-----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, A4ihjjLpnXJ1cLbokH7S2iKtCDZNkPzA+11X6CKBW804DEL6N71kUVC94WwwdFbN yd2TlXtpqeCH6DlvMYFSGg== 0000030099-97-000008.txt : 19970918 0000030099-97-000008.hdr.sgml : 19970918 ACCESSION NUMBER: 0000030099-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970912 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: SEC FILE NUMBER: 001-04003 FILM NUMBER: 97679621 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 July 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 August 31, 1997 Common Stock, par value $.25 175,396,208 INDEX Page Number Part I. Financial Information Management's Representation 3 Condensed Consolidated Statements of Earnings for the three months and nine months ended July 31, 1997 and 1996 4 Condensed Consolidated Balance Sheets as of July 31, 1997 and October 31, 1996 5 Condensed Consolidated Statements of Cash Flows for the nine months ended July 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 Signature 17 Exhibit Index Exhibit 10.1 Dresser Industries, Inc. Restricted Stock Grant Plan for 1997 Exhibit 10.2 Dresser Industries, Inc. Long-Term Incentive and Retention Plan 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 July 31, 1997 and October 31, 1996, the results of operations for the three months and the nine months ended July 31, 1997 and 1996, and cash flows for the nine months ended July 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 Nine Months Ended July 31, July 31, 1997 1996 1997 1996 (Unaudited) (Unaudited) Revenues $ 1,872.3 $ 1,638.0 $ 5,348.1 $ 4,730.5 Cost of revenues (1,435.1) (1,268.4) (4,142.4) (3,690.7) Gross earnings 437.2 369.6 1,205.7 1,039.8 Selling, engineering, admini- strative and general expenses (272.3) (244.7) (797.4) (724.8) Other income (deductions) Interest expense, net (14.5) (12.7) (44.5) (33.6) Non-recurring items (9.7) - (9.7) - Other, net (1.4) 0.5 (4.1) (3.9) Earnings before items below 139.3 112.7 350.0 277.5 Income taxes (48.7) (38.4) (122.5) (94.4) Minority interest (9.1) (6.0) (19.1) (11.0) Net earnings $ 81.5 $ 68.3 $ 208.4 $ 172.1 Earnings per common share $ .47 $ .38 $ 1.19 $ .95 Cash dividends per common share $ .17 $ .17 $ .51 $ .51 Average common shares outstanding 175.2 178.4 175.8 180.5 See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Millions)
July 31, October 31, ASSETS 1997 1996 (Unaudited) Current Assets Cash and cash equivalents $ 131.1 $ 232.4 Notes and accounts receivable, net 1,151.3 1,152.1 Inventories, net 968.8 913.6 Deferred income taxes 82.7 83.8 Other current assets 80.3 87.6 Total Current Assets 2,414.2 2,469.5 Investments in and receivables from unconsolidated affiliates 183.2 182.5 Goodwill, net 835.3 870.6 Deferred income taxes 206.3 184.0 Other assets 186.6 181.2 Property, plant and equipment - at cost 2,797.2 2,836.7 Accumulated depreciation and amortization 1,638.5 1,574.3 Total properties, net 1,158.7 1,262.4 Total Assets $4,984.3 $5,150.2 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 59.1 $ 86.0 Accounts payable 519.2 570.6 Contract advances 382.1 459.8 Accrued compensation and benefits 262.4 250.4 Income taxes 119.8 111.3 Other current liabilities 327.1 383.7 Total Current Liabilities 1,669.7 1,861.8 Employee retirement and postemployment benefit obligations 648.2 676.3 Long-term debt 754.3 756.3 Deferred compensation, insurance reserves and other liabilities 131.1 118.0 Minority interest 165.5 155.6 Shareholders' Equity Common shares 46.2 46.2 Capital in excess of par value 451.8 454.8 Retained earnings 1,506.4 1,420.8 Cumulative translation adjustments (110.6) (81.5) Pension liability adjustment (6.9) (6.9) 1,886.9 1,833.4 Less treasury shares, at cost 271.4 251.2 Total Shareholders' Equity 1,615.5 1,582.2 Total Liabilities and Shareholders' Equity $4,984.3 $5,150.2 Actual common shares outstanding 175.3 175.6 See accompanying Notes to Condensed Consolidated Financial Statements.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions)
Nine Months Ended July 31, 1997 1996 (Unaudited) Cash flows from operating activities: Net earnings $ 208.4 $ 172.1 Adjustments to reconcile net earnings to cash flow: Depreciation and amortization 191.9 167.0 Equity earnings from unconsolidated affiliates (29.2) (20.2) Minority interest 19.1 11.0 Contract advances (77.7) 128.0 Changes in working capital (206.8) (251.5) Other - net (6.9) (.9) Net cash provided by operating activities 98.8 205.5 Cash flows from investing activities: Capital expenditures (186.6) (223.7) Business acquisitions (3.6) (26.2) Proceeds from sales of assets 127.9 12.4 Net cash used by investing activities (62.3) (237.5) Cash flows from financing activities: Dividends paid (89.6) (92.3) Purchases of common shares for Treasury (41.9) (191.4) Issuance of common shares 17.3 18.0 Increase (decrease) in short-term debt (26.9) 213.4 Decrease in long-term debt (2.1) (1.8) Net cash used by financing activities (143.2) (54.1) Effect of translation adjustments on cash 5.4 (3.7) Net decrease in cash and cash equivalents (101.3) (89.8) Cash and cash equivalents, beginning of period 232.4 248.7 Cash and cash equivalents, end of period $ 131.1 $ 158.9 See accompanying Notes to Condensed Consolidated Financial Statements. Certain reclassifications of prior years' data have been made to conform to 1997 presentation.
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 1997 (Unaudited) Note A - Information by Industry Segment (In Millions)
Three Months Ended Nine Months Ended July 31, July 31, 1997 1996 1997 1996 Revenues Petroleum Products and Services $ 700.0 $ 554.1 $1,947.3 $1,542.2 Engineering Services M. W. Kellogg Operations 465.7 391.0 1,367.4 1,249.4 Energy Equipment Compression and Pumping 314.4 315.8 902.2 856.2 Measurement 167.3 154.3 482.5 456.1 Flow Control 154.8 157.8 443.1 453.7 Power Systems 80.7 70.4 225.9 213.9 717.2 698.3 2,053.7 1,979.9 Eliminations (10.6) (5.4) (20.3) (41.0) Total revenues $1,872.3 $1,638.0 $5,348.1 $4,730.5 Operating profit Petroleum Products and Services $ 87.2 $ 61.4 $ 234.6 $ 171.4 Engineering Services 26.9 24.7 77.7 65.6 Energy Equipment Compression and Pumping 27.4 26.7 59.0 56.0 Measurement 18.6 12.8 45.5 34.0 Flow Control 19.8 17.8 45.8 46.6 Power Systems 8.4 9.8 21.9 22.2 74.2 67.1 172.2 158.8 Total segment operating profit 188.3 153.2 484.5 395.8 Amortization of acquisition intangibles (7.6) (7.3) (23.0) (23.5) General corporate expenses (17.2) (20.5) (57.3) (61.2) Interest expense, net (14.5) (12.7) (44.5) (33.6) Nonrecurring items (9.7) - (9.7) - Earnings before taxes and minority interest $ 139.3 $ 112.7 $ 350.0 $ 277.5
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 Nine Months Ended July 31, July 30, 1997 1996 1997 1996 Share of earnings of uncon- solidated affiliates Ingersoll-Dresser Pump (49% owned) $ 7.0 $ 4.7 $ 22.1 $ 16.4 Other affiliates 3.1 1.7 7.1 3.8 $ 10.1 $ 6.4 $ 29.2 $ 20.2
July 31, October 31, 1997 1996 Investments in and receivables from unconsolidated affiliates Ingersoll-Dresser Pump (49% owned) $ 130.8 $ 132.5 Other affiliates 52.4 50.0 $ 183.2 $ 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):
July 31, October 31, 1997 1996 Finished products and work in process $ 748.2 $ 699.4 Raw materials and supplies 220.6 214.2 $ 968.8 $ 913.6
Note D - Dividends On July 17, 1997, the Company announced a 12% increase in the quarterly dividend to $.19. At the same time, the Company declared a quarterly dividend at the new amount per share of common stock payable on September 22, 1997, to shareholders of record on September 2, 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. General Litigation On August 28, 1997, the Eleventh Circuit Federal Court of Appeals issued its decision in favor of the Company by reversing the trial court's decision in a lawsuit brought by parties who purchased a construction equipment dealership from a third party in 1988. The Court held that the trial court judge should have granted the Company's motion for summary judgment and reversed the plaintiff's awarded judgment of $6.5 million for compensatory damages and $4.0 million for punitive damages. Asbestosis Litigation The Company has approximately 80,200 pending claims at July 31, 1997, with approximately 7,500 new claims filed and approximately 2,400 claims resolved during the third quarter of the fiscal year. Approximately 37,000 claims are currently being carried as pending until the settlements or dismissals are final. Resolution of these claims will reduce the number of pending claims at July 31, 1997, by approximately 44% for refractory product claims and 47% 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):
July 31, October 31, 1997 1996 Baroid Corporation Current assets $ 914.0 $ 796.2 Noncurrent assets 482.2 578.9 Total $1,396.2 $1,375.1 Current liabilities $ 372.3 $ 377.7 Noncurrent liabilities 359.2 429.2 Shareholders' equity 664.7 568.2 Total $1,396.2 $1,375.1
Three Months Ended Nine Months Ended July 31, July 31, 1997 1996 1997 1996 Revenues $ 531.4 $ 424.6 $1,435.7 $1,157.4 Gross earnings $ 148.8 $ 117.3 $ 403.1 $ 327.3 Earnings from operations $ 71.3 $ 50.5 $ 183.9 $ 141.7 Other income (deductions) (7.9) (2.3) (15.6) (13.9) Earnings before taxes and minority interests 63.4 48.2 168.3 127.8 Income taxes (22.2) (16.3) (58.9) (43.4) Minority interest .7 (.3) .4 (.5) Net earnings $ 41.9 $ 31.6 $ 109.8 $ 83.9
Note G - Other Developments During the third quarter of 1997, the Company completed the sale of certain assets of its Sub Sea International Unit to Global Industries, Ltd. for $102 million in cash, which resulted in a pretax loss of $9.7 million, or $.03 per share on an after-tax basis. Subsequent to July 31, 1997, the Company and Shaw Industries Ltd. of Toronto, Ontario, agreed to a long-term extension of their strategic pipecoating alliance, Bredero-Shaw, initially formed in 1996. In connection with the new agreement, Shaw agreed to pay the Company $50 million over a four year period. This transaction will result in a one-time, pretax gain of $41.7 million in the fourth quarter of 1997, or $0.15 per share. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THREE MONTHS AND NINE MONTHS ENDED JULY 31, 1997 COMPARED TO 1996 CONSOLIDATED OPERATIONS Earnings per share for the third quarter, including a non-recurring loss of $.03 per share from the recent sale of certain assets of the Company's Sub Sea operations, increased 24% to $.47 per share. Excluding the nonrecurring items, earnings improved 32% to $.50 per share. Revenues for the quarter increased 14% to $1.9 billion and operating profit increased 23% to $188.3 million. Earnings per share for the first nine months of 1997 totaled $1.19, including the non-recurring loss of $.03 per share. Excluding the non-recurring items, year-to-date earnings were $1.22 per share, an increase of 28% above the prior year. Revenues of $5.3 billion increased 13% and operating profit of $484.5 million was 22% higher than the prior year. Drilling and production operations continue to operate in strong market conditions where rig count is up 16% worldwide. In addition, global project activity is high for production and processing facilities, particularly related to natural gas. Strong demand for LNG, pipeline, petrochemical and fertilizer infrastructure is reflected in the Company's growing backlog for equipment, process technology and project management. A record backlog of $5.4 billion was 15% higher than the level a year ago. Selling, engineering, administrative and general expenses of $272.3 million for the quarter and $797.4 million for the nine months were 11% and 10% higher than the prior year periods, respectively. The increase was primarily due to higher levels of business activity. Net interest expense of $14.5 million in the quarter and $44.5 million for the nine months was up 14% and 32%, respectively, from the 1996 periods, due primarily to an increase in average borrowing levels and a higher interest rate on new long-term debt versus the previously issued commercial paper. During the quarter, the Company completed the sale of certain assets of the Sub Sea operations, as noted above, and recognized a non-recurring pretax loss of $9.7. The estimated income tax rate for the nine months ended July 31, 1997, is 35%, compared to 34% for last year. On August 7, 1997, the Company extended the strategic alliance with Shaw Industries, Ltd. This transaction will result in a one-time pretax gain of $41.7 million in the fourth quarter of 1997, or $0.15 per share. INDUSTRY SEGMENT ANALYSIS See Note A to Condensed Consolidated Financial Statements for details of financial information by Industry Segment. PETROLEUM PRODUCTS AND SERVICES SEGMENT Revenues of $700.0 million for the quarter and $1,947.3 million for the nine months were both 26% higher than those of the 1996 periods. Operating profit increased 42% to $87.2 million for the quarter and 37% to $234.6 million for the nine months. The revenue and operating profit gains for the quarter outpaced gains in rig activity. Worldwide rig count increased 16% led by a 28% increase in North America. In addition, offshore rig count was up 4%. Baroid Drilling Fluids, Sperry-Sun and Security DBS saw substantial volume increases in both the quarter and the nine month periods. Improved pricing and product mix also contributed to higher earnings. Bredero-Shaw, Sub Sea and Wellstream had significantly higher revenues in both the quarter and the nine months. Bredero-Shaw and Wellstream had improved profits in both periods. Pipeline activity in the North Sea, Far East and the U.S. contributed to the improved performance of the Bredero-Shaw pipecoating business. Wellstream benefitted from subsea completion activity in the North Sea and offshore Brazil. Sub Sea continues to have good results in the North Sea, but has been negatively impacted by market conditions in the Gulf of Mexico. ENGINEERING SERVICES SEGMENT For the quarter, M. W. Kellogg's operating profit increased 9% to $26.9 million and revenues increased 19% to $465.7 million. For the nine months, operating profit was up 18% to $77.7 million and revenues were up 9% to $1.4 billion. The profit improvement for the quarter and the nine months reflected higher activity on LNG and ammonia projects in Africa, the Mid East and Latin America, with earnings also benefitting from successful milestones being reached on several projects completed or nearing completion in the U.S., the Far East and South America. Bid and proposal costs continue to run at high levels, reflecting the continuing strength of demand for hydrocarbon processing infrastructure. Backlog at July 31, 1997 was $3.2 billion, 29% higher than a year ago. ENERGY EQUIPMENT SEGMENT Segment operating profit for the quarter of $74.2 million was up 11% and revenues of $717.2 million were up 3%. For the nine months, segment operating profit of $172.2 million and revenues of $2.1 billion were up 8% and 4%, respectively. Segment backlog was $1.8 billion, up 5% from a year ago. Compression and Pumping Revenues and operating profits for the quarter were essentially the same as last year with an increase in earnings from Ingersoll-Dresser Pump more than offsetting lower revenues and earnings by Dresser-Rand. For the nine months, both revenues and operating profits were up 5%. The revenue gain was attributable to Dresser-Rand, while the earnings increase was primarily from Ingersoll-Dresser Pump. Dresser-Rand's earnings continue to be affected by lower margin complete machine sales that were partially offset by higher contract compression activity in South America. The Ingersoll-Dresser Pump earnings improvement is attributable to the U.S. operations of the Engineered Products Group. Measurement Operating profits were up 45% while revenues rose 8% in the quarter. In the nine months, operating profits were up 34% while revenues rose 6%. Successful product introductions and lower U.S. cost structure in the Wayne fuel dispenser business and higher volume in the DMD gas meter business accounted for the majority of the increases. Flow Control Operating profits for the quarter were up 11% while revenues were essentially flat versus 1996. The earnings improvement resulted from higher volume, better product mix and improved margins by the Energy Valve Division. For the nine months, earnings were essentially the same as 1996 while revenues were down slightly. Power Systems Quarterly revenues increased 15%, but operating profits were down 14% from last year. Nine-month revenues were up 6% while operating profits were essentially the same as last year. Waukesha Engine operations experienced lower original equipment volumes offset by higher service parts activity. The Roots Blower operations benefitted from higher volume and improved product mix. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION The Company's overall financial condition remained strong at July 31, 1997. Since the beginning of the year, the Company used $101.3 million more cash than was generated by operations. Major expenditures included $186.6 million for capital expenditures, $89.6 million for dividends, and $41.9 million for purchases of the Company's common shares. In addition, $206.8 million of cash was used to finance working capital, primarily for increases in inventories and decreases in payables and accrued expenses. Cash flow from operating activities for the nine months was $98.8 million compared to $205.5 million last year. The change between years was primarily due to planned decreases in contract advances at M. W. Kellogg this year versus significant increases last year. During the third quarter of 1997, the Company completed the sale of certain assets of its Sub Sea International Unit to Global Industries, Ltd. for $102 million in cash. The proceeds received were used to pay down commercial paper. Total debt was $813.4 million as of July 31, 1997, compared to $842.3 million at October 31, 1996. Total debt was 34% of total book capitalization as of July 31, 1997 versus 35% at October 31, 1996. Net debt was 9% of market capitalization at July 31, 1997 and 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. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company notes that the statements in this Form 10-Q and elsewhere, which are forward-looking and which provide other than historical information, involve risks and uncertainties that may impact the Company's results of operations. These forward-looking statements include, among others, statements concerning the Company's general business strategies, financing decisions, corporate structure, backlog, operating trends, industry trends, cost reduction strategies and their results, expectations for funding capital expenditures and operations in future periods. The Company also continues to face many risks and uncertainties including: litigation, environmental laws, operations in high risk countries, technological and structural changes in the industries served by the Company, changes in the price of oil and natural gas, changes in capital spending by customers in the hydrocarbon industry for exploration, development, production, processing and refining and pipeline delivery networks. The risks and uncertainties inherent in these forward-looking statements could cause actual results to differ materially from those expressed in or implied by these statements. PART II. OTHER INFORMATION Item 2. Changes in Securities (c) On July 17, 1997, certain executive officers were awarded a total of 20,000 restricted shares of the Company's $.25 par value Common Stock pursuant to the Dresser Industries, Inc. Restricted Stock Grant Plan For 1997. Shares issued pursuant to the Plan are not registered. Upon termination of employment, participants will forfeit all unvested restricted stock. Participants will vest in their entire award upon approved retirement, disability or change in control of the Company. Assuming continued employment, participants will vest in one-fourth of the shares on each of the second and fourth anniversary and vest in the remaining one-half on the sixth anniversary of the award. Consideration received by the Registrant will consist of continued employment through the vesting dates previously stated. In issuing the above securities, the Company relied on the exemption from the registration and prospectus delivery requirements provided by Section 4(2) of the Securities Act of 1933. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit 10.1 Dresser Industries, Inc. Restricted Stock Grant Plan For 1997 Exhibit 10.2 Dresser Industries, Inc. Long-Term Incentive and Retention Plan Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the three months ended July 31, 1997. 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: September 12, 1997 EXHIBIT INDEX Exhibit Description 10.1 Dresser Industries, Inc. Restricted Stock Grant Plan For 1997 10.2 Dresser Industries, Inc. Long-Term Incentive and Retention Plan 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-1 2 EXHIBIT 10.1 DRESSER INDUSTRIES, INC. RESTRICTED STOCK GRANT PLAN FOR 1997 EFFECTIVE JULY 17, 1997 DRESSER INDUSTRIES, INC. RESTRICTED STOCK GRANT PLAN FOR 1997 ARTICLE 1: PREAMBLE Effective as of July 17, 1997, Dresser Industries, Inc. establishes the Dresser Industries, Inc. Restricted Stock Grant Plan. This Plan is intended to be a bonus program, as described in 29 CFR Section 2510.3-2(c), and, accordingly, is not a plan described in the Employee Retirement Income Security Act of 1974. ARTICLE 2: DEFINITIONS Words and phrases appearing in this Plan shall have the respective meanings set forth in this Article, unless the context clearly indicates to the contrary. (a) CHANGE IN CONTROL. (1) The sale of all or a majority of Dresser's assets; (2) Dresser's liquidation or dissolution; (3) The purchase by any persons or entities of beneficial ownership of at least 30 percent of Dresser's common stock (or 30 percent of the combined voting power of Dresser's then outstanding voting securities entitled to vote generally in the election of directors); or (4) The approval by Dresser's stockholders of a reorganization, merger, or consolidation, the result of which is that the persons or entities which were stockholders immediately before the transaction do not own more than 50 percent of the combined voting power of the surviving entity's then outstanding voting securities entitled to vote generally in the election of directors. (b) DISABILITY. Any physical or mental condition which renders a Participant incapable of performing the work for which the Participant was employed by Dresser or similar work for Dresser, as certified in writing by a doctor of medicine and as approved by Dresser. (c) DRESSER. Dresser Industries, Inc., a Delaware corporation. (d) PARTICIPANT. An individual to whom Restricted Stock is awarded under this Plan. A management employee who terminates employment shall cease to be a Participant, notwithstanding the designation in Article 3. (e) PLAN. Dresser Industries, Inc. Restricted Stock Grant Plan. (f) RESTRICTED STOCK. Dresser common stock, restricted in the manner described in Article 4. ARTICLE 3: ELIGIBILITY Individuals designated by the Board of Directors of Dresser Industries, Inc. as Participants shall participate in the Plan. ARTICLE 4: RESTRICTED STOCK As soon as practicable after July 17, 1997, each Participant shall receive an award of 10,000 shares of Restricted Stock. Stock certificates evidencing this award shall be registered on Dresser's books in the name of the Participant. Each certificate evidencing Restricted Stock shall bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan. Any attempt to dispose of such shares of Restricted Stock in contravention of such terms, conditions and restrictions shall be invalid. If a Participant's employment terminates, the Participant shall forfeit all non-vested Restricted Stock. A Participant will vest in all 10,000 shares of Restricted Stock upon: (a) The Participant's termination of employment after attainment of age 65, or such earlier time as the Executive Compensation Committee of Dresser's Board of Directors may determine; (b) The Participant's Disability; or (c) A Change in Control. If the Participant remains in Dresser's employ on the date indicated in the schedule below, that Participant will vest in shares of Restricted Stock as follows: IF THE PARTICIPANT THE PARTICIPANT WILL VEST IN IS EMPLOYED ON: THIS NUMBER OF SHARES OF RESTRICTED STOCK July 17, 1999 2,500 July 17, 2001 2,500 July 17, 2003 5,000 A Participant holding non-vested Restricted Stock shall be entitled to all rights (except transferability) of a shareholder of Dresser common stock, including the right to vote the shares of Restricted Stock and the right to receive dividends on those shares. Subject to Article 7, once a Participant vests in Restricted Stock, all restrictions shall lapse. ARTICLE 5: ADMINISTRATION The Executive Compensation Committee of the Board of Directors of Dresser Industries, Inc. shall have full discretionary authority to interpret and apply the terms of this Plan document, including the authority to determine whether Restricted Stock is forfeitable under the provisions of this Plan. This grant of authority shall be broadly construed and shall include the authority to find facts, to reach conclusions of law, to interpret and apply ambiguous terms, and to supply missing terms reasonably necessary to interpret the Plan. ARTICLE 6: AMENDMENT OR TERMINATION The Plan may be amended or terminated in whole or in part by Dresser's Board of Directors in its sole discretion, provided that such amendment or termination shall not cause the forfeiture of Restricted Stock vested in a Participant prior to the date of amendment or termination. ARTICLE 7: RIGHT TO CONTINUED EMPLOYMENT Nothing in this Plan shall confer on a Participant any right to continue in Dresser's employment or in any way affect Dresser's right to terminate the Participant's employment without prior notice at any time for any or no reason. ARTICLE 8: WITHHOLDING Dresser shall meet the tax withholding obligations imposed by any government with respect to grants of Restricted Stock, or the lapse of restrictions on such stock. To meet this obligation, Dresser may withhold from other cash payments due the Participant. If the amount so withheld is not sufficient, Dresser will withhold from any distribution of stock released to the Participant in accordance with Article 4 a number of shares with a market value not less than the withholding obligation and cancel (in whole or in part) the shares so withheld in order to reimburse Dresser for the payment of withholding taxes. ARTICLE 9: FORCE AND EFFECT The various provisions of this Plan are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions. ARTICLE 10: PREVAILING LAWS This Plan shall be construed and enforced in accordance with and governed by the laws of the State of Texas, to the extent not governed by the laws of the State of Delaware applicable to corporations and the issuance of stock by Delaware corporations. IN WITNESS WHEREOF, this Plan is executed as of the day and year written below by Dresser's duly authorized officer, effective as of July 17, 1997. Dated: DRESSER INDUSTRIES, INC. By: Title: EX-2 3 EXHIBIT 10.2 DRESSER INDUSTRIES, INC. LONG-TERM INCENTIVE AND RETENTION PLAN Effective July 17, 1997 DRESSER INDUSTRIES, INC. LONG-TERM INCENTIVE AND RETENTION PLAN ARTICLE 1: PREAMBLE Effective as of July 17, 1997, Dresser Industries, Inc. establishes the Dresser Industries, Inc. Long-Term Incentive and Retention Plan. This Plan is intended to be a bonus program, as described in 29 CFR Section 2510.3-2(c), and, accordingly, is not a plan described in the Employee Retirement Income Security Act of 1974. This plan is also intended to qualify as a "performance-based" program under Section 162(m) of the Internal Revenue Code. As such, the Plan will be submitted for shareholder approval. ARTICLE 2: DEFINITIONS Words and phrases appearing in this Plan shall have the respective meanings set forth in this Article, unless the context clearly indicates to the contrary. (a) AVERAGE PRICE. The price per share on a Trading Day determined by adding the high and low prices for the Trading Day and dividing their sum by two. (b) CHANGE IN CONTROL. (1) The sale of all or a majority of Dresser's assets; (2) Dresser's liquidation or dissolution; (3) The purchase by any persons or entities of beneficial ownership of at least 30 percent of Dresser's common stock (or 30 percent of the combined voting power of Dresser's then outstanding voting securities entitled to vote generally in the election of directors); or (4) The approval by Dresser's stockholders of a reorganization, merger, or consolidation, the result of which is that the persons or entities which were stockholders immediately before the transaction do not own more than 50 percent of the combined voting power of the surviving entity's then outstanding voting securities entitled to vote generally in the election of directors. (c) DISABILITY. Any physical or mental condition which renders a Participant incapable of performing the work for which the Participant was employed by Dresser or similar work for Dresser, as certified in writing by a doctor of medicine and as approved by Dresser. (d) DRESSER. Dresser Industries, Inc., a Delaware corporation. (e) PARTICIPANT. An individual to whom Restricted Stock is awarded under this Plan. A management employee who terminates employment shall cease to be a Participant, notwithstanding the designation in Article 3. (f) PERFORMANCE SHARE. A hypothetical share of Dresser common stock, as described in the Plan. (g) PERFORMANCE YEAR. The calendar year. (h) PLAN. Dresser Industries, Inc. Long-Term Incentive and Retention Plan. (i) RESTRICTED STOCK. Dresser common stock, restricted in the manner described in Article 6. (j) SHARE PRICE TARGET. The target price of a share of Dresser common stock, determined according to the following chart: PERFORMANCE YEAR SHARE PRICE TARGET 1997 $39.00 1998 $45.00 1999 $53.00 2000 $61.00 The Share Price Target shall be adjusted, if necessary, to take into account any stock splits. (k) TRADING DAY. A day on which Dresser common stock is traded on the New York Stock Exchange. ARTICLE 3: ELIGIBILITY Individuals designated by the Board of Directors of Dresser Industries, Inc. as Participants shall participate in the Plan. The grants described in the Plan are made subject to shareholder approval of the Plan. ARTICLE 4: PERFORMANCE SHARES As soon as practicable after July 17, 1997, each Participant shall receive a grant of 50,000 Performance Shares. Generally, Performance Shares shall be converted to Restricted Stock in accordance with Article 5, as long as the objective performance goals of that Article are met. Unless specifically provided for by the Executive Compensation Committee of the Board of Directors, unconverted Performance Shares shall be forfeited upon the earlier of: (a) Termination of the Participant's employment for any reason; or (b) January 1, 2001. ARTICLE 5: PERFORMANCE GOALS If the performance goal for a Performance Year or subsequent Performance Years is/are met, a Participant's Performance Shares shall be converted to Restricted Stock as soon as practicable following the designated Performance Year in accordance with the following schedule: PERFORMANCE YEAR PERFORMANCE SHARES CONVERTED 1997 5,000 1998 10,000 1999 15,000 2000 20,000 However, if a Share Price Target is met in advance of the designated Performance Year, Performance Shares shall be earned at that time, but will not be converted until immediately following the DESIGNATED Performance Year. A performance goal is met for a Performance Year, if the average price per share of Dresser common stock exceeds the Share Price Target: (a) At least 90 Trading Days (not necessarily consecutive) within the Performance Year; or (b) At least 20 Trading Days (not necessarily consecutive) within a period of 30 consecutive Trading Days, which ends on or before the last day of the Performance Year. If the performance goal for the Performance Year is not met, 50 percent of the Performance Shares which would have been converted to Restricted Stock shall be forfeited. The remainder of these Performance Shares shall be added to the schedule of Performance Shares for the next Performance Year. This carryover shall continue on this basis each year until the plan concludes January 1, 2001. ARTICLE 6: RESTRICTED STOCK Stock certificates evidencing the award of Restricted Stock in accordance with Article 5 shall be registered on Dresser's books in the name of the Participant on the date Performance Shares are converted to Restricted Stock. Each certificate evidencing Restricted Stock shall bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan. Any attempt to dispose of such shares of Restricted Stock in contravention of such terms, conditions and restrictions shall be invalid. All restrictions on a share of Restricted Stock shall lapse after a period ending on the earliest of: (a) The third anniversary of the date the share was issued; (b) The Participant's termination of employment after attainment of age 65; (c) The Participant's Disability; (d) A Change in Control; or (e) Such earlier date as the Board of Directors may determine. If a Participant's employment terminates before the end of this period of restriction, the Participant shall forfeit the Restricted Stock. During the period of restriction, the Participant shall be entitled to all other rights of a shareholder of Dresser common stock, including the right to vote the shares of Restricted Stock and the right to receive dividends on those shares. Subject to Article 10, once the restriction period ends, the Participant shall be entitled to physical custody of the stock, which, at such time, shall become fully transferable. ARTICLE 7: ADMINISTRATION The Executive Compensation Committee of the Board of Directors of Dresser Industries, Inc. shall have full discretionary authority to interpret and apply the terms of this Plan document. This grant of authority shall be broadly construed and shall include the authority to find facts, to reach conclusions of law, to interpret and apply ambiguous terms, and to supply missing terms reasonably necessary to interpret the Plan. ARTICLE 8: AMENDMENT OR TERMINATION The Plan may be amended or terminated in whole or in part by Dresser's Board of Directors in its sole discretion, provided that such amendment or termination shall not cause the forfeiture of Restricted Stock awarded to a Participant prior to the date of amendment or termination. In addition, shareholder approval is required for any material amendment of the Plan. ARTICLE 9: RIGHT TO CONTINUED EMPLOYMENT Nothing in this Plan shall confer on a Participant any right to continue in Dresser's employment or in any way affect Dresser's right to terminate the Participant's employment without prior notice at any time for any or no reason. ARTICLE 10: WITHHOLDING Dresser shall meet the tax withholding obligations imposed by any government with respect to grants of Restricted Stock, or the lapse of restrictions on such stock. To meet this obligation, Dresser may withhold from other cash payments due the Participant. If the amount so withheld is not sufficient, Dresser will withhold from any distribution of stock released to the Participant in accordance with Article 6 a number of shares with a market value not less than the withholding obligation and cancel (in whole or in part) the shares so withheld in order to reimburse Dresser for the payment of withholding taxes. ARTICLE 11: FORCE AND EFFECT The various provisions of this Plan are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions. ARTICLE 12: PREVAILING LAWS This Plan shall be construed and enforced in accordance with and governed by the laws of the State of Texas, to the extent not governed by the laws of the State of Delaware applicable to corporations and the issuance of stock by Delaware corporations. IN WITNESS WHEREOF, this Plan is executed as of the day and year written below by Dresser's duly authorized officer, effective as of July 17, 1997. Dated: DRESSER INDUSTRIES, INC. By: Title: EX-27 4
5 1000 9-MOS OCT-31-1997 JUL-31-1997 131,100 0 1,151,300 0 968,800 2,414,200 2,797,200 1,638,500 4,984,300 1,669,700 754,300 0 0 46,200 1,569,300 4,984,300 5,318,900 5,348,100 4,142,400 4,939,800 0 0 51,000 350,000 122,500 208,400 0 0 0 208,400 1.19 1.19
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