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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): MAY 21, 1999
WEATHERFORD INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
DELAWARE 1-13086 04-2515019
(State of (Commission (I.R.S. Employer
Incorporation) File No.) Identification No.)
515 POST OAK BLVD., SUITE 600
HOUSTON, TEXAS 77027
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 693-4000
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EXHIBIT INDEX APPEARS ON PAGE 9
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ITEM 5. OTHER EVENTS.
DAILEY ACQUISITION
On May 21, 1999, we entered into an agreement to acquire Dailey
International Inc. for total consideration of approximately $195 million. The
consideration that would be paid for Dailey would be in the form of our common
stock and be allocated $185 million for Dailey's Senior Notes, of which we
currently hold approximately $64.7 million principal amount, and $10 million for
Dailey's common stock. The acquisition of Dailey would be completed through a
pre-negotiated plan of reorganization in bankruptcy that has been approved by
the holders 82% of the outstanding principal amount of Dailey Senior Notes and
50% of Dailey's common stock. The plan of reorganization is expected to filed by
June 1, 1999.
Dailey is a worldwide provider of specialty services and
technologically advanced downhole tools to the oil and gas industry. It is the
leading supplier of drilling jars and other proprietary downhole tools and a
worldwide leader in air drilling services for underbalanced drilling
applications. Our acquisition of Dailey is subject to customary governmental
approvals, including bankruptcy court approval. Although there can be no
assurance that this transaction will close, we expect that the transaction will
close sometime in the third quarter of this year.
A copy of our press release announcing the acquisition of Dailey is
filed as Exhibit 99.1 and is incorporated herein by reference.
DAILEY FINANCIAL STATEMENTS
The financial statements of Dailey for the periods specified in Rule
3-05(b) of Regulation S-X are filed as Exhibits 99.2 and 99.3 and are
incorporated herein by reference.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following summary unaudited pro forma condensed consolidated
financial data of Weatherford is based on the historical financial data of
Weatherford and the historical financial data of Dailey. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations for the year ended
December 31, 1998, and the three months ended March 31, 1999, give effect to
Weatherford's proposed acquisition of Dailey as if the transaction had occurred
on January 1, 1998. The Unaudited Pro Forma Condensed Consolidated Balance Sheet
gives effect to the proposed acquisition as if this transaction had occurred on
March 31, 1999.
The pro forma information set forth below is not necessarily indicative
of the results that actually would have been achieved had such transactions been
consummated as of the aforementioned dates, or that may be achieved in the
future. In particular, the pro forma financial statements do not give effect to
any cost savings or additional synergies that may be realized by us as a result
of the proposed acquisition. We currently expect to realize around $20 million
in annual cost savings and $8 million in additional annual margins from the
acquisition. These benefits are not reflected in the pro forma adjustments and
are subject to various uncertainties described below under "Forward Looking
Statements". As a result, while we currently expect to realize these benefits
from the acquisition, there can be no assurance that these benefits will be
fully realized.
All other acquisitions by Weatherford are not material individually or
in the aggregate; therefore, pro forma information is not reflected. Because
this pro forma information is a summary, it does not contain all information
that may be important to you. You should also read the following:
o Weatherford's Management's Discussion and Analysis of Financial
Condition and Results of Operations and its financial statements and
related notes thereto contained in its Annual Report on Form 10-K
for the year ended December 31, 1998.
o Weatherford's Quarterly Report on Form 10-Q for the period ended
March 31, 1999.
o Dailey's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related
notes thereto contained in its Annual Report on Form 10-K for the
year ended December 31, 1998.
o Dailey's Quarterly Report on Form 10-Q for the period ended
March 31, 1999.
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WEATHERFORD INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 1999
(In thousands)
WEATHERFORD DAILEY PRO FORMA WEATHERFORD
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 34,736 $ 19,185 $ (17,667)(a)(b) $ 36,254
Accounts receivable, net 367,298 33,002 -- 400,300
Inventories 522,157 -- -- 522,157
Other current assets 144,873 3,142 (31,513)(b)(c) 116,502
---------- ---------- ----------- -----------
Total current assets 1,069,064 55,329 (49,180) 1,075,213
---------- ---------- ----------- -----------
Property, plant and equipment, net 1,008,014 149,674 (11,376)(d) 1,146,312
Goodwill, net 837,704 21,979 -- 859,683
Other assets 122,578 24,054 (7,640)(e) 138,992
---------- ---------- ----------- -----------
$3,037,360 $ 251,036 $ (68,196) $ 3,220,200
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 225,431 $ 736 $ -- $ 226,167
Accounts payable 108,174 12,426 -- 120,600
Other accrued liabilities 180,881 7,948 3,177 (f) 192,006
---------- ---------- ----------- -----------
Total current liabilities 514,486 21,110 3,177 538,773
---------- ---------- ----------- -----------
Long-term debt 230,111 275,067 (275,000)(e) 230,178
Minority interests 268,840 -- -- 268,840
Deferred income taxes and other 140,180 7,011 -- 147,191
5% Convertible Subordinated
Preferred Equivalent Debentures 402,500 -- -- 402,500
Stockholders' equity:
Common stock 107,949 106 4,493 (g)(h) 112,548
Capital in excess of par 1,122,694 53,062 93,814 (g)(h) 1,269,570
Treasury stock, at cost (268,460) (4,061) 4,061 (h) (268,460)
Retained earnings (deficit) 609,723 (100,190) 100,190 (h) 609,723
Accumulated other comprehensive
loss (90,663) (1,069) 1,069 (h) (90,663)
---------- ---------- ----------- -----------
Total stockholders' equity 1,481,243 (52,152) 203,627 1,632,718
---------- ---------- ----------- -----------
$3,037,360 $ 251,036 $ (68,196) $ 3,220,200
========== ========== =========== ===========
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WEATHERFORD INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(In thousands, except per share amounts)
WEATHERFORD DAILEY PRO FORMA WEATHERFORD
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ------------
Revenues $ 2,010,654 $ 132,317 $ (1,046)(i) $ 2,141,925
----------- ---------- ----------- -----------
Costs and expenses:
Cost of sales 1,426,785 108,896 (2,432)(i)(j) 1,533,249
Selling, general and administrative 293,403 39,058 -- 332,461
Merger costs and other charges 144,097 56,450 -- 200,547
Equity in earnings of unconsolidated affiliates (2,679) -- -- (2,679)
----------- ---------- ----------- -----------
1,861,606 204,404 (2,432) 2,063,578
----------- ---------- ----------- -----------
Operating income 149,048 (72,087) 1,386 78,347
----------- ---------- ----------- -----------
Other income (expense):
Interest expense (54,497) (24,429) 23,750 (k) (55,176)
Interest income 2,969 3,425 (521)(l) 5,873
Other income (expense), net 1,868 (42) -- 1,826
----------- ---------- ----------- -----------
(49,660) (21,046) 23,229 (47,477)
----------- ---------- ----------- -----------
Income (loss) before income taxes 99,388 (93,133) 24,615 30,870
Provision for income taxes 34,551 2,115 8,615 (m) 45,281
----------- ---------- ----------- -----------
Income (loss) from continuing operations $ 64,837 $ (95,248) $ 16,000 $ (14,411)
=========== ========== =========== ===========
Income (loss) from continuing operations per share:
Basic $ 0.67 $ (0.14)
=========== ===========
Diluted $ 0.66 $ (0.14)
=========== ===========
Weighted average shares outstanding:
Basic 97,065 101,664 (n)
=========== ===========
Diluted 97,757 101,664
=========== ===========
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WEATHERFORD INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1999
(In thousands, except per share amounts)
Weatherford Dailey Pro Forma Weatherford
Historical Historical Adjustments Pro Forma
----------- ---------- ----------- -----------
Revenues $ 353,834 $ 28,339 $ (525)(i) $ 381,648
---------- ---------- ----------- -----------
Costs and expenses:
Cost of sales 259,261 24,943 (702)(i)(j) 283,502
Selling, general and administrative 78,002 8,240 -- 86,242
Reorganization costs -- 1,239 -- 1,239
Equity in earnings of unconsolidated affiliates (454) (509) -- (963)
---------- ---------- ----------- -----------
336,809 33,913 (702) 370,020
---------- ---------- ----------- -----------
Operating income 17,025 (5,574) 177 11,628
---------- ---------- ----------- -----------
Other income (expense):
Interest expense (12,652) (6,900) 6,746 (k) (12,806)
Interest income 1,521 747 (1,122)(l) 1,146
Other income (expense), net (854) 272 -- (582)
---------- ---------- ----------- -----------
(11,985) (5,881) 5,624 (12,242)
---------- ---------- ----------- -----------
Income (loss) before income taxes and minority
interests 5,040 (11,455) 5,801 (614)
Provision for income taxes 1,764 1,081 2,030 (m) 4,875
---------- ---------- ----------- -----------
Income (loss) from continuing operations 3,276 (12,536) 3,771 (5,489)
Minority interest expense, net of taxes 738 -- -- 738
---------- ---------- ----------- -----------
Net income (loss) $ 2,538 $ (12,536) $ 3,771 $ (6,227)
========== ========== =========== ===========
Net income (loss) per share :
Basic $ 0.03 $ (0.06)
========== ===========
Diluted $ 0.03 $ (0.06)
========== ===========
Weighted average shares outstanding:
Basic 97,315 101,914 (n)
========== ===========
Diluted 98,007 101,914
========== ===========
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
The following notes set forth the assumptions used in preparing the
unaudited pro forma financial statements. The pro forma adjustments are based on
estimates made by Weatherford's management using information currently
available.
PRO FORMA ADJUSTMENTS
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Balance Sheet are described below:
(a) To record the cash payment of $15.0 million for transaction and
severance costs.
(b) To record Weatherford's May 24, 1999 purchase of Dailey's 9 1/2%
Senior Notes due 2008 (the "Senior Notes") for $2.7 million (face value of
$4.4 million).
(c) To reverse Weatherford's $34.2 million net investment (face value
$64.7 million) in the Senior Notes.
(d) To reflect the initial estimate of the write-down of Dailey's
property, plant, and equipment to fair market value.
(e) To reflect the retirement of the Senior Notes and the write-off of
related debt issuance costs.
(f) To reverse $3.3 million in accrued interest and the $1.1 million
income tax receivable related to the Senior Notes. To accrue $5.3 million
for litigation and other contingencies relating to Dailey.
(g) To reflect the issuance of $195.0 million in shares of Weatherford
common stock less $43.5 million in Weatherford common stock to be received
by Weatherford in respect of the Senior Notes held by Weatherford. The net
shares to be issued are approximately 4.6 million shares, valued at $32
15/16 per share, which was the closing market price on May 20, 1999. Of
this amount, the Dailey shareholders will receive shares valued at $10.0
million and the balance of the shares will be issued to the holders of the
Senior Notes other than Weatherford.
(h) To eliminate Dailey's equity, which consists of $0.1 million common
stock, $53.1 million capital in excess of par, $4.1 million of treasury
stock, $100.2 million of retained deficit, and $1.1 million of accumulated
other comprehensive loss.
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Statements of Operations are described below:
(i) To eliminate revenues of $1.0 million and $0.5 million and related
costs of $0.2 million and $0.1 million for the year ended December 31, 1998
and the three months ended March 31, 1999, respectively, associated with
transactions between Dailey and Weatherford.
(j) To reverse depreciation expense of $2.2 million and $0.6 million for
the year ended December 31, 1998 and the three months ended March 31, 1999,
respectively, to reflect the write-down of property, plant, and equipment
to fair market value. Such property, plant and equipment is being
depreciated over five years.
(k) To eliminate interest expense to reflect the retirement of the Senior
Notes.
(l) To eliminate Weatherford's interest income related to its investment
in the Senior Notes.
(m) To record the income tax provision related to the effect of the pro
forma adjustments at the statutory rate.
(n) Weatherford's historical shares outstanding and basic weighted average
pro forma shares outstanding as of March 31, 1999, were 97,283,731 and
101,914,007, respectively. Weatherford's historical shares outstanding and
basic weighted average pro forma shares outstanding as of December 31,
1998, were 97,328,462 and 101,663,578, respectively.
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements relating to our proposed
acquisition of Dailey. We believe these statements constitute "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
Certain risks and uncertainties may cause actual results to be materially
different from projected results contained in forward-looking statements in this
report. In addition to the general market risks described in our Annual and
Quarterly Reports, there exist risks and uncertainties relating to the Dailey
acquisition, including, but not limited to, the following:
o BANKRUPTCY UNCERTAINTIES. Our acquisition of Dailey is subject to
bankruptcy court approval. Although we have received agreements from
the holders of more than two-thirds of the claims of Dailey's impaired
creditors, there can be no assurance that the acquisition will be
completed in a timely manner. Our pro forma financial statements
assume that the acquisition of Dailey will be completed between 60 and
120 days without any unexpected administrative costs and expenses or
unknown claims against Dailey. To the extent the bankruptcy process
takes longer than anticipated or claims, including severance, exceed
those currently projected the costs of the acquisition could be
greater than that set forth in the pro forma financial statements.
o COST SAVINGS. We currently expect that our acquisition of Dailey will
allow us to realize around $20 million in annual cost savings through
the elimination and reduction of overlapping costs. Our ability to
achieve these savings will be dependent on our ability to integrate
the operations of the acquired business, including personnel, systems
and facilities.
o SYNERGIES. We currently expect to realize around $8 million annually
in additional margins from the manufacture of our own drilling and
fishing jars. These savings will be dependent on the ultimate amount
of jar business conducted by us, which in turn will be dependent on
market conditions. Our ability to realize these benefits will also be
dependent on the timing of the conversion of our current jar lines to
the Dailey jar line.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
23.1 Consent of Ernst & Young LLP with respect to the financial
statements of Dailey International Inc.
99.1 Press release dated May 21, 1999, announcing the acquisition
of Dailey International Inc.
99.2 Consolidated Financial Statements of Dailey International
Inc. as of December 31, 1998 and 1997 and for the year
December 31, 1998, the eight month period ended December 31,
1997 and for each of two years in the period ended April 30,
1997.
99.3 Consolidated Financial Statements of Dailey International
Inc. for the quarterly period ended March 31, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WEATHERFORD INTERNATIONAL, INC.
Dated: May 25, 1999 /s/ Bruce F. Longaker, Jr.
------------------------------------
Bruce F. Longaker, Jr.
Senior Vice President
and Chief Financial Officer
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INDEX TO EXHIBITS
NUMBER EXHIBIT
- ------ -------
23.1 Consent of Ernst & Young LLP with respect to the financial
statements of Dailey International Inc.
99.1 Press release dated May 21, 1999, announcing the acquisition
of Dailey International Inc.
99.2 Consolidated Financial Statements of Dailey International
Inc. as of December 31, 1998 and 1997 and for the year
December 31, 1998, the eight month period ended December 31,
1997 and for each of two years in the period ended April 30,
1997.
99.3 Consolidated Financial Statements of Dailey International
Inc. for the quarterly period ended March 31, 1999
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