-----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, HgmT4XAFnpQAOK0TSt9CpZgLz/ysmgct1HPYvnJ2oQ8tl2k/XwdqXo6LLOJjNDs+ O3bCS5r4pZdja4/x8dlssw== 0000890566-96-000143.txt : 19960322 0000890566-96-000143.hdr.sgml : 19960322 ACCESSION NUMBER: 0000890566-96-000143 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEATHERFORD ENTERRA INC CENTRAL INDEX KEY: 0000029302 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 741681642 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07867 FILM NUMBER: 96537171 BUSINESS ADDRESS: STREET 1: 1360 POST OAK BLVD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7134399400 MAIL ADDRESS: STREET 1: 1360 POST OAK BLVD STE 1000 CITY: HOUSTON STATE: TX ZIP: 77056 FORMER COMPANY: FORMER CONFORMED NAME: WEATHERFORD INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DIXEL INDUSTRIES INC DATE OF NAME CHANGE: 19750618 10-K 1 WEATHERFORD ENTERRA, INC. 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM .......... TO ........... COMMISSION FILE NUMBER 1-7867 WEATHERFORD ENTERRA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 74-1681642 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1360 POST OAK BOULEVARD, SUITE 1000 77056 HOUSTON, TEXAS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (713) 439-9400 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED Common Stock, $.10 par value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant's knowledge, in the Proxy Statement or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. The aggregate market value of the outstanding Common Stock of the registrant held by non-affiliates of the registrant as of March 19, 1996, based on the closing sale price of the Common Stock on the New York Stock Exchange on said date, was $1,220,777,845. There were 51,089,042 shares of Common Stock of the registrant outstanding as of March 19, 1996. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement issued in connection with the 1996 Annual Meeting of Stockholders are incorporated into Part III of this Report. PART I ITEM 1. BUSINESS. INTRODUCTION TO BUSINESS 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 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. 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 Company's Common Stock (after giving effect to a contemporaneous one-for-two reverse stock split of the Company's 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 and services 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 the Company's 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 and services 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 product and service lines, improve its worldwide market position and realize significant consolidation cost savings. 2 RECENT DEVELOPMENTS The Company has entered into a letter of understanding with and currently is engaged in negotiations relating to the possible acquisition of the assets and business of Nodeco AS, a Norwegian company engaged in the energy products business. There can be no assurance that a definitive agreement will be reached or that such acquisition will be consummated. The Company intends to file in the first quarter or early in the second quarter of 1996 a shelf registration statement with the Securities and Exchange Commission with regard to the possible issuance of public indebtedness. The Company will determine whether to issue any such public indebtedness based upon then existing market conditions; however, there can be no assurance that the Company will issue any such public indebtedness. FINANCIAL INFORMATION BY INDUSTRY SEGMENT See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 9 of Notes to Consolidated Financial Statements contained elsewhere herein for additional information. DESCRIPTION OF BUSINESS 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 and services, 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. 3 ENERGY PRODUCTS AND SERVICES. Weatherford Enterra's energy products and services 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 3/5 gas lift and related equipment to increase the flow of oil; and Arrow 3/5 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 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, manufactures, sells and services American AeroT 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 gas 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 3/5 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. PATENTS AND LICENSES The Company has followed a policy of seeking U.S. and non-U.S. patents and licenses for products and equipment that appear to have commercial applications. The Company believes its 4 patents and licenses to be adequate for the conduct of its products and services businesses and, while it considers them to be valuable in the aggregate, the Company does not believe that its business is materially dependent on its patents or licenses. In management's opinion, engineering and production skills and application experience are more responsible for the Company's market position than are patents or licenses. SEASONALITY Demand for the Company's oilfield services and energy products and services is generally affected by the seasonality of drilling activity. Higher activity generally is experienced in the spring, summer and fall. In the United States and Europe, the lowest drilling activity occurs during the early months of the year due to inclement weather; however, in Alaska and Canada, activity generally slows in the spring and early summer due to difficulty in moving equipment during the spring thaws. Weather conditions are not a significant factor in other geographic areas in which the Company offers oilfield services and energy products and services. Weather is not necessarily a significant factor in the Company's gas compression segment, although increased demand for gas during the winter months depletes gas reserves, thereby increasing the need for gas compression services. The pipeline services segment is generally affected by the weather due to constraints on pipeline construction during winter months due to inclement weather conditions and constraints during the spring and early summer due to spring thaws. BACKLOG ORDERS At December 31, 1995, the Company's backlog of orders for products and equipment believed to be firm was approximately $63,800,000 compared to approximately $81,400,000 at December 31, 1994. Substantially all of such orders will be filled in 1996. 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. 5 The following table sets forth the Company's revenues, acquisition-related costs and other unusual charges, operating income and identifiable assets attributable to each of its geographic segments. See Note 9 of Notes to Consolidated Financial Statements contained elsewhere herein for additional information. YEAR ENDED DECEMBER 31, ----------------------------------------- 1995 1994 1993 ------------- ------------- ----------- (IN THOUSANDS) REVENUES: United States................. $ 471,672 $ 383,076 $ 285,163 Canada........................ 106,491 75,809 25,811 Europe........................ 110,065 84,830 73,291 Africa........................ 57,450 41,574 38,168 Other international........... 113,229 91,460 78,058 ------------- ------------- ----------- $ 858,907 $ 676,749 $ 500,491 ============= ============= =========== ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES: United States................. $ 43,276 $ 2,500 $ 4,000 Canada........................ 2,850 -- -- Europe........................ 4,302 -- -- Africa........................ 624 -- -- Other international........... 8,119 -- -- Corporate..................... 29,011 -- -- ------------- ------------- ----------- $ 88,182 $ 2,500 $ 4,000 ============= ============= =========== OPERATING INCOME (LOSS): United States................. $ 5,745 $ 28,924 $ 17,996 Canada........................ 11,382 15,502 4,920 Europe........................ 3,088 3,023 5,607 Africa........................ 13,912 11,204 6,726 Other international........... 4,267 12,490 22,239 Corporate..................... (38,212) (5,439) (7,817) ------------- ------------- ----------- $ 182 $ 65,704 $ 49,671 ============= ============= =========== IDENTIFIABLE ASSETS: United States................. $ 790,625 $ 706,175 $ 324,730 Canada........................ 73,368 89,462 35,943 Europe........................ 141,673 125,365 65,975 Africa........................ 40,299 38,708 30,526 Other international........... 148,579 149,677 110,279 Corporate..................... 64,316 44,583 68,149 ------------- ------------- ----------- $ 1,258,860 $ 1,153,970 $ 635,602 ============= ============= =========== The Company's international operations are subject to special considerations inherent in doing business outside the United States, including war, civil disturbances and governmental activities, which may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. Certain areas, including Algeria, Nigeria, Angola and parts of the Middle East, have been subjected to political disruption or social unrest in the past twelve months. International operations also can be affected by U.S. laws and regulations limiting or prohibiting exports to, and operations in, certain countries, including Iran, Iraq, Libya, Cuba and 6 Nigeria. Government-owned petroleum companies in some of the countries in which the Company operates have adopted policies (or are subject to governmental policies) giving preference to the purchase of goods and services from companies that are majority-owned by local nationals. As a result of such policies, the Company relies on joint ventures, license arrangements and other business combinations with local nationals in these countries. In addition, political considerations may disrupt the commercial relationships between the Company and government-owned petroleum companies. Generally, business interruptions resulting from civil or political disruptions negatively impact near-term results of operations; however, management of the Company believes that it is unlikely that any specific business disruption caused by existing or foreseen civil or political instability will have a material adverse impact on the financial condition or liquidity of the Company. INDUSTRY CONDITIONS The oil and gas industry in which the Company participates historically has experienced significant volatility. Demand for the Company's oilfield services and energy products and services depends primarily upon the number of oil and gas wells being drilled, the depth and drilling conditions of such wells, the volume of production, the number of well completions and the level of workover activity. Drilling and workover activity can fluctuate significantly in a short period of time, particularly in the United States and Canada. Drilling activity is largely dependent on the level and volatility of oil and gas prices. For the years ended December 31, 1995, 1994 and 1993, average worldwide drilling activity has remained relatively stable, at 1,711, 1,772 and 1,714 active rigs, respectively. Drilling activity outside of North America increased 3% in 1995 and decreased 5% in 1994 when compared to the prior year's average activity levels. U.S. drilling activity decreased 7% in 1995 and increased 3% in 1994 when compared to the prior year's average activity levels. Canadian drilling activity increased significantly in 1994 when compared to the average activity level in 1993 and increased slightly in 1995 when compared to the average activity level in 1994, but decreased in the last half of 1995. The willingness of oil and gas operators to make capital expenditures for the exploration and production of oil and natural gas will continue to be influenced by numerous factors over which the Company has no control, including the prevailing and expected market prices for oil and natural gas. Such prices are impacted by, among other factors, the ability of the members of the Organization of Petroleum Exporting Countries ("OPEC") to maintain price stability through voluntary production limits, the level of production by non-OPEC countries, worldwide demand for oil and gas, general economic and political conditions, costs of exploration and production, availability of new leases and concessions, and governmental regulations regarding, among other things, environmental protection, taxation, price controls and product allocations. However, worldwide exploration and production expenditures by the oil and gas industry increased approximately 9% in 1995 when compared to 1994 and management of the Company anticipates expenditures to increase in 1996. No assurance can be given as to the level of future oil and gas industry activity or demand for the Company's oilfield services and energy products and services. Demand for the Company's gas compression equipment and services depends primarily on demand for natural gas, the level and stability of natural gas prices, natural gas production and consumption, construction of gathering and storage systems, and the age and operating pressures of natural gas wells. Demand for the Company's pipeline equipment and services depends on various factors, including the price of oil and gas, the need for pipelines to transport oil and gas to areas of high demand, the age and condition of existing pipelines, political and economic influences, environmental and other governmental regulations, and the demand for rehabilitation and repair of existing pipeline systems. The existence of relatively few construction projects for large diameter oil and gas pipelines at any time causes substantial fluctuations in revenues from the sale or rental of equipment used in connection 7 with such projects. Management of the Company anticipates that the rehabilitation and repair of existing pipeline systems, many in existence prior to 1970, should increase at some point in the future. COMPETITION OILFIELD SERVICES. The Company experiences significant price pressures in the markets in which it offers rental tools and fishing and other services, particularly in the U.S. markets. The principal methods of competition that apply to the Company's rental tools and fishing and other services are price, quality, availability and reputation. Weatherford Enterra competes with Baker Hughes Incorporated in most of the markets in which it participates. In addition, the Company competes with numerous small, single-site operators, larger concerns operating at multiple locations and various well servicing companies engaged in such businesses. Also, many customers own and operate large inventories of equipment they might otherwise choose to rent and have the ability to purchase additional equipment, as opposed to renting. The Company historically has enjoyed a strong competitive position in tubular running services in countries in which it operates outside the United States, but has experienced increasing competition and price pressures outside the U.S. market in recent years. The Company has experienced significant competition and price pressures in the U.S. tubular running services market. The principal methods of competition that apply to the Company's tubular running services business are price, quality, reputation and range of services offered. Weatherford Enterra competes with Frank's International, Inc. in all of the U.S. markets and in some international markets in which the Company participates. In addition, the Company competes with BJ Services Company in several of the international markets in which the Company participates. Several other small- to medium-sized companies compete with Weatherford Enterra on a regional basis in the United States and in certain other countries. Management expects competition and customer price pressures to continue in the foreseeable future in its international and U.S. oilfield services markets. ENERGY PRODUCTS AND SERVICES. The Company experiences significant competition in the pricing of its cementation products. Management of the Company believes that price will continue to be a significant factor considered in customer purchasing decisions in the foreseeable future. The principal methods of competition that apply to the Company's cementation products business are price, quality, availability and reputation. The Company competes with Halliburton Company and Davis-Lynch Inc. in most of the markets in which it participates. Weatherford Enterra has experienced competition in the pricing of virtually all of its other energy products and services businesses. The Company competes with small- to medium-sized companies as well as with larger companies and subsidiaries of large public companies having significant financial resources. GAS COMPRESSION. The Company has experienced competition in the pricing of its gas compression equipment and services. Management believes that by manufacturing a significant portion of the components used in its compressor systems, the Company has certain cost advantages over its competitors in the rental business that do not have similar manufacturing capabilities. The principal methods of competition are price, quality, reliability, delivery time and reputation. Management believes that price will continue to be a significant factor considered in customer purchasing and rental decisions in the foreseeable future. The Company competes with Tidewater Inc. and Hanover Compressors Company and various other small- to medium-sized companies. PIPELINE SERVICES. The Company's CRC-Evans pipeline business competes with various small-to medium-sized companies on a regional basis. However, management believes that these companies do not offer the broad range of products and services offered by the Company. The principal methods of competition are product reliability and performance, delivery, service, warranty and price. 8 CUSTOMERS The Company had no one customer that accounted for 10% or more of its revenues in 1995, 1994 or 1993. EMPLOYEES At December 31, 1995, the Company employed 6,451 persons, of whom 2,446 were in international locations and 4,005 were in the United States. Of the 6,451 employees, 3,719 were employed in the oilfield services segment, 1,436 in the energy products and services segment, 764 in the gas compression segment and 295 in the pipeline services segment, with 237 in administrative functions. The Company considers its employee relations to be satisfactory. EXECUTIVE OFFICERS The names of the executive officers of the Company and certain information with respect to each of them are set forth below.
NAME AGE OFFICES - --------------------------------------- --- ------------------------------------------------------------ Philip Burguieres...................... 52 Chairman of the Board, President and Chief Executive Officer James R. Burke......................... 58 Senior Vice President and President -- Products and Equipment M. E. Eagles........................... 56 Senior Vice President and President -- Services Norman W. Nolen........................ 53 Senior Vice President, Chief Financial Officer and Treasurer H. Suzanne Thomas...................... 42 Senior Vice President, Secretary and General Counsel Steven C. Grant........................ 53 Vice President -- Corporate Development and Investor Relations Jon R. Nicholson....................... 42 Vice President -- Human Resources
Mr. Burguieres was elected President and Chief Executive Officer of the Company effective April 3, 1991, a director effective April 23, 1991, and Chairman of the Board effective December 10, 1992. From January 1990 to November 1990, he was Chairman of the Board, President and Chief Executive Officer of Panhandle Eastern Corporation, a company that operates interstate natural gas transmission systems. From January 1987 to November 1989, he was Chairman of the Board, from January 1986 to November 1989, Chief Executive Officer, and from April 1981 to November 1989, President and Chief Operating Officer, of Cameron Iron Works, Inc., a manufacturer of oilfield equipment. Mr. Burke, who joined the Company on December 12, 1991 as Senior Vice President, Corporate Development and Marketing, became President of the Products Division effective March 1, 1994, Senior Vice President and Compression/Products President effective October 5, 1995 and Senior Vice President and President -- Products and Equipment effective March 15, 1996. From December 1989 to December 1991, he was an independent management consultant. From June 1983 to December 1989, he was Vice President of Corporate Development, and from 1976 to 1983, he was General Manager of a manufacturing operation, of Cameron Iron Works, Inc. Mr. Eagles, who joined the Company on March 1, 1993 as Executive Vice President and President and General Manager of the Rental and Fishing Tool Division, became Senior Vice President of the Company and President of the Services Division effective March 1, 1994. From June 1992 until March 1993, Mr. Eagles served as Senior Vice President of McDermott, Inc., a marine engineering construction company, and President of McDermott Energy Services, Inc.; and from November 1990 until June 1992, he served as Vice President of Marketing of McDermott, Inc. Prior thereto, Mr. Eagles was 9 employed by Cameron Iron Works, Inc. for over 30 years and served as Vice President of Sales and Marketing from October 1981 until November 1990. Mr. Nolen joined the Company on April 29, 1991 as Senior Vice President, Chief Financial Officer and Treasurer. From March 1990 to April 1991, he was Vice President and Chief Financial Officer of Petro/Source Corporation, an oil gathering and marketing company. From October 1980 to February 1990, he was Corporate Treasurer of Cameron Iron Works, Inc. Ms. Thomas, who joined the Company in January 1982 as Counsel, was elected Secretary in March 1986, Vice President and General Counsel in July 1987 and Senior Vice President in December 1989. Ms. Thomas was responsible for Human Resources from January 1992 until October 1995. Prior to joining the Company, Ms. Thomas was an attorney with the law firm of Baker & Botts from September 1978 to December 1981. Mr. Grant joined the Company on October 5, 1995 as Vice President -- Corporate Development and Investor Relations. Prior to joining the Company, Mr. Grant was Enterra's Senior Vice President -- Corporate Development since March 1991 and prior to that, since January 1988, was Enterra's Senior Vice President -- Finance and Chief Financial Officer. Mr. Nicholson, who joined the Company as Director of Human Resources in February 1993, was elected Vice President-Human Resources effective October 5, 1995. From March 1992 until January 1993, he was a human resources consultant. From July 1990 until March 1992, Mr. Nicholson served as President of Atlas Bradford Corporation, an oilfield services company, and from December 1988 until June 1990, he served as Vice President of Human Resources of Baroid Corporation, an oil services company. ITEM 2. PROPERTIES. The Company has numerous manufacturing facilities located in the United States and various other countries used for the manufacture of energy products and equipment, pipeline equipment and gas compressors, the principal of which are:
OWNED (O) APPROXIMATE OR LEASED (L) - LOCATION MANUFACTURED PRODUCTS SQUARE FEET EXPIRATION DATE - ------------------------------------------------------------------------- ------------ ---------------- Houston, Texas...................... Cranes, power tongs, power units and 157,169 O accessories Pearland, Texas..................... Fishing tools, milling tools, 149,706 O cutters, overshots, wireline equipment, whipstocks, heavy wall drill pipe and coring equipment Tulsa, Oklahoma..................... Pipeline equipment 145,000 O Corpus Christi, Texas............... Gas compressors 90,000 O Huntsville, Texas................... Production and service packers and 71,270 O related equipment Houma, Louisiana.................... Mechanical cementing products, float 109,761 O equipment, stage tools, rubber products and industrial valves Hannover, Germany................... Mechanical cementing products, power 65,950 L-9/99 tongs, power units and accessories and specialized bucking machines
10 The Company believes that its manufacturing facilities will be suitable and adequate to meet production demands anticipated during the next several years. The Company's manufacturing facilities operated below capacity throughout 1995. In addition to its manufacturing plants, the Company leases its corporate headquarters office and various administrative offices in Houston, Texas and leases or owns numerous sales offices, warehouses, service centers, pipe yards and stocking locations for its operations in the United States and internationally. During the year ended December 31, 1995, the Company paid real estate rentals in the aggregate amount of approximately $10,967,000. The Company's operations generally do not require highly specialized facilities, and suitable facilities generally are readily available on a lease or purchase basis, as required. ITEM 3. LEGAL PROCEEDINGS AND REGULATORY MATTERS. The Company is not a party to, nor is any of its property the subject of, any material pending legal proceedings, other than ordinary routine litigation incidental to its business and which is believed to be either covered by insurance or not material in amount. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the public health and the environment, affect the Company's operations, expenses and costs. The clear trend in environmental regulation is to place more restrictions and limitations on activities that may impact the environment, such as emissions of pollutants, generation and disposal of wastes, and use and handling of chemical substances. Increasingly strict environmental restrictions and limitations have resulted in increased operating costs for the Company and other similar businesses throughout the United States, and it is possible that the costs of compliance with environmental laws and regulations will continue to increase, both for the Company and its customers. In this regard, the Resource Conservation and Recovery Act ("RCRA"), the principal federal statute governing the disposal of solid and hazardous wastes, includes a statutory exemption that allows oil and gas exploration and production wastes to be classified as non-hazardous waste. A similar exemption is contained in many of the state counterparts to RCRA. If oil and gas exploration and production wastes were required to be managed and disposed of as hazardous waste, either as a result of changes in RCRA or the imposition of more stringent state regulations, domestic oil and gas producers, including many of the Company's customers, could be required to incur substantial obligations with respect to such wastes. Because of the potential impact on the Company's customers, any regulatory changes that impose additional restrictions or requirements on the disposal of oil and gas wastes could adversely affect demand for the Company's services and products. In addition, the Company is subject to laws and regulations concerning occupational health and safety. The Company believes that it is in substantial compliance with the requirements of environmental and occupational health and safety laws and regulations, but inasmuch as such laws and regulations are frequently changed, the Company is unable to predict the ultimate impact of such laws and regulations on the Company's business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On October 5, 1995, a special meeting was held at which the stockholders of Weatherford were asked to vote on the Enterra Merger, the one-for-two reverse stock split of Weatherford's Common Stock (the "Split") and the name change to "Weatherford Enterra, Inc.", the amendment of the 1991 Stock Option Plan (the "1991 Plan") to increase the number of shares authorized for issuance thereunder and the amendment of the Restricted Stock Incentive Plan (the "Restricted Plan") to increase the number of shares authorized for issuance thereunder. The Weatherford stockholders approved all the proposals. Of the shares of Weatherford Common Stock entitled to vote and present at the meeting, (1) 43,333,279 shares were voted in favor of the Enterra Merger, 136,503 shares against and 159,683 shares abstained; (2) 47,110,740 shares were voted in favor of the Split and the name change, 271,543 shares against and 187,764 shares abstained; (3) 41,577,950 shares were voted in favor of the amendment of the 1991 Plan, 1,098,493 shares against and 886,356 shares abstained; and (4) 40,627,455 shares were voted in favor of the amendment of the Restricted Plan, 1,949,341 shares against and 985,813 shares abstained. 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock, $0.10 par value (the "Common Stock"), is traded on the New York Stock Exchange under the symbol "WII". It previously traded, until October 1994, on the American Stock Exchange. The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices for the Common Stock as reported by the New York Stock Exchange (and prior to October 19, 1994, by the American Stock Exchange). The sale prices set forth below have been adjusted to reflect the Split effected on October 5, 1995. (See Note 6 of the Notes to Consolidated Financial Statements.) HIGH LOW --------- --------- 1994 First Quarter................... $ 22.25 $ 16.25 Second Quarter.................. 29.50 16.00 Third Quarter................... 28.00 23.25 Fourth Quarter.................. 25.50 16.50 1995 First Quarter................... 21.25 16.50 Second Quarter.................. 25.75 19.75 Third Quarter................... 30.00 23.50 Fourth Quarter.................. 29.50 21.25 1996 First Quarter (through March 19, 1996)......................... 35.88 26.00 On March 19, 1996, the closing sale price for the Common Stock as reported by the New York Stock Exchange was $35.00. As of March 19, 1996, there were approximately 4,217 record holders of Common Stock. The Company has not declared or paid dividends on the Common Stock since December 1982 and management does not anticipate paying dividends on the Common Stock at any time in the foreseeable future. 12 ITEM 6. SELECTED FINANCIAL DATA. The Selected Financial Data should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto, included elsewhere herein. The Company's Consolidated Financial Statements and the financial information presented below have been restated for all periods presented to include the accounts and results of operations of Enterra with those of the Company. All per share amounts and numbers of shares of Common Stock have been restated to reflect a contemporaneous one-for-two reverse stock split. See Notes 2 and 6 of Notes to Consolidated Financial Statements contained elsewhere herein for additional information.
AS OF OR FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- 1995(1) 1994(2) 1993(3) 1992 1991(4) ------------- ------------- ----------- ----------- ----------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND PERCENTAGES) OPERATING DATA: Revenues............................. $ 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..................... 182 65,704 49,671 35,579 31,044 Depreciation and amortization........ 95,957 71,037 50,449 35,738 35,720 Net income (loss).................... (10,558) 41,977 35,175 26,760 14,234 Net income (loss) per share.......... $ (0.21) $ 0.94 $ 0.88 $ 0.73 $ 0.37 PERCENTAGE OF REVENUES: Selling, general and administrative expenses........................... 16.1% 17.1% 18.3% 22.6% 22.5% Gross profit......................... 27.2% 27.9% 29.5% 33.2% 35.6% Operating income..................... 0.0% 9.7% 9.9% 9.5% 7.8% Net income (loss).................... (1.2)% 6.2% 7.0% 7.2% 3.6% BALANCE SHEET DATA: Working capital...................... $ 267,380 $ 251,778 $ 211,834 $ 197,526 $ 197,879 Total assets......................... 1,258,860 1,153,970 635,602 474,490 470,702 Total debt........................... 329,266 196,672 21,253 28,685 31,572 Stockholders' equity................. 730,843 734,634 474,472 349,458 334,002 Total debt-to-total capitalization... 31% 21% 4% 8% 9% OTHER DATA: Capital expenditures, excluding acquisitions....................... $ 110,625 $ 114,018 $ 63,757 $ 38,259 $ 50,636 Weighted average shares outstanding........................ 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. 13 ITEM 7. 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 each of the three years in the period ended December 31, 1995. The Consolidated Financial Statements and notes thereto included elsewhere herein 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 and services, gas 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, having acquired 23 businesses since November 1991. 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 and services 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 Weatherford 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 accompanying financial statements 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 14 $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 accompanying financial statements since the date of their respective acquisition. RESULTS OF OPERATIONS 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 and services: 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 and services.............................. 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 and services......................................... 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 and services......................................... (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 ========== ========== ==========
15 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 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 AND SERVICES. 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 and services 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. 16 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 and services 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. 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 17 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 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 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. 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 and services 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 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 18 acquisition of Energy Industries. The Company's total debt-to-total capitalization ratio was 31% at December 31, 1995 compared to 21% at December 31, 1994. In connection with the Enterra Merger, the Company entered into new bank credit facilities (the "Facilities") consisting of a $200,000,000 term loan (the "Term Loan") and a $200,000,000 revolving credit facility (the "Revolving Credit Facility"). The Facilities replaced the previous primary bank credit facilities of Weatherford and Enterra. The Term Loan is payable in 23 equal quarterly installments commencing March 31, 1996. 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 December 31, 1995 was 6.4%. 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 Facilities agreement requires that the Company maintain certain financial ratios and limits the Company's ability to incur indebtedness, make investments and dispose of assets. At December 31, 1995, the balances outstanding under the Term Loan and the Revolving Credit Facility were $200,000,000 and $120,000,000, respectively, and the Company had $80,000,000 available to borrow under the Revolving Credit Facility. Subsequent to December 31, 1995, the Company has repaid $16,000,000 of the balance outstanding under the Revolving Credit Facility. In addition, at December 31, 1995, the Company had $11,822,000 available for borrowing under working capital facilities of certain of its international subsidiaries. The Company also has various credit facilities available only for stand-by letters of credit and bid and performance bonds, pursuant to which funds are available to the Company to secure performance obligations and certain retrospective premium adjustments under insurance policies. The Company had a total of $18,857,000 of letters of credit and bid and performance bonds outstanding at December 31, 1995. 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 occasionally enters into forward exchange contracts only as a hedge against certain existing economic exposures, and not for speculative or trading purposes. These contracts reduce exposure to currency movements affecting existing assets and liabilities denominated in foreign currencies, such exposure resulting primarily from trade receivables and payables and intercompany loans. The future value of these contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. Settlement of forward exchange contracts resulted in net cash outflows totaling $2,719,000 and $1,036,000 during 1995 and 1994, respectively. The Company entered into no forward exchange contracts during 1993. The Company has entered into a letter of understanding with and currently is engaged in negotiations relating to the possible acquisition of the assets and business of Nodeco AS, a Norwegian company engaged in the energy products business. The Company would fund any cash portion of such acquisition with borrowings under the Revolving Credit Facility. There can be no assurance that such acquisition will be consummated or, if consummated, that the terms thereof will not change. 19 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 potential 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. The Company intends to file in the first or second quarter of 1996 a shelf registration statement with the Securities and Exchange Commission with regard to the possible issuance of public indebtedness. Net proceeds from the sale of any such public indebtedness would be used primarily to repay all or a portion of the amounts then outstanding under the Facilities. The Company will determine whether to issue any such public indebtedness based upon existing market conditions; however, there can be no assurance that the Company will issue any such public indebtedness. 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 Algeria, Nigeria, Angola and parts of the Middle East, 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. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Weatherford Enterra, Inc.: We have audited the accompanying consolidated balance sheets of Weatherford Enterra, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Weatherford Enterra, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas February 29, 1996 21 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 (IN THOUSANDS EXCEPT SHARE AMOUNTS) 1995 1994 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents....... $ 32,800 $ 36,106 Receivables, net of allowance of $15,942 and $11,240............ 231,125 232,882 Inventories, net................ 165,383 153,191 Deferred tax assets............. 10,995 10,349 Prepayments and other........... 23,059 17,458 ------------ ------------ Total current assets....... 463,362 449,986 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT, at cost: Land............................ 22,381 17,017 Buildings and improvements...... 85,229 81,203 Rental and service equipment.... 965,603 859,209 Machinery and other equipment... 108,357 132,811 ------------ ------------ 1,181,570 1,090,240 Less -- Accumulated depreciation................... 667,025 627,941 ------------ ------------ 514,545 462,299 ------------ ------------ GOODWILL, net........................ 259,450 221,397 ------------ ------------ OTHER ASSETS......................... 21,503 20,288 ------------ ------------ $ 1,258,860 $ 1,153,970 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt................. $ 306 $ 113 Current portion of long-term debt........................... 36,670 17,813 Accounts payable................ 52,157 64,250 Accrued compensation and employee benefits.............. 31,353 30,922 Accrued income taxes............ 4,650 8,104 Customer advances............... 6,272 17,994 Accrued insurance............... 9,435 11,850 Other accrued liabilities....... 55,139 47,162 ------------ ------------ Total current liabilities.................. 195,982 198,208 ------------ ------------ LONG-TERM DEBT....................... 292,290 178,746 ------------ ------------ DEFERRED TAX LIABILITIES............. 5,243 25,966 ------------ ------------ OTHER LONG-TERM LIABILITIES.......... 33,348 14,371 ------------ ------------ MINORITY INTERESTS................... 1,154 2,045 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $1 par; shares authorized 1,000,000, none issued......................... -- -- Common stock, $.10 par; shares authorized 80,000,000; issued 50,988,741 and 50,575,768..... 5,099 5,058 Paid-in capital................. 602,231 593,744 Retained earnings............... 130,243 140,801 Cumulative translation adjustment..................... (5,869) (4,168) Treasury stock, 41,260 and 51,202 common shares, at cost........................... (861) (801) ------------ ------------ Total stockholders' equity................... 730,843 734,634 ------------ ------------ $ 1,258,860 $ 1,153,970 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 22 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 ----------- ----------- ----------- REVENUES............................. $ 858,907 $ 676,749 $ 500,491 COSTS AND EXPENSES: Cost of sales and services......... 625,346 488,133 352,677 Selling, general and administrative expenses........................ 137,959 115,978 91,591 Research and development........... 4,954 4,735 3,649 Equity in earnings of unconsolidated affiliates....... (1,477) (1,169) (2,716) Foreign currency (gain) loss, net............................. (74) (2,205) 713 Other expense, net................. 3,835 3,073 906 Acquisition-related costs and other unusual charges................. 88,182 2,500 4,000 ----------- ----------- ----------- Total operating costs and expenses..................... 858,725 611,045 450,820 ----------- ----------- ----------- OPERATING INCOME..................... 182 65,704 49,671 Interest expense..................... 17,217 8,847 4,027 Interest income...................... (2,081) (1,959) (3,243) ----------- ----------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS................. (14,954) 58,816 48,887 Income tax provision (benefit)....... (4,616) 16,958 13,635 ----------- ----------- ----------- INCOME (LOSS) BEFORE MINORITY INTERESTS.......................... (10,338) 41,858 35,252 Minority interests................... 220 (119) 77 ----------- ----------- ----------- NET INCOME (LOSS).................... $ (10,558) $ 41,977 $ 35,175 =========== =========== =========== Weighted average common and common equivalent shares outstanding...... 50,989 44,845 38,607 =========== =========== =========== INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE................... $ (0.21) $ 0.94 $ 0.88 =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 23 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMMON STOCK CUMULATIVE TREASURY STOCK PREFERRED ---------------- PAID-IN RETAINED TRANSLATION --------------- STOCK SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT --------- ------- ------ --------- -------- ----------- ------ ------ BALANCE, December 31, 1992 as previously reported................ $ 586 21,270 $2,127 $ 181,688 $(45,699) $ 1,195 24 $(272) Adjustment for pooling of interests.......................... -- 13,628 1,363 95,166 116,651 (3,347) -- -- --------- ------- ------ --------- -------- ----------- ------ ------ BALANCE, December 31, 1992........... 586 34,898 3,490 276,854 70,952 (2,152) 24 (272) Shares issued under employee benefit plans.............................. -- 46 4 982 -- -- -- -- Stock grants and options exercised... -- 410 41 6,729 -- -- 8 (170) Issuance of Common Stock............. -- 4,675 468 92,028 -- -- -- -- Issuance of Common Stock in acquisition........................ -- 80 8 2,075 -- -- -- -- Settlement of a note receivable from a former officer................... -- -- -- 224 -- -- -- -- Conversion of Preferred Stock........ (572) 778 78 494 -- -- -- -- Redemption of Preferred Stock........ (14) -- -- (340) -- -- -- -- Currency translation adjustment...... -- -- -- -- -- (4,892) -- -- Net income........................... -- -- -- -- 35,175 -- -- -- Dividends on Preferred Stock ($12.47 per share)................. -- -- -- -- (7,303 ) -- -- -- --------- ------- ------ --------- -------- ----------- ------ ------ BALANCE, December 31, 1993........... -- 40,887 4,089 379,046 98,824 (7,044) 32 (442) Shares issued under employee benefit plans.............................. -- 9 1 178 -- -- -- -- Stock grants and options exercised... -- 131 13 1,905 -- -- 19 (359) Issuance of Common Stock in acquisition........................ -- 9,549 955 212,615 -- -- -- -- Currency translation adjustment...... -- -- -- -- -- 2,876 -- -- Net income........................... -- -- -- -- 41,977 -- -- -- --------- ------- ------ --------- -------- ----------- ------ ------ BALANCE, December 31, 1994........... -- 50,576 5,058 593,744 140,801 (4,168) 51 (801) Shares issued under employee benefit plans.............................. -- 8 1 187 -- -- -- -- Stock grants and options exercised... -- 405 40 8,300 -- -- (10) (60) Currency translation adjustment...... -- -- -- -- -- (1,701) -- -- Net loss............................. -- -- -- -- (10,558 ) -- -- -- --------- ------- ------ --------- -------- ----------- ------ ------ BALANCE, December 31, 1995........... $ -- 50,989 $5,099 $ 602,231 $130,243 $(5,869) 41 $(861) ========= ======= ====== ========= ======== =========== ====== ======
TOTAL --------- BALANCE, December 31, 1992 as previously reported................ $ 139,625 Adjustment for pooling of interests.......................... 209,833 --------- BALANCE, December 31, 1992........... 349,458 Shares issued under employee benefit plans.............................. 986 Stock grants and options exercised... 6,600 Issuance of Common Stock............. 92,496 Issuance of Common Stock in acquisition........................ 2,083 Settlement of a note receivable from a former officer................... 224 Conversion of Preferred Stock........ -- Redemption of Preferred Stock........ (354) Currency translation adjustment...... (4,892) Net income........................... 35,175 Dividends on Preferred Stock ($12.47 per share)................. (7,303) --------- BALANCE, December 31, 1993........... 474,473 Shares issued under employee benefit plans.............................. 179 Stock grants and options exercised... 1,559 Issuance of Common Stock in acquisition........................ 213,570 Currency translation adjustment...... 2,876 Net income........................... 41,977 --------- BALANCE, December 31, 1994........... 734,634 Shares issued under employee benefit plans.............................. 188 Stock grants and options exercised... 8,280 Currency translation adjustment...... (1,701) Net loss............................. (10,558) --------- BALANCE, December 31, 1995........... $ 730,843 ========= The accompanying notes are an integral part of these consolidated financial statements. 24 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995 (IN THOUSANDS) 1995 1994 1993 ----------- ----------- ----------- NET INCOME (LOSS).................... $ (10,558) $ 41,977 $ 35,175 Income items not requiring (providing) cash: Depreciation and amortization... 95,957 71,037 50,449 Non-cash portion of acquisition-related costs and other unusual charges............... 66,196 -- -- Deferred income tax provision (benefit)..................... (20,781) 649 (214) Gain on sales of assets, net.... (12,503) (9,559) (8,452) Unrealized foreign currency gain.......................... -- (2,843) -- Undistributed earnings of affiliates.................... 189 868 905 Minority interests.............. 220 (119) 77 Increase (decrease) in operating cash flow resulting from: Receivables, net.............. 16,277 (32,345) (26,330) Inventories, net.............. (12,603) (14,619) (2,921) Payment of deferred loan costs...................... (892) (818) (6,424) Prepayments and other......... (5,799) (477) 1,194 Accounts payable and accrued liabilities................ (46,307) 15,798 (961) Other long-term liabilities... 9,477 (1,980) 2,151 ----------- ----------- ----------- CASH PROVIDED BY OPERATING ACTIVITIES......................... 78,873 67,569 44,649 ----------- ----------- ----------- Purchases of property, plant and equipment.......................... (110,625) (114,018) (63,757) Acquisitions, net of notes issued and cash acquired...................... (139,226) (105,850) (117,835) Proceeds from sales of property, plant and equipment................ 40,630 19,810 31,072 Other net cash flows from investing activities......................... (9,245) (1,502) (2,052) ----------- ----------- ----------- CASH USED IN INVESTING ACTIVITIES.... (218,466) (201,560) (152,572) ----------- ----------- ----------- Borrowings under credit facilities... 411,737 144,539 102,500 Repayment of borrowings.............. (283,346) (45,299) (110,462) Proceeds from Common Stock issuance, net of costs....................... -- -- 92,496 Net cash flows from currency hedging transactions....................... (2,719) (1,036) -- Proceeds from stock option exercises, sales of stock to employee benefit plans and other............ 6,268 1,693 6,878 Preferred Stock dividends paid....... -- -- (7,303) ----------- ----------- ----------- CASH PROVIDED BY FINANCING ACTIVITIES......................... 131,940 99,897 84,109 ----------- ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH............................... 4,347 66 (1,076) ----------- ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS........................ (3,306) (34,028) (24,890) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................. 36,106 70,134 95,024 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR............................... $ 32,800 $ 36,106 $ 70,134 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest........................ $ 14,396 $ 6,380 $ 2,773 Income taxes.................... 17,741 14,236 12,136 Purchases of equipment financed by debt............................... -- 3,213 625 The accompanying notes are an integral part of these consolidated financial statements. 25 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- BASIS OF PRESENTATION. On October 5, 1995, Weatherford International Incorporated ("Weatherford") completed a merger with Enterra Corporation ("Enterra") and changed its name to "Weatherford Enterra, Inc." (see Note 2). The merger was accounted for as a pooling of interests; accordingly, the accompanying consolidated financial statements have been restated to include the results of Enterra for all periods presented. Contemporaneously with the Enterra merger, Weatherford effected a one-for-two reverse stock split of its Common Stock (see Note 6). In this report, all per common share amounts and numbers of common shares have been restated to reflect the reverse stock split. PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial statements include the accounts of Weatherford Enterra, Inc. and subsidiaries (the "Company" or "Weatherford Enterra") after elimination of all significant intercompany accounts and transactions. The Company accounts for its 50% or less-owned affiliates using the equity method. ACCOUNTING ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. CASH AND CASH EQUIVALENTS. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The reported value of all financial instruments approximates market value. Prepayments and other current assets at December 31, 1995 and 1994 included cash of approximately $2,367,000 and $2,117,000, respectively, which was restricted as a result of exchange controls in certain foreign countries or cash collateral requirements for performance bonds, letters of credit and customs bonds. INVENTORIES. Inventories, net of allowances, are valued at the lower of cost (first-in, first-out or average) or market and are summarized as follows (in thousands): 1995 1994 ----------- ----------- Spare parts and components........... $ 34,911 $ 45,894 Raw materials........................ 44,494 37,944 Work in process...................... 27,287 19,605 Finished goods....................... 58,691 49,748 ----------- ----------- $ 165,383 $ 153,191 =========== =========== Work in process and finished goods inventories include the costs of materials, labor and plant overhead. PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is depreciated on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of assets are as follows: Buildings and improvements 5 - 45 years Rental and service equipment 3 - 15 years Machinery and other equipment 3 - 15 years Expenditures for major additions and improvements are capitalized while minor replacements, maintenance and repairs are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the related accounts, and any resulting gain or loss is included in the consolidated statements of income. 26 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) GOODWILL. Goodwill represents the excess of the aggregate price paid by the Company in acquisitions accounted for as purchases over the fair market value of the net assets acquired. Goodwill is amortized on a straight-line basis generally over a period of 40 years. Management continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. Goodwill amortization expense totaled $5,852,000, $2,970,000 and $191,000 during 1995, 1994 and 1993, respectively. Accumulated amortization at December 31, 1995 and 1994 was $9,808,000 and $3,956,000, respectively. INCOME TAXES. The Company applies the liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. The Company does not provide federal income taxes on the undistributed earnings of certain of its foreign subsidiaries because it believes these amounts are permanently invested outside the United States. The cumulative amount of such undistributed earnings on which federal taxes have not been provided was $107,255,000 at December 31, 1995. If these foreign earnings were to be ultimately remitted, certain foreign withholding taxes would be payable, and U.S. federal income taxes payable at that time would be reduced by foreign tax credits generated by the repatriation, net of operating loss carryforwards and tax credit carryforwards. ENVIRONMENTAL EXPENDITURES. Environmental expenditures that relate to ongoing business activities are expensed or capitalized, in accordance with the Company's capitalization policy. Expenditures that relate to the remediation of an existing condition caused by past operations, and which do not contribute to current or future revenues, are expensed. Liabilities for these expenditures are recorded when it is probable that obligations have been incurred and the costs can be reasonably estimated. Estimates are based on currently available facts and technology, presently enacted laws and regulations and the Company's prior experience in remediation of contaminated sites. Liabilities included $17,743,000 and $9,371,000 of accrued environmental expenditures at December 31, 1995 and 1994, respectively. FOREIGN CURRENCY TRANSLATION. The functional currency for most of the Company's international operations is the applicable local currency. The translation of the foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for income statement accounts using a weighted average exchange rate for the period. The gains or losses resulting from such translation are included as a separate component of stockholders' equity. Gains or losses resulting from foreign currency transactions are included in the consolidated statements of income. FOREIGN EXCHANGE CONTRACTS. The Company occasionally enters into foreign exchange contracts only as a hedge against certain existing economic exposures, and not for speculative or trading purposes. These contracts reduce exposure to currency movements affecting existing assets and liabilities denominated in foreign currencies, such exposure resulting primarily from trade receivables and payables and intercompany loans. The future value of these contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. The counterparties to the Company's foreign exchange contracts are creditworthy multinational commercial banks. Management believes that the risk of counterparty nonperformance is immaterial. At December 31, 1995 and 1994, the Company had contracts maturing the following January to sell $56,594,000 and $55,880,000, respectively, in Norwegian kroner, U.K. pounds sterling and Dutch 27 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) guilders. Had such respective contracts matured on December 31, 1995 and 1994, the Company's required cash outlay would have been $38,000 and $461,000, respectively. REVENUE RECOGNITION. Revenues are recognized when services and rentals are provided and when products and equipment are shipped. Proceeds from customers for the cost of oilfield rental equipment that is involuntarily damaged or lost downhole are reflected as revenues. INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE. Income (loss) per common and common equivalent share is computed on the basis of the weighted average number of shares of Common Stock and common stock equivalents, if dilutive, outstanding during the periods. For purposes of this calculation, dividends on the Company's $2.625 Convertible Exchangeable Cumulative Preferred Stock (the "Preferred Stock") of $1,153,000 were deducted from net income during 1993. Preferred Stock dividends in arrears paid in 1993 totaling $6,150,000 had been deducted from net income for purposes of calculating income per common and common equivalent share during the years in which the arrearages accumulated. Fully diluted income per share is equal to primary income per share in all periods presented. CONCENTRATION OF CREDIT RISK. The Company grants credit to its customers, which are primarily in the oil and gas industry. Credit risk with respect to trade accounts receivable is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across many different countries. The Company performs periodic credit evaluations of its customers and generally does not require collateral. The Company monitors its exposure for credit losses and maintains an allowance for anticipated losses (see Note 12). RECLASSIFICATIONS. Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes to make them consistent with the current presentation format. (2) ACQUISITIONS AND MERGERS -- Results of operations for business combinations accounted for as purchases are included in the accompanying consolidated financial statements since the date of acquisition. With respect to business combinations accounted for as poolings of interests, the consolidated financial statements have been restated for all periods presented as if the companies had been combined since inception. ENTERRA. On October 5, 1995, Weatherford completed a merger with Enterra, a worldwide provider of specialized services and products to the oil and gas industry through its oilfield, pipeline and gas compression services businesses. After giving effect to a contemporaneous one-for-two reverse stock split (see Note 6), 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 Weatherford Common Stock for each share of Enterra common stock outstanding. The merger was accounted for as a pooling of interests. 28 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of revenues and net income (loss) of the combined entities as restated follows (in thousands): JANUARY 1, 1995 YEAR ENDED DECEMBER 31, THROUGH ------------------------ OCTOBER 5, 1995 1994 1993 ---------------- ----------- ----------- Revenues: Weatherford................. $312,466 $ 374,506 $ 335,434 Enterra..................... 348,573 302,243 165,057 ---------------- ----------- ----------- Combined.................... $661,039 $ 676,749 $ 500,491 ================ =========== =========== Net Income (Loss): Weatherford................. $ 28,621 $ 29,460 $ 21,990 Enterra..................... (3,609) 12,517 13,185 ---------------- ----------- ----------- Combined.................... $ 25,012 $ 41,977 $ 35,175 ================ =========== =========== ENERGY INDUSTRIES. On December 15, 1995, the Company acquired substantially all of the assets of the natural gas compression business of Energy Industries, Inc. and Zapata Energy Industries, L.P. (collectively, "Energy Industries") in a transaction accounted for as a purchase. Energy Industries was engaged in the business of fabricating, selling, installing, renting and servicing natural gas compressor units used in the oil and gas industry. The Company paid approximately $130,000,000 in cash, subject to adjustment, and assumed certain liabilities totaling approximately $12,485,000. H & H. On September 1, 1994, Weatherford completed a merger with H & H Oil Tool Co., Inc. ("H & H"), a rental and fishing tool company operating in California and the Rocky Mountain Region. The Company issued approximately 1,323,000 shares of Common Stock in exchange for all the outstanding shares of H & H common stock based on an exchange ratio of 0.3945 of a share of Company Common Stock for each share of H & H common stock outstanding. The merger was accounted for as a pooling of interests. In connection with the H & H merger, Weatherford repaid indebtedness of H & H totaling $1,595,000, which included a $1,370,000 note payable to a shareholder of H & H. In addition, Weatherford recorded acquisition-related costs totaling $2,500,000, primarily representing transaction fees and employee termination and facility closure costs to consolidate the H & H operations into Weatherford. TOTAL ENERGY. On August 12, 1994, Enterra acquired all 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 in a transaction accounted for as a purchase. Total Energy was primarily engaged in the businesses of designing, fabricating, selling, installing and renting gas compressor units and of manufacturing and servicing specialized oilfield equipment for use in the oil and gas industry. 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. ODFJELL RENTAL. On April 15, 1994, Weatherford acquired the rental assets and business of various companies comprising the Rental Division of Odfjell Drilling and Consulting Company (collectively, "Odfjell Rental") in a transaction accounted for as a purchase. Odfjell Rental was engaged in the rental of oilfield tools to the oil and gas industry in Norway, the United Kingdom, the Netherlands and Southeast Asia. Weatherford paid $56,200,000 in cash and assumed certain contractual rights and obligations. 29 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following unaudited pro forma summary results of operations assume that the acquisitions of Energy Industries, Total Energy and Odfjell Rental occurred on January 1, 1994 (in thousands except per share amounts): 1995(1) 1994 ----------- ----------- Revenues............................. $ 920,456 $ 903,060 Net income........................... $ 71,727 $ 85,887 Income per common and common equivalent share................... $ 1.41 $ 1.69 - ------------ (1) Includes unusual charges of $28,282,000, or $0.24 per common share. See Note 3. The unaudited pro forma summary results of operations are not necessarily indicative of results of operations that would have occurred had the transactions taken place on January 1, 1994 or of future results of operations of the combined businesses. HOMCO. On April 1, 1993, Weatherford acquired substantially all of the assets of Homco International, Inc. and its subsidiaries (collectively, "Homco") in a transaction accounted for as a purchase. Homco's primary businesses included rental tools and fishing tool services and manufactured products. Weatherford paid Homco $97,500,000 in cash and assumed certain liabilities totaling approximately $39,200,000. In connection with the Homco acquisition, Weatherford recorded acquisition-related costs totaling $4,000,000, primarily representing employee termination and facility closure costs to consolidate the Homco operations into Weatherford. Between April 1, 1993 and December 31, 1993, the Company sold five Homco business lines for total consideration of $25,853,000, consisting of cash of $17,353,000 and notes receivable and marketable securities valued at approximately $8,500,000. No gains or losses were recognized in connection with these sales. OTHER ACQUISITIONS. During 1995, 1994 and 1993, the Company acquired several businesses in addition to those mentioned above in transactions accounted for as purchases. The impact of these acquisitions on reported results of operations, on a pro forma basis, was not material to the Company's consolidated results of operations. (3) ACQUISITION-RELATED COSTS AND OTHER UNUSUAL CHARGES -- In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and that long-lived assets and intangibles to be disposed of be reported at the lower of carrying amount or fair value net of selling costs. SFAS No. 121 also establishes the procedures for review of recoverability, and measurement of impairment if necessary, of long-lived assets and intangibles to be held and used by an entity. During the second quarter of 1995, the Company adopted SFAS No. 121 and management of Enterra made certain strategic decisions which resulted in $28,282,000 of unusual charges. Such charges included a $10,041,000 writedown to fair value, based on management's estimation of net sales price, related to three energy products and services businesses to be sold. Revenues and operating income related to such businesses were $46,747,000 and $3,080,000 in 1995, $27,940,000 and $2,490,000 in 1994 and $1,024,000 and $231,000 in 1993, respectively. On September 25, 1995, Enterra sold substantially all of the fixed assets and inventory of one such business for cash of $9,494,000. At December 31, 1995, the carrying value of the remaining businesses to be sold was 30 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) approximately $18,500,000. One of these businesses was sold on January 31, 1996 for cash of $9,754,000, subject to adjustment. The remaining second quarter unusual charges of $18,241,000 consisted primarily 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. This restructuring resulted in reductions of approximately 40 and 80 personnel in the pipeline and oilfield services segment, respectively. During the fourth quarter of 1995, the Company recorded expenses of $59,900,000 related to the merger with Enterra and the financial impact of management decisions related to the future operations of the combined companies. The 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 service operations and administrative functions of Enterra and Weatherford (reducing approximately 600 personnel), and the reduction in recorded value of certain assets that had diminished future value in the operations of the combined Company. A summary of the 1995 acquisition-related costs and other unusual charges follows (in thousands): SECOND FOURTH QUARTER QUARTER YEAR ------- ------- ------- Enterra merger transaction-related costs.............................. $ -- $18,800 $18,800 Severance and termination costs...... 1,588 10,900 12,488 Facility closure and consolidation costs.............................. 1,893 19,050 20,943 Writedowns of assets to be sold...... 10,041 2,240 12,281 Other asset writedowns............... 13,762 8,210 21,972 Other................................ 998 700 1,698 ------- ------- ------- $28,282 $59,900 $88,182 ======= ======= ======= 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 (See Note 2). 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. (4) LONG-TERM DEBT -- Long-term debt consisted of the following (in thousands): 1995 1994 ----------- ----------- Bank term loan....................... $ 200,000 $ 67,105 Bank revolving credit facility....... 120,000 122,500 Foreign bank debt, denominated in foreign currencies................. 2,071 129 Industrial Revenue Bonds............. 3,085 3,310 Other indebtedness................... 3,804 3,515 ----------- ----------- 328,960 196,559 Less -- Amounts due within one year............................... 36,670 17,813 ----------- ----------- $ 292,290 $ 178,746 =========== =========== 31 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In connection with the Enterra merger, the Company entered into new bank credit facilities (the "Facilities") consisting of a $200,000,000 term loan (the "Term Loan") and a $200,000,000 revolving credit facility (the "Revolving Credit Facility"). The Facilities replaced the previous primary bank credit facilities of Weatherford and Enterra. The Term Loan is payable in 23 equal quarterly installments commencing March 31, 1996. 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 December 31, 1995 was 6.4%. 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 Facilities agreement requires that the Company maintain certain financial ratios and limits the Company's ability to incur indebtedness, make investments and dispose of assets. The Industrial Revenue Bonds are payable in annual installments ranging from $275,000 to $610,000, plus interest, through July 2002. The applicable rate of interest on amounts outstanding at December 31, 1995 was 5.2%. The Industrial Revenue Bonds are collateralized by a $3,142,000 irrevocable letter of credit. Maturities of the Company's long-term debt at December 31, 1995 were as follows (in thousands): 1996................................. $ 36,670 1997................................. 38,022 1998................................. 36,001 1999................................. 35,605 2000................................. 155,392 Thereafter........................... 27,270 ----------- $ 328,960 =========== At December 31, 1995, the Company had $80,000,000 available to borrow under the Revolving Credit Facility and $11,822,000 available for borrowing under working capital facilities of certain of the Company's international subsidiaries. In addition, the Company has various credit facilities available only for stand-by letters of credit and bid and performance bonds, pursuant to which funds are available to the Company to secure performance obligations and certain retrospective premium adjustments under insurance policies. The Company had a total of $18,857,000 of letters of credit and bid and performance bonds outstanding at December 31, 1995. (5) INCOME TAXES -- The components of income (loss) before income taxes and minority interests were as follows (in thousands): 1995 1994 1993 ----------- --------- --------- Foreign.............................. $ 23,853 $ 35,233 $ 37,064 United States........................ (38,807) 23,583 11,823 ----------- --------- --------- $ (14,954) $ 58,816 $ 48,887 =========== ========= ========= 32 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The income tax provision (benefit) was comprised of the following (in thousands): 1995 1994 1993 ----------- --------- --------- Current: Foreign......................... $ 15,219 $ 13,790 $ 12,655 U.S. alternative minimum taxes and state income taxes........... 946 2,519 1,194 ----------- --------- --------- Total current............. 16,165 16,309 13,849 ----------- --------- --------- Deferred: Foreign......................... 3,038 847 (769) U.S. Federal.................... (23,819) (198) 555 ----------- --------- --------- Total deferred............ (20,781) 649 (214) ----------- --------- --------- $ (4,616) $ 16,958 $ 13,635 =========== ========= ========= The consolidated provision for income taxes differs from the provision computed at the statutory U.S. federal income tax rate of 35% for the following reasons (in thousands): 1995 1994 1993 ----------- --------- --------- Tax provision at U.S. statutory rate............................... $ (5,234) $ 20,399 $ 16,930 Foreign income, taxed at more (less) than U.S. statutory rate..................... 7,687 2,448 (938) Intercompany dividends............... 557 1,479 665 Benefit of U.S. NOL carryforwards.... (15,299) (8,869) (3,667) Nondeductible goodwill............... 1,601 692 45 Nondeductible expenses related to acquisitions....................... 3,307 -- -- Other nondeductible expenses......... 1,819 394 236 Tax-exempt interest income........... -- (102) (449) U.S. alternative minimum taxes and state income taxes................. 946 517 813 ----------- --------- --------- $ (4,616) $ 16,958 $ 13,635 =========== ========= ========= On the accompanying consolidated balance sheets, current deferred tax assets and liabilities are netted within each tax jurisdiction. The components of the net deferred tax assets (liabilities) shown on the consolidated balance sheets are as follows (in thousands): 1995 1994 --------- ----------- Current deferred tax assets.......... $ 20,850 $ 16,192 Valuation allowance, current......... (9,855) (4,358) Non-current deferred tax assets...... 11,299 48,780 Valuation allowance, non-current..... (6,644) (26,625) --------- ----------- Total deferred tax assets....... 15,650 33,989 --------- ----------- Current deferred tax liabilities..... (117) (1,486) Non-current deferred tax liabilities........................ (5,627) (48,120) --------- ----------- Total deferred tax liabilities........................ (5,744) (49,606) --------- ----------- Net deferred tax assets (liabilities)...................... $ 9,906 $ (15,617) ========= =========== 33 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The change in the valuation allowance in 1995 primarily relates to current year utilization of U.S. net operating loss ("NOL") carryforwards and management's assessment that future taxable income will be sufficient to enable the Company to utilize remaining NOL carryforwards. The tax effects of significant temporary differences giving rise to deferred tax assets (liabilities) are as follows (in thousands): 1995 1994 ----------- ----------- Net operating loss and tax credit carryforwards...................... $ 40,056 $ 30,458 Depreciation and amortization........ (39,378) (37,332) Financial reserves and accruals not yet deductible..................... 16,804 16,770 Other differences between financial and tax bases of assets and liabilities.......... 8,923 5,470 Valuation allowances................. (16,499) (30,983) ----------- ----------- $ 9,906 $ (15,617) =========== =========== The Company has U.S. alternative minimum tax credit carryforwards of approximately $3,674,000 which do not expire and can be used to reduce regular tax to the extent it exceeds alternative minimum tax liability in future years. The Company also has U.S. NOL carryforwards available to reduce future U.S. taxable income of $47,780,000 expiring between 1999 and 2009 and general business credit carryforwards available to reduce future U.S. federal income taxes payable of $9,677,000 expiring between 1996 and 2000. (6) CAPITAL STOCK -- COMMON STOCK. On October 5, 1995, contemporaneously with the Enterra merger (see Note 2), the Company effected a one-for-two reverse stock split of Company Common Stock. In this report, all per common share amounts and numbers of common shares have been restated to reflect the reverse stock split. 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. On April 27, 1993, the Company completed the sale, pursuant to a public offering, of 4,675,000 shares of Common Stock at a price of $21.00 per share. The proceeds to the Company of $92,496,000, net of underwriters' discount and expenses of $536,000, were substantially used to repay indebtedness incurred in connection with the acquisition of Homco (See Note 2). PREFERRED STOCK. In the fourth quarter of 1993, the Company paid cash dividends in arrears totaling $6,150,000, or $10.50 per preferred share, on its Preferred Stock. These dividend arrearages accumulated during a 16-quarter period from 1986 through 1989. On October 27, 1993, the Company announced that it would redeem all shares of Preferred Stock outstanding on November 30, 1993 (the "Redemption Date") at a redemption price of $25.263 per preferred share. Prior to the Redemption Date, holders of 571,693 shares of Preferred Stock elected to convert such shares into 777,498 shares of Common Stock. The remaining 14,012 shares of Preferred Stock were redeemed for an aggregate redemption price of $354,000. EMPLOYEE STOCK PLANS. The Company has a number of stock option plans pursuant to which officers and other key employees may be granted options to purchase shares of Common Stock. At December 31, 1995, there were 2,324,217 shares available for issuance under the plans, at fair market value. Options generally become exercisable in three annual installments, beginning one year after the date of grant. Unexercised options expire five or ten years after the date of grant. Pursuant to the Enterra merger, the Company replaced all options outstanding under Enterra's option plan with options to purchase an equivalent number of shares of Company Common Stock. The Company has a Non- 34 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Employee Director Stock Option Plan (the "Director Option Plan") pursuant to which each non-employee director receives upon election as a director an initial option to purchase 2,500 shares and, at each annual meeting thereafter, an additional option to purchase 500 shares of Common Stock, in each case at fair market value. At December 31, 1995, there were 60,000 shares available for issuance under the Director Option Plan. Options become exercisable six months after the date of grant, and unexercised options expire ten years after the date of grant. Enterra had a similar plan, pursuant to which directors of Enterra received immediately exercisable options to purchase shares of Enterra common stock, at fair market value. All outstanding options under the Enterra director plan were exercised prior to the Enterra merger. The following table summarizes activity related to stock option plans of the Company:
NUMBER OF SHARES ------------------------- NON-EMPLOYEE OPTION PRICE EMPLOYEES DIRECTORS PER SHARE --------- ------------ ------------------------- Outstanding, December 31, 1992....... 1,176,929 35,913 $ 4.50 - $ 23.95 Granted......................... 187,125 10,562 10.14 - 24.71 Exercised....................... (363,341) (8,450) 4.50 - 23.95 Terminated...................... (33,770) -- 8.75 - 20.27 --------- ------------ Outstanding, December 31, 1993....... 966,943 38,025 5.63 - 24.71 Granted......................... 156,201 29,575 12.04 - 23.95 Exercised....................... (84,188) (8,450) 5.63 - 19.09 Terminated...................... (60,021) -- 6.75 - 19.75 --------- ------------ Outstanding, December 31, 1994....... 978,935 59,150 6.75 - 24.71 Granted......................... 953,985 57,575 18.50 - 26.00 Exercised....................... (220,284) (88,725) 8.75 - 23.08 Terminated...................... (424,404) -- 11.75 - 21.30 --------- ------------ Outstanding, December 31, 1995....... 1,288,232 28,000 6.75 - 26.00 ========= ============ Exercisable, December 31, 1995....... 432,494 20,500 6.75 - 24.71 ========= ============
In addition to the options in the above table, the Company granted options to purchase 34,200, 45,337 and 84,500 shares of Common Stock in 1991, 1994 and 1995, respectively, to former directors and former employees of acquired companies and to a former officer of the Company. These options were granted pursuant to separate agreements and are not covered by an option plan. Exercises of such options totaled 4,400, 5,600 and 40,334 shares in 1993, 1994 and 1995, respectively, and 113,703 of such options were outstanding and exercisable at December 31, 1995 at prices ranging from $10.14 to $25.75 per share. The Company has a Stock Appreciation Rights Plan (the "SAR Plan") pursuant to which certain officers and other key employees were granted stock appreciation units ("SAR's"). The SAR Plan was amended in 1992 to provide that no additional grants would be made. SAR's were awarded in connection with stock options granted under one of the Company's stock option plans and can be exercised only if the related stock option is exercised. Compensation expense is recorded based on the increase in the market price of the Company's Common Stock since the date of grant. At December 31, 1995, there were 54,166 SAR's outstanding, all of which were vested, at an average price of $10.46 per SAR. During 1995, 1994 and 1993, the Company recognized compensation expense of $121,000, $350,000 and $801,000, respectively, in connection with SAR's. 35 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has a stock bonus plan (the "Bonus Plan") pursuant to which officers and certain other key employees of the Company may be granted shares of Common Stock. The market value of shares granted under the Bonus Plan is recorded to compensation expense on the date of grant. With respect to the Bonus Plan, the Company granted 9,875 shares and recognized compensation expense of $195,000 during 1994. The Company granted no shares under the Bonus Plan in 1995 and 1993. There were 25,179 shares available for future grants under the Bonus Plan at December 31, 1995. The Company has a restricted stock plan for certain officers of the Company and previously had a restricted stock plan for non-employee directors of the Company (collectively, the "Restricted Plans"), pursuant to which shares of common stock may be granted. Shares granted under the Restricted Plans are subject to certain restrictions on ownership and transferability when granted. With respect to grants made to officers prior to 1993, such restrictions generally lapse in four equal annual installments based on continued employment. Beginning in 1993, restrictions on grants made to officers lapse in part based on continued employment and in part based on Company performance. With respect to grants made to non-employee directors, such restrictions lapsed in three equal annual installments based on continued service. The director Restricted Plan has expired by its terms. The compensation related to the restricted stock grants is deferred and amortized to expense on a straight-line basis over the period of time the restrictions are in place, and the unamortized portion is classified as a reduction of paid-in capital in the accompanying consolidated balance sheets. The following table provides a summary of activity related to the Restricted Plans: RESTRICTED PLAN RESTRICTED PLAN FOR NON-EMPLOYEE FOR OFFICERS DIRECTORS ---------------- ----------------- Outstanding, December 31, 1992....... 71,038 39,545 Granted (market price: $15.75 per share)................... 41,250 -- Forfeited....................... (5,000) (3,330) Restrictions terminated......... (24,150) (21,924) ---------------- ----------------- Outstanding, December 31, 1993....... 83,138 14,291 Granted (market price: $19.75 per share)................... 25,450 -- Forfeited....................... (2,438) -- Restrictions terminated......... (52,318) (14,291) ---------------- ----------------- Outstanding, December 31, 1994......................... 53,832 -- Granted (market price: $18.50 per share)................... 29,500 -- Restrictions terminated......... (47,193) -- ---------------- ----------------- Outstanding, December 31, 1995....... 36,139 -- ================ ================= Shares available for future grants at December 31, 1995.................. 160,437 -- ================ ================= Compensation expense: 1995............................ $392,000 $ -- 1994............................ 512,000 84,000 1993............................ 876,000 187,000 Deferred compensation at December 31: 1995............................ $884,000 $ -- 1994............................ 730,000 -- The Company has an Employee Stock Purchase Plan (the "ESPP"), pursuant to which eligible employees can purchase shares of Common Stock through payroll deductions. The Company matches 36 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) a specified percentage of the employee contributions made to the ESPP. Company matching contributions to the ESPP totaled $48,000, $45,000 and $46,000 during 1995, 1994 and 1993, respectively. There were 72,377 shares available for future purchases under the ESPP at December 31, 1995. (7) RETIREMENT AND EMPLOYEE BENEFIT PLANS -- The Company has defined benefit and defined contribution pension plans covering substantially all U.S. employees and certain international employees. Plan benefits are generally based on years of service and average compensation levels. The Company's funding policy is to contribute, at a minimum, the annual amount required under applicable governmental regulations. With respect to certain international plans, the Company has purchased irrevocable annuity contracts to settle certain benefit obligations. Plan assets are invested primarily in equity and fixed income mutual funds. Pension expense related to the Company's defined contribution pension plans totaled $4,489,000, $3,691,000 and $2,962,000 in 1995, 1994 and 1993, respectively. Pension expense related to the Company's defined benefit pension plans included the following components (in thousands): 1995 1994 1993 --------- --------- --------- Service cost -- benefits earned during the period.................. $ 692 $ 1,071 $ 650 Interest cost on projected benefit obligation......................... 365 310 237 Actual return on plan assets......... (354) (47) (227) Net amortization and deferral........ 115 (121) 107 --------- --------- --------- $ 818 $ 1,213 $ 767 ========= ========= ========= The following table sets forth the funded status of the Company's defined benefit pension plans and the assumptions used in computing such information (in thousands, except percentages): U.S. PLANS NON-U.S. PLANS -------------------- -------------------- 1995 1994 1995 1994 --------- --------- --------- --------- Actuarial present value of benefit obligations: Vested benefit obligation.......... $ 941 $ 426 $ 2,591 $ 2,170 ========= ========= ========= ========= Accumulated benefit obligation..... $ 1,441 $ 689 $ 2,939 $ 2,402 ========= ========= ========= ========= Projected benefit obligation....... $ 2,042 $ 1,075 $ 3,735 $ 2,992 Plan assets at fair value.......... 1,130 958 1,729 1,422 --------- --------- --------- --------- Projected benefit obligation in excess of plan assets............ (912) (117) (2,006) (1,570) Unrecognized prior service cost.... 10 -- 183 183 Unrecognized net (gain) loss....... 481 (57) (732) (879) Unrecognized transition obligation. -- -- 160 157 --------- --------- --------- --------- Unfunded accrued pension cost...... (421) (174) (2,395) (2,109) Adjustment for minimum liability... (21) -- -- -- --------- --------- --------- --------- Pension liability.................. $ (442) $ (174) $ (2,395) $ (2,109) ========= ========= ========= ========= Assumed discount rates............. 7.25% 8.5% 6.8-8.0% 7.5-8.0% Assumed rates of increase in compensation levels.............. 4.0% 5.25% 4.0-5.0% 4.0-5.0% Assumed expected long-term rate of return on plan assets............ 8.0% 8.0% 8.0% 8.0% 37 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) COMMITMENTS AND CONTINGENCIES -- Aggregate minimum rental commitments under noncancelable operating leases with lease terms in excess of one year as of December 31, 1995 were as follows (in thousands): 1996................................. $ 11,570 1997................................. 7,363 1998................................. 6,255 1999................................. 5,490 2000................................. 4,345 Thereafter........................... 27,467 --------- $ 62,490 ========= The Company incurred total rental expense under operating leases of $14,069,000, $15,329,000 and $13,689,000 in 1995, 1994 and 1993, respectively. The Company is involved in certain claims and lawsuits arising in the normal course of business. In the opinion of management, the likelihood that uninsured losses, if any, resulting from the ultimate resolution of these matters will have a material adverse effect on the financial position, results of operations or liquidity of the Company is remote. (9) SEGMENT INFORMATION -- 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 operates in four industry segments -- oilfield services, energy products and services, gas compression and pipeline services. Revenues by industry segment and geographic area include both revenues from unaffiliated customers and intersegment revenues from related companies. The price at which intercompany sales are made is generally based on the selling price to unaffiliated customers less a discount or the direct product cost plus a mark-up. Indirect expenses have been allocated to industry segments in proportion to outside revenues. Export sales from the United States to unaffiliated customers in other geographic areas were as follows (in thousands): 1995 1994 1993 --------- --------- --------- Europe/Commonwealth of Independent States............................. $ 10,904 $ 16,443 $ 8,014 Canada............................... 14,729 10,557 12,396 Africa............................... 17,792 9,605 820 Middle East.......................... 3,843 4,209 7,215 Asia-Pacific......................... 11,242 17,047 10,943 Latin America........................ 5,552 4,969 6,422 Other................................ 1,403 381 3,578 --------- --------- --------- $ 65,465 $ 63,211 $ 49,388 ========= ========= ========= 38 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information with respect to industry and geographic segments follows (in thousands):
CORPORATE OILFIELD ENERGY PRODUCTS GAS PIPELINE AND SERVICES AND SERVICES COMPRESSION SERVICES ELIMINATIONS CONSOLIDATED -------- --------------- ----------- -------- ------------ ------------ 1995: Outside revenues..................... $470,548 $ 225,422 $ 94,386 $68,551 $ -- $ 858,907 Intersegment revenues................ -- 20,586 -- -- (20,586) -- Acquisition-related costs and other unusual charges.................... 31,715 22,694 -- 4,762 29,011 88,182 Operating income (loss).............. 41,214 (14,210) 7,788 3,602 (38,212) 182 Identifiable assets.................. 545,688 172,770 434,146 41,940 64,316 1,258,860 Depreciation and amortization........ 65,560 8,636 14,421 5,610 1,730 95,957 Capital expenditures................. 84,968 6,171 16,246 3,098 142 110,625 1994: Outside revenues..................... $423,381 $ 143,757 $ 46,145 $63,466 $ -- $ 676,749 Intersegment revenues................ -- 11,748 -- -- (11,748) -- Acquisition-related costs............ 2,500 -- -- -- -- 2,500 Operating income (loss).............. 52,665 16,668 4,047 (2,237 ) (5,439) 65,704 Identifiable assets.................. 587,454 193,055 267,988 60,890 44,583 1,153,970 Depreciation and amortization........ 54,605 4,532 4,969 5,088 1,843 71,037 Capital expenditures................. 94,722 5,011 10,857 3,266 162 114,018 1993: Outside revenues..................... $358,048 $ 92,164 $ -- $50,279 $ -- $ 500,491 Intersegment revenues................ -- 10,779 -- -- (10,779) -- Acquisition-related costs............ 4,000 -- -- -- -- 4,000 Operating income (loss).............. 44,743 10,726 -- 2,019 (7,817) 49,671 Identifiable assets.................. 429,105 80,972 -- 57,376 68,149 635,602 Depreciation and amortization........ 41,266 2,872 -- 4,920 1,391 50,449 Capital expenditures................. 56,988 3,681 -- 3,004 84 63,757
CORPORATE UNITED OTHER AND STATES CANADA EUROPE AFRICA INTERNATIONAL ELIMINATIONS -------- -------- -------- ------- ------------- ------------ 1995: Outside revenues..................... $471,672 $106,491 $110,065 $57,450 $ 113,229 $ -- Intersegment revenues................ 10,091 167 6,049 -- 1,638 (17,945) Acquisition-related costs and other unusual charges.................... 43,276 2,850 4,302 624 8,119 29,011 Operating income (loss).............. 5,745 11,382 3,088 13,912 4,267 (38,212) Identifiable assets.................. 790,625 73,368 141,673 40,299 148,579 64,316 Capital expenditures................. 59,474 9,953 9,605 5,655 25,796 142 1994: Outside revenues..................... $383,076 $ 75,809 $ 84,830 $41,574 $ 91,460 $ -- Intersegment revenues................ 17,499 287 5,104 -- 1,372 (24,262) Acquisition-related costs............ 2,500 -- -- -- -- -- Operating income (loss).............. 28,924 15,502 3,023 11,204 12,490 (5,439) Identifiable assets.................. 706,175 89,462 125,365 38,708 149,677 44,583 Capital expenditures................. 68,903 8,989 12,309 1,581 22,099 137 1993: Outside revenues..................... $285,163 $ 25,811 $ 73,291 $38,168 $ 78,058 $ -- Intersegment revenues................ 8,383 675 7,982 115 1,375 (18,530) Acquisition-related costs............ 4,000 -- -- -- -- -- Operating income (loss).............. 17,996 4,920 5,607 6,726 22,239 (7,817) Identifiable assets.................. 324,730 35,943 65,975 30,526 110,279 68,149 Capital expenditures................. 33,161 2,312 9,521 2,835 15,854 74
CONSOLIDATED ------------ 1995: Outside revenues..................... $ 858,907 Intersegment revenues................ -- Acquisition-related costs and other unusual charges.................... 88,182 Operating income (loss).............. 182 Identifiable assets.................. 1,258,860 Capital expenditures................. 110,625 1994: Outside revenues..................... $ 676,749 Intersegment revenues................ -- Acquisition-related costs............ 2,500 Operating income (loss).............. 65,704 Identifiable assets.................. 1,153,970 Capital expenditures................. 114,018 1993: Outside revenues..................... $ 500,491 Intersegment revenues................ -- Acquisition-related costs............ 4,000 Operating income (loss).............. 49,671 Identifiable assets.................. 635,602 Capital expenditures................. 63,757 39 WEATHERFORD ENTERRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (10) UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FIRST SECOND THIRD FOURTH QUARTER QUARTER(1) QUARTER QUARTER(2) YEAR(3) -------- ---------- -------- ---------- ----------- 1995: Revenues........................ $219,289 $ 211,079 $220,375 $ 208,164 $ 858,907 Gross profit.................... 61,898 55,239 62,456 53,968 233,561 Acquisition-related costs and other unusual charges.............. -- 28,282 -- 59,900 88,182 Operating income (loss)......... 24,324 (9,163) 25,227 (40,206) 182 Income (loss) before income taxes and minority interests....... 20,580 (12,902) 21,352 (43,984) (14,954) Net income (loss)............... 14,439 (3,145) 13,148 (35,000) (10,558) Net income (loss) per share..... $ 0.29 $ (0.06) $ 0.26 $ (0.68) $ (0.21) 1994: Revenues........................ $138,282 $ 135,395 $181,624 $ 221,448 $ 676,749 Gross profit.................... 40,581 38,040 52,310 57,685 188,616 Acquisition-related costs....... -- -- 2,500 -- 2,500 Operating income................ 14,668 15,246 17,801 17,989 65,704 Income before income taxes and minority interests....... 14,419 14,316 15,753 14,328 58,816 Net income...................... 10,291 10,720 10,604 10,362 41,977 Net income per share............ $ 0.25 $ 0.26 $ 0.23 $ 0.20 $ 0.94
- ------------ (1) Includes unusual charges in 1995 of $28,282,000, or $0.24 per common share. See Note 3. (2) Includes acquisition-related costs in 1995 of $59,900,000, or $0.93 per common share. See Note 3. (3) Includes acquisition-related costs and other unusual charges in 1995 of $88,182,000, or $1.17 per common share. See Note 3. Due to changes in the weighted average common shares outstanding, the sums of the quarterly per share amounts for 1995 do not equal earnings per share for the year. (11) RELATED PARTY TRANSACTIONS The Company provides management services under various gas compressor system fleet rental agency agreements with five limited partnerships and two Subchapter S corporations. Certain of the partners of the limited partnerships and shareholders and officers of the Subchapter S corporations are employees of the Company. The Company recorded management fee income under these agency agreements totaling $1,104,000 and $386,000 during 1995 and 1994, respectively. Since the date of the Total Energy acquisition (see Note 2), the limited partnerships and Subchapter S corporations earned net revenues under these agency agreements, after deducting the management fees, of $859,000 and $299,000 during 1995 and 1994, respectively. (12) ALLOWANCE FOR DOUBTFUL ACCOUNTS Activity in the Company's allowance for doubtful accounts, deducted from receivables in the consolidated balance sheets, was as follows (in thousands): 1995 1994 1993 --------- --------- --------- Balance at beginning of year......... $ 11,240 $ 11,747 $ 6,301 Additions charged to costs and expenses........................... 6,499 2,702 2,603 Deductions for uncollectible receivables written off............ (1,878) (3,437) (1,085) Acquired businesses.................. -- 164 3,945 Translation and other, net........... 81 64 (17) --------- --------- --------- $ 15,942 $ 11,240 $ 11,747 ========= ========= ========= 40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE MATTERS. None. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. For certain information concerning directors of the Company, reference is made to the information included under the caption "Election of Directors" included in the definitive Proxy Statement, which relates to the Annual Meeting of Stockholders of the Company to be held on May 17, 1996 (the "Proxy Statement"), to be filed within 120 days after the close of the fiscal year, which information is incorporated herein by such reference. For certain information concerning executive officers of the Company, see the caption "Executive Officers" in Item 1 elsewhere in this Report. ITEM 11. EXECUTIVE COMPENSATION. For information concerning this Item, reference is made to the caption "Executive Compensation and Other Matters" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. For information concerning this Item, reference is made to the caption "Ownership of Company Stock" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. For information concerning this Item, reference is made to the caption "Executive Compensation and Other Matters" in the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Consolidated Financial Statements of Weatherford Enterra, Inc. and Subsidiaries: Report of Arthur Andersen LLP, Independent Public Accountants, dated February 29, 1996. Consolidated Balance Sheets -- December 31, 1995 and 1994. Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 1995. Consolidated Statements of Stockholders' Equity for Each of the Three Years in the Period Ended December 31, 1995. Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1995. Notes to Consolidated Financial Statements. 2. Exhibits: 2.1 -- Amended and Restated Assets Purchase Agreement among Homco International, Inc., A-1 Bit and Tool Co., Inc., A-1 Bit and Tool Company B.V., A-1 Bit and Tool Company A/S, A-1 Bit and Tool Company GmbH, A-1 Bit and Tool Company Pte., Ltd., Homco Arabian Gulf, Inc., Homco International, Inc., W.R. Grace & Company and Weatherford International Incorporated (incorporated by reference to Exhibit 2.2 to the Company's Form 10-K Annual Report for the year ended December 31, 1992 (File No. 1-7867)). 42 2.2 -- Agreement and Plan of Merger dated as of June 23, 1995, as amended by Amendment No. 1 to Agreement and Plan of Merger dated as of August 28, 1995, between Weatherford International Incorporated and Enterra Corporation (incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-62195)). 2.3 -- Amendment No. 2 to Agreement and Plan of Merger dated as of October 5, 1995, between Weatherford International Incorporated and Enterra Corporation (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated October 5, 1995 (File No. 1-7867)). 2.4 -- Agreement dated as of September 20, 1995, among Zapata Corporation, Energy Industries, Inc., Zapata Energy Industries, L.P., Enterra Corporation and Enterra Compression Company (incorporated by reference to Exhibit 2 to Enterra Corporation's Current Report on Form 8-K dated October 2, 1995 (File No. 1-8153)). 3.1 -- Corrected Restated Certificate of Incorporation of the Company. 3.2 -- Bylaws of the Company, as amended through March 17, 1994 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K dated April 28, 1994 (File No. 1-7867)). 4.1 -- Credit Agreement dated as of October 5, 1995 among Weatherford Enterra, Inc., Weatherford Enterra U.S., Inc., Weatherford/Lamb, Inc., Bank of America Illinois, as Documentation Agent, Texas Commerce Bank National Association, as Administrative Agent, Credit Lyonnais New York Branch, ABN Amro Bank, N.V., Bank of Montreal, First Interstate Bank of Texas, N.A., Arab Banking Corporation (B.S.C.) and the financial institutions listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q Quarterly Report for the quarter ended September 30, 1995 (File No. 1-7867)). 4.2 -- First Amendment to Credit Agreement dated as of December 29, 1995 among Weatherford Enterra, Inc., Weatherford Enterra, U.S., Inc. Weatherford/Lamb, Inc., Weatherford Enterra U.S., Limited Partnership, Bank of America Illinois, as Documentation Agent, Texas Commerce Bank National Association, as Administrative Agent, Credit Lyonnais New York Branch, ABN Amro Bank, N.V., Bank of Montreal, First Interstate Bank of Texas, N.A., Arab Banking Corporation (B.S.C.) and the financial institutions listed on the signature pages thereto. 4.3 -- Agreement dated as of June 23, 1995, as amended as of August 28, 1995, among Weatherford International Incorporated and American Gas & Oil Investors, Limited Partnership, AmGO II, Limited Partnership, AmGO III, Limited Partnership, First Reserve Secured Energy Assets Fund, Limited Partnership, First Reserve Fund V, Limited Partnership, First Reserve Fund V-2, Limited Partnership, and First Reserve Fund VI, Limited Partnership (collectively, the "First Reserve Funds"), and First Reserve Corporation (incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-4 (Registration No. 33-62195)). *10.1-- 1987 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). *10.2-- 1991 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). *10.3-- Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K Annual Report for the year ended December 31, 1990 (File No. 1-7867)) and First Amendment to Stock Appreciation Rights plan (incorporated by reference to Exhibit 10.3 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). 43 *10.4-- Change of Control Agreements with Philip Burguieres, James R. Burke, M.E. Eagles, Norman W. Nolen and H. Suzanne Thomas (incorporated by reference to Exhibit 10.5 to the Company's Form 10-K Annual Report for the year ended December 31, 1993 (File No. 1-7867)); James D. Green, Jon Nicholson and Weldon W. Walker (incorporated by reference to Exhibit 10.4 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)); Philip D. Gardner, Robert A. Seekely and F. Thomas Tilton (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q Quarterly Report for the quarter ended March 31, 1995 (File No. 1-7867)); and Steven C. Grant (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q Quarterly Report for the quarter ended September 30, 1995 (File No. 1-7867); First Amendment to Change of Control Agreements with Philip Burguieres, James R. Burke, M.E. Eagles, Norman W. Nolen, H. Suzanne Thomas, James D. Green, Jon Nicholson and Weldon W. Walker (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q Quarterly Report for the quarter ended March 31, 1995 (File No. 1-7867)); and Philip D. Gardner, Robert A. Seekely and F. Thomas Tilton (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-4 (Registration No. 33-62195)); and Second Amendment to Change of Control Agreements with Philip Burguieres, James R. Burke, M. E. Eagles, Norman W. Nolen, H. Suzanne Thomas, James D. Green, Jon Nicholson and Weldon W. Walker (incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4 (Registration No. 33-62195)). *10.5-- Restricted Stock Incentive Plan, as amended December 13, 1990 (incorporated by reference to Exhibit 10.9 to the Company's Form 10-K Annual Report for the year ended December 31, 1990 (File No. 1-7867)). *10.6-- Indemnification Agreements with Thomas N. Amonett, William E. Greehey, Robert K. Moses, Jr. and H. Suzanne Thomas (incorporated by reference to Exhibit 10.10 to the Company's Form 10-K Annual Report for the year ended December 31, 1987 (File No. 1-7867)); Philip Burguieres and Norman W. Nolen (incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q Quarterly Report for the quarter ended June 30, 1991 (File No. 1-7867)); James R. Burke and John W. Johnson (incorporated by reference to Exhibit 10.9 to the Company's Form 10-K Annual Report for the year ended December 31, 1991 (File No. 1-7867)); M.E. Eagles (incorporated by reference to Exhibit 10.8 to the Company's Form 10-K Annual Report for the year ended December 31, 1992 (File No. 1-7867)); Weldon W. Walker (incorporated by reference to Exhibit 10.7 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)); and John A. Hill, William E. Macaulay, Robert L. Parker, Sr., R. Rudolph Reinfrank, Roger M. Widmann and Steven C. Grant (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q Quarterly Report for the quarter ended September 30, 1995 (File No. 1-7867)). *10.7-- Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.10 to the Company's Form 10-K Annual Report for the year ended December 31, 1992 (File No. 1-7867)). *10.8-- Executive Incentive Stock Bonus Plan, as amended December 31, 1992 (incorporated by reference to Exhibit 10.11 to the Company's Form 10-K Annual Report for the year ended December 31, 1992 (File No. 1-7867)). *10.9-- Non-Employee Director Retirement Plan (incorporated by reference to Exhibit 10.12 to the Company's Form 10-K Annual Report for the year ended December 31, 1992 (File No. 1-7867)). *10.10-- Supplemental Savings Plan (incorporated by reference to Exhibit 10.11 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). 44 *10.11-- Deferred Compensation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.12 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). *10.12-- Non-Employee Director Stock Option Plan (incorporated by reference to Exhibit 10.13 to the Company's Form 10-K Annual Report for the year ended December 31, 1994 (File No. 1-7867)). *10.13-- Consulting Agreement dated October 5, 1995 between Weatherford Enterra, Inc. and D. Dale Wood (incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q Quarterly Report for the quarter ended September 30, 1995 (File No. 1-7867)). 22 -- Subsidiaries of the Company 24 -- Consent of Independent Public Accountants 27.1 -- Article 5 Financial Data Schedule 27.2 -- Article 5 Restated Financial Data Schedule * Management contract or compensatory plan or arrangement The Company will furnish to the Commission upon request a copy of each other instrument with respect to the long-term debt of the Company and its subsidiaries that defines the rights of holders of such debt or includes provisions that provide for cross default under such instruments. The Company will furnish a copy of any exhibit described above to the beneficial holder of its securities upon receipt of a written request therefor, provided that such request sets forth a good faith representation that as of March 29, 1996, the record date for the Company's 1996 Annual Meeting of Stockholders, such beneficial holder is entitled to vote at such meeting, and provided further that such holder pays to the Company a fee compensating the Company for its reasonable expenses in furnishing such exhibits. (b) Reports on Form 8-K: A report on Form 8-K dated October 5, 1995 was filed on October 16, 1995 by the Company reporting the completion of the Enterra Merger. A report on Form 8-K dated December 15, 1995 was filed on December 29, 1995 by the Company reporting the completion of the acquisition by the Company of the assets of Energy Industries. Amendment No. 1 to Form 8-K on Form 8-K/A dated December 15, 1995 was filed on February 27, 1996 by the Company reporting the audited historical financial statements of Energy Industries and the pro forma financial statements of the Company including Energy Industries. 45 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, ON MARCH 20, 1996. WEATHERFORD ENTERRA, INC. By: PHILIP BURGUIERES PHILIP BURGUIERES CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED. SIGNATURE TITLE DATE ----------------- ------------------------------------ -------------- PHILIP BURGUIERES Chairman of the Board, President and March 20, 1996 (PHILIP BURGUIERES) Chief Executive Officer (Principal Executive Officer) NORMAN W. NOLEN Senior Vice President, Chief March 20, 1996 (NORMAN W. NOLEN) Financial Officer and Treasurer (Principal Financial and Accounting Officer) THOMAS N. AMONETT Director March 20, 1996 (THOMAS N. AMONETT) WILLIAM E. GREEHEY Director March 20, 1996 (WILLIAM E. GREEHEY) JOHN A. HILL Director March 20, 1996 (JOHN A. HILL) JOHN W. JOHNSON Director March 20, 1996 (JOHN W. JOHNSON) WILLIAM E. MACAULAY Director March 20, 1996 (WILLIAM E. MACAULAY) ROBERT K. MOSES, JR. Director March 20, 1996 (ROBERT K. MOSES, JR.) ROBERT L. PARKER SR. Director March 20, 1996 (ROBERT L. PARKER, SR.) R. RUDOLPH REINFRANK Director March 20, 1996 (R. RUDOLPH REINFRANK) ROGER M. WIDMANN Director March 20, 1996 (ROGER M. WIDMANN) 46 EX-3.1 2 CORRECTED RESTATED CERT. OF INCORPORATION CORRECTED RESTATED CERTIFICATE OF INCORPORATION OF WEATHERFORD ENTERRA, INC. WEATHERFORD ENTERRA, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that a Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on October 5, 1995 and that said Restated Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware. The inaccuracy or defect of the Restated Certificate to be corrected is as follows: The corporate action referred to in Article FOURTH fails to set forth the effective time of the reverse stock split with respect to the Corporation's Common Stock issued and outstanding immediately prior to the effective time. This Certificate sets forth the Corrected Restated Certificate of Incorporation: RESTATED CERTIFICATE OF INCORPORATION OF WEATHERFORD ENTERRA, INC. (Originally incorporated on December 14, 1970 under the name Dixel Industries Incorporated) FIRST: The name of the Corporation is Weatherford Enterra, Inc. SECOND: The registered office of the Corporation in the State of Delaware is located at 1013 Centre Road, in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, Delaware. THIRD: The nature of the business, objects and purposes to be transacted, promoted or carried on by the Corporation are: To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and with goods, wares and merchandise and personal property of every class and description; To acquire, and pay for in cash, stock or bonds of this Corporation or otherwise, the goodwill, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, partnership, trust, joint stock company, syndicate, firm, association or corporation; To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this Corporation; To acquire by purchase, subscription or otherwise, and to receive, hold, own, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts and other securities, obligations, chosen in action and evidences of indebtedness or interest issued or created by any corporations, joint stock companies, syndicates, associations, firms, trusts or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any state, territory, province, municipality or other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement and enhancement in value thereof; To borrow or raise moneys for any of the purposes of the Corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyance or assignment in trust of the whole or any part of the property of the Corporation, whether at the time owned or thereafter acquired, and to sell, pledge or otherwise dispose of such bonds or other obligations of the Corporation for its corporate purposes; To purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in and with, real or personal property, or any interest therein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of the Corporation's property and assets, or any interest therein, wherever situated; and To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. The business and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this Restated Certificate of Incorporation, but the business and purposes specified in each of the foregoing clauses of this article shall be regarded as independent business and purposes. FOURTH: The total number of shares of stock of all classes which the Corporation shall have authority to issue is 81,000,000, of which 1,000,000 shares of the par value of $1 each shall be designated Serial Preferred Stock (the "Serial Preferred Stock"), and of which 80,000,000 shares of the par value of $.10 each shall be 2 designated Common Stock (the "Common Stock"). A statement of all powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the Serial Preferred Stock and the Common Stock is as follows: A. REVERSE STOCK SPLIT Effective as of 12:15 p.m. on October 5, 1995 (the "Effective Time"), each two shares of Common Stock issued and outstanding immediately prior to the Effective Time shall automatically be changed and converted, without any action on the part of the holder thereof, into one share of Common Stock and, in lieu of interests in a fraction of a share of Common Stock, each holder whose aggregate holdings of Common Stock prior to the Effective Time amounted to a number of shares not evenly divisible by two shall be entitled to receive for such interest in a fraction of a share of Common Stock, and at the Effective Time such interest in a fraction of a share of Common Stock shall be converted into the right to receive, upon the surrender of the stock certificates formerly representing shares of Common Stock, an amount in cash equal to $12.88 for such interest in a fraction of a share of Common Stock. B. SERIAL PREFERRED STOCK (1) Shares of Serial Preferred Stock may be issued from time to time in one or more series, each such series to have distinctive serial designations, as shall hereafter be determined in the resolution or resolutions providing for the issue of such Preferred Stock from time to time adopted by the Board of Directors pursuant to authority so to do, which is hereby vested in the Board of Directors. (2) Each series of Preferred Stock (a) may have such number of shares; (b) may have such voting powers, full or limited, or may be without voting powers; (c) may be subject to redemption at such time and at such prices; (d) may be entitled to receive dividends (which may be cumulative or noncumulative), at such rate or rates, on such conditions, from such date or dates, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock; (e) may have such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (f) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange, and with such adjustments; 3 (g) may be entitled to the benefit of a sinking fund or purchase fund to be applied to the purchase or redemption of shares of such series in such amount or amounts; (h) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on and the purchase, redemption or other acquisition by the Corporation or any subsidiary of any outstanding stock of the Corporation; and (i) may have such other relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof; as shall be stated in said resolution or resolutions providing for the issue of such Serial Preferred Stock. Except where otherwise set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Serial Preferred Stock, the number of shares comprising such series may be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors. (3) Shares of any series of Serial Preferred Stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of Serial Preferred Stock and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of Serial Preferred Stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Serial Preferred Stock and to any filing required by law. C. COMMON STOCK (1) Except as otherwise provided by law or by the resolution or resolutions of the Board of Directors providing for the issue of any series of the Serial Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share held. (2) Subject to all of the rights of the Serial Preferred Stock or any series thereof, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends payable in cash, stock or otherwise. 4 (3) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and after the holders of the Serial Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or a sum sufficient for such payments in full shall have been set aside, the remaining net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of the Serial Preferred Stock. D. GENERAL PROVISIONS (1) Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, upon not less than thirty nor more than sixty days written notice. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this paragraph (1), Section D of Article FOURTH. (2) No stockholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the Corporation, whether now or hereafter authorized, or any bonds, debentures or other securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed of by the Board of Directors to such persons on such terms as, in its discretion, it shall deem advisable. FIFTH: The Corporation is to have perpetual existence. SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (1) To make, alter or repeal the by-laws of the Corporation, in the manner and subject to any limitations contained in such by-laws, to the extent such action is not inconsistent with the provisions of this Restated Certificate of Incorporation. (2) To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. (3) To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. 5 (4) By a majority of the whole Board of Directors, to designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution or in the by-laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, the by-laws may provide that in the absence or disqualification of any member of such committee or committees the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. (5) When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders meeting duly called upon such notice as is required by statute, this Restated Certificate of Incorporation or the by-laws of the Corporation, to sell, lease or exchange all or substantially all the property and assets of the Corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, including securities of any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interests of the Corporation; provided, however, that to the extent any such sale, lease or exchange would constitute a "Business Combination" as defined in Article ELEVENTH of this Restated Certificate of Incorporation, the provisions of such Article ELEVENTH shall control and no such sale, lease or exchange shall be made except upon compliance with and pursuant to the applicable terms and provisions of such Article ELEVENTH. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement 6 and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation. Elections of directors need not be by written ballot unless the by-laws of the Corporation shall so provide. NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that to the extent that any provision of this Restated Certificate of Incorporation requires for approval of any such amendment, alteration, change or repeal the approving vote of a greater percentage of the capital stock of the Corporation having voting power with respect to such action than the percentage required by statute, then such provision shall be controlling and no such action shall be taken except upon a vote meeting the greater percentage requirements of such provision. TENTH: Board of Directors. A. NUMBER, ELECTION AND TERMS. The business and affairs of the Corporation shall be managed by a Board of Directors consisting of not less than six nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. At the 1983 annual meeting of stockholders, the directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1984 annual meeting of stockholders, the term of office of the second class to expire at the 1985 annual meeting of stockholders and the term of office of the third class to expire at the 1986 annual meeting of stockholders. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. B. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the rights of the holders of any series of Serial Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. No decrease in the 7 number of directors constituting the Board of Directors shall shorten the term of any incumbent director. C. REMOVAL. Subject to the rights of the holders of any series of Serial Preferred Stock then outstanding, any director or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote for the election of directors. D. AMENDMENT, REPEAL, ETC. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all the shares of the Corporation entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH. E. LIMITATION OF LIABILITY. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper personal benefit. This section shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of the amendment adding this section to the Company's Restated Certificate of Incorporation. Any repeal or modification of this section by the stockholders of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. If the Delaware General Corporation Law hereafter is amended to authorize the further elimination or limitation of the personal liability of directors, then the liability of each director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. ELEVENTH: Vote Required for Certain Business Combinations. A. HIGHER VOTE REQUIRED FOR APPROVAL OF CERTAIN BUSINESS COMBINATIONS. (1) HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any affirmative vote required by law or this Restated Certificate of Incorporation, and except as otherwise expressly provided in paragraph B of this Article ELEVENTH: (a) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or 8 consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $1,000,000 or more; or (c) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or (d) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (e) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class (it being understood that for purposes of this Article ELEVENTH, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article FOURTH of this Restated Certificate of Incorporation, including any resolution of the Board of Directors providing for the designation of any series of the Serial Preferred Stock). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) DEFINITION OF "BUSINESS COMBINATION." The term "Business Combination" as used in this Article ELEVENTH shall mean any transaction which is 9 referred to in any one or more of clauses (a) through (e) of such paragraph (1) of this paragraph A. B. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of paragraph A of this Article ELEVENTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provisions of this Restated Certificate of Incorporation, if all of the conditions specified in either of the following paragraphs (1) and (2) are met: (1) APPROVAL BY CONTINUING DIRECTORS. The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined.) (2) PRICE AND PROCEDURE REQUIREMENTS. All of the following conditions shall have been met: (a) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (A) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article ELEVENTH as the "Determination Date"), whichever is higher; and (iii) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to subparagraph B(2)(a)(ii) above, multiplied by the ratio of (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (B) the Fair Market Value per share of Common Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of Common Stock. 10 (b) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock (other than Institutional Voting Stock, as hereinafter defined) shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (B)(2)(b) shall be required to be met with respect to every class of outstanding Voting Stock (other than Institutional Voting Stock)), whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (A) within the two-year period immediately prior to the Announcement Date or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (iii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and (iv) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to subparagraph B(2)(a)(iii) above, multiplied by the ratio of (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date to (B) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of such class of Voting Stock. (c) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or 11 the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. (d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding Serial Preferred Stock; (ii) there shall have been (A) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (B) any increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). C. CERTAIN DEFINITIONS. For the purposes of this Article ELEVENTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: 12 (a) is the beneficial owner, directly or indirectly, of more than 20% of the voting power of the outstanding Voting Stock; or (b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 20% or more of the voting power of the then outstanding Voting Stock; or (c) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be a "beneficial owner" of any Voting Stock: (a) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (4) For purposes of subparagraph (2) of this paragraph C, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (3) of this paragraph C but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on May 27, 1983. (6) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested 13 Stockholder set forth in subparagraph (2) of this paragraph C, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (7) "Continuing Director" means any member of the Board of Directors of the Corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. (8) "Fair Market Value" means: (a) in the case of stock, the highest closing sales price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape for the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. (9) "Institutional Voting Stock" shall mean any class of Voting Stock which was issued to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors. (10) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash" as used in subparagraphs (2)(a) and (b) of paragraph B of this Article ELEVENTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. D. DETERMINATION BY DIRECTORS. Notwithstanding anything to the contrary in this Article ELEVENTH, the directors of the Corporation shall have the power to determine for the purposes of this Article ELEVENTH, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether a class of Voting Stock is Institutional Voting Stock, and (5) whether the assets which are the subject of any Business Combination have, 14 or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more. E. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED STOCKHOLDERS. Nothing contained in this Article ELEVENTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the by-laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the by-laws of the Corporation), the affirmative vote of the holders of 80% or more of the voting power of the shares of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article ELEVENTH of this Restated Certificate of Incorporation. IN WITNESS WHEREOF, the Corporation has caused this Corrected Restated Certificate of Incorporation to be signed by its duly authorized officer on this 18th day of January, 1996. WEATHERFORD ENTERRA, INC. By: /S/ H. SUZANNE THOMAS H. Suzanne Thomas Senior Vice President, Secretary and General Counsel 15 EX-4.2 3 1ST AMEND. TO CREDIT AGREE. DEC. 29, 1995 FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is entered into as of December 29, 1995, among WEATHERFORD ENTERRA, INC., a Delaware corporation (the "COMPANY"), WEATHERFORD ENTERRA U.S., INC., a Delaware corporation ("WUSI"), WEATHERFORD/LAMB, INC., a Delaware corporation ("WLI"), WEATHERFORD ENTERRA U.S., LIMITED PARTNERSHIP, a Louisiana limited partnership ("W/E, L.P."), the several financial institutions party to this First Amendment (collectively, the "BANKS"; individually, a "BANK"), BANK OF AMERICA ILLINOIS, as the documentation agent for the Banks (the "DOCUMENTATION AGENT"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as the administrative agent for the Banks (the "ADMINISTRATIVE AGENT"; together with the Documentation Agent, the "AGENTS"), CREDIT LYONNAIS NEW YORK BRANCH, as the senior co-agent and ABN AMRO BANK, N.V., BANK OF MONTREAL, FIRST INTERSTATE BANK OF TEXAS, N.A. and ARAB BANKING CORPORATION (B.S.C.), as the co-agents. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement referred to below shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, the Company, the Banks, the Agents and the Co-Agents are parties to a certain Credit Agreement dated as of October 5, 1995 (as at any time amended, modified or supplemented and in effect from time to time, the "CREDIT AGREEMENT"); and WHEREAS, WUSI is transferring substantially all of its assets to W/E, L.P., whose sole general partner is WUSI and whose sole limited partner is CRC-Evans Automatic Welding Limited, a Delaware corporation which is a wholly-owned subsidiary of WUSI; WHEREAS, the Company, the Banks, the Agents and the co-agents wish to amend the Credit Agreement to add W/E, L.P. as a Revolving Loan Borrower and to amend certain other terms of the Credit Agreement; and WHEREAS, pursuant to SECTION 6.13 of the Credit Agreement W/E, L.P. will execute a Guaranty; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agrees as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) AMENDMENTS TO ARTICLE I. (i) The definition of "Revolving Loan Borrowers" set forth in ARTICLE I of the Credit Agreement is hereby amended to read as follows: "REVOLVING LOAN BORROWERS" means each of the Company, WUSI, WLI and W/E, L.P. (ii) The following new definition is hereby added: "W/E, L.P." means Weatherford Enterra U.S., Limited Partnership, a Louisiana limited partnership whose sole general partner is WUSI and whose sole limited partner is CRC-Evans Automatic Welding Limited, a Delaware corporation which is wholly-owned by WUSI. (b) AMENDMENTS TO ARTICLE V. ARTICLE V of the Credit Agreement is hereby amended in the following respects: (i) SECTION 5.01(A) is hereby amended by adding (A) the following words after the word "corporation": "or partnership, as applicable", and (B) the following words after the word "incorporation": "or organization, as applicable"; and (ii) SECTION 5.01(C) is hereby amended by adding the following words after the word "corporation": "or partnership, as applicable"; and (iii) SECTION 5.02 is hereby amended by adding the following words after the word "corporate" in line 4: "or partnership, as applicable". (c) AMENDMENTS TO ARTICLE VI. ARTICLE VI is hereby amended in the following respects: (i) SECTIONS 6.04(A) and 6.04(B) are hereby amended by adding (A) the following words after the word "corporate" each time it appears: "(or partnership, as applicable)", and (B) the following words after the word "incorporation" each time it appears: "or organization". (ii) SECTION 6.13 is hereby amended by adding the following words after the word "incorporated": "or organized". (d) AMENDMENTS TO ARTICLE VII. (i) SECTION 7.01(A) of the Credit Agreement is hereby amended by adding the following words after the words "SCHEDULE 7.01,": "including any such Liens which continue on such property following a transfer of such property in cases where such transfer is permitted by SECTION 7.02(D)"; and (ii) SECTION 7.02 of the Credit Agreement is hereby amended by redesignating SUBSECTION 7.02(D) to be SUBSECTION 7.02(E) and adding a new SUBSECTION 7.02(D) to read as follows: - 2 - "(d) dispositions of assets by the Company, a Borrower or any of their respective Subsidiaries to the Company or any Guarantor;" SECTION 2. ADDITIONAL BORROWER. (a) W/E, L.P. hereby agrees to be a Revolving Loan Borrower as defined in the Credit Agreement. W/E, L.P. confirms that the representations and warranties in ARTICLE V of the Credit Agreement are true and correct as to W/E, L.P. as of the date hereof, except such representations and warranties which expressly refer to an earlier date. (b) W/E, L.P. hereby agrees to perform all the obligations of a Revolving Loan Borrower under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation SECTION 10.14 thereof, as if the undersigned were a signatory party thereto. SECTION 3. GUARANTY OF CRC-EVANS AUTOMATIC WELDING LIMITED. Pursuant to SECTION 6.13 of the Credit Agreement, no later than January 29, 1996, the Company will cause CRC-Evans Automatic Welding Limited to execute and deliver to the Administrative Agent a Guaranty substantially in the form of EXHIBIT B-2 to the Credit Agreement and to furnish to the Administrative Agent a written opinion of counsel for CRC-Evans Automatic Welding Limited substantially in the form of EXHIBITS G-1 and G-2 of the Credit Agreement. SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers and each of the Guarantors represent and warrant to the Agents and to each of the Banks that: (a) This First Amendment, the Credit Agreement as amended hereby, and each Guaranty have been duly authorized, executed and delivered by the Borrowers and the Guarantors who are parties thereto and constitute their legal, valid and binding obligations enforceable in accordance with their respective terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally and to general principles of equity). (b) The representations and warranties set forth in ARTICLE V of the Credit Agreement are true and correct in all material respects before and after giving effect to this First Amendment with the same effect as if made on the date hereof, except to the extent such representations and warranties expressly related to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date. (c) As of the date hereof, at the time of and immediately after giving effect to this First Amendment, no Default or Event of Default has occurred and is continuing. - 3 - SECTION 5. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective on the date (the "Effective Date") of the delivery by the Borrowers and the Guarantors to the Administrative Agent of the following: (a) this First Amendment, signed by the Company, the Borrowers, the Guarantors, the Agents, the co-agents and each of the Banks; (b) A Revolving Note executed by W/E, L.P. payable to each Bank, in the form attached as EXHIBIT E to the Credit Agreement; (c) a Guaranty executed by W/E, L.P. in the form attached as EXHIBIT B-2 to the Credit Agreement; (d) with respect to W/E, L.P.: (i) a copy of the partnership agreement of W/E, L.P., certified by the Secretary of W/E, L.P.; (ii) copies of the resolutions of the board of directors of Weatherford Enterra U.S., Inc., as the sole general partner of W/E, L.P., authorizing WUSI to execute the partnership agreement of W/E, L.P., certified by the Secretary or Assistant Secretary of WUSI; and copies of resolutions of the board of directors of W/E, L.P., authorizing the execution and delivery of this First Amendment, Revolving Notes and a Guaranty, together with specimen signatures of the officers executing this First Amendment, Revolving Notes and such Guaranty, certified by the Secretary or Assistant Secretary of W/E, L.P.; (iii) a Certificate issued by the Secretary of State of Louisiana, certifying the filing of the Articles of Partnership of W/E, L.P.; and (iv) a copy of W/E, L.P.'s Application for Registration to Qualify to do Business in Texas, submitted to the Texas Secretary of State; (e) a letter confirming that The Prentice-Hall Corporation System, Inc. has accepted appointment by W/E, L.P. as its agent for service of process in New York; (f) legal opinions of Texas, New York and Louisiana counsel for W/E, L.P., substantially in the form of Exhibits A, B and C attached hereto; and (g) the fees and expenses payable to the Agents pursuant to SECTION 10.04(A) of the Credit Agreement, in connection with this First Amendment. SECTION 6. EFFECT OF AMENDMENT. This First Amendment (i) except as expressly provided herein, shall not be deemed to be a consent to the modification or waiver of any - 4 - other term or condition of the Credit Agreement or of any of the instruments or agreements referred to therein and (ii) shall not prejudice any right or rights which the Administrative Agent or the Banks may now have under or in connection with the Credit Agreement, as amended by this First Amendment. Except as otherwise expressly provided by this First Amendment, all of the terms, conditions and provisions of the Credit Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Credit Agreement, as amended hereby, shall continue in full force and effect, and that this First Amendment and such Credit Agreement shall be read and construed as one instrument. SECTION 7. GUARANTIES. Each of the Guarantors hereby consents to and accepts the terms and conditions of this First Amendment, agrees to be bound by the terms and conditions hereof, and ratifies and confirms that its Guaranty executed and delivered in connection with the Credit Agreement is and remains in full force and effect. SECTION 8. MISCELLANEOUS This First Amendment shall for all purposes be construed in accordance with and governed by the laws of the State of New York. The captions in this First Amendment are for convenience of reference only and shall not define or limit the provisions hereof. This First Amendment may be executed in separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this First Amendment, it shall not be necessary to produce or account for more than one such counterpart. NO ORAL AGREEMENTS. THE CREDIT AGREEMENT (AS AMENDED BY THIS FIRST AMENDMENT) AND THE OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [SIGNATURES BEGIN ON FOLLOWING PAGE] - 5 - IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date and year first above written. WEATHERFORD ENTERRA, INC. By: /s/ NORMAN W. NOLEN Norman W. Nolen Senior Vice President, Chief Financial Officer and Treasurer WEATHERFORD ENTERRA U.S., INC. By: /s/ NORMAN W. NOLEN Norman W. Nolen Senior Vice President, Chief Financial Officer and Treasurer WEATHERFORD/LAMB, INC. By: /s/ NORMAN W. NOLEN Norman W. Nolen Senior Vice President, Chief Financial Officer and Treasurer WEATHERFORD ENTERRA U.S., LIMITED PARTNERSHIP By: /s/ H. SUZANNE THOMAS Name: H. Suzanne Thomas Title: Senior Vice President and Secretary - 6 - BANK OF AMERICA ILLINOIS, as Documentation Agent and as a Bank By: /s/ JOHN M. ROBINSON Name: John M. Robinson Title: Managing Director TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent and as a Bank By: /s/ MONA M. FOCH Name: Mona M. Foch Title: Vice President CREDIT LYONNAIS NEW YORK BRANCH, as Senior Co-Agent and as a Bank By: /s/ ALAIN PAPIASSE Name: Alain Papiasse Title: Executive Vice President ABN AMRO BANK N.V., as Co-Agent and as a Bank By: /s/ W. BRYAN CHAPMAN Name: W. Bryan Chapman Title: Vice President By: /s/ H. GENE SHIELS Name: H. Gene Shiels Title: Vice President BANK OF MONTREAL, as Co-Agent and as a Bank By: /s/ DONALD G. SKIPPER Name: Donald G. Skipper Title: Director - 7 - FIRST INTERSTATE BANK OF TEXAS, N.A., as Co-Agent and as a Bank By: /s/ FRANK W. SCHAGEMAN Name: Frank W. Schageman Title: Vice President ARAB BANKING CORPORATION (B.S.C.), as Co-Agent and as a Bank By: /s/ STEPHEN A. PLAUCHE Name: Stephen A. Plauche Title: Vice President THE BANK OF NEW YORK By: /s/ ALAN F. LYSTER, JR. Name: Alan F. Lyster, Jr. Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ F.C.H. ASHBY Name: F.C.H. Ashby Title: Senior Manager Loan Operations FIRST NATIONAL BANK OF COMMERCE By: /s/ J. CHARLES FREEL, JR. Name: J. Charles Freel, Jr. Title: Vice President THE FUJI BANK, LIMITED By: /s/ DAVID L. KELLEY Name: David L. Kelley Title: Vice President & Senior Manager - 8 - THE MITSUBISHI BANK, LIMITED By: /s/ SHOJI HONDA Name: Shoji Honda Title: General Manager NATIONSBANK OF TEXAS, N.A. By: /s/ W. KEITH BUCHANAN Name: W. Keith Buchanan Title: Vice President THE YASUDA TRUST AND BANKING COMPANY, LIMITED By: /s/ GERALD GILL Name: Gerald Gill Title: Vice President - 9 - EX-22 4 SUBSIDIARIES OF THE COMPANY WEATHERFORD ENTERRA, INC. SUBSIDIARIES AND AFFILIATES (December 31, 1995) JURISDICTION % OF COMPANY OWNERSHIP NAME OF INCORPORATION (DIRECT OR INDIRECT) ---- ---------------- ----------------------- A-1 Bit & Tool Co., B.V. Netherlands 100% by W/Eurasia B.V. Amco Internacional de Mexico, S.A. de C.V. Mexico 100% by T-LOR Barber Industries, Inc. (now known as Weatherford Delaware 100% by Barber International, Inc.) Barber Industries Ltd. (now known as Canada 100% by WE/Canada 500564 Alberta Ltd.) ("Barber") Bit & Tool A-1 S.r.l. Italy 100% by WEMESPA CanaRoss Limited Russia 50% by PAT (Cyprus) CRC-Evans Automatic Welding, Inc. ("CRC-Evans Welding") Texas 100% by CRC-Evans CRC-Evans Automatic Welding Limited Delaware 100% by WUSI CRC-Evans Canada Ltd. Canada 100% by WE/Canada CRC-Evans Holland B.V. Netherlands 100% by CRC-Evans CRC-Evans Limited Delaware 100% by CRC-Evans CRC-Evans Pipeline Equipment, Inc. Texas 100% by CRC-Evans CRC-Evans Pipeline International (UK) Limited ("CRC-Evans Ltd.") United Kingdom 100% by W/Eurasia Ltd. CRC-Evans Pipeline International, Inc. ("CRC-Evans") Delaware 100% by WEI CRC-Evans Rehabilitation Systems, Inc. ("CRC-Rehab.") Delaware 100% by CRC-Evans CRC-Evans Services Limited United Kingdom 100% by W/Eurasia Ltd. CUPS System, Inc. Delaware 100% by CRC-Rehab. EMI-Elettro Magnetica Ispezioni Italia S.r.l. Italy 100% by WEMESPA Energy Tools, Inc. Louisiana 100% by WUSI Enterra (Thailand) Ltd. Thailand 100% by WEI Enterra (U.K.) Limited United Kingdom 100% by OFRH Enterra Colombia Limited British Virgin Islands 100% by EOFS Enterra Compression Company ("E/Compression") Delaware 100% by EPEG Enterra Compression Investment Company ("E/Investment") Delaware 100% by E/Compression Enterra Corporation Nevada 100% by WEI Enterra de Mexico S.A. de C.V. Mexico 100% by WUSI Enterra International Limited United Kingdom 100% by OFRH Enterra Norway AS Norway 100% by WEI Enterra Oil Field Services, Ltd. ("EOFS") Bermuda 100% by WUSI Enterra Oilfield Rentals (Malaysia) Sdn. Bhd. Malaysia 100% by E/Singapore Enterra Oilfield Rentals Limited Hong Kong 100% by WEI Enterra Oilfield Rentals Pte. Ltd. ("E/Singapore") Singapore 100% by OFRH Enterra Oilfield Rentals Pty. Ltd. Australia 100% by OFRH Enterra Patco Oilfield Products Incorporated Texas 100% by WEI Enterra Patco Oilfield Products Limited Canada 10% by WE/Canada Enterra Petroleum Equipment Group, Inc. ("EPEG") Delaware 100% by WEI Enterra Petroleum Equipment Group (UK) Ltd. United Kingdom 100% by W/Eurasia Ltd. Enterra Quality Drilling Tools Pte. Ltd. Singapore 100% by E/Singapore Enterra Rental and Fishing Company Delaware 100% by WUSI European Material Inspection (EMI) B.V. Netherlands 100% by W/Eurasia B.V. Evline Corp. Oklahoma 100% by WEI - 1 - Homco Arabian Gulf, Inc. Delaware 100% by WUSI Homco Oilfield Services Limited United Kingdom 100% by W/Eurasia Ltd. Inversiones Papershell Venezolana, S.A. Venezuela 100% by T-LOR Keltic Oil Tools Limited United Kingdom 100% by OFRH LRJV Incorporated California 100% by WEI Lynx Tool Company Inc. Colorado 100% by WUSI Nana Test, Inc. Alaska 100% by TEST Norvac Systems, Inc. Delaware 100% by CRC-Evans Offshore Pipeline Services Limited United Kingdom 45% by CRC-Evans Ltd. Oil Field Rental Holdings Limited ("OFRH") United Kingdom 100% by W/Eurasia Ltd. Oil Field Rental Manufacturing Services Incorporated Texas 100% by WUSI PETCO Fishing & Rental Tools (U.K.) Ltd. United Kingdom 100% by W/Eurasia Ltd. PIM Pipeline Services, Inc. Delaware 100% by CRC-Evans Pipeline Induction Heat Limited United Kingdom 91.67% by CRC-Evans Ltd. Pipetex Limited United Kingdom 100% by CRC-Evans Ltd. Ported Tools, Inc. Louisiana 100% by WUSI Positive Action Tool Western (Cyprus) Limited ("PAT/Cyprus") Cyprus 100% by WE/Canada Reamco, Inc. Oklahoma 100% by EPEG Siciliano Interior Systems Co. Pennsylvania 100% by WEI ServiciosTec LDC Cayman Islands 100% by EOFS Stabil Drill Specialties Incorporated Texas 100% by EPEG Technical Oil Services Limited British Virgin Islands 100% by EOFS Test International E.C. Bahrain 100% by TEST Texas Reamer, Inc. Oklahoma 100% by EPEG Total Engineering Services Team, Inc. ("TEST") Louisiana 100% by EPEG Triumph-LOR International, Inc. ("T-LOR") Texas 100% by WUSI Watson Packer, Inc. Texas 50.85% by EPEG Weatherford Abu Dhabi, Limited ("W/Abu Dhabi") Cayman Islands 100% by WLI Weatherford/Al-Rushaid Ltd. Saudi Arabia 49% by W/Overseas Products, Ltd. Weatherford Australia Pty. Limited Australia 100% by WLI Weatherford/Bin Hamoodah Abu Dhabi, UAE 49% by W/Abu Dhabi Weatherford East Europe Service GmbH Germany 100% by W/Holding Weatherford Enterra Canada Ltd. ("WE/Canada") Canada 100% by WLI Weatherford Enterra S.A. Argentina 100% by WLI Weatherford Enterra Compression Company, L.P. Texas 99% by E/Investment & 1% by E/Compression Weatherford Enterra U.S., Limited Partnership Louisiana 99% by CRC-Evans Welding & 1% by WUSI Weatherford Espana, S.A. Spain 100% by W/Holding Weatherford Eurasia B.V. ("W/Eurasia B.V.") Netherlands 100% by WLI Weatherford Eurasia Ltd. ("W/Eurasia Ltd.") United Kingdom 99.9% by WLI & .1% by WEI Weatherford France, S.A. France 100% by WII Weatherford Holding GmbH ("W/Holding") Germany 100% by WLI Weatherford, Inc. Panama 100% by WLI Weatherford Inspection Services AS Norway 100% by W/Norge Weatherford International, Inc. (formerly Barber Industries, Inc.) Delaware 100% by Barber Weatherford Ireland Limited Ireland 50% by W/U.K. & 50% by WLI Weatherford/Lamb, Inc. Delaware 100% by WEI Weatherford Latin America S.A. Panama 100% by WLI Weatherford (Malaysia) Sdn. Bhd. Malaysia 40% by WLI - 2 - Weatherford Mediterranea S.p.A. ("WEMESPA") Italy 100% by W/Eurasia B.V. Weatherford de Mexico, S.A. de C.V. Mexico 99.9% by WLI & .1% by WII Weatherford Nigeria Ltd. Nigeria 60% by WLI Weatherford Norge A/S ("W/Norge") Norway 100% by W/Eurasia B.V. Weatherford Oil Tool Ges.m.b.H. Austria 95% by WLI & 5% by WII Weatherford Oil Tool GmbH Germany 100% by W/Holding Weatherford Oil Tool Middle East Limited British Virgin Islands 100% by WLI Weatherford Oil Tool Nederland B.V. Netherlands 100% by W/Eurasia B.V. Weatherford Oil Tool (Private) Limited Singapore 100% by WLI Weatherford Overseas Products, Limited Cayman Islands 100% by WLI Weatherford Overseas Services, Limited Cayman Islands 100% by WLI Weatherford QAF (B) Sdn. Bhd. Brunei 50% by WLI Weatherford (Saudi Arabia), Ltd. Saudi Arabia 49% by W/Overseas Services, Ltd. Weatherford Services, S.A. Panama 100% by W/Holding Weatherford (U.K.) Limited United Kingdom 100% by W/Eurasia Ltd. Weatherford U.S., Inc. ("WUSI") Delaware 100% by WEI Weatherford Venezuela, S.A. Venezuela 100% by WLI Whiting Oilfield Rental, Inc. Texas 100% by WUSI WI Products and Equipment, Inc. Cayman Islands 100% by WLI World Wide Leasing LDC Cayman Islands 99% by EOFS & 1% by WUSI
- 3 - EX-24 5 CONSENT OF IND. ACCOUNTANTS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 29, 1996, on the December 31, 1995 consolidated financial statements, included in this Form 10-K, into the Company's previously filed Registration Statement File Numbers 33-18187, 33-30522, 33-43131, 2-88509, 33-54842, 33-54844, 33-54846, 33-54848, 33-54850, 33-62253, 33-63215, 33-80068, 33-84076 and 33-84074. /s/ ARTHUR ANDERSEN LLP Arthur Andersen LLP Houston, Texas March 20, 1996 EX-27.1 6 FDS
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1995 DEC-31-1995 32,800 0 247,067 15,942 165,383 463,362 1,181,570 667,025 1,258,860 195,982 0 0 0 5,099 725,744 1,258,860 858,907 858,907 625,346 625,346 233,379 0 17,217 (14,954) (4,616) (10,558) 0 0 0 (10,558) (.21) (.21)
EX-27.2 7 FDS RESTATED
5 THE RESTATED FINANCIAL DATA SCHEDULE REFLECTS THE COMPANY'S MERGER WITH ENTERRA CORPORATION ACCOUNTED FOR A POOLING OF INTERESTS AND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS 9-MOS DEC-31-1995 DEC-31-1995 DEC-31-1995 MAR-31-1995 JUN-30-1995 SEP-30-1995 19,389 20,131 31,453 0 0 0 245,826 250,361 251,853 12,130 12,283 12,771 156,278 155,009 150,591 435,790 445,589 455,119 1,108,023 1,108,813 1,109,037 644,331 653,396 652,937 1,141,888 1,137,723 1,147,007 170,142 172,547 180,544 0 0 0 0 0 0 0 0 0 5,062 5,067 5,088 742,792 742,938 761,159 1,141,888 1,137,723 1,147,007 219,289 430,368 650,743 219,289 430,368 650,743 157,391 313,231 471,150 157,391 313,231 471,150 37,574 101,976 139,205 0 0 0 4,111 8,255 12,751 20,580 7,678 29,030 6,168 (3,305) 4,373 14,439 11,294 24,442 0 0 0 0 0 0 0 0 0 14,439 11,294 24,442 .29 .22 .48 .29 .22 .48
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