-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O+kBCQFXiFvPc1+ydYko7sQyk0PtvAMj7KOf+rIHRwHumtF5mEhueGPNVkJuB3mc hPyFYhrLt529nlzhuyBeEw== 0000030099-97-000004.txt : 19970318 0000030099-97-000004.hdr.sgml : 19970318 ACCESSION NUMBER: 0000030099-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970317 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DRESSER INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000030099 STANDARD INDUSTRIAL CLASSIFICATION: ENGINES & TURBINES [3510] IRS NUMBER: 750813641 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04003 FILM NUMBER: 97557385 BUSINESS ADDRESS: STREET 1: 2001 ROSS AVE CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2147406000 MAIL ADDRESS: STREET 1: P O BOX 718 CITY: DALLAS STATE: TX ZIP: 75221 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended January 31, 1997. [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-4003 DRESSER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware C 75-0813641 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) P. O. Box 718 2001 Ross 75221 (P. O. Box) Dallas, Texas 75201 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code - 214-740-6000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 28, 1997 Common Stock, par value $.25 176,258,349 INDEX Page Number Part I. Financial Information Management's Representation 3 Condensed Consolidated Statements of Earnings for the three months ended January 31, 1997 and 1996 4 Condensed Consolidated Balance Sheets as of January 31, 1997 and October 31, 1996 5 Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 1997 and 1996 6 Notes to Condensed Consolidated Financial Statements 7-11 Management's Discussion and Analysis of Financial Condition and Results of Operations 12-15 Part II. Other Information 16 Changes in Securities 16 Exhibits and Reports on Form 8-K 16 Signature 16 Exhibit Index Exhibit 10.1 Agreement with George Helland dated January 10, 1997 Exhibit 10.2 Agreement with John Gavin for the period February 1, 1997 - January 31, 1998 Exhibit 27 Financial Data Schedule MANAGEMENT'S REPRESENTATION The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, the notes to consolidated financial statements and management's discussion and analysis included in the Company's 1996 Annual Report on Form 10-K. In the opinion of the Company, all adjustments have been included that were necessary to present fairly the financial position of Dresser Industries, Inc. and subsidiaries as of January 31, 1997 and October 31, 1996, the results of operations for the three months ended January 31, 1997 and 1996, and cash flows for the three months ended January 31, 1997 and 1996. These adjustments consisted of normal recurring adjustments. The results of operations for such interim periods do not necessarily indicate the results for the full year. DRESSER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In Millions Except per Share Data)
Three Months Ended January 31, 1997 1996 (Unaudited) Revenues $ 1,704.5 $ 1,462.9 Cost of revenues (1,342.7) (1,142.5) Gross earnings 361.8 320.4 Selling, engineering, administrative and general expenses (258.0) (237.2) Other income (deductions) Interest expense, net (14.8) (10.0) Other, net (2.2) (0.3) Earnings before items below 86.8 72.9 Income taxes (30.4) (24.8) Minority interest (4.3) (1.5) Net earnings $ 52.1 $ 46.6 Earnings per common share $ 0.30 $ 0.26 Cash dividends per common share $ 0.17 $ 0.17 Average common shares outstanding 175.8 181.8 See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Millions)
January 31, October 31, ASSETS 1997 1996 Current Assets (Unaudited) Cash and cash equivalents $ 199.8 $ 232.4 Notes and accounts receivable, net 1,110.8 1,152.1 Inventories, net 896.5 913.6 Deferred income taxes 85.8 83.8 Other current assets 91.8 87.6 Total Current Assets 2,384.7 2,469.5 Investments in and receivables from unconsolidated affiliates 186.5 182.5 Goodwill, net 863.9 870.6 Deferred income taxes 185.1 181.2 Other assets 190.8 184.0 Property, plant and equipment - at cost 2,868.2 2,836.7 Accumulated depreciation and amortization 1,610.3 1,574.3 Net Property 1,257.9 1,262.4 Total Assets $5,068.9 $5,150.2 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 123.7 $ 86.0 Accounts payable 531.1 570.6 Contract advances 447.9 459.8 Accrued compensation and benefits 217.5 250.4 Income taxes 114.2 111.3 Other current liabilities 359.3 383.7 Total Current Liabilities 1,793.7 1,861.8 Employee retirement and postemployment benefit obligations 664.1 676.3 Long-term debt 760.7 756.3 Deferred compensation, insurance reserves and other liabilities 119.7 118.0 Minority interest 150.3 155.6 Shareholders' Equity Common shares 46.2 46.2 Capital in excess of par value 455.2 454.8 Retained earnings 1,413.1 1,420.8 Cumulative translation adjustments (82.5) (81.5) Pension liability adjustment (6.9) (6.9) 1,825.1 1,833.4 Less treasury shares, at cost 244.7 251.2 Total Shareholders' Equity 1,580.4 1,582.2 Total Liabilities and Shareholders' Equity $5,068.9 $5,150.2 Actual common shares outstanding 176.2 175.6 See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions)
Three Months Ended January 31, 1997 1996 (Unaudited) Cash flows from operating activities: Net earnings $ 52.1 $ 46.6 Adjustments to reconcile net earnings to cash flow: Depreciation and amortization 62.4 54.5 Equity earnings from unconsolidated affiliates (11.0) (10.4) Minority interest 4.3 1.5 Changes in working capital (105.2) (68.7) Other - net (3.2) (3.2) Net cash (used) provided by operating activities (.6) 20.3 Cash flows from investing activities: Capital expenditures (49.6) (84.2) Business acquisitions (3.6) (14.7) Proceeds from sales of assets .5 12.2 Net cash used by investing activities (52.7) (86.7) Cash flows from financing activities: Dividends paid (29.9) (30.9) Purchases of common shares for Treasury - (17.3) Issuance of common shares 6.8 3.3 Increase in short-term debt 37.7 34.4 Increase(decrease)in long-term debt 4.4 (6.3) Net cash provided (used) by financing activities 19.0 (16.8) Effect of translation adjustments on cash 1.7 (2.2) Net decrease in cash and cash equivalents (32.6) (85.4) Cash and cash equivalents, beginning of period 232.4 248.7 Cash and cash equivalents, end of period $ 199.8 $ 163.3 See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 (Unaudited) Note A - Information by Industry Segment (In Millions)
Three Months Ended January 31, 1997 1996 Revenues Petroleum Products and Services Drilling and Production Operations $ 426.9 $ 353.4 Kellogg Oil and Gas Services 175.8 112.8 602.7 466.2 Engineering Services M. W. Kellogg Operations 457.2 392.0 Energy Equipment Compression and Pumping 291.4 275.5 Measurement 151.0 147.7 Flow Control 145.3 145.8 Power Systems 60.7 64.5 648.4 633.5 Eliminations (3.8) (28.8) Total revenues $1,704.5 $1,462.9 Operating profit Petroleum Products and Services Drilling and Production Operations $ 60.5 $ 50.3 Kellogg Oil and Gas Services 11.5 2.6 72.0 52.9 Engineering Services 26.4 19.1 Energy Equipment Compression and Pumping 9.6 14.1 Measurement 11.2 9.4 Flow Control 10.3 12.4 Power Systems 0.6 3.2 31.7 39.1 Total segment operating profit 130.1 111.1 Amortization of acquisition intangibles (7.6) (8.4) General corporate expenses (20.8) (19.8) Interest expense, net (14.9) (10.0) Earnings before taxes and minority interest $ 86.8 $ 72.9
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 (Unaudited) Note B - Unconsolidated Affiliated Companies The Company has several investments in less than majority owned affiliates. A summary of the impact of these investments on the condensed consolidated financial statements follows (in millions):
Three Months Ended January 31, 1997 1996 Share of earnings of unconsolidated affiliates Ingersoll-Dresser Pump (49% owned) $ 9.2 $ 9.2 Other affiliates 1.8 1.2 $ 11.0 $ 10.4
January 31, October 31, 1997 1996 Investments in and receivables from unconsolidated affiliates Ingersoll-Dresser Pump (49% owned) $ 136.8 $ 132.5 Other affiliates 49.7 50.0 $ 186.5 $ 182.5
Note C - Inventories The determination of inventory values and cost of sales under the LIFO method for interim financial results is based on management's estimates of expected year-end inventories.
Inventories include the following (in millions): January 31, October 31, 1997 1996 Finished products and work in process $ 681.8 $ 699.4 Raw materials and supplies 214.7 214.2 $ 896.5 $ 913.6
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 (Unaudited) Note D - Dividends On November 21, 1996, the Company declared a quarterly dividend of $.17 per share of common stock payable on December 20, 1996 to shareholders of record on December 2, 1996. On January 16, 1997, the Company declared a quarterly dividend of $.17 per share of common stock payable on March 20, 1997 to shareholders of record on March 3, 1997. Note E - Litigation and Contingencies The Company is involved in certain legal actions and claims arising in the ordinary course of business. See Note J - Commitments and Contingencies - in the Company's 1996 Annual Report on Form 10-K for a complete discussion of these matters. A discussion of significant changes subsequent to October 31, 1996 follows. Quantum Chemical Litigation In October 1992 Quantum Chemical Corporation ("Quantum") brought suit against the Company's wholly owned subsidiary, The M. W. Kellogg Company ("Kellogg"), alleging that Kellogg negligently failed to provide an adequate design for an ethylene facility which Kellogg designed and constructed for Quantum and fraudulently misrepresented the state of development of its Millisecond Furnace technology to be used in the facility. Quantum sought $200 million in actual damages and twice that amount in punitive damages. Kellogg answered denying the claim and filed a counterclaim against Quantum alleging libel, slander, breach of contract and fraud. The case was tried during 1995. On November 30, 1995 the jury returned a verdict finding that there was no fraud on the part of Kellogg, that Quantum's claim was barred by the statute of limitations, that Quantum is liable for the $4.3 million in breach of contract damages, that Quantum is liable for $4.1 million in damages for theft of trade secrets, and that Quantum is liable for $3.0 million of Kellogg's legal fees. Quantum has filed a motion for a new trial and the case is now on appeal. The Company has not recognized any income related to the jury verdict. DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 (Unaudited) Asbestosis Litigation The Company has approximately 73,100 pending claims at January 31, 1997, with approximately 4,700 new claims filed and approximately 600 claims resolved during the first quarter of the fiscal year. Certain settlements previously reported, covering approximately 30,500 claims, are carried as pending until releases are signed. Resolution of these claims will reduce the number of pending claims at January 31, 1997, by approximately 35% for refractory product claims and 43% for non-refractory product claims. Management recognizes the uncertainties of litigation and the possibility that one or more adverse rulings could materially impact operating results. However, based upon the nature of and management's understanding of the facts and circumstances which gave rise to such actions and claims, management believes that such litigation and claims will be resolved without material effect on the Company's financial position or results of operations. Note F - Baroid Financial Information Dresser Industries, Inc. (Dresser) merged with Baroid Corporation (Baroid) on January 21, 1994. Baroid has ceased filing periodic reports with the Securities and Exchange Commission. Baroid's 8% Senior Notes (the Notes)remain outstanding and are fully guaranteed by the Company. As long as the Notes remain outstanding, summarized financial information of Baroid is required to be presented as follows (in millions):
January 31, October 31, 1997 1996 Baroid Corporation Current assets $ 830.4 $ 796.2 Noncurrent assets 582.4 578.9 Total $1,412.8 $1,375.1 Current liabilities $ 380.0 $ 377.7 Noncurrent liabilities 451.1 429.2 Shareholders' equity 581.7 568.2 Total $1,412.8 $1,375.1
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 (Unaudited)
Three Months Ended January 31, 1997 1996 Revenues $ 429.9 $ 357.9 Gross earnings $ 122.8 $ 105.0 Earnings from operations $ 52.7 $ 46.8 Other income (deductions) (5.0) (7.1) Earnings before taxes and minority interests 47.7 39.7 Income taxes (16.7) (13.5) Minority interest .1 (.2) Net earnings $ 31.1 $ 26.0 The above information includes Baroid Corporation's oilfield services operations which are reported in Drilling and Production operations and the Sub Sea operations which are reported in Kellogg Oil and Gas Services.
Note G - Subsequent Event On March 5, 1997, the Company signed a letter of intent to sell certain assets of its Sub Sea International Division to Global Industries, Ltd. for approximately $110 million. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO 1996 CONSOLIDATED OPERATIONS First quarter 1997 earnings per share increased 15% to $.30 versus $.26 in the 1996 first quarter. Revenues of $1.7 billion were 16% higher and segment operating profit of $130.1 million was 17% higher than in the 1996 first quarter. The results for the first quarter reflected the strong demand prevailing in oil and natural gas drilling, production and processing markets. January 31, 1997 consolidated backlog was $4.7 billion, 20% higher than a year ago. Selling, engineering, administrative and general expenses of $258.0 million for the quarter were 12% higher than the prior year. The increase was primarily due to increased expenses associated with higher levels of business activity. Net interest expense of $14.9 million in the quarter was up 49% from the 1996 period due primarily to an increase in total borrowings and a higher interest rate on new long-term debt versus the previously issued commercial paper. The estimated income tax rate for the three months ended January 31, 1997 is 35% compared to 34% for the three months ended January 31, 1996. INDUSTRY SEGMENT ANALYSIS See Note A to Condensed Consolidated Financial Statements for details of financial information by Industry Segment. PETROLEUM PRODUCTS AND SERVICES SEGMENT Segment revenues grew 29% to $602.7 million compared to $466.2 million last year. Operating profit rose by 36% to $72.0 million versus $52.9 million. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Drilling and Production Operations Revenues increased 21% to $426.9 million and operating profit increased 20% to $60.5 million. These gains compared favorably with the higher level of drilling activity represented by a 12% increase in world-wide rig count. Baroid Drilling Fluids had increases in both North American and International markets as a result of improved quality of wells and increased market share. Sperry-Sun had significant growth in Canada and Latin America. The formation evaluation while drilling business is running at full capacity, and the directional drilling business continues to be a major growth contributor. The Security DBS drill bit business showed significant improvement over last year's quarter, reflecting better pricing and market share, particularly for fixed cutter bits. Kellogg Oil and Gas Services Revenues of $175.8 million were up 56% from last year, and operating profit of $11.5 million was over four times the 1996 quarter. Bredero Shaw's revenues doubled and operating profits nearly tripled, driven by contracts in Norway, Malaysia and Indonesia. Wellstream's revenues for flexible pipe grew by 70% and operating profit tripled. Wellstream's U.S. plant is running at full capacity. A new plant is under construction in the U.K. to provide flexible pipe for the North Sea and other European projects. Sub Sea's revenues were essentially the same as a year ago, but operating profit was lower due to adverse market conditions in the Gulf of Mexico. The Company recently announced a letter of intent to sell certain assets not associated with deepwater remotely operated vehicles (ROVs). The sale will allow management to focus on the core ROV and subsea engineering business. ENGINEERING SERVICES SEGMENT M. W. Kellogg Operations Revenues for M. W. Kellogg rose to $457.2 million, a gain of 17%, and operating profit improved 38% to $26.4 million. Activity levels were high for fertilizer, LNG and oil and gas production projects underway in Latin America, the Middle East, Africa and the United States. The substantial completion of projects in the Far East and South America also contributed to the increase in earnings. Backlog at the end of the quarter was $2.6 billion, 49% higher than the level of a year ago. Inquiry levels and prospects continue to be high in virtually all product lines and geographical regions. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENERGY EQUIPMENT SEGMENT Segment revenues of $648.4 million were slightly higher than last year while operating profit of $31.7 million was down 19%. The weakness in profits was shared by three of the four business lines. Compression and Pumping Revenues increased 6% but operating profit fell reflecting a higher proportion of low margin complete machine shipments at Dresser-Rand that was somewhat mitigated by higher aftermarket and contract compression activity. Earnings from Ingersoll-Dresser Pump increased due to the benefit of cost control improvements and an improving market for engineered products. Mono Pumps generated improved revenue and operating profit. Measurement Revenues increased slightly and operating profit rose 19% due to stronger performances by the Wayne and DMD divisions. Flow Control Revenues were flat compared to the prior year and operating profit declined due to lower margin project business and lower aftermarket activity in its control valve operation. Energy Valve results were stronger due to improved margins. Power Systems Revenues and profit both declined reflecting lower volumes due to the impact of a work slowdown at Waukesha that has since been resolved. Roots revenues and earnings were up due to an improved mix of higher margin aftermarket sales. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION The Company's overall financial condition remained strong at January 31, 1997. Since the beginning of the year, the Company used approximately $74.7 million more cash than the operations generated resulting in an increase in short-term borrowings of $37.7 million. Major expenditures included $49.6 million for capital expenditures and $29.9 million for dividends. In addition, $105.2 million of cash was used to finance working capital, primarily for decreases in payables and accrued expenses. Total debt was $884.4 million as of January 31, 1997, compared to $842.3 million at October 31, 1996. Total debt was 36% of total book capitalization as of January 31, 1997, compared to 35% as of October 31, 1996. Net debt was 12% of market capitalization at January 31, 1997, versus 9% at October 31, 1996. LEGAL AND ENVIRONMENTAL MATTERS The Company is currently involved in a number of lawsuits and has also been identified as a potentially responsible party in a number of Superfund sites. Note E to Condensed Consolidated Financial Statements includes significant changes subsequent to October 31, 1996. PART II. OTHER INFORMATION Item 2. Changes in Securities (c) In December 1996, the Company issued 2,153 shares of Common Stock ($.25 par value) to two executive officers and directors of the Company in connection with exercises of stock options. Under the terms of the Company's 1989 Restricted Incentive Stock Plan (Plan), one restricted share will be issued for every five shares of the related stock option exercised. Stock issued pursuant to the Plan are not registered. No consideration for the unregistered shares was exchanged. In January 1997, the Company issued 1,812 shares of Common Stock to one executive officer and director of the Company pursuant to the Plan discussed above. No consideration for the unregistered shares was exchanged. Effective January 16, 1997, the Company issued 45,000 shares of Common Stock ($.25 par value) to two executive officers and directors of the Company pursuant to the Special 1997 Restricted Incentive Stock Grant (Grant). Shares issued pursuant to the Grant are not registered. No consideration for the unregistered shares was exchanged. In issuing the above securities, the Company relied on the exemption from the registration and prospectus delivery requirements of the Securities Act of 1933 (the Securities Act) provided by Section 4(2) of the Securities Act. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit 10.1 Agreement with George Helland dated January 10, 1997 Exhibit 10.2 Agreement with John Gavin for the period February 1, 1997 - January 31, 1998 Exhibit 27 Financial Data Schedule SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DRESSER INDUSTRIES, INC. By: /s/ Kenneth J. Kotara Kenneth J. Kotara Controller Dated: March 14, 1997 EXHIBIT INDEX Exhibit 10.1 Agreement with George Helland dated January 10, 1997 Exhibit 10.2 Agreement with John Gavin for the period February 1, 1997 - January 31, 1998 Exhibit 27 Financial Data Schedule. (Pursuant to Item 601 (c) (iv) of Regulation S-K, the Financial Data Schedule is not deemed to be "filed" for purposes of Section 11 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended.) EX-10.1 2 [DRESSER INDUSTRIES, INC. LETTERHEAD] January 10, 1997 Mr. George A. Helland Dresser Trading 3000 N. Sam Houston Parkway, East Houston, Texas 77032 Dear George: The purpose of this Letter Agreement is to confirm the elimination of your position within Dresser effective March 31, 1997 (herein after Separation Date or Last Day of Work). This action is being taken to align complete responsibility for all phases of Dresser Trading/NIS Operations' services and product marketing to the individual operating units. As you will note, this Letter Agreement consists of three sections - Section I sets forth the terms and conditions of termination and Section II sets forth provisions whereby any actual or potential claims that you may have against the Company are amicably resolved, and Section III sets forth the Consulting Agreement. The provisions of this Letter Agreement shall be effective only if you accept these provisions. For the purpose of Section I of this Agreement, "Company" is deemed to be Dresser Industries, Inc. For the purpose of Sections II and III of this letter, "Company" is deemed to be Dresser Industries, Inc. and its parent, subsidiary and affiliated companies as well as all predecessor companies and their parent, subsidiary and affiliated companies. SECTION I - TERMS AND CONDITIONS OF TERMINATION: A. Your termination shall be effective March 31, 1997. B. You will receive four weeks severance pay in the amount of $16,539.00 on March 31, 1997. *C. You will receive additional severance in nine monthly installments of $16,791.00 beginning April 1, 1997. In addition, you will receive $1,000.00 per day for actual services rendered. All of these payments are subject to satisfactorily complying with the terms and conditions of this Agreement. *D. For the purposes of the Dresser Stock Option Plan only, your termination will be characterized as a "retirement". In addition, we will recommend to the Board of Directors that you receive a pro rata share of any applicable 1997 bonus. E. You will receive payment for all unused 1997 vacation in accordance with Company policy. *F. The Company will make available to you the services of an Outplacement Company of your choice. G. Following your Separation Date, you are entitled to continue medical and dental coverage through April 30, 1997 in the applicable Company plan pursuant to which you have been enrolled. Additional coverage may be provided to you in accordance with the rules of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). If you elect this continued COBRA coverage, the coverage is at your expense in accordance with the terms and conditions and costs to be furnished to you. H. Information concerning retirement accounts and/or 401(k) Plan accounts will be furnished to you no later than March 31, 1997. Exercise of your outstanding Stock Options and distribution of your Deferred Compensation account will be according to the plan rules. I. All other benefits cease on March 31, 1997. J. On or before your Last Day of Work, you shall return all Company property, including, but not limited to, keys, credit cards, access cards, manuals, proposals, agreements, customer lists (except you may retain a copy for personal use), employee lists and confidential and proprietary information and all copies thereof. K. During your employment and following your termination of employment, through December 31, 1997. i) you shall not disclose any confidential and proprietary information of the Company, including, but not limited to, proposals, agreements, product plans and designs, pricing, marketing and sales plans, research and development projects or plans, customer lists and employee lists, ii) you shall continue to be bound by the provisions concerning confidential and proprietary information and inventions as set forth in agreements that you have entered into with the Company or any predecessor company or any of their parent, subsidiary or affiliated companies. Following your termination of employment, you shall not use any confidential or proprietary information of the Company, and (iii) you will not accept employment with any of Dresser's current and direct competitors without first seeking Dresser Industries' concurrence, as further described in Section III, Paragraph I. L. The payments to be made to you, as set forth in this letter, is subject to applicable withholding and deductions. Some or all of the payments and transactions described in this letter will create tax liability for which you will have responsibility. SECTION II - RELEASE OF CLAIMS A. While it is our expectation that you do not have any claims against the Company, in an effort to be certain that any actual or potential claims that you have or may have are resolved amicable forthwith, we shall extend to you the benefits as set forth above in this letter if, and only if, you agree to release the Company from any and all actual and potential claims as provided in Section II and you comply with the terms and conditions of this letter including the satisfactory performance of your work assignments through your Last Day of Work as set forth in Sections I and III. You are encouraged to seek the advice of an attorney prior to accepting the provisions of this letter. B. If you agree to the release of claims as set forth in Section II and so indicate your agreement by signing and returning this letter to the undersigned, and if you comply with the terms and conditions of this letter, including the satisfactory performance of your work assignments through your Last Day of Work as set forth in Sections I and III, the following will be provided: i) The additional consideration set forth in Section I, asterisk items, C. , D. and F. above, shall be provided. ii) payment of the 1997 bonus will be paid as soon as practical after calculation at fiscal year end. C. In consideration of the payments to be made to you and other benefits to be provided to you as set forth in this letter, you hereby irrevocably and unconditionally release the Company, and the successors, assigns, employees, officers, and directors of the Company (except as to breach of the terms of this Agreement), from and against any and all claims, liabilities, demands and causes of action, known or unknown, suspected or unsuspected, that you have or may have by reason of any action, statement, representation, omission, transaction or event occurring up to and including your Separation Date resulting from or in any way connected with your employment or termination of employment by the Company, including, but not limited to, any claims arising under the Age Discrimination In Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, and any other federal, state or local statutes, ordinances and regulations or common law. D. You shall have forty (40) days from the date of this letter to accept the terms and conditions set forth in this letter. If you agree with and accept such terms and conditions, please sign and date the enclosed copy of this letter and return it to the undersigned by said date. You shall have the right to revoke your acceptance within seven days after the date you execute this letter. Your revocation shall be in writing and must be received by the undersigned within such seven day period in order to be effective. If you do not revoke acceptance within such seven day period, your acceptance of the terms and conditions of Sections I, II and III shall become effective eight days after you execute this letter. E. You understand and agree that you: i) have forty (40) days from the date of this letter to consider its terms. ii) have carefully read and fully understand all of the provisions of this release. iii) are releasing the Company from any and all actual or potential claims you have against the Company relating to or in any way connected with your employment and termination of employment by the Company (except as to breach of the terms of this Agreement), including the claims and potential claims set forth in this Section II, and that the term "Company" includes not only Dresser Industries, Inc. but also a) Dresser Industries Inc.'s parent, subsidiary and affiliated companies; b) all predecessor companies; and c) all parent, subsidiary and affiliated companies of such predecessor companies. iv) understand that this is a legally binding document. v) knowingly and voluntarily intend to be legally bound by this release. vi) will not receive the benefits afforded to you pursuant to Sections II & III, if you do not comply with the terms and conditions of this letter, including the satisfactory performance of your work assignments through your Last Day of Work as set forth in Section I. vii) were advised to consider the terms of the release and to consult with an attorney of your choice prior to executing the release. viii) have a full seven (7) days following execution of this release to revoke your acceptance of the release as this release does not become effective unless you sign this letter, have not revoked your acceptance and your right to revoke acceptance has expired. ix) in executing this release, are not relying on any statements or representations, whether written or oral, made by the Company or any employee or officer of the Company except as specifically set forth in this letter. F. You represent that you have not filed any claim, charge or complaint against the Company and will not file such claim, charge or complaint against the Company regarding any matter covered by the release set forth above. G. This letter sets forth the entire understanding and agreement regarding your termination and supersedes all previous and contemporaneous negotiations, discussions, agreements and understanding. H. You shall not disclose the benefits afforded to you pursuant to this letter in whole or in part to anyone except your attorney family and other professional advisors and except as may be required by law. I. This release is governed by the laws of the State of Texas. SECTION III - CONSULTING AGREEMENT The purpose of this section is to set forth the agreement we have reached under which you will render consulting services to Dresser Industries, Inc. effective April 1, 1997. A. The term of this Consulting Agreement is April 1, 1997 through December 31, 1997, and may be renewed for successive yearly or monthly periods by mutual written consent. However, this agreement may be terminated at the close of any month by written notice, with good cause stated, at least five days prior to the end of the month. For the purpose of Company termination, "good cause" will mean the causing of harm to Dresser or competing with Dresser during the term of this Consulting Agreement without the permission of Dresser. B. During the term of this Consulting Agreement and any extension, you will perform minimal services not intended to interfere with any other employment you may obtain, as directed by me or other officials of the Company. Your services will consist of rendering advice and assistance regarding Dresser Trading/NIS Operations. The exact topics or subjects of your services, and the time to be devoted thereto, will be determined by me or such other officials of the Company as I may designate, and such instructions will be furnished to you in writing. C. For satisfactorily rendering such consulting services, you will be paid the additional severance and daily rate as set forth in Section I. C. D. You will be reimbursed for reasonable and necessary travel and living expenses that you incur in rendering requested services hereunder, as defined in expense reimbursement policies. Expenses will be reimbursed no less frequently than monthly upon presentation of completed expense reports on forms normally used by the Company (including all required receipts). E. You warrant that entering into this agreement will not conflict with any obligations you may have arising under any other contract or by operation of law. F. You understand and agree that you are not an agent or employee of the Company by virtue of this agreement and, accordingly, are not eligible for regular group or travel insurance or any other employee benefits. G. You also understand and agree that all drawings, designs, reports, computations, calculations, working papers, computer programs, manuals and documents of every kind received or prepared by you under the terms of this agreement or as a result of the relationship with the Company created by this agreement will be and will remain the sole property of the Company, and all copies will be delivered to the Company upon request. The Company will have full and unlimited right to use all of the same, including use of any preexisting proprietary rights owned by you to the extent such proprietary rights are incorporated in the same by you, without any claim or right thereto on your part for any additional compensation. H. You agree to make prompt and full disclosure to the Company or its nominee of all inventions, discoveries, innovations, work products and developments, whether or not patentable or copyrightable, made or conceived by you in whole or in part during the terms of this agreement and which relate to, or arise out of, any developments, services or products with which you have been concerned under this agreement. You hereby assign and agree to assign to the Company, its successors, assigns, or nominees your entire right, title and interest in and to said inventions, discoveries, innovations, work products and developments. You will, at our request, execute any and all instruments and documents which we may deem necessary or expedient to assign and convey to us, our successors, assigns or nominees, the sole and exclusive right, title and interest in and to any such inventions, discoveries, innovations, work products and developments, together with the instruments and documents deemed necessary or expedient by us in order to apply for, obtain, and maintain Letters Patent and copyrights of the United States and foreign countries therefore, in full compliance with applicable requirements. You agree to cooperate fully with the Company, its successors, assigns, or nominees in the prosecution of applications filed to obtain said Letters Patent and copyrights and in the maintenance of or in any litigation or other legal or administrative proceedings involving same. You agree that your obligation to execute any and all such instruments and documents and to render such cooperation shall continue after the termination of this agreement. It is understood that all expenses of applying for and obtaining Letters Patent and copyrights shall be borne by the Company. Further, the Company agrees to reimburse you for the time spent and reasonable traveling and other out-of-pocket expenses which you incur in connection with any steps which you take pursuant to the provisions of this paragraph, provided such time has been spent and such expenses were incurred at the prior written request or with the prior written approval of the Company. I. You agree that you will not during the term of this Agreement serve any interest or do any act or thing which conflict with the interests of the Company or any of its subsidiaries, the determination by the Company of its interest and those of its subsidiaries, and any conflict therewith, to be final and conclusive. J. Finally, it is recognized that some of the work you will be called upon to perform hereunder, as well as information furnished you by us in connection therewith, is highly confidential. Accordingly, any and all such information developed or secured during the performance of services under this agreement shall be considered by you to be confidential and the exclusive property of the Company and shall not, now or at any time hereafter, be published, stated, or used by you for any purpose without the Company's prior written consent. If you agree to perform consulting services as outlined above, please so indicate by signing and returning to me the copy of this letter provided for that purpose. We trust that the benefits afforded to you in this letter will assist in a reasonable transitioning of your employment. We wish you the very best of luck in your future endeavors. If you have any questions concerning this letter, please do not hesitate to contact me. Sincerely, DRESSER INDUSTRIES, INC. /S/ DONALD C. VAUGHN Donald C. Vaughn, President and COO ACCEPTED BY: /S/ GEORGE A. HELLAND 17 Feb 1997 George A. Helland Date EX-10.2 3 [DRESSER INDUSTRIES, INC. LETTERHEAD] January 29, 1997 Mr. John Gavin 10263 Century Woods Drive Los Angeles, CA 90067 Dear Jack: The purpose of this letter is to seek your written approval to extend the term of the Agreement under which you agreed to serve on the Dresser Industries de Mexico Advisory Board. If you agree, the term of the Agreement shall be extended to January 31, 1998. All other provisions of the Agreement shall remain in full force and effect. Please indicate your agreement by signing in the space provided below and returning to me the copy of this letter provided for that purpose. Sincerely, DRESSER INDUSTRIES, INC. By: /S/ DONALD C. VAUGHN Donald C. Vaughn Date: 01/29/97 ACCEPTED: /S/ JOHN GAVIN John Gavin Date: 2/6/97 EX-27 4
5 1,000 3-MOS OCT-31-1997 JAN-31-1997 199,800 0 1,110,800 0 896,500 2,384,700 2,868,200 1,610,300 5,068,900 1,793,700 760,700 0 0 46,200 1,534,200 5,068,900 1,693,500 1,704,500 1,342,700 1,600,700 0 0 17,100 86,800 30,400 52,100 0 0 0 52,100 .30 .30
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