Document BRkm8RJrbBZwDJbkYwQ5g5a1m
, D.C. 20549
PCRf 00-X AM8JAL REPCRT JOOTWr TO SECTICN 13 OR 15(d) OF
THE feBOUKinBS BOSOMS ACT OF 1934
For tbe fiscal year ended October 31, 1988.
Omission fils rater 1-4003
(Exact non* ad
its ctertsr)
/s*
Delaware (State or otter jurisdiction of incorporation or organisation)
75-0813641 eyar Identification No.)
Post Office Box 718 1600 Pacific
Dallas, Thacas (Address of principal executive offices)
75321 (P.O. Box)
75201 (ZipOods)
Registrant's telephone rater, including szsa cods (214) 740-6000.
Securities rsgistsrsd pursuant to Ssction 12(b) of tte Act;
of --eh elm
Conner stock, Bar value 250 Mr Stezs
$n mJrtfri
Now Bock Stock Boctenge, me. Pacific Stock Boctenge Incorporated
9-3/8% sinking Find Debentures due 1995 New Nock Stock Boctenge, Inc.
9-3/8% Sinking Fund Ddaenturss due 2000 Mr XQTX STOCK BRMliJpi ilC
11-3/4% Sinking Fund tetentures due 2007 Now York stock Boctenge, me.
Indicate by check aark abetter tte registrant (1) has filed ell reports required to be filed by Section 13 or 15(d) of tte Securities Boctenge Act of 1934 during tte preceding 12 norths, end (2) has teen subject to such filing raguirenents for tte peek 90 days.
Yes _JL Vo____
As of January 16, 1989, there wars 67,505,138 ateres of Dreeear Industries, Inc. Coanon Stock issued and outstanding, Bn aggregate aaxkst value of tte Omen Stock (based on tte dosing pries an tte Now York Stock Boctenge ss of January 16, 1989, hold by ncn-effilietes was approodsately $2,075,782,993.
Doossmts Incorporated by Reference:
Pert I (Item 1) end
Pert II (Items 5, 6, 7 end 8) '..........
Sections of Freeser Industries, Inc.,
Annuel Aqpcrt to Sbentoaldsrs for tte
Year Bated Octcter 31, 1988.
Pert in (Itens 10, 11, 12 and 13)...
Breeeer Industries, Inc., Proocy State-
aent for tte Annual Meeting of flfaareholtters to be teld March 16, 1989.
1
rar z
Item 1.
qf DFftffPWr-
Dresser Industries, Inc., together with its subsidiaries ("Dresser* or "Registrant" hereinafter) is a major worldwide supplier of products and services for industries involved in petrulsuen and natural gas exploration and develop ment, energy processing and conversion, enginsarlng services, and mining and selected industrial activities. Typically, Dresser's products and eervioee are
technologically ample* and require a higi dagrea of expertise in design, manufacturing, and marketing. Dresser was incorporated tnder the laws of Delaware in 1956 as a successor to a Pennsylvania corporation organized in 1936 by the consolidation of S. R. Dresser Manufacturing company and Clark Bros.
Ocspany. Both were carrying on businesses founded in 1880. Dresser's executive offices are located at 1600 nciflc, Dellas, TUns 75201 (telephone nmbar
214/740-6000).
For the fiscal year ended October 31, 1988, consolidated net sales and service revenues of Registrant amounted to $3,941.7 million, and net earnings were $156.8 million. A majority of such revenues was derived from the sals of products and services to ensrgy-crijctoed industries, including oil and gas exploration, drilling and production, gas transmission and distribution; petroleum and chemical processing) production of electricity; and marketing of petroLeue predicts. Other markets acoounbad for the remaining revenues and included a broad range of products and servicaa for basic industries such as steel, water, sewerage and construction.
On January 11, 198B, R^jistrant acquired the assets and business and warnmad certain liabilities of lbs ML W. Kellogg Ooapany, a wholly-owned subsidiary of The Barley (hag), me. M. W. Kellogg is one of the world's leading process engineering and ocnetructicn firms.
Registrant's operations are divided into five industry segments: oilfield operations (formerly petrolsw operations); energy processing and conversion equipment; engineering servioas; mining and construction equipment; and general industry. After the acquisition of The N. W. Kellogg Company on January 11, 1988, Registrant determined that the anriromantal products operations, previously included in the energy processing and conversion equipment aagemrt, should be combined with operations of The H. W. Kellogg Ocepuy to form a new segment, engineering services. Also during 1988, the gasoline dispensing systems business was transferred from the oilfield operations sequent to the energy processing and conversion equipment sequent and the metals mining business was transferred from the oil field operations ssgesnt to the general industry segment. Therefore, ssgwnt results for 1988, 1987 and 1986 are
reported on the revised basis, and 1987 and 1986 data have been restated accordingly. In addition, Registrant has the following unconsolidated subsidiaries: Property c Casualty Insurance Limited and Dresser Finance Corporation. Registrant's real estate company, Direlco, Inc., an unconsolidated subsidiary in fiscal years up to and including 1986, was consolidated in 1987. In fiscal 1987, Registrant sold a majority of the assets of Direlco, me. and 100% of the stock of its unconsolidated subsidiary. Dresser Leasing Corporation.
2
In fiscal 1988, Registrant sold 100% of tha stock of its unoonoolideted subsidiary, Reliance standard Ufa Insurance Ocapany.
The mfomatim by Industry Segamnt, included in Mats 0 to Consolidated Financial Statements on pages 44 through 48 of like Annual R^xart to Shareholders far the year ended October 31, 1968, is incorporated herein by reference. This information includes sales and service revenues by class of similar products or cervices within each sageart, operating profit or lots and identifiable asserts attributable to each of Registrant's business ssgssnts far each of the pest three fiscal years. This infcreation rtxuld be read in conjunction with the consolidated financial statements, notes end accountant's report appearing in the 1988 Annuel Raport to Biareholdsrs which, as indicated in Item 8 of this report, are Incorporated by reference herein.
OnflSLD OPERATIONS SEGKBCF
Registrant's petroleum operations ssgsent is a leading worldwide mppllar of products and services essential to oil and gas exploration, drilling and production. These products and sarvioae Include drilling fluid systems, oilfield products and petroleta services.
twhiUtw Fluid aynta-- Mid eolM-art bkvIhw. Effective December l, 1986, Registrant's Magoobar operations were oonbined with the BCD operations of Halliburton Ocepany into H-l Drilling Fluids Ccspany, a Vernas general partner ship, in which Registrant has a 60% interest, *-l provides a variety of drilling fluid systems and markets such fluids and related services far use in connection with drilling oil and gas wells.
Effective September l, 1987, Registrant's Shboo operations were oonbined with Geolograph-Picneer, Inc., into Sweoo Csolograph Company, a Item* general partnership, in which Registrant bee a 65% interest. Swaco Geoiognqh designs, builds and naxksts a broad line of detection and control equipment used during drilling, often in ocnjmetier with the above rtesrrlbed fluid systems, and bakers, deeilters, degasem-s and centrifuges used to remove solids and gas
prior to refuse of the fluids.
Registrant markets drilling fluid systems and related services through its K*I Drilling Fluids Company salsa fores to major dcmastic and international oil ccapanies, independent drilling operators and contractors and foreign geverrnent-awned companies.
onfiaid
and Tools!. Registrant produces a full line of
oilfield and mining rode bits, and drilling tools, which are marketed under the
Security trademark and are used in drilling oil and gas wells and in the mining
industry.
Registrant's Culberson 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.
3
PBfcrolgm Services. Effective Hay l, 1987, the Dresser Atlas operation vers ccnbined with tht Resources Qroup of Litton Industries, Inc., to fern Western Atlas Internatlcn&l, Inc., a Delaware Corporation, in which Registrant owns, on a fully diluted basis, iqpnoariiwtsly 29.6% of tbs outstanding rtmres. Certain bey employees of western, Atlas have bean granted the right to purchase hares of WMtem Atlas under a restricted stock Rircfcase Plan. Atlas wireline services include well-logging, a technique used to record infaraatlon about downhole conditions and the geological fcreation anoountsrad during or after a well has been drilled, perforating services to initiate or increase the oil and gas flow in a prospective production well, and production logging services vfcich provide monitoring information on producing wells. Wireline services are provided to oil and gas ccspaniss and govezment agencies throughout tbs world, and sales of wireline equlpawnt are made to oil and gas companies and gcwernmsnt agencies outside the united States in those countries where foreign oonpaniss are not allowed to provide wireline services.
This segment designs, manufactures and markets highly mginsered products and systems for the energy producers, transporters, processors, distributors and users throughout the world. Products and systese of this segment include cceproooars, turbines, electrical generator systems, pops, mechanical power systems, measurement and control devices, and gasoline dispensing systese.
Oonpresears. Effective January 1, 1987, Registrants Dresser Clark Division, a portion of Worthington depressor Division, and eelectsd service centers together with Registrants TUrbodyns operations ware combined with similar operations of Ingersoll-Rand Ocepeny into Dresser-Band Company. Ohs New York general partnership is owned 50% by Xngsraall-Rand and 50% by Registrant.
Clark, a leader in turbine and ccapraasog technology, manufactures industrial and aircraft derivative gaa turbines, oentrifugal ccapreesora, axial oonpreasora, reciprocating rrapnim--nru and axial expanders. Gas turbines and motors are used to drive aapreescra, generators and pupa with application in many markets including: cogeneration, power generation, natural gaa gathering, processing, transmission and distribution, natural gas injection, petrochmalcal 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 amaonia production, ettylene and liquified natural gas (IMG) production, aoal gasification, refinery services and other petrochmalcal prooaaaas. Axial crapresscira are used in ooal gasification, blast furnace, nitric acid and refinery services. Axial expanders asa used in power recovery applications, nitric acid plants and refinery processes.
Worthington OMfevaBCja: is a leader in the manufacture and supply of water cooled reciprocating ccnpresaore. Separate ocspreaaar lines are manufactured and marketed far the process, enhanced recovery, natural gas, and Industrial air coamercial markets and special shipboard air ctapraaaors for the Navy.
Turbodyne manufactures and markets single and multi-stags mechanical drive steam turbines which are uead to power pimps, fans, blowers, reciprocating ccBppeascrs and oentrifugal compressors; steam turbine generator sets which preside electric power for co-generation and alternate fuel markets; electric motors (synchronous and Induction type); and electric generators for use with
4
reciprocating engine, hydrotuzblna, steam turbine and gas turbine drivers. Turbodyne also manufactures and saxksts cryogenic expanders, oaabinad with single stage ooeprasaars or generators, to recover energy frae production of low tenpexature process gasss used in air separation hydrocarbon facilities. Ibs primary markets for such products are petrolmm, pstnort--ioal, chemical, paper and sugar industries, and engineering fires ihich design plaits for such Industries.
BIBS* Effective January 1, 1987, the Draaaer Rep Division ws foessd through the integration of the Registrant's Pacific Pops and Worthington Pncp Divisions. Dresser Pop designs, develops, Manufactures and maxheta centrifugal pups thich are used for critical applications in energy pmnneeing and patrochenlcal market* as sell at in utility and industrial markets. Dresser Pap is also a major manufacturer of heavy duty process peeps, standard end-suctlcn puqpa, horizontal qplit-oass and ailtlstaqs pusps designed for general industrial, pipeline and hi$i pressure services, such pops have a vide variety of applications in oil and gas production and refining, dasdoal and petrochemical processing, sarins, sugar, agricultural, sining and mineral processing, utilities and general industry, m fiscal 1988 the Dresser Pap Division expended nftaaraihls and vertical turbine pimp capabilities due to its acquisition of the Plsugar puep hnwlnane fron TBW Inc. in October 1987.
Roots, the developer of the rotary lobe blower, offers a full line of low to sedius pressure air and gas handling blowers along with vacuus pupa. These include rotary lobe and screw-type positive dlepl ireewnt- products and several tuzbcnachinsry (centrifugal) lines. Vie prlsery sarksts served by Roots are vesta vater treatment, pneuiotic conveying, paper, chemical and general industrial.
LaRoi portable and stationary ooaprasscrs and air tools accounted for the reneindar of the 'fxega--oar and puqp buslnase.
Power Svstaee. Registrant's Wmiloeehw Division produces power systems ocnsisting of heavy-duty reciprocating gas and diesel anginas.
Dresser Valve and Controls. Control products enoayass an asaoctaent of sensing. Indicating, transducing, treneoitting and controlling devices. Instruments, valves and meters sold under registered tzedsearks - ASHCROFT, OOH9QLJDKIED, CEWRANCE, D0QRAG8AGE, DURAXBff, DQBKDQW, HWJOOCK, BEISB and KASCNEHAN - Beasura and control pressure, teeperature, level and flow of liquids and gases, abase products are add primarily to the prooeae, power, general Industrial and gas distribution industries.
Registrant manufactures and sells a variety of gasoline dispensing systems and related sguipaant.
Registrant's engineering aarvioes eageent is, through His X. W. Kellogg Ctmpany, cne of the world leaders in providing engineering, contraction end related eervioee, primarily to the hydrocarbon process industries. This secpent also dssigpw, produces and Installs pollution control sgnipeant in ooal fixed power plants.
5
mam md aoMBiisxsnov bqoiimdit sbmvt
Registrant is a leading producer of underground and surface mining equipment and equipmant used in road construction and saintananca and ganaral construction. Effective Baptaihar 1, 1988, Registrant's Construction Equipment and HMJiflK Divisions, throuch Ragistrant's iholly-cwnad subsidiary, Crasser Finance Corporation, wars ooebirmd with opsrationa of Ruwtsu America Corporation and Xomatau America Manufacturing Corporation ("Komatsu*), wboilycunad BubeidiarlaB of Komatsu, Ltd. of Japan, lbs newly harmed ganaral partnership, Rmatau Dresser Ccepary, is squally canad by Dreossr Finance Corporation and Baaatsu.
Ccanatruetiffw wailmwnt. 3ba Construction Equipment Division manufactures and anrksts crawler tractors, crawler and wheal loaders, scrapers, excavators, actor graders, road rollers, rough terrain hydraulic cranes and road planerB. These products arm used In a wide variety of construction, mining and related applications.
Sales of construction equipment products art generally mads through distributors. Major customers include governmental agencies, private contractors and mins operators.
*- Mining Bquipawnt includes both underground and surface mining equipment and off-highway trucks.
The HMJLEMC Division is a leading producer of off-highway trucks used in all types of mining and quarry activities. Sales by this division are generally made through distributors.
The Jeffrey Division principally protases underground continuous mining machines and related equipment which are used primarily in underground bituminous coal sines. Sales of Jeffrey sqilfimnt ate generally mode directly to users through Registrant's sales engineers and aigpoxt personnel. Registrant also produces various types of ocapomnts, such as shearers and related equipment, for use in the longwall method of underground coal mining.
The Marion Division is a lsading producer of talking draglines, power ehovals and related equipnmit uaad in surface mining and quarrying. Principal users of Marion surface mining aqulfant ere operators of surface coal mines, both in toe United States and abroad. Itarion sales are made both through distributors and directly by Dresser personal, depending on toe product.
Registrant has a 50t interest in SMC Mining Shovel Corporation, a Japanese ocapany which markets shovels and drills in the Far East.
Ragistrant's general industry aageent produces products with a vide variety
of Industrial uses. Major products and markets are: Industrial products which
include pipe couplings, pipe fittings and gas meters for use primarily by
utilities end process plants, pnaustio * and refined
end related
minerals. Ode eerpaent also eippliew refractory technology and products to a
vide range of industries that utilise high-temperature processes.
6
Baftnctogv
fos RaxbisoHtalksr Refractoriss Division is a
leading rpHr of refractory products and an overseas licensor of technology.
Registrant nines, processes and aamfactures over 200 refractory products that
cover a coqplete range of classes and types In various shapes, sizes and faros.
Rsfractaries, which are mads principally froa magnesite, chromite, bauxite,
quartzite and fire days, are used in virtually every industrial prooeas
requiring heating or oantalnaent of a solid, liquid or gas at a high
temperature. Iren and steal producers, which accounted for about half of
Registrant's 1988 refractory e&lee, uee Registrant's products in various types
of iron and steel netting furnaces, In ootae evens and in iron and stael handling
and stael finishing operations, industrial markets for Registrant's refractory
products Include non-ferrous setals producers, mineral procaeenre (cassnt, lias
and glass), fossil-fueled power plants, chrolcal and peitroleuB processing plants
rod general industry.
Tndufcr<*i Rrpi-ir-arrt- PmAr. industrial squipewnt products include pips
fittings, couplings and repair devices for sale to the gas and water utilities and other industrial markets under the registered 1KESSEB trademark.
fools and Abrasive RrattictB. Clsoo pneumtic tools include wnssiWy tools
for use primarily in the electronic, aircraft and automotive aarksts, end maintenance aid fabrication tools suppllad primarily to pstrnleum refineries, chesdcal plants, foundries, steel mills and general industry. Quacksnbush pnsueatic and hydraulic precision drilling sgnlpwint is used in tbs aircraft and aerospace industries and in anbile machining applications. Airatool deeners
and SKpandars are used by the sanufacturars and users of beat aochangars and boilere of all types. Registrant's Bey State aid General Abrasives divisions ware add effective June 30, 1968.
in general, raw materials utilised by the coopery remain in adequate supply, but several operations are beginning to experience prim increases in various materials purchased in the open market Induding hey qmponenta of certain techixslogicaUy-orisnted refractory products.
BACXIOG
foe backlog of unshipped orders at the end of 1988 warn $2.04 billion. Order* constituting the Cespeny'e backlog may be canceled or deferred by customers (subject in certain cases to cancellation penalties).
foe significance of backlogs in understanding the Ompary's business has changed in recent years in line with changes in the Oapeny'* business maketp. For sacaaple, the transfer of the Construction Equipment and HHJUNt Divisions to Kesatsu Dresser Gtspany as well as the Clark and Kbrfoingtcn Oogprassor Divisions to Dresser-Rand Oospany had the effect of lowering the consol idated backlog rashers of these lrpartant product areas, in addition, foe acquisition of foe M. W. Kellogg Ooopaqy in Jhasoy 1968 added a significant new backlog business - Engineering services - to foe ccspeny. Bote foe fallowing table for an analysis of the year-end backlog position for foe pest two fiscal years:
7
{in Millions)
1988 1987
Engineering Services (1) Energy Processing and Oonversion Bguipment (2) Mining and Construction njilrunt (3) General Industry Otter and Adjustment
1,460
399 103 70
4
22 349
174 72
1
(1) The M. w. Kellogg Ccepary acquired January ilr 1988. (2) Certain segsent operations transferred to treater Rend Ccepary January
1, 1987. (3) Certain eegeerit rpmrwfrlma transferred to Komatsu Dresser Ompsny
Septitemir l, 1988.
Generally, orders for sany of the Ccepsny's servioas and products are placed by customers on the basis of current need. Therefore, backlog of orders for these servioas and products is not eatsrial.
8MKB AHD nXRKZBtmXX
Registrant's products and aervloaa are marketed through various channels.
Zn the United States, sales are gmnerally made through a group or division Bales
fyrdKuHnri or thxou^i
dlstzibutora. Sales in
are usually
affected through e division of a Qnadian subsidiary. Salas in other countries
are amds directly by a United States division or aitaidiary, through foreign
nteldlariss or affiliates, and *+*TM**f* distributor arrangements or with tte
The products of Draseer are sold in highly ocepetitive markets, and its sales and aaminga can be affected by changes in ooapstltive prices, fluctu ations in tte level of activity in major markets, or general economic conditions.
Registrant Maintains manufacturing, marketing or service facilities serving more than 65 foreign countries. Globel distribution of products and eervicM is aoocepliated through vn than 210 auhsidlary and affiliated oospenies engaged in various production, manufacturing, aervloe, and marketing functions, and through foreign representatives serving the principal market areas of tte world.
Ite Information by Geographic Area included in Robe O bo Oonsoildetad Financial Statements on pages 44 through 48 of tte Annual Report to fltexaholdare for tte year ended October 31, 1988, is incorporated herein by reference.
Registrant's foreign operations are subject to tte usual risks Which may affect such operations. Such risks include unsettled political conditions in
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certain areas, exposure to possible expropriation or other gcvenrortal actions,
exchange oontrol and cumncy prcfalass. Although it is impossible to predict the lDaalihood of such occurrences, or their effect an Registrant, earwgwamt believes these risks to be acceptable.
Registrant's divisions and subsidiaries conduct research and development activities in over 20 laboratories and test fecilitiae within thair particular fields for the purposes of improving existing products and developing new cnee to meet the needs of their custCBMce. In addition, raaoarch and develop--* programs are directed toward developoent of new products and services for diversification or expansion. Tor the fiscal years ended October 31, 1988, 1987 and 1986, Registrant spent $27.4 aril lion, $32.4 Billion and $2.9 million, respectively, for research and dmelcpent activities.
At rwrantw 1, 1988, Registrant and its subsidiaries, as defined by Regulation 1210.1-02(v)of the Securities and fitchange Ooenlsslcn, owned 2,239 patents and bad pending 705 patent applications, covering various products and processes. They also were licensed under patents owned by others. Registrant does not consider that any patent or groqp of patents relating to a particular product or process is of notarial ixportsnos then judged trm the standpoint of Registrant's total business.
As of October 31, 1988, Registrant had approadaateQy 16,400 employees in the united States (a decreese of approximately 8% free October 31, 1987}, of ebon approximately 7,750 were afatiers of 11 unions represented by 35 bargaining units. As of the same date, Registrant had approximately 14,300 eaployees at foreign locations of whoa apprcadmataly 3,550 ware aeabere of uiions. During fiscal 1988, Registrant experienced three contract negotiation strikes In the united States. Relations between Registrant and its ewpiaysas are generally considered to be satisfactory.
MsuunvE appicnm or rm mnamm
The naaas and agae of all executive officers of Registrant, all positions and offices with Registrant presently held by each parson nanad and their business experience during the last five years are stated below:
Hawe, Ace and Position
Vfi liwl OnrnnwHon Hiring Rest Five Years
John J. Murphy
(57)
Chairman of the Board,
President, Chief Executive
Officer and Director
Chairman of the Board and Odef Beecutive Officer of Registrant ainoe August 1963; President of Registrant since August 1982.
B. D. St. John
(57)
Executive Vice President -
Aribdnietratian and Director
Executive vice President - AAainstratlon of Registrant since Ncvaeber 1982.
G. A. Roach
(55)
Senior Vice President -
Operations
Senior Vice President - Operations of Registrant since Kerch 1983.
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Gene E. Lesson
(55)
Vice President - operations
Ban R. Stuart
(54)
vice President - Operations
J. J. Carboy
(59)
Senior Vice President -
Accounting and Rue
Arden B. JUdd, Jr.
(52)
Vice Resident - Washington
Counsel
Operation Paring Pmt Five ftm
Vice Pnaidmt - Operations of Registrant sinos February IMS; Visa President - Bunn nasourcee of Registrant, April 1983 - February 1988.
Visa Resident - Operations of Registrant since August 1988j President of Registrant's Dresser Valve and Oantrols Division, October 1987 August 1988; Resident of Registrant's Kbuknaha Engine Division, January 1984 - October 1987} President of Registrant's Industrial Bgalpawnt Grap, October 1975 - January 1984.
Senior Vice Resident - Accounting and Tax of Registrant since June 1987; Senior vice Presi dent - Finance end Accounting of Registrant, August 1985 - June 1987} Vice President Accounting of Registrant, October 1980 to August 1985.
Vice Residant - Washington Gomel of Registrant sinos Septaaisr 1986} Staff Vice Resident Washington Comal of Registrant, July 1978 -
Richard E. Hauslein (58)
Vice Resident - Hunan Resources
David P.McElvaln
(51)
Vice Resident - Finance
K. Scott Nickscn, Jr. (54) Vice President - General Counsel and Secretary
Vice Resident - Busan Resources of Registrant sines February 1988} Staff Vice Residant Oonpensatlon 8 Benefits of Registrant, Jlily 1987 - February 1988} Staff Vice President Bmsfit Regress of Registrant, February 1987 JUna 1987} Director of fiployee Relations of Registrant, Kovrabar 1983 - January 1987.
Vice Residant - linencs of Registrant since June 1987} President of Registrant's Financial Services Group, January 1984 - Jim 1967} Executive vice President, Financial Services Group of Registrant 1962 - 1983.
Secretary of Registrant since Septssber 1985; Vlos Resident - General Counsel of Registrant sinos October 1980.
Man, tat and FQftiticn
Killian E. Bradford (54) Senior Vice Resident Operations
nrowtlnn During Ret Five Years
Rsedxhnt and (Siief Bocutive Officer of Dresser-Rand Ccspany since Friaruazy 1988} Senior Vice President - Operation of Registrant sinos March 1984; Vies President - operations of Registrant, Ssptssber 1983 to Kerch 1984.
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M--
and Vn*\+Am
nnmrm+ir* tering PMfe Piw Y^ra
Carroll H. Browning (64) senior vice President Operations
Bdecutive Vios Rasldmt ard Chief Operating Officer of Heatam Atlas international, Inc. since Nay 1987; Senior Vice Resident Operations of Registrant since Cscashar 1984;
Resident, Atlas Oilfield Services Group of Registrant, isnedinr 1978 - nsnedrr 1984.
R. W. ytterbecg
(61)
Senior Vice President -
Operations
Chairmen end Qiief Boacutive Offiosr of Kceatsu rfcesser Ocapany sines August 1988; Senior Vlas Resident - Operations of Registrant since April
1983.
All officers are sleeted annually by the Board of Directors at a seating following the Annual Meeting of Sharrtinlrttrs. The officers serve at tbs pleasure of the Board of Directors and can be reamed at any tine by the Board.
Registrant has sore than 60 eenufacturlng plants, ranging in size free approximately 10,000 square fleet to in excess of 870,000 square fast and totaling sore than 14,000,000 equate feet, located in the Halted States, Canada, and various other flatein countries, ns sajarity of ths ssnufacturing
sites are owned in fee. In addition, salsa offices, warehouses, service canters and stock points are maintained, almost ell in leased apsoa, in the united
States, Canada and certain other foreign countries, The properties are believed to be generally well aaintained, adequate for the purposes fior which they are used, and capable of supporting a higher level of market deeand.
During fiscal 1988, Registrant also had 23 grinding anVar other facilities far beneficiatlng mineral ores, containing appreaeirately 4,000 acres in plant site property.
The following are the locations of R^istrant's principal facilities fbr each industry ssgsent:
Apprcodnete Floor Area fSamw Vat*}
Oilfield Cperaticns
Eunice, Louisiana
Dallas, Texas Itiarton, Texas
(Oilfield Products) (Oilfield Redacts) (Drilling nuide)
313,000 (l) 294,000 53,000 (2)
Energy processing and Conversion Bguipaant
Bintington texfc,
California Madrid, Spain Rio da Janeiro, Brazil Haaburg, Mast Germary
(Ocaprassani and Baps)
(Cosprsssani end Baps) (Oceprassccii and Baps) (Ocsprasscni and Baps)
269,000
64,000 204,633 220,000
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Oomersville, Indiana East Orange, New Jersey Harrison, Has Jersey Taneytown, Maryland Brantford, Ontario, Canada Chesapeake, Virginia Hmfcurg, Nest Gsraany Nantes, Francs Eloyes, France Keru, Franca Newark, United Kingdcn Buenos Aires, Argentina Brum, Austria Madrid, Spain Sidney, Ohio Clinton, loua Waukesha, Wisconsin Skaleneredale, England Avon, Massachusetts Canton, Jiussarhiisnt'te MOntebello, California Jacarei, Brasil Conds, France Barcelona, Spain Burlington, Ontario,
Canada Naples, Italy Stratford, Connecticut Berea, Kentucky Alexandria, Louisiana Salisbury, Maryland
Austin, Texas
IfalSK),
Einbeck, West Garnery
Rio da Janeiro, Brazil
Bigineerlng Services
Birninghan, England
Houston, Texas
Houston, Texas
Wenbley, Ragland
(Oaeprassom and Reps) (Coepreeacra and Reps) (Ooepressces and Reps (Ooepeassors and Fupi) (Oceprassars and Raps) (Ocspressors and Raps) (Oosprassors and Raps) (Oosprassors and Raps) (Ocsprasncre and Raps) (Ocepceesars and Raps) (Ccepressocs and Raps) (Pnepressm-e and Raps) (nripreesnre and Raps) (CYipneanrtni and Raps) (nupaesafT'e and Raps) (Rower System) (Ream: System) (Control Products) (Control Products) (Control Rraducts) (Control Products) (Control Products) (Control Rraducts) (Control Products) (Control Rraducts)
(Control Rraducts) (Control Rraducts) (Control Rraducts) (Control Products) (Gasoline Dispensing
System) (Gasoline Dispensing
(Gasoline Dispensing
(Gamline Diepenelng
(Gasoline Diepenelng
(Envircneental Rraducts)
(The M. V. Kellogg Ctspeny)
(The M. v. Kellogg Ccepany)
(lb* H. v. Kellogg Oepany)
12
Ajprxsdaata Floor Area laswcUMti
352.000 261.000 756.000
69.000 120.000 153,600 (1) 126,178
57.000 106,534
62,484 336.000 134,553
50.000 80.000 230.000 129,201 873,776 170.000 (1) 111.000 55.000 (1) 79.000 (1) 75.000 192.000 56.000 54.000
83.000 330.000 92.000 298.000
338,067 (1) 103,491 (1)
294,643 (1)
84,833 (1)
214,710 (1)
83,500
560,886 (1)
74,300
26,009 (1)
Apprcadaate Floor Ana
Mining and Construction Bqulpasnt
Ooluxbus, chio ifaricn. Ohio Woodruff, South Carolina Wakefield, England South Africa
(Mining Bgaipeait)
(Mining Erjiljeenf.) (Mining Egu1|--nt) (Mining EgnlpnairA) (Construction and
Mining Bgnipwnt)
General industry
Alliance, Chio Bsssener, Alabana Eufaula, A1abase Fairfield, Alabasa Calhoun, Georgia Haanond, Indiana Mils, Maryland Hew Savage, Maryland Xudingtcn, Michigan FUltcn, Missouri Vandalia, Missouri wlndhse, Chio Marian, Quebec, Canada West Mifflin, Pennsylvania Springfield, Chio
Houston, Texas
Bradford, Pennsylvania MSllafaoro, Pennsylvania Houston, Tncas
(Industrial Bguipssnt) (Refractory Products) (Refractory Products)
(Refractory Products) (Refractory Products)
(Refractory Brackets) (Refractory Ikoducts) (Refractory Products) (Refractory Products)
(Refractory Products) (Refractory Products) (Refractory Products)
(Refractory Products)
(Refractory Products) (Tools and Abrasive
Products) (Toole and Abrasive
Products)
(industrial Equipment) (industrial Bqulpaant)
(industrial Bquipnant)
(1) All or a portion of these facilities are leased.
192.000 597.000 132.000 280.000 227,000
60,000 132,000 51,600 248,200 92,000 291,500 166,000 168,000 210,000 380,000 375,000 298,000 447,000
65,000 60,000
201,000
525,000 110,000 105,000
Registrant has a 50% interest in an unincorporated joint venture which owns Dresser Tower, a 40-story office building in Houston, Texas, which was aceplstad in 1973. Far infatuation as to the Registrant's obligations with respect to this property, see Note L to Consolidated Financial Statsaants included in Registrant's Annual Report to Shareholders for 1988. in addition, a previously unconsolidated real estate subsidiary owned two office buildings as well as three associated parking facilities in Dallas, Texas, until they were sold on Dansrtwtr 19, 1986. See Note B to said Consolidated Financial Statenfca.
Effective Oacerthnr l, 1986, Registrant's Mineral rights to proven and prospective reserves of barite, bentonite and lignite were contributed to M-I Drilling Fluids Gcspany, a ocnpeny in which Registrant has a 60% interest. Such rights included leaseholds and Mining claiMs and, to a Minor extent, property owned in fee. The principal deposit of barite is located in Nevada, with
13
deposits
located In Australia, Ireland and Scotland. Reserves of bentonite
are located in Wycming and Greece. Based on tbe nariasr of tons of eadi of tbs
above minerals mined in fiscal 1988, **I Drilling Fluids Cospary estimates its
reserves, vbich it considers to bs proven, to be sufficient for operation for a
period of 12 years or more.
Registrant also has ricfvts to quartzite, bauxite end various types of day in nines and quarries, which Registrant considers too bs proven, totaling nara then 115,000 acres located in tin United States and Canada. Reserves are estimated to be in eaceae of 15 year*1 production.
Registrant has an undivided one-half interest in load deposits located in Hisscuri. The lead ore is mined and concentrated inter contract with Cominco American, incorporated, an Aneriaan subsidiary of Ooadnoo Ltd., a Canadian ocapany, as operator. Based on mining operations during fiscal 1988, Registrant's currant interest in the recoverable reserves in tills property is
estimated to be about 2,170,000 tons of are, estimated to contain approdiately
6.79% lead, 1.06% zinc and 0.26% copper. Sib property currently has, and is aaqaectsd to maintain for a period of about 4 yean, production at an annual rate of appnoadnately 1,050,000 tons of ore, in vbich Registrant's interest will bs 50%.
Rsfarenos is made to Item l, Lepl Fzooaadinge, contained in Bart H of Registrant's Form 10-Q Quarterly imports for the quarter ended July 31, 1988, describing settlement of patent-related litigation with Hughes Tool Ooipany. 8sa Mots L to Consolidated Financial Statements included in Registrant's Annual Report to Shareholders for 1988.
M-G--M- e
tO a VOtS fnf
Bnldwrg.
14
Mxr ii
Dividends included inter Dividend folia/ on page 49 of the Annual Report to Shanboldws for the year anted October 31, 1968, ara incorporated harain by reference.
Quarterly Coonon Stock Market prioae vara as follow for tha last two years:
1988 High . . . . low ... . 1987
High . . . .
lev ... .
First
Seoond Third
35 5/8
35
25 1/2 28 S/8
Fourth 31 1/4 27 1/2
Year 35 5/8 20
30 23 1/8
35 5/8 26 7/8
34 3/4 17 5/8
35 5/8 17 5/8
As of January 2, 1989, there were appradaately 18,400 eharaholtera of tha Registrar*'a Canon stodc diich is traded on the New fork and Pacific Stock
Item fieltotart Flnmirial Data*
Selected Financial Data on ERge 21 of the Annual Report to Shareholders for the year ended October 31, 1988, is incorporated herein by reference.
Itw 7.
nd Analysis of Financial Oondlticn end
Results r*f <Yr*iens.
ftnagaent'a Discuaaicn and Analysis on pages 22 through 25 of the Annual Report to Shareholders far tha year ended October 31, 1988, is incorporated herein by reference.
The following coneolidated Financial Stet--rtra of tha Registrant and its subsidiaries, together with the report thereon of Rice Waterhouse Included in the Annuel Dapcrt to Shenholtere for the year ended October 31, 1968, are iiOTporrow Miui ay rizvms
IS
Report of Independent Accountants
Consolidated Statseents of Earnings--Years ended October 31, 1988, 1987 and 1986.
consolidated Balance Sheets--October 31, 1988, 1967 and 1966.
Consolidated Statseents of Shareholders* Xflvestssnb-- Years ended October 31, 1988, 1987 and 1986.
Ocnsolidabed Statements of Cadi Flows -- Years ended October 31, 1988, 1987 and 1966.
Rotes to Consolidated Financial Statesente .
Annual Report Rage winter
26 27
28-29
30
31
32 - 48
Unaudited Quarterly Results on page 25 of the Annual Report to Shareholders far the year ended October 31, 1988, Is incorporated herein by reference.
Itrn_a. nl-ne--* TM """"Una and Financial Diecloeure.
Rone.
IXm 1Q
FART HZ
fff n^iB^rTTf.
Hie Proaqr Statseent for the 1989 Annual Meeting of Sharaholdere of Registrant to be held March 16, 1969, to be filed with the Securitise and
Bechange Onealaeion prior to Natunxy 28, 1909, is incorporated by reference.
itsn ii. BmiitiYtr
The Proxy Statseent for the 1989 Annuel Meeting of Sharaholdere of Registrant to be held March 16, 1969, to be filed with the Securitiee and Exchange ConsleaIon parlor to February 28, 1989, is incorporated by reference.
Iol12 flfCTBrtt/
The Prcotf Statseent for the 1989 Annual Meeting of Shareholdere of Registrant to ba held March 16, 1989, to bs filed with the Securities and Exchange Oceadesicn prior to February 28, 1989, is incorporated by reference.
Item 13.
The Prosy statSMRt for the 1989 Annual Meeting of Shareholders of Registrant to be held March 16, 1989, to be filed with the Securitiee and Exchange Oceuiaeicn prior to February 28, 1989, Is incorporated by reference.
16
IU 14. V**M+*- rifiMflial
MBT IV
cn Fore 8-K.
(a) Financial Statamnts:
(l) and (2) - lha response to this portion of Itan 14 la auftsdtbad aa a separata aaction of this report.
(3) Listing of Inhibits - Itoapmaa to this portion of Itsa 14 is
(b) Reports on Ft** 8-K.
k report on Fom 8-K ms filad Bqptaaher 14, 1SB8, floor Xtaas 5 "Other Events".
(c) Ertiibita - nmponsa to this portion of Itan 14 is aubnittad as a separata aaction to this report.
(d) Financial Statanaht achadalas - The response to this poartion of Ttm 14 is sukedtted as a aaparats aaction of this report. Saparsta financial statsaanta are filed for 1988 for rreaaar Fund coopery, an unerase!idated joint untune partnership, baaauaa under ftilaa of tha Sacuritias and Exchange Canission it constituted a significant subsidiary of Registrant as of October 31, 1987.
Iteoas 10, ll, 12, and 13 of this Report hsvs bean Incorporated by reference to Registrant's definitive Pray fitatmart- for tha 1989 Annual Resting of Shareholders to be held Ranch 16, 1989, bacauaa tha Registrant intends to fils not later than 120 day* after tha dose of Registrant's fiscal year with the Securities and Exchange cnmiaaion tha definitive pray atstsamt, pursuant to regulation liA which will involve the election of Directors, m the event each a definitive prosy etatasant is not filed, the Registrant undertakes to aeand this report on Foes 8 to include the intonation regained by Item 10, 11, 12, and 13.
The undersigned, crasser In&striee, me., hereby undertakes pursuant to Regulation S-K, Itan 601, paragraph (b) (4) (ill), to ftsniah to the Securitise and Bcchange Oxenission, <pon request, ell constituent inatrueents defining the rights of holdKs of long-ten debt of Draseer mduetrise, mo., end its oaneolidated subsidiaries not filsd herewith far the reason that tha total aacunt of securities authorised under any of such instrumnts does not sagged lot of tha total consolidated assets of Dresaar mdustrlaa, Inc., and its consolidated subsidiaries.
17
SDGKATORES
Itareuant to the require--its of Section 13 or 15(d) of the Securities Exchange Act of 1934, the abstract has duly mused this report to be signed on its by the undersigned, thereunto duly authorised on this 27th day of January 1989.
EKE9BER INDUSTRIES, INC.
By: ./
Rxrsuanb to the requir--at* of the Securities Exchange Act of 1934,
report has been signed below by the fallowing
on behalf of the
Registrant and in the capacities and on the
indicated.
DATE
mj. N(John J. Jtirphy)
(Oevid P. HcElvain) BiieTBt. n. cxsnr ,tc. (Saauel B. Casey, Jr.)
(Lillian B. Eduards) raws Wigan* (Rawlee Fulham) .jam SAvnf* (Jchn Gavin)
(W. Oeccge Nencarrov)
(Lionel B. diner) B. D. ST. JOHN* (B. D. 8t. John) By: QMCtCdL
(Rebecca R. Harris Attarney-In-Pect)
Cheixsan of the Board, President, and Director (Principal fieacutive officer) Senior Vice Resident Accounting and Tax (Principal Accounting Officer) Vice Pceaidant - Finance (Principal Financial Officer)
Director
Director
Director
Ddrecbar
Director
Director
Director
January 27, 1989
January 27, 1989
January 27, 2989 January 27, 1989 January 27, 1989 January 27, 1989 January 27, 1989 January 27, 1989 January 27, 1989 January 27, 1989
FORM 1Q-K ITEM 14(a)(1) MO (2) MO ITEM 14(d) FINANCIAL STATEMENTS AND FINANCIAL STATENEXT SCHEDULES
YEAR ENDED OCTOKR 31, 1988 DRESSER INDUSTRIES, INC. DALLAS, TEXAS
F-l
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and report of Independent accountants included In the annual report to shareholders for the year ended October 31, 1988, are incorporated by reference in Item B:
Report of Independent Accountants Consolidated Statements of Earnings--Years ended October 31, 1988, 1987, and 1986 Consolidated Balance Sheets--October 31, 1988, 1987, and 1986 Consolidated Statements of Cash Flows--Years ended October 31, 1988, 1987, and 1966 Consolidated Statements of Changes In Financial Position--Years ended October 31, 1988, 1987, and 1986 Notes to Consolidated Financial Statements The following consolidated financial statement schedules of Dresser Industries, Inc. and report of Independent accountants are Included herein: Report of Independent Accountants on Consolidated Schedules 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 far 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-Z
Separate financial statements for the unconsolidated Dresser-Rand Company are filed because It constituted a significant subsidiary as of October 31, 1987. The following consolidated financial statements schedules of Dresser-Rand Company and report of independent accountants are Included herein:
Report of Independent Accountants Consolidated Balance Sheet--Septeitber 30, 1988 and December 31, 1987 Consolidated Statement of Operations--Nine months ended September 30,1988 and year ended December 31, 1987 Consolidated Statement of Partners* Equity--Nine months ended September 30, 1988 and year ended December 31, 1987 Consolidated Statement of Cash Flows--Nine months ended September 30, 1988 and year ended Decerter 31, 1987 Notes to Consolidated Financial Statements Dresser-Rand Company Form 10-K Financial Schedules are Included In Note 14 to the financial statements as follows: Schedule V--Property, Plant and Equipment Schedule V[--Accunulated 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
Separate financial statements are not presented for any of the other unconsolidated subsidiaries or affiliates because none constitutes a significant subsidiary. Suraiarlzed balance sheet, revenues and net earnings information for the 20X to 50% owned affiliates and wholly-owned equipment distribution subsidiaries for the years ended October 31, 1988, 1987 and 1986 Is presented In Note B to Consolidated financial Statements Included In Registrant's annual report to shareholders for 1988 and furnished with this report. Suemarlzed balance sheet, revenues and net earnings Information for the Registrant's financial service, insurance and real estate subsidiaries for the years ended October 31, 1988, 1987 and 1966, Is presented in Note B to Consolidated Financial Statements Included in Registrant's annual report to shareholders for 1988 and furnished with this report.
F-4
Report of Independent Accountants on Financial Statenent Schedules
To the Board of Directors of Dresser Industries, Inc.
Our examinations of the consolidated financial statements referred to in our report dated December 19, 1988 appearing on page 26 of the 196S Annual Report to Shareholders of Dresser Industries, Inc., (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an examination of the Financial Statement Schedules listed in item 14 (a) of this Form 10-K. in our opinion, these Financial Statement Schedules present fairly the information set forth therein when read in conjunction with the related consolidated financial statements.
PR1CB WATKRHOU8B
Dallas, Texas December 19, 1986
F-5
SCHEDULE I I
- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS
PROMOTERS. AND EMPLOYEES OTHER THAN RELATED PARTIES
DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
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(M illions o f Dollars)
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F-8
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
(Millions of Dollars)
C.Ql, A
IlQf
Maintenance and repairs Depreciation and amortization of
intangible assets, preoperating costs and sinilar deferrals Taxes, other than payroll and Income taxes Royalties Advertising costs
____________ tttL B_____________ Charged to Costs and Expenses ____ Toir Ented October ?1______ im_________ 1387 ____ m.
$ 96.9 $ 89.6 $ 103.9
* ** * * * ** * **
Amounts are not presented because such amounts are less than 1% of total net sales and service revenues.
F-9
Price Waterhouse
fcfi* t1KPSK> KJ07U'
*tr,nn?r *?:
REPORT OF INDEPENDENT ACCOUNTANTS
November 15, 1988
To the Partners and Management Committee of Dresser-Rand Conpany
In our opinion, the accoapaoylng consolidated balance sheet and the related consolidated stateaents of operations, partners1 equity and cash flows present fairly. In all material respects, the finendel position of Dresser-Rand Company (a Dresser Industries, Inc. and Xngersoll-Rand Conpany partnership) and its subsidiaries at Septeaber 30, 1988 and Deceaber 31, 19B7, and the results of their opera tions and their cash flows for the nine months ended Septeaber 30. 1968 and the year ended Deceaber 31, 1987, in conformity with generally accepted accounting principles. These financial stateaents are the responsibility of the Conpany1s aanageaent; our responsibility is to express an opinion on these financial stateaents 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 stateaents are free of material aisststeaent. An audit includes exaalning, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting prin ciples used and significant estimates made by aanageaent. and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
lAut
1
DRESSER-RAND COMPANY (a partnership/
CONSOLIDATED BALANCE SHEET
ASSETS
Current assets: Cash Short-term investments, restricted Accounts receivable, less allowance for doubtful accounts of $3,108,000 in 1968 and $2,199,000 in 1987 Inventories Prepaid expenses and other current assets Receivable from Partner
Total current assets
Investment in affiliate Property, plant and equipment, at cost
less accumulated depreciation Other assets Intangible assets
Total assets
September 30, December 31,
1988
1987
(In thousands)
$ 4,584 2,926
163,910 235,634
5,435 2.925 415,414
145,516 7,708
15.033
$583.671
$ 2,879 7,736
144,439 238,775
6,210 2.710 402,749 13,370
151,300 10,435 16.341
IWAK
LIABILITIES AND PARTNERS' EQUITY
Current liabilities: Short-term borrowings Accounts payable Accrued compensation and benefits Accrued income and other taxes Accrued warranty coats Other accrued liabilities Amounts due Partners
Total current liabilities
Noncurrent liabilities
Total liabilities
Partners' equity: Contributed capital Cumulative translation adjustments Accumulated deficit
Total partners' equity
Commitments and contingencies Notes 5, 7 and 12
Total liabilities and partners' equity
$113,598 66,672 18,582 12,453 18,065 43,059
324,372 17.734
342.106
345,755 2,486
(106.676) 241.565
SSB3.671
$112,B73 59,709 15.271 12,988 10,227 44,992 72.432
328,492
20.240
348.732
345,755 5,870
(106.162)
245.463
See accompanying notes to consolidated financial statements.
DRESSER-RAKD COMPANY (a partnership)
CONSOLIDATED STATEMENT OF PARTNERS * EQUITY
Contributed capital: Contribution of net assets by the partners at inception
Cumulative translation adjustments: Beginning of period Translation adjustments
End of period
Accumulated deficit: Beginning of period Net loss for the period
End of period
Total partners' equity
Mine months
Year
ended
ended
September 30, December 31,
1966
1987
fin fhmtiunrii 1
$345,755
5,870 (3.384)
2.486
(106,162)
(106.676) 1-565
$345,755
m 5.870 5.870
(106.162) (106.162) S245.463
See accompanylog notea to consolidated financial etatementa.
DtlSSER-KAMD COMPANY
(a partnership)
CONSOL1 DATED STATEMENT OF CA5B FLOWS
Cash flow* froe operating activities: Nat loss for the period Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and anortitatlon (Gain) loss on sale of property, plant and equipment Noncurrent restructuring eost accruals Equity change In partially-owned affiliates (Increase) decrease In assets, net of effects froe purchase of SO percent Interest in affiliate: Accounts receivable Inventories Prepaid expenses and other currant assets Other assets Increase (decrease) in liabilities, net of effects froa purchase of SO percent interest la affiliate: Accounts payable Accrued ceapcnsation and benefits Accrued lncoae and other taxes Accrued warranty costs Other accrued liabilities Noncurrent liabilities Other, Including translation adjuataents, net
Nina nonths
Year
ended
ended
Sapteaber SO, Deceaber 31,
1988
1967
(in thousands)
($ 514) ($106,1(2)
25,545 (70) 511 mm
25,965 5,180
14,699 1,355
(1,920)
7,402 775
2,809
(126,751) (20,401) 1,327 (9,725)
(3,333) ' 3,311
(535) 6,950
(6,178) (3.017)
9,369 (912)
6,538 8,607 12,592 3,775
5.501
Net cash provided (used) by operating activities
29.052 069.043)
Cash flows froe investing actlvltlea: Proceeds froa salt of proparty, plant and aqalpnent Capital expenditures Net cash Increase related to purchase of SO percent owned affiliate
2,971 (19,103)
5.712
6,030 (18,966)
tm
Net cash used In invastlng activities
(10.420) (12.936)
Cash flows froa financing activities: Net short-term borrowings Net anouats due partners
Net cash (uaed) provided by financing activities
(333)
J2UtSi)
(21.737)
97,693 64.419
182.112
Vet (decrease) increase la cash and abort-ten investments
(3,105)
133
Cssh and short-tera Investments at beginning of period
10.615
10.482
Cash and short-tern Investments at end of period
^JJOJ^IS
Sac accompanying notes Co eonaolldated financial stataaents.
DRESSER-RAND COMPANY (a partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE. 1 - SUMMARY OF FORMATION AND OPERATIONS;
On December 31, 1986, Dresser Industries, Inc. end Ingersoll-Rand
Company (the Partners) entered into a partnership agreement for the formation of Dresser-Rand Company ithe Company), a New York general partnership (the partnership; owned equally by Dresser Industries, Inc. (Dresser) and Ingersoll-Rand Company (IngersollRand). The Partners contributed substantially all of the opera ting 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 Company commenced operations on January 1, 1987 and principally serves the petroleum, gas, petrochemical, chemical and electric power industries on a worldwide basis.
The net assets contributed by the Partners were recorded by the Company at amounts approximating their historical values. A
summary of contributed net assets at inception follows (in thousands):
Inventories and other current assets Property and noncurrent assets
Total assets
Current liabilities Noncurrent liabilities
$273,586 196,108
469,694
122,173 1,766
Contributed net assets
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies used in the preparation of the accompanying consolidated financial statements are set forth below:
Fiscal Year-Endi
Beginning in 1988, the Company changed its fiscal year end from December 31 to September 30.
Basis of Presentation:
Since formation, the legal transfers of several former subsidi aries of the Partners to the Company were pending finalisation of various ancillary agreements. Tne accompanying consolidated
2
financial statements reflect the operations of these entities as if all transfers had been finalized as of January 1, 1987. Accordingly, the consolidated financial atatenents of the Coapany include all doaestic and foreign majority-owned subsidiaries and the financial statements of those operations which have been operated for the benefit of the Company by the Partners until the legal or other transfers are accomplished. As of September 30, 1986; all significant legal or other transfers have been effected.
Investments in a 502-owned affiliate (1967 only - See Note 3) and less than 501-owned affiliates are accounted for on the equity method. The Company's equity in the net losses of these affiliates was not material.
All material intercompany items have been eliminated in consoli dation.
Short-term Investments:
Short-term investments are stated at cost which approximates market. These funds are available for payment of expenses in a foreign country only.
For purposes of the consolidated statement 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 generally stated at cost which is not in excess of net realizable value, and are valued using the first*in, first-out (FIFO) method.
Property and Depreciation:
Property, plant and equipment is recorded at cost, and is de preciated over the estimated useful lives of the various classes of assets. Depreciation is computed principally using accel erated 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 ware contributed to the Company ara being amortized on a straight-line besis over periods not exceeding 40 years. Such amortization amounted to $1,30B,000 in 1986 and $1,744,000 in 1967.
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Income Taxes:
The Company is a partnership and generally does not provide for U.S. income taxes since ail partnership income and losses are allocated to the Partners for Inclusion in their 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 expanse items.
Revenue Recognition and Warranties:
Revenues 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 $39,643,000 in 1986 and $43,880,000 in 1987.
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-period 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 eernings.
Foreign currency translation and exchange gains (losses) recorded in Other income (expense) in the consolidated statement of opera tions amounted to $525,000 in 1988 and ($2,117,000) in 1987.
New Accounting Standards:
The Financial Accounting Standards Board has issued certain accounting standards affecting the accounting for Income taxes and pension plans. The Company will comply with these standards by their required implementation dates.
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MOTE 3 - ACQUISITION OF 50 PERCENT INTEREST 1H AFFILIATE;
In January 1988, the Coapany acquired the remaining 50 percent interest in Kongsberg Dresser Power, Inc. froa Kongsberg Vapenfabrikk of Norway and renaaed it Dresser-ILand Power, Inc. The acquisition, for cash of $1,666,000, was affective as of January I, 1988 and was accounted for as a purchase transaction.
On an unaudited pro foraa basis, assuming the above acquisition . was nade on January 1, 1987, the net sales of the Coapany for the
year ended December 31, 1987 would have been increased by approxiaately $36,322,000 and the net loss would have increased
by approxiaately $210,000. The pro foraa results of operations are not necessarily indicative of the actual results of
operations that would have occurred had the purchase been made at the beginning of 1987 or the results that aay occur in the future.
MOTE 4 - RESTRUCTURING COSTS:
During 1987, the Coapany conducted various studies to evaluate its plant capacity and personnel needs based upon anticipated near-term requirements at depressed levels of activity. As a result, the Coapany recorded a charge to operations of $61,209,000 during 1987 for the net restructuring, rationalisa
tion and consolidation of operating divisions and subsidiaries contributed by the Partners. The actions covered by this charge
included costs for severance and relocation of eaployees arising from realigned operations, pension costs associated with employee terminations at closed facilities, the redeployment of product lines and related assets into production facilities, and the net loss on sales, scrappings and other dispositions of excess machinery and equipment and slow-moving inventories. The major components of the charge were as follows (in thousands);
Pension, severance, relocation and other personnel related costs
Costs incurred in the redeployment, consolidation and disposal of
facilities and excess assets Other nonpersonnel related costs
$39,871
16,823 4,513 861.209
During the nine months ended September 30, 1988, the Company recorded an additional charge to operations of $2,661,000 for restructuring costs in excess of amounts accrued at December 31, 1987.
The restructuring charges include accruals for costs which have been estiMted by management based upon the individual facts and circumstances of each action. All accruals are expected to be of
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a short-tarn natura and arc included in othar accrued liabilities
in the consolidated balance sheet, other than pension costs associated with enployee terminations, of approximately $15,210,000 at September 30, 1988 and $14,699,000 at December 31, 1967, which are included in noncurrent liabilities. In management's opinion, the remaining amount accrued of $15,145,000 at September 30, 1988 is reasonable and any differences between the recorded estimates and the final amounts actually incurred -should not have a material effect on the Company's consolidated
results of operations or financial position.
NOTE 5 - INVENTORIES;
The components of inventory are as follows (in thousands):
September 30, December 31,
1988
1987
Raw materials and supplies Work-in-process Finished products
$ 36,581 123,495 73.558
$ 32,960 135,483 70,332
?3iW
$238.775
Work-in-process inventories are stated after deducting customer progress payments of $51,360,000 at Saptember 30, 1988 and $33,116,000 at December 31, 1987.
ROTE 6 - PROPERTY. PLANT ASP EQUIPMENT:
Property, plant and equipment is summarized as follows (in thousands):
September 30, December 31,
1988
1987
Land and improvements Buildings and improvements Machinery and equipment Furniture and fixtures
Accumulated depreciation
$ 5,942 76,256
249,527 9.521
341,246
(195.730)
mutt
$ 5,854 69,314
244,995 10,312
330,475
(179,175)
S1S1.30Q
Depreciation expense was $24,237,000 in 1988 and $24,221,000 in
6
NOTE 7 - SHORT-TERM BORROWINGS:
Short-term borrowings consist of the following (in thousands):
September 30, December 31, 19BS__________ 1987
Domestic bank loans Foreign bank loans and other
$107,500 6.098
$110,000 2,873
At September 30, 1988, the Company had domestic lines of credit for short-term borrowing facilities aggregating $145,000,000, of which $37,500,000 was unused. Credit facilities have also been arranged with banks outside the United States under which the Company's foreign operating units may borrow in the local currency or other currencies on an overdraft and short-term note basis. At September 30, 1968, the amount of available and unused lines of credit under these arrangements aggregated $46,848,000.
Interest rates on these lines of credit are generally at the London Interbank Offered Rate (LIBOR), the prime rates of the banks or the banks' reference or base rates, at the Company's option. Commitment fees ranging from .100Z to .1251 per annum are payable on the average daily unused portion of the domestic credit lines. At September 30, 1988, the weighted average interest rate on outstanding borrowings was 8.41..
Under the terms of the partnership agreement, the Company must obtain the consent of the Partners for borrowings in excess of 33-1/3Z of the sum of the Company's indebtedness and the Partners' capital accounts. In addition, a short-term bank credit facility stipulates that the Company's net worth shall not fall below $225,000,000.
NOTE 8 - TRANSACTIONS WITH AFFILIATES:
In the normal course of business, the Company engages in sales and purchases of 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 continued at the option of the Company or the Partners. Costs and charges
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under these arrangements are generally at noraal and competitive arket rates. In addition, certain administrative services of nominal value are provided at no cost to the Company.
During the transition period in 1987, the Partners and their affiliates also provided certain administrative services to the Company, including financial, data processing, employee benefits, legal and tax services. The Company also acted as collection
agent for the Partners for certain customer accounts receivable that were not contributed to the partnership. In addition, the Partners made disbursements on behalf of the Company until the Company established a separate treasury function.
At September 30, 1988 and December 31, 1987 the Company has an interest bearing receivable from Ingersoll-Rand. The interest
rate is variable and is based on the short-term Interest rate of U.S. Treasury obligations (8.01 at September 30, 1988); there are no repayment terns. Interest income accrued was $215,000 in 1988 and $289,000 in 1987.
Amounts due partners consist of trade accounts, notes payable and advances. Tne 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. Notes payable arc short-term promissory notes. Interest on these notes varies, but approximates that of the Company's short-term bank borrowings. Interest paid to the Partner's on these notes during 1988 was $1,233,000; there were no such notes outstanding at September 30, 1988 or at any time during the year ended December*31, 1987. Advances do not bear interest and have no repayment terns.
Amounts due Partners are summarised as follows (in thousands):
Dresser
Ingersoll___ Rand
Total
September 30, 1988
Trade accounts Advances
($ 2,753) 33,347
iisum
($ 233) 21,582
($ 2,986) 54.929
221*2*2
December 31, 1987
222*222
222*22*
222*222
8
A summary of transactions with tha Partners and their affiliates is as follows (in thousands):
Nine months ended
September 30, 1988
Year ended December 31,
1987
Product sales
Product purchases Net billings and other charges for
services provided
$34,000 10,000
9,800
$45,900 18,800
7,600
One partner operated a foreign manufacturing company and con
tinued to manage a customer contract on behalf of the Company. A net gain of $1,023,000 for 1988 and a net loss of $l,245,uOO for 1987 relating to these operations is Included in the accompanying financial statements.
During 1987, the Company exchanged certain repair centers with a net recorded value of $1,197,000 with one of the Partners.
NOTE 9 - PENSION PUNS AND OTHEK EMPLOYEE BENEFITS:
U.S. Pension Plans;
The Company has defined benefit plans covering substantially all U.S. employees. Plan benefits for covered salaried employees are generally based on years of service and compensation on an aver age or final pay basis. 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 maintains defined contribution plans covering employees at two of its U.S. plant facilities.
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.
Pension costs for 1988 and 1987 were determined in accordance with Statements of Financial Accounting Standards No. 87 (SFAS 87), "Employers' Accounting for Pensions" and No. B8 (SFAS 88),
9
"Employer*' Accounting for Settlement* end Curtailments of
Defined Benefit Pension Plans and for Termination Benefits." As permitted by these statements, the Company did not elect to currently adopt the provision which would recognise a long-term pension asset and liability in the consolidated balance sheet.
The components of pension costs are as follows (in thousands):
Nine months ended
September 30, 1988
Year
ended December 31
1987
Service cost for benefits earned during the period Interest cost on projected benefit obligation
Actual return on plan assets Net amortisation and deferral Cost of defined contribution plan
Net pension cost
$3,175
2,274 (260) 775 387
$4,156
2,485 (271)
1,298 350
S9.01B
The primary assumptions used to determine the net pension cost for 1968 and 1987 were as follows:
Discount rate Expected long-term rate of return
on plan assets
Bate of increase in compensation levels
9.OX
8.5X 6.25X
The Company charged $768,000 in 1968 end $14,927,000 in 1987 to operations for plan curtailments and termination benefits asso ciated with the termination of employees at plant facilities closed and from other restructuring actions.
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The funded status of domestic employee pension benefit plans is as follows (plans where assets exceed accumulated benefits are immaterial):
September 30, December 31,
1988
1987
/in thekiicin/lc \
Actuarial present value of benefit obligations: Vested benefit obligation Nonvested benefit obligation
Accumulated benefit obligation
Additional amount for projected compensation increases
Total projected benefit obligation
Plan assets at fair value
Projected benefit obligation in excess of assets
Unrecognized net obligation existing at date of adoption of 5FAS 87
Unrecognized net loss (gain) Unrecognized prior service cost
Accrued pension cost
$23,852 1.682
25,534
.mi* 40,770 9.414
31,356
12,732 1,379 276
SIMM
$17,627 988
18,615
J1PJL5 33,630 3,096
30,532
13,719 (377) -
S17.190
Flan assets are invested primarily in fixed incoae and equity securities.
In addition to the above accrued pension cost, the Company has accrued $7,136,000 and $6,020,000 ($5,432,000 and $5,037,000 included in noncurrent liabilities) at September 30, 1988 and December 31, 1987, respectively, for pension costs relating to a plan maintained by a former employing partner.
Non-U.S. Pension Plans:
Pension coverage for employees of non-U.S. operations is provided, to the extent deemed appropriate, through separate
?lans that are either state funded or maintained by the Partners, ension expense incurred by the Company for these plans amounted to $794,000 in 1988 and $759,000 in 1987; the Company has deferred the application of SPAS 87 to these plans as permitted under the statement.
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Retiree Benefit!:
In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Host employees who retire are eligible for these benefits. The cost of retiree health care is recognised as an expense as claims are paid, and the cost of retiree life insur ance is recognized by expensing the annual insurance premiums. These costs were insignificant in 1988 and 1987.
Savings and Investment Plans:
The Company also sponsors certain savings and investment plans. The cost for these plans amounted to $1,318,000 in 1988 and $1,880,000 in 1987.
NOTE 10 - INCOME TAXES:
The components of the income (loss) before income taxes and extraordinary item are as follows (in thousands):
Nine months ended
September 30, 1988
Year ended
December 31, 1987
Domestic Foreign
($ 8,608) 15,061
($100,213) (4.421)
oau
isiw.wi
The provision for income taxes is as follows (in thousands):
Domestic - current Foreign - current
- deferred
Nine months ended
September 30, 1988
Year ended
December 31, 1987
$ 286 7f270 (589)
$ 3,242
(1,714)
S6.967
S1.S28
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Foreign current taxes of $7,270,000 in 1968 does not include
charges of $544,00.0 equivalent to income taxes which would have been incurred had foreign operating loss carryforwards not been
available. The incone tax benefit resulting from realisation of the operating loss carryforwards is presented as an extraordinary item.
An analysis of the difference between the U.S. statutory rate and the effective rate is as follows:
Nine months ended
September 30, 1986
Year ended
December 31 1987
U.S. statutory rate Tax on foreign income greater than
the U.S. statutory rate
Operating losses with no current tax
benefit to the Company Other
34.01 10.0 64.0
-
(40.0*)
-
41.7 i2)
Effective tax rate
108.01
-LT*
For tax purposes the Company has foreign net operating loss carryforwards of $36,668,000 which expire at various dates through 1996. In addition, the Company has $4,238,000 of foreign deferred depreciation deductions which have an indefinite carryforward period.
NOTE 11 - INFORMATION BY GEOGRAPHIC ABEA:
The Company operates in one industry segment consisting of the design, manufacture and marketing of energy processing and conversion equipment. 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. Ceneral corporate assets consist principally of fixed assets.
13
The financial information by geographic area is as follows (in thousands):
Nine months ended
September 30,
1988
Year ended December 31,
___ 1987
Geographic Area
Sales to customers
United States Europe Other international
Transfers between geographic areas:
$356,603 216,274
76,521
$455,071 183,630 66,583
United States Europe Other international Adjustments and eliminations
74,503 2,861
1,889 (79.253)
57,586 1,092 248
(58.926)
Total net sales
Operating income (loss) including restructuring costs
S*49,39S
2U
United States Europe Other international
General corporate expenses
$ 6,930 7,920 4.291
19,141
($ 73,441) (10,510) (878)
(84,829)
(5.292)
Total operating income (loss) Identifiable assets
(j_UUU>
United States Europe Other international General corporate assets
$423,172 106,818 52,145
1.536
$442,135 108,978
41,539 1.543
Total identifiable assets
8583.671
$594,195
International sales of U.5. manufactured products were
$155,017,000 in 1968 and $159,853,000 in 1987. These sales represent the customer value of the transfers between geographic areas, primarily to Europe, and doaestic exports sold directly to
international customers of $61,516,000 in 1988 and $86,274,000 in 1987.
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HOTE 12 - COMMITMENTS AND CONTINGENCIES:
All principal manufacturing facilities arc owned by the Company. Certain office, warehouse and light manufacturing facilities, transportation vehicles and 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):
September 30,
1989 1990 1991 1992 1993 Thereafter
$ 6,201 4,919 3,670 2,362 1,146 1,522
Total minimum lease payments
Capital lease commitments of the Company are not significant.
Total rental expense amounted to $7,791,000 in 1986 and $9,731,000 in 1967.
In the normal course of business, the Company has issued several direct and indirect guarantees, including contract performance bonds and letters of credit. Management believes these guaran tees 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 the 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.
BOTE 13 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest and Income taxes is as follows (in thousands):
Mine months ended
September 30,
1988
Tear ended December 31,
1987
Interest
$9.145
$9.089
Income taxes
$3.947
$2.474
15
NOTE 14 - FORM 10-K FINANCIAL SCHEDULES:
All dollar amounts arc shown in thousands.
Property, plant and equipment - cost (Fora 10-K, Schedule V);
Classifica-tion
Balance at beginning of period
Retire Additions ments at cost and sales
Balance at Other(*) end of period
1988:
Land
$ 5,854
Buildings
and improve-
aents
69,314
Machinery and
equipment
244,995
Furniture
and fixtures 10.312
S330.475
$ 54
2,556 15,758
735 819.103
$ 56
21 8,967
113 69.157
$ 90 4,407 (2,259)
S 825
$ 5,942
76,256 249,527
9,521 8341.246
1987:
Land
5 5,767
Buildings
and improve
ments
65,459
Machinery and
equipment
224,758
Furniture
and fixtures
8 5 $ 60
142
2,408 15,455
1.098
944 24,159
1,677 626,840
2,391 28,941
536
8 5,854
69,314 244,995
10,312 8330.475
(*) Other primarily represents reclassifications among categories and the effects of foreign currency translation.
In 1988, other includes the acquisition of 50 percent interest In affiliate (Note 3) as follows: land-$214; buildings-$2,082; machinery and equipment-$3,080; furniture and fixtures$6li; total-$5,987. In 1987, other includes reclassification of rental float.
16
Property, Plant and Equipment - Accumulated Depreciation and Amortization (Form IO-K, schedule VI):
Classification
Balance at beginning of period
Additions charged to Retire costs and ments expenses and sales Other (*)
Balance at end of period
1968:
Buildings
and improve-
ments
$ 31,536
Machinery and
equipment
140,749
Furniture
and fixtures 6.890
5 2,677 20,644 916
$ 25 6,129 102
52,708 (2,866)
5 36,896 152,396 6fa36
56.256 (1.426)
S195.730
1987:
Buildings
and improve-
cents
5 26,854
Machinery and
equipment
131,337
Furniture
and fixtures
S164.2D4
5 3,968 18,998 1.255
$ 389 14,540 701
51,103 . 4,954
323 S6.380
5 31,536 140,749 6.690
$179,175
Depreciation is provided principally using accelerated methods, except tor U.S. fixed assets with a service life of 10 years or less, which are depreciated on a straight-line basis. Estimated useful lives of 10 to 40 years for buildings, 6 to 12 years for Machinery and equipment and 5 to 10 years for furniture and fixtures were used in determining depreciation rates.
(*) Other primarily represents reclassifications among categories and the effects of foreign currency translation.
In 1986, other includes the acquisition of 50 percent interest in affiliate (Rote 3) as follows: buildings-$746; machinery and equipment-51,850; furniture and fixtures-5440; total-53,036.
17 -
Valuation and Qualifying account! (Fori 10K, Schedule VIII):
Balance at Additions
beginning charged
Balance at
Classification of period to incoae Deductions Other() end of period
Doubtful accoun t s
1988:
u+m SJLm 2-L21* i-22?
s 3.108
19B7:
$-2.299 $ 2.332
S 2.199
Obsolete and r slow-moving
inventory
1986:
k___ m
LLm
533.939
1987:
klM21
Sl0,lPfr
$35.301
(*) In 1988, other includes the acquisition of 50 percent interest in affiliate (Kota 3) as follows: Doubtful accounts - $571; obsolete
and slov-aoving inventory - $1,248. Other also Includes the effects of foreign currency translation.
18
Short*tern borrowing* (Form 10-K, Schedule XX):
Category of aggregate short-term borrowings
1988:
Balance at end of
period
Weighted
average Haximum
interest amount
rate at outstanding
end of
during
period the period
Average amount outstanding during
the period
Weighted average interest
rate during the perio
Domestic bank loans
Foreign bank loans and other
1987:
$107,500 8.571 $110,000
6,098 5.611
10,902
$89,100 7,333
8.151 6.181
Domestic bank loans
Foreign bank loans and other
$110,000 8.301 $114,500
2,873 5.831
14,490
$85,600 6,520
7.961 8.601
The average amounts outstanding were determined based on the sum of the month-end 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. For 1987, the rates computed did not include the hyperinflationary countries es those rates include factors to offset monetary devaluations which cannot be separated from the true interest rate.
Bank loans represent obligations payable to various banks and
financial institutions end are obtained on an as needed basis at various terns.
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Supplementary incone statement information (Fora 10K, Schedule X):
Nine months ended
Septeaber 30,
1988
Year ended December 31,
1987
'Maintenance and repair!
2LL2&3
Amounts for preoperating costa 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.