0000899243-95-000525.txt : 19950815 0000899243-95-000525.hdr.sgml : 19950815 ACCESSION NUMBER: 0000899243-95-000525 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEATHERFORD INTERNATIONAL INC CENTRAL INDEX KEY: 0000029302 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 741681642 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07867 FILM NUMBER: 95562904 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: DIXEL INDUSTRIES INC DATE OF NAME CHANGE: 19750618 10-Q 1 FORM 10-Q ================================================================================ FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ (Mark one) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1995 ------------- 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 INTERNATIONAL INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 74-1681642 ------------------------------ ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or 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 54,307,078 shares of Common Stock, $.10 par value, of the registrant outstanding as of July 31, 1995, including 30,057 and 22,979 shares, respectively, deemed to be outstanding pending the exchange of shares of common stock of Petroleum Equipment Tools Co. and H & H Oil Tool Co., Inc., but excluding 103,153 shares classified as Treasury Stock. (Page 1 of 15) PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31, 1995 1994 --------- ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents................................ $ 12,826 $ 22,324 Receivables, net of allowance of $7,872 and $7,610....... 111,379 104,424 Inventories, net of allowance of $9,925 and $9,352....... 53,622 54,381 Deferred tax assets...................................... 1,224 1,148 Prepayments and other.................................... 8,082 7,251 -------- -------- Total current assets.................................... 187,133 189,528 -------- -------- PROPERTY, PLANT AND EQUIPMENT, AT COST.................... 565,458 544,199 Less -- Accumulated depreciation......................... 345,053 329,043 -------- -------- 220,405 215,156 -------- -------- GOODWILL, NET............................................. 36,558 34,970 -------- -------- OTHER ASSETS.............................................. 15,735 14,309 -------- -------- $459,831 $453,963 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt.......................................... $ 124 $ 113 Current portion of long-term debt........................ 16,302 16,262 Accounts payable......................................... 15,579 27,299 Accrued income taxes..................................... 7,642 6,329 Other accrued liabilities................................ 41,532 49,586 -------- -------- Total current liabilities............................... 81,179 99,589 -------- -------- LONG-TERM DEBT............................................ 57,343 55,701 -------- -------- DEFERRED TAX LIABILITIES.................................. 2,667 2,597 -------- -------- OTHER LONG-TERM LIABILITIES............................... 14,094 13,876 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $1 par; shares authorized 1,000,000; none issued............................................. - - Common stock, $.10 par; shares authorized 80,000,000; issued 54,391,513 and 54,256,434........................ 5,440 5,426 Paid-in capital.......................................... 277,723 277,114 Retained earnings (deficit).............................. 16,830 (1,552) Cumulative translation adjustment........................ 5,386 2,013 Treasury stock, 103,153 and 102,404 common shares, at cost.................................................... (831) (801) -------- -------- 304,548 282,200 -------- -------- $459,831 $453,963 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -2- WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED - IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ---------------------- --------------------- 1995 1994 1995 1994 ---------- ---------- ---------- --------- REVENUES: International...................... $53,129 $45,141 $102,625 $ 86,495 United States...................... 44,924 46,463 96,462 93,902 ------- ------- -------- -------- Total revenues................... 98,053 91,604 199,087 180,397 ------- ------- -------- -------- COSTS AND EXPENSES: Cost of sales and services......... 70,931 64,740 144,246 128,406 Selling, general and administrative expenses.......... 14,087 14,864 28,365 29,091 Research and development........... 953 749 1,771 1,384 Equity in earnings of unconsolidated affiliates........ (374) (413) (899) (771) Foreign currency (gain) loss, net.. (236) (2,361) (269) (2,027) Other (income) expense, net........ (1,314) 25 (1,826) (96) ------- ------- -------- -------- Total costs and expenses......... 84,047 77,604 171,388 155,987 ------- ------- -------- -------- OPERATING INCOME: International...................... 9,371 6,789 18,152 13,926 United States...................... 5,511 5,781 11,423 9,907 Corporate.......................... (876) 1,430 (1,876) 577 ------- ------- -------- -------- Total operating income........... 14,006 14,000 27,699 24,410 Interest expense................... 1,787 1,445 3,608 2,163 Interest income.................... (168) (273) (382) (496) ------- ------- -------- -------- INCOME BEFORE INCOME TAXES.......... 12,387 12,828 24,473 22,743 Income taxes....................... 3,161 3,109 6,091 5,840 ------- ------- -------- -------- NET INCOME.......................... $ 9,226 $ 9,719 $ 18,382 $ 16,903 ======= ======= ======== ======== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING................. 54,664 54,367 54,527 54,320 ======= ======= ======== ======== INCOME PER COMMON AND COMMON EQUIVALENT SHARE.............................. $ 0.17 $ 0.18 $ 0.34 $ 0.31 ======= ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -3- WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED - IN THOUSANDS)
RETAINED CUMULATIVE COMMON PAID-IN EARNINGS TRANSLATION TREASURY STOCK CAPITAL (DEFICIT) ADJUSTMENT STOCK TOTAL ------ -------- --------- ----------- --------- -------- BALANCE, DECEMBER 31, 1994.. $5,426 $277,114 $(1,552) $2,013 $(801) $282,200 Shares issued under employee benefit plans... 1 94 - - - 95 Stock grants and options exercised................ 13 515 - - (30) 498 Currency translation adjustment............... - - - 3,373 - 3,373 Net income................ - - 18,382 - - 18,382 ------ -------- -------- ----------- -------- -------- BALANCE, JUNE 30, 1995...... $5,440 $277,723 $16,830 $5,386 $(831) $304,548 ====== ======== ======== =========== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -4- WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED-IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------------ 1995 1994 ---------- --------- NET INCOME........................................................ $ 18,382 $ 16,903 Income items not requiring (providing) cash: Depreciation and amortization................................... 22,586 17,393 Undistributed earnings of affiliates............................ (116) (379) Gain on disposal of property, plant and equipment, net.......... (3,062) (1,707) Unrealized foreign currency gain................................ - (2,346) Deferred income tax benefit..................................... (165) - Increase(decrease) in cash from changes in operating accounts: Receivables, net.............................................. (4,559) (4,392) Inventories, net.............................................. 2,373 (7,890) Payment of deferred loan costs................................ - (748) Prepayments and other......................................... (711) (1,986) Accounts payable and accrued liabilities...................... (20,234) 913 Other long-term liabilities................................... (82) (1,833) -------- -------- CASH PROVIDED BY OPERATING ACTIVITIES............................. 14,412 13,928 -------- -------- Purchases of property, plant and equipment........................ (24,786) (16,094) Acquisitions, net of notes issued and cash acquired............... (1,868) (65,969) Proceeds from disposition of assets............................... 6,217 2,113 Other net cash flows from investing activities.................... (895) 1,656 -------- -------- CASH USED IN INVESTING ACTIVITIES................................. (21,332) (78,294) -------- -------- Proceeds from bank borrowings..................................... 13,655 80,029 Repayments of indebtedness........................................ (12,105) (18,884) Net cash flows from currency hedging transactions................. (3,780) - Proceeds from sale of stock to employee benefit plans and stock option exercises................................................ 593 933 -------- -------- CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................... (1,637) 62,078 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH........................... (941) 332 -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS............................. (9,498) (1,956) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 22,324 21,905 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD.......................... $ 12,826 $ 19,949 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest........................................................ $ 2,703 $ 1,201 Income taxes.................................................... 4,603 1,934 Purchase of equipment financed by debt............................ - 300
The accompanying notes are an integral part of these consolidated financial statements. -5- WEATHERFORD INTERNATIONAL INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) The consolidated financial statements of Weatherford International Incorporated and its subsidiaries (the "Company" or "Weatherford") 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, 1994. No significant accounting changes have occurred during the six months ended June 30, 1995. (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) PROPOSED ENTERRA MERGER. On June 23, 1995, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Enterra Corporation ("Enterra") with and into the Company (the "Enterra Merger"). Pursuant to the Merger Agreement, each of the approximately 27,800,000 shares of Enterra common stock will be exchanged for 1.69 shares of Weatherford Common Stock (0.845 of a share of Weatherford Common Stock after giving effect to a contemporaneous one-for- two reverse stock split). The transaction will be accounted for as a pooling of interests. The Enterra Merger, which is subject to the approval of Weatherford and Enterra shareholders, is expected to close October 5, 1995. Enterra is a worldwide provider of specialized services and products to the oil and gas industry through its oilfield, pipeline and compression services and equipment businesses. For the year ended December 31, 1994, Enterra had revenues of $302,243,000 and net income of $12,517,000. During the second quarter of 1995, Enterra recognized $28,281,000 in unusual charges, primarily representing asset write-downs, staff reductions and operational consolidations. Assuming the Enterra Merger and the reverse stock split mentioned above were consummated, unaudited pro forma condensed consolidated results of operations would have been as follows (in thousands except per share amounts): -6-
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, --------------------- ------------------ 1995 1994 1995 1994 ---------- --------- -------- -------- Revenues..................... $208,642 $134,064 $425,775 $269,939 Net income(loss)............. $ (3,145) $ 10,720 $ 11,294 $ 21,011 Income(loss) per common and common equivalent share... $ (0.06) $ 0.26 $ 0.22 $ 0.51
(4) INVENTORIES. Consolidated net inventories consist of the following (in thousands):
JUNE 30, DECEMBER 31, 1995 1994 -------- ------------ Spare parts and components................. $17,912 $17,593 Raw materials.............................. 4,771 4,984 Work in process............................ 4,631 5,211 Finished goods............................. 26,308 26,593 ------- ------- $53,622 $54,381 ======= =======
(5) SUMMARIZED FINANCIAL INFORMATION OF 50% OR LESS-OWNED AFFILIATES. The Company owns a 49% interest in each of two Saudi Arabian companies and an Abu Dhabi joint venture, which are included in other assets in the accompanying consolidated balance sheets. The Company owned a 50% interest in a U.S. partnership that was dissolved in 1994. Summarized financial information for these affiliates is as follows (in thousands):
JUNE 30, DECEMBER 31, 1995 1994 -------- ------------ BALANCE SHEET DATA: Current assets...................... $3,772 $3,591 Non-current assets.................. 1,074 947 ------ ------ Total assets...................... $4,846 $4,538 ====== ====== Current liabilities................. $1,547 $1,462 Non-current liabilities............. 381 391 ------ ------ Total liabilities................. $1,928 $1,853 ====== ====== FOR THE SIX MONTHS ENDED JUNE 30, -------------------- 1995 1994 ------ ------ INCOME STATEMENT DATA: Revenues............................ $4,108 $5,518 Gross profit........................ 2,091 1,885 Net income.......................... 1,833 1,565
-7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS REVIEW Weatherford is a diversified international energy service and manufacturing company that provides a variety of services and equipment to the oil and gas industry. Weatherford's principal businesses consist of providing tubular handling services, renting specialized oilfield equipment and providing fishing services and related tools, and manufacturing and selling cementation products and other equipment. Weatherford operates in virtually every oil and gas exploration and production region in the world. Weatherford has grown significantly through acquisition in recent years, having acquired 20 businesses since November 1991. As a result of these acquisitions, the Company is an industry leader in each of its three principal businesses and has expanded its product and service lines, improved its U.S. market position and realized significant consolidation cost savings. The following table sets forth the Company's revenues attributable to each of its principal businesses (in thousands):
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------ ---------------------------- 1995 1994 1994 1993 1992 -------- -------- -------- -------- -------- Oilfield services and rentals: Tubular handling services $ 61,692 $ 54,000 $109,503 $105,715 $103,360 Rental tools and fishing tool services 85,833 82,290 170,387 130,943 53,651 Other services 7,466 5,570 12,264 14,118 8,819 -------- -------- -------- -------- -------- Total services & rentals 154,991 141,860 292,154 250,776 165,830 -------- -------- -------- -------- -------- Oilfield products and equipment: Cementation products 21,518 21,024 43,201 41,734 30,160 Other products and equipment 22,578 17,513 36,959 40,573 26,974 -------- -------- -------- -------- -------- Total products & equipment 44,096 38,537 80,160 82,307 57,134 -------- -------- -------- -------- -------- Total revenues $199,087 $180,397 $372,314 $333,083 $222,964 ======== ======== ======== ======== ========
Demand for the Company's services and products depends primarily upon the number of oil and gas wells being drilled, the depth and drilling conditions of such wells, the volume of production, the number of well completions and the level of workover activity. Drilling activity is largely dependent on the level and volatility of oil and natural gas prices. The following table sets forth selected statistics reflecting industry conditions and the Company's financial results: -8-
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, -------------- ----------------------- 1995 1994 1994 1993 1992 ------ ------ ------- ------ ------ Average rig count (a): United States...................... 695 745 775 754 721 International...................... 988 983 997 960 959 ------ ------ ------ ------ ------ Worldwide.......................... 1,683 1,728 1,772 1,714 1,680 Revenue per rig (in thousands)(b): United States...................... $ 139 $ 126 $ 240 $ 233 $ 115 International...................... 104 88 187 164 146 Worldwide.......................... 118 104 210 194 133
-------- (a) Calculated by averaging rig count figures as published by Baker Hughes Incorporated. (b) Calculated by dividing revenues by average rig count. FINANCIAL CONDITION On June 23, 1995, the Company entered into the Merger Agreement providing for the Enterra merger. Pursuant to the Merger Agreement, each of the approximately 27,800,000 shares of Enterra common stock will be exchanged for 1.69 shares of Weatherford Common Stock (0.845 of a share of Weatherford Common Stock after giving effect to a contemporaneous one-for-two reverse stock split). The transaction will be accounted for as a pooling of interests. The Enterra Merger, which is subject to the approval of Weatherford and Enterra shareholders, is expected to close October 5, 1995. The Company's operations provided cash of $14,412,000 during the first six months of 1995 compared to $13,928,000 during the first six months of 1994. Net income before depreciation and amortization of $40,968,000 in the first six months of 1995 increased $6,672,000 when compared to the same period in 1994. Changes in working capital and other operating accounts used cash of $23,213,000 during the first six months of 1995 compared to $15,936,000 in the same period of 1994, primarily as a result of increased payments in 1995 related to capital assets and inventories purchased in the fourth quarter of 1994. Capital expenditures increased to $24,786,000 during the six months ended June 30, 1995 compared to $16,094,000 for the same period in 1994. The increase was primarily attributable to the international segment, where the Company expanded its operations during 1994 with acquisitions in the North Sea, the Asia-Pacific Region and South America. The Company's consolidated indebtedness increased slightly from $72,076,000 at December 31, 1994 to $73,769,000 at June 30, 1995. The Company's total debt- to-total capitalization ratio improved to 19% at June 30, 1995 compared to 20% at December 31, 1994. The Company has a $75,000,000 Term Loan (the "Term Loan") and a $50,000,000 Revolving Credit Facility (the "Revolving Credit Facility"; collectively, the "Facilities"). Management anticipates that the Facilities will be replaced in connection with the Enterra Merger. The Term Loan is repayable in equal quarterly installments through March 31, 1999. The balance outstanding at March 31, 1996 under the Revolving Credit Facility will be repayable in equal quarterly installments through March 31, 1999. Amounts outstanding under the Facilities accrue interest at a variable rate, depending on the -9- Company's total debt-to-total capitalization ratio. The applicable interest rate on amounts outstanding at June 30, 1995 was 7.1%. The Facilities are secured by the stock of certain of the Company's significant subsidiaries. The Company is required under the Facilities agreement to maintain certain financial ratios and is limited thereby in its ability to pay dividends on and repurchase Common Stock, incur indebtedness, make investments, and dispose of, pledge or otherwise transfer assets of the Company. At June 30, 1995, the balances outstanding under the Term Loan and the Revolving Credit Facility were $59,211,000 and $10,000,000, respectively. At June 30, 1995, the Company had $40,000,000 available to borrow under the Revolving Credit Facility and $11,074,000 available for borrowing under working capital facilities of certain of its international subsidiaries. The Company has entered into forward exchange contracts as a hedge against certain existing economic exposures. The market value gains and losses recognized on the hedges offset foreign currency transaction gains and losses recognized on the related exposures. Settlement of forward exchange contracts resulted in net cash outflows totaling $3,780,000 during the first six months of 1995. Management believes the combination of working capital, the unused portion of existing credit facilities 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. In addition to the Enterra Merger, the Company is currently considering several potential acquisitions, which are at various stages of negotiation or due diligence. 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 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 civil disturbance and political activities which may disrupt oil and gas exploration and production activities, restrict the movement of funds 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 eventually resumed in relation to market forces. Certain areas, including the CIS, Algeria and Nigeria, 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, in the opinion of management, 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. The Company's ability to pay dividends on Common Stock is restricted by the terms of the Facilities. RESULTS OF OPERATIONS SECOND QUARTER 1995 COMPARED TO SECOND QUARTER 1994. Revenues increased 7% from $91,604,000 in the second quarter of 1994 to $98,053,000 in the second quarter of 1995. International revenues increased $7,988,000, or 18%, to $53,129,000 compared to $45,141,000 during the second quarter of 1994, primarily due to increased activity in the North Sea, Latin America -10- and Africa. During the second quarter of 1995, the average international rig count (excluding Canada) was 3% higher than in the same period of 1994. United States revenues decreased $1,539,000, or 3%, to $44,924,000 in the second quarter of 1995 compared to $46,463,000 for the same period of 1994, primarily as a result of lower drilling activity. The average U.S. drilling rig count was 8% lower in the second quarter of 1995 than in the second quarter of 1994. Gross profit increased $258,000, or 1%, to $27,122,000 from $26,864,000 when comparing the second quarter of 1995 to the second quarter of 1994. As a percentage of revenues, gross profit declined from 29.3% to 27.7%, reflecting differences in the revenue mix geographically and with respect to the services and products provided. Selling, general and administrative expenses decreased $777,000, or 5%, to $14,087,000 in the second quarter of 1995 compared to $14,864,000 in the second quarter of 1994, primarily as a result of cost savings achieved in consolidating the operations of H & H Oil Tool Co., Inc. ("H & H"), a U.S. rental and fishing tool company acquired in September 1994 and accounted for as a pooling of interests. As a percentage of revenues, selling, general and administrative expenses improved from 16.2% to 14.4%, reflecting the impact of revenue growth and the consolidation cost savings. Research and development costs increased 27% from $749,000 in the second quarter of 1994 to $953,000 in the second quarter of 1995, primarily reflecting the expansion of the Company's development activities to support its three principal businesses. The Company owns a 49% interest in each of two Saudi Arabian companies and an Abu Dhabi joint venture. The Company owned a 50% interest in a U.S. partnership that was dissolved in 1994. The Company's equity in the earnings of these affiliates decreased $39,000 to $374,000 in the second quarter of 1995, primarily as a result of the dissolution of the U.S. partnership during 1994 offset by improved operating results in Saudi Arabia. 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 exchange transaction gains of $236,000 in the second quarter of 1995 compared to net exchange transaction gains of $2,361,000 in the second quarter of 1994. A substantial portion of the 1994 gain represented an unrealized currency gain related to certain intercompany loans. Other (income) expense improved from a net expense of $25,000 in the second quarter of 1994 to income of $1,314,000 in the same period of 1995, primarily as a result of increased gains on sales of used rental equipment in the normal course of business. Operating income was virtually unchanged, increasing $6,000 to $14,006,000 in the second quarter of 1995 compared to $14,000,000 in the same period in 1994, primarily as a result of lower selling, general and administrative expenses and higher other income in the second quarter of 1995, which offset the large currency gain in the second quarter of 1994. Net interest expense increased by $447,000 to $1,619,000 in the second quarter of 1995 compared to $1,172,000 in the second quarter of 1994, primarily as a result of higher market interest rates in 1995. The income tax provision consists of taxes on foreign earnings, foreign taxes withheld on certain remittances from international subsidiaries, U.S. alternative minimum taxes and U.S. state income taxes. The income tax provision does not include U.S. regular federal income tax due to the availability of U.S. net operating loss carryforwards. The consolidated income tax provision increased to $3,161,000 during the second quarter of 1995 compared to $3,109,000 in the second quarter of 1994. The -11- Company's overall effective tax rate increased from 24% to 26%, primarily reflecting higher earnings in certain international jurisdictions. The Company conducts a portion of its business in currencies other than the U.S. dollar, including the German mark, the U.K. pound sterling, the Norwegian krone and the Canadian dollar. As a result of a weaker U.S. dollar, the weighted average currency exchange rates used to translate the statements of income of the Company's international subsidiaries were generally lower during the second quarter of 1995 compared to the same period in 1994, thereby increasing the amount of U.S. dollars reflected on the Company's 1995 consolidated statements of income. Had the second quarter 1995 average exchange rates been the same as in the second quarter of 1994, revenues for the second quarter of 1995 would have been approximately $3,275,000 lower. The impact on net income would not have been material. SIX MONTHS 1995 COMPARED TO SIX MONTHS 1994. Revenues increased 10% from $180,397,000 in the first six months of 1994 to $199,087,000 in the first six months of 1995. International revenues increased $16,130,000, or 19%, to $102,625,000 compared to $86,495,000 during the first six months of 1994, primarily as a result of the inclusion of the Odfjell Rental Operations acquired in April 1994, several smaller 1994 acquisitions and increased service activity in certain markets, including the North Sea, Latin America and Africa. During the first six months of 1995, the average international rig count was virtually unchanged compared to the same period of 1994. United States revenues increased 3% to $96,462,000 from $93,902,000 during the first six months of 1994, primarily due to a large export sale of products during the first quarter of 1995 totaling $5,867,000, offset by the impact of lower U.S. drilling activity. The average U.S. drilling rig count was 7% lower during the first six months of 1995 compared to the same period in 1994. Gross profit increased $2,850,000, or 6%, to $54,841,000 from $51,991,000 when comparing the first six months of 1995 to the same period in 1994. The consolidated gross profit percentage decreased from 28.8% to 27.5%, reflecting differences in the revenue mix geographically and with respect to the services and products provided. Selling, general and administrative expenses decreased $726,000, or 3%, to $28,365,000 in the first six months of 1995 compared to $29,091,000 in the first six months of 1994, primarily as a result of the cost savings achieved in consolidating the operations of H & H. As a percentage of revenues, selling, general and administrative expenses improved from 16.1% to 14.2%, reflecting the impact of revenue growth and the consolidation cost savings. Research and development costs increased $387,000, or 28%, to $1,771,000 in the first six months of 1995 compared to $1,384,000 in the first six months of 1994, primarily reflecting the expansion of the Company's development activities to support its three principal businesses. The Company owns a 49% interest in each of two Saudi Arabian companies and an Abu Dhabi joint venture. The company owned a 50% interest in a U.S. partnership that was dissolved in 1994. The Company's equity in the earnings of these affiliates increased $128,000, or 17%, to $899,000 in the first six months of 1995, primarily as a result of improved operating results in Saudi Arabia. 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 exchange transaction gains of $269,000 in the first six months of 1995 compared to net exchange transaction gains of $2,027,000 in the same period in 1994. A substantial portion of the 1994 gain represented an unrealized currency gain related to certain intercompany loans. -12- Other (income) expense improved from income of $96,000 in the first six months of 1994 to $1,826,000 in the same period of 1995, primarily as a result of increased gains on sales of used rental equipment in the normal course of business. Operating income increased $3,289,000, or 14%, to $27,699,000 through the first six months of 1995 compared to $24,410,000 in the same period in 1994, primarily as a result of the improved gross profit, selling, general and administrative expenses and other income, partially offset by the large currency gain in 1994. Net interest expense increased by $1,559,000, or 94%, to $3,226,000 in the first six months of 1995 compared to $1,667,000 in the first six months of 1994, primarily as a result of higher average debt balances outstanding in 1995 and higher market interest rates. The income tax provision consists of taxes on foreign earnings, foreign taxes withheld on certain remittances from international subsidiaries, U.S. alternative minimum taxes and U.S. state income taxes. The income tax provision does not include U.S. regular federal income tax due to the availability of U.S. net operating loss carryforwards. The consolidated income tax provision increased to $6,091,000 during the first six months of 1995 compared to $5,840,000 in the first six months of 1994, primarily reflecting higher pretax earnings in certain international jurisdictions. The Company's overall effective tax rate decreased from 26% for the first six months of 1994 to 25% for the first six months of 1995. The Company conducts a portion of its business in currencies other than the U.S. dollar, including the German mark, the U.K. pound sterling, the Norwegian krone and the Canadian dollar. As a result of a weaker U.S. dollar, the weighted average currency exchange rates used to translate the statements of income of the Company's international subsidiaries were generally lower during the first six months of 1995 compared to the same period in 1994, thereby increasing the amount of U.S. dollars reflected on the Company's 1995 consolidated statements of income. Had the average exchange rates in the first six months of 1995 been the same as in the first six months of 1994, revenues for the first six months of 1995 would have been approximately $5,577,000 lower. The impact on net income would not have been material. -13- PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits (27) Article 5 Financial Data Schedule (B) Reports on Form 8-K A report on Form 8-K dated June 23, 1995 was filed by the Company reporting the Company's execution of a definitive agreement to merge with Enterra Corporation. Pursuant to the merger, the Company will be the surviving corporation and each Enterra shareholder will receive 1.69 Weatherford shares (or 0.845 shares after giving effect to the two-for-one reverse stock split to be effected contemporaneously with the merger). -14- 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 INTERNATIONAL INCORPORATED (Registrant) Date: August 11, 1995 By: /s/ NORMAN W. NOLEN ------------------------------------ NORMAN W. NOLEN Senior Vice President, Chief Financial Officer & Treasurer -15- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 12,826 0 119,251 7,872 53,622 187,133 565,458 345,053 459,831 81,179 0 5,440 0 0 299,108 459,831 199,087 199,087 144,246 144,246 27,142 0 3,608 24,473 6,091 18,382 0 0 0 18,382 0.34 0.34