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WEATHERFORD INTERNATIONAL, INC.
2000 Annual ReportCritical Technologies for Increasing Reservoir Recovery
Underbalanced SystemsLess pressure. More flow.
Expandable Sand ScreensRevolutionize Sand Control
Production EfficiencyImproves with Remote Optimization Systems
www.weatherford.com
Brought to you by Global Reports
WO
RL
DW
ID
E
SU
CC
ES
S
Tab
le o
f C
ont
ents
1 F
inancia
l H
ighlights
2 E
dit
or’s
Note
s
6 D
rillin
g &
Inte
rventi
on
Serv
ices
Tech
nolo
gy
Sce
ne
Fully
inte
grat
ed g
loba
l cap
abilit
ies
inun
derb
alan
ced
drilli
ng s
ervi
ces
and
prod
ucts
, a r
ecog
nize
d le
ader
ship
pos
i-tio
n in
rig
mec
hani
zatio
n sy
stem
s an
d a
posi
tive
inte
rnat
iona
l mar
ket
outlo
ok h
ave
acce
lera
ted
oppo
rtun
ities
in t
his
divi
sion
.
8 C
om
ple
tion S
yste
ms
Technolo
gy
Scene
A g
loba
l lea
der i
n ex
pand
able
tech
nolo
gies
,cl
ass-
lead
ing
liner
han
ger
tech
nolo
gies
and
a st
rong
pos
ition
in th
e hi
gh-e
nd d
eepw
ater
flow
con
trol
mar
ket
adde
d to
the
out
look
for
this
div
isio
n.
10A
rtifi
cia
l Lif
t Sys
tem
sTe
chnolo
gy
Scene
Ack
now
ledg
ed a
s th
e w
orld
-wid
e si
ngle
-so
urce
pro
vide
r of
all
form
s of
art
ifici
al li
ftsy
stem
s, a
lead
ing
deve
lope
r of
rem
otel
yop
erat
ed p
rodu
ctio
n op
timiz
atio
n sy
s-te
ms,
and
thi
s di
visi
on’s
focu
s on
a s
ys-
tem
s ap
proa
ch t
o as
set
reco
very
hav
eco
ntrib
uted
to
its in
tern
atio
nal g
row
th.
12G
adgets
New
tec
hnol
ogie
s de
velo
ped
byW
eath
erfo
rd a
re h
elpi
ng t
o m
axim
ize
prod
uctio
n an
d in
crea
se s
avin
gs
for
cust
omer
s.
On t
he F
ront
Cove
r W
ith it
s m
echa
nize
d rig
sys
tem
s te
ch-
nolo
gy, W
eath
erfo
rd is
wel
l pos
ition
edto
cap
italiz
e on
the
gro
win
g w
orld
wid
etr
end
tow
ard
safe
r an
d m
ore
effic
ient
rig
oper
atio
ns. W
eath
erfo
rd c
ontin
ues
tom
ove
this
tec
hnol
ogy
forw
ard
with
pip
eha
ndlin
g sy
stem
s an
d eq
uipm
ent
desi
gns
impl
emen
ted
on n
ew-b
uild
san
d up
grad
es, f
or d
eepw
ater
dril
ling
vess
els,
and
land
rig
s.
Dri
llin
g &
Inte
rventi
on S
erv
ices
Com
peti
tive
Adva
nta
ges
•Fu
lly in
tegr
ated
glo
bal p
rovi
der
of a
ll un
derb
alan
ced
drilli
ngpr
oduc
ts a
nd s
ervi
ces.
•W
orld
wid
e le
ader
in w
ell i
nsta
llatio
n te
chno
logy
and
se
rvic
es, i
nclu
ding
adv
ance
d rig
mec
hani
zatio
n sy
stem
s.
•A
lead
er in
mul
tilat
eral
tech
nolo
gy fo
r in
crea
sing
cas
ing
exit,
thru
-tub
ing
and
re-e
ntry
app
licat
ions
.
•La
rges
t and
mos
t com
plet
e lin
e of
cem
enta
tion
prod
ucts
an
d se
rvic
es, i
nclu
ding
tech
nolo
gy fo
r in
crea
sing
glo
bal
deep
wat
er a
pplic
atio
ns.
•W
orld
’s m
ost c
ompr
ehen
sive
sol
utio
ns o
fferin
g in
sup
port
of
und
erba
lanc
ed, m
ultil
ater
al, t
hru-
tubi
ng, w
ell i
nsta
llatio
n,ce
men
tatio
n, w
ell r
epai
r/in
terv
entio
n ap
plic
atio
ns
and
drilli
ng o
pera
tions
.
•C
ompl
ete
line
of to
ols
for
fishi
ng a
pplic
atio
ns s
uch
as
mul
tilat
eral
, wor
kove
r fis
hing
, sid
etra
cks,
cas
ing
milli
ng,
and
plug
and
aba
ndon
men
t.
Gro
wth
Opport
unit
ies
•S
trong
gro
wth
pro
ject
ed in
200
1 fo
r in
tern
atio
nal
mar
kets
, esp
ecia
lly in
the
Nor
th S
ea, W
est A
frica
an
d La
tin A
mer
ica.
•G
row
th ra
te fo
r und
erba
lanc
ed s
ervi
ces
(UB
S) i
s ac
cele
ratin
g.A
dditi
onal
ly, u
nder
bala
nced
act
s as
a p
ower
ful p
ull-t
hrou
ghm
agne
t for
all
drilli
ng, i
nter
vent
ion
and
com
plet
ion
prod
ucts
and
serv
ices
.
•M
ultil
ater
als
and
UB
S a
re im
port
ant t
o re
serv
oir
reco
very
, a
key
indu
stry
man
date
.
Com
ple
tion S
yste
ms
Com
peti
tive
Adva
nta
ges
•A
com
preh
ensi
ve li
ne o
f int
egra
ted
com
plet
ion
syst
ems
for
case
d- a
nd o
pen-
hole
app
licat
ions
.
•G
loba
l lea
der
in e
xpan
dabl
e te
chno
logi
es, i
nclu
ding
Expa
ndab
le S
and
Scr
eens
(ES
S) t
hat s
et w
orld
wid
e in
stal
latio
n re
cord
s in
200
0.
•W
ell p
ositi
oned
in h
igh-
end,
dee
pwat
er fl
ow c
ontro
l m
arke
t, du
e to
inte
rven
tionl
ess
com
plet
ion
inst
alla
tion
expe
rtis
e an
d te
chno
logy
.
•C
lass
-lead
ing
liner
han
ger
tech
nolo
gies
pro
ven
in
a nu
mbe
r of
env
ironm
ents
, inc
ludi
ng w
orld
-rec
ord
exte
nded
rea
ch w
ells
.
•P
rove
n in
flata
ble
pack
er te
chno
logy
for
grow
ing
offs
hore
th
ru-t
ubin
g an
d hi
gh p
ress
ure/
high
tem
pera
ture
mar
kets
.
•Em
ergi
ng le
ader
in a
ran
ge o
f rel
iabl
e in
tellig
ent
com
plet
ion
tech
nolo
gy.
Gro
wth
Opport
unit
ies
•B
usin
ess
outlo
ok fo
r ex
pand
able
s is
exc
eptio
nally
stro
ng,
due
to th
e fo
rmat
ion
bene
fits
this
tech
nolo
gy p
rovi
des.
Add
ition
ally,
exp
anda
bles
offe
r br
oad-
base
d pu
ll-th
roug
h of
oth
er W
eath
erfo
rd p
rodu
cts
and
serv
ices
.
•C
ontin
uing
res
earc
h an
d de
velo
pmen
t wor
k, p
artic
ular
ly
for
expa
ndab
le li
ner
syst
ems
and
casi
ng, w
hich
hav
e po
tent
ial m
arke
t app
licat
ions
equ
al to
or
even
gre
ater
th
an s
and
cont
rol.
•M
argi
n ga
ins
antic
ipat
ed fr
om th
e gr
owin
g le
vera
ge o
f ou
r gl
obal
ope
ratio
ns fo
otpr
int a
nd m
anuf
actu
ring
base
.
Art
ificia
l Lif
t Sys
tem
s
Com
peti
tive
Adva
nta
ges
•Le
adin
g si
ngle
-sou
rce
wor
ldw
ide
prov
ider
of a
ll ty
pes
of
artifi
cial
lift
syst
ems
and
serv
ices
for
the
life
of th
e w
ell.
•O
nly
com
pany
in th
e in
dust
ry o
fferin
g a
syst
ems
appr
oach
to a
sset
rec
over
y so
lutio
ns.
•In
dust
ry le
ader
in d
evel
opin
g cu
stom
ized
, hyb
rid li
ft sy
stem
s.
•Le
adin
g de
velo
per
of r
emot
ely
oper
ated
pro
duct
ion
optim
izat
ion
syst
ems
that
allo
w p
roac
tive
rese
rvoi
r m
anag
emen
t and
sys
tem
per
form
ance
eva
luat
ions
.
Gro
wth
Opport
unit
ies
•Vo
lum
e fo
r lif
t exp
ecte
d to
gro
w in
Nor
th A
mer
ica
and
inte
rnat
iona
l mar
kets
.
•B
uild
inte
rnat
iona
l bus
ines
s by
leve
ragi
ng o
ff W
eath
erfo
rd’s
glob
al p
rese
nce.
•C
ontin
ued
deve
lopm
ent o
f int
ellig
ent w
ell t
echn
olog
ies.
•C
apita
lize
on in
crea
sing
coa
lbed
met
hane
pro
duct
ion
dem
and
for
pum
p pr
oduc
ts in
Nor
th A
mer
ica.
GULF
OF
MEX
ICO
Wea
therfo
rd C
omple
tion
Syste
ms R
otatin
g Co
ntrol
Top
Drive
Hea
d™(R
CTDH
), wh
ichen
hanc
es ri
g sa
fety a
nd re
lia-
bility
, is s
ucce
ssful
ly ru
n in
water
dep
ths g
reater
than
7,000
feet.
OFFS
HORE
BRA
ZIL
Wea
ther
ford
Dril
ling
&In
terve
ntio
n Se
rvice
s pr
oprie
tary
Rise
rCap
™ E
xtern
al Ri
ser
Rotat
ing
Cont
rol H
ead
Syste
mpr
otot
ype
techn
olog
y is
succ
essfu
lly p
rove
n in
a
sem
i-sub
mer
sible
field
trail
in
the
Alba
cora
Fiel
d of
the
Cam
pos
Basin
.
NORT
H SE
A
Wea
ther
ford
Arti
ficial
Lift
Syste
ms
slidi
ng s
leeve
jet
begi
ns a
sec
ond
care
er a
s a
well
testin
g to
ol. T
he S
SJ te
stto
ol, w
hich
elim
inate
s th
eda
nger
of f
orm
ation
bre
akup
and
sand
flow
, deb
uted
on
ase
mi-s
ubm
ersib
le dr
illin
g rig
and
was
used
to e
stabl
ish th
eco
nditi
ons
for m
axim
izing
the
life
of th
e ES
P pu
mp.
SOUT
HERN
RUS
SIA
Wea
ther
ford
Dril
ling
&In
terve
ntio
n Se
rvice
s sig
ns a
defin
itive
agr
eem
ent t
o bu
ildan
d op
erate
an
air c
om-
pres
sor f
acili
ty fo
r the
wor
ld’s
deep
est a
nd la
rges
t gas
tra
nspo
rtatio
n sy
stem
pro
ject
ever
atte
mpt
ed. T
he p
rojec
twi
ll ha
ve d
epth
s do
wn to
7,20
0 fee
t.
BRUN
EI
Wea
ther
ford
Com
pleti
onSy
stem
s co
mpl
etes
the
world
’sfir
st m
ulti-
zone
expa
ndab
le in
stalla
tion
for
sand
scr
eens
in th
ree
wells
vary
ing
in d
epth
s of
2,7
00
to 4
,000
mete
rs.
ALAS
KA
Wea
ther
ford
Arti
ficial
Lift
Syste
ms
debu
ts its
jet
pum
p/po
wer p
ump
com
bi-
natio
n lif
t sys
tem, w
hich
pr
omise
s to
redu
ce c
osts
signi
fican
tly, e
ven
in e
xtrem
ewe
ather
con
ditio
ns.
2000
: A
Year
of F
irst
s
Brought to you by Global Reports
Fin
ancia
l H
ighlights
(In t
hous
ands
, ex
cept
per
sha
re a
mou
nts
and
empl
oyee
s)2
00
019
99
Rev
enue
s__
____
____
____
____
____
____
____
____
____
____
____
____
____
____
__$
1,8
14,2
61
$1,
240,
200
Ear
ning
s be
fore
Inte
rest
, Dep
reci
atio
n, A
mor
tizat
ion
and
____
____
____
____
____
_Ta
xes
(bef
ore
Impa
irmen
t C
harg
es)_
____
____
____
____
____
____
____
____
____
_$
37
5,7
55
$23
3,47
6
Ear
ning
s be
fore
Inte
rest
, Dep
reci
atio
n, A
mor
tizat
ion
and
____
____
____
____
____
_Ta
xes
(afte
r Im
pairm
ent
Cha
rges
)___
____
____
____
____
____
____
____
____
____
$3
19
,43
7$
233,
476
Ope
ratin
g In
com
e__
____
____
____
____
____
____
____
____
____
____
____
____
___
$1
20
,32
8$
66,8
18
Net
Inco
me
(Los
s) fr
om C
ontin
uing
Ope
ratio
ns__
____
____
____
____
____
____
___
$(3
8,8
92)
$16
,206
Dilu
ted
EP
S fr
om C
ontin
uing
Ope
ratio
ns b
efor
e Im
pairm
ent
Cha
rges
____
____
__an
d Ta
xes
rela
ted
to D
econ
solid
atio
n of
Bus
ines
s__
____
____
____
____
____
__$
0.7
1$
0.16
Dilu
ted
EP
S fr
om C
ontin
uing
Ope
ratio
ns a
fter
Impa
irmen
t C
harg
es__
____
____
__an
d Ta
xes
rela
ted
to D
econ
solid
atio
n of
Bus
ines
s__
____
____
____
____
____
__$
(0.3
6)
$0.
16
Dilu
ted
Wei
ghte
d A
vera
ge S
hare
s__
____
____
____
____
____
____
____
____
____
__1
09
,45
710
2,88
9
Tota
l Ass
ets
____
____
____
____
____
____
____
____
____
____
____
____
____
____
__$
3,4
61,5
79
$3,
513,
789
Tota
l Deb
t___
____
____
____
____
____
____
____
____
____
____
____
____
____
____
_$
1,1
63,8
10
$95
1,87
0
Sto
ckho
lder
s’ E
quity
____
____
____
____
____
____
____
____
____
____
____
____
___
$1,3
38,4
58
$1,
843,
684
Dep
reci
atio
n an
d A
mor
tizat
ion
____
____
____
____
____
____
____
____
____
____
___
$1
99
,10
9$
166,
658
Cap
ital E
xpen
ditu
res
____
____
____
____
____
____
____
____
____
____
____
____
___
$2
66
,56
0$
174,
300
Num
ber
of E
mpl
oyee
s___
____
____
____
____
____
____
____
____
____
____
____
___
11,8
63
9,66
8
Wea
ther
ford
Inte
rnat
iona
l, In
c.
(NYS
E: W
FT),
head
quar
tere
d in
Hous
ton,
Tex
as, i
s on
e of
the
top
oilfi
eld
serv
ice
com
pani
es
in th
e w
orld
, with
app
roxi
-
mat
ely
10,5
00 e
mpl
oyee
s
and
mor
e th
an 4
00 lo
catio
ns
in 5
4 co
untri
es, e
xclu
ding
Com
pres
sion
Ser
vice
s.
Wea
ther
ford
’s pu
rpos
e is
to d
eliv
er s
uper
ior fi
nanc
ial
perfo
rman
ce b
y pr
ovid
ing
high
per
form
ance
tech
nolo
gies
and
supe
rior p
rodu
cts
and
serv
ices
that
faci
litat
e ou
r cus
-
tom
ers’
dril
ling,
com
plet
ion
and
prod
uctio
n op
erat
ions
.
ww
w.w
eath
erfo
rd.c
om1
In t
he P
ietu
Siu
pari
ai F
ield
, Li
thua
nia,
Ope
rato
r M
inijo
s N
afta
inc
reas
ed p
ro-
duct
ion
on a
hor
izon
tal
wel
l by
875
%.
How
? By
usin
g W
eath
erfo
rd’s
Und
erba
lanc
ed(U
B)pr
oduc
ts a
nd s
ervi
ces,
whi
ch h
elp
low
er p
ress
ure
in th
ew
ellb
ore.
Les
s pr
essu
re m
eans
mor
e oi
l and
gas
flow
ing
from
the
form
atio
n. A
nd m
ore
oil a
nd g
as fl
owin
g in
the
rese
rvoi
r mea
ns m
ore
mon
ey in
you
r poc
ket.
So…
if
the
pres
sure
is
on t
o in
crea
se y
our
rese
rvoi
r pr
oduc
tivity
whi
le s
till m
inim
izin
g fo
rmat
ion
dam
age,
cont
act
Wea
ther
ford
. W
e ar
e th
ein
dust
ry’s
larg
est a
nd m
ost c
ompr
ehen
-siv
eun
derb
alan
ced
prod
uct a
nd s
ervi
ceco
mpa
ny,
offe
ring
ev
eryt
hing
fr
omro
tatin
g co
ntro
l he
ads
to c
ompr
essib
ledr
illin
g flu
ids
to U
B pr
ojec
t m
anag
e-m
ent a
nd s
ite s
uper
visio
n.
But
mor
e im
port
antly
, on
shor
e or
off-
shor
e, w
e’re u
sed
to d
ealin
g w
ith p
ress
ure.
Let u
s he
lp y
ou re
duce
you
rs.
Wor
ldw
ide
Hea
dqua
rter
s: 71
3/69
3-40
00
ww
w.w
eath
erfo
rd.c
om
500
1000
1500
2000
2500
3000
3500
Aver
age
Prod
uctio
n Ra
te P
er W
ell*
■U
BW
ells
(3)
■ O
ffset
Wel
ls
Wea
ther
ford
.Les
s pr
essu
re. M
ore
flow
.™
* Stab
le pr
oduc
tion
rate
from
UBS
hor
izont
al we
ll of 3
,500
bar
rels
of o
il per
day
(BOP
D) co
mpa
red
to o
ffset
wells
of 1
80 B
OPD
with
orig
inal
Inflo
w Po
tentia
l (IP
) mea
sure
d at
400
BOPD
. ©
200
1 W
eath
erfo
rd In
terna
tiona
l, Inc
. All r
ight
s res
erve
d.
The
pre
ssur
ew
ason
.
Brought to you by Global Reports
ww
w.w
eath
erfo
rd.c
om3
2W
eath
erfo
rd In
tern
atio
nal,
Inc.
200
0 A
nnua
l Rep
ort
Edito
r’s N
otes
RE
SE
RV
OI
R
ME
CH
AN
IC
S
Am
ong
the
year
’s n
otab
le m
iles
ton
es:
■O
ur
core
bu
sin
esse
s, s
ervi
ng
the
dri
llin
g, c
omp
leti
on a
nd
pro
-d
uct
ion
seg
men
ts o
f th
e oi
l an
dn
atu
ral
gas
ind
ust
ry, d
eliv
ered
ast
ron
gfi
nan
cial
per
form
ance
th
atim
pro
ved
th
rou
ghou
t th
e ye
ar.
Rev
enu
es r
ose
46%
. Op
erat
ing
earn
ings
(be
fore
sp
ecia
l ch
arge
sre
late
d t
o th
e m
erge
r of
ou
rC
omp
ress
ion
Ser
vice
s d
ivis
ion
)in
crea
sed
164
%. F
ull
y d
ilu
ted
ea
rnin
gs p
er s
har
e fr
om c
onti
nu
ing
oper
atio
ns
(bef
ore
spec
ial
char
ges)
incr
ease
d 3
43%
to
$0.7
1.
■O
ur
bala
nce
sh
eet
was
gre
atly
stre
ngt
hen
ed w
ith
th
e $5
00 m
il-
lion
rec
eive
d f
rom
th
e is
suan
ce i
nJu
ne
of t
he
zero
-cou
pon
con
vert
-ib
le s
enio
r d
eben
ture
s d
ue
2020
.
■O
ur
stoc
k p
rice
per
form
ed
very
wel
l, as
it
incr
ease
d 9
8%d
uri
ng
the
year
. Th
ese
resu
lts
pu
t W
eath
erfo
rd i
n t
he
top
of
its
clas
s, a
s w
e w
ere
in 1
999.
O
ver
the
year
s, W
eath
erfo
rd
has
con
sist
entl
y p
rovi
ded
on
e of
th
e be
st s
tock
hol
der
ret
urn
s in
th
e oi
lfiel
d i
nd
ust
ry.
■In
Ap
ril,
our
Dri
llin
g Pr
odu
cts
div
i-si
on, G
ran
t Pr
idec
o (N
YSE
: GR
P),
was
sp
un
off
to
stoc
khol
der
s in
ata
x-fr
ee t
ran
sact
ion
. In
ad
dit
ion
to
un
lock
ing
sign
ifica
nt
valu
e fo
rst
ockh
old
ers,
th
e sp
in-o
ff a
llow
sbo
th W
eath
erfo
rd a
nd
Gra
nt
Prid
eco
to i
nd
epen
den
tly
focu
s on
th
eir
resp
ecti
ve d
evel
opm
ent.
■In
Oct
ober
, we
ann
oun
ced
th
e m
erge
r of
ou
r C
omp
ress
ion
Serv
ices
div
isio
n w
ith
Un
iver
sal
Com
pres
sion
Hol
din
gs, I
nc.
(N
YSE
:U
CO
). T
he
mer
ger,
com
ple
ted
in
Febr
uar
y 20
01, c
reat
es t
he
seco
nd
larg
est
com
pan
y in
com
pre
ssio
nse
rvic
es, a
n i
nd
ust
ry w
her
e sc
ale
mat
ters
. Fu
rth
erm
ore,
th
e co
mbi
-n
atio
n i
s a
broa
d c
onso
lid
atio
nw
ith
pow
erfu
l ec
onom
ies,
wh
ich
wil
l ac
cru
e to
bot
h U
niv
ersa
l st
ockh
old
ers
and
ou
r ow
n
thro
ugh
Wea
ther
ford
’s 1
3.75
m
illi
on s
har
es o
wn
ersh
ip.
Wea
ther
ford
is
a p
rovi
der
of
mec
han
ical
sol
uti
ons
for
the
pu
rpos
eof
op
tim
izin
g re
serv
oir
reco
very
. Wh
yre
serv
oir
reco
very
? T
he
ind
ust
ry’s
pro
du
cin
g fo
rmat
ion
s h
ave
been
over
wh
elm
ingl
y th
e sa
me
du
rin
g th
e p
ast
25 y
ears
. We
hav
e n
ot k
ept
up
wit
h t
he
rate
of
fiel
d d
isco
veri
esp
reva
len
t in
th
e 50
s, 6
0s a
nd
mos
t of
th
e 70
s. T
hat
ear
lier
tim
e w
as t
ruly
the
gold
en a
ge o
f oi
lfiel
d d
isco
veri
es.
Wit
h t
he
pas
sin
g of
tim
e, t
he
agin
gof
th
e av
erag
e p
rod
uci
ng
form
atio
nh
as r
esu
lted
in
dim
inis
hin
g fo
rmat
ion
dri
ve a
nd
gro
win
g d
ecli
ne
rate
s.Im
pro
vin
g bo
th fl
ow r
ates
an
d u
lti-
mat
e re
serv
oir
reco
very
hav
e be
com
ein
du
stry
pri
orit
ies.
Wea
ther
ford
beli
eves
th
at m
uch
can
be
acco
m-
pli
shed
to
opti
miz
e re
serv
oir
reco
very
in t
wo
inte
rrel
ated
way
s:
–M
inim
izin
g fo
rmat
ion
dam
age
–Pr
ovid
ing
opti
mal
dow
nh
ole
geom
etry
Mu
ch o
f ou
r te
chn
olog
ical
dri
veis
cen
tere
d o
n a
nd
aro
un
d f
urt
her
ing
both
obj
ecti
ves.
Yo
ur
com
pan
y is
org
aniz
ed
tod
ay i
n t
hre
e d
ivis
ion
s –
Dri
llin
g &
In
terv
enti
on S
ervi
ces,
Com
ple
tion
Syst
ems
and
Art
ifici
al L
ift
Syst
ems.
Each
of
thes
e d
ivis
ion
s h
as a
tw
o-p
ron
ged
str
ateg
y fo
r gr
owth
in
pla
ce.
Th
efi
rst
and
mos
t ob
viou
s el
emen
tof
th
at s
trat
egy
is t
o m
axim
ize
reve
nue
and
ear
nin
gs l
ever
age
to t
he
oil
and
gas
cycl
e. T
he
seco
nd
an
d p
erh
aps
the
mos
t im
por
tan
t el
emen
t is
to
pu
rsu
e in
vest
men
t an
d t
ech
nol
ogy
opp
ortu
nit
ies
that
wil
l en
han
ce r
eser
-vo
ir r
ecov
ery
wh
ile
imp
rovi
ng
our
com
pet
itiv
e ad
van
tage
an
d t
hu
sm
arke
t p
osit
ion
s an
d p
rofi
tabi
lity
. W
eath
erfo
rd’s
ear
nin
gs p
ower
-h
ouse
du
rin
g 20
00 w
as i
ts D
rill
ing
& I
nte
rven
tio
n S
ervic
es d
ivis
ion
.R
even
ue
incr
ease
d 4
7% t
o $8
82
mil
lion
, fu
elin
g a
60%
in
crea
se i
nEB
ITD
A t
o $2
77 m
illi
on. W
hil
e th
atw
as a
str
ong
per
form
ance
on
a y
ear-
to-y
ear
basi
s, t
his
div
isio
n’s
per
form
-an
ce a
ccel
erat
ed d
uri
ng
the
year
.T
his
str
ong
grow
th p
rin
cip
ally
refl
ecte
d t
he
rap
id e
xpan
sion
in
n
atu
ral
gas
dri
llin
g ac
tivi
ty i
n N
orth
Am
eric
a. I
n 2
000,
in
th
e U
nit
edSt
ates
alo
ne,
th
e av
erag
e an
nu
aln
um
ber
of r
igs
dri
llin
g fo
r n
atu
ral
gas
incr
ease
d 4
5% o
ver
1999
. All
ser
vice
and
pro
du
ct l
ines
con
trib
ute
d t
o th
eim
pro
vem
ent
and
all
are
poi
sed
to
con
tin
ue
to g
row
in
200
1. T
his
wil
lbe
par
ticu
larl
y tr
ue
in i
nte
rnat
ion
alm
arke
ts, w
hic
h i
s w
her
e h
isto
rica
lly
we
exce
l. W
eath
erfo
rd h
as o
ne
of t
he
indu
stry
’s m
ost
exte
nsi
ve in
tern
atio
nal
ToO
urSto
ckhol
der
s:
Favo
rabl
e m
arke
ts a
nd a
sha
rpen
ed fo
cus
on o
ur c
ore
busi
ness
es h
ad a
ver
y po
sitiv
eim
pact
on
Wea
ther
ford
’s p
erfo
rman
ce in
200
0. F
inan
cial
resu
lts im
prov
ed s
ubst
antia
llyw
hile
the
com
pany
com
plet
ed c
ritic
al s
teps
in it
s qu
est f
or fo
cus.
foot
pri
nts
wit
h a
hal
f ce
ntu
ry-o
ldp
rou
d t
rad
itio
n o
f se
rvic
e.
We
not
ed l
ast
year
th
at w
ith
inD
rill
ing
& I
nte
rven
tion
Ser
vice
s, w
eh
ad b
egu
n b
uil
din
g a
mar
ket-
lead
ing
pre
sen
ce i
n u
nd
erba
lan
ced
ser
vice
s(U
BS)
. Ou
r gr
owth
has
bee
n p
hen
om-
enal
in
th
is m
arke
t. I
n t
he
fou
rth
qu
arte
r of
199
9, o
ur
UB
S re
ven
ue
was
ru
nn
ing
at $
58 m
illi
on o
n a
nan
nu
aliz
ed b
asis
. By
the
fou
rth
qu
ar-
ter
of 2
000
that
ru
n r
ate
was
$12
0m
illi
on, m
ore
than
tw
ice
that
of
the
pri
or y
ear.
Th
e on
ly f
acto
r th
at w
ill
slow
th
at g
row
th i
s th
e av
aila
bili
ty
of t
ech
nic
al p
erso
nn
el a
nd
eq
uip
-m
ent
to s
erve
a m
arke
t th
at i
s st
ill
in i
ts i
nfa
ncy
. Alt
hou
gh o
nly
1%
of
the
wor
ld’s
wel
ls a
re d
rill
ed u
nd
erba
l-an
ced
tod
ay, i
t is
bec
omin
g in
crea
s-in
gly
clea
r th
at t
he
form
atio
nbe
nefi
ts o
f th
e te
chn
olog
y ar
e so
com
pel
lin
g th
at w
ides
pre
ad i
nd
ust
ryu
se w
ill
be i
nev
itab
le o
ver
tim
e.
Ou
r ch
alle
nge
wil
l be
to
man
age
that
gro
wth
res
pon
sibl
y, p
rote
ctin
gou
r sh
are
and
tec
hn
olog
y le
ader
ship
wit
hou
t d
ilu
tin
g th
e en
gin
eeri
ng
qu
alit
y of
ou
r se
rvic
es. V
ery
rece
ntl
y,in
Mar
ch 2
001,
we
ann
oun
ced
a
furt
her
ad
dit
ion
to
our
UB
S fl
eet
wit
h t
he
acq
uis
itio
n o
f ei
ght
full
yin
tegr
ated
UB
S sy
stem
s fr
om T
esco
, a
pu
blic
ly t
rad
ed C
anad
ian
oil
fiel
deq
uip
men
t co
mp
any,
to
our
grow
ing
cap
abil
itie
s.A
not
her
im
por
tan
t te
chn
olog
yw
e ar
e fo
cuse
d o
n w
ith
in t
he
Dri
llin
g&
In
terv
enti
on S
ervi
ces
div
isio
n i
sm
ult
ilat
eral
s, a
cor
e te
chn
olog
y th
atd
eliv
ers
opti
mal
geo
met
ry d
own
hol
e.W
e w
ant
to b
uil
d o
n o
ur
curr
ent
mar
ket
posi
tion
an
d fu
rth
er l
ever
age
our
cap
abil
itie
s in
cas
ing
exit
s, r
e-en
try
and
th
ru-t
ubi
ng
serv
ices
. In
Oct
ober
, we
acq
uir
ed m
ult
ilat
eral
wel
l co
mp
leti
on t
ech
nol
ogie
s fr
omSt
arfi
eld
Hol
din
gs. T
he
acq
uis
itio
nin
clu
ded
dri
llin
g, c
omp
leti
on a
nd
re
-en
try
tech
nol
ogy
and
eq
uip
men
t,an
d a
llow
s W
eath
erfo
rd t
o co
mp
ete
in t
he
hig
h e
nd
of
the
mar
ket
for
mu
ltil
ater
al j
un
ctio
n s
yste
ms.
A k
ey c
omp
onen
t of
Wea
ther
ford
’s g
row
th l
ies
wit
h i
tsC
om
ple
tio
n S
yst
ems
div
isio
n.
In 2
000,
we
laid
th
e fo
un
dat
ion
fo
r th
e fu
ture
. We
inte
grat
ed p
eop
le,
pro
du
cts,
bra
nd
s an
d f
acil
itie
sbr
ough
t to
you
r co
mp
any
from
the
inte
nsi
ve 1
999
acq
uis
itio
ns.
W
e bu
ilt
infr
astr
uct
ure
, op
ened
24
new
op
erat
ion
s ba
ses
in 1
1 co
un
trie
san
d a
dd
ed m
ore
than
400
peo
ple
,m
any
of t
hem
wit
h e
ngi
nee
rin
gsk
ills
, an
d d
oubl
ed o
ur
man
ufa
c-tu
rin
g ca
pac
ity.
In
th
e p
roce
ss, r
ev-
enu
es g
rew
by
$100
mil
lion
to
$221
mil
lion
, or
82%
, an
d o
ur
mar
ket
pos
itio
n i
mp
rove
d f
rom
nu
mbe
r fo
ur
to a
cle
ar n
um
ber
thre
e w
ith
sys
tem
s in
tegr
atio
n a
nd
bre
akth
rou
gh t
ech
-n
olog
ies.
In
ad
dit
ion
, th
is d
ivis
ion
gen
erat
ed $
20 m
illi
on E
BIT
DA
for
th
e ye
ar a
nd
by
the
thir
d q
uar
ter
was
gen
erat
ing
pos
itiv
e op
erat
ing
inco
me.
We
con
sid
er t
his
a v
ery
favo
rabl
e st
art.
On
e of
th
e m
ost
pro
mis
ing
tech
nol
ogie
s fo
r C
omp
leti
on S
yste
ms
has
bee
n i
ts e
xpan
dab
le p
rod
uct
lin
e.La
st y
ear
mar
ked
th
e in
itia
l co
mm
er-
cial
su
cces
s of
ou
r li
ne
of e
xpan
dab
lesa
nd
scr
een
(ES
S) p
rod
uct
s ba
sed
on
exp
and
able
tec
hn
olog
y. M
ore
than
40 s
ucc
essf
ul
inst
alla
tion
s of
th
isbr
eakt
hro
ugh
pro
du
ct h
ave
been
mad
e in
oil
an
d g
as fi
eld
s ar
oun
d t
he
wor
ld. T
he
pop
ula
rity
of
the
ESS
isd
ue
as m
uch
to
its
wel
l p
rod
uct
ivit
y
Edito
r’ s N
otes
RE
SE
RV
OI
R
ME
CH
AN
IC
S
Brought to you by Global Reports
ww
w.w
eath
erfo
rd.c
omW
orld
wid
e H
eadq
uart
ers:
713
/693
-400
0
The
se a
re j
ust
four
ben
efits
a m
ajor
pro
duce
r di
scov
ered
afte
r hi
ring
Wea
ther
ford
on
a co
st-p
er-h
our
cont
ract
to p
ro-
vide
art
ifici
al li
ft e
quip
men
t an
d se
rvic
es f
or t
heir
hea
vy o
ilfie
lds
in S
outh
Am
eric
a.
To s
ee h
ow w
e ca
n gi
ve y
our
asse
ts a
lift
by
cust
omiz
ing
lift
solu
tions
tha
t m
axim
ize
your
ass
et r
ecov
ery,
con
tact
us
at
713-
693-
4000
or v
isit
our
web
site
at
ww
w.w
eath
erfo
rd.c
om.
Rec
ipro
cati
ng R
od
Lift
Hyd
raul
ic L
ift
Pro
gre
ssiv
e C
avit
y P
ump
ing
Gas
Lift
Plu
nger
Lift
Ele
ctri
c S
ubm
ersi
ble
Pum
pin
g
Wel
l Op
tim
izat
ion
Wea
ther
ford
. The
Lift
Exp
erts
.™
© 2
001
Wea
ther
ford
Inte
rnat
iona
l, In
c. A
ll rig
hts
rese
rved
.
Pro
duc
ed a
head
of
pro
duc
tio
n p
lan
esti
mat
es■
Elim
inat
ed c
apit
al e
xpen
dit
ures
Exp
erie
nced
no
mec
hani
cal f
ailu
res
■A
ll w
hile
stil
l sta
ying
und
er e
xpen
se b
udge
ts
4W
eath
erfo
rd In
tern
atio
nal,
Inc.
2000
Ann
ual R
epor
t
or l
ess
form
atio
n d
amag
e be
nefi
tsas
to
its
cost
ad
van
tage
s. W
ith
in
the
Febr
uar
y to
Ap
ril
2001
tim
efra
me
alon
e, w
e h
ave
mor
e th
an 2
0 ES
Sin
stal
lati
ons
eith
er s
ched
ule
d o
r in
pro
gres
s.
Furt
her
dev
elop
men
ts i
nW
eath
erfo
rd’s
exp
and
able
tec
hn
olog
yh
ave
occu
rred
. Aft
er y
ears
of
R&
D,
we
intr
odu
ced
ou
r ow
n p
rop
riet
ary
exp
ansi
on s
yste
m, w
hic
h i
s kn
own
as
th
e R
otar
y Ex
pan
sion
Sys
tem
. T
his
sys
tem
was
use
d i
nit
iall
y fo
r ES
S sa
nd
con
trol
ap
pli
cati
ons,
bu
tlo
ng
term
it
has
maj
or i
mp
lica
tion
sfo
r w
ell
con
stru
ctio
n a
nd
com
ple
tion
sin
ce i
t is
des
ign
ed t
o ex
pan
d s
olid
ssu
ch a
s tu
bula
rs, l
iner
han
gers
an
dp
acke
rs. S
uch
ap
pli
cati
ons
wil
l h
ave
a q
uan
tum
im
pac
t on
cli
ent
wel
lbor
ege
omet
ry a
nd
eco
nom
ics.
Ou
r th
ird
div
isio
n, W
eath
erfo
rd’s
Art
ifici
al
Lif
t Sy
stem
s d
ivis
ion
,d
eliv
ered
rec
ord
res
ult
s in
200
0.R
even
ues
in
crea
sed
50%
an
d E
BIT
DA
rose
by
86%
. Th
is g
row
th w
as p
arti
c-u
larl
y im
pre
ssiv
e, f
or i
t oc
curr
ed i
n
a m
arke
t th
at w
as d
omin
ated
by
gas
dri
llin
g. T
he
Nor
th A
mer
ican
mar
ket
for
oil
and
hea
vy o
il w
as s
ubs
tan
tial
lym
ore
subd
ued
th
an i
ts g
as s
egm
ent.
Wh
erea
s ga
s ac
tivi
ty s
oare
d w
ell a
bove
1997
(th
e m
ost
rece
nt
cycl
ical
hig
h)
leve
ls, U
.S. a
nd
Can
adia
n o
il a
ctiv
ity
rem
ain
ed a
t a
frac
tion
, on
e-h
alf
to o
ne-
thir
d d
epen
din
g on
mar
ket
segm
ent,
of
1997
lev
els.
Im
pro
vin
g m
argi
ns
in t
his
bu
sin
ess
hav
e be
endr
iven
by
aggr
essi
ve p
urs
uit
of
oper
atin
g ef
fici
ency
. Pro
duct
ivit
y h
asgr
own
sh
arpl
y.R
even
ue
gen
erat
ion
per
pers
on n
earl
y do
ubl
ed d
uri
ng
the
year
to
mor
e th
an $
200,
000
by y
ear-
end.
Not
wit
hst
and
ing
its
effi
cien
cyfo
cus,
Art
ifici
al L
ift
Syst
ems
emu
late
dit
s si
ster
div
isio
ns
by i
nve
stin
g in
li
ft t
ech
nol
ogie
s. P
urs
uin
g th
e sa
me
obje
ctiv
e of
max
imiz
ing
rese
rvoi
rre
cove
ry, A
rtifi
cial
Lif
t Sy
stem
s is
wor
kin
g on
in
tell
igen
t li
ft, o
ther
wis
eca
lled
in
tell
igen
t p
rod
uct
ion
sys
tem
s,cr
oss-
bree
din
g of
lif
t sy
stem
s an
dbr
eakt
hro
ugh
lif
t te
chn
olog
ies.
Art
ifici
al L
ift
Syst
ems
intr
odu
ced
in
the
mar
ketp
lace
wel
l op
tim
izat
ion
and
rem
ote
mon
itor
ing
and
con
trol
syst
ems.
Th
ese
syst
ems
incl
ud
e fi
eld
man
agem
ent
and
pro
du
cts
that
all
owcu
stom
ers
to r
emot
ely
mon
itor
an
dco
ntr
ol w
ell
pro
du
ctio
n a
nd
op
era-
tion
s fr
om o
ne
cen
tral
loc
atio
n. S
uch
syst
ems
are
exp
ecte
d t
o of
fer
cus-
tom
ers
subs
tan
tial
op
erat
ing
savi
ngs
and
im
pro
ved
wel
l p
rod
uct
ivit
y.
Con
curr
entl
y, w
e ar
e al
so
test
ing
a n
ew r
evol
uti
onar
y p
osit
ive
dis
pla
cem
ent
turb
ine
lift
sys
tem
. As
in t
he
case
of
our
oth
er d
ivis
ion
s,
our
tech
nol
ogy
focu
s is
on
pro
du
cts
and
ser
vice
s th
at w
ill
imp
rove
ove
rall
rese
rvoi
r re
cove
ry a
nd
th
e ec
onom
ics
of p
rod
uci
ng
hyd
roca
rbon
s.
Fina
l Co
mm
ents
Wh
ile
2000
was
a g
ood
yea
r by
m
any
mea
sure
s, w
e sh
ould
rem
embe
rth
at it
was
on
ly y
ear
one
of a
rec
over
y.In
ou
r le
tter
to
you
las
t ye
ar, w
e co
mm
ente
d t
hat
th
e p
atte
rn o
f
reco
very
wou
ld b
e d
iffe
ren
t in
th
iscy
cle
wh
en c
omp
ared
to
pre
viou
scy
cles
. Ou
r op
inio
n t
hen
was
th
at
the
init
ial
rate
of
reco
very
wou
ld t
est
our
pat
ien
ce, b
ut
that
its
str
engt
han
d d
ura
tion
wou
ld e
xcee
d a
ll e
xpec
-ta
tion
s. W
e st
ill
beli
eve
this
to
betr
ue,
par
ticu
larl
y in
th
e in
tern
atio
nal
mar
kets
wh
ere
hyd
roca
rbon
s fu
ture
wil
l be
. Th
e ba
sis
for
this
bel
ief
lies
in
th
e cu
mu
lati
ve i
nte
ract
ion
bet
wee
nac
cele
rati
ng
dec
lin
e ra
tes
and
ext
ra-
ord
inar
ily
low
lev
els
of i
dle
cap
acit
yav
aila
ble.
Th
e n
eed
for
tec
hn
olog
yh
as n
ever
bee
n g
reat
er.
As
we
ente
r 20
01, w
e be
liev
eW
eath
erfo
rd i
s a
stro
nge
r co
mp
any
in t
erm
s of
its
cap
abil
itie
s, o
per
atin
gef
fect
iven
ess,
fin
anci
al c
ond
itio
n a
nd
com
peti
tive
pos
itio
n. O
ur in
vest
men
tsin
tec
hn
olog
ies
that
hel
p c
ust
omer
sop
tim
ize
rese
rvoi
r p
rod
uct
ion
are
begi
nn
ing
to y
ield
ret
urn
s. A
ll o
f th
istr
ansl
ates
in
to h
igh
er s
tock
hol
der
retu
rns.
In
fac
t, i
n i
ts F
ebru
ary
26,
2001
ed
itio
n, t
he
Wal
l St
reet
Jou
rnal
ran
ked
you
r co
mp
any
firs
t in
sto
ck-
hol
der
ret
urn
s w
ith
in t
he
oilfi
eld
serv
ice
& e
qu
ipm
ent
ind
ust
ry w
ith
a
41.2
% fi
ve y
ear
com
pou
nd
edre
turn
. We
hav
e in
th
e p
ast
ofte
nbe
en r
anke
d i
n t
he
top
slo
t fo
r st
ock-
hol
der
ret
urn
s, a
nd
we
ple
dge
on
beh
alf
of y
our
enti
re o
rgan
izat
ion
to
do
ever
yth
ing
in o
ur
pow
er t
oco
nti
nu
e th
is p
rou
d t
rad
itio
n.
Res
pec
tfu
lly,
Ber
nar
d J
. Du
roc-
Dan
ner
Brought to you by Global Reports
Con
trac
ts f
or W
eath
erfo
rd U
BS
are
on t
he
up
swin
g an
d m
arke
t sh
are
con
tin
ues
in
crea
sin
g w
orld
wid
e as
UB
S ga
ins
acce
pta
nce
for
its
saf
ety
and
prod
ucti
vity
res
ults
. Wea
ther
ford
’sU
BS
Pip
elin
e Se
rvic
es, f
or i
nst
ance
,h
ave
been
con
trac
ted
to
buil
d a
nd
oper
ate
an a
ir c
omp
ress
or f
acil
ity
that
wil
l p
rovi
de
bulk
dew
ater
ing
and
dry
ing
serv
ices
for
th
e B
lue
Stre
am
Pip
elin
e Pr
ojec
t, t
he
dee
pes
t an
dla
rges
t p
roje
ct o
f th
is k
ind
eve
rat
tem
pte
d. W
eath
erfo
rd w
as a
lso
tap
ped
to
sup
ply
eq
uip
men
t an
dte
chn
olog
y, a
s w
ell
as t
rain
en
gin
eers
from
Sh
engl
i C
hin
a’s
Petr
oleu
mA
dm
inis
trat
ive
Bu
reau
, in
th
e co
n-
cep
ts o
f U
BS.
Two
fact
ors
are
pro
pel
lin
g th
isgr
owth
in
bu
sin
ess:
1)
con
tin
ued
dem
and
for
hyd
roca
rbon
s at
sta
ble
pri
ce l
evel
s; a
nd
2)
the
chal
len
ge
of s
qu
eezi
ng
them
fro
m t
he
wor
ld’s
mat
uri
ng
fiel
ds.
Wea
ther
ford
is
un
iqu
ely
pos
itio
ned
to
con
tin
ue
mov
ing
UB
S in
to w
orld
wid
e m
arke
ts,
due
to o
ur e
xist
ing
glob
al in
fras
truc
ture
and
beca
use
we
hav
e as
sem
bled
all
com
-p
onen
ts o
f th
e U
BS
syst
em t
hro
ugh
R&
D a
nd
str
ateg
ic a
cqu
isit
ion
s.A
par
ticu
larl
y st
ron
g m
arke
t fo
r20
01 a
nd
bey
ond
wil
l be
off
shor
ean
d d
eep
wat
er e
nvi
ron
men
ts.
Wea
ther
ford
alr
ead
y h
as p
rove
n U
BS
tech
nol
ogy
is s
ucc
essf
ul
in o
ffsh
ore
app
lica
tion
s w
ith
th
e B
razi
lian
JIP
tria
ls o
f th
e p
rop
riet
ary
Ris
erC
ap™
Exte
rnal
Ris
er C
ap R
otat
ing
Con
trol
Hea
d S
yste
m. T
he
Ris
erC
ap w
as r
un
in a
10,
000-
foot
wel
l in
1,0
00 f
eet
of w
ater
in
th
e A
lbac
ora
Fiel
d o
f th
e C
amp
os B
asin
in
ear
ly 2
001.
Wea
ther
ford
als
o is
pla
nn
ing
entr
yin
to t
he
Gu
lf o
f M
exic
o m
arke
t w
ith
a co
ntr
act
for
its
firs
t p
roje
ct f
or a
maj
or o
per
ator
lat
er t
his
yea
r.
Und
erba
lanc
ed is
the
pla
nned
con
ditio
n w
here
the
bott
om h
ole
pres
sure
exe
rted
by
the
hydr
osta
tic
head
of t
he w
ellb
ore
fluid
col
umn
is le
ss t
han
the
pres
sure
of t
he fo
rmat
ion
bein
g dr
illed.
UB
S is
not
new
to
the
indu
stry
– fo
r th
e
bett
er p
art
of 5
0 ye
ars,
it’s
bee
n us
ed t
o
cond
uct
air
drilli
ng. B
ut in
the
last
five
yea
rs,
the
tech
nolo
gy h
as im
prov
ed t
o th
e po
int
whe
re U
BS
can
be
used
in a
var
iety
of a
pplic
a-
tions
, inc
ludi
ng t
he v
ast
offs
hore
mar
ket.
Drill
ing
&In
terv
entio
n Se
rvic
esT
EC
HN
OL
OG
Y
SC
EN
E
The
indu
stry
’s up
turn
and
rene
wed
focu
s on
rig
safe
ty p
ract
ices
pro
vide
st
rong
gro
wth
ave
nues
for W
eath
erfo
rd’s
mec
hani
zed
rig s
yste
ms
tech
nolo
gy.
Incr
easi
ngly,
dril
ling
cont
ract
ors
and
oper
ator
s re
quire
con
tract
ors
and
sub-
cont
ract
ors
to re
duce
or e
limin
ate
inju
ries
on th
e rig
floo
r as
a co
nditi
on in
tend
ers
and
in m
ost b
id q
ualifi
catio
ns. W
eath
erfo
rd’s
Mec
hani
zed
Rig
syst
ems
are
optim
ally
pos
ition
ed to
cap
italiz
e on
this
tren
d, s
ince
we
alre
ady
have
esta
blis
hed
a tra
ck re
cord
for s
hrin
king
saf
ety
inci
dent
num
bers
as
wel
l as
runn
ing
times
.
In 2
000,
for i
nsta
nce,
we
com
plet
ed th
e se
cond
Sta
bber
less
Sys
tem
™pr
ojec
t for
Bur
lingt
on R
esou
rces
with
a ru
n tim
e of
27
1 /2ho
urs
(a 3
4.2%
redu
ctio
n ov
er p
revi
ous
runn
ing
times
) for
a 1
5,50
0-fo
ot s
tring
of 1
4-in
chpi
pe. T
his
parti
cula
r job
repr
esen
ts o
ne o
f man
y in
dust
ry fi
rsts
by
runn
ing
all c
asin
g on
an
ultra
-dee
p, c
ritic
al w
ell w
hile
elim
inat
ing
pers
onne
l fro
m
haza
rdou
s w
ork
envi
ronm
ents
.
Wea
ther
ford
will
con
tinue
mov
ing
this
new
tech
nolo
gy fo
rwar
d w
orld
wid
e w
ith p
ipe
hand
ling
syst
ems
and
equi
pmen
t des
igns
inst
alle
d on
new
ves
sels
and
upgr
ades
for e
xist
ing
deep
wat
er d
rillin
g ve
ssel
s, a
s w
ell a
s sy
stem
s fo
ron
shor
e us
e.
Wea
ther
ford
cur
rent
ly h
as u
nder
bal
ance
d d
rilli
ng p
rog
ram
s o
n th
e d
raw
ing
bo
ard
inA
lger
ia, B
razi
l, C
hina
, Co
lum
bia
, Ind
one
sia,
Lit
huan
ia a
nd t
he U
nite
d S
tate
s, a
s w
ell a
sla
rge-
scal
e p
roje
cts
in t
he M
idd
le E
ast
and
the
No
rth
Sea
.
In 2
000,
Wea
ther
ford
ram
ped
up
its
pre
sen
ce i
n t
he
exp
and
ing
mu
ltil
ater
alm
arke
t w
ith
th
e ac
qu
isit
ion
of
Star
fiel
d.
Star
fiel
d c
omp
lete
s ou
r m
ult
ilat
eral
offe
rin
g w
ith
wh
at w
e co
nsi
der
to
be a
lead
ing
pro
pri
etar
y te
chn
olog
y in
lev
el4
to 6
mu
ltil
ater
als,
or
the
very
hig
hen
d o
f th
is p
arti
cula
r te
chn
olog
y.Pr
evio
usl
y, W
eath
erfo
rd w
as k
now
n
for
pro
vid
ing
mu
ltil
ater
al s
yste
ms
inle
vels
1 t
o 3.
Th
e St
arG
ate
Syst
em w
as t
he
key
tech
nol
ogy
gain
ed f
rom
th
e ac
qu
i-si
tion
. Sta
rGat
e is
a f
ull
y in
tegr
ated
m
ult
ilat
eral
sys
tem
in
clu
din
g d
rill
ing,
com
ple
tion
an
d r
e-en
try
tech
nol
ogy
and
eq
uip
men
t. T
he
syst
em i
s u
niq
ue
in t
he
mar
ket
in t
hat
it
per
mit
s d
own
-h
ole
orie
nta
tion
of
pre
-mil
led
win
dow
sw
ith
out
the
nee
d f
or r
otat
ion
of
the
casi
ng
from
th
e su
rfac
e. T
his
pro
vid
es a
subs
tan
tial
ad
van
tage
in
pre
dic
tabi
lity
,as
wel
l as
cos
t re
du
ctio
n.
By
the
year
200
4, m
ore
than
5,0
00m
ult
ilat
eral
wel
ls a
re p
roje
cted
to
beco
mp
lete
d. A
dd
itio
nal
ly, h
alf
of a
llsu
bsea
wel
ls a
re e
xpec
ted
to
be d
rill
edm
ult
ilat
eral
.
Sinc
e 19
94, w
hen
Wea
ther
ford
be
gan
inst
allin
g “fi
rst g
ener
atio
n”
rig s
yste
ms,
the
com
pany
has
bee
nde
velo
ping
new
gen
erat
ion
rig
syst
ems
that
elim
inat
e a
grea
ter
num
ber o
f per
sonn
el fr
om th
e rig
flo
or w
here
mos
t acc
iden
ts o
ccur
. In
fact
, our
rig
mec
hani
zatio
nad
vanc
es a
re p
rom
otin
g a
diff
eren
tbr
eed
of m
ulti-
skill
ed fi
eld
serv
ice
tech
nici
an w
ho k
now
s ho
w to
ope
rate
both
the
hard
war
e an
d so
ftw
are
ofth
ese
com
pute
r-dr
iven
sys
tem
s.
ww
w.w
eath
erfo
rd.c
om7
6W
eath
erfo
rd In
tern
atio
nal,
Inc.
200
0 A
nnua
l Rep
ort
Wha
t is
Und
erba
lanc
ed D
rilli
ng?
Mechaniz
ed R
ig S
yste
ms
Well P
osi
tioned f
or
Gro
win
g
Rig
Safe
ty T
rend.
1 2
3
4
5
Leve
l 41
Star
Defle
ctor™
dual
com
pleti
on s
ystem
2Fl
ush
tie-b
ack
hang
er3
Prod
uctio
n tu
bing
4Lo
wer c
ompl
etion
pac
ker
5Sl
otted
line
r
Mul
tilate
rals
are
pred
icted
to b
e th
e ne
xt ste
p in
pro
ducti
on te
chno
logy
.M
ultil
atera
ls op
timize
rese
rvoi
r rec
over
ywi
thou
t the
cos
t or e
nviro
nmen
tal im
pact
of a
dditi
onal
wells
bec
ause
they
take
the
wellb
ore
to th
e oi
l ins
tead
of fo
rcin
g th
e oi
l to
mak
e its
way
to th
e we
llbor
e.
Mul
tilat
eral
Upd
ate
Weath
erf
ord
Move
s in
to A
dva
nced
Mult
ilate
ral W
ell C
om
ple
tion T
echnolo
gy.
PROD
UCTI
VITY
GAIN
San
d S
afety
Reco
rd S
peed A
ccepta
nce
of
UB
S.
Brought to you by Global Reports
Inflo
w C
ontr
ol
Devi
ces
Fit
Grow
ing
Mar
ket
in L
ong
Horiz
onta
lAp
plic
atio
ns.
Appr
oxim
atel
y 40
% o
f all
scre
ens
curr
ently
are
run
in lo
ng h
orizo
ntal
appl
icat
ions
. How
ever
, as
the
wel
l pro
-du
ces
and
drai
ns it
s as
soci
ated
rese
r-vo
ir vo
lum
e, s
low
cha
nges
occ
ur in
the
pres
sure
pro
file
alon
g th
e w
ell.
This
can
mak
e it
diffi
cult
to re
gula
te in
flow
into
scre
ens,
sin
ce c
erta
in a
reas
of t
he w
ell
flow
eas
ier t
han
othe
rs.
Wea
ther
ford
cur
rent
ly is
dev
elop
ing
four
inflo
w c
ontro
l dev
ice
(ICD)
pro
to-
type
s th
at a
llow
the
rese
rvoi
r to
drai
nm
ore
unifo
rmly.
Thi
s re
sults
in m
ore
reco
vere
d hy
droc
arbo
n, w
hich
in tu
rnm
eans
mor
e pr
ofita
ble
rese
rvoi
rs.
Alth
ough
ther
e is
ano
ther
ICD
curr
ently
on th
e m
arke
t, W
eath
erfo
rd’s
will
be
uniq
ue in
that
it w
ill b
e a
sing
lesi
ze c
once
pt, w
hich
will
impr
ove
logi
stic
s on
the
rig fl
oor.
The
othe
r adv
anta
ge o
f Wea
ther
ford
’sIC
D te
chno
logy
is it
s pu
ll-th
roug
hpo
tent
ial.
The
ICDs
are
bei
ngde
sign
ed to
wor
k w
ithW
eath
erfo
rd’s
curr
ent s
and
scre
ens
such
as
the
Ultra
-Grip
™w
ire w
rap
scre
en, a
s w
ell a
s ou
rex
tend
ed re
ach
rolle
r cen
traliz
erpr
oduc
t. Te
stin
g on
the
ICD
prot
otyp
es is
sch
edul
ed fo
rse
cond
qua
rter 2
001.
Worl
dw
ide C
ontr
acts
Incre
ase
for
Com
ple
tion I
sola
tion V
alv
es.
Wea
ther
ford
’s c
ust
om l
ife-
of-t
he-
wel
l fl
ow c
ontr
ol e
qu
ip-
men
t co
nti
nu
es t
o ga
in m
arke
t sh
are
in r
egio
ns
beyo
nd
the
Nor
th S
ea w
her
e it
in
itia
lly
was
dev
elop
ed.
Late
las
t ye
ar, f
or i
nst
ance
, we
wer
e aw
ard
ed o
ur
larg
est
Ad
van
ced
Flo
w C
ontr
ol S
yste
ms
(AFC
S) c
ontr
act
–d
eliv
erin
g C
omp
leti
on I
sola
tion
Val
ves
(CIV
s) f
or a
maj
orop
erat
or i
n C
hin
a. T
he
con
trac
t is
th
e la
test
in
a s
erie
s of
oth
er A
FCS
con
trac
ts, s
uch
as
seve
ral
that
wer
e aw
ard
ed
to W
eath
erfo
rd i
n t
he
Gu
lf o
f M
exic
o. C
ombi
ned
, th
ese
rep
rese
nt
grow
ing
mar
ket
awar
enes
s of
th
e co
mp
any’
sex
per
tise
in
tot
ally
in
terv
enti
onle
ss c
omp
leti
on i
nst
alla
-ti
ons,
an
d a
lso
vali
dat
e ou
r p
ull
-th
rou
gh s
trat
egy
of i
ntr
o-
du
cin
g re
gion
ally
str
ong
pro
du
ct l
ines
in
to n
ew a
reas
of
the
wor
ld.
Ad
dit
ion
ally
, Wea
ther
ford
’s A
FCS
tech
nol
ogy
is
a p
rim
e ca
nd
idat
e fo
r th
e st
ead
ily
incr
easi
ng
offs
hor
em
arke
t, d
ue
to i
ts r
ecor
d o
f h
elp
ing
cust
omer
s re
du
ce
oper
atio
nal
cos
ts, i
mp
rove
saf
ety
and
pro
tect
th
e re
serv
oir.
Cu
rren
tly,
th
e co
mp
any
is b
idd
ing
for
maj
or d
eep
wat
erp
roje
cts
that
cou
ld f
urt
her
rai
se t
his
pro
du
ct l
ine’
s p
rofi
lein
th
e n
ext
few
yea
rs.
9
Wea
ther
ford
’s C
ompl
etio
n Is
olat
ion
Valv
e w
as b
orn
out
of c
usto
mer
nee
d fo
r a h
igh-
inte
grity
bi-d
irect
iona
l dow
n-ho
le is
olat
ion
devi
ce. T
he C
IV w
as a
pplie
d in
a m
ulti-
zone
grav
el p
ack
com
plet
ion
to p
rovi
de p
rote
ctio
n ag
ains
t flui
dlo
ss to
the
form
atio
n an
d ac
t as
a ba
rrie
r for
sub
sequ
ent
com
plet
ion
inst
alla
tions
for a
maj
or o
pera
tor i
n th
e G
ulf o
fM
exic
o. F
utur
e pl
ans
for C
IV in
clud
e ad
ditio
nal t
echn
olog
yde
velo
pmen
ts fo
r ext
rem
e hi
gh d
ebris
pot
entia
l and
hig
h pr
essu
re/h
igh
tem
pera
ture
ope
ratio
ns.
ESS
Q4’99
Q1’00
Q2’00
Q3’00
Q4’00
Q1’01
70
00
60
00
50
00
40
00
30
00
20
00
10
00
Wea
ther
ford
’s ES
S us
es th
e pr
inci
ples
of e
xpan
dabl
e tu
bula
r tec
hnol
ogy
to
prov
ide
a un
ique
met
hod
of s
and
cont
rol t
hat i
s m
ore
effic
ient
than
tradi
tiona
l san
d sc
reen
s, a
nd fa
ster
and
mor
e co
st-e
ffect
ive
than
gra
vel
pack
s. T
his
adva
ntag
e w
as a
key
reas
on b
ehin
d ou
r inc
reas
ed E
SS
inst
alla
tions
in 2
000.
Com
plet
ion
Syst
ems
TE
CH
NO
LO
GY
S
CE
NE
Dur
ing
the
past
yea
r, W
eath
erfo
rd’s
revo
luti
onar
y ES
S te
chn
olog
y co
nti
nue
d to
exc
el in
dow
nh
ole
perf
orm
ance
. In
Jan
uary
200
1, f
orin
stan
ce, w
e se
t a
new
indu
stry
re
cord
in a
ver
y ch
alle
ngi
ng
Nor
th
Sea
wel
l by
inst
allin
g a
hor
izon
tal
sect
ion
of
mor
e th
an 7
,000
fee
t w
ith
an e
xpan
dabl
e sa
nd
con
trol
sys
tem
.T
he
init
ial
clea
nu
p p
rod
uct
ion
rate
s in
dic
ate
per
form
ance
im
pro
ve-
men
t of
mor
e th
an 2
0% c
omp
ared
to
pla
n, a
nd
wel
l co
st s
avin
gs i
n e
xces
sof
$1
mil
lion
.T
hes
e ty
pes
of
geol
ogic
al a
nd
cost
adv
anta
ges
are
two
of t
he
reas
ons
beh
ind
th
e si
gnifi
can
t n
um
ber
ofw
orld
wid
e ES
S jo
bs w
e p
erfo
rmed
la
st y
ear.
To p
ut
this
in
per
spec
tive
,w
e be
gan
th
e ye
ar 2
000
aver
agin
gtw
o in
stal
lati
ons
per
qu
arte
r. B
y ye
ar-
end
, we
aver
aged
nin
e in
stal
lati
ons
a q
uar
ter,
a r
ate
we
hop
e to
dou
ble
in 2
001.
Tech
nol
ogy
lead
ersh
ip i
s an
oth
erfa
ctor
beh
ind
Wea
ther
ford
’s im
pres
sive
grow
th i
n t
his
mar
ket.
Ou
r d
isti
nct
adva
nta
ges
incl
ud
e of
feri
ng
the
only
com
mer
cial
pro
du
ct i
n t
he
ind
ust
ry, p
rovi
din
g th
e br
oad
est
pro
du
ct r
ange
an
d d
edic
atin
g si
g-n
ifica
nt
man
ufa
ctu
rin
g fa
cili
ties
for
incr
ease
d c
apac
ity.
Fo
r th
e fu
ture
, we
are
incr
easi
ng
our
exp
and
able
cap
a-bi
liti
es t
hro
ugh
th
e d
evel
opm
ent
of p
rod
uct
s su
ch a
s re
volu
tion
ary
exp
and
able
lin
er s
yste
ms
and
exp
and
able
cas
ing
that
wil
l p
ush
curr
ent
engi
nee
rin
g en
velo
pes
.
Expa
ndab
le S
and
Scre
enIn
crea
ses
Prod
uctio
n by
M
ore
Than
20%
.Fo
rmat
ion
ben
efits
, in
clu
din
g m
ajor
pro
du
ctio
n in
crea
ses
and
cos
t sa
vin
gs,
are
pos
itio
nin
g E
SS
to
gai
n s
ub
stan
tial
mar
ket
shar
e in
san
d c
ontr
ol o
ver
trad
itio
nal
tec
hn
olog
y.
ESS W
eath
erf
ord
Inte
rnati
onal, I
nc.
2000
Ann
ual R
epor
t
™
Cum
ula
tive
Foota
ge I
nst
alled
(in m
eter
s)
Brought to you by Global Reports
ww
w.w
eath
erf
ord
.com
11
In 2
000,
pro
vid
ing
lift
sol
uti
ons
vers
us
sim
ply
sel
lin
geq
uip
men
t yi
eld
ed a
nu
mbe
r of
new
con
trac
ts f
orW
eath
erfo
rd a
nd
beg
an p
osit
ion
ing
us
as a
pro
vid
er
of c
ost-
effi
cien
t an
swer
s to
op
erat
ors’
rec
over
y n
eed
sw
orld
wid
e.Fo
r in
stan
ce, i
n V
enez
uel
a, w
e su
pp
lied
pro
gres
sin
gca
vity
pu
mp
sys
tem
s w
ith
dow
nh
ole
sen
sors
, as
wel
l as
pers
onn
el t
o in
stal
l, op
erat
e an
d m
ain
tain
th
em, f
or a
maj
or o
per
ator
’s h
eavy
oil
wel
ls. T
his
pro
ject
now
ru
ns
89 w
ells
wit
h a
pro
du
ctio
n r
ate
of 1
30,0
00 b
arre
ls o
f oi
lp
er d
ay a
nd
has
had
no
mec
han
ical
pu
mp
ing
fail
ure
in
over
16
mon
ths.
Exp
loit
ing
core
com
pet
enci
es b
eyon
d t
rad
itio
nal
mar
-ke
ts a
lso
is f
oun
d i
n t
he
cust
omiz
ed s
olu
tion
Wea
ther
ford
pu
t to
geth
er f
or a
cli
ent
on A
lask
a’s
Nor
th S
lop
e. T
hro
ugh
com
pre
hen
sive
up
-fro
nt
eval
uat
ion
an
d ac
cess
to
the
full
ran
ge o
f lif
t te
chn
olog
y,w
e d
evel
oped
a j
et p
um
p/p
ower
pu
mp
com
bin
atio
n t
hat
red
uce
s co
sts
sign
ifica
ntl
y in
th
ish
arsh
pro
du
ctio
n e
nvi
ron
men
t.O
n t
he
imm
edia
te h
oriz
on f
or t
he
up
com
ing
year
w
ill
be f
urt
her
com
mer
cial
izat
ion
of
new
tec
hn
olog
ies
asw
e co
nti
nu
e an
R&
D f
ocu
s on
in
tell
igen
t w
ell
tech
nol
ogy
and
rem
otel
y-op
erat
ed w
ell
opti
miz
atio
n t
ech
nol
ogy.
We
also
wil
l co
nti
nu
e fo
cusi
ng
our
effo
rts
on m
arke
ts w
her
ew
e h
old
dom
inat
e sh
ares
su
ch a
s h
eavy
oil
in
Ven
ezu
ela
and
Can
ada,
as
wel
l as
con
tin
ued
emph
asis
on
coa
lbed
met
han
ep
rod
uct
ion
in
th
e U
nit
ed S
tate
s.
Cust
omiz
ed L
iftSo
lutio
n Eq
uals
Tech
nica
l and
Com
mer
cial
Suc
cess
.W
eath
erfo
rd re
cent
ly in
corp
orat
ed a
slid
ing
slee
ve
into
a te
mpo
rary
dril
l ste
m te
st s
tring
in a
hor
izont
alw
ell t
hat w
as b
eing
cle
aned
up
and
eval
uate
d fo
r the
pote
ntia
l run
ning
of a
n El
ectri
c Su
bmer
sibl
e Pu
mp.
By
usi
ng th
e sl
idin
g sl
eeve
jet p
ump
in th
e w
ell t
est
strin
g, p
rodu
cers
wer
e ab
le to
gra
dual
ly d
raw
dow
n w
ell
pres
sure
to k
ick
off t
he w
ell w
hile
avo
idin
g th
e da
nger
of fo
rmat
ion
brea
kup
and
sand
flow
. Dur
ing
the
clea
nup
, the
bac
k pr
essu
re w
as re
duce
d w
hile
inje
ctio
n pr
es-
sure
was
incr
ease
d an
d th
e w
ell fl
owed
at 6
,200
BPD
.
Wha
t are
Li
fting
Sys
tem
s?
Sim
ply
defin
ed, L
iftin
g Sy
stem
sin
volv
es w
orki
ng w
ith c
usto
mer
s to
det
erm
ine
the
follo
win
g: 1
) the
best
sys
tem
for t
he w
ell b
ased
on
an
anal
ysis
of w
ell c
ondi
tions
and
prod
uctio
n go
als;
2) w
hich
prod
uct c
ombi
natio
n ca
n he
lpop
timize
field
pro
duct
ion;
3) t
heab
ility
to o
ffer o
ne s
uppl
ier a
ndth
e sa
me
serv
ice
for d
iffer
ent
solu
tions
; and
4) t
echn
ical
sup
-po
rt fo
r all
the
prod
ucts
. Bec
ause
we
are
the
only
com
pany
to o
ffer
all f
orm
s of
lift,
we
are
the
only
com
pany
that
can
pro
vide
thes
ety
pes
of c
ompr
ehen
sive
ser
vice
s.
Mov
e in
to L
iftin
g So
lutio
ns M
arke
tM
arks
Shi
ft in
Foc
us D
urin
g 20
00.
Wea
ther
ford
has
mo
ved
into
a le
ader
ship
ro
le o
f p
rovi
din
g li
ftin
g s
olu
tio
ns t
hat
pin
po
int
cust
om
ers’
need
s an
d o
ffer
a s
yste
ms
app
roac
h to
ass
etre
cove
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rld
’s g
row
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pul
atio
n o
fm
atur
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field
s.
Artif
icia
l Lift
Sys
tem
sT
EC
HN
OL
OG
Y
SC
EN
E
10W
eath
erf
ord
Inte
rnati
onal, I
nc.
2000
Ann
ual R
epor
t
Alr
ead
y at
th
e fo
refr
ont
of r
emot
e au
tom
atio
n a
nd
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tim
izat
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tem
s, W
eath
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rd h
as
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her
refi
ned
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e A
IM™
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em t
hat
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orig
inal
ly i
ntr
odu
ced
in
Feb
ruar
y 20
00. T
he
syst
emn
ow i
nco
rpor
ates
all
for
ms
of s
ubs
urf
ace
lift
as
wel
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rem
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at w
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ecis
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info
rmat
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hro
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tern
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ts t
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men
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e m
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from
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des
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. RO
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elp
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ates
.
RO
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mot
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Pro
duct
ion
Optim
izat
ion
Syst
em
Brought to you by Global Reports
12W
eath
erf
ord
Inte
rnati
onal, I
nc.
2000
Ann
ual R
epor
t
Wo
lfPac
k™N
itro
gen
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n S
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mW
olfP
ack,
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ther
ford
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w n
itrog
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ener
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n sy
stem
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the
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n to
the
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pany
’s in
dust
ry le
adin
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re u
nder
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nced
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ervi
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gen
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-ra
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nefit
s to
cus
tom
ers
incl
ude:
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ting
with
few
er m
ovin
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rts,
2) re
quiri
ng le
ss c
ompl
icat
ed fi
ltrat
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and
3) le
avin
g a
smal
ler f
ootp
rint.
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the
only
sys
tem
of i
ts k
ind
with
a d
irect
driv
e de
sign
and
has
the
indu
stry
’s hi
ghes
t vol
ume
outp
ut re
lativ
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its
size
.
RO
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ote
ly O
per
ated
P
rod
ucti
on
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izat
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tem
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ther
ford
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lift
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rvic
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nd p
rodu
cts
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wth
e cu
stom
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otel
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onito
r and
co
ntro
l, de
sign
and
ana
lyze
wel
ls fr
om
a re
mot
e lo
catio
n. W
e co
ntin
ue to
be
the
mar
ket l
eade
r in
this
gro
win
g se
gmen
t by
refin
ing
exis
ting
prod
ucts
and
ser
vice
s,su
ch a
s ou
r new
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otel
y Op
erat
edPr
oduc
tion
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izatio
n Sy
stem
(ROP
OS)
tech
nolo
gy. R
OPOS
will
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rpor
ate
all
form
s of
sub
surf
ace
lift w
ith re
mot
e sy
stem
perf
orm
ance
. The
info
rmat
ion
gath
ered
ca
n be
acc
esse
d th
roug
h th
e In
tern
et a
ndad
just
men
ts to
equ
ipm
ent m
ade
from
the
oper
ator
’s de
skto
p. R
OPOS
will
hel
p lo
wer
mai
nten
ance
cos
ts a
s w
ell a
s in
crea
se
prod
uctio
n ra
tes.
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ote
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ntro
l To
p D
rive
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emen
ting
Hea
d™
(RC
TD
H)
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ther
ford
’s pr
emiu
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ner h
ange
r sys
tem
s ha
ve b
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run
in s
ome
of th
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ost
chal
leng
ing
wel
ls in
the
wor
ld, i
nclu
ding
the
wor
ld’s
long
est e
xten
ded
reac
h w
ell.
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late
st te
chno
logy
to jo
in th
ese
syst
ems
is th
e Re
mot
e Co
ntro
l Top
Driv
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ad(R
CTDH
), w
hich
is fa
st b
ecom
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the
new
sta
ndar
d in
dee
pwat
er G
ulf o
f Mex
ico
and
North
Sea
app
licat
ions
. RCT
DH a
llow
s re
mot
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tuat
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of th
e ce
men
ting
head
,m
akin
g it
safe
r tha
n st
anda
rd b
atte
ry p
ower
ed re
mot
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ntro
lled
head
s be
caus
e no
rig
per
sonn
el a
re re
quire
d to
man
ually
ope
rate
the
ball
and
dart
rele
ase
valv
es. I
t al
so b
oast
s a
smal
ler f
ootp
rint a
nd is
pow
ered
with
com
pres
sed
air.
GA
DG
ET
SC
OR
PO
RA
TE
D
IR
EC
TO
RY
Co
rpo
rate
Offi
cers
Bern
ard
J.
Duro
c-D
anner
Pre
side
nt, C
hief
Exe
cutiv
e O
ffice
r,C
hairm
an a
nd D
irect
or
E.
Lee C
olley,
III
Sen
ior
Vic
e P
resi
dent
and
P
resi
dent
, Art
ifici
al L
ift S
yste
ms
Mark
E.
Hopm
ann
Sen
ior
Vic
e P
resi
dent
and
Pre
side
nt, C
ompl
etio
n S
yste
ms
Gary
L.
Warr
en
Sen
ior
Vic
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resi
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and
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side
nt, D
rillin
g &
In
terv
entio
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ervi
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Donald
R.
Galletl
yS
enio
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ice
Pre
side
nt,
Com
mun
icat
ions
and
In
vest
or R
elat
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. N
ichols
on
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, H
uman
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ourc
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ndIn
form
atio
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chno
logy
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art
inV
ice
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side
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aw
and
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reta
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a W
. R
odri
guez
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resi
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an
d A
ccou
ntin
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ecto
rsP
hilip
Burg
uie
res
Cha
irman
Em
eritu
s W
eath
erfo
rd In
tern
atio
nal,
Inc.
Davi
d J
. B
utt
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Man
agin
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irect
orLe
hman
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ther
s, In
c.
(Inve
stm
ent b
anki
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ompa
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Bern
ard
J.
Duro
c-D
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irman
of t
he B
oard
, Pre
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ntan
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hief
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cutiv
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ffice
rW
eath
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rd In
tern
atio
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Inc.
Sheld
on B
. Lubar
Cha
irman
Lub
ar &
Co.
(P
rivat
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vest
men
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pany
)
William
E.
Macaula
yC
hairm
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Chi
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xecu
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rdM
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ctor
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hman
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s, In
c.
(Inve
stm
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anki
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ompa
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Robert
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s, J
r.P
rivat
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vest
or
Robert
A.
Rayn
eEx
ecut
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ctor
Lond
on M
erch
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ecur
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plc
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pert
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vest
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de
velo
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Hea
dq
uart
ers
Wea
ther
ford
Inte
rnat
iona
l, In
c.51
5 P
ost O
ak B
oule
vard
Hou
ston
, Tex
as 7
7027
713/
693-
4000
Reg
istr
ar a
nd
Tran
sfer
Ag
ent
Am
eric
an S
tock
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nsfe
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Tru
st C
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ny40
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as 7
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FT
Brought to you by Global Reports
“Think things through. Then follow through.”– Edward Rickenbacker
Weatherford. Completely Different.
Worldwide Headquarters: 713/693-4000 www.weatherford.com
Less than two years ago, Weatherford saw the need in theindustry for a new completion systems company. But not justany ordinary completion provider.This one needed to be responsive, agile and focused. It hadto combine production-enhancing technology with a highlytalented team of experts. And dedicated service with animpressive global infrastructure. Next time you need a completion system company with a track record of turning ideas into results, contactWeatherford Completion Systems. We’re not just different;we approach completion differently.
Turning ideas into results:Created the fastest-growing completion systemscompany in the world.
Established an extensive global infrastructure;including opening 24 new operation bases in 11countries in the year 2000 alone.
Only company to commercialize and run 23,300 feet(7,100 meters) of Expandable Sand Screen technology,a revolutionary sand control solution.
Production and Service Packers ■ Liner Systems ■ Expandable Sand Screens ■ Conventional SandScreens ■ Advanced Flow Control Systems ■ Inflatable Packers ■ Intelligent Well Systems
© 2
001
Wea
ther
ford
Inte
rnat
ional,
Inc.
All r
ights
rese
rved
.
Brought to you by Global Reports
UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KFor Annual and Transition Reports Pursuant to Sections 13 or 15(d) of Securities Exchange Act of 1934
¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Ñscal year ended December 31, 2000
OR
n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission Ñle number 1-13086
Weatherford International, Inc.(Exact name of registrant as speciÑed in its charter)
Delaware 04-2515019
(State or other jurisdiction of (IRS Employerincorporation or organization) IdentiÑcation No.)
515 Post Oak Boulevard, Suite 600, Houston, Texas 77027-3415
(Address of principal executive oÇces) (Zip Code)
Registrant's telephone number, including area code: (713) 693-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1.00 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 Ñled all reports required to be Ñled by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past90 days. Yes ¥ No n
Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant's knowledge, in deÑnitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. n
The aggregate market value of the voting stock held by nonaÇliates of the registrant as of March 12, 2001 was$5,451,170,382, based upon the closing price on the New York Stock Exchange as of such date.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latestpracticable date:
Title of Class Outstanding at March 12, 2001
Common Stock, $1.00 Par Value 110,281,062
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Items 10, 11, 12 and 13 of Part III will be included in the registrant's deÑnitiveproxy statement to be Ñled pursuant to Regulation 14A and is incorporated herein by reference.
Brought to you by Global Reports
PART I
ITEM 1. Business
Weatherford International, Inc. is one of the world's leading providers of equipment and services used forthe drilling, completion and production of oil and natural gas wells. We conduct operations in over 50countries and have more than 400 manufacturing and service and sales locations in nearly all of the oil andnatural gas producing regions in the world. We are among the leaders in each of our primary markets and ourdistribution and service network is one of the most extensive in the industry.
Our business is divided into three principal operating divisions:
‚ Drilling and Intervention Services Ì This division provides (1) drilling services and equipment rental,(2) well installation services, (3) cementing products and (4) underbalanced drilling and specialtypipeline services. It is a leader in each of these markets.
‚ Completion Systems Ì This division provides a wide range of completion products and services. Itmaintains a growing share of the world's completion market and oÅers leading proprietary and patentedtechnologies aimed at maximizing production.
‚ ArtiÑcial Lift Systems Ì This division is the only organization in the world that is able to provide allforms of artiÑcial lift used for the production of oil and gas. It also provides products and services whichoptimize and automate well production management.
In addition to the above operations, we also operated a Compression Services Division during 2000. InFebruary 2001, we completed the merger of essentially all of this division into a subsidiary of UniversalCompression Holdings, Inc. in exchange for 13.75 million shares of, or an approximate 48% interest in,Universal. Following the merger, Universal became the world's second largest provider of natural gascompression services. Universal oÅers a range of products and services from complete Ñeld compressionmanagement to single sales and rentals of compressor units, compressor maintenance, fabrication andproducts.
In April 2000, we completed the spin-oÅ to our stockholders of our Drilling Products Division through adistribution of the stock of our Grant Prideco, Inc. subsidiary. Grant Prideco is the world's largest provider ofdrill stem products and is a leading provider of premium tubulars and connections in North America. GrantPrideco's operations have been classiÑed as discontinued in our Ñnancial statements.
The following is a discussion of each of our businesses. The discussions include descriptions of ourproducts and services oÅered, our strategy for growth and the markets in which we compete. We have alsoincluded a discussion of our recent Ñnancial results, the trends aÅecting our results and our Ñnancial condition.We believe you will Ñnd these discussions informative and helpful in gaining a better understanding ofWeatherford.
References To Weatherford
When referring to Weatherford and using phrases such as ""we'' and ""us,'' the intent is to refer toWeatherford International, Inc. and its subsidiaries as a whole or on a divisional basis depending on thecontext in which the statements are made.
Strategy
Our primary objective is to provide our stockholders with above average returns on their investmentthrough income growth and asset appreciation. We seek to achieve this objective through the pursuit ofstrategic investments and technology opportunities that will enhance the long-term value of our companywhile improving the market shares, oÅerings and proÑtability of our existing businesses. Our strategy forgrowth is to focus on selected areas and markets in which there exist opportunities for higher market growth or
1
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penetration or enhanced returns through consolidations or through the provision of proprietary value-addedproducts and services. Our objective is not to provide all products and services necessary for the explorationand development of oil and gas reserves but rather to provide complete product and service capabilities withinspeciÑed market segments of the industry in which we have competitive advantages or where signiÑcantgrowth potential exists.
Principal components of our growth strategy include the following:
‚ Invest in technology to provide customers value-added products and services that can reduce the costof exploration and production of oil and gas. Examples of these technologies include our expandableproducts and services for sand control and well construction, liners and our underbalanced drillingtechnologies.
‚ Pursue strategic acquisitions, consolidations and combinations for long-term growth in new or existingmarkets.
‚ Continually review our asset holdings for ways to maximize value. The recent merger of ourCompression Services Division into Universal, which is intended to allow it to take advantage of growthopportunities outside of Weatherford, is an example of this strategy.
‚ Take advantage of secular growth trends in production enhancement technologies such as un-derbalanced drilling, expandable tubular technology, artiÑcial lift and well re-entry.
‚ Leverage our worldwide infrastructure to introduce new products and services.
Segment and Geographic Data
Financial Segment Data
When we review the operations of our business divisions we look at their revenues, operating income,EBITDA (operating income adding back depreciation and amortization), total assets and capital expendi-tures. The following chart sets forth those items for each of our operating business segments for 2000, 1999and 1998:
Drilling andIntervention Completion ArtiÑcial Compression
Services Systems Lift Systems Services
(in thousands)
2000
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 881,586 $220,624 $439,410 $272,641Operating Income (Loss)(a) ÏÏÏÏÏÏÏÏÏ 172,733 (7,433) 42,251 (10,260)EBITDA(a)(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 276,952 19,743 67,760 28,860Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,284,387 538,898 684,853 653,802Capital ExpendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123,402 34,735 18,438 85,093
1999
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 599,618 $121,136 $293,529 $225,917Operating Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏ 76,281 (21,545) 16,455 21,574EBITDA(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173,432 (7,428) 36,519 54,699Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,117,884 424,505 615,887 662,695Capital ExpendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46,074 10,731 10,347 94,755
1998
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 739,079 $118,093 $329,196 $177,481Operating Income (Loss)(c) ÏÏÏÏÏÏÏÏÏ 140,929 (3,812) (19,223) 17,092EBITDA(b)(c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 228,311 4,301 (40) 40,171Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 823,836 198,311 592,370 388,220Capital ExpendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,793 7,818 20,946 32,465
2
Brought to you by Global Reports
(a) In 2000, we incurred $56.3 million of pre-tax impairment charges for assets to be disposed of related tothe merger of essentially all of our Compression Services Division into Universal. Of these charges,$16.3 million relates to our Compression Services Division and $40.0 million relates to Corporate.
(b) Calculations of EBITDA should not be viewed as substitutes to calculations under GAAP, in particularcash Öows from operations, operating income and net income. In addition, EBITDA calculations by onecompany may not be comparable to another company's calculations.
(c) In 1998, we incurred $160.0 million in merger and other charges relating to the merger of EVI, Inc. andWeatherford Enterra, Inc. on May 27, 1998 and a reorganization and rationalization of our business tomatch industry conditions. Of these charges, $40.8 million, $4.2 million, $40.8 million, $1.5 million and$72.7 million relate to Drilling and Intervention Services, Completion Systems, ArtiÑcial Lift Systems,Compression Services and Corporate, respectively.
Geographic Data
Historically, a large portion of our business was concentrated in the United States and Canada. We alsohad a strong international presence in all of the oil producing regions of the world through our Drilling andIntervention Services Division. As the world's oil reserves have matured, international exploration, develop-ment and production have and will become more dominant.
Following the merger of EVI and Weatherford Enterra in 1998, we began a concentrated program toexpand our operations and shift more of our business internationally by utilizing the strength of our serviceinfrastructure to introduce new and existing products and services in these markets. Our eÅorts included:
‚ OÅering our completion systems and artiÑcial lift systems through our international service locations.During 1999 and in 2000, this initiative helped generate sales and project awards for our CompletionSystems Division in Brunei, South America and West Africa and for our ArtiÑcial Lift SystemsDivision in Argentina, Venezuela and China.
‚ Pursuing opportunities on a global basis for new performance-enhancing technologies and products inmultilateral, extended reach, completion, re-entry and underbalanced drilling applications. Successesinclude the global introduction of roller centralizers for extended reach drilling, revolutionary new sandcontrol products and underbalanced drilling for oÅshore applications.
The following charts set forth for 2000, 1999 and 1998 our revenues from third-party customers and long-lived assets by geographic region. Sales are based on the location of our entity that is selling or providing theproducts or services. The long-lived assets exclude deferred taxes and net of assets of discontinued operations.
Revenues from UnaÇliated Customers Long-lived Assets
For the Year Ended December 31, As of December 31,
2000 1999 1998 2000 1999 1998
(in thousands)
United States ÏÏÏÏÏÏÏÏ $ 837,440 $ 589,815 $ 634,222 $1,106,303 $1,162,077 $ 674,243Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏ 364,487 229,672 233,304 399,225 298,394 288,091Latin America ÏÏÏÏÏÏÏ 173,481 108,247 124,434 221,259 168,109 128,141EuropeÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 158,815 140,458 162,738 283,789 319,957 149,231Africa ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 93,390 77,190 91,307 33,023 28,376 40,012Asia PaciÑcÏÏÏÏÏÏÏÏÏÏ 129,676 50,260 63,838 88,673 30,870 42,134Middle East ÏÏÏÏÏÏÏÏÏ 56,972 44,558 54,006 27,516 16,919 22,715
Total ÏÏÏÏÏÏÏ $1,814,261 $1,240,200 $1,363,849 $2,159,788 $2,024,702 $1,344,567
Looking forward, we expect that Asia PaciÑc, the Middle East, North Africa and Eastern Europe will allbe growth markets for our products and services. Conversely, North America and Western Europe will exhibitdeclining growth over time as a percentage of total sales as the oil and gas reserves in those regions mature.
3
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Drilling and Intervention Services
Our Drilling and Intervention Services Division provides a wide range of products and services for theexploration, drilling and production of oil and natural gas. The principal products and services provided by thisdivision are:
‚ Drilling Services and Equipment Rental
‚ Well Installation Services
‚ Cementing Products
‚ Underbalanced Drilling and Specialty Pipeline Services
Market Trends and Outlook
Our Drilling and Intervention Services Division provides products and services used by oil and gascompanies, drilling contractors and other service companies to explore and drill for and produce oil and naturalgas. We estimate that about three-quarters of the products and services oÅered by this division are used in theinitial drilling and completion of oil and gas wells. The remainder of the products and services is used inconnection with the production phases of wells, including maintenance, redrilling and recompletion.
Historically, our Drilling and Intervention Services Division has generated approximately half of itsrevenues from activity in North America, primarily in the United States. With the increased importance ofinternational production, this division is focusing on growth in international markets while continuing tostrengthen its market position in North America.
Demand for our drilling and intervention products and services increased rapidly during 2000, particularlyin North America where the average annual Baker Hughes rotary rig count increased over 1999 by nearly 50%to 1,260. In addition, the increasing demand allowed us to increase prices in North America toward the end of2000. We increased our published price list by 10% in the third quarter. The initial beneÑcial impact of thatincrease on our Ñnancial performance was felt in the fourth quarter. Further increases in global demand in2001 may result in additional price increases during the year.
Technology is an increasingly important aspect of our products and services. Improving technology helpsus provide our customers with more eÇcient, higher margin and cost-eÅective tools to Ñnd and produce oil andgas. We have invested a substantial amount of our time and resources in building our technology oÅerings. Webelieve that our new products and services are among the best in the industry and provide our customers withways to reduce their costs of drilling and production through more eÇcient and accurate tools.
In certain areas, such as underbalanced drilling, we believe integrated oÅerings are becoming moreimportant in the market as customers seek to improve their performance with increasingly sophisticatedequipment and techniques. We expect to continue to enhance our underbalanced drilling service oÅering overthe next year and to maintain our position as the leading provider of these services.
Growth Strategy
The growth strategy for our Drilling and Intervention Services Division is to:
‚ Continue to enhance the technology of our products and services to maintain our leadership positionand allow our customers to reduce the costs of exploration and production.
‚ Leverage our worldwide sales and service infrastructure to push through new products and services.
‚ Focus on secular growth trends such as underbalanced drilling services and re-entry.
‚ Take advantage of selective consolidation and acquisition opportunities to reduce costs and increasemarket share.
‚ Provide our customers with integrated products and services within market segments.
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‚ Implement our business-to-business E-commerce strategy of oÅering selected products to ourcustomers through the Internet and various E-commerce portals and providing enhanced electroniccommunications between the customer and the Ñeld.
Products and Services OÅered
Drilling Services and Equipment Rental
Our drilling services and equipment rental operations consist of a wide variety of downhole services andproducts used during the drilling, completion, workover and plugging of oil and gas wells. These include:
‚ Downhole Drilling Services
‚ Intervention Services
‚ Equipment Rentals
These operations are provided worldwide. We believe that this group is the largest provider of theseservices in the world. The following is a description of the material products and services oÅered by this group.
Downhole Drilling Services. Services provided by this business include directional drilling services,multilateral systems, guidance and steering systems, whipstocks/casing exits, milling and cutting services, andplug and abandonment services. Downhole drilling services addresses the needs of operators to increase theproductivity of their wells and their ultimate recovery of hydrocarbons from reservoirs. The technologiesprovided by this group enable the drilling of directional and horizontal wells as well as the drilling, tieback andcompletion of multiple lateral wells from a single well bore. The principal beneÑts of these technologiesinclude the improved contact with and sweep of the reservoir, the reduction of the number of vertical wellsrequired to drill a reservoir and the resulting beneÑt to the environment at the surface, and the improvedreturn on the operator's investment.
Our primary competitors in this market are Baker Hughes, Halliburton and Schlumberger.
Intervention Services. Our intervention services operations include thru-tubing tools and systems,wireline services, conventional Ñshing services, Ñshing jars and casing patch products and services. Our thru-tubing services are primarily used in well re-entry activities and allow the operator to perform complex drilling,completion and cementation functions from existing wellbores. Thru-tubing and re-entry technologies help toreduce operator costs by eliminating the need for the drilling and completion of new wellbores. Wirelineservices provide pipe recovery and cased hole services. Conventional Ñshing services consists of removing andcleaning wellbores of obstructions, such as equipment, tools, drill string segments and other debris thatbecome caught during drilling, completion or production activities of a well. Fishing requires specialty toolsincluding Ñshing jars, milling tools, casing cutters, overshots and spears. Fishing may also employ whipstocksand mills to permit sidetracking out of a well to avoid obstructions that cannot be moved. We also providecasing patches and well control equipment. Casing patches are utilized for a variety of downhole remediationpurposes.
Our principal competitors in Ñshing services are Baker Hughes and Smith International. Our primarycompetitor in thru-tubing and downhole remediation services is Baker Hughes.
Equipment Rental. We oÅer one of the world's largest selections of specialized rental equipment andtools for the drilling, completion and workover of oil and gas wells. Our rental equipment allows ourcustomers, primarily operators and drilling contractors, to have access to inventories of tools and otherequipment without the cost of maintaining that equipment in their own inventory. The rental of thisequipment permits the equipment to be more eÇciently used and allows us to receive value-added returns onthe equipment.
Our rental equipment and tools include:
‚ Pressure control equipment such as preventers, high pressure valves, accumulators, adapters and chokeand kill manifolds.
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‚ Fishing and downhole tools such as milling tools, casing cutters, Ñshing jars, spears and overshots,stabilizers, power swivels and bottom hole assemblies.
‚ Drilling tools such as drill pipe and drilling jars.
‚ Tubular handling equipment such as elevators, spiders, slits, tongs and kelly spinners.
We manufacture many of our rental tools, such as our Dailey drilling and Ñshing jars, our pressure controlequipment (including our Williams rotating heads) and many of our Ñshing tools. As part of our spin-oÅ ofGrant Prideco, we entered into a three-year supply agreement with Grant Prideco for drill pipe and other drillstem products to ensure an economical and secure source of drill stem products in the future.
We conduct our rental operations worldwide. The breadth of our operations and locations allows us tomanage and redeploy our inventory of equipment to locations where the equipment is most needed.
We believe we are the world's largest provider of oilÑeld rental tool equipment. Our primary competitorsare Baker Hughes, Superior Energy Services and OÅshore Rentals. There are also a number of regionalcompetitors.
Well Installation Services
Our well installation services operations consist of a wide variety of tubular connection and installationservices for the drilling, completion and workover of an oil and gas well. We oÅer an integrated package oftubular services that allows our customers to receive all of their tubular handling, preparation, inspection,cleaning and wellsite installation needs from a single source. We are a leader in rig mechanization technologyused for the installation of tubing and casing and oÅer various products and services to improve rig Öooroperations by reducing staÇng requirements and increasing operational eÅectiveness and safety standards. Wealso specialize in high alloy installation services where metallurgical characteristics call for speciÑc handlingtechnology. Finally, our well installation services include high-grade completion equipment installationservices as well as cementation engineering services (consisting of computer-generated recommendations as tothe number and placement of centralizers during cementation). Many of these services are provided inconjunction with our Completion Systems Division.
We believe that we are one of the largest providers of well installation services in the world. Competitionin the market for tubular and completion well installation services is based on price, experience and quality.We believe that our ability to provide an integrated package of rig mechanization and high-grade installationservices, together with our worldwide infrastructure, provides us with a competitive advantage. Our primarycompetitors are Franks International and BJ Services. We also compete with a large number of smallerregional competitors.
Cementing Products
Cementing operations are one of the most important and expensive phases in the completion of a well.We are the world's leading producer of specialized equipment that allows operators to centralize the casing ofthe well and control the displacement of cement and other Öuids. Our cementing engineers can also analyzecomplex wells and provide detailed recommendations to help optimize cementing results. Our cementingproducts group also works closely with our Completion Systems Division in designing integrated completionsystems. Our cementing product line includes the following:
‚ Centralizer Placement Software Ì For calculating best centralizer spacing for optimum standoÅ.
‚ Centralizers Ì A comprehensive product line for varying applications and well conditions.
‚ Roller Centralizers Ì Mechanical friction-reduction systems for extended reach drilling and under-pressured conditions where diÅerential sticking risk is high.
‚ Flow Enhancement Tools Ì Tools that improve cement Öow.
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‚ Float Equipment Ì Drillable shoes and collars with Öoat valves that provide higher Öow rates.
‚ Other Equipment Ì Cement baskets, guide shoes, retainers and bridge plugs, multiple stage tools andcementing plugs.
We provide our cementing products worldwide and believe we are the world's largest provider of this typeof equipment. Our primary competitors are Halliburton and Davis Lynch.
Underbalanced Drilling and Specialty Pipeline Services
Underbalanced drilling occurs when the bottom hole pressure exerted by the hydrostatic head of thedrilling Öuid column is less than the pressure of the formation being drilled. In underbalanced applications thereservoir is able to Öow while the drilling takes place and thereby protects the formation from damage from thedrilling Öuids. Traditional drilling methods utilize weighted drilling Öuids that prevent the Öow of hydrocar-bons during drilling. There are several advantages to underbalanced drilling, including faster rates of drill bitpenetration, reduction of formation damage that inhibits production rates and minimization of lost circulationand costly stimulations. Underbalanced drilling is considered to be particularly desirable for drilling in olderÑelds and reservoirs where the downhole pressure has declined. We believe that many older Ñelds andreservoirs cannot be economically drilled other than through the use of underbalanced drilling. We estimatethat at least 20% of the world's wells are likely to be drilled underbalanced during the next 5-10 years, withthat percentage increasing over time.
We believe that we are the industry leader in underbalanced drilling and are the only company in theworld that can oÅer all critical components on a worldwide basis. These components include:
‚ Surface Equipment Ì Specially designed self-contained mobile or skid-mounted compression andnitrogen generation systems, rotating control heads to control well pressures while circulating drillingmediums during drilling, skid-mounted separators to separate air from mud, choke manifolds andsolids recovery systems.
‚ Downhole Equipment Ì High temperature motors, wireline steering tools, drill pipe, air rotaryhammer drills, casing exit systems and downhole monitoring equipment.
‚ Fluid Systems Ì Air drilling systems, mist drilling systems, foam drilling systems, including ourpatented Trans-Foam Recyclable Drilling Fluid System, and aerated Öuid drilling systems.
‚ Software/Engineering Ì Engineering and software, including simulation modeling, candidate screen-ing, corrosion mitigation, on-site engineering, data analysis and supervision.
Our principal competition in underbalanced drilling is Precision Drilling.
Raw Materials
Our Drilling and Intervention Services Division purchases a wide variety of materials from a number ofsources. Many of the products sold by this division are also manufactured by other parties. We do not believethat the loss of any one supplier would have a material adverse eÅect on this division.
Patents
Many of our products and technologies are patented or proprietary, including (1) our ""Virtual Riser''oÅshore pressure control system, which won the 1998 OÅshore Technology Award, (2) our Williams highpressure rotating heads for oÅshore production and (3) our chemicals and foam technology.
Completion Systems
In 1999, we formed our Completion Systems Division. This division was formed to establish an operatinggroup that would be focused exclusively on providing our customers with a comprehensive oÅering ofcompletion products, as well as engineered and integrated completion systems for oil and gas Ñelds.
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The principal products oÅered by this division are:
‚ Packers
‚ Sand Control Systems
‚ Expandable Systems
‚ Flow Control
‚ Liner Hangers
‚ InÖatable Packers
‚ Intelligent Well Technology
Market Trends and Outlook
The market for completion systems is believed to be in excess of $2.5 billion annually. This market iscomposed of various products and services, and we believe we have one of the most comprehensive oÅerings inthis market segment. The completion market is heavily dependent on the North American and internationalrig counts. During 2000, the demand for completion products improved with drilling activity. In particular,increasing activity in international markets and oÅshore zones has led to improving demand for the highermargin premium completion products. During the year we also continued to build this division's infrastructure,adding manufacturing capacity as well as service facilities and skilled personnel.
Although demand improved steadily during 2000, there was little price movement, except for premiumproduct lines. Early in 2001, pricing began to improve reÖecting tightening supply-demand fundamentals.
During 2000, this division integrated several key acquisitions made in late 1999. These acquisitionsincluded Petroline Wellsystems and Cardium Tool Services and signiÑcantly improved the breadth of ourproduct oÅerings. They also increased our manufacturing capabilities and presence in global oil and gasmarkets. In addition, the Petroline Expandable Sand Screen (ESS») product line, which oÅers signiÑcantproduction and cost beneÑts to producers, helped raise the division's proÑle among its customers.
We currently expect that the demand for our completion products will increase steadily during 2001 asdrilling activity increases worldwide. In particular, demand for our growing line of expandable products andservices is expected to increase. As a result, we expect that sales in our Completion Systems Division will growsigniÑcantly during the year with the level of growth to be dependent on the speed and depth of the recovery inthe industry.
Growth Strategy
The growth strategy for our Completion Systems Division is to:
‚ Build an integrated and full completion package through selective acquisitions and internal productdevelopment.
‚ Continue the expansion and introduction of our line of expandable slotted tubular completion products.
‚ Add new expandable completion products and technologies.
‚ Complete our introduction of premium liner hangers in the United States and expand our market shareworldwide.
‚ Leverage our international infrastructure to oÅer completion products worldwide.
‚ Reduce manufacturing costs through plant consolidations.
‚ Provide innovative and technologically superior completion solutions and oÅer ""best in class'' products.
‚ Reduce sales costs for lower margin products through the use of the Internet and E-commerce andenhance customer interaction through electronic communication and data sharing.
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Products and Services OÅered
Packers
Packers are mechanical or hydraulically-actuated devices that lock into the casing string and provide aseal between the casing and tubing in the well through an expanding element system. Packers permitproducing formations to be isolated from other sections of the wellbore as well as allow downhole operations,such as cementing and acidizing, to take place without damaging the reservoir.
Sand Control Systems
Specialized products are required for the control of sand in unconsolidated formations. Sand productionoften results in premature failure of artiÑcial lift and other downhole and surface equipment and can obstructthe Öow of oil and gas. Our sand control products consist of:
‚ Expandable tubular products utilizing revolutionary expandable slotted tubing technology. Oneproduct, our Expandable Sand Screen (ESS»), eliminates the problems of gravel packing, therebyreducing well costs, enhancing production and reducing erosion.
‚ Sand screens that are installed in the producing section of a well to prevent sand from reaching thesurface or causing problems with production equipment and pumps.
Expandable Systems
In addition to our ESS» product line for sand control utilizing expandable slotted tubing technology, wedeveloped new expandable technology during 2000 that has applications for solid pipe, including casing andliners, and the well construction segment of our industry. Our expandable systems include our rotaryexpansion systems which are based on positive displacement motor technology and can be deployed with drillpipe or coiled tubing. The fully patented rotary system overcomes stress limitations inherent in Ñxed coneexpansion techniques. Initial commercialization testing began in the second half of 2000.
Flow Control
Flow control systems include completion and intervention equipment that allows for life of wellproduction management. Our Öow control systems include:
‚ Standard and advanced Öow control products such as nipples, sleeves, running and pulling tools, plugs,valves and rolling systems.
‚ Comprehensive engineering, design and installation capabilities.
Liner Hangers
Liner hangers allow strings of casing to be suspended within a wellbore without having to extend thestring to the surface and are used to isolate production zones and formations. Most directional wells includeone or more liners because of the diÇculty of designing casing programs compatible with high tensile tubulars.We oÅer both drilling and production liner hangers. Drilling liners are used to isolate areas within the wellduring drilling operations. Production liners are used in the producing area of the well to support the wellboreand to isolate various sections of the well. We also oÅer expandable slotted liners that are designed to reducecost and improve production.
InÖatable Packers
These products are used in open cased hole applications for zonal isolation in drilling, completion orremedial applications. Our product line includes annulus casing packers, inÖatable production packers andinÖatable straddle packer assemblies. We also oÅer specialized high pressure, high temperature, highperformance inÖatable thru-tubing and completion packers.
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Intelligent Well Technology
Intelligent completion products allow operators to remotely monitor and control various downholecomponents, such as chokes and pumps. These products, when combined with production packers, permitvarious sections of a well to be optimized to improve production. These devices can also eliminate the need forwireline and coiled tubing because they can be operated electrically from the surface.
Backlog
The sales backlog for our completion products was $41.5 million as of February 2001, all of which isexpected to be shipped during 2001. There was no backlog as of the comparable period in the prior year.
Competition
Our principal competitors are Baker Hughes, Halliburton and Schlumberger. We also compete withvarious smaller providers of completion equipment. We believe that we are the third largest provider ofcompletion equipment in the United States and the leading provider of liner hanger equipment and Öowcontrol products in the North Sea market.
Raw Materials
Our Completion Systems Division purchases a wide variety of materials used in our manufacturingfacilities from a number of sources. We do not believe that the loss of any one supplier would have a materialadverse eÅect on this division.
Patents
Many of our completion products are patented or proprietary. Our expandable slotted tubular productsare sold pursuant to a license from Shell Research Limited with respect to certain aspects of the technology.
ArtiÑcial Lift Systems
Our ArtiÑcial Lift Systems Division is a leading provider of artiÑcial lift systems worldwide and is theonly provider of all forms of lift. ArtiÑcial lift systems are installed in oil wells that do not have suÇcientreservoir pressure to raise the oil to the surface or that need to supplement the natural reservoir drive inproducing oil from the well. We estimate that more than three-quarters of the world's producing oil wellsrequire some form of artiÑcial lift. In North America, the number of producing oil wells requiring lift is closerto 90% and outside of North America the number is approximately 70%. We believe the worldwide market forartiÑcial lift to be in excess of $1.5 billion per year, most of which has historically been in North America dueto the maturity of the North American oil Ñelds.
There are six principal types of artiÑcial lift technologies used in the industry. We oÅer each of them aswell as well optimization services. These forms of artiÑcial lift are:
‚ Progressing Cavity Pumps
‚ Reciprocating Rod Lift Systems
‚ Gas Lift Systems
‚ Electrical Submersible Pumps
‚ Hydraulic Lift Systems
‚ Other Lift Systems
Market Trends and Outlook
Our ArtiÑcial Lift Systems Division beneÑted in 2000 from improving activity levels primarily in theUnited States, Canada and in certain international markets. The international growth is due in part to the fact
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that since the merger of EVI and Weatherford Enterra in 1998, we have aggressively marketed our artiÑciallift systems worldwide through our international distribution and service locations. During 2000, we hadsuccess growing our international business primarily in Latin America and Asia PaciÑc.
In North America, demand for artiÑcial lift systems, particularly progressing cavity pumps, increaseddespite a recovery in the oil segment of the industry that was limited by favorable gas fundamentals. InCanada, we actively pursued and were awarded steam-assisted gravity drainage (SAGD) projects in heavy oilmarkets that required high temperature progressing cavity pumps. We expect the SAGD market to continueto be a signiÑcant market in Canada in the coming years. In the United States, we have been successfulmarketing and selling our pumping products for coalbed methane projects requiring dewatering of wells. Weexpect that international demand for our artiÑcial lift products will continue to increase as the rest of theworld's oilÑelds mature. As the only fully integrated provider of these systems, we expect to beneÑt from thebreadth of our product line and expertise.
Pricing increases were implemented during the year. A 3% increase was implemented in the fourthquarter which should beneÑt our performance during 2001. Additional increases will be put in place as marketconditions improve.
We also expanded our production optimization, or intelligent lift, oÅering worldwide during 2000. Thisproduct oÅering addresses our clients' needs for better planning of their production systems. In 1999, weimplemented our Ñrst package for production in Venezuela that transmits real time data from the well to theoperator's oÇce for continuous monitoring. Today, the complete optimization system allows desktopmonitoring of reservoir production and equipment performance as well as the ability to remotely adjustproduction and systems operation. A fully implemented system provides customers with potential beneÑts thatinclude improved production and lower operating and maintenance costs.
This division is also working with our Completion Systems Division on the use of its intelligentcompletion and monitoring technology to optimize the production process and reduce the cost of production.
Growth Strategy
The growth strategy for our ArtiÑcial Lift Systems Division is to:
‚ Invest in and provide technological solutions for artiÑcial lift needs, including high temperatureprogressing cavity pumps.
‚ Provide our customers with technologies that increase run times, decrease costs and eÅectively deliveroil production at a given depth, temperature and level of corrosion.
‚ Provide integrated solution packages to our customers to address all of their artiÑcial lift needs.
‚ Continue our international expansion by leveraging our international infrastructure.
‚ Reduce sales costs for lower margin products through the Internet and E-commerce sales.
‚ Reposition and consolidate our manufacturing and distribution organization to address the changingmarketplace, particularly in North America.
‚ Position our business for the return cycle in oil production and take advantage of the continuedmaturation of the world's oilÑelds.
Products and Services OÅered
Progressing Cavity Pumps
A progressing cavity pump is a downhole pump that is controlled by an above-ground electric systemconnected to a sucker rod that operates the downhole pump for the production of oil. These pumps are amongthe most eÇcient to operate and are designed to work in wells of depths up to 6,000 feet and productionbetween 10 to 4,500 barrels of oil per day. We are also developing high temperature progressing cavity pumpsfor SAGD applications. We believe that we are the world's largest provider of progressing cavity pumps and
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the only fully integrated provider of these systems. Our principal competitors for progressing cavity pumps areRobbins & Myers, Mono and KUDU.
Reciprocating Rod Lift Systems
A reciprocating rod lift system is an artiÑcial lift pumping system that uses an above-ground pumpingunit connected to a sucker rod and a downhole pump. It uses an up and down suction process to lift the oilfrom the reservoir. Reciprocating lift is used primarily for the production of oil from wells of depths up to14,000 feet and production rates from 20 to 8,000 barrels per day. Reciprocating lift systems are generallymore expensive to install than other systems but less costly to operate. We oÅer a complete package ofproducts for rod lift applications ranging from traditional pump jacks to the state-of-the-art RotaFlex» longstroke pumping unit, as well as all downhole components, including the Corod» continuous sucker rod,traditional sucker rods and tubing anchors. We believe we are the world's largest provider of reciprocating rodlift pump systems and the only fully integrated provider of these systems. Our principal competitors for rod liftsystems are Lufkin Industries, Dover Industries and Harbinson Fischer.
Gas Lift Systems
Gas lift is a form of artiÑcial lift that uses natural gas to lift oil in a producing reservoir to the surface. Theprocess of gas lift involves the injection of natural gas into the well through an above-ground injection systemand a series of downhole mandrels and gas lift valves. The gas that is injected into the system is eitherproduced from and reinjected into the well, or is injected from gas produced from nearby wells. The injectedgas acts as the lifting agent for the heavier oil. Gas lift systems are used primarily for oÅshore wells and thosewells that have a high component of gas in the well or have a gas supply near the well. Gas lift systems aredesigned to operate at a depth of up to 15,000 feet with volumes of up to 20,000 barrels of oil per day. Webelieve that we are one of the two largest providers of gas lift systems in the world, with our principalcompetitor being Schlumberger.
Electrical Submersible Pumps
An electrical submersible pump is an electric pump and motor that is placed downhole near theproducing reservoir and is driven by an electric motor controller and supply system above ground. Electricalsubmersible pumps are designed to operate at depths of 9,000 to 12,000 feet with volumes of 800 to 20,000barrels per day. We have historically not been a provider of electrical submersible pumps to the industry. In1999, we entered into an alliance with Electrical Submersible Pumps, the world's third largest supplier of thistype of pump, to receive a supply of electrical submersible pumps and to distribute in selected markets. Webelieve that this alliance is highly beneÑcial to both our customers and the customers of ElectricalSubmersible Pumps. Our principal competitors for electrical submersible pumps are Baker Hughes, Schlum-berger and Electrical Submersible Pumps.
Hydraulic Lift Systems
Hydraulic lift is a form of oil pumping system that uses an above-ground surface power unit to operate adownhole hydraulic pump (jet or piston) to lift oil from the reservoir. These systems are designed for wells atdepths of up to 20,000 feet with volumes of up to 15,000 barrels per day. Hydraulic pumps are well-suited forwells with high volumes and low solids. We believe that we are the world's largest provider of hydraulic liftsystems. Our principal competitor for hydraulic lift systems is Baker Hughes.
Other Lift Systems
We also oÅer a new form of lift that we call ""plunger lift.'' Plunger lift is the only artiÑcial lift system thatrequires no assistance from outside energy sources. The typical system consists of a plunger (or piston), topand bottom bumper springs, a lubricator and a surface controller. The plunger cycles between the top andbottom bumper springs. As it travels to the surface, it creates a solid interface between the lifted gas below and
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produced Öuid above to maximize lift energy. The travel cycle is controlled by a surface controller. Plunger liftis a low cost, easily maintained method of lift. It is particularly useful for dewatering gas wells and increasingwells with emulsion problems. Plunger lift also keeps wells free of paraÇn and other tubing deposit problemsand can be used to produce a well to depletion.
Well Optimization and Remote Monitoring and Control
Our ArtiÑcial Lift Systems Division was one of the Ñrst organizations to provide complete artiÑcial liftwell automation and optimization services and products. These services include Ñeld management andproducts that allow the customer to remotely monitor and control wells from a central location. As part of thisservice we recently entered into a long-term alliance arrangement with an existing supplier where we willjointly develop software and products for all of the forms of artiÑcial lift we oÅer to maximize production. Thissoftware will also allow the customer to utilize the Internet and the customer's own personal computer toaccess, monitor and control production. We believe that this product oÅering will beneÑt the customer withsubstantial cost savings while improving returns.
Raw Materials
Our ArtiÑcial Lift Systems Division purchases a variety of raw materials for its manufacturing operations.A number of its products are manufactured utilizing parts and components made by other manufacturers andsuppliers. This division is not dependent upon any single source of supply for its raw materials andcomponents. The loss of one or more of our suppliers could, however, disrupt production for some time.
Compression Services
In February 2001, we completed the merger of essentially all of our Compression Services Division into asubsidiary of Universal Compression Holdings, Inc. in exchange for 13.75 million shares of Universal commonstock, representing approximately 48% of Universal's total outstanding shares. Our Compression ServicesDivision was operated as a joint venture between us and GE Capital. We owned 64% of the venture and GECapital owned 36%. Concurrent with the merger, we completed the acquisition of GE Capital's 36% interest.We retained part of the Compression Services Division, namely the Singapore-based Gas Services Interna-tional operations, and $10.0 million in accounts receivable.
Prior to the Universal merger, our Compression Services Division was one of the world's largest providersof natural gas compression products and services. This division oÅered the following products and services:
‚ Rental, packaging and sales of natural gas compressors
‚ Custom-designed compression systems
‚ Full service turnkey compression management
‚ Maintenance and reconditioning services and select services such as repair services
‚ OÅshore platform installation and management of compression equipment
Prior to the merger, our principal competitors were Hanover Compression, Production Operators, asubsidiary of Schlumberger, Universal and other smaller regional compression companies.
Discontinued Operations Ì Grant Prideco
Our Grant Prideco Drilling Products Division is classiÑed as discontinued operations in light of our spin-oÅ of this division to our stockholders in April 2000. Grant Prideco is an international manufacturer andsupplier of products used for the exploration and production of oil and gas. Grant Prideco is a leading providerof drill pipe, other drill stem products and engineered connections.
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Properties
Our operations are conducted in over 50 countries. We currently have more than 55 manufacturingfacilities and approximately 350 sales, service and distribution locations throughout the world for ourcontinuing operations. The following table describes the material facilities owned or leased by us as ofDecember 31, 2000:
Facility PropertySize Size
Location (Sq. Ft.) (Acres) Tenure Utilization
Drilling & Intervention Services:
Nisku, Alberta, Canada ÏÏÏÏÏÏ 149,193 27.79 Owned BOP, Ñshing and rental, wireline andunderbalanced services
Houma, LouisianaÏÏÏÏÏÏÏÏÏÏÏ 148,869 13.00 Owned Manufacturing, cementing productsDubai, UAEÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 141,000 3.20 Leased Cementation products, well installation,
Ñshing and rental.Pearland, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏ 127,500 57.45 Owned Manufacturing, Ñshing and rentalSongkhla, Thailand ÏÏÏÏÏÏÏÏÏÏ 124,430 2.86 Leased Well installation services, ÑshingLoyang, SingaporeÏÏÏÏÏÏÏÏÏÏÏ 92,127 2.11 Leased Fishing, rental, well installation and
cementing productsHassi Messaoud, Algeria ÏÏÏÏÏ 87,196 5.00 Owned Tubular, Ñshing and rental, underbalanced
services and cementing productsDammam, Saudi ArabiaÏÏÏÏÏÏ 80,729 1.90 Leased Fishing, manufacturing, rental well
installation servicesStavanger Forrus, Norway ÏÏÏÏ 75,347 4.40 Leased Cementing, Ñshing and rental, well
installationHouston, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏ 71,242 14.50 Owned Manufacturing, well installationHannover, Germany ÏÏÏÏÏÏÏÏÏ 65,950 3.41 Leased Manufacturing, well installation and
cementing productsAbu Dhabi, UAE ÏÏÏÏÏÏÏÏÏÏÏ 65,000 1.50 Leased Cementation products, well installation,
Ñshing and rentalHouston, Texas(1) ÏÏÏÏÏÏÏÏÏÏ 60,000 24.17 Owned Research and development
Completion Systems:
Houston, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏ 92,045 13.49 Leased InÖatable packersCaxias do Sul, Brazil ÏÏÏÏÏÏÏÏ 82,979 17.50 Leased Manufacturing, packersNew Iberia, Louisiana ÏÏÏÏÏÏÏ 79,680 18.80 Owned Completion systems, liner hangers,
manufacturing, packersHuntsville, TexasÏÏÏÏÏÏÏÏÏÏÏÏ 78,212 20.00 Owned Manufacturing, packersHouston, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏ 71,400 6.50 Owned Manufacturing, sand screens
ArtiÑcial Lift Systems:
Woodward, Oklahoma ÏÏÏÏÏÏÏ 138,800 53.00 Leased Manufacturing, reciprocating rod lift andhydraulic lift
Greenville, TexasÏÏÏÏÏÏÏÏÏÏÏÏ 100,000 26.00 Owned Manufacturing, reciprocating rod liftOdessa, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99,200 7.20 Owned Manufacturing, reciprocating rod liftSao Leopoldo, BrazilÏÏÏÏÏÏÏÏÏ 86,100 17.00 Owned Manufacturing, progressing cavity pumpsNisku, Alberta, Canada ÏÏÏÏÏÏ 74,000 8.00 Owned Manufacturing, reciprocating rod liftRio Tercero, ArgentinaÏÏÏÏÏÏÏ 64,583 7.40 Owned Manufacturing, reciprocating rod lift and
hydraulic liftCompression Services(2):
Calgary, Alberta, CanadaÏÏÏÏÏ 105,760 9.22 Owned Sales, rental and serviceCorpus Christi, Texas ÏÏÏÏÏÏÏÏ 92,204 24.30 Owned Packaging, natural gas compression
systemsYukon, OklahomaÏÏÏÏÏÏÏÏÏÏÏ 72,000 14.70 Owned Repair, natural gas compressors
Corporate:
Houston, Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏ 193,167 Ì Leased Company's principal oÇces
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(1) The Houston, Texas research and development facility is shared by our Drilling and Intervention ServicesDivision, Completion Systems Division and ArtiÑcial Lift Systems Division.
(2) The facilities owned by our Compression Services Division listed herein are now operated by Universal.
Other Business Data
Patents
Many areas of our business rely on patents and proprietary technology. We currently have more than1,200 issued and pending patents from continuing operations. Many of our patents provide us with competitiveadvantages in our markets. Although we consider our patents and our patent protection to be an important partof our business, we do not believe that the loss of one or more of our patents would have a material adverseeÅect on our business.
Insurance
We currently carry a variety of insurance for our operations. We are partially self-insured for certainclaims in amounts that we believe to be customary and reasonable. We also maintain political risk insurance toinsure against certain risks while doing business in foreign countries.
Although we believe that we currently maintain insurance coverage that is adequate for the risks involved,there is always a risk that our insurance may not be suÇcient to cover any particular loss or that our insurancemay not cover all losses. For example, while we maintain product liability insurance, this type of insurance islimited in coverage, and it is possible that an adverse claim could arise that is in excess of our coverage.Finally, insurance rates have in the past been subject to wide Öuctuation, and changes in coverage could resultin increases in our cost or higher deductibles and retentions.
Federal Regulations and Environmental Matters
Our operations are subject to federal, state and local laws and regulations relating to the energy industryin general and the environment in particular. Environmental laws have in recent years become more stringentand have generally sought to impose greater liability on a larger number of potentially responsible parties.While we are not currently aware of any situation involving an environmental claim that would likely have amaterial adverse eÅect on our business, it is always possible that an environmental claim with respect to one ormore of our current businesses or a business or property that one of our predecessors owned or used could arisethat could have a material adverse eÅect.
Two of our subsidiaries have been named by the Environmental Protection Agency (""EPA'') as partiesto the Casmalia, California landÑll Superfund site. We legally transported certain waste materials to this sitebetween 1980 and 1985. In 1985, after we had ceased transporting materials to the landÑll, the EPA declaredthe landÑll a Superfund site. We have agreed to participate in a settlement for both subsidiaries. We have paidapproximately $21,500 to resolve potential liability for one subsidiary. We have agreed to settle liability for theother subsidiary as well and the EPA has assessed us with a settlement amount of $290,000. However, wedispute the EPA's settlement calculations due to the inclusion of unrelated third-party amounts andduplicative amounts. We have requested that the EPA recalculate the proposed settlement amount.
In late 2000, we were named by the EPA as a party to the Stoller Chemical Company Superfund Site inPelham, Georgia. This matter is in a very preliminary stage, however, based on the information provided bythe EPA to date, it appears that we will be a de minimus party.
Our expenditures during 2000 to comply with environmental laws and regulations were not material andwe currently expect that the cost of compliance with environmental laws and regulations for 2001 also will notbe material.
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Employees
As of December 31, 2000, we employed approximately 11,900 employees, including approximately 1,300employees of Compression Services. Certain of our operations are subject to union contracts. These contracts,however, cover only a small number of our employees. We believe that our relationship with our employees isgenerally satisfactory.
Corporate History
We are a Delaware corporation that was organized in 1972. Many of our businesses, including those ofWeatherford Enterra, have been conducted for more than 50 years.
Principal Executive OÇces
Our principal executive oÇces are located at 515 Post Oak Blvd., Suite 600, Houston, Texas 77027. Ourtelephone number is (713) 693-4000 and our Internet address is www.weatherford.com.
Forward-Looking Statements
This report, as well as other Ñlings made by us with the Securities and Exchange Commission, and ourreleases issued to the public contain various statements relating to future results, including certain projectionsand business trends. We believe these statements constitute ""Forward-Looking Statements'' as deÑned in thePrivate Securities Litigation Reform Act of 1995.
From time to time we update the various factors that are considered by us in making our forward-lookingstatements and the assumptions used by us in those statements. The following sets forth an update of thevarious assumptions used by us in our forward-looking statements as well as risks and uncertainties relating tothose statements.
Certain risks and uncertainties may cause actual results to be materially diÅerent from projected resultscontained in forward-looking statements in this report and in our other disclosures. These risks anduncertainties include, but are not limited to, those described in ""Risk Factors'' below and the following:
A Downturn in Market Conditions Could AÅect Projected Results. Any unexpected material changes inoil and gas prices or other market trends would likely aÅect the forward-looking information provided by us.The oil and gas industry is extremely volatile and subject to change based on political and economic factorsoutside our control.
Our estimates of future results and industry trends are based on assumptions regarding the future pricesof oil and gas, the North American and international rig counts and their eÅect on the demand and pricing ofour products and services. In analyzing the market and its impact on us for 2001, we have made the followingassumptions:
‚ Oil prices will average over $25 per barrel for West Texas Intermediate crude.
‚ Average natural gas prices will exceed $4.00 per mcf.
‚ World demand for oil will be up only slightly.
‚ There will not be any material decline in world demand for oil or North American demand for naturalgas.
‚ Pricing will continue to be subject to market conditions and competitive pricing pressures in certainmarkets and with respect to certain product lines.
‚ We will be able to improve our margins through price increases and such price increases will more thanoÅset wage and other cost increases.
These assumptions are based on various macroeconomic factors, and actual market conditions could varymaterially from those assumed.
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A Future Reduction in the Rig Count Could Adversely AÅect the Demand for Our Products and Services.A decline in the North American and international rig counts would adversely aÅect our results. Our forward-looking statements regarding our drilling products assume an improvement in the rig count in 2001 and thatthere will not be any material declines in the worldwide rig count, in particular the domestic rig count. Ourstatements also assume a continued increase in the international markets during 2001.
Our Manufacturing Improvements. We have recently taken steps to increase our manufacturingcapacity and reduce manufacturing costs in our European completion operations through the consolidation offacilities and additions of equipment. These activities are still ongoing. We were adversely aÅected by therelocation of manufacturing operations in our Completion Systems Division in the second quarter of 2000. Ourforward-looking statements assume that the manufacturing expansion and consolidation will be completedwithout any further material disruptions. If there are any additional disruptions or excess costs associated withthe manufacturing changes, the results of our Completion Systems Division could be adversely aÅected.
Our Capacity Constraints. Our forward-looking information assumes that we will have suÇcientmanufacturing capacity and personnel to address the demand increases that we expect, as noted above. To theextent there are limitations on capacity or personnel in areas in which the markets are improving, our growthcould be limited or our costs increased due to the need to meet demand through outside sources.
Our Integration of Acquisitions. During 1999 and 2000, we consummated, or agreed to consummate,various acquisitions of product lines and businesses. The success of these acquisitions will be dependent on ourability to integrate these product lines and businesses with our existing businesses and to eliminate duplicativecosts. We incur various duplicative costs during the integration of the operations of acquired businesses intoour businesses. Our forward-looking statements assume the successful integration of the operations of theacquired businesses and their contribution to our income during 2001. We have also assumed that ourcompression business will be successfully consolidated with Universal's and the estimated $20 million in costsavings and other synergies will be realized in 2001. Integration of acquisitions is something that cannot occurin the short term and that requires constant eÅort at the local level to be successful. Accordingly, there can beno assurance as to the ultimate success of these integration eÅorts.
Our Technological Advances. Our ability to succeed with our long-term growth strategy is dependent inpart on the technological competitiveness of our products and services. A central aspect of our growth strategyis to enhance the technology of our products and services, to expand the markets for many of our productsthrough the leverage of our worldwide infrastructure and to enter new markets and expand in existing marketswith technologically advanced value-added products. These technological advances include our underbalanceddrilling technology, our expandable sand screen technology, our rotary expansion systems and our recentlyadded multilateral technology. Our forward-looking statements have assumed above average growth fromthese new products and services in 2001.
Economic Downturn Could Adversely AÅect Demand for Products and Services. Although the economyin the United States has experienced one of its longest periods of growth in recent history, the continuedstrength of the United States economy cannot be assured. In fact, the United States and many foreigneconomies have recently experienced a slowdown in growth. If the United States or European economies wereto continue to decline or if the economies of South America or Asia were not to continue their recovery, theresulting demand and price for oil and gas and our products and services could adversely aÅect our revenuesand income. We have assumed that a worldwide recession or a material downturn in the United States orEuropean economies will not occur.
Currency Fluctuations Could Have a Material Adverse Financial Impact. A material decline incurrency rates in our markets could aÅect our future results as well as aÅect the carrying values of our assets.World currencies have been subject to much volatility. Our forward-looking statements assume no materialimpact from changes in currencies.
Changes in Global Trade Policies Could Adversely Impact Operations. Changes in global trade policiesin our markets could impact our operations in these markets. We have assumed that there will be no materialchanges in global trading policies.
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Unexpected Litigation and Legal Disputes Could Have a Material Adverse Financial Impact. If weexperience unexpected litigation or unexpected results in our existing litigation having a material eÅect onresults, the accuracy of the forward-looking statements would be aÅected. Our forward-looking statementsassume that there will be no such unexpected litigation or results.
Finally, our future results will depend upon various other risks and uncertainties, including, but notlimited to, those detailed in our other Ñlings with the Securities and Exchange Commission. For additionalinformation regarding risks and uncertainties, see our other current year Ñlings with the Securities andExchange Commission under the Securities Exchange Act of 1934, as amended, and the Securities Act of1933, as amended. We will generally update our assumptions in our Ñlings, as circumstances require.
Risk Factors
An investment in our common stock involves various risks. When considering an investment in ourcompany, you should consider carefully all of the risk factors described below, as well as the other informationincluded and incorporated by reference in this report.
Customer Credit Risks. The majority of our customers are engaged in the energy industry. Thisconcentration of customers may impact our overall exposure to credit risk, either positively or negatively, inthat customers may be similarly aÅected by changes in economic and industry conditions. We performongoing credit evaluations of our customers and do not generally require collateral in support of our tradereceivables. We maintain reserves for potential credit losses, and generally, actual losses have historically beenwithin our expectations.
Disruptions in Foreign Operations Could Adversely AÅect Our Income. Like most multinational oilÑeldservice companies, we have operations in certain international areas, including parts of the Middle East, Northand West Africa, Latin America, the Asia-PaciÑc region and the Commonwealth of Independent States, thatare inherently subject to risks of war, political disruption, civil disturbance and policies that may:
‚ Disrupt oil and gas exploration and production activities
‚ Restrict the movement of funds
‚ Lead to U.S. government or international sanctions
‚ Limit access to markets for periods of time
Our Products and Services are Subject to Operational, Litigation and Environmental Risks. Ourproducts are used for the exploration and production of oil and natural gas. These operations are subject tohazards inherent in the oil and gas industry that can cause personal injury or loss of life, damage to ordestruction of property, equipment, the environment and marine life, and suspension of operations. Thesehazards include Ñres, explosions, craterings, blowouts and oil spills. Litigation arising from an accident at alocation where our products or services are used or provided may result in our being named as a defendant inlawsuits asserting potentially large claims.
In the ordinary course of business, we become the subject of various claims and litigation. We maintaininsurance to cover many of our potential losses and we are subject to various self-retentions and deductibleswith respect to our insurance. Although we are subject to various ongoing items of litigation, we do not believethat any of the items of litigation that we are currently subject to will result in any material uninsured losses tous. It is, however, possible that an unexpected judgement could be rendered against us in cases in which wecould be uninsured and beyond the amounts that we currently have reserved or anticipate incurring for thatmatter.
We are also subject to various federal, state and local laws and regulations relating to the energy industryin general and the environment in particular. Environmental laws have in recent years become more stringentand have generally sought to impose greater liability on a larger number of potentially responsible parties.While we are not currently aware of any situation involving an environmental claim which would be likely tohave a material adverse eÅect on our business, it is always possible that an environmental claim with respect to
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one or more of our current businesses or a business or property that one of our predecessors owned could arisethat could involve the expenditure of a material amount of funds.
Currency Devaluation and Fluctuation Risks. A single European currency (""the Euro'') was introducedon January 1, 1999, at which time the conversion rates between legacy currencies and the Euro were set for 11participating member countries. However, the legacy currencies in those countries will continue to be used aslegal tender through January 1, 2002. Thereafter, the legacy currencies will be canceled, and the Euro bills andcoins will be used in the 11 participating countries. We are currently evaluating the eÅect of the Euro on ourconsolidated Ñnancial statements and our business operations; however, we do not foresee that the transition tothe Euro will have a signiÑcant impact.
Approximately 45% of our net assets from continuing operations are located outside the United Statesand are carried on our books in local currencies. Changes in those currencies in relation to the U.S. dollarresult in translation adjustments which are reÖected as accumulated other comprehensive loss in thestockholders' equity section on our balance sheet. We are also aÅected by remeasurement and transactionalgains and losses on currencies which are reÖected in our consolidated statements of operations.
Low Prices for Oil Adversely AÅect the Demand for Our Products and Services. Low oil prices adverselyaÅect demand throughout the oil and natural gas industry, including the demand for our products and services.As prices decline, we are aÅected in two signiÑcant ways. First, the funds available to our customers for thepurchase of goods and services decline. Second, exploration and drilling activity declines as marginallyproÑtable projects become uneconomic and either are delayed or eliminated. Accordingly, when oil prices arerelatively low, our revenues and income will be adversely aÅected.
Our Common Stock has Fluctuated Historically. Historically, the market price of common stock ofcompanies engaged in the oil and gas industry has been highly volatile. Likewise, the market price of ourcommon stock has varied signiÑcantly in the past. News announcements and changes in oil and natural gasprices, changes in the demand for oil and natural gas exploration and changes in the supply and demand for oiland natural gas have all been factors that have aÅected the price of our common stock.
ITEM 2. Properties
See Item 1. Business Ì Properties on page 14 of this report, which is incorporated by reference into thisitem.
ITEM 3. Legal Proceedings
In the ordinary course of business, we become the subject of various claims and litigation. We maintaininsurance to cover many of our potential losses and we are subject to various self-retentions and deductibleswith respect to our insurance.
See Item 1. Business Ì Other Business Data Ì Federal Regulations and Environmental Matters onpage 15 of this report, which is incorporated by reference into this item.
Although we are subject to various ongoing items of litigation, we do not believe that any of the items oflitigation to which we are currently subject will result in any material uninsured losses to us. It is, however,possible that an unexpected judgement could be rendered against us in the cases in which we are involved thatcould be uninsured and beyond the amounts that we currently have reserved or have anticipated incurring, forthat matter.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders of the Company during the fourth quarter of the yearended December 31, 2000.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Our common stock is traded on the New York Stock Exchange under the symbol ""WFT.'' As ofMarch 12, 2001, there were 3,056 stockholders of record. The following table sets forth, for the periodsindicated, the range of high and low sale prices per share for the common stock as reported on the New YorkStock Exchange.
Price
High Low
Year ending December 31, 2000First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $62 $347/8Second Quarter(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6111/16 35Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 501/4 363/8Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 493/8 313/4
Year ending December 31, 1999First Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $295/8 $163/4Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3911/16 2215/16Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 407/16 293/4Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 421/8 281/4
(a) The price of our common stock, subsequent to April 14, 2000, reÖects the Spin-oÅ of Grant Prideco.
On March 12, 2001, the closing sales price of our common stock as reported by the New York StockExchange was $57.10 per share. We have not declared or paid dividends on our common stock since 1984 andwe do not anticipate paying dividends on our common stock at any time in the foreseeable future.
In addition to our common stock, we currently have outstanding $402.5 million principal amount in5% Convertible Subordinated Preferred Equivalent Debentures due 2027. These debentures have thefollowing material terms:
‚ Mature on November 1, 2027
‚ Interest rate of 5% per annum, payable February 1, May 1, August 1 and November 1 of each year
‚ Are convertible into common stock at a conversion price of $53.34 per share, after giving eÅect to theGrant Prideco spin-oÅ
‚ May be redeemed at any time on or after November 4, 2000 at redemption prices set forth in anindenture relating to the debentures
‚ Are subordinated in right of payment of principal and interest on certain existing and future seniorindebtedness
In 2000, we also issued $910.0 million face amount of Zero Coupon Convertible Senior Debentures, due2020. These debentures have the following material terms:
‚ Mature on June 30, 2020
‚ Original issue discount of $408.4 million, providing the holders with an annual 3% yield to maturity
‚ Holders may convert at any time prior to maturity at a conversion rate of 9.9970 shares per $1,000principal amount at maturity
‚ Unsecured obligation ranking equal in right of payment with all other unsecured and unsubordinatedindebtedness and will rank senior to any future indebtedness
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ITEM 6. Selected Financial Data
The following table sets forth certain selected historical consolidated Ñnancial data and should be read inconjunction with Management's Discussion and Analysis of Financial Condition and Results of Operationsand the Consolidated Financial Statements and Notes thereto included elsewhere herein. The followinginformation may not be deemed indicative of our future operating results.
Year Ended December 31,
2000 1999 1998 1997 1996
(in thousands, except per share amounts)
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,814,261 $1,240,200 $1,363,849 $1,357,374 $1,129,958Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120,328 (a) 66,818 36,171 (b) 216,082 127,408Income (Loss) From Continuing
OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (38,892)(a)(c) 16,206 (883)(b) 129,745 71,225Basic Earnings (Loss) Per Share From
Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.36) 0.16 (0.01) 1.35 0.79Diluted Earnings (Loss) Per Share From
Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.36) 0.16 (0.01) 1.33 0.78Total Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,461,579 3,513,789 2,638,612 2,508,034 2,121,415Long-term Debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 730,176(d) 226,603 220,398 224,935 415,0955% Convertible Subordinated Preferred
Equivalent DebenturesÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 402,500 402,500 402,500 402,500 ÌStockholders' Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,338,458 1,843,684 1,500,090 1,462,409 1,295,048Cash Dividends Per Share ÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì
(a) Includes $56.3 million, $43.0 million net of taxes, of impairment charges for assets to be disposed ofrelated to the merger of essentially all of our Compression Services Division into Universal.
(b) Includes $160.0 million, $104.0 million net of taxes, of merger and other charges relating to the mergerbetween EVI and Weatherford Enterra and a reorganization and rationalization of our business in light ofindustry conditions.
(c) Includes $76.5 million of deferred tax provision due to the anticipated exchange of a consolidatedsubsidiary for an equity method investment in connection with the Universal merger.
(d) Includes $910.0 million face amount of our Zero Coupon Convertible Senior Debentures, at the accreteddiscount amount of $509.2 million as of December 31, 2000.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
Our business is conducted through three business segments: (1) Drilling and Intervention Services,(2) Completion Systems and (3) ArtiÑcial Lift Systems. In addition to these three segments, we historicallyoperated a Compression Services Division and a Drilling Products Division. In February 2001, we completedthe merger of essentially all of our Compression Services Division into a subsidiary of Universal CompressionHoldings, Inc. in exchange for 13.75 million shares of Universal common stock, or an approximate 48%interest in Universal. On April 14, 2000, we distributed to our stockholders all of the outstanding shares ofGrant Prideco, Inc., which held the operating assets used in our Drilling Products Division. As a result of thisdistribution, our Drilling Products Division is presented as discontinued operations in the accompanyingÑnancial statements.
The following is a discussion of our results of operations for the last three years. This discussion should beread in conjunction with our Ñnancial statements that are included with this report. Our discussion includesvarious forward-looking statements about our markets, the demand for our products and services and ourfuture results. These statements are based on certain assumptions that we consider reasonable. Forinformation about these assumptions, you should refer to the section entitled ""Forward-Looking Statements''located within Item 1. Business.
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Market Trends and Outlook
Our businesses serve the oil and gas industry. All of our businesses are aÅected by changes in theworldwide demand and price of oil and natural gas. Certain of our products and services, such as our Ñshingand rental services, well installation services and well completion services, are dependent on the level ofexploration and development activity and particularly the completion phase of the well life cycle. Otherproducts and services, such as our artiÑcial lift systems, are dependent on production activity. We currentlyestimate that approximately two-thirds of our continuing operations are reliant on drilling activity, with theremainder focused on production and reservoir enhancement activity.
The following chart sets forth certain statistics that are reÖective of historical market conditions:
Henry Hub North American InternationalWTI Oil(1) Gas(2) Rig Count(3) Rig Count(3)
2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $26.80 $9.775 1,497 7031999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.60 2.329 1,177 5751998 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.28 1.945 895 671
(1) Price per barrel as of December 31 Ì Source: Applied Reasoning, Inc.
(2) Price per MM/BTU as of December 31 Ì Source: Oil World
(3) Average rig count for December Ì Source: Baker Hughes Rig Count
The oil and gas industry has been subject to extreme volatility in recent years due to signiÑcant changes inthe demand, supply and pricing of oil and natural gas. In 1997 through early 1998, we experienced a strongincrease in the demand for our products and services due to a worldwide increase in the demand for oil andshortages of equipment and people to service this demand. Beginning in late 1997, the price of oil began to fall.Initially the eÅects of the decline primarily impacted the North American markets where activity is moresensitive to the price of oil. By late 1998, demand had fallen substantially as our customers' exploration,development and production activities worldwide dropped in reaction to sharply lower oil prices. The reductionin activity continued through most of 1999 as the price of oil hit a low of $11.07 per barrel during the year. TheNorth American and international rig counts reached historical lows of 534 and 556, respectively. During thesecond half of 1999, the price of oil increased sharply due to demand and supply imbalances and the membersof the Organization of Petroleum Exporting Countries reduced production in compliance with productionquotas. However, the pickup in our customers' activity was not proportional to the increase in the price of oil,as our customers were more cautious in new spending due to the recent volatility of prices. The demand andsupply imbalances resulted in world oil prices increasing to the $24 to $37 a barrel range during 2000, whichcaused us to experience steady improvements in the demand for our products and services.
The timing of the impact of the recovery varies region to region and division to division. The NorthAmerican rig count Öuctuations impact our divisions generally within one quarter. Our international activity,in turn, generally lags North American activity by six to nine months. Our ArtiÑcial Lift Systems Division,which tracks very closely the United States and Canadian rig counts and the Canadian workover rig count, wasthe Ñrst to beneÑt from the oil price improvements experienced in 1999 as many production projects werereinstated in light of the higher prices of oil, in particular heavy oil in Canada. Our Drilling and InterventionServices Division and our Completion Systems Division were the next to beneÑt from the improved activity in1999 in North America, particularly in our drilling services and equipment rental and cementation businesses.
Increased North American activity continued to beneÑt all of our divisions in 2000 through increasingvolumes and most recently improved pricing for many of our products and services. Outside North America,our strongest growth in 2000 was in Latin America where the rig count increased from 196 last year to 257 onDecember 31, 2000. We also saw improvement in some regions in Africa, while the Middle East and AsiaPaciÑc have been slower to recover.
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As we enter 2001, we expect continued improvements due to anticipated market recovery outside NorthAmerica. In general, during 2001 we expect the markets to aÅect our businesses as follows:
Drilling and Intervention Services
This division is expected to see quarter on quarter improvements in 2001 in both revenue and proÑtability.We believe this division should continue to see a strong contribution from the North American market.Although somewhat more diÇcult to predict, we currently expect that the markets in the North Sea and LatinAmerica will experience sales improvements of approximately 15% over the next two quarters through volumeand pricing. To a lesser extent, sales improvements will occur in the Middle East, Africa and Asia PaciÑc.
Completion Systems
Our Completion Systems Division realized its Ñrst operating proÑt in the third quarter of 2000 since thedivision was formed last year. In 2000, we saw this division seek to increase its revenue base and position itselffor growth in 2001 and beyond by expanding its sales and service infrastructure and manufacturing capacityworldwide. We are completing an increase in manufacturing capacity of around 50% over our availablecapacity in 2000 and expect to realize the beneÑts in the second half of 2001. We believe this division willcontinue to experience an increase in proÑtability in 2001. The level of its contribution will be dependent ondrilling activity levels, particularly in the international markets, the division's ability to meet market demandthrough increased manufacturing output, and its ability to successfully market its products such as its patentedexpandable sand screen, its Stratapac» premium screen and its premium liner hangers and packers.
ArtiÑcial Lift Systems
We expect that our ArtiÑcial Lift Systems Division will continue to see revenue improvements on a yearon year basis in North America and Latin America, as well as improvements in margins as a result of costcontainment, higher throughput in our plants and the impact of price increases initiated throughout 2000. Wehave planned additional price increases in the Ñrst quarter of 2001 and expect to see the impact in the secondand third quarters of 2001. The second quarter, however, will be impacted by the seasonal downturn in Canadaand the growth in North America may be somewhat limited by the higher priority our customers are currentlyplacing on natural gas projects over oil projects.
Compression Services
Our Compression Services Division, which is less aÅected by day-to-day market factors, is expected tobeneÑt from the February 2001 merger with Universal. During 2001, we will record a 48% interest inUniversal's results of operations.
Overall, the level of market improvements for our businesses in 2001 will continue to be heavilydependent on the continued recovery in the North American markets and the timing and strength of therecovery outside North America. Each of our divisions will be aÅected by the seasonal downturn experiencedeach year in Canada, normally during the second quarter. Although we believe that the activity levels in ourindustry, particularly in the international markets, are in the early stages of recovery, the extent of the recoveryis diÇcult to predict in light of the volatile nature of our business. In addition, the continued strength of theindustry is uncertain and will be highly dependent on many external factors, such as world economicconditions, compliance with Organization of Petroleum Exporting Countries quotas and weather conditions.The extreme volatility of our markets makes predictions regarding future results diÇcult.
Results of Operations for the Years Ended 2000, 1999 and 1998
The business environment in which we operated during 2000, 1999, and 1998 saw extreme changes. Weexperienced a material slow-down in the market beginning near the middle of 1998. By the end of 1998, ourindustry was in the midst of one of the worst downturns in its history. This downturn continued throughoutmost of 1999. Oil prices improved during the second half of 1999 and through 2000. Our North Americanmarkets started showing signs of improvement in the latter half of 1999. This growth continued throughout
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2000 with the strongest improvement resulting in the fourth quarter. International activity began showing signsof recovery early in 2000, but did not exhibit noticeable improvements until the fourth quarter.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
The following charts contain selected Ñnancial data comparing our results from continuing operations for2000 and 1999:
Comparative Financial Data
Year Ended
2000 1999
(in thousands, except per shareamounts)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,814,261 $1,240,200Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 553,314 351,505Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.5% 28.3%Selling, General and Administrative Attributable to Segments ÏÏ $ 343,094 $ 261,358Corporate General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,976 25,947Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120,328 (a) 66,818Income (Loss) from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (38,892)(a)(b) 16,206Income (Loss) from Continuing Operations Excluding Goodwill
Amortization, Net of Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,614)(a)(b) 38,159EBITDA(c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 319,437 (a) 233,476Income (Loss) per Diluted Share from Continuing Operations (0.36) 0.16Income (Loss) per Diluted Share from Continuing Operations
Excluding Goodwill Amortization, Net of Taxes ÏÏÏÏÏÏÏÏÏÏÏÏ (0.04) 0.37
(a) Includes $56.3 million of impairment charges for assets to be disposed of related to the merger ofessentially all of our Compression Services Division into Universal. The net after tax impact of thesecharges was $43.0 million.
(b) Includes $76.5 million of deferred tax provision due to the anticipated exchange of a consolidatedsubsidiary for an equity method investment in connection with the Universal merger.
(c) EBITDA is calculated by taking operating income and adding back depreciation and amortization. Wehave included an EBITDA calculation because when we look at the performance of our businesses, wegive consideration to their EBITDA. Calculations of EBITDA should not be viewed as substitutes tocalculations under GAAP, in particular cash Öows from operations, operating income and net income. Inaddition, EBITDA calculations by one company may not be comparable to another company'scalculations.
Sales by Geographic Region
Year Ended
2000 1999
Region:(a)U. S ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46% 48%Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20 19Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 9Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 11Africa ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 6Asia PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 4Middle East ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 3
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% 100%
(a) Sales are based on the region of origination and do not reÖect sales by ultimate destination.
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Our results from continuing operations for 2000 as compared to 1999 were also aÅected by the followingspeciÑc items:
‚ Revenues increased $574.1 million, or 46.3%, from 1999 levels due to increased volume throughout2000 and improved pricing in late 2000. International revenues increased 45.5% from 1999 to$612.3 million as compared to an increase in the average international rig count of 8.6%. NorthAmerican revenues increased $382.4 million, or 46.7%, as compared to an increase in the averageNorth American rig count of 44.7%.
‚ Revenues in 2000 were positively impacted by the full year of revenues related to our third quarter1999 acquisitions of Petroline Wellsystems, Dailey International and Williams Tool.
‚ Gross proÑt percentage increased from 28.3% in 1999 to 30.5% in 2000 primarily due to volume andpricing gains within our Drilling and Intervention Services Division and Completion Systems Division.
‚ Selling, general and administrative expenses attributable to the segments decreased as a percentage ofrevenue from 21.1% in 1999 to 18.9% in 2000. This decrease is primarily attributable to a higher revenuebase, as well as the full integration of our 1999 acquisitions into our business. These benefits werepartially offset by goodwill amortization of $37.1 million in 2000 as compared to $24.0 million in 1999.
‚ Corporate general and administrative expenses increased $11.0 million from 1999; however, itremained relatively Öat as a percentage of revenue on a year on year basis.
‚ Operating income increased from $66.8 million in 1999 to $176.6 million, excluding impairmentcharges in 2000. This increase resulted from improved market conditions and our eÅorts to reduce costsand improve eÇciencies during the industry downturn. The acquisitions made by us late in the thirdquarter of 1999 also contributed to the increase in operating income.
‚ Our 2000 tax provision includes $76.5 million of deferred taxes related to the anticipated exchange of aconsolidated subsidiary for an equity method investment in connection with the Universal merger.Excluding this $76.5 million provision and the tax eÅect of the impairment charge, our eÅective taxrate on income from continuing operations for 2000 was approximately 36.3% as compared to 29.9% for1999. The increase in our eÅective rate is primarily a result of a decrease in foreign tax beneÑts.
Universal Compression Transaction
On October 24, 2000, we announced the merger of essentially all of our Compression Services Divisioninto a subsidiary of Universal in exchange for 13.75 million shares of Universal common stock, whichapproximates 48% of Universal's outstanding shares. The transaction was completed on February 9, 2001.Concurrent with the transaction, we paid GE Capital $206.5 million for its 36% ownership in the joint venturein which our Compression Services Division operated. We retained part of the Compression Services Division,namely Singapore-based Gas Services International operations, and $10.0 million in accounts receivable.
In connection with this transaction, we recorded impairment charges in the fourth quarter of 2000 of$56.3 million, $43.0 million after taxes, and provided for deferred taxes of $76.5 million due to the anticipatedexchange of a consolidated subsidiary for an equity method investment.
The pre-tax impairment charge of $56.3 million reÖects the diÅerence between estimated fair value of netassets held for sale, which were determined using quoted market prices and estimated selling prices lessestimated costs to sell, and the net book value of the Compression Services Division assets. The carrying valueof the Compression Services Division's net assets as of December 31, 2000 was $439.3 million.
In connection with the merger with Universal, we entered into a Voting Agreement with Universalpursuant to which we have agreed to certain voting limitations with respect to shares of our Universal commonstock. For a period of no more than two years, we have agreed to vote our shares of Universal common stockthat are in excess of 33∏% of Universal's outstanding shares in the same proportion as the shares of Universalcommon stock held by the public (excluding our shares and shares held by Castle Harlan and his aÇliates).We may vote the remainder of our shares in our sole discretion. We also entered into a Registration RightsAgreement, pursuant to which we were granted certain demand and piggyback registration rights for ourshares of Universal common stock. Additionally, we entered into a Transitional Services Agreement with
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Universal to provide certain corporate and administrative services to the Compression Services Division for afee and reimbursement of costs and expenses for up to 120 days following the merger. Pursuant to the terms ofthe merger agreement, we also appointed three members to Universal's Board of Directors. As long as we ownat least 20% of Universal's outstanding common stock, we have the right to designate three Board members. Ifownership interest falls below 20%, we may designate only two directors, and if our ownership falls below 10%we will no longer be entitled to designate directors to serve on Universal's Board of Directors. Upon the closingof the merger, Universal repaid and terminated our sale and leaseback arrangements and the CompressionServices Division's credit facility.
Segment Results
Drilling and Intervention Services
Our Drilling and Intervention Services Division experienced improvements in revenue and operatingincome as the increase in the North American rig count positively impacted the demand for its products andservices. Demand in international markets was at historical lows during 1999. The low demand carried into theÑrst part of 2000, resulting in continued pricing pressures and reduced volumes. The international marketsshowed strong improvements in the second half of 2000, particularly in Latin America and Europe whererevenues increased approximately 47% and 29%, respectively, compared to the Ñrst half of 2000. Our Drillingand Intervention Services Division's revenue and operating income were also positively impacted by its 1999acquisitions, including Dailey International and Williams Tool.
The following chart sets forth data regarding the results of our Drilling and Intervention Services Divisionfor 2000 and 1999:
Year Ended
2000 1999
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $881,586 $599,618Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 296,959 171,618Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33.7% 28.6%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $127,592 $ 97,581Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172,733 76,281EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 276,952 173,432
The following material items aÅected the results of our Drilling and Intervention Services Division:
‚ Compared to 1999, revenues increased 47.0% in 2000 due to improved market conditions and the fullyear impact of our late 1999 acquisitions.
‚ Revenues in North America increased 74.6% while the average North American rig count increased44.7% year over year. International revenues increased 20.7%, while the average international rig countincreased 8.6%.
‚ Gross proÑt as a percent of revenues increased primarily due to pricing increases implemented in thesecond half of 2000 and the higher revenue base in relation to depreciation and Ñxed overhead andmanufacturing costs.
‚ Selling, general and administrative expenses decreased as a percentage of revenues from 16.3% in 1999to 14.5% in 2000. The decrease primarily reÖects a higher revenue base, partially oÅset by higheremployee costs and an increase of $6.7 million in goodwill and intangible amortization expense.
Completion Systems
Our Completion Systems Division has shown steady improvements since its formation in 1999. WesigniÑcantly changed the composition of this division in 1999 through our acquisitions of Petroline Wellsys-tems and Cardium Tool Services. In 2000, we further extended our oÅerings with our acquisition of theStratapac» and Stratacoil‚ premium screen product lines. These acquisitions, together with a major expansionof our Nodeco liner hanger product line into the United States in 1999, have expanded our businesses into the
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higher margin premium completion markets worldwide and have added sand control and Öow control to ourcompletion product and service oÅerings.
This division's revenues increased throughout 2000. Improved revenues were realized in almost allregions, most notably in North America and Asia PaciÑc. Sales of our expandable sand screens increased34.7% in the second half of 2000 compared to the Ñrst half. This improvement represents the Ñrst stages of topline growth in this product line resulting from our recently added manufacturing capacity. We recentlycompleted the longest horizontal section (4000 feet) of an expandable sand screen completion system.
In the third quarter of 2000, this division reported operating proÑts for the Ñrst time since its inception in1999. This proÑt trend continued into the fourth quarter of 2000 with operating income increasing over 50% ascompared to the third quarter.
The following chart sets forth data regarding the results of our Completion Systems Division for 2000 and1999:
Year Ended
2000 1999
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $220,624 $121,136Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,162 19,857Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.7% 16.4%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 57,601 $ 41,402Operating Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,433) (21,545)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,743 (7,428)
The following material items aÅected the results of our Completion Systems Division:
‚ Revenue in 2000 increased $99.5 million, or 82.1%, from 1999. Improvement was experienced in allhistorical product lines as well as from sales of expandable completion products and Öow controlproducts added through our acquisition of Petroline Wellsystems in September 1999.
‚ Gross proÑt percentage increased primarily due to higher gross margin percentages from our late 1999acquisitions, higher throughput in our manufacturing facilities and improved manufacturingeÇciencies.
‚ Selling, general and administrative expenses increased 39.1% from 1999 due to costs associated withthe 1999 acquisitions, the addition of sales staÅ for the new product lines and increased amortization of$7.5 million for goodwill and intangible assets.
ArtiÑcial Lift Systems
Operating results from our ArtiÑcial Lift Systems Division are heavily dependent on oil productionactivity. Revenues for this division increased approximately 50% from 1999 levels, primarily in response toimproved activity levels in North American markets, particularly in Canada. This division has also seenimproved sales in the Latin American markets from 1999 levels as rig count in this region increased from 196in December 1999 to 257 in December 2000.
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The following chart sets forth data regarding the results of our ArtiÑcial Lift Systems Division for 2000and 1999:
Year Ended
2000 1999
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $439,410 $293,529Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156,085 102,515Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.5% 34.9%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $113,834 $ 86,434Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,251 16,455EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 67,760 36,519
The following material items aÅected the results of our ArtiÑcial Lift Systems Division:
‚ Revenues increased 49.7% from 1999 to 2000 as a result of a 46.4% increase in North Americanrevenues and a 79.8% increase in Latin American revenues. We also experienced an increase of$4.8 million in revenues in the Asia PaciÑc region due to higher revenues from our joint venture inChina as well as increased sales of reciprocating and gas lift products in the region.
‚ Gross proÑt increased slightly from 34.9% in 1999 to 35.5% in 2000 due to higher pricing and improvedmanufacturing eÇciencies.
‚ Selling, general and administrative expenses as a percentage of revenues decreased from 29.4% in 1999to 25.9% in 2000 due to cost reductions previously implemented and a higher revenue base.
Compression Services
The Compression Services Division reported revenues of $272.6 million for 2000 compared to $225.9 mil-lion for 1999. Operating income declined from $21.6 million for 1999 to $6.0 million for 2000, excluding theimpairment charge of $16.3 million. The decline in operating income was primarily attributable to lowermargins on rentals, higher costs related to the reorganization of the division in 2000, higher selling, general andadministrative expenses and start-up costs associated with international expansion.
During the latter part of the year, we saw improvement reÖecting the beginning of the recovery in thisdivision following the reorganization that began earlier this year. This division is well positioned for growth inconnection with its merger in February 2001 with Universal.
The following chart sets forth data regarding the results of our Compression Services Division for 2000and 1999:
Year Ended
2000 1999
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 272,641 $225,917Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,108 57,515Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18.4% 25.5%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 44,067 $ 35,941Operating Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10,260)(a) 21,574EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,860 (a) 54,699EBITDAR(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,113 (a) 66,141
(a) Includes $16.3 million of impairment charges for assets to be disposed of related to the Universal merger.
(b) EBITDAR is calculated by adding our Compression Services Division's lease expenses from thecompressor leases, that are subject to its sale leaseback arrangements, to our EBITDA. We have includedEBITDAR for informational purposes because this is a Ñnancial measure under which other publiccompression companies are analyzed by the investment community. In addition, EBITDAR calculationsby one company may not be comparable to another company's calculations.
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The following material items aÅected the results of our Compression Services Division:
‚ Revenues in 2000 were up 20.7% from 1999 levels reÖecting $8.0 million in incremental revenues fromour rental contracts with YPF and $36.7 million of incremental revenues from the January 2000acquisition of GSI.
‚ Gross proÑt as a percentage of revenues decreased from 25.5% in 1999 to 18.4% in 2000 due to:
‚ Lower margins on rental contracts due to pricing pressures primarily in the United States.
‚ Higher lease expenses due to an increased number of compressors having been sold and subject tosale and leaseback arrangements described in our Liquidity and Capital Resources section.
‚ Increased lower margin parts and service sales as a percentage of total sales.
‚ Selling, general and administrative costs as a percentage of revenues increased to 16.2% in 2000 from15.9% in 1999 primarily as a result of costs related to the reorganization of this division and$1.3 million goodwill amortization associated with new foreign operations.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
The following charts contain selected Ñnancial data comparing our results from continuing operations for1999 and 1998:
Comparative Financial Data
Year Ended
1999 1998
(in thousands, except pershare amounts)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,240,200 $1,363,849Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 351,505 419,441 (a)Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.3% 30.8%Selling, General and Administrative Attributable to Segments ÏÏÏ $ 261,358 $ 222,282Corporate General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,947 26,020Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,818 36,171 (a)Income (Loss) from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,206 (883)(a)Income from Continuing Operations Excluding Goodwill
Amortization, Net of Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,159 12,690 (a)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 233,476 175,729 (a)Income (Loss) per Diluted Share from Continuing Operations ÏÏ 0.16 (0.01)Income per Diluted Share from Continuing Operations Excluding
Goodwill Amortization, Net of Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.37 0.13
(a) Includes $160.0 million, $104.0 million net of taxes, of merger and other charges relating to the mergerbetween EVI and Weatherford Enterra and a reorganization and rationalization of our business in light ofindustry conditions. Of these charges, $22.4 million related to the write-oÅ of inventory which is includedin gross proÑt.
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Sales by Geographic Region
Year Ended
1999 1998
Region:(a)U.S. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48% 47%Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19 17Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 12Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 9Africa ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 7Middle East ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 4Asia PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 4
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100% 100%
(a) Sales are based on the region of origination and do not reÖect sales by ultimate destination.
Our results from continuing operations for 1999 and 1998 were aÅected by the following speciÑc items:
‚ Revenues declined $123.6 million, or 9.1%, from 1998 levels. International revenues decreased 15.2%from 1998 to $420.7 million as compared to a decline in the average international rig count of 21.7%.North American revenues declined $48.0 million, or 5.5%, as compared to a decline in the averageNorth American rig count of 20.4%.
‚ Revenues were positively impacted by the 1999 acquisitions of Petroline Wellsystems, DaileyInternational and Williams Tool, which contributed a combined $44.5 million in revenues, primarily inthe fourth quarter of 1999.
‚ Gross proÑt percentage, before charges of $22.4 million in 1998, decreased from 32.4% in 1998 to28.3% in 1999 primarily due to lower pricing and the under-utilization of many of our manufacturingfacilities and our service organization during a period of low activity levels.
‚ Results for 1998 include $160.0 million in pre-tax merger and other charges for the merger betweenEVI and Weatherford Enterra and charges associated with the downturn in our industry.
‚ Selling, general and administrative expenses attributable to the segments increased as a percent ofrevenue due primarily to a lower revenue base and startup costs for new product lines and businesses,costs associated with the integration and introduction of newly acquired businesses and a $8.9 millionincrease in goodwill amortization.
‚ Operating income decreased from $196.2 million in 1998, before merger and other charges of$160.0 million, to $66.8 million in 1999. This decrease resulted from pricing pressures and manufactur-ing and operational ineÇciencies associated with the decline in activity. Although we sought to reduceour costs through reductions in headcount and locations during the industry downturn, we elected tomaintain our market position and international infrastructure in order to be prepared to capitalize onthe market recovery.
‚ Our eÅective tax rate on income from continuing operations for 1999 was approximately 29.9% ascompared to 87.1% for 1998. The 1998 rate is due in part to the mix of foreign and U.S. tax attributesand the impact of merger and other charges.
1998 Merger and Other Charges
In 1998, we incurred $160.0 million in merger and other charges relating to the merger between EVI andWeatherford Enterra and a reorganization and rationalization of its businesses in light of industry conditions.Of these charges, $113.0 million was incurred in the second quarter at the time of the merger and with theinitial downturn in the industry. A $47.0 million charge was incurred in the fourth quarter in response to thepreviously unanticipated extent of the decline in the industry which resulted in a need to make additional
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reductions in operations and align the cost structure with the then current demand. The net after tax eÅect ofthese charges was $104.0 million. The following chart summarizes the special charges made in 1998:
Drillingand ArtiÑcial
Intervention Completion Lift CompressionServices Systems Systems Services Corporate Total
(in thousands)
Merger TransactionCosts(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $ Ì $ Ì $62,462 $ 62,462
Severance and RelatedCosts(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,711 250 5,050 Ì 600 7,611
Facility Closures(3) ÏÏÏÏÏÏÏÏ 7,249 1,720 13,817 Ì Ì 22,786Corporate Related
Expenses(4) ÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 8,297 8,297Inventory Write-OÅ(5) ÏÏÏÏÏ 3,230 1,600 17,573 Ì Ì 22,403Write-Down of Assets(6) ÏÏÏ 28,595 600 4,360 1,500 1,436 36,491
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏ $40,785 $4,170 $40,800 $1,500 $72,795 $160,050
Approximately $136.5 million of these charges had been realized as of December 31, 1998, with theremainder of the charges fully realized by the end of the second quarter of 1999 in connection with plannedactivities. During 1999, no adjustments or reversals to the remaining accrued special charges were necessary.
(1) The merger transaction costs were incurred in the second quarter of 1998 and included $32.6 million inseverance and termination costs related to approximately 300 employees and former oÇcers anddirectors, and other employee beneÑts related to stock grants, in accordance with Weatherford Enterra'semployment agreements and stock option plans, and $29.9 million in professional and Ñnancial advisoryfees, Ñling and registration fees and printing and mailing costs.
(2) The severance and related costs included in the 1998 fourth quarter charges were $7.6 million forapproximately 940 employees speciÑcally identiÑed, with terminations completed in the Ñrst half of 1999,in accordance with our announced plan to terminate employees.
(3) The facility and plant closures costs were $10.0 million in the second quarter of 1998, all of which wereincurred by December 31, 1998. These costs related primarily to the elimination of duplicatedmanufacturing, distribution and service locations following the merger in May 1998. The facility andplant closures of $12.8 million were accrued in the fourth quarter of 1998 for the consolidation andclosure of approximately 100 service, manufacturing and administrative facilities in response to decliningmarket conditions in the fourth quarter. Such facilities were closed by June 30, 1999.
(4) The corporate related expenses of $5.2 million recorded in the second quarter of 1998 and $3.1 millionrecorded in the fourth quarter of 1998 were primarily for the consolidation of corporate oÇces, relatedlease obligations and the consolidation of technology centers due to the merger and to align our corporatecost structure in light of the industry conditions.
(5) The write-oÅ of inventory was $9.9 million in the second quarter of 1998 and $12.5 million in the fourthquarter of 1998, which were reported as cost of products. These charges relate to the write-oÅ ofinventory as a result of the combination of EVI's and Weatherford Enterra's operations, the rationaliza-tion of their product lines, the elimination of certain products, services and locations due to the mergerand as a result of the decline in market conditions.
(6) The write-down of assets was $24.7 million in the second quarter of 1998 and $11.8 million in the fourthquarter of 1998. These charges primarily relate to the write-down of equipment and other assets as aresult of the combination of EVI's and Weatherford Enterra's operations, the rationalization of theirproduct lines, the elimination of certain products, services and locations due to the merger, and thespeciÑc identiÑcation of assets held for sale as a result of the decline in market conditions.
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Segment Results
Drilling and Intervention Services
The following chart sets forth data regarding the results of our Drilling and Intervention Services Divisionfor 1999 and 1998:
Year Ended
1999 1998
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $599,618 $739,079Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171,618 247,963 (a)Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.6% 33.6%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 97,581 $ 72,158Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,281 140,929 (a)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173,432 228,311 (a)
(a) Operating Income and EBITDA include merger and other charges of $40.8 million. Of these charges,$3.2 million related to the write-oÅ of inventory which is included in gross proÑt.
The following material items aÅected the results of our Drilling and Intervention Services Division:
‚ Revenues declined 23.5% from 1998 excluding the impact of 1999 acquisitions, which contributed$34.2 million in revenues. Revenues in North America decreased 18.2% while the average NorthAmerican rig count decreased 20.4% year over year. International revenues decreased 19.5%, while theaverage international rig count decreased 21.7%. The largest decreases in international revenuesoccurred in Europe, Africa and Asia PaciÑc.
‚ Gross proÑt percentage declined due primarily to pricing pressures, especially in the higher margininternational markets.
‚ Selling, general and administrative expenses increased as a percentage of revenues from 9.8% in 1998to 16.3% in 1999. The increase primarily reÖects a lower revenue base, initial costs relating to newproduct lines and businesses, costs associated with the integration and introduction of newly acquiredbusinesses and a $5.3 million increase in goodwill and intangible amortization. Selling, general andadministrative costs included higher costs associated with Dailey International and Williams Tool,which had historically high selling, general and administrative costs as a percentage of revenues.Because these businesses were acquired during the latter half of 1999, we were not able to achieve fullcost savings from their integration in 1999.
‚ Operating income, excluding $40.8 million in merger and other charges, declined from $181.7 millionin 1998 to $76.3 million in 1999. This decline resulted from reduced sales volume, pricing pressures,higher selling, general and administrative costs associated with acquisitions pending their integrationand the maintenance of our worldwide infrastructure during a period of low activity.
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Completion Systems
The following chart sets forth data regarding the results of our Completion Systems Division for 1999 and1998:
Year Ended
1999 1998
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $121,136 $118,093Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,857 27,507 (a)Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.4% 23.3%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 41,402 $ 28,749Operating Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (21,545) (3,812)(a)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,428) 4,301 (a)
(a) Operating loss and EBITDA include merger and other charges of $4.2 million. Of these charges,$1.6 million related to the write-oÅ of inventory which is included in gross proÑt.
The following material items aÅected the results of our Completion Systems Division:
‚ Businesses acquired during 1999 contributed $19.9 million in revenues. Excluding the impact of theseacquisitions, revenues declined 14.3% from 1998 as a result of depressed market conditions during theyear.
‚ Gross proÑt percentage declined due to pricing pressures and an under-utilization of manufacturingfacilities experienced as a result of the depressed industry conditions. In addition, research anddevelopment costs increased $4.3 million over the prior year as we continued to focus on improving thetechnology of our products and services.
‚ Selling, general and administrative expenses increased 44.0% from 1998 due to costs associated withthe acquisition of businesses, the addition of sales staÅ for the new product lines and goodwillamortization of $2.9 million associated with 1999 acquisitions.
ArtiÑcial Lift Systems
The following chart sets forth certain data regarding the results of our ArtiÑcial Lift Systems Division for1999 and 1998 as follows:
Year Ended
1999 1998
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $293,529 $329,196Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102,515 101,972 (a)Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34.9% 31.0%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 86,434 $ 97,968Operating Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,455 (19,223)(a)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,519 (40)(a)
(a) Operating Income (Loss) and EBITDA include merger and other charges of $40.8 million. Of thesecharges, $17.6 million related to the write-oÅ of inventory which is included in gross proÑt.
The following material items aÅected the results of our ArtiÑcial Lift Systems Division:
‚ Revenues declined 10.8% from 1998 to 1999 resulting from a 14.6% decrease in U.S. revenues and a33.5% decline in Latin American revenues. This deterioration was primarily driven by the declines inthe U.S. and international rig counts. Revenues in Canada were comparable year over year due toimprovements in the Canadian heavy oil markets during the second half of 1999.
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‚ Gross proÑt, excluding merger and other charges, decreased slightly from 36.3% in 1998 to 34.9% in1999 due to pricing pressures and under-utilization of manufacturing facilities associated withdepressed market conditions during the Ñrst half of the year.
‚ Selling, general and administrative expenses as a percentage of revenues decreased slightly from 29.8%in 1998 to 29.4% in 1999 due to the successful eÅorts to reduce costs in light of the depressed marketconditions.
Compression Services
The following chart sets forth data regarding the results of our Compression Services Division for 1999and 1998 as follows:
Year Ended
1999 1998
(in thousands)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $225,917 $177,481Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57,515 41,999Gross ProÑt % ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.5% 23.7%Selling, General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 35,941 $ 23,407Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,574 17,092(a)EBITDAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54,699 40,171(a)EBITDAR ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,141 40,171(a)
(a) Includes merger and other charges of $1.5 million that relate primarily to the write-down of assets.
The following material items aÅected the results of our Compression Services Division:
‚ Revenues in 1999 were up 27.3% from 1998 levels due to the February 1999 joint venture withGE Capital and a large compression contract with YPF in Argentina.
‚ Gross proÑt as a percentage of revenues increased from 23.7% in 1998 to 25.5% in 1999. This increasereÖected a more favorable product mix following the creation of the joint venture.
‚ Selling, general and administrative costs as a percentage of revenues increased to 15.9% in 1999 from13.2% in 1998 primarily as a result of costs associated with the integration of the businesses acquired inthe joint venture and the costs associated with our international expansion.
‚ Operating income as a percentage of revenues remained Öat year over year as improvements inoperating margins were oÅset by higher administrative costs associated with the integration of theGE Capital businesses when we formed our compression joint venture in February 1999.
Discontinued Operations
Our discontinued operations consist of our Grant Prideco Drilling Products Division. Results fromdiscontinued operations were as follows:
‚ We had a loss from discontinued operations, net of taxes, for the period ended April 14, 2000 of$3.5 million. Included in this loss is $1.0 million of estimated transaction costs, net of taxes.
‚ We had a loss from discontinued operations, net of taxes, for the year ended December 31, 1999 of$37.1 million. Included in the 1999 loss is $3.6 million, net of taxes, of estimated transaction costswhich were accrued in the third quarter of 1999. Additionally, the loss includes a charge of$6.1 million, net of taxes, directly related to a pending termination of Grant Prideco's existingmanufacturing arrangement in India.
‚ We had income from discontinued operations, net of taxes, of $65.7 million for the year endedDecember 31, 1998. The results for 1998 include merger and other charges of $35.0 million, composedof $5.1 million for facility closures and exit costs, $0.2 million of severance and related costs,$28.5 million for the write-oÅ of inventory and $1.2 million for the write-down of equipment.
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The decline in Grant Prideco's net income from 1998 to 1999 was primarily attributable to the severedownturn in the businesses of Grant Prideco in the latter half of 1998, and the downturn during 1999 was dueto the decline in drilling activity and low oil prices. Material items aÅecting Grant Prideco's results for 1999compared to 1998 follow:
‚ Grant Prideco's revenues decreased due to a more than 60% drop in drill stem sales. Lower premiumtubular and connection sales resulted from reduced oÅshore activity, lower distributor purchases and adecline in tubular processing activity.
‚ Grant Prideco recorded a $9.5 million pre-tax write-down associated with the decision by GrantPrideco to terminate a manufacturing arrangement with Oil Country Tubular Limited (""OCTL'') inIndia. The decision to terminate this manufacturing arrangement was due to a combination of factors,including the downturn in the market and political instability in India.
‚ Grant Prideco's gross proÑt, gross proÑt percentages and operating income all declined in 1999compared to 1998 due to lower sales volume, pricing pressure and high manufacturing and unabsorbedcosts due to plant under-utilization.
‚ In December 1998, Grant Prideco acquired from Tubos de Acero de Mexico, S.A. (TAMSA) 93% ofthe outstanding shares of T.F. de Mexico, which owned the manufacturing facility in Veracruz, Mexicothat Grant Prideco was operating under a capital lease arrangement. As part of the consideration in theacquisition, Grant Prideco sold all of the international rights, excluding Canada, to its Atlas Bradfordtubular connection line for carbon grade tubular to TAMSA through a license arrangement, eÅectiveupon the closing of this transaction. Grant Prideco retained no obligations with respect to thedevelopment, maintenance or improvement of the Atlas Bradford connection line for the internationalmarket, and TAMSA has no obligation to pay any additional consideration for this license. Any futuresupport by Grant Prideco is provided on a fee basis. The rights Grant Prideco sold through this licensearrangement had a fair value of $9.0 million. As a result, in December 1998 Grant Prideco recorded$9.0 million in revenues to recognize the sale of Grant Prideco's international rights to the AtlasBradford connection line.
‚ Grant Prideco's corporate general and administrative expenses in 1999 increased approximately 5%compared to 1998 due to increased management fees from us and higher corporate and overhead costsrelating to the addition of staÅ in anticipation of the spin-oÅ.
Liquidity and Capital Resources
Our current sources of capital are reserves of cash, cash generated from operations and borrowings underbank lines of credit. In June 2000, we completed the private placement of $910.0 million face amount of ourZero Coupon Convertible Senior Debentures due 2020. The net proceeds from the placement of approxi-mately $491.9 million were primarily used to repay our short-term indebtedness.
As of December 31, 2000 our cash and cash equivalents were $153.8 million, an increase of $109.4 mil-lion from December 31, 1999, which was primarily attributable to the following:
‚ Net cash inÖow of $144.2 million from continuing operating activities and net cash outÖow of$11.7 million from discontinued operating activities.
‚ Proceeds from the issuance of Zero Coupon Convertible Senior Debentures, net of issuance costs, of$491.9 million.
‚ Repayments, net of borrowings, on term debt and short-term facilities for continuing operations of$303.4 million.
‚ Proceeds from the sale of property, plant and equipment of $33.4 million.
‚ Proceeds from the sale of businesses of $14.1 million.
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‚ Proceeds from the sale and leaseback of compression units by our compression joint venture of$60.1 million.
‚ Capital expenditures for property, plant and equipment for continuing operations of $266.6 million,which includes $85.1 million for our Compression Services Division funded primarily through sale andleaseback arrangements.
‚ Proceeds from the collection of our $100.0 million note receivable from Grant Prideco.
‚ Acquisition of new businesses for approximately $151.0 million in cash, net of cash acquired.
‚ Acquisitions and capital expenditures for discontinued operations of $5.1 million.
A discussion of our market risk exposures in Ñnancial instruments and currency exposures appears belowunder the heading ""Quantitative and Qualitative Market Risk Disclosures.''
Banking Facilities and Other Debt
In May 1998, we put in place a Ñve-year unsecured revolving credit facility that allows us to borrow up to$250.0 million at any time. The facility consists of a $200.0 million U.S. credit facility and a $50.0 millionCanadian credit facility. Borrowings under this facility bear interest at a variable rate based on the U.S. primerate or LIBOR. Our weighted average cost of borrowings under this facility for 2000 was 6.09%. Our creditfacility contains customary aÇrmative and negative covenants, including a maximum debt to capitalizationratio, a minimum interest coverage ratio, a limitation on liens and a limitation on asset dispositions. AtDecember 31, 2000, we had $230.0 million available for borrowing under this credit facility as $20.0 millionwas used to secure outstanding letters of credit. Currently we have $55.1 million available.
We also engage in unsecured short-term borrowings with various institutions pursuant to uncommittedfacilities. At December 31, 2000, we had $12.2 million in unsecured short-term borrowings outstanding underthe uncommitted facilities having a weighted average interest rate of 6.96% per annum.
In July 2000, the Company's Compression Services Division put in place a $25.0 million uncommittedrevolving line of credit. Interest rates are at LIBOR plus 1.75% or the ""Quoted Rate,'' deÑned as any rate ofinterest mutually agreed upon by the two parties. As of December 31, 2000, $12.9 million was outstandingunder this line of credit. Our weighted average cost of borrowings under this facility for 2000 was 8.18%. Thisfacility was terminated in connection with the Universal merger in February 2001.
As of December 31, 2000, we had various other debt outstanding of $28.1 million, primarily related toIndustrial Revenue Bonds and capital leases. We also had various other letters of credit outstanding of$22.2 million at December 31, 2000.
Zero Coupon Convertible Senior Debentures
As noted above, on June 30, 2000 we completed the private placement of $910.0 million face amount ofour Zero Coupon Convertible Senior Debentures. These debentures were issued at $501.6 million providingthe holders with an annual 3% yield to maturity. During 2000, we amortized $7.5 million of the original issuediscount. We received proceeds of $491.9 million, net of debt issuance costs of $9.7 million.
Holders may convert the Zero Coupon Convertible Senior Debentures into shares of our common stockat any time before maturity at a conversion rate of 9.9970 shares per $1,000 principal amount at maturity or aninitial conversion price of $55.1425 per share of common stock. The eÅective conversion price will increase asthe accreted value of the Zero Coupon Convertible Senior Debentures increases. We may redeem the ZeroCoupon Convertible Senior Debentures on or after June 30, 2005 at the accreted discounted amount at thetime of redemption as provided for in the indenture agreement. The holders also may require us to repurchasethe Zero Coupon Convertible Senior Debentures on June 30, 2005, June 30, 2010 and June 30, 2015 at theaccreted discounted amount at the time of redemption.
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Convertible Preferred Debentures
In November 1997, we sold $402.5 million principal amount of our 5% Convertible SubordinatedPreferred Equivalent Debentures due 2027. The Convertible Preferred Debentures bear interest at an annualrate of 5% and are convertible into common stock. The original conversion was at a price of $80 per share;however, under the terms of the Convertible Preferred Debentures, the conversion rate was adjusted to$53.34 per share following our spin-oÅ of Grant Prideco. The adjustment factor for the conversion rate wasbased on the average market price of our common stock on a pre-spin basis and the fair market value of theGrant Prideco common stock distributed.
We have the right to redeem the Convertible Preferred Debentures at any time after November 4, 2000,at redemption prices provided for in the indenture agreement. The Convertible Preferred Debentures aresubordinated in right of payment of principal and interest to the prior payment in full of certain existing andfuture senior indebtedness. We also have the right to defer payments of interest on the Convertible PreferredDebentures by extending the quarterly interest payment period for up to 20 consecutive quarters at any timewhen we are not in default in the payment of interest.
71/4% Senior Notes Due 2006
We have outstanding $200.0 million of publicly traded 71/4% Senior Notes due May 15, 2006. Interest onthe 71/4% Senior Notes is payable semi-annually on May 15 and November 15.
Compression Financing
Our Compression Services Division had entered into various sale and leaseback arrangements where ithad sold compressors having appraised values and received cash of $299.9 million. Under these arrangements,legal title to the compression units are sold to third parties and leased back to the division under a Ñve yearoperating lease with a market-based purchase option. These sales resulted in a pretax deferred gain of$94.6 million, which was deferred until the end of the lease. Upon closing of the transaction with Universal,Universal terminated this sale and leaseback arrangement and we were released from all guarantees.
Capital Expenditures
Our capital expenditures for property, plant and equipment for our continuing operations for 2000 were$266.6 million and primarily related to rental equipment, Ñshing tools and tubular service equipment andcompressors and related assets. Included within our 2000 capital expenditures was $85.1 million for ourCompression Services Division. Capital expenditures in 2001 are expected to be approximately $200.0 million.
Acquisitions
On August 10, 2000, we acquired Alpine Oil Services Corporation for shares of common stock of one ofour wholly-owned subsidiaries having a value of approximately $54.4 million. Alpine, headquartered inCalgary, Alberta, Canada, is being integrated into our Drilling and Intervention Services Division andCompletion Systems Division. The acquisition extends our underbalanced drilling capabilities worldwide, addsnew completion technology and further expands our oÅerings of products and services in Canada.
We also eÅected various other acquisitions during 2000 for total consideration of $158.0 million.
Some of our acquisitions have resulted in substantial goodwill associated with their operations, includinggoodwill of approximately $168.0 million relating to our acquisitions in 2000. The amortization expense forgoodwill during 2000 was $37.1 million. Our current annual run rate, net of taxes, is $30.7 million.
New Accounting Pronouncements
On February 14, 2001, the Financial Accounting Standards Board issued its tentative decisions on theaccounting for goodwill in an Exposure Draft, Business Combinations and Intangible Assets Ì Accounting forGoodwill. The FASB has tentatively concluded that purchased goodwill should not be amortized; rather, it
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should be reviewed for impairment. The Ñnal statement is expected to be issued in late June 2001, with aneÅective date of July 1, 2001. While this decision is tentative, should it become Ñnal in its current form, theadoption of this standard's requirements to not amortize goodwill would increase earnings per share, excludingthe impact of future acquisitions, approximately $0.07 per quarter in 2001. The Company is evaluating theimpact of the proposed standard's requirement for goodwill impairment analysis.
In December 1999, the Securities and Exchange Commission (""SEC'') issued StaÅ Accounting Bulletin(""SAB'') No. 101, Revenue Recognition in Financial Statements, which provides guidance on the recognition,presentation and disclosure of revenue in Ñnancial statements. The adoption of this bulletin did not have amaterial impact on the Company's Ñnancial position or results of operations.
In conjunction with the adoption of SAB No. 101, the Company adopted Emerging Issues Task Force(""EITF'') 00-10 Accounting for Shipping and Handling Fees and Costs. The adoption of this authoritativeguidance did not have a material impact on the Company's Ñnancial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting forDerivative Instruments and Hedging Activities. This statement establishes new accounting and reportingstandards requiring that all derivative instruments, including derivative instruments embedded in othercontracts, be recorded in the balance sheet as either an asset or liability, depending on the rights or obligationsunder the contracts, at its fair value. The statement requires that changes in the derivative's fair value berecognized currently in earnings unless speciÑc hedge accounting criteria are met. For a qualifying cash Öowhedge, the changes in fair value of the derivative instrument are initially recognized in other comprehensiveincome and then are reclassiÑed into earnings in the period that the hedged transaction aÅects earnings. For aqualifying fair value hedge, the changes in fair value of the derivative instrument are oÅset against thecorresponding changes for the hedged item through earnings. Such accounting for qualifying hedges allows aderivative's gains and losses to oÅset related results of the hedged item in the income statement and requiresthat a company formally document, designate and assess the eÅectiveness of transactions that receive hedgeaccounting treatment. SFAS No. 138, Accounting for Certain Derivative Instruments and Certain HedgingActivities, was issued in June 2000 and amends certain provisions of SFAS No. 133. These statements areeÅective for all Ñscal years beginning after June 15, 2000. We believe the adoption of the new standards willnot have a material eÅect on our Ñnancial position and results of operations.
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
We are currently exposed to market risk from changes in foreign currency and changes in interest rates. Adiscussion of our market risk exposure in Ñnancial instruments follows.
Foreign Currency Exchange Rates
Because we operate in virtually every oil and gas exploration and production region in the world, weconduct a portion of our business in currencies other than the U.S. dollar. The functional currency for most ofour international operations is the applicable local currency. Although most of our international revenues aredenominated in the local currency, the eÅects of foreign currency Öuctuations are largely mitigated becauselocal expenses of such foreign operations also generally are denominated in the same currency. The impact ofexchange rate Öuctuations during the years ended 2000, 1999 and 1998 did not have a material eÅect onreported amounts of revenues or net income.
Assets and liabilities of those foreign subsidiaries are translated using the exchange rates in eÅect at thebalance sheet date, resulting in translation adjustments that are reÖected as accumulated other comprehensiveloss in the stockholders' equity section on our balance sheet. Approximately 45% of our net assets areimpacted by changes in foreign currencies in relation to the U.S. dollar. We recorded a $51.3 millionadjustment to our equity account for the year ended December 31, 2000 to reÖect the net impact of thedecline in various foreign currencies against the U.S. dollar.
We have historically entered into forward exchange contracts only as a hedge against certain existingeconomic exposures and not for speculative or trading purposes. These contracts reduce exposure to currency
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movements aÅecting existing assets and liabilities denominated in foreign currencies which results primarilyfrom intercompany loans and debt arrangements.
As of December 31, 2000, we had no forward exchange contracts outstanding. Settlement of forwardexchange contracts resulted in net cash outÖows totaling $2.0 million during the year ended December 31,2000, $1.4 million of which related to a hedge contract held for Grant Prideco. During the years endedDecember 31, 1999 and 1998, we experienced net cash inÖows of $1.8 million and $0.4 million, respectively.The net cash Öows vary from year to year due to diÅerences in the forward rate and the spot rate on the date ofsettlement. These diÅerences may result in material net inÖows and outÖows if the currency is volatile. Webelieve that this risk is mitigated because we have historically entered into contracts with terms of 30 to60 days. However, there can be no assurance that volatility similar or greater than that experienced in the pastcould not occur in the future.
Interest Rates
We are subject to interest rate risk on our long-term Ñxed interest rate debt and, to a lesser extent,variable-interest rate borrowings. Our long-term borrowings subject to interest rate risk primarily consist of the$200.0 million principal of the 71/4% Senior Notes due 2006, the $402.5 million principal of the 5% ConvertibleSubordinated Preferred Equivalent Debentures due 2027 and the $910.0 million Zero Coupon SeniorConvertible Debentures due 2020. Changes in interest rates would, assuming all other things being equal,cause the fair market value of debt with a Ñxed interest rate to increase or decrease, and thus increase ordecrease the amount required to reÑnance the debt. As of December 31, 2000 and 1999, the fair value of theSenior Notes was $203.0 million and $194.8 million, respectively. The fair value of the Senior Notes isprincipally dependent on changes in prevailing interest rates. The fair market value of the ConvertiblePreferred Debentures was $409.5 million and $307.9 million, respectively and the fair market value of theZero Coupon Debentures at December 31, 2000 was $554.0 million. The fair value of the ConvertiblePreferred Debentures and the Zero Coupon Debentures are principally dependent on both prevailing interestrates and our current stock price as it relates to the conversion price of $53.34 per share and $55.1425 pershare of our common stock, respectively.
We have various other debt instruments but believe that the impact of changes in interest rates in thenear term will not be material to these instruments.
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ITEM 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Public Accountants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41
Consolidated Balance Sheets as of December 31, 2000 and 1999ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42
Consolidated Statements of Operations for each of the three years in the period endedDecember 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43
Consolidated Statements of Stockholders' Equity for each of the three years in the period endedDecember 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44
Consolidated Statements of Cash Flows for each of the three years in the period endedDecember 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45
Notes to Consolidated Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46
Financial Statement Schedule:
II. Valuation and Qualifying Accounts and Allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Weatherford International, Inc.:
We have audited the accompanying consolidated balance sheets of Weatherford International, Inc. (aDelaware corporation) and subsidiaries as of December 31, 2000 and 1999, and the related consolidatedstatements of operations, stockholders' equity and cash Öows for each of the three years in the period endedDecember 31, 2000. These Ñnancial statements and the schedule referred to below are the responsibility of theCompany's management. Our responsibility is to express an opinion on these Ñnancial statements andschedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether theÑnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the Ñnancial statements. An audit also includes assessing theaccounting principles used and signiÑcant estimates made by management, as well as evaluating the overallÑnancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Ñnancial statements referred to above present fairly, in all material respects, theÑnancial position of Weatherford International, Inc. and subsidiaries as of December 31, 2000 and 1999, andthe results of their operations and their cash Öows for each of the three years in the period endedDecember 31, 2000 in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic Ñnancial statements taken as awhole. The Ñnancial statement schedule listed in the index to Ñnancial statements is presented for purposes ofcomplying with the Securities and Exchange Commission's rules and is not part of the basic Ñnancialstatements. This Ñnancial statement schedule has been subjected to the auditing procedures applied in ouraudits of the basic Ñnancial statements and, in our opinion, fairly states in all material respects the Ñnancialdata required to be set forth therein in relation to the basic Ñnancial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, TexasMarch 16, 2001
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par values)
December 31,
2000 1999
ASSETS
Current Assets:Cash and Cash Equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 153,808 $ 44,361Accounts Receivable, Net of Allowance for Uncollectible Accounts of
$23,281 and $19,882, RespectivelyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 498,663 352,139Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 443,588 364,607Current Deferred Tax Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72,054 55,587Other Current AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73,474 52,455
1,241,587 869,149
Property, Plant and Equipment, at Cost:Land, Buildings and Other Property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 193,290 190,332Rental and Service EquipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,255,907 1,177,862Machinery and Equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 405,765 330,349
1,854,962 1,698,543Less: Accumulated Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 881,937 799,547
973,025 898,996
Goodwill, NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,051,562 991,679Net Assets of Discontinued OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 553,861Deferred Tax Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,204 66,077Other AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135,201 134,027
$3,461,579 $3,513,789
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:Short-Term Borrowings and Current Portion of Long-Term Debt ÏÏÏÏÏÏÏÏÏÏ $ 31,134 $ 322,767Accounts PayableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 196,200 117,530Accrued Salaries and BeneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75,320 55,586Current Tax Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 31,301Other Accrued Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 160,062 138,896
462,716 666,080
Long-Term Debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221,004 226,603Zero Coupon Convertible Senior DebenturesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 509,172 ÌMinority Interest Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198,523 198,597Deferred Tax Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 164,451 78,217Other Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 164,755 98,1085% Convertible Subordinated Preferred Equivalent DebenturesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 402,500 402,500Commitments and ContingenciesStockholders' Equity:
Series A Preferred Stock, $1 Par Value, Authorized One Share, Issued Oneand Zero Shares, Respectively ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì
Common Stock, $1 Par Value, Authorized 250,000,000 Shares, Issued121,955,723 and 120,200,449 Shares, Respectively ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 121,956 120,200
Capital in Excess of Par Value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,594,060 1,526,648Treasury Stock, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (304,315) (299,677)Retained Earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,399 586,310Accumulated Other Comprehensive LossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (126,642) (89,797)
1,338,458 1,843,684
$3,461,579 $3,513,789
The accompanying notes are an integral part of these consolidated Ñnancial statements.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
2000 1999 1998
Revenues:Products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 797,146 $ 562,922 $ 603,765Services and Rentals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,017,115 677,278 760,084
1,814,261 1,240,200 1,363,849
Costs and Expenses:Cost of ProductsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 538,894 399,167 444,099Cost of Services and Rentals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 722,053 489,528 500,309Selling, General and Administrative Attributable to
Segments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 343,094 261,358 222,282Corporate General and Administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,976 25,947 26,020Equity in Earnings of Unconsolidated AÇliatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,402) (2,618) (2,679)Impairment Charges for Assets to be Disposed Of ÏÏÏÏÏÏÏÏÏÏÏ 56,318 Ì ÌMerger and Other ChargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 137,647
1,693,933 1,173,382 1,327,678
Operating Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120,328 66,818 36,171Other Income (Expense):
Interest Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,265 3,179 3,093Interest ExpenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (59,262) (44,904) (42,489)Other, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,056) 3,291 (2,860)
Income (Loss) Before Income Taxes and Minority Interest ÏÏÏÏÏ 71,275 28,384 (6,085)Provision (BeneÑt) for Income TaxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,933 8,477 (5,297)Provision for Income Taxes, Related to Deconsolidation of
BusinessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,517 Ì Ì
Income (Loss) Before Minority Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (38,175) 19,907 (788)Minority Interest Expense, Net of Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (717) (3,701) (95)
Income (Loss) from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (38,892) 16,206 (883)Income (Loss) from Discontinued Operations, Net of Taxes ÏÏÏÏ (3,458) (37,081) 65,720
Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (42,350) $ (20,875) $ 64,837
Basic Earnings (Loss) Per Share:Income (Loss) from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.36) $ 0.16 $ (0.01)Income (Loss) from Discontinued OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.03) (0.37) 0.68
Net Income (Loss) Per ShareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.39) $ (0.21) $ 0.67
Basic Weighted Average Shares OutstandingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109,457 101,245 97,065
Diluted Earnings (Loss) Per Share:Income (Loss) from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.36) $ 0.16 $ (0.01)Income (Loss) from Discontinued OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.03) (0.36) 0.68
Net Income (Loss) Per ShareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.39) $ (0.20) $ 0.67
Diluted Weighted Average Shares Outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109,457 102,889 97,065
The accompanying notes are an integral part of these consolidated Ñnancial statements.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
CumulativeForeign
Treasury StockCapital in Currency TotalCommon Excess of Retained Translation Share Deferred Stockholders'Stock Par Value Earnings Adjustment Shares Value Compensation Equity
Balance at December 31, 1997 ÏÏÏÏÏÏÏ $101,958 $1,018,024 $ 542,348 $ (38,494) (5,096) $(165,287) $ 3,860 $1,462,409
Total Comprehensive Income (Loss) Ì Ì 64,837 (37,895) Ì Ì Ì 26,942
Shares Issued in an Acquisition ÏÏÏÏÏÏ 727 30,026 Ì Ì Ì Ì Ì 30,753
Shares Issued under Employee BeneÑt
PlansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 312 Ì Ì Ì Ì Ì 324
Stock Grants and Options Exercised ÏÏ 2,115 40,627 Ì Ì (1,240) (38,215) Ì 4,527
Tax BeneÑt of Options Exercised ÏÏÏÏÏ Ì 7,760 Ì Ì Ì Ì Ì 7,760
Purchase of Treasury Stock under
Stock Repurchase Plan ÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (993) (37,585) Ì (37,585)
Purchase of Treasury Stock for
Deferred Compensation Plan, Net of
Distributions and Forfeitures ÏÏÏÏÏÏÏ Ì Ì Ì Ì (79) (2,769) 2,350 (419)
Retirement of Treasury StockÏÏÏÏÏÏÏÏ (1,299) (49,229) Ì Ì 1,299 50,528 Ì Ì
Recognition of Deferred Compensation
Due to Merger ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5,379 Ì Ì Ì Ì Ì 5,379
Balance at December 31, 1998 ÏÏÏÏÏÏÏ 103,513 1,052,899 607,185 (76,389) (6,109) (193,328) 6,210 1,500,090
Total Comprehensive LossÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (20,875) (13,408) Ì Ì Ì (34,283)
Shares Issued in Acquisitions ÏÏÏÏÏÏÏÏ 11,986 397,083 Ì Ì (1,226) (33,694) Ì 375,375
Replacement Shares (Shares
Acquired) from Christiana MergerÏÏ 4,400 69,571 Ì Ì (4,400) (73,971) Ì Ì
Shares Issued under Employee BeneÑt
PlansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15 390 Ì Ì Ì Ì Ì 405
Stock Options Exercised ÏÏÏÏÏÏÏÏÏÏÏÏ 286 3,630 Ì Ì (114) (4,744) Ì (828)
Tax BeneÑt of Options Exercised ÏÏÏÏÏ Ì 3,075 Ì Ì Ì Ì Ì 3,075
Purchase of Treasury Stock for
Deferred Compensation Plan, Net of
Distributions and Forfeitures ÏÏÏÏÏÏÏ Ì Ì Ì Ì (109) (4,226) 4,076 (150)
Balance at December 31, 1999 ÏÏÏÏÏÏÏ 120,200 1,526,648 586,310 (89,797) (11,958) (309,963) 10,286 1,843,684
Total Comprehensive LossÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (42,350) (51,310) Ì Ì Ì (93,660)
Shares Issued in Acquisitions ÏÏÏÏÏÏÏÏ 1,386 57,865 Ì Ì Ì Ì Ì 59,251
Shares Issued under Employee BeneÑt
PlansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 685 Ì Ì Ì Ì Ì 703
Stock Options Exercised ÏÏÏÏÏÏÏÏÏÏÏÏ 352 6,671 Ì Ì (13) (525) Ì 6,498
Tax BeneÑt of Options Exercised ÏÏÏÏÏ Ì 2,191 Ì Ì Ì Ì Ì 2,191
Purchase of Treasury Stock for
Deferred Compensation Plan, Net of
Distributions and Forfeitures ÏÏÏÏÏÏÏ Ì Ì Ì Ì (25) (2,121) 1,799 (322)
Distribution of Grant Prideco, Inc. ÏÏÏ Ì Ì (490,561) 14,465 Ì Ì (3,791) (479,887)
Balance at December 31, 2000 ÏÏÏÏÏÏÏ $121,956 $1,594,060 $ 53,399 $(126,642) (11,996) $(312,609) $ 8,294 $1,338,458
The accompanying notes are an integral part of these consolidated Ñnancial statements.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)
Year Ended December 31,
2000 1999 1998
Cash Flows From Operating Activities:Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (42,350) $ (20,875) $ 64,837Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:Non-Cash Portion of Impairment Charges for Assets to be
Disposed OfÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,664 Ì ÌNon-Cash Portion of Merger and Other ChargesÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 94,095Depreciation and Amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199,109 166,658 139,558Net (Income) Loss from Discontinued Operations ÏÏÏÏÏÏÏÏÏÏ 3,458 37,081 (65,720)Gain on Sale of Assets, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12,860) (12,628) (35,315)Minority Interest Expense, Net of TaxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 717 3,701 95Deferred Income Tax Provision (BeneÑt) from Continuing
Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74,965 (15,716) (15,989)Provision for Uncollectible Accounts Receivable ÏÏÏÏÏÏÏÏÏÏÏÏ 5,158 5,083 2,189Amortization of Original Issue Discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,525 Ì ÌChange in Assets and Liabilities, Net of EÅects of Businesses
Acquired:Accounts ReceivableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (135,682) (39,632) 110,038Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (74,628) (23,495) (50,677)Other Current Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,197) (1,155) (26,025)Accounts Payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65,158 3,921 (30,876)Other Current Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,233 (65,970) (77,623)Other Assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,023 (16,853) 9,097Other, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11,120) 3,140 (3,619)
Net Cash Provided by Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏ 144,173 23,260 114,065Net Cash Provided (Used) by Discontinued Operations ÏÏ (11,670) 39,784 7,787
Net Cash Provided by Operating ActivitiesÏÏÏÏÏÏÏÏÏÏÏÏÏ 132,503 63,044 121,852
Cash Flows From Investing Activities:Acquisition of Businesses, Net of Cash AcquiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (151,024) (68,854) (149,030)Capital Expenditures for Property, Plant and Equipment ÏÏÏÏÏÏÏ (266,560) (174,300) (167,777)Proceeds from Sales of Businesses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,084 14,620 ÌProceeds from Sales of Property, Plant and EquipmentÏÏÏÏÏÏÏÏÏ 33,413 32,484 47,953Proceeds from Sale and Leaseback of Equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,069 139,815 100,000Proceeds from Grant Prideco, Inc. Note Receivable ÏÏÏÏÏÏÏÏÏÏÏ 100,000 Ì ÌAcquisitions and Capital Expenditures of Discontinued
Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,056) (34,118) (48,654)Other, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 589
Net Cash Used by Investing Activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (215,074) (90,353) (216,919)
Cash Flows From Financing Activities:Issuance of Zero Coupon Convertible Senior Debentures, NetÏÏÏ 491,868 Ì ÌBorrowings (Repayments) Under Short-Term Borrowings, NetÏÏ (288,618) 166,174 113,036Borrowings of Long-Term Debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,545 11,650 75,357Repayments on Long-Term Debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,342) (14,522) (87,928)Repayments on Debt of Discontinued OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (57,104) ÌRepayment of Minority Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (65,350) ÌPurchases of Treasury Stock, NetÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,121) (4,226) (40,356)Proceeds from Stock Option ExercisesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,663 1,329 3,932Other Financing Activities, Net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 186 454 324
Net Cash Provided by Financing ActivitiesÏÏÏÏÏÏÏÏÏÏÏÏÏ 193,181 38,405 64,365
EÅect of Exchange Rate on CashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,163) (866) (1,175)Net Increase (Decrease) in Cash and Cash EquivalentsÏÏÏÏÏÏÏÏÏÏ 109,447 10,230 (31,877)Cash and Cash Equivalents at Beginning of Year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,361 34,131 66,008
Cash and Cash Equivalents at End of Year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 153,808 $ 44,361 $ 34,131
The accompanying notes are an integral part of these consolidated Ñnancial statements.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of SigniÑcant Accounting Policies
Principles of Consolidation
The consolidated Ñnancial statements include the accounts of Weatherford International, Inc. (aDelaware corporation) and all majority-owned subsidiaries (the ""Company''). All material intercompanyaccounts and transactions have been eliminated in consolidation. The Company accounts for its 50% or less-owned aÇliates using the equity method of accounting.
Basis of Presentation
In October 1999, the Board of Directors of the Company approved a plan to distribute all of theoutstanding shares of common stock of its wholly owned subsidiary, Grant Prideco, Inc. (the ""Spin-oÅ'') toholders of the Company's common stock, $1.00 par value (""Common Stock''). These shares were distributedat the close of business on April 14, 2000 to stockholders of record as of March 23, 2000. In connection withand prior to the Spin-oÅ, the Company transferred its drilling products businesses to Grant Prideco, Inc.(""Grant Prideco''). As a result, the accompanying Ñnancial statements reÖect the operations of Grant Pridecoas discontinued operations.
Certain reclassiÑcations of prior years' balances have been made to conform such amounts to correspond-ing 2000 classiÑcations.
Nature of Operations
The Company is one of the largest global providers of innovative mechanical solutions, technology andservices for the drilling and production sectors of the oil and gas industry.
Use of Estimates
The preparation of Ñnancial statements in conformity with generally accepted accounting principles in theUnited States requires management to make estimates and assumptions that aÅect the reported amounts ofassets and liabilities at the date of the Ñnancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could diÅer from those estimates.
Inventories
Inventories are valued using the Ñrst-in, Ñrst-out (""FIFO'') method and are stated at the lower of cost ormarket.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Maintenance and repairs are expensed as incurred. Thecosts of renewals, replacements and betterments are capitalized. Depreciation on Ñxed assets is computedusing the straight-line method over the estimated useful lives for the respective categories. The Companyevaluates potential impairment of property, plant and equipment and other long-lived assets on an ongoingbasis whenever events or circumstances indicate that carrying amounts may not be recoverable. The estimateduseful lives of the major classes of property, plant and equipment are as follows:
EstimatedUseful Life
Buildings and other property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5-45 yearsRental and service equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3-15 yearsMachinery and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3-20 years
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Intangible Assets and Amortization
The Company's intangible assets are goodwill, patents, technology licenses, trademarks and otheridentiÑable intangible assets. Goodwill is being amortized on a straight-line basis over the lesser of theestimated useful life or 40 years. Other identiÑable intangible assets, included as a component of Other Assets,are amortized on a straight-line basis over the years expected to be beneÑted, ranging from 3 to 17 years.
Amortization expense for goodwill and other intangible assets was approximately $45.3 million,$28.0 million and $17.6 million for 2000, 1999 and 1998, respectively. Accumulated amortization atDecember 31, 2000 and 1999 was $113.7 million and $77.5 million, respectively.
Long-lived Assets
In accordance with Statements of Financial Accounting Standards (""SFAS'') No. 121, long-lived assetsto be held and used by the Company are reviewed for impairment when any events or changes incircumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets tobe held and used, the Company bases its evaluation on impairment indicators such as the nature of the assets,the future economic beneÑt of the assets, any historical or future proÑtability measurements, and otherexternal market conditions or factors that may be present. If such impairment indicators are present or otherfactors exist that indicate that the carrying amount of the asset may not be recoverable, the Companydetermines whether an impairment has occurred through the use of an undiscounted cash Öows analysis of theassets at the lowest level for which identiÑable cash Öows exist. If an impairment has occurred, the Companyrecognizes a loss for the diÅerence between the carrying amount and the estimated value of the asset. The fairvalue of the asset is measured using quoted market prices or, in the absence of quoted market prices, fair valueis based on an estimate of discounted cash Öows. During the years ended December 31, 1999 and 2000, theCompany's analyses indicated that there was not an impairment of its long-lived assets to be held and used.For long-lived assets held for sale, the Company bases its evaluation of impairment on carrying value ascompared to the fair market value less costs to sell. In the fourth quarter of 2000, the Company announced themerger of essentially all of its Compression Services Division and determined that there was an impairment ofits assets held for sale. Accordingly, the Company recorded a $56.3 million write-down of the assets of theCompression Services Division (see Note 2).
Environmental Expenditures
Environmental expenditures that relate to the remediation of an existing condition caused by pastoperations and do not contribute to current or future revenues are expensed. Liabilities for these expendituresare recorded when it is probable that obligations have been incurred and costs can be reasonably estimated.Estimates are based on currently available facts and technology, presently enacted laws and regulations andthe Company's prior experience in remediation of contaminated sites. Liabilities included $2.5 million and$3.1 million of accrued environmental expenditures at December 31, 2000 and 1999, respectively.
Foreign Currency Translation
The functional currency for most of the Company's international operations is the applicable localcurrency. Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollarare translated using average exchange rates during the period. Assets and liabilities of these foreignsubsidiaries are translated using the exchange rates in eÅect at the balance sheet date, and the resultingtranslation adjustments are included as Accumulated Other Comprehensive Loss, a component of stockhold-ers' equity. Currency transaction gains and losses are reÖected in income for the period.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Foreign Exchange Contracts
The Company enters into foreign exchange contracts only as a hedge against certain existing economicexposures and not for speculative or trading purposes. These contracts reduce exposure to currencymovements aÅecting speciÑc existing assets and liabilities denominated in foreign currencies. Such exposureresults primarily from long-term debt and intercompany loans. The future value of these contracts and therelated currency positions are subject to oÅsetting market risks resulting from foreign currency exchange ratevolatility. The counterparties to the Company's foreign exchange contracts are creditworthy multinationalcommercial banks. Management believes that the risk of counterparty nonperformance is immaterial. AtDecember 31, 2000, the Company was not a party to any foreign exchange contracts. At December 31, 1999,the Company had contracts maturing within the next 60 days to sell $14.7 million in U.K. pounds sterling andAustrian schillings. Had such contracts matured on December 31, 1999 the Company's required cash outlaywould have been insigniÑcant.
Allocation of Interest Expense to Discontinued Operations
The Company's historical practice has been to incur indebtedness for its consolidated group at the parentcompany level or at a limited number of subsidiaries, rather than at the operating levels, and to centrallymanage various cash functions. Consequently, a portion of the Company's historical interest expense has beenallocated to discontinued operations. The amount allocated reÖects interest expense associated with the$100.0 million unsecured subordinated note due from Grant Prideco (See Note 3) calculated using theCompany's average long-term debt interest rates for the applicable periods. The amounts allocated using thismethodology result in amounts consistent with the allocation of interest expense based on a ratio of the netassets of discontinued operations to the Company's consolidated net assets plus debt.
Accounting for Income Taxes
Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets and liabilities are recognized forthe future tax consequences attributable to diÅerences between the Ñnancial statement carrying amounts ofexisting assets and liabilities and their respective tax bases.
Revenue Recognition
In December 1999, the Securities and Exchange Commission (""SEC'') issued StaÅ Accounting Bulletin(""SAB'') No. 101, Revenue Recognition in Financial Statements, which provides guidance on the recognition,presentation, and disclosure of revenue in the Ñnancial statements. The adoption of this bulletin did not have amaterial impact on the Company's Ñnancial position or results of operations.
Revenue for product sales is recognized when all of the following criteria have been met: a) evidence ofan agreement exists, b) delivery to and acceptance by the customer has occurred, c) the price to the customeris Ñxed and determinable and d) collectibility is reasonably assured. Revenue from rental agreements isrecognized over the rental period, and revenue from service agreements is recognized when services have beenrendered. The associated costs and expenses are recognized as incurred.
In conjunction with the adoption of SAB No. 101, the Company adopted Emerging Issues Task Force(""EITF'') 00-10 Accounting for Shipping and Handling Fees and Costs. The adoption of this authoritativeguidance did not have a material impact on the Company's Ñnancial position or results of operations.
Research and Development
The Company expenses research and development costs as incurred. These expenses were $28.6 million,$17.7 million and $10.8 million in 2000, 1999 and 1998, respectively.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Minority Interests
The Company records minority interest expense, which reÖects the portion of the earnings of majority-owned operations that is applicable to the minority interest partners. In 2000 and 1999, the minority interestexpense primarily represents GE Capital Corporation's (""GE Capital'') minority interest in the results ofoperations of the Compression Services Division joint venture (See Note 4).
Earnings Per Share
Basic earnings per share is computed by dividing income by the weighted average number of shares ofCommon Stock outstanding during the year. Diluted earnings per common share is computed by dividingincome by the weighted average number of shares of Common Stock outstanding during the year adjusted forthe dilutive eÅect of the incremental shares that would have been outstanding under the Company's stockoption and restricted stock plans (See Note 14). The eÅect of stock options and restricted stock is notincluded in the computation for periods in which a loss from continuing operations occurs, because to do sowould be anti-dilutive. The eÅect of the 5% Convertible Subordinated Preferred Equivalent Debentures, due2027 (the ""Convertible Preferred Debentures'') and the Zero Coupon Convertible Senior Debentures, due2020 (the ""Zero Coupon Debentures'') on diluted earnings per share is anti-dilutive and, thus, has no impact.
The following reconciles basic and diluted weighted average shares:
December 31,
2000 1999 1998
(in thousands)
Basic weighted average number of shares outstanding ÏÏÏÏÏÏÏÏÏÏÏ 109,457 101,245 97,065Dilutive eÅect of stock option and restricted stock plansÏÏÏÏÏÏÏÏÏ Ì 1,644 Ì
Diluted weighted average number of shares outstanding ÏÏÏÏÏÏÏÏÏ 109,457 102,889 97,065
New Reporting Requirements
In June 1998, the Financial Accounting Standards Board (""FASB'') issued SFAS No. 133, Accountingfor Derivative Instruments and Hedging Activities. This statement establishes new accounting and reportingstandards requiring that all derivative instruments, including derivative instruments embedded in othercontracts, be recorded in the balance sheet as either an asset or liability, depending on the rights or obligationsunder the contracts, at their fair value. The statement requires that changes in the derivative's fair value berecognized currently in earnings unless speciÑc hedge accounting criteria are met. For a qualifying cash Öowhedge, the changes in fair value of the derivative instrument are initially recognized in other comprehensiveincome and then are reclassiÑed into earnings in the period that the hedged transaction aÅects earnings. For aqualifying fair value hedge, the changes in fair value of the derivative instrument are oÅset against thecorresponding changes for the hedged item through earnings.
Such accounting for qualifying hedges allows a derivative's gains and losses to oÅset related results of thehedged item in the income statement and requires that a company formally document, designate and assessthe eÅectiveness of transactions that receive hedge accounting treatment. SFAS No. 138, Accounting forCertain Derivative Instruments and Certain Hedging Activities, was issued in June 2000 and amends certainprovisions of SFAS No. 133. These statements are eÅective for all Ñscal years beginning after June 15, 2000.The Company believes the adoption of the new standards will not have a material eÅect on the Company'sÑnancial position and results of operations.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
2. Universal Compression Transaction
On October 24, 2000, the Company announced the merger of essentially all of its Compression ServicesDivision into a subsidiary of Universal in exchange for 13.75 million shares of Universal common stock, whichapproximates 48% of Universal's outstanding shares. The transaction was completed on February 9, 2001.Concurrent with the transaction, the Company paid GE Capital $206.5 million for its 36% ownership in thejoint venture in which the Company's Compression Services Division operated. The Company retained part ofthe Compression Services Division, namely Singapore-based Gas Services International operations, and$10.0 million in accounts receivable.
In connection with this transaction, the Company recorded impairment charges in the fourth quarter of2000 of $56.3 million, $43.0 million after taxes, and provided for deferred taxes of $76.5 million due to theanticipated exchange of a consolidated subsidiary for an equity method investment.
The pre-tax impairment charge of $56.3 million reÖects the diÅerence between estimated fair value of netassets held for sale, which were determined using quoted market prices and estimated selling prices lessestimated costs to sell, and the net book value of the Compression Services Division assets. The carrying valueof the Compression Services Division's net assets as of December 31, 2000 was $439.3 million.
In connection with the merger with Universal, the Company and Universal entered into a VotingAgreement pursuant to which the Company has agreed to certain voting limitations with respect to shares ofour Universal common stock. For a period of no more than two years, the Company has agreed to vote itsshares of Universal common stock that are in excess of 33∏% of Universal's outstanding shares in the sameproportion as the shares of Universal common stock held by the public (excluding the Company's shares andshares held by Castle Haran and his aÇliates). The Company may vote the remainder of its shares in its solediscretion. The Company and Universal also entered into a Registration Rights Agreement, pursuant to whichthe Company was granted certain demand and piggyback registration rights for its shares of Universalcommon stock. Additionally, the Company entered into a Transitional Services Agreement with Universal toprovide certain corporate and administrative services to the Compression Services Division for a fee andreimbursement of costs and expenses for up to 120 days following the merger. Pursuant to the terms of themerger agreement, the Company also appointed three members to Universal's Board of Directors. As long asthe Company owns at least 20% of Universal's outstanding common stock, the Company has the right todesignate three Board members. If ownership interest falls below 20%, it may designate only two directors, andif its ownership falls below 10% the Company will no longer be entitled to designate directors to serve onUniversal's Board of Directors. Upon the closing of the merger, Universal repaid and terminated theCompany's sale and leaseback arrangements and the Compression Services Division's credit facility.
3. Discontinued Operations
In October 1999, the Board of Directors of the Company approved a plan to spin-oÅ Grant Pridecothrough a distribution to its stockholders of one share of stock of Grant Prideco for each share of CommonStock held by the Company's stockholders. The distribution was completed as of the close of business onApril 14, 2000 (the ""Spin-oÅ Date''). The distribution of the net assets of discontinued operations and therelated accumulated other comprehensive loss is reÖected in the accompanying Consolidated Balance Sheetsas an adjustment to Retained Earnings.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The results of operations for Grant Prideco, through the Spin-oÅ Date, are reÖected in the accompanyingConsolidated Statements of Operations as Income (Loss) from Discontinued Operations, Net of Taxes.Condensed results of Grant Prideco are as follows:
Year Ended December 31,
2000 1999 1998
(in thousands)
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $124,813 $286,370 $646,454
Income (loss) before interest allocation and income taxes ÏÏÏ (831) (37,460) 112,818Interest allocation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,500) (7,250) (7,250)Provision (beneÑt) for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (888) (11,199) 39,848
Net income (loss) before Spin-oÅ related costs ÏÏÏÏÏÏÏÏÏÏÏÏ (2,443) (33,511) 65,720Spin-oÅ related costs, net of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,015) (3,570) Ì
Net income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (3,458) $(37,081) $ 65,720
The Company purchases drill pipe and other related products from Grant Prideco. The purchases madeprior to the Spin-oÅ Date have been eliminated in the accompanying consolidated Ñnancial statements. Thepurchases eliminated by the Company for the years ended December 31, 2000, 1999 and 1998 were$7.0 million, $28.6 million and $9.6 million, respectively. These purchases represent Grant Prideco's cost.
The results from discontinued operations include a management fee charged to Grant Prideco of$0.5 million, $1.5 million and $1.0 million for the years ended December 31, 2000, 1999 and 1998,respectively. The fee is based on the time devoted to Grant Prideco for accounting, tax, treasury and riskmanagement services.
Grant Prideco was charged $5.6 million for costs related to the Company's information systems functionin each of the years ended December 31, 1999 and 1998. There were no charges for the comparable period of2000. Information systems charges were based on direct support provided, equipment usage and number ofsystem users.
Agreements Between the Company and Grant Prideco
In connection with the Spin-oÅ, Grant Prideco and the Company entered into a tax allocation agreement(the ""Tax Allocation Agreement''). Under the terms of the Tax Allocation Agreement, Grant Prideco isresponsible for all taxes and associated liabilities relating to the historical businesses of Grant Prideco. TheTax Allocation Agreement also requires that any tax liabilities associated with the Spin-oÅ will be paid byGrant Prideco subject to certain exceptions relating to changes in control of the Company.
The Tax Allocation Agreement further provides that in the event there is a tax liability associated withthe historical operations of Grant Prideco that is oÅset by a tax beneÑt of the Company, the Company willapply the tax beneÑt against such tax liability and will be reimbursed for the value of the tax beneÑt when andas the Company would have been able to otherwise utilize that tax beneÑt for its own businesses.
In connection with the Spin-oÅ, the Company received from Grant Prideco an unsecured subordinatednote to the Company in the amount of $100.0 million with an interest rate of 10% and interest due quarterly.In December 2000, Grant Prideco repaid this note and all unpaid interest.
The Company has also entered into a preferred customer agreement with Grant Prideco pursuant towhich the Company agreed, for a three-year period, to purchase at least 70% of its requirements of drill stemproducts from Grant Prideco. The price for those products will be at a price not greater than that which GrantPrideco sells to its best similarly situated customers. The Company is entitled to apply against its purchases adrill stem credit granted to it in the amount of $30.0 million, subject to a limitation of the application of the
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
credit to no more than 20% of any purchase. As of December 31, 2000 the Company had $28.4 millionremaining of the drill pipe credit.
4. Acquisitions
On August 10, 2000, the Company acquired Alpine Oil Services Corporation (""Alpine'') for one share of$1.00 par value Series A Preferred Stock (see Note 13) and exchangeable securities in one of the Company'sCanadian subsidiaries that is exchangeable for Common Stock on a one-for-one basis. The approximate valueof the Alpine acquisition was $54.4 million. Alpine, headquartered in Calgary, Alberta, Canada, is beingintegrated into the Company's Drilling and Intervention Services and Completion Systems Divisions. Theacquisition extends the Company's underbalanced drilling capabilities worldwide, adds new completiontechnology and further expands our oÅerings of products and services in Canada.
On September 15, 1999, the Company acquired Williams Tool Co. (""Williams'') for 1.8 million shares ofCommon Stock having a value of approximately $63.5 million. Williams, based in Fort Smith, Arkansas,oÅers a full range of rotating control heads for horizontal, underbalanced and low hydrostatic drillingoperations. Williams products are used to control Öow from the wellbore to reduce the risk of blowouts whenoil, gas, geothermal and coal gas methane wells are being drilled with light Öuids.
The Company acquired Petroline Wellsystems Limited (""Petroline'') on September 2, 1999, for totalconsideration of approximately $161.8 million, consisting of $32.2 million in cash and 3.8 million shares ofCommon Stock. Petroline, based in Aberdeen, Scotland, is a provider of premium completion products andservices. Petroline is the leading provider of Öow control equipment in the North Sea and was the Ñrstcompany to successfully introduce completion products using new expandable tube technology.
On August 31, 1999, the Company completed the acquisition of Dailey International, Inc. (""Dailey'')pursuant to a pre-negotiated plan of reorganization in bankruptcy. Under the terms of the acquisition, theCompany issued a total of approximately 4.3 million shares of Common Stock to the Dailey noteholders andstockholders. Of the total number of shares issued, the Company issued approximately 4.0 million shares tothe Dailey noteholders and approximately 0.3 million shares to the Dailey common stockholders. At the timeof the acquisition of Dailey, the Company held approximately 24% of Dailey's 9¥% Senior Notes which theCompany acquired prior to the bankruptcy at a discount and subsequently contributed to Dailey. Inconnection with the transaction the Company holds approximately 1.2 million shares of Common Stock,which are classiÑed as treasury shares. The total purchase price for Dailey, excluding assumed liabilities ofDailey that were not impaired in the bankruptcy, was approximately $185.0 million. Dailey is a leadingprovider of specialty air, underbalanced and directional drilling equipment and services and designs,manufactures and rents proprietary downhole tools for oil and gas drilling and workover applicationsworldwide.
On February 2, 1999, the Company entered into a joint venture with GE Capital in which the Company'scompression services operations were combined with GE Capital's Global Compression Services operations.The joint venture is known as Weatherford Global Compression Services. As of December 31, 2000, theCompany owned 64% of the joint venture and GE Capital owned 36%. In connection with the Company'stransaction with Universal the Company purchased GE Capital's interest in the joint venture subsequent toyear-end (see Note 2).
The Company completed the acquisition of Ampscot Equipment Ltd. (""Ampscot''), an Albertacorporation, for approximately $57.1 million in cash on February 19, 1998. Ampscot is a Canadian-basedmanufacturer of pumping units.
On January 15, 1998, the Company completed the acquisition of Taro Industries Limited (""Taro''), anAlberta corporation, in which approximately 0.8 million shares of Common Stock have been issued to the
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
shareholders of Taro in exchange for their shares of Taro stock. Taro is a Canadian provider of wellautomation, gas compression, and drilling equipment distribution.
The Company has also eÅected various other 2000, 1999 and 1998 acquisitions integrated into theCompany's continuing operations for a total consideration of approximately $158.0 million, $81.5 million and$93.5 million, respectively. The Company also acquired various other companies that were integrated intoGrant Prideco. Total consideration was $64.4 million for 1999 and $9.2 million for 1998.
The acquisitions discussed above were accounted for using the purchase method of accounting.Therefore, the results of operations are included in the accompanying consolidated Ñnancial statements sincethe date of acquisition. The purchase price was allocated to the net assets acquired based upon their estimatedfair market values at the date of acquisition. The balances included in the Consolidated Balance Sheets relatedto the current year acquisitions are based upon preliminary information and are subject to change when Ñnalasset and liability valuations are obtained. Material changes in the preliminary allocations are not anticipatedby management.
The following presents the consolidated Ñnancial information for the Company on an unaudited proforma basis assuming the Dailey acquisition had occurred on January 1, 1998. All other 1999 acquisitions andall of the 1998 and 2000 acquisitions are not material individually or in the aggregate with same yearacquisitions, therefore, pro forma information is not presented. The unaudited pro forma information set forthbelow is not necessarily indicative of the results that actually would have been achieved had such transactionbeen consummated as of January 1, 1998 or that may be achieved in the future.
Year Ended December 31,
1999 1998
(in thousands, except pershare amounts)
RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,307,443 $1,495,120Loss from continuing operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,596) (81,132)Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (44,677) (32,991)Basic loss per common share:
Loss from continuing operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.07) (0.80)Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.43) (0.33)
Diluted loss per common share:Loss from continuing operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.07) (0.80)Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.43) (0.33)
Included in the net loss for the year ended December 31, 1998 is an extraordinary loss, net of taxes,recorded by Dailey of $17.6 million. This extraordinary loss is the result of Dailey's repurchase of their93/4% Senior Notes in the Ñrst quarter of 1998, and represents the excess of the purchase price for the notesover the carrying value on the date of repurchase.
5. EVI, Inc. and Weatherford Enterra, Inc. Merger
On May 27, 1998, EVI, Inc. (""EVI'') completed a merger with Weatherford Enterra, Inc. (""WII''),merging WII with and into EVI, pursuant to a tax free merger (the ""Merger'') in which the stockholders ofWII received 0.95 of a share of Common Stock in exchange for each outstanding share of approximately48.9 million shares of WII common stock. The Merger was accounted for as a pooling of interests.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The separate results of EVI and WII and the combined company were as follows:
January 1 toMay 27,
1998
(in thousands)
Revenues:EVIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 505,549WIIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 426,422Merger adjustmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,963)
Combined revenues including Grant PridecoÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 927,008Discontinued operations of Grant Prideco ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (311,367)
Combined revenues from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 615,641
Net Income:EVIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 54,045WIIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,481Merger adjustmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,033)
CombinedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 101,493
Merger adjustments include the elimination of intercompany revenues of $5.0 million and cost of sales of$3.4 million for the Ñve months ended May 27, 1998.
6. Merger Costs and Other Charges
In 1998, the Company incurred $160.0 million in merger and other charges relating to the mergerbetween EVI and WII and a reorganization and rationalization of its businesses in light of industry conditions.Of these charges, $113.0 million was incurred in the second quarter at the time of the merger and with theinitial downturn in the industry. A $47.0 million charge was incurred in the fourth quarter in response to thepreviously unanticipated extent of the decline in the industry which resulted in a need to make additionalreductions in operations and align the cost structure with the then current demand. The net after tax eÅect ofthese charges was $104.0 million. The following chart summarizes the charges made in 1998:
Drillingand ArtiÑcial
Intervention Completion Lift CompressionServices Systems Systems Services Corporate Total
(in thousands)
Merger transaction costs(1) ÏÏÏÏÏ $ Ì $ Ì $ Ì $ Ì $62,462 $ 62,462Severance and related costs(2)ÏÏÏ 1,711 250 5,050 Ì 600 7,611Facility closures(3) ÏÏÏÏÏÏÏÏÏÏÏÏ 7,249 1,720 13,817 Ì Ì 22,786Corporate related expenses(4) ÏÏÏ Ì Ì Ì Ì 8,297 8,297Inventory write-oÅ(5) ÏÏÏÏÏÏÏÏÏÏ 3,230 1,600 17,573 Ì Ì 22,403Write-down of assets(6) ÏÏÏÏÏÏÏÏ 28,595 600 4,360 1,500 1,436 36,491
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $40,785 $4,170 $40,800 $1,500 $72,795 $160,050
Approximately $136.5 million of these charges had been realized as of December 31, 1998, with theremainder of the charges fully realized by the end of the second quarter of 1999 in connection with plannedactivities. During 1999, no adjustments or reversals to the remaining accrued nonrecurring charges werenecessary.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
(1) The merger transaction costs were incurred in the second quarter of 1998 and included $32.6 million inseverance and termination costs related to approximately 300 employees and former oÇcers anddirectors, and other employee beneÑts related to stock grants, in accordance with WII's employmentagreements and stock option plans, and $29.9 million in professional and Ñnancial advisory fees, Ñling andregistration fees and printing and mailing costs.
(2) The severance and related costs included in the 1998 fourth quarter charges were $7.6 million forapproximately 940 employees speciÑcally identiÑed, with terminations completed in the Ñrst half of 1999,in accordance with the Company's announced plan to terminate employees.
(3) The facility and plant closures costs were $10.0 million in the second quarter of 1998, all of which wereincurred by December 31, 1998. These costs related primarily to the elimination of duplicatedmanufacturing, distribution and service locations following the Merger in May 1998. The facility andplant closures of $12.8 million were accrued in the fourth quarter of 1998 for the consolidation andclosure of approximately 100 service, manufacturing and administrative facilities in response to decliningmarket conditions in the fourth quarter. Such facilities were closed by June 30, 1999.
(4) The corporate related expenses of $5.2 million recorded in the second quarter of 1998 and $3.1 millionrecorded in the fourth quarter of 1998 were primarily for the consolidation of corporate oÇces, relatedlease obligations and the consolidation of technology centers due to the Merger and to align theCompany's corporate cost structure in light of the industry conditions.
(5) The write-oÅ of inventory was $9.9 million in the second quarter of 1998 and $12.5 million in the fourthquarter of 1998, which were reported as cost of products. These charges relate to the write-oÅ ofinventory as a result of the combination of EVI's and WII's operations, the rationalization of theirproduct lines, the elimination of certain products, services and locations due to the Merger and as a resultof the decline in market conditions.
(6) The write-down of assets was $24.7 million in the second quarter of 1998 and $11.8 million in the fourthquarter of 1998. These charges primarily relate to the write-down of equipment and other assets as aresult of the combination of EVI's and WII's operations, the rationalization of their product lines, theelimination of certain products, services and locations due to the Merger, and the speciÑc identiÑcation ofassets held for sale as a result of the decline in market conditions.
7. Cash Flow Information
The Company considers highly liquid investments with original maturities of three months or less to becash equivalents. Other Current Assets at December 31, 2000 and 1999 included cash of $2.5 million and$1.7 million, respectively, which was restricted as a result of bond requirements in certain foreign countries.
Cash paid for interest and income taxes (net of refunds) was as follows:
Year Ended December 31,
2000 1999 1998
(in thousands)
Interest paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $54,110 $50,835 $47,671Income taxes paid, net of refundsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,390 6,422 72,580
During the years ended December 31, 2000, 1999 and 1998 there were noncash-investing activities of$2.5 million, $5.4 million and $2.4 million, respectively, relating to capital leases.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The following summarizes investing activities relating to acquisitions integrated into the Company'scontinuing operations:
Year Ended December 31,
2000 1999 1998
(in thousands)
Fair value of assets, net of cash acquiredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $116,811 $466,708 $114,237GoodwillÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167,981 364,109 121,657Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (74,517) (404,032) (56,111)Common Stock issued, net of Common Stock acquired ÏÏÏÏÏ (59,251) (357,931) (30,753)
Cash consideration, net of cash acquired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $151,024 $ 68,854 $149,030
During the years ended December 31, 2000, 1999 and 1998, there were noncash-Ñnancing activities of$2.2 million, $3.1 million and $7.8 million, respectively, relating to tax beneÑts received from the exercise ofnonqualiÑed stock options. These beneÑts were recorded as a reduction of income taxes payable and anincrease to capital in excess of par value.
8. Inventories
Inventories by category are as follows:
December 31,
2000 1999
(in thousands)
Raw materials, components and supplies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $152,569 $159,380Work in process ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46,500 34,089Finished goods ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 244,519 171,138
$443,588 $364,607
Work in process and Ñnished goods inventories include the cost of materials, labor and plant overhead.
9. Short-Term Borrowings
December 31,
2000 1999
(in thousands)
Revolving credit facilities with eÅective interest rates of 8.35% at December 31,2000 and 5.77% and 6.58% at December 31, 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,900 $182,157
Short-term bank loans with eÅective interest rates of 6.55% at December 31, 2000and between 6.89% and 8.52% at December 31, 1999ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,179 132,076
$24,079 $314,233
Weighted average interest rate on short-term borrowings outstandingduring the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.57% 5.59%
In July 2000, the Company's Compression Services Division put in place a $25.0 million uncommittedrevolving line of credit. Interest rates are at LIBOR plus 1.75% or the ""Quoted Rate,'' deÑned as any rate ofinterest mutually agreed upon by the two parties. As of December 31, 2000, $13.1 million was available underthis line of credit. The Company's weighted average cost of borrowings under this facility for 2000 was 8.18%.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The Company also engages in unsecured short-term borrowings with various institutions pursuant touncommitted facilities. At December 31, 2000, the Company had $12.2 million in unsecured short-termborrowings outstanding under these arrangements. The weighted average interest rate was 6.96% and 5.32%for 2000 and 1999, respectively.
In May 1998, the Company entered into a Ñve-year unsecured credit agreement which provides forborrowings of up to an aggregate of $250.0 million, consisting of $200.0 million in the U.S. and $50.0 millionin Canada, and terminated its existing working capital facilities. Amounts outstanding under the facilityaccrue interest at a variable rate based on either the U.S. prime rate or LIBOR. A commitment fee rangingfrom 0.09% to 0.20% per annum, depending on the credit ratings assigned to the 71/4% Senior Notes dueMay 15, 2006 (the ""71/4% Senior Notes''), is payable quarterly on the unused portion of the facility. Thefacility contains customary aÇrmative and negative covenants, including a maximum debt to capitalizationratio, a minimum interest coverage ratio, a limitation on liens, and a limitation on asset dispositions. As ofDecember 31, 2000, $230.0 million was available under this facility due to $20.0 million being used to secureoutstanding letters of credit. The Company's weighted average cost of borrowings under this facility was 6.09%and 5.77% for 2000 and 1999, respectively.
The Company also has various uncommitted credit facilities available for stand-by letters of credit andbid and performance bonds. The Company had a total of $11.9 million of such letters of credit and bid andperformance bonds outstanding at December 31, 2000.
10. Long-Term Debt
December 31,
2000 1999
(in thousands)
Senior Notes with an eÅective interest rate of 7.25%, due 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $200,000 $200,000Industrial Revenue Bonds with variable interest rates, 4.85% as of December 31,
2000 and between 3.2% and 3.5% at December 31, 1999, due 2002 ÏÏÏÏÏÏÏÏÏÏÏÏ 9,915 10,415Foreign bank debt, denominated in foreign currencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,006 803Capital lease obligations under various agreements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,847 11,846Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,291 12,073
228,059 235,137Less: amounts due in one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,055 8,534
Long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $221,004 $226,603
The following is a summary of scheduled long-term debt maturities by year (in thousands):
2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,0552002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,0642003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,4922004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9532005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 203,060
$228,059
The Company has outstanding $200.0 million of 71/4% Senior Notes. The 71/4% Senior Notes areunsecured obligations of the Company due 2006. Interest is payable semi-annually on May 15 andNovember 15. Based on the borrowing rates available to the Company, the fair value of the 71/4% SeniorNotes was $203.0 million and $194.8 million at December 31, 2000 and 1999, respectively.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
As of December 31, 2000, the Company had Industrial Revenue Bonds of $8.7 million, due 2002, and$1.2 million, with principal payments of $0.6 million annually through 2002. The Company had letters ofcredit of $10.3 million associated with the Industrial Revenue Bonds.
11. Zero Coupon Convertible Senior Debentures
On June 30, 2000, the Company completed a private placement of $910.0 million face amount of its ZeroCoupon Debentures. The Zero Coupon Debentures were issued at a discount with an imputed 3% per annuminterest rate. During 2000, the Company amortized $7.5 million of the original issue discount. The Companyreceived proceeds of $491.9 million, net of debt issuance costs of $9.7 million. The proceeds were used to paydown current debt of $434.0 million and for general corporate purposes.
Holders may convert the Zero Coupon Debentures into shares of Common Stock at any time beforematurity at a conversion rate of 9.9970 shares per $1,000 principal amount at maturity or initially at a price of$55.1425 per share of Common Stock. The eÅective conversion price will increase as the accreted value of theZero Coupon Debentures increases. The Company may redeem any of the Zero Coupon Debentures on orafter June 30, 2005 at the accreted discounted amount at the time of redemption. Holders may require theCompany to repurchase the Zero Coupon Debentures on June 30, 2005, June 30, 2010, and June 30, 2015 atthe accreted discounted amount at the respective periods. As evidenced by market transactions, the estimatedfair value of the Zero Coupon Debentures was $554.0 million at December 31, 2000.
12. 5% Convertible Subordinated Preferred Equivalent Debentures
In November 1997, the Company completed a private placement of $402.5 million principal amount ofConvertible Preferred Debentures. The net proceeds from the Convertible Preferred Debentures were$390.9 million. The conversion price of the Convertible Preferred Debentures as adjusted for the Spin-oÅ is$53.34 per share of Common Stock. The Convertible Preferred Debentures are redeemable by the Companyat any time on or after November 4, 2000, at redemption prices described therein, and are subordinated inright of payment of principal and interest to the prior payment in full of certain existing and future seniorindebtedness of the Company. The Convertible Preferred Debentures bear interest at an annual rate of 5%,and the Company has the right to defer payments of interest by extending the quarterly interest paymentperiod for up to 20 consecutive quarters at any time when the Company is not in default in the payment ofinterest. As evidenced by market transactions, the estimated fair value of the Convertible PreferredDebentures was $409.5 million and $307.9 million as of December 31, 2000 and December 31, 1999,respectively.
13. Stockholders' Equity
Authorized Shares
The Company is authorized to issue 250.0 million shares of Common Stock. The Company is authorizedto issue up to 3.0 million shares of $1.00 par value preferred stock. As of December 31, 2000, except asdescribed below, no preferred stock has been issued.
The Company has authorized and issued one share of $1.00 par value Series A Preferred Stock. Inconnection with the acquisition of Alpine, the one share of Series A Preferred Stock was issued to a trustee,and will be held for the beneÑt of the former Alpine shareholders. The former Alpine shareholders were issuedan exchangeable security in one of the Company's Canadian subsidiaries that is exchangeable for CommonStock on a one-for-one basis. The one share of Series A Preferred Stock entitles the trustee to vote, essentiallyas a proxy for the former Alpine shareholders who have not yet exchanged their exchangeable securities intoshares of Common Stock, the same number of votes as could be voted if the former Alpine shareholders hadexchanged the exchangeable securities for Common Stock. As the exchangeable securities are exchanged, the
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
number of votes to which the Series A Preferred Stock is entitled decreases and the voting rights of theSeries A Preferred Stock will be eliminated entirely when there are no more outstanding exchangeablesecurities. The Series A Preferred Stock has a $1.00 liquidation preference, has no class voting rights and votestogether with the Common Stock. Except for the speciÑc voting rights and the $1.00 liquidation preference,the Series A Preferred Stock has no other rights or preferences.
Stock Repurchase Plan
In December 1997, the WII Board of Directors instituted a stock repurchase program under which up to$100.0 million of WII common stock could be purchased in open market transactions or in privatelynegotiated transactions. Pursuant to this program, WII purchased approximately 1.0 million shares of itscommon stock during 1998. In connection with the Merger, the stock repurchase program was discontinuedand the repurchased shares retired.
14. Stock-Based Compensation
Stock Option Plans
The Company has a number of stock option plans pursuant to which directors, oÇcers and other keyemployees may be granted options to purchase shares of Common Stock at the fair market value on the dateof grant.
The Company has in eÅect a 1991 Employee Stock Option Plan (""1991 ESO Plan''), a 1992 EmployeeStock Option Plan (""1992 ESO Plan'') and a 1998 Employee Stock Option Plan (""1998 ESO Plan''). Underthese plans, options to purchase up to an aggregate of 18.0 million shares of Common Stock may be granted tooÇcers and key employees of the Company (including directors who are also key employees). AtDecember 31, 2000, approximately 1.7 million shares were available for granting under such plans.
In connection with the Spin-oÅ, the stock options outstanding as of the Spin-oÅ Date were adjusted suchthat 1998 ESO Plan option holders received options only in the company for which they worked. The exerciseprices, as well as the number of shares under the 1998 ESO Plan, were adjusted so that the optionsimmediately before the Spin-oÅ had equivalent economic terms to the options immediately after the Spin-oÅ.Options holders of the 1991 ESO Plan and 1992 ESO Plan received options for both the Company and GrantPrideco. The exercise prices were adjusted so that the options immediately before the Spin-oÅ had equivalenteconomic terms to the options immediately after the Spin-oÅ.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Stock options vest after one to three years and expire after ten to thirteen years from the date of grant.Information about the above stock option plans and predecessor plans for the three years ended December 31,2000, is set forth below:
WeightedAverage
Number Exerciseof Range of Price
Shares Exercise Prices Per Share
Options outstanding, December 31, 1997ÏÏÏÏÏÏÏÏ 2,423,836 $ 4.69 - $32.19 $19.08Granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,855,423 18.13 - 50.50 20.33Exercised ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,195,584) 7.11 - 40.76 31.40Terminated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (24,971) 12.67 - 40.76 35.70
Options outstanding, December 31, 1998ÏÏÏÏÏÏÏÏ 6,058,704 4.69 - 50.50 18.96Granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,242,780 17.00 - 40.76 27.94Exercised ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (286,000) 6.88 - 32.19 11.81Terminated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (468,161) 9.00 - 40.76 20.78
Options outstanding, December 31, 1999ÏÏÏÏÏÏÏÏ 7,547,323 4.69 - 50.50 21.78Granted before Spin-oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 394,000 35.75 - 50.50 39.08Exercised before Spin-oÅÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (60,550) 27.11 - 44.01 38.17Terminated before Spin-oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,056,018) 12.37 - 40.76 21.08Adjustment for Spin-oÅÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,126,245 (1.69) - (18.14) (8.24)Granted after Spin-oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,640,000 35.88 - 47.63 36.84Exercised after Spin-oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (291,058) 5.17 - 26.20 15.36Terminated after Spin-oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (227,205) 11.50 - 36.75 21.15
Options outstanding, December 31, 2000ÏÏÏÏÏÏÏÏ 15,072,737 3.00 - 47.63 22.82
Options exercisable, December 31, 2000 ÏÏÏÏÏÏÏÏ 1,646,754 3.00 - 32.36 12.11
The 15.1 million options outstanding at December 31, 2000, have a weighted average remainingcontractual life of 11.13 years. The 1.6 million options exercisable at December 31, 2000, have a weightedaverage remaining contractual life of 7.51 years.
Pro Forma Compensation Expense
As permitted under SFAS 123, Accounting for Stock Based Compensation, the Company uses theintrinsic value method of accounting established by Accounting Principles Board Opinion (""APB'') No. 25,Accounting for Stock Issued to Employees, to account for its stock-based compensation programs. Accord-ingly, no compensation expense is recognized when the exercise price of an employee stock option is equal tothe market price of Common Stock on the grant date.
The following is a summary of the Company's net income (loss) and earnings (loss) per share asreported and pro forma as if the fair value-based method of accounting deÑned in SFAS No. 123 had beenapplied. For purposes of pro forma disclosures, the fair value of each option grant is estimated on the date ofgrant using the Black-Scholes option pricing model. The following weighted average assumptions were usedfor 2000, 1999 and 1998, respectively: expected volatility of 45.44%, 56.04% and 51.23%, risk-free interest rateof 6.2%, 5.8% and 5.1%, expected life of 4.9, 7.0 and 7.0 years and no expected dividends. The weightedaverage fair value of the options granted in 2000, 1999 and 1998 is $18.09, $17.22 and $11.97, respectively.The estimated fair value of the options is amortized to expense over the options' vesting period.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The pro forma information for the year ended December 31, 1998, reÖects the pro forma expenseassociated with the accelerated vesting of options in connection with the Merger. The pro forma information isnot meant to be representative of the eÅects on reported net income for future years.
2000 1999 1998
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
(in thousands, except per share amounts)
Net income (loss) ÏÏÏÏÏÏÏÏ $(42,350) $(70,079) $(20,875) $(33,659) $ 64,837 $55,107Basic earnings (loss)
per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.39) (0.64) (0.21) (0.33) 0.67 0.57Diluted earnings (loss)
per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.39) (0.64) (0.20) (0.33) 0.67 0.57
Executive Deferred Compensation Plan
In May 1992, the Company's stockholders approved the Executive Deferred Compensation StockOwnership Plan (the ""EDC Plan''). Under the EDC Plan, a portion of the compensation for certain keyemployees of the Company, including oÇcers and employee directors, can be deferred for payment afterretirement or termination of employment.
The Company has established a grantor trust to fund the beneÑts under the EDC Plan. The fundsprovided to such trust are invested by a trustee independent of the Company in Common Stock, which ispurchased by the trustee on the open market. The assets of the trust are available to satisfy the claims of allgeneral creditors of the Company in the event of bankruptcy or insolvency. Accordingly, the Common Stockheld by the trust and the liability of the Company under the EDC Plan are included in the accompanyingConsolidated Balance Sheets as Treasury Stock, Net.
15. Retirement and Employee BeneÑt Plans
The Company has deÑned contribution plans covering certain of its employees. Expenses related to theseplans totaled $4.5 million, $4.0 million and $3.8 million in 2000, 1999 and 1998, respectively.
16. Income Taxes
The components of income (loss) before income taxes were as follows:
2000 1999 1998
(in thousands)
Domestic ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $53,978 $17,039 $(76,900)Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,297 11,345 70,815
$71,275 $28,384 $ (6,085)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The Company's income tax provision (beneÑt) from continuing operations consisted of the following:
2000 1999 1998
(in thousands)
CurrentU.S. federal and state income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,602 $ 1,023 $(15,506)Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,883 23,170 26,198
Total CurrentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,485 24,193 10,692
DeferredU.S. federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84,137 (5,747) (12,017)Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (9,172) (9,969) (3,972)
Total DeferredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74,965 (15,716) (15,989)
$109,450 $ 8,477 $ (5,297)
Total income tax provision (beneÑt) was recorded as follows:
2000 1999 1998
(in thousands)
Income (loss) from continuing operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $109,450 $ 8,477 $(5,297)Income (loss) from discontinued operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (888) (11,199) 39,848
$108,562 $ (2,722) $34,551
The diÅerence between the tax provision at the statutory federal income tax rate and the tax provisionattributable to income (loss) from continuing operations before income taxes for the three years endedDecember 31, 2000 is analyzed below:
2000 1999 1998
(in thousands)
Statutory federal income tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 24,946 $9,934 $(2,130)EÅect of state income tax, net and Alternative Minimum
Tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (98) 754 866EÅect of domestic non-deductible expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,930 4,246 3,714Change in valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 568 Ì ÌEÅect of foreign income tax, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (96) (3,910) (1,760)Foreign Sales Corporation beneÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (1,742) (104)EÅect of acquisitions and dispositions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,517 Ì (4,548)Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,317) (805) (1,335)
$109,450 $8,477 $(5,297)
Deferred tax assets and liabilities are recognized for the estimated future tax eÅects of temporarydiÅerences between the tax basis of an asset or liability and its reported amount in the Ñnancial statements.The measurement of deferred tax assets and liabilities is based on enacted tax laws and rates currently in eÅectin each of the jurisdictions in which the Company has operations.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Deferred tax assets and liabilities are classiÑed as current or non-current according to the classiÑcation ofthe related asset or liability for Ñnancial reporting. The components of the net deferred tax asset (liabil-ity) attributable to continuing operations were as follows:
December 31,
2000 1999
(in thousands)
Deferred tax assets:Domestic and foreign operating lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 40,695 $ 37,374Accrued liabilities and reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,412 69,714Tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,127 14,349Unremitted foreign earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,960 3,143DiÅerences between Ñnancial and tax basis inventory ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,642 10,600Valuation allowanceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (25,578) (25,615)
Total deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 132,258 $109,565
Deferred tax liabilities:Property, plant and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (86,357) $(47,236)Goodwill ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,377) (18,882)Other diÅerences between Ñnancial and tax basis ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (75,717) Ì
Total deferred tax liabilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (164,451) (66,118)
Net deferred tax asset (liability ) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (32,193) $ 43,447
The change in valuation allowance in 2000 primarily relates to the utilization of U.S. tax creditcarryforwards and management's assessment that future foreign source income will be suÇcient to enable theCompany to utilize tax credit carryforwards that would have expired in 2000. Other diÅerences betweenÑnancial and tax basis of $75.7 million consists primarily of the amounts resulting from the anticipatedexchange of a consolidated subsidiary for an equity method investment in connection with the Universalmerger (see Note 2).
At December 31, 2000, the Company had $117.1 million of net operating losses, $6.4 million of whichwere generated by certain domestic subsidiaries prior to their acquisition by the Company. The use of theseacquired domestic net operating losses is subject to limitations imposed by the Internal Revenue Code and isalso restricted to the taxable income of the subsidiaries generating the losses. Loss carryforwards, if notutilized, will expire at various dates through 2020.
At December 31, 2000, the Company had approximately $28.9 million of foreign tax credits, $1.2 millionof general business credits, and $4.9 million of alternative minimum tax credits available to oÅset futurepayments of federal income taxes, expiring in varying amounts between 2003 and 2013. The alternativeminimum tax credits may be carried forward indeÑnitely under current U.S. law.
17. Disputes, Litigation and Contingencies
Litigation and Other Disputes
The Company is aware of various disputes and potential claims and is a party in various litigationinvolving claims against the Company, some of which are covered by insurance. Based on facts currentlyknown, the Company believes that the ultimate liability, if any, which may result from known claims, disputesand pending litigation, would not have a material adverse eÅect on the Company's consolidated Ñnancialposition or its results of operations with or without consideration of insurance coverage.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Insurance
The Company is self-insured for employee health insurance claims and for workers' compensation claimsfor certain of its employees. The amounts in excess of the self-insured levels are fully insured. Self-insuranceaccruals are based on claims Ñled and an estimate for signiÑcant claims incurred but not reported. Althoughthe Company believes that adequate reserves have been provided for expected liabilities arising from its self-insured obligations, it is reasonably possible that management's estimates of these liabilities will change overthe near term as circumstances develop.
18. Commitments
Sale and Leaseback of Equipment
The Company's Compression Services Division entered into various sale and leaseback arrangementswhere it sold $299.9 million of compression units as of December 31, 2000. Under these arrangements, legaltitle to the compression units was sold to third parties and leased back to the division under a Ñve-yearoperating lease with a market-based purchase option.
As of December 31, 1999, the Compression Services Division sold compressors under these arrangementsfor which it received cash equal to the appraised value of $239.8 million. These sales resulted in a pre-taxdeferred gain of $77.3 million. During the year ended December 31, 2000, the Compression Services Divisionsold additional compressors for which it received cash equal to the appraised value of $60.1 million. The 2000sales resulted in an additional pre-tax deferred gain of approximately $17.3 million. The pre-tax deferred gainsare included in Other Liabilities on the accompanying Consolidated Balance Sheets. Total lease expenseincurred under these arrangements was approximately $21.3 million and $11.4 million for the years endedDecember 31, 2000 and 1999, respectively. There was no lease expense for the year ended December 31, 1998.The lease expense is classiÑed as Cost of Services and Rentals in the accompanying Consolidated Statementsof Operations.
Of the proceeds received by the Compression Services Division from the sale and leaseback of thecompressor units, $100.0 million was distributed to the Company by the division in 1998 and $65.4 million wasdistributed to GE Capital as part of the joint venture in 1999. The remaining proceeds of these sales wereutilized by the division for internal corporate purposes and growth. The Company guaranteed certain of theobligations with respect to the sale of $200.0 million of the compression units. The remaining sales by theCompression Services Division were done on a non-recourse basis to the Company and are limited solely tothe assets of the Compression Services Division. The Company and the Compression Services Division eachguaranteed a portion of the residual value of all of the leased equipment under these leases. Subsequent toDecember 31, 2000, the sale and leaseback arrangements, including the residual value guarantees, wereterminated (see Note 2).
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Other Operating Leases
The Company is committed under various other noncancelable operating leases that primarily relate tooÇce space and equipment. Future minimum rental commitments attributable to continuing operations underthese noncancelable operating leases are as follows (in thousands):
2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 25,7062002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,9692003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,7742004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,2042005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,559Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,307
$118,519
Total rent expense incurred under operating leases attributable to continuing operations was approxi-mately $38.0 million, $31.0 million and $26.4 million for the years ended December 31, 2000, 1999, and 1998,respectively.
Other Commitments
In the fourth quarter of 1999 the Compression Services Division sold its manufacturing facility in CorpusChristi, Texas for $14.6 million. Under terms of the sale, the Compression Services Division has agreed tomake purchases from that facility for approximately $38.0 million over a Ñve-year period. As of December 31,2000, the Company had purchased $14.4 million from the facility.
19. Related Party Transactions
The Company incurred legal fees of $3.1 million, $3.0 million and $3.1 million during 2000, 1999 and1998, respectively, with a law Ñrm in which a former director and a former executive oÇcer of the Companywere partners.
During 1999, the Company completed the acquisition of Christiana Companies, Inc. (""Christiana'') forapproximately 4.4 million shares of Common Stock and $20.6 million cash. One of the members of theCompany's Board of Directors was also the Chairman and Chief Executive OÇcer of Christiana. In theacquisition, the Company acquired through Christiana (1) 4.4 million shares of the Company's CommonStock, (2) cash, after distribution to the Christiana shareholders, equal to the amount of Christiana'soutstanding tax and other liabilities and (3) a one-third interest in Total Logistic Control, LLC, a refrigeratedwarehouse, trucking and logistics company. The 4.4 million shares of Common Stock acquired are classiÑed asTreasury Stock, Net on the accompanying Consolidated Balance Sheets. Because the number of shares ofCommon Stock issued in the Christiana acquisition approximated the number of shares of Common Stockheld by Christiana prior to the acquisition, the Christiana acquisition had no material eÅect on the outstandingnumber of shares of Common Stock or net equity of the Company. In September 2000, the Company sold theone-third interest in Total Logistic Control, LLC to C2, Inc. for $8.3 million. The aforementioned member ofthe Company's Board of Directors was also a director of C2, Inc.
In 1998, the Company paid Lehman Brothers Inc., an aÇliate of Lehman Brothers Holding Inc., astockholder of the Company, approximately $3.0 million for fees associated with the Merger. The feearrangements associated with this transaction were on terms standard in the industry.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
20. Segment Information
Geographic Segments
Financial information by geographic segment, as provided to the chief operating decision maker, for eachof the three years ended December 31, 2000, is summarized below. Revenues are attributable to countriesbased on the location of the entity selling the products or performing the services. Long-lived assets are long-term assets excluding deferred tax assets of $60.2 million, $66.1 million, and $16.7 million for 2000, 1999 and1998, respectively, and net assets of discontinued operations.
Revenues from UnaÇliated Customers Long-lived Assets
For the Year Ended December 31, As of December 31,
2000 1999 1998 2000 1999 1998
(in thousands)
United StatesÏÏÏÏÏÏÏ $ 837,440 $ 589,815 $ 634,222 $1,106,303 $1,162,077 $ 674,243Canada ÏÏÏÏÏÏÏÏÏÏÏÏ 364,487 229,672 233,304 399,225 298,394 288,091Latin America ÏÏÏÏÏÏ 173,481 108,247 124,434 221,259 168,109 128,141Europe ÏÏÏÏÏÏÏÏÏÏÏÏ 158,815 140,458 162,738 283,789 319,957 149,231Africa ÏÏÏÏÏÏÏÏÏÏÏÏÏ 93,390 77,190 91,307 33,023 28,376 40,012Asia PaciÑc ÏÏÏÏÏÏÏÏ 129,676 50,260 63,838 88,673 30,870 42,134Middle East ÏÏÏÏÏÏÏÏ 56,972 44,558 54,006 27,516 16,919 22,715
Total ÏÏÏÏÏÏ $1,814,261 $1,240,200 $1,363,849 $2,159,788 $2,024,702 $1,344,567
Business Segments
The Company is a diversiÑed international energy service and manufacturing company that provides avariety of services and equipment to the exploration, production and transmission sectors of the oil and gasindustry. The Company operates in virtually every oil and gas exploration and production region in the world.In 1999, the Company redeÑned its business segments into four separate groups as determined by the chiefoperating decision maker: drilling and intervention services, completion systems, artiÑcial lift systems andcompression services. The following information has been restated for all periods presented to reÖect thisregrouping.
The Company's drilling and intervention services segment provides drilling services and equipment rental,well installation services, cementing products, underbalanced drilling and specialty pipeline services.
The Company's completion systems segment provides completion products and systems includingpackers, sand control, Öow control, liner hangers, inÖatable packers and intelligent well technology.
The Company's artiÑcial lift systems segment designs, manufactures, sells and services a complete line ofartiÑcial lift equipment, including progressing cavity pumps, reciprocating rod lift, gas lift, electricalsubmersible pumps and hydraulic lift. This segment also oÅers well optimization and remote monitoring andcontrol services.
The Company's compression services segment packages, rents and sells parts and services for gascompressor units over a broad horsepower range.
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Financial information by industry segment for each of the three years ended December 31, 2000 issummarized below. The total assets do not include the net assets of discontinued operations. The accountingpolicies of the segments are the same as those described in the summary of signiÑcant accounting policies.
Drillingand ArtiÑcial
Intervention Completion Lift CompressionServices Systems Systems Services Corporate Total
(in thousands)
2000
Revenues from unaÇliated customers ÏÏÏ $ 881,586 $220,624 $439,410 $272,641 $ Ì $1,814,261EBITDA, before impairment
charges(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 276,952 19,743 67,760 45,161 (33,861) 375,755Impairment charges for assets to be
disposed of ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 16,301 40,017 56,318Depreciation and amortizationÏÏÏÏÏÏÏÏÏÏ 104,219 27,176 25,509 39,120 3,085 199,109Operating income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172,733 (7,433) 42,251 (10,260) (76,963) 120,328Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,284,387 538,898 684,853 653,802 299,639 3,461,579Capital expenditures for property, plant,
and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123,402 34,735 18,438 85,093 4,892 266,560Non-cash portion of impairment
charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 16,301 35,363 51,664
1999
Revenues from unaÇliated customers ÏÏÏ $ 599,618 $121,136 $293,529 $225,917 $ Ì $1,240,200EBITDA(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173,432 (7,428) 36,519 54,699 (23,746) 233,476Depreciation and amortizationÏÏÏÏÏÏÏÏÏÏ 97,151 14,117 20,064 33,125 2,201 166,658Operating income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,281 (21,545) 16,455 21,574 (25,947) 66,818Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,117,884 424,505 615,887 662,695 138,957 2,959,928Capital expenditures for property, plant,
and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46,074 10,731 10,347 94,755 12,393 174,300
1998
Revenues from unaÇliated customers ÏÏÏ $ 739,079 $118,093 $329,196 $177,481 $ Ì $1,363,849EBITDA, before merger costs and other
charges(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 269,096 8,471 40,760 41,671 (24,219) 335,779Merger costs and other charges(b) ÏÏÏÏÏ 40,785 4,170 40,800 1,500 72,795 160,050Depreciation and amortizationÏÏÏÏÏÏÏÏÏÏ 87,382 8,113 19,183 23,079 1,801 139,558Operating income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 140,929 (3,812) (19,223) 17,092 (98,815) 36,171Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 823,836 198,311 592,370 388,220 90,664 2,093,401Capital expenditures for property, plant,
and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,793 7,818 20,946 32,465 2,755 167,777Non-cash portion of merger costs and
other charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,311 4,170 30,367 1,500 22,747 94,095
(a) The Company evaluates performance and allocates resources based on EBITDA, which is calculated as operatingincome adding back depreciation and amortization, excluding the impact of impairment charges for assets to bedisposed of and merger costs and other charges. Calculations of EBITDA should not be viewed as a substitute tocalculations under generally accepted accounting principles, in particular cash Öow from operations, operatingincome and net income. In addition, EBITDA calculations by one company may not be comparable to anothercompany.
(b) Includes inventory write-downs of $22.4 million, which have been classiÑed as Cost of Products in the accompanyingConsolidated Statements of Operations.
Major Customers and Credit Risk
Essentially all of the Company's customers are engaged in the energy industry. This concentration ofcustomers may impact the Company's overall exposure to credit risk, either positively or negatively, in that
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
customers may be similarly aÅected by changes in economic and industry conditions. The Company performsongoing credit evaluations of its customers and does not generally require collateral in support of its tradereceivables. The Company maintains reserves for potential credit losses, and actual losses have historicallybeen within the Company's expectations. Foreign sales also present various risks, including risks of war, civildisturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds,result in the deprivation of contract rights or the taking of property without fair consideration. Most of theCompany's foreign sales, however, are to large international companies or are secured by letters of credit orsimilar arrangements.
In 2000, 1999 and 1998 there was no individual customer who accounted for 10% of consolidatedrevenues.
21. Quarterly Financial Data (Unaudited)
The following tabulation sets forth unaudited quarterly Ñnancial data for 2000 and 1999.
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
(in thousands, except per share amounts)
2000Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $395,382 $421,848 $462,170 $534,861 $1,814,261Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114,390 127,378 139,775 171,771 553,314Income from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,993 13,204 21,523 (83,612)(a) (38,892)Loss from Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,458) Ì Ì Ì (3,458)Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,535 13,204 21,523 (83,612)(a) (42,350)Basic Earnings (Loss) Per Share:
Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.09 $ 0.12 $ 0.20 $ (0.76) $ (0.36)Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.03) Ì Ì Ì (0.03)
Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.06 $ 0.12 $ 0.20 $ (0.76) $ (0.39)
Diluted Earnings (Loss) Per Share:Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.09 $ 0.12 $ 0.19 $ (0.76) $ (0.36)Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.03) Ì Ì Ì (0.03)
Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.06 $ 0.12 $ 0.19 $ (0.76) $ (0.39)
1999Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $265,341 $278,588 $323,632 $372,639 $1,240,200Gross ProÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82,387 76,834 87,231 105,053 351,505Income from Continuing Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,762 1,933 3,022 7,489 16,206Loss from Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,224) (3,953) (14,115) (17,789) (37,081)Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,538 (2,020) (11,093) (10,300) (20,875)Basic Earnings (Loss) Per Share:
Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.04 $ 0.02 $ 0.03 $ 0.07 $ 0.16Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.01) (0.04) (0.14) (0.16) (0.37)
Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.03 $ (0.02) $ (0.11) $ (0.09) $ (0.21)
Diluted Earnings (Loss) Per Share:Continuing OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.04 $ 0.02 $ 0.03 $ 0.07 $ 0.16Discontinued Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.01) (0.04) (0.14) (0.16) (0.36)
Net Income (Loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.03 $ (0.02) $ (0.11) $ (0.09) $ (0.20)
(a) The Company incurred $56.3 million of pre-tax impairment charges for assets to be disposed of in the fourth quarterof 2000 related to the merger of essentially all of the Company's Compression Services Division into Universal. TheeÅect of these charges, net of tax, is $43.0 million. The Company also provided for deferred taxes of $76.5 million dueto the anticipated exchange of a consolidated subsidiary for an equity method investment (see Note 2).
ITEM 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure
None.
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PART III
ITEM 10. Directors and Executive OÇcers of the Registrant
Pursuant to General Instruction G (3), information on directors and executive oÇcers of the Registrantis incorporated by reference from the Company's DeÑnitive Proxy Statement to be Ñled pursuant toRegulation 14A.
ITEM 11. Executive Compensation
Pursuant to General Instruction G (3), information on executive compensation is incorporated byreference from the Company's DeÑnitive Proxy Statement to be Ñled pursuant to Regulation 14A.
ITEM 12. Security Ownership of Certain BeneÑcial Owners and Management
Pursuant to General Instruction G (3), information on security ownership of certain beneÑcial ownersand management is incorporated by reference from the Company's DeÑnitive Proxy Statement to be Ñledpursuant to Regulation 14A.
ITEM 13. Certain Relationships and Related Transactions
Pursuant to General Instruction G (3), information on certain relationships and related transactions isincorporated by reference from the Company's DeÑnitive Proxy Statement to be Ñled pursuant toRegulation 14A.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are Ñled as a part of this report or incorporated herein by reference:
1. The consolidated Ñnancial statements of the Company are listed on page 40 this report.
2. The Ñnancial statement schedule is on page 40 of this report.
3. The exhibits of the Company are listed below under Item 14 (c).
(b) Reports on Form 8-K
1. Current Report on Form 8-K dated December 21, 2000, updating the Company's operations andresults for the fourth quarter of 2000 and its expectations for the next year.
2. Current Report on Form 8-K dated October 23, 2000, announcing the following:
(i) the agreement to merge all of the Company's Global Compression Services division withand into a subsidiary of Universal Compression Holdings, Inc. in exchange for 13.75 million sharesof Universal common stock, and
(ii) the Company's earnings for the three and nine months ended September 30, 2000.
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(c) Exhibits
ExhibitNumber Description
2.1 Ì Agreement and Plan of Merger dated October 23, 2000 by and among WeatherfordInternational, Inc., WEUS Holding, Inc., Enterra Compression Company,Universal Compression Holdings, Inc. and Universal Compression, Inc.(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K ofUniversal Compression Holdings, Inc. (File No. 001-15843) and UniversalCompression, Inc. (File No. 333-48279) Ñled on October 26, 2000).
2.2 Ì Purchase Agreement, dated as of October 23, 2000, by and among WeatherfordInternational, Inc., WEUS Holding, Inc., Enterra Compression Company, GlobalCompression Service, Inc. and General Electric Capital Corporation (incorporatedby reference to Exhibit F to the Schedule 13D, with respect to the common stock ofUniversal Compression Holdings, Inc., Ñled by Weatherford International, Inc. andWEUS Holding, Inc. on November 2, 2000).
2.3 Ì Share Sale Agreement dated September 2, 1999, between the shareholders ofPetroline Wellsystems Limited and Weatherford Eurasia Limited and WeatherfordInternational, Inc. (including Registration Rights Undertaking attached asAnnex A)(incorporated by reference to Exhibit 10.1 to Form 8-K (File 1-13086)Ñled September 7, 1999).
2.4 Ì Agreement and Plan of Reorganization dated September 14, 1999, among WilliamsTool Co., the shareholders of Williams Tool Co., the shareholders of WilliamsTool Co. (Canada) Inc. (formerly 598148 Alberta Ltd.), WeatherfordInternational, Inc. and Weatherford Acquisition, Inc. (incorporated by reference toExhibit 10.1 to Form 8-K (File 1-13086) Ñled September 24, 1999).
2.5 Ì Acquisition Agreement dated as of May 21, 1999, entered into by and amongWeatherford International, Inc., Dailey International Inc. and certain subsidiariesof Dailey named therein (incorporated by reference to Exhibit 2.1 to theRegistrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999(File 1-13086)).
2.6 Ì Agreement and Plan of Merger dated as of March 4, 1998, by and betweenEVI, Inc. and Weatherford Enterra, Inc. (incorporated by reference to Exhibit 2.1to Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086, Ñled March 9,1998).
2.7 Ì Amendment No. 1 dated as of April 17, 1998, to the Agreement and Plan of Mergerdated as of March 4, 1998, by and between EVI, Inc. and Weatherford Enterra, Inc.(incorporated by reference to Exhibit 2.2 to Form 8-K, File 1-13086, Ñled April 21,1998).
2.8 Ì Amendment No. 2 dated as of April 22, 1998, to the Agreement and Plan of Mergerdated as of March 4, 1998, as amended by and between EVI, Inc. and WeatherfordEnterra, Inc. (incorporated by reference to Exhibit 2.3 to Form 8-K, File 1-13086,Ñled April 23, 1998).
2.9 Ì Share Purchase Agreement made and entered into as of January 30, 1998, by andamong the shareholders of Nika Enterprises Ltd., an Alberta corporation, listed onthe signature pages thereto and EVI Oil Tools Canada Ltd., an Alberta corporation(incorporated by reference to Exhibit 2.1 to the Form 8-K, File 1-13086, ÑledMarch 3, 1998).
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ExhibitNumber Description
2.10 Ì Amendment No. 1 dated as of May 26, 1998, to the Agreement and Plan of Mergerdated as of December 12, 1997 and to the Agreement dated as of December 12,1997, by and among EVI, Inc., Christiana Acquisition, Inc., ChristianaCompanies, Inc., C2, Inc. and Total Logistic Control, LLC (incorporated byreference to Exhibit 2.18 to the Registration Statement on Form S-4, as amended(Reg. No. 333-58741)).
2.11 Ì Amended and Restated Agreement and Plan of Merger among WeatherfordInternational, Inc., Christiana Acquisition, Inc., Christiana Companies, Inc. andC2, Inc. dated as of October 14, 1998 (incorporated by reference to Exhibit 2.19 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.12 Ì Amendment No. 2 to Logistic Purchase Agreement by and among WeatherfordInternational, Inc., Total Logistic Control, LLC, Christiana Companies, Inc. andC2, Inc. dated as of October 12, 1998 (incorporated by reference to Exhibit 2.20 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.13 Ì Amendment No. 1 to Amended and Restated Agreement and Plan of Merger, byand among Weatherford International, Inc., Christiana Acquisition, Inc., ChristianaCompanies, Inc. and C2, Inc. dated as of January 5, 1999 (incorporated byreference to Exhibit 2.21 to the Registration Statement on Form S-4 (Reg.No. 333-65663)).
2.14 Ì Amendment No. 3 to Logistic Purchase Agreement, by and among WeatherfordInternational, Inc., Total Logistic Control, LLC, Christiana Companies, Inc. andC2, Inc. dated as of January 5,1999 (incorporated by reference to Exhibit 2.22 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
3.1 Ì Amended and Restated CertiÑcate of Incorporation of the Company (incorporatedby reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for theyear ended December 31, 1998 (File No. 1-13086)).
3.2 Ì Amended and Restated By-Laws of the Company (incorporated by reference toExhibit 3.2 to Form 8-K, File 1-13086, Ñled June 2, 1998).
3.3 Ì CertiÑcate of Destination of the Registrant's Series A Preferred Stock, par value$1.00 per share (incorporated by reference to Exhibit 3.3 to Registration Statementon Form S-3 (Reg. No. 333-41344)).
4.1 Ì See Exhibit Nos. 3.1 and 3.2 for provisions of the Amended and RestatedCertiÑcate of Incorporation and Amended and Restated By-Laws of the RegistrantdeÑning the rights of the holders of Common Stock.
4.2 Ì Amended and Restated Credit Agreement dated as of May 27, 1998, among EVIWeatherford, Inc., EVI Oil Tools Canada Ltd., Chase Bank of Texas, NationalAssociation, as U.S. Administrative Agent, The Bank of Nova Scotia, asDocumentation Agent and Canadian Agent, ABN AMRO Bank, N.V., asSyndication Agent, and the other Lenders deÑned therein, including the forms ofNotes (incorporated by reference to Exhibit 4.1 to the Form 8-K, File 1-13086, ÑledJune 16, 1998).
4.3 Ì Indenture dated May 17, 1996, between Weatherford Enterra, Inc. and Bank ofMontreal Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 toWeatherford Enterra, Inc.'s Current Report on Form 8-K, File No. 1-7867, datedMay 28, 1996).
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ExhibitNumber Description
4.4 Ì First Supplemental Indenture dated and eÅective as of May 27, 1998, by and amongEVI Weatherford, Inc., the successor by merger to Weatherford Enterra, Inc., andBank of Montreal Trust Company, as Trustee (incorporated by reference toExhibit No. 4.1 to Form 8-K, File 1-13086, Ñled June 2, 1998).
4.5 Ì Form of Weatherford Enterra, Inc.'s 71/4% Notes Due May 15, 2006 (incorporatedby reference to Exhibit 4.2 to Weatherford Enterra, Inc.'s Current Report onForm 8-K, File No. 1-7867, dated May 28, 1996).
4.6 Ì Indenture dated as of October 15, 1997, between EVI, Inc. and The ChaseManhattan Bank, as Trustee (incorporated by reference to Exhibit 4.13 to theRegistration Statement on Form S-3 (Reg. No. 333-45207)).
4.7 Ì First Supplemental Indenture dated as of October 28, 1997, between EVI, Inc. andThe Chase Manhattan Bank, as Trustee (including form of Debenture)(incorporated by reference to Exhibit 4.2 to Form 8-K, File 1-13086, ÑledNovember 5, 1997).
4.8 Ì Registration Rights Agreement dated November 3, 1997, by and among EVI, Inc.,Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette SecuritiesCorporation, Credit Suisse First Boston Corporation, Lehman Brothers Inc.,Prudential Securities Incorporated and Schroder & Co. Inc. (incorporated byreference to Exhibit 4.3 to Form 8-K, File 1-13086, Ñled November 5, 1997).
4.9 Ì Participation Agreement dated December 8, 1998 by and among WeatherfordEnterra Compression Company, L.P., ABN AMRO Bank N.V., as AdministrativeAgent, Arranger and Syndication Agent, Chase Bank of Texas, NationalAssociation, and the Lessors listed on Schedule I thereto (incorporated by referenceto Exhibit 4.16 to the Registration Statement on Form S-4 (Reg. No. 333-65663)).
4.10 Ì Master Lease Intended as Security dated as of December 8, 1998 betweenWeatherford Enterra Compression Company, L.P., as Lessee, and ABN AMROBank N.V., as Administrative Agent for the Lessors (incorporated by reference toExhibit 4.17 to the Registration Statement on Form S-4 (Reg. No. 333-65663)).
4.11 Ì Guaranty Agreement dated as of December 8, 1998 between WeatherfordInternational, Inc. and ABN AMRO Bank N.V., as Administrative Agent for theLessors (incorporated by reference to Exhibit 4.18 to the Registration Statement onForm S-4 (Reg. No. 333-65663)).
4.12 Ì Registration Rights Agreement, dated as of February 9, 2001, between WEUSHolding, Inc. and Universal Compression Holdings, Inc. (incorporated by referenceto Exhibit 4.3 to the Quarterly Report on Form 10-Q of Universal CompressionHoldings, Inc. (File No. 001-15843) Ñled on February 14, 2001).
4.13 Ì Second Supplemental Indenture dated June 30, 2000, between WeatherfordInternational, Inc. and The Bank of New York, as successor trustee to Bank ofMontreal Trust (including form of Debenture) (incorporated by reference toExhibit 4.1 to Current Report on Form 8-K (File No. 1-13086) Ñled July 10,2000).
4.14 Ì Registration Rights Agreement dated June 30, 2000, between WeatherfordInternational, Inc. and Morgan Stanley & Co. Incorporated (incorporated byreference to Exhibit 4.2 to Current Report on Form 8-K (File No. 1-13086) ÑledJuly 10, 2000).
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ExhibitNumber Description
10.1 Ì Voting Agreement, dated as of February 9, 2001, among WeatherfordInternational, Inc., WEUS Holding, Inc. and Universal Compression Holdings, Inc.(incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q ofUniversal Compression Holdings, Inc. (File No. 001-15843) Ñled on February 14,2001).
10.2 Ì Transition Services Agreement, dated as of February 9, 2001, between WeatherfordInternational, Inc. and Weatherford Global Compression Services, L.P.(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q ofUniversal Compression Holdings, Inc. (File No. 001-15843) Ñled on February 14,2001).
*10.3 Ì Employment Agreement with Mark Hopmann and Gary Warren (incorporated byreference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for thequarter ended March 31, 2000 (File No. 1-13086)).
*10.4 Ì Amended and Restated Employment Agreement dated as of January 28, 2000,between Weatherford International, Inc. and Bruce F. Longaker, Jr. (incorporatedby reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q forthe quarter ended March 31, 2000 (File No. 1-13086)).
*10.5 Ì Weatherford Enterra, Inc. Non-Employee Director Stock Option Plan, as amendedand restated (incorporated by reference to Exhibit 10.1 to WeatherfordEnterra, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997(File No. 1-7867)).
*10.6 Ì Weatherford International Incorporated 1987 Stock Option Plan, as amended andrestated (incorporated by reference to Exhibit 10.3 to Weatherford Enterra, Inc.'sAnnual Report on Form 10-K for the year ended December 31, 1996 (FileNo. 1-7867)).
*10.7 Ì Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended and restated(incorporated by reference to Exhibit 10.4 to Weatherford Enterra, Inc.'s AnnualReport on Form 10-K for the year ended December 31, 1996 (File No. 1-7867)).
*10.8 Ì Weatherford Enterra, Inc. Amended and Restated Employee Stock Purchase Plan(incorporated by reference to Exhibit 4.19 to the Company's RegistrationStatement on Form S-8 (Reg. No. 333-53633)).
*10.9 Ì Weatherford Enterra, Inc. Restricted Stock Incentive Plan, as amended andrestated (incorporated by reference to Exhibit 10.6 to Weatherford Enterra, Inc.'sAnnual Report on Form 10-K for the year ended December 31, 1996 (FileNo. 1-7867)).
*10.10 Ì IndemniÑcation Agreements with Robert K. Moses, Jr. (incorporated by referenceto Exhibit 10.10 to Weatherford Enterra, Inc.'s Annual Report on Form 10-K forthe year ended December 31, 1987 (File No. 1-7867)); Philip Burguieres(incorporated by reference to Exhibit 10.4 to Weatherford Enterra, Inc.'s QuarterlyReport on Form 10-Q for the quarter ended June 30, 1991 (File No. 1-7867));William E. Macaulay (incorporated by reference to Exhibit 10.2 to WeatherfordEnterra, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30,1995 (File No. 1-7867)); and Jon Nicholson (incorporated by reference toExhibit 10.2 to Weatherford Enterra, Inc.'s Annual Report on Form 10-K for theyear ended December 31, 1996 (File No. 1-7867)).
*10.11 Ì Employment Agreement dated as of June 15, 1998, between EVI Weatherford, Inc.and Philip Burguieres (incorporated by reference to Exhibit No. 10.9 to Form 10-Q,File 1-13086, Ñled August 14, 1998).
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ExhibitNumber Description
*10.12 Ì Weatherford International, Inc. Executive Deferred Compensation StockOwnership Plan and related Trust Agreement (incorporated by reference toExhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
*10.13 Ì Weatherford International, Inc. Non-Employee Director Deferred CompensationPlan (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Reporton Form 10-Q for the quarter ended March 31, 2000 (File No. 1-13086)).
*10.14 Ì Energy Ventures, Inc. 1991 Non-Employee Director Stock Option Plan and Formof Agreement (incorporated by reference to Form 10-Q, File 1-13086, ÑledAugust 8, 1991).
*10.15 Ì Energy Ventures, Inc. 1992 Employee Stock Option Plan, as amended(incorporated by reference to Exhibit 4.7 to the Registration Statement onForm S-8 (Reg. No. 333-13531)).
*10.16 Ì Energy Ventures, Inc. Employee Stock Option Plan (incorporated by reference toExhibit 4.1 to the Registration Statement on Form S-8 (Reg. No. 33-31662)).
*10.17 Ì Form of Stock Option Agreement under the Company's Employee Stock OptionPlan (incorporated by reference to Exhibit 4.2 to the Registration Statement onForm S-8 (Reg. No. 33-31662)).
*10.18 Ì Amended and Restated Non-Employee Director Stock Option Plan (incorporatedby reference to Exhibit 10.1 to Form 10-Q, File 1-13086, Ñled August 12, 1995).
*10.19 Ì Employment Agreements with each of Bernard J. Duroc-Danner, Frances R.Powell, John C. Coble and Robert Stiles (incorporated by reference toExhibit No. 10.9 to Form 10-K, File 1-13086, Ñled March 27, 1998).
*10.20 Ì Amended and Restated Employment Agreement dated January 28, 1998, betweenWeatherford International, Inc. and Curtis W. HuÅ (incorporated by reference toExhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
*10.21 Ì Employment Agreements with E. Lee Colley, III, Donald R. Galletly and Jon R.Nicholson (incorporated by reference to Exhibit 10.21 to the Registrant's AnnualReport on Form 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.22 Ì Weatherford International, Inc. 1998 Employee Stock Option Plan, including formof agreement for oÇcers (incorporated by reference to Exhibit 4.16 to theRegistration Statement on Form S-8 (Reg. No. 333-48320)).
*10.23 Ì Form of Stock Option Agreement for Non-Employee Directors dated September 8,1998 (incorporated by reference to Exhibit 10.23 to Registrant's Annual Report onForm 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.24 Ì Form of Warrant Agreement with Robert K. Moses, Jr. dated September 8, 1998(incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report onForm 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.25 Ì Form of Amendment to Stock Option Agreements dated September 8, 1998 forNon-Employee Directors (incorporated by reference to Exhibit 4.17 to theRegistration Statement on Form S-8 (Reg. No. 333-36598)).
*10.26 Ì Form of Amendment to Warrant Agreement dated September 8, 1998 withRobert K. Moses, Jr. (incorporated by reference to Exhibit 4.18 to the RegistrationStatement on Form S-8 (Reg. No. 333-36598)).
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ExhibitNumber Description
10.27 Ì Formation Agreement dated as of February 2, 1999, by and among WeatherfordInternational, Inc., Weatherford Enterra Compression Company, L.P., GeneralElectric Capital Corporation and Global Compression Services, Inc. (incorporatedby reference to Exhibit 10.1 to Form 8-K, File 1-13086, Ñled February 5, 1999).
10.28 Ì Limited Partnership Agreement of Weatherford Global Compression Services, L.P.dated as of February 2, 1999, by and among Weatherford Global CompressionHolding, L.L.C., Weatherford Enterra Compression Company, L.P. and GlobalCompression Services, Inc. (incorporated by reference to Exhibit 10.2 to Form 8-K,File 1-13086, Ñled February 5, 1999).
10.29 Ì Limited Liability Company Agreement of Weatherford Global CompressionHolding, L.L.C. dated as of February 2, 1999, by and between Weatherford EnterraCompression Company, L.P. and Global Compression Services, Inc. (incorporatedby reference to Exhibit 10.3 to Form 8-K, File 1-13086, Ñled February 5, 1999).
10.30 Ì Registration Rights Agreement dated as of February 2, 1999, among WeatherfordGlobal Compression Services, L.P., Weatherford Enterra CompressionCompany, L.P. and Global Compression Services, Inc. (incorporated by referenceto Exhibit 10.4 to Form 8-K, File 1-13086, Ñled February 5, 1999).
*10.31 Ì Form of Stock Option Agreement for Non-Employee Directors dated July 5, 2000(incorporated by reference to Exhibit 4.16 to Registration Statement on Form S-8(Reg. No. 333-48322)).
*10.32 Ì Form of Warrant Agreement with Robert K. Moses, Jr. dated July 5, 2000(incorporated by reference to Exhibit 4.17 to Registration Statement on Form S-8(Reg. No. 333-48322)).
*10.33 Ì Amendment to Stock Option Programs (incorporated by reference to Exhibit 4.19to the Registrant's Registration Statement on Form S-8 (Reg. No. 333-36598)).
10.34 Ì Distribution Agreement, dated as of April 14, 2000, between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference to Exhibit 2.1to Registration Statement on Form S-3 of Grant Prideco, Inc. (Reg.No. 333-35272)).
10.35 Ì Subordinated Promissory Note to Weatherford International, Inc. (incorporated byreference to Exhibit 4.1 to Registration Statement on Form S-3 of GrantPrideco, Inc. (Reg. No. 333-35272)).
10.36 Ì Tax Allocation Agreement, dated as of April 14, 2000, between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
10.37 Ì Transition Services Agreement dated as of April 14, 2000 between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
10.38 Ì Preferred Supplier Agreement, dated as of March 22, 2000 between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.13 to Registrant's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2000 (File No. 1-13086)).
10.39 Ì Purchase Agreement, dated June 26, 2000, between Weatherford International, Inc.and Morgan Stanley & Co. Incorporated (incorporated by reference to Exhibit 10.1to Current Report on Form 8-K (File No. 1-13086) Ñled July 10, 2000).
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ExhibitNumber Description
*10.40 Ì Change of Control Agreement dated as of June 10, 1998, between WeatherfordInternational, Inc. and Burt Martin (incorporated by reference to Exhibit 10.2 tothe Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,2000 (File No. 1-13086)).
‰*10.41 Ì Amendment to Employment Agreement dated October 16, 2000, between PhilipBurguieres and Weatherford International, Inc.
‰21.1 Ì Subsidiaries of Weatherford International, Inc.
‰23.1 Ì Consent of Arthur Andersen LLP.
* Management contract or compensatory plan or arrangement
‰ Filed herewith
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has not Ñled with thisAnnual Report on Form 10-K certain instruments deÑning the rights of holders of long-term debt of theCompany and its subsidiaries, because the total amount of securities authorized under any of such instrumentsdoes not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. TheCompany agrees to furnish a copy of any of such instruments to the Securities and Exchange Commissionupon request.
We agree to furnish to any requesting stockholder a copy of any of the above named exhibits upon thepayment of our reasonable expenses of obtaining, duplicating and mailing the requested exhibits. All requestsfor copies of exhibits should be made in writing to our Investor Relations Department at 515 Post Oak Blvd.,Suite 600, Houston, TX 77027.
(d) Financial Statement Schedule
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SCHEDULE II
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
Additions
Balance at Charged to Balance atBeginning Costs and End of
Description of Period Expenses Collections Deductions Period
(in thousands)
Year Ended December 31, 2000:
Allowance for uncollectible accountsreceivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $19,882 $5,158 $308 $(2,067) $23,281
Year Ended December 31, 1999:
Allowance for uncollectible accountsreceivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $19,398 $5,083 $352 $(4,951) $19,882
Year Ended December 31, 1998:
Allowance for uncollectible accountsreceivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $23,077 $2,189 $910 $(6,778) $19,398
All other schedules are omitted because they are not required or because the information is included in theÑnancial statements or notes thereto.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto dulyauthorized, in the City of Houston, State of Texas, on March 21, 2001.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ BERNARD J. DUROC-DANNER
Bernard J. Duroc-DannerPresident, Chief Executive OÇcer,
Chairman of the Board and Director(Principal Executive OÇcer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by thefollowing persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ BERNARD J. DUROC-DANNER President, Chief Executive OÇcer, March 21, 2001Chairman of the Board andBernard J. Duroc-Danner
Director (Principal ExecutiveOÇcer)
/s/ LISA W. RODRIGUEZ Vice President, Finance and March 21, 2001Accounting (Principal FinancialLisa W. Rodriguez
and Accounting OÇcer)
/s/ PHILIP BURGUIERES Director March 21, 2001
Philip Burguieres
/s/ DAVID J. BUTTERS Director March 21, 2001
David J. Butters
/s/ SHELDON B. LUBAR Director March 21, 2001
Sheldon B. Lubar
/s/ WILLIAM E. MACAULAY Director March 21, 2001
William E. Macaulay
/s/ ROBERT B. MILLARD Director March 21, 2001
Robert B. Millard
/s/ ROBERT K. MOSES, JR. Director March 21, 2001
Robert K. Moses, Jr.
/s/ ROBERT A. RAYNE Director March 21, 2001
Robert A. Rayne
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INDEX TO EXHIBITS
ExhibitNumber Description
2.1 Ì Agreement and Plan of Merger dated October 23, 2000 by and among WeatherfordInternational, Inc., WEUS Holding, Inc., Enterra Compression Company,Universal Compression Holdings, Inc. and Universal Compression, Inc.(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K ofUniversal Compression Holdings, Inc. (File No. 001-15843) and UniversalCompression, Inc. (File No. 333-48279) Ñled on October 26, 2000).
2.2 Ì Purchase Agreement, dated as of October 23, 2000, by and among WeatherfordInternational, Inc., WEUS Holding, Inc., Enterra Compression Company, GlobalCompression Service, Inc. and General Electric Capital Corporation (incorporatedby reference to Exhibit F to the Schedule 13D, with respect to the common stock ofUniversal Compression Holdings, Inc., Ñled by Weatherford International, Inc. andWEUS Holding, Inc. on November 2, 2000).
2.3 Ì Share Sale Agreement dated September 2, 1999, between the shareholders ofPetroline Wellsystems Limited and Weatherford Eurasia Limited and WeatherfordInternational, Inc. (including Registration Rights Undertaking attached asAnnex A)(incorporated by reference to Exhibit 10.1 to Form 8-K (File 1-13086)Ñled September 7, 1999).
2.4 Ì Agreement and Plan of Reorganization dated September 14, 1999, among WilliamsTool Co., the shareholders of Williams Tool Co., the shareholders of WilliamsTool Co. (Canada) Inc. (formerly 598148 Alberta Ltd.), WeatherfordInternational, Inc. and Weatherford Acquisition, Inc. (incorporated by reference toExhibit 10.1 to Form 8-K (File 1-13086) Ñled September 24, 1999).
2.5 Ì Acquisition Agreement dated as of May 21, 1999, entered into by and amongWeatherford International, Inc., Dailey International Inc. and certain subsidiariesof Dailey named therein (incorporated by reference to Exhibit 2.1 to theRegistrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999(File 1-13086)).
2.6 Ì Agreement and Plan of Merger dated as of March 4, 1998, by and betweenEVI, Inc. and Weatherford Enterra, Inc. (incorporated by reference to Exhibit 2.1to Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086, Ñled March 9,1998).
2.7 Ì Amendment No. 1 dated as of April 17, 1998, to the Agreement and Plan of Mergerdated as of March 4, 1998, by and between EVI, Inc. and Weatherford Enterra, Inc.(incorporated by reference to Exhibit 2.2 to Form 8-K, File 1-13086, Ñled April 21,1998).
2.8 Ì Amendment No. 2 dated as of April 22, 1998, to the Agreement and Plan of Mergerdated as of March 4, 1998, as amended by and between EVI, Inc. and WeatherfordEnterra, Inc. (incorporated by reference to Exhibit 2.3 to Form 8-K, File 1-13086,Ñled April 23, 1998).
2.9 Ì Share Purchase Agreement made and entered into as of January 30, 1998, by andamong the shareholders of Nika Enterprises Ltd., an Alberta corporation, listed onthe signature pages thereto and EVI Oil Tools Canada Ltd., an Alberta corporation(incorporated by reference to Exhibit 2.1 to the Form 8-K, File 1-13086, ÑledMarch 3, 1998).
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ExhibitNumber Description
2.10 Ì Amendment No. 1 dated as of May 26, 1998, to the Agreement and Plan of Mergerdated as of December 12, 1997 and to the Agreement dated as of December 12,1997, by and among EVI, Inc., Christiana Acquisition, Inc., ChristianaCompanies, Inc., C2, Inc. and Total Logistic Control, LLC (incorporated byreference to Exhibit 2.18 to the Registration Statement on Form S-4, as amended(Reg. No. 333-58741)).
2.11 Ì Amended and Restated Agreement and Plan of Merger among WeatherfordInternational, Inc., Christiana Acquisition, Inc., Christiana Companies, Inc. andC2, Inc. dated as of October 14, 1998 (incorporated by reference to Exhibit 2.19 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.12 Ì Amendment No. 2 to Logistic Purchase Agreement by and among WeatherfordInternational, Inc., Total Logistic Control, LLC, Christiana Companies, Inc. andC2, Inc. dated as of October 12, 1998 (incorporated by reference to Exhibit 2.20 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.13 Ì Amendment No. 1 to Amended and Restated Agreement and Plan of Merger, byand among Weatherford International, Inc., Christiana Acquisition, Inc., ChristianaCompanies, Inc. and C2, Inc. dated as of January 5, 1999 (incorporated byreference to Exhibit 2.21 to the Registration Statement on Form S-4 (Reg.No. 333-65663)).
2.14 Ì Amendment No. 3 to Logistic Purchase Agreement, by and among WeatherfordInternational, Inc., Total Logistic Control, LLC, Christiana Companies, Inc. andC2, Inc. dated as of January 5,1999 (incorporated by reference to Exhibit 2.22 tothe Registration Statement on Form S-4 (Reg. No. 333-65663)).
3.1 Ì Amended and Restated CertiÑcate of Incorporation of the Company (incorporatedby reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for theyear ended December 31, 1998 (File No. 1-13086)).
3.2 Ì Amended and Restated By-Laws of the Company (incorporated by reference toExhibit 3.2 to Form 8-K, File 1-13086, Ñled June 2, 1998).
3.3 Ì CertiÑcate of Destination of the Registrant's Series A Preferred Stock, par value$1.00 per share (incorporated by reference to Exhibit 3.3 to Registration Statementon Form S-3 (Reg. No. 333-41344)).
4.1 Ì See Exhibit Nos. 3.1 and 3.2 for provisions of the Amended and RestatedCertiÑcate of Incorporation and Amended and Restated By-Laws of the RegistrantdeÑning the rights of the holders of Common Stock.
4.2 Ì Amended and Restated Credit Agreement dated as of May 27, 1998, among EVIWeatherford, Inc., EVI Oil Tools Canada Ltd., Chase Bank of Texas, NationalAssociation, as U.S. Administrative Agent, The Bank of Nova Scotia, asDocumentation Agent and Canadian Agent, ABN AMRO Bank, N.V., asSyndication Agent, and the other Lenders deÑned therein, including the forms ofNotes (incorporated by reference to Exhibit 4.1 to the Form 8-K, File 1-13086, ÑledJune 16, 1998).
4.3 Ì Indenture dated May 17, 1996, between Weatherford Enterra, Inc. and Bank ofMontreal Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 toWeatherford Enterra, Inc.'s Current Report on Form 8-K, File No. 1-7867, datedMay 28, 1996).
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4.4 Ì First Supplemental Indenture dated and eÅective as of May 27, 1998, by and amongEVI Weatherford, Inc., the successor by merger to Weatherford Enterra, Inc., andBank of Montreal Trust Company, as Trustee (incorporated by reference toExhibit No. 4.1 to Form 8-K, File 1-13086, Ñled June 2, 1998).
4.5 Ì Form of Weatherford Enterra, Inc.'s 71/4% Notes Due May 15, 2006 (incorporatedby reference to Exhibit 4.2 to Weatherford Enterra, Inc.'s Current Report onForm 8-K, File No. 1-7867, dated May 28, 1996).
4.6 Ì Indenture dated as of October 15, 1997, between EVI, Inc. and The ChaseManhattan Bank, as Trustee (incorporated by reference to Exhibit 4.13 to theRegistration Statement on Form S-3 (Reg. No. 333-45207)).
4.7 Ì First Supplemental Indenture dated as of October 28, 1997, between EVI, Inc. andThe Chase Manhattan Bank, as Trustee (including form of Debenture)(incorporated by reference to Exhibit 4.2 to Form 8-K, File 1-13086, ÑledNovember 5, 1997).
4.8 Ì Registration Rights Agreement dated November 3, 1997, by and among EVI, Inc.,Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette SecuritiesCorporation, Credit Suisse First Boston Corporation, Lehman Brothers Inc.,Prudential Securities Incorporated and Schroder & Co. Inc. (incorporated byreference to Exhibit 4.3 to Form 8-K, File 1-13086, Ñled November 5, 1997).
4.9 Ì Participation Agreement dated December 8, 1998 by and among WeatherfordEnterra Compression Company, L.P., ABN AMRO Bank N.V., as AdministrativeAgent, Arranger and Syndication Agent, Chase Bank of Texas, NationalAssociation, and the Lessors listed on Schedule I thereto (incorporated by referenceto Exhibit 4.16 to the Registration Statement on Form S-4 (Reg. No. 333-65663)).
4.10 Ì Master Lease Intended as Security dated as of December 8, 1998 betweenWeatherford Enterra Compression Company, L.P., as Lessee, and ABN AMROBank N.V., as Administrative Agent for the Lessors (incorporated by reference toExhibit 4.17 to the Registration Statement on Form S-4 (Reg. No. 333-65663)).
4.11 Ì Guaranty Agreement dated as of December 8, 1998 between WeatherfordInternational, Inc. and ABN AMRO Bank N.V., as Administrative Agent for theLessors (incorporated by reference to Exhibit 4.18 to the Registration Statement onForm S-4 (Reg. No. 333-65663)).
4.12 Ì Registration Rights Agreement, dated as of February 9, 2001, between WEUSHolding, Inc. and Universal Compression Holdings, Inc. (incorporated by referenceto Exhibit 4.3 to the Quarterly Report on Form 10-Q of Universal CompressionHoldings, Inc. (File No. 001-15843) Ñled on February 14, 2001).
4.13 Ì Second Supplemental Indenture dated June 30, 2000, between WeatherfordInternational, Inc. and The Bank of New York, as successor trustee to Bank ofMontreal Trust (including form of Debenture) (incorporated by reference toExhibit 4.1 to Current Report on Form 8-K (File No. 1-13086) Ñled July 10,2000).
4.14 Ì Registration Rights Agreement dated June 30, 2000, between WeatherfordInternational, Inc. and Morgan Stanley & Co. Incorporated (incorporated byreference to Exhibit 4.2 to Current Report on Form 8-K (File No. 1-13086) ÑledJuly 10, 2000).
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10.1 Ì Voting Agreement, dated as of February 9, 2001, among WeatherfordInternational, Inc., WEUS Holding, Inc. and Universal Compression Holdings, Inc.(incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q ofUniversal Compression Holdings, Inc. (File No. 001-15843) Ñled on February 14,2001).
10.2 Ì Transition Services Agreement, dated as of February 9, 2001, between WeatherfordInternational, Inc. and Weatherford Global Compression Services, L.P.(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q ofUniversal Compression Holdings, Inc. (File No. 001-15843) Ñled on February 14,2001).
*10.3 Ì Employment Agreement with Mark Hopmann and Gary Warren (incorporated byreference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for thequarter ended March 31, 2000 (File No. 1-13086)).
*10.4 Ì Amended and Restated Employment Agreement dated as of January 28, 2000,between Weatherford International, Inc. and Bruce F. Longaker, Jr. (incorporatedby reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q forthe quarter ended March 31, 2000 (File No. 1-13086)).
*10.5 Ì Weatherford Enterra, Inc. Non-Employee Director Stock Option Plan, as amendedand restated (incorporated by reference to Exhibit 10.1 to WeatherfordEnterra, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997(File No. 1-7867)).
*10.6 Ì Weatherford International Incorporated 1987 Stock Option Plan, as amended andrestated (incorporated by reference to Exhibit 10.3 to Weatherford Enterra, Inc.'sAnnual Report on Form 10-K for the year ended December 31, 1996 (FileNo. 1-7867)).
*10.7 Ì Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended and restated(incorporated by reference to Exhibit 10.4 to Weatherford Enterra, Inc.'s AnnualReport on Form 10-K for the year ended December 31, 1996 (File No. 1-7867)).
*10.8 Ì Weatherford Enterra, Inc. Amended and Restated Employee Stock Purchase Plan(incorporated by reference to Exhibit 4.19 to the Company's RegistrationStatement on Form S-8 (Reg. No. 333-53633)).
*10.9 Ì Weatherford Enterra, Inc. Restricted Stock Incentive Plan, as amended andrestated (incorporated by reference to Exhibit 10.6 to Weatherford Enterra, Inc.'sAnnual Report on Form 10-K for the year ended December 31, 1996 (FileNo. 1-7867)).
*10.10 Ì IndemniÑcation Agreements with Robert K. Moses, Jr. (incorporated by referenceto Exhibit 10.10 to Weatherford Enterra, Inc.'s Annual Report on Form 10-K forthe year ended December 31, 1987 (File No. 1-7867)); Philip Burguieres(incorporated by reference to Exhibit 10.4 to Weatherford Enterra, Inc.'s QuarterlyReport on Form 10-Q for the quarter ended June 30, 1991 (File No. 1-7867));William E. Macaulay (incorporated by reference to Exhibit 10.2 to WeatherfordEnterra, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30,1995 (File No. 1-7867)); and Jon Nicholson (incorporated by reference toExhibit 10.2 to Weatherford Enterra, Inc.'s Annual Report on Form 10-K for theyear ended December 31, 1996 (File No. 1-7867)).
*10.11 Ì Employment Agreement dated as of June 15, 1998, between EVI Weatherford, Inc.and Philip Burguieres (incorporated by reference to Exhibit No. 10.9 to Form 10-Q,File 1-13086, Ñled August 14, 1998).
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*10.12 Ì Weatherford International, Inc. Executive Deferred Compensation StockOwnership Plan and related Trust Agreement (incorporated by reference toExhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
*10.13 Ì Weatherford International, Inc. Non-Employee Director Deferred CompensationPlan (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Reporton Form 10-Q for the quarter ended March 31, 2000 (File No. 1-13086)).
*10.14 Ì Energy Ventures, Inc. 1991 Non-Employee Director Stock Option Plan and Formof Agreement (incorporated by reference to Form 10-Q, File 1-13086, ÑledAugust 8, 1991).
*10.15 Ì Energy Ventures, Inc. 1992 Employee Stock Option Plan, as amended(incorporated by reference to Exhibit 4.7 to the Registration Statement onForm S-8 (Reg. No. 333-13531)).
*10.16 Ì Energy Ventures, Inc. Employee Stock Option Plan (incorporated by reference toExhibit 4.1 to the Registration Statement on Form S-8 (Reg. No. 33-31662)).
*10.17 Ì Form of Stock Option Agreement under the Company's Employee Stock OptionPlan (incorporated by reference to Exhibit 4.2 to the Registration Statement onForm S-8 (Reg. No. 33-31662)).
*10.18 Ì Amended and Restated Non-Employee Director Stock Option Plan (incorporatedby reference to Exhibit 10.1 to Form 10-Q, File 1-13086, Ñled August 12, 1995).
*10.19 Ì Employment Agreements with each of Bernard J. Duroc-Danner, Frances R.Powell, John C. Coble and Robert Stiles (incorporated by reference toExhibit No. 10.9 to Form 10-K, File 1-13086, Ñled March 27, 1998).
*10.20 Ì Amended and Restated Employment Agreement dated January 28, 1998, betweenWeatherford International, Inc. and Curtis W. HuÅ (incorporated by reference toExhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
*10.21 Ì Employment Agreements with E. Lee Colley, III, Donald R. Galletly and Jon R.Nicholson (incorporated by reference to Exhibit 10.21 to the Registrant's AnnualReport on Form 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.22 Ì Weatherford International, Inc. 1998 Employee Stock Option Plan, including formof agreement for oÇcers (incorporated by reference to Exhibit 4.16 to theRegistration Statement on Form S-8 (Reg. No. 333-48320)).
*10.23 Ì Form of Stock Option Agreement for Non-Employee Directors dated September 8,1998 (incorporated by reference to Exhibit 10.23 to Registrant's Annual Report onForm 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.24 Ì Form of Warrant Agreement with Robert K. Moses, Jr. dated September 8, 1998(incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report onForm 10-K for the year ended December 31, 1998 (File No. 1-13086)).
*10.25 Ì Form of Amendment to Stock Option Agreements dated September 8, 1998 forNon-Employee Directors (incorporated by reference to Exhibit 4.17 to theRegistration Statement on Form S-8 (Reg. No. 333-36598)).
*10.26 Ì Form of Amendment to Warrant Agreement dated September 8, 1998 withRobert K. Moses, Jr. (incorporated by reference to Exhibit 4.18 to the RegistrationStatement on Form S-8 (Reg. No. 333-36598)).
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10.27 Ì Formation Agreement dated as of February 2, 1999, by and among WeatherfordInternational, Inc., Weatherford Enterra Compression Company, L.P., GeneralElectric Capital Corporation and Global Compression Services, Inc. (incorporatedby reference to Exhibit 10.1 to Form 8-K, File 1-13086, Ñled February 5, 1999).
10.28 Ì Limited Partnership Agreement of Weatherford Global Compression Services, L.P.dated as of February 2, 1999, by and among Weatherford Global CompressionHolding, L.L.C., Weatherford Enterra Compression Company, L.P. and GlobalCompression Services, Inc. (incorporated by reference to Exhibit 10.2 to Form 8-K,File 1-13086, Ñled February 5, 1999).
10.29 Ì Limited Liability Company Agreement of Weatherford Global CompressionHolding, L.L.C. dated as of February 2, 1999, by and between Weatherford EnterraCompression Company, L.P. and Global Compression Services, Inc. (incorporatedby reference to Exhibit 10.3 to Form 8-K, File 1-13086, Ñled February 5, 1999).
10.30 Ì Registration Rights Agreement dated as of February 2, 1999, among WeatherfordGlobal Compression Services, L.P., Weatherford Enterra CompressionCompany, L.P. and Global Compression Services, Inc. (incorporated by referenceto Exhibit 10.4 to Form 8-K, File 1-13086, Ñled February 5, 1999).
*10.31 Ì Form of Stock Option Agreement for Non-Employee Directors dated July 5, 2000(incorporated by reference to Exhibit 4.16 to Registration Statement on Form S-8(Reg. No. 333-48322)).
*10.32 Ì Form of Warrant Agreement with Robert K. Moses, Jr. dated July 5, 2000(incorporated by reference to Exhibit 4.17 to Registration Statement on Form S-8(Reg. No. 333-48322)).
*10.33 Ì Amendment to Stock Option Programs (incorporated by reference to Exhibit 4.19to the Registrant's Registration Statement on Form S-8 (Reg. No. 333-36598)).
10.34 Ì Distribution Agreement, dated as of April 14, 2000, between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference to Exhibit 2.1to Registration Statement on Form S-3 of Grant Prideco, Inc. (Reg.No. 333-35272)).
10.35 Ì Subordinated Promissory Note to Weatherford International, Inc. (incorporated byreference to Exhibit 4.1 to Registration Statement on Form S-3 of GrantPrideco, Inc. (Reg. No. 333-35272)).
10.36 Ì Tax Allocation Agreement, dated as of April 14, 2000, between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
10.37 Ì Transition Services Agreement dated as of April 14, 2000 between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q for the quarterended March 31, 2000 (File No. 1-13086)).
10.38 Ì Preferred Supplier Agreement, dated as of March 22, 2000 between WeatherfordInternational, Inc. and Grant Prideco, Inc. (incorporated by reference toExhibit 10.13 to Registrant's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2000 (File No. 1-13086)).
10.39 Ì Purchase Agreement, dated June 26, 2000, between Weatherford International, Inc.and Morgan Stanley & Co. Incorporated (incorporated by reference to Exhibit 10.1to Current Report on Form 8-K (File No. 1-13086) Ñled July 10, 2000).
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*10.40 Ì Change of Control Agreement dated as of June 10, 1998, between WeatherfordInternational, Inc. and Burt Martin (incorporated by reference to Exhibit 10.2 tothe Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,2000 (File No. 1-13086)).
‰*10.41 Ì Amendment to Employment Agreement dated October 16, 2000, between PhilipBurguieres and Weatherford International, Inc.
‰21.1 Ì Subsidiaries of Weatherford International, Inc.
‰23.1 Ì Consent of Arthur Andersen LLP.
* Management contract or compensatory plan or arrangement
‰ Filed herewith
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