424B2 1 WEATHERFORD ENTERRA, INC. - 424(B)(2) 1 Filed Pursuant to Rule 424(b)(2) Registration No. 333-02281 *************************************************************************** * * * INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A * * REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED * * WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT * * BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE * * REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT * * CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY * * NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH * * SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO * * REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH * * STATE. * * * *************************************************************************** SUBJECT TO COMPLETION DATED MAY 17, 1996 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED MAY 16, 1996) $200,000,000 [WEATHERFORD ENTERRA, INC. LOGO] WEATHERFORD ENTERRA, INC. % NOTES DUE MAY , 2006 --------------------- Interest on the % Notes due May , 2006, (the "Notes") is payable semi-annually on and of each year, beginning , 1996. The Notes are not redeemable prior to maturity and will not be subject to any sinking fund. The Notes will be represented by one or more global securities registered in the name of the nominee of The Depository Trust Company, as depository (the "Depository"). Beneficial interests in the Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository and its participants. Except as described herein, the Notes will not be issued in definitive form. Settlement of the Notes will be made by the Underwriters in immediately available funds. So long as the Notes are in the form of Book-Entry Securities, all payments of principal and interest will be made by Weatherford Enterra, Inc. (the "Company") in immediately available funds. The Notes are expected to trade in the Depository's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the Notes therefore will be required by the Depository to settle in immediately available funds. See "Description of the Notes". --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=========================================================================================== PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(1) DISCOUNT(2) COMPANY(1)(3) ------------------------------------------------------------------------------------------- Per Note................................. % % % ------------------------------------------------------------------------------------------- Total.................................... $ $ $ ===========================================================================================
(1) Plus accrued interest, if any, from May , 1996. (2) The Company has agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933. See "Underwriting". (3) Before deduction of expenses payable by the Company estimated at $250,000. --------------------- The Notes are offered by the several Underwriters, subject to prior sale, when, as and if issued by the Company, delivered to and accepted by the Underwriters, subject to certain conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer, and to reject orders in whole or in part. It is expected that delivery of the Notes will be made in New York, New York on or about May , 1996. --------------------- MERRILL LYNCH & CO. BA SECURITIES, INC. CHASE SECURITIES INC. --------------------- The date of this Prospectus Supplement is May , 1996. 2 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE COMPANY Weatherford Enterra, Inc. (formerly Weatherford International Incorporated ("Weatherford")) was organized under the laws of the State of Delaware in 1970. The "Company" or "Weatherford Enterra", as used herein, refers to Weatherford Enterra, Inc. and its subsidiaries and affiliates, unless the context indicates otherwise. Weatherford Enterra is a diversified international 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 business segments include (i) the oilfield services segment, which consists of renting specialized oilfield equipment, providing fishing, well control assistance and other downhole services and related tools, and providing tubular running services and related tools; (ii) the energy products segment, which consists of manufacturing, selling and servicing a variety of products, including cementation products, power equipment, fishing and milling tools and heavy wall drill pipe, gas lift valves, production and service packers and related equipment, electrical and instrumentation control systems and pedestal-mounted marine cranes; (iii) the gas compression segment, which consists of manufacturing, packaging, selling, renting and servicing reciprocating natural gas compressors; and (iv) the pipeline services segment, which consists of manufacturing, selling and renting specialized pipeline equipment and services. Weatherford Enterra operates in virtually every oil and gas exploration and production region in the world, with more than 330 locations in 47 countries, including the United States. Since 1991, the Company's management has implemented a business strategy focused on offering a broader mix of services and products in domestic and international markets, becoming a leading participant in each of its core businesses and pursuing cost efficiencies in both its existing operations and its newly-acquired businesses. Management has pursued this strategy through a series of acquisitions, the most significant of which was the merger (the "Enterra Merger") with Enterra Corporation ("Enterra") in October 1995, pursuant to which all outstanding shares of Enterra common stock were exchanged for approximately 23.7 million shares of the common stock, $.10 par value ("Common Stock"), of the Company (after giving effect to a contemporaneous one-for-two reverse stock split of the Common Stock). On December 15, 1995, the Company acquired the assets of Energy Industries, Inc. and Zapata Energy Industries, L.P. (collectively, "Energy Industries"), a gas compression business complementary to the Company's existing gas compression business, for approximately $130 million, subject to adjustment, and the assumption of certain current liabilities. The Enterra Merger and the acquisition of Energy Industries provided complementary products and services, increased the Company's worldwide market share in its existing rental tool and fishing and downhole services businesses, provided gas compression and pipeline services as new "core" businesses, added several additional energy products businesses and improved profitability and cash flow through anticipated annualized consolidation savings in excess of $55 million. Including the Enterra Merger and the acquisition of Energy Industries, the Company has acquired 23 businesses since November 1991 for a total consideration of approximately $950 million, of which approximately 75% has been financed through the issuance of Common Stock. As a result of these acquisitions, management believes it has positioned Weatherford Enterra as a market leader in the oilfield services segment, the gas compression segment and the pipeline services segment and in certain businesses included in the energy products segment while significantly expanding and diversifying the Company's geographic operations and product and service offerings. The acquisitions have allowed the Company to expand its S-2 3 product and service lines, improve its worldwide market position and realize significant consolidation cost savings. The Company's principal executive offices are located at 1360 Post Oak Boulevard, Suite 1000, Houston, Texas 77056, and its telephone number is (713) 439-9400. RECENT DEVELOPMENT On March 28, 1996, Weatherford Enterra executed a definitive agreement with Nodeco AS and its wholly owned subsidiary, Aarbakke AS (collectively, "Nodeco"), relating to the acquisition by Weatherford Enterra of all the assets of Nodeco. Pursuant to the agreement, at closing Weatherford Enterra will assume all liabilities of Nodeco (other than net debt in excess of 32 million Norwegian kroner ("NOK") at December 31, 1995), pay to Nodeco the cash amount of NOK 117,649,250 (which, at the May 14, 1996 exchange rate disclosed in The Wall Street Journal of 6.5807 NOK per United States dollar, is equivalent to approximately $17,900,000) and issue Nodeco AS 750,000 shares of Common Stock. The cash portion of the purchase price is subject to adjustment for changes in the Common Stock price and the NOK/US$ exchange rate prior to closing. Weatherford Enterra has registered such shares with the Securities and Exchange Commission. The Company would fund the cash portion of such transaction with borrowings under the Company's bank credit facilities. Pursuant to the agreement, the closing of the transaction is subject to certain conditions, including (i) the approval of the transaction by the requisite vote of the shareholders of each of the sellers as may be required under Norwegian law or such seller's governing documents, (ii) the delivery to Weatherford Enterra of guarantees executed by certain shareholders of Nodeco AS and (iii) the delivery to Weatherford Enterra by the sellers of certain bills of sale, deeds, assignments and other documents regarding the assets to be sold in the transaction. There can be no assurance that such transaction will be consummated. Nodeco is a privately owned, Norwegian concern that designs, manufactures, sells and rents oil and gas well completion products primarily consisting of liner hanger equipment and related services, as well as packers used in completions with electric submersible pumps. Nodeco's primary markets for these products are the Norwegian and United Kingdom sectors of the North Sea. Nodeco also provides products and services for reservoir and wellbore monitoring and manufactures precision mechanical components for customers that are primarily affiliated with the oil industry. S-3 4 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth selected historical data for the Company for the three months ended March 31, 1996 and 1995 and for each of the five years ended December 31, 1995. This selected historical data should be read in conjunction with the consolidated financial statements and notes thereto of the Company, which are incorporated by reference in the accompanying Prospectus, and "Management's Discussion and Analysis of Financial Condition and Results of Operations". See "Incorporation of Certain Documents by Reference" in the accompanying Prospectus.
AS OF OR FOR THE THREE MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------- 1996 1995 1995(1) 1994(2) 1993(3) 1992 1991(4) ---------- ---------- ---------- ---------- -------- -------- -------- (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND PERCENTAGES) OPERATING DATA: Revenues.............. $ 218,481 $ 219,289 $ 858,907 $ 676,749 $500,491 $374,203 $397,480 Acquisition-related costs and other unusual charges.... -- -- 88,182 2,500 4,000 -- 20,044 Operating income...... 23,784 24,324 182 65,704 49,671 35,579 31,044 Depreciation and amortization....... 25,404 22,529 95,957 71,037 50,449 35,738 35,720 Net income (loss)..... 13,477 14,439 (10,558) 41,977 35,175 26,760 14,234 Net income (loss) per share.............. $ 0.26 $ 0.29 $ (0.21) $ 0.94 $ 0.88 $ 0.73 $ 0.37 PERCENTAGE OF REVENUES: Selling, general and administrative expenses........... 15.2% 16.5% 16.1% 17.1% 18.3% 22.6% 22.5% Gross profit.......... 27.6% 28.2% 27.2% 27.9% 29.5% 33.2% 35.6% Operating income...... 10.9% 11.1% 0.0% 9.7% 9.9% 9.5% 7.8% Net income (loss)..... 6.2% 6.6% (1.2)% 6.2% 7.0% 7.2% 3.6% BALANCE SHEET DATA: Working capital....... $ 288,850 $ 265,648 $ 267,380 $ 251,778 $211,834 $197,526 $197,879 Total assets.......... 1,244,235 1,141,888 1,258,860 1,153,970 635,602 474,490 470,702 Total debt............ 321,465 198,041 329,266 196,672 21,253 28,685 31,572 Stockholders' equity............. $ 751,634 $ 747,854 $ 730,843 $ 734,634 $474,442 $349,458 $334,002 Total debt-to-total capitalization..... 30.0% 20.9% 31.1% 21.1% 4.3% 7.6% 8.6% OTHER DATA: Capital expenditures, excluding acquisitions....... $ 28,782 $ 24,652 $ 110,625 $ 114,018 $ 63,757 $ 38,259 $ 50,636 Weighted average shares outstanding........ 51,334 50,645 50,989 44,845 38,607 34,786 34,394
--------------- (1) Includes acquisition-related costs and other unusual charges of $88,182,000, or $1.17 per common share. (2) Includes acquisition-related costs of $2,500,000, or $0.06 per common share. (3) Includes acquisition-related costs of $4,000,000, or $0.10 per common share. (4) Includes acquisition-related costs and other unusual charges of $20,044,000, or $0.58 per common share. S-4 5 USE OF PROCEEDS The net proceeds to the Company from the sale of the Notes (estimated to be approximately $199 million) will be used by the Company for the repayment of indebtedness outstanding under the Company's $200 million revolving credit facility (the "Revolving Credit Facility"), and the balance of the net proceeds will be used for the repayment of a portion of the indebtedness outstanding under the Company's $200 million term loan (the "Term Loan" and, together with the Revolving Credit Facility, the "Facilities"). In connection with the Enterra Merger, the Company entered into the Facilities, which replaced the previous primary bank credit facilities of Weatherford and Enterra. The Term Loan is payable in equal quarterly installments on March 31, June 30, September 30 and December 31 of each year through September 30, 2001. The Revolving Credit Facility matures on September 30, 2000. Amounts outstanding under the Facilities accrue interest at a variable rate ranging from 0.375% to 0.625% above a specified Eurodollar rate, depending on the Company's total debt-to-total capitalization ratio. The applicable interest rate on amounts outstanding under the Term Loan and the Revolving Credit Facility at April 30, 1996 was 5.9375%. A commitment fee ranging from 0.15% to 0.225% per annum, depending on the Company's total debt-to-total capitalization ratio, is payable quarterly on the unused portion of the Revolving Credit Facility. At April 30, 1996, the balances outstanding under the Term Loan and the Revolving Credit Facility were approximately $191 million and $113 million, respectively, and the Company had $87 million available to borrow under the Revolving Credit Facility. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company at March 31, 1996, and as adjusted to give effect to the sale of the Notes offered hereby and the application of the net proceeds therefrom. See "Use of Proceeds". This table should be read in conjunction with the Company's consolidated financial statements and the related notes thereto, which are incorporated by reference in the accompanying Prospectus.
AT MARCH 31, 1996 --------------------------- OUTSTANDING AS ADJUSTED ----------- ----------- (IN THOUSANDS) Short-term debt and current portion of long-term debt............... $ 37,135 $ 21,317 Long-term debt: Term Loan......................................................... 156,522 85,340 Revolving Credit Facility......................................... 113,000 -- Foreign bank debt, denominated in foreign currencies.............. 8,108 8,108 Industrial revenue bonds.......................................... 2,676 2,676 % Notes Due May , 2006..................................... -- 200,000 Other............................................................. 4,024 4,024 ----------- ----------- Total debt..................................................... 321,465 321,465 ----------- ----------- Stockholders' equity: Preferred stock................................................... -- -- Common stock...................................................... 5,126 5,126 Paid-in capital................................................... 608,616 608,616 Retained earnings................................................. 143,720 143,720 Cumulative translation adjustment................................. (5,228) (5,228) Treasury stock.................................................... (600) (600) ----------- ----------- Total stockholders' equity..................................... 751,634 751,634 ----------- ----------- Total capitalization...................................... $ 1,073,099 $ 1,073,099 =========== ===========
S-5 6 BUSINESS GENERAL Weatherford Enterra is a diversified international 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 operates in four industry segments -- oilfield services, energy products, gas compression and pipeline services. Oilfield Services. Weatherford Enterra rents a full line of specialized equipment and tools and tubular goods for drilling, completion and workover of oil and gas wells. Operators and drilling contractors often find it uneconomic to maintain complete inventories of tools, drill pipe and other equipment and therefore supplement such inventories by renting. Items rented include pressure control equipment (such as blowout preventers, high-pressure valves, accumulators, adapters and choke and kill manifolds); drill pipe, drill collars and tubing; pipe handling equipment (such as elevators, spiders, slips, tongs and kelly spinners); and fishing tools (such as milling tools, casing cutters, jars, spears, overshots and whipstocks). Weatherford Enterra also provides fishing, milling and cutting services, which consist of removing or otherwise eliminating "fish" or "junk" in a well (such as cables, pipes, casing, well bore tools or debris) that is causing an obstruction. An essential step in the fishing operation is the proper selection and assembly of the fishing string. Items that might be on a fishing string include jars, subs, overshots (external), spears (internal), milling tools, casing cutters and other tools for retrieving or eliminating the "fish". The Company also provides pipe recovery electric wireline services and coring services. In addition, Weatherford Enterra provides well control assistance services in critical well situations (such as a well blow-out or a high pressure sour gas well). Management believes that, based on total revenues, Weatherford Enterra is the leading worldwide supplier of rental tools and provider of fishing and other downhole services. Weatherford Enterra provides services and equipment used to "make up" threaded tubular connections and to "run" tubulars that are used during the drilling, completion and workover of oil and gas wells. Tubulars include casing, tubing, special high alloy chrome pipe and fiberglass reinforced pipe. Casing is pipe installed (or run) in a wellbore to protect the structural integrity of the wellbore and to seal various zones in the well. Tubing is small diameter pipe run in a producing well through which oil and gas is produced. These services and related equipment ensure the mechanical integrity and leak-tight performance of tubular connections. In running tubulars, Weatherford Enterra personnel operate power tongs (similar in principle to hydraulic wrenches) and other related handling equipment, to connect the pipe as it is placed in the well, ensuring a good connection and minimizing thread damage. Management believes that, based on total revenues, the Company is the leading worldwide provider of tubular running services. Energy Products. Weatherford Enterra's energy products business consists of the manufacture, sale and servicing of a variety of products. The Company provides cementation products and trained cementation engineers to perform computerized well program studies, submit cementation proposals, finalize cementation plans and advise and assist during the cementation process. The Company does not provide cement pumping services. The Company's cementation products, marketed under the Weatherford trade name, include cementing products used to center casing strings in the wellbore (such as centralizers, wellbore wipers and scratchers); float equipment used in the cementation of the casing string to prevent cement from flowing back into the casing (such as guide shoes, float shoes and float collars); and stage tools used to set cement in the annular space between the wellbore and the casing string. The Company also sells various proprietary rubber and elastomer products that have broad drilling and tubular thread protection applications, in addition to applications in cementation services. Management believes that, based on total revenues, the Company is the leading worldwide manufacturer and supplier of cementation products. Weatherford Enterra designs, manufactures, sells and services power tongs and related pipe handling equipment used to provide tubular handling services; tubular connection testing equipment used to verify the integrity of connections; milling tools, cutters, overshots, whipstocks and wireline equipment used to provide fishing and other downhole services; heavy wall drill pipe; McMurry-Macco(TM) gas lift and related equipment to increase the flow of oil; and Arrow(TM) packers and related equipment to control the flow in oil and gas wells and to provide remedial stimulation and testing services in oil and gas wells. Weatherford Enterra, through Total S-6 7 Engineering Services Team, Inc. ("TEST"), provides electrical and instrumentation construction services to the worldwide oil and gas production industry and designs, builds, installs and services instrument control systems for electrical power generation packages used on offshore production platforms and associated offshore storage and handling facilities. The Company also designs, manufacturers, sells and services American Aero(R) pedestal-mounted hydraulic cranes used on offshore production platforms, marine vessels and dockside locations. Gas Compression. Weatherford Enterra manufactures, packages, sells, rents and services gas compression units used for increasing natural gas pressure exiting the wellhead and within gas gathering systems, injecting natural gas into oil wells to enhance oil recovery, injecting natural gas into gas storage wells and other general uses such as cogeneration, seismic marine surveys and natural as fueling stations. The acquisition of Energy Industries in December 1995 greatly expanded the Company's gas compression business through the addition of larger horsepower units and manufacturing and packaging capabilities. The Company is a major manufacturer of gas compressors ranging from 26 horsepower to 7200 horsepower. Weatherford Enterra currently offers an entire line of reciprocating gas compressors and is able to serve the international marketplace. Management believes that the Company is the second largest gas compressor rental company based on number of units and the fourth largest based on available horsepower. Pipeline Services. Weatherford Enterra's pipeline services business consists of CRC-Evans(TM) pipeline equipment, CRC-Evans automatic welding services and Pipeline Induction Heat Ltd. ("PIH") services. The pipeline equipment segment includes the manufacture of conventional line travel pipeline construction equipment, the manufacture of specialized equipment for pipe coating plants and pipe handling systems for offshore lay barges and the manufacture of rehabilitation equipment for coating removal, surface preparation and recoating pipelines. The automatic welding segment includes the provision of proprietary automatic welding systems for use in pipeline construction. PIH offers specialized field joint coating and heat treatment services for use in pipeline construction. Management believes that, based on revenues, the Company is the leading worldwide manufacturer and supplier of conventional pipeline construction equipment. INTERNATIONAL AND U.S. OPERATIONS AND EXPORT SALES The Company has manufacturing operations, either through direct ownership (including joint ventures) or through license arrangements, in the United States, Germany, Canada, Italy, The Netherlands and Saudi Arabia. The Company has product and equipment sales or service operations in more than 330 locations in 47 countries (including the United States). The Company's international operations traditionally have been more stable and profitable than its U.S. operations. International revenues in 1995, 1994 and 1993 were $387,235,000 (45% of total revenues), $293,673,000 (43% of total revenues) and $215,328,000 (43% of total revenues), respectively. Revenues for the United States segment included export sales to international customers of $65,465,000, $63,211,000 and $49,388,000 in 1995, 1994 and 1993, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should assist in an understanding of the Company's financial position and results of operations for the three months ended March 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1995. The Company's consolidated financial statements and the related notes, which are incorporated by reference in the accompanying Prospectus, contain detailed information that should be referred to in conjunction with this discussion. BUSINESS REVIEW Weatherford Enterra is a diversified international 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 business segments are oilfield services, energy products, gas S-7 8 compression and pipeline services. Weatherford Enterra operates in virtually every oil and gas exploration and production region in the world, with more than 330 locations in 47 countries. In 1991, the Company's management implemented a business strategy focused on offering a broader mix of services and products in domestic and international markets, becoming a leading participant in each of its core businesses and pursuing cost efficiencies in its existing operations and its newly-acquired businesses. Management has pursued this strategy through a series of acquisitions. As a result of these acquisitions, management believes it has positioned the Company as a market leader in its oilfield services, gas compression and pipeline services segments and in certain businesses included in its energy products segment. The acquisitions have allowed the Company to expand its product and service lines, improve its worldwide market position and realize significant consolidation cost savings. On October 5, 1995, the Company completed the Enterra Merger, which represents the Company's most significant business combination to date. Management believes that the Enterra Merger strengthens the Company's position as the worldwide leader in the rental and fishing tool services business. In addition, the Enterra Merger adds gas compression, pipeline services and several additional energy product and service businesses to the Company. In connection with the Enterra Merger, the Company effected a one-for-two reverse stock split and changed its name to "Weatherford Enterra, Inc." In this report, all per share amounts and numbers of shares of Common Stock have been restated to reflect the reverse stock split. Weatherford issued approximately 23,668,000 shares of Common Stock in exchange for all the outstanding shares of Enterra common stock based on an exchange ratio of 0.845 of a share of Common Stock for each share of Enterra common stock outstanding. The Enterra Merger was accounted for as a pooling of interests. Accordingly, the consolidated financial statements have been restated for all periods presented to include the accounts and results of operations of Enterra with those of Weatherford, as if the two companies had been combined since inception. On December 15, 1995, the Company acquired substantially all of the assets of Energy Industries, a natural gas compression business complementary to the Company's gas compression business, for approximately $130,000,000 in cash, subject to adjustment, and the assumption of certain liabilities totaling approximately $12,485,000. The results of the Energy Industries operations are included in the Company's consolidated financial statements and the related notes, which are incorporated by reference in the accompanying Prospectus, since the date of acquisition. Management believes that the Company will achieve operating efficiencies and annualized consolidation cost savings in excess of $55,000,000 after combining the operations of Weatherford, Enterra and Energy Industries, and that most of the cost saving measures will be in place by the summer of 1996. On August 12, 1994, Enterra entered the gas compression business and several energy products businesses through its acquisition of the outstanding common stock of Total Energy Services Company ("Total Energy") in exchange for shares of Enterra common stock valued, in the aggregate, at $213,570,000. Enterra also acquired the minority interests in two Total Energy subsidiaries for $23,000,000 in cash, paid transaction costs and employment-related obligations totaling approximately $15,000,000 and assumed Total Energy's long-term debt of $75,000,000. Other significant acquisitions within the past three years, all made by Weatherford, include the September 1994 merger with H & H Oil Tool Co., Inc. ("H & H") which was accounted for as a pooling of interests, the April 1994 acquisition of the Rental Division of Odfjell Drilling and Consulting Company ("Odfjell Rental") for $56,200,000 and the assumption of certain contractual rights and obligations and the April 1993 acquisition of substantially all of the assets of Homco International, Inc. and its subsidiaries (collectively, "Homco") for $97,500,000 in cash and the assumption of certain liabilities totaling approximately $39,200,000. The results of the Odfjell Rental and Homco operations are included in the Company's consolidated financial statements and the related notes, which are incorporated by reference in the accompanying Prospectus, since the date of their respective acquisition. S-8 9 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 A summary of operating results by business segment is shown below:
FOR THE THREE MONTHS ENDED MARCH 31, --------------------- 1996 1995 -------- -------- (IN THOUSANDS) REVENUES: Oilfield services............................................ $119,295 $113,663 Energy products.............................................. 51,015 58,672 Gas compression.............................................. 33,643 29,147 Pipeline services............................................ 14,888 17,807 -------- -------- Total................................................ $218,841 $219,289 ======== ======== OPERATING INCOME (LOSS): Oilfield services............................................ $ 20,256 $ 15,825 Energy products.............................................. 3,268 3,867 Gas compression.............................................. 2,625 3,497 Pipeline services............................................ 218 3,803 Corporate.................................................... (2,583) (2,668) -------- -------- Total................................................ $ 23,784 $ 24,324 ======== ========
Oilfield services. Revenues increased 5% from $113,663,000 in the first quarter of 1995 to $119,295,000 in the first quarter of 1996. International revenues increased $10,487,000, or 19%, to $65,923,000, primarily as a result of increased service activity in certain markets, including Latin America, the North Sea, Canada and West Africa. During the first quarter of 1996, the average international rig count (excluding Canada) was 5% higher than in the same period of 1995. International operating income increased 21% to $12,152,000 in the first quarter of 1996 as compared to the first quarter of 1995 primarily as a result of increased revenues. United States revenues decreased $4,855,000, or 8%, to $53,372,000 in the first quarter of 1996 compared to the same period in 1995, primarily as a result of decreased service activity in certain regions. United States operating income for the first quarter of 1996 increased 41% compared to the first quarter of 1995, despite the decline in revenues, reflecting cost savings achieved in consolidating the operations of Enterra and Weatherford which were merged in October 1995. Energy products. Revenues of $51,015,000 in the first quarter of 1996 decreased $7,657,000, or 13%, compared to the first quarter of 1995. First quarter 1995 results included an unusual $5,900,000 export sale of products and $13,011,000 of revenues from businesses sold in September 1995 and February 1996. Operating income in the energy products segment decreased $599,000 from the first quarter of 1995 primarily as a result of the two businesses that were sold and the large export sale in 1995. Excluding the impact of these items, revenues in the energy products segment increased 24% in the first quarter of 1996 compared to the same period in 1995, and operating income improved from less than $1,000,000 to $3,100,000, primarily as a result of higher cementation product sales and improved results from the Company's Arrow packer operations. Gas compression. Revenues increased $4,496,000, or 15%, from $29,147,000 in the first quarter of 1995 to $33,643,000 in the first quarter of 1996, primarily as a result of the December 1995 acquisition of the assets of Energy Industries, partially offset by the impact of lower sales of packaged compressor units. Operating income decreased $872,000, or 25%, to $2,625,000 in the first quarter of 1996 compared to $3,497,000 in the first quarter of 1995, reflecting the impact of the lower packaging sales and additional costs related to the Energy Industries operations. Pipeline services. Revenues declined $2,919,000, or 16%, to $14,888,000 in the first quarter of 1996 compared to $17,807,000 in the first quarter of 1995, and operating income decreased $3,585,000 from $3,803,000 in the first quarter of 1995 to $218,000 in the first quarter of 1996. First quarter 1995 results were S-9 10 highlighted by extremely high equipment rental activity on a Canadian pipeline project which was completed in 1995. Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of revenue decreased to 15.2% in the first quarter of 1996 from 16.5% in the first quarter of 1995, primarily as a result of cost efficiencies achieved in consolidating the operations of Enterra into the Company. Research and development. Research and development costs of $1,715,000 in the first quarter of 1996 increased 67% compared to the first quarter of 1995. The increases primarily reflected the expansion of the Company's operations and development activities to support all four of its 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. The Company's equity in the earnings of these affiliates was $501,000 in the first quarter of 1996 compared to $525,000 in the first quarter of 1995. The Company received cash dividends from its 50% or less-owned affiliates totaling $392,000 and $294,000 in the first quarter of 1996 and 1995, 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 gains of $19,000 in the first quarter of 1996 compared to $333,000 in the first quarter of 1995. Other expense, net. Other expense, net, increased to $2,026,000 in the first quarter of 1996 compared to $1,238,000 in the first quarter of 1995. The increase in the first quarter of 1996 was primarily attributable to the amortization of goodwill related to the December 1995 acquisition of Energy Industries, and lower net gains on sales of property, plant and equipment. Interest. Net interest expense increased to $4,503,000 in the first quarter of 1996 compared to $3,744,000 in the first quarter of 1995, primarily as a result of higher average debt balances outstanding. The increased indebtedness primarily related to the acquisition of Energy Industries in December 1995. Income taxes. Income tax expense as a percentage of income before income taxes was 30% in the first quarter of 1996 and the first quarter of 1995. The effective rate was lower than the U.S. statutory rate of 35% primarily as a result of foreign income taxed at various rates and the availability of U.S. net operating loss carryforwards. S-10 11 RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 A summary of operating results by business segment is shown below:
YEAR ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) REVENUES: Oilfield services: Rental and fishing/downhole services.................. $328,343 $300,214 $244,697 Tubular running services.............................. 130,387 109,503 105,715 Other oilfield services............................... 11,818 13,664 7,636 -------- -------- -------- Total oilfield services.......................... 470,548 423,381 358,048 -------- -------- -------- Energy products: Cementation products.................................. 47,237 43,201 41,734 Other oilfield products............................... 118,394 66,283 30,653 Other products and services........................... 59,791 34,273 19,777 -------- -------- -------- Total energy products............................ 225,422 143,757 92,164 -------- -------- -------- Gas compression: Manufacturing, packaging, parts and services.......... 57,565 32,790 -- Rental................................................ 36,821 13,355 -- -------- -------- -------- Total gas compression............................ 94,386 46,145 -- -------- -------- -------- Pipeline services: Rentals and services.................................. 46,227 32,240 30,825 Sales................................................. 22,324 31,226 19,454 -------- -------- -------- Total pipeline services.......................... 68,551 63,466 50,279 -------- -------- -------- $858,907 $676,749 $500,491 ======== ======== ======== ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES: Oilfield services........................................ $ 31,715 $ 2,500 $ 4,000 Energy products.......................................... 22,694 -- -- Gas compression.......................................... -- -- -- Pipeline services........................................ 4,762 -- -- Corporate................................................ 29,011 -- -- -------- -------- -------- $ 88,182 $ 2,500 $ 4,000 ======== ======== ======== OPERATING INCOME (LOSS): Oilfield services........................................ $ 41,214 $ 52,665 $ 44,743 Energy products.......................................... (14,210) 16,668 10,726 Gas compression.......................................... 7,788 4,047 -- Pipeline services........................................ 3,602 (2,237) 2,019 Corporate................................................ (38,212) (5,439) (7,817) -------- -------- -------- $ 182 $ 65,704 $ 49,671 ======== ======== ========
Oilfield services. Revenues increased 11% in 1995 to $470,548,000 compared to $423,381,000 in 1994. International revenues increased 23% to $245,698,000, primarily as a result of increased activity in certain markets, including Latin America, Africa, the North Sea and Canada. During 1995, the average international drilling rig count (excluding Canada) was 3% higher than in 1994. United States revenues increased 1% to $224,850,000, despite a 7% decline in the average U.S. drilling rig count. Operating income for the oilfield services segment decreased in 1995 compared to 1994 as a result of the acquisition-related costs and other unusual charges in 1995 discussed below. Excluding such charges, operating income would have improved S-11 12 32% to $72,929,000, primarily as a result of the increased international activity and cost savings achieved in consolidating the operations of H & H and Enterra into the Company. Oilfield services revenues increased 18% in 1994 to $423,381,000 compared to $358,048,000 in 1993. International revenues increased 23% in 1994 to $200,169,000, primarily as a result of expansion into Latin America, increased drilling activity in Canada and the addition of the Odfjell Rental operations acquired in April 1994. During 1994, the average international drilling rig count (excluding Canada) was 5% lower in 1994 than in 1993. United States revenues increased 14% in 1994 to $223,212,000 compared to 1993, reflecting the addition of the Homco operations in April 1993 and several smaller acquisitions. Operating income increased 18% in 1994 to $52,665,000, primarily as a result of the increased activity in Canada, expansion into Latin America and cost savings achieved in consolidating the operations of Homco. Energy products. Revenues increased 57% in 1995 to $225,422,000 compared to $143,757,000 in 1994, primarily as a result of the addition of the Total Energy businesses acquired in August 1994. Operating income, excluding the acquisition-related costs and other unusual charges discussed below, decreased 49% to $8,484,000, primarily as a result of operating losses incurred in 1995 by the Arrow packer business acquired from Total Energy. Energy products revenues increased 56% in 1994 to $143,757,000 compared to $92,164,000 in 1993, primarily as a result of the addition of the Total Energy businesses in August 1994. Operating income improved 55% to $16,668,000 due to the addition of the Total Energy businesses and improved operating results from the cementation products business. Gas compression. The gas compression segment was acquired as part of the Total Energy acquisition, which was accounted for as a purchase, in August 1994. Consequently, comparisons of the operating results for the periods presented are not meaningful. Compression rental revenues have remained fairly stable since the business was acquired. Sales of packaged compression units, particularly in Canada, declined significantly during the second half of 1995, as many customers deferred the acquisition of units due to the relatively low demand for natural gas. Canadian operations accounted for 45% of gas compression revenues in 1995 compared to 55% for the period from August 12, 1994 through December 31, 1994. Market conditions for compressor sales are expected to improve during 1996. Pipeline services. Revenues increased 8% in 1995 to $68,551,000 compared to $63,466,000 in 1994. Rental and service revenues of $46,227,000 increased 43% compared to 1994 as a result of increased coating service revenues from a large international pipeline construction project and increased automatic welding unit rental and service revenue in Canada, Malaysia and North Africa. Equipment sales revenue decreased $8,902,000, or 29%, primarily due to an unusually large contract in 1994 to design and construct specialized equipment to be installed on a large offshore pipe laying vessel (the "Contract"), which yielded revenues of $10,000,000 but an operating loss of $4,200,000 in 1994. Exclusive of the acquisition-related costs and other unusual charges discussed below, operating income improved to $8,364,000 in 1995 compared to an operating loss of $2,237,000 in 1994, primarily as a result of the higher rental and service activity in 1995 and the $4,200,000 loss on the Contract in 1994. Revenues for the pipeline services segment in 1994 increased 26% to $63,466,000 compared to 1993, primarily as a result of revenues from the Contract. Operating income decreased $4,256,000 to a loss of $2,237,000 in 1994, primarily due to losses incurred on the Contract. Gross profit. The consolidated gross profit percentage was 27.2% in 1995 compared to 27.9% in 1994 and 29.5% in 1993. The decline is primarily attributable to weakness in the gas compression segment and several businesses in the energy products segment. Selling, general and administrative expenses. Selling, general and administrative expenses as a percentage of revenues decreased to 16.1% in 1995 from 17.1% in 1994 and 8.3% in 1993, primarily as a result of cost efficiencies achieved in consolidating the operations of acquired businesses into the Company. Management expects the selling, general and administrative expense percentage to decrease further in 1996, as the operations of Enterra and Energy Industries are fully consolidated into the Company. S-12 13 Research and development. Research and development costs of $4,954,000 in 1995 increased 5% compared to 1994. Research and development costs in 1994 of $4,735,000 increased 30% compared to 1993. The increases primarily reflected the expansion of the Company's operations and development activities to support all four of its 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. The Company's equity in the earnings of these affiliates was $1,477,000 in 1995 compared to $1,169,000 in 1994 and $2,716,000 in 1993. The increase of 26% in 1995 compared to 1994 was primarily attributable to improved drilling activity in Saudi Arabia, and the decrease of 57% in 1994 compared to 1993 was primarily the result of increased competition and reduced drilling activity in Saudi Arabia. The Company received cash dividends from its 50% or less-owned affiliates totaling $1,666,000, $2,203,000 and $3,622,000 in 1995, 1994 and 1993, 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 gains of $74,000 in 1995 compared to a net gain of $2,205,000 in 1994 and a net loss of $713,000 in 1993. A substantial portion of the gain in 1994 represented an unrealized currency gain related to certain intercompany loans. Other expense, net. Other expense, net, increased to $3,835,000 in 1995 compared to $3,073,000 in 1994 and $906,000 in 1993. The increase in 1995 and 1994 was primarily attributable to the amortization of goodwill related to the 1994 acquisitions of Total Energy and Odfjell Rental, partially offset in 1995 by increased gains on sales of property, plant and equipment. Acquisition-related costs and other unusual charges. During the second quarter of 1995, Enterra recorded unusual charges totaling $28,282,000 ($26,000,000 of which was non-cash), representing writedowns to fair value of certain businesses to be disposed of, asset writedowns related to certain excess facilities, equipment and inventories, and estimated costs in connection with the closure of certain pipeline businesses and the consolidation of certain oilfield service administrative and operating facilities. During the fourth quarter of 1995, the Company recorded expenses of $59,900,000 ($40,196,000 of which was non-cash in 1995) related to the Enterra Merger and the financial impact of management decisions related to the future operations of the combined companies. These acquisition-related costs primarily consisted of transaction costs, severance and termination agreements with former officers and employees, facility closure costs primarily to consolidate the oilfield services operations and administrative functions of Enterra and Weatherford, and the reduction in recorded value of certain assets that had diminished future value in the operations of the combined Company. Weatherford recorded acquisition-related costs of $2,500,000 in the third quarter of 1994 related to the H & H merger and $4,000,000 in the second quarter of 1993 in connection with the Homco acquisition. The 1994 and 1993 acquisition-related costs primarily represented transaction costs of the H & H merger and employee termination and facility closure costs to consolidate the operations of H & H and Homco into Weatherford. Operating income. Operating income decreased substantially in 1995 to $182,000 compared to $65,704,000 in 1994 and $49,671,000 in 1993, primarily as a result of the acquisition-related costs and other unusual charges. Excluding such charges, operating income would have been $88,364,000 in 1995 compared to $68,204,000 in 1994 and $53,671,000 in 1993, reflecting the impact of the Company's acquisitions and related cost savings. Interest. Net interest expense increased to $15,136,000 in 1995 compared to $6,888,000 in 1994 and $784,000 in 1993, primarily as a result of higher average debt balances outstanding. The increased indebtedness primarily related to the acquisitions of Energy Industries in December 1995, Total Energy in August 1994, Odfjell Rental in April 1994 and Homco in April 1993. Income taxes. The income tax provision (benefit) consists of taxes on foreign earnings, foreign taxes withheld on certain remittances from international subsidiaries, U.S. alternative minimum and state taxes and the recognition of deferred tax credits relating to financial statement losses that are not currently deductible S-13 14 for tax purposes. The income tax provision does not include U.S. regular federal income tax due to the availability of U.S. net operating loss carryforwards. Income tax provision (benefit) as a percentage of income (loss) before income taxes and minority interests was 31%, 29% and 28% for 1995, 1994 and 1993, respectively. The increase in the effective tax rates was primarily a result of differences in the components and tax rates applicable to foreign taxable income, and a result of nondeductible goodwill amortization related to the Total Energy acquisition. LIQUIDITY AND CAPITAL RESOURCES The Company's operations used cash of $2,567,000 during the first three months of 1996 compared to providing cash of $5,604,000 during the first three months of 1995. Net income before depreciation and amortization of $38,881,000 in the first three months of 1996 increased $1,913,000 when compared to the same period in 1995. Changes in working capital and other operating accounts used cash of $35,516,000 during the first three months of 1996 compared to $28,935,000 in the same period of 1995, primarily as a result of increases in accounts receivable and inventories and decreases in accounts payable and accrued liabilities. Working capital increased from $267,380,000 at December 31, 1995 to $288,850,000 at March 31, 1996. At December 31, 1995, the Company had cash and cash equivalents of $32,800,000. The Company's operations provided cash of $78,873,000 during 1995 compared to $67,569,000 during 1994 and $44,649,000 in 1993. Operating cash flow before changes in working capital accounts increased 16% to $118,720,000 in 1995 over 1994 and 31% to $102,010,000 in 1994 compared to 1993, reflecting the impact of the acquisitions and growth in the Company's operations. Changes in working capital and other operating accounts used cash of $39,847,000 during 1995 compared to $34,441,000 in 1994 and $33,291,000 in 1993. Working capital of $267,380,000 at December 31, 1995 increased $15,602,000 from December 31, 1994, primarily due to the Energy Industries acquisition, and December 31, 1994 working capital of $251,778,000 increased $39,944,000 from December 31, 1993 as a result of the acquisition of Total Energy. In connection with the Company's plan to consolidate the operations of Enterra into Weatherford, the Company committed to vacate certain excess facilities. Accrued liabilities associated with such plan decreased from $24,328,000 to $16,495,000 between December 31, 1995 and March 31, 1996, as a result of cash payments in accordance with the consolidation plan. Capital expenditures increased to $28,782,000 during the three months ended March 31, 1996 compared to $24,652,000 for the same period in 1995. The increase was primarily attributable to increased capital spending requirements as a result of the Company's December 1995 acquisition of Energy Industries. Capital expenditures, excluding business acquisitions, decreased 3% to $110,625,000 in 1995 compared to $114,018,000 in 1994, reflecting lower capital spending in the oilfield services segment due to the consolidation of the Weatherford and Enterra rental and service equipment inventories which was partially offset by the capital requirements of the Total Energy operations acquired in August 1994. Capital expenditures, excluding business acquisitions, increased 79% in 1994 to $114,018,000, primarily to support the growth of the Company's operations resulting from the acquisitions of Total Energy, Odfjell Rental, H & H, Homco and other businesses. Management anticipates that the Company's capital spending levels will continue to be primarily influenced by market opportunities and growth in the Company's operations. In addition to the Enterra and H & H mergers and the acquisitions of Energy Industries, Total Energy, Odfjell Rental and Homco, the Company has made several other acquisitions, principally in its oilfield services and energy products segments. The total cash consideration paid in connection with these acquisitions, net of cash acquired and notes issued, was $9,135,000, $12,046,000 and $21,964,000 in 1995, 1994 and 1993, respectively. The Company's consolidated indebtedness decreased from $329,266,000 at December 31, 1995 to $321,465,000 at March 31, 1996 primarily as a result of a scheduled debt repayment. The Company's consolidated indebtedness increased to $329,266,000 at December 31, 1995 from $196,672,000 at December 31, 1994, primarily as a result of debt incurred in connection with the acquisition of Energy Industries. The Company's total debt-to-total capitalization ratio was 30% at March 31, 1996 compared to 31% at December 31, 1995 and 21% at December 31, 1994. S-14 15 The Company's primary bank credit facilities consist of a $200,000,000 Term Loan and a $200,000,000 Revolving Credit Facility. In connection with the Enterra Merger, the Company entered into the Facilities, which replaced the previous bank credit facilities of Weatherford and Enterra. The Term Loan is repayable in equal quarterly installments through September 30, 2001. The Revolving Credit Facility matures on September 30, 2000. Amounts outstanding under the Facilities accrue interest at a variable rate, ranging from 0.375% to 0.625% above a specified Eurodollar rate, depending on the Company's total debt-to-total capitalization ratio. The applicable interest rate on amounts outstanding at March 31, 1996 was 5.8%. A commitment fee ranging from 0.15% to 0.225% per annum, depending on the Company's total debt-to-total capitalization ratio, is payable quarterly on the unused portion of the Revolving Credit Facility. The Company is required under the Facilities agreement to maintain certain financial ratios, including a maximum debt-to-capitalization ratio of 45% through September 30, 1996 and 40% thereafter. At March 31, 1996, the balances outstanding under the Term Loan and the Revolving Credit Facility were $191,304,000 and $113,000,000, respectively, and the Company had $87,000,000 available to borrow under the Revolving Credit Facility. In addition, at March 31, 1996, the Company had $5,771,000 available for borrowing under working capital facilities of certain of its international subsidiaries. The Company also has various credit facilities available only for standby 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 $16,744,000 of letters of credit and bid performance bonds outstanding at March 31, 1996. The net proceeds to the Company from the sale of the Notes (estimated to be approximately $199 million) will be used by the Company for the repayment of a portion of the indebtedness outstanding under the Facilities. See "Use of Proceeds". The Company conducts a portion of its business in currencies other than the U.S. dollar, including the Canadian dollar, the German mark, the U.K. pound sterling, the Norwegian krone, certain Latin American currencies and the Italian lira. Although most of the revenues of the Company's foreign 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. 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 1995 and 1994 compared to 1993, thereby increasing the amount of U.S. dollars reflected on the Company's 1995 and 1994 consolidated statements of income. Had the average exchange rates in 1995 and 1994 been the same as in 1993, revenues for 1995 would have been approximately $9,000,000 lower and revenues for 1994 would have been virtually unchanged. The impact on net income would not have been material. The Company has entered into forward exchange contracts 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 $381,000 during the first three months of 1996, net cash outflows of $4,368,000 during the first three months of 1995 and net cash outflows totaling $2,719,000 and $1,036,000 during 1995 and 1994, respectively. The Company entered into no forward exchange contracts in 1993. On March 28, 1996, the Company executed a definitive agreement with Nodeco relating to the acquisition by the Company of all the assets of Nodeco. Pursuant to the agreement, at closing the Company will assume all liabilities of Nodeco (other than net debt in excess of NOK 32 million at December 31, 1995), pay to Nodeco the cash amount of NOK 117,649,250 (which, at the May 14, 1996 exchange rate disclosed in The Wall Street Journal of 6.5807 NOK per United States dollar, is equivalent to approximately $17,900,000) and issue Nodeco AS 750,000 shares of Common Stock. The cash portion of the purchase price is subject to adjustment for changes in the Common Stock price and the NOK/US$ exchange rate prior to closing. The Company would fund the cash portion of such transaction with borrowings under the Revolving Credit Facility. There can be no assurance that such transaction will be consummated. See "Recent Development". S-15 16 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 proposed Nodeco acquisition mentioned above, the Company is currently considering several other 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 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 civil disturbance and political activities that 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, Nigeria and Angola 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. DESCRIPTION OF THE NOTES The following description of the particular terms of the Notes offered hereby (referred to in the accompanying Prospectus as the "Securities") supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Securities set forth under the caption "Description of the Securities" in the accompanying Prospectus, to which description reference is hereby made. Except as otherwise defined herein, capitalized terms defined in the accompanying Prospectus have the same meanings when used herein. GENERAL The summary contained under this caption of certain provisions of the Indenture dated as of May 17, 1996 (the "Indenture") between the Company and Bank of Montreal Trust Company, as trustee (the "Trustee"), does not purport to be complete and is subject to and qualified by reference to the Indenture and the Notes. The Notes will be limited to $200,000,000 aggregate principal amount and will mature on May , 2006. Interest at the annual rate set forth on the cover page of this Prospectus Supplement is to accrue from May , 1996 and is to be payable semiannually on and , commencing , 1996, to the Persons in whose names the Notes are registered at the close of business on the preceding or , respectively. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. All payments on the Notes will be made in United States dollars. The Notes will be general unsecured obligations of the Company and will rank pari passu with the Company's existing and future unsecured and unsubordinated indebtedness. The Notes may not be redeemed prior to maturity and will not be subject to any sinking fund. The discharge and defeasance provisions and the covenant provisions described in the accompanying Prospectus under the caption "Description of the Securities" will apply to the Notes. S-16 17 BOOK-ENTRY ONLY SYSTEM The Notes will be issuable only as Registered Securities and will be represented by one Book-Entry Security (the "Global Security") to be deposited with, or on behalf of, The Depository Trust Company, New York, New York, as depository (the "Depository"), and registered in the name of a nominee of the Depository. The Depository will maintain the Notes in denominations of $1,000 and integral multiples thereof through its book-entry facilities. See "Description of the Securities--Global Securities" in the accompanying Prospectus for additional information concerning the Global Security. The Depository has advised the Company that the Depository's established procedures provide that (i) upon issuance of the Notes by the Company, the Depository will credit the accounts of each of its participating firms (each, a "Participant") designated by the Underwriters (as hereinafter defined) with the respective principal amounts of the Notes purchased by the Underwriters and (ii) ownership of interests in the Global Security will be shown on, and the transfer of such ownership will be effected only through, records maintained by the Depository and the Participants. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility, obligation or liability for any aspect of the records pertaining to beneficial ownership interests in the Global Security (including, without limitation, maintaining, supervising or reviewing any records relating to such beneficial ownership interests). So long as the nominee of the Depository is the registered owner of the Notes, such nominee will be considered the sole owner or holder of the Notes for all purposes under the Indenture and any applicable laws. Except as otherwise provided below, a Beneficial Owner (as hereinafter defined) of an interest in the Notes will not be entitled to receive a physical certificate representing such ownership interest and will not be considered an owner or holder of any Notes under the Indenture. A "Beneficial Owner" is a Person who has the right to sell, transfer or otherwise dispose of an interest in the Notes and the right to receive the proceeds therefrom, as well as interest, principal and premium (if any) payable in respect thereof. A Beneficial Owner's interest in the Notes will be recorded, in integral multiples of $1,000, on the records of the Participant that maintains such Beneficial Owner's account for such purpose. In turn, the Participant's interest in such Notes will be recorded, in integral multiples of $1,000, on the records of the Depository. Therefore, the Beneficial Owner must rely on the foregoing arrangements to evidence its interest in the Notes. Beneficial ownership of the Notes may be transferred only by compliance with the procedures of a Beneficial Owner's Participant (e.g., brokerage firm) and the Depository. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the Notes represented by the Global Security. All rights of ownership must be exercised through the Depository and the book-entry system, and notices that are to be given to registered owners by the Company or the Trustee will be given only to the Depository. The Company understands that, under existing practice, the Depository will forward the notices to the Beneficial Owners. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility, obligation or liability for assuring that any notices are forwarded by the Depository to any Participant or by any Participant to the Beneficial Owners. Payments of principal of and interest on the Notes represented by the Global Security will be made by the Trustee to the Depository. The Depository has advised the Company that, upon the Depository's receipt of any payment of principal or interest in respect of the Notes represented by the Global Security, the Depository will credit immediately the accounts of the related Participants with payment in amounts proportionate to their respective beneficial interest in the Notes represented by the Global Security as shown on the records of the Depository. Under the terms of the Indenture, the Company and the Trustee will treat the persons in whose names the Notes are registered as the owners of the Notes for the purpose of receiving payment of principal of and interest on the Notes and for all other purposes whatsoever. Therefore, none of the Company, the Trustee or any Paying Agent will have direct responsibility or liability for the payment of principal of or interest on the Notes to owners of beneficial interests in the Global Security. The Company expects the payments by Participants to Beneficial Owners will be governed by standing customer instructions and customary practices. Such payments will be the responsibility of such Participants. S-17 18 The Depository has advised the Company and the Underwriters as follows: the Depository is a limited-purpose trust company organized under the banking laws of the State of New York, a "banking corporation" within the meaning of the banking laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Depository was created to hold securities of Participants and to facilitate the clearance and settlement of securities transactions among Participants in such securities transactions through electronic book-entry changes in accounts of Participants, thereby eliminating the need for physical movement of securities certificates. Participants include securities brokers and dealers (including the Underwriters), banks (including the Trustee), trust companies, clearing corporations and certain other organizations, some of whom (alone or together with their representatives) own the Depository. Access to the Depository's book-entry system also is available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by the Depository only through Participants. The Global Security is exchangeable for Notes registered in the name of, and a transfer of the Global Security may be registered to, a Person other than the Depository or its nominee only if (i) the Depository notifies the Company that the Depository is unwilling or unable to continue as Depository or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, (ii) the Company executes and delivers to the Trustee a Company Order that the Global Security shall be so exchangeable and the transfer thereof so registrable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Global Security. SAME-DAY SETTLEMENT AND PAYMENT Settlement of the Notes will be made by the Underwriters in immediately available funds. So long as the Notes are in the form of Book-Entry Securities, all payments of principal and interest will be made by the Company in immediately available funds. Secondary trading in long-term notes and debentures of corporate issuers generally is settled in clearing-house or next-day funds. In contrast, the Notes are expected to trade in the Depository's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the Notes therefore will be required by the Depository to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Notes. S-18 19 UNDERWRITING Subject to the terms and conditions set forth in the Terms Agreement among Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, "Merrill Lynch"), acting on behalf of itself and the Underwriters named below (the "Underwriters"), and the Company (which incorporates by reference the terms of the Underwriting Agreement among the Company and Merrill Lynch (the "Underwriting Agreement"), except to the extent inconsistent therewith), the Underwriters named below have severally agreed to purchase from the Company the following respective principal amounts of Notes. Under certain circumstances, the commitments of non-defaulting Underwriters may be increased as set forth in the Underwriting Agreement.
PRINCIPAL UNDERWRITER AMOUNT ----------- ------------ Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................... $ BA Securities, Inc. ................................................... Chase Securities Inc................................................... ------------ Total..................................................... $200,000,000 ============
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Notes if any are purchased. The Underwriters have advised the Company that the Underwriters propose to offer the Notes to the public initially at the public offering price set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession of not in excess of % of the principal amount per Note; that the Underwriters may allow, and such dealers may reallow, a discount of not in excess of % of such principal amount on sales to certain other dealers; and that after the initial public offering, the public offering price and concession and discount to dealers may be changed by the Underwriters. The Company has agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the Underwriters may be required to make in respect of such liabilities. The Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. Merrill Lynch & Co. performed investment banking services for the Company in connection with the Enterra Merger in October 1995, for which Merrill Lynch & Co. received usual and customary fees in the amount of $2 million plus reimbursement of certain out-of-pocket expenses incurred in connection therewith. Merrill Lynch & Co. also has performed investment banking services for the Company from time to time, for which Merrill Lynch & Co. received customary compensation. In addition, Merrill Lynch & Co. from time to time has provided financial advisory services to the Company, but has received no compensation therefor other than reimbursement of out-of-pocket expenses. On May 3, 1996, the Company and Merrill Lynch & Co. entered into a forward sale contract relating to $100,000,000 of 10-year United States treasury notes. The forward sale contract will settle on May 30, 1996. In connection with the Facilities, the Company paid each of Bank of America Illinois, an affiliate of BA Securities, Inc., and Texas Commerce Bank National Association, an affiliate of Chase Securities Inc., an arrangement fee of $75,000 and is required to pay Texas Commerce Bank National Association an administrative agency fee of $50,000, payable annually in advance. Texas Commerce Bank National Association also maintains the majority of the Company's U.S. operating bank accounts and provides the Company with a $20 million letter of credit facility, for which Texas Commerce Bank National Association receives customary compensation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources". S-19 20 From time to time in the ordinary course of its business, Texas Commerce Bank National Association and Bank of America Illinois have engaged (and in the future Texas Commerce Bank National Association and other affiliates of Chase Securities Inc., and Bank of America Illinois and other affiliates of BA Securities, Inc., may engage) in various general financing and banking transactions with the Company and its affiliates. In addition, Texas Commerce Bank National Association and Bank of America Illinois are lenders under the Facilities, a portion of which is to be repaid with the proceeds of the sale of the Notes, and each will receive 11.25% of any repayment by the Company. See "Use of Proceeds". Prior to the offering made hereby, there has been no public market for the Notes. The Company does not intend to list the Notes on any securities exchange. The Underwriters have advised the Company that the Underwriters currently intend to make a market in the Notes; however, the Underwriters are not obligated to do so, and any Underwriter may discontinue any such market making at any time without notice. S-20 21 PROSPECTUS $300,000,000 WEATHERFORD ENTERRA, INC. DEBT SECURITIES ------------------------ Weatherford Enterra, Inc. (the "Company" or "Weatherford") may offer and sell from time to time, in one or more series, its unsecured debt securities consisting of notes, debentures or other evidences of indebtedness (the "Securities") with an aggregate initial offering price not to exceed $300,000,000 or, if applicable, the equivalent thereof in any other currency or currency unit, on terms to be determined at the time of offering. The specific designation, aggregate principal amount, maturity, rate (or method of determining the same) and time of payment of interest, premium, if any, purchase price, any terms in addition to or different from those described herein for redemption or repurchase, the names of and the principal amounts to be purchased by or through agents, dealers or underwriters, if any, the compensation of such persons and other special terms in connection with the offering and sale of the series of Securities in respect of which this Prospectus is being delivered are set forth in the accompanying Prospectus Supplement (the "Prospectus Supplement"). The Securities will be effectively subordinated to all obligations of the subsidiaries of the Company. Consequently, the rights of the Company to receive assets of any subsidiary (and thus the ability of holders of Securities to benefit indirectly from such assets) are subject to the prior claims of creditors of that subsidiary. As of March 31, 1996, $17.0 million of the Company's total debt was indebtedness of subsidiaries, and such subsidiaries may incur additional indebtedness in the future. The Securities will be general unsecured obligations of the Company and will rank pari passu with the Company's existing and future unsecured and unsubordinated indebtedness. As of March 31, 1996, the amount of the Company's total unsecured and unsubordinated indebtedness with which the Securities would have been pari passu was $313.5 million. ------------------------ The Company may sell Securities to or through underwriters and also may sell Securities directly to other purchasers or through agents. The accompanying Prospectus Supplement sets forth the names of any underwriters or agents involved in the sale of the Securities in respect of which this Prospectus is being delivered, the principal amounts, if any, to be purchased by underwriters and the compensation, if any, of such underwriters or agents. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ This Prospectus may not be used to consummate sales of the Securities unless accompanied by a Prospectus Supplement. The date of this Prospectus is May 16, 1996. 22 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER PERSON. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN ANY JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company with the Commission can be inspected at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, New York, New York 10048. They also may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies of such material may be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company has filed with the Commission a Registration Statement on Form S-3 (herein, together with all amendments and exhibits thereto, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered hereby. This Prospectus constitutes the prospectus of the Company filed as part of the Registration Statement and does not contain all the information contained in the Registration Statement, certain portions of which are omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the securities offered hereby, reference is made to the Registration Statement, including the exhibits thereto, which may be inspected at the Commission's offices, without charge, or copies of which may be obtained from the Commission upon payment of prescribed fees. 2 23 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed with the Commission are incorporated by reference herein: (a) The Company's Annual Report on Form 10-K for the year ended December 31, 1995. (b) The Company's Current Report on Form 8-K dated December 29, 1995, as amended by the Company's Current Report on Form 8-K/A dated February 27, 1996. (c) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and before the termination of the offering made hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated by reference in this Prospectus shall be deemed modified or superseded for purposes of this Prospectus to the extent that a statement contained in this Prospectus or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein or in the accompanying Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company undertakes to provide without charge to each person to whom a copy of this Prospectus has been delivered, upon the written or oral request of any such person, a copy of any or all of the documents incorporated by reference herein, other than the exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates. Written or oral requests for such copies should be directed to Weatherford Enterra, Inc., 1360 Post Oak Boulevard, Suite 1000, Houston, Texas 77056, Attention: Investor Relations, telephone number (713) 439-9400. THE COMPANY The Company is a diversified international 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 business segments include (i) the oilfield services segment, which consists of renting specialized oilfield equipment, providing fishing, well control assistance and other downhole services and related tools, and providing tubular running services and related tools; (ii) the energy products and services segment, which consists of manufacturing, selling and servicing a variety of products, including cementation products, power equipment, fishing and milling tools and heavy wall drill pipe, gas lift valves, production and service packers and related equipment, electrical and instrumentation control systems and pedestal-mounted marine cranes; (iii) the gas compression segment, which consists of manufacturing, packaging, selling, renting and servicing reciprocating natural gas compressors; and (iv) the pipeline services segment, which consists of manufacturing, selling and renting specialized pipeline equipment and services. The Company operates in virtually every oil and gas exploration and production region in the world, with more than 330 locations in 47 countries, including the United States. USE OF PROCEEDS Unless otherwise provided in the Prospectus Supplement accompanying this Prospectus, the net proceeds from the sale of the Securities offered by this Prospectus and the Prospectus Supplement will be added to the Company's general funds and used for repayment of debt or other general corporate purposes. Until so utilized, it is expected that such net proceeds will be placed in interest bearing time deposits or invested in short-term marketable securities. Any allocation of the net proceeds of any offering of Securities to a specific purpose will be determined at the time of such offering and will be described in the related Prospectus Supplement. 3 24 RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's consolidated ratios of earnings to fixed charges for the periods shown.
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED ---------------------------------------- MARCH 31, 1996 1995 1994 1993 1992 1991 ------------------ ---- ---- ---- ---- ---- 4.11 * 5.28 6.79 6.76 5.02
--------------- * Earnings were inadequate to cover fixed charges by $14,985,000. The 1995 ratio of earnings to fixed charges for the Company, excluding the effect of acquisition-related costs and other unusual charges incurred in 1995, was 4.34. For the purposes of computing the ratio of earnings to fixed charges, "earnings" have been calculated by adding to net income (i) income tax provision (benefit), (ii) undistributed earnings of affiliates and (iii) fixed charges. "Fixed charges" consist of interest expense, whether capitalized or expensed, and one-third of rental expense, which the Company considers representative of the interest element of rentals. DESCRIPTION OF THE SECURITIES The Securities will be issued under an indenture (the "Indenture") between the Company, as issuer, and Bank of Montreal Trust Company, as trustee (the "Trustee"), a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The terms of the Securities include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939 as in effect on the date of the Indenture (the "Trust Indenture Act"). The statements and definitions of terms under this caption relating to the Securities and the Indenture are subject to all such terms and are summaries and do not purport to be complete. Such summaries make use of certain terms defined in the Indenture and are qualified by express reference to the Indenture. Wherever particular Sections of the Indenture or terms not defined herein that are defined in the Indenture are referred to herein or in a Prospectus Supplement, it is intended that such Sections or defined terms shall be incorporated by reference herein or therein, as the case may be. The Securities may be issued from time to time in one or more series. The following description of the Securities sets forth certain general terms and provisions of the Securities of all series. The particular terms of each series of Securities offered by any Prospectus Supplement will be described in the Prospectus Supplement relating to such series. GENERAL The Indenture does not limit the amount of Securities, debentures, notes or other evidences of indebtedness that may be issued by the Company or any of its subsidiaries, nor does the Indenture restrict transactions between the Company and its affiliates or dividends and other distributions by the Company to its stockholders. In addition, other than as set forth under "--Limitation on Liens" and "--Limitation on Sale/ Leaseback Transactions", there are no provisions of the Indenture that afford holders of the Securities protection in the event of either a change in control of the Company or a highly leveraged transaction involving the Company. Securities may be issued under the Indenture from time to time in separate series up to an aggregate amount from time to time authorized by the Company for such series. The Securities will be unsecured obligations of the Company and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company unless the Company is required to secure the Securities pursuant to the Indenture provisions described below under "--Limitation on Liens". The applicable Prospectus Supplement relating to any Securities will describe the following terms of the Securities: (1) the title of the Securities; (2) any limit on the aggregate principal amount of the Securities; (3) whether the Securities are to be issuable as Registered Securities or Bearer Securities, or both, whether any of the Securities are to be issuable initially in temporary global form and whether any of the Securities are to be in permanent global form; (4) the price or prices (expressed as a percentage of the aggregate principal 4 25 amount thereof) at which the Securities will be issued; (5) the date or dates on which the Securities will mature; (6) the rate or rates per annum (or the method by which such will be determined) at which the Securities will bear interest, if any, and the date or dates from which any such interest will accrue and whether, and under what circumstances, additional amounts with respect to the Securities shall be payable; (7) the Interest Payment Dates on which any such interest on the Securities will be payable, the Regular Record Date for any interest payable on any Securities that are Registered Securities on any Interest Payment Date and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid; (8) any mandatory or optional sinking fund or analogous provisions; (9) each office or agency where, subject to the terms of the Indenture as described below under "--Payment and Paying Agents", the principal of and any premium and interest on the Securities will be payable and each office or agency where, subject to the terms of the Indenture as described below under "--Form, Exchange, Registration and Transfer", the Securities may be presented for registration of transfer or exchange; (10) the right, if any, or obligation, if any, of the Company to redeem the Securities and the period or periods, if any, within which and the price or prices at which the Securities may, pursuant to any optional or mandatory redemption provisions, be redeemed, in whole or in part, and the other detailed terms and provisions of any such optional or mandatory redemption; (11) the denominations in which any Securities which are Registered Securities will be issuable, if other than in denominations of $1,000 and any integral multiple thereof, and the denomination or denominations in which any Securities which are Bearer Securities will be issuable, if other than in denominations of $5,000; (12) the currency or currencies (including composite currencies) in which payment of principal of and any premium and interest on the Securities is payable; (13) any index used to determine the amount of payments of principal of and any premium and interest on the Securities; (14) information with respect to book-entry procedures, if any; and (15) any other terms of the Securities not inconsistent with the provisions of the Indenture. (Section 301) Any such Prospectus Supplement also will describe any special provisions for payment of additional amounts with respect to the Securities. Securities may be issued as Original Issue Discount Securities. An Original Issue Discount Security is a Security that is issued at a price lower than the amount payable upon the Stated Maturity thereof and that provides that upon redemption or acceleration of the maturity thereof an amount less than the amount payable upon the Stated Maturity thereof and determined in accordance with the terms of such Security shall become due and payable. Special United States federal income tax considerations applicable to Securities issued at an original issue discount, including Original Issue Discount Securities, and special United States tax considerations and other terms and restrictions applicable to any Securities that are issued in bearer form, offered exclusively to United States Aliens or denominated in other than United States dollars, will be set forth in any Prospectus Supplement relating thereto. The Securities will be general unsecured obligations of the Company and will rank pari passu with the Company's existing and future unsecured and unsubordinated indebtedness. Accordingly, the ability of the Company to meet its obligations under the Indenture and the Securities will be dependent on the earnings and cash flows of its subsidiaries and the ability of its subsidiaries to pay dividends or to advance funds to the Company. As of March 31, 1996, the amount of the Company's total unsecured and unsubordinated indebtedness with which the Securities would have been pari passu was $313.5 million. The Company is a holding company, conducting substantially all of its business through subsidiaries, and the Indenture does not restrict the incurrence of debt by such subsidiaries. The Securities will be effectively subordinated to all obligations of such subsidiaries. Consequently, the rights of the Company to receive assets of any subsidiary (and thus the ability of holders of Securities to benefit indirectly from such assets) are subject to the prior claims of creditors of that subsidiary. As of March 31, 1996, $17.0 million of the Company's total debt was indebtedness of subsidiaries, and such subsidiaries may incur additional indebtedness in the future. FORM, EXCHANGE, REGISTRATION AND TRANSFER Securities of a series may be issuable in definitive form solely as Registered Securities, solely as Bearer Securities or as both Registered Securities and Bearer Securities. Unless otherwise indicated in an applicable 5 26 Prospectus Supplement, Bearer Securities will have interest coupons attached. The Indenture provides that Securities of a series may be issuable in temporary or permanent global form. (Section 201) Registered Securities of any series will be exchangeable for other Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. In addition, if Securities of any series are issuable as both Registered Securities and Bearer Securities, at the option of the Holder, subject to the terms of the Indenture, Bearer Securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of such series will be exchangeable for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. Bearer Securities surrendered in exchange for Registered Securities between a Regular Record Date or a Special Record Date and the relevant date for payment of interest shall be surrendered without the coupon relating to such date for payment of interest, and interest accrued as of such date will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon, when due in accordance with the terms of the Indenture. Bearer Securities will not be issued in exchange for Registered Securities. (Section 305) Securities may be presented for exchange as provided above, and Registered Securities may be presented for registration or transfer (with the form of transfer endorsed thereon duly executed), at the office of the Security Registrar or at the office of any transfer agent designated by the Company for such purpose with respect to any series of Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. Such transfer or exchange will be effected upon the Security Registrar or any such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Company shall serve initially as Security Registrar. (Section 305) If a Prospectus Supplement refers to any transfer agent (in addition to the Security Registrar) initially designated by the Company with respect to any series of Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that, if Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a transfer agent in each Place of Payment for such series and, if Securities of a series are issuable as Bearer Securities, the Company will be required to maintain (in addition to the Security Registrar) a transfer agent in a Place of Payment for such series located outside the United States. The Company may at any time designate additional transfer agents with respect to any series of Securities. (Section 1002) In the event of any redemption in part, the Company shall not be required to (i) issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days prior to the selection of Securities of that series for redemption and ending on the close of business on (A) if Securities of the series are issuable only as Registered Securities, the day of mailing of the relevant notice of redemption and (B) if Securities of the series are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption, or, if Securities of the series also are issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption; (ii) register the transfer or exchange of any Registered Security, or portion thereof, called for redemption, except the unredeemed portion of any Registered Security being redeemed in part; or (iii) exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor that is immediately surrendered for redemption. (Section 305) PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of, and any premium and interest on, Bearer Securities will be payable, subject to any applicable laws and regulations, at the offices of such Paying Agents outside the United States as the Company may designate from time to time, in the manner indicated in such Prospectus Supplement. (Section 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on Bearer Securities on any Interest Payment Date will be made only against surrender to the Paying Agent of the coupon relating to such Interest Payment Date. (Section 1001) No payment with respect to any Bearer Security will be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an 6 27 account maintained with a bank located in the United States. Notwithstanding the foregoing, payments of principal of, and any premium and interest on, Bearer Securities denominated and payable in U.S. dollars will be made at the offices of the Company's Paying Agent in the City of New York, if (but only if) payment of the full amount thereof in U.S. dollars at all offices or agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. (Section 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of, and any premium and interest on, Registered Securities will be made at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed on or before the due date to the address of the Person entitled thereto as such address shall appear in the Security Register. (Sections 307 and 1002) Unless otherwise indicated in an applicable Prospectus Supplement, payment of any installment of interest on Registered Securities will be made to the Person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest. (Section 307) Unless otherwise indicated in an applicable Prospectus Supplement, the Trustee at its Corporate Trust Office will be designated as a Paying Agent for the Company for payments with respect to Securities that are issuable solely as Registered Securities, and the Company will maintain a Paying Agent outside the United States for payments with respect to Securities (subject to the limitations described above in the case of Bearer Securities) that are issuable solely as Bearer Securities or as both Registered Securities and Bearer Securities. Any Paying Agents outside the United States and any other Paying Agents in the United States initially designated by the Company for the Securities will be named in an applicable Prospectus Supplement. The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts, except that, if Securities of a series are issuable solely as Registered Securities, the Company will be required to maintain a Paying Agent in each Place of Payment for such series and, if Securities of a series are issuable as Bearer Securities, the Company will be required to maintain (i) a Paying Agent in the City of New York, for principal payments with respect to any Registered Securities of the series (and for payments with respect to Bearer Securities of the series in the circumstances described above, but not otherwise), and (ii) a Paying Agent in a Place of Payment located outside the United States where Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment. (Section 1002) All monies paid by the Company to a Paying Agent for the payment of principal of or any premium or interest on any Security that remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will (subject to applicable escheat laws) be repaid to the Company, and the Holder of such Security or any coupon will thereafter look only to the Company for payment thereof. (Section 1003) GLOBAL SECURITIES Securities of a series may be issued in whole or in part in the form of one or more global Securities that will be deposited with, or on behalf of, a depository identified in the Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. Unless and until it is exchanged in whole or in part for the individual Securities represented thereby, a global Security may not be transferred except as a whole by the depository for such global Security to a nominee of such depository or by a nominee of such depository to such depository or another nominee of such depository or by the depository or any nominee to a successor depository or any nominee of such successor. (Section 203) The specific terms of the depository arrangement with respect to a series of Securities and certain limitations and restrictions relating to a series of Bearer Securities in the form of one or more global Securities will be described in the Prospectus Supplement relating to such series. 7 28 CERTAIN DEFINITIONS "Attributable Indebtedness" means, with respect to any Sale/Leaseback Transaction as of any particular time, the present value (discounted at the rate of interest implicit in the terms of the lease) of the obligations of the lessee under such lease for net rental payments during the remaining term of the lease (including any period for which such lease has been extended). "Net rental payments" under any lease for any period means the sum of the rental and other payments required to be paid in such period by the lessee thereunder, not including, however, any amounts required to be paid by such lessee (whether or not designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments or similar charges required to be paid by such lessee thereunder contingent upon the amount of sales or deliveries, maintenance and repairs, insurance, taxes, assessments or similar charges. (Section 101) "Consolidated Net Worth" means the amount of total stockholders' equity shown in the most recent consolidated statement of financial position of the Company. (Section 101) "Current Assets" of any Person includes all assets of such Person that would in accordance with generally accepted accounting principles be classified as current assets. (Section 101) "Current Liabilities" of any Person includes all liabilities of such Person that would in accordance with generally accepted accounting principles be classified as current liabilities. (Section 101) "Non-Recourse Indebtedness" means indebtedness of the Company or any Subsidiary of the Company in respect of which the recourse of the holder of such indebtedness, whether direct or indirect and whether contingent or otherwise, is effectively limited to specified assets, and with respect to which neither the Company nor any Subsidiary of the Company provides any credit support. (Section 101) "Sale/Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Company or any Subsidiary, for a period of more than three years, of any real or personal property, which property has been or is to be sold or transferred by the Company or such Subsidiary to such Person in contemplation of such leasing. (Section 101) "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, or (ii) any partnership or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned. For the purposes of this definition, "securities having ordinary voting power" means securities or other equity interests that ordinarily have voting power for the election of directors, or persons having management power with respect to the Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. (Section 101) LIMITATION ON LIENS The Indenture provides that the Company will not, and will not permit any Subsidiary of the Company to, issue, assume or guarantee any indebtedness for money borrowed ("Debt") if such Debt is secured by a mortgage, pledge, security interest or lien (a "mortgage" or "mortgages") upon any real or personal property of the Company or any Subsidiary of the Company or upon any shares of stock or other equity interest or indebtedness of any Subsidiary of the Company (whether such property, shares of stock or other equity interest or indebtedness is now owned or hereafter acquired), without in any such case effectively providing that the Securities shall be secured equally and ratably with (or prior to) such Debt; provided, however, that the foregoing restrictions shall not apply to: (a) mortgages existing on the date the Securities are originally issued or mortgages provided for under the terms of agreements existing on such date; (b) mortgages on Current Assets securing Current Liabilities; (c) mortgages on any property acquired, constructed, altered or improved by the Company or any Subsidiary of the Company after the date of the Indenture that are created or assumed contemporaneously with or within one year after such acquisition (or in the case of property constructed, altered or improved, after the completion and commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of the purchase price or cost thereof, provided that in the case of any such construction, alteration or improvement the mortgages shall not apply to 8 29 any property theretofore owned by the Company or any Subsidiary of the Company other than (i) the property so altered or improved and (ii) any theretofore unimproved real property on which the property so constructed or altered, or the improvement, is located; (d) existing mortgages on property acquired (including mortgages on any property acquired from a Person that is consolidated with or merged with or into the Company or a Subsidiary of the Company) or mortgages outstanding at the time any Person becomes a Subsidiary of the Company that are not incurred in connection with such entity becoming a Subsidiary of the Company; (e) mortgages in favor of the Company or any Subsidiary of the Company; (f) mortgages on any property (i) in favor of domestic or foreign governmental bodies to secure partial, progress, advance or other payments pursuant to any contract or statute, (ii) securing indebtedness incurred to finance all or any part of the purchase price or cost of constructing, installing or improving the property subject to such mortgages, including mortgages to secure Debt of the pollution control or industrial revenue bond type, or (iii) securing indebtedness issued or guaranteed by the United States, any State, any foreign country or any department, agency, instrumentality or political subdivision of any such jurisdiction; and (g) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any mortgage referred to in the foregoing clauses (a), (b), (c), (d), (e) or (f); provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, together with the reasonable costs related to such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property that secured the mortgage so extended, renewed or replaced (plus improvements on such property). (Section 1006) Notwithstanding the foregoing, the Company and any Subsidiary of the Company may, without securing the Securities, issue, assume or guarantee secured Debt (that would otherwise be subject to the foregoing restrictions) in an aggregate amount that, together with all other such secured Debt and the aggregate amount of Attributable Indebtedness of the Company and its Subsidiaries deemed to be outstanding in respect of all Sale/Leaseback Transactions entered into pursuant to the provisions described below under "--Limitation on Sale/Leaseback Transactions" (excluding any such Sale/Leaseback Transactions the proceeds of which have been applied in accordance with clauses (2) or (3) under the "--Limitation on Sale/Leaseback Transactions" covenant described below), does not exceed 10% of the Consolidated Net Worth, as shown on a consolidated balance sheet as of a date not more than 90 days prior to the proposed transaction prepared by the Company in accordance with generally accepted accounting principles. (Section 1006) LIMITATION ON SALE/LEASEBACK TRANSACTIONS The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, enter into any Sale/Leaseback Transaction with any Person (other than the Company or a Subsidiary of the Company) unless: (1) at the time of entering into such Sale/Leaseback Transaction, the Company or such Subsidiary would be entitled to incur Debt, in a principal amount equal to the Attributable Indebtedness with respect to such Sale/Leaseback Transaction, secured by a mortgage on the property subject to such Sale/Leaseback Transaction, pursuant to the provisions of the covenant described under "--Limitation on Liens" without equally and ratably securing the Securities pursuant to such provisions; (2) after the date on which Securities are first issued and within a period commencing six months prior to the consummation of such Sale/Leaseback Transaction and ending six months after the consummation thereof, the Company or such Subsidiary shall have expended for property used or to be used in the ordinary course of business of the Company or such Subsidiary (including amounts expended for additions, expansions, alterations, repairs and improvements thereto) an amount equal to all or a portion of the net proceeds of such Sale/Leaseback Transaction, and the Company shall have elected to designate such amount as a credit against such Sale/Leaseback Transaction (with any such amount not being so designated to be applied as set forth in clause (3) below); or (3) during the 12-month period after the effective date of such Sale/Leaseback Transaction, the Company shall have applied to the voluntary defeasance or retirement of Securities or any pari passu 9 30 indebtedness of the Company an amount equal to the net proceeds of the sale or transfer of the property leased in such Sale/Leaseback Transaction, which amount shall not be less than the fair value of such property at the time of entering into such Sale/Leaseback Transaction (adjusted to reflect the remaining term of the lease and any amount expended by the Company as set forth in clause (2) above), less an amount equal to the principal amount of such Securities and pari passu indebtedness voluntarily defeased or retired by the Company within such 12-month period and not designated as a credit against any other Sale/Leaseback Transaction entered into by the Company or any Subsidiary of the Company during such period. (Section 1009) EVENTS OF DEFAULT Unless otherwise indicated in an applicable Prospectus Supplement, any of the following events will constitute an Event of Default under the Indenture with respect to Securities of any series: (a) failure to pay any interest on any Security of that series when due, continued for 30 days; (b) failure to pay principal of or any premium on any Security of that series when due; (c) failure to deposit any sinking fund payment, when due, in respect of any Security of that series; (d) failure to perform or breach of any other covenant of the Company in the Indenture (other than a covenant included in the Indenture solely for the benefit of series of Securities other than that series), continued for 90 days after written notice as provided in the Indenture; (e) the acceleration of the maturity of any indebtedness for borrowed money of the Company or any Subsidiary of the Company (other than the Securities or Non-Recourse Indebtedness) having an aggregate principal amount outstanding in excess of $25,000,000, if such acceleration is not rescinded or annulled, or such indebtedness shall not have been discharged, within 15 days after written notice thereof to the Company; (f) certain events in bankruptcy, insolvency or reorganization involving the Company; and (g) any other Event of Default provided with respect to Securities of that series. (Section 501) If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series, by notice as provided in the Indenture, may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, under certain circumstances, may rescind and annul such acceleration. (Section 502) The Indenture provides that, subject to the duty of the Trustee during default to act with the required standard of care, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such provisions for the indemnification of the Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of that series; provided, however, that the Trustee shall not be obligated to take any action unduly prejudicial to Holders not joining in such direction or involving the Trustee in personal liability. (Section 512) The Company will be required to furnish to the Trustee annually a statement as to the Company's compliance with conditions and covenants under the Indenture. (Section 1007) DEFEASANCE If so specified with respect to any particular series of Securities, the Company may discharge its indebtedness and its obligations or certain of its obligations under the Indenture with respect to such series by depositing funds or obligations issued or guaranteed by the United States of America with the Trustee. 10 31 Defeasance and Discharge The Indenture provides that, if so specified with respect to the Securities of any series, the Company will be discharged from any and all obligations in respect of the Securities of such series (except for certain obligations, including those relating to temporary Securities and exchange of Securities, registration of transfer or exchange of Securities of such series, replacement of stolen, destroyed, lost or mutilated Securities of such series, maintenance of paying agencies to hold moneys for payment in trust and payments of additional amounts, if any, required in consequence of United States withholding taxes imposed on payments to non-United States persons) upon the deposit with the Trustee, in trust, of an amount of money, and/or U.S. Government Obligations that, through the scheduled payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount, sufficient to pay and discharge the principal of, and any premium and each installment of interest on, the Securities of such series on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Securities of such series. (Sections 1302 and 1304) Such a trust may only be established if, among other things, the Company has delivered to the Trustee an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of the Indenture there has been a change in applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge, and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (Section 1304) In the event of any such defeasance and discharge of Securities of such series, Holders of Securities of such series would be entitled to look only to such trust fund for payment of principal of and any premium and any interest on their Securities until Maturity. Defeasance of Certain Obligations The Indenture provides that, if so specified with respect to the Securities of any series, the Company may omit to comply with certain restrictive covenants, including the covenants described under "--Limitation on Liens" and "--Limitation on Sale/Leaseback Transactions" above, and any such omission shall not be an Event of Default with respect to the Securities of such series, upon the deposit with the Trustee, in trust, of an amount of money, and/or U.S. Government Obligations that, through the scheduled payment of interest and principal in respect thereof in accordance with their terms, will provide money in an amount, sufficient to pay and discharge the principal of, and any premium and each installment of interest on, the Securities of such series on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Securities of such series. The obligations of the Company under the Indenture and the Securities of such series other than with respect to such covenants shall remain in full force and effect. (Sections 1303 and 1304) Such a trust may be established only if, among other things, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Securities of such series will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. (Section 1304) Although the amount of money and U.S. Government Obligations on deposit with the Trustee would be intended to be sufficient to pay amounts due on the Securities of such series at the time of their Stated Maturity, in the event the Company exercises its option to omit compliance with the covenants defeased with respect to the Securities of any series as described above and the Securities of such series are declared due and payable because of the occurrence of any Event of Default, such amount may not be sufficient to pay amounts due on the Securities of such series at the time of the acceleration resulting from such Event of Default. The Company shall in any event remain liable for such payments as provided in the Indenture. Federal Income Tax Consequences Under current United States federal income tax law, defeasance and discharge likely would be treated as a taxable exchange of Securities to be defeased for an interest in the defeasance trust. As a consequence, a 11 32 holder would recognize gain or loss equal to the difference between the holder's cost or other tax basis for such Securities and the value of the holder's interest in the defeasance trust, and thereafter would be required to include in income a share of the income, gain or loss of the defeasance trust. Under current United States federal income tax law, covenant defeasance would ordinarily not be treated as a taxable exchange of such Securities. MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Outstanding Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without consent of the Holder of each Outstanding Security affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security; (b) change the Redemption Date with respect to any Security; (c) reduce the principal amount of, or premium or interest rate on, any Security; (d) change any obligation of the Company to pay additional amounts; (e) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the Maturity thereof; (f) change the coin or currency in which any Security or any premium or interest thereon is payable; (g) change the redemption right of any Holder; (h) impair the right to institute suit for the enforcement of any payment on or with respect to any Security; (i) reduce the percentage in principal amount of Outstanding Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; (j) reduce the requirements contained in the Indenture for quorum or voting; (k) change any obligation of the Company to maintain an office or agency in the places and for the purposes required by the Indenture; or (l) modify any of the above provisions. (Section 902) The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series may, on behalf of the Holders of all Securities of that series, waive, insofar as that series is concerned, compliance by the Company with certain restrictive provisions of the Indenture. (Section 1008) The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series may, on behalf of all Holders of Securities of that series, waive any past default under the Indenture with respect to any Securities of that series, except a default (a) in the payment of principal of, or any premium or interest on, any Security of such series or (b) in respect of a covenant or provision of the Indenture that cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. (Section 513) The Indenture provides that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder or are present at a meeting of the Holders of Securities for quorum purposes, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof, and (ii) the principal amount of a Security denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the principal amount of such Security or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the amount determined as provided in clause (i) above. (Section 101) The Indenture contains provisions for convening meetings of the Holders of Securities of a series if Securities of that series are issuable as Bearer Securities. (Section 1401) A meeting may be called at any time by the Trustee, and also, upon request by the Company or the Holders of at least 10% in aggregate principal amount of the Outstanding Bearer Securities of that series, in any such case upon notice given in accordance with the provisions described under "--Notices" below. (Section 1402) Except for any consent that must be given by the Holder of each Outstanding Bearer Security affected thereby, as described above, any resolution presented at a meeting (or adjourned meeting duly reconvened at which a quorum is present) may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Bearer Securities of that series; provided, however, that, except for any consent or waiver that must be given by the Holder of each Outstanding Bearer Security affected thereby, as described above, any resolution with respect to any 12 33 request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the Holders of a specified percentage, which is less than a majority in aggregate principal amount of the Outstanding Bearer Securities of a series, may be adopted at a meeting (or adjourned meeting duly reconvened at which a quorum is present) by the affirmative vote of such specified percentage in aggregate principal amount of the Outstanding Bearer Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Bearer Securities of any series duly held in accordance with the Indenture will be binding on all Holders of Bearer Securities of that series and related coupons. The quorum at any meeting, and at any reconvened meeting, will be Persons holding or representing a majority in aggregate principal amount of the Outstanding Bearer Securities of a series. (Section 1404) CONSOLIDATION, MERGER AND SALE OF ASSETS The Company, without the consent of the Holders of any of the Outstanding Securities under the Indenture, may consolidate with or merge into, or convey, transfer or lease its properties and assets substantially as an entirety to, any other Person that is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, provided that any successor Person assumes the Company's obligations on the Securities and under the Indenture, that after giving effect to the transaction no Event of Default (and no event that, after notice or lapse of time or both, would become an Event of Default) shall have occurred and be continuing, and that certain other conditions are met. (Section 801) NOTICES Except as otherwise provided in the Indenture, notices to Holders of Bearer Securities will be given by publication at least twice in a daily newspaper in The City of New York and in such other city or cities as may be specified in such Securities. Notices to Holders of Registered Securities will be given by mail to the addresses of such Holders as they appear in the Security Register. (Section 106) TITLE Title to any Bearer Securities (including Bearer Securities in permanent global form) and any coupons appertaining thereto will pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of any Bearer Security and the bearer of any coupon and the registered owner of any Registered Security as the owner thereof (whether or not such Security or coupon shall be overdue and notwithstanding any notice to the contrary) for the purpose of making payments and for all other purposes. (Section 308) REPLACEMENT OF SECURITIES Any mutilated Security or a Security with a mutilated coupon appertaining thereto will be replaced by the Company at the expense of the Holder upon surrender of such Security to the Trustee. Securities or coupons that become destroyed, stolen or lost will be replaced by the Company at the expense of the Holder upon delivery to the Company and the Trustee of the Security and coupons or evidence of destruction, loss or theft thereof satisfactory to the Company and the Trustee; in the case of any coupon that becomes destroyed, stolen or lost, such coupon will be replaced by issuance of a new Security in exchange for the Security to which such coupon appertains. In the case of a destroyed, lost or stolen Security or coupon, an indemnity satisfactory to the Trustee and the Company may be required at the expense of the Holder of such Security or coupon before a replacement Security will be issued. (Section 306) GOVERNING LAW The Indenture, the Securities and any coupons will be governed by, and construed in accordance with, the laws of the State of New York. (Section 113) 13 34 REGARDING THE TRUSTEE The Company and certain affiliates from time to time borrow money from, and maintain deposit accounts and conduct certain banking transactions with, Bank of Montreal, an affiliate of the Trustee, in the ordinary course of their business. Bank of Montreal is a lender under the Company's bank credit facility. The Indenture and the provisions of the Trust Indenture Act incorporated by reference therein contain certain limitations on the right of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize for its own account on certain property received in respect of any such claim as security or otherwise. (Section 613) The Trustee will be permitted to engage in certain other transactions; however, if it acquires any conflicting interest, it must eliminate such conflict or resign. (Section 608) PLAN OF DISTRIBUTION GENERAL The Company may sell Securities to or through underwriters or dealers, and also may sell Securities directly to one or more other purchasers or through agents. The Prospectus Supplement accompanying this Prospectus sets forth the names of any underwriters or agents involved in the sale of the Securities and any applicable commissions or discounts. Underwriters, dealers or agents may offer and sell the Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of the Securities, underwriters or agents may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and also may receive commissions from purchasers of the Securities for whom they may act as agent. Underwriters or agents may sell the Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters or commissions from the purchasers for whom they may act as agent. The Securities, when first issued, will have no established trading market. Any underwriters or agents to or through whom Securities are sold by the Company for public offering and sale may make a market in such Securities, but such underwriters or agents will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any Securities. Any underwriters, dealers or agents participating in the distribution of the Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers or agents may be entitled, under agreements entered into with the Company, to indemnification by the Company against or contribution toward certain civil liabilities, including liabilities under the Securities Act. DELAYED DELIVERY ARRANGEMENTS If so indicated in the Prospectus Supplement, the Company will authorize underwriters or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such contracts will be subject to the approval of the Company. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of the Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such agents will not have any responsibility in respect of the validity or performance of such contracts. 14 35 LEGAL MATTERS The legality of the Securities are being passed upon by Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100, Houston, Texas 77010. Certain legal matters in connection with the Securities may be passed upon for any underwriters, dealers or agents by Vinson & Elkins L.L.P., 1001 Fannin, Suite 2300, Houston, Texas 77002. From time to time, Vinson & Elkins L.L.P. serves the Company as outside special counsel in certain unrelated matters. EXPERTS The consolidated financial statements of the Company at December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, incorporated by reference in this Prospectus and the accompanying Prospectus Supplement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are incorporated by reference in this Prospectus in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. 15 36 =============================================================================== NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN ANY JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT The Company........................... S-2 Recent Development.................... S-3 Selected Consolidated Financial Data................................ S-4 Use of Proceeds....................... S-5 Capitalization........................ S-5 Business.............................. S-6 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... S-7 Description of the Notes.............. S-16 Underwriting.......................... S-19 PROSPECTUS Available Information................. 2 Incorporation of Certain Documents by Reference........................... 3 The Company........................... 3 Use of Proceeds....................... 3 Ratio of Earnings to Fixed Charges.... 4 Description of the Securities......... 4 Plan of Distribution.................. 14 Legal Matters......................... 15 Experts............................... 15
=============================================================================== =============================================================================== $200,000,000 [WEATHERFORD ENTERRA, INC. LOGO] WEATHERFORD ENTERRA, INC. % NOTES DUE MAY , 2006 --------------------- PROSPECTUS SUPPLEMENT --------------------- MERRILL LYNCH & CO. BA SECURITIES, INC. CHASE SECURITIES INC. MAY , 1996 ===============================================================================