compared to 27% at December 31, 1996. The Company has $200 million of publicly-held 7 1/4% notes due May 15, 2006 (the "7 1/4% Notes"). Interest on the 7 1/4% Notes is payable semi-annually on May 15 and November 15 of each year. The Company's debt ratings assigned by Standard & Poor's and Moody's Investors Service are BBB+/Baa1. On October 24, 1997, the Company amended its primary bank credit facility, extending its $200 million revolving credit facility (the "Revolving Credit Facility") through October 24, 2002, reducing interest rates and fees and improving other terms and conditions. Amounts outstanding under the Revolving Credit Facility accrue interest at a variable rate ranging from 0.25% to 0.625% above a specified Eurodollar rate, based upon the senior unsecured credit ratings assigned by Standard & Poor's and Moody's Investors Service. A commitment fee ranging from 0.09% to 0.20% per annum is payable quarterly on the unused portion of the Revolving Credit Facility. The Company is required under the Revolving Credit Facility to maintain certain financial ratios, including a maximum debt-to-capitalization ratio of 50% which limits the Company's ability to incur indebtedness. At September 30, 1997, the Company had $200 million available to borrow under the Revolving Credit Facility. The Company also has various credit facilities available only for stand-by letters of credit and bid and performance bonds, pursuant to which funds are available to the Company to secure performance obligations and certain retrospective premium adjustments under insurance policies. The Company had a total of $11.8 million of letters of credit and bid and performance bonds outstanding at September 30, 1997. The Company conducts a portion of its business in currencies other than the U.S. dollar, including the Canadian dollar, major European currencies and certain Latin American currencies. Although most of the revenues of the Company's international operations are denominated in the local currency, the effects of foreign currency fluctuations are largely mitigated because local expenses of such foreign operations also generally are denominated in the same currency. 10 The Company occasionally enters into forward exchange contracts only as a hedge against certain existing economic exposures, and not for speculative or trading purposes. These contracts reduce exposure to currency movements affecting existing assets and liabilities denominated in foreign currencies, such exposure resulting primarily from trade receivables and payables and intercompany loans. The future value of these contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. Settlement of forward exchange contracts resulted in net cash inflows totaling $4.5 million and $1.2 million during the first nine months of 1997 and 1996, respectively. Management believes the the combination of working capital, the unused portion of the Revolving Credit Facility and cash flows from operations provide the Company with sufficient capital resources and liquidity to manage its routine operations. The Company continues to seek opportunities to enhance its competitiveness through strategic acquisitions. Management believes that any borrowings made in connection with any such acquisitions will not have a materially adverse impact on the Company's liquidity. Management believes that it is premature to provide specific information with respect to any other such possible acquisitions because of the status of, and possible adverse impact on, negotiations, and because, in any event, there can be no assurance that any of such possible acquisitions will be consummated. Like most multinational oilfield service companies, the Company has operations in certain international areas, including parts of the Middle East, North and West Africa, Latin America, the Asia-Pacific region and the Commonwealth of Independent States (the "CIS"), that are inherently subject to risks of war, political disruption, civil disturbance and policies that may disrupt oil and gas exploration and production activities, restrict the movement of funds, lead to U.S. government or international sanctions or limit access to markets for periods of time. Historically, the economic impact of such disruptions has been temporary and oil and gas exploration and production activities have resumed eventually in relation to market forces. Certain areas, including the CIS, Algeria, Nigeria, and parts of the Middle East and Latin America, have been subjected to political disruption or social unrest in the past twelve months. Generally, business interruptions resulting from civil or political disruptions negatively impact near-term results of operations; however, management believes that it is unlikely that any specific business disruption caused by existing or foreseen civil or political instability will have a materially adverse impact on the financial condition or liquidity of the Company. The Company has not declared dividends on Common Stock since December 1982 and management does not anticipate paying dividends on Common Stock at any time in the foreseeable future. 11 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits None. (B) Reports on Form 8-K None. 12 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. WEATHERFORD ENTERRA, INC. (Registrant) Date: NOVEMBER 13, 1997 By: /s/ NORMAN W. NOLEN NORMAN W. NOLEN Senior Vice President, Chief Financial Officer & Treasurer 13 EX-27 2
5 9-MOS DEC-31-1997 SEP-30-1997 36,295 0 299,608 18,695 159,370 520,547 1,225,390 676,767 1,380,602 200,699 0 0 0 5,267 909,619 1,380,602 196,130 808,330 129,941 543,873 20,515 0 16,063 123,563 43,325 80,181 0 0 0 80,181 1.52 1.52
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