Document 4v5RboVDNnMz3VbnDnY41YRrQ

Page 1 of 133 -----------BEGIN PRIVACY-ENHANCED MESSAGE-----------Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObblcJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbRl+lwaHhiGmeZ080dgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mE7TTN3HkpwBGxAr9nPuWgC4D/2zKyzx5ZOltTaQmqX0WD26zajpxTm47mIUeysZ bwnZzrhcuedG4InEezyy/w== PLAINTIFF'S EXHIBIT <IMS-DOCUMENT>0000950131-94-000055.txt : 19940131 <IMS-HEADER>0000950131-94-000055.hdr.sgml : 19940131 ACCESSION NUMBER: 000095013 1-94-000055 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19931031 FILED AS OF DATE: 19940128 ^TaInTTFFS^ 2 EXHIBIT \JUtt HuJ ZnnK FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL INDEX KEY: STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: STATE OF INCORPORATION: FISCAL YEAR END: DRESSER INDUSTRIES 0000030099 3561 750813641 DE 1031 INC /DE/ FILING VALUES: FORM TYPE: SEC ACT: SEC FILE NUMBER: FILM NUMBER: 10 -K 34 001-04003 94503573 BUSINESS ADDRESS: STREET 1: STREET 2: CITY: STATE: ZIP: BUSINESS PHONE: 1600 PACIFIC P O BOX 718 DALLAS TX 75221 2147406000 MAIL ADDRESS: STREET 1: CITY : STATE: ZIP: </IMS - HEADER> <DOCUMENT> <TYPE >10 -K <SEQUENCE>1 < DESCRIPTION FORM 10-K <TEXT> P.O. BOX DALLAS TX 75221 718 < PAGE > } FORM lO'-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Page 2 of 133 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 1993. OF THE Commission file number 1-4003 DRESSER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 75-0813641 (I.R.S. Employer Identification No.) POST OFFICE BOX 718 2001 ROSS AVENUE, DALLAS, TEXAS (Address of principal executive offices) 75221 (P.O. Box) 75201 (Zip Code) (Registrant's telephone number, including area code) (214) 740-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, Par Value 25c Per Share New York Stock Exchange, Inc. Pacific Stock Exchange Incorporated Preferred Stock Purchase Rights New York Stock Exchange, Inc. Pacific Stock Exchange Incorporated Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes No /x/ The aggregate market value of the voting stock (based on the closing price on the New York Stock Exchange as of January 25, 1994) held by non-affiliates of the registrant was approximately $3,690 million. As of January 25, 1994, there were 175,283,941 shares of Dresser Industries, Inc. Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Sections of Registrant's Notice of 1994 Annual Meeting of Shareholders and Proxy Statement (Part III). <PAGE> Page 3 of 133 Item 1. Business of Dresser. PART I Dresser Industries, Inc., together with its subsidiaries (hereinafter "Dresser" or "Registrant" or the "Company") is a global supplier serving the total hydrocarbon energy stream, both upstream and downstream. Registrant's highly engineered and integrated products and technical services are primarily utilized in oil and gas drilling, production and transmission; gas distribution and power generation; gas processing; petroleum refining and marketing; and petrochemical production. Dresser was incorporated under the laws of Delaware in 1956 as a successor to a Pennsylvania corporation organized in 1938 by the consolidation of S. R. Dresser Manufacturing Company and Clark Bros. Company. Both were carrying on businesses founded in 1880. Dresser's executive offices are located at 2001 Ross Avenue, Dallas, Texas 75201 (telephone number 214/7406000) . For the fiscal year ended October 31, 1993, consolidated sales and service revenues of Registrant amounted to $4,216 million. A majority of such revenues was derived from the sale of products and services to energy-oriented industries, including oil and gas exploration, drilling and production, gas transmission and distribution; petroleum and chemical processing; production of electricity; and marketing of petroleum products. Registrant's operations are divided into three industry segments: Oilfield Services; Hydrocarbon Processing Industry; and Engineering Services. Effective February 1, 1993, Registrant acquired the stock of Bredero Price Holding B.V. and its subsidiary companies ("Bredero Price"), a Netherlands based company that provides pipe coating for both onshore and offshore markets. These operations are included in the Oilfield Services segment. Effective April 1, 1993, Registrant acquired TK Valve & Manufacturing, Inc. ("TK Valve"), a Texas corporation that supplies ball valves for the oil and gas production and transmission industry. These operations are also included in the Oilfield Services segment. On December 8, 1993, Registrant announced an agreement to sell its 29.5% interest in Western Atlas International, Inc. to a wholly owned subsidiary of Litton Industries, Inc. The sale closed on January 28,1994. On January 19, 1994 shareholders of Registrant voted to approve the merger (the "Merger") of BCD Acquisition Corporation ("BCD"), a wholly owned subsidiary of Registrant, into Baroid Corporation ("Baroid"). The Merger was effective January 21, 1994 (the "Effective Date"), pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated September 7, 1993, among Registrant, BCD and Baroid. Shareholders of Baroid on the Effective Date will receive 37,286,662 million shares of Registrant's Common Stock in exchange for all of the issued and outstanding shares of Baroid. In addition, approximately 3.6 million shares of Registrant's Common Stock are reserved for issuance upon exercise of outstanding warrants to purchase Baroid common stock and for issuance pursuant to certain benefit plans assumed by Registrant. For financial reporting purposes, the Merger will be treated as a pooling of interests combination. Baroid operations include drilling fluids, drilling services and products and offshore services businesses. Further information concerning Baroid is included under the caption "Baroid" and Note R to the Consolidated Financial Statements. In connection with the Merger, Registrant and Baroid announced December 23, Page 4 of 133 1993, that they reached an agreement with the Antitrust Division of the Department of Justice (the "Antitrust Division") pursuant to which Registrant must dispose of either its 64% interest in M-I Drilling Fluids Company or Baroid Drilling Fluids Inc., a wholly-owned subsidiary of Baroid. In addition, Registrant must also dispose of the United States diamond drill bit business of DB Stratabit, Inc. ("DBS") and grant to the purchaser a non-exclusive license to manufacture steel-bodied diamond drill bits worldwide. Divestiture of the drilling fluids business must occur by June 1, 1994 and the diamond drill bit transaction must occur by July 1, 1994. On January 27, 1994, Registrant announced that it has agreed in principle to sell its interest in M-I Drilling Fluids Company to Smith International, Inc. The completion of the transaction is subject to the negotiation and execution of a definitive agreement, approval from both the Smith and Dresser Boards of Directors, the consent of minority partner Halliburton Company and certain regulatory approvals. Baroid operations are conducted principally through subsidiaries as follows: Drilling Fluids Baroid Drilling Fluids Inc. provides specially formulated fluids used in the drilling process to lubricate and cool the drill bit, seal porous well formations, remove rock cuttings and control downhole pressure. Baroid Drilling Fluids Inc. is a worldwide integrated producer and distributor of drilling fluids. Drilling Services and Products Sperry-Sun Drilling Services Inc. ("Sperry-Sun") rents specialized steering and measurement-while-drilling ("MWD") tools and provides directional drilling services for oil and gas wells throughout the world. DBS provides diamond drill bits and coring products and services to the oil and gas industry worldwide. Offshore Services Sub Sea International Inc. ("Sub Sea") provides diving and underwater engineering services to the oil and gas industry to inspect, construct, maintain and repair offshore drilling rigs and platforms, underwater pipelines and other offshore oil and gas facilities. Unmanned, remotely operated vehicles ("ROVs") are often used to perform these services. Sub Sea designs, manufactures and deploys ROVs. Sub Sea also owns and operates marine equipment which performs pipeline installation, burial and inspection and maintenance and repair work on platforms in offshore oil and gas fields. The Information by Industry Segment is included in Note P to Consolidated Financial Statements on pages 50-52 and in Management's Discussion and Analysis on pages 12-20. This information includes sales and service revenues, operating profit or loss and identifiable assets attributable to each of Registrant's business 'segments for each of the past three fiscal years. This information should be read in conjunction with the consolidated financial statements, notes Page 5 of 133 and accountant's report appearing in Item 8 of this report. OILFIELD SERVICES Registrant's oilfield services segment supplies products and services essential to oil and gas exploration, drilling and production. These products and services include drilling fluid systems, rock bits, production tools, pipe coating and resource exploration services. Drilling Fluid Systems and Related Services. M-I Drilling Fluids Company, a Texas general partnership in which Registrant has a 64% interest, provides a variety of drilling fluid systems and markets such fluids and related services for use in connection with drilling oil and gas wells. M-I markets drilling fluid systems and related services through its sales force to major domestic and international oil companies, <PAGE> 3 independent drilling operators and contractors and foreign government-owned companies. Through its Swaco Geolograph operations, M-I designs, builds and markets a broad line of detection and control equipment used during drilling, often in conjunction with the above described fluid systems, and shakers, desilters, degassers and centrifuges used to remove solids and gas prior to re use of the fluids. Total net revenues for M-I were $398.6 million in 1993, $384.1 million in 1992 and $443.5 million in 1991. Pipe Coating. Bredero Price, acquired in February 1993, provides pipe coating services for use both in on-shore and offshore pipelines, primarily in Europe and Asia. Rock Bits. Registrant produces a full line of oilfield and mining rock bits which are marketed under the Security trademark and are used in drilling oil and gas wells and in the mining industry. Production Tools. Registrant's Guiberson AVA Division produces and markets a broad line of tools which are sold to the completion, production and workover segments of the oil production industry. Drilling and well servicing contractors provide the primary market for bits and tools. Resource Exploration Services. Western Atlas International, Inc. ("Western Atlas"), an unconsolidated affiliate in which Registrant owns 29.5% of the outstanding shares, performs seismic services; integrated reservoir description services; data reduction and interpretation; core and fluids analysis; wireline logging; and provides specialized oilfield services equipment. Primary customers are the energy industry and governments worldwide. On December 8, 1993, Registrant announced it will sell its interest in Western Atlas to an affiliate of Litton Industries, Inc. for $558 million. HYDROCARBON PROCESSING INDUSTRY This segment designs, manufactures and markets highly engineered products and systems for energy producers, transporters, processors, distributors and users throughout the world. Products and systems of this segment include compressors, turbines, electrical generator systems, pumps, power systems, measurement and control devices, and gasoline dispensing systems. Page 6 of 133 Compressors. Dresser-Rand Company, a New York general partnership in which Registrant has a 51% interest, manufactures industrial and aircraft derivative gas turbines, centrifugal compressors, axial compressors, reciprocating compressors, axial expanders, single and multi-stage steam turbines, and electric motors and generators. Gas turbines, motors, and steam turbines are used to drive compressors, generators and pumps with applications in many markets including: cogeneration, power generation, natural gas gathering, processing, transmission and distribution, natural gas injection, petrochemical plants, and refineries. An extensive line of centrifugal compressors is used in a multitude of services including: gas injection, gas lift, gas processing, transmission and distribution, urea and ammonia production, ethylene and liquified natural gas (LNG) production, coal gasification, refinery services and other petrochemical processes. Axial compressors are used in coal gasification, blast furnace, nitric acid and refinery services. Axial expanders are used in power recovery applications, nitric acid plants and refinery processes. Dresser-Rand also manufactures and supplies water cooled reciprocating compressors. Separate compressor lines are manufactured and marketed for the process, enhanced oil recovery, natural gas, and industrial air commercial markets and special shipboard air compressors for the Navy. Dresser-Rand's single and multi-stage mechanical drive steam turbines are used to power pumps, fans, blowers, reciprocating compressors and centrifugal compressors; steam turbine generator sets provide electric power for co generation and alternate fuel markets; electric motors (synchronous and induction type); <PAGE> 4 and electric generators are used with reciprocating engine, hydroturbine, steam turbine and gas turbine drivers. Dresser-Rand also manufactures and markets cryogenic expanders, combined with single stage compressors or generators, to recover energy from production of low temperature process gases used in air separation hydrocarbon facilities. The primary markets for such products are petroleum, petrochemical, chemical, paper and sugar industries, and engineering firms which design plants for such industries. The Consolidated statement of earnings for 1993 includes the $1,118.1 million of Dresser-Rand's sales revenues. Sales revenues for Dresser-Rand were not included in the consolidated statements of earnings for 1992 and 1991 while it was only 50% owned by Registrant. Pumps. Effective October 1, 1992, Registrant's Pump operations (excepting Mono Pump and Peabody) were combined with the Pump operations of Ingersoll-Rand Company into Ingersoll-Dresser Pump Company, a Delaware general partnership in which Registrant has a 49% interest. Ingersoll-Rand Company holds a 51% interest in Ingersoll-Dresser Pump Company. Ingersoll-Dresser Pump Company designs, develops, manufactures, and markets centrifugal pumps which are used for critical applications in energy processing and petrochemical markets as well as in utility and municipal water and waste water markets. Ingersoll-Dresser Pump also manufactures heavy duty process pumps, submersible pumps, vertical turbine pumps, standard end-suction pumps, horizontal split-case and multistage pumps designed for general industrial, pipeline and high pressure services. Such pumps have a widp variety of applications in oil and gas production and refining, chemical and petrochemical processing, marine, sugar, agricultural, mining and mineral processing, utilities and general industry. Registrant's consolidated statements of earning's-include net revenues for the Pump businesses transferred to Ingersoll-Dresser Pump Company of $517.5 million for eleven Page 7 of 133 months for 1992 and $553.1 million for 1991. Registrant's Mono Pump operations produce progressing cavity pumps for handling viscous fluids. Power Systems. Registrant's Waukesha Engine Division produces heavy-duty reciprocating gas and diesel engines and packaged engine driven generator sets. Roots, the developer of the rotary lobe blower, offers a full line of low to medium pressure air and gas handling blowers along with vacuum pumps. These include rotary lobe and screw-type positive displacement products and several turbomachinery (centrifugal) lines. The primary markets served by Roots are waste water treatment, pneumatic conveying, paper, chemical and general industrial. Control Products. Control products encompass an assortment of sensing, indicating, transducing, transmitting and controlling devices. Instruments, valves and meters sold under registered trademarks - ASHCROFT, CONSOLIDATED, DEWRANCE, DURAGAUGE, DURATEMP, DURATRAN, EBRO, HANCOCK, HEISE, MASONEILAN and WILLY - measure and control pressure, temperature, level and flow of liquids and gases. These products are sold primarily to the process, power and gas distribution industries. Specialty products include gas meters, pipe fittings, couplings and repair devices for sale to the gas and water utilities and other industrial markets under the registered DRESSER trademark. Marketing Systems. Registrant manufactures and sells a variety of gasoline and diesel fuel dispensing systems and automated control systems under the Wayne trade name. ENGINEERING SERVICES Registrant's wholly owned subsidiary, The M. W. Kellogg Company, provides engineering, construction and related services, primarily to the hydrocarbon process industries. Sales and service revenues < PAGE> 5 for The M.W. Kellogg Company were $1,209.3 million, $1,558.8 million, and $1,594.2 million for 1993, 1992 and 1991 respectively. BACKLOG The backlog of unfilled orders at October 31, 1993, 1992 and 1991 is included in Management's Discussion and Analysis on page 18. SALES AND DISTRIBUTION Registrant's products and services are marketed through various channels. In the United States, sales are generally made through a group or division sales organization or through independent distributors. Sales in Canada are usually effected through a division of a Canadian subsidiary. Sales in other countries are made directly by a United States division or subsidiary, through foreign subsidiaries or affiliates, and through distributor arrangements or with the assistance of independent sales agents. COMPETITION AND ECONOMIC CONDITIONS Dresser's products are sold in highly competitive markets, and its sales Page 8 of 133 and earnings can be affected by changes in competitive prices, fluctuations in the level of activity in major markets, or general economic conditions. FOREIGN OPERATIONS Registrant maintains manufacturing, marketing or service facilities serving more than 75 foreign countries. Global distribution of products and services is accomplished through more than 290 subsidiary and affiliated companies engaged in various production, manufacturing, service, and marketing functions, and through foreign representatives serving the principal market areas of the world. The Information by Geographic Area is included in Note P to Consolidated Financial Statements on pages 50-52. Registrant's foreign operations are subject to the usual risks which may affect such operations. Such risks include unsettled political conditions in certain areas, exposure to possible expropriation or other governmental actions, operating in highly inflationary environments, and exchange control and currency problems. RESEARCH, DEVELOPMENT AND PATENTS Registrant's divisions, subsidiaries and affiliates conduct research and development activities in laboratories and test facilities within their particular fields for the purposes of improving existing products and developing new ones to meet the needs of their customers. In addition, research and development programs are directed toward development of new products and services for diversification or expansion. For the fiscal years ended October 31, 1993, 1992 and 1991, Registrant spent $81.5 million, $11 million and $9.4 million, respectively, for research and development activities. At December 1, 1993, Registrant and its subsidiaries and affiliates owned 1,536 patents and had pending 503 patent applications, covering various products and processes. They also were licensed under patents owned by others. Registrant does not consider that any patent or group of patents relating to a <PAGE> 6 particular product or process is of material importance when judged from the standpoint of Registrant's total business. EMPLOYEES As of October 31, 1993, Registrant had approximately 15,700 employees in the United States (a decrease of approximately 12% from October 31, 1992) , of whom approximately 5,500 were members of 10 unions represented by 21 bargaining units. As of the same date, Registrant had approximately 10,200 employees at foreign locations of whom approximately 4,500 were members of unions. During fiscal 1993, Registrant experienced one strike which lasted for 44 days. Relations between Registrant and its employees are generally considered to be satisfactory. EXECUTIVE OFFICERS OF REGISTRANT >> The names apd ages of all executive officers of Registrant, all positions and offices with Registrant presently held by each person named and their business experience during the last five years are stated below: <TABLE> Page 9 of 133 <CAPTION> Name, Age and Position <S> John J. Murphy Chairman of the Board, Chief Executive Officer and Director Principal Occupation During Past Five Years <C> <C> (62) Chairman of the Board and Chief Executive Officer of Registrant since August 1983; President of Registrant, August 1982 - March 1992. B. D. St. John Vice Chairman and Director (62) Vice Chairman of Registrant since March 1992; Chief Financial Officer of Registrant since October 1993 ; Executive Vice President Administration of Registrant, November 1982 - March 1992. William E. Bradford President, Chief Operating Officer and Director (59) President and Chief Operating Officer of Registrant since March 1992; President and Chief Executive Officer of Dresser-Rand Company, February 1988 - March 1992; Senior Vice President - Operations of Registrant, March 1984 - March 1992. James L. Bryan Senior Vice President - (57) Operations Senior Vice President - Operations since January 1994; Vice President Operations of Registrant May 1990 January 1994; President and Chief Executive Officer of M-I Drilling Fluids Company, December 1986 - May 1990 . Donald C. Vaughn Senior Vice President - </TABLE> (57) Operations Chairman of the Board, President and Chief Executive Officer of The M.W. Kellogg Company since March 1983; Senior Vice President - Operations of Registrant since January 1992. < PAGE> 7 Principal Occupation During Name, Age and Position Past Five Years STABLE > <CAPTION> f <S> Clint E. Abies <C> (54) <C> Vice President General Counsel of Page 10 of 133 Vice President - General Counsel Registrant since October 1993; Vice President - Corporate Development of Registrant November 1992 - October 1993; Senior Counsel - Corporate Ventures of Registrant, July 1986 November 1992. Paul M. Bryant Vice President - Human (47) Resources Vice President - Human Resources of Registrant since May 1993; Vice President - Human Resources of Dresser-Rand Company, January 1987 May 1993. George A. Helland Vice President (56) Vice President of Registrant since March 1993; Deputy Assistant Secretary for Export Assistance, United States Department of Energy, September 1990 - January 1993; Principal, Innova Partners, Inc., January 1988 - September 1990; Independent Consultant, May 1985 September 1990. Ardon B. Judd, Jr. Vice President - Washington Counsel (57) Vice President - Washington Counsel of Registrant since September 1986. George H. Juetten Vice President - Controller (46) Vice President - Controller of Registrant since May 1993; Audit Partner, Price Waterhouse, independent public accountants, July 1980 - May 1993. Rebecca R. Morris (48) Vice President - Corporate Counsel and Secretary Vice President - Corporate Counsel of Registrant since January 1994 and Secretary of Registrant since November 1990; Corporate Counsel of Registrant June 1987 - January 1994. David R. Smith Vice President - Tax (47) Vice President - Tax of Registrant since January 1994; Director of Tax of Registrant October 1987 - January 1994 . Paul W. Willey Treasurer </TABLE> " ; (56) Treasurer of Registrant since May 1984 . OFFICER EMPLOYED BY JOINT VENTURE COMPANY Page 11 of 133 <TABLE> <CAPTION> Principal Occupation During Name, Age and Position Past Five Years <S> Ben R. Stuart Senior Vice President Operations </TABLE> <C> <C> (59) President and Chief Executive Officer of Dresser-Rand Company since March 1992; Senior Vice President - Operations of Registrant since March 1992; Vice President - Operations of Registrant August 1988 - March 1992. <PAGE> 8 All officers are elected annually by the Board of Directors at a meeting following the Annual Meeting of Shareholders. The officers serve at the pleasure of the Board of Directors and can be removed at any time by the Board. Item 2. Properties Registrant, together with its subsidiaries and affiliates, has more than 65 manufacturing plants, ranging in size from approximately 3,000 square feet to in excess of 980,,000 square feet and totaling more than 10.8 million square feet, located in the United States, Canada, and various other foreign countries. The majority of the manufacturing sites are owned in fee. In addition, sales offices, warehouses, service centers and stock points are maintained, almost all in leased space, in the United States, Canada and certain other foreign countries. The properties are believed to be generally well maintained, adequate for the purposes for which they are used, and capable of supporting a higher level of market demand. During fiscal 1993 M-I Drilling Fluids Company also had 24 grinding and/or other facilities for beneficiating mineral ores, containing approximately 287 acres in plant site property. The following are the locations of the principal facilities of Registrant and its majority owned joint ventures for each industry segment as of October 31, 1993. <TABLE> <CAPTI0N > INDUSTRY SEGMENT AND LOCATION PRODUCT AREA APPROXIMATE FLOOR AREA (SQUARE FEET) <S> <c> <C> Oilfield Services Wharton, Texap Appleton, Wisconsin Oklahoma City, Oklahoma Dallas, Texas Dallas, Texas (Drilling Fluids) (Drilling Fluids) (Drilling Fluids) (Rock Bits) (Production Tools) 62,170 84,561 97,135 294,000 278,500 Page 12 of 133 Hydrocarbon Processing Industry Manchester, England Victoria, Australia Connersville, Indiana Huddersfield, England Waukesha, Wisconsin Appingedam, Netherlands Painted Post, New York Broken Arrow, Oklahoma Wythenshawe, England Olean, New York Lethbridge, Alberta, Canada Houston, Texas LeHavre, France Kongsberg, Norway Wellsville, New York </TABLE> (Mono Pumps) (Mono Pumps) (Power Systems) (Power Systems) (Power Systems) (Power Systems) (Compressors) (Compressors) (Compressors) (Compressors) (Compressors) (Compressors) (Compressors) (Compressors) (Steam Turbines) 490,000 162,000 445,040 159,561 901,395 136,934 982,000 125,000 306,000 896,000 78,000 135,000 538,000 135,000 389,000 (1) (1) < PAGE > 9 <TABLE> <CAPTION> Industry Segment and Location Product Area Approximate Floor Area (Square Feet) <S> <C> <C> Hydrocarbon Processing Industry (con.) Minneapolis, Minnesota Skelmersdale, England Uxbridge, England Avon, Massachusetts Canton, Massachusetts Montebello, California Alliance, Ohio Bradford, Pennsylvania Houston, Texas Jacarei, Brazil Conde, France Barcelona, Spain Burlington, Ontario, Canada Naples, Italy Stratford, Connecticut Berea, Kentucky Alexandria, Louisiana Dumfermline, Scotland (Pitreavie) Dumfermline, Scotland (Halbeath) Salisbury, Maryland Austin, Texas Malmo, Sweden s Einbeck, Germany Rio de Janeiro, Brazil Bonnyrigg, Scotland Markham, Ontario, Canada </TABLE> (Motors) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Control Products) (Marketing Systems) (Marketing Systems) (Marketing Systems) (Marketing Systems) (Marketing Systems) (Marketing Systems) (Market4ng Systems) 350,000 177,000 105,942 121,000 40,590 82,856 60,000 517,000 105,000 80,699 187,244 56,400 53,000 87,791 335,000 105,000 308,640 150,000 75,000 376,905 103,491 267,635 80,505 185,073 42,500 $5,631 (1) (1) (1) (1) (1) (1) (1) (1) Page 13 of 133 (1) all or a portion of these facilities are leased. M-I Drilling Fluids Company, a partnership in which Registrant has a 64% interest, has mineral rights to proven and prospective reserves of barite, bentonite and lignite. Such rights included leaseholds and mining claims and property owned in fee. The principal deposit of barite is located in Nevada, with deposits also located in Ireland and Scotland. Reserves of bentonite are located in Wyoming and Greece. Based on the number of tons of each of the above minerals mined in fiscal 1993, M-I Drilling Fluids Company estimates its reserves, which it considers to be proven, to be sufficient for operation for a period of 15 years or more. Registrant has an undivided one-half interest in lead deposits located in Missouri. The lead ore is mined and concentrated under contract with Cominco American Incorporated, a U. S. subsidiary of Cominco Ltd., a Canadian company, as Operator. Based on recent assessment by the Operator, measured and indicative reserves total approximately 2.75 million tons grading 8.32% lead, 1.21% zinc and 0.27% copper. A reduced <PAGE> 10 production, remnant mining phase began in 1993. Reduced grade of ore produced in recent months and the depressed price of lead and zinc have combined to limit projected mine life to the second half of 1994. Item 3. Legal Proceedings. The Company is involved in various legal proceedings. Information called for by this Item is included in Note L to the Consolidated Financial Statements on pages 41 -44 . Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of the Company's security holders during the quarter ended October 31, 1993. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Registrant is listed on the New York and Pacific Stock Exchanges. The stock symbol is Dl'. The quarterly market prices for Registrant's Common Stock, traded principally on the New York Stock Exchange, were as follows for the two most recent fiscal years: * <TABLE> <CAPTION> s Firpt Second Third Fourth Year <S> <C> <C> <C> <C> <C> 1993 High.. $18.75 21.88 25.13 25.38 25.38 Page 14 of 133 1993 Low... $17.25 17.88 20.25 20.00 17.25 1992 High.. 1992 Low... </TABLE> $21.25 $16.25 22.00 18.75 23.63 19.50 21.75 18.00 23.63 16.25 Dividends on Registrant's Common Stock are declared by the Board of Directors and normally paid to shareholders as of the record date during the third week of March, June, September and December. The cash dividends paid per share of common stock for the first quarter of fiscal 1993 and for the 1993 and 1992 fiscal years were: cTABLE > <CAPTION> First Second Third Fourth Year S> <C> <C> <C> <C> <C> 993.. 992.. /TABLE> .15 .15 . 15 . 15 . 15 . 15 . 15 . 15 . 60 . 60 As of January 25, 1994, there were approximately 25,700 shareholders of the Registrant's Common Stock. <PAGE> 11 Item 6. Selected Consolidated Financial Data The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto included in this report. <TABLE> <CAPTION> 1993 1992 1991 1990 1989 <S> Sales and service revenues Earnings from continuing operations before extraordinary items and accounting changes Per share Total assets Long-term debt Cash dividends declared Per share </TABLE> (In <C> 4,216.0 126.7 . 92 3,641.9 / 308.3 82 . 4 . 60 millions, <C> 3,797.0 69.9 . 52 3,187.8 24 . 5 81.1 . 60 except per share <C> <C> 3,970.3 3,732.0 132.0 . 98 3,090.4 92.3 139.3 1.03 3,104 . B 227.2 80 . 6 . 60 71 . 3 . 525 data) <C> 3,346.6 144.4 1.07 2,878.6 238.2 60 . 8 . 45 Page 15 of 133 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 1993 Compared to 1992 Earnings from continuing operations in 1993 increased $57 million to $127 million. The increase is attributable to the acquisition of Bredero Price, improved earnings in Oilfield Services and Engineering Services operations and changes implemented to reduce costs associated with retiree medical benefit plans. Revenues increased from $3.8 billion to $4.2 billion. The consolidation of Dresser-Rand's financial statements in 1993 was the primary reason for the increase. In 1992, Dresser-Rand was accounted for using the equity method. Earnings from operations were $219 million in 1993 compared to $126 million in 1992. Both 1993 ($74.1 million) and 1992 ($70.0 million) included Special Charges. The 1993 charge was primarily due to the settlement of the Parker & Parsley litigation ($65 million) while in 1992 the charges were mainly attributable to restructuring, particularly the Ingersoll-Dresser Pump joint venture. Excluding the Special Charges, Earnings from Operations were $293 million in 1993 and $196 million in 1992. In 1993, Earnings from Operations included 100% of Dresser-Rand's results, which added $46 million compared to 1992. In addition, the Company and its joint ventures amended retiree medical benefit plans, thereby reducing the related 1993 expense by some $26 million compared to 1992. Also during 1993, Ingersoll-Dresser Pump Company 12 <PAGE> Results of Operations 1993 Compared to 1992 (Continued) sold the inventory the Company contributed to the joint venture, allowing the release of the associated LIFO inventory reserves of $21 million. This gain is reflected as a component of the earnings from the joint venture. See the Industry Segment Analysis beginning on page 15 for a discussion of the results for each segment. Other income increased from $18 million in 1992 to $32 million in 1993 because of a $13 million gain resulting from a plan change in retiree medical benefits for younger employees. Reduced interest expense resulting from the redemption of sinking fund debentures in 1992 was offset by interest on debt incurred to finance acquisitions. The effective tax rate declined to 33% in 1993 from 45% in 1992 as a result of reduced losses in foreign countries with no tax benefit, increased utilization of foreign tax credits and a $9 million benefit associated with a change in the tax rate from 34% to 35%. The consolidation of Dresser-Rand in 1993 resulted in an increase in minority interest representing our partner's 49% share of Dresser-Rand's earnings. Results of Operations 1992 Compared to 1991 Page 16 of 133 Earnings from continuing operations were $70 million in 1992, down from $132 million in 1991. The decrease reflected the after-tax special charge of $50 million for restructuring and the increased expense for retiree medical benefits of $21 million net of tax. Revenues declined to $3.8 billion from $4.0 billion in 1991, with slightly lower revenues in each segment accounting for the reduction. Earnings from operations before Special Charges in 1992 of $196 million were $51 million lower than the $247 million recorded in 1991. The change in accounting for retiree medical benefits in 1992 accounted for $32 million of the reduction. See the Industry Segment Analysis beginning on page 15 for a discussion of the results for each segment. Other income amounted to $18 million in 1992 versus net expense of $2.3 million in 1991. The redemption of high rate sinking fund debentures reduced interest expense by $8 million. Also in 1992, the Company sold a partial interest in M. W. Kellogg's United Kingdom subsidiary resulting in a $15.5 million gain. The effective tax rate increased to 45% in 1992 from 38% in 1991. A reduction in utilization of foreign tax credits and increased foreign losses with no corresponding tax benefit caused the increase. 13 <PAGE> Results of Operations 1992 Compared to 1991 (Continued) In 1992, the Company spun-off its industrial products operations (INDRESCO) and made the decision to dispose of its Environmental Products business. The results of these operations are reflected as Discontinued Operations in the 1992 and 1991 financial statements. In 1992, the Company adopted two new accounting standards relating to retiree medical benefits and income taxes. The combined net effect of these changes was a one time non-cash charge of $394 million or $2.91 per share, which is reflected as the Cumulative Effect of Accounting Changes in the 1992 Statement of Earnings. Legal and Environmental Matters During 1993, the Company settled litigation involving Parker & Parsley for a cash payment of $58 million. See Note L - Commitments and Contingencies for further discussion of this settlement and other pending legal matters. Note L also includes disclosure of environmental clean-up situations in which the Company is involved. Cash Flow and Financial Position Dresser's overall financial position remains strong at October 31, 1993. During 1.993, the Company redeemed the last of its 11-3/4% debentures and issued $300 million of 6.25% Notes due 2000. The ratio of debt to total capitalization was 36%, which is consistent with the Company's objective of 35% debt and 65% equity. Available cash and short-term credit lines, combined with cash provided by operations, should be adequate to finance known requirements. Page 17 of 133 Cash provided by operations before payments associated with the Parker & Parsley settlement of $58 million was adequate to cover capital expenditures of $140 million and dividends of $82 million. The proceeds from the $300 million of 6.25% Notes issued during the year, together with $200 million of commercial paper borrowings, was used to finance the acquisition of Bredero Price and TK Valve ($267 million), repay long-term debt ($80 million) and pay the settlement of the Parker & Parsley litigation ($58 million). Capital expenditures increased in 1993 by $51 million to $140 million. Most of the increase was due to the consolidation of Dresser-Rand in 1993. DresserRand's capital expenditures amounted to $58 million in 1993 compared to the Pump Operations capital expenditures of $13 million in 1992. Capital expenditures planned for 1994 approximate $140 million. 14 < PAGE> Industry Segment Analysis See details of financial information by Industry Segment on pages 18 to 20. Oilfield Services Segment Consolidated revenues in 1993 included $209 million from the operations of Bredero Price and TK Valve, which were acquired in early 1993. Excluding revenues of the acquired operations, segment revenues in 1993 were essentially unchanged from 1992. The favorable impact of higher North American drilling activity on the sales volume of M-I Drilling Fluids (owned 64% by Dresser), Guiberson AVA Division and Security Division was substantially offset by the impact of lower international drilling activity. Excluding the operating profit of Bredero Price and TK Valve, 1993 operating profit of consolidated operations increased $16 million or 93% over 1992. Higher M-I Drilling Fluids profit reflected higher domestic sales volume and the benefit of operating cost reductions for a full year. Operating profit improved in both the Security and Guiberson AVA divisions. Oilfield Services results in 1992 were significantly affected by lower U.S. drilling activity compared to 1991. Consolidated revenues were down 13% from 1991, resulting in operating profit $45 million under 1991. Operating expense reductions made during 1992 only partly offset the impact of lower sales volume in M-I Drilling Fluids, Security Division and Guiberson AVA Division. In 1992, special charges of $17 million were recorded for restructuring to reduce consolidated oilfield services operations to a size appropriate to the lower level of domestic exploration, drilling and production activity. Western Atlas International, owned 29.5% by Dresser, benefited from better North American activity and continuing expanded international markets in 1993. On 10% lower revenues, the Company's share of operating profit increased to $39 million or 11% from 1992, which showed a similar increase over 1991. The Company has agreed to sell its interest in Western Atlas International to the majority partner in early/1994 for $558 million. The merger of Dresser with Baroid, a worldwide supplier of oilfield services and equipment with sales of $850 million, will significantly expand the Company's range of products and services to Oilfield customers. See Note R to ^ r\ ^ ' f-i x, r\ f\/A h ) AAf\A; Page 18 of 133 Consolidated Financial Statements for information which gives effect to the merger. 15 <PAGE> Industry Segment Analysis (Continued) Hydrocarbon Processing Industry Segment Changes in ownership and the formation of a major joint venture have significantly affected the comparison of revenues and operating profit in the Hydrocarbon Processing Segment. Dresser increased its ownership in Dresser-Rand Company from 50% to 51% as of October 1, 1992. As a result, Dresser-Rand is included as a consolidated subsidiary in 1993 and as a major joint venture in 1992 and 1991. Ingersoll-Dresser Pump Company was formed as of October 1, 1992 with Dresser owning 49%. Ingersoll-Dresser Pump is included as a major joint venture in 1993. Dresser's Pump business, which was transferred to IngersollDresser Pump, is included as consolidated Pump Operations in 1992 and 1991. Revenues for 1993 of consolidated operations other than Dresser-Rand and Pump Operations decreased 4% from 1992. A 12% decrease in sales in the Valve and Controls Division was primarily due to depressed market conditions in key international markets and to the strength of the dollar compared to other currencies. Operating profit of the consolidated operations other than Dresser-Rand and Pump Operations of $128 million was 2% under 1992. A strong performance in 1993 by the Wayne Division with earnings up $15 million from 1992 offset a 23% decline for Valve and Controls. Earnings in international markets, principally Europe, were down in 1993 compared to the prior year. Also, inventory reductions in 1992, which resulted in a favorable LIFO impact of $9 million, did not recur in 1993 . In 1992, consolidated sales excluding Dresser-Rand and Pump Operations were down slightly from 1991 with no significant changes in any one division. Earnings in 1992 increased $13 million compared to 1991. Strong earnings for the Wayne Division, improvements in the Instrument and Valve and Controls divisions and the LIFO benefit referred to above were the primary reasons for the increase. Dresser-Rand, reported as a consolidated operation in 1993, had sales of $1.1 billion, which were 13% lower than in 1992. In 1992, sales which were not included in Dresser's consolidated revenues increased from $1.2 billion in 1991 to $1.3 billion. Operating profit for each of the last three years was $90 million in 1993, $86 million in 1992 and $94 million in 1991. Expenses associated with the change in accounting for retiree medical costs reduced earnings by $14 million and $20 million in 1993 and 1992, respectively, compared to 1991. 16 < PAGE > ; Industry Segment Analysis (Continued) Hydrocarbon Processing Industry Segment (Continued) Page 19 of 133 Ingersoll-Dresser Pump Company operated at break-even in 1993, as the joint venture with Ingersol1-Rand rationalized the operations of the two former separate businesses. Also a significant portion of the joint venture's market is the European Community, which was in the midst of a recession in 1993. Operating profit for 1993 consists primarily of a $21 million release of LIFO inventory reserves related to inventory contributed to the joint venture by the Company, which was sold to third parties during the year. The Company's separate Pump Operations contributed earnings of $32 million and $36 million in 1992 and 1991, respectively. Special charges of $7 million were recorded in 1993 related to plant closing and other restructuring in the Wayne and Valve and Control operations, primarily in Europe, and similar actions at Dresser-Rand. In 1992, special charges related to the restructuring of Pump Operations ($35 million) and restructuring and special warranty claims in other Hydrocarbon Processing operations ($14 million). Engineering Services Segment Revenues in 1993 of $1.2 billion decreased 22% from 1992. In 1992, revenues were 2% under 1991. The decline in revenues reflected reduced hydrocarbon processing activity in certain international areas and slow growth and project delays in the U.S. In 1991, revenues included a $22 million payment received by The M. W. Kellogg Company for its retained interest in a foreign project. Engineering Services operating profit in 1993 increased $8 million from 1992; in 1992 operating profit was $15 million over 1991. In 1992, M. W. Kellogg realized a $15 million gain from the sale of a partial interest in its U.K. subsidiary. Operating profit in 1991 included the $22 million in revenue for the retained interest in a foreign project. Increased operating profit on lower revenues is due to enhanced gross margins on large international projects involving technologies in which M. W. Kellogg possesses expertise. 17 < PAGE> Backlog of Unfilled Orders <TABLE> <CAPTION> October 31, 1993 1992 1991 <s> Consolidated backlog Oilfield Services <C> (In millions) <C> <C> $ 185.7 $ 14.4 $ 5.6 Hydrocarbon Processing Industry Dresser-Rand (100%) s Pump Operation^ Consolidated operations - other 872.6 254.7 1,066.5 259.9 286.9 271.4 1,127.3 1,326.4 558.3 1 A 1 'A 1 Engineering Services Eliminations Total consolidated Page 20 of 133 2,478.1 1,634.7 1,495.2 (4.4) (3.8) (1.7) $3,786.7 $2,971.7 $2,057.4 Share of backlog of major joint ventures Dresser-Rand (50%) Ingersoll-Dresser Pump Company (49%) $ .178.9 $ .219.3 $ 496.5 $ 178.9 $ 219.3 $ 496.5 </TABLE> INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS The following financial information by Industry Segment for the years ended October 31, 1993, 1992 and 1991 is an integral part of Note P to Consolidated Financial Statements. The Company increased its ownership in Dresser-Rand Company from 50% to 51% as of October 1, 1992. As a result, Dresser-Rand is included as a consolidated subsidiary in 1993 and as a major joint venture operation in 1992 and 1991. Ingersoll-Dresser Pump Company was formed as of October 1, 1992 with the Company owning 49%. Ingersoll-Dresser is included as a major joint venture investment in 1993. The Company's Pump business that was transferred to Ingersoll-Dresser is included as Pump Operations in 1992 and 1991. <TABLE> <CAPTION> 1993 1992 1991 <s> Consolidated sales and service revenues Oilfield Services <C> (In millions ) <C> <C> $ 782.8 $ 564.8 $ 650.9 Hydrocarbon Processing Industry Dresser-Rand (100%) Pump Operations Consolidated operations - other 1,118.1 1,118.7 517.5 1,162.3 553.1 1,180.3 2,236.8 1,679.8 1,733 .4 Engineering Services 1,209.3 1,558.8 1,594.2 Eliminations (12.9) (6.4) (8.2) Total consolidated sales and service revenues $4,216.0 $3,797.0 $3,970.3 Share of sales aijd service revenues of major joint ventures Western Atlas (29.5%) Dresser-Rand (50%) Ingersoll-Dresser Pump !49%) $ 320.4 372.9 $ 354.5 64 5.2 39.7 $ 343.1 595.1 Page 21 of 133 $ 693.3 $1,039.4 $ 938.2 </TABLE> 18 <PAGE> INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED) <TABLE> <CAPTION> 1993 1992 1991 <S> Operating profit and earnings before taxes Oilfield Services Consolidated operations Western Atlas operations Special charges <C> (In millions) <C> <C> $ 74.4 39.2 .6 114.2 $ 16.8 35.2 (17.1) 34 . 9 $ 62.0 32.7 (1.6) 93.1 Hydrocarbon Processing Industry Dresser-Rand Pump Operations Consolidated operations - other Special charges Engineering Services Total operating profit General corporate expenses Other nonsegment expenses Special charges Retiree medical benefit plan changes Interest income (expense), net 89.5 21.2 127.9 (7.5) 231.1 75.8 421.1 (69.1) (35.1) (67.2) 12 . 8 (11.4) 43.2 31.5 131.1 (49.3) 156.5 67.6 259.0 (65.8) (33.2) (3.6) (12.9) 47.1 35.8 118.0 (3.3) 197.6 53.0 343.7 (62.6) (22.7) (19.0) Earnings before taxes $ 251.1 $ 143.5 $ 239.4 Identifiable assets Oilfield Services Consolidated operations Western Atlas investment ** ( Hydrocarbon Processing Industry Dresser - Rand $ 850.0 278.2 1,128.2 $ 432.2 259.0 691.2 $ 438.4 236.0 674.4 Page 22 of 133 assets/investment Pump investment/assets Consolidated operations - other Engineering Services Eliminations Total identifiable assets Investment in INDRESCO Corporate assets Total assets 756.7 140.0 608.2 1,504.9 510.7 (22.0) 3,121.8 733.7 147.8 634.9 1,516.4 470.7 (21.5) 2,656.8 520.1 $3 , 641.9 531.0 $3, 187.8 126.9 279.7 707.6 1, 114.2 395.9 (21.5) 2,163.0 399.2 528.2 $3,090.4 Consolidated capital expenditures Oilfield Services $ 31.4 $ 21.0 $ 35.1 Hydrocarbon Processing Industry Dresser-Rand (100%) Pump Operations Consolidated operations - other 57.5 33.6 12 . 7 40.3 11.5 50.4 91.1 53.0 61.9 Engineering Services 2.8 13 . 1 23.7 Corporate 14.5 1.4 8.0 Total consolidated capital expenditures $ 139.8 $ 88.5 $ 128.7 </TABLE> <PAGE> 19 INDUSTRY SEGMENT FINANCIAL INFORMATION - COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS (CONTINUED) <TABLE > <CAPTION> 1993 1992 1991 <S> <c> (In millions) <c> <c> Share of capital expenditures of major joint ventures Western Atlap (29.5%) Dresser-Rand (50%) Ingersol1-Dresser Pump (49%) $ 46.7 11.3 $ 70.7 65.4 $58.7 24 . 0 Total $ 58.0 $136.1 $82.7 Page 23 of 133 Consolidated depreciation and amortization Oilfield Services Hydrocarbon Processing Industry Dresser-Rand (100%) Pump Operations Consolidated operations - other Engineering Services Corporate Total consolidated depreciation and amortization $ 30.1 $ 21.1 $18.0 64.4 .3 33.8 98.5 20.8 9.2 13.4 33.0 46.4 20.9 10.2 13.2 31.3 44.5 18.7 8.3 $158.6 $ 98.6 $89.5 Share of depreciation and amortization of major joint ventures Western Atlas (29.5%) Dresser-Rand (50%) Ingersoll-Dresser Pump (49%) $ 39.6 10.8 $ 50.4 </TABLE> 20 <PAGE> Item 8. Financial Statements and Supplementary Data $ 37.0 17 . 8 $ 54 . 8 $30.0 19.2 $49.2 Report of Management The consolidated financial statements of Dresser Industries, Inc. have been prepared by management and have been audited by independent accountants. The management of the Company is responsible for the financial information and representations contained in the financial statements and other sections of this Annual Report on Form 10-K. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate under the circumstances to reflect, in all material respects, the substance of events and transactions that should be included. In preparing the financial statements, it is necessary that management make informed estimates and judgments based on currently available information of the effects of certain events and transactions. In meeting its responsibility for the reliability of the financial statements, management depends on the Company's internal control structure. This internal control structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization an are properly recorded. In designing control procedures, management recognizes that errors or irregularities may occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of the controls. Management believes that the Company's internal control structure provides reasonable assurance that errors or irregularities Page 24 of 133 that could be material to the financial statements are prevented or would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for the accompanying financial statements through its Audit and Finance Committee, which is composed solely of directors who are not officers or employees of the Company. The Committee meets with management and the internal auditors to review the work of each and to monitor the discharge by each of its responsibilities. The Committee also meets with the independent accountants and internal auditors, without management present, to discuss internal control structure, auditing and financial reporting matters. 21 <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Dresser Industries, Inc. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(A) (1) and (2) and 14(D) on page F-2 present fairly, in all material respects, the financial position of Dresser Industries, Inc. and its subsidiaries at October 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes A, G and M to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, and Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, both effective as of November 1, 1991. /s/ Price Waterhouse PRICE WATERHOUSE Dallas, Texas December 9, 1993 <PAGE> f 22 CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) <TABLE> <CAPTION> In Millions Except Per Share Data Years Ended October 31 1993 1992 1991 <s > Sales.................................................................................................. Service revenues................................................................. <C> $3,006.7 1,209.3 Total sales and service revenues............ 4,216.0 <C> $2,240.5 1,556.5 3,797.0 <C> $2,376.4 1,593.9 3,970.3 Cost of sales.......................................................................... Cost of services................................................................. 2,088.5 1,081.8 1,469.2 1,452.8 1,548.6 1,494.3 Total costs of sales and services.... Gross earnings.................................................................... Earnings from major joint ventures.... Selling, engineering, administrative and general expenses................................................. Special charges.................................................................... Earnings from operations..................................... 3, 170.3 1,045.7 60.6 (813.4) (74.1) 218.8 2,922.0 875.0 80.6 (760.0) (70.0) 125.6 3,042.9 921 .A 79.8 (760.6) (4.9) 241.7 Other income (deductions) Interest expense.............................................................. Interest earned................................................................. Retiree medical benefit plan curtailment.......................................................................... Other, net................................................................................ Total other income, net..................................... (27.4) 16.0 12 . 8 30.9 32.3 (29.7) 16.8 _ 30.8 17.9 (38.6) 19.6 _ 16.7 (2.3) Earnings before income taxes and other items below....................................................... Income taxes............................................................................. Minority interest.............................................................. Earnings from continuing operations.. Discontinued operations........................................... 251.1 (81.7) (42.7) 126.7 ." 143.5 (64.4) (9.2) 69.9 (35.3) 239.4 (91.6) (15.8) 132.0 9.2 Earnings before extraordinary items and accounting changes........................................ Extraordinary items....................................................... Cumulative effect of accounting changes......................................................................................... 126.7 34.6 (6.3) (393.8) 141.2 5.6 Net earnings (loss)................................................. $ 126.7 $ (365.5) $ 146.8 Earnings per common share..................................... Earnings from continuing operations............................................................................. Discontinued operations........................................ Warnings beforefextraordinary items and accounting changes..................... Extraordinary items.................................................... Cumulative effect of accounting changes........... . ..... .......................................... $ . 92 . 92 $ . 52 $ ( .26) . 26 ( . 05) (2.91) .98 . 07 1.05 . 04 Page 26 of 133 Net earnings (loss) ............................ ............... $ .92 $ (2.70) $ 1.09 </TABLE> See Accompanying Notes to Consolidated Financial Statements. <PAGE> 23 CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> In Millions - October 31 1993 1992 <S> ASSETS Current Assets Cash and cash equivalents.................. Notes and accounts receivable... <C> <C> $ 239.1 $ 155.2 674.9 627.4 Less allowance for doubtful receivables........................................................... Inventories Finished products and work in process........................................... Raw materials and supplies............ 28.6 646.3 22.4 605.0 484.0 108.4 498.0 46.5 592.4 544.5 Deferred income taxes............................... Prepaid expenses.............................................. 100.9 36.2 71.8 30.1 Total Current Assets............................... Investments and Other Assets Investments in and receivables from major joint ventures............... Intangibles less accumulated amortization of $67.1 in 1993 and $51.3 in 1992 ........................................ Other assets.......................................................... Deferred income taxes............................... Total Investments and Other Assets.................................................... 1,614.9 1,406.6 414.4 406.8 561.9 135.1 229.2 364.1 123.2 229.8 1,340.6 1,123.9 Property, Plant and Equipment at cost s Land and land improvements............ Buildings................................................................. Machinery and equipment..................... 67.5 311.2 1,357.9 1,736.6 67.0 298.6 1,293 . 9 1,659.5 Less accumulated depreciation... Total Properties - Net......................... 1,050.2 686.4 1,002.2 657.3 Total Assets.................................................... $3,641.9 $3,187.8 </TABLE> See Accompanying Notes to Consolidated Financial Statements. 24 < PAGE> CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> In Millions - October 31 <S> LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities Short-term debt and current portion of long-term debt..................................... Accounts payable................................................................... Advances from customers on contracts...................................................................................... Accrued compensation and benefits......................................................................................... Accrued warranty costs................................................. Income taxes................................................................................ Other accrued liabilities........................................ Total Current Liabilities..................................... Employee Retirement Benefit Obligations................................................................................... Long-Term Debt............................................................................. Deferred Compensation, Insurance Reserves and Other Liabilities......................... Minority Interest.............................................................. Shareholders' Investment - Preferred shares, 10,000,000 authorized Common shares, $0.25 par value Authorized: 400,000,000 Issued: 166,596,116....................................................... Capital in excess of par value........................... Retained earnings................................................................... Cumulative translation adjustments................................................................................... Pension liability adjustment.................................. ^; Less treasury shares, at cost............................... Total Shareholders' Investment......................... 1993 <C> 1992 <C> $ 230.8 269.8 288.3 197.8 57.9 100.9 287.1 1,432.6 707.6 308.3 98.5 151.3 $ 95.9 278.1 262.2 217.6 76.7 119.0 220.5 1,270.0 698.3 24.5 94.8 150.8 41.6 434.7 954.6 (87.9) (13.8) 1,329.2 385.6 943.6 41.6 439.0 911.7 (41.1) (4.0) 1,347.2 397.8 949.4 Page 28 of 133 Commitments and Contingencies Total Liabilities and Shareholders' Investment.............................................. $3,641.9 $3,187.8 </TABLE> See Accompanying Notes to Consolidated Financial Statements. 25 <PAGE> CONSOLIDATED STATEMENTS OF SHAREHOLDERS 1 INVESTMENT <TABLE> <CAPTION> In Millions - Years Ended October 31 1993 1992 1991 <S> Common Shares, Par Value Beginning of year........................................................... End of year............................................................................. <C> $ 41.6 $ 41.6 <C> $ 41.6 $ 41.6 <C> $ 41.6 $ 41.6 Capital in Excess of Par Value Beginning of year........................................................... Shares issued in connection with an acquisition................................................. Shares issued under benefit and dividend reinvestment plans............................................................................................ $ 439.0 $ 419.4 23.3 $ 423.3 (4.3) (3.7) (3.9) End of year............................................................................. $ 434.7 $ 439.0 $ 419.4 Retained Earnings Beginning of year........................................................... Net earnings (loss).................................................... Distribution of INDRESCO Inc . shares.............................................. Dividends on common shares at $.60 a share.............................................................. Other............................................................................................... $ 911.7 126.7 $1,760.5 (365.5) $1,694.3 146.8 . ~ (402.2) (82.4) (1.4) (81.1) (80.6) ." End of year............................................................................. $ 954.6 $ 911.7 $1, 760.5 Cumulative Translation Adjustments Beginning of year.......................................................... Translation rate changes..................................... Distribution of INDRESCO Inc. shares.............................................. $ (41.1) $ (27.3) $ 11.4 (46.8) (2.1) (38.7) . - (11.7) .- End of year............................................................................. $ (87.9) $ (41.1) $ (27.3) Pension Liability Adjustment Beginning of year.......................................................... 'Additional minimum pension liability................................................................................ $ (4.0) $ (9.8) (3.0) $ (1.0) (1.7) (1.3) End of year.................................. Treasury Shares, at Cost $. (13.8) $ (4.0) $ (3.0) Page 29 of 133 Beginning of year......................... Shares purchased............................... Shares issued in connection with an acquisition.................. Shares issued under benefit and dividend reinvestment plans............................................................. $(397.8) $ (430.0) $ (405.2) (36.0) 20.0 12.2 12.2 11.2 End of year.............................................. $(385.6) $ (397.8) $ (430.0) Total Shareholders 1 Investment, End of year.. $ 943.6 $ 949.4 $1,761.2 </TABLE > See Accompanying Notes to Consolidated Financial Statements. 26 <PAGE> CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> < CAPTION > In Millions - Years Ended October 31 1993 1992 1991 <S> Cash flows from operating activities: Net earnings (loss)...................................................... <C> $ 126.7 <C> <C> $ (365.5) $ 146.8 Adjustments to reconcile net earnings (loss) to cash flow provided by operating activities: Cumulative effect of accounting changes................................................................................... Special charges for restructuring.... . Discontinued operations losses (earnings).................................................... Retiree benefit curtailment gain............ Depreciation and amortization..................... Gain on business disposals............................... . Cash received from partnership operations.................................. Earnings from major joint ventures... Minority interest in earnings.................... Decrease (increase) in inventories... Increase (decrease) in accounts payable and accrued liabilities.... Increase in advances from customers on contracts.................................. Increase (decrease) in income taxes payable....................................... Other, net......................................................................... Total adjustments................................................ - (12.8) 158.6 10.0 (60.6) 42.7 (66.0) (29.1) 55.1 131.6) (33.2) 33.1 393.8 49.0 35.3 98.6 (18.2) 3.0 (80.6) 9.2 14.1 22.4 44.6 (33.5) 8.6 546.3 (9.2) 89.5 (3.5) 65.0 (79.8) 15.8 (12.7) (15.9) 33.8 29.9 (18.4) 94 . 5 Net cash provided by operating activities......................................................................... 159.8 18 0.8 241.3 ' r\ < \ ACA i n( a ' r\ i Page 30 of 133 Cash flows from investing activities: Business acquisitions....................................................... Capital expenditures.......................................................... Cash contributed to joint venture operations............................................................. Advances (to) from discontinued operations...................................................................................... Proceeds from disposals of assets.................. (266.7) (139.8) ." 5.0 ." (1.9) (88.5) (8.7) (24.4) 23 . 1 (32.0) (128.7) (35.6) 12.8 Net cash used by investing activities.. (401.5) (100.4) (183.5) Cash flows from financing activities: Increase(decrease) in short-term debt... Proceeds from issuance of 6.25% notes... Redemption of debentures.............................................. Decrease in other long-term debt...................... Dividends paid............................................................................. Purchases of common shares, net......................... 200.5 298.2 (62.5) (17.6) (82.4) 16.3 (133.1) (6.8) (81.1) (6.5) (5.3) (80.6) (36.0) Net cash provided (used) by financing activities................................................................................... 336.2 (204.7) (128.4) Effect of translation adjustments on cash.................................................................................................. (10.6) 1.6 (7.9) Net increase (decrease) in cash and cash equivalents.......................................................... Cash and cash equivalents, beginning of year................................................................... 83.9 155 . 2 (122.7) 277.9 (78.5) 356.4 Cash and cash equivalents, end of year...................................................................................... $ 239.1 $ 155.2 $ 277.9 </TABLE> See Accompanying Notes to Consolidated Financial Statements. < PAGE> 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Summary of Significant Accounting Policies Consolidation All majority-owned subsidiaries are consolidated and all material intercompany accounts and transactions are eliminated. Investments in 20% to 50% owned partnerships and affiliates are reported at cost adjusted for the Company's equity in undistributed earnings. Revenue Recognition ^----------------------- } Revenues and earnings from long-term construction contracts are recognized on the percentage-of-completion method, measured generally oh a cost.incurred basis. Estimated contract costs include allowances for completion risks. Page 31 of 133 process and schedule guarantees and warranties that generally are not finally determinable until the latter stages of a contract. Estimated contract earnings are reviewed and revised periodically as the work progresses. The cumulative effect of any estimated loss is charged against earnings in the period in which such losses are identified. Revenues from sale of products other than from long-term construction contracts are recorded when the products are shipped. Inventories Inventories are valued at the lower of cost or market. The cost of most U.S. inventories produced by divisions of the Parent Company and wholly-owned subsidiaries is determined using the last-in, first-out (LIFO) method. The valuation of inventories not on LIFO, principally foreign inventories and inventories of consolidated joint venture companies, is determined using either the first-in, first-out (FIFO) or average cost method. Property, Plant and Equipment Fixed assets are depreciated over the estimated service life. Most assets are depreciated on a straight-line basis. Certain assets with service lives of more than 10 years are depreciated on accelerated methods. Accelerated depreciation methods are also used for tax purposes, wherever permitted. Due to the large number of asset classes, it is not practicable to state the rates used in computing the provisions for depreciation. Maintenance and repairs are expensed as incurred. Betterments are capitalized. Intangibles The difference between purchase price and fair values at date of acquisition of net assets of businesses acquired is amortized on a straight-line basis over the estimated periods benefited, not exceeding 40 years. 28 <PAGE> Note A - Summary of Significant Accounting Policies (Continued) Postretirement Benefits Effective November 1, 1991, postretirement benefits other than pensions are accounted for in accordance with Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions (SFAS 106). Under SFAS 106, the Company accrues the estimated cost of these benefits during the employees' active service period. The Company previously expensed the cost of these benefits as claims and premiums were paid. See Note M for additional information. Income Taxes sf Effective November 1, 1991, income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109, the Company accounts for income taxes by the asset and liability method. Previously the Company deferred the tax effects of timing i r\ i - r\ i Page 32 of 133 differences between financial reporting and taxable income. The asset and liability method requires the recognition of deferred tax assets and liabilities for the future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities. Taxes on the minority interest's share of domestic partnership earnings of consolidated entities are provided at the Company's effective domestic tax rate. See Note G for additional information. Translation of Foreign Currencies For subsidiaries in countries which do not have highly inflationary economies, asset and liability accounts are translated at rates in effect at the balance sheet date, and revenue and expense accounts are translated at rates approximating the actual rates on the dates of the transactions. Translation adjustments are included as a separate component of shareholders' investment. For subsidiaries in countries with highly inflationary economies, inventories, cost of sales, property, plant and equipment and related depreciation are translated at historical rates. Other asset and liability accounts are translated at rates in effect at the balance sheet date, and revenues and expenses excluding cost of sales and depreciation are translated at rates approximating the actual rates on the dates of the transactions. Translation adjustments are reflected in the statement of earnings. Financial Instruments - Fair Value and Off-Balance-Sheet Risk The carrying amounts of cash and cash equivalents, short-term investments and accounts and notes payable approximate fair value because of the short maturity of those instruments. The carrying amount of long-term debt is approximately equal to fair value based on market information. 29 <PAGE> Note A - Summary of Significant Accounting Policies (Continued) Financial Instruments - Fair Value and Off-Balance-Sheet Risk (Continued) The Company has cash and cash equivalents held in currencies other than local currencies, and receivables and payables to be settled in currencies other than local currencies. These financial assets and liabilities create exposure to potential foreign exchange gains and losses arising on future changes in currency exchange rates. The Company protects against such risks by entering into forward exchange contracts. The Company does not engage in speculation, nor does the Company typically hedge nontransaction-related balance sheet exposure. At October 31, 1993, the Company had $237 million of forward exchange contracts outstanding, 98% of which were in European currencies. The fair value of foreign exchange contracts is based on year-end quoted rates for contracts with similar terms and maturity dates. However, such fair values are offset by gains and lossesjon the assets and liabilities hedged by such contracts, so that there is no significant difference between the recorded value and fair value of the Company's net foreign exchange position. Reclassification of Prior Years Page 33 of 133 Prior years' financial statements have been reclassified to conform to 1993 presentations. Note B - Cash Flow Statement Cash and cash equivalents include cash on hand and investments with maturities of three months or less at time of original purchase. Supplemental information about cash payments and significant noncash investing and financing activities is as follows (in millions): <TABLE> <CAPTION> <s> 1993 1992 <C> <C> 1991 <C> Cash payments for income taxes............................ $94.6 $ 83.7 $69.8 Cash payments for interest on debt........................................................................................................ $19.8 $ 30.8 $34.1 Cash payments for interest on tax settlements...................................................................... $14.0 $ $17.3 Acquisition of AVA International Corp. Assets acquired....................................................................... Liabilities assumed.......................................................... Common Shares issued from Treasury...................................................................................... Net cash paid................................................................... $ 54.4 (9.2) (43.3) $ 1.9 </TABLE> 30 <PAGE> Note C - Major Unconsolidated Joint Ventures Ingersol1-Dresser Pump Company Effective October 1, 1992, the Company and Ingersoll-Rand Company formed a joint venture comprised of the pump businesses of the two companies including all standard and engineered pump operations except the Company's Mono Pump subsidiaries. The new company, Ingersoll-Dresser Pump Company, is a general partnership owned 49% by the Company and 51% by Ingersoll-Rand Company. The Company contributed approximately $151 million of net assets, including reserves for restructuring and retiree benefits other than pensions, in exchange for its ownership interest. The operating results of the contributed Dresser Pump business prior to October 1, 1992 are fully consolidated in the Company's statement of earrings. The Company's share of operating results for the month of October, 1992 and all of 1993 are included in earnings from major joint ventures. Summarized financial information is as follows (in millions): Page 34 of 133 <TABLE> <CAPTION> October 31, INGERSOLL-DRESSER PUMP COMPANY 1993 1992 <s> <C> <C> Current assets............................................................................................... ............... Noncurrent assets...................................................................................... ............... $357.7 183.2 Total assets............................................................................................... ................ $540.9 $435.8 180.6 $616.4 Current liabilities................................................................................ ................ $218.0 $251.8 Noncurrent liabilities....................................................................... ...................... 46.9 59.8 Owners' equity Contributed capital and retained earnings... ..................... 311.6 309.8 Cumulative translation adjustment............................... ..................... (35.6) (5.0) 276.0 304.8 Total liabilities and owners' equity...................... ................ $540.9 $616.4 </TABLE> <TABLE> <CAPTION> Twelve Months Ended October 31, 1993 Month of October 1992 <S> <C> Net sales............................................................................................................... ............... $761.0 <C> $ 81.0 Gross profit..................................................................................................... ................ $159.1 $ 16.3 Income from continuing operations before extraordinary items.................................................... ................ $ 3.3 $ 1.8 Net income............................................................................................................ ............... $ 3.3 $ 1.8 The Company's investment................................................................ ................ $136.2 $147.8 The Company's share of pre-tax earnings................... ................ $ 21.4 $ 2.2 </TABLE > The Company's share of pre-tax earnings includes $21.3 million from the release of LIFO inventory valuation reserves related to inventory contributed to the joint venture by the Company and sold by Ingersoll-Dresser Pump Company to third parties. < PAGE> f 31 Note C - Major Unconsolidated Joint Ventures (Continued) Page 35 of 133 In connection with the Ingersol1-Dresser Pump Company joint venture agreement, the Company granted to Ingersol1-Rand Company an option to purchase 51% of the stock of Mono Group Limited for a price equal to 51% of its book value, including the unamortized goodwill, at the exercise date. The option period begins October 1, 1994, and expires April 30, 1995. If the option to purchase is exercised by Ingersoll-Rand Company, both Ingersoll-Rand and the Company have agreed to contribute their respective Mono Group Limited shares to the Ingersoll-Dresser Pump Company as a contribution of capital to the partnership. Western Atlas International, Inc. Western Atlas International, Inc. is a joint venture that was formed May 1, 1987 when the Company and Litton Industries combined their respective Atlas Wireline division and Western Geophysical division. On December 8, 1-993, the Company announced an agreement to sell its 29.5% interest in Western Atlas International, Inc. to a wholly-owned subsidiary of Litton Industries. See Note R for additional information. Summarized financial information is as follows (in millions): <TABLE> <CAPTION> September 30, 1993 1992 <S> WESTERN ATLAS INTERNATIONAL, INC. Current assets............................................................................................ Noncurrent assets................................................................................... <C> $ 430.7 778.2 <C> $ 459.4 770.8 Total assets............................................................................................ $1,208.9 $1,230.2 Current liabilities............................................................................ Noncurrent liabilities................................................................... Shareholders' investment............................................................. $ 170.9 $ 214.0 94.3 151.6 943.7 864.6 Total liabilities and shareholders' investment................................................. $1,208.9 $1,230.2 </TABLE> <TABLE> <CAPTI0N> Twelve Months Ended September 30, 1993 1992 1991 <s> Net sales..................................... <C> $1,086.8 <C> $1,201.8 <C> $1,167.2 `.Gross profit. . f.................. $ 236.2 $ 243.8 $ 222.6 Income from continuing operations before extraordinary items.................. $ 81.9 $ 74.3 $ 68.9 Page 36 of 133 Net income........................................................... ............ $ 79.6 $ 74.3 $ 68.9 The Company's investment and receivable........................................ ............ $ 278.2 $ 259.0 $ 236.0 The Company's share of pre-tax earnings................................................. $ 39.2 $ 35.2 $ 32.7 </TABLE> 32 <PAGE> Note C - Major Unconsolidated Joint Ventures (Continued) Dresser-Rand Company The Company owned 50% of Dresser-Rand from its inception on January 1, 1987 through September 30, 1992. Effective October 1, 1992, the Company acquired an additional 1% ownership interest. Since the Company now owns 51% of DresserRand, it is included as a fully consolidated subsidiary with a 49% minority interest for 1993. Summarized financial information for the periods when equity accounting was applied is as follows (in millions): <TABLE> <CAPTION> Twelve - Months Ended September 30, 1992 1991 <S> DRESSER-RAND COMPANY Net sales............................................................................................... <C> $1,290.3 <C> $1,190.2 Gross profit...................................................................................... $ 244.8 $ 242.9 Income from continuing operations before extraordinary items..................................... $ 74.7 $ 74.7 Net income............................................................................................ $ 77.8 $ 83.6 The Company's share of pre-tax earnings.. $ 43.2 $ 47.1 </TABLE > Note D - Business Combinations Effective February 1, 1993 the Company acquired all the outstanding stock of Bredero Price Holding B.V., a Netherlands corporation, from Koninklijke Begemann i n i 'n Page 37 of 133 Groep N.V. for approximately $161.5 million in cash. Bredero Price is a multinational company that provides pipe coating for both onshore and offshore markets. Effective April 1, 1993, the Company acquired TK Valve & Manufacturing, Inc. from Sooner Pipe & Supply Corporation, Tulsa, Oklahoma for approximately $143.5 million in cash. TK Valve supplies ball valves for the oil and gas production and transmission industry. The purchase price exceeded the fair value of the net assets acquired by approximately $122 million for Bredero Price and approximately $92 million for TK Valve. Both acquisitions were accounted for as purchases. The resulting goodwill is being amortized on a straight-line basis over 40 years. The Consolidated Statement of Earnings includes the results of operations of Bredero Price from February 1, 1993 and TK Valve from April 1, 1993. 33 <PAGE> Note D - Business Combinations (Continued) The following unaudited pro forma summary presents information as if the acquisitions had occurred at the beginning of each fiscal year. The pro forma information is provided for information purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined enterprises (in millions except per share amounts): <TABLE> <CAPTION> Unaudited Years Ended October 31, 1993 1992 <S> <C> <C> Sales and service revenues......................... $4,305.7 $4,055.6 Earnings before extraordinary item and accounting changes.................................. $ 135.2 64.4 Net earnings (loss).............................................. $ 135.2 $ (335.7) Per share: Earnings before extraordinary item and accounting changes.................. $ .98 $ .48 Net earnings.................................................................... $ .98 $ (2.48) </TABLE> Sn 1992, the Company acquired all of the shares of AVA International Corp. (AVA) in exchange for 1.9 million shares of the Company's common stock with a value of $43.3 million and $1.9 million cash. AVA produces well completion products that are sold primarily in foreign markets. The transaction, which was accounted for as a purchase, resulted in goodwill of $39.3 million which is being amortized on /A i r> i Page 38 of 133 a straight-line basis over 40 years. acquisition was not significant. The pro forma effect of the AVA Note E - Long-Term Contracts Consistent with industry practice, service revenues and cost of services include the value of materials, equipment and labor contracts furnished by customers and for which the Company is responsible for the ultimate acceptability of performance of the project based on such material, equipment or labor. The value of such items was $112.4 million, $114.0 million and $471.7 million for the years ended October 31, 1993, 1992 and 1991, respectively. Amounts billed in excess of revenues recognized to date are included in current liabilities under advances from customers on contracts. Note F - Inventories Inventories on the LIFO method were $77.9 million and $73.9 million at October 31, 1993 and 1992, respectively. Under the average cost method, inventories would have increased by $92.2 million and $98.8 million at October 31, 1993 and 1992, respectively. 34 <PAGE> Note F - Inventories (Continued) During 1992, the Company experienced significant quantity reductions in LIFO inventories which were carried at lower costs that prevailed in prior years. Quantity reductions reduced the cost of sales by $14.6 million and increased earnings, net of tax, by $9.5 million or $.06 per share in 1992. Inventories are stated net of progress payments received on contracts of $175.7 million and $118.9 million at October 31, 1993 and 1992, respectively. Note G - Income Taxes The Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes, as of November 1, 1991. The 1992 Statement of Earnings includes a charge of $40.8 million for the cumulative effect of the change. Prior year financial statements were not restated when SFAS 109 was adopted. The domestic and foreign components of earnings before income taxes of continuing operations consist of the following (in millions): <TABLE> <CAPTION> <S> 1993 <C> 1992 <C> 1991 <c> Dome Stic Foreign. $137.5 113.6 $64.7 78.8 $144.4 95.0 . .] ... 'TAAnn'AAAnn.'/^i t i ni nonosC iivirrn Page 39 of 133 Total earnings before income taxes................................................................................... $251.1 $143.5 $239.4 </TABLE> The components of the provision for income taxes of continuing operations are as follows (in millions): <TABLE> <CAPTION> 1993 1992 1991 <S> Current U.S. Federal State................... Foreign............. <C> $ 46.6 3 .2 47.7 97.5 <C> $ 45.4 2.0 41.5 88.9 <C> $51.9 4.1 47.2 103.2 Deferred U.S. Federal Foreign............. (19.0) 3 .2 (15.8) (28.4) 3.9 (24.5) (9.3) (2.3) (11.6) Total income tax provision $ 81.7 $64.4 $ 91.6 </TABLE > Under the provisions of SFAS 109, the tax benefits of loss and credit carryforwards can be recognized in the period they arise if certain realization criteria are met. As a result of these provisions, the tax benefits attributable to approximately $40 million domestic carryforwards and $28 million of foreign carryforwards were reflected as a reduction in the 1992 cumulative effect charge referred to above. 35 < PAGE> Note G - Income Taxes (Continued) The 1991 current taxes of $103.2 contain a charge of $5.6 million equivalent to income taxes which would have been incurred had net operating loss carryforwards not been available. The income tax benefits resulting from utilizing the operating loss carryforwards are presented as an extraordinary item in 1991. Since the Company plans to continue to finance foreign operations and expansion through reinvestment of undistributed earnings of its foreign subsidiaries (approximately $537 million at October 31, 1993), no provisions are generallymade for U.S. or additional foreign taxes on such earnings. When the Company identifies exceptions to the general reinvestment policy, additional taxes are provided. The following is a reconciliation of income taxes at the U.S. Federal income tax rate (34.8% for 1993 and 34% for 1992 and 1991) to the provision for income Page 40 of 133 taxes for continuing operations reflected in the Consolidated Statements of Earnings (in millions): <TABLE> <CAPTION> 1993 1992 1991 <s> <C> <C> <C> Provision for income taxes at statutory rates.............................................. Minority interest's share of domestic partnership earnings Enacted tax rate change............................ Withholding taxes and foreign income taxes on branch profits....................................................................... Utilization of foreign tax credits....................................................................... Foreign losses not benefited............ Foreign taxes in excess of U.S. rate on foreign earnings.................................................................... Additional taxes for repatriation of foreign earnings.................................................................... Benefit of tax basis of property in excess of book value.............................................................. State and local income taxes, net of U.S. Federal income tax benefit........................................................... Other................................................................................... $87.5 (7.9) (8.7) 16.2 (20.6) 8.8 2 .5 4.1 2.1 (2.3) $ 48.8 (3.1) 15.1 (15.1) 12.4 2.1 4.9 (1.4) 1.3 ( . 6) $ 81.4 (4.8) 11.2 (19.7) 7.7 7.4 7.4 (3.4) 2.3 2.1 Provision for income taxes............. $ 81.7 $ 64.4 $ 91.6 </TABLE> 36 <PAGE> Note G - Income Taxes (Continued) Deferred income tax benefits result from the recognition of temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in differences between income for tax purposes and income for financial statement purposes in future years. The deferred income tax provisions (credits) related to the following (in millions): <TABLE> <CAPTION > s ; 1993 --------- 1992 --------- 1991 --------- <s> Post retirement benefits <C> $ 5.4 <C> $(11.2) <C> $ Page 41 of 133 Litigation settlement............................... Restructuring costs..................................... Enacted tax rate change......................... Other items including warranty, insurance and similar accruals. (24.3) 9.4 (8.7) 2.4 (17.3) 4.0 (11.6) Total deferred taxes $(15.8) $(24.5) $(11.6) </TABLE> The components of the net deferred tax asset as of October 31, 1993, were as follows (in millions): <TABLE> cCAPTION > 1993 1992 <S> <C> Deferred tax assets : Post retirement benefits........................................................... $195.8 Warranty reserves......................................................................................... 15.1 Restructuring costs.......................................................................... 7.9 Insurance reserves...................................................................................... 33.7 Bad debt.................................................................................................................... 18.4 Pension............................................................................................................... 5.7 Deferred compensation............................................................................ 12.8 Litigation settlement............................................................................ 24.3 Net operating loss carryforwards.......................................... 18.7 Other items........................................................................................................... 54.2 Valuation allowance................................................................................. (34.7) <C> $201.2 14.1 17.3 32.4 19.4 9.0 12.8 17.6 21.3 (30.5) Total deferred tax asset.................................................... Deferred tax liability - Depreciation.................. 351.9 (21.8) 314.6 (13.0) Net deferred tax asset.................................................................... $330.1 $301.6 </TABLE> At October 31, 1993, the Company had foreign operating loss carryforwards of approximately $54 million that had not been benefited. The tax benefit of these losses is recorded as a deferred tax asset and offset with a corresponding valuation allowance. These losses are available to reduce the future tax liabilities of their respective foreign entity. Approximately $42 million of these losses will carryforward indefinitely while the remaining amounts expire at various dates from 1994 to 2002. The net change of $4.2 million in the valuation allowance for deferred tax assets related all to changes in foreign loss carryforwards. 37 <PAGE> Note H - Short-Term Debt ** ; Short-term debt at October 31, 1993 consisted of $216 million of domestic commercial paper maturing on December 31, 1993 and $13.5 million of primarily foreign bank loans. -> r\ n /'i 'rsn rwA m r / > i i r\ im ? -n i Page 42 of 133 The Company has short-term committed bank lines of credit totalling $250 million of which $216.0 million support commercial paper. Such lines provide for borrowings at the prevailing interest rates. The lines of credit may be used by the Company and certain foreign subsidiaries, and include Eurodollars and foreign currencies. The lines of credit may be terminated at the option of the banks or the Company. Loan arrangements have been established with banks outside the United States, under which the Company's foreign subsidiaries may borrow on an overdraft and short-term note basis. At October 31, 1993, the amount available and unused under these arrangements aggregated $114.2 million. Note I - Long-Term Debt Long-term debt is summarized as follows (in millions): cTABLE > <CAPTION> <s> 1993 <c> 1992 <c> Notes, 6 1/4%, due 2000 Sinking fund debentures, 11 3/4%, due 2007 ................................................ Notes payable under institutional loan agreements, 8%, due in annual installments to June 1997 .......................................................................... Other loan agreements, 3 1/2% to 11 7/8%, due in installments to 2003......................................................................................... $300.0 $ .- 62.5 .- 11.3 9.6 17.7 Less portion due within one year... 309.6 1.3 91.5 67.0 $308.3 $24.5 </TABLE> In June 1993, the Company made a public offering of debt securities in the form of $300.0 million of 6.25% Notes due 2000 from which the Company received $298.2 million in proceeds. The proceeds were used to retire short-term debt that was issued to acquire Bredero Price Holding B.V. and TK Valve & Manufacturing, Inc. (See Note D). The interest is payable semi-annually on May 15 and November 15. During 1992 the Company redeemed $133.1 million of Sinking Fund Debentures at redemption prices ranging from 100% to 106% of principal amount. On November 2, 1992, the Company redeemed the remaining $62.5 million in principal amounts of its 11 3/4% Sinking Fund Debentures due 2007 at a redemption price of 105.68%. The resulting loss was accrued as of October 31, 1992. The $9.8 million total losses on the debenture redemptions above are reported net of taxes of $3.5 million as an extraordinary loss in the 1992 Statement of Earnings. f 38 <PAGE> Page 43 of 133 Note J - Employee Incentive Plans Stock Compensation Plan The Company's shareholders have approved the 1992 Stock Compensation Plan which includes a Stock Option Program, a Restricted Incentive Stock Program and a Performance Stock Unit Program. .The Stock Option Program provides for the granting of options to officers and key employees for purchase of the Company's common shares. The Plan is administered by the Executive Compensation Committee of the Board of Directors, whose members are not eligible for grants under the Plan. No option can be for a term of more than ten years from date of grant. The option price is recommended by the committee, but cannot be less than 100% of the average of the high and low prices of the shares on the New York Stock Exchange on the day the options are granted. The exercise price for options granted during 1993 increases on the annual anniversary dates of grant. Changes in outstanding options during the three years ended October 31, 1993 and options exercisable at October 31, 1993 are as follows: <TABLE> <CAPTION> <S> Outstanding at November 1, 1990 Granted at $20.3125 Exercised at $9,125 to $21,250 Canceled or expired <C> 478,806 142,800 (91,956) (3,900) Outstanding at October 31, 1991 Granted at $19,125 to $20,000 Exercised at $9,125 to $21,250 Canceled or expired 525,750 220,449 (116,505) (43,845) Outstanding at October 31, 1992 Granted at $17,375 to $21,000 Exercised at $9,125 to $21,250 Canceled or expired 585 , 849 1,110,000 (166,959) (10,143) Outstanding at October 31, 1993 1,518,747 Exercisable at $9,125 to $25.1563 574,027 </TABLE> Shares reserved for granting of future options under the 1992 plan were 8,814,762 shares at October 31, 1993. Deferred Compensation Plan Under the Deferred Compensation Plan, a portion of the incentive compensation for officers and key employees can be deferred in the form of common stock units or in cash for payment after retirement or termination of,employment. Payments are made either in common shares of the Company or in cash at the equivalent market value of the common stock units at the option of the employee. Deferred n i f\r\nr\ in;!r'ni Page 44 of 133 compensation was $38.9 million at October 31, 1993 and $39.8 million at October 31, 1992. 39 <PAGE> Note K - Capital Shares Changes in issued common shares during the three years ended October 31, 1993 are as follows: <TABLE> <S > Shares at October 31, 1990 Issued under employee benefit and dividend reinvestment plans <C> 166,585,516 10,600 Shares at October 31, 1991 Shares at October 31, 1992 166,596,116 166,596,116 Shares at October 31, 1993 </TABLE> 166,596,116 Changes in common shares held in treasury during the three years ended October 31, 1993 are as follows: <TABLE> <S> Treasury shares at October 31, 1990 Purchased Issued under dividend reinvestment plans <C> 31,011,271 1,912,029 (631,637) Treasury shares at October 31, 1991 Issued in connection with the acquisition of a business Issued under benefit and dividend reinvestment plans 32,291,663 (1,925,354) (697,009) Treasury shares at October 31, 1992 Issued under benefit and dividend reinvestment plans 29,669,300 (685,705) Treasury shares at October 31, 1993 28,983,595 </TABLE> Preferred Stock Purchase Rights In 1990, the Company issued one new Preferred Stock Purchase Right for each outstanding share of the Company's Common Stock. The Rights will expire in 2000 unless they are Redeemed earlier. The Rights will generally not be exercisable until after 10 days (or such later time as the Board of Directors may determine) from the earlier of a public announcement that a person or group has, without Board approval, acquired Page 45 of 133 beneficial ownership of 15% or more of the Company's Common Stock or the commencement of, or public announcement of an intent to commence, a tender or exchange offer which, if successful, would result in the offeror acquiring 30% or more of the Company's Common Stock. Once exercisable, each Right would entitle its holder to purchase 1/100 of a share of the Company's Series A Junior Preferred Stock at an exercise price of $90, subject to adjustment in certain circumstances. If the Company is acquired in a merger or other business combination not previously approved by the Company's Continuing Directors, each Right then exercisable would entitle its holder to purchase at the exercise price that number of shares of the surviving company's common stock which has a market value equal to twice the Right's exercise price. In addition, if any person or group (with certain exceptions) were to acquire beneficial ownership of 15% or more of the Company's Common Stock (unless pursuant to a transaction approved by the Company's Continuing Directors), each Right would entitle all rightholders, other than the 15% stockholder or group, to purchase that number of Series A Junior Preferred Stock having a market value equal to twice the Right's price. 40 <PAGE> Note K - Capital Shares (Continued) Preferred Stock Purchase Rights (Continued) The Rights may be redeemed by the Company for $.01 per Right until the tenth day after a person or group has obtained beneficial ownership of 15% or more of the Company's Common Stock (or such later date as the Continuing Directors may determine). The Rights are not considered to be common stock equivalents because there is no indication that any event will occur which would cause them to become exercisable. Note L - Commitments and Contingencies Parker & Parsley Litigation The Company was involved in litigation brought by Parker & Parsley Petroleum Company and related plaintiffs in 1989. On April 19, 1993, the Company entered into an agreement in principle to settle with the plaintiffs in the Parker & Parsley litigation, whereby the Company, without admitting any wrong doing, agreed to pay $57.5 million to settle all current and future claims brought forth by the plaintiffs. The settlement was paid on May 26, 1993. Legal actions arising from the same facts filed by Glyn Snell, et. al., and working interest owners who did not participate in the Parker & Parsley case (Texas Ten vs. Dresser et. al.) remain outstanding. The Company recorded a Special Charge of $65.0 million in 1993 to cover the Parker & Parsley;settlement, legal fees and other expenses related to the Parker & Parsley litigation, the Glyn Snell, et. al. litigation, and the working interest owners litigation. The Company believes that it has insurance coverage for the amounts that it has Page 46 of 133 paid or will pay pursuant to the above-described settlement of the litigation, and in fact $13.5 million has been received from certain insurance carriers. However, other insurance carriers have denied coverage, and the Company is engaged in litigation with these carriers seeking recovery of the costs and expenses incurred by the Company in the defense and settlement of the litigation. The Company's claim includes the $57.5 million settlement, as well as all unreimbursed costs and expenses incurred by the Company in defending the action. The insurance carriers had previously sued seeking a declaration that the claims asserted by the Company are not covered by the relevant insurance policies. The carrier's action has been abated in favor of the action brought by the Company. Discovery in the action is proceeding. Trial is currently scheduled for April, 1994. The Company also believes it has insurance coverage with respect to claims made in the suits brought by royalty owners and working interest owners. The amount and timing of any recoveries from the insurance carriers cannot be determined with certainty. Any recoveries will be recognized when amounts can be determined with certainty. 41 <PAGE> Note L - Commitments and Contingencies (Continued) Asbestosis Litigation The Company has approximately 42,800 pending claims (approximately 12,000 filed in 1993) in which it is alleged that third parties sustained injuries and damages resulting from inhalation of asbestos fibers used in products manufactured by the Company and its predecessor companies. The Company has never been a miner or processor of asbestos but did produce a few refractory products that contained some asbestos. Approximately 50% of the pending claims allege injury as a result of exposure to such products, while the other 50% of the claimants allege injury as a result of exposure to asbestos gaskets and packings used in other products manufactured by the Company. Since 1976, the Company has tried, settled or summarily disposed of approximately 13,000 such claims for a total cost of $29 million including legal fees. The Company has entered into agreements with insurance carriers with respect to such claims. Management has no reason to believe the carriers will not be able to meet their obligations pursuant to the agreements. Under the agreements, insurance covers 60%-67% of legal fees and any settlements or awards. The net cost to the Company after recoveries from the carriers has been approximately $10 million. Of the 13,000 claims settled, approximately 80% relate to cases involving refractory products. Any future refractory product claims filed are the responsibility of INDRESCO Inc. pursuant to an agreement entered into at the time of the spin-off. The Company has provided for the estimated exposure, based on past experience, for the remaining open cases involving refractory products. The Company has also provided for estimated exposure relating to non-refractory product claims. However, the Company has less experience in settling such claims. Generally when settlements have been made, the amounts involved are substantially lower than the claims involving refractory products. In 1993, the Company did sustain an adverse judgment in cases filed by employees of Ingalls Shipyard in Pascagoula, Mississippi. The -Company's share of damages awarded in six cases amounted to $3.8 million plus 10% add on for punitive damages. The judgment does not conform to the Company's past experience and was not in accord with the evidence. The court has entered judgment- in the case and Page 47 of 133 the Company has filed the appropriate post trial motions. The court has not ruled on the motions. If relief is denied, the Company will appeal the decision. Any ultimate loss would be covered by the agreement with the insurance carriers and would not result in a net loss exceeding approximately $1 million. Management recognizes the uncertainties of litigation and the possibility that a series of adverse rulings could materially impact operating results. However, based upon the Company's historical experience with similar claims, the time elapsed since the Company discontinued sale of products containing asbestos, and management's understanding of the facts and circumstances which gave rise to such claims, management believes that the pending asbestos claims will be resolved without material effect on the Company's financial position or results of operations. 42 < PAGE > Note L - Commitments and Contingencies (Continued) Quantum Chemical Litigation In October 1992, Quantum Chemical Corporation ("Quantum") brought suit against the Company's wholly owned subsidiary, The M. W. Kellogg Company ("Kellogg"), alleging that Kellogg negligently failed to provide an adequate design for an ethylene facility which Kellogg designed and constructed for Quantum and fraudulently misrepresented the state of development of its Millisecond Furnace technology to be used in the facility. Quantum is seeking $200 million in actual damages and punitive damages equal to twice the actual damages claimed. Kellogg has answered denying the claim and has filed a counterclaim against Quantum alleging libel, slander, breach of contract and fraud. Discovery in the action is proceeding, and trial is set for April 11, 1994. Management believes the Quantum lawsuit is totally without merit and will be resolved without material adverse effect on the Company's financial position or results of operations. Other Litigation The Company and its subsidiaries are involved in certain other legal actions and claims arising in the ordinary course of business. Management recognizes the uncertainties of litigation and the possibility that one or more adverse rulings could materially impact operating results. However, based upon the nature of and management's understanding of the facts and circumstances which gave rise to such actions and claims, management believes that such litigation and claims will be resolved without material effect on the Company's financial position or results of operations. Environmental Matters The Company is identified as a potentially responsible party in 67 Superfund sites. Primary responsibility for eight of these sites was assumed by INDRESCO inc. at the time of the INDRESCO spin-off in 1992 (See Note 0). At three of the 6,7 sites, Fisherj-Calo, Bio-Ecology, and Operating Industries, the Company may be responsible for remediation costs ranging between $200,000 and $1 million. The Company previously has entered into de minimis settlements in respect of several other Superfund sites. Based upon the Company's' historical experience with similar claims and management's understanding of the facts and circumstances Page 48 of 133 relating to the sites other than Fisher-Calo, Bio-Ecology, and Operating Industries, management believes that the other situations will be resolved at nominal cost to the Company. Other The Company and certain subsidiaries are contingently liable as guarantors of obligations aggregating approximately $200 million at October 31, 1993, of which $170.0 million were guarantees of loans to Komatsu Dresser Company, a partnership in which INDRESCO Inc. (See Note O) has an ownership interest. Obligations to guarantee loans to Komatsu Dresser Company expired November 1, 1993. The Company has no further obligations regarding Komatsu Dresser Company. 43 <PAGE> Note L - Commitments and Contingencies (Continued) Other (Continued) Total rental and lease expense charged to earnings was $74.7 million in 1993, $66.4 million in 1992 and $73.7 million in 1991. At October 31, 1993, the aggregate minimum annual obligations under noncancelable leases were: $36.4 million for 1994; $28.4 million for 1995; $20.7 million for 1996; $11.6 million for 1997; $9.1 million for 1998; and $49.8 million for all subsequent years. The lease obligations related primarily to general and sales office space and warehouses. Note M - Postretirement and Postemployment Benefits Benefits Other than Pensions The Company sponsors a number of plans providing health and life insurance benefits for retired U.S. bargaining and non-bargaining employees meeting eligibility requirements. Although certain plans are contributory, the Company has generally absorbed the majority of the costs. The Company funds the benefit plans as claims and premiums are paid. The Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefit Plans Other than Pensions (SFAS 106), for its U.S. benefit plans as of November 1, 1991. The Company elected to recognize this change in accounting on the immediate recognition basis. The cumulative effect as of November 1, 1991, reflected in the Statement of Earnings for the year ended October 31, 1992 as cumulative effect of an accounting change, was as follows (in millions, except per share amount): <TABLE> <CAPTION> ; Accrued postretirement benefit Amount applicable to minority interests <c> $ 644.0 (101.0) 543 . 0 i .. . i. ......'. j . nnnntnnnnn;n i 11 m nrinn-: ^ <, ift'i ; :n i Page 49 of 133 Income tax benefit (190.0) Decrease in net earnings Decrease in earnings per common share </TABLE> $ 353 . 0 $ 2.61 The effects of postretirement benefits for non-U.S. employees, which supplement foreign government plans, are not significant under SFAS 106. During fiscal 1993, the Company, Dresser-Rand and Ingersoll-Dresser Pump Company adopted amendments to certain postretirement medical benefit plans, primarily the non-union plans. The major amendments included the elimination of benefits for younger employees and the introduction of limits on the amount of future cost increases which will be absorbed by the companies. These amendments resulted in a curtailment gain of $12.8 million which was recognized in 1993 and unrecognized gains of $208.3 million which will be recognized as a reduction in benefit expense on a straight line basis over the periods ranging from 12 years to 18 years. 44 <PAGE> Note M - Postretirement and Postemployment Benefits (Continued) Benefits Other than Pensions (Continued) The liability of the U.S. plans at October 31, 1993 and 1992 was as follows (in millions): <TABLE> <CAPTI0N> 1993 1992 <S> Actuarial present value of accumulated postretirement benefit obligation: Retirees Fully eligible active plan participants Other active plan participants <C> <C> $306.6 72 . 0 121.1 $411.1 102.7 163.7 Total accumulated postretirement benefit obligation Unamortized gains from plan amendments Unrecognized net loss 499.7 198.5 (28.2) 677.5 .~ Accrued postretirement benefit liability $670.0 $677.5 </TABLE > Accrued compensation and benefits on the Balance Sheet include the current portion of the benefit liability. The net periodic postretirement benefit expense for the years ended October 31, 1993 and 1992 included the following components (in millions): Page 50 of 133 <TABLE> <CAPTION > 1993 1992 <s> <C> <C> Service cost for benefits earned Interest cost on accumulated postretirement benefit obligation Net amortization of unrecognized gain $ 7.6 40.4 (9.8) $11.8 53.0 ." Net periodic postretirement benefit cost $38.2* $64.8 Actual benefits paid $22.1 $22.7 </TABLE> *Includes $14.3 million in 1993 and $20 million in 1992 for Dresser-Rand Company which was not consolidated in 1992. Assumptions used to calculate the Accumulated Postretirement Benefit Obligation were as follows: <TABLE> <S> Discount rate October 31, 1993 ......................................................................... October 31, 1992 ......................................................................... </TABLE> <C> 7.0% 8.5% Health care trend rate October 31, 1993 thereafter. October 31, 1992 thereafter. (wei ghted based on participant 13% for 1993 declining to 5.5% 15% for 1992 declining to 6.0% count) in 2003 in 2006 and and level level The above changes in assumptions and changes in circumstances and experience resulted in an unrecognized net loss of $(28.2) million. <PAGE> 45 Note M - Postretirement and Postemployment Benefits (Continued) Benefits Other than Pensions (Continued) A one percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of October 31, 1993 by approximately $44 million and would increase the net postretirement benefit cost for 1993 by approximately $5 million. Defined Benefit Pension Plans The Company has numerous defined benefit pension plans covering substantially all employees in the United States. The benefits for the U.S. plans covering the salaried employees are based primarily on years of service and employees' qualifying compensation during the final years of employment. The benefits for the U.S. plans covering the hourly employees are based primarily on years of 1 A U 7 'A Page 51 of 133 service. The U.S. plans are funded in accordance with the requirements of applicable laws and regulations. The U.S. plan assets are invested in cash, short-term investments, equities, fixed-income instruments and real estate at October 31, 1993. The Company has additional defined benefit pension plans for employees outside the United States. The benefits under these plans are based primarily on years of service and compensation levels. The Company funds these plans in amounts sufficient to meet the minimum funding requirements under governmental regulations, plus such additional amounts as the Company may deem appropriate. The Company recognized a minimum pension liability for underfunded plans. The minimum liability is equal to the excess of the accumulated benefit obligation over plan assets. A corresponding amount is recognized as either an intangible asset or a reduction of shareholders' investment. The Company had recorded additional liabilities of $39.9 million and $19.5 million, intangible assets of $15.9 million and $12.6 million, and adjustments to shareholders' investment, net of income taxes, of $13.8 million and $4.0 million, as of October 31, 1993 and 1992, respectively. Pension expense includes the following (in millions): <TABLE> <CAPTION> <s> 1993 <C> 1992 <C> 1991 <C> Service cost for benefits earned.., Interest cost on projected benefit obligation........................................... Actual return on plan assets.................. Net amortization and deferral............... $ 19.4 36.9 (36.0) .7 $ 18.2 32.7 (35.0) (1.6) $ 15.9 27.1 (26.8) (4.2) Net pension expense........................................... $ 21.0 $ 14.3 $ 12.0 </TABLE> Cash contributions to the plans in 1993 were $38.7 million. 46 <PAGE> Note M - Postretirement and Postemployment Benefits (Continued) Defined Benefit Pension Plans (Continued) The funded status of the plans on the August 1 measurement dates was as follows (in millions): <TABLE> <CAPTION> > i 1993 1992 <s> PLANS (PRIMARILY FOREIGN) WITH ASSETS EXCEEDING ACCUMULATED BENEFITS <C> <C> Page 52 of 133 Actuarial present value of benefit obligations: Vested benefit obligation............................ Accumulated benefit obligation............ Projected benefit obligation............................... Plan assets at fair value........................................ $ 116.6 $ 119.5 $ 134.5 212.6 $ 117.3 $ 120.1 $ 134.3 201.4 Projected benefit obligation under plan assets................................................................. Unrecognized net gain................................................................ Prior service cost not yet recognized in net periodic pension cost............................................................................................ Unrecognized transition net asset........................... 78.1 (16.7) 2.0 (21.1) 67.1 (5.0) 3.7 (26.6) Prepaid pension costs recognized as of August 1.......................................................................... $ 42.3 $ 39.2 PLANS (PRIMARILY DOMESTIC) WITH ACCUMULATED BENEFITS EXCEEDING ASSETS Actuarial present value of benefit obligations: Vested benefit obligation............................ $ 268.0 $ 191.4 Accumulated benefit obligation............ Projected benefit obligation............................ Plan assets at fair value..................................... $ 291.8 $ 364.6 212.8 $ 209.0 $ 298.8 160.4 Projected benefit obligation over plan assets.............................................................. Unrecognized net loss................................................. Prior service cost not yet recognized in net periodic pension expense................................................................. Unrecognized transition net obligation................................................................................ Adjustment required to recognize minimum liability............................................................. (151.8) 56.5 (138.4) 26.5 24.1 5.3 (39.9) 23.5 6.0 (19.5) Pension liability recognized as of August 1......................................................................................... $(105.8) $(101.9) </TABLE> On the Balance Sheet, other assets include prepaid pension costs and accrued compensation and benefits include the current portion of the pension liabilities. <PAGE> 47 Note M - Postretirement and Postemployment Benefits (Continued) -----------------------------------r------------------------------------------------------------------------------------------------------------------------------------------------------ Defined Benefit Pension Plans (Continued) Page 53 of 133 Contributions made in August and October 1993 to the trust for the pension plans decreased the liability for plans with accumulated benefits exceeding assets by $7.2 million. The actuarial assumptions used in determining funded status of the plans were as follows: <TABLE> <CAPTION> U.S. PLANS 1993 1992 <S> Discount rate..................................... Expected long-term rate of return on assets......................... Rate of increase in compensation levels............... <C> 7.0% 8.5% to 9.0% 3.5% to 4.0% <C> 8.75% 8.5% to 9.0% 5.0% to 5.5% FOREIGN PLANS 1993 1992 Discount rate..................................... Expected long-term rate of return on assets......................... Rate of increase in compensation levels............... </TABLE> 5.0% to 10.5% 5.0% to 12.5% 7.5% to 12.0% 7.5% to 13.5% 3.0% to 7.5% 3.0% to 11.0% The changes in assumptions in 1993 increased the projected benefit obligation by approximately $40 million. Defined Contribution Plans The Company has defined contribution plans for most of its U.S. salaried employees. Under these plans, eligible employees may contribute amounts through payroll deductions supplemented by employer contributions for investment in various funds established by the plans. The cost of these plans was $12.5 million, $8.8 million and $7.1 million in 1993, 1992 and 1991, respectively. Postemployment Benefits In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits (SFAS 112), which requires that accrual accounting be used for the cost of benefits provided to former or inactive employees who have not yet retired. Such benefits include salary continuation, disability, severance and health care. Under SFAS 112, the cost of benefits must be accrued either over the employee's service period or at the date of an event that gives rise to the benefits. SFAS 112 must be adopted by the Company no later than fiscal year 1995. The Company currently accrues the cost of some benefits covered by SFAS 112 but not all. SFAS 112 requires a cumulative catch-up charge to earnings upon adoption. The Company has not determined the amount of the cumulative adjustment. The Company expects to adopt SFAS 112 in the first quarter of fiscal 1995. < PAGE > 48 Page 54 of 133 Note N - Supplementary Earnings Statement Information and Special Charges Earnings per common share are based on the average number of common shares outstanding during each period. The average common shares outstanding were 137.3 million in 1993, 135.5 million in 1992 and 134.2 million in 1991. Common stock equivalents do not have a material effect on earnings per share. Depreciation of property, plant and equipment charged to earnings amounted to $141.5 million in 1993, $87.5 million in 1992 and $78.9 million in 1991. The increase in 1993 is primarily due to the consolidation of Dresser-Rand. Amortization of intangibles was $17.2 million in 1993, $11.1 million in 1992 and $10.6 million in 1991 and is included in selling, engineering, administrative and general expenses. Engineering, research and development costs were $152.9 million in 1993, and $94.0 million in 1992 and 1991. Research and development costs, as defined by Statement of Financial Accounting Standards No. 2, charged to earnings were $81.5 million in 1993, $11.0 million in 1992 and $9.4 million in 1991. The increases in 1993 costs are primarily due to the consolidation of Dresser-Rand. The components of other income (deductions), net on the Consolidated Statements of Earnings are as follows (in millions): <TABLE> <CAPTI0N> 1993 1992 1991 <s > <C> <C> <C> Gain on business disposal.. Equity earnings.................................. Other income........................................... Foreign exchange............................... $ -15.7 12.3 2.9 $ 18.2 10.3 13 . 2 (10.9) $ 3.5 7.3 19.0 (13.1 $30.9 $ 30.8 $ 16.7 </TABLE > Special Charges The Company recorded special charges totalling $74.1 million in 1993. The charges included $65.0 million to cover settlement, legal fees and expenses of the Parker & Parsley and related litigation (See Note L) and $13.2 million for restructuring and termination costs partially offset by a $4.1 million gain from curtailment of retiree medical benefits. The curtailments resulted from employee terminations associated with plant closings. The special charges reduced segment operating profit by $6.9 million and the remaining $67.2 million was reflected as nonsegment expenses. In 1992, the Company recorded special charges totalling $70.0 million. The charges provided $35.0 million for the restructuring of the pump joint venture, $25.0 million fo^ restructuring and termination costs in other operations, and $10.0 million primarily for the settlement of special warranty claims. The special charges reduced segment earnings of Oilfield Services by $17.1 million and Hydrocarbon Processing Industry by $49.3 million. The remaining $3.6 million was reflected as nonsegment expenses. r\ r r\ /ar\ r\ r\ r r Page 55 of 133 < PAGE > Note 0 - Discontinued Operations 49 In 1992, the Company decided to dispose of its Environmental Products business and recorded a $12.0 million charge for the estimated costs of disposal and future operating losses. Effective August 1, 1992, the Company divested its industrial products and equipment businesses including its 50% interest in Komatsu Dresser Company. The divestiture/spin-off was accomplished by a distribution of one INDRESCO share for every five shares of the Company's common stock. The results of operations net of income taxes for Environmental Products (including the $12 million charge in 1992) and for the INDRESCO businesses are reported as discontinued operations. Summarized information on the Discontinued Operations is as follows (in millions): <TABLE > <CAPTI0N> 1992 1991 <S> <C> <C> Net sales $469.0 $709.9 Earnings (loss) before income taxes Income tax expense (benefit) $(39.2) (3.9) $ 13.4 5.6 Net earnings (loss) before extraordinary item Tax benefits from loss carryforwards (35.3) 7.8 1.4 Net earnings (loss) $(35.3) $ 9.2 </TABLE> Note P - Information by Industry Segment and Geographic Area The Company's industry segments are outlined below. See Notes C and 0 for information about changes in joint venture operations and discontinued operations. Oilfield Services s The Segment provides products and technical services utilized in the worldwide search for and development of crude oil and natural gas through exploration, drilling and production activities. Principal products and services of consolidated operations include drilling fluid systems, rock bits, downhole production tools, pipe coating and'ball valves. The Western Atlas Page 56 of 133 unconsolidated joint venture, which the Company has agreed to sell as discussed in Note R, provides integrated reservoir description services, seismic services, core analysis and wireline logging services. The Bredero Price and TK Valve & Manufacturing'acquired operations are included in this segment (See Note D). <PAGE> 50 Note P - Information by Industry Segment.and Geographic Area (Continued) Hydrocarbon Processing Industry The Segment provides highly engineered products, which are essential to the transportation and processing of various hydrocarbon raw materials, the conversion of the hydrocarbon raw materials into higher value-added energy forms and the marketing of refined products. Principal products, services and systems of consolidated operations include compressors, turbines, diesel engines, measurement and control devices, gas meters, piping specialties and gasoline dispensing systems along with related repair services. The Ingersoll-Dresser Pump unconsolidated joint venture provides pumps along with related repair services. Engineering Services The Segment, which consists of the M. W. Kellogg Company, is involved in the design, engineering and construction of energy-related complexes throughout the world. Total revenues include sales and services to unaffiliated customers and either intersegment sales and services or intergeographic area sales and services. The intersegment and intergeographic area sales and services are accounted for at prices which approximate arm's length market prices. Operating profit consists of total revenues less total operating expenses and includes equity earnings or losses from unconsolidated affiliates. General corporate expenses, foreign exchange gains or losses, interest income and expense, and other income and expenses (including administrative and general expenses applicable to divested operations) not identifiable with a segment have been excluded in determining operating profit. Identifiable assets are those assets that are identified with particular segments. Corporate assets are principally cash and cash equivalents and deferred income tax benefits. Industry Segment Financial Information The financial information by industry segment for the years ended October 31, 1993, 1992 and 1991 is included in Item 7., Management's Discussion and Analysis on pages 18 to 20 of this report, and is an integral part of this Note to Consolidated Financial Statements. 51 < PAGE> Note P - Information by Industry Segment and Geographic Area ( Continued) Page 57 of 133 Geographic Area Financial Information The financial information by Geographic Area for the years ended October 31, 1993, 1992 and 1991 is as follows (in millions): <TABLE> <CAPTION> 1993 <s> Sales and service revenues United States............................................................. Canada................................................................................... Latin America............................................................. Europe................................................................................... Mid East, Far East and Africa Intergeographic area sales and service revenues United States............................................................. Canada.................................................................................. Latin America............................................................. Europe.................................................................................. Mid East, Far East and Africa............ Eliminations................................................................... <c> $2,314.4 116.3 185.6 986.0 613.7 252.8 3.4 .7 78.6 24.3 (359.8) 1992 <c> $2,233.3 81.0 115.2 911.4 456.1 146.1 2.8 2.1 40.0' 31.2 (222.2) 1991 <c> $2,218.0 96.4 135.6 944.7 575.6 149.4 1.6 1.8 43.0 24.9 (220.7) Total sales and service revenues $4,216.0 $3,797.0 $3,970.3 Operating profit United States................................................................ Canada...................................................................................... Latin America................................................................ Europe...................................................................................... Mid East, Far East and Africa............... Adjustments and Eliminations.................. 179.8 $ 61.9 $ 179.1 12 . 8 4.1 10.4 8.1 15.1 9.8 77.9 43.1 52.4 81.7 54.9 24.0 .2 ( .7) (11.8) Subtotal............................................................................. 360.5 178.4 263.9 Major Joint Ventures United States................................................................ Canada...................................................................................... Latin America................................................................ Europe...................................................................................... Mid East, Far East and Africa............... 24.8 .8 .7 17.8 16.5 19.7 2.9 5.7 34.6 17.7 35.1 1.5 11.7 24.0 7.5 Subtotal............................................................................ 60.6 80.6 79.8 Total operating profit............................ $ 421.1 $ 259.0 $ 343.7 Identifiable assets United States................................................................ Canada...................................................................................... Latin America................................................................ SSuroDe.........................j......................................................... Mid East, Far East and Africa............... Adjustments and eliminations.................. $1,888.8" 65.9 154.9 880.2 287.5 (155.5) $1,769.6 74.3 194.9 603 . 1 146.3 (131.4) $1,375.0 55.9 100.9 628.4 141.5 (138.7) Total identifiable assets......................... $3,121.8 $2,656.8 $2, 163.0 Page 58 of 133 United States export sales Canada.................. Latin America Europe.................. .. Mid East, Far East and Africa................ $ 40.6 165.1 44.4 371.4 $ 26.0 108.0 29.6 243.1 $ 38.4 71.2 19.1 179.3 Total United States export sales.. $ 621.5 $ 406.7 $ 308.0 </TABLE> < PAGE > 52 Note Q - Quarterly Financial Data (Unaudited) <TABLE> <CAPTION> Quarters Ended January 31 April 30 July 31 October 31 <s> 1993 Net sales and service revenues..................................... Gross earnings.............................................. In millions, except per share data <c> <c> <c> <c> $ 923.7 209.0 $1,067.2 260.6 $1/064.8 267.3 $1,160.3 308.8 Net earnings.............................................. $ 19.5 $ 2.7 $ 34.8 $ 69.7 Earnings per common share............ 1992 Net sales and service revenues............................................................. Gross earnings.............................................. Net earnings (loss) Continuing operations...................... Discontinued operations............... Subtotal before extraordinary items and accounting changes............................ Extraordinary items............................ Cumulative effect of accounting changes............................ Total net earnings(loss)........................................... Earnings (loss) per common share Continuing operations..................... ^ Discontinued operations............... Subtotal before extraordinary items and accounting changes............ $ . 14 $ 891.0 194.5 10.2 (6.0) 4.2 (393.8) $(389.6) $ . 08 ( .04) .04 $ . 02 $ .26 $ .50 $ 938.3 $ 957.6 206.2 227.8 $1,010.1 246.5 13.7 1.3 29.3 (12.0) 16.7* (18.6)** 15.0 (3.7) 17 . 3 (1-9) (2.6) .- $ 11 . 3 $ 17.3 $ (4.5) $ . 10 $ .21 $ . 13 . 01 ( . 09) ( . 14) .11 .12 (.01) Page 59 of 133 Extraordinary items. Cumulative effect of accounting changes. (2.91) ( . 03) ( . 02) Total net earnings (loss).................................................... $ (2.87) $ .08 $ .12 $ (.03) </TABLE> * Includes after-tax special charges for restructuring costs, termination costs and special warranty claims of $36.0 million. ** Includes $12.0 million for the estimated costs of disposal and future operating losses. <PAGE> 53 Note R - Subsequent Events (Unaudited) Merger with Baroid Corporation On September 7, 1993, the Company and Baroid Corporation (Baroid) announced an agreement to merge the two companies. The agreement provides that, upon consummation of the merger, stockholders of Baroid will receive 0.40 shares of Dresser common stock for each share of issued and outstanding Baroid common stock and Baroid will become a wholly-owned subsidiary of Dresser. The merger will be accounted for as a pooling of interests. Supplemental unaudited earnings statement information assuming the merger had occurred on November 1, 1990, is as follows (in millions except earnings per share): <TABLE> <CAPTION> Unaudited Years Ended October 31, 1993 1992 1991 <S > <C> <C> <C> Net sales and service revenues............ $5,043.8 $4,551.8 $4,681.1 Earnings before extraordinary items and accounting changes.................................. Extraordinary items.............................................. Cumulative effect of accounting changes.............................................. $ 128.2 $ 56.9 (6.3) $ 129.6 6.1 (393.8) Net earnings (loss)................................................. Per share: Earnings before extraordinary items and accounting changes.................................. ^Extraordinary ifems.............................................. Cumulative effect of accounting changes.............................................. $ 128.2 $ (343.2) $ 135.7 $ . 74 $ .34 $ .75 ( . 04) . 04 (2.29) nnnAA."A i r\n/ \ - 1 /V I -> 'A ) Page 60 of 133 Net earnings (loss)....................................................... $ .74 $ (1.99) $ .79 </TABLE> Expenses associated with the merger of approximately $30.0 million less a tax benefit of $2.9 million, for a net special charge of $27.1 million or $0.16 per share, have been reflected in the combined results of operations for the year ended October 31, 1993 shown above. The above supplemental unaudited earnings statement information includes Baroid information for the twelve months ended October 31, 1993, December 31, 1992 and December 31, 1991. Following the merger, the Company is required by the United States Department of Justice to dispose of either its 64% general partnership interest in M-I Drilling Fluids Company or its 100% interest in Baroid Drilling Fluids Inc. prior to June 1, 1994. Dresser has not yet determined which drilling fluids company will be divested but is at present negotiating with interested parties. M-I Drilling Fluids Company revenues were $398 million and earnings before taxes were $25 million for the year ended October 31, 1993 and Baroid Drilling Fluids Inc. revenues were $372 million and earnings before taxes were $39 million for the same period. 54 <PAGE> Note R - Subsequent Events (Unaudited) (Continued) Sale of Interest in Western Atlas International, Inc. On December 8, 1993, Dresser and Litton Industries, Inc. announced an agreement for the sale of Dresser's 29.5% interest in Western Atlas International, Inc. to a wholly-owned subsidiary of Litton for $358 million in cash and $200 million in 7 1/2% notes due over seven years. The sale is expected to close in January, 1994 and will result in an after-tax gain of approximately $150 million that Dresser will recognize in the first quarter of fiscal year 1994. 55 < PAGE> Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None . PART III Item 10. Directors and Executive Officers of Registrant. Certain information required by this Item is incorporated by reference to Dresser's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the "Dresser' Proxy Statement"). \ <-> <~\ /_\ - ami r\ < a/iaa;: .. i lA'p/m Page 61 of 133 Item 11. Executive Compensation. The information required by this Item is incorporated by reference to the Dresser Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this Item is incorporated by reference to the Dresser Proxy Statement. Item 13. Certain Relationships and Related Transactions. The information required by this Item is incorporated by reference to the Dresser Proxy Statement. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) List of Financial Statements, Financial Statement Schedules and Exhibits. (1) and (2) - Response to this portion of Item 14 is submitted as a separate section of this report. (3) Response to this portion of Item 14 is submitted as a separate section of this report. (b) Reports on Form 8-K. None . (c) Exhibits - Response to this portion of Item 14 is submitted as a separate section to this report. Management contracts or compensatory plans or arrangements in which Directors or executive officers participate are included in Exhibits 10.1 - 10.27. (d) Financial Statement Schedules - The response to this portion of Item 14 is submitted as a separate section of this report. Separate financial statements for the formerly unconsolidated Dresser-Rand Company are filed because under the Rules of the Securities and Exchange Commission it constituted a significant subsidiary as of October 31, 1991. The financial statements of Dresser-Rand Company, together with the report of Price Waterhouse dated November 12, 1992, appearing on pages 3 through 17 of the accompanying Consolidated Financial Statements of Dresser-Rand Company are incorporated by reference in this report. With the exception of the aforementioned information, the Consolidated Financial Statements of Dresser-Rand Company is not to be deemed filed as a part of this Form 10-K Annual Report. /'i/WWA '(i 1 AO r f\ 1 ^ 1 fl 1 Afi6Ms C 1/V'l 1 Yil Page 62 of 133 UNDERTAKINGS For the purpose of complying with the rules governing registration statements on Form S-8 under the Securities Act of 1933 (as amended effective July 31, 1990), the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's registration statements on Form S-8 Nos. 2-76847 (filed April 5, 1982), 2-81536 (filed January 28, 1983), 33-26099 (filed December 21, 1988), 33-30821 (filed August 28, 1989), and 33-48165 (filed May 27, 1992): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the provisions of the Company's Restated Certificate of Incorporation, as amended, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. < PAGE> 57 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on, January 28, 1994. DRESSER INDUSTRIES, INC. By: /s/ George H. Juetten George H. Juetten, Vice President - Controller Pursuant to the requirements of the Securities Exchange Act of 1934, report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on January 28, 1994. this <TABLE> <CAPTION> SIGNATURE TITLE <S> <C> *JOHN J. MURPHY kJohn J. Murphy)j Chairman of the Board and Director (Principal Executive Officer) /s/ George H. Juetten (George H. Juetten) . Vice-President - Controller (Principal Accounting Officer) MAPi 1 A 1 "i A 1 Page 63 of 133 *B. D. ST. JOHN (B. D. St. John) WILLIAM E. BRADFORD (William E. Bradford, Director) SAMUEL B. CASEY, JR. (Samuel B. Casey, Jr., Director) (Lawrence S. Eagleburger, Director) RAWLES FULGHAM (Rawles Fulgham, Director) JOHN A.. GAVIN (John A., Gavin, Director) RAY L. HUNT (Ray L. Hunt, Director) Vice Chairman of the Board (Principal Financial Officer) (J. Landis Martin, Director) *W. GEORGE NANCARROW (W. George Nancarrow, Director) LIONEL H. OLMER (Lionel H. Olmer, Director) (Jay A. Precourt, Director) A. KENNETH PYE (A. Kenneth Pye, Director) RICHARD W. VIESER (Richard W. Vieser, Director) BY:/s/ Stanley E. McGlothlin Stanley E. McGlothlin (Attorney-In-Fact) </TABLE> <PAGE> FORM 10-K ITEM 14(A)(1) AND (2) AND ITEM 14(D) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED OCTOBER 31 1993 DRESSER INDUSTRIES, INC . DALLAS, TEXAS LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements and report of independent accountants are included in Item 8: <TABLE> <CAPTI0N> Page Number < S > f Report of Independent Accountants <C> 22 Consolidated Statements of Earnings(Loss)-Years ended October 31, 1993, 1992, and 1991 23 Page 64 of 133 Consolidated Balance Sheets-October 31, 1993 and 1992 24-25 Consolidated Statements of Shareholders' Investment-Years ended October 31, 1993, 1992 and 1991 26 Consolidated Statements of Cash Flows-Years ended October 31, 1993, 1992, and 1991 27 Notes to Consolidated Financial Statements </TABLE> 28-55 The following consolidated financial statement schedules of Dresser Industries, Inc. and report of independent accountants are included herein: Schedule II-- Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties Schedule VIII-- Valuation and Qualifying Accounts Schedule IX-- Short-Term Borrowings Schedule X-- Supplementary Income Statement Information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. F-2 <PAGE> LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED) Separate financial statements for the formerly unconsolidated Dresser-Rand Company are filed because it constituted a significant subsidiary as of October 31, 1991. Effective October 1, 1992, Dresser-Rand Company became a majorityowned consolidated subsidiary. The following consolidated financial statements of Dresser-Rand Company and report of independent accountants are included herein: Financial Highlights Operations Review Report of Independent Accountants Consolidated Statements of Operations-Years ended September 30, 1992, 1991 and 1990 Consolidated Balance Sheets-September 30, 1992 and 1991 sConsolidated Statements of Partners' Equity-Years ended September 30, 1992, 1991 and 1990 Consolidated Statements of Cash Flows-Years ended September 30, 1992, 1991 and 1990 1 A 1 AAAA i n ' i i /n i Page 65 of 133 Notes to Consolidated Financial Statements Dresser-Rand Company Form 10-K Financial Schedules are included herein as follows: Report of Independent Accountants on Financial Statement Schedules Schedule V-- Property, Plant and Equipment Schedule VI- - Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment Schedule VIII-- Valuation and Qualifying Accounts Schedule IX-- Short-Term Borrowings Schedule X-- Supplementary Income Statement Information All other Dresser-Rand Company schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. F-3 <PAGE> LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED) Separate financial statements are not presented for any of the other unconsolidated affiliates because none constitutes a significant subsidiary. Summarized financial statement information for Ingersoll-Dresser Pump Company (49% owned) and Western Atlas International, Inc. (29.5% owned) is presented in Note C to Consolidated Financial Statements included in Item 8. Other 20% to 50% owned unconsolidated affiliates are not material. F-4 < PAGE > Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties Dresser Industries, Inc. and Subsidiaries (Millions of Dollars) <TABLE> <CAPTION> Col . A Col. B Col. C Col. D s Year Ended October 31 <S> ; Name of Debtor <c> Balance at Beginning of Period <c> Additions <c> Deductions Amounts Collected A W <C> < . . ' A .... 1. . . a___ ......."jnnnn 'nnnnncn i *? i n i Ann/K; m'H-m 1993 1993 1992 1991 </TABLE> Western Atlas International, Inc. Ingersoll-Dresser Pump Company Western Atlas International, Inc. Dresser-Rand Company 10.0 - 17.8 6.1 10.0 32.2 Page 66 of 133 10.0 - 50.0 NoCe: Amounts receivable for purchases subject to the usual trade terms and other such items arising in the ordinary course of business are excluded. <PAGE> F-5 SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS DRESSER INDUSTRIES, INC. AND SUBSIDIARIES (MILLIONS OF DOLLARS) <TABLE> <CAPTION> Col. A Col. B DESCRIPTIONS Balance at Beginning of Period Cha Cos Ex <S> ALLOWANCE DEDUCTED FROM ASSETS TO WHICH THEY APPLY Year ended October 31, 1993 For doubtful receivables classified as current assets................... <C> $22.4 <C> For deferred tax asset valuation allowance classified as noncurrent assets.................................................................................................................................... $30.5 Year ended October 31, 1992 For doubtful receivables classified as current assets......................... $19.5 For deferred tax asset valuation allowance classified as noncurrent assets.................................................................................................................................... $ Year ended October 31, 1991 For doubtful receivables classified as current assets....................... $21.2 <h/TABLE> Notes,: (A)Primarily, reclassification from <pther accrued accounts due to acquisition. liabilities, and addition of tr*r r\ r\ r r 1 r\ M '/Al Page 67 of 133 (B) Primarily addition of accounts due to acquisition of additional interest, partially offset by removal of companies accounts contributed to Ingersoll-Dresser Pump Company. (C) Primarily reclassification from other noncurrent liabilities, and reclassification to reserve for accounts receivable from unconsolidated affiliate. (D) Receivable write-offs and reclassifications, net of recoveries. F-6 <PAGE> SCHEDULE IX - SHORT-TERM BORROWINGS DRESSER INDUSTRIES, INC. AND SUBSIDIARIES (MILLIONS OF DOLLARS) <TABLE> <CAPTION> Col. A Col. B Col. C Col. D CATEGORY OF AGGREGATE SHORT-TERM BORROWINGS <S> Year ended October 31, 1993 Notes payable to banks Commercial paper Year ended October 31, 1992 Notes payable to banks Commercial paper Year ended October 31, 1991 Notes payable to banks </TABLE> Balance at End of Period <C> $ 13.5 2 16.0 Weighted Average Interest Rate (A) <C> 9.2% 3.2% Maximum Amount Outstandi During t Year <C> $ 19.5 442.8 $ 13.9 15.0 11.6% 3.2% $ 30.3 16 . 0 $ 12.6 13.8% $19.1 Notes : (A) The rates do not include the hyperinflationary countries as those rates include factors to offset monetary devaluations which cannot be separated from the true interest rate. (B) The average borrowings are based on the amounts outstanding at each quarter-end. (C) The rates were computed by dividing actual interest expense for the year by the average debt outstanding during the year. Hyperinflationary country debt and interest rates were excluded as in (A). (D) Includes $300 million that was classified as long-term debt in April, 1993, since it was being refinanced. < PAGE > F-7 SCHEDULE X-' SUPPLEMENTARY INCOME STATEMENT INFORMATION 1A ^ ' r\ Page 68 of 133 DRESSER INDUSTRIES, INC. AND SUBSIDIARIES (MILLIONS OF DOLLARS) <TABLE> <CAPTION> Charged to Costs and Expenses Year Ended October 31 ITEM 1993 1992 1991 <S > Maintenance and repairs Depreciation and amortization of intangible assets, preoperating costs and similar deferrals Taxes, other than payroll and income taxes Royalties Advertising costs </TABLE> <C> $73.3 * * * * <C> $50.6 <C> $58.6 * `Amounts are not presented because such amounts are less than 1% of total net sales and service revenues. F-8 < PAGE> DRESSER-RAND COMPANY (A PARTNERSHIP) CONSOLIDATED FINANCIAL STATEMENTS ** SEPTEMBER 30, 1992 AND 1991 <PAGE> DRESSER-RAND COMPANY <TABLE> <CAPTI0N > CONTENTS: <S> Financial Highlights "} Operations Review Report of Independent Accountants Page <C> 1 2 3 Statements of Operations Balance Sheets Statements of Partners' Equity Statements of Cash Flows Notes to Financial Statements Partnership Information </TABLE> < PAGE > DRESSER-RAND COMPANY 4 5 6 7 8 18 FINANCIAL HIGHLIGHTS Dollars in millions <TABLE> < CAPTION > <S> Years ended September 30, Net sales.......................................................... Operating income..................................... Net income....................................................... At September 30, Partners' equity..................................... Working capital........................................ Current ratio.............................................. Average number of days outstanding in receivables.. Average number of months supply of inventory, net of advance and progress payments............................... Debt-to-total capitalization rate......................... <>/ TAB L E > f 1992 C> 1991 <C> 1990 <C> $1,290.4 $ 91.4 $ 77.8 1,190.2 94.0 83.6 1,017.4 69.9 57.2 $ 354.8 $ 99.6 1.3 35.0 266.4 112.4 1.3 41.0 335.3 194.3 1.8 50 . 0 1.8 . 5% 2.6 1.8% 3.1 1.9 Page 69 of 133 'A 1 Page 70 of 133 DRESSER-RAND OPERATIONS REVIEW Dresser-Rand reported revenues of $1.3 billion in 1992, up slightly from 1991. The 1992 earnings before taxes and extraordinary item of $93.5 million were essentially flat to the prior year. Earnings before tax reflect a 7.2% return on sales. Bookings in 1992 of $1.3 billion were the same as last year. The larger projects were received in Europe and the Middle East. Dresser-Rand also booked a large compression services contract in Venezuela with Maraven to be performed over 1993-94. Backlog at year-end was $1.1 billion. Turbo products bookings activity, while down from the record year in 1991, included orders for gas processing and transmission applications in Abu Dhabi, the North Sea and Czechoslovakia. Other applications involved the upgrading of refineries for reformulated gasoline requirements. Turbo was also successful on several oil production projects in the Americas. Turbo Division has enhanced its competitive position with Memorandums of Understanding with European Gas Turbines Ltd. for the joint marketing of gas turbine driven compressor packages, and with MAN/GHH for the manufacturing and marketing of axial flow compressors. The Engine Process Compressor Division benefitted from an overall increase in the worldwide market for motor driven process reciprocating compressors. The European markets were particularly strong, while the North American market softened in the last half of the year. Domestic gas price recovery has shown improvement in the compression services segments. In 1993, we see increased natural gas production as an opportunity for the reciprocating product and continued impact of environmentally driven projects in the North American refining market. Steam Turbine, Motor and Generator Division capitalized on the expansion of the power generation market in the pulp and paper industry through several major orders for turbine generators. The Electric Machinery operation also benefitted from higher demand by utilities, municipal projects, and offshore turbine activity. The petrochemical and refining markets were the major source of Steam Turbine business in the European markets. The worldwide petrochemical/refining markets require steam turbines to drive pumps and compressors, and provide a solid booking base in the future. We continue to register our worldwide manufacturing facilities under the ISO 9000 series, including those in the U.S. We received ISO registration at our Wellsville, New York, Steam Turbine facility in late 1992. All of our major units should achieve registration in 1993. Selective partnering and the practical application of employee quality training remain key parts of Dresser-Rand's focus of providing total customer satisfaction by being the best in product design, manufacture, and customer service. ; Ben R. Stuart President and Chief November, 1992 Executive Officer idAnn ^ i n i fw3/3/ls*C <,. 1 A;1 ? Page 71 of 133 <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS -2- To the Partners and Management Committee of Dresser-Rand Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, partners' equity and cash flows present fairly, in all material respects, the financial position of Dresser-Rand Company (a Dresser Industries, Inc. and Ingersoll-Rand Company partnership) and its subsidiaries at September 30, 1992 and 1991, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1992, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse PRICE WATERHOUSE Hackensack, New Jersey November 12, 1992 <PAGE> -3- DRESSER-RAND COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS <TABLE> <CAPTION> In thousands <S> Net sales...................................................................................... Costs and expenses: Cost of produces sold Selling, general and administrative............... Years ended September 30, 1992 1991 1990 <C> $1,290,389 <c> $1,190,222 <c> $1,017,379 1,045,573 153,406 1,198,979 947,330 148,873 1,096,203 811,486 136,034 947,520 Page 72 ofl33 Operating income............................... Interest expense............................... Interest income.................................. Other income (expense), net Income before income taxes and extraordinary item.... Income tax expense: Taxes payable.................................. Tax effect of loss carryforwards............................... 91,410 (1,653) 2,013 1,689 93,459 15,636 3,094 18,730 94,019 (1,583) 2,198 (468) 94,166 10,594 8,907 19,501 69,859 (1,720) 1, 688 (3,485) 66,342 9, 192 4, 197 13,389 Income before extraordinary item................................................................................... Extraordinary item-realization of operating loss carryforwards.... Net income for the year............................ 74,729 3,094 74,665 8,907 52,953 4,197 $ 77,823 $ 83,572 `? 57,150 </TABLE> See accompanying notes to consolidated financial statements. <PAGE> 4- DRESSER-RAND COMPANY CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> In thousands <S> ASSETS Current assets: Cash and cash equivalents.............................................. Accounts receivable, less allowance for doubtful accounts of $7,808 in 1992 and $10,010 in 1991.............................................................. Inventories......................................................................................... Prepaid expenses and other current assets Due from Partners....................................................................... "} Total current assets.................................................... Property, plant and equipment, at cost less accumulated depreciation..................................... Other assets............................................................................................ September 30, 1992 1991 <C> <C> $ 19, 590 $ 24 , 148 159, 600 255 , 190 11, 609 21, 665 467 , 654 246 , 003 11, 998 169,, 364 267,, 103 7,, 526 4, 117 472 , 258 148 , 124 9, 557 i nAO/ioorn i A AAA r C 1 A '1 T) I Page 73 of 133 Intangible assets Total assets 8,056 $733,711 9, 800 $639, 739 LIABILITIES AND PARTNERS' EQUITY Current liabilities: Short-term borrowings.............................................. Accounts payable.............................................................. Customers1 advance payments............................ Accrued liabilities: Compensation and benefits............................ Income and other taxes..................................... Pensions................................................................................ Warranty costs.............................................................. Other......................................................................................... Total current liabilities......................... Noncurrent liabilities.................................................. Total liabilities................................................. Partners' equity: Contributed capital..................................................... Pension liability adjustments...................... Cumulative translation adjustments... Retained earnings........................................................... Total Partners' equity.................................. Commitments and contingencies - Note 10 Total liabilities and Partners' equity................................................................................ </TABLE> $ 1 , 080 103 , 934 59,, 624 32 ,, 754 25,,210 10, 943 60, 430 74 , 037 368 , 012 10, 924 378 , 936 $ 2, 866 108, 040 81, 385 30, 681 13, 004 15, 104 47, 636 61, 128 359, 844 13 , 517 373, 361 197,755 (3,044) 13,148 146,916 354,775 197,755 (3,914) 3,444 69,093 266,378 $733,711 $639,739 See accompanying notes to consolidated financial statements. < PAGE> -5- DRESSER-RAND COMPANY CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY <TABLE> <CAPTION> In thousands <S > Contributed s Beginning Return of capital: of y$ar............................ Partners' capital End of year Years ended September 30, 1992 1991 1990 <C> <C> <c> $197,755 $ 345,755 $345,755 (148,000) 197,755 197,755 345,755 /"> ' r\ r\ 1 A ' 1 A1 Page 74 of 133 Pension liability adjustments: Beginning of year.................................. Pension liability adjustments End of year.................................................... Cumulative translation adjustments: Beginning of year.................................. Translation adjustments............... End of year.................................................... (3,914) 870 (3,044) (4,148) 234 (3,914) (4,148) (4,148) 3,444 9,704 13,148 8, 151 (4,707) 3,444 2.075 6.076 8, 151 Retained earnings(deficit) : Beginning of year...................... Net income for the year.. End of year........................................ Total Partners' equity............. 69,093 77,823 (14,479) 83,572 (71,629) 57,150 146,916 69,093 (14,479) $354,775 ? 266,378 $335,279 </TABLE> See accompanying notes to consolidated financial statements. <PAGE> -6- DRESSER-RAND COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> In thousands Years ended September 30, 1992 1991 1990 <S> Cash flows from operating activities: Net income for the year................................................................. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................ Gain on sale of property, plant and equipment............................................................................................ Other noncash items....................................................................... (Increase) decrease in assets: Accounts receivable.............................................................. Inventories...................................................................................... Customers' advance and progress payments......................................................................................... Prepaid expenses and other current assets............................................................................................... Other assets................................................................................... Increase (decrease) in liabilities: Accounts payable....................................................................... Accrued liabilities: Compensation and benefits.................................. <C> <C> <C> $ 77,823 $ 83,572 $ 57,150 35,630 (114) 6, 075 18,967 74,238 (74,676) (3,532) (2,375) (11,356) 513 38,351 36,977 (374) (3,910) (54) 1,643 12,572 (57,865) (39,521) (49,869) 56,965 69,009 419 (119) 640 (697) 18,335 11,614 3,473 6,157 i r\ i in i Page 75 of 133 Income and other taxes.............................................. Pensions......................................................................................... Warranty costs...................................................................... Other.................................................................................................. Noncurrent liabilities.................................................... 9,915 (4,161) 8,673 8,776 (2,309) 1,042 274 8, 066 8,652 (6,231) (1,427) 5, 111 13,083 11,376 (10,350) Net cash provided by operating activities............................................................................. 142,087 163,222 110,842 Cash flows from investing activities: Capital expenditures.......................................................................... Proceeds from sale of property, plant and equipment..................................................................................................... (13 0 > 765) 3,384 (48,033) (36,512) 2,250 3, 780 Net cash used in investing activities... (127,381) (45,783) (32,732) Cash flows from financing activities: Repayments of short-term borrowings, net............ Return of Partners' capital.................................................... Account balance with Partners, net............................... (Decrease) in notes due Partners..................................... Net cash used in financing activities... (2,004) (17,260) (230) (108,000) (627) (745) (39,446) (36,000) (19,264) (108,857) (76,191) Net increase (decrease) in cash and cash equivalents........................................................................................................ Cash and cash equivalents at beginning of year. (4,558) 24,148 8,582 15,566 1,919 13,647 Cash and cash equivalents at end of year.................. $ 19,590 $ 24,148 $ 15,566 </TABLE> Noncash financing activity: During 1991, amounts due from partners of $40,000,000 were reclassified as a return of Partners' capital. See accompanying notes to consolidated financial statements. <PAGE> -7- DRESSER-RAND COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - FORMATION, OWNERSHIP AND OPERATIONS On December 31, 1986, Dresser Industries, Inc. and Ingersoll-Rand Company (the Partners) entered into a partnership agreement for the formation of Dresser-Rand Company (the Company), a New York general partnership (the partnership) owned equally by Dresser Industries, Inc. (Dresser) and Ingersoll-Rand Company (Ingersoll-Rand). The Partners contributed substantially all of the operating assets (excluding domestic cash and accounts receivable) and certain related liabilities which comprised their worldwide reciprocating compressor, steam turbine, and turbo-machinery businesses in exchange for an equal ownership interest. The net assets contributed by the Partners were recorded by the Company at amounts approximating their historical values. The Company commenced operations on January 1, 1987, and principally serves the petroleum, gas, petrochemical, chemical, and electric power industries on a worldwide basis. Page 76 of 133 Effective October 1, 1992, Dresser contributed $8,035,000 to the Company and ownership interests became 51 percent Dresser and 49 percent Ingersoll-Rand. the same time, the Company's fiscal year was changed to end on October 31. At NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies used in the preparation of the accompanying consolidated financial statements are set forth below. Basis of Presentation The consolidated financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. Investments in affiliates owned 50% or less are accounted for on the equity method. The Company's equity in the net earnings of these affiliates was not material. All material intercompany items have been eliminated in consolidation. Cash Equivalents Cash equivalents are stated at cost which approximates market. For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Inventories Inventories are stated at cost, which is not in excess of net realizable value, and are valued principally using the first-in, first-out (FIFO) method. Property and Depreciation Property, plant and equipment is recorded at cost, and is depreciated over the estimated useful lives of the various classes < PAGE > -8- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of assets. Depreciation is computed principally using accelerated methods, except for U.S. fixed assets with a service life of ten years or less, which are depreciated on a straight-line basis. Intangible Assets Costs in excess of values assigned to the underlying net assets of businesses acquired by the Partners which were contributed to the Company are being amortized on a straight-line basis over periods not exceeding 40 years. Such amortization amounted to $1,744,000 in 1992, 1991 and 1990. Income Taxes The Company is a partnership and generally does not provide for U.S. income taxes since all partnership income and losses are allocated to the Partners for inclusion in thejr respective income tax returns. Income taxes are provided on the taxable earnings of U.S. and foreign subsidiaries, including deferred taxes arising from timing differences between financial and tax reporting of income and-expense items. 1 h M "i Yi i Page 77 of 133 Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" was issued in February 1992. The statement requires the Company to make changes in accounting for income taxes no later than fiscal year 1994. Based on a preliminary review of the provisions of this statement, the Company does not believe its implementation will have a material effect on income or retained earnings. Revenue Recognition and Warranties Revenue from the sale of products and estimated provisions for warranty costs are recorded for financial reporting purposes generally when the products are shipped. Service and equipment rental revenues are accrued as earned. Research, Engineering and Development Costs Expenses for research and development activities, including engineering costs, are expensed as incurred and amounted to $67,074,000 in 1992, $63,768,000 in 1991, and $55,583,000 in 1990. Foreign Currency Assets and liabilities of foreign entities operating in other than highly inflationary economies are translated at current exchange rates, and income and expenses are translated using average-for-the-year exchange rates. Adjustments resulting from translation are recorded in Partners' equity and will be included in net earnings only upon sale or liquidation of the underlying foreign investment. For foreign subsidiaries operating in highly inflationary economies, inventory and property balances and related income statement accounts are translated using historical exchange rates and resulting gains and losses are credited or charged to earnings. <PAGE> -9- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company enters into forward foreign exchange contracts as a hedge against movements on the Company's assets and liabilities exposed to foreign exchange rate fluctuations. Gains and losses are recognized currently.in income, and the resulting credit or debit offsets foreign exchange gains or losses on those assets and liabilities. Foreign currency translation and exchange gains (losses) recorded in other income (expense) in the accompanying Consolidated Statements of Operations amounted to $995,000 in 1992, $2,321,000 in 1991, and $(783,000) in 1990. NOTE 3 - INVENTORIES The components of inventory are as follows (in thousands): <TABLE> <CAPTION > f <S> ' Raw materials and supplies September 30, 1992 1991 <C> $ 57,864 <C> $ 66,011 Page 78 of 133 Finished products and work in process 197,326 201,092 $255,190 $267,103 </TABLE> Finished products and work in process inventories are stated after deducting customer progress payments of $117,022,000 in 1992 and $162,910,000 in 1991. NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is summarized as follows (in thousands): <TABLE> cCAPTION > September 30, 1992 1991 <S> Land......................... Buildings and Machinery and Furniture and improvement s equipment... fixtures .... Accumulated depreciation <C> <C> $ 5,301 104,951 422,626 13,409 $ 5,345 90,226 311,108 12,674 546,287 (300,284) 419,353 (271,229) $246,003 $ 148,124 </TABLE> Depreciation expense was $33,886,000 in 1992, $36,607,000 in 1991, and $35,233,000 in 1990 . NOTE 5 - SHORT-TERM BORROWINGS Short-term borrowings consist primarily of foreign bank loans. At September 30, 1992, the Company had no U.S. bank loans or lines of credit for short-term borrowing facilities. Credit facilities have been arranged with banks outside the United States under which the Company1s foreign operating units may borrow in the local currency or other currencies on an overdraft and short-term note basis. The amount of available lines of credit under these arrangements aggregated $55,355,000, of which $55,109,000 were unused at September 30, 1992. At September 30, 1992, the weighted average interest rate on outstanding borrowings was 11.75%. < PAGE> -10- NOTE 5 - SHORT-TERM BORROWINGS (CONTINUED) Under the terms of the partnership agreement, the Company must obtain the consent of the Partners for any borrowing if, after giving effect to such borrowing, aggregate indebtedness equals or exceeds 33-1/3% of the sum of the Company's indebtedness and the Partners' capital accounts. NOTE 6 -.TRANSACTIONS WITH AFFILIATES In the normal course of business, the Company engages 'in sales and purchases of O OAAn A 1 1 /A ' A ' 1 "> ' ( < Page 79 of 133 manufactured products with the Partners and their affiliates. There are also various licensing, subcontracting, and servicing arrangements among the parties pursuant to the partnership and other agreements. Some of the agreements had planned expiration dates while others continue at the option of the Company or the Partners. Costs and charges under these arrangements are generally at normal and competitive market rates. In addition, certain administrative services of nominal value are provided at no cost to the Company. A summary of transactions with the Partners and their affiliates is as follows (in thousands): <TABLE> <CAPTION> Years ended September 30, 1992 1991 1990 <S> Product sales................................................. Product purchases..................................... Net billings and other charges for services provided...................... </TABLE> <C> $29,000 22,000 <C> $57,000 23,000 <C> $44,000 17,000 3,100 3,600 3 , 100 Amounts due from Partners consist of trade accounts and advances. The trade accounts represent the net balance arising from the sale or purchase of equipment and services to and from the Partners and do not accrue interest. Advances, which primarily represent cash in excess of the immediate working capital needs of the partnership, do not bear interest and have no repayment terms. Amounts due from (to) Partners are as follows (in thousands): <TABLE> <CAPTI0N> Dresser IngersollRand Total <S> September 30, 1992 <C> <C> <C> Trade accounts.... $ 775 $(1,110) $ (335) Advances............................ 11,000 11,000 22,000 $11,775 $ 9,890 $21,665 September 30, 1991 Trade accounts. . . . $ 4,256 $ (139) $ 4,117 </TABLE> One partner continues to operate a foreign manufacturing company on behalf of the Company. Net gains (losses) of $644,000 in 1992, $(383,000) in 1991, and $701,000 in 1990 relating to this operation are included in the accompanying Consolidated Statements of Operations. > NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS O A /AAOAv" 1i m m -? iC\ Page 80 of 133 Pension Plans The Company has noncontributory pension plans covering substantially all U.S. and Canadian employees. In addition, pension or retirement indemnity coverage is provided for the majority of employees in other countries. The Company's U.S. salaried employees generally receive benefits based on years of service and qualifying compensation on a final average earnings formula. Benefit plans covering hourly employees generally have flat benefit formulas based primarily on years of service. These plans, with some modifications, have been adopted by the Company as a continuation of prior coverage under defined benefit and contribution plans sponsored by the Partners. The Company also maintained a defined contribution plan covering employees at one of its domestic facilities which was terminated in July 1990. Foreign plans provide benefits based on earnings and years of service. The Company's policy is to fund sufficient amounts to maintain the plans on a sound actuarial basis. Such amounts could be in excess of pension costs expensed, subject to the limitations imposed by current tax regulations. The components of pension costs are as follows <TABLE> <CAPTION> (in thousands): Years ended September 30, 1992 1991 1990 <S> Service cost for benefits earned during the year.................................................... Interest cost on projected benefit obligation.................................................................... Actual return on plan assets................. Net amortization and deferral................ Cost of defined contribution plans. <C> <C> <C> $ 6,828 $ 6, 417 $ 3,808 8 , 175 (5,478) 2,402 362 7 , 293 (3, 486) 2, 577 126 5,691 (2,394) 1, 899 763 Net pension cost $12,289 $12,927 $ 9,767 The primary assumptions used to determine the net pension cost were as follows: Discount Rate U.S...................... Foreign.... 8.5% 10.1% 8 . 5% 10.3% 8.5% 10.7% Expected long-term rate of return on plan assets: U.S............................................................................................ Foreign................................................................................ </TABLE> 8.5% 11.8% 8.5% 11 . 9% 8.5% 11.3% A merit salary scale with a 5% inflation factor was used to project future compensation levels as a basis for 1992, 1991 and 1990 U.S. pension cost. For the foreign plans, rates of 6.2%, 6.4% and 6.6% were used to project future oompensation levels for 1992, 1991 and 1990, respectively. < PAGE > -12- Annh'/inAbiirni i n i aa/ia;; -1in ^ n i Page 81 of 133 NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS (CONTINUED) The Company credited $1,556,000 in 1990 to operations for plan curtailments and termination benefits associated with the termination of employees at plant facilities closed. Plan assets are invested primarily in fixed income and equity securities. Plans where assets exceed accumulated benefits are immaterial. The funded status of employee pension benefit plans is as follows (in thousands): <TABLE> <CAPTION> <s> Actuarial present value of benefit obligations: Vested benefit obligation............................................................................. Nonvested benefit obligation.................................................................... September 30, 1992 1991 <C> <C> $ 57,251 7,683 $ 53,214 4,795 Accumulated benefit obligation.................................................................... Additional amount for projected compensation increases...................................................................................... 64,934 42,972 58,009 35,950 Total projected benefit obligation....................................................... Plan assets at fair value................................................................................... 107,906 71,697 93,959 50,243 Projected benefit obligation in excess of assets............ Unrecognized net obligation existing at date of adoption of SFAS 87............................................................................................... Unrecognized net loss............................................................................................... Unrecognized prior service cost................................................................ Adjustment required to recognize minimum liability. 36,209 (10,854) ( 8,174) (10,493) 7,709 43,716 (11,516) (9,699) (11,393) 8,584 Accrued pension cost.................................................................................................. $ 14,397 $ 19,692 </TABLE> In addition to the above accrued pension cost, the Company has accrued $3,676,000 and $3,997,000 ($3,160,000 and $3,481,000 included in noncurrent liabilities) at September 30, 1992 and 1991, respectively, for pension costs relating to a plan maintained by a former employing partner. Pension expense for foreign operations, computed under Statement of Financial Accounting Standards No. 87 (SFAS 87), amounted to $1,920,000 in 1992, $2,380,000 in 1991 and $1,219,000 in 1990. In addition, the Company incurred a cost of $362,000 in 1992, $147,000 in 1991 and $145,000 in 1990 related to foreign defined contribution plans. The provisions of SFAS 87 require the recognition of a liability in the amount of the Company's unfunded accumulated benefit obligation with an equal amount recognized as an intangible asset or as a separate component (reduction) of equity; such amounts are adjusted each year based on actuarial valuations. As of September 30, 1992, the Company has recognized a noncurrent liability of $7,709,000, an intangible asset of $4,665,000 (included in other assets) and a charge to equity;of $3,044,000. These amounts are $875,000, $5,000 and $870,000, respectively, lower than those reported as of September 30, 1991. Retiree Benefits Page 82 of 133 In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Most employees who retire are eligible for these benefits. The cost of retiree health care is recognized as an <PAGE> -13- NOTE 7 - PENSION PLANS AND OTHER EMPLOYEE BENEFITS (CONTINUED) expense as claims are paid, and the cost of retiree life insurance is recognized by expensing the annual insurance premiums. These costs were $2,901,000 in 1992, $2,836,000 in 1991 and $1,840,000 in 1990. In December 1990 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106). Effective for fiscal years beginning after December 15, 1992, this new statement requires accrual of postretirement benefits (such as health care and life insurance) during the years an employee provides services. The Company expects to adopt SFAS 106 in the first quarter of 1993 and estimates the accumulated liability for postretirement benefits to be $160,000,000 on a pre-tax basis. Upon adoption, the Company will record this amount as a one time charge against earnings. The annual pre-tax postretirement benefit expense for fiscal 1993 is estimated to be $17,000,000. Savings and Investment Plans The Company also sponsors certain savings and investment plans, these plans amounted to $2,410,000 in 1992, $2,255,000 in 1991, in 1990. The cost for and $2,039,000 NOTE 8 - INCOME TAXES The components of income follows (in thousands): <TABLE> <CAPTION> before income taxes and extraordinary item are as Years ended September 30, 1992 1991 1990 <s> <C> <C> <C> u.s..................................................................................................... . . . . ............................ Foreign......................................................................................... ........................................ $53,767 39,692 $61,707 32,459 $40,032 26,310 $93,459 $94,166 $66,342 The provision for income taxes is as follows (in thousands): U.S. Foreign - current.................................................................................................. - deferred....................................................... ..................................... - current.......................................................... ..................................... - deferred....................................................... .................. ~............... $ 2,454 38 15,456 (2,312) $ 1,463 (62) 9,509 (316) $ 31 636 8,389 136 </TABLE> ; $15,636 $10,594 $ 9,192 -14 - A/> - 11AM 'A Page 83 of 133 <PAGE> NOTE 8 - INCOME TAXES (CONTINUED) An analysis of Che difference between the U.S. statutory rate and the effective rate is as follows: <TABLE> <CAPTION> Years ended September 30, 1992 1991 1990 <S> U.S. statutory rate......................... Tax on foreign income less than the U.S. statutory rate.................................. <C> 34.0% <C> 34.0% <C> 34.0% (2.1) (5.1) (2.2) Partnership income allocated directly to Partners............... Utilization of' foreign tax credits....................................................... Other.................................................................... Effective tax rate............................ (17.8) 3.0 (0.4) 16.7% (17.8) 1.5 (1.3) 11.3% (18.7) 0.8 13.9% </TABLE> Current taxes of $17,910,000 in 1992, $10,972,000 in 1991, and $8,420,000 in 1990 do not include charges of $3,094,000, $8,907,000, and $4,197,000, respectively, equivalent to income taxes which would have been incurred had operating loss carryforwards not been available. The income tax benefit resulting from realization of the operating loss carryforwards is presented as an extraordinary item in the accompanying Consolidated Statements of Operations. For tax purposes the Company has net operating loss carryforwards of $22,014,000, of which $4,741,000 carryforward indefinitely, and the remaining amounts expire at various dates through 1998. NOTE 9 - INFORMATION BY GEOGRAPHIC AREA The Company operates in one industry segment consisting of the design, manufacture, and marketing of energy processing and conversion equipment. There are no significant concentrations of credit risk in trade receivables at September 30, 1992. Customers are not concentrated in any specific geographic region and no single customer accounted for 10 percent or more of net sales. Identifiable assets are those assets that are identified with particular geographic areas and operations. General corporate assets consist principally of property, plant and equipment. NOTE 9 - INFORMATION BY GEOGRAPHIC AREA (CONTINUED) The financial <TABLE> <CAPTION> information by geographic area is as follows (in thousands): Years ended September 30, AhOA 'AAAAA.'/^ 1 1 n 1 AAAAC C 1AM-)/Al Page 84 of 133 1992 1991 1990 <s> NET SALES <c > United States............................................................................. $ 768,158 Europe................................................................................................... 422,704 Other foreign............................................................................. 99,527 <C> $ 671,814 419,559 98,849 <C> $ 593,412 333,895 90,072 Transfers between geographic areas: United States............................................................................. Europe................................................................................................... Other foreign............................................................................. Adjustments and eliminations............................... 142,865 7, 497 2,049 (152,411) 146,139 5,417 2,469 (154,025) 102,308 4,732 2,331 (109,371) Total net sales................................................................. $1,290,389 $1,190,222 $1,017,379 OPERATING INCOME United States............................................................................. $ 68,404 $ 72,242 $ 48,856 Europe................................................................................................... 32,123 22,450 23,045 Other foreign............................................................................. 7,658 13,554 10,320 General corporate expenses..................................... 108,185 (16,775) 108,246 (14,227) 82,221 (12,362) Total operating income........................................... $ 91,410 $ 94,019 $ 69,859 IDENTIFIABLE ASSETS United States............................................................................. $ 416,080 Europe................................................................................................... 173,059 Other foreign............................................................................. 140,589 General corporate assets........................................... 3,983 Total identifiable assets.................................. $ 733,711 $ 360,509 137,554 55,933 4,358 $ 558,354 $ 414,644 129,247 54,253 3 , 056 $ 601,200 </TABLE> Foreign sales of U.S. manufactured products were $475,074,000 in 1992, $351,635,000 in 1991, and $231,621,000 in 1990. These sales represent the customer value of the transfers between geographic areas, primarily to Europe, and domestic exports sold directly to foreign customers of $299,824,000 in 1992, $170,677,000 in 1991, and $102,202,000 in 1990. NOTE 10 - COMMITMENTS AND CONTINGENCIES All principal manufacturing facilities are owned by the Company. Certain office, warehouse and light manufacturing facilities, transportation vehicles, surd data processing equipment are leased. Future minimum lease payments required under noncancellable operating leases with initial terms in excess of one year are as follows (in thousands): <TABLE> 1 ..;.!,.,,.^AAnn/nnnnncnni ni nnnnss fvt in'n/m Page 85 of 133 <s> September 30, 1993 ................................................................................... 1994 ................................................................................... 1995 ................................................................................... 1996................................................................................... 1997 ................................................................................... Thereafter................................................................. <c> $ 9,626 6,280 3,250 2,076 1,291 1,438 Total minimum lease payments.. $23,961 </TABLE> <PAGE> -16- NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED) Total rental expense amounted to $16,312,000 in 1992, $13,305,000 in 1991, $13,934,000 in 1990. Capital lease commitments of the Company are not significant. and In the normal course of business, the Company issues direct and indirect guarantees, primarily contract performance bonds and letters of credit. Management believes these guarantees will not adversely affect the consolidated financial statements. The Company is involved in various litigation and claims arising in the normal course of business. Based on advice of counsel, management believes that recovery or liability with respect to these matters will not have a material effect on the consolidated financial position or results of operations of the Company. NOTE 11 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest and income taxes was as follows (in thousands): <TABLE> <CAPTION> Years ended September' 30, 1992 1991 1990 <S> Interest..................................................... .................................. <C> $1,953 <C> $ 1,508 <C> $1,363 Income taxes........................................ .................................. $9,696 </TABLE> -17- <PAGE> DRESSER-RAND COMPANY EXECUTIVE OFFICES 1 BARON STEUBEN PLACE CORNING,.-NY 14830 (607)937-6400 $10,272 $8,523 a .. i. - 1 .. /^nnnrvnnnnoN Dm cm nnnfKs vt i rv i vm Page 86 of 133 OFFICERS BEN R. STUART President and Chief Executive Officer JOHN A. HELDMAN Vice President and Chief Financial Officer PAUL M. BRYANT Vice President, Human Resources EUGENE H. MOORE Vice President, General Counsel MANAGEMENT COMMITTEE THEODORE H. BLACK Chairman of the Board and Ingersoll-Rand Company Chief Executive Officer WILLIAM E. BRADFORD President and Chief Operating Officer Dresser Industries, Inc. JOHN J. MURPHY Chairman of the Board and Dresser Industries, Inc. Chief Executive Officer JAMES E. PERRELLA President Ingersoll-Rand Company BEN R. STUART President and Chief Executive Officer of the Company AUDIT COMMITTEE Consists of three (3) Directors each from Dresser Industries, Inc. and Ingersoll-Rand Company, for a total of six (6) Audit Committee members. -18- <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To The Partners of Dresser-Rand Company Our audits of the consolidated financial statements referred to in our ' * .. .i.:. ..........''nnnnjnnnnncnni o-i nnnrKstw i n/i i .'n i Page 87 of 133 report dated November 12, 1992, appearing on page 3 of the 1992 consolidated financial statements of Dresser-Rand Company, also included an audit of the financial statement schedules listed in item 14 (d) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse PRICE WATERHOUSE Hackensack, NJ November 12, 1992 < PAGE > DRESSER-RAND COMPANY SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990 (AMOUNTS IN THOUSANDS) <TABLE> <CAPTION> Classification <S> 1992 Land............................... Buildings and improvements.. Machinery and equipment............. Furniture and fixtures................ Balance at Beginning of period Additions at cost Retirements and sales Other(*) Balance at end of period <C> <C> <C> <C> <C> $ 5,345 90,226 311,108 12,674 $419,353 $ 13,989 116,118 658 $130,765 $ 283 1,158 11,722 164 $13,327 $ 239 1,894 7,122 241 $ 9,496 $ 5,301 104,951 422,626 13,409 $546,287 1991 Land............................... Buildings and improvements.. Machinery and equipment............ Furniture and fixtures................ $ 5,483 84,144 286,872 12,037 S f $388,536 1990 Land............................... $ 5,627 $ 116 7,752 38,502 1, 663 $ 48,033 $ $ 148 502 11,070 686 $12,406 $ (106) (1,168) (3,196) (340) $(4,810) $ 373 $ 229 $ 5,345 90,226 311,108 12,674 $419,353 $ 5,483 Buildings and improvements . . . Machinery and equipment............... Furniture and fixtures................... 77,515 259,588 9,707 $352,437 5,493 29,012 2,007 $ 36,512 1, 159 7,559 143 $ 9,234 2,295 5,831 466 $ 8,821 Page 88 of 133 84,144 286,872 12,037 $388,536 (*) Other primarily represents reclassifications among categories and the effects of foreign currency translation. <PAGE> DRESSER-RAND COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990 (AMOUNTS IN THOUSANDS) </TABLE> <TABLE> <CAPTION> Classification Balance at beginning of period Additions charged to costs and expenses Retirements and sales Other(*) Balance at end of peri* <S> 1992 <C> <C> <C> <C> <C> Buildings and improvements.. Machinery and equipment............ Furniture and fixtures............... $ 48,862 213,406 8,961 $ 4,148 28,467 1,271 $ 563 9,353 141 $ 976 4 , 113 137 $ 53,423 236,633 10,228 $271,229 $33,886 $10,057 $ 5,226 $300,284 1991 Buildings and improvements.. Machinery and equipment............ Furniture and fixtures............... $ 45,967 193,607 8,596 $ 3,968 31,422 1,217 $ 414 9,512 604 $ (659) (2,111) (248) $ 48,862 213,406 8,961 1990 $248,170 t $36,607 $10,530 $(3,018) $271,229 Buildings and improvements.. $ 40,247 $ 5,143 $ 593 $ 1,170 $ 45,967 . i. ; . .) '"innnn'AAnnncni ni r\r\nr\c; t, uvirm Machinery and equipment................ Furniture and fixtures................... 165,684 7, 095 $213,026 28,806 1,284 $35,233 4,781 134 $ 5,508 3,898 351 $ 5,419 Page 89 of 133 193,607 8,596 $248,170 (*) Other primarily represents reclassifications among categories and the effects of foreign currency translation. < PAGE > DRESSER-RAND COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990 (AMOUNTS IN THOUSANDS) </TABLE> <TABLE> <CAPTION> Classification Balance at beginning of period <S> <C> Doubtful accounts 1992 ............................... $10,010 Additions charged to income Deductions <C> <C> $ 1,239 $ 1,231 Other{*) <C> $ (2,210) Balance at end of period <C> $ 7,808 1991............................... $ 8,886 $ 4,864 $ 2,135 $(1,605) $ 10,010 1990 ............................... $ 5,471. $ 3,838 $ 711 $ 288 $ 8, 886 </TABLE> (*) Other primarily represents reclassifications among categories and the effects of foreign currency translation. FOR THE SCHEDULE IX - SHORT-TERM BORROWINGS YEARS ENDED SEPTEMBER 30, 1992, 1991 (AMOUNTS IN THOUSANDS) AND 1990 <TABLE> cCAPTION > Category of aggregate short - term borrowings Weighted f average interest Balance rate at at end of end of period - period Maximum amount outstanding during the period Average amount outstanding during the period Weighted average interest rate during the perioc onoor~ a ' t ** 'n i Page 90 of 133 <s> 1992 <c> <c> <c> <c> <c> U. S . bank loans. Foreign bank loans and other............... $ 1,080 11.75% $ 6,108 $ 2,075 9.87% 1991 U.S . bank loans. Foreign bank loans and other................ $ 2,866 10.87% $ 6,067 $ 2,761 10.25% 1990 U.S. bank loans. Foreign bank loans and other............... </TABLE> $ 3,019 8.99% $ 6,059 $ 3,261 9.66% The average amounts outstanding were determined based on the sum of the monthend amounts outstanding divided by the number of months in the period. The weighted average interest rates were based on the sum of the quarter-end rates divided by the number of quarters in the period. <PAGE> DRESSER-RAND COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED SEPTEMBER 30, 1992, 1991 AND 1990 (AMOUNTS IN THOUSANDS) Maintenance and repairs CHARGED TO COSTS AND EXPENSES 1992 1991 1990 $22,473 $22,691 $21,481 Amounts for preoperating costs and similar deferrals, royalties, advertising costs, and taxes other than payroll and income taxes are not presented because such amounts are less than one percent of total net sales. <PAGE> <TABLE> <CAPTION> EXHIBIT INDEX TO EXHIBITS DESCRIPTION PAGE <s> 3.1 *3.2 4.1 4.2 10 . 1 10.2 10.3 10.4 *10.5 10 . 6 Page 91 of 133 <c> Restated Certificate of Incorporation of Registrant and amendments thereto. (Incorporated by reference to Exhibit 3(a) to Registrant's Form 10-K for the year ended October 31, 1991). By-Laws, as amended, of Registrant. Rights Agreement dated August 16, 1990, between Registrant and Harris Trust Company of New York as Rights Agent. (Incorporated by reference to Exhibit 1 to Registration Statement on Form 8-A filed on August 30, 1990, as amended by Amendment No.l on Form 8 filed on October 3, 1990) . Form of Indenture, dated as of June 1, 1993, between Dresser Industries, Inc. and NationsBank of Texas, N.A., as Trustee, for unsecured debentures, notes and other evidences of indebtedness. (Incorporated by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-3 (Registration No. 33-59562). Dresser Industries, Inc. Deferred Compensation Plan. (Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated February 11, 1966, filed pursuant to Regulation 14A, File No. 1-4003) . Dresser Industries, Inc. Short-Term Deferred Compensation Plan. (Incorporated by reference to Exhibit 10(b) to Registrant's Form 10-K for the year ended October 31, 1992) . Dresser Industries, Inc. Retirement Income Plan under ERISA, as amended effective May 1, 1984, and Amendments No. 1, 2 and 3 thereto. (Incorporated by reference to Exhibit 10(d) to Registrant's Form 10-K for the year ended October 31, 1986). Dresser Industries, Inc. Consolidated Salaried Retirement Plan, as amended by restatement effective May 1, 1989. (Incorporated by reference to Exhibit 10(d) to Registrant's Form 10-K for the year ended October 31, 1992) . Amendments No. 1, 2 and 3 to the Dresser industries, Inc. Consolidated Salaried Retirement Plan, as amended by restatement effective May 1, 1989. Form of relinquishment of Severance <c> 1 nM rr> Compensation Agreement. (Incorporated by reference to Exhibit 10(f) to Registrant's Form 10-K for the year ended October 31, 1992) . 10.7 </TABLE> Incentive Compensation Plan for the Officers and Headquarters Staff of Dresser Industries, Inc. (Incorporated by reference to Exhibit 10(g) to Registrant's Form 10-K for the year ended October 31, 1992) . * Filed Herewith < PAGE > INDEX TO EXHIBITS (CONT.) <TABLE> <CAPTION> EXHIBIT <S> <c> DESCRIPTION 10.8 Dresser Industries, Inc. 1982 Stock Option Plan. (Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated February 12, 1982, filed pursuant to Regulation 14A, File No. 1-4003). 10.9 ERISA Excess Benefit Plan for Salaried Employees of Dresser Industries, Inc. and Its Participating Subsidiaries Who Are Not Represented by a Recognized Union, and Amendments No. 1 and 2 thereto. (Incorporated by reference to Exhibit 10(k) to Registrant's Form 10-K for the year ended October 31, 1990). 10.10 ERISA Compensation Limit Benefit Plan for Executives of Dresser Industries, Inc. (Incorporated by reference to Exhibit 10(1) to Registrant's Form 10-K for the year ended October 31, 1989) . 10.11 Supplemental Executive Retirement Plan for Top Executives of Dresser Industries, Inc., as amended by restatement effective May 1, 1992 (renamed Supplemental Executive Retirement Plan of Dresser Industries, Inc. effective August 1, 1993). (Incorporated by reference to Exhibit 10(1) to Registrant's Form 10-K for the year ended October 31, 1992) . *10.12 Amendment No. 1 to the Supplemental Executive Retirement Plan of Dresser Industries, Inc. 10 . 13 Dresser Industries, Inc., Performance Stock Unit Plan. (Incorporated by reference to Page 92 of 133 PAGE <c> i r\ ' t ni 10.14 10.15 *10 . 16 *10.17 </TABLE> Exhibit 10(1) to Registrant's Form 10-K for the year ended October 31, 1985) . Dresser Industries, Inc. Deferred Compensation Plan for Non-employee Directors, as amended. (Incorporated by reference for Exhibit 10(n) to Registrant's Form 10-K/A for the year ended October 31, 1992) . Dresser Industries, Inc. 1989 Restricted Incentive Stock Plan. (Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated February 10, 1989, filed pursuant to Regulation 14A, File No. 1-4003) . Dresser Industries, Inc. 1989 Director Retirement Plan, as amended by restatement effective July 15, 1993. Form of Election for Deferral of 1989 Director Retirement Plan Awards pursuant to the Dresser Industries, Inc. 1989 Director Retirement Plan. * Filed Herewith <PAGE> INDEX TO EXHIBITS (CONT.) <TABLE> <CAPTION> EXHIBIT DESCRIPTION <S> <C> 10.18 The M. W. Kellogg Company Retirement Plan, and Amendments No. 1, 2 and 3 thereto. (Incorporated by reference to Exhibit 10(r) to Registrant's Form 10-K for the year ended October 31, 1990) . 10.19 Amendment No. 4 to The M. W. Kellogg Company Retirement Plan. (Incorporated by reference to Exhibit 10(r) to Registrant's Form 10-K for the year ended October 31, 1991) . 10.20 Long Term Performance Plan for Selected Employees of The M. W. Kellogg Company. (Incorporated by reference to Exhibit 10(s) to Registrant's Form 10-K for the year ended October 31, 1991). SL 0.2 1 Annual Incentive Plan for Selected Employees of The M. W. Kellogg Company. (Incorporated by reference to Exhibit 10 (t) to Registrant's Form 10-K for the year ended October 31, 1991). r\ '/> i i ir\r\ r r\ r> AAAn;: ..., Page 93 of 133 PAGE <C> 1 A ' 1 ? >f\ 1 Page 94 of 133 10.22 *10.23 10.24 10.25 10.26 10.27 *21 *23 *24 </TABLE> Dresser Industries, Inc. 1992 Stock Compensation Plan. (Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated February 7, 1992, filed pursuant to Regulation 14A, File No. 1-4003). Amendment No.1 to Dresser Industries, Inc. 1992 Stock Compensation Plan. Dresser-Rand Company President and Chief Executive Officer Fiscal Year 1992 Incentive Plan. (Incorporated by reference to Exhibit 10(v) to Registrant's Form 10-K for the year ended October 31, 1992) . Dresser-Rand Company Retirement Savings Plan. (Incorporated by reference to Exhibit 10(x) to Registrant's Form 10-K for the year ended October 31, 1992). Dresser-Rand Company Pension Plan. (Incorporated by reference to Exhibit 10(y) to Registrant's Form 10-K for the year ended October 31, 1992). Dresser Industries, Inc. Deferred Savings Plan. (Incorporated by reference to Exhibit 10 (z) to Registrant's Form 10-K for the year ended October 31, 1992) . Subsidiaries of Registrant at October 31, 1993 . Consent of Price Waterhouse. Powers of Attorney. * Filed Herewith </TEXT> </DOCUMENT> <D0CUMENT> <TYPE>EX- 3.2 <SEQUENCE>2 <DESCRIPTION>BY-LAWS <TEXT> <PAGE> ; BY-LAWS OF DRESSER INDUSTRIES, INC. ARTICLE I EXHIBIT 3.2 Effective 11/21/91 As amended and effective 1/21/94 and 3/17/94 'onpnnrn 1 -* n < f\ n a r iivn'ni Page 95 of 133 Section 1. Principal Office in Delaware. The principal office shall be in the City of Wilmington, County of New Castle, and the name of the resident agent in charge thereof is the Corporation Trust Company, Corporation Trust Center, 1208 Orange Street, Wilmington, Delaware 19801. Section 2. Other Offices. The Company may also have offices at such other places, either within or without the State of Delaware, as the Board of Directors may from time to time appoint or as the business of the Company may require. ARTICLE II Section 1. Annual Meeting of Shareholders. The Annual Meeting of Shareholders of the Company shall be held at the principal office of the Company, Dallas, Texas, or at such other place within or without the State of Texas at such time and on such date in the months of March, April or May of each year as the Directors may determine. In the absence of a determination by the Directors, the Annual Meeting of Shareholders shall be held at the principal office of the Company, Dallas, Texas at 10:00 a.m. on the third Thursday in March of each year, if not a legal holiday or, if a legal holiday, then on the next succeeding business day. The Directors shall be elected at the Annual Meeting and such other business transacted as may properly be brought before the meeting. Section 2. Special Meetings of Shareholders. Special meetings of the shareholders for any purpose or purposes may be called at any time by the Chairman of the Board, the Vice Chairman or the President or a majority of the Board of Directors, and each such special meeting unless another place is designated by a resolution of the Board of Directors, shall be held at the office of the Company in Dallas, Texas. At any time, upon written request of any person entitled to call a special meeting, it shall be the duty of the Secretary to call such special meeting of the shareholders to be held at such time as the Secretary may fix. The call of said special meeting shall state < PAGE > 1 the time and place of said meeting if said meeting is to be held at some place other than the office of the Company, and the purpose or purposes of the proposed meeting. Section 3. Notice of Meetings of Shareholders. Written or printed notice of the time, place and purpose or purposes of the Annual Meetings and of each special meeting of the shareholders shall be given ' ' .;....00000 'nnnnnmm n-i onrinc c in'n'ni Page 96 of 133 by or at the direction of the person authorized to call the meeting to each shareholder of record entitled to vote at the meeting, at his last known address as the same appears upon the books of the Company, not more than sixty (60) days prior to the date of the meeting. It shall also be the duty of the Secretary to provide for any further or additional notice that may be required by law. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting other than by announcement at the meeting at which such adjournment is taken. Section 4. Quorum. At any meeting of the shareholders, the presence in person or by proxy of the holders of a majority of the outstanding shares entitled to vote at such meeting shall constitute a quorum for all purposes, unless otherwise provided by these By-Laws, the Certificate of Incorporation or by law. The shareholders present at a duly organized meeting can continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, those present may, except as otherwise provided by law, adjourn the meeting to such time and place, without further notice, as they may determine, but in the case of any meeting called for the election of Directors, those who attend the second of such adjourned meetings, although less than a quorum as fixed in this section of the By-Laws or in the Certificate of Incorporation, shall nevertheless constitute a quorum for the purpose of electing Directors. Section 5. Organization. Meetings of the shareholders shall be called to order by the Chairman of the Board or in his absence by the Vice Chairman or in the absence of both by the President of the Company. Such person shall act as Chairman of the meeting or, in the absence of the Chairman of the Board, the Vice Chairman and the President or with the consent of each of them if present in person, the meeting may elect any shareholder present or the duly authorized proxy of any shareholder to act as Chairman of the meeting. The Secretary of the Company or, in his absence, any Assistant Secretary in attendance, shall act as Secretary of all meetings of shareholders, but if neither the Secretary nor any Assistant Secretary be present thereat the presiding officer may appoint any person to act as Secretary of the meeting and to keep the record of the proceedings. <PAGE> 2 Section 6. Inspectors of Election. Three Inspectors of Election may be appointed by the Board of Directors before or at each meeting of the shareholders of the Company at which an election of Directors shall take place. If no such appointment shall have been made, or if the Inspectors appointed by the Board of Directors shall refuse to act or fail to attend, then the appointment shall be made by the presiding officer at the meeting. The Inspectors shall receive and take in charge all proxies and ballots, and shall decide all questions concerning the qualification of voters, the validity of proxies, the acceptance and rejection of votes, and shall count the votes cast and shall make a report of the results thereof to the meeting and make such reports to the presiding officer with respect to the foregoing as he 3 nnnn 'nnnnnc n i ? i m nonriN; Page 97 of 133 may request. Section 7. Order of Business. The order of business at all meetings of shareholders, unless otherwise determined by a vote of the holders of a majority of the shares entitled to vote at said meeting present in person or represented by proxy, shall be determined by the presiding officer. Section 8. Voting. Except as otherwise provided in the Certificate of Incorporation, every shareholder of record shall have the right at every shareholders' meeting to one (1) vote for every share standing in his name on the books of the Company. Every shareholder may vote either in person or by proxy. Every proxy shall be executed in writing by the shareholder or by his duly authorized attorney-infact and filed with the Secretary of the Company. The proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of the proxy shall not be effective until written notice thereof has been given to the Secretary of the Company. No unrevoked proxy may be voted on after three (3) years from the date of its execution unless the proxy provides for a longer period. A proxy shall not be revoked by the death or incapacity of the maker unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Company. A shareholder shall not sell his vote or execute a proxy to any person for any sum of money or anything of value. The stock transfer books of the Company shall be the evidence of the ownership of the shares of stock for the purpose of voting. All elections shall be held and all questions shall be decided by a plurality vote, except as otherwise required by these By-Laws, the Certificate of Incorporation or by law. <PAGE> 3 Section 9. Voting Lists. The agent having charge of the transfer books for the shares of this Company shall make, at least ten (10) days before each election of Directors, a complete list of the shareholders entitled to vote at said election, arranged in alphabetical order, with the address of, and the number of shares held by each, which list shall be open at the place where said election is to be held for ten (10) days and shall be subject to inspection by any shareholder of the Company during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the Meeting. The original share ledger or transfer book or duplicates thereof shall be the only evidence as to who are shareholders entitled to examine such list or share ledger or transfer book or to vote in person or by proxy at any meeting of the shareholders. ^, ARTICLE III Directors r\ r\ 'A a a gci m i a 1 AM ' A 1 Page 98 of 133 Section 1. Number and Term of Office. The business and affairs of the Company shall be managed by or under the direction of a Board of Directors, twelve (12) [effective 1/21/94 "fourteen (14)" and effective 3/17/94 "thirteen (13)"] in number, which number may be altered from time to time by amendment of these By-Laws, but the said number shall never be less than three (3). Said Directors need not be-shareholders. Section 2. Election of Directors. The Directors shall be elected by the shareholders at the annual meeting of said shareholders and shall hold their offices until their successors are elected and qualified in their stead. Vacancies in the Board of Directors, from any cause whatsoever, including any increase in the number of Directors, shall be filled by a majority of the remaining members of the Board, though less than a quorum, and each person so elected shall be a Director until his successor is elected by the shareholders, who may make such selection at the next annual meeting of the shareholders or at any special meeting called for that purpose and held prior thereto. All elections of Directors shall be by ballot. Section 3. Place of Meetings. The meetings of the Board of Directors shall be at such place, within or without the State of Delaware, as the majority of the Directors may from time to time appoint or as may be designated in the notice calling the meeting. <PAGE> 4 Section 4. Organization Meeting of the Board. After each annual election of Directors, the newly elected Directors shall meet for the purpose of organization, the election and appointment of officers, and the transaction of such other business at such time and place as shall be fixed by the written consent of a majority of the Directors or as shall be specified in the notice given hereinafter provided for special meetings of the Board of Directors. Section 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time designate, and the Board in fixing the time and place of such meetings may provide that no notice thereof shall be necessary. Section 6. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or the Vice Chairman or the President or by a majority of the Directors or a majority of the Executive Committee for the time being in office. Special meetings of the Board of Directors shall be held at such times and places as shall be set forth in the call of the meeting. r\ n, r r\ M 1 . /"< n 'l 1 n / 1 -> 'A 1 Page 99 of 133 Section 7. Notice of Directors' Meetings. The Secretary of the Company shall give notice to each Director of each regular or special meeting by mailing the same at least two (2) days before the meeting to his last known address, or by telegraphing or telephoning the same not less than one (1) day before the meeting, which notice shall state the time and place and general purpose or purposes of the meeting. No notice of any meeting shall be necessary if every Director shall be either present or shall have consented thereto by letter, cablegram, radiogram or telegram. If at any meeting there is less than a quorum, a majority of those present at such meeting may adjourn the same. When a meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting other than by an announcement at the meeting at which such adjournment is taken. Section 8. Quorum. One-Third (1/3) of the Directors in office shall constitute a quorum for the transaction of business, and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. <PAGE> 5 Section 9. Order of Business. The order of business at all meetings of the Board of Directors, unless otherwise determined by the affirmative vote of a majority of the members present at any meeting, shall be determined by the presiding officer. Section 10. Compensation of the Directors. The Directors may receive a stated compensation for their services as Directors, and by resolution of the Board a fixed fee and the expenses incident to attendance at each meeting of the Board or any Committee thereof may be determined. Nothing herein contained shall be construed to preclude any Director from serving the Company in any other capacity as an officer, agent or otherwise and receiving compensation therefor. Section 11. Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these ByLaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such Committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or Committee. ARTICLE IV i r\ 11 -> >r\ i Page 100 of 133 Executive Committee Section 1. Number. The Company may have an Executive Committee appointed by the Board of Directors which shall consist of at least three (3) members and shall be made up of members of the Board of Directors. The Board of Directors may designate one of the members thereof as Chairman of the Executive Committee. Section 2. Vacancies. Vacancies occurring in the Executive Committee for any cause may be filled at any meeting of the Board of Directors. Section 3. Executive Committee to Report to Board. All actions by the Executive Committee shall be reported to the Board at its meeting next succeeding such action and shall be subject to revision or alteration by the Board; provided, however, that rights of third parties shall not be affected by any revision or alteration. <PAGE> 6 Section 4. Procedure. The Executive Committee shall fix its own rules of procedure and shall meet where and as provided by such rules or by resolution of the Board. The presence of a majority shall be necessary to constitute a quorum for the transaction of business and in every case an affirmative vote by a majority of all of the members of the Committee present shall be necessary. Section 5. Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise the power and authority to declare dividends and all other powers of the Board in the management and direction of the business and the conduct of the affairs of the Company in such manner as the Executive Committee shall deem for the best interests of the Company in all cases where specific direction shall not have been given by the Board, and shall have power to authorize the seal of the Company to be affixed to all instruments and documents which may require it. ARTICLE V Other Committees From time to.time the Board of Directors may appoint any other committee or committees for any lawful purposes whatsoever, which shall have such powers as i n < AAhn:; i n ' 7 ? >C\ 1 Page 101 of 133 shall be specified in the resolution of appointment. ARTICLE VI Officers Section 1. Executive and Other Officers. The officers of the Company shall include a Chairman of the Board, a President, a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors. The Board may also elect a Vice Chairman. Other than the Chairman of the Board, the Vice Chairman and the President, it shall not be necessary for officers of the Company to be Directors. The Board of Directors shall have authority from time to time to elect or appoint one or more Vice Presidents, any one or more of whom may be designated Executive Vice Presidents or Senior Vice Presidents, a General Counsel, one or more Assistant Secretaries and one or more Assistant Treasurers. Any person may fill one or more offices, except the offices of President and Secretary. The Board of Directors may appoint such other agents of the Company as it may deem necessary for the transaction of the business of the Company and prescribe their several duties, or may by resolution authorize the Chairman of the Board or the President or any Vice President to appoint agents of the Company and to prescribe the duties of agents so <PAGE> 7 appointed by them. All agents appointed pursuant to such authorization may be removed by any of the persons so designated. All officers and agents elected or appointed by the Board of Directors shall be subject to removal by the Board at any time, with or without cause. The Board of Directors shall fix the compensation to be paid to the officers and agents of the Company elected or appointed by the Board and take from them such bonds with security for the discharge of their duties and responsibilities as the Directors may see fit. All vacancies among the officers from any cause whatsoever shall be filled by the Board of Directors. Section 2. Election of Officers. A Chairman of the Board of Directors, a President, a Secretary and a Treasurer shall be elected by the Directors of the Company at their first meeting after the annual meeting of the Shareholders. Section 3. The Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Company. He shall preside at all meetings of the shareholders and of the Board of Directors. He shall also preside at all meetings of the Executive Committee if the position of Chairman of the Committee shall be vacant or at any such meetings from whjch the Chairman of the Executive Committee is absent. Subject to the direction of the Board of Directors and the Executive Committee, the Chairman of the Board shall have general charge of the business and affairs of the Company. He shall also do and perform such other duties as from time to time may be assigned to him by the Board of Directors or by the Executive vwinn'nm ni AA/3HCC * IH'1 vm Page 102 of 133 Committee. Section 4. The Vice Chairman of the Board. The Vice Chairman of the Board, if there be one, shall preside at meetings of shareholders and of the Board of Directors from which the Chairman of the Board is absent. He shall also do and perform such other duties as from time to time may be assigned to him by the Board of Directors, by the Executive Committee or by the Chairman of the Board. Section 5. The President. The President shall preside at all meetings of the Board of Directors and of the shareholders if the offices of Chairman of the Board and Vice Chairman shall be vacant or at any such meetings from which the Chairman of the Board and the Vice Chairman are absent. Subject to the direction of the Board of Directors, the Executive Committee and the Chairman of the Board, he shall have general charge of those operations of the Company as assigned by the Chairman of the Board. He shall also do and perform such other duties as from time to time may be assigned to him by the Board of Directors, the Executive Committee or the Chairman of the Board. <PAGE> 8 Section 6. Vice President. The Vice President or Vice Presidents, in the event there is more than one, shall do and perform such duties as from time to time may be assigned to him or them by the Board of Directors, the Executive Committee, the Chairman of the Board or the Vice Chairman or the President. Section 7. Secretary. The Secretary shall keep minutes of all proceedings of the Board and of the Executive Committee and the minutes of all meetings of shareholders in books provided for that purpose. He shall attend to the giving and serving of all notices for the Company; he shall have charge of such books and papers as the Board may direct; he shall have custody of the seal of the Company and shall affix the same to any instrument or document which requires the seal of the Company, and he shall in general perform all duties incident to the office of Secretary, subject to the control of the Board. He shall also perform such other duties as may be assigned to him by the Board. Section 8. Treasurer. Subject to the direction of the Vice President - Finance, the Treasurer shall have custody and control of all of the funds and securities of the Company, shall be responsible for all moneys and other property of the Company in his custody and shal) perform all duties incident to the office of Treasurer. He shall do and perform such other duties as may from time to time be assigned to him by the Vice President - Finance. If required by the Board, he shall give a bond for the faithful discharge of his duties in such sum as the Board may require. r\ < A A A A ~ Page 103 of 133 Section 9. General Counsel. The General Counsel shall do and perform such duties as from time to time may be assigned to him by the Board of Directors, the Executive Committee, the Chairman of the Board, the Vice Chairman or the President. ARTICLE VII Capital Stock Section 1. Share Certificates. Every holder of stock of this Company shall be entitled to have a certificate signed by or in the name of the Company by the Chairman or Vice Chairman of the Board of Directors or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company and sealed with the corporate seal, which <PAGE> 9 seal may be facsimile engraved or printed, certifying the number of shares owned by such holder in the Company. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue. The certificates of stock of the Company shall be in such form as shall be approved by the Board. Such certificates shall be successive in number and the names and addresses of all persons owning shares of capital stock of the Company with the number of shares owned by each and the date or dates of issue of the shares of stock held by each, shall be entered on the books kept for that purpose by the proper agents of the Company. The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof. Section 2. Old Certificates to be Cancelled. Except in case of lost, stolen or destroyed certificates, and in that case only after conforming to the requirements hereinafter provided, no new certificates shall be issued until the former certificate for the shares represented thereby shall have been surrendered and cancelled. Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit of that fact and shall furnish to the Company and/or its Transfer Agent or Agents, Registrar or Registrars, a Bond of Indemnity with one i.*. "* nAnn /AnnmicA i -f-i ., i ni Annncc 1AM *3 /A1 Page 104 of 133 (1) or more sureties in an amount satisfactory to the Board of Directors. The affidavit and Bond of Indemnity shall be in such form and said Bond shall have such surety or sureties as the Board of Directors may require; provided, however, that the Board of Directors may authorize officers of the Company to approve the form of the affidavit and Bond of Indemnity and the sufficiency of the surety or sureties thereon. Upon the furnishing and approval of said affidavit and Bond of Indemnity, a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost, stolen or destroyed. In the event such lost, stolen or destroyed certificate shall represent five (5) or less shares of the Common Stock of the Company, the Board of Directors may, in its discretion, accept a personal indemnity bond in a form satisfactory to the Board of Directors, in lieu of the Bond of Indemnity hereinabove referred to. If required by the Board, a final order or decree of a court of competent jurisdiction of the right of any such person to receive a new certificate shall be procured. <PAGE> 10 Section 3. Transfer of Shares of Stock. Shares of stock shall be transferred only on the books of the Company by the holder thereof or by his attorney thereunto duly authorized upon the surrender and cancellation of certificates for a like number of shares, subject, however, to all payments due or to become due thereon. Section 4. Regulations. The Board of Directors may make such regulations as it may deem expedient concerning the issue, transfer and registration of stock. Section 5. Transfer Agent and Registrar. The Board of Directors may appoint a Transfer Agent or Transfer Agents to make, and a Registrar or Registrars to record transfers of shares. Section 6. Fixing Closing Dates. The Board of Directors may fix in advance a date not exceeding sixty (60) days preceding the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or any adjournment thereof, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion, or exchange of shares, or in connection with the obtaining of the count of the shareholders for any purpose. In such case, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting, or any adjournment ^hereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights or give such consents, as the case may be, notwithstanding any transfer of any shares on the books of the Company after any record date fixed, as aforesaid. The Board of Directors may close the books of the Company against transfer of shares during the whole or "> 'hAAAA." A 1 ^ 1 r\ i AAAAC 1 A ' 1 ?/A1 Page 105 of 133 any part of such period, and, in such case, written or printed notice thereof shall be mailed at least ten (10) days before the closing thereof to each shareholder of record at the address appearing on the records of the Company or supplied by him to the Company for the purpose of notice. While the stock transfer books of the Company are closed, no transfer of shares shall be made thereon. In the event that the Board of Directors shall not in advance of a meeting of shareholders have closed the transfer books, or have fixed a record date for the determination of the shareholders entitled to notice of or to vote at any meeting of the shareholders, no shares of stock, which have been transferred on the books of the Company within twenty (20) days next preceding such meeting, shall be entitled to notice or shall be voted at any such meeting. < PAGE > 11 ARTICLE VIII Board to Declare Dividends Subject to the provisions of the Certificate of Incorporation and of the laws of the State of Delaware, the Board of Directors, in its discretion, from time to time may declare stock dividends and cash dividends out of any fund legally available therefor as shall appear advisable to the Directors. Such dividends shall be paid at such time after the declaration as the Directors may fix. ARTICLE IX Execution and Signing of Documents Except as otherwise provided by the Board of Directors, deeds, contracts, leases, agreements and other documents shall be signed by the Chairman of the Board, or the Vice Chairman, or the President, or any Vice President and, when a seal is required, sealed with the Company's seal and attested by the Secretary, or any Assistant Secretary, or the Treasurer, or any Assistant Treasurer. Except as otherwise provided by the Board of Directors, promissory notes, debentures and bonds shall be signed by the Chairman of the Board, or the Vice Chairman, or the President, or any Vice President, together with the Treasurer, or any Assistant Treasurer, or Secretary, or any Assistant Secretary. Checks on the Company's bank accounts may be signed by such officer or officers or other agents as the Board of Directors may from time to time authorize or designate, or the Board of Directors may by resolution authorize officers of the Company to designate the agents who may sign checks on the Company's bank accounts. In any case where the signatures of two officers are required on any document or other instrument executed on behalf of the Company, such signatures must be those of two different persons. ARTICLE X Miscellaneous Section 1. Seal. ID'1 VA1 Page 106 of 133 The corporate seal of this Company shall be circular in form and shall bear the name of the corporation and the words "Corporate Seal, Delaware". Section 2. Inspection of Books. The Board of Directors shall determine from time to time whether the accounts and books of the Company, or any of them shall be open to the inspection of shareholders, and if permitted, when and under what conditions and regulations the accounts and books of the <PAGE> 12 Company or any of them shall be open to the inspection of shareholders, shareholders' rights in this respect shall be restricted and limited accordingly. and the Section 3. Notices. Whenever the provisions of the law, the Certificate of Incorporation or these By-Laws require notice to be given to any Director, officer or shareholder, such provision shall not be construed as requiring personal notice, and such notice may be given in writing by depositing the same in a post office or letter box in a post-paid, sealed wrapper addressed to such Director, officer or shareholder at his or her address as the same appears in the books of the Company, and the time when the same shall be mailed shall be deemed to be the time of the giving of such notice. A waiver of any notice in writing signed by a shareholder, Director or officer, whether before or after the time stated in said waiver, shall be deemed equivalent to such notice. ARTICLE XI Amendment The Board of Directors is expressly authorized to make, alter or repeal ByLaws of the corporation, provided, however, that alterations, amendments or repeals of the By-Laws may be made by the holders of a majority of the shares outstanding and entitled to vote at any meeting, if the notice of such meeting contains a statement of the proposed alteration, amendment or repeal. </TEXT> </D0CUMENT> <DOCUMENT> <TYPE>EX-10.5 cSEQUENCEs 3 DESCRIPTIONS AMD f 1, 2, & 3 <TEXT > 13 < PAGEs 'vumn 'nnnnncnm n-i nnnncc ln-'n/m Page 107 of 133 AMENDMENT 1 TO THE DRESSER INDUSTRIES, INC. CONSOLIDATED SALARIED RETIREMENT PLAN AMENDED AND RESTATED AS OF MAY 1, 1989 EXHIBIT 10.5 1. Effective May 1, 1992, the title to Article XII of the Plan shall be changed to read "ARTICLE XII - JOINT VENTURES, SALES, AND SPIN-OFFS." 2. Effective May 1, 1992, a new Section 12.13 shall be added to read as follows: SECTION 12.13 SPIN-OFF INTO THE DRESSER INDUSTRIES, INC. RETIREMENT INCOME PLAN FOR INDUSTRIAL OPERATIONS As of May 1, 1992, this Plan shall be divided into two plans. The first plan shall be a continuation of this Plan the "Dresser Industries, Inc. Consolidated Salaried Retirement Plan," referred to hereafter in this Section 12.13 as the "First Dresser Plan." The second plan shall be the "Dresser Industries, Inc. Retirement Income Plan for Industrial Operations," referred to hereafter in this Section 12.13 as the "Second Dresser Plan." Dresser Industries, Inc. shall assume the sponsorship of the Second Dresser Plan and shall continue the sponsorship of the First Dresser Plan. Subject to the provisions of Section 10.08, the liabilities and Trust assets of the Plan between the First Dresser Plan and the Second Dresser Plan. The liabilities allocated to the Second Dresser Plan shall be for the benefits accrued under the Plan as of April 30, 1992, for Participants (active and inactive) who will be assigned to the Industrial Operations of the Company. All other Plan liabilities shall remain the obligation of this First Dresser Plan. Employees of the following list of Participant groups will be assigned to the Second Dresser Plan: 1. Industrial Tool Division 2. Harbison-Walker Refractories 3. Jeffrey Division 4. Marion Division 5. Komatsu Dresser Company 6. Dresser Finance Corporation Page 1 <PAGE> 7.Certain Dresser Corporate Headquarters Employees designated by the Company in writing to the Committee s Trust assets phall be allocated proportionately between the Second Dresser Plan and the First Dresser Plan based on the amount that the Actuary determines to be the present value on a Plan termination basis of benefits accrued for the Participants (active and inactive) in the Participant groups listed above and all other Participants. To the extent that Trust assets r\ r\ r ' 1 -* 7M Page 108 of 133 exceed the value of benefits accrued, such excess shall also be allocated proportionately. The Actuary's allocation of Trust assets shall be subject to the provisions of Section 10.08. The division of the Plan into two plans shall not cause any Participant to incur a Severance from Service Date. Benefits shall not commence or be payable under either plan until there is a Severance from Service Date from the First Dresser Plan for the respective Dresser Industries, Inc. Employees or until there is a Severance from Service Date under section 1.46 of the Second Dresser Plan for respective employees covered under that plan. Page 2 <PAGE> AMENDMENT NO. 2 TO THE DRESSER INDUSTRIES, INC. CONSOLIDATED SALARIED RETIREMENT PLAN AS AMENDED BY RESTATEMENT EFFECTIVE MAY 1, 1989 1. Effective July 31, 1993, a new Section 11.16 is added, to read as follows: "SECTION 11.16 HOURLY EMPLOYEES OF WAYNE DIVISION, AUSTIN, TEXAS. Effective July 31, 1993, the Dresser Industries, Inc. Pension Plan for Hourly Employees of Wayne Division, Austin, Texas ("The Wayne Plan"), shall be merged into this Plan and shall be treated as if it were a Predecessor Plan. Subject to the provisions of this Section 11.16, pension benefits for employee participants of The Wayne Plan who have not incurred a severance from service date (as defined in section 1.37 of that plan) as of May 1, 1993, shall become Participants of this Plan. Also effective on July 31, 1993, this Plan shall assume the obligations for benefits for inactive participants (retirees, surviving spouses, beneficiaries, other annuitants, transferred participants, and vested terminated participants) of The Wayne Plan. As of July 31, 1993, the trust assets of The Wayne Plan shall be transferred to the Trust Fund for this Plan. From that time forward, The Wayne Plan trust assets shall be amalgamated into the Trust Fund and shall no longer be separately identifiable as for the exclusive benefit of the participants in The Wayne Plan; but, of course, shall, subject to the provisions of Article VIII of this Plan, be used for the exclusive benefit of all Participants under this Plan, including former participants in The Wayne Plan. The pension benefits for active participants of The Wayne Plan on May 1, 1993, shall be determined under the formula stated in paragraph (a) of Section 4.01 of this Plan. Credited Service used in the calculation of such benefits shall be the number of years of benefit accrual service to July 31, 1993, under section 3.03 of The Wayne Plan _(not including service before June 1, 1975, as stated in that plan), plus years of Credited Service accrued under this Plan after July 31, 1993. Aggregate years of Credited Service shall not exceed 35 years. ** f In addition to pension benefits accrued and accruing under this Plan prior to this merger of The Wayne Plan into this Plan, the pension benefits for participants in t n i -* >r\ i Page 109 of 133 < PAGE > 1 The Wayne Plan who transferred to salaried status and who are active Participants under this Plan as of July 31, 1993, shall be calculated by including, subject to the 35-year maximum on Credited Service, benefit accrual service as of the date of transfer as Credited Service under this Plan and using Final Average Monthly Earnings and Covered Compensation as of the Severance from Service Date. All pension benefits for such Participants for Credited Service before transfer to salaried status shall be calculated under the formula stated in paragraph (a) of Section 4.01. Active participants of The Wayne Plan described in the third paragraph of this Section 11.16, and transferred participants described in the immediately preceding paragraph shall have a minimum Accrued Benefit under Section 4.01 of this Plan equal to the normal retirement benefit under section 1.24 of The Wayne Plan based on the benefit accrued as of July 31, 1993. That is a monthly amount of the dollar multiplier in effect at the date of transfer for transferred participants or $15.00 for active participants times benefit accrual service under The Wayne Plan as of July 31, 1993. If a Participant is eligible for and elects Immediate Early Retirement under Section 4.02, this minimum benefit shall be the Actuarial Equivalent of the benefit payable at Normal Retirement Age. With regard to this minimum benefit, provided such benefit is less than $10 per month, the first $1,750 of any lump sum settlement of the benefit in accordance with Section 10.04 shall be based on Actuarial Equivalent factors. Also, in the event of settlement of any benefit upon Plan termination, the first $1,750 of a lump sum settlement of the benefit in accordance with Section 10.04 shall be based on Actuarial Equivalent factors. 2. Effective October 7, 1992, a new Section 12.14 is added, to read as follows: "SECTION 12.14 INGERSOLL-DRESSER PUMP COMPANY. Following are provisions describing the benefits payable from the Plan for Participants who were Employees of the Company as of October 7, 1992, who become employees of Ingersoll-Dresser Pump Company ("the Pump JV") on October 8, 1992, or thereafter, pursuant to the Employee Relations Agreement Between Dresser Industries, Inc. and Ingersoll-Rand Company and Ingersoll-Dresser Pump Company ("the Agreement") effective as of October 1, 1992. Each formerly active Plan Participant shall be considered an inactive Plan Participant and the benefit amount payable from the Plan shall be computed according to the provisions of the appropriate section of Article IV of <PAGE> 2 this Plan as in effect on October 7, 1992, in the case of a Plan Participant who transfers employment directly from the Company to the Pump JV on October 8, 1992, considering the date of transfer as the Severance from Service Date for purposes of computing Credited Service _and Final Average Monthly Earnings. For any Plan Participant who transfers employment directly from the Company to the Pump JV after October 8, 1992, the date of such transfer shall be considered the Severance from Service Date for purposes of computing s Credited Service and Final Average Monthly Earnings in Article IV. Provided, further, that each such former Employee's service with the Pump JV commencing on such Employee's first day of employment with the Pump JV shall be counted as Continuous Service under this Plan for the purpose of determining Vesting Service (which determines eligibility for Plan participation, eligibility for i n : i i a Page 110 of 133 retirement benefits, and eligibility for appropriate early retirement reduction factors), and no inactive Plan Participant shall be eligible to commence benefits under this Plan until such inactive Plan Participant terminates employment with the Pump JV, or any successor thereof. For those transferred Plan Participants who transferred on October 8, 1992, and who as of that date (1) have combined age and Vesting Service equal to 65 or more, (2) have reached or passed their 50th birthday, and (3) have at least ten years of Vesting Service, shall have an additional Grandfather Benefit as defined below: The Grandfather Benefit is the excess, if any, of (X) over the sum of (Y) plus (Z), where all benefits are expressed in a life only annuity form and where: (X) is the benefit calculated under the applicable, respective formulas of this Plan counting service and compensation with the Pump JV after transfer to the Pump JV along with service and compensation with the Company prior to transfer to the Pump JV in the determination of Credited Service and Final Average Monthly Earnings, (Y) is the benefit described in the second paragraph of this Section 12 . 14, and (Z) is the sum of the benefits listed in (i), (ii), and (iii) below as of the dat e the Participant terminates employment from the Pump JV: (i) The benefits payable from the Pump JV tax qualified defined benefit plan(s). <PAGE> 3 If such benefits cannot commence at the same time as benefits commence under this Plan but are to be paid in a monthly form at a future date, then benefits will not be reduced under this (i) until the Participant attains Age 65. If such benefits cannot commence in a monthly form of payment at the same time as benefits commence under this Plan and such benefits are received in a single sum payment, then benefits under this (i) shall be the Actuarial Equivalent of such single sum payment as if paid in a life only form commencing at the same time benefits from this Plan commence. (ii)The actuarial equivalent of the amount payable from the Ingersoll-Dresser Pump Company Retirement Account Plan. For purposes of this subparagraph, the "actuarial equivalent" shall be based on the mortality table specified in Section 1.02 and the New PBGC Rate specified in Section 10.04, and (iii) The actuarial equivalent of the company match amount payable from the Ingersoll-Dresser Pump Company Savings and Investment Plan. For purposes of this subparagraph, the ) "actuarial equivalent" shall be based on the mortality table specified in Section 1.02 and the New PBGC Rate specified in Section 10.04. If benefits from this Plan are payable in other than the life only form, Page 111 of 133 the above adjustments in the life only form shall be made before converting benefits from this Plan into such other form in accordance with Article V of this Plan. The Grandfather Benefit shall be vested in the manner prescribed in Section 4.05 for all other benefits payable from this Plan." <PAGE> 4 AMENDMENT NO. 3 TO THE DRESSER INDUSTRIES, INC. CONSOLIDATED SALARIED RETIREMENT PLAN 1. A new Section 4.12 is added, effective October 1, 1993, to read as follows: "SECTION 4.12 SPECIAL VOLUNTARY TERMINATION BENEFITS. A supplemental pension benefit shall be payable according to the provisions of the Eligibility, Amount, Form of Benefit, Timing of Payment, and Special Provisions for Calculating a Lump-Sum Cash Out sub-sections of this Section 4.12 of the Plan. (a) Eligibility: The supplemental pension benefit shall be payable to each Participant in the Plan who is employed at the downtown Dallas headquarters or at the Richardson Computer Center who voluntarily terminates employment on October 16, 1993. Any such Participant must have at least five years of Vesting Service as of October 16, 1993. The Surviving Spouse of an eligible Participant (1) who has not notified the Company in writing to voluntarily terminate on October 16, 1993, but dies prior to October 1, 1993, or (2) who has notified the Company in writing of his intent to so voluntarily terminate on October 16, 1993, but who dies prior to that date, shall have the Spouse's Death Benefit otherwise payable under Sections 4.06 or 4.07 of the Plan determined in a manner consistent with the addition of age and service had the Participant survived to October 16, 1993, as provided in the following subsections of this Section 4.12. (b) Amount: The amount of the supplemental pension benefit shall be calculated by first applying the provisions of Section 4.01(a), (b), and (c) of the plan and granting three more years of Credited Service than would otherwise be used under Section 4.01(a). Notwithstanding the preceding sentence, the maximum number of years of Credited Service stated in Section 4.01 shall continue to be applicable. In then applying the provisions of Section 4.02, 4.03, or 4.05, as the case may be, the early retirement factors shall be at an age three years older than would otherwise be used. The resulting amount of benefit shall then be reduced by (1) the benefit that would otherwise be payable from this Plan in the absence of this Section/4.12 and (2) the benefit that an insurance company became obligated to pav (modified appropriately for retirement before Normal Retirement Age) as provided in Section 4.01(d) of this Plan. In the determination of the supplemental pension benefit, the Final Average Monthly Earnings shall be determined as of October 16, 1993. The 'thhAr\'Annnr\;nni pm ADnncc * in/n/m Page 112 of 133 result of the calculations of this subsection (b) shall be the supplemental pension benefit in the Life-Only benefit form. (c) Form of Benefit: Except in the case of a Participant who elects a Lump-Sum Cash Out option, the supplemental pension benefit shall commence and continue to be paid for the same period of time and in the same manner and form as the Normal Retirement benefit, Immediate Early Retirement benefit, Deferred Early Retirement benefit, or deferred vested benefit, whichever is applicable with regard to a particular Participant, and shall be paid together with other benefits under this Plan. Notwithstanding the preceding sentence, the supplemental pension benefit shall commence, if applicable, according to the next subsection of this Section 4.12. (d) Timing of Payment: In addition to providing three additional years of service and three additional years of age for the purpose of benefit calculation, three additional years of age and Vesting Service for the purpose of eligibility for payment of benefits are granted. Thus, the references to "Age 55" in Sections 4.02, 4.05, 4.06 and 4.07 shall be changed to "Age 52" for Participants meeting the eligibility requirements stated above and electing to voluntarily terminate employment on October 16, 1993; any benefit that would otherwise be payable only at age 65 shall be payable at any time between age 62 and age 65, as the Participant shall elect. Similarly, in Sections 4.02 and 4.07, the references to "Age 65" shall be changed to "Age 62" and the references to "ten or more years of Vesting Service" shall be changed to "seven or more years of Vesting Service" for such Participants. (e) Special Provisions for Calculating a Lump-Sum Cash Out: For purposes of calculating a lump-sum benefit in accordance with Section 10.04 of this Plan, there shall be no adjustment in the Participant's age in finding the actuarial equivalent present value factor. However, in the calculation of the lump-sum cash out amount for a <PAGE> 2 Participant who is eligible for deferred vested benefits under Section 4.05 of this Plan, the factor for a benefit deferred to age 62 shall be used instead of a factor for a benefit deferred to age 65. In addition, three additional years of Interest of the Participant's contributions to the Prior Plan, at the annual rate of 5%, shall be payable as part of the lump-sum cash out. For a Participant who becomes eligible for an immediate early retirement benefit under Section 4.02, who would not otherwise be eligible for an immediate early retirement benefit under that Section were it not for this Section 4.12, the lump-sum cash out shall be calculated as follows: The Actuarial Equivalent of the Accrued Benefit under the Plan that is eligible for payment as a lump sum before application of this Section 4.12 shal'l be subtracted from the immediate annuity benefit under the Life-Only Option that could be paid as a lump sum after the application of this Section 4.12. The lump-sum value of this difference, calculated in accordance with the rules of Section 10.04 shall then be added to the lump-sum cash out benefit that would otherwise be payable from the Plan before the application of this Section 4.12. The resulting amount shall then be the amount payable under the Lump-Sum Cash Out option of this Plan." . . I \ .. -1. i .... 'AAAnncm i n \ aaaac c , i f\ 'n.'Ai Page 113 of 133 2. Section 12.14 is amended entirely, effective July 31, 1993, to read as follows: "SECTION 12.14 INGERSOLL-DRESSER PUMP COMPANY. Following are provisions describing the benefits payable from the Plan for Participants who were Employees of the Company as of October 7, 1992, who become employees of Ingersoll-Dresser Pump Company ("the Pump JV") on October 8, 1992, or thereafter, pursuant to the Employee Relations Agreement Between Dresser Industries, Inc. and Ingersoll-Rand Company and Ingersoll-Dresser Pump Company ("the Agreement") effective as of October 1, 1992. Each formerly active Plan Participant shall be considered an inactive Plan Participant and the benefit amount payable from the Plan shall be computed according to the provisions of the appropriate section of Article IV of this Plan as in effect on October 7, 1992, in the case Of a Plan Participant who transfers employment directly from the Company to the Pump JV on October 8, 1992, considering the date of transfer as the Severance from Service Date for purposes of computing Credited Service and Final Average Monthly Earnings. Provided, however, that any Bonuses paid by the Pump JV and the Company to any such Plan Participant between October 8, 1992, and December 31, 1992, shall be considered as having been paid on October 7, 1992, for purposes of determining Final Average Monthly Earnings under this Plan. For any Plan Participant who transfers employment directly from the Company to the Pump JV after October 8, 1992, the date of such transfer shall be considered the Severance from Service Date for purposes of computing Credited Service and Final Average Monthly Earnings in Article IV. Provided, further, that each such former Employee's service with the Pump JV commencing on such Employee's first day of employment with the Pump JV shall be counted as Continuous Service under this Plan for the purpose of determining Vesting Service (which determines eligibility for Plan participation, eligibility for retirement benefits, and eligibility for appropriate early retirement reduction factors), and no inactive Plan Participant shall be eligible to commence benefits under this Plan until such inactive Plan Participant terminates employment with the Pump JV, or any successor thereof. For those transferred Plan Participants who transferred on October 8, 1992, and who as of that date (1) have combined age and Vesting Service equal to 65 or more, (2) have reached or passed their 50th birthday, and (3) have at least ten years of Vesting Service, shall have an additional Grandfather Benefit as defined below: The Grandfather Benefit is the excess, if any, of (X) over the sum of (Y) plus (Z), where all benefits are expressed in a life only annuity form and where: (X) is the benefit calculated under the applicable, respective formulas of this Plan counting service and compensation with the Pump JV after transfer to the Pump JV along with service and compensation with the Company prior to transfer to the Pump JV in the determination of Credited Service and Final Average Monthly Earnings, (Y) is the benefit described in the second paragraph of this Section 12.14, and ''hhnn'AAnnn'nni n i AAAA c c ,. i n' i i ir\ i Page 114 of 133 (Z) is the sum of the benefits listed in (i), (ii), and (iii) below as of the date the Participant terminates employment from the Pump JV: (i) The benefits payable from the Pump JV tax qualified defined benefit plan(s). < PAGE > 4 If such benefits cannot commence at the same time as benefits commence under this Plan but are to be paid in a monthly form at a future date, then benefits will not be reduced under this (i) until the Participant attains Age 65. If such benefits cannot commence in a monthly form of payment at the same time as benefits commence under this Plan and such benefits are received in a single sum payment, then benefits under this (i) shall be the Actuarial Equivalent of such single sum payment as if paid in a life only form commencing at the same time benefits from this Plan commence. (ii) The actuarial equivalent of the amount payable from the Ingersoll-Dresser Pump Company Retirement Account Plan. For purposes of this subparagraph, the "actuarial equivalent" shall be based on the mortality table specified in Section 1.02 and the New PBGC Rate specified in Section 10.04, and (iii) The actuarial equivalent of the company match amount payable from the Ingersoll-Dresser Pump Company Savings and Investment Plan. For purposes of this subparagraph, the "actuarial equivalent" shall be based on the mortality table specified in Section 1.02 and the New PBGC Rate specified in Section 10.04. If benefits from this Plan are payable in other than the life only form the above adjustments in the life only form shall be made before converting benefits from this Plan into such other form in accordance with Article V of this Plan. The Grandfather Benefit shall be vested in the manner prescribed in Section 4..05 for all other benefits payable from this Plan." </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.12 <SEQUENCE>4 <DESCRIPTI0N>AMD#1 <TEXT> s < PAGE > ; SUP. EX. RET. 5 EXHIBIT 10.12 mO " r\ 1 a i r\ r\ a a " i n 'i 'A 1 Page 115 of 133 AMENDMENT NO. 1 TO THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR TOP EXECUTIVES OF DRESSER INDUSTRIES, INC., AS AMENDED BY RESTATEMENT EFFECTIVE MAY 1, 1992 1. Effective August 1, 1993, the name of the Plan shall be changed from the "Supplemental Executive Retirement Plan for Top Executives of Dresser Industries, Inc." to the "Supplemental Executive Retirement Plan of Dresser Industries, Inc." 2. Effective May 1, 1993, Section 3.1, Eligibility, is amended by adding a new sentence at the end of such Section, to read as follows: "Furthermore, an employee of the Company who has been an employee of a Dresser joint venture company shall be covered for purposes of protecting pension benefits to the extent provided in Section4.3." 3. Effective May 1, 1993, Section 4.3, Restoration of Benefits Lost Due to Transfer to a Joint Venture Company, is amended by adding a new sentence at the end of the first paragraph of such Section, to read as follows: "This Plan shall also pay such additional benefit to an employee of the Company who does not meet the eligibility requirements of Section 3.1 at the time of transfer to a joint venture company but who subsequently transfers back to Dresser in a position described in Section 3.1, provided such employee meets the other eligibility requirements of Section 3.1 for a benefit under this Section 4.3." </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-10.16 <SEQUENCE>5 <DESCRIPTION>DESC. OF PLAN <TEXT> <PAGE> EXHIBIT 10.16 DESCRIPTION OF THE PLAN GENERAL The 1989 Director Retirement Plan ("Plan") was unanimously approved by the disinterested (nonparticipating) members of the Board of Directors of Dresser on August 17, 1989 and unanimously amended by such disinterested directors on July 15, 1993. The Plan has not been submitted to or acted upon by the shareholders of Dresser. The principal purposes of the Plan are to provide current compensation in lieu of retirement benefits to those members of Dresser's Board of Directors who are not also employees of Dresser, to assist Qresser in attracting and retaining outside directors with experience and ability on a basis competitive with industry practices, and to associate more fully the interests of such directors with those of Dresser's shareholders. ; The shares of Common Stock granted and delivered under the Plan shall be treasury shares. The maximum number of shares to be issued under the Plan is 200,000. Page 116 of 133 The number and kind of shares issuable under the Plan, or which may be awarded to any participant, shall be adjusted appropriately in the event of stock dividends, stock splits, recapitalization, mergers, consolidations, combinations or exchanges of shares or other similar corporate changes. ELIGIBILITY Directors of Dresser who are not employees of Dresser ("Eligible Directors") are eligible to receive awards. Directors of Dresser who are also employed by Dresser ("Employee Directors") are not eligible during the period of such employment to receive any awards under the Plan. Since the composition of Dresser's Board of Directors is subject to change, it is impossible to determine the total number of participants in the plan or the number of awards which may be granted. However, as of July 15, 1993, there were nine Directors eligible for participation. ADMINISTRATION The Plan is administered by the Employee Directors. The Plan vests authority in the Employee Directors to administer and interpret the Plan. The costs and expenses of administering the Plan shall be borne by Dresser and not charged against any award or to any participant. The Employee Directors shall have authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration <PAGE> -1- of the Plan and for the conduct of its business as the Employee Directors deem necessary or advisable. The Employee Directors' interpretations of the Plan, and all actions taken and determinations made by the Employee Directors pursuant to the powers vested in them hereunder, shall be by unanimous decision and shall be conclusive and binding on all parties concerned, including Dresser, its shareholders and any participant. AWARDS Awards under the Plan shall consist of grants of validly issued, fully paid and nonassessable shares of Dresser Common Stock in each odd-numbered year commencing in 1989. The number of shares of Dresser Common Stock to be granted to a participant (the "Periodic Award") shall be determined by dividing (i) the number which is equal to 60% of the result of multiplying the annual rate of cash annual retainer payable by Dresser to such participant for such participant's services as a director on August 1 following the end of the period for which the award is made (which retainer amount was increased to $28,000 per year effective August 1, 1993), times the quotient of the greater of 12 or the number of months served by such director during the period divided by 12, by (ii) the average of the high and low per share sale prices for Dresser Common Stock on the New York Stock Exchange on the last trading day of the week prior to the week in which the grant is to be made or the immediately preceding trading day, and rounding the quotient thereof to the nearest whole number. Awards shall be granted automatically in each odd-numbered year and the date of grant of each award will be the date of the regularly scheduled meeting of Dresser's Board of Directors next following August 1 of each such year. The first Periodic Award was for the twelve months ended August 1, 1989, and each subsequent Award shall be for the 24 months ended the immediately preceding r> i hhAA," - i a i ra i Page 117 of 133 August 1. RIGHTS AS SHAREHOLDER A participant under the Plan shall have none of the rights of an owner of Common Stock in respect of shares to be awarded, unless and until certificates for such shares of Common Stock are issued to the participant. No employee of Dresser shall have any claim or right to be granted an award under the Plan. ADDITIONAL PROVISIONS OF THE PLAN DEATH, DISABILITY OR RETIREMENT In the event of the death, disability or retirement of a participant prior to the granting of a Periodic Award in respect of the 24 month period in which such event occurred, an Award shall be granted in respect of such period to the retired participant or his or her estate in an amount proportionate to the participant's service during such period rounded to the nearest whole number of years. Such Award shall be determined by dividing (i) the number <PAGE> -2- which is equal to 60% of the total cash annual retainer payable by Dresser to such participant for such participant's services as a director at the end of the period of such participant's service by (ii) the average of the high and low per share sale prices for Dresser Common Stock on the New York Stock Exchange on the last trading day of the week prior to the week in which the grant is to be made or the immediately preceding trading day, and rounding the quotient thereof to the nearest whole number. If any participant shall cease to be a director for any reason other than death, disability or retirement, his or her rights to any Award in respect of the 24 months during which such cessation occurred shall terminate. WITHHOLDING TAXES Dresser shall have the right to require the payment (through withholding from the participant's retainer or otherwise) of any withholding taxes required by federal, state, or local law in respect of any Periodic or other Award. ASSIGNMENT OR TRANSFER No rights to receive awards under the Plan shall be assignable or transferable by a participant except by will or the laws of descent and distribution. FUNDING The Plan shall be unfunded. Dresser shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any award under the Plan. AMENDMENTS AND TERMINATIONS The Employee Directors may at any time terminate or amend the Plan in whole or in part (provided that the Plan shall not be amended more than once in any period of six months), but no such action shall adversely affect any rights or Page 118 of 133 obligations with respect to any awards theretofore granted under the Plan. Notwithstanding the foregoing, Employee Directors shall not have the power to amend the Plan as to who is eligible for awards, the formula for calculating the number of shares granted, and the date of grants. EMPLOYEE DIRECTORS The Plan is administered by the Employee Directors. are not eligible to participate in the Plan. The Employee Directors On July 15, 1993, the names and addresses of the Employee Directors were as follows: < PAGE> -3- <TABLE> <CAPTION> NAMES ADDRESSES <S> W. E. Bradford <C> Dresser Industries, Inc. P. 0. Box 718 Dallas, Texas 75221 John J. Murphy Dresser Industries, Inc. P. 0. Box 718 Dallas, Texas 75221 B. D. St. John </TABLE> Dresser Industries, Inc. P. 0. Box 718 Dallas, Texas 75221 Each Employee Director serves, as a Director, at the pleasure of the Shareholders of Dresser and, as an employee, at the pleasure of the Board of Directors. </TEXT> </D0CUMENT> <D0CUMENT> <TYPE>EX-10.17 <SEQUENCE>6 <DESCRIPTI0N>ELECTI0N FORM <TEXT> -4- <PAGE> EXHIBIT 10.17 ELECTION FORM DEFERRAL OF 1989 DIRECTOR RETIREMENT PLAN AWARD t------------------------------------------------------------------------------------------------------------------- TO: Rebecca R. Morris Secretary Dresser Industries, 1600 Pacific Avenue Dallas, TX 75201 Inc. Page 119 of 133 1. Percentage I hereby elect to defer up to 100% of the stock award due to me as a Dresser Industries, Inc. Director for the period from August 1, 1993 to July 31, 1995 (the "Deferred Stock Award"), as indicated below. I understand that the portion of my stock that I defer will be converted into phantom shares of Dresser Industries, Inc. Common Stock. Phantom shares are payable in cash. (Indicate the percentage of stock award to be deferrred, if any. Deferrals must be made in 10% increments.) % of the stock award 2. Payment I elect my payment period to commence on: (circle one) 1/1 4/1 7/1 10/1 in (Year) Note: Deferrals may not be made for less than one year. Payment terms must be specified at least 6 months prior to and in the taxable year prior to the commencement of the payment period. (Signature) </TEXT> </DOCUMENTS <DOCUMENT> <TYPE>EX-10.23 <SEQUENCE>7 <DESCRIPTION>AMD#l 92" STOCK PLAN <TEXT> <PAGE> (Date) EXHIBIT 10.23 f AMENDMENT NO. 1 TO THE DRESSER INDUSTRIES, INC. 1992 STOCK COMPENSATION PLAN Effective August 1, 1993, Part B, Section 4 of the Plan, relating to ' a .... i-:.. ~ -i . ... '?nnnrwnnnnosni 11 01 nnnfKs i d-m ^ rn Page 120 of 133 restricted incentive stock, is amended by restating the .introductory paragraph and subsection (a) thereof as follows: "The Committee shall grant Restricted Incentive Stock Awards to Eligible Employees with respect to nonqualified stock options or incentive stock options granted to them by the Company under Part A. Stock Option Program of the Plan ("Stock Options"). From the date of such grant the Eligible Employee shall be a Participant. Each grant of a Restricted Incentive Stock Award shall entitle the Participant to receive, for every five shares of such nonqualified or incentive stock options granted to such Participant, one share of Stock upon exercise of the underlying nonqualified or incentive stock options. As to Restricted Incentive Stock Awards granted on or after August 1, 1993, related Restricted Stock shall be issued only if at the time of exercise such Participant is actively employed by the Company, a Subsidiary or an Affiliated Company and is not Disabled. The Committee shall grant Restricted Incentive Stock Awards to optionees in order to encourage them to hold shares of Stock following exercise of Stock Options. Each Restricted Incentive Stock Award shall contain the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Committee, provided, however, that no Restricted Incentive Stock Award shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth elsewhere in this Program. < PAGE > (a) Issuance of Restricted Incentive Stock. Restricted Incentive Stock shall be issued as follows: (i) Provided that the Company shall receive written acceptance by the Participant of the Restrictions and other terms and conditions described in the Program on the date of exercise of a Stock Option, and provided that as to Restricted Incentive Stock Awards granted on or after August 1, 1993, the Participant is actively employed on such date of exercise and is not Disabled, a Participant shall be issued, pursuant to a Restricted Incentive Stock Award, one share of Restricted Stock for every five Option Shares. (ii) The Company, at the direction of the Committee, shall hold certificates evidencing shares of Stock granted pursuant to a Restricted Incentive Stock Award and the related Option shares, alternatively, deliver the certificates to the Participant." </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-21 <SEQUENCE>8 < DESCRIPTION PARENTS & SUB. <TEXT> or < PAGE> EXHIBIT 21 Exhibit 21. Parents and Subsidiaries *>----------------------- ^--------------------------------------------------------------------------- There is furnished a list of subsidiaries of Dresser Industries, Inc. as of October 31, 1993. ' /x /d r\ - f\ i cn i r\f\r\nc Ift ' 1 7 -Y) I See Note (a). Page 121 of 133 <TABLE> <CAPTION> Name State or Other Sovereign Power Under the Laws of Which Organized % of Voting Securities owned by Immediate Parent <S> <C> <C> AVA International Corp. AVA Italiana S.r.L. AVA Norway A/S AVA S.A.R.L. BCD Acquisition Corporation Bredero Price Holding B.V. Bredero Price Coatings Pty. Ltd. Bredero Price GmbH Bredero Price International B.V. Bredero Price International, Inc. Bredero Price Middle East Limited Bredero Price (Nigeria) Limited Bredero Price Services Limited Bredero Price (Thailand) Limited Bredero Price (West Africa) Limited Bredero Norway B.V. Bredero Price Europipe A/S Chalfont Limited Imavag Limited Kapeq Trading Limited P.T. Bredero Price Indonesia SIF-Isopipe S.A. SIF Overseas Trading Limited Uniglobe Engineering Limited Vosnoc Limited Dresser AG Dresser Anstalt Dresser Australia Pty. Ltd. Dresser Singapore Pte. Ltd. Colville Trading Pte. Ltd. Magcobar Manufacturing Nigeria Limited P.T. Dresser Magcobar Indonesia Dresser Canada, Inc. M-I Drilling Fluids Canada, Inc. Dresser Congo S.A.R.L. Dresser Foreign Sales Corporation Limited Dresser Holding, Inc. </TABLE> < PAGE> Texas Italy Norway France Delaware Netherlands Australia Germany Netherlands Texas Cyprus Nigeria England Thailand Cyprus Netherlands Norway Cyprus Cyprus Cyprus Indonesia France Cyprus Cyprus Cyprus Liechtenstein Liechtenstein Australia Singapore Singapore Nigeria Indonesia Canada Canada Congo Guam Delaware 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% 100% 100% 60% 100% 100% 100% (1) 100% 100% (2) 75% 100% 100% (1) 100% 100% (1) 100% 100% 100% 100% 100% (3) 60% 60% 100% 64% 100% 100% 100% EXHIBIT 21 - OCTPBER 31, 1993 Page 2 <TABLE> <CAPTION > Page 122 of 133 Name <s> State or Other Sovereign Power Under the Laws of Which Organized <C> Dresser (Holdings) Limited AVA (U.K.) Limited Dresser Holmes Limited Lodge Sturtevant Limited Dresser U.K. Limited Dresser U.K. Pensions Limited Mono Group Limited Mono Pumps Limited Mono Pumps (Australia) Pty. Limited Mono Pumps (New Zealand) Limited M. W. Kellogg (Eastern Hemisphere) Limited M. W. Kellogg Limited KESA Limited K.R.S.A. Limited Kellogg Construction Limited Kellogg Offshore Limited Kellogg Plant Services Limited M. W. Kellogg International Limited M. W. Kellogg (Pensions) Limited MWKL Field Services Limited Dresser Industria e Comercio Ltda. Wayne Compressores Ltda. Dresser International, Ltd. Dresser Investments N.V. Dresser Korea, Inc. Dresser Minerals International, Inc. Dresser-Nagano, Inc. Dresser Norge A/S Dresser Oilfield Gabon S.a.r.L. Dresser-Rand Company (Partnership) Dresser-Rand Canada, Inc. Dresser-Rand Compression Services, S.A. Dresser-Rand Holding Company Dresser-Rand B.V. Dresser-Rand GmbH Dresser-Rand Japan Ltd. Dresser-Rand Overseas Sales Company Dresser-Rand (U.K.) Ltd_ Dresser-Rand Sales Company, S.A. Dresser-Rand Services, S.a.r.L. Dresser-Rand de Venezuela S.A. Turbodyne Electric Power Corporation Dresser-Rand International B.V. Dresser-Rand Italia S.r.L. Dresser-Rand Machinery Repair Belgie N.V. Dresser Rand de Mexico, S.A. de C.V. <ry'TABLE> f < PAGE > England England England England England England Scotland England Australia New Zealand England England England England England England England England England Cayman Islands Brazil Brazil Delaware Netherlands Antilles Korea Texas Delaware Norway Gabon New York Canada Switzerland Delaware Netherlands Germany Japan Delaware England Switzerland Switzerland Venezuela Delaware Netherlands Italy Belgium Mexico % of Voting Securities owned by Immediate Parent <C> 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (4: 100% 55% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 71.4% 100% 95% 51% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (5) EXHIBIT 21 - OCTOBER 31, 1993 aaaa 1 ^ 1 rs i A A/Vl i r\ i i>r\ Page 3 <TABLE> cCAPTION > Name State or Other Sovereign Power Under the Laws of Which Organized <S> <C> Dresser-Rand Power, Inc. Dresser-Rand Comercio e Industria Ltda. Dresser-Rand A/S Dresser-Rand (SEA) Pte. Ltd. Dresser-Rand S.A. Dresser-Rand Services B.V. Dresser Services, Inc. Dresser de Venezuela, C.A. M-I Drilling Fluids Company (Partnership) Baritina de Bolivia Ltda. Dresser AG Zug Dresser do Brasil, Ltda. Far East Engineering Technology Limited M-I Australia Pty. Ltd. M-I Bur M-I Drilling Fluids Company GmbH M-I Drilling Fluids Foreign Sales Corporation, Ltd. M-I Drilling Fluids International, B.V. Mykobar Mining Company. S.A. M-I Drilling Fluids International, Inc. M-I Drilling Fluids (Singapore) Pte. Ltd. M-I Drilling Fluids de Venezuela C.A. M-I Gabon S.A. M-I Great Britain Limited M-I Italiana S.p.A. M-I Kazakstan Ltd. M-I Norge A/S M-I Overseas Limited Magcobar (Ireland) Limited Foynes Manufacturing Limited Management & Engineering Resources Company Radio Magcobar, Inc. Swaco Geolograph Limited Swaco Geolograph Norge A/S M. W. Kellogg Company, The Kellogg Capital Corporation Kellogg Pan American Corporation C.A. M. W. Kellogg Holdings, Inc. Aromatics Plant Services Limited Intercontinental Services Limited KCI Constructors, Inc. s KRW Energy Systems Inc. Kellogg China Consultants Inc. Kellogg China Inc. Kellogg Development Corporation </TABLE> Delaware Brazil Norway Singapore France Netherlands Delaware Venezuela Texas Bolivia Switzerland Brazil Thailand Australia Cayman Islands Austria Guam Netherlands Greece Texas Singapore Venezuela Gabon England Italy C.I.S. Norway Cayman Islands Ireland Ireland Bermuda Texas England Norway Delaware Delaware Venezuela Delaware Delaware Virgin Islands Delaware Delaware Delaware Delaware Delaware ' j - v 'lAAnn 'AAnnnrAm r\ i nn/3ACC .. . Page 123 of 133 % of Voting Securities owned by Immediate Parent <C> 100% 100% 100% 100% 100% 100% 100% 100% 64% 98% 100% 93% 100% 100% 100% 100% (6) (7) (8) 100% 100% 100% 100% 100% 99.3% 90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% 100% 100% (9) (10) in.'n'm Page 124 of 133 <PAGE> EXHIBIT 21 - OCTOBER 31, 1993 Page 4 <TABLE> <CAPTION> Name State or Other Sovereign Power Under the Laws of Which Organized % of Voting Securities owned by Immediate Parent <S> <C> <C> Kellogg Far East, Inc. Kellogg ISL Limited Kellogg India Limited Kellogg Indonesia, Inc. Kellogg International Corporation Kellogg International Services Corporation Kellogg International Services Limited Kellogg Iran, Inc. Kellogg Iraq Limited Kellogg Italy, Inc. Kellogg Korea, Inc. Kellogg Malaysia, Inc. Kellogg (Malaysia) Sdn. Bhd. Kellogg Mexico, Inc. Kellogg Middle East Limited Kellogg Middle East Services Inc. Kellogg Nigeria Inc. Kellogg Overseas Construction Corporation Kellogg Overseas Corporation Kellogg Overseas Services Corporation Kellogg Pan American Corporation Kellogg Plant Services Inc. Kellogg Rust Services Inc. Kellogg Rust Synfuels, Inc. Kellogg Saudi Arabia Limited Kellogg Services, Inc. Kuwait Kellogg Ltd. M. W. Kellogg Company Limited M. W. Kellogg Constructors Inc. Pullman Incorporated Capital Corporation Pullman Kellogg Algeria Inc. Pullman Kellogg Plant Services Algeria, Inc. Societe Kellogg Malaysian Barite Sdn. Bhd. Masoneilan International, Inc. Dresser B.V. Dresser Europe S.A. Dresser Industrial Products B.V. '* AVA Netherlands B.V. Dresser Japan Ltd. Dresser Netherlands B.V. Dresser Wayne AB Dresser Produits Industriels Delaware Cayman Islands Delaware Delaware Delaware Delaware Cayman Islands Delaware Delaware Delaware Delaware Delaware Malaysia Delaware Delaware Delaware Delaware Delaware Delaware Panama Delaware Delaware Delaware Delaware Delaware Delaware Delaware Canada Delaware Delaware Delaware Delaware Delaware Malaysia Delaware Netherlands Belgium Netherlands Netherlands Japan Netherlands Sweden France 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (11) Page 125 ol 133 Kellogg France, S.A. Masoneilan S.p.A. Masoneilan HP + HP GmbH Masoneilan Internacional, </TABLE> < PAGE > S.A. de C V. France Italy Germany Mexico 100% 100% 100% 100% EXHIBIT 21 - OCTOBER 31, 1993 Page 5 <TABLE> <CAPTION> Name State or Other Sovereign Power Under the Laws of Which Organized % of Voting Securit owned ! Immedi, Paren <S> <C> <C> Masoneilan S.A. Masoneilan (S.E.A.) Pte. Ltd. P.T. Security Mulia Indonesia Property and Casualty Insurance, Limited Property and Casualty Insurance Ltd. - U.S. T K Valve & Manufacturing, Inc. T K Valve Holding Limited T K Valve Limited T K Valve (Abu Dhabi) Limited T K Valve (Europe) Limited T K Valve (Borneo) Limited Tecman Services Limited T K Valve (Singapore) Pte. Ltd. T K Valve, Inc. T K Valve (Canada) Ltd. Triconos Mineros S.A. Turbo Productos Dresser S.A. de C.V. Worthington Corporation Worthington do Brasil, Inc. Worthington Pump Inc. Worthington Colombiana,. S.A. Worthington GmbH </TABLE> Spain Singapore Indonesia Bermuda Vermont Texas England England Scotland Scotland Scotland Cyprus Singapore Texas Canada Chile Mexico Delaware Delaware Delaware Colombia Austria 75% 100% 70% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% 100% 100% 100% 100% 100% 100% 100% 93% 100% (a) The names of certain subsidiaries of Registrant have been omitted since the unnamed subsidiaries considered in the aggregate as a single subsidiary would not constitute a significant subsidiary. (1) Shares held in trust by Abacus (Nominees) Limited (99.9%) and Abacus (Cyprus) Limited (.1%). (2) Shares held in trust by Abacus (Cyprus) Limited (50%) and Abacus (Nominees) Limited (50%) . 53) Shares held p.n trust by Asiaciti Management Pte. Ltd. for the benefit of Dresser Singapore Pte. Ltd. (4) Represented by common voting shares. 100% of issued preferred voting shares are owned by Dresser Canada, Inc. ^vdr,.1,-n-.t.i/innoo/nnnnosm n -Qd-nnonss tvt irri3/ni Page 126 of 133 (5) Remaining 5% owned by Dresser Minerals International, Inc . (6) Remaining 2% owned by M-I Overseas Limited. (7) Remaining 7% owned by M-I Overseas Limited. <PAGE> EXHIBIT 21 - OCTOBER 31, 1993 Page 6 ( 8) Represented by common voting shares. M-I Drilling Fluids Company owns all but one of these issued ordinary shares which is owned by M-I Drilling Fluids International B.V. 100% of the issued Class A preferred shares (non-voting) owned by M-I Drilling Fluids Company. M-I Drilling Fluids Canada, Inc. owns 100% of the issued Class B preferred shares (non-voting with 1 exception). ( 9) Remaining .7% owned by M-I Overseas Limited. (10) Interest actually held by Reid Finance Limited and eight nominees for the benefit of M-I Drilling Fluids Company. (11) 100% of issued voting preference shares held by Dresser Anstalt. (12) Remaining 25% owned by Dresser Produits Industriels. (13) Remaining 49% held by T K Valve Limited's agent, Pipeline Equipment Benelux B.V. (14) Remaining 7% owned by Dresser Minerals International, Inc. (1.8%); Dresser International, Ltd. (1.8%); Dresser Industries, Inc. (1.7%); Worthington Corporation (1%) ; and Dresser Holding, Inc. (.7%) . </TEXT> </D0CUMENT> <DOCUMENT> <TYPE>EX- 21 <SEQUENCE>9 <DESCRIPTION>CONSENT <TEXT> < PAGE > EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (numbers 2-76847, 2^81536, 33-2609?, 33-30821 and 33-48165), Form S-3 (numbers 2-91309, 33-47832 and 33-59562) and Form S-4 (number 33-50563) of Dresser Industries, Inc. of our report dated December 9, 1993 appearing on page 22 of the Dresser Industries Inc. Annual Report on Form 10-K and of our report dated November 12, 1992 relating to the financial statements of Dresser-Rand Company as of September 30, llttv oiao rrm 'ar^LL oc-/^,LTnr/d-,t;>',innoo/nnooosoni -Qd-fionn^s tvt 10/13/ni Page 127 of 133 1992 and 1991 and for the two years in the period ended September 30, 1992 appearing on page 3 of the 1992 consolidated financial statements of Dresser-Rand Company included in this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules of Dresser-Rand Company, which appears on page 87 of this Form 10-K. /s/ Price Waterhouse PRICE WATERHOUSE Dallas, Texas January 25, 1994 </TEXT> </D0CUMENT> <DOCUMENT> <TYPE>EX-24 <SEQUENCE>10 <DESCRIPTIONS OF A <TEXT> < PAGE > POWER OF ATTORNEY EXHIBIT 24 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. < PAGE > /s/ John J. Murphy John J. Murphy, Chairman of the Board and Director POWER OF ATTORNEY 7u"\nrin.-A i -> r\ i aacw').* .* /1i n ? n i Page 128 of 133 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. <PAGE> /s/ B. D. St. John B. D. St. John Vice Chairman and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for her and in her name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorneys - in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set her hand this 20th day of January, 1994. s < PAGE > f /s/ William E. Bradford W. E. Bradford Director POWER OF ATTORNEY ...................... a t.v,I,,.-,,-oiot.-,/-jnnoo-nnnwKm 11 -Od.nnnn^ vi i o' n Yi i Page 129 of 133 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. <PAGE> /s/Samuel B. Casey, Jr. Samuel B. Casey, Jr. Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. < PAGE > /s/ Rawles Fulgham Rawles Fulgham Director ..' a ..,,i /,.-i .-Moto nnnnci-'nnnncKm 11. o-i _nnnn44 tvt 1 o.'l 1 '01 POWER OF ATTORNEY Page 130 ot 133 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. <PAGE> /s/ John A. Gavin John A. Gavin Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. /s/ Ray L. Hunt Ray L. Hunt Director K f 1 t-> 1 l i 11c < '/v 1 \ rr l-\ ' ( .^rM'.M'innocvnonnosnni-Oi-nnnoss tvt in/n/oi <PAGE> POWER OF ATTORNEY Page 131 ot 133 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. <PAGE> /s/ W. George Nancarrow W. George Nancarrow Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. "f /s/ Lionel H. Olmer Lit,-,- 'Ux-ww cnr imv1' A rrhn ec-WOmr/Hftt;i/50099/00009501 11 -94-000055 tXt 10/13/01 <PAGE> Lionel H. Olmer Director POWER OF ATTORNEY Page 132 of 133 KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. <PAGE> /s/ A. Kenneth Pye A. Kenneth Pye Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or officer of DRESSER INDUSTRIES, INC., a Delaware corporation (the "Company"), hereby constitutes and appoints REBECCA MORRIS and STANLEY E. MCGLOTHLIN and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign Dresser Industries, Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1993, and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each or either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys - in-fact and agents, and each or either of them, or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. " IN WITNESS ^HEREOF, the undersigned Director and/or officer of the Company has hereunto set his hand this 20th day of January, 1994. - < a ,.,i.:.. <, .i, nnnnn'flAmfi<mni ni nAnn^ ivi 1 rvi ITH /s/ Richard W. Vieser Richard W. Director </TEXT> </DOCUMENT> </IMS -DOCUMENT> -----------END PRIVACY-ENHANCED MESSAGE------------ Vieser Page 133 of 133 ; , j ....... . ''nnnn'nnnnncAm o ^ n/innss h-t i n n 7 /m