item 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference consolidated financial statements financial statement schedule consolidated financial statements financial statement schedule company listed index page 24 reports form 8k company filed reports form 8k fourth quarter 1995 exhibits 31 certificate incorporation company amended may 22 1991 incorporated reference exhibit 41 registration statement form s3 registration 3340833 32 bylaws amended incorporated reference exhibit 32 form 10k file 07265 filed march 1 1994 41 certificate incorporation company amended may 22 1991 incorporated reference exhibit 41 registration statement form s3 registration 3340833 42 bylaws amended incorporated reference exhibit 32 form 10k file 07265 filed march 1 1994 43 indenture dated march 15 1994 among energy ventures inc issuer subsidiary guarantors party thereto guarantors chemical bank trustee incorporated reference form 8k file 07265 filed april 5 1994 44 specimen 10 14 senior note due 2004 energy ventures inc incorporated reference form 8k file 07265 filed april 5 1994 45 first supplemental indenture among energy ventures inc prideco chemical bank trustee dated june 30 1995 incorporated reference exhibit 44 registration statement form s3 registration 3361933 101 letter agreement dated september 24 1990 among engy inc columbia gas transmission corporation coleve joint venture incorporated reference exhibit 1032 registration statement form s2 registration 3336653 102 letter agreement dated september 24 1990 engy inc columbia gas transmission corporation incorporated reference exhibit 1033 registration statement form s2 registration 3336653 103 purchase sale agreement engy inc columbia gas development corporation dated october 22 1990 exhibit a1 thereto incorporated reference form 8k file 07265 filed november 6 1990 104 coleve termination agreement columbia gas development corporation engy inc energy ventures inc dated october 22 1990 incorporated reference form 8k file 07265 filed november 6 1990 105 dismissal agreement columbia gas development corporation engy inc coleve dated october 22 1990 incorporated reference form 8k file 07265 filed november 6 1990 106 amended restated loan security agreement among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender dated october 13 1992 incorporated reference form 10q file 07265 filed november 16 1992 107 first amendatory agreement dated may 5 1993 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10k file 07265 filed march 1 1994 108 second amendatory agreement dated august 12 1993 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10q file 07265 filed november 3 1993 109 third amendatory agreement dated october 12 1993 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10q file 07265 filed november 3 1993 1010 fourth amendatory agreement dated february 21 1994 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10q file 07265 filed may 11 1994 1011 fifth amendatory agreement dated march 22 1994 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10q file 07265 filed may 11 1994 1012 letter agreement dated may 5 1994 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender incorporated reference form 10q file 07265 filed may 11 1994 1013 sixth amendatory agreement dated june 30 1994 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard bay drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender 1014 seventh amendatory agreement dated may 18 1995 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant tfw inc mallard bay drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender 1015 eighth amendatory agreement dated september 13 1995 amended restated loan security agreement dated october 13 1992 among evihighland pump company grant prideco inc mallard bay drilling inc borrowers energy ventures inc guarantor transamerica business credit corporation lender 1016 executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 07265 filed november 16 1992 1017 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 registration 3365790 1018 nonemployee director deferred compensation plan incorporated reference form 10q file 07265 filed november 16 1992 1019 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 07265 filed august 8 1991 1020 1992 employee stock option plan form agreement incorporated reference exhibit 43 registration statement form s8 registration 3331662 1021 energy ventures inc employees stock option plan incorporated reference exhibit 41 registration statement form s8 registration 3331662 1022 form stock option agreement companys employees stock option plan incorporated reference exhibit 42 registration statement form s8 registration 3331662 1023 amended restated nonemployee director stock option plan incorporated reference form 10q file 07265 filed august 12 1995 1024 amended restated promissory note agreement dated september 29 1993 energy ventures inc maker ensco tool supply company payee incorporated reference form 10q filed november 3 1993 1025 term loan agreement dated december 17 1992 energy ventures mid east inc borrower emirates bank international limited lender incorporated reference form 10q file 07265 filed november 3 1993 1026 amendment term loan agreement dated december 17 1992 energy ventures mid east inc borrower emirates bank international limited lender dated september 2 1993 incorporated reference form 10q file 07265 filed november 3 1993 1027 agreement plan merger dated november 10 1993 among production oil tools energy ventures inc production oil tools acquisition co incorporated reference form 10k file 07265 filed march 1 1994 1028 lease agreement dated september 30 1993 among tf de mexico sa de cv lessor grant tf de mexico sa de cv lessee energy ventures inc guarantor revemex sa de cv owner subleased assets incorporated reference form 10k file 07265 filed march 1 1994 1029 stock purchase agreement dated february 9 1994 energy ventures inc shareholders awi drilling workover inc incorporated reference form 8k file 07265 filed february 23 1994 1030 registration rights agreement dated march 24 1994 among energy ventures inc subsidiary guarantors party thereto lehman brothers inc kidder peabody co incorporated reference form 8k file 07265 filed april 5 1994 1031 registration rights agreement dated march 24 1994 energy ventures inc lehman brothers inc incorporated reference form 8k file 07265 filed april 5 1994 1032 woodward oklahoma lease agreements amended incorporated reference form 10k file 07265 filed march 23 1995 1033 agreement plan merger dated may 22 1995 amended amendment 1 dated june 30 1995 among prideco inc christiana companies inc william chunn donald morris sandra hamilton energy ventures inc grant acquisition company incorporated reference exhibit 21 form 8k file 07265 filed july 12 1995 1034 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited 211 subsidiaries energy ventures inc 231 consent arthur andersen llp management compensation incentive plan filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holder longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy agreements securities exchange commission upon request signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized energy ventures inc bernard j durocdanner bernard j durocdanner president chief executive officer principal executive officer director date march 19 1996 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated schedule ii energy ventures inc subsidiaries valuation qualifying accounts allowances three years ended december 31 1995 index exhibitsitem 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference consolidated financial statements financial statement schedule consolidated financial statements financial statement schedule company listed index page 19 reports form 8k october 3 1996 company filed current report form 8k announcing completed acquisition irmaos geremia ltd announcing signing agreement sell companys mallard drilling rig contracting division parker drilling company including pro forma financial statements company giving effect disposition mallard drilling rig contracting division november 26 1996 company filed current report form 8k announcing completion previously announced sale mallard drilling rig contracting division parker drilling company including pro forma financial statements company giving effect disposition mallard drilling rig contracting division december 26 1996 company filed current report form 8k announcing completion acquisition assets arrow completion systems weatherford enterra inc signing merger agreement gulfmark international inc new gulfmark inc pursuant company would acquire gulfmark international inc taxfree merger exchange issuance approximately 22 million shares companys common stock exhibits 31 restated certificate incorporation company incorporated reference exhibit 31 registration statement form s3 registration 33303407 32 bylaws amended incorporated reference exhibit no32 form 10k file 07265 filed march 1 1994 41 restated certificate incorporation company incorporated reference exhibit 31 registration statement form s3 registration 33303407 42 bylaws amended incorporated reference exhibit 32 form 10k file 07265 filed march 1 1994 43 indenture dated march 15 1994 among energy ventures inc issuer subsidiary guarantors party thereto guarantors chemical bank trustee incorporated reference form 8k file 07265 filed april 5 1994 44 specimen 10 14 senior note due 2004 energy ventures inc incorporated reference form 8k file 07265 filed april 5 1994 45 first supplemental indenture among energy ventures inc prideco chemical bank trustee dated june 30 1995 incorporated reference exhibit 44 registration statement form s3 registration 3361933 46 second supplemental indenture among energy ventures inc evi arrow inc evi watson inc chase manhattan bank trustee dated effective december 6 1996 47 amended restated credit agreement among energy ventures inc subsidiary guarantors defined therein lenders defined therein chase manhattan bank dated december 6 1996 including form note incorporated reference exhibit 41 form 8k file 07265 filed december 26 1996 101 executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 07265 filed november 16 1992 102 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 registration 3365790 103 nonemployee director deferred compensation plan incorporated reference form 10q file 07265 filed november 16 1992 104 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 07265 filed august 8 1991 105 1992 employee stock option plan amended incorporated reference exhibit 47 registration statement form s8 registration 33313531 106 energy ventures inc employees stock option plan incorporated reference exhibit 41 registration statement form s8 registration 3331662 107 form stock option agreement companys employees stock option plan incorporated reference exhibit 42 registration statement form s8 registration 3331662 108 amended restated nonemployee director stock option plan incorporated reference form 10q file 07265 filed august 12 1995 109 lease agreement dated september 30 1993 among tf de mexico sa de cv lessor grant tf de mexico sa de cv lessee energy ventures inc guarantor revemex sa de cv owner subleased assets incorporated reference form 10k file 07265 filed march 1 1994 1010 registration rights agreement dated march 24 1994 energy ventures inc lehman brothers inc incorporated reference form 8k file 07265 filed april 5 1994 1011 woodward oklahoma lease agreements amended incorporated reference form 10k file 07265 filed march 23 1995 1012 agreement plan merger dated may 22 1995 amended amendment 1 dated june 30 1995 among prideco inc christiana companies inc william chunn donald morris sandra hamilton energy ventures inc grant acquisition company incorporated reference exhibit 21 form 8k file 07265 filed july 12 1995 1013 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited incorporated reference exhibit 1034 form 10k file 07265 filed march 20 1996 1014 amended restated lease agreement dated may 3 1996 baker hughes oilfield operations inc grant prideco inc 1015 agreement plan merger dated june 20 1996 energy ventures inc tca acquisition inc tubular corporation america incorporated reference exhibit 21 form 8k file 07265 filed june 24 1996 1016 asset purchase agreement dated june 21 1996 energy ventures inc mallard bay drilling inc noble drilling west africa inc noble drilling corporation incorporated reference exhibit 23 form 8k file 07265 filed june 24 1996 1017 stock purchase agreement dated september 14 1996 among parker drilling company energy ventures inc incorporated reference exhibit 21 form 8k file 07265 filed october 3 1996 1018 asset purchase agreement dated october 18 1996 among energy ventures inc arrow completion systems inc weatherford enterra inc incorporated reference exhibit 21 form 8k file 07265 filed december 26 1996 1019 agreement plan merger dated december 5 1996 among energy ventures inc gulfmark acquisition co gulfmark international inc new gulfmark international inc incorporated reference exhibit 22 form 8k file 07265 file december 26 1996 1020 agreement plan distribution dated december 5 1996 among gulfmark international inc new gulfmark international inc energy ventures inc incorporated reference exhibit 23 form 8k file 07265 filed december 26 1996 211 subsidiaries energy ventures inc 231 consent arthur andersen llp 271 financial data schedule management compensation incentive plan filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holder longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy agreements securities exchange commission upon request signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized energy ventures inc bernard j durocdanner bernard j durocdanner president chief executive officer principal executive officer director date march 20 1997 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated schedule ii energy ventures inc subsidiaries valuation qualifying accounts allowances three years ended december 31 1996 index exhibitsitem 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference consolidated financial statements financial statement schedule consolidated financial statements financial statement schedule company listed index page 19 reports form 8k current report form 8k dated october 20 1997 amended form 8ka dated october 20 1997 filing third quarter 1997 earnings ii december 31 1996 financial statements restated may 1997 twoforone stock split iii announcement signing agreements acquire trico industries inc bmw pump inc bmw monarch lloydminster ltd current report form 8k dated october 24 1997 filing financial statements businesses assets gulfmark international inc acquired company may 1 1997 gulfmark retained assets quarter ended march 31 1997 current report form 8k dated november 5 1997 reporting issuance aggregate principal amount 3500 million companys 5 convertible subordinated preferred equivalent debentures due 2027 debentures private placement november 3 1997 containing certain pro forma financial statements company giving effect issuance debentures current report form 8k dated november 12 1997 reporting issuance additional aggregate principal amount 525 million companys debentures private placement cover overallotments november 10 1997 containing certain pro forma financial statements company giving effect issuance debentures current report form 8k dated november 18 1997 announcing commencement cash tender offer consent solicitation relating companys outstanding 10 14 senior notes due 2004 10 14 senior notes due 2004 series b senior notes containing certain pro forma financial statements company giving effect companys acquisition senior notes current report form 8k dated november 24 1997 announcing signing agreement acquire taro industries limited current report form 8k dated december 2 1997 announcing completion acquisitions trico industries inc bmw pump inc bmw monarch lloydminster ltd current report form 8k dated december 31 1997 announcing signing merger agreement december 12 1997 acquire christiana companies inc ii completion cash tender offer consent solicitation relating companys senior notes december 15 1997 iii agreement acquire houston well screen group companies van der horst ltd exhibits 21 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 21 amendment 1 form 8k form 8ka file 113086 filed march 9 1998 22 share purchase agreement made entered january 30 1998 among shareholders nika enterprises ltd alberta corporation listed signature pages thereto evi oil tools canada ltd alberta corporation incorporated reference exhibit 21 form 8k file 113086 filed march 3 1998 23 agreement plan merger dated december 12 1996 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 21 form 8k file 113086 filed december 31 1997 24 agreement dated december 12 1997 among evi inc christiana companies inc total logistic control llc c2 inc incorporated reference exhibit 22 form 8k file 113086 filed december 31 1997 25 letter agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 23 form 8k file 113086 filed december 31 1997 26 stock purchase agreement dated october 9 1997 evi inc paccar inc incorporated reference exhibit 21 form 8k file 113086 filed october 21 1997 27 stock purchase agreement dated october 9 1997 among certain shareholders bmw monarch lloydminster ltd shareholders bmw pump inc shareholder makelki holdings ltd shareholder 589979 alberta ltd shareholders 600969 alberta ltd shareholders 391862 alberta ltd evi inc incorporated reference exhibit 22 form 8k file 113086 filed october 21 1997 28 agreement plan merger dated july 16 1997 amended among xls holding inc evi inc gpxl inc incorporated reference exhibit 21 form 8k file 113086 filed august 26 1997 29 stock purchase agreement dated february 21 1997 among seigo arai kanematsu usa inc energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed march 17 1997 210 agreement plan merger dated december 5 1996 among energy ventures inc gulfmark acquisition co gulfmark international inc new gulfmark international inc incorporated reference exhibit 22 form 8k file 113086 filed december 26 1996 211 agreement plan distribution dated december 5 1996 among gulfmark international inc new gulfmark international inc energy ventures inc incorporated reference exhibit 23 form 8k file 113086 filed december 26 1996 212 first amendment agreement plan merger dated march 27 1997 among energy ventures inc gulfmark acquisition co gulfmark international inc gulfmark offshore inc incorporated reference exhibit 23 registration statement form s4 reg 33324133 213 stock purchase agreement dated september 14 1996 among parker drilling company energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed october 3 1996 214 agreement plan merger dated june 20 1996 energy ventures inc tca acquisition inc tubular corporation america incorporated reference exhibit 21 form 8k file 113086 filed june 24 1996 31 restated certificate incorporation company amended incorporated reference exhibit 32 form 10k file 113086 filed may 14 1997 32 bylaws company amended incorporated reference exhibit 32 form 10k file 113086 filed march 1 1994 41 see exhibit nos 31 32 provisions restated certificate incorporation amended bylaws registrant defining rights holders common stock 42 credit agreement dated february 17 1998 among evi inc evi oil tools canada ltd subsidiary guarantors defined therein chase bank texas national association us administrative agent bank nova scotia documentation agent canadian agent abn amro bank nv syndication agent lenders defined therein including form note incorporated reference exhibit 41 form 8k file 113086 filed march 3 1998 43 indenture dated march 15 1994 among energy ventures inc issuer subsidiary guarantors party thereto guarantors chemical bank trustee incorporated reference form 8k file 113086 filed april 5 1994 44 specimen 10 14 senior note due 2004 energy ventures inc incorporated reference form 8k file 113086 filed april 5 1994 45 first supplemental indenture among energy ventures inc prideco chemical bank trustee dated june 30 1995 incorporated reference exhibit 44 registration statement form s3 reg 3361933 46 second supplemental indenture among energy ventures inc evi arrow inc evi watson inc chase manhattan bank trustee dated effective december 6 1996 incorporated reference exhibit 46 form 10k file 113086 filed march 20 1997 47 third supplemental indenture among evi inc ercon inc chase manhattan bank trustee dated effective may 1 1997 incorporated reference exhibit 992 form 8k file 113086 filed october 27 1997 48 fourth supplemental indenture among evi inc xls holding inc xl systems inc chase manhattan bank trustee dated effective august 25 1997 incorporated reference exhibit 993 form 8k file 113086 filed october 27 1997 49 fifth supplemental indenture evi inc chase manhattan bank dated december 12 1997 including form note form exchange note incorporated reference exhibit 41 form 8k file 113086 filed december 31 1997 410 indenture dated october 15 1997 evi inc chase manhattan bank trustee incorporated reference exhibit 413 registration statement form s3 reg 33345207 411 first supplemental indenture dated october 28 1997 evi inc chase manhattan bank trustee including form debenture incorporated reference exhibit 42 form 8k file 113086 filed november 5 1997 412 registration rights agreement dated november 3 1997 among evi inc morgan stanley co incorporated donaldson lufkin jenrette securities corporation credit suisse first boston corporation lehman brothers inc prudential securities incorporated schroder co inc incorporated reference exhibit 43 form 8k file 113086 filed november 5 1997 101 executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 113086 filed november 16 1992 102 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 reg 3365790 103 nonemployee director deferred compensation plan incorporated reference form 10q file 113086 filed november 16 1992 104 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 113086 filed august 8 1991 105 1992 employee stock option plan amended incorporated reference exhibit 47 registration statement form s8 reg 33313531 106 energy ventures inc employees stock option plan incorporated reference exhibit 41 registration statement form s8 reg 3331662 107 form stock option agreement companys employees stock option plan incorporated reference exhibit 42 registration statement form s8 reg 3331662 108 amended restated nonemployee director stock option plan incorporated reference form 10q file 113086 filed august 12 1995 109 employment agreements bernard j durocdanner james g kiley frances r powell john c coble robert stiles 1010 lease agreement dated september 30 1993 among tf de mexico sa de cv lessor grant tf de mexico sa de cv lessee energy ventures inc guarantor revemex sa de cv owner subleased assets incorporated reference form 10k file 113086 filed march 1 1994 1011 modification dated november 21 1996 lease agreement dated september 30 1993 among tf de mexico sa de cv grant prideco sa de cv energy ventures inc guarantor steel pipes mexico sa grant prideco inc 1012 woodward oklahoma lease agreements amended incorporated reference form 10k file 113086 filed march 23 1995 1013 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited incorporated reference exhibit 1034 form 10k file 113086 filed march 20 1996 1014 amended restated lease agreement dated may 3 1996 baker hughes oilfield operations inc grant prideco inc incorporated reference exhibit 1014 form 10k amended form 10ka file 113086 filed march 24 1997 1015 asset purchase agreement dated june 21 1996 energy ventures inc mallard bay drilling inc noble drilling west africa inc noble drilling corporation incorporated reference exhibit 23 form 8k file 113086 filed june 24 1996 211 subsidiaries evi inc 231 consent arthur andersen llp 271 financial data schedule management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holder longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy agreements securities exchange commission upon request signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized evi inc bernard j durocdanner bernard j durocdanner president chief executive officer principal executive officer director date march 26 1998 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated schedule ii valuation qualifying accounts allowances three years ended december 31 1997 index exhibits 21 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 21 amendment 1 form 8k form 8ka file 113086 filed march 9 1998 22 share purchase agreement made entered january 30 1998 among shareholders nika enterprises ltd alberta corporation listed signature pages thereto evi oil tools canada ltd alberta corporation incorporated reference exhibit 21 form 8k file 113086 filed march 3 1998 23 agreement plan merger dated december 12 1996 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 21 form 8k file 113086 filed december 31 1997 24 agreement dated december 12 1997 among evi inc christiana companies inc total logistic control llc c2 inc incorporated reference exhibit 22 form 8k file 113086 filed december 31 1997 25 letter agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 23 form 8k file 113086 filed december 31 1997 26 stock purchase agreement dated october 9 1997 evi inc paccar inc incorporated reference exhibit 21 form 8k file 113086 filed october 21 1997 27 stock purchase agreement dated october 9 1997 among certain shareholders bmw monarch lloydminster ltd shareholders bmw pump inc shareholder makelki holdings ltd shareholder 589979 alberta ltd shareholders 600969 alberta ltd shareholders 391862 alberta ltd evi inc incorporated reference exhibit 22 form 8k file 113086 filed october 21 1997 28 agreement plan merger dated july 16 1997 amended among xls holding inc evi inc gpxl inc incorporated reference exhibit 21 form 8k file 113086 filed august 26 1997 29 stock purchase agreement dated february 21 1997 among seigo arai kanematsu usa inc energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed march 17 1997 210 agreement plan merger dated december 5 1996 among energy ventures inc gulfmark acquisition co gulfmark international inc new gulfmark international inc incorporated reference exhibit 22 form 8k file 113086 filed december 26 1996 211 agreement plan distribution dated december 5 1996 among gulfmark international inc new gulfmark international inc energy ventures inc incorporated reference exhibit 23 form 8k file 113086 filed december 26 1996 212 first amendment agreement plan merger dated march 27 1997 among energy ventures inc gulfmark acquisition co gulfmark international inc gulfmark offshore inc incorporated reference exhibit 23 registration statement form s4 reg 33324133 213 stock purchase agreement dated september 14 1996 among parker drilling company energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed october 3 1996 214 agreement plan merger dated june 20 1996 energy ventures inc tca acquisition inc tubular corporation america incorporated reference exhibit 21 form 8k file 113086 filed june 24 1996 31 restated certificate incorporation company amended incorporated reference exhibit 32 form 10k file 113086 filed may 14 1997 32 bylaws company amended incorporated reference exhibit 32 form 10k file 113086 filed march 1 1994 41 see exhibit nos 31 32 provisions restated certificate incorporation amended bylaws registrant defining rights holders common stock 42 credit agreement dated february 17 1998 among evi inc evi oil tools canada ltd subsidiary guarantors defined therein chase bank texas national association us administrative agent bank nova scotia documentation agent canadian agent abn amro bank nv syndication agent lenders defined therein including form note incorporated reference exhibit 41 form 8k file 113086 filed march 3 1998 43 indenture dated march 15 1994 among energy ventures inc issuer subsidiary guarantors party thereto guarantors chemical bank trustee incorporated reference form 8k file 113086 filed april 5 1994 44 specimen 103 senior note due 2004 energy ventures inc incorporated reference form 8k file 113086 filed april 5 1994 45 first supplemental indenture among energy ventures inc prideco chemical bank trustee dated june 30 1995 incorporated reference exhibit 44 registration statement form s3 reg 3361933 46 second supplemental indenture among energy ventures inc evi arrow inc evi watson inc chase manhattan bank trustee dated effective december 6 1996 incorporated reference exhibit 46 form 10k file 113086 filed march 20 1997 47 third supplemental indenture among evi inc ercon inc chase manhattan bank trustee dated effective may 1 1997 incorporated reference exhibit 992 form 8k file 113086 filed october 27 1997 48 fourth supplemental indenture among evi inc xls holding inc xl systems inc chase manhattan bank trustee dated effective august 25 1997 incorporated reference exhibit 993 form 8k file 113086 filed october 27 1997 49 fifth supplemental indenture evi inc chase manhattan bank dated december 12 1997 including form note form exchange note incorporated reference exhibit 41 form 8k file 113086 filed december 31 1997 410 indenture dated october 15 1997 evi inc chase manhattan bank trustee incorporated reference exhibit 413 registration statement form s3 reg 33345207 411 first supplemental indenture dated october 28 1997 evi inc chase manhattan bank trustee including form debenture incorporated reference exhibit 42 form 8k file 113086 filed november 5 1997 412 registration rights agreement dated november 3 1997 among evi inc morgan stanley co incorporated donaldson lufkin jenrette securities corporation credit suisse first boston corporation lehman brothers inc prudential securities incorporated schroder co inc incorporated reference exhibit 43 form 8k file 113086 filed november 5 1997 101 executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 113086 filed november 16 1992 102 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 reg 3365790 103 nonemployee director deferred compensation plan incorporated reference form 10q file 113086 filed november 16 1992 104 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 113086 filed august 8 1991 105 1992 employee stock option plan amended incorporated reference exhibit 47 registration statement form s8 reg 33313531 106 energy ventures inc employees stock option plan incorporated reference exhibit 41 registration statement form s8 reg 3331662 107 form stock option agreement companys employees stock option plan incorporated reference exhibit 42 registration statement form s8 reg 3331662 108 amended restated nonemployee director stock option plan incorporated reference form 10q file 113086 filed august 12 1995 109 employment agreements bernard j durocdanner james g kiley frances r powell john c coble robert stiles 1010 lease agreement dated september 30 1993 among tf de mexico sa de cv lessor grant tf de mexico sa de cv lessee energy ventures inc guarantor revemex sa de cv owner subleased assets incorporated reference form 10k file 113086 filed march 1 1994 1011 modification dated november 21 1996 lease agreement dated september 30 1993 among tf de mexico sa de cv grant prideco sa de cv energy ventures inc guarantor steel pipes mexico sa grant prideco inc 1012 woodward oklahoma lease agreements amended incorporated reference form 10k file 113086 filed march 23 1995 1013 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited incorporated reference exhibit 1034 form 10k file 113086 filed march 20 1996 1014 amended restated lease agreement dated may 3 1996 baker hughes oilfield operations inc grant prideco inc incorporated reference exhibit 1014 form 10k amended form 10ka file 113086 filed march 24 1997 1015 asset purchase agreement dated june 21 1996 energy ventures inc mallard bay drilling inc noble drilling west africa inc noble drilling corporation incorporated reference exhibit 23 form 8k file 113086 filed june 24 1996 211 subsidiaries evi inc 231 consent arthur andersen llp 271 financial data schedule management contract compensatory plan arrangement filed herewithitem 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference 1 consolidated financial statements company listed page 45 report 2 financial statement schedule listed page 45 report 3 exhibits company listed item 14 c b reports form 8k 1 current report form 8k dated november 12 1999 containing pro forma financial information company dailey international inc 2 current report form 8k dated october 22 1999 announcing following companys earnings three nine months ended september 30 1999 ii companys restated historical financial statements managements discussion analysis years ended december 31 1998 1997 1996 three months ended march 31 1999 1998 three six months ended june 30 1999 1998 restated light reclassification grant prideco discontinued operation iii restated pro forma information dailey international inc acquisition reflect grant prideco discontinued operations c exhibits exhibit number description 21 share sale agreement dated september 2 1999 shareholders petroline wellsystems limited weatherford eurasia limited weatherford international inc including registration rights undertaking attached annex incorporated reference exhibit 101 form 8k file 113086 filed september 7 1999 22 agreement plan reorganization dated september 14 1999 among williams tool co shareholders williams tool co shareholders williams tool co canada inc formerly 598148 alberta ltd weatherford international inc weatherford acquisition inc incorporated reference exhibit 101 form 8k file 113086 filed september 24 1999 23 acquisition agreement dated may 21 1999 entered among weatherford international inc dailey international inc certain subsidiaries dailey named therein incorporated reference exhibit 21 registrants quarterly report form 10q quarter ended june 30 1999 file 113086 24 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 21 amendment 1 form 8k form 8ka file 113086 filed march 9 1998 25 amendment 1 dated april 17 1998 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 22 form 8k file 113086 filed april 21 1998 26 amendment 2 dated april 22 1998 agreement plan merger dated march 4 1998 amended evi inc weatherford enterra inc incorporated reference exhibit 23 form 8k file 113086 filed april 23 1998 27 share purchase agreement made entered january 30 1998 among shareholders nika enterprises ltd alberta corporation listed signature pages thereto evi oil tools canada ltd alberta corporation incorporated reference exhibit 21 form 8k file 113086 filed march 3 1998 28 agreement plan merger dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 21 form 8k file 113086 filed december 31 1997 29 agreement dated december 12 1997 among evi inc christiana companies inc total logistic control llc c2 inc incorporated reference exhibit 22 form 8k file 113086 filed december 31 1997 210 letter agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 23 form 8k file 113086 filed december 31 1997 211 amended restated arrangement agreement taro industries limited evi inc 756745 alberta ltd 759572 alberta ltd dated december 5 1997 incorporated reference exhibit 24 form 8k file 113086 filed december 31 1997 212 stock purchase agreement dated october 9 1997 evi inc paccar inc incorporated reference exhibit 21 form 8k file 113086 filed october 21 1997 213 stock purchase agreement dated october 9 1997 among certain shareholders bmw monarch lloydminster ltd shareholders bmw pump inc shareholder makelki holdings ltd shareholder 589979 alberta ltd shareholders 600969 alberta ltd shareholders 391862 alberta ltd evi inc incorporated reference exhibit 22 form 8k file 113086 filed october 21 1997 214 agreement plan merger dated december 5 1996 among energy ventures inc gulfmark acquisition co gulfmark international inc new gulfmark international inc incorporated reference exhibit 22 form 8k file 113086 filed december 26 1996 exhibit number description 215 agreement plan distribution dated december 5 1996 among gulfmark international inc new gulfmark international inc energy ventures inc incorporated reference exhibit 23 form 8k file 113086 filed december 26 1996 216 first amendment agreement plan merger dated march 27 1997 among energy ventures inc gulfmark acquisition co gulfmark international inc gulfmark offshore inc incorporated reference exhibit 23 registration statement form s4 amended reg 33324133 217 amendment 1 dated may 26 1998 agreement plan merger dated december 12 1997 agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc total logistic control llc incorporated reference exhibit 218 registration statement form s4 amended reg 33358741 218 amended restated agreement plan merger among weatherford international inc christiana acquisition inc christiana companies inc c2 inc dated october 14 1998 incorporated reference exhibit 219 registration statement form s4 reg 33365663 219 amendment 2 logistic purchase agreement among weatherford international inc total logistic control llc christiana companies inc c2 inc dated october 12 1998 incorporated reference exhibit 220 registration statement form s4 reg 33365663 220 amendment 1 amended restated agreement plan merger among weatherford international inc christiana acquisition inc christiana companies inc c2 inc dated january 5 1999 incorporated reference exhibit 221 registration statement form s4 reg 33365663 221 amendment 3 logistic purchase agreement among weatherford international inc total logistic control llc christiana companies inc c2 inc dated january 51999 incorporated reference exhibit 222 registration statement form s4 reg 33365663 31 amended restated certificate incorporation company incorporated reference exhibit 31 registrants annual report form 10k year ended december 31 1998 file 113086 32 amended restated bylaws company incorporated reference exhibit 32 form 8k file 113086 filed june 2 1998 41 see exhibit nos 31 32 provisions amended restated certificate incorporation amended restated bylaws registrant defining rights holders common stock 42 amended restated credit agreement dated may 27 1998 among evi weatherford inc evi oil tools canada ltd chase bank texas national association us administrative agent bank nova scotia documentation agent canadian agent abn amro bank nv syndication agent lenders defined therein including forms notes incorporated reference exhibit 41 form 8k file 113086 filed june 16 1998 43 indenture dated may 17 1996 weatherford enterra inc bank montreal trust company trustee incorporated reference exhibit 41 weatherford enterra incs current report form 8k file 17867 dated may 28 1996 44 first supplemental indenture dated effective may 27 1998 among evi weatherford inc successor merger weatherford enterra inc bank montreal trust company trustee incorporated reference exhibit 41 form 8k file 113086 filed june 2 1998 exhibit number description 45 form weatherford enterra incs 7 14 notes due may 15 2006 incorporated reference exhibit 42 weatherford enterra incs current report form 8k file 17867 dated may 28 1996 46 indenture dated october 15 1997 evi inc chase manhattan bank trustee incorporated reference exhibit 413 registration statement form s3 reg 33345207 47 first supplemental indenture dated october 28 1997 evi inc chase manhattan bank trustee including form debenture incorporated reference exhibit 42 form 8k file 113086 filed november 5 1997 48 registration rights agreement dated november 3 1997 among evi inc morgan stanley co incorporated donaldson lufkin jenrette securities corporation credit suisse first boston corporation lehman brothers inc prudential securities incorporated schroder co inc incorporated reference exhibit 43 form 8k file 113086 filed november 5 1997 49 participation agreement dated december 8 1998 among weatherford enterra compression company lp abn amro bank nv administrative agent arranger syndication agent chase bank texas national association lessors listed schedule thereto incorporated reference exhibit 416 registration statement form s4 reg 33365663 410 master lease intended security dated december 8 1998 weatherford enterra compression company lp lessee abn amro bank nv administrative agent lessors incorporated reference exhibit 417 registration statement form s4 reg 33365663 411 guaranty agreement dated december 8 1998 weatherford international inc abn amro bank nv administrative agent lessors incorporated reference exhibit 418 registration statement form s4 reg 33365663 101 employment agreement mark hoppman gary warren 102 employment agreement dated march 1 1999 weatherford international inc bruce f longaker jr incorporated reference exhibit 101 registrants quarterly report form 10q quarter ended march 31 1999 file 113086 103 weatherford enterra inc nonemployee director stock option plan amended restated incorporated reference exhibit 101 weatherford enterra incs quarterly report form 10q quarter ended june 30 1997 file 17867 104 weatherford international incorporated 1987 stock option plan amended restated incorporated reference exhibit 103 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 105 weatherford enterra inc 1991 stock option plan amended restated incorporated reference exhibit 104 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 106 weatherford enterra inc amended restated employee stock purchase plan incorporated reference exhibit 419 companys registration statement form s8 reg 33353633 107 weatherford enterra inc restricted stock incentive plan amended restated incorporated reference exhibit 106 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 108 amended restated change control agreement jon nicholson incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 exhibit number description 109 change control agreement randall stilley incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1997 file 117867 1010 indemnification agreements robert k moses jr incorporated reference exhibit 1010 weatherford enterra incs annual report form 10k year ended december 31 1987 file 17867 philip burguieres incorporated reference exhibit 104 weatherford enterra incs quarterly report form 10q quarter ended june 30 1991 file 17867 william e macaulay incorporated reference exhibit 102 weatherford enterra incs quarterly report form 10q quarter ended september 30 1995 file 17867 jon nicholson incorporated reference exhibit 102 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 randall stilley incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1997 file 117867 1011 employment agreement dated june 15 1998 evi weatherford inc philip burguieres incorporated reference exhibit 109 form 10q file 113086 filed august 14 1998 1012 energy ventures inc executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 113086 filed november 16 1992 1013 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 reg 3365790 1014 energy ventures inc nonemployee director deferred compensation plan incorporated reference form 10q file 113086 filed november 16 1992 1015 energy ventures inc 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 113086 filed august 8 1991 1016 energy ventures inc 1992 employee stock option plan amended incorporated reference exhibit 47 registration statement form s8 reg 33313531 1017 energy ventures inc employee stock option plan incorporated reference exhibit 41 registration statement form s8 reg 3331662 1018 form stock option agreement companys employee stock option plan incorporated reference exhibit 42 registration statement form s8 reg 3331662 1019 amended restated nonemployee director stock option plan incorporated reference exhibit 101 form 10q file 113086 filed august 12 1995 1020 employment agreements bernard j durocdanner frances r powell john c coble robert stiles incorporated reference exhibit 109 form 10k file 113086 filed march 27 1998 1021 employment agreement dated march 16 1998 evi inc curtis w huff incorporated reference exhibit 101 registrants quarterly report form 10q quarter ended march 31 1998 file 113086 1022 employment agreements e lee colley iii donald r galletly jon r nicholson randall stilley incorporated reference exhibit 1021 registrants annual report form 10k year ended december 31 1998 file 113086 1023 weatherford international inc 1998 employee stock option plan including form agreement officers incorporated reference exhibit 1022 registrants annual report form 10k year ended december 31 1998 file 113086 exhibit number description 1024 form stock option agreement nonemployee directors dated september 8 1998 incorporated reference exhibit 1023 registrants annual report form 10k year ended december 31 1998 file 113086 1025 form warrant agreement robert k moses jr dated september 8 1998 incorporated reference exhibit 1024 registrants annual report form 10k year ended december 31 1998 file 113086 1026 formation agreement dated february 2 1999 among weatherford international inc weatherford enterra compression company lp general electric capital corporation global compression services inc incorporated reference exhibit 101 form 8k file 113086 filed february 5 1999 1027 limited partnership agreement weatherford global compression services lp dated february 2 1999 among weatherford global compression holding llc weatherford enterra compression company lp global compression services inc incorporated reference exhibit 102 form 8k file 113086 filed february 5 1999 1028 limited liability company agreement weatherford global compression holding llc dated february 2 1999 weatherford enterra compression company lp global compression services inc incorporated reference exhibit 103 form 8k file 113086 filed february 5 1999 1029 registration rights agreement dated february 2 1999 among weatherford global compression services lp weatherford enterra compression company lp global compression services inc incorporated reference exhibit 104 form 8k file 113086 filed february 5 1999 1030 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited incorporated reference exhibit 1034 form 10k file 113086 filed march 20 1996 1031 amended restated lease agreement dated may 3 1996 baker hughes oilfield operations inc grant prideco inc incorporated reference exhibit 1014 form 10k amended form 10ka file 113086 filed march 24 1997 1032 woodward oklahoma lease agreements amended incorporated reference exhibit 1032 form 10k file 113086 filed march 23 1995 211 subsidiaries weatherford international inc 231 consent arthur andersen llp 271 financial data schedule management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon request agree furnish requesting stockholder copy named exhibits upon payment reasonable expenses obtaining duplicating mailing requested exhibits requests copies exhibits made writing investor relations department 515 post oak blvd suite 600 houston tx 77027 financial statement schedule ii weatherford international inc subsidiaries valuation qualifying accounts allowances three years ended december 31 1999 schedules omitted required information included financial statements notes thereto signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized city houston state texas march 15 2000 weatherford international inc bernard j durocdanner bernard j durocdanner president chief executive officer chairman board director principal executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon request agree furnish requesting stockholder copy named exhibits upon payment reasonable expenses obtaining duplicating mailing requested exhibits requests copies exhibits made writing investor relations department 515 post oak blvd suite 600 houston tx 77027item 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference 1 consolidated financial statements company listed page 36 report 2 financial statement schedule page 75 report 3 exhibits company listed item 14c b reports form 8k 1 current report form 8k dated november 30 2001 announcing acquisition johnson screens division vivendi environnement 110 million 2 current report form 8k dated november 16 2001 announcing following closing private placement 350 million companys 6 58 senior notes due 2011 ii acquisition cidra corporations optical sensing systems business unit 625 million cash approximately 19 million shares companys common stock 3 current report form 8k dated november 6 2001 announcing proposal make private placement approximately 350 million senior notes 4 current report form 8k dated october 24 2001 announcing following companys earnings quarter ended september 30 2001 ii signing agreement acquire johnson screens division vivendi environnement 110 million iii signing agreement acquire cidra corporations optical sensing systems oss business unit approximately 130 million companys common stock c exhibits management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon request agree furnish requesting stockholder copy named exhibits upon payment reasonable expenses obtaining duplicating mailing requested exhibits requests copies exhibits made writing investor relations department 515 post oak blvd suite 600 houston tx 77027 financial statement schedule ii weatherford international inc subsidiaries valuation qualifying accounts allowances three years ended december 31 2001 schedules omitted required information included financial statements notes thereto signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized city houston state texas march 22 2002 weatherford international inc bernard j durocdanner bernard j durocdanner president chief executive officer chairman board director principal executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan arrangement filed herewithitem 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference 1 consolidated financial statements company listed page 42 report 2 financial statement schedule listed page 42 report 3 exhibits company listed item 14c b reports form 8k 1 current report form 8ka filed december 10 1998 amending current report form 8ka filed july 16 1998 amending current report form 8k dated june 15 1998 reporting companys managements discussion analysis financial condition results operations restated basis ii supplemental restated financial statements december 31 1997 1996 three years ended december 31 1997 2 current report form 8k dated october 22 1998 announcing companys earnings quarter ended september 30 1998 c exhibits 21 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 21 amendment 1 form 8k form 8ka file 113086 filed march 9 1998 22 amendment 1 dated april 17 1998 agreement plan merger dated march 4 1998 evi inc weatherford enterra inc incorporated reference exhibit 22 form 8k file 113086 filed april 21 1998 23 amendment 2 dated april 22 1998 agreement plan merger dated march 4 1998 amended evi inc weatherford enterra inc incorporated reference exhibit 23 form 8k file 113086 filed april 23 1998 24 share purchase agreement made entered january 30 1998 among shareholders nika enterprises ltd alberta corporation listed signature pages thereto evi oil tools canada ltd alberta corporation incorporated reference exhibit 21 form 8k file 113086 filed march 3 1998 25 agreement plan merger dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 21 form 8k file 113086 filed december 31 1997 26 agreement dated december 12 1997 among evi inc christiana companies inc total logistic control llc c2 inc incorporated reference exhibit 22 form 8k file 113086 filed december 31 1997 27 letter agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc incorporated reference exhibit 23 form 8k file 113086 filed december 31 1997 28 amended restated arrangement agreement taro industries limited evi inc 756745 alberta ltd 759572 alberta ltd dated december 5 1997 incorporated reference exhibit 24 form 8k file 113086 filed december 31 1997 29 stock purchase agreement dated october 9 1997 evi inc paccar inc incorporated reference exhibit 21 form 8k file 113086 filed october 21 1997 210 stock purchase agreement dated october 9 1997 among certain shareholders bmw monarch lloydminster ltd shareholders bmw pump inc shareholder makelki holdings ltd shareholder 589979 alberta ltd shareholders 600969 alberta ltd shareholders 391862 alberta ltd evi inc incorporated reference exhibit 22 form 8k file 113086 filed october 21 1997 211 agreement plan merger dated july 16 1997 amended among xls holding inc evi inc gpxl inc incorporated reference exhibit 21 form 8k file 113086 filed august 26 1997 212 stock purchase agreement dated february 21 1997 among seigo arai kanematsu usa inc energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed march 17 1997 213 agreement plan merger dated december 5 1996 among energy ventures inc gulfmark acquisition co gulfmark international inc new gulfmark international inc incorporated reference exhibit 22 form 8k file 113086 filed december 26 1996 214 agreement plan distribution dated december 5 1996 among gulfmark international inc new gulfmark international inc energy ventures inc incorporated reference exhibit 23 form 8k file 113086 filed december 26 1996 215 first amendment agreement plan merger dated march 27 1997 among energy ventures inc gulfmark acquisition co gulfmark international inc gulfmark offshore inc incorporated reference exhibit 23 registration statement form s4 amended reg 33324133 216 stock purchase agreement dated september 14 1996 among parker drilling company energy ventures inc incorporated reference exhibit 21 form 8k file 113086 filed october 3 1996 217 agreement plan merger dated june 20 1996 energy ventures inc tca acquisition inc tubular corporation america incorporated reference exhibit 21 form 8k file 113086 filed june 24 1996 218 amendment 1 dated may 26 1998 agreement plan merger dated december 12 1997 agreement dated december 12 1997 among evi inc christiana acquisition inc christiana companies inc c2 inc total logistic control llc incorporated reference exhibit 218 registration statement form s4 amended reg 33358741 219 amended restated agreement plan merger among weatherford international inc christiana acquisition inc christiana companies inc c2 inc dated october 14 1998 incorporated reference exhibit 219 registration statement form s4 reg 33365663 220 amendment 2 logistic purchase agreement among weatherford international inc total logistic control llc christiana companies inc c2 inc dated october 12 1998 incorporated reference exhibit 220 registration statement form s4 reg 33365663 221 amendment 1 amended restated agreement plan merger among weatherford international inc christiana acquisition inc christiana companies inc c2 inc dated january 5 1999 incorporated reference exhibit 221 registration statement form s4 reg 33365663 222 amendment 3 logistic purchase agreement among weatherford international inc total logistic control llc christiana companies inc c2 inc dated january 5 1999 incorporated reference exhibit 222 registration statement form s4 reg 33365663 31 amended restated certificate incorporation company 32 amended restated bylaws company incorporated reference exhibit 32 form 8k file 113086 filed june 2 1998 41 see exhibit nos 31 32 provisions amended restated certificate incorporation amended restated bylaws registrant defining rights holders common stock 42 amended restated credit agreement dated may 27 1998 among evi weatherford inc evi oil tools canada ltd chase bank texas national association us administrative agent bank nova scotia documentation agent canadian agent abn amro bank nv syndication agent lenders defined therein including forms notes incorporated reference exhibit 41 form 8k file 113086 filed june 16 1998 43 indenture dated may 17 1996 weatherford enterra inc bank montreal trust company trustee incorporated reference exhibit 41 weatherford enterra incs current report form 8k file 17867 dated may 28 1996 44 first supplemental indenture dated effective may 27 1998 among evi weatherford inc successor merger weatherford enterra inc bank montreal trust company trustee incorporated reference exhibit 41 form 8k file 113086 filed june 2 1998 45 form weatherford enterra incs 7 14 notes due may 15 2006 incorporated reference exhibit 42 weatherford enterra incs current report form 8k file 17867 dated may 28 1996 46 indenture dated march 15 1994 among energy ventures inc issuer subsidiary guarantors party thereto guarantors chemical bank trustee incorporated reference form 8k file 113086 filed april 5 1994 47 specimen 10 14 senior note due 2004 energy ventures inc incorporated reference form 8k file 113086 filed april 5 1994 48 first supplemental indenture among energy ventures inc prideco inc chemical bank trustee dated june 30 1995 incorporated reference exhibit 44 registration statement form s3 reg 3361933 49 second supplemental indenture among energy ventures inc evi arrow inc evi watson inc chase manhattan bank trustee dated effective december 6 1996 incorporated reference exhibit 46 form 10k file 113086 filed march 20 1997 410 third supplemental indenture among evi inc ercon inc chase manhattan bank trustee dated effective may 1 1997 incorporated reference exhibit 992 form 8k file 113086 filed october 27 1997 411 fourth supplemental indenture among evi inc xls holding inc xl systems inc chase manhattan bank trustee dated effective august 25 1997 incorporated reference exhibit 993 form 8k file 113086 filed october 27 1997 412 fifth supplemental indenture evi inc chase manhattan bank dated december 12 1997 including form note form exchange note incorporated reference exhibit 41 form 8k file 113086 filed december 31 1997 413 indenture dated october 15 1997 evi inc chase manhattan bank trustee incorporated reference exhibit 413 registration statement form s3 reg 33345207 414 first supplemental indenture dated october 28 1997 evi inc chase manhattan bank trustee including form debenture incorporated reference exhibit 42 form 8k file 113086 filed november 5 1997 415 registration rights agreement dated november 3 1997 among evi inc morgan stanley co incorporated donaldson lufkin jenrette securities corporation credit suisse first boston corporation lehman brothers inc prudential securities incorporated schroder co inc incorporated reference exhibit 43 form 8k file 113086 filed november 5 1997 416 participation agreement dated december 8 1998 among weatherford enterra compression company lp abn amro bank nv administrative agent arranger syndication agent chase bank texas national association lessors listed schedule thereto incorporated reference exhibit 416 registration statement form s4 reg 33365663 417 master lease intended security dated december 8 1998 weatherford enterra compression company lp lessee abn amro bank nv administrative agent lessors incorporated reference exhibit 417 registration statement form s4 reg 33365663 418 guaranty agreement dated december 8 1998 weatherford international inc abn amro bank nv administrative agent lessors incorporated reference exhibit 418 registration statement form s4 reg 33365663 101 weatherford enterra inc nonemployee director stock option plan amended restated incorporated reference exhibit 101 weatherford enterra incs quarterly report form 10q quarter ended june 30 1997 file 17867 102 weatherford enterra inc 401k savings plan incorporated reference exhibit 415 companys registration statement form s8 reg 33353633 103 weatherford international incorporated 1987 stock option plan amended restated incorporated reference exhibit 103 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 104 weatherford enterra inc 1991 stock option plan amended restated incorporated reference exhibit 104 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 105 weatherford enterra inc amended restated employee stock purchase plan incorporated reference exhibit 419 companys registration statement form s8 reg 33353633 106 weatherford enterra inc restricted stock incentive plan amended restated incorporated reference exhibit 106 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 107 amended restated change control agreement jon nicholson incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 108 change control agreement randall stilley incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1997 file 117867 109 indemnification agreements robert k moses jr incorporated reference exhibit 1010 weatherford enterra incs annual report form 10k year ended december 31 1987 file 17867 philip burguieres incorporated reference exhibit 104 weatherford enterra incs quarterly report form 10q quarter ended june 30 1991 file 17867 william e macaulay incorporated reference exhibit 102 weatherford enterra incs quarterly report form 10q quarter ended september 30 1995 file 17867 jon nicholson incorporated reference exhibit 102 weatherford enterra incs annual report form 10k year ended december 31 1996 file 17867 randall stilley incorporated reference exhibit 101 weatherford enterra incs annual report form 10k year ended december 31 1997 file 117867 1010 employment agreement dated june 15 1998 evi weatherford inc philip burguieres incorporated reference exhibit 109 form 10q file 113086 filed august 14 1998 1011 energy ventures inc executive deferred compensation stock ownership plan related trust agreement incorporated reference form 10q file 113086 filed november 16 1992 1012 first amendment energy ventures inc executive deferred compensation stock ownership plan dated june 28 1993 incorporated reference exhibit 43 registration statement form s8 reg 3365790 1013 energy ventures inc nonemployee director deferred compensation plan incorporated reference form 10q file 113086 filed november 16 1992 1014 energy ventures inc 1991 nonemployee director stock option plan form agreement incorporated reference form 10q file 113086 filed august 8 1991 1015 energy ventures inc 1992 employee stock option plan amended incorporated reference exhibit 47 registration statement form s8 reg 33313531 1016 energy ventures inc employee stock option plan incorporated reference exhibit 41 registration statement form s8 reg 3331662 1017 form stock option agreement companys employee stock option plan incorporated reference exhibit 42 registration statement form s8 reg 3331662 1018 amended restated nonemployee director stock option plan incorporated reference exhibit 101 form 10q file 113086 filed august 12 1995 1019 employment agreements bernard j durocdanner james g kiley frances r powell john c coble robert stiles incorporated reference exhibit 109 form 10k file 113086 filed march 27 1998 1020 employment agreement dated march 16 1998 evi inc curtis w huff incorporated reference exhibit 101 registrants quarterly report form 10q quarter ended march 31 1998 file 113086 1021 employment agreements donald r galletly e lee colley iii jon r nicholson randall stilley 1022 weatherford international inc 1998 employee stock option plan including form agreement officers 1023 form stock option agreement nonemployee directors dated september 8 1998 1024 form warrant agreement robert k moses jr dated september 8 1998 1025 weatherford international inc 401k savings plan 1026 manufacturing sales agreement dated january 1 1996 grant prideco sa oil country tubular limited incorporated reference exhibit 1034 form 10k file 113086 filed march 20 1996 1027 amended restated lease agreement dated may 3 1996 baker hughes oilfield operations inc grant prideco inc incorporated reference exhibit 1014 form 10k amended form 10ka file 113086 filed march 24 1997 1028 formation agreement dated february 2 1999 among weatherford international inc weatherford enterra compression company lp general electric capital corporation global compression services inc incorporated reference exhibit 101 form 8k file 113086 filed february 5 1999 1029 limited partnership agreement weatherford global compression services lp dated february 2 1999 among weatherford global compression holding llc weatherford enterra compression company lp global compression services inc incorporated reference exhibit 102 form 8k file 113086 filed february 5 1999 1030 limited liability company agreement weatherford global compression holding llc dated february 2 1999 weatherford enterra compression company lp global compression services inc incorporated reference exhibit 103 form 8k file 113086 filed february 5 1999 1031 registration rights agreement dated february 2 1999 among weatherford global compression services lp weatherford enterra compression company lp global compression services inc incorporated reference exhibit 104 form 8k file 113086 filed february 5 1999 1032 woodward oklahoma lease agreements amended incorporated reference exhibit 1032 form 10k file 113086 filed march 23 1995 211 subsidiaries weatherford international inc 231 consent arthur andersen llp 271 financial data schedule management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon request agree furnish requesting stockholder copy named exhibits upon payment reasonable expenses obtaining duplicating mailing requested exhibits requests copies exhibits made writing investor relations department 515 post oak blvd suite 600 houston tx 77027 financial statement schedule ii weatherford international inc subsidiaries valuation qualifying accounts allowances three years ended december 31 1998 schedules omitted required information included financial statements notes thereto signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized city houston state texas march 29 1999 weatherford international inc bernard j durocdanner bernard j durocdanner president chief executive officer chairman board director pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon requestitem 14 exhibits financial statement schedules reports form 8k following documents filed part report incorporated herein reference 1 consolidated financial statements company listed page 40 report 2 financial statement schedule page 40 report 3 exhibits company listed item 14 c b reports form 8k 1 current report form 8k dated december 21 2000 updating companys operations results fourth quarter 2000 expectations next year 2 current report form 8k dated october 23 2000 announcing following agreement merge companys global compression services division subsidiary universal compression holdings inc exchange 1375 million shares universal common stock ii companys earnings three nine months ended september 30 2000 c exhibits management contract compensatory plan arrangement filed herewith permitted item 601b4iiia regulation sk company filed annual report form 10k certain instruments defining rights holders longterm debt company subsidiaries total amount securities authorized instruments exceed 10 total assets company subsidiaries consolidated basis company agrees furnish copy instruments securities exchange commission upon request agree furnish requesting stockholder copy named exhibits upon payment reasonable expenses obtaining duplicating mailing requested exhibits requests copies exhibits made writing investor relations department 515 post oak blvd suite 600 houston tx 77027 financial statement schedule ii weatherford international inc subsidiaries valuation qualifying accounts allowances three years ended december 31 2000 schedules omitted required information included financial statements notes thereto signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized city houston state texas march 21 2001 weatherford international inc bernard j durocdanner bernard j durocdanner president chief executive officer chairman board director principal executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated index exhibits management contract compensatory plan arrangement filed herewith item 7 managements discussion analysis financial condition results operations general company manufactures markets drill pipe premium tubular products artificial lift completion systems oilfield equipment segment provides contract drilling workover services contract drilling segment use exploration production oil natural gas level exploration production activity influenced worldwide economic conditions supply demand political stability oil producing countries however natural gas oil prices historically prevalent factor determining level worldwide exploration production income continuing operations 11311000 77 per share revenues 351587000 1995 compared income continuing operations 4642000 37 per share revenues 248537000 1994 operating income 1995 32440000 compared 19469000 1994 represents 67 increase 1995 compared 1994 increase operating income 1995 primarily reflects improvements companys tubular products division coupled contribution operating income attributable acquisition prideco june 30 1995 demand companys tubular products benefited 1995 continuing reduction worldwide inventory used drill pipe trends resulted increased drill pipe demand improved results 1995 also reflected generally improved industry conditionsthe acquisition fluid packed pump sucker rod businesses nationaloilwell august 1994 higher international revenues companys internal cost saving efforts early fourth quarter 1995 company completed public offering 3450000 shares common stock public offering net proceeds offering approximately 726 million funds offering used reduce companys outstanding debt revolving lines credit finance expansion companys domestic international tubular operations general corporate purposes offering resulted reduction companys debt total capitalization ratio december 31 1995 approximately 38 december 1995 company made strategic decision dispose highland store distribution system united states part artificial lift completion tool equipment division decision reflected companys desire focus efforts manufacturing eliminate substantial cost associated serving distributor united states market early 1996 company completed sale operations continental emsco approximately 3 million cash 4 million vendor credit continental emsco future equipment needs company 05 million note receivable consideration received sale approximated net book value assets sold resulting material gain loss disposition company us store system provided company ability reduce work force 170 employees eliminate overhead cost maintaining store distribution network reduce inventory costs us connection disposition continental emsco appointed nonexclusive distributor us companys artificial lift division us manufactured products well exclusive distributor companys rotaflex products us company believes distribution arrangement together arrangements company major distributors permit broader distribution companys products cost effective basis company retained canadian distribution system used service support corod product lines company currently focusing efforts assimilating acquisition prideco improving manufacturing efficiencies capabilities company also continuing seek opportunities expansion sales manufacturing outside us company currently expects 1996 results benefit continuing strong tubular sales cost reductions oil tools division results however dependent market conditions particular level drilling activity us gulf coast demand drill pipe tubular products results operations comparison fiscal year 1995 fiscal year 1994 oilfield equipment segment revenues operating income oilfield equipment segment 2717 million 231 million respectively year ended december 31 1995 compared 1853 million 82 million respectively year ended december 31 1994 increases revenues operating income primarily attributable contributions increased drill pipe sales higher prices margins addition companys canadian pump sales higher 1995 compared 1994 increase sales tubulars products 1995 606 million compared 226 million 1994 increase sales 1995 resulted acquisition prideco june 30 1995 well overall increase demand drill pipe evidence improved demand drill pipe companys tubular backlog december 31 1995 784 million compared 352 million december 31 1994 company anticipates backlog existing december 31 1995 shipped next twelve months addition company implemented price increases second half 1995 company benefit 1996 existing backlog turns results oilfield equipment segment include 075 million royalty payment fourth quarter 1995 benefited operating income 1995 oilfield equipment segment also benefited lower average manufacturing costs tubulars associated increased sales higher gross margins companys mexican facility lower cost base united states facilities company expects production octl facility becomes fully operational average manufacturing costs tubulars decline result lower labor costs facility however company expects initial production inefficiencies associated octl facility third quarter 1995 company experienced increases cost green tubing primary material used production tubular goods date company generally able pass additional costs raw material customers however assurances continue able companys recent acquisition prideco expected benefit results segment higher revenues improved margins reductions per unit costs tubular goods although assurance ultimate savings may realized result acquisition company currently expects realize annual savings overhead distribution costs excess 6 million operations prideco fully integrated company expects integration completed middle 1996 revenues operating income associated companys artificial lift division 1065 million 80 million respectively 1995 compared 851 million 53 million respectively 1994 increases revenues operating income 1995 primarily attributable companys increases canadian progressive cavity pump corod sales company currently process effecting cost reductions division eliminating redundant administrative costs company anticipates process completed operating results division improve disposition companys united states distribution system also provides company opportunity focus manufacturing product design contract drilling segment revenues operating income contract drilling segment 799 million 145 million respectively 1995 compared 633 million 158 million respectively 1994 increase revenues 1995 reflects increase international operations nigeria peru argentina new contracts nigeria peru take effect late third quarter 1994 july 1995 companys two peru rigs placed standby recently one rigs placed back operation rig remaining standby june 1995 companys operations commenced argentina covering four drilling rigs operations nigeria peru argentina contributed 246 million revenues 1995 operating income international operations 36 million 1995 compared 52 million 1994 operating income 1994 included insurance settlement respect national iranian oil company nioc contract increased operating income 48 million reduced operating losses 26 million relating iranian operations 1994 argentina operations produced operating loss 05 million 1995 attributable certain initial startup costs incurred company expects 1996 benefit startup operating costs incurred 1995 expects operation argentina favorable impact 1996 operating results operations nigeria currently subject various political risk regard currently pending us congress various legislation enacted would restrict trade investment nigeria date legislation enacted however legislation adopted either restricted trade investment nigeria companys nigerian operations could materially affected domestic revenues increased 5 1995 compared 1994 due increase domestic barge rig volume operating income 1995 108 million compared 106 million 1994 mallards 1995 operating income reduced fourth quarter increase reserves workers compensation claims cases settled well unsettled claims expenses partially offset gain sale rig net effect reduced 1995 operating results approximately 08 million september 30 1994 company settled claims insurance carriers respect termination workover drilling contract nioc terms settlement companys insurance carriers company received net cash payment 23 million retained rights funds collected recovered company nioc rigs equipment deployed iran company since sold redeployed argentina rigs equipment iran although company receiving payments retained obligations four year extended payment arrangement reached central bank iran local banks timing ultimate recovery subject various risks relating iran including impact recently imposed united states sanctions restrictions trade investment iran net carrying value reserves obligations december 31 1995 approximately 36 million demand companys domestic contract drilling workover services continue materially dependent levels exploration development gulf mexico coastal inland waters price natural gas also material factor effecting demand general selling general administrative expenses increased approximately 19 569 million 1995 479 million 1994 increase 1995 attributable prideco acquisition increased sales international expansion interest expense increased 1995 167 million 137 million 1994 increase interest expense attributable higher levels indebtedness 1995 companys working capital lines credit due increases level companys business companys interest expense declined fourth quarter 1995 result reduction debt following public offering companys effective tax rate 1995 approximately 31 compared 28 1994 increase rate reflects impact certain tax benefits occurring 1994 associated net operating loss carryforwards partially offset foreign losses corresponding tax benefit substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations comparison fiscal year 1994 fiscal year 1993 year ended december 31 1994 company reported net income continuing operations 858000 007 per share 46 million 037 per share respectively revenues 2485 million compared net income continuing operations 59 million 049 per share 79 million 066 per share respectively revenues 2460 million fiscal year 1993 1994 company refinanced outstanding indebtedness proceeds 120 million senior notes due 2004 part transaction company incurred first quarter extraordinary charge approximately 38 million net taxes approximately 19 million 030 per share extraordinary charge represented difference reacquisition price net carrying value companys 34 million senior notes including unamortized debt issuance costs year ended december 31 1994 companys operating income 195 million compared 186 million fiscal year 1993 1994 operating income companys oilfield equipment contract drilling segments 82 million 158 million respectively 1993 operating income segments 108 million 118 million respectively september 30 1994 company settled claims insurance carriers respect termination workover contract nioc insurance settlement increased operating income 48 million reduced operating losses 26 million relating iranian operations 1994 benefit offset reduction operating income nigeria peru oilfield equipment segment revenues oilfield equipment segment increased 8 1853 million 1994 compared 1716 million 1993 increase due primarily increased sales tubular products partially offset reduced procurement revenues operations international tool supply company acquired june 30 1993 sold december 30 1993 increase tubular products revenues primarily due change sales mix larger diameter drill pipe operating income oilfield equipment segment 82 million 1994 compared 108 million 1993 reduction operating income resulted costs incurred company consolidation certain plants product lines resulting acquisition fluid packed lines sucker rod pumps sucker rods nationaloilwell addition company experienced reduced margins tubular products artificial lift equipment due lower oil prices steep decline natural gas prices second half 1994 sluggish domestic international development activity company however benefited increased utilization certain facilities due increased revenues contract drilling segment revenues contract drilling segment decreased approximately 15 633 million 1994 compared 744 million 1993 domestic revenues slightly lower due reduced drilling activity international revenues decreased primarily due termination land drilling contract nioc iran addition international revenues related companys operations peru nigeria lower 1994 compared 1993 result companys rigs nigeria peru going contract middle 1993 companys rigs peru nigeria began new contracts second half 1994 contract drilling segments operating income 158 million 1994 compared 118 million 1993 domestic operating income increased 36 1994 compared 1993 international operating income increased 31 1994 compared 1993 increase 1994 principally due higher domestic day rates february 1994 acquisition awi drilling workover inc awi 12 rigs awi acquisition improved gross profit 1994 prior acquisition eight 12 rigs charter company increase partially offset lower rig utilization 1994 48 52 1993 due reduced activity us gulf coast area insurance settlement respect nioc contract increased operating income 48 million reduced operating losses 26 million relating iranian operations 1994 benefit offset reduction operating income nigeria peru march 1995 company entered twoyear land drilling contract ypf argentina contract covers four drilling rigs general selling general administrative expenses increased approximately 5 479 million 1994 457 million 1993 increase 1994 primarily attributable full year operations companys mexico hungary china facilities well full year operations production oil tools acquisition increases partially offset selling general administrative costs associated sold december 30 1993 interest expense increased 76 million year ended december 31 1993 137 million 1994 reflecting increased cost associated companys 120 million senior notes due 2004 issued march 1994 substantially subsequently exchanged new series senior notes due 2004 essentially identical old series net proceeds 120 million senior notes used repay substantially companys outstanding indebtedness working capital purposes prepayment companys prior indebtedness resulted extraordinary charge net taxes 3784000 030 per share first quarter 1994 companys effective tax rate income continuing operations decreased 28 1994 38 1993 favorable impact 1994 effective tax rate obtained utilization net operating loss carryforwards partially offset foreign losses corresponding tax benefit liquidity capital resources early fourth quarter 1995 company completed public offering 3450000 shares common stock net proceeds offering approximately 726 million funds offering used reduce companys outstanding debt revolving lines credit finance expansion companys domestic international tubular operations general corporate purposes offering resulted reduction companys debt total capitalization ratio december 31 1995 approximately 38 december 31 1995 company cash equivalents approximately 45 million compared approximately 31 million december 31 1994 december 31 1995 companys working capital approximately 152 million compared approximately 94 million december 31 1994 increase working capital primarily result recent public offering december 31 1995 december 31 1994 company place various working capital lines credit secured inventory receivables companys subsidiaries providing borrowings 655 million subject availability requirements borrowings companys lines credit generally based lenders determination collateral value current assets securing lines credit lines credit bear interest floating rates ranging prime plus 1 14 secured substantially borrowing subsidiarys accounts receivable inventory company subsidiaries required comply various affirmative negative covenants relating working capital earnings net worth facilities also impose certain limitations use funds company subsidiaries acquisitions capital expenditures incurrence additional indebtedness operational matters certain expenditures certain prohibitions declaration payment dividends company december 31 1995 december 31 1994 48 million 173 million respectively borrowed revolving lines credit 51 million 1 million respectively used support outstanding letters credit december 31 1995 december 31 1994 556 million 356 million respectively available additional borrowing credit facilities average interest rate facilities 88 1994 102 1995 company currently outstanding 120 million senior notes semiannual interest payments march september senior notes issued pursuant terms indenture dated march 15 1994 certain subsidiaries company unconditionally guaranteed companys obligations senior notes indenture relating senior notes contains various customary affirmative negative covenants among things limit ability company certain subsidiaries incur certain additional indebtedness unless companys consolidated fixed charge coverage ratio defined indenture least 20 10 ii make dividends distributions certain restricted payments iii create certain liens iv engage certain transitions affiliates v engage sale leaseback transactions vi make certain asset dispositions vii merge consolidate transfer substantially assets another person indenture also limits ability company certain subsidiaries issue preferred stock creates restrictions ability certain subsidiaries pay dividends make distributions august 1994 company received letter irs proposing increase gain recognized company upon dissolution october 1990 coleve columbia general irs proposal seeks payment tax liability approximately 141 million plus accrued interest thereon includes 34 million taxes relating proposed disallowance certain interest deductions taken company respect coleve subject similar letter received company fourth quarter 1993 tax liability respect matters previously provided deferred tax liability companys financial statements company disagrees irs position currently pursuing rights administrative review appeal intends vigorously contest matter although resolution remaining issues could affect timing payment previously accrued tax liabilities require use portion available capital company believe results audit ultimate resolution irs proposed adjustments material impact results operations financial position demand companys tubular products contract drilling services particularly effected price natural gas level oil gas exploration activity demand companys artificial lift completion tool equipment directly dependent oil production activity although companys international contract drilling services effected level exploration activity countries provides services domestic drilling operations materially dependent level exploration activity us gulf coast domestic natural gas prices companys current sources capital cash generated operations borrowings working capital lines credit company believes current reserves cash shortterm investments access existing credit lines internally generated cash operations sufficient finance projected cash requirements current future operations company continually evaluating new acquisitions focus proprietary technology underutilized assets enhance operations future acquisitions may funded cash flow operations borrowings lines credit facilities equity issuances desirable capital expenditures acquisitions dispositions june 30 1995 company acquired prideco transaction involved issuance approximately 225 million shares common stock acquisition expected provide company greater manufacturing marketing efficiencies allowing consolidation overhead reduced distribution marketing costs rationalization manufacturing operations revenues operating income prideco fiscal year ended june 30 1995 552 million 42 million respectively july 1995 company acquired engemaq sa brazilian completion tool business 4 million allocations purchase price fair market values net assets acquired 1995 acquisitions based preliminary estimates fair market value may revised additional information concerning asset liability valuations obtained january 1996 company entered longterm manufacturing sales agreement octl indiabased manufacturer drill pipe premium tubulars octl facility built 1990 direction personnel currently employed grant prideco modern tubular fabricating facility world facility used company pursue strategic expansion sales operations eastern hemisphere company believes combination grant pridecos product line coupled octls low manufacturing costs proximity major eastern hemisphere markets accomplish objective expansion intended substantially increase companys sales growing eastern hemisphere markets last years represented less 5 companys total revenues manufacturing operations behalf company expected commence second quarter 1996 terms octl agreement company right terminate agreement annual basis agreement initial fiveyear term renewable successive fiveyear terms agreement may terminated octl certain limited circumstances including beginning december 31 2000 certain minimum orders placed octl payments made company terms agreement octl company made onetime payment 8 million exclusive right grant pridecos products manufactured facility company also required pay direct operating expenses relating facility including cost inventory raw materials used manufacture companys products company expects octl facility require firstyear investment 20 million 25 million includes 8 million deposit made january 1996 working capital requirements funds relating octl facility expected financed existing cash borrowings lines credit facilities early 1996 company completed sale store distribution system united states approximately 75 million company received 3 million cash 4 million vendor credit continental emsco future equipment needs company 05 million note receivable consideration received sale approximated net book value assets sold resulting material gain loss addition funds used finance acquisitions capital expenditures company 1995 totaled approximately 327 million 1995 capital expenditures included approximately 16 million relating acquisition land rig deployed argentina equipment additions three existing land rigs argentina three deep drilling barge rigs ongoing routine capital expenditures next twelve months budgeted approximately 219 million capital expenditures expected funded available cash flow operations borrowings lines credit facilities item 8item 7 managements discussion analysis financial condition results operations general company international manufacturer supplier oilfield equipment company manufactures markets drill pipe premium tubular products tubular products segment manufactures markets complete line artificial lift production equipment production equipment segment companys products used exploration production oil natural gas recent periods company benefited improved market conditions continuing consolidation markets competes decline excess inventories used drill pipe company achieved significant growth recent years consistent strategy focused acquisitions internal development strategy combined increased demand companys products resulted significantly higher revenues operating income company currently largest manufacturer supplier drill pipe world largest manufacturer premium tubulars north america among largest manufacturers rod lift equipment world income continuing operations 1996 245 million 120 per share revenues 478 million compared income continuing operations 1995 26 million 18 per share revenues 2717 million increase income continuing operations 1996 primarily attributable increased sales margins drill pipe tubular products improved results also reflected companys acquisitions prideco inc prideco june 1995 enerpro may 1996 tca august 1996 operating assets superior september 1996 net income year ended december 31 1996 982 million 482 per share compared net income 113 million 77 per share year ended december 31 1995 included net income 1996 onetime gain net taxes 446 million 669 million 329 per share november 1996 sale company mallard division parker cash approximately 306 million 3056600 shares parker preferred stock subsequently converted 3056600 shares parker common stock december 1996 company intends use net proceeds disposition finance acquisitions internal development oilfield equipment businesses result sale mallard division current prior year financial results attributable mallard division reclassified discontinued operations accompanying consolidated financial statements year ended december 31 1996 income discontinued operations net taxes mallard division 75 million also included net income 1996 extraordinary aftertax charge 731000 04 per share second quarter 1996 relating termination companys 60 million credit facility replaced 120 million revolving credit facility demand companys tubular products particularly affected price natural gas level oil gas exploration activity demand companys production equipment directly dependent oil production activity exploration production activity also affected worldwide economic conditions supply demand oil natural gas seasonal trends political stability oil producing countries company also taking action increase presence new complementary phases premium tubulars market acquisitions including pending 64 million acquisition ta industries us manufacturer premium couplings accessories sales companys production equipment products historically concentrated north america company recently significantly expanded production equipment operations south america september 1996 acquisition geremia manufacturer progressing cavity pumps early 1997 acquisition anbert cilindros saic anbert manufacturer rod pumps argentina company currently expects 1997 results continue benefit strong tubular products sales 1996 1997 acquisitions results however dependent market conditions demand drill pipe tubular products accordingly assurance future results profitability results operations fiscal year 1996 compared fiscal year 1995 tubular products segment sales tubular products 1996 3425 million compared 1542 million 1995 operating income associated tubular products segment 1996 444 million compared 152 million 1995 results fourth quarter include 43 million charge attributable relocation tool joint manufacturing facility results 1996 reflected 73 increase sales drill pipe 27 increase sales premium tubulars increase drill pipe sales reflected overall increase demand drill pipe companys june 1995 acquisition prideco increase demand drill pipe due increased drilling activity particularly offshore higher sales prices continuing decline supply used drill pipe inventory company historically competed increase sales premium tubular products reflected acquisitions enerpro tca superior increase demand associated increased natural gas deep offshore exploration production activity acquisitions complimented companys engineered premium threading technology improvement operating income reflected effects increased sales improved pricing lower average manufacturing costs due consolidation savings third fourth quarters 1996 company implemented price increases drill pipe expected benefit 1997 results existing backlog turns price improvements however partially offset increase price raw materials particularly green tubing primary material used company production tubular goods companys sales drill pipe tubular products 59 4 7 attributable sales us canada latin america respectively sales drill pipe tubular products us canada latin america 1995 represented 62 4 12 respectively sales 1995 company currently process implementing various manufacturing changes tubular products division light recent acquisitions reduce costs improve efficiencies changes include closing companys tool joint manufacturing facility bastrop texas relocation various equipment personnel veracruz mexico facilities company incurred 43 million charge operating income fourth quarter 1996 associated changes company expects realize costs savings 1997 result changes backlog tubular products december 31 1996 approximately 170 million compared 78 million december 31 1995 company currently expects backlog shipped within next twelve months production equipment segment revenues operating income companys production equipment segment 1355 million 82 million respectively 1996 compared 1174 million 78 million respectively 1995 production equipment segment recorded charge 15 million fourth quarter 1996 associated consolidation two packer manufacturing facilities arising companys acquisition packer manufacturing operations arrow december 1996 company expects benefit 1997 packer facilities consolidation company also benefited reduction manufacturing expenses process efficiencies realized segments primary facilities sales production equipment north america constituted approximately 78 total sales 1996 segment compared 88 sales 1995 sales south america increased 17 1996 8 1995 increased south american sales primarily attributable 47 million revenues geremia manufacturer progressing cavity pumps acquired october 1996 canadian sales 549 million 1996 representing increase approximately 46 1995 levels company near completion construction new canadian manufacturing plant produce continuous rod expected expand capacity 150 company also process expanding capabilities facility manufacture rotors stators progressing cavity pumps pursuant exclusive license technology transfer arrangement netzsch germany production rotors stators facility expected commence early 1998 company anticipates increase capacity new continuous rod plant along manufacturing efficiencies benefit 1997 results sales united states 503 million 1996 compared 652 million 1995 revenues 1996 include sales companys highland pump distribution business sold first quarter 1996 connection companys decision focus efforts division manufacturing product design general corporate expenses percentage revenues 1996 13 compared 19 1995 percentage decrease 1996 primarily attributable growth revenues companys tubular products segment companys effective tax rate income continuing operations 1996 approximately 22 effective rate favorably impacted 4 million tax benefit fourth quarter 1996 resulting companys 64 million settlement october 1996 united states internal revenue service irs connection dissolution october 1990 coleve joint venture company also recorded tax charge approximately 446 million associated companys gain sale mallard division company realized net tax benefit income continuing operations 240000 1995 primarily benefit certain net operating losses previously subject separate company limitations interest expense 1996 165 million compared 163 million 1995 following companys sale mallard division company repaid substantially outstanding working capital indebtedness result interest expense 1997 expected decline 1996 levels substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations fiscal year 1995 comparison fiscal year 1994 tubular products segment company recorded 606 million increase sales tubular products 1995 1994 sales increase sales 1995 resulted acquisition prideco june 30 1995 higher sales prices overall increase demand drill pipe company implemented price increases second half 1995 company benefited 1996 existing backlog turned results tubular products segment include 075 million royalty payment fourth quarter 1995 benefited operating income 1995 oilfield equipment segment also benefited lower average manufacturing costs tubulars associated increased sales higher gross margins companys facility mexico lower cost base united states facilities third quarter 1995 company experienced increases cost green tubing primary material used production tubular goods company able pass additional costs raw material customers companys 1995 sales drill pipe tubular products 62 4 12 attributable sales us canada latin america respectively sales drill pipe tubular products us canada latin america 1994 represented 54 4 12 respectively sales 1994 us increase reflects increase demand acquisition prideco production equipment segment revenues operating income associated companys production equipment segment 1174 million 78 million respectively 1995 compared 903 million 51 million respectively 1994 increases revenues operating income 1995 primarily attributable companys increases canadian progressing cavity pumps corod sales production equipment north america constituted approximately 88 total sales 1995 segment compared 91 sales 1994 sales south america increased 8 1995 3 1994 increased south american sales primarily attributable 22 million increase revenue following companys acquisition engemaq sa 1995 general selling general administrative expenses increased approximately 16 484 million 1995 417 million 1994 increase 1995 attributable prideco acquisition increased sales international expansion interest expense increased 1995 163 million 135 million 1994 increase interest expense attributable higher levels indebtedness 1995 companys working capital lines credit due increases level companys business companys interest expense declined fourth quarter 1995 result reduction debt following 1995 equity offering 726 million company realized 240000 tax benefit 1995 income continuing operations compared 38 million tax benefit 1994 1995 tax benefit reflects impact net operating loss carryforwards certain tax benefits occurred 1995 adoption new accounting pronouncements company adopted statement financial accounting standards 121 sfas 121 accounting impairment longlived assets longlived assets disposed effective january 1 1996 sfas 121 establishes accounting standards impairment longlived assets certain identifiable intangibles goodwill related assets held used longlived assets certain identifiable intangibles disposed accordingly companys longlived assets certain identifiable intangibles reviewed impairment whenever events changes circumstances indicate carrying amount assets may recoverable performing review recoverability company estimates future cash flows expected result use asset eventual disposition sum expected future cash flows undiscounted without interest charges less carrying amount asset impairment loss recognized adoption sfas 121 impact companys consolidated financial position results operations october 1995 financial accounting standards board issued statement financial accounting standard 123 sfas 123 accounting stockbased compensation sfas 123 establishes financial accounting reporting standards stockbased employee compensation pronouncement allows entity continue measure compensation cost instruments using intrinsic valuebased method accounting prescribed accounting principles board opinion 25 apb 25 compensation cost recognized accompanying financial statements stock options since exercise price companys stock options issued equals market value underlying stock date grant company intend adopt fair value method accounting stockbased compensation sfas 123 liquidity capital resources november 11 1996 company sold mallard division parker cash approximately 306 million shares parkers preferred stock subsequently converted 3056600 shares parkers common stock december 1996 net cash proceeds company taxes sale mallard division approximately 237 million company also process disposing parkers common stock received sale mallard division pursuant public offering effected parker company intends deploy net proceeds mallard division disposition finance acquisitions development oilfield equipment business july 1996 company completed public offering 3450000 shares common stock net proceeds offering approximately 101 million funds offering utilized fund tca acquisition companys acquisition two rigs nigeria subsequently sold parker part mallard division sale general corporate purposes including reduction companys working capital facility december 31 1996 company cash equivalents approximately 224 million compared approximately 29 million december 31 1995 december 31 1996 companys working capital approximately 326 million compared approximately 231 million december 31 1995 increase working capital primarily attributable companys sale mallard division increased operations december 31 1996 companys debt total capitalization ratio approximately 23 compared 37 december 31 1995 december 31 1996 december 31 1995 company place various working capital lines credit secured inventory receivables companys subsidiaries december 31 1996 december 31 1995 approximately 29 million 46 million respectively outstanding revolving lines credit approximately 101 million 51 million respectively used support outstanding letters credit december 31 1996 december 31 1995 1179 million 556 million respectively available additional borrowing credit facilities average interest rates facilities 1022 fiscal 1995 848 1996 company currently available working capital facilities providing 1309 million borrowings facilities subject certain borrowing base requirements relating companys accounts receivable inventory securing borrowings bear interest variable rates secured accounts receivables inventory stock various companys domestic foreign subsidiaries facilities contain customary affirmative negative covenants relating working capital earnings net worth facilities also impose limitations companys subsidiaries use funds future acquisitions capital expenditures incurrence additional debt operational matters certain expenditures well prohibitions declaration payment cash dividends company december 31 1996 company limited principal credit facility amount dividends distributions restricted payments could made 133 million company currently outstanding 120 million 10 14 senior notes due 2004 senior notes semiannual interest payments march september senior notes issued pursuant terms indenture dated march 15 1994 certain subsidiaries company unconditionally guaranteed companys obligations senior notes indenture relating senior notes contains various customary affirmative negative covenants indenture also limits based specific formula ability company certain subsidiaries pay dividends make distributions december 31 1996 company limited indenture amount cash dividends distributions restricted payments could made approximately 278 million october 11 1996 company entered 39 million tax settlement plus accrued interest 25 million irs relating dispute regarding tax impact company upon dissolution coleve october 1990 tax liability respect dissolution previously provided deferred tax liability companys consolidated financial statements settlement resulted company recognizing 4 million tax benefit fourth quarter due elimination certain previously accrued deferred taxes longer required paid result settlement companys current sources capital current cash including net proceeds sale mallard division cash generated operations borrowings working capital lines credit company believes current reserves cash shortterm investments access existing credit lines internally generated cash operations sufficient finance projected cash requirements current future operations december 1996 company entered agreement acquire gulfmark international inc gulfmark pursuant tax free merger approximately 22 million shares companys common stock currently held gulfmark issued stockholders gulfmark prior merger gulfmark spinoff stockholders marine transportation services business merger subject among things approval stockholders company gulfmark company expects merger consummated second quarter 1997 acquisitions dispositions tubular products segment january 1996 company entered longterm manufacturing sales agreement octl pursuant octl manufactures drill pipe premium tubulars company exclusive basis octls plant india part agreement company made 8 million deposit january 1996 octl funds facilities working capital requirements may 3 1996 company acquired enerpro manufacturer premium threads thread connections 312714 shares common stock assumption approximately 31 million indebtedness operations enerpro combined premium thread operations companys tubular division august 5 1996 company acquired tca approximately 500000 shares common stock 1435 million cash 650000 note due january 1997 assumed debt approximately 15 million acquisition tca manufactures premium casing expanded range companys premium tubular products line add broader line premium casing company acquired superior alberta canada based premium tubular manufacturer total cash consideration approximately 16 million september 4 1996 february 24 1997 company entered agreement acquire ta designs manufactures markets premium couplings accessories total consideration including assumed debt approximately 64 million acquisition ta subject various conditions including receipt required regulatory approvals expiration waiting periods transaction expected close april 30 1997 production equipment segment february 1996 company sold united states retail store distribution system continental emsco approximately 75 million company received 3 million cash 4 million vendor credit 05 million note receivable consideration received sale approximated net book value assets sold resulting material gain loss april 1996 company acquired production specialties manufacturer gas lift equipment approximately 31 million october 1 1996 company acquired stock geremia porto alegre brazil based designer manufacturer marketer progressing cavity pumps approximately 245 million cash assumed debt december 10 1996 company acquired arrow total cash consideration approximately 215 million operations arrow currently integrated production equipment division plant consolidations allocation purchase price fair market value net assets acquired arrow acquisition subject revision purchase price subject adjustment pending resolution certain asset valuations must agreed buyer seller company believes ultimate resolution cost acquisition material impact assets acquired results operations result revision february 13 1997 company acquired anbert argentinian rod pump business approximately 8 million march 14 1997 company acquired griffin legrand manufacturer progressing cavity pumps conventional pumping units total cash consideration approximately 21 million capital expenditures capital expenditures company 1996 totaled approximately 26 million 1996 capital expenditures included approximately 7 million relating plant expansions ongoing routine capital expenditures 1997 estimated approximately 25 million capital expenditures expected funded available cash flow operations borrowings existing lines credit facilities matters companys annual meeting may 6 1997 agenda includes among things proposal increase companys authorized shares common stock 40 million shares 80 million shares effect two one stock split proposal change name company energy ventures inc evi inc effect pending stock split reflected december 31 1996 form 10k certain statements made herein public filings releases company contain forwardlooking information defined private securities litigation reform act 1995 involve risk uncertainty forwardlooking statements may include limited future sales earnings margins production levels costs expected savings acquisitions demand products product deliveries market trends oil gas industry oilfield service sector thereof research development environmental expenditures currency fluctuations various business trends projections also made net proceeds effects mallard division sale savings recent acquisitions forwardlooking statements may made management orally writing including limited managements discussion analysis financial condition results operations section sections companys filings securities exchange commission securities exchange act 1934 securities act 1933 actual results trends future may differ materially depending variety factors including limited changes price oil gas changes domestic international rig count global trade policies domestic international drilling activities worldwide political stability economic growth including currency fluctuations government export import policies technological advances involving companys products companys successful execution internal operating plans manufacturing consolidations restructurings performance issues key suppliers subcontractors ability company maintain price increases market shares raw material costs changes collective bargaining labor disputes regulatory uncertainties legal proceedings future results also dependent upon ability company continue identify complete successful acquisitions acceptable prices integrate acquisitions companys operations penetrate existing new markets results mallard division sale also subject various assumptions including adjustments required connection sale companys us foreign tax treaties applicable sale final structure transfer certain assets required transferred mallard division connection sale matters item 8item 7 managements discussion analysis financial condition results operations general company international manufacturer supplier engineered oilfield tools equipment companys products used drilling production phases oil natural gas wells company achieved significant growth recent years consistent strategy synergistic acquisitions internal development acquisitions focused acquisition name brand products development complete product lines savings consolidation internal development focused product development geographic expansion companys product lines divided drilling products segment consisting drill pipe premium tubulars marine connectors production equipment segment consisting completion artificial lift equipment companys principal products consist drill pipe drilling tools premium connectors associated high grade tubulars marine connectors packers completion tools artificial lift systems companys growth strategy resulted company becoming largest manufacturer drill pipe drill collars heavyweight drill pipe world largest provider premium tubular connectors north america one largest providers artificial lift equipment world production equipment segment designs manufactures services artificial lift completion equipment companys knowledge none competitors broad product line rod lift progressing cavity pumps recent developments weatherford merger march 4 1998 company entered agreement plan merger weatherford providing merger weatherford company pursuant expected tax free merger stockholders weatherford receive 095 share companys common stock exchange outstanding share weatherford common stock based number shares weatherford common stock outstanding march 3 1998 total approximately 491 million shares common stock would issued merger addition approximately 12 million shares common stock would reserved issuance company outstanding options weatherfords compensation benefit plans company surviving corporation renamed evi weatherford inc weatherford diversified international energy service manufacturing company provides variety services equipment exploration production transmission sectors oil gas industry weatherford operates three industry segments consisting oilfield services oilfield products gas compression acquisition weatherford proposed companys strategy taking advantage opportunities oilfield service industry particularly well construction production life cycle segments company believes combination companys broad range completion artificial lift products weatherfords international oilfield service infrastructure reputation provide combined entity firm foundation growth merger also pursued company provide company greater diversified line products services serve customers needs ii expand companys international presence iii provide company benefits product leveraging consolidation savings weatherford merger subject various conditions including approval stockholders company weatherford receipt required regulatory approvals expiration termination waiting periods extensions thereof hartscottrodino act although assurance merger close company currently anticipates merger consummated shortly receipt regulatory approvals approval merger stockholders company weatherford 1998 1997 acquisitions first quarter 1998 company completed three acquisitions consisting houston well screen leading provider downhole sand control screens cash approximately 276 million ii taro canadian provider well monitoring gas compression drilling equipment distribution 08 million shares common stock iii ampscot equipment ltd ampscot canadian manufacturer conventional pumping units cash approximately 550 million company also completed number strategic acquisitions 1997 directed expansion companys drilling products segment production equipment segment acquisitions included griffin legrand griffin canadian manufacturer progressing cavity pumps conventional pumpjacks march 1997 ii ta industries inc ta manufacturer premium couplings casing april 1997 iii xls holding inc xl manufacturer high performance connectors marine applications conductors risers offshore structural components august 1997 iv mcallister petroleum services ltd mcallister canadian manufacturer inflatable packers electronic temperature pressure instruments august 1997 v trico manufacturer distributor subsurface pumps sucker rods accessories hydraulic lift systems december 1997 vi bmw pump bmw monarch canadianbased manufacturer supplier progressing cavity pumps december 1997 vii various small acquisitions intended expand companys manufacturing capabilities geographic scope breadth product lines acquisition xl accounted immaterial pooling interests 1997 acquisitions accounted using purchase method accounting results operations 1997 acquisitions included companys operating results since respective dates acquisitions allocation purchase price fair market value net assets acquired bmw monarch bmw pump acquisitions subject revision purchase price subject adjustment pending resolution certain asset valuations must agreed buyer seller company believes ultimate resolution cost acquisition material impact assets acquired companys results operations result revision allocation purchase price fair market values net assets acquired trico acquisition based preliminary estimates fair market value property plant equipment subject revision subsequent completion independent appraisal company currently expect material adjustments preliminary estimates used determining asset valuations company recorded approximately 3049 million goodwill connection 1997 acquisitions substantially increased companys market share various products expanded geographic distribution capabilities charge associated amortization goodwill intangibles 55 million 1997 expected approximately 118 million 1998 market trends demand companys drilling products particularly affected price natural gas level oil gas exploration activity demand companys production equipment directly dependent oil production activity exploration production activities also affected worldwide economic conditions supply demand oil natural gas seasonal trends political stability oil producing countries oil gas industry substantially volatile years due large part volatility prevailing prices oil natural gas 1996 much 1997 oil gas service industry experienced general improvement product demand pricing relatively stable improved oil natural gas prices combined strong world economy increase exploration development activity worldwide trend together decline worldwide inventory used drill pipe benefited company results 1997 1996 recent months worldwide price oil declined prices dropped much 40 13 per barrel spot deliveries prices natural gas weakened slightly year basis declines attributed among things excess supply oil world markets reduced domestic demand associated unseasonably warm winter potential lower worldwide demand due impact economic downturn southeast asia prices oil continued decline company others industry begun experience softening demand products services particular products associated exploration activity oil production although companys backlog drill pipe remains strong softening market mainly impacted demand products associated production heavy oil marginal wells prolonged period low price oil expected adversely affect demand throughout industry including products manufactured company case companys revenues income could expected similarly affected although shortterm outlook industry remains uncertain absent significant downturn us world economies company believes market conditions industry improve long term demand supply balance becomes inline timing recovery however cannot predicted certainty convertible debentures issuance tender senior notes november 1997 company completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures net proceeds debentures 3909 million debentures bear interest annual rate 5 convertible companys common stock price 80 per share debentures redeemable company time november 4 2000 redemption prices set forth supplemental indenture relating debentures subordinated right payment principal interest prior payment full certain existing future senior indebtedness company also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters anytime company default payment interest december 1997 company completed cash tender offer tender offer companys outstanding 1200 million 10 14 senior notes due 2004 senior notes aggregate 11998 million principal amount senior notes acquired company pursuant tender offer acquisition senior notes resulted onetime extraordinary charge net taxes 90 million 019 per basic share year ended december 31 1997 stock split companys annual stockholders meeting may 6 1997 stockholders approved twoforone split common stock effected stock dividend related amendment companys restated certificate incorporation increased number authorized shares companys common stock 400 million shares 800 million shares result stock split stock per share data contained herein restated reflect effect twoforone stock split results operations year ended december 31 1997 compared year ended december 31 1996 general income continuing operations 1997 837 million 181 per basic share revenues 8923 million compared income continuing operations 1996 245 million 060 per basic share revenues 4780 million increases revenues income continuing operations reflect strength companys markets effect 1997 acquisitions full year 1996 acquisitions 1997 acquisitions ta xl mcallister griffin trico bmw monarch bmw pump addition various small 1997 acquisitions benefited 1997 revenues 1665 million income continuing operations 123 million basic diluted earnings per share 027 026 respectively 1996 acquisitions geremia arrow superior tube limited superior tubular corporation america tca enerpro international inc enerpro addition various small 1996 acquisitions benefited 1996 revenues 836 million income continuing operations 65 million basic diluted earnings per share 016 net income 1997 747 million 162 per basic share compared 982 million 241 per basic share 1996 included net income 1997 extraordinary charge 90 million 019 per basic share related tender senior notes december 1997 net income 1996 included 75 million 018 per basic share discontinued operations related companys mallard bay contract drilling division mallard division sold november 1996 gain net taxes 446 million 669 million 165 per basic share related disposition additionally company incurred extraordinary charge net taxes 07 million 002 per basic share early extinguishment debt 1996 revenues 1997 increased approximately 87 1996 primarily result various acquisitions described higher average sales prices cost goods sold percentage revenues declined 781 total revenues 1996 717 1997 due stronger prices sales higher margin products selling general administrative costs attributable segments percentage total revenues increased slightly 1997 due incurrence costs associated assimilation acquired businesses amortization intangibles fourth quarter 1996 company adopted plan close bastrop texas tool joint manufacturing facility combine two packer facilities closure one facility arlington texas connection decisions company incurred charge 58 million associated closures charge 43 million related tool joint facility closure relocation equipment facility 15 million related consolidation packer facilities closure one plants company incurred 38 million 1996 costs associated actions 1996 including costs relating relocation equipment bastrop facility facilities company also accrued 20 million part 58 million charge exit costs expected incurred 1997 relating closure bastrop arlington facilities costs included 08 million severance termination costs 09 million reduction carrying value bastrop facility light intended disposition facility 03 million termination arlington lease approximately 400 employees affected closures company substantially completed closure bastrop arlington facilities end second quarter 1997 incurred substantially charges related closing facilities drilling products segment companys drilling products segment reported revenues operating income 6189 million 1238 million respectively 1997 3425 million 444 million respectively 1996 improvements primarily due increased demand drill pipe drilling tools strength premium tubular activity companys acquisition ta premium tubular couplings accessories manufacturer april 1997 third quarter acquisition xl manufacturer marine connectors increase demand drill pipe reflected higher domestic international drilling activity particular offshore drilling premium tubular revenues increased approximately 3079 million 1997 approximately 1578 million 1996 increase premium tubular revenues reflected strong demand gulf mexico acquisition ta 1997 acquisitions ta xl various small acquisitions benefited 1997 revenues operating income segment 968 million 161 million respectively cost goods sold declined percentage revenues 811 1996 735 1997 due increased pricing companys products reduced costs resulting expansion companys mexico tool joint facility company expects annual cost savings approximately 70 million relating expansion consolidation mexico facility third quarter 1997 mexico facility became fully operational benefited operations second half 1997 selling general administrative expenses 1997 percentage revenues 65 compared 60 1996 reflected higher selling general administrative expenses associated operations ta well increase amortization goodwill intangibles companys 1997 sales drill pipe tubular products 64 10 7 attributable sales us canada latin america respectively sales drill pipe tubular products us canada latin america 1996 represented 59 4 7 respectively us sales 1997 1996 included sales us distributors us companies ultimate use outside us backlog tubular products december 31 1997 approximately 3600 million compared 1700 million december 31 1996 company currently expects 3200 million backlog shipped within next twelve months remaining backlog first quarter 1999 increase backlog tubular products december 31 1997 reflects strong demand drill pipe assurance level backlog continue material changes demand drilling products rig utilization could effect demand companys drill pipe production equipment segment companys production equipment segment reported revenues operating income 2734 million 255 million respectively 1997 1355 million 82 million respectively 1996 improvements primarily due strong growth canadian south american markets particular companys corod geremia progressing cavity pump product lines 1997 acquisitions mcallister griffin trico bmw monarch bmw pump various small acquisitions benefited 1997 revenues operating income segment 697 million 73 million respectively cost goods sold declined percentage revenues 707 1996 676 1997 result improvement segments domestic cost structure december 1997 acquisitions trico bmw pump bmw monarch selling general administrative expenses 1997 percentage revenues 231 compared 232 1996 company continue 1998 focus reducing selling general administrative expenses integration acquired operations 1998 company plans continue effort integrate production equipment segment canadian us operations 1996 company began construction new canadian manufacturing plant produce continuous rods expected expand capacity 150 continuous rod expansion completed late fourth quarter 1997 new canadian plant also manufacture rotors stators progressing cavity pumps pursuant exclusive license technology transfer arrangement netzsch providing customary royalty sales products manufactured using technology production rotors stators facility expected commence second quarter 1998 sales production equipment north america constituted approximately 78 total sales 1997 1996 sales south america increased slightly 18 1997 17 1996 due companys increasing presence region canadian sales 1068 million 1997 representing increase approximately 95 1996 levels increase primarily results companys 1997 canadian acquisitions griffin mcallister bmw pump bmw monarch corporate expenses percentage revenues 1997 08 compared 13 1996 percentage decrease 1996 primarily attributable growth 1997 revenues interest expense 1997 231 million compared 165 million 1996 increase interest expense 1997 compared 1996 reflects companys increase indebtedness 1997 companys 4025 million principal amount debentures issued november 1997 interest expense 1998 expected increase 1997 levels result companys debentures increase 1998 partially offset due december 1997 acquisition approximately 11998 million principal amount senior notes 1997 company benefited onetime pretax gain 34 million relating sale company parker drilling company parker common stock companys effective tax rate income continuing operations 1997 approximately 35 compared 22 1996 effective rate favorably impacted 40 million tax benefit resulting companys 64 million settlement october 1996 united states internal revenue service irs connection dissolution october 1990 oil gas joint venture company also recorded 1996 tax charge approximately 446 million associated companys gain sale mallard division year ended december 31 1996 compared year ended december 31 1995 general income continuing operations 1996 245 million 060 per basic share revenues 4780 million compared income continuing operations 1995 26 million 009 per basic share revenues 2717 million revenues 1996 increased approximately 76 1995 result various acquisitions improved market conditions increase income continuing operations 1996 primarily attributable increased sales margins drill pipe drilling products 1996 acquisitions geremia arrow superior tca enerpro addition various small 1996 acquisitions benefited 1996 revenues 836 million net income continuing operations 65 million basic diluted earnings per share 016 net income year ended december 31 1996 982 million 241 per basic share compared net income 113 million 038 per basic share year ended december 31 1995 included net income 1996 onetime gain net taxes 446 million 669 million 165 per basic share november 1996 sale company mallard division cash approximately 3069 million 31 million shares parker preferred stock subsequently converted 31 million shares parker common stock december 1996 sold 1997 also included net income 1996 income discontinued operations net taxes 75 million related operations mallard division drilling products segment sales drilling products 1996 3425 million compared 1542 million 1995 operating income associated drilling products segment 1996 444 million compared 152 million 1995 results fourth quarter 1996 include 43 million charge attributable close companys bastrop tool joint facility relocation equipment facilities results 1996 reflected 73 increase sales drill pipe 27 increase sales premium tubulars increase drill pipe sales reflected overall increase demand drill pipe companys june 1995 acquisition prideco inc increase demand drill pipe due increased drilling activity particularly offshore continuing decline supply used drill pipe inventory company historically competed increase sales premium tubular products reflected acquisitions enerpro tca superior increase demand associated increased natural gas deep offshore exploration production activity 1996 acquisitions enerpro tca superior benefited 1996 revenues 668 million operating income 80 million improvement operating income 1996 reflected effects increased sales improved pricing lower average manufacturing costs due consolidation manufacturing processes third fourth quarters 1996 company implemented price increases drill pipe company began receive 1996 backlog filled price improvements however partially offset increase price raw materials particularly green tubing primary material used company production tubular goods companys sales drill pipe drilling tubular products 59 4 7 attributable sales us canada latin america respectively sales drill pipe drilling tubular products us canada latin america 1995 represented 62 4 12 respectively sales 1995 included us sales drill pipe tubular products goods sold us distributors companies ultimate use outside us production equipment segment revenues operating income companys production equipment segment 1355 million 82 million respectively 1996 compared 1174 million 78 million respectively 1995 described production equipment segment recorded charge 15 million fourth quarter 1996 associated consolidation two packer manufacturing facilities arising companys acquisition packer manufacturing operations arrow december 1996 acquisitions geremia arrow addition various small 1996 acquisitions benefited 1996 revenues 169 million operating income 18 million sales production equipment north america constituted approximately 78 total sales 1996 compared 88 sales 1995 sales south america increased 17 1996 8 1995 increased south american sales primarily attributable revenues geremia acquired october 1996 canadian sales 549 million 1996 representing increase approximately 46 1995 levels reflected improved canadian market conditions sales us 503 million 1996 compared 652 million 1995 revenues 1996 include sales companys highland pump distribution business sold first quarter 1996 corporate expenses percentage revenues 1996 13 compared 19 1995 percentage decrease 1996 primarily attributable growth revenues companys drilling products segment companys effective tax rate income continuing operations 1996 approximately 22 effective rate favorably impacted 40 million tax benefit fourth quarter 1996 resulting companys 64 million settlement october 1996 united states irs connection dissolution october 1990 oil gas joint venture company also recorded tax charge approximately 446 million associated companys gain sale mallard division november 1996 company realized net tax benefit income continuing operations 02 million 1995 primarily benefit certain net operating losses previously subject separate company limitations interest expense 1996 165 million comparable 163 million 1995 new accounting pronouncements 1996 financial accounting standards board fasb issued statement financial accounting standards 128 sfas 128 earnings per share replaces primary earnings per share basic earnings per share requires dual presentation basic diluted earnings per share company adopted sfas 128 fourth quarter fiscal 1997 historical earnings per share data restated reflect adoption sfas 128 june 1997 fasb issued statement financial accounting standards 130 sfas 130 reporting comprehensive income sfas 130 establishes standards reporting comprehensive income components full set generalpurpose financial statements effective years beginning december 15 1997 company adopt sfas 130 first quarter 1998 sfas 130 adopted december 31 1997 primary adjustments reclassifications reflect net income comprehensive income basis years presented would consisted foreign currency translation adjustments effect unrealized realized gains marketable securities june 1997 fasb issued statement financial accounting standards 131 sfas 131 disclosures segments enterprise related information sfas 131 effective years beginning december 31 1997 requires segment information reported basis consistent used internally evaluating segment performance deciding allocate resources segments company adopt sfas 131 1998 reviewing segments light sfas 131 1998 fasb issued statement financial accounting standards 132 sfas 132 employers disclosures pensions postretirement benefits sfas 132 standardizes disclosure requirements pensions postretirement benefits sfas 132 effective years beginning january 15 1997 company adopted sfas 132 december 31 1997 would impact consolidated financial statements company liquidity capital resources december 31 1997 company cash equivalents 319 million compared 2240 million december 31 1996 reduction cash equivalents since december 31 1996 primarily attributable acquisition senior notes pursuant tender offer 11998 million use approximately 3198 million cash acquire new businesses tax payments approximately 628 million relating 1996 sale companys mallard division reduction cash partially offset net proceeds 3909 million relating sale debentures november 1997 november 1997 company completed private placement 4025 million principal amount debentures bear interest annual rate 5 convertible price 80 per share common stock debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters anytime company default payment interest april 1997 company sold investment parker common stock pursuant public offering effected parker net proceeds received company approximately 234 million december 31 1997 company outstanding 242 million borrowings working capital facilities compared 29 million december 31 1996 addition company outstanding approximately 149 million 101 million letters credit december 31 1997 december 31 1996 respectively february 1998 company entered new credit agreement provides borrowings aggregate 2500 million consisting 2000 million us credit facility 500 million canadian credit facility terminated 1200 million us 315 million canadian c450 million working capital facilities borrowings new credit facility bear interest variable rate based prime libor secured pledges various stock companys foreign subsidiaries addition certain companys foreign subsidiaries guarantors facility companys credit facility contains customary affirmative negative covenants including debt incurrence tests interest coverage ratio negative pledges acquisitions certain levels certain dispositions assets addition facility requires company maintain minimum tangible net worth 4540 million december 31 1997 defined credit agreement companys current sources capital current cash generated operations borrowings working capital line credit company believes current reserves cash shortterm investments access existing credit line internally generated cash operations sufficient finance projected cash requirements current future operations company continually reviewing acquisitions markets depending upon size nature timing acquisition company could require additional capital form either debt equity combination substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations capital expenditures capital expenditures property plant equipment company year ended december 31 1997 totaled approximately 626 million primarily related plant expansions canada equipment upgrades corig purchases 1997 company completed expansion veracruz mexico tool joint manufacturing facility company recorded obligation 163 million lease reflect terms thereof ongoing routine capital expenditures 1998 excluding capital expenditures relating pending merger weatherford estimated approximately 650 million capital expenditures expected funded available cash flow operations desirable borrowings existing line credit facilities 1997 company began modifying computer system programming process transactions year 2000 anticipated spending modification expensed incurred expected material christiana gulfmark mergers december 1997 company entered merger agreement christiana companies inc christiana c2 inc wisconsin corporations pursuant approximately 39 million shares common stock issued stockholders christiana merger subsidiary company christiana merger prior christiana merger christiana required sell twothirds interest total logistic control logistic wholly owned subsidiary christiana c2 inc approximately 107 million following logistic sale remaining assets christiana consist approximately 39 million shares common stock ii onethird interest logistic iii cash assets book value approximately 100 million iv contingent cash payment 100 million payable earlier five years effective date merger extent funds required satisfy contingent claims christiana anticipated christiana material debt consummation christiana merger various tax liabilities paid remaining cash balance christiana merger number shares common stock issuable proposed christiana merger approximates number shares common stock currently held christiana merger expected material effect outstanding number shares common stock equity company christiana merger subject various conditions including approval stockholders company christiana receipt required regulatory approvals expiration termination waiting periods extensions thereof hartscottrodino act although assurance christiana merger close company currently anticipates acquisition consummated shortly receipt regulatory approvals approval christiana merger shareholders company christiana approval logistic sale stockholders christiana may 1 1997 company acquired gulfmark pursuant merger approximately 44 million shares common stock issued stockholders gulfmark prior merger gulfmark effected spinoff stockholders marine transportation services business retained assets gulfmark acquired company transaction consisted approximately 44 million shares common stock erosion control business certain miscellaneous assets number shares common stock issued gulfmark acquisition approximated number shares common stock held gulfmark prior acquisition gulfmark acquisition material effect outstanding number shares common stock equity company shares common stock received pursuant transaction classified treasury stock cost accompanying consolidated balance sheet forwardlooking statements certain statements made herein public filings releases company contain forwardlooking information defined private securities litigation reform act 1995 involve risk uncertainty forwardlooking statements may include limited future sales earnings margins production levels costs expected savings acquisitions plant expansions demand products product deliveries market trends oil gas industry oilfield service sector thereof research development environmental expenditures currency fluctuations various business trends see managements discussion analysis generalmarket trends businessrisk factors forwardlooking statements may made management orally writing including limited managements discussion analysis financial condition results operations section sections companys filings securities exchange commission securities exchange act 1934 securities act 1933 actual results trends future may differ materially depending variety factors including limited whether long current pricing trend oil continue effect thereof demand price companys products changes price oil gas changes domestic international rig count global trade policies domestic international drilling activities impact economic downturn southeast asia worldwide economies associated demand oil worldwide political stability economic growth including currency fluctuations government export import policies technological advances involving companys products companys successful execution internal operating plans manufacturing consolidations restructurings performance issues key suppliers subcontractors ability company maintain price increases market shares raw material costs changes collective bargaining labor disputes regulatory uncertainties legal proceedings future results also dependent upon ability company successfully complete integrate proposed acquisition weatherford well ability continue identify complete successful acquisitions acceptable prices integrate acquisitions companys operations penetrate existing new markets item 8item 7 managements discussion analysis financial condition results operations general business conducted four business segments 1 drilling intervention services 2 completion systems 3 artificial lift systems 4 compression services also historically operated drilling products division manufactured sold drill stem products premium tubulars connections october 1999 board directors approved spinoff us drilling products division spinoff subject receipt favorable ruling internal revenue service aspects spinoff recently advised internal revenue service ruling received us end march 2000 result board directors declared distribution one share grant prideco common stock share weatherford common stock outstanding close business march 23 2000 subject receipt ruling expect spinoff completed april 14 2000 reclassified historical operations division discontinued operation light anticipated spinoff following discussion results operations last three years discussion read conjunction financial statements included report discussion results financial condition includes various forwardlooking statements markets demand products services future results statements based certain assumptions consider reasonable information assumptions refer section entitled forwardlooking statements located within item 1 business market trends outlook businesses serve oil gas industry certain products services well installation services well completion services dependent north american worldwide level exploration development activity products services artificial lift systems compression services dependent oil gas production activity currently estimate 40 50 continuing operations focused drilling activity remainder focused production reservoir enhancement activity oil gas industry subject extreme volatility recent years due significant changes demand supply pricing oil natural gas 1997 early 1998 experienced strong increase demand products services due worldwide increase demand oil shortages equipment people service demand increase demand strongly felt drilling intervention services artificial lift systems divisions drilling intervention services division experienced record sales profits internationally north american markets artificial lift systems division benefited high levels canadian exploration production particular heavy oil regions period industry operated levels experienced since early 1980s many businesses operated near full capacity beginning late 1997 price oil began fall decline attributable number factors significant factors drop demand due downturn asian developing economies excess supply oil due increased production oil exporting countries concerns future production iraq impact prior exploration efforts large reserve discoveries initially effects decline felt isolated markets canadian californian heavy oil markets drilling production activity sensitive price oil drilling completion activity north american regions began decline due greater sensitivity north american production prices late 1998 demand fallen substantially customers exploration development production activities internationally also dropped reaction sharply lower oil prices 1998 price oil ranged high 1762 per barrel low 1044 per barrel west texas intermediate crude north american rig count also fell high 1508 rigs low 1998 854 international rig count typically trails domestic rig count number months fell 1998 high 819 low 671 1999 price oil hit low 1107 per barrel north american international rig counts reached historical lows 534 556 respectively downturn industry began 1998 led customers substantially curtail exploration drilling activity second half 1998 1999 reduction activity resulted substantially lower purchases equipment manufactured sold us exploration completion wells field services fishing rental sales artificial lift production equipment services also materially impacted fall demand impacted unprecedented wave mergers consolidations among customers due market conditions customers canceled delayed rebid many projects reduce costs light market conditions certain markets united states canada believe activity fell 70 although market conditions materially adversely affected businesses results 1999 made strategic decision add core competencies downturn take advantage desirable acquisitions new technologies businesses markets decision based belief downturn would create unique opportunities us acquire desirable terms businesses capabilities could serve platform growth future also believed consolidating nature industry many opportunities would available principal acquisitions completed us late 1998 1999 include 1 acquisitions cardium tool services petroline wellsystems limited second third quarters 1999 two acquisitions significantly increased capabilities completion systems division areas flow control liner hangers packers added state art sand control technology completion product offering fourth quarter 1998 also acquired 51 interest subtech international company provides products intelligent completions production automation subsequent december 31 1999 acquired remaining 49 subtech 2 acquisitions dailey international inc williams tool co third quarter 1999 ecd northwest air drilling inc second quarter 1999 three acquisitions provided us complete integrated package provision underbalanced drilling services largest compression fleet industry used underbalanced air drilling proprietary line pressure control equipment state art foam chemical technology used underbalanced drilling largest fleet industry nitrogen membrane units dailey international acquisition also provided us proprietary manufactured line drilling fishing jars use fishing rental operations 3 joint venture ge capital corporation first quarter 1999 joint venture combined compression business ges global compression services business create second largest natural gas compression fleet industry joint venture allowed us expand compression operations higher margin higher horsepower market well growing international markets 4 acquisition various licenses technologies businesses multilateral reentry markets transactions provided us key technologies platform growth growing multilateral reentry markets believe steps taken 1998 1999 benefit results industry improves downturn industry materially adversely impacted results last two years substantially lower sales margins results also affected higher average fixed variable costs associated maintenance extensive worldwide manufacturing sales service infrastructure period low activity second half 1999 price oil increased due members organization petroleum exporting countries reducing production compliance production quotas effects resulted world oil prices recently trading 30 barrel range first time decade artificial lift systems division first benefit price improvements many production projects reinstated light higher prices oil particular heavy oil canada natural gas activity canada also increased significantly due new pipelines higher demand drilling intervention services division next benefit improved activity north america particular fishing rental business pickup groups however gradual customers cautious new spending due part volatility prices recently able improve pricing certain markets expect prices continue improve year based demand nature projects performed international activity generally lags north american activity around six months remains depressed shows initial signs recovery particularly case north sea latin america two principal markets result revenues increasing improved north american demand improvements overall profitability expected gradual next six nine months 2000 expect demand products services steadily improve strongest improvement expected second half 2000 timing improvements operations dependent upon segment industry involved expect artificial lift systems division continue see improvements north american revenues improvements margins result cost containment pricing higher throughput plants division however affected normal seasonal downturn canada second quarter drilling intervention services division expected see quarter improvements revenue profitability throughout year strongest growth expected occur second half year international markets strengthen recently created completion systems division highly dependent international activity expected slow first half year begin realizing operating profit second half year compression services division less affected daytoday market factors expected flat marginally first half year realize growth second half year new projects added level market improvements businesses 2000 heavily dependent whether oil natural gas prices remain present levels impact recent commodity price increases customer spending although believe activity levels industry bottomed recovering extent recovery difficult predict light volatile nature business regard strength recovery dependent many external factors compliance opec quotas world economic conditions weather conditions following chart sets forth certain historical statistics reflective market conditions operate 1 price per barrel december 31 source applied reasoning inc 2 price per mmbtu december 31 source oil world 3 average rig count december source baker hughes rig count results operations years ended 1999 1998 1997 business environment operated 1999 1998 1997 saw extreme changes experienced strong market 1997 first part 1998 material slowdown beginning near middle 1998 end 1998 industry midst one worst downturns history downturn continued throughout 1999 oil prices improved second half 1999 allowing modest improvements north american markets international activity recently begun improve expected increase materially later 2000 timing international recovery impact revenue earnings growth 2000 year ended december 31 1999 compared year ended december 31 1998 following charts contain selected financial data comparing results continuing operations 1999 1998 comparative financial data includes 1600 million 1040 million net tax merger charges relating merger evi inc weatherford enterra inc reorganization rationalization business light industry conditions charges 224 million related writeoff inventory classified costs products b ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitutes calculations gaap particular cash flows operations operating income net income addition ebitda calculations one company may comparable another companys calculations sales geographic region sales based region origination reflect sales ultimate destination results continuing operations 1999 1998 also affected following specific items revenues declined 1236 million 91 1998 levels international revenues decreased 152 1998 4207 million compared decline average international rig count 217 north american revenues declined 480 million 55 compared decline average north american rig count 204 revenues positively impacted 1999 acquisitions petroline dailey international williams tool combined contributed 445 million revenues primarily fourth quarter 1999 gross profit percentage charges 224 million 1998 decreased 322 1998 279 1999 primarily due lower pricing underutilization many manufacturing facilities service organization period low activity levels results 1998 include 1600 million pretax charges merger evi weatherford enterra charges associated downturn industry selling general administrative expenses attributable segments increased percent revenue due primarily lower revenue base startup costs new product lines businesses costs associated integration introduction newly acquired businesses 104 million increase goodwill intangible amortization selling general administrative costs included higher selling general administrative costs associated dailey international williams tool historically high selling general administrative costs percentage revenues businesses acquired latter half 1999 able achieve full cost savings integration acquisitions 1999 acquisitions however substantially integrated realizing benefits goodwill amortization 1999 240 million compared 151 million 1998 goodwill amortization expected around 81 million quarter 2000 corporate expenses percentage revenues 1999 21 compared 19 1998 due primarily lower revenue base operating income decreased 1962 million 1998 charges 1600 million 668 million 1999 decrease resulted pricing pressures manufacturing operational inefficiencies associated decline activity although sought past year reduce costs reductions headcount locations light industry downturn elected maintain market position international infrastructure downturn order capitalize market recovery occurs effective tax rate income continuing operations 1999 approximately 299 compared 871 1998 rate due part mix foreign us tax attributes impact one time charges 1998 special charges 1998 incurred 1600 million merger charges relating merger evi weatherford enterra reorganization rationalization businesses light industry conditions charges 1130 million incurred second quarter time merger initial downturn industry 470 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need make additional reductions operations align cost structure current demand net tax effect charges 1040 million following chart summarizes special charges made 1998 approximately 1365 million charges realized december 31 1998 remainder charges fully realized end second quarter 1999 connection planned activities 1999 adjustments reversals remaining accrued special charges necessary following chart summarizes utilization 1998 special charges 1 merger transaction costs incurred second quarter 1998 included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance weatherford enterras employment agreements stock option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included 1998 fourth quarter charges 76 million approximately 940 employees specifically identified terminations completed first half 1999 accordance announced plan terminate employees 3 facility plant closures costs 100 million second quarter 1998 incurred december 31 1998 costs related primarily elimination duplicated manufacturing distribution service locations following merger may 1998 facility plant closures 128 million accrued fourth quarter 1998 consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter facilities closed june 30 1999 4 corporate related expenses 52 million recorded second quarter 1998 31 million recorded fourth quarter 1998 primarily consolidation corporate offices related lease obligations consolidation technology centers due merger align corporate cost structure light industry conditions 5 writeoff inventory 99 million second quarter 1998 125 million fourth quarter 1998 reported cost products charges relate writeoff inventory result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 247 million second quarter 1998 118 million fourth quarter 1998 charges primarily relate writedown equipment assets result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger specific identification assets held sale result decline market conditions segment results drilling intervention services drilling intervention services division began 1998 strong revenue income growth second half 1998 division began experience reductions revenue operating income margins rig count declined demand products services dropped demand north america continued decline 1999 although north american rig count improved second half 1999 large part improvement lower margin markets demand international markets declined significantly 1999 1998 levels resulting reduced volumes pricing pressures although implemented cost reductions division 1999 declines revenues occurred faster cost reductions ongoing cost maintaining divisions international infrastructure necessary longterm success cost integration assimilation acquisitions completed 1999 introduction new businesses products downturn eroded divisions profitability 1999 believe drilling intervention services division well positioned growth 2000 industry recovers results division expected improve 2000 strongest improvement occurring second half 2000 expect upturn international activity levels also expect improvements pricing occur throughout year volume increases occur demand improves following chart sets forth additional data regarding results drilling intervention services division 1999 1998 includes merger charges 408 million consists 73 million facility closures 286 million writedown equipment 17 million severance 32 million writeoff inventory writeoff inventory classified cost products following material items affected results drilling intervention services division excluding impact 1999 acquisitions revenues declined 235 1998 revenues north america decreased 182 average north american rig count decreased 204 year international revenues decreased 195 average international rig count decreased 217 largest decreases international revenues occurred europe africa asia pacific businesses acquired 1999 contributed 342 million revenues gross profit percentage declined due primarily pricing pressures especially higher margin international markets selling general administrative expenses increased percentage revenues 98 1998 163 1999 increase primarily reflects lower revenue base initial costs relating new product lines businesses costs associated integration introduction newly acquired businesses 53 million increase goodwill intangible amortization selling general administrative costs included higher costs associated dailey international williams tool historically high selling general administrative costs percentage revenues businesses acquired latter half 1999 able achieve full cost savings integration 1999 acquisitions however substantially integrated realizing benefits operating income excluding 408 million charges declined 1817 million 1998 763 million 1999 decline resulted reduced sales volume pricing pressures higher selling general administrative costs associated acquisitions pending integration maintenance worldwide infrastructure period low activity completion systems completion systems division undergone substantial changes past two years early 1998 divisions business primarily concentrated sale liner hangers north sea manufacture sale lower margin packers sand screens businesses particular liner hangers sold north sea market benefited strong activity early 1998 severely impacted downturn market conditions occurred late 1998 1999 significantly changed direction division 1999 acquisitions petroline cardium acquisitions together major expansion nodeco liner hanger product line united states 1999 expanded businesses higher margin premium completion markets worldwide added sand control flow control completion product service offerings three significant factors affected results division 1999 1 reduced prices margins due declines demand 2 manufacturing service underabsorption 3 higher costs associated addition sales manufacturing capabilities several new product lines 2000 division expected continue incur startup costs associated expansion organization business affected low international activity first half year result currently expect division incur operating losses first half year begin experience operating profits latter half year following chart sets forth additional data regarding results completion systems division 1999 1998 includes merger charges 42 million consists 17 million facility closures 06 million writedown equipment 03 million severance 16 million writeoff inventory writeoff inventory classified cost products material items affecting results completion systems division 1999 compared 1998 businesses acquired 1999 contributed 199 million revenues excluding impact acquisitions revenues declined 143 1998 result depressed market conditions year gross profit percentage declined due pricing pressures underutilization manufacturing facilities experienced result depressed industry conditions addition research development costs increased 43 million prior year continue focus improving technology products services selling general administrative expenses increased 440 1998 due costs associated acquisition businesses addition sales staff new product lines goodwill amortization 29 million associated 1999 acquisitions operating loss division increased 1998 result reduced revenues acquisitions operating inefficiencies caused poor market conditions higher selling general administrative costs described artificial lift systems artificial lift systems division significantly affected downturn industry conditions experienced throughout 1998 1999 decline oil prices resulted decrease demand divisions products customers reduced deferred purchases products used produce oil particular heavy oil decline pronounced canada us combined basis represented 80 divisions revenues second half 1999 began see industry conditions improve due higher oil prices improved north american rig count particularly canada division expected return greater profitability 2000 absent another material decline oil prices level improvement dependent upon strength recovery following chart sets forth additional data regarding results artificial lift systems division 1999 1998 includes merger charges 408 million consists 138 million facility closures 176 million writeoff inventory 50 million severance 44 million related writedown equipment writeoff inventory classified cost products material items affecting results artificial lift systems division follows revenues declined 108 1998 1999 resulting 146 decrease us revenues 335 decline latin american revenues deterioration primarily driven declines us international rig counts revenues canada comparable year due improvements canadian heavy oil markets second half 1999 gross profit excluding merger charges decreased slightly 363 1998 349 1999 due pricing pressures underutilization manufacturing facilities associated depressed market conditions first half year selling general administrative expenses percentage revenues decreased slightly 298 1998 294 1999 due successful efforts reduce costs light depressed market conditions operating income excluding merger charges decreased 236 216 million 1998 165 million 1999 decrease primarily attributable reduction revenues depressed margins compression services compression services division least affected declines market conditions 1998 1999 business based levels natural gas development production stable oil production revenues margins operating income improved prior year primarily due better revenue mix impact joint venture entered ge capital february 1999 division however affected year respect pricing lower margin lower horsepower compressors division also affected costs associated integration weatherford global compression businesses following chart sets forth additional data regarding results compression services division 1999 1998 includes merger charges 15 million relates primarily writedown assets material items affecting results compression services division 1999 compared 1998 follows revenues 1999 273 1998 levels due february 1999 joint venture ge capital large compression contract ypf argentina gross profit percentage revenues increased 223 1998 232 1999 increase reflected favorable product mix following creation joint venture selling general administrative costs percentage revenues increased 136 1999 119 1998 primarily result costs associated integration businesses acquired joint venture costs associated international expansion operating income percentage revenues remained flat year improvements operating margins offset higher administrative costs associated integration ge capital businesses currently expect divisions results improve 2000 cost reduction measures implemented new projects added year ended december 31 1998 compared year ended december 31 1997 following charts contain selected financial data comparing results continuing operations 1998 1997 comparative financial data includes 1600 million 1040 million net tax merger charges relating merger evi weatherford enterra reorganization rationalization business light industry conditions charges 224 million related writeoff inventory classified costs products b ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitutes calculations gaap particular cash flows operations operating income net income addition ebitda calculations one company may comparable another companys calculations sales geographic region year ended 1998 1997 region us 47 53 canada 17 16 europe 12 11 latin america 9 7 africa 7 5 middle east 4 3 4 5 total 100 sales based region origination reflect sales ultimate destination results 1997 reflect strong demand products services increases prices markets demand exceeded supply businesses operated near full capacity period results first half 1998 continued benefit favorable market conditions however second half 1998 saw significant deterioration market conditions materially impacted revenue operating income results continuing operations 1998 1997 also affected following specific items results 1998 include 1600 million pretax charges merger evi weatherford enterra charges associated downturn industry revenues second six months 1998 declined 130 compared period 1997 156 compared first half 1998 decrease 1998 operating income 1962 million charges 1600 million compared 1997 operating income 2161 million primarily due depressed market conditions second half 1998 businesses acquired 1997 1998 contributed 2646 million revenues 90 million operating income 1998 revenues operating income 1997 businesses acquired 1997 697 million 73 million respectively businesses sold 1997 contributed 769 million revenues 1997 net income disposed businesses 83 million 1997 interest charges 1998 reflected higher levels debt following issuance november 1997 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 borrowings used fund acquisitions corporate expenses percentage revenues 1998 19 compared 27 1997 percentage decrease 1997 primarily attributable consolidation savings due merger evi weatherford enterra effective tax rate income continuing operations 1998 871 compared 345 1997 1998 rate due part mix foreign us tax attributes impact one time charges segment results drilling intervention services following chart sets forth certain data regarding results drilling intervention services division 1998 1997 includes merger charges 408 million consists 73 million facility closures 286 million writedown equipment 17 million severance 32 million writeoff inventory writeoff inventory classified cost products material items affecting results drilling intervention services division 1998 compared 1997 follows north american revenues 1998 declined 287 compared 1997 due average rig count reduction 167 international revenues increased 107 1997 3805 million 1998 significant revenue increases occurred african middle eastern markets businesses sold us 1997 contributed 769 million revenues 1997 gross profit charges 32 million declined slightly 1997 levels decrease north american revenues offset increased revenues higher margin international markets selling general administrative expenses percentage revenues remained flat approximately 10 year operating income charges 408 million declined 1998 1817 million 2071 million 1997 primarily due reduction revenues operating income charges percentage revenues 1998 remained comparable 1997 approximately 25 completion systems following chart sets forth certain data regarding results completion systems division 1998 1997 includes merger charges 42 million consists 17 million facility closures 06 million writedown equipment 03 million severance 16 million writeoff inventory writeoff inventory classified cost products material items affecting results completion systems division 1998 compared 1997 follows businesses acquired 1998 contributed 161 million 1998 revenues additionally 1998 revenues benefited full year revenues associated businesses acquired second half 1997 businesses contributed additional 170 million revenues 1998 gross profit negatively impacted 1998 deterioration market conditions resulted pricing pressures impact primarily felt north america selling general administrative costs percentage revenues increased 207 1997 243 1998 due 16 million increase goodwill amortization additional costs associated 1997 1998 acquisitions operating income merger charges declined 83 million 1997 04 million 1998 negatively impacted decline market conditions second half year well higher selling general administrative costs associated acquisitions artificial lift systems following chart sets forth certain data regarding results artificial lift systems division 1998 1997 follows includes merger charges 408 million consists 138 million facility closures 176 million writeoff inventory 50 million severance 44 million related writedown equipment writeoff inventory classified cost products material items affecting results artificial lift systems division 1998 compared 1997 second half 1998 experienced decline revenues 334 compared first half 1998 revenues 1998 related 1997 acquisitions 1891 million gross profit charges 176 million increased 1195 million 1998 698 million 1997 due improved margins products sold first half 1998 selling general administrative expenses percentage revenues increased significantly 188 1997 298 1998 due higher amortization goodwill intangibles relating 1997 1998 acquisitions division higher selling costs associated december 1997 acquisitions distribution entities system costs primarily related year 2000 compliance costs operating income charges 408 million 228 million 1997 216 million 1998 due increased selling general administrative expenses reduced revenues associated industry conditions compression services following chart sets forth certain data regarding results compression services division 1998 1997 follows includes merger charges 15 million relates primarily writedown assets material items affecting results compression services division 1998 compared 1997 revenues 1998 slightly 1997 second half 1998 revenues approximately 32 first half 1998 gross profit percentage revenues increased 196 1997 223 1998 increase reflected improvement design compressor packages sold operational efficiencies increase selling general administrative expenses 1998 compared 1997 primarily reflects costs associated expansion international markets operating income charges 186 million 1998 benefited improved margins discontinued operations discontinued operations consist grant prideco drilling products division results discontinued operations follows loss discontinued operations net taxes year ended december 31 1999 371 million included loss 36 million net taxes estimated transaction costs accrued third quarter 1999 additionally loss includes onetime charge 61 million net taxes directly related pending termination grant pridecos existing manufacturing arrangement india income discontinued operations net taxes 657 million 670 million years ended december 31 1998 1997 results 1998 include merger charges 350 million comprised 51 million facility closures exit costs 02 million severance related costs 285 million writeoff inventory 12 million writedown equipment decline grant pridecos net income 1998 1999 primarily attributable severe downturn businesses grant prideco latter half 1998 1999 due decline drilling activity low oil prices material items affecting grant pridecos results 1999 compared 1998 included decreased revenues due 60 drop drill stem sales lower premium tubular connection sales due reduced offshore activity lower distributor purchases decline tubular processing activity 95 million pretax writedown associated decision grant prideco terminate manufacturing arrangement oil country tubular limited octl india decision terminate manufacturing arrangement due combination factors including downturn market political instability india grant prideco continues approximately 173 million outstanding receivables advances owed octl process seeking collect amounts cash conversion equity octl product deliveries grant prideco experienced high manufacturing unabsorbed costs due fixed costs associated manufacturing operations plant underutilization grant pridecos gross profit gross profit percentages operating income declined 1999 compared 1998 due lower sales volume pricing pressure high fixed costs december 1998 grant prideco acquired tubos de acero de mexico sa tamsa 93 outstanding shares tf de mexico owned manufacturing facility veracruz mexico grant prideco operating capital lease arrangement part consideration grant prideco paid acquisition grant prideco sold international rights excluding canada grant pridecos atlas bradford tubular connection line carbon grade tubular tamsa license arrangement license resulted sale grant pridecos rights effective upon closing transaction grant prideco retained obligations respect development maintenance improvement atlas bradford connection line international market tamsa obligation give grant prideco additional consideration license support grant prideco provided fee basis rights grant prideco sold license arrangement fair value 90 million result december 1998 grant prideco recorded 90 million revenues recognize sale grant pridecos international rights atlas bradford connection line grant pridecos corporate general administrative expenses 1999 increased approximately 5 compared 1998 due increased management fees us higher corporate overhead costs relating addition staff anticipation spinoff grant pridecos results 1998 compared 1997 reflected improved market conditions first half 1998 first half 1998 operations benefited strong demand pricing well large backlog going second half 1998 year progressed demand declined prices began soften decline demand prices however materially affect results due backlog existed year results 1998 also included 350 million charge associated market changes occurred 1998 excluding charges results 1998 compared 1997 significantly higher due higher margins prices received sales higher margins prices reflected improved demand first half 1998 grant pridecos facilities operating near capacity extraordinary charge 1997 recorded extraordinary charge 90 million net taxes related acquisition approximately 1200 million principal amount 10 14 senior notes due 2004 10 14 senior notes due 2004 series b liquidity capital resources current sources capital existing cash generated operations borrowings bank lines credit believe current reserves cash access existing credit lines internally generated cash operations sufficient finance projected cash requirements current future operations continually reviewing acquisitions markets depending upon size nature timing acquisition may need additional capital form either debt equity combination following chart contains information regarding continuing businesses capital resources borrowings exposures december 31 1999 1998 increase cash equivalents since december 31 1998 primarily attributable following net cash inflow 233 million continuing operating activities net cash inflow 398 million discontinued operating activities borrowings net repayments term debt shortterm facilities continuing operations 1633 million repayments term debt 571 million discontinued operations proceeds sale property plant equipment 325 million proceeds sale compression manufacturing business 146 million proceeds sale leaseback compression units compression joint venture 1398 million proceeds 654 million subsequently paid ge capital terms joint venture agreement capital expenditures property plant equipment continuing operations 1743 million includes 948 million compression services division funded primarily sale leaseback arrangements acquisition new businesses approximately 689 million cash net cash acquired acquisitions capital expenditures discontinued operations 341 million functional currency international operations applicable local currency assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments reflected accumulated comprehensive loss stockholders equity section balance sheet approximately 35 net assets impacted changes foreign currencies relation us dollar recorded 134 million adjustment equity account year ended december 31 1999 reflect net impact decline various foreign currencies us dollar discussion market risk exposures financial instruments additional currency exposures appears heading quantitative qualitative market risk disclosure banking facilities may 1998 put place fiveyear unsecured revolving credit facility allows us borrow 2500 million time facility consists 2000 million us credit facility 500 million canadian credit facility borrowings facility bear interest variable rate based us prime rate libor weighted average cost borrowings facility 1999 577 credit facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions december 31 1999 677 million available borrowing credit facility also engage unsecured shortterm borrowings various institutions pursuant uncommitted facilities bid note arrangements december 31 1999 1321 million unsecured shortterm borrowings outstanding arrangements average interest rate 532 per annum convertible subordinated debentures november 1997 completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 net proceeds debentures 3909 million debentures bear interest annual rate 5 convertible common stock price 80 per share right redeem debentures time november 4 2000 redemption prices provided indenture agreement debentures subordinated right payment principal interest prior payment full certain existing future senior indebtedness also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters time default payment interest terms debentures conversion rate debentures adjusted following spin grant prideco following sets forth formula adjustment conversion rights debentures proposed spinoff new conversion price original conversion price b original conversion price 80 per share market price per share common stock distribution date grant prideco common stock expect april 14 2000 distribution date market price common stock purposes adjustment defined section 63g first supplemental indenture equal daily average last recorded sale price regular way per share common stock reported new york stock exchange composite tape ten trading days ending including distribution date b fair market value per share grant prideco common stock distributed determined good faith board directors board directors determined fair market value share grant prideco common stock time distribution equal daily average last recorded sale price whendistributed per share grant prideco common stock reported new york stock exchange composite tape ten trading days ending including distribution date however less ten trading days grant prideco common stock ending including distribution date daily average shall based actual number trading days grant prideco common stock ending including distribution date 7 14 senior notes due 2006 outstanding 2000 million publicly traded 7 14 senior notes due may 15 2006 interest 7 14 senior notes payable semiannually may 15 november 15 compression financing compression services division entered various sale leaseback arrangements sold 2398 million compression units right sell another 1102 million compression units arrangements legal title compression units sold third parties leased back division five year operating lease marketbased purchase option december 31 1998 compression services division sold compressors arrangements appraised values 1196 million received cash amount 1000 million receivable 196 million year ended december 31 1999 compression services division received 196 million cash related 1998 sales 1202 million result transactions completed 1999 proceeds received compression services division sale leaseback compressor units 1000 million distributed us 1998 division 654 million distributed ge capital 1999 part joint venture remaining proceeds sales utilized joint venture internal corporate purposes growth guaranteed certain obligations joint venture respect sale 2000 million compression units remaining sales joint venture done nonrecourse basis us limited solely assets joint venture compression services division continues review potential projects expansion operations domestically internationally depending size projects expect financing projects funded joint ventures cash flow operations proceeds sale leaseback arrangements project similar type financing grant prideco note connection spinoff grant prideco issue unsecured subordinated note us amount 1000 million 1000 million obligation us bear interest annual rate equal 100 interest payments due quarterly principal unpaid interest due later march 31 2002 terms note grant prideco required repay note proceeds debt equity financing excluding financing credit facility equity issued connection business combination indebtedness grant prideco us subordinated working capital obligations grant prideco banks grant prideco currently intends repay obligations within 12 months completion spinoff pursuant anticipated public debt financing timing grant pridecos repayment indebtedness however dependent upon market conditions capital expenditures capital expenditures property plant equipment continuing operations 1999 1743 million primarily related compression rental equipment fishing tools tubular service equipment included within 1999 capital expenditures 948 million compression services division primarily related us assets longterm contract ypf portion 1999 capital expenditures related projects initiated end 1998 capital expenditures 2000 expected approximately 1100 million excluding capital expenditures compression operations capital expenditures compression operations based contract needs timing new projects entered compression joint venture may involve use sale leaseback arrangements compression operations nature capital intensive event growth require substantial investments compressor units expect future capital investments compression services division financed compression joint venture debt sale leaseback arrangements similar financing structures repaid cash flows generated compressor units projected term rental equipment acquisitions joint venture grown substantially years selective acquisitions combinations following table summarizes 1999 1998 acquisitions operating segment 1999 cash paid net cash acquired includes net effect cash retained us christiana companies inc acquisition february 1999 completed joint venture ge capital combined compression services operations ge capitals global compressions services operations joint venture known weatherford global compression services worlds second largest provider natural gas contract compression services owns manages 4000 compression units worldwide one million horsepower 64 joint venture ge capital owns 36 right acquire ge capitals interest anytime price equal third party market determined value less book value currently approximately 2000 million ge capital also right require us purchase interest time february 2001 third party market determined value well request public offering interest date purchased interest time february 1999 completed acquisition christiana approximately 44 million shares common stock 206 million cash acquisition acquired christiana 1 44 million shares common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control refrigerated warehouse trucking logistics company acquired christiana gave us unique opportunity interest total logistic essentially consideration investment total logistic held us passive investment august 1999 completed acquisition dailey international pursuant prenegotiated plan reorganization bankruptcy terms acquisition issued total approximately 43 million shares common stock dailey international noteholders stockholders total number shares issued approximately 40 million shares dailey international noteholders approximately 03 million shares dailey international common stockholders time acquisition dailey international held approximately 24 daileys senior notes contributed dailey international connection transaction hold approximately 12 million shares common stock treasury shares total purchase price dailey international excluding assumed liabilities dailey international impaired bankruptcy approximately 1850 million dailey international leading provider specialty air underbalanced directional drilling equipment services oil gas industry designs manufactures rents proprietary downhole tools oil gas drilling workover applications worldwide september 1999 acquired petroline total consideration approximately 1618 million consisting 322 million cash 38 million shares common stock also agreed pay sellers additional funds event resell shares common stock received acquisition certain market transactions price less 35175 per share obligation continues october 2000 petroline based aberdeen scotland provider premium completion products services international oil gas industry petroline leading provider flow control equipment north sea first company successfully introduce completion products using new expandable tube technology september 1999 acquired williams tool 18 million shares common stock williams tool based fort smith arkansas offers full range rotating control heads horizontal underbalanced low hydrostatic head drilling operations williams tool products used control flow wellbore reduce risk blowouts oil gas geothermal coal gas methane wells drilled light fluids also effected various acquisitions integrating continuing operations 1999 total consideration 609 million various acquisitions effected 1999 grant prideco total consideration 215 million cash 02 million shares common stock assumed debt 254 million acquisitions resulted substantial goodwill associated operations including goodwill approximately 3641 million relating acquisitions 1999 amortization expense goodwill intangibles 1999 280 million new accounting pronouncements june 1998 financial accounting standards board issued statement financial accounting standards 133 accounting derivative instruments hedging activities sfas 133 provides comprehensive consistent standard recognition measurement derivatives hedging activities june 1999 fasb issued sfas 137 accounting derivative instruments hedging activitiesdeferral effective date sfas 133 amending effective date sfas 133 fiscal years beginning june 15 2000 plan adopt sfas 133 2001 currently evaluating impact sfas 133 consolidated financial statements anticipate adoption statement material impact year 2000 matters year 2000 issue risk information systems computers equipment products using datesensitive software containing computer chips twodigit date fields unable correctly process year 2000 date change identified corrected failures could occur software hardware equipment products suppliers vendors customers could result interruptions business failure could material impact us response year 2000 issue prepared implemented comprehensive multistep plan assess remediate significant year 2000 issues information technology systems including computer software hardware noninformation technology systems utilizing datesensitive software computer chips including products facilities equipment infrastructures addition assessment review systems communicated thirdparty contractors vendors service providers customers purpose evaluating readiness year 2000 determining extent may affected remediation systems software applications products phases year 2000 plan completed connection implementation completion year 2000 plan incurred pretax expenditures approximately 112 million since january 1998 approximately 96 million incurred connection replacement business application software approximately 16 million incurred connection replacement certain information technology hardware systems 1999 expenditures associated year 2000 plan represent approximately 15 management information systems departments budget 1999 various information technology projects related year 2000 issue deferred due year 2000 efforts effects delays expected material impact us date know failures software hardware equipment products suppliers vendors customers result occurrence year 2000 date change however failure could material impact us material adverse effects year 2000 occurred unable predict likely worst case year 2000 scenario believe however worst case scenario material us discussion efforts expectations relating risks uncertainties associated year 2000 issues year 2000 plan contain forwardlooking statements risks uncertainties include limited unanticipated problems encountered us andor suppliers vendors customers item 7aitem 7 managements discussion analysis financial condition results operations general business conducted three business segments 1 drilling intervention services 2 completion systems 3 artificial lift systems addition three segments historically operated compression services division drilling products division february 2001 completed merger essentially compression services division subsidiary universal compression holdings inc exchange 1375 million shares universal common stock approximately 45 universals current common stock outstanding april 14 2000 distributed stockholders outstanding shares grant prideco inc held operating assets used drilling products division result distribution drilling products division presented discontinued operations accompanying financial statements following discussion results operations last three years discussion read conjunction financial statements notes thereto included item 8 financial statements supplementary data discussion includes various forwardlooking statements markets demand products services future results statements based certain assumptions consider reasonable information assumptions refer section entitled forwardlooking statements located within item 1 business unable provide certain information regarding results excluding impact acquisitions due integration acquisitions operations acquire numerous companies every year focus integration efforts may realize benefits acquisition provides market trends outlook businesses serve oil gas industry businesses affected changes worldwide demand price oil natural gas certain products services well installation services well completion services dependent level exploration development activity completion phase well life cycle products services artificial lift systems dependent production activity currently estimate approximately twothirds continuing operations reliant drilling activity remainder focused production reservoir enhancement activity following chart sets forth certain statistics reflective historical market conditions 1 price per barrel december 31 source applied reasoning inc 2 price per mmbtu december 31 source oil world 3 average rig count december source baker hughes rig count oil gas industry subject extreme volatility recent years due significant changes demand supply pricing oil natural gas 1999 demand products services low customers exploration development production activities worldwide reduced reaction sharply lower oil prices low levels activity continued 1999 price oil hit low 1107 per barrel year north american international rig counts reached historical lows 534 556 respectively second half 1999 price oil increased sharply due demand supply imbalances members organization petroleum exporting countries reducing production compliance production quotas pickup customers activity proportional increase price oil customers cautious new spending due recent volatility prices 2000 price oil increased result supply demand imbalances created reduced customer investment oil gas development 1998 1999 increase price oil gas 2000 allowed us experience steady improvements demand products services particular north american markets increase demand products international markets lagged recovery north america international activity began increase latter half 2000 steady improvement continuing 2001 international rig count increased 38 1999 low 2001 high demand oil natural gas began weaken third quarter 2001 response slowing growth worldwide economies resulted slowdown north american rig activity us rig count peaked 1293 rigs july 2001 december declined 32 low 882 rigs natural gas prices declined high 982 per mcf earlier 2001 recent price approximately 231 per mcf expect continued decline 2002 north american markets response slowing growth worldwide economy drilling activity outside north america somewhat less volatile north american market due significant investment complexity surrounding international projects drilling decisions relating projects tend evaluated monitored longerterm perspective regard oil natural gas pricing contracts span two three years international rig activity fourth quarter remained constant approximately 750 rigs customers international spending expected improve modestly 2002 however expect international demand products services exceed expected industrywide increase international market activity leverage technology offerings expand market share general expect markets affect businesses follows drilling intervention services completion systems due recent decline natural gas prices expect decline revenues approximately 10 us market throughout 2002 fourth quarter 2001 activity levels canada anticipated decline approximately 20 seasonal high first quarter 2002 due spring break remain lower levels throughout end year also forecast latin american market decline 5 10 due current political environment argentina venezuela lower volumes pricing pressures adversely impact operating profits regions divisions expected see international revenue profitability improvements 2002 currently expect markets europe west africa experience revenue growth 10 middle east north africa experience sales improvements 15 asia pacifics revenues increase 20 2002 improvement levels supported market share gains technology product offerings balanced drilling systems expandable products specific new product offerings include downhole deployment valve underbalanced drilling expandable liner hanger expandable casing patches addition reliance upon drilling activity level divisions contribution dependent ability react shifting market demand ability successfully market products services including technology product offerings artificial lift division primarily oil driven business currently 63 north american based 37 international north american oil activity sluggish 2001 due concerted focus natural gas drilling however division benefit shift priority customers place oil projects rather natural gas projects light recent decline natural gas prices canada recently awarded fiveyear contract support firstphase heavyoil development incremental business begin 2002 expect us market activity consistent 2001 fourth quarter activity levels share gains market come expansion production optimization technology expect achieve international market penetration core products leverage global footprint lift options marketing strategy overall level results operations businesses 2002 heavily dependent worldwide industrial production ability react changes industry addition strength industry highly dependent many external factors world economic conditions member country compliance organization petroleum exporting countries quotas terroristrelated instability weather conditions extreme volatility markets makes predictions regarding future results difficult critical accounting policies estimates discussion analysis financial condition results operation based upon consolidated financial statements prepare financial statements conformity accounting principles generally accepted united states required make certain estimates judgments assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses periods presented base estimates historical experience available information various assumptions believed reasonable circumstances ongoing basis evaluate estimates including related bad debts inventory investments intangible assets goodwill income taxes contingent liabilities actual results may differ estimates different assumptions conditions accounting policies believe critical reporting results operations financial position follows accounts receivable perform ongoing credit evaluations customers adjust credit limits based upon payment history customers current credit worthiness determined review current credit information continuously monitor collections payments customers maintain provision estimated uncollectible accounts based upon historical experience specific customer collection issues identified credit losses historically within expectations provisions established cannot give assurances continue experience credit loss rates past cyclical nature industry may affect customers operating performance cash flows could impact ability collect obligations addition many customers located certain international areas inherently subject risks economic political civil instabilities may impact ability collect accounts receivables equity investments equity investments unconsolidated subsidiaries primarily include investment universal review equity investments impairment record adjustment believe decline fair value temporary fair value asset measured using quoted market prices absence quoted market prices fair value based estimate discounted cash flows determining whether decline temporary consider cyclicality industry investment operates historical performance relation peers current economic environment future conditions industry operating performance relation peers future economic environment may vary current assessment recoverability future conditions could therefore result determination decline fair value temporary income taxes provide income taxes accordance statement financial accounting standards sfas 109 accounting income taxes standard takes account differences financial statement treatment tax treatment certain transactions deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years temporary differences expected recovered settled effect change tax rates recognized income expense period includes enactment date calculation requires us make certain estimates future operations changes state federal foreign tax laws well changes financial condition could affect estimates valuation allowance deferred tax assets record valuation allowance reduce deferred tax assets likely portion deferred tax assets expire realization benefit future deductibility probable ultimate realization deferred tax assets depends ability generate sufficient taxable income appropriate character future revenue recognition revenue product sales recognized following criteria met evidence agreement exists b delivery acceptance customer occurred c price customer fixed determinable collectibility reasonably assured products deemed accepted customer upon receipt written acceptance revenue rental service agreements recognized earned rental period services rendered associated costs expenses recognized incurred results operations year ended december 31 2001 compared year ended december 31 2000 following charts contain selected financial data comparing results continuing operations 2001 2000 comparative financial data includes 563 million impairment charges related merger essentially compression services division universal net tax impact charges 430 million b includes 765 million deferred tax liability associated difference book basis compression services division tax basis common stock universal received connection merger compression services division universal c ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitutes calculations generally accepted accounting principles particular cash flows operations operating income net income addition ebitda calculations one company may comparable another companys calculations sales geographic region results continuing operations 2001 compared 2000 affected following specific items excluding results compression services division revenues increased 7224 million 457 2000 levels incremental revenue result improved market conditions pricing initiatives acquisitions new technology product lines impact factors follows north american revenues improved 309 reflecting benefits increased average annual rig count 188 contributions 27 million 2001 acquisitions excluding technology related acquisitions international revenues improved 689 compared average annual international rig count increase 149 2001 acquisitions excluding technology based acquisitions contributed 90 million international revenue growth geographic regions experienced strong gains particularly asia pacific revenues excluding acquisitions grew 874 technology product lines including underbalanced services expandables production optimization intelligent well increased 1617 million technology contribution grown current run rate 14 total revenue gross profit percentage increased 305 2000 344 2001 primarily due volume pricing gains divisions selling general administrative expenses attributable segments decreased percentage revenue 189 2000 160 2001 decrease primarily attributable higher revenue base partially offset increase selling marketing expenses 112 million corporate general administrative expense increased 27 million 2000 however remained relatively flat percentage revenue year basis equity earnings 2001 increased 181 million 2000 due investment universal 2001 interest expense increased 147 million 2000 due full year amortization original issue discount zero coupon convertible senior debentures higher average shortterm borrowings mitigated lower average interest rates effective tax rate income continuing operations 2001 2000 excluding impact charges recorded related merger compression services division universal approximately 363 segment results drilling intervention services drilling intervention services division experienced strong improvements revenues operating income 2001 compared 2000 division benefited increased demand due market activity pricing initiatives technology product acceptance acquisitions implemented price increases us third quarter 2000 first quarter 2001 price increases also achieved renewal longerterm international contracts price increases higher demand reflected divisions financial results beginning fourth quarter 2000 continuing third quarter 2001 result weakening us market experienced lower volume pricing pressures fourth quarter 2001 april 2001 acquired orwell group plc based aberdeen scotland approximately 2585 million consisting 34 million shares common stock 814 million assumed debt subsequently paid full orwell international provider oilfield services drilling fishing remediation marine applications acquisition increases capacity share international markets product lines geographic regions experienced increase annual revenue product line reflecting significant improvement underbalanced services revenues nearly doubled 1579 million excluding acquisitions divisions strongest international improvements latin america asia pacific following chart sets forth data regarding results drilling intervention services division 2001 2000 2001 divisions revenues improved 516 2000 levels north american revenues impacted average annual rig count increase 188 improved technology revenues underbalanced services 237 million international revenues improved 735 reflecting benefits 149 average annual rig count improvement contributions acquisitions 80 million international growth underbalanced services almost 50 million gross profit percentage revenue increased primarily due pricing initiatives put place second half 2000 first quarter 2001 higher utilization assets selling general administrative expenses decreased percentage revenues 144 2000 119 2001 decrease primarily reflects higher revenue base partially offset increased selling costs attributable higher sales also incurred 53 million additional goodwill intangible amortization expense division completion systems completion systems division showed strong improvements 2001 compared 2000 divisions revenues increased quarter throughout 2001 international market expansion growth expandables product line contributed significantly improvement fourth quarter 2000 annualized run rate expandables 171 million grew annualized run rate 745 million fourth quarter 2001 november 2001 acquired johnson screens approximately 1100 million cash cidras optical sensing business approximately 1231 million cash 625 million 19 million common stock johnson global provider screens fluidsolid separation process including recently introduced excelflotm premium screen line super flotm super weldr thin packtm screens oil gas production oil gas screens operations integrated division remaining operations integrated artificial lift systems division acquisition provide manufacturing consolidation benefits access new technologies cidra provider suite permanent inwell fiber optic sensing systems include pressure temperature gauges flow phase fraction systems allfiber well seismic system acquisition provides division proprietary technology advanced intelligent completion field automation systems following chart sets forth data regarding results completion systems division 2001 2000 revenue 2001 increased 1326 million 608 2000 levels revenues north america increased 552 million due average annual rig count increase 188 contributions acquisitions excluding technologybased acquisitions 10 million international revenues excluding expandables acquisitions improved 310 average annual international rig count increase 149 increased expandables revenue 407 million revenues acquisitions 45 million contributed incremental international revenue gross profit percentage revenue increased 228 2000 272 2001 due pricing initiatives higher throughput manufacturing facilities product mix benefits partially offset increased research development expenses 64 million selling general administrative expenses percentage revenue decreased 198 2001 264 2000 primarily due higher revenue base partially offset higher employee costs associated efforts expand division artificial lift systems artificial lift systems division improved 2001 compared 2000 due market acceptance technologies improved activity levels expansion certain international markets divisions new technology product line production optimization contributed approximately 47 million revenue continued success changing divisions geographic mix historical 90 north american 10 international balanced composition 63 north american 37 international fourth quarter 2001 international growth due aggressive marketing artificial lift systems worldwide international distribution service locations expansion new markets 2001 success growing international business primarily latin america asia pacific following chart sets forth data regarding results artificial lift systems division 2001 2000 revenues increased 280 primarily due acquisitions technology growth increased volume pricing initiatives current year acquisitions contributed close 20 million technology contributed close 47 million 2001 excluding acquisitions technology us revenue improved 237 asia pacific revenue doubled gross profit percentage revenue improved 74 2000 primarily due pricing initiatives product mix selling general administrative expenses percentage revenue declined 248 2000 226 2001 primarily due higher revenue base rationalization distribution centers partially offset increased selling costs associated incremental revenues year ended december 31 2000 compared year ended december 31 1999 following charts contain selected financial data comparing results continuing operations 2000 1999 comparative financial data sales geographic region results continuing operations 2000 1999 affected following specific items revenues increased 5741 million 463 1999 levels due increased volume throughout 2000 improved pricing late 2000 international revenues increased 455 1999 6123 million compared increase average annual international rig count 86 north american revenues increased 3824 million 467 compared increase average annual north american rig count 447 revenues 2000 positively impacted full year revenues related third quarter 1999 acquisitions petroline wellsystems dailey international williams tool gross profit percentage increased 283 1999 305 2000 primarily due volume pricing gains within drilling intervention services division completion systems division selling general administrative expenses attributable segments decreased percentage revenue 211 1999 189 2000 decrease primarily attributable higher revenue base well full integration 1999 acquisitions business benefits partially offset goodwill amortization 371 million 2000 compared 240 million 1999 corporate general administrative expenses increased 110 million 1999 however remained relatively flat percentage revenue year basis 2000 tax provision includes 765 million deferred taxes related exchange consolidated subsidiary equity method investment connection universal merger excluding 765 million provision tax effect impairment charge effective tax rate income continuing operations 2000 approximately 363 compared 299 1999 increase effective rate primarily result decrease foreign tax benefits segment results drilling intervention services following chart sets forth data regarding results drilling intervention services division 2000 1999 compared 1999 revenues increased 475 2000 due improved market conditions full year impact late 1999 acquisitions revenues north america increased 755 average annual north american rig count increased 447 year international revenues increased 207 average annual international rig count increased 86 gross profit percent revenues increased primarily due pricing increases implemented second half 2000 higher revenue base relation depreciation fixed overhead manufacturing costs selling general administrative expenses decreased percentage revenues 163 1999 144 2000 decrease primarily reflects higher revenue base partially offset higher employee costs increase 67 million goodwill intangible amortization expense completion systems following chart sets forth data regarding results completion systems division 2000 1999 revenue 2000 increased 969 million 800 1999 improvement experienced historical product lines well sales expandable completion products flow control products added acquisition petroline wellsystems september 1999 gross profit percentage increased primarily due higher gross margin percentages late 1999 acquisitions higher throughput manufacturing facilities improved manufacturing efficiencies selling general administrative expenses increased 391 1999 due costs associated 1999 acquisitions addition sales staff new product lines increased amortization 75 million goodwill intangible assets artificial lift systems following chart sets forth certain data regarding results artificial lift systems division 2000 1999 revenues increased 626 1999 2000 result 463 increase north american revenues 778 increase latin american revenues also experienced increase 211 million 197 million revenues middle east north africa region asia pacific region respectively primarily due acquisition gas services international gross profit decreased slightly 349 1999 336 2000 due product mix selling general administrative expenses percentage revenues decreased 294 1999 248 2000 due cost reductions previously implemented higher revenue base compression services universal transaction february 9 2001 completed merger essentially compression services division subsidiary universal exchange 1375 million shares universal common stock approximated 48 universals outstanding shares following merger universal unrelated transaction issued additional shares common stock reducing ownership 45 retained part compression services division namely singaporebased gsi business consolidated within artificial lift systems division 100 million accounts receivable concurrent transaction paid ge capital 2065 million 36 ownership joint venture compression services division operated connection transaction recorded impairment charges fourth quarter 2000 563 million 430 million taxes provided deferred taxes 765 million due exchange consolidated subsidiary equity method investment impairment charge reflects difference estimated fair value net assets held sale determined using quoted market prices estimated selling prices less estimated costs sell net book value compression services division assets connection merger universal entered registration rights agreement pursuant granted certain demand piggyback registration rights shares universal common stock pursuant terms merger agreement also appointed three members universals board directors including chairman president chief executive officer long least 20 universals outstanding common stock right designate three board members ownership interest falls 20 may designate two directors serve universals board directors december 31 2001 appointed three universals eleven board members including chairman president chief executive officer 2001 prior effective date merger compression services division contributed 269 million revenues 36 million ebitda operating loss 06 million subsequent merger began recording equity earnings unconsolidated affiliates based portion universals net income difference cost basis investment fair value net assets universal time merger 1525 million amortized straightline 40 years equity earnings unconsolidated affiliates results compression services division 2000 1999 follows revenues 2000 2348 million 2259 million 1999 reflecting 80 million incremental revenues rental contracts ypf excluding charges division contributed 445 million ebitda 67 million operating income 2000 1999 ebitda 547 million operating income 216 million decline primarily attributable lower margins rental contracts due pricing pressures primarily us higher lease expenses due increased number compressors sold subject sale leaseback arrangements increased revenues lower margin parts service sales percentage total sales higher selling general administrative costs related reorganization division discontinued operations discontinued operations consist grant prideco drilling products division spunoff stockholders april 2000 loss discontinued operations net taxes period ended april 14 2000 35 million included loss 10 million transaction costs net taxes loss discontinued operations net taxes year ended december 31 1999 371 million included 1999 loss 36 million net taxes transaction costs additionally loss included charge 61 million net taxes directly related termination grant pridecos manufacturing arrangement india liquidity capital resources current sources capital cash generated operations borrowings bank lines credit continually reviewing acquisitions markets depending size timing acquisition could require additional capital form either debt equity historical cash flows historical cash flows two years ended december 31 2001 follows sources liquidity operating cash flow directly related business segments operate market conditions deteriorate experience unforeseen declines results operations cash flows may reduced anticipate rely primarily upon existing cash balances cash flows operating activities maintain liquidity fulfill obligations next 12 months may also use credit facilities maintain liquidity shortterm needs following table summarizes credit facilities december 31 2001 1 revolving credit facilities april 2001 entered 2500 million threeyear multicurrency revolving credit facility commitment capacity 4000 million interest accrues variable rate based borrowers applicable eurocurrency rate may 1998 put place fiveyear unsecured revolving credit facility allows us borrow 2000 million us credit facility 500 million canadian credit facility borrowings facility bear interest variable rate based us prime rate libor credit facilities contain customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation occurrence indebtedness limitation asset dispositions compliance covenants set forth credit facilities committed revolving credit facilities contain provision makes availability dependent upon credit ratings however interest rates dependent upon credit rating longterm senior debt 2 asset securitization july 2001 entered agreement financial institution sell continuous basis undivided interest specific pool current domestic accounts receivables pursuant agreement periodically sell certain trade accounts receivables whollyowned bankruptcyremote subsidiary formed purchase accounts receivables turn sell participating interests accounts receivables financial institution sale participating interests limited percentage receivables sold subsidiary accordance sfas 140 accounting transfers servicing financial assets extinguishments liabilities related receivables removed consolidated balance sheets subsidiary records retained interest amount receivables sold excess cash received retained interest receivables pool valued based recoverable value approximates book value retained servicing responsibilities subordinated interest receivables sold recourse us failure debtors pay due account debtors bankruptcy inability pay retained interest receivables pool subordinate investors interests permitted securitize 1500 million agreement credit rating falls bbb standard poors baa3 moodys financial institution obligation purchase accounts receivables currently pay program fee participating interests variable rate based financial institutions commercial paper rate plus fees contractual obligations following summarizes contractual cash obligations effect obligations expected liquidity cash flows future 1 shortterm debt december 31 2001 1409 million borrowings revolving credit facilities 225 million unsecured shortterm borrowings outstanding uncommitted facilities 2 senior notes derivative instruments november 16 2001 issued 3500 million senior notes due november 15 2011 interest 6 58 senior notes payable semiannually may 15 november 15 commencing may 15 2002 outstanding 2000 million publicly traded 7 14 senior notes due may 15 2006 interest 7 14 senior notes payable semiannually may 15 november 15 december 31 2001 effect fixed variable interest rate swap hedge 1000 million exposure 7 14 senior notes subsequent december 31 2001 hedged remaining 1000 million objective transactions protect debt changes fair value take advantage interest rates available current economic environment agreement may 15 november 15 year maturity receive interest fixed rate 7 14 pay floating rate based 6month libor interest rate differential received paid swap recognized life swap adjustment interest expense december 31 2001 fair market value swap agreement effect 31 million liability 3 longterm debt december 31 2001 various debt outstanding 515 million primarily related industrial revenue bonds foreign bank debt capital leases capital expenditures commitments capital expenditures property plant equipment 2001 3394 million primarily related new technologies drilling equipment fishing tools tubular service equipment capital expenditures 2002 expected approximately 2500 million also execute letters credit normal course business letters credit outstanding 867 million december 31 2001 including letters credit revolver 414 million letters credit 404 million expire 2002 387 million 2003 44 million 2004 01 million 2005 31 million thereafter addition aforementioned cash obligations contractual obligations related debentures may settled cash equity combination thereof follows zero coupon convertible senior debentures june 30 2000 completed private placement 9100 million face amount zero coupon convertible senior debentures issued 5016 million providing holders annual 3 yield maturity december 31 2001 accreted amount 5246 million holders may convert zero coupon convertible senior debentures shares common stock time maturity conversion rate 99970 shares per 1000 principal amount maturity initial conversion price 551425 per share common stock effective conversion price increase accreted value zero coupon convertible senior debentures increases may redeem zero coupon convertible senior debentures june 30 2005 accreted amount time redemption provided indenture agreement holders also may require us repurchase zero coupon convertible senior debentures june 30 2005 june 30 2010 june 30 2015 accreted amount accreted value 5822 million 6756 million 7841 million june 30 2005 2010 2015 respectively may election repurchase debentures cash common stock combination thereof zero coupon convertible senior debentures unsecured ranking equal right payment unsecured unsubordinated indebtedness rank senior future subordinated indebtedness convertible preferred debentures november 1997 sold 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 convertible preferred debentures bear interest annual rate 5 paid quarterly starting february 1 1997 convertible common stock conversion rate adjusted spinoff grant prideco 5334 per share right redeem convertible preferred debentures redemption prices provided indenture convertible preferred debentures subordinated right payment principal interest prior payment full certain existing future senior indebtedness also right exercised right defer payments interest convertible preferred debentures extending quarterly interest payment period 20 consecutive quarters time default payment interest related party agreements chairman president chief executive officer also chairman board directors grant prideco addition four members serve grant pridecos boards directors connection spinoff grant prideco entered preferred customer agreement pursuant agreed threeyear period purchase least 70 requirements drill stem products grant prideco price products price greater grant prideco sells best similarly situated customers entitled apply purchase drill stem credit 300 million subject limitation application credit 20 purchase december 31 2001 194 million remaining drill stem credit new accounting pronouncements august 2001 financial accounting standards board fasb issued sfas 144 accounting impairment disposal longlived assets statement supercedes sfas 121 accounting impairment longlived assets longlived assets disposed accounting reporting provisions accounting principles board opinion apb 30 statement retains fundamental provisions sfas 121 basic requirements apb 30 however establishes single accounting model used longlived assets disposed sale expands presentation discontinued operations include disposal transactions provisions statement effective financial statements issued fiscal years beginning december 15 2001 anticipate statement material impact financial position results operations july 2001 fasb issued sfas 142 goodwill intangible assets statement establishes new accounting standards goodwill recognition intangibles certain intangibles determined indefinite life continues require recognition goodwill certain intangibles determined indefinite life assets permit amortization previously required statement also establishes new method testing goodwill intangibles determined indefinite life impairment requires tested impairment least annually reporting unit level written results operations periods recorded value greater market value statement effective fiscal years beginning december 15 2001 except goodwill certain intangibles determined indefinite life acquired june 30 2001 subject nonamortization provisions statement immediately apply new rules accounting goodwill intangible assets beginning january 1 2002 application goodwill nonamortization provision statement expected result increase net income per diluted share approximately 028 annual basis yet determined whether potential nonamortization identifiable intangible assets material impact financial position results operations 2002 perform first required impairment tests yet determined impact tests financial position results operations july 2001 fasb issued sfas 141 business combinations statement establishes accounting reporting standards requiring business combinations accounted using purchase method accounting statement effective business combinations initiated june 30 2001 effect financial position results operations item 7aitem 7 managements discussion analysis financial condition results operations general may 1998 new weatherford created merger evi inc weatherford enterra inc merger accounted pooling interests financial statements restated reflect businesses combined basis also redefined business segments four separate divisions completion oilfield services artificial lift systems compression services drilling products segment data restated reflect four divisions following discussion results operations last three years current financial position discussion read conjunction financial statements included report discussion results financial condition includes various forwardlooking statements markets demand products services future results statements based certain assumptions consider reasonable information assumptions refer section entitled forwardlooking statements market trends outlook businesses serve oil gas industry certain products services drill pipe tubular installation services well completion services dependent north american worldwide level exploration development activity products services artificial lift systems compression services dependent oil gas production activity currently estimate 50 60 business reliant drilling activity remainder related production activity oil gas industry subject extreme volatility recent years due significant changes demand supply pricing oil natural gas 1997 early 1998 experienced strong increase demand products services due worldwide increase demand oil shortages equipment people service demand period industry operated levels experienced since early 1980s many businesses operated full capacity beginning late 1997 price oil began fall reasons decline included spreading impact financial crisis asia worldwide demand oil increase supply oil worldwide new projects production came online initially effects changes felt isolated markets canadian california heavy oil markets drilling production activity sensitive price oil drilling completion activity north america began decline due greater sensitivity north american production prices late 1998 demand throughout industry fallen substantially customers exploration development production activities worldwide dropped reaction sharply lower oil prices low oil prices also affected economies various developing countries particular latin america former soviet union heavily dependent oil exports growth many countries experiencing declines economies turn affected worldwide demand price oil following chart sets forth certain historical statistics reflective current market conditions operate selected industry data 1 2 3 north american international wti oil henry hub gas rig count rig count 1998 1128 1945 895 671 1997 1832 2264 1499 819 1996 2539 2757 1195 810 1 price per barrel december 31 source applied reasoning inc 2 price per mmbtu december 31 source oil world 3 average rig count december source baker hughes rig count reduction drilling production activity impacted businesses lower revenues pricing pressure reduced margins contributing conditions following trends low oil prices reduced funds available clients explore produce oil gas made exploration production oil reserves various locations uneconomical reduced exploration activity reduced demand products services provided us serving drilling markets drilling products division significantly affected north american activity declined decline international activity due maturity reserves north america higher per barrel cost exploration production north america capital budgets customers reduced delayed industry consolidations market uncertainties future oil prices reduced demand products services resulted pricing pressures reduced margins markets enter 1999 substantial uncertainty demand stop declining recovery start view nearing bottom cycle improvements slowly begin felt near end year believe principal factor behind recovery reduction supply oil production rates decline due current reduction drilling activity recent proposed production cuts oil producing countries may also result improved market conditions extent cuts actually implemented increases worldwide demand could also speed recovery expect material improvements industry conditions sometime 2000 expect light current market conditions revenues operating income special charges net income continuing operations special charges 1999 substantially year basis absent significant turnaround third quarter 1999 extent decline function market stabilizes begins recover extreme volatility markets however makes predictions regarding results 1999 difficult make results operations business environment operated last three years experienced extreme changes starting 1996 began experience first significant improvements markets number years improvement continued 1997 first part 1998 material slow beginning near middle 1998 end 1998 industry midst one worse downturns history year ended december 31 1998 compared year ended december 31 1997 following charts contain selected financial data comparing results 1998 1997 includes 1950 million 1268 million net tax merger charges relating merger evi weatherford enterra reorganization rationalization business light industry conditions charges 509 million related writeoff inventory classified cost products b ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitute calculations gaap particular cash flows operations operating income net income addition ebitda calculations one company may comparable another company sales based region origination reflect sales ultimate destination results 1998 reflected volatile industry competed trends factors affecting businesses varied depending quarter results 1998 1997 also affected following specific items results 1998 include 1950 million pretax charges merger evi weatherford enterra inc charges associated downturn industry revenues second six months 1998 declined 143 compared period 1997 174 compared first half 1998 increase 1998 operating income 3440 million charges 1950 million compared 1997 operating income 3360 million reflected strong demand products first half 1998 businesses acquired 1997 1998 contributed 4035 million revenues 259 million operating income 1998 revenues operating income 1997 businesses acquired 1997 1665 million 233 million businesses sold 1997 contributed 769 million revenues 1997 net income disposed businesses 83 million 1997 recorded extraordinary charge 90 million net taxes related acquisition approximately 1200 million principal amount 10 14 senior notes due 2004 10 14 senior notes due 2004 series b interest charges 1998 reflected higher levels debt following issuance november 1997 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 borrowings used fund acquisitions corporate expenses percentage revenues 1998 13 compared 19 1997 percentage decrease 1997 primarily attributable consolidation savings due merger effective tax rate income continuing operations 1998 348 compared 355 1997 1998 special charges 1998 incurred 1950 million merger charges relating merger evi weatherford enterra reorganization rationalization businesses light industry conditions charges 1200 million incurred second quarter time merger initial downturn industry 750 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need us make additional reductions operations align cost structure business current demand net aftertax effect charges 1268 million 130 per diluted share 1714 million charges realized december 31 1998 remainder charges expected fully expended second quarter 1999 connection planned activities 1999 assess whether adjustments reversals remaining accrued special charges necessary following chart summarizes special charges made us 1998 1 merger related costs incurred second quarter included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance weatherford enterras employment agreements option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included fourth quarter charges 76 million approximately 1000 employees specifically identified terminations completed first half 1999 accordance announced plan terminate employees 3 facility plant closures costs 153 million second quarter incurred year end costs related primarily elimination duplicated manufacturing distribution service locations following merger may facility plant closures 128 million accrued fourth quarter consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter 4 corporate related expenses 52 million recorded second quarter 31 million recorded fourth quarter primarily relocation corporate offices related lease obligations consolidation technology centers due merger align corporate cost structure light current conditions 5 writeoff inventory 124 million second quarter 385 million fourth quarter reported cost products charges relate writeoff inventory result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 246 million second quarter 130 million fourth quarter charges primarily relate writedown equipment assets result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger industry downturn specific identification assets held sale result decline market conditions segment results completion oilfield services completion oilfield services division began first half 1998 strong revenue income growth second half year division began experience reductions revenue operating income margins rig count declined demand products services dropped divisions north american operations adversely affected downturn revenue declines continued first quarter 1999 although continuing reduce costs division reductions personnel declines revenues occurred faster cost reductions revenue reduction also resulted manufacturing operational inefficiencies division due lower operating levels believe division well positioned growth industry recovers results division 1999 highly dependent timing improvements market following chart sets forth additional data regarding results completion oilfield services division 1998 1997 includes merger charges 450 million consists 90 million facility closures 292 million writedown equipment 20 million severance 48 million write inventory writeoff inventory classified cost products material items affecting results completion oilfield services division 1998 compared 1997 north american revenues 1998 declined 224 compared 1997 due average rig count reduction 174 international revenues increased 100 1998 4328 million significant revenue increases occurred african middle eastern markets businesses sold us 1997 contributed 769 million revenues 1997 gross profit charges 48 million declined 1998 120 revenue second half 1998 dropped 108 compared first half 1998 selling general administrative expenses increased percentage revenues 110 1997 117 1998 increase primarily reflects reduced revenue base operating income charges 450 million declined 1998 1805 million 2154 million 1997 primarily due increased costs reduced revenues associated industry conditions artificial lift systems artificial lift systems division first segment business affected market downturn beginning late 1997 oil prices began fall demand divisions products fell customers reduced deferred purchases products used produce oil particular heavy oil decline pronounced canada purchased various companies served market believe divisions business generally bottomed expect division realize slight sales income increases 1999 however long price oil remains depressed expect demand divisions products increase significantly result expect division significant contributor income 1999 looking beyond 1999 expect worlds oilfields mature demand divisions products increase return greater profitability international activity begin increase 1999 leverage worldwide distribution network market products services offered following chart sets forth additional data regarding results artificial lift systems division 1998 1997 includes merger charges 408 million primarily including 138 million facility closures 176 million writeoff inventory 50 million severance 44 million related writedown equipment writeoff inventory classified costs products material items affecting results artificial lift systems division 1998 compared 1997 second half 1998 experienced decline revenues 334 compared first half 1998 revenues 1998 related 1997 acquisitions 1891 million gross profit charges 176 million increased 1195 million 1998 698 million 1997 due improved margins products sold first half 1998 selling general administrative expenses percentage revenues increased significantly 188 1997 298 1998 due higher amortization goodwill intangibles relating 1997 1998 acquisitions segment higher selling costs associated december 1997 acquisitions distribution entities system costs primarily related year 2000 compliance costs operating income charges 408 million 228 million 1997 216 million 1998 due increased selling general administrative expenses reduced revenues associated industry conditions compression services compression services division least affected recent declines market conditions due fact business based levels natural gas development production stable oil production revenues 1998 essentially flat compared 1997 spent large portion year working position division growth gross margins operating income division increased 1998 focused improving manufacturing operational efficiencies divisions operations looking forward 1999 believe division best positioned operating divisions growth 1999 expect increased demand gas compression services customers seek ways reduce costs international demand also expected increase seek opportunities foreign producers worldwide infrastructure expect divisions revenues operating income also significantly 1999 due joint venture ge capital described heading acquisitions dispositions following chart sets forth additional data regarding results compression services division 1998 1997 includes merger charges 15 million relates primarily specific identification excess equipment held sale due weakening market conditions material items affecting results compression services division 1998 compared 1997 revenues 1998 slightly 1997 second half 1998 revenues approximately 32 first half 1998 gross profit percentage revenues increased 196 1997 223 1998 increase reflected improvement design compressor packages sold operational efficiencies increase selling general administrative expenses 1998 compared 1997 primarily reflects costs associated expansion international markets operating income charges 186 million 1998 benefited improved margins drilling products drilling products division affected recent decline drilling activity although revenues 1998 compared 1997 increase attributable sales backlog prior price increases division also expected continue declining revenues throughout year backlog drill pipe reduced substantially end second quarter 1999 currently expect sales premium connections tubulars increase slightly year progresses due inventory reductions distributor level however anticipate increase sales volumes drill pipe 1999 unless rig count increases substantially expect increased premium sales offset revenue income losses drop drill pipe sales addition high fixed costs associated manufacturing operations division expect division operate loss first half 1999 second half results dependent timing improvements demand expect see later 1999 time 2000 following chart sets forth additional data regarding results drilling products division 1998 1997 includes merger charges 350 million including 53 million facility closures 285 million writeoff inventory 12 million writedown equipment writeoff inventory classified cost products material items affecting results drilling products division 1998 compared 1997 increase revenues 1998 reflects benefit sales backlog 1997 first half 1998 sales second half 1998 decreased 205 compared first half 1998 premium tubular revenues declined second half 1998 due decrease demand distributors inventories fell light prevailing market conditions december 1998 acquired company owned facility veracruz mexico canceled lease associated facility also licensed internationally certain rights atlas bradford thread line recorded 90 million revenues arrangement improved gross profit charges 285 million significantly benefited lower average costs associated higher production volumes first half 1998 second half 1998 reflected shift sales mix higher margin product sales lower margin product sales selling general administrative expenses increased percentage revenues 66 1997 73 1998 increase reflects system costs primarily associated year 2000 compliance costs well amortization goodwill associated 1997 acquisitions division operating income charges 350 million improved 1208 million 1997 1504 million 1998 due favorable operating results first half 1998 year ended december 31 1997 compared year ended december 31 1996 following charts contain selected financial data comparing results 1997 1996 ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitute calculations gaap particular cash flow operations operating income net income addition ebitda calculations one company may comparable another company sales based region origination reflect sales ultimate destination results 1997 reflected major improvement 1996 saw improvements domestic international rig counts drilling activity improvements resulted businesses operating near full capacity increased prices demand products services exceeded supply improvements generally seen geographic markets north america realizing greatest increases businesses also benefited prior consolidation efforts market expansions addition general effect substantially better market conditions 1997 compared 1996 results 1997 1996 affected specific following items revenue increases 1997 reflected impact various acquisitions made 1997 impact consolidation restructuring higher average sales prices reflect strength markets 1997 acquisitions 1997 benefited 1997 revenues 1665 million income continuing operations 123 million acquisitions 1996 benefited 1997 revenues 2692 million income continuing operations 245 million businesses sold us 1997 contributed 769 million revenues 1997 1343 million 1996 gross profit percentage revenues increased 251 1996 295 1997 due stronger prices sales higher margin products services selling general administrative costs attributable segments percentage total revenues flat 1997 1996 despite increased amortization intangibles costs associated assimilation acquired businesses corporate expenses percentage revenues 1997 19 compared 27 1996 percentage decrease 1996 primarily attributable growth 1997 revenues interest charges 1997 reflected increased indebtedness 1997 4025 million principal amount debentures issued november 1997 net income disposed businesses 83 million 1997 96 million 1996 recorded 1997 extraordinary charge 90 million net taxes related acquisition approximately 1200 million principal amount 10 14 senior notes due 2004 10 14 senior notes due 2004 series b also recorded extraordinary charge 07 million net taxes early extinguishment debt 1996 reported income 75 million net taxes discontinued operations related mallard division gain 669 million net taxes 446 million related disposition 1997 benefited onetime pretax gain 34 million relating sale parker drilling company common stock received connection disposition mallard division effective tax rate income continuing operations 1997 355 compared 305 1996 effective rate favorably impacted 40 million tax benefit resulting 64 million settlement october 1996 united states internal revenue service connection dissolution october 1990 oil gas joint venture 1996 special charges fourth quarter 1996 adopted plan close bastrop texas tool joint manufacturing facility combine two packer facilities closure one facility arlington texas connection decisions incurred charge 58 million associated closures charge 43 million related tool joint facility closure relocation equipment facility 15 million related consolidation packer facilities closure one plants incurred 38 million 1996 costs associated actions 1996 including costs relating relocation equipment bastrop facility facilities also accrued 20 million part 58 million charge estimated exit costs incurred 1997 relating closure bastrop arlington facilities costs included 08 million severance termination costs 09 million reduction carrying value bastrop facility light intended disposition facility 03 million termination arlington lease approximately 400 employees affected closures substantially completed closure bastrop arlington facilities incurred substantially charges related closing facilities end second quarter 1997 segment results completion oilfield services following chart sets forth certain data regarding results completion oilfield services division 1997 1996 material items affecting results completion oilfield services division 1997 compared 1996 increase revenues primarily reflects increased volume activity improved pricing resulting 15 increase worldwide drilling activity increased use certain drilling techniques reentry multilateral horizontal directional drilling also important contributors revenue growth 1997 particularly north america us oilfield services revenues increased 33 3177 million us average rig count increased 21 oilfield services revenues canada increased 31 average canadian rig count increased 39 international oilfield services revenues excluding canada increased 18 compared average rig count increase 2 international revenue increases primarily attributable increased volume rental service activity pricing improvement introduction downhole services new markets businesses sold us 1997 contributed 769 million revenues 1997 1343 million 1996 cementation product sales increased 32 1996 liner hanger sales service revenues included results nodeco aarbakke date acquired may 1996 increased 66 1997 1996 gross profit margin percentage revenues increased 1997 339 283 result improved pricing certain areas increased volume selling general administrative expenses 1997 percentage revenues 110 compared 108 1996 completion products operating income increased 157 million 67 1996 1997 primarily result increased volume cementation product sales operating efficiencies inclusion nodeco operations full year 1997 artificial lift systems following chart sets forth certain data regarding results artificial lift systems division 1997 1996 material items affecting results artificial lift systems division 1997 compared 1996 revenue growth artificial lift systems division primarily due increased sales artificial lift equipment canadian south american markets effects acquisitions 1997 acquired trico industries bmw monarch bmw pump various small artificial lift companies acquisitions benefited 1997 revenues 649 million operating income 68 million sales progressing cavity pump product lines particularly strong canada south america heavy oil markets improved gross profit percentage revenues increased 279 1996 280 1997 result improvement divisions domestic cost structure december 1997 acquisitions trico industries bmw pump bmw monarch selling general administrative expenses 1997 percentage revenues 188 compared 201 1996 spite higher amortization combination expenses related 1997 acquisitions compression services following chart sets forth certain data regarding results compression services division 1997 1996 material items affecting results compression services division 1997 compared 1996 revenue increases primarily due increase manufacturing packaging revenues 21 782 million improvement 12 1007 million compressor rental service revenues gross profit increased 193 1996 196 1997 due improvements manufacturing packaging operations selling general administrative expenses 1997 compared 1996 declined due cost reductions operating income increased due improved sales slightly better margins lower selling general administrative expenses drilling products following chart sets forth certain data regarding results drilling products division 1997 1996 material items affecting results drilling products division 1997 compared 1996 improved results primarily due increased demand drill pipe drilling tools strength premium tubular activity acquisition ta industries inc premium tubular couplings accessories manufacturer april 1997 third quarter 1997 acquisition xl systems inc manufacturer marine connectors drill pipe drill stem products sales increased approximately 2834 million 1997 1813 million 1996 increase demand drill pipe reflected higher domestic international drilling activity particular offshore drilling revenues drill pipe sales also reflected higher pricing products premium tubular revenues increased approximately 3079 million 1997 approximately 1578 million 1996 increase premium tubular revenues reflected strong demand gulf mexico acquisition ta industries 1997 acquisitions ta industries xl systems various small acquisitions benefited 1997 revenues division 968 million benefited operating income 161 million gross profit division increased percentage revenues 187 1996 263 1997 due increased pricing products reduced costs resulting expansion mexico tool joint facility third quarter 1997 mexico facility became fully operational benefited operations second half 1997 30 million selling general administrative expenses 1997 percentage revenues 66 compared 61 1996 reflected higher selling general administrative expenses associated operations ta industries well increase amortization goodwill intangibles liquidity capital resources current sources capital current cash generated operations borrowings bank lines credit believe current reserves cash shortterm investments access existing credit line internally generated cash operations sufficient finance projected cash requirements current future operations continually reviewing acquisitions markets depending upon size nature timing acquisition may need additional capital form either debt equity combination following chart contains information regarding capital resources borrowings exposures years ended 1998 1997 reduction cash equivalents since december 31 1997 primarily attributable acquisition new businesses approximately 1388 million cash capital expenditures property plant equipment 2059 million offset net borrowings revolving credit facilities 930 million cash 1000 million sale leaseback consummated fourth quarter 1998 cash flow operations 1279 million banking facilities may 1998 put place fiveyear unsecured revolving credit facility allows us borrow 2500 million time facility consists 2000 million us credit facility 500 million canadian credit facility borrowings facility bear interest variable rate based us prime rate libor credit facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions convertible subordinated debentures november 1997 completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 net proceeds debentures 3909 million debentures bear interest annual rate 5 convertible common stock price 80 per share right redeem debentures time november 4 2000 redemption prices provided indenture agreement subordinated right payment principal interest prior payment full certain existing future senior indebtedness also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters time default payment interest 7 14 senior notes due 2006 outstanding 2000 million publicly traded 7 14 senior notes due may 15 2006 interest 7 14 senior notes payable semiannually may 15 november 15 year compression financing compression services division entered sale leaseback arrangement december 1998 provided right sell 2000 million compression units december 1999 lease back five year period operating lease payments lease calculated based rate return purchase price agreed valuation leased compressors terms lease compression services division may repurchase equipment time weatherford international provided residual value guarantee end term lease equal approximately 855 appraised value compression units lease december 31 1998 compression services division sold compressors arrangement appraised value 1196 million received cash 1000 million receivable 196 million receivable classified current assets accompanying consolidated balance sheets balance due demand net book value equipment sold approximately 774 million resulting pretax gain 422 million may deferred end lease capital expenditures capital expenditures property plant equipment 1998 2059 million primarily related drill pipe tubing fishing tools tubular service equipment compression rental equipment completion plant expansions canada much 1998 capital expenditures related projects initiated end 1997 early 1998 capital expenditures 1999 expected approximately 1050 million compression operations nature capital intensive event growth require substantial investments compressor units capital investments historically financed existing cash internally generated cash flow expect future capital investments compression division financed compression joint venture debt sale leaseback arrangements similar financing structures repaid cash flows generated compressor units projected term rental equipment acquisitions dispositions company grown substantially years selective acquisitions combinations following table summarizes 1998 1997 acquisitions operating segment subsequent year end completed joint venture ge capital corporation combined compression services operations ge capitals global compressions services operations joint venture known weatherford global compression worlds second largest provider natural gas contract compression services owns manages 4000 compression units worldwide one million horse power pro forma combined 1998 revenues operating income ebitda joint venture 2569 million 73 million 521 million respectively 64 joint venture ge capital owns 36 right acquire ge capitals interest anytime price equal third party market determined value less book value ge capital also right require us purchase interest time february 2001 third party market determined value well request public offering interest date purchased interest time also recently completed acquisition christiana companies inc approximately 40 million shares common stock 200 million cash acquisition acquired christiana 1 40 million shares common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control refrigerated warehouse trucking logistics company tlc net book value approximately 82 million 1998 revenues 908 million operating income 58 million ebitda 126 million acquired christiana gave us unique opportunity interest tlc essentially consideration intend hold investment christiana passive investment 1998 1997 acquisitions exception acquisition xl systems inc 1997 accounted immaterial pooling interests accounted using purchase method accounting results operations acquisitions included consolidated statements income dates acquisition 1998 1997 acquisitions material individually aggregate applicable year acquisitions resulted substantial goodwill associated operations including goodwill approximately 4853 million relating acquisitions 1997 1998 amortization expense goodwill intangibles 1998 234 million 1997 sold certain noncore businesses cash proceeds transactions totaled 688 million 1997 exposures industry exposure substantially customers engaged energy industry concentration customers may impact overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions many customers slowed payment accounts light current industry conditions others experienced greater financial difficulties meeting payment terms perform ongoing credit evaluations customers generally require collateral support trade receivables maintain reserves potential credit losses actual losses historically within expectations litigation environmental exposure ordinary course business become subject various claims litigation maintain insurance cover many potential losses subject various selfretentions deductibles respect insurance although subject various ongoing items litigation believe items litigation currently subject result material uninsured losses us however possible unexpected judgment could rendered us cases could uninsured beyond amounts currently reserved anticipate incurring matter also subject various federal state local laws regulations relating energy industry general environment particular environmental laws recent years become stringent generally sought impose greater liability larger number potentially responsible parties currently aware situation involving environmental claim would likely material adverse effect business always possible environmental claim respect one current businesses business property one predecessors owned used could arise could involve expenditure material amount funds international exposure like multinational oilfield service companies operations certain international areas including parts middle east north west africa latin america asiapacific region commonwealth independent states inherently subject risks war political disruption civil disturbance policies may disrupt oil gas exploration production activities restrict movement funds lead us government international sanctions limit access markets periods time historically economic impact disruptions temporary oil gas exploration production activities resumed eventually relation market forces certain areas including cis algeria nigeria parts middle east asiapacific region latin america subjected political disruption negatively impacted results operations following events currency exposure single european currency euro introduced january 1 1999 time conversion rates legacy currencies euro set 11 participating member countries however legacy currencies countries continue used legal tender january 1 2002 thereafter legacy currencies canceled euro bills coins used 11 participating countries currently evaluating effect euro consolidated financial statements business operations however foresee transition euro significant impact approximately 51 net assets located outside united states carried books local currencies changes currencies relation us dollar result translation adjustments reflected accumulated comprehensive loss stockholders equity balance sheet 1998 recorded 379 million adjustment equity account reflect net impact decline various foreign currencies us dollar discussion market risk exposures financial instruments additional currency exposures appears heading quantitative qualitative market risk disclosure new accounting pronouncements june 1997 financial accounting standards board fasb issued statement financial accounting standards sfas 130 reporting comprehensive income sfas 130 establishes standards reporting comprehensive income components full set generalpurpose financial statements effective years beginning december 15 1997 adopted sfas 130 first quarter 1998 june 1997 fasb issued sfas 131 disclosures segments enterprise related information sfas 131 effective years beginning december 15 1997 requires segment information reported basis consistent used internally evaluating segment performance deciding allocate resources segments adopted sfas 131 restated segment information related disclosures accordance requirements february 1998 fasb issued sfas 132 employers disclosures pensions postretirement benefits sfas 132 standardizes disclosure requirements pensions postretirement benefits sfas 132 effective years beginning december 15 1997 adopted sfas 132 1998 march 1998 aicpa issued statement position sop 981 accounting costs computer software developed obtained internal use sop provides guidance respect accounting various types costs incurred computer software developed obtained use adopted sop 981 1998 significant effect consolidated results operations financial position april 1998 aicpa issued sop 985 reporting costs startup activities capitalize startup cost thus adoption significant effect consolidated results operations financial position june 1998 fasb issued sfas 133 accounting derivative instruments hedging activities sfas 133 provides comprehensive consistent standard recognition measurement derivatives hedging activities sfas 133 effective years beginning june 15 1999 currently evaluating impact sfas 133 consolidated financial statements october 1998 fasb issued sfas 134 accounting mortgagebacked securities retained securitization mortgage loans held sale mortgage banking enterprise sfas 134 applicable us impact financial statements year 2000 matters year 2000 issue risk information systems computers equipment products using datesensitive software containing computer chips twodigit date fields unable correctly process year 2000 date change identified corrected prior year 2000 failures could occur software hardware equipment products suppliers vendors customers could result interruptions business failure could material impact us response year 2000 issue prepared implemented plan year 2000 plan assess remediate significant year 2000 issues information technology systems including computer software hardware noninformation technology systems utilizing datesensitive software computer chips nonit including products facilities equipment infrastructures management information systems department mis department together technical engineering employees outside consultants responsible implementation execution year 2000 plan year 2000 plan comprehensive multistep process covering nonit systems primary phases year 2000 plan 1 assessing analyzing systems identify year 2000 ready 2 preparing cost resource estimates repair remediate replace systems year 2000 ready 3 developing companywide detailed strategy coordinate repair replacement systems year 2000 ready 4 implementing strategy make systems year 2000 ready 5 verifying testing auditing year 2000 readiness systems end 1998 first phase year 2000 plan completed respect assessment nonit systems second phase also completed end 1998 work currently underway third phase year 2000 plan third phase completed end first quarter 1999 fourth phase fifth final phase completed end third quarter 1999 unexpected delays problems prevent us completing phases year 2000 plan timely manner could material adverse impact us part year 2000 plan currently installing year 2000 ready business application systems expect installations complete end third quarter 1999 retained outside consultants assist us installation new software assessment year 2000 readiness systems expect retain additional consultants assist us remediation testing phases year 2000 plan addition assessment review systems begun communications thirdparty contractors vendors service providers customers purpose evaluating readiness year 2000 determining extent may affected remediation systems software applications products expect review evaluate year 2000 programs significant thirdparty contractors however guarantee nonit systems thirdparty contractors year 2000 ready failure party year 2000 ready systems would result interruptions business could material adverse impact us connection implementation completion year 2000 plan currently expect incur pretax expenditures approximately 100 million incurred 63 million expenditures december 31 1998 approximately 57 million incurred connection replacement business application software approximately 06 million incurred connection replacement certain hardware systems intend continue fund year 2000 plan expenditures working capital thirdparty lease financing based upon information currently available believe expenditures associated achieving year 2000 compliance material impact operating results however unanticipated problems relating year 2000 issue result materially increased expenditures could material adverse impact us expenditures associated year 2000 plan represent approximately 12 mis departments budget 1999 various projects related year 2000 issue deferred due year 2000 efforts effects delays expected material impact company completed evaluation likely worst case year 2000 scenario preparing contingency plan response year 2000 worst case scenario estimate lost revenues due year 2000 issues however assurance contingency plan developed us sufficient alleviate remediate significant year 2000 problems may experience discussion efforts expectations relating risks uncertainties associated year 2000 issues year 2000 plan contain forwardlooking statements defined private securities litigation reform act 1995 statements involve predictions expectations concerning ability achieve year 2000 compliance amount costs expenses related year 2000 issue effect year 2000 issue may business results operations certain risks uncertainties may cause actual results materially different projected expected results overall effect may materially adverse impact us risks uncertainties include limited unanticipated problems costs identified phases year 2000 plan ability successfully implement year 2000 plan timely manner ability suppliers vendors customers make systems products year 2000 compliant item 7aitem 7 managements discussion analysis financial condition results operations general business conducted three business segments 1 drilling intervention services 2 completion systems 3 artificial lift systems addition three segments historically operated compression services division drilling products division february 2001 completed merger essentially compression services division subsidiary universal compression holdings inc exchange 1375 million shares universal common stock approximate 48 interest universal april 14 2000 distributed stockholders outstanding shares grant prideco inc held operating assets used drilling products division result distribution drilling products division presented discontinued operations accompanying financial statements following discussion results operations last three years discussion read conjunction financial statements included report discussion includes various forwardlooking statements markets demand products services future results statements based certain assumptions consider reasonable information assumptions refer section entitled forwardlooking statements located within item 1 business market trends outlook businesses serve oil gas industry businesses affected changes worldwide demand price oil natural gas certain products services fishing rental services well installation services well completion services dependent level exploration development activity particularly completion phase well life cycle products services artificial lift systems dependent production activity currently estimate approximately twothirds continuing operations reliant drilling activity remainder focused production reservoir enhancement activity following chart sets forth certain statistics reflective historical market conditions 1 price per barrel december 31 source applied reasoning inc 2 price per mmbtu december 31 source oil world 3 average rig count december source baker hughes rig count oil gas industry subject extreme volatility recent years due significant changes demand supply pricing oil natural gas 1997 early 1998 experienced strong increase demand products services due worldwide increase demand oil shortages equipment people service demand beginning late 1997 price oil began fall initially effects decline primarily impacted north american markets activity sensitive price oil late 1998 demand fallen substantially customers exploration development production activities worldwide dropped reaction sharply lower oil prices reduction activity continued 1999 price oil hit low 1107 per barrel year north american international rig counts reached historical lows 534 556 respectively second half 1999 price oil increased sharply due demand supply imbalances members organization petroleum exporting countries reduced production compliance production quotas however pickup customers activity proportional increase price oil customers cautious new spending due recent volatility prices demand supply imbalances resulted world oil prices increasing 24 37 barrel range 2000 caused us experience steady improvements demand products services timing impact recovery varies region division north american rig count fluctuations impact divisions generally within one quarter international activity turn generally lags north american activity six nine months artificial lift systems division tracks closely united states canadian rig counts canadian workover rig count first benefit oil price improvements experienced 1999 many production projects reinstated light higher prices oil particular heavy oil canada drilling intervention services division completion systems division next benefit improved activity 1999 north america particularly drilling services equipment rental cementation businesses increased north american activity continued benefit divisions 2000 increasing volumes recently improved pricing many products services outside north america strongest growth 2000 latin america rig count increased 196 last year 257 december 31 2000 also saw improvement regions africa middle east asia pacific slower recover enter 2001 expect continued improvements due anticipated market recovery outside north america general 2001 expect markets affect businesses follows drilling intervention services division expected see quarter improvements 2001 revenue profitability believe division continue see strong contribution north american market although somewhat difficult predict currently expect markets north sea latin america experience sales improvements approximately 15 next two quarters volume pricing lesser extent sales improvements occur middle east africa asia pacific completion systems completion systems division realized first operating profit third quarter 2000 since division formed last year 2000 saw division seek increase revenue base position growth 2001 beyond expanding sales service infrastructure manufacturing capacity worldwide completing increase manufacturing capacity around 50 available capacity 2000 expect realize benefits second half 2001 believe division continue experience increase profitability 2001 level contribution dependent drilling activity levels particularly international markets divisions ability meet market demand increased manufacturing output ability successfully market products patented expandable sand screen stratapacr premium screen premium liner hangers packers artificial lift systems expect artificial lift systems division continue see revenue improvements year basis north america latin america well improvements margins result cost containment higher throughput plants impact price increases initiated throughout 2000 planned additional price increases first quarter 2001 expect see impact second third quarters 2001 second quarter however impacted seasonal downturn canada growth north america may somewhat limited higher priority customers currently placing natural gas projects oil projects compression services compression services division less affected daytoday market factors expected benefit february 2001 merger universal 2001 record 48 interest universals results operations overall level market improvements businesses 2001 continue heavily dependent continued recovery north american markets timing strength recovery outside north america divisions affected seasonal downturn experienced year canada normally second quarter although believe activity levels industry particularly international markets early stages recovery extent recovery difficult predict light volatile nature business addition continued strength industry uncertain highly dependent many external factors world economic conditions compliance organization petroleum exporting countries quotas weather conditions extreme volatility markets makes predictions regarding future results difficult results operations years ended 2000 1999 1998 business environment operated 2000 1999 1998 saw extreme changes experienced material slowdown market beginning near middle 1998 end 1998 industry midst one worst downturns history downturn continued throughout 1999 oil prices improved second half 1999 2000 north american markets started showing signs improvement latter half 1999 growth continued throughout 2000 strongest improvement resulting fourth quarter international activity began showing signs recovery early 2000 exhibit noticeable improvements fourth quarter year ended december 31 2000 compared year ended december 31 1999 following charts contain selected financial data comparing results continuing operations 2000 1999 comparative financial data includes 563 million impairment charges assets disposed related merger essentially compression services division universal net tax impact charges 430 million b includes 765 million deferred tax provision due anticipated exchange consolidated subsidiary equity method investment connection universal merger c ebitda calculated taking operating income adding back depreciation amortization included ebitda calculation look performance businesses give consideration ebitda calculations ebitda viewed substitutes calculations gaap particular cash flows operations operating income net income addition ebitda calculations one company may comparable another companys calculations sales geographic region sales based region origination reflect sales ultimate destination results continuing operations 2000 compared 1999 also affected following specific items revenues increased 5741 million 463 1999 levels due increased volume throughout 2000 improved pricing late 2000 international revenues increased 455 1999 6123 million compared increase average international rig count 86 north american revenues increased 3824 million 467 compared increase average north american rig count 447 revenues 2000 positively impacted full year revenues related third quarter 1999 acquisitions petroline wellsystems dailey international williams tool gross profit percentage increased 283 1999 305 2000 primarily due volume pricing gains within drilling intervention services division completion systems division selling general administrative expenses attributable segments decreased percentage revenue 211 1999 189 2000 decrease primarily attributable higher revenue base well full integration 1999 acquisitions business benefits partially offset goodwill amortization 371 million 2000 compared 240 million 1999 corporate general administrative expenses increased 110 million 1999 however remained relatively flat percentage revenue year basis operating income increased 668 million 1999 1766 million excluding impairment charges 2000 increase resulted improved market conditions efforts reduce costs improve efficiencies industry downturn acquisitions made us late third quarter 1999 also contributed increase operating income 2000 tax provision includes 765 million deferred taxes related anticipated exchange consolidated subsidiary equity method investment connection universal merger excluding 765 million provision tax effect impairment charge effective tax rate income continuing operations 2000 approximately 363 compared 299 1999 increase effective rate primarily result decrease foreign tax benefits universal compression transaction october 24 2000 announced merger essentially compression services division subsidiary universal exchange 1375 million shares universal common stock approximates 48 universals outstanding shares transaction completed february 9 2001 concurrent transaction paid ge capital 2065 million 36 ownership joint venture compression services division operated retained part compression services division namely singaporebased gas services international operations 100 million accounts receivable connection transaction recorded impairment charges fourth quarter 2000 563 million 430 million taxes provided deferred taxes 765 million due anticipated exchange consolidated subsidiary equity method investment pretax impairment charge 563 million reflects difference estimated fair value net assets held sale determined using quoted market prices estimated selling prices less estimated costs sell net book value compression services division assets carrying value compression services divisions net assets december 31 2000 4393 million connection merger universal entered voting agreement universal pursuant agreed certain voting limitations respect shares universal common stock period two years agreed vote shares universal common stock excess 33 13 universals outstanding shares proportion shares universal common stock held public excluding shares held castle harlan affiliates may vote remainder shares sole discretion also entered registration rights agreement pursuant granted certain demand piggyback registration rights shares universal common stock additionally entered transitional services agreement universal provide certain corporate administrative services compression services division fee reimbursement costs expenses 120 days following merger pursuant terms merger agreement also appointed three members universals board directors long least 20 universals outstanding common stock right designate three board members ownership interest falls 20 may designate two directors ownership falls 10 longer entitled designate directors serve universals board directors upon closing merger universal repaid terminated sale leaseback arrangements compression services divisions credit facility segment results drilling intervention services drilling intervention services division experienced improvements revenue operating income increase north american rig count positively impacted demand products services demand international markets historical lows 1999 low demand carried first part 2000 resulting continued pricing pressures reduced volumes international markets showed strong improvements second half 2000 particularly latin america europe revenues increased approximately 47 29 respectively compared first half 2000 drilling intervention services divisions revenue operating income also positively impacted 1999 acquisitions including dailey international williams tool following chart sets forth data regarding results drilling intervention services division 2000 1999 following material items affected results drilling intervention services division compared 1999 revenues increased 470 2000 due improved market conditions full year impact late 1999 acquisitions revenues north america increased 746 average north american rig count increased 447 year international revenues increased 207 average international rig count increased 86 gross profit percent revenues increased primarily due pricing increases implemented second half 2000 higher revenue base relation depreciation fixed overhead manufacturing costs selling general administrative expenses decreased percentage revenues 163 1999 145 2000 decrease primarily reflects higher revenue base partially offset higher employee costs increase 67 million goodwill intangible amortization expense completion systems completion systems division shown steady improvements since formation 1999 significantly changed composition division 1999 acquisitions petroline wellsystems cardium tool services 2000 extended offerings acquisition stratapacr stratacoiltm premium screen product lines acquisitions together major expansion nodeco liner hanger product line united states 1999 expanded businesses higher margin premium completion markets worldwide added sand control flow control completion product service offerings divisions revenues increased throughout 2000 improved revenues realized almost regions notably north america asia pacific sales expandable sand screens increased 347 second half 2000 compared first half improvement represents first stages top line growth product line resulting recently added manufacturing capacity recently completed longest horizontal section 4000 feet expandable sand screen completion system third quarter 2000 division reported operating profits first time since inception 1999 profit trend continued fourth quarter 2000 operating income increasing 50 compared third quarter following chart sets forth data regarding results completion systems division 2000 1999 following material items affected results completion systems division revenue 2000 increased 995 million 821 1999 improvement experienced historical product lines well sales expandable completion products flow control products added acquisition petroline wellsystems september 1999 gross profit percentage increased primarily due higher gross margin percentages late 1999 acquisitions higher throughput manufacturing facilities improved manufacturing efficiencies selling general administrative expenses increased 391 1999 due costs associated 1999 acquisitions addition sales staff new product lines increased amortization 75 million goodwill intangible assets artificial lift systems operating results artificial lift systems division heavily dependent oil production activity revenues division increased approximately 50 1999 levels primarily response improved activity levels north american markets particularly canada division also seen improved sales latin american markets 1999 levels rig count region increased 196 december 1999 257 december 2000 following chart sets forth data regarding results artificial lift systems division 2000 1999 following material items affected results artificial lift systems division revenues increased 497 1999 2000 result 464 increase north american revenues 798 increase latin american revenues also experienced increase 48 million revenues asia pacific region due higher revenues joint venture china well increased sales reciprocating gas lift products region gross profit increased slightly 349 1999 355 2000 due higher pricing improved manufacturing efficiencies selling general administrative expenses percentage revenues decreased 294 1999 259 2000 due cost reductions previously implemented higher revenue base compression services compression services division reported revenues 2726 million 2000 compared 2259 million 1999 operating income declined 216 million 1999 60 million 2000 excluding impairment charge 163 million decline operating income primarily attributable lower margins rentals higher costs related reorganization division 2000 higher selling general administrative expenses startup costs associated international expansion latter part year saw improvement reflecting beginning recovery division following reorganization began earlier year division well positioned growth connection merger february 2001 universal following chart sets forth data regarding results compression services division 2000 1999 includes 163 million impairment charges assets disposed related universal merger b ebitdar calculated adding compression services divisions lease expenses compressor leases subject sale leaseback arrangements ebitda included ebitdar informational purposes financial measure public compression companies analyzed investment community addition ebitdar calculations one company may comparable another companys calculations following material items affected results compression services division revenues 2000 207 1999 levels reflecting 80 million incremental revenues rental contracts ypf 367 million incremental revenues january 2000 acquisition gsi gross profit percentage revenues decreased 255 1999 184 2000 due lower margins rental contracts due pricing pressures primarily united states higher lease expenses due increased number compressors sold subject sale leaseback arrangements described liquidity capital resources section increased lower margin parts service sales percentage total sales selling general administrative costs percentage revenues increased 162 2000 159 1999 primarily result costs related reorganization division 13 million goodwill amortization associated new foreign operations year ended december 31 1999 compared year ended december 31 1998 following charts contain selected financial data comparing results continuing operations 1999 1998 comparative financial data includes 1600 million 1040 million net taxes merger charges relating merger evi weatherford enterra reorganization rationalization business light industry conditions charges 224 million related writeoff inventory included gross profit sales geographic region sales based region origination reflect sales ultimate destination results continuing operations 1999 1998 affected following specific items revenues declined 1236 million 91 1998 levels international revenues decreased 152 1998 4207 million compared decline average international rig count 217 north american revenues declined 480 million 55 compared decline average north american rig count 204 revenues positively impacted 1999 acquisitions petroline wellsystems dailey international williams tool contributed combined 445 million revenues primarily fourth quarter 1999 gross profit percentage charges 224 million 1998 decreased 324 1998 283 1999 primarily due lower pricing underutilization many manufacturing facilities service organization period low activity levels results 1998 include 1600 million pretax merger charges merger evi weatherford enterra charges associated downturn industry selling general administrative expenses attributable segments increased percent revenue due primarily lower revenue base startup costs new product lines businesses costs associated integration introduction newly acquired businesses 89 million increase goodwill amortization operating income decreased 1962 million 1998 merger charges 1600 million 668 million 1999 decrease resulted pricing pressures manufacturing operational inefficiencies associated decline activity although sought reduce costs reductions headcount locations industry downturn elected maintain market position international infrastructure order prepared capitalize market recovery effective tax rate income continuing operations 1999 approximately 299 compared 871 1998 rate due part mix foreign us tax attributes impact merger charges 1998 merger charges 1998 incurred 1600 million merger charges relating merger evi weatherford enterra reorganization rationalization businesses light industry conditions charges 1130 million incurred second quarter time merger initial downturn industry 470 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need make additional reductions operations align cost structure current demand net tax effect charges 1040 million following chart summarizes special charges made 1998 approximately 1365 million charges realized december 31 1998 remainder charges fully realized end second quarter 1999 connection planned activities 1999 adjustments reversals remaining accrued special charges necessary 1 merger transaction costs incurred second quarter 1998 included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance weatherford enterras employment agreements stock option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included 1998 fourth quarter charges 76 million approximately 940 employees specifically identified terminations completed first half 1999 accordance announced plan terminate employees 3 facility plant closures costs 100 million second quarter 1998 incurred december 31 1998 costs related primarily elimination duplicated manufacturing distribution service locations following merger may 1998 facility plant closures 128 million accrued fourth quarter 1998 consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter facilities closed june 30 1999 4 corporate related expenses 52 million recorded second quarter 1998 31 million recorded fourth quarter 1998 primarily consolidation corporate offices related lease obligations consolidation technology centers due merger align corporate cost structure light industry conditions 5 writeoff inventory 99 million second quarter 1998 125 million fourth quarter 1998 reported cost products charges relate writeoff inventory result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 247 million second quarter 1998 118 million fourth quarter 1998 charges primarily relate writedown equipment assets result combination evis weatherford enterras operations rationalization product lines elimination certain products services locations due merger specific identification assets held sale result decline market conditions segment results drilling intervention services following chart sets forth data regarding results drilling intervention services division 1999 1998 operating income ebitda include merger charges 408 million charges 32 million related writeoff inventory included gross profit following material items affected results drilling intervention services division revenues declined 235 1998 excluding impact 1999 acquisitions contributed 342 million revenues north america decreased 182 average north american rig count decreased 204 year international revenues decreased 195 average international rig count decreased 217 largest decreases international revenues occurred europe africa asia pacific gross profit percentage declined due primarily pricing pressures especially higher margin international markets selling general administrative expenses increased percentage revenues 98 1998 163 1999 increase primarily reflects lower revenue base initial costs relating new product lines businesses costs associated integration introduction newly acquired businesses 53 million increase goodwill intangible amortization selling general administrative costs included higher costs associated dailey international williams tool historically high selling general administrative costs percentage revenues businesses acquired latter half 1999 able achieve full cost savings integration 1999 operating income excluding 408 million merger charges declined 1817 million 1998 763 million 1999 decline resulted reduced sales volume pricing pressures higher selling general administrative costs associated acquisitions pending integration maintenance worldwide infrastructure period low activity completion systems following chart sets forth data regarding results completion systems division 1999 1998 operating loss ebitda include merger charges 42 million charges 16 million related writeoff inventory included gross profit following material items affected results completion systems division businesses acquired 1999 contributed 199 million revenues excluding impact acquisitions revenues declined 143 1998 result depressed market conditions year gross profit percentage declined due pricing pressures underutilization manufacturing facilities experienced result depressed industry conditions addition research development costs increased 43 million prior year continued focus improving technology products services selling general administrative expenses increased 440 1998 due costs associated acquisition businesses addition sales staff new product lines goodwill amortization 29 million associated 1999 acquisitions artificial lift systems following chart sets forth certain data regarding results artificial lift systems division 1999 1998 follows operating income loss ebitda include merger charges 408 million charges 176 million related writeoff inventory included gross profit following material items affected results artificial lift systems division revenues declined 108 1998 1999 resulting 146 decrease us revenues 335 decline latin american revenues deterioration primarily driven declines us international rig counts revenues canada comparable year due improvements canadian heavy oil markets second half 1999 gross profit excluding merger charges decreased slightly 363 1998 349 1999 due pricing pressures underutilization manufacturing facilities associated depressed market conditions first half year selling general administrative expenses percentage revenues decreased slightly 298 1998 294 1999 due successful efforts reduce costs light depressed market conditions compression services following chart sets forth data regarding results compression services division 1999 1998 follows includes merger charges 15 million relate primarily writedown assets following material items affected results compression services division revenues 1999 273 1998 levels due february 1999 joint venture ge capital large compression contract ypf argentina gross profit percentage revenues increased 237 1998 255 1999 increase reflected favorable product mix following creation joint venture selling general administrative costs percentage revenues increased 159 1999 132 1998 primarily result costs associated integration businesses acquired joint venture costs associated international expansion operating income percentage revenues remained flat year improvements operating margins offset higher administrative costs associated integration ge capital businesses formed compression joint venture february 1999 discontinued operations discontinued operations consist grant prideco drilling products division results discontinued operations follows loss discontinued operations net taxes period ended april 14 2000 35 million included loss 10 million estimated transaction costs net taxes loss discontinued operations net taxes year ended december 31 1999 371 million included 1999 loss 36 million net taxes estimated transaction costs accrued third quarter 1999 additionally loss includes charge 61 million net taxes directly related pending termination grant pridecos existing manufacturing arrangement india income discontinued operations net taxes 657 million year ended december 31 1998 results 1998 include merger charges 350 million composed 51 million facility closures exit costs 02 million severance related costs 285 million writeoff inventory 12 million writedown equipment decline grant pridecos net income 1998 1999 primarily attributable severe downturn businesses grant prideco latter half 1998 downturn 1999 due decline drilling activity low oil prices material items affecting grant pridecos results 1999 compared 1998 follow grant pridecos revenues decreased due 60 drop drill stem sales lower premium tubular connection sales resulted reduced offshore activity lower distributor purchases decline tubular processing activity grant prideco recorded 95 million pretax writedown associated decision grant prideco terminate manufacturing arrangement oil country tubular limited octl india decision terminate manufacturing arrangement due combination factors including downturn market political instability india grant pridecos gross profit gross profit percentages operating income declined 1999 compared 1998 due lower sales volume pricing pressure high manufacturing unabsorbed costs due plant underutilization december 1998 grant prideco acquired tubos de acero de mexico sa tamsa 93 outstanding shares tf de mexico owned manufacturing facility veracruz mexico grant prideco operating capital lease arrangement part consideration acquisition grant prideco sold international rights excluding canada atlas bradford tubular connection line carbon grade tubular tamsa license arrangement effective upon closing transaction grant prideco retained obligations respect development maintenance improvement atlas bradford connection line international market tamsa obligation pay additional consideration license future support grant prideco provided fee basis rights grant prideco sold license arrangement fair value 90 million result december 1998 grant prideco recorded 90 million revenues recognize sale grant pridecos international rights atlas bradford connection line grant pridecos corporate general administrative expenses 1999 increased approximately 5 compared 1998 due increased management fees us higher corporate overhead costs relating addition staff anticipation spinoff liquidity capital resources current sources capital reserves cash generated operations borrowings bank lines credit june 2000 completed private placement 9100 million face amount zero coupon convertible senior debentures due 2020 net proceeds placement approximately 4919 million primarily used repay shortterm indebtedness december 31 2000 cash equivalents 1538 million increase 1094 million december 31 1999 primarily attributable following net cash inflow 1442 million continuing operating activities net cash outflow 117 million discontinued operating activities proceeds issuance zero coupon convertible senior debentures net issuance costs 4919 million repayments net borrowings term debt shortterm facilities continuing operations 3034 million proceeds sale property plant equipment 334 million proceeds sale businesses 141 million proceeds sale leaseback compression units compression joint venture 601 million capital expenditures property plant equipment continuing operations 2666 million includes 851 million compression services division funded primarily sale leaseback arrangements proceeds collection 1000 million note receivable grant prideco acquisition new businesses approximately 1510 million cash net cash acquired acquisitions capital expenditures discontinued operations 51 million discussion market risk exposures financial instruments currency exposures appears heading quantitative qualitative market risk disclosures banking facilities debt may 1998 put place fiveyear unsecured revolving credit facility allows us borrow 2500 million time facility consists 2000 million us credit facility 500 million canadian credit facility borrowings facility bear interest variable rate based us prime rate libor weighted average cost borrowings facility 2000 609 credit facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions december 31 2000 2300 million available borrowing credit facility 200 million used secure outstanding letters credit currently 551 million available also engage unsecured shortterm borrowings various institutions pursuant uncommitted facilities december 31 2000 122 million unsecured shortterm borrowings outstanding uncommitted facilities weighted average interest rate 696 per annum july 2000 companys compression services division put place 250 million uncommitted revolving line credit interest rates libor plus 175 quoted rate defined rate interest mutually agreed upon two parties december 31 2000 129 million outstanding line credit weighted average cost borrowings facility 2000 818 facility terminated connection universal merger february 2001 december 31 2000 various debt outstanding 281 million primarily related industrial revenue bonds capital leases also various letters credit outstanding 222 million december 31 2000 zero coupon convertible senior debentures noted june 30 2000 completed private placement 9100 million face amount zero coupon convertible senior debentures issued 5016 million providing holders annual 3 yield maturity 2000 amortized 75 million original issue discount received proceeds 4919 million net debt issuance costs 97 million holders may convert zero coupon convertible senior debentures shares common stock time maturity conversion rate 99970 shares per 1000 principal amount maturity initial conversion price 551425 per share common stock effective conversion price increase accreted value zero coupon convertible senior debentures increases may redeem zero coupon convertible senior debentures june 30 2005 accreted discounted amount time redemption provided indenture agreement holders also may require us repurchase zero coupon convertible senior debentures june 30 2005 june 30 2010 june 30 2015 accreted discounted amount time redemption convertible preferred debentures november 1997 sold 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 convertible preferred debentures bear interest annual rate 5 convertible common stock original conversion price 80 per share however terms convertible preferred debentures conversion rate adjusted 5334 per share following spinoff grant prideco adjustment factor conversion rate based average market price common stock prespin basis fair market value grant prideco common stock distributed right redeem convertible preferred debentures time november 4 2000 redemption prices provided indenture agreement convertible preferred debentures subordinated right payment principal interest prior payment full certain existing future senior indebtedness also right defer payments interest convertible preferred debentures extending quarterly interest payment period 20 consecutive quarters time default payment interest 7 14 senior notes due 2006 outstanding 2000 million publicly traded 7 14 senior notes due may 15 2006 interest 7 14 senior notes payable semiannually may 15 november 15 compression financing compression services division entered various sale leaseback arrangements sold compressors appraised values received cash 2999 million arrangements legal title compression units sold third parties leased back division five year operating lease marketbased purchase option sales resulted pretax deferred gain 946 million deferred end lease upon closing transaction universal terminated sale leaseback arrangement released guarantees capital expenditures capital expenditures property plant equipment continuing operations 2000 2666 million primarily related rental equipment fishing tools tubular service equipment compressors related assets included within 2000 capital expenditures 851 million compression services division capital expenditures 2001 expected approximately 2000 million acquisitions august 10 2000 acquired alpine oil services corporation shares common stock one whollyowned subsidiaries value approximately 544 million alpine headquartered calgary alberta canada integrated drilling intervention services division completion systems division acquisition extends underbalanced drilling capabilities worldwide adds new completion technology expands offerings products services canada also effected various acquisitions 2000 total consideration 1580 million acquisitions resulted substantial goodwill associated operations including goodwill approximately 1680 million relating acquisitions 2000 amortization expense goodwill 2000 371 million current annual run rate net taxes 307 million new accounting pronouncements february 14 2001 financial accounting standards board issued tentative decisions accounting goodwill exposure draft business combinations intangible assets accounting goodwill fasb tentatively concluded purchased goodwill amortized rather reviewed impairment final statement expected issued late june 2001 effective date july 1 2001 decision tentative become final current form adoption standards requirements amortize goodwill would increase earnings per share excluding impact future acquisitions approximately 007 per quarter 2001 company evaluating impact proposed standards requirement goodwill impairment analysis december 1999 securities exchange commission sec issued staff accounting bulletin sab 101 revenue recognition financial statements provides guidance recognition presentation disclosure revenue financial statements adoption bulletin material impact companys financial position results operations conjunction adoption sab 101 company adopted emerging issues task force eitf 0010 accounting shipping handling fees costs adoption authoritative guidance material impact companys financial position results operations june 1998 financial accounting standards board issued sfas 133 accounting derivative instruments hedging activities statement establishes new accounting reporting standards requiring derivative instruments including derivative instruments embedded contracts recorded balance sheet either asset liability depending rights obligations contracts fair value statement requires changes derivatives fair value recognized currently earnings unless specific hedge accounting criteria met qualifying cash flow hedge changes fair value derivative instrument initially recognized comprehensive income reclassified earnings period hedged transaction affects earnings qualifying fair value hedge changes fair value derivative instrument offset corresponding changes hedged item earnings accounting qualifying hedges allows derivatives gains losses offset related results hedged item income statement requires company formally document designate assess effectiveness transactions receive hedge accounting treatment sfas 138 accounting certain derivative instruments certain hedging activities issued june 2000 amends certain provisions sfas 133 statements effective fiscal years beginning june 15 2000 believe adoption new standards material effect financial position results operations item 7a nannannanitem 7a quantitative qualitative market risk disclosures currently exposed market risk changes foreign currency changes interest rates discussion market risk exposure financial instruments follows foreign currency exchange rates operate virtually every oil gas exploration production region world conduct portion business currencies us dollar although international revenues denominated local currency effects foreign currency fluctuations largely mitigated local expenses foreign operations also generally denominated currency impact exchange rate fluctuations years ended 1999 1998 1997 material effect reported amounts revenues net income enter forward exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting existing assets liabilities denominated foreign currencies exposure resulting primarily intercompany loans debt arrangements future value contracts related currency positions subject offsetting market risk resulting foreign currency exchange rate volatility counterparties foreign exchange contracts creditworthy multinational commercial banks believe risk counterparty nonperformance immaterial december 31 1999 contract purchase 3198 million austrian schillings 239 million contract sell 240 million uk pounds sterling 386 million austrian schillings contract entered behalf grant prideco order hedge debt denominated austrian schillings 3198 million associated grant pridecos acquisition 5001 interest voestalpine stahlrohr kindberg gmbh co uk pounds sterling contract relates intercompany receivable gains losses contacts recognized currently earnings offsetting impact change fair value asset liability hedged settlement forward exchange contracts resulted net cash inflows totaling 18 million 04 million 52 million years ended december 31 1999 1998 1997 respectively net cash inflows vary year due differences forward rate spot rate date settlement difference may result material net inflows outflows currency volatile instance spot rate uk pound sterling contract unfavorably fluctuate 5 spot rate date settlement would experience 19 million cash outflow believe risk mitigated enter contracts terms 30 60 days however assurance volatility similar greater experienced past could occur future interest rates subject interest rate risk longterm fixed interest rate debt lesser extent variable interest rate borrowings longterm borrowings primarily consist 2000 million principal 7 14 senior notes due 2006 4025 million principal 5 convertible subordinated preferred equivalent debentures due 2027 changes interest rates would assuming things equal cause fair market value debt fixed interest rate increase decrease thus increase decrease amount required refinance debt december 31 1999 1998 fair value senior notes approximated carrying value fair market value debentures 3079 million 2496 million respectively fair value senior notes principally dependent changes prevailing interest rates whereas fair value debentures principally dependent prevailing interest rates current stock price relates conversion price 80 per share common stock various debt instruments believe impact changes interest rates near term material instruments item 8item 7a quantitative qualitative disclosure market risk currently exposed market risk changes foreign currency changes interest rates discussion market risk exposure financial instruments follows foreign currency exchange rates operate virtually every oil gas exploration production region world conduct portion business currencies us dollar functional currency international operations applicable local currency although international revenues denominated local currency effects foreign currency fluctuations partly mitigated local expenses foreign operations also generally denominated currency impact exchange rate fluctuations years ended 2001 2000 1999 material effect reported amounts revenues net income assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments reflected accumulated comprehensive loss stockholders equity section balance sheet approximately 27 net assets impacted changes foreign currencies relation us dollar recorded 542 million adjustment equity account year ended december 31 2001 reflect net impact decline various foreign currencies us dollar interest rates subject interest rate risk longterm fixed interest rate debt lesser extent variableinterest rate borrowings longterm borrowings subject interest rate risk primarily consist 3500 million principal 6 58 senior notes due 2011 2000 million principal 7 14 senior notes due 2006 4025 million principal 5 convertible subordinated preferred equivalent debentures due 2027 9100 million zero coupon senior convertible debentures due 2020 changes interest rates would assuming things equal cause fair market value debt fixed interest rate increase decrease thus increase decrease amount required refinance debt december 31 2001 fair value 6 58 senior notes 3325 million fair value 7 14 senior notes 2095 million 2030 million december 31 2001 2000 respectively fair value senior notes principally dependent changes prevailing interest rates december 31 2001 2000 fair market value convertible preferred debentures 3471 million 4095 million respectively fair market value zero coupon convertible debentures 5345 million 5540 million respectively fair value convertible preferred debentures zero coupon debentures principally dependent prevailing interest rates current stock price relates conversion price 5334 per share 551425 per share common stock respectively december 31 2001 interest rate swap converts fixed rate debt variable rate debt interest rate swap hedges 1000 million 7 14 fixed rate senior notes liability fair value 31 million december 31 2001 interest rate swap agreement counter party pays fixed rate 7 14 interest pay variable interest rate based published 6month libor payments agreement settled may 15 november 15 year may 2006 coincide interest payment dates hedged debt instrument subsequent december 31 2001 entered additional interest rate swap hedge remaining 1000 million 7 14 fixed rate senior notes various longterm debt instruments believe impact changes interest rates near term material instruments shortterm borrowings 1635 million december 31 2001 241 million december 31 2000 approximate fair market value item 8item 7a quantitative qualitative market risk disclosures currently exposed market risk changes foreign currency changes interest rates discussion market risk exposure financial instruments follows foreign currency exchange rates operate virtually every oil gas exploration production region world conduct portion business currencies us dollar although international revenues denominated local currency effects foreign currency fluctuations largely mitigated local expenses foreign operations also generally denominated currency impact exchange rate fluctuations years ended 1998 1997 1996 material effect reported amounts revenues net income enter forward exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting existing assets liabilities denominated foreign currencies exposure resulting primarily trade receivables payables intercompany loans future value contracts related currency positions subject offsetting market risk resulting foreign currency exchange rate volatility counterparties foreign exchange contracts creditworthy multinational commercial banks believe risk counterparty nonperformance immaterial december 31 1998 1997 contracts maturing within next 60 days sell 334 million 368 million respectively norwegian kroner uk pounds sterling canadian dollars dutch guilders largest contracts norwegian kroner 288 million 254 million december 31 1998 1997 respectively respective contracts matured december 31 1998 1997 required cash outlay would minimal settlement forward exchange contracts resulted net cash inflows totaling 04 million 52 million 11 million years ended december 31 1998 1997 1996 respectively net cash inflows vary year due differences forward rate spot rate date settlement difference may result material net inflows outflows currency volatile instance experienced 52 million net cash inflow 1997 42 million related norwegian kroner difference spot rate settlement date forward rate related kroner much 8 although currencies could fluctuate future result either net inflow outflow believe risk mitigated enter contracts terms 30 60 days however assurance volatility similar greater experienced 1997 could occur future interest rates subject interest rate risk longterm fixed interest rate debt lesser extent variable interest rate borrowings longterm borrowings primarily consist 2000 million principal 7 14 senior notes due 2006 4025 million principal 5 convertible subordinated preferred equivalent debentures due 2027 changes interest rates would assuming things equal cause fair market value debt fixed interest rate increase decrease thus increase decrease amount required refinance debt december 31 1998 1997 fair value senior notes approximated carrying value fair market value debentures 2496 million 3688 million respectively fair value senior notes solely dependent changes prevailing interest rates whereas fair value debentures dependent prevailing interest rates current stock price relates conversion price 80 per share common stock various debt instruments believe impact changes interest rates near term material instruments item 8item 7a quantitative qualitative disclosure market risk currently exposed market risk changes foreign currency changes interest rates discussion market risk exposure financial instruments follows foreign currency exchange rates operate virtually every oil gas exploration production region world conduct portion business currencies us dollar functional currency international operations applicable local currency although international revenues denominated local currency effects foreign currency fluctuations largely mitigated local expenses foreign operations also generally denominated currency impact exchange rate fluctuations years ended 2000 1999 1998 material effect reported amounts revenues net income assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments reflected accumulated comprehensive loss stockholders equity section balance sheet approximately 45 net assets impacted changes foreign currencies relation us dollar recorded 513 million adjustment equity account year ended december 31 2000 reflect net impact decline various foreign currencies us dollar historically entered forward exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting existing assets liabilities denominated foreign currencies results primarily intercompany loans debt arrangements december 31 2000 forward exchange contracts outstanding settlement forward exchange contracts resulted net cash outflows totaling 20 million year ended december 31 2000 14 million related hedge contract held grant prideco years ended december 31 1999 1998 experienced net cash inflows 18 million 04 million respectively net cash flows vary year due differences forward rate spot rate date settlement differences may result material net inflows outflows currency volatile believe risk mitigated historically entered contracts terms 30 60 days however assurance volatility similar greater experienced past could occur future interest rates subject interest rate risk longterm fixed interest rate debt lesser extent variableinterest rate borrowings longterm borrowings subject interest rate risk primarily consist 2000 million principal 7 14 senior notes due 2006 4025 million principal 5 convertible subordinated preferred equivalent debentures due 2027 9100 million zero coupon senior convertible debentures due 2020 changes interest rates would assuming things equal cause fair market value debt fixed interest rate increase decrease thus increase decrease amount required refinance debt december 31 2000 1999 fair value senior notes 2030 million 1948 million respectively fair value senior notes principally dependent changes prevailing interest rates fair market value convertible preferred debentures 4095 million 3079 million respectively fair market value zero coupon debentures december 31 2000 5540 million fair value convertible preferred debentures zero coupon debentures principally dependent prevailing interest rates current stock price relates conversion price 5334 per share 551425 per share common stock respectively various debt instruments believe impact changes interest rates near term material instruments item 8 item 8 financial statements supplementary data index financial statements financial statement schedule schedules omitted required information included financial statements notes thereto report independent public accountants energy ventures inc audited accompanying consolidated balance sheets energy ventures inc delaware corporation subsidiaries december 31 1995 1994 related consolidated statements income stockholders investment cash flows three years period ended december 31 1995 consolidated financial statements schedule referred responsibility companys management responsibility express opinion consolidated financial statements schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures consolidated financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position energy ventures inc subsidiaries december 31 1995 1994 results operations cash flows three years period ended december 31 1995 conformity generally accepted accounting principles audits made purpose forming opinion basic consolidated financial statements taken whole financial statement schedule listed part ii item 8 presented purposes complying securities exchange commissions rules part basic consolidated financial statements financial statement schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements taken whole arthur andersen llp houston texas february 26 1996 energy ventures inc subsidiaries consolidated balance sheets accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements income accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements stockholders investment accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements cash flows accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts energy ventures inc majorityowned subsidiaries partnerships company material intercompany accounts transactions eliminated consolidation nature operations company international manufacturer supplier oilfield equipment contract drilling services company operates two business segments oilfield equipment contract drilling oilfield equipment segment manufactures high performance tubulars complete line artificial lift equipment well completion tools companys contract drilling rig fleet consists primarily barge rigs used major large independent oil gas companies exploration development natural gas primarily us gulf coast area companys tubular products contract drilling operating divisions provide products services used primarily natural gas exploration production artificial lift completion tool product lines tied maturation oil producing formations inventories valued using firstin firstout fifo method stated lower cost market property plant equipment property plant equipment carried cost depreciation domestic property plant equipment provided using straightline method estimated useful lives respective categories useful lives major classes property plant equipment follows due differences international us rig contracting markets depreciation international drilling rigs related equipment provided using unitsofproduction method unitsofproduction method depreciation based utilization drilling rigs minimum provision rigs idle interest costs related major capital projects capitalized component construction costs interest costs capitalized 266000 247000 574000 1995 1994 1993 respectively maintenance repairs expensed incurred costs renewals replacements betterments capitalized intangible assets amortization excess cost fair value net tangible assets businesses acquired amortized straightline basis lesser expected useful lives 40 years intangible assets included assets amortized years expected benefited amortization expense goodwill intangible assets 2781000 996000 1578000 1995 1994 1993 respectively accumulated amortization goodwill december 31 1995 1994 1979000 1553000 respectively foreign currency translation results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments energy ventures inc subsidiaries notes consolidated financial statementscontinued 1 summary significant accounting policiescontinued included separate component stockholders investment currency transaction gains losses reflected income period companys nigerian operations highly inflationary economy use us dollar functional currency accordingly gains losses resulting balance sheet translation reflected income period income taxes effective january 1 1993 company adopted statement financial accounting standard 109 sfas 109 adoption sfas 109 material effect companys consolidated financial position results operations asset liability method sfas 109 deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases weighted average shares earnings per share computed based weighted average number common shares outstanding respective periods stock options outstanding excluded weighted average number shares since dilutive effect material use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates planned accounting changes january 1 1996 sfas 121 accounting impairment longlived assets longlived assets disposed effective company statement sets forth guidelines regarding recognize impairment longlived assets measure impairment management believes adoption sfas 121 significant effect companys consolidated financial position results operations january 1 1996 sfas 123 accounting stockbased compensation effective company sfas 123 permits require fair value based method accounting employee stock option plans results compensation expense recognition stock options granted company plans continue use current intrinsic value based method accounting plans reclassifications certain reclassifications prior year balances made conform amounts corresponding 1995 classifications 2 supplemental cash flow information purposes consolidated statements cash flows company considers highly liquid investments original maturities three months less cash equivalents energy ventures inc subsidiaries notes consolidated financial statementscontinued 2 supplemental cash flow informationcontinued cash paid years ended december 31 1995 1994 1993 interest net amounts capitalized income taxes net refunds follows refer note 4 additional information concerning noncash investing financing activities 3 inventories category follows work process finished goods inventories include cost materials labor plant overhead 4 acquisitions dispositions december 1995 company made strategic decision dispose highland store distribution system united states part artificial lift completion tool equipment division decision reflected companys desire focus efforts manufacturing eliminate substantial cost associated serving distributor united states market early 1996 company completed sale store distribution system united states continental emsco company approximately 75 million company received 3 million cash 4 million vendor credit continental emsco company future equipment needs company 05 million note receivable consideration received sale approximated net book value assets sold resulting material gain loss july 1995 company acquired engemaq sa brazilian completion tool business 4 million june 30 1995 company acquired prideco inc prideco transaction involved issuance approximately 225 million shares common stock acquisition expected provide company greater manufacturing marketing efficiencies allowing consolidation overhead reduced distribution marketing costs rationalization manufacturing operations allocations purchase price fair market values net assets acquired 1995 acquisitions based preliminary estimate fair market value may revised additional information concerning asset liability valuations obtained september 1 1994 company completed acquisition fluid packedtm pumps line rod pumps parts accessories sucker rod line nationaloilwell 135 million cash acquired assets integrated companys artificial lift completion tool equipment division included acquisition manufacturing facilities equipment woodward oklahoma santa teresa new mexico product inventory energy ventures inc subsidiaries notes consolidated financial statementscontinued 4 acquisitions dispositionscontinued july 29 1994 company acquired tubular finishing facility located bryan texas bryan facility company exchanged eastman cherrington environmental inc eastman cherrington including cash payment approximately 2 million bryan facility acquired tubular finishing mill 160000 square foot industrial facility located 55 acres facility operated part companys grant prideco drill pipe tubular products division recorded net book value eastman cherrington including operations date disposition approximated appraised value bryan facility result material gain loss realized exchange see note 5 additional information eastman cherrington february 9 1994 company purchased outstanding stock awi drilling workover inc awi purchase price 15 million cash 50 million notes payable 433333 shares companys common stock 100 par value assets awi consist primarily 12 barge drilling rigs eight charter company time acquisition charter fees incurred company approximately 25 million 1993 november 1993 company acquired production oil tools manufacturer downhole packers completion systems approximately 22 million comprised cash shares companys common stock june 30 1993 company acquired energy service company international tool supply procurement division procurement division tubular services division tubular services approximately 48 million consisting cash notes payable obligations tubular services threading facility oil country tubulars specializing premium tubulars large diameters tubular services integrated grant prideco december 30 1993 company sold procurement division together certain assets company proceeds sale used repay remaining principal balance notes payable incurred finance acquisitions discussed accounted using purchase method accounting results operations included consolidated statements income respective dates acquisition results operations related acquisition nationaloilwells fluid packed pump product lines bryan facility material therefore pro forma information presented following table presents selected unaudited consolidated financial information company pro forma basis assuming prideco acquisition sale 3450000 shares common stock occurred january 1 1994 pro forma information set forth necessarily indicative results actually would achieved transactions consummated january 1 1994 may achieved future energy ventures inc subsidiaries notes consolidated financial statementscontinued 5 discontinued operations july 29 1994 company disposed eastman cherrington including cash payment approximately 2 million exchange tubular finishing facility located bryan texas revenues discontinued operation eastman cherrington 1994 1993 14 million 33 million respectively discontinued operation eastman cherrington reflected net loss 797000 21 million 1994 1993 respectively recorded net book value eastman cherrington including operations date disposition approximated appraised value bryan facility result material gain loss realized exchange results operations eastman cherrington reflected accompanying consolidated statements income discontinued operations net taxes 6 shortterm borrowings lines credit companys shortterm borrowings december 31 1995 1994 consisted following december 31 1995 company place various working capital lines credit secured inventory receivables companys subsidiaries providing borrowings 655 million subject availability requirements borrowings companys lines credit generally based lenders determination collateral value current assets securing lines credit company subsidiaries required maintain various affirmative negative covenants relating working capital earnings net worth facilities also impose certain limitations use funds company subsidiaries acquisitions capital expenditures incurrence additional indebtedness operational matters certain prohibitions declaration payment dividends company december 31 1995 approximately 48 million borrowed revolving lines credit approximately 51 million used support outstanding letters credit additional borrowings approximately 556 million available based collateral values december 31 1995 7 longterm debt companys longterm debt december 31 1995 1994 consisted following energy ventures inc subsidiaries notes consolidated financial statements continued 7 longterm debtcontinued following summary scheduled debt maturities year thousands march 24 1994 company sold pursuant private placement 120 million 1025 senior notes due 2004 july 1994 substantially notes exchanged substantially identical series 1025 senior notes due 2004 semiannual interest payments march september issues senior notes issued pursuant terms indenture dated march 15 1994 certain subsidiaries company unconditionally guaranteed companys obligations senior notes see note 17 indenture relating senior notes contains various customary affirmative negative covenants among things limit ability company certain subsidiaries incur certain additional indebtedness unless companys consolidated fixed charge coverage ratio defined indenture least 20 10 ii make dividends distributions certain restricted payments iii create certain liens iv engage certain transactions affiliates v engage sale leaseback transactions vi make certain asset dispositions vii merge consolidate transfer substantially assets another person indenture also limits ability company certain subsidiaries issue preferred stock creates restrictions ability certain subsidiaries pay dividends make distributions december 31 1995 company limited amount dividends distributions restricted payments could made approximately 137 million carrying value 120 million senior notes approximates fair value december 31 1994 december 31 1995 fair value 120 million senior notes using rate currently available company similar debt approximates 125 million placement 120 million senior notes provided company 116 million net proceeds used prepay 34 million 1225 senior notes due 1997 repay substantially companys outstanding indebtedness senior notes remaining funds used working capital general purposes connection early retirement company incurred first quarter extraordinary charge approximately 38 million net taxes approximately 19 million 030 per share extraordinary charge represented difference reacquisition price net carrying value 34 million senior notes including unamortized debt issuance costs accrued interest payable included accrued liabilities consolidated financial statements approximately 38 million 37 million december 31 1995 1994 respectively 8 stockholders investment public stock offering early fourth quarter 1995 company completed public offering 3450000 shares common stock public offering net proceeds offering approximately 726 million energy ventures inc subsidiaries notes consolidated financial statements continued 8 stockholders investmentcontinued stock option plans may 1981 companys stockholders approved companys employee stock option plan option plan non qualified stock option plan expired may 1991 option plan options provided officers key employees company including directors also key employees subsidiaries purchase aggregate 1000000 shares common stock company may 1991 companys stockholders approved companys nonemployee director stock option plan director plan nonqualified stock option plan director plan options purchase aggregate 500000 shares common stock company may granted nonemployee directors company options purchase 15000 shares common stock automatically granted nonemployee director date initial election december 31 1995 365000 shares available granting options may 1992 companys stockholders approved companys 1992 employee stock option plan eso plan eso plan options purchase aggregate 600000 shares common stock company may granted officers key employees company including directors also key employees subsidiaries december 31 1995 136000 shares available granting options transactions option plans summarized follows profit sharing plans company certain subsidiaries adopted retirement plans qualify section 401k internal revenue code plans generally provide 20 matching contributions company maximum liability 12 participating employees annual compensation company plan also right make additional discretionary matching contributions total contributions company plans 306000 193000 383000 1995 1994 1993 respectively energy ventures inc subsidiaries notes consolidated financial statements continued 8 stockholders investmentcontinued executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company subsidiaries including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company primarily common stock company purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust consolidated accounting purposes included accompanying consolidated statements stockholders investment treasury stock cost reflected consolidated balance sheets compensation expense related plan significant three years period ended december 31 1995 9 income taxes domestic foreign components income taxes continuing operations consisted following total income tax provision benefit recorded follows companys provision income taxes continuing operations three years ended december 31 1995 consisted energy ventures inc subsidiaries notes consolidated financial statements continued 9 income taxescontinued difference tax provision statutory federal income tax rate tax provision attributable income continuing operations income taxes three years ended december 31 1995 accompanying consolidated statements income analyzed deferred income tax provisions income taxes three years ended december 31 1995 primarily consisted components net deferred tax liability december 31 1995 december 31 1994 follows energy ventures inc subsidiaries notes consolidated financial statements continued 9 income taxescontinued amount federal operating loss carryforwards tax purposes generated certain subsidiaries prior acquisition 17060000 includes 4710000 federal operating loss carryforwards previously benefited book purposes utilized expire 2001 2007 use preacquisition operating losses subject limitations imposed internal revenue code december 31 1995 company 860000 alternative minimum tax credit carryforwards may used indefinitely reduce regular federal income taxes additionally december 31 1995 company us federal income tax purposes 760000 foreign tax credit carryforwards expiring principally 1996 1999 realization portion deferred tax asset dependent generating sufficient taxable income prior expiration carryforward amounts although realization assured management believes likely net deferred tax asset realized amount deferred tax asset considered realizable however could reduced near term estimates future taxable income carryforward period reduced company valuation allowance reflect estimated amount deferred tax assets realization uncertain net change valuation allowance year ended december 31 1995 decrease 1915000 net change principally relates reduction valuation allowance required certain deferred tax assets realization became certain 1995 coleve tax matter august 1994 company received letter united states internal revenue service irs proposing increase gain recognized company upon dissolution october 1990 joint venture coleve columbia gas development corporation general irs proposal seeks payment tax liability approximately 141 million plus accrued interest thereon includes 34 million taxes relating proposed disallowance certain interest deductions taken company respect coleve subject similar letter received company fourth quarter 1993 tax liability respect matters previously provided deferred tax liability companys consolidated financial statements company disagrees irs position currently pursuing rights administrative review appeal intends vigorously contest matter although resolution remaining issues could affect timing payment previously accrued tax liabilities require use portion available capital company believe results audit ultimate resolution irs proposed adjustments material impact consolidated results operations financial position 10 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations insurance company partially selfinsured employee health insurance claims workers compensation certain employees although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop energy ventures inc subsidiaries notes consolidated financial statements continued 11 insurance settlement september 30 1994 company settled claims insurance carriers respect termination workover drilling contract national iranian oil company nioc terms settlement companys insurance carriers company received net cash payment 23 million reimbursement certain operating costs incurred amounts received accordance terms workover drilling contract company also retained rights funds collected recovered company nioc rigs equipment deployed iran rigs related equipment moved iran december 31 1994 company adjusted carrying value receivables rigs equipment established reserves demobilization refurbishment contract settlement costs totaled approximately 18 million insurance settlement increased operating income 48 million reduced operating losses 26 million relating iranian operations 1994 12 commitments company committed various noncancelable operating leases primarily relate office space equipment total lease expense incurred noncancelable operating leases approximately 5124000 4626000 3055000 years ended december 31 1995 1994 1993 respectively future minimum rental commitments operating leases follows thousands 13 related party transactions company incurred legal fees 594000 748000 582000 1995 1994 1993 respectively law firm director company partner company paid approximately 4037000 1995 3300000 1994 underwriting fees associated public offering private placement 120 million 1025 senior notes respectively underwriting group transactions included lehman brothers affiliate lehman brothers holdings inc major stockholder company well several unrelated underwriters fee arrangements associated offerings terms standard underwriting industry 14 subsequent event january 1996 company entered longterm manufacturing sales agreement oil country tubular ltd octl indiabased manufacturer drill pipe premium tubulars manufacturing operations behalf company expected commence second quarter 1996 january 1996 terms agreement octl company made onetime payment 8 million exclusive right grant pridecos product manufactured facility energy ventures inc subsidiaries notes consolidated financial statements continued 15 segment information business segments company operates two business segments oilfield equipment contract drilling oilfield equipment segment manufactures high performance tubulars complete line artificial lift completion tool equipment companys tubular products used primarily natural gas exploration production companys contract drilling segment consists primarily fleet barge rigs used major large independent oil gas companies primarily exploration development natural gas us gulf coast area internationally contract drilling segment currently operating one barge rig nigeria two platform rigs peru four land rigs argentina financial information industry segment three years ended december 31 1995 summarized thousands identifiable assets included corporate column includes elimination intercompany transactions major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letter credit similar arrangements 1995 1994 1993 individual customer accounted 10 consolidated revenues exception contract drilling segment whose foreign rigs typically operate longterm contracts company believe dependent material degree single customer energy ventures inc subsidiaries notes consolidated financial statements continued 15 segment informationcontinued foreign operations export sales companys equipment services used approximately 50 countries us customers operating abroad foreign customers sales equipment services outside united states accounted 38 36 40 total revenues 1995 1994 1993 respectively based upon ultimate destination equipment services sold shipped provided customer company summarized financial information three years ended december 31 1995 geographic area follows 16 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 1995 1994 energy ventures inc subsidiaries notes consolidated financial statements continued 16 quarterly financial data unauditedcontinued 1 net income per common share year ended december 31 1995 differs summation individual quarters within year due impact public offering common stock shares issued connection prideco acquisition 17 condensed consolidating financial statements 120 million senior notes described note 7 unconditionally guaranteed joint several basis certain subsidiaries company accordingly following condensed consolidating balance sheets december 31 1995 1994 related condensed consolidating statements income cash flows three years period ended december 31 1995 provided condensed consolidating financial statements herein followed notes integral part statements energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statementscontinued condensed consolidating balance sheet december 31 1995 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating balance sheet december 31 1994 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement income year ended december 31 1995 thousands condensed consolidating statement income year ended december 31 1994 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement income year ended december 31 1993 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1995 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1994 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1993 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued significant accounting policies reclassifications certain reclassifications prior year balances made conform amounts corresponding 1995 classifications elimination entries revenues related cost sales individual category presented net intercompany transactions b longterm debt companys summary scheduled debt maturities year description debt information disclosed note 7 c coleve tax matter company received letter irs seeking payment tax liability approximately 141 million plus accrued interest thereon respect coleve see note 9 additional information regarding tax matter insurance settlement september 30 1994 company received net proceeds 23 million insurance carriers settlement termination workover drilling contract nioc see note 11 additional information regarding settlement e notes 1 16 read conjunction condensed consolidating financial statements item 9item 8 financial statements supplementary data index financial statements financial statement schedule schedules omitted required information included financial statements notes thereto report independent public accountants energy ventures inc audited accompanying consolidated balance sheets energy ventures inc delaware corporation subsidiaries december 31 1996 1995 related consolidated statements income stockholders investment cash flows three years period ended december 31 1996 consolidated financial statements schedule referred responsibility companys management responsibility express opinion consolidated financial statements schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures consolidated financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position energy ventures inc subsidiaries december 31 1996 1995 results operations cash flows three years period ended december 31 1996 conformity generally accepted accounting principles audits made purpose forming opinion basic consolidated financial statements taken whole financial statement schedule listed part ii item 8 presented purposes complying securities exchange commissions rules required part basic consolidated financial statements financial statement schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements taken whole arthur andersen llp houston texas february 10 1997 energy ventures inc subsidiaries consolidated balance sheets accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements income accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements stockholders investment accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries consolidated statements cash flows accompanying notes integral part consolidated financial statements energy ventures inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts energy ventures inc majorityowned subsidiaries company material intercompany accounts transactions eliminated consolidation nature operations company international manufacturer supplier oilfield equipment company manufactures drill pipe premium tubulars complete line artificial lift production equipment used exploration production oil natural gas inventories valued using firstin firstout fifo method stated lower cost market investments marketable securities investments marketable securities accounted accordance statement financial standards 115 sfas 115 accordingly investments recorded fair market value unrealized gains losses recorded separate component stockholders investment company classified investments available sale temporary decline fair value securities charged earnings marketable securities 238 million held december 31 1996 consists 3056600 shares parker drilling company parker common stock company applied 20 discount factor common stock shares restricted companys ability sell shares subject terms registration rights agreement parker allows parker restrict ability company resell shares property plant equipment property plant equipment carried cost maintenance repairs expensed incurred costs renewals replacements betterments capitalized depreciation fixed assets computed using straightline method estimated useful lives respective categories useful lives major classes property plant equipment follows life buildings 15 40 years machinery equipment 5 20 years furniture vehicles 3 7 years intangible assets amortization companys intangible assets comprised primarily goodwill identifiable intangible assets primarily patents technology licenses company reviews intangible assets impairment whenever events changes circumstances indicate carrying amount applicable assets may recoverable assessing recoverability assets company estimates future cash flows expected result use asset eventual disposition sum expected future cash flows undiscounted without interest charges less carrying amount asset impairment loss recognized management believes events circumstances warrant revision remaining useful life affect recoverability goodwill amortized energy ventures inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies continued intangible assets amortization continued straightline basis 40 years identifiable intangible assets included component assets amortized straightline basis years expected benefited ranging 5 15 years amortization expense goodwill intangible assets 2063000 1307000 726000 1996 1995 1994 respectively accumulated amortization goodwill december 31 1996 1995 3465000 1846000 respectively foreign currency translation results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments included separate component stockholders investment currency transaction gains losses reflected income period end 1996 mexico became highly inflationary economy accordingly effective january 1 1997 translation adjustments related companys operations mexico reflected results operations company expect change material effect consolidated financial position future results operations revenue recognition company recognizes revenue products shipped accepted customer service revenues recognized services performed accounting income taxes statement financial accounting standards 109 accounting income taxes sfas 109 deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases weighted average shares earnings per share computed based weighted average number common shares outstanding respective periods stock options outstanding excluded weighted average number shares since dilutive effect material use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates adoption recent accounting pronouncements company adopted statement financial accounting standards 121 sfas 121 accounting impairment longlived assets longlived assets disposed effective january 1 1996 sfas 121 establishes accounting standards impairment longlived assets certain identifiable intangibles goodwill related assets held used longlived assets certain identifiable intangibles disposed accordingly companys longlived assets certain identifiable intangibles reviewed impairment whenever events changes circumstances indicate carrying amount assets may recoverable performing review recoverability company estimates future cash energy ventures inc subsidiaries notes consolidated financial statementscontinued 1 summary significant accounting policies continued adoption recent accounting pronouncements continued flows expected result use asset eventual disposition sum expected future cash flows undiscounted without interest charges less carrying amount asset impairment loss recognized adoption sfas 121 impact companys consolidated financial position results operations october 1995 financial accounting standards board issued statement financial standards 123 sfas 123 accounting stockbased compensation sfas 123 establishes financial accounting reporting standards stockbased employee compensation pronouncement allows entity continue measure compensation cost instruments using intrinsic valuebased method accounting prescribed accounting principles board opinion 25 apb 25 compensation cost recognized accompanying financial statements stock options since exercise price companys stock options issued equals market value underlying stock date grant company intend adopt fair value method accounting stockbased compensation sfas 123 reclassifications restatements certain reclassifications prior year balances made conform amounts corresponding 1996 classifications consolidated financial statements restated reflect sale companys mallard division november 11 1996 see note 5 2 supplemental cash flow information purposes consolidated statements cash flows company considers highly liquid investments original maturities three months less cash equivalents cash paid years ended december 31 1996 1995 1994 interest income taxes net refunds follows refer note 4 additional information concerning noncash investing financing activities 3 inventories category follows work process finished goods inventories include cost materials labor plant overhead energy ventures inc subsidiaries notes consolidated financial statementscontinued 4 acquisitions dispositions december 10 1996 company acquired arrow completion systems arrow total cash consideration approximately 215 million operations arrow currently integrated production equipment division plant consolidations allocation purchase price fair market value net assets acquired arrow acquisition subject revision purchase price subject adjustment pending resolution certain asset valuations must agreed buyer seller company believes ultimate resolution cost acquisition material impact assets acquired companys results operations result revision october 1 1996 company acquired stock irmaos geremia ltd geremia porto alegre brazil based designer manufacturer marketer progressing cavity pumps approximately 245 million cash assumed debt company acquired superior tube limited superior alberta canada based premium tubular manufacturer total cash consideration approximately 16 million september 4 1996 august 5 1996 company acquired tubular corporation america inc tca approximately 500000 shares common stock 1435 million cash 650000 note due january 1997 assumed debt approximately 15 million may 3 1996 company acquired enerpro international inc enerpro manufacturer premium threads thread connections 312714 shares common stock assumption approximately 31 million indebtedness april 1996 company acquired production specialties inc production specialties manufacturer gas lift equipment approximately 31 million february 1996 company sold united states retail store distribution system continental emsco approximately 75 million company received 3 million cash 4 million vendor credit 05 million note receivable consideration received sale approximated net book value assets sold resulting material gain loss july 1995 company acquired engemaq sa engemaq brazilian completion tool business 4 million june 30 1995 company acquired prideco inc prideco transaction involved issuance approximately 225 million shares common stock september 1 1994 company completed acquisition fluid packedtm pumps line rod pumps parts accessories sucker rod line nationaloilwell 135 million cash july 29 1994 company acquired tubular finishing facility located bryan texas bryan facility company exchanged eastman cherrington environmental inc eastman cherrington including cash payment approximately 2 million bryan facility see note 5 additional information eastman cherrington acquisitions discussed accounted using purchase method accounting results operations included consolidated statements income respective dates acquisition results operations related acquisitions arrow geremia superior enerpro production specialties engemaq material individually aggregate therefore pro forma information presented energy ventures inc subsidiaries notes consolidated financial statementscontinued 4 acquisitions dispositions continued following table presents selected unaudited consolidated financial information company pro forma basis assuming prideco tca acquisitions july 1996 equity offering 3450000 shares common stock october 1995 equity offering 3450000 shares common stock occurred january 1 1995 pro forma information set forth necessarily indicative results actually would achieved transactions consummated january 1 1995 may achieved future 5 discontinued operations november 11 1996 company completed sale contract drilling segment comprised mallard bay contract drilling division mallard division parker exchange cash approximately 306 million 3056600 shares parker preferred stock valued company 20 million company reported net gain disposal mallard division 669 million net taxes 446 million company applied 20 discount factor parker preferred stock restricted nature stock received subsequently parker converted preferred stock parker common stock december 31 1996 company reported connection parker common stock 24 million unrealized gain net taxes component stockholders investment results operations mallard division reflected accompanying consolidated statements income discontinued operations net taxes companys consolidated balance sheets statements income prior periods restated condensed results mallard division discontinued operations follows 1992 company established environmental services group eastman cherrington environmental eastman cherrington provided horizontal drilling related services purpose performing remediation sampling containment monitoring december 1993 company determined business eastman cherrington consistent companys longterm strategic objectives adopted plan disposition division companys plan disposition contemplated disposition division april 1994 time company adopted plan disposition company contacted preliminary discussions number potential purchasers division would involved disposition division sale institutional purchaser based discussions historical operations division operating budget outstanding contracts division company estimated incurrence approximately 330000 net losses anticipated date disposition giving effect projected disposition accrued amount 1993 first quarter 1994 company worked toward definitive agreement one potential purchasers negotiations failed result definitive agreement due purchasers desire one directors company participate purchase boards view would inappropriate sell eastman cherrington purchaser circumstances following occurrence company proceeded negotiations alternative purchasers including ultimate purchaser time company estimated potential additional operating losses pending new projected disposition date third quarter 1994 light estimate consideration projected recieved disposition based discussions ultimate purchaser company deferred losses 797000 disposition eastman cherrington july 1994 exchange tubular finishing facility bryan texas time disposition consideration received approximated book value division plus 1994 deferred losses result material gain loss realized disposition eastman cherrington revenues 33 million net loss 21 million 1993 including 330000 accrual 1994 losses revenues 14 million net loss 797000 1994 excluding 330000 accrued year end 1993 energy ventures inc subsidiaries notes consolidated financial statementscontinued 6 shortterm borrowings lines credit companys shortterm borrowings december 31 1996 1995 consisted following june 26 1996 company entered new 120 million working capital facility replaced companys prior us working capital line credit second quarter 1996 company incurred extraordinary charge 731000 net taxes 394000 relating termination prior working capital facility company currently available working capital facilities providing 1309 million borrowings facilities subject certain borrowing base requirements relating companys accounts receivable inventory securing borrowings bear interest variable rates secured accounts receivables inventory stock various companys domestic foreign subsidiaries facilities contain customary affirmative negative covenants relating working capital earnings net worth facilities also impose limitations companys subsidiaries use funds future acquisitions capital expenditures incurrence additional debt operational matters certain expenditures december 31 1996 company limited principal credit facility amount cash dividends distributions restricted payments could made 133 million december 31 1996 approximately 29 million outstanding revolving lines credit approximately 101 million used support outstanding letters credit additional borrowings approximately 1179 million available based collateral values december 31 1996 7 longterm debt companys longterm debt december 31 1996 1995 consisted following energy ventures inc subsidiaries notes consolidated financial statementscontinued 7 longterm debt continued following summary scheduled debt maturities year thousands march 24 1994 company sold pursuant private placement 120 million 1025 senior notes due 2004 july 1994 substantially notes exchanged substantially identical series 1025 senior notes due 2004 semiannual interest payments march september issues senior notes issued pursuant terms indenture dated march 15 1994 certain subsidiaries company unconditionally guaranteed companys obligations senior notes see note 17 company restricted specific formula amount cash dividends distributions restricted payments could made terms senior notes approximately 278 million december 31 1996 estimated fair value companys 120 million senior notes december 31 1996 1995 126 million 125 million respectively using rate currently available company similar debt 8 stockholders investment public stock offerings july 25 1996 company completed public offering 3450000 shares common stock public offering net proceeds offering approximately 1009 million company also completed public offering early fourth quarter 1995 3450000 shares common stock net proceeds offering approximately 726 million stock option plans may 1981 companys stockholders approved companys employee stock option plan option plan nonqualified stock option plan expired may 1991 option plan options provided officers key employees company including directors also key employees subsidiaries purchase aggregate 1000000 shares common stock company maintains nonemployee director stock option plan director plan nonqualified stock option plan director plan options purchase aggregate 500000 shares common stock company may granted nonemployee directors company options purchase 5000 shares common stock automatically granted nonemployee director date initial election reelection december 31 1996 330000 shares available granting options company also effect 1992 employee stock option plan eso plan eso plan options purchase aggregate 1000000 shares common stock company may granted officers key employees company including directors also key employees subsidiaries december 31 1996 286000 shares available granting options energy ventures inc subsidiaries notes consolidated financial statements continued 8 stockholders investment continued stock options vest one five years expire ten years date grant information stock option plans three years ended december 31 1996 set forth 809268 options outstanding december 31 1996 weighted average remaining contractual life 74 years 433333 options exercisable december 31 1996 weighted average remaining contractual life 54 years weighted average fair value options granted 1996 1995 1961 1165 respectively stockbased compensation pro forma information regarding net income earnings per share required sfas 123 determined company accounted stock options fair value method provided therein fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions used options issued 1996 1995 respectively riskfree interest rates 66 67 expected lives 7 years expected volatility 48 47 expected dividends purposes pro forma disclosures estimated fair value options amortized expense options vesting period set forth summary companys net income earnings per share reported pro forma fair value based method accounting defined sfas 123 applied pro forma information meant representative effects reported net income future years provided sfas 123 effects awards granted january 1 1995 considered pro forma calculation preferred stock company authorized issue 3000000 shares 100 par value preferred stock december 31 1996 none issued energy ventures inc subsidiaries notes consolidated financial statements continued 8 stockholders investment continued profit sharing plans company certain subsidiaries adopted retirement plans qualify section 401k internal revenue code plans generally provide 40 matching contributions company maximum liability 12 participating employees annual compensation company plan also right make additional discretionary matching contributions total contributions company plans 513000 226000 138000 1996 1995 1994 respectively executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company subsidiaries including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company primarily common stock company purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust consolidated accounting purposes included accompanying consolidated statements stockholders investment treasury stock cost reflected consolidated balance sheets 9 income taxes domestic foreign components income taxes continuing operations consisted following energy ventures inc subsidiaries notes consolidated financial statements continued 9 income taxes continued companys provision benefit income taxes continuing operations three years ended december 31 1996 consisted difference tax provision statutory federal income tax rate tax provision attributable income continuing operations income taxes three years ended december 31 1996 accompanying consolidated statements income analyzed deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations generally deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax asset liability follows energy ventures inc subsidiaries notes consolidated financial statements continued 9 income taxes continued december 31 1996 company 13229000 us net operating losses generated certain subsidiaries prior acquisition use preacquisition operating losses subject limitations imposed internal revenue code also restricted taxable income one subsidiary us carryforwards utilized expire 2001 2009 company also approximately 7743000 foreign net operating loss carryforwards 7357000 expire 1998 2001 remainder carried forward indefinitely realization portion deferred tax asset dependent generating sufficient taxable income prior expiration carryforward amounts although realization assured management believes likely net deferred tax asset realized amount deferred tax asset considered realizable however could reduced near term estimates future taxable income carryforward period reduced company valuation allowance reflect estimated amount deferred tax assets realization uncertain net change valuation allowance year ended december 31 1996 decrease 416000 net change principally relates reduction valuation allowance required certain deferred tax assets realization became certain 1996 october 11 1996 company entered 39 million tax settlement plus accrued interest 25 million united states internal revenue service irs relating dispute regarding tax impact company upon dissolution coleve joint venture 1990 tax liability respect dissolution previously provided deferred tax liability companys consolidated financial statements settlement resulted company recognizing 4 million tax benefit fourth quarter due elimination certain previously accrued deferred taxes longer required paid result settlement energy ventures inc subsidiaries notes consolidated financial statements continued 10 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage insurance company partially selfinsured employee health insurance claims workers compensation certain employees although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 11 insurance settlement september 30 1994 company settled claims insurance carriers respect termination workover contract national iranian oil company nioc terms settlement companys insurance carriers company received net cash payment 23 million reimbursement certain operating costs incurred amounts received accordance terms workover drilling contract company also retained rights funds collected recovered company nioc rigs equipment deployed iran rigs equipment moved iran december 31 1994 company reduced carrying value receivables 88 million reflect uncertainties respect collection entire amount nioc receivables value rigs equipment 35 million reflect estimated fair value rigs company also wrote 26 million mobilization costs amortized life companys contract nioc required reimbursed company nioc addition company established reserve 28 million cover anticipated costs demobilization rigs outside iran including estimated costs export storage overseas shipping local transportation 500000 relating additional costs anticipated incurred connection final settlement contract arrangements nioc reductions carrying value reserves based information available company time settlement 12 commitments company committed various noncancelable operating leases primarily relate office space equipment total lease expense incurred noncancelable operating leases approximately 5230000 3812000 3698000 years ended december 31 1996 1995 1994 respectively future minimum rental commitments operating leases follows thousands january 1996 company entered longterm manufacturing sales agreement oil country tubular ltd octl pursuant octl manufactures drill pipe premium tubulars company energy ventures inc subsidiaries notes consolidated financial statements continued 12 commitments continued exclusive basis octls plant india octl arrangement used company pursue strategic expansion sales operations eastern hemisphere 13 related party transactions company incurred legal fees 1596000 594000 748000 1996 1995 1994 respectively law firm director company partner company paid lehman brothers affiliate lehman brothers holdings inc major stockholder company approximately 5175000 4037000 underwriting fees associated public offerings 1996 1995 respectively approximately 1536000 fees related disposition mallard 1996 fee arrangements associated offerings terms standard industry 14 subsequent event february 13 1997 company acquired anbert cilindros saic anbert argentina based sucker rod business total consideration approximately 8 million february 24 1997 company entered agreement acquire ta industries inc ta manufacturer premium couplings premium accessories total cash consideration approximately 64 million acquisition ta subject various conditions including receipt required regulatory approvals expiration waiting periods transaction expected close prior april 30 1997 march 14 1997 company acquired griffin legrand total cash consideration approximately 21 million griffin legrand based alberta canada designs manufactures markets progressing cavity pumps conventional pumping units december 1996 company entered agreement acquire gulfmark international inc gulfmark pursuant tax free merger approximately 22 million shares companys common stock currently held gulfmark issued stockholders gulfmark prior merger gulfmark spinoff stockholders marine transportation services business merger subject among things approval stockholders company gulfmark company expects merger consummated second quarter 1997 companys annual meeting may 6 1997 agenda includes among things proposal increase companys authorized shares common stock 40 million shares 80 million shares effect two one stock split proposal change name company energy ventures inc evi inc effect pending stock split reflected december 31 1996 form 10k 15 segment information business segments company operates two business segments tubular products production equipment tubular products segment manufactures drill pipe high performance tubulars production equipment segment manufactures complete line artificial lift production equipment companys products used exploration production oil natural gas energy ventures inc subsidiaries notes consolidated financial statements continued 15 segment information continued financial information industry segment three years ended december 31 1996 summarized thousands information presented restated reflect mallard division discontinued operations identifiable assets exclude net assets relating mallard division approximately 955 million 747 million december 31 1995 1994 respectively identifiable assets included corporate column includes elimination intercompany transactions major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letter credit similar arrangements 1996 1995 1994 individual customer accounted 10 consolidated revenues foreign operations export sales companys equipment services used approximately 55 countries us customers operating abroad foreign customers sales equipment services outside united states accounted 51 46 total revenues 1996 1995 1994 respectively based upon ultimate destination equipment services sold shipped provided customer company energy ventures inc subsidiaries notes consolidated financial statements continued 15 segment information continued 16 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 1996 1995 information presented restated reflect mallard division discontinued operations energy ventures inc subsidiaries notes consolidated financial statements continued 16 quarterly financial data unaudited continued 1 net income per common share year ended december 31 1996 differs summation individual quarters within year due impact public offering common stock shares issued connection tca enerpro acquisitions 2 net income per common share year ended december 31 1995 differs summation individual quarters within year due impact public offering common stock shares issued connection prideco acquisition 17 condensed consolidating financial statements 120 million senior notes described note 7 unconditionally guaranteed full unconditional joint several basis certain subsidiaries company subsidiary guarantors wholly owned company subsidiary guarantor accordingly following condensed consolidating balance sheets december 31 1996 1995 related condensed consolidating statements income cash flows three years period ended december 31 1996 provided condensed consolidating financial statements herein followed notes integral part statements energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating balance sheet december 31 1996 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating balance sheet december 31 1995 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement income year ended december 31 1996 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement income year ended december 31 1995 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement income year ended december 31 1994 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1996 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1995 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued condensed consolidating statement cash flows year ended december 31 1994 thousands energy ventures inc subsidiaries notes consolidated financial statements continued 17 condensed consolidating financial statements continued significant accounting policies reclassifications restatements certain reclassifications prior year balances made conform amounts corresponding 1996 classifications consolidated financial statements restated reflect sale companys mallard division november 11 1996 see note 5 additional information elimination entries revenues related cost sales individual category presented net intercompany transactions b longterm debt companys summary scheduled debt maturities year description debt information disclosed note 7 c insurance settlement september 30 1994 company received net cash payment 23 million insurance carriers settlement termination workover drilling contract nioc see note 11 additional information regarding settlement notes 1 16 read conjunction condensed consolidating financial statements item 9item 8 financial statements supplementary data index financial statements financial statement schedule schedules omitted required information included financial statements notes thereto report independent public accountants evi inc audited accompanying consolidated balance sheets evi inc formerly energy ventures inc delaware corporation subsidiaries december 31 1997 1996 related consolidated statements income stockholders equity cash flows three years period ended december 31 1997 consolidated financial statements schedule referred responsibility companys management responsibility express opinion consolidated financial statements schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures consolidated financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position evi inc subsidiaries december 31 1997 1996 results operations cash flows three years period ended december 31 1997 conformity generally accepted accounting principles audits made purpose forming opinion basic consolidated financial statements taken whole financial statement schedule listed part ii item 8 presented purposes complying securities exchange commissions rules required part basic consolidated financial statements financial statement schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements taken whole arthur andersen llp houston texas january 29 1998 evi inc subsidiaries consolidated balance sheets accompanying notes integral part consolidated financial statements evi inc subsidiaries consolidated statements income accompanying notes integral part consolidated financial statements evi inc subsidiaries consolidated statements stockholders equity accompanying notes integral part consolidated financial statements evi inc subsidiaries consolidated statements cash flows accompanying notes integral part consolidated financial statements evi inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies nature operations evi inc formerly energy ventures inc together subsidiaries company international manufacturer supplier oilfield equipment company manufactures drill pipe premium tubulars complete line artificial lift production equipment used exploration production oil natural gas principles consolidation consolidated financial statements include accounts evi inc majorityowned subsidiaries material intercompany accounts transactions eliminated consolidation reclassifications restatements certain reclassifications prior year balances made conform amounts corresponding 1997 classifications consolidated financial statements restated reflect companys may 1997 twoforone stock split adoption statement financial accounting standards 128 sfas 128 earnings per share see note 8 use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates inventories valued using firstin firstout fifo method stated lower cost market marketable securities investments marketable securities accounted accordance statement financial accounting standards 115 sfas 115 accounting certain investments debt equity securities accordingly investments recorded fair market value unrealized gains losses recorded separate component stockholders equity company classified investments available sale temporary decline fair value securities charged earnings april 1997 company sold marketable securities comprised approximately 31 million shares parker drilling company parker common stock pursuant public offering effected parker result company received net proceeds approximately 234 million recognized pretax gain approximately 34 million property plant equipment property plant equipment carried cost maintenance repairs expensed incurred costs renewals replacements betterments capitalized depreciation fixed assets computed using straightline method estimated useful lives respective categories useful lives major classes property plant equipment follows evi inc subsidiaries notes consolidated financial statements continued intangible assets amortization companys intangible assets comprised primarily goodwill identifiable intangible assets principally patents technology licenses company reviews intangible assets impairment whenever events changes circumstances indicate carrying amount applicable assets may recoverable assessing recoverability assets company estimates future cash flows expected result use asset eventual disposition sum expected future cash flows undiscounted without interest charges less carrying amount asset impairment loss recognized management believes events circumstances warrant revision remaining useful life affect recoverability goodwill amortized straightline basis lesser estimated useful life 40 years identifiable intangible assets included component assets amortized straightline basis years expected benefited ranging 5 15 years amortization expense goodwill intangible assets approximately 55 million 21 million 13 million 1997 1996 1995 respectively accumulated amortization goodwill december 31 1997 1996 75 million 35 million respectively stockbased compensation intrinsic value method accounting used stockbased employee compensation whereby compensation expense recognized exercise price employee stock option equal market price companys common stock 100 par value common stock grant date see note 8 pro forma information required statement financial accounting standards 123 sfas 123 accounting stockbased compensation foreign currency translation results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments included separate component stockholders equity currency transaction gains losses reflected income period accounting income taxes statement financial accounting standards 109 sfas 109 accounting income taxes deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases revenue recognition company recognizes revenue products shipped accepted customer service revenues recognized services performed earnings per share 1996 financial accounting standards board fasb issued sfas 128 replaces primary earnings per share basic earnings per share requires dual presentation basic diluted earnings per share company adopted sfas 128 fourth quarter fiscal 1997 historical earnings per share data included herein restated reflect adoption sfas 128 basic earnings per share computed dividing net income weighted average number shares common stock outstanding year diluted earnings per common share computed dividing net evi inc subsidiaries notes consolidated financial statementscontinued income weighted average number shares common stock outstanding year adjusted dilutive effect incremental shares would outstanding companys stock option plans see note 8 effect 5 convertible subordinated preferred equivalent debentures diluted earnings per share antidilutive thus impact following reconciles basic diluted weighted average shares future reporting requirements june 1997 fasb issued statement financial accounting standards 130 sfas 130 reporting comprehensive income sfas 130 establishes standards reporting comprehensive income components full set generalpurpose financial statements effective years beginning december 15 1997 company adopt sfas 130 first quarter 1998 sfas 130 adopted december 31 1997 primary adjustments reclassifications reflect net income comprehensive income basis years presented would consisted foreign currency translation adjustments effect unrealized realized gains marketable securities june 1997 fasb issued statement financial accounting standards 131 sfas 131 disclosures segments enterprise related information sfas 131 effective years beginning december 31 1997 requires segment information reported basis consistent used internally evaluating segment performance deciding allocate resources segments company adopt sfas 131 1998 reviewing segments light sfas 131 1998 fasb issued statement accounting standards 132 sfas 132 employers disclosures pensions postretirement benefits sfas 132 standardizes disclosure requirements pensions postretirement benefits sfas 132 effective years beginning january 15 1997 company adopted sfas 132 december 31 1997 would impact consolidated financial statements company 2 supplemental cash flow information purposes consolidated statements cash flows company considers highly liquid investments original maturities three months less cash equivalents cash paid years ended december 31 1997 1996 1995 interest income taxes net refunds follows years ended december 31 1997 1996 1995 noncash investing activities 244 million 17 million 36 million respectively relating capital leases evi inc subsidiaries notes consolidated financial statementscontinued following summarizes investing activities relating acquisitions year ended december 31 1997 noncash financing activities 66 million relating tax benefits received exercise nonqualified stock options benefits recorded reduction income taxes payable increase additional paidin capital 3 inventories category follows work process finished goods inventories include cost materials labor plant overhead 4 acquisitions dispositions december 3 1997 company completed acquisition outstanding shares bmw monarch lloydminster ltd bmw monarch bmw pump inc bmw pump aggregate consideration approximately 915 million cash 143 million assumed debt bmw pump canadianbased manufacturer progressing cavity pumps bmw monarch canadian supplier progressing cavity pumps well production related oilfield products allocation purchase price fair market value net assets acquired bmw monarch bmw pump acquisitions subject revision purchase price subject adjustment pending resolution certain asset valuations must agreed buyer seller company believes ultimate resolution cost acquisition material impact assets acquired companys results operations result revision december 2 1997 company completed acquisition capital stock trico industries inc trico exchange 1050 million cash assumption 87 million debt trico texasbased manufacturer distributor subsurface reciprocating pumps sucker rods accessories hydraulic lift systems allocation purchase price fair market values net assets acquired trico acquisition based preliminary estimates fair market value property plant equipment subject revision subsequent completion independent appraisal company currently expect material adjustments preliminary estimates used determining asset valuations august 25 1997 company completed acquisition xls holding inc xl transaction accounted pooling interests xl designs manufactures markets high performance connectors evi inc subsidiaries notes consolidated financial statementscontinued marine applications conductors risers offshore structural components connection acquisition company issued approximately 09 million shares common stock exchange equity interests xl effect business combination significant prior period financial statements restated august 8 1997 company completed acquisition mcallister petroleum services ltd mcallister calgary canadabased manufacturer marketer inflatable packers electronic temperaturepressure instrumentation approximately 246 million may 1 1997 company acquired gulfmark international inc gulfmark pursuant merger approximately 44 million shares common stock issued stockholders gulfmark prior merger gulfmark effected spinoff stockholders marine transportation services business retained assets gulfmark acquired company transaction consisted approximately 44 million shares common stock erosion control company certain miscellaneous assets 44 million shares common stock acquired classified treasury stock cost accompanying consolidated balance sheet number shares common stock issued gulfmark acquisition approximated number shares common stock held gulfmark prior acquisition gulfmark acquisition material effect outstanding number shares common stock equity company april 14 1997 company acquired ta industries inc ta manufacturer premium couplings premium accessories approximately 441 million cash 197 million assumed debt march 14 1997 company acquired assets griffin legrand griffin total cash consideration approximately 205 million griffin based calgary canada designs manufactures markets progressing cavity pumps conventional pumping units december 10 1996 company acquired arrow completion systems arrow texasbased packer manufacturer total cash consideration approximately 220 million october 1 1996 company acquired stock irmaos geremia ltd geremia porto alegre brazilbased designer manufacturer marketer progressing cavity pumps approximately 245 million cash assumed debt september 4 1996 company acquired superior tube limited superior alberta canadabased premium tubular manufacturer total cash consideration approximately 160 million august 5 1996 company acquired tubular corporation america inc tca approximately 10 million shares common stock 144 million cash 07 million note due january 1997 assumed debt approximately 150 million may 3 1996 company acquired enerpro international inc enerpro manufacturer premium threads thread connections 06 million shares common stock assumption approximately 31 million indebtedness february 1996 company sold united states retail store distribution system continental emsco approximately 75 million consideration received sale approximated net book value assets sold resulting material gain loss company also effected various 1997 1996 acquisitions total consideration approximately 391 million 51 million respectively acquisitions discussed exception xl accounted immaterial pooling interests accounted using purchase method accounting results operations acquisitions included consolidated statements income respective dates acquisition evi inc subsidiaries notes consolidated financial statementscontinued following table presents selected unaudited consolidated financial information company pro forma basis assuming august 1996 tca acquisition may 1997 gulfmark acquisition december 1997 acquisitions trico bmw pump bmw monarch occurred january 1 1996 1997 1996 acquisitions material individually aggregate applicable year therefore pro forma information presented pro forma information set forth necessarily indicative results actually would achieved transaction consummated january 1 1996 may achieved future 5 plant closures company adopted plan close bastrop texas tool joint manufacturing facility combine two packer facilities closure one facility arlington texas fourth quarter 1996 connection decisions company incurred charge 58 million associated closures charge 43 million related tool joint facility closure relocation equipment facility 15 million related consolidation packer facilities closure one plants company incurred 38 million 1996 costs associated actions 1996 including costs relating relocation equipment bastrop facility facilities company also accrued 20 million part 58 million charge exit costs expected incurred 1997 relating closure bastrop arlington facilities costs included 08 million severance termination costs 09 million reduction carrying value bastrop facility light intended plan disposition facility 03 million termination arlington lease approximately 400 employees affected closures closure bastrop arlington facilities substantially completed june 1997 6 discontinued operations november 11 1996 company completed sale contract drilling segment comprised mallard bay contract drilling division mallard division parker exchange cash approximately 3069 million approximately 31 million shares parker common stock valued company approximately 200 million company reported net gain disposal mallard division 669 million net taxes 446 million evi inc subsidiaries notes consolidated financial statementscontinued results operations mallard division reflected accompanying consolidated statements income discontinued operations net taxes condensed results mallard division discontinued operations follows 7 debt shortterm borrowings lines credit june 1996 company entered 1200 million working capital facility terminated companys prior us working capital facility resulted extraordinary charge approximately 07 million net taxes 04 million facility contains customary affirmative negative covenants relating working capital earnings net worth borrowings facility accrued interest variable rate based prime libor 875 december 31 1997 due demand december 31 1997 debt outstanding facility however approximately 55 million used support outstanding letters credit august 1997 company entered canadian line credit agreement provides 315 million 450 million canadian facility contains customary affirmative negative covenants relating working capital earnings net worth borrowings accrued interest variable rate approximately 546 december 31 1997 due demand february 1998 company entered new 2500 million working capital facility consisting 2000 million us 500 million canadian credit facilities terminated 1200 million us 315 million canadian working capital facilities see note 13 evi inc subsidiaries notes consolidated financial statementscontinued longterm debt november 1997 company completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures net proceeds debentures 3909 million debentures convertible price 80 per share common stock debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters anytime company default payment interest evidenced market transactions estimated fair value debentures 3688 million december 31 1997 december 1997 company completed cash tender offer consent solicitation tender offer relating companys outstanding 1200 million 10 14 senior notes due 2004 senior notes aggregate 11998 million principal amount senior notes validly tendered company pursuant tender offer prepayment senior notes resulted extraordinary charge net taxes 56 million 90 million 019 per basic share year ended december 31 1997 extraordinary charge consists prepayment fees professional fees write unamortized debt issuance costs december 31 1996 estimated fair value senior notes 1260 million connection companys acquisition trico december 2 1997 company assumed 87 million variable rate demand industrial development revenue refunding bonds interest rate floating 446 december 31 1997 contract terms require interest payments maturity occurring december 2002 connection bonds company letter credit 92 million upon completion expansion veracruz mexico tool joint manufacturing facility company recorded obligation 163 million lease reflect terms thereof following summary scheduled longterm debt maturities year thousands evi inc subsidiaries notes consolidated financial statementscontinued 8 stockholders equity stock split companys annual stockholders meeting may 6 1997 stockholders approved twoforone split common stock dividend related amendment companys restated certificate incorporation increased number authorized shares common stock 400 million shares 800 million shares result stock split stock per share data contained herein restated reflect effect twoforone stock split public stock offerings july 25 1996 company completed public offering 69 million shares common stock net proceeds offering approximately 1009 million company also completed public offering early fourth quarter 1995 69 million shares common stock net proceeds offering approximately 726 million stock option plans may 1981 companys stockholders approved companys employee stock option plan option plan nonqualified stock option plan expired may 1991 company maintains nonemployee director stock option plan director plan nonqualified stock option plan director plan options purchase aggregate 10 million shares common stock may granted nonemployee directors company options purchase 10000 shares common stock automatically granted nonemployee director date initial election reelection december 31 1997 approximately 06 million shares available granting options company also effect 1992 employee stock option plan eso plan eso plan options purchase aggregate 20 million shares common stock may granted officers key employees company including directors also key employees subsidiaries december 31 1997 approximately 03 million available granting options stock options vest one five years expire ten years date grant information stock option plans three years ended december 31 1997 set forth 14 million options outstanding december 31 1997 weighted average remaining contractual life 51 years 06 million options exercisable december 31 1997 weighted average remaining evi inc subsidiaries notes consolidated financial statementscontinued contractual life 40 years weighted average fair value options granted 1997 1996 1995 1749 889 524 respectively stockbased compensation pro forma information regarding net income earnings per share required sfas 123 determined company accounted stock options fair value method provided therein fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions used options issued 1997 1996 1995 respectively riskfree interest rates 65 63 65 expected lives seven years expected volatility 49 53 52 expected dividends purposes pro forma disclosures estimated fair value options amortized expense options vesting period set forth summary companys net income earnings per share reported pro forma fair valuebased method accounting defined sfas 123 applied pro forma information meant representative effects reported net income future years provided sfas 123 effects awards granted january 1 1995 considered pro forma calculation preferred stock company authorized issue 30 million shares 100 par value preferred stock december 31 1997 none issued profit sharing plans company certain subsidiaries adopted retirement plans qualify section 401k internal revenue code plans generally provide 40 matching contributions company maximum liability 12 participating employees annual compensation company plan also right make additional discretionary matching contributions total contributions company plans 08 million 05 million 02 million 1997 1996 1995 respectively executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company subsidiaries including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company primarily common stock company purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust consolidated accounting purposes included accompanying consolidated statements stockholders equity treasury stock cost reflected consolidated balance sheets evi inc subsidiaries notes consolidated financial statementscontinued 9 income taxes domestic foreign components income taxes continuing operations consisted following total income tax provision benefit recorded follows companys provision benefit income taxes continuing operations three years ended december 31 1997 consisted difference tax provision statutory federal income tax rate tax provision attributable income continuing operations income taxes three years ended december 31 1997 accompanying consolidated statements income analyzed evi inc subsidiaries notes consolidated financial statementscontinued deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations generally deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax asset liability follows december 31 1997 company 79 million us net operating losses generated certain subsidiaries prior acquisition use preacquisition operating losses subject limitations imposed internal revenue code also restricted taxable income one subsidiary us carryforwards utilized expire 2001 2009 company also approximately 08 million foreign net operating loss carryforwards 04 million expire 1998 2001 remainder carried forward indefinitely realization portion deferred tax asset dependent generating sufficient taxable income prior expiration carryforward amounts although realization assured management believes likely net deferred tax asset realized amount deferred tax asset considered realizable however could reduced near term estimates future taxable income carryforward period reduced company valuation allowance reflect estimated amount deferred tax assets realization uncertain net change valuation allowance year ended december 31 1997 decrease 04 million net change principally relates reduction valuation allowance required certain deferred tax assets realization became certain 1997 october 11 1996 company entered 39 million tax settlement plus accrued interest 25 million united states internal revenue service irs relating dispute regarding tax impact company upon dissolution oil gas joint venture 1990 tax liability respect dissolution previously provided deferred tax liability companys consolidated financial statements settlement resulted company recognizing 40 million tax benefit 1996 due elimination certain previously accrued deferred taxes longer required paid result settlement evi inc subsidiaries notes consolidated financial statementscontinued 10 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage insurance company partially selfinsured employee health insurance claims workers compensation claims certain employees although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 11 commitments company committed various noncancelable operating leases primarily relate office space equipment total lease expense incurred noncancelable operating leases approximately 70 million 52 million 38 million years ended december 31 1997 1996 1995 respectively future minimum rental commitments noncancelable operating leases follows thousands january 1996 company entered longterm manufacturing sales agreement oil country tubular ltd octl pursuant octl manufactures drill pipe premium tubulars company exclusive basis octls plant india 12 related party transactions company incurred legal fees 18 million 16 million 06 million 1997 1996 1995 respectively law firm director company partner 1997 company paid lehman brothers inc affiliate lehman brothers holdings inc major stockholder company approximately 20 million dealer management fees associated tender offer senior notes debenture offering company incurred fees approximately 67 million associated companys public offering disposition mallard division 1996 underwriting fees 40 million associated public offering 1995 fee arrangements associated transactions terms standard industry 13 subsequent events december 12 1997 company entered agreement acquire christiana companies inc christiana pursuant tax free merger christiana merger approximately 39 million shares companys common stock issued stockholders christiana prior christiana merger christiana sell twothirds interest logistic sale total logistic control llc logistic c2 evi inc subsidiaries notes consolidated financial statementscontinued inc consideration approximately 107 million following logistic sale remaining assets christiana consist approximately 39 million shares companys common stock ii onethird interest logistic iii cash assets book value approximately 100 million iv contingent cash payment 100 million payable earlier five years effective date christiana merger extent funds required satisfy contingent claims christiana number shares common stock issued acquisition approximate number shares acquired christiana merger material impact outstanding number shares equity company christiana merger subject various conditions including approval stockholders company christiana receipt required regulatory approvals expiration termination waiting periods extensions thereof hartscottrodino act although assurance christiana merger close company currently anticipates acquisition consummated shortly receipt regulatory approvals approval christiana merger stockholders company christiana approval logistic sale stockholders christiana january 12 1998 company completed acquisition houston well screen group companies hws van der horst limited singapore company net purchase price approximately 276 million cash hws acquisition includes purchase van der horst usa inc holding company houston well screen company houston well screen asia pte ltd operations singapore indonesia hws makes wedgewire screen products use oil gas production applications january 15 1998 company completed acquisition taro industries limited taro alberta corporation approximately 08 million shares companys common stock issued shareholders taro exchange shares taro stock taro canadian provider well automation gas compression drilling equipment distribution integrated companys production equipment segment events unaudited subsequent date independent auditors report february 1998 company entered new credit agreement provides borrowings aggregate 2500 million consisting 2000 million us credit facility 500 million canadian credit facility terminated 1200 million us 315 million canadian working capital facilities borrowings new credit facility bear interest variable rate based either prime libor secured pledges various stock companys domestic foreign subsidiaries addition certain companys domestic subsidiaries guarantors facility companys credit facility contains customary affirmative negative covenants including debt incurrence tests interest coverage ratio negative pledges acquisitions certain levels certain dispositions assets addition facility requires company maintain minimum tangible net worth least 4540 million december 31 1997 defined credit agreement february 19 1998 company completed acquisition ampscot equipment ltd alberta corporation ampscot approximately 550 million cash ampscot canadianbased manufacturer pumping units march 4 1998 company entered agreement plan merger weatherford enterra inc weatherford providing merger weatherford company pursuant expected tax free merger stockholders weatherford receive 095 share companys common stock exchange outstanding share weatherford common stock 010 par value weatherford common stock based number shares weatherford common stock outstanding march 3 1998 total approximately 491 million shares companys common stock would issued merger addition approximately 12 million shares companys common stock would reserved issuance evi inc subsidiaries notes consolidated financial statementscontinued company outstanding options weatherfords benefit plans company surviving corporation renamed evi weatherford inc merger subject various conditions including approval stockholders company weatherford receipt required regulatory approvals expiration termination waiting periods extensions thereof hartscottrodino act although assurance merger close company currently anticipates merger consummated shortly receipt regulatory approvals approval merger stockholders company weatherford 14 segment information business segments company operates two business segments drilling products production equipment drilling products segment manufactures drill pipe high performance tubulars production equipment segment manufactures complete line artificial lift production equipment companys products used exploration production oil natural gas financial information industry segment three years ended december 31 1997 summarized identifiable assets exclude net assets relating mallard division approximately 955 million december 31 1995 corporate assets principally include cash equivalents tax assets liabilities 1996 company incurred charge 58 million associated plant closures charge 43 million related closure tool joint facility within drilling products segment 15 million related closure packer facility within production equipment segment operating income 1996 drilling products production equipment segments include accruals included within 58 million charge 15 million 05 million respectively plant closures evi inc subsidiaries notes consolidated financial statementscontinued major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letter credit similar arrangements 1997 1996 1995 individual customer accounted 10 consolidated revenues foreign operations export sales companys equipment services used approximately 61 countries us customers operating abroad foreign customers sales equipment services outside united states accounted 51 46 total revenues 1997 1996 1995 respectively based upon ultimate destination equipment services sold shipped provided customer company evi inc subsidiaries notes consolidated financial statementscontinued financial information geographic segment three years ended december 31 1997 summarized intergeographic revenues accounted prices approximate arms length market prices certain prior year balances restated conform current year presentation evi inc subsidiaries notes consolidated financial statementscontinued 15 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 1997 1996 1 first second third quarters 1997 quarterly financial data restated amounts previously reported companys respective forms 10q reclassify certain amounts conform prior periods presentation classify veracruz mexico facility capital lease reflect terms thereof 2 includes extraordinary charge net taxes approximately 90 million related repayment senior notes fourth quarter 1997 evi inc subsidiaries notes consolidated financial statementscontinued 3 includes income discontinued operations net taxes approximately 16 million 17 million 28 million 13 million recorded first second third fourth quarters 1996 respectively 4 includes extraordinary charge net taxes approximately 07 million recorded second quarter 1996 5 includes gain disposal discontinued operations net taxes approximately 669 million recorded fourth quarter 1996 item 9item 8 financial statements financial statement schedule index financial statements financial statement schedule schedules omitted required information included financial statements notes thereto report independent public accountants weatherford international inc audited accompanying consolidated balance sheets weatherford international inc delaware corporation subsidiaries december 31 1999 1998 related consolidated statements operations stockholders equity cash flows three years period ended december 31 1999 consolidated financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures consolidated financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position weatherford international inc subsidiaries december 31 1999 1998 results operations cash flows three years period ended december 31 1999 conformity accounting principles generally accepted united states audits made purpose forming opinion basic consolidated financial statements taken whole supplemental schedule ii relating weatherford international inc subsidiaries presented purposes complying securities exchange commissions rules required part basic consolidated financial statements supplemental schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements weatherford international inc subsidiaries taken whole arthur andersen llp houston texas january 28 2000 weatherford international inc subsidiaries consolidated balance sheets thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements operations thousands except per share amounts accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements stockholders equity thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts weatherford international inc majorityowned subsidiaries company material intercompany accounts transactions eliminated consolidation company accounts 50 lessowned affiliates using equity method basis presentation october 1999 board directors company approved plan distribute outstanding shares common stock wholly owned subsidiary grant prideco inc spinoff holders companys common stock 100 par value common stock connection spinoff company transfer drilling products businesses grant prideco inc grant prideco result accompanying financial statements reflect operations grant prideco discontinued operation see note 2 nature operations company one worlds largest providers oilfield services equipment oil gas industry use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates inventories valued using firstin firstout fifo method stated lower cost market current assets current assets comprised nontrade receivables prepaid expenses shortterm investments net decrease december 31 1998 december 31 1999 primarily reflects collection receivable 196 million related december 1998 sale leaseback compression equipment see note 16 198 million reduction shortterm investment debt securities dailey international inc dailey see note 3 debt equity securities investments debt equity securities accounted accordance statement financial accounting standards sfas 115 accounting debt equity securities accordingly investments recorded fair market value unrealized gains losses recorded separate component stockholders equity april 1997 company sold equity securities comprised approximately 31 million shares parker drilling company parker common stock pursuant public offering effected parker result company received net proceeds approximately 234 million recognized pretax gain approximately 34 million weatherford international inc subsidiaries notes consolidated financial statements continued property plant equipment property plant equipment carried cost maintenance repairs expensed incurred costs renewals replacements betterments capitalized depreciation fixed assets computed using straightline method estimated useful lives respective categories company evaluates potential impairment property plant equipment longlived assets ongoing basis whenever events circumstances indicate carrying amounts may recoverable useful lives major classes property plant equipment follows life buildings property 5 45 years rental service equipment 3 15 years machinery equipment 3 20 years intangible assets amortization companys intangible assets comprised primarily goodwill identifiable intangible assets principally patents technology licenses company periodically evaluates goodwill intangible assets net accumulated amortization impairment based undiscounted cash flows associated asset compared carrying amount asset management believes events circumstances warrant revision remaining useful life affect recoverability intangible assets goodwill amortized straightline basis lesser estimated useful life 40 years identifiable intangible assets included component assets amortized straightline basis years expected benefited ranging 5 17 years result 1999 acquisitions company increased identifiable intangible assets 561 million amortization expense goodwill intangible assets approximately 280 million 176 million 116 million 1999 1998 1997 respectively accumulated amortization goodwill december 31 1999 1998 682 million 414 million respectively environmental expenditures environmental expenditures relate remediation existing condition caused past operations contribute current future revenues expensed liabilities expenditures recorded probable obligations incurred costs reasonably estimated estimates based currently available facts technology presently enacted laws regulations companys prior experience remediation contaminated sites liabilities included 31 million 36 million accrued environmental expenditures december 31 1999 1998 respectively stockbased compensation 1995 financial accounting standards board fasb issued sfas 123 accounting stock based compensation company elected adopt accounting recognition provisions sfas 123 permitted continued use intrinsic value method accounting established accounting principles board opinion 25 apb 25 accounting stock issued employees account stockbased compensation programs apb 25 compensation expense recognized exercise price employee stock option equal market price common stock grant date company adopted sfas 123 making required pro forma disclosures net earnings per share fair value method accounting sfas 123 applied see note 12 foreign currency translation functional currency companys international operations applicable local currency results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments included accumulated comprehensive loss component stockholders equity currency transaction gains losses reflected income period weatherford international inc subsidiaries notes consolidated financial statements continued net change cumulative foreign currency translation adjustment reported consolidated statements stockholders equity december 31 1998 december 31 1999 134 million primarily reflects devaluation latin american european currencies partially offset improvement canadian dollar foreign exchange contracts company enters foreign exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting specific existing assets liabilities denominated foreign currencies exposure resulting primarily longterm debt intercompany loans future value contracts related currency positions subject offsetting market risks resulting foreign currency exchange rate volatility counterparties companys foreign exchange contracts creditworthy multinational commercial banks management believes risk counterparty nonperformance immaterial december 31 1999 1998 company contracts maturing within next 60 days sell 147 million 334 million respectively norwegian kroner uk pounds sterling austrian schillings dutch guilders respective contracts matured december 31 1999 1998 companys required cash outlay would insignificant allocation interest expense discontinued operations companys historical practice incur indebtedness consolidated group parent company level limited number subsidiaries rather operating levels centrally manage various cash functions consequently portion companys historical interest expense allocated discontinued operations amount allocated reflects interest expense associated 1000 million unsecured subordinated note due grant prideco see note 2 calculated using companys average longterm debt interest rates applicable periods amounts allocated using methodology result amounts consistent allocation interest expense based ratio net assets discontinued operations companys consolidated net assets plus debt accounting income taxes sfas 109 accounting income taxes deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases revenue recognition company recognizes revenue products shipped upon delivery rentals services rendered proceeds customers cost oilfield rental equipment involuntarily damaged lost downhole reflected revenues research development company expenses research development costs incurred expenses 177 million 108 million 78 million 1999 1998 1997 respectively minority interests company records minority interest expense reflects portion earnings majorityowned operations applicable minority interest partners minority interest expense 1999 primarily represents ge capital corporations ge capital minority interest weatherford global compression services compression services division profits see note 3 earnings per share basic earnings per share computed dividing income weighted average number shares common stock outstanding year diluted earnings per common share computed dividing income weighted average number shares common stock outstanding year adjusted dilutive effect incremental shares would outstanding companys stock option restricted stock weatherford international inc subsidiaries notes consolidated financial statements continued plans see note 12 effect stock options restricted stock included computation periods loss continuing operations occurs would antidilutive effect 5 convertible subordinated preferred equivalent debentures due 2027 diluted earnings per share antidilutive thus impact following reconciles basic diluted weighted average shares new reporting requirements june 1998 fasb issued sfas 133 accounting derivative instruments hedging activities sfas 133 provides comprehensive consistent standard recognition measurement derivatives hedging activities june 1999 fasb issued sfas 137 accounting derivative instruments hedging activitiesdeferral effective date sfas 133 amending effective date sfas 133 fiscal years beginning june 15 2000 company plans adopt sfas 133 2001 company currently evaluating impact sfas 133 consolidated financial statements anticipate adoption material impact 2 discontinued operations dispositions grant prideco october 1999 board directors company approved plan spin grant prideco spinoff conditioned upon receipt revenue ruling united states internal revenue service irs effect receipt shares grant prideco common stock tax free federal income tax purposes companys stockholders company recognize income gain loss result spinoff results operations grant prideco reflected accompanying consolidated statements operations discontinued operations net taxes condensed results grant prideco follows connection spinoff grant prideco issue unsecured subordinated note company amount 1000 million 1000 million obligation bear interest annual rate equal 100 interest payments due quarterly principal unpaid interest due later march 31 2002 terms note grant prideco required repay note proceeds debt equity financing excluding financing credit facility equity issued connection business combination indebtedness grant prideco company subordinated working capital obligations grant prideco banks grant prideco currently intends repay obligations within 12 months completion weatherford international inc subsidiaries notes consolidated financial statements continued spinoff pursuant anticipated public debt financing timing grant pridecos repayment indebtedness however dependent upon market conditions company purchases drill pipe related products grant prideco amounts purchased company years ended december 31 1999 1998 1997 286 million 96 million 77 million respectively purchases represent grant pridecos cost eliminated accompanying consolidated financial statements company charged grant prideco management fee 15 million 10 million 09 million years ended december 31 1999 1998 1997 respectively fee based time devoted grant prideco accounting tax treasury risk management services grant prideco charged 56 million 56 million 35 million costs related companys information systems function years ended december 31 1999 1998 1997 respectively information systems charges based direct support provided equipment usage number system users company intends enter transition services agreement grant prideco period one year spinoff date agreement company provide certain services requested grant prideco fee services based cost plus 10 transition services provided agreement may include accounting tax finance employee benefit management information systems similar services company intends enter preferred customer agreement grant prideco pursuant company agree least three year period purchase least 70 requirements drill stem product grant prideco price products price greater grant prideco sells best similarly situated rental tool customers company entitled apply purchases drill stem credit granted amount 300 million subject limitation application credit 20 purchase businesses 1997 company also sold certain noncore businesses cash proceeds transactions totaled 688 million 3 acquisitions september 15 1999 company acquired williams tool co williams 18 million shares common stock williams based fort smith arkansas offers full range rotating control heads horizontal underbalanced low hydrostatic drilling operations williams products used control flow wellbore reduce risk blowouts oil gas geothermal coal gas methane wells drilled light fluids company acquired petroline wellsystems limited petroline september 2 1999 total consideration approximately 1618 million consisting 322 million cash 38 million shares common stock company also agreed pay sellers additional funds event resell shares common stock received acquisition certain market transactions price less 35175 per share obligation continues october 2000 petroline based aberdeen scotland provider premium completion products services international oil gas industry petroline leading provider flow control equipment north sea first company successfully introduce completion products using new expandable tube technology weatherford international inc subsidiaries notes consolidated financial statements continued august 31 1999 company completed acquisition dailey pursuant prenegotiated plan reorganization bankruptcy terms acquisition company issued total approximately 43 million shares common stock dailey noteholders stockholders total number shares issued company issued approximately 40 million shares dailey noteholders approximately 03 million shares dailey common stockholders time acquisition dailey company held approximately 24 daileys 9 12 senior notes company acquired prior bankruptcy discount subsequently contributed dailey connection transaction company holds approximately 12 million shares common stock classified treasury shares total purchase price dailey excluding assumed liabilities dailey impaired bankruptcy approximately 1850 million dailey leading provider specialty air underbalanced directional drilling equipment services oil gas industry designs manufactures rents proprietary downhole tools oil gas drilling workover applications worldwide february 8 1999 company completed acquisition christiana companies inc christiana approximately 44 million shares common stock 206 million cash acquisition company acquired christiana 1 44 million shares companys common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control refrigerated warehouse trucking logistics company 44 million shares common stock acquired classified treasury stock cost accompanying consolidated balance sheets number shares common stock issued christiana acquisition approximated number shares common stock held christiana prior acquisition christiana acquisition material effect outstanding number shares common stock net equity company one members companys board directors also chairman chief executive officer christiana february 2 1999 company completed joint venture ge capital companys compression services operations combined ge capitals global compression services operations joint venture known weatherford global compression services company owns 64 joint venture ge capital owns 36 company right acquire ge capitals interest anytime price equal third party marketdetermined value less book value approximately 200 million december 31 1999 ge capital also right require company purchase interest anytime february 2001 marketdetermined third party valuation well request public offering interest date company purchased interest time company completed acquisition ampscot equipment ltd ampscot alberta corporation approximately 571 million cash february 19 1998 ampscot canadianbased manufacturer pumping units january 15 1998 company completed acquisition taro industries limited taro alberta corporation approximately 08 million shares common stock issued shareholders taro exchange shares taro stock taro canadian provider well automation gas compression drilling equipment distribution company completed acquisition january 12 1998 houston well screen group companies hws van der horst limited singapore company net purchase price approximately 276 million cash hws acquisition included purchase van der horst usa inc holding company houston well screen company houston well screen asia pte ltd operations singapore indonesia hws makes wedgewire screen products use oil gas production applications december 3 1997 company completed acquisition outstanding shares bmw monarch lloydminster ltd bmw monarch bmw pump inc bmw pump aggregate consideration approximately 988 million cash 143 million assumed debt bmw pump canadianbased manufacturer progressing cavity pumps bmw monarch canadian supplier progressing cavity pumps well production related oilfield products weatherford international inc subsidiaries notes consolidated financial statements continued company completed acquisition capital stock trico industries inc trico exchange 1050 million cash assumption 87 million debt december 2 1997 trico texasbased manufacturer distributor subsurface reciprocating pumps sucker rods accessories hydraulic lift systems may 1 1997 company acquired gulfmark international inc gulfmark pursuant merger approximately 44 million shares common stock issued stockholders gulfmark prior merger gulfmark effected spinoff stockholders marine transportation services business retained assets gulfmark acquired company transaction consisted approximately 44 million shares common stock erosion control company certain miscellaneous assets 44 million shares common stock acquired held classified treasury stock number shares common stock issued gulfmark acquisition approximated number shares common stock held gulfmark prior acquisition gulfmark acquisition material effect outstanding number shares common stock net equity company also effected various 1999 1998 1997 acquisitions integrated companys continuing operations total consideration approximately 609 million 659 million 756 million respectively company also acquired various companies integrated grant prideco total consideration 644 million 1999 92 million 1998 66 million 1997 acquisitions discussed accounted using purchase method accounting results operations acquisitions accounted purchases included accompanying consolidated financial statements since date acquisition purchase price allocated net assets acquired based upon estimated fair market values date acquisition balances included consolidated balance sheets related current year acquisitions based upon preliminary information subject change final asset liability valuations obtained material changes preliminary allocations anticipated management following presents consolidated financial information company unaudited pro forma basis assuming dailey acquisition occurred january 1 1998 1999 acquisitions material individually aggregate year acquisitions therefore pro forma information presented pro forma information set forth necessarily indicative results actually would achieved transactions consummated january 1 1998 may achieved future included net loss year ended december 31 1998 extraordinary loss net taxes recorded dailey 176 million extraordinary loss result daileys repurchase 9 34 senior notes first quarter 1998 represents excess purchase price notes carrying value date repurchase weatherford international inc subsidiaries notes consolidated financial statements continued 4 evi inc weatherford enterra inc merger may 27 1998 evi inc evi completed merger weatherford enterra inc wii merging wii evi pursuant tax free merger stockholders wii received 095 share companys common stock exchange outstanding share wii common stock approximately 489 million shares merger accounted pooling interests separate results evi wii combined company follows merger adjustments include elimination intercompany revenues 50 million 71 million cost sales 34 million 57 million five months ended may 27 1998 year ended december 31 1997 respectively merger adjustments year ended december 31 1997 also includes elimination expenses 17 million recorded wii sale arrow completion systems inc evi december 1996 5 merger charges 1998 company incurred 1600 million merger charges relating merger reorganization rationalization businesses light industry conditions charges 1130 million incurred second quarter time merger initial downturn industry 470 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need make additional reductions operations align cost structure current demand net tax effect charges 1040 million following chart summarizes special charges made 1998 weatherford international inc subsidiaries notes consolidated financial statements continued approximately 1365 million charges realized december 31 1998 remainder charges fully realized end second quarter 1999 connection planned activities 1999 adjustments reversals remaining accrued special charges necessary following chart summarizes utilization 1998 special charges 1 merger transaction costs incurred second quarter 1998 included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance wiis employment agreements stock option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included 1998 fourth quarter charges 76 million approximately 940 employees specifically identified terminations completed first half 1999 accordance companys announced plan terminate employees 3 facility plant closures costs 100 million second quarter 1998 incurred december 31 1998 costs related primarily elimination duplicated manufacturing distribution service locations following merger may 1998 facility plant closures 128 million accrued fourth quarter 1998 consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter facilities closed june 30 1999 4 corporate related expenses 52 million recorded second quarter 1998 31 million recorded fourth quarter 1998 primarily consolidation corporate offices related lease obligations consolidation technology centers due merger align companys corporate cost structure light industry conditions 5 writeoff inventory 99 million second quarter 1998 125 million fourth quarter 1998 reported cost products charges relate writeoff inventory result combination evis wiis operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 247 million second quarter 1998 118 million fourth quarter 1998 charges primarily relate writedown equipment assets result combination evis wiis operations rationalization product lines elimination certain products services locations due merger specific identification assets held sale result decline market conditions 6 cash flow information company considers highly liquid investments original maturities three months less cash equivalents current assets december 31 1999 1998 included cash approximately 17 million 32 million respectively restricted result exchange controls certain foreign countries cash collateral requirements performance bonds letters credit customs bonds weatherford international inc subsidiaries notes consolidated financial statements continued cash paid years ended december 31 1999 1998 1997 interest income taxes net refunds follows included 1997 income taxes paid 628 million related disposal companys contract drilling segment november 1996 years ended december 31 1999 1998 1997 noncash investing activities 54 million 24 million 32 million respectively relating capital leases following summarizes investing activities relating acquisitions integrated companys continuing operations years ended december 31 1999 1998 1997 noncash financing activities 31 million 78 million 88 million respectively relating tax benefits received exercise nonqualified stock options benefits recorded reduction income taxes payable increase capital excess par value 7 inventories category follows work process finished goods inventories include cost materials labor plant overhead 8 shortterm borrowings weatherford international inc subsidiaries notes consolidated financial statements continued may 1998 company entered new five year unsecured credit agreement provides borrowings aggregate 2500 million consisting 2000 million us 500 million canada terminated existing working capital facilities amounts outstanding facility accrue interest variable rate based either us prime rate libor commitment fee ranging 009 020 per annum depending credit ratings assigned 7 14 senior notes due may 15 2006 7 14 senior notes payable quarterly unused portion facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions december 31 1999 approximately 1822 million outstanding approximately 01 million used support outstanding letters credit companys weighted average cost borrowings facility 1999 577 company also engages unsecured shortterm borrowings various institutions pursuant uncommitted facilities bid note arrangements december 31 1999 company 1321 million unsecured shortterm borrowings outstanding arrangements average interest rate 532 per annum company also various credit facilities available standby letters credit bid performance bonds pursuant funds available company secure performance obligations certain retrospective premium adjustments insurance policies company total 168 million letters credit bid performance bonds outstanding december 31 1999 9 longterm debt following summary scheduled longterm debt maturities year thousands company outstanding 2000 million 7 14 senior notes 7 14 senior notes unsecured obligations company interest payable semiannually may 15 november 15 based borrowing rates available company fair value 7 14 senior notes approximates carrying value december 31 1999 1998 december 1997 company completed cash tender offer consent solicitation tender offer relating companys outstanding 1200 million 10 14 senior notes due 2004 senior notes aggregate 11998 million principal amount senior notes validly tendered company pursuant tender offer prepayment senior notes resulted extraordinary charge 90 million net taxes 56 million 009 per basic share year ended december 31 1997 extraordinary charge consists prepayment fees professional fees writeoff unamortized debt issuance costs weatherford international inc subsidiaries notes consolidated financial statements continued december 31 1999 company industrial revenue bonds 87 million due 2002 17 million principal payments 04 million annually 2003 connection industrial revenue bonds company letters credit 109 million 10 5 convertible subordinated preferred equivalent debentures november 1997 company completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 debentures net proceeds debentures 3909 million debentures convertible price 80 per share common stock debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters time company default payment interest evidenced market transactions estimated fair value debentures 3079 million 2496 million december 31 1999 december 31 1998 respectively terms debentures conversion rate debentures adjusted following spinoff grant prideco 11 stockholders equity authorized shares company authorized issue 2500 million shares common stock company authorized issue 30 million shares 100 par value preferred stock december 31 1999 none issued stock repurchase plan december 1997 wii board directors instituted stock repurchase program 1000 million wii common stock could purchased open market transactions privately negotiated transactions pursuant program wii purchased approximately 03 million shares common stock december 1997 1998 wii purchased approximately 10 million shares common stock connection merger stock repurchase program discontinued repurchased shares retired 12 stockbased compensation stock option plans company number stock option plans pursuant directors officers key employees may granted options purchase shares common stock fair market value date grant company effect 1991 employee stock option plan 1991 eso plan 1992 employee stock option plan 1992 eso plan 1998 employee stock option plan 1998 eso plan plans options purchase aggregate 104 million shares common stock may granted officers key employees company including directors also key employees december 31 1999 approximately 32 million shares available granting plans weatherford international inc subsidiaries notes consolidated financial statements continued stock options vest one three years expire ten thirteen years date grant information stock option plans predecessor plans three years ended december 31 1999 set forth 71 million options outstanding december 31 1999 weighted average remaining contractual life 109 years 13 million options exercisable december 31 1999 weighted average remaining contractual life 65 years pro forma compensation expense pro forma information regarding net income loss earnings loss per share required sfas 123 determined company accounted stock options fair value method provided therein fair value option grant estimated date grant using blackscholes option pricing model following weighted average assumptions used 1999 1998 1997 respectively expected volatility 5604 5123 4485 riskfree interest rate 58 51 63 expected life seven years seven years five years expected dividends weighted average fair value options granted 1999 1998 1997 1722 1197 1442 respectively following summary companys net income loss earnings loss per share reported pro forma fair valuebased method accounting defined sfas 123 applied purposes pro forma disclosures estimated fair value options amortized expense options vesting period pro forma information year ended december 31 1998 reflects pro forma expense associated accelerated vesting options connection merger pro forma information meant representative effects reported net income future years provided sfas 123 effects awards granted january 1 1995 considered pro forma calculation weatherford international inc subsidiaries notes consolidated financial statements continued restricted stock plans wii restricted stock plan certain officers wii restricted plan restricted stock plan nonemployee directors wii director restricted plan collectively restricted stock plans pursuant shares common stock granted shares granted restricted stock plans subject certain restrictions ownership transferability granted restrictions applicable shares granted restricted plan lapse part based continued employment part based company performance restrictions applicable shares granted director restricted plan removed connection merger subsequently plan terminated restrictions related certain shares granted restricted plan also removed result merger subsequently plan frozen 1998 company granted 110150 shares restricted stock directors officers company 75000 shares granted pursuant separate agreement covered restricted stock plans compensation related restricted stock grants deferred amortized expense straightline basis period time restrictions place unamortized portion classified reduction capital excess par value accompanying consolidated balance sheets following table provides summary restricted stock activity executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company including officers employee directors deferred payment retirement termination employment weatherford international inc subsidiaries notes consolidated financial statements continued company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company common stock company purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust included accompanying consolidated balance sheets treasury stock cost 13 retirement employee benefit plans company defined contribution plans covering certain employees expenses related plans totaled 40 million 38 million 28 million 1999 1998 1997 respectively 14 income taxes components income loss income taxes follows companys income tax provision benefit continuing operations consisted following total income tax provision benefit recorded follows weatherford international inc subsidiaries notes consolidated financial statements continued difference tax provision statutory federal income tax rate tax provision attributable income loss continuing operations income taxes three years ended december 31 1999 analyzed deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax asset attributable continuing operations follows change valuation allowance 1999 primarily relates tax assets associated acquisitions made period managements assessment character nature future taxable income may allow company realize certain tax benefits net operating losses tax credits within prescribed carryforward period accordingly appropriate valuation allowance made weatherford international inc subsidiaries notes consolidated financial statements continued december 31 1999 company 374 million net operating losses 70 million generated certain domestic subsidiaries prior acquisition company use acquired domestic net operating losses subject limitations imposed internal revenue code also restricted taxable income subsidiaries generating losses 207 million loss carryforward relates grant prideco subject tax allocation agreement discussed whereby company reimbursed grant prideco extent losses fully utilized company tax year 2000 loss carryforwards relating grant prideco utilized expire various dates 2010 connection spinoff grant prideco company enter tax allocation agreement tax allocation agreement terms tax allocation agreement grant prideco responsible taxes associated liabilities relating historical businesses grant prideco tax allocation agreement also provides tax liabilities associated spinoff assumed paid grant prideco subject certain exceptions relating changes control company tax allocation agreement provides future tax liability associated grant prideco offset tax benefit company grant prideco apply tax benefit tax liability reimburse company value tax benefit grant prideco would able otherwise utilize tax benefit businesses company future benefit tax losses incurred grant prideco prior part consolidated return company spinoff grant prideco required pay company amount cash equal benefit utilized grant prideco expires unused grant prideco extent benefits utilized company 15 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage insurance company selfinsured employee health insurance claims workers compensation claims certain employees amounts excess selfinsured levels fully insured selfinsurance accruals based claims filed estimate significant claims incurred reported although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 16 commitments sale leaseback equipment companys compression services division entered various sale leaseback arrangements sold 2398 million compression units right sell another 1102 million compression units arrangements legal title compression units sold third parties leased back division five year operating lease marketbased purchase option december 31 1998 compression services division sold compressors arrangements appraised values 1196 million received cash amount 1000 million receivable 196 million year ended december 31 1999 compression services division sold additional compressors appraised value 1202 million received cash 1398 million 196 million related 1998 sales 1999 1998 sales resulted pretax deferred gains approximately 351 million 422 million respectively pretax deferred gains included deferred income taxes accompanying consolidated balance sheets may deferred end lease weatherford international inc subsidiaries notes consolidated financial statements continued proceeds received compression services division sale leaseback compressor units 1000 million distributed company division 654 million distributed ge capital part joint venture remaining proceeds sales utilized division internal corporate purposes growth company guaranteed certain obligations compression services division respect sale 2000 million compression units company guaranteed minimum residual value leased equipment end lease compression services division similarly agreed guarantee portion residual value leased equipment leases remaining sales division done nonrecourse basis company limited solely assets compression services division lease agreements calls quarterly payments following table provides future minimum lease payments thousands lease exclusive guarantee payments 2000 16856 2001 16856 2002 16856 2003 16156 2004 4193 70917 operating leases company committed various noncancelable operating leases primarily relate office space equipment future minimum rental commitments attributable continuing operations noncancelable operating leases follows thousands 2000 23291 2001 18443 2002 13369 2003 9095 2004 6987 thereafter 31192 102377 total rent expense incurred operating leases attributable continuing operations approximately 310 million 264 million 261 million years ended december 31 1999 1998 1997 respectively commitments fourth quarter 1999 compression services division sold manufacturing facility corpus christi texas 146 million terms sale compression services division agreed make purchases facility approximately 380 million fiveyear period 17 related party transactions company incurred legal fees 30 million 31 million 27 million 1999 1998 1997 respectively law firm former director current executive officer company partners 1998 company paid lehman brothers inc affiliate lehman brothers holding inc major stockholder company approximately 30 million fees associated merger 1997 company paid approximately 20 million dealer management fees associated tender offer senior notes debenture offering fee arrangements associated transactions terms standard industry weatherford international inc subsidiaries notes consolidated financial statements continued 18 segment information foreign operations financial information geographic segment three years ended december 31 1999 summarized revenues attributable countries based location entity selling products performing services longlived assets longterm assets excluding deferred tax assets 661 million 167 million 128 million 1999 1998 1997 respectively net assets discontinued operations business segments company diversified international energy service manufacturing company provides variety services equipment exploration production transmission sectors oil gas industry company operates virtually every oil gas exploration production region world 1999 company redefined business segments four separate groups drilling intervention services completion systems artificial lift systems compression services following information restated periods presented reflect regrouping companys drilling intervention services segment provides fishing rental services well installation services cementing products underbalanced drilling specialty pipeline services companys completion systems segment provides completion products systems including packers sand control flow control liner hangers inflatable packers intelligent well technology companys artificial lift systems segment designs manufactures sells services complete line artificial lift equipment including progressing cavity pumps reciprocating rod lift gas lift electrical submersible pumps hydraulic lift segment also offers well optimization remote monitoring control services companys compression services segment packages rents sells parts services gas compressor units broad horsepower range weatherford international inc subsidiaries notes consolidated financial statements continued financial information industry segment three years ended december 31 1999 summarized total assets include net assets discontinued operations accounting policies segments described summary significant accounting policies company evaluates performance allocates resources based ebitda calculated operating income adding back depreciation amortization excluding impact merger costs charges calculations ebitda viewed substitute calculations generally accepted accounting principles particular operating income net income addition ebitda calculations one company may comparable another company b includes inventory writedowns 224 million classified cost products accompanying consolidated statements operations major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letters credit similar arrangements 1999 1998 1997 individual customer accounted 10 consolidated revenues weatherford international inc subsidiaries notes consolidated financial statements continued 19 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 1999 1998 1 company incurred 1130 million 470 million pretax merger costs second fourth quarters 1998 respectively effect charges net tax second fourth quarters 735 305 million respectively charges 99 million 125 million related writeoff inventory classified cost products accompanying consolidated statements operations 20 subsequent events unaudited february 2000 companys compression services division acquired gas services international ltd gsi approximately 232 million gsis business units include compressor package rental maintenance service floating production storage loading platforms gsi locations indonesia dubai singapore item 9item 8 financial statements supplementary data index financial statements financial statement schedule report independent auditors stockholders board directors weatherford international inc audited accompanying consolidated balance sheet weatherford international inc subsidiaries december 31 2001 related consolidated statements operations stockholders equity cash flows year ended audit also included financial statement schedule listed index item 14a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audit conducted audit accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects consolidated financial position weatherford international inc subsidiaries december 31 2001 consolidated results operations cash flows year ended conformity accounting principles generally accepted united states also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein ernst young llp houston texas january 30 2002 report independent public accountants stockholders weatherford international inc audited accompanying consolidated balance sheet weatherford international inc delaware corporation subsidiaries december 31 2000 related consolidated statements operations stockholders equity cash flows two years period ended december 31 2000 financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position weatherford international inc subsidiaries december 31 2000 results operations cash flows two years period ended december 31 2000 conformity accounting principles generally accepted united states audits made purpose forming opinion basic consolidated financial statements taken whole schedule listed index financial statements presented purposes complying securities exchange commissions rules part basic consolidated financial statements schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements taken whole arthur andersen llp houston texas march 16 2001 weatherford international inc subsidiaries consolidated balance sheets thousands except shares par values accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements operations thousands except per share amounts accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements stockholders equity thousands except par value accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts weatherford international inc delaware corporation majorityowned subsidiaries company material intercompany accounts transactions eliminated consolidation company accounts 50 lessowned affiliates using equity method accounting nature operations company one largest global providers innovative mechanical solutions technology services drilling production sectors oil gas industry basis presentation october 1999 board directors company approved plan distribute outstanding shares common stock wholly owned subsidiary grant prideco inc spinoff holders companys common stock 100 par value common stock shares distributed close business april 14 2000 stockholders record march 23 2000 connection prior spinoff company transferred drilling products businesses grant prideco inc grant prideco result accompanying financial statements reflect operations grant prideco discontinued operations certain reclassifications prior years balances made conform amounts corresponding current year classifications use estimates preparation financial statements conformity accounting principles generally accepted united states requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates inventories valued using firstin firstout fifo method stated lower cost market property plant equipment property plant equipment owned capital lease carried cost maintenance repairs expensed incurred cost renewals replacements betterments capitalized depreciation fixed assets including capital leases computed using straightline method estimated useful lives respective categories estimated useful lives major classes property plant equipment follows weatherford international inc subsidiaries notes consolidated financial statements continued intangible assets amortization companys intangible assets goodwill patents technology licenses trademarks identifiable intangible assets goodwill acquisitions initiated prior june 30 2001 amortized straightline basis lesser estimated useful life 40 years december 31 2001 goodwill acquisitions initiated june 30 2001 amortized identifiable intangible assets included component assets accompanying consolidated balance sheets amortized straightline basis years expected benefited ranging 3 20 years amortization expense goodwill intangible assets approximately 476 million 453 million 280 million 2001 2000 1999 respectively accumulated amortization december 31 2001 2000 1206 million 1137 million respectively longlived assets accordance statement financial accounting standards sfas 121 accounting impairment longlived assets longlived assets disposed longlived assets including goodwill held used company reviewed determine whether events changes circumstances indicate carrying amount asset may recoverable longlived assets held used company bases evaluation impairment indicators nature assets future economic benefit assets historical future profitability measurements external market conditions factors may present impairment indicators present factors exist indicate carrying amount asset may recoverable company determines whether impairment occurred use undiscounted cash flows analysis asset lowest level identifiable cash flows exist impairment occurred company recognizes loss difference carrying amount estimated value asset fair value asset measured using quoted market prices absence quoted market prices based estimate discounted cash flows fourth quarter 2000 company announced merger essentially compression services division determined impairment assets held sale see note 2 years ended december 31 2001 1999 impairment longlived assets environmental expenditures environmental expenditures relate remediation existing condition caused past operations contribute future revenues expensed liabilities expenditures recorded probable obligations incurred costs reasonably estimated estimates based available facts technology enacted laws regulations companys prior experience remediation contaminated sites accrued undiscounted environmental liabilities 50 million 25 million december 31 2001 2000 respectively foreign currency translation functional currency companys international operations applicable local currency results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet dates resulting translation adjustments included accumulated comprehensive loss component stockholders equity currency transaction gains losses reflected companys results operations period incurred weatherford international inc subsidiaries notes consolidated financial statements continued allocation interest expense discontinued operations companys historical practice incur indebtedness consolidated group parent company level limited number subsidiaries rather operating levels centrally manage various cash functions consequently portion companys historical interest expense allocated discontinued operations amount allocated reflects interest expense associated 1000 million unsecured subordinated note due grant prideco see note 3 calculated using companys average longterm debt interest rates applicable periods amounts allocated using methodology result amounts consistent allocation interest expense based ratio net assets discontinued operations companys consolidated net assets plus debt accounting income taxes sfas 109 accounting income taxes deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases revenue recognition revenue product sales recognized following criteria met evidence agreement exists b delivery acceptance customer occurred c price customer fixed determinable collectibility reasonably assured products deemed accepted customer upon receipt written acceptance revenue rental service agreements recognized earned rental period services rendered associated costs expenses recognized incurred accordance emerging issues task force 0010 accounting shipping handling fees costs company recognizes revenue associated rebillable shipping handling costs revenues costs shipping handling costs cost products cost services rentals accompanying consolidated statements operations research development engineering company expenses research development engineering costs incurred expenses 465 million 286 million 177 million 2001 2000 1999 respectively minority interests company records minority interest reflects minority interest partners portion earnings majorityowned operations 2001 2000 1999 minority interest primarily represents ge capital corporations ge capital minority interest results operations weatherford global compression services compression services division see note 4 earnings per share basic earnings per share periods presented equals net income divided weighted average number shares common stock outstanding period diluted earnings per share computed dividing net income adjusted assumed conversion dilutive debentures weighted average number shares common stock outstanding period adjusted dilutive effect companys stock option restricted stock plans incremental shares assumed conversion dilutive debentures weatherford international inc subsidiaries notes consolidated financial statements continued diluted earnings per share 2001 reflects assumed conversion companys zero coupon convertible senior debentures zero coupon debentures companys 5 convertible subordinated preferred equivalent debentures convertible preferred debentures quarterly periods conversion would dilutive net income dilutive earnings per share calculation 2001 adjusted add back amortization original issue discount net taxes relating zero coupon debentures totaling 106 million interest net taxes convertible preferred debentures totaling 98 million effect zero coupon debentures convertible preferred debentures 2000 1999 diluted earnings per share antidilutive thus impact following reconciles basic diluted weighted average number shares outstanding new reporting requirements august 2001 financial accounting standards board fasb issued sfas 144 accounting impairment disposal longlived assets statement supersedes sfas 121 accounting reporting provisions accounting principles board opinion apb 30 statement retains fundamental provision sfas 121 basic requirements apb 30 however establishes single accounting model used longlived assets disposed sale expands presentation discontinued operations include disposal transactions provisions statement effective financial statements issued fiscal years beginning december 15 2001 company anticipate statement material impact financial position results operations july 2001 fasb issued sfas 142 goodwill intangible assets statement establishes new accounting standards goodwill recognition intangibles certain intangibles determined indefinite life continues require recognition goodwill certain intangibles determined indefinite life assets permit amortization previously required statement also establishes new method testing goodwill intangibles determined indefinite life impairment requires tested impairment least annually reporting unit level written results operations periods recorded value greater market value statement effective fiscal years beginning december 15 2001 except goodwill certain intangibles determined indefinite life acquired june 30 2001 subject nonamortization provisions statement immediately company apply new rules accounting goodwill intangible assets beginning january 1 2002 application goodwill nonamortization provision statement expected result increase net income per diluted share approximately 028 annual basis company yet determined whether potential nonamortization identifiable intangible assets material impact financial position results operations 2002 company perform first required impairment tests company yet determined impact tests financial position results operations weatherford international inc subsidiaries notes consolidated financial statements continued july 2001 fasb issued sfas 141 business combinations statement establishes accounting reporting standards requiring business combinations accounted using purchase method accounting statement effective business combinations initiated june 30 2001 current impact companys financial statements 2 universal compression merger transaction february 9 2001 company completed merger essentially compression services division subsidiary universal compression holdings inc universal exchange 1375 million shares universal common stock company retained part compression services division including singaporebased gas services international operations consolidated within companys artificial lift systems division universal common stock received represented approximately 48 universals total common stock outstanding date merger subsequent merger universal issued additional shares common stock companys ownership declined 45 december 31 2001 connection transaction company recorded impairment charges fourth quarter 2000 563 million 430 million taxes provided deferred taxes 765 million due exchange consolidated subsidiary equity method investment impairment charge reflects difference estimated fair value net assets held sale determined using quoted market prices estimated selling prices less estimated costs sell net book value compression services division assets prior merger company operated division joint venture ge capital company paid ge capital 2065 million 36 ownership joint venture concurrent merger weatherford international inc subsidiaries notes consolidated financial statements continued december 31 2000 net assets compression services division excluding assets company retained follows thousands connection merger universal company universal entered voting agreement pursuant company agreed certain voting limitations respect shares universal common stock voting agreement expired december 2001 company may vote shares sole discretion company universal also entered registration rights agreement pursuant company granted certain demand piggyback registration rights shares universal common stock additionally company entered transitional services agreement universal provide certain corporate administrative services fee reimbursement costs expenses 120 days following merger pursuant terms merger agreement company also appointed three members universals board directors including companys chairman president chief executive officer long company owns least 20 universals outstanding common stock company right designate three board members ownership interest falls 20 may designate two directors ownership falls 10 company longer entitled designate directors serve universals board directors december 31 2001 company appointed three universals eleven board members including companys chairman president chief executive officer upon closing merger universal repaid terminated companys sale leaseback arrangements compression services divisions credit facility equity investment universal connection merger company deconsolidated businesses merged universal recorded investment universal equity investments unconsolidated affiliates accompanying consolidated balance sheets accordingly company began recording equity interest weatherford international inc subsidiaries notes consolidated financial statements continued universals results operations based estimates provided universal equity earnings unconsolidated affiliates accompanying consolidated statements operations 2001 company receive distributions universal related equity earnings unconsolidated affiliates difference cost basis companys investment universal companys proportionate interest fair value net assets universal merger date 1525 million amortized straightline 40 years equity earnings unconsolidated affiliates 2001 december 31 2001 companys carrying value investment universal 4755 million fair value companys ownership interest universal 4055 million company reviews investment universal impairment accordance apb 18 equity method accounting investments common stock apb 18 requires recognition loss decline investment temporary company believes decline value universals stock price temporary determining whether decline temporary company considers cyclicality industry universal operates historical performance relation peers current economic environment summarized financial information universal twelve months ended december 31 2001 presented thousands gross profit defined universal total revenues less rental expense cost sales excluding depreciation amortization gain asset sales interest income 3 discontinued operations october 1999 board directors company approved plan spinoff grant prideco distribution company stockholders one share stock grant prideco share common stock held companys stockholders distribution completed close business april 14 2000 spinoff date companys chairman president chief executive officer also chairman board directors grant prideco addition four members serve boards directors company grant prideco distribution net assets discontinued operations related accumulated comprehensive loss reflected accompanying consolidated balance sheets adjustment retained earnings results operations grant prideco spinoff date reflected weatherford international inc subsidiaries notes consolidated financial statements continued accompanying consolidated statements operations loss discontinued operations net taxes condensed results grant prideco follows company purchases drill pipe related products grant prideco purchases made prior spinoff date eliminated accompanying consolidated financial statements purchases eliminated company years ended december 31 2000 1999 70 million 286 million respectively purchases represent grant pridecos cost results discontinued operations include management fee charged grant prideco 05 million 15 million years ended december 31 2000 1999 respectively fee based time devoted grant prideco accounting tax treasury risk management services grant prideco charged 56 million costs related companys information systems function year ended december 31 1999 charges comparable period 2000 information systems charges based direct support provided equipment usage number system users agreements company grant prideco connection spinoff grant prideco company entered tax allocation agreement tax allocation agreement terms tax allocation agreement grant prideco responsible taxes associated liabilities relating historical businesses grant prideco tax allocation agreement also requires tax liabilities associated spinoff paid grant prideco tax allocation agreement provides event tax liability associated historical operations grant prideco offset tax benefit company apply tax benefit tax liability reimbursed value tax benefit company would able otherwise utilize tax benefit businesses connection spinoff company received grant prideco unsecured subordinated note amount 1000 million interest rate 10 interest due quarterly december 2000 grant prideco repaid note unpaid interest time spinoff company entered preferred customer agreement grant prideco pursuant company agreed threeyear period purchase least 70 requirements drill stem products grant prideco price products price greater grant prideco sells best similarly situated customers company entitled apply purchases drill stem credit 300 million subject limitation 20 purchase december 31 2001 company 194 million remaining drill stem credit weatherford international inc subsidiaries notes consolidated financial statements continued 4 acquisitions november 30 2001 company acquired johnson screens division johnson vivendi environnement 1100 million johnson based minneapolis minnesota global provider screens fluidsolid separation processes including recentlyintroduced excelflotm premium screen line superflotm super weldr thin packtm screens oil gas production acquisition provides completion systems division artificial lift systems division significant manufacturing consolidation benefits economies scale access innovative new technologies november 16 2001 company acquired cidra corporations optical sensing systems business unit cidra approximately 1231 million consisting 19 million shares common stock cash 625 million cidra based houston texas provider suite permanent inwell fiber optic sensor systems include pressure temperature gauges flow phase fraction systems allfiber inwell seismic system acquisition provides completion systems division proprietary technology growing field advanced intelligent completion field automation systems april 19 2001 company acquired orwell group plc orwell total consideration approximately 2585 million consisting 34 million shares common stock 814 million assumed debt paid full following closing transaction orwell based aberdeen scotland international provider oilfield services drilling fishing remediation marine applications acquisition increases companys presence international markets increases capacity orwells operations integrated companys drilling intervention services division august 10 2000 company acquired alpine oil services corporation alpine one share 100 par value series preferred stock see note 12 exchangeable securities one companys canadian subsidiaries exchangeable common stock oneforone basis approximate value alpine acquisition 544 million alpine headquartered calgary alberta canada integrated companys drilling intervention services completion systems divisions acquisition extends companys underbalanced drilling capabilities worldwide adds new completion technology expands offerings products services canada september 15 1999 company acquired williams tool co williams 18 million shares common stock value approximately 635 million williams based fort smith arkansas offers full range rotating control heads horizontal underbalanced low hydrostatic drilling operations williams products used control flow wellbore reduce risk blowouts oil gas geothermal coal bed methane wells drilled light fluids company acquired petroline wellsystems limited petroline september 2 1999 total consideration approximately 1618 million consisting 322 million cash 38 million shares common stock petroline based aberdeen scotland provider premium completion products services international oil gas industry petroline leading provider flow control equipment north sea first company successfully introduce completion products using new expandable tube technology august 31 1999 company completed acquisition dailey international inc dailey pursuant prenegotiated plan reorganization bankruptcy terms acquisition company issued total approximately 43 million shares common stock dailey noteholders stockholders total number shares issued company issued approximately 40 million shares dailey noteholders approximately 03 million shares dailey common stockholders time acquisition dailey company held approximately 24 daileys 9 12 senior notes company acquired prior bankruptcy discount subsequently contributed dailey connection transaction company holds approximately 12 million shares common stock classified treasury shares total purchase price dailey excluding assumed liabilities weatherford international inc subsidiaries notes consolidated financial statements continued dailey impaired bankruptcy approximately 1850 million dailey leading provider specialty air underbalanced directional drilling equipment services oil gas industry designs manufactures rents proprietary downhole tools oil gas drilling workover applications worldwide february 2 1999 company completed joint venture ge capital companys compression services operations combined ge capitals global compression services operations joint venture known weatherford global compression services december 31 2000 company owned 64 joint venture ge capital owned 36 connection companys transaction universal company purchased ge capitals interest joint venture see note 2 company also effected various acquisitions 2001 2000 1999 integrated companys continuing operations total consideration approximately 2815 million 1580 million 815 million respectively company also acquired various companies integrated grant prideco total consideration 644 million 1999 acquisitions discussed accounted using purchase method accounting results operations acquisitions accounted purchases included accompanying consolidated financial statements since date acquisition purchase price allocated net assets acquired based upon estimated fair market values date acquisition balances included consolidated balance sheets related current year acquisitions based upon preliminary information subject change final asset liability valuations obtained material changes preliminary allocations anticipated management following presents consolidated financial information company unaudited pro forma basis assuming dailey acquisition occurred january 1 1999 acquisitions 2000 2001 acquisitions material individually aggregate year acquisitions therefore pro forma information presented unaudited pro forma information set forth necessarily indicative results actually would achieved transactions consummated january 1 1999 may achieved future 5 cash flow information company considers highly liquid investments original maturities three months less cash equivalents current assets december 31 2001 2000 included cash approximately 43 million 25 million respectively restricted result bond requirements certain foreign countries weatherford international inc subsidiaries notes consolidated financial statements continued cash paid interest income taxes net refunds follows years ended december 31 2001 2000 1999 noncashinvesting activities 50 million 25 million 54 million respectively relating capital leases following summarizes investing activities relating acquisitions integrated companys continuing operations years ended december 31 2001 2000 1999 noncashfinancing activities 100 million 22 million 31 million respectively relating tax benefits received exercise nonqualified stock options benefits recorded reduction income taxes payable increase capital excess par value accompanying consolidated balance sheets 2001 additional noncashfinancing activities related interest rate swaps 19 million see note 9 6 inventories category follows work process finished goods inventories include cost materials labor plant overhead 7 asset securitization july 2001 company entered oneyear agreement financial institution sell continuous basis undivided interest specific pool companys domestic accounts receivables pursuant agreement company periodically sells certain trade accounts receivables whollyowned bankruptcyremote subsidiary company w1 receivables lp w1 formed purchase accounts receivables turn sell participating interests accounts receivables financial institution sale participating interests limited percentage receivables sold w1 accordance sfas 140 accounting transfers servicing financial assets extinguishments weatherford international inc subsidiaries notes consolidated financial statements continued liabilities related receivables removed consolidated balance sheets w1 records retained interest amount receivables sold excess cash received companys retained interest receivables pool valued based recoverable value approximates book value transaction company retains servicing responsibilities subordinated interest receivables sold recourse company failure debtors pay due account debtors bankruptcy inability pay companys retained interest receivables pool subordinate investors interests company permitted securitize 1500 million agreement companys credit rating falls bbb standard poors baa3 moodys financial institution obligation purchase accounts receivable company currently pays program fee participating interests variable rate based financial institutions commercial paper rate plus fees program fees totaled 23 million year ended december 31 2001 included interest expense accompanying consolidated statements operations december 31 2001 company received 1408 million purchased interests retained interests receivables sold 1007 million 8 shortterm borrowings april 2001 company entered 2500 million threeyear multicurrency revolving credit facility commitment capacity 4000 million december 31 2001 company 1591 million available agreement facility contain provision makes availability dependent upon companys credit ratings however amounts outstanding accrue interest variable rate based borrowers applicable eurocurrency rate credit ratings assigned companys longterm senior debt standard poors moodys investor service commitment fee 0125 payable quarterly unused portion facility contains customary affirmative negative covenants reflects covenant structure companys existing 2500 million revolving credit agreement dated may 1998 remains effect companys weighted average interest rate 556 2001 july 2000 companys compression services division put place 250 million uncommitted revolving line credit interest rates libor plus 175 quoted rate defined rate interest mutually agreed upon two parties connection merger compression services division universal line credit terminated see note 2 companys weighted average cost borrowings facility 799 818 2001 2000 respectively may 1998 company entered fiveyear unsecured credit agreement provides borrowings aggregate 2500 million consisting 2000 million us 500 million weatherford international inc subsidiaries notes consolidated financial statements continued canada amounts outstanding facility accrue interest variable rate based either us prime rate libor credit rating assigned companys longterm senior debt commitment fee ranging 009 020 per annum depending credit ratings assigned companys long term senior debt payable quarterly unused portion facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation occurrence indebtedness limitation asset dispositions facility contain provision makes availability dependent upon companys credit ratings december 31 2001 1586 million available facility due 414 million used secure outstanding letters credit companys weighted average cost borrowings facility 447 609 2001 2000 respectively company also engages unsecured shortterm borrowings various institutions pursuant uncommitted facilities december 31 2001 company 225 million unsecured shortterm borrowings outstanding arrangements weighted average interest rate 509 696 2001 2000 respectively company also various uncommitted credit facilities available standby letters credit bid performance bonds company total 362 million letters credit bid performance bonds outstanding december 31 2001 9 longterm debt following summary scheduled longterm debt maturities year thousands 6 58 senior notes november 16 2001 company completed private placement 3500 million 6 58 senior notes due 2011 6 58 senior notes interest notes payable semiannually arrears weatherford international inc subsidiaries notes consolidated financial statements continued may 15 november 15 year commencing may 15 2002 evidenced market transactions estimated fair value 6 58 senior notes 3325 million december 31 2001 7 14 senior notes company outstanding 2000 million 7 14 senior notes due 2006 7 14 senior notes 7 14 senior notes unsecured obligations company due 2006 interest payable semiannually may 15 november 15 based borrowing rates available company fair value 7 14 senior notes 2095 million 2030 million december 31 2001 2000 respectively 2001 company entered two interest rate swap agreements manage exposure 1000 million 7 14 senior notes agreements effectively modify companys exposure interest risk converting fixedrate debt floating rate hedge considered perfectly effective changes fair value debt due changes benchmark interest rate term accordance sfas 133 shortcut method applies need periodically reassess effectiveness hedge term swaps swap agreements recorded fair market value classified assets liabilities offset longterm debt accompanying consolidated balance sheets following describes swaps entered 2001 1000 million principal 1 july 2001 company entered swap whereby received interest fixed rate 7 14 paid floating rate based libor interest payment dates swap terminated november 15 2001 time termination company adjusted swap agreement fair market value received 41 million cash asset gain termination deferred recognized adjustment interest expense remaining life 7 14 senior notes 2 november 15 2001 company entered new interest rate swap agreement may 15 november 15 year maturity company receive interest fixed rate 7 14 pay floating rate based libor december 31 2001 fair market value swap liability 31 million effective rate 7 14 senior notes year ended december 31 2001 644 giving effect interest rate swaps industrial revenue bonds december 31 2001 company industrial revenue bonds 87 million due 2002 connection industrial revenue bonds principal related interest company letters credit 92 million 10 zero coupon convertible senior debentures june 30 2000 company completed private placement 9100 million face amount zero coupon debentures due 2020 zero coupon debentures issued discount imputed 3 per annum interest rate 2001 2000 company amortized 154 million 75 million respectively original issue discount december 31 2001 2000 unamortized discount zero coupon debentures 3854 million 4008 million respectively holders may convert zero coupon debentures shares common stock time maturity conversion rate 99970 shares per 1000 principal amount maturity initially price 551425 per share common stock effective conversion price increase accreted value zero coupon debentures increases company may redeem zero coupon debentures weatherford international inc subsidiaries notes consolidated financial statements continued june 30 2005 accreted amount time redemption holders may require company repurchase zero coupon debentures june 30 2005 june 30 2010 june 30 2015 accreted amount company may elect repurchase zero coupon debentures cash common stock combination thereof zero coupon debentures unsecured ranking equal right payment unsecured unsubordinated indebtedness rank senior future subordinated indebtedness evidenced market transactions estimated fair value zero coupon debentures 5345 million 5540 million december 31 2001 2000 respectively 11 5 convertible subordinated preferred equivalent debentures november 1997 company completed private placement 4025 million principal amount convertible preferred debentures due 2027 net proceeds convertible preferred debentures 3909 million conversion price convertible preferred debentures adjusted spinoff 5334 per share common stock convertible preferred debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company convertible preferred debentures bear interest annual rate 5 company right defer payments interest extending quarterly interest payment period 20 consecutive quarters time company default payment interest evidenced market transactions estimated fair value convertible preferred debentures 3471 million 4095 million december 31 2001 2000 respectively 12 stockholders equity authorized shares company authorized issue 2500 million shares common stock company authorized issue 30 million shares 100 par value preferred stock three years ended december 31 2001 preferred stock issued except noted december 31 2000 company authorized issued one share 100 par value series preferred stock connection acquisition alpine former alpine shareholders issued exchangeable securities one companys canadian subsidiaries exchangeable common stock oneforone basis one share series preferred stock issued trustee entitled trustee vote essentially proxy former alpine shareholders yet exchanged exchangeable securities shares common stock 2001 former alpine shareholders exchanged securities series preferred stock canceled 13 stockbased compensation stock option plans company number stock option plans pursuant directors officers key employees may granted options purchase shares common stock fair market value date grant company effect 1991 employee stock option plan 1991 eso plan 1992 employee stock option plan 1992 eso plan 1998 employee stock option plan 1998 eso plan plans options purchase aggregate 252 million shares common stock may granted officers key employees company including directors also key employees december 31 2001 approximately 15 million shares available granting plans connection spinoff stock options outstanding spinoff date adjusted 1998 eso plan option holders received options company worked exercise weatherford international inc subsidiaries notes consolidated financial statements continued prices well number shares 1998 eso plan adjusted options immediately spinoff equivalent economic terms options immediately spinoff options holders 1991 eso plan 1992 eso plan received options company grant prideco exercise prices adjusted options immediately spinoff equivalent economic terms options immediately spinoff stock options vest one four years expire ten fourteen years date grant information stock option plans predecessor plans three years ended december 31 2001 set forth options exercisable december 31 2000 1999 16 million 13 million respectively pro forma compensation expense permitted sfas 123 accounting stock based compensation company uses intrinsic value method accounting established apb 25 accounting stock issued employees account stockbased compensation programs accordingly compensation expense recognized weatherford international inc subsidiaries notes consolidated financial statements continued exercise price employee stock option equal market price common stock grant date following summary companys net income loss earnings loss per share reported pro forma fair valuebased method accounting defined sfas 123 applied purposes pro forma disclosures fair value option grant estimated date grant using blackscholes option pricing model following weighted average assumptions used 2001 2000 1999 respectively expected volatility 5889 4544 5604 riskfree interest rate 44 62 58 expected life 54 49 70 years expected dividends weighted average fair value options granted 2001 2000 1999 1447 1809 1722 respectively estimated fair value options amortized proforma expense options vesting period executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company common stock purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust liability company edc plan included accompanying consolidated balance sheets treasury stock net 14 retirement employee benefit plans company defined contribution plans covering certain employees contribution expenses related plans totaled 67 million 45 million 40 million 2001 2000 1999 respectively 15 income taxes components income taxes minority interest follows weatherford international inc subsidiaries notes consolidated financial statements continued companys income tax provision continuing operations consisted following total income tax provision benefit recorded follows difference tax provision statutory federal income tax rate tax provision attributable income continuing operations income taxes three years ended december 31 2001 analyzed deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations weatherford international inc subsidiaries notes consolidated financial statements continued deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax liability attributable continuing operations follows change valuation allowance 2001 primarily relates operating loss carryforwards certain nonus jurisdictions ultimate realization deferred tax asset depends ability generate sufficient taxable income appropriate character future company provided additional taxes anticipated repatriation earnings foreign subsidiaries december 31 2001 company 676 million net operating losses 47 million generated certain domestic subsidiaries prior acquisition company use acquired domestic net operating losses subject limitations imposed internal revenue code also restricted taxable income subsidiaries generating losses loss carryforwards utilized expire various dates 2019 december 31 2001 company approximately 184 million foreign tax credits 03 million general business credits 01 million alternative minimum tax credits available offset future payments federal income taxes foreign tax credits general business credits expire varying amounts 2004 alternative minimum tax credits may carried forward indefinitely current us law 16 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage weatherford international inc subsidiaries notes consolidated financial statements continued insurance company selfinsured employee health insurance claims workers compensation claims certain employees amounts excess selfinsured levels fully insured selfinsurance accruals based claims filed estimate significant claims incurred reported although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 17 commitments operating leases company committed various operating lease agreements primarily relate office space equipment generally leases include renewal provisions rental payments may adjusted taxes insurance maintenance related property future minimum rental commitments noncancelable operating leases follows thousands total rent expense incurred operating leases attributable continuing operations approximately 319 million 380 million 310 million years ended december 31 2001 2000 1999 respectively sale leaseback equipment companys compression services division entered various sale leaseback arrangements sold compressors received cash equal appraised value 2999 million december 31 2000 arrangements legal title compression units sold third parties leased back division fiveyear operating lease marketbased purchase option sales resulted pretax deferred gain 946 million included liabilities accompanying consolidated balance sheets december 31 2000 total lease expense incurred arrangements approximately 25 million 213 million 114 million years ended december 31 2001 2000 1999 respectively lease expense classified cost services rentals accompanying consolidated statements operations proceeds received compression services division sale leaseback compressor units 1000 million distributed company division 1998 654 million distributed ge capital part joint venture 1999 remaining proceeds sales utilized division internal corporate purposes growth company guaranteed certain obligations respect sale 2000 million compression units remaining sales compression services division done nonrecourse basis company limited solely assets compression services division company compression services division guaranteed portion residual value leased equipment leases subsequent december 31 2000 connection merger compression services division weatherford international inc subsidiaries notes consolidated financial statements continued universal sale leaseback arrangements including residual value guarantees terminated see note 2 18 related party transactions 2001 company paid lehman brothers inc lehman affiliate lehman brothers holding inc stockholder company approximately 11 million fees associated acquisition 09 million associated private placement 6 58 senior notes see note 9 company also entered interest rate swap agreements 7 14 senior notes see note 9 lehman 2001 fee arrangements terms associated transactions terms standard industry company incurred legal fees 20 million 31 million 30 million 2001 2000 1999 respectively law firm former executive officer company partner member companys board directors chief executive officer first reserve corporation first reserve corporation beneficially owns certain convertible preferred securities cidra corporation convertible less 10 cidra corporations common stock fully diluted converted basis purchase price companys acquisition cidra see note 4 determined competitive bid process conducted thirdparty investment banking firm member companys board directors participate vote meeting companys board directors acquisition cidra discussed approved 1999 company completed acquisition christiana companies inc christiana approximately 44 million shares common stock 206 million cash one members companys board directors also chairman chief executive officer christiana acquisition company acquired christiana 1 44 million shares companys common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control llc refrigerated warehouse trucking logistics company 44 million shares common stock acquired classified treasury stock net accompanying consolidated balance sheets number shares common stock issued christiana acquisition approximated number shares common stock held christiana prior acquisition christiana acquisition material effect outstanding number shares common stock net equity company september 2000 company sold onethird interest total logistic control llc c2 inc 83 million aforementioned member companys board directors also director c2 inc 19 segment information geographic segments financial information geographic segment provided chief operating decision maker three years ended december 31 2001 summarized revenues attributable countries based ultimate destination sale products performance services longlived assets weatherford international inc subsidiaries notes consolidated financial statements continued longterm assets excluding deferred tax assets 138 million 602 million 661 million december 31 2001 2000 1999 respectively net assets discontinued operations business segments company diversified international energy service manufacturing company provides variety services equipment exploration production transmission sectors oil gas industry company operates virtually every oil gas exploration production region world company divides business segments three separate groups defined chief operating decision maker drilling intervention services completion systems artificial lift systems company also historically operated compression services segment amounts reported segment include results february 9 2001 see note 2 companys drilling intervention services segment provides wide range oilfield products services including downhole drilling intervention services proprietary drilling equipment rentals well installation services cementing products underbalanced drilling companys completion systems segment provides completion products systems including expandable systems intelligent well technology packers liner hangers well screens flow control inflatable packers companys artificial lift systems segment designs manufactures sells services complete line artificial lift equipment including progressing cavity pumps reciprocating rod lift systems gas lift systems electrical submersible pumps hydraulic lift systems lift systems segment also offers well optimization remote monitoring control services companys compression services segment historically packaged rented sold parts provided services gas compressor units broad horsepower range financial information industry segment three years ended december 31 2001 summarized total assets include net assets discontinued operations accounting policies segments described summary significant accounting policies weatherford international inc subsidiaries notes consolidated financial statements continued company evaluates performance allocates resources based ebitda calculated operating income adding back depreciation amortization calculations ebitda viewed substitute calculations generally accepted accounting principles particular cash flows operations operating income net income addition ebitda calculations one company may comparable another company major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letters credit similar arrangements 2001 2000 1999 individual customer accounted 10 consolidated revenues weatherford international inc subsidiaries notes consolidated financial statements continued 20 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 2001 2000 company incurred 563 million pretax impairment charges fourth quarter 2000 effect charges net tax 430 million company also recorded 765 million deferred tax provision related deconsolidation compression services division see note 2 21 subsequent events unaudited march 1 2002 company obtained worldwide license shells expandable technology expandable technologies refer slotted solid expandables related tools accessories specialized expansion systems terms agreement company receives global license shells expandable tubular intellectual property existing future immediate access us market use expandable sand screen esstm system consideration includes 700 million cash 200 million promissory note 600 million warrants purchase common stock addition company receive 50 reduction royalty rate currently pays shell licensed technology item 9item 8 financial statements supplementary data index financial statements financial statement schedules page report independent public accountants 43 consolidated balance sheets december 31 1998 1997 44 consolidated statements income three years period ended december 31 1998 45 consolidated statements stockholders equity three years period ended december 31 1998 46 consolidated statements cash flows three years period ended december 31 1998 47 notes consolidated financial statements 48 financial statement schedule ii valuation qualifying accounts allowances 76 schedules omitted required information included financial statements notes thereto report independent public accountants weatherford international inc audited accompanying consolidated balance sheets weatherford international inc delaware corporation subsidiaries december 31 1998 1997 related consolidated statements income stockholders equity cash flows three years period ended december 31 1998 consolidated financial statements schedule referred responsibility companys management responsibility express opinion consolidated financial statements schedule based audits conducted audits accordance generally accepted auditing standards require plan perform audit obtain reasonable assurance whether consolidated financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures consolidated financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall consolidated financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects consolidated financial position weatherford international inc subsidiaries december 31 1998 1997 results operations cash flows three years period ended december 31 1998 conformity generally accepted accounting principles audits made purpose forming opinion basic consolidated financial statements taken whole financial statement schedule listed part ii item 8 presented purposes complying securities exchange commissions rules required part basic consolidated financial statements financial statement schedule subjected auditing procedures applied audits basic consolidated financial statements opinion fairly states material respects financial data required set forth therein relation basic consolidated financial statements taken whole arthur andersen llp houston texas february 17 1999 weatherford international inc subsidiaries consolidated balance sheets thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements income thousands except per share amounts accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements stockholders equity thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies basis presentation may 27 1998 evi inc evi completed merger weatherford enterra inc wii changed name evi weatherford inc together subsidiaries company see note 2 merger accounted pooling interests accordingly accompanying financial statements restated include results wii periods presented certain reclassifications prior year balances made conform amounts corresponding 1998 classifications name change companys annual stockholders meeting september 21 1998 stockholders company approved name change evi weatherford inc weatherford international inc companys common stock 100 par value common stock listed new york stock exchange new stock symbol wft nature operations company one worlds largest providers oilfield services equipment oil gas industry principles consolidation consolidated financial statements include accounts weatherford international inc majorityowned subsidiaries material intercompany accounts transactions eliminated consolidation company accounts 50 lessowned affiliates using equity method use estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates inventories valued using firstin firstout fifo method stated lower cost market current assets current assets comprised nontrade receivables prepaid expenses shortterm investments net increase december 31 1997 december 31 1998 primarily reflects receivable 196 million related december 1998 sale leaseback compression equipment see note 14 fourth quarter purchase shortterm investments debt securities 207 million debt equity securities investments debt equity securities accounted accordance statement financial accounting standards 115 sfas 115 accounting debt equity securities accordingly investments recorded fair market value unrealized gains losses recorded separate component stockholders equity company classified investments current assets available sale temporary decline fair value securities charged earnings april 1997 company sold equity securities comprised approximately 31 million shares parker drilling company parker common stock pursuant public offering effected parker result company received net proceeds approximately 234 million recognized pretax gain approximately 34 million see note 15 weatherford international inc subsidiaries notes consolidated financial statements property plant equipment property plant equipment carried cost maintenance repairs expensed incurred costs renewals replacements betterments capitalized depreciation fixed assets computed using straightline method estimated useful lives respective categories company evaluates potential impairment property plant equipment longlived assets ongoing basis whenever events circumstances indicate carrying amounts may recoverable useful lives major classes property plant equipment follows intangible assets amortization companys intangible assets comprised primarily goodwill identifiable intangible assets principally patents technology licenses company periodically evaluates goodwill intangible assets net accumulated amortization impairment based undiscounted cash flows associated asset compared carrying amount asset management believes events circumstances warrant revision remaining useful life affect recoverability intangible assets goodwill amortized straightline basis lesser estimated useful life 40 years identifiable intangible assets included component assets amortized straightline basis years expected benefited ranging 5 15 years amortization expense goodwill intangible assets approximately 234 million 150 million 108 million 1998 1997 1996 respectively accumulated amortization goodwill december 31 1998 1997 485 million 301 million respectively environmental expenditures environmental expenditures relate remediation existing condition caused past operations contribute current future revenues expensed liabilities expenditures recorded probable obligations incurred costs reasonably estimated estimates based currently available facts technology presently enacted laws regulations companys prior experience remediation contaminated sites liabilities included 73 million 127 million accrued environmental expenditures december 31 1998 1997 respectively stockbased compensation 1995 financial accounting standards board fasb issued statement financial accounting standards 123 sfas 123 accounting stock based compensation company elected adopt accounting recognition provisions sfas 123 permitted continued use intrinsic value method accounting established accounting principles board opinion 25 apb 25 account stockbased compensation programs apb 25 compensation expense recognized exercise price employee stock option equal market price common stock grant date company adopted sfas 123 making required pro forma disclosures net earnings per share fair value method accounting sfas 123 applied see note 10 foreign currency translation functional currency companys international operations applicable local currency results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments included accumulated comprehensive loss component stockholders equity currency transaction gains losses reflected income period weatherford international inc subsidiaries notes consolidated financial statements net decline cumulative foreign currency translation adjustment reported consolidated statements stockholders equity december 31 1997 december 31 1998 379 million primarily reflects financial impact devaluation canadian latin american currencies compared us dollar foreign exchange contracts company enters foreign exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting specific existing assets liabilities denominated foreign currencies exposure resulting primarily trade receivables payables intercompany loans future value contracts related currency positions subject offsetting market risks resulting foreign currency exchange rate volatility counterparties companys foreign exchange contracts creditworthy multinational commercial banks management believes risk counterparty nonperformance immaterial december 31 1998 1997 company contracts maturing within next 60 days sell 334 million 368 million respectively norwegian kroner uk pounds sterling canadian dollars dutch guilders respective contracts matured december 31 1998 1997 companys required cash outlay would insignificant accounting income taxes statement financial accounting standards 109 sfas 109 accounting income taxes deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases revenue recognition company recognizes revenue products shipped accepted customer service rentals provided proceeds customers cost oilfield rental equipment involuntarily damaged lost downhole reflected revenues earnings per share basic earnings per share computed dividing net income weighted average number shares common stock outstanding year diluted earnings per common share computed dividing net income weighted average number shares common stock outstanding year adjusted dilutive effect incremental shares would outstanding companys stock option restricted stock plans see note 10 effect 5 convertible subordinated preferred equivalent debentures due 2027 debentures diluted earnings per share antidilutive thus impact following reconciles basic diluted weighted average shares new reporting requirements february 1998 fasb issued statement accounting standards 132 sfas 132 employers disclosures pensions postretirement benefits sfas 132 standardizes disclosure requirements pensions postretirement benefits company adopted sfas 132 1998 see note 11 weatherford international inc subsidiaries notes consolidated financial statements march 1998 aicpa issued statement position sop 981 accounting costs computer software developed obtained internal use sop provides guidance respect accounting various types costs incurred computer software developed obtained companys use company adopted sop 981 adoption significant effect consolidated results operations financial position april 1998 aicpa issued sop 985 reporting costs startup activities company capitalize startup cost thus adoption significant effect consolidated results operations financial position company june 1998 fasb issued statement financial accounting standards 130 sfas 130 reporting comprehensive income sfas 130 establishes standards reporting comprehensive income components full set generalpurpose financial statements company adopted sfas 130 1998 presents comprehensive income accompanying consolidated statements stockholders equity primary adjustments reclassifications reflect net income comprehensive income basis years presented foreign currency translation adjustments effect unrealized realized gains marketable securities june 1998 fasb issued statement accounting standards 133 sfas 133 accounting derivative instruments hedging activities sfas 133 provides comprehensive consistent standard recognition measurement derivatives hedging activities sfas 133 effective fiscal years beginning june 15 1999 company currently evaluating impact sfas 133 consolidated financial statements october 1998 fasb issued statement accounting standards 134 sfas 134 accounting mortgagebacked securities retained securitization mortgage loans held sale mortgage banking enterprise sfas 134 applicable company impact consolidated financial statements 2 merger acquisitions december 1998 company acquired company owned veracruz mexico facility cancelled lease associated facility total consideration transaction cash 15 million note payable 485 million due march 1999 company also licensed internationally certain rights companys atlas bradford thread lines recorded approximately 90 million revenue arrangement may 27 1998 evi completed merger wii merging wii evi pursuant tax free merger stockholders wii received 095 share companys common stock exchange outstanding share wii common stock approximately 489 million shares addition approximately 14 million shares common stock reserved issuance company outstanding options wiis compensation benefit plans merger accounted pooling interests weatherford international inc subsidiaries notes consolidated financial statements separate results evi wii combined company follows merger adjustments include elimination intercompany revenues 50 million 71 million 52 million cost sales 34 million 57 million 42 million five months ended may 27 1998 years ended december 31 1997 1996 respectively merger adjustments years ended december 31 1997 1996 also include elimination expenses 17 million gain 27 million respectively recorded wii sale arrow completion systems inc evi december 1996 february 19 1998 company completed acquisition ampscot equipment ltd ampscot alberta corporation approximately 571 million cash ampscot canadianbased manufacturer pumping units january 15 1998 company completed acquisition taro industries limited taro alberta corporation approximately 08 million shares common stock issued shareholders taro exchange shares taro stock taro canadian provider well automation gas compression drilling equipment distribution january 12 1998 company completed acquisition houston well screen group companies hws van der horst limited singapore company net purchase price approximately 276 million cash hws acquisition includes purchase van der horst usa inc holding company houston well screen company houston well screen asia pte ltd operations singapore indonesia hws makes wedgewire screen products use oil gas production applications december 3 1997 company completed acquisition outstanding shares bmw monarch lloydminster ltd bmw monarch bmw pump inc bmw pump aggregate consideration approximately 988 million cash including final working capital adjustment 143 million assumed debt bmw pump canadianbased manufacturer progressing cavity pumps bmw monarch canadian supplier progressing cavity pumps well production related oilfield products december 2 1997 company completed acquisition capital stock trico industries inc trico exchange 1050 million cash assumption 87 million debt trico texasbased manufacturer distributor subsurface reciprocating pumps sucker rods accessories hydraulic lift systems weatherford international inc subsidiaries notes consolidated financial statements august 25 1997 company completed acquisition xls holding inc xl transaction accounted pooling interests xl designs manufactures markets high performance connectors marine applications conductors risers offshore structural components connection acquisition company issued approximately 09 million shares common stock exchange equity interests xl effect business combination significant prior period financial statements restated may 1 1997 company acquired gulfmark international inc gulfmark pursuant merger approximately 44 million shares common stock issued stockholders gulfmark prior merger gulfmark effected spinoff stockholders marine transportation services business retained assets gulfmark acquired company transaction consisted approximately 44 million shares common stock erosion control company certain miscellaneous assets 44 million shares common stock acquired classified treasury stock cost accompanying consolidated balance sheets number shares common stock issued gulfmark acquisition approximated number shares common stock held gulfmark prior acquisition gulfmark acquisition material effect outstanding number shares common stock net equity company april 14 1997 company acquired ta industries inc ta manufacturer premium couplings premium accessories approximately 441 million cash 197 million assumed debt may 23 1996 company acquired business assets nodeco norwegian company whollyowned subsidiary aarbakke collectively nodeco designs manufactures sells rents oil gas well completion products primarily consisting liner hanger equipment related services well pump packers company paid cash approximately 144 million issued 07 million shares common stock company also effected various 1998 1997 1996 acquisitions total consideration approximately 751 million 822 million 616 million respectively acquisitions exception wii xl accounted using purchase method accounting results operations acquisitions xl included consolidated statements income respective dates acquisition 1998 1997 acquisitions material individually aggregate applicable year 3 merger charges 1998 company incurred 1950 million merger charges relating merger evi wii reorganization rationalization businesses light industry conditions charges 1200 million incurred second quarter time merger initial downturn industry 750 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need make additional reductions operations align cost structure current demand net aftertax effect charges 1268 million 1714 million charges realized december 31 1998 remainder charges expected fully expended second quarter 1999 connection planned activities 1999 assess whether adjustments reversals remaining accrued special charges necessary following chart summarizes special charges made 1998 1 merger related costs incurred second quarter included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance wiis employment agreements option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included fourth quarter charges 76 million approximately 1000 employees specifically identified terminations completed first half 1999 accordance announced plan terminate employees 3 facility plant closures costs 153 million second quarter incurred year end costs related primarily elimination duplicated manufacturing distribution service locations following merger may facility plant closures 128 million accrued fourth quarter consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter 4 corporate related expenses 52 million recorded second quarter 31 million recorded fourth quarter primarily relocation corporate offices related lease obligations consolidation technology centers due merger align corporate cost structure light current conditions 5 writeoff inventory 124 million second quarter 385 million fourth quarter reported cost products charges relate writeoff inventory result combination evis wiis operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 246 million second quarter 130 million fourth quarter charges primarily relate writedown equipment assets result combination evis wiis operations rationalization product lines elimination certain products services locations due merger industry downturn specific identification assets held sale result decline market conditions weatherford international inc subsidiaries notes consolidated financial statements company adopted plan close bastrop texas tool joint manufacturing facility combine two packer facilities closure one facility arlington texas fourth quarter 1996 connection decisions company incurred charge 58 million associated closures charge 43 million related tool joint facility closure relocation equipment facility 15 million related consolidation packer facilities closure one plants company incurred 38 million 1996 costs associated actions 1996 including costs relating relocation equipment bastrop facility facilities company also accrued 20 million part 58 million charge exit costs expected incurred 1997 relating closure bastrop arlington facilities costs included 08 million severance termination costs 09 million reduction carrying value bastrop facility light intended plan disposition facility 03 million termination arlington lease approximately 400 employees affected closures closure bastrop arlington facilities substantially completed june 1997 4 cash flow information company considers highly liquid investments original maturities three months less cash equivalents current assets december 31 1998 1997 included cash approximately 32 million 34 million respectively restricted result exchange controls certain foreign countries cash collateral requirements performance bonds letters credit customs bonds cash paid years ended december 31 1998 1997 1996 interest income taxes net refunds follows years ended december 31 1998 1997 1996 noncash investing activities 24 million 244 million 17 million respectively relating capital leases following summarizes investing activities relating acquisitions years ended december 31 1998 1997 noncash financing activities 78 million 88 million respectively relating tax benefits received exercise nonqualified stock options benefits recorded reduction income taxes payable increase capital excess par value weatherford international inc subsidiaries notes consolidated financial statements 5 inventories category follows work process finished goods inventories include cost materials labor plant overhead 6 shortterm borrowings june 1996 company entered new working capital facility terminated companys prior us working capital facility resulted extraordinary charge approximately 07 million net taxes 04 million may 1998 company entered new five year unsecured credit agreement provides borrowings aggregate 2500 million consisting 2000 million us credit facility 500 million canadian credit facility terminated existing working capital facilities amounts outstanding facility accrue interest variable rate based either us prime rate libor commitment fee ranging 009 020 per annum depending credit ratings assigned 7 14 senior notes due may 15 2006 7 14 senior notes payable quarterly unused portion facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions december 31 1998 approximately 1173 million outstanding approximately 18 million used support outstanding letters credit company also various credit facilities available standby letters credit bid performance bonds pursuant funds available company secure performance obligations certain retrospective premium adjustments insurance policies company total 168 million letters credit bid performance bonds outstanding december 31 1998 weatherford international inc subsidiaries notes consolidated financial statements 7 longterm debt following summary scheduled longterm debt maturities year thousands company outstanding 2000 million 7 14 senior notes 7 14 senior notes unsecured obligations company interest 7 14 senior notes payable semiannually may 15 november 15 year based borrowing rates available company fair value 7 14 senior notes approximates carrying value december 31 1998 1997 december 1997 company completed cash tender offer consent solicitation tender offer relating companys outstanding 1200 million 10 14 senior notes due 2004 senior notes aggregate 11998 million principal amount senior notes validly tendered company pursuant tender offer prepayment senior notes resulted extraordinary charge 90 million net taxes 56 million 009 per basic share year ended december 31 1997 extraordinary charge consists prepayment fees professional fees write unamortized debt issuance costs contract terms industrial revenue bonds require principal interest payments maturity occurring december 2002 connection industrial revenue bonds company letters credit 113 million 1997 upon completion expansion veracruz mexico tool joint manufacturing facility company recorded obligation 163 million lease reflect terms thereof december 1998 lease terminated connection acquisition company owned veracruz mexico facility see note 2 weatherford international inc subsidiaries notes consolidated financial statements 8 5 convertible subordinated preferred equivalent debentures november 1997 company completed private placement 4025 million principal amount 5 convertible subordinated preferred equivalent debentures due 2027 net proceeds debentures 3909 million debentures convertible price 80 per share common stock debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company also right defer payments interest debentures extending quarterly interest payment period debentures 20 consecutive quarters anytime company default payment interest evidenced market transactions estimated fair value debentures 2496 million 3688 million december 31 1998 december 31 1997 respectively 9 stockholders equity authorized shares may 1998 companys restated certificate incorporation amended restated increase authorized number shares common stock 800 million 2500 million preferred stock company authorized issue 30 million shares 100 par value preferred stock december 31 1998 none issued public stock offerings july 25 1996 company completed public offering 69 million shares common stock net proceeds offering approximately 1009 million stock repurchase plan december 1997 wii board directors instituted stock repurchase program 1000 million wii common stock could purchased open market transactions privately negotiated transactions pursuant program wii purchased approximately 03 million shares common stock december 1997 1998 wii purchased approximately 10 million shares common stock connection merger stock repurchase program discontinued repurchased shares retired 10 stockbased compensation stock option plans company number stock option plans pursuant directors officers key employees may granted options purchase shares common stock fair market value date grant company effect 1991 employee stock option plan 1991 eso plan 1992 employee stock option plan 1992 eso plan 1998 employee stock option plan 1998 eso plan plans options purchase aggregate 82 million shares common stock may granted officers key employees company including directors also key employees december 31 1998 approximately 22 million options available granting plans company maintained nonemployee director stock option plan director plan nonqualified stock option plan 1998 director plan terminated extent additional options granted weatherford international inc subsidiaries notes consolidated financial statements stock options vest one three years expire ten thirteen years date grant information stock option plans predecessor plans three years ended december 31 1998 set forth 61 million options outstanding december 31 1998 weighted average remaining contractual life 105 years 13 million options exercisable december 31 1998 weighted average remaining contractual life 64 years pro forma compensation expense pro forma information regarding net income earnings per share required sfas 123 determined company accounted stock options fair value method provided therein fair value option grant estimated date grant using blackscholes option pricing model following weightedaverage assumptions riskfree interest rates 50 70 expected lives four seven years expected volatility 38 52 expected dividends weighted average fair value options granted 1998 1997 1996 1197 1442 1061 respectively set forth summary companys net income earnings per share reported pro forma fair valuebased method accounting defined sfas 123 applied purposes pro forma disclosures estimated fair value options amortized expense options vesting period pro forma information year ended december 31 1998 reflects pro forma expense associated accelerated vesting options connection merger pro forma information meant representative effects reported net income future years provided sfas 123 effects awards granted january 1 1995 considered pro forma calculation weatherford international inc subsidiaries notes consolidated financial statements restricted stock plans wii restricted stock plan certain officers wii restricted plan restricted stock plan nonemployee directors wii director restricted plan collectively restricted stock plans pursuant shares common stock granted shares granted restricted stock plans subject certain restrictions ownership transferability granted restrictions applicable shares granted restricted plan lapse part based continued employment part based company performance restrictions applicable shares granted director restricted plan removed connection merger subsequently plan terminated restrictions related certain shares granted restricted plan also removed result merger subsequently plan frozen 1998 company granted 110150 shares restricted stock directors officers company 75000 shares granted pursuant separate agreement covered restricted stock plans compensation related restricted stock grants deferred amortized expense straightline basis period time restrictions place unamortized portion classified reduction capital excess par value accompanying consolidated balance sheets following table provides summary restricted stock activity executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company subsidiaries including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company primarily common stock company purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust included accompanying consolidated statements stockholders equity treasury stock cost reflected consolidated balance sheets weatherford international inc subsidiaries notes consolidated financial statements 11 retirement employee benefit plans company defined contribution plans covering certain employees expenses related plans totaled 44 million 36 million 37 million 1998 1997 1996 respectively company defined benefit pension plans covering certain us international employees company two us plans one terminated 1998 us plan acquired part trico acquisition december 1997 plan frozen december 31 1998 respect certain international plans company purchased irrevocable annuity contracts settle certain benefit obligations 1998 company terminated one international plans plan benefits generally based years service average compensation levels companys funding policy contribute minimum annual amount required applicable governmental regulations plan assets invested primarily equity fixed income mutual funds weatherford international inc subsidiaries notes consolidated financial statements pension expense related companys defined benefit pension plans included following components following table sets forth summaries changes benefit obligations plan assets funded status companys defined benefit pension plans assumptions used computing information weatherford international inc subsidiaries notes consolidated financial statements 12 income taxes components income taxes follows companys income tax provision benefit continuing operations consisted following total income tax provision benefit recorded follows difference tax provision statutory federal income tax rate tax provision attributable income continuing operations income taxes three years ended december 31 1998 analyzed weatherford international inc subsidiaries notes consolidated financial statements deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations change valuation allowance 1997 1996 primarily relates utilization us net operating losses nol tax credit carryforwards managements assessment future taxable income sufficient enable company utilize remaining nol tax credit carryforwards deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax asset liability follows december 31 1998 company 101 million us net operating losses generated certain subsidiaries prior acquisition use preacquisition operating losses subject limitations imposed internal revenue code also restricted taxable income subsidiaries generating losses us carryforwards utilized expire 1999 2009 october 11 1996 company entered 39 million tax settlement plus accrued interest 25 million united states internal revenue service irs relating dispute regarding tax impact company upon dissolution oil gas joint venture 1990 tax liability respect dissolution previously provided deferred tax liability companys consolidated financial statements settlement resulted company recognizing 40 million tax benefit 1996 due elimination certain previously accrued deferred taxes longer required paid result settlement 13 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage weatherford international inc subsidiaries notes consolidated financial statements insurance company selfinsured employee health insurance claims workers compensation claims certain employees amounts excess selfinsured levels fully insured selfinsurance accruals based claims filed estimate significant claims incurred reported although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 14 commitments sale leaseback equipment company entered sale leaseback arrangement december 1998 provided right sell 2000 million compression units december 1999 lease back five year period operating lease payments lease calculated based rate return purchase price agreed valuation leased compressors terms lease company may repurchase equipment time company provided residual value guarantee end term lease equal approximately 855 appraised value compression units lease december 31 1998 company sold compressors arrangement appraised value 1196 million received cash 1000 million receivable 196 million receivable classified current assets accompanying consolidated balance sheets balance due demand net book value equipment sold approximately 774 million resulting pretax gain 422 million may deferred end lease agreement calls quarterly payments following table provides future minimum lease payments thousands aforementioned lease exclusive guarantee payments operating leases company committed various noncancelable operating leases primarily relate office space equipment future minimum rental commitments noncancelable operating leases follows thousands total rent expense incurred operating leases approximately 300 million 279 million 264 million years ended december 31 1998 1997 1996 respectively weatherford international inc subsidiaries notes consolidated financial statements commitments january 1996 company entered longterm manufacturing sales agreement oil country tubular ltd octl pursuant octl manufactures drill pipe premium tubulars company exclusive basis octls plant india 15 discontinued operations dispositions november 11 1996 company completed sale contract drilling segment comprised mallard bay contract drilling division mallard division parker exchange cash approximately 3069 million approximately 31 million shares parker common stock valued company approximately 200 million company reported net gain disposal mallard division 669 million net taxes 446 million results operations mallard division reflected accompanying consolidated statements income discontinued operations net taxes condensed results mallard division discontinued operations follows 1997 1996 company also sold certain noncore businesses cash proceeds transactions totaled 688 million 192 million 1997 1996 respectively 16 related party transactions company incurred legal fees 31 million 27 million 22 million 1998 1997 1996 respectively law firm former director current executive officer company partners 1998 company paid lehman brothers inc affiliate lehman brothers holding inc major stockholder company approximately 30 million fees associated merger 1997 company paid approximately 20 million dealer management fees associated tender offer senior notes debenture offering company incurred fees approximately 67 million associated companys public offering disposition mallard division 1996 fee arrangements associated transactions terms standard industry 17 subsequent events february 1999 company completed joint venture ge capital corporation ge capital companys compression services operations combined ge capitals global compression services operations joint venture known weatherford global compression company owns 64 joint venture ge capital owns 36 company right acquire ge capitals interest anytime price equal greater market determined third party valuation book value ge capital also right require company purchase interest anytime february 2001 market determined third party valuation well request public offering interest date purchased interest time february 8 1999 company completed acquisition christiana companies inc approximately 40 million shares common stock 200 million cash acquisition company acquired christiana 1 40 million shares companys common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control refrigerated warehouse trucking logistics company 40 million shares common stock acquired classified treasury stock number shares common stock issued christiana acquisition approximated number shares common stock held christiana prior acquisition christiana acquisition material effect outstanding number shares common stock net equity company weatherford international inc subsidiaries notes consolidated financial statements 18 segment information business segments company diversified international energy service manufacturing company provides variety services equipment exploration production transmission sectors oil gas industry company operates virtually every oil gas exploration production region world 1998 company redefined business segments four separate groups completion oilfield services artificial lift systems compression services drilling products following information restated reflect regrouping companys completion oilfield services segment provides fishing downhole services well installation services well completion systems equipment rental companys artificial lift systems segment designs manufactures sells services complete line artificial lift equipment including progressing cavity pumps reciprocating rod lift equipment gas lift equipment electrical submersible pumps hydraulic lift equipment companys compression services segment manufactures packages rents sells parts services gas compressor units broad horsepower range companys drilling products segment manufactures drill stem products premium engineered connections premium tubulars marine subsea connectors related accessories weatherford international inc subsidiaries notes consolidated financial statements financial information industry segment three years ended december 31 1998 summarized company evaluates performance allocates resources based ebitda calculated operating income adding back depreciation amortization excluding impact merger costs charges calculations ebitda viewed substitute calculations gaap particular operating income net income addition ebitda calculations one company may comparable another company b includes inventory writedowns 509 million classified cost products accompanying consolidated statements income weatherford international inc subsidiaries notes consolidated financial statements c 1996 company incurred charge 58 million associated plant closures charge 43 million related closure tool joint facility within drilling products segment 15 million related closure packer facility within completion oilfield services segment ebidta operating income 1996 drilling products completion oilfield services segments include accruals included within 58 million charge 15 million 05 million respectively plant closures foreign operations export sales financial information geographic segment three years ended december 31 1998 summarized revenues attributable countries based location entity selling products longlived assets longterm assets excluding deferred tax assets 167 million 128 million 189 million 1998 1997 1996 respectively major customers credit risk substantially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letters credit similar arrangements 1998 1997 1996 individual customer accounted 10 consolidated revenues weatherford international inc subsidiaries notes consolidated financial statements 19 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 1998 1997 1 first second third quarters 1998 quarters 1997 restated amounts previously reported companys respective forms 10q amendment 1 form 8k filed july 21 1998 reclassify certain amounts conform current year presentation 2 company incurred 1200 million 750 million pretax merger costs second fourth quarters 1998 respectively effect charges net tax second fourth quarters 780 488 million respectively charges 124 million 385 million related writeoff inventory classified cost products accompanying consolidated statements income 3 includes extraordinary charge net taxes approximately 90 million related repayment senior notes fourth quarter 1997 item 9item 8 financial statements supplementary data index financial statements financial statement schedule report independent public accountants stockholders weatherford international inc audited accompanying consolidated balance sheets weatherford international inc delaware corporation subsidiaries december 31 2000 1999 related consolidated statements operations stockholders equity cash flows three years period ended december 31 2000 financial statements schedule referred responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects financial position weatherford international inc subsidiaries december 31 2000 1999 results operations cash flows three years period ended december 31 2000 conformity accounting principles generally accepted united states audits made purpose forming opinion basic financial statements taken whole financial statement schedule listed index financial statements presented purposes complying securities exchange commissions rules part basic financial statements financial statement schedule subjected auditing procedures applied audits basic financial statements opinion fairly states material respects financial data required set forth therein relation basic financial statements taken whole arthur andersen llp houston texas march 16 2001 weatherford international inc subsidiaries consolidated balance sheets thousands except shares par values accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements operations thousands except per share amounts accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements stockholders equity thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements weatherford international inc subsidiaries notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts weatherford international inc delaware corporation majorityowned subsidiaries company material intercompany accounts transactions eliminated consolidation company accounts 50 lessowned affiliates using equity method accounting basis presentation october 1999 board directors company approved plan distribute outstanding shares common stock wholly owned subsidiary grant prideco inc spinoff holders companys common stock 100 par value common stock shares distributed close business april 14 2000 stockholders record march 23 2000 connection prior spinoff company transferred drilling products businesses grant prideco inc grant prideco result accompanying financial statements reflect operations grant prideco discontinued operations certain reclassifications prior years balances made conform amounts corresponding 2000 classifications nature operations company one largest global providers innovative mechanical solutions technology services drilling production sectors oil gas industry use estimates preparation financial statements conformity generally accepted accounting principles united states requires management make estimates assumptions affect reported amounts assets liabilities date financial statements reported amounts revenues expenses reporting period actual results could differ estimates inventories valued using firstin firstout fifo method stated lower cost market property plant equipment property plant equipment carried cost maintenance repairs expensed incurred costs renewals replacements betterments capitalized depreciation fixed assets computed using straightline method estimated useful lives respective categories company evaluates potential impairment property plant equipment longlived assets ongoing basis whenever events circumstances indicate carrying amounts may recoverable estimated useful lives major classes property plant equipment follows weatherford international inc subsidiaries notes consolidated financial statements continued intangible assets amortization companys intangible assets goodwill patents technology licenses trademarks identifiable intangible assets goodwill amortized straightline basis lesser estimated useful life 40 years identifiable intangible assets included component assets amortized straightline basis years expected benefited ranging 3 17 years amortization expense goodwill intangible assets approximately 453 million 280 million 176 million 2000 1999 1998 respectively accumulated amortization december 31 2000 1999 1137 million 775 million respectively longlived assets accordance statements financial accounting standards sfas 121 longlived assets held used company reviewed impairment events changes circumstances indicate carrying amount asset may recoverable longlived assets held used company bases evaluation impairment indicators nature assets future economic benefit assets historical future profitability measurements external market conditions factors may present impairment indicators present factors exist indicate carrying amount asset may recoverable company determines whether impairment occurred use undiscounted cash flows analysis assets lowest level identifiable cash flows exist impairment occurred company recognizes loss difference carrying amount estimated value asset fair value asset measured using quoted market prices absence quoted market prices fair value based estimate discounted cash flows years ended december 31 1999 2000 companys analyses indicated impairment longlived assets held used longlived assets held sale company bases evaluation impairment carrying value compared fair market value less costs sell fourth quarter 2000 company announced merger essentially compression services division determined impairment assets held sale accordingly company recorded 563 million writedown assets compression services division see note 2 environmental expenditures environmental expenditures relate remediation existing condition caused past operations contribute current future revenues expensed liabilities expenditures recorded probable obligations incurred costs reasonably estimated estimates based currently available facts technology presently enacted laws regulations companys prior experience remediation contaminated sites liabilities included 25 million 31 million accrued environmental expenditures december 31 2000 1999 respectively foreign currency translation functional currency companys international operations applicable local currency results operations foreign subsidiaries functional currencies us dollar translated using average exchange rates period assets liabilities foreign subsidiaries translated using exchange rates effect balance sheet date resulting translation adjustments included accumulated comprehensive loss component stockholders equity currency transaction gains losses reflected income period weatherford international inc subsidiaries notes consolidated financial statements continued foreign exchange contracts company enters foreign exchange contracts hedge certain existing economic exposures speculative trading purposes contracts reduce exposure currency movements affecting specific existing assets liabilities denominated foreign currencies exposure results primarily longterm debt intercompany loans future value contracts related currency positions subject offsetting market risks resulting foreign currency exchange rate volatility counterparties companys foreign exchange contracts creditworthy multinational commercial banks management believes risk counterparty nonperformance immaterial december 31 2000 company party foreign exchange contracts december 31 1999 company contracts maturing within next 60 days sell 147 million uk pounds sterling austrian schillings contracts matured december 31 1999 companys required cash outlay would insignificant allocation interest expense discontinued operations companys historical practice incur indebtedness consolidated group parent company level limited number subsidiaries rather operating levels centrally manage various cash functions consequently portion companys historical interest expense allocated discontinued operations amount allocated reflects interest expense associated 1000 million unsecured subordinated note due grant prideco see note 3 calculated using companys average longterm debt interest rates applicable periods amounts allocated using methodology result amounts consistent allocation interest expense based ratio net assets discontinued operations companys consolidated net assets plus debt accounting income taxes sfas 109 accounting income taxes deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases revenue recognition december 1999 securities exchange commission sec issued staff accounting bulletin sab 101 revenue recognition financial statements provides guidance recognition presentation disclosure revenue financial statements adoption bulletin material impact companys financial position results operations revenue product sales recognized following criteria met evidence agreement exists b delivery acceptance customer occurred c price customer fixed determinable collectibility reasonably assured revenue rental agreements recognized rental period revenue service agreements recognized services rendered associated costs expenses recognized incurred conjunction adoption sab 101 company adopted emerging issues task force eitf 0010 accounting shipping handling fees costs adoption authoritative guidance material impact companys financial position results operations research development company expenses research development costs incurred expenses 286 million 177 million 108 million 2000 1999 1998 respectively weatherford international inc subsidiaries notes consolidated financial statements continued minority interests company records minority interest expense reflects portion earnings majorityowned operations applicable minority interest partners 2000 1999 minority interest expense primarily represents ge capital corporations ge capital minority interest results operations compression services division joint venture see note 4 earnings per share basic earnings per share computed dividing income weighted average number shares common stock outstanding year diluted earnings per common share computed dividing income weighted average number shares common stock outstanding year adjusted dilutive effect incremental shares would outstanding companys stock option restricted stock plans see note 14 effect stock options restricted stock included computation periods loss continuing operations occurs would antidilutive effect 5 convertible subordinated preferred equivalent debentures due 2027 convertible preferred debentures zero coupon convertible senior debentures due 2020 zero coupon debentures diluted earnings per share antidilutive thus impact following reconciles basic diluted weighted average shares new reporting requirements june 1998 financial accounting standards board fasb issued sfas 133 accounting derivative instruments hedging activities statement establishes new accounting reporting standards requiring derivative instruments including derivative instruments embedded contracts recorded balance sheet either asset liability depending rights obligations contracts fair value statement requires changes derivatives fair value recognized currently earnings unless specific hedge accounting criteria met qualifying cash flow hedge changes fair value derivative instrument initially recognized comprehensive income reclassified earnings period hedged transaction affects earnings qualifying fair value hedge changes fair value derivative instrument offset corresponding changes hedged item earnings accounting qualifying hedges allows derivatives gains losses offset related results hedged item income statement requires company formally document designate assess effectiveness transactions receive hedge accounting treatment sfas 138 accounting certain derivative instruments certain hedging activities issued june 2000 amends certain provisions sfas 133 statements effective fiscal years beginning june 15 2000 company believes adoption new standards material effect companys financial position results operations weatherford international inc subsidiaries notes consolidated financial statements continued 2 universal compression transaction october 24 2000 company announced merger essentially compression services division subsidiary universal exchange 1375 million shares universal common stock approximates 48 universals outstanding shares transaction completed february 9 2001 concurrent transaction company paid ge capital 2065 million 36 ownership joint venture companys compression services division operated company retained part compression services division namely singaporebased gas services international operations 100 million accounts receivable connection transaction company recorded impairment charges fourth quarter 2000 563 million 430 million taxes provided deferred taxes 765 million due anticipated exchange consolidated subsidiary equity method investment pretax impairment charge 563 million reflects difference estimated fair value net assets held sale determined using quoted market prices estimated selling prices less estimated costs sell net book value compression services division assets carrying value compression services divisions net assets december 31 2000 4393 million connection merger universal company universal entered voting agreement pursuant company agreed certain voting limitations respect shares universal common stock period two years company agreed vote shares universal common stock excess 33 13 universals outstanding shares proportion shares universal common stock held public excluding companys shares held castle haran affiliates company may vote remainder shares sole discretion company universal also entered registration rights agreement pursuant company granted certain demand piggyback registration rights shares universal common stock additionally company entered transitional services agreement universal provide certain corporate administrative services compression services division fee reimbursement costs expenses 120 days following merger pursuant terms merger agreement company also appointed three members universals board directors long company owns least 20 universals outstanding common stock company right designate three board members ownership interest falls 20 may designate two directors ownership falls 10 company longer entitled designate directors serve universals board directors upon closing merger universal repaid terminated companys sale leaseback arrangements compression services divisions credit facility 3 discontinued operations october 1999 board directors company approved plan spinoff grant prideco distribution stockholders one share stock grant prideco share common stock held companys stockholders distribution completed close business april 14 2000 spinoff date distribution net assets discontinued operations related accumulated comprehensive loss reflected accompanying consolidated balance sheets adjustment retained earnings weatherford international inc subsidiaries notes consolidated financial statements continued results operations grant prideco spinoff date reflected accompanying consolidated statements operations income loss discontinued operations net taxes condensed results grant prideco follows company purchases drill pipe related products grant prideco purchases made prior spinoff date eliminated accompanying consolidated financial statements purchases eliminated company years ended december 31 2000 1999 1998 70 million 286 million 96 million respectively purchases represent grant pridecos cost results discontinued operations include management fee charged grant prideco 05 million 15 million 10 million years ended december 31 2000 1999 1998 respectively fee based time devoted grant prideco accounting tax treasury risk management services grant prideco charged 56 million costs related companys information systems function years ended december 31 1999 1998 charges comparable period 2000 information systems charges based direct support provided equipment usage number system users agreements company grant prideco connection spinoff grant prideco company entered tax allocation agreement tax allocation agreement terms tax allocation agreement grant prideco responsible taxes associated liabilities relating historical businesses grant prideco tax allocation agreement also requires tax liabilities associated spinoff paid grant prideco subject certain exceptions relating changes control company tax allocation agreement provides event tax liability associated historical operations grant prideco offset tax benefit company apply tax benefit tax liability reimbursed value tax benefit company would able otherwise utilize tax benefit businesses connection spinoff company received grant prideco unsecured subordinated note company amount 1000 million interest rate 10 interest due quarterly december 2000 grant prideco repaid note unpaid interest company also entered preferred customer agreement grant prideco pursuant company agreed threeyear period purchase least 70 requirements drill stem products grant prideco price products price greater grant prideco sells best similarly situated customers company entitled apply purchases drill stem credit granted amount 300 million subject limitation application weatherford international inc subsidiaries notes consolidated financial statements continued credit 20 purchase december 31 2000 company 284 million remaining drill pipe credit 4 acquisitions august 10 2000 company acquired alpine oil services corporation alpine one share 100 par value series preferred stock see note 13 exchangeable securities one companys canadian subsidiaries exchangeable common stock oneforone basis approximate value alpine acquisition 544 million alpine headquartered calgary alberta canada integrated companys drilling intervention services completion systems divisions acquisition extends companys underbalanced drilling capabilities worldwide adds new completion technology expands offerings products services canada september 15 1999 company acquired williams tool co williams 18 million shares common stock value approximately 635 million williams based fort smith arkansas offers full range rotating control heads horizontal underbalanced low hydrostatic drilling operations williams products used control flow wellbore reduce risk blowouts oil gas geothermal coal gas methane wells drilled light fluids company acquired petroline wellsystems limited petroline september 2 1999 total consideration approximately 1618 million consisting 322 million cash 38 million shares common stock petroline based aberdeen scotland provider premium completion products services petroline leading provider flow control equipment north sea first company successfully introduce completion products using new expandable tube technology august 31 1999 company completed acquisition dailey international inc dailey pursuant prenegotiated plan reorganization bankruptcy terms acquisition company issued total approximately 43 million shares common stock dailey noteholders stockholders total number shares issued company issued approximately 40 million shares dailey noteholders approximately 03 million shares dailey common stockholders time acquisition dailey company held approximately 24 daileys 9 12 senior notes company acquired prior bankruptcy discount subsequently contributed dailey connection transaction company holds approximately 12 million shares common stock classified treasury shares total purchase price dailey excluding assumed liabilities dailey impaired bankruptcy approximately 1850 million dailey leading provider specialty air underbalanced directional drilling equipment services designs manufactures rents proprietary downhole tools oil gas drilling workover applications worldwide february 2 1999 company entered joint venture ge capital companys compression services operations combined ge capitals global compression services operations joint venture known weatherford global compression services december 31 2000 company owned 64 joint venture ge capital owned 36 connection companys transaction universal company purchased ge capitals interest joint venture subsequent yearend see note 2 company completed acquisition ampscot equipment ltd ampscot alberta corporation approximately 571 million cash february 19 1998 ampscot canadianbased manufacturer pumping units january 15 1998 company completed acquisition taro industries limited taro alberta corporation approximately 08 million shares common stock issued weatherford international inc subsidiaries notes consolidated financial statements continued shareholders taro exchange shares taro stock taro canadian provider well automation gas compression drilling equipment distribution company also effected various 2000 1999 1998 acquisitions integrated companys continuing operations total consideration approximately 1580 million 815 million 935 million respectively company also acquired various companies integrated grant prideco total consideration 644 million 1999 92 million 1998 acquisitions discussed accounted using purchase method accounting therefore results operations included accompanying consolidated financial statements since date acquisition purchase price allocated net assets acquired based upon estimated fair market values date acquisition balances included consolidated balance sheets related current year acquisitions based upon preliminary information subject change final asset liability valuations obtained material changes preliminary allocations anticipated management following presents consolidated financial information company unaudited pro forma basis assuming dailey acquisition occurred january 1 1998 1999 acquisitions 1998 2000 acquisitions material individually aggregate year acquisitions therefore pro forma information presented unaudited pro forma information set forth necessarily indicative results actually would achieved transaction consummated january 1 1998 may achieved future included net loss year ended december 31 1998 extraordinary loss net taxes recorded dailey 176 million extraordinary loss result daileys repurchase 9 34 senior notes first quarter 1998 represents excess purchase price notes carrying value date repurchase 5 evi inc weatherford enterra inc merger may 27 1998 evi inc evi completed merger weatherford enterra inc wii merging wii evi pursuant tax free merger stockholders wii received 095 share common stock exchange outstanding share approximately 489 million shares wii common stock merger accounted pooling interests weatherford international inc subsidiaries notes consolidated financial statements continued separate results evi wii combined company follows merger adjustments include elimination intercompany revenues 50 million cost sales 34 million five months ended may 27 1998 6 merger costs charges 1998 company incurred 1600 million merger charges relating merger evi wii reorganization rationalization businesses light industry conditions charges 1130 million incurred second quarter time merger initial downturn industry 470 million charge incurred fourth quarter response previously unanticipated extent decline industry resulted need make additional reductions operations align cost structure current demand net tax effect charges 1040 million following chart summarizes charges made 1998 approximately 1365 million charges realized december 31 1998 remainder charges fully realized end second quarter 1999 connection planned activities 1999 adjustments reversals remaining accrued nonrecurring charges necessary weatherford international inc subsidiaries notes consolidated financial statements continued 1 merger transaction costs incurred second quarter 1998 included 326 million severance termination costs related approximately 300 employees former officers directors employee benefits related stock grants accordance wiis employment agreements stock option plans 299 million professional financial advisory fees filing registration fees printing mailing costs 2 severance related costs included 1998 fourth quarter charges 76 million approximately 940 employees specifically identified terminations completed first half 1999 accordance companys announced plan terminate employees 3 facility plant closures costs 100 million second quarter 1998 incurred december 31 1998 costs related primarily elimination duplicated manufacturing distribution service locations following merger may 1998 facility plant closures 128 million accrued fourth quarter 1998 consolidation closure approximately 100 service manufacturing administrative facilities response declining market conditions fourth quarter facilities closed june 30 1999 4 corporate related expenses 52 million recorded second quarter 1998 31 million recorded fourth quarter 1998 primarily consolidation corporate offices related lease obligations consolidation technology centers due merger align companys corporate cost structure light industry conditions 5 writeoff inventory 99 million second quarter 1998 125 million fourth quarter 1998 reported cost products charges relate writeoff inventory result combination evis wiis operations rationalization product lines elimination certain products services locations due merger result decline market conditions 6 writedown assets 247 million second quarter 1998 118 million fourth quarter 1998 charges primarily relate writedown equipment assets result combination evis wiis operations rationalization product lines elimination certain products services locations due merger specific identification assets held sale result decline market conditions 7 cash flow information company considers highly liquid investments original maturities three months less cash equivalents current assets december 31 2000 1999 included cash 25 million 17 million respectively restricted result bond requirements certain foreign countries cash paid interest income taxes net refunds follows years ended december 31 2000 1999 1998 noncashinvesting activities 25 million 54 million 24 million respectively relating capital leases weatherford international inc subsidiaries notes consolidated financial statements continued following summarizes investing activities relating acquisitions integrated companys continuing operations years ended december 31 2000 1999 1998 noncashfinancing activities 22 million 31 million 78 million respectively relating tax benefits received exercise nonqualified stock options benefits recorded reduction income taxes payable increase capital excess par value 8 inventories category follows work process finished goods inventories include cost materials labor plant overhead 9 shortterm borrowings july 2000 companys compression services division put place 250 million uncommitted revolving line credit interest rates libor plus 175 quoted rate defined rate interest mutually agreed upon two parties december 31 2000 131 million available line credit companys weighted average cost borrowings facility 2000 818 weatherford international inc subsidiaries notes consolidated financial statements continued company also engages unsecured shortterm borrowings various institutions pursuant uncommitted facilities december 31 2000 company 122 million unsecured shortterm borrowings outstanding arrangements weighted average interest rate 696 532 2000 1999 respectively may 1998 company entered fiveyear unsecured credit agreement provides borrowings aggregate 2500 million consisting 2000 million us 500 million canada terminated existing working capital facilities amounts outstanding facility accrue interest variable rate based either us prime rate libor commitment fee ranging 009 020 per annum depending credit ratings assigned 7 14 senior notes due may 15 2006 7 14 senior notes payable quarterly unused portion facility contains customary affirmative negative covenants including maximum debt capitalization ratio minimum interest coverage ratio limitation liens limitation asset dispositions december 31 2000 2300 million available facility due 200 million used secure outstanding letters credit companys weighted average cost borrowings facility 609 577 2000 1999 respectively company also various uncommitted credit facilities available standby letters credit bid performance bonds company total 119 million letters credit bid performance bonds outstanding december 31 2000 10 longterm debt following summary scheduled longterm debt maturities year thousands company outstanding 2000 million 7 14 senior notes 7 14 senior notes unsecured obligations company due 2006 interest payable semiannually may 15 november 15 based borrowing rates available company fair value 7 14 senior notes 2030 million 1948 million december 31 2000 1999 respectively weatherford international inc subsidiaries notes consolidated financial statements continued december 31 2000 company industrial revenue bonds 87 million due 2002 12 million principal payments 06 million annually 2002 company letters credit 103 million associated industrial revenue bonds 11 zero coupon convertible senior debentures june 30 2000 company completed private placement 9100 million face amount zero coupon debentures zero coupon debentures issued discount imputed 3 per annum interest rate 2000 company amortized 75 million original issue discount company received proceeds 4919 million net debt issuance costs 97 million proceeds used pay current debt 4340 million general corporate purposes holders may convert zero coupon debentures shares common stock time maturity conversion rate 99970 shares per 1000 principal amount maturity initially price 551425 per share common stock effective conversion price increase accreted value zero coupon debentures increases company may redeem zero coupon debentures june 30 2005 accreted discounted amount time redemption holders may require company repurchase zero coupon debentures june 30 2005 june 30 2010 june 30 2015 accreted discounted amount respective periods evidenced market transactions estimated fair value zero coupon debentures 5540 million december 31 2000 12 5 convertible subordinated preferred equivalent debentures november 1997 company completed private placement 4025 million principal amount convertible preferred debentures net proceeds convertible preferred debentures 3909 million conversion price convertible preferred debentures adjusted spinoff 5334 per share common stock convertible preferred debentures redeemable company time november 4 2000 redemption prices described therein subordinated right payment principal interest prior payment full certain existing future senior indebtedness company convertible preferred debentures bear interest annual rate 5 company right defer payments interest extending quarterly interest payment period 20 consecutive quarters time company default payment interest evidenced market transactions estimated fair value convertible preferred debentures 4095 million 3079 million december 31 2000 december 31 1999 respectively 13 stockholders equity authorized shares company authorized issue 2500 million shares common stock company authorized issue 30 million shares 100 par value preferred stock december 31 2000 except described preferred stock issued company authorized issued one share 100 par value series preferred stock connection acquisition alpine one share series preferred stock issued trustee held benefit former alpine shareholders former alpine shareholders issued exchangeable security one companys canadian subsidiaries exchangeable common stock oneforone basis one share series preferred stock entitles trustee vote essentially proxy former alpine shareholders yet exchanged exchangeable securities shares common stock number votes could voted former alpine shareholders exchanged exchangeable securities common stock exchangeable securities exchanged weatherford international inc subsidiaries notes consolidated financial statements continued number votes series preferred stock entitled decreases voting rights series preferred stock eliminated entirely outstanding exchangeable securities series preferred stock 100 liquidation preference class voting rights votes together common stock except specific voting rights 100 liquidation preference series preferred stock rights preferences stock repurchase plan december 1997 wii board directors instituted stock repurchase program 1000 million wii common stock could purchased open market transactions privately negotiated transactions pursuant program wii purchased approximately 10 million shares common stock 1998 connection merger stock repurchase program discontinued repurchased shares retired 14 stockbased compensation stock option plans company number stock option plans pursuant directors officers key employees may granted options purchase shares common stock fair market value date grant company effect 1991 employee stock option plan 1991 eso plan 1992 employee stock option plan 1992 eso plan 1998 employee stock option plan 1998 eso plan plans options purchase aggregate 180 million shares common stock may granted officers key employees company including directors also key employees december 31 2000 approximately 17 million shares available granting plans connection spinoff stock options outstanding spinoff date adjusted 1998 eso plan option holders received options company worked exercise prices well number shares 1998 eso plan adjusted options immediately spinoff equivalent economic terms options immediately spinoff options holders 1991 eso plan 1992 eso plan received options company grant prideco exercise prices adjusted options immediately spinoff equivalent economic terms options immediately spinoff weatherford international inc subsidiaries notes consolidated financial statements continued stock options vest one three years expire ten thirteen years date grant information stock option plans predecessor plans three years ended december 31 2000 set forth 151 million options outstanding december 31 2000 weighted average remaining contractual life 1113 years 16 million options exercisable december 31 2000 weighted average remaining contractual life 751 years pro forma compensation expense permitted sfas 123 accounting stock based compensation company uses intrinsic value method accounting established accounting principles board opinion apb 25 accounting stock issued employees account stockbased compensation programs accordingly compensation expense recognized exercise price employee stock option equal market price common stock grant date following summary companys net income loss earnings loss per share reported pro forma fair valuebased method accounting defined sfas 123 applied purposes pro forma disclosures fair value option grant estimated date grant using blackscholes option pricing model following weighted average assumptions used 2000 1999 1998 respectively expected volatility 4544 5604 5123 riskfree interest rate 62 58 51 expected life 49 70 years expected dividends weighted average fair value options granted 2000 1999 1998 1809 1722 1197 respectively estimated fair value options amortized expense options vesting period weatherford international inc subsidiaries notes consolidated financial statements continued pro forma information year ended december 31 1998 reflects pro forma expense associated accelerated vesting options connection merger pro forma information meant representative effects reported net income future years executive deferred compensation plan may 1992 companys stockholders approved executive deferred compensation stock ownership plan edc plan edc plan portion compensation certain key employees company including officers employee directors deferred payment retirement termination employment company established grantor trust fund benefits edc plan funds provided trust invested trustee independent company common stock purchased trustee open market assets trust available satisfy claims general creditors company event bankruptcy insolvency accordingly common stock held trust liability company edc plan included accompanying consolidated balance sheets treasury stock net 15 retirement employee benefit plans company defined contribution plans covering certain employees expenses related plans totaled 45 million 40 million 38 million 2000 1999 1998 respectively 16 income taxes components income loss income taxes follows weatherford international inc subsidiaries notes consolidated financial statements continued companys income tax provision benefit continuing operations consisted following total income tax provision benefit recorded follows difference tax provision statutory federal income tax rate tax provision attributable income loss continuing operations income taxes three years ended december 31 2000 analyzed deferred tax assets liabilities recognized estimated future tax effects temporary differences tax basis asset liability reported amount financial statements measurement deferred tax assets liabilities based enacted tax laws rates currently effect jurisdictions company operations weatherford international inc subsidiaries notes consolidated financial statements continued deferred tax assets liabilities classified current noncurrent according classification related asset liability financial reporting components net deferred tax asset liability attributable continuing operations follows change valuation allowance 2000 primarily relates utilization us tax credit carryforwards managements assessment future foreign source income sufficient enable company utilize tax credit carryforwards would expired 2000 differences financial tax basis 757 million consists primarily amounts resulting anticipated exchange consolidated subsidiary equity method investment connection universal merger see note 2 december 31 2000 company 1171 million net operating losses 64 million generated certain domestic subsidiaries prior acquisition company use acquired domestic net operating losses subject limitations imposed internal revenue code also restricted taxable income subsidiaries generating losses loss carryforwards utilized expire various dates 2020 december 31 2000 company approximately 289 million foreign tax credits 12 million general business credits 49 million alternative minimum tax credits available offset future payments federal income taxes expiring varying amounts 2003 2013 alternative minimum tax credits may carried forward indefinitely current us law 17 disputes litigation contingencies litigation disputes company aware various disputes potential claims party various litigation involving claims company covered insurance based facts currently known company believes ultimate liability may result known claims disputes pending litigation would material adverse effect companys consolidated financial position results operations without consideration insurance coverage weatherford international inc subsidiaries notes consolidated financial statements continued insurance company selfinsured employee health insurance claims workers compensation claims certain employees amounts excess selfinsured levels fully insured selfinsurance accruals based claims filed estimate significant claims incurred reported although company believes adequate reserves provided expected liabilities arising selfinsured obligations reasonably possible managements estimates liabilities change near term circumstances develop 18 commitments sale leaseback equipment companys compression services division entered various sale leaseback arrangements sold 2999 million compression units december 31 2000 arrangements legal title compression units sold third parties leased back division fiveyear operating lease marketbased purchase option december 31 1999 compression services division sold compressors arrangements received cash equal appraised value 2398 million sales resulted pretax deferred gain 773 million year ended december 31 2000 compression services division sold additional compressors received cash equal appraised value 601 million 2000 sales resulted additional pretax deferred gain approximately 173 million pretax deferred gains included liabilities accompanying consolidated balance sheets total lease expense incurred arrangements approximately 213 million 114 million years ended december 31 2000 1999 respectively lease expense year ended december 31 1998 lease expense classified cost services rentals accompanying consolidated statements operations proceeds received compression services division sale leaseback compressor units 1000 million distributed company division 1998 654 million distributed ge capital part joint venture 1999 remaining proceeds sales utilized division internal corporate purposes growth company guaranteed certain obligations respect sale 2000 million compression units remaining sales compression services division done nonrecourse basis company limited solely assets compression services division company compression services division guaranteed portion residual value leased equipment leases subsequent december 31 2000 sale leaseback arrangements including residual value guarantees terminated see note 2 weatherford international inc subsidiaries notes consolidated financial statements continued operating leases company committed various noncancelable operating leases primarily relate office space equipment future minimum rental commitments attributable continuing operations noncancelable operating leases follows thousands total rent expense incurred operating leases attributable continuing operations approximately 380 million 310 million 264 million years ended december 31 2000 1999 1998 respectively commitments fourth quarter 1999 compression services division sold manufacturing facility corpus christi texas 146 million terms sale compression services division agreed make purchases facility approximately 380 million fiveyear period december 31 2000 company purchased 144 million facility 19 related party transactions company incurred legal fees 31 million 30 million 31 million 2000 1999 1998 respectively law firm former director former executive officer company partners 1999 company completed acquisition christiana companies inc christiana approximately 44 million shares common stock 206 million cash one members companys board directors also chairman chief executive officer christiana acquisition company acquired christiana 1 44 million shares companys common stock 2 cash distribution christiana shareholders equal amount christianas outstanding tax liabilities 3 onethird interest total logistic control llc refrigerated warehouse trucking logistics company 44 million shares common stock acquired classified treasury stock net accompanying consolidated balance sheets number shares common stock issued christiana acquisition approximated number shares common stock held christiana prior acquisition christiana acquisition material effect outstanding number shares common stock net equity company september 2000 company sold onethird interest total logistic control llc c2 inc 83 million aforementioned member companys board directors also director c2 inc 1998 company paid lehman brothers inc affiliate lehman brothers holding inc stockholder company approximately 30 million fees associated merger fee arrangements associated transaction terms standard industry weatherford international inc subsidiaries notes consolidated financial statements continued 20 segment information geographic segments financial information geographic segment provided chief operating decision maker three years ended december 31 2000 summarized revenues attributable countries based location entity selling products performing services longlived assets longterm assets excluding deferred tax assets 602 million 661 million 167 million 2000 1999 1998 respectively net assets discontinued operations business segments company diversified international energy service manufacturing company provides variety services equipment exploration production transmission sectors oil gas industry company operates virtually every oil gas exploration production region world 1999 company redefined business segments four separate groups determined chief operating decision maker drilling intervention services completion systems artificial lift systems compression services following information restated periods presented reflect regrouping companys drilling intervention services segment provides drilling services equipment rental well installation services cementing products underbalanced drilling specialty pipeline services companys completion systems segment provides completion products systems including packers sand control flow control liner hangers inflatable packers intelligent well technology companys artificial lift systems segment designs manufactures sells services complete line artificial lift equipment including progressing cavity pumps reciprocating rod lift gas lift electrical submersible pumps hydraulic lift segment also offers well optimization remote monitoring control services companys compression services segment packages rents sells parts services gas compressor units broad horsepower range weatherford international inc subsidiaries notes consolidated financial statements continued financial information industry segment three years ended december 31 2000 summarized total assets include net assets discontinued operations accounting policies segments described summary significant accounting policies company evaluates performance allocates resources based ebitda calculated operating income adding back depreciation amortization excluding impact impairment charges assets disposed merger costs charges calculations ebitda viewed substitute calculations generally accepted accounting principles particular cash flow operations operating income net income addition ebitda calculations one company may comparable another company b includes inventory writedowns 224 million classified cost products accompanying consolidated statements operations major customers credit risk essentially companys customers engaged energy industry concentration customers may impact companys overall exposure credit risk either positively negatively weatherford international inc subsidiaries notes consolidated financial statements continued customers may similarly affected changes economic industry conditions company performs ongoing credit evaluations customers generally require collateral support trade receivables company maintains reserves potential credit losses actual losses historically within companys expectations foreign sales also present various risks including risks war civil disturbances governmental activities may limit disrupt markets restrict movement funds result deprivation contract rights taking property without fair consideration companys foreign sales however large international companies secured letters credit similar arrangements 2000 1999 1998 individual customer accounted 10 consolidated revenues 21 quarterly financial data unaudited following tabulation sets forth unaudited quarterly financial data 2000 1999 company incurred 563 million pretax impairment charges assets disposed fourth quarter 2000 related merger essentially companys compression services division universal effect charges net tax 430 million company also provided deferred taxes 765 million due anticipated exchange consolidated subsidiary equity method investment see note 2 item 9 nannannannannannannan